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U.S. 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 4/1/02 to 6/30/02.





Commission File Number 0-24151





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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)





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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  ̈





The Registrant has a single class of common stock, of which there are 1,808,335 shares issued and outstanding as of June 30, 2002.





Transitional Small Business Disclosure Format:  Yes  x  No  ̈





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TABLE OF CONTENTS





PagePart I

Financial InformationItem 1.

Financial StatementsConsolidated Statements of ConditionJune 30, 2002 and December 31, 2001

1Consolidated Statements of IncomeThree Months year-to-date ended June 30, 2002 and 2001

2Consolidated Statements of Cash Flowyear-to-date ended June 30, 2002 and 2001

3Consolidated Statements of Stockholders Equity as of June 30, 2002 and 2001

4Notes to Consolidated Financial Statements

6Item 2.

Managements Discussion and Analysis or Plan of Operation

9Part II

Other InformationItem 2.

Changes in Securities

9Item 4.

Submission of Matters to a Vote of Security Holders

9Item 6.

Exhibits and Reports on Form 8-K

9Signatures

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PART I    FINANCIAL INFORMATION





Item 1.Financial Statements





NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF CONDITION


June 30, 2002 and December 31, 2001


($ in thousands)





June 30 2002

December 31 2001Unaudited

AuditedASSETSCash and due from banks

$
6,766

$
8,710Federal funds sold


3,597


6,620Securities held-to-maturity (Note 2)


1,085


225Securities available-for-sale (Note 2)


40,372


40,938Federal Home Loan Bank stock, at cost


574


557Loans, net of allowance for loan losses of $1,882 in 2002 and $1,649 in 2001 (Notes 3 & 4)


133,281


128,601Loans held for sale


1,133


933Accrued interest receivable


1,090


1,097Premises and equipment, net (Note 7)


3,762


3,277Foreclosed real estate


1,070


317Other assets


1,829


1,593TOTAL ASSETS


194,559


192,868LIABILITIESNoninterest bearing demand deposits

$
29,651

$
32,998Money Market accounts


34,665


35,198NOW accounts


12,371


13,730Savings accounts


4,455


4,296Time Certificates of Deposit, $100,000 and over


29,163


23,337Time Certificates of Deposit, under $100,000


40,344


42,618TOTAL DEPOSITS


150,649


152,177Securities sold under agreement to repurchase


20,396


22,409Borrowed funds, Federal Home Loan Bank (Note 5)


6,175


1,804Accrued interest payable and other liabilities


1,053


899TOTAL LIABILITIES


27,624


25,112TOTAL DEPOSITS AND LIABILITIES


178,273


177,289Stockholders EquityCommon stock, no par, 5,000,000 shares authorized; issued and outstanding 1,808,335 on June 30, 2002 and 1,806,556 on
December 31, 2001 (Note 6)


14,325


13,495Retained earnings


1,455


1,667Accumulated other comprehensive income, net of tax of $261 for 2002 and $215 for 2001


506


417TOTAL STOCKHOLDERS EQUITY


16,286


15,579TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
194,559

$
192,868





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




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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF INCOME


Three months and year-to-date ended June 30, 2002 and 2001


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





Three Months Ended

Year-to-date06/30/02

06/30/01

2002

2001Unaudited

Unaudited

Unaudited

UnauditedInterest IncomeInterest and fees on loans

$
2,567

$
2,933

$
5,068

$
5,744Interest on securities


565


694


1,163


1,381Interest on federal funds sold


16


42


28


104TOTAL INTEREST INCOME


3,148


3,669


6,259


7,229Interest ExpenseInterest on deposits


796


1,346


1,607


2,792Interest on securities sold under agreement to repurchase


72


169


130


359Interest on borrowed funds


84


33


153


61TOTAL INTEREST EXPENSE


952


1,548


1,890


3,212NET INTEREST INCOME


2,196


2,121


4,369


4,017Provision for loan losses


270


175


540


310NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES


1,926


1,946


3,829


3,707Noninterest IncomeFees and service charges


230


238


456


470Net gain from sale of loans


131


206


238


390Other noninterest income


112


58


211


121TOTAL NONINTEREST INCOME


473


502


905


981Noninterest ExpenseSalaries and employee benefits


1,124


1,206


2,208


2,253Occupancy/FF&E expense


202


168


392


345Depreciation and amortization expense


125


121


245


236Other operating expense


533


487


977


926TOTAL NONINTEREST EXPENSE


1,984


1,982


3,822


3,760INCOME BEFORE TAXES


415


466


912


928Federal income tax expense


141


158


310


315NET INCOME

$
274

$
308

$
602

$
613Quarter Ended

Quarter Ended

Year-to-date

Year-to-date06/30/02

06/30/01

06/30/02

06/30/01Unaudited

Unaudited

Unaudited

UnauditedWeighted average shares outstanding (Note 6)


1,807,757


1,829,985


1,806,705


1,829,672Basic earnings per share

$
0.15

$
0.17

$
0.33

$
0.34Weighted average shares outstanding (Note 6)


1,807,757


1,829,985


1,806,705


1,829,672Effect of dilutive securities


2,609


1,720


2,609


1,720Weighted average shares outstanding, adjusted for dilutive securities


1,810,366


1,831,705


1,809,314


1,831,392Earnings per share assuming full dilution

$
0.15

$
0.17

$
0.33

$
0.33





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




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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF CASH FLOW


Year-to-date ended June 30, 2002 and 2001


($ in thousands)





Year-to-date2002


2001Unaudited


UnauditedNet income

$
602


$
613Adjustments to reconcile net income to cash provided by operating activities:Provision for loan losses


540



310Depreciation and amortization


245



236(Increase)/decrease in assets and liabilities:Accrued interest receivable


7



88Other assets


(278
)


(197
)Accrued interest payable & other liabilities


154



17NET CASH PROVIDED BY OPERATING ACTIVITIES


1,270



1,067Cash flows from investing activities:Net (increase)/decrease in federal funds sold


3,023



(244
)Net (increase)/decrease in investment securities


(175
)


(2,964
)Net (increase)/decrease in loans


(5,220
)


(10,850
)Net (increase)/decrease in loans held for sale


(200
)


(1,610
)Purchase of premises and equipment net of gain or loss on asset disposal


(735
)


(597
)Foreclosed real estate activity (net)


(753
)


(113
)NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES


(4,060
)


(16,378
)Cash flows from financing activities:Net increase/(decrease) in deposits


(1,528
)


6,144Net increase/(decrease) in securities sold under agreement to repurchase


(2,013
)


4,620Net proceeds/(payments) from borrowed funds


4,371



3,560Cash received from stock sales (net)


16



39NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES


846



14,363Net increase/(decrease) in cash and cash equivalents


(1,944
)


(948
)Cash and cash equivalents, beginning of year


8,710



8,644CASH AND CASH EQUIVALENTS, END OF QUARTER

$
6,766


$
7,696








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




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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


In Actual Dollars


As of June 30, 2001





Total


Common Stock


Retained Earnings


Accumulated Comprehensive Income


Comprehensive IncomeBalance, December 31, 1999 (audited)

$
11,145,919


$
10,312,307


$
1,535,355


($
701,743
)Net income 2000


799,185







799,185






$
799,185Unrealized gains (losses) on available for sale securities


892,662











892,662



892,662Comprehensive income


















1,691,847Proceeds from issuance of capital stock


1,498,026



1,498,026Transfers


0



1,026,025



(1,026,025
)Balance December 31, 2000 (audited)


14,335,792



12,836,358



1,308,515



190,919Net income, 2001, year-to-date


612,953







612,953







612,953Unrealized gains (losses) on available for sale securities


8,361











8,361



8,361Comprehensive income

















$
621,314Proceeds from issuance of capital stock


50,000



50,000Repurchase of capital stock


(9,100
)


(9,100
)Fractional shares, issued in cash


(2,369
)


(2,369
)Transfers


0



828,000



(828,000
)Balance, end-of-quarter, June 30, 2001 (unaudited)

$
14,995,637


$
13,702,889


$
1,093,468


$
199,280Disclosure of 2001 reclassification amount:Unrealized holding gains during period

$
8,361Reclassification adjustment for gains or losses reported in net income


0Net unrealized gains on securities

$
8,361








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




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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


In Actual Dollars


As of June 30, 2002





Total


Common Stock


Retained Earnings


Accumulated Comprehensive Income

Comprehensive IncomeBalance, December 31, 2000 (audited)

$
14,335,792


$
12,836,358


$
1,308,515


$
190,919Net income 2001


1,188,815







1,188,815





$
1,188,815Unrealized gains (losses) on available for sale securities


225,639











225,639


225,639Comprehensive income

















1,414,454Proceeds from issuance of capital stock


52,360



52,360Repurchase of capital stock


(221,532
)


(221,532
)Fractional shares, issued in cash


(2,369
)






(2,369
)Transfers


0



828,000



(828,000
)Balance December 31, 2001 (audited)


15,578,705



13,495,186



1,666,961



416,558Net income, 2002, year-to-date


601,648







601,648






601,648Unrealized gains (losses) on available for sale securities


89,634











89,634


89,634Comprehensive income
















$
691,282Proceeds from issuance of capital stock


27,802



27,802Repurchase of capital stock


(9,161
)


(9,161
)Fractional shares issued in cash


(2,289
)






(2,289
)Transfers


0



811,462



(811,462
)Balance, end-of-quarter, June 30, 2002 (unaudited)

$
16,286,339


$
14,325,289


$
1,454,858


$
506,192Disclosure of 2002 reclassification amount:Unrealized holding gains during period

$
88,685Reclassification adjustment for losses reported in net income


949Net unrealized gains on securities

$
89,634





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




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NORTHWEST BANCORPORATION, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Note 1.    Management Statement





In the opinion of the Company, the accompanying audited and unaudited Consolidated Financial Statements
present fairly the financial position of the Company as of June 30, 2002 and December 31, 2001, as well as the results of operations and changes in financial position for the three-month and six-month, year-to-date periods ended June 30, 2002 and
2001. 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, 2001.





Certain reclassifications of June 30, 2001 balances have been made to conform to the June 30, 2002 presentation; there was no impact on
net income or stockholders equity. Shares outstanding and calculation of earnings per share have been restated for the three-month and six-month, year-to-date periods ending June 30, 2001 to reflect the effect of a five-percent stock dividend
effective for shareholders of record as of May 15, 2002.





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. 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. A realized loss on the sale of a security in the second-quarter 2002, in the amount of $949, is included in the financial results presented for that period, as well as for the results
of the six-month, year-to-date period ending June 30, 2002. There are no realized gains or losses included in the results of the three-month or six-month, year-to-date, periods ending June 30, 2001. Carrying amount and fair values at June 30, 2002
and December 31, 2001 were as follows (in thousands):





June 30, 2002

December 31, 2001Amortized Cost

Fair Value

Amortized Cost

Fair ValueUnaudited

Unaudited

Audited

AuditedSecurities available-for-sale:US Treasury securities

$
7,232

$
7,379

$
5,527

$
5,661Obligations of federal government agencies


22,641


22,989


26,290


26,681Mortgage backed securities


8,514


8,711


7,769


7,876Corporate Bonds


1,218


1,233


721


720TOTAL

$
39,605

$
40,372

$
40,307

$
40,938Securities held-to-maturity:Obligations of states, municipalities and political subdivisions

$
1,085

$
1,097

$
225

$
235




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NORTHWEST BANCORPORATION, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Note 3.    Loans





Loan detail by category as of June 30, 2002 and December 31, 2001 is as follows (in thousands):





June 30 2002


December 31 2001Unaudited


AuditedCommercial loans

$
106,564


$
105,457Real estate loans


18,985



16,943Installment loans


4,532



4,446Consumer and other loans


5,344



3,726TOTAL LOANS


135,425



130,572Allowance for loan losses


(1,882
)


(1,649
)Deferred loan fees, net of deferred costs


(262
)


(322
)NET LOANS

$
133,281


$
128,601





Note 4.    Allowance for Loan Losses





The allowance for loan loss is maintained at levels considered adequate by management to provide for possible loan losses. The allowance
is based on managements assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of underlying collateral. Changes in the allowance
for loan loss during the three-month and six-month, year-to-date periods ended June 30, 2002 and 2001 were as follows (in thousands):





Three Months Ended


Year-to-date06/30/02


06/30/01


2002


2001Unaudited


Unaudited


Unaudited


UnauditedBalance, beginning of period

$
1,798


$
1,529


$
1,649


$
1,625Provision for loan losses


270



175



540



310Loan Charge-offs


(192
)


(200
)


(318
)


(432
)Loan Recoveries


6



4



11



5Balance, end of period

$
1,882


$
1,508


$
1,882


$
1,508





Note 5.    Borrowed Funds





The Companys subsidiary, Inland Northwest Bank, has unsecured operating lines of credit with Key Bank of Washington for $3,000,000,
US Bank for $1,500,000, Zions Bank for $1,500,000 and the Federal Home Loan Bank of Seattle (FHLB) for approximately $9,726,887 (5.0% of bank assets.) There were no balances outstanding on any of the lines on June 30, 2002 or December 31, 2001;
there was a balance of $3,600,000 on the FHLB line on June 30, 2001. The bank also has access to an equal (5.0%) amount of long-term funding through the FHLB (that is, an additional $9,726,887) and has taken advances to fund Community Investment
Program and other loans utilizing these funds. Long-term notes payable to the FHLB were $6,174,674 on June 30, 2002; $1,803,974 on December 31, 2001; and, $1,845,638 on June 30, 2001.




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NORTHWEST BANCORPORATION, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)







Note 6.    Common Stock





On March 19, 2002, the Board of Directors authorized a five-percent stock dividend payable to shareholders of record as of May 15, 2002.
Shares reported as outstanding as of December 31, 2001, as well as earnings per share and weighted average and actual shares outstanding for the three-month and six-month, year-to-date periods ending June 30, 2001, have been restated to reflect the
stock dividend.





Note 7.    Branch Relocation





On June 3, 2002 Inland Northwest Bank opened a new branch office in the Ironwood district of Coeur dAlene, Idaho; the bank owns the property and facilities at this
location. The new office replaces the Sherman Avenue branch, which was located in a leased facility, near downtown Coeur dAlene. The lease on the Sherman Avenue branch expired in early 2002, with the bank paying monthly rental on the facility
until the branch was closed. A nominal amount of leasehold improvements remained un-amortized at the time the branch closed. Second-quarter 2002 financial results include the write-down of the remaining leasehold improvements, offset by a small
gain-on-sale generated by disposal of excess equipment from the old facility. The net effect was to reduce after-tax income by $7,417. Total cost of the new facility, $1,415,488, is reported with June 30, 2002 financial information under
Premises and equipment, net. Bank management is considering the sale of excess land at the new branch location, but does not anticipate either a gain or loss on the sale.





Note 8.    Amendment to the Inland Northwest Bank Non-Qualified Stock Option Plan





At its meeting on April 16, 2002, the Board of Directors of Inland Northwest Bank approved an amendment to the Inland Northwest Bank Non-Qualified Stock Option Plan (the Plan), reserving
and setting aside an additional 125,000 shares of the common stock of Northwest Bancorporation, Inc. for issuance pursuant to options granted under the Plan. The amended Plan is incorporated in this filing as Exhibit 10.2.31.




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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.





PART II    OTHER INFORMATION





Item
2.Changes in Securities





A five-percent stock dividend was declared by the
directors on March 19, 2002, payable to stockholders of record as of May 15, 2002; 86,111 shares were issued and delivered on June 14, 2002. During the second quarter of the 2002 fiscal year, the Registrant issued 2,700 shares of common stock to
non-employee directors pursuant to the Registrants compensation plan for non-employee directors; this plan provides for the issuance of 200 shares annually to each non-employee director, with an additional 100 shares to the chairperson,
provided completion of twelve months of service prior to the annual shareholder meeting.





The Registrant believes
that the issuance of these shares of common stock was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.





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





The annual meeting of
shareholders of the Registrant was held on Monday, May 20, 2002. In addition to the election of Directors described in the proxy material furnished to the shareholders pursuant to Regulation 14A, the shareholders also ratified the selection of Moss
Adams, LLP, 601 West Riverside Avenue, Suite 1800, Spokane, Washington 99202-0663, as independent public accountants for the Company for the fiscal year ending December 31, 2002. 1,336,976 shares were voted in favor of the ratification with 3,856
shares being voted against or withheld, including abstentions and broker non-votes.





Item 6.Exhibits and Reports on Form 8-K





(a)  Exhibit 10.2.31





Non-Qualified Stock Option Plan, as amended April 16, 2002





Exhibit 99.1





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





Exhibit 99.2





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





(b)  Reports on Form 8-K





Not applicable





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/    CHRISTOPHER C. JUREYChristopher C. Jurey, Executive Vice President and Chief Financial Officer





Date:    August 12, 2002




9