Northwest Bancshares, Inc.
Annual Report 2012

Plain-text annual report

Building for the Future 2012 Summary Annual Report “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region, Three Years in a Row” Northwest J.D. Power and Associates Celebration, Warren, Pennsylvania • June 27, 2012 Building Loyalty, Trust, and Value among our Employees, Customers, Communities, and Shareholders Dear Shareholder, It is my pleasure to report another year of significant progress at Northwest Bancshares, Inc. As we began the 2012 year, our company established the following specific goals that we believed were key to our success: • Achieving record earnings • Enhancing shareholder value through effective capital management • Attaining significant growth in loans • Strengthening our lending and credit functions • Strengthening our Compliance Management System and being released from the existing regulatory enforcement action • Improving the overall credit quality of our company • Continuing to be recognized for industry excellence Message to Stockholders Although we fell slightly short of achieving the first goal of record earnings, we are pleased to report considerable success in achieving all the other goals established for 2012. EarningS PErformancE Net income for the year ended December 31, 2012 was $63.6 million, down $591,000, or less than 1%, from 2011. However, because there were fewer shares outstanding in 2012, earnings per share increased to $0.68 in 2012 from $0.64 in 2011. Most notable about this year’s operating performance was our ability to maintain a consistent net interest margin despite the challenge of historically low levels of interest rates. As a result, net interest income was $264.0 million in 2012, down slightly from $267.3 million the previous year. Negatively impacting this year’s earnings was a $2.4 million increase in losses on foreclosed real estate properties. Most of these losses were incurred on Florida properties as we continue to address the limited remnants of our discontinued Florida operation. Also negatively impacting earnings was a $6.0 million, or 3.0%, increase in operating expense as we significantly increased our staffing levels in response to regulatory requirements. Much of the increase in staffing related to our initiatives to strengthen our Compliance Management System and the lending and credit functions. Although costly, we believe these enhancements will greatly assist in avoiding future regulatory and credit issues. On a positive note, the provision for loan losses decreased $7.8 million, or 22.9%, over the previous year as credit quality improved and recoveries of prior year losses accelerated. Also positively impacting this year’s earnings was a $3.8 million increase in mortgage banking revenues as the sale of mortgage loans to Freddie Mac yielded record levels of profits. Enhancing SharEholDEr ValuE Enhancing shareholder value remains the primary goal of our company. Given our robust capital position and temporary restrictions on acquiring other banks, it is essential that we pursue the best opportunities available to return excess capital to our shareholders. To that end, we were pleased this year to repurchase 4.2 million shares of our common stock at an average price of $11.81. We currently view stock buybacks at these levels as a better alternative for the return of capital than paying special dividends. As we approached the end of 2012, our Board determined that we should pay the dividend we would normally pay in the first quarter of 2013 prior to the end of 2012. This decision was prompted by the anticipation of future increases in the tax rates for dividends. We acknowledge that this action may be confusing for our shareholders, as they received five dividend payments in 2012 while we anticipate only three payments in 2013. However, we believe the potential tax savings justifies any confusion that may result. Given that five dividend payments of $0.12 were made in 2012, the dividend yield to our shareholders was approximately 5%. At the time we reported the decision to prepay the fourth quarter dividend, we also announced an increase of 5.0 million shares to our existing share repurchase program. As of December 31, 2012, there were 6.5 million shares remaining to be repurchased Five dividend payments of $0.12 were made in 2012 and the dividend yield to our shareholders was approximately 5%. 2 under this plan. Since completing our second step offering in December of 2009, we have repurchased 19.4 million shares at a total cost of $231.2 million and an average per share price of $11.92. Although these purchases were completed at a price in excess of tangible book value, we estimate that the resulting dilution will be recovered in less than three years through increases in earnings per share. In an effort to enhance shareholder value, we will continue to monitor our capital position, the market value of our shares, the tax rates for dividends and the opportunities to grow our company when assessing future alternatives for the utilization of capital. loan growth For several years we have recognized that the growth of our loan portfolio is a mission critical issue for Northwest. With a significant amount of cash invested in overnight deposits earning less than 0.25%, any deployment of cash to fund loan growth provides a significant increase in interest income. In this regard, we were pleased to grow loans by $151 million, or 2.7%, in a year when economic activity was measured and American businesses were reluctant to borrow. We commend our business development teams for their success in addressing this strategic goal. StrEngthEning lEnDing anD crEDit functionS Over the past ten years, we have made great strides in lowering our dependency on residential mortgage loans while building a diversified commercial loan portfolio. While that portfolio was growing, we remained vigilant in enhancing credit oversight. During 2012, we completed another transformational step in our lending and credit evolution. Recognizing that our lenders were significantly burdened with administrative responsibilities, we moved many of their administrative tasks to our independent credit administration group, thereby providing additional time for business development. An additional benefit of this realignment is that it will provide more consistent administration of credit and further enhancements in credit quality. StrEngthEning our comPliancE managEmEnt SyStEm We began 2012 operating under a formal “Consent Order,” which was issued by the FDIC on August 8, 2011 and required Northwest to strengthen our Compliance Management System. A strong Compliance Management System provides assurance that all governmental regulations are properly addressed. The Dodd-Frank Act, which established the Consumer Financial Protection Bureau, significantly increased the expectations of federal banking regulators with regard to regulatory compliance, with an emphasis on enhancing consumer protection. Northwest’s management team reacted quickly, decisively and aggressively to the requirements of the Consent Order and it was removed by the FDIC on July 2, 2012. The Consent Order was later replaced by a less severe agreement known as a “Memorandum of Understanding” which requires additional assurance from Northwest that our strengthened compliance management system is functioning properly and is sustainable. We continue to work diligently to further address Loans grew by $151 million in a year when economic activity was measured and businesses were reluctant to borrow. 3 Message to Stockholders these requirements and to be relieved of all regulatory restrictions. However, until such time as our regulators lift these restrictions, we will not be permitted to acquire another banking institution. Our efforts to meet the enhanced compliance expectations have come at a great cost to our institution and its shareholders. The ongoing annual expense associated with this additional regulatory burden now exceeds $4 million. imProVing crEDit Quality The sustained economic downturn of the past five years has taken its toll on our nation’s borrowers and we began the year with persistently high levels of non-performing assets. Our goal on January 1, 2012 was to significantly reduce the volume of delinquent borrowers and troubled assets. Much progress has been made. Loans delinquent ninety days or more decreased from $95.8 million to $68.3 million while total delinquent loans decreased from $174.9 million to $157.4 million. Non-performing assets, which include loans delinquent 90 days or more, restructured loans and foreclosed real estate, decreased from $131.1 million to $118.7 million. Our lending and credit personnel are to be commended for their efforts in improving asset quality. As a result of this improvement, loans charged off in 2012 were $30.5 million compared to $42.4 million in 2011. In addition, the amount that was set aside in 2012 for future loan losses was $26.3 million, down significantly from $34.2 million the previous year. We continue to work diligently at improving the credit culture at Northwest and we believe the changes we have made to our lending and credit areas will greatly improve both credit quality and credit consistency in the years ahead. rEcognition We were pleased for the third consecutive year to be ranked “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region” by J.D. Power and Associates. Our staff continues to take great pride in the level of service they provide to all Northwest customers. We were also honored to learn that Forbes named Northwest to its list of “America’s Most Trustworthy Companies” for the second time. Creating a high level of trust with our customers and shareholders is a core value of our company and this recognition validates the strength of that commitment. For the second time, Keefe, Bruyette & Woods recognized Northwest as one of the top 50 banks in the country for our ten-year operating performance. Given our commitment to provide consistent returns through continuous improvement, this award also has a very special meaning to our company. Finally, Bank Director magazine named Northwest in 2012 to its “Nifty 50,” a prestigious list of top performing banks as assessed by strategy, business model, and the operating skill of its management team. These rankings highlight banks that excel both in deploying their capital and getting a return on that capital. othEr notablE EVEntS Although we were not permitted to acquire another depository institution during 2012, we pursued opportunities to enhance In December, we acquired The Bert Agency, a provider of employee benefit plans and property and casualty insurance. 4 our franchise through other acquisition opportunities. On December 31, 2012, we acquired The Bert Agency, a provider of employee benefit plans and property and casualty insurance. We are excited about this additional opportunity to expand our insurance offerings and we look forward to continued growth in this area. In an effort to improve efficiency, we consolidated customers’ accounts from our offices in Glen Burnie, Maryland and Johnsonburg and Weedville, Pennsylvania with Northwest offices in the same geographic vicinities. As customers increasingly choose to transact business using alternative delivery channels, we continue to seek office consolidation opportunities as a method to improve our efficiency. looking ahEaD We believe the financial industry will continue to face tremendous challenges in the years ahead. Our Board of Directors and management team continuously assess our strategy as circumstances change and new opportunities emerge. Our primary area of focus going forward will be the improvement of earnings as measured by our return-on- average assets. We believe this ratio is the best assessment of how effectively we are managing our company. Return-on-average-assets was 0.79% in 2012. Reaching a level that approaches 1.00% is a strategic target we must achieve to keep Northwest competitive with our peers in providing attractive shareholder returns. Given the current economic, interest- rate and regulatory environment, this will not be an easy task. However, if we can deploy more excess cash to our loan portfolio, normalize loan loss provisions, increase noninterest income, and squeeze more efficiencies from our operations, we believe this target is within reach. We also remain devoted stewards of our capital and recognize that it must be actively managed to maximize shareholder returns. Given this commitment, we will pursue opportunities to leverage capital by acquiring other banks when such acquisitions are not excessively dilutive to tangible equity and when such dilution can be recovered within a reasonable period of time. If acceptable leverage opportunities do not materialize, we will continue to return capital to our shareholders by actively pursuing share buybacks while giving full consideration to the payment of special dividends. concluSion On behalf of the Directors, officers and employees of Northwest Bancshares, Inc., I thank you for your continued confidence in our company. We remain committed to managing Northwest in a manner that enhances the value of your investment. Sincerely, William J. Wagner Chairman, President and CEO We remain devoted stewards of our capital and recognize that it must be actively managed to maximize shareholder returns. 5 NEW YORK OHIO PENNSYLVANIA Market Coverage Northwest Bancshares, Inc.’s network of offices serves communities in Pennsylvania, New York, Ohio, and Maryland. NORTHWEST SAVINGS BANK NORTHWEST CONSUMER DISCOUNT COMPANY MARYLAND NEW YORK OHIO PENNSYLVANIA MARYLAND 6 NORTHWEST SAVINGS BANK NORTHWEST CONSUMER DISCOUNT COMPANY Financial Highlights northwESt bancSharES, inc. anD SubSiDiariES in thousands, except per share and other data at yEar EnD DEcEmbEr 31, Total assets Loans receivable, net Deposits Shareholders’ equity Book value per share Closing market price per share for thE yEar EnDED DEcEmbEr 31, Net interest income Net income Diluted earnings per share Dividends per share (1) kEy financial ratioS for thE yEar EnDED DEcEmbEr 31, Return on average shareholders’ equity Return on average assets Tangible common equity Average interest rate spread Nonperforming assets to total assets at end of period Net charge-offs as a percentage of average loans outstanding Allowance for loan losses to nonperforming loans at end of period Allowance for loan losses as a percentage of loans receivable othEr Data at DEcEmbEr 31, Number of: Community banking locations Consumer finance offices Full time equivalent employees Registered shareholders(2) (1) Includes acceleration of first quarter 2013 dividend paid on December 24, 2012 (2) Excludes shareholders who own their stock in “street name.” 2012 $7,942,600 $5,629,261 $5,764,600 $1,128,469 $12.05 $12.14 $263,976 $63,560 $0.68 $0.60 5.48% 0.79% 12.23% 3.41% 1.84% 0.43% 60.91% 1.28% 165 52 2,042 14,486 2011 $7,957,705 $5,480,381 $5,780,325 $1,154,904 $11.85 $12.44 $267,269 $64,151 $0.64 $0.43 5.24% 0.80% 12.59% 3.39% 1.99% 0.72% 54.26% 1.28% 168 52 1,950 14,914 2010 $8,148,155 $5,457,593 $5,764,336 $1,307,450 $11.85 $11.78 $257,641 $57,523 $0.53 $0.40 4.40% 0.71% 14.19% 3.19% 2.08% 0.63% 51.49% 1.38% 171 52 1,881 14,693 7 Growth & Performance Northwest has demonstrated the ability to safely grow our balance sheet... while increasing income commensurate with that growth... aSSEtS in billions of dollars $6.33 $6.45 $6.53 $6.66 $6.93 $5.68 $8.03 $8.15 $7.96 $7.94 10 8 6 4 2 0 annual nEt incomE in millions of dollars $56.8 $52.4 $51.5 $49.1 $48.2 $42.8 $32.7 $64.2 $63.6 $57.5 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 which the market has rewarded in the exceptional performance of our stock. NWBI (+507.00%) S&P 500 (+208.51%) SNL U.S. Bank (+98.54%) Stock PricE PErformancE SincE iPo in total return % 600 400 200 0 -200 8 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 Corporate Profile northwESt bancSharES, inc., a savings Our Business Solutions offering includes and loan holding company, owns and operates commercial loans, business deposit accounts, Northwest Savings Bank, a Pennsylvania-chartered cash management services, and benefits savings bank headquartered in Warren, management services featuring personal Pennsylvania. attention and local decision making. As of December 31, 2012, we held assets of $7.94 Our Personal Banking offering includes billion and operated 165 community banking mortgage, home equity, and consumer loans, locations and 267 Automated Teller Machines and checking and other deposit products with a (ATMs) throughout our markets in central, personal touch and a complete menu of delivery eastern, and western Pennsylvania, western channels. We also provide comprehensive New York, eastern Ohio, and Maryland. brokerage, trust, and investment management Our primary business involves gathering funds from deposits and borrowings and investing those services, and personal insurance products to meet all of our customers’ financial needs. funds in loans and investment securities. We also operate Northwest Consumer Discount For 116 years, we have served our communities with an ever-expanding array of banking and investment products that meet the needs of both business and personal customers. Company, a consumer finance company that specializes in helping customers meet their consumer credit needs. As of December 31, 2012, Northwest Consumer had loans outstanding of $108.7 million at 52 offices across Pennsylvania. SourcES of funDS Subordinated Debt 1% Money Market Deposit Accounts 17% Certificates of Deposit 28% Savings Accounts 17% Borrowed Funds 13% Checking Accounts 24% inVEStmEnt of funDS Consumer Loans 3% Commercial Loans 5% Other Assets 7% Home Equity Loans 14% Commercial Real Estate loans 20% Mortgage Loans 30% Cash & Investments 21% 9 Strategic Focus 10 Looking ahead, Northwest is positioned to be a premier provider of financial services in all of our markets. As displayed in the sections that follow, we have demonstrated significant success in delivering: • buSinESS SolutionS including business loans and deposits as well as assisting businesses with their employee benefit plans. • PErSonal banking products and services, including checking and deposit accounts and loans to fill all personal needs. Business Solutions wE SPEcializE in DEVEloPing laSting rElationShiPS baSED on cuStom-tailorED ProDuctS anD SErVicES, local DEciSion making, anD PErSonal attEntion. Northwest’s goal is to provide a wide array of financial solutions to businesses utilizing products and services that are competitively priced and of the highest quality. • Business Checking • Retirement Plans • Merchant Services • Commercial Lending • Small Business Loans • Employee Benefits • Insurance • Express Deposit • Business Online Banking and Bill Pay • Business Mobile Banking • Business Credit Cards 11 Business Solutions Building a strategic process with our business customers loanS Northwest’s commercial loans have grown substantially over the past four years... while yields have remained at attractive levels despite the low interest rate environment.... and loan losses have been much lower than the industry average. commErcial loanS in millions of dollars commErcial loan yiElDS VS. 3-yEar trEaSury yiElD at DEcEmbEr 31 loan loSSES VS. inDuStry aVEragE loSSES as a % of loans 2,500 2,000 1,500 1,000 500 0 $1,886.0 $1,889.6 $2,048.6 $1,695.7 $1,487.4 2008 2009 2010 2011 2012 7 6 5 4 3 2 1 0 6.05% 5.82% 5.73% 5.63% 5.25% 1.70% 1.00% 1.02% 0.36% 0.36% 2008 2009 2010 2011 2012 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.50% 2.55% 1.55% 1.29% 0.19% 0.51% 0.63% 0.72% 0.88% 0.43% 2008 2009 2010 2011 2012 Northwest commercial loan yields 3-year Treasury yield Northwest losses Industry average losses DEPoSitS Balances of business deposits have increased substantially... while the average cost of such deposits has decreased. Northwest’s mix of business deposits is diversified due to our focus on meeting the needs of all types of businesses. buSinESS DEPoSit balancES in millions of dollars $1,017.6 $784.5 $808.6 $855.3 $691.2 1,200 1,000 800 600 400 200 0 12 coSt of buSinESS DEPoSitS 0.81% 0.56% 1.0 0.8 0.6 0.4 0.2 0.0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Interest Checking Accounts 15% Business Money Market Accounts 28% Municipal Accounts 17% 0.28% 0.17% 0.12% Non-Interest Checking Accounts 40% Business Solutions EmPloyEE bEnEfitS Northwest has increased assets under management in recent years... along with the number of benefit plans administered... which has driven an increase in fee income from these business lines. bEnEfit Plan aSSEtS unDEr managEmEnt in millions of dollars # of bEnEfit PlanS aDminiStErED bEnEfit Plan managEmEnt rEVEnuE in millions of dollars $808.9 $718.7 $651.3 $542.8 $375.1 1,000 800 600 400 200 0 1,798 1,828 1,538 2,000 1,500 1,000 500 0 822 864 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 10 8 6 4 2 0 $8.8 $8.1 $7.3 $4.0 $4.1 2008 2009 2010 2011 2012 aSSEt miX as a % of total assets bEnEfit PlanS aDminiStErED as a % of total plans buSinESS rEVEnuE as a % of total revenue Investment Management 9% Investment Management 6% Investment Management 14% Benefits 86% Employee Benefit 46% Retirement Benefit 45% Employee Benefit 43% Retirement Benefit 51% 13 Personal Banking northwESt haS a comPrEhEnSiVE array of financial toolS to SatiSfy our cuStomErS’ nEEDS aS thEy liVE, work, anD Play. Our company’s goal is to deliver the highest quality personal banking products and services with maximum convenience and competitive pricing. • Checking, Savings, and CDs • Loans and Lines of Credit • Mobile Banking • Online Banking and Bill Pay • 50,000+ Free ATMs • eStatementsplus • Debit and Credit Cards • Telephone Banking 14 Personal Banking DEEPEning rElationShiPS Our strategy of increasing the number of services per household... and decreasing the number of single service households... creates meaningful customer relationships, reduces attrition, and improves operating performance. SErVicES PEr houSEholD # of SinglE SErVicE houSEholDS # of houSEholDS 2.711 2.629 2.547 3.00 2.75 2.50 2.25 2.00 2.908 2.846 100,000 96,659 94,213 88,991 84,641 81,319 90,000 80,000 70,000 60,000 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 300,000 275,000 250,000 225,000 200,000 295,051 297,957 295,596 292,397 288,502 2008 2009 2010 2011 2012 incrEaSing chEcking balancES Northwest has had great success in recent years in procuring new checking accounts... while checking account balances have also increased significantly... and provided significant levels of checking-related fee income. # of chEcking accountS 250,000 200,000 189,424 203,354 213,359 218,420 222,427 150,000 100,000 50,000 0 2008 2009 2010 2011 2012 chEcking account balancES in millions of dollars $935.0 $867.9 $725.6 $779.3 $616.6 2008 2009 2010 2011 2012 1,000 800 600 400 200 0 35 30 25 20 15 10 5 0 chEcking account fEES in millions of dollars $30.0 $31.5 $34.8 $32.3 $31.5 2008 2009 2010 2011 2012 15 Personal Banking Building quality personal relationships emphasizing service, convenience, and value rEmaining a PrEfErrED ProViDEr of conSumEr crEDit The mortgage and home equity portfolios have provided an attractive and stable yield during a period of low interest rates while losses remain relatively low during the recent economic downturn due to our conservative lending practices and low average balances. mortgagE Portfolio yiElD VS. 10-yEar trEaSury yiElD at DEcEmbEr 31 Mortgage yield 10-year Treasury yield 5.96% 5.78% 5.54% 5.27% 4.83% 3.85% 3.30% 2.25% 1.89% 1.78% 2008 2009 2010 2011 2012 6 5 4 3 2 1 0 8 7 6 5 4 3 2 1 0 homE EQuity Portfolio yiElD VS. 3-yEar trEaSury yiElD at DEcEmbEr 31 Yield on home equity loans 3-year Treasury yield mortgagE & homE EQuity loanS loSSES as a % of total mortgages and home equities 6.54% 6.15% 5.89% 5.64% 5.27% 1.70% 1.00% 1.02% 0.36% 0.36% 2008 2009 2010 2011 2012 0.25 0.20 0.15 0.10 0.05 0.00 0.24% 0.24% 0.24% 0.08% 0.05% 2008 2009 2010 2011 2012 conSumEr loanS We continue to retain much of our consumer loan portfolio during the recent cycle of low demand. While losses have remained at manageable levels... and yields have remained attractive during a period of low interest rates. conSumEr loanS in millions of dollars $267.5 $273.9 $255.8 $245.7 $235.4 conSumEr loan loSSES as a % of consumer loans 1.95% 1.94% 1.81% 1.64% 2.20% 2.5 2.0 1.5 1.0 0.5 0.0 12 10 8 6 4 2 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 yiElD on conSumEr loanS VS. 3-yEar trEaSury yiElD at DEcEmbEr 31 10.45% 10.60% 11.30% 11.57% 11.98% 1.00% 1.70% 1.02% 0.36% 0.36% 2008 2009 2010 2011 2012 Yield on consumer loans 3-year Treasury yield 300 250 200 150 100 50 0 16 Investment Management and Insurance northwESt iS DEDicatED to turning our cuStomErS’ financial SuccESS into financial SEcurity. We have achieved significant growth in both personal assets under management and number of clients as we leverage the opportunities to develop such relationships with customers who also use our banking services. • Investments • Planning and Management • Trust and Estate Services • Employee Benefits • Insurance • Retirement Plans • Oil and Gas Lease Income 17 Investment Management Assets under management have increased significantly in recent years... while we have had success with customer retention... which has provided a growing source of fee income. PErSonal aSSEtS unDEr managEmEnt in millions of dollars # of cliEntS inVEStmEnt managEmEnt rEVEnuE in millions of dollars 750 625 500 375 250 $703 $639 $558 $508 $415 7,714 6,905 8,607 7,526 7,787 10,000 8,000 6,000 4,000 2,000 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 5 4 3 2 1 0 $4.6 $4.7 $4.0 $3.5 $3.0 2008 2009 2010 2011 2012 PErSonal aSSEt miX as a % of total assets under management PErSonal cliEnt miX as a % of total clients PErSonal rEVEnuE miX as a % of total Investment Management revenue Trust 56% Brokerage 34% 18 Investment Management 10% Investment Management 10% Trust 16% Brokerage 74% Brokerage 26% Trust 62% Investment Management 12% Financial Data and Investor Information 19 Financial Data conDEnSED conSoliDatED balancE ShEEt (in thousands, except share data) aSSEtS Cash and cash equivalents Marketable securities available-for-sale Marketable securities held-to-maturity Loans receivable, net of allowance for loan losses of $73,219 and $71,138 Accrued interest receivable Real estate owned, net Bank-owned life insurance Premises and equipment Goodwill and other intangible assets Federal Home Loan Bank stock, at cost Other assets total aSSEtS liabilitiES anD SharEholDErS’ EQuity Deposits Borrowed funds Advances by borrowers for taxes and insurance Accrued interest payable Other liabilities Trust preferred securities total liabilitiES Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued Common stock, $0.01 par value, 500,000,000 shares authorized; 93,652,960 and 97,493,046 shares issued and outstanding, respectively Paid-in capital Retained earnings Unallocated common stock of Employee Stock Ownership Plan Accumulated other comprehensive loss, net total SharEholDErS’ EQuity total liabilitiES anD SharEholDErS’ EQuity 20 aS of DEcEmbEr 31, 2012 2011 $ 451,704 1,079,074 155,081 5,629,261 23,313 26,165 137,044 138,824 177,990 46,834 77,310 $ 7,942,600 $ 5,764,600 860,047 23,325 888 62,177 103,094 6,814,131 — 937 613,249 550,296 (24,525) (11,488) 1,128,469 $ 7,942,600 $ 688,297 908,349 231,389 5,480,381 24,599 26,887 133,524 132,152 174,005 48,935 109,187 $ 7,957,705 $ 5,780,325 827,925 23,571 1,104 66,782 103,094 6,802,801 — 975 659,523 543,598 (25,966) (23,226) 1,154,904 $ 7,957,705 conDEnSED conSoliDatED StatEmEntS of incomE (in thousands, except share data) intErESt incomE: Loans Investments and interest-earning cash total intErESt incomE intErESt EXPEnSE: Deposits Borrowed funds total intErESt EXPEnSE Net interest income Provision for loan losses Net interest income after provision for loan losses nonintErESt incomE: Service charges and fees Trust and other financial services income Gain/(loss) on securities Insurance commission income Income from bank-owned life insurance Other total nonintErESt incomE nonintErESt EXPEnSE: Compensation and employee benefits Premises and occupancy costs Office operations Processing expenses Amortization of intangibles Marketing expenses Federal deposit insurance premiums Other total nonintErESt EXPEnSE Income before income taxes Income tax expense nEt incomE Basic earnings per share Diluted earnings per share yEarS EnDED DEcEmbEr 31, 2012 2011 2010 $ 309,391 29,784 339,175 $ 320,942 39,128 360,070 $ 328,948 41,620 370,568 43,377 31,822 75,199 263,976 26,338 237,638 34,486 8,544 323 6,264 4,961 3,189 57,767 111,727 22,409 13,224 25,000 1,012 7,829 5,554 18,722 205,477 89,928 26,368 63,560 0.68 0.68 $ $ $ 60,721 32,080 92,801 267,269 34,170 233,099 35,378 8,125 (579) 6,548 6,019 2,645 58,136 106,595 23,055 12,850 23,332 1,819 9,953 7,101 15,522 200,227 91,008 26,857 64,151 0.64 0.64 $ $ $ 75,174 37,753 112,927 257,641 40,486 217,155 37,921 7,252 660 5,190 5,080 4,295 60,398 100,709 22,665 13,864 23,152 2,784 9,875 9,054 14,405 196,508 81,045 23,522 57,523 0.53 0.53 $ $ $ 21 Directors and Officers board of Directors northwest bancshares, inc. and northwest Savings bank corporate officers northwest bancshares, inc. and northwest Savings bank william J. wagner Chairman, President, and Chief Executive Officer Northwest Bancshares, Inc. John m. bauer Co-Chairman, Contact Technologies, Inc. richard l. carr Retired Superintendent, Titusville Area School District Deborah J. chadsey Attorney and Partner, Kavinoky Cook LLP Dr. a. Paul king Retired President, Oral Surgery of Erie Joseph f. long Retired Partner, KPMG LLP Treasurer, Passavant Hospital Foundation Dr. richard E. mcDowell President Emeritus, The University of Pittsburgh at Bradford John P. meegan Executive Vice President and Chief Operating Officer, Hefren-Tillotson, Inc. Sonia m. Probst Retired Chief Executive Officer, Rouse Estate Philip m. tredway President and Chief Executive Officer, Erie Molded Plastics, Inc. william J. wagner President and Chief Executive Officer Steven g. fisher Executive Vice President, Banking Services william w. harvey, Jr. Executive Vice President, Finance and Chief Financial Officer timothy a. huber Executive Vice President, Chief Lending Officer gregory c. larocca Executive Vice President, Wealth Management, Trust & Insurance Services and Corporate Secretary Julia w. mctavish Executive Vice President, Chief Human Resources Officer michael g. Smelko Executive Vice President, Chief Credit Officer ronald b. andzelik Senior Vice President, Compliance and Community Reinvestment Act Officer robert bablak, Jr. Senior Vice President, Community Banking John k. beard Senior Vice President, Retail Investment Services 22 Douglas bert Senior Vice President, Senior Executive, Insurance Services william m. guthrie Senior Vice President, Senior Executive, Wealth Management John E. hall Senior Vice President, Consumer Lending neil r. hoffman Senior Vice President, Commercial Lending gerald J. ritzert Senior Vice President, Finance and Controller richard f. Seibel Senior Vice President, Risk Management Vicki l. Stec Senior Vice President, Compliance and Bank Secrecy Officer David E. westerburg Senior Vice President, Marketing and Operations, Chief Marketing Officer andrew c. young Senior Vice President, Chief Information Officer Stephen m. bell Vice President, Facilities thomas k. creal Vice President, Credit Administration michael r. DelPrince Vice President, Finance barbara l. Demontier Vice President, Human Resources michael a. Doherty Vice President, Credit Administration w. norman Ewing Vice President, Systems and Programming James g. holding Vice President, Communications Dean c. huya Vice President, Loss Mitigation Paul c. lindberg Vice President, Loan Review Dorothy E. lobdell Vice President, Mortgage Lending Edward a. martone Vice President, Human Resources kevin g. mizak Vice President, Chief Auditor Donald E. reed Vice President, Finance and Treasurer David c. Stevenson Vice President, Computer Operations Eric D. Stoever Vice President, Chief Technology Officer James m. Swanson Vice President, Retail Deposit Products william c. tarpenning Vice President, Mortgage Banking Deborah a. Vecellio Vice President, Mortgage Servicing Shawn o. walker Vice President, Marketing region Presidents northwest Savings bank Richard J. Oppitz Maryland Nancy J. May Eastern Pennsylvania Julie A. Marasco Northwest Pennsylvania, Ohio Christopher A. Martin Southwest Pennsylvania James E. Martin Erie, Pennsylvania Jonathan E. Rockey Central Pennsylvania Jonathan P. Scalise New York Investor Information corporate headquarters: online Shareholder access: common Stock information: 100 Liberty Street P.O. Box 128 Warren, Pennsylvania 16365 Telephone : (814) 726-2140 Fax : (814) 728-7716 www.northwestsavingsbank.com annual meeting: April 17, 2013, 11:00 a.m. The Struthers Library Theatre 302 West Third Avenue Warren, Pennsylvania 16365 Stock listing: Northwest Bancshares, Inc. common stock is traded on the NASDAQ Global Select Market under the symbol “NWBI.” Registered shareholders may access their account(s) online through American Stock Transfer & Trust Company, LLC at www. amstock.com. Here you can easily initiate a number of transactions and inquiries as well as obtain important details about your holdings and general stock transfer information. • Update your mailing address • Access account information • Print a duplicate 1099 tax form • Combine/consolidate accounts • Request a replacement dividend check • Download stock transfer instructions and forms • Enroll in direct deposit of dividends Stock transfer, registrar, and Dividend Disbursing agent: financial information: Shareholder communications regarding change of address, change in registration of certificates, reporting of lost certificates and dividend checks should be directed to: American Stock Transfer and Trust Company, LLC 6201 15th Avenue Brooklyn, New York 11219 Toll Free : (800) 937-5449 Toll Free : (877) 777-0800 Fax : (718) 236-2641 Email : info@amstock.com Web Site : www.amstock.com The Annual Report on Form 10-K is filed with the Securities and Exchange Commission (SEC). Copies of this document and other filings, including exhibits thereto, may be obtained electronically at the SEC home page at www.sec.gov or through the Company’s website www.northwestsavingsbank.com. Copies may also be obtained, without charge, upon request by writing to the Company’s corporate headquarters. independent auditors: KPMG LLP Pittsburgh, Pennsylvania Securities counsel: Luse Gorman Pomerenk & Schick, P.C. Washington, D.C. Year Ended December 31, 2012 High $13.08 First quarter 13.00 Second quarter 12.70 Third quarter 12.50 Fourth quarter Year Ended December 31, 2011 High $12.59 First quarter 12.67 Second quarter 13.36 Third quarter 12.93 Fourth quarter Low $12.14 11.03 11.22 11.11 Low $11.47 11.90 10.74 11.33 Cash Dividends Declared $ 0.12 0.12 0.12 0.24 (1) Cash Dividends Declared $ 0.10 0.11 0.11 0.11 (1) Includes acceleration of first quarter 2013 dividend paid on December 24, 2012 Dividend reinvestment & Direct Stock Purchase and Sale Plan: Northwest Bancshares, Inc. is pleased to offer a Dividend Reinvestment and Direct Stock Purchase and Sale Plan through American Stock Transfer & Trust Company, LLC (the “Plan Administrator”). The plan provides both existing registered shareholders and interested new investors with a convenient method to purchase shares of Northwest Bancshares, Inc. common stock. If you are already a registered share- holder or are interested in becoming one, you may access the plan material and enroll online at www.amstock.com by clicking on “Invest Online” under “Shareholder Services” or via our investor relations website at www.northwestsavingsbank.com. Alternatively, you may request a plan prospectus and enrollment application by calling American Stock Transfer & Trust Company, toll-free, at (877) 715-0499 or Northwest, toll-free, at (800) 859-1000 or (814) 728-7263. Direct Deposit of Dividends: Shareholders who do not reinvest their dividends may elect to have cash dividends directly deposited into their savings or checking account, thereby providing immediate access to funds and eliminating mail delays and lost or stolen checks. You may enroll online by accessing your shareholder account(s) at www.amstock.com or, to obtain an enrollment card, by calling the Company’s transfer agent, toll-free, at (800) 937-5449 or Northwest, toll-free, at (800) 859-1000. investor relations: William J. Wagner President and Chief Executive Officer William W. Harvey, Jr. Executive Vice President and Chief Financial Officer Shareholder relations: Ian R. Scott Assistant Vice President, Shareholder Relations and Assistant Corporate Secretary (800) 859-1000 23 Notes In addition to historical information, this report may contain certain forward-looking statements that are based on assumptions and information currently available to management, including assumptions as to changes in market interest rates. These forward-looking statements are subject to various risks and uncertainties including, but not limited to, economic, regulatory, competitive, legislative, and other factors affecting the company and its operations. Readers are cautioned not to place undue reliance on these forward-looking statements as actual results may differ materially from those expressed or implied. Management has no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the release of this report. 24 “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region, Three Years in a Row” 50 keeFe, BRuYette & WOOdS Bank Director Magazine 2012 Northwest Savings Bank received the highest numerical score among retail banks in the Mid-Atlantic region in the proprietary J.d. Power and Associates 2010-2012 Retail Banking Satisfaction Studies.SM Study based on 51,498 total responses measuring 31 providers in the Mid-Atlantic region (de, Md, NJ, NY, PA, VA & Wash., d.C.) and measures opinions of consumers with their primary banking provider. Proprietary study results are based on experiences and perceptions of consumers surveyed January-February, 2012. Your experiences may vary. Visit jdpower.com. 100 Liberty Street PO Box 128 Warren, Pennsylvania 16365 (814) 726-2140 www.northwestsavingsbank.com 

Continue reading text version or see original annual report in PDF format above