Northwest Bancshares, Inc.
Annual Report 2014

Plain-text annual report

2014 Summary Annual Report “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region.” Northwest Savings Bank received the highest numerical score among retail banks in the Mid-Atlantic region in the proprietary J.D. Power 2014 Retail Banking Satisfaction StudySM. Study based on 80,445 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 2014. Your experiences may vary. Visit jdpower.com. ©2014, Forbes Media LLC. Used with permission. Building loyalty, trust and value among our employees, customers, communities and shareholders Message to 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, 2014. We believe we continued to make great progress in our evolution as a full-service financial institution this past year, while achieving consistent core earnings and providing significant value to our shareholders and customers. Most notably, we continued to effectively deploy excess capital, greatly enhanced our delivery channels, announced a significant bank acquisition as well as the acquisition of two fee-based businesses and restructured our management team to be better aligned to address the strategic initiatives of our company. Message to Shareholders Annual Earnings and Operating Results Earnings for the year ended December 31, 2014 decreased by $4.6 million, or 6.9%, to $62.0 million from $66.6 million the previous year. This decrease resulted primarily from a $4.5 million, or 1.8%, decrease in net interest income; a $1.8 million, or 9.7%, increase in the provision for loan losses and an $8.4 million, or 4.0%, increase in noninterest expense. The decrease in net interest income resulted from the continuation of the low interest rate environment, which caused the yield on our loan portfolio to drop more than the cost of our deposits and borrowings. The increase in the provision for loan losses resulted primarily from the weather-related deterioration of a large commercial credit. The increase in noninterest expense resulted primarily from normal increases in compensation expense, the payment of termination benefits relating to our corporate reorganization, additional marketing expense relating primarily to checking account and retail loan campaigns and higher processing expense and professional services relating to the strengthening of our compliance management systems. Partially offsetting these decreases to income was an increase in noninterest income of $5.7 million, or 8.6%, relating primarily to a $3.0 million, or 32.5%, increase in trust and other financial services income. This increase in trust and other financial services income was primarily due to the January 1, 2014 acquisition of Evans Capital Management, a wealth management and insurance brokerage company. Our progress in further developing and growing our fee producing products and services elevated noninterest income to 0.93% of assets in 2014, within reach of our long-standing goal of 1%. The annualized returns on average shareholders’ equity and average assets were 5.69% and 0.79% respectively for 2014, compared to 5.87% and 0.84% the previous year. These returns do not meet our internal expectations and we recognize that our company must work diligently to improve net interest margin, maintain strong asset quality, increase noninterest income and control operating expense. The last five years have been a period of great change for our company as we struggled with the turmoil of the economic crisis, the aggressive expansion of our risk management and compliance functions and the upgrade of our delivery and administrative platforms with a focus on positioning Northwest for the future. With a significant portion of those costs now absorbed, we feel we are well-positioned to improve earnings and meet the expectations of a $10 billion financial services company. Shareholder Value and Capital Deployment The market value of our common stock decreased from $14.78 to $12.53, or 15.2%, during 2014 following a 21.7% increase in the previous year. Most of this decrease relates to the payment of two special dividends of $.10 and $1.00, respectively. These payments represented an approximate dividend yield of 8.5%, and were made to return excess capital to our shareholders at a time when it could not be used more effectively to support organic growth or the acquisition of other banks. Also impacting the price of our shares was the lackluster performance of the banking sector in general, as bank stocks fell out of favor and the NASDAQ Bank Index increased only 2.84% during 2014. In addition to the aforementioned special dividends, we paid four regular quarterly dividends of $.13 for total payments of $.52 in 2014, thereby providing Northwest’s shareholders with an annual regular dividend yield of approximately 4%. Combined with the special dividends, the total dividend yield for our shareholders in 2014 was approximately 12.5%. 2 The total dividend yield for our shareholders in 2014 was approximately 12.5%. In the fourth quarter of 2014, when our shares decreased in market value along with the rest of the banking industry, we resumed our stock buyback activity and repurchased 424,000 shares at an average price of $12.45. We continue to view stock buybacks as a viable alternative for returning capital to our shareholders and enhancing shareholder value. Enhancing Delivery Channels, Customer Convenience and Customer Security We were pleased to make significant enhancements to our customer offering in 2014, which we believe added convenience while providing opportunities to increase efficiency and reduce operating expenses. Most significantly, we launched our mobile deposit platform in July, thereby offering our customers the ability to deposit checks to their Northwest accounts utilizing their smart phones. This technology has been widely accepted by customers and is projected to be a transformational offering for the banking industry. We also began offering a “live chat” feature at our call center which gives live access to a customer service representative through our website. In addition, we upgraded our self-service voice response telephone system to provide a state of the art customer experience. Although not new in 2014, our second year of offering full-service ATMs demonstrated increased customer preference for this channel, as 13% of all deposits are now made using our automatic machines. Northwest has a tradition of being an active originator of residential mortgage and home equity loans in all of the markets we serve. We recognize that home ownership plays a significant role in fulfilling the American dream. Home mortgages also represent a significant portion of our loan portfolio and provide substantial interest and fee income. Given the importance of this product, we launched a major initiative during 2014 to evaluate our process for soliciting and originating these loans, with a focus on realizing greater efficiency and enhancing customer satisfaction. In addition, we strive to be a highly-respected partner with the builders, realtors, appraisers and attorneys who are involved with the mortgage process. With these goals in mind, we developed a new model for mortgage lending that offers both a centralized, virtual approach or a local, high-touch approach to allow our customers to be served as they choose. This model has been implemented over the past few months with great enthusiasm, and we are optimistic regarding future success in this area. Corporate Restructuring During our most recent strategic planning sessions, the Board of Directors and management team concluded that the two issues most critical to our long-term success are the execution of an advanced business development process and the achievement of a higher level of efficiency in all facets of our operations. With these two critical issues in mind, our management team formed a task force to analyze our management structure and develop an organizational approach that would best capitalize on these initiatives. Following months of thoughtful research and deliberation, the task force recommended to the Board that our company be organized into three distinct divisions: Production and Revenue; Technology, Operations, Finance and Support; and Risk Management. It was our belief that this structure would greatly eliminate silos within the company, streamline decision making and better position Northwest to address the challenges of a rapidly-changing financial industry. It was further determined that the first two of these divisions should be led by two seasoned and proven Northwest veterans. With that, Steven Fisher was promoted to Senior Executive Vice President and The two issues most critical to our long term success are the execution of advanced business development process and the achievement of a higher level of efficiency. 3 Message to Shareholders Chief Revenue Officer and William Harvey was additional capacity we have added to these areas of customer losses were absorbed by Northwest, even promoted to Senior Executive Vice President and has come at great expense, but we now believe though we shared no responsibility for the breach. Chief Financial Officer. It was further decided Northwest possesses an enhanced compliance that the third division, Risk Management, should management and BSA system that meets the continue to be led by the company’s Chief requirements of a $10 billion bank. Executive Officer, William Wagner. Although in its infancy, this new structure has already provided great value in terms of recognizing areas of weakness, addressing operating inefficiencies and promoting change in how we do business. We are optimistic that this new model will assist in our efforts to improve profitability and enhance shareholder value. Meeting Regulatory Expectations We continued to make great progress in 2014 with our efforts to strengthen our compliance management system as well as our capabilities Protecting Our Customers Customer concern is a Northwest tradition, and we worked diligently this past year to protect our customers from the rash of fraudulent transactions and stolen identity issues that are plaguing the world’s financial systems. Specifically, we offered our online banking customers, free of charge, a software solution for their computers that will help protect them from fraudulent attacks. We also added enhanced security technologies to our operating systems and introduced enhanced customer cyber security awareness education and training. in addressing the requirements of the Bank You most likely read several media reports during Secrecy Act. In this regard, we added additional the past year regarding significant data breaches compliance personnel during 2014 and now by non-bank retailers. Because Northwest’s feel that we have sufficient staffing to fulfill our customers had conducted transactions with these mission. In the area of Bank Secrecy, we completed retailers, they became at risk for identity theft and the full implementation of new investigative fraudulent transactions. Northwest acted quickly software and increased our staffing to a level that and aggressively in such situations to protect our is sufficient to perform the necessary follow- customers from harm. Unfortunately, the costs Looking ahead to 2015, we are developing a plan to replace our existing debit and credit cards with a new type of card that utilizes EMV-chip technology. This type of card has been used successfully in Europe and has greatly reduced the incidence of identity theft and data breaches. Although this will be an expensive replacement, we anticipate the cost will be recovered through future reductions in losses from fraud. Proposed Acquisition of LNB Bancorp, Inc. and Lorain National Bank On December 15, 2014, Northwest returned to the bank mergers and acquisitions market, after a six year absence, with the announcement of the proposed acquisition of LNB Bancorp, Inc. and its subsidiary, Lorain National Bank. Lorain National Bank is a $1.2 billion community bank based in Lorain, Ohio with 20 banking offices in the greater Cleveland market. We had looked at a number of potential bank acquisitions over the past few years, but were unable to find an opportunity that was attractive from the standpoint of both shareholder and franchise value. We believe LNB presents such up procedures on system-generated alerts. The incurred for mitigation as well as the reimbursement an opportunity. 4 Our new organizational structure already has provided great value in terms of recognizing areas of weakness, addressing operating efficiency and promoting change in how we do business. Lorain National Bank’s market, with a Most importantly, we are acquiring a bank and Conclusion concentration of offices west of Cleveland in a base of customers that will greatly enhance Lorain County, has demographics similar to the Northwest’s earnings and franchise value in the geographic areas where Northwest has excelled. Additionally, having a significant presence in the Cleveland market greatly enhances our existing metropolitan franchises in Pittsburgh, Erie, Buffalo, Rochester and Baltimore, and widens Northwest’s reach in the pursuit of organic growth and in-market acquisitions. LNB’s office network is stronger than we typically see, with average deposits per branch exceeding $52 million and a solid base of core deposits and checking accounts. Their loan portfolio is well-diversified, with a significant portion of consumer loans, that complements Northwest’s concentration of residential mortgages. We were also impressed by the quality of LNB’s personnel, who we believe will embrace the Northwest culture. years ahead. Completion of the merger is subject to approval by the FDIC, the Federal Reserve Bank of Cleveland, the Pennsylvania Department Although we are disappointed to report core earnings that were lower than the previous year’s historical record, we are pleased with the significant progress our company made in 2014. Given this progress, we believe Northwest is well-positioned of Banking and the Securities and Exchange for sustained growth and increased profitability Commission, as well as the shareholders of LNB Bancorp, Inc. If approved, we anticipate closing the merger in the third quarter of 2015. Recognition in the years ahead. The keys to our success in that endeavor will be to achieve acceptable levels of loan growth; to continue to increase the income earned from fee-producing products and services; to acquire other banks, wealth management companies and insurance agencies that offer both franchise For the fourth time in five years, Northwest was and shareholder value; and to aggressively control recognized by J.D. Power as the bank with the operating expense. “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region.” We also were recognized for the third time by Forbes for trustworthiness as a public company in Our staff is eager to address the challenges of the future and we embrace the opportunity to improve our company and enhance shareholder value. On behalf of the Board of Directors and the being named to their list of “America’s 50 Most entire staff of Northwest Bancshares, Inc., I extend Trustworthy Financial Institutions.” Given the our gratitude for your continued support and For these reasons, we actively pursued this merger in what proved to be a highly-competitive process. vision and values propositions of our company, we are proud to receive recognition for providing The pricing of the transaction was comparable to a quality customer experience and an exceptional recent deals of similar size, and at a level that we level of transparency and honesty in our financial believe is attractive for Northwest’s shareholders. reporting. confidence in our company. Sincerely, William J. Wagner Chairman, President and CEO For the fourth time in five years, Northwest was recognized by J.D. Power for Customer Satisfaction with Retail Banking. 5 Market Coverage NORTHWEST BANK NORTHWEST CONSUMER DISCOUNT COMPANY Northwest Bancshares, Inc.’s network of offices serves communities in Pennsylvania, New York, Ohio and Maryland. NORTHWEST BANK NORTHWEST CONSUMER DISCOUNT COMPANY NEW YORK OHIO PENNSYLVANIA NEW YORK 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 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 (1) (1) Excludes shareholders who own their stock in “street name.” 2014 $7,775,033 $5,922,373 $5,632,542 $1,062,647 $11.22 $12.53 $247,031 $61,962 $0.67 $1.62 5.69% 0.79% 11.64% 3.27% 1.25% 0.35% 84.35% 1.13% 162 51 2,042 13,756 2013 $7,879,859 $5,734,943 $5,668,879 $1,155,185 $12.26 $14.78 $251,564 $66,559 $0.73 $0.50 5.87% 0.84% 12.70% 3.31% 1.60% 0.36% 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 $262,543 $63,389 $0.67 $0.60 5.48% 0.79% 12.24% 3.40% 1.86% 0.43% 60.06% 1.28% 165 52 2,042 14,486 7 Growth & Performance Northwest has maintained a steady balance sheet... while increasing income during a period of economic challenge... ASSETS in billions of dollars ANNUAL NET INCOME in millions of dollars $6.45 $6.53 $6.66 $6.93 $8.03 $8.15 $7.96 $7.94 $7.88 $7.78 $64.2 $63.4 $66.6 $62.0 $57.5 $56.8 $51.5 $49.1 $48.2 $32.7 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 STOCK PRICE PERFORMANCE SINCE IPO in total return % while providing our shareholders with a substantiated return on their investment NWBI (+1,092.65%) S&P 500 (+552.26%) SNL U.S. Bank (+407.05%) 1,200 1,000 800 600 400 200 0 -200 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 4 1 0 2 10 8 6 4 2 0 8 Corporate Profile NORTHWEST BANCSHARES, INC. Our Business Solutions offering includes is a savings and loan holding company that owns commercial loans, business deposit accounts, and operates Northwest Bank, a Pennsylvania- cash management services, employee benefits and chartered savings bank headquartered in Warren, property and casualty insurance featuring personal Pennsylvania. attention and local decision making. As of December 31, 2014, we held assets of $7.78 Our Personal Banking offering includes billion and operated 162 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 118 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, 2014, investment products that meet the needs of Northwest Consumer had loans outstanding of both business and personal customers. $104.2 million at 51 offices across Pennsylvania. SOURCES OF FUNDS Subordinated Debt 2% Money Market Deposit Accounts 18% Certificates of Deposit 22% Savings Accounts 18% Checking Accounts 27% Borrowed Funds 13% INVESTMENT OF FUNDS Consumer Loans 3% Commercial Loans 6% Other Assets 5% Home Equity Loans 14% Mortgage Loans 32% Commercial Real Estate loans 24% Cash & Investments 16% 9 POSITIONED TO BE A PREMIER PROVIDER OF A FULL LINE OF FINANCIAL PRODUCTS AND SERVICES IN ALL OF OUR MARKETS, WE HAVE DEMONSTRATED SIGNIFICANT SUCCESS IN DELIVERING: • BUSINESS SOLUTIONS including business loans and deposit services, retirement services, employee benefits and property and casualty insurance. • PERSONAL BANKING products and services including checking and savings accounts, loans, investment management and insurance. Strategic Focus 10 Business Solutions NORTHWEST’S GOAL IS TO PROVIDE A FULL LINE OF FINANCIAL SOLUTIONS TO BUSINESSES THROUGH PRODUCTS AND SERVICES THAT ARE COMPETITIVELY PRICED AND OF THE HIGHEST QUALITY. We develop lasting relationships by providing personal attention and tailoring our products and services to suit the needs of our clients. • Business Checking • Business Online Banking and Bill Pay • IBM® Security Trusteer Rapport™ • Business Mobile Banking • Merchant Services • Express Deposit (Remote Capture) • Business Credit Cards • Commercial Lending • Small Business Loans • Investment Management Services • Retirement Plans • Employee Benefits • Insurance 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 historically been 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 $1,886.0 $1,889.6 $2,048.6 $2,102.8 $2,294.5 1,500 1,000 500 0 2010 2011 2012 2013 2014 7 6 5 4 3 2 1 0 5.73% 5.63% 5.25% 4.61% 4.46% 1.02% 0.36% 0.36% 0.78% 1.10% 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.55% 1.55% 0.63% 0.72% 1.00% 0.94% 0.91% 0.88% 0.43% 0.38% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 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 five years... while the average cost of such deposits has decreased and remains very low. BUSINESS DEPOSIT BALANCES in millions of dollars 1,500 1,200 900 $808.6 $855.3 $1,205.5 $1,017.6 $1,073.4 COST OF BUSINESS DEPOSITS 0.28% 0.30 0.25 0.20 0.15 0.10 0.05 0.00 0.17% 0.12% 0.14% 0.13% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 600 300 0 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 14% Municipal Accounts 13% Business Money Market Accounts 35% Non-Interest Checking Accounts 38% 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 1,200 1,000 800 600 400 200 0 $1,142.2 $1,046.8 $718.7 $651.3 $808.9 2010 2011 2012 2013 2014 7 6 5 4 3 2 1 0 $6.2 $5.5 $4.0 $4.2 $4.5 2010 2011 2012 2013 2014 8 7 6 5 4 3 2 1 0 $7.4 $6.3 $3.7 $3.3 $2.6 2010 2011 2012 2013 2014 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 20% Investment Services 16% Property/Casualty 24% Retirement Services 80% Retirement Services 84% Employee Benefits 76% 13 Personal Banking 14 OUR GOAL IS TO DELIVER THE HIGHEST QUALITY PERSONAL BANKING PRODUCTS AND SERVICES WITH MAXIMUM CONVENIENCE AND COMPETITIVE PRICING. Northwest offers a comprehensive array of financial tools to suit the way our customers live, work and play. • Checking, Savings and CDs • Online Banking and Bill Pay • IBM® Security Trusteer Rapport™ • eStatementsPLUS • Mobile Banking with Mobile Deposit • Northwest Visa® Check Card with GO! Rewards • AuToMatic Deposit ATMs • 55,000 free ATMs through the Freedom ATM Alliance® and Allpoint® networks • Credit Cards • Mortgage and Home Equity Loans and Lines of Credit • Consumer Loans and Lines of Credit 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 3.056 2.908 2.941 2.846 3.00 2.75 2.711 2.50 2.25 2.00 100,000 90,000 88,991 84,641 80,000 70,000 60,000 81,319 78,058 73,997 300,000 297,957 295,596 292,397 288,747 289,185 275,000 250,000 225,000 200,000 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 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 213,359 218,420 222,427 223,139 229,020 CHECKING ACCOUNT BALANCES in millions of dollars $935.0 $963.6 $1,035.9 $867.9 $779.3 1,200 1,000 800 600 400 200 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 250,000 200,000 150,000 100,000 50,000 0 35 30 25 20 15 10 5 0 CHECKING ACCOUNT FEES in millions of dollars $34.8 $32.3 $31.5 $31.2 $32.0 2010 2011 2012 2013 2014 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 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 5.54% 5.27% 3.30% 4.83% 4.53% 4.43% 1.89% 1.78% 3.04% 2.17% 6 5 4 3 2 1 0 2010 2011 2012 2013 2014 CONSUMER LOANS HOME EQUITY PORTFOLIO YIELD VS. 3-YEAR TREASURY YIELD AT DECEMBER 31 Yield on home equity loans 3-year Treasury yield 5.89% 5.64% 5.27% 4.89% 4.72% 1.02% 0.36% 0.36% 0.78% 1.10% MORTGAGE & HOME EQUITY LOANS LOSSES as a % of total mortgages and home equities 0.25 0.24% 0.24% 0.24% 0.20 0.15 0.10 0.05 0.00 0.13% 0.11% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 6 5 4 3 2 1 0 We were able to retain much of our consumer loan portfolio during the recent cycle of low demand... while losses remained at manageable levels... CONSUMER LOANS in millions of dollars $255.8 $245.7 $228.4 $228.3 $242.7 CONSUMER LOAN LOSSES as a % of consumer loans 2.65% 2.65% 2.20% 1.94% 1.64% 2.5 2.0 1.5 1.0 0.5 0.0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 300 250 200 150 100 50 0 16 and yields remained attractive during a period of low interest rates. YIELD ON CONSUMER LOANS VS. 3-YEAR TREASURY YIELD AT DECEMBER 31 11.30% 11.57% 11.98% 11.62% 10.76% 1.02% 0.36% 0.36% 0.78% 1.10% 2010 2011 2012 2013 2014 Yield on consumer loans 3-year Treasury yield 12 10 8 6 4 2 0 Investment Management and Insurance DEDICATED TO TURNING FINANCIAL SUCCESS INTO FINANCIAL SECURITY, NORTHWEST HAS DEVELOPED A BROAD RANGE OF FINANCIAL SERVICES DESIGNED TO MEET THE INVESTMENT, TRUST AND INSURANCE NEEDS OF OUR CLIENTS. In doing this, we have achieved significant growth in personal assets under management and created new opportunities to leverage our relationships with bank customers. • Investment Advisory • Financial Planning and Management • Trust and Estate Services • Brokerage • Retirement Accounts • Oil, Gas and Mineral Services • Education Savings • Property and Casualty Insurance • Life, Disability and 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 $850 $703 $706 $639 $558 900 675 450 225 0 15,186 8,607 7,526 7,794 10,279 16,000 12,000 8,000 4,000 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 8 7 6 5 4 3 2 1 0 $8.0 $5.5 $4.6 $4.7 $3.5 2010 2011 2012 2013 2014 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 33% Brokerage 37% Investment Advisory 30% Trust 5% Investment Advisory 16% Insurance 9% Insurance 4% Brokerage 24% Trust 35% Brokerage 70% Investment Advisory 37% 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 $67,518 and $71,348 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; 94,721,453 and 94,243,713 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, 2014 2013 $ 240,706 912,371 103,695 5,922,373 18,623 16,759 144,362 143,909 178,356 33,293 60,586 $ 7,775,033 $ 5,632,542 888,109 30,507 936 57,198 103,094 6,712,386 — 947 626,134 481,577 (21,641) (24,370) 1,062,647 $ 7,775,033 $ 391,905 1,016,767 121,366 5,734,943 19,152 18,203 140,172 146,139 176,963 43,715 70,534 $ 7,879,859 $ 5,668,879 881,645 26,669 888 43,499 103,094 6,724,674 — 943 619,678 569,547 (23,083) (11,901) 1,155,185 $ 7,879,859 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, 2014 2013 $ 282,050 21,568 303,618 $ 286,977 25,749 312,726 $ 25,322 31,265 56,587 247,031 20,314 226,717 36,383 12,369 4,930 8,760 4,191 5,942 72,575 115,967 23,455 14,721 26,671 1,323 8,213 5,193 19,992 215,535 83,757 21,795 61,962 0.68 0.67 $ $ $ 29,279 31,883 61,162 251,564 18,519 233,045 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 26,199 66,559 0.73 0.73 $ $ $ $ $ $ 2012 307,958 29,784 337,742 43,377 31,822 75,199 262,543 26,338 236,205 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 89,632 26,243 63,389 0.68 0.67 21 Directors and Officers Board of Directors Northwest Bancshares, Inc. and Northwest Bank Corporate Officers Northwest Bancshares, Inc. and Northwest Bank William J. Wagner Chairman, President and Chief Executive Officer, Northwest Bancshares, Inc. William J. Wagner President and Chief Executive Officer Ronald B. Andzelik Senior Vice President, Chief Compliance Officer Shawn O. Walker Senior Vice President, Chief Marketing Officer Deborah J. Chadsey Attorney and Partner, Kavinoky Cook LLP Timothy B. Fannin Retired Partner, Catalano, Case, Catalano & Fannin Timothy M. Hunter* President and Chief Executive Officer, McInnes Rolled Rings Dr. A. Paul King Retired President, Oral Surgery of Erie Dr. Richard E. McDowell President Emeritus, The University of Pittsburgh at Bradford William F. McKnight Controller, Interstate Chemical Company 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. *Mr. Hunter is a Director of Northwest Bank only. Steven G. Fisher Senior Executive Vice President, Chief Revenue Officer John K. Beard Senior Vice President, Retail Investment Services Stephen M. Bell Vice President, Facilities William W. Harvey, Jr. Senior Executive Vice President, Chief Financial Officer Richard K. Laws Executive Vice President, Chief Legal Counsel, Corporate Secretary and CMS Enterprise Oversight Officer Julia W. McTavish Executive Vice President, Chief Human Resources Officer Gerald J. Ritzert Executive Vice President, Finance and Controller Michael G. Smelko Executive Vice President, Chief Credit Officer Thomas J. Townsend Executive Vice President, Chief Risk Officer David E. Westerburg Executive Vice President, Chief Operations Officer Andrew C. Young Executive Vice President, Chief Information Officer 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 Kevin G. Mizak Senior Vice President, Chief Auditor Vicki L. Stec Senior Vice President, Bank Secrecy Officer William C. Tarpenning Senior Vice President, Mortgage Banking 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, Commercial Loan Administration W. Norman Ewing Vice President, Systems and Programming Dean C. Huya Vice President, Loss Mitigation Dorothy E. Lobdell Vice President, Mortgage Lending Edward A. Martone Vice President, Human Resources Donald E. Reed Vice President, Finance and Treasurer Melody Schott Vice President, Delivery Channels Eric D. Stoever Vice President, Chief Technology Officer James M. Swanson Vice President, Deposit Operations Deborah A. Vecellio Vice President, Mortgage Servicing Region Presidents Northwest Bank Nancy J. May Eastern Pennsylvania/Maryland 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.northwest.com Annual Meeting: April 15, 2015, 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.northwest.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, P.C. Washington, D.C. Year Ended December 31, 2014 First quarter Second quarter Third quarter Fourth quarter Year Ended December 31, 2013 First quarter Second quarter Third quarter Fourth quarter High $15.07 15.11 13.86 13.30 High $12.95 13.58 14.57 15.05 Low $13.66 12.77 11.99 11.86 Low $12.04 11.98 12.88 13.15 Cash Dividends Declared $ 0.23 1.13 0.13 0.13 Cash Dividends Declared $ 0.00 0.24 0.13 0.13 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.northwest.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. Senior 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. ©2015 Northwest Bancshares, Inc. 24 100 Liberty Street PO Box 128 Warren, Pennsylvania 16365 (814) 726-2140 www.northwest.com 

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