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

WARREN, Pa., Oct. 24, 2016

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.15 per share payable on November 17, 2016, to shareholders of record as of November 3, 2016. This is the 88th 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 approximately 3.8%.

Earnings for the current quarter include acquisition costs of $7.2 million related to the September 9, 2016 purchase of 18 branches from First Niagara Bank, and $5.1 million of stock-based compensation costs associated with the termination of the Northwest Savings Bank Employee Stock Ownership Plan ("ESOP"). Excluding the after-tax impact of these expenses totaling $8.3 million, non-GAAP net operating income for the quarter ended September 30, 2016 was $22.5 million, or $0.22 per diluted share, compared to non-GAAP net operating income of $17.9 million, or $0.19 per diluted share in the same quarter last year.  The non-GAAP annualized returns on average shareholders' equity and average assets for the quarter ended September 30, 2016 were 7.74% and 0.99% compared to 6.30% and 0.82% in the previous year. The aforementioned termination of the ESOP includes the cancellation of approximately 1,367,000 shares of common stock as of September 30, 2016.

In making this announcement, William J. Wagner, President and CEO, noted, "The $4.6 million, or 26%, increase in non-GAAP quarterly earnings over the previous year primarily reflects the impact of the merger of Lorain National Bank, which occurred in August 2015, and the refinancing of $700.0 million of fixed-rate FHLB advances, which occurred in May 2016. Since the purchase of the Buffalo branches occurred late in the current quarter, there was limited impact on earnings. However, we anticipate the full impact from this transaction to be realized in the fourth quarter of 2016."

Net interest income increased by $11.7 million, or 17.5%, to $78.6 million for the quarter ended September 30, 2016, from $66.9 million for the quarter ended September 30, 2015. This increase is due primarily to a $6.3 million, or 8.3%, increase in interest income on loans as a result of a $647.0 million increase in the Company's loan portfolio from a year ago. Also contributing to the increase in net interest income was a $6.2 million decrease in interest expense on borrowed funds due primarily to the payoff of Federal Home Loan Bank ("FHLB") advances with the funds received by assuming the deposits from the First Niagara branch purchase. Additionally, interest paid on deposits decreased by $510,000 for the quarter due primarily to the change in deposit mix. Partially offsetting these improvements was a $1.1 million decrease in interest income on investment securities as the portfolio decreased due to the cash flow from these securities being used to fund loan growth. As a result of these changes, the Company's net interest margin increased to 3.88% for the quarter ended September 30, 2016 from 3.50% for the same quarter last year.

The provision for loan losses increased by $2.3 million, or 74.9%, to $5.5 million for the quarter ended September 30, 2016, from $3.2 million for the quarter ended September 30, 2015. This increase is due primarily to the downgrade of four commercial banking relationships requiring an additional $1.9 million of combined reserves. However, overall credit quality remained steady while classified loans to total loans decreased to 2.73% at September 30, 2016 from 2.81% at September 30, 2015 and total loan delinquency to total loans decreased to 1.11% at September 30, 2016 from 1.20% at September 30, 2015.

Noninterest income increased by $2.7 million, or 14.8%, to $20.8 million for the quarter ended September 30, 2016, from $18.1 million for the quarter ended September 30, 2015. Contributing to this increase was an increase in mortgage banking income of $1.6 million, or 606.4%, which is the result of resuming the sale of mortgage loans originated by the Wholesale Lending Division.  Additionally, service charges and fees increased by $1.1 million, or 10.7%, which is attributable to the growth in checking accounts from both the LNB Bancorp, Inc. ("LNB") acquisition and internal growth initiatives. As was previously announced, the Company's insurance subsidiary signed an agreement of its intentions to acquire an insurance agency in Warren, Pennsylvania on November 1, 2016 which is anticipated to provide approximately $500,000 of additional annual insurance commission revenue.