NWBI Q2 Deep Dive: Merger Integration and Deposit Stability Take Center Stage

Regional banking company Northwest Bancshares (NASDAQ:NWBI) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 53.5% year on year to $150.4 million. Its non-GAAP profit of $0.30 per share was 7.1% above analysts’ consensus estimates.

Is now the time to buy NWBI? Find out in our full research report (it’s free).

StockStory’s Take

Northwest Bancshares delivered solid revenue and non-GAAP profit growth in the second quarter, outpacing Wall Street expectations, but the market response was notably negative. Management attributed performance to strong net interest margin and improved fee income, supported by prudent expense control even as the company completed the Penns Woods merger. CEO Louis Torchio emphasized the operational complexity and successful execution of the integration, stating, “Closing the largest transaction in our company's history, while continuing to deliver strong operational and financial performance is a result of the cumulative effort of many months of hard work by our team.” The company also reported stable credit quality and deposit growth, but investors appear focused on near-term merger costs and uncertainties.

Looking ahead, Northwest Bancshares’ outlook is shaped by ongoing integration of Penns Woods, cost control efforts, and the need to optimize the combined operations. Management expects to maintain net interest margin stability and gradually realize cost savings, with CFO Douglas Schosser noting, "We expect to achieve 100% of the savings by the second quarter of 2026." The company is also focused on growing its commercial and consumer loan portfolios while closely monitoring credit risk in specific segments such as multifamily construction and certain C&I borrowers. As the merger synergies unfold and the interest rate environment evolves, leadership remains cautious in providing specific guidance, preferring to update investors as integration progresses.

Key Insights from Management’s Remarks

Management credited the quarter’s performance to successful Penns Woods merger integration, disciplined lending strategy, and expense management, while highlighting ongoing credit and merger-related uncertainties.

• Penns Woods acquisition impact: The closing and initial integration of the Penns Woods transaction expanded Northwest Bancshares’ footprint to over 150 financial centers, boosted asset size to approximately $17 billion, and is expected to deliver substantial cost synergies. Management reported that merger-related cost reductions are on target and that the deal’s equity consideration was lower than initially anticipated due to favorable share pricing at close.
• Deposit growth and stability: Average deposits increased modestly, with management citing a less competitive environment for rate-sensitive deposits. The acquisition brought in a new base of customer deposits, and leadership highlighted a continued focus on maintaining a high-quality, low-cost funding profile as a differentiator against regional peers.
• Loan portfolio remix: The company continued its strategic shift toward a more balanced mix of commercial and consumer loans, with C&I (commercial and industrial) lending growing 19% year over year. Consumer lending also increased, aided by targeted efforts in indirect and home equity channels, which management described as opportunistic moves given current rate conditions.
• Credit quality trends: Net charge-offs and delinquencies remained stable and below guidance, but management noted an increase in classified loans, particularly in multifamily construction projects affected by excess supply and in select C&I credits facing macroeconomic headwinds. The company believes it is adequately reserved and expects some improvement in non-performing assets by year-end.
• Expense control and efficiency: Despite higher noninterest expenses tied to the merger, underlying costs remained consistent with prior trends. Excluding one-time charges, the efficiency ratio improved, reflecting an ongoing focus on operational discipline while investing in talent and customer service.

Drivers of Future Performance

Northwest Bancshares’ forward outlook centers on merger integration, cost savings realization, and adapting to evolving credit and deposit trends.

• Merger synergies and expense management: Management anticipates realizing full cost savings from the Penns Woods integration by the second quarter of next year. Until then, noninterest expenses will remain elevated due to transition costs, with CFO Schosser emphasizing, “We originally had indicated that we’d get about 75% of [cost savings] in 2025, with the remainder coming through the second quarter of ’26.”
• Deposit and loan growth opportunities: The company expects continued, albeit modest, deposit growth, supported by the incoming Penns Woods customer base and reduced competition for rate-sensitive deposits. Loan growth will be targeted and flexible, with the ability to shift focus between commercial and consumer segments depending on market and interest rate conditions.
• Credit risk management: Management highlighted ongoing monitoring of credit exposures, especially within multifamily real estate and certain C&I borrowers. The company expects some classified loans to resolve as market conditions normalize but remains cautious given macroeconomic uncertainties and evolving industry-specific risks such as tariffs.

Catalysts in Upcoming Quarters

In the coming quarters, our team will closely track (1) the pace at which Northwest Bancshares realizes cost synergies and operational efficiencies from the Penns Woods merger, (2) stabilization and growth of core deposits following integration, and (3) credit trends in the commercial real estate and C&I portfolios, particularly in regions or sectors experiencing headwinds. Updates on new branch openings and the impact of shifting interest rates will also be important markers.

Northwest Bancshares currently trades at $11.56, down from $12.34 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.