Filed by Northwest Bancshares, Inc.

Pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Securities Exchange Act of 1934

Subject Company: Penns Woods Bancorp, Inc.

Commission File No. 0-17077

 

 

Adjusted net income (non-GAAP) of $35 million, or $0.27 per diluted share

Efficiency ratio improved to 61.8%

 

Columbus, Ohio — January 24, 2025

 

Northwest Bancshares, Inc., (the “Company”), (Nasdaq: NWBI) announced net income for the quarter ended December 31, 2024 of $33 million, or $0.26 per diluted share. This represents an increase of $4 million compared to the same quarter last year, when net income was $29 million, or $0.23 per diluted share, and a decrease of $1 million compared to the prior quarter, when net income was $34 million, or $0.26 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended December 31, 2024 were 8.20% and 0.91% compared to 7.64% and 0.80% for the same quarter last year and 8.50% and 0.93% from the prior quarter.

Compared to adjusted net income (non-GAAP) of $34 million, or $0.26 per diluted share in the prior quarter, adjusted net income (non-GAAP) increased by $1 million to $35 million, or $0.27 per diluted share for the quarter ended December 31, 2024. This increase was driven by an increase in noninterest income which was offset by an increase in provision expense of $17 million for the quarter ended December 31, 2024 compared to $4.9 million for the quarter ended September 30, 2024. The adjusted annualized returns on average shareholders’ equity (non-GAAP) and average assets (non-GAAP) for the quarter ended December 31, 2024 were 8.71% and 0.97% compared to 8.51% and 0.93% for the prior quarter.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share payable on February 14, 2025 to shareholders of record as of February 3, 2025. This is the 121st consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company’s common stock as of December 31, 2024, this represents an annualized dividend yield of approximately 6.1%.

Remarking on the results, President and CEO Louis J. Torchio said, “We are pleased with our fourth quarter earnings, which demonstrate the success of our business model focused on strategic growth and transformation. Our focus on commercial banking and deposit growth has delivered an increase in average C&I loans and sustainable deposit generation while maintaining a stable cost of funds. We’ve entered 2025 with significant momentum driven by improvements in our net interest margin and efficiency ratio, thanks to the commitment of our entire team to produce results while managing risks and taking care of our customers.

Notably in the fourth quarter, we were pleased to announce that we entered into an agreement to acquire Penns Woods Bancorp, Inc. expected to close in the third quarter of 2025, subject to customary closing conditions. This transaction marks another milestone in our long-term growth strategy and will place Northwest in the nation’s top 100 largest banks. Our combination of companies will be strongly positioned to serve communities that are familiar to Northwest while also expanding into new markets across North Central and Northeastern Pennsylvania.

We look forward to continuing our long-standing tradition of customer-focused banking in these new markets and across the entire Northwest footprint.

I am pleased to announce that for the 121st consecutive quarter, we will provide a $0.20 per share dividend, which demonstrates our continued commitment to providing value to our shareholders. Our dedication to financial stability, outstanding performance and sustainable growth remains steadfast this year, as we work to deliver benefits to our shareholders, customers, and communities.”

•Average loans receivable decreased $47 million from the quarter ended December 31, 2023 driven by our personal banking portfolio, which decreased by $448 million as cash flows from this portfolio were reinvested in our commercial portfolios. This was partially offset by growth in our commercial banking portfolio, which grew by $401 million in total, including a $368 million increase in our commercial and industrial portfolio as we have continued to build-out our commercial lending verticals. Compared to the third quarter of 2024, average loans receivable decreased by $19 million. Growth was muted in the quarter as we continue to reinvest cash flows from our personal banking portfolio into our commercial banking portfolio and focus on profitability and credit discipline.

•Average investments declined $43 million from the quarter ended December 31, 2023 and increased $35 million from the quarter ended September 30, 2024. The decline from the prior year was driven by the investment portfolio restructure which occurred in the second quarter as a portion of the proceeds from the investment sale were used to reduce outstanding borrowings. The growth in average investments compared to the third quarter was due to an increase in net portfolio purchases during the quarter to reach a normalized percentage of total assets for liquidity purposes.

•Average deposits grew $232 million from the quarter ended December 31, 2023, driven by a $224 million increase in our average time deposits as we competitively positioned our deposit products over the last year. This increase was partially offset by a decrease in money market balances as customers shifted balances into higher yielding time deposit accounts. Compared to the third quarter of 2024, average deposits declined $68 million, driven by a $159 million decrease in time deposits due a decline in the need for brokered CDs. This was partially offset by a $69 million increase in our average interest-bearing checking deposits.

•Average borrowings saw a reduction of $326 million compared to the quarter ended December 31, 2023 and a $2 million increase compared to the quarter ended September 30, 2024. The decrease in average borrowings is primarily attributable to the pay-down of wholesale borrowings made possible by the increase in the average balance of deposits noted above coupled with the proceeds from our investment portfolio restructuring.

Compared to the quarter ended December 31, 2023, net interest income increased $8 million and net interest margin increased to 3.42% from 3.16% for the quarter ended December 31, 2023. This increase in net interest income resulted primarily from:

•A $13 million increase in interest income that was the result of cash and marketable securities being redeployed into higher yielding loans. Driven by higher market interest rates, the average yield on loans improved to 5.56% for the quarter ended December 31, 2024 from 5.19% for the quarter ended December 31, 2023. This increase includes an interest recovery of $2.1 million on a non-accrual commercial loan payoff. Excluding this interest recovery, the adjusted yield on loans for the quarter ended December 31, 2024 was 5.48% and the adjusted net interest margin was 3.36%.

•A $5 million increase in interest expense as the result of higher costs of deposits due to the higher interest rate environment and competitive pressure for liquidity. The cost of interest-bearing liabilities increased to 2.27% for the quarter ended December 31, 2024 from 2.04% for the quarter ended December 31, 2023.

Compared to the quarter ended September 30, 2024, net interest income increased $3 million and net interest margin increased to 3.42% for the quarter ended December 31, 2024 from 3.33% for the quarter ended September 30, 2024. This increase in net interest income resulted from the following:

•A $4 million decrease in interest expense driven by lower interest expense on deposits as average yield improved compared to the prior quarter to 2.14% from 2.27% for the quarter ended September 30, 2024.

•A $1 decrease in interest income, as lower interest yields were partially offset by an interest recovery of $2.1 million on a non-accrual commercial loan payoff.

During the quarter the Company took several steps to de-risk our loan portfolio and reduce our levels of nonperforming, criticized and classified loans by completing two loan pool sales and transferring certain loans within our Long Term Healthcare portfolio into held for sale as of December 31, 2024. As a result we saw an elevated level of charge-offs during the fourth quarter as the loans noted above were written-down to fair market value prior to sale. Total charge-offs related to the loan sales and transfer to loans held-for-sale was a combined $15 million. Additionally, the Company saw a decrease in classified loans to $272 million, or 2.44% of total loans, at December 31, 2024 from $320 million, or 2.83% of total loans, at September 30, 2024.

The total provision for credit losses for the quarter ended December 31, 2024 was $16.6 million primarily driven by the elevated charge-offs discussed above, coupled with growth in our commercial lending portfolio and changes in the economic forecasts in the current period.

     

Noninterest income increased from the quarter ended December 31, 2023 by $11 million and from the quarter ended September 30, 2024 by $12 million due primarily to an increase in other operating income driven by a gain on sale of Visa B shares and a gain on a low income housing tax credit investment.

Noninterest expense increased from the quarter ended December 31, 2023 due to a $3 million increase in personnel expenses driven by an increase in incentive compensation and contract employee expense during the quarter.

Compared to the quarter ended September 30, 2024, noninterest expense increased due to a $3 million decrease in personnel expense driven by a decline in contract employee expense and employee benefit expenses, which were more than offset by an increase in non-personnel expense of $8 million due to $3 million of merger and restructuring expenses in the current quarter as well as an increase in processing and other expense due to technology investments and the timing of charitable contributions.

The provision for income taxes increased by $2 million from the quarter ended December 31, 2023 and remained flat from the quarter ended September 30, 2024 primarily due to the quarterly change in income before income taxes.

Net income increased from the quarter ended December 31, 2023, due to the factors discussed above, and decreased from the quarter ended September 30, 2024 due to the factors discussed above.

Headquartered in Columbus, Ohio, Northwest Bancshares, Inc. is the bank holding company of Northwest Bank. Founded in 1896 Northwest Bank is a full-service financial institution offering a complete line of business and personal banking products, as well as employee benefits and wealth management services. As of December 31, 2024, Northwest operated 130 full-service financial centers and eleven free standing drive-up facilities in Pennsylvania, New York, Ohio and Indiana. Northwest Bancshares, Inc.’s common stock is listed on The Nasdaq Stock Market LLC (“NWBI”). Additional information regarding Northwest Bancshares, Inc. and Northwest Bank can be accessed online at www.northwest.com.

 

#                      #                      #

Forward-Looking Statements - This release may contain forward-looking statements with respect to the financial condition and results of operations of Northwest Bancshares, Inc. including, without limitation, statements relating to the earnings outlook of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including inflation and an increase in non-performing loans; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses or the ability to complete sales transactions; (7) increased risk associated with commercial real-estate and business loans; (8) changes in liquidity, including the size and composition of our deposit portfolio; (9) reduction in the value of our goodwill and other intangible assets; and (10) the effect of any pandemic, war or act of terrorism. This release also contains forward-looking statements with respect to the proposed merger between the Company and Penns Woods Bancorp, Inc. (“Penns Woods”) including, without limitation, statements with respect to the expected timing of and benefits of the proposed merger. Such statements are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including, without limitation: (1) the businesses of the Company and Penns Woods may not be integrated successfully or such integration may take longer to accomplish than expected; (2) the expected cost savings and any revenue synergies from the proposed merger may not be fully realized within the expected timeframes; (3) disruption from the proposed merger may make it more difficult to maintain relationships with clients, associates, or suppliers; (4) the required governmental approvals of the proposed merger may not be obtained on the expected terms and schedule; and (5) Penns Woods’ shareholders may not approve the proposed merger and the merger agreement. Management has no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release, except as required by law.

Additional Information about the Merger and Where to Find It - This news release does not constitute an offer to sell or the solicitation of an offer to buy securities of the Company. In connection with the proposed merger, the Company will file with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that will include a proxy statement of Penns Woods, and a prospectus of the Company, as well as other relevant documents concerning the proposed transaction. INVESTORS AND SHAREHOLDERS OF PENNS WOODS, AND OTHER INTERESTED PARTIES ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The Proxy Statement/Prospectus will be mailed to shareholders of Penns Woods prior to the shareholder meeting, which has not yet been scheduled. In addition, when the Registration Statement on Form S-4, which will include the Proxy Statement/Prospectus, and other related documents are filed by the Company with the SEC, it may be obtained for free at the SEC’s website at www.sec.gov, and from either the Company’s website at www.northwest.bank or Penns Woods’ website at www.pwod.com.

Participants in the Solicitation - The Company, Penns Woods, and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of the Company and Penns Woods in connection with the proposed merger. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company’s 2024 annual meeting of shareholders, as filed with the SEC on March 8, 2024. Information about the directors and executive officers of Penns Woods is set forth in the proxy statement for Penns Woods’s 2024 annual meeting of shareholders, as filed with the SEC on March 26, 2024. Information about any other persons who may, under the rules of the SEC, be considered participants in the solicitation of shareholders of Penns Woods in connection with the proposed merger will be included in the Proxy Statement/Prospectus. You can obtain free copies of these documents from the SEC, the Company, or Penns Woods using the website information above. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

**    Excludes loss on sale of investments, amortization of intangible assets and merger, asset disposition and restructuring expenses (non-GAAP). See reconciliation of non-GAAP financial measures for additional information relating to these items.

**    Excludes loss on sale of investments, gain on sale of mortgage servicing rights, amortization of intangible assets and merger, asset disposition and restructuring expenses (non-GAAP). See reconciliation of non-GAAP financial measures for additional information relating to these items.

The following non-GAAP financial measures used by the Company provide information useful to investors in understanding our operating performance and trends, and facilitate comparisons with the performance of our peers. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s Consolidated Statements of Financial Condition.

The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s Consolidated Statements of Income.

*    The table summarizes the Company’s results from operations on a GAAP basis and on an operating (non-GAAP) basis for the periods indicated. Operating results exclude merger, asset disposition and restructuring expense, loss on sale of investments and gain on sale of mortgage servicing rights. The net tax effect was calculated using statutory tax rates of approximately 28.0%. The Company believes this non-GAAP presentation provides a meaningful comparison of operational performance and facilitates a more effective evaluation and comparison of results to assess performance in relation to ongoing operations.

Generally, deposits in excess of $250,000 are not federally insured. The following table provides details regarding the Company’s uninsured deposits portfolio:

(1)      Uninsured deposits presented may be different from actual amounts due to titling of accounts.

Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $26.2 million, or 0.22% of total deposits, as of December 31, 2024. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $167.4 million, or 1.38% of total deposits, as of December 31, 2024. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $295,000 as of December 31, 2024.

The following table provides additional details for the Company’s deposit portfolio:

Our average deposit account balance as of December 31, 2024 was $18,000. The Company’s insured cash sweep deposit balance was $551 million as of December 31, 2024.

The following table provides additional details regarding the Company’s deposit portfolio over time:

(1)     December 31, 2024 figures are estimated.

(2)    Amounts and ratios include the capital conservation buffer of 2.5%, which does not apply to Tier 1 capital to average assets (leverage ratio). For further information related to the capital conservation buffer, see “Item 1. Business - Supervision and Regulation” of our 2023 Annual Report on Form 10-K.

*    As of December 31, 2024, the Company had $3.2 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250 million overnight line of credit, which has no balance as of December 31, 2024, as well as $555 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.

The following table provides the various loan sectors in our commercial real estate portfolio at December 31, 2024:

The following table describes the collateral of our commercial real estate portfolio by state at December 31, 2024: