Columbus, Ohio — January 22, 2024

 

Northwest Bancshares, Inc., (the “Company”), (NasdaqGS: NWBI) announced net income for the quarter ended December 31, 2023 of $29.0 million, or $0.23 per diluted share. This represents a decrease of $5.6 million, or 16.3%, compared to the same quarter last year, when net income was $34.6 million, or $0.27 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended December 31, 2023 were 7.64% and 0.80% compared to 9.38% and 0.98% for the same quarter last year.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share payable on February 14, 2024 to shareholders of record as of February 2, 2024. This is the 117th 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, 2023, this represents an annualized dividend yield of approximately 6.4%.

 

Louis J. Torchio, President and CEO, added, “We were very pleased with 2023 results as we continue to execute upon our commercial banking strategy despite the current year liquidity and interest rate challenges for the industry. We grew loans at a measured pace of 4.5%, but more importantly we reallocated over $440.0 million from lower yielding investment securities, retail loans and consumer loans into the more profitable commercial portfolio, which grew $677.2 million, or 17.1%. We were also pleased with the stability of our deposit base throughout the year which grew $515.4 million, enabling us to reduce more expensive borrowed funds by $282.3 million, and our tangible common equity grew to 8.30%, which provides flexibility for growth going forward.”

Mr. Torchio continued, “We have also taken additional measures to control our noninterest expense growth by consolidating three more branches, rightsizing our retail and consumer staff, and renegotiating third-party contracts across the board. These measures required severance and professional service costs in the fourth quarter of approximately $3.5 million. The expense savings going forward will be allocated to the continued build-out of our credit administration, risk management, and internal audit functions that support our focus on commercial loan growth.”

Net interest income decreased by $10.7 million, or 9.2%, to $106.3 million for the quarter ended December 31, 2023, from $117.0 million for the quarter ended December 31, 2022. This decrease in net interest income resulted primarily from a $40.3 million increase in interest expense due to increases in both the average balance and average cost of interest-bearing liabilities. The average balance of interest-bearing liabilities increased $663.1 million, or 7.2%, to $9.912 billion for the quarter ended December 31, 2023 from $9.249 billion for the quarter ended December 31, 2022, driven by an increase in time deposits and borrowed funds. In addition, the cost of interest-bearing liabilities increased to 2.04% for the quarter ended December 31, 2023 from 0.46% for the quarter ended December 31, 2022 due to higher market interest rates and competitive pressure for liquidity. Partially offsetting this increase in interest expense was a $29.5 million increase in interest income. Cash and marketable securities were redeployed into higher yielding loans, which, along with higher market interest rates, caused the yield on interest-earning assets to increase to 4.67% for the quarter ended December 31, 2023 from 3.89% for the quarter ended December 31, 2022. Interest income on loans receivable increased $29.4 million, or 25.1%, due to an increase of $525.2 million, or 4.9%, in the average balance of loans in addition to an increase in the yield on loans to 5.19% for the quarter ended December 31, 2023 from 4.35% for the quarter ended December 31, 2022. The net effect of these changes in interest rates and average balances was a decrease in the Company's net interest margin to 3.16% for the quarter ended December 31, 2023 from 3.57% for the same quarter last year.

The provision for credit losses decreased by $3.0 million, or 27.1%, to $7.9 million for the current quarter ended December 31, 2023 from $10.9 million for the quarter ended December 31, 2022. Economic forecasts continued to improve, and the Company continued to experience a decrease in substandard loans by $17.8 million, or 7.5%, to $218.5 million, or 1.91% of total loans, at December 31, 2023 from $236.2 million, or 2.16% of total loans, at December 31, 2022.

This decrease was assisted by the note sale of approximately $8.0 million of nonperforming loans for a net gain of approximately $726,000. In addition, delinquencies remain well controlled.

 Noninterest income increased by $1.3 million, or 4.7%, to $29.2 million for the quarter ended December 31, 2023, from $27.9 million for the quarter ended December 31, 2022. This increase was driven by increases in core businesses such as service charges and fees on deposits and loans, trust and other financial services income and the net gain on the sale of SBA loans and other real estate owned. Service charges and fees increased $1.8 million, or 12.7%, to $15.9 million for the quarter ended December 31, 2023 from $14.1 million for the quarter ended December 31, 2022 driven by deposit-related fees based on customer activity as well as commercial loan fees, and the net gain on real estate owned increased $1.0 million to $1.1 million for the quarter ended December 31, 2023 from $51,000 for the quarter ended December 31, 2022 as a result of gains on property sales in the current period. These increases were partially offset by a $2.4 million, or 49.7%, decrease in other operating income to $2.5 million for the quarter ended December 31, 2023 from $4.9 million for the quarter ended December 31, 2022 as a result of gains from the sales of branch buildings associated with the previously announced branch consolidations during the quarter ended December 31, 2022.

Noninterest expense increased by $1.9 million, or 2.1%, to $90.7 million for the quarter ended December 31, 2023 from $88.8 million for the quarter ended December 31, 2022. This increase primarily resulted from a $3.5 million, or 7.6%, increase in compensation and employee benefits to $50.2 million for the quarter ended December 31, 2023, from $46.7 million for the quarter ended December 31, 2022 driven primarily by the buildout of the commercial business and related credit, risk management and internal audit support functions over the past twelve months. Processing expenses increased $1.4 million, or 10.5%, to $15.0 million for the quarter ended December 31, 2023, from $13.6 million for the quarter ended December 31, 2022 due to the implementation of additional third-party software platforms. FDIC insurance premiums increased $1.3 million, or 100.4%, to $2.6 million for the quarter ended December 31, 2023 from $1.3 million for the quarter ended December 31, 2022 due to an increase in the deposit insurance assessment rate beginning in the first quarter of 2023.

The provision for income taxes decreased by $2.7 million, or 25.9%, to $7.8 million for the quarter ended December 31, 2023 from $10.6 million for the quarter ended December 31, 2022 due primarily to lower income before income taxes.

Net income for the year ended December 31, 2023 was $135.0 million, or $1.06 per diluted share. This represents an increase of $1.3 million, or 1.0%, compared to the year ended December 31, 2022, when net income was $133.7 million, or $1.05 per diluted share. The annualized returns on average shareholders' equity and average assets for the year ended December 31, 2023 were 8.94% and 0.95% compared to 8.80% and 0.94% for the prior year. This increase in net income was the result of an increase in net interest income of $15.0 million, or 3.6%, to $435.7 million for the year ended December 31, 2023 from $420.7 million for the year ended December 31, 2022. This increase in net interest income was primarily due to an increase in the average yield on interest-earning assets, partially offset by increases in the average balance and average cost of interest-bearing liabilities. The average yield on interest-earning assets increased to 4.42% for the year ended December 31, 2023 compared to 3.41% for the prior year due to the rising interest rate environment as well as the change in asset mix to higher yielding commercial loans. The average balance of interest-bearing liabilities increased by $355.6 million, or 3.8% and the average cost increased to 1.56% for the year ended December 31, 2023 from 0.30% for the year ended December 31, 2022 due to rising interest rates throughout the year as well as competitive pressure for funding and liquidity. In addition, the total provision for credit losses decreased $5.4 million, or 19.2% compared to the prior year, specifically within the provision for unfunded commitments as a result of the timing of the origination of loans with off balance sheet exposures. Noninterest income increased $3.0 million, or 2.7% to $113.8 million for the year ended December 31, 2023 from $110.8 million for the year ended December 31, 2022, driven by a $4.0 million increase in service charges and fees, $1.8 million in gains on sales of SBA loans during the current year, and a $1.5 million increase in income from bank owned life insurance as a result of death benefits received in the current year. These changes were partially offset by a $22.0 million, or 6.7%, increase in noninterest expense to $351.6 million for the year ended December 31, 2023 from $329.5 million for the year ended December 31, 2022, driven by a $7.3 million increase in compensation and employee benefits expense, a $6.2 million increase in processing expenses due to the implementation of additional third-party software platforms, and a $4.5 million increase in federal deposit insurance premiums due to an increase in the deposit insurance assessment rate beginning in the first quarter of 2023.

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 employee benefits and wealth management services. As of December 31, 2023, Northwest operated 134 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.

 

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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; (8) changes in liquidity, including the size and composition of our deposit portfolio; (9) reduction in the value of our goodwill and other intangible assets; and (10) 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.

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

**    Excludes amortization of intangible assets and merger, asset disposition and restructuring expenses (non-GAAP).See reconciliation of non-GAAP financial measures for additional information relating to these items.

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

**    Excludes amortization of intangible assets and merger, asset disposition and restructuring expenses (non-GAAP). See reconciliation of non-GAAP financial measures for additional information relating to these items.

The following non-GAAP financial measures used by the Company provide information useful to investors in understanding our operating performance and trends, and facilitate comparisons with the performance of our peers. The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s Consolidated Statements of Financial Condition.

The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company's Consolidated Statements of Income.

*    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.

Generally, deposits in excess of $250,000 are not federally insured. The following table provides details regarding the Company’s uninsured deposits portfolio:

(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 $19.0 million, or 0.16% of total deposits, as of December 31, 2023. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $105.8 million, or 0.88% of total deposits, as of December 31, 2023. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $300,000 as of December 31, 2023.

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

Our average deposit account balance as of December 31, 2023 was $17,000. The Company’s insured cash sweep deposit balance was $357.0 million as of December 31, 2023.

The following table provides additional details regarding the Company’s deposit portfolio over time:

(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 2020 Annual Report on Form 10-K.

*    As of December 31, 2023, the Company had $3.3 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250.0 million overnight line of credit, which had a $163.5 million drawn balance, as well as $297.5 million of borrowing capacity available with the Federal Reserve Bank and $105.0 million with two correspondent banks.

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

The following table describes our commercial real estate portfolio by state at December 31, 2023:

*    Includes $7.8 million, $6.9 million, $4.9 million, $7.4 million, and $7.4 million of acquired loans at December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.

**    Includes $20.3 million, $28.9 million, $31.2 million, $31.9 million, and $39.1 million of acquired loans at December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.