Northwest Bancshares, Inc. Announces Second Quarter 2023 Earnings and Quarterly Dividend

COLUMBUS, Ohio, July 24, 2023 /PRNewswire/ -- Northwest Bancshares, Inc., (the "Company"), (NasdaqGS: NWBI) announced net income for the quarter ended June 30, 2023 of $33.0 million, or $0.26 per diluted share. This represents a decrease of $382,000, or 1.1%, compared to the same quarter last year, when net income was $33.4 million, or $0.26 per diluted share. The annualized returns on average shareholders' equity and average assets for the quarter ended June 30, 2023 were 8.72% and 0.93% compared to 8.90% and 0.94% 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 August 14, 2023 to shareholders of record as of August 3, 2023. This is the 115^th 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, 2023, this represents an annualized dividend yield of approximately 7.5%.

Louis J. Torchio, President and CEO, added, "We are very pleased with the positioning and strength of our balance sheet during the past twelve months as we have been able to grow loans by almost $840.0 million, or approximately 8.0%, over that time period by reallocating cash and investments to higher yielding earning assets. Specifically, as a result of the new commercial lending verticals we have recently implemented, commercial loans have grown $416.9 million, or 42.2%, over the past year. As part of this balance sheet shift towards commercial banking, we sold the mortgage servicing rights on approximately $1.3 billion of one- to four family mortgage loans for an $8.3 million gain, which enabled us to sell approximately $110.0 million of investment securities for an equivalent loss, resulting in no impact to tangible capital. We were then able to reallocate these funds from investments yielding approximately 2.0% into commercial loan originations yielding over 7.0%. In addition, our overall deposit balances remained stable during the most recent quarter, although we continue to see customers shift into higher yielding deposit products. Tangible common equity remains strong at over 8.0% and asset quality continues to perform well."

Mr. Torchio continued, "with the continued inversion in the yield curve and the change in our customer deposit mix, as well as higher borrowing costs and balances, the increase in our overall cost of funds continued to outpace our yield improvement, which resulted in net interest margin compression on a linked quarter basis to 3.28% from 3.47%. We expect some additional net interest margin compression could continue for the remainder of the year."

Net interest income increased by $8.3 million, or 8.3%, to $108.5 million for the quarter ended June 30, 2023, from $100.3 million for the quarter ended June 30, 2022. This increase in net interest income is a result of both the increase in market interest rates and the change in our interest-earning asset mix throughout the past year. 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 4.34% for the quarter ended June 30, 2023 from 3.20% for the quarter ended June 30, 2022. Interest income on loans receivable increased $37.2 million, or 38.9%, due to an increase of $907.8 million, or 8.9%, in the average balance of loans in addition to an increase in the yield on loans to 4.83% for the quarter ended June 30, 2023 from 3.79% for the quarter ended June 30, 2022. Partially offsetting this increase in interest income was an increase in the cost of interest-bearing liabilities to 1.47% for the quarter ended June 30, 2023 from 0.24% for the quarter ended June 30, 2022. This increase was largely due to higher market interest rates causing an increase in both deposit and borrowing costs. The net effect of these changes in interest rates and average balances was an increase in the Company's net interest margin to 3.28% for the quarter ended June 30, 2023 from 3.07% for the same quarter last year.

The provision for credit losses increased by $2.9 million, or 48.2%, to $8.9 million for the current quarter ended June 30, 2023 from $6.0 million for the quarter ended June 30, 2022. This increase was primarily due to growth within our commercial loan portfolio year over year, as well as forecasted economic deterioration reflected in our allowance for credit loss models. The Company continued to experience improvement in asset quality as classified loans decreased by $63.3 million, or 22.8%, to $214.1 million, or 1.90% of total loans, at June 30, 2023 from $277.4 million, or 2.66% of total loans, at June 30, 2022. Total delinquent loans increased to $72.1 million, or 0.64% of loans receivable, at June 30, 2023 from $51.1 million, or 0.49% of loans receivable, at June 30, 2022. The increase was primarily driven by two commercial loan administrative delinquencies totaling $22.9 million at June 30, 2023, which have subsequently been brought current.

Noninterest income decreased by $651,000, or 2.1%, to $29.8 million for the quarter ended June 30, 2023, from $30.4 million for the quarter ended June 30, 2022. This decrease was primarily due to a decrease in mortgage banking income of $1.1 million, or 52.3% to $1.0 million for the quarter ended June 30, 2023 from $2.2 million for the quarter ended June 30, 2022. 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 5.5%, to $85.9 million for the quarter ended June 30, 2023 from $81.4 million for the quarter ended June 30, 2022. This increase primarily resulted from a $1.7 million, or 13.1%, increase in processing expenses to $14.6 million for the quarter ended June 30, 2023, from $12.9 million for the quarter ended June 30, 2022 due to the implementation of additional third party software programs. Also contributing to this variance was a restructuring expense of $1.6 million for the quarter ended June 30, 2023 due to the severance charge for personnel changes during the current quarter. Lastly, FDIC insurance premiums increased $934,000, or 82.7%, to $2.1 million for the quarter ended June 30, 2023 from $1.1 million for the quarter ended June 30, 2022 due to an increase in the deposit insurance assessment rate beginning in the first quarter of 2023.

The provision for income taxes increased by $663,000, or 6.7%, to $10.5 million for the quarter ended June 30, 2023 from $9.9 million for the quarter ended June 30, 2022 due primarily to an increase 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, 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.

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; and (9) 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.