NWBI 10-Q Quarterly Report June 30, 2022

NORTHWEST BANCSHARES, INC.

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nwbi-20220630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

☐ 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.)

3 Easton Oval

Suite 500

Columbus

Ohio

43219

(Address of Principal Executive Offices)

(Zip Code)

(814) 726-2140

(Registrant’s telephone number, including area code)

Not applicable

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, 0.01 Par Value

NWBI

NASDAQ Stock Market, LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒ Large accelerated filer ☐ Accelerated filer

☐ Non-accelerated filer ☐ Smaller reporting company

☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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), 126,876,036 shares outstanding as of July 31, 2022.

Table of Contents

NORTHWEST BANCSHARES, INC.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Statements of Financial Condition at June 30 , 2022 and December 31, 2021 (Unaudited)

Consolidated Statements of Income for the quarter and six months ended June 30 , 2022 and 2021 (Unaudited)

Consolidated Statements of Comprehensive Income for the quarter and six mo nths ended June 30 , 2022 and 2021 (Unaudited)

Consolidated Statements of Changes in Shareholders’ Equity for the quarter and six months ended June 30 , 2022 and 2021 (Unaudited)

Consolidated Statements of Cash Flows for the six months ended June 30 , 2022 and 2021 (Unaudited)

Notes to Consolidated Financial Statements (Unaudited)

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

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 1. FINANCIAL STATEMENTS

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(in thousands, except share data)


	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	504,532	1,279,259


Marketable securities available-for-sale (amortized cost of $1,516,743 and $1,565,002, respectively)	1,364,743		1,548,592
Marketable securities held-to-maturity (fair value of $835,565 and $751,513, respectively)	923,180		768,154
Total cash and cash equivalents and marketable securities	2,792,455		3,596,005


Loans held-for-sale	31,153		25,056








Loans held for investment	10,401,671		9,991,336

Allowance for credit losses	(98,355)		(102,241)
Loans receivable, net	10,334,469		9,914,151


FHLB stock, at cost	13,362		14,184
Accrued interest receivable	27,708		25,599
Real estate owned, net	1,205		873
Premises and equipment, net	146,869		156,524
Bank-owned life insurance	254,109		256,213
Goodwill	380,997		380,997
Other intangible assets, net	10,538		12,836
Other assets	192,983		144,126
Total assets	$	14,154,695	14,501,508

Liabilities and shareholders’ equity
Liabilities:
Noninterest-bearing demand deposits	$	3,058,249	3,099,526
Interest-bearing demand deposits	2,858,691		2,940,442
Money market deposit accounts	2,631,712		2,629,882
Savings deposits	2,362,725		2,303,760
Time deposits	1,155,878		1,327,555
Total deposits	12,067,255		12,301,165


Borrowed funds	130,490		139,093
Subordinated debt	113,666		123,575
Junior subordinated debentures	129,184		129,054
Advances by borrowers for taxes and insurance	55,622		44,582
Accrued interest payable	1,725		1,804
Other liabilities	162,214		178,664
Total liabilities	12,660,156		12,917,937

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, 126,881,766 and 126,612,183 shares issued and outstanding, respectively	1,269		1,266
Additional paid-in capital	1,015,349		1,010,405
Retained earnings	620,551		609,529

Accumulated other comprehensive loss	(142,630)		(37,629)
Total shareholders’ equity	1,494,539		1,583,571
Total liabilities and shareholders’ equity	$	14,154,695	14,501,508

See accompanying notes to unaudited Consolidated Financial Statements.

Table of Contents

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(in thousands, except share data)


	Quarter ended June 30,			Six months ended June 30,
	2022		2021	2022	2021
Interest income:
Loans receivable	$	95,574	95,255	183,748	197,573
Mortgage-backed securities	7,158		5,680	13,518	9,880
Taxable investment securities	715		693	1,392	1,327
Tax-free investment securities	683		594	1,357	1,169
FHLB stock dividends	82		138	163	254
Interest-earning deposits	1,684		192	2,151	375
Total interest income	105,896		102,552	202,329	210,578
Interest expense:
Deposits	3,341		4,773	7,092	10,287
Borrowed funds	2,290		2,050	4,349	4,104
Total interest expense	5,631		6,823	11,441	14,391
Net interest income	100,265		95,729	190,888	196,187
Provision for credit losses	2,629		—	1,148	(5,620)
Net interest income after provision for credit losses	97,636		95,729	189,740	201,807
Noninterest income:
Loss on sale of investments	(3)		(105)	(5)	(126)

Service charges and fees	13,673		12,744	26,740	25,138


Trust and other financial services income	7,461		7,435	14,473	13,919
Insurance commission income	—		1,043	—	3,589
Gain on real estate owned, net	291		166	262	124
Income from bank-owned life insurance	2,008		1,639	3,991	3,375
Mortgage banking income	2,157		3,811	3,622	9,831
Gain on sale of insurance business	—		25,327	—	25,327
Other operating income	4,861		2,648	7,105	5,484
Total noninterest income	30,448		54,708	56,188	86,661
Noninterest expense:
Compensation and employee benefits	48,073		48,894	94,990	96,133
Premises and occupancy costs	7,280		7,410	15,077	16,224
Office operations	3,162		3,317	6,545	6,482
Collections expense	403		303	923	919
Processing expenses	12,947		15,151	25,495	28,607
Marketing expenses	2,047		2,101	4,175	4,081
Federal deposit insurance premiums	1,130		1,353	2,259	2,660
Professional services	3,333		4,231	5,906	8,813
Amortization of intangible assets	1,115		1,433	2,298	3,027
Real estate owned expense	72		85	109	160
Merger, asset disposition and restructuring expense	—		632	1,374	641

Other expenses	5,245		1,422	7,600	4,776
Total noninterest expense	84,807		86,332	166,751	172,523
Income before income taxes	43,277		64,105	79,177	115,945
Federal and state income taxes expense	9,851		15,138	17,464	26,741
Net income	$	33,426	48,967	61,713	89,204
Basic earnings per share	$	0.26	0.38	0.49	0.70
Diluted earnings per share	$	0.26	0.38	0.49	0.70

See accompanying notes to unaudited Consolidated Financial Statements.

Table of Contents

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(in thousands)


	Quarter ended June 30,			Six months ended June 30,
	2022		2021	2022	2021
Net income	$	33,426	48,967	61,713	89,204
Other comprehensive income net of tax:
Net unrealized holding gains/(losses) on marketable securities:
Unrealized holding gains/(losses), net of tax of $11,973, ($1,245), $30,850, and $4,736, respectively	(39,954)		4,322	(104,737)	(13,099)
Reclassification adjustment for gains included in net income, net of tax of $0, $43, $0, and $65, respectively	(1)		(136)	(2)	(211)
Net unrealized holding gains/(losses) on marketable securities	(39,955)		4,186	(104,739)	(13,310)






Defined benefit plan:
Actuarial reclassification adjustments for prior period service costs and actuarial (gains)/losses included in net income, net of tax of $51, ($128), $101, and ($258), respectively	(131)		334	(262)	667



Other comprehensive (loss)/income	(40,086)		4,520	(105,001)	(12,643)

Total comprehensive (loss)/income	$	(6,660)	53,487	(43,288)	76,561

See accompanying notes to unaudited Consolidated Financial Statements.

Table of Contents

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in thousands, expect share data)


				Additional paid-in capital	Retained earnings	Accumulated other comprehensive loss	Total shareholders’ equity
	Common stock
Quarter ended June 30, 2022	Shares	Amount
Beginning balance at March 31, 2022	126,686,373	$	1,267	1,012,308	612,481	(102,544)	1,523,512



Comprehensive income:
Net income	—	—		—	33,426	—	33,426

Other comprehensive loss, net of tax of $12,024	—	—		—	—	(40,086)	(40,086)

Total comprehensive income/(loss)	—	—		—	33,426	(40,086)	(6,660)





Exercise of stock options	139,795	1		1,618	—	—	1,619

Stock-based compensation expense	65,155	2		1,422	—	—	1,424





Stock-based compensation forfeited	(9,557)	(1)		1	—	—	—



Dividends paid ($0.20 per share)	—	—		—	(25,356)	—	(25,356)

Ending balance at June 30, 2022	126,881,766	$	1,269	1,015,349	620,551	(142,630)	1,494,539


				Additional paid-in capital	Retained earnings	Accumulated other comprehensive income/(loss)	Total shareholders’ equity
	Common stock
Quarter ended June 30, 2021	Shares	Amount
Beginning balance at March 31, 2021	127,222,648	$	1,272	1,018,822	571,612	(50,712)	1,540,994

Comprehensive income:
Net income	—	—		—	48,967	—	48,967

Other comprehensive income, net of tax of ($1,331)	—	—		—	—	4,520	4,520

Total comprehensive income	—	—		—	48,967	4,520	53,487





Exercise of stock options	418,916	4		5,102	—	—	5,106

Stock-based compensation expense	320,755	3		1,715	—	—	1,718

Share repurchases	(34,460)	—		(465)	—	—	(465)

Stock-based compensation forfeited	(19,974)	—		—	—	—	—



Dividends paid ($0.20 per share)	—	—		—	(25,479)	—	(25,479)

Ending balance at June 30, 2021	127,907,885	$	1,279	1,025,174	595,100	(46,192)	1,575,361

See accompanying notes to unaudited Consolidated Financial Statements.

Table of Contents

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(in thousands, expect share data)


				Additional paid-in capital	Retained earnings	Accumulated other comprehensive loss	Total shareholders’ equity
	Common stock
Six months ended June 30, 2022	Shares	Amount
Beginning balance at December 31, 2021	126,612,183	$	1,266	1,010,405	609,529	(37,629)	1,583,571

Comprehensive income:
Net income	—	—		—	61,713	—	61,713

Other comprehensive loss, net of tax of $30,951	—	—		—	—	(105,001)	(105,001)

Total comprehensive income/(loss)	—	—		—	61,713	(105,001)	(43,288)





Exercise of stock options	241,408	2		2,822	—	—	2,824

Stock-based compensation expense	75,377	2		2,121	—	—	2,123





Stock-based compensation forfeited	(47,202)	(1)		1	—	—	—

Dividends paid ($0.40 per share)	—	—		—	(50,691)	—	(50,691)

Ending balance at June 30, 2022	126,881,766	$	1,269	1,015,349	620,551	(142,630)	1,494,539


				Additional paid-in capital	Retained earnings	Accumulated other comprehensive loss	Total shareholders’ equity
	Common stock
Six months ended June 30, 2021	Shares	Amount
Beginning balance at December 31, 2020	127,019,452	$	1,270	1,015,502	555,480	(33,549)	1,538,703

Comprehensive income:
Net income	—	—		—	89,204	—	89,204

Other comprehensive loss, net of tax of $4,543	—	—		—	—	(12,643)	(12,643)

Total comprehensive income/(loss)	—	—		—	89,204	(12,643)	76,561





Exercise of stock options	986,345	10		12,023	—	—	12,033

Stock-based compensation expense	322,685	3		2,676	—	—	2,679

Stock-based compensation forfeited	(32,585)	—		—	—	—	—

Share repurchases	(388,012)	(4)		(5,027)	—	—	(5,031)

Dividends paid ($0.39 per share)	—	—		—	(49,584)	—	(49,584)

Ending balance at June 30, 2021	127,907,885	$	1,279	1,025,174	595,100	(46,192)	1,575,361

See accompanying notes to unaudited Consolidated Financial Statements.

Table of Contents

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Six months ended June 30,
	2022		2021
Operating activities:
Net income	$	61,713	89,204
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	1,148		(5,620)
Net gain on sale of assets	(625)		(570)
Mortgage banking activity	(2,660)		(13,818)
Gain on sale of insurance business	—		(25,327)

Net depreciation, amortization and accretion	2,860		3,058
(Increase)/decrease in other assets	(23,489)		26,603
Decrease in other liabilities	(16,891)		(18,261)
Net amortization on marketable securities	2,783		4,040
Noncash compensation expense related to stock benefit plans	2,123		2,679
Noncash write-down of real estate owned	41		128


Deferred income tax expense	2,256		900

Origination of loans held-for-sale	(225,091)		(420,530)
Proceeds from sale of loans held-for-sale	222,662		462,522

Net cash provided by operating activities	26,830		105,008

Investing activities:
Purchase of marketable securities held-to-maturity	(212,892)		(479,165)
Purchase of marketable securities available-for-sale	(102,178)		(509,499)
Proceeds from maturities and principal reductions of marketable securities held-to-maturity	57,254		18,261
Proceeds from maturities and principal reductions of marketable securities available-for-sale	148,260		225,823
Proceeds from sale of marketable securities available-for-sale	—		61,748
Proceeds from bank-owned life insurance	2,553		3,984
Loan originations	(2,158,246)		(2,056,750)
Loan purchases	(304,163)		—
Proceeds from loan maturities and principal reductions	2,054,203		2,292,701

Net proceeds/(redemptions) of FHLB stock	822		(1,539)
Proceeds from sale of real estate owned	424		1,431
Proceeds from sale of real estate owned for investment	153		153
Disposals/(purchases) of premises and equipment, net	1,687		(1,005)
Proceeds from the sale of insurance business	—		28,238

Net cash used in investing activities	(512,123)		(415,619)

Table of Contents

NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued)

(in thousands)


	Six months ended June 30,
	2022		2021
Financing activities:
Net (decrease)/increase in deposits	$	(233,910)	491,475

Repayments of long-term borrowings	(10,094)		(22,000)
Net decrease in short-term borrowings	(8,603)		(3,785)
Increase in advances by borrowers for taxes and insurance	11,040		8,378
Cash dividends paid on common stock	(50,691)		(49,584)
Purchase of common stock for retirement	—		(5,031)
Proceeds from stock options exercised	2,824		12,033

Net cash (used in)/provided by financing activities	(289,434)		431,486

Net (decrease)/increase in cash and cash equivalents	$	(774,727)	120,875

Cash and cash equivalents at beginning of period	$	1,279,259	736,277
Net (decrease)/increase in cash and cash equivalents	(774,727)		120,875
Cash and cash equivalents at end of period	$	504,532	857,152







Cash paid during the period for:
Interest on deposits and borrowings (including interest credited to deposit accounts of $6,943 and $10,295, respectively)	$	11,520	14,625
Income taxes	11,581		20,601







Non-cash activities:
Loan foreclosures and repossessions	$	2,591	2,831
Sale of real estate owned financed by the Company	—		54

See accompanying notes to unaudited Consolidated Financial Statements.

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 Columbus, Ohio, is a bank holding company regulated by the Board of Governors of the Federal Reserve System (“FRB”). The primary activity of the Company is the ownership of all of the issued and outstanding common stock of Northwest Bank, a Pennsylvania-chartered savings bank (“Northwest”). Northwest is regulated by the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking. Northwest operates 150 community-banking offices throughout Pennsylvania, Western New York, Eastern Ohio, and Indiana.

The accompanying unaudited Consolidated Financial Statements include the accounts of the Company and its subsidiary, Northwest, and Northwest’s subsidiaries Northwest Capital Group, Inc., Great Northwest Corporation, and MutualFirst Interest Company, 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 Financial 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, 2021 updated, as required, for any new pronouncements or changes.

Allowance for Credit Losses and Provision for Credit Losses Update

During the quarter-ended June 30, 2022, the Bank implemented a new model to calculate the allowance for credit losses on our vehicle loan portfolio. Additionally, as part of the process we re-assessed our loan segmentation and loans that were previously included in our consumer loan portfolio were moved into our vehicle loan portfolio. The change in segmentation was driven by underlying collateral types and the loans continue to share similar risk characteristics.

The allowance for credit losses within the vehicle loan portfolio is calculated using a non-discounted cash flow model developed by an external third-party. Monthly probabilities of default and prepayment are estimated for each loan, along with estimates of exposure at default and loss given default. The model utilizes loan, borrower, and collateral characteristics, and macroeconomic data as inputs.

Certain items previously reported have been reclassified to conform to the current year’s reporting format.

The results of operations for the quarter ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other period.

Stock-Based Compensation

On May 18, 2022, the Company awarded employees 150,027 restricted stock units (“RSUs”) with a weighted average discounted grant date fair value of $11.00. The RSUs vest over a three-year period with the first vesting occurring one year from the grant date. The Company awarded directors 41,206 restricted stock awards (“RSAs”) with a grant date fair value of $12.55 which fully vest one-year from the grant date. Also, the Company awarded employees 150,027 performance share units (“PSUs”) with a discounted grant date fair value of $10.26. The number of PSUs earned will be based on attainment of certain performance criteria over a three-year period, with the actual number of shares issuable ranging between 0% and 150% of the number of PSUs granted. The PSUs have a three-year cliff vesting, from the date of grant, and any PSU's earned will be issued after the vesting period. Stock-based compensation expense of $1.4 million and $1.7 million for the quarters ended June 30, 2022 and 2021, respectively, was recognized in compensation expense relating to our stock benefit plans. At June 30, 2022, there was compensation expense of $1.1 million to be recognized for awarded but unvested stock options, $6.6 million for unvested restricted common shares, $1.3 million to be recognized for awarded but unvested RSUs, $420,000 to be recognized for awarded but unvested RSAs, and $1.3 million to be recognized for awarded but unvested PSUs.

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. We had a $241,000 and $336,000 liability for unrecognized tax benefits as of June 30, 2022 and 2021, respectively.

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We recognize interest accrued related to: (1) unrecognized tax benefits in other expenses and (2) refund claims in other operating income. We recognize penalties (if any) in other expenses. 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, 2021, 2020, 2019 and 2018.

(2) Marketable Securities

The following table shows the portfolio of marketable securities available-for-sale at June 30, 2022 (in thousands):


	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses	Fair value
Debt issued by the U.S government and agencies:
Due in one year through five years	$	20,000	—	(1,147)	18,853
Due after ten years	55,553		—	(7,674)	47,879

Debt issued by government-sponsored enterprises:

Due in one year through five years	992		—	(12)	980
Due in five years through ten years	46,019		—	(5,735)	40,284




Municipal securities:
Due in less than one year	723		1	—	724
Due in one year through five years	1,174		6	(19)	1,161
Due in five years through ten years	32,974		25	(1,640)	31,359
Due after ten years	95,283		45	(13,175)	82,153

Corporate debt issues:

Due in five years through ten years	13,564		8	(62)	13,510

Residential mortgage-backed securities:
Fixed rate pass-through	243,193		144	(22,991)	220,346
Variable rate pass-through	9,813		62	(60)	9,815

Fixed rate agency CMOs	964,937		12	(99,663)	865,286
Variable rate agency CMOs	32,518		137	(262)	32,393
Total residential mortgage-backed securities	1,250,461		355	(122,976)	1,127,840
Total marketable securities available-for-sale	$	1,516,743	440	(152,440)	1,364,743

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The following table shows the portfolio of marketable securities available-for-sale at December 31, 2021 (in thousands):


	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses	Fair value
Debt issued by the U.S. government and agencies:
Due in one year through five years	$	20,000	—	(68)	19,932
Due after ten years	57,681		—	(1,722)	55,959

Debt issued by government-sponsored enterprises:
Due in less than one year	177		—	—	177
Due in one year through five years	991		73	—	1,064

Due in five years through ten years	46,411		1	(1,568)	44,844




Municipal securities:
Due in less than one year	946		13	—	959
Due in one year through five years	1,261		22	(3)	1,280
Due in five years through ten years	23,692		661	(146)	24,207
Due after ten years	99,558		2,884	(187)	102,255





Residential mortgage-backed securities:
Fixed rate pass-through	265,604		2,389	(2,525)	265,468
Variable rate pass-through	11,306		294	(9)	11,591

Fixed rate agency CMOs	997,680		2,284	(18,965)	980,999
Variable rate agency CMOs	39,695		224	(62)	39,857
Total residential mortgage-backed securities	1,314,285		5,191	(21,561)	1,297,915
Total marketable securities available-for-sale	$	1,565,002	8,845	(25,255)	1,548,592

The following table shows the portfolio of marketable securities held-to-maturity at June 30, 2022 (in thousands):


	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses	Fair value
Debt issued by the U.S. government and agencies:
Due in one year through five years	$	16,477	—	(1,214)	15,263
Due in five years through ten years	107,975		—	(15,547)	92,428

Residential mortgage-backed securities:
Fixed rate pass-through	171,477		2	(18,329)	153,150
Variable rate pass-through	611		2	—	613
Fixed rate agency CMOs	626,080		197	(52,731)	573,546
Variable rate agency CMOs	560		5	—	565
Total residential mortgage-backed securities	798,728		206	(71,060)	727,874
Total marketable securities held-to-maturity	$	923,180	206	(87,821)	835,565

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The following table shows the portfolio of marketable securities held-to-maturity at December 31, 2021 (in thousands):


	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses	Fair value
Debt issued by the U.S. government and agencies:
Due in one through five years	$	16,478	—	(206)	16,272
Due in five years through ten years	107,973		—	(4,613)	103,360


Residential mortgage-backed securities:
Fixed rate pass-through	183,092		58	(2,161)	180,989
Variable rate pass-through	667		24	—	691
Fixed rate agency CMOs	459,345		251	(10,011)	449,585
Variable rate agency CMOs	599		17	—	616
Total residential mortgage-backed securities	643,703		350	(12,172)	631,881
Total marketable securities held-to-maturity	$	768,154	350	(16,991)	751,513

The following table shows the contractual maturity of our residential mortgage-backed securities available-for-sale at June 30, 2022 (in thousands):


	Amortized cost		Fair value




Residential mortgage-backed securities:
Due in less than one year	$	142	142
Due in one year through five years	44,173		42,250
Due after five years through ten years	175,552		163,453
Due after ten years	1,030,594		921,995
Total residential mortgage-backed securities	$	1,250,461	1,127,840

The following table shows the contractual maturity of our residential mortgage-backed securities held-to-maturity at June 30, 2022 (in thousands):


	Amortized cost		Fair value




Residential mortgage-backed securities:

Due in one year through five years	$	20,792	18,371
Due after five years through ten years	171,108		152,785
Due after ten years	606,828		556,718
Total residential mortgage-backed securities	$	798,728	727,874

The following table shows the fair value of and gross unrealized losses on marketable securities, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2022 (in thousands):


	Less than 12 months			12 months or more		Total
	Fair value		Unrealized loss	Fair value	Unrealized loss	Fair value	Unrealized loss
U.S. government-sponsored enterprises	$	65,246	(6,707)	150,441	(24,622)	215,687	(31,329)
Municipal securities	101,666		(14,055)	3,702	(779)	105,368	(14,834)
Corporate debt issues	6,409		(62)	—	—	6,409	(62)

Residential mortgage-backed securities - agency	1,141,928		(107,959)	560,788	(86,077)	1,702,716	(194,036)

Total	$	1,315,249	(128,783)	714,931	(111,478)	2,030,180	(240,261)

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	Less than 12 months			12 months or more		Total
	Fair value		Unrealized loss	Fair value	Unrealized loss	Fair value	Unrealized loss
U.S. government-sponsored enterprises	$	132,782	(3,504)	106,160	(4,673)	238,942	(8,177)


Municipal securities	25,118		(336)	—	—	25,118	(336)
Residential mortgage-backed securities - agency	1,428,582		(26,516)	184,389	(7,217)	1,612,971	(33,733)
Total	$	1,586,482	(30,356)	290,549	(11,890)	1,877,031	(42,246)

The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position as of June 30, 2022, which were comprised of 583 individual securities, represents a credit loss impairment. All of these securities were issued by U.S. government agencies, U.S. government-sponsored enterprises, corporate debt or local municipalities. The securities issued by the U.S. government agencies or U.S. government-sponsored enterprises are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The corporate debt issues and securities issued by local municipalities were all highly rated by major rating agencies and have no history of credit losses. The unrealized losses were primarily attributable to changes in the interest rate environment and not due to the credit quality of these investment securities. The Company does not have the intent to sell these investment securities and it is likely that we will not be required to sell these securities before their anticipated recovery, which may be at maturity.

All of the Company’s held-to-maturity debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Therefore, the Company did not record an allowance for credit losses for these securities as of June 30, 2022.

The following table presents the credit quality of our held-to-maturity securities, based on the latest information available as of June 30, 2022 (in thousands). The credit ratings are sourced from nationally recognized rating agencies, which include Moody’s and S&P, or when credit ratings cannot be sourced from the agencies, they are presented based on asset type. All of our held-to-maturity securities were current in their payment of principal and interest as of June 30, 2022.


	AA+		Total




Held-to-maturity securities (at amortized cost):
Debt issued by the U.S. government-sponsored enterprises	$	124,452	124,452
Residential mortgage-backed securities	798,728		798,728
Total marketable securities held-to-maturity	$	923,180	923,180

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(3) Loans Receivable

The following table shows a summary of our loans receivable at amortized cost basis at June 30, 2022 and December 31, 2021 (in thousands):


	June 30, 2022				December 31, 2021
	Originated (1)		Acquired (2)	Total	Originated (1)	Acquired (2)	Total
Personal Banking:

Residential mortgage loans (3)	$	3,101,251	185,524	3,286,775	2,783,459	211,161	2,994,620
Home equity loans	1,095,844		184,648	1,280,492	1,107,202	212,729	1,319,931
Vehicle loans	1,785,828		109,907	1,895,735	1,384,246	99,985	1,484,231
Consumer loans	97,939		8,871	106,810	307,961	46,556	354,517
Total Personal Banking	6,080,862		488,950	6,569,812	5,582,868	570,431	6,153,299

Commercial Banking:
Commercial real estate loans	2,130,573		355,401	2,485,974	2,202,027	423,454	2,625,481
Commercial real estate loans - owner occupied	342,907		47,295	390,202	321,253	68,750	390,003
Commercial loans	926,565		60,271	986,836	765,877	81,732	847,609
Total Commercial Banking	3,400,045		462,967	3,863,012	3,289,157	573,936	3,863,093
Total loans receivable, gross	9,480,907		951,917	10,432,824	8,872,025	1,144,367	10,016,392

Allowance for credit losses	(84,300)		(14,055)	(98,355)	(86,750)	(15,491)	(102,241)
Total loans receivable, net (4)	$	9,396,607	937,862	10,334,469	8,785,275	1,128,876	9,914,151

(1) Includes originated and purchased loan pools purchased in an asset acquisition.

(2) Includes loans subject to purchase accounting in a business combination.

(3) Includes fair value of $31.2 million and $25.1 million of loans held-for-sale at June 30, 2022 and December 31, 2021, respectively.

(4) Includes $67.0 million and $62.8 million of net unearned income, unamortized premiums and discounts and deferred fees and costs at June 30, 2022 and December 31, 2021, respectively.

During the six months ended June 30, 2022, the Company purchased a total of $115.8 million small business equipment finance loan pools and a total of $188.3 million one- to four-family jumbo mortgage loan pools.

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The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the quarter ended June 30, 2022 (in thousands):


	Balance as of June 30, 2022		Current period provision	Charge-offs	Recoveries	Balance as of March 31, 2022
Allowance for Credit Losses
Personal Banking:
Residential mortgage loans	$	16,158	2,723	(138)	267	13,306
Home equity loans	5,232		(583)	(255)	427	5,643
Vehicle loans	15,738		1,888	(934)	603	14,181
Consumer loans	779		(1,685)	(978)	333	3,109
Total Personal Banking	37,907		2,343	(2,305)	1,630	36,239

Commercial Banking:
Commercial real estate loans	39,641		(1,917)	(4,392)	1,378	44,572
Commercial real estate loans - owner occupied	4,095		(188)	—	7	4,276
Commercial loans	16,712		2,391	(329)	442	14,208
Total Commercial Banking	60,448		286	(4,721)	1,827	63,056
Total	$	98,355	2,629	(7,026)	3,457	99,295

Allowance for Credit Losses - off-balance sheet exposure
Personal Banking:

Residential mortgage loans	$	6	—	—	—	6
Home equity loans	64		9	—	—	55

Total Personal Banking	70		9	—	—	61

Commercial Banking:
Commercial real estate loans	3,463		1,671	—	—	1,792
Commercial real estate loans - owner occupied	328		120	—	—	208
Commercial loans	3,589		1,596	—	—	1,993
Total Commercial Banking	7,380		3,387	—	—	3,993
Total off-balance sheet exposure	$	7,450	3,396	—	—	4,054

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The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the quarter ended June 30, 2021 (in thousands):


	Balance as of June 30, 2021		Current period provision	Charge-offs	Recoveries	Balance as of March 31, 2021
Allowance for Credit Losses
Personal Banking:
Residential mortgage loans	$	7,247	1,922	(770)	234	5,861
Home equity loans	7,239		2,253	(379)	124	5,241
Vehicle loans	12,888		(1,196)	(1,598)	794	14,888
Consumer loans	2,801		691	(803)	350	2,563
Total Personal Banking	30,175		3,670	(3,550)	1,502	28,553

Commercial Banking:
Commercial real estate loans	64,580		(2,925)	(3,074)	373	70,206
Commercial real estate loans - owner occupied	4,729		(1,138)	(890)	4	6,753
Commercial loans	17,846		393	(1,161)	129	18,485
Total Commercial Banking	87,155		(3,670)	(5,125)	506	95,444
Total	$	117,330	—	(8,675)	2,008	123,997

Allowance for Credit Losses - off-balance sheet exposure
Personal Banking:
Residential mortgage loans	$	2	—	—	—	2
Home equity loans	42		8	—	—	34

Total Personal Banking	44		8	—	—	36

Commercial Banking:
Commercial real estate loans	1,932		(183)	—	—	2,115
Commercial real estate loans - owner occupied	181		(207)	—	—	388
Commercial loans	1,232		(848)	—	—	2,080
Total Commercial Banking	3,345		(1,238)	—	—	4,583
Total off-balance sheet exposure	$	3,389	(1,230)	—	—	4,619

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The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the six months ended June 30, 2022 (in thousands):


	Balance as of June 30, 2022		Current period provision	Charge-offs	Recoveries	Balance as of December 31, 2021
Allowance for Credit Losses
Personal Banking:
Residential mortgage loans	$	16,158	9,685	(1,321)	421	7,373
Home equity loans	5,232		(214)	(702)	848	5,300
Vehicle loans	15,738		583	(1,581)	1,253	15,483
Consumer loans	779		(691)	(2,054)	640	2,884
Total Personal Banking	37,907		9,363	(5,658)	3,162	31,040

Commercial Banking:
Commercial real estate loans	39,641		(11,582)	(5,416)	2,498	54,141
Commercial real estate loans - owner occupied	4,095		201	—	11	3,883
Commercial loans	16,712		3,166	(1,010)	1,379	13,177
Total Commercial Banking	60,448		(8,215)	(6,426)	3,888	71,201
Total	$	98,355	1,148	(12,084)	7,050	102,241

Allowance for Credit Losses - off-balance sheet exposure
Personal Banking:
Residential mortgage loans	$	6	4	—	—	2
Home equity loans	64		25	—	—	39

Total Personal Banking	70		29	—	—	41

Commercial Banking:
Commercial real estate loans	3,463		2,582	—	—	881
Commercial real estate loans - owner occupied	328		186	—	—	142
Commercial loans	3,589		2,195	—	—	1,394
Total Commercial Banking	7,380		4,963	—	—	2,417
Total off-balance sheet exposure	$	7,450	4,992	—	—	2,458

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The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the six months ended June 30, 2021 (in thousands):


	Balance as of June 30, 2021		Current period provision	Charge-offs	Recoveries	Balance as of December 31, 2020
Allowance for Credit Losses
Personal Banking:
Residential mortgage loans	$	7,247	1,330	(1,625)	276	7,266
Home equity loans	7,239		1,601	(607)	253	5,992
Vehicle loans	12,888		(423)	(2,905)	1,391	14,825
Consumer loans	2,801		1,342	(2,099)	687	2,871
Total Personal Banking	30,175		3,850	(7,236)	2,607	30,954

Commercial Banking:
Commercial real estate loans	64,580		(7,756)	(7,700)	655	79,381
Commercial real estate loans - owner occupied	4,729		(4,904)	(890)	5	10,518
Commercial loans	17,846		3,190	(1,215)	2,297	13,574
Total Commercial Banking	87,155		(9,470)	(9,805)	2,957	103,473
Total	$	117,330	(5,620)	(17,041)	5,564	134,427

Allowance for Credit Losses - off-balance sheet exposure
Personal Banking:
Residential mortgage loans	$	2	—	—	—	2
Home equity loans	42		7	—	—	35

Total Personal Banking	44		7	—	—	37

Commercial Banking:
Commercial real estate loans	1,932		(1,517)	—	—	3,449
Commercial real estate loans - owner occupied	181		(145)	—	—	326
Commercial loans	1,232		(1,319)	—	—	2,551
Total Commercial Banking	3,345		(2,981)	—	—	6,326
Total off-balance sheet exposure	$	3,389	(2,974)	—	—	6,363

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The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable at June 30, 2022 (in thousands):


	Total loans receivable		Allowance for credit losses	Nonaccrual loans (1)	Loans 90 days past due and accruing	TDRs	Allowance related to TDRs	Additional commitments to customers with loans classified as TDRs
Personal Banking:
Residential mortgage loans	$	3,286,775	16,158	7,616	—	6,157	861	—
Home equity loans	1,280,492		5,232	4,156	—	1,465	472	—
Vehicle loans	1,895,735		15,738	3,166	—	—	—	—
Consumer loans	106,810		779	136	379	—	—	—
Total Personal Banking	6,569,812		37,907	15,074	379	7,622	1,333	—

Commercial Banking:
Commercial real estate loans	2,485,974		39,641	76,437	—	42,180	1,558	18
Commercial real estate loans - owner occupied	390,202		4,095	590	—	144	23	—
Commercial loans	986,836		16,712	6,284	—	4,291	549	327
Total Commercial Banking	3,863,012		60,448	83,311	—	46,615	2,130	345

Total	$	10,432,824	98,355	98,385	379	54,237	3,463	345

(1)Includes $37.6 million of nonaccrual TDRs.

The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable at December 31, 2021 (in thousands):


	Total loans receivable		Allowance for credit losses	Nonaccrual loans (1)	Loans 90 days past due and accruing	TDRs	Allowance related to TDRs	Additional commitments to customers with loans classified as TDRs
Personal Banking:
Residential mortgage loans	$	2,994,620	7,373	10,402	—	6,749	1,442	—
Home equity loans	1,319,931		5,300	5,758	—	1,781	718	—
Vehicle loans	1,484,231		15,483	3,263	—	—	—	—
Consumer loans	354,517		2,884	675	331	—	—	—
Total Personal Banking	6,153,299		31,040	20,098	331	8,530	2,160	—

Commercial Banking:
Commercial real estate loans	2,625,481		54,141	129,666	—	17,025	2,024	400
Commercial real estate loans - owner occupied	390,003		3,883	1,233	—	159	24	—
Commercial loans	847,609		13,177	7,474	—	4,574	609	60
Total Commercial Banking	3,863,093		71,201	138,373	—	21,758	2,657	460

Total	$	10,016,392	102,241	158,471	331	30,288	4,817	460

(1)Includes $17.2 million of nonaccrual TDRs.

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We present the amortized cost of our loans on nonaccrual status including such loans with no allowance. The following table presents the amortized cost of our loans on nonaccrual status as of the beginning and end of the period ended June 30, 2022 (in thousands):


			June 30, 2022
	Nonaccrual loans at January 1, 2022		Nonaccrual loans with an allowance	Nonaccrual loans with no allowance	Total nonaccrual loans at the end of the period	Loans 90 days past due and accruing
Personal Banking:
Residential mortgage loans	$	10,402	7,616	—	7,616	—
Home equity loans	5,758		3,956	200	4,156	—
Vehicle loans	3,263		1,941	1,225	3,166	—
Consumer loans	675		136	—	136	379
Total Personal Banking	20,098		13,649	1,425	15,074	379

Commercial Banking:
Commercial real estate loans	129,666		10,534	65,903	76,437	—
Commercial real estate loans - owner occupied	1,233		590	—	590	—
Commercial loans	7,474		3,506	2,778	6,284	—
Total Commercial Banking	138,373		14,630	68,681	83,311	—

Total	$	158,471	28,279	70,106	98,385	379

During the three and six months ended June 30, 2022, we recognized $137,000 and $290,000 of interest income on nonaccrual and troubled debt restructuring loans.

The following table presents the amortized cost of our loans on nonaccrual status as of the year ended December 31, 2021 (in thousands):


			December 31, 2021
	Nonaccrual loans at January 1, 2021		Nonaccrual loans with an allowance	Nonaccrual loans with no allowance	Total nonaccrual loans at the end of the period	Loans 90 days past due and accruing
Personal Banking:
Residential mortgage loans	$	15,924	10,402	—	10,402	—
Home equity loans	9,123		5,551	207	5,758	—
Vehicle loans	5,533		3,251	12	3,263	—
Consumer loans	1,031		674	1	675	331
Total Personal Banking	31,611		19,878	220	20,098	331

Commercial Banking:
Commercial real estate loans	44,092		65,529	64,137	129,666	—
Commercial real estate loans - owner occupied	3,642		1,233	—	1,233	—
Commercial loans	23,487		3,941	3,533	7,474	—
Total Commercial Banking	71,221		70,703	67,670	138,373	—

Total	$	102,832	90,581	67,890	158,471	331

During the year ended December 31, 2021, we recognized $803,000 of interest income on nonaccrual and troubled debt restructuring loans.

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The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of June 30, 2022 (in thousands):


	Real estate		Equipment	Total
Personal Banking:
Residential mortgage loans	$	575	—	575
Home equity loans	100		—	100


Total Personal Banking	675		—	675

Commercial Banking:
Commercial real estate loans	74,267		—	74,267

Commercial loans	3,810		1,262	5,072
Total Commercial Banking	78,077		1,262	79,339

Total	$	78,752	1,262	80,014

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2021 (in thousands):


	Real estate		Equipment	Total
Personal Banking:
Residential mortgage loans	$	580	—	580
Home equity loans	99		—	99


Total Personal Banking	679		—	679

Commercial Banking:
Commercial real estate loans	119,825		1,705	121,530

Commercial loans	3,973		1,926	5,899
Total Commercial Banking	123,798		3,631	127,429

Total	$	124,477	3,631	128,108

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Our loan portfolios include loans that have been modified in a TDR, where concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include: extending the note’s maturity date, permitting interest only payments, reducing the interest rate to a rate lower than current market rates for new debt with similar risk, reducing the principal payment, principal forbearance or other actions. These concessions are applicable to all loan segments and classes. Certain TDRs are classified as nonperforming at the time of restructuring and may be returned to performing status after considering the borrower’s sustained repayment performance for a period of at least six months.

When we modify loans in a TDR, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, the loan’s observable market price or the current fair value of the collateral, less selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premiums or discounts), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, we evaluate all TDRs, including those that have payment defaults, for possible impairment in accordance with ASC 310-10. As a result, loans modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan.

Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, we evaluate the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, partial charge-offs may be taken to further write-down the carrying value of the loan, or the loan may be charged-off completely.

In March 2020 and August 2020, joint statements were issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as nonaccrual during the term of the modification. For borrowers who are 30 days or more past due when enrolling in a loan modification program related to the COVID-19 pandemic, we evaluate the loan modifications under our existing TDR framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest. This TDR relief under the CARES Act was extended by the Consolidated Appropriations Act, 2021 (“CAA”), signed into law on December 27, 2020. Under the CAA, such relief will continue until the earlier of 60 days after the date the COVID-19 national emergency comes to an end or January 1, 2022. Certain loan modifications made during the prior year were done in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. Accordingly, these loans were not categorized as TDRs.

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The following table provides a roll forward of troubled debt restructurings for the periods indicated (dollars in thousands):


	For the quarter ended June 30,
	2022			2021
	Number of contracts	Amount		Number of contracts	Amount
Beginning TDR balance:	130	$	28,701	164	$	27,510
New TDRs	2	26,115		2	2,295
Re-modified TDRs	5	6,403		1	344
Net paydowns	—	(479)		—	(1,610)







Paid-off loans:
Residential mortgage loans	—	—		4	(726)
Home equity loans	1	(13)		1	(11)

Commercial real estate loans	2	(80)		2	(302)

Commercial loans	1	(7)		1	(69)
Ending TDR balance:	128	$	54,237	158	$	27,431
Accruing TDRs		$	16,590		$	18,480
Nonaccrual TDRs		37,647			8,951


	For the six months ended June 30,
	2022			2021
	Number of contracts	Amount		Number of contracts	Amount
Beginning TDR balance:	134	$	30,288	170	$	32,135
New TDRs	2	26,115		2	2,295
Re-modified TDRs	6	6,603		5	1,241
Net paydowns	—	(1,509)		—	(4,073)
Charge-offs:
Residential mortgage loans	1	(3)		—	—





Paid-off loans:
Residential mortgage loans	1	(201)		4	(726)
Home equity loans	2	(77)		1	(11)

Commercial real estate loans	3	(369)		5	(2,686)
Commercial real estate loans - owner occupied	—	—		1	(47)
Commercial loans	1	(7)		3	(697)
Ending TDR balance:	128	$	54,237	158	$	27,431
Accruing TDRs		$	16,590		$	18,480
Nonaccrual TDRs		37,647			8,951

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The following table provides information related to TDRs (including re-modified TDRs) by portfolio segment and by class of financing receivable during the periods indicated (in thousands):


	For the quarter ended June 30, 2022					For the six months ended June 30, 2022
	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance








Commercial Banking:
Commercial real estate loans	3	$	58,042	29,292	1,122	4	$	58,372	29,492	1,133

Commercial loans	4	3,524		3,226	410	4	3,524		3,226	411
Total Commercial Banking	7	61,566		32,518	1,532	8	61,896		32,718	1,544

Total	7	$	61,566	32,518	1,532	8	$	61,896	32,718	1,544


	For the quarter ended June 30, 2021					For the six months ended June 30, 2021
	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance

Personal Banking:
Residential mortgage loans	—	$	—	—	—	1	$	121	116	10
Home equity loans	—	—		—	—	1	3		—	—


Total Personal Banking	—	—		—	—	2	124		116	10

Commercial Banking:
Commercial real estate loans	1	725		343	34	3	1,537		1,125	148

Commercial loans	2	2,396		2,295	—	2	2,396		2,295	—
Total Commercial Banking	3	3,121		2,638	34	5	3,933		3,420	148

Total	3	$	3,121	2,638	34	7	$	4,057	3,536	158

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The following table provides information as of June 30, 2022 for TDRs (including re-modified TDRs) by type of modification, by portfolio segment and class of financing receivable for modifications during the quarter ended June 30, 2022 (in thousands):


		Type of modification
	Number of contracts	Rate		Maturity date	Total







Commercial Banking:
Commercial real estate loans	3	$	4,179	25,113	29,292

Commercial loans	4	—		3,226	3,226
Total Commercial Banking	7	4,179		28,339	32,518

Total	7	$	4,179	28,339	32,518

The following table provides information as of June 30, 2021 for TDRs (including re-modified TDRs) by type of modification, by portfolio segment and class of financing receivable for modifications during the quarter ended June 30, 2021 (in thousands):


		Type of modification
	Number of contracts	Rate		Maturity date	Total







Commercial Banking:
Commercial real estate loans	1	$	—	343	343

Commercial loans	2	—		2,295	2,295
Total Commercial Banking	3	—		2,638	2,638

Total	3	$	—	2,638	2,638


		Type of modification
	Number of contracts	Rate		Maturity date	Total







Commercial Banking:
Commercial real estate loans	4	$	4,179	25,313	29,492

Commercial loans	4	—		3,226	3,226
Total Commercial Banking	8	4,179		28,539	32,718

Total	8	$	4,179	28,539	32,718

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		Type of modification
	Number of contracts	Rate		Maturity date	Other	Total
Personal Banking:
Residential mortgage loans	1	$	116	—	—	116
Home equity loans	1	—		—	—	—


Total Personal Banking	2	116		—	—	116

Commercial Banking:
Commercial real estate loans	3	—		1,052	73	1,125

Commercial loans	2	—		2,295	—	2,295
Total Commercial Banking	5	—		3,347	73	3,420

Total	7	$	116	3,347	73	3,536

The following table provides information related to troubled debt restructurings modified within the previous twelve months of June 30, 2022 that subsequently defaulted:


	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance






Commercial Banking:
Commercial real estate loans	1	$	4,167	3,823	—

Total Commercial Banking	1	4,167		3,823	—

Total	1	$	4,167	3,823	—

The following table provides information related to troubled debt restructurings modified within the previous twelve months of June 30, 2021 that subsequently defaulted:


	Number of contracts	Recorded investment at the time of modification		Current recorded investment	Current allowance






Commercial Banking:
Commercial real estate loans	1	$	454	454	50

Total Commercial Banking	1	454		454	50

Total	1	$	454	454	50

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The following table provides information related to the amortized cost basis of loan payment delinquencies at June 30, 2022 (in thousands):


	30-59 days delinquent		60-89 days delinquent	90 days or greater delinquent	Total delinquency	Current	Total loans receivable	90 days or greater delinquent and accruing

Personal Banking:
Residential mortgage loans	$	785	5,941	5,445	12,171	3,274,604	3,286,775	—
Home equity loans	3,664		952	2,081	6,697	1,273,795	1,280,492	—
Vehicle loans	6,449		1,170	1,861	9,480	1,886,255	1,895,735	—
Consumer loans	449		290	460	1,199	105,611	106,810	379
Total Personal Banking	11,347		8,353	9,847	29,547	6,540,265	6,569,812	379

Commercial Banking:
Commercial real estate loans	2,581		1,350	14,823	18,754	2,467,220	2,485,974	—
Commercial real estate loans - owner occupied	120		122	126	368	389,834	390,202	—
Commercial loans	1,486		341	583	2,410	984,426	986,836	—
Total Commercial Banking	4,187		1,813	15,532	21,532	3,841,480	3,863,012	—















Total loans	$	15,534	10,166	25,379	51,079	10,381,745	10,432,824	379

The following table provides information related to the amortized cost basis of loan payment delinquencies at December 31, 2021 (in thousands):


	30-59 days delinquent		60-89 days delinquent	90 days or greater delinquent	Total delinquency	Current	Total loans receivable	90 days or greater delinquent and accruing

Personal Banking:
Residential mortgage loans	$	20,567	5,433	7,641	33,641	2,960,979	2,994,620	—
Home equity loans	3,153		949	4,262	8,364	1,311,567	1,319,931	—
Vehicle loans	5,331		1,487	1,635	8,453	1,475,778	1,484,231	—
Consumer loans	1,205		519	765	2,489	352,028	354,517	331
Total Personal Banking	30,256		8,388	14,303	52,947	6,100,352	6,153,299	331

Commercial Banking:
Commercial real estate loans	16,938		699	23,489	41,126	2,584,355	2,625,481	—
Commercial real estate loans - owner occupied	127		70	574	771	389,232	390,003	—
Commercial loans	193		727	1,105	2,025	845,584	847,609	—
Total Commercial Banking	17,258		1,496	25,168	43,922	3,819,171	3,863,093	—
Total originated loans	$	47,514	9,884	39,471	96,869	9,919,523	10,016,392	331

Credit Quality Indicators: For Commercial Banking we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze loans individually by classifying the loans by credit risk. Credit relationships greater than or equal to $1.0 million classified as special mention or substandard are reviewed quarterly for deterioration or improvement to determine if the loan is appropriately classified. We use the following definitions for risk ratings other than pass:

Special Mention — Loans designated as special mention have specific, well-defined risk issues, which create a high level of uncertainty regarding the long-term viability of the business. Loans in this class are considered to have high-risk characteristics. A special mention loan exhibits material negative financial trends due to company-specific or systemic conditions. If these potential weaknesses are not mitigated, they threaten the borrower’s capacity to meet its debt obligations. Special mention loans still demonstrate sufficient financial flexibility to react to and positively address the root cause of the adverse financial trends without significant deviations from their current business strategy. Their potential weaknesses deserve our close attention and warrant enhanced monitoring.

Substandard — Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the

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liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard. In addition, those weaknesses make collection or liquidation in full highly questionable and improbable. A loan classified as doubtful exhibits discernible loss potential, but a complete loss seems very unlikely. The possibility of a loss on a doubtful loan is high, but because of certain important and reasonably specific pending factors that may strengthen the loan, its classification as an estimated loss is deferred until a more exact status can be determined.

Loss — Loans classified as loss are considered uncollectible and of such value that the continuance as a loan is not warranted. A loss classification does not mean that the loan has no recovery or salvage value; instead, it means that it is not practical or desirable to defer writing off all or a portion of a basically worthless loan even though partial recovery may be possible in the future.

For Personal Banking loans a pass risk rating is maintained until they are greater than 90 days past due, and risk rating reclassification is based primarily on past due status of the loan. The risk rating categories can generally be described by the following groupings:

Pass — Loans classified as pass are homogeneous loans that are less than 90 days past due from the required payment date at month-end.

Substandard — Loans classified as substandard are homogeneous loans that are greater than 90 days past due from the required payment date at month-end, loans classified as TDRs or homogenous retail loans that are greater than 180 days past due from the required payment date at month-end that has been written down to the value of underlying collateral, less costs to sell.

Doubtful — Loans classified as doubtful are homogeneous loans that are greater than 180 days past due from the required payment date at month-end and not written down to the value of underlying collateral. These loans are generally charged-off in the month in which the 180 day period elapses.

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The following table presents the amortized cost basis of our loan portfolio by year of origination and credit quality indicator for each portfolio segment as of June 30, 2022 (in thousands):


	YTD June 30, 2022		2021	2020	2019	2018	Prior	Revolving loans	Revolving loans converted to term loans	Total loans receivable
Personal Banking:
Residential mortgage loans
Pass	$	290,471	843,802	572,648	278,086	141,007	1,147,103	—	—	3,273,117
Substandard	—		106	710	258	417	12,167	—	—	13,658
Total residential mortgage loans	290,471		843,908	573,358	278,344	141,424	1,159,270	—	—	3,286,775
Home equity loans
Pass	62,500		138,755	187,786	121,932	56,161	231,691	435,304	40,995	1,275,124
Substandard	—		48	—	378	345	2,889	845	863	5,368
Total home equity loans	62,500		138,803	187,786	122,310	56,506	234,580	436,149	41,858	1,280,492
Vehicle loans
Pass	527,150		742,059	288,651	181,929	97,160	55,620	—	—	1,892,569
Substandard	83		964	402	764	578	375	—	—	3,166
Total vehicle loans	527,233		743,023	289,053	182,693	97,738	55,995	—	—	1,895,735
Consumer loans
Pass	9,391		12,822	5,966	5,235	3,613	6,244	61,662	1,361	106,294
Substandard	—		27	—	10	5	61	412	1	516
Total consumer loans	9,391		12,849	5,966	5,245	3,618	6,305	62,074	1,362	106,810
Total Personal Banking	889,595		1,738,583	1,056,163	588,592	299,286	1,456,150	498,223	43,220	6,569,812
Business Banking:
Commercial real estate loans
Pass	124,555		344,825	415,474	297,289	235,348	798,170	28,902	9,104	2,253,667
Special mention	—		798	1,466	20,818	1,077	6,863	988	15	32,025
Substandard	—		96	7,117	28,401	43,407	116,480	564	4,217	200,282


Total commercial real estate loans	124,555		345,719	424,057	346,508	279,832	921,513	30,454	13,336	2,485,974
Commercial real estate loans - owner occupied
Pass	41,726		63,126	18,245	39,001	47,377	132,060	3,233	1,772	346,540
Special mention	—		—	—	15,067	3,698	689	61	—	19,515
Substandard	—		—	—	5,360	1,934	14,747	—	2,106	24,147


Total commercial real estate loans - owner occupied	41,726		63,126	18,245	59,428	53,009	147,496	3,294	3,878	390,202
Commercial loans
Pass	335,778		127,282	63,945	54,761	21,293	57,692	288,640	4,738	954,129
Special mention	153		155	283	486	47	—	1,344	—	2,468
Substandard	569		306	896	3,309	2,596	1,881	11,060	9,622	30,239


Total commercial loans	336,500		127,743	65,124	58,556	23,936	59,573	301,044	14,360	986,836
Total Business Banking	502,781		536,588	507,426	464,492	356,777	1,128,582	334,792	31,574	3,863,012

Total loans	$	1,392,376	2,275,171	1,563,589	1,053,084	656,063	2,584,732	833,015	74,794	10,432,824

During the six months ended June 30, 2022, $9.2 million of revolving loans were converted to term loans.

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The following table presents the amortized cost basis of our loan portfolio by year of origination and credit quality indicator for each portfolio segment as of December 31, 2021 (in thousands):


	2021		2020	2019	2018	2017	Prior	Revolving loans	Revolving loans converted to term loans	Total loans receivable
Personal Banking:
Residential mortgage loans
Pass	$	644,862	602,429	304,275	156,639	171,240	1,098,635	—	—	2,978,080
Substandard	138		489	377	538	882	14,116	—	—	16,540
Total residential mortgage loans	645,000		602,918	304,652	157,177	172,122	1,112,751	—	—	2,994,620
Home equity loans
Pass	150,847		210,224	138,661	65,011	61,692	209,959	435,660	40,766	1,312,820
Substandard	—		—	441	60	455	3,820	1,275	1,060	7,111
Total home equity loans	150,847		210,224	139,102	65,071	62,147	213,779	436,935	41,826	1,319,931
Vehicle loans
Pass	801,084		292,804	205,653	119,304	34,546	27,576	—	—	1,480,967
Substandard	387		365	1,141	745	379	247	—	—	3,264
Total vehicle loans	801,471		293,169	206,794	120,049	34,925	27,823	—	—	1,484,231
Consumer loans
Pass	117,856		81,266	47,195	20,595	9,794	12,202	63,025	1,578	353,511
Substandard	213		161	105	64	26	50	357	30	1,006
Total consumer loans	118,069		81,427	47,300	20,659	9,820	12,252	63,382	1,608	354,517
Total Personal Banking	1,715,387		1,187,738	697,848	362,956	279,014	1,366,605	500,317	43,434	6,153,299
Business Banking:
Commercial real estate loans
Pass	306,689		433,219	335,541	263,524	221,450	683,537	26,288	10,179	2,280,427
Special mention	803		1,808	52,513	3,296	1,394	8,529	729	23	69,095
Substandard	—		34,153	44,712	46,045	56,077	89,311	492	5,169	275,959


Total commercial real estate loans	307,492		469,180	432,766	312,865	278,921	781,377	27,509	15,371	2,625,481
Commercial real estate - owner occupied
Pass	69,084		19,452	51,997	60,824	57,676	94,687	2,822	2,707	359,249
Special mention	—		—	—	769	1,959	1,444	856	—	5,028
Substandard	—		—	3,575	2,887	7,840	10,602	—	822	25,726


Total commercial real estate - owner occupied loans	69,084		19,452	55,572	64,480	67,475	106,733	3,678	3,529	390,003
Commercial loans
Pass	224,367		110,171	73,276	27,668	20,748	76,987	262,805	12,301	808,323
Special mention	197		661	812	1,195	50	581	2,234	—	5,730
Substandard	329		4,767	5,102	4,437	1,529	2,116	6,667	8,609	33,556


Total commercial loans	224,893		115,599	79,190	33,300	22,327	79,684	271,706	20,910	847,609
Total Business Banking	601,469		604,231	567,528	410,645	368,723	967,794	302,893	39,810	3,863,093

Total loans	$	2,316,856	1,791,969	1,265,376	773,601	647,737	2,334,399	803,210	83,244	10,016,392

During the year ended December 31, 2021, $27.3 million of revolving loans were converted to term loans.

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(4) Goodwill and Other Intangible Assets

The following table provides information for intangible assets subject to amortization at the dates indicated (in thousands):


	June 30, 2022		December 31, 2021
Amortizable intangible assets:
Core deposit intangibles - gross	$	74,899	74,899

Less: accumulated amortization	(64,416)		(62,158)
Core deposit intangibles - net	$	10,483	12,741
Customer and Contract intangible assets - gross	$	12,775	12,775

Customer list intangible assets disposed of due to sale of insurance business	—		(1,547)
Less: accumulated amortization	(12,720)		(11,133)
Customer and Contract intangible assets - net	55		95
Total intangible assets - net	$	10,538	12,836

The following table shows the actual aggregate amortization expense for the quarters and six months ended June 30, 2022 and 2021, as well as the estimated aggregate amortization expense, based upon current levels of intangible assets, for the current fiscal year and each of the five succeeding fiscal years (in thousands):


For the quarter ended June 30, 2022	$	1,115
For the quarter ended June 30, 2021	1,433
For the six months ended June 30, 2022	2,298
For the six months ended June 30, 2021	3,027
For the year ending December 31, 2022	4,277
For the year ending December 31, 2023	3,270
For the year ending December 31, 2024	2,452
For the year ending December 31, 2025	1,662
For the year ending December 31, 2026	871
For the year ending December 31, 2027	304

The following table provides information for the changes in the carrying amount of goodwill (in thousands):


	Total
Balance at December 31, 2020	$	382,279
Purchase accounting adjustment	77
Goodwill disposed of due to sale of insurance business	(1,359)
Balance at December 31, 2021	380,997


Balance at June 30, 2022	$	380,997

We performed our annual goodwill impairment test as of June 30, 2022 in accordance with ASC 350 and concluded that goodwill was not impaired.

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(5) Borrowed Funds

(a) Borrowings

Borrowed funds at June 30, 2022 and December 31, 2021 are presented in the following table:


	June 30, 2022				December 31, 2021
	Amount		Average rate		Amount		Average rate






Collateralized borrowings, due within one year	$	117,440	0.19	%	$	139,093	0.19	%
Collateral received, due within one year	13,050		1.58	%	—		—
Total borrowed funds	$	130,490			$	139,093

Borrowings from the Federal Home Loan Banks (“FHLB”) of Pittsburgh and Indianapolis, if any, are secured by our residential first mortgage and other qualifying loans. Certain of these borrowings are subject to restrictions or penalties in the event of prepayment.

The revolving line of credit with the FHLB of Pittsburgh carries a commitment of $250.0 million. The rate is adjusted daily by the FHLB of Pittsburgh, and any borrowings on this line may be repaid at any time without penalty. The revolving line of credit had no balance as of June 30, 2022 and December 31, 2021.

At June 30, 2022 and December 31, 2021, collateralized borrowings due within one year were $117.4 million and $139.1 million, respectively. These borrowings are collateralized by cash or various securities held in safekeeping by the FHLB.

At June 30, 2022 and December 31, 2021, collateral received was $13.1 million and $0, respectively. This represents collateral posted to us from our derivative counterparties.

On September 9, 2020, the Company issued $125.0 million of 4.00% fixed-to-floating rate subordinated notes with a maturity date of September 15, 2030. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 4.00%, payable semi-annually in arrears commencing on March 15, 2021, and a floating rate of interest equivalent to the 3-month Secured Overnight Financing Rate (“SOFR”) plus 3.89% payable quarterly in arrears commencing on December 15, 2025. The subordinated debt issuance costs of approximately $1.8 million are being amortized over five years on a straight-line basis into interest expense. At June 30, 2022 and December 31, 2021, subordinated debentures, net of issuance costs, were $113.7 million and $123.6 million, respectively.

(b) Trust Preferred Securities

The Company has seven statutory business trusts: Northwest Bancorp Capital Trust III, a Delaware statutory business trust, Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust, LNB Trust II, a Delaware statutory business trust, Union National Capital Trust I (“UNCT I”), a Delaware statutory business trust, Union National Capital Trust II (“UNCT II”), a Delaware statutory business trust, MFBC Statutory Trust I, a Delaware statutory trust, and Universal Preferred Trust, a Delaware statutory trust (the “Trusts”). The Trusts exist solely to issue preferred securities to third parties for cash, issue common securities to the Company in exchange for capitalization of the Trusts, invest the proceeds from the sale of trust securities in an equivalent amount of debentures of the Company, and engage in other activities that are incidental to those previously listed.

The Trusts have invested the proceeds of the offerings in junior subordinated deferrable interest debentures issued by the Company. The structure of these debentures mirrors the structure of the trust-preferred securities. These subordinated debentures are the sole assets of the Trusts. As the shareholders of the trust preferred securities are the primary beneficiaries of the Trusts, the Trusts are not consolidated in our financial statements.

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The following table sets forth a summary of the cumulative trust preferred securities and the junior subordinated debt held by the Trust as of the date listed.


	Maturity date	Interest rate	Capital debt securities		June 30, 2022		December 31, 2021
Northwest Bancorp Capital Trust III	December 30, 2035	3-month LIBOR plus 1.38%	$	50,000	$	51,547	51,547
Northwest Bancorp Statutory Trust IV	December 15, 2035	3-month LIBOR plus 1.38%	50,000		51,547		51,547
LNB Trust II	June 15, 2037	3-month LIBOR plus 1.48%	7,875		8,119		8,119
UNCT I (1)	January 23, 2034	3-month LIBOR plus 2.85%	8,000		7,962		7,950
UNCT II (1)	November 23, 2034	3-month LIBOR plus 2.00%	3,000		2,755		2,741
MFBC Statutory Trust I (1)	September 15, 2035	3-month LIBOR plus 1.70%	5,000		3,632		3,580
Universal Preferred Trust (1)	October 7, 2035	3-month LIBOR plus 1.69%	5,000		3,622		3,570
					$	129,184	129,054

(1) Net of discounts due to the fair value adjustment made at the time of acquisition.

Cash distributions on the trust securities are made on a quarterly basis to the extent interest on the debentures is received by the Trusts. We have the right to defer payment of interest on the subordinated debentures at any time, or from time-to-time, for periods not exceeding five years. If interest payments on the subordinated debentures are deferred, the distributions on the trust securities also are deferred. To date there have been no interest deferrals. Interest on the subordinated debentures and distributions on the trust securities is cumulative. Our obligation constitutes a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the trust under the preferred securities.

The Trusts must redeem the preferred securities when the debentures are paid at maturity or upon an earlier redemption of the debentures to the extent the debentures are redeemed. All or part of the debentures may be redeemed at any time. Also, the debentures may be redeemed at any time if existing laws or regulations, or the interpretation or application of these laws or regulations, change causing:

•the interest on the debentures to no longer be deductible by the Company for federal income tax purposes;

•the trusts to become subject to federal income tax or to certain other taxes or governmental charges;

•the trusts to register as an investment company; or

•the preferred securities to no longer qualify as Tier I capital.

We may, at any time, dissolve any of the Trusts and distribute the debentures to the trust security holders, subject to receipt of any required regulatory approvals.

(6) Guarantees

We issue standby letters of credit in the normal course of business. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party. We are required to perform under a standby letter of credit when drawn upon by the guaranteed third party in the case of nonperformance by our customer. The credit risk associated with standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to normal loan underwriting procedures. Collateral may be obtained based on management’s credit assessment of the customer. At June 30, 2022, the maximum potential amount of future payments we could be required to make under these non-recourse standby letters of credit was $46.5 million, of which $36.8 million is fully collateralized. At June 30, 2022, we had a liability which represents deferred income of $685,000 related to the standby letters of credit.

(7) Earnings Per Share

Basic earnings per common share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period, without considering any dilutive items. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

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The following table sets forth the computation of basic and diluted EPS (in thousands, except share data and per share amounts):


	Quarter ended June 30,			Six months ended June 30,
	2022		2021	2022	2021
Net income	$	33,426	48,967	61,713	89,204
Less: Dividends and undistributed earnings allocated to participating securities	159		340	294	619
Net income available to common shareholders	$	33,267	48,627	61,419	88,585

Weighted average common shares outstanding	126,059,165		126,749,707	125,960,997	126,456,814
Add: Participating shares outstanding	604,613		887,958	604,613	887,958
Total weighted average common shares and dilutive potential shares	126,663,778		127,637,665	126,565,610	127,344,772

Basic earnings per share	$	0.26	0.38	0.49	0.70

Diluted earnings per share	$	0.26	0.38	0.49	0.70

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(8) Pension and Other Post-Retirement Benefits

The following table sets forth the net periodic costs for the defined benefit pension plans and post-retirement healthcare plans for the periods indicated (in thousands):


	Quarter ended June 30,
	Pension benefits			Other post-retirement benefits
	2022		2021	2022	2021
Service cost	$	2,599	2,860	—	—
Interest cost	1,671		1,518	10	5
Expected return on plan assets	(3,864)		(3,465)	—	—
Amortization of prior service cost	(564)		(581)	—	—
Amortization of the net loss	381		1,040	2	3
Net periodic cost	$	223	1,372	12	8



	Six months ended June 30,
	Pension benefits			Other post-retirement benefits
	2022		2021	2022	2021
Service cost	$	5,198	5,720	—	—
Interest cost	3,342		3,035	20	9
Expected return on plan assets	(7,728)		(6,930)	—	—
Amortization of prior service cost	(1,128)		(1,161)	—	—
Amortization of the net loss	762		2,079	4	7
Net periodic cost	$	446	2,743	24	16

We anticipate making a contribution to our defined benefit pension plan between $0 and $2.0 million during the year ending December 31, 2022.

(9) Disclosures About Fair Value of Financial Instruments

We are required to disclose fair value information about financial instruments whether or not recognized in the Consolidated Statement of Financial Condition. Fair value information of certain financial instruments and all nonfinancial instruments is not required to be disclosed. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Financial assets and liabilities recognized or disclosed at fair value on a recurring basis and certain financial assets and liabilities on a non-recurring basis are accounted for using a three-level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. This hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used.

Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques:

• Level 1 - Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.

• Level 2 - Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, for example, matrix pricing.

• Level 3 - Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following:

◦Quotes from brokers or other external sources that are not considered binding;

◦Quotes from brokers or other external sources where it cannot be determined that market participants would in fact transact for the asset or liability at the quoted price; and

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◦Quotes and other information from brokers or other external sources where the inputs are not deemed observable.

We are responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. We perform due diligence to understand the inputs used or how the data was calculated or derived. We also corroborate the reasonableness of external inputs in the valuation process.

The carrying amounts reported in the Consolidated Statement of Financial Condition approximate fair value for the following financial instruments: cash and cash equivalents, marketable securities available-for-sale, residential mortgage loans held-for-sale, accrued interest receivable, interest rate lock commitments, forward commitments, interest rate swaps, savings and checking deposits, borrowed funds, foreign exchange swaps, risk participation agreements, and accrued interest payable.

Marketable Securities

Where available, market values are based on quoted market prices, dealer quotes, and prices obtained from independent pricing services.

Debt Securities — available-for-sale - Generally, debt securities are valued using pricing for similar securities, recently executed transactions and other pricing models utilizing observable inputs. The valuation for most debt securities is classified as Level 2. Securities within Level 2 include corporate bonds, municipal bonds, mortgage-backed securities and U.S. government obligations. Certain debt securities which were AAA rated at purchase do not have an active market and as such we have used an alternative method to determine the fair value of these securities. The fair value has been determined using a discounted cash flow model using market assumptions, which generally include cash flow, collateral and other market assumptions. As such, securities which otherwise would have been classified as Level 2 securities if an active market for those assets or similar assets existed are included herein as Level 3 assets.

Debt Securities — held-to-maturity - The fair value of debt securities held-to-maturity is determined in the same manner as debt securities available-for-sale.

Loans Receivable

Loans with comparable characteristics including collateral and re-pricing structures are segregated for valuation purposes. Each loan pool is separately valued utilizing a discounted cash flow analysis. Projected monthly cash flows are discounted to present value using a market rate for comparable loans, which is not considered an exit price. Characteristics of comparable loans include remaining term, coupon interest, and estimated prepayment speeds. Delinquent loans are separately evaluated given the impact delinquency has on the projected future cash flow of the loan including the approximate discount or market rate, which is not considered an exit price.

Loans Held-for-Sale

The estimated fair value of loans held-for-sale is based on market bids obtained from potential buyers.

FHLB Stock

Due to the restrictions placed on transferability of FHLB stock, it is not practical to determine the fair value.

Deposit Liabilities

The estimated fair value of deposits with no stated maturity, which includes demand deposits, money market, and other savings accounts, is the amount payable on demand. Although market premiums paid for depository institutions reflect an additional value for these low-cost deposits, adjusting fair value for any value expected to be derived from retaining those deposits for a future period of time or from the benefit that results from the ability to fund interest-earning assets with these deposit liabilities is prohibited. The fair value estimates of deposit liabilities do not include the benefit that results from the low-cost funding provided by these deposits compared to the cost of borrowing funds in the market. Fair values for time deposits are estimated using a discounted cash flow calculation that applies contractual cost currently being offered in the existing portfolio to current market rates being offered locally for deposits of similar remaining maturities. The valuation adjustment for the portfolio consists of the present value of the difference of these two cash flows, discounted at the assumed market rate of the corresponding maturity.

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Borrowed Funds

Fixed rate advances are valued by comparing their contractual cost to the prevailing market cost. The carrying amount of repurchase agreements approximates their fair value.

Subordinated Debentures

The fair value of our subordinated debentures is calculated using the discounted cash flows at rates observable for other similarly traded liabilities.

Junior Subordinated Debentures

The fair value of junior subordinated debentures is calculated using the discounted cash flows at the prevailing rate of interest.

Interest Rate Lock Commitments and Forward Commitments

The fair value of interest rate lock commitments is based on the value of underlying loans held-for-sale which is based on quoted prices for similar loans in the secondary market. This value is then adjusted based on the probability of the loan closing (i.e., the “pull-through” amount, a significant unobservable input). The fair value of forward sale commitments is based on quoted prices from the secondary market based on the settlement date of the contracts.

Interest Rate and Foreign Exchange Swap Agreements and Risk Participation Agreements

The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the LIBOR swap curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using LIBOR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable. The fair value of the foreign exchange swap is derived from proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions we believe to be reasonable. Risk participation agreements are entered into when Northwest purchases a portion of a commercial loan that has an interest rate swap. Northwest assumes credit risk on its portion of the interest rate swap should the borrower fail to pay as agreed. The value of risk participation agreements is determined based on the value of the swap after considering the credit quality, probability of default, and loss given default of the borrower.

Off-Balance Sheet Financial Instruments

These financial instruments generally are not sold or traded, and estimated fair values are not readily available. However, the fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. Commitments to extend credit are generally short-term in nature and, if drawn upon, are issued under current market terms. At June 30, 2022 and December 31, 2021, there was no significant unrealized appreciation or depreciation on these financial instruments.

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The following table sets forth the carrying amount and estimated fair value of our financial instruments included in the Consolidated Statement of Financial Condition at June 30, 2022 (in thousands):


	Carrying amount		Estimated fair value	Level 1	Level 2	Level 3
Financial assets:
Cash and cash equivalents	$	504,532	504,532	504,532	—	—
Securities available-for-sale	1,364,743		1,364,743	—	1,364,743	—
Securities held-to-maturity	923,180		835,565	—	835,565	—
Loans receivable, net	10,303,316		9,619,661	—	—	9,619,661
Residential mortgage loans held-for-sale	31,153		31,153	—	—	31,153
Accrued interest receivable	27,708		27,708	27,708	—	—
Interest rate lock commitments	1,520		1,520	—	—	1,520
Forward commitments	213		213	—	213	—

Foreign exchange swaps	2		2	—	2	—
Interest rate swaps not designated as hedging instruments	31,018		31,018	—	31,018	—
FHLB stock	13,362		13,362	—	—	—
Total financial assets	$	13,200,747	12,429,477	532,240	2,231,541	9,652,334

Financial liabilities:
Savings and checking deposits	$	10,911,377	10,911,377	10,911,377	—	—
Time deposits	1,155,878		1,163,015	—	—	1,163,015

Borrowed funds	130,490		130,418	130,418	—	—
Subordinated debt	113,666		107,485	—	107,485	—
Junior subordinated debentures	129,184		114,729	—	—	114,729



Interest rate swaps not designated as hedging instruments	31,028		31,028	—	31,028	—
Risk participation agreements	18		18	—	18	—
Accrued interest payable	1,725		1,725	1,725	—	—
Total financial liabilities	$	12,473,366	12,459,795	11,043,520	138,531	1,277,744

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The following table sets forth the carrying amount and estimated fair value of our financial instruments included in the Consolidated Statement of Financial Condition at December 31, 2021 (in thousands):


	Carrying amount		Estimated fair value	Level 1	Level 2	Level 3
Financial assets:
Cash and cash equivalents	$	1,279,259	1,279,259	1,279,259	—	—
Securities available-for-sale	1,548,592		1,548,592	—	1,548,592	—
Securities held-to-maturity	768,154		751,513	—	751,513	—
Loans receivable, net	9,889,095		9,648,825	—	—	9,648,825
Residential mortgage loans held-for-sale	25,056		25,056	—	—	25,056
Accrued interest receivable	25,599		25,599	25,599	—	—
Interest rate lock commitments	1,684		1,684	—	—	1,684
Forward commitments	371		371	—	371	—
Interest rate swaps not designated as hedging instruments	31,254		31,254	—	31,254	—
FHLB stock	14,184		14,184	—	—	—
Total financial assets	$	13,583,248	13,326,337	1,304,858	2,331,730	9,675,565

Financial liabilities:
Savings and checking accounts	$	10,973,610	10,973,610	10,973,610	—	—
Time deposits	1,327,555		1,339,308	—	—	1,339,308
Borrowed funds	139,093		139,093	139,093	—	—
Subordinated debt	123,575		129,138	—	129,138	—
Junior subordinated debentures	129,054		120,083	—	—	120,083
Foreign exchange swaps	341		341	—	341	—
Interest rate swaps not designated as hedging instruments	31,357		31,357	—	31,357	—
Risk participation agreements	60		60	—	60	—
Accrued interest payable	1,804		1,804	1,804	—	—
Total financial liabilities	$	12,726,449	12,734,794	11,114,507	160,896	1,459,391

Fair value estimates are made at a point-in-time, based on relevant market data and information about the instrument. The methods and assumptions detailed above were used in estimating the fair value of financial instruments at both June 30, 2022 and December 31, 2021.

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The following table represents assets and liabilities measured at fair value on a recurring basis at June 30, 2022 (in thousands):


	Level 1		Level 2	Level 3	Total assets at fair value


Debt securities:
U.S. government and agencies	$	—	66,732	—	66,732
Government-sponsored enterprises	—		41,264	—	41,264
States and political subdivisions	—		115,397	—	115,397
Corporate	—		13,510	—	13,510
Total debt securities	—		236,903	—	236,903

Residential mortgage-backed securities:
GNMA	—		14,100	—	14,100
FNMA	—		132,487	—	132,487
FHLMC	—		83,164	—	83,164
Non-agency	—		410	—	410
Collateralized mortgage obligations:
GNMA	—		404,716	—	404,716
FNMA	—		217,403	—	217,403
FHLMC	—		275,560	—	275,560


Total mortgage-backed securities	—		1,127,840	—	1,127,840

Interest rate lock commitments	—		—	1,520	1,520
Forward commitments	—		213		213
Foreign exchange swaps	—		2	—	2
Interest rate swaps not designated as hedging instruments	—		31,018	—	31,018
Total assets	$	—	1,395,976	1,520	1,397,496



Interest rate swaps not designated as hedging instruments	—		31,028	—	31,028
Risk participation agreements	—		18	—	18
Total liabilities	$	—	31,046	—	31,046

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The following table represents assets and liabilities measured at fair value on a recurring basis at December 31, 2021 (in thousands):


	Level 1		Level 2	Level 3	Total assets at fair value


Debt securities:
U.S. government and agencies	$	—	75,891	—	75,891
Government-sponsored enterprises	—		46,085	—	46,085
States and political subdivisions	—		128,701	—	128,701

Total debt securities	—		250,677	—	250,677

Residential mortgage-backed securities:
GNMA	—		16,510	—	16,510
FNMA	—		160,063	—	160,063
FHLMC	—		100,055	—	100,055
Non-agency	—		431	—	431
Collateralized mortgage obligations:
GNMA	—		492,328	—	492,328
FNMA	—		269,060	—	269,060
FHLMC	—		259,468	—	259,468


Total mortgage-backed securities	—		1,297,915	—	1,297,915

Interest rate lock commitments	—		—	1,684	1,684
Forward commitments	—		371	—	371
Interest rate swaps not designated as hedging instruments	—		31,254	—	31,254
Total assets	$	—	1,580,217	1,684	1,581,901

Foreign exchange swaps	$	—	341	—	341
Interest rate swaps not designated as hedging instruments	—		31,357	—	31,357
Risk participation agreements	—		60	—	60
Total liabilities	$	—	31,758	—	31,758

The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):


	For the quarter ended June 30,			Six months ended June 30, 2022
	2022		2021	2022	2021
Beginning balance,	$	1,680	5,060	1,684	6,465





Interest rate lock commitments:

Net activity	(160)		(1,452)	(164)	(2,857)



Ending balance	$	1,520	3,608	1,520	3,608

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans held-for-sale, loans individually assessed, real estate owned, and mortgage servicing rights.

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The following table represents the fair market measurement for only those nonrecurring assets that had a fair market value below the carrying amount as of June 30, 2022 (in thousands):


	Level 1		Level 2	Level 3	Total assets at fair value
Loans individually assessed	$	—	—	7,168	7,168

Real estate owned, net	—		—	1,205	1,205
Total assets	$	—	—	8,373	8,373

The following table represents the fair market measurement for only those nonrecurring assets that had a fair market value below the carrying amount as of December 31, 2021 (in thousands):


	Level 1		Level 2	Level 3	Total assets at fair value
Loans individually assessed	$	—	—	46,968	46,968
Mortgage servicing rights	—		—	380	380
Real estate owned, net	—		—	873	873
Total assets	$	—	—	48,221	48,221

Individually Assessed Loans - A loan is considered to be individually assessed as described in Note 1(f) of the Notes to the Consolidated Financial Statements in Item 8 of Part II of our 2021 Annual Report on Form 10-K. We classify loans individually assessed as nonrecurring Level 3.

Real Estate Owned - Real estate owned is comprised of property acquired through foreclosure or voluntarily conveyed by borrowers. These assets are recorded on the date acquired at the lower of the related loan balance or fair value, less estimated disposition costs, with the fair value being determined by appraisal. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or fair value, less estimated disposition costs. We classify real estate owned as nonrecurring Level 3.

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at June 30, 2022 (in thousands):

Fair value

Valuation techniques

Significant
unobservable inputs

Range (weighted average)

Loans individually assessed

7,168

Appraisal value (1)

Estimated cost to sell

10.0%

Discounted cash flow

Discount rate

5.46% to 13.26% (6.86%)

Real estate owned, net

1,205

Appraisal value (1)

Estimated cost to sell

10.0%

Loans held for sale

31,153

Quoted prices for similar loans in active markets adjusted by an expected pull-through rate

Estimated pull-through rate

100.0%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent.

(10) Derivative Financial Instruments

We are a party to derivative financial instruments in the normal course of business to manage our own exposure to fluctuations in interest rates and to meet the needs of our customers. The primary derivatives that we use are interest rate swaps and caps and foreign exchange contracts, which are entered into with counterparties that meet established credit standards. We believe that the credit risk inherent in all of our derivative contracts is minimal based on our credit standards and the netting and collateral provisions of the interest rate swap agreements.

Derivatives Not Designated as Hedging Instruments

We act as an interest rate or foreign exchange swap counterparty for certain commercial borrowers in the normal course of servicing our customers, which are accounted for at fair value. We manage our exposure to such interest rate or foreign exchange swaps by entering into corresponding and offsetting interest rate swaps with third parties that mirror the terms of the swaps we have with the commercial borrowers. These positions (referred to as “customer swaps”) directly offset each other, and our exposure is the fair value of the derivatives due to changes in credit risk of our commercial borrowers and third parties. Customer swaps are recorded within other assets or other liabilities on the consolidated statement of financial condition at their estimated fair value. Changes to the

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fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the Consolidated Statement of Income.

We enter into interest rate lock commitments for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate within a specified period of time. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative financial instruments under applicable accounting guidance. Interest rate lock commitments on loans held-for-sale are carried at fair value in other assets on the consolidated statement of financial condition. Northwest sells loans to the secondary market on a mandatory or best efforts basis. The loans sold on a mandatory basis commit us to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date, or the commitment must be paired off. These forward commitments entered into on a mandatory delivery basis meet the definition of a derivative financial instrument. All closed loans to be sold on a mandatory delivery basis are classified as held-for-sale on the Consolidated Statement of Financial Condition. Changes to the fair value of the interest rate lock commitments and the forward commitments are recorded in mortgage banking income in the Consolidated Statements of Income.

We enter into risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution.

The following table presents information regarding our derivative financial instruments for the periods indicated (in thousands):


	Asset derivatives			Liability derivatives
	Notional amount		Fair value	Notional amount	Fair value
At June 30, 2022


Derivatives not designated as hedging instruments:
Interest rate swap agreements	$	691,991	31,018	691,991	31,028
Foreign exchange swap agreements	675		2	—	—
Interest rate lock commitments	72,160		1,520	—	—
Forward commitments	19,621		213	—	—
Risk participation agreements	—		—	92,812	18
Total Derivatives	$	784,447	32,753	784,803	31,046

At December 31, 2021


Derivatives not designated as hedging instruments:
Interest rate swap agreements	$	644,997	31,254	644,997	31,357
Foreign exchange swap agreements	—		—	17,124	341
Interest rate lock commitments	67,473		1,684	—	—
Forward commitments	14,484		371	—	—
Risk participation agreements	—		—	93,135	60
Total derivatives	$	726,954	33,309	755,256	31,758

The following table presents income or expense recognized on derivatives for the periods indicated (in thousands):


	For the quarter ended June 30,			For the six months ended June 30,
	2022		2021	2022	2021



Non-hedging swap derivatives:
Increase/(decrease) in other income	$	53	(26)	114	498
(Decrease)/increase in mortgage banking income	(96)		1,510	322	3,570

(11) Legal Proceedings

We establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated. As of June 30, 2022, we do not anticipate that the aggregate ultimate liability arising out of any pending or threatened legal proceedings will be material to our Consolidated Financial Statements. Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate loss to us from legal proceedings.

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During the year ended December 31, 2018, Northwest and our subsidiary, The Bert Company (doing business as Northwest Insurance Services) (“NWIS”), were involved in a lawsuit against, among others, First National Bank of Pennsylvania (“FNB”) and their insurance subsidiary, First National Insurance Agency, LLC (“FNIA”). All counterclaims against Northwest were discontinued and, in December 2018, a verdict was rendered in favor of NWIS on several of its claims. Post-trial proceedings have continued throughout the current year and, due to the inherent uncertainties with respect to these proceedings, we have not accrued any awards associated with this verdict within our Consolidated Financial Statements as of June 30, 2022.

(12) Changes in Accumulated Other Comprehensive Income

The following tables show the changes in accumulated other comprehensive income by component for the periods indicated (in thousands):


	For the quarter ended June 30, 2022
	Unrealized losses on securities available-for-sale		Change in defined benefit pension plans	Total
Balance as of March 31, 2022	$	(77,101)	(25,443)	(102,544)



Other comprehensive loss before reclassification adjustments (1)	(39,954)		—	(39,954)
Amounts reclassified from accumulated other comprehensive income (2) (3)	(1)		(131)	(132)

Net other comprehensive loss	(39,955)		(131)	(40,086)

Balance as of June 30, 2022	$	(117,056)	(25,574)	(142,630)


	For the quarter ended June 30, 2021
	Unrealized gains/(losses) on securities available-for-sale		Change in defined benefit pension plans	Total
Balance as of March 31, 2021	$	(653)	(50,059)	(50,712)



Other comprehensive loss before reclassification adjustments (4)	4,322		—	4,322
Amounts reclassified from accumulated other comprehensive income (5) (6)	(136)		334	198

Net other comprehensive income	4,186		334	4,520

Balance as of June 30, 2021	$	3,533	(49,725)	(46,192)

(1)Consists of unrealized holding losses, net of tax of $11,973.

(2)Consists of realized gains, net of tax of $0.

(3)Consists of realized gains, net of tax of $51.

(4)Consists of unrealized holding gains, net of tax ($1,245).

(5)Consists of realized gains, net of tax $43.

(6)Consists of realized losses, net of tax of ($128).

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	For the six months ended June 30, 2022
	Unrealized gains/(losses) on securities available-for-sale		Change in defined benefit pension plans	Total
Balance as of December 31, 2021	$	(12,317)	(25,312)	(37,629)



Other comprehensive loss before reclassification adjustments (1)	(104,737)		—	(104,737)
Amounts reclassified from accumulated other comprehensive income (2) (3)	(2)		(262)	(264)

Net other comprehensive loss	(104,739)		(262)	(105,001)

Balance as of June 30, 2022	$	(117,056)	(25,574)	(142,630)



	For the six months ended June 30, 2021
	Unrealized gains on securities available-for-sale		Change in defined benefit pension plans	Total
Balance as of December 31, 2020	$	16,843	(50,392)	(33,549)



Other comprehensive income/(loss) before reclassification adjustments (4)	(13,099)		—	(13,099)
Amounts reclassified from accumulated other comprehensive income (5) (6)	(211)		667	456

Net other comprehensive (loss)/income	(13,310)		667	(12,643)

Balance as of June 30, 2021	$	3,533	(49,725)	(46,192)

(1)Consists of unrealized holding losses, net of tax of $30,850.

(2)Consists of realized gains, net of tax of $0.

(3)Consists of realized gains, net of tax of $101.

(4)Consists of unrealized holding losses, net of tax $4,736.

(5)Consists of realized gains, net of tax $65.

(6)Consists of realized losses, net of tax of ($258).

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

In addition to historical information, this document may contain certain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, as they reflect management’s analysis only as of the date of this report. We have no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report.

Important factors that might cause such a difference include, but are not limited to:

• inflation and changes in the interest rate environment that reduce our margins, our loan origination, or the fair value of financial instruments;

• the disruption to local, regional, national and global economic activity caused by infectious disease outbreaks, including the outbreak of coronavirus (COVID-19) and the significant impact that such outbreak has had and may continue to have on our growth, operations and earnings;

•changes in asset quality, including increases in default rates on loans and higher levels of nonperforming loans and loan charge-offs generally, and specifically resulting from the economic dislocation caused by the COVID-19 pandemic;

•changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

•changes in federal, state, or local tax laws and tax rates;

• general economic conditions, either nationally or in our market areas, that are different than expected;

• adverse changes in the securities and credit markets;

• cyber-security concerns, including an interruption or breach in the security of our website or other information systems;

• technological changes that may be more difficult or expensive than expected;

• the ability of third-party providers to perform their obligations to us;

• competition among depository and other financial institutions, including with respect to service charges and fees;

• our ability to enter new markets successfully and capitalize on growth opportunities;

• our ability to manage our internal growth and our ability to successfully integrate acquired entities, businesses or branch offices;

• changes in consumer spending, borrowing and savings habits;

• our ability to continue to increase and manage our commercial and personal loans;

• possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises;

• the impact of the economy on our loan portfolio (including cash flow and collateral values), investment portfolio, customers and capital market activities;

• our ability to receive regulatory approvals for proposed transactions or new lines of business;

• the effects of any federal government shutdown;

• changes in the financial performance and/or condition of our borrowers;

• the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) and other accounting standard setters;

• changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

• our ability to access cost-effective funding;

• the effect of global or national war, conflict, or terrorism;

• our ability to manage market risk, credit risk and operational risk;

• our ability to retain key employees; and

• our compensation expense associated with equity allocated or awards to our employees.

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Overview of Critical Accounting Policies Involving Estimates

Please refer to Note 1 of the Notes to Consolidated Financial Statements in Item 8 of Part II of our 2021 Annual Report on Form 10-K.

Recently Issued Accounting Standards

The following accounting standard updates issued by the FASB have not yet been adopted.

In March 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance provides expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The amendments primarily include contract modifications and hedge accounting, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance is effective as of March 12, 2020 through December 31, 2022. We are currently in the process of evaluating the amendments and determining the impact on our financial statements.

In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform.” This ASU provides amendments, which are elective, and apply to all entities that have derivative instruments that use an interest rate for margining, discounting or contract price alignment of certain derivative instruments that are modified as a result of the reference rate reform. This guidance is effective as of the date of issuance through December 31, 2022. We are currently in the process of evaluating the amendments and determining the impact on our financial statements.

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure.” This ASU eliminates the accounting guidance for troubled debt restructurings, while enhancing disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. This ASU also requires the disclosure of current period gross write-offs by year for origination for financing receivables. This guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those years, with early adoption permitted. This ASU is applied prospectively to modifications and write-offs beginning on the first day of the fiscal year of adoption. An entity may elect to adopt a modified retrospective transition method on the recognition and measurement of the TDR guidance. We are currently in the process of evaluating the ASU and determining the impact on our financial statements.

Comparison of Financial Condition

Total assets at June 30, 2022 were $14.155 billion, a decrease of $346.8 million, or 2.4%, from $14.502 billion at December 31, 2021. This decrease in assets was due to a decrease in total cash and cash equivalents as well as a decrease in marketable securities, partially offset by an increase in loans receivable, as described in further detail below.

Total cash and cash equivalents decreased by $774.7 million, or 60.6%, to $504.5 million at June 30, 2022 from $1.279 billion at December 31, 2021. This decrease was driven by organic loan growth, described in further detail below, as well as the purchase of two small business equipment finance loan pools totaling $115.8 million and two one-to four-family jumbo mortgage loan packages totaling $188.3 million during the six months ended June 30, 2022.

Total marketable securities decreased by $28.8 million, or 1.2%, to $2.288 billion at June 30, 2022 from $2.317 billion at December 31, 2021. This decrease was driven primarily by the rising interest rate environment which negatively impacted the fair market value of our available-for-sale portfolio.

Total loans receivable increased by $416.4 million, or 4.2%, to $10.433 billion at June 30, 2022, from $10.016 billion at December 31, 2021. This increase was due to organic loan growth as well as the purchases of the small business equipment finance and one-to- four-family jumbo mortgage loan pools during the year. Our personal loan banking portfolio increased by $416.5 million, or 6.8%, to $6.570 billion at June 30, 2022, from $6.153 billion at December 31, 2021. In addition, continued growth in our consumer indirect auto loans and lower sales of residential mortgages into the secondary market contributed to the increase in total loans receivable.

Total deposits decreased by $233.9 million, or 1.9%, to $12.067 billion at June 30, 2022 from $12.301 billion at December 31, 2021. This decrease was primarily due to decreases in time and demand deposit accounts of $294.7 million, or 4.0%. We believe these decreases were primarily the result of customer spending activity returning to pre-pandemic levels at a time when inflationary pressures have caused higher prices and government stimulus programs have ended.

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Total shareholders’ equity at June 30, 2022 was $1.495 billion, or $11.78 per share, a decrease of $89.0 million, or 5.6%, from $1.584 billion, or $12.51 per share, at December 31, 2021. This decrease was primarily the result of an increase in accumulated other comprehensive loss of $105.0 million due to an increase in unrealized losses in the available-for-sale investment portfolio due to rising interest rates, as well as a payment of cash dividends of $50.7 million for the six months ended June 30, 2022. These decreases were partially offset by year-to-date earnings of $61.7 million.

Regulatory Capital

Financial institutions and their holding companies are subject to various regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct, material effect on a company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting guidelines. Capital amounts and classifications are also subject to qualitative judgments made by the regulators about components, risk-weighting and other factors.

Applicable rules limit an organization’s capital distributions and certain discretionary bonus payments if the organization does not hold a “capital conservation buffer” consisting of 2.5% of Total, Tier 1 and Common Equity Tier 1 (“CET1”) capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

Quantitative measures, established by regulation to ensure capital adequacy, require financial institutions to maintain minimum amounts and ratios (set forth in the table below) of Total, CET1 and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Capital requirements are presented in the tables below (in thousands).


	At June 30, 2022
	Actual				Minimum capital requirements (1)				Well capitalized requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk weighted assets)
Northwest Bancshares, Inc.	$	1,692,802	16.481	%	$	1,078,484	10.500	%	$	1,027,128	10.000	%
Northwest Bank	1,461,989		14.247	%	1,077,489		10.500	%	1,026,180		10.000	%

Tier 1 capital (to risk weighted assets)
Northwest Bancshares, Inc.	1,491,179		14.518	%	873,058		8.500	%	821,702		8.000	%
Northwest Bank	1,374,032		13.390	%	872,253		8.500	%	820,944		8.000	%

CET1 capital (to risk weighted assets)
Northwest Bancshares, Inc.	1,365,984		13.299	%	718,989		7.000	%	667,633		6.500	%
Northwest Bank	1,374,032		13.390	%	718,326		7.000	%	667,017		6.500	%

Tier 1 capital (leverage) (to average assets)
Northwest Bancshares, Inc.	1,491,179		10.717	%	556,565		4.000	%	695,707		5.000	%
Northwest Bank	1,374,032		9.878	%	556,391		4.000	%	695,489		5.000	%

(1) Amounts and ratios include the capital conservation buffer of 2.5%, which does not apply to Tier 1 capital to average assets (leverage ratio).

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	At December 31, 2021
	Actual				Minimum capital requirements (1)				Well capitalized requirements
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk weighted assets)
Northwest Bancshares, Inc.	$	1,682,487	17.056	%	$	1,035,786	10.500	%	$	986,463	10.000	%
Northwest Bank	1,551,084		15.738	%	1,034,819		10.500	%	985,542		10.000	%

Tier I capital (to risk weighted assets)
Northwest Bancshares, Inc.	1,475,190		14.954	%	838,494		8.500	%	789,170		8.000	%
Northwest Bank	1,467,362		14.889	%	837,711		8.500	%	788,434		8.000	%

CET1 capital (to risk weighted assets)
Northwest Bancshares, Inc.	1,350,125		13.687	%	690,524		7.000	%	641,201		6.500	%
Northwest Bank	1,467,362		14.889	%	689,879		7.000	%	640,602		6.500	%

Tier I capital (leverage) (to average assets)
Northwest Bancshares, Inc.	1,475,190		10.349	%	570,160		4.000	%	712,699		5.000	%
Northwest Bank	1,467,362		10.296	%	570,047		4.000	%	712,558		5.000	%

(1) Amounts and ratios include the capital conservation buffer of 2.5%, which does not apply to Tier 1 capital to average assets (leverage ratio).

Liquidity

We are required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations. Northwest monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”). Northwest Bank’s liquidity ratio at June 30, 2022 was 13.6%. We adjust liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments. At June 30, 2022, Northwest had $3.582 billion of additional borrowing capacity available with the FHLB, including $250.0 million on an overnight line of credit which had no balance at June 30, 2022, as well as $91.2 million of borrowing capacity available with the Federal Reserve Bank and $110.0 million with three correspondent banks.

Dividends

We paid $25.4 million and $25.5 million in cash dividends during the quarters ended June 30, 2022 and 2021, respectively. The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) was 76.9% and 52.6% for the quarters ended June 30, 2022 and June 30, 2021, respectively, on dividends of $0.20 per share for the quarters ended June 30, 2022 and June 30, 2021. On July 20, 2022, the Board of Directors declared a cash dividend of $0.20 per share payable on August 15, 2022 to shareholders of record as of August 4, 2022. This represents the 111th consecutive quarter we have paid a cash dividend.

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Nonperforming Assets

The following table sets forth information with respect to nonperforming assets. Nonaccrual loans are those loans on which the accrual of interest has ceased. Generally, when a loan is 90 days past due, we fully reverse all accrued interest thereon and cease to accrue interest thereafter. Exceptions are made for loans that have contractually matured, are in the process of being modified to extend the maturity date and are otherwise current as to principal and interest, and well-secured loans that are in the process of collection. Loans may also be placed on nonaccrual before they reach 90 days past due if conditions exist that call into question our ability to collect all contractual interest. Other nonperforming assets represent property acquired through foreclosure or repossession. Foreclosed property is carried at the lower of its fair value less estimated costs to sell or the principal balance of the related loan.


	June 30, 2022			December 31, 2021
	(in thousands)
Loans 90 days or more past due:
Residential mortgage loans	$	5,445		7,641
Home equity loans	2,081			4,262
Vehicle loans	1,861			1,635
Other consumer loans	460			765
Commercial real estate loans	14,823			23,489
Commercial real estate - owner occupied	126			574
Commercial loans	583			1,105
Total loans 90 days or more past due	$	25,379		39,471
Total real estate owned (REO)	$	1,205		873
Total loans 90 days or more past due and REO	26,584			40,344
Total loans 90 days or more past due to net loans receivable	0.25		%	0.40	%
Total loans 90 days or more past due and REO to total assets	0.19		%	0.28	%
Nonperforming assets:
Nonaccrual loans - loans 90 days or more past due	$	25,000		39,140
Nonaccrual loans - loans less than 90 days past due	73,385			119,331
Loans 90 days or more past due still accruing	379			331
Total nonperforming loans	98,764			158,802
Total nonperforming assets	$	99,969		159,675
Total nonaccrual loans to total loans	0.94		%	1.59	%
Nonaccrual TDR loans (1)	$	37,647		17,216
Accruing TDR loans	16,590			13,072
Total TDR loans	$	54,237		30,288

(1)Included in nonaccrual loans above.

Allowance for Credit Losses

We adopted CECL on January 1, 2020, as further described in Note 1(f) of the Notes to the Consolidated Financial Statements in Item 8 of Part II of our 2021 Annual Report on Form 10-K. Our Board of Directors has adopted an “Allowance for Credit Losses” policy designed to provide management with a systematic methodology for determining and documenting the allowance for credit losses each reporting period. This methodology was developed to provide a consistent process to ensure that the allowance for credit losses is in conformity with GAAP, our policies and procedures and other supervisory and regulatory guidelines.

On an ongoing basis, the Credit Administration department, as well as loan officers, branch managers and department heads, review and monitor the loan portfolio for problem loans. This portfolio monitoring includes a review of the monthly delinquency reports as well as historical comparisons and trend analysis. Personal and small business commercial loans are classified primarily by delinquency status. In addition, a meeting is held every quarter with each region to monitor the performance and status of commercial loans on an internal watch list. On an on-going basis, the loan officer, in conjunction with a portfolio manager, grades or classifies problem commercial loans or potential problem commercial loans based upon their knowledge of the lending relationship and other information previously accumulated. This rating is also reviewed independently by our Loan Review department on a periodic basis. Our loan grading system for problem commercial loans is consistent with industry regulatory guidelines which classifies loans as “substandard”, “doubtful” or “loss.” Loans that do not expose us to risk sufficient to warrant classification in one of the previous categories, but which possess some weaknesses, are designated as “special mention”. A “substandard” loan is any loan that is 90 days or more contractually delinquent or is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as “doubtful” have all the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts,

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conditions or values, highly questionable and improbable. Loans classified as “loss” have all the weakness inherent in those classified as “doubtful” and are considered uncollectible.

Credit relationships that have been classified as substandard or doubtful and are greater than or equal to $1.0 million are reviewed by the Credit Administration department to determine if they no longer continue to demonstrate similar risk characteristics to their loan pool. If a loan no longer demonstrates similar risk characteristics to their loan pool they are removed from the pool and an individual assessment will be performed.

If it is determined that a loan needs to be individually assessed, the Credit Administration department determines the proper measure of fair value for each loan based on one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent, less costs of sale or disposal. If the measurement of the fair value of the loan is more or less than the amortized cost basis of the loan, the Credit Administration department adjusts the specific allowance associated with that individual loan accordingly.

If a substandard or doubtful loan is not individually assessed, it is grouped with other loans that possess common characteristics for credit losses and analysis. For the purpose of calculating reserves, we have grouped our loans into seven segments: residential mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial loans. The allowance for credit losses is measured using a combination of statistical models and qualitative assessments. We use a twenty four month forecasting period and revert to historical average loss rates thereafter. Reversion to average loss rates takes place over twelve months. Historical average loss rates are calculated using historical data beginning in October 2009 through the current period.

The credit losses for individually assessed loans along with the estimated loss for each homogeneous pool are consolidated into one summary document. This summary schedule along with the support documentation used to establish this schedule is presented to management’s Allowance for Credit Loss Committee (“ACL Committee”) monthly. The ACL Committee reviews and approves the processes and ACL documentation presented. Based on this review and discussion, the appropriate amount of ACL is estimated and any adjustments to reconcile the actual ACL with this estimate are determined. The ACL Committee also considers if any changes to the methodology are needed. In addition to the ACL Committee’s review and approval, a review is performed by the Risk Management Committee of the Board of Directors on a quarterly basis and annually by internal audit.

In addition to the reviews by management’s ACL Committee and the Board of Directors’ Risk Management Committee, regulators from either the FDIC and/or the Pennsylvania Department of Banking and Securities perform an extensive review on at least an annual basis for the adequacy of the ACL and its conformity with regulatory guidelines and pronouncements. Any recommendations or enhancements from these independent parties are considered by management and the ACL Committee and implemented accordingly.

We acknowledge that this is a dynamic process and consists of factors, many of which are external and out of our control, that can change frequently, rapidly and substantially. The adequacy of the ACL is based upon estimates using all the information previously discussed as well as current and known circumstances and events. There is no assurance that actual portfolio losses will not be substantially different than those that were estimated.

We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness. As part of the analysis as of June 30, 2022, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events. In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations. The ACL decreased by $3.9 million, or 3.8%, to $98.4 million, or 0.94% of total loans at June 30, 2022 from $102.2 million, or 1.02% of total loans, at December 31, 2021. Total classified loans decreased $85.8 million, or 23.6%, to $277.4 million at June 30, 2022 from $363.2 million at December 31, 2021. This decrease was primarily due to the upgrade and payoff of loans in our commercial real estate portfolio during the current year.

We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses. Nonaccrual loans of $98.4 million, or 0.94% of total loans receivable at June 30, 2022, decreased by $60.1 million, or 37.9%, from $158.5 million, or 1.59% of total loans receivable at December 31, 2021. This decrease was primarily related to upgrades to loans within our commercial real estate portfolio. As a percentage of average loans, annualized net charge-offs decreased to 0.14% for the quarter ended June 30, 2022 compared to 0.20% for the year ended December 31, 2021.

Comparison of Operating Results for the Quarters Ended June 30, 2022 and 2021

Net income for the quarter ended June 30, 2022 was $33.4 million, or $0.26 per diluted share, a decrease of $15.5 million, or 31.7%, from net income of $49.0 million, or $0.38 per diluted share, for the quarter ended June 30, 2021. The decrease in net income

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primarily resulted from a decrease in noninterest income of $24.3 million, or 44.3% and an increase in the provision for credit losses of $2.6 million. Partially offsetting these changes was a $4.5 million, or 4.7%, increase in net interest income, a decrease in noninterest expense of $1.5 million, or 1.8%, as well as a $5.3 million, or 34.9%, decrease in income tax expense. Net income for the quarter ended June 30, 2022 represents annualized returns on average equity and average assets of 8.90% and 0.94%, respectively, compared to 12.58% and 1.37% for the same quarter last year. A further discussion of notable changes follows.

Interest Income

Total interest income increased $3.3 million, or 3.3%, to $105.9 million for the quarter ended June 30, 2022 from $102.6 million for the quarter ended June 30, 2021. This increase was due to an increase in the average balance of interest-earning assets of $94.9 million, or 0.7%, to $13.347 billion for the quarter ended June 30, 2022 from $13.252 billion for the quarter ended June 30, 2021, which was primarily driven by growth in the mortgage-backed securities portfolio and interest-earning deposits. Additionally, the average yield earned on interest-earning assets increased to 3.18% for the quarter ended June 30, 2022 from 3.10% for the quarter ended June 30, 2021 due to the rising interest rate environment.

Interest income on loans receivable increased by $319,000, or 0.3%, to $95.6 million for the quarter ended June 30, 2022 compared to $95.3 million for the quarter ended June 30, 2021. This increase in interest income was due to an increase in the average yield on loans receivable, to 3.77% for the quarter ended June 30, 2022, from 3.71% from the quarter ended June 30, 2021, due to the increase in market interest rates. Partially offsetting this increase in yield was a decrease in the average balance of loans receivable by $139.5 million, or 1.4%, to $10.158 billion for the quarter ended June 30, 2022 from $10.297 billion for the quarter ended June 30, 2021 due primarily to $252.4 million of PPP loan forgiveness since June 30 of last year.

Interest income on mortgage-backed securities increased by $1.5 million, or 26.0%, to $7.2 million for the quarter ended June 30, 2022 compared to $5.7 million for the quarter ended June 30, 2021. This increase was driven by an increase in the average balance of mortgage-backed securities of $196.1 million, or 11.2%, to $1.952 billion for the quarter ended June 30, 2022 from $1.756 billion for the quarter ended June 30, 2021. This increase in average balance was primarily a result of additional purchases utilizing excess cash from deposit growth during the past year. The average yield on mortgage-backed securities increased to 1.47% for the quarter ended June 30, 2022 from 1.29% for the quarter ended June 30, 2021 due to the purchase of mortgage-backed securities with yields higher than the existing portfolio.

Interest income on investment securities increased by $111,000, or 8.6%, for the quarter ended June 30, 2022 to $1.4 million from $1.3 million for the quarter ended June 30, 2021. This increase was due to an increase in the average balance of investment securities by $12.5 million, or 3.4%, to $376.9 million for the quarter ended June 30, 2022 from $364.4 million for the quarter ended June 30, 2021. The average yield on investment securities increased to 1.48% for the quarter ended June 30, 2022 from 1.41% for the quarter ended June 30, 2021.

Dividends on FHLB stock decreased by $56,000, or 40.6%, to $82,000 for the quarter ended June 30, 2022 from $138,000 for the quarter ended June 30, 2021. This decrease was due to the decrease in the average balance of FHLB stock by $9.7 million, or 41.9%, to $13.4 million for the quarter ended June 30, 2022 from $23.1 million for the quarter ended June 30, 2021. Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB. The average yield increased slightly to 2.44% for the quarter ended June 30, 2022 from 2.40% for the quarter ended June 30, 2021.

Interest income on interest-earning deposits increased by $1.5 million to $1.7 million for the quarter ended June 30, 2022 from $192,000 for the quarter ended June 30, 2021. This increase was driven by an increase in the average yield on interest-earning deposits to 0.79% for the quarter ended June 30, 2022 from 0.09% for the quarter ended June 30, 2021, due to the Federal Reserve Board raising targeted short-term interest rates. Additionally, the average balance of interest-earning deposits increased by $35.4 million, or 4.4%, to $846.1 million for the quarter ended June 30, 2022 from $810.7 million for the quarter ended June 30, 2021.

Interest Expense

Interest expense decreased by $1.2 million, or 17.5%, to $5.6 million for the quarter ended June 30, 2022 from $6.8 million for the quarter ended June 30, 2021. This decrease in interest expense was primarily due to the decline in the the average cost of interest-bearing liabilities, which decreased to 0.24% for the quarter ended June 30, 2022 from 0.29% for the quarter ended June 30, 2021. This decrease resulted primarily from the decrease in the interest rate paid on deposit accounts in response to decreases in market interest rates as well as the overall change in the mix of deposit accounts as customers move from time deposits to more liquid accounts. Additionally, the average balance of interest-bearing liabilities decreased by $45.7 million, or 0.5%, to $9.466 billion for the quarter ended June 30, 2022 from $9.512 billion for the quarter ended June 30, 2021.

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Net Interest Income

Net interest income increased by $4.5 million, or 4.7%, to $100.3 million for the quarter ended June 30, 2022 from $95.7 million for the quarter ended June 30, 2021. This increase is attributable to the factors discussed above. Additionally, our interest rate spread increased to 2.94% for the quarter ended June 30, 2022 from 2.82% for the quarter ended June 30, 2021, and our net interest margin increased to 3.05% for the quarter ended June 30, 2022 from 2.89% for the quarter ended June 30, 2021, primarily due to rising interest-earning asset yields in response to recent increases in market interest rates.

Provision for Credit Losses

The Company recorded a provision expense of $2.6 million for the quarter ended June 30, 2022 compared to no provision for credit losses during the quarter ended June 30, 2021. The current period provision was driven by loan portfolio growth and the slower economic growth forecasts by Moodys. The lack of provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 to the industries impacted by COVID-19.

In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses.” The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at June 30, 2022.

Noninterest Income

Noninterest income decreased by $24.3 million, or 44.3%, to $30.4 million for the quarter ended June 30, 2022 from $54.7 million for the quarter ended June 30, 2021. This decrease was primarily driven by the sale of the insurance business during the quarter ended June 30, 2021, resulting in a $25.3 million pre-tax gain. As a result of this sale, insurance commission income ceased during the second quarter last year resulting in a decrease of $1.0 million for the quarter ended June 30, 2022. Also contributing to the decrease in noninterest income was a decrease in mortgage banking income of $1.7 million, or 43.4%, to $2.2 million for the quarter ended June 30, 2022 from $3.8 million for the quarter ended June 30, 2021 due to the impact of less favorable pricing in the secondary market, as a result of the recent volatile interest rate environment. Partially offsetting these decreases was an increase in other operating income of $2.2 million, or 83.6%, to $4.9 million for the quarter ended June 30, 2022 compared to $2.6 million for the quarter ended June 30, 2021. This increase was driven by an increase in interest rate swap income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities. Service charges and fees increased $929,000, or 7.3%, to $13.7 million for the quarter ended June 30, 2022 compared to $12.7 million for the quarter ended June 30, 2021, as customer activity increased in 2022 after COVID-19 restricted behavior in the prior year.

Noninterest Expense

Noninterest expense decreased by $1.5 million, or 1.8%, to $84.8 million for the quarter ended June 30, 2022 from $86.3 million for the quarter ended June 30, 2021. This decrease was due to a decline in a majority of the noninterest expense categories as we continue to emphasize efficiency initiatives. Processing expenses decreased $2.2 million, or 14.5%, to $12.9 million for the quarter ended June 30, 2022 from $15.2 million for the quarter ended June 30, 2021 due to the investment in our technology and infrastructure during the prior year. Professional services decreased $898,000, or 21.2%, to $3.3 million for the quarter ended June 30, 2022 from $4.2 million for the quarter ended June 30, 2021 due to the use of third-party experts to assist with our digital strategy rollout in the prior year. Compensation and employee benefits decreased $821,000 to $48.1 million for the quarter ended June 30, 2022 from $48.9 million for the quarter ended June 30, 2021, despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon Mr. Seiffert's passing. The decrease in compensation and employee benefits was driven primarily by the branch consolidations completed in April. Offsetting these decreases was an increase in other expenses of $3.8 million to $5.2 million for the quarter ended June 30, 2022 from $1.4 million for the quarter ended June 30, 2021 due to an increase in our unfunded loan loss reserve associated with the origination of loans with current off balance sheet exposure.

Income Taxes

The provision for income taxes decreased by $5.3 million, or 34.9%, to $9.9 million for the quarter ended June 30, 2022 from $15.1 million for the quarter ended June 30, 2021. This decrease in income taxes was due to a decrease in income before taxes in the current year. We anticipate our effective tax rate to be between 21.0% and 23.0% for the year ending December 31, 2022.

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Comparison of Operating Results for the Six Months Ended June 30, 2022 and 2021

Net income for the six months ended June 30, 2022 was $61.7 million, or $0.49 per diluted share, a decrease of $27.5 million, or 30.8%, from $89.2 million, or $0.70 per diluted share, for the six months ended June 30, 2021. The decrease in net income resulted primarily from a decrease in noninterest income of $30.5 million, or 35.2%, as well as an increase in the provision for credit losses of $6.8 million, or 120.4%, and a $5.3 million, or 2.7% decrease in net interest income. Partially offsetting these unfavorable variances was a decrease in income tax expense of $9.3 million, or 34.7%, and a $5.8 million, or 3.3%, decrease in noninterest expense. Net income for the six months ended June 30, 2022 represents annualized returns on average equity and average assets of 8.01% and 0.87%, respectively, compared to 11.61% and 1.27% for the six months ended June 30, 2021. A further discussion of notable changes follows.

Interest Income

Total interest income decreased by $8.2 million, or 3.9%, to $202.3 million for the six months ended June 30, 2022 from $210.6 million for the six months ended June 30, 2021. This decrease is the result of a decrease in the average yield earned on interest-earning assets to 3.05% for the six months ended June 30, 2022 from 3.23% for the six months ended June 30, 2021. Despite the recent rising rate environment, loan yields are down year over year and have only started to rise during the quarter ended June 30, 2022. Partially offsetting this decrease was an increase in the average balance of interest-earning assets by $301.4 million, or 2.3%, to $13.371 billion for the six months ended June 30, 2022 from $13.070 billion for the six months ended June 30, 2021 primarily driven by growth in the mortgage-backed securities portfolio and interest-earning deposits.

Interest income on loans receivable decreased by $13.8 million, or 7.0%, to $183.7 million for the six months ended June 30, 2022 from $197.6 million for the six months ended June 30, 2021. This decrease is attributed to a decrease in the average balance of loans receivable by $322.1 million, or 3.1%, to $10.030 billion for the six months ended June 30, 2022 from $10.352 billion for the six months ended June 30, 2021 due primarily to PPP loan forgiveness and the payoff of several classified commercial real estate loan relationships. Additionally, the average yield on loans receivable decreased to 3.69% for the six months ended June 30, 2022 from 3.83% for the six months ended June 30, 2021 despite the recent rise in market interest rates.

Interest income on mortgage-backed securities increased by $3.6 million, or 36.8%, to $13.5 million for the six months ended June 30, 2022 from $9.9 million for the six months ended June 30, 2021. This increase is attributed to an increase in the average balance of mortgage-backed securities of $407.2 million, or 26.4%, to $1.949 billion for the six months ended June 30, 2022 from $1.542 billion for the six months ended June 30, 2021. This increase in average balance was primarily a result of additional purchases utilizing excess cash from deposit growth during the past year. Additionally, the average yield on mortgage-backed securities increased to 1.39% for the six months ended June 30, 2022 from 1.28% for the six months ended June 30, 2021 due to the purchase of fixed rate mortgage-backed securities with yields higher than the existing portfolio.

Interest income on investment securities increased by $253,000, or 10.1%, to $2.7 million for the six months ended June 30, 2022 from $2.5 million for the six months ended June 30, 2021. This increase is primarily attributable to an increase in the average balance of investment securities by $27.3 million, or 7.9%, to $375.3 million for the six months ended June 30, 2022 from $348.0 million for the six months ended June 30, 2021. Additionally, the average yield on investment securities increased slightly to 1.46% for the six months ended June 30, 2022 from 1.43% for the six months ended June 30, 2021.

Dividends on FHLB stock decreased by $91,000, or 35.8%, to $163,000 for the six months ended June 30, 2022 from $254,000 for the six months ended June 30, 2021. This decrease was due to an $8.8 million, or 39.2%, decrease in the average balance of FHLB stock to $13.6 million for the six months ended June 30, 2022 from $22.5 million for the six months ended June 30, 2021. Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB. Partially offsetting the decrease in the balance was an increase in the average yield on FHLB stock to 2.41% for the six months ended June 30, 2022 from 2.27% for the six months ended June 30, 2021 as the FHLB of Pittsburgh increased yields on required stock holdings due to higher market interest rates.

Interest income on interest-earning deposits increased by $1.8 million to $2.2 million for the six months ended June 30, 2022 from $375,000 for the six months ended June 30, 2021. This increase is attributable to an increase in the average balance of interest-earning deposits by $197.7 million, or 24.5%, to $1.004 billion for the six months ended June 30, 2022 from $805.9 million for the six months ended June 30, 2021. Additionally, the average yield on interest-earning deposits increased to 0.43% for the six months ended June 30, 2022 from 0.09% for the six months ended June 30, 2021, as a result of increases in the targeted federal funds rate by the Federal Reserve.

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Interest Expense

Interest expense decreased by $3.0 million, or 20.5%, to $11.4 million for the six months ended June 30, 2022 from $14.4 million for the six months ended June 30, 2021. This decrease in interest expense was driven by a decrease in the average cost of interest-bearing liabilities to 0.24% for the six months ended June 30, 2022 from 0.31% for the six months ended June 30, 2021. This decrease resulted from decreases in the interest rate paid on deposits as well as the change in deposit mix as customers chose to move funds from fixed-rate time deposits to more liquid deposit accounts. Despite a rising interest rate environment, we have been able to keep our cost of deposits stable. Additionally, the yield on time deposits has continued to decrease, from 0.91% for the six months ended June 30, 2021 to 0.64% for the six months ended June 30, 2022, as time deposits with higher rates are maturing and rolling into lower rate deposit products. Partially offsetting this decrease was an increase in the average balance of interest-bearing liabilities by $66.6 million, or 0.7%, to $9.512 billion for the six months ended June 30, 2022 from $9.445 billion for the six months ended June 30, 2021. This increase in the average balance resulted from growth in deposits over the past year.

Net Interest Income

Net interest income decreased by $5.3 million, or 2.7%, to $190.9 million for the six months ended June 30, 2022 from $196.2 million for the six months ended June 30, 2021. This decrease is attributable to the factors discussed above. Our interest rate spread and net interest margin both decreased over the course of the year. Our interest rate spread decreased to 2.81% for the six months ended June 30, 2022 from 2.92% for the six months ended June 30, 2021 and our net interest margin decreased to 2.86% for the six months ended June 30, 2022 from 3.00% for the six months ended June 30, 2021. These decreases were primarily due to declining interest-earning asset yields on loans receivable.

Provision for Credit Losses

The provision for credit losses increased by $6.8 million, or 120.4%, to a current period provision expense of $1.1 million for the six months ended June 30, 2022 from a negative provision of $5.6 million for the six months ended June 30, 2021. The current period provision was driven by the current portfolio mix, changes to asset quality and classified assets and the most recent economic forecasts. The negative provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 for industries impacted by COVID-19

Annualized net charge-offs to average loans decreased to 0.10% for the six months ended June 30, 2022 from 0.22% for the six months ended June 30, 2021. Additionally, classified assets declined by $175.7 million, or 38.8%, to $277.4 million, or 2.66% of loans outstanding at June 30, 2022 from $453.1 million, or 4.39% of loans outstanding at June 30, 2021.

In determining the amount of the current period provision, we considered current economic conditions, including but not limited to unemployment levels, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience. We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses.” The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at June 30, 2022.

Noninterest Income

Noninterest income decreased by $30.5 million, or 35.2%, to $56.2 million for the six months ended June 30, 2022 from $86.7 million for the six months ended June 30, 2021. This decrease was primarily driven by the sale of the insurance business on April 30, 2021, during the six months ended June 30, 2021, resulting in a $25.3 million pre-tax gain. This insurance business sale in the prior year also resulted in a decrease in insurance commission income of $3.6 million from the six months ended June 30, 2021. In addition, mortgage banking income decreased by $6.2 million, or 63.2%, due to the impact of less favorable secondary market pricing. Partially offsetting these decreases were $1.6 million increases in both service charges and fees and other operating income. Service charges and fees increased to $26.7 million for the six months ended June 30, 2022 from $25.1 million for the six months ended June 30, 2021 due to increased customer activity in 2022 after COVID-19 restricted behavior in the prior year. Other operating income increased to $7.1 million for the six months ended June 30, 2022 from $5.5 million for the six months ended June 30, 2021 due to an increase in swap fee income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities.

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Noninterest Expense

Noninterest expense decreased by $5.8 million, or 3.3%, to $166.8 million for the six months ended June 30, 2022, from $172.5 million for the six months ended June 30, 2021. This decrease was driven by a $3.1 million, or 10.9%, decrease in processing expenses to $25.5 million for the six months ended June 30, 2022 from $28.6 million for the six months ended June 30, 2021 due to the prior year investment in technology and infrastructure. Additionally, professional service expense decreased by $2.9 million, or 33.0%, to $5.9 million for the six months ended June 30, 2022 from $8.8 million for the six months ended June 30, 2021 due to utilization of third-party experts to recruit talent and to assist with our digital strategy rollout during the prior year. Compensation and employee benefits expense decreased $1.1 million, or 1.2%, to $95.0 million for the six months ended June 30, 2022 from $96.1 million for the six months ended June 30, 2021 despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon Mr. Seiffert's passing. This decrease in compensation and benefits as well as the $1.1 million, or 7.1%, decrease in premises and occupancy costs are due primarily to branch consolidations completed over the past two years. Partially offsetting these decreases, was a $2.8 million, or 59.1%, increase in other expenses due to an increase in the reserve for unfunded commitments resulting from the origination of loans with current off balance sheet exposure.

Income Taxes

The provision for income taxes decreased by $9.3 million, or 34.7%, to $17.5 million for the six months ended June 30, 2022 from $26.7 million for the six months ended June 30, 2021. This decrease was primarily due to the decrease in income before tax of $36.8 million, or 31.7%. We anticipate our effective tax rate to be between 21.0% and 23.0% for the year ending December 31, 2022.

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Average Balance Sheet

(in thousands)

The following table sets forth certain information relating to the Company’s average balance sheet and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.


	Quarter ended June 30,
	2022					2021
	Average balance		Interest	Avg. yield/ cost (h)		Average balance		Interest	Avg. yield/ cost (h)
Assets
Interest-earning assets:
Residential mortgage loans	$	3,171,469	27,327	3.45	%	$	2,935,034	25,609	3.49	%
Home equity loans	1,277,440		11,961	3.76	%	1,380,794		12,232	3.55	%
Consumer loans	1,880,769		15,777	3.36	%	1,589,739		14,555	3.67	%

Commercial real estate loans	2,915,750		31,844	4.32	%	3,257,810		33,349	4.05	%
Commercial loans	912,454		9,090	3.94	%	1,133,969		9,978	3.48	%
Loans receivable (a) (b) (d) (includes FTE adjustments of $425 and $468, respectively)	10,157,882		95,999	3.79	%	10,297,346		95,723	3.73	%
Mortgage-backed securities (c)	1,952,375		7,158	1.47	%	1,756,227		5,680	1.29	%
Investment securities (c) (d) (includes FTE adjustments of $192 and $179, respectively)	376,935		1,590	1.69	%	364,414		1,466	1.61	%
FHLB stock, at cost	13,428		82	2.44	%	23,107		138	2.40	%
Other interest-earning deposits	846,142		1,684	0.79	%	810,741		192	0.09	%
Total interest-earning assets (includes FTE adjustments of $617 and $647, respectively)	13,346,762		106,513	3.20	%	13,251,835		103,199	3.12	%
Noninterest-earning assets (e)	909,943					1,104,924

Total assets	$	14,256,705				$	14,356,759

Liabilities and shareholders’ equity
Interest-bearing liabilities:
Savings deposits	$	2,361,919	589	0.10	%	$	2,255,578	590	0.10	%
Interest-bearing demand deposits	2,857,336		310	0.04	%	2,840,949		407	0.06	%
Money market deposit accounts	2,653,467		668	0.10	%	2,537,629		621	0.10	%
Time deposits	1,220,815		1,774	0.58	%	1,493,947		3,155	0.85	%
Borrowed funds (f)	123,749		167	0.54	%	131,240		150	0.46	%
Subordinated debentures	119,563		1,203	4.03	%	123,443		1,264	4.11	%
Junior subordinated debentures	129,142		920	2.82	%	128,882		636	1.95	%
Total interest-bearing liabilities	9,465,991		5,631	0.24	%	9,511,668		6,823	0.29	%
Noninterest-bearing demand deposits (g)	3,090,372					3,036,202
Noninterest-bearing liabilities	193,510					247,930

Total liabilities	12,749,873					12,795,800
Shareholders’ equity	1,506,832					1,560,959
Total liabilities and shareholders’ equity	$	14,256,705				$	14,356,759
Net interest income/Interest rate spread			100,882	2.96	%			96,376	2.84	%
Net interest-earning assets/Net interest margin	$	3,880,771		3.07	%	$	3,740,167		2.91	%
Ratio of interest-earning assets to interest- bearing liabilities	1.41X					1.39X

(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.

(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.

(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.

(d)Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent (“FTE”) basis.

(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.

(f)Average balances include FHLB borrowings and collateralized borrowings.

(g)Average cost of deposits were 0.11% and 0.16%, respectively.

(h)Annualized. Shown on a FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax exempt loans and investments using the federal statutory rate applicable to each period presented. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: loans — 3.77% and 3.71%, respectively; investment securities — 1.48% and 1.41%, respectively; interest-earning assets — 3.18% and 3.10%, respectively. GAAP basis net interest rate spreads were 2.94% and 2.82%, respectively; and GAAP basis net interest margins were 3.05% and 2.89%, respectively.

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Rate/Volume Analysis

(in thousands)

The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) net change. Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.


	For the quarter ended June 30, 2022 vs. 2021
	Increase/(decrease) due to			Total increase/(decrease)
	Rate		Volume
Interest-earning assets:
Loans receivable	$	1,576	(1,300)	276
Mortgage-backed securities	759		719	1,478
Investment securities	71		53	124
FHLB stock, at cost	3		(59)	(56)
Other interest-earning deposits	1,406		86	1,492
Total interest-earning assets	3,815		(501)	3,314

Interest-bearing liabilities:
Savings deposits	(27)		26	(1)
Interest-bearing demand deposits	(99)		2	(97)
Money market deposit accounts	17		30	47
Time deposits	(984)		(397)	(1,381)
Borrowed funds	27		(10)	17
Subordinated debt	(25)		(36)	(61)
Junior subordinated debentures	282		2	284
Total interest-bearing liabilities	(809)		(383)	(1,192)

Net change in net interest income	$	4,624	(118)	4,506

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Average Balance Sheet

(in thousands)


	Six months ended June 30,
	2022					2021
	Average balance		Interest	Avg. yield/ cost (h)		Average balance		Interest	Avg. yield/ cost (h)
Assets
Interest-earning assets:
Residential mortgage loans	$	3,077,155	52,868	3.44	%	$	2,971,037	51,975	3.50	%
Home equity loans	1,285,668		23,433	3.68	%	1,406,260		25,046	3.57	%
Consumer loans	1,840,110		30,684	3.36	%	1,526,861		29,121	3.82	%

Commercial real estate loans	2,957,744		61,601	4.14	%	3,285,696		71,820	4.32	%
Commercial loans	868,854		15,987	3.66	%	1,161,736		20,543	3.50	%
Loans receivable (a) (b) (d) (includes FTE adjustments of $825 and $932, respectively)	10,029,531		184,573	3.71	%	10,351,590		198,505	3.85	%
Mortgage-backed securities (c)	1,948,794		13,518	1.39	%	1,541,585		9,880	1.28	%
Investment securities (c) (d) (includes FTE adjustments of $381 and $351, respectively)	375,323		3,130	1.67	%	347,977		2,847	1.64	%
FHLB stock, at cost	13,648		163	2.41	%	22,462		254	2.27	%
Other interest-earning deposits	1,003,627		2,151	0.43	%	805,930		375	0.09	%
Total interest-earning assets (includes FTE adjustments of $1,206 and $1,283, respectively)	13,370,923		203,535	3.07	%	13,069,544		211,861	3.25	%
Noninterest-earning assets (e)	969,111					1,103,734

Total assets	$	14,340,034				$	14,173,278

Liabilities and shareholders’ equity
Interest-bearing liabilities:
Savings deposits	$	2,348,282	1,181	0.10	%	$	2,187,184	1,215	0.11	%
Interest-bearing demand deposits	2,866,333		631	0.04	%	2,812,348		836	0.06	%
Money market deposit accounts	2,660,745		1,321	0.10	%	2,517,673		1,278	0.10	%
Time deposits	1,256,513		3,959	0.64	%	1,538,489		6,959	0.91	%
Borrowed funds (f)	129,487		324	0.50	%	137,488		303	0.44	%
Subordinated debentures	121,574		2,454	4.04	%	123,400		2,522	4.10	%
Junior subordinated debentures	129,109		1,571	2.42	%	128,850		1,278	1.96	%
Total interest-bearing liabilities	9,512,043		11,441	0.24	%	9,445,432		14,391	0.31	%
Noninterest-bearing demand deposits (g)	3,075,617					2,921,343
Noninterest-bearing liabilities	198,854					256,748

Total liabilities	12,786,514					12,623,523

Shareholders’ equity	1,553,520					1,549,755

Total liabilities and shareholders’ equity	$	14,340,034				$	14,173,278

Net interest income/Interest rate spread			192,094	2.83	%			197,470	2.94	%

Net interest-earning assets/Net interest margin	$	3,858,880		2.87	%	$	3,624,112		3.02	%

Ratio of interest-earning assets to interest-bearing liabilities	1.41X					1.38X

(a)Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.

(b)Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.

(c)Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.

(d)Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent ("FTE") basis.

(e)Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.

(f)Average balances include FHLB borrowings and collateralized borrowings.

(g)Average cost of deposits were 0.12% and 0.17%, respectively.

(h)Annualized. Shown on a FTE basis. The FTE basis adjusts for the tax benefit of income on certain tax exempt loans and investments using the federal statutory rate applicable to each period presented. We believe this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: loans — 3.69% and 3.83%, respectively; investment securities — 1.46% and 1.43%, respectively; interest-earning assets — 3.05% and 3.23%, respectively. GAAP basis net interest rate spreads were 2.81% and 2.92%, respectively; and GAAP basis net interest margins were 2.86% and 3.00%, respectively.

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Rate/Volume Analysis

(in thousands)


	For the six months ended June 30, 2022 vs. 2021
	Increase/(decrease) due to			Total increase/(decrease)
	Rate		Volume
Interest-earning assets:
Loans receivable	$	(6,914)	(7,018)	(13,932)
Mortgage-backed securities	813		2,825	3,638
Investment securities	55		228	283
FHLB stock, at cost	16		(107)	(91)
Other interest-earning deposits	1,354		422	1,776
Total interest-earning assets	(4,676)		(3,650)	(8,326)

Interest-bearing liabilities:
Savings deposits	(108)		74	(34)
Interest-bearing demand deposits	(212)		7	(205)
Money market deposit accounts	(21)		64	43
Time deposits	(2,073)		(927)	(3,000)
Borrowed funds	43		(22)	21
Subordinated debt	(38)		(30)	(68)
Junior subordinated debentures	297		(4)	293
Total interest-bearing liabilities	(2,112)		(838)	(2,950)

Net change in net interest income	$	(2,564)	(2,812)	(5,376)

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As the holding company for a savings bank, one of our primary market risks is interest rate risk. Interest rate risk is the sensitivity of net interest income to variations in interest rates over a specified time period. The sensitivity results from differences in the time periods in which interest rate sensitive assets and liabilities mature or re-price. We attempt to control interest rate risk by matching, within acceptable limits, the re-pricing periods of assets and liabilities. We have attempted to limit our exposure to interest sensitivity by increasing core deposits, enticing customers to extend certificates of deposit maturities, borrowing funds with fixed-rates and longer maturities and by shortening the maturities of our assets by emphasizing the origination of more short-term fixed rate loans and adjustable rate loans. We also have the ability to sell a portion of the long-term, fixed-rate mortgage loans that we originate. In addition, we purchase shorter term or adjustable-rate investment securities and mortgage-backed securities.

We have an Asset/Liability Committee consisting of members of management which meets monthly to review market interest rates, economic conditions, the pricing of interest-earning assets and interest-bearing liabilities and the balance sheet structure. On a quarterly basis, this Committee also reviews the interest rate risk position and cash flow projections.

The Board of Directors has a Risk Management Committee which meets quarterly and reviews interest rate risk and trends, our interest sensitivity position, the liquidity position and the market risk inherent in the investment portfolio.

In an effort to assess interest rate risk and market risk, we utilize a simulation model to determine the effect of immediate incremental increases and decreases in interest rates on net income and the market value of equity. Certain assumptions are made regarding loan prepayments and decay rates of savings and interest-bearing demand accounts. Because it is difficult to accurately project the market reaction of depositors and borrowers, the effect of actual changes in interest rates on these assumptions may differ from simulated results. We have established the following guidelines for assessing interest rate risk:

Net interest income simulation. Given a parallel shift of 100 basis points (“bps”), 200 bps and 300 bps in interest rates, the estimated net income may not decrease by more than 5%, 10% and 15%, respectively, within a one-year period.

Net income simulation. Given a parallel shift of 100 bps, 200 bps and 300 bps in interest rates, the estimated net income may not decrease by more than 10%, 20% and 30%, respectively, within a one-year period.

Market value of equity simulation. The market value of equity is the present value of assets and liabilities. Given a parallel shift of 100 bps, 200 bps and 300 bps in interest rates, the market value of equity may not decrease by more than 15%, 30% and 35%, respectively, from the computed economic value at current interest rate levels.

The following table illustrates the simulated impact of a 100 bps, 200 bps or 300 bps upward or a 100 bps downward movement in interest rates on net income, return on average equity, earnings per share and market value of equity. This analysis was prepared assuming that interest-earning asset and interest-bearing liability levels at June 30, 2022 remain constant. The impact of the rate movements was computed by simulating the effect of an immediate and sustained shift in interest rates over a twelve-month period from June 30, 2022 levels.


	Increase									Decrease
Parallel shift in interest rates over the next 12 months	100 bps			200 bps			300 bps			100 bps
Projected percentage increase/(decrease) in net interest income	0.2		%	0.1		%	(0.1)		%	(8.0		%)
Projected percentage increase/(decrease) in net income	0.7		%	0.5		%	0.2		%	(18.0		%)
Projected increase/(decrease) in return on average equity	0.7		%	0.5		%	0.2		%	(17.3		%)
Projected increase/(decrease) in earnings per share	$	0.01		$	—		$	—		$	(0.21)
Projected percentage increase/(decrease) in market value of equity	(6.4		%)	(12.9		%)	(19.1		%)	2.5		%

The figures included in the table above represent projections that were computed based upon certain assumptions including prepayment rates and decay rates. These assumptions are inherently uncertain and, as a result, cannot precisely predict the impact of changes in interest rates. Actual results may differ significantly due to timing, magnitude and frequency of interest rate changes and changes in market conditions, and actions that may be taken by management in response to interest rate changes.

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Item 4. CONTROLS AND PROCEDURES

Under the supervision of and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, these disclosure controls and procedures were effective.

There were no changes in the internal controls over financial reporting during the period covered by this report or in other factors that have materially affected, or are reasonably likely to materially affect the internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are subject to a number of asserted and unasserted claims encountered in the normal course of business. We believe that any additional liability, other than that which has already been accrued, that may result from such potential litigation will not have a material adverse effect on the financial statements. However, we cannot presently determine whether or not any claims against us will have a material adverse effect on our results of operations in any future reporting period. Refer to Note 11.

Item 1A. RISK FACTORS

Except as previously disclosed, there have been no material updates or additions to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

a) Not applicable.

b) Not applicable.

c) On December 13, 2012, the Board of Directors approved a program that authorizes the repurchase of approximately 5,000,000 shares of common stock. This program does not have an expiration date. During the quarter ended June 30, 2022, there were no shares of common stock repurchased and there are a maximum of 2,261,130 remaining shares that can be purchased under the current repurchase program.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

Not applicable.

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Item 6. EXHIBITS






31.1			Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-15 or 15d-15 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1			Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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104			The cover page of this Quarterly Report on Form 10-Q, formatted in inline XBRL.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.


NORTHWEST BANCSHARES, INC.
(Registrant)


Date:	August 5, 2022	By:	/s/ William W. Harvey, Jr.
			William W. Harvey, Jr.
			Chief Financial Officer and Interim President and Chief Executive Officer
			(Duly Authorized Officer)


Date:	August 5, 2022	By:	/s/ Jeffrey J. Maddigan
			Jeffrey J. Maddigan
			Executive Vice President, Finance, Accounting and Corporate Treasurer
			(Principal Accounting Officer)

TABLE OF CONTENTS

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 Part II 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

Exhibits

31.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule13a-15 or 15d-15 of the Securities Exchange Act of 1934, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002.

NWBI 10-Q Quarter ended June 30, 2022

Exhibits