What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-23 · 248 added, 312 removed, 651 unchanged (46% of the section changed)

9 unchanged sentences

Our net income was $100 million, or $0.79 per diluted share, for the year ended December 31, 2024 compared to $135 million, or $1.06 per diluted share, for the year ended December 31, 2023, and $134 million, or $1.05 per diluted share, for the year ended December 31, 2022.

The provision for credit losses was $22.9 million for the year ended December 31, 2023 compared to $28.3 million for the year ended December 31, 2022, and a provision credit of $15.8 million for the year ended December 31, 2021.

The provision for credit losses was $25 million for the year ended December 31, 2024 compared to $23 million for the year ended December 31, 2023, and $28 million for the year ended December 31, 2022.

Selected Financial and Other Data

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Mortgage-backed securities available-for-sale 988,707 861,291

Loans held-for-sale 76,331 8,768

Loans receivable, net of allowance for credit losses:

Residential mortgage loans held-for-sale 8,768 9,913

Residential mortgage loans 3,163,922 3,401,224

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(4) Represents net interest income as a percentage of average interest-earning assets (shown on a FTE basis).

(5) Provision for unfunded commitments was reclassified from other expenses for periods prior to December 31, 2023.

Respective ratios were updated to reflect the reclassification.

(5) 2022 includes $5.6 million in merger, asset disposition and restructuring expense.

(7) 2021 includes $25.3 million gain on sale of insurance business.

(6) 2023 includes $6.7 million in merger, asset disposition and restructuring expense.

(9) 2023 includes $6.7 million in merger, asset disposition and restructuring expense.

(7) 2024 includes $5.8 million in merger, asset disposition and restructuring expense and a $39.4 loss on sale of investments.

(8) Excludes goodwill and other intangible assets (non-GAAP).

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The following table summarizes the non-GAAP financial measures derived from amounts reported in the Company’s Consolidated Statements of Financial Condition.

2023 December 31,

2022 December 31,

As of December 31,

2024 2023 2022

Tangible common equity to assets

14 unchanged sentences

We maintain an allowance for expected lifetime losses in the loan portfolio.

The allowance for credit losses represents management’s estimate of lifetime expected losses based on all available information.

The allowance for credit losses represents management’s estimate of

lifetime expected losses based on all available information.

The allowance for credit losses is based on management’s evaluation of relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

13 unchanged sentences

We placed the most weight on the baseline scenario, with the remaining weight split evenly between the upside and downside scenarios.

If we placed 100% weighting on the baseline scenario, the quantitative allowance for credit losses would have been approximately $15.3 million lower.

These forecasts revert to our long-term historical average loss rate after a 24 month forecasting period.

If we shortened the forecasting period to twelve months and reverted to our long-term historical loss rate thereafter, the quantitative allowance for credit losses would have been approximately $5.2 million lower.

If we placed 100% weighting on the downside scenario, the quantitative allowance for credit losses would have been approximately $31 million higher.

Although management believes that it uses the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

9 unchanged sentences

2023-06, “Disclosure Improvements.” This ASU includes amendments on several subtopics in the FASB Accounting Standards Codification (“Codification”) to incorporate certain disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K.

The adoption of this ASU may lead to certain disclosure being relocated into the financial statements.

The adoption of this ASU may lead to certain disclosures being relocated into the financial statements.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

7 unchanged sentences

We do not believe this guidance will have a material impact on the Company’s financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses”.

The guidance requires disaggregated disclosure of

specified expense categories.

The guidance also requires disclosure of total selling expenses and how the Company defines selling expenses.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027.

Prospective application is required, with retrospective application permitted.

The Company is currently evaluating the effect the updated guidance will have on the Company’s financial statement disclosures.

Balance Sheet Analysis

Total assets at December 31, 2023 were $14.419 billion, an increase of $305.8 million, or 2.2%, from $14.113 billion at December 31, 2022.

This increase in assets was driven by an increase in total loans receivable.

Total assets at December 31, 2024 were flat at $14.4 billion, a decreasing slightly by $11 million from December 31, 2023.

This decrease in assets was driven by decreases in personal banking loans receivable, partially offset by increases in cash and cash equivalents and commercial banking loans receivable.

A discussion of significant changes follows.

Cash and cash equivalents .

Cash and cash equivalents decreased by $17.1 million, or 12.3%, to $122.3 million at December 31, 2023, from $139.4 million at December 31, 2022.

This decrease was primarily to fund organic loan growth, described in further detail below.

Cash and cash equivalents increased by $166 million, or 136%, to $288 million at December 31, 2024, from $122 million at December 31, 2023.

This increase was primarily due to growth in our deposits coupled with a focus on profitability and credit discipline while investing these cash flows into commercial loans.

Marketable securities .

Marketable securities decreased by $241.2 million, or 11.5%, to $1.858 billion at December 31, 2023, from $2.099 billion at December 31, 2022.

Held-to-maturity securities decreased $66.4 million, and available-for-sale marketable securities decreased $174.7 million.

These decreases were driven by the maturity and regular monthly cash flows, in addition to the sale of approximately $110.0 million of available-for-sale securities during the year in order to reallocate these funds into higher interest-earning products.

Marketable securities remained flat at $1.9 billion at both December 31, 2024 and December 31, 2023.

Available-for-sale marketable securities increased $66 million driven by the securities portfolio restructure in the current year, while held-to-maturity securities decreased $64 million drive by maturities and regular monthly cash flows.

During the second quarter the Company restructured our security portfolio by selling 15% of available-for-sale securities during the year in order to reallocate these funds into higher interest-earning products.

The following table sets forth certain information regarding the amortized cost and fair value of our available-for-sale marketable securities portfolio and mortgage-backed securities portfolio at the dates indicated.

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Loans Receivable .

Gross loans receivable increased by $494.4 million, or 4.5%, to $11.415 billion at December 31, 2023, from $10.920 billion at December 31, 2022.

This increase was due to organic loan growth.

Our business banking portfolio increased by $677.2 million, or 17.1%, to $4.633 billion at December 31, 2023 from $3.956 billion at December 31, 2022, primarily as a result of the new commercial lending verticals that we initiated during the current year.

Specifically, our commercial and industrial (C&I) loan portfolio increased by $526.8 million, or 46.5%.

The increase in our total business banking was partially offset by a decrease in our personal banking loan portfolio by $182.9 million, or 2.6%, to $6.782 billion at December 31, 2023 from $6.965 billion at December 31, 2022.

Cash flows from both our marketable securities portfolio and personal banking portfolio were redirected to partially fund business banking growth.

Gross loans receivable decreased by $226 million, or 2%, to $11.2 billion at December 31, 2024, from $11.4 billion at December 31, 2023.

Our personal banking loan portfolio decreased by $451 million, or 7%, to $6.3 billion at December 31, 2024 from $6.8 billion at December 31, 2023.

Cash flows from our personal banking portfolio were partially redirected to fund commercial banking growth, which increased by $225 million, or 5%, to $4.9 billion at December 31, 2024 from $4.6 billion at December 31, 2023.

This represents organic loan growth resulting from the new commercial lending verticals that we implemented during the prior year.

Specifically, our commercial and industrial (C&I) loan portfolio increased by $349 million, or 21% compared to December 31, 2023.

Set forth below are selected data related to the composition of our loan portfolio by type of loan as of the dates indicated.

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Personal Banking:

Residential mortgage loans held-for-sale $ 8,768 0.1 % $ 9,913 0.1 %

Residential mortgage loans $ 3,178,269 28.4 % $ 3,419,417 30.0 %

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Property type Percent of portfolio

5 or More Unit Dwelling 14.5 %

Nursing Home 12.8

Retail Building 13.4 %

5 or More Unit Dwelling 13.3

Commercial Office Building - non-owner occupied 10.5

Residential acquisition & development - 1-4 family, townhouses and apartments 4.8

Nursing Home 10.4

Manufacturing & Industrial Building 5.8

Multi-use building - commercial, retail and residential 4.4

Warehouse/Storage Building 4.3

Multi-use building - commercial, retail and residential 4.2

Commercial office building - owner occupied 4.2

Residential acquisition & development - 1-4 family, townhouses and apartments 4.1

Multi-use building - office and warehouse 3.5

Single Family Dwelling 2.7

Other Medical Facility 2.9

Single Family Dwelling 2.4

Student Housing 2.4

Hotel/Motel 2.3

2-4 Family 2.1

Agricultural Real Estate 2.2

Commercial acquisition and development 2.0

All Other Types 12.1

8 unchanged sentences

Total deposits increased by $165 million, or 1%, to $12.1 billion at December 31, 2024 from $12.0 billion at December 31, 2023.

This increase was driven by a $1.551 billion, or 147.4%, increase in time deposits due to customer preferences for this fixed maturity product.

Partially offsetting this increase were decreases in savings and money market deposits totaling $659.1 million, or 13.9%, as customers moved balances to higher yielding product alternatives.

In addition, demand deposit accounts decreased by $376.1 million, or 6.6%, as we believe customers used funds during this period of higher inflationary costs.

During the year ended December 31, 2023, we purchased $483.9 million of brokered deposits, which made up 18.6% of our time deposits and 4.0% of our total deposit balance at year end.

This increase was driven by a $75 million, or 3% increase in time deposits as we continued to competitively position our deposits products, a $66 million, or 3% increase in savings deposits and a $40 million or 2% increase in money market deposits.

Partially offsetting these increases was a decrease in non-interest bearing deposit accounts of $48 million or 2% due to seasonality in customer deposit accounts.

As of December 31, 2024, we had $201 million of brokered deposits, which made up 7% of our time deposits and 2% of our total deposit balance at year end.

The balance carried an average all-in cost of 4.32% and an average original term of 12 months.

These purchases were through a registered broker, as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources.

In addition, at year end we had $356.6 million of deposits through our participation in the Intrafi Network Deposits (formerly ICS) program.

These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks.

In addition, at year end we had $713 million of deposits through our participation in the Intrafi Network Deposits and FIS Insured Deposit programs.

These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC insurance coverage above the insurance coverage available to our depositors at a single FDIC-insured institution, by placing multiple interest-bearing demand accounts at other member banks and Northwest receives an equal amount of deposits from other member banks.

The balance carried an average cost of 3.68%.

30 unchanged sentences

Total $ 373,925

At December 31, 2023 and 2022, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.835 billion and $4.031 billion, respectively.

At December 31, 2024 and 2023, we had total deposits in excess of $250,000 per depositor per account ownership category (the limit for FDIC insurance) of $1.9 billion and $1.8 billion, respectively.

At those dates, we had no deposits that were uninsured for any other reason.

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Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023

Net income for the year ended December 31, 2023 was $135.0 million, or $1.06 per diluted share, an increase of $1.3 million, or 1.0%, from $133.7 million, or $1.05 per diluted share, for the year ended December 31, 2022.

The increase in net income resulted from an increase in net interest income of $15.0 million, or 3.6%, a decrease in the provision for credit losses of $5.4 million, or 19.2%, and an increase in noninterest income of $3.0 million, or 2.7%, partially offset by an increase in noninterest expense of $22.0 million, or 6.7%.

Net income for the year ended December 31, 2023 represents a return on average equity and

average assets of 8.94% and 0.95%, respectively, compared to 8.80% and 0.94% for the year ended December 31, 2022.

A discussion of significant changes follows.

Interest Income.

Total interest income increased by $139.1 million, or 31.0%, to $587.9 million for the year ended December 31, 2023 from $448.8 million for the year ended December 31, 2022.

This increase is the result of increases in both the average yield and the average balance of interest-earning assets, as well as the change in our interest-earning asset mix.

The average yield earned on interest-earning assets increased to 4.40% for the year ended December 31, 2023 from 3.39% for the year ended December 31, 2022 due to the rising interest rate environment.

Additionally, the average balance of interest-earning assets increased by $113.6 million, or 0.9%, to $13.367 billion for the year ended December 31, 2023 from $13.254 billion for the year ended December 31, 2022.

The changes in interest-earning asset mix are described further below.

Interest income on loans receivable increased by $135.8 million, or 33.3%, to $543.7 million for the year ended December 31, 2023 from $407.8 million for the year ended December 31, 2022.

This increase in interest income on loans receivable is due to increases in both the average yield and average balance of loans receivable.

The average yield earned on loans receivable increased to 4.90% for the year ended December 31, 2023 from 3.95% for the year ended December 31, 2022 due to the increase in market interest rates.

The average balance of loans receivable increased $781.2 million, or 7.6%, to $11.100 billion for the year ended December 31, 2023 from $10.319 billion for the year ended December 31, 2022 due to organic loan growth in our commercial, residential mortgage, and consumer loan portfolios.

Interest income on mortgage-backed securities increased by $2.1 million, or 6.8%, to $32.9 million for the year ended December 31, 2023 from $30.8 million for the year ended December 31, 2022.

This increase is the result of an increase in the average yield on mortgage-backed securities to 1.80% for the year ended December 31, 2023 from 1.56% for the year ended December 31, 2022 due to the purchase of higher yielding mortgage-backed securities in the prior year.

Partially offsetting this increase was a decrease in the average balance of mortgage-backed securities of $146.2 million, or 7.4%, to $1.822 billion for the year ended December 31, 2023 from $1.969 billion for the year ended December 31, 2022 due to the sale of available-for-sale securities during the year coupled with regularly scheduled payments and maturities, the cashflows of which were redirected to higher yielding loans.

Interest income on investment securities decreased by $229,000, or 3.9%, to $5.6 million for the year ended December 31, 2023 from $5.8 million for the year ended December 31, 2022.

This decrease is the result of a decrease in the average balance of investment securities of $24.1 million, or 6.3%, to $357.4 million for the year ended December 31, 2023 from $381.5 million for the year ended December 31, 2022.

Partially offsetting this decrease in average balance was an increase in the average yield on investment securities to 1.57% for the year ended December 31, 2023 from 1.53% for the year ended December 31, 2022.

Dividends on FHLB stock increased by $2.1 million, or 292.9%, to $2.9 million for the year ended December 31, 2023 from $730,000 for the year ended December 31, 2022.

This increase is the result of increases in both the average balance and the average yield of FHLB stock.

The average balance of FHLB stock increased $22.4 million, or 131.3%, to $39.5 million for the year ended December 31, 2023 from $17.1 million for the year ended December 31, 2022.

Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB.

Additionally, the average yield increased to 7.27% for the year ended December 31, 2023 from 4.27% for the year ended December 31, 2022 due to increases in market interest rates.

Interest income on interest-earning deposits decreased by $698,000, or 19.4%, to $2.9 million for the year ended December 31, 2023 from $3.6 million for the year ended December 31, 2022.

This decrease is attributable to a decrease in the average balance of interest-earning deposits by $519.8 million, or 91.6%, to $47.8 million for the year ended December 31, 2023 from $567.6 million for the year ended December 31, 2022 as the Bank deployed funds into higher yielding loans.

Partially offsetting this decrease in average balance was an increase in the average yield on interest-earning deposits to 6.07% for the year ended December 31, 2023 from 0.63% for the year ended December 31, 2022, due to the campaign by the Federal Reserve Board over the last year to raise targeted short-term interest rates to combat inflation.

Interest Expense.

Interest expense increased by $124.1 million, or 441.4%, to $152.2 million for the year ended December 31, 2023 from $28.1 million for the year ended December 31, 2022 due to increases in both the average cost and average balance of interest-bearing liabilities, as well as the change in liability mix.

The average cost of interest-bearing liabilities increased to 1.56% for the year ended December 31, 2023 from 0.30% for the year ended December 31, 2022 resulting primarily from the rising interest rate environment.

In addition, customers shifted balances from savings and market deposit accounts into higher yielding time deposits.

The average balance of interest-bearing liabilities increased $355.6 million, or 3.8%, to $9.736 billion for the year ended December 31, 2023 from $9.381 billion for the year ended December 31, 2022 driven by an increase in average borrowed funds of $479.6 million, or 226.2%.

Wholesale borrowings were utilized to fund loan growth as well as replace the decrease in the average balance of interest-bearing deposits, which declined by $120.6 million, or 1.4%.

Lastly, the average balance of noninterest-bearing demand deposits decreased by $285.6 million, or 9.3%, as we believe customers used funds during a period of higher inflationary costs and searched for higher yield alternatives.

Net Interest Income.

Net interest income increased by $15.0 million, or 3.6%, to $435.7 million for the year ended December 31, 2023 from $420.7 million for the year ended December 31, 2022.

This increase was attributable to the factors discussed above.

Our interest rate spread decreased to 2.83% for the year ended December 31, 2023 from 3.09% for the year ended December 31, 2022, and our net interest margin increased to 3.26% for the year ended December 31, 2023 from 3.17% for the year ended December 31, 2022 due to the change in market rates as well as the change in our interest-earning asset and funding mix.

Provision for Credit Losses.

We analyze the allowance for credit losses as described in No te 1(f) of the Notes to the Consolidated Financial Statements.

The provision for credit losses decreased by $5.4 million, or 19.2%, to 22.9 million for the year ended December 31, 2023 compared to $28.3 million for the year ended December 31, 2022.

The current period provision for credit losses includes $18.7 million for credit losses - loans and $4.2 million for credit losses - unfunded commitments.

The prior period provision for credit losses includes $17.9 million for credit losses - loans and $10.5 million for credit losses - unfunded commitments.

The $804,000 increase in the provision for credit losses - loans was driven by continued growth within our loan portfolio, and the $6.2 million decrease in our provision for credit losses - unfunded commitments was driven by the timing of the origination of loans with current off-balance sheet exposure as our undrawn commitments increased more rapidly during the prior year.

Net charge-offs to average loans increased to 0.11% for the year ended December 31, 2023 from 0.02% for the year ended December 31, 2022 due to several large recoveries during 2022.

Total substandard loans declined by $17.8 million, or 7.5%, to $218.5 million, or 1.91% of loans outstanding at December 31, 2023 from $236.2 million, or 2.16% of loans outstanding at December 31, 2022.

This decrease was assisted by the note sale of approximately $8.0 million of nonperforming loans for a net gain of approximately $726,000.

In addition, delinquencies remain well controlled.

In determining the amount of the current period provision, we considered current economic conditions, including unemployment levels, bankruptcy filings, and changes in collateral values, and assessed the impact of these factors on the quality of our loan portfolio and historical loss experience.

We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses”.

The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at December 31, 2023.

Noninterest Income.

Noninterest income increased by $3.0 million, or 2.7%, to $113.8 million for the year ended December 31, 2023 from $110.8 million for the year ended December 31, 2022.

This increase was driven by increases in service charges and fees, gains on sales of SBA loans, income from bank owned life insurance, and net gains on sales of real estate owned.

Service charges and fees increased $4.0 million, or 7.3%, to $59.2 million for the year ended December 31, 2023 from $55.2 million for the year ended December 31, 2022, driven by commercial loan fees and an increase in deposit related fees based on customer activity in the current year.

We also recognized $1.8 million in gains on the sales of SBA loans during the current year due to this newly launched lending vertical.

Income from bank owned life insurance increased $1.5 million, or 20.5%, to $8.6 million for the year ended December 31, 2023 from $7.1 million for the year ended December 31, 2022, resulting from death benefits received in the current year.

Lastly, the net gain on sales of real estate owned increased $1.4 million, or 232.7%, to $2.0 million for the year ended December 31, 2023 from $603,000 for the year ended December 31, 2022 as a result of gains on foreclosed property sales in the current year.

These increases were partially offset by decreases in other operating income and mortgage banking income.

Other operating income decreased $3.5 million, or 23.1%, to $11.8 million for the year ended December 31, 2023 from $15.3 million for the year ended December 31, 2022 due to prior year gains on the sales of branch buildings associated with the branch consolidations announced during the prior year.

Mortgage banking income decreased $2.4 million, or 50.0%, to $2.4 million for the year ended December 31, 2023 from $4.9 million for the year ended December 31, 2022 due primarily to the volatile interest rate environment causing unfavorable pricing in the secondary market, as well as a slowdown in mortgage loan activity due to higher market interest rates.

In addition, during the current year we sold the mortgage servicing rights on approximately $1.3 billion of one- to four family mortgage loans for an $8.3 million gain, while also selling $110.0 million of investment securities for an equivalent loss, resulting in no impact to capital.

However, we were able to reallocate these funds from investments yielding approximately 2.0% into commercial loans yielding over 7.0%.

Noninterest Expense.

Noninterest expense increased by $22.0 million, or 6.7%, to $351.6 million for the year ended December 31, 2023 from $329.5 million for the year ended December 31, 2022.

This increase was due to increases in almost all expense categories due to both inflationary costs as well as the continued build out of talent and infrastructure necessary to propel the organization to a higher level of performance.

In particular, compensation and employee benefits increased $7.3 million, or 3.9%, to $195.7 million for the year ended December 31, 2023 from $188.4 million for the year ended December 31, 2022, driven primarily by the buildout of the commercial business and related credit, risk management, and internal audit support functions over the past twelve months.

Processing expenses increased $6.2 million, or 11.8%, to $58.7 million for the year ended December 31, 2023 from $52.5 million for the year ended December 31, 2022 due to the implementation of additional third-party software platforms.

FDIC insurance premiums increased $4.5 million, or 94.0%, to $9.3 million for the year ended December 31, 2023 from $4.8 million for the year

ended December 31, 2022 due to an increase in the deposit insurance assessment rate beginning in the first quarter of 2023.

Professional services increased $3.1 million, or 21.2%, to $17.8 million for the year ended December 31, 2023 from $14.7 million for the year ended December 31, 2022 primarily due to the use of third-party consulting and staffing support.

Merger, asset disposition and restructuring expense increased $1.1 million, or 20.2%, to $6.7 million for the year ended December 31, 2023 from $5.6 million for the year ended December 31, 2022 due to the severance and fixed asset charges related to the branch optimization and personnel reductions previously announced.

Lastly, other expenses increased $1.1 million, or 21.7%, to $6.4 million for the year ended December 31, 2023 from $5.2 million for the year ended December 31, 2022 due to an increase in employee relocation and other expenses.

Partially offsetting these increases was a $1.0 million, or 23.5%, decrease in amortization of intangible assets to $3.3 million for the year ended December 31, 2023 compared to $4.3 million for the year ended December 31, 2022 due to previously acquired intangible assets being fully amortized in the prior year.

Income Taxes.

The provision for income taxes increased by $95,000, or 0.2%, to $40.1 million for the year ended December 31, 2023 from $40.0 million for the year ended December 31, 2022.

This increase in income tax expense is primarily due to the $1.4 million, or 0.8%, increase in pretax income to $175.1 million for the year ended December 31, 2023 from $173.7 million for the year ended December 31, 2022.

Our effective tax rate for the year ended December 31, 2023 was 22.9% compared to 23.0% for the year ended December 31, 2022.

Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021

Net income for the year ended December 31, 2024 was $100 million, or $0.79 per diluted share, a decrease of $35 million, or 25.7%, from $135 million, or $1.06 per diluted share, for the year ended December 31, 2023.

The decrease in net income resulted from an increase in the provision for credit losses of $44.1 million, or 279.3%, and a decrease in noninterest income of $32.0 million, or 22.4%.

Partially offsetting these unfavorable variances was an increase in net interest income of $29.4 million, or 7.5%, a decrease in income tax expense of $6.8 million, or 14.5%, and a decrease in noninterest expense of $19.3 million, or 5.5%.

Net income for the year ended December 31, 2022 represents returns on average equity and average assets of 8.80% and 0.94%, respectively, compared to 9.91% and 1.08% for the year ended December 31, 2021.

The decrease in net income resulted, primarily from a decrease in noninterest income of $27 million, or 23.6%, resulting from a loss on investment sale as part of our securities portfolio restructure.

Additionally contributing to the decrease in net income was an increase in noninterest expense of $17 million or 4.8%, partially offset by a decrease in the provision for credit losses of $2 million, or 7.1%, and a decrease in income taxes of $11 million or 27.1%.

Net income for the year ended December 31, 2024 represents a return on average equity and average assets of 6.41% and 0.70%, respectively, compared to 8.94% and 0.95% for the year ended December 31, 2023.

A discussion of significant changes follows.

Interest Income.

Total interest income increased by $30.3 million, or 7.2%, to $448.8 million for the year ended December 31, 2022 from $418.5 million for the year ended December 31, 2021.

This increase is the result of increases in the average yield on interest-earning assets as well as the average balance of interest-earning assets, and specifically the change in our interest-earning asset mix.

The average yield earned on interest-earning assets increased to 3.39% for the year ended December 31, 2022 from 3.16% for the year ended December 31, 2021 due to the rising interest rate environment.

The average balance of interest-earning assets increased by $17.6 million, or 0.1%, to $13.254 billion for the year ended December 31, 2022 from $13.236 billion for the year ended December 31, 2021.

Interest income on loans receivable increased by $17.5 million, or 4.5%, to $407.8 million for the year ended December 31, 2022 from $390.3 million for the year ended December 31, 2021.

This increase in interest income on loans receivable is due to increases in the average yield on loans receivable as well as the average balance of loans receivable.

The average yield earned on loans receivable increased to 3.95% for the year ended December 31, 2022 from 3.81% for the year ended December 31, 2021 primarily due to the increase in market interest rates.

The average balance of loans receivable increased $79.3 million, or 0.8%, to $10.319 billion for the year ended December 31, 2022 from $10.240 billion for the year ended December 31, 2021 driven mainly by growth in our retail portfolio as commercial Paycheck Protection Program ( “ PPP”) loans continued to payoff.

Interest income on mortgage-backed securities increased by $9.3 million, or 43.5%, to $30.8 million for the year ended December 31, 2022 from $21.5 million for the year ended December 31, 2021.

This increase is attributed to increases in both the average yield of mortgage-backed securities and the average balance.

The average yield on mortgage-backed securities increased to 1.56% for the year ended December 31, 2022 from 1.26% for the year ended December 31, 2021 due to the purchase of fixed-rate mortgage-backed securities with yields higher than the existing portfolio.

Additionally, the average balance of mortgage-backed securities increased by $264.5 million, or 15.5%, to $1.969 billion for the year ended December 31, 2022 from $1.704 billion for the year ended December 31, 2021.

This increase was primarily a result of additional purchases as we deployed interest-earning deposits into higher yielding investments throughout 2022.

Interest income on investment securities increased by $736,000, or 14.4%, to $5.8 million for the year ended December 31, 2022 from $5.1 million for the year ended December 31, 2021.

This increase is primarily the result of an increase in the average balance of investment securities of $30.7 million, or 8.8%, to $381.5 million for the year ended December 31, 2022 from $350.8 million for the year ended December 31, 2021.

Additionally, the average yield on investment securities increased to 1.53% for the year ended December 31, 2022 from 1.45% for the year ended December 31, 2021.

Dividends on FHLB stock increased by $323,000, or 79.4%, to $730,000 for the year ended December 31, 2022 from $407,000 for the year ended December 31, 2021.

This increase is the result of an increase in the average yield on FHLB stock to 4.27% for the year ended December 31, 2022 from 2.01% for the year ended December 31, 2021 as the FHLB of Pittsburgh increased dividend rates on required stock holdings in relation to higher market interest rates.

Partially offsetting this increase was a decrease in the average balance of FHLB stock of $3.2 million, or 15.6%, to $17.1 million for the year ended December 31, 2022 from $20.2 million for the year ended December 31, 2021.

Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB.

Interest income on interest-earning deposits increased by $2.4 million, or 201.4%, to $3.6 million for the year ended December 31, 2022 from $1.2 million for the year ended December 31, 2021.

This increase is attributable to an increase in the average yield on interest-earning deposits to 0.63% for the year ended December 31, 2022 from 0.13% for the year ended December 31, 2021, as a result of increases in the targeted federal funds rate by the Federal Reserve.

This was partially offset by a decrease in the average balance of interest-earning deposits by $353.8 million, or 38.4%, to $567.6 million for the year ended December 31, 2022 from $921.4 million for the year ended December 31, 2021 as we deployed funds into higher yielding loans and investments.

Interest Expense.

Interest expense increased by $871,000, or 3.2%, to $28.1 million for the year ended December 31, 2022 from $27.2 million for the year ended December 31, 2021 due to an increase in the average cost of interest-bearing liabilities to 0.30% for the year ended December 31, 2022 from 0.29% for the year ended December 31, 2021.

This increase was due to increases in the interest rates paid on borrowed funds and junior subordinated debentures in response to increases in market interest rates.

Partially offsetting these increases was a decrease in the average balance of interest-bearing liabilities of $120.5 million, or 1.3%, to $9.381 billion for the year ended December 31, 2022 from $9.501 billion for the year ended December 31, 2021.

This decrease in average balance was driven by a decrease in average deposits by $191.7 million, or 2.1%, as customers utilized funds for higher inflationary purchases and searched for higher alternative yields.

Net Interest Income

Net interest income increased by $29.4 million, or 7.5%, to $420.7 million for the year ended December 31, 2022 from $391.3 million for the year ended December 31, 2021.

This increase was attributable to the factors discussed above, specifically the increase in interest income which was partially offset by the increase in interest expense on borrowed funds.

Our interest rate spread increased to 3.09% for the year ended December 31, 2022 from 2.88% for the year ended December 31, 2021, and our net interest margin increased to 3.17% for the year ended December 31, 2022 from 2.96% for the year ended December 31, 2021 due to the change in market rates as well as the change in our interest-earning asset mix.

To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in the discussion below on a fully taxable equivalent “FTE basis” (i.e., as if all income were taxable and at the same rate).

For example, $100 of tax-exempt income would be presented as $126, an amount that, if taxed at the statutory federal income tax rate of 21%, would yield $100.

See the “Average Balance Sheet” for information regarding tax-equivalent adjustments and GAAP results.

Net interest income for 2024 was $436 million, which remained flat compared to 2023.

Net interest income (FTE) was $439 million for 2024 and net interest margin (FTE) was 3.26%.

Compared to the prior year, net interest income (FTE) increased $0.2 million and net interest margin (FTE) decreased by two basis points.

The increase in net interest income (FTE) and decrease in net interest margin (FTE) was driven by an increase in interest income resulting from higher earning asset yields offset by an increase in interest-bearing deposit costs and a shift in funding mix to higher cost deposits due to the higher interest rate environment.

Average loans receivable increased $185 million, or 2%, from the year ended December 31, 2023.

This increase was driven by commercial loans, which grew by $433 million, as we have continued to build-out our commercial lending verticals, and commercial real estate loans, which grew by $119 million from the same period.

These increases were offset partially by a $368 million decrease in personal banking loans from the year ended December 31, 2023.

Interest income on loans receivable increased by $72 million, or 13%, from 2023 as the result of increases in both the average yield and the average balance on loans receivable.

The average yield on loans receivable increased due to the elevated market interest rates as well as a change in mix to higher yield loan products.

Average investments declined 7% from the year ended December 31, 2023 driven by the sale of investment securities during the second quarter of 2024 coupled with regular principal payments and maturities.

Interest income on investment securities increased by $7 million, or 17%, from the year ended December 31, 2023 due to the increase in the average yield on investments (FTE) to 2.25% for 2024 which was partially offset by a decline in the average balance of investments for both periods.

Average deposits grew 4% from 2023 driven by an increase in our average time deposits due to customer preferences for this fixed maturity product type which grew by $845 million from the year ended December 31, 2023.

This increase was partially offset by a $217 million decrease in money market balances as customers shifted balances into higher yielding time deposit accounts.

Interest expense on deposits increased by $100 million, or 95%, from 2023 primarily attributable to increases in both the average yield and average balance of deposit accounts as we continued competitively positioning our deposit products.

Compared to the year ended December 31, 2023, average borrowings saw a 55% reduction primarily attributable to the strategic pay-down of wholesale borrowings.

This decrease was made possible by a substantial increase in cash reserves, resulting from the sale of investment securities during the year, as well as a notable rise in the average balance of deposits.

The decrease in the average balance of borrowings resulted in a decrease in interest expense on borrowings by $19 million from 2023.

Average Balance Sheets

The following table sets forth average balance sheets, average yields, on a fully taxable equivalent basis, and average costs, and certain other information at and for the periods indicated.

All average balances are daily average balances.

Non-accrual loans are included in the computation of average balances.

The yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income or expense.

The effect of these fees is not considered material.

The average yield for loans receivable and investment securities are calculated on a FTE basis.

There were no out-of-period adjustments or other exclusions from the amounts presented in the table.

For the years ended December 31,

2024 2023 2022

balance Interest Average

(Dollars in thousands)

Interest-earning assets:

Loans receivable (includes FTE adjustments of $2,928, $2,477, and $1,954, respectively) (1), (2), (3) $ 11,285,219 618,704 5.48 % $ 11,100,118 546,136 4.92 % $ 10,318,898 409,782 3.97 %

Mortgage-backed securities (4) 1,739,141 39,793 2.29 % 1,822,375 32,886 1.80 % 1,968,528 30,804 1.56 %

Investment securities (includes FTE adjustments of $576, $704, and $834, respectively) (4), (5) 287,118 5,825 2.03 % 357,436 6,312 1.77 % 381,518 6,671 1.75 %

FHLB stock, at cost 24,948 1,891 7.58 % 39,467 2,868 7.27 % 17,065 730 4.27 %

Interest-earning deposits 126,097 6,487 5.15 % 55,998 2,901 5.11 % 567,609 3,599 0.63 %

Total interest-earning assets (includes FTE adjustments of $3,504, $3,181, and $2,788, respectively) 13,462,523 672,700 5.00 % 13,375,349 591,103 4.42 % 13,253,618 451,586 3.41 %

Noninterest-earning assets (6) 922,648 894,415 924,080

Total assets $ 14,385,171 $ 14,269,809 $ 14,177,698

Interest-bearing liabilities:

Savings deposits $ 2,142,852 24,222 1.13 % $ 2,148,127 8,822 0.41 % $ 2,336,217 2,343 0.10 %

Interest-bearing demand deposits 2,574,810 27,394 1.06 % 2,556,281 11,606 0.45 % 2,810,889 1,517 0.05 %

Money market deposit accounts 1,966,732 34,564 1.76 % 2,183,583 24,734 1.13 % 2,613,422 3,377 0.13 %

Time deposits 2,758,157 119,312 4.33 % 1,913,372 60,181 3.15 % 1,161,432 6,883 0.59 %

Borrowed funds (7) 308,540 13,882 4.50 % 691,636 32,903 4.76 % 212,026 4,531 2.14 %

Subordinated debt 114,355 4,592 4.02 % 114,002 4,592 4.03 % 117,625 4,750 4.04 %

Junior subordinated debentures 129,695 9,652 7.32 % 129,434 9,401 7.14 % 129,175 4,716 3.60 %

Total interest-bearing liabilities 9,995,141 233,618 2.34 % 9,736,435 152,239 1.56 % 9,380,786 28,117 0.30 %

Noninterest-bearing demand deposits (8) 2,582,540 2,785,279 3,070,892

Noninterest-bearing liabilities 244,036 237,810 207,316

Total liabilities 12,821,717 12,759,524 12,658,994

Shareholders’ equity 1,563,454 1,510,285 1,518,704

Total liabilities and shareholders’ equity $ 14,385,171 $ 14,269,809 $ 14,177,698

Net interest income 439,082 438,864 423,469

Net interest rate spread (9) 2.66 % 2.86 % 3.11 %

Net interest-earning assets/net interest margin (10) $ 3,467,382 3.26 % $ 3,638,959 3.28 % $ 3,872,832 3.20 %

Tax equivalent adjustment 3,504 3,181 2,788

Net interest income, GAAP basis 435,578 435,683 420,681

Ratio of average interest-earning assets to average interest-bearing liabilities 1.35X 1.37X 1.41X

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

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

(3) Interest income on tax-free loans is presented on a FTE basis including adjustments, as indicated.

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

(5) Interest income on tax-free investment securities is presented on a FTE basis including adjustments, as indicated.

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

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

(8) Average cost of deposits was 1.71%, 0.91% and 0.12%, respectively and average cost of interest-bearing deposits were 2.18%, 1.20%, and 0.16%, respectively.

(9) Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(10) Net interest margin represents net interest income as a percentage of average interest-earning assets.

(11) Shown on a FTE basis and in consideration of applicable current federal, state and local tax rates.

Rate/Volume Analysis

The following table presents, on a FTE basis, the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the year ended December 31, 2024 compared to 2023 and for the year ended December 31, 2023 compared to 2022.

For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to:

(1) changes in volume multiplied by the prior year rate;

(2) changes in rate multiplied by the prior year volume;

and (3) the total increase or decrease.

Changes not solely attributable to rate or volume have been allocated proportionately to the change due to volume and the change due to rate.

There were no out-of-period adjustments or other exclusions from the amounts presented in the table.

Years ended December 31, 2024 vs.

2023 Years ended December 31, 2023 vs.

Increase/(decrease)

increase/(decrease) Increase/(decrease)

increase/(decrease)

Rate Volume Rate Volume

(In thousands)

Interest-earning assets:

Loans receivable $ 62,421 10,147 72,568 97,916 38,438 136,354

Mortgage-backed securities 8,811 (1,904) 6,907 4,720 (2,638) 2,082

Investment securities 939 (1,426) (487) 67 (426) (359)

FHLB stock, at cost 124 (1,101) (977) 510 1,628 2,138

Interest-earning deposits (27) 3,613 3,586 30,861 (31,559) (698)

Total interest-earning assets 72,268 9,329 81,597 134,074 5,443 139,517

Interest-bearing liabilities:

Savings deposits 15,459 (59) 15,400 7,251 (772) 6,479

Interest-bearing demand deposits 15,591 197 15,788 11,245 (1,156) 10,089

Money market deposit accounts 13,640 (3,810) 9,830 26,226 (4,869) 21,357

Time deposits 22,588 36,543 59,131 29,647 23,651 53,298

Borrowed funds (1,786) (17,235) (19,021) 5,555 22,817 28,372

Subordinated debt (14) 14 — (12) (146) (158)

Junior subordinated debentures 232 19 251 4,667 18 4,685

Total interest-bearing liabilities 65,710 15,669 81,379 84,579 39,543 124,122

Net change in net interest income $ 6,558 (6,340) 218 49,495 (34,100) 15,395

Provision for Credit Losses

We analyze the allowance for credit losses as described in No te 1(f) of the Notes to the Consolidated Financial Statements.

The provision for credit losses increased by $44.1 million, or 279.3%, to a total provision expense of $28.3 million for the year ended December 31, 2022 compared to a provision credit of $15.8 million for the year ended December 31, 2021.

The provision for the year ended December 31, 2022 includes $17.9 million for credit losses - loans and $10.5 million for credit losses - unfunded commitments.

The prior period provision for credit losses includes a credit of 11.9 million for credit losses - loans and a credit of $3.9 million for credit losses - unfunded commitments.

The $29.7 million, or 250.3%, increase to provision for credit losses - loans was driven primarily by growth within our loan portfolio, and the $14.4 million, or 367.7%, increase to a provision for credit losses - unfunded commitments was driven primarily by the origination of loans with off-balance sheet exposure.

Both increases were also impacted by a deterioration in the most recent economic forecasts reflected in our allowance for credit loss models, including a reduction in home and used vehicle values.

The negative provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 for industries impacted by COVID-19.

Total classified loans decreased by $126.9 million, or 34.9%, to $236.2 million at December 31, 2022 from $363.2 million at December 31, 2021.

In addition, net charge-offs to average loans decreased to 0.02% for the year ended December 31, 2022 from 0.20% for the year ended December 31, 2021.

2020 2021 2022 2023 2024

Provision for credit losses - loans (in thousands) $ 83,975 (11,883) 17,860 18,664 27,679

Provision/(benefit) for credit losses - unfunded commitments (in thousands) 3,139 (3,905) 10,455 4,210 (3,174)

Annualized net charge-offs to average loans 0.27 % 0.20 % 0.02 % 0.11 % 0.32 %

The provision for credit losses increased by $2 million, or 7.1%, compared to the year ended December 31, 2023.

This increase included a $9 million increase in the provision for credit losses - loans, which was partly offset by a $7 million decrease in the provision for credit losses - unfunded commitments.

The changes in the provision noted above is driven by growth within our commercial lending portfolio and changes in the economic forecasts coupled with a decline in our reserves for unfunded commitments in the current period.

This decline is based on the timing of origination and funding of commercial construction loans and lines of credit.

During the year ended quarter December 31, 2024 the Company took several steps to de-risk our loan portfolio and reduce our levels of nonperforming, criticized and classified loans by completing two loan pool sales and transferring certain loans within our Long Term Healthcare portfolio into held for sale as of December 31, 2024.

As a result we saw an elevated level of charge-offs during the year as the loans noted above were written-down to fair market value prior to sale.

Total charge-offs related to the loan sales and transfer to loans held-for-sale was a combined $15 million.

After completing these steps the Company saw an increase in classified loans to $272 million, or 2.44% of total loans, at December 31, 2024 f rom $219 million, or 1.91% of total loans, at December 31, 2023.

The primary driver of the increase over the past year is reflective of the Company’s exposure to the Long Term Healthcare segment and the challenges a few operators have experienced post Covid.

2 unchanged sentences

Noninterest Income

Noninterest income decreased by $32.0 million, or 22.4%, to $110.8 million for the year ended December 31, 2022 from $142.9 million for the year ended December 31, 2021.

This decrease was primarily driven by the sale of our insurance business on April 30, 2021, resulting in a $25.3 million pre-tax gain during the prior year.

This insurance business sale in the prior year also resulted in a decrease in insurance commission income of $3.6 million from the year ended December 31, 2021.

Also contributing to this decrease was a decrease in mortgage banking income of $11.0 million, or 69.4%, to $4.9 million for the year ended December 31, 2022 from $15.9 million for the year ended December 31, 2021, due primarily to the volatile interest rate

environment causing unfavorable pricing in the secondary market, as well as a slowdown in mortgage loan activity in general.

Partially offsetting these decreases were increases in service charges and fees, other operating income, and income from bank-owned life insurance.

Service charges and fees increased $3.4 million, or 6.5%, to $55.2 million for the year ended December 31, 2022 from $51.8 million for the year ended December 31, 2021 due to increased customer activity in 2022 after COVID-19 restricted behavior in the prior year.

Other operating income increased $3.3 million, or 28.0%, to $15.3 million for the year ended December 31, 2022 from $12.0 million for the year ended December 31, 2022, resulting from gains on the sale of branch buildings associated with the previously announced branch consolidations and improvements in other fee income.

Lastly, income from bank-owned life insurance increased $1.1 million, or 17.8%, to $7.1 million for the year ended December 31, 2022 from $6.1 million for the year ended December 31, 2021 due to additional death benefits received during the current year.

Breakdown of noninterest income for the year ended December 31,

Change from 2023 Change from 2023

2024 Amount Percent 2023 Amount Percent 2022

Noninterest income:

Loss on sale of investments $ (39,413) (31,106) 374 % $ (8,307) (8,299) NA $ (8)

Gain on sale of mortgage servicing rights — (8,305) (100) % 8,305 8,305 NA —

Gain on sale of SBA loans 3,819 2,019 112 % 1,800 1,800 NA —

Service charges and fees 62,957 3,743 6 % 59,214 4,026 7 % 55,188

Trust and other financial services income 30,102 2,818 10 % 27,284 (481) (2) % 27,765

Income from bank-owned life insurance 6,327 (2,261) (26) % 8,588 1,459 20 % 7,129

Other operating income (1) 23,218 6,279 37 % 16,939 (3,836) (18) % 20,775

Total noninterest (loss)/income $ 87,010 (26,813) (24) % $ 113,823 2,974 3 % $ 110,849

(1) Other noninterest income includes the net gain on real estate owned, mortgage banking income, and other operating income.

See the “Consolidated Statements of Income” in Item 1.

Financial Statements of this report.

Noninterest income decreased by $27 million, or 24% which was driven by a loss on sale of investments of $39 million;

excluding the loss on sale of securities non interest income grew by $13 million, or 11%.

The increase from the prior year was driven by service charges and fees, SBA loan sales and other operating income.

Other operating income increased $6 million, or 37% driven by a gain on sale of Visa B shares and a gain on a low income housing tax credit investment.

Service charges and fees increased $4 million, or 6%, driven by commercial loan fees and deposit related fees based on customer activity in the current year.

Gains on the sales of SBA loans increased $2 million in during the current.

Partially offsetting these increases was a decrease in income from bank owned life insurance of $2 million, resulting from higher death benefits received in the prior year.

Noninterest Expense

Noninterest expense decreased by $19.3 million, or 5.5%, to $329.5 million for the year ended December 31, 2022 from $348.8 million for the year ended December 31, 2021 due to decreases across the majority of expense categories.

Other expenses decreased $7.0 million, or 57.3%, to $5.2 million for the year ended December 31, 2022 from $12.3 million for the year ended December 31, 2021 driven by an increase in the discount rate used to calculate our pension liability and related pension expense.

Compensation and employee benefits decreased $5.5 million, or 2.9%, to $188.4 million for the year ended December 31, 2022 from $193.9 million for the year ended December 31, 2021, despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon the passing of our former Chief Executive Officer.

This decrease in compensation and employee benefits, as well as a $1.5 million, or 4.7%, decrease in premises and occupancy costs, to $29.6 million for the year ended December 31, 2022 from $31.1 million for the year ended December 31, 2021, was driven primarily by the branch consolidations completed in April 2022.

Processing expenses decreased $3.3 million, or 5.9%, to $52.5 million for the year ended December 31, 2022 from $55.8 million for the year ended December 31, 2021, due to the prior year investment in technology and infrastructure.

Professional services decreased $2.9 million, or 16.6%, to $14.7 million for the year ended December 31, 2022 from $17.6 million for the year ended December 31, 2021 primarily due to the utilization of third-party experts to assist with our digital strategy rollout during the prior year.

Lastly, amortization of intangible assets decreased $1.3 million, or 23.0%, to $4.3 million for the year ended December 31, 2022 compared to $5.6 million for the year ended December 31, 2021 due to previously acquired intangible assets being fully amortized.

These decreases were partially offset by an increase of $2.2 million, or 62.7%, in merger, asset disposition and restructuring expense to $5.6 million for the year ended December 31, 2022 from $3.5 million for the year ended December 31, 2021 due to severance and fixed asset charges related to the branch and personnel optimization to be completed during the first quarter of 2023.

Income Taxes.

The provision for income taxes decreased by $6.8 million, or 14.5%, to $40.0 million for the year ended December 31, 2022 from $46.8 million for the year ended December 31, 2021.

This decrease in income tax expense is primarily due to the $27.4 million, or 13.6%, decrease in pretax income to $173.7 million for the year ended December 31, 2022 from $201.1 million for the year ended December 31, 2021.

In addition, our effective tax rate for the year ended December 31, 2022 was 23.0% compared to 23.3% for the year ended December 31, 2021.

Breakdown of noninterest expense for the year ended December 31,

Change from 2023 Change from 2023

2024 Amount Percent 2023 Amount Percent 2022

Noninterest expense:

Compensation and employee benefits $ 214,455 18,764 10 % $ 195,691 7,332 4 % $ 188,359

Premises and occupancy 29,469 318 1 % 29,151 (467) (2) % 29,618

Processing expense 59,351 664 1 % 58,687 6,191 12 % 52,496

Professional services 14,883 (2,936) (16) % 17,819 3,116 21 % 14,703

Other operating expense (1) 50,379 173 — % 50,206 5,859 13 % 44,347

Total noninterest (loss)/income $ 368,537 16,983 5 % $ 351,554 22,031 7 % $ 329,523

(1) Other noninterest expense includes collections expense, marketing expense, FDIC insurance expense, amortization of intangible assets, real estate owned expense, merger, asset disposition and restructuring expense, and other expenses.

See th e “Consolidated Statements of Income” in Ite m 1.

Financial Statements of this report.

Noninterest expense increased $17 million, or 5%, from the year ended December 31, 2023.

This increase was primarily attributable to an increase in compensation and employee benefits expense of $19 million, or 10%, for the year ended December 31, 2024 driven primarily by the build out of the commercial business and related credit, risk management, and internal audit support functions over the past year coupled with an increase in contracted employees expense and an increase in employee benefits expense.

Partially offsetting this increase was a decrease in non-personnel expense related to professional services.

Professional services decreased $3 million, or 16% from the year ended December 31, 2023 primarily due to the use of third-party consulting and staffing support in the prior year.

The provision for income taxes decreased by $11 million, or 27%, from the year ended December 31, 2023 primarily due to lower income before taxes.

Our effective tax rate for the year ended December 31, 2024 was 22.6% compared to 22.9% for the year ended December 31, 2023.

Asset Quality

7 unchanged sentences

In addition, the borrower is given information which provides access to consumer counseling services to the extent required by the regulations of the Department of Housing and Urban Development and other applicable authorities.

When a loan continues in a delinquent status for 60 days or more, and a payment schedule has not been developed or kept by the borrower, we may send the borrower a notice of intent to foreclose, providing for cure periods of at least 30 days.

When a loan continues in a delinquent status for 60 days or more, and a payment

schedule has not been developed or kept by the borrower, we may send the borrower a notice of intent to foreclose, providing for cure periods of at least 30 days.

If not cured, foreclosure proceedings are initiated.

5 unchanged sentences

When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at the lower of the related loan balance or its fair value as determined by an appraisal, less estimated costs of disposal.

If the value of the property is less

than the principal balance, less any related specific credit loss reserve allocations, the difference is charged against the allowance for credit losses.

Any subsequent write-down of real estate owned or loss at the time of disposition is charged against earnings.

If the value of the property is less than the principal balance, less any related specific credit loss reserve allocations, the difference is charged against the allowance for credit losses.

Any subsequent write-down of real estate owned or loss at the time of disposition is charged against income.

Nonaccrual, Past Due, Restructured Loans and Nonperforming Assets .

26 unchanged sentences

Total nonperforming loans 62,057 97,082

Other nonperforming assets (1) 16,102 —

Total nonperforming assets $ 78,194 97,186

(1) Other nonperforming assets includes nonaccrual loans held for sale.

Classification of Assets .

5 unchanged sentences

Assets that do not expose the savings institution to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are required to be designated as “special mention”.

At December 31, 2023, we had 113 loans, with an aggregate principal balance of $130.8 million, designated as “special mention”.

At December 31, 2024, we ha d 130 loans, with an aggregate principal balance of $110 million, designated as “special mention”.

We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

10 unchanged sentences

This methodology was developed to provide a consistent process and review procedure to ensure that the allowance for credit losses is in conformity with GAAP, our policies and procedures and other supervisory and regulatory guidelines.

On an ongoing basis, the Credit Administration department, as well as loan officers, branch managers and department heads, review and monitor the loan portfolio for problem loans.

On an ongoing basis, the Credit Administration department, as well as loan officers and department heads, review and monitor the loan portfolio for problem loans.

This portfolio monitoring includes a review of the monthly delinquency reports as well as historical comparisons and trend analysis.

Personal and small business commercial loans are classified primarily by delinquency status.

In addition, a meeting is held every quarter with each region to monitor the performance and status of commercial loans on an internal watch list.

In addition, a meeting is held every quarter with each vertical to monitor the performance and status of commercial loans on an internal watch list.

On an on-going basis, the loan officer, in conjunction with a portfolio manager, grades or classifies problem commercial loans or potential problem commercial loans based upon their knowledge of the lending relationship and other information previously accumulated.

14 unchanged sentences

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

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

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

occupied and commercial loans.

The allowance for credit losses is measured using a combination of statistical models and qualitative assessments.

8 unchanged sentences

In addition to the ACL Committee’s review and approval, a review is performed by the Risk Management Committee of the Board of Directors on a quarterly basis and annually by internal audit.

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

In addition to the reviews by management’s ACL Committee and the Board of Directors’ Risk Management Committee, regulators from either the FDIC and/or the Department of Banking perform an extensive review on at least an annual basis for the adequacy of the ACL and its conformity with regulatory guidelines and pronouncements.

Any recommendations or enhancements from these independent parties are considered by management and the ACL Committee and implemented accordingly.

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In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations.

The ACL increased by $7.2 million, or 6.1%, to $125.2 million, or 1.10% of gross loans at December 31, 2023 from $118.0 million, or 1.08% of total loans, at December 31, 2022 .

This increase was the result of organic loan growth, as well as a continued deterioration in economic forecasts, specifically including a reduction in used vehicle prices, as well as increased vacancy rates and decreased rents impacting commercial real estate.

The ACL decreased by $8 million, or 7%, to $117 million, or 1.04% of gross loans at December 31, 2024 from $125 million, or 1.10% of total loans, at December 31, 2023.

This decrease was the result of the reduction in total loans of $226 million, coupled with the de-risking of our loan portfolio through the reduction of nonperforming, criticized and classified assets.

Quarterly, management’s Credit Committee reviews the concentration of credit by industry and customer, lending products and activity, competition and collateral values, as well as economic conditions in general and in each of our market areas.

The Credit Committee also reviews and discusses delinquency trends, nonperforming asset amounts and ACL levels and ratios compared to our peer group as well as state and national statistics.

We also consider how the levels of non-accrual loans and h istorical charge-offs have influenced the required amount of ACL.

Nonaccrual loans of $94.4 million, or 0.83% of total gross loans receivable at December 31, 2023, increased by $13.1 million, or 16.2%, from $81.2 million, or 0.74% of total gross loans receivable, at December 31, 2022.

This increase was primarily related to current commercial real estate loans.

As a percentage of average loans, net charge-offs increased to 0.11% for the year ended December 31, 2023 compared to 0.02% for the year ended December 31, 2022 due to some large recoveries in the prior year.

We also consider how the levels of non-accrual loans and historical charge-offs have influenced the required amount of ACL.

Nonaccrual loans of $61 million, or 0.55% of total gross loans receivable at December 31, 2024, decreased by $33 million, or 35%, from $94 million, or 0.83% of total gross loans receivable, at December 31, 2023.

This decrease was primarily related to current commercial real estate loans that resulted from the loan sales and loans moved to held-for-sale as of year end.

As a percentage of average loans, net charge-offs increased to 0.32% for the year ended December 31, 2024 compared to 0.11% due to the loans noted above being written-down to fair value prior to the sale.

Total charge-offs related to the loan sales and transfer to loans held-for-sale was a combined $15 million.

Analysis of the Allowance for Credit Losses .

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(1) Represents percentage of loans in each category to total loans.

Average Balance Sheets

The following table sets forth average balance sheets, average yields, on a fully taxable equivalent (“FTE”) basis, and average costs, and certain other information at and for the periods indicated.

All average balances are daily average balances.

Non-accrual loans are included in the computation of average balances.

The yields set forth below include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income or expense.

The effect of these fees is not considered material.

The average yield for loans receivable and investment securities are calculated on a FTE basis.

There were no out-of-period adjustments or other exclusions from the amounts presented in the table.

For the years ended December 31,

2023 2022 2021

balance Interest Average

(Dollars in thousands)

Interest-earning assets:

Loans receivable (includes FTE adjustments of $2,477, $1,954, and $1,922, respectively) (1), (2), (3) $ 11,100,118 546,136 4.92 % $ 10,318,898 409,782 3.97 % $ 10,239,620 392,265 3.83 %

Mortgage-backed securities (4) 1,822,375 32,886 1.80 % 1,968,528 30,804 1.56 % 1,704,006 21,463 1.26 %

Investment securities (includes FTE adjustments of $704, $834, and $747, respectively) (4), (5) 357,436 6,312 1.77 % 381,518 6,671 1.75 % 350,806 5,848 1.67 %

FHLB stock, at cost 39,467 2,868 7.27 % 17,065 730 4.27 % 20,229 407 2.01 %

Interest-earning deposits 47,787 2,901 6.07 % 567,609 3,599 0.63 % 921,360 1,194 0.13 %

Total interest-earning assets (includes FTE adjustments of $3,181, $2,788, and $2,669, respectively) 13,367,183 591,103 4.42 % 13,253,618 451,586 3.41 % 13,236,021 421,177 3.18 %

Noninterest-earning assets (6) 902,626 924,080 1,072,313

Total assets $ 14,269,809 $ 14,177,698 $ 14,308,334

Interest-bearing liabilities:

Savings deposits $ 2,148,127 8,822 0.41 % $ 2,336,217 2,343 0.10 % $ 2,232,454 2,440 0.11 %

Interest-bearing demand deposits 2,556,281 11,606 0.45 % 2,810,889 1,517 0.05 % 2,862,677 1,660 0.06 %

Money market deposit accounts 2,183,583 24,734 1.13 % 2,613,422 3,377 0.13 % 2,554,975 2,570 0.10 %

Time deposits 1,913,372 60,181 3.15 % 1,161,432 6,883 0.59 % 1,463,522 12,452 0.85 %

Borrowed funds (7) 691,636 32,903 4.76 % 212,026 4,531 2.14 % 135,285 616 0.46 %

Subordinated debt 114,002 4,592 4.03 % 117,625 4,750 4.04 % 123,457 4,980 4.03 %

Junior subordinated debentures 129,434 9,401 7.26 % 129,175 4,716 3.60 % 128,915 2,528 1.93 %

Total interest-bearing liabilities 9,736,435 152,239 1.56 % 9,380,786 28,117 0.30 % 9,501,285 27,246 0.29 %

Noninterest-bearing demand deposits (8) 2,785,279 3,070,892 2,999,392

Noninterest-bearing liabilities 237,810 207,316 250,075

Total liabilities 12,759,524 12,658,994 12,750,752

Shareholders’ equity 1,510,285 1,518,704 1,557,582

Total liabilities and shareholders’ equity $ 14,269,809 $ 14,177,698 $ 14,308,334

Net interest income 438,864 423,469 393,931

Net interest rate spread (9) 2.86 % 3.11 % 2.89 %

Net interest-earning assets/net interest margin (10) $ 3,630,748 3.28 % $ 3,872,832 3.20 % $ 3,734,736 2.98 %

Ratio of average interest-earning assets to average interest-bearing liabilities 1.37X 1.41X 1.39X

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

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

(3) Interest income on tax-free loans is presented on a FTE basis including adjustments, as indicated.

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

(5) Interest income on tax-free investment securities is presented on a FTE basis including adjustments, as indicated.

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

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

(8) Average cost of deposits was 0.91%, 0.12% and 0.16%, respectively and average cost of interest-bearing deposits were 1.20%, 0.16%, and 0.21%, respectively.

(9) Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(10) Net interest margin represents net interest income as a percentage of average interest-earning assets.

(11) Shown on a FTE basis and in consideration of applicable current federal, state and local tax rates.

GAAP basis yields for the years ended December 31, 2023, 2022 and 2021 were - Loans:

4.90%, 3.95%, and 3.81%, respectively, Investment securities:

1.57%, 1.53%, and 1.45%, respectively, Interest-earning assets:

4.40%, 3.39%, and 3.16%, respectively.

GAAP basis net interest rate spreads were 2.83%, 3.09%, and 2.88%, respectively, and GAAP basis net interest margins were 3.26%, 3.17%, and 2.96% respectively.

Rate/Volume Analysis

The following table presents, on a FTE basis, the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities for the year ended December 31, 2023 compared to 2022 and for the year ended December 31, 2022 compared to 2021.

For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to:

(1) changes in volume multiplied by the prior year rate;

(2) changes in rate multiplied by the prior year volume;

and (3) the total increase or decrease.

Changes not solely attributable to rate or volume have been allocated proportionately to the change due to volume and the change due to rate.

There were no out-of-period adjustments or other exclusions from the amounts presented in the table.

Years ended December 31, 2023 vs.

2022 Years ended December 31, 2022 vs.

Increase/(decrease)

increase/(decrease) Increase/(decrease)

increase/(decrease)

Rate Volume Rate Volume

(In thousands)

Interest-earning assets:

Loans receivable $ 97,916 38,438 136,354 14,458 3,059 17,517

Mortgage-backed securities 4,720 (2,638) 2,082 5,194 4,147 9,341

Investment securities 67 (426) (359) 275 548 823

FHLB stock, at cost 510 1,628 2,138 458 (135) 323

Interest-earning deposits 30,861 (31,559) (698) 4,564 (2,159) 2,405

Total interest-earning assets 134,074 5,443 139,517 24,949 5,460 30,409

Interest-bearing liabilities:

Savings deposits 7,251 (772) 6,479 (217) 120 (97)

Interest-bearing demand deposits 11,245 (1,156) 10,089 (172) 29 (143)

Money market deposit accounts 26,226 (4,869) 21,357 746 61 807

Time deposits 29,647 23,651 53,298 (3,767) (1,802) (5,569)

Borrowed funds 5,555 22,817 28,372 2,269 1,646 3,915

Subordinated debt (12) (146) (158) 10 (240) (230)

Junior subordinated debentures 4,667 18 4,685 2,184 4 2,188

Total interest-bearing liabilities 84,579 39,543 124,122 1,053 (182) 871

Net change in net interest income $ 49,495 (34,100) 15,395 23,896 5,642 29,538

Liquidity and Capital Resources

Northwest Bank is required to maintain a sufficient level of liquid assets, as determined by management and defined and reviewed for adequacy by the FDIC during their regular examinations.

Northwest Bank is required to maintain a sufficient level of liquid assets, as determined by management and defined by the FDIC and reviewed for adequacy during the FDIC’s regular examinations.

The FDIC, however, does not prescribe by regulation a minimum amount or percentage of liquid assets.

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Liquidity needs can also be met by temporarily drawing upon lines-of-credit established for such reasons.

Following the first quarter of 2023 bank failures, the Federal Reserve Board (“FRB”) established the Bank Term Funding Program (“BTFP”) as an additional source of available liquidity to support depository institutions through pledging qualifying assets as collateral.

The Bank has taken steps to support readiness but has not participated through December 31, 2023.

In January 2024, the FRB announced it will stop extending loans under the BTFP after March 11, 2024.

At December 31, 2023, Northwest Bank had $3.286 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250.0 million overnight line of credit, which had a balance of $163.5 million at December 31, 2023, as well as $297.5 million of borrowing capacity available with the Federal Reserve Bank and $105.0 million with two correspondent banks.

Following the first quarter of 2023 bank failures, the Federal Reserve Board established the Bank Term Funding Program (“BTFP”) as an additional source of available liquidity to support depository institutions through pledging qualifying assets as collateral.

In January 2024, the Federal Reserve Board announced it will stop extending loans under the BTFP after March 11, 2024.

The Bank took steps to support readiness but did not participate in the BTFP.

At December 31, 2024, Northwest Bank had $3.2 billion of additional borrowing capacity available with the FHLB of Pittsburgh, including a $250 million overnight line of credit, which had no balance at December 31, 2024, as well as $555 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.

We believe the Bank has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

2 unchanged sentences

We manage the pricing of our deposits to maintain a desired deposit balance.

In addition, we invest excess funds in short-term interest earning and

other assets, which provide liquidity to meet lending requirements.

Short-term interest-earning deposits amounted to $35.9 million at December 31, 2023.

In addition, we invest excess funds in short-term interest earning and other assets, which provide liquidity to meet lending requirements.

There were no short-term interest-earning deposits at December 31, 2024.

For additional information about our cash flows from operating, financing, and investing activities, see the Consolidated Statements of Cash Flows included in the Consolidated Financial Statements.

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Financial institutions, such as Northwest Bank, are also subject to deposit outflows.

Our net deposits increased by $515.4 million for the year ended December 31, 2023, decreased by $836.6 million for the year ended December 31, 2022, and increased by $701.9 million for the year ended December 31, 2021.

Our net deposits increased by $165 million for the year ended December 31, 2024, increased by $515 million for the year ended December 31, 2023, and decreased by $837 million for the year ended December 31, 2022.

Similarly, the amount of principal repayments on loans and the amount of new loan originations is heavily influenced by the general level of market interest rates, consumer confidence and consumer spending.

5 unchanged sentences

When necessary, we utilize borrowings as a source of liquidity and as a source of funds for long-term investment when market conditions permit.

The net cash flow from the receipt and repayment of borrowings was a net decrease of $282.3 million, a net increase of $532.0 million, and a net decrease of $20.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The net cash flow from the receipt and repayment of borrowings was a net decrease of $199 million, a net decrease of $282 million, and a net increase of $532 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Northwest Bancshares, Inc.

4 unchanged sentences

At December 31, 2024, Northwest Bancshares, Inc.

(on an unconsolidated basis) had liquid assets of $276.0 million.

(on an unconsolidated basis) had liquid assets of $239 mil lion.

Other activity with respect to cash flow was the payment of cash dividends on common stock in the amount of $102 million, $102 million, and $101 million for years the ended December 31, 2024, 2023 and 2022, respectively.

1 unchanged sentence

During 2024, our Board of Directors declared regular quarterly cash dividends totaling $0.80 per share of common stock.

We monitor the capital levels of Northwest Bank to provide for current and future business opportunities and to meet regulatory guidelines for “well capitalized” institutions.

Northwest Bank is required by the Pennsylvania Department of Banking and Securities and the FDIC to meet minimum capital adequacy requirements.

At December 31, 2023, Northwest Bank exceeded all regulatory minimum capital requirements and is considered to be “well capitalized”.

In addition, as of December 31, 2023, we were not aware of any recommendation by a regulatory authority that, if it were implemented, would have a material effect on liquidity, capital resources or operations.

Regulatory Capital Requirements.

Northwest Bank is subject to minimum capital requirements established by the FDIC.

Business Supervision and Regulation — Capital Requirements and Prompt Corrective Action”.

The following table summarizes Northwest Bank’s total shareholders’ equity, regulatory capital, total risk-based assets, and leverage and risk-based capital ratios at the dates indicated.

At December 31,

(Dollars in thousands)

Northwest Bancshares, Inc.

and Northwest Bank are required to meet minimum capital requirements and subject to “well capitalized” standards established by the Federal Reserve Board and FDIC, respectively.

Business—Supervision and Regulation—Federal Bank Holding Company Regulation—Capital Requirements and Prompt Corrective Action” and “Item 1.

Business—Supervision and Regulation—Federal Banking Regulation—Prompt Corrective Action.

At December 31, 2024, Northwest Bancshares, Inc.

and Northwest Bank exceeded all regulatory minimum capital requirements and were considered to be “well capitalized”.

The following table summarizes Northwest Bancshares and Northwest Bank’s total shareholders’ equity, regulatory capital, total risk-based assets, and leverage and risk-based capital ratios at the dates indicated.

Northwest Bancshares, Inc.

Northwest Bank

At December 31, At December 31,

2024 2023 2024 2023

(Dollars in thousands) (Dollars in thousands)

Total shareholders’equity (GAAP capital)

1 unchanged sentence

Accumulated other comprehensive loss 110,914 149,492 110,914 149,492

Other deductions (11,617) (11,645) (11,617) (11,645)

non-qualifying intangible assets (357,799) (269,982) (353,706) (265,889)

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(1) Tier 2 capital consists of the allowance for credit losses, which is limited to 1.25% of total risk-weighted assets as detailed under the regulations of the FDIC, and 45% of pre-tax net unrealized gains on securities available-for-sale.

Northwest Bank is also subject to capital guidelines of the Pennsylvania Department of Banking.

Northwest Bank is also subject to capital guidelines of the Department of Banking.

Although not adopted in regulation form, the Department of Banking requires 6% leverage capital and 10% total risk-based capital.

Business — Supervision and Regulation — Capital Requirements and Prompt Corrective Action”.

Business—Supervision and Regulation—Pennsylvania Savings Bank Law”.

Contractual Obligations.

30 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis