Good morning. Thank you for standing by and welcome to Northwest Bancshares' second quarter 2024 earnings call. This call is being recorded, and playback will be made available on Northwest Bancshares' investor relations website. All participants are now in listen-only mode. Towards the end of today's call, we will conduct a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press th e star one. Now, I would like to introduce Jeffrey Maddigan, Northwest Head of Investor Relations. Please go ahead. Good morning, everyone, and thank you, operator. Thank you for joining Northwest Bancshares' second quarter 2024 earnings call. Today with me, I have Louis Torchio, President and CEO of Northwest Bancshares Inc, the holding company for Northwest Bank. Also with me is Douglas Schosser, Chief Financial Officer, and T.K. Creal, Chief Credit Officer. During this morning's call, we will reference information found in the supplemental earnings release presentation, which can be found on Northwest Bancshares' investor relations website. Included in that presentation, you will find our statements on forward-looking information and other data, including non-GAAP measures. These statements cover our earnings material, plus commentary offered on this morning's call. Please keep in mind that actual results may differ materially from forward-looking statements offered today, July 23rd, 2024. These forward-looking statements will not be updated after today's call. Thank you, and with that, I would like to turn it over to Lou. Good morning, everyone. Thank you for joining us today to discuss our quarterly results. Before we dive into the numbers, which Doug will cover, I would like to acknowledge the significance of this call. It marks an important milestone in our company's growth and maturity. As the bank has grown in size and complexity, we recognize the need to enhance our investor relations function and provide more comprehensive and regular updates to our shareholders and the financial community. This quarterly call format reflects our commitment to transparency, open communication, and best practices in corporate governance. We are eager to share our results with you and provide insights into our strategy, performance, and forward outlook. I'm thrilled to highlight the exceptional leadership team we've assembled over the past year at Northwest. In June, we welcomed Urich Bowers as our new Chief Consumer Banking and Strategy Officer, succeeding John Golding. Urich brings valuable experience from PNC to our organization. Earlier this year, we also added Doug Schosser as our new CFO, leveraging his expertise from KeyBanc. These additions significantly enhance our strategic development and execution capabilities. Looking back, we further strengthened our leadership team with Greg Betchkal, our Chief Risk Officer, with experience at Citibank, KeyBanc, and Bread Financial, and Jay DesMarteau, Chief Commercial Banking Officer, who brings rich experience from GE Capital, TD Bank, and most recently, Lending Club. Together with our existing experienced and capable leaders, I have confidence that this group of experienced individuals will propel our bank to new heights in the coming years. I'd also like to highlight some key strategic initiatives that are driving our performance and positioning us for long-term success. First, our commercial bank transformation continued to gain momentum. Under Jay DesMarteau 's leadership, you'll see how we shifted our focus to growing our C&I portfolio. We established new commercial lending verticals, which are showing promising early results. These verticals include sponsor finance, equipment finance, sports finance, franchise finance, and a new SBA lending group. Each unit is outperforming our early expectations, and I'm eager to see their continued contributions. Last quarter, we also announced our intention to restructure our securities portfolio. We were successful with this plan, and Doug will talk more about the strategy and our results in a few minutes. The results of the restructure enabled Northwest to purchase higher-yielding securities, as well as significantly reduced our overnight borrowing. A portion of the benefit showed up in our net interest margin improvement for this quarter. Overall, I'm pleased with our core financial results, and I'm confident the positive changes to our securities portfolio will enable a strong position for Northwest for the coming quarters and years ahead. I want to thank each and every team member for their talent and dedication to produce these results. I'm proud of your hard work and focus on our customers and our communities. I'm also pleased to notify you that the impact to our bank operations from the CrowdStrike IT issue was minimal. All of our branches and ATMs were open and running, servicing our customers. Personal and business customers have been able to access online banking, mobile banking, Treasury Pro, and wire funds without incident. Finally, as we have for the past 119 quarters, on behalf of the Board of Directors, I'm pleased to declare a quarterly dividend of $0.20 per share to shareholders of record as of August 2nd, 2024. Now, I'd like to introduce Doug Schosser, Northwest Bank 's Chief Financial Officer, as he will take you through our financial results. Doug? Thank you, Lou. Good morning, everyone. Please look to page four in the earnings presentation as I cover the financial results Northwest posted for the second quarter of 2024. We announced net income for the quarter of $5 million or $0.04 per diluted share. After adjusting for the securities loss and restructuring charges, EPS is $0.27 per share and $0.05 above analyst consensus estimates. We completed our previously announced securities restructure, hitting our targets on the reinvestments, which I will discuss later. Loan growth was more muted this quarter as we focused on improving our new loan yields rather than seeking loan growth more aggressively. These actions resulted in an improving net interest margin, which, after bottoming in the first quarter, rebounded to 320 basis points during the second quarter. The income was improved over the first quarter due to strong SBA originations, while noninterest expenses were maintained at the $90 million level after we adjusted for some restructuring costs incurred in the quarter. Credit quality remains very good, and overall allowance coverage increased slightly to 1.10% of loans. Now, I will get into some additional details. Turning to slide five, you will see the results of the restructuring so far. We sold $314 million, or 15% of our portfolio, at a loss of $39.4 million pre-tax, with an average yield of 1.79%. We reinvested $258 million of the proceeds, with an average yield of 6%. This represents a yield pickup of over 420 basis points, with an anticipated payback of three years or less. The average overall portfolio yield now stands at 2.45% compared to 1.96% at the end of the first quarter. These results met or even exceeded initial expectations. Next, I'll speak to our loan portfolio, which can be found on page six. Most notably, you'll see that our commercial and industrial loans grew 3.2% since last quarter and 33.4% since the same quarter last year, while residential mortgages declined $143 million, or 4.1% since last year. To these earlier points, this demonstrates the results of our commercial banking transformation. While our commercial real estate portfolio grew modestly, less than 1% since last quarter, you can see the change in the loan mix to a more desirable share of C&I compared to CRE. Embedded within this growth is the discipline to grow profitably, maintaining adequate margins on new loans originated. You'll see in the bottom right chart that our loan yield has grown steadily quarter-over-quarter for the last 5 quarters and now stands at 5.47%. On the next page seven, I will cover deposits. Largely due to competitive pricing and continual marketing efforts, deposits grew by 1.6% since the last quarter and 5.8% since the same period last year. While our cost of deposits grew by 15 basis points, that represents the lowest increase in the past 5 quarters. Most deposit growth was within our consumer time deposit product category, with modest growth in both consumer savings and non-interest demand accounts. The current cost of deposits stands at 1.76, which is near best-in-class relative to our peers. On page eight, I will cover net interest margin, which now stands at 320 basis points, or a 10 basis point improvement from the first quarter and 8 basis points lower than the same quarter last year. Net interest income grew from $104 million at the end of the last quarter to $108 million, or approximately 4%. This is the first quarter with NIM growth since a year ago and reflects the impact of reduced borrowings, higher loan yields, and a slower pace of growth of our cost of funds. We remain diligent in managing our deposit growth and pricing strategy alongside prudent loan pricing. We ended the quarter with a cost of funds of 2.4%. Net interest income, covered on slide nine, grew 9%, or $2.6 million quarter-over-quarter, excluding the loss incurred from the securities restructuring. As I mentioned previously, the gain on the sale of SBA loans grew by 67%. We also saw gains year-over-year in trust fees and consumer deposit service charges. Slide 10 shows details of our noninterest expense. Our efficiency ratio improved to 65.4% despite modestly rising expenses. However, if we adjust out one-time costs incurred due to the termination of John Golding's contract, expenses were essentially flat for the quarter. We remained focused on expense management. We're making smart decisions to insource work previously produced by more expensive third-party professional services firms. We continue to be focused on finding additional cost reductions without impacting core operating activities or diminishing the service levels our customers have come to expect and maintaining a well-managed institution. A few comments on credit quality. On page 11, our allowance to loans coverage increased slightly to 1.10% with net charge-offs of just 7 basis points for the quarter. As seen on page 12, overall credit performance remained strong, although we did see a slight increase in non-performing assets. However, these increases can result from small changes given the overall low level of classified assets today. Slide 13 shows our commercial loan concentration. As you can see from the graphs, we have a diverse portfolio. Backed by strong underwriting, we've been able to avoid many of the CRE-specific issues. We do not have material risk with exposure in large metro office or rent-controlled markets. Our healthcare sector, which has seen some challenges recently, is currently beginning to show signs of improvement. Page 14 summarizes the balance sheet changes I just shared with you and also shows our estimated capital ratios that remain very strong. We expect to report a 13.18% CET1 capital ratio and an 11 basis point improvement on our TCE to tangible asset ratio, which will be 8.37%. Finally, I will cover our outlook for the second half of the year. We'll stay focused on responsible and profitable loan growth in the commercial space, specifically C&I lending. We anticipate low single-digit loan growth. We expect deposits to remain largely flat, and we will manage our deposit costs while balancing client expectations and market pressures. Tha t combined with disciplined loan pricing will allow for modest expansion of the net interest margin. We expect modest growth of 0%-2% in non-interest income, and we remain focused on keeping expenses flat. This will have a positive impact on our efficiency ratio. Both our tax rate and net charge-offs are expected to normalize closer to Q1 2024 levels. On behalf of the entire leadership team and Board of Directors, thank you for joining us this morning. At this time, I'll turn the call over to Desiree, our operator, who will facilitate my question and answers. Thank you. 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 star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Your first question comes from the line of Tim Switzer with KBW. Your line is open. Hey, good morning. Thank you for taking my questions. We really appreciate you guys doing the conference call and the updated presentation and guidance. It's great. Thank you, Tim. Nice to hear from you this morning. My first question is on the timing and impact of the securities restructuring. It seems like from the presentation, it maybe had up to a 13 basis point impact on the margin this quarter. Could you guys maybe provide some details on the timing of it over the course of the quarter, and then what's the impact we should expect in Q3? Sure. We started the restructuring in the middle towards the end of the quarter. Most of the sales were late May and early June. We finished all of the selling activity towards the end of June. We have a little bit more about $20 million, give or take, to redeploy into some asset classes that have a little less supply in the market. So that was the timing. So we will get a full quarter's benefit next year, and we would expect that to be incremental 4-5 basis points. An incremental 4-5 basis points in Q3? Correct. On the investment portfolio. Okay. And is that guidance? 9 total basis points for the margin. Okay. And should we assume some incremental NIM expansion on a core basis on top of that in Q3 and Q4, or is that going to be the primary driver? We continue to focus on our ability to price in this market. I think there is some opportunity for some additional core margin growth based on how we handle deposit pricing opportunities as well as loan volumes in the quarter. Okay. Great. And then if I could ask a follow-up, kind of clarifying exactly what's intended in the guidance. On the non-interest income and expense side, you're guiding to low single-digit growth off of the adjusted base per quarter. Do we take the average in the first half of the year and just add low single-digit growth on top of that, or is it low single-digit growth in Q3 relative to Q2, and then low single-digit growth in Q4 relative to Q3? I think it's low single-digit growth on the adjusted Q2 numbers. I wouldn't necessarily say that it's 2% per quarter. It's 2% over the course of the year. Got you. Okay. That's very clear. I'll get back in the queue. Thank you. Okay. Thank you. Your next question comes from the line of Daniel Tamayo with Raymond James. Your line is open. Hey, good morning, guys. This is Tim DeLacey filling in for Danny. I'll echo the comments. Thank you for hosting the call and taking my questions this morning. First off, yeah, thank you. First quarter in a while here where commercial growth was not very strong, and you alluded to the comment on keeping loan yields advantageous for you. Can you talk a bout if that reflects maybe a change in the competitive dynamics with potential entrants in the markets? And then perhaps a follow-up, can you talk to how current pipelines are comparatively to the last few quarters in that commercial portfolio? Thanks. Yeah. I wouldn't say it's due to higher levels of competition. I think it is due to both credit discipline and pricing discipline as we look at opportunities. I will say we did have some higher levels of runoff in our portfolio than we were expecting. So that puts some downward pressure on the overall balance growth for the quarter. We wouldn't expect that level of payoffs to continue. As for our pipelines, we are seeing pipelines that are similar this quarter to last quarter, and we wouldn't expect to have continued reductions in loan balances across the portfolios because, again, we're expecting that runoff to not be as big of an impact on us going forward. But again, that runoff is outside of our control. In certain cases, it was corporate transactions and things that just created some earlier-than-anticipated paydowns. Great. I appreciate that color there. Then maybe switching over to the credit cost. Did remain low for the quarter. Did see the nonaccruals pick up in the commercial, and you did specifically mention that one single credit. Is there any detail that you can provide on that from an industry vertical and then maybe the trends you're seeing overall in that portfolio? Yeah. I mean, I don't think that we're getting into that level of disclosure on this call. I would just say, as we stated in our earlier comments, some of the healthcare portfolio has shown some signs of stress, but we believe that that is getting better or at least normalizing. We did guide to a more normalized overall provision level. I think over the cycle, we would say our overall charge-off number would be 15-20 basis points. I don't know that we'll get there next quarter, but you should see that credit normalization over time. Okay. Great. That's all that I had today, guys. Thank you for taking my questions. Okay. You're welcome. Next question comes from the line of Frank Schiraldi with Piper Sandler. Your line is open. Good morning. Good morning. Just first on expenses, just want to make sure I heard you correctly. So when we're looking at the guidance, you talked about low single-digit growth. So that's low single-digit growth in the back half of the year annualized off of normalized 2Q numbers. Just saying it a different way, is that the right way to think about it? Yeah. I think last quarter we talked about a $90 million per quarter expense number. I still think that's fairly good. So depending on how you look at second quarter, again, we're looking forward saying it's going to be around $90 million, give or take 2% of that. Again, I don't think it's sustained expense growth. We continue to focus on expenses, but there's a lot of uncertainty. So we continue to look for opportunities to drive overall profitability. But again, on the conservative side, we're at that $90 million ±2% over the course of the year and a quarter. Gotcha. Okay. And then just switching gears as a follow-up, just the macro picture seems to have improved a bit, certainly at least stabilized, and bank stocks certainly reacted positively over the last month or so. So just wondering your thoughts if your appetites changed at all for M&A, your updated thoughts there on opportunities in the near- term? Hey, Frank, it's Lou. Thanks for the question. Really, I think with the deployment of our capital strategy, it continues to be, one, protect and deliver on the dividend. Secondly, we are focused on organic growth and optimizing and transitioning the firm over time, which is our stated goal. And then certainly, thirdly, acquisitions. We have a strategy. Conversations are picking up, whether that means expanding our geography into higher growth markets, whether it's acquiring an institution that brings businesses that we otherwise don't have, or whether it's a deposit play or really a combination of all of that. So we are actively having conversations. We're interested in growing organically and inorganically. And then, of course, lastly would be any buybacks as a result of our capital position. So yeah, we do see the market clearing. There are more conversations going on, and we are interested, but we're going to be pretty selective. We want to make sure that strategically it propels us to where we want to go. And then just in terms of geography, would it be if there is some expansion, would you still expect that to be contiguous expansion? And any thoughts on most attractive geographies as you look out at the potential for M&A? Yeah. I mean, we certainly will consider in- markets as well. We think it's a little bit lower risk. It's a higher execution. But certainly, we'd like to grow, as I said, in some different markets that provide more opportunity for the franchise. We certainly are based here in Columbus now. Ohio is a focus of ours. Indiana, specifically the Indianapolis area, would be a focus. And we are focused primarily. I really don't see us going outside of contiguous footprint. So the four states we're in, think about the contiguous states around those states. So as you know, we can only evaluate the opportunities that are presented to us. But we will be fairly selective in deploying capital. Great. Thanks for the color. Thank you. Next question comes from the line of Daniel Cardenas with Janney. Your line is open. Hey, good morning, guys. Just some follow-up on the margin. What kind of rate cut assumptions are baked, if any, are baked into your margin guidance? Yeah. Last time we looked at it, we were looking at about three cuts over the course of the year for the final year as part of our margin guidance. Again, I think we're pretty well positioned to handle if it comes out to be two or something like that. But we definitely were providing guidance given the more current Fed stance. Okay. For every 25 basis points, what kind of cuts, what kind of impact does that have on the margin? Might turn that over to Jeff to answer more specifically. Yeah. I think because of where they come in. So we're kind of assuming there's September and then late in the year. So certainly, the last two don't have that much impact. We do think we'll be able to bring deposit prices down in line with any kind of cuts to kind of help buffer margin and, if anything, continue to keep increasing margin as our guidance suggests. So really gets to that deposit beta our ability to bring down deposit costs. And we just think that given the competition or what the competition is facing in margin compression, that they'll be eager to bring costs down as well. So we think there'll be some ability to do that. Okay. Great. Thank you. And then what does your CRE ratio, concentration ratio look like at quarter end? Hold that number. Just a second. I think that was on the earnings deck on the loan section, if I recall. Page 13. Flip to page 13. That just shows the overall concentration. You're looking for a percent of the portfolio for CRE. So it's $3 billion on the loan. Yeah. I'm just kind of looking for the regulatory number that everybody's looking at right now. All right. Yep. Give us one second. We'll pull that for you. Yeah. We'll come back. If you have another question before that one, we can come back and clean that up. Yeah. Sure. No problem. And then on the operating expense side, thanks for the color there as well. I know there's been some branch rationalization exercises that you guys have gone through. Is that pretty much done, or could we maybe expect to see a few more branch closures here in the second half of the year? Yeah. Hi, this is Lou. We don't anticipate really any further branch closures. I mean, we are looking at a multi-year plan for consumer both investing in the franchise as well as there may be some two-for-ones, some consolidation. And we're looking at really a branch of the future modernization plan, but nothing meaningful. We think we've really exhausted the branch closure piece for the organization. All right. So then as I think about expenses then, are technology investments really going to be the biggest growth driver here on a go- forward basis? No. I mean, we've got, if you look at our commercial strategy, we've been building up multiple verticals that Lou mentioned in his opening comments. So those have not even been online for a full year yet. So we can expect as those verticals mature, we would expect to get more production out of them for a full year 2025 as opposed to what they did for a partial year in 2024. And then as we have brought Urich onto the scene to run consumer, I also think we'll see sort of a different level of execution within our branches to drive some organic growth that way. So I think we've got levers for growth right now that we're going to focus on over the course of the next year. We should be able to derive growth just from sort of those types of blocking and tackling activities as well as having full years across these commercial verticals. I would add also specifically around your expense question, we have invested a lot in our IT stack. We have invested in our risk management and our commercial credit acumen at the organization. We are building the firm both from a regulatory and from an operating platform to be able to scale the organization and sort of remix the balance sheet as we described and grow organically. That run rate that you see has a lot of investment already embedded in it. Okay. Great. Thanks. That's all I have for right now. The CRE concentration is 168%. Next question comes from the line of David Mirochnick with Stephens. Your line is open. Hey, good morning. This is David on for Matt Breese. Morning, David. I was wondering if we could start s o you guys could talk on the loan book just in terms of you guys know what percent of the book is pure floating rate as in we'll reprice within three months and then just maybe what those are tied to? Yeah. Absolutely. On the commercial book, we would have 53% of that would be floating. The overall book, it would be 27% would be floating. Great. And then is it safe to assume those are tied to prime or so for maybe a 200 or 250 spread? Yeah. I think that's a good assumption. Okay. Great. And then by chance, do you have the yield on maybe the difference in the yield of the floating book and the yield on the fixed rate book? If we don't, we can get back to you. Yeah. We'll have to get back. We'll have to follow up with that. I mean, we obviously can provide that. No worries. Then I guess just switching over to deposits, sorry if I missed it. You guys talk about maybe your expectations on where you think DDAs will kind of settle out? And maybe in terms, are you being more selective now and kind of looking at running off higher-cost deposits as you guys kind of mentioned looking at funding costs? Yeah. I'm going to come back and answer your earlier question. I think you do have that statistic with us. I would tell you as far as the deposit goes, right, we plan to look at our CD book as it matures and take advantage of keeping the maturities on that short and providing an opportunity for reprice as rates would decline in the market. And I would also say that we continue to look at our money market book, and that would have a relatively high beta on the way down as would some of our business deposits. So again, I think where we have the opportunity to price deposits down, we'll take advantage of it. But we're also operating in a competitive market, and we want to maintain our overall deposit levels and potentially grow them. So that would be part of it. I think the earlier question you asked was what our floating rate yield was in the aggregate, and it's 7.95%. Great. I appreciate that. And then last would just be if there's any kind of color you can give, maybe thoughts on the provision going forward and will the reserve maybe keep ticking higher if you see any pressure in the C&I space? Yeah. I mean, again, you would expect the provision to go up if our charge-offs go up in order to maintain our coverage ratio. So there is the potential for that. And then other than that, it's a peaceful situation, right, where it's going to depend on economic outlook overall. I wouldn't expect our provision is necessarily going to increase because we're putting on riskier credit. So I think the book we expect to maintain the level of credit risk that we take today, but it's going to be tied to both economic changes as well as sort of what happens on the charge-off side. Got it. I appreciate it. Those are all my questions. Thanks for the time. Okay. Thank you. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. We have another question came in. Comes from the line of Manuel Navas with D.A. Davidson. Your line is open. Hey, good morning. Hey, Manuel. Hey. Morning. On the loan growth, I appreciate some of the commentary. Do you have the actual runoff that was this quarter that you had to fight against on the commercial side? Do you have a balance number? I mean, I would just say it was, I don't know that we're going to get into all of those details, but it was not insignificant. Let me give you a general direction. Yeah. I mean, it was $400 million-$600 million. Okay. And then if you talk about pipelines being very similar, which on the commercial side have been strong for a while, what specific lines are doing best? Is there any that you're starting to move away from because you are opening up a number of different business lines? Just wondering if you're at the point you're winnowing any of them or are all still performing excellently and still all ramping up? Yeah. This is Lou. How are you doing? Doing well. Yeah. Thanks for the question. So some of them are maturing quite nicely. Some will be more strategic than others. In addition to the verticals that we described, we are heading into strategic planning, and we'll be revisiting our lower middle market/upper-end business banking model inside our footprint as well, what that looks like and what our go-to-market strategy is. So that'll see further development. Some of those businesses come with fees and deposits are more strategic, and some are just asset generation. So as we go through strategic planning, as the market evolves and as we see how those mature, that will dictate our course of action as far as how we optimize. What we're looking to do is optimize performance as well as give ourselves enough latitude and levers to be able to transform the balance sheet as we've described previously. I hope that gives you a little color on that. No, I do appreciate that. Any specific lines that you're calling out? Oh, go ahead. I'm sorry. Just. No, I was just going to say we are seeing really good success in our sponsored finance group and our SBA group that are contributing. And of course, equipment finance has been around, so it's been gestating for a while. And so notwithstanding the market for that, given where those credits get put and where they lie on the curve is a little bit difficult, but we're seeing success there as well. So we're really happy with Jay's leadership, and he's been able to procure a great deal of talent from his former employers across his career to be able to stand those up. And they're relatively efficient, and so we're really pleased with that. I appreciate the commentary. Do you have any insight on new loan yields in the pipeline on the commercial side? We've been targeting 7.5 and better. So I would give you generic guidance around that level. Of course, each deal is unique and priced sort of individually, but I think generally if you think about that being a decent level to count on, obviously higher is more attractive to us, but it's all risk-based pricing. All right. Thank you. Thanks, guys. I'll step back into the queue. Thanks, Manuel. There are no further questions at this time. Mr. Doug Schosser, I turn the call back over to you. Okay. Well, we'd like to thank all of you for taking some time to join us this morning. All of the information that was discussed is available on our investor relations website. Thank you. We'll talk again next quarter. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.