Northwest Bancshares, Inc.
Annual Report 2013

Plain-text annual report

Continuing our evolution as a full-service financial institution 2013 Summary Annual Report Building loyalty, trust and value among our employees, customers, communities and shareholders The Board of Directors, officers and employees of Northwest Bancshares, Inc. are pleased to report on our company’s operations for the year ended December 31, 2013. Most significantly, we believe 2013 marks the beginning of a period of normalization for our company as the aftermath of the Great Recession finally appears to have ended. With that, we are pleased to report record earnings for our company in 2013, as well as a significant increase in the market value of our stock. The year also brought an end to our regulatory compliance challenges, significant improvement in our operations and further enhancements to our franchise. Message to Stockholders Annual Earnings Shareholder Value and Capital Deployment repurchases unattractive. With our shares now Net income for the year ended December 31, 2013 Northwest’s common shares increased in market was $66.7 million, an increase of $3.2 million, value by 21.7% in 2013, rising to $14.78 from or 5%, over the previous year. The increase was $12.14. This increase is consistent with the trading in excess of 140% of tangible book value, stock repurchases have become excessively dilutive and such activity has been temporarily curtailed. primarily due to a $3.7 million after-tax gain on movement of bank stocks in general during a Although we continue to seek opportunities to the sale of common and preferred stocks from year when the U.S. stock market posted robust leverage capital by growing our balance sheet, our investment portfolio. Although net interest returns. Although the strength of the stock market we spent almost the entire year under continued income decreased measurably as a result of the provided a significant enhancement to shareholder regulatory restraint, which hindered our ability continuation of low market interest rates, this loss value, we also actively sought opportunities to to acquire other banks. Fortunately, during in income was offset by a significant reduction manage capital for the benefit of our shareholders. that time period there were very few attractive in the provision for loan losses as asset quality continued to improve. Also contributing to the consistency in core earnings was a substantial increase in the income from our trust, insurance and other financial services lines of business, while the increase in operating expense was controlled. In an effort to return excess capital to our shareholders and to provide them with a strong dividend yield, we paid $.50 in cash dividends during the year, which represented approximately 70% of earnings and a yield of approximately 3.50%. Unless we can uncover more viable acquisition opportunities offered either within our existing footprint or in contiguous markets. We are hopeful that merger and acquisition activity will increase in 2014, and we remain committed to pursuing those opportunities which enhance our franchise, increase earnings and provide lasting shareholder value. Earnings per share increased 8.8% to $.74 while alternatives to leverage excess capital, we plan to return-on-equity increased from 5.48% to 5.88% continue to employ a strategy of paying ever- Loan Growth and Credit Quality and return-on-average-assets increased from .79% increasing and aggressive dividends to limit further to .84%. While we do not consider these earnings accumulation of capital. We were pleased to achieve loan growth of $104 million, or 1.8% in 2013 despite continued weak ratios to be stellar when compared to our long- term goals, we are pleased to realize continued progress while being confronted with an extremely difficult operating environment. We also utilized stock buybacks to return excess demand on the part of consumer and business capital with the purchase of 368,800 shares in the borrowers. Residential mortgage loans experienced second quarter at an average price of $12.09 per share. Unfortunately, the dramatic increase in the the greatest rate of growth, increasing $83 million, or 3.4%. In recent years, we have targeted minimal price of our stock later in the year made further growth in our mortgage portfolio as the rates on 2 We are pleased to report record earnings and an end to our regulatory compliance challenges. such loans approached historic lows near three agenda this year, and we were pleased in November will meet current and future expectations. We percent. With mortgage rates rising above four to be released from the informal agreement we had also remain cognizant of the requirements of the percent in 2013, we chose to use excess liquidity to executed with our federal banking regulator one Community Reinvestment Act and our obligation grow this portfolio in an attempt to preserve our year earlier. Over the past three years, our Board, to the communities we serve. In this regard, in net interest margin. officers and employees have been intensely focused 2013 we formed a Fair Lending Task Force to Northwest’s commercial lenders continue to make progress in growing market share as our expertise and reputation in this area continues to build. To assist with future growth requirements, we formed a separate small business lending unit which utilizes the resources of office managers to develop business relationships in their markets. This will not only leverage our local talent, but also provide more time for our commercial lenders to pursue larger credits. Credit quality improved significantly during 2013, with loans 90 days or more delinquent falling to $58 million, or 1.0% of total loans. This is the lowest amount and percentage of such delinquency since April 2008, when our country was entering the initial stages of the economic crisis. Regulatory Compliance on strengthening our compliance management ensure that Northwest is being proactive in seeking system in a quest to protect consumers and meet lending opportunities which address the needs the expectations of all regulatory bodies. This process has carried a significant price tag, and we currently estimate that this effort has added between $3 million and $5 million of on-going annual expense. However, we believe that this enhanced system will not only help us avoid future regulatory concerns, but also give Northwest a competitive edge should smaller community banks decide to pursue a highly-qualified merger partner. Despite having met current regulatory expectations, our efforts to strengthen our compliance system have not diminished. We of the low and moderate income borrowers who reside in the markets we serve. Expansion of Trust, Investment Management and Insurance Lines We began 2013 with the acquisition of the Bert (Insurance) Agency in Erie, Pennsylvania. The transition went well due to great cooperation on the part of the former Bert employees. The revenues provided by this group effectively doubled our insurance income in 2013 from the previous year. We remain enthusiastic regarding are currently in the final stages of implementing the revenue enhancing potential of insurance an enhanced process to meet the increasing products, and we plan to take advantage of future requirements of the Bank Secrecy Act. This is a opportunities to expand this line of business. We challenge that even the largest banks in the country finished the year on December 31, 2013 with the are struggling to address. Based on our success purchase of Evans Capital Management, which is The enhancement of our regulatory compliance to date, we are confident that we are creating a also headquartered in Erie. Evans had $240 million management system remained at the top of our comprehensive system that is scalable and that of assets under management or administration, Credit quality improved significantly with 90 day delinquencies falling to 1% of total loans. 3 Message to Stockholders which increased our combined totals to nearly ago when the facility we were leasing was razed. mobile banking. We view this evolution as an $2 billion. The Evans group also had an insurance We had significant success in the former location opportunity to improve both customer satisfaction division which we have integrated with our and we look forward to similar success in this and operational efficiency. Two major projects were consolidated insurance group, Northwest Insurance beautiful and vibrant Pennsylvania community. initiated in 2013 to address changing consumer Services, Inc. We are pleased to have the former The second office opening was in Zelienople, preference. First, we began upgrading all of our Evans employees as part of the Northwest team. Butler County, Pennsylvania, which complements As a result of both our internal growth and the acquisition of existing businesses, annual income from Trust, Insurance and other financial services grew $3.2 million, or 21%, in 2013. Continuing to grow these sources of noninterest income remains a strategic goal for our company. Enhancement of Our Franchise In recent years we have reduced the number of de novo branch openings as bricks and mortar seem to be diminishing in importance when attempting to attract or retain customers. our network of offices in the greater Pittsburgh market. The Zelienople area is experiencing economic and population growth as it benefits from its proximity to the rapidly growing north Pittsburgh suburbs. We also sought opportunities to create efficiencies by closing or consolidating offices. In this regard, we consolidated our Sykesville, Pennsylvania office with the DuBois office and closed a drive-through facility in Oil City. Customer Convenience However, in 2013, we opened two new offices in American consumers continue to transform our geographic areas that should provide significant industry by changing the way they choose to bank. opportunities to serve growing markets. The first The number of transactions taking place in our onsite ATMs to enable them to accept either check or cash deposits, while giving customers immediate credit and expanded availability to these funds. This technology is receiving wide acceptance and we are hopeful that it will eventually enable our offices to reduce hours of operation and staffing requirements. Mobile banking, where customers use portable electronic devices to make inquiries and transact business, is anticipated to be the most significant evolution in our industry in decades. Northwest introduced an upgraded mobile banking app in September 2013 and it has been enthusiastically received by over 17,000 of our customers. As part of this mobile offering, we will be releasing an application in early 2014 which will allow customers to deposit a check using their cell opening was in downtown Hershey, Dauphin offices continues to decrease while our customers phone. Again, we are hopeful that this change County, Pennsylvania, which in essence was the increase their access through telephone banking, in transaction preference will drive efficiencies replacement of an office that we lost several years online banking, direct deposit and, most recently, in our operations. 4 Income from Trust, Insurance and other financial services grew $3.2 million or 21%. Conclusion In conclusion, we must reflect on the challenging five-year period just ended during which time the banking industry encountered the perfect storm of credit deterioration, margin compression and increased operational costs. The Great Recession resulted in significant deterioration in the credit quality of loan portfolios and pushed loan losses to historically high levels. As the Federal Reserve pushed interest rates to historic lows, net interest margins were put under tremendous pressure. Finally, the industry was hit by an onslaught of additional costs ranging from compliance and risk management enhancement to fraud and cyber prevention. We believe Northwest successfully weathered the challenges of this five-year financial firestorm. half of those of our peer group and were even lower We thank you for your patience, confidence and when compared to national averages. We were support during a challenging period in the history also pleased to control operating expenses despite of our company. We will make every effort to having to devote significantly more resources to ensure that our shareholders are satisfied investors regulatory oversight, risk monitoring and loss in Northwest Bancshares, Inc. prevention. As a result, our expense to asset ratio increased marginally from 2.48% in 2008 to 2.61% in 2013, a time period during which total assets remained flat. While we are pleased to have demonstrated such consistency over the past five years, we recognize that we must remain focused on achieving acceptable annual earnings growth to enhance shareholder value. To achieve that goal we must take advantage of strategic opportunities to return excess capital while growing our company both internally and through accretive acquisitions. We must also continue to improve our loan Sincerely, William J. Wagner Chairman, President and CEO Our average annual net interest margin remained and deposit mix while growing our sources of in a range between 3.50% and 3.66% from 2009 noninterest income, specifically in the areas of to 2013, keeping that component of our annual wealth management and insurance. Finally, we earnings relatively consistent. While the credit must make every effort to build more efficiencies quality of our loan portfolio deteriorated during into our business model, especially in the area of that time, our actual loan losses were approximately staffing levels and compensation expense. We must remain focused on achieving acceptable annual earnings growth to enhance shareholder value. 5 Market Coverage NORTHWEST SAVINGS BANK NORTHWEST CONSUMER DISCOUNT COMPANY Northwest Bancshares, Inc.’s network of offices serves communities in Pennsylvania, New York, Ohio and Maryland. NORTHWEST SAVINGS BANK NORTHWEST CONSUMER DISCOUNT COMPANY NEW YORK NEW YORK OHIO PENNSYLVANIA OHIO PENNSYLVANIA MARYLAND 6 MARYLAND 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.” 2013 $7,881,475 $5,734,943 $5,668,879 $1,156,801 $12.29 $14.78 $251,876 $66,739 $0.73 $0.50 5.88% 0.84% 12.76% 3.32% 1.60% 0.38% 66.12% 1.23% 165 50 2,043 13,994 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% 12.24% 3.40% 1.86% 0.43% 60.06% 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% 54.05% 1.28% 168 52 1,950 14,914 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 $8.03 $8.15 $7.96 $7.94 $7.88 ANNUAl NET INCOmE in millions of dollars $56.8 $52.4 $51.5 $49.1 $48.2 $32.7 $64.2 $63.6 $66.7 $57.5 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 STOCK pRICE pERFORmANCE SINCE IpO in total return % which the market has rewarded in the exceptional performance of our stock. NWBI (+639.00%) S&P 500 (+299.15%) SNL U.S. Bank (+170.34%) 700 600 500 400 300 200 100 0 -100 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 3 1 0 2 10 8 6 4 2 0 8 Corporate Profile NORTHWEST BANCSHARES, INC., Our Business Solutions offering includes a savings and loan holding company, owns and commercial loans, business deposit accounts, operates Northwest Savings Bank, a Pennsylvania- cash management services and benefits chartered savings bank headquartered in Warren, management services featuring personal Pennsylvania. attention and local decision making. As of December 31, 2013, we held assets of $7.88 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, eastern and western Pennsylvania, western New York, eastern Ohio and Maryland. personal touch and a complete menu of delivery channels. We also provide comprehensive brokerage, trust and investment management services and personal insurance products to Our primary business involves gathering funds meet all of our customers’ financial needs. from deposits and borrowings and investing those funds in loans and investment securities. We also operate Northwest Consumer Discount Company, a consumer finance company that For 117 years, we have served our communities specializes in helping customers meet their with an ever-expanding array of banking and consumer credit needs. As of December 31, 2013, investment products that meet the needs of Northwest Consumer had loans outstanding of both business and personal customers. $101.0 million at 50 offices across Pennsylvania. SOURCES OF FUNDS Subordinated Debt 1% Money Market Deposit Accounts 18% Certificates of Deposit 25% Savings Accounts 18% Checking Accounts 25% Borrowed Funds 13% INvESTmENT OF FUNDS Consumer Loans 3% Commercial Loans 5% Other Assets 8% Home Equity Loans 14% Mortgage Loans 31% Commercial Real Estate Loans 20% Cash & Investments 19% 9 Strategic Focus 10 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 and insurance. • pERSONAl BANKINg products and services, including checking and deposit accounts and loans to fill all personal needs. Business Solutions 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. We specialize in developing lasting relationships based on custom-tailored products and services, local decision making and personal attention. • Business Checking • Retirement Plans • Merchant Services • Commercial Lending • Small Business Loans • Employee Benefits • Insurance • Express Deposit (Remote Capture) • Business Online Banking and Bill Pay • Business Mobile Banking • Business Credit Cards 11 Business Solutions Building a strategic partnership with our business customers lOANS Northwest’s commercial loans have grown substantially over the past five 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 $1,695.7 $2,048.6 $2,102.8 2009 2010 2011 2012 2013 7 6 5 4 3 2 1 0 5.82% 5.73% 5.63% 5.25% 4.61% 1.70% 1.02% 0.36% 0.36% 0.78% 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.50% 2.55% 1.55% 0.51% 0.63% 0.72% 0.88% 0.43% 0.38% 1.00% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Northwest commercial loan yields 3-year Treasury yield Northwest losses Industry average losses DEpOSITS Balances of business deposits have also increased substantially over the past four years... while the average cost of such deposits has decreased and remains very low. COST OF BUSINESS DEpOSITS BUSINESS DEpOSIT BAlANCES in millions of dollars $1,017.6 $1,073.4 $784.5 $808.6 $855.3 1,200 1,000 800 600 400 200 0 0.56% 0.28% 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 12 Northwest’s mix of business deposits is diversified due to our focus on meeting the needs of all types of businesses. Interest Checking Accounts 16% Municipal Accounts 15% Business Money Market Accounts 30% 0.17% 0.12% 0.14% Non-Interest Checking Accounts 39% Business Solutions RETIREmENT, INSURANCE AND INvESTmENT SERvICES Northwest has increased assets under administration and management in recent years... which has driven an increase in fee income from these business lines. Northwest’s new insurance lines have also provided a significant boost to fee income. ASSETS UNDER mANAgEmENT in millions of dollars RETIREmENT AND INvESTmENT SERvICES REvENUE in millions of dollars INSURANCE REvENUE in millions of dollars $1,046.8 $808.9 $718.7 $651.3 1,200 1,000 800 600 $542.8 400 200 0 2009 2010 2011 2012 2013 6 5 4 3 2 1 0 $5.5 $4.0 $4.2 $4.5 $3.6 2009 2010 2011 2012 2013 7 6 5 4 3 2 1 0 $6.3 $3.3 $3.7 $2.6 2010 2011 2012 2013 ASSET mIX as a % of total assets RETIREmENT AND INvESTmENT SERvICES REvENUE as a % of total revenue INSURANCE REvENUE as a % of total insurance revenue Investment Services 14% Investment Services 17% Property/Casualty 19% Retirement Services 86% Retirement Services 83% Employee Benefits 81% 13 Personal Banking 14 OUR COmpANy’S gOAl IS TO DElIvER THE HIgHEST qUAlITy pERSONAl BANKINg pRODUCTS AND SERvICES WITH mAXImUm CONvENIENCE AND COmpETITIvE pRICINg. Northwest has a comprehensive array of financial tools to satisfy our customers’ needs as they live, work and play. • Checking, Savings and CDs • Loans and Lines of Credit • Mobile Banking • Online Banking and Bill Pay • 55,000+ Free ATMs • eStatementsplus • Debit and Credit Cards • Telephone Banking 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 2.908 2.941 2.846 100,000 94,213 300,000 295,051 297,957 295,596 292,397 288,747 90,000 80,000 70,000 60,000 88,991 84,641 81,319 78,058 2009 2010 2011 2012 2013 275,000 250,000 225,000 200,000 2009 2010 2011 2012 2013 2.711 2.629 3.00 2.75 2.50 2.25 2.00 2009 2010 2011 2012 2013 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 203,354 213,359 218,420 222,427 223,139 250,000 200,000 150,000 100,000 50,000 0 CHECKINg ACCOUNT BAlANCES in millions of dollars $935.0 $963.6 $867.9 $725.6 $779.3 1,000 800 600 400 200 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 35 30 25 20 15 10 5 0 CHECKINg ACCOUNT FEES in millions of dollars $34.8 $31.5 $32.3 $31.5 $31.2 2009 2010 2011 2012 2013 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 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 5 4 3 2 1 0 5.78% 5.54% 5.27% 3.85% 3.30% 4.83% 4.53% 3.04% 1.89% 1.78% 2009 2010 2011 2012 2013 8 7 6 5 4 3 2 1 0 6.15% 5.89% 5.64% 5.27% 4.89% 1.70% 1.02% 0.36% 0.36% 0.78% 0.24% 0.24% 0.24% 0.13% 0.25 0.20 0.15 0.10 0.05 0.00 0.08% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 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 $273.9 $255.8 $245.7 $228.4 $228.3 CONSUmER lOAN lOSSES as a % of consumer loans 2.65% 2.20% 1.94% 1.81% 1.64% 2.5 2.0 1.5 1.0 0.5 0.0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 12 10 8 6 4 2 0 yIElD ON CONSUmER lOANS vS. 3-yEAR TREASURy yIElD AT DECEmBER 31 11.30% 11.57% 11.98% 11.62% 10.60% 1.70% 1.02% 0.36% 0.36% 0.78% 2009 2010 2011 2012 2013 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. Since 1999, Northwest has developed a broad range of financial services designed to meet the banking, investment, insurance and financial needs of its clients. This has allowed us to achieve significant growth in both personal assets under management and number of clients as we leverage the opportunities to develop such relationships with bank customers. • Investment Advisory • Financial Planning and Management • Trust and Estate Services • Brokerage • Retirement Accounts • Oil and Gas Lease Royalty Management • Education Savings • Annuities • Life Insurance • Long Term Care Insurance 17 Investment Management and Insurance Assets under management have grown significantly in recent years... as we have had success with customer acquisition... leading to a growing source of fee income. pERSONAl ASSETS UNDER mANAgEmENT in millions of dollars # OF ClIENTS INvESTmENT mANAgEmENT AND INSURANCE REvENUE in millions of dollars $703 $706 $639 $558 $508 800 600 400 200 0 12,000 10,000 8,000 6,000 4,000 2,000 0 10,496 8,607 7,714 7,526 7,787 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 pERSONAl ASSET mIX as a % of total assets under management Brokerage 33% Trust 50% Investment Advisory 17% pERSONAl ClIENT mIX as a % of total clients Investment Advisory 13% Trust 9% Insurance 27% Brokerage 51% 6 5 4 3 2 1 0 $5.5 $4.6 $4.7 $3.5 $3.0 2009 2010 2011 2012 2013 pERSONAl REvENUE mIX as a % of total Investment Management revenue Insurance 8% Brokerage 21% Investment Advisory 20% Trust 51% 18 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; 94,243,713 and 93,652,960 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 AS OF DECEmBER 31, 2013 2012 $ 391,905 1,016,767 121,366 5,734,943 21,821 18,203 140,172 146,139 176,782 43,715 69,662 $ 7,881,475 $ 5,668,879 881,645 26,669 888 43,499 103,094 6,724,674 — 943 619,678 571,164 (23,083) (11,901) 1,156,801 $ 7,881,475 $ 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 20 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, 2013 2012 2011 $ 287,289 25,749 313,038 $ 308,254 29,784 338,038 $ 320,100 39,128 359,228 29,279 31,883 61,162 251,876 18,519 233,357 35,884 9,330 5,405 8,635 5,197 2,396 66,847 112,190 23,182 14,454 25,548 1,210 6,284 5,600 18,666 207,134 93,070 26,331 66,739 0.74 0.73 $ $ $ 43,377 31,822 75,199 262,839 26,338 236,501 35,623 8,544 323 6,264 4,961 3,189 58,904 111,727 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 92,801 266,427 34,170 232,257 36,220 8,125 (579) 6,548 6,019 2,645 58,978 106,595 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 $ $ $ 21 Directors and Offi cers Board of Directors Northwest Bancshares, Inc. and Northwest Savings Bank William J. Wagner Chairman, President and Chief Executive Offi cer 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 Timothy B. Fannin Partner, Catalano, Case, Catalano & Fannin 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, Th e University of Pittsburgh at Bradford William F. McKnight Controller, Interstate Chemical Company John P. Meegan Executive Vice President and Chief Operating Offi cer, Hefren-Tillotson, Inc. Sonia M. Probst Retired Chief Executive Offi cer, Rouse Estate Philip M. Tredway President and Chief Executive Offi cer, Erie Molded Plastics, Inc. Corporate Offi cers Northwest Bancshares, Inc. and Northwest Savings Bank William J. Wagner President and Chief Executive Offi cer Steven G. Fisher Executive Vice President, Banking Services William W. Harvey, Jr. Executive Vice President, Finance and Chief Financial Offi cer Timothy A. Huber Executive Vice President, Chief Lending Offi cer Gregory C. LaRocca Executive Vice President, Wealth Management, Trust & Insurance Services and Corporate Secretary Julia W. McTavish Executive Vice President, Chief Human Resources Offi cer Michael G. Smelko Executive Vice President, Chief Credit Offi cer Ronald B. Andzelik Senior Vice President, Compliance and Community Reinvestment Act Offi cer Robert Bablak, Jr. Senior Vice President, Community Banking John K. Beard Senior Vice President, Retail Investment Services Douglas H. Bert Senior Vice President, Senior Executive, Insurance Services Don J. Boetger Senior Vice President, Senior Executive, Retirement 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 Richard K. Laws Senior Vice President, Chief Legal Counsel and CMS Enterprise Oversight Offi cer Dorothy E. Lobdell Senior Vice President, Mortgage Lending Gerald J. Ritzert Senior Vice President, Finance and Controller Vicki L. Stec Senior Vice President, Compliance and Bank Secrecy Offi cer Thomas J. Townsend Senior Vice President, Chief Risk Offi cer David E. Westerburg Senior Vice President, Marketing and Operations, Chief Marketing Offi cer Andrew C. Young Senior Vice President, Chief Information Offi cer 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 Dean C. Huya Vice President, Loss Mitigation Paul C. Lindberg Vice President, Loan Review Edward A. Martone Vice President, Human Resources Kevin G. Mizak Vice President, Chief Auditor Donald E. Reed Vice President, Finance and Treasurer Melody Schott Vice President, Delivery Channels David C. Stevenson Vice President, Computer Operations Eric D. Stoever Vice President, Chief Technology Offi cer James M. Swanson Vice President, Deposit Operations 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 Robert Bablak, Jr 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 22 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 16, 2014, 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.” Stock Transfer, Registrar and Dividend Disbursing Agent: 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 Registered shareholders can 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 Financial Information: 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, 2013 High $12.95 First quarter 13.58 Second quarter 14.57 Third quarter 15.05 Fourth quarter Year Ended December 31, 2012 First quarter Second quarter Third quarter Fourth quarter High $13.08 13.00 12.70 12.50 Low $12.04 11.98 12.88 13.15 Low $12.14 11.03 11.22 11.11 Cash Dividends Declared $ 0.00 0.24 0.13 0.13 Cash Dividends Declared $ 0.12 0.12 0.12 0.24 (1) (1) Includes acceleration of first quarter 2013 dividend paid on December 24, 2013 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 from 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. ©2014 Northwest Bancshares, Inc. 24 100 Liberty Street PO Box 128 Warren, Pennsylvania 16365 (814) 726-2140 www.northwestsavingsbank.com 

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