Northwest Acquires Ohio Banks

WARREN, Pa. – Northwest Bancshares, Inc. and LNB Bancorp, Inc. jointly announced the signing of a definitive merger agreement pursuant to which Northwest Bancshares, Inc. will acquire LNB Bancorp, Inc., the Lorain, Ohio-based holding company and parent of Lorain National Bank.

It is a combination cash and stock transaction valued at approximately $18.64 per share, or $183.3 million in the aggregate, using the 20 day average closing stock price of Northwest Bancshares, Inc. as of Friday, December 12, 2014.

The transaction is immediately accretive to Northwest’s earnings per share excluding merger costs, increasing its stand-alone EPS by approximately 17% beginning in 2016, and will give Northwest access to a new region of prospective customers. The acquisition is expected to increase Northwest’s return on average tangible common equity from approximately 7% to approximately 9% after the first year of combined operations and provide Northwest with an additional $1.24 billion in total assets, $1.06 billion in total deposits, $923 million in loans and 20 banking locations based upon financial information as of September 30, 2014. Inclusive of LNB, Northwest will have over $6.7 billion in deposits and 184 branch locations.

Daniel E. Klimas, President and Chief Executive Officer of LNB Bancorp, Inc., will be named Regional President and market leader for Northwest’s Ohio franchise after the merger is consummated.

Klimas commented, “During our proud 109 year history, LNB has been committed to serving our clients and local communities. Through a consistent level of superior quality service, our dedicated staff has grown a loyal commercial and retail customer base. We are very excited about joining the Northwest team. We strongly believe that Northwest Bancshares, Inc. demonstrates a commitment to its clients, employees and the communities it serves, shares our core values and has an outstanding record of enhancing shareholder value. We are also pleased that Northwest has agreed that the headquarters for the newly formed Ohio Region of Northwest will be Lorain, Ohio.”

“Since completing a $658 million stock offering in 2009, we have actively pursued opportunities to leverage that capital and add to the 36 successful bank and branch acquisitions we had previously completed,” added William J. Wagner, President and Chief Executive Officer of Northwest Bancshares, Inc.

Wagner continued, “We have maintained a focus on banks that will enhance Northwest’s franchise and shareholder values. As part of our strategy, we have sought opportunities to expand our presence in the attractive Northeast Ohio market. LNB offers a great opportunity to address our strategic goals with a complementary blend of performance, size and location and a business model that is similar to Northwest’s. That said, we believe LNB’s customers and employees will embrace Northwest’s culture and values. The structure of this transaction allows LNB to be rewarded for its fine performance and scarcity value, yet the anticipated deal multiples are comparable to similar transactions. This merger marks Northwest’s first use of our common stock as part of the consideration, with half of the payment to LNB’s shareholders being made using Northwest shares. As a result, Northwest will maintain a robust capital position following the merger, giving the combined company significant capital to pursue future acquisitions, pay attractive dividends and repurchase shares when we anticipate that such activities will enhance shareholder value.”

Under the terms of the merger agreement, which has been approved unanimously by the boards of directors of both companies, shareholders of LNB Bancorp, Inc. will be entitled to elect to receive either 1.461 shares of Northwest Bancshares, Inc. common stock or $18.70 in cash for each common share of LNB Bancorp, Inc., subject to an overall allocation of exchanged shares into 50% cash and 50% stock. The exchange ratio is fixed and the transaction is expected to qualify as a tax-free exchange for shareholders of LNB Bancorp, Inc. to the extent such shareholders receive Northwest Bancshares common stock.

Annual dividend of $0.52 per share paid in 2014, excluding special dividends, equates to almost $0.76 per share for LNB shareholders electing stock, representing an increase of approximately 1,800% over the $0.04 per share in dividends paid by LNB in 2014. Based on the 20 day average of Northwest’s closing stock price before the execution of the definitive agreement, the deal is valued at $183.3 million, or $18.64 per share, which equates to a price to tangible book value ratio of 197.7% and a price to earnings ratio, after considering cost savings, of 11.0x based on consensus estimates for LNB’s 2016 net income. The tangible book valuation dilution earn back is forecast to be approximately 4.9 years.

As part of the merger, one mutually-agreed upon LNB Bancorp director will be added to Northwest’s bank and holding company boards. All of the directors and certain executive officers of LNB Bancorp have entered into voting agreements with Northwest pursuant to which they have agreed to vote their shares in favor of the transaction.

Northwest Bancshares, Inc. and LNB Bancorp, Inc. expect to complete the transaction in the second quarter of 2015, after satisfaction of customary closing conditions, including regulatory approvals and the approval of the shareholders of LNB Bancorp.

When the transaction is consummated, the combination of the two banking companies will create a bank with approximately $9.0 billion in total assets providing banking services through 184 branch locations and 297 ATMs in four states. The transaction will expand Northwest’s franchise by 20 offices located in Lorain, Cuyahoga and Summit Counties in northeastern Ohio.

Boenning & Scattergood is serving as financial advisor and Luse Gorman is serving as legal counsel to Northwest in this transaction.

Sandler O’Neill + Partners L.P. is serving as financial adviser and Calfee, Halter & Griswold LLP is serving as legal counsel to LNB Bancorp.


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