Company: NWBI
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001471265-25-000016
Chunk: 314

Company: Northwest Bancshares, Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 8
Chunk 314
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The allowance for credit losses within the consumer loan portfolio is calculated at the portfolio-level using a non-discounted cash flow method through a suite of loss rate models developed internally with the assistance of an external third-party. This class of financing receivables is further divided into credit cards, unsecured lines of credit and other consumer loans.The allowance for credit losses for credit cards and unsecured lines of credit is calculated using two transition matrix models to project portfolio-level net charge-off rates. Both models use current balance and delinquency status as key risk drivers. These models are not natively sensitive to macroeconomic forecasts. The necessary adjustments to account for current and expected macroeconomic conditions is captured via our qualitative adjustment framework.For other consumer loans, a regression model is used to project portfolio-level net charge-off rates. This model uses borrower information and macroeconomic forecasts as key inputs.Commercial Real Estate LoansThe commercial real estate loan class is further segmented into smaller pools of loans with similar risk characteristics, commercial real estate loans and small business commercial real estate loans.  The allowance for credit losses for the commercial real estate loan portfolio is calculated at the pool level using a non-discounted cash flow method through a PD/LGD model developed by an external third-party. This model projects default and severity rates. The model accepts as inputs key risk drivers such as: current balance, original loan-to-value-ratio, type of collateral, location of collateral, delinquency status, loan age, obligor financial statement information, and expected prepayment rates, among other characteristics. It also utilizes macroeconomic forecasts of commercial real estate price indices, unemployment rates, gross domestic product and others.  The allowance for credit losses for commercial real estate small business portfolio is calculated at a borrower-level with a PD/LGD model. Separate models were built by industry segment. Each model was built with a logistic regression model except for the U.S. Small Business Administration (SBA) and Agriculture sub-portfolios. For SBA, a portfolio-level fractional logit model was developed; the small Agriculture segment uses a simple long-run average loss rate. The LGD model is assumption-based and assigns varying LGDs by industry segment. The models’ overall key inputs are borrower and collateral characteristics and  macroeconomic forecasts including real GDP, unemployment, home price appreciation, and real disposable personal income.Commercial Loans and Commercial Real Estate - Owner Occupied LoansThe commercial loan class is further segmented into smaller pools of loans with similar risk characteristics, commercial loans and commercial small business loans, including equipment finance loans.