Northwest Bancshares, Inc. announces First Quarter 2018 Earnings and Quarterly Dividend

Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended March 31, 2018 of $25.0 million, or $0.24 per diluted share. This represents an increase of $7.3 million, or 40.8%, compared to the same quarter last year when net income was $17.7 million or $0.17 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended March 31, 2018 were 8.40% and 1.08% compared to 6.15% and 0.75% for the same quarter last year.

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.17 per share payable on May 17, 2018, to shareholders of record as of May 3, 2018. This is the 94th consecutive quarter in which the Company has paid a cash dividend. Based on the market value of the Company’s stock as of March 31, 2018, this represents an annualized dividend yield of approximately 4.1%.

In making this announcement, William J. Wagner, Chairman and CEO, noted, “We are pleased that the strategies employed over the past two years to simplify our business model and focus on our core competencies had a noticeable impact on our first quarter operating results. Primarily as a result of the divestiture last year of both our Maryland offices and retirement services business, combined with the closure of our consumer finance subsidiary, operating expenses in the first quarter of 2018 decreased $4.2 million or almost 6% over the previous year. With a greater focus on our core competencies of lending and deposit gathering, we were pleased to realize net loan growth in the first quarter of $88.9 million, or 4.4% on an annualized basis. In addition, deposits grew this quarter by $158.5 million, or 8.1%, on an annualized basis, with $102.7 million of that growth coming from checking accounts. Finally, due primarily to the combined decreases in operating expenses and income taxes, with the latter attributable to the Tax Cuts and Jobs Act in December 2017, our annualized return on assets for the quarter was 1.08%, the first time in recent history that core earnings exceeded 1.00% of assets.”

Net interest income increased by $1.2 million, or 1.5%, to $81.8 million for the quarter ended March 31, 2018, from $80.6 million for the quarter ended March 31, 2017. This increase is due primarily to a $2.4 million, or 3.0%, increase in interest income on loans receivable and a $791,000, or 35.6%, increase in interest income on mortgage-backed securities. These increases were primarily the result of increases in the average balance of loans receivable and mortgage-backed securities of $116.8 million and $86.4 million, respectively. Additionally, the average yield on loans receivable and mortgage-backed securities increased by seven and 28 basis points, respectively. Partially offsetting these improvements was an increase in interest expense on deposits of $993,000, or 18.2%, due to the recent increase in market interest rates. The net impact of these changes caused the Company’s net interest margin to increase to 3.72% for the quarter ended March 31, 2018 from 3.62% for the same quarter last year.

The provision for loan losses decreased by $428,000, or 9.2%, to $4.2 million for the quarter ended March 31, 2018, from $4.6 million for the quarter ended March 31, 2017. This decrease is due primarily to the improvement in the historical loss rates for commercial loans when compared to last year. Additionally, reserves in the first half of 2017 were elevated in connection with the closure of the Company’s consumer finance subsidiary. Also, total nonaccrual loans decreased to $58.7 million, or 0.74% of total loans at March 31, 2018 from $73.3 million, or 0.97% of total loans, at March 31, 2017.

Noninterest income increased by $284,000, or 1.3%, to $21.8 million for the quarter ended March 31, 2018, from $21.5 million for the quarter ended March 31, 2017. Contributing to this increase was an increase in other operating income of $857,000, or 59.9%, which is primarily attributable to the growth in fee income associated with commercial lending activity. Partially offsetting this improvement was an increase in loss on real estate owned of $479,000, or 714.9%, to $546,000 for the current quarter compared to $67,000 for the prior year’s quarter, primarily as a result of the sale of one commercial property.

Noninterest expense decreased by $4.2 million, or 5.9%, to $67.4 million for the quarter ended March 31, 2018, from $71.6 million for the quarter ended March 31, 2017. This decrease resulted primarily from a $1.8 million, or 4.6%, decrease in compensation and employee benefits due primarily to restructuring that occurred during 2017, including the closure of the Company’s consumer finance subsidiary and the sale of the Company’s three Maryland offices and retirement services business. Additionally, office operations decreased by $814,000, or 19.3%, due primarily to internal initiatives designed to reduce customer fraud related losses.

Income tax expense decreased by $1.2 million, or 13.8%, despite an increase in income before taxes of $6.1 million, or 23.7%. As a result of the enactment of the Tax Cuts and Jobs Act in December 2017, the Company’s effective tax rate, which includes both federal and state income taxes, decreased to 21.7% for the quarter ended March 31, 2018 from 31.2% for last year’s quarter.

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 162 full-service community banking offices and ten 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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