8-K
Northwest Bancshares, Inc. (NWBI)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 2020
Northwest Bancshares, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 001-34582 | 27-0950358 | ||
|---|---|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | ||
| 100 Liberty Street | Warren | Pennsylvania | 16365 | |
| --- | --- | --- | --- | |
| (Address of principal executive office) | (Zip code) |
(814) 726-2140
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, 0.01 Par Value | NWBI | NASDAQ Stock Market, LLC |
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
Indicate by a check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act. ☐
Item 2.02 Results of Operations and Financial Condition
On July 27, 2020, Northwest Bancshares, Inc. issued an earnings release for the quarter ended June 30, 2020. A copy of the release is included as exhibit 99.1 to this report and is being furnished to the SEC and shall not be deemed “filed” for any purpose.
Item 9.01 Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release dated July 27, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| NORTHWEST BANCSHARES, INC. | ||||
|---|---|---|---|---|
| Date: | July 27, 2020 | By: | /s/ William W. Harvey, Jr. | |
| William W. Harvey, Jr. | ||||
| Chief Financial Officer |
Document
EXHIBIT 99.1
PRESS RELEASE OF NORTHWEST BANCSHARES, INC.
EARNINGS RELEASE
FOR IMMEDIATE RELEASE
| Contact: | Ronald J. Seiffert, Chairman, President and Chief Executive Officer (814) 726-2140 |
|---|---|
| William W. Harvey, Jr., Senior Executive Vice President and Chief Financial Officer (814) 726-2140 |
Northwest Bancshares, Inc. Announces Second Quarter 2020 Earnings and Quarterly Dividend
Warren, Pennsylvania — July 27, 2020
Northwest Bancshares, Inc., (the "Company"), (NasdaqGS: NWBI) announced a net loss for the quarter ended June 30, 2020 of $6.2 million, or $(0.05) per diluted share. This represents a decrease of $32.6 million, or 123.5%, compared to the same quarter last year when net income was $26.4 million or $0.25 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended June 30, 2020 were (1.63)% and (0.18)% compared to 8.01% and 1.02% for the same quarter last year. As noted in our non-GAAP reconciliation, when adjusting for COVID-related provision expense and acquisition-related costs, non-GAAP net income was approximately $30.2 million, or $0.25, per diluted share, which would represent an increase over the same quarter in the prior year of $3.0 million, or 11.0%, and result in a return on average shareholders’ equity of 7.95% and a return on average assets of 0.89%.
The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share payable on August 14, 2020 to shareholders of record as of August 6, 2020. This is the 103rd consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company's common stock as of June 30, 2020, this represents an annualized dividend yield of approximately 7.43%.
In making this announcement, Ronald J. Seiffert, Chairman, President and CEO, noted, "Obviously we are disappointed to report a loss for the quarter. However, as we assess the reasons for this loss, there is certainly cause for optimism as we enter the second half of the year. The primary drivers behind the quarterly loss are threefold. First, COVID-related loan loss provisions driven by a deteriorated economic forecast, which we estimate accounted for approximately $21.3 million of our elevated provision expense. Second, our loan loss provision expense during the quarter was also negatively impacted by the recording of provision expense for our MutualBank acquisition of approximately $18.2 million as promulgated by ASU 2016-13, also known as CECL. CECL requires an additional estimated loan loss provision or the “double count” for certain loans when integrating an acquisition. Third, acquisition costs of $9.7 million associated with the close and integration of MutualBank during the quarter negatively affected results as well. It should be noted, however, that year-to-date acquisition costs of $12.1 million were lower than originally projected."
Mr. Seiffert continued, "Assuming the current economic environment continues to remain stable, we believe that we have adequately provided for potential future losses during the first half of the year and have been able to do so with current earnings. In addition, as depicted in the attached non-GAAP pro forma financials, core quarterly earnings of approximately $30.2 million are strong and position us well for the remainder of the year. We are also fortunate to possess a robust capital position which has enabled us to maintain our regular quarterly cash dividend to common stock shareholders.”
Mr. Seiffert concluded, "While most of our back-office and regional headquarter personnel continue to work effectively from home out of an abundance of caution, all of our branch offices have been re-opened for business as usual and we are very pleased, once again to offer our award-winning service to our loyal customers. I am so very honored and proud to be associated with our dedicated employees, our talented management team and our engaged Board of Directors who have all risen to the occasion during these extremely challenging times. They continue to stand tall in the face of adversity to service our customers and communities."
Net interest income increased by $5.5 million, or 5.9%, to $98.1 million for the quarter ended June 30, 2020, from $92.6 million for the quarter ended June 30, 2019, primarily due to a $3.1 million, or 25.2%, decrease in interest expense on deposits as well as a $587,000, or 34.1%, decrease in interest expense on borrowed funds. This decrease in interest expense was due to a decline in market interest rates when compared to the prior year, resulting in a decrease in the cost of our interest-bearing liabilities to 0.48% for the quarter ended June 30, 2020 from 0.82% for the quarter ended June 30, 2019. Also contributing to the increase in net interest income was a $2.1 million, or 2.1%, increase in interest income on loans receivable primarily due to an increase of $1.606 billion, or 18.7%, in the average balance of loans as a result of the acquisition of MutualBank on April 24,
- Despite the overall increase in net interest income due primarily to balance sheet growth, the net interest margin decreased to 3.38% for the quarter ended June 30, 2020 from 3.91% for the same quarter last year as interest earning asset yields decreased to 3.75% for the quarter ended June 30, 2020 from 4.53% for the quarter ended June 30, 2019. Contributing to the decline in asset yields, was the increase in average cash balances of $602.9 million, earning just 0.12%, due to deposit growth associated with Payroll Protection Program ("PPP") loan funds and consumer stimulus checks. In addition, PPP loan balances of approximately $450.0 million with coupon rates of 1.00%, has negatively impacted overall interest earning asset yields.
The provision for loan losses increased by $47.1 million to $51.8 million for the quarter ended June 30, 2020, from $4.7 million for the quarter ended June 30, 2019. During the current year, the Company adopted CECL, which requires that all financial assets measured at amortized cost be presented at the net amount expected to be collected inclusive of the entity's current estimate of all lifetime expected credit losses. In addition, the estimated economic impact of COVID-19 caused us to increase our provision expense for the quarter by approximately $21.3 million and provision expense for the integration of MutualBank loans amounted to approximately $18.2 million.
Noninterest income increased by $12.1 million, or 51.9%, to $35.5 million for the quarter ended June 30, 2020, from $23.4 million for the quarter ended June 30, 2019. This increase was primarily due to the increase in mortgage banking income of $11.8 million to $12.0 million for the quarter ended June 30, 2020 from $188,000 for the quarter ended June 30, 2019. This increase was due to continued efforts to expand our secondary market sales capabilities over the last year, as well as an interest rate environment conducive to refinance activity and attractive secondary market pricing. In addition, there was a $379,000 increase, or 8.5%, in trust and other financial services income primarily due to additional trust fee income in our Indiana region as a result of the acquisition of MutualBank.
Noninterest expense increased by $11.7 million, or 15.0%, to $89.2 million for the quarter ended June 30, 2020, from $77.5 million for the quarter ended June 30, 2019. This increase resulted primarily from an increase in acquisition expense of $8.6 million over the prior year, due to expenses incurred as a result of the acquisition of MutualBank on April 24, 2020. Also contributing to the increase was a $4.6 million increase in other expenses primarily due to the reserve for unfunded commitments during the second quarter of 2020 as a result of an increase in unfunded commitments and the estimated economic impact of COVID-19. Partially offsetting this increase was a decrease of $2.0 million, or 4.7%, in compensation and employee benefits primarily due to an increase in deferred loan costs directly related to the origination of PPP loans during the current quarter.
The provision for income taxes decreased by $8.5 million, or 115.4%, to $(1.1) million for the quarter ended June 30, 2020, from $7.4 million for the quarter ended June 30, 2019. This decrease was due primarily to the decrease in net income before taxes by $41.1 million, or 121.7%.
Headquartered in Warren, Pennsylvania, Northwest Bancshares, Inc. is the 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, employee benefits and wealth management services, as well as the fulfillment of business and personal insurance needs. As of June 30, 2020, Northwest operated 205 full-service community banking offices and eight free standing drive-through facilities in Pennsylvania, New York, Ohio and Indiana. Northwest Bancshares, Inc.’s common stock is listed on the NASDAQ Global Select Market (“NWBI”). Additional information regarding Northwest Bancshares, Inc. and Northwest Bank can be accessed on-line 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 limitations, 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 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; and (8) the effect of any pandemic, including COVID-19, war or act of terrorism. 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.
Northwest Bancshares, Inc. and Subsidiaries
Consolidated Statements of Financial Condition (Unaudited)
(dollars in thousands, except per share amounts)
| June 30,<br>2020 | December 31,<br>2019 | June 30,<br>2019 | |||||
|---|---|---|---|---|---|---|---|
| Assets | |||||||
| Cash and cash equivalents | $ | 837,227 | 60,846 | 106,988 | |||
| Marketable securities available-for-sale (amortized cost of $1,176,258, $815,495 and $850,248, respectively) | 1,198,792 | 819,901 | 854,765 | ||||
| Marketable securities held-to-maturity (fair value of $17,245, $18,223 and $20,676, respectively) | 16,415 | 18,036 | 20,414 | ||||
| Total cash and cash equivalents and marketable securities | 2,052,434 | 898,783 | 982,167 | ||||
| Residential mortgage loans held-for-sale | 34,118 | 7,709 | — | ||||
| Residential mortgage loans | 3,188,637 | 2,860,418 | 2,899,164 | ||||
| Home equity loans | 1,450,370 | 1,342,918 | 1,314,947 | ||||
| Consumer loans | 1,518,119 | 1,125,132 | 1,011,424 | ||||
| Commercial real estate loans | 3,308,824 | 2,754,390 | 2,808,153 | ||||
| Commercial loans | 1,358,719 | 718,107 | 703,194 | ||||
| Total loans receivable | 10,858,787 | 8,808,674 | 8,736,882 | ||||
| Allowance for credit losses | (140,586) | (57,941) | (53,107) | ||||
| Loans receivable, net | 10,718,201 | 8,750,733 | 8,683,775 | ||||
| Federal Home Loan Bank stock, at cost | 25,542 | 14,740 | 14,966 | ||||
| Accrued interest receivable | 40,510 | 25,755 | 28,742 | ||||
| Real estate owned, net | 1,897 | 950 | 2,070 | ||||
| Premises and equipment, net | 166,966 | 147,409 | 148,973 | ||||
| Bank-owned life insurance | 251,897 | 189,091 | 186,870 | ||||
| Goodwill | 386,044 | 346,103 | 344,720 | ||||
| Other intangible assets, net | 23,381 | 23,076 | 24,112 | ||||
| Other assets | 178,212 | 97,268 | 89,088 | ||||
| Total assets | $ | 13,845,084 | 10,493,908 | 10,505,483 | |||
| Liabilities and shareholders’ equity | |||||||
| Liabilities | |||||||
| Noninterest-bearing demand deposits | $ | 2,686,487 | 1,609,653 | 1,944,550 | |||
| Interest-bearing demand deposits | 2,632,310 | 1,944,108 | 1,670,983 | ||||
| Money market deposit accounts | 2,327,286 | 1,863,998 | 1,784,437 | ||||
| Savings deposits | 1,993,761 | 1,604,838 | 1,683,551 | ||||
| Time deposits | 1,823,097 | 1,569,410 | 1,600,372 | ||||
| Total deposits | 11,462,941 | 8,592,007 | 8,683,893 | ||||
| Borrowed funds | 440,079 | 246,336 | 171,677 | ||||
| Junior subordinated debentures | 128,630 | 121,800 | 121,757 | ||||
| Advances by borrowers for taxes and insurance | 58,559 | 44,556 | 54,507 | ||||
| Accrued interest payable | 1,389 | 1,142 | 1,207 | ||||
| Other liabilities | 222,637 | 134,782 | 138,854 | ||||
| Total liabilities | 12,314,235 | 9,140,623 | 9,171,895 | ||||
| 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, 127,838,400, 106,859,088, and 106,614,607 shares issued and outstanding, respectively | 1,278 | 1,069 | 1,066 | ||||
| Paid-in capital | 1,023,083 | 805,750 | 798,942 | ||||
| Retained earnings | 530,928 | 583,407 | 562,799 | ||||
| Accumulated other comprehensive loss | (24,440) | (36,941) | (29,219) | ||||
| Total shareholders’ equity | 1,530,849 | 1,353,285 | 1,333,588 | ||||
| Total liabilities and shareholders’ equity | $ | 13,845,084 | 10,493,908 | 10,505,483 | |||
| Equity to assets | 11.06 | % | 12.90 | % | 12.69 | % | |
| Tangible common equity to assets | 8.35 | % | 9.72 | % | 9.52 | % | |
| Book value per share | $ | 11.97 | 12.66 | 12.51 | |||
| Tangible book value per share | $ | 8.77 | 9.21 | 9.05 | |||
| Closing market price per share | $ | 10.23 | 16.63 | 17.61 | |||
| Full time equivalent employees | 2,518 | 2,209 | 2,238 | ||||
| Number of banking offices | 213 | 181 | 182 |
Northwest Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share amounts)
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31, 2020 | December 31, 2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||
| Interest income: | |||||||||||
| Loans receivable | $ | 103,012 | 94,973 | 97,866 | 101,091 | 100,917 | |||||
| Mortgage-backed securities | 4,038 | 4,175 | 4,237 | 4,188 | 4,280 | ||||||
| Taxable investment securities | 439 | 648 | 683 | 884 | 898 | ||||||
| Tax-free investment securities | 564 | 185 | 201 | 224 | 237 | ||||||
| FHLB dividends | 309 | 262 | 262 | 307 | 316 | ||||||
| Interest-earning deposits | 185 | 135 | 169 | 172 | 159 | ||||||
| Total interest income | 108,547 | 100,378 | 103,418 | 106,866 | 106,807 | ||||||
| Interest expense: | |||||||||||
| Deposits | 9,336 | 11,403 | 12,893 | 13,694 | 12,484 | ||||||
| Borrowed funds | 1,133 | 1,747 | 1,580 | 2,236 | 1,720 | ||||||
| Total interest expense | 10,469 | 13,150 | 14,473 | 15,930 | 14,204 | ||||||
| Net interest income | 98,078 | 87,228 | 88,945 | 90,936 | 92,603 | ||||||
| Provision for credit losses | 51,750 | 27,637 | 8,223 | 3,302 | 4,667 | ||||||
| Net interest income after provision for credit losses | 46,328 | 59,591 | 80,722 | 87,634 | 87,936 | ||||||
| Noninterest income: | |||||||||||
| Gain/(loss) on sale of investments | (8) | 181 | 27 | — | 29 | ||||||
| Gain on sale of loans | — | 1,302 | 908 | 826 | — | ||||||
| Service charges and fees | 13,069 | 15,116 | 14,125 | 13,558 | 13,339 | ||||||
| Trust and other financial services income | 4,823 | 5,001 | 4,517 | 4,609 | 4,444 | ||||||
| Insurance commission income | 2,395 | 2,372 | 1,858 | 1,887 | 2,145 | ||||||
| Gain/(loss) on real estate owned, net | (97) | (91) | 86 | (227) | 91 | ||||||
| Income from bank-owned life insurance | 1,248 | 1,036 | 1,121 | 1,095 | 1,197 | ||||||
| Mortgage banking income | 12,022 | 1,194 | 1,494 | 1,921 | 188 | ||||||
| Other operating income | 2,044 | 1,865 | 4,077 | 2,500 | 1,930 | ||||||
| Total noninterest income | 35,496 | 27,976 | 28,213 | 26,169 | 23,363 | ||||||
| Noninterest expense: | |||||||||||
| Compensation and employee benefits | 40,049 | 42,746 | 42,074 | 40,816 | 42,008 | ||||||
| Premises and occupancy costs | 7,195 | 7,471 | 7,051 | 7,061 | 7,387 | ||||||
| Office operations | 3,711 | 3,382 | 4,097 | 3,197 | 3,708 | ||||||
| Collections expense | 644 | 474 | 566 | 747 | 939 | ||||||
| Processing expenses | 11,680 | 11,142 | 10,263 | 11,122 | 10,634 | ||||||
| Marketing expenses | 2,047 | 1,507 | 1,010 | 1,373 | 2,729 | ||||||
| Federal deposit insurance premiums | 1,618 | — | — | (702) | 681 | ||||||
| Professional services | 2,825 | 2,812 | 3,533 | 3,032 | 3,198 | ||||||
| Amortization of intangible assets | 1,760 | 1,651 | 1,634 | 1,702 | 1,760 | ||||||
| Real estate owned expense | 89 | 95 | 72 | 119 | 128 | ||||||
| Restructuring/acquisition expense | 9,679 | 2,458 | 1,114 | 23 | 1,105 | ||||||
| Other expenses | 7,866 | 4,873 | 5,157 | 2,106 | 3,235 | ||||||
| Total noninterest expense | 89,163 | 78,611 | 76,571 | 70,596 | 77,512 | ||||||
| Income/(loss) before income taxes | (7,339) | 8,956 | 32,364 | 43,207 | 33,787 | ||||||
| Income tax expense/(benefit) | (1,139) | 1,017 | 6,773 | 9,793 | 7,404 | ||||||
| Net income/(loss) | (6,200) | 7,939 | 25,591 | 33,414 | 26,383 | ||||||
| Basic earnings per share | $ | (0.05) | 0.08 | 0.24 | 0.32 | 0.25 | |||||
| Diluted earnings per share | $ | (0.05) | 0.07 | 0.24 | 0.31 | 0.25 | |||||
| Weighted average common shares outstanding - basic | 121,480,563 | 105,882,553 | 105,627,194 | 105,517,707 | 105,233,635 | ||||||
| Weighted average common shares outstanding - diluted | 121,480,563 | 106,148,247 | 106,306,615 | 106,270,544 | 106,258,215 | ||||||
| Annualized return on average equity | (1.63) | % | 2.37 | % | 7.52 | % | 9.90 | % | 8.01 | % | |
| Annualized return on average assets | (0.18) | % | 0.30 | % | 0.97 | % | 1.25 | % | 1.02 | % | |
| Annualized return on tangible common equity ** | (2.22) | % | 3.28 | % | 10.32 | % | 13.46 | % | 10.97 | % | |
| Efficiency ratio * | 58.19 | % | 64.67 | % | 63.01 | % | 58.81 | % | 64.37 | % | |
| Annualized noninterest expense to average assets * | 2.30 | % | 2.83 | % | 2.80 | % | 2.59 | % | 2.88 | % |
* Excludes restructuring/acquisition expenses and amortization of intangible assets (non-GAAP).
** 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)
| Six months ended June 30, | |||||
|---|---|---|---|---|---|
| 2020 | 2019 | ||||
| Interest income: | |||||
| Loans receivable | $ | 197,985 | 195,852 | ||
| Mortgage-backed securities | 8,213 | 8,245 | |||
| Taxable investment securities | 1,087 | 1,834 | |||
| Tax-free investment securities | 749 | 419 | |||
| FHLB dividends | 571 | 487 | |||
| Interest-earning deposits | 320 | 259 | |||
| Total interest income | 208,925 | 207,096 | |||
| Interest expense: | |||||
| Deposits | 20,739 | 22,629 | |||
| Borrowed funds | 2,880 | 3,882 | |||
| Total interest expense | 23,619 | 26,511 | |||
| Net interest income | 185,306 | 180,585 | |||
| Provision for credit losses | 79,387 | 11,134 | |||
| Net interest income after provision for credit losses | 105,919 | 169,451 | |||
| Noninterest income: | |||||
| Gain on sale of investments | 173 | 23 | |||
| Gain on sale of loans | 1,302 | — | |||
| Service charges and fees | 28,185 | 25,382 | |||
| Trust and other financial services income | 9,824 | 8,639 | |||
| Insurance commission income | 4,767 | 4,323 | |||
| Gain/(loss) on real estate owned, net | (188) | 88 | |||
| Income from bank-owned life insurance | 2,284 | 2,202 | |||
| Mortgage banking income | 13,216 | 404 | |||
| Other operating income | 3,909 | 3,964 | |||
| Total noninterest income | 63,472 | 45,025 | |||
| Noninterest expense: | |||||
| Compensation and employee benefits | 82,795 | 80,196 | |||
| Premises and occupancy costs | 14,666 | 14,605 | |||
| Office operations | 7,093 | 6,839 | |||
| Collections expense | 1,118 | 1,247 | |||
| Processing expenses | 22,822 | 21,068 | |||
| Marketing expenses | 3,554 | 4,615 | |||
| Federal deposit insurance premiums | 1,618 | 1,387 | |||
| Professional services | 5,637 | 5,722 | |||
| Amortization of intangible assets | 3,411 | 3,207 | |||
| Real estate owned expense | 184 | 287 | |||
| Restructuring/acquisition expense | 12,137 | 3,031 | |||
| Other expenses | 12,739 | 6,732 | |||
| Total noninterest expense | 167,774 | 148,936 | |||
| Income before income taxes | 1,617 | 65,540 | |||
| Income tax expense/(benefit) | (122) | 14,113 | |||
| Net income | $ | 1,739 | 51,427 | ||
| Basic earnings per share | $ | 0.02 | 0.49 | ||
| Diluted earnings per share | $ | 0.02 | 0.49 | ||
| Weighted average common shares outstanding - basic | 113,672,131 | 104,173,601 | |||
| Weighted average common shares outstanding - diluted | 113,774,339 | 105,382,270 | |||
| Annualized return on average equity | 0.24 | % | 7.99 | % | |
| Annualized return on average assets | 0.03 | % | 1.02 | % | |
| Annualized return on tangible common equity ** | 0.31 | % | 10.75 | % | |
| Efficiency ratio * | 61.19 | % | 63.25 | % | |
| Annualized noninterest expense to average assets * | 2.53 | % | 2.84 | % |
* Excludes restructuring/acquisition expenses and amortization of intangible assets (non-GAAP).
** Excludes goodwill and other intangible assets (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 June 30, | Six months ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||
| Operating results (non-GAAP): | |||||||||
| Net interest income | $ | 98,078 | 92,603 | 185,306 | 180,585 | ||||
| Provision for credit losses | 12,279 | 4,667 | 16,203 | 11,134 | |||||
| Noninterest income | 35,496 | 23,363 | 63,472 | 45,025 | |||||
| Noninterest expense | 83,368 | 76,407 | 157,637 | 145,905 | |||||
| Income taxes | 7,708 | 7,657 | 14,216 | 14,807 | |||||
| Net operating income (non-GAAP) | $ | 30,219 | 27,235 | 60,722 | 53,764 | ||||
| Diluted earnings per share (non-GAAP) | $ | 0.25 | 0.26 | 0.53 | 0.51 | ||||
| Average equity | $ | 1,528,868 | 1,320,382 | 1,439,489 | 1,298,334 | ||||
| Average assets | 13,590,131 | 10,412,664 | 12,093,801 | 10,150,040 | |||||
| Annualized return on average equity (non-GAAP) | 7.95 | % | 8.27 | % | 8.48 | % | 8.35 | % | |
| Annualized return on average assets (non-GAAP) | 0.89 | % | 1.05 | % | 1.01 | % | 1.07 | % | |
| Reconciliation of net operating income to net income: | |||||||||
| Net operating income (non-GAAP) | $ | 30,219 | 27,235 | 60,722 | 53,764 | ||||
| Non-GAAP adjustments, net of tax: | |||||||||
| COVID-related provision ** | (17,121) | — | (36,189) | — | |||||
| CECL provision impact due to acquisition of MutualBank | (14,618) | — | (14,618) | — | |||||
| PPP deferred origination costs | 3,389 | — | 3,389 | — | |||||
| COVID-related off balance sheet provision ** | (266) | — | (1,780) | — | |||||
| Restructuring/acquisition expense | (7,803) | (852) | (9,785) | (2,337) | |||||
| Net income/(loss) (GAAP) | $ | (6,200) | 26,383 | 1,739 | 51,427 | ||||
| Diluted earnings per share (GAAP) | $ | (0.05) | 0.25 | 0.02 | 0.49 | ||||
| Annualized return on average equity (GAAP) | (1.63) | % | 8.01 | % | 0.24 | % | 7.99 | % | |
| Annualized return on average assets (GAAP) | (0.18) | % | 1.02 | % | 0.03 | % | 1.02 | % |
* 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 estimated COVID-related provision, CECL provision related to the acquisition of MutualBank, PPP deferred origination costs, estimated COVID-related off balance sheet provision and restructuring/acquisition expense. 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.
** To arrive at the non-COVID related provision estimates, the Company applied Moody's forecast scenarios prior to the onset of COVID-19 to our loan portfolio at June 30, 2020.
Northwest Bancshares, Inc. and Subsidiaries
Regulatory capital requirements (Unaudited)
(dollars in thousands)
| At June 30, 2020 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Actual | Minimum capital<br>requirements (1) | Well capitalized<br>requirements | |||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||
| Total capital (to risk weighted assets) | |||||||||||||
| Northwest Bancshares, Inc. | $ | 1,521,506 | 14.454 | % | $ | 1,105,299 | 10.500 | % | $ | 1,052,666 | 10.000 | % | |
| Northwest Bank | 1,409,018 | 13.397 | % | 1,104,346 | 10.500 | % | 1,051,759 | 10.000 | % | ||||
| Tier 1 capital (to risk weighted assets) | |||||||||||||
| Northwest Bancshares, Inc. | 1,383,261 | 13.141 | % | 894,766 | 8.500 | % | 842,133 | 8.000 | % | ||||
| Northwest Bank | 1,270,773 | 12.082 | % | 893,995 | 8.500 | % | 841,407 | 8.000 | % | ||||
| Common equity tier 1 capital (to risk weighted assets) | |||||||||||||
| Northwest Bancshares, Inc. | 1,258,620 | 11.957 | % | 736,866 | 7.000 | % | 684,233 | 6.500 | % | ||||
| Northwest Bank | 1,270,773 | 12.082 | % | 736,231 | 7.000 | % | 683,643 | 6.500 | % | ||||
| Tier 1 capital (leverage) (to average assets) | |||||||||||||
| Northwest Bancshares, Inc. | 1,383,261 | 10.488 | % | 527,571 | 4.000 | % | 659,464 | 5.000 | % | ||||
| Northwest Bank | 1,270,773 | 9.680 | % | 525,093 | 4.000 | % | 656,366 | 5.000 | % |
(1) 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 2019 Annual Report on Form 10-K.
Northwest Bancshares, Inc. and Subsidiaries
Marketable securities (Unaudited)
(dollars in thousands)
| June 30, 2020 | |||||
|---|---|---|---|---|---|
| Marketable securities available-for-sale | Amortized cost | Gross unrealized<br>holding gains | Gross unrealized<br>holding losses | Fair value | |
| Debt issued by the U.S. government and agencies: | |||||
| Due after ten years | $ | 10,000 | 112 | — | 10,112 |
| Debt issued by government sponsored enterprises: | |||||
| Due in less than one year | 35,751 | 228 | — | 35,979 | |
| Due in one year through five years | 25,225 | 292 | — | 25,517 | |
| Due in five years through ten years | 13,302 | 134 | (93) | 13,343 | |
| Municipal securities: | |||||
| Due in less than one year | 3,634 | 5 | — | 3,639 | |
| Due in one year through five years | 4,005 | 95 | (3) | 4,097 | |
| Due in five years through ten years | 8,489 | 228 | — | 8,717 | |
| Due after ten years | 96,640 | 2,785 | (7) | 99,418 | |
| Residential mortgage-backed securities: | |||||
| Fixed rate pass-through | 324,026 | 5,782 | (230) | 329,578 | |
| Variable rate pass-through | 17,190 | 585 | (14) | 17,761 | |
| Fixed rate agency CMOs | 586,290 | 13,320 | (788) | 598,822 | |
| Variable rate agency CMOs | 51,706 | 165 | (62) | 51,809 | |
| Total residential mortgage-backed securities | 979,212 | 19,852 | (1,094) | 997,970 | |
| Total marketable securities available-for-sale | $ | 1,176,258 | 23,731 | (1,197) | 1,198,792 |
| Marketable securities held-to-maturity | |||||
| Residential mortgage-backed securities: | |||||
| Fixed rate pass-through | $ | 1,969 | 126 | — | 2,095 |
| Variable rate pass-through | 1,058 | 38 | — | 1,096 | |
| Fixed rate agency CMOs | 12,784 | 658 | — | 13,442 | |
| Variable rate agency CMOs | 604 | 8 | — | 612 | |
| Total residential mortgage-backed securities | 16,415 | 830 | — | 17,245 | |
| Total marketable securities held-to-maturity | $ | 16,415 | 830 | — | 17,245 |
Northwest Bancshares, Inc. and Subsidiaries
Borrowed funds (Unaudited)
(dollars in thousands)
| June 30, 2020 | ||||
|---|---|---|---|---|
| Amount | Average rate | |||
| Term notes payable to the Federal Home Loan Bank (FHLB): | ||||
| Payable to FHLB of Pittsburgh | $ | 100,000 | 0.48 | % |
| Payable to the FHLB of Indianapolis acquired from MutualBank | 200,481 | 1.65 | % | |
| Total term notes payable to the FHLB | 300,481 | |||
| Collateralized borrowings, due within one year | 139,598 | 0.29 | % | |
| Total borrowed funds * | $ | 440,079 |
* As of June 30, 2020, the Company had $3.1 billion of additional borrowing capacity available with the Federal Home Loan Bank of Pittsburgh, including a $250.0 million overnight line of credit, which had no balance, as well as $110.1 million of borrowing capacity available with the Federal Reserve Bank and $110.0 million with three correspondent banks.
Northwest Bancshares, Inc. and Subsidiaries
Asset quality (Unaudited)
(dollars in thousands)
| June 30,<br>2020 | March 31,<br>2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Nonaccrual loans current: | |||||||||||
| Residential mortgage loans | $ | 413 | 285 | 72 | 676 | 432 | |||||
| Home equity loans | 481 | 592 | 197 | 607 | 475 | ||||||
| Consumer loans | 214 | 77 | 78 | 68 | 94 | ||||||
| Commercial real estate loans | 30,677 | 14,337 | 9,241 | 7,674 | 12,605 | ||||||
| Commercial loans | 6,551 | 3,514 | 3,424 | 3,777 | 5,666 | ||||||
| Total nonaccrual loans current | $ | 38,336 | 18,805 | 13,012 | 12,802 | 19,272 | |||||
| Nonaccrual loans delinquent 30 days to 59 days: | |||||||||||
| Residential mortgage loans | $ | 61 | 691 | 674 | 40 | 13 | |||||
| Home equity loans | 247 | 159 | 224 | 102 | 418 | ||||||
| Consumer loans | 335 | 143 | 121 | 246 | 172 | ||||||
| Commercial real estate loans | 2,372 | 496 | 196 | 925 | 469 | ||||||
| Commercial loans | — | — | 55 | 44 | 45 | ||||||
| Total nonaccrual loans delinquent 30 days to 59 days | $ | 3,015 | 1,489 | 1,270 | 1,357 | 1,117 | |||||
| Nonaccrual loans delinquent 60 days to 89 days: | |||||||||||
| Residential mortgage loans | $ | 1,013 | 218 | 1,048 | 979 | 910 | |||||
| Home equity loans | 960 | 539 | 689 | 436 | 717 | ||||||
| Consumer loans | 666 | 488 | 417 | 426 | 322 | ||||||
| Commercial real estate loans | 163 | 2,096 | 413 | 536 | 1,426 | ||||||
| Commercial loans | 768 | 37 | 341 | — | 780 | ||||||
| Total nonaccrual loans delinquent 60 days to 89 days | $ | 3,570 | 3,378 | 2,908 | 2,377 | 4,155 | |||||
| Nonaccrual loans delinquent 90 days or more: | |||||||||||
| Residential mortgage loans | $ | 15,369 | 10,457 | 12,682 | 11,722 | 10,617 | |||||
| Home equity loans | 7,060 | 5,816 | 5,635 | 5,966 | 5,591 | ||||||
| Consumer loans | 6,896 | 3,459 | 3,610 | 3,400 | 2,902 | ||||||
| Commercial real estate loans | 29,729 | 25,342 | 25,014 | 22,292 | 21,123 | ||||||
| Commercial loans | 11,535 | 16,685 | 4,739 | 5,741 | 2,920 | ||||||
| Total nonaccrual loans delinquent 90 days or more | $ | 70,589 | 61,759 | 51,680 | 49,121 | 43,153 | |||||
| Total nonaccrual loans | $ | 115,510 | 85,431 | 68,870 | 65,657 | 67,697 | |||||
| Total nonaccrual loans | $ | 115,510 | 85,431 | 68,870 | 65,657 | 67,697 | |||||
| Loans 90 days past maturity and still accruing | 77 | 31 | 32 | 85 | 55 | ||||||
| Nonperforming loans | 115,587 | 85,462 | 68,902 | 65,742 | 67,752 | ||||||
| Real estate owned, net | 1,897 | 1,075 | 950 | 1,237 | 2,070 | ||||||
| Nonperforming assets | $ | 117,484 | 86,537 | 69,852 | 66,979 | 69,822 | |||||
| Nonaccrual troubled debt restructuring * | $ | 17,562 | 17,375 | 9,043 | 9,138 | 13,375 | |||||
| Accruing troubled debt restructuring | 17,888 | 15,977 | 22,956 | 21,162 | 17,894 | ||||||
| Total troubled debt restructuring | $ | 35,450 | 33,352 | 31,999 | 30,300 | 31,269 | |||||
| Nonperforming loans to total loans | 1.06 | % | 0.97 | % | 0.78 | % | 0.74 | % | 0.78 | % | |
| Nonperforming assets to total assets | 0.85 | % | 0.81 | % | 0.67 | % | 0.63 | % | 0.66 | % | |
| Allowance for credit losses to total loans | 1.29 | % | 1.05 | % | 0.66 | % | 0.60 | % | 0.61 | % | |
| Allowance for total loans excluding PPP loan balances | 1.36 | % | N/A | N/A | N/A | N/A | |||||
| Allowance for credit losses to nonperforming loans | 121.63 | % | 108.70 | % | 84.09 | % | 80.40 | % | 78.38 | % |
* Amounts included in nonperforming loans above.
Northwest Bancshares, Inc. and Subsidiaries
Loans by credit quality indicators (Unaudited)
(dollars in thousands)
| At June 30, 2020 | Pass | Special<br> mention * | Substandard<br>** | Doubtful<br>*** | Loss | Loans<br>receivable | |
|---|---|---|---|---|---|---|---|
| Personal Banking: | |||||||
| Residential mortgage loans | $ | 3,196,304 | — | 26,451 | — | — | 3,222,755 |
| Home equity loans | 1,438,339 | — | 12,031 | — | — | 1,450,370 | |
| Consumer loans | 1,508,129 | — | 9,990 | — | — | 1,518,119 | |
| Total Personal Banking | 6,142,772 | — | 48,472 | — | — | 6,191,244 | |
| Commercial Banking: | |||||||
| Commercial real estate loans | 3,034,984 | 72,755 | 199,993 | 1,092 | — | 3,308,824 | |
| Commercial loans | 1,270,279 | 41,458 | 42,692 | 4,290 | — | 1,358,719 | |
| Total Commercial Banking | 4,305,263 | 114,213 | 242,685 | 5,382 | — | 4,667,543 | |
| Total loans | $ | 10,448,035 | 114,213 | 291,157 | 5,382 | — | 10,858,787 |
| At March 31, 2020 | |||||||
| Personal Banking: | |||||||
| Residential mortgage loans | $ | 2,830,596 | — | 7,690 | — | — | 2,838,286 |
| Home equity loans | 1,345,052 | — | 8,211 | — | — | 1,353,263 | |
| Consumer loans | 1,174,067 | — | 3,988 | — | — | 1,178,055 | |
| Total Personal Banking | 5,349,715 | — | 19,889 | — | — | 5,369,604 | |
| Commercial Banking: | |||||||
| Commercial real estate loans | 2,537,736 | 73,967 | 143,765 | — | — | 2,755,468 | |
| Commercial loans | 618,267 | 43,071 | 50,464 | — | — | 711,802 | |
| Total Commercial Banking | 3,156,003 | 117,038 | 194,229 | — | — | 3,467,270 | |
| Total loans | $ | 8,505,718 | 117,038 | 214,118 | — | — | 8,836,874 |
| At December 31, 2019 | |||||||
| Personal Banking: | |||||||
| Residential mortgage loans | $ | 2,858,582 | — | 9,545 | — | — | 2,868,127 |
| Home equity loans | 1,336,111 | — | 6,807 | — | — | 1,342,918 | |
| Consumer loans | 1,120,732 | — | 4,400 | — | — | 1,125,132 | |
| Total Personal Banking | 5,315,425 | — | 20,752 | — | — | 5,336,177 | |
| Commercial Banking: | |||||||
| Commercial real estate loans | 2,538,816 | 80,570 | 135,004 | — | — | 2,754,390 | |
| Commercial loans | 616,983 | 42,380 | 58,744 | — | — | 718,107 | |
| Total Commercial Banking | 3,155,799 | 122,950 | 193,748 | — | — | 3,472,497 | |
| Total loans | $ | 8,471,224 | 122,950 | 214,500 | — | — | 8,808,674 |
| At September 30, 2019 | |||||||
| Personal Banking: | |||||||
| Residential mortgage loans | $ | 2,887,077 | — | 9,056 | — | — | 2,896,133 |
| Home equity loans | 1,320,930 | — | 7,243 | — | — | 1,328,173 | |
| Consumer loans | 1,090,030 | — | 4,263 | — | — | 1,094,293 | |
| Total Personal Banking | 5,298,037 | — | 20,562 | — | — | 5,318,599 | |
| Commercial Banking: | |||||||
| Commercial real estate loans | 2,601,025 | 69,380 | 142,253 | 181 | — | 2,812,839 | |
| Commercial loans | 639,998 | 37,666 | 42,800 | 115 | — | 720,579 | |
| Total Commercial Banking | 3,241,023 | 107,046 | 185,053 | 296 | — | 3,533,418 | |
| Total loans | $ | 8,539,060 | 107,046 | 205,615 | 296 | — | 8,852,017 |
| At June 30, 2019 | |||||||
| Personal Banking: | |||||||
| Residential mortgage loans | $ | 2,890,472 | — | 8,692 | — | — | 2,899,164 |
| Home equity loans | 1,307,887 | — | 7,060 | — | — | 1,314,947 | |
| Consumer loans | 1,007,813 | — | 3,611 | — | — | 1,011,424 | |
| Total Personal Banking | 5,206,172 | — | 19,363 | — | — | 5,225,535 | |
| Commercial Banking: | |||||||
| Commercial real estate loans | 2,586,013 | 86,434 | 135,525 | 181 | — | 2,808,153 | |
| Commercial loans | 621,889 | 38,182 | 42,141 | 982 | — | 703,194 | |
| Total Commercial Banking | 3,207,902 | 124,616 | 177,666 | 1,163 | — | 3,511,347 | |
| Total loans | $ | 8,414,074 | 124,616 | 197,029 | 1,163 | — | 8,736,882 |
* Includes $37.4 million, $13.1 million, $10.3 million, $8.7 million, and $8.1 million of acquired loans at June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, respectively.
** Includes $108.2 million, $56.8 million, $53.1 million, $46.6 million, and $38.6 million of acquired loans at June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, respectively.
*** Includes $1.1 million of acquired loans at June 30, 2020.
Northwest Bancshares, Inc. and Subsidiaries
Loan delinquency (Unaudited)
(dollars in thousands)
| June 30,<br>2020 | * | March 31,<br>2020 | * | December 31,<br>2019 | * | September 30,<br>2019 | * | June 30,<br>2019 | * | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Number of loans and dollar amount of loans) | ||||||||||||||||||||||||||||
| Loans delinquent 30 days to 59 days: | ||||||||||||||||||||||||||||
| Residential mortgage loans | 15 | $ | 629 | — | % | 358 | $ | 32,755 | 1.2 | % | 292 | $ | 23,296 | 0.8 | % | 21 | $ | 1,236 | — | % | 30 | $ | 1,629 | 0.1 | % | |||
| Home equity loans | 118 | 4,569 | 0.3 | % | 190 | 7,061 | 0.5 | % | 173 | 6,469 | 0.5 | % | 149 | 4,774 | 0.4 | % | 148 | 4,573 | 0.3 | % | ||||||||
| Consumer loans | 629 | 7,199 | 0.5 | % | 953 | 8,774 | 0.7 | % | 960 | 9,208 | 0.8 | % | 864 | 7,597 | 0.7 | % | 856 | 7,630 | 0.7 | % | ||||||||
| Commercial real estate loans | 46 | 14,177 | 0.4 | % | 58 | 12,895 | 0.5 | % | 43 | 7,921 | 0.3 | % | 27 | 5,308 | 0.2 | % | 31 | 2,418 | 0.1 | % | ||||||||
| Commercial loans | 12 | 1,242 | 0.1 | % | 35 | 7,545 | 1.1 | % | 32 | 1,187 | 0.2 | % | 20 | 362 | 0.1 | % | 14 | 666 | 0.1 | % | ||||||||
| Total loans delinquent 30 days to 59 days | 820 | $ | 27,816 | 0.3 | % | 1,594 | $ | 69,030 | 0.8 | % | 1,500 | $ | 48,081 | 0.5 | % | 1,081 | $ | 19,277 | 0.2 | % | 1,079 | $ | 16,916 | 0.2 | % | |||
| Loans delinquent 60 days to 89 days: | ||||||||||||||||||||||||||||
| Residential mortgage loans | 64 | $ | 5,364 | 0.2 | % | 11 | $ | 511 | — | % | 67 | $ | 5,693 | 0.2 | % | 95 | $ | 5,320 | 0.2 | % | 78 | $ | 6,264 | 0.2 | % | |||
| Home equity loans | 59 | 2,326 | 0.2 | % | 65 | 2,652 | 0.2 | % | 66 | 2,405 | 0.2 | % | 66 | 2,103 | 0.2 | % | 59 | 2,319 | 0.2 | % | ||||||||
| Consumer loans | 258 | 2,916 | 0.2 | % | 265 | 2,610 | 0.2 | % | 395 | 3,302 | 0.3 | % | 288 | 2,632 | 0.2 | % | 338 | 2,897 | 0.3 | % | ||||||||
| Commercial real estate loans | 18 | 3,913 | 0.1 | % | 12 | 2,981 | 0.1 | % | 19 | 1,690 | 0.1 | % | 15 | 1,893 | 0.1 | % | 16 | 2,617 | 0.1 | % | ||||||||
| Commercial loans | 15 | 1,151 | 0.1 | % | 10 | 309 | — | % | 17 | 6,403 | 0.9 | % | 10 | 589 | 0.1 | % | 16 | 1,725 | 0.2 | % | ||||||||
| Total loans delinquent 60 days to 89 days | 414 | $ | 15,670 | 0.1 | % | 363 | $ | 9,063 | 0.1 | % | 564 | $ | 19,493 | 0.2 | % | 474 | $ | 12,537 | 0.1 | % | 507 | $ | 15,822 | 0.2 | % | |||
| Loans delinquent 90 days or more: ** | ||||||||||||||||||||||||||||
| Residential mortgage loans | 185 | $ | 15,369 | 0.5 | % | 129 | $ | 10,457 | 0.4 | % | 141 | $ | 12,775 | 0.4 | % | 138 | $ | 11,816 | 0.4 | % | 129 | $ | 10,800 | 0.4 | % | |||
| Home equity loans | 182 | 7,060 | 0.5 | % | 152 | 5,816 | 0.4 | % | 159 | 5,688 | 0.4 | % | 157 | 5,966 | 0.4 | % | 136 | 5,591 | 0.4 | % | ||||||||
| Consumer loans | 709 | 6,896 | 0.5 | % | 445 | 3,459 | 0.3 | % | 590 | 3,611 | 0.3 | % | 398 | 3,401 | 0.3 | % | 710 | 2,908 | 0.3 | % | ||||||||
| Commercial real estate loans | 149 | 29,729 | 0.9 | % | 139 | 25,342 | 0.9 | % | 129 | 25,014 | 0.9 | % | 118 | 22,292 | 0.8 | % | 118 | 21,123 | 0.7 | % | ||||||||
| Commercial loans | 47 | 11,535 | 0.8 | % | 51 | 16,685 | 2.3 | % | 37 | 4,739 | 0.7 | % | 40 | 5,741 | 0.8 | % | 25 | 2,920 | 0.4 | % | ||||||||
| Total loans delinquent 90 days or more | 1,272 | $ | 70,589 | 0.7 | % | 916 | $ | 61,759 | 0.7 | % | 1,056 | $ | 51,827 | 0.6 | % | 851 | $ | 49,216 | 0.6 | % | 1,118 | $ | 43,342 | 0.5 | % | |||
| Total loans delinquent | 2,506 | $ | 114,075 | 1.1 | % | 2,873 | $ | 139,852 | 1.6 | % | 3,120 | $ | 119,401 | 1.4 | % | 2,406 | $ | 81,030 | 0.9 | % | 2,704 | $ | 76,080 | 0.9 | % |
* Represents delinquency, in dollars, divided by the respective total amount of that type of loan outstanding.
** Includes purchased credit deteriorated loans of $18.0 million at June 30, 2020 and $298,000 at March 31, 2020, and purchased credit impaired loans of $147,000, $95,000, and $190,000 at December 31, 2019, September 30, 2019, and June 30, 2019, respectively.
Northwest Bancshares, Inc. and Subsidiaries
Analysis of loan portfolio by loan sector (Unaudited)
(dollars in thousands)
Loans outstanding
The following table provides delinquency information for various loan sectors in our portfolio that are potentially vulnerable to the COVID-19 pandemic impacts at June 30, 2020:
| At June 30, 2020 | 30-59 days <br>delinquent | * | 60-89 days <br>delinquent | * | 90 days <br>or greater <br>delinquent | * | Total<br>delinquent | * | Current | * | Total <br>loans<br> receivable | * | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Restaurants/bars | $ | 1,052 | — | % | $ | — | — | % | $ | 171 | — | % | $ | 1,223 | — | % | $ | 96,211 | 0.9 | % | $ | 97,434 | 0.9 | % |
| Hotels/hospitality | 3,368 | — | % | — | — | % | — | — | % | 3,368 | — | % | 183,232 | 1.7 | % | 186,600 | 1.7 | % | ||||||
| Gyms and fitness | — | — | % | — | — | % | — | — | % | — | — | % | 5,385 | — | % | 5,385 | — | % | ||||||
| Transportation | 20 | — | % | — | — | % | 3,353 | — | % | 3,373 | — | % | 61,485 | 0.6 | % | 64,858 | 0.6 | % | ||||||
| Oil and gas | — | — | % | — | — | % | 296 | — | % | 296 | — | % | 11,139 | 0.1 | % | 11,435 | 0.1 | % | ||||||
| Residential care facilities | — | — | % | — | — | % | — | — | % | — | — | % | 228,412 | 2.1 | % | 228,412 | 2.1 | % | ||||||
| Retail buildings | 600 | — | % | 291 | — | % | 786 | — | % | 1,677 | — | % | 441,355 | 4.1 | % | 443,032 | 4.1 | % | ||||||
| Education/student housing | — | — | % | — | — | % | 503 | — | % | 503 | — | % | 143,306 | 1.3 | % | 143,809 | 1.3 | % | ||||||
| Construction/development: | ||||||||||||||||||||||||
| Education/student housing | — | — | % | — | — | % | — | — | % | — | — | % | 33,520 | 0.3 | % | 33,520 | 0.3 | % | ||||||
| Hotels/hospitality | — | — | % | — | — | % | — | — | % | — | — | % | 25,514 | 0.2 | % | 25,514 | 0.2 | % | ||||||
| Residential care facilities | — | — | % | — | — | % | — | — | % | — | — | % | 35,861 | 0.3 | % | 35,861 | 0.3 | % | ||||||
| All other construction/development | 2,650 | — | % | 351 | — | % | 5,587 | 0.1 | % | 8,588 | 0.1 | % | 193,589 | 1.8 | % | 202,177 | 1.9 | % | ||||||
| All other sectors | 20,126 | 0.2 | % | 15,028 | 0.1 | % | 59,893 | 0.6 | % | 95,047 | 0.9 | % | 9,285,703 | 85.5 | % | 9,380,750 | 86.4 | % | ||||||
| Total loans | $ | 27,816 | 0.3 | % | $ | 15,670 | 0.1 | % | $ | 70,589 | 0.7 | % | $ | 114,075 | 1.1 | % | $ | 10,744,712 | 98.9 | % | $ | 10,858,787 | 100.0 | % |
* Percent of total loans outstanding.
Loan deferrals
The following table represents loans that entered into various deferments offered by the Company to aid customers in the COVID-19 pandemic. The loan balances are as of June 30, 2020, however, the approval of the deferral occurred prior and was executed by the Company by June 30, 2020. Of these loan deferrals, 303 borrowers applied for and received PPP loans totaling approximately $51.8 million:
| Total loan deferrals | Second request deferrals approved | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| At June 30, 2020 | Number of loans | Outstanding principal balance | ** | Number <br>of loans | Outstanding <br>principal balance | ** | ||||
| Residential mortgage loans | 936 | $ | 131,567 | 4.1 | % | 10 | $ | 1,660 | 0.1 | % |
| Home equity loans | 652 | 42,836 | 3.0 | % | 11 | 786 | 0.1 | % | ||
| Consumer loans | 2,455 | 49,374 | 3.3 | % | 128 | 3,033 | 0.2 | % | ||
| Commercial real estate loans | 1,511 | 967,340 | 29.2 | % | 5 | 2,323 | 0.1 | % | ||
| Commercial loans | 652 | 120,999 | 8.9 | % | 5 | 630 | — | % | ||
| Total loans | 6,206 | $ | 1,312,116 | 12.1 | % | 159 | $ | 8,432 | 0.1 | % |
** Percent of total loan type outstanding.
Northwest Bancshares, Inc. and Subsidiaries
Allowance for credit losses (Unaudited)
(dollars in thousands)
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2020 | March 31, 2020 | December 31,<br>2019 | September 30,<br>2019 | June 30,<br>2019 | |||||||
| Beginning balance | $ | 92,897 | 57,941 | 52,859 | 53,107 | 55,721 | |||||
| CECL adoption | — | 10,792 | — | — | — | ||||||
| Initial allowance on loans purchased with credit deterioration | 8,845 | — | — | — | — | ||||||
| Provision | 51,750 | 27,637 | 8,223 | 3,302 | 4,667 | ||||||
| Charge-offs residential mortgage | (38) | (343) | (222) | (190) | (397) | ||||||
| Charge-offs home equity | (173) | (289) | (113) | (466) | (389) | ||||||
| Charge-offs consumer | (3,191) | (3,488) | (3,142) | (3,078) | (2,566) | ||||||
| Charge-offs commercial real estate | (690) | (331) | (107) | (389) | (4,367) | ||||||
| Charge-offs commercial | (10,349) | (815) | (1,143) | (1,151) | (1,087) | ||||||
| Recoveries | 1,535 | 1,793 | 1,586 | 1,724 | 1,525 | ||||||
| Ending balance | $ | 140,586 | 92,897 | 57,941 | 52,859 | 53,107 | |||||
| Net charge-offs to average loans, annualized | 0.51 | % | 0.16 | % | 0.14 | % | 0.16 | % | 0.34 | % | |
| Six months ended June 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | ||||||
| 2020 | 2019 | ||||||||||
| Beginning balance | $ | 57,941 | 55,214 | ||||||||
| CECL adoption | 10,792 | — | |||||||||
| Initial allowance on loans purchased with credit deterioration | 8,845 | — | |||||||||
| Provision | 79,387 | 11,134 | |||||||||
| Charge-offs residential mortgage | (381) | (754) | |||||||||
| Charge-offs home equity | (462) | (542) | |||||||||
| Charge-offs consumer | (6,679) | (5,587) | |||||||||
| Charge-offs commercial real estate | (1,021) | (4,971) | |||||||||
| Charge-offs commercial | (11,164) | (4,357) | |||||||||
| Recoveries | 3,328 | 2,970 | |||||||||
| Ending balance | $ | 140,586 | 53,107 | ||||||||
| Net charge-offs to average loans, annualized | 0.35 | % | 0.34 | % | |||||||
| June 30, 2020 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Originated loans | Acquired loans | Total loans | |||||||||
| Balance | Reserve | Balance | Reserve | Balance | Reserve | ||||||
| Residential mortgage loans | $ | 2,840,430 | 9,846 | 382,325 | 1,862 | 3,222,755 | 11,708 | ||||
| Home equity loans | 1,153,969 | 7,272 | 296,401 | 2,091 | 1,450,370 | 9,363 | |||||
| Consumer loans | 1,207,050 | 12,794 | 311,069 | 3,547 | 1,518,119 | 16,341 | |||||
| Personal Banking Loans | 5,201,449 | 29,912 | 989,795 | 7,500 | 6,191,244 | 37,412 | |||||
| Commercial real estate loans | 2,422,605 | 63,654 | 886,219 | 24,006 | 3,308,824 | 87,660 | |||||
| Commercial loans | 1,140,714 | 12,497 | 218,005 | 3,017 | 1,358,719 | 15,514 | |||||
| Commercial Banking Loans | 3,563,319 | 76,151 | 1,104,224 | 27,023 | 4,667,543 | 103,174 | |||||
| Total Loans | $ | 8,764,768 | 106,063 | 2,094,019 | 34,523 | 10,858,787 | 140,586 |
Northwest Bancshares, Inc. and Subsidiaries
Average balance sheet (Unaudited)
(dollars in thousands)
The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.
| Quarter ended | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | |||||||||||||||||||||||
| Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | |||||||||||||
| Assets: | |||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||
| Residential mortgage loans | $ | 3,092,392 | 29,019 | 3.75 | % | $ | 2,845,483 | 28,062 | 3.94 | % | $ | 2,847,932 | 28,011 | 3.93 | % | $ | 2,894,716 | 28,991 | 4.01 | % | $ | 2,857,425 | 29,300 | 4.10 | % | ||
| Home equity loans | 1,415,091 | 13,806 | 3.92 | % | 1,345,059 | 14,801 | 4.43 | % | 1,333,748 | 15,354 | 4.57 | % | 1,316,033 | 16,131 | 4.86 | % | 1,319,056 | 17,717 | 5.39 | % | |||||||
| Consumer loans | 1,375,130 | 14,993 | 4.39 | % | 1,123,336 | 12,160 | 4.35 | % | 1,073,565 | 12,016 | 4.44 | % | 1,028,579 | 11,916 | 4.60 | % | 945,080 | 10,736 | 4.57 | % | |||||||
| Commercial real estate loans | 3,156,749 | 34,595 | 4.34 | % | 2,747,419 | 31,437 | 4.53 | % | 2,741,687 | 32,985 | 4.71 | % | 2,796,351 | 34,441 | 4.82 | % | 2,801,953 | 35,537 | 5.02 | % | |||||||
| Commercial loans | 1,161,228 | 11,269 | 3.84 | % | 712,621 | 8,856 | 4.92 | % | 717,438 | 9,841 | 5.37 | % | 710,847 | 9,949 | 5.48 | % | 670,613 | 7,966 | 4.70 | % | |||||||
| Total loans receivable (a) (b) (d) | 10,200,590 | 103,682 | 4.09 | % | 8,773,918 | 95,316 | 4.37 | % | 8,714,370 | 98,207 | 4.47 | % | 8,746,526 | 101,428 | 4.60 | % | 8,594,127 | 101,256 | 4.73 | % | |||||||
| Mortgage-backed securities (c) | 714,657 | 4,038 | 2.26 | % | 668,470 | 4,175 | 2.50 | % | 667,910 | 4,237 | 2.54 | % | 641,085 | 4,188 | 2.61 | % | 644,887 | 4,280 | 2.65 | % | |||||||
| Investment securities (c) (d) | 170,309 | 1,244 | 2.92 | % | 144,152 | 881 | 2.44 | % | 151,289 | 938 | 2.48 | % | 218,753 | 1,168 | 2.14 | % | 226,325 | 1,198 | 2.12 | % | |||||||
| FHLB stock, at cost | 22,192 | 309 | 5.60 | % | 15,931 | 262 | 6.61 | % | 13,400 | 262 | 7.76 | % | 16,302 | 307 | 7.47 | % | 16,117 | 316 | 7.86 | % | |||||||
| Other interest-earning deposits | 623,870 | 185 | 0.12 | % | 34,697 | 135 | 1.54 | % | 31,624 | 169 | 2.09 | % | 28,832 | 172 | 2.33 | % | 20,983 | 159 | 3.00 | % | |||||||
| Total interest-earning assets | 11,731,618 | 109,458 | 3.75 | % | 9,637,168 | 100,769 | 4.21 | % | 9,578,593 | 103,813 | 4.30 | % | 9,651,498 | 107,263 | 4.41 | % | 9,502,439 | 107,209 | 4.53 | % | |||||||
| Noninterest-earning assets (e) | 1,858,513 | 960,303 | 869,117 | 916,781 | 910,225 | ||||||||||||||||||||||
| Total assets | $ | 13,590,131 | $ | 10,597,471 | $ | 10,447,710 | $ | 10,568,279 | $ | 10,412,664 | |||||||||||||||||
| Liabilities and shareholders’ equity: | |||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||
| Savings deposits | $ | 1,884,202 | 648 | 0.14 | % | $ | 1,611,111 | 727 | 0.18 | % | $ | 1,615,996 | 792 | 0.19 | % | $ | 1,658,670 | 788 | 0.19 | % | $ | 1,696,715 | 777 | 0.18 | % | ||
| Interest-bearing demand deposits | 2,428,060 | 812 | 0.13 | % | 1,915,871 | 1,307 | 0.27 | % | 1,769,623 | 1,570 | 0.35 | % | 1,655,952 | 1,711 | 0.41 | % | 1,674,779 | 1,569 | 0.38 | % | |||||||
| Money market deposit accounts | 2,204,810 | 1,600 | 0.29 | % | 1,921,243 | 3,088 | 0.65 | % | 1,845,535 | 3,226 | 0.69 | % | 1,798,175 | 3,772 | 0.83 | % | 1,776,558 | 3,433 | 0.78 | % | |||||||
| Time deposits | 1,761,260 | 6,276 | 1.43 | % | 1,528,891 | 6,281 | 1.65 | % | 1,607,992 | 7,305 | 1.80 | % | 1,618,591 | 7,423 | 1.82 | % | 1,561,034 | 6,705 | 1.72 | % | |||||||
| Borrowed funds (f) | 371,700 | 296 | 0.32 | % | 240,118 | 709 | 1.19 | % | 177,670 | 444 | 0.99 | % | 243,960 | 1,002 | 1.63 | % | 147,119 | 413 | 1.13 | % | |||||||
| Junior subordinated debentures | 127,472 | 837 | 2.60 | % | 121,809 | 1,038 | 3.37 | % | 121,796 | 1,136 | 3.65 | % | 121,767 | 1,235 | 3.97 | % | 121,757 | 1,307 | 4.25 | % | |||||||
| Total interest-bearing liabilities | 8,777,504 | 10,469 | 0.48 | % | 7,339,043 | 13,150 | 0.72 | % | 7,138,612 | 14,473 | 0.80 | % | 7,097,115 | 15,931 | 0.89 | % | 6,977,962 | 14,204 | 0.82 | % | |||||||
| Noninterest-bearing demand deposits (g) | 2,401,368 | 1,640,180 | 1,800,861 | 1,915,392 | 1,888,697 | ||||||||||||||||||||||
| Noninterest-bearing liabilities | 882,391 | 268,139 | 158,434 | 216,433 | 225,623 | ||||||||||||||||||||||
| Total liabilities | 12,061,263 | 9,247,362 | 9,097,907 | 9,228,940 | 9,092,282 | ||||||||||||||||||||||
| Shareholders’ equity | 1,528,868 | 1,350,109 | 1,349,803 | 1,339,339 | 1,320,382 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 13,590,131 | $ | 10,597,471 | $ | 10,447,710 | $ | 10,568,279 | $ | 10,412,664 | |||||||||||||||||
| Net interest income/Interest rate spread | 98,989 | 3.27 | % | 87,619 | 3.48 | % | 89,340 | 3.50 | % | 91,332 | 3.52 | % | 93,005 | 3.71 | % | ||||||||||||
| Net interest-earning assets/Net interest margin | $ | 2,954,114 | 3.38 | % | $ | 2,298,125 | 3.66 | % | $ | 2,439,981 | 3.73 | % | $ | 2,554,383 | 3.79 | % | $ | 2,524,477 | 3.91 | % | |||||||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.34X | 1.31X | 1.34X | 1.36X | 1.36X |
(a) Average gross loans receivable includes loans held as available-for-sale and loans placed on nonaccrual status.
(b) Interest income includes accretion/amortization of deferred loan fees/expenses, which was not material.
(c) Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
(d) Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent ("FTE") basis.
(e) Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
(f) Average balances include FHLB borrowings and collateralized borrowings.
(g) Average cost of deposits were 0.35%, 0.53%, 0.59%, 0.63%, and 0.58%, respectively.
(h) Shown on a FTE basis. GAAP basis yields for the periods indicated were: Loans - 4.06%, 4.35%, 4.46%, 4.59%, and 4.71%, respectively, Investment securities - 2.36%, 2.31%, 2.34%, 2.03%, and 2.01%, respectively, Interest-earning assets - 3.72%, 4.19%, 4.28%, 4.39%, and 4.51%, respectively. GAAP basis net interest rate spreads were 3.24%, 3.47%, 3.48%, 3.50%, and 3.69%, respectively, and GAAP basis net interest margins were 3.34%, 3.64%, 3.71%, 3.77%, and 3.90%, respectively.
Average Balance Sheet
(in thousands)
The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.
| Six months ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||||||
| Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | Average<br>balance | Interest | Avg.<br>yield/<br>cost (h) | |||||
| Assets | ||||||||||
| Interest-earning assets: | ||||||||||
| Residential mortgage loans | $ | 2,969,096 | 57,081 | 3.85 | % | $ | 2,850,031 | 58,582 | 4.11 | % |
| Home equity loans | 1,380,076 | 28,607 | 4.17 | % | 1,292,662 | 33,765 | 5.27 | % | ||
| Consumer loans | 1,249,233 | 27,153 | 4.37 | % | 909,007 | 20,927 | 4.64 | % | ||
| Commercial real estate loans | 2,952,084 | 66,032 | 4.42 | % | 2,681,848 | 66,303 | 4.92 | % | ||
| Commercial loans | 936,924 | 20,124 | 4.25 | % | 643,005 | 16,933 | 5.24 | % | ||
| Loans receivable (a) (b) (d) | 9,487,413 | 198,997 | 4.22 | % | 8,376,553 | 196,510 | 4.73 | % | ||
| Mortgage-backed securities (c) | 691,564 | 8,213 | 2.38 | % | 624,786 | 8,245 | 2.64 | % | ||
| Investment securities (c) (d) | 157,231 | 2,125 | 2.70 | % | 226,815 | 2,364 | 2.08 | % | ||
| FHLB stock, at cost | 19,062 | 571 | 6.02 | % | 16,096 | 487 | 6.10 | % | ||
| Other interest-earning deposits | 329,284 | 320 | 0.19 | % | 16,381 | 259 | 3.14 | % | ||
| Total interest-earning assets | 10,684,554 | 210,226 | 3.96 | % | 9,260,631 | 207,865 | 4.53 | % | ||
| Noninterest-earning assets (e) | 1,409,247 | 889,409 | ||||||||
| Total assets | $ | 12,093,801 | $ | 10,150,040 | ||||||
| Liabilities and shareholders’ equity | ||||||||||
| Interest-bearing liabilities: | ||||||||||
| Savings deposits | $ | 1,747,656 | 1,375 | 0.16 | % | $ | 1,673,957 | 1,535 | 0.18 | % |
| Interest-bearing demand deposits | 2,171,970 | 2,119 | 0.20 | % | 1,588,989 | 2,732 | 0.35 | % | ||
| Money market deposit accounts | 2,061,226 | 4,688 | 0.46 | % | 1,735,185 | 6,011 | 0.70 | % | ||
| Time deposits | 1,645,077 | 12,557 | 1.54 | % | 1,497,208 | 12,351 | 1.66 | % | ||
| Borrowed funds (f) | 305,910 | 1,005 | 0.66 | % | 202,029 | 1,419 | 1.42 | % | ||
| Junior subordinated debentures | 124,638 | 1,875 | 2.98 | % | 118,242 | 2,463 | 4.14 | % | ||
| Total interest-bearing liabilities | 8,056,477 | 23,619 | 0.59 | % | 6,815,610 | 26,511 | 0.78 | % | ||
| Noninterest-bearing demand deposits (g) | 2,022,177 | 1,699,496 | ||||||||
| Noninterest-bearing liabilities | 575,658 | 336,600 | ||||||||
| Total liabilities | 10,654,312 | 8,851,706 | ||||||||
| Shareholders’ equity | 1,439,489 | 1,298,334 | ||||||||
| Total liabilities and shareholders’ equity | $ | 12,093,801 | $ | 10,150,040 | ||||||
| Net interest income/Interest rate spread | 186,607 | 3.37 | % | 181,354 | 3.75 | % | ||||
| Net interest-earning assets/Net interest margin | $ | 2,628,077 | 3.49 | % | $ | 2,445,021 | 3.92 | % | ||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.33X | 1.36X |
(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.
(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
(d)Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent ("FTE") basis.
(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
(f)Average balances include FHLB borrowings and collateralized borrowings.
(g)Average cost of deposits were 0.43% and 0.56%, respectively.
(h)Shown on a FTE basis. GAAP basis yields were: loans — 4.20% and 4.71%, respectively; investment securities — 2.34% and 1.99%, respectively; interest-earning assets — 3.93% and 4.51%, respectively. GAAP basis net interest rate spreads were 3.34% and 3.73%, respectively; and GAAP basis net interest margins were 3.47% and 3.90%, respectively.
16