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Northwest Bancshares saw profits fall 12 percent in first quarter

Northwest Bancshares saw first-quarter profits fall 12 percent from a year ago, as lower revenues and higher expenses outweighed loan growth and an improvement in credit quality.

In its report Monday for the January-through-March quarter, the Warren, Pa.-based parent of Northwest Savings Bank, which operates as Jamestown Savings Bank in Chautauqua County, had net income of $15.2 million, or 16 cents per share, down from $17.3 million, or 16 cents per share, a year ago. Profits were exactly flat from the fourth quarter.

President and CEO William J. Wagner touted growth in loans and a 27 percent drop in bad loans that are at least 60 days late in payments.

Still, he said, "we remain cautious about the sustainability of the economic recovery," so the bank set aside $6.3 million, or $900,000 less than a year ago, although it wrote off $4.5 million as uncollectible, down from $7.2 million a year ago.

Meanwhile, Wagner said, the bank is still working to follow the terms of a July 2011 "consent order" with one of its regulators, the Federal Deposit Insurance Corp. Under that agreement, the bank paid $700,000 in fines and restitution and agreed to take major steps to improve compliance with consumer laws, regulations and guidance after the FDIC found it had failed to pay appropriate interest to certain depositors.

That order had resulted from a regulatory examination a year earlier that torpedoed the bank's planned $20 million purchase of Butler, Pa.-based NexTier in November 2010, and the bank wants "to be released from this oversight as soon as possible," Wagner said.

Net interest income from taking deposits and making loans fell 2.4 percent to $65.4 million, largely because of a 2.9 percent drop in interest income from loans and a 24.6 percent drop in interest income from investments, because of lower interest rates. That was partially offset by a 19.4 percent drop in what it paid on deposits.

Net loans grew by $56.4 million in the three-month period since Dec. 31, with business and commercial real estate loans in particular growing by $61 million, or 3.3 percent.

Fee and other income fell 4.8 percent to $13.6 million, mostly from a loss of $1 million on the bank's portfolio of $28.9 million in foreclosed property, compared with almost no loss a year ago. The bank actively manages that inventory, and it said the higher loss stemmed from losses on the sale of some properties and write-downs on the value of others. Deposit service fees also fell 5.6 percent to $8.4 million, but trust and insurance revenues rose.

Operating expenses, meanwhile, rose 3.8 percent to $51.3 million because of higher compensation and employee benefits costs, which rose 9.2 percent. That's due to adding staff in commercial lending, loan servicing, credit review and regulatory compliance, as well as higher pension and health insurance costs. Most other cost categories also rose, except premises and occupancy expenses and federal deposit insurance premiums.

The bank's board of directors declared a quarterly cash dividend of 12 cents per share, payable May 17 to shareholders of record on May 3. That marks the 70th straight quarter that the bank has paid a cash dividend. The bank did not buy back any stock during the quarter.