Northwest Bancshares, Inc.
Annual Report 2018

Plain-text annual report

Honoring the Past, Building for the Future A Message to Shareholders from Ronald J. Seiffert, Chairman, President & CEO Honoring the Past Northwest Bancshares, Inc. and its predecessors have operated as a community banking institution since 1896. With assets of $9.6 billion as of December 31, 2018, the company has demonstrated a pattern of sustained expansion resulting from a balance of consistent internal growth combined with a series of successfully-executed mergers and acquisitions. We pride ourselves in delivering quality service to our customers while fostering a positive, stable and secure working environment that provides our employees opportunities for advancement. Our organization is built upon trust. Our employees trust that the board and management will always do what is right for employees, customers and the company. Our board and management trust that all Northwest employees will perform their duties to the best of their abilities while demonstrating those core values we have identified as being key to our success. Over the last 25 years as a publicly-traded company, Northwest has demonstrated success by safely growing our balance sheet, expanding our menu of products and services, increasing our level of sophistication and capability, acquiring other banks and bank branches and thus enhancing shareholder value. Over this period, we have also transitioned our company’s balance sheet from that of a thrift institution to a commercial bank. Despite this period of significant change and substantial success, we have been able to maintain our focus as a true community bank with a balanced approach to providing value to our employees, customers, communities and shareholders. Over the last four years, Northwest has continued to enhance shareholder value by embracing a number of transformational changes: • The successful acquisition and conversion of Lorain National Bank in Ohio with 21 offices and assets of approximately $1.2 billion; • The acquisition of 18 offices with deposits of approximately $1.6 billion in greater Buffalo, New York from First Niagara Bank; • The consolidation of 24 of our banking offices within our footprint into nearby Northwest locations; • The closure and/or divestiture of three Maryland Region branches; Northwest Consumer Discount Company; our retirement services recordkeeping business offered through Boetger and Associates; our mortgage settlement agency and our oil, gas and mineral group; • The development of a comprehensive branding strategy across the bank’s footprint, including a more consistent and expansive approach to marketing and advertising and the development of a new logo, as well as a consistent color palette and collateral materials; • The further development of the level of competency and sophistication of our commercial, corporate and small business lending capabilities; • The further development and execution of a more comprehensive and complete approach to risk oversight, including enterprise risk management, audit, compliance, BSA and community reinvestment; • The further development of the level of competency and sophistication of our investment brokerage business. This included the consolidation of multiple product platforms into a singular platform (LPL) offering a broader array of products, services and investment research, the development of a market- driven incentive plan and the introduction of a referral fee program in our branches; • The development of a scorecard for our seven regions in 2018, which tracks the daily production of loans, deposits, fees and referrals at point-of-sale to enhance accountability; 1 • The development of sales incentive plans for our commercial, small business and retail sales teams; and, • The announced merger with Union Community Bank in Lancaster County, Pennsylvania. All of the above initiatives were accomplished while maintaining our strong community bank culture and values which embrace a philosophy that if we do the right thing for our employees each and every day they, in turn, will do the right thing for our customers and our financial metrics will benefit following this success. The success of this philosophy was independently corroborated by JD Power, who ranked Northwest as Highest Customer Satisfaction with Retail Banking in the highly-competitive Mid-Atlantic Region during six of the last nine years. The successful execution of the above major initiatives contributed significantly to our 2018 performance. For the fiscal year ending December 31, 2018, the company generated net income of $105 million, which represented an 11.7% increase over the previous year while diluted earnings per share increased 10.9% over the same period. The annual returns on average shareholders’ equity and average assets were 8.61% and 1.11%, respectively, which compared favorably to 7.95% and 0.99% for the same period last year. Similar to the banking industry as a whole, Northwest has been challenged in recent years by the low interest rate environment. While the net interest margin for the industry has generally decreased, we have been able to maintain a relatively strong margin by deploying excess cash into loans and by replacing maturing time deposits with checking deposits. As a result, our net interest margin increased 0.06% for the year to a healthy 3.88% despite four market rate increases and a flattening yield curve. From a balance sheet perspective, our capital ratios remained strong at December 31, 2018, as reflected by a Tier I Risk Based Capital Ratio of 15.09%, our liquidity position remained good and our overall credit quality remained sound. Building for the Future Although we were very pleased with the overall performance of the company in 2018, we recognize that there remains room for improvement. For example, our Return on Average Assets and Efficiency ratios compared favorably to the industry in general at year- end but lagged behind some of our peer competitors. In order to address our performance deficiencies as well as the ever-increasing challenges in our industry, the company launched a comprehensive and thorough strategic planning process in February of 2018, which included the engagement of 26 separate departments of the bank. Each of the departments was tasked to develop a new five-year plan for their area and to identify key initiatives that, when effectively executed, would contribute materially towards achieving the company’s overall corporate objectives. Our primary corporate objective is to enhance shareholder value through revenue growth; improve efficiency and profitability; mergers and acquisitions; effective risk management and talent acquisition, development and retention. As a result of this process, a number of key corporate initiatives emerged: • Successfully close and convert our merger with Union Community Bank in Lancaster County, Pennsylvania on March 8, 2019 with minimal customer and employee disruption; • Continue to assess merger and acquisition opportunities to include whole-bank and bank-branch purchases; • Improve production productivity in our commercial, small business and retail delivery channels through better execution of defined sales processes, better usage of production scorecards and leveraging our new sales incentive plans; • Expand our production capability in residential mortgage lending through the introduction of licensed mortgage loan officers (MLOs) into our metropolitan markets, the introduction of a new sales incentive plan for the MLOs, the implementation of a new, state-of-the-art mortgage loan origination system and the development of a broader array of mortgage products; • Expand our power sports lending capability in our dealer services channel from Pennsylvania to our existing nine-state auto market; • Open a new commercial loan production office in Columbus, Ohio; • Improve production productivity in our cash management channel through the introduction of new products and services and through direct calling efforts by our cash management advisors focused on cash-centric commercial customers; • Improve production productivity in our electronic banking delivery channel through increasing customer usage of our comprehensive product offering; • Improve efficiencies through optimizing the number of our retail branch locations and through the critical assessment of major non-interest expense categories to include major vendor contracts and outsource opportunities; • Continue to explore the ability to reduce costs by moving processing to the cloud and to use artificial intelligence to streamline or eliminate rudimentary operational functions; 2 • Develop a “customer-centric” digital bank strategy that will provide “end-to-end” fulfillment of the bank’s products and services digitally with a primary focus on cross-sell opportunities to our 450,000 customer households; • Research and develop an actionable plan to build our “branch of the future”; • Maintain effective risk management oversight to include the implementation of CECL on time and on budget, the continued implementation of our Model Risk Management process and the continued implementation of our Third Party Risk Management process; and, • Design, develop and implement a more comprehensive talent acquisition, development and retention strategy to include a more deliberate succession planning process. Through the effective execution of the above initiatives in 2019 and beyond, we are highly confident that we will build upon our historically-good financial performance and, in turn, materially enhance shareholder value. William J. Wagner’s Retirement On October 5, 2018, following a 34-year distinguished career with Northwest, William J. Wagner retired as our Chairman, President & CEO. Bill began his career with the company in 1984 as Chief Financial Officer and was named President and Chief Operating Officer in 1998. Upon John Hanna’s retirement in 2003, Bill was named President and Chief Executive Officer and, in 2008, added the additional responsibilities as our Chairman of the Board. Over the course of his career, Bill led the company through our initial public offering in 1994 and completed over 38 acquisitions. All transactions were consummated in a timely and professional manner with the principal focus being on the welfare of the employees and customers of the acquired bank. With each successive acquisition, the company’s integration expertise grew and Northwest developed a strong reputation in the industry for being a competent and compassionate acquirer. Under Bill’s strong leadership, in 2015 and 2016, Northwest completed two of its largest mergers (Lorain National Bank in Ohio and the acquisition of 18 offices in greater Buffalo from First Niagara Bank) and, in 2018, Bill announced the merger with Union Community Bank, a $500 million bank headquartered in Lancaster County, Pennsylvania. Under Bill’s steady and consistent managerial approach over the years, the bank further demonstrated success by safely growing the balance sheet, expanding the menu of our products and services and increasing our level of sophistication and capability. However, Bill’s greatest legacy is the strong community bank culture and values that he instilled in Northwest Bank that will distinguish the company for many years to come. I consider myself truly fortunate to have had the opportunity to work for Bill, a man who always conducted himself with the highest degree of character and humility. I am honored and humbled to follow in his extremely large footsteps. Bill Wagner will truly be missed by our Northwest family. Conclusion We are extremely proud of the many accomplishments of Northwest Bank over the course of our very successful 123-year history. As a large community bank, we are big enough to provide all the products and services necessary to compete effectively with any competitor in our marketplace but small enough to deliver those products and services in a more customer- oriented and community-oriented manner. We are very pleased with our historical operating performance and our balance sheet is strong with sufficient capital to grow and help mitigate future potential downturns in the economy. We believe we have developed a very compelling five-year strategic plan that will continue to drive exceptional performance and shareholder value in 2019 and beyond. Our greatest strength, however, is our people. We have exceptional employees who are extremely dedicated to the company, to our customers and to the communities we serve. On behalf of our Board of Directors and our 2,200 dedicated employees, I wish to thank our shareholders for your confidence in our company and for your continued support! Sincerely, Ronald J. Seiffert Chairman, President and CEO 3 Corporate Profile 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 financial needs of individuals, families, organizations and businesses seeking to bank, borrow, invest, insure and plan their futures. As of December 31, 2018, we held assets of $9.61 billion, 162 full-service community banking locations, ten free-standing drive through locations and 277 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. Source of Funds Investment of Funds Checking Accounts Money Market Accounts Savings Accounts Certificates of Deposit Borrowed Funds Subordinated Debt 39% 20% 20% 17% 3% 1% Mortgage Loans Commercial Real Estate Home Equity Loans Cash and Investments Consumer Loans Commercial Loans 32% 28% 14% 10% 9% 7% 4 7%9%10%14%28%32%17%20%20%39%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 $8.1 1-4 Family Residential Mortgages Home Equity Loans Consumer Loans Commercial Real Estate Commercial and Industrial $5.4 $2.7 $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Deposit Growth and Mix in billions of dollars $8 $6 $4 $2 $0 Savings Accounts Checking Accounts Money Market Accounts Certificates 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 2018 5 Financial Highlights Northwest Bancshares, Inc. and subsidiaries In thousands, except per share and other data AT YEAR END DECEMBER 31, 2018 2017 2016 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-offs as a percentage of average loans outstanding $ 9,607,773 $ 9,363,934 $ 9,623,640 7,996,225 7,736,614 7,496,408 7,894,179 7,826,989 7,882,321 1,257,638 1,207,724 1,170,663 12.17 9.00 16.94 11.79 8.54 16.73 11.51 8.17 18.03 $ 338,641 $ 330,785 $ 307,335 105,491 105,491 1.02 1.02 0.68 8.61% 1.11% 10.03% 3.73% 0.78% 0.28% 94,467 83,735 0.92 0.83 0.64 7.04% 0.88% 9.68% 3.72% 0.75% 0.31% 87.43% 0.73% 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% Allowance for loan losses to nonperforming loans at end of period 76.21% Allowance for loan losses as a percentage of loans receivable 0.69% OTHER DATA AT DECEMBER 31, Full-service community banking locations 162 162 167 Average deposits per full-service location (2) $ 48,730 $ 48,315 $ 48,063 Full-time equivalent employees Registered shareholders (3) 2,128 2,106 13,068 13,209 2,306 13,690 (1) Excludes after-tax impact of restructuring and acquisition expenses of $2.7 million and $7.3 million for 2017 and 2016, respectively, as well as a gain on the sale of offices of $10.3 million and the benefit from the Tax Cuts and Jobs Act of 2017 of $3.1 million for 2017 and the FHLB prepayment penalty of $22.2 million and the termination of the ESOP plan of $3.1 million for 2016. (2) In thousands. 2016 excludes three offices pending sale in Maryland. (3) Excludes shareholders who own their stock in “street name.” 6 Growth and Performance While Northwest resumed its long-standing tradition of balance sheet growth in 2015 and 2016, the past two years we've focused on developing platforms and processes that will prepare us to cross the $10 billion threshold. Profitability on an adjusted basis has increased significantly over the past three years as a result of our acquisition initiatives and focus on revenue growth and operating efficiency. Assets in billions of dollars 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Annual Net Income in millions of dollars GAAP Non-GAAP $83.7 $60.5 $49.7 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Common Stock Information Stock Price Performance Since IPO in total return % (Source: SNL Financial) 2018 High Low Div 1Q $17.35 $16.11 $0.17 2Q $18.12 $16.21 $0.17 3Q $18.51 $17.32 $0.17 4Q $17.93 $15.52 $0.17 2017 High Low Div 1Q $18.63 $16.21 $0.16 2Q $17.39 $14.95 $0.16 3Q $17.41 $15.06 $0.16 4Q $17.78 $15.34 $0.16 900 650 400 150 -100 NWBI S&P 500 +752.88% +438.35% SNL U.S. Bank +243.92% SNL U.S. Thrift +202.25% 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 2 0 1 8 7 $105.5$94.5$49.7$60.5$62.0$66.6$63.4$64.2$57.5$32.7$83.7$82.3$67.0$9.61$9.36$9.62$8.95$7.78$7.88$7.94$7.96$8.15$8.03$83.7$82.3$67.0$83.7$82.3$67.0Market Coverage A network of offices across three states. An award-winning year. In 2018, Northwest Bank was ranked “Highest Customer Satisfaction with Retail Banking in the Mid-Atlantic Region, 6 out of 9 years" by JD Power. We were also proud to be named by Time’s Money Magazine as the “Best Bank in the Mid-Atlantic Region,” an area comprised of New York, New Jersey, Pennsylvania, Maryland, Delaware, West Virginia and Virginia. 8 Northwest Bank received the highest score in the Mid-Atlantic in the J.D. Power 2010-2012, 2014, 2016, 2018 U.S. Retail Banking Satisfaction Studies of customers’ satisfaction with their retail bank. For more information, visit jdpower.com/awards. Increasing the value of you. For us, this isn't just a job. It's our chance to make a difference. Like the world around us, banking is getting more connected by the second. Today, most banking can be done with the tap of a finger. Most—but not all of it. Sometimes you need more from your bank. You need people. People who know that conversation is still the world's most sophisticated banking tool. Who remember that personal banking needs personal attention. Who believe that no matter how banking may change, there's nothing more important than increasing the value of you. 9 Business Solutions A greater degree of confidence. If you're running a business, your day-to-day gives you plenty to think about. You don't have time to wonder whether your business banking strategies are all working together properly. But we do. With Northwest 360, our team becomes an extension of yours, mapping out a plan to accomplish your goals. Your business gets smarter—and your focus stays where it belongs. That's how we're increasing the value of you. 10 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 five 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 Business Deposit Balances in billions of dollars 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Commercial Loan Yields Cost of Business Deposits 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Commercial Loan Losses as a % of commercial loans Business Deposit Mix 2014 2015 2016 2017 2018 48% 48% of business deposits were in non-interest bearing checking accounts Money Market Accounts Municipal Accounts 25% 15% Interest Checking Accounts 12% 11 15%25%48%12%0.32%0.24%0.26%0.49%0.89%$1.919$1.701$1.705$1.405$1.2064.72%4.41%4.37%4.44%4.60%0.34%0.19%0.08%0.11%0.13%$3.301$3.233$3.071$2.962$2.295Business Solutions Trust Services Business trust revenue increased over the past year as we continued to diversify our mix of both revenue and assets under management. Business Trust Assets Under Management in millions of dollars Business Trust Asset Mix as a % of total business assets under management 81% 81% of business trust assets were in retirement plans Endowments/Foundations 13% Investment Management Trusts 4% 2% 2014 2015 2016 2017 2018 Business Trust Revenue in millions of dollars Business Trust Revenue Mix as a % of total business revenue 71% 71% of business trust revenue came from retirement plans Endowments/Foundations 15% Investment Management Trusts 9% 5% 2014 2015 2016 2017 2018 Business investments, employee retirement plans and succession plans play an enormous role in the health of a business. That's where our trust officers shine. 12 13%81%$4.3$4.2$4.0$3.9$3.79%15%71%5%$1,239.1$1,337.7$1,222.7$1,123.6$1,091.9Insurance Services Through Northwest Insurance Services, we complete our full-service business offer with a personal approach to property and casualty insurance and employee benefits, which significantly boosts fee income. Business Insurance Revenue in millions of dollars Business Insurance Revenue Mix as a % of total business insurance revenue 74% 74% of business insurance revenue came from employee benefits accounts Property and Casualty 26% 2014 2015 2016 2017 2018 Northwest Insurance Services advisors work with businesses as an extension of their team—from plan evaluation and implementation to employee education and administration. 13 $8.1$8.2$8.2$7.3$7.074%26%Personal Solutions We are all in. To most people, a good bank is an account, an app and an ATM. But when did “good” become good enough? To be a great bank, it takes people. Who know your name and face. Who take problems off your shoulders. Who take the time, make the effort and worry about what matters to you. At Northwest, it’s pretty simple. The difference between a good bank and a great bank—is doing more to increase the value of you. 14 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 them for years to come as we deepen those relationships. Number of Households Number of Checking Accounts 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Services Per Household Checking Account Balances in millions of dollars 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Savings and Insured Money Fund Deposit Balances in billions of dollars Checking Account Fees in millions of dollars 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 (1) In 2017, services per household declined as we welcomed former Northwest Consumer Discount Company single-service loan customers to the bank. 15 $46.2$44.2$38.7$33.7$32.0313,864310,993311,141253,717229,020$1,838.4$1,796.6$1,749.0$1,325.6$1,035.9$2.960$3.041$3.168$2.325$2.061401,727393,070372,502318,091272,7382.8472.8533.0272.9703.039Personal Solutions Loans Mortgage and home equity loans are a core offering and continue to provide a stable return. Consumer loans have grown substantially in recent years with an emphasis on higher credit quality. Mortgage Portfolio Yield Consumer Loans in millions of dollars 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Home Equity Portfolio Yield Consumer Loan Portfolio Yield 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Mortgage and Home Equity Loan Losses as a % of total mortgages and home equities Consumer Loan Losses as a % of consumer loans 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 16 (1) Excludes consumer finance loans from Northwest Consumer Discount Company 4.95%5.98%6.50%8.50%11.15%0.07%0.08%0.15%0.09%0.11%$837.9$657.3$631.3$510.6$242.74.80%4.45%4.32%4.33%4.50%4.06%4.11%4.18%4.42%4.57%1.91%1.87%1.73%1.62%2.65%Trust Services We continue to grow personal trust revenue through our focus on relationships, service and customized investment management solutions. Personal Trust Assets Under Management in millions of dollars Personal Trust Asset Mix as a % of total personal assets under management 73% of trust assets were in investment management accounts Trusts 27% 73% 2014 2015 2016 2017 2018 Personal Trust Revenue in millions of dollars Personal Trust Revenue Mix as a % of total personal revenue 69% of trust revenue came from investment management accounts Trusts 31% 69% 2014 2015 2016 2017 2018 Our experienced team of trust officers help ensure customer assets are protected— and their legacies are fulfilled. 17 69%31%73%27%$3.8$3.6$3.5$3.1$2.8$364.9$403.0$393.2$372.0$309.8 Personal Solutions Northwest Advisors After our first full year with LPL Financial as our broker dealer, we continued to grow the quality of our program as well as personal investment management revenue. Personal Assets Under Management in millions of dollars Personal Asset Mix as a % of total personal assets under management 35% 35% of personal investment assets were in annuity accounts Brokerage Advisory 33% 32% 2014 2015 2016 2017 2018 Personal Investment Management Revenue in millions of dollars Personal Investment Management Revenue Mix as a % of total personal revenue 60% 60% of personal investment revenue came from advisory accounts Annuity Brokerage 24% 16% 2014 2015 2016 2017 2018 18 24%60%16%33%35%32%$9.7$9.1$5.2$4.2$4.7$1,440.6$1,487.1$1,274.9$587.1$540.1Insurance Services 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 significantly increased revenue in 2018. Personal Insurance Revenue in thousands of dollars Personal Insurance Revenue Mix as a % of total personal insurance revenue 72% 72% of personal insurance revenue came from property and casualty policies Health, Life and Disability Insurance 28% 2014 2015 2016 2017 2018 19 $1,215.4$1,209.2$901.1$576.5$469.372%28% 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, 2018 2017 $ 68,789 801,450 22,765 $ 77,710 792,535 29,678 Loans receivable, net of allowance for loan losses of $56,795 and $60,939 7,996,225 7,736,614 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 24,490 2,498 171,079 143,390 327,241 15,635 34,211 23,352 5,666 171,547 151,944 333,089 11,733 30,066 $ 9,607,773 $ 9,363,934 $ 7,894,179 $ 7,826,989 234,389 108,238 43,298 744 66,312 40,825 460 68,485 111,213 111,213 8,350,135 8,156,210 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; 103,354,030 and 102,394,828 shares issued and outstanding, respectively Paid-in capital Retained earnings Accumulated other comprehensive loss TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,034 1,027 745,926 550,374 730,719 508,058 (39,696) (32,080) 1,257,638 1,207,724 $ 9,607,773 $ 9,363,934 20 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, 2018 2017 2016 $ 356,571 $ 339,992 $ 329,039 19,210 18,864 16,595 375,781 358,856 345,634 30,985 23,057 6,155 5,014 23,465 14,834 37,140 28,071 38,299 338,641 330,785 307,335 20,332 19,751 13,542 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 318,309 311,034 293,793 NONINTEREST INCOME: Service charges and fees Trust and other financial 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 benefits Premises and occupancy costs Office 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 50,792 16,581 157 8,791 5,821 9,560 49,717 17,987 1,148 9,013 6,093 26,522 91,702 110,480 44,113 14,103 625 10,522 5,361 10,636 85,360 152,395 152,296 142,595 27,519 14,139 2,209 28,863 16,342 2,849 39,046 39,086 5,848 8,434 2,746 1,014 6,764 9,607 3,518 4,419 22,748 21,859 26,134 14,898 2,431 34,859 4,259 8,852 4,404 49,191 21,883 276,098 285,603 307,838 133,913 135,911 28,422 41,444 71,315 21,648 $ 105,491 $ 94,467 $ 49,667 $ 1.03 $ 1.02 $ 0.94 $ 0.92 $ 0.50 $ 0.49 (1) Includes gain on the sale of Maryland offices of $17,186 in 2017. 21 Directors and Officers Timothy M. Hunter President and CEO McInnes Rolled Rings, Erie Bronze & Aluminum Company Mark A. Paup President and CEO Zippo Manufacturing, W.R. Case and Sons Cutlery Company William F. McKnight Controller Interstate Chemical Company Sonia M. Probst Retired CEO Rouse Estate John P. Meegan Executive Vice President and COO Hefren-Tillotson, Inc. Philip M. Tredway President and CEO Erie Molded Plastics, Inc. Board of Directors Ronald J. Seiffert Chairman, President and CEO Northwest Bancshares, Inc. Robert M. Campana President Campana Capital Deborah J. Chadsey Attorney and Partner Kavinoky Cook LLP Timothy B. Fannin Retired Partner Catalano, Case, Catalano & Clark-Radzieta, LLP Corporate Officers Ronald J. Seiffert President Chief Executive Officer Richard K. Laws Executive Vice President Chief Counsel/Corporate Secretary Thomas J. Townsend Executive Vice President Chief Risk Officer Steven G. Fisher Senior Executive Vice President Chief Revenue Officer Julia W. McTavish Executive Vice President Chief Human Resources Officer Shawn O. Walker Executive Vice President Chief Marketing Officer William W. Harvey, Jr. Senior Executive Vice President Chief Financial Officer Michael G. Smelko Executive Vice President Chief Credit Officer Scott J. Watson Executive Vice President Deputy Chief Information Officer Michael W. Bickerton Executive Vice President Commercial Lending John J. Golding Executive Vice President Business Development Louis J. Torchio Executive Vice President Retail Lending Andrew C. Young Executive Vice President Chief Information Officer 22 Corporate Officers Ronald B. Andzelik Senior Vice President Chief Compliance Officer Steven M. Crissey Senior Vice President Human Resources Heidi Schwab Senior Vice President Commercial Loan Operations Neil A. Aquino, Jr. Senior Vice President Commercial Real Estate Lending Barbara L. DeMontier Senior Vice President Human Resources John E. Hall Senior Vice President Dealer Services Vicki L. Stec Senior Vice President Bank Secrecy Officer Eric D. Stoever Senior Vice President Chief Technology Officer John K. Beard Senior Vice President Northwest Advisors Stephen M. Bell Senior Vice President Facilities Douglas H. Bert Senior Vice President Insurance Services Kevin S. Carpenter Senior Vice President Retail Lending Michele D. Cavalier Senior Vice President Senior Trust Officer Thomas K. Creal IV Senior Vice President Credit Administration Region Presidents Richard C. Hamister New York Julie Fallon Hughes Southwest Pennsylvania Julie A. Marasco Northwest Pennsylvania James E. Martin Erie, Pennsylvania Nancy J. May Eastern Pennsylvania Kevin W. Nelson Ohio Jonathan E. Rockey Central Pennsylvania Neil R. Hoffman Senior Vice President Commercial/Industrial Lending James M. Swanson Senior Vice President Deposit Products/Treasury Management D. Kirk Jacobson Senior Vice President Small Business Lending Jeffrey J. Maddigan Senior Vice President Treasurer Kevin G. Mizak Senior Vice President Chief Auditor Melody Schott Senior Vice President Support Services William C. Tarpenning Senior Vice President Retail Lending C. Forrest Tefft Senior Vice President Corporate Finance Lending Jeffrey R. White Senior Vice President Controller 23 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 17, 2019, 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 certificates and dividend checks should be directed to: American Stock Transfer and Trust Company, LLC 6201 15th Avenue Brooklyn, New York 11219 Toll Free: 1-800-937-5449 Toll Free: 1-877-715-0499 Email: help@astfinancial.com www.astfinancial.com Online Shareholder Access Registered shareholders can securely manage their account(s) online through American Stock Transfer & Trust Company, LLC at www.astfinancial.com by clicking “Individual” and “Shareholder Central”. 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 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. Dividend Reinvestment and 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 shareholder or are interested in becoming one, you may access the plan material and enroll online at www.astfinancial.com by clicking on "Individual" and “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 1-877-715-0499 or Northwest, toll-free, at 1-800-859-1000 or (814) 728-7263. Direct Deposit of Dividends Registered 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.astfinancial.com or, to obtain an enrollment card, by calling the company’s transfer agent, toll-free, at 1-800-937-5449 or Northwest, toll-free, at 1-800-859-1000. Investor Relations Ronald J. Seiffert Chairman, 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 1-800-859-1000 24 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. ©2019 Northwest Bancshares, Inc. 100 Liberty Street PO Box 128 Warren, Pennsylvania 16365 (814) 726-2140 northwest.com 

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