Northwest Bancshares, Inc. announces record Fourth Quarter increase

Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended December 31, 2016 of $24.5 million, or $0.24 per diluted share. This represents an increase of $8.3 million, or 51.3%, compared to the same quarter last year when net income was $16.2 million or $0.16 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended December 31, 2016 were 8.37% and 1.01% compared to 5.55% and 0.73% for the same quarter last year.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per share payable on February 16, 2017, to shareholders of record as of February 2, 2017. This represents a 6.67% increase over the prior year and is the 89th consecutive quarter in which the Company has paid a cash dividend.

In making this announcement, William J. Wagner, President and CEO, noted, “The results of the fourth quarter when compared to the previous year reflect the earnings accretion we expected from both the LNB merger and the First Niagara branch acquisition. As a result of these acquisitions our checking accounts have increased by 37% over the last two years and time deposits have decreased to less than 20% of total deposits. This change in deposit mix has increased our net interest margin from 3.53% to 3.75%. These acquisitions along with the recently announced plan to divest our three offices in Maryland better defines our footprint for the future and establishes a framework for increased revenue growth and greater efficiency.”

Net interest income increased by $11.7 million, or 16.6%, to $82.9 million for the quarter ended December 31, 2016, from $71.2 million for the quarter ended December 31, 2015. This increase is due primarily to a $4.8 million, or 5.9%, increase in interest income on loans and a $6.8 million, or 84.7% decrease in interest expense on borrowed funds. The increase in loan interest income is a result of a $580.1 million increase in the average balance of the Company’s loan portfolio from the same quarter last year, while the decrease in interest expense on borrowed funds is due primarily to the payoff of Federal Home Loan Bank (“FHLB”) advances with the funds received from the purchase of deposits in western New York.

The provision for loan losses decreased by $2.5 million, or 53.3%, to $2.1 million for the quarter ended December 31, 2016, from $4.6 million for the quarter ended December 31, 2015. This decrease is due primarily to a decrease in the percentage of total loan delinquency to total loans to 1.61% at December 31, 2016 from 1.87% at December 31, 2015. 

Noninterest income increased by $5.3 million, or 27.0%, to $24.8 million for the quarter ended December 31, 2016, from $19.5 million for the quarter ended December 31, 2015. Contributing to this increase was an increase in mortgage banking income of $2.1 million, which is the result of resuming the sale of mortgage loans originated by the Wholesale Lending Division.  Also contributing to this increase was an increase in service charges and fees of $1.9 million, or 17.8%, which is primarily attributable to the growth in checking accounts from both acquisitions, and internal growth initiatives. Additionally, trust and other financial services income increased by $721,000, or 21.1%, due primarily to the approximately $450.0 million of wealth management assets acquired with the western New York branch purchase.

  Noninterest expense increased by $7.6 million, or 12.3%, to $68.8 million for the quarter ended December 31, 2016, from $61.2 million for the quarter ended December 31, 2015. This increase resulted primarily from a $4.6 million, or 14.3%, increase in compensation and employee benefits due primarily to the costs associated with the employees added from the 18 western New York branches. The other increases for the current quarter compared to the prior year are also primarily attributable to incremental expenses from the additional branches. Partially offsetting these increases were decreases in federal deposit insurance premiums and collection expense of $824,000 and $815,000, respectively.

Net income for the year ended December 31, 2016 was $49.7 million, or $0.49 per diluted share, which represents a decrease of $10.8 million, or 18.0%, compared to the year ended December 31, 2015, when net income was $60.5 million, or $0.64 per diluted share. The annualized returns on average shareholders’ equity and average assets for the year ended December 31, 2016 were 4.28% and 0.55%, respectively, compared to 5.49% and 0.73% for the same period last year.  This decrease is due primarily to a $37.0 million penalty incurred from the prepayment of FHLB borrowings, acquisition and restructuring expenses of $12.2 million, and ESOP termination expense of $5.1 million.

Non-GAAP net operating income for the year ended December 31, 2016, which excludes the after-tax impact of the aforementioned FHLB prepayment penalty, restructuring and acquisition expenses, and ESOP termination expenses totaling $34.7 million, was $84.3 million, or $0.84 per diluted share.

This represents an increase of $17.3 million, or 25.8%, compared to the year ended December 31, 2015 with non-GAAP net operating income of $67.0 million, or $0.71 per diluted share. The non-GAAP annualized returns on average shareholders’ equity and average assets for the year ended December 31, 2016 were 7.27% and 0.93%, respectively, compared to 6.08% and 0.80% for the same period last year.

The Company previously announced that it has entered into a purchase and assumption agreement to sell three bank branches located in the greater Baltimore, Maryland area to Shore Bancshares, Inc.’s banking subsidiary, Shore United Bank. This divestiture includes approximately $216.0 million of deposits, $147.0 million of performing loans and $40.0 million of cash.

The transaction includes a deposit premium of 8.0% and based on the amounts at the time the agreement was signed Northwest anticipates recording a gain of approximately $17.0 million. The sale is expected to close during the second quarter of 2017.

Headquartered in Warren, Pennsylvania, Northwest Bancshares, Inc. is the holding company of Northwest Bank. Founded in 1896, Northwest Bank is a full-service financial institution offering a complete line of business and personal banking products, employee benefits and wealth management services, as well as the fulfillment of business and personal insurance needs. Northwest operates 167 full-service community banking offices and nine free standing drive-through facilities in Pennsylvania, New York, Ohio and Maryland and 49 consumer finance offices in Pennsylvania through its subsidiary, Northwest Consumer Discount Company.  Northwest Bancshares, Inc.’s common stock is listed on the NASDAQ Global Select Market (“NWBI”). Additional information regarding Northwest Bancshares, Inc. and Northwest Bank can be accessed on-line at www.northwest.com.

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