** **

**SECURITIES AND EXCHANGE COMMISSION**

#### **Washington, D.C. 20549**

 

## **FORM 10-K**

 

| **ý** | **ANNUAL REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|-------------------------------------------------------------------------------------------|

 

**For the Fiscal Year Ended December 31, 2001**

 

**OR**

 

| **o** | **TRANSITION REPORT PURSUANT TO SECTION  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**Commission FileNumber: 0-26632**

 

**Pacific Northwest Bancorp**

(Exact name of registrant as specified in its charter)

 

| **Washington**                                                 |   | **91-1691216**                       |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| **1111 Third Avenue, Suite 250, Seattle, Washington**          |   | **98101**                            |
| (Address of principal executive offices)                       |   | (Zip Code)                           |
|                                                           |   |                                 |
| **(206) 624-9761**                                             |
| Registrant’s telephone number, including area code        |

 

Securities registered pursuant toSection 12(b) of the Act: None

 

Securities registered pursuant toSection 12(g) of the Act:

 

|   | **Common Stock, no par value per  share** |   |
|--------|-------------------------------------------|--------|
|   | (Title of Class)                          |   |

 

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YES ý  NO  o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. o

 

Theaggregate market value of the common stock held by non-affiliates of theRegistrant was $370,419,243 based upon the closing price of the Registrant’scommon stock as quoted on the Nasdaq National Market on February 22, 2002 of$23.91.

 

Asof February 22, 2002, there were issued and outstanding 15,492,231 shares ofthe Registrant’s common stock.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

1.    ManagementDiscussion and Analysis and Consolidated Financial Statements included in the2001 Financial Information distributed to shareholders with the 2001 AnnualReport (Part II).

2.    ManagementDiscussion and Analysis included in the December 31, 1999 Quarterly Report onForm 10-Q (Part II).

3.    ProxyStatement for the 2002 Annual Meeting of Shareholders (“Proxy Statement”).(Part III).

 

 

**PART I**

**Item 1. Business**

 

**General**

 

PacificNorthwest Bancorp (Bancorp) is a bank holding company incorporated in the Stateof Washington in 1994.  The consolidatedentity includes Bancorp and its wholly owned subsidiaries and is collectivelyreferred to as PNWB.  As of December 31,2001, Bancorp’s wholly owned subsidiaries were Pacific Northwest Bank andInterWest Capital Trust I.  As ofDecember 31, 2001, PNWB had consolidated total assets of $2.7 billion, totalloans receivable of $1.8 billion, total deposits of $1.6 billion andshareholders’ equity of $200.5 million.

 

Bancorpand PNWB previously conducted business as InterWest Bank which was organized in1956 as Island Savings and Loan Association by two local business people whorecognized the need to create a new business to help families obtain homes inthe growing community of Oak Harbor on Whidbey Island, Washington.  On July 5, 1957, Island Savings began operationsas the first state-chartered stock savings and loan association in the State ofWashington.  By 1984, the name IslandSavings and Loan Association was outgrown both as a geographic description andas an indicator of the scope of the company’s products and services.  On May 30, 1984, the name InterWest SavingsBank was ratified unanimously by shareholders and board members.

 

OnJanuary 17, 1995, the shareholders of InterWest Savings Bank approved a plan toreorganize InterWest Savings Bank into the holding company form ofownership.  The reorganization wascompleted on July 28, 1995, on which date InterWest Savings Bank became thewholly owned subsidiary of InterWest Bancorp, Inc., and the shareholders ofInterWest Savings Bank became shareholders of InterWest Bancorp, Inc..  Subsequent to this reorganization, theholding company has engaged in no significant activity other than holding thestock of banking subsidiaries.

 

InNovember 1996, the name InterWest Savings Bank was changed to InterWest Bank toreflect the expansion of the business. In July 2000, subsequent to acquisitionof six commercial banks, InterWest Bank converted its subsidiary bank charterfrom a state savings bank to a state commercial bank. This was consistent witha redefined focus to emphasize commercial banking activities.  Effective September 1, 2000, InterWestBancorp, Inc. changed its name to Pacific Northwest Bancorp and the company’scommercial bank subsidiary, InterWest Bank, changed its name to PacificNorthwest Bank.  In conjunction with thename changes, PNWB moved its corporate headquarters to Seattle.

 

OnJune 20, 2000, the Board of Directors approved a change of PNWB’s fiscal yearend from September 30 to December 31, retroactively to January 1, 2000.

 

Between1996 and 1999, Bancorp completed the acquisition of six commercialbanking institutions.  They were CentralBancorporation, Puget Sound Bancorp, Inc., Pacific Northwest Bank, PioneerBancorp, Inc., Kittitas Valley Bancorp, Inc., and NBT Northwest Bancorp.  These acquisitions added commercial bankingassets of approximately $668 million, measured as of each acquisitiondate.  The acquisitions were accountedfor using either the pooling-of-interests or purchase method of accounting.

 

PNWB provides a variety of financial products and services for bothbusiness and individual customers. Financial services of PNWB include thebanking activities of accepting deposits from businesses and individuals andoriginating commercial and commercial real estate loans, residential loans,consumer loans, and agricultural loans. PNWB will continue to emphasize changing the composition of the loanportfolio and the deposit base as part of the migration to a commercial bank.  These changes are intended to have apositive impact on net interest income and service fee revenue while continuingto meet the needs of PNWB’s customers. Investment products are also availablethrough Pacific Northwest Financial Services, Inc. and insurance products areavailable through Pacific Northwest Insurance Agency, Inc., both wholly ownedsubsidiaries of Pacific Northwest Bank.

 

**Business Segment Information**

 

Between the period August 31, 1996 and October 1999,PNWB acquired six commercial banking institutions.  Subsequent to these acquisitions, PNWB managed at the subsidiarybank level.  Each subsidiary bank had aboard of

 

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directors and an executive management team that wasresponsible for the operation and performance of the respective subsidiarybank.

 

During the year ended December 31, 2000, PNWB mergedthe subsidiary banks into one single bank. In addition, PNWB consolidated its executive management functions andimplemented a new organizational structure while converting multiple separateoperating systems into a single operating system.  As a result of these organizational andsystem changes, the financial information that is used by the chief operatingdecision maker in allocating resources and assessing performance is onlyprovided for one reportable segment as of December 31, 2001 and 2000.  Prior periods have been restated to reflectthe change in segment reporting.

 

**Market Area**

 

Presently, PNWB conducts its business through 55 full-service branchoffices in western and central Washington state.  In western Washington, PNWB serves the Interstate 5 corridor fromthe Canadian border south to Centralia and the Olympic Peninsula.  This market has benefited in recent yearsfrom growth in home construction necessitated by population increases.  PNWB’s other primary market area is centralWashington, including Wenatchee, Ellensburg and Yakima, which is characterizedby an agricultural base and less rapid population growth.

 

PNWB does business in several differentnon-metropolitan communities, some of which are economically linked because ofgeographic proximity or significantly impacted by a small number of significantemployers, while other areas may be influenced by different economic variables.Economic activity in central Washington is not closely linked to westernWashington.  The areas served havediverse, and to some extent independent, economic characteristics, strengthsand weaknesses, although all of these depend to various degrees on agriculture,small business, and construction and, in some cases, a small number ofsignificant employers.

 

**Growth Strategy**

 

In 1995, PNWB implemented a strategy to increase itsemphasis on commercial banking and to become a statewide institution.  The acquisition of Central Bancorporation inAugust of 1996 was an important first step in the implementation of thisstrategy.  In the ensuing three years,Bancorp completed five additional acquisitions.  These acquisitions added commercial banking assets ofapproximately $668 million, measured as of each acquisition date.  Additionally, PNWB opened several de novobranches in western Washington.  PNWBbelieves that its growth strategy will allow it to achieve greaterdiversification of its markets and products, enhance shareholder value by moreeffectively leveraging equity capital, and more effectively position itself totake advantage of acquisition opportunities in the rapidly changing financialservices industry.

 

This growth strategy will have to come primarilyfrom expansion into new markets.  Inrecognition of these factors, this growth strategy emphasizes: increasingcommercial lending; acquiring commercial banks; de novo branching; providingnon-deposit investment products; and improving technology to enhance servicesand realizing operating efficiencies.

 

A source of futuregrowth may be through acquisitions. Bancorp management believes that many other financial institutions areconsidering selling their institutions for a variety of reasons, including lackof shareholder liquidity, management succession issues, technology challenges,and increasing competition.  Bancorpactively reviews proposals for various acquisition opportunities.  Bancorp has a due diligence review processto evaluate potential acquisitions and has established parameters for potentialacquisitions relating to market factors, financial performance and certainnonfinancial factors.  The objective ofacquisitions will be to increase the opportunity for quality earning assetgrowth, deposit generation and fee-based income opportunities; diversify the earningassets portfolio and core deposit base through expansion into new geographicmarkets; maintain a well capitalized position after the acquisition; improvethe potential profits from the combined operations through economies of scale;and enhance shareholder value measured through increasing return on equityand/or increasing earnings per share. Successful completion of acquisitions by Bancorp depends on severalfactors such as the availability of suitable acquisition candidates, necessaryregulatory and shareholder approval, and compliance with applicable capitalrequirements.  No assurance can be madethat acquisition activity will continue in the future.

 

Bancorp’s ability to make future acquisitions depends in part onBancorp’s capital position and, in the case of cash acquisitions, on its cashassets or ability to acquire cash. Bancorp may need to obtain additional debt and equity capital inpursuing its business strategy. Bancorp’s access to capital markets or thecosts of this capital can be 

 

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impacted by economic, financial, competitive and other conditionsbeyond Bancorp’s control.  Further,acquisition candidates may not be available in the future on favorableterms.  There are only a limited numberof suitable acquisition candidates within Bancorp’s existing and potentialmarket areas, and many of these candidates would also be attractive acquisitioncandidates for other financial institutions. This competition is likely to affect Bancorp’s ability to makeacquisitions, increase the price paid for certain acquisitions, and increasethe costs in analyzing possible acquisitions. Therefore, no assurance can be made that acquisition activity willcontinue in the future.

 

Managing growth through acquisitions is achallenging process that includes integration and training of personnel,developing common products and pricing, combining office and operationspolicies and procedures, data processing conversion and various other matters.  PNWB has grown, and intends to continue togrow, through acquisitions of banks and other financial institutions.  After any such acquisition(s), PNWB mayexperience adverse changes in results of operations of acquired entities,unforeseen liabilities, asset quality problems of acquired entities, loss ofkey personnel, loss of customers because of change in identity, difficulties inintegrating data processing and operational procedures and deterioration inlocal economic conditions.  PNWBbelieves it has taken steps to address the issues resulting from acquisitionsin recent years and has developed a plan to fully integrate all banks acquired.

 

**Key Operating Ratios**

 

The “five-yearselected consolidated financial data” section contained in “ManagementDiscussion and Analysis” in the 2001 Financial Information, which is listed asan exhibit under Item 14, is incorporated herein by reference.

 

## **Distribution of Assets, Liabilities and Shareholders’Equity; Interest Rates and Interest Differential**

 

Thesection “Net Interest Income” contained in “Management Discussion and Analysis”in the 2001 Financial Information, which is listed as an exhibit under Item 14,is incorporated herein by reference.

 

**Investment Activities**

 

The section“Securities and Other Interest-Earning Assets” contained in “ManagementDiscussion and Analysis” in the 2001 Financial Information, which is listed asan exhibit under Item 14, is incorporated herein by reference.

 

The following table presents the name of the issuer and the aggregateamortized cost and aggregate estimated fair value of securities of each issuerfor those securities in PNWB’s portfolio for which the aggregate amortized costexceeds 10 percent of PNWB’s shareholders’ equity as of December 31, 2001.

 
|                                         |   | **Amortized Cost**        |        | **EstimatedFair Value** |       |
|----------------------------------------------|--------|---------------------------|-------------|-------------------------|------------|
|                                         |   | **Dollars  in thousands** |        |
| **Federal National Mortgage  Association**   |   | **$**                     | **109,829** | ** **              | **$**      | **110,118** | ** ** |
| **Residential Funding Mortgage  Security I** |   | **91,386**                | ** **  | **92,092**              | ** ** |
| **PNC Mortgage Securities  Corporation**     |   | **36,112**                | ** **  | **36,389**              | ** ** |
| **GE Capital Mortgage Services,  Inc.**      |   | **25,175**                | ** **  | **25,339**              | ** ** |
|                                              |        |                           |             |                         |            |  |  |

### ** **

### **Lending Activities**

 

The section “Loans Receivable and Loans Held for Sale” contained in“Management Discussion and Analysis” in the 2001 Financial Information, whichis listed as an exhibit under Item 14, is incorporated herein by reference.

 

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### **Allowance for Losses onLoans**

 

The section “Allowance for Losses on Loans” contained in “ManagementDiscussion and Analysis” in the 2001 Financial Information, which is listed asan exhibit under Item 14, is incorporated herein by reference.

 

**Non-performing Assets**

 

The section “Non-performing Assets” contained in “Management Discussionand Analysis” in the 2001 Financial Information, which is listed as an exhibitunder Item 14, is incorporated herein by reference.

 

**Deposits**

 

Thesection “Deposits” contained in “Management Discussion and Analysis” in the2001 Financial Information, which is listed as an exhibit under Item 14, isincorporated herein by reference.

 

## **Borrowings**

 

Thesections “FHLB Advances and Securities Sold Under Agreements to Repurchase” and“Guaranteed Preferred Beneficial Interests in Subordinated Debt” contained in“Management Discussion and Analysis” in the 2001 Financial Information, whichis listed as an exhibit under Item 14, is incorporated herein by reference.

 

**Personnel**

 

Asof December 31, 2001, Bancorp, including its subsidiaries, had 842 full-timeequivalent employees.  PNWB believesthat employees play a vital role in the success of a service company such asPNWB and that PNWB’s relationship with its employees is good.  The employees are not represented by acollective bargaining unit.

 

**Competition**

 

Thebanking industry is highly competitive. Pacific Northwest Bank faces strong competition in attracting depositsand in originating loans.  The mostdirect competition for deposits has historically come from other commercialbanks, savings institutions and credit unions located in the primary marketarea. As with all banking organizations, PNWB also has competition fromnonbanking sources, including mutual funds, corporate and governmental debtsecurities and other investment alternatives. PNWB expects increasing competition from other financial institutionsand nonbanking sources in the future. Many of PNWB’s competitors have more significant financial resources,larger market share and greater name recognition than PNWB. The existence ofsuch competitors may make it difficult for PNWB to achieve its financial goals.

 

Competitionhas further increased as a result of Washington banking laws that permitstatewide branching of Washington-domiciled financial institutions andacquisition of Washington-based financial institutions by out-of-state bankholding companies.

 

PNWB’scompetition for loans comes principally from other commercial banks, savingsinstitutions, credit unions and mortgage banking companies.  PNWB competes for loans principally throughthe efficiency and quality of the services it provides borrowers, real estatebrokers and home builders, and the interest rates and loan fees it charges.

 

PNWBcompetes for deposits by offering depositors a wide variety of checkingaccounts, savings accounts, certificates and other services.  PNWB’s ability to attract and retaindeposits depends on its ability to provide deposit products that satisfy therequirements of customers as to interest rates, liquidity, transaction fees,risk of loss of deposit, convenience and other factors.  Deposit relationships are actively solicitedthrough a sales and service system.

 

Changesin technology, mostly from the growing use of computers and computer-basedtechnology, present competitive challenges to PNWB.  Large banking institutions typically have the ability to devotesignificant resources to developing and maintaining technology-based servicessuch as on-line banking and other banking products and services over theInternet, including deposit services and mortgage loans.  Some new banking competitors offer all oftheir services on-line.  Customers whobank by computer or by telephone may not need to physically go to a branchlocation.  PNWB’s high servicephilosophy emphasizes face-to-face contact with tellers, loan officers andother employees.  PNWB believes apersonal approach to banking is a competitive advantage, one that will remainpopular in the communities that

 

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areits natural marketplace.  However,customer preferences may change, and the rapid growth of on-line banking could,at some point, render PNWB’s personal, branch-based approach obsolete.  PNWB has partially offset this risk byoffering on-line banking services to its customers, and by continuing toprovide 24-hour banking services.  Therecan be no assurance that these efforts will be successful in preventing theloss of customers to competitors.

 

**SUPERVISION ANDREGULATION**

 

##### **Introduction**

 

The following generally refers to certain statutesand regulations affecting the banking industry.  These references provide brief summaries only and are notintended to be complete.  They are qualifiedin their entirety by the referenced statutes and regulations.  In addition, some statutes and regulationsmay exist which apply to and regulate the banking industry, but are notreferenced below.

 

Bancorp is a bank holding company.  Its wholly owned subsidiaries are PacificNorthwest Bank and InterWest Capital Trust I. The Bank Holding Company Act of 1956, as amended (“BHCA”) subjectsBancorp and its subsidiaries to supervision and examination by the Federal ReserveBank (“FRB”), and Bancorp files annual reports of operations with the FRB.

 

##### **Bank HoldingCompany Regulation**

 

In general, the BHCA limits bank holding companybusiness to owning or controlling banks and engaging in other banking-relatedactivities.  Bank holding companies mustobtain the FRB’s approval before they: (1) acquire direct or indirect ownershipor control of any voting shares of any bank that results in total ownership orcontrol, directly or indirectly, of more than 5 percent of the voting shares ofsuch bank; (2) merge or consolidate with another bank holding company; or (3)acquire substantially all of the assets of any additional banks.  Subject to certain state laws, such as ageand contingency restrictions, a bank holding company that is adequatelycapitalized and adequately managed may acquire the assets of both in-state andout-of-state banks.

 

With certain exceptions, the BHCA prohibits bankholding companies from acquiring direct or indirect ownership or control ofvoting shares in any company that is not a bank or a bank holding companyunless the FRB determines that the activities of such company are incidental orclosely related to the business of banking. If a bank holding company is well-capitalized and meets certain criteriaspecified by the FRB, it may engage de novo in certain permissible nonbankingactivities without prior FRB approval.

 

The Change in Bank Control Act of 1978, asamended, requires a person (or group of persons acting in concert) acquiring“control” of a bank holding company to provide the FRB with 60 days’ priorwritten notice of the proposed acquisition. Following receipt of this notice, the FRB has 60 days within which toissue a notice disapproving the proposed acquisition, but the FRB may extendthis time period for up to another 30 days. An acquisition may be completed before expiration of the disapprovalperiod if the FRB issues written notice of its intent not to disapprove thetransaction.  In addition, any “company”must obtain the FRB’s approval before acquiring 25% (5% if the “company” is abank holding company) or more of the outstanding shares or otherwise obtainingcontrol over Bancorp.

 

##### **Transactions withAffiliates**

 

Bancorp and its subsidiaries are deemed affiliateswithin the meaning of the Federal Reserve Act, and transactions betweenaffiliates are subject to certain restrictions.  Accordingly, Bancorp and its subsidiaries must comply withSections 23A and 23B of the Federal Reserve Act.  Generally, Sections 23A and 23B (1) limit the extent to which afinancial institution or its subsidiaries may engage in “covered transactions”with an affiliate, as defined, to an amount equal to 10% of such institution’scapital and surplus and an aggregate limit on all such transactions with allaffiliates to an amount equal to 20% of such capital and surplus, and (2)require all transactions with an affiliate, whether or not “coveredtransactions,” to be on terms substantially the same, or at least as favorableto the institution or subsidiary, as those provided to a non-affiliate.  The term “covered transaction” includes themaking of loans, purchase of assets, issuance of a guarantee and other similartypes of transactions.

 

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##### **Regulation ofManagement**

 

Federal law: (1) sets forth the circumstancesunder which officers or directors of a financial institution may be removed bythe institution’s federal supervisory agency; (2) places restraints on lendingby an institution to its executive officers, directors, principal shareholders,and their related interests; and (3) prohibits management personnel fromserving as a director or in other management positions with another financialinstitution which has assets exceeding a specified amount or which has anoffice within a specified geographic area.

 

##### **Tie-InArrangements**

 

Bancorp and its subsidiaries are prohibited fromengaging in certain tie-in arrangements in connection with any extension ofcredit, sale or lease of property or furnishing of services.  For example, with certain exceptions,neither Bancorp nor its subsidiaries may condition an extension of credit oneither a requirement that the customer obtain additional services provided byit or an agreement by the customer to refrain from obtaining other servicesfrom a competitor.

 

##### **State Law Restrictions**

 

As a Washington corporation, Bancorp may besubject to certain limitations and restrictions as provided under applicableWashington corporate laws.

 

**Securities Registration and Reporting**

 

Bancorp common stock is registered with the SECunder the Securities Exchange Act of 1934 and thus Bancorp is subject to theperiodic reporting and proxy solicitation requirements and the insider-tradingrestrictions of that Act.  The periodicreports, proxy statements, and other information filed by Bancorp under thatAct can be inspected and copied at or obtained from the Washington, D.C. officeof the SEC.  In addition, the securitiesissued by Bancorp are subject to the registration requirements of theSecurities Act of 1933 and applicable state securities laws unless exemptionsare available.

 

##### **Pacific NorthwestBank**

 

##### **General**

 

Applicable federal and state statutes andregulations governing a bank’s operations relate, among other matters, tocapital requirements, required reserves against deposits, investments, loans,legal lending limits, certain interest rates payable, mergers andconsolidations, borrowings, issuance of securities, payment of dividends,establishment of branches, and dealings with affiliated persons.  The Federal Deposit Insurance Corporation (“FDIC”)has authority to prohibit banks under their supervision from engaging in whatthey consider to be unsafe or unsound practices in conducting their business.

 

Pacific Northwest Bank is a state-charteredcommercial bank subject to extensive regulation and supervision by both theWashington Department of Financial Institutions and the FDIC.  The federal laws that apply to PacificNorthwest Bank regulate, among other things, the scope of its business, itsinvestments, its reserves against deposits, the timing of the availability ofdeposited funds, and the nature and amount of and collateral for loans.  The laws and regulations governing PacificNorthwest Bank generally have been promulgated to protect depositors and not toprotect shareholders of such institutions or their holding companies.

 

*CRA. *The Community ReinvestmentAct requires that, in connection with examinations of financial institutionswithin their jurisdiction, the Federal Reserve or the FDIC evaluates the recordof the financial institutions in meeting the credit needs of their localcommunities, including low and moderate income neighborhoods, consistent withthe safe and sound operation of those banks. These factors are also considered in evaluating mergers, acquisitions,and applications to open a branch or facility.

 

*InsiderCredit Transactions.*Pacific Northwest Bank is also subjectto certain restrictions imposed by the Federal Reserve Act on extensions ofcredit to executive officers, directors, principal shareholders, or any relatedinterests of such persons.  Extensionsof credit (i) must be made on substantially the same terms, including interestrates and collateral, and follow credit underwriting procedures that are notless stringent than those prevailing at the time for 

 

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comparable transactions with persons not covered above and who are notemployees; and (ii) must not involve more than the normal risk of repayment orpresent other unfavorable features. Pacific Northwest Bank is also subject to certain lending limits andrestrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment ofsubstantial civil monetary penalties on the affected bank or any officer,director, employee, agent, or other person participating in the conduct of theaffairs of Pacific Northwest Bank, the imposition of a cease and desist order,and other regulatory sanctions.

 

*FDICIA. *Under the Federal DepositInsurance Corporation Improvement Act of 1991 (the “FDICIA”), each federalbanking agency has prescribed, by regulation, noncapital safety and soundnessstandards for institutions under its authority.  These standards cover internal controls, information systems, andinternal audit systems, loan documentation, credit underwriting, interest rateexposure, asset growth, compensation, fees and benefits, such other operationaland managerial standards as the agency determines to be appropriate, andstandards for asset quality, earnings and stock valuation.  An institution that fails to meet thesestandards must develop a plan acceptable to the agency, specifying the stepsthat the institution will take to meet the standards.  Failure to submit or implement such a plan may subject theinstitution to regulatory sanctions. Management of Bancorp believes that Pacific Northwest Bank meets allsuch standards, and therefore, does not believe that these regulatory standardsmaterially affect Bancorp’s business operations.

 

##### **Loans to OneBorrower**

 

Pacific Northwest Bank is subject to limitations onthe aggregate amount of loans that it can make to any one borrower, includingrelated entities.  Applicableregulations generally limit loans to one borrower to 20 percent of unimpaired capitaland surplus.

 

##### **Interstate Bankingand Branching**

 

The Riegle-Neal Interstate Banking and BranchingEfficiency Act of 1994 (the “Interstate Act”) permits nationwide interstatebanking and branching under certain circumstances.  This legislation generally authorizes interstate branching and relaxesfederal law restrictions on interstate banking. Currently, bank holdingcompanies may purchase banks in any state, and states may not prohibit suchpurchases.  Additionally, banks arepermitted to merge with banks in other states as long as the home state ofneither merging bank has “opted out.” The Interstate Act requires regulators to consult with communityorganizations before permitting an interstate institution to close a branch ina low-income area.

 

With regard to interstate bank mergers, Washington has “opted in” to the Interstate Act and allows in-statebanks to merge with out-of-state banks subject to certain agingrequirements.  Washington law generallyauthorizes the acquisition of an in-state bank by an out-of-state bank or bankholding company through the acquisition of or a merger with a Washingtonfinancial institution that has been in existence for at least five years priorto the acquisition.

 

##### **Deposit Insurance**

 

The deposits of Pacific Northwest Bank are currentlyinsured to a maximum of $100,000 per depositor through the Savings AssociationInsurance Fund (the “SAIF”) administered by the FDIC.  All insured banks are required to pay semi-annual depositinsurance premium assessments to the FDIC.

 

The FDICIA included provisions to reform the FederalDeposit Insurance System, including the implementation of risk-based depositinsurance premiums.  The FDICIA alsopermits the FDIC to make special assessments on insured depository institutionsin amounts determined by the FDIC to be necessary to give it adequateassessment income to repay amounts borrowed from the U.S. Treasury and othersources, or for any other purpose the FDIC deems necessary.  The FDIC has implemented a risk-basedinsurance premium system under which banks are assessed insurance premiumsbased on how much risk they present to the SAIF.  Banks with higher levels of capital and a low degree ofsupervisory concern are assessed lower premiums than banks with lower levels ofcapital or a higher degree of supervisory concern.

 

##### **Dividends**

 

The principal source of Bancorp’s revenue isdividends received from Pacific Northwest Bank.  The payment of dividends is subject to governmentregulation.  Without prior approval ofthe director of financial institutions in the 

 

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state of Washington, no Washington state bank ispermitted to declare or pay any cash dividends in an amount greater than itsretained earnings.  In addition,regulatory authorities may prohibit banks and bank holding companies frompaying dividends that would constitute an unsafe or unsound bankingpractice.  Other than the laws andregulations noted above, which apply to all banks and bank holding companies,neither Bancorp nor Pacific Northwest Bank is currently subject to anyregulatory restrictions on its dividends.

 

##### **Capital Adequacy**

 

Federal bank regulatory agencies use capitaladequacy guidelines in the examination and regulation of bank holding companiesand banks.  If capital falls belowminimum guideline levels, the holding company or bank may be denied approval toacquire or establish additional banks or nonbank businesses or to open newfacilities.

 

The FDIC and Federal Reserve use risk-based capitalguidelines for banks and bank holding companies.  These are designed to make such capital requirements moresensitive to differences in risk profiles among banks and bank holdingcompanies, to account for off-balance sheet exposure and to minimizedisincentives for holding liquid assets. Assets and off-balance sheet items areassigned to broad risk categories, each with appropriate weights.  The resulting capital ratios representcapital as a percentage of total risk-weighted assets and off-balance sheetitems.  The guidelines are minimums, andthe Federal Reserve has noted that bank holding companies contemplatingsignificant expansion programs should not allow expansion to diminish theircapital ratios and should maintain ratios well in excess of the minimum.  The current guidelines require all bankholding companies and federally-regulated banks to maintain a minimumrisk-based total capital ratio equal to 8 percent, of which at least 4 percentmust be Tier I capital. Tier I capital for bank holding companies includescommon shareholders’ equity, certain qualifying perpetual preferred stock andminority interests in equity accounts of consolidated subsidiaries, lessintangibles except as described above.

 

The Federal Reserve also employs a leverage ratio,which is Tier I capital as a percentage of total assets less intangibles, to beused as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to constrain themaximum degree to which a bank holding company may leverage its equity capitalbase.  The Federal Reserve requires aminimum leverage ratio of 3 percent.

 

FDICIA created a statutory framework of supervisoryactions indexed to the capital level of the individual institution.  Under regulations adopted by the FDIC, aninstitution is assigned to one of five capital categories depending on itstotal risk-based capital ratio, Tier I risk-based capital ratio, and leverageratio, together with certain subjective factors.  Institutions which are deemed to be “undercapitalized” dependingon the category to which they are assigned are subject to certain mandatorysupervisory corrective actions.  Bancorpdoes not believe that these regulations have any material effect on itsoperations currently.

 

Reference is made to Note 19 of the Notes to theConsolidated Financial Statements in the 2001 Financial Information, which islisted as an exhibit under Item 14, for additional information concerningregulatory capital.

 

##### **Effects ofGovernment Monetary Policy**

 

The earnings and growth of Bancorp and itssubsidiaries are affected not only by general economic conditions, but also bythe fiscal and monetary policies of the federal government, particularly theFederal Reserve.  The Federal Reservecan and does implement national monetary policy for such purposes as curbinginflation and combating recession, but its open market operations in U.S.government securities, control of the discount rate applicable to borrowingsfrom the Federal Reserve, and establishment of reserve requirements againstcertain deposits, influence the growth of bank loans, investments and deposits,and also affect interest rates charged on loans or paid on deposits.  The nature and impact of future changes inmonetary policies and their impact on Bancorp and its subsidiaries cannot bepredicted with certainty.

##### ** **

##### **Changes in BankingLaws and Regulations**

 

On November 12, 1999, the President of the UnitedStates signed into law the Financial Services Modernization Act of 1999.  Generally, the legislation (i) repeals thehistorical restrictions on preventing banks from affiliating with securitiesfirms, (ii) provides a uniform framework for the activities of banks, savingsinstitutions and their holding companies, (iii) broadens the activities thatmay be conducted by national banks and banking subsidiaries of bank holdingcompanies, (iv) provides an enhanced framework for protecting the privacy ofconsumers’ information and

 

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(v) addresses a variety of other legal andregulatory issues affecting both day-to-day operations and long-term activitiesof financial institutions.

 

The Financial Services Modernization Act of 1999permits bank holding companies to engage in a wider variety of financialactivities than permitted under previous law, particularly with respect toinsurance and securities activities.  Inaddition, in a change from previous law, bank holding companies are in aposition to be owned, controlled or acquired by any company engaged infinancially related activities, so long as such company meets certainregulatory requirements.

 

This legislation has not materially affected theoperations of Bancorp or its subsidiaries. However, to the extent the legislation permits banks, securities firmsand insurance companies to affiliate, the financial services industry mayexperience further consolidation.  Thisconsolidation could result in a growing number of larger financial institutionsthat offer a wider variety of financial services than PNWB currently offers andthat can aggressively compete in the markets currently served by PNWB.

 

**TAXATION**

 

**Federal Taxation**

 

**General**.  Bancorpand its subsidiaries report their income on a fiscal year basis using theaccrual method of accounting. Except for interest expense rules pertaining tocertain tax exempt income applicable to banks and the recently repealed baddebt reserve deduction, PNWB is subject to federal income tax, under existingprovisions of the Internal Revenue Code of 1986, as amended, in generally thesame manner as other corporations.  Thefollowing discussion of tax matters is intended only as a summary and does notpurport to be a comprehensive description of the tax rules applicable toPNWB.  PNWB has not been audited by theIRS during the past five years. Reference is made to Note 17 of the Notes to Consolidated FinancialStatements in the 2001 Financial Information, which is listed as an exhibitunder Item 14, for additional information concerning income taxes.

 

**Tax Bad Debt Reserve Recapture**.  Fortaxable years beginning prior to January 1, 1996, qualified thrift institutionssuch as the former InterWest Bank (renamed Pacific Northwest Bank in 2000) werepermitted to establish a reserve for bad debts based on actual loss experienceor based on a percentage equal to 8 percent of the bank’s taxable income,computed with certain adjustments.  Eachyear, InterWest Bank selected the most favorable method for calculating the taxdeduction attributable to the tax bad debt reserve.  The Small Business Job Protection Act of 1996 requires thatInterWest Bank recapture for federal income tax purposes the portion of thebalance of tax bad debt reserves that exceeds the year end 1987 balance, withcertain adjustments.  As a result ofthis legislation, the recaptured amounts are to be taken into taxable incomeratably over a six-year period beginning in fiscal year 1999.  This legislation also requires banks tocalculate the tax bad debt deduction based on actual current losses beginningin fiscal year 1997.

 

**Dividends-Received Deduction**.  Bancorpmay exclude from its income 100 percent of dividends received from subsidiarybanks as a member of the same affiliated group of corporations.

 

**Washington State Taxation**

 

Thestate of Washington does not currently have a corporate income tax.  The subsidiary banks are subject to abusiness and occupation tax which is imposed under Washington law at the rateof 1.50 percent of gross receipts; however, interest received on loans securedby mortgages or first deeds of trust on residential properties is not subjectto such tax.

 

#### **Forward-looking Statements**

 

Inthis Annual Report on Form 10-K, Bancorp has included certain “forward-lookingstatements” concerning its future operations. It is Bancorp’s desire to takeadvantage of the “safe harbor” provisions of the Private Securities LitigationReform Act of 1995. This statement is for the express purpose of availingBancorp of the protections of such safe harbor with respect to all forwardlooking statements contained in this Annual Report on Form 10-K.  Sentences containing words such as “may,”“will,” “expect,” “anticipate,” “believe,” “estimate,” “should,” “projected,”or similar words may constitute forward-looking statements.  Although Bancorp believes that theexpectations expressed in these forward-looking statements are based onreasonable assumptions within the bounds of its knowledge of its business andoperations, it is possible that actual results may differ materially from theseexpectations.  Bancorp has used these

 

10

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statementsto describe expectations and estimates in various areas, including, but notlimited to: changes in the economy of the markets in which it operates;interest rate movements; future acquisition and growth strategies; dataconversions for acquired institutions; the impact of competitive products,services and pricing; and legislative, regulatory and accounting changesaffecting the banking and financial services industry.  Actual results could vary materially fromthe future results covered in forward-looking statements.  Factors such as interest rate trends andloan delinquency rates, as well as the general state of the economy inWashington state and the United States as a whole, could also cause actualresults to vary materially from the future results anticipated in suchforward-looking statements.  Thesefactors should be considered in evaluating the forward-looking statements andundue reliance should not be placed on such statements.

 

**Item 2. Properties**

 

Themain office of Pacific Northwest Bancorp and Pacific Northwest Bank, is aleased facility located in Seattle, Washington.  Pacific Northwest Bank also owns a significant administrativefacility located in Oak Harbor, Washington. Pacific Northwest Bank operated a total of 55 branch offices as ofDecember 31, 2001, of which 43 are owned by Pacific Northwest Bank and 12 areleased from third parties.  See Note 7in the Notes to Consolidated Financial Statements in the 2001 FinancialInformation, which is listed under Item 14, for further information withrespect to Properties.

 

**Item 3. Legal Proceedings**

 

PNWBis not engaged in any legal proceedings of a material nature at the presenttime.  Periodically, there are variousclaims and lawsuits involving Bancorp and its subsidiaries, principally asdefendants, such as claims to enforce liens, condemnation proceedings onproperties in which PNWB holds security interests, claims involving the makingand servicing of real property loans and other issues incident to PNWB’sbusiness.  In the opinion of managementand PNWB’s legal counsel, no significant loss is expected from any of suchpending claims or lawsuits.

 

**Item 4. Submission of Matters to a Vote of Security-Holders**

 

None.

 

11

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**PART II**

 

**Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters**

 

Bancorp’scommon stock trades on The Nasdaq Stock Market under the symbol “PNWB.”  As of December 31, 2001, there were15,595,204 shares of common stock outstanding held by approximately 6,500shareholders.

 

Setforth in the following table are the high and low sales prices as reported onThe Nasdaq Stock Market and the dividends declared on common stock for eachquarter.

 
|           |   | **Sales Price** |   |    |   |
|----------------|--------|-----------------|--------|---------|--------|
|           |   | **High**        |   | **Low** |   | **DividendsDeclared** |   |
| 2001           |   |            |   |    |   |   |   |
|           |   |            |   |    |   |   |   |
| First Quarter  |   | $               | 19.69  |    | $      | 13.31 |   | $ | 0.14 |   |
| Second Quarter |   | 21.20           |   | 16.45   |   | 0.14 |   |
| Third Quarter  |   | 23.71           |   | 19.01   |   | 0.14 |   |
| Fourth Quarter |   | 22.50           |   | 19.90   |   | 0.14 |   |
|           |   |            |   |    |   |   |   |
| 2000           |   |            |   |    |   |   |   |
|           |   |            |   |    |   |   |   |
| First Quarter  |   | $               | 19.38  |    | $      | 13.50 |   | $ | 0.14 |   |
| Second Quarter |   | 17.00           |   | 12.25   |   | 0.14 |   |
| Third Quarter  |   | 14.38           |   | 12.02   |   | 0.14 |   |
| Fourth Quarter |   | 14.00           |   | 10.00   |   | 0.14 |   |

 

**Item 6. Selected Financial Data**

 

The“five-year selected consolidated financial data” section contained in“Management Discussion and Analysis” in the 2001 Financial Information, whichis listed under Item 14, is incorporated herein by reference.

 

**Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

Management Discussion andAnalysis included in the December 31, 1999 Quarterly Report on Form 10-Q isincorporated herein by reference.

 

ManagementDiscussion and Analysis for the year ended December 31, 2001 is incorporatedherein by reference to the section caption “Management Discussion and Analysis”in the 2001 Financial Information, which is listed under Item 14 herein.

 

**Item 7a. Quantitative and QualitativeDisclosure about Market Risk**

 

Theinformation required by this item is incorporated herein by reference to thesection “Market Risk” in “Management Discussion and Analysis” in the 2001Financial Information, which is listed under Item 14 herein.

 

**Item 8. Financial Statements and Supplementary Data**

 

TheConsolidated Financial Statements contained in the 2001 Financial Information,which is listed under Item 14, is incorporated herein by reference.

 

**Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure**

 

None.

 

12

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#### **PART III**

 

**Item 10.  Directors and Executive Officers of the Registrant**

 

Theinformation contained under the sections captioned “Proposal 1 Election ofDirectors” and “Compliance with Section 16(a) of the Exchange Act” in Bancorp’sProxy Statement for the 2002 Annual Meeting of Shareholders (“Proxy Statement”)is incorporated herein by reference.

 

Thefollowing sets forth the age, position, and the business experience during thepast five years of those executive officers of Pacific Northwest Bancorp whoare not also directors of Pacific Northwest Bancorp.

 

BetteJ. Floray (50) is Executive Vice President and Chief Financial Officer ofPacific Northwest Bank and Pacific Northwest Bancorp, positions Ms. Floray hasheld since July 2000.  Ms. Floray servedas a consultant from 1998 through June 2000 including consulting services toPacific Northwest Bancorp during the period September 1999 through June2000.  From 1994 to 1998 Ms. Floray wasExecutive Vice President and Chief Financial Officer of Community Bank ofPasadena, California.

 

KimS. Brace (55) is Executive Vice President of Pacific Northwest Bancorp and isExecutive Vice President and Chief Administrative Officer of Pacific NorthwestBank.   Ms. Brace has held thesepositions since April 2000.  Prior tothis time, Ms. Brace was an executive officer of the original Pacific NorthwestBank since its formation in 1988.  Ms.Brace is the wife of Mr. George P. Brace.

 

George P. Brace(61) is Executive Vice President of Pacific Northwest Bancorp and is ExecutiveVice President and Manager of Commercial Banking of Pacific NorthwestBank.  Mr. Brace has held thesepositions since July 2001.  From March2000 to July 2001, Mr. Brace was Executive Vice President and Puget SoundRegional Manager of Pacific Northwest Bank.  Prior to March 2000, Mr. Brace held various executive officer positionswith the original Pacific Northwest Bank since its formation in 1988.  Mr. Brace is the husband of Ms. Kim S.Brace.

 

CharlesA. Foisie (53) is Executive Vice President of Pacific Northwest Bancorp and isExecutive Vice President and Banking Group Manager of Pacific NorthwestBank.  Mr. Foisie has held thesepositions since January 2000.  Mr.Foisie served as a Senior Vice President of Pacific Northwest Bank (formerlyInterWest Bank) since 1997. Prior to this time, Mr. Foisie was employed by KeyBank of Washington from 1983 to 1997, servicing as a Vice President from 1990to 1992 and Senior Vice President from 1992 to 1997.

 

David H. Straus(55) is Executive Vice President of Pacific Northwest Bancorp and is ExecutiveVice President and Chief Credit Officer of Pacific Northwest Bank.  Mr. Straus has held these positions sinceApril 2000. Prior to this time, Mr. Straus was an executive officer of theoriginal Pacific Northwest Bank since its formation in 1988.

 

**Item 11.  Executive Compensation**

 

Theinformation contained under the section captioned – “ExecutiveCompensation” in the Proxy Statement is incorporated herein by reference.

 

**Item 12.  Security Ownership of Certain Beneficial Owners and Management**

 

(a)Security Ownership of Certain Beneficial Owners

 

Informationrequired by this item is incorporated herein by reference to the sectioncaptioned “Security Ownership of Certain Beneficial Owners and Management” inthe Proxy Statement.

 

(b)Security Ownership of Management

 

Informationrequired by this item is incorporated herein by reference to the sectioncaptioned “Security Ownership of Certain Beneficial Owners and Management” inthe Proxy Statement.

 

(c)Changes in Control

 

13

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Bancorpis not aware of any arrangements, including any pledge by any person ofsecurities of Bancorp, the operation of which may at a subsequent date resultin a change in control of Bancorp.

 

14

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**Item 13.  Certain Relationships and Related Transactions**

 

Theinformation contained under the section captioned “Certain Transactions withManagement” in the Proxy Statement is incorporated herein by reference.

 

**PART IV**

** **

**Item14.  Exhibits, Financial Statement Schedules,and Reports on Form 8-K**

 
| (a)    | (1)                                         | Consolidated Financial  Statements                                                                                                                                                           |
|--------|---------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                        |                                                                                                                                                                                         |   |   |
|   |                                        | Independent Auditors' Report                                                                                                                                                                 |
|   |                                        |                                                                                                                                                                                         |   |   |
|   | (a)                                         | Consolidated Statements of  Financial Condition as of December 31, 2001 and 2000                                                                                                             |
|   | (b)                                         | Consolidated Statements of  Income For the Years Ended December 31, 2001 and 2000, the Three Month Period  Ended December 31, 1999 and the Year Ended September 30, 1999                     |
|   | (c)                                         | Consolidated Statements of  Shareholders’ Equity For the Years Ended December 31, 2001 and 2000, the  Three Month Period Ended December 31, 1999 and the Year Ended September 30,  1999 |
|   | (d)                                         | Consolidated Statements of Cash  Flows For the Years Ended December 31, 2001 and 2000, the Three Month Period  Ended December 31, 1999 and the Year Ended September 30, 1999                 |
|   | (e)                                         | Notes to Consolidated Financial  Statements                                                                                                                                                  |
|   |                                        |                                                                                                                                                                                         |   |   |
|   | Notes  to Consolidated Financial Statements |
|   |                                        |                                                                                                                                                                                         |   |   |
|   | (2)                                         |                                                                                                                                                                                         | All required financial statement schedules are  included in the Notes to Consolidated Financial Statements. |
|   |                                        |                                                                                                                                                                                         |   |   |
|   |                                        |                                                                                                                                                                                         | Consolidated  Financial Statements and Notes to Consolidated Financial Statements are  included in Exhibit 13 herein. |
|   |                                        |                                                                                                                                                                                         |   |   |
| (b)    | Reports  on Form 8-K                        |                                                                                                                                                                                         |
|   |                                        |                                                                                                                                                                                         |   |   |
|   | None.                                       |                                                                                                                                                                                         |   |   |
|   |                                        |                                                                                                                                                                                         |   |   |
| (c)    | Exhibits                                    |                                                                                                                                                                                         |   |   |
|   |                                        |                                                                                                                                                                                         |   |   |
|   | (3.1)                                       |                                                                                                                                                                                         | Articles  of Incorporation of Pacific Northwest Bancorp (incorporated by reference to  Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended  December 31, 2000) |
|   | (3.2)                                       |                                                                                                                                                                                         | Bylaws  of Pacific Northwest Bancorp (incorporated by reference to Exhibit 3.2 to the  Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000) |
|   | (3.3)                                       |                                                                                                                                                                                         | Amendment  to the Bylaws of Pacific Northwest Bancorp (incorporated by reference to  Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter  ended September 30, 2001) |
|   | (10.1)                                      |                                                                                                                                                                                         | Amended and Restated Pacific Northwest Bancorp  Salary Deferral 401(K) plan (incorporated by reference to Exhibit 99.1 to the  Registrant’s Registration Statement on Form S-8 (File No. 333-76014)) |
|   | (10.2)                                      |                                                                                                                                                                                         | Amended  Pacific Northwest Bancorp 1996 Outside Directors Stock Options-for-fees Plan  (incorporated by reference to Exhibit 10.19 to the Registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2001) |
|   | (10.3)                                      |                                                                                                                                                                                         | Employment  Agreement entered into between Pacific Northwest Bancorp and Kim S. Brace  (incorporated by reference to Exhibit 10.20 to the Registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2001) |
|   | (10.4)                                      |                                                                                                                                                                                         | Severance  Pay Agreement entered into between Pacific Northwest Bancorp and Bette J.  Floray (incorporated by reference to Exhibit 10.21 to the Registrant’s Quarterly  Report on Form 10-Q for the quarter ended September 30, 2001) |
|   | (10.5)                                      |                                                                                                                                                                                         | Change  In Control Agreement entered into between Pacific Northwest Bancorp and Bette  J. Floray (incorporated by reference to Exhibit 10.22 to the Registrant’s  Quarterly Report on Form 10-Q for the quarter ended September 30, 2001) |
|        |                                             |                                                                                                                                                                                              |  |  |  |

 

15

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|   | (10.6)  |   | Employment  Agreement and its First Amendment entered into between Pacific Northwest  Bancorp and George P. Brace (incorporated by reference to Exhibit 10.17 to  the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,  2001) |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (10.7)  |   | Employment  Agreement entered into between Pacific Northwest Bancorp and Stephen M.  Walden (incorporated by reference to Exhibit 10.1 to the Registrant’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)                         |
|   | (10.8)  |   | Severance  and Change in Control Agreement between Pacific Northwest Bancorp and Patrick  M. Fahey (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual  Report on Form 10-K for the year ended December 31, 2000)                    |
|   | (10.9)  |   | Employment  Agreement entered into between Pacific Northwest Bancorp and Kim S. Brace  (incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report  on Form 10-K for the year ended December 31, 2000)                                |
|   | (10.10) |   | Form  of Severance Pay Agreement entered into between Pacific Northwest Bank and  its executive officers (incorporated by reference to Exhibit 10.1 to the  Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,  2000)          |
|   | (10.11) |   | Pacific  Northwest Bancorp Make Whole Benefit Plan (incorporated by reference to  Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2000)                                                            |
|   | (10.12) |   | Pacific  Northwest Bancorp Deferred Compensation Plan (incorporated by reference to  Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year  ended December 31, 2000)                                                                |
|   | (10.13) |   | Form  of Change in Control Agreement entered into between Pacific Northwest Bank  and its executive officers (incorporated by reference to Exhibit 10.2 to the  Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,  2000)      |
|   | (10.14) |   | Pacific  Northwest Bancorp Amended and Restated 1993 Incentive Stock Option Plan  (incorporated by reference to the Registrant’s Annual Report on Form 10-K for  the year ended September 30, 1998)                                                    |
|   | (10.15) |   | Central Bancorporation  1992 Employee Stock Option Plan (incorporated by reference to Exhibit 99.2 to  the Registrant’s Registration Statement on Forms S-8 (File No. 333-13191))                                                                      |
|   | (10.16) |   | 1996  Outside Directors Stock Options-for-Fees Plan (incorporated by reference to  Exhibit 99.1 to  the Registrant’s  Registration Statement on Form S-8 (File No. 333-24525))                                                                    |
|   | (10.17) |   | First National Bank of  Port Orchard 1990 Employee and Director Stock Option Plan (incorporated by  reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form  S-8 (File No. 333-50685))                                            |
|   | (10.18) |   | Pacific Northwest Bank  1988 Stock Option Plan (incorporated by reference to Exhibit 99.1 to the  Registrant’s Registration Statement on Form S-8 (File No. 333-57679))                                                                                |
|   | (10.19) |   | Pioneer  Bancorp, Inc. Amended and Restated Incentive Stock Option Plan (incorporated  by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form  S-8 (File No. 333-57679))                                                      |
|   | (10.20) |   | Kittitas  Valley Bancorp 1996 Director Stock Option Plan (incorporated by reference to  Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 (File No.  333-65839))                                                                     |
|   | (10.21) |   | Kittitas  Valley Bancorp Employee Stock Option Plan (incorporated by reference to  Exhibits 99.2 and 99.3 to the Registrant’s Registration Statement on Form S-8  (File No. 333-65839))                                                                |
|   | (10.22) |   | Data  Services Contract (P) (incorporated by reference to Exhibit 10.2 of the  Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,  2000)                                                                                        |
|   | (13)    |   | Management Discussion  and Analysis and Consolidated Financial Statements included in the 2001  Financial Information distributed to shareholders with the 2001 Annual Report                                                                               |
|   | (21)    |   | Subsidiaries of the  Registrant (incorporated by reference to Exhibit 21 to the Registrant’s  Annual Report on Form 10-K for the year ended December 31, 2000)                                                                                         |
|   | (23.1)  |   | Consent  of Independent Auditors                                                                                                                                                                                                                            |

 

16

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 of the Securities Exchange Act of 1934,Pacific Northwest Bancorp has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|                       | Pacific  Northwest Bancorp |
|----------------------------|----------------------------|
|                       |                       |   |
| Date:  March 26, 2002 | By:                        |  /s/ Patrick M. Fahey |   |
|                       |                       | Patrick  M. Fahey |
|                       |                       | President  and Chief Executive Officer |
|                       |                       | (Principal  Executive Officer) |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on this 26th day of March 2002.

 
| **Signatures**                |   | **Titles**                                               |
|-------------------------------|--------|----------------------------------------------------------|
|                          |   |                                                     |
|  /s/ Patrick M. Fahey    |   | Director,  President and Chief Executive Officer         |
| Patrick  M. Fahey             |   |                                                     |
|                          |   |                                                     |
|  /s/ Bette J. Floray     |   | Executive  Vice President (Principal Financial Officer)  |
| Bette  J. Floray              |   |                                                     |
|                          |   |                                                     |
|  /s/ Eric Jensen         |   | Chief  Accounting Officer (Principal Accounting Officer) |
| Eric  Jensen                  |   |                                                     |
|                          |   |                                                     |
|  /s/ Stephen M. Walden   |   | Chairman  of the Board                                   |
| Stephen  M. Walden            |   |                                                     |
|                          |   |                                                     |
|  /s/ Gary M. Bolyard     |   | Director                                                 |
| Gary  M. Bolyard              |   |                                                     |
|                          |   |                                                     |
|  /s/ Larry Carlson       |   | Director                                                 |
| Larry  Carlson                |   |                                                     |
|                          |   |                                                     |
|  /s/ Michael T. Crawford |   | Director                                                 |
| Michael  T. Crawford          |   |                                                     |
|                          |   |                                                     |
|  /s/ Jean Gorton         |   | Director                                                 |
| Jean  Gorton                  |   |                                                     |
|                          |   |                                                     |
|  /s/ C. Stephen Lewis    |   | Director                                                 |
| C.  Stephen Lewis             |   |                                                     |
|                          |   |                                                     |
|  /s/ Clark H. Mock       |   | Director                                                 |
| Clark  H. Mock                |   |                                                     |
|                          |   |                                                     |
|  /s/ Russel E. Olson     |   | Director                                                 |
| Russel  E. Olson              |   |                                                     |
|                          |   |                                                     |
|  /s/ Bette Woods         |   | Director                                                 |
| Bette  Woods                  |   |                                                     |

 

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