Northwest Bank will close its consumer finance subsidiary's 44 offices, saying the business has simply failed to grow.
The Northwest Consumer Discount Company offices are set to close July 14, the Pennsylvania-based bank said Monday as it released first-quarter earnings. All of the locations are in Pennsylvania.
The 44 offices have about 130 employees. Northwest president and CEO William Wagner said an undetermined number of those employees will be retained in other jobs.
Wagner said the consumer finance subsidiary has failed to grow in the past 20 years, and, as a result, the subsidiary's profitability diminished, as its $115 million loan portfolio remained static. The NCDC tended to serve customers who didn't have a strong credit profile, but also some other customers who just enjoyed doing business with the employees in those locations, Wagner said.
The bank said all of the NCDC loans will be transferred to Northwest Bank for servicing and collections. Northwest said it "will continue to make direct consumer loans to qualified customers as well as continue to offer indirect sales finance loans through various dealers and retailers."
Northwest estimated its pretax expenses related to the office closings will be about $3 million over the next two quarters. The bank reported the consumer finance subsidiary last year contributed about $1.6 million in non-interest income, and net income after taxes of $486,000. The NCDC also had a provision for loan losses of $3.7 million and non-interest expense of $11.6 million.
Northwest in its first quarter reported net income of $17.7 million, down from $18 million the year before.
Northwest has ramped up its presence in Western New York, acquiring 18 former First Niagara branches. Despite the bank's first quarter dropoff in net income, Wagner said Northwest was pleased with the contribution from the additional branches. "Our retention of customers has been excellent," he said.