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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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Form 10-QSB

(Mark One)



| ̈ | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
.
|- | ------------------------------------------------------------------------------------------------------------------



|x | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from 1/1/06 to 3/31/06.
|- | ------------------------------------------------------------------------------------------------------------------------------------

Commission file number 000-24151



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NORTHWEST BANCORPORATION, INC.

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Washington                                                     |  | 91-1574174                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer identification No.)

421 West Riverside, Spokane, WA 99201-0403

(Address of principal executive offices)

(509) 456-8888

(Issuers telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No ̈

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x

APPLICABLE ONLY TO CORPORATE ISSUERS

The Registrant has a single class of common stock, of which there are 2,109,728 shares issued and outstanding as of March 31, 2006.

Transitional Small Business Disclosure Format:

Yes  x    No ̈



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Table of Contents



|               |  |         |  |                                                                                                  |  |     
|-------------- |  | ------- |  | ------------------------------------------------------------------------------------------------ |  | ----
|               |  |         |  |                                                                                                  |  | Page
|               |  |         | 
|Part I         |  |         |  | Financial Information                                                                            |  |     
|               |  |         | 
|               |  | Item 1. |  | Financial Statements                                                                             |  |     
|               |  |         | 
|               |  |         |  | Consolidated Statements of Condition  March 31, 2006 and December 31, 2005                      |  | 1   
|               |  |         | 
|               |  |         |  | Consolidated Statements of Income  Three-months, year-to-date, ended March 31, 2006 and 2005    |  | 2   
|               |  |         | 
|               |  |         |  | Consolidated Statements of Cash Flow  Three-months, year-to-date, ended March 31, 2006 and 2005 |  | 3   
|               |  |         | 
|               |  |         |  | Consolidated Statements of Stockholders Equity as of March 31, 2006 and 2005                    |  | 4   
|               |  |         | 
|               |  |         |  | Notes to Consolidated Financial Statements                                                       |  | 6   
|               |  |         | 
|               |  | Item 2. |  | Managements Discussion and Analysis or Plan of Operation                                        |  | 10  
|               |  |         | 
|               |  | Item 3. |  | Controls and Procedures                                                                          |  | 10  
|               |  |         | 
|Part II        |  |         |  | Other Information                                                                                |  |     
|               |  |         | 
|               |  | Item 6. |  | Exhibits and Reports on Form 8-K                                                                 |  | 11  
|               | 
|Signatures     |  | 12     
|               | 
|Certifications |  |        



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Part I Financial Information



|Item 1. | Financial Statements
|------- | --------------------

NORTHWEST BANCORPORATION,
INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONDITION

Unaudited

March 31, 2006

(Dollars in thousands)



|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                  |  | March 312006 |         |   | December 31 2005 |  
|Assets                                                                                                                                            |  |              |         |   |                  |   |         |  
|Cash and due from banks                                                                                                                           |  | $            | 8,020   |   |                  | $ | 8,337   |  
|Federal funds sold/FHLB interest bearing balances                                                                                                 |  |              | 4,975   |   |                  |   | 2,234   |  
|Securities held-to-maturity (Note 2; fair value, $3,957 and $4,076, respectively)                                                                 |  |              | 3,983   |   |                  |   | 4,089   |  
|Securities available-for-sale (Note 2; cost, $32,387 and $32,588, respectively)                                                                   |  |              | 31,838  |   |                  |   | 32,200  |  
|Federal Home Loan Bank stock, at cost                                                                                                             |  |              | 646     |   |                  |   | 646     |  
|Loans, net of allowance for loan losses of $2,322 in 2006 and $2,252 in 2005 (Notes 3 & 4)                                                        |  |              | 196,004 |   |                  |   | 186,318 |  
|Loans held for sale                                                                                                                               |  |              | 1,368   |   |                  |   | 148     |  
|Accrued interest receivable                                                                                                                       |  |              | 1,190   |   |                  |   | 1,040   |  
|Premises and equipment, net                                                                                                                       |  |              | 6,142   |   |                  |   | 5,650   |  
|Foreclosed real estate                                                                                                                            |  |              | 5       |   |                  |   | 17      |  
|Bank owned life insurance                                                                                                                         |  |              | 3,344   |   |                  |   | 3,314   |  
|Other assets                                                                                                                                      |  |              | 1,634   |   |                  |   | 1,472   |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL ASSETS                                                                                                                                      |  | $            | 259,149 |   |                  | $ | 245,465 |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Liabilities                                                                                                                                       |  |              |         |   |                  |   |         |  
|Noninterest bearing demand deposits                                                                                                               |  | $            | 46,509  |   |                  | $ | 49,107  |  
|Money Market accounts                                                                                                                             |  |              | 43,963  |   |                  |   | 44,899  |  
|NOW accounts                                                                                                                                      |  |              | 14,276  |   |                  |   | 13,038  |  
|Savings accounts                                                                                                                                  |  |              | 8,776   |   |                  |   | 8,246   |  
|Time Certificates of Deposit, $100,000 and over                                                                                                   |  |              | 32,354  |   |                  |   | 29,311  |  
|Time Certificates of Deposit, under $100,000                                                                                                      |  |              | 59,629  |   |                  |   | 47,442  |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL DEPOSITS                                                                                                                                    |  |              | 205,507 |   |                  |   | 192,043 |  
|Securities sold under agreement to repurchase                                                                                                     |  |              | 17,109  |   |                  |   | 17,755  |  
|Borrowed funds (Note 5)                                                                                                                           |  |              | 6,714   |   |                  |   | 6,815   |  
|Borrowed funds, other (Note 5)                                                                                                                    |  |              | 599     |   |                  |   | 599     |  
|Junior subordinated debentures issued in connection with trust preferred securities (Note 6)                                                      |  |              | 5,155   |   |                  |   | 5,155   |  
|Accrued interest payable and other liabilities                                                                                                    |  |              | 1,869   |   |                  |   | 1,411   |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL OTHER LIABILITIES                                                                                                                           |  |              | 31,446  |   |                  |   | 31,735  |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL DEPOSITS & LIABILITIES                                                                                                                      |  |              | 236,953 |   |                  |   | 223,778 |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|Stockholders Equity                                                                                                                              |  |              |         |   |                  |   |         |  
|Common stock, no par, 5,000,000 shares authorized; issued and outstanding 2,109,728 on March 31, 2006 and 2,105,209 on December 31,
2005 (Note 8) |  |              | 18,644  |   |                  |   | 18,637  |  
|Retained earnings                                                                                                                                 |  |              | 3,915   |   |                  |   | 3,306   |  
|Accumulated other comprehensive loss, net of tax benefit of ($186) for 2006 and ($132) for 2005                                                   |  |              | (363    | ) |                  |   | (256    | )
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                        |  |              | 22,196  |   |                  |   | 21,687  |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                        |  | $            | 259,149 |   |                  | $ | 245,465 |  
|                                                                                                                                                  |  |              |         |   |                  |   |         |  

The accompanying Notes are an integral part of these condensed financial
statements.



1



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

Three months, year-to-date, ended
March 31, 2006 and 2005

(Dollars in thousands, except number of shares and per share information)



|                                                                      |  |                             |           |      |   |          
|--------------------------------------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                                                      |  | Three-months ended March 31
|                                                                      |  | 2006                        |           | 2005
|Interest Income                                                       |  |                             |           |      |   |          
|Interest and fees on loans                                            |  | $                           | 3,647     |      | $ | 2,629    
|Interest on securities                                                |  |                             | 379       |      |   | 370      
|Interest on federal funds sold                                        |  |                             | 51        |      |   | 27       
|                                                                      |  |                             |           |      |   |          
|TOTAL INTEREST INCOME                                                 |  |                             | 4,077     |      |   | 3,026    
|Interest Expense                                                      |  |                             |           |      |   |          
|Interest on deposits                                                  |  |                             | 1,092     |      |   | 701      
|Interest on securities sold under agreement to repurchase             |  |                             | 171       |      |   | 63       
|Interest on borrowed funds                                            |  |                             | 183       |      |   | 80       
|                                                                      |  |                             |           |      |   |          
|TOTAL INTEREST EXPENSE                                                |  |                             | 1,446     |      |   | 844      
|NET INTEREST INCOME                                                   |  |                             | 2,631     |      |   | 2,182    
|Provision for loan losses                                             |  |                             | 90        |      |   | 60       
|                                                                      |  |                             |           |      |   |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                   |  |                             | 2,541     |      |   | 2,122    
|Noninterest Income                                                    |  |                             |           |      |   |          
|Fees and service charges                                              |  |                             | 217       |      |   | 232      
|Net gain from sale of loans                                           |  |                             | 68        |      |   | 81       
|Other noninterest income                                              |  |                             | 156       |      |   | 151      
|                                                                      |  |                             |           |      |   |          
|TOTAL NONINTEREST INCOME                                              |  |                             | 441       |      |   | 464      
|Noninterest Expense                                                   |  |                             |           |      |   |          
|Salaries and employee benefits (Note 7)                               |  |                             | 1,260     |      |   | 1,138    
|Occupancy, furniture, fixture & equipment expense                     |  |                             | 214       |      |   | 204      
|Depreciation and amortization expense                                 |  |                             | 121       |      |   | 112      
|Other operating expense                                               |  |                             | 473       |      |   | 506      
|                                                                      |  |                             |           |      |   |          
|TOTAL NONINTEREST EXPENSE                                             |  |                             | 2,068     |      |   | 1,960    
|INCOME BEFORE PROVISION FOR TAXES                                     |  |                             | 914       |      |   | 626      
|Provision for taxes                                                   |  |                             | 305       |      |   | 176      
|                                                                      |  |                             |           |      |   |          
|NET INCOME                                                            |  | $                           | 609       |      | $ | 450      
|                                                                      |  |                             |           |      |   |          
|Weighted average shares outstanding (Note 8)                          |  |                             | 2,214,741 |      |   | 2,210,461
|Basic earnings per share                                              |  | $                           | 0.27      |      | $ | 0.20     
|                                                                      |  |                             |           |      |   |          
|Weighted average shares outstanding (Note 8)                          |  |                             | 2,214,741 |      |   | 2,210,461
|Effect of dilutive securities                                         |  |                             | 35,352    |      |   | 43,306   
|Weighted average shares outstanding, adjusted for dilutive securities |  |                             | 2,250,093 |      |   | 2,253,767
|Earnings per share assuming full dilution                             |  | $                           | 0.27      |      | $ | 0.20     
|                                                                      |  |                             |           |      |   |          

The accompanying Notes are an integral part of these condensed financial
statements.



2



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOW

Unaudited

Three months, year-to-date, ended
March 31, 2006 and 2005

(Dollars in thousands)



|                                                                              |  |                                           |         |   |      |   |        |  
|----------------------------------------------------------------------------- |  | ----------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                                              |  | Three-months, year-to-date, endedMarch 31 |        
|                                                                              |  | 2006                                      |         |   | 2005 |  
|Net income                                                                    |  | $                                         | 609     |   |      | $ | 450    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                                           |         |   |      |   |        |  
|Provision for loan losses                                                     |  |                                           | 90      |   |      |   | 60     |  
|Depreciation and amortization                                                 |  |                                           | 121     |   |      |   | 112    |  
|Change in assets and liabilities:                                             |  |                                           |         |   |      |   |        |  
|Accrued interest receivable                                                   |  |                                           | (150    | ) |      |   | (67    | )
|Net increase in loans held for sale                                           |  |                                           | (1,220  | ) |      |   | (698   | )
|Net increase in bank owned life insurance                                     |  |                                           | (30     | ) |      |   | (29    | )
|Other assets                                                                  |  |                                           | (109    | ) |      |   | (657   | )
|Accrued interest payable & other liabilities                                  |  |                                           | 458     |   |      |   | 6      |  
|                                                                              |  |                                           |         |   |      |   |        |  
|NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES                              |  |                                           | (231    | ) |      |   | (823   | )
|Cash flows from investing activities:                                         |  |                                           |         |   |      |   |        |  
|Net increase in federal funds sold/FHLB interest bearing balances             |  |                                           | (2,741  | ) |      |   | 362    |  
|Net decrease in investment securities                                         |  |                                           | 307     |   |      |   | 4,702  |  
|Net increase in loans                                                         |  |                                           | (9,776  | ) |      |   | (4,938 | )
|Purchase of premises and equipment net of gain or loss on asset disposal      |  |                                           | (613    | ) |      |   | (795   | )
|Foreclosed real estate activity (net)                                         |  |                                           | 12      |   |      |   | (12    | )
|                                                                              |  |                                           |         |   |      |   |        |  
|NET CASH USED BY INVESTING ACTIVITIES                                         |  |                                           | (12,811 | ) |      |   | (681   | )
|Cash flows from financing activities:                                         |  |                                           |         |   |      |   |        |  
|Net increase in deposits                                                      |  |                                           | 13,464  |   |      |   | 4,128  |  
|Net increase/(decrease) in securities sold under agreement to repurchase      |  |                                           | (646    | ) |      |   | 498    |  
|Repayment of borrowed funds                                                   |  |                                           | (101    | ) |      |   | (3,480 | )
|Cash received from stock sales                                                |  |                                           | 10      |   |      |   | 1      |  
|Cash paid to repurchase stock                                                 |  |                                           | (2      | ) |      |   | 0      |  
|                                                                              |  |                                           |         |   |      |   |        |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                     |  |                                           | 12,725  |   |      |   | 1,147  |  
|Net increase in cash and cash equivalents:                                    |  |                                           | (317    | ) |      |   | (357   | )
|Cash and due from banks, beginning of year                                    |  |                                           | 8,337   |   |      |   | 7,736  |  
|                                                                              |  |                                           |         |   |      |   |        |  
|CASH AND DUE FROM BANKS, END OF QUARTER                                       |  | $                                         | 8,020   |   |      | $ | 7,379  |  

The accompanying Notes are an integral part of these condensed financial
statements.



3



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Unaudited

(Dollars in thousands)

As of March 31, 2006



|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|---------------------------------------------------------------- |  | ----- | ------ | - | ------------ | - | ------ | ----------------- |  | - | ------------------------------ | - |  | -------------------- | - |  | ----- | -
|                                                                 |  | Total |        |   | Common Stock |   |        | Retained Earnings |  |   | Accumulated Comprehensive Loss |   |  | Comprehensive Income |  
|Balance, December 31, 2004                                       |  | $     | 19,961 |   |              | $ | 16,943 |                   |  | $ | 3,063                          |   |  | ($45)                |   |  |       |  
|Net income 2005                                                  |  |       | 2,160  |   |              |   |        |                   |  |   | 2,160                          |   |  |                      |   |  | 2,160 |  
|Unrealized losses on available for sale securities, net of taxes |  |       | (211   | ) |              |   |        |                   |  |   |                                |   |  | (211                 | ) |  | (211  | )
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Comprehensive income                                             |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  | 1,949 |  
|Proceeds from issuance of common stock                           |  |       | 61     |   |              |   | 61     |                   |  |   |                                |   |  |                      |   |  |       |  
|Cash dividends paid                                              |  |       | (285   | ) |              |   |        |                   |  |   | (285                           | ) |  |                      |   |  |       |  
|Transfers                                                        |  |       | 0      |   |              |   | 1,632  |                   |  |   | (1,632                         | ) |  |                      |   |  |       |  
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Balance December 31, 2005                                        |  |       | 21,686 |   |              |   | 18,636 |                   |  |   | 3,306                          |   |  | (256                 | ) |  |       |  
|Net income, 2006, year-to-date                                   |  |       | 609    |   |              |   |        |                   |  |   | 609                            |   |  |                      |   |  | 609   |  
|Unrealized losses on available for sale securities, net of taxes |  |       | (107   | ) |              |   |        |                   |  |   |                                |   |  | (107                 | ) |  | (107  | )
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Comprehensive income                                             |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  | 502   |  
|Proceeds from issuance of common stock                           |  |       | 10     |   |              |   | 10     |                   |  |   |                                |   |  |                      |   |  |       |  
|Repurchase of common stock                                       |  |       | (2     | ) |              |   | (2     | )                 |  |   |                                |   |  |                      |   |  |       |  
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Balance, end-of-quarter, March 31, 2006                          |  | $     | 22,196 |   |              | $ | 18,644 |                   |  | $ | 3,915                          |   |  | ($363)               |   |  |       |  
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Disclosure of 2006 reclassification amount:                      |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Unrealized holding loss on available for sale securities         |  |       | ($162) |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Reclassification adjustment for gains realized in income         |  |       | 0      |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Net unrealized loss                                              |  |       | (162   | ) |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Tax effect                                                       |  |       | (55    | ) |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|Net of tax amount                                                |  |       | ($107) |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  
|                                                                 |  |       |        |   |              |   |        |                   |  |   |                                |   |  |                      |   |  |       |  

The accompanying Notes are an integral part of these condensed financial
statements.



4



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Unaudited

(Dollars in thousands)

As of March 31,
2005



|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|---------------------------------------------------------------- |  | ----- | ------ | - | ------------ | - | ----------------- |  | - | --------------------------------------- | - |  | -------------------- | ------ | - |  | ----- | -
|                                                                 |  | Total |        |   | Common Stock |   | Retained Earnings |  |   | Accumulated Comprehensive Income/(Loss) |   |  | Comprehensive Income |       
|Balance, December 31, 2003                                       |  | $     | 18,504 |   |              | $ | 15,332            |  | $ | 2,833                                   |   |  | $                    | 339    |   |  |       |  
|Net income 2004                                                  |  |       | 1,964  |   |              |   |                   |  |   | 1,964                                   |   |  |                      |        |   |  | 1,964 |  
|Unrealized losses on available for sale securities, net of taxes |  |       | (384   | ) |              |   |                   |  |   |                                         |   |  |                      | (384   | ) |  | (384  | )
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Comprehensive income                                             |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  | 1,580 |  
|Proceeds from issuance of common stock                           |  |       | 109    |   |              |   | 109               |  |   |                                         |   |  |                      |        |   |  |       |  
|Cash dividends paid                                              |  |       | (232   | ) |              |   |                   |  |   | (232                                    | ) |  |                      |        |   |  |       |  
|Transfers                                                        |  |       | 0      |   |              |   | 1,502             |  |   | (1,502                                  | ) |  |                      |        |   |  |       |  
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Balance December 31, 2004                                        |  |       | 19,961 |   |              |   | 16,943            |  |   | 3,063                                   |   |  |                      | (45    | ) |  |       |  
|Net income, 2005, year-to-date                                   |  |       | 450    |   |              |   |                   |  |   | 450                                     |   |  |                      |        |   |  | 450   |  
|Unrealized losses on available for sale securities, net of taxes |  |       | (215   | ) |              |   |                   |  |   |                                         |   |  |                      | (215   | ) |  | (215  | )
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Comprehensive income                                             |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  | 235   |  
|Proceeds from issuance of common stock                           |  |       | 1      |   |              |   | 1                 |  |   |                                         |   |  |                      |        |   |  |       |  
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Balance, end-of-quarter, March 31, 2005                          |  | $     | 20,197 |   |              | $ | 16,944            |  | $ | 3,513                                   |   |  |                      | ($260) |   |  |       |  
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Disclosure of 2005 reclassification amount:                      |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Unrealized holding loss on available for sale securities         |  |       | ($326) |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Reclassification adjustment for gains realized in income         |  |       | 0      |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Net unrealized loss                                              |  |       | (326   | ) |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Tax effect                                                       |  |       | (111   | ) |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|Net of tax amount                                                |  |       | ($215) |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  
|                                                                 |  |       |        |   |              |   |                   |  |   |                                         |   |  |                      |        |   |  |       |  

The accompanying Notes are an integral part of these condensed financial
statements.



5



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Notes to Consolidated Financial Statements



|NOTE 1. | Management Statement
|------- | --------------------

In the opinion of the Company, the
accompanying unaudited Consolidated Financial Statements reflect all adjustments necessary for a fair presentation of the financial position of the Company as of March 31, 2006 and December 31, 2005, as well as the results of operations
and changes in financial position for the three-month, year-to-date periods ended March 31, 2006 and 2005. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed statements be read in conjunction with the Independent Auditors Report and Financial Statements contained in the
Companys most recent Annual Report on Form 10-KSB, as of December 31, 2005.

Certain reclassifications of March 31, 2005
balances have been made to conform to the March 31, 2006 presentation; there was no impact on net income or stockholders equity. The number of weighted average shares outstanding, the effect of dilutive securities on earnings per share
and the calculation of earnings per share have been adjusted for the three-month, year-to-date periods ending March 31, 2006 and 2005 to reflect the effect of a five-percent stock dividend effective for shareholders of record as of May 15,
2006 and payable on June 15, 2006.



|NOTE 2. | Securities
|------- | ----------

Most of the securities are classified as
available-for-sale and are stated at fair value, and unrealized holding gains and losses, net of related deferred taxes, are reported as a separate component of stockholders equity. Realized gains or losses on available-for-sale securities
sales are reported as part of non-interest income based on the net proceeds and the adjusted carrying amount of the securities sold, using the specific identification method. There were no securities sold in the three-month, year-to-date periods
ending March 31, 2006 and 2005; consequently, there were no gains or losses included in non-interest income. Carrying amounts and fair values at March 31, 2006 and December 31, 2005 were as follows (in thousands):



|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|---------------------------------------------------------------- |  | -------------- | ------ | ----------------- | - | -------------- |  | ---------- | ------ |  | - | ------
|                                                                 |  | March 31, 2006 |        | December 31, 2005
|                                                                 |  | Amortized Cost |        | Fair Value        |   | Amortized Cost |  | Fair Value
|Securities available-for-sale:                                   |  |                |        |                   |   |                |  |            |        |  |   |       
|Obligations of federal government agencies                       |  | $              | 25,695 |                   | $ | 25,159         |  | $          | 25,695 |  | $ | 25,306
|US Treasury securities                                           |  |                | 4,986  |                   |   | 4,984          |  |            | 5,130  |  |   | 5,120 
|Mortgage backed securities                                       |  |                | 1,209  |                   |   | 1,246          |  |            | 1,269  |  |   | 1,319 
|Corporate Bonds                                                  |  |                | 497    |                   |   | 449            |  |            | 494    |  |   | 455   
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|TOTAL                                                            |  | $              | 32,387 |                   | $ | 31,838         |  | $          | 32,588 |  | $ | 32,200
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|Available-for-sale marketable equity securities1                 |  | $              | 250    |                   | $ | 250            |  | $          | 250    |  | $ | 250   
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|Securities held-to-maturity:                                     |  |                |        |                   |   |                |  |            |        |  |   |       
|Obligations of states, municipalities and political subdivisions |  |                | 3,983  |                   |   | 3,957          |  |            | 4,089  |  |   | 4,076 
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|TOTAL                                                            |  | $              | 3,983  |                   | $ | 3,957          |  | $          | 4,089  |  | $ | 4,076 
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       
|Equity securities with a limited market2                         |  | $              | 395    |                   | $ | 395            |  | $          | 205    |  | $ | 205   
|                                                                 |  |                |        |                   |   |                |  |            |        |  |   |       



|(1) | Represents those AFS marketable equity securities that are recorded in Other Assets on the Consolidated Balance Sheet. Securities consist of ($250k) investment in the
common stock of a bank holding company headquartered in Bellevue, WA.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Represents those equity securities with limited marketability that are recorded in Other Assets, on the Consolidated Balance Sheet. These securities are reviewed
quarterly to determine whether there has been any impairment in value. Securities consist of ($155k) equity investment in a Trust created by the Company in connection with issuance of trust preferred securities, ($190k) investment in the common
stock of Pacific Coast Bankers Bank and ($50k) investment in an economic development company, reported at cost.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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|NOTE 3. | Loans
|------- | -----

Loan detail by category as of March 31, 2006 and
December 31, 2005 is as follows (in thousands):



|                          |  |               |         |   |                  |   |         |  
|------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                          |  | March 31 2006 |         |   | December 31 2005 |  
|Commercial loans          |  | $             | 126,412 |   |                  | $ | 124,611 |  
|Real estate loans         |  |               | 57,716  |   |                  |   | 50,162  |  
|Consumer and other loans  |  |               | 9,023   |   |                  |   | 8,991   |  
|Installment loans         |  |               | 5,510   |   |                  |   | 5,079   |  
|                          |  |               |         |   |                  |   |         |  
|TOTAL LOANS               |  | $             | 198,661 |   |                  | $ | 188,843 |  
|                          |  |               |         |   |                  |   |         |  
|Allowance for loan losses |  |               | (2,322  | ) |                  |   | (2,252  | )
|Net deferred loan fees    |  |               | (335    | ) |                  |   | (273    | )
|                          |  |               |         |   |                  |   |         |  
|NET LOANS                 |  | $             | 196,004 |   |                  | $ | 186,318 |  
|                          |  |               |         |   |                  |   |         |  



|NOTE 4. | Allowance for Loan Losses
|------- | -------------------------

The Companys subsidiary,
Inland Northwest Bank (the Bank) maintains an allowance for loan losses at a level considered adequate by management to provide for reasonably anticipated credit losses in the Banks loan portfolio. Future credit losses are
estimated through an analysis of various factors affecting the performance of the loan portfolio, including: individual review of problem loans, including an evaluation of the quality of underlying collateral; current business conditions and the
Banks historical loan loss experience; the term, in years, that the average loan is expected to remain on the Banks books; and other factors that management determines to be relevant at the time of the analysis. In accordance with
accounting and regulatory requirements, the portion of the allowance relating to unused loan commitments and other off-balance sheet items is reclassified to Accrued interest payable and other liabilities. Changes in the allowance for
loan losses during the three-month, year-to-date periods ended March 31, 2006 and 2005 were as follows (in thousands):



|                                                                                                                                                           |  |                                   |       |   |           |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----- | - | --------- | - | ----- | -
|                                                                                                                                                           |  | Three-months, year-to-date, ended |      
|                                                                                                                                                           |  | 3/31/2006                         |       |   | 3/31/2005 |  
|Balance, beginning of period                                                                                                                               |  | $                                 | 2,252 |   |           | $ | 1,944 |  
|Add reserve for probable losses on unused loan commitments and off-balance sheet items (OBS)                                                               |  |                                   | 179   |   |           |   | 206   |  
|                                                                                                                                                           |  |                                   |       |   |           |   |       |  
|Balance, beginning of period, including OBS reserve                                                                                                        |  |                                   | 2,431 |   |           |   | 2,150 |  
|Provision for loan losses                                                                                                                                  |  |                                   | 90    |   |           |   | 60    |  
|Loan Charge-offs                                                                                                                                           |  |                                   | (15   | ) |           |   | (12   | )
|Loan Recoveries                                                                                                                                            |  |                                   | 6     |   |           |   | 13    |  
|                                                                                                                                                           |  |                                   |       |   |           |   |       |  
|Balance, end of period, prior to adjustment for off-balance sheet items                                                                                    |  |                                   | 2,512 |   |           |   | 2,211 |  
|Reclassification of reserve for probable losses on unused loan commitments and off-balance sheet items to Accrued interest payable and
other liabilities |  |                                   | (190  | ) |           |   | (235  | )
|                                                                                                                                                           |  |                                   |       |   |           |   |       |  
|Balance, end of period                                                                                                                                     |  | $                                 | 2,322 |   |           | $ | 1,976 |  
|                                                                                                                                                           |  |                                   |       |   |           |   |       |  



7



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|NOTE 5. | Borrowed Funds
|------- | --------------

The Bank has three unsecured operating
lines of credit with KeyBank of Washington for $10,200,000, with two lines totaling $10,100,000, maturing July 1, 2006, and the remaining $100,000 line maturing on July 1, 2007. In addition, the Bank maintains a line of credit with Pacific
Coast Bankers Bank for $5,000,000, maturing June 30, 2006, U.S. Bank for $1,500,000, maturing July 31, 2006, and Zions Bank for $1,500,000 with no stated maturity. There was zero outstanding on these lines at March 31, 2006 and
December 31, 2005. The Bank also has a line of credit with the Federal Home Loan Bank of Seattle (FHLB) for $38,770,000 at March 31, 2006, with $32,057,000 available in overnight funds and long-term funds. This line is collateralized by
all assets of the Bank. There were $6,713,597 and $6,814,934 of outstanding long-term advances on the Federal Home Loan Bank line at March 31, 2006 and December 31, 2005, respectively. There was zero outstanding on overnight funds on the
FHLB line at March 31, 2006 and December 31, 2005.

Other borrowed funds outstanding on March 31, 2006 and December 31,
2005 are related to a ground lease, with a purchase option, that the Bank entered into in early 2005 (a copy of the ground lease was filed as an Exhibit to the Companys Form 10-KSB filing on March 24, 2005). As a capitalized
lease, the value of the property, $599,404, is included as an asset on the consolidated statement of financial condition in Premises and equipment, net and the net present value of future payments is included as a liability in
Borrowed funds, other.



|NOTE 6. | Junior Subordinated Debentures
|------- | ------------------------------

In June 2005, the Company
completed the issuance of $5.155 million ($5,155,000) of debentures in connection with a private placement of pooled trust preferred securities by Northwest Bancorporation Capital Trust I. The trust preferred securities, in the amount of $5 million
($5,000,000), were sold to pooled investment vehicles sponsored and marketed by investment banking firms. This subordinated debt has been recorded as a liability on the statement of financial condition; subject to limitations under current Federal
Reserve guidelines, this subordinated debt qualifies as Tier 1 capital for regulatory capital purposes. Under the terms of the transaction, the trust preferred securities and debentures have a maturity of thirty years and are redeemable by the
Company after five years, with certain exceptions. The holders of the trust preferred securities are entitled to receive cumulative cash distributions at a fixed annual rate of 5.95% during the first five years; thereafter, the rate is variable.
After the first five years, the interest rate is reset quarterly to equal three-month LIBOR plus 1.70%. Northwest Bancorporation Capital Trust I is not consolidated in these financial statements. Pursuant to FIN 46R, the Corporation reports the
junior subordinated debentures within the liabilities section of the statement of financial condition.



8



---

The following tables are a summary of current trust preferred securities at March 31, 2006 and December 31,
2005 (dollars in thousands):

March 31, 2006



|                                        |  |                                                            |       |                                                           |   |                                                              |  |                 |       |                         |      |  |                  |   |                   |                         |  |                      
|--------------------------------------- |  | ---------------------------------------------------------- | ----- | --------------------------------------------------------- | - | ------------------------------------------------------------ |  | --------------- | ----- | ----------------------- | ---- |  | ---------------- | - | ----------------- | ----------------------- |  | ---------------------
|Name of Trust                           |  | Aggregate liquidation amount of trust preferred securities |       | Aggregate liquidation amount of common capital securities |   | Aggregate principal amount of junior subordinated debentures |  | Stated maturity |       | Per annum interest rate |      |  | Extension period |   | Redemption option
|Northwest BancorporationCapital Trust I |  | $                                                          | 5,000 |                                                           | $ | 155                                                          |  | $               | 5,155 |                         | 2035 |  | 5.95             | % |                   | 20 consecutive quarters |  | On or after 6/30/2010
|                                       
|December 31, 2005                      
|                                        |  |                                                            |       |                                                           |   |                                                              | 
|Name of Trust                           |  | Aggregate liquidation amount of trust preferred securities |       | Aggregate liquidation amount of common capital securities |   | Aggregate principal amount of junior subordinated debentures |  | Stated maturity |       | Per annum interest rate |      |  | Extension period |   | Redemption option
|Northwest BancorporationCapital Trust I |  | $                                                          | 5,000 |                                                           | $ | 155                                                          |  | $               | 5,155 |                         | 2035 |  | 5.95             | % |                   | 20 consecutive quarters |  | On or after 6/30/2010



|NOTE 7. | Stock-based Compensation
|------- | ------------------------

Prior to fiscal 2006, the
Company accounted for stock-based compensation under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted
by Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, (SFAS 123). Compensation costs related to stock options granted at fair value under
those plans were not recognized in the consolidated statements of income.

In December 2004, FASB issued SFAS 123 (revised 2004),
Share-Based Payment, (SFAS 123R). Under the new standard, companies are no longer able to account for share-based compensation transactions using the intrinsic value method in accordance with APB Opinion No. 25. Instead,



9



---

companies are required to account for such transactions using a fair-value method and recognize the expense in the consolidated statements of income.

Effective January 1, 2006, the Company adopted SFAS 123R using the modified-prospective-transition method. Under this transition
method, stock compensation cost recognized beginning January 1, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated
in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of
SFAS 123R. Results for prior periods have not been restated.



|NOTE 8. | Common Stock
|------- | ------------

On April 19, 2005, the Board of
Directors declared a five-percent stock dividend payable on June 15, 2005 to shareholders of record as of May 16, 2005. On April 18, 2006, the Board of Directors declared a five-percent stock dividend payable on June 15, 2006 to
shareholders of record as of May 15, 2006. Shares reported as outstanding, as well as earnings per share, the number of weighted average shares outstanding and the effect of dilutive securities for the three-month, year-to-date periods ending
March 31, 2006 and 2005, have been adjusted to reflect the stock dividends.

On April 19, 2005, the Board of Directors declared a
fourteen-cent ($0.14) per share cash dividend which was paid on June 15, 2005 to shareholders of record as of May 13, 2005. On April 18, 2006, the Board of Directors declared a sixteen-cent ($0.16) per share cash dividend which will
be paid on June 15, 2006 to shareholders of record as of May 12, 2006.



|NOTE 9. | Subsequent Events
|------- | -----------------

At its April 18, 2006 meeting, the
Board of Directors of the Company declared cash and stock dividends as detailed in Note 8. As detailed in Note 8, shares reported as outstanding, earnings per share, the number of weighted average shares outstanding and the effect of dilutive
securities for all periods presented have been adjusted to reflect the stock dividend payable.



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

The Registrant relied upon Alternative 2 in its registration statement filed on Form 10-SB; there is no information to provide in response to Item 6(a)(3)(i) to Model B of Form 1-A.



|Item 3. | Controls and Procedures
|------- | -----------------------

The Companys
President and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Companys President and the
Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in ensuring that material information required to be disclosed in this report has been made known to them in a timely fashion. There was no
significant change in the Companys internal control over financial reporting during the first fiscal



10



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quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

Part II Other Information



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



| | (a) | Exhibit 31.1
| | --- | ------------

Certification of Randall L. Fewel, President
and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2

Certification of Christopher C. Jurey, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1

Certification of Randall L.
Fewel, President and Chief Executive Officer, pursuant to 18 U.S.C. 1350

Exhibit 32.2

Certification of Christopher C. Jurey, Chief Financial Officer, pursuant to 18 U.S.C. 1350



| | (b) | Reports on Form 8-K
| | --- | -------------------

The Company filed the following
report on Form 8-K during the period covered by this Report:

Report filed January 30, 2006. On January 30, 2006 the Company
issued a press release announcing financial information for the fourth-quarter of 2005.



11



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SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.



NORTHWEST BANCORPORATION, INC.By

/s/ Randall L. FewelRandall L. Fewel, President andChief Executive Officer


Date: May 5, 2006

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



NORTHWEST BANCORPORATION, INC.By

/s/ Christopher C. JureyChristopher C. Jurey, Chief Financial Officer


Date: May 5, 2006



12