Northwest Bancshares, Inc. Announces First Quarter 2023 Earnings and Quarterly Dividend

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Financial Condition (Unaudited)

(dollars in thousands, except per share amounts)

March 31,2023

December 31,2022

March 31,2022

Assets

Cash and cash equivalents

$         96,497

139,365

1,161,006

Marketable securities available-for-sale (amortized cost of $1,402,805, $1,431,728 and $1,542,170, respectively)

1,205,510

1,218,108

1,442,098

Marketable securities held-to-maturity (fair value of $750,345, $751,384 and $677,376, respectively)

866,022

881,249

737,730

Total cash and cash equivalents and marketable securities

2,168,029

2,238,722

3,340,834

Loans held-for-sale

7,006

9,913

19,272

Residential mortgage loans

3,499,078

3,488,686

3,102,617

Home equity loans

1,281,546

1,297,674

1,286,520

Consumer loans

2,232,133

2,168,655

1,895,981

Commercial real estate loans

2,826,485

2,823,555

2,959,893

Commercial loans

1,246,023

1,131,969

874,751

Total loans receivable

11,092,271

10,920,452

10,139,034

Allowance for credit losses

(121,257)

(118,036)

(99,295)

Loans receivable, net

10,971,014

10,802,416

10,039,739

FHLB stock, at cost

41,519

40,143

13,318

Accrued interest receivable

36,177

35,528

26,268

Real estate owned, net

524

413

929

Premises and equipment, net

140,301

145,909

149,970

Bank-owned life insurance

256,310

255,062

254,109

Goodwill

380,997

380,997

380,997

Other intangible assets, net

7,651

8,560

11,654

Other assets

191,294

205,574

193,365

Total assets

$   14,193,816

14,113,324

14,411,183

Liabilities and shareholders' equity

Liabilities

Noninterest-bearing demand deposits

$     2,896,092

2,993,243

3,128,849

Interest-bearing demand deposits

2,541,503

2,686,431

2,891,622

Money market deposit accounts

2,328,050

2,457,569

2,680,613

Savings deposits

2,194,743

2,275,020

2,367,438

Time deposits

1,576,791

1,052,285

1,251,878

Total deposits

11,537,179

11,464,548

12,320,400

Borrowed funds

688,641

681,166

121,436

Subordinated debt

113,927

113,840

123,670

Junior subordinated debentures

129,379

129,314

129,119

Advances by borrowers for taxes and insurance

49,893

47,613

44,022

Accrued interest payable

2,236

3,231

563

Other liabilities

159,286

182,126

148,461

Total liabilities

12,680,541

12,621,838

12,887,671

Shareholders' equity

Preferred stock, $0.01 par value: 50,000,000 shares authorized, no shares issued

—

—

—

Common stock, $0.01 par value: 500,000,000 shares authorized, 127,065,400, 127,028,848 and 126,686,373 shares issued and outstanding, respectively

1,271

1,270

1,267

Additional paid-in capital

1,020,855

1,019,647

1,012,308

Retained earnings

649,672

641,727

612,481

Accumulated other comprehensive loss

(158,523)

(171,158)

(102,544)

Total shareholders' equity

1,513,275

1,491,486

1,523,512

Total liabilities and shareholders' equity

$   14,193,816

14,113,324

14,411,183

Equity to assets

10.66 %

10.57 %

10.57 %

Tangible common equity to assets*

8.15 %

8.03 %

8.07 %

Book value per share

$           11.91

11.74

12.03

Tangible book value per share*

$             8.85

8.67

8.93

Closing market price per share

$           12.03

13.98

13.51

Full time equivalent employees

2,066

2,160

2.268

Number of banking offices

150

150

170

*

Excludes goodwill and other intangible assets (non-GAAP).

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share amounts)

Quarter ended

March 31,2023

December 31,2022

September 30,2022

June 30,2022

March 31,2022

Interest income:

Loans receivable

$     123,745

117,137

106,943

95,574

88,174

Mortgage-backed securities

8,537

8,603

8,683

7,158

6,360

Taxable investment securities

845

840

838

715

677

Tax-free investment securities

700

701

709

683

674

FHLB stock dividends

690

419

148

82

81

Interest-earning deposits

423

153

1,295

1,684

467

Total interest income

134,940

127,853

118,616

105,896

96,433

Interest expense:

Deposits

11,238

3,871

3,157

3,341

3,751

Borrowed funds

11,238

6,938

2,710

2,290

2,059

Total interest expense

22,476

10,809

5,867

5,631

5,810

Net interest income

112,464

117,044

112,749

100,265

90,623

   Provision for credit losses - loans

4,870

9,023

7,689

2,629

(1,481)

Provision for credit losses - unfunded commitments (1)

126

1,876

3,585

3,396

1,596

Net interest income after provision for credit losses

107,468

106,145

101,475

94,240

90,508

Noninterest income:

Loss on sale of investments

—

(1)

(2)

(3)

(2)

Service charges and fees

13,189

14,125

14,323

13,673

13,067

Trust and other financial services income

6,449

6,642

6,650

7,461

7,012

Gain/(loss) on real estate owned, net

108

51

290

291

(29)

Income from bank-owned life insurance

1,269

1,663

1,475

2,008

1,983

Mortgage banking income

524

477

766

2,157

1,465

Other operating income

2,430

4,901

3,301

4,861

2,244

Total noninterest income

23,969

27,858

26,803

30,448

25,740

Noninterest expense:

Compensation and employee benefits

46,604

46,658

46,711

48,073

46,917

Premises and occupancy costs

7,471

7,370

7,171

7,280

7,797

Office operations

3,010

3,544

3,229

3,162

3,383

Collections expense

387

563

322

403

520

Processing expenses

14,350

13,585

13,416

12,947

12,548

Marketing expenses

2,892

2,773

2,147

2,047

2,128

Federal deposit insurance premiums

2,223

1,319

1,200

1,130

1,129

Professional services

4,758

5,434

3,363

3,333

2,573

Amortization of intangible assets

909

932

1,047

1,115

1,183

Real estate owned expense

181

53

61

72

37

Merger, asset disposition and restructuring expense

2,802

4,243

—

—

1,374

Other expenses

1,863

2,304

321

1,849

759

Total noninterest expense

87,450

88,778

78,988

81,411

80,348

Income before income taxes

43,987

45,225

49,290

43,277

35,900

Income tax expense

10,308

10,576

11,986

9,851

7,613

Net income

$      33,679

34,649

37,304

33,426

28,287

Basic earnings per share

$          0.27

0.27

0.29

0.26

0.22

Diluted earnings per share

$          0.26

0.27

0.29

0.26

0.22

Annualized return on average equity

9.11 %

9.38 %

9.84 %

8.90 %

7.17 %

Annualized return on average assets

0.97 %

0.98 %

1.05 %

0.94 %

0.80 %

Annualized return on tangible common equity *

12.15 %

12.48 %

13.84 %

12.16 %

10.14 %

Efficiency ratio (1) **

61.38 %

57.70 %

55.85 %

61.43 %

66.85 %

Annualized noninterest expense to average assets (1) **

2.40 %

2.37 %

2.20 %

2.26 %

2.19 %

(1)

Reclassified from other expenses for periods prior to March 31, 2023. Respective ratios updated for reclassification.

  *

Excludes goodwill and other intangible assets (non-GAAP).

**

Excludes amortization of intangible assets and merger, asset disposition and restructuring expenses (non-GAAP).

Northwest Bancshares, Inc. and Subsidiaries

Reconciliation of Non-GAAP to GAAP Net Income (Unaudited) *

(dollars in thousands, except per share amounts)

Quarter ended March 31,

2023

2022

Operating results (non-GAAP):

Net interest income

$               112,464

90,623

Provision for credit losses

4,996

115

Noninterest income

23,969

25,740

Noninterest expense

84,648

78,974

Income taxes

11,093

7,998

Net operating income (non-GAAP)

$                 35,696

29,276

Diluted earnings per share (non-GAAP)

$                     0.28

0.23

Average equity

$            1,498,825

1,600,728

Average assets

14,121,496

14,423,574

Annualized return on average equity (non-GAAP)

9.66 %

7.42 %

Annualized return on average assets (non-GAAP)

1.03 %

0.82 %

Reconciliation of net operating income to net income:

Net operating income (non-GAAP)

$                35,696

29,276

Non-GAAP adjustments, net of tax:

Merger, asset disposition and restructuring expense

(2,017)

(989)

Net income (GAAP)

$                33,679

28,287

Diluted earnings per share (GAAP)

$                    0.26

0.22

Annualized return on average equity (GAAP)

9.11 %

7.17 %

Annualized return on average assets (GAAP)

0.97 %

0.80 %

Tangible common equity to tangible assets, including unrealized losses on held-to-maturity investments

  Total shareholders' equity

1,513,275

1,523,512

  Less: goodwill and intangible assets

388,648

392,651

  Less: unrealized losses on held-to-maturity investments, net of tax

83,287

43,455

  Tangible common equity, including unrealized losses on held-to-maturity investments

1,041,340

1,087,406

   Total assets

14,193,816

14,411,183

   Less: goodwill and intangible assets

388,648

392,651

   Tangible assets

13,805,168

14,018,532

Tangible common equity to tangible assets, including unrealized losses on held-to-maturity investments

7.54 %

7.76 %

*

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. 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.

Northwest Bancshares, Inc. and Subsidiaries

Deposits (Unaudited)

(dollars in thousands)

Generally, deposits in excess of $250,000 are not federally insured. The following tableprovides details around the Company's uninsured deposits portfolio: 

As of March 31, 2023

Balance

Percent of total deposits

Number ofrelationships

Uninsured deposits per the Call Report (1)

$              2,917,743

25.29 %

4,950

Less intercompany deposit accounts

787,363

6.82 %

13

Less collateralized deposit accounts

564,787

4.90 %

275

Adjusted balance of uninsured deposits

$              1,565,593

13.57 %

4,662

(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 $34.0 million, or 0.29% of total deposits, as of March 31, 2023. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $148.2 million, or 1.28% of total deposits, as of March 31, 2023. The average adjusted uninsured deposit account balance was $336,000 as of March 31, 2023.

The following table provides additional details over the Company's deposit portfolio:

As of March 31, 2023

Balance

Percent of total deposits

Number of accounts

Personal noninterest bearing demand deposits

$              1,428,232

12.38 %

291,561

Business noninterest bearing demand deposits

1,467,860

12.72 %

45,924

Personal interest-bearing demand deposits

1,627,546

14.11 %

60,459

Business interest-bearing demand deposits

913,957

7.92 %

8,451

Personal money market deposits

1,626,614

14.10 %

26,867

Business money market deposits

701,436

6.08 %

3,008

Savings deposits

2,194,743

19.02 %

216,358

Time deposits

1,576,791

13.67 %

61,779

Total deposits

$            11,537,179

100.00 %

714,407

Our average deposit account balance as of March 31, 2023 was $16,000. The Company's insured cash sweep deposit balance was $161.6 million as of

March 31, 2023.

Northwest Bancshares, Inc. and Subsidiaries

Marketable Securities (Unaudited)

(dollars in thousands)

March 31, 2023

Marketable securities available-for-sale

Amortized cost

Gross unrealized

holding gains

Gross unrealized

holding losses

Fair value

Weighted averageduration

   Debt issued by the U.S. government and agencies:

  Due after one year through five years

$              20,000

—

(1,421)

18,579

3.60

  Due after ten years

52,089

—

(9,653)

42,436

6.28

   Debt issued by government sponsored enterprises:

   Due after one year through five years

20,983

—

(2,680)

18,303

4.73

   Due after five years through ten years

25,600

—

(3,623)

21,977

5.25

   Municipal securities:

   Due within one year

503

—

—

503

0.25

   Due after one year through five years

990

27

(12)

1,005

2.59

   Due after five years through ten years

38,384

1

(1,612)

36,773

4.72

   Due after ten years

87,322

131

(11,059)

76,394

9.04

   Corporate debt issues:

   Due after five years through ten years

13,528

—

(958)

12,570

5.62

   Residential mortgage-backed agency securities:

   Fixed rate pass-through

221,361

49

(28,136)

193,274

6.02

   Variable rate pass-through

8,287

4

(149)

8,142

4.24

   Fixed rate agency CMOs

886,717

—

(137,663)

749,054

5.22

   Variable rate agency CMOs

27,041

35

(576)

26,500

3.98

   Total residential mortgage-backed agency securities

1,143,406

88

(166,524)

976,970

5.34

   Total marketable securities available-for-sale

$         1,402,805

247

(197,542)

1,205,510

5.55

Marketable securities held-to-maturity

Government sponsored

Due after one year through five years

$              29,477

—

(3,131)

26,346

3.68

Due after five years through ten years

94,978

—

(15,560)

79,418

5.72

   Residential mortgage-backed agency securities:

   Fixed rate pass-through

$            159,504

—

(22,260)

137,244

5.58

   Variable rate pass-through

521

—

(7)

514

4.64

   Fixed rate agency CMOs

581,013

—

(74,710)

506,303

6.76

   Variable rate agency CMOs

529

—

(9)

520

6.16

   Total residential mortgage-backed agency securities

741,567

—

(96,986)

644,581

6.51

   Total marketable securities held-to-maturity

$            866,022

—

(115,677)

750,345

6.32

Northwest Bancshares, Inc. and Subsidiaries

Borrowed Funds (Unaudited)

(dollars in thousands)

March 31, 2023

Amount

Average rate

Term notes payable to the FHLB of Pittsburgh, due within one year

$                        403,000

5.17 %

Notes payable to the FHLB of Pittsburgh, due within one year

183,700

5.15 %

      Total term notes payable to the FHLB

586,700

5.17 %

Collateralized borrowings, due within one year

83,290

1.16 %

Collateral received, due within one year

18,651

5.17 %

Subordinated debentures, net of issuance costs

113,927

4.28 %

Junior subordinated debentures

129,379

6.77 %

      Total borrowed funds *

$                        931,947

4.92 %

*

As of March 31, 2023, the Company had $3.2 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250.0 million overnight line of credit, which had a $183.7 million drawn balance, as well as $305.0 million of borrowing capacity available with the Federal Reserve Bank and $105.0 million with two correspondent banks.

Northwest Bancshares, Inc. and Subsidiaries

Analysis of Loan Portfolio by Loan Sector (Unaudited) 

 Commercial real estate loans outstanding

The following table provides the various loan sectors in our commercial real estate portfolio at March 31, 2023:

March 31, 2023

Property type

Percent of portfolio

5 or more unit dwelling

14.1 %

Nursing home

13.4 %

Retail building

11.9 %

Commercial office building - non-owner occupied

8.6 %

Residential acquisition & development - 1-4 family, townhouses and apartments

5.7 %

Manufacturing & industrial building

3.6 %

Commercial acquisition and development

3.6 %

Warehouse/storage building

3.5 %

Multi-use building - office and warehouse

3.5 %

Commercial office building - owner occupied

3.4 %

Hotel/motel

3.1 %

Single family dwelling

3.0 %

Other medical facility

2.7 %

Student housing

2.7 %

Multi-use building - commercial, retail and residential

2.6 %

2-4 family

2.4 %

Agricultural real estate

2.3 %

All other

9.9 %

   Total

100.0 %

The following table provides our commercial real estate portfolio by state at March 31, 2023:

March 31, 2023

State

Percent of portfolio

New York

31.0 %

Pennsylvania

30.6 %

Ohio

19.4 %

Indiana

8.7 %

Virginia

2.3 %

All other

8.0 %

   Total

100.0 %

Northwest Bancshares, Inc. and Subsidiaries

Asset Quality (Unaudited)

(dollars in thousands)

March 31,2023

December 31,2022

September 30,2022

June 30,2022

March 31,2022

Nonaccrual loans current:

Residential mortgage loans

$           1,423

1,496

2,186

1,970

1,884

Home equity loans

1,084

1,418

1,158

1,337

1,376

Consumer loans

911

836

833

976

1,148

Commercial real estate loans

50,045

53,303

56,193

60,537

79,810

Commercial loans

1,468

895

1,801

5,270

6,060

Total nonaccrual loans current

$         54,931

57,948

62,171

70,090

90,278

Nonaccrual loans delinquent 30 days to 59 days:

Residential mortgage loans

$              688

473

54

2

760

Home equity loans

18

180

316

172

195

Consumer loans

223

178

155

158

190

Commercial real estate loans

1,900

1,220

55

911

333

Commercial loans

341

145

237

358

4

Total nonaccrual loans delinquent 30 days to 59 days

$           3,170

2,196

817

1,601

1,482

Nonaccrual loans delinquent 60 days to 89 days:

Residential mortgage loans

$              919

31

32

199

830

Home equity loans

338

290

432

566

371

Consumer loans

340

341

382

226

280

Commercial real estate loans

1,355

473

848

630

—

Commercial loans

126

96

132

73

—

Total nonaccrual loans delinquent 60 days to 89 days

$           3,078

1,231

1,826

1,694

1,481

Nonaccrual loans delinquent 90 days or more:

Residential mortgage loans

$           3,300

5,574

5,544

5,445

3,976

Home equity loans

2,190

2,257

1,779

2,081

2,968

Consumer loans

2,791

2,672

2,031

1,942

1,782

Commercial real estate loans

8,010

7,867

8,821

14,949

21,399

Commercial loans

1,139

1,491

638

583

795

Total nonaccrual loans delinquent 90 days or more

$         17,430

19,861

18,813

25,000

30,920

Total nonaccrual loans

$         78,609

81,236

83,627

98,385

124,161

Total nonaccrual loans

$         78,609

81,236

83,627

98,385

124,161

Loans 90 days past due and still accruing

652

744

357

379

420

Nonperforming loans

79,261

81,980

83,984

98,764

124,581

Real estate owned, net

524

413

450

1,205

929

Nonperforming assets

$         79,785

82,393

84,434

99,969

125,510

Nonperforming loans to total loans

0.71 %

0.75 %

0.78 %

0.95 %

1.23 %

Nonperforming assets to total assets

0.56 %

0.58 %

0.61 %

0.71 %

0.87 %

Allowance for credit losses to total loans

1.09 %

1.08 %

1.02 %

0.94 %

0.98 %

Allowance for total loans excluding PPP loan balances

1.09 %

1.08 %

1.02 %

0.95 %

0.98 %

Allowance for credit losses to nonperforming loans

152.98 %

143.98 %

130.76 %

99.59 %

79.70 %

Northwest Bancshares, Inc. and Subsidiaries

Loans by Credit Quality Indicators (Unaudited)

(dollars in thousands) 

At March 31, 2023

Pass

Special

   mention *

Substandard

**

Doubtful

Loss

Loans

receivable

Personal Banking:

  Residential mortgage loans

$       3,499,135

—

6,330

—

—

3,505,465

  Home equity loans

1,277,915

—

3,631

—

—

1,281,546

  Consumer loans

2,227,379

—

4,754

—

—

2,232,133

Total Personal Banking

7,004,429

—

14,715

—

—

7,019,144

Commercial Banking:

  Commercial real estate loans

2,585,676

69,837

171,591

—

—

2,827,104

  Commercial loans

1,217,344

6,381

22,298

—

—

1,246,023

Total Commercial Banking

3,803,020

76,218

193,889

—

—

4,073,127

Total loans

$     10,807,449

76,218

208,604

—

—

11,092,271

At December 31, 2022

Personal Banking:

  Residential mortgage loans

$       3,484,870

—

13,729

—

—

3,498,599

  Home equity loans

1,292,146

—

5,528

—

—

1,297,674

  Consumer loans

2,164,220

—

4,435

—

—

2,168,655

Total Personal Banking

6,941,236

—

23,692

—

—

6,964,928

Commercial Banking:

  Commercial real estate loans

2,579,809

55,076

188,670

—

—

2,823,555

  Commercial loans

1,100,707

7,384

23,878

—

—

1,131,969

Total Commercial Banking

3,680,516

62,460

212,548

—

—

3,955,524

Total loans

$     10,621,752

62,460

236,240

—

—

10,920,452

At September 30, 2022

Personal Banking:

  Residential mortgage loans

$       3,388,168

—

13,730

—

—

3,401,898

  Home equity loans

1,279,968

—

5,021

—

—

1,284,989

  Consumer loans

2,112,478

—

3,760

—

—

2,116,238

Total Personal Banking

6,780,614

—

22,511

—

—

6,803,125

Commercial Banking:

  Commercial real estate loans

2,589,648

34,684

188,498

—

—

2,812,830

  Commercial loans

1,094,830

4,004

26,736

—

—

1,125,570

Total Commercial Banking

3,684,478

38,688

215,234

—

—

3,938,400

Total loans

$     10,465,092

38,688

237,745

—

—

10,741,525

At June 30, 2022

Personal Banking:

  Residential mortgage loans

$       3,273,117

—

13,658

—

—

3,286,775

  Home equity loans

1,275,124

—

5,368

—

—

1,280,492

  Consumer loans

1,998,863

—

3,682

—

—

2,002,545

Total Personal Banking

6,547,104

—

22,708

—

—

6,569,812

Commercial Banking:

  Commercial real estate loans

2,600,207

51,540

224,429

—

—

2,876,176

  Commercial loans

954,129

2,468

30,239

—

—

986,836

Total Commercial Banking

3,554,336

54,008

254,668

—

—

3,863,012

Total loans

$     10,101,440

54,008

277,376

—

—

10,432,824

At March 31, 2022

Personal Banking:

  Residential mortgage loans

$       3,108,366

—

13,523

—

—

3,121,889

  Home equity loans

1,280,342

—

6,178

—

—

1,286,520

  Consumer loans

1,892,162

—

3,819

—

—

1,895,981

Total Personal Banking

6,280,870

—

23,520

—

—

6,304,390

Commercial Banking:

  Commercial real estate loans

2,633,808

62,091

263,994

—

—

2,959,893

  Commercial loans

839,125

3,277

32,349

—

—

874,751

Total Commercial Banking

3,472,933

65,368

296,343

—

—

3,834,644

Total loans

$       9,753,803

65,368

319,863

—

—

10,139,034

*

Includes $7.4 million, $7.4 million, $4.5 million, $7.4 million, and $4.4 million of acquired loans at March 31, 2023, December 31, 2022, September 30, 2022,

June 30, 2022, and March 31, 2022, respectively.

**

Includes $31.9 million, $39.1 million, $51.4 million, $59.3 million, and $71.9 million of acquired loans at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.

Northwest Bancshares, Inc. and Subsidiaries

Loan Delinquency (Unaudited)

(dollars in thousands)

March 31,2023

*

December 31,2022

*

September 30,2022

*

June 30,2022

*

March 31,2022

*

(Number of loans and dollar amount of loans)

Loans delinquent 30 days to 59 days:

Residential mortgage loans

259

$  26,992

0.8 %

304

$  29,487

0.8 %

26

$   1,052

— %

20

$      785

— %

281

$  24,057

0.8 %

Home equity loans

111

4,235

0.3 %

145

6,657

0.5 %

88

3,278

0.3 %

107

3,664

0.3 %

105

3,867

0.3 %

Consumer loans

587

6,930

0.3 %

737

9,435

0.4 %

549

6,546

0.3 %

563

6,898

0.3 %

523

6,043

0.3 %

Commercial real estate loans

23

4,834

0.2 %

29

4,008

0.1 %

13

1,332

— %

26

2,701

0.1 %