Northwest Bancshares, Inc. Annual Report 2017

Plain-text annual report

8284c3.indd 1 3/6/18 6:49 AM 8284c3.indd 2 3/6/18 6:49 AM Message to Shareholders William J. Wagner, Chairman and CEO 2017 was another very busy year for Northwest Bancshares, Inc., with our company achieving great success in addressing the major strategic goals of increasing production and revenue, improving effi ciency, strengthening risk management and enhancing customer convenience. While these initiatives greatly improved the quality of our institution, several of them also signiﬁ cantly impacted operating revenues for the year, resulting in a relatively “noisy” income statement. While reported earnings under Generally Accepted Accounting Principles (GAAP) were a respectable $94.5 million, or $.92 per share, these results included a $10.3 million after-tax proﬁ t on the sale of our three Maryland banking offi ces, $2.7 million of after- tax restructuring expense relating to the closure of our consumer ﬁ nance subsidiary and a $3.1 million reduction in income taxes relating to the passage of the Tax Cuts and Jobs Act of 2017. Adjusting GAAP earnings to remove these non-core items results in core earnings of $83.7 million, or $.83 per share, which is slightly higher than the previous year’s adjusted earnings of $82.3 million, or $.82 per share, but less than our expectations as the year began. However, in comparing the years, we note that the closure of our consumer ﬁ nance subsidiary, with its 45 offi ces, elevated consumer loan losses in the current year by approximately $6 million, resulting in a $4 million reduction in net income after-tax. Excluding these losses, in addition to those previously discussed, adjusted earnings for 2017 were $88.7 million, a 7.8% increase over the previous year. Production and Revenue Growth Our Revenue and Production Division had a strong showing in 2017, with our lenders closing commercial, residential mortgage and consumer loans in the amounts of $947 million, $763 million and $298 million, respectively. Unfortunately, we also experienced heavy loan payoff s during the year as competition was intense and borrowers continued to pay down debt, thereby limiting net growth in these portfolios to 5.7%, 1.1% and 4.4%, respectively. The focus for deposit growth this year, similar to the past few years, was on checking accounts, as balances increased by $176 million, or 6.1%. Contributing most signiﬁ cantly to this eff ort was the opening of more than 21,000 new personal checking accounts, which brought more than 10,000 new households to the Northwest family. Along with this growth in personal checking accounts, we doubled the number of new business checking accounts opened when compared to the previous year, resulting in the addition of 3,700 new business deposit customers. Contributing signiﬁ cantly to this achievement were the eff orts of our small business lenders, who doubled their loan production over the previous year. 8284c3.indd 3 1 3/6/18 6:49 AM Checking account balances increased by $176 million and we opened more than 21,000 new personal checking accounts, bringing over 10,000 new households to the Northwest family. The Production and Revenue Division also executed on several initiatives designed to drive future success in production levels. In an eff ort to automate the customer referral process, we implemented “Northwest Connect,” a customer relationship management system which documents and integrates the business development eff orts of all Northwest production personnel. Also, with a goal to drive effi ciency and provide a vastly streamlined and improved investment off ering to our wealth management customers, we shed four separate investment management platforms and selected LPL Financial as our sole provider of investment products. Effi ciency Improvement This year, our eff orts to improve effi ciency were led by three major initiatives: the sale of our Maryland offi ces, the divestiture of our retirement services business and the closure of our consumer ﬁ nance subsidiary. It is important to note that these three lines of business were experiencing little growth and providing meager bottom line income. They also had relatively high expense ratios, with expenses aggregating $20 million, which equates to .22% of our company’s consolidated assets. Given that our company-wide expense-to-asset ratio is 2.80%, these expenses represented approximately 8% of total operating expense. An ancillary beneﬁ t of these three initiatives was a reduction in the complexity of our organization, which will enable our staff to narrow their focus on the lines of business that present the greatest opportunity for growth and improvement in proﬁ tability. In seeking additional opportunities to enhance effi ciency, our support staff continued to address the challenges of the combined impact of the LNB and First Niagara acquisitions, which were completed in 2015 and 2016, respectively, and increased transaction volumes by 40% to 50%. In that regard, we were pleased to achieve the normalization of our operations and staffi ng levels in mid-year 2017, and we continue to seek opportunities to improve effi ciency through technology utilization and process improvement. In this regard, our operations personnel completed several notable initiatives relating to the centralization of commercial loan operations, the automation of the indirect lending process and the implementation of an automated system to handle debit card disputes. Finally, we initiated a project to automate the commercial loan origination process, which is designed to improve effi ciency, enhance credit reporting and address future requirements relating to credit stress testing and CECL. We anticipate that this new process will launch in mid-year 2018. Strengthening Risk Management Our Risk Management Division continued to strengthen their enterprise risk management process through both the implementation of new vendor management software and the enhancement of our capabilities to identify and communicate risk. While we continue to address the requirements of a $10 billion bank with regard to Dodd-Frank stress testing, we remain active in lobbying our representatives in Congress for their support in eliminating that burdensome and expensive exercise. In a similar regard, our executive management team continued to support our industry’s eff orts to lessen the immense regulatory burden that has so signiﬁ cantly impacted our nation’s banks. Finally, the bank’s credit department continued to support our institution’s eff ort to manage credit risk in the loan portfolio, and we are pleased to report that overall credit quality is currently at the highest level in recent history. 2 8284c3.indd 4 3/6/18 6:49 AM We doubled the number of new business checking accounts opened when compared to the previous year, resulting in the addition of 3,700 new business deposit customers. Enhancing Customer Convenience Conclusion With a continued focus on customer convenience, we introduced a new website in 2017 which was successfully rolled out with minimal customer disruption and a high level of customer acclaim. This conversion was a complex process that involved signiﬁ cant potential for disruption, and our team is to be commended for delivering a seamless transition. Also, in an eff ort to further protect our customers from the escalating threat of cyber fraud and identity theft, we off ered fraud protection software that received a high level of subscription. Hiring of President and Chief Operating Offi cer We were pleased to announce in November, 2017 that Ronald J. Seiff ert was hired as President and Chief Operating Offi cer of both Northwest Bancshares, Inc. and Northwest Bank. Ron is a seasoned banker, having spent 23 years at Huntington Bank, where he rose to the level of Vice Chairman. During his time at Huntington, the bank’s assets grew from $2 billion to $25 billion, with Ron serving in various leadership roles in credit administration, retail lending, commercial banking and operational support. Most recently, Ron served as Chairman, President and CEO of Delaware County Bank in central Ohio, where he led the eff ort to improve credit quality and restore the bank to proﬁ tability. In his initial assignment with Northwest, Ron will lead all of our revenue and production areas as well as the ﬁ nance, administration, facilities and operational support departments of the bank. We believe that Ron’s strong commercial banking experience will be a great beneﬁ t to our institution, and that his positive attitude and high ethical standards closely align with the Northwest culture. We have enjoyed having Ron as a member of our executive team over the past few months, and we anticipate that he will contribute greatly to the future success of our company. As we reﬂ ect on another year of signiﬁ cant accomplishment, we pause and take note of the current strength of our institution. Our company undoubtedly has never been in a better position to compete and elevate our performance. The mix of our loan and deposit portfolios for the ﬁ rst time approaches the level of commercial banks of our size and, as a result, our net interest margin is at a historic high. Our fee income is also at the highest level in our history, and we have narrowed our focus on the fee-producing activities that provide the best opportunities for growth and enhanced proﬁ tability. The credit proﬁ le of our loan portfolio continues to improve and nonperforming assets rest at very low levels. We have an abundance of capital to not only support future growth, but also provide adequate protection for our shareholders in the event of an economic downturn. Our support systems and menu of products and services have never been better, and the markets we serve are experiencing low levels of unemployment and increasing economic strength. We believe we have a solid relationship with our regulators fostered by mutual cooperation and respect. And last but not least, we have exceptional employees who are intelligent, capable, driven and ﬁ ercely loyal to our company. We believe Northwest's future is bright, and we look forward to executing strategies designed to improve proﬁ tability and enhance shareholder value. On behalf of the Board of Directors and Northwest’s 2,500 dedicated employees, I wish to thank our shareholders for their continued conﬁ dence in our company. Sincerely, William J. Wagner Chairman and CEO 8284c3.indd 5 3 3/6/18 6:49 AM Corporate Proﬁ le Northwest Bancshares, Inc. Northwest Bancshares, Inc. is a federally- chartered savings and loan holding company that owns and operates Northwest Bank, a Pennsylvania-chartered savings bank headquartered in Warren, Pennsylvania. For more than 120 years, we have served our communities by meeting the diverse ﬁ nancial needs of individuals, families, organizations and businesses seeking to bank, borrow, invest, insure and plan their futures. As of December 31, 2017, we held assets of $9.36 billion, 162 full-service community banking locations, ten free-standing drive through locations and 285 ATMs across Pennsylvania, New York and Ohio. Our primary business involves gathering funds from deposits and borrowings and investing them in loans and investment securities. 18% Source of Funds 21% 7% 8% 32% 38% 10% Investment of Funds 15% 21% 28% Checking Accounts Money Market Accounts Savings Accounts Certiﬁ cates of Deposit Borrowed Funds Subordinated Debt 38% 21% 21% 18% 1% 1% Mortgage Loans Commercial Real Estate Home Equity Loans Cash and Investments Consumer Loans Commercial Loans 32% 28% 15% 10% 8% 7% 4 8284c3.indd 6 3/6/18 6:49 AM Northwest's sources of funds and mix of loans and investments have changed considerably over the years as we have strived to transform from a thrift to commercial bank. Loan Growth and Mix in billions of dollars $8 $6 $4 $2 $0 1-4 Family Residential Mortgages Home Equity Loans Consumer Loans Commercial Real Estate Commercial and Industrial 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Deposit Growth and Mix in billions of dollars $8 $6 $4 $2 $0 8284c3.indd 7 Savings Accounts Checking Accounts Money Market Accounts Certiﬁ cates of Deposit 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5 3/6/18 6:49 AM Financial Highlights Northwest Bancshares, Inc. and subsidiaries In thousands, except per share and other data AT YEAR END DECEMBER 31, 2017 2016 2015 Total assets Loans receivable, net Deposits Shareholders’ equity Book value per share Tangible book value per share Closing market price per share FOR THE YEAR ENDED DECEMBER 31, Net interest income Net income Non-GAAP net income Diluted earnings per share Non-GAAP earnings per share Dividends per share KEY FINANCIAL RATIOS FOR THE YEAR ENDED DECEMBER 31, Return on average shareholders’ equity (1) Return on average assets (1) Tangible common equity Average interest rate spread Nonperforming assets to total assets at end of period Net charge-off s as a percentage of average loans outstanding $ 9,363,934 $ 9,623,640 $ 8,951,899 7,736,614 7,496,408 7,159,449 7,826,989 7,882,321 6,612,581 1,207,724 1,170,663 1,163,163 11.79 8.54 16.73 11.51 8.17 18.03 11.42 8.76 13.39 $ 330,785 $ 307,335 $ 263,253 94,467 83,735 0.92 0.83 0.64 7.04% 0.88% 9.68% 3.72% 0.75% 0.31% 49,667 82,264 0.49 0.82 0.60 7.09% 0.90% 8.95% 3.60% 0.88% 0.21% 76.00% 0.81% 60,540 67,012 0.64 0.71 0.56 6.08% 0.80% 10.28% 3.29% 0.91% 0.23% 85.86% 0.87% Allowance for loan losses to nonperforming loans at end of period 87.43% Allowance for loan losses as a percentage of loans receivable 0.73% OTHER DATA AT DECEMBER 31, Full-service community banking locations 162 167 176 Average deposits per full-service location (2) $ 48,315 $ 48,063 $ 37,571 Full time equivalent employees Registered shareholders (3) 2,106 13,209 2,306 13,690 2,186 14,363 (1) Excludes after-tax impact of restructuring and acquisition expenses of $4.4 million, $34.7 million and $6.5 million for 2017, 2016 and 2015, respectively, as well as a gain on the sale of offi ces of $17.2 million for 2017. (2) In thousands. 2016 excludes three offi ces pending sale in Maryland. (3) Excludes shareholders who own their stock in “street name.” 6 8284c3.indd 8 3/6/18 6:49 AM Growth and Performance While Northwest resumed its long-standing Assets in billions of dollars $9.62 $9.36 $8.95 $8.03 $8.15 $7.96 $7.94 $7.88 $7.78 tradition of balance sheet $6.93 growth in 2015 and 2016, this past year we focused on developing platforms and processes that will prepare us to cross the $10 billion threshold. Proﬁ tability on an adjusted basis has increased signiﬁ cantly over the past three years as a result of our acquisition initiatives and focus on revenue growth and operating effi ciency. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Annual Net Income in millions of dollars GAAP Non-GAAP $64.2 $63.4 $66.6 $62.0 $57.5 $67.0 $60.5 $60.5 $48.2 $32.7 $94.5 $83.7 $82.3 $49.7 $49.7 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Common Stock Information Stock Price Performance Since IPO in total return % (Source: SNL Financial) 2017 High 1Q $18.63 $16.21 $0.16 Low Div 2Q $17.39 $14.95 $0.16 3Q $17.41 $15.06 $0.16 4Q $17.78 $15.34 $0.16 2016 High 1Q $13.71 $11.78 $0.15 Low Div 2Q $14.89 $13.09 $0.15 3Q $15.75 $14.47 $0.15 4Q $19.10 $15.26 $0.15 8284c3.indd 9 +1,719.53% NWBI S&P 500 +796.79% SNL U.S. Bank +667.88% 2,000 1,500 1,000 500 0 -500 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 7 3/6/18 6:49 AM Market Coverage A network of ofﬁces across three states. In 2017, we were proud to be named one of Bankrate's “Best Regional Banks” and by Time's Money Magazine as the “Best Bank in Pennsylvania” and runner-up in New York. 8 8284c3.indd 10 3/6/18 6:49 AM Making a diff erence For us, this isn't just a job. It's our chance to make a diff erence. To bring dreams to life. To solve real problems. To make someone's life easier. That's why we go above and beyond. From the teller who shows a customer a new way to save to the advisor helping your employees prepare for retirement. People at Northwest care about others. And, we take pride in our work. We're always thinking, how can we help? That passion can make a big diff erence— even in small ways. 8284c3.indd 11 9 3/6/18 6:49 AM Business Solutions A greater degree of conﬁ dence. Cash Management. Financing. Insurance. Investments. Beneﬁ ts. If you're running a business, you need to consider it all. At Northwest, we make it easy with a fresh perspective focused on taking care of business your way. We work one-on-one with our clients to pinpoint opportunities and work out a plan. We learn about them, their operations and their vision. Then, our ﬂ exible model lets us customize solutions to ﬁ t their goals and preferences. Whether they're just getting started, or they've been in business 50 years, we surround them with the people and products to give them a greater degree of conﬁ dence. 10 8284c3.indd 12 3/6/18 6:49 AM Business Solutions Loans and Deposits Commercial relationships continue to be a growing segment of our business as commercial loans and deposits have grown substantially over the past ﬁ ve years. Yields and costs have started to increase due to the changing interest rate environment, but our interest spread remains attractive. Our business deposit mix continues to improve as we meet the needs of all types of businesses. Commercial Loans in billions of dollars $2.103 $2.295 $2.962 $3.071 $3.233 Business Deposit Balances in billions of dollars $1.705 $1.701 $1.405 $1.206 $1.073 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Commercial Loan Yields Cost of Business Deposits 4.61% 4.46% 4.30% 4.23% 4.42% 0.19% 0.14% 0.13% 0.11% 0.08% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Commercial Loan Losses as a % of commercial loans 0.94% 0.59% 0.38% 0.33% 0.24% 2013 2014 2015 2016 2017 Business Deposit Mix 14% 14% 20% 52% 52% 52% of business deposits were in non-interest bearing checking accounts Money Market Interest Checking Municipal 20% 14% 14% 8284c3.indd 13 11 3/6/18 6:49 AM Business Solutions Trust Services Business assets have been expanding in recent years, driven primarily by growth of our retirement plan business and endowment and foundation management services. Business Trust Assets Under Management in millions of dollars Business Trust Asset Mix as a % of total business assets under management $1,046.5 $1,091.9 $1,123.6 $1,337.7 $1,222.7 13% 82% 82% 82% of business trust assets were in retirement plans Endowments/Foundations 13% Investment Management Trusts 3% 2% 2013 2014 2015 2016 2017 Business Trust Revenue in millions of dollars Business Trust Revenue Mix as a % of total business revenue $3.7 $3.4 $3.9 $4.0 $4.2 8% 4% 13% 75% 75% of business trust revenue came from retirement plans Endowments/Foundations 13% Investment Management 2013 2014 2015 2016 2017 75% Trusts Business investments, retirement plans and succession plans play an enormous role in the health of a business. That's where our trust offi cers shine. 12 8284c3.indd 14 8% 4% 3/6/18 6:49 AM Insurance Services Through Northwest Insurance Services, we complete our full-service business off er with a personal approach to property and casualty insurance and employee beneﬁ ts, which signiﬁ cantly boosts fee income. Business Insurance Revenue in millions of dollars Business Insurance Revenue Mix as a % of total business insurance revenue $7.0 $7.3 $6.4 $8.2 $8.2 2013 2014 2015 2016 2017 31% 69% 69% 69% of business insurance revenue came from employee beneﬁ ts accounts Property and Casualty 31% Northwest Insurance Services advisors work with businesses as an extension of their team—from plan evaluation and implementation to employee education and administration. 8284c3.indd 15 13 3/6/18 6:49 AM Personal Solutions We are all in. There's an energy that deﬁ nes Northwest. A spirit that says yes-we-can. And a passion that's evident in everything we do. You can see it when we greet customers. Hear it when we come up with great solutions. And feel it when you walk into any offi ce or visit us online. That energy comes from each and every one of us, working together to reach one goal—to make life better. For our customers, we team up to do the best job we can. So we can make a diff erence, every single day. 14 8284c3.indd 16 3/6/18 6:49 AM Deposits We pride ourselves in the relationships we've built meeting our customers' needs. We continue to have great success attracting and keeping new checking account customers, and look forward to serving our customers for years to come as we deepen those relationships. Number of Households Number of Checking Accounts 398,395 419,192 311,141 310,993 288,747 289,185 337,904 223,139 229,020 253,717 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Services Per Household 3.056 3.031 2.987 2.941 Checking Account Balances in millions of dollars $1,749.0 $1,796.6 2.861 $1,325.6 $963.6 $1,035.9 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Savings and Insured Money Fund Deposit Balances in billions of dollars $3.168 $3.041 $2.038 $2.061 $2.325 Checking Account Fees in millions of dollars $31.2 $32.0 $33.7 $44.2 $38.7 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 (1) In 2017, services per household declined as we welcomed former Northwest Consumer Discount Company single-service loan customers to the bank. 15 8284c3.indd 17 3/6/18 6:49 AM Personal Solutions Loans Mortgage and home equity loans are a core off ering and continue to provide a stable return. Consumer loans have grown substantially in recent years with an emphasis on higher credit quality. Accordingly, while consumer loan yields have decreased signiﬁ cantly during the most recent two years, so have the losses from such loans. Mortgage Portfolio Yield Consumer Loans in millions of dollars 4.53% 4.43% 4.26% 4.14% 4.10% $631.3 $671.4 $510.6 $228.3 $242.7 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Home Equity Portfolio Yield Consumer Loan Portfolio Yield 4.89% 4.72% 4.54% 4.46% 4.77% 11.62% 10.76% 6.86% 6.62% 5.97% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Mortgage and Home Equity Loan Losses as a % of total mortgages and home equities Consumer Loan Losses as a % of consumer loans 0.15% 2.65% 2.65% 0.13% 0.11% 0.09% 0.08% 2.20% 1.97% 2.02% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 16 8284c3.indd 18 (1) Excludes consumer ﬁ nance loans from Northwest Consumer Discount Company. 3/6/18 6:49 AM Trust Services We have consistently grown personal assets under management through our focus on relationship, service and customized investment management solutions, which has led to a growing contribution to fee income. Personal Trust Assets Under Management in millions of dollars Personal Trust Asset Mix as a % of total personal assets under management $372.0 $393.2 $403.0 $309.8 $309.8 2013 2014 2015 2016 2017 Personal Trust Revenue in millions of dollars $2.8 $2.8 $3.1 $3.5 $3.6 2013 2014 2015 2016 2017 28% 72% of trust assets were in investment management accounts Trusts 28% 72% 72% Personal Trust Revenue Mix as a % of total personal revenue 33% 67% of trust revenue came from investment management accounts Trusts 33% 67% 67% Our experienced team of trust offi cers help ensure customer assets are protected— and their legacies are fulﬁ lled. 8284c3.indd 19 17 3/6/18 6:49 AM Personal Solutions Northwest Advisors Northwest Advisors personal assets under management and the quality of our program grew signiﬁ cantly in 2016 and 2017 as a result of the First Niagara acquisition and transition to LPL Financial as our broker dealer. Personal Assets Under Management in millions of dollars Personal Asset Mix as a % of total personal assets under management $1,487.1 $1,274.9 $540.1 $587.1 $396.6 2013 2014 2015 2016 2017 34% 32% 34% 34% 34% of personal investment assets were in advisory accounts Brokerage Annuity 34% 32% Personal Investment Management Revenue in millions of dollars Personal Investment Management Revenue Mix as a % of total personal revenue $9.1 $4.7 $4.2 $5.2 $2.3 2013 2014 2015 2016 2017 19% 33% 48% 48% 48% of personal investment revenue came from advisory accounts Brokerage Annuity 33% 19% 18 8284c3.indd 20 3/6/18 6:49 AM Insurance Through the acquisitions of a number of insurance companies over the last few years and an investment in digital partnerships, we've increased our physical and online presence, which signiﬁ cantly increased revenue in 2017. Personal Insurance Revenue in thousands of dollars Personal Insurance Revenue Mix as a % of total personal insurance revenue $1,209.2 $901.1 $576.5 $469.3 $352.2 2013 2014 2015 2016 2017 28% 72% of personal insurance revenue came from property and casualty policies Health, Life and Disability Insurance 28% 72% 72% 8284c3.indd 21 19 3/6/18 6:49 AM 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 AS OF DECEMBER 31, 2017 2016 $ 77,710 $ 389,867 792,535 29,678 826,200 19,978 Loans receivable, net of allowance for loan losses of $56,795 and $60,939 7,736,614 7,496,408 Assets held-for-sale 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 Liabilities held-for-sale Borrowed funds Advances by borrowers for taxes and insurance Accrued interest payable Other liabilities Trust preferred securities TOTAL LIABILITIES — 152,528 23,352 5,666 171,547 151,944 333,089 11,733 30,066 21,699 4,889 171,449 161,185 339,853 7,390 32,194 $ 9,363,934 $ 9,623,640 $ 7,826,989 $ 7,882,321 — 108,238 40,825 460 68,485 111,213 215,657 142,899 36,879 635 63,373 111,213 8,156,210 8,452,977 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; 102,394,828 and 101,699,406 shares issued and outstanding, respectively Paid-in capital Retained earnings Accumulated other comprehensive loss TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,027 1,017 730,719 508,058 718,834 478,803 (32,080) (27,991) 1,207,724 1,170,663 $ 9,363,934 $ 9,623,640 20 8284c3.indd 22 3/6/18 6:49 AM Condensed consolidated statements of income In thousands, except per 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 YEARS ENDED DECEMBER 31, 2017 2016 2015 $ 339,992 $ 329,039 $ 298,665 18,864 16,595 20,915 358,856 345,634 319,580 23,057 5,014 23,465 14,834 28,071 38,299 24,055 32,272 56,327 330,785 307,335 263,253 19,751 13,542 9,712 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 311,034 293,793 253,541 NONINTEREST INCOME: Service charges and fees Trust and other ﬁ nancial services income Gain/(loss) on sale of investments Insurance commission income Income from bank-owned life insurance Other (1) TOTAL NONINTEREST INCOME NONINTEREST EXPENSE: Compensation and employee beneﬁ ts Premises and occupancy costs Offi ce operations Collections expense Processing expenses Amortization of intangibles Marketing expenses Federal deposit insurance premiums Restructuring and acquisition expenses Other TOTAL NONINTEREST EXPENSE Income before income taxes Income tax expense NET INCOME Basic earnings per share Diluted earnings per share (1) Includes gain on the sale of Maryland offi ces of $17,186 in 2017. 49,717 17,987 1,148 9,013 6,093 26,522 110,480 44,113 14,103 625 10,522 5,361 10,636 85,360 38,362 12,342 1,037 9,526 4,338 3,231 68,836 150,228 140,927 119,818 28,863 16,342 2,849 39,086 6,764 9,607 3,518 4,419 23,927 26,134 14,898 2,431 34,859 4,259 8,852 4,404 49,191 21,883 24,641 12,337 3,247 30,780 1,688 8,499 5,109 9,751 18,007 285,603 307,838 233,877 135,911 41,444 71,315 21,648 88,500 27,960 $ 94,467 $ 49,667 $ 60,540 $ 0.94 $ 0.92 $ 0.50 $ 0.49 $ 0.64 $ 0.64 8284c3.indd 23 21 3/6/18 6:49 AM Directors and Offi cers Board of Directors William J. Wagner Chairman and Chief Executive Offi cer Northwest Bancshares, Inc. Ronald J. Seiff ert President and Chief Operating Offi cer Northwest Bancshares, Inc. Robert M. Campana President Campana Capital Deborah J. Chadsey Attorney and Partner Kavinoky Cook LLP Corporate Offi cers William J. Wagner Chief Executive Offi cer Ronald J. Seiff ert President Chief Operating Offi cer Steven G. Fisher Senior Executive Vice President Chief Revenue Offi cer William W. Harvey, Jr. Senior Executive Vice President Chief Financial Offi cer Michael W. Bickerton Executive Vice President Commercial Lending Richard K. Laws Executive Vice President Chief Counsel Corporate Secretary Timothy B. Fannin Retired Partner Catalano, Case, Catalano & Clark-Radzieta, LLP John P. Meegan Executive Vice President and Chief Operating Offi cer Hefren-Tillotson, Inc. Timothy M. Hunter President and Chief Executive Offi cer McInnes Rolled Rings and Erie Bronze & Aluminum Company Mark A. Paup President and Chief Executive Offi cer Zippo Manufacturing and W.R. Case and Sons Cutlery Company William F. McKnight Controller Interstate Chemical Company Sonia M. Probst Retired Chief Executive Offi cer Rouse Estate Gerald J. Ritzert Executive Vice President Corporate Controller Jonathan P. Scalise Executive Vice President Business Development Michael G. Smelko Executive Vice President Chief Credit Offi cer Louis J. Torchio Executive Vice President Retail Lending Thomas J. Townsend Executive Vice President Chief Risk Offi cer Shawn O. Walker Executive Vice President Chief Marketing Offi cer Philip M. Tredway President and Chief Executive Offi cer Erie Molded Plastics, Inc. Andrew C. Young Executive Vice President Chief Information Offi cer Ronald B. Andzelik Senior Vice President Chief Compliance Offi cer Neil A. Aquino, Jr. Senior Vice President Commercial Real Estate Lending John K. Beard Senior Vice President Northwest Advisors Stephen M. Bell Senior Vice President Facilities Douglas H. Bert Senior Vice President Insurance Services Michele D. Cavalier Senior Vice President Senior Trust Offi cer Julia W. McTavish Executive Vice President Chief Human Resources Offi cer David E. Westerburg Executive Vice President Chief Operations Offi cer 22 8284c3.indd 24 3/6/18 6:49 AM Christina D. Dinger Vice President Process Improvement/ Program Management W. Norman Ewing Vice President Systems and Programming Jack R. Freeman Vice President Corporate Credit Offi cer Dean C. Huya Vice President Loss Mitigation Julie K. Johnson Vice President Loan Servicing Kimberly A. Johnson Vice President Electronic Banking Raymond R. Learn II Vice President Fair Lending Offi cer Dorothy E. Lobdell Vice President Retail Lending Corporate Offi cers Thomas K. Creal IV Senior Vice President Credit Administration John E. Hall Senior Vice President Indirect Lending Eric D. Stoever Senior Vice President Chief Technology Offi cer James M. Swanson Senior Vice President Deposit Operations Neil R. Hoff man Senior Vice President Commercial/Industrial Lending William C. Tarpenning Senior Vice President Retail Lending D. Kirk Jacobson Senior Vice President Small Business Lending C. Forrest Teff t Senior Vice President Corporate Finance Lending Pamela L. Balas Vice President Loan Servicing Steven M. Crissey Vice President Human Resources Michael R. DelPrince Vice President Accounting Barbara L. DeMontier Vice President Human Resources Jeff rey J. Maddigan Senior Vice President Treasurer Kevin G. Mizak Senior Vice President Chief Auditor Melody Schott Senior Vice President Offi ce Services Heidi Schwab Senior Vice President Loan Operations Vicki L. Stec Senior Vice President Bank Secrecy Offi cer Region Presidents John J. Golding New York Julie A. Marasco Northwest Pennsylvania James E. Martin Erie, Pennsylvania Nancy J. May Eastern Pennsylvania Kevin W. Nelson Ohio Jonathan E. Rockey Central Pennsylvania 8284c3.indd 25 23 3/6/18 6:49 AM Investor Information Corporate Headquarters Financial Information 100 Liberty Street PO Box 128 Warren, Pennsylvania 16365 Telephone: (814) 726-2140 Fax: (814) 728-7716 www.northwest.com Annual Meeting April 18, 2018, 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 stock registration, reporting of lost certiﬁ cates 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) 715-0499 Email: help@astﬁ nancial.com www.astﬁ nancial.com Online Shareholder Access Registered shareholders can sign up to access their account(s) online through American Stock Transfer & Trust Company, LLC at www.astﬁ nancial.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 Independent Auditors KPMG LLP, Pittsburgh, Pennsylvania Securities Counsel Luse Gorman, P.C., Washington, D.C. The Annual Report on Form 10-K is ﬁ led with the Securities and Exchange Commission (SEC). Copies of this document and other ﬁ lings, 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. Dividend Reinvestment and Direct Stock Purchase and Sale Plan Northwest Bancshares, Inc. is pleased to off er 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 shareholder or are interested in becoming one, you may access the plan material and enroll online at www.astﬁ nancial.com by clicking on “Invest Online” 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.astﬁ nancial.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 Chairman and Chief Executive Offi cer Ronald J. Seiff ert President and Chief Operating Offi cer William W. Harvey, Jr. Senior Executive Vice President and Chief Financial Offi cer Shareholder Relations Ian R. Scott Assistant Vice President, Shareholder Relations and Assistant Corporate Secretary (800) 859-1000 24 8284c3.indd 26 3/6/18 6:49 AM 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 aff ecting the company and its operations. Readers are cautioned not to place undue reliance on these forward-looking statements, as actual results may diff er materially from those expressed or implied. Management has no obligation to revise or update these forward-looking statements to reﬂ ect events or circumstances that arise after the release of this report. ©2018 Northwest Bancshares, Inc. 8284c3.indd 27 3/6/18 6:49 AM 8284c3.indd 28 3/6/18 6:49 AM

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