KBRA Affirms Ratings for Northwest Bancshares, Inc.

KBRA affirms the senior unsecured debt rating of BBB+, the subordinated debt rating of BBB, and the short-term debt rating of K2 for Columbus, Ohio-based Northwest Bancshares, Inc. (NASDAQ: NWBI) (“the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of A-, the subordinated debt rating of BBB+, and short-term deposit and debt ratings of K2 for the subsidiary bank, Northwest Bank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by NWBI’s durable, low-cost, and granular deposit franchise with core deposits comprising 96% of total funding sources. The company’s operating market is primarily within secondary, or more rural regions with less price-sensitive consumers; this dynamic has enabled NWBI to sustain materially lower funding costs through various interest rate cycles with NWBI’s total cost of deposits tracking among the lowest of all KBRA rated financial institutions at 1.57% for 1H25. However, NWBI’s loan portfolio is concentrated in fixed-rate conventional residential mortgage loans, somewhat limiting the company’s ability to reprice the loan portfolio amid the higher rate environment. Management has focused on allowing the residential portfolio to run-off, using the proceeds to fund higher-yielding commercial loan growth, which has, in part, supported NIM expansion through 1H25 to 3.72%. Going forward, we expect the margin to continue to benefit from the remixing of loans, combined with the recent acquisition of Penn Woods Bancorp (closed July 25, 2025). Additionally, NWBI’s noninterest income lines remain a solid contribution to earnings representing ~20% of total revenue supported by durable fee income from the company’s investment management and trust services.

While we note that NPAs have historically tracked above peer averages, loss content remains well contained dating back to the GFC when the company largely outperformed peers with a peak NCO ratio of 0.7% in 2011. Furthermore, the company maintains a considerably lower concentration in both C&D and investor CRE (16% and 116%, respectively at 2Q25). The company’s health care portfolio comprises ~10% of commercial loans, which has experienced elevated levels of deterioration post-pandemic. Nonetheless, classified loans remain manageable, in our view, at 4.6% of total loans. Additionally, NWBI has historically managed capital rather conservatively, with capital ratios generally tracking above peers, including a CET1 ratio at 12.8% as of 2Q25 providing ample loss absorbing capacity should potential credit issues arise. That said, given management’s intention to grow the commercial portfolio, we expect capital metrics to track below where they have historically run, though ratios should remain largely in line with peer levels.

Rating Sensitivities

A rating upgrade is not expected over the medium term, though continued growth and geographic expansion while maintaining solid earnings performance and sound credit quality metrics, may have positive rating implications over time. Aggressive capital management resulting in capital levels deteriorating beyond peers levels, and/or outsized credit losses impacting profitability could result in negative rating action.

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