Profile: Northwest Bancshares Inc (NWBI.OQ)

Northwest Bancshares, Inc., incorporated on September 8, 2009, is a savings and loan holding company. The primary activity of the Company is the ownership of all of the issued and outstanding common stock of Northwest Savings Bank, a chartered savings bank (Northwest). As of December 31, 2012, Northwest Savings Bank operated 165 community-banking offices throughout its market area in central and western Pennsylvania, western New York, eastern Ohio and Maryland. The Company operates in two segments: Community Banking and Consumer Finance. The Community Banking segment includes its savings bank subsidiary, Northwest Savings Bank, as well as the subsidiaries of the savings bank that provide similar products and services. The Consumer Finance segment is comprised of Northwest Consumer Discount Company, a subsidiary of Northwest Savings Bank.

Northwest Savings Bank, through its wholly-owned subsidiary, Northwest Consumer Discount Company, also operates 52 consumer finance offices throughout Pennsylvania. Northwest Savings Bank also offers investment management and trust services and, through wholly-owned subsidiaries, actuarial and benefit plan administration services, as well as property and casualty and employer benefits plan insurance. The Company’s loan portfolio segments consist of Personal Banking loans and Business Banking loans. Personal Banking loans include residential mortgage loans, home equity loans and other consumer loans. Business Banking loans include the commercial real estate loans and commercial loans. The Company’s principal sources of funds are personal and business deposits, borrowed funds and the principal and interest payments on loans and marketable securities. The Company’s principal source of income is interest received on loans and marketable securities.

Lending Activities

The Company provides commercial real estate loans and commercial business loans, which generally have adjustable rates of interest and shorter maturities than one- to four-family residential real estate loans. The Company also purchases mortgage-backed securities and other types of investment securities that generally have short average lives and/or adjustable interest rates. As of December 31, 2012, the Company sells low-yielding fixed rate residential mortgage loans with maturities of more than 15 years, and on a more limited basis, those with maturities of 15 years or less, while retaining all adjustable rate residential mortgage loans. The Company offers residential mortgage loans with terms ranging from 15 to 30 years, with either fixed or adjustable interest rates. The Company’s fixed rate residential mortgage loans offer fixed rates for up to 30 years. The Company’s adjustable rate residential mortgage loans offer initial interest rate adjustment periods of one, three, and five years, terms up to 30 years and adjustments based on changes in designated market indices.

The Company’s home equity loans are secured by the borrower’s principal residence with a maximum loan-to-value ratio, including the principal balances of both the first and second mortgage loans, of 90% or less. Home equity loans are offered on a fixed rate basis with terms of up to 20 years. Home equity lines of credit are offered on an adjustable-rate basis with terms of up to 25 years. As of December 31, 2012, the disbursed portion of home equity lines of credit totaled $300.4 million, or 5.2% of gross loans, with $143.8 million remaining undisbursed, and our fixed-rate home equity loans totaled $776.2 million, or 13.4% of gross loans. The Company generally underwrites home equity loans and lines of credit in a manner similar to our underwriting of residential mortgage loans.

The principal types of other consumer loans the Company offers are automobile loans, sales finance loans, unsecured personal loans, credit card loans, and loans secured by deposit accounts. These loans are offered with maturities of ten years or less. The Company’s multi-family commercial real estate loans are secured by multi-family residences, such as rental properties. The Company’s commercial real estate loans are secured by nonresidential properties, such as hotels, commercial offices, manufacturing facilities and retail establishments. As of December 31, 2012, a portion of its multi-family commercial real estate and commercial real estate loans were secured by properties located within its market area. The Company offers commercial loans to finance various activities in its market area, some of which are secured in part by additional real estate collateral. As of December 31, 2012, the aggregate amount loaned to one borrower, or related borrowers, totaled $68.3 million and was secured by seven different mixed use commercial buildings.

Investment Activities

The investment portfolio is used to provide collateral for qualified deposits and borrowings, to provide additional earnings when loan production is low, and to reduce its tax liability. The Company purchase debentures and mortgage-backed securities that generally are issued by the Federal Home Loan Bank, Fannie Mae, Freddie Mac or Ginnie Mae. As of December 31, 2012, the Company’s investment portfolio includes residential mortgage-backed securities available for sale and investment securities available for sale. The Company’s residential mortgage-backed securities available for sale includes fixed-rate pass through certificates, variable-rate pass through certificates, fixed-rate non-agency CMOs, fixed-rate agency CMOs, variable-rate non-agency CMOs and variable-rate agency CMOs. The Company’s investment securities available for sale include United States Government, agency and GSEs, Municipal securities, corporate debt issues and Equity securities and mutual funds.

Sources of Funds

Deposits are the source of the Company’s funds for lending and other investment purposes. In addition to deposits, it derives funds from the amortization and prepayment of loans and mortgage-backed securities, the maturity of investment securities, operations and, if needed, borrowings. Personal and business deposits are generated principally from its market area by offering a selection of deposit instruments, including checking accounts, savings accounts, money market deposit accounts, term certificate accounts and individual retirement accounts. Deposits are the primary source of funds for its lending and investment activities and general business purposes. The Company also relies upon borrowings to supplement its supply of lendable funds and to meet deposit withdrawal requirements. Borrowings from the Federal Home Loan Bank of Pittsburgh typically are collateralized by a portion of our real estate loans. In addition to the Federal Home Loan Bank of Pittsburgh, the Company has borrowing facilities with the Federal Reserve Bank, two correspondent banks and it borrow funds, in the form of corporate repurchase agreements, from municipalities, corporations and school districts.

Subsidiary Activities

The Company’s sole direct consolidated subsidiary is Northwest Savings Bank. Northwest Bancshares, Inc. also owns all of the common stock of two statutory business trusts: Northwest Bancorp Capital Trust III and Northwest Bancorp Statutory Trust IV (the Trusts). Northwest Savings Bank has 10 wholly owned subsidiaries: Northwest Settlement Agency, LLC, Great Northwest Corporation, Northwest Financial Services, Inc., Northwest Advisors, Inc., Northwest Consumer Discount Company, Inc., Allegheny Services, Inc., Boetger and Associates, Inc., Veracity Benefits Design, Inc., Northwest Capital Group, Inc. and The Bert Company.