Northwest Bancshares, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Management, including the principal executive officer and principal financial officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013) . Based on such assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting is effective based upon those criteria. 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/ Louis J. Torchio /s/ William W. Harvey, Jr. Louis J. 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) 65 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Northwest Bancshares, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Northwest Bancshares, Inc. and subsidiaries ’ (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in I nternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2023 and 2022, 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, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 2024 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management ’ s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Pittsburgh, Pennsylvania February 23, 2024 66 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Northwest Bancshares, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Northwest Bancshares, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023, 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 23, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 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 held for investment was $125.2 million as of December 31, 2023, 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 expected credit loss methodologies incorporate probability of default (PD) and loss given default (LGD) models to determine a PD and LGD loss assumption which is applied to loan level exposures on an undiscounted basis over the contractual term of the loans, adjusted for prepayments, certain of which use a prepayment model. The Company uses a twenty-four month reasonable and supportable forecast period, which is based on a probability-weighted multiple macroeconomic forecast approach (macroeconomic forecasts) and reverts to historical average loss rates over a twelve-month period for the remaining life of the loans. The following methodologies were developed for each significant loan portfolio segment: (1) the allowance for credit losses within the residential mortgage and home equity loan portfolios are calculated using a PD, LGD and prepayment model adjusted for asset specific characteristics 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 using a PD, LGD and prepayment model adjusted for asset specific characteristics at the loan-level using projected default rates and prepayment rates, as well as macroeconomic forecasts determined at the pool level; (3) the allowance for credit losses for commercial real estate small business and commercial small business loan portfolios are calculated using PD and LGD models at the borrower-level using both a regression model and a fractional logit model, as well as macroeconomic forecasts and expected prepayment rates at the pool level; and (4) the allowance for credit losses for the commercial real estate and commercial loan portfolios are calculated using PD and LGD models at the pool-level using projected 67 Table of Contents default and severity rates as well as macroeconomic forecasts and expected prepayment rates 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. We identified the assessment of the expected credit losses on a collective basis for all loans, except for consumer loans (the collective ACL) as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the collective ACL methodologies, including the (1) PD, LGD and prepayment models and their significant assumptions, including the selection and weighting of the macroeconomic forecasts, and the reasonable and supportable forecast period, (2) adjustment for asset specific risk characteristics for residential mortgage, home equity and vehicle loans and (3) the qualitative factors and their significant assumptions. The assessment also included an evaluation of the conceptual soundness and performance of the models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s collective ACL estimate, including controls over the: • development of the collective ACL methodologies • development of the small business banking PD, LGD and prepayment models • continued use and conceptual soundness of the PD, LGD and prepayment models • performance monitoring of the models • determination and measurement of the significant assumptions used in the models • determination of the qualitative factors, including the significant assumptions used in the measurement of the qualitative factors • analysis of the collective ACL results, trends, and ratios. We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s collective ACL methodologies for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the development and performance testing of the model assumptions, inclusive of the metrics used for asset-specific risk characteristics for the mortgage, home equity, and vehicle models, by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices • assessing the conceptual soundness and performance testing of the model assumptions by inspecting the model documentation to determine whether the models are suitable for their intended use • evaluating the selection and weighting of the macroeconomic forecasts, by comparing it to the Company’s business environment and relevant industry practices • evaluating the length of the reasonable and supportable forecast period by comparing it to specific portfolio risk characteristics and trends • evaluating the methodology used to develop the qualitative factors and the effect of certain factors on the collective ACL compared with relevant credit risk factors and consistency with credit trends. We also assessed the sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating the cumulative results of the audit procedures, qualitative aspects of the Company’s accounting practices, and potential bias in the accounting estimate. /s/ KPMG LLP We have served as the Company’s auditor since 1963. Pittsburgh, Pennsylvania February 23, 2024 68 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (in thousands, excluding share data) December 31, 2023 2022 Assets Cash and cash equivalents $ 122,260 139,365 Marketable securities available-for-sale (amortized cost of $ 1,240,003 and $ 1,431,728 , respectively) 1,043,359 1,218,108 Marketable securities held-to-maturity (fair value of $ 699,506 and $ 751,384 , respectively) 814,839 881,249 Total cash and cash equivalents and marketable securities 1,980,458 2,238,722 Loans held-for-sale 8,768 9,913 Loans held for investment 11,406,041 10,910,539 Allowance for credit losses ( 125,243 ) ( 118,036 ) Loans receivable, net 11,289,566 10,802,416 FHLB stock, at cost 30,146 40,143 Accrued interest receivable 47,353 35,528 Real estate owned, net 104 413 Premises and equipment, net 138,838 145,909 Bank-owned life insurance 251,895 255,062 Goodwill 380,997 380,997 Other intangible assets, net 5,290 8,560 Other assets 294,458 205,574 Total assets $ 14,419,105 14,113,324 Liabilities and shareholders’ equity Liabilities: Deposits $ 11,979,902 11,464,548 Borrowed funds 398,895 681,166 Subordinated debt 114,189 113,840 Junior subordinated debentures 129,574 129,314 Advances by borrowers for taxes and insurance 45,253 47,613 Accrued interest payable 13,669 3,231 Other liabilities 186,306 182,126 Total liabilities 12,867,788 12,621,838 Shareholders’ equity: Preferred stock, $ 0.01 par value: 50,000,000 authorized, no shares issued — — Common stock, $ 0.01 par value: 500,000,000 shares authorized, 127,110,453 and 127,028,848 shares issued and outstanding, respectively 1,271 1,270 Additional paid-in capital 1,024,852 1,019,647 Retained earnings 674,686 641,727 Accumulated other comprehensive loss ( 149,492 ) ( 171,158 ) Total shareholders’ equity 1,551,317 1,491,486 Total liabilities and shareholders’ equity $ 14,419,105 14,113,324 See accompanying notes to Consolidated Financial Statements. 69 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, excluding share data) Years ended December 31, 2023 2022 2021 Interest income: Loans receivable $ 543,659 407,828 390,343 Mortgage-backed securities 32,886 30,804 21,463 Taxable investment securities 3,258 3,070 2,616 Tax-free investment securities 2,350 2,767 2,485 FHLB stock dividends 2,868 730 407 Interest-earning deposits 2,901 3,599 1,194 Total interest income 587,922 448,798 418,508 Interest expense: Deposits 105,343 14,120 19,122 Borrowed funds 46,896 13,997 8,124 Total interest expense 152,239 28,117 27,246 Net interest income 435,683 420,681 391,262 Provision for credit losses - loans 18,664 17,860 ( 11,883 ) Provision for credit losses - unfunded commitments (1) 4,210 10,455 ( 3,905 ) Net interest income after provision for credit losses 412,809 392,366 407,050 Noninterest income: Loss on sale of investments ( 8,307 ) ( 8 ) ( 176 ) Gain on sale of mortgage servicing rights 8,305 — — Gain on sale of SBA loans 1,800 — — Gain on sale of loans 726 — — Service charges and fees 59,214 55,188 51,837 Trust and other financial services income 27,284 27,765 27,921 Insurance commission income — — 3,633 Gain on real estate owned, net 2,006 603 442 Income from bank-owned life insurance 8,588 7,129 6,050 Mortgage banking income 2,431 4,865 15,892 Gain on sale of insurance business — — 25,327 Other operating income 11,776 15,307 11,963 Total noninterest income 113,823 110,849 142,889 Noninterest expense: Compensation and employee benefits 195,691 188,359 193,887 Premises and occupancy costs 29,151 29,618 31,073 Office operations 12,955 13,318 13,769 Collections expense 1,695 1,808 1,932 Processing expenses 58,687 52,496 55,763 Marketing expenses 9,444 9,095 8,237 Federal deposit insurance premiums 9,271 4,778 4,975 Professional services 17,819 14,703 17,621 Amortization of intangible assets 3,270 4,277 5,553 Real estate owned expense 456 223 298 Merger, asset disposition and restructuring expense 6,749 5,617 3,453 Other expenses 6,366 5,231 12,254 Total noninterest expense 351,554 329,523 348,815 Income before income taxes 175,078 173,692 201,124 Provision for income taxes: Federal 31,332 30,910 35,306 State 8,789 9,116 11,495 Total provision for income taxes 40,121 40,026 46,801 Net income $ 134,957 133,666 154,323 Basic earnings per share $ 1.06 1.05 1.22 Diluted earnings per share $ 1.06 1.05 1.21 (1) Reclassified from other expenses for periods prior to December 31, 2023 See accompanying notes to Consolidated Financial Statements. 70 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Years ended December 31, 2023 2022 2021 Net income $ 134,957 133,666 154,323 Other comprehensive income net of tax: Net unrealized holding gains/(losses) on marketable securities: Unrealized holding gains/(losses), net of tax of $( 3,429 ), $ 45,321 , and $ 10,333 , respectively 7,875 ( 151,888 ) ( 28,873 ) Reclassification adjustment for losses/(gains) included in net income, net of tax of ($ 1,700 ), $ 0 , and $ 92 , respectively 5,672 ( 1 ) ( 287 ) Net unrealized holding gains/(losses) on marketable securities 13,547 ( 151,889 ) ( 29,160 ) Change in fair value of interest rate swaps, net of tax of $ 110 , $ 0 , and $ 0 , respectively ( 374 ) — — Defined benefit plan: Net gain, net of tax $( 3,961 ), $( 7,182 ), $( 9,144 ), respectively 10,019 18,884 23,748 Reclassification adjustments for prior period service costs and actuarial (gains)/losses included in net income, net of tax of $ 607 , $ 202 , and $( 515 ), respectively ( 1,526 ) ( 524 ) 1,332 Net gain on defined benefit plans 8,493 18,360 25,080 Other comprehensive income/(loss) 21,666 ( 133,529 ) ( 4,080 ) Total comprehensive income $ 156,623 137 150,243 See accompanying notes to Consolidated Financial Statements. 71 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (in thousands, excluding per share data) Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income/(loss) Total shareholders’ equity Balance at December 31, 2020 $ 1,270 1,015,502 555,480 ( 33,549 ) 1,538,703 Comprehensive income: Net income — — 154,323 — 154,323 Other comprehensive income, net of tax of $ 766 — — — ( 4,080 ) ( 4,080 ) Total comprehensive income — — 154,323 ( 4,080 ) 150,243 Exercise of stock options 12 13,999 — — 14,011 Share repurchases ( 18 ) ( 23,836 ) — — ( 23,854 ) Stock-based compensation expense 3 4,739 — — 4,742 Stock-based compensation forfeited ( 1 ) 1 — — — Dividends paid ($ 0.79 per share) — — ( 100,274 ) — ( 100,274 ) Balance at December 31, 2021 1,266 1,010,405 609,529 ( 37,629 ) 1,583,571 Comprehensive income: Net income — — 133,666 — 133,666 Other comprehensive income, net of tax of $ 38,341 — — — ( 133,529 ) ( 133,529 ) Total comprehensive income — — 133,666 ( 133,529 ) 137 Exercise of stock options 4 5,169 — — 5,173 Stock-based compensation expense 1 4,073 — — 4,074 Stock-based compensation forfeited ( 1 ) — — — ( 1 ) Dividends paid ($ 0.80 per share) — — ( 101,468 ) — ( 101,468 ) Balance at December 31, 2022 1,270 1,019,647 641,727 ( 171,158 ) 1,491,486 Comprehensive income: Net income — — 134,957 — 134,957 Other comprehensive income, net of tax of ($ 8,373 ) — — — 21,666 21,666 Total comprehensive income — — 134,957 21,666 156,623 Adoption of ASU No. 2022-02 — — ( 329 ) — ( 329 ) Exercise of stock options 1 629 — — 630 Stock-based compensation expense 1 4,575 — — 4,576 Stock-based compensation forfeited ( 1 ) 1 — — — Dividends paid ($ 0.80 per share) — — ( 101,669 ) — ( 101,669 ) Balance at December 31, 2023 $ 1,271 1,024,852 674,686 ( 149,492 ) 1,551,317 See accompanying notes to Consolidated Financial Statements. 72 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2023 2022 2021 Operating activities: Net income $ 134,957 133,666 154,323 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 22,874 28,315 ( 15,788 ) Loss on sale of investments 8,307 — — Net loss/(gain) on sale of assets 2,117 42 ( 1,201 ) Mortgage banking activity ( 895 ) ( 3,512 ) ( 20,120 ) Gain on sale of SBA loans ( 1,754 ) — — Gain on sale of mortgage servicing rights ( 8,305 ) — — Gain on sale of loans ( 726 ) — — Gain on sale of insurance business — — ( 25,327 ) Net depreciation, amortization and accretion 24,497 6,448 6,633 (Increase)/decrease in other assets ( 117,813 ) ( 33,751 ) 22,163 Increase in other liabilities 21,771 19,775 7,930 Net amortization on marketable securities 3,090 4,808 7,757 Noncash compensation expense related to stock benefit plans 4,576 4,074 4,742 Noncash write-down of real estate owned 100 54 173 Deferred income tax (benefit)/expense ( 4,920 ) ( 5,504 ) 12,314 Origination of loans held-for-sale ( 198,637 ) ( 362,867 ) ( 752,831 ) Proceeds from sale of loans held-for-sale 203,651 383,883 804,690 Net cash provided by operating activities 92,890 175,431 205,458 Investing activities: Purchase of marketable securities held-to-maturity — ( 212,892 ) ( 658,817 ) Purchase of marketable securities available-for-sale ( 23,502 ) ( 102,178 ) ( 705,146 ) Proceeds from maturities and principal reductions of marketable securities held-to-maturity 65,588 98,701 68,495 Proceeds from maturities and principal reductions of marketable securities available-for-sale 103,424 231,728 449,372 Proceeds from sale of marketable securities available-for-sale 101,229 — 59,579 Proceeds from bank-owned life insurance 13,307 5,096 3,984 Proceeds from sale of mortgage servicing rights 13,118 — — Loan originations ( 3,963,743 ) ( 4,585,563 ) ( 3,961,816 ) Loan purchases — ( 371,121 ) — Proceeds from loan maturities and principal reductions 3,446,731 4,047,147 4,490,089 Net redemptions/(proceeds) of FHLB stock 9,997 ( 25,959 ) 7,564 Proceeds from sale of real estate owned 2,735 1,633 2,700 Proceeds from sale of real estate owned for investment, net — 305 305 Purchases of premises and equipment ( 8,564 ) ( 4,320 ) ( 17,517 ) Proceeds from sale of insurance business — — 28,238 Net cash used in investing activities ( 239,680 ) ( 917,423 ) ( 232,970 ) 73 Table of Contents NORTHWEST BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years ended December 31, 2023 2022 2021 Financing activities: Net increase/(decrease) in deposits $ 515,354 ( 836,617 ) 701,932 Repayments of long-term borrowings — ( 10,094 ) ( 22,105 ) Net (decrease)/increase in short-term borrowings ( 282,270 ) 542,073 1,432 (Decrease)/increase in advances by borrowers for taxes and insurance ( 2,360 ) 3,031 ( 648 ) Cash dividends paid on common stock ( 101,669 ) ( 101,468 ) ( 100,274 ) Proceeds from stock options exercised 630 5,173 14,011 Purchase of common stock for retirement — — ( 23,854 ) Net cash provided by/(used in) financing activities 129,685 ( 397,902 ) 570,494 Net (decrease)/increase in cash and cash equivalents $ ( 17,105 ) ( 1,139,894 ) 542,982 Cash and cash equivalents at beginning of period $ 139,365 1,279,259 736,277 Net (decrease)/increase in cash and cash equivalents ( 17,105 ) ( 1,139,894 ) 542,982 Cash and cash equivalents at end of period $ 122,260 139,365 1,279,259 Cash paid during the period for: Interest on deposits and borrowings (including interest credited to deposit accounts of $ 86,316 , $ 13,399 , and $ 18,711 , respectively) $ 141,801 26,690 27,496 Income taxes 47,996 39,365 33,576 Noncash activities: Loan foreclosures and repossessions $ 4,055 4,076 4,897 Sale of real estate owned financed by the Company 70 175 54 See accompanying notes to Consolidated Financial Statements. 74 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (1) Summary of Significant Accounting Policies (a) Nature of Operations 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, offers a complete line of business and personal banking products, as well as treasury management solutions and wealth management services through its 142 banking locations in Pennsylvania, New York, Ohio, and Indiana. We have determined that we have one reportable business segment. (b) Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries after elimination of all intercompany accounts and transactions. (c) Cash and Cash Equivalents For purposes of the statements of financial condition and cash flows, cash and cash equivalents include cash and amounts due from banks, interest-bearing deposits in other financial institutions, federal funds sold, and other short-term investments with original maturities of three months or less. (d) Marketable Securities We classify marketable securities at the time of purchase as held-to-maturity, available-for-sale, or trading. Securities for which management has the intent and ability to hold until maturity are classified as held-to-maturity and are carried at cost, adjusted for amortization of premiums and accretion of discounts on a level yield basis (amortized cost). If it is management’s intent at the time of purchase to hold securities for an indefinite period of time and/or to use such securities as part of its asset/liability management strategy, the securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive income/(loss), a separate component of shareholders’ equity, net of tax. Securities classified as available-for-sale include securities that may be sold in response to changes in interest rates, resultant prepayment risk, or other market factors. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading and are reported at fair value, with changes in fair value included in earnings. The cost of securities sold is determined on a specific identification basis. We held no securities classified as trading at or during the years ended December 31, 2023 and 2022. Fair values are determined as described in Note 16. Throughout the year we validate the prices received from third parties by comparing them to prices provided by a different independent pricing service. We have reviewed the detailed valuation methodologies provided to us by our pricing services. 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 total ed $ 2.5 million and $ 2.8 million at December 31, 2023 and December 31, 2022, 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. 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. For available-for-sale debt securities in an unrealized loss position, on at least a quarterly basis, we review our investments for impairment. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. We consider both our intent to sell and the likelihood that we will not have to sell the investment securities before recovery of their amortized cost basis during our evaluation. If we intend to sell the investment security or if it is more likely than not that we will be required to sell the investment security, the entire impairment is recorded in earnings. For available-for-sale debt securities that do not meet this criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment we consider the issuer of the securities and their creditworthiness, any changes to the rating of the security and any adverse conditions specifically related to the security, among other factors. Also, we may evaluate the business and financial outlook of the issuer, as well as broader economic performance indicators. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is 75 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 recorded for the credit loss, limited by the amount that the fair value is less than amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. 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 totale d $ 1.6 million and $ 2.0 million at December 31, 2023 and December 31, 2022, 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. The receivable for interest income that is accrued but not collected is reversed against interest income when the debt security is placed on nonaccrual status. No debt securities were on nonaccrual status as of December 31, 2023 and December 31, 2022. (e) Loans Receivable Our portfolio segments are based on the class of financing receivable. Additionally, the class of financing receivables are based on several factors including the method for monitoring and assessing credit risk and the risk characteristics of the financing receivables. Based on evaluation of the nature of our financing receivables, along with the nature and extent of exposure to credit risk arising from these receivables, our portfolio segments were determined to be Personal Banking and Business Banking loans. • Personal Banking loans consist of the following classes of financing receivables: ◦ Residential mortgage loans - fixed and adjustable rate mortgage loans ◦ Home equity loans - first and second mortgage loans and home equity lines of credit ◦ Vehicle loans - direct and indirect automobile and motorcycle loans ◦ Consumer loans - unsecured lines of credit, credit card loans, and other consumer loans • Business Banking loans consist of the following classes of financing receivables: ◦ Commercial real estate - multi-family commercial real estate loans are secured by multi-family residences, such as rental properties and loans secured by nonresidential properties such as hotels, commercial offices, medical buildings, manufacturing facilities and retail establishments, excluding owner-occupied loans, and including small business commercial real estate loans ◦ 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 and equipment finance loans Loans are reported at amortized cost. 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 $ 42.2 million and $ 30.4 million at December 31, 2023 and December 31, 2022, 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. Interest income on loans is credited to income as earned. Interest earned on loans for which no payments were received during the month is accrued at month end. 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. Interest receipts on all nonaccrual loans are recognized as interest income when it has been determined that all principal and interest will be collected or are applied to principal when collectability of contractual principal is in doubt. Nonaccrual loans generally are restored to an accrual basis when principal and interest become current and a period of performance has been established in accordance with the contractual terms, typically six months . Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other-than-insignificant payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. 76 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Loan delinquency is measured based on the number of days since the payment due date. 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 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. Loan fees and certain direct loan origination costs are deferred and the net deferred fee or cost is then recognized using the level-yield method over the contractual life of the loan as an adjustment to interest income. We identify certain residential mortgage loans and small business administration guaranteed loans which will be sold prior to maturity, as loans held-for-sale. These loans are recorded at fair value less estimated cost to sell. At December 31, 2023 and 2022, there were $ 8.8 million and $ 9.9 million of loans classified as held-for-sale, respectively. Acquired loans that are not considered purchased with credit deterioration (“PCD”) are initially measured at fair value with no carryover of the related allowance for credit losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Acquired loans may be classified as PCD loans upon acquisition if they have experienced more than insignificant credit deterioration since origination. Loans are considered to have experienced more than insignificant credit deterioration if they are greater than 30 days past due, classified special mention or worse or on nonaccrual status. An allowance for credit losses on day 1 is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. (f) Allowance for Credit Losses and Provision for Credit Losses The allowance for credit losses is deducted from, or added to, the loan’s amortized cost basis to present the net amount expected to be collected on our lending portfolios. 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 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. Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments. The contractual term excludes expected extensions, renewals and modifications or the extension or renewal option is included in the contract and is not unconditionally cancellable by the Company. Credit card receivables do not have stated maturities. 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. 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 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 macroeconomic forecast 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 (“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, 2023, we considered the most recent macroeconomic forecasts available. 77 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Mortgage and Home Equity Loans 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, LGD, and prepayment model developed by an external third-party and adjusted for asset specific characteristics. These classes are further divided into smaller pools of loans with similar risk characteristics such as: lines versus loans, fixed versus variable, senior lien position versus junior lien position, among other things. For each pool, the models project default rates, prepayment rates, and severity rates. The models accept as inputs key risk drivers such as: current balance, original credit bureau score, original loan-to-value ratio, type of collateral, location of collateral, delinquency status, loan age, among other characteristics. They also utilize macroeconomic forecasts of home price indices, unemployment rates, gross domestic product, and others. Vehicle Loans The allowance for credit losses within the vehicle loan pool is calculated using a non-discounted cash flow model through a PD, LGD, and prepayment model developed by an external third-party and adjusted for asset specific risk characteristics. 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 The allowance for credit losses within the consumer loan portfolio is calculated at the portfolio-level using a non-discounted cash flow method through a suite of loss rate models developed internally with the assistance of an external third-party. This class of financing receivables is further divided into credit cards, unsecured lines of credit and other consumer loans. The allowance for credit losses for credit cards and unsecured lines of credit is calculated using two transition matrix models to project portfolio-level net charge-off rates. Both models use current balance and delinquency status as key risk drivers. These models are not natively sensitive to macroeconomic forecasts. The necessary adjustments to account for current and expected macroeconomic conditions is captured via our qualitative adjustment framework. For other consumer loans, a regression model is used to project portfolio-level net charge-off rates. This model uses borrower information and macroeconomic forecasts as key inputs. Commercial Real Estate Loans The commercial real estate loan class is further segmented into smaller pools of loans with similar risk characteristics, commercial real estate loans and small business commercial real estate loans. The allowance for credit losses for the commercial real estate 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. This model projects default and severity rates. 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 characteristics. It also utilizes macroeconomic forecasts of commercial real estate price indices, unemployment rates, gross domestic product and others. The allowance for credit losses for commercial real estate small business portfolio is calculated at a borrower-level with a PD/LGD model. Separate models were built by industry segment. Each model was built with a logistic regression model except for the U.S. Small Business Administration (SBA) and Agriculture sub-portfolios. For SBA, a portfolio-level fractional logit model was developed; the small Agriculture segment uses a simple long-run average loss rate. The LGD model is assumption-based and assigns varying LGDs by industry segment. The models ’ overall key inputs are borrower and collateral characteristics and macroeconomic forecasts including real GDP, unemployment, home price appreciation, and real disposable personal income. 78 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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 and commercial small business loans, including 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 portfolio and the commercial real estate owner occupied loan portfolio models project default and severity rates. The model accepts as inputs key risk drivers such as the obligor financial statement information, collateral type, the obligor’s primary industry, expected prepayment rates, among other characteristics. It also utilizes macroeconomic forecasts of unemployment rates, gross domestic product, corporate bond spreads, and others. The allowance for credit losses for commercial small business loans is calculated at a borrower-level with a PD/LGD model. Separate models were built by industry segment. Each model was built with a logistic regression model except for the U.S. Small Business Administration (SBA) and Agriculture sub-portfolios. For SBA, a portfolio-level fractional logit model was developed; the small Agriculture segment uses a simple long-run average loss rate. The LGD model is assumption-based and assigns varying LGDs by industry segment. The models ’ overall key inputs are borrower and collateral characteristics and macroeconomic forecasts including real GDP, unemployment, home price appreciation, and real disposable personal income. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When we determine that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs. If this criteria is not met, a discounted cash flow method is used to determine the allowance for credit losses. All changes in the discounted cash flow method over time are reported in the allowance for credit losses. The allowance calculation is also supplemented with qualitative reserves that takes into consideration the current portfolio and specific risk characteristics, such as changes in underwriting standards, portfolio mix, delinquency level, or term, as well as changes in environmental conditions, among other factors, that have occurred but are not yet reflected in the quantitative model component. The modifications to borrowers experiencing financial distress are included in their respective portfolio segment and the current loan balance and updated loan terms are run through their respective allowance models to arrive at the quantitative portion of the allowance for credit losses. Subsequent performance of the loans will be measured by delinquency status and will be captured through our models or our qualitative factor assessment, as deemed appropriate. If we no longer believe the loan demonstrates similar risks to their respective portfolio segment, an individual assessment will be performed. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. 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 - unfunded commitments 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. The estimate includes a consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Off-balance-sheet exposures that are not unconditionally cancellable have been identified for the mortgage, home equity, commercial real estate, and commercial loan portfolios. (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. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or the current fair value, less 79 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 estimated disposition costs. Any subsequent write-down or gains or losses realized from the disposition of such property are credited or charged to noninterest income. (h) Restricted Investment in FHLB Stock Federal law requires a member institution of the FHLB system to hold stock of its district FHLB according to a predetermined formula. FHLB stock is carried at cost and evaluated for impairment based on the ultimate recoverability of the par value. FHLB stock can only be purchased, redeemed and transferred at par value. Dividends are reported in interest income in the Consolidated Statements of Income. (i) Premises and Equipment Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is accumulated on a straight-line basis over the estimated useful lives of the related assets. Estimated lives range from three to 39 years . Amortization of leasehold improvements is accumulated on a straight-line basis over the terms of the related leases or the useful lives of the related assets, whichever is shorter. (j) Goodwill Goodwill is generated from the premium paid for an acquisition and is allocated to reporting units, which are either our reportable segments or one level below. Reporting units are identified based upon analyzing each individual operating segment. A reporting unit is defined as a distinct, separately identifiable component of an operating segment for which complete, discrete financial information is available that management regularly reviews. Goodwill is not subject to amortization but is tested for impairment at least annually and possibly more frequently if certain events occur or changes in circumstances arise. In testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing all events and circumstances, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test would be unnecessary. However, if we conclude otherwise, it would then be required to perform the first step of the goodwill impairment test and continue to the second step, if necessary. Step 1 requires the fair value of each reporting unit be compared to its carrying amount, including goodwill. Determining the fair value of a reporting unit requires a high degree of subjective judgment, including developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, incorporating general economic and market conditions and selecting an appropriate control premium. We have established June 30 of each year as the date for conducting our annual goodwill impairment assessment. 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 o f June 30, 2023 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 assessme nt for 2023 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 2023. Future events could cause us to conclude that goodwill has become impaired, which would result in recording an impairment loss. There were no events or changes in circumstance in our operations that would cause us to update the assessment performed as of June 30, 2023 and 2022. Accordingly, we have determined that goodwill is not impaired as of December 31, 2023 and 2022. (k) Core Deposit and Other Identifiable Intangibles Through the assistance of an independent third party, we analyze and prepare a core deposit study for all bank acquisitions or other identifiable intangible asset study, such as customer lists, for all non-bank acquisitions. The core deposit study reflects the cumulative present value benefit of acquiring deposits versus an alternative source of funding. 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 . 80 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (l) Bank-Owned Life Insurance We own insurance on the lives of a certain group of current and former employees and directors. The policies were purchased to help offset the increase in the costs of various benefit plans, including healthcare, as well as the directors deferred compensation plan. The cash surrender value of these policies is included as an asset on the Consolidated Statements of Financial Condition and any increases in the cash surrender value are recorded as tax-free noninterest income on the Consolidated Statements of Income. In the event of the death of an insured individual covered by these policies, after distribution to the insured’s beneficiaries, if any, we receive a tax-free death benefit, which is recorded as noninterest income. (m) Deposits Interest on deposits is accrued and charged to expense monthly and is paid or credited in accordance with the terms of the accounts. (n) Revenue Recognition Revenue that is not associated with our financial assets and financial liabilities is recognized when performance obligations under the terms of a contract with our customers are satisfied. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The majority of our revenue continues to be recognized at the point in time when the services are provided to our customers. (o) Pension Plans We maintain multiple noncontributory defined benefit pension plans (“Pension Plan”) for substantially all of our employees. The net periodic pension cost has been calculated using service cost, interest cost, expected returns on plan assets and net amortization. The other components of the net periodic benefit cost are included in other expense on the Consolidated Statement of Income and are reported separately from the service costs. Pension expense and obligations depend on assumptions used in calculating such amounts. These assumptions include discount rates, anticipated salary increases, interest costs, expected return on plan assets, mortality rates, and other factors. In determining the projected benefit obligations for pension benefits at December 31, 2023 and 2022, we u sed a discount rate of 4.79 % and 4.99 %, respectively. We use the FTSE (previously Citigroup) Pension Liability Index rates matching the duration of our benefit payments as of the measurement date, December 31, to determine the discount rate. (p) Income Taxes We join with our wholly owned subsidiaries in filing a consolidated federal income tax return. In accordance with an intercompany tax allocation agreement, the applicable federal income tax expense or benefit is allocated to each subsidiary based upon taxable income or loss calculated on a separate company basis. Each subsidiary is responsible for payment of its own federal income tax liability or receives reimbursement of federal income tax benefit. In addition, deferred taxes are calculated and maintained on a separate company basis. We account for income taxes under the asset and liability method. The objective of the asset and liability method is to establish deferred tax assets and liabilities for temporary differences between the financial reporting and tax basis of our assets and liabilities based on the tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities with regard to a change in tax rates is recognized in the tax provision in the period the change is enacted. 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 81 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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. The Black-Scholes-Merton option-pricing model uses variables including expected volatilities, expected term, risk-free discount rate and annual rate of quarterly dividends. Expected volatilities are based on historical volatility of the Company’s stock. The expected terms are based upon actual exercise and forfeiture experience of previous option grants. The risk-free rate is based on yields on U.S. Treasury securities of a similar maturity to the expected term of the options. During the years ended December 31, 2023 and 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. Stock-based employee compensation expense related to common share awards of $ 4.3 million, $ 2.8 million and $ 4.1 million was included in income before income taxes during the years ended December 31, 2023, 2022 and 2021, respectively. The effect on net income for the years ended December 31, 2023, 2022 and 2021 was a reduction of $ 3.1 million, $ 2.0 million and $ 2.9 million, respectively. Total compensation expense for unvested stock options of $ 332,000 has yet to be recognized as of December 31, 2023. The weighted average period over which this remaining stock option expense will be recognized is approximately 3.08 years. For additional information regarding grants of stock options and common shares, see Note 15. (r) Derivative Financial Instruments We recognize all derivative financial instruments as either assets or liabilities in the balance sheet and measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. 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 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 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. We act as an interest rate or foreign exchange swap counterparty for certain commercial borrowers in the normal course of servicing our customers, which are accounted for at fair value. We manage our exposure to such interest rate or foreign exchange swaps by entering into corresponding and offsetting interest rate swaps with third parties that mirror the terms of the swaps we have with the commercial borrowers. These positions (referred to as “customer swaps”) directly offset each other and our exposure is the fair value of the derivatives due to changes in credit risk of our commercial borrowers and third parties. Customer swaps are recorded within other assets or other liabilities on the consolidated statement of financial condition at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the Consolidated Statement of Income. (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 Statements of Financial Condition. We utilize the same underwriting standards for these instruments as other extensions of credit. (t) Leases At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification of a finance or operating lease. Operating lease right of use (“ROU ” ) assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating 82 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments. ROU assets are further adjusted for lease incentives and initial direct costs. The Company has operating leases for certain branch and office facilities or land with lease terms up to 35 years. These leases generally contain renewal options for periods ranging from one to ten years . 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. Certain lease agreements include rental payments that are adjusted periodically for an index or rate. The leases are initially measured using the projected adjustment for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Generally, the Company cannot practically determine the interest rate implicit in the lease. Therefore, the Company uses its incremental borrowing rate as the discount rate for the lease. 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 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 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. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Statements of Income and Consolidated Statements of Cash Flows for the years ended December 31, 2022 and December 31, 2021, to reclassify the provision for credit losses - unfunded commitments, previously presented in other expense, to provide additional transparency to financial statement users. (2) Recently Adopted Accounting Standards In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure.” This ASU eliminates the accounting guidance for troubled debt restructurings (“TDRs”), while enhancing disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. This ASU also requires the disclosure of current period gross write-offs by year for origination for financing receivables. This guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those years, with early adoption permitted. This ASU is applied prospectively to modifications and write-offs beginning on the first day of the fiscal year of adoption. An entity may elect to adopt a modified retrospective transition method on the recognition and measurement of the TDR guidance. We adopted ASU 2022-02 using a modified retrospective transition approach related to the recognition and measurement of the TDR guidance and on a prospective basis for modification and write-offs. 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 ASU 2022-02 disclosure for periods before the date of adoption (i.e. January 1, 2023). This change did not have a material effect on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The 83 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 guidance provides expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The amendments primarily include contract modifications and hedge accounting, as well as providing a one-time election for the sale or transfer of debt securities classified as held-to-maturity. This guidance was effective as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date to Topic 848”. This guidance extends the guidance of ASU 2022-04 from December 31, 2022 to December 31, 2024. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform.” This ASU provides amendments, which are elective, and apply to all entities that have derivative instruments that use an interest rate for margining, discounting or contract price alignment of certain derivative instruments that are modified as a result of the reference rate reform. This ASU is effective upon issuance through December 31, 2024, and can be adopted at any time during this period. During the current year, we completed our LIBOR transition plan and modified the Company’s loan and other financial instrument contracts that are impacted by the transition. The Company chose the Secured Overnight Financing Rate (“SOFR”) as its alternative replacement for LIBOR on both back-to-back swaps and variable rate loans. There was no material impact to the Company’s financial statements as a result of the transition. (3) Leases 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. The components of lease cost recognized within our Consolidated Statements of Income were as follows: For the years ended December 31, 2023 2022 2021 Operating lease costs (office operations) $ 6,529 6,201 5,802 Variable lease costs (office operations) 863 677 662 Total operating lease costs $ 7,392 6,878 6,464 Amounts reported in the Consolidated Statements of Financial Condition were as follows: For the years ended December 31, 2023 2022 Operating leases: Operating lease ROU assets (other assets) $ 61,727 54,925 Operating lease liabilities (other liabilities) 64,723 57,737 Other information related to leases were as follows: For the years ended December 31, 2023 2022 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 5,941 6,207 ROU assets obtained in exchange for lease obligations 13,736 5,588 Weighted average remaining lease term 16.6 years 15.6 years Weighted average discount rate 4.2 % 3.2 % 84 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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. Maturities of lease liabilities by fiscal year for our operating leases are as follows: As of December 31, 2023 2024 $ 6,153 2025 5,912 2026 5,856 2027 5,786 2028 5,786 Thereafter 63,147 Total lease payments 92,640 Less amount of lease payments representing interest 27,917 Total present value of lease payments $ 64,723 Rental expense for the years ended December 31, 2023, 2022 and 2021 was $ 7.4 million , $ 6.9 million and $ 6.5 million, respectively. (4) Marketable Securities Marketable securities available-for-sale at December 31, 2023 are as follows: Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Debt issued by the U.S. government and agencies: Due after one year through five years $ 20,000 — ( 1,135 ) 18,865 Due after ten years 49,383 — ( 9,934 ) 39,449 Debt issued by government-sponsored enterprises: Due after one year through five years 45,986 — ( 5,763 ) 40,223 Due after five years through ten years 386 — ( 12 ) 374 Municipal securities: Due after one year through five years 4,279 22 ( 427 ) 3,874 Due after five years through ten years 20,725 — ( 1,437 ) 19,288 Due after ten years 60,762 125 ( 8,580 ) 52,307 Corporate debt issues: Due after five years through ten years 8,466 — ( 778 ) 7,688 Residential mortgage-backed securities: Fixed rate pass-through 209,069 27 ( 25,222 ) 183,874 Variable rate pass-through 7,140 11 ( 71 ) 7,080 Fixed rate agency CMOs 789,842 — ( 143,055 ) 646,787 Variable rate agency CMOs 23,965 38 ( 453 ) 23,550 Total residential mortgage-backed securities 1,030,016 76 ( 168,801 ) 861,291 Total marketable securities available-for-sale $ 1,240,003 223 ( 196,867 ) 1,043,359 85 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Marketable securities held-to-maturity at December 31, 2023 are as follows: Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Debt issued by government-sponsored enterprises: Due after one year through five years $ 69,471 — ( 8,100 ) 61,371 Due after five years through ten years 54,987 — ( 8,700 ) 46,287 Residential mortgage-backed securities: Fixed rate pass-through 147,874 — ( 20,834 ) 127,040 Variable rate pass-through 449 1 — 450 Fixed rate agency CMOs 541,529 — ( 77,694 ) 463,835 Variable rate agency CMOs 529 — ( 6 ) 523 Total residential mortgage-backed securities 690,381 1 ( 98,534 ) 591,848 Total marketable securities held-to-maturity $ 814,839 1 ( 115,334 ) 699,506 Marketable securities available-for-sale at December 31, 2022 are as follows: Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Debt issued by the U.S. government and agencies: 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 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 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: Fixed rate pass-through 227,122 35 ( 31,171 ) 195,986 Variable rate pass-through 8,837 10 ( 184 ) 8,663 Fixed rate agency CMOs 906,962 — ( 145,284 ) 761,678 Variable rate agency CMOs 27,853 31 ( 640 ) 27,244 Total residential mortgage-backed securities 1,170,774 76 ( 177,279 ) 993,571 Total marketable securities available-for-sale $ 1,431,728 105 ( 213,725 ) 1,218,108 86 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Marketable securities held-to-maturity at December 31, 2022 are as follows: Amortized cost Gross unrealized holding gains Gross unrealized holding losses Fair value Debt issued by the U.S. government and agencies: 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: Fixed rate pass-through 163,196 — ( 24,684 ) 138,512 Variable rate pass-through 542 — ( 12 ) 530 Fixed rate agency CMOs 592,527 — ( 83,325 ) 509,202 Variable rate agency CMOs 529 — ( 11 ) 518 Total residential mortgage-backed securities 756,794 — ( 108,032 ) 648,762 Total marketable securities held-to-maturity $ 881,249 — ( 129,865 ) 751,384 The following table shows the contractual maturity of our residential mortgage-backed securities available-for-sale at December 31, 2023: Amortized cost Fair value Residential mortgage-backed securities: Due within one year $ 167 166 Due after one year through five years 23,946 22,391 Due after five years through ten years 27,806 26,111 Due after ten years 978,097 812,623 Total residential mortgage-backed securities $ 1,030,016 861,291 The following table shows the contractual maturity of our residential mortgage-backed securities held-to-maturity at December 31, 2023: Amortized cost Fair value Residential mortgage-backed securities: Due after one year through five years $ 20,261 17,861 Due after five years through ten years 20,217 16,308 Due after ten years 649,903 557,679 Total residential mortgage-backed securities $ 690,381 591,848 The following table presents information regarding the issuers and the carrying values of our residential mortgage-backed securities at December 31, 2023 and 2022: December 31, 2023 2022 Residential mortgage-backed securities: FNMA $ 568,160 651,404 GNMA 407,441 438,193 FHLMC 576,066 660,762 Other (including non-agency) 5 6 Total residential mortgage-backed securities $ 1,551,672 1,750,365 Marketable securities having a carrying value of $ 368.5 million at December 31, 2023 were pledged under collateral agreements. During the year ended December 31, 2023, we sold marketable securities classified as available-for-sale for $ 101.2 million, with gross realized gains of $ 9,000 and gross realized losses of $ 8.3 million. During the year ended December 31, 2022, there were no sales of 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 years ended December 31, 2023, 2022, and 20 21, we did no t recognize an allowance for credit losses in our investment portfolio. 87 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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, 2023: Less than 12 months 12 months or more Total Fair value Unrealized loss Fair value Unrealized loss Fair value Unrealized loss U.S. government-sponsored enterprises $ — — 206,569 ( 33,644 ) 206,569 ( 33,644 ) Corporate debt issues — — 7,688 ( 778 ) 7,688 ( 778 ) Municipal securities 2,753 ( 81 ) 66,046 ( 10,363 ) 68,799 ( 10,444 ) Residential mortgage-backed securities - agency 17,976 ( 242 ) 1,423,707 ( 267,093 ) 1,441,683 ( 267,335 ) Total temporarily impaired securities $ 20,729 ( 323 ) 1,704,010 ( 311,878 ) 1,724,739 ( 312,201 ) The following table shows the fair value and gross unrealized losses on investment securities 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 Fair value Unrealized loss Fair value Unrealized loss Fair value Unrealized loss U.S. 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 ) Residential mortgage-backed securities - agency 373,186 ( 22,796 ) 1,264,042 ( 262,515 ) 1,637,228 ( 285,311 ) Total temporarily impaired securities $ 448,576 ( 27,487 ) 1,509,214 ( 316,103 ) 1,957,790 ( 343,590 ) The Company does not believe that the available-for-sale debt securities that were in an unrealized loss position as of December 31, 2023, which were comprised of 488 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. The securities issued by the U.S. government agencies or U.S. government-sponsored enterprises are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The corporate debt issues and securities issued by local municipalities were all highly rated by major rating agencies and have no history of credit losses. The unrealized losses were primarily attributable to changes in the interest rate environment and not due to the credit quality of these investment securities. The Company does not have the intent to sell these investment securities and it is likely that we will not be required to sell these securities before their anticipated recovery, which may be at maturity. All of the Company ’ s held-to-maturity debt securities are issued by U.S. government-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. 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, 2023. The following table presents the credit quality for our held-to-maturity securities, based on the latest information available as of December 31, 2023 (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, 2023. AA+ Total Held-to-maturity securities: Debt issued by the U.S. government-sponsored agencies $ 124,458 124,458 Residential mortgage-backed securities 690,381 690,381 Total marketable securities held-to-maturity $ 814,839 814,839 88 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (5) Loans Receivable The following table shows a summary of our loans receivable at amortized cost basis at December 31, 2023 and December 31, 2022 (in thousands): December 31, 2023 December 31, 2022 Originated (1) Acquired (2) Total Originated (1) Acquired (2) Total Personal Banking: Residential mortgage loans (3) $ 3,283,299 144,886 3,428,185 3,327,879 170,720 3,498,599 Home equity loans 1,103,410 124,448 1,227,858 1,131,641 166,033 1,297,674 Vehicle loans 1,943,540 65,061 2,008,601 1,965,385 91,398 2,056,783 Consumer loans 111,446 5,980 117,426 104,284 7,588 111,872 Total Personal Banking 6,441,695 340,375 6,782,070 6,529,189 435,739 6,964,928 Commercial Banking: Commercial real estate loans 2,389,537 238,920 2,628,457 2,135,607 312,421 2,448,028 Commercial real estate loans - owner occupied 319,195 26,358 345,553 341,704 33,823 375,527 Commercial loans 1,623,481 35,248 1,658,729 1,082,914 49,055 1,131,969 Total Commercial Banking 4,332,213 300,526 4,632,739 3,560,225 395,299 3,955,524 Total loans receivable, gross 10,773,908 640,901 11,414,809 10,089,414 831,038 10,920,452 Allowance for credit losses ( 118,079 ) ( 7,164 ) ( 125,243 ) ( 107,379 ) ( 10,657 ) ( 118,036 ) Total loans receivable, net (4) $ 10,655,829 633,737 11,289,566 9,982,035 820,381 10,802,416 (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 $ 8.8 million and $ 9.9 million of loans held-for-sale at December 31, 2023 and December 31, 2022, respectively. (4) Includes $ 68.3 million and $ 76.1 million of net unearned income, unamortized premiums and discounts and deferred fees and costs at December 31, 2023 and December 31, 2022, 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. No loans were purchased during the year ended December 31, 2023. As of December 31, 2023 and 2022, we serviced loans for others approximating $ 230.8 million and $ 1.549 billion, respectively. These loans serviced for others are not our assets and are not included in our financial statements. As of December 31, 2023 and 2022, approximately 38 % and 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. Loans receivable as of December 31, 2023 and 2022 include $ 4.032 billion and $ 3.333 billion, respectively, of adjustable rate loans and $ 7.314 billion and $ 7.511 billion, respectively, of fixed rate loans. 89 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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, 2023 (in thousands): Balance as of December 31, 2023 Current period provision Charge-offs Recoveries ASU 2022-02 Adoption Balance as of December 31, 2022 Allowance for Credit Losses Personal Banking: Residential mortgage loans $ 18,193 ( 1,515 ) ( 1,189 ) 1,636 — 19,261 Home equity loans 5,403 ( 356 ) ( 852 ) 709 — 5,902 Vehicle loans 26,911 8,299 ( 6,468 ) 2,021 — 23,059 Consumer loans 1,199 5,311 ( 5,983 ) 1,206 — 665 Total Personal Banking 51,706 11,739 ( 14,492 ) 5,572 — 48,887 Commercial Banking: Commercial real estate loans 51,267 6,604 ( 2,298 ) 2,029 426 44,506 Commercial real estate loans - owner occupied 3,775 ( 227 ) ( 68 ) 66 — 4,004 Commercial loans 18,495 548 ( 4,166 ) 1,474 — 20,639 Total Commercial Banking 73,537 6,925 ( 6,532 ) 3,569 426 69,149 Total $ 125,243 18,664 ( 21,024 ) 9,141 426 118,036 Allowance for Credit Losses - off-balance-sheet exposure (1) Personal Banking: Residential mortgage loans $ 2 ( 2 ) — — — 4 Home equity loans 65 ( 9 ) — — — 74 Total Personal Banking 67 ( 11 ) — — — 78 Commercial Banking: Commercial real estate loans 6,147 772 — — — 5,375 Commercial real estate loans - owner occupied 173 ( 206 ) — — — 379 Commercial loans 10,736 3,655 — — — 7,081 Total Commercial Banking 17,056 4,221 — — — 12,835 Total off-balance-sheet exposure $ 17,123 4,210 — — — 12,913 (1) The table above has been revised to reflect the correct ending balance for total off-balance-sheet exposure at December 31, 2022. We evaluated the effect of the revision, both qualitatively and quantitatively, and concluded that the impact of the revision was not material. During the year ended December 31, 2023, we sold $ 8.0 million of loans that were classified as held-for-investment, for a gain of $ 726,000 , which is reported in gain on sale of loans on the Consolidated Statements of Income. 90 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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, 2022 (in thousands): Balance as of December 31, 2022 Current period provision Charge-offs Recoveries Balance as of December 31, 2021 Allowance for Credit Losses Personal Banking: Residential mortgage loans $ 19,261 13,129 ( 2,033 ) 792 7,373 Home equity loans 5,902 540 ( 1,469 ) 1,531 5,300 Vehicle loans 23,059 8,863 ( 3,621 ) 2,334 15,483 Consumer loans 665 1,013 ( 4,785 ) 1,553 2,884 Total Personal Banking 48,887 23,545 ( 11,908 ) 6,210 31,040 Commercial Banking: Commercial real estate loans 44,506 ( 12,633 ) ( 7,366 ) 10,364 54,141 Commercial real estate loans - owner occupied 4,004 36 — 85 3,883 Commercial loans 20,639 6,912 ( 1,657 ) 2,207 13,177 Total Commercial Banking 69,149 ( 5,685 ) ( 9,023 ) 12,656 71,201 Total $ 118,036 17,860 ( 20,931 ) 18,866 102,241 Allowance for Credit Losses - off-balance-sheet exposure (1) Personal Banking: Residential mortgage loans $ 4 2 — — 2 Home equity loans 74 35 — — 39 Total Personal Banking 78 37 — — 41 Commercial Banking: Commercial real estate loans 5,375 4,494 — — 881 Commercial real estate loans - owner occupied 379 237 — — 142 Commercial loans 7,081 5,687 — — 1,394 Total Commercial Banking 12,835 10,418 — — 2,417 Total off-balance-sheet exposure $ 12,913 10,455 — — 2,458 (1) The table above has been revised to reflect the correct ending balance for total off-balance-sheet exposure at December 31, 2022. We evaluated the effect of the revision, both qualitatively and quantitatively, and concluded that the impact of the revision was not material. 91 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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 Balance as of December 31, 2020 Allowance for Credit Losses Personal Banking: Residential mortgage loans $ 7,373 2,844 ( 3,672 ) 935 7,266 Home equity loans 5,300 1,788 ( 3,380 ) 900 5,992 Vehicle loans 15,483 2,754 ( 4,632 ) 2,536 14,825 Consumer loans 2,884 3,070 ( 5,417 ) 2,360 2,871 Total Personal Banking 31,040 10,456 ( 17,101 ) 6,731 30,954 Commercial Banking: Commercial real estate loans 54,141 ( 15,496 ) ( 11,933 ) 2,189 79,381 Commercial real estate loans - owner occupied 3,883 ( 5,852 ) ( 890 ) 107 10,518 Commercial loans 13,177 ( 991 ) ( 4,213 ) 4,807 13,574 Total Commercial Banking 71,201 ( 22,339 ) ( 17,036 ) 7,103 103,473 Total $ 102,241 ( 11,883 ) ( 34,137 ) 13,834 134,427 Allowance for Credit Losses - off-balance-sheet exposure Personal Banking: Residential mortgage loans $ 2 — — — 2 Home equity loans 39 4 — — 35 Total Personal Banking 41 4 — — 37 Commercial Banking: Commercial real estate loans 881 ( 2,568 ) — — 3,449 Commercial real estate loans - owner occupied 142 ( 184 ) — — 326 Commercial loans 1,394 ( 1,157 ) — — 2,551 Total Commercial Banking 2,417 ( 3,909 ) — — 6,326 Total off-balance sheet exposure $ 2,458 ( 3,905 ) — — 6,363 92 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable at December 31, 2023 (in thousands): Total loans receivable Allowance for credit losses Nonaccrual loans Loans 90 days past due and accruing Personal Banking: Residential mortgage loans $ 3,428,185 18,193 8,727 1,671 Home equity loans 1,227,858 5,403 4,492 26 Vehicle loans 2,008,601 26,911 4,816 44 Consumer loans 117,426 1,199 229 722 Total Personal Banking 6,782,070 51,706 18,264 2,463 Commercial Banking: Commercial real estate loans 2,628,457 51,267 71,297 225 Commercial real estate loans - owner occupied 345,553 3,775 676 — Commercial loans 1,658,729 18,495 4,147 10 Total Commercial Banking 4,632,739 73,537 76,120 235 Total $ 11,414,809 125,243 94,384 2,698 The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable at December 31, 2022, prior to the adoption of ASU 2022-02 (in thousands): Total loans receivable Allowance for credit losses Nonaccrual loans (1) Loans 90 days past due and accruing TDRs Allowance related to TDRs Additional commitments to customers with loans classified as TDRs Personal Banking: Residential mortgage loans $ 3,498,599 19,261 7,574 — 6,279 1,069 — Home equity loans 1,297,674 5,902 4,145 — 1,470 546 — Vehicle loans 2,056,783 23,059 3,771 2 — — — Consumer loans 111,872 665 256 405 — — — Total Personal Banking 6,964,928 48,887 15,746 407 7,749 1,615 — Commercial Banking: Commercial real estate loans 2,448,028 44,506 62,239 — 31,980 638 400 Commercial real estate loans - owner occupied 375,527 4,004 624 — 94 31 — Commercial loans 1,131,969 20,639 2,627 337 858 116 4 Total Commercial Banking 3,955,524 69,149 65,490 337 32,932 785 404 Total $ 10,920,452 118,036 81,236 744 40,681 2,400 404 (1) Includes $ 29.2 million of nonaccrual TDRs. 93 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 We present the amortized cost of our loans on nonaccrual status including such loans with no allowance. The following table presents the amortized cost of our loans on nonaccrual status as of the beginning and end of the year ended December 31, 2023 (in thousands): Nonaccrual loans at January 1, 2023 December 31, 2023 Nonaccrual loans with an allowance Nonaccrual loans with no allowance Total nonaccrual loans at the end of the period Loans 90 days past due and accruing Personal Banking: Residential mortgage loans $ 7,574 8,304 423 8,727 1,671 Home equity loans 4,145 4,084 408 4,492 26 Vehicle loans 3,771 4,187 629 4,816 44 Consumer loans 256 229 — 229 722 Total Personal Banking 15,746 16,804 1,460 18,264 2,463 Commercial Banking: Commercial real estate loans 62,239 47,359 23,938 71,297 225 Commercial real estate loans - owner occupied 624 676 — 676 — Commercial loans 2,627 3,996 151 4,147 10 Total Commercial Banking 65,490 52,031 24,089 76,120 235 Total $ 81,236 68,835 25,549 94,384 2,698 During the year ended December 31, 2023, we did not recognize any interest income on nonaccrual loans. The following table presents the amortized cost of our loans on nonaccrual status as of the beginning and end of the year ended December 31, 2022, (in thousands): Nonaccrual loans at January 1, 2022 December 31, 2022 Nonaccrual loans with an allowance Nonaccrual loans with no allowance Total nonaccrual loans at the end of the period Loans 90 days past and accruing Personal Banking: Residential mortgage loans $ 10,402 7,574 — 7,574 — Home equity loans 5,758 3,887 258 4,145 — Vehicle loans 3,263 2,175 1,596 3,771 2 Consumer loans 675 256 — 256 405 Total Personal Banking 20,098 13,892 1,854 15,746 407 Commercial Banking: Commercial real estate loans 129,666 22,182 40,057 62,239 — Commercial real estate loans - owner occupied 1,233 624 — 624 — Commercial loans 7,474 2,024 603 2,627 337 Total Commercial Banking 138,373 24,830 40,660 65,490 337 Total $ 158,471 38,722 42,514 81,236 744 During the year ended December 31, 2022, we recognized $ 678,000 of interest income on nonaccrual and troubled debt restructuring loans. 94 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2023 (in thousands): Real estate Total Commercial Banking: Commercial real estate loans $ 66,934 66,934 Commercial loans 150 150 Total Commercial Banking 67,084 67,084 Total $ 67,084 67,084 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 Total Personal Banking: Residential mortgage loans $ 569 — 569 Home equity loans 100 — 100 Total Personal Banking 669 — 669 Commercial Banking: Commercial real estate loans 57,056 — 57,056 Commercial loans 175 210 385 Total Commercial Banking 57,231 210 57,441 Total $ 57,900 210 58,110 Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extensions, an other-than-insignificant payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. In some cases, the Company provides multiple types of concessions to one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay, and/or an interest rate reduction. The following table presents the amortized cost basis of loans as of December 31, 2023 that were both experiencing financial difficulty and modified during the periods indicated, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financial receivable is also presented below (dollars in thousands). 95 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Payment delay Term extension Combination term extension and interest rate reduction Total class of financing receivable Personal Banking: Residential mortgage loans $ 363 499 — 0.03 % Home equity loans — 403 84 0.04 % Consumer loans — — 3 — % Total Personal Banking 363 902 87 0.02 % Commercial Banking: Commercial real estate loans — 71 — — % Commercial loans — 11 — — % Total Commercial Banking — 82 — — % Total $ 363 984 87 0.01 % The Company has committed to lend additional amounts totaling $ 31,000 to the borrowers included in the previous table. The following table presents the effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023: Weighted-average interest rate reduction Weighted-average term extension in months Payment deferral (Years) Personal Banking: Residential mortgage loans — 142 0.50 Home equity loans 5 % 92 — Consumer loans 12 % 356 — Total Personal Banking 17 % 118 0.50 Commercial Banking: Commercial real estate loans — 57 — Commercial loans — 23 — Total Commercial Banking — 52 — Total loans 17 % 113 0.50 The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that such loans have been modified since the adoption of ASU 2022-02 (in thousands): Current 30-59 days delinquent 60-89 days delinquent 90 days or greater delinquent Personal Banking: Residential mortgage loans $ 148 342 8 363 Home equity loans 465 23 — — Consumer loans 3 — — — Total Personal Banking 616 365 8 363 Commercial Banking: Commercial real estate loans 71 — — — Commercial loans 11 — — — Total Commercial Banking 82 — — — Total loans $ 698 365 8 363 96 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 A modification is considered to be in default when the loan is 90 days or more past due. The following table provides the amortized cost basis of financing receivables that had a payment default during the period and were modified since the adoption of ASU 2022-02 to borrowers experiencing financial difficulty (in thousands) : Payment delay Personal Banking: Residential mortgage loans $ 363 Total Personal Banking 363 Total $ 363 The modifications to borrowers experiencing financial distress are included in their respective portfolio segment and the current loan balance and updated loan terms are run through their respective ACL models to arrive at the quantitative portion of the ACL. Subsequent performance of the loans will be measured by delinquency status and will be captured through our ACL models or our qualitative factor assessment, as deemed appropriate. If we no longer believe the loan demonstrates similar risks to their respective portfolio segment an individual assessment will be performed. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The following table provides a roll forward of troubled debt restructurings for the period indicated, prior to the adoption of ASU 2022-02 (dollars in thousands): For the year ended December 31, 2022 Number of contracts Amount Beginning TDR balance: 134 $ 30,288 New TDRs 14 30,894 Re-modified TDRs 11 8,391 Net paydowns — ( 11,870 ) Charge-offs: Residential mortgage loans 2 ( 63 ) Commercial real estate loans 1 ( 150 ) Commercial loans 1 ( 130 ) Paid-off loans: Residential mortgage loans 4 ( 361 ) Home equity loans 3 ( 89 ) Commercial real estate loans 6 ( 4,324 ) Commercial real estate loans - owner occupied 1 ( 44 ) Commercial loans 7 ( 3,470 ) Ending TDR balance: 123 $ 40,681 Accruing TDRs $ 11,442 Nonaccrual TDRs 29,239 97 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following tables provide information related to TDRs (including re-modified TDRs) by portfolio segment and by class of financing receivable during the periods indicated, prior to the adoption of ASU 2022-02 (dollars in thousands): For the year ended December 31, 2022 Number of contracts Recorded investment at the time of modification Current recorded investment Current allowance Personal Banking: Residential mortgage loans 4 $ 530 522 37 Home equity loans 6 183 171 42 Total Personal Banking 10 713 693 79 Commercial Banking: Commercial real estate loans 9 34,716 20,954 66 Commercial loans 6 3,856 263 20 Total Commercial Banking 15 38,572 21,217 86 Total 25 $ 39,285 21,910 165 For the year ended December 31, 2021 Number of contracts Recorded investment at the time of modification Current recorded investment Current allowance Personal Banking: Residential mortgage loans 1 $ 125 114 15 Home equity loans 3 155 34 34 Total Personal Banking 4 280 148 49 Commercial Banking: Commercial real estate loans 8 12,006 10,572 1,453 Commercial loans 6 4,147 3,903 451 Total Commercial Banking 14 16,153 14,475 1,904 Total 18 $ 16,433 14,623 1,953 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, prior to the adoption of ASU 2022-02 (dollars in thousands): Type of modification Number of contracts Rate Payment Maturity date Total Personal Banking: Residential mortgage loans 4 $ — 379 143 522 Home equity loans 6 — 23 148 171 Total Personal Banking 10 — 402 291 693 Commercial Banking: Commercial real estate loans 9 129 98 20,727 20,954 Commercial loans 6 — — 263 263 Total Commercial Banking 15 129 98 20,990 21,217 Total 25 $ 129 500 21,281 21,910 98 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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, prior to the adoption of ASU 2022-02 (dollars in thousands): Type of modification Number of contracts Rate Payment Maturity date Other Total Personal Banking: Residential mortgage loans 1 $ 114 — — — 114 Home equity loans 3 — 30 4 — 34 Total Personal Banking 4 114 30 4 — 148 Commercial Banking: Commercial real estate loans 8 2,077 — 8,424 71 10,572 Commercial loans 6 171 — 3,732 — 3,903 Total Commercial Banking 14 2,248 — 12,156 71 14,475 Total 18 $ 2,362 30 12,160 71 14,623 The following table provides information related to re-modified trouble debt restructurings by portfolio segment and class of financing receivable for modifications during the year ended December 31, 2022, prior to the adoption of ASU 2022-02 (dollars in thousands): Type of re-modification Number of re-modified TDRs Payment Maturity date Total Personal Banking: Residential mortgage loans 1 $ — 129 129 Home equity loans 1 — — — Total Personal Banking 2 — 129 129 Commercial Banking: Commercial real estate loans 4 53 196 249 Commercial loans 5 — 210 210 Total Commercial Banking 9 53 406 459 Total 11 $ 53 535 588 The following table provides information related to re-modified trouble debt restructurings by portfolio segment and class of financing receivable for modifications during the year ended December 31, 2021, prior to the adoption of ASU 2022-02 (dollars in thousands): Type of re-modification Number of re-modified TDRs Rate Maturity date Other Total Personal Banking: Residential mortgage loans 1 $ 114 — — 114 Home equity loans 1 — — — — Total Personal Banking 2 114 — — 114 Commercial Banking: Commercial real estate loans 7 2,077 5,108 71 7,256 Total Commercial Banking 7 2,077 5,108 71 7,256 Total 9 $ 2,191 5,108 71 7,370 99 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 No TDRs modified within the previous twelve months of December 31, 2022 subsequently defaulted. The following table provides information related to troubled debt restructurings modified within the previous twelve months of December 31, 2021 that subsequently defaulted (prior to the adoption of ASU 2022-02): Number of contracts Recorded investment at the time of modification Current recorded investment Current allowance Commercial Banking: Commercial real estate loans 1 $ 4,167 3,823 — Total Commercial Banking 1 4,167 3,823 — Total 1 $ 4,167 3,823 — The following table provides information related to the amortized cost basis of loan payment delinquencies at December 31, 2023 (in thousands): 30-59 days delinquent 60-89 days delinquent 90 days or greater delinquent Total delinquency Current Total loans receivable 90 days or greater delinquent and accruing Personal Banking: Residential mortgage loans $ 30,041 7,796 7,995 45,832 3,382,353 3,428,185 1,671 Home equity loans 5,761 982 3,126 9,869 1,217,989 1,227,858 26 Vehicle loans 10,382 3,326 3,051 16,759 1,991,842 2,008,601 44 Consumer loans 829 428 927 2,184 115,242 117,426 722 Total Personal Banking 47,013 12,532 15,099 74,644 6,707,426 6,782,070 2,463 Commercial Banking: Commercial real estate loans 2,010 1,031 6,535 9,576 2,618,881 2,628,457 225 Commercial real estate loans - owner occupied 1,194 — 177 1,371 344,182 345,553 — Commercial loans 4,196 703 2,780 7,679 1,651,050 1,658,729 10 Total Commercial Banking 7,400 1,734 9,492 18,626 4,614,113 4,632,739 235 Total loans $ 54,413 14,266 24,591 93,270 11,321,539 11,414,809 2,698 The following table provides information related to the amortized cost basis loan payment delinquencies at December 31, 2022 (in thousands): 30-59 days delinquent 60-89 days delinquent 90 days or greater delinquent Total delinquency Current Total loans receivable 90 days or greater delinquent and accruing Personal Banking: Residential mortgage loans $ 29,487 5,563 5,574 40,624 3,457,975 3,498,599 — Home equity loans 6,657 975 2,257 9,889 1,287,785 1,297,674 — Vehicle loans 8,677 2,770 2,471 13,918 2,042,865 2,056,783 2 Consumer loans 758 300 608 1,666 110,206 111,872 405 Total Personal Banking 45,579 9,608 10,910 66,097 6,898,831 6,964,928 407 Commercial Banking: Commercial real estate loans 3,947 2,377 7,589 13,913 2,434,115 2,448,028 — Commercial real estate loans - owner occupied 61 — 278 339 375,188 375,527 — Commercial loans 2,648 1,115 1,829 5,592 1,126,377 1,131,969 337 Total Commercial Banking 6,656 3,492 9,696 19,844 3,935,680 3,955,524 337 Total loans $ 52,235 13,100 20,606 85,941 10,834,511 10,920,452 744 100 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Credit Quality Indicators: For Commercial Banking loans we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze loans individually by classifying the loans by credit risk. Credit relationships greater than or equal to $ 1.0 million classified as special mention or substandard are reviewed quarterly for deterioration or improvement to determine if the loan is appropriately classified. We use the following definitions for risk ratings other than pass: Special Mention — Loans designated as special mention have specific, well-defined risk issues, which create a high level of uncertainty regarding the long-term viability of the business. Loans in this class are considered to have high-risk characteristics. A special mention loan exhibits material negative financial trends due to company-specific or systemic conditions. If these potential weaknesses are not mitigated, they threaten the borrower’s capacity to meet its debt obligations. Special mention loans still demonstrate sufficient financial flexibility to react to and positively address the root cause of the adverse financial trends without significant deviations from their current business strategy. Their potential weaknesses deserve our close attention and warrant enhanced monitoring. Substandard — Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified as substandard. In addition, those weaknesses make collection or liquidation in full highly questionable and improbable. A loan classified as doubtful exhibits discernible loss potential, but a complete loss seems very unlikely. The possibility of a loss on a doubtful loan is high, but because of certain important and reasonably specific pending factors that may strengthen the loan, its classification as an estimated loss is deferred until a more exact status can be determined. Loss — Loans classified as loss are considered uncollectible and of such value that the continuance as a loan is not warranted. A loss classification does not mean that the loan has no recovery or salvage value; instead, it means that it is not practical or desirable to defer writing off all or a portion of a basically worthless loan even though partial recovery may be possible in the future. For Personal Banking loans a pass risk rating is maintained until they are greater than 90 days past due, and risk rating reclassification is based primarily on past due status of the loan. The risk rating categories can generally be described by the following groupings: Pass — Loans classified as pass are homogeneous loans that are less than 90 days past due from the required payment date at month-end. Substandard — Loans classified as substandard are homogeneous loans that are greater than 90 days past due from the required payment date at month-end, loans classified as TDRs, or homogenous retail loans that are greater than 180 days past due from the requirement payment date at month-end that has been written down to the value of underlying collateral, less costs to sell. Doubtful — Loans classified as doubtful are homogeneous loans that are greater than 180 days past due from the required payment date at month-end and not written down to the value of underlying collateral. These loans are generally charged-off in the month in which the 180 day period elapses. 101 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table presents the amortized cost basis of our loan portfolio by year of origination and credit quality indicator and the current period charge-offs by year of origination for each portfolio segment as of December 31, 2023 (in thousands): 2023 2022 2021 2020 2019 Prior Revolving loans Revolving loans converted to term loans Total loans receivable Personal Banking: Residential mortgage loans Pass $ 186,081 665,379 792,488 506,068 244,678 1,019,152 — — 3,413,846 Substandard — 1,581 — 1,252 311 11,195 — — 14,339 Total residential mortgage loans 186,081 666,960 792,488 507,320 244,989 1,030,347 — — 3,428,185 Residential mortgage current period charge-offs — ( 9 ) ( 5 ) ( 130 ) ( 23 ) ( 1,023 ) — — ( 1,189 ) Home equity loans Pass 71,497 100,639 106,043 146,121 94,144 197,259 463,868 43,526 1,223,097 Substandard — 236 54 197 35 1,733 1,447 1,059 4,761 Total home equity loans 71,497 100,875 106,097 146,318 94,179 198,992 465,315 44,585 1,227,858 Home equity current period charge-offs — ( 53 ) ( 46 ) — ( 48 ) ( 352 ) ( 144 ) ( 209 ) ( 852 ) Vehicle loans Pass 664,876 682,275 397,809 132,775 67,853 58,153 — — 2,003,741 Substandard 646 1,418 1,453 299 556 488 — — 4,860 Total vehicle loans 665,522 683,693 399,262 133,074 68,409 58,641 — — 2,008,601 Vehicle current period charge-offs ( 678 ) ( 1,844 ) ( 1,967 ) ( 475 ) ( 652 ) ( 853 ) — — ( 6,468 ) Consumer loans Pass 24,277 11,582 5,552 2,072 1,355 6,603 64,214 820 116,475 Substandard 55 43 19 6 6 46 726 50 951 Total consumer loans 24,332 11,625 5,571 2,078 1,361 6,649 64,940 870 117,426 Consumer loan current period charge-offs ( 3,412 ) ( 511 ) ( 390 ) ( 157 ) ( 177 ) ( 980 ) ( 317 ) ( 38 ) ( 5,983 ) Total Personal Banking 947,432 1,463,153 1,303,418 788,790 408,938 1,294,629 530,255 45,455 6,782,070 Business Banking: Commercial real estate loans Pass 223,335 470,762 303,873 332,620 228,382 745,244 27,583 24,804 2,356,603 Special Mention 2,819 24,735 27,871 5,365 4,053 38,665 711 — 104,219 Substandard 1,920 750 26,850 18,167 37,044 82,717 79 108 167,635 Total commercial real estate loans 228,074 496,247 358,594 356,152 269,479 866,626 28,373 24,912 2,628,457 Commercial real estate current period charge-offs ( 14 ) — ( 492 ) — ( 51 ) ( 1,741 ) — — ( 2,298 ) Commercial real estate loans - owner occupied Pass 24,725 51,986 47,655 15,984 28,614 140,175 2,378 2,390 313,907 Special Mention 1,221 120 1,218 — 14,386 2,952 — — 19,897 Substandard — — 118 1,666 4,646 4,641 — 678 11,749 Total commercial real estate loans - owner occupied 25,946 52,106 48,991 17,650 47,646 147,768 2,378 3,068 345,553 Commercial real estate - owner occupied current period charge-offs — — — — — ( 68 ) — — ( 68 ) Commercial loans Pass 482,605 430,378 73,469 26,868 34,090 54,617 531,742 4,110 1,637,879 Special Mention 508 3,671 52 299 240 26 1,882 — 6,678 Substandard — 3,015 872 356 2,361 840 4,729 1,999 14,172 Total commercial loans 483,113 437,064 74,393 27,523 36,691 55,483 538,353 6,109 1,658,729 Commercial loans current period charge-offs ( 35 ) ( 2,072 ) ( 517 ) ( 430 ) ( 205 ) ( 845 ) ( 60 ) ( 2 ) ( 4,166 ) Total Business Banking 737,133 985,417 481,978 401,325 353,816 1,069,877 569,104 34,089 4,632,739 Total loans $ 1,684,565 2,448,570 1,785,396 1,190,115 762,754 2,364,506 1,099,359 79,544 11,414,809 For the year ended December 31, 2023, $ 18.9 million of revolving loans were converted to term loans. 102 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table summarizes amortized cost basis loan balances by year of origination, class of loans, and risk category as of December 31, 2022 (in thousands): 2022 2021 2020 2019 2018 Prior Revolving loans Revolving loans converted to term loans Total loans receivable Personal Banking: Residential mortgage loans Pass $ 659,930 837,823 546,604 265,520 131,599 1,043,394 — — 3,484,870 Substandard 422 187 474 796 531 11,319 — — 13,729 Total residential mortgage loans 660,352 838,010 547,078 266,316 132,130 1,054,713 — — 3,498,599 Home equity loans Pass 114,598 126,608 173,044 110,495 50,314 198,971 475,229 42,887 1,292,146 Substandard — 46 — 127 324 3,066 683 1,282 5,528 Total home equity loans 114,598 126,654 173,044 110,622 50,638 202,037 475,912 44,169 1,297,674 Vehicle loans Pass 966,432 611,310 227,897 135,134 70,071 42,166 — — 2,053,010 Substandard 292 1,096 667 689 657 372 — — 3,773 Total vehicle loans 966,724 612,406 228,564 135,823 70,728 42,538 — — 2,056,783 Consumer loans Pass 19,302 9,874 4,327 3,557 2,409 5,094 65,610 1,037 111,210 Substandard 24 9 37 9 3 48 432 100 662 Total consumer loans 19,326 9,883 4,364 3,566 2,412 5,142 66,042 1,137 111,872 Total Personal Banking 1,761,000 1,586,953 953,050 516,327 255,908 1,304,430 541,954 45,306 6,964,928 Business Banking: Commercial real estate loans Pass 322,050 346,355 369,868 244,188 209,500 696,628 24,954 13,314 2,226,857 Special Mention — 17,216 16,782 87 1,000 15,887 157 15 51,144 Substandard — 4,561 3,617 48,879 41,521 70,384 459 606 170,027 Total commercial real estate loans 322,050 368,132 390,267 293,154 252,021 782,899 25,570 13,935 2,448,028 Commercial real estate loans - owner occupied Pass 62,905 51,673 17,989 49,600 43,570 123,278 2,477 1,460 352,952 Special Mention 126 — 18 — 2,297 1,106 385 — 3,932 Substandard — — — 5,085 2,440 9,250 — 1,868 18,643 Total commercial real estate loans - owner occupied 63,031 51,673 18,007 54,685 48,307 133,634 2,862 3,328 375,527 Commercial loans Pass 481,797 90,320 52,833 46,966 17,250 53,107 354,402 4,032 1,100,707 Special Mention 628 2,190 506 1,704 227 — 2,129 — 7,384 Substandard 1,833 603 908 2,097 1,605 735 12,941 3,156 23,878 Total commercial loans 484,258 93,113 54,247 50,767 19,082 53,842 369,472 7,188 1,131,969 Total Business Banking 869,339 512,918 462,521 398,606 319,410 970,375 397,904 24,451 3,955,524 Total loans $ 2,630,339 2,099,871 1,415,571 914,933 575,318 2,274,805 939,858 69,757 10,920,452 For the year ended December 31, 2022, $ 20.7 million of revolving loans were converted to term loans. 103 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Our exposure to credit loss in the event of nonperformance by the other party to off-balance-sheet financial instruments is represented by the contract amount of the financial instrument. We use the same credit policies in making commitments for off- balance-sheet financial instruments as we do for on-balance-sheet instruments. Financial instruments with off-balance-sheet risk as of December 31, 2023 and 2022 are presented in the following table: Years ended December 31, 2023 2022 Loans commitments $ 198,166 248,636 Undisbursed lines of credit 1,185,709 1,094,535 Standby letters of credit 46,900 45,140 Total $ 1,430,775 1,388,311 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral we obtain upon extension of credit is based on management’s credit evaluation of the counterparty. Collateral held varies but generally may include cash, marketable securities, real estate and other property. Outstanding loan commitments at December 31, 2023 for fixed rate loans were $ 78.1 million. The interest rates on these commitments approximate market rates at December 31, 2023. Outstanding loan commitments at December 31, 2023 for adjustable rate loans were $ 120.1 million. The fair values of these commitments are affected by fluctuations in market rates of interest. We issue standby letters of credit in the normal course of business. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party. We are required to perform under a standby letter of credit when drawn upon by the guaranteed third party in the case of nonperformance by our customer. The credit risk associated with standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s credit assessment of the customer. As of December 31, 2023, the maximum potential amount of future payments we could be required to make under these standby letters of credit is $ 46.9 million, of which $ 29.7 million is fully collateralized. A liability (which represents deferred income) of $ 1.1 million and $ 792,000 has been recognized for the obligations as of December 31, 2023 and 2022, respectively, and there are no recourse provisions that would enable us to recover any amounts from third parties. In addition, we maintain a $ 10.0 million credit limit with a correspondent bank for private label credit card facilities for certain existing commercial clients of the Bank, of which $ 6.9 million of the credit limit was allocated to credit cards that have been issued. These issued credit cards had an outstanding balance of $ 632,000 at December 31, 2023. 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. Upon sale, the mortgage servicing right (“MSR”) is established, which represents the then-fair value of future net cash flows expected to be realized for performing the servicing activities. The fair value of the MSRs are estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. In determining the fair value of the MSRs, stochastic modeling is performed using variables such as the forward yield curve, prepayment rates, annual service cost, average life expectancy and option adjusted spreads. 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 Statements of Financial Condition. Capitalized MSRs are evaluated quarterly for impairment based on the estimated fair value of those rights. The MSRs are stratified by certain risk characteristics, primarily loan term and note rate. If impairment exists within a risk stratification tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced or eliminated. We do not directly hedge against realized or potential future impairment losses on our MSRs. 104 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table shows changes in MSRs as of and for the years ended December 31, 2023 and 2022: Servicing rights Valuation allowance Net carrying value and fair value Balance at December 31, 2021 $ 10,166 ( 11 ) 10,155 Additions 1,282 4 1,286 Amortization ( 3,646 ) — ( 3,646 ) Balance at December 31, 2022 7,802 ( 7 ) 7,795 Additions 788 ( 1 ) 787 MSR sale ( 5,930 ) — ( 5,930 ) Amortization ( 1,551 ) — ( 1,551 ) Balance at December 31, 2023 $ 1,109 ( 8 ) 1,101 (6) Accrued Interest Receivable Accrued interest receivable as of December 31, 2023 and 2022 is presented in the following table: December 31, 2023 2022 Investment securities $ 1,795 1,722 FHLB dividends 637 391 Mortgage-backed securities 2,743 3,020 Loans receivable 42,178 30,395 Total $ 47,353 35,528 (7) FHLB Stock 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: Membership stock purchase (Subclass B-1) ranging from 0.05 % to 1.0 % of the member asset value as defined by the FHLB, currently at 0.10 %; and Activity-based stock purchase (Subclass B-2) ranging from 2.0 % to 6.0 % of outstanding advances, currently at 4.0 %; 0.0 % to 6.0 % of acquired member assets, currently at 4.0 %; 0.0 % to 4.0 % of certain letters of credit, currently at 0.75 %; and 0.0 % to 6.0 % of outstanding advance commitments settling more than 30 days after trade, currently at 0.0 %. 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 %; 0.10 % to 6.0 % for letters of credit, currently at 0.10 %; 1.0 % to 6.0 % of derivative contracts, 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, 2023 and December 31, 2022 was $ 27.0 million and $ 37.0 million, respectively. In addition, our investment of capital stock of the FHLB of Indianapolis at December 31, 2023 and December 31, 2022 was $ 3.1 million. We received dividends on capital stock during the years ended December 31, 2023 and 2022 of $ 2.9 million and $ 730,000 , respectively. Future dividends may be established at different rates for the two subclasses of capital stock. 105 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (8) Premises and Equipment Premises and equipment at December 31, 2023 and 2022 are summarized by major classification in the following table: December 31, 2023 2022 Land and land improvements $ 23,905 24,368 Office buildings and improvements 140,443 139,180 Furniture, fixtures and equipment 133,513 138,590 Leasehold improvements 23,547 23,559 Total, at cost 321,408 325,697 Less accumulated depreciation and amortization ( 182,570 ) ( 179,788 ) Premises and equipment, net $ 138,838 145,909 Depreciation and amortization expense for the years ended December 31, 2023, 2022, and 2021 was $ 11.5 million, $ 11.6 million, and $ 12.1 million, respectively. (9) Goodwill and Other Intangible Assets The following table provides information for intangible assets subject to amortization for the years ended December 31, 2023 and 2022: December 31, 2023 2022 Amortizable intangible assets: Core deposit intangibles - gross $ 74,899 74,899 Less: accumulated amortization ( 69,609 ) ( 66,367 ) Core deposit intangibles - net $ 5,290 8,532 Customer and Contract intangible assets - gross $ 12,775 12,775 Less: accumulated amortization ( 12,775 ) ( 12,747 ) Customer and Contract intangible assets - net — 28 Total intangible assets - net $ 5,290 8,560 The following information shows the actual aggregate amortization expense for the years ended December 31, 2023, 2022 and 2021 as well as the estimated aggregate amortization expense, based upon current levels of intangible assets, for each of the five succeeding fiscal years: For the year ended December 31, 2021 $ 5,553 For the year ended December 31, 2022 4,277 For the year ended December 31, 2023 3,270 For the year ending December 31, 2024 2,452 For the year ending December 31, 2025 1,662 For the year ending December 31, 2026 871 For the year ending December 31, 2027 305 The following table provides information for the changes in the carrying amount of goodwill: Total Balance at December 31, 2022 $ 380,997 Balance at December 31, 2023 $ 380,997 We performed our annual goodwill impairment test as of June 30, 2023 2022, and 2021 in accordance with ASC 350, Intangibles - Goodwill and Other, and concluded that goodwill was not impaired. As of December 31, 2023, 2022 and 2021, there were no events or changes in circumstances that would cause us to update that year ’ s goodwill impairment test and we concluded there was no impairment of goodwill as of such dates. 106 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (10) Deposits Deposit balances at December 31, 2023 and 2022 are shown in the table below: December 31, 2023 2022 Noninterest-bearing demand deposits $ 2,669,023 2,993,243 Interest-bearing demand deposits 2,634,546 2,686,431 Money market deposit accounts 1,968,218 2,457,569 Savings deposits 2,105,234 2,275,020 Time deposits (1) 2,602,881 1,052,285 Total deposits $ 11,979,902 11,464,548 (1) Includes $ 483.9 million and $ 0 of brokered deposits at December 31, 2023 and 2022. The aggregate amount of time deposits with a minimum denomination of $100,000 at December 31, 2023 and 2022 was $ 950.3 million and $ 355.0 million, respectively. Generally, deposits in excess of $250,000 are not federally insured. At December 31, 2023 and 2022, we had $ 1.835 billion and $ 4.031 billion of deposits in accounts exceeding $250,000, respectively. The following table summarizes the contractual maturity of time deposits at December 31, 2023 and 2022: December 31, 2023 2022 Due within 12 months $ 2,464,022 754,564 Due between 12 and 24 months 70,679 186,803 Due between 24 and 36 months 27,550 46,500 Due between 36 and 48 months 23,590 26,734 Due between 48 and 60 months 13,997 33,691 After 60 months 3,043 3,993 Total time deposits $ 2,602,881 1,052,285 The following table summarizes the interest expense incurred on the respective deposits for the years ended December 31, 2023, 2022 and 2021: Years ended December 31, 2023 2022 2021 Interest-bearing demand deposits $ 11,606 1,517 1,660 Money market deposit accounts 24,734 3,381 2,597 Savings deposits 8,822 2,339 2,413 Time deposits (1) 60,181 6,883 12,452 Total interest expense on deposits $ 105,343 14,120 19,122 (1) Includes $ 7.8 million, $ 0 , and $ 0 of interest expense on brokered deposits at December 31, 2023, 2022, and 2021. 107 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (11) Borrowed Funds (a) Borrowings Borrowed funds at December 31, 2023 and 2022 are presented in the following table: December 31, 2023 2022 Amount Average rate Amount Average rate Term notes payable to the FHLB of Pittsburgh, due within one year $ 175,000 5.71 % $ 500,000 4.55 % Notes payable to the FHLB of Pittsburgh, due within one year 163,500 5.70 % 51,300 4.45 % Collateralized borrowings, due within one year 35,495 1.72 % 105,766 0.27 % Collateral received, due within one year 24,900 5.26 % 24,100 4.17 % Total borrowed funds $ 398,895 $ 681,166 Borrowings from the Federal Home Loan Banks (“FHLB”) of Pittsburgh, if any, are secured by our residential first mortgage and other qualifying loans. At December 31, 2023, the carrying value of these loans was $ 6.022 billion. Certain of these borrowings are subject to restrictions or penalties in the event of prepayment. The revolving line of credit with the FHLB of Pittsburgh carries a commitment of $ 250.0 million. The rate is adjusted daily by the FHLB of Pittsburgh, and any borrowings on this line may be repaid at any time without penalty. At December 31, 2023 and December 31, 2022, the balance of the revolving line of credit was $ 163.5 million and $ 51.3 million, respectively. At December 31, 2023 and December 31, 2022, collateralized borrowings due within one year were $ 35.5 million and $ 105.8 million, respectively. These borrowings are collateralized by cash or various securities held in safekeeping by the FHLB. At December 31, 2023, the carrying value of the cash and securities used as collateral was $ 92.0 million. At December 31, 2023 and December 31, 2022, collateral received was $ 24.9 million and $ 24.1 million, respectively. This represents collateral posted to us from our derivative counterparties. At December 31, 2023 and December 31, 2022, term notes payable to the FHLB of Pittsburgh due within one year were $ 175.0 million and $ 500.0 million, respectively. The December 31, 2023 total is made up of seven advances: $ 25.0 million at 5.76 % maturing January 26, 2024; $ 25.0 million at 5.77 % maturing January 31, 2024; $ 25.0 million at 5.73 % maturing February 9, 2024; $ 25.0 million at 5.68 % maturing February 13, 2024; $ 25.0 million at 5.70 % maturing February 12, 2024; $ 25.0 million at 5.67 % maturing February 20, 2024 and $ 25.0 million at 5.67 % maturing February 29, 2024. On September 9, 2020, the Company issued $ 125.0 million of 4.00 % fixed-to-floating rate subordinated notes with a maturity date of September 15, 2030. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 4.00 %, payable semi-annually in arrears commencing on March 15, 2021, and a floating rate of interest equivalent to the 3-month Secured Overnight Financing Rate (“SOFR”) plus 3.89 % payable quarterly in arrears commencing on December 15, 2025. During the year-ended December 31, 2022 the Company repurchased $ 10.2 million of subordinated notes leaving $ 114.8 million of subordinated notes outstanding as of December 31, 2023. The subordinated debt issuance costs of approximately $ 1.8 million are being amortized over five years on a straight-line basis into interest expense. At December 31, 2023 and December 31, 2022, subordinated debentures, net of issuance costs, were $ 114.2 million and $ 113.8 million, respectively. For the years ended December 31, 2023, December 31, 2022, and December 31, 2021 total interest expense paid on the subordinate notes was $ 4.9 million, $ 5.1 million, and $ 5.3 million, respectively. (b) Trust Preferred Securities The Company has seven statutory business trusts: Northwest Bancorp Capital Trust III, a Delaware statutory business trust, Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust, LNB Trust II, a Delaware statutory business trust, Union National Capital Trust I (“UNCT I”), a Delaware statutory business trust, Union National Capital Trust II (“UNCT II”), a Delaware statutory business trust, MFBC Statutory Trust I, a Delaware statutory trust, and Universal Preferred Trust, a Delaware statutory trust (the “Trusts”). The Trusts exist solely to issue preferred securities to third parties for cash, issue common securities to the Company in exchange for capitalization of the Trusts, invest the proceeds from the sale of trust securities in an equivalent amount of debentures of the Company, and engage in other activities that are incidental to those previously listed. 108 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The Trusts have invested the proceeds of the offerings in junior subordinated deferrable interest debentures issued by the Company. The structure of these debentures mirrors the structure of the trust-preferred securities. These subordinated debentures are the sole assets of the Trusts. As the shareholders of the trust preferred securities are the primary beneficiaries of the Trusts, the Trusts are not consolidated in our financial statements. The following table sets forth a summary of the cumulative trust preferred securities and the junior subordinated debt held by the Trust as of December 31, 2023 and 2022. Maturity date Interest rate Capital debt securities December 31, 2023 2022 Northwest Bancorp Capital Trust III December 30, 2035 3-month SOFR plus 1.38 % $ 50,000 51,547 51,547 Northwest Bancorp Statutory Trust IV December 15, 2035 3-month SOFR plus 1.38 % 50,000 51,547 51,547 LNB Trust II June 15, 2037 3-month SOFR plus 1.48 % 7,875 8,119 8,119 Union National Capital Trust I (1) January 23, 2034 3-month SOFR plus 2.85 % 8,000 7,999 7,975 Union National Capital Trust II (1) November 23, 2034 3-month SOFR plus 2.00 % 3,000 2,796 2,768 MFBC Statutory Trust I (1) September 15, 2035 3-month SOFR plus 1.70 % 5,000 3,788 3,684 Universal Preferred Trust (1) October 7, 2035 3-month SOFR plus 1.69 % 5,000 3,778 3,674 $ 128,875 129,574 129,314 (1) Net of discounts due to the fair value adjustment made at the time of acquisition . Cash distributions on the trust securities are made on a quarterly basis to the extent interest on the debentures is received by the Trusts. We have the right to defer payment of interest on the subordinated debentures at any time, or from time-to-time, for periods not exceeding five years . If interest payments on the subordinated debentures are deferred, the distributions on the trust securities also are deferred. To date there have been no interest deferrals. Interest on the subordinated debentures and distributions on the trust securities is cumulative. Our obligation constitutes a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the trust under the preferred securities. For the years ended December 31, 2023, December 31, 2022, and December 31, 2021, total interest expense paid on the trust preferred securities was $ 9.4 million, $ 4.7 million, and $ 2.5 million respectively. The Trusts must redeem the preferred securities when the debentures are paid at maturity or upon an earlier redemption of the debentures to the extent the debentures are redeemed. All or part of the debentures may be redeemed at any time. Also, the debentures may be redeemed at any time if existing laws or regulations, or the interpretation or application of these laws or regulations, change causing: • the interest on the debentures to no longer be deductible by the Company for federal income tax purposes; • the trust to become subject to federal income tax or to certain other taxes or governmental charges; • the trust to register as an investment company; or • the preferred securities do not qualify as Tier I capital. We may, at any time, dissolve any of the Trusts and distribute the debentures to the trust security holders, subject to receipt of any required regulatory approvals. 109 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (12) Income Taxes Total income tax was allocated for the years ended December 31, 2023, 2022 and 2021 as follows: Years ended December 31, 2023 2022 2021 Income tax expense $ 40,121 40,026 46,801 Shareholders’ equity for unrealized gain/(loss) on securities available-for-sale 3,429 ( 45,321 ) ( 10,425 ) Shareholders’ equity for pension adjustment 3,354 6,980 9,659 Shareholders’ equity for swap fair value adjustment ( 110 ) — — Unallocated income tax $ 46,794 1,685 46,035 Income tax expense applicable to income before taxes consists of: Years ended December 31, 2023 2022 2021 Current tax provision/(benefit): Federal $ 36,599 36,235 24,554 State 8,442 9,295 9,933 Total current tax provision/(benefit) 45,041 45,530 34,487 Deferred tax provision/(benefit): Federal ( 5,267 ) ( 5,325 ) 10,752 State 347 ( 179 ) 1,562 Total deferred tax provision/(benefit) ( 4,920 ) ( 5,504 ) 12,314 Total income tax expense $ 40,121 40,026 46,801 A reconciliation of the expected federal statutory income tax rate to the effective rate, expressed as a percentage of pretax income for the years ended December 31, 2023, 2022 and 2021, is as follows: Years ended December 31, 2023 2022 2021 Expected tax rate 21.0 % 21.0 % 21.0 % Tax-exempt interest income ( 1.2 ) % ( 1.1 ) % ( 0.9 ) % State income tax, net of federal benefit 4.0 % 4.0 % 4.5 % Bank-owned life insurance ( 1.0 ) % ( 0.9 ) % ( 0.6 ) % Stock-based compensation — % 0.1 % ( 0.1 ) % Dividends on stock plans ( 0.4 ) % ( 0.5 ) % ( 0.4 ) % Low income housing and historic tax credits — % ( 0.2 ) % ( 0.2 ) % Other 0.5 % 0.6 % — % Effective tax rate 22.9 % 23.0 % 23.3 % 110 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below: December 31, 2023 2022 Deferred tax assets: Deferred compensation expense $ 5,001 4,804 Bad debts 28,483 27,105 Other reserves 4,511 3,554 Accrued post-retirement benefit cost 477 502 Stock benefit plans 1,134 652 Pension and post-retirement benefits — 2,767 Unrealized loss on the fair value of securities available-for-sale 45,985 49,414 Deferred income 35 95 Lease liability 14,593 13,101 Purchase accounting 698 696 Net operating loss 1,058 1,592 Other 2,431 1,877 Total deferred tax assets 104,406 106,159 Deferred tax liabilities: Pension expense 6,543 6,231 Intangible assets 18,041 17,400 Mortgage servicing rights 242 1,768 Fixed assets 5,567 6,518 Net deferred loan costs 2,412 3,055 Right of use asset 13,917 12,463 Pension and post-retirement benefits 587 — Interest rate derivatives 134 123 Other 2,388 2,369 Total deferred tax liabilities 49,831 49,927 Net deferred tax asset $ 54,575 56,232 We have $ 1.5 million of federal net operating loss carryovers subject to the annual limitation under Internal Revenue Code Section 382 at December 31, 2023. The carryovers begin to expire in 2031 and are expected to be fully realized. We have $ 25.9 million of Indiana net operating loss carryovers subject to annual limitation as Indiana conforms to the Internal Revenue Code Section 382 at December 31, 2023. The carryovers begin to expire in 2025. Due to limitation, we do not currently expect to realize $ 7.6 million of the Indiana net operating loss carryover. This is netted against the net operating loss deferred tax asset in the preceding table. We recorded a valuation allowance against state deferred tax assets of a Northwest subsidiary since the subsidiary is not expected to utilize its deferred tax assets in the foreseeable future. This valuation allowance is netted against other deferred tax assets in the preceding table. Other than stated above, we have determined that no valuation allowance is necessary for the deferred tax assets because it is more likely than not that these assets will be realized through future reversals of existing temporary differences and through future taxable income. We will continue to review the criteria related to the recognition of deferred tax assets on a regular basis. We utilize a comprehensive approach to recognize, measure, present and disclose in our financial statements uncertain tax positions that the company has taken or expects to take on a tax return. We recognize interest accrued and penalties (if any) related to unrecognized tax benefits in income tax expense. The accrual for interest and penalties was not material for all years presented. 111 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table presents changes in unrecognized tax benefits at December 31, 2023, 2022 and 2021: Year ended December 31, 2023 2022 2021 Unrecognized tax benefits: Balance, beginning of year $ 473 241 331 Increases related to prior year tax positions 623 252 37 Decreases related to prior year tax positions ( 74 ) ( 28 ) ( 173 ) Increases related to current year tax positions 58 8 46 Balance, end of year $ 1,080 473 241 It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes. We do not expect any significant changes in unrecognized tax benefits during the next twelve months. We are subject to routine audits of our tax returns by the Internal Revenue Service as well as all states in which we conduct business. We are subject to audit by the Internal Revenue Service for the tax periods ended after December 31, 2019 and generally subject to audit by any state in which we conduct business for the tax periods ended after December 31, 2019. (13) Shareholders’ Equity Retained earnings are partially restricted in connection with regulations related to the insurance of deposit accounts, which requires Northwest to maintain certain statutory reserves. Northwest may not pay dividends on or repurchase any of its common stock if the effect thereof would reduce retained earnings below the level of adequate capitalization as defined by federal and state regulators. In tax years prior to fiscal 1997, Northwest was permitted, under the Internal Revenue Code (“IRC”), to deduct an annual addition to a reserve for bad debts in determining taxable income, subject to certain limitations. Bad debt deductions for income tax purposes are included in taxable income of later years only if the bad debt reserve is used subsequently for purposes other than to absorb bad debt losses. Because Northwest does not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes have been provided prior to fiscal 1987. Retained earnings at December 31, 2023 and 2022 include approximately $ 39.1 million representing such bad debt deductions for which no deferred income taxes have been provided. (14) Earnings Per Share Basic earnings per common share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period, without considering any dilutive items. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. During the year ended December 31, 2023, 2,814,207 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 $ 11.75 . During the year ended December 31, 2022, 1,950,847 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 $ 13.79 . 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 . 112 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021. Years ended December 31, 2023 2022 2021 Net income $ 134,957 133,666 154,323 Less: Dividends and undistributed earnings allocated to participating securities 339 585 1,010 Net income available to common shareholders $ 134,618 133,081 153,313 Weighted average common shares outstanding (1) 126,668,671 126,167,892 126,181,586 Add: Participating shares outstanding (1) 319,501 556,201 828,251 Total weighted average common shares and dilutive potential shares (1) 126,988,172 126,724,093 127,009,837 Basic earnings per share (1) $ 1.06 1.05 1.22 Diluted earnings per share (1) $ 1.06 1.05 1.21 (1) Not in thousands. (15) Employee Benefit Plans (a) Pension Plans We maintain noncontributory defined benefit pension plans covering substantially all employees and members of our board of directors. Retirement benefits are based on certain compensation levels, age, and length of service. Contributions are based on an actuarially determined amount to fund not only benefits attributed to service to date but also for those expected to be earned in the future. In addition, we have an unfunded Supplemental Executive Retirement Plan (“SERP”) to compensate those executive participants eligible for the defined benefit pension plan whose benefits are limited by Section 415 of the IRC. We also sponsor a retirement savings plan in which substantially all employees participate. We provide a matching contribution of 100 % of each employee’s contribution to a maximum of 4 % of the employee’s compensation. Effective August 1, 2020, the Pension Plan was amended to include a soft freeze. The soft freeze will allow those employees in an eligible position that were hired, rehired, or acquired on or before July 31, 2020, to continue to vest and accrue additional benefits for each year they are credited with 1,000 hours or more. Employees that are hired, rehired, acquired, or transfer to an eligible job classification on or after August 1, 2020 are not eligible to participate in the Pension Plan. Total expense for the defined contribution retirement savings plan was $ 4.4 million, $ 3.6 million, and $ 4.6 million for the years ended December 31, 2023, 2022 and 2021, and net periodic pension expense for the defined benefit pension plan was a benefit of $ 1.1 million for the year ended December 31, 2023 and a total cost of $ 893,000 and $ 5.5 million for the years ended 2022 and 2021, respectively. 113 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Components of net periodic pension cost and other amounts recognized in other comprehensive income: The following table sets forth components of net periodic pension cost and other amounts recognized in other comprehensive income for the years ended December 31, 2023, 2022 and 2021. Years ended December 31, 2023 2022 2021 Defined benefit pension plan: Service cost $ 6,241 10,396 11,440 Interest cost 9,009 6,683 6,070 Expected return on plan assets ( 13,915 ) ( 15,454 ) ( 13,859 ) Amortization of prior service cost ( 2,254 ) ( 2,257 ) ( 2,322 ) Amortization of the net loss ( 219 ) 1,525 4,156 Net periodic pension cost, defined benefit pension plans ( 1,138 ) 893 5,485 Other changes in defined benefit pension plan recognized in other comprehensive income: Net gain ( 14,066 ) ( 28,222 ) ( 36,552 ) Amortization of prior service cost 2,254 2,257 2,322 Total recognized in other comprehensive income ( 11,812 ) ( 25,965 ) ( 34,230 ) Total recognized in net periodic pension cost and other comprehensive income $ ( 12,950 ) ( 25,072 ) ( 28,745 ) 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, 2024 is $ 71,000 and $ 2.3 million, respectively. The following table sets forth information for the defined benefit pension plans’ funded status at December 31, 2023 and 2022: December 31, 2023 2022 Change in benefit obligation: Benefit obligation at beginning of year $ 184,759 246,934 Service cost 6,241 10,396 Interest cost 9,009 6,683 Actuarial gain 935 ( 70,121 ) Benefits paid ( 15,748 ) ( 9,133 ) Benefit obligation at end of year 185,196 184,759 Change in plan assets: Fair value of plan assets at beginning of year 202,791 239,438 Actual return on plan assets 29,135 ( 27,970 ) Employer contributions 418 456 Benefits paid ( 15,748 ) ( 9,133 ) Fair value of plan assets at end of period 216,596 202,791 Funded status at end of year $ 31,400 18,032 The following table sets forth the assumptions used to develop the net periodic pension cost: Years ended December 31, 2023 2022 2021 Discount rate 4.99 % 2.75 % 2.39 % Expected long-term rate of return on assets 7.00 % 6.50 % 6.50 % Rate of increase in compensation levels 3.00 % 3.00 % 3.00 % 114 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table sets forth the assumptions used to determine benefit obligations at the end of each period: Years ended December 31, 2023 2022 2021 Discount rate 4.79 % 4.99 % 2.75 % Expected long-term rate of return on assets 7.00 % 6.50 % 6.50 % Rate of increase in compensation levels 3.00 % 3.00 % 3.00 % The expected long-term rate of return on assets is based on the expected return of each of the asset categories, weighted based on the median of the target allocation for each category. We use the FTSE (previously Citigroup) Pension Liability Index rates matching the duration of our benefit payments as of the measurement date to determine the discount rate. The accumulated benefit obligation for the funded defined benefit pension plan was $ 183.1 million, $ 182.3 million, and $ 243.6 million at December 31, 2023, 2022 and 2021, respectively. The accumulated benefit obligation for all unfunded defined benefit plans was $ 2.1 million, $ 2.5 million, and $ 3.3 million at December 31, 2023, 2022 and 2021, respectively. The following table sets forth certain information related to our pension plans: December 31, 2023 2022 Projected benefit obligation $ 185,196 184,759 Accumulated benefit obligation 185,196 184,759 Fair value of plan assets 216,596 202,791 Because of the current funding status, we do not anticipate a funding requirement during the year ending December 31, 2024. 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. To meet target allocation ranges set forth by the Plan Administrative Committee, periodically, the assets are reallocated by the Trustee. The investment policy is reviewed periodically to determine if the policy should be changed. Pension assets are conservatively invested with the goal of providing market or better returns with below market risks. Assets are invested in a balanced portfolio composed primarily of equities, fixed income, and cash or cash equivalent investments. The Trustee tries to maintain an approximate asset mix position of 20 % to 50 % bonds and 30 % to 60 % equities. A maximum of 10 % may be invested in any one stock, including the stock of Northwest Bancshares, Inc. The objective of holding equity securities is to provide capital appreciation consistent with the ownership of the common stocks of medium to large companies. Acceptable bond investments are direct or agency obligations of the U.S. Government or investment grade corporate bonds. The average maturity of the bond portfolio shall not exceed ten years . The following table sets forth the weighted average asset allocation of defined benefit plans: December 31, Target allocation 2023 2022 Debt securities 20 – 50 % 25 % 26 % Equity securities 30 – 60 % 69 % 65 % Other 5 – 50 % 6 % 9 % Total 100 % 100 % 115 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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 16. The following table sets forth the pension plan assets as of December 31, 2023 and 2022. December 31, 2023 2022 Defined benefit pension assets: Common stock $ 71,192 61,552 Mutual funds 131,921 121,826 Money market funds 2,150 9,208 Other 11,333 10,205 Total defined benefit pension plan assets (1) $ 216,596 202,791 (1) The defined benefit pension plan statement of net assets also includes accrued interest and dividends resulting in net assets available for benefits of $ 217.0 million and $ 203.0 million, respectfully. The benefits expected to be paid in each year from 2024 to 2028 are $ 9.0 million, $ 9.5 million, $ 9.7 million, $ 10.1 million and $ 10.5 million, respectively. The aggregate benefits expected to be paid in the five years from 2029 to 2033 are $ 60.4 million. The expected benefits to be paid are based on the same assumptions used to measure our benefit obligations at December 31, 2023 and include estimated future employee service. (b) Post-retirement Healthcare Plan In addition to pension benefits, we provide post-retirement healthcare benefits for certain employees who were employed as of October 1, 1993 and were at least 55 years of age on that date. We use the accrual method of accounting for post-retirement benefits other than pensions. Components of net periodic benefit cost and other amounts recognized in other comprehensive income: The following table sets forth the net periodic benefit cost for the post-retirement healthcare benefits plan for the years ended December 31, 2023, 2022 and 2021: Years ended December 31, 2023 2022 2021 Interest cost $ 71 40 42 Amortization of net loss 39 6 14 Net period benefit cost $ 110 46 56 The following table sets forth other changes in the post-retirement healthcare plan’s plan assets and benefit obligations recognized in other comprehensive income: Years ended December 31, 2023 2022 2021 Net (gain)/loss $ ( 35 ) 183 ( 66 ) Total recognized in other comprehensive income $ ( 35 ) 183 ( 66 ) Total recognized in net periodic benefit cost and other comprehensive income $ 74 229 ( 10 ) 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, 2024 is $ 38,000 . 116 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table sets forth the funded status of the post-retirement healthcare benefit plan at December 31, 2023 and 2022: December 31, 2023 2022 Change in benefit obligation: Benefit obligation at beginning of year $ 1,521 1,560 Interest cost 71 40 Actuarial loss 3 189 Benefits paid ( 209 ) ( 268 ) Benefit obligation at end of year $ 1,386 1,521 Change in plan assets: Employer contributions $ 209 268 Benefits paid ( 209 ) ( 268 ) Funded status at year end $ ( 1,386 ) ( 1,521 ) The assumptions used to develop the preceding information for post-retirement healthcare benefits are as follows: Years ended December 31, 2023 2022 2021 Discount rate 4.99 % 2.75 % 2.39 % Monthly cost of healthcare insurance per beneficiary (1) $ 916 415 343 Annual rate of increase in healthcare costs 5.00 % 5.00 % 5.00 % (1) Not in thousands. If the assumed rate of increase in healthcare costs was increased by one percentage point to 6 % from the level presented above, the interest cost component of net periodic post-retirement healthcare benefit cost would increase by $ 3,300 and the accumulated post-retirement benefit obligation for healthcare benefits would increase by $ 66,200 . The following table sets forth information for plans with an accumulated benefit obligation in excess of plan assets: December 31, 2023 2022 Projected benefit obligation $ 1,386 1,521 Accumulated benefit obligation 1,386 1,521 (c) Common Stock Awards On April 18, 2018, shareholders approved the Northwest Bancshares, Inc. 2018 Equity Incentive Plan with 1,500,000 common shares authorized for award. From this plan, we 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. 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 years 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 265,176 , of which 40,362 shares were forfeited during the year ended December 31, 2023. Forfeited shares may be awarded to other eligible recipients in future grants until the plan termination date in 2028. At December 31, 2023, there was compensation expense of $ 2.1 million to be recognized for unvested restricted common shares, with an expense recognition period remaining of three years . 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 can awarded employees or directors restricted stock units (“RSUs”). The RSUs vest over a specified time period with the first vesting occurring one year from the grant date. We also award restricted stock awards (“RSAs”) which fully vest one-year from the grant date. We also award performance share units (“PSUs”). 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. 117 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 During the years ended December 31, 2022 and 2023, we granted the following awards (amounts in this table are not in thousands) : Year-ended Grant date Award to Shares Grant type Weighted average grant date fair value Total market value Vesting period December 31, 2022 5/18/2022 Employees 150,027 RSU $ 11.00 $ 1.7 million 3 years 5/18/2022 Employees 150,027 PSU 10.26 $ 1.5 million 3 years 5/18/2022 Directors 41,206 RSA 12.55 $ 517,000 1 year Various Employees 13,115 RSU 12.69 $ 166,000 3 years December 31, 2023 3/15/2023 Employees 176,623 RSU 11.28 $ 2.0 million 3 years 3/15/2023 Employees 176,623 PSU 10.54 $ 1.9 million 3 years 3/15/2023 Directors 33,048 RSA 12.80 $ 423,000 1 year 3/27/2023 Employees 80,980 RSU 11.20 $ 907,000 2 years Various Employees 128148 RSU 10.30 $ 1.3 million 3 years Total shares forfeited from the 2022 plan were 71,073 of which 44,791 shares were forfeited during the year ended December 31, 2023. At December 31, 2023, there was compensation expense of $ 4.0 million to be recognized for awarded but unvested RSUs and $ 1.8 million to be recognized for awarded but unvested PSUs, with an expense recognition period remaining of 2.5 years. At December 31, 2023, there was compensation expense of $ 88,000 to be recognized for awarded but unvested RSAs, with an expense recognition period remaining of one year . (d) Stock Option Plans The Northwest Bancshares, Inc. 2018 Equity Incentive Plan also authorized the granting of 3,500,000 stock options authorized for award. 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. There were no stock options granted during the years-ended December 31, 2022 and December 31, 2023. 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. The following table summarizes the activity in our option plans during the years ended December 31, 2023, 2022 and 2021 (amounts in this table are not in thousands): Years ended December 31, 2023 2022 2021 Number Weighted average exercise price Number Weighted average exercise price Number Weighted average exercise price Balance at beginning of year 3,657,580 $ 14.25 4,380,310 $ 14.05 5,243,172 $ 13.72 Granted (1) — — — — 693,972 13.68 Exercised (2) ( 63,315 ) 11.46 ( 465,920 ) 12.14 ( 1,219,581 ) 12.28 Forfeited/expired ( 385,260 ) 13.80 ( 256,810 ) 14.64 ( 337,253 ) 14.59 Balance at end of year 3,209,005 14.36 3,657,580 14.25 4,380,310 14.05 Exercisable at end of year 2,601,367 14.52 2,556,235 14.43 2,618,733 14.15 (1) Weighted average fair value of options at grant date: N/A, N/A and $ 0.64 , respectively. (2) The total intrinsic value of options exercised was $ 115,000 , $ 839,000 and $ 2.3 million, respectively. 118 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The aggregate intrinsic value of all options expected to vest and fully vested options at December 31, 2023 is ($ 748,000 ) and ($ 5.3 ) 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, 2023 (amounts in this table are not in thousands): Exercise price $ 9.71 Exercise price $ 12.37 Exercise price $ 13.15 Exercise price $ 13.68 Options outstanding: Number of options 394,798 249,306 217,863 542,124 Weighted average remaining contract life (years) 6.5 1.5 0.5 7.5 Options exercisable: Number of options 249,193 233,622 217,863 354,612 Weighted average remaining term - vested (years) 6.5 1.5 0.5 7.5 Exercise price $ 14.15 Exercise price $ 15.57 Exercise price $ 16.59 Exercise price $ 17.27 Total average $ 14.36 Options outstanding: Number of options 359,473 449,417 578,361 417,663 3,209,005 Weighted average remaining contract life (years) 2.5 3.5 4.5 5.5 4.4 Options exercisable: Number of options 315,615 366,920 527,197 336,345 2,601,367 Weighted average remaining term - vested (years) 2.5 3.5 4.5 5.5 3.1 (16) Disclosures About Fair Value of Financial Instruments We are required to disclose fair value information about financial instruments whether or not recognized in the Consolidated Statement of Financial Condition. Fair value information of certain financial instruments and all nonfinancial instruments is not required to be disclosed. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. Financial assets and liabilities recognized or disclosed at fair value on a recurring basis and certain financial assets and liabilities on a non-recurring basis are accounted for using a three-level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. This hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used. Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques: • Level 1 - Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities. • Level 2 - Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, for example, matrix pricing. • Level 3 - Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following: • Quotes from brokers or other external sources that are not considered binding; • Quotes from brokers or other external sources where it cannot be determined that market participants would in fact transact for the asset or liability at the quoted price; and • Quotes and other information from brokers or other external sources where the inputs are not deemed observable. 119 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 We are responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. We perform due diligence to understand the inputs used or how the data was calculated or derived. We also corroborate the reasonableness of external inputs in the valuation process. The carrying amounts reported in the Consolidated Statement of Financial Condition approximate fair value for the following financial instruments: cash and cash equivalents, marketable securities available-for-sale, residential mortgage loans held-for-sale, accrued interest receivable, interest rate lock commitments, forward commitments, interest rate swaps, savings and checking deposits, foreign exchange swaps, risk participation agreements, and accrued interest payable. Marketable Securities Where available, market values are based on quoted market prices, dealer quotes, and prices obtained from independent pricing services. Debt securities — available-for-sale - Generally, debt securities are valued using pricing for similar securities, recently executed transactions and other pricing models utilizing observable inputs. The valuation for most debt securities is classified as Level 2. Securities within Level 2 include corporate bonds, municipal bonds, mortgage-backed securities and U.S. government obligations. Certain debt securities which were AAA rated at purchase do not have an active market, and as such we have used an alternative method to determine the fair value of these securities. The fair value has been determined using a discounted cash flow model using market assumptions, which generally include cash flow, collateral and other market assumptions. As such, securities which otherwise would have been classified as Level 2 securities if an active market for those assets or similar assets existed are included herein as Level 3 assets. Debt securities — held-to-maturity - The fair value of debt securities held-to-maturity is determined in the same manner as debt securities available-for-sale. Loans Receivable Loans with comparable characteristics including collateral and re-pricing structures are segregated for valuation purposes. Each loan pool is separately valued utilizing a discounted cash flow analysis. Projected monthly cash flows are discounted to present value using a market rate for comparable loans, which is not considered an exit price. Characteristics of comparable loans include remaining term, coupon interest, and estimated prepayment speeds. Delinquent loans are separately evaluated given the impact delinquency has on the projected future cash flow of the loan including the approximate discount or market rate, which is not considered an exit price. Loans Held-for-Sale The estimated fair value of loans held-for-sale is based on market bids obtained from potential buyers. FHLB Stock Due to the restrictions placed on the transferability of FHLB stock, it is not practical to determine the fair value. FHLB stock is recorded at cost. Deposit Liabilities The estimated fair value of deposits with no stated maturity, which includes demand deposits, money market, and other savings accounts, is the amount payable on demand. Although market premiums paid for depository institutions reflect an additional value for these low-cost deposits, adjusting fair value for any value expected to be derived from retaining those deposits for a future period of time or from the benefit that results from the ability to fund interest-earning assets with these deposit liabilities is prohibited. The fair value estimates of deposit liabilities do not include the benefit that results from the low-cost funding provided by these deposits compared to the cost of borrowing funds in the market. Fair values for time deposits are estimated using a discounted cash flow calculation that applies contractual cost currently being offered in the existing portfolio to current market rates being offered locally for deposits of similar remaining maturities. The valuation adjustment for the portfolio consists of the present value of the difference of these two cash flows, discounted at the assumed market rate of the corresponding maturity. 120 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Borrowed Funds Fixed rate advances are valued by comparing their contractual cost to the prevailing market cost. The carrying amount of repurchase agreements approximates their fair value. Subordinated Debentures The fair value of our subordinated debentures is calculated using the discounted cash flows at rates observable for other similarly traded liabilities. Junior Subordinated Debentures The fair value of junior subordinated debentures is calculated using the discounted cash flows at the prevailing rate of interest. Interest Rate Lock Commitments and Forward Commitments The fair value of interest rate lock commitments is based on the value of underlying loans held-for-sale which is based on quoted prices for similar loans in the secondary market. This value is then adjusted based on the probability of the loan closing (i.e., the “pull-through” amount, a significant unobservable input). The fair value of forward sale commitments is based on quoted prices from the secondary market based on the settlement date of the contracts. Cash Flow Hedges, 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 SOFR discount curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable. The fair value of the foreign exchange swap is derived from proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions we believe to be reasonable. Risk participation agreements are entered into when Northwest purchases a portion of a commercial loan that has an interest rate swap. Northwest assumes credit risk on its portion of the interest rate swap should the borrower fail to pay as agreed. The value of risk participation agreements is determined based on the value of the swap after considering the credit quality, probability of default, and loss given default of the borrower. Off-Balance Sheet Financial Instruments These financial instruments generally are not sold or traded, and estimated fair values are not readily available. However, the fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. Commitments to extend credit are generally short-term in nature and, if drawn upon, are issued under current market terms. At December 31, 2023 and 2022, there was no significant unrealized appreciation or depreciation on these financial instruments. 121 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table sets forth the carrying amount and estimated fair value of our financial instruments included in the Consolidated Statement of Financial Condition at December 31, 2023 and 2022: December 31, 2023 Carrying amount Estimated fair value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 122,260 122,260 122,260 — — Securities available-for-sale 1,043,359 1,043,359 — 1,043,359 — Securities held-to-maturity 814,839 699,506 — 699,506 — Loans receivable, net 11,280,798 10,274,593 — — 10,274,593 Residential mortgage loans held-for-sale 8,768 8,768 — — 8,768 Accrued interest receivable 47,353 47,353 47,353 — — Interest rate lock commitments 641 641 — — 641 Forward commitments 12 12 — 12 — Interest rate swaps designated as hedging instruments 713 713 — 713 — Interest rate swaps not designated as hedging instruments 41,406 41,406 — 41,406 — FHLB stock 30,146 30,146 — — — Total financial assets $ 13,390,295 12,268,757 169,613 1,784,996 10,284,002 Financial liabilities: Savings and checking deposits $ 9,377,021 9,377,021 9,377,021 — — Time deposits 2,602,881 2,113,177 — — 2,113,177 Borrowed funds 398,895 386,446 386,446 — — Subordinated debt 114,189 109,471 — 109,471 — Junior subordinated debentures 129,574 112,159 — — 112,159 Foreign exchange swaps 291 291 — 291 — Interest rate swaps designated as hedging instruments 1,198 1,198 — 1,198 — Interest rate swaps not designated as hedging instruments 41,437 41,437 — 41,437 — Risk participation agreements 14 14 — 14 — Accrued interest payable 13,669 13,669 13,669 — — Total financial liabilities $ 12,679,169 12,154,883 9,777,136 152,411 2,225,336 122 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 December 31, 2022 Carrying amount Estimated fair value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 139,365 139,365 139,365 — — Securities available-for-sale 1,218,108 1,218,108 — 1,218,108 — Securities held-to-maturity 881,249 751,384 — 751,384 — Loans receivable, net 10,792,503 9,910,852 — — 9,910,852 Residential mortgage loans held-for-sale 9,913 9,913 — — 9,913 Accrued interest receivable 35,528 35,528 35,528 — — Interest rate lock commitments 559 559 — — 559 Forward commitments 128 128 — 128 — Interest rate swaps not designated as hedging instruments 26,642 26,642 — 26,642 — FHLB stock 40,143 40,143 — — — Total financial assets $ 13,144,138 12,132,622 174,893 1,996,262 9,921,324 Financial liabilities: Savings and checking accounts $ 10,412,263 10,412,263 10,412,263 — — Time deposits 1,052,285 1,059,790 — — 1,059,790 Borrowed funds 681,166 680,996 680,996 — — Subordinated debt 113,840 102,554 — 102,554 — Junior subordinated debentures 129,314 133,546 — — 133,546 Foreign exchange swaps 23 23 — 23 — Interest rate swaps not designated as hedging instruments 45,464 45,464 — 45,464 — Risk participation agreements 18 18 — 18 — Accrued interest payable 3,231 3,231 3,231 — — Total financial liabilities $ 12,437,604 12,437,885 11,096,490 148,059 1,193,336 Fair value estimates are made at a point-in-time, based on relevant market data and information about the instrument. The preceding methods and assumptions were used in estimating the fair value of financial instruments at December 31, 2023 and 2022. 123 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table represents assets and liabilities measured at fair value on a recurring basis as of December 31, 2023: Level 1 Level 2 Level 3 Total at fair value Debt securities: U.S. government and agencies $ — 58,314 — 58,314 Government sponsored enterprises — 40,597 — 40,597 States and political subdivisions — 75,469 — 75,469 Corporate — 7,688 — 7,688 Total debt securities — 182,068 — 182,068 Residential mortgage-backed securities: GNMA — 17,441 — 17,441 FNMA — 102,678 — 102,678 FHLMC — 70,830 — 70,830 Non-agency — 5 — 5 Collateralized mortgage obligations: GNMA — 331,784 — 331,784 FNMA — 148,892 — 148,892 FHLMC — 189,661 — 189,661 Total mortgage-backed securities — 861,291 — 861,291 Interest rate lock commitments — — 641 641 Forward commitments — 12 — 12 Interest rate swaps designated as hedging instruments — 713 — 713 Interest rate swaps not designated as hedging instruments — 41,406 — 41,406 Total assets $ — 1,085,490 641 1,086,131 Foreign exchange swaps $ — 291 — 291 Interest rate swaps designated as hedging instruments — 1,198 — 1,198 Interest rate swaps not designated as hedging instruments — 41,437 — 41,437 Risk participation agreements — 14 — 14 Total liabilities $ — 42,940 — 42,940 124 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table represents assets and liabilities measured at fair value on a recurring basis as of December 31, 2022: Level 1 Level 2 Level 3 Total at fair value Debt securities: U.S. government and agencies $ — 60,592 — 60,592 Government sponsored enterprises — 39,201 — 39,201 States and political subdivisions — 111,766 — 111,766 Corporate — 12,978 — 12,978 Total debt securities — 224,537 — 224,537 Residential mortgage-backed securities: GNMA — 12,434 — 12,434 FNMA — 117,218 — 117,218 FHLMC — 74,991 — 74,991 Non-agency — 6 — 6 Collateralized mortgage obligations: GNMA — 364,553 — 364,553 FNMA — 185,588 — 185,588 FHLMC — 238,781 — 238,781 Total mortgage-backed securities — 993,571 — 993,571 Interest rate lock commitments — — 559 559 Forward commitments — 128 — 128 Interest rate swaps not designated as hedging instruments — 26,642 — 26,642 Total assets $ — 1,244,878 559 1,245,437 Foreign exchange swaps $ — 23 — 23 Interest rate swaps not designated as hedging instruments — 45,464 — 45,464 Risk participation agreements — 18 — 18 Total liabilities $ — 45,505 — 45,505 The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the year ended December 31, 2023 and 2022: Years ended December 31, 2023 2022 Beginning balance January 1, $ 559 1,684 Net activity 82 ( 1,125 ) Ending balance December 31, $ 641 559 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, 2023: Level 1 Level 2 Level 3 Total assets at fair value Loans individually assessed $ — — 36,747 36,747 Mortgage servicing rights — — 133 133 Real estate owned, net — — 104 104 Total assets $ — — 36,984 36,984 125 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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: Level 1 Level 2 Level 3 Total assets at fair value Loans individually assessed $ — — 15,416 15,416 Mortgage servicing rights — — 95 95 Real estate owned, net — — 413 413 Total assets $ — — 15,924 15,924 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. Mortgage servicing rights - Mortgage servicing rights represent the value of servicing residential mortgage loans, when the mortgage loans have been sold into the secondary market and the associated servicing has been retained. The value is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management judgment. Servicing rights and the related mortgage loans are segregated into categories or homogeneous pools based upon common characteristics. Adjustments are only made when the estimated discounted future cash flows are less than the carrying value, as determined by individual pool. As such, mortgage servicing rights are classified as nonrecurring Level 3. Real Estate Owned - Real estate owned is comprised of property acquired through foreclosure or voluntarily conveyed by borrowers. These assets are recorded on the date acquired at the lower of the related loan balance or fair value, less estimated disposition costs, with the fair value being determined by appraisal. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or fair value, less estimated disposition costs. We classify real estate owned as nonrecurring Level 3. The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at December 31, 2023: Fair value ($) Valuation techniques Significant unobservable inputs Range (weighted average) Loans individually assessed 36,747 Appraisal value (1) Estimated cost to sell 10 % Mortgage servicing rights 133 Discounted cash flow Annual service cost $ 91 Prepayment rate 6.6 % to 16.9 % ( 10.0 %) Expected life (months) 52.7 to 103.7 ( 74.8 ) Option adjusted spread 731 basis points Forward yield curve 5.46 % to 5.38 % Real estate owned, net 104 Appraisal value (1) Estimated cost to sell 15 % Loans held for sale 8,768 Quoted prices for similar loans in active markets adjusted by an expected pull-through rate Estimated pull-through rate 100 % (1) Fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable. (17) Regulatory Capital Requirements We and our banking subsidiary are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices must be met. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. 126 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 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. Quantitative measures established by regulation to ensure capital adequacy require us and our banking subsidiary to maintain minimum amounts and ratios (set forth in the table below) of Total, Tier 1, and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). As of December 31, 2023 and 2022, we and our banking subsidiary exceeded all capital adequacy requirements to which we were subject. We have elected to phase the estimated impact of CECL into regulatory capital in accordance with the interim final rule of the Board of Governors of the Federal Reserve System (FRB) and other U.S. banking agencies that became effective on March 31, 2020. 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. As of December 15, 2023, the most recent assessment from FDIC, Northwest Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels required to be considered “well-capitalized” for regulatory purposes . To be considered as “well capitalized,” Northwest Bank must maintain total risk-based, Tier 1 risk-based, CET 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the bank’s categories. The actual, required, and well capitalized levels as of December 31, 2023 and 2022 were as follows: At December 31, 2023 Actual Minimum capital requirements (1) Well capitalized requirements Amount Ratio Amount Ratio Amount Ratio Total capital (to risk weighted assets) Northwest Bancshares, Inc. $ 1,799,883 16.040 % $ 1,178,234 10.500 % $ 1,122,128 10.000 % Northwest Bank 1,520,736 13.564 % 1,177,257 10.500 % 1,121,197 10.000 % Tier 1 capital (to risk weighted assets) Northwest Bancshares, Inc. 1,553,766 13.847 % 953,809 8.500 % 897,702 8.000 % Northwest Bank 1,388,808 12.387 % 953,018 8.500 % 896,958 8.000 % CET 1 capital (to risk weighted assets) Northwest Bancshares, Inc. 1,428,181 12.727 % 785,489 7.000 % 729,383 6.500 % Northwest Bank 1,388,808 12.387 % 784,838 7.000 % 728,778 6.500 % Tier 1 capital (leverage to average assets) Northwest Bancshares, Inc. 1,553,766 10.841 % 573,290 4.000 % 716,612 5.000 % Northwest Bank 1,388,808 9.697 % 572,903 4.000 % 716,128 5.000 % (1) Amounts and ratios include the 2023 capital conservation buffer of 2.5 % with the exception of Tier 1 capital to average assets. For further information related to the capital conservation buffer, see “ Item 1. Business - Supervision and Regulation ” . 127 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 At December 31, 2022 Actual Minimum capital requirements (1) Well capitalized requirements Amount Ratio Amount Ratio Amount Ratio Total capital (to risk weighted assets) Northwest Bancshares, Inc. $ 1,745,701 16.363 % $ 1,120,216 10.500 % $ 1,066,872 10.000 % Northwest Bank 1,568,202 14.712 % 1,119,214 10.500 % 1,065,918 10.000 % Tier 1 capital (to risk weighted assets) Northwest Bancshares, Inc. 1,516,621 14.216 % 906,841 8.500 % 853,498 8.000 % Northwest Bank 1,452,962 13.631 % 906,030 8.500 % 852,734 8.000 % CET 1 capital (to risk weighted assets) Northwest Bancshares, Inc. 1,391,296 13.041 % 746,810 7.000 % 693,467 6.500 % Northwest Bank 1,452,962 13.631 % 746,143 7.000 % 692,847 6.500 % Tier 1 capital (leverage to average assets) Northwest Bancshares, Inc. 1,516,621 10.817 % 560,816 4.000 % 701,020 5.000 % Northwest Bank 1,452,962 10.365 % 560,706 4.000 % 700,882 5.000 % (1) Amounts and ratios include the 2022 capital conservation buffer of 2.5 % with the exception of Tier 1 capital to average assets. For further information related to the capital conservation buffer, see Item 1. Business - “ Supervision and Regulation”. (18) Contingent Liabilities We and our subsidiaries are subject to a number of asserted and unasserted claims encountered in the normal course of business. Management believes that the aggregate liability, if any, that may result from such potential litigation will not have a material adverse effect on our financial statements. However, we cannot presently determine whether or not any claims against us will have a material adverse effect on our results of operations in any future reporting period. (19) Legal Proceedings We establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated. As of December 31, 2023, we do not anticipate that the aggregate ultimate liability arising out of any pending or threatened legal proceedings will be material to our Consolidated Financial Statements. Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances. Due to the inherent subjectivity of assessments and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate loss to us from legal proceedings. (20) Components of Accumulated Other Comprehensive Income The following table sets forth the components of accumulated other comprehensive loss as of December 31, 2023 and 2022: December 31, 2023 2022 Unrealized loss on marketable securities available-for-sale $ ( 150,659 ) ( 164,206 ) Fair value of interest rate swaps ( 374 ) — Defined benefit pension plans 1,541 ( 6,952 ) Accumulated other comprehensive loss $ ( 149,492 ) ( 171,158 ) 128 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table shows the changes in accumulated other comprehensive loss by component for the year ended December 31, 2023: Unrealized gains and losses on securities available-for-sale Change in fair value of interest rate swaps Change in defined benefit pension plans Total Balance as of January 1, $ ( 164,206 ) — ( 6,952 ) ( 171,158 ) Other comprehensive income/(loss) before reclassification adjustments (1) (2) (3) 7,875 ( 374 ) 10,019 17,520 Amounts reclassified from accumulated other comprehensive income (4) (5) 5,672 — ( 1,526 ) 4,146 Net other comprehensive income/(loss) 13,547 ( 374 ) 8,493 21,666 Balance as of December 31, $ ( 150,659 ) ( 374 ) 1,541 ( 149,492 ) (1) Consists of unrealized holding gains, net of tax of $( 3,429 ). (2) Change in fair value of interest rate swaps, net of tax of $ 110 . (3) Consists of unrealized gains, net of tax of $( 3,961 ). (4) Consists of realized losses, net of tax of $( 1,700 ). (5) Consists of realized gains, net of tax of $ 607 . The following table shows the changes in accumulated other comprehensive loss by component for the year ended December 31, 2022: Unrealized gains and losses on securities available-for-sale Change in defined benefit pension plans Total Balance as of January 1, $ ( 12,317 ) ( 25,312 ) ( 37,629 ) 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 ) Net other comprehensive (loss)/income ( 151,889 ) 18,360 ( 133,529 ) Balance as of December 31, $ ( 164,206 ) ( 6,952 ) ( 171,158 ) (1) Consists of unrealized holding losses, net of tax of $ 45,321 . (2) Consists of unrealized gains, net of tax of $( 7,182 ). (3) Consists of realized gains, net of tax of $ 0 . (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 defined benefit pension plans Total Balance as of January 1, $ 16,843 ( 50,392 ) ( 33,549 ) Other comprehensive (loss)/income before reclassification adjustments (1) (2) ( 28,873 ) 23,748 ( 5,125 ) Amounts reclassified from accumulated other comprehensive income (3) (4) ( 287 ) 1,332 1,045 Net other comprehensive (loss)/income ( 29,160 ) 25,080 ( 4,080 ) Balance as of December 31, $ ( 12,317 ) ( 25,312 ) ( 37,629 ) (1) Consists of unrealized holding losses, net of tax of $ 10,333 . (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 ). 129 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (21) Parent Company Only Financial Statements - Condensed Statements of Financial Condition December 31, 2023 2022 Assets Cash and cash equivalents $ 276,026 174,102 Investment in bank subsidiary 1,588,711 1,656,159 Other assets 9,405 9,490 Total assets $ 1,874,142 1,839,751 Liabilities and shareholders’ equity Liabilities: Debentures payable $ 243,763 243,154 Other liabilities 2,302 2,109 Total liabilities 246,065 245,263 Shareholders’ equity 1,628,077 1,594,488 Total liabilities and shareholders’ equity $ 1,874,142 1,839,751 Statements of Income Years ended December 31, 2023 2022 2021 Income: Interest income $ 187 140 87 Other income 729 805 527 Dividends from bank subsidiary 215,000 161,000 73,000 Undistributed earnings from equity investment in bank subsidiary ( 67,106 ) ( 18,187 ) 88,944 Total income 148,810 143,758 162,558 Expense: Compensation and employee benefits 1,906 1,656 1,358 Other expenses 1,044 1,042 1,033 Interest expense 14,342 9,825 7,870 Total expense 17,292 12,523 10,261 Income before income taxes 131,518 131,235 152,297 Income tax benefit ( 3,439 ) ( 2,431 ) ( 2,026 ) Net income $ 134,957 133,666 154,323 130 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 Statements of Cash Flows Years ended December 31, 2023 2022 2021 Operating activities: Net income $ 134,957 133,666 154,323 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of subsidiary 67,106 18,187 ( 88,944 ) Net change in other assets and liabilities 900 ( 9,457 ) 597 Net cash provided by operating activities 202,963 142,396 65,976 Investing activities: Net cash used in investing activities — — — Financing activities: Cash dividends paid on common stock ( 101,669 ) ( 101,468 ) ( 100,274 ) Repurchase of Northwest stock — — ( 23,854 ) Proceeds from stock options exercised 630 5,173 14,011 Net cash used in financing activities ( 101,039 ) ( 96,295 ) ( 110,117 ) Net increase/(decrease) in cash and cash equivalents $ 101,924 46,101 ( 44,141 ) Cash and cash equivalents at beginning of period $ 174,102 128,001 172,142 Net increase/(decrease) in cash and cash equivalents 101,924 46,101 ( 44,141 ) Cash and cash equivalents at end of period $ 276,026 174,102 128,001 131 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 (22) Derivative Financial Instruments We are a party to derivative financial instruments in the normal course of business to manage our own exposure to fluctuations in interest rates and to meet the needs of our customers. The primary derivatives that we use are interest rate swaps and caps and foreign exchange contracts, which are entered into with counterparties that meet established credit standards. We believe that the credit risk inherent in all of our derivative contracts is minimal based on our credit standards and the netting and collateral provisions of the interest rate swap agreements. Derivatives Designated as Hedging Instruments As of December 31, 2023, the Company had entered into seven 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 $ 175 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-SOFR 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 . Our cash flow hedges are recorded within other assets on the Consolidated Statement of Financial Condition at their estimated fair value. As long as the hedge remains highly effective, the changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are 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. Amounts reclassified into earnings are included in interest expense in the Consolidated Statement of Income. Derivatives Not Designated as Hedging Instruments We act as an interest rate or foreign exchange swap counterparty for certain commercial borrowers in the normal course of servicing our customers, which are accounted for at fair value. We manage our exposure to such interest rate or foreign exchange swaps by entering into corresponding and offsetting interest rate swaps with third parties that mirror the terms of the swaps we have with the commercial borrowers. These positions (referred to as “customer swaps”) directly offset each other and our exposure is the fair value of the derivatives due to changes in credit risk of our commercial borrowers and third parties. Customer swaps are recorded within other assets or other liabilities on the consolidated statement of financial condition at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the Consolidated Statement of Income. We enter into interest rate lock commitments for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate within a specified period of time. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative financial instruments under applicable accounting guidance. Interest rate lock commitments on loans held-for-sale are carried at fair value in other assets on the consolidated statement of financial condition. Northwest sells loans to the secondary market on a mandatory or best efforts basis. The loans sold on a mandatory basis commit us to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date, or the commitment must be paired off. These forward commitments entered into on a mandatory delivery basis meet the definition of a derivative financial instrument. All closed loans to be sold on a mandatory delivery basis are classified as held-for-sale on the Consolidated Statement of Financial Condition. Changes to the fair value of the interest rate lock commitments and the forward commitments are recorded in mortgage banking income in the Consolidated Statements of Income. We enter into risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. These risk participation agreements are recorded within other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value. Changes to the fair value of the the risk participation agreements are included in other operating income in the Consolidated Statement of Income. 132 Table of Contents NORTHWEST BANCSHARES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, 2022 and 2021 The following table presents information regarding our derivative financial instruments at the dates indicated: Asset derivatives Liability derivatives Notional amount Fair value Notional amount Fair value At December 31, 2023 Derivatives designated as hedging instruments: Interest rate swap agreements $ 75,000 713 100,000 1,198 Derivatives not designated as hedging instruments: Interest rate swap agreements 725,139 41,406 725,139 41,437 Foreign exchange swap agreements — — 12,278 291 Interest rate lock commitments 21,857 641 — — Forward commitments 281 12 — — Risk participation agreements — — 101,727 14 Total derivatives $ 822,277 42,772 939,144 42,940 At December 31, 2022 Derivatives not designated as hedging instruments: Interest rate swap agreements $ 651,114 26,642 651,114 45,464 Foreign exchange swap agreements — — 2,328 23 Interest rate lock commitments 19,727 559 — — Forward commitments 4,909 128 — — Risk participation agreements — — 114,159 18 Total derivatives $ 675,750 27,329 767,601 45,505 The following table presents income or expenses recognized on derivatives for the periods indicated: For the years ended December 31, 2023 2022 2021 Hedging derivatives: Decrease in interest expense $ 1,573 — — Non-hedging swap derivatives: (Decrease)/increase in other income ( 613 ) ( 83 ) 1,033 (Decrease)/increase in mortgage banking income ( 34 ) 1,368 5,515 The following table presents information regarding our derivative financial instruments designated as hedging for the year ended December 31, 2023 (dollars in thousands): Notional amount Effective rate Estimated decrease to interest expense in the next twelve months Maturity date Remaining term (in months) Interest rate products: Issued May 11, 2023 $ 25,000 3.48 % $ ( 556 ) 5/11/2027 40 Issued May 12, 2023 25,000 3.52 % ( 544 ) 5/12/2028 52 Issued May 19, 2023 25,000 3.79 % ( 470 ) 11/19/2027 47 Issued May 31, 2023 25,000 4.01 % ( 415 ) 11/30/2026 35 Issued July 26, 2023 25,000 4.29 % ( 369 ) 7/26/2028 55 Issued July 31, 2023 25,000 4.36 % ( 346 ) 1/31/2028 49 Issued August 9, 2023 25,000 4.33 % ( 350 ) 8/9/2027 43 Total $ 175,000 $ ( 3,050 ) 133 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.