Northwest Bancshares, Inc. announces Fourth Quarter 2019 Earnings and Quarterly Dividend Increase
Northwest Bancshares, Inc., (the “Company”), (NasdaqGS: NWBI) announced net income for the quarter ended December 31, 2019 of $25.6 million, or $0.24 per diluted share. This represents a decrease of $876,000, or 3.3%, compared to the same quarter last year when net income was $26.5 million or $0.26 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended December 31, 2019 were 7.52% and 0.97% compared to 8.44% and 1.09% for the same quarter last year.
The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share payable on February 14, 2020 to shareholders of record as of February 6, 2020. This is the 101st consecutive quarter in which the Company has paid a cash dividend and represents a 5.6% increase over the prior year. Based on the market value of the Company’s stock as of December 31, 2019, this represents an annualized dividend yield of approximately 4.57%.
In making this announcement, Ronald J. Seiffert, Chairman, President and CEO, noted, “While the fourth quarter was negatively impacted by a loan loss provision for a recently classified C&I loan, costs associated with litigation settlements as well as a continued decline in net interest margin as expected, overall we were very pleased with our annual 2019 results. Annual net income of $110.4 million, or $1.04 per diluted share, exceeded the prior year net income of $105.5 million, or $1.02 per diluted share, by $4.9 million or almost 5.0%. For the year, loans grew $757.2 million, or 9.4%, with approximately half of this growth coming from the Union Community Bank acquisition and the other half coming from internal growth. In addition, we were able to fund this growth almost entirely with internal deposit growth. Noninterest income experienced exceptional growth for the year of $7.7 million, or 8.4%, across almost all categories. Our mortgage banking operation is beginning to contribute in a meaningful way, brokerage investment revenue increased by over 7% and recent changes in the fourth quarter in our fees and fee income philosophy will benefit us going into 2020. Finally, we look forward to welcoming the MutualBank employees and customers in April along with their $2.1 billion balance sheet and expected earnings accretion.”
Net interest income increased by $2.1 million, or 2.4%, to $88.9 million for the quarter ended December 31, 2019, from $86.8 million for the quarter ended December 31, 2018, primarily due to a $5.4 million, or 5.8%, increase in interest income on loans receivable. This increase was primarily due to an increase of $734.0 million, or 9.2%, in the average balance of loans. Partially offsetting this improvement was an increase in interest expense on deposits of $3.9 million, or 43.5%, due to elevated market interest rates when compared to the prior year, resulting in an increase in the cost of our interest-bearing liabilities to 0.80% for the quarter ended December 31, 2019 from 0.67% for the quarter ended December 31, 2018. The net impact of these changes caused the Company’s net interest margin to decrease to 3.73% for the quarter ended December 31, 2019 from 3.94% for the same quarter last year.
The provision for loan losses increased by $4.4 million, or 116.9%, to $8.2 million for the quarter ended December 31, 2019, from $3.8 million for the quarter ended December 31, 2018. The provision increased in the current quarter due to the downgrade of an $11.5 million commercial loan resulting in a loan loss reserve on this relationship of approximately $7.4 million.
Noninterest income increased by $5.0 million, or 21.4%, to $28.2 million for the quarter ended December 31, 2019, from $23.2 million for the quarter ended December 31, 2018. This increase was due to a $1.3 million, or 10.1%, increase in service charges and fees as a result of additional fees collected on deposit accounts due to a recent change in fee structure, a $1.3 million increase in mortgage banking income as a result of expanding our secondary market sales capabilities and a $1.0 million, or 34.6%, increase in other operating income from increases in interest rate swap fee income. In addition, we recognized a gain of $908,000 in the current quarter on the sale of approximately $52.2 million of one-to-four family mortgage loans from our portfolio. Consistent with our strategy in the third quarter of 2019, we chose to sell these loans as they were identified as most likely to refinance due to declining market interest rates and we redeployed the proceeds into shorter duration consumer and commercial loans at an equivalent yield.
Noninterest expense increased by $4.3 million, or 5.9%, to $76.6 million for the quarter ended December 31, 2019, from $72.3 million for the quarter ended December 31, 2018. This increase resulted from a $2.8 million, or 7.0%, increase in compensation and employee benefits due to both internal growth in compensation and staff as well as the addition of Union Community Bank (“UCB”) employees. Also contributing to this increase was an increase in other expenses of $1.2 million, or 31.5%, primarily related to an increase in litigation accruals and an increase in acquisition expense of $679,000 due to initial expenses incurred as a result of the recently announced acquisition of MutualFirst Financial, Inc. Partially offsetting this increase was a decrease in marketing expenses of $1.3 million due primarily to our debit card reward program being discontinued and a decrease in federal deposit premiums of $637,000 due to an assessment credit received during the quarter as a result of the deposit insurance fund becoming fully funded.
Net income for the year ended December 31, 2019 was $110.4 million, or $1.04 per diluted share. This represents an increase of $4.9 million, or 4.7%, compared to the year ended December 31, 2018, when net income was $105.5 million, or $1.02 per diluted share. The annualized returns on average shareholders’ equity and average assets for the year ended December 31, 2019 were 8.36% and 1.07% compared to 8.61% and 1.11% for the prior year. This increase in net income was the result of an increase in net interest income after provision of $19.5 million, or 6.1%, and an increase in noninterest income of $7.7 million, or 8.4%. These increases were partially offset by an increase in noninterest expense of $20.0 million, or 7.2%. Contributing to the additional expense is the added cost of UCB operations, including additional compensation costs, additional processing costs associated with our new commercial and residential mortgage platforms as well as increased online banking usage fees, and the acquisition costs associated with the UCB conversion in March 2019 and the initial costs incurred for the pending MutualFirst Financial, Inc. acquisition scheduled to close in the second quarter of 2020.
Headquartered in Warren, Pennsylvania, Northwest Bancshares, Inc. is the holding company of Northwest Bank. Founded in 1896, Northwest Bank is a full-service financial institution offering a complete line of business and personal banking products, employee benefits and wealth management services, as well as the fulfillment of business and personal insurance needs. Northwest operates 172 full-service community banking offices and nine free standing drive-through facilities in Pennsylvania, New York and Ohio. Northwest Bancshares, Inc.’s common stock is listed on the NASDAQ Global Select Market (“NWBI”). Additional information regarding Northwest Bancshares, Inc. and Northwest Bank can be accessed on-line at www.northwest.com.