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NWBI 10Q Quarterly Report

Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a14-13939_1ex31d1.htm
EX-31.2 a14-13939_1ex31d2.htm
EX-32.1 a14-13939_1ex32d1.htm

Northwest Bancshares Earnings 2014-06-30

Balance SheetIncome StatementCash Flow

10-Q 1 a14-13939_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2014

 

or

 

o         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from               to               

 

Commission File Number 001-34582

 

NORTHWEST BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

27-0950358

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

100 Liberty Street, Warren, Pennsylvania

 

16365

(Address of principal executive offices)

 

(Zip Code)

 

(814) 726-2140

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large Accelerated Filer x

 

Accelerated Filer o

 

 

 

Non-Accelerated Filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a Shell Company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Common Stock ($0.01 par value) 94,964,483 shares outstanding as of July 31, 2014

 

 

 



Table of Contents

 

NORTHWEST BANCSHARES, INC.

INDEX

 

 

 

PAGE

 

 

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

Consolidated Statements of Financial Condition as of June 30, 2014 and December 31, 2013

1

 

 

 

 

Consolidated Statements of Income for the quarter ended and six months ended June, 2014 and 2013

2

 

 

 

 

Consolidated Statements of Comprehensive Income for the quarter ended and six months ended June 30, 2014 and 2013

3

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the quarter ended June 30, 2014 and 2013

4

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2014 and 2013

5

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013

6

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

48

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

64

 

 

 

Item 4.

Controls and Procedures

65

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

66

 

 

 

Item 1A.

Risk Factors

66

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

 

 

 

Item 3.

Defaults Upon Senior Securities

67

 

 

 

Item 4.

Mine Safety Disclosures

67

 

 

 

Item 5.

Other information

67

 

 

 

Item 6.

Exhibits

67

 

 

 

 

Signature

68

 

 

 

 

Certifications

 

 



Table of Contents

 

ITEM 1. FINANCIAL STATEMENTS

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share data)

 

 

 

(Unaudited)

 

 

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

97,467

 

98,122

 

Interest-earning deposits in other financial institutions

 

287,867

 

293,149

 

Federal funds sold and other short-term investments

 

634

 

634

 

Marketable securities available-for-sale (amortized cost of $972,258 and $1,022,078)

 

977,786

 

1,016,767

 

Marketable securities held-to-maturity (fair value of $117,670 and $124,061)

 

114,154

 

121,366

 

Total cash and investments

 

1,477,908

 

1,530,038

 

 

 

 

 

 

 

Personal Banking:

 

 

 

 

 

Residential mortgage loans held for sale

 

 

221

 

Residential mortgage loans

 

2,485,740

 

2,482,783

 

Home equity loans

 

1,066,943

 

1,083,939

 

Other consumer loans

 

231,974

 

228,348

 

Total Personal Banking

 

3,784,657

 

3,795,291

 

Business Banking:

 

 

 

 

 

Commercial real estate loans

 

1,694,882

 

1,608,399

 

Commercial loans

 

406,195

 

402,601

 

Total Business Banking

 

2,101,077

 

2,011,000

 

Total loans

 

5,885,734

 

5,806,291

 

Allowance for loan losses

 

(71,442

)

(71,348

)

Total loans, net

 

5,814,292

 

5,734,943

 

 

 

 

 

 

 

Federal Home Loan Bank stock, at cost

 

43,986

 

43,715

 

Accrued interest receivable

 

21,756

 

21,821

 

Real estate owned, net

 

14,915

 

18,203

 

Premises and equipment, net

 

145,344

 

146,139

 

Bank owned life insurance

 

142,223

 

140,172

 

Goodwill

 

175,988

 

174,463

 

Other intangible assets

 

3,694

 

2,319

 

Other assets

 

62,210

 

69,663

 

Total assets

 

$

7,902,316

 

7,881,476

 

 

 

 

 

 

 

Liabilities and Shareholders’ equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Noninterest-bearing checking deposits

 

$

872,661

 

789,135

 

Interest-bearing checking deposits

 

901,486

 

852,809

 

Money market deposit accounts

 

1,183,228

 

1,167,954

 

Savings deposits

 

1,236,307

 

1,191,584

 

Time deposits

 

1,580,240

 

1,667,397

 

Total deposits

 

5,773,922

 

5,668,879

 

 

 

 

 

 

 

Borrowed funds

 

869,335

 

881,645

 

Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities

 

103,094

 

103,094

 

Advances by borrowers for taxes and insurance

 

37,677

 

26,669

 

Accrued interest payable

 

816

 

888

 

Other liabilities

 

45,000

 

43,499

 

Total liabilities

 

6,829,844

 

6,724,674

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.01 par value: 50,000,000 authorized, no shares issued

 

 

 

Common stock, $0.01 par value: 500,000,000 shares authorized, 94,949,695 and 94,243,713 shares issued, respectively

 

949

 

943

 

Paid-in capital

 

626,213

 

619,678

 

Retained earnings

 

472,726

 

571,164

 

Unallocated common stock of employee stock ownership plan

 

(22,200

)

(23,083

)

Accumulated other comprehensive loss

 

(5,216

)

(11,900

)

Total shareholders’ equity

 

1,072,472

 

1,156,802

 

Total liabilities and shareholders’ equity

 

$

7,902,316

 

7,881,476

 

 

See accompanying notes to unaudited consolidated financial statements

 

1



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share data)

 

 

 

Quarter ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans receivable

 

$

70,797

 

71,987

 

140,170

 

144,960

 

Mortgage-backed securities

 

2,666

 

3,308

 

5,459

 

6,749

 

Taxable investment securities

 

1,014

 

1,034

 

2,094

 

1,939

 

Tax-free investment securities

 

1,598

 

2,094

 

3,253

 

4,157

 

Interest-earning deposits

 

286

 

340

 

486

 

591

 

Total interest income

 

76,361

 

78,763

 

151,462

 

158,396

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

6,421

 

7,404

 

12,911

 

15,218

 

Borrowed funds

 

7,793

 

8,032

 

15,507

 

15,863

 

Total interest expense

 

14,214

 

15,436

 

28,418

 

31,081

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

62,147

 

63,327

 

123,044

 

127,315

 

Provision for loan losses

 

8,285

 

5,405

 

15,770

 

12,563

 

Net interest income after provision for loan losses

 

53,862

 

57,922

 

107,274

 

114,752

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Gain on sale of investments

 

349

 

19

 

3,697

 

120

 

Service charges and fees

 

9,042

 

9,037

 

17,450

 

17,728

 

Trust and other financial services income

 

3,055

 

2,263

 

6,102

 

4,467

 

Insurance commission income

 

2,237

 

2,190

 

4,801

 

4,485

 

Loss on real estate owned, net

 

(562

)

(2,285

)

(697

)

(2,415

)

Income from bank owned life insurance

 

1,050

 

1,088

 

2,051

 

2,173

 

Mortgage banking income

 

265

 

236

 

514

 

1,192

 

Other operating income

 

1,688

 

865

 

2,863

 

2,041

 

Total noninterest income

 

17,124

 

13,413

 

36,781

 

29,791

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

28,543

 

28,156

 

56,515

 

56,086

 

Premises and occupancy costs

 

5,740

 

5,744

 

12,297

 

11,897

 

Office operations

 

3,868

 

3,866

 

7,625

 

7,134

 

Processing expenses

 

6,639

 

7,390

 

13,228

 

13,243

 

Marketing expenses

 

2,931

 

2,093

 

4,568

 

3,993

 

Federal deposit insurance premiums

 

1,338

 

1,424

 

2,635

 

2,862

 

Professional services

 

1,775

 

1,199

 

3,837

 

2,892

 

Amortization of other intangible assets

 

331

 

349

 

662

 

697

 

Real estate owned expense

 

459

 

600

 

1,098

 

1,199

 

Other expenses

 

2,182

 

1,985

 

4,504

 

4,274

 

Total noninterest expense

 

53,806

 

52,806

 

106,969

 

104,277

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

17,180

 

18,529

 

37,086

 

40,266

 

 

 

 

 

 

 

 

 

 

 

Federal and state income taxes

 

4,465

 

5,051

 

9,731

 

11,490

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,715

 

13,478

 

27,355

 

28,776

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.14

 

0.15

 

0.30

 

0.32

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.14

 

0.15

 

0.30

 

0.32

 

 

See accompanying notes to unaudited consolidated financial statements

 

2



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)

 

 

 

Quarter ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net Income

 

$

12,715

 

13,478

 

27,355

 

28,776

 

Other comprehensive income net of tax:

 

 

 

 

 

 

 

 

 

Net unrealized holding gains/ (losses) on marketable securities:

 

 

 

 

 

 

 

 

 

Unrealized holding gains/ (losses) net of tax of $(1,997), $7,276, $(5,576) and $6,841, respectively

 

3,123

 

(11,399

)

8,719

 

(10,729

)

Reclassification adjustment for gains included in net income, net of tax of $130, $44, $1,348 and $87 respectively

 

(204

)

(68

)

(2,108

)

(134

)

Net unrealized holding gains/ (losses) on marketable securities

 

2,919

 

(11,467

)

6,611

 

(10,863

)

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swaps, net of tax of $(53), $(874), $(188) and $(1,241), respectively

 

98

 

1,626

 

349

 

2,306

 

 

 

 

 

 

 

 

 

 

 

Defined benefit plan:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for prior period service costs included in net income, net of tax of $74, $(123), $149 and $(246), respectively

 

(138

)

229

 

(276

)

458

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/ (loss)

 

2,879

 

(9,612

)

6,684

 

(8,099

)

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

15,594

 

3,866

 

34,039

 

20,677

 

 

See accompanying notes to unaudited consolidated financial statements

 

3



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(dollars in thousands, expect share data)

 

Quarter ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at March 31, 2013

 

93,802,335

 

$

938

 

615,160

 

565,594

 

(9,975

)

(24,137

)

1,147,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

13,478

 

 

 

13,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax of $6,350

 

 

 

 

 

(9,612

)

 

(9,612

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

13,478

 

(9,612

)

 

3,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

174,992

 

2

 

1,681

 

 

 

 

1,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

269,320

 

3

 

1,134

 

 

 

394

 

1,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

(368,800

)

(4

)

(4,455

)

 

 

 

(4,459

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.24 per share)

 

 

 

 

(21,968

)

 

 

(21,968

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2013

 

93,877,847

 

$

939

 

613,520

 

557,104

 

(19,587

)

(23,743

)

1,128,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at March 31, 2014

 

94,464,430

 

$

945

 

622,758

 

564,580

 

(8,095

)

(22,632

)

1,157,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

12,715

 

 

 

12,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(1,846)

 

 

 

 

 

2,879

 

 

2,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

12,715

 

2,879

 

 

15,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

212,635

 

2

 

2,167

 

 

 

 

2,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

272,630

 

2

 

1,288

 

 

 

432

 

1,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($1.13 per share)

 

 

 

 

(104,569

)

 

 

(104,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2014

 

94,949,695

 

$

949

 

626,213

 

472,726

 

(5,216

)

(22,200

)

1,072,472

 

 

See accompanying notes to unaudited consolidated financial statements

 

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NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(dollars in thousands, expect share data)

 

Six months ended June 30, 2013

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at December 31, 2012

 

93,652,960

 

$

937

 

613,249

 

550,296

 

(11,488

)

(24,525

)

1,128,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

28,776

 

 

 

28,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax of $5,441

 

 

 

 

 

(8,099

)

 

(8,099

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

28,776

 

(8,099

)

 

20,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

324,367

 

3

 

2,898

 

 

 

 

2,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

269,320

 

3

 

1,828

 

 

 

782

 

2,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

(368,800

)

(4

)

(4,455

)

 

 

 

(4,459

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.24 per share)

 

 

 

 

(21,968

)

 

 

(21,968

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2013

 

93,877,847

 

$

939

 

613,520

 

557,104

 

(19,587

)

(23,743

)

1,128,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at December 31, 2013

 

94,243,713

 

$

943

 

619,678

 

571,164

 

(11,900

)

(23,083

)

1,156,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

27,355

 

 

 

27,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(4,267)

 

 

 

 

 

6,684

 

 

6,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

27,355

 

6,684

 

 

34,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

433,352

 

4

 

4,459

 

 

 

 

4,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

272,630

 

2

 

2,076

 

 

 

883

 

2,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($1.36 per share)

 

 

 

 

(125,793

)

 

 

(125,793

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2014

 

94,949,695

 

$

949

 

626,213

 

472,726

 

(5,216

)

(22,200

)

1,072,472

 

 

See accompanying notes to unaudited consolidated financial statements

 

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NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net Income

 

$

27,355

 

28,776

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision for loan losses

 

15,770

 

12,563

 

Net gain on sale of assets

 

(3,874

)

(584

)

Net depreciation, amortization and accretion

 

4,937

 

4,708

 

Decrease in other assets

 

4,591

 

11,200

 

Decrease in other liabilities

 

(3,531

)

(21

)

Net amortization on marketable securities

 

210

 

59

 

Noncash write-down of real estate owned

 

1,381

 

2,971

 

Origination of loans held for sale

 

(758

)

(35,991

)

Proceeds from sale of loans held for sale

 

1,023

 

51,673

 

Noncash compensation expense related to stock benefit plans

 

2,961

 

2,613

 

Net cash provided by operating activities

 

50,065

 

77,967

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Purchase of marketable securities available-for-sale

 

(22,805

)

(227,595

)

Proceeds from maturities and principal reductions of marketable securities available-for-sale

 

70,071

 

143,939

 

Proceeds from maturities and principal reductions of marketable securities held-to-maturity

 

7,205

 

21,690

 

Proceeds from sale of marketable securities available-for-sale

 

6,048

 

 

Loan originations

 

(939,594

)

(984,068

)

Proceeds from loan maturities and principal reductions

 

842,751

 

962,424

 

Purchase of Federal Home Loan Bank stock

 

(271

)

(1,406

)

Proceeds from sale of real estate owned

 

5,704

 

8,969

 

Sale of real estate owned for investment, net

 

304

 

228

 

Purchase of premises and equipment

 

(5,034

)

(7,895

)

Acquistions, net of cash received

 

(2,792

)

 

Net cash used in investing activities

 

(38,413

)

(83,714

)

 

6



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NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

(in thousands)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

FINANCING ACTIVITIES:

 

 

 

 

 

Increase in deposits, net

 

$

105,043

 

18,492

 

Proceeds from long-term borrowings

 

 

30,000

 

Repayments of long-term borrowings

 

(27

)

(34

)

Net decrease in short-term borrowings

 

(12,283

)

(32,669

)

Increase in advances by borrowers for taxes and insurance

 

11,008

 

9,935

 

Cash dividends paid

 

(125,793

)

(21,968

)

Purchase of common stock for retirement

 

 

(4,459

)

Proceeds from stock options exercised

 

4,463

 

2,901

 

Net cash (used in)/ provided by financing activities

 

(17,589

)

2,198

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

$

(5,937

)

(3,549

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$

391,905

 

451,704

 

Net decrease in cash and cash equivalents

 

(5,937

)

(3,549

)

Cash and cash equivalents at end of period

 

$

385,968

 

448,155

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

Cash and due from banks

 

$

97,467

 

87,524

 

Interest-earning deposits in other financial institutions

 

287,867

 

359,997

 

Federal funds sold and other short-term investments

 

634

 

634

 

Total cash and cash equivalents

 

$

385,968

 

448,155

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest on deposits and borrowings (including interest credited to deposit accounts of $11,608 and $13,707, respectively)

 

$

28,490

 

30,926

 

Income taxes

 

$

14,872

 

15,960

 

 

 

 

 

 

 

Non-cash activities:

 

 

 

 

 

Loans foreclosures and repossessions

 

$

3,707

 

7,019

 

Sale of real estate owned financed by the Company

 

$

330

 

296

 

 

See accompanying notes to unaudited consolidated financial statements

 

7



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Unaudited

 

(1)                                 Basis of Presentation and Informational Disclosures

 

Northwest Bancshares, Inc. (the “Company”) or (“NWBI”), a Maryland corporation headquartered in Warren, Pennsylvania, is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System.  The Company was incorporated to be the successor to Northwest Bancorp, Inc. upon the completion of the mutual-to-stock conversion of Northwest Bancorp, MHC in December 2009.  The primary activity of the Company is the ownership of all of the issued and outstanding common stock of Northwest Savings Bank, a Pennsylvania-chartered savings bank (“Northwest”).  Northwest is regulated by the FDIC and the Pennsylvania Department of Banking.  At June 30, 2014, Northwest operated 165 community-banking offices throughout Pennsylvania, western New York, eastern Ohio and Maryland.

 

The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiary, Northwest, and Northwest’s subsidiaries Northwest Settlement Agency, LLC, Northwest Consumer Discount Company, Northwest Financial Services, Inc., Northwest Advisors, Inc., Northwest Capital Group, Inc., Allegheny Services, Inc., Great Northwest Corporation, Boetger & Associates, Inc., The Bert Company, Veracity Benefits Designs and Evans Capital Management, Inc. The unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information or footnotes required for complete annual financial statements.  In the opinion of management, all adjustments necessary for the fair presentation of the Company’s financial position and results of operations have been included.  The consolidated statements have been prepared using the accounting policies described in the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 updated, as required, for any new pronouncements or changes.

 

The results of operations for the quarter and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014, or any other period.

 

Stock-Based Compensation

 

On May 21, 2014, we awarded employees 534,950 stock options and directors 57,600 stock options with an exercise price of $13.15 and grant date fair value of $1.45 per stock option.  On May 21, 2014, we also awarded employees 251,030 restricted common shares and directors 21,600 restricted common shares with a grant date fair value of $13.22.  Awarded stock options and common shares vest over a ten-year period with the first vesting occurring on the grant date.  Stock-based compensation expense of $1.8 million and $1.5 million for the quarter ended June 30, 2014 and 2013, respectively, and $3.0 million and $2.6 million for the six months ended June 30, 2014 and 2013, respectively, was recognized in compensation expense relating to our stock benefit plans.  At June 30, 2014 there was compensation expense of $5.5 million to be recognized for awarded but unvested stock options and $17.2 million for unvested common shares.

 

Income Taxes- Uncertain Tax Positions

 

Accounting standards prescribe a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.  A tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits.  The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information.  As of June 30, 2014 we had no liability for unrecognized tax benefits.

 

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Table of Contents

 

We recognize interest accrued related to: (1) unrecognized tax benefits in federal and state income taxes and (2) refund claims in other operating income.  We recognize penalties (if any) in federal and state income taxes.  There is no amount accrued for the payment of interest or penalties at June 30, 2014.  We are subject to audit by the Internal Revenue Service and any state in which we conduct business for the tax periods ended December 31, 2012, 2011 and 2010.

 

Recent Accounting Pronouncements

 

In January 2014, the FASB issued ASU No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” This guidance permits reporting entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. The proportional amortization method permits the amortization of the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. This guidance is effective retrospectively for fiscal years and interim periods within those years, beginning after December 15, 2014, and early adoption is permitted. We do not expect that this standard will have a material impact on our results of operations or financial position.

 

In January 2014, the FASB issued ASU No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure”. This guidance clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure. Interim and annual disclosure is required of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. This guidance is effective using either the modified retrospective transition method or a prospective transition method for fiscal years and interim periods within those years, beginning after December 15, 2014, and early adoption is permitted. We do not expect that this standard will have a material impact on our results of operations or financial position.

 

In May 2014 the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This guidance supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of this guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and provides five steps to be analyzed to accomplish the core principle. This guidance is effective retrospectively for annual reporting periods beginning after December 15, 2016, including interim periods within those years and early adoption is not permitted.  We are currently evaluating the impact this standard will have on our results of operations and financial position.

 

In June 2014 the FASB issued ASU 2014-11, “Transfers and Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures”. This guidance requires repurchase-to-maturity transactions to be recorded and accounted for as secured borrowings and also requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement.  Additionally, an entity is required to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements, and provide increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The guidance related to repurchase-to-maturity and repurchase financing

 

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Table of Contents

 

transactions, and disclosures for certain transactions accounted for as a sale is effective for annual reporting periods beginning after December 15, 2014, including interim periods within those years. The disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings are required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015.  We do not expect that this standard will have a material impact on our results of operations or financial position.

 

In June 2014 the FASB issued ASU 2014-12, “Compensation—Stock Compensation”. This guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Specifically, if the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. Further, the total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. This guidance is effective for annual periods beginning after December 15, 2015, including interim periods within those years and early adoption is permitted.  We do not expect that this standard will have a material impact on our results of operations or financial position.

 

(2)                                 Business Segments

 

We operate in two reportable business segments: Community Banking and Consumer Finance.  The Community Banking segment provides services traditionally offered by full-service community banks, including business and personal deposit accounts and business and personal loans, as well as insurance, brokerage and investment management and trust services.  The Consumer Finance segment, which is comprised of Northwest Consumer Discount Company, a subsidiary of Northwest, operates 50 offices in Pennsylvania and offers personal installment loans for a variety of consumer and real estate products.  This activity is funded primarily through an intercompany borrowing relationship with Allegheny Services, Inc., a subsidiary of Northwest.  Net income is the primary measure used by management to measure segment performance.  The following tables provide financial information for these reportable segments.  The “All Other” column represents the parent company and elimination entries necessary to reconcile to the consolidated amounts presented in the financial statements.

 

10



Table of Contents

 

At or for the quarter ended:

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2014 ($ in 000’s)

 

Banking

 

Finance

 

All other (1)

 

Consolidated

 

External interest income

 

$

71,435

 

4,706

 

220

 

76,361

 

Intersegment interest income

 

591

 

 

(591

)

 

Interest expense

 

13,148

 

591

 

475

 

14,214

 

Provision for loan losses

 

7,500

 

785

 

 

8,285

 

Noninterest income

 

16,629

 

482

 

13

 

17,124

 

Noninterest expense

 

50,540

 

2,948

 

318

 

53,806

 

Income tax expense (benefit)

 

4,519

 

358

 

(412

)

4,465

 

Net income

 

12,948

 

506

 

(739

)

12,715

 

Total assets

 

$

7,773,965

 

105,909

 

22,442

 

7,902,316

 

 

 

 

 

 

 

 

 

 

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2013 ($ in 000’s)

 

Banking

 

Finance

 

All other (1)

 

Consolidated

 

External interest income

 

$

73,236

 

5,218

 

309

 

78,763

 

Intersegment interest income

 

676

 

 

(676

)

 

Interest expense

 

14,162

 

676

 

598

 

15,436

 

Provision for loan losses

 

4,700

 

705

 

 

5,405

 

Noninterest income

 

12,986

 

414

 

13

 

13,413

 

Noninterest expense

 

49,447

 

3,144

 

215

 

52,806

 

Income tax expense (benefit)

 

5,024

 

459

 

(432

)

5,051

 

Net income

 

13,565

 

648

 

(735

)

13,478

 

Total assets

 

$

7,811,048

 

111,102

 

41,664

 

7,963,814

 

 


(1)   Eliminations consist of intercompany loans, interest income and interest expense.

 

At or for the six months ended:

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2014 ($ in 000’s)

 

Banking

 

Finance

 

All other (1)

 

Consolidated

 

External interest income

 

$

141,554

 

9,365

 

543

 

151,462

 

Intersegment interest income

 

1,197

 

 

(1,197

)

 

Interest expense

 

26,317

 

1,197

 

904

 

28,418

 

Provision for loan losses

 

14,350

 

1,420

 

 

15,770

 

Noninterest income

 

33,662

 

770

 

2,349

 

36,781

 

Noninterest expense

 

100,402

 

5,869

 

698

 

106,969

 

Income tax expense (benefit)

 

9,054

 

684

 

(7

)

9,731

 

Net income

 

26,290

 

965

 

100

 

27,355

 

Total assets