Northwest Bancshares Inc.
11/10/2025 | Press release | Distributed by Public on 11/10/2025 14:10
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information, this document may contain certain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, as they reflect management's analysis only as of the date of this report. We have no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report.
Important factors that might cause such a difference include, but are not limited to:
• the possibility that any of the anticipated benefits of the Merger (as defined below) will not be realized or will not be realized within the expected time period; the effect of the Merger on the combined company's customer and employee relationships and operating results; and other factors that may affect the results of operations and financial condition of the combined company;
• inflation and changes in the interest rate environment that reduce our margins, our loan origination, or the fair value of financial instruments;
• changes in asset quality, including increases in default rates on loans and higher levels of nonperforming loans and loan charge-offs generally;
• changes in laws, government regulations or supervision, examination and enforcement priorities affecting financial institutions, including as part of the regulatory reform agenda of the Trump administration, as well as changes in regulatory fees and capital requirements;
• changes in federal, state, or local tax laws and tax rates;
• general economic conditions, either nationally or in our market areas, that are different than expected, including inflationary or recessionary pressures or those related to changes in monetary, fiscal, regulatory and tariff policies of the U.S. government, including policies of the U.S. Department of Treasury and the Federal Reserve Board;
• adverse changes in the securities and credit markets;
• instability or breakdown in the financial services sector, including failures or rumors of failures of other depository institutions, along with actions taken by governmental agencies to address such turmoil;
• cyber-security concerns, including an interruption or breach in the security of our website or other information systems;
• technological changes that may be more difficult or expensive than expected;
• changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio;
• the ability of third-party providers to perform their obligations to us;
• competition among depository and other financial institutions, including with respect to deposit gathering, service charges and fees;
• our ability to enter new markets successfully and capitalize on growth opportunities;
• our ability to manage our growth internally and our ability to successfully integrate acquired entities, businesses or branch offices;
• changes in consumer spending, borrowing and savings habits;
• our ability to continue to increase and manage our commercial, including commercial real estate, and personal loans;
• possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises;
• changes in the value of our goodwill or other intangible assets;
• the impact of the economy on our loan portfolio (including cash flow and collateral values), investment portfolio, customers and capital market activities;
• our ability to receive regulatory approvals for proposed transactions or new lines of business;
• the effects of any federal government shutdown or the inability of the federal government to manage debt limits:
•a prolonged government shutdown, which could adversely affect the U.S. and global economy;
• changes in the financial performance and/or condition of our borrowers;
• the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") and other accounting standard setters;
• changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;
• our ability to access cost-effective funding;
• the effect of global or national war, conflict, or terrorism;
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• our ability to manage market risk, credit risk and operational risk;
• the disruption to local, regional, national and global economic activity caused by infectious disease outbreaks, and the significant impact that any such outbreaks may have on our growth, operations and earnings;
• the effects of natural disasters and extreme weather events;
• changes in our ability to continue to pay dividends, either at current rates or at all;
• our ability to retain key employees; and
• our compensation expense associated with equity allocated or awarded to our employees.
Overview of Critical Accounting Policies Involving Estimates
Please refer to Note 1 of the Notes to Consolidated Financial Statements in Item 8 of Part II of our 2024 Annual Report on Form 10-K.
Recently Issued Accounting Standards
The following Accounting Standard Updates ("ASU") issued by the Financial Accounting Standards Board ("FASB") have not yet been adopted.
In October 2023, the FASB issued ASU No. 2023-06, "Disclosure Improvements." This ASU includes amendments on several subtopics in the FASB Accounting Standards Codification ("Codification") to incorporate certain disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. The adoption of this ASU may lead to certain disclosures being relocated into the financial statements. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. These amendments are to be applied prospectively. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. We do not believe this guidance will have a material impact on the Company's financial statements.
In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures." This ASU requires additional disaggregated disclosures on entity's effective tax rate reconciliation and additional details on income taxes paid. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. This ASU is applied prospectively with the option to apply the ASU retrospectively. We do not believe this guidance will have a material impact on the Company's financial statements.
In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The guidance requires disaggregated disclosure of specified expense categories. The guidance also requires disclosure of total selling expenses and how the Company defines selling expenses. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Prospective application is required, with retrospective application permitted. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statement disclosures. In January 2025, the FASB issued ASU 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." The guidance amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.
In September 2025, the FASB issued ASU 2025-06, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software". This ASU addresses the challenges of applying current internal-use software accounting requirements due to the evolution of software development since the original guidance was issued. The ASU removes all references to project stages. The amendments require an entity to start capitalizing software costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2027, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted as of the beginning of an annual reporting period. We do not believe this guidance will have a material impact on the Company's financial statements.
On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" and commonly referred to as the One Big Beautiful Bill Act("the Act"). The enactment of the Act did not have a material impact on the company's financial statements.
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Acquisition of Penns Woods
On July 25, 2025, the Company completed its acquisition of Penns Woods, pursuant to the merger agreement, which was entered into by the Company and Penns Woods on December 16, 2024 (the "Merger Agreement"). In accordance with the Merger Agreement, the Company and Penns Woods completed a business combination whereby Penns Woods merged with and into the Company (the "Merger"), with the Company as the surviving corporation in the Merger. Immediately after the effective time of the Merger (the "Effective Time"), Penns Woods' wholly-owned subsidiary banks, Luzerne Bank, a Pennsylvania-chartered state bank, and Jersey Shore State Bank, a Pennsylvania-chartered state bank, merged with and into Northwest Bank, with Northwest Bank as the surviving bank in the subsidiary bank mergers. Under the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Penns Woods' common stock, $5.55 par value, issued and outstanding immediately prior to the Effective Time (except for Treasury Shares (as provided for in the Merger Agreement), converted, in accordance with the procedures set forth in the Merger Agreement, into a right to receive 2.385 shares of common stock, $0.01 par value, of the Company.
The Penns Woods results of operations are included in the Company's consolidated results since the date of acquisition. Therefore, the Company's third quarter and year to date 2025 results reflect increased levels of average balances, net interest income, and noninterest expense compared to the prior quarter and 2024 results. After purchase accounting fair value adjustments, the acquisition added $2.2 billion of total assets, including $1.8 billion of loans, $160 million of investments, of which $82 million were immediately sold, as well as $2.0 billion of total liabilities, primarily consisting of $1.6 billion in deposits. The Company recorded preliminary goodwill of $57 million and core deposit intangibles of $48 million related to the acquisition.
Comparison of Financial Condition
Total assets at September 30, 2025 were $16.4 billion, an increase of $2.0 billion from December 31, 2024. This increase in assets was primarily driven by the addition of the Penns Woods assets. A discussion of significant changes follows.
Cash and cash equivalents decreased by $10 million, or 3%, to $279 million at September 30, 2025, from $288 million at December 31, 2024 due to these funds being invested into higher yielding loans and marketable securities.
Total marketable securities increased to $2.0 billion at September 30, 2025, increasing by $114 million, or 6%, from December 31, 2024. Available-for-sale securities increased by $162 million, this was driven by the acquisition of Penns Woods which included $160 million is marketable securities, of which $82 million were immediately sold. Additional increases were driven by the purchase of additional securities and the improvement of our unrealized loss position. Held-to-maturity securities decreased $48 million, driven by maturities and regular monthly cash flows.
Gross loans receivable was $12.9 billion at September 30, 2025, increasing $1.8 billion from December 31, 2024. This increase is attributed to the Penns Woods acquisition of $1.8 billion in loans. Our personal banking loan portfolio increased by $810 million, to $7.1 billion at September 30, 2025 while our commercial banking loans increased by $951 million, to $5.8 billion at September 30, 2025.
The following table provides the various loan sectors in our commercial real estate portfolio at September 30, 2025:
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| Property type | Percent of portfolio | |||||||
| 5 or more unit dwelling | 10.3 | % | ||||||
| Retail Building | 9.9 | |||||||
| Nursing Home | 7.6 | |||||||
| Commercial office building - non-owner occupied | 7.5 | |||||||
| Manufacturing & industrial building | 5.1 | |||||||
| Warehouse/storage building | 3.3 | |||||||
| Commercial office building - owner occupied | 3.3 | |||||||
| Multi-use building - commercial, retail and residential | 2.8 | |||||||
| Multi-use building - office and warehouse | 2.7 | |||||||
| Other medical facility | 2.1 | |||||||
| Residential acquisition & development - 1-4 family, townhouses and apartments | 2.7 | |||||||
| Hotel/motel | 1.8 | |||||||
| Single family dwelling | 1.7 | |||||||
| Student housing | 1.7 | |||||||
| Agricultural real estate | 1.5 | |||||||
| 2-4 family | 1.2 | |||||||
| Commercial acquisition and development | 1.6 | |||||||
| All other | 33.2 | |||||||
| Total | 100.0 | % | ||||||
The following table describes the collateral of our commercial real estate portfolio by state at September 30, 2025:
| State | Percent of portfolio | |||||||
| New York | 24.7 | % | ||||||
| Pennsylvania | 42.2 | |||||||
| Ohio | 15.6 | |||||||
| Indiana | 4.9 | |||||||
| New Jersey | 2.1 | |||||||
| All other | 10.5 | |||||||
| Total | 100.0 | % | ||||||
Total deposits increased by $1.6 billion, to $13.7 billion at September 30, 2025 from $12.1 billion at December 31, 2024. This increase was driven by the acquisition which resulted in an additional $1.6 billion in deposits.
As of September 30, 2025, we had $115 million of brokered deposits, which made up 4% of our time deposits and 1% of our total deposit balance at quarter end. As of December 31, 2024, we had $201 million of brokered deposits, which made up 7% of our time deposits and 2% of our total deposit balance at year end. The balance carried an average all-in cost of 4.18% and 4.32% as of September 30, 2025 and December 31, 2024, respectively and an average original term of 12 months. These deposits were purchased through a registered broker, as part of an Asset/Liability Committee ("ALCO") strategy to increase and diversify funding sources.
In addition, we had $795 million and had $713 million of deposits through our participation in the IntraFi Network Deposits and FIS Insured Deposit programs as of September 30, 2025 and December 31, 2024, respectively. These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest Bank receives an equal amount of deposits from other member banks. The balance carried an average cost of 3.34% as of September 30, 2025 and 3.68% as of December 31, 2024.
At September 30, 2025 and December 31, 2024, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.9 billion. At those dates, we had no deposits that were uninsured for any other reason. The following table presents details regarding the Company's uninsured deposits portfolio:
|
As of September 30, 2025
|
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| Balance |
Percent of total deposits |
Number of relationships | |||||||||||||||
| Uninsured deposits per the Call Report (1) | $ | 3,746,638 | 27.4 | % | 6,277 | ||||||||||||
| Less intercompany deposit accounts | 1,321,881 | 9.7 | % | 12 | |||||||||||||
| Less collateralized deposit accounts | 480,761 | 3.5 | % | 253 | |||||||||||||
| Uninsured deposits excluding intercompany and collateralized accounts | $ | 1,943,996 | 14.2 | % | 6,012 | ||||||||||||
(1) Uninsured deposits presented may be different from actual amounts due to titling of accounts.
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Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $39 million, or 0.28% of total deposits, as of September 30, 2025. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $198 million, or 1.45%, of total deposits, as of September 30, 2025. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $323,353 as of September 30, 2025.
Total shareholders' equity increased to $1.9 billion, or $12.70 per share, at September 30, 2025 compared to $12.52 per share at December 31, 2024, increasing by $259 million in the current year, primarily driven by the issuance of common stock in connection with the Penns Woods acquisition. The additional increase was the result of the an improvement in accumulated other comprehensive loss of $24 million, or 21%, primarily due to a decrease in unrealized losses in the available-for-sale investment portfolio, partially offset by 81 million of cash dividend payments for the nine months ended September 30, 2025.
Regulatory Capital
Financial institutions and their holding companies are subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct, material effect on a company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting guidelines. Capital amounts and classifications are also subject to qualitative judgments made by the regulators about components, risk-weighting and other factors.
Applicable rules limit an organization's capital distributions and certain discretionary bonus payments if the organization does not hold a "capital conservation buffer"consisting of 2.5% of Total, Tier 1 and Common Equity Tier 1 ("CET1") capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
Quantitative measures, established by regulation to ensure capital adequacy, require financial institutions to maintain minimum amounts and ratios (set forth in the table below) of Total, CET1 and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Capital requirements are presented in the tables below (dollars in thousands).
| At September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Actual | Minimum capital requirements (1) | Well capitalized requirements (2) | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| Total capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | $ | 1,876,174 | 15.45 | % | $ | 1,274,938 | 10.50 | % | $ | 1,214,227 | 10.00 | % | |||||||||||||||||||||||
| Northwest Bank | 1,677,965 | 13.83 | % | 1,273,516 | 10.50 | % | 1,212,872 | 10.00 | % | ||||||||||||||||||||||||||
| Tier 1 capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,483,249 | 12.22 | % | 1,032,093 | 8.50 | % | 728,536 | 6.00 | % | ||||||||||||||||||||||||||
| Northwest Bank | 1,526,047 | 12.58 | % | 1,030,941 | 8.50 | % | 970,298 | 8.00 | % | ||||||||||||||||||||||||||
| CET1 capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,483,249 | 12.22 | % | 849,959 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||
| Northwest Bank | 1,526,047 | 12.58 | % | 849,010 | 7.00 | % | 788,367 | 6.50 | % | ||||||||||||||||||||||||||
| Tier 1 capital (leverage) (to average assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,483,249 | 9.47 | % | 626,201 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
| Northwest Bank | 1,526,047 | 9.76 | % | 625,427 | 4.00 | % | 781,784 | 5.00 | % | ||||||||||||||||||||||||||
(1) Amounts and ratios include the capital conservation buffer of 2.5%, which does not apply to Tier 1 capital to average assets (leverage ratio).
(2) Reflects the well-capitalized standard applicable to Northwest Bank and the well-capitalized standard applicable to the Company under the Federal Reserve Board's Regulation Y.
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| At December 31, 2024 (1) | |||||||||||||||||||||||||||||||||||
| Actual | Minimum capital requirements (2) | Well capitalized requirements (3) | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| Total capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | $ | 1,708,786 | 16.08 | % | $ | 1,115,932 | 10.50 | % | $ | 1,062,793 | 10.00 | % | |||||||||||||||||||||||
| Northwest Bank | 1,466,832 | 13.81 | % | 1,114,929 | 10.50 | % | 1,061,837 | 10.00 | % | ||||||||||||||||||||||||||
| Tier 1 capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,468,646 | 13.82 | % | 903,374 | 8.50 | % | 637,676 | 6.00 | % | ||||||||||||||||||||||||||
| Northwest Bank | 1,341,230 | 12.63 | % | 902,561 | 8.50 | % | 849,469 | 8.00 | % | ||||||||||||||||||||||||||
| CET1 capital (to risk weighted assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,342,801 | 12.63 | % | 743,955 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||
| Northwest Bank | 1,341,230 | 12.63 | % | 743,286 | 7.00 | % | 690,194 | 6.50 | % | ||||||||||||||||||||||||||
| Tier 1 capital (leverage) (to average assets) | |||||||||||||||||||||||||||||||||||
| Northwest Bancshares, Inc. | 1,468,646 | 10.39 | % | 565,426 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
| Northwest Bank | 1,341,230 | 9.50 | % | 564,937 | 4.00 | % | 706,171 | 5.00 | % | ||||||||||||||||||||||||||
(1) We elected to temporarily delay the estimated impact of current expected credit losses ("CECL") on regulatory capital in accordance with a rule of the Federal Reserve Board and other U.S. banking agencies for a two-year deferral period, followed by a three-year transition period which began January 1, 2022. As of December 31, 2024, 75% of the impact of the CECL deferral was phased, while the impact of the CECL deferral was fully phased in as of June 30, 2025.
(2) Amounts and ratios include the capital conservation buffer of 2.5%, which does not apply to Tier 1 capital to average assets (leverage ratio).
(3) Reflects the well-capitalized standard applicable to Northwest Bank and the well-capitalized standard applicable to the Company under the Federal Reserve Board's Regulation Y.
Regulatory Considerations
It is uncertain how the rapid changes initiated by the Trump administration will impact our business going forward. These include the impact of tariffs, immigration reform, and changes at the agencies that regulate us, including the modification, rescission, withdrawal or changes to the approach and enforcement of rules and guidance relating to us.
Liquidity
Northwest Bank is required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations. Northwest frequently monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings ("liquidity ratio"). Northwest Bank's liquidity ratio at September 30, 2025 was12.95%. Northwest Bank adjusts liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments. At September 30, 2025, Northwest had $3.7 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had no balance as of September 30, 2025, as well as $795 million of borrowing capacity available with the Federal Reserve Bank and $369 million with four correspondent banks.
Dividends
We paid $29 million in cash dividends during the quarter ended September 30, 2025 compared to $25 million for the quarter ended June 30, 2024. The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for the quarters ended September 30, 2025 and 2024 was 1000.0% and 76.9% on dividends of $0.20 per share. On October 16, 2025, the Board of Directors declared a cash dividend of $0.20 per share payable on November 18, 2025 to shareholders of record as of November 6, 2025. This represents the 124thconsecutive quarter we have paid a cash dividend.
Nonperforming Assets
The following table sets forth information with respect to nonperforming assets. Nonaccrual loans are those loans on which the accrual of interest has ceased. Generally, when a loan is 90 days past due, we fully reverse all accrued interest thereon and cease to accrue interest thereafter. Exceptions are made for loans that have contractually matured, are in the process of being modified to extend the maturity date and are otherwise current as to principal and interest, and well-secured loans that are in the process of collection. Loans may also be placed on nonaccrual before they reach 90 days past due if conditions exist that call into question our ability to collect all
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contractual interest. Other nonperforming assets represent property acquired through foreclosure or repossession. Foreclosed property is carried at the lower of its fair value less estimated costs to sell or the principal balance of the related loan.
| September 30, 2025 | December 31, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Loans 90 days or more past due: | |||||||||||
| Residential mortgage loans | $ | 9,427 | 4,931 | ||||||||
| Home equity loans | 2,963 | 2,250 | |||||||||
| Vehicle loans | 3,861 | 3,191 | |||||||||
| Other consumer loans | 1,004 | 776 | |||||||||
| Commercial real estate loans | 55,252 | 7,702 | |||||||||
| Commercial real estate - owner occupied | 1,201 | - | |||||||||
| Commercial loans | 9,490 | 7,335 | |||||||||
| Total loans 90 days or more past due | $ | 83,198 | 26,185 | ||||||||
| Total real estate owned (REO) | $ | 174 | 35 | ||||||||
| Total loans 90 days or more past due and REO | 83,372 | 26,220 | |||||||||
| Total loans 90 days or more past due to net loans receivable | 0.65 | % | 0.23 | % | |||||||
| Total loans 90 days or more past due and REO to total assets | 0.51 | % | 0.18 | % | |||||||
| Nonperforming assets: | |||||||||||
| Nonaccrual loans - loans 90 days or more past due | 82,498 | 25,529 | |||||||||
| Nonaccrual loans - loans less than 90 days past due | 45,827 | 35,872 | |||||||||
| Loans 90 days or more past due still accruing | 701 | 656 | |||||||||
| Total nonperforming loans | 129,026 | 62,057 | |||||||||
| Other nonperforming assets (1) | - | 16,102 | |||||||||
| Total nonperforming assets | $ | 129,200 | $ | 78,194 | |||||||
| Total nonaccrual loans to total loans | 0.99 | % | 0.55 | % | |||||||
(1) Other nonperforming assets includes nonaccrual loans held for sale.
Allowance for Credit Losses
On an ongoing basis, the Credit Administration department, as well as loan officers and department heads, review and monitor the loan portfolio for problem loans. This portfolio monitoring includes a review of the monthly delinquency reports as well as historical comparisons and trend analysis. Personal and small business commercial loans are classified primarily by delinquency status. In addition, a meeting is held every quarter with each vertical to monitor the performance and status of commercial loans on an internal watch list. On an on-going basis, the loan officer, in conjunction with a portfolio manager, grades or classifies problem commercial loans or potential problem commercial loans based upon their knowledge of the lending relationship and other information previously accumulated. This rating is also reviewed independently by our Loan Review department on a periodic basis. Our loan grading system for problem commercial loans is consistent with industry regulatory guidelines which classifies loans as "substandard", "doubtful" or "loss". Loans that do not expose us to risk sufficient to warrant classification in one of the previous categories, but which possess some weaknesses, are designated as "special mention". A "substandard" loan is any loan that is 90 days or more contractually delinquent or is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as "doubtful" have all the weaknesses inherent in those classified as "substandard" with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions or values, highly questionable and improbable. Loans classified as "loss" have all the weakness inherent in those classified as "doubtful" and are considered uncollectible.
Credit relationships that have been classified as substandard or doubtful and are greater than or equal to $1.0 million are reviewed by the Credit Administration department to determine if they no longer continue to demonstrate similar risk characteristics to their loan pool. If a loan no longer demonstrates similar risk characteristics to their loan pool they are removed from the pool and an individual assessment will be performed.
If it is determined that a loan needs to be individually assessed, the Credit Administration department determines the proper measure of fair value for each loan based on one of three methods: (1) the present value of expected future cash flows discounted at the loan's effective interest rate; (2) the loan's observable market price; or (3) the fair value of the collateral if the loan is collateral dependent, less costs of sale or disposal. If the measurement of the fair value of the loan is more or less than the amortized cost basis of the loan, the Credit Administration department adjusts the specific allowance associated with that individual loan accordingly.
If a substandard or doubtful loan is not individually assessed, it is grouped with other loans that possess common characteristics for credit losses and analysis. For the purpose of calculating reserves, we have grouped our loans into seven segments: residential
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mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial loans. The allowance for credit losses is measured using a combination of statistical models and qualitative assessments. We use a twenty four month forecasting period and revert to historical average loss rates thereafter. Reversion to average loss rates takes place over twelve months. Historical average loss rates are calculated using historical data beginning in October 2009 through the current period.
The credit losses for individually assessed loans along with the estimated loss for each homogeneous pool are consolidated into one summary document. This summary schedule along with the support documentation used to establish this schedule is presented to management's Allowance for Credit Losses Committee ("ACL Committee") monthly. The ACL Committee reviews and approves the processes and ACL documentation presented. Based on this review and discussion, the appropriate amount of ACL is estimated and any adjustments to reconcile the actual ACL with this estimate are determined. The ACL Committee also considers if any changes to the methodology are needed. In addition to the ACL Committee's review and approval, a review is performed by the Risk Management Committee of the Board of Directors on a quarterly basis and annually by internal audit.
In addition to the reviews by management's ACL Committee and the Board of Directors' Risk Management Committee, regulators from either the FDIC and/or the Pennsylvania Department of Banking and Securities perform an extensive review on at least an annual basis for the adequacy of the ACL and its conformity with regulatory guidelines and pronouncements. Any recommendations or enhancements from these independent parties are considered by management and the ACL Committee and implemented accordingly.
We acknowledge that this is a dynamic process and consists of factors, many of which are external and out of our control that can change frequently, rapidly and substantially. The adequacy of the ACL is based upon estimates using all the information previously discussed as well as current and known circumstances and events. There is no assurance that actual portfolio losses will not be substantially different than those that were estimated.
We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of September 30, 2025, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL increased by $41 million to $157 million, or 1.22% of total loans at September 30, 2025, up from 1.04% at December 31, 2024. This increase was primarily driven by the Day 1 initial provision from the Penns Woods acquisition of $20.6 million. Excluding the Day 1 provision for credit losses from the acquisition, the provision for credit losses for the quarter ended September 30, 2025 was $10.5 million, which increased compared to the prior year primarily due to an increase in net charge offs coupled with an increase due to individually assessed loans.
Total classified loans increased by $255 million to $527 million at September 30, 2025 compared to $272 million at December 31, 2024. This increase was driven by changes in our commercial real estate portfolio which increased $141 million. The increase in classified loans was driven by the Penns Woods acquisition, the remaining long-term healthcare portfolio being returned to held for investment, construction projects with lease up rates lower than projected and a few larger C&I borrowers whose performance deteriorated during the year.
We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses. Nonaccrual loans of $128 million at September 30, 2025 increased by $67 million, or 109%, from $61 million at December 31, 2024, or 0.99% of total loans receivable as of September 30, 2025 and 0.55% of total loans receivable as of December 31, 2024. As a percentage of average loans, annualized net charge-offs were 0.29% for the three months ended September 30, 2025 compared to 0.32% for the year ended December 31, 2024 which included a $15 million write-down on certain loans to fair value before they were transferred to held for sale.
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Comparison of Operating Results for the Quarters Ended September 30, 2025 and 2024
The following chart provides a reconciliation of net income from the quarter ended September 30, 2024 to the quarter ended September 30, 2025 (dollars in thousands):
Net income for the quarter ended September 30, 2025 was $3 million, or $0.02 per diluted share, a decrease of $31 million, or 91%, from net income of $34 million, or $0.26 per diluted share, for the quarter ended September 30, 2024. This decrease in net income resulted primarily from an increase in noninterest expense of $43 million which was driven by the increase in acquisition expense of $31 million and compensation and employee benefits of $7 million. This was offset by an increase in net interest income of $25 million which was driven by an increase in income on loans receivable of $21 million. Net income for the quarter ended September 30, 2025 represents annualized returns on average equity and average assets of 0.69% and 0.08%, respectively, compared to 8.50% and 0.93% for the same quarter last year.
To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in the discussion below on a fully taxable equivalent "FTE basis" (i.e., as if all income were taxable and at the same rate). For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100. See the "GAAP to Non-GAAP Reconciliations" for information regarding tax-equivalent adjustments and GAAP results.
Net Interest Income
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Net interest income for the third quarter of 2025 was $136 million which increased $25 million, or 22%, from the third quarter of 2024. Net interest income (FTE) was $137 million for the quarter ended September 30, 2025 and net interest margin (FTE) was 3.65%. Compared to the same quarter of the prior year, net interest income (FTE) increased $25 million and net interest margin (FTE) increased by thirty-two basis points. The increase in net interest income (FTE) and net interest margin (FTE) was driven by an increase in interest income resulting from higher earning asset yields, coupled with a decrease in interest expense due to decline in the average balance of borrowings and higher cost brokered CD.
For the nine months ended September 30, 2025, net interest income (FTE) was $386 million, an increase of $62 million, or 19%from the same period last year. Net interest margin increased by forty-eightbasis points. Similar to the quarterly fluctuations noted above, the increase in net interest income (FTE) included increases in interest income driven by higher interest-earning asset yields, including a $13.1 million non-accrual interest recovery in the first quarter of 2025, and balances, partially offset by lower interest-bearing liability costs and balances.
Average loans receivable increased $1.3 billion, or 12%, from the quarter ended September 30, 2024. This increase was driven by the acquisition of Penns Woods which resulted in an additional $1.8 billion in loans. Interest income on loans receivable increased by $21 million, or 14%, from the same quarter in the prior year, and by $37 million, or 8%, from the same nine-month period in the prior year, driven by the Penns Woods acqusition and a loan mix shift towards higher yielding commercial loans and an interest recovery of $13.1 million on a non-accrual commercial real estate loan payoff during the first quarter of 2025.
Average investments increased 6% from the third quarter of 2024 driven by the Penns Woods acquisition and the reinvestment of cash flows from regular principal payments and maturities. Interest income on investment securities increased by $2 million, or 19%, from the quarter ended September 30, 2024 and increased $9 million, or 29%, for the nine months ended September 30, 2024. The increase is due to the increase in the average balance of investment and the increase in yield on investments (FTE) to 2.81% for the quarter ended September 30, 2025 and 2.71% for the nine months ended September 30, 2025.
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Average deposits grew 10% from the quarter ended September 30, 2024 driven by an increase in average balances from the Penns Woods merger. Our average money market and interest-bearing checking deposit accounts grew by $426 million and $215 million, respectively, from the quarter ended September 30, 2024 partly due to acquisition and customers shifting funds to these competitively priced products as their time deposits matured. These increases were partially offset by a decrease in time deposits of $12 million. Interest expense on deposits decreased by $2 million, or 4% from the quarter ended September 30, 2024, and by $9 million, or 6% from the nine months ended September 30, 2024, primarily attributable to decrease in average yield paid on deposits which was partially offset by an increase in average balance of deposit accounts.
Compared to the quarter ended September 30, 2024, average borrowings saw a 57% increase. This increase was attributable to the acquisition of long-term borrowings from Penns Woods.The increase in the average balance of borrowings resulted in an increase in interest expense on borrowings by $1 million from the quarter ended September 30, 2024. Interest expense decreased $5 million from the nine months ended September 30, 2024 from the strategic pay-down of wholesale borrowings with the proceeds from our investment portfolio restructuring in the second quarter of 2024.
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Average Balance Sheet
(in thousands)
The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.
| Quarter ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
Average balance |
Interest |
Avg. yield/ cost (h) |
Average balance |
Interest |
Avg. yield/ cost (h) |
||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Residential mortgage loans | $ | 3,160,008 | 31,386 | 3.97 | % | $ | 3,286,316 | 31,537 | 3.84 | % | |||||||||||||||||||||||||
| Home equity loans | 1,421,717 | 21,080 | 5.88 | % | 1,166,866 | 17,296 | 5.90 | % | |||||||||||||||||||||||||||
| Consumer loans | 2,330,173 | 32,729 | 5.57 | % | 1,955,988 | 26,034 | 5.29 | % | |||||||||||||||||||||||||||
| Commercial real estate loans | 3,377,740 | 51,761 | 6.00 | % | 2,995,032 | 47,473 | 6.31 | % | |||||||||||||||||||||||||||
| Commercial loans | 2,278,859 | 41,519 | 7.13 | % | 1,819,400 | 34,837 | 7.62 | % | |||||||||||||||||||||||||||
| Loans receivable (a) (b) (d) (includes FTE adjustments of $752 and $764, respectively) | 12,568,497 | 178,475 | 5.63 | % | 11,223,602 | 157,177 | 5.57 | % | |||||||||||||||||||||||||||
| Mortgage-backed securities (c) | 1,810,209 | 12,668 | 2.80 | % | 1,735,728 | 10,908 | 2.51 | % | |||||||||||||||||||||||||||
| Investment securities (c) (d) (includes FTE adjustments of $218 and $150, respectively) | 301,719 | 2,153 | 2.85 | % | 263,127 | 1,504 | 2.29 | % | |||||||||||||||||||||||||||
| FHLB stock, at cost | 30,434 | 652 | 8.51 | % | 20,849 | 394 | 7.51 | % | |||||||||||||||||||||||||||
| Other interest-earning deposits | 164,131 | 1,700 | 4.05 | % | 173,770 | 2,312 | 5.29 | % | |||||||||||||||||||||||||||
| Total interest-earning assets (includes FTE adjustments of $970 and $914, respectively) | 14,874,990 | 195,648 | 5.22 | % | 13,417,076 | 172,295 | 5.11 | % | |||||||||||||||||||||||||||
| Noninterest-earning assets (e) | 1,067,450 | 934,593 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 15,942,440 | $ | 14,351,669 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Savings deposits | $ | 2,343,137 | 6,679 | 1.13 | % | $ | 2,151,933 | 6,680 | 1.23 | % | |||||||||||||||||||||||||
| Interest-bearing demand deposits | 2,782,369 | 8,258 | 1.18 | % | 2,567,682 | 7,452 | 1.15 | % | |||||||||||||||||||||||||||
| Money market deposit accounts | 2,392,748 | 11,785 | 1.95 | % | 1,966,684 | 9,170 | 1.85 | % | |||||||||||||||||||||||||||
| Time deposits | 2,818,526 | 25,158 | 3.54 | % | 2,830,737 | 30,896 | 4.34 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits (g) | 10,336,780 | 51,880 | 1.99 | % | 9,517,036 | 54,198 | 2.27 | % | |||||||||||||||||||||||||||
| Borrowed funds (f) | 347,357 | 3,366 | 3.84 | % | 220,677 | 2,266 | 4.09 | % | |||||||||||||||||||||||||||
| Subordinated debentures | 114,745 | 1,335 | 4.65 | % | 114,396 | 1,148 | 4.01 | % | |||||||||||||||||||||||||||
| Junior subordinated debentures | 129,986 | 2,123 | 6.39 | % | 129,727 | 2,467 | 7.56 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 10,928,868 | 58,704 | 2.13 | % | 9,981,836 | 60,079 | 2.39 | % | |||||||||||||||||||||||||||
| Noninterest-bearing demand deposits (g) | 2,959,871 | 2,579,775 | |||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | 244,306 | 217,161 | |||||||||||||||||||||||||||||||||
| Total liabilities | 14,133,045 | 12,778,772 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,809,395 | 1,572,897 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 15,942,440 | $ | 14,351,669 | |||||||||||||||||||||||||||||||
| Net interest income (FTE)/Interest rate spread (FTE) (d) | 136,944 | 3.09 | % | 112,216 | 2.72 | % | |||||||||||||||||||||||||||||
| Net interest-earning assets/Net interest margin (FTE) | $ | 3,946,122 | 3.65 | % | $ | 3,435,240 | 3.33 | % | |||||||||||||||||||||||||||
| Tax equivalent adjustment (d) | 970 | 914 | |||||||||||||||||||||||||||||||||
| Net interest income, GAAP basis | 135,974 | 111,302 | |||||||||||||||||||||||||||||||||
| Ratio of interest-earning assets to interest- bearing liabilities | 1.36X | 1.34X | |||||||||||||||||||||||||||||||||
(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.
(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
(d)Interest income on tax-free investment securities and tax-free loans are presented on a FTE basis. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
(f)Average balances include FHLB borrowings and collateralized borrowings.
(g)Average cost of deposits were 1.55% and 1.78%, respectively.
(h)Annualized.
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Rate/Volume Analysis
(in thousands)
The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected interest income (FTE) and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) net change. Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.
| For the quarter ended September 30, 2025 vs. 2024 | |||||||||||||||||
| Increase/(decrease) due to |
Total increase/(decrease) |
||||||||||||||||
| Rate | Volume | ||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans receivable | $ | 2,201 | 19,097 | 21,298 | |||||||||||||
| Mortgage-backed securities | 1,238 | 522 | 1,760 | ||||||||||||||
| Investment securities | 374 | 275 | 649 | ||||||||||||||
| FHLB stock, at cost | 53 | 205 | 258 | ||||||||||||||
| Other interest-earning deposits | (512) | (100) | (612) | ||||||||||||||
| Total interest-earning assets | 3,354 | 19,999 | 23,353 | ||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Savings deposits | (546) | 545 | (1) | ||||||||||||||
| Interest-bearing demand deposits | 168 | 638 | 806 | ||||||||||||||
| Money market deposit accounts | 516 | 2,099 | 2,615 | ||||||||||||||
| Time deposits | (5,628) | (110) | (5,738) | ||||||||||||||
| Borrowed funds | (128) | 1,228 | 1,100 | ||||||||||||||
| Subordinated debt | 183 | 4 | 187 | ||||||||||||||
| Junior subordinated debentures | (348) | 4 | (344) | ||||||||||||||
| Total interest-bearing liabilities | (5,783) | 4,408 | (1,375) | ||||||||||||||
| Net change in net interest income (FTE) | $ | 9,137 | 15,591 | 24,728 | |||||||||||||
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Average Balance Sheet
(in thousands)
The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages
.
| Nine months ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
Average balance |
Interest |
Avg. yield/ cost (h) |
Average balance |
Interest |
Avg. yield/ cost (h) |
||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Residential mortgage loans | $ | 3,135,705 | 91,758 | 3.90 | % | $ | 3,340,332 | 96,392 | 3.85 | % | |||||||||||||||||||||||||
| Home equity loans | 1,236,733 | 53,509 | 5.78 | % | 1,185,145 | 51,893 | 5.85 | % | |||||||||||||||||||||||||||
| Consumer loans | 2,118,568 | 87,650 | 5.53 | % | 2,012,461 | 77,401 | 5.14 | % | |||||||||||||||||||||||||||
| Commercial real estate loans | 3,033,193 | 151,726 | 6.60 | % | 3,005,966 | 136,556 | 6.07 | % | |||||||||||||||||||||||||||
| Commercial loans | 2,145,555 | 114,818 | 7.06 | % | 1,768,325 | 99,923 | 7.55 | % | |||||||||||||||||||||||||||
| Loans receivable (a) (b) (d) (includes FTE adjustments of $2,186 and $2,227, respectively) | 11,669,754 | 499,461 | 5.72 | % | 11,312,229 | 462,165 | 5.46 | % | |||||||||||||||||||||||||||
| Mortgage-backed securities (c) | 1,791,479 | 36,552 | 2.72 | % | 1,729,064 | 28,278 | 2.18 | % | |||||||||||||||||||||||||||
| Investment securities (c) (d) (includes FTE adjustments of $529 and $427, respectively) | 277,338 | 5,420 | 2.61 | % | 294,598 | 4,251 | 1.92 | % | |||||||||||||||||||||||||||
| FHLB stock, at cost | 23,080 | 1,336 | 7.74 | % | 26,195 | 1,499 | 7.64 | % | |||||||||||||||||||||||||||
| Other interest-earning deposits | 209,320 | 6,789 | 4.28 | % | 124,037 | 4,935 | 5.31 | % | |||||||||||||||||||||||||||
| Total interest-earning assets (includes FTE adjustments of $2,715 and $2,654, respectively) | 13,970,971 | 549,558 | 5.26 | % | 13,486,123 | 501,128 | 4.96 | % | |||||||||||||||||||||||||||
| Noninterest-earning assets (e) | 972,376 | 919,969 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 14,943,347 | $ | 14,406,092 | |||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Savings deposits | $ | 2,250,418 | 19,653 | 1.17 | % | $ | 2,139,461 | 17,673 | 1.10 | % | |||||||||||||||||||||||||
| Interest-bearing demand deposits | 2,662,521 | 22,513 | 1.13 | % | 2,554,172 | 19,501 | 1.02 | % | |||||||||||||||||||||||||||
| Money market deposit accounts | 2,200,063 | 30,748 | 1.87 | % | 1,962,019 | 25,684 | 1.75 | % | |||||||||||||||||||||||||||
| Time deposits | 2,683,081 | 73,117 | 3.64 | % | 2,787,306 | 91,780 | 4.40 | % | |||||||||||||||||||||||||||
| Total interesting-bearing deposits (g) | 9,796,083 | 146,031 | 1.99 | % | 9,442,958 | 154,638 | 2.19 | % | |||||||||||||||||||||||||||
| Borrowed funds (f) | 260,392 | 7,618 | 3.91 | % | 337,427 | 11,636 | 4.61 | % | |||||||||||||||||||||||||||
| Subordinated debentures | 114,661 | 3,631 | 4.22 | % | 114,310 | 3,444 | 4.02 | % | |||||||||||||||||||||||||||
| Junior subordinated debentures | 129,922 | 6,327 | 6.42 | % | 129,662 | 7,375 | 7.60 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 10,301,058 | 163,607 | 2.12 | % | 10,024,357 | 177,093 | 2.36 | % | |||||||||||||||||||||||||||
| Noninterest-bearing demand deposits (g) | 2,721,350 | 2,581,018 | |||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | 232,909 | 245,917 | |||||||||||||||||||||||||||||||||
| Total liabilities | 13,255,317 | 12,851,292 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 1,688,030 | 1,554,800 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 14,943,347 | $ | 14,406,092 | |||||||||||||||||||||||||||||||
| Net interest income (FTE)/Interest rate spread (FTE) (d) | 385,951 | 3.14 | % | 324,035 | 2.60 | % | |||||||||||||||||||||||||||||
| Net interest-earning assets/Net interest margin (FTE) | $ | 3,669,913 | 3.69 | % | $ | 3,461,766 | 3.21 | % | |||||||||||||||||||||||||||
| Tax equivalent adjustment (d) | 2,715 | 2,654 | |||||||||||||||||||||||||||||||||
| Net interest income, GAAP basis | 383,236 | 321,381 | |||||||||||||||||||||||||||||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.36X | 1.35X | |||||||||||||||||||||||||||||||||
(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.
(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
(d)Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent ("FTE") basis. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.
(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
(f)Average balances include FHLB borrowings and collateralized borrowings.
(g)Average cost of deposits were 1.56% and 1.72%, respectively.
(h)Annualized.
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Rate/Volume Analysis
(in thousands)
The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected interest income (FTE) and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) net change. Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.
| For the nine months ended September 30, 2025 vs. 2024 | |||||||||||||||||
| Increase/(decrease) due to |
Total increase/(decrease) |
||||||||||||||||
| Rate | Volume | ||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Loans receivable | $ | 21,995 | 15,301 | 37,296 | |||||||||||||
| Mortgage-backed securities | 7,000 | 1,274 | 8,274 | ||||||||||||||
| Investment securities | 1,508 | (339) | 1,169 | ||||||||||||||
| FHLB stock, at cost | 18 | (181) | (163) | ||||||||||||||
| Other interest-earning deposits | (875) | 2,729 | 1,854 | ||||||||||||||
| Total interest-earning assets | 29,646 | 18,784 | 48,430 | ||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Savings deposits | 1,011 | 969 | 1,980 | ||||||||||||||
| Interest-bearing demand deposits | 2,096 | 916 | 3,012 | ||||||||||||||
| Money market deposit accounts | 1,738 | 3,326 | 5,064 | ||||||||||||||
| Time deposits | (15,823) | (2,840) | (18,663) | ||||||||||||||
| Borrowed funds | (1,764) | (2,254) | (4,018) | ||||||||||||||
| Subordinated debt | 176 | 11 | 187 | ||||||||||||||
| Junior subordinated debentures | (1,061) | 13 | (1,048) | ||||||||||||||
| Total interest-bearing liabilities | (13,627) | 141 | (13,486) | ||||||||||||||
| Net change in net interest income (FTE) | $ | 43,273 | 18,643 | 61,916 | |||||||||||||
Provision for Credit Losses
| 3Q24 | 4Q24 | 1Q25 | 2Q25 | 3Q25 | |||||||||||||||||||||||||
| Provision for credit losses - loans (in thousands) | $ | 5,727 | 15,549 | 8,256 | 11,456 | 31,394 | |||||||||||||||||||||||
| Provision/(benefit) for credit losses - unfunded commitments (in thousands) | (852) | 1,016 | (345) | (2,712) | (189) | ||||||||||||||||||||||||
| Annualized net charge-offs to average loans | 0.18 | % | 0.87 | % | 0.08 | % | 0.18 | % | 0.29 | % | |||||||||||||||||||
The provision for credit losses increased by $26 million from the quarter ended September 30, 2024. This increase included a $26 million increase in the provision for credit losses - loans, as well as a $0.7 million increase in the provision for credit losses - unfunded commitments. This increase is due to the initial Day 1 provision from the Penns Woods acquisition of $20.6 million. Excluding the Day 1 provision for credit losses from the acquisition, the provision for credit losses for the quarter ended September 30, 2025 was $10.5 million, which increased compared to the prior year and the prior quarter primarily due to an increase in net charge offs coupled with an increase due to individually assessed loans.
The increase in our provision forunfunded commitments in the current period is due to the Penns Woods acquisition offset by a decline based on the timing of organic origination and funding of commercial construction loans and lines of credit.
Additionally, the Company saw an increase in classified loans to $527 million, or 4.07% of total loans, at September 30, 2025 from $320 million, or 2.83% of total loans, at September 30, 2024 and $518 million, or 4.57% of total loans, at June 30, 2025. This increase was driven by changes in our commercial real estate portfolio which increased $141 million from the prior year. The increase
from the prior quarter was primarily due to classified loans acquired in the Penns Woods acquisition which were partially offset by improvements in our legacy loan portfolio.
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In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited to improvements in unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled "Allowance for Credit Losses." The provision that is recorded is appropriate, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at September 30, 2025.
Noninterest Income
(a) Other noninterest income includes the net gain on real estate owned, mortgage banking income, and other operating income. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Noninterest income for the quarter ended September 30, 2025 was $32 million, an increase of $4 million from the quarter ended September 30, 2024, driven by an increase in other operating income from a gain on equity method investments during the current quarter compared to a loss on equity method investments and the sale of a building during the prior year. From the nine months ended September 30, 2024 noninterest income increased $45 million which was driven by the loss on sale in investments that occurred in the second quarter of 2024. Excluding the loss on sale of securities, noninterest income increased $5 million, or 6%,from the nine months ended September 30, 2024, driven by growth within our trust and other financial services operations.
Noninterest Expense
(a) Other noninterest expense includes collections expense, marketing expense, FDIC insurance expense, amortization of intangible assets, asset disposition and restructuring expense, and other expenses. See the "Consolidated Statements of Income" in Item 1. Financial Statements of this report.
Noninterest expense increased by $43 million, or 47%, from the quarter ended September 30, 2024 and $50 million, or 18%from the nine months ended September 30, 2024. The increase from the prior year quarter was primarily attributable to the increase in merger and restructuring expenses of $31 million for the quarter ended September 30, 2025, which is driven by the Penns Woods acquisition and an increase in compensation and employee benefits expense of $7 million, or 12%, to $63 million for the quarter ended
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September 30, 2025 driven primarily by an increase in core compensation and benefits expense due to the addition of Penns Woods employees coupled with an increase in performance based incentive compensation expense. Additionally, there was a $1 million in amortization of intangible expense related to the acquisition.
The increase from the nine months ended September 30, 2024 was driven by an increase in merger and restructuring expensesof $36 million, driven by the Penns Woods acquisition and an increase in compensation and employee benefits expense of $12 million or 7% driven primarily by the same factors discussed above.
Income Taxes
The provision for income taxes decreased by $10 million from the quarter ended September 30, 2024due to lower income before taxes caused by the large acquisition expense in during the third quarter. The provision for income taxes increased by $4 million from the nine months ended September 30, 2024 primarily due to higher income before income taxes from the loss on sale in investments that occurred in the second quarter of 2024..
The provision for income taxes is primarily driven by changes in our current period income before taxes. We anticipate our effective tax rate to be between 22.0% and 24.0% for the year ending December 31, 2025.
GAAP to Non-GAAP Reconciliations
The following non-GAAP financial measures used by the Company provide information useful to investors in understanding our operating performance and trends, and facilitate comparisons with the performance of our peers. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company's Consolidated Statements of Income.
| Quarter ended | |||||||||||||||||||||||||||||
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September 30, 2025 |
June 30, 2025 |
March 31, 2025 |
December 31, 2024 |
September 30, 2024 |
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| Net interest income fully tax equivalent (FTE) | |||||||||||||||||||||||||||||
| Net interest income (GAAP) | $ | 135,974 | 119,444 | 127,818 | 114,197 | 111,302 | |||||||||||||||||||||||
| Plus: Taxable-equivalent adjustment | 970 | 878 | 867 | 851 | 914 | ||||||||||||||||||||||||
| Net interest income FTE | 136,944 | 120,322 | 128,685 | 115,048 | 112,216 | ||||||||||||||||||||||||
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Northwest Bancshares Inc. published this content on November 10, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 10, 2025 at 20:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]