Q2 2026 Northwest Bancshares Inc Earnings Call

July 28, 2026

Speaker #1: Thank you for standing by. My name is Prilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bankshurst Inc. Q2, 2026, earnings call.

Speaker #1: All lines have been placed on mute to prevent any background noise. After this speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad, and if you would like to withdraw your question, please press the star one again.

Speaker #1: Thank you for standing by. My name is Prilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Northwest Bancshares, Inc. Q2, 2026 earnings call.

Speaker #1: Thank you. I'd now like to turn the conference over to Michael Perry, Northwest Managing Director of Corporate Development and Strategy and Investor Relations. He may begin.

Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again.

Speaker #2: Good morning, everyone, and thank you, operator. Welcome to Northwest Bankshares' second quarter 2026 earnings call. Joining me today are Lou Torchio, President and CEO of Northwest Bankshares; Doug Schosser, our Chief Financial Officer; and TK Creel, our Chief Credit Officer.

Speaker #1: Thank you. I would now like to turn the conference over to Michael Perry, Northwest Managing Director of Corporate Development and Strategy and Investor Relations. He may begin.

Speaker #2: During this call, we will refer to information included in the supplemental second quarter 2026 earnings presentation, which is available on our investor relations website.

Speaker #2: Good morning, everyone, and thank you, operator. Welcome to Northwest Bancshares' second quarter 2026 earnings call. Joining me today are Lou Torchio, President and CEO of Northwest Bancshares; Doug Schosser, our Chief Financial Officer; and TK Creel, our Chief Credit Officer.

Speaker #2: 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.

Speaker #3: Good morning, everyone. Thank you for joining us today to discuss our second quarter 2026 results. I'll let Doug take you through the details of our second quarter performance in a moment.

Speaker #2: During this call, we will refer to information included in the supplemental second quarter 2026 earnings presentation, which is available on our investor relations website.

Speaker #3: But first, I want to reflect on several important milestones including record net income and how they have contributed to our achievements and momentum in the second quarter positioning us well for continued growth in 2026.

Speaker #2: 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.

Speaker #3: We recently passed the 1-year anniversary of the closing of the Penns Woods acquisition, which has been a very successful creative transaction for us, and on a static basis we have achieved the full tangible book value earned back within 1 year, and expect to achieve the full earned back on a crossover basis by the end of 2026, significantly ahead of our expectations when we announced the transaction.

Speaker #3: This quarter, we achieved our 4th consecutive quarter of improvement in both our net interest margin and adjusted efficiency ratio, evidence of the growing momentum and continuing transformation at Northwest.

Speaker #3: We recently passed the one-year anniversary of the closing of the Penns Woods acquisition, which has been a very successful creative transaction for us, and on a static basis we have achieved the full tangible book value earned back within one year, and expect to achieve the full earned back on a crossover basis by the end of 2026, significantly ahead of our expectations when we announced the transaction.

Speaker #3: Also, tomorrow, we have the official grand opening of our first de novo financial center in Columbus. This is the first of our 4 new financial centers that we plan to open in Columbus this year, with more to follow in 2027.

Speaker #3: This quarter, we achieved our fourth consecutive quarter of improvement in both our net interest margin and adjusted efficiency ratio, evidence of the growing momentum and continuing transformation at Northwest.

Speaker #3: We are excited about the growth opportunities that our expansion will bring to our headquarters market. On a personal note, with more than 3 decades in the banking industry, I can say with confidence that our new financial center takes the customer experience to a completely different level.

Speaker #3: Also, tomorrow, we have the official grand opening of our first de novo financial center in Columbus. This is the first of our four new financial centers that we plan to open in Columbus this year, with more to follow in 2027.

Speaker #3: It is aesthetically striking and brings to life the hospitality-led approach York and his team have embedded across our consumer bank. Now, turning to slide 4, you can see some of the financial highlights of the second quarter 2026.

Speaker #3: We are excited about the growth opportunities that our expansion will bring to our headquarters market. On a personal note, with more than three decades in the banking industry, I can say with confidence that our new financial center takes the customer experience to a completely different level.

Speaker #3: We delivered 54 million in net income for the second quarter, a record in the company's history. Resulting in more than 59% year-over-year growth in net income.

Speaker #3: Also, other than the second quarter of 2021, when we divested our insurance business for a large gain, we delivered diluted earnings per share of 36 cents in the second quarter, which is also a record for the bank.

Speaker #3: We delivered $54 million in net income for the second quarter, a record in the company's history, resulting in more than 59% year-over-year growth in net income.

Speaker #3: Momentum in our C&I business continued with a 148 million of average C&I loan growth in the second quarter, representing 32% year-over-year growth. We continue to grow our nationwide business verticals in a very disciplined manner, and collectively they now represent approximately 27% of our commercial lending portfolio.

Speaker #3: Also, other than the second quarter of 2021, when we divested our insurance business for a large gain, we delivered diluted earnings per share of $0.36 in the second quarter, which is also a record for the bank.

Speaker #3: We are pleased with the performance of these verticals, which are led by experienced and highly networked industry leaders. In addition, we continue to focus on investing in and growing our in-market regional and middle-market commercial lending business.

Speaker #3: Momentum in our C&I business continued with 148 million of average C&I loan growth in the second quarter, representing 32% year-over-year growth. We continue to grow our nationwide business verticals in a very disciplined manner, and collectively they now represent approximately 27% of our commercial lending portfolio.

Speaker #3: We are also growing our SBA lending business both locally and nationally, including several key new hires this year with significant industry experience, to further build on our momentum from earning a spot among the top 50 originators in the U.S.

Speaker #3: by volume in 2025. We recorded net interest margin of 375 basis points in the second quarter of 2026, benefiting from our deposit franchise, which continues to be one of Northwest's core strengths.

Speaker #3: We achieved our 4th consecutive quarter of lower deposit costs. One of the best in-class among our peers. Our record net income in the second quarter of 2026 drove strong returns with a ROAA of 1.27% and ROTCE of 14.9%, and an adjusted ROAA of 1.28% and adjusted ROTC of 15.03%.

Speaker #3: We recorded net interest margin of 375 basis points in the second quarter of 2026, benefiting from our deposit franchise, which continues to be one of Northwest's core strengths.

Speaker #3: We achieved our fourth cost target, one of the best in-class among our peers. Our record net income in the second quarter of 2026 drove strong returns, with a ROAA of 1.27% and ROTCE of 14.9%, and an adjusted ROAA of 1.28% and adjusted ROTCE of 15.03%.

Speaker #3: We achieved these results while continuing to invest in talent, technology, and new financial centers to support our future growth. I am very pleased with our results, and I am proud of the team for their continued commitment to driving strong core performance across the bank.

Speaker #3: As I highlighted earlier, we continue to execute on our plans to transform the consumer bank, including our financial center network. In addition, we recently announced the hiring of our new Chief Information Officer and 3 new hires into leadership roles, and our consumer bank to strengthen how we engage customers across our network, digital platforms, and product lines.

Speaker #3: And in the second quarter of 2026, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of 20 cents per share.

Speaker #3: As I highlighted earlier, we continue to execute on our plans to transform the consumer bank, including our financial center network. In addition, we recently announced the hiring of our new Chief Information Officer and three new hires into leadership roles in our consumer bank to strengthen how we engage customers across our network, digital platforms, and product lines.

Speaker #3: This is the 127th consecutive quarter in which the company has paid a cash dividend. Also, I'm pleased to announce that Northwest was recently recognized as one of Time's America's Best Companies for 2026.

Speaker #3: None of this would be possible without the hard work and dedication of our 2,200 associates. I am proud to lead this team. As we look ahead for the rest of 2026, we continue to focus on organic growth initiatives, further optimizing our financial performance, expanding our financial center network, serving our core customers and communities.

Speaker #3: And in the second quarter of 2026, we delivered on our commitment to our shareholders, returning more than half of our profits through a quarterly dividend of 20 cents per share.

Speaker #3: With that, I'll turn it over to Doug to review our second quarter results in more detail. Doug?

Speaker #3: None of this would be possible without the hard work and dedication of our 2,200 associates. I am proud to lead this team. As we look ahead to the rest of 2026, we continue to focus on organic growth initiatives, further optimizing our financial performance, expanding our financial center network, and serving our core customers and communities.

Speaker #2: Thank you, Lou, and good morning, everyone. As Lou indicated, we are very pleased with our strong financial performance in the second quarter. This is the product of all the efforts of our entire team working together to deliver these results, and I want to thank them for their tireless efforts.

Speaker #2: Now, let's continue on slide 5 of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the second quarter.

Speaker #3: With that, I'll turn it over to Doug to review our second quarter results in more detail. Doug?

Speaker #2: Our gap EPS for the quarter was 36 cents per share, and on an adjusted basis, our EPS was 37 cents per share, an improvement on the prior quarter of 2 cents per share on both a gap basis and an adjusted basis.

Speaker #2: Driven by growth in average earning assets, accrued fee income, and a decrease in our cost of deposits. Total revenue was 181.2 million dollars for the second quarter, which represented a 3.5% increase quarter over quarter and a 20.5% increase year over year.

Speaker #2: Now, let's continue on slide 5 of the earnings presentation, where I'll walk you through the highlights of Northwest's financial results for the second quarter.

Speaker #2: Our GAAP EPS for the quarter was $0.36 per share, and on an adjusted basis, our EPS was $0.37 per share, an improvement on the prior quarter of $0.02 per share on both a GAAP basis and an adjusted basis.

Speaker #2: Also, we are very pleased that we achieved significant positive operating leverage: 330 basis points, quarter over quarter, and we maintained our focus on exercising tight expense discipline.

Speaker #2: This also translated into an improvement in our adjusted efficiency ratio to 56.2%, which was 158 basis point improvement quarter over quarter, all of which created an improvement in our pretext pre-provision net revenue in the second quarter 2026, which increased to 77.3 million dollars and 8% increase from the first quarter 2026.

Speaker #2: In a 31% increase year over year on an adjusted basis. Turning to slide 6, I'll spend a moment covering our loan balances. We achieved our 3rd consecutive quarter of period N loan growth in the second quarter with period N loans increasing by 174 million dollars to 13.2 billion dollars, while our average loans grew 10 million dollars.

Speaker #2: This also translated into an improvement in our adjusted efficiency ratio to 56.2%, which was a 158 basis point improvement quarter over quarter, all of which created an improvement in our pretax, pre-provision net revenue in the second quarter 2026, which increased to $77.3 million, an 8% increase from the first quarter 2026.

Speaker #2: Our performance this quarter was from organic loan growth in both our commercial and consumer businesses, as we continue to experience runoff in our residential mortgage and legacy CRE portfolios.

Speaker #2: In a 31% increase year over year on an adjusted basis. Turning to slide 6, I'll spend a moment covering our loan balances. We achieved our third consecutive quarter of period end loan growth in the second quarter, with period end loans increasing by 174 million dollars to 13.2 billion dollars, while our average loans grew 10 million dollars.

Speaker #2: Our loan yield was relatively stable, decreasing by 1 basis point to 5.61% in the second quarter. Our CNI loan growth continued with strong performance in many of our new verticals and in our other commercial loan portfolios.

Speaker #2: Our performance this quarter was from organic loan growth in both our commercial and consumer businesses as we continue to experience runoff in our residential mortgage and legacy CRE portfolios.

Speaker #2: Average CNI loans increased 148 million dollars or 5.6% quarter over quarter, and 678 million dollars or 32.2% year over year. Our recent CRE loan production levels have been strong, but continue to be offset by elevated levels of runoff in the CRE portfolio.

Speaker #2: Our loan yield was relatively stable, decreasing by 1 basis point to 5.61% in the second quarter. Our C&I loan growth continued with strong performance in many of our new verticals and in our other commercial loan portfolios.

Speaker #2: Our overall interest rate sensitivity position continues to remain slightly asset-sensitive, with continued growth in floating-rate commercial loans, however, we feel we are appropriately positioned for the current and expected interest rate environment in 2026.

Speaker #2: Average C&I loans increased 148 million dollars or 5.6% quarter over dollars or 32.2% year over year. Our recent CRE loan production levels have been strong, but continue to be offset by elevated levels of runoff in the CRE portfolio.

Speaker #2: In addition, there is an opportunity to restructure our sub debt by extinguishing it within the next quarter, as it already received a 20% regulatory capital haircut last September and will lose an additional 20% of its regulatory capital treatment this September.

Speaker #2: Our overall interest rate sensitivity position continues to remain slightly asset sensitive, with continued growth in floating rate commercial loans. However, we feel we are appropriately positioned for the current and expected interest rate environment in 2026.

Speaker #2: This action should add approximately 2 basis points to net interest margin going forward, and we would expect all of our regulatory capital ratios to remain strong and above well-capitalized levels.

Speaker #2: Moving to slide 7 and our deposit balances, which continue to be a source of strength and stability, our average total deposits grew by 87 million quarter over quarter, partially benefiting from growth in money market and savings accounts and deepening customer relationships.

Speaker #2: Our granular, diversified deposit book has an average balance of 19,800 dollars, with customer deposits consisting of over 716,000 accounts with an average tenure of more than 12 and a half years.

Speaker #2: For the 3rd consecutive quarter, our cost of deposits declined, down 5 basis points to 1.43%, a product of our proactive management of the overall portfolio.

Speaker #2: Our granular, diversified deposit book has an average balance of 19,800 dollars, with customer deposits consisting of over 716,000 accounts, with an average tenure of more than 12 and a half years.

Speaker #2: 34% of the CD portfolio matured in the second quarter of 2026, at a weighted average rate of 340 basis points. New volumes which are coming on with rates in the low 3% are driving an overall decline in CD costs, supporting an overall decline in deposit costs.

Speaker #2: For the third consecutive quarter, our cost of deposits declined, down 5 basis points to 1.43%, a product of our proactive management of the overall portfolio.

Speaker #2: On slide 8, we show our 4th consecutive quarter of net interest margin improvement, with net interest margin increasing 5 basis points to 3.75% in the second quarter 2026, benefiting from increased investment security yields and a further improvement in funding costs.

Speaker #2: Turning to our securities portfolio on slide 9, new security purchases in the quarter were consistent with the current composition of the portfolio and continue to strengthen an already strong source of liquidity.

Speaker #2: On slide 8, we show our fourth consecutive quarter of net interest margin improvement, with net interest margin increasing 5 basis points to 3.75% in the second quarter 2026, benefiting from increased investment security yields and a further improvement in funding costs.

Speaker #2: Our portfolio yield continues to increase, as new security purchases came on at higher yields than the runoff portfolio. 24% of this portfolio is held to maturity to protect tangible common equity.

Speaker #2: Turning to slide 10, our non-interest income increased 1.6 million quarter over quarter, driven by growth in our wealth management business, resulting in an increase in trust and financial services income.

Speaker #2: Non-interest income increased 3.3 million or 10.6% year over year, benefiting from an increase in trust and other financial services income. And an increase in service charges and fees, regarding non-interest expenses detailed on slide 11.

Speaker #2: We achieved our 4th consecutive quarter of improvement in our adjusted efficiency ratio, which was 56.2% in the second quarter of 2026, continuing our expense management focus over the last year.

Speaker #2: Non-interest income increased $3.3 million, or 10.6% year over year, benefiting from an increase in trust and other financial services income, and an increase in service charges and fees. Regarding non-interest expenses, please refer to the details on slide 11.

Speaker #2: Overall expenses, excluding merger and restructuring expenses, remained relatively flat, benefiting from a decrease in non-personnel expenses, including a 3.2 million dollar decrease in FDIC insurance premium.

Speaker #2: We achieved our fourth consecutive quarter of improvement in our adjusted efficiency ratio, which was 56.2% in the second quarter of 2026, continuing our expense management focus over the last year.

Speaker #2: FDIC insurance premium expense in the second quarter was lower due to a prior period assessment rate change driven by the amendment of prior period call reports.

Speaker #2: On a year-over-year basis, expenses in the second quarter of 2026 were higher, but the year-ago quarter did not include the acquired penswoods operations. On slide 12, you'll see our overall ACL coverage was relatively flat at 1.13% in the second quarter 2026, down 2 basis points from the first quarter.

Speaker #2: Overall expenses, excluding merger and restructuring expenses, remained relatively flat, benefiting from a decrease in non-personnel expenses, including a $3.2 million decrease in the FDIC insurance premium.

Speaker #2: FDIC insurance premium expense in the second quarter was lower due to a prior period assessment rate change, driven by the amendment of prior period call reports.

Speaker #2: Our quarterly annualized net charge offs of 15 basis points were below the low end of our full-year guidance. Our NPAs remained mostly flat this quarter, and while our classified loans did increase this quarter, we have no expectation that the increase would result in higher overall charge offs.

Speaker #2: Turning to credit quality on slide 13, our credit risk metrics remain within internal expectations, given the impact of the loans we acquired. Our total delinquency declined from 1.30% to 0.90% quarter over quarter, primarily as a result of a 30-day month effect on the mortgage portfolio and payoffs in the healthcare portfolio.

Speaker #2: Our quarterly annualized net charge offs of 15 basis points were below the low end of our full year guidance. Our NPAs remained mostly flat this quarter, and while our classified loans did increase this quarter, we have no expectation that the increase would result in higher overall charge offs.

Speaker #2: Our 90-day plus delinquencies increased from 34 basis points to 49 basis points quarter over quarter, while NPAs were flat at 70 basis points of average loans in the quarter.

Speaker #2: Taking a deeper dive into the breakdown of our credit quality on slide 14, in the second quarter of 2026, we experienced an increase in classified loans as a percentage of total loans, and on an absolute basis, which was attributable partly to the continued migration of acquired loans to our credit administration standards and downgrades in the healthcare book.

Speaker #2: Our 90-day plus delinquencies increased from 34 basis points to 49 basis points quarter over quarter, while NPAs were flat at 70 basis points of average loans in the quarter.

Speaker #2: As we've discussed on earlier calls, our strategy with respect to classified loans has continued to work them down over time. And finally, on slide 15, we'd like to provide a current full-year outlook for 2026, specifically.

Speaker #2: For loan and deposit growth, our outlook remains unchanged. For revenue, we would expect to be in the middle of our stated range. For net interest margin, we expect to be in the 373 to 375 basis points range, assuming that the Fed funds rate is unchanged.

Speaker #2: For non-interest income, we expect to be at the high end of our range. For non-interest expense, we expect to be in the middle of our range.

Speaker #2: And for net charge offs, based on current economic conditions, we expect to be in the low to middle of our range. We expect the tax rate to drift up to 24% based on stronger earnings.

Speaker #2: We remain very confident about Northwest Business and our excited about our prospects for the rest of the year. Now I will turn the call over to the operator, who will open up the lines for a live Q&A session.

Speaker #2: For non-interest income, we expect to be at the high end of our range. For non-interest expense, we expect to be in the middle of our range.

Speaker #1: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press the star and 1 on your telephone keypad to raise your hand and join the queue.

Speaker #2: And for net charge-offs, based on current economic conditions, we expect to be in the low to middle of our range. We expect the tax rate to drift up to 24% based on stronger earnings.

Speaker #1: If you would like to withdraw your question, simply press the star and 1 again. With that, our first question comes from the line of Daniel Tamayo with Raymond James Please go ahead.

Speaker #2: We remain very confident about Northwest Business and are excited about our prospects for the rest of the year. Now I will turn the call over to the operator, who will open up the lines for a live Q&A session.

Speaker #3: Thank you. Good morning, everybody.

Speaker #4: Morning.

Speaker #1: Thank you, Lila. Begin the question and answer session. If you have dialed in and would like to ask a question, please press the star and 1 on your telephone keypad to raise your hand and join the queue.

Speaker #3: Maybe. Starting on the deposit book, so we saw a little bit of a decline this quarter, and you mentioned where the new CD rates are coming on, and obviously got some loan growth coming in the back half of the year.

Speaker #1: If you would like to withdraw your question, simply press the star and 1 again. With that, our first question. Comes from the line of Daniel Tamayo with Raymond James, please go ahead.

Speaker #3: Just curious, how you're seeing deposit growth expectations in the back half of the year? I see the guidance for the low single digit, but as loan-to-deposit ratio moves up a little bit, where's the comfort rate there?

Speaker #2: Thank you. Good morning, everybody.

Speaker #3: Morning.

Speaker #2: Maybe. Starting on the deposit book, we saw a little bit of a decline this quarter, and you mentioned where the new CD rates are coming on. Obviously, we've also got some loan growth coming in the back half of the year.

Speaker #3: And how do you kind of think the that could impact deposit pricing? Kind of lot there, but just looking into deposits. Thank you.

Speaker #2: Yeah, happy to answer that question, Danny. Thank you. So the first thing I would point out is when you're looking at spot balances, right, very volatile metric, given a lot of the things that can happen at the end last day of the month.

Speaker #2: Just curious, how you're seeing deposit growth expectations in the back half of the year? I see the guidance for the low single digit, but as loan-to-deposit ratio moves up a little bit, where's the comfort rate there?

Speaker #2: We look at more critically sort of average deposits, which were up 6/10 of a percent for the quarter, 87 million dollars. But dissect the decline in spot balances a little bit between 331 and 630.

Speaker #2: And how do you kind of think that could impact deposit pricing? It's kind of a lot there, but just looking into deposits. Thank you.

Speaker #3: Yeah, happy to answer that question, Danny. Thank you. So, the first thing I would point out is, when you're looking at spot balances—right?—it's a very volatile metric.

Speaker #2: We'd have been down or we would have been up for customer deposits and our brokered CDs would have been slightly down. And that was an intentional shift where we took advantage of some lower funding costs on the FHLB desk than we had in our brokered deposit book.

Speaker #3: Given a lot of different things that can happen at the end last day of the month, we look at more critically sort of the average deposits, which were up 6/10 of a percent for the quarter, 87 million dollars.

Speaker #2: So again, if you exclude that, the balances would actually have been up 19 million dollars from customer deposits, and the only decline really was in brokered CDs.

Speaker #3: But dissect the decline in spot balances a little bit: between 3/31 and now, we would have been up for customer deposits, and our brokered CDs would have been slightly down.

Speaker #2: So we continue to look favorably on the rest of the year. That guidance was thoughtfully contrived to make sure that we got to that 2% rate.

Speaker #2: The other thing I would say is we have more activity that we expect in the last half of the year as we continue to open our branches in the Columbus market, which is a very high-growth market.

Speaker #3: That was an intentional shift, where we took advantage of some lower funding costs on the FHLB desk than we had in our brokered deposit book.

Speaker #3: So again, if you exclude that, the balance has actually been up $19 million from customer deposits, and the only decline really was in brokered CDs.

Speaker #3: Okay, thanks for that, Doug. And then I guess maybe on the expense guide, so you said middle of the range, that implies a pretty big step up in the back half of the year.

Speaker #3: So we continue to look favorably on the rest of the year. That guidance was thoughtfully contrived to make sure that we got to that 2% rate.

Speaker #3: Just curious, how we should be thinking about besides the rebound in the FDIC premiums, where the drivers of that expense increase are and if that run rate is kind of my numbers are shaken out around 109 million, correct me if I'm wrong, but seems like that maybe takes the exit rate a little bit higher than we were thinking before.

Speaker #3: The other thing I would say is, we have more activity that we expect in the last half of the year as we continue to open our branches in the Columbus market, which is a very high-growth market.

Speaker #2: Okay, thanks for that, Doug. And then, I guess maybe on the expense guide—so you said middle of the range. That implies a pretty big step up in the back half of the year.

Speaker #3: Thanks.

Speaker #2: Just curious, how we should be thinking about besides the rebound in the FDIC premiums, where the drivers of that expense increase are and if that run rate is kind of my numbers are shaking out around 109 million, correct me if I'm wrong, but seems like that maybe takes the exit rate a little bit higher than we were thinking before.

Speaker #2: Yeah, I would tell you, if you just adjust for the FDIC benefit that we got in the corner, you would get to like 107 million.

Speaker #2: So I would say anywhere in that 107 to 109 range is fine. We were thinking more in the 108s as it continued to stand below or we continued to look at opportunities to optimize expenses, but as we said, we're investing in the business.

Speaker #2: We're going to have costs coming online for branches and other things. And we're going to continue to want to look at kind of long-term growth opportunities.

Speaker #2: Thanks.

Speaker #3: Yeah, I would tell you, if you just adjust for the FDIC benefit that we got in the quarter, you would get to, like, $107 million.

Speaker #2: Which is going to provide a little bit of upward pressure on those expenses, but for the full year, we still have every reason to believe that we're going to that we're going to generate positive operating leverage year over year, reduce our efficiency ratio, and continue to be able to invest for the future.

Speaker #3: So I would say anywhere in that 107 to 109 range is fine. We were thinking more in the 108s as it continued to stand below.

Speaker #3: Or we continue to look at opportunities to optimize expenses, but as we said, we're investing in the business. We're going to have costs coming online for branches and other things.

Speaker #3: Okay, sounds like you're making some investments for the future. That's great. Thanks, Doug. Appreciate it. Bye, guys.

Speaker #3: And we're going to continue opportunities. Which is going to provide a little bit of upward pressure on those expenses, but for the full year, we still have every reason to believe that we're going to generate positive operating leverage year over year, reduce our efficiency ratio, and continue to be able to invest for the future.

Speaker #2: Yep, thanks, Danny.

Speaker #1: And the next question comes from the line of Jeff Brulis with DA Davidson. Please go ahead.

Speaker #5: Thanks. Good morning. On the loan side, just looking at looks like period and growth quite a bit above the quarterly average. Just looking at the timing of that, does that suggest that came on fairly late in the quarter?

Speaker #2: Okay, sounds like you're making some investments for the future. That's great. Thanks, Doug. Appreciate it. Bye, guys.

Speaker #2: Yes, we had a really strong late push in the quarter. The other thing I would point out is commercial real estate in particular, I think a lot of people have commented on it, but we saw some higher levels of runoff in that book.

Speaker #3: Yep, thanks, Danny.

Speaker #1: And the next question comes from the line of Jeff Brulis with D.A. Davidson. Please go ahead.

Speaker #4: Thanks. Good morning. On the loan side, just looking at it looks like period-end growth was quite a bit above the quarterly average. Just looking at the timing of that, does that suggest that came on fairly late in the quarter?

Speaker #2: Again, combination of construction loans that end up getting the perm financing off the book, as well as some other of the borrowers that were that we've worked out, like in some of the more classified asset areas.

Speaker #3: Yes, we had a really strong late push in the quarter. The other thing I would point out is, with commercial real estate in particular—I think a lot of people have commented on it—but we saw some higher levels of runoff in that book.

Speaker #2: Contributed to that decline. We feel really good about the pipelines going forward, and we feel really good about sort of the outlook. So again, with a little bit lower levels of runoff, particularly on CRE, everything else was shaken up pretty good.

Speaker #3: Again, a combination of construction loans that end up getting to perm financing off the books, as well as some other borrowers that we've worked out, like in some of the more classified asset areas.

Speaker #2: And we did start to see that production turn around in the last half of the quarter.

Speaker #5: Got it. And then I guess if a question on the margin, if I think about the three legs of the stool, you've got pretty stable loan yields, nice deposit costs decline, and increasing securities yields.

Speaker #3: Contributed to that decline. We feel really good about the pipelines going forward, and we feel really good about sort of the outlook. So again, with a little bit lower levels of runoff, particularly on CRE, everything else was shaken up pretty good.

Speaker #5: So you've got kind of a flattish sort of guide on the margin. I guess on all three fronts, you're expecting those to moderate? I guess a loan yields are fairly flat.

Speaker #3: And we did start to see that production turn around in the last half of the quarter.

Speaker #4: Got it. And then, I guess just a question on the margin. If I think about the three legs of the stool, you've got pretty stable loan yields, nice deposit cost declines, and increasing securities yields.

Speaker #5: Maybe those are coming in. But just the thought behind where margins sort of flatten out here, given the guide. Thanks.

Speaker #2: Yeah, as you would know, it's a very competitive environment out there, both on the loan side. There's a lot of competition looking for loan growth.

Speaker #4: So you've got kind of a flattish sort of guide on the margin. I guess on all three fronts, you're expecting those to moderate. I guess loan yields are fairly flat.

Speaker #2: There's also a lot of competition looking for deposit growth. So I think we're being a little bit realistic on what it's going to take for growth going forward.

Speaker #4: Maybe those are coming in. But just the thought behind where margins sort of flatten out here given the guide. Thanks.

Speaker #2: And all those areas, obviously, when you're opening up new branches and you're attracting customers, you're doing that relatively higher rates than you would on an existing book of business.

Speaker #3: Yeah, as you would know, it's a very competitive environment out there, both on the loan side. There's a lot of competition looking for loan growth.

Speaker #2: So we benefit from the fact that we're new entrant into the markets in Columbus, but yet those are still going to come on at relatively higher rates.

Speaker #3: There's also a lot of competition looking for deposit growth, so I think we're being a little bit realistic about what it's going to take for growth going forward.

Speaker #2: So I think what we're saying is there's a lot of moving parts. You should expect to see loan competition remain as it relates to rate because we're not really to compromise.

Speaker #3: And all those areas, obviously, when you're opening up new branches and you're attracting customers, you're doing that at relatively higher rates than you would on an existing book of business.

Speaker #2: We're not really willing to compromise on structure. And then you should expect to see deposit competition continue to be strong. We also in the opening comments suggested that we still have some opportunities on a liability side.

Speaker #3: So we benefit from the fact that we're a new entrant into the markets in Columbus, but yet those are still going to come on at relatively higher rates.

Speaker #2: As it relates to our sub debt, so again, to your point, we are pulling all the levers to manage the margin, but we are also suggesting that 373 to 375 is sort of an exit is realistic.

Speaker #3: So I think what we're saying is there's a lot of moving parts. You should expect to see loan competition remain, as it relates to rate, because we're not really to compromise we're not really willing to compromise on structure.

Speaker #2: And that is above where we started kind of in the low 370s if people were drinking 371, 372, wanted to provide a little bit of clarity that we liked the 375 when we think that there's some opportunity to continue to support at those levels as we move forward.

Speaker #3: And then you should expect to see deposit competition continue to be strong. We also, in the opening comments, suggested that we still have some opportunities on the liability side as it relates to our sub debt.

Speaker #5: Okay. And just to follow on, just to securities yield side, that's of the three things, that's the one that maybe you continue to see some incremental progress on that, at least in the short run.

Speaker #3: So again, to your point, we are pulling all the levers to manage the margin, but we are also suggesting that 373 to 375 is sort of an exit is realistic.

Speaker #3: And that is above where we started, kind of in the low 370s—people were thinking 371, 372. I wanted to provide a little bit of clarity that we liked the 375, and we think that there's some opportunity to continue to support at those levels as we move forward.

Speaker #2: For sure. As those older vintages run off, we are able to put them on at current market rates, which are materially higher. It's just a portfolio overall only has so many cash flowing items.

Speaker #2: Any given quarter, but we are able to invest those at higher rates and we've been able to pull that up consistently quarter over quarter.

Speaker #4: Okay. And just a follow on just the securities yield side, that's of the three things, that's the one that maybe you continue to see some incremental progress on that, at least in the short run.

Speaker #2: And we've continued to expect that.

Speaker #5: Okay. I appreciate it. Thanks.

Speaker #1: And the next question comes from the line of Brian Ferran with Truist. Please go ahead.

Speaker #3: For sure. As those older vintages run off, we are able to put them on at current market rates, which are materially higher. It's just a portfolio overall only has so many cash flowing items.

Speaker #6: Hey, just to follow on questions on the guidance slide on page 15. So with the NIM a little higher and fees a little higher, but revenue still at the middle of the range, is there something that is a little lower that's balancing those two out?

Speaker #3: Any given quarter, but we are able to invest those at higher rates, and we've been able to pull that up consistently, quarter over quarter.

Speaker #3: And we would continue to expect that.

Speaker #4: Okay. I appreciate it. Thanks.

Speaker #6: Or is it putting too fine a point on it because things round to a million etc., just trying to see was there something balancing out the upgrade to NIM and fees?

Speaker #1: And the next question comes from the line of Ryan Ferran with Truist. Please go ahead.

Speaker #5: Hey, just to follow up on the questions about the guidance slide on page 15. So, with the NIM a little higher and fees a little higher, but revenue still at the middle of the range, is there something that is a little lower that's balancing those two out?

Speaker #6: Or is it just reading too fine a point into it to say, the revenue is still in the middle of the range?

Speaker #2: No, I think you're right on where revenue is going to be in the middle of the range. I think we're also making sure from an overall earnings standpoint that people look at the expenses and don't get don't hold us into that 103, 104 million dollar range that we had in the first two quarters that we would expect some upward pressure there.

Speaker #5: Or is it putting too fine a point on it because things round to a million, etc.? Just trying to see, was there something balancing out the upgrade to NIM and fees?

Speaker #2: But again, right now, if we continue to have reasonable loan growth and a little bit more costly deposit going forward and a little bit of pressure on the loan yield sides, again, not pressure relative to what's rolling on, but just kind of keeping it consistent with where we're at, you're going to end up in the middle of that revenue range.

Speaker #5: Or is it just reading too fine a point into it to say the revenue is still in the middle of the range?

Speaker #3: No, I think you're right on where revenue is going to be—in the middle of the range. I think we're also making sure, from an overall earnings standpoint, that people look at the expenses and don't hold us to that $103 or $104 million range that we had in the first two quarters. We would expect some upward pressure there.

Speaker #6: And then I hate to ask about the tax rate, but because it did change is 24 kind of what you would best guess as we fill out models in the future?

Speaker #3: But again, right now, if we continue to have reasonable loan growth and a little bit more costly deposit going forward and a little bit of pressure on the loan yield sides, again, not pressure relative to what's rolling on, but just kind of keeping it consistent with where we're at, you're going to end up in the middle of that revenue range.

Speaker #6: Could it drift higher to 25? Just any best guess of like tax rate into the end of this year and 27?

Speaker #2: Yeah, I mean, it's drifting we're not all that upset. It's drifting higher because it's drifting higher for the right reasons, which is we have better earnings.

Speaker #2: So yeah, we tried to just clarify that as we earn more that tax rate is going to be impacted as well. But that 24, that approximate 24 should be a good number for you guys to use.

Speaker #5: And then I hate to ask about the tax rate, but because it did change, is 24% kind of what you would best guess as we fill out models in the future?

Speaker #5: Could it drift higher to 25? Just any best guess of, like, tax rate into the end of this year and '27?

Speaker #6: If I could sneak in one last one, did you give an update or can you on just the growth from the specialty national industry verticals, kind of where they stand now and maybe which ones are kind of having the most success in the current environment, both on growth and pricing?

Speaker #3: Yeah, I mean, it's drifting—we're not all that upset. It's drifting higher because it's drifting higher for the right reasons, which is we have better earnings.

Speaker #3: So, yeah, we try to just clarify that as we earn more, that tax rate is going to be impacted as well. But that 24, that approximate 24, should be a good number for you guys to use.

Speaker #2: Yeah, I think they're all doing quite well. They're right where we would want them to be. I think in the opening comments, Lou suggested they're now making up about 27% of the CNI portfolio, which is up from where it was.

Speaker #5: If I could sneak in one last one, did you give an update or can you on just the growth from the specialty national industry verticals, kind of where they stand now and maybe which ones are kind of having the most success in the current environment, both on growth and pricing?

Speaker #2: Again, they're well balanced. We're seeing success across all of those platforms. And as you would expect, since a number of them have been launched in the last couple of years, that growth isn't that growth should be expected as those Salesforces come up to speed and we get our overall position in the market better well known.

Speaker #3: Yeah, I think they're all doing quite well. They're right where we would want them to be. I think in the opening comments, Lou suggested they're now making up about 27% of the CNI portfolio, which is up from where it was.

Speaker #2: We also see benefits on the SBA side, of course, which doesn't really lead to balance growth, but is supportive of the overall fee income generating capability that we have.

Speaker #3: Again, they're well balanced. We're seeing success across all of those platforms. And as you would expect, since a number of them have been launched in the last couple of years, that growth should be expected as those sales forces come up to speed and we get our overall position in the market better well known.

Speaker #2: So I think we're generally pretty happy with all of those vertical performances and we see that opportunity continuing in the future. I don't know, Lou, if you have anything to add.

Speaker #3: No, I would agree with Doug. I think the important thing to note is while the verticals are representing a larger percentage of our overall commercial book now, we remain disciplined.

Speaker #3: We also see benefits on the SBA side, of course, which doesn't really lead to balance growth but is supportive of the overall fee income-generating capability that we have.

Speaker #3: The growth is measured. We believe that our back office, our underwriting, our portfolio management in those areas is very sound and we have experienced executives running those verticals.

Speaker #3: So I think we're generally pretty happy with all of those vertical performances, and we see that opportunity continuing in the future. I don't know, Lou, if you had anything to add.

Speaker #3: And so the pipelines going into the second half or going into the third quarter are a little above the second quarter. And so we would expect to continue to see that same growth.

Speaker #2: No, I would agree with Doug. I think the important thing to note is that while the verticals are representing a larger percentage of our overall commercial book now, we remain disciplined.

Speaker #2: The growth is measured. We believe that our back office, our underwriting, and our portfolio management in those areas are very sound, and we have experienced executives running those verticals.

Speaker #6: Thanks so much.

Speaker #1: And the next question comes from the line of David Bishop with Holiday Group. Please go ahead.

Speaker #5: Yeah, good morning.

Speaker #2: And so the pipelines going into the second half or going into the third quarter are a little above the second quarter. And so we would expect to continue to see that same growth.

Speaker #7: Hey, quick question. Good morning. May have missed it, but update on share repurchase activity and remind me where you are in the authorization stack.

Speaker #7: Thanks.

Speaker #2: Yes. No, you didn't miss it. So the authorization still stands at the 50 million that we had approved and we haven't become active in that yet.

Speaker #5: Thanks so much.

Speaker #2: Again, I direct you back to our prepared comments where we talked about next on the list is to work through the sub debt that we have outstanding that continues to lose its capital treatment as we kind of get further out.

Speaker #1: And the next question comes from the line of David Bishop with Holiday Group. Please go ahead.

Speaker #4: Yeah, good morning. Hey, quick question. Good morning. I may have missed it, but could you provide an update on share repurchase activity, and remind me where we are in the authorization stack?

Speaker #2: And we believe that that will return approximately two basis points in margin performance. So that's where we're focused on now.

Speaker #4: Thanks.

Speaker #3: Yes. No, you didn't miss it. So the authorization still stands at the $50 million that we had approved, and we haven't become active in that yet.

Speaker #7: Got it. And then a little bit of an increase in the substandard sounds like maybe some of the nursing home category, maybe just some color in terms of what drove that increase.

Speaker #3: Again, I'd direct you back to our prepared comments, where we talked about what's next on the list: to work through the sub debt that we have outstanding, which continues to lose its capital treatment as we get further out.

Speaker #7: Thank you.

Speaker #2: Yeah, if you go to sort of the credit quality side, you will see some inflows on the or some downgrades that were driving that about 146 million as disclosed on slide 14.

Speaker #3: And we believe that that will return approximately two basis points in margin performance. So that's where we're focused on now.

Speaker #2: And again, we're still working through our new customers from our Pennswoods transaction and as they get more used to our credit standards and our expectations for documentation and other things, we tend to have a little bit more pressure on their credit grades.

Speaker #4: Got it. And then a little bit of an increase in the substandard sounds like maybe it's on the nursing home category, maybe just some color in terms of what drove that increase.

Speaker #4: Thank you.

Speaker #2: But we again continue to be happy with where our MPA performance has been overall charge offs. Those aren't drifting upward. So we continue to manage through that credit and classified book from or the rest of the year.

Speaker #3: Yeah, if you go to sort of the credit quality side, you will see some inflows, or some downgrades that were driving that—about $146 million, as disclosed on slide 14.

Speaker #3: And again, we're still working through our new customers from our Pennswoods transaction. As they get more used to our credit standards and our expectations for documentation and other things, we tend to see a little bit more pressure on their credit grades.

Speaker #7: Got it. Thank you.

Speaker #1: And the next question comes from the line of Matthew Rees with Steven C. Please go ahead.

Speaker #8: Hey, good morning. I think I have what I need on the CNI growth outlook front. I guess what I was curious about, can you help me out with commercial real estate expectations?

Speaker #3: But we, again, continue to be happy with where our MPA performance has been. Overall charge-offs aren't drifting upward, so we continue to manage through that credit and classified book for the rest of the year.

Speaker #8: Understanding payoffs can be volatile and sounds like it's been a bit higher than expected, but just considering originations there, it sounds like you've turned them back on to a greater extent.

Speaker #4: Got it. Thank you.

Speaker #1: And the next question comes from the line of Matthew Rees with Stephens Inc. Please go ahead.

Speaker #8: What are your expectations on commercial real estate that category for the rest of the year?

Speaker #4: Hey, good morning.

Speaker #3: Good morning.

Speaker #4: I think I have what I need on the CNI growth outlook front. I guess what I was curious about—can you help me out with commercial real estate expectations?

Speaker #3: This is Lou. It will be largely flat. We'll continue to see a little decline. We're rotating out of maybe what more traditionally we have done on the CRE.

Speaker #4: Understanding payoffs can be volatile, and it sounds like they've been a bit higher than expected, but just considering originations there, it sounds like you've turned them back on to a greater extent.

Speaker #3: But we certainly have a focus. We've hired a number of new folks and we'd like to mitigate that runoff and we think we're making strides in that area.

Speaker #4: What are your expectations on commercial real estate, that category, for the rest of the year?

Speaker #3: And so by the end of the year, we think we'll be in position to where we won't see that continuous churn quarter over quarter.

Speaker #2: This is Lou. It will be largely flat. We'll continue to see a little decline as we're rotating out of maybe what more traditionally we have done on the CRE.

Speaker #3: We're looking at a number of different venues there, products and a different go-to-market strategy. So that business is sort of being retold. And so we're very comfortable where it's at now.

Speaker #2: But we certainly have a focus. We've hired a number of new folks, and we'd like to mitigate that runoff. And we think we're making strides in that area.

Speaker #3: One of the reasons why we like our positioning across the commercial and consumer bank is we have a lot of different levers and so we're able to continue our growth trajectory for the year while we still see some runoff in that in the second half.

Speaker #2: And so, by the end of the year, we think we'll be in a position where we won't see that continuous churn quarter over quarter.

Speaker #2: We're looking at a number of different venues there, products, and a different go-to-market strategy. So that business is sort of being retold. And so we're very comfortable where it's at now.

Speaker #8: Got it. Okay. And then I'm sorry if I missed it, but what was the dollar amount tied to the national lines of business within CNI?

Speaker #8: What was that a year ago? And I'm curious if you've had any success kind of doing both sides of the balance sheet of national lines of the business or deposits going there.

Speaker #2: One of the reasons why we like our positioning across the commercial and consumer bank is we have a lot of different levers. And so we're able to continue our growth trajectory for the year, while we still see some runoff in that in the second half.

Speaker #2: Yeah. So we did point out that we had 148 million increase in CNI loans. And you can assume that a very good portion of that comes from those national businesses.

Speaker #4: Got it. Okay. And then, I'm sorry if I missed it, but what was the dollar amount tied to the national lines of business within CNI?

Speaker #2: And yes, those tend to be pretty full relationships. So we do have a commercial finance business. That one you're going to have a little bit less cross-sell on that side, but generally speaking for things like franchise or sports or our sponsor group, you are seeing full relationships with the posits coming in and continued opportunities on the deposit side.

Speaker #4: What was that a year ago? And I'm curious if you've had any success kind of doing both sides of the balance sheet—of national lines of the business or deposits going there.

Speaker #3: Yeah. So we did point out that we had a $148 million increase in C&I loans. And you can assume that a very good portion of that comes from those national businesses.

Speaker #2: So again, pretty happy with the way those businesses are shaking out and very happy with the relationship, the full relationships that we get on those specialty lines.

Speaker #3: And yes, those tend to be pretty full relationships. So we do have a commercial finance business. That one you're going to have a little bit less cross-sell on that side, but generally speaking, for things like franchise or sports or our sponsor group, you are seeing full relationships with the posits coming in and continued opportunities on the deposit side.

Speaker #8: Got it. Okay. A couple more. I hope you don't mind. Do you have the period end deposit cost? I know you kind of hinted at maybe higher cost on the come.

Speaker #8: But what were they a period end? And if you had to look at your crystal ball, should we be thinking about a couple of basis points a quarter in higher deposit costs?

Speaker #3: So again, pretty happy with the way those businesses are shaking out, and very happy with the full relationships that we get on those specialty lines.

Speaker #8: ? Is that the right way to kind of model it out?

Speaker #2: It's really hard to project it as you know, right? There's a lot of moving parts with the deposit book. We didn't I don't have off the top of my head what the period end costs were.

Speaker #4: Got it. Okay. A couple more. I hope you don't mind.

Speaker #3: Nope, go ahead.

Speaker #4: Do you have the period-end deposit cost? I know you kind of hinted at maybe higher costs coming, but what were they at period-end?

Speaker #2: I'll tell you though, as you book. So with that being relatively short-term maturities, call it six months, as in a bit of a higher rate environment than the ones that are rolling on.

Speaker #4: And if you had to look at your crystal ball, should we be thinking about a couple of basis points a quarter in higher deposit costs?

Speaker #4: Is that the right way to kind of model it out?

Speaker #2: But we still have sorry, they were at a they were at a higher rate that ones that come on, but we're starting to lose that because now we put a bunch of those on in the first quarter.

Speaker #3: It's really hard to project it, as you know, right? There are a lot of moving parts with the deposit book. I don't have, off the top of my head, what the period-end costs were.

Speaker #2: Those will be maturing. The rates have been pretty consistent quarter over quarter. So I think you're more likely to lose sort of the opportunity for pricing for those kinds of wider pricing gaps.

Speaker #3: I'll tell you though, as you continue to think about just think about the CD book. So with that being relatively short-term maturities, call it six months, as those roll off, they were in a bit of a higher rate environment than the ones that are rolling on.

Speaker #2: And you're going to replace with a little bit more competitive and a slightly more competitive environment. I think you saw pretty universally a lot of banks talk about more competitive deposit pricing, but we continue to think that it's going to be manageable.

Speaker #3: But we still have sorry, they were at a they were at a higher rate than ones that come on, but we're starting to lose that because now we put a bunch of those on in the first quarter.

Speaker #2: And like I said, we're doing other things to continue to support the margin like thinking about the sub debt and other opportunities that we have.

Speaker #3: Those will be maturing. The rates have been pretty consistent quarter over quarter, so I think you’re more likely to lose the opportunity for pricing for those kinds of wider pricing gaps.

Speaker #2: In the event we would have a little bit more deposit cost pressure. I don't think it's going to be dramatic.

Speaker #3: And you're going to replace with a little bit more competitive and a slightly more competitive environment. I think you saw pretty universally a lot of banks talk about more competitive deposit pricing.

Speaker #8: Understood. Last one from me. Talked within C income your trust and other financial services income picked up pretty strong this quarter. It's up 9.6%.

Speaker #3: But we continue to think that it's going to be manageable. And like I said, we're doing other things to continue to support the margin, like thinking about the sub debt and other opportunities that we have.

Speaker #8: It just seems a little bit strong relative to market performance. And I was curious what happened there, if there's anything one time, sustainability, maybe talk about that line item a little bit.

Speaker #3: In the event, we would have a little bit more deposit cost pressure.

Speaker #4: Okay.

Speaker #3: I don't think it's going to be dramatic.

Speaker #2: Yeah. We're really happy with how that business has been performing for us. I think on a long-term basis, we've got some very strong reps who work in our branches, supported by LPL.

Speaker #4: Understood. Last one for me. Talking about fee income, your trust and other financial services income picked up pretty strongly this quarter—it's up 9.6%.

Speaker #2: We also recently announced that we had hired a new wealth management leader. So he continues to retool that business. And then the other thing we've benefited from, of course, is higher overall market valuations in the stock market.

Speaker #4: It just seems a little bit strong relative to market performance. I was curious what happened there—if there's anything one-time, about sustainability—maybe talk about that line item a little bit.

Speaker #2: And then as we earn annual fees off of those, that book when it's bigger, we make more money there. So generally speaking, sort of pretty good performance across the board on all of those areas.

Speaker #3: Yeah. We're really happy with how that business has been performing for us. I think, on a long-term basis, we've got some very strong reps who work in our branches, supported by LPL.

Speaker #2: And we continue to see some opportunity there. I think the next leg of the journey is going to be just how do we continue to fill out that business across all of our branches.

Speaker #3: We also recently announced that we had hired a new wealth management leader, so he continues to retool that business. And then the other thing we've benefited from, of course, is higher overall market valuations and the stock market.

Speaker #8: I'll leave it there. Thank you so much.

Speaker #3: And then, as we earn annual fees off of those, when that book is bigger, we make more money there. So, generally speaking, it's pretty good performance across the board in all of those areas.

Speaker #2: Thank you.

Speaker #1: And the next question comes from the line of Emily Lee with KBW. Please go ahead.

Speaker #7: Hi, everyone. This is Emily stepping in for Tim Switzer. Thanks for taking my questions.

Speaker #3: And we continue to see some opportunity there. I think the next leg of the journey is going to be just how do we continue to fill out that business across all of our branches.

Speaker #2: You're welcome. And good morning.

Speaker #3: Good morning.

Speaker #7: Yeah, good morning. So I was wondering, do you have any levers to maybe pull on the expense front if, say, loan growth doesn't come in as strong as expected?

Speaker #7: And maybe if you can talk about if you're planning on doing any other investments, maybe on the tech side, just, yeah, puts and takes on the expense.

Speaker #4: I'll leave it there. Thank you so much.

Speaker #3: Thank you.

Speaker #1: And the next question comes from the line of Emily Lee with KBW. Please go ahead.

Speaker #2: Yeah. Like everybody, we have levers on the expense side that we can pull. There is a pretty decent chunk of variable compensation expense within there.

Speaker #5: Hi, everyone. This is Emily, stepping in for Tim Switzer. Thanks for taking my questions.

Speaker #3: You're welcome. And good morning.

Speaker #2: Good morning.

Speaker #2: That is the loan growth didn't come through. There'd be some opportunity there. And then in general, there's always opportunities to sort of rebalance that.

Speaker #5: Yeah, good morning. So I was wondering, do you have any levers to maybe pull on the expense front if, say, loan growth doesn't come in as strong as expected?

Speaker #5: And maybe, if you can, talk about whether you’re planning on doing any other investments—maybe on the tech side. Just, yeah, puts and takes on the expense.

Speaker #2: So again, right now, we're not suggesting that we think that's going to be an issue with the loan growth guide that we gave. And then again, we always look for opportunities, having the opportunity to get a bit of a refund on some of our FDIC insurance premiums as an example.

Speaker #3: Yeah. Like everybody, we have levers on the expense side that we can pull. There is a pretty decent chunk of variable compensation expense within there.

Speaker #2: So we'll continue to look for those items as well.

Speaker #3: That is the loan growth didn't come through. There'd be some opportunity there. And then in general, there's always opportunities to sort of rebalance that.

Speaker #7: Great. Thank you. And then you touched on FDI being supportive of C income going forward, and you also mentioned trust. Are there any other fee income lines you want to point out that could maybe provide upside or downside to your expectations?

Speaker #3: So again, right now, we're not suggesting that we think that's going to be an issue with the loan growth guide that we gave. And then again, we always look for opportunities, including the opportunity to get a bit of a refund on some of our FDIC insurance premiums, as an example.

Speaker #2: No. I mean, those are the main ones. Obviously, as we get more consumers, we tend to see opportunities on the service charge side of the equation.

Speaker #3: So we'll continue to look for those items as well.

Speaker #2: So I mean, that's viable as well, but that's more a component of how many customers we have. And sort of what level of activity they have out as they spend or think about kind of their banking relationship.

Speaker #5: Great, thank you. And then you touched on SBA being supportive of fee income going forward, and you also mentioned trust. Are there any other fee income lines you want to point out that could maybe provide upside or downside to your expectations?

Speaker #2: There's always some small gains that we have on our investment on our investments that are outside of what's managed in treasury. But again, we don't really know how those things are going to shake out.

Speaker #3: No, I mean, those are the main ones. Obviously, as we get more consumers, we tend to see opportunities on the service charge side of the equation.

Speaker #2: We don't really forecast them. We can't. So there's always a little bit of upside here and there, but I would say the vast majority is sort of on those businesses that we're trying to scale and grow like trust.

Speaker #3: So, I mean, that's viable as well, but that's more a component of how many customers we have and sort of what level of activity they have, as they spend or think about kind of their banking relationship.

Speaker #7: Okay. Great. Well, thanks for taking my question.

Speaker #3: There are always some small gains that we have on our investments, or on our investments that are outside of what's managed in Treasury. But again, we don't really know how those things are going to shake out.

Speaker #2: You're welcome. Thank you.

Speaker #1: And the next question comes from the line of Manuel Navas with Piper Sandler. Please go ahead.

Speaker #3: We don't really forecast them. We can't. So there's always a little bit of upside here and there, but I would say the vast majority is sort of on those businesses that we're trying to scale and grow like trust.

Speaker #3: Hey, good morning. In discussing your Columbus plans of four new branches this year, you said that there were further plans after that. Can you kind of just add some color on your plans for the market?

Speaker #5: Okay. Great. Well, thanks for taking my question.

Speaker #3: If there's going to be more built out next year. And then any other regional focus areas as you look out towards 2027?

Speaker #3: You're welcome. Thank you.

Speaker #1: And the next question comes from the line of Manuel Navas with Piper Sandler. Please go ahead.

Speaker #2: Yeah. So we had always talked about having five Columbus branches that we're going to be opened this year. We did update that to, say, four because one of our branches had some permitting issues that kind of drug construction out slightly longer.

Speaker #6: Hey, good morning. In discussing your Columbus plans of four new branches this year, you said that there were further plans after that. Can you kind of just add some color on your plans for the market?

Speaker #2: So that one we would expect to open in February. So that would get us to the five that we've always talked about. We haven't really gotten into future plans.

Speaker #6: If there's going to be more built out next year, and then any other regional focus areas as you look out towards 2027?

Speaker #2: And quite honestly, five branches for a firm that hasn't been opening a lot of branches is a lot. So we want to make sure that our strategies are successful, learn from the build of the five, and then be able to apply that to any future growth that we'd have.

Speaker #3: Yeah. So, we had always talked about having five Columbus branches that were going to be opened this year. We did update that to say four, because one of our branches had some permitting issues that kind of dragged construction out slightly longer.

Speaker #2: But I would just comment that the Columbus market is an exceptionally strong market, and there is likely plenty of room to continue to think about opportunities within that market.

Speaker #3: So that one we would expect to open in February, so that would get us to the five that we've always talked about. We haven't really gotten into future plans.

Speaker #2: But as of now, we haven't gone into any more details on what our future plans are.

Speaker #3: And quite honestly, five branches for a firm that hasn't been opening a lot of branches is a lot. So we want to make sure that our strategies are successful, learn from the build of the five, and then be able to apply that to any future growth that we'd have.

Speaker #3: And I apologize. This was covered it seems like the capital deployment plans are first to handle the sub debt. But you're now a year past Penns Woods.

Speaker #3: But I would just comment that the Columbus market is an exceptionally strong market, and there is likely plenty of room to continue to think about opportunities within that market.

Speaker #3: What are you what would you consider deployment priorities after that? And where does M&A fit in?

Speaker #3: But as of now, we haven't gone into any more details on what our future plans are.

Speaker #2: Yeah. So again, we really haven't changed our capital priorities, right? So we key is supporting organic growth. So we want to focus on that.

Speaker #6: And I apologize if this was already covered. You mentioned that the capital deployment plans are first to handle the sub debt, but you're now a year past Penns Woods.

Speaker #2: And then we want to continue to maintain support for the dividend that we've already had. And everybody would expect to continue and then between the next two opportunities, M&A and other opportunities for share buybacks, I think we're realistic to say that that environment is pretty volatile and it's hard to project.

Speaker #6: What are your—what would you consider deployment priorities after that? And where does M&A fit in?

Speaker #2: So we've got a couple of leverage there and we'll pull them as related, but I'll let Lou comment on the M&A side of the equation.

Speaker #3: Yeah. So again, we really haven't changed our capital priorities, right? So the key is supporting organic growth, so we want to focus on that.

Speaker #3: Yeah. Hey, Manuel. I would just say that from the M&A, we haven't really changed our perspective we're always open for discussions and opportunities that fit our strategic plan, both from a geographical perspective and a strategy perspective.

Speaker #3: And then, we want to continue to maintain support for the dividend that we've already had and everybody would expect to continue. And then, between the next two opportunities—M&A and other opportunities for share buybacks—I think we're realistic to say that that environment is pretty volatile, and it's hard to project.

Speaker #3: But we certainly are only going to enter into arrangements that are highly accretive that have shareholder value and that we feel we can execute on.

Speaker #3: So, we've got a couple of levers there, and we'll pull them as related. But I'll let Lou comment on the M&A side of the equation.

Speaker #2: Yeah. Hey, Manuel. I would just say that, from the M&A side, we haven't really changed our perspective. We're always open for discussions and opportunities that fit our strategic plan, both from a geographical perspective and a strategy perspective.

Speaker #3: I would just say that we have a very experienced team, senior leadership team, as it relates to M&A. And we have updated our playbook.

Speaker #3: There were lessons learned in Penns Woods. As well as that went, and as we executed at a high level, we think there are always lessons learned.

Speaker #2: But we certainly are only going to enter into arrangements that are highly accretive that have shareholder value and that we feel we can execute on.

Speaker #3: So we're continuing to tool the organization to capitalize on opportunities as they come up. Certainly, as you can tell, it helps fuel future growth and gives us the opportunity to increase EPS and revenue.

Speaker #2: I would just say that we have a very experienced senior leadership team as it relates to M&A, and we have updated our playbook.

Speaker #2: There were lessons learned in Penns Woods. As well as that went, and as we executed at a high level, we think there are always lessons learned.

Speaker #3: So we're but right now, we're focused as an organization on continuing to optimize our own financial performance. Positive operating leverage, expense saves throughout the organization, and driving core earnings and core growth, which is what last year after the acquisition, we told the market that we would do.

Speaker #2: So we're continuing to tool the organization to capitalize on opportunities as they come up. Certainly, as you can tell, it helps fuel future growth and gives us the opportunity to increase EPS and revenue.

Speaker #3: And we're fulfilling that promise. So we'll see how that goes.

Speaker #2: So we're but right now, we're focused as an organization on continuing to optimize our own financial performance. Positive operating leverage, expense saves throughout the organization, and driving core earnings and core growth, which is what last year after the acquisition, we told the market that we would do.

Speaker #2: Yeah. And just to double-click on the M&A point, I would just say we're really excited. We mentioned it in the prepared comments that we have now reached the static payback in less than a year.

Speaker #2: So we're 11 months outside of the close as of 6/30. And we are now at 988 tangible book value per share. We were 985 before we announced.

Speaker #2: And Lou also foreshadowed the fact that we would expect to get the crossover valuation probably by the end of the fourth quarter. So again, both those would have been in a year or slightly over a year versus the 2.9-year payback period we stated up front.

Speaker #2: And we're fulfilling that promise. So we'll see how that goes.

Speaker #3: Yeah, and just to double-click on the M&A point, I would just say we're really excited. We mentioned in the prepared comments that we have now reached the static payback in less than a year.

Speaker #2: So we're very happy with the way that transaction went and feel good about our capabilities there.

Speaker #3: So, we're 11 months outside of the close as of 6/30, and we are now at $9.88 tangible book value per share. We were at $9.85 before we announced.

Speaker #3: Yeah. I was going to bring that up too. The payback is faster than expected. What are some of the lessons you've learned, though? It's you brought that up, and I just kind of wanted to in light of that kind of successful take a book value return, what are some things you've learned from this transaction?

Speaker #3: And Lou also foreshadowed the fact that we would expect to get the crossover valuation probably by the end of the fourth quarter. So again, both of those would have been in a year or slightly over a year, versus the 2.9-year payback period we stated up front.

Speaker #3: So we're very happy with the way that transaction went. And feel good about our capabilities there.

Speaker #2: Yeah. Maybe I'll start and I'll let Lou back clean up on that one. I mean, I think the first thing is being very disciplined in the target and the pricing of the transaction is pretty important, right?

Speaker #6: Yeah. I was going to bring that up too. The payback is faster than expected. What are some of the lessons you've learned, though? It's you brought that up, and I just kind of wanted to in light of that kind of successful take a book value return, what are some things you've learned from this transaction?

Speaker #2: So I think finding the right cultural fit and then being able to do the deal with reasonable levels of cost mean a lot. And then I think it's all about how you move into these markets and appropriately remove costs from the old organization and then make sure that you're keeping connected with the customers of that organization and transitioning.

Speaker #3: Yeah. Maybe I'll start, and I'll let Lou bat cleanup on that one. I mean, I think the first thing is, being very disciplined in the target and the pricing of the transaction is pretty important, right?

Speaker #2: So there's always opportunities to do a better job there. And I think we had our fair share of learnings from that. But generally speaking, I think we liked the way the rest of the deal progressed.

Speaker #3: So I think finding the right cultural fit and then being able to do the deal with reasonable levels of cost mean a lot. And then, I think it's all about how you move into these markets and appropriately remove costs from the old organization, and then make sure that you're keeping connected with the customers of that organization and transitioning.

Speaker #3: Yeah. I would just add, Manuel, my experience, I've been with a number of firms, and we've done a lot of M&A. And I think the one thing to keep top of mind when you're going into the deal is not to destroy value that you just paid for, right?

Speaker #3: So we were very intentional. We spent a lot of time in the market with the employees. We spent a lot of time with the customers.

Speaker #3: So there's always opportunities to do a better job there, and I think we had our fair share of learnings from that. But, generally speaking, I think we liked the way the rest of the deal progressed.

Speaker #3: And so I think that you've got to make sure that you can properly integrate when you are able to obtain the cost saves. And so we were very laser-focused on maintaining value.

Speaker #2: Yeah, I would just add, Manuel, from my experience—I've been with a number of firms, and we've done a lot of M&A. I think the one thing to keep top of mind when you're going into a deal is not to destroy the value that you just paid for, right?

Speaker #3: And now we are well into the stage of how do we build on the marketplace that we just acquired? So how do we layer our products and services and personnel in so that we can provide future growth both in the retail and commercial banks?

Speaker #2: So we were very intentional. We spent a lot of time in the market with the employees. We spent a lot of time with the customers.

Speaker #2: And so I think that you've got to make sure that you can properly integrate when you are able to obtain the cost saves. And so we were very laser focused on maintaining value.

Speaker #3: So there was a lot of good work done. I think that one of the lessons learned was that in the new environment is speed and data and information and communication are going to be key.

Speaker #2: And now we are well into the stage of: how do we build on the marketplace that we just acquired? So, how do we layer our products, services, and personnel in, so that we can provide future growth in both the retail and commercial banks?

Speaker #3: And so we are we're very happy with the way Penns Woods ended up.

Speaker #1: I really appreciate that. Thank you.

Speaker #2: So, there was a lot of good work done. I think that one of the lessons learned was that, in the new environment, speed, data, information, and communication are going to be key.

Speaker #4: And the next question comes from the line of Daniel Cardenas with Green Capital. Please go ahead.

Speaker #5: Good morning, guys.

Speaker #2: Good morning.

Speaker #5: So most of my questions have been asked and answered. Just one question on reserve levels. So given the continued change in your loan portfolio, the more commercializing nature, how likely is it that we could see some build-up in reserve levels on a go forward basis, especially given the charge-off history that's been fairly well-behaved?

Speaker #2: And so we are we're very happy with the way Penns Woods ended up.

Speaker #6: I really appreciate that. Thank you.

Speaker #1: And the next question comes from the line of Daniel Cardenas with Green Capital. Please go ahead.

Speaker #5: Good morning, guys.

Speaker #3: Good morning.

Speaker #5: So, most of my questions have been asked and answered. Just one question on reserve levels. Given the continued change in your loan portfolio, the more commercializing nature, how likely is it that we could see some build-up in reserve levels on a go-forward basis, especially given the charge-off history that's been fairly well-behaved?

Speaker #2: Yeah. I mean, again, there's a lot that goes into those reserve calculations, not the least of which is sort of the outward look on the economy and sort of future levels of reserves are going to have a lot to do with sort of where those numbers come in.

Speaker #2: And that is a very difficult thing to forecast. So right now, I would say things look pretty good. Things have been pretty stable. We've gotten through a number of shocks, right, whether it was tariffs early on or whether it was the conflicts overseas.

Speaker #3: Yeah. I mean, again, there's a lot that goes into those reserve calculations, not the least of which is sort of the outward look on the economy and sort of future levels of reserves are going to have a lot to do with sort of where those numbers come in.

Speaker #2: So we continue to just sort of be patient and wait for all those things. But generally speaking, I think we feel pretty comfortable with our overall levels of reserves and pretty comfortable with the guidance that we provided on sort of net charge-offs for the year.

Speaker #3: And that is a very difficult thing to forecast. So right now, I would say things look pretty good. Things have been pretty stable. We've gotten through a number of shocks, right? Whether it was tariffs early on, or whether it was the conflicts overseas.

Speaker #2: But it is a very tricky thing to get too far out on.

Speaker #5: Okay. Appreciate it. All right, guys. Thank you very much. Good quarter.

Speaker #2: Thank you.

Speaker #3: Thank you.

Speaker #3: So, we continue to just sort of be patient and wait for all those things. But, generally speaking, I think we feel pretty comfortable with our overall levels of reserves and pretty comfortable with the guidance that we provided on net charge-offs for the year.

Speaker #4: And we do have a follow-up question coming from Ryan Farhan with Truist. Please go ahead.

Speaker #5: Hey, just one last one on credit. Just the charge-offs required to get to the low to middle end of the range in the back half, I think, are kind of in the 10 million a quarter range.

Speaker #3: But it is a very tricky thing to get too far out on.

Speaker #5: Okay, appreciate it. All right, guys. Thank you very much. Good quarter.

Speaker #5: When you think about the step-up versus the 5 million a quarter, recently, I'm just wondering, is it like you can't run rate 5 million a quarter forever, one loan could double that, or is it something you're seeing with the classifieds ticking up or how much of that is reversion to the mean general conservatism and how much of that is line of sight on maybe some resolutions you have in the pipeline?

Speaker #2: Thank you.

Speaker #3: Thank you.

Speaker #1: And we do have a follow-up question coming from Brian Farhan with Truist. Please go ahead.

Speaker #5: Hey, just one last one on credit. Just the charge-offs required to get to the low to middle end of the range in the back half, I think, are kind of in the $10 million a quarter range.

Speaker #2: Yeah. So I would say it's definitely a bit of both, but it's reversion to the mean mostly, right? We can't continue to run at those levels of charge-offs forever.

Speaker #5: When you think about the step-up versus the $5 million a quarter recently, I'm just wondering, is it like you can't run-rate $5 million a quarter forever? One loan could double that, or is it something you're seeing with the classifieds ticking up? How much of that is reversion to the mean, general conservatism, and how much of that is line of sight on maybe some resolutions you have in the pipeline?

Speaker #2: We're still working through some credits we obviously know what our MPAs are right now, and we can see the resolution of some of those.

Speaker #2: And we just want to make sure that we're being very square with everybody around where the charge-offs could be in the back half of the year.

Speaker #2: But we also wanted to provide some guidance that we don't expect to see them at the top end of that range, but somewhere operating in the middle part to lower part of that we think is reasonable at this point.

Speaker #3: Yeah, so I would say it’s definitely a bit of both, but it’s reversion to the mean mostly, right? We can’t continue to run at those levels of charge-offs forever.

Speaker #5: Thank you so much.

Speaker #3: We're still working through some credits. We obviously know what our MPAs are right now, and we can see the resolution of some of those.

Speaker #4: And I'm showing no further questions at this time. I would like to hand it back to the CEO, Lou Tosher, for closing remarks.

Speaker #3: And we just want to make sure that we're being very clear with everybody about where the charge-offs could be in the back half of the year.

Speaker #3: 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 about our amendment 2026 as we are well positioned to continue to optimize our financial performance and to capitalize on opportunities to drive profitable core growth.

Speaker #3: But we also wanted to provide some guidance that we don't expect to see them at the top end of that range, but operating somewhere in the middle to lower part, which we think is reasonable at this point.

Speaker #5: Thank you so much.

Speaker #3: I look forward to speaking to you on our third quarter earnings call in the fall. Thank you.

Speaker #1: And I'm sorry, no further questions at this time. I would like to hand it back to the CEO, Lou Torchio, for closing remarks.

Speaker #2: 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 about our momentum in 2026, as we are well positioned to continue to optimize our financial performance and to capitalize on opportunities to drive profitable core growth.

Speaker #2: I look forward to speaking to you on our third quarter earnings call in the fall. Thank you.

Q2 2026 Northwest Bancshares Inc Earnings Call

Request DemoDemo

Northwest Bancshares

Earnings