Northwest Bancshares, Inc. Announces First Quarter 2016 Earnings and Quarterly Dividend

WARREN, Pa., April 22, 2016

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share payable on May 16, 2016, to shareholders of record as of May 2, 2016. This represents the 86th consecutive quarter in which the Company has paid a cash dividend. Based on the current market value of the Company's stock, this represents an annualized dividend yield of 4.4%.

In making this announcement, William J. Wagner, President and CEO, noted, "We are pleased that our first quarter operating results reflect the positive impact of the LNB acquisition, which significantly increased both net interest income and noninterest income. Although we believe we have realized the cost savings originally projected for this transaction, expenses grew at an elevated rate as we continue to add the personnel, processes, and technology necessary to meet the requirements of a $9.0 billion bank. Operating efficiency remains a central focus and we look forward to the completion of our previously announced branch consolidation plan, which will positively impact expense ratios beginning in the second quarter of this year. We are also pleased that loans increased for the quarter by $70.0 million, or 3.9% on an annual basis, as our recently established corporate finance group gained momentum and greatly assisted with that effort."

Net interest income increased by $8.6 million, or 13.6%, to $71.6 million for the quarter ended March 31, 2016, from $63.0 million for the quarter ended March 31, 2015. This increase is due primarily to a $10.1 million, or 14.2%, increase in interest income on loans as a result of a $1.229 billion increase in the company's loan portfolio. Contributing significantly to this increase was the acquisition of Lorain National Bank ("LNB") on August 14, 2015, which included loans of $928.0 million.  Also contributing to the increase in net interest income was a $475,000 decrease in interest expense on borrowed funds due primarily to the maturity of FHLB term advances. Partially offsetting these improvements was a $936,000 decrease in FHLB dividends as the company received a $1.0 million special dividend in the first quarter of 2015. The interest paid on deposits increased by $322,000 as deposit balances were $988.0 million, or 17.4%, higher than they were in the previous year, primarily due to the LNB acquisition. As a result of these changes, net interest margin increased to 3.57% for the quarter ended March 31, 2016 from 3.51% for the same quarter last year and 3.53% for the quarter ended December 31, 2015.

The provision for loan losses increased by $760,000, or 84.4%, to $1.7 million for the quarter ended March 31, 2016, from $900,000 for the quarter ended March 31, 2015. Loss provisions remain at low levels as asset quality continues to improve. The percentage of nonperforming loans to total loans decreased to 1.03% at March 31, 2016 from 1.21% at March 31, 2015 and classified loans decreased by $4.6 million, or 2.3%, to $196.7 million at March 31, 2016 from $201.3 million at March 31, 2015.

Noninterest income increased by $4.8 million, or 33.0%, to $19.4 million for the quarter ended March 31, 2016, from $14.6 million for the quarter ended March 31, 2015. Contributing to this increase was an increase in service charges and fees of $1.4 million, or 16.2%, which is attributable to the growth in checking accounts from both the LNB acquisition and the successful execution of internal growth initiatives. Also contributing to the increase in noninterest income was an increase in gain on sale of real estate owned of $1.3 million, as the Company recognized a net gain of $249,000 for the quarter ended March 31, 2016 compared to a net loss of $1.0 million for the same quarter last year. Additionally, trust and other financial services income and insurance commission income increased by $485,000 and $286,000, respectively, for the quarter ended March 31, 2016 compared to the same quarter last year.

Noninterest expense increased by $9.6 million, or 17.8%, to $63.3 million for the quarter ended March 31, 2016, from $53.7 million for the quarter ended March 31, 2015. This increase resulted primarily from an increase in compensation and employee benefits of $5.1 million, or 18.4%, due primarily to the addition of lending and credit talent and the employees retained from the LNB acquisition. Other expenses increased by $2.1 million, or 92.1% due primarily to an increase in charitable contributions made to utilize Pennsylvania Education Improvement Tax Credits (EITC).  The offsetting tax credit for these contributions will be recognized as part of the annual effective tax rate. Also contributing to the increase in noninterest expense was an increase in processing expenses of $1.2 million, or 16.8%, due primarily to the acquisition of LNB, upgrades to technology and the replacement of debit cards in an effort to enhance customer security.