Company: NWBI
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001471265-25-000016
Chunk: 48

Company: Northwest Bancshares, Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1A
Chunk 48
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 incurred other comprehensive loss of $6 million related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. 

The current level of, or any increases in market interest rates may reduce our mortgage banking income. We generate revenues primarily from gains on the sale of mortgage loans to investors, and from the amortization of deferred mortgage servicing rights. We recognized noninterest income of $2 million on mortgage banking activities during the year ended December 31, 2024. We also earn interest on loans held for sale while awaiting delivery to our investors. In a rising or higher interest rate environment, our mortgage loan originations may decrease, resulting in fewer loans that are available for sale. This would result in a decrease in interest income and a decrease in revenues from loan sales. In addition, our results of operations are affected by the amount of noninterest expense associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment, data processing and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.

Hedging against interest rate exposure may adversely affect our earnings.

On occasion we have employed various financial methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities. We also engage in hedging strategies with respect to arrangements with our customers. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions. Hedging strategies can be imperfect and may fail to protect us from loss. Moreover, hedging activities could result in costs if the hedge proves to be ineffective. Additionally, hedging activities could fail to protect us or adversely affect us because, among other things:

•available interest rate hedging may not correlate to the risk for which protection is sought;

•the duration of the hedge may not match the duration of the related asset or liability;

•the counterparty in the hedging transaction may default on its obligation to pay;

•the credit quality of the counterparty may degrade to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; 

•the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and/or

•downward adjustments, or “mark-to-market” losses, would reduce our stockholders’ equity.

Risks