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Northwest Bancshares, Inc. Announces Fourth Quarter 2022 Earnings and Quarterly Dividend

COLUMBUS, Ohio, Jan. 23, 2023 /PRNewswire/ -- Northwest Bancshares, Inc., (the "Company"), (NasdaqGS: NWBI) announced net income for the quarter ended December 31, 2022 of $34.6 million, or $0.27 per diluted share.  This represents an increase of $4.6 million, or 15.3%, compared to the same quarter last year, when net income was $30.1 million, or $0.24 per diluted share.  The annualized returns on average shareholders' equity and average assets for the quarter ended December 31, 2022 were 9.38% and 0.98% compared to 7.65% and 0.82% for the quarter ended December 31, 2021.

(PRNewsfoto/Northwest Bancshares, Inc.)
(PRNewsfoto/Northwest Bancshares, Inc.)

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share payable on February 14, 2023 to shareholders of record as of February 2, 2023. This is the 113th consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company's common stock as of December 31, 2022, this represents an annualized dividend yield of approximately 5.7%.

Louis J. Torchio, President and CEO, added, "We were very pleased with our organic loan growth this quarter of $178.9 million, or 1.7%, spread across all loan categories. In addition, our net interest margin expanded by 15 basis points to 3.57%, and asset quality metrics remain solid.  We have also taken additional measures to reduce expenses and improve our efficiency.  We recently announced the further optimization of eight offices within our branch network to be completed in April 2023.  In-branch activity continues to slow as customers prefer to transact through online and mobile channels.  In addition, we have re-aligned our workforce to correspond with our strategic direction as a commercial bank, further streamlining our operations.  These efforts generated $4.2 million of severance and restructuring costs in the fourth quarter with an additional $3.2 million expected to be recognized in the first quarter of 2023."

Mr. Torchio continued, "These necessary measures will reduce our overall workforce by approximately 12% and generate approximately $16.0 million in annual operating expense savings beginning in the second quarter of 2023. These operating expense savings are expected to be reinvested in the Company's strategic initiatives during 2023, focused on shifting our balance sheet mix and continuing our journey as a full-service commercial bank. This shift includes further buildout of our core middle market C&I strategy throughout our footprint with full relationship banking, including enhanced treasury management services. In addition, we will further scale small business lending with particular focus on Small Business Administration (SBA) financing and secondary market sales, as well as the recent addition of our new equipment finance team with specialty finance expertise throughout the east coast"

Net interest income increased by $20.4 million, or 21.1%, to $117.0 million for the quarter ended December 31, 2022, from $96.7 million for the quarter ended December 31, 2021.  This increase in net interest income is due to both the increase in market interest rates and the change in our interest-earning asset mix. Cash in interest-earning deposits was redeployed into higher yielding loans and investments, which, along with higher market interest rates, caused the yield on interest-earning assets to increase to 3.89% for the quarter ended December 31, 2022 from 3.05% for the quarter ended December 31, 2021.  This increase in yield was partially offset by an increase in the cost of interest-bearing liabilities, which increased to 0.46% for the quarter ended December 31, 2022 from 0.26% for the quarter ended December 31, 2021.  The net effect of the changes in interest rates and average balances was an increase in the Company's net interest margin to 3.57% for the quarter ended December 31, 2022, from 2.89% for the same quarter last year.

The provision for credit losses increased by $10.9 million, reflecting an expense of $9.0 million for the current quarter ended December 31, 2022 compared to a provision credit of $1.9 million for the quarter ended December 31, 2021.  This increase was primarily due to growth within our loan portfolio during the current year in conjunction with forecasted economic deterioration reflected in our allowance for credit loss models, including a reduction in home and used vehicle values.  The Company continued to experience improvement in asset quality as classified loans decreased by $126.9 million, or 34.9%, to $236.2 million, or 2.2% of total loans, at December 31, 2022, from $363.2 million, or 3.6% of total loans, at December 31, 2021.  Total delinquent loans also decreased to $85.9 million, or 0.8% of loans receivable, at December 31, 2022 from $96.9 million, or 1.0% of loans receivable, at December 31, 2021. In addition, the Company experienced net charge-offs during the current quarter of $806,000, or 0.03% on an annualized basis, compared to net charge-offs of $5.6 million, or 0.22% on an annualized basis, during the same quarter last year, for an overall net improvement of $4.8 million.

Noninterest income increased by $816,000, or 3.0%, to $27.9 million for the quarter ended December 31, 2022, from $27.0 million for the quarter ended December 31, 2021. This increase was primarily due to an increase in our other operating income of $1.7 million, or 53.5%, to $4.9 million for the quarter ended December 31, 2022 from $3.2 million for the quarter ended December 31, 2021. This increase was primarily the result of gains from the sale of branch buildings associated with the previously announced branch consolidations and improvements in other fee income. Partially offsetting this increase was a decline in mortgage banking income of $1.6 million, or 77.5%, to $477,000 for the quarter ended December 31, 2022 from $2.1 million for the quarter ended December 31, 2021. This decrease reflects the impact of less favorable pricing in the secondary market, due primarily to the volatile interest rate environment, as well as a decrease in mortgage volumes primarily due to higher market interest rates.

Noninterest expense increased by $4.4 million, or 5.1%, to $90.7 million for the quarter ended December 31, 2022 from $86.3 million for the quarter ended December 31, 2021. This increase was primarily due to an increase in other expenses of $2.8 million, or 210.5%, and an increase in merger, asset disposition and restructuring expenses of $1.4 million, or 50.9%. The increase in other expense was primarily due to an increase in our unfunded loan loss reserve associated with the origination of loans with current off-balance sheet exposure. The increase in merger, asset disposition and restructuring expense was a result of severance and fixed asset charges related to the branch optimization and personnel reduction, as previously noted.

The provision for income taxes increased by $1.3 million, or 14.1%, to $10.6 million for the quarter ended December 31, 2022 from $9.3 million for the quarter ended December 31, 2021 due primarily to an increase in income before taxes in the current quarter.

Net income for the year ended December 31, 2022 was $133.7 million, or $1.05 per diluted share. This represents a decrease of $20.7 million, or 13.4%, compared to the year ended December 31, 2021, when net income was $154.3 million, or $1.21 per diluted share. The annualized returns on average shareholders' equity and average assets for the year ended December 31, 2022 were 8.80% and 0.94% compared to 9.91% and 1.08% for the prior year. This decrease in net income was the result of an increase in provision for credit losses of $29.7 million, primarily as a result of the provision credit in 2021 related to the release of reserves built-up during COVID-19. In addition, noninterest income decreased by $32.0 million, or 22.4%, largely due to the $25.3 million gain recognized on the sale of the insurance business in the second quarter of 2021.  Also contributing to the decline in noninterest income was an $11.0 million reduction in mortgage banking income due to the volatile interest rate environment causing unfavorable pricing in the secondary market and a slowdown in mortgage loan activity in general.  Partially offsetting these unfavorable variances was an increase in net interest income by $29.4 million, or 7.5%, to $420.7 million for the year ended December 31, 2022 from $391.3 million for the year ended December 31, 2021.  This increase in net interest income was due primarily to an increase in the yield on interest-earning assets to 3.41% for the year ended December 31, 2022 from 3.18% for the year ended December 31, 2021, as well as an increase in the average balance of interest earning assets by $17.6 million.  Lastly, noninterest expense decreased by $4.9 million, or 1.4%, to $340.0 million for the year ended December 31, 2022 from $344.9 million for the year ended December 31, 2021 despite an increase in merger, asset disposition and restructuring expense of $2.2 million, or 62.7%, related to the branch and personnel optimization expense and an increase in other expenses of $7.3 million related primarily to the buildup of credit loss reserves for unfunded loans with off balance sheet exposure.

Headquartered in Columbus, Ohio, Northwest Bancshares, Inc. is the bank holding company of Northwest Bank. Founded in 1896 and headquartered in Warren, Pennsylvania, Northwest Bank is a full-service financial institution offering a complete line of business and personal banking products, as well as treasury management solutions and wealth management services. As of December 31, 2022, Northwest operated 142 full-service community banking offices and eight free standing drive-through facilities in Pennsylvania, New York, Ohio and Indiana. The common stock of Northwest Bancshares, Inc. 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 inflation and an increase in non-performing loans; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses or the ability to complete sales transactions; (7) increased risk associated with commercial real-estate and business loans; 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)



December 31,
2022


September 30,
2022


December 31,
2021

Assets






Cash and cash equivalents

$       139,365


118,549


1,279,259

Marketable securities available-for-sale (amortized cost of $1,431,728, $1,466,883 and $1,565,002, respectively)

1,218,108


1,251,791


1,548,592

Marketable securities held-to-maturity (fair value of $751,384, $771,238 and $751,513, respectively)

881,249


899,411


768,154

Total cash and cash equivalents and marketable securities

2,238,722


2,269,751


3,596,005

Residential mortgage loans held-for-sale

9,913


15,834


25,056

Residential mortgage loans

3,488,686


3,386,064


2,969,564

Home equity loans

1,297,674


1,284,989


1,319,931

Consumer loans

2,168,655


2,116,238


1,838,748

Commercial real estate loans

2,823,555


2,812,830


3,015,484

Commercial loans

1,131,969


1,125,570


847,609

Total loans receivable

10,920,452


10,741,525


10,016,392

Allowance for credit losses

(118,036)


(109,819)


(102,241)

Loans receivable, net

10,802,416


10,631,706


9,914,151

FHLB stock, at cost

40,143


19,281


14,184

Accrued interest receivable

35,528


29,536


25,599

Real estate owned, net

413


450


873

Premises and equipment, net

145,909


146,173


156,524

Bank-owned life insurance

255,062


255,015


256,213

Goodwill

380,997


380,997


380,997

Other intangible assets, net

8,560


9,491


12,836

Other assets

205,574


210,744


144,126

Total assets

$   14,113,324


13,953,144


14,501,508

Liabilities and shareholders' equity






Liabilities






Noninterest-bearing demand deposits

$     2,993,243


3,094,120


3,099,526

Interest-bearing demand deposits

2,686,431


2,812,730


2,940,442

Money market deposit accounts

2,457,569


2,577,013


2,629,882

Savings deposits

2,275,020


2,327,419


2,303,760

Time deposits

1,052,285


1,067,110


1,327,555

Total deposits

11,464,548


11,878,392


12,301,165







Borrowed funds

681,166


150,036


139,093

Subordinated debt

113,840


113,753


123,575

Junior subordinated debentures

129,314


129,249


129,054

Advances by borrowers for taxes and insurance

47,613


29,647


44,582

Accrued interest payable

3,231


831


1,804

Other liabilities

182,126


191,450


178,664

Total liabilities

12,621,838


12,493,358


12,917,937

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, 127,028,848, 126,921,989 and
126,612,183 shares issued and outstanding, respectively

1,270


1,269


1,266

Additional paid-in capital

1,019,647


1,017,189


1,010,405

Retained earnings

641,727


632,476


609,529

Accumulated other comprehensive loss

(171,158)


(191,148)


(37,629)

Total shareholders' equity

1,491,486


1,459,786


1,583,571

Total liabilities and shareholders' equity

$   14,113,324


13,953,144


14,501,508

Equity to assets

10.57 %


10.46 %


10.92 %

Tangible common equity to assets*

8.03 %


7.88 %


8.43 %

Book value per share

$           11.74


11.50


12.51

Tangible book value per share*

$             8.67


8.42


9.40

Closing market price per share

$           13.98


13.51


14.16

Full time equivalent employees

2,160


2,191


2,332

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


December 31,
2022


September 30,
2022


June 30,
2022


March 31,
2022


December 31,
2021






Interest income:










Loans receivable

$     117,137


106,943


95,574


88,174


95,295

Mortgage-backed securities

8,603


8,683


7,158


6,360


5,743

Taxable investment securities

840


838


715


677


640

Tax-free investment securities

701


709


683


674


688

FHLB stock dividends

419


148


82


81


82

Interest-earning deposits

153


1,295


1,684


467


467

Total interest income

127,853


118,616


105,896


96,433


102,915

Interest expense:










Deposits

3,871


3,157


3,341


3,751


4,295

Borrowed funds

6,938


2,710


2,290


2,059


1,964

Total interest expense

10,809


5,867


5,631


5,810


6,259

Net interest income

117,044


112,749


100,265


90,623


96,656

   Provision for credit losses

9,023


7,689


2,629


(1,481)


(1,909)

Net interest income after provision for credit losses

108,021


105,060


97,636


92,104


98,565

Noninterest income:










Loss on sale of investments

(1)


(2)


(3)


(2)


(4)

Service charges and fees

14,125


14,323


13,673


13,067


13,500

Trust and other financial services income

6,642


6,650


7,461


7,012


6,820

Gain/(loss) on real estate owned, net

51


290


291


(29)