XNAS:NWBI Northwest Bancshares Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

XNAS:NWBI Fair Value Estimate
Premium
XNAS:NWBI Consider Buying
Premium
XNAS:NWBI Consider Selling
Premium
XNAS:NWBI Fair Value Uncertainty
Premium
XNAS:NWBI Economic Moat
Premium
XNAS:NWBI Stewardship
Premium
 

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, 2012

 

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) 97,895,728 shares outstanding as of July 31, 2012

 

 

 



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, 2012 and December 31, 2011

1

 

 

 

 

Consolidated Statements of Income for the three months ended and six months ended June 30, 2012 and 2011

2

 

 

 

 

Consolidated Statements of Comprehensive Income for the three months ended and six months ended June 30, 2012 and 2011

3

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the three months ended June 30, 2012 and 2011

4

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2012 and 2011

5

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011

7

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

8

 

 

 

Item 2.

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

42

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

62

 

 

 

Item 4.

Controls and Procedures

63

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

63

 

 

 

Item 1A.

Risk Factors

63

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

 

 

 

Item 3.

Defaults Upon Senior Securities

64

 

 

 

Item 4.

Mine Safety Disclosures

64

 

 

 

Item 5.

Other information

64

 

 

 

Item 6.

Exhibits

64

 

 

 

 

Signature

66

 

 

 

 

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,

 

 

 

2012

 

2011

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

82,295

 

94,276

 

Interest-earning deposits in other financial institutions

 

638,940

 

593,388

 

Federal funds sold and other short-term investments

 

633

 

633

 

Marketable securities available-for-sale (amortized cost of $874,048 and $885,408)

 

900,643

 

908,349

 

Marketable securities held-to-maturity (fair value of $187,043 and $239,412)

 

180,134

 

231,389

 

Total cash and investments

 

1,802,645

 

1,828,035

 

 

 

 

 

 

 

Personal Banking:

 

 

 

 

 

Residential mortgage loans held for sale

 

12,800

 

967

 

Residential mortgage loans

 

2,418,756

 

2,396,399

 

Home equity loans

 

1,102,936

 

1,084,786

 

Other consumer loans

 

240,992

 

245,689

 

Total Personal Banking

 

3,775,484

 

3,727,841

 

Business Banking:

 

 

 

 

 

Commercial real estate loans

 

1,494,781

 

1,435,767

 

Commercial loans

 

399,470

 

387,911

 

Total Business Banking

 

1,894,251

 

1,823,678

 

Total loans

 

5,669,735

 

5,551,519

 

Allowance for loan losses

 

(70,110

)

(71,138

)

Total loans, net

 

5,599,625

 

5,480,381

 

 

 

 

 

 

 

Federal Home Loan Bank stock, at cost

 

46,834

 

48,935

 

Accrued interest receivable

 

23,871

 

24,599

 

Real estate owned, net

 

30,470

 

26,887

 

Premises and equipment, net

 

135,004

 

132,152

 

Bank owned life insurance

 

135,722

 

133,524

 

Goodwill

 

171,882

 

171,882

 

Other intangible assets

 

1,549

 

2,123

 

Other assets

 

90,394

 

109,187

 

Total assets

 

$

8,037,996

 

7,957,705

 

 

 

 

 

 

 

Liabilities and Shareholders’ equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

732,200

 

658,560

 

Interest-bearing demand deposits

 

845,209

 

800,676

 

Savings deposits

 

2,195,095

 

2,036,272

 

Time deposits

 

2,033,366

 

2,284,817

 

Total deposits

 

5,805,870

 

5,780,325

 

 

 

 

 

 

 

Borrowed funds

 

853,114

 

827,925

 

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

 

32,324

 

23,571

 

Accrued interest payable

 

1,242

 

1,104

 

Other liabilities

 

73,210

 

66,782

 

Total liabilities

 

6,868,854

 

6,802,801

 

 

 

 

 

 

 

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, 97,880,874 and 97,493,046 shares issued and outstanding, respectively

 

979

 

975

 

Paid-in capital

 

662,183

 

659,523

 

Retained earnings

 

552,278

 

543,598

 

Unallocated common stock of employee stock ownership plan

 

(25,192

)

(25,966

)

Accumulated other comprehensive loss

 

(21,106

)

(23,226

)

 

 

1,169,142

 

1,154,904

 

Total liabilities and shareholders’ equity

 

$

8,037,996

 

7,957,705

 

 

See accompanying notes to consolidated financial statements - unaudited

 

1



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except per share amounts)

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans receivable

 

$

77,422

 

79,993

 

155,581

 

160,450

 

Mortgage-backed securities

 

4,409

 

6,073

 

9,100

 

12,829

 

Taxable investment securities

 

435

 

594

 

1,008

 

992

 

Tax-free investment securities

 

2,318

 

2,992

 

4,764

 

6,066

 

Interest-earning deposits

 

473

 

489

 

853

 

896

 

Total interest income

 

85,057

 

90,141

 

171,306

 

181,233

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

11,184

 

15,473

 

24,128

 

31,536

 

Borrowed funds

 

7,912

 

7,989

 

15,811

 

15,978

 

Total interest expense

 

19,096

 

23,462

 

39,939

 

47,514

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

65,961

 

66,679

 

131,367

 

133,719

 

Provision for loan losses

 

4,963

 

8,367

 

11,250

 

15,611

 

Net interest income after provision for loan losses

 

60,998

 

58,312

 

120,117

 

118,108

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Impairment losses on securities

 

 

(577

)

(545

)

(577

)

Noncredit related losses on securities not expected to be sold (recognized in other comprehensive income)

 

 

70

 

307

 

70

 

Net impairment losses

 

 

(507

)

(238

)

(507

)

Gain/ (loss) on sale of investments, net

 

(44

)

45

 

 

49

 

Service charges and fees

 

8,702

 

9,321

 

17,127

 

18,249

 

Trust and other financial services income

 

2,018

 

2,185

 

4,134

 

4,095

 

Insurance commission income

 

1,603

 

1,790

 

3,321

 

3,170

 

Loss on real estate owned, net

 

(582

)

(593

)

(1,652

)

(620

)

Income from bank owned life insurance

 

1,107

 

1,716

 

2,224

 

2,882

 

Mortgage banking income

 

789

 

290

 

1,320

 

487

 

Other operating income

 

1,244

 

1,015

 

2,241

 

1,783

 

Total noninterest income

 

14,837

 

15,262

 

28,477

 

29,588

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

27,416

 

29,658

 

55,254

 

55,157

 

Premises and occupancy costs

 

5,483

 

5,650

 

11,231

 

11,841

 

Office operations

 

3,340

 

3,255

 

6,664

 

6,355

 

Processing expenses

 

6,059

 

5,687

 

12,201

 

11,454

 

Marketing expenses

 

3,829

 

2,108

 

5,865

 

4,067

 

Federal deposit insurance premiums

 

1,418

 

2,355

 

3,038

 

4,782

 

Professional services

 

1,500

 

1,289

 

3,197

 

2,545

 

Amortization of other intangible assets

 

279

 

479

 

574

 

970

 

Real estate owned expense

 

571

 

249

 

1,311

 

680

 

Other expenses

 

2,071

 

1,760

 

3,907

 

4,017

 

Total noninterest expense

 

51,966

 

52,490

 

103,242

 

101,868

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

23,869

 

21,084

 

45,352

 

45,828

 

 

 

 

 

 

 

 

 

 

 

Federal and state income taxes

 

7,508

 

6,081

 

13,810

 

13,572

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

16,361

 

$

15,003

 

31,542

 

32,256

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.17

 

0.15

 

0.33

 

0.31

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.17

 

0.15

 

0.33

 

0.31

 

 

See accompanying notes to unaudited consolidated financial statements

 

2



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)

 

 

 

Three months ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

Net Income

 

$

16,361

 

15,003

 

Other comprehensive income net of tax:

 

 

 

 

 

Net unrealized holding gains on marketable securities:

 

 

 

 

 

Unrealized holding gains net of tax of $(572) and $(2,488), respectively

 

894

 

4,620

 

Other-than-temporary impairment on securities included in net income, net of tax of $0 and $(177), respectively

 

 

330

 

Reclassification adjustment for (gains)/ losses included in net income, net of tax of $91 and $(100), respectively

 

(141

)

188

 

Net unrealized holding gains on marketable securities

 

753

 

5,138

 

 

 

 

 

 

 

Change in fair value of interest rate swaps, net of tax of $410 and $705, respectively

 

(641

)

(1,309

)

 

 

 

 

 

 

Other comprehensive income

 

112

 

3,829

 

 

 

 

 

 

 

Total comprehensive income

 

$

16,473

 

18,832

 

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

Net Income

 

$

31,542

 

32,256

 

Other comprehensive income net of tax:

 

 

 

 

 

Net unrealized holding gains on marketable securities:

 

 

 

 

 

Unrealized holding gains net of tax of $(1,473) and $(3,619), respectively

 

2,255

 

6,721

 

Other-than-temporary impairment on securities included in net income, net of tax of $(93) and $(177), respectively

 

145

 

330

 

Reclassification adjustment for (gains)/ losses included in net income, net of tax of $122 and $(92), respectively

 

(190

)

172

 

Net unrealized holding gains on marketable securities

 

2,210

 

7,223

 

 

 

 

 

 

 

Change in fair value of interest rate swaps, net of tax of $48 and $223, respectively

 

(90

)

(415

)

 

 

 

 

 

 

Other comprehensive income

 

2,120

 

6,808

 

 

 

 

 

 

 

Total comprehensive income

 

$

33,662

 

39,064

 

 

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)

 

Three months ended June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

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, 2011

 

107,733,432

 

$

1,078

 

793,951

 

529,630

 

(10,518

)

(27,025

)

1,287,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

15,003

 

 

 

15,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(2,060)

 

 

 

 

 

3,829

 

 

3,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

15,003

 

3,829

 

 

18,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

72,230

 

1

 

386

 

 

 

 

387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

1,273,949

 

12

 

3,384

 

 

 

386

 

3,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

(5,813,566

)

(58

)

(71,514

)

 

 

 

(71,572

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.11 per share)

 

 

 

 

(11,404

)

 

 

(11,404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2011

 

103,266,045

 

$

1,033

 

726,207

 

533,229

 

(6,689

)

(26,639

)

1,227,141

 

 

Three months ended June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

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, 2012

 

97,593,396

 

$

976

 

660,933

 

547,352

 

(21,218

)

(25,568

)

1,162,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

16,361

 

 

 

16,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(71)

 

 

 

 

 

112

 

 

112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

16,361

 

112

 

 

16,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

24,101

 

 

209

 

 

 

 

209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

263,377

 

3

 

1,041

 

 

 

376

 

1,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.12 per share)

 

 

 

 

(11,435

)

 

 

(11,435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2012

 

97,880,874

 

$

979

 

662,183

 

552,278

 

(21,106

)

(25,192

)

1,169,142

 

 

See accompanying notes to unaudited consolidated financial statements

 

4



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

Six months ended June 30, 2011

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at December 31, 2010

 

110,295,117

 

$

1,103

 

824,164

 

523,089

 

(13,497

)

(27,409

)

1,307,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

32,256

 

 

 

32,256

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(3,665)

 

 

 

 

 

6,808

 

 

6,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

32,256

 

6,808

 

 

39,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

128,968

 

2

 

738

 

 

 

 

740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

1,273,949

 

12

 

3,867

 

 

 

770

 

4,649

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share repurchases

 

(8,431,989

)

(84

)

(102,562

)

 

 

 

(102,646

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.21 per share)

 

 

 

 

(22,116

)

 

 

(22,116

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2011

 

103,266,045

 

$

1,033

 

726,207

 

533,229

 

(6,689

)

(26,639

)

1,227,141

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

Unallocated

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

common stock

 

Shareholders’

 

Six months ended June 30, 2012 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income/ (loss)

 

of ESOP

 

Equity

 

Beginning balance at December 31, 2011

 

97,493,046

 

$

975

 

659,523

 

543,598

 

(23,226

)

(25,966

)

1,154,904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

31,542

 

 

 

31,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax of $(1,396)

 

 

 

 

 

2,120

 

 

2,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

31,542

 

2,120

 

 

33,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

124,451

 

1

 

994

 

 

 

 

995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

263,377

 

3

 

1,666

 

 

 

774

 

2,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid ($0.24 per share)

 

 

 

 

(22,862

)

 

 

(22,862

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance at June 30, 2012

 

97,880,874

 

$

979

 

662,183

 

552,278

 

(21,106

)

(25,192

)

1,169,142

 

 

See accompanying notes to unaudited consolidated financial statements

 

5



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net Income

 

$

31,542

 

32,256

 

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

 

 

 

 

 

Provision for loan losses

 

11,250

 

15,611

 

Net loss on sale of assets

 

1,718

 

1,597

 

Net depreciation, amortization and accretion

 

3,691

 

4,634

 

Decrease in other assets

 

14,578

 

10,597

 

Increase in other liabilities

 

6,428

 

233

 

Net amortization of premium on marketable securities

 

(19

)

(258

)

Noncash impairment losses on investment securities

 

238

 

507

 

Noncash write-down of real estate owned

 

886

 

416

 

Origination of loans held for sale

 

(106,900

)

(46,254

)

Proceeds from sale of loans held for sale

 

95,315

 

49,655

 

Noncash compensation expense related to stock benefit plans

 

2,443

 

4,649

 

Net cash provided by operating activities

 

61,170

 

73,643

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Purchase of marketable securities available-for-sale

 

(144,666

)

(184,770

)

Purchase of marketable securities held-to-maturity

 

 

 

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

 

155,891

 

106,668

 

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

 

51,170

 

76,783

 

Proceeds from sale of marketable securities available-for-sale

 

 

 

Loan originations

 

(1,030,529

)

(801,314

)

Proceeds from loan maturities and principal reductions

 

902,818

 

820,330

 

Proceeds from redemption of Federal Home Loan Bank stock

 

2,101

 

5,858

 

Proceeds from sale of real estate owned

 

6,329

 

4,594

 

Sale/ (purchase) of real estate owned for investment, net

 

228

 

(251

)

Purchase of premises and equipment

 

(8,561

)

(1,781

)

Net cash provided by/ (used in) investing activities

 

(65,219

)

26,117

 

 

6



Table of Contents

 

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)

(in thousands)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

FINANCING ACTIVITIES:

 

 

 

 

 

Increase in deposits, net

 

$

25,545

 

54,970

 

Repayments of long-term borrowings

 

(34

)

(50,033

)

Net increase in short-term borrowings

 

25,223

 

6,190

 

Increase in advances by borrowers for taxes and insurance

 

8,753

 

7,503

 

Cash dividends paid

 

(22,862

)

(22,116

)

Purchase of common stock for retirement

 

 

(102,646

)

Proceeds from stock options exercised

 

995

 

740

 

Net cash provided by/ (used in) financing activities

 

37,620

 

(105,392

)

 

 

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

$

33,571

 

(5,632

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$

688,297

 

719,111

 

Net increase/ (decrease) in cash and cash equivalents

 

33,571

 

(5,632

)

Cash and cash equivalents at end of period

 

$

721,868

 

713,479

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

Cash and due from banks

 

$

82,295

 

80,889

 

Interest-earning deposits in other financial institutions

 

638,940

 

631,957

 

Federal funds sold and other short-term investments

 

633

 

633

 

Total cash and cash equivalents

 

$

721,868

 

713,479

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest on deposits and borrowings (including interest credited to deposit accounts of $20,736 and $26,828, respectively)

 

$

39,801

 

48,075

 

Income taxes

 

$

4,292

 

10,135

 

 

 

 

 

 

 

Non-cash activities:

 

 

 

 

 

Loans foreclosures and repossessions

 

$

12,038

 

6,395

 

Sale of real estate owned financed by the Company

 

$

380

 

266

 

 

See accompanying notes to unaudited consolidated financial statements

 

7



Table of Contents

 

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, 2012, Northwest operated 167 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., Boetger & Associates, Inc., Allegheny Services, Inc., Great Northwest Corporation and Veracity Benefits Design.  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 and 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, 2011 updated, as required, for any new pronouncements or changes.

 

The results of operations for the quarter ended and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 

Stock-Based Compensation

 

On May 23, 2012, we awarded employees 508,573 stock options and directors 64,800 stock options with an exercise price of $11.70 and a grant date fair value of $1.23 per stock option.  On May 23, 2012, we also awarded employees 239,077 common shares and directors 24,300 common shares with a grant date fair value of $11.64.  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 $1.4 million and $3.8 million for the three months ended June 30, 2012 and 2011, respectively, and $2.4 million and $4.6 million for the six months ended June 30, 2012 and 2011, respectively, was recognized in compensation expense relating to our stock benefit plans.  At June 30, 2012 there was compensation expense of $6.0 million to be recognized for awarded but unvested stock options and $15.1 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, 2012 we had no liability for unrecognized tax benefits.

 

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

 

8



Table of Contents

 

income taxes.  There is no amount accrued for the payment of interest or penalties at June 30, 2012.  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, 2010, 2009 and 2008.

 

(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 commercial and personal demand, savings and time deposit accounts and commercial 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 52 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.

 

At or for the quarter ended:

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2012 ($ in 000’s)

 

Banking

 

Finance

 

All other *

 

Consolidated

 

External interest income

 

$

79,290

 

5,512

 

255

 

85,057

 

Intersegment interest income

 

738

 

 

(738

)

 

Interest expense

 

17,785

 

738

 

573

 

19,096

 

Provision for loan losses

 

4,250

 

713

 

 

4,963

 

Noninterest income

 

14,241

 

581

 

15

 

14,837

 

Noninterest expense

 

48,587

 

3,180

 

199

 

51,966

 

Income tax expense (benefit)

 

7,304

 

647

 

(443

)

7,508

 

Net income

 

16,343

 

815

 

(797

)

16,361

 

Total assets

 

$

7,881,277

 

116,262

 

40,457

 

8,037,996

 

 

 

 

 

 

 

 

 

 

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2011 ($ in 000’s)

 

Banking

 

Finance

 

All other *

 

Consolidated

 

External interest income

 

$

84,520

 

5,385

 

236

 

90,141

 

Intersegment interest income

 

766

 

 

(766

)

 

Interest expense

 

22,243

 

766

 

453

 

23,462

 

Provision for loan losses

 

7,650

 

717

 

 

8,367

 

Noninterest income

 

14,677

 

572

 

13

 

15,262

 

Noninterest expense

 

49,332

 

3,005

 

153

 

52,490

 

Income tax expense (benefit)

 

5,865

 

611

 

(395

)

6,081

 

Net income

 

14,873

 

858

 

(728

)

15,003

 

Total assets

 

$

7,944,536

 

115,428

 

27,381

 

8,087,345

 

 


* Eliminations consist of intercompany loans, interest income and interest expense.

 

9



Table of Contents

 

At or for the six months ended:

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2012 ($ in 000’s)

 

Banking

 

Finance

 

All other *

 

Consolidated

 

External interest income

 

$

159,695

 

11,043

 

568

 

171,306

 

Intersegment interest income

 

1,486

 

 

(1,486

)

 

Interest expense

 

37,325

 

1,486

 

1,128

 

39,939

 

Provision for loan losses

 

9,750

 

1,500

 

 

11,250

 

Noninterest income

 

27,323

 

1,092

 

62

 

28,477

 

Noninterest expense

 

96,465

 

6,376

 

401

 

103,242

 

Income tax expense (benefit)

 

13,525

 

1,151

 

(866

)

13,810

 

Net income

 

31,439

 

1,622

 

(1,519

)

31,542

 

Total assets

 

$

7,881,277

 

116,262

 

40,457

 

8,037,996

 

 

 

 

 

 

 

 

 

 

 

 

 

Community

 

Consumer

 

 

 

 

 

June 30, 2011 ($ in 000’s)

 

Banking

 

Finance

 

All other *

 

Consolidated

 

External interest income

 

$

170,136

 

10,632

 

465

 

181,233

 

Intersegment interest income

 

1,536

 

 

(1,536

)

 

Interest expense

 

45,203

 

1,536

 

775

 

47,514

 

Provision for loan losses

 

14,150

 

1,461

 

 

15,611

 

Noninterest income

 

28,537

 

1,025

 

26

 

29,588

 

Noninterest expense

 

95,433

 

6,042

 

393

 

101,868

 

Income tax expense (benefit)

 

13,261

 

1,088

 

(777

)

13,572

 

Net income

 

32,162

 

1,530

 

(1,436

)

32,256

 

Total assets

 

$

7,944,536

 

115,428

 

27,381

 

8,087,345

 

 


* Eliminations consist of intercompany loans, interest income and interest expense.

 

10



Table of Contents

 

(3)                                 Investment securities and impairment of investment securities

 

The following table shows the portfolio of investment securities available-for-sale at June 30, 2012 (in thousands):

 

 

 

 

 

Gross

 

Gross

 

 

 

 

 

 

 

unrealized

 

unrealized

 

 

 

 

 

Amortized

 

holding

 

holding

 

Fair

 

 

 

cost

 

gains

 

losses

 

value

 

Debt issued by the U.S. government and agencies:

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

54

 

 

 

54

 

 

 

 

 

 

 

 

 

 

 

Debt issued by government sponsored enterprises:

 

 

 

 

 

 

 

 

 

Due in one year - five years

 

27,496

 

35

 

(24

)

27,507

 

Due in five years - ten years

 

38,727

 

620

 

(1

)

39,346

 

Due after ten years

 

8,486

 

 

(23

)

8,463

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

12,398

 

5,964

 

(4

)

18,358

 

 

 

 

 

 

 

 

 

 

 

Municipal securities:

 

 

 

 

 

 

 

 

 

Due in one year - five years

 

6,948

 

228

 

 

7,176

 

Due in five years - ten years

 

23,191

 

941

 

 

24,132

 

Due after ten years

 

112,287

 

5,759

 

(107

)

117,939

 

 

 

 

 

 

 

 

 

 

 

Corporate debt issues:

 

 

 

 

 

 

 

 

 

Due after ten years

 

25,025

 

229

 

(5,597

)

19,657

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Fixed rate pass-through

 

102,252

 

7,368

 

 

109,620

 

Variable rate pass-through

 

120,805

 

6,374

 

(2

)

127,177

 

Fixed rate non-agency CMOs

 

7,186

 

170

 

(345

)

7,011

 

Fixed rate agency CMOs

 

131,500

 

3,174

 

 

134,674

 

Variable rate non-agency CMOs

 

934

 

 

(22

)

912

 

Variable rate agency CMOs

 

256,759

 

2,033

 

(175

)

258,617

 

Total residential mortgage-backed securities

 

619,436

 

19,119

 

(544

)

638,011