The Company’s adjusted net operating income was $35 million, or $0.27 per diluted share(1)

 

Columbus, Ohio — July 23, 2024

 

Northwest Bancshares, Inc., (the “Company”), (NasdaqGS: NWBI) announced net income for the quarter ended June 30, 2024 of $5 million, or $0.04 per diluted share. This represents a decrease of $28 million compared to the same quarter last year, when net income was $33 million, or $0.26 per diluted share, and a decrease of $24 million compared to the prior quarter, when net income was $29 million, or $0.23 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended June 30, 2024 were 1.24% and 0.13% compared to 8.72% and 0.93% for the same quarter last year and 7.57% and 0.81% from the prior quarter.

Excluding loss on the sale of investments of $28 million, net of tax, and restructuring expense of $1 million, net of tax, the Company’s adjusted net operating income was $35 million, or $0.27 per diluted share for the quarter ended June 30, 2024. This represents an increase of $1 million from the same quarter last year, when adjusted net operating income was $34 million, or $0.27 per diluted share, and an increase of $5 million compared to the prior quarter, where adjusted net operating income was $30 million, or $0.23 per diluted share. The adjusted annualized returns on average shareholders’ equity and average assets for the quarter ended June 30, 2024 were 9.00% and 0.96% compared to 9.02% and 0.96% for the same quarter last year and 7.75% and 0.83% from the prior quarter.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share payable on August 14, 2024 to shareholders of record as of August 2, 2024. This is the 119th 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, 2024, this represents an annualized dividend yield of approximately 6.9%.

In the quarter, as previously disclosed, the Company repositioned its security portfolio by selling 15% of its investment securities with proceeds totaling $276 million at a pre-tax loss of $39 million, or $28 million after tax. The proceeds of the sale were immediately used to repay short-term borrowings. In addition, $258 million has already been invested into securities netting a 420 basis point higher yield. The Company currently expects to earn-back the loss over the next three years.

Louis J. Torchio, President and CEO, added, “Our core earnings this quarter reflect our commitment to responsible growth, with particularly strong performance in our commercial division. I’m especially proud of the flawless execution of our previously announced securities restructuring, which has yielded results surpassing our initial projections. This success underscores our team’s ability to implement strategic initiatives effectively while maintaining focus on our core business objectives.”

“Performance this quarter highlights the significant progress in our commercial transformation strategy. We’ve seen solid loan growth, particularly in commercial and industrial originations, which aligns with our strategic focus. This targeted growth outpaces less preferred categories in the current market, such as commercial office space or long-term health care. Our success in this area not only validates our strategic direction but also positions us well for sustained, quality growth in the commercial sector.”

(1) See reconciliation of non-GAAP financial measures for additional information relating to these items.

•Average loans receivable increased $303 million from the quarter ended June 30, 2023 driven by our commercial banking portfolio, which grew by $631 million in total, including a $444 million increase in our commercial and industrial portfolio as we have continued to build-out our commercial lending verticals. Compared to the first quarter of 2024, average loans receivable increased by $23 million, also driven by growth in the commercial banking portfolio.

•Average investments declined $213 million from the quarter ended June 30, 2023 and $30 million from the quarter ended March 31, 2024. The decline from the prior year was driven by the investment portfolio restructure described above and from lack of reinvestment of cash flow over the past year. The decline in investments from the prior quarter is expected to be temporary and was also driven by the timing of the investment portfolio repositioning activity.

•Average deposits grew $666 million from the quarter ended June 30, 2023, driven by a $1.1 billion increase in our average time deposits as we continued competitively positioning our deposit products. This increase was partially offset by a decrease in money market balances as customers shifted balances into higher yielding time deposit accounts. Compared to the first quarter of 2024, average deposits grew $198 million, also driven by an increase in time deposits.

•Average borrowings saw a significant reduction of $514 million compared to the quarter end June 30, 2023 and $147 million compared to the quarter ended March 31, 2024. The decrease in average borrowings is primarily attributable to the strategic pay-down of wholesale borrowings. This decrease was made possible by our repositioning of our securities portfolio as well as a substantial increase in cash reserves resulting from the notable rise in the average balance of deposits noted above.

Net interest income decreased $2 million and net interest margin decreased to 3.20% for the quarter ended June 30, 2024 from 3.28% for the quarter ended June 30, 2023. This decrease in net interest income resulted primarily from:

•A $23 million increase in interest income that was the result of cash and marketable securities being redeployed into higher yielding loans. Driven by higher market interest rates, the average yield on loans improved to 5.47% for the quarter ended June 30, 2024 from 4.83% for the quarter ended June 30, 2023.

•A $25 million increase in interest expense more than offset the increase in interest income as the result of higher costs of deposits due to the higher interest rate environment and competitive pressure for liquidity. The cost of interest-bearing liabilities increased to 2.40% for the quarter ended June 30, 2024 from 1.47% for the quarter ended June 30, 2023.

Compared to the quarter ended March 31, 2024, net interest income increased $4 million and net interest margin increased to 3.20% for the quarter ended June 30, 2024. This increase in net interest income resulted from the following:

•A $7 million increase in interest income driven by higher interest income on loans receivable as both the average balance and average yield increased compared to the prior quarter. The average yield on loans improved to 5.47% from 5.33% for the quarter ended March 31, 2024.

•Partially offsetting the increase in interest income was a $3 million increase in interest expense due to increases in both the average balance and average yield of interest-earning deposits. The cost of interest-bearing liabilities increased to 2.40% from 2.28% for the quarter ended March 31, 2024.

The total provision for credit losses for the quarter ended June 30, 2024 was a credit of $0.4 million primarily driven by improvements in the economic forecasts coupled with a decline in our reserves for unfunded commitments in the current period. This decline is based on the timing of origination and funding of commercial construction loans and lines of credit.

Additionally, the Company continued to experience low levels of classified loans with a slight increase to $257 million or 2.26% of total loans at June 30, 2024 from $214 million, or 1.90% of total loans, at June 30, 2023 and $229 million, or 1.99% of total loans, at March 31, 2024.

     

Noninterest income for the quarter ended June 30, 2024 showed a loss of $9 million inclusive of a $39 million loss on the sale of investment securities, excluding the loss on sale of securities net interest income grew by $1 million, or 3%, from the quarter ended June 30, 2023 and $3 million, or 9% from the quarter ended March 31, 2024. In addition, in the prior year period we realized a gain on sale of mortgage servicing rights of $8 million and an offsetting loss on the sale of investments of $8 million.

Noninterest expense increased from the quarter ended June 30, 2023 due to a $6 million increase in personnel expenses driven by the build-out of the commercial business and related credit, risk management and internal audit support functions over the past year.

Compared to the quarter ended March 31, 2024, noninterest expense increased due to a $2 million increase in personnel expense driven by an annual salary merit increase, additional contracted employees utilized during the quarter and an increase in incentive compensation expenses.

The provision for income taxes decreased by $9 million from the quarter ended June 30, 2023 and $7 million from the quarter ended March 31, 2024 primarily due to lower income before income taxes.

Net income declined compared to both the quarter ended June 30, 2023 and the quarter ended March 31, 2024 due to loss on sale of investments from the current period balance sheet restructuring as well as the additional factors discussed above.

Headquartered in Columbus, Ohio, Northwest Bancshares, Inc. is the bank 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, as well as employee benefits and wealth management services. As of June 30, 2024, Northwest operated 131 full-service financial centers 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.

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, loss on sale of investments and gain on sale of mortgage servicing rights. 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 $19.4 million, or 0.16% of total deposits, as of June 30, 2024. Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $102 million, or 0.84% of total deposits, as of June 30, 2024. The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $289,000 as of June 30, 2024.

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

Our average deposit account balance as of June 30, 2024 was $17,000. The Company’s insured cash sweep deposit balance was $394 million as of June 30, 2024.

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 2023 Annual Report on Form 10-K.

*    As of June 30, 2024, the Company had $3.4 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250 million overnight line of credit, which has no balance as of June 30, 2024, as well as $404 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.

The following table provides the various loan sectors in our commercial real estate portfolio at June 30, 2024:

The following table describes the collateral of our commercial real estate portfolio by state at June 30, 2024: