Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bancshares Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Michael Perry, Managing Director, Corporate Development and Strategy and Investor Relations. Please go ahead.

Good morning, everyone, and thank you, operator. Welcome to Northwest Bancshares Fourth Quarter 2025 Earnings Call. Joining me today are Lou Torchio, President and CEO of Northwest Bancshares; Doug Schosser, our Chief Financial Officer; and T.K. Creal, our Chief Credit Officer. During this call, we will refer to information included in the supplemental fourth quarter and full year 2025 earnings presentation, which is available on our Investor Relations website. If you'd like to read our forward-looking and other related disclosures, you can find them on Slide 2. Thank you. And now I'll hand it over to Lou.

Good morning, everyone. Thank you for joining us today to discuss our fourth quarter and 2025 full year results. I'll let Doug take you through the specifics of our strong fourth quarter performance. I would like to take a step back and reflect on a transformational year for Northwest and how our achievements position us for continued growth in 2026. On Slide 4, you can see some of the financial highlights of 2025. We closed on a significant acquisition, drove record revenue of $655 million for the full year and continue to expand the firm's net interest margin. Coupled with our demonstrated expense management discipline through the closing and integration of our sizable acquisition, we drove double-digit EPS growth, all while investing in the talent, technology and new financial centers and products to support our future growth prospects. One of the high points of the year was the acquisition and successful integration of Penns Woods, bringing us into the ranks of the top 100 banks in the U.S. by assets. As well as adding 20 financial centers to our existing Pennsylvania footprint, we welcome new team members and thousands of new customers to Northwest. I'm proud of the team for a successful execution of a seamless integration at scale while maintaining our distinct Northwest culture and driving a strong core performance across the bank. We continue to transform our consumer bank, moving from branch consolidation to expansion, opening our first new financial center since 2018 in the Indianapolis, Indiana MSA, featuring our new design focused on customer hospitality. We're building out our presence in our Columbus headquarters market with new financial centers now under development and due to open later this year in key locations across the city. We've already added several new team members with strong local and business…

Thank you, Lou, and good morning, everyone. As Lou indicated, we are pleased with our financial performance. We delivered a strong fourth quarter, and we successfully completed all remaining merger conversion activities on time and on budget. This is the product of all the efforts of our entire team working tirelessly to deliver these results while also ensuring that our merger and conversion activities went smoothly. I am grateful to the team for their efforts. Now let's continue on Page 5 of the earnings presentation, where I'll walk you through the highlights of Northwest financial results for the fourth quarter. As a reminder, we closed our merger on July 25. As such, this is our first full quarter of reporting as a combined entity. Given the overall size of this transaction, our fully completed conversion and opportunities as a combined organization, we don't intend to disaggregate results now or in the future. Our GAAP EPS for the quarter was $0.31 per share. And on an adjusted basis, our EPS was $0.33 per share, an improvement on the prior quarter of $0.29 per share and $0.04 per share, respectively, driven by record revenue, net interest margin improvement and expense management discipline. Net interest income grew $6.2 million or 4.6% quarter-over-quarter, with net interest margin improving to 3.69%, benefiting from higher average loan yields, increased average earning assets from the acquisition and purchase accounting accretion. Noninterest income increased by $5.5 million or 17% quarter-over-quarter, driven by an increase in bank-owned life insurance income due to higher death benefit recorded in the fourth quarter, supporting a total revenue increase of $11.8 million quarter-over-quarter or 7%. We also saw improvement in our pretax pre-provision net revenue in the fourth quarter of 2025, which increased to $66.4 million, a 92% increase from the third quarter…

[Operator Instructions] Your first question comes from Jeff Rulis with D.A. Davidson.

Just a follow on, Doug, I appreciate the commentary on the expenses and the cost saves. I guess looking at the full year guide, call it, the midpoint at $425 million for expenses, I guess that's $106 million a quarter, I guess, if you just average. But typical seasonality and then is Q1 maybe a little -- you start off a little heavier on that end. If you could just comment on any trend line with the expenses, that would be great.

Yes, happy to, Jeff, and thanks for the question. So a couple of things, right? So yes, you're right. Seasonally, you will typically see some increases in expenses in the first quarter for like FICA resets and some other things. But I still think our overall guide, you're right in the way you think about it, right? If I've got the low end of the guide at about $105 million a quarter, we also would see increases typically in the second quarter for merit increases. So I think you're right to say that the first quarter might be a little bit elevated, but I would expect overall it not to be at the same level as we were at in the fourth quarter.

Got you. And it seemed like is some of the performance-based in Q4 a little onetime? I know that you've got the full quarter of Penns Woods, but is there a little bit of nonrecurring kind of performance year-end stuff in that figure?

Yes. As you true up all your incentive plans and production plans and other things in the year-end, you've got a little bit of that lift in the fourth quarter as well. Correct.

Appreciate it. And one last one, just on the margin, similar kind of question. The low 30 to 3.70% range, one, does that include accretion, assuming it does? And then two, kind of the rate assumptions underlying that?

Yes. So it does include sort of normal contractual purchase accounting accretion. So there would be some slight variation to that when you've got early paydowns or payoffs. So it's one thing to note. The other thing is we do have included in our guidance 3 rate cuts internally. Now one of them was in January. We received a rate cut that we weren't expecting in December. So that effectively offsets it. So we would be thinking there's going to be 2 more rate cuts between here and the end of the year. However, we are pretty neutrally positioned, drifting slightly asset sensitive, as I said in my remarks, but generally neutral. So our NIM guidance really isn't contingent on those 2 rate cuts. We would stick to that if there were only one rate cut or no rate cuts.

Your next question comes from Tim Switzer with KBW.

First one, a quick follow-up on the NIM and the purchase accounting. Can you clarify the overall net purchase accounting impact to NII this quarter? Because I think the slide deck referenced 4 basis points, but also $4 million. And my math on those don't quite add up to that. And then I guess, just to clarify, is that also a good run rate going forward?

Yes, I'm not sure on the math piece. But yes, the $4 million and the 4 basis points was effectively what we were kind of going back and recalculating all of that to. Again, I would say, generally speaking, we had pretty positive movements across the balance sheet, right? We did have a rate cut in there. So you had improvements in loan yields, small, but they were there in the margin. You had improvement or you had lower deposit costs and you also had improvements on the securities portfolio. And then you had that 4 basis points impact from purchase accounting. But again, all of those underlying metrics were driving up. Income-wise, of course, having a rate reduction in there sort of changes the income dynamic a little bit on the loan portfolio.

I get you. Okay. But is 4 basis points a good run rate for purchase accounting, obviously dependent on prepayments and things like that?

Yes, probably. I mean, we would have had -- as we went through the fourth quarter, of course, we closed our merger in July, right? So by the time we got through the end, the first 2 quarters are a little bit bumpy because you're still kind of catching up on everything. But the guidance would fully incorporate those contractual purchase accounting. So I think if you kind of go with the low 3.70s guidance that were provided, that would be inclusive both of normal performance as well as the impact of purchase accounting. Again, it does not assume materially different levels of prepayments.

Okay. Got it. And then I was looking for an update. You mentioned on the call, but on your SBA business, you mentioned about recently closing funding. Could you maybe provide a little bit more details there? And then what are your growth expectations for this business going forward? And how much of that volume will you be retaining on the balance sheet versus looking to sell?

Yes. I'll -- Lou will answer some of that, and I'll give you some of that. First of all, one of the things that we had the opportunity to do is balance sheet a bit more of that because we had some opportunistic fee income. As the BOLI proceeds come through and we have the opportunity to not have to take as many SBA gains, we certainly did that within the quarter because obviously, those are very nice yielding loans, and we like to have them on our balance sheet. And I think as we've talked about before, we do, do national originations in the SBA business. But for our in-footprint clients, we tend to want to keep them on the balance sheet. And the other thing that we'll tend to do is we'll manage a reasonable amount of growth in fee income from the SBA business as well as balance sheeting a reasonable portion of that business. I don't think we want to get into the cycle where we're booking all the gains in on that constant treadmill. So as we continue to build out the SBA vertical, we're going to do both. We're going to balance sheet, and we're going to sell for gains as we kind of migrate through the process. And then again, we are really excited about the build-out of that team and the fact that we've now reached the top 40 in SBA volume, top 40 originators by volume.

Yes, Tim, this is Lou. Just a follow-up on Doug's comments and your question. We really like the flexibility that this provides for us for commercial loan growth, spread income on the balance sheet with the flexibility and the lever to generate fee income. We are just now in the early innings of scaling this business. We've invested a lot in people, a lot in the underwriting and due diligence and portfolio management around this. And our strategy really is to capitalize on quality business nationally, but also and maybe more importantly, to focus on driving customers and customer retention in the footprint in the 4 states we operate in. So we're going to layer this product, and we're looking at some other SBA products into our retail franchise. As we noted, we thought it was important to note in the call that the deal we did right here in Columbus. And so yes, we're really, really happy with the business. We'll be -- like we are with all these businesses, we'll scale them prudently. We're not in a hurry to get to the top 10. So yes, really pleased with this. And most importantly, I think I'd like to drive the message that we've built the infrastructure to do this in a prudent manner.

Yes. Got it. I mean the strategy makes a lot of sense to me. You touched on it, if I could have one quick follow-up. There's been some disruption in the SBA space with the rising credit losses over the last few years and then some of the SOP changes over the summer. Where are you finding the talent you're hiring from? And how are you going forward, making sure that you guys are as you mentioned, prudently running the business?

Yes. No, great question because it's very important, right? So as you know, we've kind of remade the executive suite here over the last couple of years. And J.D. Marteau, who we formerly was GE, TD Bank and LendingClub. When he came to the firm, he had contacts that he was able to bring. So we know the management we're bringing in. We know the performance level, and we understand what their acumen is and they have a long history of success. I wouldn't certainly want to name firms, but I would tell you, like all businesses, we've gone to the best and the best of the industry and recruited from those franchise. So we're really comfortable and have experience with the team.

Your next question comes from Daniel Tamayo with Raymond James.

This is Tim DeLacey on for Danny. So I just wanted to switch over maybe to the balance sheet. You had mentioned in the release, you had targeted the securities portfolio increase in the quarter. Could you maybe share some details on maybe when the timing of when the securities were purchased during the quarter and then kind of describe maybe your appetite to grow the security book relative to the asset base going forward?

Yes. So we looked at the opportunity. So again, I think we were -- keep growing our securities book a little bit because we were slightly underweighted if you sort of compare us to sort of peer banks and other things. We did take advantage of that a little bit earlier in the quarter, but not all of it. So basically mid- to late October and then there was a bit more done in November, mid- to late November. And we'll continue to look at advantages for how do we sort of support that portfolio going forward. It's a very nice store of liquidity for us. And also, as we've got an outlook for declining rates, we'll also do things like try to prepurchase some of the securities that we see maturing within the quarter earlier in the quarter versus late to try to pick up a little bit of yield benefit there as well. So really, I would just say it's generally prudently managing the investment portfolio and growing it slightly just to keep it sort of in line with peers. I think we're targeting around 17% of loans or assets into that bucket.

Okay. Great. And then maybe just one follow-up. CRE down this quarter. You guys obviously have the capacity to grow the portfolio going forward here. But in that low to mid-single-digit guidance for loan growth in 2026, how should we be thinking about CRE as a contributor to the loan growth this year?

Yes. So you're right. We do have some opportunities there given the percentage of capital that we have related to our CRE book. It takes a while to turn that flow around, but we're definitely in the CRE business, and we continue to look for opportunities to sort of support that particular in our market. So again, it's not one of the businesses that we're aggressively growing nationally. But in our footprint, when there's good developers and operators, and we have opportunities to sort of lend to those we would. Again, we also have some nonperforming assets that we -- or some criticized and classified assets that we talked about that are some real estate developers. So you're also seeing a little bit of that pressure on that overall line item. And again, we hope that, that continues to abate as we get through next year. So again, we're looking forward to turning that CRE business around to get it to more flat to slight growth, and that's an opportunity that we have coming up in the next year or 2.

Your next question comes from Kyle Gierman with Hovde Group.

I'm on for Dave Bishop. Yes. So loan growth was strong this quarter. I was wondering if you could provide some color on what segments and geographic areas are leading the way and how the pipeline is looking into the new year?

Yes. So the pipeline is looking very good. So we've had a nice improvement in the portfolio actually throughout last year, and it continues into the first quarter. And I think I would say it's a broad-based level of growth. So we continue to see kind of growth in our national verticals. Where we're going to focus a little bit more is sort of in our 4-state footprint and in some of our businesses that we think we can continue to attract talent and develop some growth opportunities in market. But again, I would say it's generally broad-based. There are some other things that might translate into some good business opportunities into '26, like some of the tax changes that went through last term, including the expensing of equipment is good for our equipment finance business, the full expensing that you get on the tax benefit. So again, everywhere that there's some opportunities, and we like the credit profile and we like the returns that we're getting on those loans, we've got people who are out there and ready to do the business.

Awesome. And maybe a follow-up on that. Could you touch on the payoff and prepayment trends you are seeing in the quarter?

Yes. I mean, again, we've been focusing on the criticized classified assets and continue to manage that down. So our -- that was a pretty significant source of our paydowns. And then again, with interest rates falling, there's going to be other clients that are going to look to refinance existing loans. Obviously, we try to participate in those credits as well, but there's always a bit of a give and take in a rate environment that's changing. So I would just say there was nothing in particular that we'd point out on the paydown side, just sort of normal business flows. I will say that -- coming off of the year that we had focusing on the merger, now we're kind of back to business and running the bank more completely without having that distraction. So that will also be helpful.

Your next question comes from Matthew Breese with Stephens Inc.

Just a few for me. The first thing, quick, what was the exact amount of the BOLI death benefit? I was assuming about $6.5 million.

Yes. I think that is a pretty good assumption because it was about $6.5 million.

Okay. And then, Doug, you had talked a little bit about CD costs and upcoming maturities. I think you said 43% maturing in the first quarter. As you're seeing the CD book kind of reprice mature, what is the blended new cost of CDs, including some of the higher cost promotional stuff? I'm just trying to get a sense for where CD costs could go near term.

Yes. I think we're seeing probably about a 10 basis point opportunity. Again, it's all going to be based on competitive pressures at the time. But you're seeing that kind of an opportunity that evolves. We also have got -- so we're not -- we've got other savings products as well, and we're attracting new money at times when we have some of those promotional rates, all of which is helpful. But I would say if you're kind of thinking about that 10 to 15 basis point opportunity on kind of the reprice with the markets coming down, that's probably fair.

Got it. And then the rest of the book, obviously, you have a lot of lower cost categories. Just given the environment, we're hearing a lot more about competitive conditions. The core deposit book, how much more room is there to lower costs?

Yes. I mean, again, you're right. I think we're seeing that as well, and we're very focused on sort of managing kind of both the overall size of the deposit book to support growth as well as the overall cost of the book. And obviously, no one knows kind of where the rate counts -- rate hikes and cycles are going to go. But I would tell you that I think what we're seeing is you're just seeing a little bit of a longer period of time between change in rates at the Fed and then sort of the reaction sort of the banks in general. So I think we're kind of following that trend. So I don't -- I'm not concerned that there's not an opportunity there, but that opportunity might just lag rate reductions by a little bit longer than it had in the past. So call it, 30, 45 days before you're going to see sort of those rate reductions.

Got it. Okay. And then just last one is on M&A. Following the last deal, curious your appetite to participate in whole bank M&A and whether or not there's active or ongoing or an increase in conversations?

Yes. This is Lou. I'll take that. I think we've signaled in the past, and it remains true that we stay focused now on the successful accretion and driving organic growth in '26 as a result of our acquisition. Certainly, we're open to conversations, nothing imminent for us. We're really focused on making sure we execute the '26 plan and that we get the results that are correlated with the acquisition. We think it's going to be very additive. We like our jump-off point. And we want to string together several quarters of strong results before we would entertain anything like that. Again, notwithstanding given the regulatory environment and maybe some opportunistic deals as we get further along in this year and look into '27. We'll keep our options open. However, our goal is to find something that fits culturally that drives earnings and value for our shareholders and that fits into our geographic footprint. So we're not interested really in going out of market at this point.

[Operator Instructions] Your next question comes from Manuel Navas with Piper Sandler.

Can we swing back to the NIM for a moment? Could you just talk about -- the guide is pretty strong. I'm just wondering what are the drivers and progression of the NIM across the year. I hear you on the CD book repricing being a little bit more neutral. Securities yields are benefiting and loan yields are benefiting. Just kind of where does that kind of [ set ] the path across the year?

Yes. I mean we're not giving into kind of all that guide, but I think it's safe to assume that we would have a slightly improving margin as you get some of the benefit of those rate cuts, which I think most people are projecting those to be later in the year, right? So that 3.70% mid or low 3.70s is pretty consistent with where we were at 3.69% for the quarter. And I think we're working to hold on to that. The trade-off, obviously, is we also want to have asset growth. So to the extent that there's competition out there, we're not going to price ourselves out of that competition, but we're not anticipating a significant downward pressure either. So I think we're going to work to maintain that low 3.70s margin. And again, to the extent that it's going to have any sort of slope to it, it's going to be a little bit later in the year because you would expect to have some slightly lower funding costs that would benefit us.

I appreciate that. Another progression question. The net charge-off range is pretty solid. Kind of what are some assumptions on that progression? Or can you not get into that a bit?

I mean, yes, I think that we have -- so obviously, in the fourth quarter, and we talked about the guide last quarter, right, that $13 million, that was largely focused on -- we had one significant credit that we knew we were working out, and we thought that there was going to be some loss content there. So now I think we're back into a much more normalized flow. So again, there may be a small peak or valley in one quarter given a credit or 2 that happens, and we're at a relatively overall low level. So you can get little spikes. But we're not anticipating it to be anything super material. So hopefully, we'll have that be a pretty steady charge-off rate throughout the year. And that guide is guides for this year, also harken back. We've kind of set our long-term guide is always that 25% to 35%. So we're still anticipating being at the lower end of that kind of overall guide.

That's great commentary. Switching back to loan growth for a moment. Can you talk about the mix? You spoke a little bit to CRE having some headwinds, but some building potential there. But can you just talk about the different segments and where you see the most growth? I'm guessing C&I has the biggest drivers, but just kind of speak across the loan book for this year with that low single-digit to mid-single-digit guide.

Yes. You'll probably get a little bit of feedback both from Lou and I on this topic, right? I think we see some opportunities kind of across the book. So whether it be in indirect or even to the extent that we can start to think about the mortgage portfolio, how we slow some of that runoff, when we look at certainly what's going on in CRE and then when we see our national vertical. So we like the way we're positioned to do business across all of them, and we'll be looking to kind of just support that overall asset growth that we're targeting that low to mid-single-digit level. So again, I don't know that we would say it's going to continue to be solely focused just on commercial, but certainly, we continue to have opportunity to grow commercial. And again, we've kind of talked about our overall mix. We're not targeting any specific thing. I think we're about 45% commercial, 55% consumer. We like that. We like it anywhere kind of in that 50%, 5% plus or minus on either side. So I think we like the shape of -- we like the way things are shaping up and having an inverted yield curve also is nice. So we have the opportunity to kind of blend out a little bit on the longer end of that curve and pick up some yield that way as well. But Lou?

I would concur with Doug, right? So we're getting to the point of equilibrium where we're getting a lot of balance in the book. If you remember a couple of years ago, we were heavy consumer with a large focus in mortgage and long on the curve. As we continue to work that down, remix the sheet, we're nearing a 50-50. And we kind of like that both from an interest rate risk and a credit risk standpoint. We are very diversified for a firm our size in that I think that helps with the risk profile. We're not particularly overweighted in any one business. We have a lot of different levers. We think that this year, consumer, both mortgage, home equity, our indirect will be strong. And so driving -- I think we're driving growth in our budget across all those sectors. We really like the position we're in. We like the flexibility that we have. And I think it's -- we're unique in that we do have these commercial national verticals. As Doug pointed out, we have a renewed emphasis on in market, business banking, lower middle market. We have what's recognized in the 4 states as a very, very strong consumer franchise. So -- we like the diversification, and we like the ability to be able to pivot, and we are focused on growth in '26 organically on the heels of a pretty significant acquisition that would also drive top line revenue.

There are no further questions at this time. I'll now turn the call back over to Lou Torchio, President and Chief Executive Officer, for closing remarks.

Thank you. On behalf of the entire leadership team and the Board of Directors, thank you for joining our call this morning. I'm excited at our prospects in 2026 as we build out our consumer franchise in Columbus, Ohio, deepen relationships in our existing core markets and continue to build market share in our commercial lines of business. I look forward to speaking to you on our first quarter call in the spring.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.