NWSB Northwest Bancorp (MM)

WARREN, Pa., Jan. 23 /PRNewswire-FirstCall/ -- Northwest Bancorp, Inc. (NASDAQ:NWSB) announced net income for the quarter ended December 31, 2007 of $15.9 million, or $0.33 per diluted share. This represents an increase of $6.1 million, or 61.7%, over the same quarter last year when net income was $9.8 million, or $0.20 per diluted share. The annualized returns on average shareholders' equity and average assets for the current quarter were 10.54% and 0.95% compared to 6.42% and 0.60% for the same quarter last year. Earnings in the current quarter were positively impacted by an after-tax gain on the sale of investment securities of approximately $3.0 million, and were negatively affected by an after-tax non-cash impairment charge of $1.1 million relating to the write-down of its $7.5 million investment in Freddie Mac ("FHLMC") preferred stock securities. Earnings were also negatively impacted by the establishment of a litigation reserve in the amount of $300,000, after tax, relating to the Company's affiliation with Visa Inc. Prior year quarterly earnings included expense of approximately $1.9 million, after tax, relating to the retirement of the Company's trust preferred debt. Adjusting both periods for these non-core items, earnings were $14.4 million in the current quarter versus $11.7 million last year. In making this announcement, William J. Wagner, President and CEO, noted, "We were pleased to see a positive trend in earnings throughout this calendar year, primarily due to the increases in net interest margin and fee income. Much of this increase is due to the success we have had in changing our balance sheet mix as the commercial loan portfolio grew 29% and consumer loans increased 9%. With production personnel near full strength and the recent steepening of the yield curve, we look forward to continuing a positive trend in earnings in 2008." Net interest income increased by approximately $5.0 million, or 11.6%, for the quarter ended December 31, 2007 compared to the same quarter last year and increased $734,000, or 1.6%, compared to the quarter ended September 30, 2007. The net interest margin for the quarter ended December 31, 2007 was 3.21% compared to 2.96% for the quarter ended December 31, 2006 and 3.10% for the quarter ended September 30, 2007. Noninterest income increased by approximately $5.4 million, or 51.9%, for the quarter ended December 31, 2007 compared to the same quarter last year. This increase resulted primarily from a gain on the sale of investments of $5.0 million which was partially offset by a non-cash impairment charge on Freddie Mac preferred stock of $1.9 million. The remainder of the increase was primarily attributed to an increase in service charges and fees of approximately $1.6 million, or 25.0%. Noninterest expense increased by $304,000, or less than 1%, to $38.6 million for the quarter ended December 31, 2007, from $38.3 million for the quarter ended December 31, 2006. Included in the current quarter was legal expense of $500,000 related to litigation of Visa Inc. reflecting possible damages for which the Company may be liable as a Visa member. Included in the prior year quarter is a loss on the early extinguishment of the Company's trust preferred debt of $3.1 million. The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.22 per share payable on February 14, 2008 to shareholders of record as of February 1, 2008. Net income for the year ended December 31, 2007 of $49.1 million, or $0.99 per diluted share, represents a decrease of $2.4 million, or 4.7% compared to net income of $51.5 million, or $1.03 per diluted share, for the year ended December 31, 2006. The returns on average shareholders' equity and average assets were 8.18% and 0.73% for the current year compared to 8.60% and 0.79% in the prior year. In comparing the two calendar years, an increase in net interest income of $7.6 million, or 4.3%, was partially offset by a decrease in noninterest income of $3.0 million, or 6.5%. The increase in net interest income resulted from an increase in net interest margin of 4 basis points to 3.10% from 3.06%. The decrease in noninterest income was primarily the result of investment security losses and write-downs of $3.5 million in the current year and a gain on the sale of the education loan portfolio of $4.8 million in the prior year. In addition, noninterest expense increased $12.2 million, or 8.7%, from the prior year excluding the prior year expense of $3.1 million on the retirement of trust preferred debt. Adjusting both periods for these non-core items, earnings were $51.5 million in the current year versus $50.3 million in the prior year. Founded in 1896 and headquartered in Warren, Pennsylvania, Northwest Bancorp, Inc., through its subsidiary Northwest Savings Bank, currently operates 166 community-banking offices in Pennsylvania, New York, Ohio, Maryland and Florida. Northwest Savings Bank is a full-service financial institution offering all lines of retail and business banking products as well as investment management and trust services. The Company also operates 51 consumer finance offices in Pennsylvania and New York through its subsidiary, Northwest Consumer Discount Company. Northwest Bancorp, Inc.'s stock is listed on the NASDAQ Global Select Market. Additional information regarding Northwest Bancorp, Inc. can be accessed on-line at http://www.northwestsavingsbank.com/. Forward-Looking Statements - This press release may contain forward- looking statements with respect to the financial condition and results of operations of Northwest Bancorp, Inc. including, without limitations, statements relating to the earnings outlook of the Company. These forward- looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real-estate and business loans and non-performing loans. Management has no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release. Northwest Bancorp, Inc. and Subsidiaries Consolidated Statements of Financial Condition (Dollars in thousands, except per share amounts) December 31, December 31, Assets 2007 2006 Cash and cash equivalents $75,905 99,013 Interest-earning deposits in other financial institutions 153,160 41,387 Federal funds sold and other short- term investments 1,551 13,933 Marketable securities available-for- sale (amortized cost of $1,125,426 and $770,967) 1,133,367 767,514 Marketable securities held-to-maturity (market value of $0 and $720,515) - 716,967 Total cash, interest-earning deposits and marketable securities 1,363,983 1,638,814 Loans held for sale 28,412 23,390 Mortgage loans - one- to four- family 2,386,506 2,371,010 Home equity loans 973,161 867,039 Consumer loans 272,867 278,330 Commercial real estate loans 845,397 693,982 Commercial business loans 331,063 216,345 Total loans receivable 4,837,406 4,450,096 Allowance for loan losses (41,784) (37,655) Loans receivable, net 4,795,622 4,412,441 Federal Home Loan Bank stock, at cost 31,304 34,289 Accrued interest receivable 27,084 28,033 Real estate owed, net 8,667 6,653 Premises and equipment, net 110,894 104,866 Bank owned life insurance 118,682 110,864 Goodwill 171,614 155,770 Mortgage servicing rights 8,955 7,688 Other intangible assets 11,782 9,581 Other assets 14,929 18,816 Total assets $6,663,516 6,527,815 Liabilities and Shareholders' equity Liabilities: Noninterest-bearing demand deposits $361,102 317,389 Interest-bearing demand deposits 717,991 677,394 Savings deposits 1,426,545 1,402,345 Time deposits 3,036,696 2,969,622 Total deposits 5,542,334 5,366,750 Borrowed funds 339,115 392,814 Advances by borrowers for taxes and insurance 24,159 22,600 Accrued interest payable 4,356 4,038 Other liabilities 32,354 33,958 Junior subordinated debentures 108,320 103,094 Total liabilities 6,050,638 5,923,254 Shareholders' equity: Preferred stock, $0.10 par value: 50,000,000 shares authorized, no shares issued - - Common stock, $0.10 par value: 500,000,000 shares authorized, 51,191,109 and 51,137,227 issued, respectively 5,119 5,114 Paid-in-capital 214,606 211,295 Retained earnings 458,425 425,024 Accumulated other comprehensive loss 816 (11,609) Treasury stock of 2,610,800 and 1,107,900 shares, respectively, at cost (66,088) (25,263) Total shareholders' equity 612,878 604,561 Total liabilities and shareholders' equity $6,663,516 6,527,815 Equity to assets 9.20% 9.26% Book value per share $12.62 $12.08 Closing market price per share $26.57 $27.46 Full time equivalent employees 1,805 1,777 Number of banking offices 166 160 Northwest Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (Dollars in thousands, except per share amounts) Three months ended Year ended December 31, December 31, 2007 2006 2007 2006 Interest income: Loans receivable $82,731 73,617 315,570 286,316 Mortgage-backed securities 6,993 8,020 29,385 31,523 Taxable investment securities 6,523 8,095 30,583 31,164 Tax-free investment securities 3,078 3,332 12,626 12,986 Interest-earning deposits 729 1,426 7,867 6,584 Total interest income 100,054 94,490 396,031 368,573 Interest expense: Deposits 46,370 43,164 186,540 156,985 Borrowed funds 5,862 8,467 24,475 34,124 Total interest expense 52,232 51,631 211,015 191,109 Net interest income 47,822 42,859 185,016 177,464 Provision for loan losses 2,522 2,077 8,743 8,480 Net interest income after provision for loan losses 45,300 40,782 176,273 168,984 Noninterest income: Service charges and fees 7,978 6,380 27,754 24,459 Trust and other financial services income 1,705 1,385 6,223 5,321 Insurance commission income 712 672 2,705 2,550 Gain on sale of loans, net 94 111 728 4,832 Gain/ (loss) on sale of real estate owned, net (91) 103 (83) 735 Gain/ (loss) on investment securities, net 3,058 30 (3,454) 368 Income from bank owned life insurance 1,160 1,105 4,460 4,344 Mortgage banking income 554 (3) 1,643 479 Other operating income 750 699 3,046 2,938 Total noninterest income 15,920 10,482 43,022 46,026 Noninterest expense: Compensation and employee benefits 21,421 19,389 84,217 78,611 Premises and occupancy costs 5,276 5,101 21,375 20,368 Office operations 3,167 2,994 12,788 12,411 Processing expenses 3,917 3,229 15,019 12,051 Advertising 537 794 3,742 2,818 Amortization of intangible assets 1,306 921 4,499 3,876 Loss on early extinguishment of debt - 3,124 - 3,124 Other expense 2,984 2,752 11,102 10,423 Total noninterest expense 38,608 38,304 152,742 143,682 Income before income taxes 22,612 12,960 66,553 71,328 Income taxes 6,698 3,120 17,456 19,792 Net income $15,914 9,840 49,097 51,536 Basic earnings per share $0.33 $0.20 $1.00 $1.03 Diluted earnings per share $0.33 $0.20 $0.99 $1.03 Return on average equity 10.54% 6.42% 8.18% 8.60% Return on average assets 0.95% 0.60% 0.73% 0.79% Basic common shares outstanding 48,486,394 49,847,297 49,040,617 49,878,812 Diluted common shares outstanding 48,830,692 50,195,839 49,354,161 50,136,308 Northwest Bancorp, Inc. and Subsidiaries Supplementary data (Dollars in thousands) Three months Year ended December 31, ended December 31, 2007 2006 2007 2006 Allowance for loan losses Beginning balance $41,669 37,297 37,655 33,411 Provision 2,522 2,077 8,743 8,480 Charge-offs (2,765) (1,874) (8,190) (7,617) Recoveries 358 155 1,457 1,399 Acquisitions - - 2,119 1,982 Ending balance $41,784 37,655 41,784 37,655 Net charge-offs to average loans, annualized 0.20% 0.16% 0.14% 0.14% December 31, 2007 2006 Non-performing loans $49,610 40,525 Real estate owned, net 8,667 6,653 Non-performing assets $58,277 47,178 Non-performing loans to total loans 1.03% 0.91% Non-performing assets to total assets 0.87% 0.72% Allowance for loan losses to total loans 0.86% 0.85% Allowance for loan losses to non- performing loans 84.22% 92.92% Reconciliation of the GAAP financial measures to the aforementioned non- GAAP measures: Three months Year ended December 31, ended December 31, 2007 2006 2007 2006 GAAP net income $15,914 9,840 49,097 51,536 Excluding (after-tax): (Gain)/ loss on investments securities, net (2,975) - 932 (221) Freddie Mac impairment write- down 1,140 - 1,140 - Visa litigation reserve 300 - 300 - Gain on sale of education loan portfolio - - - (2,899) Prior year retirement of trust preferred debt - 1,874 - 1,874 Non-GAAP net income $14,379 11,714 51,469 50,290 Average Balance Sheet (Dollars in Thousands) The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages. Three Months Ended December 31, 2007 2006 Average Interest Avg. Average Interest Avg. Balance Yield/ Balance Yield/ Cost Cost ASSETS: Interest earning assets: Loans receivable (a) (b) (d) $4,833,537 $83,147 6.82% 4,423,845 74,048 6.70% Mortgage-backed securities ( c ) 549,050 6,993 5.09% 656,494 8,019 4.89% Investment securities ( c ) (d) (e) 732,265 10,764 5.88% 876,549 12,768 5.83% FHLB stock 32,697 494 6.04% 34,282 453 5.29% Other interest earning deposits 66,123 729 4.31% 104,738 1,426 5.33% Total interest earning assets 6,213,672 102,127 6.53% 6,095,908 96,714 6.35% Noninterest earning assets (f) 473,056 436,445 TOTAL ASSETS 6,686,728 6,532,353 LIABILITIES AND SHAREHOLDERS' EQUITY: Interest bearing liabilities: Savings accounts 755,354 2,297 1.21% 819,614 2,977 1.44% Now accounts 712,967 2,532 1.41% 661,518 2,670 1.60% Money market demand accounts 663,556 6,128 3.66% 588,714 5,414 3.65% Certificate accounts 3,058,449 35,413 4.59% 2,922,014 32,103 4.36% Borrowed funds (g) 357,502 3,988 4.43% 391,026 4,528 4.59% Debentures 108,325 1,874 6.77% 198,315 3,939 7.77% Total interest bearing liabilities 5,656,153 52,232 3.66% 5,581,201 51,631 3.67% Noninterest bearing liabilities 426,361 337,925 Total liabilities 6,082,514 5,919,126 Shareholders' equity 604,214 613,227 TOTAL LIABILITIES AND EQUITY 6,686,728 6,532,353 Net interest income/ Interest rate spread 49,895 2.87% 45,083 2.68% Net interest earning assets/ Net interest margin 557,519 3.21% 514,707 2.96% Ratio of interest earning assets to interest bearing liabilities 1.10X 1.09X (a) Average gross loans receivable includes loans held as available-for- sale and loans placed on nonaccrual status. (b) Interest income includes accretion/ amortization of deferred loan fees/ expenses, which was not material. ( c ) Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale. (d) Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent basis. (e) Average balances include Fannie Mae and FHLMC stock. (f) Average balances include the effect of unrealized gains or losses on securities held as available-for-sale. (g) Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings. Average Balance Sheet (Dollars in Thousands) The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages. Year Ended December 31, 2007 2006 Average Interest Avg. Average Interest Avg. Balance Yield/ Balance Yield/ Cost Cost ASSETS: Interest earning assets: Loans receivable (a) (b) (d) $4,660,693 $317,321 6.78% 4,395,274 288,037 6.59% Mortgage-backed securities ( c ) 584,053 29,385 5.03% 660,986 31,523 4.77% Investment securities ( c ) (d) (e) 820,337 47,990 5.85% 861,411 49,450 5.74% FHLB stock 33,348 2,017 6.05% 34,292 1,692 4.93% Other interest earning deposits 150,665 7,867 5.15% 133,218 6,584 4.87% Total interest earning assets 6,249,096 404,580 6.45% 6,085,181 377,286 6.20% Noninterest earning assets (f) 453,922 437,607 TOTAL ASSETS 6,703,018 6,522,788 LIABILITIES AND SHAREHOLDERS' EQUITY: Interest bearing liabilities: Savings accounts 793,172 10,909 1.38% 882,974 12,619 1.43% Now accounts 698,585 11,038 1.58% 663,046 9,396 1.42% Money market demand accounts 637,983 23,551 3.69% 574,820 19,446 3.38% Certificate accounts 3,076,693 141,042 4.58% 2,850,548 115,524 4.05% Borrowed funds (g) 381,262 17,225 4.52% 402,789 18,508 4.59% Debentures 105,850 7,250 6.76% 203,413 15,616 7.57% Total interest bearing liabilities 5,693,545 211,015 3.71% 5,577,590 191,109 3.43% Noninterest bearing liabilities 409,096 346,016 Total liabilities 6,102,641 5,923,606 Shareholders' equity 600,377 599,182 TOTAL LIABILITIES AND EQUITY 6,703,018 6,522,788 Net interest income/ Interest rate spread 193,565 2.74% 186,177 2.77% Net interest earning assets/ Net interest margin 555,551 3.10% 507,591 3.06% Ratio of interest earning assets to interest bearing liabilities 1.10X 1.09X (a) Average gross loans receivable includes loans held as available- for-sale and loans placed on nonaccrual status. (b) Interest income includes accretion/ amortization of deferred loan fees/ expenses, which was not material. ( c ) Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale. (d) Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent basis. (e) Average balances include Fannie Mae and FHLMC stock. (f) Average balances include the effect of unrealized gains or losses on securities held as available-for-sale. (g) Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings. DATASOURCE: Northwest Bancorp, Inc. CONTACT: William J. Wagner, President and Chief Executive Officer, or William W. Harvey, Jr., Executive Vice President and Chief Financial Officer of Northwest Bancorp, Inc., +1-814-726-2140 Web site: http://www.northwestsavingsbank.com/

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