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