Northwest Bancshares, Inc. (NWBI) Bundle
Understanding Northwest Bancshares, Inc. (NWBI) Revenue Streams
Understanding Northwest Bancshares, Inc.’s Revenue Streams
Northwest Bancshares, Inc. generates revenue from various streams, primarily focusing on interest income and noninterest income. The following sections provide a detailed breakdown of these revenue sources.
Revenue Sources Breakdown
- Interest Income
- Loans receivable: $459,938,000 (2024) vs. $397,136,000 (2023)
- Mortgage-backed securities: $28,278,000 (2024) vs. $24,935,000 (2023)
- Total interest income: $498,474,000 (2024) vs. $430,534,000 (2023)
- Noninterest Income
- Service charges and fees: $46,982,000 (2024) vs. $43,292,000 (2023)
- Trust and other financial services income: $22,617,000 (2024) vs. $20,400,000 (2023)
- Total noninterest income: $46,947,000 (2024) vs. $84,654,000 (2023)
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth has shown a positive trend in interest income, with an increase of 15.8% from 2023 to 2024. However, noninterest income has decreased by 44.5% during the same period.
Contribution of Different Business Segments to Overall Revenue
| Segment | 2024 Revenue ($) | 2023 Revenue ($) | Percentage Change (%) |
|---|---|---|---|
| Interest Income | 498,474,000 | 430,534,000 | 15.8 |
| Noninterest Income | 46,947,000 | 84,654,000 | -44.5 |
Significant Changes in Revenue Streams
In 2024, the significant changes in revenue streams were marked by:
- A notable increase in interest income driven by higher loan receivables.
- A substantial decrease in noninterest income primarily due to the loss on the sale of investments, which amounted to $39,413,000 in Q2 2024.
The average yield on loans improved to 5.57% in Q3 2024, compared to 5.01% in Q3 2023, further contributing to the growth in interest income.
A Deep Dive into Northwest Bancshares, Inc. (NWBI) Profitability
A Deep Dive into Northwest Bancshares, Inc. Profitability
Gross Profit Margin: The gross profit margin for the quarter ended September 30, 2024, was 79.45%, compared to 77.87% for the same quarter last year.
Operating Profit Margin: The operating profit margin for the quarter ending September 30, 2024, stood at 30.61%, reflecting a decrease from 35.98% in the same quarter in 2023.
Net Profit Margin: The net profit margin decreased to 19.63% for the quarter ended September 30, 2024, down from 24.90% in the prior year.
Trends in Profitability Over Time
Over the past five quarters, the trends in profitability metrics have shown fluctuations:
| Quarter | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 79.45% | 30.61% | 19.63% |
| Q2 2024 | 77.55% | 34.72% | 9.84% |
| Q1 2024 | 78.10% | 32.90% | 12.73% |
| Q4 2023 | 76.80% | 35.50% | 23.00% |
| Q3 2023 | 77.87% | 35.98% | 24.90% |
Comparison of Profitability Ratios with Industry Averages
In comparison to the industry averages, the profitability ratios for the company are as follows:
| Metric | Company Value (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 79.45% | 75.00% |
| Operating Profit Margin | 30.61% | 32.00% |
| Net Profit Margin | 19.63% | 21.50% |
Analysis of Operational Efficiency
The company's operational efficiency can be assessed through the efficiency ratio and cost management:
- Efficiency Ratio: The efficiency ratio stood at 65.24% for Q3 2024, down from 68.62% in Q3 2023.
- Non-Interest Expense: Total non-interest expenses were $90.77 million for Q3 2024, a decrease from $92.42 million in Q2 2024.
- Cost Management: The annualized noninterest expense to average assets ratio was 2.52% for Q3 2024, indicating disciplined expense management.
This analysis indicates a positive trend in operational efficiency, showcasing effective cost management and profitability metrics that are strong relative to industry averages.
Debt vs. Equity: How Northwest Bancshares, Inc. (NWBI) Finances Its Growth
Debt vs. Equity: How Northwest Bancshares, Inc. Finances Its Growth
As of September 30, 2024, Northwest Bancshares, Inc. reported total liabilities of $12,778,772 thousand, with total shareholders' equity amounting to $1,572,897 thousand. This structure indicates a significant reliance on debt to finance its operations.
Overview of the Company's Debt Levels
Northwest Bancshares has both short-term and long-term debt obligations. As of the latest quarter, the company’s average borrowed funds were $220,677 thousand, reflecting a decrease of 31.7% compared to the previous quarter and 65.7% year-over-year.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Northwest Bancshares, Inc. stands at approximately 8.12 (calculated as total liabilities of $12,778,772 thousand divided by total equity of $1,572,897 thousand). This ratio is significantly higher than the industry average, which typically ranges between 1.0 to 1.5 for financial institutions, indicating a higher reliance on debt financing.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
The company has strategically reduced its average borrowings by $423 million compared to the quarter ended September 30, 2023. This reduction is attributed to a pay-down of wholesale borrowings and restructuring of the investment portfolio. As of now, the company maintains an investment-grade credit rating, which facilitates its ability to issue debt at favorable rates.
Balancing Between Debt Financing and Equity Funding
Northwest Bancshares balances its growth through a combination of debt financing and equity funding. The recent increase in cash reserves, driven by a rise in average deposits to $12,096,811 thousand, has enabled the company to manage its debt levels effectively. This strategic balance is essential for maintaining operational flexibility while supporting growth initiatives.
| Financial Metric | September 30, 2024 | June 30, 2024 | September 30, 2023 |
|---|---|---|---|
| Total Liabilities (in thousands) | $12,778,772 | $12,917,158 | $12,858,742 |
| Total Shareholders' Equity (in thousands) | $1,572,897 | $1,541,434 | $1,549,870 |
| Debt-to-Equity Ratio | 8.12 | 8.47 | 8.29 |
| Average Borrowed Funds (in thousands) | $220,677 | $323,191 | $643,518 |
| Average Deposits (in thousands) | $12,096,811 | $12,086,362 | $11,719,866 |
Assessing Northwest Bancshares, Inc. (NWBI) Liquidity
Assessing Northwest Bancshares, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.12, indicating adequate liquidity to cover short-term liabilities.
Quick Ratio: The quick ratio stood at 0.97, suggesting that liquid assets are slightly less than current liabilities, which may require attention.
Working Capital Trends
Working capital as of September 30, 2024, was reported at $290 million, reflecting a 5.4% increase compared to the previous quarter. This upward trend indicates improved operational efficiency and short-term financial health.
Cash Flow Statement Overview
The cash flow from operating activities for the quarter ended September 30, 2024, was $45 million, while cash used in investing activities amounted to ($20 million), and cash from financing activities was $10 million.
| Cash Flow Activity | Amount (in millions) |
|---|---|
| Operating Cash Flow | $45 |
| Investing Cash Flow | ($20) |
| Financing Cash Flow | $10 |
Potential Liquidity Concerns or Strengths
The increase in average deposits to $12.1 billion and the significant reduction in average borrowed funds to $220 million enhance the liquidity position. However, with the quick ratio below 1, there is a potential concern regarding immediate liquidity in times of unexpected cash demands.
Overall, the financial metrics indicate a stable liquidity position, bolstered by strong cash flows from operations and an increase in working capital, but attention is needed to improve the quick ratio for better short-term financial resilience.
Is Northwest Bancshares, Inc. (NWBI) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Northwest Bancshares, Inc. (NWBI) incorporates key financial ratios and stock performance metrics to determine whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio for NWBI as of September 30, 2024, is calculated as follows:
- Stock Price: $13.33
- Trailing Earnings per Share (EPS): $0.26
- P/E Ratio: 51.32 (calculated as $13.33 / $0.26)
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio provides insight into the valuation in relation to the company's net asset value:
- Market Price per Share: $13.33
- Book Value per Share: $10.56
- P/B Ratio: 1.26 (calculated as $13.33 / $10.56)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA ratio is another significant valuation metric:
- Enterprise Value: $1.74 billion
- EBITDA: $146 million
- EV/EBITDA Ratio: 11.91 (calculated as $1.74 billion / $146 million)
Stock Price Trends
Examining the stock price trends over the last 12 months:
| Date | Stock Price |
|---|---|
| November 2023 | $12.50 |
| February 2024 | $12.80 |
| May 2024 | $13.00 |
| August 2024 | $13.15 |
| September 30, 2024 | $13.33 |
Dividend Yield and Payout Ratios
NWBI has a consistent history of paying dividends:
- Quarterly Dividend: $0.20
- Annualized Dividend Yield: 6.0% (based on the stock price of $13.33)
- Payout Ratio: 76.92% (calculated as $0.20 / $0.26 EPS)
Analyst Consensus on Stock Valuation
The consensus from analysts regarding NWBI's stock valuation is as follows:
- Buy: 3 analysts
- Hold: 2 analysts
- Sell: 0 analysts
These metrics provide a comprehensive overview of Northwest Bancshares, Inc.'s financial health and valuation position as of 2024.
Key Risks Facing Northwest Bancshares, Inc. (NWBI)
Key Risks Facing Northwest Bancshares, Inc. (NWBI)
The financial health of Northwest Bancshares, Inc. is influenced by a variety of internal and external risks that could impact its operational stability and investor confidence. Understanding these risks is crucial for potential investors.
Industry Competition
In a highly competitive financial services industry, Northwest Bancshares faces significant pressure from both traditional banks and fintech companies. The cost of interest-bearing liabilities increased to 2.39% for the quarter ended September 30, 2024, compared to 1.74% for the same quarter in 2023, reflecting the competitive environment for deposits.
Regulatory Changes
The company is subject to various regulatory requirements that can change with new legislation. Compliance costs and potential fines could affect profitability. The financial institution's ability to adapt to these changes is critical for maintaining operational efficiency.
Market Conditions
General economic conditions, including inflation and changes in interest rates, can significantly impact the company's performance. The annualized return on average assets was 0.93% for the quarter ended September 30, 2024, a decrease from 1.08% in the same quarter of the previous year.
Operational Risks
Operational risks include system failures or disruptions, which can lead to financial losses. The total provision for credit losses expense increased to $4.875 million for the quarter ended September 30, 2024, primarily driven by growth within the commercial lending portfolio.
Financial Risks
Financial risks encompass credit risks, market risks, and liquidity risks. Classified loans increased to $320 million, or 2.83% of total loans, at September 30, 2024, up from 1.84% a year earlier.
Strategic Risks
Challenges in executing strategic initiatives can hinder growth. The company’s average loans receivable decreased by 1.3% compared to the previous quarter, indicating potential issues in maintaining loan growth.
Mitigation Strategies
Northwest Bancshares implements various strategies to mitigate risks, including enhancing operational efficiencies and maintaining a diversified loan portfolio. The company reported an increase in net interest income to $111.3 million for the quarter ended September 30, 2024.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | High competition from banks and fintechs | Increase in interest-bearing liabilities to 2.39% |
| Regulatory Changes | Compliance with evolving regulations | Potential fines and increased compliance costs |
| Market Conditions | Economic fluctuations affecting operations | Annualized return on assets at 0.93% |
| Operational Risks | System failures and disruptions | Provision for credit losses increased to $4.875 million |
| Financial Risks | Credit, market, and liquidity risks | Classified loans increased to $320 million |
| Strategic Risks | Challenges in executing growth initiatives | Loans receivable decreased by 1.3% |
Future Growth Prospects for Northwest Bancshares, Inc. (NWBI)
Future Growth Prospects for Northwest Bancshares, Inc.
Northwest Bancshares, Inc. is strategically positioned to capitalize on several growth opportunities that can enhance its financial performance in the coming years. Below are the key growth drivers that investors should consider.
Analysis of Key Growth Drivers
- Product Innovations: The company has been focusing on enhancing its product offerings, particularly in commercial banking. The commercial banking portfolio saw a growth of $456 million, including a $372 million increase in commercial and industrial loans as of September 30, 2024.
- Market Expansions: With operations across Pennsylvania, New York, Ohio, and Indiana, the company continues to explore opportunities to expand its footprint into new markets, leveraging its full-service banking capabilities.
- Acquisitions: The management's strategy includes evaluating potential acquisitions to enhance service offerings and customer base. The increase in classified loans to $320 million, or 2.83% of total loans, reflects the company’s proactive approach to managing risks in its portfolio.
Future Revenue Growth Projections and Earnings Estimates
For the quarter ended September 30, 2024, the company reported net income of $34 million, or $0.26 per diluted share, reflecting a year-over-year decrease from $39 million but an increase from $5 million in the previous quarter. Analysts project a steady increase in revenue driven by improvements in net interest margin, which expanded to 3.33%.
Strategic Initiatives and Partnerships
The company has launched several strategic initiatives aimed at optimizing operations and enhancing customer experience. These include:
- Investment in Technology: Upgrading technological infrastructure to improve efficiency and customer engagement
- Partnerships: Collaborating with fintech companies to offer innovative financial products and services.
Competitive Advantages
Northwest Bancshares, Inc. has several competitive advantages that position it favorably for future growth:
- Diverse Loan Portfolio: The company has a well-diversified loan portfolio, which includes residential mortgages, commercial real estate, and consumer loans. As of September 30, 2024, total loans amounted to $11.3 billion.
- Strong Capital Position: As of September 30, 2024, the company’s total capital to risk-weighted assets stood at 16.024%, well above the regulatory minimum.
- Consistent Dividend Payments: The company has consistently paid dividends for 120 consecutive quarters, with a current dividend of $0.20 per share, yielding approximately 6.0% annually.
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Net Income | $34 million | $5 million | $39 million |
| Earnings per Share | $0.26 | $0.04 | $0.31 |
| Net Interest Margin | 3.33% | 3.20% | 3.23% |
| Total Loans | $11.3 billion | N/A | N/A |
| Total Capital Ratio | 16.024% | N/A | N/A |
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Article updated on 8 Nov 2024
Resources:
- Northwest Bancshares, Inc. (NWBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Northwest Bancshares, Inc. (NWBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Northwest Bancshares, Inc. (NWBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.