Northwest Bancshares, Inc. announces Second Quarter 2017 Earnings

Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended June 30, 2017 of $31.0 million, or $0.30 per diluted share. This represents an increase of $38.0 million compared to the same quarter last year when the Company reported a net loss of $7.0 million or $0.07 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended June 30, 2017 were 10.48% and 1.30% compared to (2.44)% and (0.32)% for the same quarter last year.

The current quarter’s earnings were significantly augmented by the sale of the Company’s three Maryland offices at a profit of $17.2 million, or $10.3 million after tax, while earnings for the same quarter in the previous year were negatively impacted by a penalty of $37.0 million, or $22.2 million after tax, relating to the prepayment of $700.0 million of long-term, fixed-rate Federal Home Loan Bank (“FHLB”) borrowings. For more information, see “Reconciliation of Non-GAAP to GAAP Net Income” within this press release.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per share payable on August 17, 2017 to shareholders of record as of August 3, 2017. This is the 91st consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company’s stock as of June 30, 2017, this dividend represents an annualized yield of approximately 4.1%.

In making this announcement, William J. Wagner, President and CEO, noted, “Excluding the aforementioned profit on the sale of the Maryland offices and costs associated with the closure of our consumer finance business, adjusted non-GAAP earnings for the quarter were $22.3 million, or $0.22 per share, a significant improvement over the first quarter of 2017. With the sale of the Maryland offices and closure of the consumer finance business now completed, our efforts will be focused on the lines of business and markets that are scalable, efficient, and offer meaningful opportunities for growth and earnings enhancement.”

Net interest income increased by $7.2 million, or 9.5%, to $82.7 million for the quarter ended June 30, 2017, from $75.5 million for the quarter ended June 30, 2016. This increase is due primarily to a $3.2 million, or 3.9%, increase in interest income on loans receivable as a result of a $396.9 million, or 5.5%, increase in average loans receivable from the prior year period. Also contributing to the increase in net interest income is a $2.9 million, or 70.1%, decrease in interest expense on borrowed funds as a result of the prepayment of $700.0 million of long-term FHLB borrowings in the second quarter of 2016.

The provision for loan losses increased by $1.4 million, or 32.5%, to $5.6 million for the quarter ended June 30, 2017, from $4.2 million for the quarter ended June 30, 2016. This increase relates to the growth in the indirect automobile and commercial business loan portfolios as well as for the closure of the Company’s consumer finance subsidiary. Overall credit quality improved slightly with nonaccrual loans decreasing to $72.8 million, or 0.95% of total loans, at June 30, 2017 from $75.9 million, or 1.04% of total loans, at June 30, 2016 and total loan delinquency decreasing to $82.5 million, or 1.07% of total loans outstanding, at June 30, 2017 from $83.8 million, or 1.15% of total loans outstanding, at June 30, 2016.

Excluding the $17.2 million profit received on the sale of the Maryland offices, noninterest income increased by $4.0 million, or 19.8%, to $24.3 million for the quarter ended June 30, 2017, from $20.3 million for the quarter ended June 30, 2016. Contributing to this increase was an increase in service charges and fees of $2.1 million, or 19.9%, which is attributable to the growth in checking accounts. Additionally, trust and other financial services income increased by $1.3 million, or 40.4%, due primarily to growth in assets under management.

Excluding the $37.0 million penalty incurred in the prior year period due to the prepayment of long-term FHLB borrowings, noninterest expense increased by $8.1 million, or 12.5%, for the quarter ended June 30, 2017. This increase, comprised primarily of increases in compensation and employee benefits of $4.5 million, or 13.4%, premises and occupancy costs of $828,000, or 13.2%, office operations of $827,000, or 24.7%, and amortization of intangible assets of $1.0 million, or 146.3%, relates primarily to the acquisition of 18 bank offices and related personnel in September 2016.

Net income for the six-month period ended June 30, 2017 was $48.7 million, or $0.48 per diluted share. This represents an increase of $37.7 million, or 344.0%, compared to the six-month period ended June 30, 2016, when net income was $11.0 million, or $0.11 per diluted share. The annualized returns on average shareholders’ equity and average assets for the six-month period ended June 30, 2017 were 8.34% and 1.03% compared to 1.90% and 0.25% for the same period last year. In addition to the aforementioned items impacting the quarter, net interest income for the six-month period ended June 30, 2017 increased by $16.2 million, or 11.0%, due primarily to the loans received with the office acquisition previously discussed.

As announced in April, the Company closed the remaining 43 offices of its consumer finance subsidiary, Northwest Consumer Discount Company (“NCDC”), on July 14, 2017. All loans were transferred to Northwest Bank which will continue to operate NCDC’s indirect sales finance program.

Also, in a continued effort to exit less efficient lines of business, Northwest Bank recently entered into a definitive agreement to sell its retirement services subsidiary, Boetger and Associates, Inc. (“Boetger”), to Boetger’s current managing director. Both the annual revenue and annual expense generated by this line of business are approximately $2.5 million. It is anticipated that this transaction will close in the fourth quarter of 2017 and that Boetger will continue to administer Northwest Bank’s retirement plans.

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 164 full-service community banking offices and nine free standing drive-through facilities in Pennsylvania, New York, and Ohio. 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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