Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
     
þ   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Fiscal Year Ended December 31, 2008
OR
     
o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from                      to                     
Commission File No. 000-23817
NORTHWEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
     
United States   23-2900888
     
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification Number)
     
100 Liberty Street, Warren, Pennsylvania   16365
     
(Address of Principal Executive Offices)   Zip Code
(814) 726-2140
(Registrant’s telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
     
Title of each class   Name of each exchange on which registered
     
Common Stock, $0.10 Par Value   NASDAQ Stock Market, LLC
Securities Registered Pursuant to Section 12(g) of the Act:
None
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES þ NO o
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ
     As of February 28, 2009, there were 48,506,474 shares outstanding of the Registrant’s Common Stock, including 30,536,457 shares held by Northwest Bancorp, MHC, the Registrant’s mutual holding company.
     The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2008, as reported by the Nasdaq Global Select Market, was approximately $391.3 million.
DOCUMENTS INCORPORATED BY REFERENCE
(1)   Proxy Statement for the 2009 Annual Meeting of Stockholders of the Registrant (Part III).
 
 

 


TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL            DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED            STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR            INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
EX-10.1
EX-10.2
EX-10.3
EX-10.7
EX-10.9
EX-21
EX-23
EX-31.1
EX-31.2
EX-32


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PART I
ITEM 1. BUSINESS
General
      Northwest Bancorp, Inc.
     Northwest Bancorp, Inc. is a Federal corporation that was formed on June 29, 2001, as the successor to a Pennsylvania corporation of the same name. Both the Federal corporation and its Pennsylvania predecessor are referred to as the “Company.” The Company became the stock holding company of Northwest Savings Bank (the “Bank”) in a transaction (the “Two-Tier Reorganization”) that was approved by the Bank’s stockholders in December of 1997, and completed in February of 1998. In the Two-Tier Reorganization, each share of the Bank’s common stock was converted into and became a share of common stock of the Company, par value $0.10 per share (the “Common Stock”), and the Bank became a wholly-owned subsidiary of the Company. Northwest Bancorp, MHC (the “Mutual Holding Company”), which owned a majority of the Bank’s outstanding shares of common stock immediately prior to completion of the Two-Tier Reorganization, became the owner of the same percentage of the outstanding shares of Common Stock of the Company immediately following the completion of the Two-Tier Reorganization. On August 25, 2003, the Company completed an incremental stock offering whereby the Company cancelled 7,255,520 shares of the Company’s stock owned by the Mutual Holding Company and the Company sold the same number of shares in a subscription offering. The Mutual Holding Company owns approximately 63% of the Company’s outstanding shares. The Mutual Holding Company received approval from the Office of Thrift Supervision (“OTS”) to waive its right to receive cash dividends from the Company during 2008. As of December 31, 2008, the primary activity of the Company was the ownership of all of the issued and outstanding common stock of the Bank.
     As of December 31, 2008, through the Bank, the Company operated 167 community-banking offices throughout its market area in northwest, southwest and central Pennsylvania, western New York, eastern Ohio, Maryland and Florida. The Company, through the Bank and its wholly owned subsidiaries, also operates 49 consumer finance offices throughout Pennsylvania. In January 2009, the Company consolidated its two New York consumer finance offices with an office in Pennsylvania. Historically, the Company has focused its lending activities primarily on the origination of loans secured by first mortgages on owner-occupied, one- to four-family residences. In an effort to reduce interest rate risk and improve profit margins, the Company has made a strategic decision to focus its lending efforts on shorter term consumer and commercial loans, while continuing to offer one- to four- family first mortgage loans to customers in its market area. With the change in lending emphasis, the Company regularly sells a portion of the one- to four-family mortgage loans that it originates.
     The Company’s principal sources of funds are deposits, borrowed funds and the principal and interest payments on loans and marketable securities. The Company’s principal source of income is interest received on loans and marketable securities. The Company’s principal expenses are the interest paid on deposits and the cost of employee compensation and benefits.
     The Company’s principal executive office is located at 100 Liberty Street, Warren, Pennsylvania, and its telephone number at that address is (814) 726-2140.
     The Company’s website ( www.northwestsavingsbank.com ) contains a direct link to the Company’s filings with the Securities and Exchange Commission, including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these filings, if any. Copies may also be obtained, without charge, by written request to Shareholder Relations, P.O. Box 128, 100 Liberty Street, Warren, Pennsylvania 16365.
      Northwest Savings Bank
     The Bank is a Pennsylvania-chartered stock savings bank headquartered in Warren, Pennsylvania, which is located in northwestern Pennsylvania. The Bank is a community-oriented financial institution offering traditional deposit and loan products, and through a wholly-owned subsidiary, consumer finance services. The Bank’s mutual savings bank predecessor was founded in 1896. The Bank in its current stock form was established on November 2, 1994, as a result of the reorganization (the “Reorganization”) of the Bank’s mutual predecessor into a mutual holding company structure. At the time of the Reorganization, the Bank issued a majority of its to-be outstanding shares of common stock to the Mutual Holding Company (which was formed in connection with the Reorganization) and sold a minority of its to-be outstanding shares to stockholders other than the Mutual Holding Company in a stock offering conducted as part of the Reorganization.
     The Bank’s principal executive office is located at 100 Liberty Street, Warren, Pennsylvania, and its telephone number at that address is (814) 726-2140.

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Market Area
     The Company has been, and intends to continue to be, an independent community-oriented financial institution offering a wide variety of financial services to meet the needs of the communities it serves. The Company is headquartered in Warren, Pennsylvania, which is located in the northwestern region of Pennsylvania, and has its highest concentration of deposits and loans in the portion of its office network located in northwestern Pennsylvania. Since the early 1990s, the Company has expanded, primarily through acquisitions, into the southwestern and central regions of Pennsylvania. As of December 31, 2008, the Company operated 141 community banking offices and 49 consumer finance offices located in the Pennsylvania counties of Allegheny, Armstrong, Bedford, Berks, Blair, Butler, Cambria, Cameron, Centre, Chester, Clarion, Clearfield, Clinton, Columbia, Crawford, Cumberland, Dauphin, Elk, Erie, Fayette, Forest, Huntingdon, Indiana, Jefferson, Lancaster, Lawrence, Lebanon, Luzerne, Lycoming, McKean, Mercer, Mifflin, Northumberland, Potter, Schuylkill, Tioga, Venango, Warren, Washington, Westmoreland and York. In addition, the Company operated five community banking offices located in the Ohio counties of Ashtabula, Geauga and Lake, 14 community banking offices located in the New York counties of Chautauqua, Erie, Monroe and Cattaraugus, five community banking offices in the Maryland counties of Baltimore, Anne Arundel and Howard and two community banking offices in Broward County, Florida.
Lending Activities
      General. Historically, the Company’s principal lending activity has been the origination, for retention in its portfolio, of fixed-rate and, to a lesser extent, adjustable-rate mortgage loans collateralized by one- to four-family residential real estate located in its market area. The Company also originates loans collateralized by multifamily residential and commercial real estate, commercial business loans and consumer loans. Generally, the Company focuses its lending activities in the geographic areas that it maintains offices. As of December 31, 2008, loans in Pennsylvania, New York, Ohio, Maryland, Florida and other states were 79.4%, 9.1%, 0.8%, 7.3%, 1.9% and 1.5% of the loan portfolio, respectively.
     In an effort to manage interest rate risk, the Company has sought to make its interest-earning assets more interest rate sensitive by originating adjustable-rate loans, such as adjustable-rate mortgage loans and home equity loans, and by originating short-term and medium-term fixed-rate consumer loans. In recent years the Company has emphasized the origination of commercial real estate and commercial business loans which generally have shorter maturities or variable rates of interest. The Company also purchases mortgage-backed securities and other types of investment securities that generally have short average lives or adjustable interest rates. Because the Company also originates a substantial amount of long-term fixed-rate mortgage loans collateralized by one- to four-family residential real estate, when possible, the Company originates and underwrites loans according to standards that allow it to sell them in the secondary mortgage market for purposes of managing interest-rate risk and liquidity. The Company currently sells in the secondary market a limited amount of fixed-rate residential mortgage loans with maturities of more than 15 years, and generally retains all adjustable-rate mortgage loans and fixed-rate residential mortgage loans with maturities of 15 years or less. Although the Company is selling an increasing amount of the mortgage loans that it originates, it continues to be a portfolio lender and at any one time the Company holds only a nominal amount of loans identified as held-for-sale. The Company retains servicing on the mortgage loans it sells and realizes monthly service fee income. The Company generally retains in its portfolio all consumer loans that it originates while it periodically sells participations in the multifamily residential, commercial real estate or commercial business loans that it originates in an effort to reduce the risk of certain individual credits and the risk associated with certain businesses or industries.

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      Analysis of Loan Portfolio. Set forth below are selected data relating to the composition of the Company’s loan portfolio by type of loan as of the dates indicated.
                                                                                                 
    At December 31,     At June 30,  
    2008     2007     2006     2005     2005     2004  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
    (Dollars in Thousands)                     (Dollars in Thousands)                  
Real estate:
                                                                                               
One- to four-family
  $ 2,492,940       47.2 %     2,430,117       48.9 %     2,411,024       53.5 %     2,805,900       59.5 %     2,693,174       60.3 %     2,615,328       63.1 %
Home equity
    1,035,954       19.6 %     992,335       20.0 %     887,352       19.7 %     780,451       16.5 %     737,619       16.5 %     588,192       14.2 %
Multifamily and commercial
    1,100,218       20.8 %     906,594       18.3 %     701,951       15.6 %     594,503       12.6 %     534,224       11.9 %     454,606       11.0 %
 
                                                                       
Total real estate loans
  $ 4,629,112       87.6 %     4,329,046       87.2 %     4,000,327       88.8 %     4,180,854       88.6 %     3,965,017       88.7 %     3,658,126       88.3 %
Consumer:
                                                                                               
Automobile
    102,267       2.0 %     125,298       2.5 %     138,401       3.1 %     144,519       3.1 %     138,102       3.1 %     120,887       2.9 %
Education loans
    38,152       0.7 %     14,551       0.3 %     11,973       0.3 %     120,504       2.5 %     112,462       2.5 %     95,599       2.3 %
Loans on savings accounts
    11,191       0.2 %     10,563       0.2 %     10,313       0.2 %     9,066       0.2 %     8,500       0.2 %     8,038       0.2 %
Other (1)
    115,913       2.2 %     117,831       2.4 %     109,303       2.4 %     106,390       2.3 %     102,787       2.3 %     112,163       2.7 %
 
                                                                       
Total consumer loans
  $ 267,523       5.1 %     268,243       5.4 %     269,990       6.0 %     380,479       8.1 %     361,851       8.1 %     336,687       8.1 %
Commercial business
    387,145       7.3 %     367,459       7.4 %     235,311       5.2 %     157,572       3.3 %     142,391       3.2 %     149,509       3.6 %
 
                                                                       
Total loans receivable, gross
  $ 5,283,780       100.0 %     4,964,748       100.0 %     4,505,628       100.0 %     4,718,905       100.0 %     4,469,259       100.0 %     4,144,322       100.0 %
 
                                                                                               
Deferred loan fees
    (5,041 )             (4,179 )             (3,027 )             (3,877 )             (4,257 )             (6,630 )        
Undisbursed loan proceeds
    (81,918 )             (123,163 )             (52,505 )             (59,348 )             (56,555 )             (53,081 )        
Allowance for loan losses (real estate loans)
    (33,760 )             (28,854 )             (17,936 )             (16,875 )             (15,918 )             (15,113 )        
Allowance for loan losses (other loans)
    (21,169 )             (12,930 )             (19,719 )             (16,536 )             (15,645 )             (15,557 )        
 
                                                                                   
Total loans receivable, net
  $ 5,141,892               4,795,622               4,412,441               4,622,269               4,376,884               4,053,941          
 
                                                                                   
 
(1)   Consists primarily of secured and unsecured personal loans.
      Loan Maturity and Repricing Schedule. The following table sets forth the maturity or period of repricing of the Company’s loan portfolio at December 31, 2008. Demand loans and loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. Adjustable and floating-rate loans are included in the period in which interest rates are next scheduled to adjust rather than in which they contractually mature, and fixed-rate loans are included in the period in which the final contractual repayment is due.
                                                 
            Between     Between     Between              
    Within 1 Year     1-2 Years     2-3 Years     3-5 Years     Beyond 5 Years     Total  
    (In Thousands)  
Real estate loans:
                                               
One- to four-family residential
  $ 194,953       128,566       117,431       234,006       1,817,984     $ 2,492,940  
Multifamily and commercial
    374,641       131,556       109,381       381,377       103,263       1,100,218  
Consumer loans
    382,501       129,440       117,265       205,306       468,965       1,303,477  
Commercial business loans
    131,829       46,292       38,489       134,199       36,336       387,145  
 
                                   
Total loans
  $ 1,083,924       435,854       382,566       954,888       2,426,548     $ 5,283,780  
 
                                   

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      Fixed- and Adjustable-Rate Loan Schedule. The following table sets forth at December 31, 2008, the dollar amount of all fixed-rate and adjustable-rate loans due after December 31, 2009. Adjustable- and floating-rate loans are included in the table based on the contractual due date of the loan.
                         
    Fixed     Adjustable     Total  
    (In Thousands)  
Real estate loans:
                       
One- to four-family residential
  $ 2,296,290       68,091     $ 2,364,381  
Mulitfamily and commercial
    343,645       608,986       952,631  
Consumer loans
    879,576       159,992       1,039,568  
Commercial business loans
    126,324       208,888       335,212  
 
                 
Total loans
  $ 3,645,835       1,045,957     $ 4,691,792  
 
                 
      One- to Four-Family Residential Real Estate Loans. The Company currently offers one- to four-family residential mortgage loans with terms typically ranging from 15 to 30 years, with either adjustable or fixed interest rates. Originations of fixed-rate mortgage loans versus adjustable-rate mortgage loans are monitored on an ongoing basis and are affected significantly by such factors as the level of market interest rates, customer preference, the Company’s interest rate sensitivity position and loan products offered by the Company’s competitors. Therefore, even when management’s strategy is to increase the origination of adjustable-rate mortgage loans, market conditions may be such that there is greater demand for fixed-rate mortgage loans.
     The Company’s fixed-rate loans, whenever possible, are originated and underwritten according to standards that permit sale into the secondary mortgage market. Whether the Company can or will sell fixed-rate loans into the secondary market, however, depends on a number of factors including the yield and the term of the loan, market conditions, and the Company’s current liquidity and interest rate sensitivity position. The Company historically has been primarily a portfolio lender, and at any one time the Company has held only a nominal amount of loans as held for sale. The Company’s current strategy is to grow the consumer and commercial loan portfolios by more than it grows its portfolio of long-term fixed-rate mortgages. With this in mind, it currently retains in its portfolio fixed-rate loans with terms of 15 years or less, and sells a portion of fixed-rate loans (servicing retained) with terms of more than 15 years. The Company’s mortgage loans are amortized on a monthly basis with principal and interest due each month. One- to four-family residential mortgage loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option, usually without a prepayment penalty.
     The Company currently offers adjustable-rate mortgage loans with initial interest rate adjustment periods of one, three and five years, based on changes in a designated market index. The Company determines whether a borrower qualifies for an adjustable-rate mortgage loan based on the fully indexed rate of the adjustable-rate mortgage loan at the time the loan is originated. One- to four-family adjustable-rate residential mortgage loans totaled $55.5 million, or 1.0% of the Company’s gross loan portfolio at December 31, 2008.
     The Company’s one- to four-family residential mortgage loans customarily include due-on-sale clauses, which are provisions giving the Company the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan. Due-on-sale clauses are an important means of adjusting the rates on the Company’s fixed-rate mortgage loan portfolio, and the Company has generally exercised its rights under these clauses.
     Regulations limit the amount that a savings bank may lend relative to the appraised value of the real estate securing the loan, as determined by an appraisal at the time of loan origination. Appraisals are either performed by the Company’s in-house appraisal staff or by an appraiser who has been deemed qualified by the Company’s chief appraiser. Such regulations permit a maximum loan-to-value ratio of 95% for residential property and 80% for all other real estate loans. The Company’s lending policies generally limit the maximum loan-to-value ratio on both fixed-rate and adjustable-rate mortgage loans without private mortgage insurance to 80% of the lesser of the appraised value or the purchase price of the real estate that serves as collateral for the loan. The Company makes a limited amount of one- to four-family residential mortgage loans with loan-to-value ratios in excess of 80%. For one- to four-family residential mortgage loans with loan-to-value ratios in excess of 80%, the Company generally requires the borrower to obtain private mortgage insurance. The Company requires fire and casualty insurance, as well as a title guaranty regarding good title, on all properties securing real estate loans made by the Company.

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     Some financial institutions acquired by the Company held loans that are serviced by others and are secured by one- to four-family residences. At December 31, 2008, the Company’s portfolio of one- to four-family loans serviced by others totaled $11.6 million. The Company currently has no formal plans to enter into new loan participations.
     Included in the Company’s $2.5 billion portfolio of one- to four-family residential real estate loans are construction loans of $25.0 million, or 1.0% of the Company’s total loan portfolio. The Company offers fixed-rate and adjustable-rate residential construction loans primarily for the construction of owner-occupied one- to four-family residences in the Company’s market area to builders or to owners who have a contract for construction. Construction loans are generally structured to become permanent loans, and are originated with terms of up to 30 years with an allowance of up to one year for construction. During the construction phase the loans have a fixed interest rate and convert into either a fixed-rate or an adjustable-rate mortgage loan at the end of the construction period. Advances are made as construction is completed. In addition, the Company originates loans within its market area that are secured by individual unimproved or improved lots. Land loans are currently offered with fixed-rates for terms of up to 10 years. The maximum loan-to-value ratio for the Company’s land loans is 75% of the appraised value, and the maximum loan-to-value ratio for the Company’s construction loans is 95% of the lower of cost or appraised value.
     Construction lending generally involves a greater degree of credit risk than other one- to four-family residential mortgage lending. The repayment of the construction loan is often dependent upon the successful completion of the construction project. Construction delays or the inability of the borrower to sell the property once construction is completed may impair the borrower’s ability to repay the loan.
      Multifamily Residential and Commercial Real Estate Loans. The Company’s multifamily residential real estate loans are secured by multifamily residences, such as rental properties. The Company’s commercial real estate loans are secured by nonresidential properties such as hotels, church property, manufacturing facilities and retail establishments. At December 31, 2008, a significant portion of the Company’s multifamily residential and commercial real estate loans were secured by properties located within the Company’s market area. The Company’s largest multifamily residential real estate loan relationship at December 31, 2008, had a principal balance of $13.4 million, and was collateralized by multiple residential real estate rental properties. These loans were performing in accordance with their terms as of December 31, 2008. The Company’s largest commercial real estate loan relationship at December 31, 2008, had a principal balance of $40.4 million and was collateralized by several hotels and retail stores. These loans were performing in accordance with their terms as of December 31, 2008. Multifamily residential and commercial real estate loans are offered with both adjustable interest rates and fixed interest rates. The terms of each multifamily residential and commercial real estate loan are negotiated on a case-by-case basis. The Company generally makes multifamily residential and commercial real estate loans up to 80% of the appraised value of the property collateralizing the loan.
     Loans secured by multifamily residential and commercial real estate generally involve a greater degree of credit risk than one- to four-family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multifamily residential and commercial real estate is typically dependent upon the successful operation of the related real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.
      Consumer Loans. The principal types of consumer loans offered by the Company are adjustable-rate home equity lines of credit and fixed-rate consumer loans such as second mortgage loans, home equity loans, automobile loans, sales finance loans, unsecured personal loans, credit card loans, and loans secured by deposit accounts. Consumer loans are typically offered with maturities of ten years or less. Generally, the Company’s home equity lines of credit are secured by the borrower’s principal residence with a maximum loan-to-value ratio, including the principal balances of both the first and second mortgage loans, of 90% or less. Such loans are offered on an adjustable-rate basis with terms of up to 20 years. At December 31, 2008, the disbursed portion of home equity lines of credit totaled $120.1 million, or 9.5% of consumer loans, with $211.3 million remaining undisbursed.
     The underwriting standards employed by the Company for consumer loans include a determination of the applicant’s credit history and an assessment of ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

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     Consumer loans entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles, mobile homes, boats, recreation vehicles, appliances, and furniture. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the lack of demand for used automobiles.
      Commercial Business Loans. The Company currently offers commercial business loans to finance various activities in the Company’s market area, some of which are secured in part by additional real estate collateral. At December 31, 2008 the largest commercial business loan relationship had a principal balance of $10.5 million, and was secured by all fixed assets of a diagnostic imaging center.
     Commercial business loans are offered with both fixed and adjustable interest rates. Underwriting standards employed by the Company for commercial business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated by the applicant’s business. The financial strength of each applicant also is assessed through a review of financial statements provided by the applicant.
     Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower’s business. The Company generally obtains personal guarantees from the borrower or a third party as a condition to originating its commercial business loans.
      Loan Originations, Solicitation, Processing, and Commitments. Loan originations are derived from a number of sources such as real estate broker referrals, existing customers, borrowers, builders, attorneys, brokers and walk-in customers. Historically all of the Company’s loan originators were salaried employees, and the Company did not pay commissions in connection with loan originations. Beginning in 2007, the Company implemented a program whereby certain commercial lenders are paid commissions based on predetermined goals. Upon receiving a loan application, the Company obtains a credit report and employment verification to verify specific information relating to the applicant’s employment, income, and credit standing. In the case of a real estate loan, an in-house appraiser or an appraiser approved by the Company, appraises the real estate intended to secure the proposed loan. A loan processor in the Company’s loan department checks the loan application file for accuracy and completeness, and verifies the information provided. The Company has a formal loan policy, which assigns lending limits to the Company’s various loan officers. Also, the Company has a Credit Committee that meets quarterly to review the assigned lending limits and to monitor the Company’s lending policies, loan activity, economic conditions and concentrations of credit. The Company has a Senior Loan Committee, which has lending authority as designated in the Company’s loan policy that is approved by the Board of Directors. Loans exceeding the limits established for the Senior Loan Committee must be approved by the Executive Committee of the Board of Directors or by the entire Board of Directors. The Company’s policy is to make no loans either individually or in the aggregate to one entity in excess of $15.0 million. Exceptions to this policy are permitted with the prior approval from the Board of Directors. Fire and casualty insurance is required at the time the loan is made and throughout the term of the loan, and at the discretion of the Company, flood insurance may be required. After the loan is approved, a loan commitment letter is promptly issued to the borrower. At December 31, 2008, the Company had commitments to originate $116.3 million of loans.
     If the loan is approved, the commitment letter specifies the terms and conditions of the proposed loan including the amount of the loan, interest rate, amortization term, a description of the required collateral and required insurance coverage. The borrower must provide proof of fire and casualty insurance on the property (and, as required, flood insurance) serving as collateral, which insurance must be maintained during the full term of the loan. A title guaranty, based on a title search of the property, is required on all loans secured by real property.
      Loan Origination Fees and Other Income. In addition to interest earned on loans, the Company generally receives loan origination fees. To the extent that loans are originated or acquired for the Company’s portfolio, Statement of Financial Accounting Standards No. 91 Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”) requires that the Company defer loan origination fees and costs and amortize such amounts as an adjustment of yield over the life of the loan by use of the level yield method. Fees deferred under SFAS 91 are recognized into income immediately upon prepayment or the sale of the related loan. At December 31, 2008, the Company had $5.0 million of net deferred loan origination fees. Loan origination fees are volatile sources of income. Such fees vary with the volume and type of loans and commitments made and purchased, principal repayments, and competitive conditions in the marketplace.

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     In addition to loan origination fees, the Company also receives other fees, service charges, and other income that consist primarily of deposit transaction account service charges, late charges, credit card fees, and income from operations of real estate owned (“REO”). The Company recognized fees and service charges of $32.4 million, $27.8 million and $24.5 million for the years ended December 31, 2008, 2007 and 2006, respectively.
      Loans-to-One Borrower. Savings banks are subject to the same loans-to-one borrower limits as those applicable to national banks, which restrict loans to one borrower to an amount equal to 15% of unimpaired capital and unimpaired surplus on an unsecured basis, and an additional amount equal to 10% of unimpaired capital and unimpaired surplus if the loan is secured by readily marketable collateral (generally, financial instruments and bullion, but not real estate). At December 31, 2008, the largest aggregate amount loaned by the Company to one borrower totaled $40.4 million and was secured by several hotels and retail stores. The Company’s second largest lending relationship totaled $20.0 million and was secured by a senior living center. The Company’s third largest lending relationship totaled $16.8 million and was secured by a hotel. The Company’s fourth largest lending relationship totaled $14.2 million and was secured by commercial real estate. The Company’s fifth largest lending relationship totaled $13.9 million and was secured by a hotel. These loans were performing in accordance with their terms at December 31, 2008.
Delinquencies and Classified Assets
      Collection Procedures. The Company’s collection procedures provide that when a loan is five days past due, a computer-generated late notice is sent to the borrower requesting payment. If delinquency continues, at 15 days a delinquent notice, plus a notice of a late charge, is sent and personal contact efforts are attempted, either in person or by telephone, to strengthen the collection process and obtain reasons for the delinquency. Also, plans to arrange a repayment plan are made. If a loan becomes 60 days past due, a collection letter is sent, personal contact is attempted, and the loan becomes subject to possible legal action if suitable arrangements to repay have not been made. In addition, the borrower is given information, which provides access to consumer counseling services, to the extent required by regulations of the Department of Housing and Urban Development. When a loan continues in a delinquent status for 90 days or more, and a repayment schedule has not been made or kept by the borrower, generally a notice of intent to foreclose is sent to the borrower, giving 30 days to cure the delinquency. If not cured, foreclosure proceedings are initiated.
      Nonperforming Assets. Loans are reviewed on a regular basis and are placed on a nonaccrual status when, in the opinion of management, the collection of additional principal and/or interest is doubtful. Loans are automatically placed on nonaccrual status when either principal or interest is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on a nonaccrual status is reversed and charged against interest income.
     Real estate acquired by the Company as a result of foreclosure or by deed in lieu of foreclosure is classified as Real Estate Owned (“REO”) until such time as it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at the lower of the related loan balance or its fair value as determined by an appraisal, less estimated costs of disposal. If the value of the property is less than the loan, less any related specific loan loss reserve allocations, the difference is charged against the allowance for loan losses. Any subsequent write-down of REO or loss at the time of disposition is charged against earnings.

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      Loans Past Due and Nonperforming Assets. The following table sets forth information regarding the Company’s loans 30 days or more past due, nonaccrual loans 90 days or more past due, and real estate acquired or deemed acquired by foreclosure at the dates indicated. When a loan is delinquent 90 days or more, the Company fully reserves all accrued interest thereon and ceases to accrue interest thereafter. For all the dates indicated, the Company did not have any material restructured loans within the meaning of Statement of Financial Accounting Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings (“SFAS 15”). A large number of one- to four- family mortgage loans are due on the first day of the month. Effective December 31, 2005, the Company changed its fiscal year-end from June 30 (a 30-day month) to December 31 (a 31-day month) causing the loans that are 30 to 59 days delinquent to increase dramatically compared to prior fiscal year ends because of the additional day.
                                                         
    At December 31,     At June 30,  
    2008     2007     2006     2005     2005     2004  
    Number     Balance                                          
    (Dollars in Thousands)  
Loans past due 30 days to 59 days:
                                                       
One- to four-family residential loans
    392     $ 32,988       27,270       24,078       26,290       3,941       5,765  
Multifamily and commercial RE loans
    99       18,901       11,331       7,975       4,924       5,198       2,201  
Consumer loans
    1,157       11,295       10,550       9,096       12,053       5,611       4,877  
Commercial business loans
    86       7,700       9,947       4,325       2,450       1,000       782  
 
                                         
Total loans past due 30 days to 59 days
    1,734     $ 70,884       59,098       45,474       45,717       15,750       13,625  
 
                                                       
Loans past due 60 days to 89 days:
                                                       
One- to four-family residential loans
    101       7,599       6,077       5,970       9,156       4,687       4,925  
Multifamily and commercial RE loans
    54       8,432       4,984       3,846       3,399       8,156       1,023  
Consumer loans
    379       2,836       2,676       2,833       3,773       3,134       2,032  
Commercial business loans
    45       3,801       2,550       501       263       279       309  
 
                                         
Total loans past due 60 days to 89 days
    579     $ 22,668       16,287       13,150       16,591       16,256       8,289  
 
                                                       
Loans past due 90 days or more (1):
                                                       
One- to four-family residential loans
    223       20,435       12,542       10,334       12,179       11,507       11,322  
Multifamily and commercial RE loans
    155       43,828       24,323       18,982       21,013       15,610       13,823  
Consumer loans
    687       9,756       7,582       4,578       8,322       5,514       4,536  
Commercial business loans
    114       25,184       5,163       6,631       1,502       979       2,824  
 
                                         
Total loans past due 90 days or more
    1,179     $ 99,203       49,610       40,525       43,016       33,610       32,505  
 
                                         
 
                                                       
Total loans 30 days or more past due
    3,492     $ 192,755       124,995       99,149       105,324       65,616       54,419  
 
                                         
 
                                                       
Total loans 90 days or more past due (1)
    1,179     $ 99,203       49,610       40,525       43,016       33,610       32,505  
 
                                                       
Total REO
    109       16,844       8,667       6,653       4,872       6,685       3,951  
 
                                         
 
                                                       
Total loans 90 days or more past due and REO
    1,288     $ 116,047       58,277       47,178       47,888       40,295       36,456  
 
                                         
 
                                                       
Total loans 90 days or more past due to net loans receivable
            1.93 %     1.03 %     0.92 %     0.93 %     0.77 %     0.80 %
Total loans 90 days or more past due and REO to total assets
            1.67 %     0.87 %     0.72 %     0.74 %     0.64 %     0.57 %
 
(1)   The Company classifies as nonperforming all loans 90 days or more delinquent.
     During the year ended December 31, 2008, gross interest income of approximately $6.8 million would have been recorded on loans accounted for on a nonaccrual basis if the loans had been current during the year. No interest income on nonaccrual loans was included in income during the year.
      Classification of Assets. The Company’s policies, consistent with regulatory guidelines, provide for the classification of loans considered to be of lesser quality as “substandard,” “doubtful,” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the savings institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” so that their continuance as assets without the

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establishment of a specific loss reserve is not warranted. Assets that do not expose the savings institution to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are required to be designated “special mention” by management. At December 31, 2008, the Company had 312 loans, with an aggregate principal balance of $47.2 million, designated as special mention.
     The Company regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations. The Company’s largest classified assets are generally also the Company’s largest nonperforming assets.
     The following table sets forth the aggregate amount of the Company’s classified assets at the dates indicated.
                         
    At December 31,  
    2008     2007     2006  
    (In Thousands)  
Substandard assets
  $ 155,245       85,526       70,182  
Doubtful assets
    3,596       4,374       2,129  
Loss assets
    64       388       270  
 
                 
Total classified assets
  $ 158,905       90,288       72,581  
 
                 
      Allowance for Loan Losses. Loans that have been classified as substandard or doubtful are reviewed by the Risk Management (“Risk Management”) department for possible impairment under the provisions of Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS 114”). A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement including both contractual principal and interest payments.
     If an individual loan is deemed to be impaired the Risk Management department determines the proper measurement of impairment for each loan based on one of three methods as prescribed by SFAS No. 114: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is more or less than the recorded investment in the loan, the Risk Management department adjusts the specific allowance associated with that individual loan accordingly.
     If a substandard or doubtful loan is not considered to be individually impaired, it is grouped with other loans that possess common characteristics for impairment evaluation and analysis under the provisions of SFAS No. 5, “Accounting for Contingencies.” This segmentation is accomplished by grouping loans of similar product types, risk characteristics and industry concentration into homogeneous pools. Each pool is then analyzed based on the historical delinquency, charge-off and recovery trends over the past three years which are then extended to include the loss realization period during which the event of default occurs, additional consideration is also given to the current economic, political, regulatory and interest rate environment. This adjusted historical net charge-off amount as a percentage of loans outstanding for each group is used to estimate the measure of impairment.
     The individual impairment measures along with the estimated losses for each homogeneous pool are consolidated into one summary document. This summary schedule along with the supporting documentation used to establish this schedule is presented to the Credit Committee on a quarterly basis by the Risk Management department. The Credit Committee is comprised of members of Senior Management from various departments within the Company including mortgage, consumer and commercial lending, appraising, administration and finance as well as the President of the Company. The Credit Committee reviews the processes and documentation presented, reviews the concentration of credit by industry and customer, discusses lending products, activity, competition and collateral values, as well as economic conditions in general and in each market area of the Company. Based on this review and discussion, the appropriate allowance for loan losses is estimated and any adjustments necessary to reconcile the actual allowance for loan losses with this estimate are determined. In addition, the Credit Committee considers whether any changes to the methodology are needed. The Credit Committee also compares the Company’s delinquency trends, nonperforming asset amounts and allowance for loan loss levels to its peer group and to state and national statistics. A similar review is also performed by the Board of Directors’ Risk Management Committee.
     In addition to the reviews by the Credit Committee and the Risk Management Committee, regulators from either the FDIC or Pennsylvania State Department of Banking perform an extensive review on an annual basis of the adequacy of the allowance for loan losses and its conformity with regulatory guidelines and pronouncements. The internal audit department also performs a regular review of the detailed supporting schedules for accuracy and reports their findings to the Audit Committee of

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the Board of Directors. Any recommendations or enhancements from these independent parties are considered by management and the Credit Committee and implemented accordingly.
     Management acknowledges that this is a dynamic process and consists of factors, many of which are external and beyond management’s control, that can change. The adequacy of the allowance for loan losses is based upon estimates using all the information previously discussed as well as current and known circumstances and events. There is no assurance that actual portfolio losses will not be substantially different than those that were estimated. Management believes that all known losses as of the balance sheet dates have been recorded.
      Analysis of the Allowance For Loan Losses. The following table sets forth the analysis of the allowance for loan losses for the periods indicated. Ratios for the six months ended December 31, 2005 have been annualized.
                                                 
                            Six Months        
                            Ended        
    Years Ended December 31,     December 31,     Years Ended June 30,  
    2008     2007     2006     2005     2005     2004  
    (In Thousands)  
Net loans receivable
  $ 5,141,892       4,795,622       4,412,441       4,622,269       4,376,884       4,053,941  
Average loans outstanding
  $ 5,016,694       4,660,693       4,395,274       4,532,523       4,234,241       3,846,261  
 
Allowance for loan losses balance at beginning of period
  $ 41,784       37,655       33,411       31,563       30,670       27,166  
Provision for loan losses
  $ 22,851       8,743       8,480       4,722       9,566       6,860  
Charge-offs:
                                               
Real estate loans
    (3,962 )     (2,042 )     (1,148 )     (282 )     (676 )     (176 )
Consumer loans
    (6,290 )     (5,175 )     (5,543 )     (3,314 )     (5,726 )     (5,113 )
Commercial loans
    (1,358 )     (973 )     (926 )     (43 )     (3,071 )     (461 )
 
                                   
Total charge-offs
    (11,610 )     (8,190 )     (7,617 )     (3,639 )     (9,473 )     (5,750 )
Recoveries:
                                               
Real estate loans
    140       250       123       4       1        
Consumer loans
    1,060       1,073       1,214       455       750       562  
Commercial loans
    704       134       62       51       49       502  
 
                                   
Total recoveries
    1,904       1,457       1,399       510       800       1,064  
Acquired through acquistions
          2,119       1,982       255             1,330  
 
                                   
Allowance for loan losses balance at end of period
  $ 54,929       41,784       37,655       33,411       31,563       30,670  
 
                                   
 
                                               
Allowance for loan losses as a percentage of net loans receivable
    1.07 %     0.87 %     0.85 %     0.72 %     0.72 %     0.76 %
Net charge-offs as a percentage of average loans outstanding
    0.19 %     0.14 %     0.14 %     0.14 %     0.20 %     0.12 %
Allowance for loan losses as a percentage of nonperforming loans
    55.37 %     84.22 %     92.92 %     77.67 %     93.91 %     94.35 %
Allowance for loan losses as a percentage of nonperforming loans and REO
    47.33 %     71.70 %     79.81 %     69.77 %     78.33 %     84.13 %

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      Allocation of Allowance for Loan Losses. The following table sets forth the allocation of allowance for loan losses by loan category at the dates indicated.
                                                 
                    At December 31,        
    2008     2007     2006  
            % of Total             % of Total             % of Total  
    Amount     Loans (1)     Amount     Loans (1)     Amount     Loans (1)  
    (Dollars in Thousands)  
Balance at end of period applicable to:
                                               
Real estate loans
  $ 33,760       87.6 %     28,854       87.2 %     17,936       88.8 %
Consumer loans
    6,125       5.1 %     6,645       5.4 %     16,500       6.0 %
Commercial business loans
    15,044       7.3 %     6,285       7.4 %     3,219       5.2 %
 
                                   
Total allowance for loan loss
  $ 54,929       100.0 %     41,784       100.0 %     37,655       100.0 %
 
                                   
 
(1)   Represents percentage of loans in each category to total loans.
                                                 
    At December 31,     At June 30,  
    2005     2005     2004  
            % of Total             % of Total             % of Total  
    Amount     Loans (1)     Amount     Loans (1)     Amount     Loans (1)  
    (Dollars in Thousands)  
Balance at end of period applicable to:
                                               
Real estate loans
  $ 16,875       88.6 %     15,918       88.7 %     15,113       88.3 %
Consumer loans
    13,991       8.1 %     13,179       8.1 %     11,790       8.1 %
Commercial business loans
    2,545       3.3 %     2,466       3.2 %     3,767       3.6 %
 
                                   
Total allowance for loan loss
  $ 33,411       100.0 %     31,563       100.0 %     30,670       100.0 %
 
                                   
 
(1)   Represents percentage of loans in each category to total loans.
Investment Activities
     The Company’s investment portfolio is comprised of mortgage-backed securities, investment securities, and cash and cash equivalents. During 2007, decreases in investment securities and mortgage-backed securities resulted from the Company’s efforts to minimize credit risk in its investment portfolio by divesting a significant portion of its non-agency corporate debt securities and mutual funds. Included in the sale of investments were securities previously classified as held-to-maturity, and as a result of this sale all remaining held-to-maturity investments were required to be reclassified as available-for-sale.
     The Company is required under federal regulations to maintain a minimum amount of liquid assets that may be invested in specified short-term securities and certain other investments. The Company generally has maintained a portfolio of liquid assets that exceeds regulatory guidelines. Liquidity levels may be increased or decreased depending upon the yields on investment alternatives and upon management’s judgment as to the attractiveness of the yields then available in relation to other opportunities and its expectation of the level of yield that will be available in the future, as well as management’s projections as to the short-term demand for funds to be used in the Company’s loan origination and other activities.

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      Amortized Cost and Market Value of Investment and Mortgage-Backed Securities. The following table sets forth certain information regarding the amortized cost and market values of the Company’s investment securities portfolio and mortgage-backed securities portfolio at the dates indicated.
                                                 
    At December 31,  
    2008     2007     2006  
    Amortized           Amortized           Amortized        
    Cost     Market Value     Cost     Market Value     Cost     Market Value  
    (In Thousands)  
Mortgage-backed securities held to maturity:
                                               
Fixed-rate pass through certificates
  $                         9,097       8,965  
Variable-rate pass through certificates
                            188,700       188,382  
Fixed-rate collateralized mortgage obligations (“CMOs”)
                            4,484       4,249  
Variable-rate CMOs
                            49,374       49,335  
 
                                   
 
                                               
Total mortgage-backed securities held to maturity
                            251,655       250,931  
 
                                   
 
                                               
Mortgage-backed securities available for sale:
                                               
Fixed-rate pass through certificates
    186,659       193,099       73,284       73,992       68,720       67,430  
Variable-rate pass through certificates
    276,121       277,183       306,885       309,054       199,442       198,365  
Fixed-rate CMOs
    60,119       57,480       73,514       71,793       87,946       85,402  
Variable-rate CMOs
    228,917       217,877       76,886       76,908       27,613       27,771  
 
                                   
 
                                               
Total mortgage-backed securities available for sale
    751,816       745,639       530,569       531,747       383,721       378,968  
 
                                   
Total mortgage-backed securities
  $ 751,816       745,639       530,569       531,747       635,376       629,899  
 
                                   
 
                                               
Investment securities held to maturity:
                                               
U.S. Government, agency and GSEs
  $                         161,755       160,580  
Municipal securities
                            269,886       273,438  
Corporate debt issues
                            33,671       35,566  
 
                                   
 
                                               
Total investment securities held to maturity
                            465,312       469,584  
 
                                   
 
                                               
Investment securities available for sale:
                                               
U.S. Government, agency and GSEs
    97,884       108,908       286,359       292,546       214,031       212,525  
Municipal securities
    268,616       267,548       262,895       267,120       14,553       14,604  
Corporate debt issues
    25,165       15,961       37,225       35,075       63,114       60,577  
Equity securities and mutual funds
    954       1,114       6,478       6,879       95,548       100,840  
 
                                   
 
                                               
Total investment securities available for sale
  $ 392,619       393,531       592,957       601,620       387,246       388,546  
 
                                   
      Issuers of Mortgage-Backed Securities. The following table sets forth information regarding the issuers and the carrying value of the Company’s mortgage-backed securities.
                         
    At December 31,  
    2008     2007     2006  
    (In Thousands)  
Mortgage-backed securities:
                       
Fannie Mae
  $ 288,082       165,391       205,127  
Ginnie Mae
    99,354       88,428       120,799  
Freddie Mac
    320,297       229,960       249,685  
Other (non-agency)
    37,906       47,968       55,012  
 
                 
Total mortgage-backed securities
  $ 745,639       531,747       630,623  
 
                 

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      Investment Portfolio Maturities. The following table sets forth the scheduled maturities, carrying values, amortized cost, market values and weighted average yields for the Company’s investment securities and mortgage-backed securities portfolios at December 31, 2008. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust.
     
                                                                                         
    At December 31, 2008  
    One Year or Less     One to Five Years     Five to Ten Years     More than Ten Years     Total  
            Annualized             Annualized             Annualized             Annualized                     Annualized  
    Amortized     Weighted     Amortized     Weighted     Amortized     Weighted     Amortized     Weighted     Amortized             Weighted  
    Cost     Average Yield     Cost     Average Yield     Cost     Average Yield     Cost     Average Yield     Cost     Market Value     Average Yield  
    (Dollars in Thousands)  
Investment securities available for sale:
                                                                                       
Government sponsored entites
  $ 2,985       5.29 %     2,962       5.40 %     30,352       5.32 %     61,494       5.21 %   $ 97,793     $ 108,820       5.25 %
U.S. Government and agency obligations
    91       2.60 %                                         91       88       2.60 %
Municipal securities
                460       4.22 %     43,159       4.17 %     224,997       4.52 %     268,616       267,548       4.46 %
Corporate debt issues
                                        25,165       5.42 %     25,165       15,961       5.42 %
Equity securities and mutual funds
                                        954       7.06 %     954       1,114       7.06 %
 
                                                                           
Total investment securities available for sale
  $ 3,076       5.21 %     3,422       5.24 %     73,511       4.64 %     312,610       4.73 %   $ 392,619     $ 393,531       4.72 %
 
                                                                                       
Mortgage-backed securities available for sale:
                                                                                       
Pass through certificates
    276,557       4.96 %     13,912       4.54 %     8,783       4.92 %     163,528       5.37 %     462,780       470,282       5.10 %
CMOs
    228,917       1.73 %                 22,636       4.76 %     37,483       4.50 %     289,036       275,357       2.33 %
 
                                                                           
Total mortgage-backed securities available for sale
  $ 505,474       3.50 %     13,912       4.54 %     31,419       4.81 %     201,011       5.21 %   $ 751,816     $ 745,639       4.03 %
 
                                                                           
 
Total investment securities and mortgage-backed securities
  $ 508,550       3.51 %     17,334       4.68 %     104,930       4.69 %     513,621       4.92 %   $ 1,144,435     $ 1,139,170       4.27 %
 
                                                                           

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Sources of Funds
      General. Deposits are the major source of the Company’s funds for lending and other investment purposes. In addition to deposits, the Company derives funds from the amortization and prepayment of loans and mortgage-backed securities, the maturity of investment securities, operations and, if needed, borrowings from the Federal Home Loan Bank of Pittsburgh (“FHLB”). Scheduled loan principal repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest rates and market conditions. Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds from other sources or on a longer term basis for general business purposes.
      Deposits. Consumer and commercial deposits are generated principally from the Company’s market area by offering a broad selection of deposit instruments including checking accounts, savings accounts, money market deposit accounts, term certificate accounts and individual retirement accounts. While the Company accepts deposits of $100,000 or more, it does not offer substantial premium rates for such deposits. Deposit account terms vary according to the minimum balance required, the period of time during which the funds must remain on deposit, and the interest rate, among other factors. The Company regularly executes changes in its deposit rates based upon cash flow requirements, general market interest rates, competition, and liquidity requirements. Other than those obtained through bank acquisitions, the Company to date has not obtained funds through brokers, nor solicited funds outside its market area.
     The following table sets forth the dollar amount of deposits in the various types of accounts offered by the Company at the dates indicated.
                                                                         
    At December 31,  
    2008     2007     2006  
    Balance     Percent (1)     Rate (2)     Balance     Percent (1)     Rate (2)     Balance     Percent (1)     Rate (2)  
    (Dollars in Thousands)  
Savings accounts
  $ 760,245       15.1 %     1.14 %   $ 745,430       13.4 %     1.20 %   $ 807,873       15.1 %     1.44 %
Checking accounts
    1,100,131       21.8 %     0.37 %     1,079,093       19.5 %     0.85 %     994,783       18.5 %     1.05 %
Money market accounts
    720,375       14.3 %     1.58 %     681,115       12.3 %     3.63 %     594,472       11.1 %     3.62 %
Certificates of deposit                                                                        
Maturing within 1 year     1,285,695       25.5 %     2.88 %     2,541,053       45.9 %     4.70 %     2,024,850       37.7 %     4.47 %
Maturing 1 to 3 years
    829,776       16.5 %     3.74 %     379,183       6.8 %     4.31 %     801,156       14.9 %     4.50 %
Maturing more than 3 years
    341,989       6.8 %     4.11 %     116,460       2.1 %     4.62 %     143,616       2.7 %     4.56 %
 
                                                     
Total certificates
  $ 2,457,460       48.8 %     3.34 %     3,036,696       54.8 %     4.65 %     2,969,622       55.3 %     4.48 %
 
                                                     
Total deposits
  $ 5,038,211       100.0 %     2.08 %   $ 5,542,334       100.0 %     3.29 %   $ 5,366,750       100.0 %     3.26 %
 
                                                     
 
(1)   Represents percentage of total deposits.
 
(2)   Represents weighted average nominal rate at fiscal year end.
Large Certificates of Deposit Maturities. The following table indicates the amount of the Company’s certificates of deposit of $100,000 or more by time remaining until maturity at December 31, 2008.
         
    Certificates of  
                       Maturity Period   Deposits  
    (In Thousands)  
Three months or less
  $ 109,298  
Over three months through six months
    82,046  
Over six months through twelve months
    84,492  
Over twelve months
    257,568  
 
     
 
       
Total
  $ 533,404  
 
     

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Borrowings
     Deposits are the primary source of funds for the Company’s lending and investment activities and for its general business purposes. The Company also relies upon borrowings from the FHLB to supplement its supply of lendable funds and to meet deposit withdrawal requirements. Borrowings from the FHLB typically are collateralized by the Bank’s stock in the FHLB and a portion of the Bank’s real estate loans.
     The FHLB functions as a central reserve bank providing credit for the Bank and other member financial institutions. As a member, the Bank is required to own capital stock in the FHLB and is authorized to apply for borrowings on the security of such stock and certain of its real estate loans and other assets (principally, securities that are direct obligations of the United States or its sponsored entities) provided certain standards related to creditworthiness have been met. Borrowings are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Depending on the program, limitations on the amount of borrowings are based either on a fixed percentage of a member institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness. All of the Company’s FHLB borrowings currently have fixed interest rates and original maturities of between one day and ten years.
                         
    During the Years Ended December 31,
    2008   2007   2006
    (Dollars in Thousands)
FHLB-Pittsburgh borrowings:
                       
Average balance outstanding
  $ 625,706       305,597       352,596  
Maximum outstanding at end of any month during period
  $ 972,018       332,160       377,592  
Balance outstanding at end of period
  $ 972,018       257,025       332,196  
Weighted average interest rate during period
    3.89 %     4.59 %     4.62 %
Weighted average interest rate at end of period
    3.49 %     4.64 %     4.58 %
 
                       
Reverse repurchase agreements:
                       
Average balance outstanding
  $ 88,349       70,875       44,860  
Maximum outstanding at end of any month during period
  $ 98,108       83,432       55,705  
Balance outstanding at end of period
  $ 91,436       77,452       55,705  
Weighted average interest rate during period
    1.75 %     4.01 %     4.03 %
Weighted average interest rate at end of period
    1.02 %     3.25 %     4.25 %
 
                       
Other borrowings:
                       
Average balance outstanding
  $ 4,602       4,790       5,333  
Maximum outstanding at end of any month during period
  $ 4,652       4,923       5,660  
Balance outstanding at end of period
  $ 4,491       4,638       4,913  
Weighted average interest rate during period
    4.99 %     4.99 %     4.99 %
Weighted average interest rate at end of period
    4.99 %     4.99 %     4.99 %
 
                       
Total borrowings:
                       
Average balance outstanding
  $ 718,657       381,262       402,789  
Maximum outstanding at end of any month during period
  $ 1,067,945       408,596       424,766  
Balance outstanding at end of period
  $ 1,067,945       339,115       392,814  
Weighted average interest rate during period
    3.74 %     4.52 %     4.59 %
Weighted average interest rate at end of period
    3.29 %     4.33 %     4.54 %
Competition
     The Company’s market area in Pennsylvania, western New York, eastern Ohio, Maryland and Florida has a large concentration of financial institutions. As a result, the Company encounters strong competition both in attracting deposits and in originating retail and commercial loans. Its most direct competition for deposits has come historically from commercial banks, brokerage houses, other savings banks and credit unions in its market area. The Company expects continued competition from these financial institutions in the foreseeable future. With the continued acceptance of internet banking by our customers and consumers generally, competition for deposits has increased from institutions operating outside of our market area as well as from insurance companies. The Company competes for deposits by offering depositors a high level of personal service and expertise together with a wide range of financial products and services.

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     The competition for retail and commercial loans comes principally from commercial banks, mortgage banking companies, and other savings institutions. This competition for loans has increased substantially in recent years as a result of the large number of institutions competing in the Company’s market area as well as the increased efforts by commercial banks to increase small business lending. The Company competes for loans primarily through the interest rates and loan fees it charges and the efficiency and quality of services it provides borrowers, real estate brokers, and builders. Factors that affect competition include general and local economic conditions, current interest rate levels, and volatility of the mortgage markets.
Subsidiary Activities
     The Company’s sole consolidated subsidiary is the Bank. The Bank has seven wholly owned subsidiaries — Northwest Settlement Agency, LLC, Great Northwest Corporation, Northwest Financial Services, Inc., Northwest Consumer Discount Company, Inc., Allegheny Services, Inc., Boetger and Associates, Inc., and Northwest Capital Group, Inc. For financial reporting purposes all of these companies are included in the consolidated financial statements of the Company.
     Northwest Settlement Agency, LLC provides title insurance to borrowers of Northwest Savings Bank and other lenders. At December 31, 2008, the Bank had an equity investment in Northwest Settlement Agency, LLC of $949,000. For the period ended December 31, 2008, Northwest Settlement Agency, LLC had net income of $402,000.
     Great Northwest’s sole activity is holding equity investments in government-assisted low-income housing projects in various locations in the Company’s market area. At December 31, 2008, the Bank had an equity investment in Great Northwest of $6.1 million. For the year ended December 31, 2008, Great Northwest had net income of $255,000 generated primarily from federal low-income housing tax credits.
     Northwest Financial Services’ principal activity is the operation of retail brokerage activities for the Company. It also owns the common stock of several financial institutions. In addition, Northwest Financial Services holds an equity investment in one government assisted low-income housing project. At December 31, 2008, the Bank had an equity investment in Northwest Financial Services of $7.1 million, and for the year ended December 31, 2008, Northwest Financial Services had net income of $127,000.
     Northwest Consumer Discount Company operates 49 consumer finance offices throughout Pennsylvania and two consumer finance offices in New York operating as a separate company doing business as Northwest Finance Company. Effective January 23, 2009, the Company consolidated the New York offices into an existing office in Pennsylvania. At December 31, 2008, the Bank had an equity investment in Northwest Consumer Discount Company of $27.0 million and the net income of Northwest Consumer Discount Company for the year ended December 31, 2008 was $2.0 million. Consumer loans entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as automobiles, mobile homes, boats, and recreation vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In particular, amounts realizable on the sale of repossessed automobiles may be significantly reduced based upon the condition of the automobiles and the lack of demand for used automobiles.
     Allegheny Services, Inc. is a Delaware investment company that holds mortgage loans originated through the Bank’s wholesale lending operation as well as municipal bonds. In addition, Allegheny Services, Inc. has loans to both the Bank and Northwest Consumer Discount Company. At December 31, 2008 the Bank had an equity investment in Allegheny Services, Inc. of $634.2 million, and for the year ended December 31, 2008, Allegheny Services, Inc. had net income of $21.5 million.
     Boetger and Associates, Inc. is an actuarial and employee benefits consulting firm that specializes in the design, implementation and administration of qualified retirement plan programs. At December 31, 2008, the Bank had an equity investment of $1.5 million in Boetger and Associates and for the year ended December 31, 2008, Boetger and Associates had net income of $127,000.
     Northwest Capital Group’s principal activity is to own, operate and ultimately divest of properties that were acquired in foreclosure. At December 31, 2008, the Bank had an equity investment of $703,000 in Northwest Capital Group and reported no net income for the year ended December 31, 2008.
     Until January 23, 2009, Northwest Finance Company, Inc. operated two consumer finance offices in Jamestown and Fredonia, New York. As of December 31, 2008, Northwest Consumer Discount Company’s equity investment in Northwest

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Finance Company was $(172,000). For the year ended December 31, 2008, Northwest Finance Company had a net loss of $(92,000).
     Federal regulations require insured institutions to provide 30 days advance notice to the FDIC before establishing or acquiring a subsidiary or conducting a new activity in a subsidiary. The insured institution must also provide the FDIC such information as may be required by applicable regulations and must conduct the activity in accordance with the rules and orders of the FDIC. In addition to other enforcement and supervision powers, the FDIC may determine after notice and opportunity for a hearing that the continuation of a savings bank’s ownership of or relation to a subsidiary constitutes a serious risk to the safety, soundness or stability of the savings bank, or is inconsistent with the purposes of federal banking laws. Upon the making of such a determination, the FDIC may order the savings bank to divest the subsidiary or take other actions.
Personnel
     As of December 31, 2008, the Company and its wholly-owned subsidiaries had 1,699 full-time and 321 part-time employees. None of the Company’s employees is represented by a collective bargaining group. The Company believes its working relationship with its employees to be good.
REGULATION
General
     The Company is a Federal corporation, and the Mutual Holding Company is a Federal mutual holding company. The Company and the Mutual Holding Company are required to file certain reports with, and otherwise comply with the rules and regulations of the OTS.
     The Bank is a Pennsylvania-chartered savings bank whereby deposit accounts are insured up to applicable limits by the FDIC under the Deposit Insurance Fund (“DIF”). The Bank is subject to extensive regulation by the Department of Banking of the Commonwealth of Pennsylvania (the “Department”), as its chartering agency, and by the FDIC, as the insurer of its deposit accounts. The Bank must file reports with the Department and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions including, but not limited to, mergers with or acquisitions of other financial institutions. The Bank is examined periodically by the Department and the FDIC to test the Bank’s compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the FDIC insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and with their examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulation, whether by the Department or the FDIC, could have a material adverse impact on the Company, the Mutual Holding Company, the Bank and their operations.
Pennsylvania Savings Bank Law
     The Pennsylvania Banking Code of 1965, as amended (the “Banking Code”) contains detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers, employees, and depositors, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The Banking Code delegates extensive rulemaking power and administrative discretion to the Department so that the supervision and regulation of state-chartered savings banks is flexible and readily responsive to changes in economic conditions and in savings and lending practices.
     One of the purposes of the Banking Code is to provide savings banks with the opportunity to be competitive with each other and with other financial institutions existing under other Pennsylvania laws as well as other state, federal and foreign laws. A Pennsylvania savings bank may locate or change the location of its principal place of business and establish an office anywhere in Pennsylvania, with the prior approval of the Department.
     The Department generally examines each savings bank not less frequently than once every two years. Although the Department may accept the examinations and reports of the FDIC in lieu of the Department’s examination, the current practice is for the Department to conduct individual examinations. The Department may order any savings bank to discontinue any violation of law or unsafe or unsound business practice and may direct any trustee, officer, attorney, or employee of a savings bank engaged in an objectionable activity, after the Department has ordered the activity to be terminated, to show cause at a hearing before the Department why such person should not be removed.

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Insurance of Deposit Accounts.
     Deposit accounts at Northwest Savings Bank are insured by the FDIC, generally up to a maximum of $100,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. Northwest Savings Bank’s deposits, therefore, are subject to FDIC deposit insurance assessments. Effective October 3, 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) temporarily (until December 31, 2009) raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor.
     The FDIC imposes an assessment against all depository institutions for deposit insurance. This assessment is based on the risk category of the institution and, prior to 2009, ranged from five to 43 basis points of the institution’s deposits. On October 7, 2008, as a result of decreases in the reserve ratio of the DIF, the FDIC issued a proposed rule establishing a Restoration Plan for the DIF. The rulemaking proposed that, effective January 1, 2009, assessment rates would increase uniformly by seven basis points for the first quarter 2009 assessment period. The rulemaking proposed to alter the way in which the FDIC’s risk-based assessment system differentiates for risk and set new deposit insurance assessment rates, effective April 1, 2009. Under the proposed rule, the FDIC would first establish an institution’s initial base assessment rate. This initial base assessment rate would range, depending on the risk category of the institution, from 10 to 45 basis points. The FDIC would then adjust the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustment to the initial base assessment rate would be based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate would range from eight to 77.5 basis points of the institution’s deposits. On December 22, 2008, the FDIC published a final rule raising the current deposit insurance assessment rates uniformly for all institutions by seven basis points (to a range from 12 to 50 basis points) for the first quarter of 2009. However, the FDIC approved an extension of the comment period on the parts of the proposed rulemaking that would become effective on April 1, 2009. The FDIC expects to issue a second final rule early in 2009, to be effective April 1, 2009, to change the way that the FDIC’s assessment differentiates for risk and to set new assessment rates beginning with the second quarter of 2009. On February 27, 2009, the FDIC proposed an emergency assessment charged to all financial institutions of 0.20% of insured deposits as of June 30, 2009, payable on September 30, 2009. The emergency assessment charge to the Company, if approved, will be approximately $10.0 million.
     In addition to FDIC premiums, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance cost and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2008, the annualized FICO assessment was equal to 1.14% for each $100 in domestic deposits maintained at an institution.
      Temporary Liquidity Guarantee Program. On October 14, 2008, the FDIC announced a new program — the Temporary Liquidity Guarantee Program. This program has two components. One guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and June 30, 2009. The FDIC will pay the unpaid principal and interest on an FDIC-guaranteed debt instrument upon the uncured failure of the participating entity to make a timely payment of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until June 30, 2012. In return for the FDIC’s guarantee, participating institutions will pay the FDIC a fee based on the amount and maturity of the debt. The Bank has opted not to participate in this component of the Temporary Liquidity Guarantee Program.
     The other component of the program provides full federal deposit insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2009. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. The Bank has opted to participate in this component of the Temporary Liquidity Guarantee Program.
Capital Requirements
     Any savings institution that fails any of the FDIC capital requirements is subject to possible enforcement actions by the FDIC. Such actions could include a capital directive, a cease and desist order, civil money penalties, the establishment of restrictions on an institution’s operations, termination of federal deposit insurance, and the appointment of a conservator or receiver. Certain actions are required by law. The FDIC’s capital regulation provides that such actions, through enforcement proceedings or otherwise, could require one or more of a variety of corrective actions.
     The Bank is also subject to more stringent capital guidelines of the Department. Although not adopted in regulation form, the Department utilizes capital standards of 6% leverage capital and 10% risk-based capital. The components of leverage and risk-based capital are substantially the same as those defined by the FDIC.

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Prompt Corrective Action
     Under federal regulations, a bank shall be deemed to be (i) “well capitalized” if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0% under certain circumstances); (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is less than 3.0%; and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Federal regulations also specify circumstances under which a federal banking agency may reclassify a well capitalized institution as adequately capitalized and may require an adequately capitalized institution to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized). As of December 31, 2008, the Bank was “well-capitalized” for this purpose. See Regulatory Capital Requirements and footnote 17 of the Company’s audited financial statements.
Loans-to-One Borrower Limitation
     Under federal regulations, with certain limited exceptions, a Pennsylvania chartered savings bank may lend to a single or related group of borrowers on an “unsecured” basis an amount equal to 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if such loan is secured by readily marketable collateral, which is defined to include certain securities and bullion, but generally does not include real estate. The Company’s internal policy, however, is to make no loans either individually or in the aggregate to one entity in excess of $15.0 million. However, in special circumstances this limit may be exceeded subject to the approval of the Board of Directors.
Activities and Investments of Insured State-Chartered Banks
     Federal law generally limits the activities and equity investments of FDIC-insured, state-chartered banks to those that are permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally may not, directly or indirectly, acquire or retain any equity investment of a type, or in an amount, that is not permissible for a national bank. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary; (ii) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation, or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank’s total assets; (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors’, trustees’, and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions; and (iv) acquiring or retaining the voting shares of a depository institution if certain requirements are met.
The USA PATRIOT Act
     The USA Patriot Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The USA Patriot Act also requires the federal banking agencies to take into consideration the effectiveness of controls designed to combat money-laundering activities in determining whether to approve a merger or other acquisition application of a member institution. Accordingly, if we engage in a merger or other acquisition, our controls designed to combat money laundering would be considered as part of the application process. We have established policies, procedures and systems designed to comply with these regulations.
Holding Company Regulation
      Generally. Federal law allows a state savings bank, such as the Bank, that qualifies as a “Qualified Thrift Lender,” as discussed below, to elect to be treated as a savings association for purposes of the savings and loan company provisions of the HOLA. Such election results in its holding company being regulated as a savings and loan holding company by the OTS rather than as a bank holding company by the Federal Reserve Board. In 2001 the Company and the Mutual Holding Company made such election by converting from a Pennsylvania corporation and a Pennsylvania mutual holding company to a Federal corporation and Federal mutual holding company, respectively. The Company and the Mutual Holding Company are savings and loan holding companies within the meaning of the HOLA. As such, the Company and the Mutual Holding Company are

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registered with the OTS and are subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over the Company and the Mutual Holding Company and any nonsavings institution subsidiaries. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. As federal corporations, the Company and the Mutual Holding Company are generally not subject to state business organizations laws.
      Permitted Activities. Pursuant to Section 10(o) of the HOLA and OTS regulations and policy, a mutual holding company and a federally chartered mid-tier holding company, such as the Company, may engage in the following activities: (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of such holding company or an interim savings association subsidiary of such holding company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association or associations share their home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity (A) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act, unless the Director of the OTS, by regulation, prohibits or limits any such activity for savings and loan holding companies; or (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; and (x) purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the Director. In addition, a Federal mutual holding company may engage in any activities permissible for a financial holding company under Section 4(k) of the Bank Holding Company Act and regulations of the Federal Reserve Board thereunder, including underwriting debt and equity securities, insurance agency and underwriting, and merchant banking. If a mutual holding company acquires or merges with another holding company, the holding company acquired or the holding company resulting from such merger or acquisition may only invest in assets and engage in activities listed above, and has a period of two years to cease any nonconforming activities and divest of any nonconforming investments.
     The HOLA prohibits a savings and loan holding company, including the Company and the Mutual Holding Company, directly or indirectly, or through one or more subsidiaries, from acquiring another savings institution or holding company thereof, without prior written approval of the OTS. It also prohibits the acquisition or retention of more than 5% of the voting stock of another savings institution or savings and loan holding company without the prior approval of the OTS, and from acquiring or retaining control of any depository institution that is not FDIC-insured. In evaluating applications by holding companies to acquire savings institutions, the OTS must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community and competitive factors.
      Qualified Thrift Lender Test. To be regulated as a savings and loan holding company by the OTS (rather than as a bank holding company by the Federal Reserve Board), the Bank must qualify as a Qualified Thrift Lender. To qualify as a Qualified Thrift Lender, the Bank must be a “domestic building and loan association,” as defined in the Internal Revenue Code, or comply with the Qualified Thrift Lender test. Under the Qualified Thrift Lender test, a savings institution is required to maintain at least 65% of its “portfolio assets” (total assets less: (1) specified liquid assets up to 20% of total assets; (2) intangibles, including goodwill; and (3) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed and related securities) in at least nine months out of each 12-month period. As of December 31, 2008 the Bank met the Qualified Thrift Lender test.
      Waivers of Dividends by the Mutual Holding Company. OTS regulations require the Mutual Holding Company to notify the OTS of any proposed waiver of its right to receive dividends. The OTS reviews dividend waiver notices on a case-by-case basis. During 2008 the Mutual Holding Company requested and received permission from the OTS to waive dividends.
      Conversion of the Mutual Holding Company to Stock Form. OTS regulations permit the Mutual Holding Company to convert from the mutual to the stock form of ownership (a “Conversion Transaction”). There can be no assurance when, if ever, a Conversion Transaction will occur, and the Board of Directors has no current intention or plan to undertake a Conversion Transaction. In a Conversion Transaction a new holding company would be formed as the successor to the Company (the “New Holding Company”), the Mutual Holding Company’s corporate existence would end, and certain depositors of the Bank would receive the right to subscribe for additional shares of the New Holding Company. Based upon current OTS policy, in a Conversion Transaction, each share of Common Stock held by the Company’s public stockholders (“Minority Stockholders”) would be automatically converted into a number of shares of common stock of the New Holding Company determined pursuant

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an exchange ratio that ensures that after the Conversion Transaction, subject to any adjustment to reflect the receipt of cash in lieu of fractional shares, the percentage of the to-be outstanding shares of the New Holding Company issued to Minority Stockholders in exchange for their Common Stock would be equal to the percentage of the outstanding shares of Common Stock held by Minority Stockholders immediately prior to the Conversion Transaction. The total number of shares held by Minority Stockholders after the Conversion Transaction would also be affected by any purchases by such persons in the offering that would be conducted as part of the Conversion Transaction.
Federal Securities Laws
     Shares of the Company’s common stock are registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is also subject to the proxy rules, tender offer rules, insider trading restrictions, annual and periodic reporting, and other requirements of the Exchange Act.
Sarbanes-Oxley Act of 2002
     The Sarbanes-Oxley Act of 2002 was enacted to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the Securities and Exchange Commission, under the Securities Exchange Act of 1934.
     The Sarbanes-Oxley Act includes specific additional disclosure requirements, requires the Securities and Exchange Commission and national securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules, and mandates further studies of certain issues by the Securities and Exchange Commission. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.
     Although the Company has incurred additional expense in complying with the provisions of the Sarbanes-Oxley Act and the resulting regulations, such compliance has not had a material impact on the Company’s results of operations or financial condition.
Emergency Economic Stabilization Act of 2008
     In accordance with its stated purpose of restoring liquidity and stability to the financial system of the United States, EESA established the Troubled Asset Relief Program (“TARP”), under which, the United States Department of the Treasury (“UST”) is authorized to purchase preferred stock from qualified financial institutions. Currently, UST does not have a program for mutual financial institutions or mutual holding companies. Once a program for mutual institutions and mutual holding companies has been established, the Company will evaluate whether to participate in TARP.
Regulatory Enforcement Authority
     Federal law provides federal banking regulators with substantial enforcement powers. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders, and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.
Dividends
     The Company’s ability to pay dividends depends, to a large extent, upon the Bank’s ability to pay dividends to the Company. The Banking Code of the Commonwealth of Pennsylvania states, in part, that dividends may be declared and paid by the Bank only out of accumulated net earnings. A dividend may not be declared or paid unless the surplus, prior to the transfer of net earnings, would not be reduced by the payment of the dividend. Finally, dividends may not be declared or paid if the Bank is in default in payment of any assessment due to the FDIC. The Bank has not declared or paid any dividends which caused the Bank’s surplus to be reduced as described above and the Bank was not in default of any assessment due the FDIC.

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     In addition, the Bank is required to notify the OTS prior to paying a dividend to the Company, and to receive the nonobjection of the OTS to any such dividend.
FEDERAL AND STATE TAXATION
      Federal Taxation. For federal income tax purposes, the Company files a consolidated federal income tax return with its wholly owned subsidiaries on a calendar year basis. The applicable federal income tax expense or benefit is properly allocated to each subsidiary based upon taxable income or loss calculated on a separate company basis. The Mutual Holding Company is not permitted to file a consolidated federal income tax return with the Company, and must pay Federal income tax on 20% of the dividends received from the Company. Because the Mutual Holding Company has nominal assets other than the stock of the Company, it does not have a material federal income tax liability other than the tax due on the dividends received from the Company, if any are received.
     The Company accounts for income taxes in accordance with SFAS 109. The asset and liability method accounts for deferred income taxes by applying the enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities. The resulting deferred tax liabilities and assets are adjusted to reflect changes in tax laws.
     The Company is currently under examination by the Internal Revenue Service for the tax periods ended June 30, 2005, December 31, 2005, 2006 and 2007. The statute of limitations is open for examinations by the Internal Revenue Service for the tax years ended June 30, 2005 through December 31, 2007.
      State Taxation. The Company is subject to the Corporate Net Income Tax and the Capital Stock Tax of the Commonwealth of Pennsylvania. Dividends received from the Bank qualify for a 100% dividends received deduction and are not subject to Corporate Net Income Tax. In addition, the Company’s investments in its subsidiaries qualify as exempt intangible assets and greatly reduce the amount of Capital Stock Tax assessed.
     The Bank is subject to the Mutual Thrift Institutions Tax of the Commonwealth of Pennsylvania based on the Bank’s financial net income determined in accordance with generally accepted accounting principles with certain adjustments. The tax rate under the Mutual Thrift Institutions Tax is 11.5%. Interest on Pennsylvania and federal obligations is excluded from net income. An allocable portion of interest expense incurred to carry the obligations is disallowed as a deduction. The Bank is also subject to taxes in the other states in which it conducts business. These taxes are apportioned based upon the volume of business conducted in those states as a percentage of the whole. Because a majority of the Bank’s affairs are conducted in Pennsylvania, taxes paid to other states are not material.
     The subsidiaries of the Bank are subject to the Corporate Net Income Tax and the Capital Stock Tax of the Commonwealth of Pennsylvania and other applicable taxes in the states where they conduct business.
ITEM 1A. RISK FACTORS
     In addition to factors discussed in the description of the business of the Company and Bank and elsewhere in this report, the following are factors that could adversely affect future results of operations and financial condition of the Company.
      Our Stock Value May be Negatively Affected by our Mutual Holding Company Structure, which May Impede Takeovers. The Mutual Holding Company, as the majority stockholder of the Company, is able to control the outcome of virtually all matters presented to stockholders for their approval, including a proposal to acquire the Company. Accordingly, the Mutual Holding Company may prevent the sale of control or merger of the Company or its subsidiaries even if such a transaction were favored by a majority of the public stockholders of the Company.
      Changes in Interest Rates Could Adversely Affect the Company’s Results of Operations and Financial Condition. The Company’s results of operations and financial condition are significantly affected by changes in interest rates. Results of operations depend substantially on net interest income, which is the difference between the interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities. Because the Company’s interest-bearing liabilities generally reprice or mature more quickly than its interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income. The Company has taken steps to mitigate this risk such as investing excess funds in variable rate and short-term investments.

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     Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. Under these circumstances, the Company is subject to reinvestment risk to the extent that it is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. Also, increases in interest rates may extend the life of fixed rate assets, whereby, the Company would not have the opportunity to reinvest in higher yielding alternatives.
      If the Allowance for Credit Losses is Not Sufficient to Cover Actual Loan Losses, the Company’s Earnings Could Decrease. The Company’s customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of those loans may be insufficient to pay any remaining loan balance. The Company may experience significant loan losses, which could have a material adverse effect on operating results. The Company makes various assumptions and judgments about the collectibility of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. If the assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover losses inherent in the loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease net income.
     The Company’s emphasis on the origination of commercial real estate and business loans is one of the more significant factors in evaluating the allowance for loan losses. As the Company continues to increase the amount of such loans, additional or increased provisions for loan losses may be necessary and would decrease earnings.
     Bank regulators periodically review the Company’s allowance for loan losses and may require an increase to the provision for loan losses or further loan charge-offs. Any increase in the Company’s allowance for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on the Company’s results of operations and/ or financial condition.
      The Concentration of Loans in the Company’s Primary Market Area May Increase Risk. The Company’s success depends primarily on the general economic conditions in northwest, southwest and central Pennsylvania, western New York, eastern Ohio, Maryland and Florida. Accordingly, the local economic conditions in these areas have a significant impact on the ability of borrowers to repay loans and the value of the collateral securing those loans. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond the Company’s control would impact these local economic conditions and could negatively affect financial results.
      Strong Competition May Limit Growth and Profitability. Competition in the banking and financial services industry is intense. The Company competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than the Company and may offer certain services that the Company does not or cannot provide. The Company’s profitability depends upon its ability to successfully compete in its market area.
      The Company Operates in a Highly Regulated Environment and May Be Adversely Affected by Changes in Laws and Regulations. The Company is subject to extensive regulation, supervision and examination by the OTS, the FDIC and the Commonwealth of Pennsylvania. Such regulators govern the activities in which the Company may engage, primarily for the protection of depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank, the adequacy of a bank’s allowance for loan losses and the level of deposit insurance premiums assessed. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or additional deposit insurance premiums could have a material impact on the Company and its operations. The Company believes that it is in substantial compliance with applicable federal, state and local laws, rules and regulations. Because the Company’s business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change. There can be no assurance that proposed laws, rules and regulations, or any other law, rule or regulation will not be adopted in the future, which could make compliance more difficult or expensive or otherwise adversely affect the Company’s business, financial condition or prospects.
      Recent negative developments in the financial industry and the domestic and international credit markets may adversely affect our operations and results. Negative developments in the latter half of 2007 and during 2008 in the global credit and securitization markets have resulted in uncertainty in the financial markets in general with the expectation of the general economic downturn continuing into 2009. Loan portfolio quality has deteriorated at many institutions. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to

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decline. Bank and bank holding company stock prices have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets.
In response to these developments, Congress adopted the Emergency Economic Stabilization Act of 2008, under which the U.S. Department of the Treasury has the authority to expend up to $700 billion to assist in stabilizing and providing liquidity to the U.S. financial system. Although it was originally contemplated that these funds would be used primarily to purchase troubled assets under the Troubled Asset Relief Program, on October 14, 2008, the U.S. Department of the Treasury announced the Capital Purchase Program, under which it will purchase up to $250 billion of non-voting senior preferred shares of certain qualified financial institutions in an attempt to encourage financial institutions to build capital to increase the flow of financing to businesses and consumers and to support the economy. In addition, Congress has temporarily increased Federal Deposit Insurance Corporation deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009. The Federal Deposit Insurance Corporation has also announced the creation of the Temporary Liquidity Guarantee Program which is intended to strengthen confidence and encourage liquidity in financial institutions by temporarily guaranteeing newly issued senior unsecured debt of participating organizations and providing full coverage for noninterest-bearing transaction deposit accounts (such as business checking accounts, interest-bearing transaction accounts paying 50 basis points or less and lawyers’ trust accounts), regardless of dollar amount until December 31, 2009.
     The potential exists for additional federal or state laws and regulations regarding lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be active in responding to concerns and trends identified in examinations, including the expected issuance of many formal enforcement orders. Actions taken to date, as well as potential actions, may not have the beneficial effects that are intended, particularly with respect to the extreme levels of volatility and limited credit availability currently being experienced. In addition, new laws, regulations, and other regulatory changes will increase our Federal Deposit Insurance Corporation insurance premiums and may also increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws, regulations, and other regulatory changes, along with negative developments in the financial industry and the domestic and international credit markets, may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability. Further, continued declines in the stock market in general, or for stock of financial institutions and their holding companies, could affect our stock performance.
      Lack of consumer confidence in financial institutions may decrease our level of deposits. Our level of deposits may be affected by lack of consumer confidence in financial institutions, which have caused fewer depositors to be willing to maintain deposits that are not insured by the Federal Deposit Insurance Corporation. That may cause depositors to withdraw deposits and place them in other institutions or to invest uninsured funds in investments perceived as being more secure, such as securities issued by the United States Treasury. These consumer preferences may cause us to be forced to pay higher interest rates to retain deposits and may constrain liquidity as we seek to meet funding needs caused by reduced deposit levels.
      Future legislative or regulatory actions responding to perceived financial and market problems could impair our rights against borrowers. There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. Were proposals such as these, or other proposals limiting our rights as a creditor, to be implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor.
      If Our Investment in the Federal Home Loan Bank of Pittsburgh Becomes Impaired , Our Earnings and Stockholders’ Equity Could Decrease . We are required to own common stock of the Federal Home Loan Bank of Pittsburgh to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the FHLB’s advance program. The aggregate cost and fair value of our FHLB common stock as of December 31, 2008 was $63.1 million based on its cost. FHLB common stock is not a marketable security.
     Recent published reports indicate that certain Federal Home Loan Banks may be subject to accounting rules and asset quality risks that could result in materially lower regulatory capital levels. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the FHLB-Pittsburgh, could be substantially diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in FHLB- Pittsburgh common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the amount of the impairment charge.
ITEM 1B. UNRESOLVED STAFF COMMENTS
     Not applicable.

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ITEM 2. PROPERTIES
     As of December 31, 2008, the Company conducted its business through its main office located in Warren, Pennsylvania, 132 other full-service offices and eight free-standing drive-up locations throughout its market area in northwest, southwest and central Pennsylvania, fourteen offices in western New York, five offices in eastern Ohio, five offices in Maryland and two offices in south Florida. The Company and its wholly owned subsidiaries also operated 49 consumer finance offices located throughout Pennsylvania and two consumer lending offices in New York. At December 31, 2008, the Company’s premises and equipment had an aggregate net book value of approximately $115.8 million.
ITEM 3. LEGAL PROCEEDINGS
     The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     During the fourth quarter of the fiscal year covered by this report, the Company did not submit any matters to the vote of security holders.

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PART II
ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
     The Company’s common stock is listed on the Nasdaq Global Select Market under the symbol “NWSB.” As of December 31, 2008, the Company had 22 registered market makers, 6,886 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms), and 48,502,174 shares outstanding, net of 2,742,800 treasury shares repurchased. As of such date, the Mutual Holding Company held 30,536,457 shares of common stock and stockholders other than the Mutual Holding Company held 17,965,717 shares. The following table sets forth market price and dividend information for the Company’s common stock.
                         
Year ended                   Cash Dividends
December 31, 2008   High   Low   Declared
First quarter
    $30.16       23.50     $ 0.22  
Second quarter
    28.10       21.78       0.22  
Third quarter
    34.34       20.05       0.22  
Fourth quarter
    29.86       18.80       0.22  
                         
Year ended                   Cash Dividends
December 31, 2007   High   Low   Declared
First quarter
  $ 28.31       25.26     $ 0.20  
Second quarter
    28.99       26.08       0.20  
Third quarter
    29.75       25.51       0.22  
Fourth quarter
    30.03       25.76       0.22  
     Payment of dividends on the Common Stock is subject to determination and declaration by the Board of Directors and will depend upon a number of factors, including capital requirements, regulatory limitations on the payment of dividends, the Company’s results of operations and financial condition, tax considerations and general economic conditions. No assurance can be given that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends, once declared, will continue.
     There were no sales of unregistered securities during the quarter ended December 31, 2008.
     During the year the Company repurchased 132,000 shares of common stock, at an average cost of $25.26, as part of previously announced repurchase programs. The maximum number of shares available for repurchase at December 31, 2008 is 273,600.
     The following table reports information regarding purchases of the Company’s common stock during the fourth quarter of 2008 and the stock repurchase plan approved by the Company’s Board of Directors:
ISSUER PURCHASES OF EQUITY SECURITES
                                 
                    (c) Total Number of    
                    Shares   (d) Maximum Number of
    (a) Total Number   (b) Average   Purchased as Part of   Shares that May Yet
    of Shares   Price Paid per   Publicly Announced   Be Purchased Under the
Period   Purchased   Share   Plans or Programs (1)   Plans or Programs (1)
October 2008
                      273,600  
November 2008
                      273,600  
December 2008
                      273,600  
                     
Total
                         
 
(1)   The Company’s Board of Directors approved a repurchase program for up to 5% of publicly traded common stock, or 1,000,000 shares. The current program has no expiration date.

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Stock Performance Graph
     Set forth hereunder is a stock performance graph comparing (a) the cumulative total return on the Common Stock between June 30, 2003 and December 31, 2008, (b) the cumulative total return on stocks included in the Total Return Index for the Nasdaq Stock Market (US) over such period, and (c) the cumulative total return on stocks included in the Nasdaq Bank Index over such period. Cumulative return assumes the reinvestment of dividends, and is expressed in dollars based on an assumed investment of $100.
     There can be no assurance that the Company’s stock performance will continue in the future with the same or similar trend depicted in the graph. The Company will not make or endorse any predictions as to future stock performance.
                                                         
    6/03   6/04   6/05   12/05   12/06   12/07   12/08
 
Northwest Bancorp
    100.00       145.76       138.31       140.19       186.25       185.80       154.67  
NASDAQ Composite
    100.00       128.19       129.34       140.27       157.21       171.64       100.00  
NASDAQ Bank
    100.00       117.32       126.61       128.75       146.64       115.80       88.57  
COMPARISON OF 66 MONTH CUMULATIVE TOTAL RETURN*
Among Northwest Bancorp, The NASDAQ Composite Index
And The NASDAQ Bank Index
(PERFORMANCE GRAPH)
*$100 invested on 6/30/03 in stock and index-including reinvestment of dividends.

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ITEM 6. SELECTED FINANCIAL DATA
Selected Financial and Other Data
     Set forth below are selected consolidated financial and other data of the Company. For additional information about the Company, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of the Company and related notes included elsewhere herein.
                                                 
    At December 31,   At June 30,
    2008   2007   2006   2005   2005   2004
    (In Thousands)
Selected Consolidated Financial Data:
                                               
Total assets
  $ 6,930,241       6,663,516       6,527,815       6,447,307       6,330,482       6,343,248  
Investment securities held-to-maturity
                465,312       444,407       467,303       209,241  
Investment securities available-for-sale
    393,531       601,620       388,546       289,871       290,702       444,676  
Mortgage-backed securities held-to-maturity
                251,655       189,851       235,676       392,301  
Mortgage-backed securities available-for-sale
    745,639       531,747       378,968       323,965       384,481       411,003  
Loans receivable net:
                                               
Real estate
    4,508,393       4,172,850       3,926,859       4,100,754       3,888,287       3,583,302  
Consumer
    261,398       261,598       253,490       366,488       348,672       324,897  
Commercial
    372,101       361,174       232,092       155,027       139,925       145,742  
Total loans receivable, net
  $ 5,141,892       4,795,622       4,412,441       4,622,269       4,376,884       4,053,941  
Deposits
    5,038,211       5,542,334       5,366,750       5,228,479       5,187,946       5,191,621  
Advances from FHLB and other borrowed funds
    1,067,945       339,115       392,814       417,356       410,344       449,147  
Shareholders’ equity
  $ 613,784       612,878       604,561       585,658       582,190       550,472  
                                                 
                            Six Months        
                            Ended        
    Years Ended December 31,     December 31,     Years Ended June 30,  
    2008     2007     2006     2005     2005     2004  
    (In Thousands)  
Selected Consolidated Operating Data:
                                               
Total interest income
  $ 388,659       396,031       368,573       170,449       321,824       300,230  
Total interest expense
    169,293       211,015       191,109       79,414       138,047       134,466  
 
                                   
Net interest income
    219,366       185,016       177,464       91,035       183,777       165,764  
Provision for loan losses
    22,851       8,743       8,480       4,722       9,566       6,860  
 
                                   
Net interest income after provision for loan losses
    196,515       176,273       168,984       86,313       174,211       158,904  
Noninterest income
    38,752       43,022       46,026       19,851       32,004       31,862  
Noninterest expense
    170,128       152,742       143,682       66,317       128,659       128,805  
 
                                   
Income before income tax expense
    65,139       66,553       71,328       39,847       77,556       61,961  
Income tax expense
    16,968       17,456       19,792       10,998       22,741       19,829  
 
                                   
Net income
  $ 48,171       49,097       51,536       28,849       54,815       42,132  
 
                                   
 
                                               
Earnings per share:
                                               
Basic
  $ 1.00       1.00       1.03       0.57       1.10       0.88  
 
                                   
Diluted
  $ 0.99       0.99       1.03       0.56       1.09       0.87  
 
                                   

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                            At or for    
                            the Six    
                            Months    
                            Ended    
    At or for the Year Ended December 31,   December 31,   At or for the Year Ended June 30,
    2008   2007   2006   2005*   2005   2004
Key Financial Ratios and Other Data:
                                               
Return on average assets (net income divided by average total assets)
    0.70 %     0.73 %     0.79 %     0.91 %     0.86 %     0.68 %
Return on average equity (net income divided by average equity)
    7.75 %     8.18 %     8.60 %     9.81 %     9.74 %     8.17 %
Average capital to average assets
    9.04 %     8.96 %     9.19 %     9.23 %     8.87 %     8.27 %
Capital to total assets
    8.86 %     9.20 %     9.26 %     9.04 %     9.20 %     8.68 %
Net interest rate spread (average yield on interest-earning assets less average cost of interest-bearing liabilities)
    3.25 %     2.74 %     2.77 %     2.99 %     3.07 %     2.83 %
Net interest margin (net interest income as a percentage of average interest-earning assets)
    3.57 %     3.10 %     3.06 %     3.21 %     3.24 %     2.98 %
Noninterest expense to average assets
    2.48 %     2.28 %     2.20 %     2.08 %     2.03 %     2.06 %
Net interest income to noninterest expense
    1.29 x     1.21 x     1.24 x     1.37 x     1.43 x     1.29 x
Dividend payout ratio
    88.89 %     84.85 %     67.96 %     53.57 %     44.04 %     45.98 %
Nonperforming loans to net loans receivable
    1.93 %     1.03 %     0.92 %     0.93 %     0.77 %     0.80 %
Nonperforming assets to total assets
    1.67 %     0.87 %     0.72 %     0.74 %     0.64 %     0.57 %
Allowance for loan losses to nonperforming loans
    55.37 %     84.22 %     92.92 %     77.67 %     93.91 %     94.35 %
Allowance for loan losses to net loans receivable
    1.07 %     0.87 %     0.85 %     0.72 %     0.72 %     0.76 %
Average interest-earning assets to average interest-bearing liabilities
    1.10 x     1.10 x     1.09 x     1.09 x     1.08 x     1.06 x
Number of:
                                               
Full-service offices
    167       166       160       153       153       152  
Consumer finance offices
    51       51       51       50       49       49  
 
*   Ratios are annualized where appropriate
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
          In addition to historical information, this document may contain certain forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, as they reflect management’s analysis only as of the date of this report. The Company has no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this report.
Important factors that might cause such a difference include, but are not limited to:
    Changes in interest rates which could impact our net interest margin;
 
    Adverse changes in our loan portfolio or investment securities portfolio and the resulting credit risk-related. losses and/ or market value adjustments;
 
    The adequacy of the allowance for loan losses;
 
    Changes in general economic or business conditions resulting in changes in demand for credit and other services, among other things;
 
    Changes in consumer confidence, spending and savings habits relative to the bank and non-bank financial services we provide;
 
    Compliance with laws and regulatory requirements of federal and state agencies;
 
    New legislation affecting the financial services industry;
 
    Competition from other financial institutions in originating loans and attracting deposits;
 
    Our ability to effectively implement technology driven products and services;
 
    Sources of liquidity;
 
    Changes in costs and expenses; and
 
    Our success in managing the risks involved in the foregoing.
Executive Summary
     Total assets increased by $266.7 million, or 4.0%, to $6.930 billion at December 31, 2008 from $6.664 billion at December 31, 2007. This increase is primarily due to strong loan demand throughout the Company’s market area, as net loans receivable increased by $346.3 million, or 7.2%, to $5.142 billion at December 31, 2008 from $4.796 billion at December 31, 2007.
     The earnings of the Company depend primarily on its level of net interest income, which is the difference between interest earned on the Company’s interest-earning assets, consisting primarily of loans, mortgage-backed securities and other investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of the Company’s interest rate spread, which is the difference

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between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, as well as a function of the average balance of interest-earning assets as compared to interest-bearing liabilities. Also contributing to the Company’s earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, fees related to insurance and investment management and trust services, and gains and losses on sale of assets. Interest income and noninterest income are offset by a provision for loan losses, general administrative and other expenses, including employee compensation and benefits and occupancy and equipment costs, as well as by state and federal income tax expense.
     Net income for the year ended December 31, 2008 was $48.2 million, or $0.99 per diluted share, a decrease of $926,000, or 1.9%, from $49.1 million, or $0.99 per diluted share, for the year ended December 31, 2007. This decrease was a result of a decrease in noninterest income and an increase in noninterest expense, partially offset by an increase in net interest income, all of which are discussed in detail in the following sections.
Critical Accounting Policies and Estimates
     The Company’s critical accounting policies involve accounting estimates that: a) require assumptions about highly uncertain matters, and b) could vary sufficiently to cause a material effect on the Company’s financial condition or results of operations.
      Allowance for Loan Losses. In originating loans, the Company recognizes that losses will be experienced on loans and that the risk of loss will vary with, among other things, the type of loan, the creditworthiness of the borrower, general economic conditions and the quality of the collateral for the loan. The Company maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance for loan losses represents management’s estimate of probable losses based on information available as of the date of the financial statements. The allowance for loan losses is based on management’s evaluation of the collectibility of the loan portfolio, including past loan loss experience, known and inherent losses, information about specific borrower situations and estimated collateral values, and current economic conditions. The loan portfolio and other credit exposures are regularly reviewed by management in its determination of the allowance for loan losses. The methodology for assessing the appropriateness of the allowance includes a review of historical losses, peer group comparisons, industry data and economic conditions. As an integral part of their examination process, regulatory agencies periodically review the Company’s allowance for loan losses and may require the Company to make additional provisions for estimated losses based upon judgments different from those of management. In establishing the allowance for loan losses, loss factors are applied to various pools of outstanding loans. Loss factors are derived using the Company’s historical loss experience and may be adjusted for factors that affect the collectibility of the portfolio as of the evaluation date. Commercial loans over a certain dollar amount are evaluated individually to determine the required allowance for loan losses and to evaluate the potential impairment of such loans under SFAS 114. Although management believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect the Company’s financial condition and results of operations. The allowance review methodology is based on information known at the time of the review. Changes in factors underlying the assessment could have a material impact on the amount of the allowance that is necessary and the amount of provision to be charged against earnings. Such changes could impact future results. Management believes, to the best of their knowledge, that all known losses as of December 31, 2008 have been recorded.
      Valuation of Investment Securities. All of the Company’s investment securities are classified as available for sale and recorded at current fair value on our Consolidated Statement of Financial Condition. Unrealized gains or losses, net of deferred taxes, are reported in other comprehensive income as a separate component of shareholder’s equity. In general, fair value is based upon quoted market prices of identical assets, where available. If quoted prices are not available, fair value is based upon valuation models that use cash flow, security structure and other observable information. Where sufficient data is not available to produce a fair valuation, fair value is based on broker quotes of similar assets. Broker quotes may be adjusted to ensure that financial instruments are recorded at fair value. Adjustments may include unobservable parameters, among other things.
     The Company conducts a quarterly review and evaluation of our investment securities to determine if any declines in fair value are other than temporary. In making this determination, we consider the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, the financial condition of the issuer and the delinquency or default rates of underlying collateral. In addition, we consider our ability and intent to hold the investment securities currently in an unrealized loss position until they mature or for a sufficient period of time to allow for a recovery in

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their fair value. Any valuation decline that we determine to be other than temporary would require us to write down the security to fair value through a charge to earnings. See note 3 to the Company’s audited financial statements for further information.
     During the year ended December 31, 2008, the Company recorded other-than-temporary impairment charges of approximately $16.0 million. The Company recorded charges of $320,000 during the quarter ended March 31, 2008, $1.1 million during the quarter ended June 30, 2008, $10.9 million during the quarter ended September 30, 2008 and $3.7 million during the quarter ended December 31, 2008. The other-than-temporary impairment charges were $5.5 million of Freddie Mac perpetual preferred stock, $600,000 of a single issuer trust preferred security and $9.9 million of pooled trust preferred securities. As of December 31, 2008, the remaining fair value of securities on which other-than-temporary impairment was recorded was $1.8 million.
      Goodwill. Goodwill is not subject to amortization but must be tested for impairment at least annually, and possibly more frequently if certain events or changes in circumstances arise. Impairment testing requires that the fair value of each reporting unit be compared to its carrying amount, including goodwill. Reporting units are identified based upon analyzing each of the Company’s individual operating segments. A reporting unit is defined as any distinct, separately identifiable component of an operating segment for which complete, discrete financial information is available that management regularly reviews. Goodwill is allocated to the carrying value of each reporting unit based on its relative fair value at the time it is acquired. Determining the fair value of a reporting unit requires a high degree of subjective management judgment. A discounted cash flow valuation model is used to determine the fair value of each reporting unit. The discounted cash flow model incorporates such variables as growth of net income, interest rates and terminal values. Based upon an evaluation of key data and market factors, management selects the specific variables to be incorporated into the valuation model. Future changes in the economic environment or the operations of the reporting units could cause changes to these variables, which could give rise to declines in the estimated fair value of the reporting unit. Declines in fair value could result in impairment being identified. The Company has established June 30 of each year as the date for conducting its annual goodwill impairment assessment. The variables are selected as of that date and the valuation model is run to determine the fair value of each reporting unit. At June 30, 2008, the Company did not identify any individual reporting unit where the fair value was less than the carrying value.
      Deferred Income Taxes. The Company uses the asset and liability method of accounting for income taxes as prescribed in Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS 109”). Using this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates the Company makes in determining our deferred tax assets, which are inherently subjective, are reviewed on an ongoing basis as regulatory and business factors change. A reduction in estimated future taxable income could require the Company to record a valuation allowance. Changes in levels of valuation allowances could result in increased income tax expense, and could negatively affect earnings.
      Other Intangible Assets. Using the purchase method of accounting for acquisitions, the Company is required to record the assets acquired, including identified intangible assets, and liabilities assumed at their fair values. These fair values often involve estimates based on third-party valuations, including appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques, which are inherently subjective. Core deposit and other intangible assets are recorded in purchase accounting when a premium is paid to acquire other entities or deposits. Other intangible assets, which are determined to have finite lives, are amortized based on the period of estimated economic benefits received, primarily on an accelerated basis.
      Pension Benefits. Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with U.S. generally accepted accounting principles, actual results that differ from the assumptions are amortized over future periods and, therefore, generally affect recognized expense. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense.
     In determining the present value of future obligations for pension benefits at December 31, 2008, the Company used a discount rate of 6.00%, which is 0.50% lower than the discount rate used at December 31, 2007 of 6.50%. The Company uses the Citigroup Pension Liability Index rate as of the measurement date to determine the discount rate. Effective January 1, 2008, the Company changed the measurement date from October 31 to December 31 concurrent with the Company’s adoption of the

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measurement provisions of Statement of Financial Accounting Standards No. 158. The Company’s pre-tax pension expense is forecasted to increase from approximately $4.8 million for the year ended December 31, 2008 to approximately $7.9 million for the year ending December 31, 2009.
Financial Condition
      Cash and equivalents. Cash and equivalents decreased by $150.7 million, or 65.3%, to $79.9 million at December 31, 2008 from $230.6 million at December 31, 2007. This decrease was attributable to the Company using cash to fund loan growth and purchase investment securities.
      Marketable securities . Investment securities increased by $5.8 million, or 0.5%, to $1.139 billion at December 31, 2008 from $1.133 billion at December 31, 2007. This increase was the result of the Company investing excess cash in marketable securities in order to earn a higher yield. The Company regularly reviews the investment portfolio for declines in value below amortized cost that might be considered “other than temporary.” During the year the Company recognized other-than-temporary impairment charges of $16.0 million. The other-than-temporary impairment charges were $5.5 million for preferred stock of Freddie Mac, $600,000 for a single issuer trust preferred security with a remaining amortized cost of $1.4 million at December 31, 2008 and $9.9 million for multiple pooled-trust preferred securities with remaining amortized cost of $13.7 million as of December 31, 2008. As of December 31, 2008 and 2007, the Company concluded that the remaining declines associated with the rest of the investment securities were temporary in nature.
      Loans receivable . Net loans receivable increased $346.3 million, or 7.2%, to $5.142 billion at December 31, 2008 from $4.796 billion at December 31, 2007. This increase in loans was primarily attributable to growth in the Company’s consumer and commercial loan portfolios. Consumer home equity loans increased $43.6 million, or 4.4%, commercial real estate loans increased $193.6 million, or 21.4%, and commercial business loans increased $19.7 million, or 5.4%. Geographically, the Company’s loans are predominately in Pennsylvania. Approximately 79.4% of the Company’s loans are in Pennsylvania, 9.1% in New York, 7.3% in Maryland, 1.9% in Florida, 0.8% in Ohio and 1.5% in other states. Of the loans in each geographic area, 1.3% of the Pennsylvania loans are greater than 90 days delinquent, 0.5% of the New York loans are greater than 90 delinquent, 3.0% of the Maryland loans are greater than 90 days delinquent, 20.1% of the Florida loans are greater than 90 days delinquent, 0.7% of the Ohio loans are greater than 90 days delinquent and 14.5% of the other loans are greater than 90 days delinquent.
     Total delinquency 30 days or more past due increased by $67.8 million, or 54.2%, to $192.8 million at December 31, 2008 from $125.0 million at December 31, 2007. The $192.8 million of total delinquency at December 31, 2008 represents 3,492 loans, while the $125.0 million of total delinquency at December 31, 2007 represents 3,587 loans. Delinquency of one- to four-family mortgage and consumer loans increased $18.3 million, or 27.3%, and commercial real estate and commercial business loans increased $49.5 million, or 85.0%. Like most financial institutions, the Company experienced an increase in the amount of delinquency during the past year due to deteriorating economic conditions. The largest increases have occurred in Florida and Maryland where economic activity has slowed the most. However, most of the increase in delinquency is related to several large commercial relationships as the total number of delinquent loans decreased by 95.
      Deposits . Deposits decreased $504.1 million, or 9.1%, to $5.038 billion at December 31, 2008 from $5.542 billion at December 31, 2007. This designed decrease in deposits was attributable to the Company using FHLB advances as a less expensive long-term funding alternative, while allowing rate-sensitive certificates of deposit to mature and be invested elsewhere. The Company allowed $579.2 million of certificate of deposit funds to exit, reducing the related cost of certificates of deposit from 4.58% as of December 31, 2007, to 3.93% as of December 31, 2008. This provided a reduction in certificate of deposit interest expense of $34.3 million during the year ended December 31, 2008.
      Shareholders’ equity . Shareholders’ equity increased by $906,000, or less than 1.0%, to $613.8 million at December 31, 2008 from $612.9 million at December 31, 2007. This increase in shareholders’ equity was primarily attributable to net income of $48.2 million, which was offset by other comprehensive loss of $30.6 million, the payment of dividends of $15.8 million and stock repurchases of $3.3 million.
Results of Operations — Year ended December 31, 2008 compared to year ended December 31, 2007
      Interest income . Interest income decreased by $7.8 million, or 1.9%, on a taxable equivalent basis, to $396.8 million for the year ended December 31, 2008 from $404.6 million for the year ended December 31, 2007. The decrease in interest income was due to a decrease in the average yield on interest-earning assets, which was partially offset by an increase in the average balance of interest-earning assets. The average rate earned on interest-earnings assets decreased by 27 basis points, to 6.18% for the year ended December 31, 2008 from 6.45% for the year ended December 31, 2007. The average balance of interest-earning assets increased by $131.9 million, or 2.1%, to $6.381 billion for the year ended December 31, 2008 from

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\

$6.249 billion for the year ended December 31, 2007. An explanation of the growth in interest-earnings assets is discussed in each category below.
     Interest income on loans receivable increased by $11.4 million, or 3.6%, on a taxable equivalent basis, to $328.7 million for the year ended December 31, 2008 from $317.3 million for the year ended December 31, 2007. This increase was attributable to an increase in the average balance of loans receivable, which was partially offset by a decrease in the average yield on loans receivable. The average loans receivable balance increased by $356.0 million, or 7.6%, to $5.017 billion for the year ended December 31, 2008 from $4.661 billion for the year ended December 31, 2007. This increase was attributable to both the Company’s efforts in attracting and maintaining quality consumer and commercial loan relationships as well as continued strong loan demand throughout the Company’s market area. During the year the Company increased commercial loan balances by $213.3 million, or 16.7% and consumer home equity loans by $43.6 million, or 4.4%. The average yield on loans receivable decreased by 28 basis points, to 6.50% for the year ended December 31, 2008, from 6.78% for the year ended December 31, 2007. This decrease is primarily due to the Company’s variable rate loans repricing in a generally lower interest rate environment.
     Interest income on mortgage-backed securities increased $5.3 million, or 18.1%, to $34.7 million for the year ended December 31, 2008 from $29.4 million for the year ended December 31, 2007. This increase was attributable to an increase in the average balance of mortgage-backed securities, which was partially offset by a decrease in the mortgage-backed securities average yield. The average mortgage-backed securities balance increased by $148.2 million, or 25.4%, to $732.3 million for the year ended December 31, 2008 from $584.1 million for the year ended December 31, 2007. The increase in the average balance is primarily the result of the Company investing cash flows during the first six months of the year from calls and maturities in the investment portfolio into mortgage-backed securities, many of which were variable rate, in anticipation of interest rates moving higher. The average yield on mortgage-backed securities decreased by 29 basis points, to 4.74% for the year ended December 31, 2008, from 5.03% for the year ended December 31, 2007. This decrease in yield is primarily the result of the generally low interest rate environment throughout 2008.
     Interest income on investment securities decreased by $18.7 million, or 39.0%, on a taxable equivalent basis, to $29.3 million for the year ended December 31, 2008 from $48.0 million for the year ended December 31, 2007. This decrease was attributable to a decrease in the average balance of investment securities, which was partially offset by an increase in the yield on investment securities. The average investment securities balance decreased by $341.4 million, or 41.6%, to $478.9 million for the year ended December 31, 2008 from $820.3 million for the year ended December 31, 2007. This decrease is primarily from the November 2007 sale of $120.0 million of investment securities as well as the ongoing sale of zero coupon treasury strips throughout 2008. The average yield increased by 26 basis points, to 6.11% for the year ended December 31, 2008, from 5.85% for the year ended December 31, 2007. The increase in the average yield is primarily due the 6.75% taxable equivalent yield on municipal securities comprising a larger percentage of the investment security portfolio.
      Interest expense . Interest expense decreased by $41.7 million, or 19.8%, to $169.3 million for the year ended December 31, 2008 from $211.0 million for the year ended December 31, 2007. This decrease was attributed to a decrease in the interest rate paid on all funding sources, which was partially offset by an increase in the average balance of interest-bearing liabilities. The average rate paid on all deposit accounts decreased during the year ending December 31, 2008 with savings accounts decreasing from 1.38% for the year ended December 31, 2007, to 1.18% for the year ended December 31, 2008, interest-bearing demand deposits decreasing from 1.58% for the year ended December 31, 2007 to 0.88% for the year ended December 31, 2008, money market demand accounts decreasing from 3.69% for the year ended December 31, 2007 to 2.04% for the year ended December 31, 2008 and certificate accounts decreasing from 4.58% for the year ended December 31, 2007 to 3.93% for the year ended December 31, 2008. In addition to the decreases in the rates paid on deposit accounts there was an overall decrease in the average balance of deposit accounts, which decreased by $258.5 million, or 5.0%, to $4.948 billion for the year ended December 31, 2008 from $5.206 billion for the year ended December 31, 2007. The strategic reduction of certificate accounts was offset by an increase in the average balance of borrowed funds, which increased by $337.4 million, or 88.5%, to $718.7 million for the year ended December 31, 2008, from $381.3 million for the year ended December 31, 2007. The average rate paid on borrowed funds also decreased 78 basis points to 3.74% for the year ended December 31, 2008, from 4.52% for the year ended December 31, 2007. Throughout the year, the Company monitored funding alternatives, including borrowings from the FHLB, to extend the maturities on funding sources, while maintaining a low cost of funds.
      Net interest income (including GAAP reconciliation) . Net interest income increased $33.9 million, or 17.5%, on a taxable equivalent basis, to $227.5 million for the year ended December 31, 2008 from $193.6 million for the year ended December 31, 2007. This increase was a result of the factors previously discussed, primarily due to the cost of funds decreasing more than the asset yield, contributing to a 47 basis point increase in net interest margin to 3.57% for the year ended December 31, 2008 from 3.10% for the year ended December 31, 2007. The interest earned on certain assets is

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completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparisons of yields for all interest-earning assets, we also provide net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP in the Consolidated Statements of Income. Net interest income on a GAAP basis was $219.4 million, the taxable-equivalent adjustment was $8.2 million and the net interest income on a taxable equivalent basis was $227.5 million for the year ended December 31, 2008. Net interest income on a GAAP basis was $185.0 million, the taxable-equivalent adjustment was $8.6 million and the net interest income on a taxable equivalent basis was $193.6 million for the year ended December 31, 2007.
      Provision for loan losses . Management analyzes the allowance for loan losses as described in the section “Allowance for Loan Losses.” The provision recorded adjusts this allowance to a level that reflects the loss inherent in the Company’s loan portfolio as of the reporting date. The provision for loan losses increased $14.2 million, or 161.4%, to $22.9 million for the year ended December 31, 2008 from $8.7 million for the year ended December 31, 2007. During the year ended December 31, 2008, the Company made provisions for two large commercial loans located in the Florida region and one large commercial loan located in the Maryland region as well as a decline in the general economic factors used in the formulation of the reserve for loan losses. To the best of management’s knowledge, all known losses as of December 31, 2008 have been recorded.
      Noninterest income . Noninterest income decreased by $4.2 million, or 9.9%, to $38.8 million for the year ended December 31, 2008 from $43.0 million for the year ended December 31, 2007. This decrease in noninterest income was primarily due to an increase in the noncash other-than-temporary impairment of investment securities, which increased by $7.6 million, or 90.3%, to $16.0 million for the year ended December 31, 2008, from $8.4 million for the year ended December 31, 2007 and a noncash impairment of mortgage servicing assets of $2.2 million for the year ended December 31, 2008 compared to a recovery of previous noncash impairment of mortgage servicing assets of $65,000 in the year ended December 31, 2007. Partially offsetting the decreases due to noncash impairments were increases in service charges and fees, which increased by $4.7 million, or 16.9%, to $32.4 million for the year ended December 31, 2008, from $27.8 million for the year ended December 31, 2007 and increases in trust and other financial services income of $495,000, or 8.0%, income from bank owned life insurance of $337,000, or 7.6%, and other operating income of $1.3 million, or 42.0%. Also contributing to the decrease from the prior year were decreases in insurance commission income of $329,000, or 12.2% and mortgage banking income of $913,000, or 57.9%.
      Noninterest expense . Noninterest expense increased by $17.4 million, or 11.4%, to $170.1 million for the year ended December 31, 2008 from $152.7 million for the year ended December 31, 2007. This increase was primarily due to an increase in compensation and employee benefits of $6.9 million, an increase in processing expenses of $3.6 million, an increase in advertising of $1.8 million, an increase in federal deposit insurance premiums of $3.2 million, an increase in the penalty for early repayment of debt of $705,000 and an increase in other expenses of $467,000. The increases in operating expenses were a result of the Company’s continued upgrading of its personnel and systems to build customer loyalty and improve its loan mix.
      Income taxes . Income tax expense decreased $488,000, or 2.8%, to $17.0 million for the year ended December 31, 2008 from $17.5 million for the year ended December 31, 2007. This decrease is due to a decrease in income before income taxes of $1.4 million and a decrease in the effective tax rate from 26.2% to 26.0%. The decrease in the effective tax rate was primarily due to higher percentage of earnings on tax free assets during the current year.
Results of Operations — Year ended December 31, 2007 compared to year ended December 31, 2006
      Interest income . Interest income increased $27.3 million, or 7.2%, on a taxable equivalent basis, to $404.6 million for the year ended December 31, 2007 from $377.3 million for the year ended December 31, 2006. The increase in interest income was due to both an increase in the average balance of interest-earning assets and an increase in the average yield on interest-earning assets. The average balance of interest-earning assets increased $163.9 million, or 2.7%, to $6.249 billion for the year ended December 31, 2007 from $6.085 billion for the year ended December 31, 2006. The average rate earned on interest-earnings assets increased by 25 basis points, to 6.45% for the year ended December 31, 2007 from 6.20% for the year ended December 31, 2006. The growth in average interest-earning assets was primarily attributable to the acquisition of CSB Bank and the increase in average rate was primarily attributable to the continued change in mix of the Company’s loan portfolio with an emphasis on increasing the percentage of consumer and commercial loans while decreasing the percentage of one- to four-family mortgage loans.
     Interest income on loans receivable increased $29.3 million, or 10.2%, on a taxable equivalent basis, to $317.3 million for the year ended December 31, 2007 from $288.0 million for the year ended December 31, 2006. This increase was attributable to increases in both the average balance of loans receivable and the average yield on those loans. The average loans

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receivable balance increased $265.4 million, or 6.0%, to $4.661 billion for the year ended December 31, 2007 from $4.395 billion for the year ended December 31, 2006. This increase was attributable to both the Company’s efforts in attracting and maintaining quality consumer and commercial loan relationships as well as the acquisition of CSB Bank. During the year ended December 31, 2007 the Company increased commercial loan balances by $336.8 million, or 35.9%, and consumer home equity loans by $105.0 million, or 11.8%. The average yield on loans receivable increased 19 basis points for the year ended December 31, 2007 to 6.78% from 6.59% for the year ended December 31, 2006. This increase was primarily attributable to the significant growth in consumer and commercial loans which generally carry higher rates of interest than residential mortgage loans.
     Interest income on mortgage-backed securities decreased $2.1 million, or 6.8%, to $29.4 million for the year ended December 31, 2007 from $31.5 million for the year ended December 31, 2006. This decrease is primarily attributable to a decrease in the average balance of $76.9 million, or 11.6%, to $584.1 million for the year ended December 31, 2007 from $661.0 million for the year ended December 31, 2006. This decrease was attributable to the Company’s effort to use cash flows from these securities to fund loan growth. The decrease in average balance was partially offset by an increase in the average yield of 26 basis points to 5.03% for the year ended December 31, 2007 from 4.77% for the year ended December 31, 2006 as the yield on floating rate bonds increased over the 18 month period from June 30, 2005 through December 31, 2007 with the general movement of short-term interest rates.
     Interest income on investment securities decreased $1.5 million, or 3.0%, on a taxable equivalent basis, to $48.0 million for the year ended December 31, 2007 from $49.5 million for the year ended December 31, 2006. This decrease was primarily attributable to a decrease in the average balance of $41.1 million, or 4.8%, to $820.3 million for the year ended December 31, 2007 from $861.4 million for the year ended December 31, 2006. This decrease was attributable to the Company’s effort to use cash flows from these securities to fund loan growth. The decrease in average balance was partially offset by an increase in the average yield of 11 basis points to 5.85% for the year ended December 31, 2007 from 5.74% for the year ended December 31, 2006. This increase in average yield is primarily attributable to the Company purchasing securities during the year yielding higher interest rates than those in the existing investment portfolio.
      Interest expense . Interest expense increased $19.9 million, or 10.4%, to $211.0 million for the year ended December 31, 2007 from $191.1 million for the year ended December 31, 2006. This increase was attributed to increases in both the average balance and the average rate paid on deposits. The average balance increased $235.0 million, or 4.7%, to $5.206 billion for the year ended December 31, 2007 from $4.971 billion for the year ended December 31, 2006. This increase was primarily due to the acquisition of CSB Bank, which contributed approximately $82.9 million to the average balance of deposits. The average rate paid on deposits increased 42 basis points to 3.58% for the year ended December 31, 2007 from 3.16% for the year ended December 31, 2006. This increase in the average rate was due to both a general increase in average short-term rates during the year and the change in mix of deposits with an increase in higher cost certificates of deposit and a decrease in low-cost passbook and statement savings accounts. Partially offsetting the increase in the cost of deposits was a decrease in interest expense on trust preferred debentures of $8.4 million, as the Company redeemed approximately $99.0 million of trust preferred securities in December 2006.
      Net interest income (including GAAP reconciliation) . Net interest income increased $7.4 million, or 4.0%, on a taxable equivalent basis, to $193.6 million for the year ended December 31, 2007 from $186.2 million for the year ended December 31, 2006. This increase was a result of the factors previously discussed, primarily due to a larger increase in interest earning assets than in interest bearing liabilities contributing to a four basis point increase in net interest margin to 3.10% for the year ended December 31, 2007 from 3.06% for the year ended December 31, 2006. The interest earned on certain assets is completely or partially exempt from federal income tax. As such, these tax-exempt instruments typically yield lower returns than a taxable investment. To provide more meaningful comparisons of yields for all interest-earning assets, we also provide net interest income on a taxable-equivalent basis by increasing the interest income earned on tax-exempt assets to make it fully equivalent to interest income earned on other taxable investments. This adjustment is not permitted under GAAP in the Consolidated Statements of Income. Net interest income on a GAAP basis was $185.0 million, the taxable-equivalent adjustment was $8.6 million and the net interest income on a taxable equivalent basis was $193.6 million for the year ended December 31, 2007. Net interest income on a GAAP basis was $177.5 million, the taxable-equivalent adjustment was $8.7 million and the net interest income on a taxable equivalent basis was $186.2 million for the year ended December 31, 2006.
      Provision for loan losses . Management analyzes the allowance for loan losses as described in the section “Allowance for Loan Losses.” The provision recorded adjusts this allowance to a level that reflects the loss inherent in the Company’s loan portfolio as of the reporting date. The provision for loan losses increased $263,000, or 3.1%, to $8.7 million for the year ended December 31, 2007 from $8.5 million for the year ended December 31, 2006. To the best of management’s knowledge, all known losses as of December 31, 2007 were recorded as of December 31, 2007.

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      Noninterest income . Noninterest income decreased $3.0 million, or 6.5%, to $43.0 million for the year ended December 31, 2007 from $46.0 million for the year ended December 31, 2006. This decrease in noninterest income was primarily due to the loss on sale of investment securities in the amount of $1.6 million and a noncash other-than-temporary impairment of Freddie Mac preferred stock of $1.9 million. The decrease was also impacted by a $4.1 million gain on the sale of education loans in the previous year. The negative effect of the prior year gain on sale of education loans and the current year losses on securities were partially offset by increases in service charges and fees of $3.3 million, trust and other financial services income of $902,000, insurance commission income of $155,000 and mortgage banking income of $1.2 million.
      Noninterest expense . Noninterest expense increased $9.0 million, or 6.3%, to $152.7 million for the year ended December 31, 2007 from $143.7 million for the year ended December 31, 2006. This increase was primarily due to an increase in compensation and employee benefits of $5.6 million, an increase in processing expenses of $3.0 million, an increase in premises and occupancy costs of $1.0 million, an increase in advertising of $924,000 and an increase in amortization of intangible assets of $623,000, all of which are partially offset by a decrease in the loss on early extinguishment of debt of $3.1 million. These increases in operating expenses were a result of the Company’s continued expansion of its existing retail office network, both de novo and through the CSB acquisition, as well as the addition of commercial lending and investment management and trust personnel.
      Income taxes . Income tax expense decreased $2.3 million, or 11.8%, to $17.5 million for the year ended December 31, 2007 from $19.8 million for the year ended December 31, 2006. This decrease is due to a decrease in income before income taxes of $4.8 million and a decrease in the effective tax rate from 27.7% to 26.2%. The decrease in the effective tax rate was primarily due to lower state incomes taxes and a higher percentage of earnings on tax free assets during the year.

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      Average Balance Sheets . The following tables set 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. Yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented.
                                                                         
    Years Ended December 31,  
    2008     2007     2006  
                    Average                     Average                     Average  
    Average             Yield/     Average             Yield/     Average             Yield/  
    Balance     Interest     Cost     Balance     Interest     Cost     Balance     Interest     Cost  
    (Dollars in Thousands)  
Interest-earning assets:
                                                                       
Loans receivable (1)(2)(3)
  $ 5,016,694       328,687       6.50 %     4,660,693       317,321       6.78 %     4,395,274       288,037       6.59 %
Mortgage-backed securities (5)
    732,281       34,694       4.74 %     584,053       29,385       5.03 %     660,986       31,523       4.77 %
Investment securities (4)(5)(6)
    478,933       29,250       6.11 %     820,337       47,990       5.85 %     861,411       49,450       5.74 %
FHLB stock (7)
    48,167       1,428       2.96 %     33,348       2,017       6.05 %     34,292       1,692       4.93 %
Interest-earning deposits:
    104,895       2,756       2.59 %     150,665       7,867       5.15 %     133,218       6,584       4.87 %
 
                                                           
Total interest-earnings assets:
  $ 6,380,970       396,815       6.18 %     6,249,096       404,580       6.45 %     6,085,181       377,286       6.20 %
Noninterest-earning assets (8)
    488,579                       453,922                       437,607                  
 
                                                                 
Total assets
  $ 6,869,549                       6,703,018                       6,522,788                  
 
                                                                 
 
                                                                       
Interest-bearing liabilities:
                                                                       
Savings accounts
  $ 778,341       9,159       1.18 %     793,172       10,909       1.38 %     882,974       12,619       1.43 %
Interest-bearing demand accounts
    732,097       6,434       0.88 %     698,585       11,038       1.58 %     663,046       9,396       1.42 %
Money market demand accounts
    720,713       14,726       2.04 %     637,983       23,551       3.69 %     574,820       19,446       3.38 %
Certificate accounts
    2,716,815       106,742       3.93 %     3,076,693       141,042       4.58 %     2,850,548       115,524       4.05 %
Borrowed funds (9)
    718,657       26,893       3.74 %     381,262       17,225       4.52 %     402,789       18,508       4.59 %
Junior subordinated deferrable interest debentures
    108,287       5,339       4.86 %     105,850       7,250       6.76 %     203,413       15,616       7.57 %
 
                                                           
Total interest-bearing liabilities
  $ 5,774,910       169,293       2.93 %     5,693,545       211,015       3.71 %     5,577,590       191,109       3.43 %
Noninterest-bearing liabilities
    473,410                       409,096                       346,016                  
 
                                                                 
Total liabilities
    6,248,320                       6,102,641                       5,923,606                  
Shareholders’ equity
    621,229                       600,377                       599,182                  
 
                                                                 
Total liabilities and equity
  $ 6,869,549                       6,703,018                       6,522,788                  
 
                                                                 
Net interest income
          $ 227,522                       193,565                       186,177          
 
                                                                 
Net interest rate spread (10)
                    3.25 %                     2.74 %                     2.77 %
 
                                                                 
Net interest-earning assets
  $ 606,060                       555,551                       507,591                  
 
                                                                 
Net interest margin (11)
                    3.57 %                     3.10 %                     3.06 %
 
                                                                 
Ratio of average interest-earning assets to average interest-bearing liabilities
    1.10 x                     1.10 x                     1.09 x                
 
                                                                 
 
(1)   Average gross loans receivable includes loans held as available-for-sale and loans placed on nonaccrual status.
 
(2)   Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material.
 
(3)   Interest income on tax-free loans is presented on a taxable equivalent basis including adjustments of $1,559, $1,751 and $1,721, respectively.
 
(4)   Interest income on tax-free investment securities is presented on a taxable equivalent basis including adjustments of $6,597, $6,798 and $6,992, respectively.
 
(5)   Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
 
(6)   Average balances include Fannie Mae and Freddie Mac stock.
 
(7)   The FHLB suspended dividends until further notice during the quarter ended December 31, 2008.
 
(8)   Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
 
(9)   Average balances include FHLB advances, securities sold under agreements to repurchase and other borrowings.
 
(10)   Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
 
(11)   Net interest margin represents net interest income as a percentage of average interest-earning assets.

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      Rate/Volume Analysis. Net interest income can also be analyzed in terms of the impact of changes in interest rates on interest-earning assets and interest-bearing liabilities and changes in the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (change in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume) and (iii) the net change. Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.
                                                 
    Years Ended December 31,  
    2008 vs. 2007     2007 vs. 2006  
    Increase/(Decrease) Due to     Total Increase     Increase/(Decrease) Due to     Total Increase  
    Rate     Volume     (Decrease)     Rate     Volume     (Decrease)  
    (In Thousands)  
Interest-earning assets:
                                               
Loans receivable
  $ (12,864 )     24,230     $ 11,366     $ 10,072       19,212     $ 29,284  
Mortgage-backed securities
    (2,149 )     7,458       5,309       1,733       (3,871 )     (2,138 )
Investment securities
    2,110       (20,850 )     (18,740 )     943       (2,403 )     (1,460 )
FHLB stock
    (1,485 )     896       (589 )     382       (57 )     325  
Interest-earning deposits:
    (3,314 )     (1,797 )     (5,111 )     396       887       1,283  
 
                                   
Total interest-earnings assets
  $ (17,702 )     9,937     $ (7,765 )   $ 13,526       13,768     $ 27,294  
Interest-bearing liabilities:
                                               
Savings accounts
    (1,560 )     (190 )     (1,750 )     (451 )     (1,259 )     (1,710 )
Interest-bearing demand accounts
    (5,134 )     530       (4,604 )     1,109       533       1,642  
Money market demand accounts
    (11,879 )     3,054       (8,825 )     1,870       2,235       4,105  
Certificate accounts
    (18,981 )     (15,319 )     (34,300 )     15,752       9,766       25,518  
Borrowed funds
    (5,575 )     15,243       9,668       (302 )     (981 )     (1,283 )
Junior subordinated deferrable interest debentures
    (2,078 )     167       (1,911 )     (1,280 )     (7,086 )     (8,366 )
 
                                   
Total interest-bearing liabilities
  $ (45,207 )     3,485     $ (41,722 )   $ 16,698       3,208     $ 19,906  
 
                                   
 
                                               
Net change in net interest income
  $ 27,505       6,452     $ 33,957     $ (3,172 )     10,560     $ 7,388  
 
                                   
      Regulatory Capital Requirements . The FDIC’s capital regulations establish a minimum 3.0% Tier I leverage capital requirement for the most highly-rated state-chartered, non-member banks, with an additional cushion of at least 100 to 200 basis points for all other state-chartered, non-member banks, which effectively increases the minimum Tier I leverage ratio for such other banks to 4.0% to 5.0% or more. Under the FDIC’s regulation, the highest-rated banks are those that the FDIC determines are not anticipating or experiencing significant growth and have well diversified risk, including no undue interest rate risk exposure, excellent asset quality, high liquidity, good earnings and, in general, which are considered a strong banking organization, and usually rated composite 1 under the Uniform Financial Institutions Rating System. Leverage or core capital is defined as the sum of common stockholders’ equity (including retained earnings, but excluding accumulated other comprehensive income), noncumulative perpetual preferred stock and related surplus, and minority interests in consolidated subsidiaries, minus all intangible assets other than certain qualifying supervisory goodwill, and certain purchased mortgage servicing rights and purchased credit card relationships.
     The FDIC also requires that savings banks meet a risk-based capital standard. The risk-based capital standard for savings banks requires the maintenance of total capital, which is defined as Tier I capital and supplementary (Tier 2 capital) to risk weighted assets of 8%. In determining the amount of risk-weighted assets, all assets, plus certain off balance sheet assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in the type of asset or item.
     The components of Tier I capital are equivalent to those discussed above under the 3% leverage standard. The components of supplementary (Tier 2) capital include certain perpetual preferred stock, certain mandatory convertible securities, certain subordinated debt and intermediate preferred stock and general allowances for loan and lease losses. Allowance for loan and lease losses includable in supplementary capital is limited to a maximum of 1.25% of risk-weighted assets. Overall, the

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amount of capital counted toward supplementary capital cannot exceed 100% of core capital. At December 31, 2008, the Bank exceeded its capital requirements.
     A bank which has less than the minimum leverage capital requirement must, within 60 days of the date as of which it fails to comply with such requirement, submit to its FDIC regional director for review and approval a reasonable plan describing the means and timing by which the bank will achieve its minimum leverage capital requirement. A bank that fails to file such plan with the FDIC is deemed to be operating in an unsafe and unsound manner, and could be subject to a cease-and-desist order from the FDIC. The FDIC’s regulation also provides that any insured depository institution with a ratio of Tier I capital to total assets that is less than 2.0% is deemed to be operating in an unsafe or unsound condition pursuant to Section 8(a) of the FDIA and is subject to potential termination of deposit insurance. However, such an institution will not be subject to an enforcement proceeding thereunder solely on account of its capital ratios if it has entered into and is in compliance with a written agreement with the FDIC to increase its Tier I leverage capital ratio to such level as the FDIC deems appropriate and to take such other action as may be necessary for the institution to be operated in a safe and sound manner. The FDIC capital regulation also provides, among other things, for the issuance by the FDIC or its designee(s) of a capital directive, which is a final order issued to a bank that fails to maintain minimum capital to restore its capital to the minimum leverage capital requirement within a specified time period. Such directive is enforceable in the same manner as a final cease-and-desist order.
     The following table summarizes the Bank’s total shareholder’s equity, regulatory capital, total risk-based assets, and leverage and risk-based regulatory ratios at December 31, 2008 and 2007.
                 
    December 31, 2008     December 31, 2007  
    (Dollars in Thousands)  
Total shareholders’ equity (GAAP capital)
  $ 706,610       714,160  
Less: accumulated other comprehensive (income)/ loss
    22,017       (931 )
Less: nonqualifying intangible assets
    (178,758 )     (183,396 )
 
           
Leverage capital
  $ 549,869       529,833  
Plus: Tier 2 capital (1)
    54,198       41,952  
 
           
Total risk-based capital
  $ 604,067       571,785  
 
           
Average total assets for leverage ratio
  $ 6,829,557       6,454,343  
 
           
Net risk-weighted assets including off-balance sheet items
  $ 4,329,431       4,053,803  
 
           
 
Leverage capital ratio
    8.05 %     8.21 %
Minimum requirement (2)
  3.00% to 5.00 %   3.00% to 5.00 %
 
               
Risk-based capital ratio
    13.95 %     14.10 %
Minimum requirement
    8.00 %     8.00 %
 
(1)   Tier 2 capital consists of the allowance for loan losses, which is limited to 1.25% of total risk-weighted assets as detailed under regulations of the FDIC, and 45% of pre-tax net unrealized gains on securities available-for-sale.
 
(2)   The FDIC has indicated that the most highly rated institutions which meet certain criteria will be required to maintain a ratio of 3.00%, and all other institutions will be required to maintain an additional cushion of 100 to 200 basis points.
     The Bank is also subject to Pennsylvania Department of Banking (“Department”) capital guidelines. Although not adopted in regulation form, the Department utilizes capital standards of 6% leverage capital and 10% risk-based capital. The components of leverage and risk-based capital are substantially the same as those defined by the FDIC.
      Liquidity and Capital Resources. The Bank is required to maintain a sufficient level of liquid assets, as determined by management and defined and reviewed for adequacy by the FDIC during their regular examinations. The FDIC, however, does not prescribe by regulation a minimum amount or percentage of liquid assets. The FDIC allows any marketable security, whose sale would not impair the capital adequacy of the Company, to be eligible for liquidity. Liquidity is quantified through the use of a standard liquidity ratio of liquid assets to borrowings plus deposits. Using this formula, the Bank’s liquidity ratio was 14.8% as of December 31, 2008. The Bank adjusts its liquidity level in order to meet funding needs of deposit outflows, repayment of borrowings and loan commitments. The Company also adjusts liquidity as appropriate to meet its asset and liability management objectives.
     In addition to deposits, the Company’s primary sources of funds are the amortization and repayment of loans and mortgage-backed securities, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans and mortgage-backed securities are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rate levels, economic conditions, and competition. The Company manages the pricing of its deposits to maintain a desired deposit balance. In

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addition, the Company invests excess funds in short-term interest earning and other assets, which provide liquidity to meet lending requirements. Short-term interest-earning deposits amounted to $24.1 million at December 31, 2008. For additional information about cash flows from the Company’s operating, financing, and investing activities, see the Statements of Cash Flows included in the Consolidated Financial Statements.
     A portion of the Company’s liquidity consists of cash and cash equivalents, which are a product of its operating, investing, and financing activities. The primary sources of cash were net income, principal repayments on loans and mortgage-backed securities, and increases in deposit accounts.
     Liquidity management is both a daily and long-term function of business management. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the FHLB, which provide an additional source of funds. At December 31, 2008, the Company had advances of $972.0 million, including $146.0 million of overnight advances, from the FHLB. The Company borrows from the FHLB to reduce interest rate risk and to provide liquidity when necessary.
     At December 31, 2008, the Company’s customers had $273.7 million of unused lines of credit available and $116.3 million in loan commitments. This amount does not include the unfunded portion of loans in process. Certificates of deposit scheduled to mature in less than one year at December 31, 2008, totaled $1.286 billion. Management believes that a significant portion of such deposits will remain with the Company.
     The major sources of the Company’s cash flows are in the areas of loans, marketable securities, deposits and borrowed funds.
     Deposits are the Company’s primary source of externally generated funds. The level of deposit inflows during any given period is heavily influenced by factors outside of management’s control, such as the general level of short-term and long-term market interest rates, as well as higher alternative yields that investors may obtain on competing investments such as money market mutual funds. Financial institutions, such as the Company, are also subject to deposit outflows. The Company’s net deposits increased/(decreased) by $(504.1) million, $9.7 million and $54.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.
     Similarly, the amount of principal repayments on loans and the amount of new loan originations is heavily influenced by the general level of market interest rates. Funds received from loan maturities and principal payments on loans for the years ended December 31, 2008, 2007 and 2006 were $1.284 billion, $1.235 billion and $1.118 billion, respectively. Loan originations for the years ended December 31, 2008, 2007 and 2006 were $1.885 billion, $1.742 billion and $1.488 billion, respectively. The Company also sells a portion of the loans it originates and the cash flows from such sales for the years ended December 31, 2008, 2007 and 2006 were $212.5 million, $250.3 million and $624.6 million, respectively.
     The Company experiences significant cash flows from its portfolio of marketable securities as principal payments are received on mortgage-backed securities and as investment securities mature. Cash flow from the repayment of principal and the maturity of marketable securities for the years ended December 31, 2008, 2007 and 2006 were $319.1 million, $333.8 million and $254.2 million, respectively.
     When necessary, the Company utilizes borrowings as a source of liquidity and as a source of funds for long-term investment when market conditions permit. The net cash flow from the receipt and repayment of borrowings was a net increase/(decrease) of $728.5 million, $(65.8) million and $(23.7) million for the years ended December 31, 2008, 2007 and 2006, respectively.
     Other activity with respect to cash flow was the payment of cash dividends on common stock in the amount of $15.8 million, $15.7 million and $13.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. Dividends waived by Northwest Bancorp, MHC during the years ended December 31, 2008, 2007 and 2006 were $26.9 million, $25.7 million and $21.4 million, respectively. In September 2005, the Company initiated the first of its three common stock repurchase plans. Since that time the Company has used $69.4 million to repurchase a total of 2.7 million shares of its common stock.

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      Contractual Obligations. The Company is obligated to make future payments according to various contracts. The following table presents the expected future payments of the contractual obligations aggregated by obligation type.
                                         
    Payments due  
                    Three years to              
    Less than one     One year to less     less than five     Five years or        
    year     than three years     years     greater     Total  
    (In Thousands)  
Contractual obligations at December 31, 2008
                                       
 
                                       
Long-term debt (1)
  $ 285,635       196,532       270,000       315,778     $ 1,067,945  
Junior subordinated debentures (2)
                      108,254       108,254  
Operating leases (3)
    4,280       6,931       4,366       10,310       25,887  
 
                             
Total
  $ 289,915       203,463       274,366       434,342     $ 1,202,086  
 
                             
 
(1)   See Note 11, Borrowed funds, of the Notes to Consolidated Financial Statements for additional information.
 
(2)   See Note 22, Junior Subordinated Debentures/Trust-Preferred Securities, of the Notes to Consolidated Financial Statements for additional information.
 
(3)   See Note 8, Premises and Equipment, of the Notes to Consolidated Financial Statements for additional information.
      Impact of Inflation and Changing Prices . The Consolidated Financial Statements of the Company and notes thereto, presented elsewhere herein, have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike most industrial companies, nearly all the assets and liabilities of the Company are monetary. As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      Asset and Liability Management-Interest Rate Sensitivity Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring an institution’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income while a positive gap would tend to positively affect net interest income. Similarly, during a period of falling interest rates, a negative gap would tend to positively affect net interest income while a positive gap would tend to adversely affect net interest income.
     The Company’s policy in recent years has been to reduce its exposure to interest rate risk generally by better matching the maturities of its interest rate sensitive assets and liabilities and by increasing the interest rate sensitivity of its interest-earning assets. The Company (i) purchases adjustable-rate investment securities and mortgage-backed securities which at December 31, 2008 totaled $393.5 million; and (ii) originates adjustable-rate mortgage loans, adjustable-rate consumer loans, and adjustable-rate commercial loans, which at December 31, 2008, totaled $1.147 billion or 22.0% of the Company’s total loan portfolio. Of the Company’s $6.365 billion of interest-earning assets at December 31, 2008, $1.732 billion, or 27.2%, consisted of assets with adjustable rates of interest. When market conditions are favorable, the Company also attempts to reduce interest rate risk by lengthening the maturities of its interest-bearing liabilities by using FHLB advances as a source of long-term fixed-rate funds, and by promoting longer-term certificates of deposit.
     At December 31, 2008, total interest-bearing liabilities maturing or repricing within one year exceeded total interest-earning assets maturing or repricing in the same period by $263.2 million, representing a cumulative negative one-year gap ratio of 3.80%. The Company has an Asset/Liability Committee with members consisting of various individuals from Senior Management. This committee meets monthly in an effort to effectively manage the Company’s balance sheet and to monitor activity and set pricing. The Company also has a Risk Management Committee comprised of certain members of the Board of Directors, which among other things, is responsible for reviewing the Company’s level of interest rate risk. The Committee meets quarterly and, as part of their risk management assessment, reviews interest rate risks and trends, the Company’s interest sensitivity position and the liquidity and market value of the Company’s investment portfolio.

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     The following table sets forth, on an amortized cost basis, the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2008, which are expected to reprice or mature, based upon certain assumptions, in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown that reprice or mature during a particular period were determined in accordance with the earlier of the term of repricing or the contractual term of the asset or liability. Management believes that these assumptions approximate the standards used in the savings industry and considers them appropriate and reasonable. For information regarding the contractual maturities of the Company’s loans, investments and deposits, see “Business of the Company—Lending Activities,” “—Investment Activities” and “—Sources of Funds.”
                                                         
    Amounts Maturing or Repricing  
    Within     1-3     3-5     5-10     10-20     Over 20        
    1 Year     Years     Years     Years     Years     Years     Total  
    (Dollars in Thousands)  
Rate-sensitive assets:
                                                       
Interest-earning deposits
  $ 24,107                                   $ 24,107  
Mortgage-backed securities:
                                                       
Fixed-rate
    73,941       82,377       43,044       51,217                   250,579  
Variable-rate
    389,569       51,828       53,663                         495,060  
Investment securities
    97,585       83,178       26,499       186,269                   393,531  
Real estate loans:
                                                       
Adjustable-rate
    71,984       1,816                               73,800  
Fixed-rate
    308,773       530,322       450,161       738,575       367,248             2,395,079  
Home equity lines of credit
    163,659                                     163,659  
Education loans
    38,152                                     38,152  
Other consumer loans
    406,776       440,582       205,651       50,950                   1,103,959  
Commercial loans
    819,855       433,020       172,320       2,018                   1,427,213  
 
                                         
Total rate-sensitive assets
    2,394,401       1,623,123       951,338       1,029,029       367,248             6,365,139  
 
                                                       
Rate-sensitive liabilities:
                                                       
Fixed maturity deposits
    1,285,695       829,776       327,358       14,367       264             2,457,460  
Money market deposit accounts
    685,642                         19,959             705,601  
Savings accounts
    209,000       322,000                   244,019             775,019  
Checking accounts
    187,000       254,000                         659,131       1,100,131  
FHLB advances
    189,708       196,532       270,000       315,778                   972,018  
Other borrowings
    92,319       778       1,978       852                   95,927  
Trust preferred securities
    8,249             25,001       75,004                   108,254  
 
                                         
Total rate-sensitive liabilities
    2,657,613       1,603,086       624,337       406,001       264,242       659,131       6,214,410  
 
                                         
 
                                                       
Interest sensitivity gap per period
  $ (263,212 )     20,037       327,001       623,028       103,006       (659,131 )   $ 150,729  
 
                                         
 
                                                       
Cumulative interest sensitivity gap
  $ (263,212 )     (243,175 )     83,826       706,854       809,860       150,729     $ 150,729  
 
                                         
 
                                                       
Cumulative interest sensitivity gap as a percentage of total assets
    (3.80 )%     (3.51 )%     1.21 %     10.20 %     11.69 %     2.17 %     2.17 %
Cumulative interest-earning assets as a percent of cumulative interest-bearing liabilities
    90.10 %     94.29 %     101.72 %     113.36 %     114.58 %     102.43 %     102.43 %
     When assessing the interest rate sensitivity of the Company, analysis of historical trends indicates that loans will prepay at various speeds (or annual rates) depending on the variance between the weighted average portfolio rates and the current market rates. In preparing the table above, it has been assumed market rates will remain constant at current levels and as a result, the Company’s loans will be affected as follows: (i) adjustable-rate mortgage loans will prepay at an annual rate of 5% to 10%; (ii) fixed-rate mortgage loans will prepay at an annual rate of 7% to 10%; (iii) commercial loans will prepay at an annual rate of 8% to 12%; (iv) consumer loans held by the Bank will prepay at an annual rate of 20%; and (v) consumer loans held by Northwest Consumer will prepay at an annual rate of 60% to 65%. In regards to the Company’s deposits, it has been assumed that (i) fixed maturity deposits will not be withdrawn prior to maturity; (ii) money market accounts will gradually reprice over the next five years; and (iii) savings accounts and checking accounts will reprice either when the rates on such accounts reprice as interest rate levels change, or when deposit holders withdraw funds from such accounts and select other types of deposit

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accounts, such as certificate accounts, which may have higher interest rates. For purposes of this analysis, management has estimated, based on historical trends, that $187.0 million of the Company’s checking accounts and $209.0 million of the Company’s savings accounts are interest sensitive and may reprice in one year or less, and that the remainder may reprice over longer time periods.
     The above assumptions utilized by management are annual percentages based on remaining balances and should not be regarded as indicative of the actual prepayments and withdrawals that may be experienced by the Company. Moreover, certain shortcomings are inherent in the analysis presented by the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, interest rates on certain types of assets and liabilities may fluctuate in advance of or lag behind changes in market interest rates. Additionally, certain assets, such as some adjustable-rate loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Moreover, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table.
     In an effort to assess the market risk, the Company utilizes a simulation model to determine the effect of immediate incremental increases or decreases in interest rates on net interest income and the market value of the Company’s equity. Certain assumptions are made regarding loan prepayments and decay rates of passbook and NOW accounts. Because it is difficult to accurately project the market reaction of depositors and borrowers, the effects of actual changes in interest on these assumptions may differ from simulated results.
     The Company has established the following guidelines for assuming interest rate risk:
    Net income simulation. Given a parallel shift of 2% in interest rates, the estimated net income may not decrease by more than 20% within a one-year period.
 
    Market value of equity simulation. The market value of the Company’s equity is the net present value of the Company’s assets and liabilities. Given a parallel shift of 2% in interest rates, equity may not decrease by more than 35% of total shareholder’ equity.
     The following table illustrates the simulated impact of a 1% or 2% upward or downward movement in interest rates on net income, return on average equity, diluted earnings per share and market value of equity. This analysis was prepared assuming that interest-earning asset levels at December 31, 2008 remain constant. The impact of the rate movements was computed by simulating the effect of an immediate and sustained shift in interest rates over a twelve-month period from the December 31, 2008 levels.
                                 
    Movements in interest rates from
    December 31, 2008 rates
    Increase   Decrease
    1%   2%   1%   2%
Simulated impact over the next 12 months compared with December 31, 2008:
                               
Percentage increase/(decrease) in net income
    2.3 %     (1.2 )%     5.2 %     5.7 %
Increase/(decrease) in return on average equity
    0.2 %     (0.1 )%     0.5 %     0.6 %
Increase/(decrease) in diluted earnings per share
  $ 0.03       ($0.02 )   $ 0.07     $ 0.08  
Percentage increase/(decrease) in market value of equity
    (9.6 )%     (17.9 )%     (2.3 )%     (7.1 )%

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.
Management, including the principal executive officer and principal financial officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal control — Integrated Framework . Based on such assessment, management concluded that, as of December 31, 2008, the Company’s internal control over financial reporting is effective based upon those criteria.
KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Report and has issued a report with respect to the effectiveness of the Company’s internal control over financial reporting.
             
/s/ William J. Wagner       /s/ William W. Harvey, Jr.
 
William J. Wagner
     
 
William W. Harvey, Jr.
   
Chief Executive Officer
      Chief Financial Officer    

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Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
The Board of Directors and Shareholders
Northwest Bancorp, Inc.:
We have audited Northwest Bancorp, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Northwest Bancorp, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008, and our report dated March 4, 2009 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Pittsburgh, Pennsylvania
March 4, 2009

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Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Northwest Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial condition of Northwest Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Northwest Bancorp, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period then ended in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company adopted a new framework for measuring fair value effective January 1, 2008, in accordance with FASB No. 157, Fair Value Measurements.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Northwest Bancorp, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 4, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Pittsburgh, Pennsylvania
March 4, 2009

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Amounts in thousands, excluding share data)
                 
    December 31  
    2008     2007  
Assets
               
 
               
Cash and cash equivalents
  $ 55,815       75,905  
Interest-earning deposits in other financial institutions
    16,795       153,160  
Federal funds sold and other short-term investments
    7,312       1,551  
Marketable securities available-for-sale (amortized cost of $1,144,435 and $1,123,526)
    1,139,170       1,133,367  
Loans receivable, net of allowance for loan losses of $54,929 and $41,784
    5,141,892       4,795,622  
Accrued interest receivable
    27,252       27,084  
Real estate owned, net
    16,844       8,667  
Federal Home Loan Bank stock, at cost
    63,143       31,304  
Premises and equipment, net
    115,842       110,894  
Bank owned life insurance
    123,479       118,682  
Goodwill
    171,363       171,614  
Other intangible assets
    7,395       11,782  
Mortgage servicing rights
    6,280       8,955  
Other assets
    37,659       14,929  
 
           
Total assets
  $ 6,930,241       6,663,516  
 
           
 
               
Liabilities and Shareholders’ Equity
               
 
               
Liabilities:
               
Deposits
  $ 5,038,211       5,542,334  
Borrowed funds
    1,067,945       339,115  
Advances by borrowers for taxes and insurance
    26,190       24,159  
Accrued interest payable
    5,194       4,356  
Other liabilities
    70,663       32,354  
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities
    108,254       108,320  
 
           
Total liabilities
    6,316,457       6,050,638  
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; shares issued 51,244,974 and 51,191,109, respectively
    5,124       5,119  
Paid-in capital
    218,332       214,606  
Retained earnings, substantially restricted
    490,326       458,425  
Accumulated other comprehensive (loss)/ income, net
    (30,575 )     816  
Treasury stock of 2,742,800 and 2,610,800 shares, respectively, at cost
    (69,423 )     (66,088 )
 
           
Total shareholders’ equity
    613,784       612,878  
 
           
Total liabilities and shareholders’ equity
  $ 6,930,241       6,663,516  
 
           
See accompanying notes to consolidated financial statements.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Amounts in thousands, excluding share data)
                         
    Years ended December 31,  
    2008     2007     2006  
Interest income:
                       
Loans receivable
  $ 327,128       315,570       286,316  
Mortgage-backed securities
    34,694       29,385       31,523  
Taxable investment securities
    11,828       30,583       31,164  
Tax-free investment securities
    12,253       12,626       12,986  
Interest-earning deposits
    2,756       7,867       6,584  
 
                 
Total interest income
    388,659       396,031       368,573  
 
                       
Interest expense:
                       
Deposits
    137,061       186,540       156,985  
Borrowed funds
    32,232       24,475       34,124  
 
                 
Total interest expense
    169,293       211,015       191,109  
 
                 
Net interest income
    219,366       185,016       177,464  
Provision for loan losses
    22,851       8,743       8,480  
 
                 
Net interest income after provision for loan losses
    196,515       176,273       168,984  
 
                       
Noninterest income:
                       
Service charges and fees
    32,432       27,754       24,459  
Trust and other financial services income
    6,718       6,223       5,321  
Insurance commission income
    2,376       2,705       2,550  
Gain on sale of marketable securities, net
    6,037       4,958       368  
Other-than-temporary impairment of investments
    (16,004 )     (8,412 )      
Gain on sale of loans, net
          728       4,832  
(Loss)/ gain on sale of real estate owned, net
    (428 )     (83 )     735  
Income from bank owned life insurance
    4,797       4,460       4,344  
Mortgage banking income
    665       1,578       684  
Non-cash (impairment)/ recovery of mortgage servicing asset
    (2,165 )     65       (205 )
Other operating income
    4,324       3,046       2,938  
 
                 
Total noninterest income
    38,752       43,022       46,026  
 
                       
Noninterest expense:
                       
Compensation and employee benefits
    91,129       84,217       78,611  
Premises and occupancy costs
    21,924       21,375       20,368  
Office operations
    13,237       12,788       12,411  
Processing expenses
    18,652       15,019       12,051  
Professional services
    2,582       2,778       2,877  
Amortization of intangible assets
    4,387       4,499       3,876  
Advertising
    5,500       3,742       2,818  
Federal deposit insurance premiums
    3,884       663       685  
Loss on early extinguishment of debt
    705             3,124  
Other expenses
    8,128       7,661       6,861  
 
                 
Total noninterest expense
    170,128       152,742       143,682  
 
                 
Income before income taxes
    65,139       66,553       71,328  
 
                       
Provision for income taxes:
                       
Federal
    14,739       15,597       16,840  
State
    2,229       1,859       2,952  
 
                 
Total provision for income taxes
    16,968       17,456       19,792  
 
                 
Net income
  $ 48,171       49,097       51,536  
 
                 
Basic earnings per share
  $ 1.00       1.00       1.03  
 
                 
Diluted earnings per share
  $ 0.99       0.99       1.03  
 
                 
See accompanying notes to consolidated financial statements.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
Years ended December 31, 2008, 2007 and 2006

(Amounts in thousands, excluding share data)
                                                 
                            Accumulated                
                            other             Total  
    Common     Paid-in     Retained     comprehensive     Treasury     shareholders’  
    stock     capital     earnings     income (loss), net     stock     equity  
Balance at December 31, 2005
  $ 5,108       208,132       389,985       (384 )     (17,183 )   $ 585,658  
Comprehensive income:
                                               
Net income
                51,536                   51,536  
Other comprehensive loss, net of tax
                      (859 )           (859 )
 
                                   
Total comprehensive income
                51,536       (859 )           50,677  
Treasury stock repurchases
                            (8,080 )     (8,080 )
Prior period adjustments — adoption of SAB 108
                (2,770 )                 (2,770 )
Exercise of stock options
    6       867                         873  
Stock compensation
          2,296                         2,296  
Adjustment for adoption of SFAS No. 158
                      (10,366 )           (10,366 )
Dividends paid ($0.70 per share)
                (13,727 )                 (13,727 )
 
                                   
Balance at December 31, 2006
    5,114       211,295       425,024       (11,609 )     (25,263 )     604,561  
Comprehensive income:
                                               
Net income
                49,097                   49,097  
Other comprehensive income, net of tax
                      12,425             12,425  
 
                                   
Total comprehensive income
                49,097       12,425             61,522  
Treasury stock repurchases
                            (40,825 )     (40,825 )
Exercise of stock options
    5       857                         862  
Stock compensation
          2,454                         2,454  
Dividends paid ($0.84 per share)
                (15,696 )                 (15,696 )
 
                                   
Balance at December 31, 2007
    5,119       214,606       458,425       816       (66,088 )     612,878  
Effect of changing pension plan measurement date pursuant to SFAS No. 158, net of tax of $(319) and $361, respectively
                (499 )     572             73  
 
                                   
Beginning balance as adjusted
    5,119       214,606       457,926       1,388       (66,088 )     612,951  
Comprehensive income:
                                               
Net income
                48,171                   48,171  
Other comprehensive loss, net of tax
                      (31,963 )           (31,963 )
 
                                   
Total comprehensive income
                48,171       (31,963 )           16,208  
Treasury stock repurchases
                            (3,335 )     (3,335 )
Exercise of stock options
    5       995                         1,000  
Stock compensation
          2,731                         2,731  
Dividends paid ($0.88 per share)
                (15,771 )                 (15,771 )
 
                                   
Balance at December 31, 2008
  $ 5,124       218,332       490,326       (30,575 )     (69,423 )   $ 613,784  
 
                                   
See accompanying notes to consolidated financial statements.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
                         
    Years ended December 31,  
    2008     2007     2006  
Operating activities:
                       
Net income
  $ 48,171       49,097       51,536  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Provision for loan losses
    22,851       8,743       8,480  
Net gain on sales of assets
    (3,468 )     (4,638 )     (4,550 )
Loss on early extinguishment of debt
                3,124  
Net depreciation, amortization, and accretion
    16,222       14,572       10,828  
Increase in other assets
    (2,007 )     (11,119 )     (10,945 )
Increase in other liabilities
    3,997       3,799       5,353  
Net amortization of discounts/premiums on marketable securities
    (6,382 )     (4,396 )     (1,334 )
Noncash compensation expense related to stock benefit plans
    2,731       2,454       2,296  
Noncash other-than-temporary impairment of investment securities
    16,004       8,412        
Noncash impairment/(recovery) of mortgage servicing rights
    2,165       (65 )     205  
Deferred income tax expense/ (benefit)
    (6,480 )     (750 )     8,775  
Origination of loans held for sale
    (234,973 )     (252,810 )     (153,354 )
Proceeds from loan sales
    212,535       250,295       143,340  
 
                 
Net cash provided by operating activities
    71,366       63,594       63,754  
Investing activities:
                       
Purchase of marketable securities held-to-maturity
                (201,912 )
Purchase of marketable securities available-for-sale
    (457,776 )     (49,102 )     (280,459 )
Proceeds from maturities and principal reductions of marketable securities held-to-maturity
          151,374       115,550  
Proceeds from maturities and principal reductions of marketable securities available-for-sale
    319,051       182,454       138,640  
Proceeds from sales of marketable securities available-for-sale
    113,484       105,361       5,333  
Proceeds from sales of marketable securities held-to-maturity
          15,652        
Loan originations
    (1,649,652 )     (1,489,646 )     (1,334,596 )
Proceeds from loan maturities and principal reductions
    1,283,980       1,234,511       1,118,372  
Proceeds from sale of portfolio loans
                481,301  
Redemption/(purchase) of Federal Home Loan Bank stock
    (31,839 )     3,715       (979 )
Proceeds from sale of real estate owned
    7,176       5,316       6,771  
Sale/(purchase) of real estate owned for investment
    155       (101 )     66  
Purchase of premises and equipment
    (15,655 )     (11,411 )     (13,071 )
Acquisitions, net of cash received
          (25,150 )     (2,605 )
 
                 
Net cash (used in)/ provided by investing activities
    (431,076 )     122,973       32,411  

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
                         
    Years ended December 31,  
    2008     2007     2006  
Financing activities:
                       
(Decrease)/ increase in deposits, net
  $ (504,123 )     9,737       54,948  
Proceeds from long-term borrowings
    645,000              
Repayments of long-term borrowings
    (84,270 )     (75,180 )     (47,759 )
Net increase in short-term borrowings
    168,484       9,342       24,025  
Increase/ (decrease) in advances by borrowers for taxes and insurance
    2,031       1,476       (2,142 )
Treasury stock repurchases
    (3,335 )     (40,825 )     (8,080 )
Repayment of junior subordinated debentures
                (102,062 )
Cash dividends paid
    (15,771 )     (15,696 )     (13,727 )
Proceeds from options exercised, including tax benefit realized
    1,000       862       873  
 
                 
Net cash provided by/ (used in) financing activities
    209,016       (110,284 )     (93,924 )
 
                 
Net (decrease)/ increase in cash and cash equivalents
  $ (150,694 )     76,283       2,241  
 
                 
Cash and cash equivalents at beginning of period
  $ 230,616       154,333       152,092  
Net (decrease)/ increase in cash and cash equivalents
    (150,694 )     76,283       2,241  
 
                 
Cash and cash equivalents at end of period
  $ 79,922       230,616       154,333  
 
                 
Cash paid during the period for:
                       
Interest on deposits and borrowings (including interest credited to deposit accounts of $129,275, $160,291 and $136,319, respectively)
  $ 168,455       210,697       191,458  
Income taxes
    22,541       16,684       6,940  
Noncash activities:
                       
Business acquisitions:
                       
Fair value of assets acquired
  $       211,846       86,673  
Net cash paid
          (25,150 )     (2,605 )
 
                 
Liabilities assumed
  $       186,696       84,068  
 
                 
Loan foreclosures and repossessions
  $ 15,780       6,975       7,817  
Loans transferred to held for investment from loans held for sale
    24,827              
Sale of real estate owned financed by the Company
    614       1,013       768  
See accompanying notes to consolidated financial statements.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(1)   Summary of Significant Accounting Policies
  (a)   Nature of Operations
 
      The Northwest group of companies is organized in a two-tier holding company structure. Northwest Bancorp, MHC (MHC) is a federal mutual holding company and, at December 31, 2008 and 2007, owned approximately 63% of the outstanding shares of common stock of Northwest Bancorp, Inc. (the Company). Annually, the MHC applies for and, for the past three years, has received approval from the Office of Thrift Supervision to waive its right to receive dividends from the Company. Dividends waived by MHC during the years ended December 31, 2008, 2007, and 2006 were $26,872,000, $25,651,000, and $21,376,000, respectively.
 
      Northwest Bancorp, Inc., which is headquartered in Warren, Pennsylvania, is a federal savings and loan holding company for its wholly owned subsidiary, Northwest Savings Bank (Northwest). Northwest offers traditional deposit and loan products through its 167 banking locations in Pennsylvania, New York, Ohio, Maryland, and Florida. Northwest, through its subsidiary Northwest Consumer Discount Company, also offers loan products through 49 consumer finance offices in Pennsylvania.
 
  (b)   Principles of Consolidation
 
      The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of all intercompany accounts and transactions.
 
  (c)   Cash and Cash Equivalents
 
      For purposes of the statement of cash flows, cash and cash equivalents include cash and amounts due from depository institutions, interest-bearing deposits in other financial institutions, federal funds sold, and other short-term investments.
 
  (d)   Marketable Securities
 
      The Company classifies marketable securities at the time of purchase as available-for-sale, or trading securities. If it is management’s intent at the time of purchase to hold securities for an indefinite period of time and/or to use such securities as part of its asset/liability management strategy, the securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses excluded from net earnings and reported as accumulated other comprehensive income, a separate component of shareholders’ equity, net of tax. Securities classified as available-for-sale include securities that may be sold in response to changes in interest rates, resultant prepayment risk, or other market factors. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading and are reported at fair value, with unrealized gains and losses included in earnings. The cost of securities sold is determined on a specific identification basis. The Company held no securities classified as trading at or for the years ended December 31, 2008 and 2007.
 
      The Company regularly reviews its investment securities for declines in value below amortized cost that might be considered “other than temporary.” If a decline in value is considered other than temporary, an impairment charge is recorded in the income statement.
 
      Federal law requires a member institution of the Federal Home Loan Bank (FHLB) system to hold stock of its district FHLB according to a predetermined formula. This stock is recorded at cost and may be pledged to secure FHLB advances.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
  (e)   Loans Receivable
 
      Loans are stated at their unpaid principal balance net of any deferred origination fees or costs and the allowance for estimated loan losses. Interest income on loans is credited to income as earned. Interest earned on loans for which no payments were received during the month is accrued at month end. Interest accrued on loans more than 90 days delinquent is reversed, and such loans are placed on nonaccrual status.
 
      The Company has identified certain residential loans which will be sold prior to maturity. These loans are recorded at the lower of amortized cost or fair value and at December 31, 2008 and 2007 were $18,738,000 and $28,412,000, respectively.
 
      Loan fees and certain direct loan origination costs are deferred, and the net deferred fee or cost is then recognized using the level-yield method over the contractual life of the loan as an adjustment to interest income.
 
  (f)   Allowance for Loan Losses and Provision for Loan Losses
 
      Provisions for estimated loan losses and the amount of the allowance for loan losses are based on losses inherent in the loan portfolio that are both probable and reasonably estimable at the date of the financial statements. Management believes, to the best of their knowledge, that all known losses as of the statement of condition dates have been recorded.
 
      Management considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Nonaccrual loans are deemed to be impaired unless fully secured with liquid collateral. In evaluating whether a loan is impaired, management considers not only the amount that the Company expects to collect but also the timing of collection. Generally, if a delay in payment is insignificant (e.g., less than 30 days), a loan is not deemed to be impaired.
 
      When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or at the loan’s market price or fair value of the collateral if the loan is collateral dependent. Larger loans are evaluated individually for impairment. Smaller balance, homogeneous loans (e.g., primarily consumer and residential mortgages) are evaluated collectively for impairment. Impairment losses are included in the allowance for loan losses. Impaired loans are charged off when management believes that the ultimate collectibility of a loan is not likely.
 
      Interest income on impaired loans is recognized using the cash basis method. Such interest ultimately collected is credited to income in the period of recovery or applied to reduce principal if there is sufficient doubt about the collectibility of principal. Interest that has been accrued on impaired loans that are contractually past due 90 days and over is reversed.
 
  (g)   Real Estate Owned
 
      Real estate owned is comprised of property acquired through foreclosure or voluntarily conveyed by delinquent borrowers. These assets are recorded on the date acquired at the lower of the related loan balance or market value of the collateral less disposition cost with the market value being determined by an appraisal. Subsequently, foreclosed assets are valued at the lower of the amount recorded at acquisition date or the current market value, less estimated disposition costs. Gains or losses realized from the disposition of such property are credited or charged to noninterest income.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
  (h)   Premises and Equipment
 
      Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is accumulated on a straight-line basis over the estimated useful lives of the related assets. Estimated lives range from three to thirty years. Amortization of leasehold improvements is accumulated on a straight-line basis over the terms of the related leases or the useful lives of the related assets, whichever is shorter.
 
  (i)   Goodwill
 
      In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill is allocated to various reporting units, which are either the Company’s reportable segments or one level below. Goodwill is no longer amortized but is tested for impairment on an annual basis and between annual tests if events occur, or if circumstances change, that would more likely than not reduce the fair value below its carrying amount. The annual impairment test is based on discounted cash flow models that incorporate variables including growth in net income, discount rates, and terminal values. If the carrying amount of goodwill exceeds its fair value, an impairment loss is recognized as a non-cash charge.
 
  (j)   Core Deposit Intangibles
 
      The Company engages an independent third party expert to analyze and prepare a core deposit study for all acquisitions. This study reflects the cumulative present value benefit of acquiring deposits versus an alternative source of funding. Based upon this analysis, the amount of the premium related to the core deposits of the business purchased is calculated along with the estimated life of the acquired deposits. The core deposit intangible, which is recorded in other intangible assets, is then amortized to expense on an accelerated basis over an approximate life of seven years.
 
  (k)   Bank-Owned Life Insurance
 
      The Company owns insurance on the lives of a certain group of key employees and directors. The policies were purchased to help offset the increase in the costs of various fringe benefit plans including healthcare as well as the directors deferred compensation plan. The cash surrender value of these policies is included as an asset on the consolidated statements of financial condition, and any increases in the cash surrender value are recorded as noninterest income on the consolidated statements of income. In the event of the death of an insured individual under these policies, after distribution to the insured’s beneficiaries the Company would receive a death benefit, which would be recorded as noninterest income.
 
  (l)   Deposits
 
      Interest on deposits is accrued and charged to expense monthly and is paid or credited in accordance with the terms of the accounts.
 
  (m)   Pension Plans
 
      The Company has noncontributory defined benefit pension plans. The net periodic pension cost has been calculated in accordance with Statement of Financial Accounting Standards No. 87, Employers’ Accounting for Pensions . In conjunction with the adoption of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans , the Company changed its measurement date to December 31 from October 31 for its defined benefit pension plans effective December 31, 2008.
 
  (n)   Income Taxes
 
      The Company joins with its wholly owned subsidiaries in filing a consolidated federal income tax return.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The Company accounts for income taxes using the asset and liability method prescribed by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes . The objective of the asset and liability method is to establish deferred tax assets and liabilities for temporary differences between the financial reporting and tax basis of the Company’s assets and liabilities based on the tax rates expected to be in effect when such amounts are realized or settled.
 
  (o)   Stock Related Compensation
 
      The Company accounts for its stock-based compensation plans under the provisions of Statement of Financial Accounting Standards No. 123 (revised 2005), Share-Based Payments (“SFAS 123(r)”). The Black-Scholes-Merton option-pricing model was used to determine the fair value of each option award, estimated on the grant date. During the year ended December 31, 2008 the Company awarded 393,777 stock options to employees and 24,000 stock options to directors. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the grant date and options generally vest over a five-year to seven-year period from the grant date. Expected volatilities are based on historical volatility of the Company’s stock. The expected term of options is based upon previous option grants. The risk-free rate is based on yields on U.S. Treasury securities of a similar maturity to the expected term of the options. New shares are issued when options granted from the 1995, 2000 and 2005 Stock Options Plans are exercised and treasury shares will be issued when options granted from the 2008 Stock Option Plan are exercised.
 
      Stock-based employee compensation expense related to the Company’s recognition and retention plan of $1,092,000, $1,251,000 and $1,176,000 was included in income before income taxes during the years ended December 31, 2008, 2007 and 2006, respectively. The effect on net income for the years ended December 31, 2008, 2007 and 2006 was a reduction of $710,000, $813,000 and $765,000, respectively. The Company will recognize the remaining expense of $1,124,000 over the next three years. Total compensation expense for unvested stock options of $1,455,000 has yet to be recognized as of December 31, 2008. The weighted average period over which this remaining stock option expense will be recognized is approximately 2.25 years.
 
      The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions: (1) dividend yields ranging from 1.6% to 3.9% based on historical dividends and market prices; (2) expected volatility of 17% to 33% based on historical volatility; (3) risk-free interest rates ranging from 2.8% to 6.5%; and (4) expected lives of seven to eight years based on previous grants.
 
  (p)   Segment Reporting
 
      Statement of Financial Accounting Standard No. 131, Disclosures about Segments of an Enterprise and Related Information , requires that public business enterprises report financial and descriptive information about their reportable operating segments. Based on the guidance provided by this statement, the Company has identified two reportable segments, Community Banks and Consumer Finance. See note 21 for related disclosures.
 
  (q)   Derivative financial instruments – interest rate swaps
 
      The Company accounts for derivative financial instruments in accordance with Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), as amended. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Pursuant to SFAS 133, the accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. An entity that elects to use hedge accounting is required, at inception, to establish the method it will use for assessing the effectiveness of hedging derivative and the measurement approach for determining the ineffective aspect of the hedge. Those methods must be consistent with the Company’s approach to managing risk.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The Company utilizes interest rate swap agreements as part of the management of interest rate risk to hedge the interest rate risk on the Company’s Trust Preferred Debentures. Amounts receivable or payable are recognized as accrued under the terms of the agreements and the differential is recorded as an adjustment to interest expense. The interest rate swaps are designated as cash flow hedges, with the effective portion of the derivative’s unrealized gain or loss is recorded as a component of other comprehensive income. The ineffective portion of the unrealized gain or loss, if any, would be recorded in other expense. See note 22 for related disclosures.
 
  (r)   Off-Balance-Sheet Instruments
 
      In the normal course of business, the Company extends credit in the form of loan commitments, undisbursed lines of credit, and standby letters of credit. These off-balance-sheet instruments involve, to various degrees, elements of credit and interest rate risk not reported in the consolidated statement of financial condition.
 
  (s)   Use of Estimates
 
      The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. The estimates and assumptions that we deem important to our financial statements relate to the allowance for loan losses, the accounting treatment and valuation of our investment securities portfolio, the analysis of the carrying value of goodwill and income taxes. These estimates and assumptions are based on management’s best estimates and judgment and we evaluate them using historical experience and other factors, including the current economic environment. We adjust our estimates and assumptions when facts and circumstances dictate. Illiquid credit markets and current economic conditions have increased the uncertainty inherent in our estimates and assumptions. As future events cannot be determined, actual results could differ significantly from our estimates.
 
  (t)   Reclassification of Prior Years’ Statements
 
      Certain items previously reported have been reclassified to conform with the current year’s reporting format.
(2)   Recent Accounting Pronouncements
      In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R applies to all transactions or other events in which an entity obtains control of one or more businesses, including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration. SFAS 141R applies to all business entities, including mutual entities that previously used the pooling-of-interest method of accounting for some business combinations. The objective of SFAS 141R is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141R establishes principles and requirements for how the acquirer recognizes and measures the identifiable assets acquired and the liabilities assumed, recognizes and measures the goodwill acquired, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effect of the business combination. SFAS 141R does not apply to the acquisition of an asset or a group of assets that does not constitute a business or a combination between entities under common control. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
 
      In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115 (“SFAS

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS 159 became effective January 1, 2008. The Company has not elected to value any assets or liabilities (not otherwise measured at fair value) under SFAS 159. The Company continues to evaluate the impact of SFAS 159 should we elect fair value measurement for any asset or liability purchased or assumed in the future.
 
      In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158” ). The Company adopted the measurement date change provision of SFAS 158 effective January 1, 2008. The measurement date change did not have a material impact on the financial condition or operations of the Company.
 
      In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“ SFAS 157” ), which upon adoption will replace various definitions of fair value in existing accounting literature with a single definition, will establish a framework for measuring fair value, and will require additional disclosures about fair value measurements. SFAS 157 clarifies that fair value is the price that would be received to sell an asset or the price paid to transfer a liability in the most advantageous market available to the Company and emphasizes that fair value is a market-based measurement and should be based on the assumptions market participants would use. SFAS 157 also creates a three-level hierarchy under which individual fair value estimates are ranked based on the relative reliability of the inputs used in the valuation. This hierarchy is the basis for the disclosure requirements, with fair value estimates based on the least reliable inputs requiring more extensive disclosures about the valuation method used. SFAS 157 is required to be applied whenever another financial accounting standard requires or permits an asset or liability to be measured at fair value. SFAS 157 does not expand the use of fair value to any new circumstances. SFAS 157 is effective for years beginning after November 15, 2007 and interim periods within those fiscal years. In February 2008, the FASB issued FSP 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delays the effective date of SFAS 157 for non-recurring, non-financial instruments to fiscal years beginning after November 15, 2008. The Company has elected to apply this deferral to all nonfinancial assets and nonfinancial liabilities that are measured on a nonrecurring basis. Additionally, on October 10, 2008, the FASB issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”) , which clarifies the application of SFAS 157 in a market that is not active. FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The Company adopted SFAS 157, January 1, 2008. See footnote 16 for further information.
 
      In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (an amendment to FASB Statement No. 133) (“SFAS 161”) . SFAS 161 requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and related Interpretations, and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The required disclosures include the fair value of derivative instruments and their gains and losses in tabular format, information about credit-risk-related contingent features in derivative agreements, counterparty credit risk and a company’s strategies and objectives for using derivative financial instruments. SFAS 161 also requires entities to disclose information that would enable users of its financial statements to understand the volume of its derivative activity. SFAS will be effective for the Company beginning January 1, 2009. The adoption of this standard will not have a material impact on the financial condition or operations of the Company.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      In January 2009, the FASB issued FASB Staff Position (“FSP”) No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 . Effective for interim and annual reporting periods ending after December 15, 2008, FSP EITF 99-20-1 amended EITF 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets , to achieve a more consistent evaluation of whether there is other-than-temporary impairment for the debt securities under the scope of EITF 99-20 and the debt securities not within the scope of EITF 99-20 that would fall under the scope of SFAS 115, Accounting for Certain Investments in Debt and Equity Securities . The adoption of FSP EITF 99-20-1 did not have a material impact of the financial condition or operations of the Company.
(3)   Marketable Securities
 
    Marketable securities at December 31, 2008 are as follows:
                                 
            Gross     Gross        
            unrealized     unrealized        
    Amortized     holding     holding     Market  
    cost     gains     losses     value  
Available-for-sale:
                               
U.S. government and agencies:
                               
Due in one year or less
  $ 91             (3 )     88  
Government sponsored enterprises:
                               
Due in one year or less
    2,985       50             3,035  
Due in one year – five years
    2,962       208             3,170  
Due in five years – ten years
    30,352       2,066             32,418  
Due after ten years
    61,494       8,712       (9 )     70,197  
Equity securities
    954       160             1,114  
Municipal securities:
                               
Due in one year – five years
    460       1             461  
Due in five years – ten years
    43,160       822       (86 )     43,896  
Due after ten years
    224,996       2,707       (4,512 )     223,191  
Corporate debt issues:
                               
Due after ten years
    25,165       214       (9,418 )     15,961  
Mortgage-backed securities:
                               
Fixed rate pass-through
    186,659       6,447       (7 )     193,099  
Variable rate pass-through
    276,121       3,136       (2,074 )     277,183  
Fixed rate CMO
    60,119       445       (3,084 )     57,480  
Variable rate CMO
    228,917       48       (11,088 )     217,877  
 
                       
Total mortgage- backed securities
    751,816       10,076       (16,253 )     745,639  
 
                       
Total securities available-for-sale
  $ 1,144,435       25,016       (30,281 )     1,139,170  
 
                       

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
Marketable securities at December 31, 2007 are as follows:
                                 
            Gross     Gross        
            unrealized     unrealized        
    Amortized     holding     holding     Market  
    cost     gains     losses     value  
Available-for-sale:
                               
U.S. government and agencies:
                               
Due in one year or less
  $ 368             (3 )     365  
Government sponsored enterprises:
                               
Due in one year or less
    6,959       35             6,994  
Due in one year – five years
    42,352       259             42,611  
Due in five years – ten years
    56,406       194       (50 )     56,550  
Due after ten years
    180,274       5,945       (193 )     186,026  
Equity securities
    6,478       401             6,879  
Municipal securities:
                               
Due in one year – five years
    816       1             817  
Due in five years – ten years
    33,217       388       (63 )     33,542  
Due after ten years
    228,862       4,019       (120 )     232,761  
Corporate debt issues:
                               
Due after ten years
    37,225       546       (2,696 )     35,075  
Mortgage-backed securities:
                               
Fixed rate pass-through
    73,284       998       (290 )     73,992  
Variable rate pass-through
    306,885       2,263       (494 )     309,054  
Fixed rate CMO
    73,514       248       (1,969 )     71,793  
Variable rate CMO
    76,886       416       (394 )     76,908  
 
                       
Total mortgage- backed securities
    530,569       4,325       (3,147 )     531,747  
 
                       
Total securities available-for-sale
  $ 1,123,526       16,113       (6,272 )     1,133,367  
 
                       

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
The following table presents information regarding the issuers and the carrying value of the Company’s mortgage-backed securities:
                 
    December 31  
    2008     2007  
Mortgage-backed securities:
               
FNMA
  $ 288,082       165,391  
GNMA
    99,354       88,428  
FHLMC
    320,297       229,960  
Other (nonagency)
    37,906       47,968  
 
           
Total mortgage-backed securities
  $ 745,639       531,747  
 
           
Marketable securities having a carrying value of $388,599,000 at December 31, 2008 were pledged under collateral agreements. During the years ended December 31, 2008, 2007 and 2006 the Company sold marketable securities classified as available-for-sale for $113,484,000, $105,361,000 and $5,333,000, respectively. The gross realized gains on these sales were $6,037,000, $7,397,000 and $368,000, respectively. The gross realized losses on the sales for the years ended December 31, 2008, 2007 and 2006 were $0, $2,439,000 and $0, respectively. During 2007, due to deterioration in the credit markets, the Company sold the majority of its non-agency corporate debt portfolio. Included therein was $15,277,000 of securities classified as held-to-maturity. The held-to-maturity securities were sold for a net gain of $375,000. In conjunction with the sale of held-to-maturity securities, the Company was required under generally accepted accounting principles to transfer the remaining held-to-maturity portfolio of $649,658,000 to available-for-sale. At the time of transfer, the transferred securities had an unrealized gain of $4,690,000. During the years ended December 31, 2008 and 2007 the Company recognized noncash other-than-temporary impairment in its investment portfolio resulting in write-downs of $16,004,000 and $8,412,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
The following table shows the fair value and gross unrealized losses on investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2008:
                                                 
    Less than 12 months     12 months or more     Total  
            Unrealized             Unrealized             Unrealized  
    Fair value     losses     Fair value     losses     Fair value     losses  
U.S. government and agencies
  $             1,094       (12 )   $ 1,094       (12 )
Municipal securities
    109,255       (4,598 )                 109,255       (4,598 )
Corporate issues
    8,618       (7,055 )     2,573       (2,363 )     11,191       (9,418 )
Mortgage-backed securities
    285,087       (11,625 )     80,104       (4,628 )     365,191       (16,253 )
 
                                   
 
                                               
Total temporarily impaired securities
  $ 402,960       (23,278 )     83,771       (7,003 )   $ 486,731       (30,281 )
 
                                   
Percentage of total
    83 %             17 %             100 %        
 
                                         
The following table shows the fair value and gross unrealized losses on investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2007:
                                                 
    Less than 12 months     12 months or more     Total  
            Unrealized             Unrealized             Unrealized  
    Fair value     losses     Fair value     losses     Fair value     losses  
U.S. government and agencies
  $             30,225       (246 )   $ 30,225       (246 )
Municipal securities
    24,775       (96 )     5,928       (87 )     30,703       (183 )
Corporate issues
    24,533       (2,551 )     847       (145 )     25,380       (2,696 )
Mortgage-backed securities
    59,032       (495 )     130,731       (2,652 )     189,763       (3,147 )
 
                                   
 
Total temporarily impaired securities
  $ 108,340       (3,142 )     167,731       (3,130 )   $ 276,071       (6,272 )
 
                                   
Percentage of total
    39 %             61 %             100 %        
 
                                         
The decline in the fair value of securities primarily resulted from changes in the levels of interest rates and the illiquidity in the marketplace. Regularly, the Company performs an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired other-than-temporarily. The assessment considers many factors including the severity and duration of the impairment; the Company’s intent and ability to hold the security for a period of time sufficient for recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit ratings, underlying collateral position and recent downgrades. For asset backed securities, the Company evaluates current characteristics of each security such as delinquency and foreclosure levels, credit enhancement and projected losses and coverage. It is possible that the underlying collateral of these securities will perform worse than current expectations, which may lead to adverse changes in cash flows on these

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    securities and potential future other-than-temporary impairment losses. Events that may trigger material declines in fair values for these securities in the future would be, but are not limited to; deterioration of credit metrics, significantly higher levels of default and severity of loss on the underlying collateral, deteriorating credit enhancement and loss coverage ratios, or further illiquidity. Securities on which there is an unrealized loss that is deemed to the other than temporary are written down to fair value with the write-down recorded separately in the income statement. The Company has the ability and intent to hold these securities until the market value recovers or maturity and the Company believes the collection of the contractual principal and interest is probable. For these reasons, the Company considers the unrealized losses to be temporary impairment losses. There are approximately 355 positions that are temporarily impaired at December 31, 2008. The aggregate carrying amount of cost-method investments at December 31, 2008 was $1,139,170,000 of which all were evaluated for impairment.
 
(4)   Loans Receivable
 
    Loans receivable at December 31, 2008 and 2007 are summarized in the table below:
                 
    December 31  
    2008     2007  
Real estate loans:
               
One-to-four family
  $ 2,492,940       2,430,117  
Home equity
    1,035,954       992,335  
Multi-family and commercial
    1,100,218       906,594  
 
           
 
               
Total real estate loans
    4,629,112       4,329,046  
 
               
Consumer loans:
               
Automobile
    102,267       125,298  
Education
    38,152       14,551  
Loans on savings accounts
    11,191       10,563  
Other
    115,913       117,831  
 
           
 
               
Total consumer loans
    267,523       268,243  
 
               
Commercial loans
    387,145       367,459  
 
           
 
               
Total loans receivable, gross
    5,283,780       4,964,748  
 
               
Deferred loan fees
    (5,041 )     (4,179 )
Allowance for loan losses
    (54,929 )     (41,784 )
Undisbursed loan proceeds (real estate loans)
    (81,918 )     (123,163 )
 
           
 
               
Toal Loans receivable, net
  $ 5,141,892       4,795,622  
 
           

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
At December 31, 2008 and 2007, the Company serviced loans for others approximating $1,099,949,000, and $998,285,000 respectively. These loans serviced for others are not assets of the Company and are excluded from the Company’s financial statements.
At December 31, 2008 and 2007, approximately 79% and 77%, respectively, of the Company’s loan portfolio was secured by properties located in Pennsylvania. The Company does not believe it has significant concentrations of credit risk to any one group of borrowers given its underwriting and collateral requirements.
Loans receivable at December 31, 2008 and 2007 include $1,300,990,000 and $1,042,691,000 of adjustable rate loans and $3,982,790,000 and $3,922,057,000, respectively, of fixed rate loans.
The Company’s exposure to credit loss in the event of nonperformance by the other party to off-balance-sheet financial instruments is represented by the contract amount of the financial instrument. The Company uses the same credit policies in making commitments for off-balance-sheet financial instruments as it does for on-balance-sheet instruments. Financial instruments with off-balance-sheet risk as of December 31, 2008 and 2007 are presented in the following table:
                 
    December 31  
    2008     2007  
Loan commitments
  $ 116,330       69,851  
Undisbursed lines of credit
    273,670       328,373  
Standby letters of credit
    15,821       14,955  
 
           
 
  $ 405,821       413,179  
 
           
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained by the Company upon extension of credit is based on management’s credit evaluation of the counterparty. Collateral held varies but generally may include cash, marketable securities, and property.
Outstanding loan commitments at December 31, 2008, for fixed rate loans, are $56,442,000. The interest rates on these commitments approximate market rates at December 31, 2008. Outstanding loan commitments at December 31, 2008 for adjustable rate loans are $59,888,000. The fair value of these commitments are affected by fluctuations in market rates of interest.
The Company issues standby letters of credit in the normal course of business. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party. The Company is required to perform under a standby letter of credit when drawn upon by the guaranteed third party in the case of nonperformance by the Company’s customer. The credit risk associated with standby letters of credit is essentially the same as that involved in extending loans to customers and is subject to normal credit policies. Collateral may be obtained based on management’s credit assessment of the customer. The maximum potential amount of future payments the Company could be required to make under these standby letters of credit is $15,821,000, of which $12,278,000 is fully collateralized. A liability (which represents deferred income) of $162,000 and $104,000 has been recognized by the Company for the obligations as of December 31, 2008 and 2007, respectively, and there are no recourse provisions that would enable the Company to recover any amounts from third parties.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    The Company automatically places loans on nonaccrual status when they become more than 90 days contractually delinquent or when the paying capacity of the obligor becomes inadequate to meet the requirements of the contract. When a loan is placed on nonaccrual, all previously accrued and uncollected interest is reversed against current period interest income. Nonaccrual loans at December 31, 2008, 2007 and 2006 were $99,203,000, $49,610,000, and $40,525,000, respectively.
 
    A loan is considered to be impaired, as defined by SFAS No. 114, Accounting by Creditors for Impairment of a Loan , when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement including both contractual principal and interest payments. The amount of impairment is required to be measured using one of the three methods prescribed by SFAS 114: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, a specific reserve is allocated for the impairment. Impaired loans at December 31, 2008, 2007 and 2006 were $99,203,000, $49,610,000 and $40,525,000, respectively. Average impaired loans during the years ended December 31, 2008, 2007 and 2006 were $72,434,000, $41,179,000 and $41,625,000, respectively.
 
    There were no commitments to lend additional funds to debtors on nonaccrual status.
 
(5)   Accrued Interest Receivable
 
    Accrued interest receivable as of December 31, 2008 and 2007 is presented in the following table:
                 
    December 31  
    2008     2007  
Investment securities
  $ 3,672       5,455  
Mortgage-backed securities
    2,997       2,818  
Loans receivable
    20,583       18,811  
 
           
 
  $ 27,252       27,084  
 
           

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(6)   Allowance for Loan Losses
 
    Changes in the allowance for losses on loans receivable for the years ended December 31, 2008, 2007 and 2006 are presented in the following table:
                         
    Years ended December 31,  
    2008     2007     2006  
Balance, beginning of year
  $ 41,784       37,655       33,411  
Provision
    22,851       8,743       8,480  
Charge-offs
    (11,610 )     (8,190 )     (7,617 )
Acquisitions
          2,119       1,982  
Recoveries
    1,904       1,457       1,399  
 
                 
Balance, end of year
  $ 54,929       41,784       37,655  
 
                 
    While management uses available information to provide for losses, future additions to the allowance may be necessary based on changes in economic conditions. Current economic conditions have increased the uncertainty inherent in our estimates and assumptions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Management believes, to the best of their knowledge, that all known losses as of the balance sheet dates have been recorded.
 
(7)   Federal Home Loan Bank Stock
 
    The Company’s banking subsidiary is a member of the Federal Home Loan Bank system. As a member, Northwest maintains an investment in the capital stock of the FHLB, at cost, in an amount not less than 4.75% of borrowings outstanding plus 0.75% of unused FHLB borrowing capacity. During the quarter ended December 31, 2008, the FHLB suspended paying dividends on its capital stock. Recent published reports indicate that the FHLB may be subject to accounting rules and asset quality risks that could result in materially lower regulatory capital levels. In an extreme situation, it is possible that the capitalization of the FHLB could be substantially diminished or reduced to zero. Consequently, there is a risk that our investment in the FHLB common stock could be deemed other-than-temporarily impaired in the future.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(8)   Premises and Equipment
 
    Premises and equipment at December 31, 2008 and 2007 are summarized by major classification in the following table:
                 
    December 31  
    2008     2007  
Land and land improvements
  $ 14,292       14,139  
Office buildings and improvements
    106,561       99,438  
Furniture, fixtures, and equipment
    82,574       74,013  
Leasehold improvements
    10,990       11,186  
 
           
 
               
Total, at cost
    214,417       198,776  
 
               
Less accumulated depreciation and amortization
    (98,575 )     (87,882 )
 
           
 
               
Premises and equipment, net
  $ 115,842       110,894  
 
           
    Depreciation and amortization expense for the years ended December 31, 2008, 2007 and 2006 was $11,984,000, $9,264,000, and $8,706,000, respectively.
 
    Premises used by certain of the Company’s branches and offices are occupied under formal operating lease arrangements. The leases expire on various dates through 2027. Minimum annual rentals by fiscal year are summarized in the following table:
         
2009
  $ 4,280  
2010
    3,678  
2011
    3,253  
2012
    2,438  
2013
    1,928  
Thereafter
    10,310  
 
     
 
  $ 25,887  
 
     
    Rental expense for the years ended December 31, 2008, 2007 and 2006 was $5,017,000, $4,555,000 and $4,142,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(9)   Goodwill and Other Intangible Assets
 
    The following table provides information for intangible assets subject to amortization for the periods indicated:
                 
    December 31  
    2008     2007  
Amortized intangible assets:
               
Core deposit intangibles — gross
  $ 30,275       24,475  
Acquisitions
          5,800  
Less accumulated amortization
    (23,172 )     (19,318 )
 
           
 
               
Core deposit intangibles — net
  $ 7,103       10,957  
 
           
 
               
Customer contract intangible assets — gross
  $ 1,731       831  
Acquisitions
          900  
Less accumulated amortization
    (1,439 )     (906 )
 
           
 
               
Customer contract intangible assets — net
  $ 292       825  
 
           
    The following information shows the actual aggregate amortization expense for the current and prior years as well as the estimated aggregate amortization expense, based upon current levels of intangible assets, for each of the five succeeding fiscal years:
         
For the year ended 12/31/06
  $ 3,876  
For the year ended 12/31/07
    4,499  
For the year ended 12/31/08
    4,387  
For the year ending 12/31/09
    2,847  
For the year ending 12/31/10
    1,896  
For the year ending 12/31/11
    1,445  
For the year ending 12/31/12
    693  
For the year ending 12/31/13
    355  

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    The following table provides information for the changes in the carrying amount of goodwill:
                         
    Community     Consumer        
    banks     finance     Total  
Balance at December 31, 2006
  $ 154,458       1,312       155,770  
Goodwill acquired
    15,844             15,844  
Impairment losses
                 
 
                 
Balance at December 31, 2007
    170,302       1,312       171,614  
Goodwill acquired
                 
Tax adjustment
    (251 )           (251 )
Impairment losses
                 
 
                 
Balance at December 31, 2008
  $ 170,051       1,312       171,363  
 
                 
    We have performed the required goodwill impairment tests and have determined that goodwill is not impaired as of December 31, 2008 and 2007.
 
(10)   Deposits
 
    Deposit balances at December 31, 2008 and 2007 are shown in the table below:
                 
    December 31  
    2008     2007  
Savings accounts
  $ 760,245       745,430  
Interest-bearing checking accounts
    706,120       717,991  
Noninterest-bearing checking accounts
    394,011       361,102  
Money market deposit accounts
    720,375       681,115  
Certificates of deposit
    2,457,460       3,036,696  
 
           
 
               
 
  $ 5,038,211       5,542,334  
 
           
    The aggregate amount of certificates of deposit with a minimum denomination of $100,000 at December 31, 2008 and 2007 was $533,404,000 and $681,695,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    The following table summarizes the contractual maturity of the certificate accounts:
                 
    December 31  
    2008     2007  
Due within 12 months
  $ 1,285,695       2,541,053  
Due between 12 and 24 months
    590,849       253,957  
Due between 24 and 36 months
    238,927       125,226  
Due between 36 and 48 months
    289,001       50,759  
Due between 48 and 60 months
    37,905       44,959  
After 60 months
    15,083       20,742  
 
           
 
               
 
  $ 2,457,460       3,036,696  
 
           
    The following table summarizes the interest expense incurred on the respective deposits:
                         
    Years ended December 31,  
    2008     2007     2006  
Savings accounts
  $ 9,159       10,908       12,619  
Interest-bearing checking accounts
    6,434       11,038       9,396  
Money market deposit accounts
    14,726       23,551       19,446  
Certificate accounts
    106,742       141,043       115,524  
 
                 
 
                       
 
  $ 137,061       186,540       156,985  
 
                 

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(11)   Borrowed Funds
 
    Borrowed funds at December 31, 2008 and 2007 are presented in the following table:
                                 
    December 31  
    2008     2007  
            Average             Average  
    Amount     rate     Amount     rate  
Term notes payable to the FHLB of Pittsburgh:
                               
Due within one year
  $ 43,708       3.87 %     84,031       5.00 %
Due between one and two years
    36,532       4.36 %     35,588       4.63 %
Due between two and three years
    160,000       4.11 %     36,567       4.36 %
Due between three and four years
    145,000       3.90 %     65,000       5.02 %
Due between four and five years
    125,000       3.85 %     35,000       4.55 %
Due between five and ten years
    315,778       4.11 %     839       2.81 %
 
                           
 
    826,018               257,025          
 
Revolving line of credit, Federal Home Loan Bank of Pittsburgh
    146,000       0.59 %            
Investor notes payable, due various dates in 2009
    4,491       4.99 %     4,638       4.99 %
Securities sold under agreement to repurchase, due within one year
    91,436       1.02 %     77,452       3.25 %
 
                           
 
                               
Total borrowed funds
  $ 1,067,945               339,115          
 
                           
    Borrowings from the Federal Home Loan Bank of Pittsburgh are secured by the Company’s mortgage-backed securities and qualifying residential first mortgage loans. Certain of these borrowings are subject to restrictions or penalties in the event of prepayment.
 
    The revolving line of credit with the Federal Home Loan Bank of Pittsburgh carries a commitment of $150,000,000 maturing on December 7, 2011. The rate is adjusted daily by the Federal Home Loan Bank, and any borrowings on this line may be repaid at any time without penalty.
 
    The securities sold under agreements to repurchase are collateralized by various securities held in safekeeping by the Federal Home Loan Bank of Pittsburgh. The market value of such securities exceeds the value of the securities sold under agreements to repurchase. The average amount of agreements outstanding in the years ended December 31, 2008, 2007 and 2006 was $88,349,000, $70,875,000 and $44,860,000, respectively. The maximum amount of security repurchase agreements outstanding during the years ended December 31, 2008, 2007 and 2006 was $98,108,000, $83,432,000 and $55,705,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(12)   Income Taxes
Total income tax was allocated for the years ended December 31, 2008, 2007 and 2006 as follows:
                         
    Years ended December 31,  
    2008     2007     2006  
Income before income taxes
  $ 16,968       17,456       19,792  
Goodwill for prior acquisition
    (251 )            
Shareholders’ equity for unrealized (loss)/gain on securities available-for-sale
    (5,916 )     4,672       (627 )
Shareholders’ equity for tax benefit for excess of fair value above cost of stock benefit plans
    (349 )     (300 )     (305 )
Shareholders’ equity for pension adjustment
    (9,099 )     3,311       (6,628 )
Shareholders’ equity for swap fair value adjustment
    (4,590 )            
Shareholders’ equity for prior period adjustments
                (1,492 )
 
                 
 
  $ (3,237 )     25,139       10,740  
 
                 
Income tax expense (benefit) applicable to income before taxes consists of:
                         
    Years ended December 31,  
    2008     2007     2006  
Current
  $ 23,448       18,206       11,017  
Deferred
    (6,480 )     (750 )     8,775  
 
                 
 
  $ 16,968       17,456       19,792  
 
                 
A reconciliation from the expected federal statutory income tax rate to the effective rate, expressed as a percentage of pretax income, is as follows:
                         
    Years ended December 31,  
    2008     2007     2006  
Expected tax rate
    35.0 %     35.0 %     35.0 %
Tax-exempt interest income
    (7.4 ) %     (7.3 )%     (7.0 )%
State income tax, net of federal benefit
    2.2 %     1.9 %     2.6 %
Bank-owned life insurance
    (2.6 )%     (2.3 )%     (2.1 )%
Other
    (1.2 )%     (1.1 )%     (0.8 )%
 
                 
Effective tax rate
    26.0 %     26.2 %     27.7 %
 
                 

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2008 and 2007 are presented below:
                 
    December 31  
    2008     2007  
Deferred tax assets:
               
Deferred fee income
  $ 527       499  
Deferred compensation expense
    2,980       1,719  
Net operating loss carryforwards
    1,352       3,716  
Bad debts
    14,002       10,438  
Accrued postretirement benefit cost
    682       698  
Stock benefit plans
    375       375  
Marketable securities available for sale
    2,078        
Writedown of investment securities
    6,243       665  
Reserve for uncollected interest
    1,894       844  
Pension expense
    559       1,013  
Pension and postretirement benefits
    12,060       3,317  
Alternative minimum tax credit carryforwards
    371       1,950  
Unrealized loss on the fair value of derivatives
    4,590        
Other
    379       142  
 
           
 
               
 
    48,092       25,376  
 
Deferred tax liabilities:
               
Marketable securities available for sale
          3,838  
Purchase accounting
    2,487       3,451  
Intangible asset
    10,952       9,228  
Mortgage servicing rights
    2,198       3,134  
Fixed assets
    6,630       5,993  
Other
    621       613  
 
           
 
               
 
    22,888       26,257  
 
           
 
               
Net deferred tax asset/ (liability)
  $ 25,204       (881 )
 
           
    The Company has determined that no valuation allowance is necessary for the deferred tax assets because it is more likely than not that these assets will be realized through carryback to taxable income in prior years, future reversals of existing temporary differences, and through future taxable income. Net deferred tax assets of $877,000 were recorded in 2007 related to the acquisition of CSB Bank. The Company will continue to review the criteria related to the recognition of deferred tax assets on a regular basis.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    Under provisions of the Internal Revenue Code (“IRC”), Northwest has approximately $3,863,000 of federal net operating losses, which expire in years 2009 through 2027. These net operating losses, which were acquired as part of the First Carnegie and Maryland Permanent acquisitions, are subject to annual carryforward limitations imposed by IRC code section 382. The Company believes the limitations will not prevent the carryforward benefits from being utilized. In addition, the Company has approximately $371,000 of alternative minimum tax credit carryforwards, which can be carried forward indefinitely.
 
    The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”) , on January 1, 2007. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 also provides related guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption did not require us to recognize any increase or decrease in our liability for unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
         
Balance at January 1, 2008
  $ 967  
Additions based on tax positions related to the current year
     
Additions for tax positions of prior years
     
Reductions for tax positions of prior years
    (967 )
Settlements
     
 
     
Balance at December 31, 2008
  $  
 
     
    The balance at December 31, 2008 reflects no unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate. The Company recognizes interest accrued and penalties (if any) related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2008, the Company did not accrue any interest. At December 31, 2008 the Company had no amount accrued for interest or the payment of penalties.
 
    The Company is subject to routine audits of our tax returns by the Internal Revenue Service as well as all states in which the Company conducts business. The Internal Revenue Service commenced an examination of our federal income tax returns for the year ended June 30, 2005, the six-month period ended December 31, 2005 and the years ended December 31, 2006 and 2007 in January of 2008 that we anticipate will be completed during 2009. We do not anticipate a material change to our financial position due to the settlement of this audit. The Company is subject to audit by any state in which we conduct business for the tax periods ended June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007.
 
(13)   Shareholders’ Equity
 
    Retained earnings are partially restricted in connection with regulations related to the insurance of savings accounts, which requires Northwest to maintain certain statutory reserves. Northwest may not pay dividends on or repurchase any of their common stock if the effect thereof would reduce retained earnings below the level of adequate capitalization as defined by federal and state regulators.
 
    In tax years prior to fiscal 1997, Northwest was permitted, under the Internal Revenue Code (the Code), to deduct an annual addition to a reserve for bad debts in determining taxable income, subject to certain limitations. Bad debt deductions for income tax purposes are included in taxable income of later years only if the bad debt reserve is used subsequently for purposes other than to absorb bad debt losses. Because Northwest does not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes have been provided prior to fiscal 1987. Retained earnings at December 31, 2008 include approximately $39,107,000 representing such bad debt deductions for which no deferred income taxes have been provided.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(14)   Earnings Per Share
 
    Basic earnings per common share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period, without considering any dilutive items. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For the year ended December 31, 2008, 213,686 options with a strike price of $25.49 per share, 179,806 options with a strike price of $25.89 per share, 2,000 options with a strike price of $28.09 per share and 191,709 options with a strike price of $25.03 per share were excluded from the calculation of earnings per share because they were anti-dilutive. There were no anti-dilutive options during 2007 or 2006. The computation of basic and diluted earnings per share follows:
                         
    Years ended December 31,  
    2008     2007     2006  
Net income available to common shareholders
  $ 48,171       49,097       51,536  
 
                 
Weighted average common shares outstanding
    48,363       49,041       49,879  
Dilutive potential shares due to effect of stock options
    235       313       257  
 
                 
Total weighted average common shares and dilutive potential shares
    48,598       49,354       50,136  
 
                 
Basic earnings per share
  $ 1.00       1.00       1.03  
 
                 
Diluted earnings per share
  $ 0.99       0.99       1.03  
 
                 
(15)   Employee Benefit Plans
  (a)   Pension Plans
 
      The Company maintains noncontributory defined benefit pension plans covering substantially all employees and the members of its board of directors. Retirement benefits are based on certain compensation levels, age, and length of service. Contributions are based on an actuarially determined amount to fund not only benefits attributed to service to date but also for those expected to be earned in the future. In addition, the Company has an unfunded Supplemental Executive Retirement Plan (“SERP”) to compensate those executive participants eligible for the Company’s defined benefit pension plan whose benefits are limited by Section 415 of the Internal Revenue Code.
 
      The Company also sponsors a retirement savings plan in which substantially all employees participate. The Company provides a matching contribution of 50% of each employee’s contribution to a maximum of 6% of the employee’s compensation.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      Total expense for all retirement plans, including defined benefit pension plans, was approximately $5,957,000, $6,639,000 and $6,310,000, for the years ended December 31, 2008, 2007 and 2006, respectively.
 
      Components of net periodic pension cost and other amounts recognized in other comprehensive income:
 
      The following table sets forth the net periodic pension cost for the Company’s defined benefit pension plans:
                         
    Years ended December 31,  
    2008     2007     2006  
Service cost
  $ 5,022       4,958       4,555  
Interest cost
    4,559       4,094       3,492  
Expected return on plan assets
    (4,988 )     (4,409 )     (3,601 )
Net amortization and deferral
    175       825       793  
 
                 
Net periodic pension cost
  $ 4,768       5,468       5,239  
 
                 
      The following table sets forth other changes in the Company’s defined benefit pension plans’ plan assets and benefit obligations recognized in other comprehensive income:
                         
    Years ended December 31,  
    2008     2007     2006  
Net loss (gain)
  $ 25,675       (8,391 )      
Prior service cost (credit)
    (2,184 )            
Amortization of prior sevice cost
    (51 )     (77 )      
 
                 
Total recognized in other comprehensive income
  $ 23,440       (8,468 )      
 
                 
Total recognized in net periodic pension cost and other comprehensive income/ (loss)
  $ 28,208       (3,000 )     5,239  
 
                 
      The estimated net loss and prior service cost for the Company’s defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic cost over the next year are $1,677,000 and $125,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The following table sets forth information for the Company’s defined benefit pension plans’ funded status at December 31, 2008 and 2007:
                 
    December 31  
    2008     2007  
Change in benefit obligation:
               
Benefit obligation at beginning of year
  $ 73,708       71,891  
Service cost
    5,022       4,958  
Interest cost
    4,559       4,094  
Actuarial (gain) loss
    (675 )     (5,630 )
Benefits paid
    (1,845 )     (1,605 )
 
           
Benefit obligation at end of year
  $ 80,769       73,708  
 
           
 
               
Change in plan assets:
               
Fair value of plan assets at beginning of year
  $ 62,943       55,622  
Actual return on plan assets
    (18,394 )     6,461  
Employer contributions
    6,332       2,465  
Benefits paid
    (1,845 )     (1,605 )
 
           
Fair value of plan assets at end of period
  $ 49,036       62,943  
 
           
Funded status at end of year
  $ (31,733 )     (10,765 )
 
           
      The following table sets forth the assumptions used to develop the net periodic pension cost:
                         
    Years ended December 31,
    2008   2007   2006
Discount rate
    6.25 %     5.75 %     5.75 %
Expected long-term rate of return on assets
    8.00 %     8.00 %     8.00 %
Rate of increase in compensation levels
    4.00 %     4.00 %     4.00 %

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The following table sets forth the assumptions used to determine benefit obligations at the end of each period:
                         
    Years ended December 31,
    2008   2007   2006
Discount rate
    6.00 %     6.25 %     5.75 %
Expected long-term rate of return on assets
    8.00 %     8.00 %     8.00 %
Rate of increase in compensation levels
    4.00 %     4.00 %     4.00 %
      The expected long-term rate of return on assets is based on the expected return of each of the asset categories, weighted based on the median of the target allocation for each category.
 
      The accumulated benefit obligation for the funded defined benefit pension plan was $57,146,000, $51,010,000 and $48,325,000 at December 31, 2008, 2007 and 2006, respectively. The accumulated benefit obligation for all unfunded defined benefit plans was $3,844,000, $3,659,000 and $4,014,000 at December 31, 2008, 2007 and 2006, respectively.
 
      The following table sets forth information for pension plans with an accumulated benefit obligation in excess of plan assets:
                 
    December 31,
    2008   2007
Projected benefit obligation
  $ 80,769       73,708  
Accumulated benefit obligation
  $ 60,990       54,668  
Fair value of plan assets
  $ 49,036       62,943  
      The Company anticipates making contributions to its defined benefit pension plan between $2 million and $8 million during the fiscal year ending December 31, 2009.
 
      The investment policy as established by the Plan Administrative Committee, to be followed by the Trustee, is to invest assets based on the target allocations shown in the table below. To meet target allocation ranges set forth by the Plan Administrative Committee, periodically, the assets are reallocated by the Trustee. The investment policy is reviewed periodically to determine if the policy should be changed. Pension assets are conservatively invested with the goal of providing market or better returns with below market risks. Assets are invested in a balanced portfolio composed primarily of equities, fixed income, and cash or cash equivalent investments. The Trustee tries to maintain an approximate asset mix position of 30% to 60% equities and 20% to 50% bonds.
 
      A maximum of 10% may be invested in any one stock, including the stock of Northwest Bancorp, Inc. The objective of holding equity securities is to provide capital appreciation consistent with the ownership of the common stocks of medium to large companies. Acceptable bond investments are direct or agency obligations of the U.S. Government or investment grade corporate bonds. The average maturity of the bond portfolio shall not exceed 10 years.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The following table sets forth the weighted average asset allocation of defined benefit plans:
                         
    Target   December 31
Asset category   allocation   2008   2007
Debt securities
    20 - 50 %     38 %     39 %
Equity securities
    30 - 60 %     60 %     58 %
Other
    5 - 50 %     2 %     3 %
 
                       
Total
            100 %     100 %
 
                       
      The benefits expected to be paid in each year from 2009 to 2013 are $1,959,000, $2,144,000, $2,286,000, $2,517,000, and $2,933,000, respectively. The aggregate benefits expected to be paid in the five years from 2014 to 2018 are $19,823,000. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2008 and include estimated future employee service.
 
  (b)   Postretirement Healthcare Plan
 
      In addition to pension benefits, the Company provides postretirement healthcare benefits for certain employees who were employed by the Company as of October 1, 1993 and were at least 55 years of age on that date. The Company accounts for these benefits in accordance with Statement of Financial Accounting Standards No. 106, Employers’ Accounting for Postretirement Benefits Other than Pensions (SFAS 106). SFAS 106 requires the accrual method of accounting for postretirement benefits other than pensions.
 
      Components of net periodic benefit cost and other amounts recognized in other comprehensive income:
 
      The following table sets forth the net periodic benefit cost for the Company’s postretirement healthcare benefits plan:
                         
    Years ended December 31,  
    2008     2007     2006  
Service cost
  $              
Interest cost
    98       93       91  
Recognized actuarial gain
    43       42       34  
 
                 
 
                       
Net periodic benefit cost
  $ 141       135       125  
 
                 

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The following table sets forth other changes in the Company’s postretirement healthcare plan’s plan assets and benefit obligations recognized in other comprehensive income:
                         
    Years ended December 31,  
    2008     2007     2006  
Net loss (gain)
  $ 204       (22 )      
 
                 
Total recognized in other comprehensive income
  $ 204       (22 )      
 
                 
Total recognized in net periodic benefit cost and other comprehensive income
  $ 345       113       125  
 
                 
      The estimated net loss for the postretirement healthcare benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year is $57,000.
 
      The following table sets forth the funded status of the Company’s postretirement healthcare benefit plan at December 31, 2008 and 2007:
                 
    December 31  
    2008     2007  
Change in benefit obligation:
               
Benefit obligation at beginning of year
  $ 1,637       1,701  
Service cost
           
Interest cost
    98       93  
Actuarial (gain) loss
    218       20  
Benefits paid
    (186 )     (177 )
 
           
Benefit obligation at end of year
    1,767       1,637  
 
               
Change in plan assets:
               
Fair value of plan assets at beginning of year
  $        
Employer contributions
    186       177  
Benefits paid
    (186 )     (177 )
 
           
Fair value of plan assets at end of year
  $        
 
           
Funded status at year end
  $ (1,767 )     (1,637 )
 
           

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      The assumptions used to develop the preceding information for postretirement healthcare benefits are as follows:
                         
    Years ended December 31,
    2008   2007   2006
Discount rate
    6.00 %     5.75 %     5.75 %
Monthly cost of healthcare insurance per beneficiary (1)
  $ 305       274       257  
Annual rate of increase in healthcare costs
    4.00 %     4.00 %     4.00 %
 
(1)   Not in thousands
      If the assumed rate of increase in healthcare costs was increased by one percentage point to 5% from the level of 4% presented above, the service and interest cost components of net periodic postretirement healthcare benefit cost would increase by $12,000, in the aggregate, and the accumulated postretirement benefit obligation for healthcare benefits would increase by $80,000.
 
      The following table sets forth amounts recognized in accumulated other comprehensive income:
                         
    Years ended December 31,  
    2008     2007     2006  
Net loss/ (gain)
  $ 204       634       656  
 
                 
      The accumulated benefit obligation for the Company’s postretirement healthcare benefit plan at December 31, 2008 and 2007 was $1,767,000 and $1,637,000, respectively.
 
      The following table sets forth information for plans with an accumulated benefit obligation in excess of plan assets:
                 
    December 31,
    2008   2007
Projected benefit obligation
  $ 1,767       1,637  
Accumulated benefit obligation
  $ 1,767       1,637  
Fair value of plan assets
  $        
  (c)   Employee Stock Ownership Plan
 
      The Company has an employee stock ownership plan (ESOP) for employees who have attained age 21 and who have completed a 12-month period of employment with the Company during which they worked at least 1,000 hours. The Company can make contributions to the ESOP at the board’s discretion. Company shares would then be purchased periodically in the open market and allocated to employee accounts based on each employee’s relative portion of the Company’s total eligible compensation recorded during the year.
 
      No contributions were made and no expense was recognized during the years ended December 31, 2008, 2007 and 2006.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
  (d)   Recognition and Retention Plan
 
      On November 17, 2004, the Company established a Recognition and Retention Plan for Employees and Outside Directors (RRP) with 290,220 shares authorized. The objective of the RRP is to enable the Company to provide directors, officers, and employees with a proprietary interest in the Company. On March 16, 2005, 278,231 shares were issued with a weighted average grant date fair value per share of $21.42 (total market value of $5,959,000 at issuance). Total common shares forfeited were 8,322, of which, 685, 3,058 and 1,644 shares were forfeited during the years ended December 31, 2008, 2007, and 2006, respectively. During 2007, 4,300 shares were issued with a weighted average grant date fair value per share of $27.04 (total market value of $116,000 at issuance). Shares of common stock granted pursuant to the RRP were in the form of restricted stock and generally vest over a five-year period at the rate of 20% per year, commencing one year after the award date. As of December 31, 2008, 60% of the March 16, 2005 issuance have vested and 20% of the 2007 issuances have vested. Once shares have vested, they are no longer restricted. Compensation expense, in the amount of the fair market value of the common stock at the date of the grant, will be recognized pro rata over the five years during which the shares are payable. While restricted, the recipients are entitled to all voting and other shareholder rights, except that the shares may not be sold, pledged, or otherwise disposed of and are required to be held in a trust.
 
  (e)   Stock Option Plans
 
      On November 21, 1995, the Company adopted the 1995 Stock Option Plan. The objective of the Stock Option Plan is to provide an additional performance incentive to the Company’s employees and outside directors. The Stock Option Plan authorized the grant of stock options and limited stock appreciation rights for 1,380,000 shares of the Company’s common stock. On December 20, 1995, the Company granted 242,000 nonstatutory stock options to its outside directors at an exercise price of $5.58 per share (95% of the Company’s common stock fair market value per share at grant date) and 923,200 incentive stock options to employees at an exercise price of $5.875 per share. On March 22, 1996, the Company granted 122,800 incentive stock options to employees at an exercise price of $5.625 per share. On December 16, 1998, the Company granted 15,086 incentive stock options to employees at an exercise price of $9.875 per share. On October 20, 1999, the Company granted 2,000 nonstatutory stock options to an outside director and 57,700 incentive stock options to employees at an exercise price of $7.812 per share. On June 21, 2000, the Company granted the remaining 17,214 incentive stock options as well as 786 previously forfeited options at an exercise price of $6.875 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing with the grant date.
 
      On November 17, 2000, the Company adopted the 2000 Stock Option Plan. This Plan authorized the grant of stock options and limited stock rights for 800,000 shares of the Company’s common stock. On October 17, 2001, the Company granted 84,000 nonstatutory stock options to its outside directors and 143,845 incentive stock options to employees at an exercise price of $9.780 per share. On August 21, 2002, the Company granted 162,940 incentive stock options to employees at an exercise price of $13.30 per share. On August 20, 2003, the Company granted 182,000 incentive stock options to employees at an exercise price of $16.59 per share. On December 15, 2004, the Company granted 220,780 incentive stock options to employees at an exercise price of $25.49 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing with the grant date.
 
      On November 17, 2005, the Company adopted the 2005 Stock Option Plan. This Plan authorizes the grant of stock options and limited stock rights for 725,552 shares of the Company’s common stock. On January 19, 2005, the Company granted 70,000 nonstatutory stock options to its outside directors and 154,546 incentive stock options to employees at an exercise price of $22.93 per share. On January 18, 2006 the Company granted 158,333 incentive stock options to employees at an exercise price of $22.18 per share. On January 17, 2007 the Company granted 179,806 stock options to employees at an exercise price of $25.89 per share. On June 20, 2007 the Company granted 2,000 stock options to a new director at an exercise price of $28.09 per share. On January 16, 2008 the

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
      Company granted the remaining 160,867 incentive stock options as well as 30,842 previously forfeited incentive stock options to employees at an exercise price of $25.03 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing one year from the grant date.
 
      On May 21, 2008, the Company adopted the 2008 Stock Option Plan. This Plan authorized the grant of stock options and limited stock rights for 1,750,000 shares of the Company’s common stock. On November 19, 2008 the Company granted 24,000 nonstatutory stock options to its outside directors and 202,068 incentive stock options to employees at an exercise price of $22.03 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting over a seven year period commencing one year from the grant date.
 
      The following table summarizes the activity in the Company’s option plans during the years ended December 31, 2008, 2007 and 2006:
                                                 
    Years Ended December 31,
    2008   2007   2006
            Weighted           Weighted           Weighted
            average           average           average
            exercise           exercise           exercise
    Number   price   Number   price   Number   price
Balance at beginning of year
    1,236,358     $ 19.96       1,112,858     $ 18.65       1,019,189     $ 17.55  
Granted
    417,777       23.41 (a)     181,806       25.91 (a)     158,333       22.18 (a)
Exercised
    (54,367 )     12.20 (b)     (52,572 )     12.66 (b)     (63,064 )     10.14 (b)
Forfeited
          0.00       (5,734 )     22.14       (1,600 )     5.63  
 
                                               
Balance at end of year
    1,599,768       21.12       1,236,358       19.96       1,112,858       18.65  
 
                                               
Exercisable at end of year
    853,167       18.88       796,270       17.61       651,415       15.78  
 
(a)   Weighted average fair value of options at grant date: $3.05, $5.12, and $4.75, respectively.
 
(b)   The total intrinsic value of options exercised was $692,000, $773,000 and $898,000, respectively.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006

(All dollar amounts presented in tables are in thousands)
    The aggregate intrinsic value of all options expected to vest and fully vested options at December 31, 2008 is $0 and $3,429,000, respectively. The following table summarizes the number of options outstanding, number of options exercisable, and weighted average remaining life of all option grants:
                                                 
    Exercise   Exercise   Exercise   Exercise   Exercise   Exercise
    Price   Price   Price   Price   Price   Price
    $6.875   $7.812   $9.780   $13.302   $16.590   $22.030
Options outstanding:
                                               
Number of options
    4,800       16,400       134,201       110,054       144,314       226,068  
Weighted average remaining contract life (years)
    1.50       1.00       2.75       4.00       5.00       9.75  
Options exercisable:
                                               
Number of options
    4,800       16,400       134,201       110,054       144,314        
Weighted average remaining term - vested (years)
    1.50       1.00       2.75       4.00       5.00       9.75  
                                                         
    Exercise   Exercise   Exercise   Exercise   Exercise   Exercise    
    Price   Price   Price   Price   Price   Price   Total
    $22.180   $22.930   $25.030   $25.490   $25.890   $28.090   $21.120
Options outstanding:
                                                       
Number of options
    155,801       220,929       191,709       213,686       179,806       2,000       1,599,768  
Weighted average remaining contract life (years)
    7.00       6.00       9.00       6.00       8.00       8.00       6.65  
Options exercisable:
                                                       
Number of options
    61,703       131,648             213,686       35,961       400       853,167  
Weighted average remaining term - vested (years)
    7.00       6.00       9.00       6.00       8.00       8.00       4.19  

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(16)   Disclosures About Fair Value of Financial Instruments
 
    SFAS No. 107, Disclosure about Fair Value of Financial Instruments (SFAS 107), requires disclosure of fair value information about financial instruments whether or not recognized in the consolidated statement of financial condition. SFAS 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The carrying amounts reported in the consolidated statement of financial condition approximate fair value for the following financial instruments: cash on hand, interest-earning deposits in other institutions, federal funds sold and other short-term investments, accrued interest receivable, accrued interest payable, and marketable securities available-for-sale.
 
    The following table sets forth the carrying amount and estimated fair value of the Company’s financial instruments included in the consolidated statement of financial condition as of December 31, 2008 and 2007:
                                 
    December 31  
    2008     2007  
    Carrying     Estimated     Carrying     Estimated  
    amount     fair value     amount     fair value  
Financial assets:
                               
Cash and equivalents
  $ 79,922       79,922       230,616       230,616  
Securities available-for-sale
    1,139,170       1,139,170       1,133,367       1,133,367  
Loans receivable, net
    5,141,892       5,446,835       4,795,622       4,941,215  
Accrued interest receivable
    27,252       27,252       27,084       27,084  
FHLB stock
    63,143       63,143       31,304       31,304  
 
                       
 
                               
Total financial assets
  $ 6,451,379       6,756,322       6,217,993       6,363,586  
 
                       
 
                               
Financial liabilities:
                               
Savings and checking accounts
  $ 2,580,751       2,580,751       2,505,638       2,505,638  
Time deposits
    2,457,460       2,500,410       3,036,696       3,071,514  
Borrowed funds
    1,067,945       1,049,399       339,115       338,671  
Trust-preferred securities
    108,254       116,783       108,320       108,320  
Cash flow hedges — swaps
    13,114       13,114              
Accrued interest payable
    5,194       5,194       4,356       4,356  
 
                       
 
                               
Total financial liabilities
  $ 6,232,718       6,265,651       5,994,125       6,028,499  
 
                       
    Fair value estimates are made at a point-in-time, based on relevant market data and information about the instrument. The following methods and assumptions were used in estimating the fair value of financial instruments at December 31, 2008 and 2007.
 
    Marketable Securities
 
    Where available, market values are based on quoted market prices, dealer quotes, and prices obtained from independent pricing services. See the SFAS 157 section of this footnote for further detail on how fair values of marketable securities are determined. Refer to note 3 for the detail of the type of investment securities.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    Loans Receivable
 
    Loans with comparable characteristics including collateral and repricing structures were segregated for valuation purposes. Each loan pool was separately valued utilizing a discounted cash flow analysis. Projected monthly cash flows were discounted to present value using a market rate for comparable loans. Characteristics of comparable loans included remaining term, coupon interest, and estimated prepayment speeds. Delinquent loans were evaluated separately, given the impact delinquency has on the projected future cash flow of the loan and the approximate discount or market rate.
 
    Deposit Liabilities
 
    SFAS 107 defines the estimated fair value of deposits with no stated maturity, which includes demand deposits, money market, and other savings accounts, to be the amount payable on demand. Although market premiums paid for depository institutions reflect an additional value for these low-cost deposits, SFAS 107 prohibits adjusting fair value for any value expected to be derived from retaining those deposits for a future period of time or from the benefit that results from the ability to fund interest-earning assets with these deposit liabilities. The fair value estimates of deposit liabilities do not include the benefit that results from the low-cost funding provided by these deposits compared to the cost of borrowing funds in the market. Fair values for time deposits are estimated using a discounted cash flow calculation that applies contractual cost currently being offered in the existing portfolio to current market rates being offered locally for deposits of similar remaining maturities. The valuation adjustment for the portfolio consists of the present value of the difference of these two cash flows, discounted at the assumed market rate of the corresponding maturity.
 
    Borrowed Funds
 
    The fixed rate advances were valued by comparing their contractual cost to the prevailing market cost.
 
    Trust-Preferred Securities
 
    The fair value of the trust-preferred securities are calculated using the discounted cash flows at the prevailing rate of interest.
 
    Cash flow hedges — Interest rate swap agreements (“swaps”)
 
    The fair values of the swaps is the amount the Company would have expected to pay to terminate the agreements and is based upon the present value of the expected future cash flows using the LIBOR swap curve, the basis for the underlying interest rate.
 
    Off-Balance Sheet Financial Instruments
 
    These financial instruments generally are not sold or traded, and estimated fair values are not readily available. However, the fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. Commitments to extend credit issued by the Company are generally short-term in nature and, if drawn upon, are issued under current market terms. At December 31, 2008 and 2007, there was no significant unrealized appreciation or depreciation on these financial instruments.
 
    SFAS No. 157 — Fair Value Measurements
 
    Effective January 1, 2008, the Company adopted the provisions of SFAS 157 for all financial assets and liabilities recognized or disclosed at fair value on a recurring basis and certain financial assets and liabilities on a non-recurring basis. SFAS 157 establishes a three-level hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. The fair value hierarchy gives the highest priority to quoted prices with readily available independent data in active markets for identical assets or liabilities (Level 1) and the lowest priority to

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    unobservable market inputs (Level 3). When various inputs for measurement fall within different levels of the fair value hierarchy, the lowest level input that has a significant impact on fair value measurement is used.
 
    Financial assets and liabilities are categorized based upon the following characteristics or inputs to the valuation techniques:
    Level 1 — Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in actively traded markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.
 
    Level 2 — Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets or liabilities that are actively traded. Level 2 also includes pricing models in which the inputs are corroborated by market data, for example, matrix pricing.
 
    Level 3 — Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following:
  o   Quotes from brokers or other external sources that are not considered binding;
 
  o   Quotes from brokers or other external sources where it can not be determined that market participants would in fact transact for the asset or liability at the quoted price;
 
  o   Quotes and other information from brokers or other external sources where the inputs are not deemed observable.
    The Company is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. The Company performs due diligence to understand the inputs used or how the data was calculated or derived. The Company corroborates the reasonableness of external inputs in the valuation process.
 
    The following table represents assets measured at fair value on a recurring basis as of December 31, 2008:
                                 
                            Total assets at  
    Level 1     Level 2     Level 3     fair value  
Equity securities — available for sale
  $ 894             220       1,114  
 
                               
Debt securities — available for sale
          1,132,119       5,937       1,138,056  
 
                               
Derivative fair value of interest rate swap
          (13,114 )           (13,114 )
 
                       
 
                               
Total assets
  $ 894       1,119,005       6,157       1,126,056  
 
                       
    Debt securities — available for sale — Generally, debt securities are valued using pricing for similar securities, recently executed transactions and other pricing models utilizing observable inputs. The valuation for most debt securities is classified as Level 2. Securities within Level 2 include corporate bonds, municipal bonds, mortgage-backed securities and US government obligations. Certain debt securities which were AAA rated at purchase do not have an active market and as such the Company has used an alternative method to determine the fair value of these securities. The fair value has been determined using a discounted cash flow model using market assumptions, which generally include cash flow, collateral and other market assumptions. As such, securities which otherwise would have been classified as level 2 securities if an active market for those assets or similar assets existed are included herein as level 3 assets. Other debt

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    securities, pooled trust preferred securities rated below AA at purchase, have a fair value based on a discounted cash flow model using similar assumptions to those noted above and accordingly are classified as level 3 assets.
 
    Equity securities — available for sale — Level 1 securities include publicly traded securities valued using quoted market prices. Level 3 securities include investments in two financial institutions that provide financial services only to investor banks received as part of previous acquisitions without observable market data to determine the investments fair values. These securities can only be sold back to the issuing financial institution at cost.
 
    Interest rate swap agreements (Swaps) — The fair value of the swaps was the amount the Company would have expected to pay to terminate the agreements and is based upon the present value of the expected future cash flows using the LIBOR swap curve, the basis for the underlying interest rate.
 
    The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2008:
                 
    Equity        
    securities     Debt securities  
Balance at January 1, 2008
  $ 220       22,369  
 
               
Total net realized investment gains/(losses) and net change in unrealized appreciation/(depreciation):
               
Included in net income as OTTI
          (9,522 )
Included in other comprehensive income
          (1,234 )
 
               
Purchases and sales
           
Net transfers in (out) of Level 3
          (5,676 )
 
           
 
               
Balance at December 31, 2008
  $ 220       5,937  
 
           
    Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition such as loans held for sale, loans measured for impairment and mortgage servicing rights. The following table represents the fair market measurement for nonrecurring assets as of December 31, 2008:
                                 
                            Total assets  
    Level 1     Level 2     Level 3     at fair value  
Loans held for sale
  $ 18,738                   18,738  
 
                               
Loans measured for impairment
                9,130       9,130  
 
                               
Mortgage servicing rights
                5,481       5,481  
 
                       
 
                               
Total assets
  $ 18,738             14,611       33,349  
 
                       
    Loans held for sale — Mortgage loans held for sale are recorded at the lower of carrying value or market value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering. As the fair value is

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    determined by a quoted price from Freddie Mac, and the Company has open delivery contracts with Freddie Mac, the Company classifies loans held for sale as nonrecurring Level 1.
 
    Impaired loans — A loan is considered to be impaired when it is probable that all of the principle and interest due under the original terms of the loan may not be collected. Impairment is measured based on the fair value of the underlying collateral or discounted cash flows when collateral does not exist. The Company measures impairment on all nonaccrual commercial and commercial real estate loans for which it has established specific reserves as part of the specific allocated allowance component of the allowance for loan losses. The Company classifies impaired loans as nonrecurring Level 3.
 
    Mortgage servicing rights — Mortgage servicing rights represent the value associated with servicing residential mortgage loans, when the mortgage loans have been sold into the secondary market and the related servicing has been retained by the Company. The value is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds and delinquency rate assumptions as inputs. All of these assumptions require a significant degree of management judgment. Servicing rights and the related mortgage loans are segregated into categories or homogeneous pools based upon common characteristics. Adjustments are made when the estimated discounted future cash flows are less than the carrying value, as determined by individual pool. As such, mortgage servicing rights are classified as nonrecurring Level 3.
 
(17)   Regulatory Capital Requirements
 
    The Company’s banking subsidiary is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by the regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices must be met. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
 
    Quantitative measures established by regulation to ensure capital adequacy require the Company’s banking subsidiary to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital to average assets (as defined). At December 31, 2008 and 2007, the Company’s banking subsidiary exceeded all capital adequacy requirements to which they were subject. At December 31, 2008, the maximum amount available for dividend payments by Northwest to the Company, while maintaining its “well capitalized” status, was approximately $99,600,000.
 
    As of December 15, 2008, the most recent notification from the FDIC categorized Northwest as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the bank must maintain total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the bank’s categories.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    The actual, required, and well capitalized levels as of December 31, 2008 and 2007 were as follows:
                                                 
    December 31, 2008
                    Minimum capital   Well capitalized
    Actual   requirements   requirements
    Amount   Ratio   Amount   Ratio   Amount   Ratio
Total capital (to risk weighted assets):
  $ 604,067       13.95 %   $ 346,354       8.00 %   $ 432,943       10.00 %
Tier I capital (to risk weighted assets):
    549,869       12.70 %     173,177       4.00 %     259,766       6.00 %
Tier I capital (leverage) (to average assets):
    549,869       8.05 %     204,887       3.00 %*     341,478       5.00 %
                                                 
    December 31, 2007
                    Minimum capital   Well capitalized
    Actual   requirements   requirements
    Amount   Ratio   Amount   Ratio   Amount   Ratio
Total capital (to risk weighted assets):
  $ 571,785       14.10 %   $ 324,304       8.00 %   $ 405,380       10.00 %
Tier I capital (to risk weighted assets):
    529,833       13.07 %     162,152       4.00 %     243,228       6.00 %
Tier I capital (leverage) (to average assets):
    529,833       8.21 %     193,630       3.00 %*     322,717       5.00 %
 
*   The FDIC has indicated that the most highly rated institutions, which meet certain criteria, will be required to maintain a ratio of 3%, and all other institutions will be required to maintain an additional capital cushion of 100 to 200 basis points. As of December 31, 2008, the Company had not been advised of any additional requirements in this regard.
(18)   Contingent Liabilities
 
    The Company and its subsidiaries are subject to a number of asserted and unasserted claims encountered in the normal course of business. Management believes that the aggregate liability, if any, that may result from such potential litigation will not have a material adverse effect on the Company’s financial statements.

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(19)   Components of Comprehensive Income
 
    The following table sets forth the components of comprehensive income for the years ended December 31, 2008, 2007 and 2006:
                         
    Years ended December 31,  
    2008     2007     2006  
Unrealized (loss) gain on marketable securities available-for-sale, net of tax of $3,809, $(6,511) and $298, respectively
    (5,957 )     10,184       (466 )
Reclassification adjustment for gains included in net income, net of tax of $2,035, $1,877 and $263, respectively
    (3,183 )     (2,938 )     (393 )
Change in fair value of interest rate swaps, net of tax of $4,590, $0 and $0, respectively
    (8,524 )            
Defined benefit plans:
                       
Net (loss)/ gain, net of tax of $9,161, $(3,281) and $0, respectively
    (14,330 )     5,132        
Amortization of prior service costs, net of tax of $(20), $(30) and $0, respectively
    31       47        
 
                 
Other comprehensive income
  $ (31,963 )     12,425       (859 )
 
                 
(20)   Northwest Bancorp, Inc. (Parent Company Only)
Statements of Financial Condition
                 
    December 31  
    2008     2007  
Assets
               
Cash and cash equivalents
  $ 20,695       3,618  
Marketable securities available-for-sale
    73       96  
Investment in bank subsidiary
    706,610       714,160  
Other assets
    8,021       3,582  
 
           
Total assets
  $ 735,399       721,456  
 
           
 
               
Liabilities and Shareholders’ Equity
               
Liabilities:
               
Debentures payable
  $ 108,249       108,249  
Other liabilities
    13,366       329  
 
           
Total liabilities
    121,615       108,578  
Shareholders’ equity
    613,784       612,878  
 
           
Total liabilities and shareholders’ equity
  $ 735,399       721,456  
 
           

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
Statements of Income
                         
    Years ended December 31,  
    2008     2007     2006  
Income:
                       
Interest income
  $ 359       480       3,891  
Dividends from bank subsidiary
    39,000       49,000       45,000  
Undistributed earnings from equity investment in bank subsidiary
    12,722       4,838       16,551  
 
                 
Total income
    52,081       54,318       65,442  
Expense:
                       
Compensation and benefits
    380       366       378  
Other expense
    105       159       182  
Loss on early extinquishment of debt
                3,124  
Interest expense
    5,339       7,250       15,616  
 
                 
Total expense
    5,824       7,775       19,300  
 
                 
Income before income taxes
    46,257       46,543       46,142  
Federal and state income taxes
    (1,914 )     (2,554 )     (5,394 )
 
                 
Net income
  $ 48,171       49,097       51,536  
 
                 

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
Statements of Cash Flows
                         
    Years ended December 31,  
    2008     2007     2006  
Operating activities:
                       
Net income
  $ 48,171       49,097       51,536  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Undistributed earnings of subsidiary
    (12,722 )     (4,838 )     (16,551 )
Loss on early extinguishment
                3,124  
Noncash stock benfit plan compensation expense
    2,731       2,454       2,296  
Net change in other assets and liabilities
    (2,997 )     1,636       (3,242 )
 
                 
Net cash provided by operating activities
    35,183       48,349       37,163  
Investing activities:
                       
Acquisitions, net of cash received
          5,048        
 
                 
Net cash provided by investing activities
          5,048        
Financing activities:
                       
Cash dividends paid
    (15,771 )     (15,696 )     (13,727 )
Treasury stock repurchases
    (3,335 )     (40,825 )     (8,080 )
Redemption of trust preferred stock
                (102,062 )
Proceeds from options exercised
    1,000       862       873  
 
                 
Net cash used in financing activities
    (18,106 )     (55,659 )     (122,996 )
 
                 
Net increase/ (decrease) in cash and cash equivalents
  $ 17,077       (2,262 )     (85,833 )
 
                 
Cash and cash equivalents at beginning of year
    3,618       5,880       91,713  
Net increase/ (decrease) in cash and cash equivalents
  $ 17,077       (2,262 )     (85,833 )
 
                 
Cash and cash equivalents at end of year
  $ 20,695       3,618       5,880  
 
                 

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
(21)   Business Segments
 
    The Company has identified two reportable business segments based upon the operating approach currently used by management. The Community Banking segment includes the savings bank subsidiary of the Company, Northwest Savings Bank, as well as the subsidiaries of the savings bank that provide similar products and services. The savings bank is a community-oriented institution that offers a full array of traditional deposit and loan products, including mortgage, consumer, and commercial loans as well as trust, investment management, actuarial and benefit plan administration, and brokerage services typically offered by a full service financial institution. The Consumer Finance segment is comprised of Northwest Consumer Discount Company, a subsidiary of Northwest Savings Bank, which operates offices in Pennsylvania and New York. This subsidiary compliments the services of the bank by offering personal installment loans for a variety of consumer and real estate products. This activity is funded primarily through its intercompany borrowing relationship with Allegheny Services, Inc. Net income is primarily used by management to measure segment performance. The following tables provide financial information for these segments. The All Other column represents the parent company, other nonbank subsidiaries, and elimination entries necessary to reconcile to the consolidated amounts presented in the financial statements.
                                 
At or for the year ended   Community     Consumer     All        
December 31, 2008   banking     finance     other*     Consolidated  
External interest income
  $ 368,201       20,452       6     $ 388,659  
Intersegment interest income
    4,959             (4,959 )      
Interest expense
    163,922       5,186       185       169,293  
Provision for loan losses
    19,500       3,351             22,851  
Noninterest income
    36,324       2,269       159       38,752  
Noninterest expense
    158,652       10,990       486       170,128  
Income tax expense (benefit)
    17,646       1,236       (1,914 )     16,968  
 
                       
Net income
  $ 49,764       1,958       (3,551 )   $ 48,171  
 
                       
Total assets
  $ 6,792,735       115,463       22,043     $ 6,930,241  
 
                       

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
                                 
At or for the year ended   Community     Consumer     All        
December 31, 2007   banking     finance     other*     Consolidated  
External interest income
  $ 375,761       20,266       4     $ 396,031  
Intersegment interest income
    7,991             (7,991 )      
Interest expense
    195,533       8,232       7,250       211,015  
Provision for loan losses
    6,000       2,743             8,743  
Noninterest income
    40,250       2,552       220       43,022  
Noninterest expense
    143,878       8,339       525       152,742  
Income tax expense (benefit)
    18,607       1,403       (2,554 )     17,456  
 
                       
Net income
  $ 59,984       2,101       (12,988 )   $ 49,097  
 
                       
Total assets
  $ 6,629,725       122,657       (88,866 )   $ 6,663,516  
 
                       
                                 
At or for the year ended   Community     Consumer     All        
December 31, 2006   banking     finance     other*     Consolidated  
External interest income
  $ 349,964       18,605       4     $ 368,573  
Intersegment interest income
    8,234             (8,234 )      
Interest expense
    178,634       8,494       3,981       191,109  
Provision for loan losses
    6,000       2,480             8,480  
Noninterest income
    42,988       2,515       523       46,026  
Noninterest expense
    131,847       8,150       3,685       143,682  
Income tax expense (benefit)
    24,435       751       (5,394 )     19,792  
 
                       
Net income
  $ 60,270       1,245       (9,979 )   $ 51,536  
 
                       
Total assets
  $ 6,493,770       124,993       (90,948 )   $ 6,527,815  
 
                       
 
*   Eliminations consist of intercompany interest income and interest expense.
(22)   Guaranteed Preferred Beneficial Interests in Company’s Junior Subordinated Deferrable Interest Debentures (Trust-Preferred Securities) and Interest Rate Swap Agreements
 
    The Company has three statutory business trusts: Northwest Bancorp Capital Trust III, a Delaware statutory business trust, and Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust and Penn Laurel Financial Corp. Trust I, a Delaware statutory business trust (the Trusts). The Penn Laurel Financial Corp, Trust I was assumed with the acquisition of Penn Laurel Financial Corporation in June 2007. These trusts exist solely to issue preferred securities to third parties for cash, issue common securities to the Company in exchange for capitalization of the Trusts, invest the proceeds from the sale of trust securities in an equivalent amount of debentures of the Company, and engage in other activities that are incidental to those previously listed. The aforementioned trusts are not consolidated in accordance with FIN 46 (R), Consolidation of Variable Interest Entities and Interpretation of ARB No. 51. Northwest Bancorp Capital Trust III issued 50,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on December 5, 2006 (liquidation value of $1,000 per preferred security or $50,000,000) with a stated maturity of December 30, 2035 and a floating rate of interest, which is reset quarterly, equal to three-month LIBOR plus 1.38%. Northwest Bancorp Statutory Trust IV issued 50,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on December 15, 2006

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    (liquidation value of $1,000 per preferred security or $50,000,000) with a stated maturity of December 15, 2035 and a floating rate of interest, which is reset quarterly, equal to three-month LIBOR plus 1.38%. Penn Laurel Financial Corp. Trust I issued 5,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on January 23, 2004 (liquidation value of $1,000 per preferred security or $5,000,000) with a stated maturity of January 23, 2034 and floating rate of interest, which is reset quarterly, equal to three-month LIBOR plus 2.80%.
 
    The Trusts have invested the proceeds of the offerings in junior subordinated deferrable interest debentures issued by the Company. The structure of these debentures mirrors the structure of the trust-preferred securities. Northwest Bancorp Statutory Trust III holds $51,547,000 of the Company’s junior subordinated debentures due December 30, 2035 with a floating rate of interest, reset quarterly, of three-month LIBOR plus 1.38%. The rate in effect at December 31, 2008 was 2.85%. Northwest Bancorp Statutory Trust IV holds $51,547,000 of the Company’s junior subordinated debentures due December 15, 2035 with a floating rate of interest, reset quarterly, of three-month LIBOR plus 1.38%. The rate in effect at December 31, 2008 was 3.38%. Penn Laurel Financial Corp. Trust I holds $5,155,000 of the Company’s junior subordinated debentures due January 23, 2034 with a floating rate of interest, reset quarterly, of three-month LIBOR plus 2.80%. The rate in effect at December 31, 2008 was 6.27%. These subordinated debentures are the sole assets of the Trusts.
 
    Cash distributions on the trust securities are made on a quarterly basis to the extent interest on the debentures is received by the Trusts. The Company has the right to defer payment of interest on the subordinated debentures at any time, or from time-to-time, for periods not exceeding five years. If interest payments on the subordinated debentures are deferred, the distributions on the trust securities also are deferred. Interest on the subordinated debentures and distributions on the trust securities is cumulative. The Company obligation constitutes a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the trust under the preferred securities.
 
    The Trusts must redeem the preferred securities when the debentures are paid at maturity or upon an earlier redemption of the debentures to the extent the debentures are redeemed. All or part of the debentures may be redeemed at any time on or after December 31, 2010. Also, the debentures may be redeemed at any time if existing laws or regulations, or the interpretation or application of these laws or regulations, change causing:
    the interest on the debentures to no longer be deductible by the Company for federal income tax purposes;
 
    the trust to become subject to federal income tax or to certain other taxes or governmental charges;
 
    the trust to register as an investment company; and
 
    the Company to become subject to capital requirements and the preferred securities do not qualify as Tier I capital.
    The Company may, at any time, dissolve any of the Trusts and distribute the debentures to the trust security holders, subject to receipt of any required regulatory approval(s).
 
    During the quarter ended September 30, 2008, the Company entered into four interest rate swap agreements (swaps). The Company designated the swaps as a cash flow hedge and they are intended to protect against the variability of cash flows associated with Trust III and Trust IV. The first two swaps hedge the interest rate risk of Trust III, wherein the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.20% to the same counterparty calculated on a notional amount of $25.0 million and the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.61% to the same counterparty calculated on a notional amount of $25.0 million. The terms of these two swaps are five years and ten years, respectively. The second two swaps hedge the interest rate risk of Trust IV, wherein the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 3.85% to the same counterparty

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
    calculated on a notional amount of $25.0 million and the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.09% to the same counterparty calculated on a notional amount of $25.0 million. The terms of these two swaps are seven years and ten years, respectively. The swap agreements were entered into with a counterparty that met the Company’s credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in the contracts is not significant.
 
    At December 31, 2008, the fair value of the swap agreements was $(13,114,000) and was the amount the Company would have expected to pay if the contracts were terminated. There was no material hedge ineffectiveness for this swap.
 
(23)   Selected Quarterly Financial Data (Unaudited)
                                 
    Three months ended  
    March 31     June 30     September 30     December 31  
    (In thousands, except per share data)  
2008:
                               
Interest income
  $ 96,821       97,152       97,519       97,167  
Interest expense
    48,387       43,423       39,819       37,664  
 
                       
Net interest income
    48,434       53,729       57,700       59,503  
Provision for loan losses
    2,294       3,395       6,950       10,212  
Noninterest income
    12,891       11,644       4,952       9,265  
Noninterest expenses
    42,427       41,488       42,739       43,474  
 
                       
Income before income taxes
    16,604       20,490       12,963       15,082  
Income taxes
    3,982       6,048       3,140       3,798  
 
                       
Net income
  $ 12,622       14,442       9,823       11,284  
 
                       
Basic earnings per share
  $ 0.26       0.30       0.20       0.23  
Diluted earnings per share
  $ 0.26       0.30       0.20       0.23  

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NORTHWEST BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(All dollar amounts presented in tables are in thousands)
                                 
    Three months ended  
    March 31     June 30     September 30     December 31  
    (In thousands, except per share data)  
2007:
                               
Interest income
  $ 95,592       98,827       101,558       100,054  
Interest expense
    50,857       53,458       54,468       52,232  
 
                       
Net interest income
    44,735       45,369       47,090       47,822  
Provision for loan losses
    2,006       2,066       2,149       2,522  
Noninterest income
    10,489       11,366       5,427       15,920  
Noninterest expenses
    37,876       37,777       38,481       38,608  
 
                       
Income before income taxes
    15,342       16,892       11,707       22,612  
Income taxes
    4,045       4,592       2,121       6,698  
 
                       
Net income
  $ 11,297       12,300       9,586       15,914  
 
                       
Basic earnings per share
  $ 0.23       0.25       0.20       0.33  
Diluted earnings per share
  $ 0.23       0.25       0.20       0.33  
                                 
    Three months ended  
    March 31     June 30     September 30     December 31  
    (In thousands, except per share data)  
2006:
                               
Interest income
  $ 89,402       91,316       93,365       94,490  
Interest expense
    43,542       46,532       49,404       51,631  
 
                       
Net interest income
    45,860       44,784       43,961       42,859  
Provision for loan losses
    2,099       2,067       2,237       2,077  
Noninterest income
    13,965       10,207       11,372       10,482  
Noninterest expenses
    35,203       34,897       35,278       38,304  
 
                       
Income before income taxes
    22,523       18,027       17,818       12,960  
Income taxes
    6,711       5,000       4,961       3,120  
 
                       
Net income
  $ 15,812       13,027       12,857       9,840  
 
                       
Basic earnings per share
  $ 0.32       0.26       0.26       0.20  
Diluted earnings per share
  $ 0.32       0.26       0.26       0.20  

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ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
     Not Applicable
ITEM 9A. CONTROLS AND PROCEDURES
     Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
     There were no significant changes made in our internal controls during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
     See Management’s Report On Internal Control Over Financial Reporting — filed herewith under Part II, Item 8, “Financial Statements and Supplementary Data.”
ITEM 9B. OTHER INFORMATION
     Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
     The “Proposal I—Election of Directors” section of the Company’s definitive proxy statement for the Company’s 2009 Annual Meeting of Stockholders (the “2009 Proxy Statement”) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
     The “Proposal I—Election of Directors” section of the Company’s 2009 Proxy Statement is incorporated herein by reference.
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
     The “Proposal I—Election of Directors” section of the Company’s 2009 Proxy Statement is incorporated herein by reference.
     The Company does not have any equity compensation program that was not approved by stockholders, other than its employee stock ownership plan.

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     Set forth below is certain information as of December 31, 2008 regarding equity compensation plans that have been approved by stockholders.
                         
    Number of securities to                
    be issued upon exercise             Number of securities  
Equity compensation plans   of outstanding options     weighted average     remaining available for  
approved by stockholders   and rights     exercise price     issuance under plan  
 
1995 Stock Option Plan
    21,200     $ 7.60        
2000 Stock Option Plan
    602,255       17.63        
2004 Stock Option Plan
    750,245       24.03        
2008 Stock Option Plan
    226,068       22.03       1,523,932  
 
                 
Total
    1,599,768     $ 21.12       1,523,932  
 
                 
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
     The “Transactions with Certain Related Persons” section of the Company’s 2009 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
     The “Proposal II — Ratification of Appointment of Independent Registered Public Accounting Firm” Section of the Company’s 2009 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
     (a)(1) Financial Statements
     The following documents are filed as part of this Form 10-K.
  (A)   Management’s Report on Internal Control Over Financial Reporting
 
  (B)   Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
 
  (C)   Report of Independent Registered Public Accounting Firm
 
  (D)   Consolidated Statements of Financial Condition — at December 31, 2008 and 2007
 
  (E)   Consolidated Statements of Income — Years ended December 31, 2008, 2007 and 2006
 
  (F)   Consolidated Statements of Changes in Shareholders’ Equity — Years ended December 31, 2008, 2007 and 2006
 
  (G)   Consolidated Statements of Cash Flows — Years ended December 31, 2008, 2007 and 2006
 
  (H)   Notes to Consolidated Financial Statements.
     (a)(2) Financial Statement Schedules
          None.

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     (a)(3) Exhibits
         
       
Regulation       Reference to Prior Filing
S-K Exhibit       or Exhibit Number
Number   Document   Attached Herto
2
  Plan of acquisition, reorganization, arrangement, liquidation or succession    None
 
       
3
  Articles of Incorporation and Bylaws    ***
 
       
4
  Instruments defining the rights of security holders, including indentures    *
 
       
9
  Voting trust agreement    None
 
       
10.1
  Amendment and Restatement of Deferred Compensation Plan for Outside Directors Of Northwest Savings Bank and Eligible Affiliates    10.1
 
       
10.2
  Retirement Plan for Outside Directors of Northwest Savings Bank and Eligible Affiliates    10.2
 
       
10.3
  Amended and Restated Northwest Savings Bank Nonqualified Supplemental Retirement Plan    10.3
 
       
10.4
  Employee Stock Ownership Plan    *
 
       
10.5
  Northwest Bancorp, Inc. 2004 Stock Option Plan    ****
 
       
10.6
  Northwest Bancorp, Inc. 2004 Recognition and Retention Plan    ****
 
       
10.7
  Management Bonus Plan    10.7
 
       
10.8
  Northwest Bancorp, Inc. 2008 Stock Option Plan    *****
 
       
10.9
  Amended and Restated Northwest Savings Bank and Affiliates Upper Managers Bonus Deferred Compensation Plan    10.9
 
       
10.10
  Employment Agreement for William J. Wagner    ******
 
       
10.11
  Employment Agreement for William W. Harvey, Jr.    ******
 
       
10.12
  Employment Agreement for Steven G. Fisher    ******

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Regulation       Reference to Prior Filing
S-K Exhibit       or Exhibit Number
Number   Document   Attached Herto
10.13
  Employment Agreement for Gregory C. LaRocca    ******
 
       
10.14
  Employment Agreement for Robert A. Ordiway    ******
 
       
11
  Statement re: computation of per share earnings    None
 
       
12
  Statement re: computation of ratios    Not required
 
       
16
  Letter re: change in certifying accountant    None
 
       
18
  Letter re: change in accounting principles    None
 
       
21
  Subsidiaries of Registrant    21
 
22
  Published report regarding matters submitted to vote of security holders    None
 
       
23
  Consent of experts and counsel    23
 
       
24
  Power of Attorney    Not Required
 
       
28
  Information from reports furnished to State insurance regulatory authorities    None
 
       
31.1
  Certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as Amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    31.1
 
       
31.2
  Certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as Amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002    31.2
 
       
32
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    32
 
*   Incorporated by reference to the Company’s Registration Statement on Form S-4 (File No. 333-31687), originally filed with the SEC on July 21, 1997, as amended on October 9, 1997 and November 4, 1997.
 
***   Incorporated by reference to the Definitive Proxy Statement for the 2000 Annual Meeting of Shareholders (File No. 000-23817), filed with the SEC on November 21, 2000.
 
****   Incorporated by reference to the Definitive Proxy Statement for the 2004 Annual Meeting of Shareholders (File No. 000-23817), filed with the SEC on October 6, 2004.
 
*****   Incorporated by reference to the Definitive Proxy Statement for the 2008 Annual Meeting of Shareholders (File No. 000-23817), filed with the SEC on April 11, 2008.
 
******   Incorporated by reference to the Periodic Report or Form 8-K (File No. 000-23817), filed with the SEC on September 19, 2007.

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SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  NORTHWEST BANCORP, INC.
 
 
Date: March 4, 2009  By:   /s/ William J. Wagner  
    William J. Wagner, Chairman, President and   
    Chief Executive Officer (Principal Executive Officer)   
 
Pursuant to the requirements of the Securities Exchange of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
         
     
Date: March 4, 2009  By:   /s/ William J. Wagner    
    William J. Wagner, Chairman, President, and   
    Chief Executive Officer and Director   
 
     
Date: March 4, 2009  By:   /s/ William W. Harvey, Jr.  
    William W. Harvey, Jr., Executive Vice President, Finance,   
    Chief Financial Officer (Principal Financial Officer)   
 
     
Date: March 4, 2009  By:   /s/ Gerald J. Ritzert  
    Gerald J. Ritzert, Senior Vice President,   
    Chief Accounting Officer (Principal Accounting Officer)   
 
     
Date: March 4, 2009  By:   /s/ John M. Bauer  
    John M. Bauer, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Richard L. Carr  
    Richard L. Carr, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Thomas K. Creal  
    Thomas K. Creal, III, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Robert G. Ferrier  
    Robert G. Ferrier, Director   
       
 
     
Date: March 4, 2009  By:   /s/ A. Paul King  
    A. Paul King, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Joseph F. Long  
    Joseph F. Long, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Richard E. McDowell  
    Richard E. McDowell, Director   
       
 
     
Date: March 4, 2009  By:   /s/ Philip M. Tredway  
    Philip M. Tredway, Director   
       
 

103

Exhibit 10.1
AMENDMENT AND RESTATEMENT OF
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
OF NORTHWEST SAVINGS BANK AND ELIGIBLE AFFILIATES
Effective as of January 1, 2005
Preamble
          This Plan is an unfunded deferred compensation arrangement to enable members of the Board of Directors of Northwest Savings Bank (“Bank”) and its Eligible Affiliates who are not employed on a full-time basis by the Bank or an Eligible Affiliate who receive compensation for their services as Directors in the form of fees, to elect, prior to the period in which such fees are earned, to defer all or part of such fees for payment in a later taxable period. This Plan was adopted by the Board of Directors of the Bank’s predecessor, Northwest Mutual Savings Association in March of 1979, and was amended effective June 17, 1987, February 21, 1996 , July 1, 2003 , April 1, 2004 and July 1, 2004. Deferral Elections made by Eligible Directors prior to July 1, 2004 shall be governed by the terms of their Deferral Elections and of this Plan as in effect prior to July 1, 2004. The Plan is being amended and restated as of January 1, 2005 to correct typographical errors, conform with past practice and maintain compliance with Section 409A of the Internal Revenue Code.

 


 

ARTICLE I

Definitions
          “Bank” means Northwest Savings Bank, a Pennsylvania corporation, and its corporate successors.
          “Beneficiary” means the person whom the Participant has designated pursuant to Section 5.03 and Exhibit III to receive any amounts remaining in his/her Director’s Deferred Compensation account at the Participant’s death.
          “Board” means the Board of Directors of Northwest Savings Bank or any committee of the Board to which the Board has delegated its authority with respect to the Plan.
          “Director’s Deferred Compensation Account” is defined in Section 3.01.
          “Director’s Fees” means all remuneration for service on the Board of the Bank or any Eligible Affiliate, including retainers, meeting fees and other payments.
          “Disability” means mental or physical disability of at least six months which prevents a Participant from engaging in the principal duties of his/her position as an Eligible Director, provided that such disability qualifies as a “Disability” under Treasury Regulations Section 1.409A-3(i)(4).
          “Eligible Affiliate” means the parent corporation or an affiliated corporation of the Bank which the Board has determined by duly adopted resolution to be eligible for the Plan including Northwest Bancorp Mutual Holding Company and Northwest Bancorp, Inc.
          “Eligible Director” means a member of the Board of Directors of the Bank or of an Eligible Affiliate, who receives compensation for his/her services as a Director in the form of fees and who is not employed by the Bank or an Eligible Affiliate on a full-time basis.

2


 

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
          “Event of Distribution” means any of the events of distribution included in the Deferral Election form executed by an Eligible Director hereunder, and any of the other events of distribution permitted under Article IV hereof .
          “Fiscal Year” means the Bank’s fiscal year, which ran from July 1 through June 30 until June 30, 2005. The period July 1 — December 31, 2005 was a short Fiscal Year. Effective January 1, 2006 the Bank’s Fiscal Year corresponds with the calendar year.
          “Participant” means an Eligible Director who elects to defer compensation pursuant to the Plan and who retains, or whose beneficiaries retain, benefits under the Plan in accordance with its terms.
          “Plan” means this Deferred Compensation Plan as it may be amended from time to time.
          “Plan Administrator” means the Committee comprised of William Wagner, Gregory LaRocca and Julie McTavish or their respective successors on such Committee as may be appointed from time to time by the Board or by the Compensation Committee of the Board of the Bank.
          “Retire” or “Retirement” means termination for any reason of the Participant’s service as a Director following the Participant’s attainment of 59 1 / 2 , but not later than the Participant’s age 72.
          “Year” (unless otherwise specified) means the Bank’s Fiscal Year.

3


 

ARTICLE II
Deferral of Compensation Payable as Director’s Fees
Section 2.01 . Deferral Elections . Each Eligible Director may elect annually to defer the dollar amount or percentage of his annual compensation payable in the form of Director’s Fees which he/she specifies in a Deferral Election which he/she executes in the form of Exhibit I hereto and files with the Plan Administrator in the Fiscal Year prior to that in which such Director’s Fees are earned. A Deferral Election becomes irrevocable (subject to the exceptions set forth below) as of the December 31 immediately preceding the Fiscal Year with respect to which it is executed. A Participant may cancel or change a Deferral Election by filing a later dated one with the Plan Administrator prior to the time it becomes irrevocable . Such final , irrevocable Deferral Election shall apply to the Director’s Fees which the Eligible Director earns in the Fiscal Year which immediately follows that in which he/she executes and files his/her Deferral Election. Such Deferral Election shall also apply to Director’s Fees which the Eligible Director earns in subsequent Fiscal Years for which no contrary Deferral Election, or cancellation thereof, is filed with the Plan Administrator. In addition, in the Year in which a Director first becomes eligible to participate in the Plan, if the Eligible Director executes and files his/her Deferral Election within 30 days of first becoming Eligible to participate, such Deferral Election shall also apply to the Director’s Fees which the Eligible Director earns in the remainder of the Fiscal Year after filing his/her Deferral Election with the Plan Administrator. A Deferral Election shall be irrevocable as of the December 31 immediately preceding the Fiscal Year with respect to which it was executed, except that the Participant shall retain the right (a) to accelerate the time of payment scheduled under any previously filed Deferral Election in the event of an unforeseeable emergency in accordance with Sections 4.02 through 4.04 hereof, (b) to change his/her

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designation of beneficiaries with respect to any previously filed Deferral Election, upon filing a duly executed beneficiary designation form with the Plan Administrator in accordance with Section 5.02 and (c) to further defer the payment of Director’s Fees scheduled under any Deferral Election previously filed by executing a Postponement of Deferral Election in accordance with Section 2.02 hereof.
Section 2.02 Change in Time and Form of Payment . A Participant may elect to change the form of payment or to further defer the payment of Director’s Fees subject to a Deferral Election previously filed, by executing a Change of a Deferral Election in the form of Exhibit II hereto with the Plan Administrator, subject to the following conditions:
  (a)   the Participant’s Change of Deferral Election shall not be effective until the first day of the 13 th month after it is filed with the Plan Administrator, and shall not apply to any payment or series of installment payments treated as a single payment scheduled to be paid under any previously filed Deferral Election prior to the first day of the 13 th month after the Participant’s Change of Deferral Election is filed with the Plan Administrator; and
 
  (b)   the Change of Deferral Election postpones the date of payment of the Deferral Election to which it relates for a period of at least five years from the date such payment was previously scheduled to be paid, or in the case of a series of installment payments treated as a single payment, five years from the date the first payment in the series was previously scheduled to be paid.

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  (c)   any Change of Deferral Election that changes only the form of payment must delay the starting date of the originally scheduled payment by at least five years.
The right to a series of substantially equal periodic installment payments over a predetermined number of years is not a right to a life annuity and is treated as the right to a single payment under this Plan. Accordingly, filing of a Change of Deferral Election delaying for five years the right to receive installment payments scheduled under a previously filed Deferral Election to be made over a five-year period will result in all of such scheduled installment payments to be paid in a lump sum in the fifth year, and filing of a Change of Deferral Election delaying for five years the right to receive installment payments scheduled under a previously filed Deferral Election to be made over a ten-year period will result in the first five of such scheduled installments to be paid in a lump sum in the fifth year, and the remaining five annual installments to be paid as previously scheduled in the fifth through the 10 th years.
ARTICLE III
Accumulation of Deferred Compensation
Section 3.01 . Participant Accounts . The dollar amount of Director’s Fees deferred pursuant to each Deferral Election executed and filed by each Participant hereunder shall be credited as of the end of the calendar month in which such Fees are payable to such Participant to an unfunded book reserve account (the “Director’s Deferred Compensation Account”) and shall be recorded on the financial books and records of the Bank or the Eligible Affiliate, as applicable, as a deferred compensation liability in the names of the respective Participants.

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Section 3.02 . Interest on Accounts . Unless the Bank allows Participants to direct the investment of their Deferred Compensation Accounts, the Director’s Deferred Compensation Account of each Participant having a credit balance shall be credited with interest at the end of each calendar quarter at the rate equal to the average crediting rate for the insurance policies which the Bank carried on the lives of the Directors in the preceding Fiscal Year, grossed up by dividing it by one (1) minus the Bank’s highest marginal income tax rate for the preceding Fiscal Year. For example, if the average crediting rate on the Directors’ life insurance policies in the preceding Fiscal Year was 5% and the Bank’s highest marginal tax rate for that Fiscal Year was 35%, the interest payable on the Directors’ Deferred Compensation Account for a calendar quarter in the current Fiscal Year would be one-fourth of 7.69% (5%/(1 minus 35%)), or 1.92%. Such interest shall be credited on or before the last business day of each calendar quarter in the current Fiscal Year on the average credit balance held in each Participant’s Director’s Deferred Compensation Account during that quarter. If Participants direct the investment of their Deferred Compensation Accounts, the net earnings or losses shall be attributable to those investments and no interest shall be paid on such Accounts.
Section 3.03 . Additional Benefit Upon Death Before Age 72 . In the event that a Participant dies while an Eligible Director but before attaining age 72, his/her beneficiary shall receive an additional death benefit payable in a lump sum within 60 days following death calculated as the present value of the additional balance that the Participant would have accrued in his/her Director’s Deferred Compensation Account assuming that (1) he/she had not died but had continued as a Participant to his/her age 72, (2) he/she had continued the same Deferral Election of Director’s Fees to age 72 that he/she had been making at the date of death, and (3) interest had

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continued to be credited on such deferred Director’s Fees pursuant to Section 3.02 to his/her age 72 at the same rate as was in effect at the Participant’s date of death.
ARTICLE IV
Events of Distribution
Section 4.01 . Selection of Event of Distribution . Within 30 days following the first to occur of the Events of Distribution selected by each Participant in each Deferral Election filed with the Plan Administrator, the amount of his/her Director’s Deferred Compensation Account governed by each Deferral Election shall become payable to the Participant (or his/her designated beneficiary) in accordance with Article V.
Section 4.02 . Unforeseeable Emergency . In addition to the Events of Distribution selected by the Participant in his/her Deferral Election, as referred to in Section 5.01, a portion of the Director’s Deferred Compensation Account of any Participant shall be payable to him/her or to any of his/her beneficiaries in the event of an unforeseeable emergency that is caused by an event beyond the control of the Participant or beneficiary and that would result in severe financial hardship to the Participant or beneficiary if early withdrawal were not permitted , upon a withdrawal request duly filed and documented with the Plan Administrator. Any early withdrawal pursuant to this section is limited to the amount necessary to meet the emergency, which cannot be met from other resources of the Participant or of his/her spouse, beneficiary or dependent, such as insurance, savings or borrowing, plus an amount equal to the taxes that must be paid as a result of such early distribution. For the purposes of this Article IV “dependent”

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shall mean as defined in Code Section 152, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B).
Section 4.03 . Definition of Unforeseeable Emergency . Conditions which warrant approval of a Participant’s (or beneficiary’s) application for early withdrawal from a Directors’ Deferred Compensation Account because of unforeseeable emergency are limited to cases of severe financial hardship to the Participant (or to his/her beneficiary) resulting from an illness or accident of the Participant, his/her spouse, beneficiary or dependent, loss of the property of the Participant or of his/her spouse, beneficiary or dependent due to casualty (including the need to rebuild a home following damage not otherwise covered by insurance), or other similar and extraordinary and unforeseeable circumstances arising out of events beyond the control of the Participant or of his/her spouse, beneficiary or dependent. Examples of what may constitute unforeseeable emergencies, depending on the relevant facts and circumstances, include: imminent foreclosure of or eviction from the primary residence; medical expenses, prescription drug medications and funeral expenses. The purchase of a home and the payment of college tuition are not unforeseeable emergencies.
Section 4.04. Amount of Payment Permitted and Conditions of Payment Upon an Unforeseeable Emergency . Distributions because of an unforeseeable emergency may not exceed the amount reasonably necessary to satisfy the emergency need, which may include amounts necessary to pay any Federal, State, local or foreign income taxes or penalties reasonably anticipated to result from the distribution. Distributions because of an unforeseeable emergency may not be made to

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the extent that the financial hardship to the Participant (or to his/her spouse, beneficiary, or dependent) is or may be relieved —
  (a)   through reimbursement or compensation by insurance or otherwise; or
 
  (b)   by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or
 
  (c)   by cessation of deferrals under the Plan.
Amounts withdrawn may not be returned to the Plan. Withdrawals will be subject to Federal income tax. Participants who make a hardship withdrawal may elect to cancel Elective Deferrals or other contributions to the Plan for the remainder of the Plan Year following receipt of a hardship distribution.
Section 4.05 . Other Events of Distribution . In addition to the Events of Distribution selected by the Participant in his/her Deferral Election, as referred to in Section 5.01, payments from the Director’s Deferred Compensation Account of any Participant shall be accelerated (within the limits of Code §409A and the regulations thereunder) to the extent that the Plan Administrator determines to be necessary to:
  (a)   pay an individual other than the Participant to fulfill a domestic relations order, as defined in Code Section 414(p)(1)(B);
 
  (b)   comply with Federal, State, local or foreign ethics laws or conflicts of interest laws;
 
  (c)   provide cashouts of the entirety of the Participant’s interest under this and related plans of nonqualified deferred compensation of the Bank and its

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      Eligible Affiliates where such entire interest is not in excess of the applicable dollar amount under Code Section 402(g)(1)(B);
 
  (d)   provide for payment of employment taxes under the Federal Insurance Contributions Act (FICA) and Railroad Retirement Tax Act (RRTA) and other employment taxes imposed on compensation deferred under the Plan;
 
  (e)   provide for payment of the income tax at source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable State, local or foreign tax laws as the result of the payment of the FICA or RRTA amount, and for payment of the additional income tax at source on wages attributable to the pyramiding of Code Section 3401 wages and taxes, provided that the total distribution under this acceleration provision does not exceed the aggregate of the FICA or RRTA amount, and the income tax withholding related to such FICA or RRTA amount;
 
  (f)   provide for the payment of the amount required to be included in income as the result of any failure of this Plan to comply with the requirements of Code Section 409A or the regulations finally and lawfully issued thereunder;
 
  (g)   satisfy a debt of the Participant to the Bank which was incurred in the ordinary course of the Participant’s service relationship to the Bank, provided that the acceleration and application of a Participant’s compensation deferred hereunder to satisfy such debt is made at the same time and in the same amount as the debt would have been otherwise due and collectible from the Participant and does not exceed $5,000 in any tax year of the Participant.

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  (h)   make any other acceleration of the time and form of a payment available to the Bank under Code Section 409A and the regulations thereunder.
ARTICLE V
Payment of Deferred Compensation
Section 5.01 . Payment of Account Balances . Within 30 days following the occurrence of the first of the Events of Distribution listed by each Participant’s Deferral Election, the then current balance of his/her Deferred Compensation Account governed by such Deferral Election shall commence to be paid to the Participant (or his/her designated beneficiary) in a lump sum or in approximately equal monthly, quarterly or annual installments over a period of years in accordance with the respective distribution option selected by the Participant in his/her Deferral Elections filed with the Plan Administrator. Any portion of a Participant’s Deferred Compensation account with respect to which there is no effective distribution option election on file with the Plan Administrator shall be distributed to the Participant in a lump sum on the first anniversary of his/her retirement, death, disability or other severance from service as a member of the Board. So long as any Director’s Deferred Compensation Account has a credit balance, it shall continue to be credited with interest in accordance with Section 3.02.
Section 5.02 Delay of Payments Under Certain Circumstances . A payment that is otherwise due to be distributed from a Participant’s Deferred Compensation Account in accordance with his/her Deferral Election shall be delayed in the following circumstances:
  (a)   to the extent that the Bank reasonably anticipates that the scheduled payment would not be deductible from the Bank’s taxable income due to the

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      application of Code Section 162(m), in which event the payment shall be made, as the Bank decides, either (i) during the Bank’s first taxable year in which the Bank reasonable anticipates that the deduction of such payment will be allowed under Code Section 162(m), or (ii) during the period beginning with the Participant’s separation from the service of the Bank and its Eligible Affiliates and ending on the later of the last day of the Bank’s taxable year in which the Participant separated from such service or the 15 th day of the third month following the Participant’s separation from such service, or
 
  (b)   in the event that the Participant is a “specified employee” within the meaning of Section 409A and the regulations issued thereunder at the time, or within six months prior to the time, a payment is otherwise due to be distributed from his/her Deferred Compensation Account in accordance with his/her Deferral Election, then no payment shall be made from his/her Deferred Compensation account until the first day of the seventh month following the date of his/her separation from the service of the Bank and its Eligible Affiliates, unless such separation from service is due to the death of the Participant, or
 
  (c)   to the extent that the Bank reasonably anticipates that the making of the payment will violate Federal securities law or other applicable law, provided that the Bank makes the payment at the earliest date at which it reasonably anticipates that making of the payment will not cause such violation.

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Section 5.03 Designation of Beneficiaries . Each Participant shall have the right to designate one or more Beneficiaries who are to succeed to his/her right to receive future payments hereunder in the event of his/her death by completing the Beneficiary Designation Form set forth at Exhibit III. In case of a failure of designation or the death of a designated Beneficiary without a designated successor, distribution shall be made to the Participant’s estate. No designation of Beneficiaries shall be valid unless in writing signed by the Participant, dated, and filed with the Plan Administrator. A Participant may change a beneficiary designation without the consent of any earlier designated beneficiaries.
ARTICLE VI
General Provisions
Section 6.01. Administration . The Plan shall be administered by the Plan Administrator. No member of the Plan Administrator shall be eligible to participate in the Plan. The Plan Administrator shall have the power to interpret the Plan and to decide any and all matters arising hereunder, including but not limited to the right to remedy possible ambiguities, inconsistencies or omissions, by general rule or particular decision, provided that all such interpretations and decisions shall be applied in a uniform and nondiscriminatory manner to all Participants similarly situated. In addition, any interpretations and decisions made by the Plan Administrator shall be final, conclusive and binding upon all persons who have or who claim to have any interest in or under the Plan.

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Section 6.02 . Compliance with Code Section 409A. The Plan shall be administered and interpreted to comply with Section 409A of the Internal Revenue Code and all regulations thereunder in order to preserve the tax-deferred treatment of the Directors’ Deferred Compensation Accounts accrued hereunder pending distributions to Participants and Beneficiaries in accordance with Deferral Elections filed hereunder. In no event may any distribution be made from the Plan or action taken under the Plan that would make any Directors’ Deferred Compensation Account hereunder subject to the interest and additional tax imposed by Code Section 409A(a)(1)(B).
Section 6.03. Funding . All liabilities under this Plan for compensation deferred by Participants hereunder shall be unfunded for purposes of federal income taxes and for purposes of Title I of ERISA. All benefits paid under this Plan shall be paid in cash from the general assets of the Bank. All liability for Retirement Benefits payable under the Plan shall be reflected on the accounting records of the Bank, but shall not be construed to create or require the creation of a trust, custodial or escrow account. The Bank may establish one or more trusts, with such trustees as the Board may approve, for the purpose of holding and providing for the payment of Director’s Deferred Compensation a Accounts hereunder. Such trusts may be irrevocable but the assets thereof shall be subject to the claims of the Bank’s creditors. To the extent that any Director’s Deferred Compensation Accounts held under the Plan are actually paid from any such trust, the Bank shall have no further obligations with respect thereto, but to the extent not so paid, such a Accounts shall be payable from such insurance contracts, annuities or other funds that the Bank may purchase, establish or accumulate to aid in holding and providing benefits under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions,

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shall create a trust or fiduciary relationship of any kind between the Bank and a Director or any other person. A Director shall not acquire any interest greater than that of an unsecured creditor in his/her Deferred Compensation Account.
Section 6.04 . Expenses . The expenses of administering the Plan shall be borne by the Bank or Eligible Affiliate.
Section 6.05 . Indemnification . The members of the Plan Administrator and its agents and officers, directors and employees of the bank shall be indemnified and held harmless by the Bank and Eligible Affiliates to the fullest extent now or hereafter permitted by law against and from any and all loss, cost, liability or expense, including attorney’s fees, fines, civil penalties, interest and excise taxes that may be imposed upon or reasonably incurred by them in connection with or resulting from any actual or threatened civil, criminal, administrative or investigative claim, action, suit or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by them in settlement (with the Bank’s or Eligible Affiliate’s written approval) or paid by them in satisfaction of a judgment in any such action, suit or proceeding. The indemnification provided by this section shall continue for persons who have ceased to be members or agents of the Plan Administrator, and to former directors, officers and employees of the Bank or Eligible Affiliate, and shall inure to the benefit of the heirs, executors and administrators of persons entitled to indemnity hereunder. This section shall not be applicable to any person if the loss, cost, liability or expense is finally judicially determined to be due to such person’s recklessness or willful misconduct.

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Section 6.06. Nonassignability . Neither a Participant in the Plan nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of actual receipt of any Director’s Deferred Compensation account, all rights to which are expressly declared to be nonassignable and nontransferable. No part of any Director’s Deferred Compensation Account shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.
Section 6.07 . Payment to Guardian . If any amount held in a Director’s Deferred Compensation account is payable to a person declared incompetent or to a person incapable of handling the disposition of property, the Plan Administrator may direct payment of such a Account to the guardian, legal representative or person having the care and custody of such incompetent person, without responsibility to follow application of amounts so paid. Payments made pursuant to this provision shall completely discharge the Bank, any Eligible Affiliates, the Plan and the Plan Administrator.
Section 6.08 . Successors . The provisions of this Plan shall bind and inure to the benefit of the Bank, its Eligible Affiliates and their successors and assigns. The term “successors” as used herein shall include any corporation or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Bank or of an Eligible Affiliate, and the successors of any such corporation or other business entity.

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Section 6.09 . Gender and Number . Except when otherwise indicated by the context, words in the masculine gender shall include the feminine gender; the plural shall include the singular and the singular shall include the plural.
Section 6.10 . Not a Contract of Service . Neither the establishment of, nor the participation or eligibility for participation of any Eligible Director in, this Plan shall be construed to confer any right of tenure on the part of any Eligible Director or any right of nomination, renomination, election or re-election to the Board of Directors of the Bank or Eligible Affiliate. The Bank shall not incur any liability for any loss of benefits that might result under this Plan from any failure of the stockholders to elect or re-elect any Eligible Director to the applicable Board of Directors or any failure of the applicable Board of Directors to nominate any Eligible Director for re-election.
Section 6.11 . Severability . In the event any provision of the Plan shall be held invalid or illegal for any reason, or to fail to comply with Section 409A of the Internal Revenue Code, such illegality, invalidity or noncompliance shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal, invalid or noncomplying provision had never been inserted, and the Bank and Eligible Affiliates shall have the privilege and opportunity to correct and remedy such questions of illegality, invalidity or noncompliance by amendment as provided in the Plan.

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Section 6.12 . Applicable Law . The Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania except as otherwise required by applicable Federal Law, including Code Section 409A.
ARTICLE VII
Claims Procedure
Section 7.01 . General . Any claim for any payment due under the Plan shall be filed by the Participant or beneficiary (“claimant”) in the manner prescribed by the Plan Administrator.
Section 7.02 . Denials . If a claim for a payment requested under the Plan is wholly or partially denied, notice of the decision shall be furnished to the claimant by the Plan Administrator within a reasonable period of time after receipt of the claim by the Plan Administrator.
Section 7.03 . Notice . Any claimant who is denied a claim for payment requested under the Plan shall be furnished written notice setting forth:
  (a)   the specific reason or reasons for the denial;
 
  (b)   specific reference to the pertinent provision of the Plan upon which the denial is based;
 
  (c)   a description of any additional material or information necessary of the claimant to perfect the claim; and
 
  (d)   an explanation of the claim review procedure under the Plan.

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Section 7.04 . Appeals Procedure . In order that a claimant may appeal a denial of a claim, the claimant or the claimant’s duly authorized representative may:
  (a)   request a review by written application to the Plan Administrator, or its designee, no later than 60 days after receipt by the claimant of written notification of denial of a claim;
 
  (b)   review pertinent documents; and
 
  (a)   submit issues and comments in writing.
Section 7.05 . Review . A decision on review of a denied claim shall be made not later than 60 days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than one hundred and twenty (120) days after receipt of a request for a review. The decision on review shall be in writing and shall include the specific reason(s) for the decision and the specific reference(s) to the pertinent provisions of the Plan on which the decision is based.
ARTICLE VIII
Amendment or Termination of Plan
Section 8.01 . General . The Plan may be amended in whole or in part or terminated from time to time by the Board of the Bank or any Eligible Affiliate (but only with respect to that Eligible Affiliate), provided that no amendment or termination may divest any Participant or beneficiary of rights to deferred compensation earned and accumulated in the Plan at the time of such

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amendment or termination. Any termination of the Plan that results in accelerated payment of benefits shall comply with the requirements of Treasury Regulation Section 1.409A-3(j)(ix).
Section 8.02 . Notice . Notice of every such amendment shall be given in writing to each Participant and beneficiary of a deceased Participant.
           IN WITNESS WHEREOF , Northwest Savings bank has caused this Amendment and Restatement to be executed by its duly authorized officers effective as of January 1, 2005.
                 
        NORTHWEST SAVINGS BANK    
 
               
December 17, 2008
      By:   /s/ William Wagner    
 
Date
         
 
William Wagner, President
   

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EXHIBIT I
DEFERRAL ELECTION UNDER DIRECTORS’
DEFERRED COMPENSATION PLAN
OF NORTHWEST SAVINGS BANK AND ELIGIBLE AFFILIATES
             
TO:
  Plan Administrator   FROM:                                              
 
  c/o Human Resources Department   (Name of Eligible Director)    
 
  Northwest Savings Bank
108 Liberty Street
Warren, Pennsylvania 16365
 
 
 
(Name of Bank or
Eligible Affiliate)
   
      ELECTION . Pursuant to the Directors’ Deferred Compensation Plan (“Plan”) of Northwest Savings Bank (“Bank”), of which I acknowledge I have received a copy, and subject to all of the terms and conditions of the Plan, I hereby elect to defer receipt of $                      or                      % of the Annual Compensation otherwise payable to me in the form of Director’s Fees by the Bank or an Eligible Affiliate in the Fiscal Year of the Bank which immediately follows that in which this Deferral Election is delivered to the Plan Administrator.
     This Deferral Election shall also apply to the Director’s Fees otherwise due me from the Bank or an Eligible Affiliate in all subsequent Fiscal Years for which I fail to file a cancellation of this Deferral Election or a contrary Deferral Election with the Plan Administrator.
     In the Fiscal Year in which I first become eligible to participate in the Plan this Deferral Election shall also apply to the Director’s Fees otherwise due me from the Bank or an Eligible Affiliate for the remainder of the Fiscal Year following my filing of this Deferral Election with the Bank, provided that it is delivered to the Plan Administrator within 30 days of my first becoming eligible to participate in the Plan.
     Such deferred compensation shall be held in my Director’s Deferred Compensation Account under the Plan for distribution to me, with interest accrued in accordance with Section 3.02 of the Plan, commencing within 30 days of the first to occur of the following Events of Distribution which I have selected: [The Participant should initial and fill in any blank in any Event of Distribution which is selected, and cross out any Event of Distribution which is not selected.]
             
 
    (1 )   My retirement as a Director on or after age 59 1 / 2 up to age 72. [This option not available for Deferral Elections filed after such retirement eligibility.]
 
           
 
           
 
    (2 )   My voluntary resignation from the Board of Directors.
 
           
 
           
 
    (3 )   My failure to be nominated or elected as a member of the Board of Directors.
 
           
 
           
 
    (4 )   My death.
 
           
 
           
 
    (5 )   My becoming disabled or incurring a disability, defined as my suffering from a mental or physical disability which prevents me from engaging in the principal duties as a Director of the Bank for a period of six consecutive months.
 
         
 
           
 
    (6 )   My attainment of age                      . [Age selected must be above the Participant’s age when Deferral Election is filed.]
 
           
 
           
 
    (7 )   The following specific date following the year in which this Deferral Election is filed:                      20, ___.
 
         

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     An Eligible Director may not defer any portion of his/her Director’s Fees earned during any Fiscal Year which immediately follows a Fiscal Year in which he/she received any distribution of Director’s Fees earned and deferred during a prior Fiscal Year.
     I understand that the Plan also permits me to make an early withdrawal of a portion of my Director’s Deferred Compensation Account that is necessary for me to avoid a severe financial hardship resulting from an unforeseeable emergency caused by an event beyond my control, within the meaning and intent of the Plan. Any such hardship withdrawal is limited to the amount necessary to meet the immediate financial need created by the emergency, which cannot be satisfied by insurance, borrowing or my other resources.
     Within 30 days of the first to occur of the above Events of Distribution (but subject to the terms and conditions of the Plan) the then current balance of my Director’s Deferred Compensation Account shall commence to be paid to me or to my designated beneficiary in accordance with one of the following options which I have selected as indicated by my initialing it and by filling in the blank if options 2, 3 or 4 is selected:
             
 
    (1 )   Lump sum; or
 
           
 
           
 
    (2 )   Approximately equal monthly installments over a period of                      years (either five (5) or ten (10)); or
 
           
 
           
 
    (3 )   Approximately equal quarterly installments over a period of                      years (either five (5) or ten (10)); or
 
           
 
           
 
    (4 )   Approximately equal annual installments over a period of                      years (either five (5) or ten (10)).
 
           
      ELECTION PERIOD . Subject to the terms and conditions of the Plan, this election shall be effective and irrevocable for the Director’s Fees which I shall earn in the Fiscal Year which immediately follows my delivery of this Deferral Election to the Plan Administrator, plus, in the first Fiscal Year in which I am eligible to participate in the Plan, the Director’s Fees which I shall earn in the remainder of the Fiscal Year following my delivery of this Deferral Election to the Plan Administrator, provided that it is filed within 30 days of my first becoming eligible to participate in the Plan.
                 
 
          ELIGIBLE DIRECTOR    
 
Date:
      Signed:        
 
 
 
     
 
   
 
               
 
          Printed or Typed:                                              
 
               
 
          Employee Social Security No.:    
 
               
 
         
 
   
 
               
Received
          PLAN ADMINISTRATOR    
 
               
 
               
Date:
      Signed:        
 
 
 
     
 
   

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EXHIBIT II
CHANGE OF DEFERRAL ELECTION UNDER DIRECTORS’
DEFERRED COMPENSATION PLAN
OF NORTHWEST SAVINGS BANK AND ELIGIBLE AFFILIATES
             
TO:
  Plan Administrator   FROM:                                              
 
  c/o Human Resources Department   (Name of Eligible Director)    
 
  Northwest Savings Bank
108 Liberty Street
Warren, Pennsylvania 16365
 
 
(Name of Bank or
Eligible Affiliate)
   
PART I
      CHANGE OF SCHEDULED PAYMENT(S) . In accordance with Section 2.02 of the Directors’ Deferred Compensation Plan of Northwest Savings Bank and Eligible Affiliates (“Plan”), I hereby elect to postpone the payment of the compensation which I have deferred under my Deferral Election form(s) previously filed with you dated                      , 20___;                      , 20 ___;                      , 20___; from the original date(s) of                      , 20___;                      , 20___;                      , 20___;
when payment was scheduled to commence under said form(s), to the following date(s) [insert dates which follow the previously scheduled date(s) by at least five years]:
PART II
      CHANGE OF FORM OF PAYMENT . In accordance with Section 2.02 of the Plan, I hereby elect to change the form of the payment which I deferred under my Deferral Election forms dated                      , from the original payment form which was
         
 
  o   lump sum
 
  o   five equal installments
 
  o   ten equal installments
to the new payment form, which is
         
 
  o   lump sum
 
  o   five equal installments
 
  o   ten equal installments

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     Except as specifically amended by this Change of Deferral Election, my previously filed Deferral Election(s) to which this Postponement relates shall continue in full force and effect.
                 
 
          ELIGIBLE DIRECTOR    
 
Date:                      , 20                        Signed:        
 
         
 
   
 
          Printed or Typed:                                              
 
               
 
          Employee Social Security No.:    
 
               
 
         
 
   
 
               
RECEIVED
          PLAN ADMINISTRATOR    
 
               
 
               
Date:                      , 20                        Signed:        
 
         
 
   

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EXHIBIT III
BENEFICIARY DESIGNATION
Participant Name :                                           SSN:                                           
     
 
Mailing   Address:
             
 
 
           
 
 
  City   State   Zip Code
In accordance with the terms of the Plan, I hereby designate the following Beneficiary(ies) to receive any death benefits under the Plan:
                     
PRIMARY BENEFICIARY:                
 
                   
Name:
          % of Benefit:        
 
 
 
       
 
   
 
                   
Name:
          % of Benefit:        
 
 
 
       
 
   
 
                   
Name:
          % of Benefit:        
 
 
 
       
 
   
SECONDARY BENEFICIARY (if all Primary Beneficiaries pre-decease the Participant):
                     
Name:
          % of Benefit:        
 
 
 
       
 
 
 
                   
Name:
          % of Benefit:        
 
 
 
       
 
   
 
                   
Name:
          % of Benefit:        
 
 
 
       
 
 
     This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect and this Beneficiary Designation is revocable.
             
 
Date
     
 
Participant
   

 

Exhibit 10.2
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
OF NORTHWEST SAVINGS BANK AND ELIGIBLE AFFILIATES
Article I. Establishment and Purpose
     1.1 Establishment of the Plan
     Northwest Savings Bank (the “Bank”) established the Retirement Plan for Outside Directors (the “Plan”) of Northwest Savings Bank, effective July 1, 1992 (the “Effective Date”). The Plan was amended effective April 1, 2003, amended and restated in its entirety effective April 1, 2004, and further amended and restated effective as of January 1, 2005 to correct typographical errors, conform with past practice and maintain compliance with Section 409A of the Internal Revenue Code.
     1.2 Purpose
     The purpose of this Plan is to recognize the value of an Outside Director’s past service to the Bank and Eligible Affiliates, to enhance the ability of the Bank and Eligible Affiliates to attract and retain competent and experienced Outside Directors and to assure the availability of each participating Outside Director’s knowledge and experience as a resource to the Bank and Eligible Affiliates following his retirement as an Outside Director. The Plan is intended to be an unfunded plan of deferred compensation, not qualified under the Internal Revenue Code, but in compliance with Section 409A of the Internal Revenue Code so as to preserve the tax-deferred treatment of the Retirement Benefits accrued under this Plan until distributed to Participants.
Article II. Definitions and Construction
     2.1 Definitions
     The terms used in this Plan shall have the meanings assigned to them below.
  (a)   “Plan Administrator” means the person or group of persons appointed by the Board of Directors to administer this Plan. In the event there is no person or group of persons appointed by the Board to administer this Plan, or such person or group resigns from or fails to assume the responsibility to administer the Plan, the Human Resources Department of the Bank shall act as Plan Administrator.
 
  (b)   “Bank” means Northwest Savings Bank, a Pennsylvania corporation, and its corporate successors.
 
 
  (c)   “Board” or “Board of Directors” means the Board of Directors of the Bank.
 
  (d)   “Beneficiary” means the person whom the Participant has designated pursuant to Section 3.4(c) to receive undistributed Retirement Benefits which the Participant has accrued hereunder at his date of death.

 


 

  (e)   “Director” means a member of the Board of Directors of the Bank or any Eligible Affiliate , or, in the case of Northwest Bancorp Mutual Holding Company, a member of its Board of Trustees.
 
  (f)   “Eligible Affiliate” means the parent corporation or an affiliated corporation of Northwest Savings Bank which the Board of Northwest Savings Bank has determined by duly adopted resolution to be eligible for the Plan , including Northwest Bancorp Mutual Holding Company and Northwest Bancorp, Inc..
 
  (g)   “Disability Benefit” is the amount payable to a Participant in accordance with Section 3.5 hereof upon his becoming “Disabled” as defined in Treasury Regulations Section 1.409A-3(i)(4).
 
  (h)   “Outside Director” means a Director who is not an employee of the Bank who is not entitled, either before or after retirement from the Board of the Bank or any Eligible Affiliates, to receive employee pension benefits from the Bank or from any of its subsidiaries or affiliates.
 
  (i)   “Participant” means any eligible Outside Director of the Bank or any Eligible Affiliates who meets the participation requirements set forth in Section 3.1 of this Plan.
 
  (j)   “Retainer” means the annual Retainer payable to an Outside Director each Fiscal Year as compensation for membership on the Board of Directors of the Bank or any Eligible Affiliate.
 
  (k)   “Retire” or “Retirement” means termination for any reason from service as a Director of the Bank or Eligible Affiliate after five or more Years of Service, provided that such Retirement qualifies as a “Separation from Service” as defined in Treasury Regulations Section 1.409A-1(h).
 
  (l)   “Retirement Benefit” is the amount payable to a Participant following his Retirement calculated in accordance with Section 3.3(a) of this Plan.
 
  (m)   “Years of Service” means the number of consecutive 12-month periods, or fractions thereof, which an Outside Director serves on the Board of Directors of the Bank or any Eligible Affiliate, but not to exceed ten (10) such consecutive 12-month periods. Years of Service shall include service on the Board of Directors of the Bank or of an Eligible Affiliate prior to the establishment of this Plan, and any period during which the Participant is disabled within the meaning of Section 3.5 hereof prior to age 65. However, in no event shall the Years of Service credited under this Plan exceed ten (10).

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     2.2 Gender and Number
     Except when otherwise indicated by the context, words in the masculine gender shall include the feminine gender; the plural shall include the singular and the singular shall include the plural.
     2.3 Not a Contract of Service
     Neither the establishment of, nor the participation or eligibility for participation of any Outside Director in, this Plan shall be construed to confer any right of tenure on the part of any Outside Director or any right of nomination, renomination, election or re-election to the Board of Directors of the Bank or any Eligible Affiliate. The Bank or Eligible Affiliate shall not incur any liability for any loss of benefits that might result under this Plan from any failure of the stockholders to elect or re-elect any Outside Director to the applicable Board of Directors or any failure of the Board of Directors to nominate any Outside Director for re-election.
     2.4 Severability
     In the event any provision of the Plan shall be held invalid or illegal for any reason, or to fail to comply with Section 409A of the Internal Revenue Code, such illegality , invalidity or noncompliance shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal , invalid or noncomplying provision had never been inserted, and the Bank shall have the privilege and opportunity to correct and remedy such questions of illegality , invalidity or noncompliance by amendment as provided in the Plan.
     2.5 Applicable Law
     The Plan shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania except as otherwise required by applicable federal law , including Section 409A of the Internal Revenue Code.
Article III. Participation and Benefits
     3.1 Participation
     An Outside Director shall become a Participant in this Plan on the date such Director completes five Years of Service as a Director of the Bank or an Eligible Affiliate.
     3.2 Eligibility for Benefits
     An Outside Director shall not be eligible for any benefits hereunder until such Director has completed five Years of Service. No benefits are payable under this Plan to any Director

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who terminates his service on the Board of the Bank or any Eligible Affiliate prior to completing five Years of Service.
     3.3 Retirement Benefit
  (a)   Amount of Retirement Benefit. Upon a Participant’s Retirement from the Board of the Bank or an Eligible Affiliate on or after his attainment of age 60, he shall be entitled to an annual Retirement Benefit in an amount equal to:
  (1)   Sixty percent of the annual Retainer payable to an Outside Director as compensation for membership on the applicable Board at the annual rate which was in effect immediately prior to his Retirement;
plus
  (2)   Sixty percent of the annual meeting fees payable to an Outside Director as compensation for his attendance at meetings of the applicable Board at the annual rate which was in effect immediately prior to his Retirement.
  (b)   Upon a Participant’s Retirement from the applicable Board prior to his attainment of age 60, he shall be entitled to an annual Retirement Benefit equal to one-half of the Retirement Benefit calculated under subparagraphs (1) and (2) of paragraph (a) above.
 
  (c)   Commencement of Payments
  (1)   Retirement prior to Attainment of Age 65. In the event a Participant retires from the applicable Board prior to his attainment of age 65, Retirement Benefits shall commence on the first day of the calendar quarter following his attainment of age 65.
 
  (2)   Retirement after Attainment of Age 65. In the event a Participant retires from the applicable Board after his attainment of age 65, Retirement Benefits shall commence on the first day of the calendar quarter following his Retirement.
  (d)   Duration and Payment of Retirement Benefits. Retirement Benefits shall be paid to each Retired Participant for a period equal to the lesser of the number of his Years of Service, his life or ten years. Retirement Benefits shall be paid in quarterly installments on the first day of each calendar quarter following the Participant’s Retirement.

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     3.4 Death Benefit.
  (a)   Death While Serving on an Applicable Board. Upon the death of a Participant on or after April 1, 2003 while serving on an applicable Board, the Bank or Eligible Affiliate, as applicable, shall pay to the Participant’s Beneficiary an amount equal to the benefit described in Section 3.3(a) of this Plan for a period equal to the lesser of the number of his Years of Service or ten (10) Years. The present value of this stream of payments shall be paid to the Participant’s Beneficiary in a lump sum within 60 days following the Participant’s death, using a 7.0 percent discount rate.
 
  (b)   Death After Serving on an Applicable Board. Upon the death of a Participant on or after April 1, 2003 following the Participant’s Retirement from an applicable Board, the Bank or Eligible Affiliate, as applicable, shall pay to the Participant’s designated Beneficiary the remaining benefit that the Participant was entitled to under this Plan, if any. The present value of any remaining benefits shall be paid to the Participant’s Beneficiary in a lump sum within 60 days following the Participant’s death, using a 7.0 percent discount rate.
 
  (c)   Designation of a Beneficiary. The Plan Administrator shall make available to all Participants an appropriate form for their designation of a Beneficiary to receive remaining benefits payable under the Plan in the event of the Participant’s death. If a Participant has not designated a Beneficiary or the designated Beneficiary has pre-deceased the Participant at the time of his death, any remaining benefits payable under the Plan at the Participant’s death shall be paid to his estate.
     3.5 Disability Benefits
     In the event a Participant suffers a disability prior to age 65 for which the Participant receives disability benefits under the federal Social Security Act, or if the Participant is not subject to the Federal Social Security Act but he suffers a disability for which he would qualify for disability benefits under the Federal Social Security Act if he were subject to it, the Participant shall continue to receive sixty percent (60%) of the annual Retainer and the annual Board meeting fees at the annual rate in effect immediately prior to his meeting the test for disability benefits under the Social Security Act as a Disability Benefit hereunder. Such Disability Benefit shall be payable under this Plan until the Participant’s age 65, at which time the Participant shall be eligible for Retirement Benefits calculated as though the disabled Participant had continued in active service on the applicable Board until age 65. The period of time during which a Participant receives Disability Benefits hereunder prior to attainment of age 65 shall be included in the Years of Service credited to the Participant for purposes of calculating the duration of Retirement Benefits payable hereunder. In the event a Participant becomes

5


 

permanently disabled within the meaning of the Federal Social Security Act after age 65 he shall retire from the Board and commence to receive his Retirement Benefit hereunder on the first day of the ensuing calendar quarter. Notwithstanding anything in this paragraph to the contrary, Disability Benefits shall only be payable to the extent that the Participant is “Disabled” within the meaning of Treasury Regulation Section 1.409A-3(i)(4).
Article IV. Continuing Obligations of Retired Outside Directors.
     4.1 Consultation
     During the period that a retired Outside Director is receiving a Retirement Benefit under the Plan, he shall make himself available to the Bank or Eligible Affiliate for consultation with Directors or senior officers of the Bank or Eligible Affiliate upon request on matters within his experience related to the business of the Bank or Eligible Affiliate. Such consulting services shall be rendered at reasonable times and places, taking into account the health, age and other duties of such retired Outside Director. To the extent possible, such consulting services shall be rendered by personal consultation by telephone or at the principal residence or office, wherever located, of the retired Outside Director, at times most convenient to the retired Outside Director.
     4.2 Non-Competition
     The obligation of the Bank or Eligible Affiliate to make or continue payments under this Plan shall be subject to the condition that the retired Outside Director shall not engage, either directly or indirectly, in any activity which is competitive with any activity of the Bank or Eligible Affiliate. In the event of a breach by the retired Outside Director of the foregoing condition, the Bank or Eligible Affiliate shall not be obligated to make any payment coming due hereunder subsequent to the occurrence of such breach. The Plan Administrator, upon prior written request of a retired Outside Director, may waive the condition specified above with respect to non-competition if, based upon all of the relevant circumstances, in the sole judgment of the Plan Administrator, the granting of such a waiver is justified, having due regard to both the interests of the Bank or Eligible Affiliate and those of the retired Outside Director.
Article V. General Provisions.
     5.1 Administration
     The Plan shall be administered by the Plan Administrator. No member of the Plan Administrator shall be eligible to participate in the Plan. The Plan Administrator shall have the power to interpret the Plan and to decide any and all matters arising hereunder, including but not limited to the right to remedy possible ambiguities, inconsistencies or omissions, by general rule or particular decision, provided that all such interpretations and decisions shall be applied in a uniform and nondiscriminatory manner to all Participants similarly situated. In addition, any interpretations and decisions made by the Plan Administrator shall be final, conclusive and binding upon all persons who have or who claim to have any interest in or under the Plan.

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     5.2 Funding
     All benefits paid under this Plan shall be paid in cash from the general assets of the Bank or Eligible Affiliate. All liability for Retirement Benefits payable under the Plan shall be reflected on the accounting records of the Bank or Eligible Affiliate, but shall not be construed to create or require the creation of a trust, custodial or escrow account. The Bank or Eligible Affiliate may establish one or more trusts, with such trustees as the Bank or Eligible Affiliate may approve, for the purpose of providing for the payment of Retirement Benefits hereunder. Such trusts may be irrevocable but the assets thereof shall be subject to the claims of the Bank’s or Eligible Affiliate’s creditors. To the extent that any Retirement Benefits provided under the Plan are actually paid from any such trust, the Bank or Eligible Affiliate shall have no further obligations with respect thereto, but to the extent not so paid, such Benefits shall be payable from such insurance contracts, annuities or other funds that the Bank or Eligible Affiliate may purchase, establish or accumulate to aid in providing benefits under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create a trust or fiduciary relationship of any kind between the Bank or Eligible Affiliate and a Director or any other person. A Director shall not acquire any interest greater than that of an unsecured creditor.
     5.3 Expenses
     The expenses of administering the Plan shall be borne by the Bank or Eligible Affiliate, as applicable.
     5.4 Indemnification
     The members of the Plan Administrator and its agents and officers, directors and employees of the Bank and all Eligible Affiliates shall be indemnified and held harmless by the Bank and Eligible Affiliates to the fullest extent now or hereafter permitted by law against and from any and all loss, cost, liability or expense, including attorney’s fees, fines, civil penalties , interest and excise taxes that may be imposed upon or reasonably incurred by them in connection with or resulting from any actual or threatened civil, criminal, administrative or investigative claim, action, suit or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by them in settlement (with the Bank’s or Eligible Affiliate’s written approval) or paid by them in satisfaction of a judgment in any such action, suit or proceeding. The indemnification provided by this section shall continue for persons who have ceased to be members or agents of the Plan Administrator, and to former directors, officers and employees of the Bank and Eligible Affiliates, and shall inure to the benefit of the heirs, executors and administrators of persons entitled to indemnity hereunder. This section shall not be applicable to any person if the loss, cost, liability or expense is finally judicially determined to be due to such person’s recklessness or willful misconduct.

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     5.5 Nonassignability
     Neither a Participant in the Plan nor any other person shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of actual receipt of the Retirement Benefits, if any, payable hereunder, all rights to which are expressly declared to be nonassignable and nontransferable. No part of any amount payable hereunder, prior to actual payment, shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.
     5.6 Payment to Guardian
     If a Plan benefit is payable to a person declared incompetent or to a person incapable of handling the disposition of property, the Plan Administrator may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such incompetent person, without responsibility to follow application of amounts so paid. Payments made pursuant to this provision shall completely discharge the Bank, the Eligible Affiliate, the Plan and the Plan Administrator.
     5.7 Successors
     The provisions of this Plan shall bind and inure to the benefit of the Bank, its Eligible Affiliates and their successors and assigns. The term successors as used herein shall include any corporation or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Bank or of an Eligible Affiliate, and the successors of any such corporation or other business entity.
Article VII. Amendment and Termination.
     6.1 Amendment and Termination
     The Bank and Eligible Affiliates expect to continue the Plan indefinitely, but specifically reserves the right, in the sole and unfettered discretion of its Board of Directors, at any time, to amend, in whole or in part, any or all of the provisions of the Plan and to terminate the Plan in whole or in part, provided, however, that no such amendment or termination shall adversely affect any rights of an Outside Director to receive the Retirement Benefit which had accrued on his behalf on account of his service as an Outside Director prior to such amendment or termination. Any termination of the Plan that results in accelerated payment of benefits shall comply with the requirements of Treasury Regulation Section 1.409A-3(j)(ix).

8


 

     6.2 Subject to Regulatory Action and Compliance with Code Section 409A
     The Plan shall be effective until and unless it is found to violate any rule or regulation of any governmental agency which is authorized to regulate the Bank, Eligible Affiliate or the Plan, or fail to comply with Section 409A of the Internal Revenue Code, in which case the Plan shall be terminated as of the date of violation, or amended to the extent necessary to avoid the violation of any rule or regulation of a governmental agency authorized to regulate the Bank, Eligible Affiliate or the Plan, or to comply with Section 409A of the Internal Revenue Code in order to preserve the tax-deferred treatment of the Benefits accrued under the Plan pending distribution to Participants. No distribution shall be made from the Plan or action taken under the Plan that would make any Retirement Benefit payable or accrued hereunder subject to the interest and additional tax imposed by Code Section 409A(a)(1)(B).
      IN WITNESS WHEREOF , Northwest Savings Bank has caused this Amended and Restated Retirement Plan for Outside Directors, to be executed by its duly authorized officers on the date set forth below , effective as of January 1, 2005.
                 
        NORTHWEST SAVINGS BANK    
 
               
December 17, 2008
      By:   /s/ William Wagner    
 
Date
         
 
William Wagner, President
   

9

Exhibit 10.3
AMENDED AND RESTATED
NORTHWEST SAVINGS BANK
NONQUALIFIED SUPPLEMENTAL RETIREMENT PLAN
Preamble
     Northwest Savings Bank (“Bank”), has established the Northwest Savings Bank Pension Plan as a defined benefit pension plan (“Qualified Plan”) intended to be qualified under the Internal Revenue Code of 1986, as amended (“Code”), for the purpose of providing income to its employees during their retirement from the service of the Bank.
     Code Sections 401(a)(17) and 415 reduce the pension otherwise payable under the Qualified Plan to employees whose compensation exceeds the limits of Section 401(a)(17) or for whom contributions or benefits would exceed the limits of Section 415.
     Effective June 16, 1993, the Bank established this unfunded deferred compensation plan (“Nonqualified Plan”) to make up for the cut back in retirement income described above for a select group of management or highly compensated employees. This Nonqualified Plan provides a supplemental retirement benefit for participants in the Qualified Plan which, when combined with the pension payable to them under the Qualified Plan, will equal the pension which they would have received thereunder but for the application of Code Sections 401(a)(17) and 415.
     Effective January 1, 2005, this Nonqualified Plan is amended and restated in its entirety to comply with Code Section 409Aand the final regulations issued thereunder in April 2007.
ARTICLE I
Definitions
     Unless the context of this Plan requires or connotes a different meaning, all undefined capitalized terms used in this Plan shall have the same meanings as are respectively assigned to

 


 

them under the Qualified Plan, and the terms and conditions of the Qualified Plan are incorporated herein by reference wherever necessary or appropriate.
     1.1. “Benefit Formula” means the method set forth in the Qualified Plan to calculate the amount of benefit payable to a participant thereunder at the time such benefit commences to be paid, including all actuarially equivalent factors utilized under the Qualified Plan, and excluding any actuarial adjustment for the postponement of the commencement of Retirement Benefits payable to any Participant after his or her 70 th birthday. The Benefit Formula shall include all applicable actuarial reductions, and all offsets and deductions, required by the Qualified Plan for payments available from Federal Social Security, from Worker’s Compensation, and from other qualified plans, if any, but shall not reflect the application of Code Sections 401(a)(17) or 415.
     1.2 “Beneficiary” means the person whom the Participant has designated on a Beneficiary Designation Form (see Exhibit 3) to receive any death benefits hereunder. In the event the Participant has not validly designated a Beneficiary or if all Beneficiaries designated by the Participant have died, then the Participant’s estate shall be the default Beneficiary hereunder.
     1.3 “Board” means the Bank’s Board of Directors.
     1.4 “Change in Control” means any of the following events occurs:
          (a) Change in the ownership of the Company or the Bank . A change in the ownership of the Company or the Bank shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that, together with stock held by such person or

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group, constitutes more than 50% of the total fair market value or total voting power of the stock the Company.
          (b) Change in the effective control of the Company or the Bank . A change in the effective control of the Company or the Bank shall occur on the date that either (i) any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)(D)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company. possessing 30% or more of the total voting power of the stock of the Company; or (ii) a majority of members of the Board of the Company or the Bank is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of the Company or the Bank prior to the date of the appointment or election, provided that this sub-section (ii) is inapplicable where a majority shareholder of the Company or the Bank is another corporation.
          (c) Change in the ownership of a substantial portion of the Company’s assets or the Bank’s assets . A change in the ownership of a substantial portion of the Company’s assets or the Bank’s assets shall occur on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)(C)), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company or the Bank that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company or the Bank immediately prior to such acquisition or acquisitions. For this purpose, gross fair

-3-


 

market value means the value of the assets of the Company or the Bank, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no Change in Control event under this paragraph (iii) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer.
     1.5. “Committee” means the members of the Board appointed to administer this Plan.
     1.6 “Company” means Northwest Bancorp, Inc., the holding company of the Bank.
     1.7 “Disability” means the Participant is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank, or (c) determined to be totally disabled by the Social Security Administration.
     1.8. “Effective Date” of the Plan was originally June 16, 1993; however, the effective date of the amended and restated Plan is
January 1, 2005.
     1.9. “Participant” means a participant in the Qualified Plan, or the beneficiary or estate of a deceased Participant, who is or becomes entitled to a benefit hereunder by reason of a reduction required by Sections 401(a)(17) or 415 of the Code in the amount of benefit otherwise payable to such Participant as a participant in the Qualified Plan, or to his beneficiary or estate, if deceased. Effective January 1, 2005 “Participant” means an Employee who the Committee specifies to be a Participant in this Plan in accordance with Section 3.1.

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     1.10. “Payment Event” means the earliest to occur of the Participant’s death, Disability, Retirement Date or a Change in Control.
     1.11 “Retirement Date” means the date specified by each Participant on his or her Payment Election Form (see Exhibit 1). If a validly completed Payment Election Form does not exist, then the Participant’s Retirement Date shall be the date the Participant attains age sixty-five (65).
     1.12. “Supplemental Retirement Benefit” means the benefit payable by the Bank to a Participant hereunder.
ARTICLE II
Calculation and Payment of Supplemental Retirement Benefit
     2.1. Amount of Supplemental Retirement Benefit . The Supplemental Retirement Benefit payable to a Participant hereunder shall equal the difference between the amount payable to the Participant as a participant under the Qualified Plan and the amount which would have been payable to such participant after the Effective Date under the Benefit Formula of the Qualified Plan but for the limitations of Sections 401(a)(17) or 415 of the Code, as such Sections may be amended from time to time hereafter, or under any successor provisions of such Sections.
     2.2. Form and Time of Payment of Supplemental Retirement Benefit . The Supplemental Retirement Benefit of a Participant hereunder shall be payable in accordance with one of the three options that the Participant may elect on a Payment Election Form (see Exhibit 1). Payment in accordance with the option elected shall be made or commenced within thirty (30) days after the first Payment Event occurs.

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     2.3. Participant’s Election of Method and Time of Payment . Within thirty (30) days after first becoming eligible to participate in this Plan (or, for Participants who joined the Plan before December 31, 2008, then by December 31, 2008), the Participant shall deliver to the Committee a Payment Election Form (see Exhibit 1) setting forth his/her election of one of the following options for payment of the Participant’s Supplemental Retirement Benefit:
          (a) lump sum payable within thirty (30) days after the occurrence of the first Payment Event;
          (b) three (3) substantially equal annual installments, the first of which is payable within thirty (30) days after the occurrence of the first Payment Event, and the second and third installments of which are payable on the second and third anniversaries of the payment of the first installment, where each installment is hereby designated as a separate payment;
          (c) five (5) substantially equal annual installments, the first of which is payable within thirty (30) days after the occurrence of the first Payment Event, the second through fifth installments of which are respectively payable on the second through fifth anniversaries of the payment of the first installment, where each installment is hereby designated as a separate payment.
     If a Participant fails to timely deliver a valid Payment Election Form to the Committee, the Participant shall be deemed to have elected payment in five (5) substantially equal annual installments starting at the Participant’s Retirement Age.
     2.4. Participant’s Option to Change Payment . A Participant may elect to change the time and/or form of payment by delivering a Notice of Adjustment of Time and Form of Payment (see Exhibit 2) to the Committee at least 12 months prior to the occurrence of any of the

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Payment Event. The Participant must specify which payment(s) the Participant elects to change, and the new time and form of payment, which must not be earlier than five (5) years after the date of the originally scheduled payment. There is no limit on the number of new deferral elections which a Participant may execute, provided that each deferral election is delivered to the Committee at least 12 months prior to occurrence of the payment date, and provided further that each deferral election defers payment for at least five (5) years beyond the previously scheduled payment date. All deferral elections which a Participant may deliver pursuant to this Section 2.4 are irrevocable unless superseded by a valid subsequent deferral election.
     2.5. Aggregate Benefit Limitation . This Nonqualified Plan shall not be construed or applied as providing for payments to any Participant which, when combined with benefits payable under the Qualified Plan, exceed the amounts payable to or on behalf of such Participant as a participant under the Benefit Formula of the Qualified Plan apart from the limitations of Sections 401(a)(17) and 415 of the Code.
     2.6. Bank’s Right to Delay Scheduled Payment . The Bank has the right to delay paying any Supplemental Retirement Benefit that is scheduled to be paid to any Participant or Beneficiary in the event that, in the Committee’s reasonable opinion, such scheduled payment will: (a) violate a term or covenant of a loan agreement or similar agreement to which the Bank is a party (which the Bank entered into for legitimate business reasons, and not to avoid the restrictions on deferral elections under Code Section 409A), and such violation will cause material harm to the Bank; (b) not be deductible by the Bank under Code Section 162(m); (c) violate Federal securities laws or other applicable law; or (d) jeopardize the solvency of the

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Bank; then, following the occurrence of any such events, the payment shall be made as soon as the event justifying the delay no longer exists.
     2.7. Acceleration of Payment For Participant’s Taxes . Payment of the Supplemental Retirement Benefit shall be automatically accelerated to the extent necessary to pay:
          (a) taxes imposed on any Participant’s Supplemental Retirement Benefit under the Federal Insurance Contributions Act (“FICA”), and to pay the income tax at the source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA taxes imposed on any Participant’s Supplemental Retirement Benefit; and
          (b) all amounts required to be included in any Participant’s income at any time when this Nonqualified Plan and the Supplemental Retirement Benefit accrued hereunder for any Participant fails to meet the requirements of Code Section 409A and the regulations promulgated thereunder.
ARTICLE III
Designation of Participants Entitled to Benefits;
Forfeiture of Benefits
     3.1. Designation of Participants Entitled to Benefits . The Committee shall specify which Employees who are participants in the Qualified Plan and whose compensation exceeds the limitations of Code Sections 401(a)(17) and 415 in any calendar year shall be Participants in this Nonqualified Plan with respect to Compensation earned in that calendar year. The Committee shall deliver prompt written notice to each Employee who the Committee specifies is eligible to be a Participant in this Nonqualified Plan, including notification of the Employee’s right to timely complete a Payment Election Form (see Exhibit 1).

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     3.2. Forfeitures of Benefits . The right of a Participant to receive current or future payments hereunder shall be forfeited upon the occurrence of any one or more of the following events:
          (a) if the Participant is discharged from employment by the Bank for an act which, in the opinion of the Committee, constitutes fraud against, or embezzlement of funds of, the Bank or its customers; or
          (b) if, while employed by the Company or Bank and for a period of one year following termination of employment with the Company or Bank, the Participant shall enter into a business or employment which the Committee determines to be (i) detrimentally competitive with the business of the Company or the Bank, and (ii) substantially damaging to the financial interests of the Company or the Bank, within any county in which the Company or the Bank has any branch locations or business operations; or
          (c) if the Participant terminates employment with the Bank prior to his/her death, Disability, Retirement Date or a Change in Control.
ARTICLE IV
Plan Administration
     4.1. Duties and Obligations of Committee . The Committee shall be responsible for administering, interpreting and otherwise carrying out the terms of this Plan.
     4.2. Eligibility and Benefit Determination . The Committee shall have the sole right to determine the eligibility of any person to participate in this Plan, and the amount of any benefit payable hereunder.

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ARTICLE V
Funding
     5.1. Unfunded Plan . The Bank shall not be required to establish any form of trust or fundfor the purpose of providing any Supplemental Retirement Benefits.
     5.2. Optional Funding . In order to meet its obligations hereunder, the Bank may set aside funds in an amount necessary to fund part or all of the Supplemental Retirement Benefits. Such funds may be kept in cash, or invested and reinvested, in the discretion of the Committee. The Bank shall retain titleto and beneficial ownership of any such assets and no Participant or Beneficiary shall under any circumstances acquire any property interest in any specific assets of the Bank.
     5.3. Investments . Investments of funds set aside to meet the Bank’s obligation hereunder may be made in savings accounts, stocks, bonds or other securities selected by the Committee in its sole discretion.
ARTICLE VI
General
     6.1. Expenses . The books and records to be maintained for the purpose of the Nonqualified Plan shall be maintained by the Bank at its expense and subject to the supervision and control of the Committee. All expenses of administering the Nonqualified Plan shall be paid by the Bank.
     6.2. Prohibition Against Assignment of Benefits . To the extent permitted by law, the right of any Participant or Beneficiary in any benefit or to any payment hereunder shall not be

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subject in any manner to attachment or other legal process for the debts of such Participant or Beneficiary; and any such benefit or payment shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance. However, the rights of a Participant hereunder may be subject to the terms of a domestic relations order as defined in Code Section 414(p)(1)(B) issued by a court having jurisdiction over the Participant for support of the Participant’s spouse, former spouse or dependent.
     6.3. No Liability for Actions Taken In Good Faith . No member of the Board or of the Committee and no officer or employee of the Bank shall be liable to any person for any action taken or omitted in connection with the administration of this Nonqualified Plan unless attributable to his own fraud of willful misconduct; nor shall the Bank be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of the director, officer or employee of the Bank.
     6.4. No Contract of Employment . This Nonqualified Plan shall not be construed to establish a guarantee of future or continued employment by the Bank of any Participant.
     6.5. No Trust or Fiduciary Relationship Created . Nothing contained herein shall be deemed to create a trust of any kind or create any fiduciary relationship. Funds invested hereunder shall continue for all purposes to be a part of the general funds of the Bank, and no person other than the Bank shall, by virtue of the provisions of this Nonqualified Plan, have any interest in such funds. To the extent that any person acquires a right to receive payments from the Bank under this Nonqualified Plan, such right shall be no greater than the right of any unsecured general creditor of the Bank.

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     6.6. Incompetency of a Participant or Beneficiary . If the Committee determines that any person entitled to payments under the Nonqualified Plan is aminor or incompetent by reason of physical or mental disability, it may cause all payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow application of amounts so paid. Payments made pursuant to this provision shall completely discharge the Bank, the Nonqualified Plan, and the Committee.
     6.7. Applicable Law and Construction . The provisions of the Nonqualified Plan shall be construed, administered and governed under the laws of the Commonwealth of Pennsylvania to the extent such laws are not preempted by ERISA or any other federal laws which may from time to time be applicable. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and whenever any words are used herein in the singular form, they shall be construed as though they were also use din the plural form in all cases where they would so apply. Titles of Articles and Sections hereof are for convenience of reference only and are not to be taken into account in construing the provisions of this Plan.
     6.8. Severability . In case any provision of the Nonqualified Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Nonqualified Plan, which shall be construed and enforced as if the illegal and invalid provision had never been included in the Plan.

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ARTICLE VII
Amendment and Termination
     7.1 Amendment . The Committee may at any time amend the Plan in whole or in part, provided, however, that no amendment shall be effective to decrease or restrict the amount accrued to the date of amendment. Notice of material Plan amendments shall be given in writing to each Participant and Beneficiary.
     7.2 Termination . The Board may completely terminate the Plan at any time. Subject to the requirements of Code Section 409A, in the event of complete termination of the Plan, the Plan shall cease to operate and the Bank shall pay each Participant his or her Benefit as if the Participant had terminated service as of the effective date of the complete termination. Such complete termination of the Plan may occur only under the following circumstances and conditions:
          (a) The Board may terminate the Plan within twelve (12) months of a corporate dissolution taxed under Code section 331, or with approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of (i) the calendar year in which the Plan terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
          (b) The Board may terminate the Plan within the thirty (30) days preceding a Change in Control (but not following a Change in Control), provided that the Plan shall only be treated as terminated if all substantially similar arrangements sponsored by the Bank are

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terminated so that the Participant and all other executives under substantially similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date of the termination of the arrangements.
          (c) The Board may terminate the Plan provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank or its holding company, (ii) all arrangements sponsored by the Bank that would be aggregated with this Plan under Final Treasury Regulations Section 1.409A-1(c) if the Participant covered by this Plan was also covered by any of those other arrangements are also terminated; (iii) no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within twelve (12) months of the termination of the arrangement; (iv) all payments are made within twenty-four (24) months of the termination of the arrangements; and (v) the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Final Treasury Regulations Section 1.409A-1(c) if the Participant participated in both arrangements, at any time within three (3) years following the date of termination of the arrangement.

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      IN WITNESS WHEREOF , Northwest Savings Bank has caused this Amended and Restated Plan to be executed by a duly authorized officer effective as of January 1, 2005.
                 
        NORTHWEST SAVINGS BANK    
 
               
December 17, 2008
      By:   /s/ William Wagner    
 
Date
         
 
William Wagner, President and
   
 
          Chief Executive Officer    

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Exhibit 10.7
MANAGEMENT BONUS GUIDELINES
Purpose:
     Attract, retain and motivate management with exceptional ability.
Eligibility Requirements:
    Management personnel are eligible for consideration
 
    Employed by the company for a minimum of six months of the fiscal year
 
    Be actively employed by the company at the time of payment or retired between the last day of the fiscal year and the payment date. Retirees must meet the definition of normal retirement – sixty-five years old with a minimum of five years of service with the company
 
    Rated Meets Expectations or higher on last performance evaluation
Calculations:
    Bonus percentages are based on a Board approved matrix which consists of eight company performance levels and five categories of management
 
    Bonus percentages for Category A are 0%, 10%, 18%, 20%, 23%, 27%, 31%, and 35%.
 
    Bonuses will be calculated on base salaries as of the last day of the fiscal year
 
    Bonuses will be prorated for those with six but less than twelve months of service in the fiscal year and those promoted to an eligible position during the fiscal year
 
    Bonuses for those on an approved leave of absence, including disability, will be prorated based upon the number of full months actually worked during the fiscal year
 
    Bonuses will be rounded to the nearest hundredth – up or down

Exhibit 10.9
AMENDED AND RESTATED
NORTHWEST SAVINGS BANK AND AFFILIATES UPPER
MANAGERS’ BONUS DEFERRED COMPENSATION PLAN
Preamble
     This Amended and Restated Northwest Savings Bank and Affiliates Upper Managers’ Bonus Deferred Compensation Plan (the “Plan”), effective January 1, 2005 (the “Effective Date”) updates and revises the Managers’ Bonus Deferred Compensation Plan of Northwest Savings Bank and Affiliates (the “Predecessor Plan”), which was effective as of July 1, 2000 and was amended effective as of July 1, 2001 solely to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations thereunder. The Plan was frozen, effective December 31, 2005, with the effect that the Participants’ existing and outstanding elections to defer compensation shall be subject to the terms of this Plan. The Board has designated the following affiliates of the Bank as eligible to participate in the Plan effective from July 1, 2000: Northwest Consumer Discount Company; Jamestown Savings Bank.
ARTICLE I
Definitions
      “Board” means the Board of Directors of Northwest Savings Bank.
      “Bank” or “Northwest” means Northwest Savings Bank, a Pennsylvania corporation, and its corporate successors, and such of its affiliated corporations as the Board determines to make eligible for the Plan, by duly adopted resolution.
      “Disability” means the Participant (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be

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expected to result in death, or last for a continuous period of not less than 12 months; (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death, or last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank; or (c) is determined to be disabled by the Social Security Administration.
      “Eligible Affiliate” means an affiliated corporation of the Bank which the Board has determined by duly adopted resolution to be eligible for the Plan.
      “Eligible Employee” means a member of the upper management of the Bank or of an Eligible Affiliate at Grade Level 16 or above who is eligible to receive an annual management incentive bonus.
      “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
      “Event of Distribution” means the earlier of the Participant’s (a) voluntary Separation from Service; (b) involuntary Separation from Service for a period of six consecutive months; (c) death; or (d) Disability.
      “Participant” means an Eligible Employee who elects to defer compensation pursuant to the Plan and who retains, or whose beneficiaries retain, benefits under the Plan in accordance with its terms.
      “Plan” means the Amended and Restated Northwest Savings Bank and Affiliates Upper Managers’ Bonus Deferred Compensation Plan as it may be amended from time to time.
      “Plan Administrator” means the human resources department of the Bank.

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     “ Separation from Service” or “ Separates from Service ” means the Participant’s retirement, Disability, death or other termination of employment with the Bank within the meaning of Code Section 409A. No Separation from Service shall be deemed to occur due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed 6 months or, if longer, so long as the Participant’s right to reemployment is provided by law or contract. If the leave exceeds six (6) months and the Participant’s right to reemployment is not provided by law or by contract, then the Participant shall have a Separation from Service on the first date immediately following such six (6)-month period. Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Bank and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to less than 50% of the average level of bona fide services performed over the immediately preceding 36 months (or such lesser period of time in which the Participant performed services for the Bank).
      “Specified Employee” means a “key employee” of the Bank within the meaning of Code Section 416(i) without regard to paragraph 5 thereof (i.e., generally, employees making more than $150,000 per year, as adjusted annually by the IRS), determined in accordance with Treasury Regulation 1.409A-1(i).
      “Year” (unless otherwise specified) means the Bank’s fiscal year, which runs from July 1 through June 30.
ARTICLE II

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Deferral of Compensation
Section 2.01 . Deferral Elections . Each Eligible Employee may elect each year to defer the dollar amount or percentage of his annual bonus which he specifies in a Deferral Election Form which he executes in the form of Exhibit 1 hereto and files with the Plan Administrator. Such Deferral Election shall apply only to the annual bonus which the Eligible Employee earns in the fiscal year which follows that in which he executes and files his Deferral Election Form. In addition, in the year in which an employee first becomes eligible to participate in the Plan, including the year in which the Plan is first adopted by the Bank, if the Eligible Employee executes and files his Deferral Election within 30 days of first becoming Eligible to participate, such Deferral Election shall also apply to the annual bonus which the Eligible Employee earns in the fiscal year in which his Deferral Election is filed. Once made, a Deferral Election shall be irrevocable and shall remain in effect for the fiscal year with respect to which it was executed, except that the Participant shall retain the right to change his designation of beneficiaries with respect to any Deferral Election at any time, upon filing a duly executed beneficiary designation form with the Plan Administrator in accordance with Section 5.02. Notwithstanding the foregoing, effective December 31, 2005, the Plan is hereby frozen so that no further elections to defer compensation shall be permitted under the Plan.
ARTICLE III
Accumulation of Deferred Compensation
Section 3.01 . Participant Accounts . The dollar amount of annual bonus deferred pursuant to each Deferral Election executed and filed by each Participant hereunder shall be credited as of

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the end of the calendar month in which such bonus is payable to such Participant to an unfunded book reserve account (the “Deferred Compensation Account”) and shall be recorded on the financial books and records of the Bank as a deferred compensation liability in the names of the respective Participants.
Section 3.02 . Interest on Accounts . The Deferred Compensation Accounts of each Participant having a credit balance shall earn interest at the annual earnings rate paid on the Bank’s five (5) year certificates of deposit as of the end of the preceding fiscal year. Such interest shall be credited on or before the last business day of each calendar quarter on the average credit balance held in each Participant’s Deferred Compensation Account during that quarter.
ARTICLE IV
Event of Distribution
Section 4.01 . Event of Distribution . Within 30 days following the Event of Distribution, the aggregate amount of his Deferred Compensation Account shall become payable to the Participant (or his designated beneficiary) in accordance with Article V.
Section 4.02 . Unforeseeable Emergency . In addition to the Event of Distribution, a portion of the Deferred Compensation Account of any Participant shall be payable to him or to any of his beneficiaries in the event of an unforeseeable emergency that is caused by an event beyond the control of the Participant or beneficiary and that would result in severe financial hardship to the individual if early withdrawal were not permitted. Any early withdrawal pursuant to this section is limited to the amount necessary to meet the emergency, which cannot be met from other

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resources, such as insurance, savings or borrowing.. Such withdrawal shall be made within 30 days following the date on which the Bank determines that the Participant has suffered an unforeseeable emergency.
Section 4.03 . Definition of Unforeseeable Emergency . Conditions which warrant approval of a Participant’s (or beneficiary’s) application for early withdrawal on account of unforeseeable emergency are limited to cases of severe financial hardship to the Participant (or to his spouse, beneficiary, or dependent as defined in Code Section 152 without regard to Code Section 152(b)(1), (b)(2), and (d)(1)(B)) resulting from a sudden and unexpected illness or accident, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Early withdrawal may not be made to the extent that the financial hardship to the Participant (or to his beneficiary) is or may be relieved —
  (a)   through reimbursement or compensation by insurance or otherwise;
 
  (b)   by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or
 
  (c)   cessation of deferrals under this Plan.
The need to send a Participant’s dependent to college or to purchase a home are not considered an unforeseeable emergency. Amounts withdrawn may not be returned to the Plan. Withdrawals will be subject to Federal income tax. A Participant may include in his hardship withdrawal the amount of taxes he will incur as a result of it.
Participants who make a hardship withdrawal may not make Elective Deferrals or other contributions to the Plan for twelve months following receipt of a hardship distribution.

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ARTICLE V
Payment of Deferred Compensation
Section 5.01 . Payment of Account Balances . The current balance of the Participant’s Deferred Compensation Account shall be payable in a single cash lump sum distribution within 30 days following the occurrence of the Event of Distribution, unless the Participant elects otherwise in accordance with Section 5.04 below. Notwithstanding the foregoing, in the event that the Participant dies, the current balance in the Participant’s Deferred Compensation Account as of the Participant’s date of death shall be paid to the Participant’s designated beneficiary(ies). Such benefit shall commence within 30 days following the date of the Participant’s death and shall be payable in a lump sum distribution.
Section 5.02 . Designation of Beneficiaries . Each Participant shall have the right to designate beneficiaries using the Beneficiary Designation Form attached hereto as Exhibit 2. The designated beneficiaries are to succeed to his right to receive future payments hereunder in the event of his death. In case of a failure of designation or the death of a designated beneficiary without a designated successor, distribution shall be made to the Participant’s estate. No designation of beneficiaries shall be valid unless in writing signed by the Participant, dated, and filed with the Plan Administrator. Beneficiaries may be changed without the consent of any prior beneficiaries. Payment of a deceased Participant’s Deferred Compensation Account to his designated beneficiary may be made in a single sum or over a period less than the number of years designated by the deceased Participant, as determined by the Plan Administrator in its unfettered discretion.

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Section 5.03 . Delay in the Commencement Date for Payment of Benefits . Notwithstanding the foregoing, if the Participant is a Specified Employee and the distribution under the Plan is due to Separation from Service (other than due to death or Disability), then solely to the extent necessary to avoid penalties under Code Section 409A, no distribution shall be made during the first six (6) months following the Participant’s Separation from Service. Rather, any distribution which would otherwise be paid to the Participant during such period shall be accumulated and paid to the Participant in a lump sum on the first day of the seventh month following such Separation from Service.
Section 5.04. Transition Year Election for Participants . Notwithstanding the foregoing, a Participant may elect a specified date on which the current balance of the Participant’s Deferred Compensation Account will be paid by filing with the Bank a Transition Year Election Form, attached hereto as Exhibit 3, on or before December 31, 2008.
ARTICLE VI
General
Section 6.01 . Benefits Not Assignable . The right of any Participant or beneficiary of a Participant in any benefit or to any payment hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of any Participant or of any Participant’s beneficiaries.

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Section 6.02 . No Trust or Fiduciary Relationship; Unfunded Accounts . Nothing contained herein shall be deemed to create a trust of any kind or create any fiduciary relationship. All liabilities created under this Plan for compensation deferred by Participants hereunder shall be unfunded for purposes of federal income taxes and for purposes of Title I of ERISA. Nothing contained herein shall be construed as giving any Participant or any beneficiary of a Participant, any right to or title in the Deferred Compensation Accounts maintained in his name, or in any other assets of the Bank, which shall at all times be subject to the claims of general creditors of the Bank. The right of any Participant or beneficiary to any benefits or Accounts hereunder is exclusively contractual.
Section 6.03 . Usage . All references to the masculine pronoun herein shall mean or include the feminine pronoun as appropriate or as required by the context. The plural shall include the singular and vice versa.
Section 6.04 . Plan Administration . The Plan Administrator shall have the full power and authority to interpret, construe, and administer this Plan, and such interpretation, construction and administration shall be conclusive on all Participants and beneficiaries. This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania to the extent not pre-empted by ERISA.
Section 6.05 . Exculpatory Provision . No member of the Board or of the Plan Administrator and no officer or employee of the Bank shall be liable to any person for any action taken or

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omitted in connection with the administration of this Plan unless attributable to his own fraud or willful misconduct; nor shall the Bank be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director, officer or employee of the Bank.
Section 6.06 . No Contract of Employment . This Plan shall not be deemed to constitute a contract of employment between the parties hereto nor shall any provision hereof restrict the right of the Bank or an Eligible Affiliate to discharge the employee or restrict the right of the employee to terminate his or her employment.
Section 6.07 . Taxes . The Bank may withhold from any benefit payable under this Plan all federal, state, city, income, employment or other taxes as shall be required pursuant to any law or governmental regulation then in effect. Moreover, the Plan shall permit the acceleration of the time or schedule of a payment to pay employment related taxes as permitted under Treasury Regulation 1.409A-3(j) or to pay any taxes that may become due at any time that the arrangement fails to meet the requirements of Code Section 409A and the regulations and other guidance promulgated thereunder. In the latter case, such payments shall not exceed the amount required to be included in income as the result of the failure to comply with the requirements of Code Section 409A.
ARTICLE VII
Claims Procedure

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Section 7.01 . General . Any claim for any payment due under the Plan shall be filed by the Participant or beneficiary (“claimant”) in the manner prescribed by the Plan Administrator.
Section 7.02 . Denials . If a claim for a payment requested under the Plan is wholly or partially denied, notice of the decision shall be furnished to the claimant by the Plan Administrator within a reasonable period of time after receipt of the claim by the Plan Administrator.
Section 7.03 . Notice . Any claimant who is denied a claim for payment requested under the Plan shall be furnished written notice setting forth:
  (a)   the specific reason or reasons for the denial;
 
  (b)   specific reference to the pertinent provision of the Plan upon which the denial is based;
 
  (c)   a description of any additional material or information necessary of the claimant to perfect the claim; and
 
  (d)   an explanation of the claim review procedure under the Plan.
Section 7.04 . Appeals Procedure . In order that a claimant may appeal a denial of a claim, the claimant or the claimant’s duly authorized representative may:
  (a)   request a review by written application to the Plan Administrator, or its designee, no later than 60 days after receipt by the claimant of written notification of denial of a claim;
 
  (b)   review pertinent documents; and

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  (c)   submit issues and comments in writing.
Section 7.05 . Review . A decision on review of a denied claim shall be made not later than 60 days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than 120 days after receipt of a request for a review. The decision on review shall be in writing and shall include the specific reason(s) for the decision and the specific reference(s) to the pertinent provisions of the Plan on which the decision is based.
ARTICLE VIII
Amendment and Termination of the Plan
Section 8.01 . General . The Plan may be amended in whole or in part or terminated from time to time by the Board, provided that no amendment or termination may divest any Participant or beneficiary of rights to deferred compensation earned and accumulated in the Plan at the time of such amendment or termination.
Section 8.02 . Notice . Notice of every such amendment shall be given in writing to each Participant and beneficiary of a deceased Participant.
Section 8.03 Termination . Subject to the requirements of Code Section 409A, in the event of complete termination of the Plan, the Plan shall cease to operate and the Bank shall pay out to the Participant his or her benefit as if the Participant had Separated from Service as of the effective date of the complete termination. Such complete termination of the Plan shall occur only under the following circumstances and conditions:

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(a) The Bank may terminate the Plan within 12 months of a corporate dissolution taxed under Code Section 331, or with approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of (i) the calendar year in which the Plan terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.
(b) The Bank may terminate the Plan by irrevocable Board action taken within the 30 days preceding a Change in Control (but not following a Change in Control), provided that the Plan shall only be treated as terminated if all substantially similar arrangements sponsored by the Bank are terminated so that the Participant and all participants under substantially similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within 12months of the date of the termination of the arrangements. For purposes herein, the definition of “Change in Control” shall be defined in accordance with Code Section 409A.
(c) The Bank may terminate the Plan provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) all arrangements sponsored by the Bank that would be aggregated with this Plan under Treasury Regulation 1.409A-1(c) if the

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Participant covered by this Plan was also covered by any of those other arrangements are also terminated; (iii) no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement; (iv) all payments are made within 24 months of the termination of the arrangements; and (v) the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulation 1.409A-1(c) if the Participant participated in both arrangements, at any time within three (3) years following the date of termination of the arrangement.
     IN WITNESS WHEREOF, the Bank has signed this amended and restated Plan on the date set forth below, with the intention of bringing the Plan into compliance with Code Section 409A.
             
    NORTHWEST SAVINGS BANK    
 
           
December 17, 2008
  By:   /s/ William Wagner    
 
Date
     
 
   

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EXHIBIT 1
AMENDED AND RESTATED
NORTHWEST SAVINGS BANK AND AFFILIATES UPPER
MANAGERS’ BONUS DEFERRED COMPENSATION PLAN
DEFERRAL ELECTION FORM
[NOTE: DO NOT USE THIS FORM AFTER DECEMBER 31, 2005 BECAUSE THE PLAN HAS BEEN FROZEN; IT IS HERE ONLY FOR HISTORICAL REASONS]
     
Participant’s Name:
   
 
   
           ELECTION . Pursuant to the Amended and Restated Northwest Savings Bank (the “Bank”) and Affiliates Upper Managers’ Bonus Deferred Compensation Plan (“Plan”) which I acknowledge I have received a copy, I hereby elect to defer receipt of $                                           or                      % of the annual management incentive bonus which is declared and payable to me by the Bank in the fiscal year immediately following that in which this Deferral Election Form is delivered to the Plan Administrator.
          In the fiscal year in which I first become eligible to participate in the Plan this Deferral Election Form shall also apply to the manager’s bonus otherwise due to me from the Bank for the fiscal year in which this Deferral Election Form is filed with the Bank, provided that it is delivered to the Plan Administrator within 30 days of my first becoming eligible to participate in the Plan.
          Capitalized terms which are not defined herein shall have the same meaning as set forth in the Plan .
         
 
 
Date
 
 
Participant
   
 
       
 
 
Date
 
 
Duly Authorized Officer of the Bank
   

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EXHIBIT 2
AMENDED AND RESTATED
NORTHWEST SAVINGS BANK AND AFFILIATES UPPER
MANAGERS’ BONUS DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION FORM
     
Print Name:
   
 
   
I hereby designate the following Beneficiary(ies) to receive my benefits under the Plan, following my death:
                 
PRIMARY BENEFICIARY:        
 
               
Name:
      % of Benefit:        
 
               
 
               
Name:
      % of Benefit:        
 
               
 
               
Name:
      % of Benefit:        
 
               
 
               
SECONDARY BENEFICIARY (if all Primary Beneficiaries pre-decease the Participant):
 
               
Name:
      % of Benefit:        
 
               
 
               
Name:
      % of Benefit:        
 
               
 
               
Name:
      % of Benefit:        
 
               
     This Beneficiary Designation hereby revokes any prior Beneficiary Designation which may have been in effect. This Beneficiary Designation is revocable.
         
 
Date
 
 
Participant
   
 
       
 
Date
 
 
Duly Authorized Office of the Bank
   

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EXHIBIT 3
AMENDED AND RESTATED
NORTHWEST SAVINGS BANK AND AFFILIATES UPPER
MANAGERS’ BONUS DEFERRED COMPENSATION PLAN
TRANSITION YEAR ELECTION FORM
Instructions : Due to IRS rules, if you are participating in the Amended and Restated Northwest Savings Bank and Affiliates Upper Managers’ Bonus Deferred Compensation Plan (the “Plan”) you may complete this form by no later than December 31, 2008 to elect the specified date on which your benefit will commence under the Plan. You may not use this form to change the time of payment of your benefits under the Plan that are scheduled to be made to you in 2008, or otherwise to cause payments to be made to you in 2008. Capitalized terms which are not defined herein shall have the same meaning as set forth in the Plan.
     
Print Name :
   
 
   
Pursuant to Section 5.04 of the Plan I hereby elect for the entire balance of my Deferred Compensation Account to be paid upon either (please choose one):
                                A specified date of                                            , 20___.
                                My Event of Distribution (i.e., the earlier of my: (i) involuntary Separation from Service for a period of six consecutive months; (ii) voluntary Separation from Service; (iii) death; or (iv) Disability)
I understand that if I fail to timely file this Transition Year Election Form with the Bank on or before December 31, 2008, I will be deemed to have elected to receive the entire balance of my Deferred Compensation Account upon my Event of Distribution.
         
 
 
Date
 
 
Participant
   
 
 
       
 
Date
 
 
Duly Authorized Officer of the Bank
   

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Exhibit 21
Subsidiaries of the Company
  Northwest Savings Bank, a Pennsylvania savings bank
 
  Northwest Bancorp Capital Trust III, a Delaware statutory business trust
 
  Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust
 
  CSB Trust
Subsidiaries of Northwest Savings Bank
  Northwest Financial Services, Inc., a Pennsylvania corporation
 
  Great Northwest Corporation, a Pennsylvania corporation
 
  Northwest Capital Group Inc., a Pennsylvania corporation
 
  Allegheny Services, Inc., a Delaware corporation
 
  Northwest Settlement Agency, LLC, a Pennsylvania limited liability company
 
  Boetger and Associates, Inc., a Pennsylvania corporation
 
  Northwest Consumer Discount Company, Inc., a Pennsylvania corporation which operates under this name in 15 locations in western and central Pennsylvania and also operates:
  o   d/b/a Northwest Finance Company in Jamestown and Fredonia, NY, a New York corporation
 
  o   d/b/a Butler Consumer Discount Company in six locations in southwestern Pennsylvania
 
  o   d/b/a Civic Consumer Discount Company in to locations in southwestern Pennsylvania
 
  o   d/b/a Uniontown Financial Services in Uniontown, Pennsylvania
 
  o   d/b/a Erie Consumer Discount in three locations in Erie, Pennsylvania
 
  o   d/b/a Corry Consumer Discount in Corry, Pennsylvania
 
  o   d/b/a Thrift Financial Services in Indiana, Pennsylvania
 
  o   d/b/a Clearfield Consumer Discount in Clearfield, Pennsylvania
 
  o   d/b/a Titusville Consumer Discount in Titusville, Pennsylvania
 
  o   d/b/a Lewistown Consumer Discount in Lewistown, Pennsylvania
 
  o   d/b/a Jeannette Financial Services in Jeannette, Pennsylvania
 
  o   d/b/a Zelie Consumer Discount in Zelienople, Pennsylvania
 
  o   d/b/a Washington Consumer Discount in Washington, Pennsylvania
 
  o   d/b/a St. Mary’s Consumer Discount in St. Mary’s, Pennsylvania
 
  o   d/b/a Hazelton Financial Services in Hazelton, Pennsylvania
 
  o   d/b/a State College Financial Services in State College, Pennsylvania
 
  o   d/b/a Pottsville Financial Services in Pottsville, Pennsylvania
 
  o   d/b/a Williamsport Financial Services in Williamsport, Pennsylvania
 
  o   d/b/a Altoona Financial Services in Altoona, Pennsylvania
 
  o   d/b/a Punxsutawney Financial Services in Punxsutawney, Pennsylvania
 
  o   d/b/a Huntingdon Financial Services in Huntingdon, Pennsylvania
 
  o   d/b/a Belle Vernon Financial Services in Belle Vernon, Pennsylvania
 
  o   d/b/a Latrobe Financial Services in Latrobe, Pennsylvania
 
  o   d/b/a Bloomsburg Financial Services in Bloomsburg, Pennsylvania
 
  o   d/b/a Sunbury Financial Services in Sunbury, Pennsylvania
 
  o   d/b/a Meadville Financial Services in Meadville, Pennsylvania
 
  o   d/b/a Lock Haven Financial Services in Lock Haven, Pennsylvania

Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Northwest Bancorp, Inc.:
We consent to the incorporation by reference in the registration statements (No. 333-41984, 333-85118, and 333-46651) on Form S-8 of Northwest Bancorp, Inc. of our reports dated March 4, 2009, with respect to the consolidated statements of financial condition of Northwest Bancorp, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related statements of income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008, and the effectiveness of internal control over financial reporting as of December 31, 2008, which reports appear in the December 31, 2008 annual report on Form 10-K of Northwest Bancorp, Inc. Our report on the consolidated financial statements refers to a change in framework for measuring fair value effective January 1, 2008, in accordance with FASB Statement 157, Fair Value Measurements.
/s/ KPMG LLP
Pittsburgh, Pennsylvania
March 4, 2009

 

EXHIBIT 31.1
Certification pursuant to Rule 13a-14
Of the Securities Exchange Act of 1934, as Amended,
As adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, William J. Wagner, certify that:
1. I have reviewed this Annual Report on Form 10-K of Northwest Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
March 4, 2009
  /s/ William J. Wagner    
 
Date
 
 
William J. Wagner
   
 
  President and Chief Executive Officer    

 

EXHIBIT 31.2
Certification pursuant to Rule 13a-14
Of the Securities Exchange Act of 1934, as amended,
As adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, William W. Harvey, Jr., certify that:
1. I have reviewed this Annual Report on Form 10-K of Northwest Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
March 4, 2009
  /s/ William W. Harvey, Jr.    
 
Date
 
 
William W. Harvey, Jr.
   
 
  Executive Vice President, Finance and
    Chief Financial Officer
   

 

EXHIBIT 32
Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officers of Northwest Bancorp, Inc. (the “Company”) hereby certify that, to the best of their knowledge:
1.   the Company’s Annual Report on Form 10-K for the Year ended December 31, 2008 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
 
2.   that as of the date of this statement, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
March 4, 2009
  /s/ William J. Wagner    
 
Date
 
 
William J. Wagner
   
 
  President and Chief Executive Officer    
 
       
March 4, 2009
  /s/ William W. Harvey, Jr.    
 
       
Date
  William W. Harvey, Jr.    
 
  Executive Vice President, Finance and    
 
     Chief Financial Officer    
The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.
A signed original of this written statement required by Section 906 has been provided to Northwest Bancorp, Inc. and will be retained by Northwest Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.