Northwest Bancshares, Inc. announces Third Quarter 2017 Earnings and Quarterly Dividend

Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended September 30, 2017 of $23.6 million, or $0.23 per diluted share. This represents an increase of $9.4 million, or 66.2%, compared to the same quarter last year when net income was $14.2 million or $0.14 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended September 30, 2017 were 7.81% and 0.99% compared to 4.89% and 0.63% for the same quarter last year.

Net income in the prior year period was negatively impacted by an additional $4.3 million, after tax, of restructuring costs associated with the acquisition of 18 offices in western New York, as well as $3.1 million, after tax, of expenses related to the termination of the Northwest Bank Employee Stock Ownership Plan (“ESOP”). Adjusting both quarters for non-core items, net income for the quarter ended September 30, 2017 was $24.4 million, or $0.24 per diluted share, an increase of $2.8 million, or 13.2%, compared to net income of $21.6 million, or $0.21 per diluted share in the previous year. For more information, see “Reconciliation of Non-GAAP to GAAP Net Income” within this release.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.16 per share payable on November 16, 2017 to shareholders of record as of November 2, 2017. This is the 92nd consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company’s stock as of September 30, 2017, this dividend represents an annualized yield of approximately 3.7%.

In making this announcement, William J. Wagner, President and CEO, noted, “We are pleased to report normalized earnings this quarter following a two year period during which earnings were impacted by significant restructuring activity. This restructuring included the acquisition of LNB Bancorp, Inc. in August 2015, the consolidation of 24 offices in April 2016, the acquisition of 18 offices in the western New York market in September 2016, the sale of our Maryland region in May 2017 and finally the closure of Northwest Consumer Discount Company in July 2017. These restructuring initiatives have greatly streamlined our operation, resulting in a product and service set that enhances Northwest’s ability to successfully compete within our chosen markets as a mid-sized community bank. With that, we were encouraged to see that our efficiency ratio decreased to 60.9% in the current quarter compared to 69.1% in the quarter which last preceded the restructuring initiatives.”

Net interest income increased by $5.9 million, or 7.7%, to $83.2 million for the quarter ended September 30, 2017, from $77.3 million for the quarter ended September 30, 2016. This increase is due primarily to a $4.3 million, or 5.3%, increase in interest income on loans receivable as a result of a $308.7 million, or 4.2%, increase in average loans receivable from the prior year period. Also contributing to the increase in net interest income was a $1.2 million, or 36.5%, increase in interest income on investment securities as a result of redirecting excess cash to higher yielding assets.

Despite higher provisions being required for consumer loans in the current quarter, which were directly related to the closure of the Company’s consumer finance subsidiary, the provision for loan losses decreased by $2.5 million, or 45.3%, to $3.0 million for the quarter ended September 30, 2017, from $5.5 million for the quarter ended September 30, 2016. Nonaccrual loans decreased to $73.3 million, or 0.9% of total loans, at September 30, 2017 from $86.3 million, or 1.1% of total loans, at September 30, 2016.

Noninterest income increased by $3.8 million, or 18.1%, to $24.6 million for the quarter ended September 30, 2017, from $20.8 million for the quarter ended September 30, 2016. Contributing to this increase were increases in service charges and fees of $1.7 million, or 15.5%, which is attributable to the growth in checking accounts, and trust and other financial services income of $1.4 million, or 39.6%, due primarily to growth in assets under management.

Noninterest expense decreased by $4.9 million, or 6.6%, to $68.8 million for the quarter ended September 30, 2017, from $73.7 million for the quarter ended September 30, 2016. This decrease is comprised primarily of decreases in restructuring and acquisition expense of $5.8 million, or 80.5%, due to the September 2016 acquisition of 18 offices, and in compensation and employee benefits of $2.1 million, or 5.5%, due to the closure of the Company’s consumer finance subsidiary in the current quarter, as well as $5.1 million of expense recorded in the prior year related to termination of the ESOP. Partially offsetting these improvements were increases in premises and occupancy costs of $857,000, processing expenses of $806,000, and amortization of intangible assets of $623,000, due primarily to the acquisition of offices.

Net income for the nine-month period ended September 30, 2017 was $72.3 million, or $0.71 per diluted share. This represents an increase of $47.1 million, or 187.3%, compared to the nine-month period ended September 30, 2016, when net income was $25.2 million, or $0.25 per diluted share. The annualized returns on average shareholders’ equity and average assets for the nine-month period ended September 30, 2017 were 8.16% and 1.01% compared to 2.90% and 0.38% for the same period last year. In addition to the aforementioned items impacting the quarter, net income for the nine-month period ended September 30, 2017 was significantly enhanced by the second quarter sale of the Company’s three Maryland offices at a profit of $17.2 million and an increase in net interest income of $22.2 million, or 9.9%, due primarily to the loans received with the acquisition previously discussed. Additionally, earnings for the nine-month period ended September 30, 2016 were negatively impacted by a penalty of $37.0 million relating to the prepayment of $700.0 million of long-term, fixed-rate Federal Home Loan Bank borrowings and the $5.1 million cost associated with the termination of Northwest Bank’s ESOP.

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 bank 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.bank.

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