##### 



SECURITIES AND EXCHANGE COMMISSION
 450 Fifth Street, N.W.
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 June 30, 2005
 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. 0-23817
 NORTHWEST BANCORP, INC.
  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:
    
    NoneSecurities Registered Pursuant to Section 12(g) of the Act:
    
    Common Stock, par value $.10 per share(Title of Class)
 þ o
 o
 þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 1.
    
    Proxy Statement for the 2005 Annual Meeting of Stockholders of the Registrant (Part III).




---



##### 



PART I
 ITEM 1.
    
    BUSINESS
 General
 Northwest Bancorp, Inc.
     www.northwestsavingsbank.com
 2




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##### 



Northwest Savings Bank
   Market Area
  Lending Activities
 General.
  3




---



##### 



Analysis of Loan Portfolio.
 At June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Real estate:One- to four-family
    
    $
    2,693,174
    
    
    
    60.3
    %
    
    $
    2,615,328
    
    
    
    63.1
    %
    
    $
    2,285,151
    
    
    
    65.1
    %
    
    $
    2,056,105
    
    
    
    66.9
    %
    
    $
    2,005,020
    
    
    
    68.7
    %Multifamily and commercial
    
    
    534,224
    
    
    
    11.9
    
    
    
    454,606
    
    
    
    11.0
    
    
    
    377,507
    
    
    
    10.8
    
    
    
    304,456
    
    
    
    9.9
    
    
    
    249,049
    
    
    
    8.5Total real estate loans
    
    
    3,227,398
    
    
    
    72.2
    
    
    
    3,069,934
    
    
    
    74.1
    
    
    
    2,662,658
    
    
    
    75.9
    
    
    
    2,360,561
    
    
    
    76.8
    
    
    
    2,254,069
    
    
    
    77.2Consumer:Automobile
    
    
    138,102
    
    
    
    3.1
    
    
    
    120,887
    
    
    
    2.9
    
    
    
    119,778
    
    
    
    3.4
    
    
    
    117,240
    
    
    
    3.8
    
    
    
    94,475
    
    
    
    3.2Home improvement
    
    
    723,507
    
    
    
    16.2
    
    
    
    587,103
    
    
    
    14.2
    
    
    
    387,698
    
    
    
    11.1
    
    
    
    293,865
    
    
    
    9.6
    
    
    
    260,169
    
    
    
    8.9Education loans
    
    
    112,462
    
    
    
    2.5
    
    
    
    95,599
    
    
    
    2.3
    
    
    
    90,485
    
    
    
    2.6
    
    
    
    84,817
    
    
    
    2.8
    
    
    
    77,753
    
    
    
    2.7Loans on savings accounts
    
    
    8,500
    
    
    
    0.2
    
    
    
    8,038
    
    
    
    0.2
    
    
    
    7,879
    
    
    
    0.2
    
    
    
    7,733
    
    
    
    0.2
    
    
    
    8,923
    
    
    
    0.3Other (1)
    
    
    116,899
    
    
    
    2.6
    
    
    
    113,252
    
    
    
    2.7
    
    
    
    107,522
    
    
    
    3.1
    
    
    
    113,570
    
    
    
    3.7
    
    
    
    134,023
    
    
    
    4.6Total consumer loans
    
    
    1,099,470
    
    
    
    24.6
    
    
    
    924,879
    
    
    
    22.3
    
    
    
    713,362
    
    
    
    20.4
    
    
    
    617,225
    
    
    
    20.1
    
    
    
    575,343
    
    
    
    19.7Commercial business
    
    
    142,391
    
    
    
    3.2
    
    
    
    149,509
    
    
    
    3.6
    
    
    
    130,694
    
    
    
    3.7
    
    
    
    95,968
    
    
    
    3.1
    
    
    
    89,784
    
    
    
    3.1Total loans receivable, gross
    
    
    4,469,259
    
    
    
    100.0
    %
    
    
    4,144,322
    
    
    
    100.0
    %
    
    
    3,506,714
    
    
    
    100.0
    %
    
    
    3,073,754
    
    
    
    100.0
    %
    
    
    2,919,196
    
    
    
    100.0
    %Deferred loan fees
    
    
    (4,257
    )
    
    
    
    
    
    
    (6,630
    )
    
    
    
    
    
    
    (7,402
    )
    
    
    
    
    
    
    (2,938
    )
    
    
    
    
    
    
    (2,517
    )Undisbursed loan proceeds
    
    
    (56,555
    )
    
    
    
    
    
    
    (53,081
    )
    
    
    
    
    
    
    (42,272
    )
    
    
    
    
    
    
    (36,168
    )
    
    
    
    
    
    
    (39,808
    )Allowance for loan losses
(real estate loans)
    
    
    (15,918
    )
    
    
    
    
    
    
    (15,113
    )
    
    
    
    
    
    
    (13,660
    )
    
    
    
    
    
    
    (11,703
    )
    
    
    
    
    
    
    (11,629
    )Allowance for loan losses
(other loans)
    
    
    (15,645
    )
    
    
    
    
    
    
    (15,557
    )
    
    
    
    
    
    
    (13,506
    )
    
    
    
    
    
    
    (10,339
    )
    
    
    
    
    
    
    (8,661
    )Total loans receivable, net
    
    $
    4,376,884
    
    
    
    
    
    
    $
    4,053,941
    
    
    
    
    
    
    $
    3,429,874
    
    
    
    
    
    
    $
    3,012,606
    
    
    
    
    
    
    $
    2,856,581
 
 (1)
    
    Consist primarily of secured and unsecured personal loans. Loan Maturity and Repricing Schedule.
 Within 1
    
    
    Between
    
    
    Between
    
    
    BetweenYear
    
    
    1-2 Years
    
    
    2-3 Years
    
    
    3-5 Years
    
    
    Beyond 5 Years
    
    
    Total(In Thousands)Real estate loans:One- to four-family residential
    
    $
    183,943
    
    
    $
    131,166
    
    
    $
    123,836
    
    
    $
    250,048
    
    
    $
    2,004,181
    
    
    $
    2,693,174Multifamily and commercial
    
    
    172,544
    
    
    
    66,151
    
    
    
    88,087
    
    
    
    137,186
    
    
    
    70,256
    
    
    
    534,224Consumer loans
    
    
    430,580
    
    
    
    110,314
    
    
    
    101,104
    
    
    
    164,698
    
    
    
    292,774
    
    
    
    1,099,470Commercial business loans
    
    
    45,990
    
    
    
    17,632
    
    
    
    23,478
    
    
    
    36,565
    
    
    
    18,726
    
    
    
    142,391Total loans
    
    $
    833,057
    
    
    $
    325,263
    
    
    $
    336,505
    
    
    $
    588,497
    
    
    $
    2,385,937
    
    
    $
    4,469,259
 4




---



##### 



Fixed- and Adjustable-Rate Loan Schedule.
 Fixed
    
    
    Adjustable
    
    
    Total(In Thousands)Real estate loans:One- to four-family residential
    
    $
    2,505,135
    
    
    $
    61,578
    
    
    $
    2,566,713Multifamily and commercial
    
    
    149,600
    
    
    
    316,252
    
    
    
    465,852Consumer loans
    
    
    564,622
    
    
    
    230,118
    
    
    
    794,740Commercial business loans
    
    
    39,454
    
    
    
    15,304
    
    
    
    54,758Total loans
    
    $
    3,258,811
    
    
    $
    623,252
    
    
    $
    3,882,063
 One- to Four-Family Residential Real Estate Loans.
      5




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##### 



Multifamily Residential and Commercial Real Estate Loans.
  6




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##### 



Consumer Loans.
   Commercial Business Loans.
   Loan Originations, Solicitation, Processing, and Commitments.
 7




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##### 



Loan Origination Fees and Other Income.
  Loans-to-One Borrower.
 Delinquencies and Classified Assets
 Collection Procedures.
 Nonperforming Assets.
 8




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##### 



Loans Past Due and Nonperforming Assets.
 At June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Number
    
    
    Balance(Dollars in Thousands)Loans past due 30 days to 59 days:One- to four-family residential loans
    
    
    81
    
    
    $
    3,941
    
    
    $
    5,765
    
    
    $
    3,830
    
    
    $
    4,068
    
    
    $
    3,055Multifamily and commercial loans
    
    
    48
    
    
    
    5,198
    
    
    
    2,201
    
    
    
    1,291
    
    
    
    1,278
    
    
    
    1,184Consumer loans
    
    
    976
    
    
    
    5,611
    
    
    
    4,877
    
    
    
    3,832
    
    
    
    3,243
    
    
    
    3,439Commercial business loans
    
    
    20
    
    
    
    1,000
    
    
    
    782
    
    
    
    308
    
    
    
    165
    
    
    
    418Total loans past due 30 days to 59 days
    
    
    1,125
    
    
    $
    15,750
    
    
    $
    13,625
    
    
    $
    9,261
    
    
    $
    8,754
    
    
    $
    8,096Loans past due 60 days to 89 days:One- to four-family residential loans
    
    
    86
    
    
    $
    4,687
    
    
    $
    4,925
    
    
    $
    3,998
    
    
    $
    3,478
    
    
    $
    3,001Multifamily and commercial loans
    
    
    26
    
    
    
    8,156
    
    
    
    1,023
    
    
    
    873
    
    
    
    269
    
    
    
    248Consumer loans
    
    
    513
    
    
    
    3,134
    
    
    
    2,032
    
    
    
    1,920
    
    
    
    1,604
    
    
    
    1,262Commercial business loans
    
    
    11
    
    
    
    279
    
    
    
    309
    
    
    
    159
    
    
    
    35
    
    
    
    758Total loans past due 60 days to 89 days
    
    
    636
    
    
    $
    16,256
    
    
    $
    8,289
    
    
    $
    6,950
    
    
    $
    5,386
    
    
    $
    5,269Loans past due 90 days or more (1):One- to four-family residential loans
    
    
    232
    
    
    $
    11,507
    
    
    $
    11,322
    
    
    $
    11,267
    
    
    $
    7,278
    
    
    $
    6,874Multifamily and commercial loans
    
    
    42
    
    
    
    15,610
    
    
    
    13,823
    
    
    
    11,975
    
    
    
    2,407
    
    
    
    2,296Consumer loans
    
    
    1,089
    
    
    
    5,514
    
    
    
    4,536
    
    
    
    4,912
    
    
    
    3,991
    
    
    
    3,129Commercial business loans
    
    
    25
    
    
    
    979
    
    
    
    2,824
    
    
    
    4,602
    
    
    
    2,124
    
    
    
    5,336Total loans past due 90 days or more
    
    
    1,388
    
    
    $
    33,610
    
    
    $
    32,505
    
    
    $
    32,756
    
    
    $
    15,800
    
    
    $
    17,635Total loans 30 days or more past due
    
    
    3,149
    
    
    $
    65,616
    
    
    $
    54,419
    
    
    $
    48,967
    
    
    $
    29,940
    
    
    $
    31,000Total loans 90 days or more past due (1)
    
    
    1,388
    
    
    $
    33,610
    
    
    $
    32,505
    
    
    $
    32,756
    
    
    $
    15,800
    
    
    $
    17,635Total REO
    
    
    87
    
    
    
    6,685
    
    
    
    3,951
    
    
    
    5,739
    
    
    
    5,157
    
    
    
    3,697Total loans 90 days or more past due and REO
    
    
    1,475
    
    
    $
    40,295
    
    
    $
    36,456
    
    
    $
    38,495
    
    
    $
    20,957
    
    
    $
    21,332Total loans 90 days or more past due to
net loans receivable
    
    
    
    
    
    
    0.77
    %
    
    
    0.80
    %
    
    
    0.96
    %
    
    
    0.52
    %
    
    
    0.62
    %Total loans 90 days or more past due
and REO to total assets
    
    
    
    
    
    
    0.64
    %
    
    
    0.57
    %
    
    
    0.68
    %
    
    
    0.49
    %
    
    
    0.55
    %
 
 (1)
    
    The Company classifies as nonperforming all loans 90 days or more delinquent.  Classification of Assets.
 9




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##### 



At June 30,2005
    
    
    2004
    
    
    2003(In Thousands)Substandard assets
    
    $
    58,925
    
    
    $
    58,561
    
    
    $
    49,353Doubtful assets
    
    
    1,752
    
    
    
    5,055
    
    
    
    3,256Loss assets
    
    
    32
    
    
    
    259
    
    
    
    Total classified assets
    
    $
    60,709
    
    
    $
    63,875
    
    
    $
    52,609
 Allowance for Loan Losses.
    10




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##### 



Analysis of the Allowance For Loan Losses.
 Years Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(In Thousands)Net loans receivable
    
    $
    4,376,884
    
    
    $
    4,053,941
    
    
    $
    3,429,874
    
    
    $
    3,012,606
    
    
    $
    2,856,581Average loans outstanding
    
    
    4,234,241
    
    
    
    3,846,261
    
    
    
    3,258,520
    
    
    
    2,935,629
    
    
    
    2,715,012Allowance for loan losses balance at beginning of period
    
    
    30,670
    
    
    
    27,166
    
    
    
    22,042
    
    
    
    20,290
    
    
    
    18,260Provision for loan losses
    
    
    9,566
    
    
    
    6,860
    
    
    
    8,445
    
    
    
    6,360
    
    
    
    5,347Charge-offs:Real estate loans
    
    
    (676
    )
    
    
    (176
    )
    
    
    (242
    )
    
    
    (292
    )
    
    
    (176
    )Consumer loans
    
    
    (5,726
    )
    
    
    (5,113
    )
    
    
    (4,281
    )
    
    
    (4,452
    )
    
    
    (3,528
    )Commercial loans
    
    
    (3,071
    )
    
    
    (461
    )
    
    
    (1,258
    )
    
    
    (569
    )
    
    
    (158
    )Total charge-offs
    
    
    (9,473
    )
    
    
    (5,750
    )
    
    
    (5,781
    )
    
    
    (5,313
    )
    
    
    (3,862
    )Recoveries:Real estate loans
    
    
    1
    
    
    
    
    
    
    
    47
    
    
    
    63
    
    
    
    32Consumer loans
    
    
    750
    
    
    
    562
    
    
    
    527
    
    
    
    382
    
    
    
    453Commercial loans
    
    
    49
    
    
    
    502
    
    
    
    123
    
    
    
    23
    
    
    
    60Total recoveries
    
    
    800
    
    
    
    1,064
    
    
    
    697
    
    
    
    468
    
    
    
    545Acquired through acquisition
    
    
    
    
    
    
    1,330
    
    
    
    1,763
    
    
    
    237
    
    
    
    Allowance for loan losses balance at end of period
    
    $
    31,563
    
    
    $
    30,670
    
    
    $
    27,166
    
    
    $
    22,042
    
    
    $
    20,290Allowance for loan losses as a percentage of net
loans receivable
    
    
    0.72
    %
    
    
    0.76
    %
    
    
    0.79
    %
    
    
    0.73
    %
    
    
    0.71
    %Net charge-offs as a percentage of average
loans outstanding
    
    
    0.20
    %
    
    
    0.12
    %
    
    
    0.16
    %
    
    
    0.17
    %
    
    
    0.12
    %Allowance for loan losses as a percentage of
nonperforming loans
    
    
    93.91
    %
    
    
    94.35
    %
    
    
    82.93
    %
    
    
    139.51
    %
    
    
    115.06
    %Allowance for loan losses as a percentage
of nonperforming loans and REO
    
    
    78.33
    %
    
    
    84.13
    %
    
    
    70.57
    %
    
    
    105.18
    %
    
    
    95.12
    %
 Allocation of Allowance for Loan Losses.
 At June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofTotal
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    TotalAmount
    
    
    Loans(1)
    
    
    Amount
    
    
    Loans(1)
    
    
    Amount
    
    
    Loans(1)
    
    
    Amount
    
    
    Loans(1)
    
    
    Amount
    
    
    Loans(1)Balance at end of period
applicable to:Real estate loans
    
    $
    15,918
    
    
    
    72.2
    %
    
    $
    15,113
    
    
    
    74.1
    %
    
    $
    13,660
    
    
    
    75.9
    %
    
    $
    11,703
    
    
    
    76.8
    %
    
    $
    11,629
    
    
    
    77.2
    %Consumer loans
    
    
    13,179
    
    
    
    24.6
    
    
    
    11,790
    
    
    
    22.3
    
    
    
    10,965
    
    
    
    20.4
    
    
    
    8,855
    
    
    
    20.1
    
    
    
    6,682
    
    
    
    19.7Commercial business loans
    
    
    2,466
    
    
    
    3.2
    
    
    
    3,767
    
    
    
    3.6
    
    
    
    2,541
    
    
    
    3.7
    
    
    
    1,484
    
    
    
    3.1
    
    
    
    1,979
    
    
    
    3.1Total allowance for loan loss
    
    
    31,563
    
    
    
    100.0
    %
    
    $
    30,670
    
    
    
    100.0
    %
    
    $
    27,166
    
    
    
    100.0
    %
    
    $
    22,042
    
    
    
    100.0
    %
    
    $
    20,290
    
    
    
    100.0
    %
 
 (1)
    
    Represents percentage of loans in each category to total loans. 11




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##### 



Investment Activities
   Amortized Cost and Market Value of Investment and Mortgage-Backed Securities.
 At June 30,2005
    
    
    2004
    
    
    2003Amortized
    
    
    Market
    
    
    Amortized
    
    
    Market
    
    
    Amortized
    
    
    MarketCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Mortgage-backed securities held to maturity:Fixed-rate pass through certificates
    
    $
    14,609
    
    
    $
    14,791
    
    
    $
    16,618
    
    
    $
    16,744
    
    
    $
    24,079
    
    
    $
    24,873Variable-rate pass through certificates
    
    
    140,473
    
    
    
    140,546
    
    
    
    198,497
    
    
    
    196,961
    
    
    
    59,510
    
    
    
    59,737Fixed-rate collateralized mortgage obligations (CMOs)
    
    
    7,725
    
    
    
    7,504
    
    
    
    7,519
    
    
    
    7,444
    
    
    
    24,651
    
    
    
    24,596Variable-rate CMOs
    
    
    72,869
    
    
    
    73,197
    
    
    
    169,667
    
    
    
    170,753
    
    
    
    258,466
    
    
    
    259,966Total mortgage-backed securities held to maturity
    
    
    235,676
    
    
    
    236,038
    
    
    
    392,301
    
    
    
    391,902
    
    
    
    366,706
    
    
    
    369,172Mortgage-backed securities available for sale:Fixed-rate pass through certificates
    
    $
    82,612
    
    
    $
    83,153
    
    
    $
    92,659
    
    
    $
    92,106
    
    
    $
    43,449
    
    
    $
    45,461Variable-rate pass through certificates
    
    
    172,263
    
    
    
    171,639
    
    
    
    87,486
    
    
    
    86,752
    
    
    
    128,528
    
    
    
    129,486Fixed-rate CMOs
    
    
    98,478
    
    
    
    97,192
    
    
    
    141,485
    
    
    
    137,866
    
    
    
    191,911
    
    
    
    190,167Variable-rate CMOs
    
    
    32,296
    
    
    
    32,497
    
    
    
    92,710
    
    
    
    94,279
    
    
    
    194,973
    
    
    
    196,514Total mortgage-backed securities available for sale
    
    
    385,649
    
    
    
    384,481
    
    
    
    414,340
    
    
    
    411,003
    
    
    
    558,861
    
    
    
    561,628Total mortgage-backed securities
    
    
    621,325
    
    
    
    620,519
    
    
    
    806,641
    
    
    
    802,905
    
    
    
    925,567
    
    
    
    930,800Investment securities held to maturity:U.S. Government and agency
    
    $
    184,341
    
    
    $
    183,738
    
    
    $
    53,214
    
    
    $
    53,584
    
    
    $
    18,724
    
    
    $
    20,923Municipal securities
    
    
    242,850
    
    
    
    246,707
    
    
    
    114,849
    
    
    
    113,755
    
    
    
    65,556
    
    
    
    68,905Corporate debt issues
    
    
    40,112
    
    
    
    42,985
    
    
    
    41,178
    
    
    
    42,497
    
    
    
    45,831
    
    
    
    47,667Total investment securities held to maturity
    
    $
    467,303
    
    
    $
    473,430
    
    
    $
    209,241
    
    
    $
    209,836
    
    
    $
    130,111
    
    
    $
    137,495Investment securities available for sale:U.S. Government and agency
    
    $
    138,996
    
    
    $
    138,557
    
    
    $
    184,887
    
    
    $
    181,521
    
    
    $
    41,900
    
    
    $
    43,703Municipal securities
    
    
    14,545
    
    
    
    14,642
    
    
    
    144,802
    
    
    
    142,469
    
    
    
    119,796
    
    
    
    123,654Corporate debt issues
    
    
    40,945
    
    
    
    40,806
    
    
    
    27,441
    
    
    
    27,438
    
    
    
    27,502
    
    
    
    27,581Equity securities and mutual funds
    
    
    91,002
    
    
    
    96,697
    
    
    
    87,099
    
    
    
    93,248
    
    
    
    140,660
    
    
    
    147,518Total investment securities available for sale
    
    $
    285,488
    
    
    $
    290,702
    
    
    $
    444,229
    
    
    $
    444,676
    
    
    $
    329,858
    
    
    $
    342,456
 12




---



##### 



Issuers of Mortgage-Backed Securities.
 At June 30,2005
    
    
    2004
    
    
    2003(In Thousands)Mortgage-backed securities:Fannie Mae
    
    $
    222,549
    
    
    $
    402,469
    
    
    $
    369,604Ginnie Mae
    
    
    179,795
    
    
    
    178,847
    
    
    
    61,456Freddie Mac
    
    
    184,717
    
    
    
    179,506
    
    
    
    427,553Other (non-agency)
    
    
    33,096
    
    
    
    42,482
    
    
    
    69,721Total mortgage-backed securities
    
    $
    620,157
    
    
    $
    803,304
    
    
    $
    928,334
 13




---



##### 



Investment Portfolio Maturities.
 At June 30, 2005One Year or Less
    
    
    One to Five Years
    
    
    Five to Ten Years
    
    
    More than Ten Years
    
    
    TotalAnnualized
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Market
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Value
    
    
    Yield(Dollars in Thousands)Investment securities held to maturity:U.S. Government and agency obligations
    
    $
    20,000
    
    
    
    3.02
    %
    
    $
    72,530
    
    
    
    3.44
    %
    
    $
    73,413
    
    
    
    4.41
    %
    
    $
    18,398
    
    
    
    4.22
    %
    
    $
    184,341
    
    
    $
    183,738
    
    
    
    3.86
    %Municipal securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,455
    
    
    
    4.10
    
    
    
    237,395
    
    
    
    4.67
    
    
    
    242,850
    
    
    
    246,707
    
    
    
    4.66Corporate debt issues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,112
    
    
    
    8.33
    
    
    
    40,112
    
    
    
    42,985
    
    
    
    8.33Total investment securities held to maturity
    
    $
    20,000
    
    
    
    3.02
    %
    
    $
    72,530
    
    
    
    3.44
    %
    
    $
    78,868
    
    
    
    4.39
    %
    
    $
    295,905
    
    
    
    5.14
    %
    
    $
    467,303
    
    
    $
    473,430
    
    
    
    4.66
    %Investment securities available for sale:U.S. Government and agency obligations
    
    $
    
    
    
    
    
    %
    
    $
    30,787
    
    
    
    3.23
    %
    
    $
    26,252
    
    
    
    4.79
    %
    
    $
    81,957
    
    
    
    3.99
    %
    
    $
    138,996
    
    
    $
    138,557
    
    
    
    3.97
    %Municipal securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    964
    
    
    
    3.70
    
    
    
    13,581
    
    
    
    3.93
    
    
    
    14,545
    
    
    
    14,642
    
    
    
    3.91Corporate
debt issues
    
    
    
    
    
    
    
    
    
    
    1,027
    
    
    
    5.00
    
    
    
    28,500
    
    
    
    3.94
    
    
    
    11,418
    
    
    
    3.80
    
    
    
    40,945
    
    
    
    40,806
    
    
    
    3.93Equity
securities and mutual funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,002
    
    
    
    3.97
    
    
    
    91,002
    
    
    
    96,697
    
    
    
    3.97Total investment securities available for sale
    
    $
    
    
    
    
    
    %
    
    $
    31,814
    
    
    
    3.29
    %
    
    $
    55,716
    
    
    
    4.34
    %
    
    $
    197,958
    
    
    
    3.96
    %
    
    $
    285,488
    
    
    $
    290,702
    
    
    
    3.96
    %Mortgage-backed securities held to maturity:Pass-through certificates
    
    $
    140,473
    
    
    
    3.47
    %
    
    $
    321
    
    
    
    5.05
    %
    
    $
    596
    
    
    
    4.04
    %
    
    $
    13,692
    
    
    
    5.38
    %
    
    $
    155,082
    
    
    $
    155,337
    
    
    
    3.65
    %CMOs
    
    
    72,870
    
    
    
    4.17
    
    
    
    
    
    
    
    
    
    
    
    4,708
    
    
    
    3.39
    
    
    
    3,016
    
    
    
    3.16
    
    
    
    80,594
    
    
    
    80,701
    
    
    
    4.09Total mortgage-backed securities held to
maturity
    
    $
    213,343
    
    
    
    3.71
    %
    
    $
    321
    
    
    
    5.05
    %
    
    $
    5,304
    
    
    
    3.46
    %
    
    $
    16,708
    
    
    
    4.98
    %
    
    $
    235,676
    
    
    $
    236,038
    
    
    
    3.80
    %Mortgage-backed securities available for sale:Pass through certificates
    
    $
    172,263
    
    
    
    3.44
    %
    
    $
    1,727
    
    
    
    5.07
    %
    
    $
    34,179
    
    
    
    4.41
    %
    
    $
    46,706
    
    
    
    4.87
    %
    
    $
    254,875
    
    
    $
    254,792
    
    
    
    3.84
    %CMOs
    
    
    32,296
    
    
    
    4.21
    
    
    
    
    
    
    
    
    
    
    
    13,527
    
    
    
    3.52
    
    
    
    84,951
    
    
    
    4.06
    
    
    
    130,774
    
    
    
    129,689
    
    
    
    4.04Total mortgage-backed securities available
for sale
    
    $
    204,559
    
    
    
    3.56
    %
    
    $
    1,727
    
    
    
    5.07
    %
    
    $
    47,706
    
    
    
    4.16
    %
    
    $
    131,657
    
    
    
    4.35
    %
    
    $
    385,649
    
    
    $
    384,481
    
    
    
    3.91
    %Total investment securities and mortgage-backed
securities
    
    $
    437,902
    
    
    
    3.61
    %
    
    $
    106,392
    
    
    
    3.42
    %
    
    $
    187,594
    
    
    
    4.29
    %
    
    $
    642,228
    
    
    
    4.10
    %
    
    $
    1,374,116
    
    
    $
    1,384,651
    
    
    
    4.16
    %
 14




---



##### 



Sources of Funds
 General.
 Deposits.
  At June 30,2005
    
    
    
    
    
    
    
    
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    2003Balance
    
    
    Percent(1)

    
    Rate(2)

    
    Balance
    
    
    Percent(1)

    
    Rate(2)

    
    Balance
    
    
    Percent(1)

    
    Rate(2)(Dollars in Thousands)Savings accounts
    
    $
    1,049,606
    
    
    
    20.2
    %
    
    
    1.40
    %
    
    $
    1,076,999
    
    
    
    20.7
    %
    
    
    1.38
    %
    
    $
    947,030
    
    
    
    20.3
    %
    
    
    1.67
    %Checking accounts
    
    
    944,168
    
    
    
    18.2
    
    
    
    0.69
    
    
    
    885,121
    
    
    
    17.1
    
    
    
    0.49
    
    
    
    878,586
    
    
    
    18.8
    
    
    
    0.86Money market accounts
    
    
    631,685
    
    
    
    12.2
    
    
    
    2.05
    
    
    
    897,325
    
    
    
    17.3
    
    
    
    1.60
    
    
    
    689,590
    
    
    
    14.7
    
    
    
    2.06Certificates of deposit:Maturing within 1 year
    
    
    1,160,817
    
    
    
    22.4
    
    
    
    2.94
    
    
    
    1,189,234
    
    
    
    22.9
    
    
    
    2.61
    
    
    
    998,250
    
    
    
    21.3
    
    
    
    2.93Maturing 1 to 3 years
    
    
    1,188,683
    
    
    
    22.9
    
    
    
    3.79
    
    
    
    876,342
    
    
    
    16.9
    
    
    
    3.69
    
    
    
    812,212
    
    
    
    17.4
    
    
    
    4.01Maturing more than 3 years
    
    
    212,987
    
    
    
    4.1
    
    
    
    4.14
    
    
    
    266,600
    
    
    
    5.1
    
    
    
    4.19
    
    
    
    352,831
    
    
    
    7.5
    
    
    
    4.55Total certificates
    
    
    2,562,487
    
    
    
    49.4
    
    
    
    3.44
    
    
    
    2,332,176
    
    
    
    44.9
    
    
    
    3.24
    
    
    
    2,163,293
    
    
    
    46.2
    
    
    
    3.63Total deposits
    
    $
    5,187,946
    
    
    
    100.0
    %
    
    
    2.33
    %
    
    $
    5,191,621
    
    
    
    100.0
    %
    
    
    2.05
    %
    
    $
    4,678,499
    
    
    
    100.0
    %
    
    
    2.44
    %
 
 (1)
    
    Represents percentage of total deposits.(2)
    
    Represents weighted average nominal rate at fiscal year end. Large Certificates of Deposit Maturities.
 CertificatesMaturity Period
    
    of Deposit(In Thousands)Three months or less
    
    $
    67,383Three through six months
    
    
    61,101Six through twelve months
    
    
    95,366Over twelve months
    
    
    281,460Total
    
    $
    505,310
 Borrowings
  15




---



##### 



During the Year Ended June 30,2005
    
    
    2004
    
    
    2003(Dollars in Thousands)FHLB-Pittsburgh borrowings:Average balance outstanding
    
    $
    406,057
    
    
    $
    428,591
    
    
    $
    412,817Maximum outstanding at end of any month during period
    
    
    412,915
    
    
    
    519,631
    
    
    
    471,416Balance outstanding at end of period
    
    
    377,846
    
    
    
    412,981
    
    
    
    430,014Weighted average interest rate during period
    
    
    4.64
    %
    
    
    4.62
    %
    
    
    4.78
    %Weighted average interest rate at end of period
    
    
    4.71
    %
    
    
    4.83
    %
    
    
    4.89
    %Reverse repurchase agreements:Average balance outstanding
    
    $
    26,889
    
    
    $
    29,364
    
    
    $
    20,791Maximum outstanding at end of any month during period
    
    
    33,670
    
    
    
    32,097
    
    
    
    29,226Balance outstanding at end of period
    
    
    26,579
    
    
    
    29,902
    
    
    
    29,226Weighted average interest rate during period
    
    
    1.63
    %
    
    
    1.27
    %
    
    
    1.80
    %Weighted average interest rate at end of period
    
    
    2.25
    %
    
    
    1.29
    %
    
    
    1.27
    %Other borrowings:Average balance outstanding
    
    $
    6,182
    
    
    $
    6,253
    
    
    $
    6,603Maximum outstanding at end of any month during period
    
    
    6,300
    
    
    
    6,322
    
    
    
    6,696Balance outstanding at end of period
    
    
    5,919
    
    
    
    6,264
    
    
    
    6,510Weighted average interest rate during period
    
    
    4.99
    %
    
    
    5.10
    %
    
    
    6.50
    %Weighted average interest rate at end of period
    
    
    4.99
    %
    
    
    4.99
    %
    
    
    5.12
    %Total borrowings:Average balance outstanding
    
    $
    439,847
    
    
    $
    466,277
    
    
    $
    440,211Maximum outstanding at end of any month during period
    
    
    452,737
    
    
    
    554,257
    
    
    
    496,026Balance outstanding at end of period
    
    
    410,344
    
    
    
    449,147
    
    
    
    465,750Weighted average interest rate during period
    
    
    4.52
    %
    
    
    4.39
    %
    
    
    4.66
    %Weighted average interest rate at end of period
    
    
    4.55
    %
    
    
    4.60
    %
    
    
    4.66
    %
 Competition
    16




---



##### 



Subsidiary Activities
          17




---



##### 



Personnel
  REGULATION
 General
   Pennsylvania Savings Bank Law
   18




---



##### 



Insurance of Accounts and Regulation by the FDIC
  i.e. i.e.
   Capital Requirements
  19




---



##### 



Loans-to-One Borrower Limitation
  Prompt Corrective Action
  Activities and Investments of Insured State-Chartered Banks
  20




---



##### 



The USA PATRIOT Act
 th
  
    
    Pursuant to Section 352, all financial institutions must establish anti-money
laundering programs that include, at minimum: (i) internal policies, procedures, and
controls; (ii) specific designation of an anti-money laundering compliance officer;
(iii) ongoing employee training programs; and (iv) an independent audit function to
test the anti-money laundering program.
    
    Section 326 of the Act authorizes the Secretary of the Department of Treasury, in
conjunction with other bank regulators, to issue regulations that provide for minimum
standards with respect to customer identification at the time new accounts are opened.
On July 23, 2002, the federal bank regulators jointly issued proposed rules to
implement Section 326. The proposed rules require financial institutions to establish
a program specifying procedures for obtaining identifying information from customers
seeking to open new accounts. This identifying information would be essentially the
same information currently obtained by most financial institutions for individual
customers.
    
    Section 312 of the Act requires financial institutions that establish, maintain,
administer, or manage private banking accounts or correspondence accounts in the United
States for non-United States persons or their representatives (including foreign
individuals visiting the United States) to establish appropriate, specific, and, where
necessary, enhanced due diligence policies, procedures, and controls designed to detect
and report money laundering.
    
    Effective December 25, 2001, financial institutions are prohibited from
establishing, maintaining, administering or managing correspondent accounts for foreign
shell banks (foreign banks that do not have a physical presence in any country), and
will be subject to certain record keeping obligations with respect to correspondent
accounts of foreign banks.
    
    Bank regulators are directed to consider a holding companys effectiveness in
combating money laundering when ruling on Federal Reserve Act and Bank Merger Act
applications.
 Holding Company Regulation
 Generally
 21




---



##### 



Permitted Activities
  Qualified Thrift Lender Test.
 Waivers of Dividends by the Mutual Holding Company
 Conversion of the Mutual Holding Company to Stock Form
 22




---



##### 



Federal Securities Laws
  Sarbanes-Oxley Act of 2002
    23




---



##### 



Regulatory Enforcement Authority
  Dividends
   FEDERAL AND STATE TAXATION
 Federal Taxation.
   State Taxation.
 24




---



##### 



ITEM 2. PROPERTIES
   PENNSYLVANIA
 Austin, Potter Co. 21 Turner StreetBellefonte, Centre Co. 117 North Allegheny StreetBellevue, Allegheny Co. 532 Lincoln AvenueBethel Park, Allegheny Co. 6284 Library RoadBennetts Valley, Elk Co. 499 River RoadBradford (4), McKean Co. Bradford Mall  1001 E. Main Street 33 Main Street 85 West Washington Street 950 E. Main StreetBridgeville, Allegheny Co. 431 Washington AvenueButler, Butler Co. 151 Pittsburgh RoadCanonsburg, Washington Co. 148 West Pike StreetCarnegie, Allegheny Co. 242 East Main StreetCentre Hall, Centre Co. 219 North Pennsylvania AvenueClarion (2), Clarion Co. 601 Main Street 97 West Main StreetClearfield, Clearfield Co. 1200 South Second StreetColumbia, Lancaster Co. 350 Locust StreetCoudersport, Potter Co. 302 N. East StreetCorry, Erie Co. 150 North Center StreetCranberry, Venango Co. Cranberry MallEbensburg, Cambria Co. 176 Lovell AvenueEdinboro, Erie Co. Walmart, 108 Washington Towne BlvdElizabeth, Allegheny Co. 603 Scenery DriveElizabethtown, Lancaster Co. 2296 South Market Street
 25




---



##### 



Emporium, Cameron Co. 2 East Fourth StreetErie (11), Erie Co. 2256 West 8th Street K-Mart Plaza West2863 West 26th Street 4525 Buffalo Road Millcreek Mall 3407 Liberty Street 5624 Peach Street 401 State Street 121 West 26th Street K-Mart Plaza South1328 East Grandview Blvd. 1945 Douglas Parkway 800 State StreetFairview, Erie Co. 7512 West Ridge RoadFranklin, Venango Co. 1301 Liberty StreetFredericktown, Washington Co. 520 Front StreetGaleton, Potter Co. 30 West StreetGibsonia, Allegheny Co. The Village of St. Barnabus5850 Meridian RoadGreenville, Mercer Co. Walmart, 45 Williamson RoadGrove City, Mercer Co. 200 S. Center StreetHanover (2), York Co. 1 Center Square 1055 Baltimore StreetHarborcreek, Erie Co. 4270 East Lake RoadHershey (2), Dauphin Co. 10 West Chocolate Avenue 370 West Governor RoadJohnsonburg (2), Elk Co. 553 Market Street Johnsonburg Plaza, Route 219Johnstown(2), Cambria Co. 225 Franklin Street 475 Theatre DriveKane (2), McKean Co. 56 Fraley Street 355 Biddle StreetKittanning, Armstrong Co. 22 Franklin Village MallLake City, Erie Co. 2102 Rice AvenueLancaster(2), Lancaster County 922 Columbia Avenue 1195 Manheim PikeLawrenceville, Tioga Co. 53 Main StreetLebanon (2), Lebanon Co. 770 Cumberland Street 547 South 10th StreetLewistown, Mifflin County 51 West Market StreetLititz, Lancaster Co. 744 South Broad StreetLock Haven, Clinton Co. 104 East Main StreetLoyalsock, Lycoming Co. 815 Westminster DriveMansfield, Tioga Co. 50 South Main StreetMarianna, Washington Co. 1784 Main StreetMarienville, Forest Co. Walnut & West Spruce StreetMcDonald, Washington Co. 101 East Lincoln AvenueMcKees Rocks, Allegheny Co. 1811 McKees Rocks RoadMeadville (3), Crawford Co. 999 South Main Street 73 Park Avenue 730 North Main Street
 26




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##### 



Mount Joy, Lancaster Co. 24 East Main StreetMt. Lebanon, Allegheny Co. 300 Cochran RoadMyerstown, Lebanon Co. 1 West Main AvenueNew Bethlehem, Clarion Co. 301 Broad StreetNew Holland, Lancaster Co. 201 West Main StreetNorth East, Erie Co. 35 East Main StreetOil City (3), Venango Co. One East First Street 301 Seneca Street 259 Seneca StreetPalmyra, Lebanon Co. 1048 East Main StreetPittsburgh (5), Allegheny Co. 543 Brownsville Road 710 Old Clairton Road 300 6th Avenue 201 North Craig Street 7709 McKnight RoadPleasantville, Venango Co. 102 East State StreetPottsville, Schuylkill Co. 104 North Centre StreetRed Lion, York Co. 3140 Cape Hern RoadRidgway (2), Elk Co. 170 Main Street 125 Main StreetRimersburg, Clarion Co. 629 Main StreetSarver, Butler Co. Monroe Road and Route 356Schaefferstown, Lebanon Co. Dutch-Way Shopping MallRoute 501 NorthSewickley, Allegheny Co. 414 Beaver StreetSheffield, Warren Co. 101 South Main StreetShinglehouse, Potter Co. 105 West Academy StreetSligo, Clarion Co. 1613 Bald Eagle StreetSmethport, McKean Co. 428 Main StreetSmithfield, Huntingdon Co. 100 Fairgrounds RoadSpringboro, Crawford Co. 105 South Main StreetSt. Marys (2), Elk Co. 39 South St. Marys Street St. Marys Plaza824 Million Dollar HighwayState College (3), Centre Co. 201 West Beaver Avenue 611 University Drive 1524 West College Avenue 1767 North Atherton StreetSykesville, Jefferson Co. Main and Park StreetTidioute, Warren Co. 5 Buckingham StreetTionesta, Forest Co. 221 Elm StreetTitusville (2), Crawford Co. Spring & Franklin Street 319 West Central AvenueUnion City (2), Erie Co. 22 North Main Street 4 Perry StreetValencia, Butler Co. 1421 Pittsburgh RoadVolant, Lawrence Co. Main StreetWampum, Lawrence Co. 342 Main Street
 27




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##### 



Warren (3), Warren Co. 1666 Market Street Ext. 125 Ludlow Street Liberty Street at Second AvenueWashington (2), Washington Co. Walmart, 30 Trinity Point Drive 1265 West Chestnut StreetWattsburg, Erie Co. 14457 Main StreetWellsboro (2), Tioga Co. 61 Main Street 16 Main StreetWestfield, Tioga Co. 100 East Main StreetWestmont, Cambria Co. 1740 Lyter DriveWexford, Allegheny Co. 10533 Perry HighwayWrightsville, York Co. 120 North 4th StreetYork (3), York Co. Queensgate Shopping Center2220 South Queens Street Stonybrook Plaza3649 East Market Street 1700 Roosevelt Avenue
 MARYLAND
 Baltimore, Baltimore Co. 1101 Maiden Choice LaneElkridge, Howard Co. 6050 Marshalee Drive
 NEW YORK
 Amherst, Erie Co. 3150 Sheridan DriveBuffalo (2), Erie Co. 295 Main Street 3670 McKinley ParkwayCheektowaga, Erie Co. 3517 Union RoadFalconer, Chautauqua Co. 210 West Main StreetJamestown (3), Chautauqua Co. 23 West Third Street 768 Foote Avenue 7 West Third StreetKenmore, Erie Co. 2981 Delaware AvenueLakewood, Chautauqua Co. 311 East Fairmount AvenueMayville, Chautauqua Co. 29 S. Erie StreetOlean, Cattaraugus Co. 2513 West State StreetWilliamsville, Erie Co. 4545 Transit Road
 28




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##### 



OHIO
 Ashtabula, Ashtabula Co. 1040 Lake AvenueChardon, Geauga Co. 325 Center StreetGeneva, Ashtabula Co. 30 East Main StreetMadison, Lake Co. 1903 Hubbard RoadPainesville, Lake Co. 70 Richmond Street
 29




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##### 



ITEM 3.
    
    LEGAL PROCEEDINGS
  ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  PART II
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Fiscal Year Ended
    
    
    
    
    
    
    
    
    
    Cash DividendsJune 30, 2005
    
    High
    
    
    Low
    
    
    DeclaredFirst quarter
    
    $
    23.15
    
    
    $
    20.42
    
    
    $
    0.12Second quarter
    
    
    26.32
    
    
    
    21.95
    
    
    
    0.12Third quarter
    
    
    25.21
    
    
    
    21.00
    
    
    
    0.12Fourth quarter
    
    
    22.23
    
    
    
    19.79
    
    
    
    0.12
 Fiscal Year Ended
    
    
    
    
    
    
    
    
    
    Cash DividendsJune 30, 2004
    
    High
    
    
    Low
    
    
    DeclaredFirst quarter
    
    $
    18.57
    
    
    $
    15.75
    
    
    $
    0.10Second quarter
    
    
    22.24
    
    
    
    18.14
    
    
    
    0.10Third quarter
    
    
    26.67
    
    
    
    20.16
    
    
    
    0.10Fourth quarter
    
    
    25.75
    
    
    
    19.85
    
    
    
    0.10
    ITEM 6.
    
    SELECTED FINANCIAL DATA
 Selected Financial and Other Data
  30




---



##### 



At June 30,2005
    
    

2004*
    
    

2003
    
    
    2002
    
    
    2001(In Thousands)Selected Consolidated Financial Condition Data:Total assets
    
    $
    6,330,482
    
    
    $
    6,343,248
    
    
    $
    5,681,695
    
    
    $
    4,305,535
    
    
    $
    3,852,831Investment securities held-to-maturity
    
    
    467,303
    
    
    
    209,241
    
    
    
    130,111
    
    
    
    132,643
    
    
    
    129,991Investment securities available-for-sale
    
    
    290,702
    
    
    
    444,676
    
    
    
    342,456
    
    
    
    174,982
    
    
    
    96,645Mortgage-backed securities held-to-maturity
    
    
    235,676
    
    
    
    392,301
    
    
    
    366,706
    
    
    
    263,860
    
    
    
    209,340Mortgage-backed securities available-for-sale
    
    

    384,481

    
    
    
    411,003
    
    
    
    561,628
    
    
    
    260,741
    
    
    
    294,934Loans receivable net:Real estate
    
    
    3,150,668
    
    
    
    2,995,110
    
    
    
    2,599,324
    
    
    
    2,309,752
    
    
    
    2,200,115Consumer
    
    
    1,086,291
    

    
    
    913,089
    
    
    
    702,397
    
    
    
    608,370
    
    
    
    568,661Commercial
    
    
    139,925
    
    
    
    145,742
    
    
    
    128,153
    
    
    
    94,484
    
    
    
    87,805Total loans receivable, net
    
    
    4,376,884
    
    
    
    4,053,941
    
    
    
    3,429,874
    
    
    
    3,012,606
    
    
    
    2,856,581Deposits
    
    
    5,187,946
    
    
    
    5,191,621
    
    
    
    4,678,499
    
    
    
    3,593,122
    
    
    
    3,264,940Advances from FHLB and other borrowed funds
    
    
    410,344
    
    
    
    449,147
    
    
    
    465,750
    
    
    
    259,260
    
    
    
    276,212Shareholders equity
    
    
    582,190
    
    
    
    550,472
    
    
    
    395,074
    
    
    
    316,640
    
    
    
    275,713
 Years Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(In Thousands)Selected Consolidated Operating Data:Total interest income
    
    $
    321,824
    
    
    $
    300,230
    
    
    $
    282,524
    
    
    $
    274,500
    
    
    $
    269,430Total interest expense
    
    
    138,047
    
    
    
    134,466
    
    
    
    142,014
    
    
    
    147,255
    
    
    
    157,322Net interest income
    
    
    183,777
    
    
    
    165,764
    
    
    
    140,510
    
    
    
    127,245
    
    
    
    112,108Provision for loan losses
    
    
    9,566
    
    
    
    6,860
    
    
    
    8,445
    
    
    
    6,360
    
    
    
    5,347Net interest income after provision for loan losses
    
    
    174,211
    
    
    
    158,904
    
    
    
    132,065
    
    
    
    120,885
    
    
    
    106,761Noninterest income
    
    
    32,004
    
    
    
    31,862
    
    
    
    27,028
    
    
    
    18,173
    
    
    
    15,054Noninterest expense
    
    
    127,639
    
    
    
    128,271
    
    
    
    116,067
    
    
    
    84,524
    
    
    
    82,339Income before income tax expense and cumulative effect
of accounting change
    
    
    78,576
    
    
    
    62,495
    
    
    
    43,026
    
    
    
    54,534
    
    
    
    39,476Income tax expense
    
    
    22,772
    
    
    
    19,845
    
    
    
    16,963
    
    
    
    16,600
    
    
    
    12,699Income before cumulative effect of accounting change
    
    
    55,804
    
    
    
    42,650
    
    
    
    26,063
    
    
    
    37,934
    
    
    
    26,777Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,237
    
    
    
    Net income
    
    $
    55,804
    
    
    $
    42,650
    
    
    $
    26,063
    
    
    $
    40,171
    
    
    $
    26,777Basic per share amounts:Income before cumulative effect of accounting change
    
    $
    1.12
    
    
    $
    0.89
    
    
    $
    0.55
    
    
    $
    0.80
    
    
    $
    0.57Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.05
    
    
    
    Net income
    
    $
    1.12
    
    
    $
    0.89
    
    
    $
    0.55
    
    
    $
    0.85
    
    
    $
    0.57Diluted per share amounts:Income before cumulative effect of accounting change
    
    $
    1.11
    
    
    $
    0.88
    
    
    $
    0.54
    
    
    $
    0.79
    
    
    $
    0.56Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.05
    
    
    
    Net income
    
    $
    1.11
    
    
    $
    0.88
    
    
    $
    0.54
    
    
    $
    0.84
    
    
    $
    0.56
 At or for the Year Ended June 30,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Key Financial Ratios and Other Data:Return on average assets (net income divided
by average total assets)
    
    
    0.88
    %
    
    
    0.68
    %
    
    
    0.51
    %
    
    
    0.99
    %
    
    
    0.75
    %Return on average equity (net income divided by
average equity)
    
    
    9.91
    
    
    
    8.27
    
    
    
    7.25
    
    
    
    13.61
    
    
    
    10.25Average capital to average assets
    
    
    8.87
    
    
    
    8.27
    
    
    
    7.07
    
    
    
    7.24
    
    
    
    7.27Capital to total assets
    
    
    9.20
    
    
    
    8.68
    
    
    
    6.95
    
    
    
    7.35
    
    
    
    7.16Net interest rate spread (average yield on interest-earning
assets less average cost of interest-bearing liabilities)
    
    
    3.07
    
    
    
    2.83
    
    
    
    2.85
    
    
    
    3.11
    
    
    
    2.97Net interest margin (net interest income as a
percentage of average interest-earning assets)
    
    
    3.24
    
    
    
    2.98
    
    
    
    3.01
    
    
    
    3.42
    
    
    
    3.35Noninterest expense to average assets
    
    
    2.01
    
    
    
    2.06
    
    
    
    2.28
    
    
    
    2.07
    
    
    
    2.29Net interest income to noninterest expense
    
    
    1.44
    x
    
    
    1.29
    x
    
    
    1.21
    x
    
    
    1.51
    x
    
    
    1.36
    xDividend payout ratio
    
    
    43.24
    
    
    
    45.45
    
    
    
    59.26
    
    
    
    28.57
    
    
    
    28.57Nonperforming loans to net loans receivable
    
    
    0.76
    
    
    
    0.80
    
    
    
    0.96
    
    
    
    0.52
    
    
    
    0.62Nonperforming assets to total assets
    
    
    0.64
    
    
    
    0.57
    
    
    
    0.68
    
    
    
    0.49
    
    
    
    0.55Allowance for loan losses to nonperforming loans
    
    
    93.91
    
    
    
    94.35
    
    
    
    82.93
    
    
    
    139.51
    
    
    
    115.06Allowance for loan losses to net loans receivable
    
    
    0.72
    
    
    
    0.76
    
    
    
    0.79
    
    
    
    0.73
    
    
    
    0.71Average interest-earning assets to average
interest-bearing liabilities
    
    
    1.08
    x
    
    
    1.06
    x
    
    
    1.06
    x
    
    
    1.08
    x
    
    
    1.08
    xNumber of:Full-service offices
    
    
    153
    
    
    
    152
    
    
    
    141
    
    
    
    126
    
    
    
    118Consumer finance offices
    
    
    49
    
    
    
    49
    
    
    
    47
    
    
    
    49
    
    
    
    45
 
  31




---



##### 



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
  Executive Summary
      32




---



##### 



Critical Accounting Policies
  Allowance for Loan Losses. Accounting by Creditors for Impairment of a Loan"
 Goodwill.
 33




---



##### 



Deferred Income Taxes. Accounting for
Income Taxes
 Other Intangible Assets.
 Financial Condition
 Cash
and cash equivalents.
 Investment securities
 Mortgage-backed securities
 Loans receivable
 Deposits
 Borrowings
 34




---



##### 



Shareholders equity
 Results of Operations  6/30/05 compared to 6/30/04
 Interest income
    Interest expense
 Net interest income
 Provision for Loan Losses
 35




---



##### 



Noninterest income
 Noninterest expense
 Income taxes
 Results of Operations  6/30/04 compared to 6/30/03
 Interest
Income.
   36




---



##### 



Interest expense
 Net
interest income
 Provision for Loan Losses
 Noninterest income
 Noninterest expense
 Income taxes
 37




---



##### 



Average Balance Sheet
 Years Ended June 302005
    
    
    2004
    
    
    2003Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    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)
    
    $
    4,234,241
    
    
    $
    262,158
    
    
    
    6.19
    %
    
    $
    3,846,261
    
    
    $
    244,926
    
    
    
    6.37
    %
    
    $
    3,258,520
    
    
    $
    231,204
    
    
    
    7.10
    %Mortgage-backed securities (4)
    
    
    729,757
    
    
    
    26,102
    
    
    
    3.58
    
    
    
    883,914
    
    
    
    25,815
    
    
    
    2.92
    
    
    
    733,832
    
    
    
    26,744
    
    
    
    3.64Investment securities(3)(4)(5)
    
    
    690,096
    
    
    
    36,415
    
    
    
    5.28
    
    
    
    662,687
    
    
    
    33,128
    
    
    
    5.00
    
    
    
    345,501
    
    
    
    21,759
    
    
    
    6.30FHLB stock
    
    
    35,504
    
    
    
    855
    
    
    
    2.41
    
    
    
    38,381
    
    
    
    572
    
    
    
    1.49
    
    
    
    30,711
    
    
    
    924
    
    
    
    3.01Interest-earning deposits
    
    
    222,422
    
    
    
    4,184
    
    
    
    1.88
    
    
    
    391,352
    
    
    
    3,527
    
    
    
    0.90
    
    
    
    389,855
    
    
    
    4,813
    
    
    
    1.23Total interest-earning assets
    
    
    5,912,020
    
    
    
    329,714
    
    
    
    5.58
    
    
    
    5,822,595
    
    
    
    307,968
    
    
    
    5.29
    
    
    
    4,758,419
    
    
    
    285,444
    
    
    
    6.00Noninterest-earning assets(6)
    
    
    433,796
    
    
    
    
    
    
    
    
    
    
    
    415,125
    
    
    
    
    
    
    
    
    
    
    
    327,966Total assets
    
    $
    6,345,816
    
    
    
    
    
    
    
    
    
    
    $
    6,237,720
    
    
    
    
    
    
    
    
    
    
    $
    5,086,385Interest-bearing liabilities:Savings accounts
    
    $
    1,080,889
    
    
    $
    15,037
    
    
    
    1.39
    
    
    $
    1,031,405
    
    
    
    13,923
    
    
    
    1.35
    
    
    $
    841,614
    
    
    
    17,849
    
    
    
    2.12NOW accounts
    
    
    669,485
    
    
    
    5,363
    
    
    
    0.80
    
    
    
    683,626
    
    
    
    5,302
    
    
    
    0.78
    
    
    
    561,794
    
    
    
    6,897
    
    
    
    1.23Money market demand accounts
    
    
    756,026
    
    
    
    13,168
    
    
    
    1.74
    
    
    
    876,157
    
    
    
    14,786
    
    
    
    1.69
    
    
    
    525,503
    
    
    
    12,412
    
    
    
    2.36Certificate accounts
    
    
    2,443,718
    
    
    
    76,511
    
    
    
    3.13
    
    
    
    2,317,003
    
    
    
    72,317
    
    
    
    3.12
    
    
    
    2,036,329
    
    
    
    76,726
    
    
    
    3.77Borrowed funds(7)
    
    
    439,847
    
    
    
    19,889
    
    
    
    4.52
    
    
    
    466,277
    
    
    
    20,482
    
    
    
    4.39
    
    
    
    440,211
    
    
    
    20,521
    
    
    
    4.66Debentures
    
    
    102,062
    
    
    
    8,079
    
    
    
    7.92
    
    
    
    101,297
    
    
    
    7,656
    
    
    
    7.56
    
    
    
    99,000
    
    
    
    7,610
    
    
    
    7.69Total interest-bearing liabilities
    
    
    5,492,027
    
    
    
    138,047
    
    
    
    2.51
    
    
    
    5,475,765
    
    
    
    134,466
    
    
    
    2.46
    
    
    
    4,504,451
    
    
    
    142,015
    
    
    
    3.15Noninterest-bearing liabilities
    
    
    290,842
    
    
    
    
    
    
    
    
    
    
    
    246,105
    
    
    
    
    
    
    
    
    
    
    
    222,572Total liabilities
    
    
    5,782,869
    
    
    
    
    
    
    
    
    
    
    
    5,721,870
    
    
    
    
    
    
    
    
    
    
    
    4,727,023Shareholders equity
    
    
    562,947
    
    
    
    
    
    
    
    
    
    
    
    515,850
    
    
    
    
    
    
    
    
    
    
    
    359,362Total liabilities and equity
    
    $
    6,345,816
    
    
    
    
    
    
    
    
    
    
    $
    6,237,720
    
    
    
    
    
    
    
    
    
    
    $
    5,086,385Net interest income
    
    
    
    
    
    $
    191,667
    
    
    
    
    
    
    
    
    
    
    $
    173,502
    
    
    
    
    
    
    
    
    
    
    $
    143,429Net interest rate spread(8)
    
    
    
    
    
    
    
    
    
    
    3.07
    %
    
    
    
    
    
    
    
    
    
    
    2.83
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Net interest-earning assets
    
    $
    419,993
    
    
    
    
    
    
    
    
    
    
    $
    346,830
    
    
    
    
    
    
    
    
    
    
    $
    253,968Net interest margin(9)
    
    
    
    
    
    
    
    
    
    
    3.24
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %
    
    
    
    
    
    
    
    
    
    
    3.01
    %Ratio of average interest-earning
assets to average interest-bearing
liabilities
    
    
    1.08
    x
    
    
    
    
    
    
    
    
    
    
    1.06
    x
    
    
    
    
    
    
    
    
    
    
    1.06
    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 investment securities and tax-free loans are presented on a taxable
equivalent basis.(4)
    
    Average balances do not include the effect of unrealized gains or losses on securities held as
available-for-sale.(5)
    
    Average balances include Fannie Mae and Freddie Mac stock.(6)
    
    Average balances include the effect of unrealized gains or losses on securities held as
available-for-sale.(7)
    
    Average balances include FHLB advances, securities sold under agreements to repurchase and
other borrowings.(8)
    
    Net interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities.(9)
    
    Net interest margin represents net interest income as a percentage of average interest-earning
assets. Rate/Volume Analysis.
 38




---



##### 



Years Ended June 30,2005 vs. 2004
    
    
    2004 vs. 2003Increase/(Decrease)
    
    
    Total
    
    
    Increase/(Decrease)
    
    
    TotalDue to
    
    
    Increase
    
    
    Due to
    
    
    IncreaseRate
    
    
    Volume
    
    
    (Decrease)
    
    
    Rate
    
    
    Volume
    
    
    (Decrease)(In Thousands)Interest-earning assets:Loans receivable
    
    $
    (7,474
    )
    
    $
    24,706
    
    
    $
    17,232
    
    
    $
    (27,980
    )
    
    $
    41,702
    
    
    $
    13,722Mortgage-backed securities
    
    
    5,801
    
    
    
    (5,514
    )
    
    
    287
    
    
    
    (6,399
    )
    
    
    5,470
    
    
    
    (929
    )Investment securities
    
    
    1,900
    
    
    
    1,387
    
    
    
    3,287
    
    
    
    (8,607
    )
    
    
    19,976
    
    
    
    11,369FHLB stock
    
    
    352
    
    
    
    (69
    )
    
    
    283
    
    
    
    (583
    )
    
    
    231
    
    
    
    (352
    )Interest-earning deposits
    
    
    3,834
    
    
    
    (3,177
    )
    
    
    657
    
    
    
    (1,304
    )
    
    
    18
    
    
    
    (1,286
    )Total interest-earning assets
    
    
    4,413
    
    
    
    17,333
    
    
    
    21,746
    
    
    
    (44,873
    )
    
    
    67,397
    
    
    
    22,524Interest-bearing liabilities:Savings accounts
    
    
    436
    
    
    
    678
    
    
    
    1,114
    
    
    
    (7,951
    )
    
    
    4,025
    
    
    
    (3,926
    )NOW accounts
    
    
    174
    
    
    
    (113
    )
    
    
    61
    
    
    
    (3,091
    )
    
    
    1,496
    
    
    
    (1,595
    )Money market demand accounts
    
    
    474
    
    
    
    (2,092
    )
    
    
    (1,618
    )
    
    
    (5,908
    )
    
    
    8,282
    
    
    
    2,374Certificate accounts
    
    
    233
    
    
    
    3,961
    
    
    
    4,194
    
    
    
    (14,984
    )
    
    
    10,575
    
    
    
    (4,409
    )Borrowed funds
    
    
    602
    
    
    
    (1,195
    )
    
    
    (593
    )
    
    
    (1,254
    )
    
    
    1,215
    
    
    
    (39
    )Debentures
    
    
    364
    
    
    
    59
    
    
    
    423
    
    
    
    (131
    )
    
    
    177
    
    
    
    46Total interest-bearing liabilities
    
    
    2,283
    
    
    
    1,298
    
    
    
    3,581
    
    
    
    (33,319
    )
    
    
    25,770
    
    
    
    (7,549
    )Net change in net interest income
    
    $
    2,130
    
    
    $
    16,035
    
    
    $
    18,165
    
    
    $
    (11,554
    )
    
    $
    41,627
    
    
    $
    30,073
 Regulatory Capital Requirements
    39




---



##### 



June 30, 2005
    
    
    June 30, 2004(Dollars in thousands)Total shareholders equity (GAAP capital)
    
    $
    667,374
    
    
    $
    539,691Less: unrealized (gain)/ loss on securities available for sale
    
    
    (4,492
    )
    
    
    2,438Less: nonqualifying intangible assets
    
    
    (154,253
    )
    
    
    (139,839
    )Leverage capital
    
    
    508,629
    
    
    
    402,290Plus: Tier 2 capital (1)
    
    
    34,110
    
    
    
    28,541Total risk-based capital
    
    
    542,739
    
    
    
    430,831Average total assets for leverage ratio
    
    
    6,083,422
    
    
    
    5,323,638Net risk-weighted assets including off-balance sheet items
    
    
    3,494,230
    
    
    
    2,868,810Leverage capital ratio
    
    
    8.36
    %
    
    
    7.56
    %Minimum requirement (2)
    
    3.00% to 5.00%
    
    3.00% to 5.00%Risk-based capital ratio
    
    
    15.53
    %
    
    
    15.02
    %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.  Liquidity and Capital Resources.
  40




---



##### 



Contractual Obligations.
 41




---



##### 



Payments dueOne year to
    
    
    Three yearsLess than
    
    
    less than
    
    
    to less than
    
    
    Five yearsone year
    
    
    three years
    
    
    five years
    
    
    or greater
    
    
    Total(In thousands)Contractual obligations at
June 30, 2005Long-term debt
    
    $
    26,579
    
    
    $
    43,396
    
    
    $
    144,383
    
    
    $
    195,986
    
    
    $
    410,344Junior subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,062
    
    
    
    102,062Operating leases
    
    
    2,634
    
    
    
    4,229
    
    
    
    3,253
    
    
    
    4,788
    
    
    
    14,904Total
    
    $
    29,213
    
    
    $
    47,625
    
    
    $
    147,636
    
    
    $
    302,836
    
    
    $
    527,310
 
 (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
 Impact of New Accounting Standards
 Share-Based Payments (SFAS 123R) Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Accounting for Real Estate Time-Sharing Transactions, an amendment of
FASB Statements No. 66 and 67 (SFAS 152).
 42




---



##### 



Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29
(SFAS 153).
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Asset and Liability Management-Interest Rate Sensitivity Analysis.
   43




---



##### 



Amounts Maturing or RepricingWithin 1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Over 20Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5-10 Years
    
    
    10-20 Years
    
    
    Years
    
    
    Total(Dollars in Thousands)Rate-sensitive assets:Interest-earning deposits
    
    $
    52,237
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    52,237Mortgage-backed securities:Fixed
    
    
    60,828
    
    
    
    71,930
    
    
    
    35,187
    
    
    
    35,479
    
    
    
    
    
    
    
    
    
    
    
    203,424Variable
    
    
    417,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417,901Investment securities
    
    
    449,646
    
    
    
    106,752
    
    
    
    84,112
    
    
    
    112,281
    
    
    
    
    
    
    
    
    
    
    
    752,791Real estate loans:Adjustable-rate
    
    
    59,217
    
    
    
    4,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,765Fixed-rate
    
    
    307,715
    
    
    
    538,069
    
    
    
    466,459
    
    
    
    828,640
    
    
    
    431,971
    
    
    
    
    
    
    
    2,572,854Home equity lines of credit
    
    
    162,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162,098Education loans
    
    
    112,462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,462Other consumer loans
    
    
    301,558
    
    
    
    316,362
    
    
    
    144,907
    
    
    
    62,083
    
    
    
    
    
    
    
    
    
    
    
    824,910Commercial loans
    
    
    311,837
    
    
    
    229,809
    
    
    
    112,653
    
    
    
    22,316
    
    
    
    
    
    
    
    
    
    
    
    676,615Total rate-sensitive assets
    
    $
    2,235,499
    
    
    $
    1,267,470
    
    
    $
    843,318
    
    
    $
    1,060,799
    
    
    $
    431,971
    
    
    $
    
    
    
    $
    5,839,057Rate-sensitive liabilities:Fixed maturity deposits
    
    $
    1,160,817
    
    
    $
    1,188,683
    
    
    $
    156,022
    
    
    $
    56,690
    
    
    $
    275
    
    
    $
    
    
    
    $
    2,562,487Money market deposit accounts
    
    
    392,001
    
    
    
    
    
    
    
    99,662
    
    
    
    
    
    
    
    140,022
    
    
    
    
    
    
    
    631,685Savings accounts
    
    
    491,000
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    478,606
    
    
    
    
    
    
    
    1,049,606Checking accounts
    
    
    123,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    821,168
    
    
    
    944,168FHLB advances
    
    
    
    
    
    
    43,396
    
    
    
    138,463
    
    
    
    195,173
    
    
    
    814
    
    
    
    
    
    
    
    377,846Other borrowings
    
    
    29,046
    
    
    
    2,777
    
    
    
    675
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,498Trust Preferred Securities
    
    
    30,928
    
    
    
    71,134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,062Total rate-sensitive liabilities
    
    $
    2,226,792
    
    
    $
    1,385,990
    
    
    $
    394,822
    
    
    $
    251,863
    
    
    $
    619,717
    
    
    $
    821,168
    
    
    $
    5,700,352Interest sensitivity gap per period
    
    $
    8,707
    
    
    $
    (118,520
    )
    
    $
    448,496
    
    
    $
    808,936
    
    
    $
    (187,746
    )
    
    $
    (821,168
    )
    
    $
    138,705Cumulative interest sensitivity gap
    
    $
    8,707
    
    
    $
    (109,813
    )
    
    $
    338,683
    
    
    $
    1,147,619
    
    
    $
    959,873
    
    
    $
    138,705
    
    
    $
    138,705Cumulative interest sensitivity gap
as a percentage of total assets
    
    
    0.14
    %
    
    
    (1.73
    )%
    
    
    5.35
    %
    
    
    18.13
    %
    
    
    15.16
    %
    
    
    2.19
    %
    
    
    2.19
    %Cumulative interest-earning assets as
a percent of cumulative
interest-bearing liabilities
    
    
    100.39
    %
    
    
    96.96
    %
    
    
    108.45
    %
    
    
    126.94
    %
    
    
    119.67
    %
    
    
    102.43
    %
    
    
    102.43
    %
  44




---



##### 




    
    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 50%
of total shareholder equity.
  Movements in interest rates fromJune 30, 2005 ratesIncrease
    
    
    Decrease1%
    
    
    2%
    
    
    1%
    
    
    2%Simulated impact over the next 12 months
compared with June 30, 2005:Percentage increase/(decrease) in net income
    
    
    4.0
    %
    
    
    3.3
    %
    
    
    (2.7
    )%
    
    
    (10.0
    )%Increase/(decrease) in return on average equity
    
    
    0.4
    %
    
    
    0.3
    %
    
    
    (0.3
    )%
    
    
    (1.0
    )%Increase/(decrease) in diluted earnings per share
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    (0.03
    )
    
    $
    (0.11
    )Percentage increase/(decrease) in market value of equity
    
    
    (6.9
    )%
    
    
    (19.1
    )%
    
    
    6.8
    %
    
    
    12.3
    %
 45




---



##### 



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 46




---



##### 



Managements Report on Internal Control Over Financial Reporting
  Internal Control  Integrated Framework
  /s/ William J. Wagner
    
    /s/ William W. Harvey, Jr.William J. Wagner
    
    William W. Harvey, Jr.Chief Executive Officer
    
    Chief Financial Officer
 47




---



##### 



Report of Independent Registered Public Accounting Firm
 
 .
    48




---



##### 



/s/ KPMG LLPPittsburgh, PennsylvaniaSeptember 13, 2005
 49




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    50




---



##### 



Report of Independent Registered Public Accounting Firm
 
      
 51




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    2005
    
    
    2004AssetsCash and cash equivalents
    
    $
    83,651
    
    
    
    57,466Interest-earning deposits in other financial institutions
    
    
    52,237
    
    
    
    174,199Federal funds sold and other short-term investments
    
    
    
    
    
    
    160,058Marketable securities available-for-sale (amortized cost
of $671,137 and $858,569)
    
    
    675,183
    
    
    
    855,679Marketable securities held-to-maturity (market value
of $709,468 and $601,738)
    
    
    702,979
    
    
    
    601,542Loans receivable, net of allowance for loan
losses of $31,563 and $30,670
    
    
    4,376,884
    
    
    
    4,053,941Accrued interest receivable
    
    
    24,387
    
    
    
    22,578Real estate owned, net
    
    
    6,685
    
    
    
    3,951Federal Home Loan Bank stock, at cost
    
    
    33,055
    
    
    
    38,884Premises and equipment, net
    
    
    96,028
    
    
    
    82,417Bank owned life insurance
    
    
    104,573
    
    
    
    100,090Goodwill
    
    
    142,078
    
    
    
    142,078Other intangible assets
    
    
    11,920
    
    
    
    16,429Other assets
    
    
    20,822
    
    
    
    33,936Total assets
    
    $
    6,330,482
    
    
    
    6,343,248Liabilities and Shareholders EquityLiabilities:Deposits
    
    $
    5,187,946
    
    
    
    5,191,621Borrowed funds
    
    
    410,344
    
    
    
    449,147Advances by borrowers for taxes and insurance
    
    
    30,769
    
    
    
    29,607Accrued interest payable
    
    
    4,020
    
    
    
    4,280Other liabilities
    
    
    13,151
    
    
    
    16,059Junior subordinated deferrable interest debentures held by trusts
that issued guaranteed capital debt securities
    
    
    102,062
    
    
    
    102,062Total liabilities
    
    
    5,748,292
    
    
    
    5,792,776Shareholders equity:Preferred stock, $0.10 par value. Authorized 50,000,000 and
10,000,000 shares, respectively; issued and outstanding 0 shares at
June 30, 2005 and 2004
    
    
    
    
    
    
    Common stock, $0.10 par value. Authorized 500,000,000 and
100,000,000 shares, respectively; issued and outstanding 50,843,805 and 47,960,287 shares at June 30, 2005 and 2004, respectively
    
    
    5,084
    
    
    
    4,796Paid-in capital
    
    
    206,492
    
    
    
    211,545Retained earnings, substantially restricted
    
    
    371,567
    
    
    
    336,164Accumulated other comprehensive income, net
    
    
    4,514
    
    
    
    (2,033
    )Unearned
compensation  recognition and retention plan
    
    
    (5,467
    )
    
    
    Total shareholders equity
    
    
    582,190
    
    
    
    550,472Total liabilities and shareholders equity
    
    $
    6,330,482
    
    
    
    6,343,248
  52




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    2005
    
    
    2004
    
    
    2003Interest income:Loans receivable
    
    $
    260,833
    
    
    
    243,630
    
    
    
    232,760Mortgage-backed securities
    
    
    26,102
    
    
    
    25,815
    
    
    
    26,744Taxable investment securities
    
    
    18,513
    
    
    
    15,210
    
    
    
    9,857Tax-free investment securities
    
    
    12,192
    
    
    
    12,048
    
    
    
    8,350Interest-earning deposits
    
    
    4,184
    
    
    
    3,527
    
    
    
    4,813Total interest income
    
    
    321,824
    
    
    
    300,230
    
    
    
    282,524Interest expense:Deposits
    
    
    110,079
    
    
    
    106,328
    
    
    
    113,883Borrowed funds
    
    
    27,968
    
    
    
    28,138
    
    
    
    28,131Total interest expense
    
    
    138,047
    
    
    
    134,466
    
    
    
    142,014Net interest income
    
    
    183,777
    
    
    
    165,764
    
    
    
    140,510Provision for loan losses
    
    
    9,566
    
    
    
    6,860
    
    
    
    8,445Net interest income
after provision
for loan losses
    
    
    174,211
    
    
    
    158,904
    
    
    
    132,065Noninterest income:Service charges and fees
    
    
    16,786
    
    
    
    14,068
    
    
    
    13,540Trust and other financial services income
    
    
    4,291
    
    
    
    3,982
    
    
    
    3,492Insurance commission income
    
    
    2,222
    
    
    
    948
    
    
    
    1,188Gain on sale of marketable securities, net
    
    
    523
    
    
    
    4,536
    
    
    
    1,264Gain (loss) on sale of loans, net
    
    
    (100
    )
    
    
    433
    
    
    
    1,729Gain on sale of real estate owned, net
    
    
    906
    
    
    
    1,561
    
    
    
    493Income from bank owned life insurance
    
    
    4,378
    
    
    
    4,364
    
    
    
    3,411Writedown of investment securities
    
    
    
    
    
    
    (166
    )
    
    
    Other operating income
    
    
    2,998
    
    
    
    2,136
    
    
    
    1,911Total noninterest income
    
    
    32,004
    
    
    
    31,862
    
    
    
    27,028
  53




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    2005
    
    
    2004
    
    
    2003Noninterest expense:Compensation and employee benefits
    
    $
    70,823
    
    
    
    65,059
    
    
    
    55,139Premises and occupancy costs
    
    
    17,724
    
    
    
    16,175
    
    
    
    13,657Office operations
    
    
    11,329
    
    
    
    10,785
    
    
    
    9,856Processing expenses
    
    
    10,578
    
    
    
    9,317
    
    
    
    8,378Amortization of intangible assets
    
    
    4,509
    
    
    
    4,706
    
    
    
    701Advertising
    
    
    3,674
    
    
    
    3,582
    
    
    
    3,502Goodwill impairment
    
    
    
    
    
    
    7,904
    
    
    
    16,771Prepayment penalties on FHLB advances
    
    
    
    
    
    
    2,533
    
    
    
    Other expenses
    
    
    9,002
    
    
    
    8,210
    
    
    
    8,063Total noninterest expense
    
    
    127,639
    
    
    
    128,271
    
    
    
    116,067Income before income taxes
    
    
    78,576
    
    
    
    62,495
    
    
    
    43,026Provision for income taxes:Federal
    
    
    19,044
    
    
    
    16,441
    
    
    
    14,670State
    
    
    3,728
    
    
    
    3,404
    
    
    
    2,293Total provision for income taxes
    
    
    22,772
    
    
    
    19,845
    
    
    
    16,963Net income
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063Basic earnings per share
    
    $
    1.12
    
    
    
    0.89
    
    
    
    0.55Diluted earnings per share
    
    $
    1.11
    
    
    
    0.88
    
    
    
    0.54
  54




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    Accumulated
    
    
    Unearnedother
    
    
    recognitioncomprehensive
    
    
    and
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    income
    
    
    retention
    
    
    shareholdersstock
    
    
    capital
    
    
    earnings
    
    
    (loss), net
    
    
    plan shares
    
    
    equityBalance at June 30,
2002
    
    $
    4,755
    
    
    
    71,838
    
    
    
    233,831
    
    
    
    6,216
    
    
    
    
    
    
    
    316,640Comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    26,063
    
    
    
    
    
    
    
    
    
    
    
    26,063Change in
unrealized gain
on securities,
net of tax and
reclassification
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,214
    
    
    
    
    
    
    
    1,214Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    26,063
    
    
    
    1,214
    
    
    
    
    
    
    
    27,277Exercise of stock
options
    
    
    14
    
    
    
    728
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    742Tax benefit of
stock compensation
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    221Acquisition of
Leeds Federal
Savings Bank
    
    
    
    
    
    
    15,000
    
    
    
    36,688
    
    
    
    2,429
    
    
    
    
    
    
    
    54,117Dividends paid
($0.32 per share)
    
    
    
    
    
    
    
    
    
    
    (3,923
    )
    
    
    
    
    
    
    
    
    
    
    (3,923
    )Balance at June 30,
2003
    
    
    4,769
    
    
    
    87,787
    
    
    
    292,659
    
    
    
    9,859
    
    
    
    
    
    
    
    395,074Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    42,650
    
    
    
    
    
    
    
    
    
    
    
    42,650Change in
unrealized gain
on securities,
net of tax and
reclassification
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,892
    )
    
    
    
    
    
    
    (11,892
    )Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    42,650
    
    
    
    (11,892
    )
    
    
    
    
    
    
    30,758Exercise of stock
options
    
    
    27
    
    
    
    1,004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,031Tax benefit of
stock compensation
    
    
    
    
    
    
    832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    832Dividends paid
($0.40 per share)
    
    
    
    
    
    
    
    
    
    
    (9,963
    )
    
    
    
    
    
    
    
    
    
    
    (9,963
    )Acquisition of
First Carnegie
Deposit
    
    
    
    
    
    
    9,118
    
    
    
    10,818
    
    
    
    
    
    
    
    
    
    
    
    19,936Common stock
issued, net of
issuance costs
    
    
    
    
    
    
    112,804
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,804Balance at June 30,
2004
    
    
    4,796
    
    
    
    211,545
    
    
    
    336,164
    
    
    
    (2,033
    )
    
    
    
    
    
    
    550,472Comprehensive
income:Net income
    
    
    
    
    
    
    
    
    
    
    55,804
    
    
    
    
    
    
    
    
    
    
    
    55,804Change in
unrealized gain
on securities,
net of tax and
reclassification
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,547
    
    
    
    
    
    
    
    6,547Total
comprehensive
income
    
    
    
    
    
    
    
    
    
    
    55,804
    
    
    
    6,547
    
    
    
    
    
    
    
    62,351Issuance of common
shares in exchange
for Leeds Federal
and
First Carnegie
Shares
    
    
    243
    
    
    
    (12,013
    )
    
    
    (230
    )
    
    
    
    
    
    
    
    
    
    
    (12,000
    )Recognition and
retention plan, net
    
    
    27
    
    
    
    5,932
    
    
    
    
    
    
    
    
    
    
    
    (5,467
    )
    
    
    492Exercise of stock
options
    
    
    18
    
    
    
    779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    797Tax benefit of
stock compensation
    
    
    
    
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249Dividends paid
($0.48 per share)
    
    
    
    
    
    
    
    
    
    
    (20,171
    )
    
    
    
    
    
    
    
    
    
    
    (20,171
    )Balance at June 30,
2005
    
    $
    5,084
    
    
    
    206,492
    
    
    
    371,567
    
    
    
    4,514
    
    
    
    (5,467
    )
    
    
    582,190
  55




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    2005
    
    
    2004
    
    
    2003Operating activities:Net income
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    9,566
    
    
    
    6,860
    
    
    
    8,445Net gain on sales of assets
    
    
    (1,329
    )
    
    
    (6,530
    )
    
    
    (3,486
    )Net depreciation, amortization, and accretion
    
    
    9,216
    
    
    
    12,530
    
    
    
    10,019Decrease in other assets
    
    
    6,783
    
    
    
    17,376
    
    
    
    1,434Decrease in other liabilities
    
    
    (3,168
    )
    
    
    (13,618
    )
    
    
    (2,482
    )Net amortization of discounts/premiums
on marketable securities
    
    
    2,787
    
    
    
    7,633
    
    
    
    987Noncash compensation expense related
to stock benefit plans
    
    
    492
    
    
    
    
    
    
    
    Noncash writedown of investment securities
    
    
    
    
    
    
    166
    
    
    
    Noncash goodwill impairment
    
    
    
    
    
    
    7,904
    
    
    
    16,771Other
    
    
    
    
    
    
    
    
    
    
    1Net cash provided by operating
activities
    
    
    80,151
    
    
    
    74,971
    
    
    
    57,752Investing activities:Purchase of marketable securities held-to-maturity
    
    
    (172,540
    )
    
    
    (314,227
    )
    
    
    (478,871
    )Purchase of marketable securities available-for-sale
    
    
    (247,716
    )
    
    
    (631,218
    )
    
    
    (751,076
    )Proceeds from maturities and principal reductions
of marketable securities held-to-maturity
    
    
    215,900
    
    
    
    436,922
    
    
    
    422,231Proceeds from maturities and principal reductions
of marketable securities available-for-sale
    
    
    267,204
    
    
    
    697,042
    
    
    
    217,394Proceeds from sales of marketable securities
available-for-sale
    
    
    22,713
    
    
    
    307,736
    
    
    
    84,134Purchase of bank-owned life insurance
    
    
    
    
    
    
    
    
    
    
    (10,000
    )Loan originations
    
    
    (1,429,608
    )
    
    
    (1,431,306
    )
    
    
    (1,316,999
    )Proceeds from loan maturities and principal
reductions
    
    
    997,290
    
    
    
    966,289
    
    
    
    1,000,429Proceeds from loan sales
    
    
    78,214
    
    
    
    89,929
    
    
    
    233,868Redemption/(purchase) of Federal Home Loan
Bank stock
    
    
    5,829
    
    
    
    12,960
    
    
    
    (7,276
    )Proceeds from sale of real estate owned
    
    
    6,749
    
    
    
    8,107
    
    
    
    5,317Sale/(purchase) of real estate owned for investment
    
    
    78
    
    
    
    (226
    )
    
    
    (87
    )Purchase of premises and equipment
    
    
    (20,373
    )
    
    
    (22,848
    )
    
    
    (11,425
    )Acquisitions, net of cash received
    
    
    
    
    
    
    (21,910
    )
    
    
    167,223Net cash provided by (used by)
investing activities
    
    
    (276,260
    )
    
    
    97,250
    
    
    
    (445,138
    )
  56




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    2005
    
    
    2004
    
    
    2003Financing activities:(Decrease) increase in deposits, net
    
    $
    (3,635
    )
    
    
    (177,807
    )
    
    
    560,802Proceeds from long-term borrowings
    
    
    
    
    
    
    
    
    
    
    180,000Repayments of long-term borrowings
    
    
    (35,056
    )
    
    
    (251,064
    )
    
    
    (40,776
    )Net increase (decrease) in short-term borrowings
    
    
    (2,823
    )
    
    
    676
    
    
    
    12,056Increase (decrease) in advances by borrowers
for taxes and insurance
    
    
    1,162
    
    
    
    2,994
    
    
    
    1,562Proceeds from stock offering, net of issuance costs
    
    
    
    
    
    
    112,804
    
    
    
    Cash dividends paid
    
    
    (20,171
    )
    
    
    (9,963
    )
    
    
    (3,923
    )Proceeds from options exercised
    
    
    797
    
    
    
    1,031
    
    
    
    742Net cash (used by) provided by
financing activities
    
    
    (59,726
    )
    
    
    (321,329
    )
    
    
    710,463Net increase (decrease) in cash and
cash equivalents
    
    
    (255,835
    )
    
    
    (149,108
    )
    
    
    323,077Cash and cash equivalents at beginning of year
    
    
    391,723
    
    
    
    540,831
    
    
    
    217,754Net (decrease) increase in cash and cash equivalents
    
    
    (255,835
    )
    
    
    (149,108
    )
    
    
    323,077Cash and cash equivalents at end of year
    
    $
    135,888
    
    
    
    391,723
    
    
    
    540,831Cash paid during the year for:Interest on deposits and borrowings (including
interest credited to deposit accounts of
$94,106, $91,829, and $99,079, respectively)
    
    $
    138,307
    
    
    
    131,909
    
    
    
    141,466Income taxes
    
    
    19,491
    
    
    
    7,459
    
    
    
    15,649Noncash activities:Business acquisitions:Fair value of assets acquired
    
    $
    
    
    
    
    1,000,392
    
    
    
    473,007Net cash received (paid)
    
    
    
    
    
    
    (21,910
    )
    
    
    167,223Liabilities assumed
    
    $
    
    
    
    
    978,482
    
    
    
    640,230Loan foreclosures and repossessions
    
    $
    8,622
    
    
    
    4,647
    
    
    
    3,053Sale of real estate owned financed by the Company
    
    
    1,113
    
    
    
    340
    
    
    
    815Forgiveness of loan to Northwest Bancorp, MHC
    
    
    12,000
    
    
    
    
    
    
    
    
  57




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (1)
    
    Summary of Significant Accounting Policies
 (a)
    
    Nature of OperationsThe 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
June 30, 2005 owned approximately 60% of the outstanding shares of common stock of
Northwest Bancorp, Inc. (the Company). On September 10, 2004, in exchange for 100%
of the outstanding shares of Leeds Federal, the Company cancelled a $12.0 million
loan receivable from, and issued 1,334,859 shares to, Northwest Bancorp MHC.
Concurrent with the Companys acquisition of Leeds Federal, the Company merged
Leeds Federal into Northwest Savings Bank. On November 15, 2004, in exchange for
100% of the outstanding shares of First Carnegie, the Company issued 1,090,900
shares to Northwest Bancorp, MHC. Concurrent with the Companys acquisition of
First Carnegie, the Company merged First Carnegie into Northwest Savings Bank. The
Companys financial condition and financial results have been revised to reflect
acquisitions of both Leeds Federal Savings Bank and First Carnegie Deposit as of
the date they were acquired by the Mutual Holding Company. After the Companys
acquisition of First Carnegie, MHC applied for and received approval from the
Office of Thrift Supervision to waive its right to receive dividends from the
Company. While MHC owned Leeds Federal and First Carnegie, it accepted dividends
from the Company. Dividends waived by Northwest Bancorp, MHC during fiscal 2005,
2004, and 2003 were $3,664,000, $9,159,000, and $11,317,000, respectively.
Dividends paid to Northwest Bancorp, MHC during fiscal 2005, 2004, and 2003 were
$10,571,000, $2,812,000, and $0, respectively.During the 2004 fiscal year, the Company sold 7,255,520 common shares previously
owned by MHC. The transaction increased the Companys capital by $112.8 million but
did not increase the number of shares outstanding.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 153 banking
locations in Pennsylvania, New York, Ohio, and Maryland. The Company and its
subsidiaries also offer loan products through 49 consumer finance offices in
Pennsylvania and New York.(b)
    
    Principles of ConsolidationThe 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 EquivalentsFor 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.
  58




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (d)
    
    Marketable SecuritiesThe Company classifies marketable securities at the time of their purchase as either
held-to-maturity, available-for-sale, or trading securities. Securities for which
management has the intent and the Company has the ability to hold until their maturity are
classified as held-to-maturity and are carried on the Companys books at cost, adjusted for
amortization of premium and accretion of discount on a level yield basis. 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
available-for-sale include securities which 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 June 30, 2005 and
2004.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.(e)
    
    Loans ReceivableLoans 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 market value and are not
significant as of June 30, 2005 and 2004.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)
    
    Provision for Loan LossesProvisions 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 balance sheet dates have been recorded.
  59




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    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 OwnedReal 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, as 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.(h)
    
    Premises and EquipmentPremises 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)
    
    GoodwillIn 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
  60




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    value, an impairment loss is recognized as a non-cash charge. Prior to the Companys acquisition of
Leeds and First Carnegie from Northwest Bancorp, MHC, Leeds recorded a goodwill impairment loss of
$16,771,000 in fiscal year 2003 and First Carnegie recorded a goodwill impairment loss of
$7,904,000 in fiscal year 2004. Prior to the adoption of SFAS 142, goodwill was amortized on a
straight-line basis over a ten-year period.(j)
    
    Core Deposit IntangiblesThe Company engages an independent third party of experts 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 7 years.(k)
    
    Bank-Owned Life InsuranceThe Company owns insurance on the lives of a certain group of key employees. The policies
were purchased to help offset the cost of increases in various fringe benefit plans
including healthcare. 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, the Company would receive a death
benefit which would be recorded as noninterest income.(l)
    
    DepositsInterest on deposits is accrued and charged to expense monthly and is paid or credited in
accordance with the terms of the accounts.(m)
    
    Pension PlansThe 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. The Company uses
an April 30th measurement date for its defined benefit pension plans.(n)
    
    Income TaxesThe Company joins with its wholly owned subsidiaries in filing a consolidated federal
income tax return.The Company accounts for income taxes using the asset and liability method. 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.
  61




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (o)
    
    Stock OptionsThe Company accounts for its stock-based compensation plans under the provisions of APB Opinion No.
25, Accounting for Stock Issued to Employeesutilizing the intrinsic-value-based method, on which
APB No. 25 is based. In accordance with SFAS No. 123, Accounting for Stock-based Compensation, the
Company previously adopted the disclosure-only option and continues to apply the provisions of APB
No. 25, for financial statement purposes. The Black-Scholes option pricing model was used to
determine the fair value estimates for disclosure purposes.The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Had
compensation costs for the Stock Option Plan been determined consistent with the fair value method
of SFAS 123, Accounting for Stock-Based Compensation, which permits entities to expense an
estimated fair value of employee stock options granted, the Companys net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
 2005
    
    
    2004
    
    
    2003Net income:As reported
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063Deduct total stock-based
employee compensation
expense determined under
fair-value-based
method for
all awards, net of tax
    
    
    (989
    )
    
    
    (518
    )
    
    
    (377
    )Pro forma
    
    $
    54,815
    
    
    
    42,132
    
    
    
    25,686Basic earnings per share:As reported
    
    $
    1.12
    
    
    
    0.89
    
    
    
    0.55Pro forma
    
    $
    1.10
    
    
    
    0.88
    
    
    
    0.54Diluted earnings per share:As reported
    
    $
    1.11
    
    
    
    0.88
    
    
    
    0.54Pro forma
    
    $
    1.09
    
    
    
    0.87
    
    
    
    0.53
 Stock-based employee compensation expense related to the Companys recognition and retention plan
of $492,000 was included in reported net income during fiscal 2005. No stock-based employee
compensation expense was included in reported net income during
fiscal 2004 and 2003.The fair value of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (1) dividend yields ranging
from 1.60% to 2.50%; (2) expected volatility of 18% to 33%; (3) risk-free interest rates ranging
from 4.50% to 6.50%; and (4) expected lives of seven years. The effects of applying
SFAS No. 123 may not be representative of the effects on reported net income in future years.
  62




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (p)
    
    Segment ReportingStatement 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 footnote 21 for related disclosures.(q)
    
    Off-Balance-Sheet InstrumentsIn 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.(r)
    
    Use of EstimatesThe 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. Actual results could differ
from these estimates.(s)
    
    Reclassification of Prior Years StatementsCertain items previously reported have been reclassified to conform with the current years
reporting format.
 (2)
    
    Business CombinationsOn August 31, 2003, the Company completed the acquisition of First Bell Bancorp, Inc. and its
subsidiary Bell Federal Savings and Loan Association of Bellevue, both headquartered in Bellevue,
Pennsylvania. The acquisition included seven offices, assets of approximately $933.0 million, and
deposits of approximately $609.4 million. The cash acquisition amount of approximately $114.3
million created intangible assets of approximately $66.4 million.On September 13, 2002, the Company completed the acquisition of Prestige Bancorp, Inc. and its
subsidiary Prestige Bank, both headquartered in Pleasant Hills, Pennsylvania. The acquisition
included four offices, assets of approximately $180.0 million, and deposits of approximately $122.0
million. The cash acquisition amount of approximately $14.6 million created intangible assets of
approximately $6.0 million.
  63




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (3)
    
    Marketable SecuritiesMarketable securities at June 30, 2005 are as follows:
 Gross
    
    
    Grossunrealized
    
    
    unrealizedAmortized
    
    
    holding
    
    
    holding
    
    
    Marketcost
    
    
    gains
    
    
    losses
    
    
    valueHeld-to-maturity:U.S. government and agencies:Due in one year or less
    
    $
    20,000
    
    
    
    
    
    
    
    (95
    )
    
    
    19,905Due in one year  five years
    
    
    72,530
    
    
    
    
    
    
    
    (319
    )
    
    
    72,211Due in five years  ten years
    
    
    73,413
    
    
    
    308
    
    
    
    (371
    )
    
    
    73,350Due after ten years
    
    
    18,398
    
    
    
    
    
    
    
    (126
    )
    
    
    18,272Municipal securities:Due in five years  ten years
    
    
    5,455
    
    
    
    73
    
    
    
    (2
    )
    
    
    5,526Due after ten years
    
    
    237,395
    
    
    
    4,051
    
    
    
    (265
    )
    
    
    241,181Corporate debt issues:Due after ten years
    
    
    40,112
    
    
    
    2,981
    
    
    
    (108
    )
    
    
    42,985Mortgage-backed securities:Fixed rate pass-through
    
    
    14,609
    
    
    
    213
    
    
    
    (31
    )
    
    
    14,791Variable rate pass-through
    
    
    140,473
    
    
    
    766
    
    
    
    (693
    )
    
    
    140,546Fixed rate CMO
    
    
    7,725
    
    
    
    
    
    
    
    (221
    )
    
    
    7,504Variable rate CMO
    
    
    72,869
    
    
    
    597
    
    
    
    (269
    )
    
    
    73,197Total mortgage-backed
securities
    
    
    235,676
    
    
    
    1,576
    
    
    
    (1,214
    )
    
    
    236,038Total securities
held-to-maturity
    
    $
    702,979
    
    
    
    8,989
    
    
    
    (2,500
    )
    
    
    709,468
  64




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    Gross
    
    
    Grossunrealized
    
    
    unrealizedAmortized
    
    
    holding
    
    
    holding
    
    
    Marketcost
    
    
    gains
    
    
    losses
    
    
    valueAvailable-for-sale:U.S. government and agencies:Due in one year  five years
    
    $
    30,787
    
    
    
    2
    
    
    
    (263
    )
    
    
    30,526Due in five years  ten years
    
    
    26,252
    
    
    
    38
    
    
    
    (161
    )
    
    
    26,129Due after ten years
    
    
    81,957
    
    
    
    91
    
    
    
    (146
    )
    
    
    81,902Equity securities and mutual funds
    
    
    91,002
    
    
    
    7,985
    
    
    
    (2,290
    )
    
    
    96,697Municipal securities:Due in five years  ten years
    
    
    964
    
    
    
    17
    
    
    
    (3
    )
    
    
    978Due after ten years
    
    
    13,581
    
    
    
    157
    
    
    
    (74
    )
    
    
    13,664Corporate debt issues:Due in one year  five years
    
    
    1,027
    
    
    
    
    
    
    
    (59
    )
    
    
    968Due in five years  ten years
    
    
    28,500
    
    
    
    79
    
    
    
    (162
    )
    
    
    28,417Due after ten years
    
    
    11,418
    
    
    
    60
    
    
    
    (57
    )
    
    
    11,421Mortgage-backed securities:Fixed rate pass-through
    
    
    82,612
    
    
    
    799
    
    
    
    (258
    )
    
    
    83,153Variable rate pass-through
    
    
    172,263
    
    
    
    194
    
    
    
    (818
    )
    
    
    171,639Fixed rate CMO
    
    
    98,478
    
    
    
    173
    
    
    
    (1,459
    )
    
    
    97,192Variable rate CMO
    
    
    32,296
    
    
    
    244
    
    
    
    (43
    )
    
    
    32,497Total mortgage-backed securities
    
    
    385,649
    
    
    
    1,410
    
    
    
    (2,578
    )
    
    
    384,481Total
securities available-for-sale
    
    $
    671,137
    
    
    
    9,839
    
    
    
    (5,793
    )
    
    
    675,183
  65




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
     Gross
    
    
    Grossunrealized
    
    
    unrealizedAmortized
    
    
    holding
    
    
    holding
    
    
    Marketcost
    
    
    gains
    
    
    losses
    
    
    valueHeld-to-maturity:U.S. government and agencies:Due in one year  five years
    
    $
    12,518
    
    
    
    
    
    
    
    (1
    )
    
    
    12,517Due in five years  ten years
    
    
    39,982
    
    
    
    629
    
    
    
    (257
    )
    
    
    40,354Due after ten years
    
    
    714
    
    
    
    2
    
    
    
    (3
    )
    
    
    713Municipal securities:Due in five years  ten years
    
    
    2,568
    
    
    
    15
    
    
    
    
    
    
    
    2,583Due after ten years
    
    
    112,281
    
    
    
    1,148
    
    
    
    (2,257
    )
    
    
    111,172Corporate debt issues:Due after ten years
    
    
    41,178
    
    
    
    1,796
    
    
    
    (477
    )
    
    
    42,497Mortgage-backed securities:Fixed rate pass-through
    
    
    16,618
    
    
    
    197
    
    
    
    (71
    )
    
    
    16,744Variable rate pass-through
    
    
    198,497
    
    
    
    504
    
    
    
    (2,040
    )
    
    
    196,961Fixed rate CMO
    
    
    7,519
    
    
    
    
    
    
    
    (75
    )
    
    
    7,444Variable rate CMO
    
    
    169,667
    
    
    
    1,148
    
    
    
    (62
    )
    
    
    170,753Total mortgage-
backed
securities
    
    
    392,301
    
    
    
    1,849
    
    
    
    (2,248
    )
    
    
    391,902Total securities
held-to-maturity
    
    $
    601,542
    
    
    
    5,439
    
    
    
    (5,243
    )
    
    
    601,738
  66




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    Gross
    
    
    Grossunrealized
    
    
    unrealizedAmortized
    
    
    holding
    
    
    holding
    
    
    Marketcost
    
    
    gains
    
    
    losses
    
    
    valueAvailable-for-sale:U.S. government and agencies:Due within one year
    
    $
    7,352
    
    
    
    
    
    
    
    (220
    )
    
    
    7,132Due in one year  five years
    
    
    18,290
    
    
    
    
    
    
    
    (506
    )
    
    
    17,784Due in five years  ten years
    
    
    37,490
    
    
    
    204
    
    
    
    (164
    )
    
    
    37,530Due after ten years
    
    
    121,755
    
    
    
    164
    
    
    
    (2,844
    )
    
    
    119,075Equity securities and mutual funds
    
    
    87,099
    
    
    
    7,865
    
    
    
    (1,716
    )
    
    
    93,248Municipal securities:Due in five years  ten years
    
    
    915
    
    
    
    7
    
    
    
    (7
    )
    
    
    915Due after ten years
    
    
    143,887
    
    
    
    814
    
    
    
    (3,147
    )
    
    
    141,554Corporate debt issues:Due in one year or less
    
    
    3,018
    
    
    
    9
    
    
    
    
    
    
    
    3,027Due in one year  five years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due in five years  ten years
    
    
    15,000
    
    
    
    80
    
    
    
    
    
    
    
    15,080Due after ten years
    
    
    9,423
    
    
    
    37
    
    
    
    (129
    )
    
    
    9,331Mortgage-backed securities:Fixed rate pass-through
    
    
    92,659
    
    
    
    767
    
    
    
    (1,320
    )
    
    
    92,106Variable rate pass-through
    
    
    87,486
    
    
    
    142
    
    
    
    (876
    )
    
    
    86,752Fixed rate CMO
    
    
    141,485
    
    
    
    280
    
    
    
    (3,899
    )
    
    
    137,866Variable rate CMO
    
    
    92,710
    
    
    
    1,603
    
    
    
    (34
    )
    
    
    94,279Total mortgage-backed securities
    
    
    414,340
    
    
    
    2,792
    
    
    
    (6,129
    )
    
    
    411,003Total securities
available-for-sale
    
    $
    858,569
    
    
    
    11,972
    
    
    
    (14,862
    )
    
    
    855,679
   June 302005
    
    
    2004Mortgage-backed securities:FNMA
    
    $
    222,549
    
    
    
    402,469GNMA
    
    
    179,795
    
    
    
    178,847FHLMC
    
    
    184,717
    
    
    
    179,506Other (nonagency)
    
    
    33,096
    
    
    
    42,482Total mortgage-backed securities
    
    $
    620,157
    
    
    
    803,304
  67




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
      Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    losses
    
    
    value
    
    
    losses
    
    
    value
    
    
    lossesU.S. government and agencies
    
    $
    235,759
    
    
    
    1,228
    
    
    
    18,037
    
    
    
    253
    
    
    
    253,796
    
    
    
    1,481Municipal securities
    
    
    21,419
    
    
    
    282
    
    
    
    3,936
    
    
    
    62
    
    
    
    25,355
    
    
    
    344Corporate issues
    
    
    34,411
    
    
    
    424
    
    
    
    72,269
    
    
    
    2,252
    
    
    
    106,680
    
    
    
    2,676Mortgage-backed securities
    
    
    247,744
    
    
    
    1,831
    
    
    
    115,758
    
    
    
    1,961
    
    
    
    363,502
    
    
    
    3,792Total temporarily
impaired securities
    
    $
    539,333
    
    
    
    3,765
    
    
    
    210,000
    
    
    
    4,528
    
    
    
    749,333
    
    
    
    8,293Percentage of total
    
    
    79
    %
    
    
    
    
    
    
    21
    %
    
    
    
    
    
    
    100
    %
   68




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (4)
    
    Loans ReceivableLoans receivable at June 30, 2005 and 2004 are summarized in the table below:
 2005
    
    
    2004Real estate loans:One- to four-family
    
    $
    2,693,174
    
    
    
    2,615,328Multi-family and commercial
    
    
    534,224
    
    
    
    454,606Total real estate loans
    
    
    3,227,398
    
    
    
    3,069,934Consumer loans:Automobile
    
    
    138,102
    
    
    
    120,887Home improvement
    
    
    723,507
    
    
    
    587,103Education
    
    
    112,462
    
    
    
    95,599Loans on savings accounts
    
    
    8,500
    
    
    
    8,038Other
    
    
    116,899
    
    
    
    113,252Total consumer loans
    
    
    1,099,470
    
    
    
    924,879Commercial loans
    
    
    142,391
    
    
    
    149,509Total loans receivable, gross
    
    
    4,469,259
    
    
    
    4,144,322Deferred loan fees
    
    
    (4,257
    )
    
    
    (6,630
    )Allowance for loan losses
    
    
    (31,563
    )
    
    
    (30,670
    )Undisbursed loan proceeds (real estate loans)
    
    
    (56,555
    )
    
    
    (53,081
    )Total loans receivable, net
    
    $
    4,376,884
    
    
    
    4,053,941
        69




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
     June 302005
    
    
    2004Loan commitments
    
    $
    69,480
    
    
    
    151,426Undisbursed lines of credit
    
    
    255,387
    
    
    
    220,262Standby letters of credit
    
    
    14,205
    
    
    
    12,234$
    339,072
    
    
    
    383,922
     Accounting by Creditors for
Impairment of a Loan
  70




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    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 June 30, 2005,
2004, and 2003 were $33,610,000, $32,505,000, and $32,740,000, respectively. Average impaired
loans during fiscal 2005, 2004, and 2003 were $34,011,000, $32,361,000, and $23,749,000,
respectively.There were no commitments to lend additional funds to debtors
on nonaccrual status.(5)
    
    Accrued Interest ReceivableAccrued interest receivable as of June 30, 2005 and 2004 is presented in the following table:
 June 302005
    
    
    2004Investment securities
    
    $
    5,871
    
    
    
    5,299Mortgage-backed securities
    
    
    2,218
    
    
    
    2,676Loans receivable
    
    
    16,298
    
    
    
    14,603$
    24,387
    
    
    
    22,578
 (6)
    
    Allowance for Loan LossesChanges in the allowance for losses on loans receivable for the years ended June 30,
2005, 2004, and 2003 are presented in the following table:
 2005
    
    
    2004
    
    
    2003Balance, beginning of fiscal year
    
    $
    30,670
    
    
    
    27,166
    
    
    
    22,042Provision
    
    
    9,566
    
    
    
    6,860
    
    
    
    8,445Charge-offs
    
    
    (9,473
    )
    
    
    (5,750
    )
    
    
    (5,781
    )Acquisitions
    
    
    
    
    
    
    1,330
    
    
    
    1,763Recoveries
    
    
    800
    
    
    
    1,064
    
    
    
    697Balance, end of fiscal year
    
    $
    31,563
    
    
    
    30,670
    
    
    
    27,166
 While management uses available information to provide for losses, future additions to
the allowance may be necessary based on changes in economic conditions. 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.
  71




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (7)
    
    Federal Home Loan Bank StockThe 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 Federal Home Loan
Bank of Pittsburgh, at cost, in an amount not less than 4.75% of borrowings outstanding plus
0.6% of unused FHLB borrowing capacity.(8)
    
    Premises and EquipmentPremises and equipment at June 30, 2005 and 2004 are summarized by major
classification in the following table:
 2005
    
    
    2004Land and land improvements
    
    $
    9,362
    
    
    
    7,898Office buildings and improvements
    
    
    83,982
    
    
    
    74,087Furniture, fixtures, and equipment
    
    
    60,688
    
    
    
    51,956Leasehold improvements
    
    
    7,283
    
    
    
    6,732Total, at cost
    
    
    161,315
    
    
    
    140,673Less accumulated depreciation and
amortization
    
    
    65,287
    
    
    
    58,256Premises and equipment, net
    
    $
    96,028
    
    
    
    82,417
 Depreciation and amortization expense for the years ended June 30, 2005, 2004, and 2003
was $7,684,000, $6,877,000, and $6,042,000, 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 2021. Minimum annual
rentals by fiscal year are summarized in the following table:
 2006
    
    $
    2,6342007
    
    
    2,2582008
    
    
    1,9712009
    
    
    1,8152010
    
    
    1,438Thereafter
    
    
    4,788$
    14,904
 Rental expense for the years ended June 30, 2005, 2004, and 2003 was $3,221,000,
$3,204,000, and $2,698,000, respectively.
  72




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (9)
    
    Goodwill and Other Intangible AssetsThe following table provides information for intangible assets subject to amortization for the
periods indicated:
 June 302005
    
    
    2004Amortized intangible assets:Core deposit intangibles  gross
    
    $
    21,006
    
    
    
    21,006Less accumulated amortization
    
    
    (9,670
    )
    
    
    (5,507
    )Core deposit intangibles  net
    
    $
    11,336
    
    
    
    15,499Customer contract intangible assets  gross
    
    $
    831
    
    
    
    831Less accumulated amortization
    
    
    (247
    )
    
    
    (164
    )Customer contract intangible assets  net
    
    $
    584
    
    
    
    667Noncompete intangible assets  gross
    
    $
    1,050
    
    
    
    1,050Less accumulated amortization
    
    
    (1,050
    )
    
    
    (787
    )Noncompete intangible assets  net
    
    $
    
    
    
    
    263
 The following information shows the actual aggregate amortization expense for the
current and prior fiscal 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 fiscal year ended 6/30/03
    
    $
    701For the fiscal year ended 6/30/04
    
    
    4,706For the fiscal year ended 6/30/05
    
    
    4,509For the fiscal year ended 6/30/06
    
    
    3,602For the fiscal year ended 6/30/07
    
    
    2,970For the fiscal year ended 6/30/08
    
    
    2,356For the fiscal year ended 6/30/09
    
    
    1,658For the fiscal year ended 6/30/10
    
    
    716
  73




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The following table provides information for the changes in the carrying amount of goodwill:
 Community
    
    
    Consumerbanks
    
    
    finance
    
    
    TotalBalance at June 30, 2003
    
    
    86,619
    
    
    
    893
    
    
    
    87,512Goodwill acquired
    
    
    62,051
    
    
    
    419
    
    
    
    62,470Amortization
    
    
    
    
    
    
    
    
    
    
    Impairment losses
    
    
    (7,904
    )
    
    
    
    
    
    
    (7,904
    )Balance at June 30, 2004
    
    
    140,766
    
    
    
    1,312
    
    
    
    142,078Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    Amortization
    
    
    
    
    
    
    
    
    
    
    Impairment losses
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2005
    
    $
    140,766
    
    
    
    1,312
    
    
    
    142,078
 (10)   DepositsDeposit balances at June 30, 2005 and 2004 are shown in the table below:
 2005
    
    
    2004Savings accounts
    
    $
    1,049,606
    
    
    
    1,076,999Interest-bearing checking accounts
    
    
    679,422
    
    
    
    666,193Noninterest-bearing checking accounts
    
    
    264,746
    
    
    
    218,928Money market deposit accounts
    
    
    631,685
    
    
    
    897,325Certificates of deposit
    
    
    2,562,487
    
    
    
    2,332,176$
    5,187,946
    
    
    
    5,191,621
 The aggregate amount of certificates of deposit with a minimum denomination of $100,000
was approximately $505,310,000 at June 30, 2005 and $479,186,000 at June 30, 2004. Generally,
deposits in excess of $100,000 are not federally insured.
  74




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The following table summarizes the contractual maturity of the certificate accounts:
 2005
    
    
    2004Due within 12 months
    
    $
    1,160,817
    
    
    
    1,189,234Due between 12 and 24 months
    
    
    646,865
    
    
    
    547,293Due between 24 and 36 months
    
    
    541,818
    
    
    
    329,049Due between 36 and 48 months
    
    
    103,872
    
    
    
    142,048Due between 48 and 60 months
    
    
    52,150
    
    
    
    85,656After 60 months
    
    
    56,965
    
    
    
    38,896$
    2,562,487
    
    
    
    2,332,176
 The following table summarizes the interest expense incurred on the respective deposits:
 Years ended June 302005
    
    
    2004
    
    
    2003Savings accounts
    
    $
    15,037
    
    
    
    13,923
    
    
    
    17,849Interest-bearing checking accounts
    
    
    5,363
    
    
    
    5,302
    
    
    
    6,897Money market deposit accounts
    
    
    13,168
    
    
    
    14,786
    
    
    
    12,412Certificate accounts
    
    
    76,511
    
    
    
    72,317
    
    
    
    76,725$
    110,079
    
    
    
    106,328
    
    
    
    113,883
  75




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (11)   Borrowed FundsBorrowed funds at June 30, 2005 and 2004, are presented in the following table:
 2005
    
    
    2004Average
    
    
    
    
    
    
    AverageAmount
    
    
    rate
    
    
    Amount
    
    
    rateTerm notes payable to the FHLB
of Pittsburgh:Due within one year
    
    $
    
    %
    
    
    
    
    
    $
    34,706
    %
    
    
    6.15Due between one and two years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due between two and three years
    
    
    43,396
    
    
    
    3.98
    
    
    
    
    
    
    
    Due between three and four years
    
    
    101,058
    
    
    
    5.00
    
    
    
    43,546
    
    
    
    3.97Due between four and five years
    
    
    37,406
    
    
    
    4.72
    
    
    
    101,076
    
    
    
    5.00Due between five and ten years
    
    
    195,172
    
    
    
    4.72
    
    
    
    232,802
    
    
    
    4.72Due between ten and twenty years
    
    
    814
    
    
    
    3.00
    
    
    
    851
    
    
    
    3.00377,846
    
    
    
    
    
    
    
    412,981Revolving line of credit, Federal
Home Loan Bank of Pittsburgh
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Investor notes payable, due
various dates through 2009
    
    
    5,919
    
    
    
    4.99
    
    
    
    6,264
    
    
    
    4.99Securities sold under agreement to
repurchase, due within one year
    
    
    26,579
    
    
    
    2.25
    
    
    
    29,902
    
    
    
    1.29Total borrowed funds
    
    $
    410,344
    
    
    
    
    
    
    $
    449,147
 Borrowings from the Federal Home Loan Bank of Pittsburgh are secured by the Companys
investment securities, 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 $175,000,000 maturing on December 7, 2005. 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 fiscal years 2005 and 2004 was $26,889,000 and
$29,364,000, respectively. The maximum amount of security repurchase agreements outstanding
during fiscal years 2005 and 2004 was $33,670,000 and $32,097,000, respectively.
  76




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (12)   Income TaxesTotal income tax was allocated for the years ended June 30, 2005, 2004, and 2003 as follows:
 2005
    
    
    2004
    
    
    2003Income before income taxes
    
    $
    22,772
    
    
    
    19,845
    
    
    
    16,963Shareholders equity for
unrealized gain/ (loss) on
securities
available-for-sale
    
    
    3,525
    
    
    
    (6,403
    )
    
    
    1,962Shareholders equity for
tax benefit for excess of fair
value above cost of stock option
and recognition and retention
plans
    
    
    (249
    )
    
    
    (832
    )
    
    
    (221
    )$
    26,048
    
    
    
    12,610
    
    
    
    18,704
 Income tax expense (benefit) applicable to income before taxes consists of:
 Years ended June 302005
    
    
    2004
    
    
    2003Current
    
    $
    12,307
    
    
    
    17,528
    
    
    
    15,061Deferred
    
    
    10,465
    
    
    
    2,317
    
    
    
    1,902$
    22,772
    
    
    
    19,845
    
    
    
    16,963
 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 June 302005
    
    2004
    
    2003Expected tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Tax-exempt interest income
    
    
    (5.9
    )
    
    
    (6.5
    )
    
    
    (5.4
    )State income tax, net of federal benefit
    
    
    3.0
    
    
    
    3.0
    
    
    
    2.5Goodwill impairment
    
    
    
    
    
    
    4.4
    
    
    
    13.6Bank-owned life insurance
    
    
    (2.0
    )
    
    
    (2.0
    )
    
    
    (2.0
    )Other
    
    
    (1.1
    )
    
    
    (2.1
    )
    
    
    (4.3
    )Effective tax rate
    
    
    29.0
    %
    
    
    31.8
    %
    
    
    39.4
    %
  77




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at June 30, 2005 and 2004 are presented below:
 2005
    
    
    2004Deferred tax assets:Deferred fee income
    
    $
    485
    
    
    
    609Deferred compensation expense
    
    
    2,191
    
    
    
    2,671Net operating loss carryforwards
    
    
    4,669
    
    
    
    7,449Bad debts
    
    
    10,113
    
    
    
    9,319Accrued postretirement benefit cost
    
    
    372
    
    
    
    367Marketable securities available-for-sale
    
    
    
    
    
    
    709Reserve for uncollected interest
    
    
    333
    
    
    
    866Pension expense
    
    
    218
    
    
    
    Purchase accounting
    
    
    
    
    
    
    449Alternative minimum tax credit carryforward
    
    
    1,950
    
    
    
    8,055Other
    
    
    260
    
    
    
    49320,591
    
    
    
    30,987Deferred tax liabilities:Marketable securities available-for-sale
    
    
    2,431
    
    
    
    Pension expense
    
    
    
    
    
    
    102Purchase accounting
    
    
    255
    
    
    
    Intangible asset
    
    
    8,417
    
    
    
    7,649Mortgage servicing rights
    
    
    892
    
    
    
    844Fixed assets
    
    
    2,005
    
    
    
    1,222Other
    
    
    354
    
    
    
    73714,354
    
    
    
    10,554Net deferred tax asset
    
    $
    6,237
    
    
    
    20,433
 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. The Company will continue to review the criteria related to
the recognition of deferred tax assets on a quarterly basis.Under provisions of the Internal Revenue Code, Northwest has
approximately $12,813,000 of federal
net operating losses and approximately $3,150,000 of state net operating losses, which expire in
years 2006 through 2024. These net operating losses were acquired as part of the Prestige Bank and
Bell Federal Savings and Loan acquisitions. In addition, the Company
has approximately $1,950,000
of alternative minimum tax credit carryforwards, which can be carried forward indefinitely.
  78




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (13)
    
    Shareholders EquityRetained 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 June 30, 2005 include approximately
$38,900,000 representing such bad debt deductions for which no deferred income taxes have
been provided.(14)
    
    Earnings Per ShareBasic 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 common stock equivalents or 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. There were no anti-dilutive options in any
period presented in the table below. The computation of basic and diluted earnings per share
follows:
 Years ended June 302005
    
    
    2004
    
    
    2003Net income available to common shareholders
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063Weighted average common shares outstanding
    
    
    49,901
    
    
    
    47,817
    
    
    
    47,626Common stock equivalents due to effect of stock
options
    
    
    467
    
    
    
    582
    
    
    
    531Total weighted average
common shares and
equivalents
    
    
    50,368
    
    
    
    48,399
    
    
    
    48,157Basic earnings per share
    
    $
    1.12
    
    
    
    0.89
    
    
    
    0.55Diluted earnings per share
    
    $
    1.11
    
    
    
    0.88
    
    
    
    0.54
  79




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (15)
    
    Employee Benefit Plans
 (a)
    
    Pension PlansThe 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 (SERF) 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.Total expense for all retirement plans, including defined benefit pension plans, was
approximately $5,801,000, $5,271,000, and $3,945,000, for the years ended June 30, 2005,
2004, and 2003, respectively. Net periodic pension cost for the Companys defined
benefit pension plans consists of the following:
 Years ended June 302005
    
    
    2004
    
    
    2003Service cost
    
    $
    3,753
    
    
    
    3,324
    
    
    
    2,526Interest cost
    
    
    3,104
    
    
    
    2,656
    
    
    
    2,207Expected return on plan assets
    
    
    (2,810
    )
    
    
    (2,208
    )
    
    
    (1,910
    )Net amortization and deferral
    
    
    701
    
    
    
    811
    
    
    
    349Net periodic pension cost
    
    $
    4,748
    
    
    
    4,583
    
    
    
    3,172
  80




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The following table sets forth, for the Companys defined benefit pension plans, the plans
funded status and amounts recognized in the Companys consolidated statements of financial
condition at June 30, 2005 and 2004:
 2005
    
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    50,928
    
    
    
    43,628Service cost
    
    
    3,753
    
    
    
    3,324Interest cost
    
    
    3,147
    
    
    
    2,657Actuarial loss
    
    
    5,040
    
    
    
    2,278Benefits paid
    
    
    (1,167
    )
    
    
    (959
    )Benefit obligation at end of year
    
    $
    61,701
    
    
    
    50,928Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    36,310
    
    
    
    28,770Actual return on plan assets
    
    
    2,337
    
    
    
    4,807Employer contribution
    
    
    5,260
    
    
    
    3,692Benefits paid
    
    
    (1,167
    )
    
    
    (959
    )Fair value of plan assets at end of year
    
    $
    42,740
    
    
    
    36,310Funded status
    
    $
    (18,961
    )
    
    
    (14,618
    )Unrecognized transition asset
    
    
    (97
    )
    
    
    (137
    )Unrecognized prior service cost
    
    
    251
    
    
    
    330Unrecognized net actuarial loss
    
    
    18,509
    
    
    
    13,615Adjustment to recognize minimum liability
    
    
    (325
    )
    
    
    (138
    )Accrued benefit cost
    
    $
    (623
    )
    
    
    (948
    )
 The Company uses the same discount rate and rate of increase in compensation levels to
determine both the net pension cost and benefit obligation.The following table sets forth the assumptions used to develop the net pension cost and
benefit obligation:
 Years ended June 302005
    
    2004
    
    2003Discount rate
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.25
    %Expected long-term rate of return on
assets
    
    
    8.00
    
    
    
    8.00
    
    
    
    8.00Rate 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.
  81




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The accumulated benefit obligation for the funded defined benefit pension plan was $40,198,000 and
$32,086,000 at June 30, 2005 and 2004, respectively. The accumulated benefit obligation for all
unfunded defined benefit plans was $4,569,000 and $2,172,000 at June 30, 2005 and 2004,
respectively.The Company anticipates making contributions to its defined benefit pension plan of $3.0 million
to $7.0 million during the fiscal year ending June 30, 2006.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. The assets
will be reallocated periodically by the Trustee based on the ranges set forth by the Plan
Administrative Committee to meet the target allocations. The investment policy will be reviewed
periodically to determine if the policy should be changed. Pension assets will be conservatively
invested with the goal of providing market or better returns with below market risks. Assets will
be invested in a balanced portfolio composed primarily of equities, fixed income, and cash or cash
equivalent investments. The Trustee will try to maintain an approximate asset mix position of
30-60% equities and 20-50% bonds.A maximum of 10% may be invested in any one stock, including the stock of Northwest Bancorp, Inc.
The actual 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.The following table sets forth the weighted average asset allocation of defined benefit plans:
 Target
    
    June 30Asset category
    
    allocation
    
    2005
    
    2004Debt securities
    
    
    20  50
    %
    
    
    25
    %
    
    
    29
    %Equity securities
    
    
    30  60
    
    
    
    56
    
    
    
    58Real estate
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    5  50
    
    
    
    19
    
    
    
    13Total
    
    
    
    
    
    
    100
    %
    
    
    100
    %
 The benefits expected to be paid in each year from 2006  2010 are $1,091,000,
$1,170,000, $1,244,000, $1,293,000, and $1,489,000, respectively. The aggregate benefits
expected to be paid in the five years from 2011  2015 are $11,069,000. The expected
benefits to be paid are based on the same assumptions used to measure the Companys benefit
obligation at June 30, 2005 and include estimated future employee service.(b)
    
    Postretirement Healthcare PlanIn 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
  82




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    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.Net periodic cost for the Companys postretirement healthcare benefits consist of the following:
 Years ended June 302005
    
    
    2004
    
    
    2003Service cost
    
    $
    
    
    
    
    
    
    
    
    2Interest cost
    
    
    98
    
    
    
    91
    
    
    
    64Recognized actuarial gain
    
    
    29
    
    
    
    22
    
    
    
    2Net
periodic
(benefit)
cost
    
    $
    127
    
    
    
    113
    
    
    
    68
 The following table sets forth the funded status of the Companys postretirement healthcare
benefit plan and the amounts recognized in the Companys consolidated statements of financial
condition at June 30, 2005 and 2004:
 2005
    
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    1,631
    
    
    
    1,507Service cost
    
    
    
    
    
    
    Interest cost
    
    
    99
    
    
    
    91Actuarial (gain) loss
    
    
    95
    
    
    
    131Benefits paid
    
    
    (150
    )
    
    
    (98
    )Benefit obligation at end of year
    
    
    1,675
    
    
    
    1,631Fair value of plan assets at end of year
    
    
    
    
    
    
    Funded status
    
    
    (1,675
    )
    
    
    (1,631
    )Unrecognized net actuarial (gain) loss
    
    
    612
    
    
    
    547Accrued benefit cost
    
    $
    (1,063
    )
    
    
    (1,084
    )
  83




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The assumptions used to develop the preceding information for postretirement healthcare
benefits are as follows:
 Years ended June 302005
    
    
    2004
    
    
    2003Discount rate
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.25
    %Monthly cost of healthcare insurance per
beneficiary
    
    $
    229.20
    
    
    
    222.25
    
    
    
    198.61Annual rate of increase in healthcare
costs
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
 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 $7,000, in the
aggregate, and the accumulated postretirement benefit obligation for healthcare benefits
would increase by $117,000.(c)
    
    Employee Stock Ownership PlanThe Company has continued its previously leveraged 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 now
makes annual contributions to the ESOP at the boards discretion. Company shares are then
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.ESOP compensation expense was $1,100,000, $871,000, and $1,123,000 for the fiscal years
ended June 30, 2005, 2004, and 2003, respectively.(d)
    
    Recognition and Retention PlanOn November 17, 2004, the Company established a Recognition and Retention Plan for
Employees and Outside Directors (RRP). The objective of the RRP was to enable the Company to
provide directors, officers, and employees with a proprietary interest in the Company. The
number of common shares awarded under the RRP was 278,231 (total market value of $5,959,000
at issuance date). Shares of common stock granted pursuant to the RRP were in the form of
restricted stock and generally are payable over a five-year period at the rate of 20% per
year, commencing one year after the award date. 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. The recipients are entitled to all
voting and other shareholder rights, except that the shares, while restricted, may not be
sold, pledged, or otherwise disposed of and are required to be held in a trust.
  84




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##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (e)
    
    Stock Option PlanOn 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. 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, 2004, the Company adopted the 2004
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. These options are exercisable
for a period often years from the grant date with each recipient vesting at the rate of 20%
per year commencing at one year from the grant date.
  85




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    The following table summarizes the activity in the Companys Option Plan during the
periods ending June 30:
 2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exercise
    
    
    
    
    
    
    exerciseNumber
    
    
    price
    
    
    Number
    
    
    price
    
    
    Number
    
    
    priceBalance at
beginning of year
    
    
    1,061,884
    
    
    $
    9.66
    
    
    
    1,182,656
    
    
    $
    7.74
    
    
    
    1,177,880
    
    
    $
    6.74Granted
    
    
    445,326
    
    
    
    24.20
    (a)
    
    
    182,000
    
    
    
    16.59
    (a)
    
    
    162,940
    
    
    
    13.30
    (a)Exercised
    
    
    (199,456
    )
    
    
    6.30
    
    
    
    (301,314
    )
    
    
    6.30
    
    
    
    (156,792
    )
    
    
    5.94Forfeited
    
    
    (3,948
    )
    
    
    15.16
    
    
    
    (1,458
    )
    
    
    13.23
    
    
    
    (1,372
    )
    
    
    7.82Balance at end of year
    
    
    1,303,806
    
    
    
    15.13
    
    
    
    1,061,884
    
    
    
    9.66
    
    
    
    1,182,656
    
    
    
    7.74Exercisable at end
of year
    
    
    694,821
    
    
    
    10.19
    
    
    
    729,068
    
    
    
    7.78
    
    
    
    902,983
    
    
    
    6.64
 (a)
    
    
    Weighted average fair value of options at grant date: $6.98, $4.03, and
$3.76, 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
    
    Exercise
    
    Exercise
    
    Exercise
    
    Exercise
    
    Exerciseprice
    
    price
    
    price
    
    price
    
    price
    
    price
    
    price
    
    price
    
    price
    
    price
    
    price
    
    Total$5.580
    
    $5.625
    
    $5.875
    
    $6.875
    
    $7.812
    
    $9.780
    
    $9.875
    
    $13.302
    
    $16.59
    
    $22.93
    
    $25.49
    
    $15.126Options outstanding:Number of options
    
    
    44,000
    
    
    
    18,860
    
    
    
    211,074
    
    
    
    8,700
    
    
    
    34,200
    
    
    
    199,210
    
    
    
    14,486
    
    
    
    152,338
    
    
    
    176,188
    
    
    
    224,546
    
    
    
    220,204
    
    
    
    1,303,806Weighted average
remaining contract
life (years)
    
    
    0.50
    
    
    
    0.75
    
    
    
    0.50
    
    
    
    5.00
    
    
    
    4.25
    
    
    
    6.25
    
    
    
    3.50
    
    
    
    7.00
    
    
    
    8.00
    
    
    
    9.50
    
    
    
    9.50
    
    
    
    6.39Options exercisable:Number of options
    
    
    44,000
    
    
    
    18,860
    
    
    
    211,074
    
    
    
    8,700
    
    
    
    34,200
    
    
    
    163,634
    
    
    
    14,486
    
    
    
    87,877
    
    
    
    67,949
    
    
    
    
    
    
    
    44,041
    
    
    
    694,821
 (16)
    
    Disclosures About Fair Value of Financial InstrumentsSFAS 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.
  86




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
     2005
    
    
    2004Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    Estimatedamount
    
    
    fair value
    
    
    amount
    
    
    fair valueFinancial assets:Cash and equivalents
    
    $
    135,888
    
    
    
    135,888
    
    
    
    391,723
    
    
    
    391,723Securities available-for-sale
    
    
    675,183
    
    
    
    675,183
    
    
    
    855,679
    
    
    
    855,679Securities held-to-maturity
    
    
    702,979
    
    
    
    709,468
    
    
    
    601,542
    
    
    
    601,738Loans receivable
    
    
    4,408,447
    
    
    
    4,523,332
    
    
    
    4,084,611
    
    
    
    4,170,724Accrued interest receivable
    
    
    24,387
    
    
    
    24,387
    
    
    
    22,578
    
    
    
    22,578FHLB stock
    
    
    33,055
    
    
    
    33,055
    
    
    
    38,884
    
    
    
    38,884Total financial assets
    
    $
    5,979,939
    
    
    
    6,101,313
    
    
    
    5,995,017
    
    
    
    6,081,326Financial liabilities:Savings and checking accounts
    
    $
    2,625,459
    
    
    
    2,625,459
    
    
    
    2,859,445
    
    
    
    2,859,445Time deposits
    
    
    2,562,487
    
    
    
    2,590,090
    
    
    
    2,332,176
    
    
    
    2,367,329Borrowed funds
    
    
    410,344
    
    
    
    410,509
    
    
    
    449,147
    
    
    
    452,691Trust-preferred securities
    
    
    102,062
    
    
    
    104,493
    
    
    
    102,062
    
    
    
    102,959Accrued interest payable
    
    
    4,020
    
    
    
    4,020
    
    
    
    4,280
    
    
    
    4,280Total financial
liabilities
    
    $
    5,704,372
    
    
    
    5,734,571
    
    
    
    5,747,110
    
    
    
    5,786,704
  Marketable Securities
  Loans Receivable
   87




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    Deposit LiabilitiesSFAS 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 FundsThe fixed rate advances were valued by comparing their contractual cost to the prevailing
market cost.Trust-Preferred SecuritiesThe fair value of fixed rate trust-preferred securities is based on the closing trade
price on the last day of the fiscal year. The variable rate trust-preferred securities are
calculated using the discounted cash flows at the prevailing rate of interest.Off-Balance Sheet Financial InstrumentsThese 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 June 30, 2005 and 2004,
there was no significant unrealized appreciation or depreciation on these financial
instruments.(17)
    
    Regulatory Capital RequirementsThe 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
  88




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
       June 30, 2005Minimum capital
    
    
    Well capitalizedActual
    
    
    requirements
    
    
    requirementsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk
weighted assets):Northwest Savings Bank
    
    $
    542,739
    
    
    
    15.53
    %
    
    $
    279,538
    
    
    
    8.00
    %
    
    $
    349,423
    
    
    
    10.00
    %Tier I capital (to risk
weighted assets):Northwest Savings Bank
    
    
    508,629
    
    
    
    14.56
    
    
    
    139,769
    
    
    
    4.00
    
    
    
    209,654
    
    
    
    6.00Tier I capital (leverage)
(to average assets):Northwest Savings Bank
    
    
    508,629
    
    
    
    8.36
    
    
    
    182,503
    
    
    
    3.00
    *
    
    
    304,171
    
    
    
    5.00
  89




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    June 30, 2005Minimum capital
    
    
    Well capitalizedActual
    
    
    requirements
    
    
    requirementsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk
weighted assets):Northwest Savings Bank
    
    $
    430,831
    
    
    
    15.02
    %
    
    $
    229,505
    
    
    
    8.00
    %
    
    $
    286,881
    
    
    
    10.00
    %Tier I capital (to risk
weighted assets):Northwest Savings Bank
    
    
    402,290
    
    
    
    14.02
    
    
    
    114,752
    
    
    
    4.00
    
    
    
    172,129
    
    
    
    6.00Tier I capital (leverage)
(to average assets):Northwest Savings Bank
    
    
    402,290
    
    
    
    7.56
    
    
    
    159,709
    
    
    
    3.00
    *
    
    
    266,182
    
    
    
    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
June 30, 2005, the Company had not been advised of any additional requirements in this
regard.
 (18)
    
    Contingent LiabilitiesThe 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.(19)
    
    Components of Comprehensive IncomeFor the year ended June 30:
 2005
    
    
    2004
    
    
    2003Unrealized gain (loss) on marketable
securities available-for-sale
    
    $
    10,072
    
    
    
    (15,526
    )
    
    
    2,568Tax (expense) benefit
    
    
    (3,789
    )
    
    
    5,434
    
    
    
    (899
    )Reclassification adjustment for (gains) losses
included in net income, net of tax
of $(142), $970, and $245, respectively
    
    
    264
    
    
    
    (1,800
    )
    
    
    (455
    )Net unrealized gain (loss)
    
    $
    6,547
    
    
    
    (11,892
    )
    
    
    1,214
  90




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (20)
    
    Northwest Bancorp, Inc. (Parent Company Only)
   June 302005
    
    
    2004AssetsCash and cash equivalents
    
    $
    10,092
    
    
    
    10,542Marketable securities available-for-sale
    
    
    104
    
    
    
    1,116Investment in bank subsidiaries
    
    
    667,373
    
    
    
    610,241Loan receivable  Northwest Bancorp, MHC
    
    
    
    
    
    
    22,000Goodwill
    
    
    
    
    
    
    2,138Other assets
    
    
    6,907
    
    
    
    7,006Total assets
    
    $
    684,476
    
    
    
    653,043Liabilities and Shareholders EquityLiabilities:Debentures payable
    
    $
    102,062
    
    
    
    102,062Other liabilities
    
    
    224
    
    
    
    509Total liabilities
    
    
    102,286
    
    
    
    102,571Shareholders equity
    
    
    582,190
    
    
    
    550,472Total liabilities and shareholders equity
    
    $
    684,476
    
    
    
    653,043
  91




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
     Years ended June 302005
    
    
    2004
    
    
    2003Income:Interest income
    
    $
    823
    
    
    
    1,366
    
    
    
    2,042Dividends from bank subsidiary
    
    
    16,000
    
    
    
    
    
    
    
    Undistributed earnings from equity
investment in bank subsidiaries
    
    
    45,438
    
    
    
    47,621
    
    
    
    30,150Gain on sale of marketable
securities available-for-sale
    
    
    
    
    
    
    69
    
    
    
    Other income
    
    
    3
    
    
    
    2
    
    
    
    9Total income
    
    
    62,264
    
    
    
    49,058
    
    
    
    32,201Expense:Compensation and benefits
    
    
    804
    
    
    
    318
    
    
    
    272Amortization of intangible assets
    
    
    262
    
    
    
    788
    
    
    
    Other expense
    
    
    364
    
    
    
    292
    
    
    
    319Interest expense
    
    
    8,079
    
    
    
    7,714
    
    
    
    7,845Total expense
    
    
    9,509
    
    
    
    9,112
    
    
    
    8,436Net income before taxes
    
    
    52,755
    
    
    
    39,946
    
    
    
    23,765Federal and state income taxes
    
    
    (3,049
    )
    
    
    (2,704
    )
    
    
    (2,298
    )Net income
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063
  92




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
     Years ended June 302005
    
    
    2004
    
    
    2003Operating activities:Net income
    
    $
    55,804
    
    
    
    42,650
    
    
    
    26,063Adjustments to reconcile net income to net
cash provided (used) by operating
activities:Undistributed earnings of subsidiaries
    
    
    (45,438
    )
    
    
    (47,621
    )
    
    
    (30,150
    )Depreciation and amortization
    
    
    262
    
    
    
    788
    
    
    
    Noncash compensation expense related
to stock benefit plans
    
    
    492
    
    
    
    
    
    
    
    Gain on sale of marketable securities
available-for-sale
    
    
    
    
    
    
    (69
    )
    
    
    Net change in other assets and liabilities
    
    
    (196
    )
    
    
    1,036
    
    
    
    (1,145
    )Net cash used by operating
activities
    
    
    10,924
    
    
    
    (3,216
    )
    
    
    (5,232
    )Investing activities:Additional investment in subsidiaries
    
    
    
    
    
    
    (1,000
    )
    
    
    (3,000
    )Loan to Northwest Bancorp, MHC
    
    
    10,000
    
    
    
    (10,000
    )
    
    
    (12,000
    )Proceeds from sale or maturity of marketable
securities available-for-sale
    
    
    1,000
    
    
    
    1,169
    
    
    
    1,932Acquisitions, net of cash received
    
    
    (3,000
    )
    
    
    (122,673
    )
    
    
    Net cash used by investing
activities
    
    
    8,000
    
    
    
    (132,504
    )
    
    
    (13,068
    )Financing activities:Cash dividends paid
    
    
    (20,171
    )
    
    
    (9,963
    )
    
    
    (3,923
    )Proceeds from stock offering, net of
issuance costs
    
    
    
    
    
    
    112,804
    
    
    
    Proceeds from options exercised
    
    
    797
    
    
    
    1,031
    
    
    
    742Net cash provided (used) by
financing activities
    
    
    (19,374
    )
    
    
    103,872
    
    
    
    (3,181
    )Net increase (decrease) in cash
and cash equivalents
    
    $
    (450
    )
    
    
    (31,848
    )
    
    
    (21,481
    )Cash and cash equivalents at beginning of year
    
    $
    10,542
    
    
    
    42,390
    
    
    
    63,871Net increase (decrease) in cash
and cash equivalents
    
    
    (450
    )
    
    
    (31,848
    )
    
    
    (21,481
    )Cash and cash equivalents at end of year
    
    $
    10,092
    
    
    
    10,542
    
    
    
    42,390
  93




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    (21)
    
    Business SegmentsThe 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, that operates forty-seven offices
in Pennsylvania and two in southwestern New York. This subsidiary compliments the services of
the banks 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 Northwest Savings Bank. 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 fiscal year ended
    
    Community
    
    
    Consumer
    
    
    AllJune 30, 2005
    
    banks
    
    
    finance
    
    
    other*
    
    
    ConsolidatedExternal interest income
    
    $
    304,144
    
    
    
    17,203
    
    
    
    477
    
    
    
    321,824Intersegment interest income
    
    
    5,449
    
    
    
    
    
    
    
    (5,449
    )
    
    
    Interest expense
    
    
    129,767
    
    
    
    5,757
    
    
    
    2,523
    
    
    
    138,047Provision for loan losses
    
    
    6,980
    
    
    
    2,586
    
    
    
    
    
    
    
    9,566Noninterest income
    
    
    29,374
    
    
    
    2,388
    
    
    
    242
    
    
    
    32,004Noninterest expense
    
    
    118,385
    
    
    
    7,824
    
    
    
    1,430
    
    
    
    127,639Income tax expense (benefit)
    
    
    24,398
    
    
    
    1,423
    
    
    
    (3,049
    )
    
    
    22,772Net income
    
    
    59,437
    
    
    
    2,001
    
    
    
    (5,634
    )
    
    
    55,804Total assets
    
    
    6,295,545
    
    
    
    123,363
    
    
    
    (88,426
    )
    
    
    6,330,482
  94




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    At or for the fiscal year ended
    
    Community
    
    
    Consumer
    
    
    AllJune 30, 2004
    
    banks
    
    
    finance
    
    
    other*
    
    
    ConsolidatedExternal interest income
    
    $
    282,072
    
    
    
    17,483
    
    
    
    675
    
    
    
    300,230Intersegment interest income
    
    
    4,507
    
    
    
    
    
    
    
    (4,507
    )
    
    
    Interest expense
    
    
    126,960
    
    
    
    4,819
    
    
    
    2,687
    
    
    
    134,466Provision for loan losses
    
    
    4,138
    
    
    
    2,722
    
    
    
    
    
    
    
    6,860Noninterest income
    
    
    30,352
    
    
    
    1,269
    
    
    
    241
    
    
    
    31,862Noninterest expense
    
    
    118,955
    
    
    
    7,919
    
    
    
    1,397
    
    
    
    128,271Income tax expense (benefit)
    
    
    21,182
    
    
    
    1,367
    
    
    
    (2,704
    )
    
    
    19,845Net income
    
    
    45,696
    
    
    
    1,925
    
    
    
    (4,971
    )
    
    
    42,650Total assets
    
    
    6,188,002
    
    
    
    123,153
    
    
    
    32,093
    
    
    
    6,343,248
 At or for the fiscal year ended
    
    Community
    
    
    Consumer
    
    
    AllJune 30, 2003
    
    banks
    
    
    finance
    
    
    other*
    
    
    ConsolidatedExternal interest income
    
    $
    264,235
    
    
    
    17,858
    
    
    
    431
    
    
    
    282,524Intersegment interest income
    
    
    5,278
    
    
    
    
    
    
    
    (5,278
    )
    
    
    Interest expense
    
    
    135,362
    
    
    
    5,705
    
    
    
    947
    
    
    
    142,014Provision for loan losses
    
    
    5,874
    
    
    
    2,571
    
    
    
    
    
    
    
    8,445Noninterest income
    
    
    25,918
    
    
    
    1,110
    
    
    
    
    
    
    
    27,028Noninterest expense
    
    
    107,906
    
    
    
    7,570
    
    
    
    591
    
    
    
    116,067Income tax expense (benefit)
    
    
    17,965
    
    
    
    1,296
    
    
    
    (2,298
    )
    
    
    16,963Net income
    
    
    28,324
    
    
    
    1,826
    
    
    
    (4,087
    )
    
    
    26,063Total assets
    
    
    5,537,746
    
    
    
    123,747
    
    
    
    20,202
    
    
    
    5,681,695
 
 *
    
    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)The Company has two Delaware statutory business trusts, Northwest Capital Trust I and
Northwest Bancorp Statutory Trust I (the Trusts). 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. Northwest Capital Trust I issued
2,760,000 of 8.75% Cumulative Trust Preferred Securities through a public offering on
November 30, 2001 (liquidation value of $25 per preferred security or $69,000,000) with a
stated maturity of
  95




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    December 31, 2031. The securities trade on the Nasdaq Stock Market under the symbol NWSBP.
Northwest Bancorp Statutory Trust I issued 30,000 Cumulative Trust Preferred Securities in a
private transaction to a pooled investment vehicle on December 18, 2001 (liquidation value of
$1,000 per preferred security or $30,000,000) with a stated maturity of December 23, 2031 and a
floating rate of interest, which is reset quarterly, equal to three month LIBOR plus 3.60%. The
trust-preferred securities qualify as regulatory Tier I capital and the cash distributions are tax
deductible.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 Capital Trust I holds $71,134,025 of the Companys 8.75%
junior subordinated debentures, due December 31, 2031. Northwest Bancorp Statutory Trust I holds
$30,928,000 of the Companys junior subordinated debentures due December 23, 2031 with a floating
rate of interest, reset quarterly, of three-month LIBOR plus 3.60%. The rate in effect at June 30,
2005 was 7.03%. These subordinated debentures are the sole assets of the trusts.Prior to the adoption of FASB Interpretation No. 46 Revised (FIN 46 Revised) effective October 1,
2003, for financial reporting purposes, the trusts were treated as subsidiaries and were
consolidated into the financial statements of the Company. The capital securities were presented
as separate line item on the consolidated statement of financial condition as Guaranteed
preferred beneficial interests in Companys junior subordinated deferrable interest debentures
(trust-preferred securities), and the retained common capital securities of the trusts were
eliminated against the Companys investment in the trusts. Distributions on the trust-preferred
securities were reported as interest expense.Upon adoption of FIN 46 Revised, the trusts were deconsolidated. As a result, the junior
subordinated debentures are reported on the consolidated statement of financial condition as
Junior subordinated deferrable interest debentures held by trusts that issue guaranteed capital
debt securities. The Company records interest expense on the junior subordinated debentures. The
Company also recorded the $3.1 million of common capital securities issued by the trusts in other
assets.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, 2006. 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;
  96




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    
    
    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.
 In addition, all or part of the debentures may be redeemed on or after December 31, 2003 and
prior to December 31, 2006 in the unlikely event of a mutual-to-stock conversion of Northwest
Bancorp, MHC (the mutual holding company of Northwest Bancorp, Inc.). Under such
circumstances the debentures may be redeemed at a price equal to the accrued and unpaid
interest to the date fixed for redemption plus 107% of the principal amount, thereof, and
holders of the preferred securities will receive 107% of the liquidation amount of $25 per
preferred security plus any accrued and unpaid distributions to the date of redemption.The Company may, at any time, dissolve the trust and distribute the debentures to the trust
security holders, subject to receipt of any required regulatory approval(s).(23)
    
    Selected Quarterly Financial Data (Unaudited)
 Three months endedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30(In thousands, except per share data)Fiscal 2005:Interest income
    
    $
    78,133
    
    
    
    79,468
    
    
    
    81,752
    
    
    
    82,471Interest expense
    
    
    33,300
    
    
    
    34,082
    
    
    
    34,429
    
    
    
    36,236Net interest income
    
    
    44,833
    
    
    
    45,386
    
    
    
    47,323
    
    
    
    46,235Provision for loan losses
    
    
    1,839
    
    
    
    2,164
    
    
    
    2,906
    
    
    
    2,657Noninterest income
    
    
    7,610
    
    
    
    7,501
    
    
    
    8,558
    
    
    
    8,335Noninterest expenses
    
    
    30,338
    
    
    
    32,173
    
    
    
    32,729
    
    
    
    32,399Income before income taxes
    
    
    20,266
    
    
    
    18,550
    
    
    
    20,246
    
    
    
    19,514Income taxes
    
    
    5,998
    
    
    
    5,384
    
    
    
    5,983
    
    
    
    5,407Net income
    
    $
    14,268
    
    
    
    13,166
    
    
    
    14,263
    
    
    
    14,107Basic earnings per share
    
    $
    0.30
    
    
    
    0.26
    
    
    
    0.28
    
    
    
    0.28Diluted earnings per share
    
    $
    0.29
    
    
    
    0.26
    
    
    
    0.28
    
    
    
    0.28
  97




---



##### 



NORTHWEST BANCORP, INC. AND SUBSIDIARIES
    Three months endedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30(In thousands, except per share data)Fiscal 2004:Interest income
    
    $
    71,118
    
    
    
    76,786
    
    
    
    76,685
    
    
    
    75,641Interest expense
    
    
    35,355
    
    
    
    33,984
    
    
    
    32,502
    
    
    
    32,625Net interest
income
    
    
    35,763
    
    
    
    42,802
    
    
    
    44,183
    
    
    
    43,016Provision for loan losses
    
    
    1,745
    
    
    
    1,733
    
    
    
    1,659
    
    
    
    1,723Noninterest income
    
    
    9,954
    
    
    
    7,484
    
    
    
    8,291
    
    
    
    6,133Noninterest expenses
    
    
    25,647
    
    
    
    30,679
    
    
    
    30,794
    
    
    
    41,151Income before
income taxes
    
    
    18,325
    
    
    
    17,874
    
    
    
    20,021
    
    
    
    6,275Income taxes
    
    
    5,473
    
    
    
    5,128
    
    
    
    5,832
    
    
    
    3,412Net income
    
    $
    12,852
    
    
    
    12,746
    
    
    
    14,189
    
    
    
    2,863Basic earnings per share
    
    $
    0.27
    
    
    
    0.27
    
    
    
    0.30
    
    
    
    0.06Diluted earnings per share
    
    $
    0.27
    
    
    
    0.26
    
    
    
    0.29
    
    
    
    0.06
 (24)
    
    Subsequent EventOn August 23, 2005, the Company announced that its Board of Directors authorized the
repurchase of up to 5%, or approximately one million, of the Companys publicly traded shares.
The stock repurchase program, which has no expiration date, may be carried out through open
market purchases, block trades, and in negotiated private transactions. Any repurchased shares
will be held as treasury stock and will be available for general corporate purposes.
 98




---



##### 



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A.
    
    CONTROLS AND PROCEDURES
    ITEM 9B.
    
    OTHER INFORMATION
  99




---



##### 



PART III
 ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11.
    
    EXECUTIVE COMPENSATION
  ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    Number of securities to be issued
    
    
    
    
    
    
    Number of securitiesEquity compensation plans
    
    upon exercise of outstanding
    
    
    Weighted average
    
    remaining available forapproved by stockholders
    
    options and rights
    
    
    exercise price
    
    issuance under plan1995 Stock Option Plan
    
    331,320
    
    
    
    $
    6.22
    
    
    2000 Stock Option Plan
    
    747,940
    
    
    
    $
    16.73
    
    
    6,4352004 Stock Option Plan
    
    224,546
    
    
    
    $
    22.93
    
    
    501,006Total
    
    1,303,806
    
    
    
    $
    15.13
    
    
    507,441
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   (A)
    
    Report of Independent Registered Public Accounting Firm(B)
    
    Consolidated Statements of Financial Condition  at June 30, 2005
and 2004(C)
    
    Consolidated Statements of Income  Years ended June 30, 2005,
2004 and 2003
 100




---



##### 



(D)
    
    Consolidated Statements of Changes in Shareholders Equity 
Years ended June 30, 2005, 2004 and 2003(E)
    
    Consolidated Statements of Cash Flows  Years ended June 30,
2005, 2004 and 2003(F)
    
    Notes to Consolidated Financial Statements.
 Financial Statement Schedules
  Exhibits
 Regulation
    
    
    
    Reference to Prior FilingS-K Exhibit
    
    
    
    or Exhibit NumberNumber
    
    Document
    
    Attached Hereto2
    
    Plan of acquisition, reorganization,
arrangement, liquidation or
succession
    
    None3
    
    Articles of Incorporation and Bylaws
    
    ***4
    
    Instruments defining the rights of
security holders, including
indentures
    
    *9
    
    Voting trust agreement
    
    None10.1
    
    Restated Deferred Compensation Plan
for Directors
    
    *10.2
    
    Retirement Plan for Outside Directors
    
    *10.3
    
    Northwest Savings Bank Nonqualified
Supplemental Retirement Plan
    
    *10.4
    
    Employee Stock Ownership Plan
    
    *10.5
    
    Employee Severance Compensation Plan
    
    *10.6
    
    Employment Agreement for William J.
Wagner
    
    **10.7
    
    Form of Senior Vice President
Employment Agreement
    
    **10.8
    
    Northwest Bancorp, Inc. 2004 Stock
Option Plan
    
    ****10.9
    
    Northwest Bancorp, Inc. 2004
Recognition and Retention Plan
    
    ****11
    
    Statement re: computation of per
share earnings
    
    None12
    
    Statement re: computation or ratios
    
    Not required16
    
    Letter re: change in certifying
accountant
    
    None18
    
    Letter re: change in accounting
principles
    
    None21
    
    Subsidiaries of Registrant
    
    **22
    
    Published report regarding matters
submitted to vote of security
holders
    
    None23
    
    Consent of experts and counsel
    
    23
 101




---



##### 



Regulation
    
    
    
    Reference to Prior FilingS-K Exhibit
    
    
    
    or Exhibit NumberNumber
    
    Document
    
    Attached Hereto24
    
    Power of Attorney
    
    Not Required28
    
    Information from reports furnished
to State insurance regulatory
authorities
    
    None31.1
    
    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
    
    31.131.2
    
    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
    
    31.232
    
    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.**
    
    This document has been filed with the Securities and Exchange Commission on September 30,
2002.***
    
    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. 102




---



##### 



SIGNATURES
  NORTHWEST BANCORP, INC.Date:
    

September 13, 2005
    
    
    
    By:
    
    /s/ William J. WagnerWilliam J. Wagner, Chairman, President andChief Executive Officer (PrincipalExecutive Officer)
  By:
    
    /s/ William J. Wagner
    
    By:
    

/s/
William W. Harvey, Jr.William J. Wagner, Chairman, President,
    
    
    
    William W. Harvey, Jr., Senior ViceChief Executive Officer and Director
    
    
    
    President, Finance (PrincipalFinancial and Accounting Officer)Date:  September 13,
2005
    
    
    
    Date:  September 13,
2005By:
    

/s/ John M. Bauer
    
    By:
    

/s/ Richard L. CarrJohn M. Bauer, Director
    
    
    
    Richard L. Carr, DirectorDate:  September 13,
2005
    
    
    
    Date:  September 13,
2005By:
    

/s/ Richard
E. McDowell
    

By:
    

/s/ Thomas
K. CrealRichard E. McDowell, Director
    
    
    
    Thomas K. Creal, III, DirectorDate:  September 13,
2005
    
    
    
    Date:  September 13,
2005By:
    
    /s/ Joseph F. Long
    
    By:
    

/s/ A. Paul KingJoseph F. Long, Director
    
    
    
    A. Paul King, DirectorDate:  September 13,
2005
    
    
    
    Date:  September 13,
2005By:
    

/s/ Robert
G. FerrierRobert G. Ferrier, DirectorDate: September 13, 2005
 103