Northwest Bancshares, Inc. Announces Fourth Quarter 2012 Earnings

Jan 22, 2013, 08:45 ET from Northwest Bancshares, Inc.

WARREN, Pa., Jan. 22, 2013 /PRNewswire/ -- Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended December 31, 2012 of $16.3 million, or $0.18 per diluted share.  This represents an increase of $1.1 million, or 7.6%, over the same quarter last year when net income was $15.2 million, or $0.16 per diluted share, and an increase of $632,000, or 4.0%, over the quarter ended September 30, 2012 when net income was $15.7 million, or $0.17 per diluted share.  The annualized returns on average shareholders' equity and average assets for the current quarter were 5.68% and 0.82% compared to 5.23% and 0.76% for the same quarter last year and 5.37% and 0.78% for the quarter ended September 30, 2012. 

As previously announced the Board of Directors declared a quarterly cash dividend of $0.12 per share for the first quarter of 2013 and accelerated its payment into the fourth quarter of 2012. Paid on December 24, 2012, this represents the 73rd consecutive quarter in which the Company has declared a cash dividend. 

Net interest income increased by $77,000, or 0.1%, to $66.6 million for the quarter ended December 31, 2012, from $66.5 million for the quarter ended December 31, 2011, as a $5.2 million decrease in interest paid on deposit accounts was partially offset by a $3.2 million decrease in interest income on loans receivable and a $1.9 million decrease in interest income from investment securities. These changes from the previous year were primarily due to decreases in market interest rates and continued competitive pricing pressure.

The provision for loan losses decreased by $2.3 million, or 22.2%, to $8.2 million for the quarter ended December 31, 2012, from $10.5 million for the quarter ended December 31, 2011.  As of December 31, 2012, the allowance for loan losses was $73.2 million, or 1.28% of total loans, compared to $71.1 million, or 1.28% of total loans, as of December 31, 2011.  The decrease in the provision for loan losses is partially attributable to a decrease in loans that are 90 days or more delinquent to $68.3 million as of December 31, 2012, from $95.8 million as of December 31, 2011 and $80.4 million as of September 30, 2012.  Additionally, net charge-offs for the quarter ended December 31, 2012, decreased by $6.5 million, or 51.2%, to $6.1 million compared to $12.6 million in the same quarter last year.

Noninterest income increased by $1.1 million, or 7.8%, to $15.1 million for the quarter ended December 31, 2012, from $14.0 million for the quarter ended December 30, 2011, due primarily to an increase in mortgage banking income of $1.9 million, as an increased number of residential mortgage loans were sold at favorable pricing levels.

Noninterest expense increased by $2.8 million, or 5.7%, to $51.2 million for the quarter ended December 31, 2012, from $48.4 million for the quarter ended December 30, 2011, due primarily to an increase in compensation and employee benefits of $2.9 million, or 11.3%.  This increase is the result of the addition of 92 full-time equivalent employees, primarily in our compliance and lending areas and increased benefit costs. Additionally, real estate owned expense increased by $799,000.  Partially offsetting these increases was a decrease in marketing expense of $3.0 million, which was due to the timing of marketing campaigns.

Net income for the year ended December 31, 2012 of $63.6 million represents a decrease of $591,000, or 0.9%, compared to net income of $64.2 million for the year ended December 31, 2011.  Even though net income decreased slightly from the previous year, diluted earnings per share increased to $0.68 from $0.64, as there were 5,974,113 fewer diluted average shares outstanding in 2012.  The annualized returns on average shareholders' equity and average assets were 5.48% and 0.79%, respectively, for the year ended December 31, 2012 compared to 5.24% and 0.80%, respectively, in the prior year.    

In making this announcement, William J. Wagner, President and CEO, noted, "2012 was a challenging but productive year. During the year, we further enhanced our compliance management system, restructured our Credit Department to strengthen our commercial lending process and exited some of our larger problem loans. In addition, we were able to deploy $230 million of interest-earning cash by increasing investments securities by approximately $100 million and growing our loan portfolio by $150 million. This use of cash, along with continued growth in checking balances enabled us to maintain our net interest margin at 3.65% throughout the year. Credit quality continued to improve and we were able to decrease our provision for loan losses by nearly $8 million from the prior year. Non-performing loans are now at their lowest level in four years and net charge-offs were down approximately 40% from the previous year. Finally, we continued to manage our excess capital position during the quarter by repurchasing more than 4.2 million of our common shares at an average price of $11.81 per share."

Headquartered in Warren, Pennsylvania, Northwest Bancshares, Inc. is the holding company of Northwest Savings Bank.  Founded in 1896, Northwest Savings Bank is a full-service financial institution offering a complete line of business and personal banking products as well as benefits and wealth management services. Northwest operates 165 community banking offices in Pennsylvania, New York, Ohio and Maryland and 52 consumer finance offices in Pennsylvania through its subsidiary, Northwest Consumer Discount Company.  Northwest Bancshares, Inc.'s common stock is listed on the NASDAQ Global Select Market. Additional information regarding Northwest Bancshares, Inc. can be accessed on-line at www.northwestsavingsbank.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 that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real-estate and business loans and non-performing loans.  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

(Dollars in thousands, except per share amounts)

December 31,

Assets

2012

2011

Cash and cash equivalents

$                      88,277

94,276

Interest-earning deposits in other financial institutions

362,794

593,388

Federal funds sold and other short-term investments

633

633

Marketable securities available-for-sale (amortized cost of $1,053,122 and $885,408)

1,079,074

908,349

Marketable securities held-to-maturity (fair value of $161,969 and $239,412)

155,081

231,389

Total cash, interest-earning deposits and marketable securities

1,685,859

1,828,035

Residential mortgage loans held for sale

15,441

967

Residential mortgage loans

2,400,208

2,396,399

Home equity loans 

1,076,637

1,084,786

Other consumer loans

235,367

245,689

Commercial real estate loans

1,585,833

1,435,767

Commercial loans

388,994

387,911

Total loans receivable

5,702,480

5,551,519

Allowance for loan losses

(73,219)

(71,138)

Loans receivable, net

5,629,261

5,480,381

Federal Home Loan Bank stock, at cost

46,834

48,935

Accrued interest receivable

23,313

24,599

Real estate owned, net

26,165

26,887

Premises and Equipment, net

138,824

132,152

Bank owned life insurance

137,044

133,524

Goodwill and other intangible assets

178,530

174,005

Other assets

76,770

109,187

Total assets

$              7,942,600

7,957,705

Liabilities and Shareholders' equity

Liabilities

Noninterest-bearing demand deposits

$                  755,429

658,560

Interest-bearing demand deposits

851,771

800,676

Savings deposits

2,271,311

2,036,272

Time deposits

1,886,089

2,284,817

Total deposits

5,764,600

5,780,325

Borrowed funds

860,047

827,925

Advances by borrowers for taxes and insurance

23,325

23,571

Accrued interest payable

888

1,104

Other liabilities

62,177

66,782

Junior subordinated debentures

103,094

103,094

Total liabilities

6,814,131

6,802,801

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, 93,652,960 shares

and 97,493,046 shares issued and outstanding, respectively

937

975

Paid-in-capital

613,249

659,523

Retained earnings

550,296

543,598

Unallocated common stock of Employee Stock Ownership Plan

(24,525)

(25,966)

Accumulated other comprehensive loss

(11,488)

(23,226)

Total shareholders' equity

1,128,469

1,154,904

Total liabilities and shareholders' equity

$              7,942,600

7,957,705

Equity to assets

14.21%

14.51%

Tangible common equity to assets

12.23%

12.60%

Book value per share

$                      12.05

$                         11.85

Tangible book value per share

$                      10.14

$                         10.06

Closing market price per share

$                      12.14

$                         12.44

Full time equivalent employees

2,042

1,950

Number of banking offices

165

168

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

Quarter ended

December 31,

September 30,

2012

2011

2012

Interest income:

Loans receivable

$                    76,701

79,930

77,109

Mortgage-backed securities

3,697

5,077

3,941

Taxable investment securities

743

776

577

Tax-free investment securities

2,132

2,600

2,223

Interest-earning deposits

382

423

364

Total interest income

83,655

88,806

84,214

Interest expense:

Deposits

9,042

14,227

10,207

Borrowed funds

7,998

8,041

8,013

Total interest expense

17,040

22,268

18,220

Net interest income

66,615

66,538

65,994

Provision for loan losses

8,173

10,502

6,915

Net interest income after provision

for loan losses

58,442

56,036

59,079

Noninterest income:

Impairment losses on securities

-

(1,504)

(340)

Noncredit related losses on securities not expected

to be sold (recognized in other comprehensive income)

-

1,074

247

Net impairment losses

-

(430)

(93)

Gain/ (loss) on sale of investments, net

394

157

260

Service charges and fees

8,587

8,630

8,772

Trust and other financial services income

2,288

1,967

2,122

Insurance commission income

1,463

1,582

1,480

Loss on real estate owned, net

(2,020)

(466)

(1,187)

Income from bank owned life insurance

1,589

1,199

1,148

Mortgage banking income

1,874

(29)

1,484

Other operating income

964

1,428

949

Total noninterest income

15,139

14,038

14,935

Noninterest expense:

Compensation and employee benefits

28,302

25,434

28,171

Premises and occupancy costs

5,680

5,556

5,498

Office operations

3,419

3,286

3,141

Processing expenses

6,459

5,982

6,340

Marketing expenses

134

3,098

1,830

Federal deposit insurance premiums

1,211

933

1,305

Professional services

1,869

1,441

1,939

Amortization of intangible assets

219

374

219

Real estate owned expense

1,261

462

832

Other expense

2,662

1,870

2,528

Total noninterest expense

51,216

48,436

51,803

Income before income taxes

22,365

21,638

22,211

Income tax expense

6,040

6,463

6,518

Net income

$                    16,325

15,175

15,693

Basic earnings per share

$                        0.18

0.16

0.17

Diluted earnings per share

$                        0.18

0.16

0.17

Annualized return on average equity

5.68%

5.23%

5.37%

Annualized return on average assets

0.82%

0.76%

0.78%

Basic common shares outstanding

92,716,973

93,675,589

94,422,878

Diluted common shares outstanding

92,937,877

93,972,187

94,610,656

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

Year ended 

December 31,

2012

2011

Interest income:

Loans receivable

$                            309,391

320,942

Mortgage-backed securities

16,738

23,450

Taxable investment securities

2,328

2,452

Tax-free investment securities

9,119

11,514

Interest-earning deposits

1,599

1,712

Total interest income

339,175

360,070

Interest expense:

Deposits

43,377

60,721

Borrowed funds

31,822

32,080

Total interest expense

75,199

92,801

Net interest income

263,976

267,269

Provision for loan losses

26,338

34,170

Net interest income after provision

for loan losses

237,638

233,099

Noninterest income:

Impairment losses on securities

(996)

(2,081)

Noncredit related losses on securities not expected

to be sold (recognized in other comprehensive income)

665

1,144

Net impairment losses

(331)

(937)

Gain on sale of investments, net

654

358

Service charges and fees

34,486

35,378

Trust and other financial services income

8,544

8,125

Insurance commission income

6,264

6,548

Loss on real estate owned, net

(4,859)

(2,426)

Income from bank owned life insurance

4,961

6,019

Mortgage banking income

4,678

858

Other operating income

4,154

4,213

Total noninterest income

58,551

58,136

Noninterest expense:

Compensation and employee benefits

111,727

106,595

Premises and occupancy costs

22,409

23,055

Office operations

13,224

12,850

Processing expenses

25,000

23,332

Marketing expenses

7,829

9,953

Federal deposit insurance premiums

5,554

7,101

Professional services

7,005

5,224

Amortization of intangible assets

1,012

1,819

Real estate owned expense

3,404

1,625

Other expense

9,097

8,673

Total noninterest expense

206,261

200,227

Income before income taxes

89,928

91,008

Income tax expense

26,368

26,857

Net income

$                               63,560

64,151

Basic earnings per share

$                                   0.68

0.64

Diluted earnings per share

$                                   0.68

0.64

Annualized return on average equity

5.48%

5.24%

Annualized return on average assets

0.79%

0.80%

Basic common shares outstanding

93,912,821

99,801,783

Diluted common shares outstanding

94,203,451

100,177,564

Northwest Bancshares, Inc. and Subsidiaries

Asset quality

(Dollars in thousands)

December 31,  2012

December 31, 2011

December 31, 2010

December 31, 2009

Non-accrual loans current:

Residential mortgage loans

$                  797

-

-

-

Home equity loans

635

-

-

-

Other consumer loans

44

-

-

-

Commercial real estate loans

24,960

13,057

7,378

-

Commercial loans

5,424

13,480

23,317

13,141

Total non-accrual loans current

$             31,860

26,537

30,695

13,141

Non-accrual loans delinquent 30 days to 59 days:

Residential mortgage loans

$                       -

-

-

-

Home equity loans

-

-

-

-

Other consumer loans

-

-

-

-

Commercial real estate loans

5,549

3,274

4,039

-

Commercial loans

2,002

90

1,465

-

Total non-accrual loans delinquent 30 days to 59 days

$                7,551

3,364

5,504

-

Non-accrual loans delinquent 60 days to 89 days:

Residential mortgage loans

$                        -

-

-

-

Home equity loans

-

-

-

-

Other consumer loans

-

-

-

-

Commercial real estate loans

2,802

1,560

10,923

1,705

Commercial loans

9,652

3,808

848

-

Total non-accrual loans delinquent 60 days to 89 days

$             12,454

5,368

11,771

1,705

Non-accrual loans delinquent 90 days or more:

Residential mortgage loans

$             24,286

28,221

29,751

29,134

Home equity loans

8,479

9,560

10,263

10,008

Other consumer loans

1,936

2,667

2,565

2,775

Commercial real estate loans

24,550

44,603

44,965

49,594

Commercial loans

9,096

10,785

12,877

18,269

Total non- accrual loans delinquent 90 days or more

$             68,347

95,836

100,421

109,780

Total non-accrual loans

$          120,212

131,105

148,391

124,626

December 31,

December 31,

December 31,

December 31,

2012

2011

2010

2009

Nonperforming loans

$          120,212

131,105

148,391

124,626

Real estate owned, net

26,165

26,887

20,780

20,257

Nonperforming assets

$          146,377

157,992

169,171

144,883

Non-accrual troubled debt restructuring *

$             39,614

29,575

41,740

2,908

Accruing troubled debt restructuring

49,830

39,854

10,865

18,177

Total troubled debt restructuring

$             89,444

69,429

52,605

21,085

Nonperforming loans to total loans

2.11%

2.36%

2.68%

2.35%

Nonperforming assets to total assets

1.84%

1.99%

2.08%

1.81%

Allowance for loan losses to total loans

1.28%

1.28%

1.38%

1.33%

Allowance for loan losses to nonperforming loans

60.91%

54.26%

51.49%

56.49%

* Amounts included in nonperforming loans above.

Northwest Bancshares, Inc. and Subsidiaries

Delinquency

(Dollars in thousands)

Loan delinquency schedule

(Number of loans and dollar amount of loans)

December 31,

December 31,

December 31,

December 31,

2012

*

2011

*

2010

*

2009

*

Loans delinquent 30 days to 59 days:

Residential mortgage loans

430

$      32,921

1.4%

427

$      33,671

1.4%

427

$      35,329

1.5%

343

$      27,913

1.2%

Home equity loans

224

6,534

0.6%

222

7,426

0.7%

230

7,317

0.7%

184

7,014

0.6%

Consumer loans

1,122

5,456

2.3%

903

4,854

2.0%

1,008

5,318

2.1%

923

4,297

1.6%

Commercial real estate loans

87

13,001

0.8%

104

10,680

0.7%

82

16,287

1.2%

85

16,152

1.3%

Commercial loans

41

3,233

0.8%

32

2,027

0.5%

48

6,590

1.5%

48

3,293

0.9%

Total loans delinquent 30 days to 59 days

1,904

$      61,145

1.1%

1,688

58,658

1.1%

1,795

$      70,841

1.3%

1,583

$      58,669

1.1%

Loans delinquent 60 days to 89 days:

Residential mortgage loans

100

$         9,387

0.4%

99

$         8,629

0.4%

106

$         9,848

0.4%

77

$         6,657

0.3%

Home equity loans

65

1,977

0.2%

47

1,953

0.2%

81

3,249

0.3%

52

1,719

0.2%

Consumer loans

448

1,830

0.8%

412

1,787

0.7%

356

1,331

0.5%

348

1,425

0.5%

Commercial real estate loans

33

4,596

0.3%

38

3,122

0.2%

39

14,365

1.1%

35

5,811

0.5%

Commercial loans

17

10,158

2.5%

25

4,958

1.3%

9

1,678

0.4%

26

2,474

0.7%

Total loans delinquent 60 days to 89 days

663

$      27,948

0.5%

621

20,449

0.4%

591

$      30,471

0.6%

538

$      18,086

0.3%

Loans delinquent 90 days or more:

Residential mortgage loans

266

$      24,286

1.0%

273

$      28,221

1.2%

275

$      29,751

1.2%

265

$      29,134

1.2%

Home equity loans

175

8,479

0.8%

177

9,560

0.9%

190

10,263

0.9%

195

10,008

0.9%

Consumer loans

427

1,936

0.8%

456

2,667

1.1%

374

2,565

1.0%

546

2,775

1.0%

Commercial real estate loans

146

24,550

1.6%

131

44,603

3.1%

181

44,965

3.3%

199

49,594

4.0%

Commercial loans

61

9,096

2.2%

66

10,785

2.8%

111

12,877

3.0%

124

18,269

4.9%

Total loans delinquent 90 days or more

1,075

$      68,347

1.2%

1,103

95,836

1.7%

1,131

$   100,421

1.8%

1,329

$   109,780

2.1%

Total loans delinquent

3,642

$   157,440

2.8%

3,412

$   174,943

3.2%

3,517

$   201,733

3.7%

3,450

$   186,535

3.5%

* - Represents delinquency, in dollars, divided by the respective total amount of that type of loan outstanding.  

 

Northwest Bancshares, Inc. and Subsidiaries

Loans by credit quality indicators as of December 31, 2012 

(Dollars in thousands)

Recorded

investment

Special

in loans

Pass

mention

Substandard

 Doubtful 

 Loss 

receivable

Personal Banking:

Residential mortgage loans

$         2,395,809

-

18,743

48

1,049

2,415,649

Home equity loans

1,068,183

-

8,454

-

-

1,076,637

Other consumer loans

234,106

-

1,261

-

-

235,367

Total Personal Banking

3,698,098

-

28,458

48

1,049

3,727,653

Business Banking:

Commercial real estate loans

1,352,118

68,130

163,751

1,834

-

1,585,833

Commercial loans

320,228

13,077

52,742

2,947

-

388,994

Total Business Banking

1,672,346

81,207

216,493

4,781

-

1,974,827

$         5,370,444

81,207

244,951

4,829

1,049

5,702,480

Northwest Bancshares, Inc. and Subsidiaries

Loans by credit quality indicators as of December 31, 2011

(Dollars in thousands)

Recorded

investment

Special

in loans

Pass

mention

Substandard

 Doubtful 

 Loss 

receivable

Personal Banking:

Residential mortgage loans

$         2,373,275

-

22,843

11

1,237

2,397,366

Home equity loans

1,074,512

-

10,274

-

-

1,084,786

Other consumer loans

244,491

-

1,198

-

-

245,689

Total Personal Banking

3,692,278

-

34,315

11

1,237

3,727,841

Business Banking:

Commercial real estate loans

1,211,583

75,981

144,947

3,256

-

1,435,767

Commercial loans

298,597

23,887

62,753

2,674

-

387,911

Total Business Banking

1,510,180

99,868

207,700

5,930

-

1,823,678

$         5,202,458

99,868

242,015

5,941

1,237

5,551,519

 

Northwest Bancshares, Inc. and Subsidiaries

Allowance for loan losses

(Dollars in thousands)

Quarter ended

Year ended

December 31, 

December 31, 

2012

2011

2012

2011

Allowance for loan losses 

Beginning balance

$             71,177

73,208

71,138

76,412

Provision

8,173

10,502

26,338

34,170

Charge-offs residential mortgage

(836)

(1,530)

(4,295)

(4,198)

Charge-offs home equity

(1,317)

(998)

(4,066)

(4,734)

Charge-offs other consumer

(1,592)

(1,467)

(5,919)

(5,283)

Charge-offs commercial real estate

(4,102)

(4,288)

(9,919)

(12,508)

Charge-offs commercial

(1,245)

(4,935)

(6,254)

(15,641)

Recoveries

2,961

646

6,196

2,920

Ending balance

$             73,219

71,138

73,219

71,138

Net charge-offs to average loans, annualized

0.43%

0.91%

0.43%

0.72%

 

Northwest Bancshares, Inc. and Subsidiaries

Municipal securities portfolio

(Dollars in thousands)

December 31, 2012

As a %

Market

 Book 

Unrealized

of book

 value 

 value 

gain

value

Municipal securities by state:

Pennsylvania

School districts

$                 96,271

91,951

4,320

46.7%

General obligations

37,205

35,418

1,787

18.0%

Revenue bonds

3,006

2,948

58

1.5%

Total Pennsylvania

136,482

130,317

6,165

66.2%

New York

26,831

25,954

877

13.2%

Ohio

6,390

5,973

417

3.0%

All other states

37,683

34,659

3,024

17.6%

$              207,386

196,903

10,483

December 31, 2011

As a %

Market

 Book 

Unrealized

of book

 value 

 value 

gain

value

Municipal securities by state:

Pennsylvania