Northwest Bancshares(NWBI) - 2021 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents Northwest Bancshares, Inc.'s unaudited consolidated financial statements for Q1 2021, covering financial condition, income, cash flows, and detailed notes Consolidated Statements of Financial Condition Total assets grew to $14.27 billion by March 31, 2021, driven by cash and marketable securities, with deposits reaching $12.11 billion Consolidated Balance Sheet Highlights | Account | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $979.29 million | $736.28 million | | Loans receivable, net | $10.24 billion | $10.45 billion | | Total assets | $14.27 billion | $13.81 billion | | Liabilities & Equity | | | | Total deposits | $12.11 billion | $11.60 billion | | Total liabilities | $12.73 billion | $12.27 billion | | Total shareholders' equity | $1.54 billion | $1.54 billion | Consolidated Statements of Income Net income for Q1 2021 significantly increased to $40.2 million, driven by a favorable provision for credit losses and a 15.2% rise in net interest income Quarterly Income Statement Highlights | Account | Q1 2021 (USD) | Q1 2020 (USD) | | :--- | :--- | :--- | | Net interest income | $100.46 million | $87.23 million | | Provision for credit losses | $(5.62) million | $27.64 million | | Noninterest income | $31.95 million | $27.98 million | | Noninterest expense | $86.19 million | $78.61 million | | Net income | $40.24 million | $7.94 million | | Diluted earnings per share | $0.32 | $0.07 | Consolidated Statements of Cash Flows Cash and cash equivalents increased by $243.0 million in Q1 2021, primarily from financing activities and operations, partially offset by investing activities Quarterly Cash Flow Summary | Activity | Q1 2021 (USD) | Q1 2020 (USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $68.02 million | $50.30 million | | Net cash provided by/(used) in investing activities | $(286.45) million | $36.03 million | | Net cash provided by financing activities | $461.44 million | $129.28 million | | Net increase in cash and cash equivalents | $243.01 million | $215.61 million | Notes to Consolidated Financial Statements Provides detailed disclosures on accounting policies, marketable securities, loan portfolio, and other financial instruments, including a $2.03 billion securities portfolio - The company operates 170 community-banking offices across Pennsylvania, Western New York, Eastern Ohio, and Indiana[19] - On April 1, 2021, subsequent to the quarter end, the company completed the sale of its subsidiary, Northwest Insurance Services (NWIS), for an aggregate purchase price of $31.8 million in cash, subject to closing adjustments[130][131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, attributing increased net income to lower credit loss provisions and higher net interest income, with strengthened financial condition and strong capital Comparison of Financial Condition Total assets grew by $464.1 million (3.4%) to $14.27 billion by March 31, 2021, driven by marketable securities and cash, funded by a 4.4% increase in deposits - Total assets increased by $464.1 million (3.4%) since December 31, 2020, primarily due to growth in marketable securities and cash[137] - Total deposits increased by $513.9 million (4.4%), mainly from growth in checking, savings, and money market accounts, attributed to PPP loan funds and consumer stimulus checks[141] - Total loans decreased by $212.8 million (2.0%) as paydowns outpaced new originations, with the exception of consumer loans (primarily indirect auto)[140] Regulatory Capital The company and its bank subsidiary maintained capital ratios significantly above "well capitalized" minimums as of March 31, 2021 Regulatory Capital Ratios (Company) as of March 31, 2021 | Ratio | Actual | Minimum Requirement (incl. buffer) | Well Capitalized Requirement | | :--- | :--- | :--- | :--- | | CET1 capital (to risk weighted assets) | 13.30% | 7.00% | 6.50% | | Tier 1 capital (to risk weighted assets) | 14.56% | 8.50% | 8.00% | | Total capital (to risk weighted assets) | 16.83% | 10.50% | 10.00% | | Tier 1 capital (leverage) | 10.25% | 4.00% | 5.00% | Nonperforming Assets Total nonperforming assets increased to $225.9 million at March 31, 2021, primarily due to a rise in nonaccrual loans Nonperforming Assets | Category | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | Total nonperforming loans | $224.15 million | $103.42 million | | Total REO, net | $1.74 million | $2.23 million | | Total nonperforming assets | $225.89 million | $105.65 million | | Total TDR loans | $27.51 million | $32.14 million | Comparison of Operating Results Net income for Q1 2021 increased by $32.3 million to $40.2 million, driven by a favorable change in credit loss provision and a 15.2% rise in net interest income - Net income increased by $32.3 million YoY, primarily due to a decrease in the provision for credit losses from a $27.6 million expense in Q1 2020 to a $5.6 million credit in Q1 2021[163][173] - Net interest income increased by $13.2 million (15.2%) YoY, although the net interest margin decreased from 3.64% to 3.16% due to declining asset yields[172] - Noninterest income increased by $4.0 million (14.2%), driven by a $4.8 million rise in mortgage banking income[175] - Noninterest expense increased by $7.6 million (9.6%), mainly from higher compensation, processing expenses, and professional services, partly due to the MutualBank acquisition[176] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk through simulations, projecting net income changes under various rate shifts, with a 100 bps upward shift increasing net income by 3.4% Simulated Impact of Interest Rate Shifts over 12 Months | Parallel Rate Shift | Projected % Change in Net Income | Projected % Change in Market Value of Equity | | :--- | :--- | :--- | | +300 bps | +4.5% | (14.6)% | | +200 bps | +4.3% | (7.5)% | | +100 bps | +3.4% | (1.4)% | | -100 bps | (9.1)% | (8.9)% | Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[196] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal claims but does not anticipate any material adverse effect on its financial statements from pending litigation - The company does not expect any pending legal proceedings to have a material adverse effect on its consolidated financial statements[198] Item 1A. Risk Factors No material updates or additions to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2020 Form 10-K filing[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company repurchased 353,552 shares of common stock at an average price of $12.85 per share, with 3,720,710 shares remaining Common Stock Repurchases - Q1 2021 | Month | Shares Purchased | Average Price Paid per Share (USD) | | :--- | :--- | :--- | | January | 165,497 | $12.79 | | February | 188,055 | $12.90 | | March | 0 | N/A | | Total | 353,552 | | - A maximum of 3,720,710 shares remain available for purchase under the current repurchase program, which does not have an expiration date[200] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL documents[207]