By Northwest Bancshares, Inc.—
COLUMBUS, OH—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.
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.
About Northwest Bancshares, Inc.
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.
