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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 7/1/06 to 9/30/06.
|- | ------------------------------------------------------------------------------------------------------------------------------------

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 2,232,572 shares issued and outstanding as of September 30, 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                                                                                                 |  | 1   
|               |  |                                                                                                                     
|               |  | Consolidated Statements of Condition  September 30, 2006 and December 31, 2005                                      |  | 1   
|               |  |                                                                                                                     
|               |  | Consolidated Statements of Income  Three-months and nine-months, year-to-date, ended September 30, 2006 and 2005    |  | 2   
|               |  |                                                                                                                     
|               |  | Consolidated Statements of Cash Flow  Three-months and nine-months, year-to-date, ended September 30, 2006 and 2005 |  | 3   
|               |  |                                                                                                                     
|               |  | Consolidated Statements of Stockholders Equity as of September 30, 2006 and 2005                                    |  | 4-5 
|               |  |                                                                                                                     
|               |  | Notes to Consolidated Financial Statements                                                                           |  | 6   
|               |  |                                                                                                                     
|Item 2.        |  | Managements Discussion and Analysis or Plan of Operation                                                            |  | 12  
|               |  |                                                                                                                     
|Item 3.        |  | Controls and Procedures                                                                                              |  | 13  
|               |  |                                                                                                                     
|Part II        |  | Other Information                                                                                                    |  |     
|               |  |                                                                                                                     
|Item 2.        |  | Changes in Securities                                                                                                |  | 13  
|               |  |                                                                                                                     
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                                     |  | 13  
|               | 
|Signatures     |  | 14                                                                                                                  
|               | 
|Certifications |  |                                                                                                                     



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Part I Financial Information



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

NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONDITION

Unaudited

September 30, 2006

(Dollars in thousands)



|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | --------------- | - | ------- | -
|                                                                                                                                             |  | September-302006 |         |   | December-312005 |  
|Assets                                                                                                                                       |  |                  |         |   |                 |   |         |  
|Cash and due from banks                                                                                                                      |  | $                | 8,082   |   |                 | $ | 8,337   |  
|Federal funds sold/FHLB interest bearing balances                                                                                            |  |                  | 6,842   |   |                 |   | 2,234   |  
|Securities held-to-maturity (fair value, $3,919 and $4,076, respectively)                                                                    |  |                  | 3,898   |   |                 |   | 4,089   |  
|Securities available-for-sale (amortized cost, $32,228 and $32,588, respectively)                                                            |  |                  | 31,887  |   |                 |   | 32,200  |  
|Federal Home Loan Bank stock, at cost                                                                                                        |  |                  | 646     |   |                 |   | 646     |  
|Loans, net of allowance for loan losses of $2,489 in 2006 and $2,252 in 2005                                                                 |  |                  | 208,172 |   |                 |   | 186,318 |  
|Loans held for sale                                                                                                                          |  |                  | 965     |   |                 |   | 148     |  
|Accrued interest receivable                                                                                                                  |  |                  | 1,358   |   |                 |   | 1,040   |  
|Premises and equipment, net                                                                                                                  |  |                  | 7,280   |   |                 |   | 5,650   |  
|Foreclosed real estate                                                                                                                       |  |                  | 5       |   |                 |   | 17      |  
|Bank owned life insurance                                                                                                                    |  |                  | 3,400   |   |                 |   | 3,314   |  
|Other assets                                                                                                                                 |  |                  | 2,031   |   |                 |   | 1,472   |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL ASSETS                                                                                                                                 |  | $                | 274,566 |   |                 | $ | 245,465 |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|Liabilities                                                                                                                                  |  |                  |         |   |                 |   |         |  
|Noninterest bearing demand deposits                                                                                                          |  | $                | 52,833  |   |                 | $ | 49,107  |  
|Money Market accounts                                                                                                                        |  |                  | 37,754  |   |                 |   | 44,899  |  
|NOW accounts                                                                                                                                 |  |                  | 14,205  |   |                 |   | 13,038  |  
|Savings accounts                                                                                                                             |  |                  | 9,704   |   |                 |   | 8,246   |  
|Time Certificates of Deposit, $100,000 and over                                                                                              |  |                  | 33,502  |   |                 |   | 29,311  |  
|Time Certificates of Deposit, under $100,000                                                                                                 |  |                  | 61,896  |   |                 |   | 47,442  |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL DEPOSITS                                                                                                                               |  |                  | 209,894 |   |                 |   | 192,043 |  
|Securities sold under agreement to repurchase                                                                                                |  |                  | 24,811  |   |                 |   | 17,755  |  
|Borrowed funds                                                                                                                               |  |                  | 8,509   |   |                 |   | 6,815   |  
|Capital lease liability                                                                                                                      |  |                  | 599     |   |                 |   | 599     |  
|Junior subordinated debentures issued in connection with trust preferred securities                                                          |  |                  | 5,155   |   |                 |   | 5,155   |  
|Accrued interest payable and other liabilities                                                                                               |  |                  | 1,960   |   |                 |   | 1,412   |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL OTHER LIABILITIES                                                                                                                      |  |                  | 41,034  |   |                 |   | 31,736  |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL DEPOSITS & OTHER LIABILITIES                                                                                                           |  |                  | 250,928 |   |                 |   | 223,779 |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|Stockholders Equity                                                                                                                         |  |                  |         |   |                 |   |         |  
|Common stock, no par, 5,000,000 shares authorized; issued and outstanding 2,232,572 on September 30, 2006 and 2,108,864 on
December 31, 2005 |  |                  | 20,693  |   |                 |   | 18,636  |  
|Retained earnings                                                                                                                            |  |                  | 3,170   |   |                 |   | 3,306   |  
|Accumulated other comprehensive loss, net of tax benefit of ($116) for 2006 and ($132) for 2005                                              |  |                  | (225    | ) |                 |   | (256    | )
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                   |  |                  | 23,638  |   |                 |   | 21,686  |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                   |  | $                | 274,566 |   |                 | $ | 245,465 |  
|                                                                                                                                             |  |                  |         |   |                 |   |         |  

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



1



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

Three months and nine months,
year-to-date, ended September 30, 2006 and 2005

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



|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|--------------------------------------------------------------------- |  | ------------------------------ | --------- | -------------------------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                                                                      |  | Three-months endedSeptember 30 |           | Nine-months, year-to-date,ended September 30
|                                                                      |  | 2006                           |           | 2005                                         |   | 2006      |  | 2005
|Interest Income                                                       |  |                                |           |                                              |   |           |  |      |           |  |   |          
|Interest and fees on loans                                            |  | $                              | 4,227     |                                              | $ | 3,116     |  | $    | 11,748    |  | $ | 8,636    
|Interest on securities                                                |  |                                | 384       |                                              |   | 362       |  |      | 1,134     |  |   | 1,088    
|Interest on federal funds sold                                        |  |                                | 56        |                                              |   | 93        |  |      | 171       |  |   | 136      
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|TOTAL INTEREST INCOME                                                 |  |                                | 4,667     |                                              |   | 3,571     |  |      | 13,053    |  |   | 9,860    
|Interest Expense                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|Interest on deposits                                                  |  |                                | 1,276     |                                              |   | 917       |  |      | 3,589     |  |   | 2,430    
|Interest on securities sold under agreement to repurchase             |  |                                | 260       |                                              |   | 109       |  |      | 620       |  |   | 249      
|Interest on borrowed funds                                            |  |                                | 189       |                                              |   | 176       |  |      | 547       |  |   | 373      
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|TOTAL INTEREST EXPENSE                                                |  |                                | 1,725     |                                              |   | 1,202     |  |      | 4,756     |  |   | 3,052    
|NET INTEREST INCOME                                                   |  |                                | 2,942     |                                              |   | 2,369     |  |      | 8,297     |  |   | 6,808    
|Provision for loan losses                                             |  |                                | 90        |                                              |   | 90        |  |      | 270       |  |   | 234      
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                   |  |                                | 2,852     |                                              |   | 2,279     |  |      | 8,027     |  |   | 6,574    
|Noninterest Income                                                    |  |                                |           |                                              |   |           |  |      |           |  |   |          
|Fees and service charges                                              |  |                                | 229       |                                              |   | 246       |  |      | 675       |  |   | 721      
|Net gain from sale of loans                                           |  |                                | 168       |                                              |   | 199       |  |      | 452       |  |   | 486      
|Other noninterest income                                              |  |                                | 183       |                                              |   | 157       |  |      | 509       |  |   | 469      
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|TOTAL NONINTEREST INCOME                                              |  |                                | 580       |                                              |   | 602       |  |      | 1,636     |  |   | 1,676    
|Noninterest Expense                                                   |  |                                |           |                                              |   |           |  |      |           |  |   |          
|Salaries and employee benefits                                        |  |                                | 1,326     |                                              |   | 1,113     |  |      | 3,899     |  |   | 3,372    
|Occupancy, furniture, fixture & equipment expense                     |  |                                | 228       |                                              |   | 191       |  |      | 672       |  |   | 593      
|Depreciation and amortization expense                                 |  |                                | 149       |                                              |   | 118       |  |      | 412       |  |   | 342      
|Other operating expense                                               |  |                                | 582       |                                              |   | 514       |  |      | 1,657     |  |   | 1,617    
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|TOTAL NONINTEREST EXPENSE                                             |  |                                | 2,285     |                                              |   | 1,936     |  |      | 6,640     |  |   | 5,924    
|INCOME BEFORE PROVISION FOR TAXES                                     |  |                                | 1,147     |                                              |   | 945       |  |      | 3,023     |  |   | 2,326    
|Provision for taxes                                                   |  |                                | 378       |                                              |   | 309       |  |      | 998       |  |   | 733      
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|NET INCOME                                                            |  | $                              | 769       |                                              | $ | 636       |  | $    | 2,025     |  | $ | 1,593    
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|                                                                      |  |                               
|                                                                      |  | Three-months endedSeptember 30 |           | Nine-months, year-to-date,ended September 30
|                                                                      |  |                                | 2006      |                                              |   | 2005      |  |      | 2006      |  |   | 2005     
|Weighted average shares outstanding                                   |  |                                | 2,220,182 |                                              |   | 2,213,072 |  |      | 2,217,530 |  |   | 2,211,774
|Basic earnings per share                                              |  | $                              | 0.35      |                                              | $ | 0.29      |  | $    | 0.91      |  | $ | 0.72     
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          
|Weighted average shares outstanding                                   |  |                                | 2,220,182 |                                              |   | 2,213,072 |  |      | 2,217,530 |  |   | 2,211,774
|Effect of dilutive securities                                         |  |                                | 40,591    |                                              |   | 48,736    |  |      | 38,608    |  |   | 46,306   
|Weighted average shares outstanding, adjusted for dilutive securities |  |                                | 2,260,773 |                                              |   | 2,261,808 |  |      | 2,256,138 |  |   | 2,258,080
|Earnings per share assuming full dilution                             |  | $                              | 0.34      |                                              | $ | 0.28      |  | $    | 0.90      |  | $ | 0.71     
|                                                                      |  |                                |           |                                              |   |           |  |      |           |  |   |          

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



2



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOW

Unaudited

Nine months, year-to-date, ended
September 30, 2006 and 2005

(Dollars in thousands)



|                                                                              |  |                                              |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                              |  | Nine-months, year-to-date,ended September 30 |        
|                                                                              |  | 2006                                         |         |   | 2005 |  
|Net income                                                                    |  | $                                            | 2,025   |   |      | $ | 1,593   |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                                              |         |   |      |   |         |  
|Provision for loan losses                                                     |  |                                              | 270     |   |      |   | 234     |  
|Depreciation and amortization                                                 |  |                                              | 412     |   |      |   | 342     |  
|Change in assets and liabilities:                                             |  |                                              |         |   |      |   |         |  
|Accrued interest receivable                                                   |  |                                              | (318    | ) |      |   | (174    | )
|Net increase in loans held for sale                                           |  |                                              | (817    | ) |      |   | (808    | )
|Net increase in bank owned life insurance                                     |  |                                              | (86     | ) |      |   | (91     | )
|Other assets                                                                  |  |                                              | (575    | ) |      |   | (997    | )
|Accrued interest payable & other liabilities                                  |  |                                              | 548     |   |      |   | 169     |  
|Equity compensation expense                                                   |  |                                              | 36      |   |      |   | 0       |  
|                                                                              |  |                                              |         |   |      |   |         |  
|NET CASH USED BY OPERATING ACTIVITIES                                         |  |                                              | 1,495   |   |      |   | 268     |  
|Cash flows from investing activities:                                         |  |                                              |         |   |      |   |         |  
|Net (increase)/decrease in federal funds sold/FHLB interest bearing balances  |  |                                              | (4,608  | ) |      |   | 3,294   |  
|Net decrease in investment securities                                         |  |                                              | 551     |   |      |   | 3,770   |  
|Net increase in loans                                                         |  |                                              | (22,124 | ) |      |   | (26,275 | )
|Purchase of premises and equipment net of gain or loss on asset disposal      |  |                                              | (2,042  | ) |      |   | (1,365  | )
|Foreclosed real estate activity (net)                                         |  |                                              | 12      |   |      |   | 188     |  
|                                                                              |  |                                              |         |   |      |   |         |  
|NET CASH USED BY INVESTING ACTIVITIES                                         |  |                                              | (28,211 | ) |      |   | (20,388 | )
|Cash flows from financing activities:                                         |  |                                              |         |   |      |   |         |  
|Net increase in deposits                                                      |  |                                              | 17,851  |   |      |   | 13,551  |  
|Net increase in securities sold under agreement to repurchase                 |  |                                              | 7,056   |   |      |   | 3,928   |  
|Proceeds from issuance of junior subordinated debentures                      |  |                                              | 0       |   |      |   | 5,155   |  
|Proceeds from issuance of borrowed funds                                      |  |                                              | 2,000   |   |      |   | 0       |  
|Repayment of borrowed funds                                                   |  |                                              | (306    | ) |      |   | (985    | )
|Cash received from stock sales                                                |  |                                              | 205     |   |      |   | 61      |  
|Cash paid to repurchase stock                                                 |  |                                              | (3      | ) |      |   | 0       |  
|Cash dividend paid                                                            |  |                                              | (342    | ) |      |   | (285    | )
|                                                                              |  |                                              |         |   |      |   |         |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                     |  |                                              | 26,461  |   |      |   | 21,425  |  
|Net increase/(decrease) in cash and cash equivalents:                         |  |                                              | (255    | ) |      |   | 1,305   |  
|Cash and due from banks, beginning of year                                    |  |                                              | 8,337   |   |      |   | 7,736   |  
|                                                                              |  |                                              |         |   |      |   |         |  
|CASH AND DUE FROM BANKS, END OF QUARTER                                       |  | $                                            | 8,082   |   |      | $ | 9,041   |  

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



3



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NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Unaudited

(Dollars in thousands)

As of September 30, 2006



|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|---------------------------------------------------------------- |  | ----- | ------ | - | ----------- | - | ------ | ---------------- |  | - | --------------------------------- | - |  | ------------------- | - |  | ----- | -
|                                                                 |  | Total |        |   | CommonStock |   |        | RetainedEarnings |  |   | AccumulatedOtherComprehensiveLoss |   |  | ComprehensiveIncome |  
|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, due to stock dividend                                 |  |       |       |   |             |   | 1,632  |                  |  |   | (1,632                            | ) |  |                     |   |  |       |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Balance December 31, 2005                                        |  |       | 21,686 |   |             |   | 18,636 |                  |  |   | 3,306                             |   |  | (256                | ) |  |       |  
|Net income, 2006, year-to-date                                   |  |       | 2,025  |   |             |   |        |                  |  |   | 2,025                             |   |  |                     |   |  | 2,025 |  
|Unrealized gains on available for sale securities, net of taxes  |  |       | 31     |   |             |   |        |                  |  |   |                                   |   |  | 31                  |   |  | 31    |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Comprehensive income                                             |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  | 2,056 |  
|Proceeds from issuance of common stock                           |  |       | 205    |   |             |   | 205    |                  |  |   |                                   |   |  |                     |   |  |       |  
|Repurchase of common stock                                       |  |       | (3     | ) |             |   | (3     | )                |  |   |                                   |   |  |                     |   |  |       |  
|Equity-based compensation                                        |  |       | 36     |   |             |   |        |                  |  |   | 36                                |   |  |                     |   |  |       |  
|Cash dividends paid                                              |  |       | (342   | ) |             |   |        |                  |  |   | (342                              | ) |  |                     |   |  |       |  
|Transfers, due to stock dividend                                 |  |       |       |   |             |   | 1,855  |                  |  |   | (1,855                            | ) |  |                     |   |  |       |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Balance, end-of-quarter, September 30, 2006                      |  | $     | 23,638 |   |             | $ | 20,693 |                  |  | $ | 3,170                             |   |  | ($225               | ) |  |       |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Disclosure of 2006 reclassification amount:                      |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Unrealized holding gain on available for sale securities         |  | $     | 47     |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Reclassification adjustment for gains realized in income         |  |       | 0      |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Net unrealized gain                                              |  |       | 47     |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Tax effect                                                       |  |       | 16     |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|Net of tax amount                                                |  | $     | 31     |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  
|                                                                 |  |       |        |   |             |   |        |                  |  |   |                                   |   |  |                     |   |  |       |  

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



4



---

NORTHWEST BANCORPORATION, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Unaudited

(Dollars in thousands)

As of
September 30, 2005



|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|---------------------------------------------------------------- |  | ----- | ------ | - | ----------- | - | ---------------- |  | - | --------------------------------- | - |  | ------------------- | ----- | - |  | ----- | -
|                                                                 |  | Total |        |   | CommonStock |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveLoss |   |  | ComprehensiveIncome |      
|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, due to stock dividend                                 |  |       |       |   |             |   | 1,502            |  |   | (1,502                            | ) |  |                     |       |   |  |       |  
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Balance December 31, 2004                                        |  |       | 19,961 |   |             |   | 16,943           |  |   | 3,063                             |   |  |                     | (45   | ) |  |       |  
|Net income, 2005, year-to-date                                   |  |       | 1,593  |   |             |   |                  |  |   | 1,593                             |   |  |                     |       |   |  | 1,593 |  
|Unrealized losses on available for sale securities, net of taxes |  |       | (124   | ) |             |   |                  |  |   |                                   |   |  |                     | (124  | ) |  | (124  | )
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Comprehensive income                                             |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  | 1,469 |  
|Proceeds from issuance of common stock                           |  |       | 61     |   |             |   | 61               |  |   |                                   |   |  |                     |       |   |  |       |  
|Cash dividends paid                                              |  |       | (285   | ) |             |   |                  |  |   | (285                              | ) |  |                     |       |   |  |       |  
|Transfers, due to stock dividend                                 |  |       |       |   |             |   | 1,633            |  |   | (1,633                            | ) |  |                     |       |   |  |       |  
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Balance, end-of-quarter, September 30, 2005                      |  | $     | 21,206 |   |             | $ | 18,637           |  | $ | 2,738                             |   |  |                     | ($169 | ) |  |       |  
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Disclosure of 2005 reclassification amount:                      |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Unrealized holding loss on available for sale securities         |  |       | ($188  | ) |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Reclassification adjustment for gains realized in income         |  |       |       |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Net unrealized loss                                              |  |       | (188   | ) |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Tax effect                                                       |  |       | (64    | ) |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|Net of tax amount                                                |  |       | ($124  | ) |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  
|                                                                 |  |       |        |   |             |   |                  |  |   |                                   |   |  |                     |       |   |  |       |  

The accompanying notes are an integral part of these condensed consolidated
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 September 30, 2006 and December 31, 2005, as well as the results of
operations and changes in financial position for the three-month and nine-month, year-to-date periods ended September 30, 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 September 30, 2005 balances have been made to conform to the September 30, 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 and nine-month, year-to-date periods ending September 30, 2006 and 2005 to reflect the effect of a five-percent
stock dividend effective for shareholders of record as of May 15, 2006 and paid 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 or nine-month,
year-to-date periods ending September 30, 2006 and 2005; consequently, there were no gains or losses included in non-interest income. Carrying amounts and fair values at September 30, 2006 and December 31, 2005 were as follows (in
thousands):



|                                                                 |  |                    |        |                   |   |               |  |           |        |  |   |       
|---------------------------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ------------- |  | --------- | ------ |  | - | ------
|                                                                 |  | September 30, 2006 |        | December 31, 2005
|                                                                 |  | AmortizedCost      |        | FairValue         |   | AmortizedCost |  | FairValue
|Securities available-for-sale:                                   |  |                    |        |                   |   |               |  |           |        |  |   |       
|Obligations of federal government agencies                       |  | $                  | 23,695 |                   | $ | 23,382        |  | $         | 25,695 |  | $ | 25,306
|US Treasury securities                                           |  |                    | 6,985  |                   |   | 6,978         |  |           | 5,130  |  |   | 5,120 
|Mortgage backed securities                                       |  |                    | 1,048  |                   |   | 1,073         |  |           | 1,269  |  |   | 1,319 
|Corporate Bonds                                                  |  |                    | 500    |                   |   | 454           |  |           | 494    |  |   | 455   
|                                                                 |  |                    |        |                   |   |               |  |           |        |  |   |       
|TOTAL                                                            |  | $                  | 32,228 |                   | $ | 31,887        |  | $         | 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 |  |                    | 3,898  |                   |   | 3,919         |  |           | 4,089  |  |   | 4,076 
|                                                                 |  |                    |        |                   |   |               |  |           |        |  |   |       
|TOTAL                                                            |  | $                  | 3,898  |                   | $ | 3,919         |  | $         | 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 ($250
thousand) investment, at fair market value, in the common stock of a bank holding company headquartered in Bellevue, WA. As this company is relatively new, it is anticipated that it will be some time before an active market in its stock develops. To
determine fair market value, the Company reviews the financial performance of the bank subsidiary of the Bellevue-based holding company and, pursuant to the latest review, believes that the current fair market value approximates cost.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6



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|(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 ($155 thousand) equity investment in a Trust created by the Company in connection with issuance of trust preferred securities, ($190 thousand)
investment in the common stock of Pacific Coast Bankers Bank and ($50 thousand) investment in an economic development company, each of these investments is reported at cost.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Loan detail by category as of September 30, 2006 and
December 31, 2005 is as follows (in thousands):



|                          |  |                  |         |   |                 |   |         |  
|------------------------- |  | ---------------- | ------- | - | --------------- | - | ------- | -
|                          |  | September 302006 |         |   | December 312005 |  
|Commercial loans          |  | $                | 133,530 |   |                 | $ | 124,611 |  
|Real estate loans         |  |                  | 62,445  |   |                 |   | 50,162  |  
|Consumer and other loans  |  |                  | 8,199   |   |                 |   | 8,991   |  
|Installment loans         |  |                  | 6,892   |   |                 |   | 5,079   |  
|                          |  |                  |         |   |                 |   |         |  
|TOTAL LOANS               |  | $                | 211,066 |   |                 | $ | 188,843 |  
|                          |  |                  |         |   |                 |   |         |  
|Allowance for loan losses |  |                  | (2,489  | ) |                 |   | (2,252  | )
|Net deferred loan fees    |  |                  | (405    | ) |                 |   | (273    | )
|                          |  |                  |         |   |                 |   |         |  
|NET LOANS                 |  | $                | 208,172 |   |                 | $ | 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



7



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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 and nine-month, year-to-date periods
ended September 30, 2006 and 2005 were as follows (in thousands):



|                                                                                                                                                           |  |                    |       |   |                   |   |       |           |  |   |           |   |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | - | ----------------- | - | ----- | --------- |  | - | --------- | - |  | - | ----- | -
|                                                                                                                                                           |  | Three-months ended |       |   | Nine-months ended |  
|                                                                                                                                                           |  | 9/30/2006          |       |   | 9/30/2005         |   |       | 9/30/2006 |  |   | 9/30/2005 |  
|Balance, beginning of period                                                                                                                               |  | $                  | 2,430 |   |                   | $ | 2,117 |           |  | $ | 2,252     |   |  | $ | 1,944 |  
|Add reserve for probable losses on unused loan commitments and off-balance sheet items (OBS)                                                               |  |                    | 201   |   |                   |   | 185   |           |  |   | 179       |   |  |   | 206   |  
|                                                                                                                                                           |  |                    |       |   |                   |   |       |           |  |   |           |   |  |   |       |  
|Balance, beginning of period, including OBS reserve                                                                                                        |  |                    | 2,631 |   |                   |   | 2,302 |           |  |   | 2,431     |   |  |   | 2,150 |  
|Provision for loan losses                                                                                                                                  |  |                    | 90    |   |                   |   | 90    |           |  |   | 270       |   |  |   | 234   |  
|Loan Charge-offs                                                                                                                                           |  |                    | (29   | ) |                   |   | (28   | )         |  |   | (44       | ) |  |   | (50   | )
|Loan Recoveries                                                                                                                                            |  |                    | 4     |   |                   |   | 21    |           |  |   | 39        |   |  |   | 51    |  
|                                                                                                                                                           |  |                    |       |   |                   |   |       |           |  |   |           |   |  |   |       |  
|Balance, end of period, prior to adjustment for off-balance sheet items                                                                                    |  |                    | 2,696 |   |                   |   | 2,385 |           |  |   | 2,696     |   |  |   | 2,385 |  
|Reclassification of reserve for probable losses on unused loan commitments and off-balance sheet items to Accrued interest payable and
other liabilities |  |                    | (207  | ) |                   |   | (112  | )         |  |   | (207      | ) |  |   | (112  | )
|                                                                                                                                                           |  |                    |       |   |                   |   |       |           |  |   |           |   |  |   |       |  
|Balance, end of period                                                                                                                                     |  | $                  | 2,489 |   |                   | $ | 2,273 |           |  | $ | 2,489     |   |  | $ | 2,273 |  
|                                                                                                                                                           |  |                    |       |   |                   |   |       |           |  |   |           |   |  |   |       |  



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

The Bank has a line of credit with the
Federal Home Loan Bank of Seattle (FHLB) and operating lines of credit with several other financial institutions. The FHLB line provides the Bank access to long-term funding, with repayment terms as long as thirty years, and to short-term funding to
meet current liquidity needs. The operating lines with other financial instituions are available for short-term funding, to meet current liquidity needs.

The following table outlines amounts outstanding and the availability of borrowed funds for the periods covered in this report:



|                                     |  |                                 |        |          |                   |           |            |                             |         |                                                          |                    |   |       |  |   |      
|------------------------------------ |  | ------------------------------- | ------ | -------- | ----------------- | --------- | ---------- | --------------------------- | ------- | -------------------------------------------------------- | ------------------ | - | ----- |  | - | -----
|                                     |  | Line amount (1)($ in thousands) |        | Maturity |                   |           | Collateral |                             | Purpose |                                                          | Outstanding as of:
|                                     |  |                                 |        |          |                   | 9/30/2006 |            | 12/31/2005                 
|                                     |  |                                 |        |          |                   |           |            |                             |         |                                                          | ($ in thousands)  
|Federal Home Loan Bank of Seattle(2) |  | $                               | 41,075 |          | Annual            | (3)       |            | General pledge of assets(4) |         | Line of credit, with access to short and long-term funds |                    | $ | 8,509 |  | $ | 6,815
|KeyBank of Washington(5)             |  | $                               | 10,000 |          | 7/1/2007          |           |            | Unsecured                   |         | Short-term line of credit                                |                    |   |      |  |   |     
|                                     |  | $                               | 100    |          | 7/1/2007          |           |            | Unsecured                   |         | Supports foreign currency transactions                   |                    |   |      |  |   |     
|                                     |  | $                               | 100    |          | 7/1/2008          |           |            | Unsecured                   |         | Supports letters of credit                               |                    |   |      |  |   |     
|Pacific Coast Bankers Bank(6)        |  | $                               | 5,000  |          | 6/30/2007         |           |            | Unsecured                   |         | Short-term line of credit                                |                    |   |      |  |   |     
|U.S. Bank(5)                         |  | $                               | 1,500  |          | 7/31/2007         |           |            | Unsecured                   |         | Short-term line of credit                                |                    |   |      |  |   |     
|Zions Bank(5)                        |  | $                               | 1,500  |          | No statedmaturity |           |            | Unsecured                   |         | Short-term line of credit                                |                    |   |      |  |   |     
|                                     |  |                                 |        |          |                   |           |            |                             |         |                                                          |                    |   |       |  |   |      
|                                     |  |                                 |        |          |                   |           |            |                             |         | Total borrowed funds                                     |                    | $ | 8,509 |  | $ | 6,815



|(1) | The FHLB line amount is computed as 15% of Bank assets as of the reporting date and will change from quarter to quarter as asset totals change.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



8



---

|(2) | Access to the FHLB line is conditioned to stock ownership; additional stock purchase may be required to access the full amount of the line. The FHLB may be used for
overnight borrowings (federal funds purchased) or for short-term (between 7 days and 1-year) or intermediate/long-term borrowings (as long as thirty years). All of the balances outstanding for the reporting dates were intermediate or long-term.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The FHLB reviews its commitment annually and notifies the Bank that the arrangement will continue, but does not state an exact maturity date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The FHLB requires a general pledge of all Bank assets. Actual advances are limited by the amount of single family and multi-family real estate loans in the
Banks loan portfolio, as well as certain commercial real estate loans. In practice, these loans provide the FHLB with adequate collateral coverage, exclusive of other Bank assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Federal funds purchased lines of credit to cover short-term liquidity needs. Typically expected to be re-paid within a few days.
|--- | --------------------------------------------------------------------------------------------------------------------------------



|(6) | Federal funds purchased line of credit to cover short-term liquidity needs. Typically expected to be re-paid within a few days. May be extended to as much as thirty
days.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



---

|NOTE | 6. Capital Lease Liability
|---- | --------------------------

The capital lease liability
outstanding on September 30, 2006 and December 31, 2005 is 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 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 Capital lease liability.



|NOTE | 7. Material Contract
|---- | --------------------

In the third-quarter 2006, the Bank entered into an
agreement with the Spokane Public Facilities District (PFD) for the purchase of naming rights to the Spokane Opera House; that facility will henceforth be known as the INB Performing Arts Center. Under the agreement, the Bank will pay the PFD $150
thousand per year for a period of ten years. Expense related to the agreement will be recognized as Other operating expense and will affect (reduce) net income by about $25 thousand per quarter, beginning with the third-quarter
2006.



|NOTE | 8. 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.

The following tables are a summary of current trust
preferred securities at September 30, 2006 and December 31, 2005 (dollars in thousands):

September 30, 2006



|                                         |  |                                                       |       |                                                      |   |                                                         |  |                |       |                      |      |  |                 |   |                  |                         |  |                      
|---------------------------------------- |  | ----------------------------------------------------- | ----- | ---------------------------------------------------- | - | ------------------------------------------------------- |  | -------------- | ----- | -------------------- | ---- |  | --------------- | - | ---------------- | ----------------------- |  | ---------------------
|Name of Trust                            |  | Aggregateliquidationamount oftrustpreferredsecurities |       | Aggregateliquidationamount ofcommoncapitalsecurities |   | Aggregateprincipalamount ofjuniorsubordinateddebentures |  | Statedmaturity |       | Perannuminterestrate |      |  | Extensionperiod |   | Redemptionoption
|Northwest Bancorporation Capital Trust I |  | $                                                     | 5,000 |                                                      | $ | 155                                                     |  | $              | 5,155 |                      | 2035 |  | 5.95            | % |                  | 20 consecutive quarters |  | On or after 6/30/2010



10



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December 31, 2005



|                                         |  |                                                       |       |                                                      |   |                                                         |  |                |       |                      |      |  |                 |   |                  |                       |  |                    
|---------------------------------------- |  | ----------------------------------------------------- | ----- | ---------------------------------------------------- | - | ------------------------------------------------------- |  | -------------- | ----- | -------------------- | ---- |  | --------------- | - | ---------------- | --------------------- |  | -------------------
|Name of Trust                            |  | Aggregateliquidationamount oftrustpreferredsecurities |       | Aggregateliquidationamount ofcommoncapitalsecurities |   | Aggregateprincipalamount ofjuniorsubordinateddebentures |  | Statedmaturity |       | Perannuminterestrate |      |  | Extensionperiod |   | Redemptionoption
|Northwest Bancorporation Capital Trust I |  | $                                                     | 5,000 |                                                      | $ | 155                                                     |  | $              | 5,155 |                      | 2035 |  | 5.95            | % |                  | 20consecutivequarters |  | On orafter6/30/2010



|NOTE | 9. 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, 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 | 10. 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 and nine-month, year-to-date
periods ending September 30, 2006 and 2005, have been adjusted to reflect the stock dividends.



11



---

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 was paid on June 15, 2006 to shareholders of
record as of May 12, 2006.



|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.



12



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|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 third fiscal 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 2. | Changes in Securities
|------- | ---------------------

From time to time, typically
in instances where a stockholder owns less than one-hundred (100) shares, the Company will repurchase shares of its common stock at a price that is reflective of the last several trades reported on various Internet quotation services, such as
www.otcbb.com. During the third quarter of 2006, the Company repurchased 70 shares at an average price of $17.83.

During the third
quarter of 2006, employees exercised stock options granted by the Company in stock option agreements prepared in accordance with the Companys Non-Qualified Stock Option Plan; employees purchased 13,770 shares of common stock with a
weighted-average exercise price per share of $9.22 and an average market value, at the date of exercise, of $17.96.

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 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 July 19, 2006. On July 19, 2006 the Company
issued a press release announcing financial information for the second-quarter of 2006.



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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 and Chief Executive
Officer


Date: November 9, 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: November 9, 2006



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