Northwest Bancshares, Inc. Announces Second Quarter 2013 Earnings and Dividend Increase

WARREN, Pa., July 22, 2013

The Company also announced that its Board of Directors declared a $0.01 increase in its quarterly cash dividend to $0.13 per share payable on August 15, 2013, to shareholders of record as of August 1, 2013.  This represents the 75^th consecutive quarter in which the Company has paid a cash dividend. 

In making this announcement, William J. Wagner, President and CEO, noted, "Although earnings for the quarter are disappointing, they were greatly impacted by several unusual items, including a $1.9 million write-down of a foreclosed property, $1.3 million in ATM replacement expense and a $553,000 decrease in mortgage banking income.  However, we are pleased to report that progress continues to be made in executing our strategy to improve shareholder value.  Loans receivable increased by $81.1 million, or 1.4 %, during the quarter which helped offset the ongoing pressure on our net interest margin created by the continued low interest rate environment.  Troubled assets continue to decrease in most categories as foreclosed real estate was down $2.8 million, or 11.5 %, during the quarter and loans 90 days or more delinquent decreased by $9.1 million, or 12.6%.  Loans charged-off for the quarter were at the third lowest level for the past four years.  Finally, we were pleased to repurchase 369,000 of our common shares at an average per share price of $12.09 and to increase our dividend from $0.12 to $0.13 per share.  Both of these initiatives were designed to return excess capital to our shareholders."

Net interest income decreased by $2.4 million, or 3.6%, to $63.3 million for the quarter ended June 30, 2013, from $65.7 million for the quarter ended June 30, 2012, as a $5.2 million decrease in interest income on loans receivable and a $726,000 decrease in interest income from investment securities was partially offset by a $3.8 million decrease in interest paid on deposit accounts.  These changes from the previous year were primarily due to continued competitive pricing pressure on new and existing credit relationships, adjustable rate loans and investment securities re-pricing at lower interest rates and higher yielding municipal securities being called and replaced with investment securities at lower rates.

The provision for loan losses increased by $442,000, or 8.9%, to $5.4 million for the quarter ended June 30, 2013, from $5.0 million for the quarter ended June 30, 2012.  As of June 30, 2013, the allowance for loan losses was $72.6 million, or 1.28% of total loans, compared to $70.1 million, or 1.24% of total loans, as of June 30, 2012 and $73.2 million, or 1.28% of total loans, as of December 31, 2012.  The increase in the provision for loan losses is partially attributable to increases in the historical loss factors and a slight increase in nonperforming loans to $120.6 million as of June 30, 2013, from $117.3 million as of June 30, 2012. 

Noninterest income decreased by $1.7 million, or 11.1%, to $13.4 million for the quarter ended June 30, 2013, from $15.1 million for the quarter ended June 30, 2012, due primarily to a $1.9 million write-down on a foreclosed condominium project bringing the remaining balance down to $4.9 million. Additionally, mortgage banking income decreased by $553,000, primarily as a result of the decision to hold more residential mortgage loan originations in our portfolio.  Partially offsetting these decreases was an increase in insurance commission income of $587,000 as a result of the purchase of the Bert Company, effective January 1, 2013.

Noninterest expense increased by $840,000, or 1.6%, to $52.8 million for the quarter ended June 30, 2013, from $52.0 million for the quarter ended June 30, 2012, due primarily to an increase in processing expense of $1.3 million, or 22.0%.  This increase is primarily the result of an incremental expense related to upgrading and replacing our ATM network. Additionally, compensation and employee benefits increased by $740,000, or 2.7%, due primarily to the addition of 38 full-time equivalent employees compared to last year as well as increased health insurance costs.  Partially offsetting these increases was a decrease in marketing expense of $1.7 million, which was due to the timing of various campaigns.