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

·13-min read

COLUMBUS, Ohio, July 25, 2022 /PRNewswire/ -- Northwest Bancshares, Inc., (the "Company"), (NasdaqGS: NWBI) announced net income for the quarter ended June 30, 2022 of $33.4 million, or $0.26 per diluted share.  This represents a decrease of $15.5 million, or 31.7%, compared to the same quarter last year, when net income was $49.0 million, or $0.38 per diluted share.  The annualized returns on average shareholders' equity and average assets for the quarter ended June 30, 2022 were 8.90% and 0.94% compared to 12.58% and 1.37% for the same quarter last year. Prior year earnings were enhanced by a $25.3 million pre-tax gain on the sale of the Northwest insurance line of business.

(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 August 15, 2022 to shareholders of record as of August 4, 2022. This is the 111th 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, 2022, this represents an annualized dividend yield of approximately 6.0%.

During the second quarter, the Company announced the unfortunate passing of Chairman, President, and Chief Executive Officer, Ronald J. Seiffert, from natural causes. Subsequently, as announced on May 25, 2022, the Northwest Bancshares and Northwest Bank Boards of Directors named the Company's Chief Financial Officer, William W. Harvey Jr,. as interim President and Chief Executive Officer and the Company's Lead Director, Timothy B. Fannin, as interim Chairman of the Board.

Mr. Harvey commented, "Everyone in the Northwest family is deeply saddened by the unexpected passing of Ron. Ron was such a strong leader during his time at Northwest and he positioned us well for the future. We are committed to carrying out his vision and strategic direction for the company."

In relation to the quarterly results, Mr. Harvey noted, "We are pleased with the loan growth momentum generated during the quarter with organic loan growth of approximately $200.0 million, or almost 2.0%, augmented by the purchase of a $50.0 million one-to-four family jumbo mortgage loan portfolio and a $43.0 million small business equipment finance pool.  Also, during the quarter our net interest margin expanded by 32bp as a result of both an increase in market interest rates and the deployment of excess liquidity into higher yielding interest-earning assets."

Mr. Harvey continued, "Asset quality metrics continue to improve with nonperforming and classified assets dropping to $100.0 million and $277.4 million, respectively, and total delinquency and net charge-offs falling to pre-pandemic levels. Outside of an increase in other noninterest expense related primarily to an additional $3.4 million reserve for unfunded loan commitments, we continue to see a favorable trend in expense management over the past five quarters."

Net interest income increased by $4.5 million, or 4.7%, to $100.3 million for the quarter ended June 30, 2022, from $95.7 million for the quarter ended June 30, 2021, due primarily to a $1.5 million increase in both interest income on mortgage-backed securities and interest income on interest-earning deposits.  The increase in interest income on mortgage-backed securities was due to an increase of $196.1 million, or 11.2%, in the average balance of mortgage-backed securities in addition to an increase in the yield on mortgage-backed securities to 1.47% for the quarter ended June 30, 2022 from 1.29% for the quarter ended June 30, 2021.  The increase in interest income on interest-earning deposits was due to an increase of $35.4 million, or 4.4%, in the average balance of interest-earning deposits in addition to an increase in the yield on interest-earning deposits to 0.79% for the quarter ended June 30, 2022 from 0.09% for the quarter ended June 30, 2021. Also contributing to the increase in net interest income was a decrease in interest expense on deposits of $1.4 million, or 30.0%, primarily due to a decrease in our cost of our interest-bearing liabilities to 0.24% for the quarter ended June 30, 2022, from 0.29% for the quarter ended June 30, 2021. The net effect of the changes in interest rates and average balances was an increase in the Company's net interest margin to 3.07% for the quarter ended June 30, 2022, from 2.91% for the same quarter last year.

The Company continued to experience improvement in asset quality as classified loans decreased by $175.7 million, or 38.8%, to $277.4 million, or 2.7% of total loans, at June 30, 2022, from $453.1 million, or 4.4% of total loans, at June 30, 2021.  Total delinquent loans also decreased to $51.1 million, or 0.49% of loans receivable, at June 30, 2022 from $68.9 million, or 0.70% of loans receivable, at June 30, 2021. In addition, annualized net charge-offs were 0.14% during the current quarter compared to 0.26% during the same quarter last year. As the result, the provision for credit losses during the current quarter remained historically low at just $2.6 million.

Noninterest income decreased by $24.3 million, or 44.3%, to $30.4 million for the quarter ended June 30, 2022, from $54.7 million for the quarter ended June 30, 2021.  This decrease was primarily due to the sale of our insurance business in the second quarter of 2021, for a pre-tax gain of $25.3 million, which also resulted in a decrease in insurance commission income of $1.0 million, or 100.0% from the quarter ended June 30, 2021. In addition, mortgage banking income decreased by $1.7 million, or 43.4%, to $2.2 million for the quarter ended June 30, 2022 from $3.8 million for the quarter ended June 30, 2021. This decrease reflects the impact of less favorable pricing in the secondary market, due primarily to the volatile interest rate environment. Offsetting these decreases was an increase in other operating income of $2.2 million, or 83.6%, to $4.9 million for the quarter ended June 30, 2022 from $2.6 million for the quarter ended June 30, 2021 due to an increase in swap fee income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities.

Noninterest expense decreased by $1.5 million, or 1.8%, to $84.8 million for the quarter ended June 30, 2022 from $86.3 million for the quarter ended June 30, 2021. This decrease primarily resulted from a $2.2 million, or 14.5%, decrease in processing expense to $12.9 million for the quarter ended June 30, 2022 from $15.2 million for the quarter ended June 30, 2021 due to the investment in our technology and infrastructure during the prior year.  Also contributing to this favorable variance was an $898,000, or 21.2%, decrease in professional services to $3.3 million for the quarter ended June 30, 2022 from $4.2 million for the quarter ended June 30, 2021 due to the use of third-party experts to assist with our digital strategy rollout in the prior year.  Compensation and employee benefits also decreased by $821,000, or 1.7%, to $48.1 million for the quarter ended June 30, 2022 from $48.9 million for the quarter ended June 30, 2021, despite recognizing approximately $1.4 million of additional expenses related to the acceleration of compensation and stock benefits upon Mr. Seiffert's passing. The decrease in compensation and employee benefits was driven primarily by the branch consolidations completed in April.  Partially offsetting these decreases was an increase in other expenses of $3.8 million to $5.2 million for the quarter ended June 30, 2022 from $1.4 million for the quarter ended June 30, 2021 due to an increase in our unfunded loan loss reserve associated with the origination of loans with current off balance sheet exposure.

The provision for income taxes decreased by $5.3 million, or 34.9%, to $9.9 million for the quarter ended June 30, 2022, from $15.1 million for the quarter ended June 30, 2021, due primarily to a decrease in income before taxes in the current year.

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 June 30, 2022, Northwest operated 142 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,

2022


December 31,

2021


June 30,

2021

Assets






Cash and cash equivalents

$        504,532


1,279,259


857,152

Marketable securities available-for-sale (amortized cost of $1,516,743, $1,565,002 and $1,593,813, 
respectively)

 

1,364,743


 

1,548,592


 

1,599,024

Marketable securities held-to-maturity (fair value of $835,565, $751,513 and $632,620, respectively)

923,180


768,154


639,424

Total cash and cash equivalents and marketable securities

2,792,455


3,596,005


3,095,600







Residential mortgage loans held-for-sale

31,153


25,056


29,055

Residential mortgage loans

3,255,622


2,969,564


2,925,496

Home equity loans

1,280,492


1,319,931


1,376,228

Consumer loans

2,002,545


1,838,748


1,745,231

Commercial real estate loans

2,876,176


3,015,484


3,215,189

Commercial loans

986,836


847,609


1,018,781

Total loans receivable

10,432,824


10,016,392


10,309,980

Allowance for credit losses

(98,355)


(102,241)


(117,330)

Loans receivable, net

10,334,469


9,914,151


10,192,650







FHLB stock, at cost

13,362


14,184


23,287

Accrued interest receivable

27,708


25,599


27,585

Real estate owned, net

1,205


873


1,353

Premises and equipment, net

146,869


156,524


156,076

Bank-owned life insurance

254,109


256,213


253,539

Goodwill

380,997


380,997


380,997

Other intangible assets, net

10,538


12,836


15,362

Other assets

192,983


144,126


151,607

Total assets

$   14,154,695


14,501,508


14,298,056

Liabilities and shareholders' equity






Liabilities






Noninterest-bearing demand deposits

$     3,058,249


3,099,526


3,002,632

Interest-bearing demand deposits

2,858,691


2,940,442


2,824,219

Money market deposit accounts

2,631,712


2,629,882


2,538,607

Savings deposits

2,362,725


2,303,760


2,262,152

Time deposits

1,155,878


1,327,555


1,463,098

Total deposits

12,067,255


12,301,165


12,090,708







Borrowed funds

130,490


139,093


133,876

Subordinated debt

113,666


123,575


123,501

Junior subordinated debentures

129,184


129,054


128,924

Advances by borrowers for taxes and insurance

55,622


44,582


53,608

Accrued interest payable

1,725


1,804


1,820

Other liabilities

162,214


178,664


190,258

Total liabilities

12,660,156


12,917,937


12,722,695

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, 126,881,766, 126,612,183 and 
127,907,885 shares issued and outstanding, respectively

 

1,269


 

1,266


 

1,279

Additional paid-in capital

1,015,349


1,010,405


1,025,174

Retained earnings

620,551


609,529


595,100

Accumulated other comprehensive loss

(142,630)


(37,629)


(46,192)

Total shareholders' equity

1,494,539


1,583,571


1,575,361

Total liabilities and shareholders' equity

$  14,154,695


14,501,508


14,298,056







     Equity to assets 

10.56 %


10.92 %


11.02 %

     Tangible common equity to assets* 

8.01 %


8.43 %


8.48 %

     Book value per share

$            11.78


12.51


12.32

     Tangible book value per share*

$              8.69


9.40


9.22

     Closing market price per share

$            12.80


14.16


13.64

     Full time equivalent employees

2,188


2,332


2.393

     Number of banking offices

150


170


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


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2021


June 30,
2021






Interest income:










Loans receivable

$       95,574


88,174


95,295


97,475


95,255

Mortgage-backed securities

7,158


6,360


5,743


5,840


5,680

Taxable investment securities

715


677


640


649


693

Tax-free investment securities

683


674


688


628


594

FHLB stock dividends

82


81


82


71


138

Interest-earning deposits

1,684


467


467


352


192

Total interest income

105,896


96,433


102,915


105,015


102,552

Interest expense:










Deposits

3,341


3,751


4,295


4,540


4,773

Borrowed funds

2,290


2,059


1,964


2,056


2,050

Total interest expense

5,631


5,810


6,259


6,596


6,823

Net interest income

100,265


90,623


96,656


98,419


95,729

   Provision for credit losses

2,629


(1,481)


(1,909)


(4,354)


Net interest income after provision for credit losses

97,636


92,104


98,565


102,773


95,729

Noninterest income:










Loss on sale of investments

(3)


(2)


(4)


(46)


(105)

Service charges and fees

13,673