Company: NWBI
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001471265-25-000016
Chunk: 136

Company: Northwest Bancshares, Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1B
Chunk 136
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 down when, in our opinion, they are no longer collectible or when it has been determined that the collateral value no longer supports the carrying value of the loan for loans that are collateral dependent. Loan fees and certain direct loan origination costs are deferred and the net deferred fee or cost is then recognized using the level-yield method over the contractual life of the loan as an adjustment to interest income. We identify certain residential mortgage loans, small business administration guaranteed loans and commercial loans which will be sold prior to maturity, as loans held-for-sale. These loans are recorded at fair value less estimated cost to sell. At December 31, 2024 and 2023, there were $76 million and $9 million of loans classified as held-for-sale, respectively.Acquired loans that are not considered purchased with credit deterioration (“PCD”) are initially measured at fair value with no carryover of the related allowance for credit losses. Determining the fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.Acquired loans may be classified as PCD loans upon acquisition if they have experienced more than insignificant credit deterioration since origination. An allowance for credit losses on day 1 is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. (f)                                Allowance for Credit Losses and Provision for Credit Losses The allowance for credit losses is deducted from, or added to, the loan’s amortized cost basis to present the net amount expected to be collected on our lending portfolios. We estimate the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Loans are charged off against the allowance when we believe that a loan balance is confirmed to be uncollectible.