Northwest Bancshares(US:NWBI)2024-02-23 22:27Financial Condition and Performance - As of December 31, 2023, the company had $85.8 million invested in municipal bonds and $194.3 million in loans to municipalities, indicating significant exposure to potential operating losses due to economic stress on state and local governments[236]. - The company's municipal bond portfolio may face risks from declining revenues and large unfunded liabilities, which could materially affect its financial condition and liquidity[236]. - At December 31, 2023, the company held $602.3 million in deposits from municipalities, which may be more volatile than other deposits, posing a risk to liquidity and earnings if a significant amount were withdrawn[247]. - Total assets increased to $14.42 billion as of December 31, 2023, from $14.11 billion in 2022, representing a growth of about 2.2%[467]. - Total liabilities increased to $12.87 billion in 2023, compared to $12.62 billion in 2022, marking a rise of about 2.0%[467]. - Shareholders' equity increased to $1.55 billion in 2023, compared to $1.49 billion in 2022, representing a growth of about 4.0%[467]. - Net income for 2023 was $134,957 thousand, a marginal increase from $133,666 thousand in 2022[472]. - Total noninterest expense increased to $351,554 thousand in 2023, up from $329,523 thousand in 2022, marking a 7% rise[470]. Interest Rate Sensitivity - Total interest-earning liabilities maturing or re-pricing within one year exceeded total interest-bearing assets by $565.9 million, resulting in a negative one-year gap ratio of 3.92%[425]. - The company’s interest-earning assets totaled $13.283 billion, with $4.072 billion, or 30.7%, consisting of assets with adjustable rates of interest as of December 31, 2023[424]. - Estimated net interest income may decrease by 5%, 10%, and 15% with parallel shifts of 100 bps, 200 bps, and 300 bps in interest rates, respectively[431]. - Estimated net income may decrease by 10%, 20%, and 30% under the same interest rate shifts[432]. - Market value of equity may decrease by 15%, 30%, and 35% with parallel shifts of 100 bps, 200 bps, and 300 bps in interest rates, respectively[433]. - Cumulative interest sensitivity gap as a percentage of total assets is 23.09%[428]. - Management estimates that $617.8 million (23.5%) of interest-bearing demand accounts are interest sensitive and may re-price in one year or less[437]. Credit Losses and Allowance - The allowance for credit losses for loans held for investment was $125.2 million as of December 31, 2023, compared to $118.0 million in 2022, reflecting an increase of approximately 1.0%[460]. - The allowance for credit losses as of December 31, 2023, was $125,243 thousand, up from $118,036 thousand in 2022, marking an increase of about 6.5%[585]. - The total allowance for credit losses for personal banking was $51,706 thousand in 2023, compared to $48,887 thousand in 2022, indicating an increase of about 3.3%[585]. - The allowance for credit losses is estimated using relevant information, with a focus on historical data and macroeconomic forecasts[506]. - The allowance for credit losses in the mortgage and home equity loan pools is calculated using a non-discounted cash flow method, incorporating key risk drivers such as current balance and original loan-to-value ratio[508]. - The company did not recognize an allowance for credit losses in its investment portfolio for the years ended December 31, 2023, 2022, and 2021[572]. Loans and Deposits - Loans held for investment rose to $11.41 billion in 2023, up from $10.91 billion in 2022, indicating an increase of approximately 4.6%[467]. - Deposits grew to $11.98 billion in 2023, up from $11.46 billion in 2022, reflecting an increase of approximately 4.6%[467]. - The total personal banking loans receivable reached $6,782,070 thousand as of December 31, 2023, compared to $6,964,928 thousand in the previous year, indicating a decrease of about 2.6%[579]. - Commercial banking loans receivable increased to $4,632,739 thousand in 2023 from $3,955,524 thousand in 2022, reflecting a growth of approximately 17.1%[579]. - The company serviced loans for others totaling approximately $230.8 million as of December 31, 2023, down from $1.549 billion in 2022[581]. - The company did not purchase any loans during the year ended December 31, 2023, after acquiring $182.8 million in small business equipment finance loan pools and $188.3 million in jumbo mortgage loan pools in 2022[581]. Marketable Securities - Total marketable securities available-for-sale as of December 31, 2023, amounted to $1,240,003 million, with gross unrealized holding gains of $223 million and gross unrealized holding losses of $196,867 million, resulting in a fair value of $1,043,359 million[568]. - Total marketable securities held-to-maturity as of December 31, 2023, were valued at $814,839 million, with gross unrealized holding gains of $1 million and gross unrealized holding losses of $115,334 million, leading to a fair value of $699,506 million[570]. - The company sold marketable securities classified as available-for-sale for $101.2 million during the year ended December 31, 2023, realizing gross gains of $9,000 and gross losses of $8.3 million[572]. - The fair value of temporarily impaired securities as of December 31, 2023, was $1,724,739 million, with total unrealized losses of $312,201 million[574]. - All held-to-maturity securities are issued by U.S. government-sponsored agencies or enterprises, which are highly rated and have a long history of no credit losses[575]. Internal Controls and Compliance - The company's internal control over financial reporting is effective as of December 31, 2023, based on established criteria[443]. - The company expressed an unqualified opinion on the effectiveness of its internal control over financial reporting as of December 31, 2023[456]. - The critical audit matter identified involved the assessment of expected credit losses on a collective basis, requiring significant auditor judgment due to measurement uncertainty[462]. Operating Leases and Compensation - Total operating lease costs for 2023 were $7.4 million, an increase from $6.9 million in 2022 and $6.5 million in 2021[564]. - Operating lease ROU assets increased to $61.7 million in 2023 from $54.9 million in 2022, while operating lease liabilities rose to $64.7 million from $57.7 million[564]. - The weighted average remaining lease term increased to 16.6 years in 2023 from 15.6 years in 2022, with a weighted average discount rate of 4.2% compared to 3.2% in the previous year[564]. - Stock-based employee compensation expense for common share awards was $4.3 million in 2023, $2.8 million in 2022, and $4.1 million in 2021, with a net income reduction of $3.1 million, $2.0 million, and $2.9 million respectively[545].