What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 383 added, 409 removed, 2256 unchanged (26% of the section changed)

6 unchanged sentences

KPMG LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Report and has issued a report with respect to the effectiveness of the Company’s internal control over financial reporting.

/s/ Ronald J.

Seiffert /s/ William W.

Seiffert, Chairman, President and Chief Executive Officer (Principal Executive Officer) William W.

Harvey, Jr., Senior Executive Vice President

and Chief Financial Officer (Principal Financial Officer)

Torchio /s/ William W.

Torchio, President and Chief Executive Officer (Principal Executive Officer) William W.

Harvey, Jr., Senior Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer)

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated statements of financial condition of Northwest Bancshares, Inc.

and subsidiaries (the Company) as of December 31, 2021 and December 31, 2020, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 5 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments”.

Basis for Opinion

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Allowance for credit losses for loans evaluated on a collective basis

As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses for loans was $102.2M, as of December 31, 2021, a portion which included the measure of expected credit losses on a collective (pool) basis for those loans that share similar risk characteristics (the collective ACL).

The expected credit loss methodologies apply either a probability of default and loss given default loss assumption or a portfolio-level loss net charge-off rate assumption to loan level exposures on an undiscounted basis over the contractual term of the loans, adjusted for prepayments.

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s allowance for credit losses for loans held for investment was $118.0M as of December 31, 2022, a portion of which included the measurement of expected credit losses on a collective (pool) basis for those loans that share similar risk characteristics (the collective ACL).

The expected credit loss methodologies apply either a probability of default and loss given default loss assumption or a portfolio-level net charge-off rate assumption to loan level exposures on an undiscounted basis over the contractual term of the loans, adjusted for prepayments.

The Company uses a twenty-four month reasonable and supportable forecast period, which is based on a probability-weighted multiple macroeconomic scenarios approach and reverts to historical average loss rates over a twelve-month period for the remaining life of the loans.

The following collective ACL modeling methodologies were developed for each significant loan portfolio segment:

(1) the allowance for credit losses within the mortgage and home equity loan portfolios are calculated at the loan-level using projected default rates, prepayment rates, and severity rates as well as macroeconomic forecasts determined at the pool level;

(2) the allowance for credit losses within the vehicle loan portfolio is calculated at the portfolio-level using a vintage analysis to project portfolio-level net charge-off rates;

(3) the allowance for credit losses is calculated for commercial

real estate and commercial small business loans at the portfolio-level using a regression model to project portfolio-level net charge-off rates as well as macroeconomic forecasts;

and (4) the allowance for credit losses for the commercial real estate and commercial loan portfolio is calculated at loan-level using projected default and severity rates as well as macroeconomic forecasts determined at the pool level.

A portion of the collective ACL is comprised of adjustments to historical loss information for asset-specific risk characteristics to reflect the extent they do not exist in the historical loss information.

The following collective ACL methodologies were developed for each significant loan portfolio segment:

(1) the allowance for credit losses within the mortgage, home equity, and vehicle loan portfolios are calculated at the loan-level using projected default, prepayment, and severity rates as well as macroeconomic forecasts determined at the pool level;

(2) the allowance for credit losses for the commercial real estate small business and commercial small business loan portfolios are calculated at the portfolio-level using a regression model to project portfolio-level net charge-off rates as well as macroeconomic forecasts determined at the pool level;

and (3) the allowance for credit losses for the commercial real estate and commercial loan portfolios are calculated at the loan-level using projected default and severity rates as well as macroeconomic forecasts determined at the pool level.

A portion of the collective ACL is comprised of adjustments to historical loss information for asset-specific risk characteristics to reflect the extent they do not exist in the

historical loss information.

These adjustments are based on qualitative factors not reflected in the quantitative models but are likely to impact the measurement of estimated credit losses.

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• development of the collective ACL methodologies

• continued use and conceptual soundness of the default, severity, prepayments, and projected portfolio-level net charge-off rate (model assumptions)

• continued use and conceptual soundness of the default, severity, prepayments, and projected portfolio-level net charge-off rates (model assumptions)

• performance monitoring of the models

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Noninterest income:

Gain/(loss) on sale of investments ( 176 ) 236 50

(Loss)/gain on sale of investments ( 8 ) ( 176 ) 236

Gain on sale of loans — — 1,302

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Other comprehensive income net of tax:

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

Unrealized holding gains/(losses), net of tax of $ 10,333 , $( 5,607 ), and $( 3,994 ), respectively

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

Unrealized holding (losses)/gains, net of tax of $ 45,321 , $ 10,333 , and $( 5,607 ), respectively

( 151,888 ) ( 28,873 ) 13,711

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( 1 ) ( 287 ) ( 15 )

Net unrealized holding gains/(losses) on marketable securities ( 29,160 ) 13,696 9,979

Net unrealized holding (losses)/gains on marketable securities ( 151,889 ) ( 29,160 ) 13,696

Change in fair value of interest rate swaps:

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18,884 23,748 ( 11,301 )

Reclassification adjustments for prior period service costs and net losses included in net income,

net of tax of $( 515 ), $( 395 ), and $( 334 ), respectively

Reclassification adjustments for prior period service costs and actuarial (gains)/losses included in net income, net of tax of $ 202 , $( 515 ), and $( 395 ), respectively

( 524 ) 1,332 997

Net gain/(loss) on defined benefit plans 18,360 25,080 ( 10,304 )

Other comprehensive income/(loss) ( 4,080 ) 3,392 2,755

Other comprehensive (loss)/income ( 133,529 ) ( 4,080 ) 3,392

Total comprehensive income $ 137 150,243 78,246

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, excluding share data)

(in thousands, excluding per share data)

stock Additional paid-in

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Total comprehensive income — — 74,854 3,392 78,246

Acquisition of Union Community Bank 24 43,264 — — 43,288

Acquisition of Mutual Bank 206 213,200 — — 213,406

Reclassification due to adoption of ASU No.

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Exercise of stock options 1 1,478 — — 1,479

Share repurchases ( 7 ) ( 9,269 ) — — ( 9,276 )

Stock-based compensation expense 3 4,236 — — 4,239

Stock-based compensation forfeited ( 2 ) 2 — — —

Other — 105 — — 105

Dividends paid ($ 0.76 per share)

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Total comprehensive income — — 154,323 ( 4,080 ) 150,243

Acquisition of Mutual Bank 206 213,200 — — 213,406

Reclassification due to adoption of ASU No.

2016-13 — — ( 9,649 ) — ( 9,649 )

Exercise of stock options 12 13,999 — — 14,011

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Stock-based compensation forfeited ( 1 ) 1 — — —

Other — 105 — — 105

Dividends paid ($ 0.79 per share)

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Exercise of stock options 4 5,169 — — 5,173

Share repurchases ( 18 ) ( 23,836 ) — — ( 23,854 )

Stock-based compensation expense 1 4,073 — — 4,074

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Provision for credit losses 17,860 ( 11,883 ) 83,975

Net gain on sale of assets ( 1,201 ) ( 3,249 ) ( 2,472 )

Net (gain)/loss on sale of assets 42 ( 1,201 ) ( 3,249 )

Mortgage banking activity ( 3,512 ) ( 20,120 ) ( 25,798 )

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Loan originations ( 4,585,563 ) ( 3,961,816 ) ( 4,655,969 )

Loan purchases ( 371,121 ) — —

Proceeds from loan maturities and principal reductions 4,047,147 4,490,089 4,383,933

Proceeds from sale of loans held for investment — — 50,791

Net proceeds of FHLB stock 7,564 6,107 1,348

Net (proceeds)/redemptions of FHLB stock ( 25,959 ) 7,564 6,107

Proceeds from sale of real estate owned 1,633 2,700 1,651

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NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

NORTHWEST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Financing activities:

Net increase in deposits $ 701,932 1,390,187 218,449

Net (decrease)/increase in deposits $ ( 836,617 ) 701,932 1,390,187

Proceeds from long-term borrowings — — 123,211

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Purchase of common stock for retirement — ( 23,854 ) ( 9,276 )

Net cash provided by financing activities 570,494 1,095,571 165,188

Net increase/(decrease) in cash and cash equivalents $ 542,982 675,431 ( 7,943 )

Net cash (used)/provided by financing activities ( 397,902 ) 570,494 1,095,571

Net (decrease)/increase in cash and cash equivalents $ ( 1,139,894 ) 542,982 675,431

Cash and cash equivalents at beginning of period $ 1,279,259 736,277 60,846

Net increase/(decrease) in cash and cash equivalents 542,982 675,431 ( 7,943 )

Net (decrease)/increase in cash and cash equivalents ( 1,139,894 ) 542,982 675,431

Cash and cash equivalents at end of period $ 139,365 1,279,259 736,277

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(a) Nature of Operations

Northwest Bancshares, Inc., a Maryland corporation headquartered in Columbus, Ohio, is the federal savings and loan holding company for its wholly owned subsidiary, Northwest Bank.

Northwest Bank, a Pennsylvania chartered savings bank, offers personal and business deposit and loan products as well as investment management and insurance services through its 170 banking locations in Pennsylvania, New York, Ohio, and Indiana.

Northwest Bancshares, Inc., a Maryland corporation headquartered in Columbus, Ohio, is the b ank holding company for its wholly owned subsidiary, Northwest Bank.

Northwest Bank, a Pennsylvania chartered savings bank, offering a complete line of business and personal banking products, as well as treasury management solutions and wealth management services through its 150 banking locations in Pennsylvania, New York, Ohio, and Indiana.

We have determined that we have one reportable business segment.

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On a quarterly basis, we measure expected credit losses on held-to-maturity debt securities on a collective basis by major security type and all of our held-to-maturity debt securities are residential mortgage-backed securities.

Accrued interest receivable on held-to-maturity debt securities totaled $ 2.2 million and $ 1.8 million at December 31, 2021 and December 31, 2020, respectively, and is excluded from estimated credit losses.

All of our residential mortgage-backed securities are issued by U.S.

Accrued interest receivable on held-to-maturity debt securities total ed $ 2.8 million and $ 2.2 million at December 31, 2022 and December 31, 2021, respectively, and is excluded from estimated credit losses.

All of our r esidential mortgage-backed securities are issued by U.S.

government entities and agencies.

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Losses are charged against the allowance when we believe the uncollectibility of an available-for-sale security is confirmed or when there is an intent or requirement to sell the security.

Accrued interest receivable on available-for-sale debt securities totaled $ 1.9 million at December 31, 2021 and December 31, 2020, and is excluded from the estimate of credit losses.

Accrued interest receivable on available-for-sale debt securities totale d $ 2.0 million and $ 1.9 million at December 31, 2022 and December 31, 2021, respectively , and is excluded from the estimate of credit losses.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days past due.

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◦ Commercial real estate - owner-occupied loans - commercial real estate loans secured by residential or non-residential properties

◦ Commercial loans - other commercial loans, including small business commercial loans

◦ Commercial loans - other commercial loans, including small business commercial loans and equipment finance loans

Loans are reported at amortized cost.

Amortized cost is the principal balance outstanding, net of any deferred purchased premiums and discounts, deferred origination fees or costs and the allowance for credit losses.

Accrued interest receivable totaled $ 21.3 million and $ 31.7 million at December 31, 2021 and December 31, 2020, respectively, and was reported in accrued interest receivable on the Consolidated Statements of Financial Position.

Amortized cost is the principal balance outstanding, net of any deferred purchased premiums an d discounts, deferred origination fees or costs and the allowance for credit losses.

Accrued interest receivable totaled $ 30.4 million and $ 21.3 million at December 31, 2022 and December 31, 2021, respectively, and was reported in accrued interest receivable on the Consolidated Statements of Financial Condition.

Accrued interest receivable is excluded from the amortized cost basis of loans and from the estimate of allowance for credit losses.

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Interest earned on loans for which no payments were received during the month is accrued at month end.

Accrued interest on loans more than 90 days delinquent is reversed and such loans are placed on nonaccrual status.

Generally accrued interest on loans more than 90 days delinquent is reversed and such loans are placed on nonaccrual status, except for credit card loans which are not placed in nonaccrual status based on delinquency.

All loans are placed on nonaccrual status when principal or interest is 90 days or more delinquent or when there is reasonable doubt that interest or principal will not be collected in accordance with the contractual terms.

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TDRs may include modifications of terms of loans, receipts of assets from borrowers in partial or full satisfaction of loans, or a combination thereof.

A modified loan is determined to be a TDR based on the contractual terms as specified by the original loan agreement or the most recent modification.

Once classified as a TDR, a loan is removed from

A modified loan is determined to be a TDR based on the contractual

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

such classification under three circumstances:

terms as specified by the original loan agreement or the most recent modification.

Once classified as a TDR, a loan is removed from such classification under three circumstances:

(1) the loan is paid off, (2) the loan is charged off, or (3) if, at the beginning of the current fiscal year, the loan has performed in accordance with the modified terms for a minimum of six consecutive months and at the time of modification the loan’s interest rate represented a then current market interest rate for a loan of similar risk.

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Past due status is measured using the loan’s contractual maturity date.

Personal Banking loans are charged-off or charged down when they become 180 days delinquent, unless the borrower has filed for bankruptcy.

Personal Banking loans are charged-off or charged down when they become 180 da ys delinquent, unless the borrower has filed for bankruptcy.

Business Banking loans are charged-off or charged down when, in our opinion, they are no longer collectible or when it has been determined that the collateral value no longer supports the carrying value of the loan for loans that are collateral dependent.

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We estimate the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

Loans are charged off against the allowance when we believe the uncollectibility of a loan balance is confirmed.

Loans are charged off against the allowance when we believe that a loan balance is confirmed to be uncollectible.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

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In determining the estimated life of a credit card receivable, we first estimate the future cash flows expected to be received and then apply those expected future cash flows to the credit card balance.

Expected credit losses for credit cards are determined by estimating the amount and timing of principal payments expected to be received as payment for the balance outstanding as of the reporting date and applying those principal payments against the balance outstanding as of the reporting period until the expected payments have been fully allocated.

The allowance for credit losses is recorded for the excess of the balance outstanding as of the reporting period over the expected principal payments.

The allowance for credit losses is measured on a collective (“pool”) basis when similar risk characteristics exist.

For the purpose of calculating portfolio-level reserves, we have grouped our loans into seven segments:

residential mortgage loans, home

residential mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate owner-occupied and commercial loans.

The allowance for credit losses is measured at the pool level utilizing loan-level inputs wherever possible.

We use a twenty-four month forecasting period and revert to historical average loss rates thereafter.

The reasonable and supportable forecast is based on a

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate owner-occupied and commercial loans.

The allowance for credit losses is measured at the pool level utilizing loan-level inputs wherever possible.

We use a twenty-four month forecasting period and revert to historical average loss rates thereafter.

The reasonable and supportable forecast is based on a probability-weighted multiple economic scenario approach and obtained from a third party vendor.

probability-weighted multiple economic scenario approach and obtained from a third party vendor.

Reversion to the mean takes place over a twelve-month period.

Our loss rate models utilize a linear reversion method.

For our Probability of Default (“PD”)/Loss Given Default (“LDG”) models we revert the PD utilizing exponential reversion, which is an accelerated method, and the LGD utilizing a linear reversion method.

Historical average loss rates are calculated using historical data beginning in 2009 through the current period.

As part of the analysis as of December 31, 2021, we considered the most recent economic conditions and forecasts available which incorporated the impact of COVID-19.

For our probability of default (“PD”)/loss given default (“LGD”) models we revert the PD utilizing exponential reversion, which is an accelerated method, and the LGD utilizing a linear reversion method.

Historical average loss rates are calculated using historica l data beginning in 2009 through the current period.

As part of the analysis as of December 31, 2022, we considered the most recent economic conditions and forecasts available.

Mortgage and Home Equity Loans

The allowance for credit losses within the mortgage and home equity loan classes is calculated at the pool-level using a non-discounted cash flow method through a PD and LGD model developed by an external third-party.

The allowance for credit losses within the mortgage and home equity loan pools is calculated using a non-discounted cash flow method through a PD and LGD model developed by an external third-party.

These classes are further divided into smaller pools of loans with similar risk characteristics such as:

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Vehicle Loans

The allowance for credit losses within the vehicle loan portfolio is calculated at the portfolio-level using a non-discounted cash flow method through a loss rate model developed internally with the assistance of an external third-party.

The allowance for vehicle loans utilizes a vintage analysis to project portfolio-level net charge-off rates.

The class is further divided into short term versus long term loans, prime versus subprime borrowers, and origination vintage.

This model uses current balance, original credit bureau score, original debt-to-income ratio, loan term, loan age, and other product characteristics as key risk drivers.

The model used for vehicle loans is not natively sensitive to macroeconomic conditions.

The necessary adjustments to account for current and expected macroeconomic conditions is captured via our qualitative adjustment framework.

The allowance for credit losses within the vehicle loan pool is calculated using a non-discounted cash flow model through a PD and LGD model developed by an external third-party.

These classes are further divided into smaller pools of loans with similar risk characteristics such as:

cars, trucks and powersport vehicles and recreational vehicles.

Monthly probabilities of default and prepayments are estimated for each loan, along with estimates of exposure at default and loss given default.

The model accepts as inputs key risk drivers such as loan, borrower, and collateral characteristics.

It also uses macroeconomic forecasts of used car price indices, gross domestic product, unemployment rates and others.

Consumer Loans

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The model accepts as inputs key risk drivers such as:

current balance, original loan-to-value-ratio, type of collateral, location of collateral, delinquency status, loan age, obligor financial statement information, and expected prepayment rates, among other

It also utilizes macroeconomic forecasts of commercial real estate price indices, unemployment rates, gross domestic product and others.

The allowance for credit losses is calculated for commercial real estate small business loans at the portfolio-level using a non-discounted cash flow method through a loss rate model developed internally with the assistance of an external third-party.

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

characteristics.

It also utilizes macroeconomic forecasts of commercial real estate price indices, unemployment rates, gross domestic product and others.

A regression model is used to project portfolio-level net charge-off rates.

regression model is used to project portfolio-level net charge-off rates.

This model uses loan characteristics and macroeconomic forecasts as key inputs.

Commercial Loans and Commercial Real Estate - Owner Occupied Loans

The commercial loan class is further segmented into smaller pools of loans with similar risk characteristics, commercial loans, commercial small business loans and commercial equipment finance loans.

The allowance for credit losses for the commercial loan portfolio and the commercial real estate - owner occupied loan portfolio is calculated at the pool level using a non-discounted cash flow method through a PD/LGD model developed by an external third-party.

The commercial loan class is further segmented into smaller pools of loans with similar risk characteristics, commercial loans and commercial small business loans.

The commercial loan portfolio and the commercial real estate owner occupied loan portfolio models project default and severity rates.

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This model uses loan characteristics and macroeconomic forecasts as key inputs.

The allowance for credit losses for commercial equipment finance loans is calculated at the portfolio-level using a weighted-average remaining maturity method through an internally developed model.

This model uses loan characteristics including, delinquency status and years to maturity.

This model is not natively sensitive to macroeconomic conditions.

The necessary adjustments to account for current and expected macroeconomic conditions is captured via our qualitative adjustment framework.

Loans that do not share risk characteristics are evaluated on an individual basis.

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For off-balance-sheet credit exposures, we estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable.

The liability for credit losses on off-balance-sheet credit exposures is adjusted through a provision for credit loss expense and is included within “other expenses”.

The liability for credit losses on off-balance-sheet credit exposures is adjusted through a provision for credit loss expense and is included within other expense on the Consolidated Statements of Income.

We estimate the liability balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

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Off-balance-sheet exposures that are not unconditionally cancellable have been identified for the mortgage, home equity, commercial real estate, and commercial loan portfolios.

Results for reporting periods beginning after January 1, 2020 are presented under CECL methodology while prior period amounts continue to be reported in accordance with Accounting Standards Codification (“ASC”) Topic 450, Contingencies;

and specific reserves based upon ASC Topic 310, Receivables.

ASC Topic 450 applies to homogeneous loan pools such as commercial loans, consumer lines of credit and residential mortgages that are not individually evaluated for impairment.

ASC Topic 310 is applied to commercial and consumer loans that are individually evaluated for impairment.

(g) Real Estate Owned

Real estate owned is comprised of property either acquired through foreclosure or voluntarily conveyed by borrowers.

These assets are recorded on the date acquired at the lower of the loan balance or fair value of the collateral, less estimated disposition costs, with the fair value being determined by an appraisal.

Any initial write-down is charged to the allowance for credit losses.

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

(g) Real Estate Owned

Real estate owned is comprised of property either acquired through foreclosure or voluntarily conveyed by borrowers.

Any initial write-down is charged to the allowance for credit losses.

Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or the current fair value, less estimated disposition costs.

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Quarterly, we evaluate if there are any triggering events that would require an update to our previous assessment.

We conducted our annual impairment assessment as of June 30, 2021 by first performing a qualitative assessment of goodwill to determine if it was more likely than not that the fair value was less than the carrying value.

We conducted our annual impairment assessment as o f June 30, 2022 b y first performing a qualitative assessment of goodwill to determine if it was more likely than not that the fair value was less than the carrying value.

In performing a qualitative analysis, factors considered include, but are not limited to, macroeconomic conditions, industry and market conditions and overall financial performance.

The results of the qualitative assessment for 2021 indicated that it was not more likely than not that the fair value of the reporting unit was less than the carrying value.

Consequently, no additional quantitative two-step impairment test was required and no impairment was recorded in 2021.

The results of the qualitative assessme nt for 2022 i ndicated that it was not more likely than not that the fair value of the reporting unit was less than the carrying value.

Consequently, no additional quantitative impairment test was required and no impairment was recorded in 2022.

Future events could cause us to conclude that goodwill has become impaired, which would result in recording an impairment loss.

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The core deposit study reflects the cumulative present value benefit of acquiring deposits versus an alternative source of funding.

The other identifiable intangible asset

The other identifiable intangible asset study reflects the cumulative present value benefit of acquiring the income stream from an existing customer base versus developing new business relationships.

Based upon analysis, the amount of the premium related to the core deposits or other identifiable intangibles of the business purchased is calculated along with the estimated life of the intangible.

The intangible, which is recorded in other intangible assets, is then amortized to expense on an accelerated basis over an approximate life of typically betwe en seven to eleven years .

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

study reflects the cumulative present value benefit of acquiring the income stream from an existing customer base versus developing new business relationships.

Based upon analysis, the amount of the premium related to the core deposits or other identifiable intangibles of the business purchased is calculated along with the estimated life of the intangible.

The intangible, which is recorded in other intangible assets, is then amortized to expense on an accelerated basis over an approximate life of typically between seven to eleven years .

(l) Bank-Owned Life Insurance

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If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established.

(q) Stock-Related Compensation

Stock-based compensation awards granted, comprised of performance and time-based restricted stock units, stock options, and restricted stock awards, are valued at fair value and compensation cost is recognized on a straight-line basis over the requisite service or performance period of each award.

For service-based awards compensation will be recognized pro rata over the periods in which the shares vest.

F or performance-based awards, compensation expense is recognized evenly over the performance period, based on the probability of the achievements of the performance conditions set forth in the plans.

Forfeitures are recognized as they occur.

For restricted stock awards, the recipients are entitled to all shareholder rights, except that the shares may not be sold, pledged, or

NORTHWEST BANCSHARES, INC.

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(All dollar amounts presented in tables are in thousands, except as indicated)

(q) Stock-Related Compensation

otherwise disposed of and are required to be held in a trust.

For restricted stock units and performance stock units, the recipients are not entitled to any of the shareholder rights.

We determine the fair value of each option award, estimated on the grant date, using the Black-Scholes-Merton option-pricing model.

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Treasury securities of a similar maturity to the expected term of the options.

For options outstanding at December 31, 2021, the following assumptions were used to determine the option’s fair value:

(1) annual rate of quarterly dividends ranging from 3.9 % to 7.5 % based on historical dividends and market prices;

(2) expected volatility of 13.0 % to 19.0 % based on historical average monthly volatility;

(3) risk-free discount rates ranging from 0.7 % to 2.9 %;

and (4) expected lives of nine to ten years based on previous grants.

During the year ended December 31, 2021, we awarded 621,972 stock options to employees and 72,000 stock options to directors.

During the year ended December 31, 2020, we awarded 556,476 stock options to employees and 57,600 stock options to directors.

The options granted in 2021 and 2020 vest over a five or seven-year period, depending on the date of the grant, with the first vesting occurring on the grant date.

During the year ended December 31, 2022, we awarded no stock options to employees or directors.

New shares are issued when options are exercised.

Option awards are generally granted with an exercise price equal to the closing market price of the Company’s stock on the day before the grant date.

During the year ended December 31, 2021, we awarded 307,207 restricted shares to employees and 27,000 restricted shares to directors.

During the year ended December 31, 2020, we awarded 261,091 restricted shares to employees and 21,600 restricted shares to directors.

These common share awards vest over a five or seven-year period, depending on the date of the grant, with the first vesting occurring on the grant date.

Once shares have vested, they are no longer restricted.

Compensation expense, in the amount of the fair market value of the common stock at the date of the grant will be recognized pro rata over the periods in which the shares vest.

While restricted, the recipients are entitled to all shareholder rights, except that the shares may not be sold, pledged, or otherwise disposed of and are required to be held in a trust.

For additional information regarding grants of stock options and common shares, see Note 15.

Stock-based employee compensation expense related to common share awards of $ 2.8 million, $ 4.1 million and $ 3.5 million was included in income before income taxes during the years ended December 31, 2022, 2021 and 2020, respectively.

The effect on net income for the years ended December 31, 2022, 2021 and 2020 was a reduction of $ 2.0 million, $ 2.9 million and $ 2.5 million, respectively.

Total compensation expense for unvested stock options of $ 1.7 million has yet to be recognized as of December 31, 2021.

Total compensation expense for unvested stock options of $ 909,000 has yet to be recognized as of December 31, 2022.

The weighted average period over which this remaining stock option expense will be recognized is approximately 3.80 years.

For additional information regarding grants of stock options and common shares, see Note 14.

(r) Derivative Financial Instruments

1 unchanged sentence

The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

An entity that elects to use hedge accounting is required, at inception, to establish the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge.

To qualify for hedge accounting rules, a hedging relationship must be highly effective in offsetting the risk designation as being hedge.

The hedging relationship must be formally documented at inception and assess the hedging relationship at least on a quarterly basis to ensure the hedging instrument continues to be highly effective over the life of the hedging relationship.

Those methods must be consistent with our approach to managing risk.

At times, we utilize interest rate swap agreements as part of the management of interest rate risk to hedge the interest rate risk on our trust preferred debentures.

At times, we utilize interest rate swap agreements as part of the management of interest rate risk to hedge the interest rate risk on floating rate borrowings.

Amounts receivable or payable are recognized as accrued under the terms of the agreements and the differential is recorded as an adjustment to interest expense.

The interest rate swaps are designated as cash flow hedges, with the effective portion of the derivative’s unrealized gain or loss recorded as a component of other comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The ineffective portion of the unrealized gain or loss, if any, would be recorded in other expense.

For derivatives that are not designated as hedging instruments, any gain or loss is recognized immediately in earnings.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The interest rate swaps are designated as cash flo w hedges, with the derivative’s unrealized gain or loss recorded as a component of other comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

A hedging relationship that is determined to not be highly effective no longer qualifies for hedge accounting and must be de-designated.

Any gain or loss is recognized immediately in earnings.

(s) Off-Balance-Sheet Instruments

In the normal course of business, we extend credit in the form of loan commitments, undisbursed lines of credit, and standby letters of credit.

These off-balance-sheet instruments involve, to various degrees, elements of credit and interest rate risk not reported in the Consolidated Statement of Financial Condition.

These off-balance-sheet instruments involve, to various degrees, elements of credit and interest rate risk not reported in the Consolidated Statements of Financial Condition.

We utilize the same underwriting standards for these instruments as other extensions of credit.

(t) Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period.

The estimates and assumptions that we deem important to our financial statements relate to the allowance for loan losses, the accounting treatment and valuation of our investment securities portfolio, the analysis of the carrying value of goodwill, pension and income taxes.

These estimates and assumptions are based on management’s best estimates and judgment and we evaluate them using historical experience and other factors, including the current economic environment.

We adjust our estimates and assumptions when facts and circumstances dictate.

As future events cannot be determined, actual results could differ significantly from our estimates.

(u) Reclassification of Prior Years’ Statements

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

(2) Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) - Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans”.

This guidance removes and adds disclosure requirements for defined benefit pension or other post-retirement plans.

On January 1, 2021, the Company adopted ASU 2018-14 on a retrospective basis for disclosures impacted.

The adoption of this standard did not have a material effect on our results of operations or financial position.

Refer to Note 15, “Employee Benefit Plans ” .

In December 2019, the FASB issued ASU 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes”.

This guidance simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences.

ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

On January 1, 2021, the Company adopted ASU 2019-12 on a prospective basis.

The adoption of the standard did not have a material effect on our results of operations or financial position.

At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification of a finance or operating lease.

5 unchanged sentences

These options are included in the lease term when it is reasonably certain that the options will be exercised.

Some of the Company’s lease arrangements contain lease components (e.g., minimum rent payments) and non-lease components (e.g., common area maintenance, taxes, etc.).

For all leases, the Company elected the option of not separating lease and non-lease components and instead we account for them as a single lease component.

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

Some of the Company’s lease arrangements contain lease components (e.g., minimum rent payments) and non-lease components (e.g., common area maintenance, taxes, etc.).

For all leases, the Company elected the option of not separating lease and non-lease components and instead we account for them as a single lease component.

Certain lease agreements include rental payments that are adjusted periodically for an index or rate.

4 unchanged sentences

The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

(u) Use of Estimates

The estimate and assumptions that we deem important to our financial statements relate to the allowance for credit losses.

This estim ate and assumptions are based on management’s best estimates and judgment and we evaluate them using historical experience and other factors, including the current economic environment.

We adjust our estimates and assumptions when facts and circumstances dictate.

As future events cannot be determined, actual results could differ significantly from our estimates.

(v) Reclassification of Prior Years’ Statements

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

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

1 unchanged sentence

For the years ended December 31,

2022 2021 2020

Operating lease costs (office operations) $ 6,201 5,802 6,139

6 unchanged sentences

Operating lease liabilities (other liabilities) 57,737 57,726

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

Other information related to leases were as follows:

6 unchanged sentences

Weighted average discount rate 3.2 % 3.1 %

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

6 unchanged sentences

Rental expense for the years ended December 31, 2022, 2021 and 2020 was $ 6.9 million, $ 6.5 million and $ 6.8 million, respectively.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

(3) Marketable Securities

5 unchanged sentences

government and agencies:

Due in one year through five years $ 20,000 — ( 68 ) 19,932

Due after one year through five years $ 20,000 — ( 1,799 ) 18,201

Due after ten years 53,152 — ( 10,761 ) 42,391

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

Due after one year through five years 993 — ( 49 ) 944

Due after five years through ten years 45,814 — ( 7,557 ) 38,257

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 within one year 506 — ( 1 ) 505

Due after one year through five years 986 21 ( 13 ) 994

Due after five years through ten years 36,332 — ( 2,290 ) 34,042

Due after ten years 89,631 8 ( 13,414 ) 76,225

Corporate debt issues:

Due after five years through ten years 13,540 — ( 562 ) 12,978

Residential mortgage-backed securities:

5 unchanged sentences

Total marketable securities available-for-sale $ 1,431,728 105 ( 213,725 ) 1,218,108

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Marketable securities held-to-maturity at December 31, 2022 are as follows:

4 unchanged sentences

government and agencies:

Due in one year through five years $ 16,478 — ( 206 ) 16,272

Due in five years through ten years 107,973 — ( 4,613 ) 103,360

Due after one year through five years $ 29,478 — ( 3,676 ) 25,802

Due after five years through ten years 94,977 — ( 18,157 ) 76,820

Residential mortgage-backed securities:

5 unchanged sentences

Total marketable securities held-to-maturity $ 881,249 — ( 129,865 ) 751,384

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

Marketable securities available-for-sale at December 31, 2021 are as follows:

4 unchanged sentences

government and agencies:

Due after ten year $ 40,761 211 ( 55 ) 40,917

Due after 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 24,976 159 — 25,135

Due in one year through five years 238 3 — 241

Due in five years through ten years 68,973 238 ( 80 ) 69,131

Due within one year 177 — — 177

Due after one year through five years 991 73 — 1,064

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

Municipal securities:

Due in less than one year 4,008 14 — 4,022

Due in one year through five years 2,803 63 ( 2 ) 2,864

Due in five years through ten years 16,045 429 ( 5 ) 16,469

Due within one year 946 13 — 959

Due after one year through five years 1,261 22 ( 3 ) 1,280

Due after five years through ten years 23,692 661 ( 146 ) 24,207

Due after ten years 99,558 2,884 ( 187 ) 102,255

6 unchanged sentences

Total marketable securities available-for-sale $ 1,565,002 8,845 ( 25,255 ) 1,548,592

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Marketable securities held-to-maturity at December 31, 2021 are as follows:

4 unchanged sentences

government and agencies:

Due after one year through five years $ 16,478 — ( 206 ) 16,272

Due after five years through ten years 107,973 — ( 4,613 ) 103,360

9 unchanged sentences

Residential mortgage-backed securities:

Due in less than one year $ 490 491

Due in one year through five years 14,013 14,126

Due within one year $ 132 130

Due after one year through five years 32,192 29,538

Due after five years through ten years 46,188 43,438

9 unchanged sentences

Residential mortgage-backed securities:

Due in one year through five years $ 792 833

Due after one year through five years $ 20,612 17,568

Due after five years through ten years 20,250 15,879

1 unchanged sentence

Total residential mortgage-backed securities $ 756,794 648,762

The following table presents information regarding the issuers and the carrying values of our mortgage-backed securities at December 31, 2021 and 2020:

The following table presents information regarding the issuers and the carrying values of our residential mortgage-backed securities at December 31, 2022 and 2021:

Residential mortgage-backed securities:

5 unchanged sentences

Marketable securities having a carrying value of $ 241.5 million at December 31, 2022 were pledged under collateral agreements.

During the year ended December 31, 2022, there were no sold marketable securities classified as available-for-sale.

During the year ended December 31, 2021, we sold marketable securities classified as available-for-sale for $ 59.6 million, with gross realized gains of $ 410,000 and gross realized losses of $ 396,000 .

During the year ended December 31, 2020, we sold marketable securities classified as available-for-sale for $ 1.1 million, with gross realized gains of $ 64,000 and no gross realized losses.

During the year ended December 31, 2019, we sold marketable securities classified as available-for-sale for $ 32.4 million, with gross realized gains of $ 29,000 and no gross realized losses.

During the years ended December 31, 2021 and 2020, we did no t recognize allowance for credit losses in our investment portfolio and during the year ended December 31, 2019, we did no t recognize non-cash credit related other-than-temporary-impairment in our investment portfolio.

The following table shows the fair value and gross unrealized losses on investment 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 December 31, 2021:

During the years ended December 31, 2022, 20 21 and 2020, we did no t recognize allowance for credit losses in our investment portfolio.

The following table shows the fair value and gross unrealized losses on available for sale investment securities and held to maturity investment 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 December 31, 2022:

Less than 12 months 12 months or more Total

3 unchanged sentences

government sponsored enterprises $ 1,735 ( 82 ) 200,679 ( 41,917 ) 202,414 ( 41,999 )

Corporate debt issues 12,979 ( 562 ) — — 12,979 ( 562 )

Municipal securities 60,676 ( 4,047 ) 44,493 ( 11,671 ) 105,169 ( 15,718 )

10 unchanged sentences

Total temporarily impaired securities $ 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 December 31, 2022, which were comprised of 647 individual securities, represents a credit loss impairment.

All of these securities were issued by U.S.

government agencies, U.S.

government-sponsored enterprises, local municipalities, or represent corporate debt.

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position as of December 31, 2021, which were comprised of 245 individual securities, represents a credit loss impairment.

All of these securities were issued by U.S.

The securities issued by the U.S.

government agencies or U.S.

government-sponsored agencies.

These securities are either explicitly or implicitly guaranteed by the 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 securities are issued by U.S.

government-sponsored agencies.

All of the Company ’ s held-to-maturity debt securities are issued by U.S.

government-sponsored 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 December 31, 2021.

The following table presents the credit quality for our held-to-maturity securities, based on the latest information available as of December 31, 2021.

The credit ratings are sourced from nationally recognized rating agencies, including Moody ’ s and S&P, or when credit ratings cannot be sourced from the agencies, they are presented based on asset type.

The decline in fair value of the held-to-maturity debt securities were primarily attributable to changes in the interest rate environment and not due to the credit quality of these investment securities, therefore, the Company did not record an allowance for credit losses for these securities as of December 31, 2022.

The following table presents the credit quality for our held-to-maturity securities, based on the latest information available as of December 31, 2022 (in thousands).

The credit ratings are sourced from nationally recognized rating agencies, which include Moody ’ s and S&P, 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 December 31, 2022.

5 unchanged sentences

(4) Loans Receivable

On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments ” using the modified retrospective transition approach.

As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required ASC 326 disclosures for periods before the date of adoption (i.e., January 1, 2020).

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

15 unchanged sentences

Total loans receivable, net (4) $ 9,982,035 820,381 10,802,416 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 $ 9.9 million and $ 25.1 million of loans held-for-sale at December 31, 2022 and December 31, 2021, respectively.

(4) Includes $ 76.1 million and $ 62.8 million of net unearned income, unamortized premiums and discounts and deferred fees and costs at December 31, 2022 and December 31, 2021, respectively.

During the year ended December 31, 2022, the Company purchased a total of $ 182.8 million small business equipment finance loan pools and a total of $ 188.3 million one- to four-family jumbo mortgage loan pools.

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

As of December 31, 2021, 2020, and 2019, we serviced loans for others approximating $ 1.622 billion, $ 1.516 billion, and $ 793.1 million, respectively.

As of December 31, 2022 and 2021, we serviced loans for others approximating $ 1.549 billion and $ 1.622 billion, respectively.

These loans serviced for others are not our assets and are not included in our financial statements.

As of December 31, 2021 and 2020, approximately 41 % and 42 %, respectively, of our loan portfolio was secured by properties located in Pennsylvania.

As of December 31, 2022 and 2021, approximately 41 % of our loan portfolio was secured by properties located in Pennsylvania.

We do not believe we have significant concentrations of credit risk to any one group of borrowers given our underwriting and collateral requirements.

33 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the year ended December 31, 2020 and includes the cumulative effect of adopting ASU 2016-13 (in thousands):

The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the year ended December 31, 2021 (in thousands):

Balance as of December 31, 2021 Current

period provision Charge-offs Recoveries Initial ACL

on loans purchased with credit deterioration Cumulative effect of ASU 2016-13* Balance as of December 31, 2019

period provision Charge-offs Recoveries Balance as of December 31, 2020

Allowance for Credit Losses

16 unchanged sentences

Home equity loans 39 4 — — 35

Consumer loans — — — — — ( 402 ) 402

Total Personal Banking 41 4 — — 37

5 unchanged sentences

Total off-balance-sheet exposure $ 2,458 ( 3,905 ) — — 6,363

* Includes the impact of the initial allowance on PCD loans of $ 517,000 .

During the year ended December 31, 2020, we sold $ 50.0 million of loans that were classified as held-for-investment, for a gain of $ 1.3 million, which is reported in gain on sale of loans on the Consolidated Statements of Income.

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the year ended December 31, 2019, prior to the adoption of ASU 2016-13 (in thousands):

The following table provides information related to the allowance for credit losses by portfolio segment and by class of financing receivable for the year ended December 31, 2020, and includes the cumulative effect of adopting ASU 2016-13 (in thousands):

Balance as of December 31, 2020 Current

period provision Charge-offs Recoveries Balance as of December 31, 2018

Originated loans

period provision Charge-offs Recoveries Initial ACL

on loans purchased with credit deterioration Cumulative effect of ASU 2016-13* Balance as of December 31, 2019

Allowance for Credit Losses

Personal Banking:

1 unchanged sentence

Home equity loans 5,992 ( 3,357 ) ( 608 ) 766 216 5,786 3,189

Vehicle loans 14,825 11,416 ( 6,827 ) 1,867 235 842 7,292

Consumer loans 2,871 4,126 ( 5,831 ) 1,542 157 ( 2,424 ) 5,301

2 unchanged sentences

Commercial real estate loans 79,381 58,483 ( 4,240 ) 1,287 5,720 2,288 15,843

Commercial real estate loans - owner occupied 10,518 2,588 ( 83 ) 27 963 1,278 5,745

Commercial loans 13,574 14,008 ( 16,212 ) 1,741 459 ( 4,419 ) 17,997

Total Commercial Banking 103,473 75,079 ( 20,535 ) 3,055 7,142 ( 853 ) 39,585

Total originated loans 51,439 16,190 ( 21,406 ) 4,904 51,751

Acquired loans

Total 134,427 83,975 ( 34,718 ) 7,592 8,845 10,792 57,941

Allowance for Credit Losses -

off-balance-sheet exposure

Personal Banking:

5 unchanged sentences

Commercial real estate loans 3,449 1,438 — — — 1,934 77

Commercial real estate loans - owner occupied 326 235 — — — 88 3

Commercial loans 2,551 1,459 — — — 923 169

Total Commercial Banking 6,326 3,132 — — — 2,945 249

Total acquired loans 6,502 6,469 ( 4,806 ) 1,376 3,463

Total $ 57,941 22,659 ( 26,212 ) 6,280 55,214

Total off-balance sheet exposure $ 6,363 3,139 — — — 2,250 974

* Includes the impact of the initial allowance on PCD loans of $ 517,000

NORTHWEST BANCSHARES, INC.

48 unchanged sentences

January 1, 2022 December 31, 2022

Nonaccrual loans

with an allowance Nonaccrual

Nonaccrual loans with an allowance Nonaccrual

no allowance Total Nonaccrual

36 unchanged sentences

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2022 (in thousands):

Real estate Equipment Other Total

Real estate Equipment Total

Personal Banking:

Residential mortgage loans $ 569 — 569

$ 580 — — 580

Home equity loans 100 — 100

6 unchanged sentences

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 Other Total

Real estate Equipment Total

Personal Banking:

Residential mortgage loans $ 580 — 580

$ 1,269 — — 1,269

Home equity loans 99 — 99

2 unchanged sentences

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

79,392 1,997 1,703 83,092

Commercial loans 3,973 1,926 5,899

3,313 197 11,069 14,579

Total Commercial Banking 123,798 3,631 127,429

21 unchanged sentences

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 came to an end on 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.

NORTHWEST BANCSHARES, INC.

14 unchanged sentences

Home equity loans — — 1 ( 29 )

Vehicle loans — — — —

Commercial real estate loans 1 ( 150 ) 2 ( 53 )

4 unchanged sentences

Home equity loans 3 ( 89 ) 6 ( 147 )

Vehicle loans — — — —

Commercial real estate loans 6 ( 4,324 ) 11 ( 3,064 )

36 unchanged sentences

Commercial real estate loans 8 12,006 10,572 1,453

Commercial real estate loans - owner occupied 1 58 48 8

Commercial loans 6 4,147 3,903 451

12 unchanged sentences

Commercial real estate loans 9 7,365 7,615 311

Commercial real estate loans - owner occupied 1 58 48 8

Commercial loans 5 2,944 408 40

1 unchanged sentence

Total 18 $ 10,543 8,238 373

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information as of December 31, 2022 for TDRs (including re-modified TDRs) by type of modification, by portfolio segment and class of financing receivable for modifications during the year ended December 31, 2022 (in thousands):

Type of modification

Number of contracts Rate Payment Maturity date Other Total

Number of contracts Rate Payment Maturity date Total

Personal Banking:

Residential mortgage loans 4 $ — 379 143 522

1 $ 114 — — — 114

Home equity loans 6 — 23 148 171

3 — 30 4 — 34

Total Personal Banking 10 — 402 291 693

1 unchanged sentence

Commercial real estate loans 9 129 98 20,727 20,954

8 2,077 — 8,424 71 10,572

Commercial loans 6 — — 263 263

6 171 — 3,732 — 3,903

Total Commercial Banking 15 129 98 20,990 21,217

Total 25 $ 129 500 21,281 21,910

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information as of December 31, 2021 for TDRs (including re-modified TDRs) by type of modification, by portfolio segment and class of financing receivable for modifications during the year ended December 31, 2021 (in thousands):

10 unchanged sentences

8 2,077 — 8,424 71 10,572

Commercial real estate loans - owner occupied 1 — — 48 — 48

Commercial loans

2 unchanged sentences

Total 18 $ 2,362 30 12,160 71 14,623

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information as of December 31, 2020 for TDRs (including re-modified TDRs) by type of modification, by portfolio segment and class of financing receivable for modifications during the year ended December 31, 2020 (in thousands):

10 unchanged sentences

9 — — 7,335 280 7,615

Commercial real estate - owner occupied 1 — — 48 — 48

Commercial loans

4 unchanged sentences

Type of re-modification

re-modified TDRs Rate Payment Maturity date Other Total

re-modified TDRs Payment Maturity date Total

Personal Banking:

Residential mortgage loans

1 $ 114 — — — 114

Home equity loans

2 unchanged sentences

Commercial real estate loans

7 2,077 — 5,108 71 7,256

Commercial loans

Total Commercial Banking 9 53 406 459

7 unchanged sentences

Type of re-modification

re-modified TDRs Rate Payment Maturity date Other Total

re-modified TDRs Rate Maturity date Other Total

Personal Banking:

6 unchanged sentences

7 2,077 5,108 71 7,256

Commercial real estate loans - owner occupied 1 48 48

Commercial loans

1 — — — 80 80

Total Commercial Banking 7 2,077 5,108 71 7,256

2 unchanged sentences

Type of re-modification

re-modified TDRs Rate Payment Maturity date Other Total

Personal Banking:

Residential mortgage loans

— $ — — — — —

Home equity loans

Total Personal Banking — — — — — —

re-modified TDRs Maturity date Other Total

Commercial Banking:

1 unchanged sentence

3 6,652 — 6,652

Commercial real estate loans - owner occupied 1 48 — 48

Commercial loans

1 — — 38 — 38

Total Commercial Banking 5 6,700 80 6,780

Total 5 6,700 80 6,780

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

No TDRs modified within the previous twelve months of December 31, 2022 or December 31, 2020 subsequently defaulted.

The following table provides information related to troubled debt restructurings modified within the previous twelve months

8 unchanged sentences

Total 1 $ 4,167 3,823 —

No TDRs modified within the previous twelve months of December 31, 2020 or December 31, 2019 subsequently defaulted.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table provides information related to the amortized cost basis of loan payment delinquencies at December 31, 2022 (in thousands):

23 unchanged sentences

Total loans $ 52,235 13,100 20,606 85,941 10,834,511 10,920,452 744

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

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

17 unchanged sentences

Total loans $ 47,514 9,884 39,471 96,869 9,919,523 10,016,392 331

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

Credit Quality Indicators:

20 unchanged sentences

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.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

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.

53 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

Based on the most recent analysis performed, the amortized cost basis by risk category of loans by class of loans by origination year is as follows as of December 31, 2020 (in thousands):

The following table summarizes amortized cost basis loan balances by year of origination, class of loans, and risk category as of December 31, 2021 (in thousands):

2021 2020 2019 2018 2017 Prior Revolving loans Revolving loans converted to term loans Total loans receivable

66 unchanged sentences

A liability (which represents deferred income) of $ 792,000 and $ 500,000 has been recognized for the obligations as of December 31, 2022 and 2021, respectively, and there are no recourse provisions that would enable us to recover any amounts from third parties.

In addition, we maintain a $ 5.0 million credit limit with a correspondent bank for private label credit card facilities for certain existing commercial clients of the Bank, of which $ 777,000 of the credit limit was allocated to credit cards that have been issued.

These issued credit cards had an outstanding balance of $ 110,000 at December 31, 2022.

The clients of the Bank are responsible for repaying any balances due on these credit cards directly to the correspondent bank;

however, if the customer fails to repay their balance, the Bank could be required to satisfy the obligation to the correspondent bank and initiate collection from our customer as part of the existing credit facility of that customer.

Mortgage servicing assets are recognized as separate assets when servicing rights are created through loan originations and the underlying loan is sold.

3 unchanged sentences

MSRs are amortized against mortgage banking income in proportion to, and over the period of, the estimated future net servicing income of the underlying mortgage loans.

MSRs are recorded in other assets on the Consolidated Statement of Financial Condition.

MSRs are recorded in other assets on the Consolidated Statements of Financial Condition.

Capitalized MSRs are evaluated quarterly for impairment based on the estimated fair value of those rights.

27 unchanged sentences

Loans receivable 30,395 21,330

$ 25,599 35,554

Total $ 35,528 25,599

(6) FHLB Stock

Northwest Bank is a member of the FHLB of Pittsburgh and FHLB of Indianapolis.

Northwest Bank is a member of the FHLB of Pittsburgh and a former member of the FHLB of Indianapolis.

As a member of the FHLB of Pittsburgh, we are required to maintain an investment in the capital stock of the FHLB of Pittsburgh in accordance with their 2015 Capital Plan, at cost, in two subclasses based on the following ranges:

4 unchanged sentences

and 0.0 % to 6.0 % of outstanding advance commitments settling more than 30 days after trade, currently at 0.0 %.

As a member of the FHLB of Indianapolis, we are required to maintain an investment in the capital stock of the FHLB of Indianapolis in accordance with their capital plan that became effective on September 26, 2020.

This plan requires the Company to invest in two subclasses based on the following ranges:

Membership stock requirements (B-1 stock) ranging from 0.01 % to 0.50 % of the member asset value as defined by the FHLB, currently at 0.10 %;

and Activity-based stock requirements (B-2 stock) ranging from 1.0 % to 6.0 % of advances, currently at 4.5 %;

As a former member of the FHLB of Indianapolis, we are required to maintain an investment in the capital stock of the FHLB of Indianapolis in accordance with their capital plan that became effective on September 26, 2020.

This plan requires the Company, as a former member, to maintain its activity-based stock requirements (B-2 stock) ranging from 1.0 % to 6.0 % of advances, currently at 4.5 %;

1.0 % to 6.0 % for lines of credit, currently at 4.5 %;

1 unchanged sentence

1.0 % to 6.0 % of derivative contracts, currently at 4.5 %;

0.0 % to 6.0 % for the mandatory Mortgage Purchase Program (“MPP”), currently at 0.0 %;

0.0 % to 6.0 % for the optional MPP, currently at 4.5 %;

and 1.0 % to 6.0 % for Community Investment Program (“CIP”) advances, currently at 4.5 %.

0.0 % to 6.0 % for mandatory Mortgage Purchase Program ( when servicing rights are created through loan originations and the underlying loan is sold.

Upon sale, the mortgage servicing right (“ MPP ” ), currently at 0.0 %, 0.0 % to 6.0 % for optional MPP, currently at 4.5 %;

and 1.0 % to 6.0 % for Community Investment Program ( when servicing rights are created through loan originations and the underlying loan is sold.

Upon sale, the mortgage servicing right (“ CIP ” ) advances, currently at 4.5 %.

Class B stock may be redeemed upon five year 's prior written notice from the member in accordance with Section VI.B of the capital plan.

Class B stock is also subject to repurchase by the FHLB of Indianapolis, in its discretion, whether or not requested by the member.

Our class B shares are scheduled to be redeemed on April 24, 2025 unless they are repurchased by the FHLB of Indianapolis prior to that date.

Our investment in the capital stock of the FHLB of Pittsburgh at December 31, 2022 and December 31, 2021 was $ 37.0 million and $ 10.4 million, respectively.

21 unchanged sentences

Core deposit intangibles - gross $ 74,899 74,899

Acquisitions — 3,717

accumulated amortization ( 66,367 ) ( 62,158 )

21 unchanged sentences

Balance at December 31, 2020 $ 382,279

Goodwill acquired 36,176

Balance at December 31, 2020 382,279

Purchase accounting adjustment 77

1 unchanged sentence

Balance at December 31, 2021 380,997

We have determined that goodwill is not impaired as of December 31, 2021 and 2020.

There were no events or changes in circumstances that would cause us to update that goodwill impairment test as of June 30, 2021 and 2020.

(10) Deposits

Balance at December 31, 2022 $ 380,997

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

As of December 31, 2022, 2021 and 2020, there were no events or changes in circumstances that would cause us to update that goodwill impairment test and we have concluded there is no impairment of goodwill.

Deposit balances at December 31, 2022 and 2021 are shown in the table below:

16 unchanged sentences

Total time deposits $ 1,052,285 1,327,555

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table summarizes the interest expense incurred on the respective deposits for the years ended December 31, 2022, 2021 and 2020:

6 unchanged sentences

Total interest expense on deposits $ 14,120 19,122 35,896

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

(10) Borrowed Funds

2 unchanged sentences

Amount Average rate Amount Average rate

Term notes payable to the FHLB:

Payable to the FHLB of Indianapolis acquired from MutualBank $ — — % $ 22,054 1.92 %

Total term notes payable to the FHLB — 22,054

Term notes payable to the FHLB of Pittsburgh, due within one year $ 500,000 4.55 % $ — — %

Notes payable to the FHLB of Pittsburgh, due within one year 51,300 4.45 % — — %

Collateralized borrowings, due within one year 105,766 0.27 % 139,093 0.19 %

Collateral received, due within one year 24,100 4.17 % — — %

Total borrowed funds $ 681,166 $ 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.

Borrowings from the Federal Home Loan Banks (“FHLB”) of Pittsburgh, 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.

During the year ended December 31, 2021, $ 22.0 million of term notes payable to the FHLB of Indianapolis matured.

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 December 31, 2021 and December 31, 2020.

At December 31, 2022 and December 31, 2021, the balance of the revolving line of credit was $ 51.3 million and $ 0 , respectively.

At December 31, 2022 and December 31, 2021, collateralized borrowings due within one year were $ 105.8 million and $ 139.1 million, respectively.

1 unchanged sentence

The market value of these securities exceeds the value of the collateralized borrowings .

The average amount of collateralized borrowings outstanding in the years ended December 31, 2021, 2020 and 2019 was $ 132.1 million, $ 122.8 million and $ 91.1 million, respectively.

The maximum amount of collateralized borrowings outstanding during the years ended December 31, 2021, 2020 and 2019 was $ 139.6 million, $ 150.6 million and $ 101.1 million, respectively.

The average amount of collateralized borrowings outstanding in the years ended December 31, 2022 and 2021 was $ 115.4 million and $ 132.1 million, respectively.

The maximum amount of collateralized borrowings outstanding during the years ended December 31, 2022 and 2021 was $ 135.7 million and $ 139.6 million, respectively.

At December 31, 2022 and December 31, 2021, collateral received was $ 24.1 million and $ 0 , respectively.

This represents collateral posted to us from our derivative counterparties.

At December 31, 2022 and December 31, 2021, term notes payable to the FHLB of Pittsburgh due within one year were $ 500.0 million and $ 0 , respectively.

This total is made up of five advances:

$ 100.0 million at 4.54 % maturing January 6, 2023;

$ 100.0 million at 4.53 % maturing January 13, 2023;

$ 100.0 million at 4.57 % maturing January 19, 2023;

$ 100.0 million at 4.54 % maturing January 20, 2023;

and $ 100.0 million at 4.58 % maturing January 27, 2023.

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 SOFR plus 3.89 % payable quarterly in arrears commencing on December 15, 2025.

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.

During the year-ended December 31, 2022 the Company repurchased $ 10.2 million of subordinated notes leaving $ 114.8 million of subordinated notes outstanding.

The subordinated debt issuance costs of approximately $ 1.8 million are being amortized over five years on a straight-line basis into interest expense.

3 unchanged sentences

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 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.

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

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.

19 unchanged sentences

5,000 3,674 3,570

Total $ 128,875 129,054 128,794

$ 128,875 129,314 129,054

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

29 unchanged sentences

2022 2021 2020

Current $ 34,487 25,756 27,903

Deferred 12,314 ( 8,084 ) 2,776

Current tax provision/(benefit):

Federal $ 36,235 24,554 23,968

State 9,295 9,933 1,788

Total current tax provision/(benefit) 45,530 34,487 25,756

Deferred tax provision/(benefit):

Federal ( 5,325 ) 10,752 ( 9,072 )

State ( 179 ) 1,562 988

Total deferred tax provision/(benefit) ( 5,504 ) 12,314 ( 8,084 )

Total income tax expense $ 40,026 46,801 17,672

38 unchanged sentences

Right of use asset 12,463 12,322

Unrealized gain on fair value of securities available-for-sale — 6,332

Interest rate derivatives 123 341

28 unchanged sentences

Increases related to current year tax positions 8 46 —

Settlements — — —

Lapse of statute — — —

Balance, end of year $ 473 241 331

18 unchanged sentences

During the year ended December 31, 2021, 2,146,897 stock options were not included in the computation of diluted earnings per share because the stock options’ exercise price was more than the average market price of the common shares of $ 13.80 .

During the year ended December 31, 2019, all stock options outstanding were included in the computation of diluted earnings per share because the stock options’ exercise price was less than the average market price of the common shares of $ 17.07 .

During the year ended December 31, 2020, 4,677,841 stock options were not included in the computation of diluted earnings per share because the stock options’ exercise price was more than the average market price of the common shares of $ 11.54 .

NORTHWEST BANCSHARES, INC.

48 unchanged sentences

Total recognized in net periodic pension cost and other comprehensive income $ ( 25,072 ) ( 28,745 ) 18,101

The estimated net loss and prior service credit for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic cost ending December 31, 2022 is $ 1.5 million and $ 4.0 million, respectively.

The estimated net gain and prior service credit for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic cost ending December 31, 2023 is $ 1.6 million and $ 1.5 million, respectively.

The following table sets forth information for the defined benefit pension plans’ funded status at December 31, 2022 and 2021:

3 unchanged sentences

Interest cost 6,683 6,070

Actuarial (gain)/loss ( 19,834 ) 29,084

Actuarial gain ( 70,121 ) ( 19,834 )

Benefits paid ( 9,133 ) ( 9,331 )

7 unchanged sentences

Funded status at end of year $ 18,032 ( 7,496 )

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table sets forth the assumptions used to develop the net periodic pension cost:

4 unchanged sentences

Rate of increase in compensation levels 3.00 % 3.00 % 3.00 %

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table sets forth the assumptions used to determine benefit obligations at the end of each period:

12 unchanged sentences

Fair value of plan assets 202,791 239,438

We anticipate making a contribution to our defined benefit pension plan of $ 2.0 million to $ 4.0 million during the year ending December 31, 2022.

Because of the current funding status, we do not anticipate a funding requirement during the year ending December 31, 2023.

The investment policy as established by the Plan Administrative Committee, to be followed by the Trustee, is to invest assets based on the target allocations shown in the table below.

9 unchanged sentences

The average maturity of the bond portfolio shall not exceed ten years .

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table sets forth the weighted average asset allocation of defined benefit plans:

Target December 31,

allocation 2021 2020

Target allocation 2022 2021

Debt securities 20 – 50 %

2 unchanged sentences

Total 100 % 100 %

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

All of the assets held by the defined benefit pension plan are measured and recorded at estimated fair value on our balance sheet on a recurring basis as Level 1 assets, as defined by the fair value hierarchy defined in Note 15.

The following tables sets forth the pension plan assets as of December 31, 2021 and 2020.

The following table sets forth the pension plan assets as of December 31, 2022 and 2021.

Defined benefit pension assets:

21 unchanged sentences

2022 2021 2020

Net gain $ ( 66 ) ( 51 ) ( 475 )

Net loss/(gain) $ 183 ( 66 ) ( 51 )

Total recognized in other comprehensive income $ 183 ( 66 ) ( 51 )

Total recognized in net periodic benefit cost and other comprehensive loss $ 229 ( 10 ) ( 7 )

The estimated net loss for the post-retirement healthcare benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the year ending December 31, 2023 is $ 39,000 .

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table sets forth the funded status of the post-retirement healthcare benefit plan at December 31, 2022 and 2021:

2 unchanged sentences

Interest cost 40 42

Actuarial gain ( 53 ) ( 34 )

Actuarial loss/(gain) 189 ( 53 )

Benefits paid ( 268 ) ( 236 )

Defined benefit plan acquired from MutualBank — 1,037

Benefit obligation at end of year $ 1,521 1,560

15 unchanged sentences

On April 18, 2018, we established the Northwest Bancshares, Inc.

On April 18, 2018, shareholders approved the Northwest Bancshares, Inc.

2018 Equity Incentive Plan with 1,500,000 common shares authorized for award.

1 unchanged sentence

We also awarded employees 293,755 common shares and outside directors 27,000 common shares with a grant date fair value of $ 13.68 per share (total market value of $ 4.4 million at issuance) on May 25, 2021.

In addition, on May 25, 2021, we awarded employees 293,755 restricted common shares and directors 27,000 restricted common shares with a grant date fair value of $ 13.68 .

These common shares vest over a five-year period with the first vesting occurring on the grant date.

Also during 2021, we awarded discretionary grants of 13,452 common shares with a weighted average grant date fair value of $ 13.76 .

During 2022, we awarded discretionary grants of 12,521 common shares with a weighted average grant date fair value of $ 13.98 .

These shares vest over a five or seven year period, depending on the date of grant, with the first vesting occurring on the date of grant.

Total common shares forfeited from the 2018 plan were 224,814 , of which 61,547 shares were forfeited during the year ended December 31, 2022.

Forfeited shares may be awarded to other eligible recipients in future grants until the plan termination date in 2028.

At December 31, 2022, there was compensation expense of $ 5.4 million to be recognized for unvested restricted common shares, with an expense recognition period remaining of three years .

NORTHWEST BANCSHARES, INC.

3 unchanged sentences

(All dollar amounts presented in tables are in thousands, except as indicated)

On May 18, 2022, shareholders approved the Northwest Bancshares, Inc.

2022 Equity Incentive Plan with 3,500,000 shares authorized for award.

From this plan, we awarded employees 150,027 restricted stock units (“RSUs”) with a weighted average discounted grant date fair value of $ 11.00 (total market value of $ 1.7 million at issuance) on May 18, 2022.

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 (total market value of $ 517,000 at issuance), which fully vest one-year from the grant date, on May 18, 2022.

We also awarded employees 150,027 performance share units (“PSUs”) with a discounted grant date fair value of $ 10.26 (total market value of $ 1.5 million at issuance) on May 18, 2022.

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.

Also during 2022, we awarded RSU discretionary grants of 13,115 shares with a weighted average discounted grant date fair value of $ 12.69 .

Total shares forfeited from the 2022 plan were 26,282 as of December 31, 2022.

At December 31, 2022, there was compensation expense of $ 1.2 million to be recognized recognized for awarded but unvested RSUs and $ 1.0 million to be recognized for awarded but unvested PSUs, with an expense recognition period remaining of 2.5 years.

At December 31, 2022, there was compensation expense of $ 180,000 to be recognized for awarded but unvested RSAs, with an expense recognition period remaining of one year .

(d) Stock Option Plans

3 unchanged sentences

On May 25, 2021, we granted employees 621,972 stock options and outside directors 72,000 stock options with an exercise price of $ 13.68 per share.

On May 25, 2021, we granted employees 621,972 stock options and directors 72,000 stock options with an exercise price of $ 13.68 per share.

There were no stock options granted during the year-ended December 31, 2022.

These awarded stock options vest over a five-year period with the first vesting occurring on the grant date with a ten-year exercise period from the grant date.

13 unchanged sentences

(1) Weighted average fair value of options at grant date:

$ 0.64 , $ 0.13 and $ 1.14 , respectively.

(2) The total intrinsic value of options exercised was $ 2.3 million, $ 444,000 and $ 5.2 million, respectively.

The aggregate intrinsic value of all options expected to vest and fully vested options at December 31, 2021 is $ 448,066 and $ 26,973 , respectively.

N/A, $ 0.64 and $ 0.13 , respectively.

(2) The total intrinsic value of options exercised was $ 839,000 , $ 2.3 million and $ 444,000 , respectively.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

The aggregate intrinsic value of all options expected to vest and fully vested options at December 31, 2022 is $ 145,000 and ($ 1.1 ) million, respectively.

The following table summarizes the number of options outstanding, number of options exercisable, and weighted average remaining life of all option grants as of December 31, 2022 (amounts in this table are not in thousands):

15 unchanged sentences

Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

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.

10 unchanged sentences

• 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;

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

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

4 unchanged sentences

financial instruments:

cash and cash equivalents, marketable securities available-for-sale, accrued interest receivable, interest rate lock

commitments, forward commitments, interest rate swaps, savings and checking deposits and accrued interest payable.

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, foreign exchange swaps, risk participation agreements, and accrued interest payable.

Marketable Securities

8 unchanged sentences

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.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Loans Receivable

7 unchanged sentences

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

FHLB stock is recorded at cost.

Deposit Liabilities

2 unchanged sentences

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.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

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.

10 unchanged sentences

The fair value of forward sale commitments is based on quoted prices from the secondary market based on the settlement date of the contracts.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Cash Flow Hedges, Interest Rate and Foreign Exchange Swap Agreements

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.

6 unchanged sentences

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

24 unchanged sentences

Financial liabilities:

Savings and checking accounts $ 10,973,610 10,973,610 10,973,610 — —

Savings and checking deposits $ 10,412,263 10,412,263 10,412,263 — —

Time deposits 1,052,285 1,059,790 — — 1,059,790

32 unchanged sentences

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 —

15 unchanged sentences

States and political subdivisions — 111,766 — 111,766

Corporate — 12,978 — 12,978

Total debt securities — 224,537 — 224,537

43 unchanged sentences

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

4 unchanged sentences

Beginning balance January 1, $ 1,684 6,465

Total gains or losses:

Included in net income — —

Net activity ( 1,125 ) ( 4,781 )

Transfers from Level 3 — —

Transfers into of Level 3 — —

Ending balance December 31, $ 559 1,684

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 MSRs.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans individually assessed, real estate owned, and MSRs.

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, 2022:

5 unchanged sentences

Total assets $ — — 15,924 15,924

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

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:

2 unchanged sentences

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) as part of the adoption of ASU 2016-13.

Individually Assessed Loans - A loan is considered to be individually assessed as described in Note 1(f).

We classify loans individually assessed as nonrecurring Level 3.

15 unchanged sentences

Loans individually assessed 15,416 Appraisal value (1) Estimated cost to sell 10 %

Discounted cash flow Discount rate 8.60 % to 12.95 % ( 9.61 %)

Discounted cash flow Discount rate 6.48 % ( 6.48 %)

Mortgage servicing rights 95 Discounted cash flow Annual service cost $ 85

6 unchanged sentences

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

(16) Regulatory Capital Requirements

3 unchanged sentences

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

Applicable regulations 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.

3 unchanged sentences

banking agencies that became effective on March 31, 2020.

As a result, we will delay recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extends through December 31, 2021.

Beginning on January 1, 2022, we will be required to phase in 25 % of the previously deferred estimated capital impact of CECL, with an additional 25 % to be phased in at the beginning of each subsequent year until fully phased in by the first quarter of 2025.

As a result, we delayed recognizing the estimated impact of CECL on regulatory capital until after a two-year deferral period, which for us extended through December 31, 2021.

Beginning on January 1, 2022, we were required to phase in 75% of the previously deferred estimated capital impact of CECL, with 50% to be phased in at the beginning of 2023, and 25% at the beginning of 2024, until fully phased in by the first quarter of 2025.

Under the interim final rule, the estimated impact of CECL on regulatory capital that we will defer and later phase in is calculated as the entire day-one impact at adoption plus 25% of the subsequent change in allowance during the two-year deferral period.

2 unchanged sentences

There are no conditions or events since that notification that management believes have changed the bank’s categories.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The actual, required, and well capitalized levels as of December 31, 2022 and 2021 were as follows:

22 unchanged sentences

Business - Supervision and Regulation ” .

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

At December 31, 2021

21 unchanged sentences

Business - “ Supervision and Regulation”.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

(17) Contingent Liabilities

7 unchanged sentences

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.

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 December 31, 2021.

(19) Components of Accumulated Other Comprehensive Income

3 unchanged sentences

Accumulated other comprehensive loss $ ( 171,158 ) ( 37,629 )

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021 and 2020

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table shows the changes in accumulated other comprehensive loss by component for the year ended December 31, 2022:

3 unchanged sentences

Balance as of January 1, $ ( 12,317 ) ( 25,312 ) ( 37,629 )

Other comprehensive income/(loss) before reclassification adjustments (1), (2) ( 28,873 ) 23,748 ( 5,125 )

Other comprehensive (loss)/income before reclassification adjustments (1) (2) ( 151,888 ) 18,884 ( 133,004 )

Amounts reclassified from accumulated other comprehensive income (3) (4) ( 1 ) ( 524 ) ( 525 )

2 unchanged sentences

(1) Consists of unrealized holding losses, net of tax of $ 45,321 .

(2) Consists of unrealized holdings gains, net of tax $ 9,144 .

(3) Consists of realized holding losses, net of tax of ($ 92 ).

(2) Consists of unrealized gains, net of tax of $( 7,182 ).

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

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

(4) Consists of realized gains, net of tax of $ 202 .

The following table shows the changes in accumulated other comprehensive loss by component for the year ended December 31, 2021:

Unrealized gains and losses on securities available-for-sale Change in

fair value of

interest rate

swaps Change in defined

Unrealized gains and losses on securities available-for-sale Change in defined

benefit pension plans Total

4 unchanged sentences

Balance as of December 31, $ ( 12,317 ) ( 25,312 ) ( 37,629 )

(1) Consists of unrealized holding gains, net of tax of $ 5,607 .

(1) Consists of unrealized holding losses, net of tax of $ 10,333 .

(3) Consists of unrealized holding losses, net of tax of ($ 4,169 ).

(4) Consists of realized gains, net of tax of ($ 6 ).

(5) Consists of realized losses interest rate swaps, net of tax of $ 209 .

(2) Consists of unrealized gains, net of tax of $( 9,144 ).

(3) Consists of realized gains, net of tax of $ 92 .

(4) Consists of realized losses, net of tax of $( 515 ).

The following table shows the changes in accumulated other comprehensive loss by component for the year ended December 31, 2020:

Unrealized gains and losses on securities

available-for-sale Change in defined benefit pension plans Total

available-for-sale Change in fair value of

interest rate

swaps Change in defined benefit pension plans Total

Balance as of January 1, $ 3,147 — ( 40,088 ) ( 36,941 )

5 unchanged sentences

(2) Consists of unrealized holding losses, net of tax of $ 209 .

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

(3) Consists of unrealized losses, net of tax of $ 4,169 .

(4) Consists of realized gains, net of tax of $ 6 .

(5) Consists of realized losses, net of tax of $( 209 ).

(6) Consists of realized losses, net of tax of $( 395 ).

NORTHWEST BANCSHARES, INC.

42 unchanged sentences

Undistributed earnings of subsidiary 18,187 ( 88,944 ) ( 80,996 )

Gain on sale of marketable securities — — ( 29 )

Net change in other assets and liabilities ( 9,457 ) 597 128,287

1 unchanged sentence

Investing activities:

Net purchase sale of marketable securities — — —

Net cash used in investing activities — — —

19 unchanged sentences

During March 2020, the Company entered into four separate pay-fixed interest rate swaps in order to synthetically convert short-term three month FHLB advances to fixed-rate term funding with an aggregate value of $ 100 million with maturities ranging from three to five years .

Our risk management objective and strategy for these interest rate swaps at such time was to reduce our exposure to variability in interest-related cash outflows attributable to changes in the USD-LIBOR swap rate, the designated benchmark interest rate being hedged.Based upon our contemporaneous quantitative analysis at the inception of each interest rate swap, we have determined these interest rate swaps qualified for hedge accounting in accordance with ASC 815, Derivatives and Hedging .

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

Based upon our contemporaneous quantitative analysis at the inception of each interest rate swap, we have determined these interest rate swaps qualified for hedge accounting in accordance with ASC 815, Derivatives and Hedging .

As long as the hedge remains highly effective the changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

A hedging relationship that is determined to not be highly effective no longer qualifies for hedge accounting and any gain or loss is recognized immediately in earnings.

During the quarter of September 30, 2020, the Company discontinued these cash flow hedges and, as a result, reclassified a $ 1.3 million loss into earnings.

16 unchanged sentences

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.

NORTHWEST BANCSHARES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020 and 2019

(All dollar amounts presented in tables are in thousands, except as indicated)

The following table presents information regarding our derivative financial instruments for the periods indicated:

12 unchanged sentences

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 — —

8 unchanged sentences

Non-hedging swap derivatives:

Increase/(decrease) in other income 1,033 ( 700 ) ( 63 )

(Decrease)/increase in other income ( 83 ) 1,033 ( 700 )

Increase in mortgage banking income 1,368 5,515 6,867

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data