July 30, 2013
Via EDGAR
Ms. Sharon M. Blume
Assistant Chief Accountant
Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 4720
Washington, D.C. 20549
Re: | Northwest Bancshares, Inc. |
|
| Form 10-K for the Fiscal Year Ended December 31, 2012 |
|
| Filed March 1, 2013 |
|
| File No. 001-34582 |
|
Dear Ms. Blume:
The following are responses to the comment letter from the U.S. Securities and Exchange Commission to Northwest Bancshares, Inc. (the “Company”) dated July 17, 2013. For ease of reference the comments have been reproduced below.
Form 10K for the Fiscal Year Ended December 31, 2012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Asset Quality
Loans Past Due and Nonperforming Assets, page 52
1. Please tell us and expand future filings to present the table of nonaccrual, past due and restructured loans pursuant to Item III C 1 of Guide III. In this regard, you may present nonperforming loans which would be defined as nonaccrual loans (including nonperforming trouble-debt restructured loans) and loans 90 days or more past due and still accruing. Nonperforming assets would include nonperforming loans and real estate owned.
In future filings, we will expand our table on page 52 to include nonperforming loans and assets. These disclosures will include nonaccrual loans and loans 90 days or more past due and still accruing. The following table illustrates the changes that will be made in future filings and provides the requested data.
Nonaccrual, Past Due, Restructured Loans and Nonperforming Assets. The following table sets forth information regarding our nonaccrual, past due and restructured loans and nonperforming assets. Generally, when a loan is 90 days or more past due, we fully reverse all accrued interest thereon and cease to accrue interest thereafter. Exceptions are made for loans that have contractually matured, are in the process of being modified to extend the maturity date and are otherwise current as to principal or interest and well secured loans that are in the process of collection.
|
| At December 31, |
| |||||||||
|
| 2012 |
| 2011 |
| 2010 |
| 2009 |
| 2008 |
| |
|
| (Dollars in thousands) |
| |||||||||
Loans 90 days or more past due: |
|
|
|
|
|
|
|
|
|
|
| |
Residential mortgage loans |
| $ | 24,286 |
| 28,221 |
| 29,751 |
| 29,134 |
| 20,309 |
|
Home equity loans |
| 8,479 |
| 9,560 |
| 10,263 |
| 10,008 |
| 7,817 |
| |
Other consumer loans |
| 1,936 |
| 2,667 |
| 2,565 |
| 2,775 |
| 2,065 |
| |
Commercial real estate loans |
| 26,248 |
| 45,113 |
| 44,965 |
| 49,594 |
| 43,828 |
| |
Commercial loans |
| 9,096 |
| 10,785 |
| 12,877 |
| 18,269 |
| 25,184 |
| |
Total loans 90 days or more past due |
| $ | 70,045 |
| 96,346 |
| 100,421 |
| 109,780 |
| 99,203 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total real estate owned (REO) |
| 26,165 |
| 26,887 |
| 20,780 |
| 20,257 |
| 16,844 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Total loans 90 days or more past due and REO |
| 96,210 |
| 123,233 |
| 121,201 |
| 130,037 |
| 116,047 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Total loans 90 days or more past due to net loans receivable |
| 1.21 | % | 1.75 | % | 1.84 | % | 2.10 | % | 1.93 | % | |
|
|
|
|
|
|
|
|
|
|
|
| |
Total loans 90 days or more past due and REO to total assets |
| 1.19 | % | 1.54 | % | 1.49 | % | 1.63 | % | 1.67 | % | |
Nonperforming assets: |
|
|
|
|
|
|
|
|
|
|
| |
Nonaccrual loans - loans 90 days or more past due |
| $ | 68,347 |
| 95,836 |
| 100,421 |
| 109,780 |
| 99,203 |
|
Nonaccrual loans - loans less than 90 days past due |
| 51,865 |
| 35,269 |
| 47,970 |
| — |
| — |
| |
Loans 90 days or more past due still accruing |
| 1,698 |
| 510 |
| — |
| — |
| — |
| |
Total nonperforming loans |
| 121,910 |
| 131,615 |
| 148,391 |
| 109,780 |
| 99,203 |
| |
Total nonperforming assets |
| $ | 148,075 |
| 158,502 |
| 169,171 |
| 130,037 |
| 116,047 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nonaccrual troubled debt restructured loans * |
| $ | 41,166 |
| 29,575 |
| 41,740 |
| 2,908 |
| — |
|
Accruing troubled debt restructured loans |
| 48,278 |
| 39,854 |
| 10,865 |
| 18,177 |
| — |
| |
Total troubled debt restructured loans |
| $ | 89,444 |
| 69,429 |
| 52,605 |
| 21,085 |
| — |
|
* Also included in “nonaccrual loans” above
Item 8. Financial Statements and Supplementary Data
Financial Statements
Note (1) Summary of Significant Accounting Policies
(d) Investment Securities, page 73
2. Please tell us and expand future filings to include your impairment policy with regard to Federal Home Loan Bank stock.
On an ongoing basis, we evaluate our Federal Home Loan Bank stock for impairment. Our evaluation includes factors such as recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes related to the Federal Home Loan Bank.
In future filings we will revise the disclosure on page 73 as follows:
Federal law requires a member institution of the Federal Home Loan Bank (FHLB) system to hold stock of its district FHLB according to a predetermined formula. This stock is recorded at cost. Quarterly, we evaluate our investment in the FHLB of Pittsburgh for impairment. We evaluate recent and long-term operating performance, liquidity, funding and capital positions, stock repurchase history, dividend history and impact of legislative and regulatory changes. Based on our most recent evaluation, we have determined that no impairment write-downs are currently required.
Note (4) Loans Receivable and Allowance for Loan Losses, Page 94
3. Please tell us whether you have re-modified any troubled-debt restructurings (“TDRs”) during the periods presented. If so, tell us and expand future filings to describe the types of re-modifications made and quantify the related amounts.
During the year ended December 31, 2012, twelve TDRs totaling approximately $8.8 million were re-modified. The following table illustrates the number of loans and types of modifications that were made. In future filings we will add this table to our discussion of TDRs on page 92.
|
|
|
| Type of modification |
|
|
| |||||||
|
| Number of re- |
| Rate |
| Payment |
| Maturity |
| Other |
| Total |
| |
Personal Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Residental mortgage loans |
| — |
| $ | — |
| — |
| — |
| — |
| — |
|
Home equity loans |
| — |
| — |
| — |
| — |
| — |
| — |
| |
Other consumer loans |
| — |
| — |
| — |
| — |
| — |
| — |
| |
Total Personal Banking |
| — |
| — |
| — |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Business Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial real estate loans |
| 5 |
| 800 |
| — |
| 1,662 |
| 231 |
| 2,693 |
| |
Commercial loans |
| 7 |
| 1,747 |
| — |
| 4,077 |
| 304 |
| 6,128 |
| |
Total Business Banking |
| 12 |
| 2,547 |
| — |
| 5,739 |
| 535 |
| 8,821 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total |
| 12 |
| $ | 2,547 |
| — |
| 5,739 |
| 535 |
| 8,821 |
|
4. Please tell us and expand the disclosure in future filings to state the amounts of the allowance related to TDRs held for each period presented and if the company has commitments to lend additional amounts to customers with outstanding loans that are classified as TDRs. In addition, tell us and expand the disclosures to provide a TDR rollforward in future filings.
In future filings, we will expand our disclosures, beginning on page 88, to include the allowance related to TDRs held at period end, additional commitments to lend to customers with outstanding loans classified as TDRs and a rollforward of TDR balances.
The following tables illustrate the changes that will be made in future filings and provide the requested data as of December 31, 2012.
The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable as of December 31, 2012:
|
| Recorded |
| Allowance for |
| Recorded |
| Recorded |
| TDRs |
| Allowance |
| Additional |
| |
Personal Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Residental mortgage loans |
| $ | 2,415,649 |
| 8,002 |
| 25,083 |
| 9 |
| 5,045 |
| 1,074 |
| — |
|
Home equity loans |
| 1,076,637 |
| 8,294 |
| 9,114 |
| 2 |
| 1,891 |
| 266 |
| — |
| |
Other consumer loans |
| 235,367 |
| 5,156 |
| 1,980 |
| 776 |
| — |
| — |
| — |
| |
Total Personal Banking |
| 3,727,653 |
| 21,452 |
| 36,177 |
| 787 |
| 6,936 |
| 1,340 |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Business Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial real estate loans |
| 1,585,833 |
| 34,499 |
| 57,861 |
| 388 |
| 49,826 |
| 7,322 |
| 391 |
| |
Commercial loans |
| 388,994 |
| 13,242 |
| 26,174 |
| 523 |
| 32,682 |
| 4,112 |
| 2,596 |
| |
Total Business Banking |
| 1,974,827 |
| 47,741 |
| 84,035 |
| 911 |
| 82,508 |
| 11,434 |
| 2,987 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total |
| $ | 5,702,480 |
| 69,193 |
| 120,212 |
| 1,698 |
| 89,444 |
| 12,774 |
| 2,987 |
|
The following table provides information related to the loan portfolio by portfolio segment and by class of financing receivable as of December 31, 2011:
|
| Recorded |
| Allowance for |
| Recorded |
| Recorded |
| TDRs |
| Allowance |
| Additional |
| |
Personal Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Residental mortgage loans |
| $ | 2,397,366 |
| 8,482 |
| 28,221 |
| 12 |
| 806 |
| 128 |
| — |
|
Home equity loans |
| 1,084,786 |
| 8,687 |
| 9,560 |
| 221 |
| — |
| — |
| — |
| |
Other consumer loans |
| 245,689 |
| 5,325 |
| 2,667 |
| 277 |
| — |
| — |
| — |
| |
Total Personal Banking |
| 3,727,841 |
| 22,494 |
| 40,448 |
| 510 |
| 806 |
| 128 |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Business Banking: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Commercial real estate loans |
| 1,435,767 |
| 32,148 |
| 62,494 |
| — |
| 38,216 |
| 3,933 |
| 1,198 |
| |
Commercial loans |
| 387,911 |
| 12,080 |
| 28,163 |
| — |
| 30,407 |
| 1,436 |
| 661 |
| |
Total Business Banking |
| 1,823,678 |
| 44,228 |
| 90,657 |
| — |
| 68,623 |
| 5,369 |
| 1,859 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total |
| $ | 5,551,519 |
| 66,722 |
| 131,105 |
| 510 |
| 69,429 |
| 5,497 |
| 1,859 |
|
The following table provides a rollforward of TDR balances as of December 31, 2012 and 2011:
|
| December 31, |
| |||
|
| 2012 |
| 2011 |
| |
TDRs as of January 1, |
| $ | 69,429 |
| 52,605 |
|
New TDRs (1) |
| 56,845 |
| 40,184 |
| |
Net paydowns |
| (25,205 | ) | (14,595 | ) | |
Charge-offs |
| (2,704 | ) | (307 | ) | |
Paid-off loans |
| (8,921 | ) | (1,310 | ) | |
Transferred to REO |
| — |
| (7,148 | ) | |
TDRs as of December 31, |
| $ | 89,444 |
| 69,429 |
|
(1) For 2012, includes $3.0 million of loans added in accordance with recent regulatory guidance requiring loans discharged under bankruptcy proceedings and not reaffirmed by the borrower to be charged-off to their collateral value and to be considered TDRs regardless of their payment delinquency status.
5. Please tell us and expand future filings to state your accounting policy for removing loans from the TDR classification. Also, clarify whether you continue to measure impairment on these loans using ASC 310-10 once the TDR classification is removed.
Once we classify a loan a TDR, the loan is only removed from TDR classification under three circumstances: (1) the loan is paid off, (2) the loan is charged off or (3) if, at the beginning of the current fiscal year, the loan has performed in accordance with the modified terms for a minimum of six consecutive months and at the time of modification the loan’s interest rate represented a then current market interest rate for a loan of similar risk. We currently have not removed any loans from TDR classification unless they have paid off or been charged off.
We consider all TDRs to be impaired loans, and therefore, we continue to measure TDRs for impairment using ASC 310-10.
In future filings we will revise the third paragraph of footnote 1 (e) on page 73 as follows:
A loan (from any class) is considered to be a trouble-debt restructured loan (TDR) when the restructuring constitutes a concession and the borrower is experiencing financial difficulties. TDRs may include certain modifications of terms of loans, receipts of assets from borrowers in partial or full satisfaction of loans, or a combination thereof. TDRs are impaired loans and are measured for impairment until the loan has performed in accordance with its modified terms for a reasonable period of time, generally six consecutive months. A modified loan is determined to be a TDR based on the contractual terms as specified by the original loan agreements of the most recent modification. Once classified a TDR, a loan is only removed from such classification under three circumstances: (1) the loan is paid off, (2) the loan is charged off, or (3) if, at the beginning of the current fiscal year, the loan has performed in accordance with the modified terms for a minimum of six consecutive months and at the time of modification the loan’s interest rate represented a then current market interest rate for a loan of similar risk.
* * * *
The Company acknowledges that:
· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
· staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
· the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We trust that the above information is responsive to the staff’s comments. Please direct any additional comments or questions to the undersigned at (814) 728-7242, or to our attorney, Ned Quint, at (202) 274-2007.
| Sincerely, | |
|
| |
| /s/ William W. Harvey, Jr. | |
| William W. Harvey, Jr. | |
| Executive Vice President, Finance | |
|
| |
cc: | William J. Wagner, President and |
|
| Chief Executive Officer |
|
| Ned Quint, Esq. |
|
