Northwest Bancshares, Inc.

Northwest Bancshares, Inc. Annual Report: A Year of Strategic Growth and Strong Performance

In 2025, Northwest Bancshares, Inc. achieved significant strategic growth and strong financial performance, highlighted by a major acquisition and continued expansion in its core banking operations. This summary offers investors a clear picture of the company's financial health, strategic initiatives, and future outlook.

Business Overview

Northwest Bancshares, Inc. functions as a financial holding company, primarily operating through its subsidiary, Northwest Bank. The company delivers a comprehensive suite of banking and financial services to individuals, businesses, and organizations. These services encompass:

• Deposit Products: Checking, savings, money market accounts, and certificates of deposit.
• Loan Products: Commercial loans (including real estate and industrial), consumer loans (residential mortgages, home equity, auto, and other personal loans).
• Specialized Services: Mortgage banking and wealth management.

Northwest Bank reaches customers through a network of branches and digital channels across its key markets in Pennsylvania, New York, Ohio, and Maryland.

Key Financial Highlights

Northwest Bancshares reported strong financial results for the year ending December 31, 2025:

• Net Interest Income: Grew robustly by 12.5% to $450 million, driven by strong loan growth and effective interest rate management.
• Net Income: Increased by 15% to $120 million, resulting in diluted earnings per share of $1.15. This growth reflects efficient operations and successful integration efforts.
• Total Assets: Expanded significantly by 18% to $15.5 billion, primarily due to the Penns Woods acquisition and organic loan growth.
• Total Deposits: Rose by 16% to $12.8 billion, demonstrating strong customer relationships and effective deposit-gathering strategies.
• Loan Portfolio: Expanded by 14% to $10.5 billion, reflecting healthy demand across both commercial and consumer segments.
• Profitability Ratios: The company achieved solid profitability, with a Return on Assets (ROA) of 0.85% and a Return on Equity (ROE) of 8.2%. These ratios indicate efficient asset utilization and strong shareholder value creation.

Strategic Expansion: The Penns Woods Acquisition

A pivotal moment in 2025 was Northwest's successful acquisition of Penns Woods Bancorp Inc., completed on July 25, 2025. This strategic move significantly expanded Northwest's market presence and financial scale, adding approximately $2.5 billion in assets, $2.0 billion in deposits, and 35 new branch locations across central Pennsylvania.

The integration process is well underway. The acquisition positively contributed to Northwest's financial results during the last quarter of 2025 (October 1 to December 31) and established a strong foundation for future growth. Northwest anticipates realizing $15 million in annual cost savings from the integration by the end of 2026.

Diversified Loan and Investment Portfolios

Northwest Bancshares maintains a well-diversified portfolio of loans and investment securities:

• Loan Portfolio: The total loan portfolio grew to $10.5 billion, featuring a balanced mix:
  • Commercial Banking (55% of total loans): This segment, totaling $5.8 billion, achieved robust 18% growth. Commercial real estate loans (including owner-occupied) comprised 35% of the total portfolio, while general commercial loans made up 20%. This strong focus on commercial lending reflects healthy business activity in the operating regions.
  • Personal Banking (45% of total loans): This segment, totaling $4.7 billion, grew by 9%. Residential mortgages remained the largest component at 30% of the total portfolio, with home equity, auto, and other consumer loans making up the remaining 15%.
• Investment Securities: The investment securities portfolio stood at $3.5 billion, providing both liquidity and yield. It primarily includes:
  • U.S. Government and Agency Securities (60%): These offer stability and low credit risk.
  • Mortgage-Backed Securities (MBS) (30%): This includes agency-backed (FNMA, GNMA, FHLMC) fixed-rate and variable-rate MBS, providing diversified exposure to the housing market.
  • Corporate Debt (10%): A smaller allocation for enhanced yield.

Prudent Risk Management and Credit Quality

Northwest's robust credit quality metrics underscore its commitment to strong risk management:

• Asset Quality: Non-performing assets (NPAs) decreased to a low 0.45% of total loans, down from 0.52% in the prior year. This reduction indicates effective credit underwriting and monitoring. Net charge-offs remained low at 0.18% of average loans.
• Allowance for Loan Losses: The allowance for loan and lease losses stood at $120 million, representing 1.14% of total loans. This provides ample coverage for potential credit losses.
• Off-Balance Sheet Exposure: The company carefully manages $1.2 billion in commitments, such as unused lines of credit, within established risk parameters, monitoring them for potential drawdowns.
• Loan Modifications: The volume of modified loans, primarily for struggling borrowers, decreased by 15% year-over-year. These modifications predominantly involved payment deferrals (60%) and extended maturities (30%), with a smaller portion involving interest rate reductions. This positive trend suggests improving economic conditions for borrowers and proactive engagement from the bank.

Financial Health, Capital, and Liquidity

Northwest Bancshares maintained a strong financial position throughout 2025:

• Capital Ratios: The company consistently held capital ratios well above regulatory "well-capitalized" thresholds. This reflects a robust financial foundation capable of supporting future growth.
• Cash and Cash Equivalents: Northwest maintained a strong cash position, with cash and amounts due from banks providing immediate liquidity.
• Debt Structure: Total borrowings, including Federal Home Loan Bank (FHLB) advances (loans from a cooperative bank), subordinated debt, and other short-term borrowings, supported asset growth and diversified funding sources. The company maintains a diversified funding base to support its operations and growth initiatives.
• Liquidity Management: Northwest manages its liquidity using a combination of on-balance sheet resources (like cash and investment securities) and off-balance sheet funding sources (including FHLB borrowing capacity and brokered deposits, which are large deposits obtained from other financial institutions). Contingency funding plans are in place to address potential liquidity stresses and ensure sufficient funds are available to meet obligations.

Risk Factors

Various risks could materially affect Northwest Bancshares' business, financial condition, and results of operations. Key risks include:

• Interest Rate Risk: Fluctuations in interest rates could negatively impact net interest income (the difference between interest earned and interest paid), asset valuations, and deposit costs.
• Credit Risk: The risk of financial loss if borrowers cannot repay their loans or fulfill contractual obligations. This includes risks tied to specific loan portfolios (e.g., commercial real estate, consumer loans) and broader economic conditions.
• Liquidity Risk: The risk that the company cannot meet its financial obligations as they come due without incurring unacceptable losses.
• Operational Risk: Risks inherent in daily operations, such as fraud, system failures, human error, and inadequate internal processes.
• Cybersecurity Risk: The risk of data breaches, system disruptions, or other cyberattacks that could compromise sensitive information or disrupt operations.
• Regulatory and Compliance Risk: The risk of failing to comply with extensive and evolving banking laws, regulations, and supervisory requirements, which could lead to penalties, restrictions, or reputational damage.
• Economic Conditions: Adverse changes in local, regional, national, or global economic conditions could negatively impact loan demand, credit quality, and deposit levels.
• Integration Risk: The risk of challenges in successfully integrating acquired businesses, such as Penns Woods Bancorp Inc., potentially hindering the achievement of anticipated synergies or causing disruptions.

Competitive Position

The financial services industry remains highly competitive across all of Northwest Bancshares' operating markets. Northwest competes with a wide range of financial institutions, including national, regional, and community banks, credit unions, and non-bank financial service providers.

Competitors vie for customers based on factors such as interest rates on loans and deposits, service fees, product offerings, customer service quality, and convenience (including branch locations and digital capabilities). Northwest differentiates itself and maintains its competitive standing by leveraging its community banking model, local market expertise, personalized customer service, and the expanded footprint gained from the Penns Woods acquisition.

Strategic Outlook and Shareholder Value

Looking ahead, Northwest Bancshares focuses on several key strategic priorities:

• Successful Integration: Complete the seamless integration of Penns Woods Bancorp to maximize operational efficiencies, enhance customer retention, and realize anticipated cost savings.
• Organic Growth: Continue prudent loan growth across both commercial and consumer segments, leveraging its expanded footprint and market presence.
• Digital Transformation: Invest in digital banking capabilities to enhance customer experience, improve operational efficiency, and expand reach.
• Shareholder Returns: Maintain a disciplined capital allocation strategy, including consistent dividend payouts and potential share repurchases, to enhance long-term shareholder value.

Northwest Bancshares, Inc. concluded 2025 in a strong financial position, poised for continued growth and profitability, while effectively managing risk and delivering value to its shareholders.