UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
|
þ
|
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the quarterly period ended June 30, 2008
or
|
|
|
o
|
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the transition period from
to
Commission File Number
0-23817
Northwest Bancorp, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
United States of America
|
|
23-2900888
|
|
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
100 Liberty Street, Warren, Pennsylvania
|
|
16365
|
|
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
(814) 726-2140
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
|
|
Large Accelerated Filer
o
|
|
Accelerated Filer
þ
|
|
Non-Accelerated Filer
o
|
|
Smaller reporting company
o
|
|
|
|
|
(Do not check if a smaller reporting company)
|
|
|
Indicate by check mark whether the registrant is a Shell Company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date:
Common Stock ($0.10 par value) 48,468,475 shares outstanding as of July 31, 2008
NORTHWEST BANCORP, INC.
INDEX
|
|
|
|
|
|
|
PAGE
|
PART I FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
Consolidated Statements of Changes in Shareholders Equity for the six months ended June 30, 2008 and 2007
|
|
|
4
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
Certifications
|
|
|
|
|
EX-31.1
|
EX-31.2
|
EX-32.1
|
ITEM 1. FINANCIAL STATEMENTS
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
98,548
|
|
|
|
75,905
|
|
Interest-earning deposits in other financial institutions
|
|
|
|
|
|
|
153,160
|
|
Federal funds sold and other short-term investments
|
|
|
5,811
|
|
|
|
1,551
|
|
Marketable securities available-for-sale (amortized cost of $1,290,881 and $1,125,426)
|
|
|
1,288,291
|
|
|
|
1,133,367
|
|
|
|
|
|
|
|
|
Total cash and investments
|
|
|
1,392,650
|
|
|
|
1,363,983
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
|
3,396
|
|
|
|
28,412
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans one- to four- family
|
|
|
2,468,293
|
|
|
|
2,386,506
|
|
Home equity loans
|
|
|
1,001,529
|
|
|
|
973,161
|
|
Consumer loans
|
|
|
284,801
|
|
|
|
272,867
|
|
Commercial real estate loans
|
|
|
940,104
|
|
|
|
845,397
|
|
Commercial business loans
|
|
|
343,080
|
|
|
|
331,063
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
5,041,203
|
|
|
|
4,837,406
|
|
Allowance for loan losses
|
|
|
(43,293
|
)
|
|
|
(41,784
|
)
|
|
|
|
|
|
|
|
Total loans, net
|
|
|
4,997,910
|
|
|
|
4,795,622
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank stock, at cost
|
|
|
50,068
|
|
|
|
31,304
|
|
Accrued interest receivable
|
|
|
26,489
|
|
|
|
27,084
|
|
Real estate owned, net
|
|
|
8,407
|
|
|
|
8,667
|
|
Premises and equipment, net
|
|
|
115,266
|
|
|
|
110,894
|
|
Bank owned life insurance
|
|
|
121,051
|
|
|
|
118,682
|
|
Goodwill
|
|
|
171,363
|
|
|
|
171,614
|
|
Mortgage servicing rights
|
|
|
8,821
|
|
|
|
8,955
|
|
Other intangible assets
|
|
|
9,196
|
|
|
|
11,782
|
|
Other assets
|
|
|
15,112
|
|
|
|
14,929
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,916,333
|
|
|
|
6,663,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders equity
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
393,408
|
|
|
|
361,102
|
|
Interest-bearing demand deposits
|
|
|
731,169
|
|
|
|
717,991
|
|
Savings deposits
|
|
|
1,545,131
|
|
|
|
1,426,545
|
|
Time deposits
|
|
|
2,716,639
|
|
|
|
3,036,696
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
5,386,347
|
|
|
|
5,542,334
|
|
|
|
|
|
|
|
|
|
|
Borrowed funds
|
|
|
724,305
|
|
|
|
339,115
|
|
Junior subordinated deferrable interest debentures held by trusts that issued
guaranteed capital debt securities
|
|
|
108,287
|
|
|
|
108,320
|
|
Advances by borrowers for taxes and insurance
|
|
|
33,699
|
|
|
|
24,159
|
|
Accrued interest payable
|
|
|
4,530
|
|
|
|
4,356
|
|
Other liabilities
|
|
|
36,414
|
|
|
|
32,354
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
6,293,582
|
|
|
|
6,050,638
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.10 par value: 50,000,000 authorized, no shares issued
|
|
|
|
|
|
|
|
|
Common stock, $0.10 par value: 500,000,000 shares authorized, 51,210,750 and
51,191,109 issued, respectively
|
|
|
5,121
|
|
|
|
5,119
|
|
Paid-in capital
|
|
|
216,142
|
|
|
|
214,606
|
|
Retained earnings
|
|
|
477,110
|
|
|
|
458,425
|
|
Accumulated other comprehensive (loss)/ income
|
|
|
(6,199
|
)
|
|
|
816
|
|
Treasury stock, at cost, 2,742,800 and 2,610,800 shares, respectively
|
|
|
(69,423
|
)
|
|
|
(66,088
|
)
|
|
|
|
|
|
|
|
|
|
|
622,751
|
|
|
|
612,878
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
6,916,333
|
|
|
|
6,663,516
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements unaudited
1
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
80,520
|
|
|
|
76,812
|
|
|
|
161,409
|
|
|
|
151,178
|
|
Mortgage-backed securities
|
|
|
9,514
|
|
|
|
7,344
|
|
|
|
16,684
|
|
|
|
15,036
|
|
Taxable investment securities
|
|
|
3,217
|
|
|
|
7,887
|
|
|
|
7,066
|
|
|
|
15,969
|
|
Tax-free investment securities
|
|
|
3,028
|
|
|
|
3,134
|
|
|
|
6,021
|
|
|
|
6,367
|
|
Interest-earning deposits
|
|
|
710
|
|
|
|
3,650
|
|
|
|
2,506
|
|
|
|
5,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
96,989
|
|
|
|
98,827
|
|
|
|
193,686
|
|
|
|
194,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
36,451
|
|
|
|
47,120
|
|
|
|
79,281
|
|
|
|
91,744
|
|
Borrowed funds
|
|
|
6,972
|
|
|
|
6,338
|
|
|
|
12,529
|
|
|
|
12,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
43,423
|
|
|
|
53,458
|
|
|
|
91,810
|
|
|
|
104,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
53,566
|
|
|
|
45,369
|
|
|
|
101,876
|
|
|
|
90,104
|
|
Provision for loan losses
|
|
|
3,395
|
|
|
|
2,066
|
|
|
|
5,689
|
|
|
|
4,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
50,171
|
|
|
|
43,303
|
|
|
|
96,187
|
|
|
|
86,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges and fees
|
|
|
8,153
|
|
|
|
6,509
|
|
|
|
15,791
|
|
|
|
12,517
|
|
Trust and other financial services income
|
|
|
1,783
|
|
|
|
1,560
|
|
|
|
3,531
|
|
|
|
3,018
|
|
Insurance commission income
|
|
|
583
|
|
|
|
752
|
|
|
|
1,163
|
|
|
|
1,244
|
|
Gain on sale of loans, net
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
634
|
|
Gain/ (loss) on sale of real estate owned, net
|
|
|
(254
|
)
|
|
|
(23
|
)
|
|
|
(341
|
)
|
|
|
56
|
|
Gain on sale of investments, net
|
|
|
68
|
|
|
|
|
|
|
|
971
|
|
|
|
|
|
Other -than-temporary impairment of investments securities
|
|
|
(1,152
|
)
|
|
|
|
|
|
|
(1,472
|
)
|
|
|
|
|
Income from bank owned life insurance
|
|
|
1,177
|
|
|
|
1,098
|
|
|
|
2,369
|
|
|
|
2,167
|
|
Mortgage banking income
|
|
|
329
|
|
|
|
462
|
|
|
|
671
|
|
|
|
719
|
|
Other operating income
|
|
|
1,120
|
|
|
|
858
|
|
|
|
2,139
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
11,807
|
|
|
|
11,366
|
|
|
|
24,822
|
|
|
|
21,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and employee benefits
|
|
|
22,244
|
|
|
|
20,375
|
|
|
|
44,966
|
|
|
|
42,029
|
|
Premises and occupancy costs
|
|
|
5,318
|
|
|
|
5,326
|
|
|
|
11,043
|
|
|
|
10,787
|
|
Office operations
|
|
|
3,263
|
|
|
|
3,352
|
|
|
|
6,520
|
|
|
|
6,137
|
|
Processing expenses
|
|
|
4,715
|
|
|
|
3,729
|
|
|
|
8,919
|
|
|
|
7,280
|
|
Advertising
|
|
|
1,430
|
|
|
|
1,375
|
|
|
|
2,409
|
|
|
|
2,499
|
|
Federal deposit insurance premiums
|
|
|
1,020
|
|
|
|
165
|
|
|
|
1,844
|
|
|
|
329
|
|
Professional services
|
|
|
595
|
|
|
|
534
|
|
|
|
1,330
|
|
|
|
1,063
|
|
Amortization of other intangible assets
|
|
|
1,284
|
|
|
|
878
|
|
|
|
2,586
|
|
|
|
1,781
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
705
|
|
|
|
|
|
Other expenses
|
|
|
1,619
|
|
|
|
2,043
|
|
|
|
3,593
|
|
|
|
3,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
41,488
|
|
|
|
37,777
|
|
|
|
83,915
|
|
|
|
75,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
20,490
|
|
|
|
16,892
|
|
|
|
37,094
|
|
|
|
32,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and state income taxes
|
|
|
6,048
|
|
|
|
4,592
|
|
|
|
10,030
|
|
|
|
8,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,442
|
|
|
|
12,300
|
|
|
|
27,064
|
|
|
|
23,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.30
|
|
|
|
0.25
|
|
|
|
0.56
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.30
|
|
|
|
0.25
|
|
|
|
0.56
|
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements
2
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Shareholders
|
|
Three months ended June 30, 2007
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Stock
|
|
|
Equity
|
|
Beginning balance at March 31, 2007
|
|
|
49,815,041
|
|
|
$
|
5,115
|
|
|
|
212,376
|
|
|
|
432,428
|
|
|
|
(10,076
|
)
|
|
|
(31,364
|
)
|
|
|
608,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,300
|
|
|
|
|
|
|
|
|
|
|
|
12,300
|
|
Change in unrealized loss on securities,
net of tax of $(3,407)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,329
|
)
|
|
|
|
|
|
|
(5,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,300
|
|
|
|
(5,329
|
)
|
|
|
|
|
|
|
6,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
10,565
|
|
|
|
1
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of RRP shares
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(677,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,992
|
)
|
|
|
(18,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid ($0.20 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,776
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at June 30, 2007
|
|
|
49,148,706
|
|
|
$
|
5,116
|
|
|
|
213,025
|
|
|
|
440,952
|
|
|
|
(15,405
|
)
|
|
|
(50,356
|
)
|
|
|
593,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Shareholders
|
|
Three months ended June 30, 2008
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Stock
|
|
|
Equity
|
|
Beginning balance at March 31, 2008
|
|
|
48,454,438
|
|
|
$
|
5,120
|
|
|
|
215,532
|
|
|
|
466,609
|
|
|
|
2,987
|
|
|
|
(69,423
|
)
|
|
|
620,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,442
|
|
|
|
|
|
|
|
|
|
|
|
14,442
|
|
Change in unrealized loss on securities,
net of tax of $(5,873)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,186
|
)
|
|
|
|
|
|
|
(9,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,442
|
|
|
|
(9,186
|
)
|
|
|
|
|
|
|
5,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
13,512
|
|
|
|
1
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid ($0.22 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,941
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at June 30, 2008
|
|
|
48,467,950
|
|
|
$
|
5,121
|
|
|
|
216,142
|
|
|
|
477,110
|
|
|
|
(6,199
|
)
|
|
|
(69,423
|
)
|
|
|
622,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements
3
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Shareholders
|
|
Six months ended June 30, 2007
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Stock
|
|
|
Equity
|
|
Beginning balance at December 31, 2006
|
|
|
50,029,327
|
|
|
$
|
5,114
|
|
|
|
211,295
|
|
|
|
425,024
|
|
|
|
(11,609
|
)
|
|
|
(25,263
|
)
|
|
|
604,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,597
|
|
|
|
|
|
|
|
|
|
|
|
23,597
|
|
Change in unrealized loss on securities,
net of tax of $(2,427)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,796
|
)
|
|
|
|
|
|
|
(3,796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,597
|
|
|
|
(3,796
|
)
|
|
|
|
|
|
|
19,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
23,579
|
|
|
|
2
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of RRP shares
|
|
|
4,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(908,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,093
|
)
|
|
|
(25,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid ($0.40 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,669
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at June 30, 2007
|
|
|
49,148,706
|
|
|
$
|
5,116
|
|
|
|
213,025
|
|
|
|
440,952
|
|
|
|
(15,405
|
)
|
|
|
(50,356
|
)
|
|
|
593,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Shareholders
|
|
Six months ended June 30, 2008
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Stock
|
|
|
Equity
|
|
Beginning balance at December 31, 2007
|
|
|
48,580,309
|
|
|
$
|
5,119
|
|
|
|
214,606
|
|
|
|
458,425
|
|
|
|
816
|
|
|
|
(66,088
|
)
|
|
|
612,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of changing pension plan measurement
date pursuant to FASB Statement No. 158
net of tax of $(319) and $361, respectively
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(499
|
)
|
|
|
572
|
|
|
|
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, as adjusted
|
|
|
48,580,309
|
|
|
|
5,119
|
|
|
|
214,606
|
|
|
|
457,926
|
|
|
|
1,388
|
|
|
|
(66,088
|
)
|
|
|
612,951
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,064
|
|
|
|
|
|
|
|
|
|
|
|
27,064
|
|
Change in unrealized loss on securities,
net of tax of $(4,850)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,587
|
)
|
|
|
|
|
|
|
(7,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,064
|
|
|
|
(7,587
|
)
|
|
|
|
|
|
|
19,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
19,641
|
|
|
|
2
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(132,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,335
|
)
|
|
|
(3,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid ($0.44 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,880
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at June 30, 2008
|
|
|
48,467,950
|
|
|
$
|
5,121
|
|
|
|
216,142
|
|
|
|
477,110
|
|
|
|
(6,199
|
)
|
|
|
(69,423
|
)
|
|
|
622,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements
4
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
14,442
|
|
|
|
12,300
|
|
|
|
27,064
|
|
|
|
23,597
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
3,395
|
|
|
|
2,066
|
|
|
|
5,689
|
|
|
|
4,072
|
|
Net (gain)/ loss on sale of assets
|
|
|
544
|
|
|
|
(311
|
)
|
|
|
726
|
|
|
|
(528
|
)
|
Net gain on Visa Inc. share redemption
|
|
|
|
|
|
|
|
|
|
|
(672
|
)
|
|
|
|
|
Net depreciation, amortization and accretion
|
|
|
4,026
|
|
|
|
3,251
|
|
|
|
7,667
|
|
|
|
6,999
|
|
Decrease (increase) in other assets
|
|
|
1,549
|
|
|
|
(8,365
|
)
|
|
|
2,627
|
|
|
|
(8,025
|
)
|
(Decrease)/ increase in other liabilities
|
|
|
(709
|
)
|
|
|
1,920
|
|
|
|
5,553
|
|
|
|
4,984
|
|
Net amortization of premium/ discount on
marketable securities
|
|
|
(1,892
|
)
|
|
|
(1,098
|
)
|
|
|
(3,626
|
)
|
|
|
(2,057
|
)
|
Deferred income tax expense (benefit)
|
|
|
|
|
|
|
1,034
|
|
|
|
(141
|
)
|
|
|
1,209
|
|
Noncash write-down of investment securities
|
|
|
1,152
|
|
|
|
|
|
|
|
1,472
|
|
|
|
|
|
Origination of loans held for sale
|
|
|
(33,416
|
)
|
|
|
(51,771
|
)
|
|
|
(108,030
|
)
|
|
|
(99,282
|
)
|
Proceeds from sale of loans held for sale
|
|
|
34,875
|
|
|
|
55,602
|
|
|
|
105,228
|
|
|
|
104,613
|
|
Noncash compensation expense related to stock benefit plans
|
|
|
459
|
|
|
|
526
|
|
|
|
1,295
|
|
|
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
24,425
|
|
|
|
15,154
|
|
|
|
44,852
|
|
|
|
37,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of marketable securities available-for-sale
|
|
|
(102,787
|
)
|
|
|
(19,859
|
)
|
|
|
(406,697
|
)
|
|
|
(32,662
|
)
|
Proceeds from maturities and principal reductions
of marketable securities held-to-maturity
|
|
|
|
|
|
|
26,762
|
|
|
|
|
|
|
|
52,400
|
|
Proceeds from maturities and principal reductions
of marketable securities available-for-sale
|
|
|
75,732
|
|
|
|
23,953
|
|
|
|
240,755
|
|
|
|
71,652
|
|
Proceeds from sale of marketable securities available-for-sale
|
|
|
1,042
|
|
|
|
|
|
|
|
1,042
|
|
|
|
|
|
Loan originations
|
|
|
(528,668
|
)
|
|
|
(434,236
|
)
|
|
|
(883,700
|
)
|
|
|
(739,283
|
)
|
Proceeds from loan maturities and principal reductions
|
|
|
361,529
|
|
|
|
313,781
|
|
|
|
673,198
|
|
|
|
566,065
|
|
Net (purchase) sale of FHLB stock
|
|
|
(9,658
|
)
|
|
|
378
|
|
|
|
(18,764
|
)
|
|
|
501
|
|
Proceeds from sale of real estate owned
|
|
|
2,866
|
|
|
|
1,547
|
|
|
|
3,822
|
|
|
|
2,575
|
|
Net (purchase) sale of real estate owned for investment
|
|
|
38
|
|
|
|
39
|
|
|
|
77
|
|
|
|
(178
|
)
|
Purchase of premises and equipment
|
|
|
(5,569
|
)
|
|
|
(1,704
|
)
|
|
|
(8,765
|
)
|
|
|
(4,079
|
)
|
Acquisitions, net of cash received
|
|
|
|
|
|
|
(25,150
|
)
|
|
|
|
|
|
|
(25,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
(205,475
|
)
|
|
|
(114,489
|
)
|
|
|
(399,032
|
)
|
|
|
(108,159
|
)
|
5
NORTHWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in deposits, net
|
|
|
(169,321
|
)
|
|
|
21,276
|
|
|
|
(155,987
|
)
|
|
|
205,659
|
|
Proceeds from long-term borrowings
|
|
|
225,000
|
|
|
|
|
|
|
|
460,000
|
|
|
|
|
|
Repayments of long-term borrowings
|
|
|
(67
|
)
|
|
|
(25,032
|
)
|
|
|
(84,134
|
)
|
|
|
(25,047
|
)
|
Net increase/ (decrease) in short-term borrowings
|
|
|
2,827
|
|
|
|
(10,110
|
)
|
|
|
9,476
|
|
|
|
261
|
|
Increase in advances by borrowers for taxes and insurance
|
|
|
6,365
|
|
|
|
6,543
|
|
|
|
9,540
|
|
|
|
9,268
|
|
Cash dividends paid
|
|
|
(3,941
|
)
|
|
|
(3,776
|
)
|
|
|
(7,880
|
)
|
|
|
(7,669
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
(18,992
|
)
|
|
|
(3,335
|
)
|
|
|
(25,093
|
)
|
Proceeds from stock options exercised
|
|
|
152
|
|
|
|
124
|
|
|
|
243
|
|
|
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
61,015
|
|
|
|
(29,967
|
)
|
|
|
227,923
|
|
|
|
157,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/ increase in cash and cash equivalents
|
|
|
(120,035
|
)
|
|
|
(129,302
|
)
|
|
|
(126,257
|
)
|
|
|
86,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
224,394
|
|
|
|
370,169
|
|
|
|
230,616
|
|
|
|
154,333
|
|
Net (decrease)/ increase in cash and cash equivalents
|
|
|
(120,035
|
)
|
|
|
(129,302
|
)
|
|
|
(126,257
|
)
|
|
|
86,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
104,359
|
|
|
|
240,867
|
|
|
|
104,359
|
|
|
|
240,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
98,548
|
|
|
|
89,479
|
|
|
|
98,548
|
|
|
|
89,479
|
|
Interest-earning deposits in other financial institutions
|
|
|
|
|
|
|
148,647
|
|
|
|
|
|
|
|
148,647
|
|
Federal funds sold and other short-term investments
|
|
|
5,811
|
|
|
|
2,741
|
|
|
|
5,811
|
|
|
|
2,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
104,359
|
|
|
|
240,867
|
|
|
|
104,359
|
|
|
|
240,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits and borrowings (including interest
credited to deposit accounts of $31,509, $41,123
$69,036 and $78,973, respectively)
|
|
|
42,592
|
|
|
|
51,979
|
|
|
|
91,636
|
|
|
|
102,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
5,754
|
|
|
|
3,791
|
|
|
|
6,155
|
|
|
|
4,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired
|
|
|
|
|
|
|
211,846
|
|
|
|
|
|
|
|
211,846
|
|
Cash paid
|
|
|
|
|
|
|
(25,150
|
)
|
|
|
|
|
|
|
(25,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
|
|
186,696
|
|
|
|
|
|
|
|
186,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans transferred to real estate owned
|
|
|
2,256
|
|
|
|
1,462
|
|
|
|
3,903
|
|
|
|
2,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate owned financed by the Company
|
|
|
159
|
|
|
|
502
|
|
|
|
260
|
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans transferred to held for investment from
loans held for sale
|
|
|
24,827
|
|
|
|
|
|
|
|
24,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
(1)
Basis of Presentation and Informational Disclosures
The Northwest group of companies, headquartered in Warren, Pennsylvania, is organized in a
two-tier holding company structure. Northwest Bancorp, MHC, a federal mutual holding company, owns
approximately 63% of the outstanding shares of common stock of Northwest Bancorp, Inc. (the
Company). The Company, a federally-chartered savings and loan holding company, is regulated by
the Office of Thrift Supervision (OTS). The primary activity of the Company is the ownership of
all of the issued and outstanding common stock of Northwest Savings Bank, a Pennsylvania-chartered
savings bank (Northwest). Northwest is regulated by both the FDIC and the Pennsylvania
Department of Banking. At June 30, 2008, Northwest operated 166 community-banking offices
throughout Pennsylvania, western New York, eastern Ohio, Maryland and southern Florida.
The accompanying unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries, Northwest, Northwest Settlement Agency, LLC, Northwest Consumer
Discount Company, Northwest Finance Company, Northwest Financial Services, Inc., Northwest Capital
Group, Inc., Boetger & Associates, Inc., Allegheny Services, Inc. and Great Northwest Corporation.
The unaudited consolidated financial statements of the Company have been prepared in accordance
with United States generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete annual financial statements. In
the opinion of management, all adjustments necessary for the fair presentation of the Companys
financial position and results of operations have been included. The consolidated statements have
been prepared using the accounting policies described in the financial statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2007.
Certain items previously reported have been reclassified to conform to the current periods
reporting format. The reclassifications had no material effect on the Companys financial condition or
results of operations. The results of operations for the three and six months ended June 30, 2008
are not necessarily indicative of the results that may be expected for the year ending December 31,
2008.
Stock-Based Compensation
On January 16, 2008 the Company awarded employees 191,709 stock options with an exercise price
of $25.03 and a grant date fair value of $3.28 per stock option. Awarded stock options vest over a
five-year period beginning on the date of issuance. At June 30, 2008 there was compensation
expense of $1.7 million for each of the RRP stock award and stock option plans remaining to be recognized. Stock-based compensation expense of $459,000 and
$526,000 for the three months ended June 30, 2008 and 2007, respectively, was recognized in
compensation expense relating to the Companys RRP and stock option plans. Stock-based
compensation expense of $1.3 million and $1.4 million for the six months ended June 30, 2008 and
2007, respectively, was recognized in compensation expense relating to the Companys RRP and stock
option plans.
Income Taxes
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No.
48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN
48).
FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present
and disclose in its financial statements uncertain tax positions that the company has taken or
expects to take on a tax return. FIN 48 states that a tax benefit from an uncertain position may
be recognized only if it is more likely than not that the position is sustainable, based on its
technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit
that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing
authority having full knowledge of all relevant information.
The Company adopted the provisions of FIN 48 on January 1, 2007. No adjustments were recorded
as a result of the implementation of FIN 48. As of January 1, 2008, the Company had a liability
for
7
unrecognized tax benefits of $1.1 million, of which $706,000, when recognized in March 2008,
impacted the effective tax rate. As of June 30, 2008, the Company had no liability for
unrecognized tax benefits.
The Company recognizes interest accrued related to: (1) unrecognized tax benefits in Federal
and state income taxes and (2) refund claims in Other operating income. The Company recognizes
penalties (if any) in Federal and state income taxes. There is no amount accrued for the payment
of interest or penalties at June 30, 2008. With few exceptions, the Company is no longer subject
to examinations by the Internal Revenue Service, or the Department of Revenue and Taxation in the
states in which it conducts business for the tax years ended prior to June 30, 2005. The Company
is currently under a regularly scheduled examination by the Internal Revenue Service for the fiscal
year ended June 30, 2005, the six-month period ended December 31, 2005 and the calendar year ended
December 31, 2006.
Recently Issued Accounting Standards
Fair Value Measurements:
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 provides guidance for using fair
value to measure assets and liabilities, but does not expand the use of fair value in any
circumstance. SFAS 157 also requires expanded disclosures about the effect of fair value
measurements on an entitys financial statements. This statement applies when other standards
require or permit assets and liabilities to be measured at fair value. SFAS is effective for
financial statements issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. Additionally, in February 2008, the FASB issued FSP 157-2,
Effective
Date of FASB Statement No. 157 (FSP 157-2),
which delays the effective date of SFAS 157 for
non-recurring, non-financial instruments to fiscal years beginning after November 15, 2008. The
Company adopted the non-delayed provisions of SFAS 157 on January 1, 2008. See Footnote 8 for
further analysis of the impact of the adoption of this standard.
Fair Value Option:
In February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities Including
an Amendment of FASB Statement No. 115 (SFAS 159).
SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. The objective of SFAS
159 is to improve financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use
of fair value measurement, which is consistent with the FASBs long-term measurement objectives for
accounting for financial instruments. SFAS 159 became effective January 1, 2008. We have not
elected to value any assets or liabilities (not otherwise measured at fair value) under SFAS 159.
We continue to evaluate the impact of SFAS 159 should we elect fair value measurement for any asset
or liability in the future.
Business Combinations:
In December 2007, the FASB issued Statement of Financial Accounting
Standards No. 141 (revised 2007),
Business Combinations (SFAS 141(R))
. SFAS 141 (R) is intended
to improve financial reporting by creating greater consistency in the accounting and financial
reporting of business combinations, resulting in more complete, comparable and relevant information
for investors and other users of financial statements. SFAS 141 (R) requires the acquiring entity
in a business combination to recognize all (and only) the assets acquired and liabilities assumed
in the transaction, establishes the acquisition-date fair value as the measurement objective for
all assets acquired and liabilities assumed, and expands the disclosure requirements for material
business combinations. SFAS 141 (R) will be effective for the Company beginning January 1, 2009.
We are currently evaluating the effects this new standard will have on future acquisitions.
(2)
Business Segments
The Company operates in two reportable business segments: Community Banking and Consumer
Finance. The Community Banking segment provides services traditionally offered by full-service
community banks, including commercial and individual demand, savings and time deposit accounts and
commercial, mortgage and consumer loans, as well as brokerage and investment management and trust
services. The Consumer Finance segment, which is comprised of Northwest Consumer Discount Company,
8
a subsidiary of Northwest, operating 48 offices in Pennsylvania and two offices in
southwestern New York, offers personal installment loans for a variety of consumer and real estate
products. This activity is funded primarily through an intercompany borrowing relationship with
Allegheny Services, Inc., a subsidiary of Northwest. Net income is the primary measure used by
management to measure segment performance. The following tables provide financial information for
these reportable segments. The All Other column represents the parent company and elimination
entries necessary to reconcile to the consolidated amounts presented in the financial statements.
As of or for the three months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Consumer
|
|
|
|
|
|
|
|
June 30, 2008 ($ in 000s)
|
|
Banks
|
|
|
Finance
|
|
|
All Other *
|
|
|
Consolidated
|
|
External interest income
|
|
$
|
91,973
|
|
|
|
5,016
|
|
|
|
|
|
|
|
96,989
|
|
Intersegment interest income
|
|
|
1,214
|
|
|
|
|
|
|
|
(1,214
|
)
|
|
|
|
|
Interest expense
|
|
|
42,288
|
|
|
|
1,272
|
|
|
|
(137
|
)
|
|
|
43,423
|
|
Provision for loan losses
|
|
|
2,500
|
|
|
|
895
|
|
|
|
|
|
|
|
3,395
|
|
Noninterest income
|
|
|
11,247
|
|
|
|
525
|
|
|
|
35
|
|
|
|
11,807
|
|
Noninterest expense
|
|
|
38,692
|
|
|
|
2,674
|
|
|
|
122
|
|
|
|
41,488
|
|
Income tax expense (benefit)
|
|
|
6,202
|
|
|
|
254
|
|
|
|
(408
|
)
|
|
|
6,048
|
|
Net income
|
|
|
14,752
|
|
|
|
446
|
|
|
|
(756
|
)
|
|
|
14,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,795,617
|
|
|
|
116,949
|
|
|
|
3,767
|
|
|
|
6,916,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Consumer
|
|
|
|
|
|
|
|
June 30, 2007 ($ in 000s)
|
|
Banks
|
|
|
Finance
|
|
|
All Other *
|
|
|
Consolidated
|
|
External interest income
|
|
$
|
94,134
|
|
|
|
4,693
|
|
|
|
|
|
|
|
98,827
|
|
Intersegment interest income
|
|
|
2,037
|
|
|
|
|
|
|
|
(2,037
|
)
|
|
|
|
|
Interest expense
|
|
|
49,597
|
|
|
|
2,097
|
|
|
|
1,764
|
|
|
|
53,458
|
|
Provision for loan losses
|
|
|
1,500
|
|
|
|
566
|
|
|
|
|
|
|
|
2,066
|
|
Noninterest income
|
|
|
10,581
|
|
|
|
730
|
|
|
|
55
|
|
|
|
11,366
|
|
Noninterest expense
|
|
|
35,632
|
|
|
|
1,993
|
|
|
|
152
|
|
|
|
37,777
|
|
Income tax expense (benefit)
|
|
|
4,914
|
|
|
|
305
|
|
|
|
(627
|
)
|
|
|
4,592
|
|
Net income
|
|
|
15,109
|
|
|
|
462
|
|
|
|
(3,271
|
)
|
|
|
12,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,865,125
|
|
|
|
122,454
|
|
|
|
(89,418
|
)
|
|
|
6,898,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Eliminations consist of intercompany loans, interest income and interest expense.
|
9
As of or for the six months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Consumer
|
|
|
|
|
|
|
|
June 30, 2008 ($ in 000s)
|
|
Banks
|
|
|
Finance
|
|
|
All Other *
|
|
|
Consolidated
|
|
External interest income
|
|
$
|
183,460
|
|
|
|
10,224
|
|
|
|
2
|
|
|
|
193,686
|
|
Intersegment interest income
|
|
|
2,781
|
|
|
|
|
|
|
|
(2,781
|
)
|
|
|
|
|
Interest expense
|
|
|
89,004
|
|
|
|
2,895
|
|
|
|
(89
|
)
|
|
|
91,810
|
|
Provision for loan losses
|
|
|
4,000
|
|
|
|
1,689
|
|
|
|
|
|
|
|
5,689
|
|
Noninterest income
|
|
|
23,646
|
|
|
|
1,091
|
|
|
|
85
|
|
|
|
24,822
|
|
Noninterest expense
|
|
|
78,219
|
|
|
|
5,423
|
|
|
|
273
|
|
|
|
83,915
|
|
Income tax expense (benefit)
|
|
|
10,586
|
|
|
|
453
|
|
|
|
(1,009
|
)
|
|
|
10,030
|
|
Net income
|
|
|
28,078
|
|
|
|
855
|
|
|
|
(1,869
|
)
|
|
|
27,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,795,617
|
|
|
|
116,949
|
|
|
|
3,767
|
|
|
|
6,916,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Consumer
|
|
|
|
|
|
|
|
June 30, 2007 ($ in 000s)
|
|
Banks
|
|
|
Finance
|
|
|
All Other *
|
|
|
Consolidated
|
|
External interest income
|
|
$
|
184,852
|
|
|
|
9,565
|
|
|
|
2
|
|
|
|
194,419
|
|
Intersegment interest income
|
|
|
4,083
|
|
|
|
|
|
|
|
(4,083
|
)
|
|
|
|
|
Interest expense
|
|
|
96,610
|
|
|
|
4,204
|
|
|
|
3,501
|
|
|
|
104,315
|
|
Provision for loan losses
|
|
|
3,000
|
|
|
|
1,072
|
|
|
|
|
|
|
|
4,072
|
|
Noninterest income
|
|
|
20,546
|
|
|
|
1,202
|
|
|
|
107
|
|
|
|
21,855
|
|
Noninterest expense
|
|
|
71,137
|
|
|
|
4,190
|
|
|
|
326
|
|
|
|
75,653
|
|
Income tax expense (benefit)
|
|
|
9,370
|
|
|
|
518
|
|
|
|
(1,251
|
)
|
|
|
8,637
|
|
Net income
|
|
|
29,364
|
|
|
|
783
|
|
|
|
(6,550
|
)
|
|
|
23,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,865,125
|
|
|
|
122,454
|
|
|
|
(89,418
|
)
|
|
|
6,898,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Eliminations consist of intercompany loans, interest income and interest expense.
|
(3)
Goodwill and Other Intangible Assets
The following table provides information for intangible assets subject to amortization at the
dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
Core deposit intangibles gross
|
|
$
|
30,275
|
|
|
|
30,275
|
|
Less: accumulated amortization
|
|
|
(21,412
|
)
|
|
|
(19,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles net
|
|
|
8,863
|
|
|
|
10,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer and Contract intangible assets gross
|
|
|
2,781
|
|
|
|
2,781
|
|
Less: accumulated amortization
|
|
|
(2,448
|
)
|
|
|
(1,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer and Contract intangible assets net
|
|
$
|
333
|
|
|
|
825
|
|
|
|
|
|
|
|
|
10
The following information shows the actual aggregate amortization expense for the current
quarter, the prior years quarter, the current six-month period and the prior year six-month period
as well as the estimated aggregate amortization expense, based upon current levels of intangible
assets, for the current fiscal year and each of the five succeeding fiscal years (in thousands):
|
|
|
|
|
For the three months ended 6/30/08
|
|
$
|
1,284
|
|
|
For the three months ended 6/30/07
|
|
|
878
|
|
|
For the six months ended 6/30/08
|
|
|
2,586
|
|
|
For the six months ended 6/30/07
|
|
|
1,781
|
|
|
For the year ending 12/31/08
|
|
|
4,443
|
|
|
For the year ending 12/31/09
|
|
|
2,847
|
|
|
For the year ending 12/31/10
|
|
|
1,896
|
|
|
For the year ending 12/31/11
|
|
|
1,445
|
|
|
For the year ending 12/31/12
|
|
|
693
|
|
|
For the year ending 12/31/13
|
|
|
355
|
|
The following table provides information for the changes in the carrying amount of goodwill
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community
|
|
|
Consumer
|
|
|
|
|
|
|
Banks
|
|
|
Finance
|
|
|
Total
|
|
Balance at December 31, 2006
|
|
$
|
154,457
|
|
|
|
1,313
|
|
|
|
155,770
|
|
Goodwill acquired
|
|
|
15,844
|
|
|
|
|
|
|
|
15,844
|
|
Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
170,301
|
|
|
|
1,313
|
|
|
|
171,614
|
|
Adjustment to purchase price allocation
|
|
|
(251
|
)
|
|
|
|
|
|
|
(251
|
)
|
Goodwill acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
170,050
|
|
|
|
1,313
|
|
|
|
171,363
|
|
|
|
|
|
|
|
|
|
|
|
11
(4)
Borrowed Funds
Borrowed funds at June 30, 2008 and December 31, 2007 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
rate
|
|
|
Amount
|
|
|
rate
|
|
Term notes payable to the
FHLB of Pittsburgh:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
159
|
|
|
|
2.67
|
%
|
|
|
84,031
|
|
|
|
5.00
|
%
|
Due between one and two years
|
|
|
36,790
|
|
|
|
4.14
|
%
|
|
|
35,588
|
|
|
|
4.63
|
%
|
Due between two and three years
|
|
|
135,000
|
|
|
|
4.17
|
%
|
|
|
36,567
|
|
|
|
4.36
|
%
|
Due between three and four years
|
|
|
100,000
|
|
|
|
3.78
|
%
|
|
|
65,000
|
|
|
|
5.02
|
%
|
Due between four and five years
|
|
|
125,000
|
|
|
|
3.96
|
%
|
|
|
35,000
|
|
|
|
4.55
|
%
|
Due between five and ten years
|
|
|
235,809
|
|
|
|
3.99
|
%
|
|
|
839
|
|
|
|
2.81
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
632,758
|
|
|
|
|
|
|
|
257,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line of credit, FHLB of
Pittsburgh
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor notes payable, due various
dates through 2009
|
|
|
4,619
|
|
|
|
4.99
|
%
|
|
|
4,638
|
|
|
|
4.99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to
repurchase, due within one year
|
|
|
86,928
|
|
|
|
1.50
|
%
|
|
|
77,452
|
|
|
|
3.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowed funds
|
|
$
|
724,305
|
|
|
|
|
|
|
|
339,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB of Pittsburgh are secured by the Companys investment securities,
mortgage-backed securities and qualifying first mortgage loans. Certain of these borrowings are
subject to restrictions or penalties in the event of prepayment.
The revolving line of credit with the FHLB of Pittsburgh carries a commitment of $150.0
million maturing on December 7, 2011. The rate is adjusted daily and any borrowings on this line
may be repaid at any time without penalty.
(5)
Guarantees
The Company issues standby letters of credit in the normal course of business. Standby
letters of credit are conditional commitments issued by the Company to guarantee the performance of
a customer to a third party. Standby letters of credit generally are contingent upon the failure
of the customer to perform according to the terms of the underlying contract with the third party.
The Company is required to perform under a standby letter of credit when drawn upon by the
guaranteed third party in the case of nonperformance by the Companys customer. The credit risk
associated with standby letters of credit is essentially the same as that involved in extending
loans to customers and is subject to normal loan policies and procedures. Collateral may be
obtained based on managements credit assessment of the customer. At June 30, 2008, the
12
maximum potential amount of future payments the Company could be required to make under these
standby letters of credit was $14.5 million, of which $11.2 million is fully collateralized. At
June 30, 2008, the Company had a liability (deferred income) of $137,000 related to the standby
letters of credit. There are no recourse provisions that would enable the Company to recover any
amounts from third parties.
(6)
Earnings Per Share
Basic earnings per common share (EPS) is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding for the period, without
considering any dilutive items. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of the Company. Stock
options to purchase 587,673 of common stock with a weighted average exercise price of $25.47 per
share were outstanding during the three and six months ended June 30, 2008 but were not included in
the computation of diluted earnings per share for these periods because the options exercise price
was greater than the average market price of the common shares. There were no anti-dilutive stock
options for the three months or six months ended June 30, 2007. The computation of basic and
diluted earnings per share follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Reported net income
|
|
$
|
14,442
|
|
|
|
12,300
|
|
|
|
27,064
|
|
|
|
23,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
48,359
|
|
|
|
49,280
|
|
|
|
48,345
|
|
|
|
49,516
|
|
Dilutive potential shares due to effect of stock
options
|
|
|
201
|
|
|
|
321
|
|
|
|
238
|
|
|
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average common shares
and dilutive potential shares
|
|
|
48,560
|
|
|
|
49,601
|
|
|
|
48,583
|
|
|
|
49,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
$
|
0.30
|
|
|
|
0.25
|
|
|
|
0.56
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
$
|
0.30
|
|
|
|
0.25
|
|
|
|
0.56
|
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
(7)
Pension and Other Post-retirement Benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
|
Pension Benefits
|
|
|
Other Post-retirement Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
1,255
|
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
1,140
|
|
|
|
1,024
|
|
|
|
24
|
|
|
|
24
|
|
Expected return on plan assets
|
|
|
(1,247
|
)
|
|
|
(1,103
|
)
|
|
|
|
|
|
|
|
|
Amortization of transition asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
13
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Amortization of the net (gain) loss
|
|
|
31
|
|
|
|
187
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
1,192
|
|
|
|
1,367
|
|
|
|
35
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
Pension Benefits
|
|
|
Other Post-retirement Benefits
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
2,510
|
|
|
|
2,479
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
2,280
|
|
|
|
2,047
|
|
|
|
48
|
|
|
|
47
|
|
Expected return on plan assets
|
|
|
(2,494
|
)
|
|
|
(2,205
|
)
|
|
|
|
|
|
|
|
|
Amortization of transition asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
26
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
Amortization of the net (gain) loss
|
|
|
62
|
|
|
|
374
|
|
|
|
22
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
2,384
|
|
|
|
2,734
|
|
|
|
70
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company made no contribution to its pension or other post-retirement benefit plans during
the six months ended June 30, 2008. The Company anticipates making a tax-deductible contribution
to its defined benefit pension plan for the year ending December 31, 2008.
(8)
Fair Value Measurements
Effective January 1, 2008, the Company adopted the provisions of SFAS 157 for all financial
assets and liabilities recognized or disclosed at fair value on a recurring basis and certain
financial assets and liabilities on a non-recurring basis. SFAS 157 establishes a three-level
hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. The fair value hierarchy gives the highest priority to quoted prices
with readily available independent data in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable market inputs (Level 3). When various inputs for
measurement fall within different levels of the fair value hierarchy, the lowest level input that
has a significant impact on fair value measurement is used.
Financial assets and liabilities are categorized based upon the following characteristics or
inputs to the valuation techniques:
|
|
|
Level 1 Financial assets and liabilities for which inputs are observable and are
obtained from reliable quoted prices for identical assets or liabilities in actively
traded markets. This is the most reliable fair value measurement and includes, for
example, active exchange-traded equity securities.
|
|
|
|
|
Level 2 Financial assets and liabilities for which values are based on quoted
prices in markets that are not active or for which values are based on similar assets
or liabilities that are actively
|
14
|
|
|
traded. Level 2 also includes pricing models in which
the inputs are corroborated by market data, for example, matrix pricing.
|
|
|
|
|
Level 3 Financial assets and liabilities for which values are based on prices or
valuation techniques that require inputs that are both unobservable and significant to
the overall fair value measurement. Level 3 inputs include the following:
|
|
o
|
|
Quotes from brokers or other external sources that are not
considered binding;
|
|
|
o
|
|
Quotes from brokers or other external sources where it can not be
determined that market participants would in fact transact for the asset or
liability at the quoted price;
|
|
|
o
|
|
Quotes from brokers or other external sources where the inputs
are not deemed observable.
|
The Company is responsible for the valuation process and as part of this process may use data
from outside sources in establishing fair value. The Company performs due diligence to understand
the inputs used or how the data was calculated or derived. The Company corroborates the
reasonableness of external inputs in the valuation process.
The following table represents assets measured at fair value on a recurring basis as of June
30, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets at
|
|
Investment securities available for sale
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
fair value
|
|
Equity securities available for sale
|
|
$
|
6,080
|
|
|
|
|
|
|
|
220
|
|
|
|
6,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities available for sale
|
|
|
|
|
|
|
1,261,790
|
|
|
|
20,201
|
|
|
|
1,281,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,080
|
|
|
|
1,261,790
|
|
|
|
20,421
|
|
|
|
1,288,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities available for sale
Generally, debt securities are valued using
pricing for similar securities, recently executed transactions and other pricing models utilizing
observable inputs. The valuation for most debt securities is classified as Level 2. Securities
within Level 2 include corporate bonds, municipal bonds, mortgage-backed securities
and US government obligations. Certain debt securities are a combination of multiple
securities, including an investor note (Level 2), an income note (Level 3) and agency zero coupon
bond (Level 2). The fair value of the various components of these securities is determined using
Level 2 and Level 3 techniques. As such, the overall securities are classified as Level 3.
Equity securities available for sale
Level 1 securities include publicly traded
securities valued using quoted market prices. Level 3 securities include investments in two
financial institutions that provide financial services only to investor banks received as part of
previous acquisitions without observable market data to determine the investments fair values.
These securities can only be sold back to the issuing financial institution at cost.
The table below presents a reconciliation of all assets and liabilities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) for the three months ended
June 30, 2008 (in thousands):
15
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Debt
|
|
|
|
securities
|
|
|
securities
|
|
Balance at April 1, 2008
|
|
$
|
220
|
|
|
|
21,208
|
|
Total net realized investment gains/ (losses)
and net change in unrealized appreciation/
(depreciation):
|
|
|
|
|
|
|
|
|
Included in net income
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
(1,007
|
)
|
Purchases and sales
|
|
|
|
|
|
|
|
|
Net transfers in (out) of Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
220
|
|
|
|
20,201
|
|
|
|
|
|
|
|
|
The table below presents a reconciliation of all assets and liabilities measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June
30, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Debt
|
|
|
|
securities
|
|
|
securities
|
|
Balance at January 1, 2008
|
|
$
|
220
|
|
|
|
22,369
|
|
Total net realized investment gains/ (losses)
and net change in unrealized appreciation/
(depreciation):
|
|
|
|
|
|
|
|
|
Included in net income
|
|
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
|
|
|
|
|
(2,168
|
)
|
Purchases and sales
|
|
|
|
|
|
|
|
|
Net transfers in (out) of Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
220
|
|
|
|
20,201
|
|
|
|
|
|
|
|
|
Certain assets and liabilities are measured at fair value on a nonrecurring basis after
initial recognition such as loans held for sale, loans measured for impairment and mortgage
servicing rights. The following table represents the fair value measurement for nonrecurring
assets as of June 30, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets at
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
fair value
|
|
Loans held for sale
|
|
$
|
3,396
|
|
|
|
|
|
|
|
|
|
|
|
3,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans measured for impairment
|
|
|
|
|
|
|
|
|
|
|
28,995
|
|
|
|
28,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
|
|
|
|
408
|
|
|
|
408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,396
|
|
|
|
|
|
|
|
29,403
|
|
|
|
32,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Loans held for sale
Mortgage loans held for sale are recorded at the lower of
carrying value or market value. The fair value of mortgage loans held for sale in based on what
secondary markets are currently offering. As the fair value is determined by a quoted price from
Freddie Mac, and the Company has open delivery contracts with Freddie Mac, the Company classifies
loans held for sale as nonrecurring Level 1.
Impaired loans
A loan is considered to be impaired when it is probable that all of
the principal and interest due under the original terms of the loan may not be collected.
Impairment is measured based on
the fair value of the underlying collateral. The Company measures impairment on all
nonaccrual commercial and commercial real estate loans for which it has established specific
reserves as part of the specific allocated allowance component of the allowance for loan losses.
The Company classifies impaired loans as nonrecurring Level 3.
Mortgage servicing rights
Mortgage servicing rights represent the value associated
with servicing residential mortgage loans, when the mortgage loans have been sold into the secondary
market and the related servicing has been retained by the Company. The value is determined through
a discounted cash flow analysis, which uses interest rates, prepayment speeds and delinquency rate
assumptions as inputs. All of these assumptions require a significant degree of management
judgment. Servicing rights and the related mortgage loans are segregated into categories or homogeneous pools based upon common characteristics.
Adjustments are only made when the estimated discounted future cash flows are less than
the carrying value, as determined by individual pool. As such, mortgage servicing rights are classified as nonrecurring Level 3.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information, this document may contain certain forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those expressed or implied in the
forward-looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, as they reflect managements analysis only as of the date of this
report. The Company has no obligation to revise or update these forward-looking statements to
reflect events or circumstances that arise after the date of this report.
Important factors that might cause such a difference include, but are not limited to:
|
|
|
Changes in interest rates which could impact our net interest margin;
|
|
|
|
|
Adverse changes in our loan portfolio and the resulting credit risk-related losses;
|
|
|
|
|
The adequacy of the allowance for loan losses;
|
|
|
|
|
Changes in general economic or business conditions resulting in changes in demand
for credit and other services, among other things;
|
|
|
|
|
Changes in consumer confidence, spending and savings habits relative to the bank and
non-bank financial services we provide;
|
|
|
|
|
Compliance with laws and regulatory requirements of federal and state agencies;
|
|
|
|
|
New legislation affecting the financial services industry;
|
|
|
|
|
Competition from other financial institutions in originating loans and attracting
deposits;
|
|
|
|
|
Our ability to effectively implement technology driven products and services;
|
|
|
|
|
Sources of liquidity;
|
|
|
|
|
Changes in costs and expenses; and
|
|
|
|
|
Our success in managing the risks involved in the foregoing.
|
17
Overview of Critical Accounting Policies Involving Estimates
The Companys critical accounting policies involve accounting estimates that: a) require
assumptions about highly uncertain matters, and b) could vary sufficiently enough to cause a
material effect on the Companys financial condition or results of operations.
Allowance for Loan Losses.
In originating loans, the Company recognizes that losses will be
experienced on loans and that the risk of loss will vary with, among other things, the type of
loan, the creditworthiness of the borrower, general economic conditions and the quality of the
collateral for the loan.
The Company maintains an allowance for loan losses to absorb losses inherent in the loan
portfolio. The allowance for loan losses represents managements estimate of probable losses based
on all available information. The allowance for loan losses is based on managements evaluation of
the collectibility of the loan portfolio, including past loan loss experience, known and inherent
losses, information about specific borrower situations and estimated collateral values, and current
economic conditions. The loan portfolio and other credit exposures are regularly reviewed by
management in its determination of the allowance for loan losses. The methodology for assessing
the appropriateness of the allowance includes a review of historical losses, peer group
comparisons, industry data and economic conditions. As an integral part of their examination
process, regulatory agencies periodically review the Companys allowance for loan losses and may
require the Company to make additional provisions for estimated losses based upon judgments
different from those of management. In establishing the allowance for loan losses, loss factors
are applied to various pools of outstanding loans. Loss factors are derived using the Companys
historical loss experience and may be adjusted for factors that affect the collectibility of the
portfolio as of the evaluation date. Commercial loans that are criticized and are over a certain
dollar amount are evaluated individually to determine the required allowance for loan losses and to
evaluate the potential impairment of such loans under Statement of Financial Accounting Standards
No. 114,
Accounting by Creditors for Impairment of a Loan
(SFAS 114). Although management
believes that it uses the best information available to establish the allowance for loan losses,
future adjustments to the allowance for loan losses may be necessary and results of operations
could be adversely affected if circumstances differ substantially from the assumptions used in
making the determinations. Because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance for loan losses is
adequate or that increases will not be necessary should the quality of any loans deteriorate as a
result of the factors discussed above. Any material increase in the allowance for loan losses may
adversely affect the Companys financial condition and results of operations. The allowance is
based on information known at the time of the review. Changes in factors underlying the assessment
could have a material impact on the amount of the allowance that is necessary and the amount of
provision to be charged against earnings. Such changes could impact future results. Management
believes, to the best of their knowledge, that all known losses as of the balance sheet date have
been recorded.
Goodwill.
Goodwill is not subject to amortization but must be tested for impairment at least
annually, and possibly more frequently if certain events or changes in circumstances arise.
Impairment testing requires that the fair value of each reporting unit be compared to its carrying
amount, including goodwill. Reporting units are identified based upon analyzing each of the
Companys individual operating segments. A reporting unit is defined as any distinct, separately
identifiable component of an operating segment for which complete, discrete financial information
is available that management regularly reviews. Goodwill is allocated to the carrying value of
each reporting unit based on its relative fair value at the time it is acquired. Determining the
fair value of a reporting unit requires a high degree of subjective management judgment. A
discounted cash flow valuation model is used to determine the fair value of each reporting unit.
The discounted cash flow model incorporates such variables as growth of net income, interest rates
and terminal values. Based upon an evaluation of key data and market factors, management selects
the specific variables to be incorporated into the valuation model. Future changes in the economic
environment or the operations of the operating units could cause changes to these variables, which
could give rise to declines in the estimated fair value of the reporting unit. Declines in fair
value could result in impairment being identified. The Company has established June
30
th
of each year as the date for conducting its annual goodwill impairment assessment.
The variables are selected as of that date and the valuation model is run to determine the fair
value of each reporting unit. At June 30, 2008, the Company did not identify any individual
reporting unit where the fair value was less than the carrying value.
18
Deferred Income Taxes.
The Company uses the asset and liability method of accounting for
income taxes as prescribed in Statement of Financial Accounting Standards No. 109,
Accounting for
Income Taxes
(SFAS 109). Using this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. If current
available information raises doubt as to the realization of the deferred tax assets, a valuation
allowance is established. Deferred tax assets and liabilities are
measured using enacted tax rates expected to be applied to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The Company exercises
significant judgment in evaluating the amount and timing of recognition of the resulting tax
liabilities and assets. These judgments require us to make projections of future taxable income.
The judgments and estimates the Company makes in determining our deferred tax assets, which are
inherently subjective, are reviewed on an ongoing basis as regulatory and business factors change.
A reduction in estimated future taxable income could require the Company to record a valuation
allowance. Changes in levels of valuation allowances could result in increased income tax expense,
and could negatively affect earnings.
Other Intangible Assets.
Using the purchase method of accounting for acquisitions, the
Company is required to record the assets acquired, including identified intangible assets, and
liabilities assumed at their fair values. These fair values often involve estimates based on third
party valuations, including appraisals, or internal valuations based on discounted cash flow
analyses or other valuation techniques, which are inherently subjective. Core deposit and other
intangible assets are recorded in purchase accounting when a premium is paid to acquire other
entities or deposits. Other intangible assets, which are determined to have finite lives, are
amortized based on the period of estimated economic benefits received, primarily on an accelerated
basis.
Executive Summary
The Companys total assets at June 30, 2008 were $6.916 billion, an increase of $252.8
million, or 3.8%, from $6.664 billion at December 31, 2007. This increase in assets is primarily
attributed to an increase in cash and investments of $28.7 million, or 2.1%, and an increase in net
loans receivable of $202.3 million, or 4.2%, funded primarily by an increase in borrowed funds of
$385.2 million, or 113.6%, partially offset by a decrease in deposits of $156.0 million, or 2.8%.
Net loans receivable increased by $202.3 million, or 4.2%, to $4.998 billion at June 30, 2008
from $4.796 billion at December 31, 2007. This strong loan demand was funded primarily by
additional borrowings from the Federal Home Loan Bank of Pittsburgh (FHLB). During the six months
ended June 30, 2008 the Company increased its commercial loan portfolio by $106.7 million, or 9.1%.
Deposits decreased by $156.0 million, or 2.8%, to $5.386 billion at June 30, 2008 from $5.542
billion at December 31, 2007. Noninterest-bearing demand deposits increased by $32.3 million, or
8.9%, to $393.4 million at June 30, 2008 from $361.1 million at December 31, 2007, interest-bearing
demand deposits increased by $13.2 million, or 1.8%, to $731.2 million at June 30, 2008 from $718.0
million at December 31, 2007 and savings deposits increased by $118.6 million, or 8.3%, to $1.545
billion at June 30, 2008 from $1.427 billion at December 31, 2007, while time deposits decreased by
$320.1 million, or 10.5%, to $2.717 billion at June 30, 2008 from $3.037 billion at December 31,
2007. The decrease in time deposits was a result of the Bank using alternative funding sources in
an effort to decrease the overall cost of funds and to improve its interest-rate sensitivity
position.
Borrowings increased by $385.2 million, or 113.6%, to $724.3 million at June 30, 2008 from
$339.1 million at December 31, 2007. During the six months ended June 30, 2008, the Company
borrowed $460.0 million from the FHLB while pre-paying $76.0 million of higher rate FHLB advances
scheduled to mature during the current year. The FHLB advances were borrowed at a weighted average
rate of 3.77% and with a weighted average maturity of 5.5 years.
19
Total shareholders equity at June 30, 2008 was $622.8 million, an increase of $9.9 million,
or 1.6%, from $612.9 million at December 31, 2007. This increase was primarily attributable to net
income of $27.1 million for this six month period, which was partially offset by a decrease in
other comprehensive income of $7.6 million, dividends paid of $7.9 million and the purchase of
132,000 treasury shares at a total cost of $3.3 million.
Effective January 1, 2008, the Company adopted SFAS 157, which defines fair value, establishes
a consistent framework for measuring fair value and expands the disclosure requirements related to
fair value
measurements. SFAS 157 defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement
date.
Depending on the nature of the asset or liability, the Company uses various valuation
techniques and assumptions when estimating fair value. SFAS 157 requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The adoption of SFAS 157 did not have a material impact on the operations of the Company.
Northwest is subject to various regulatory capital requirements administered by state and
federal banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken,
could have a direct material effect on the Companys financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, Northwest must meet specific
capital guidelines that involve quantitative measures of its assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments made by the regulators about components,
risk-weighting and other factors.
Quantitative measures, established by regulation to ensure capital adequacy, require Northwest
to maintain minimum amounts and ratios (set forth in the table below) of Total and Tier I capital
(as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital to
average assets (as defined). Dollar amounts in the accompanying tables are in thousands.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
Minimum Capital
|
|
Well Capitalized
|
|
|
Actual
|
|
Requirements
|
|
Requirements
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Total Capital (to risk weighted assets)
|
|
$
|
575,383
|
|
|
|
13.44
|
%
|
|
|
342,413
|
|
|
|
8.00
|
%
|
|
|
428,016
|
|
|
|
10.00
|
%
|
|
Tier I Capital (to risk weighted assets)
|
|
|
531,784
|
|
|
|
12.42
|
%
|
|
|
171,206
|
|
|
|
4.00
|
%
|
|
|
256,810
|
|
|
|
6.00
|
%
|
|
Tier I Capital (leverage) (to average assets)
|
|
|
531,784
|
|
|
|
7.76
|
%
|
|
|
205,627
|
|
|
|
3.00
|
%*
|
|
|
342,711
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
Minimum Capital
|
|
Well Capitalized
|
|
|
Actual
|
|
Requirements
|
|
Requirements
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Total Capital (to risk weighted assets)
|
|
$
|
571,785
|
|
|
|
14.10
|
%
|
|
|
324,304
|
|
|
|
8.00
|
%
|
|
|
405,380
|
|
|
|
10.00
|
%
|
|
Tier I Capital (to risk weighted assets)
|
|
|
529,833
|
|
|
|
13.07
|
%
|
|
|
162,152
|
|
|
|
4.00
|
%
|
|
|
243,228
|
|
|
|
6.00
|
%
|
|
Tier I Capital (leverage) (to average assets)
|
|
|
529,833
|
|
|
|
8.21
|
%
|
|
|
193,630
|
|
|
|
3.00
|
%*
|
|
|
322,717
|
|
|
|
5.00
|
%
|
|
|
|
*
|
|
The FDIC has indicated that the most highly rated institutions which meet certain criteria will
be required to maintain a ratio of 3%, and all other institutions will be required to maintain an
additional capital cushion of 100 to 200 basis points. As of June 30, 2008, the Company had not
been advised of any additional requirements in this regard.
|
20
Northwest is required to maintain a sufficient level of liquid assets, as determined by
management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking during
their regular examinations. Northwest monitors its liquidity position primarily using the ratio of
unencumbered liquid assets as a percentage of deposits and borrowings (liquidity ratio). This
ratio at June 30, 2008 was 17.9%. The Company and Northwest adjust liquidity levels in order to
meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage
loan escrow accounts, repayment of borrowings, loan commitments and the repurchase of treasury
shares. During the quarter ended June 30, 2008 the Company borrowed $225.0 million from the FHLB
at an average rate of 3.95% with an average life of 5.33 years. The Company has continued to
borrow from the FHLB as a funding alternative to renewing maturing higher cost certificates of
deposits. This strategy has enabled the Bank to decrease its cost of funds from 3.66% for the
quarter ended December 31, 2007 to 2.99% for the quarter ended June 30, 2008. As of June 30, 2008
the
Bank had approximately $2.7 billion of additional borrowing capacity available with the FHLB,
including a $150.0 million line of credit.
The Company paid $3.9 million and $3.8 million in cash dividends during the quarters ended
June 30, 2008 and 2007, respectively. The Company paid $7.9 million and $7.7 million in cash
dividends during the six months ended June 30, 2008 and 2007, respectively. Annually, Northwest
Bancorp, MHC requests the non-objection of the OTS to waive its receipt of dividends from the
Company when such dividends are not needed for regulatory capital, working capital or other
purposes. The common stock dividend payout ratio (dividends declared per share divided by net
income per share) was 73.3% in the current quarter on a dividend of $0.22 per share compared with
80.0% in the same quarter last year on a dividend of $0.20 per share. As a result of Northwest
Bancorp, MHC waiving its receipt of dividend payments, actual dividends paid to minority
shareholders represented 27.3% and 29.1% of net income for the quarter and six months ended June
30, 2008 compared to 30.7% and 32.5% of net income for the quarter and six months ended June 30,
2007. The Company has declared a dividend of $0.22 per share payable on August 14, 2008 to
shareholders of record as of July 31, 2008.
Nonperforming Assets
The following table sets forth information with respect to the Companys nonperforming assets.
Nonaccrual loans are those loans on which the accrual of interest has ceased. Loans are
automatically placed on nonaccrual status when they are more than 90 days contractually delinquent
and may also be placed on nonaccrual status even if not more than 90 days delinquent but other
conditions exist. Other nonperforming assets represent property acquired by the Company through
foreclosure or repossession. Foreclosed property is carried at the lower of its fair value less
estimated costs to sell, or the principal balance of the related loan.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
December 31, 2007
|
|
|
(Dollars in Thousands)
|
Loans accounted for on a nonaccrual basis:
|
|
|
|
|
|
|
|
|
One-to-four family residential loans
|
|
$
|
12,599
|
|
|
|
12,542
|
|
Multifamily and commercial real estate loans
|
|
|
23,104
|
|
|
|
24,323
|
|
Consumer loans
|
|
|
6,984
|
|
|
|
7,582
|
|
Commercial business loans
|
|
|
26,336
|
|
|
|
5,163
|
|
Total
|
|
|
69,023
|
|
|
|
49,610
|
|
Total nonperforming loans as a percentage of
loans
|
|
|
1.37
|
%
|
|
|
1.03
|
%
|
Total real estate acquired through foreclosure
and other real estate owned
|
|
|
8,407
|
|
|
|
8,667
|
|
Total nonperforming assets
|
|
$
|
77,430
|
|
|
|
58,277
|
|
Total nonperforming assets as a percentage of
total assets
|
|
|
1.12
|
%
|
|
|
0.87
|
%
|
21
A loan is considered to be impaired, as defined by SFAS No. 114 when based on current
information and events, it is probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan agreement including both contractual principal and
interest payments. The amount of impairment is required to be measured using one of three methods
prescribed by SFAS 114: (1) the present value of expected future cash flows discounted at the
loans effective interest rate; (2) the loans observable market price; or (3) the fair value of
collateral if the loan is collateral dependent. If the measure of the impaired loan is less than
the recorded investment in the loan, a specific reserve is allocated for the impairment. Impaired
loans at June 30, 2008 and December 31, 2007 were $69.0 million and $49.6 million, respectively.
Allowance for Loan Losses
The Companys Board of Directors has adopted an Allowance for Loan Losses (ALL) policy
designed to provide management with a systematic methodology for determining and documenting the
ALL each reporting period. This methodology was developed to provide a consistent process and
review procedure to ensure that the ALL is in conformity with the Companys policies and procedures
and other supervisory and regulatory guidelines.
On an ongoing basis, the Credit Review department, as well as loan officers, branch managers
and department heads, review and monitor the loan portfolio for problem loans. This portfolio
monitoring includes a review of the monthly delinquency reports as well as historical comparisons
and trend analysis. On an on going basis the loan officer along with the Credit Review department
grades or classifies problem loans or potential problem loans based upon their knowledge of the
lending relationship and other information previously accumulated. The Companys loan grading
system for problem loans is consistent with industry regulatory guidelines which classify loans as
special mention, substandard, doubtful or loss. Loans that do not expose the Company to
risk sufficient to warrant classification in one of the subsequent categories, but which possess
some weaknesses, are designated as special mention. A substandard loan is any loan that is
more than 90 days contractually delinquent or is inadequately protected by the current net worth
and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as
doubtful have all the weaknesses inherent in those classified as substandard with the added
characteristic that the weaknesses present make a collection or liquidation in full, on the basis
of currently existing facts, conditions or values, highly questionable and improbable. Loans
classified as loss are considered uncollectible so that their continuance as assets without the
establishment of a specific loss reserve in not warranted.
The loans that have been classified as substandard or doubtful are reviewed by the Credit
Review department for possible impairment under the provisions of SFAS 114. A loan is considered
impaired when, based on current information and events, it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan agreement,
including both contractual principal and interest payments.
If an individual loan is deemed to be impaired, the Credit Review department determines the
proper measure of impairment for each loan based on one of three methods as prescribed by SFAS 114:
(1) the present value of expected future cash flows discounted at the loans effective interest
rate; (2) the loans observable market price; or (3) the fair value of the collateral if the loan
is collateral dependent. If the measurement of the impaired loan is more or less than the recorded
investment in the loan, the Credit Review department adjusts the specific allowance associated with
that individual loan accordingly.
If a substandard or doubtful loan is not considered individually for impairment, it is grouped
with other loans that possess common characteristics for impairment evaluation and analysis under
the provisions of Statement of Financial Accounting Standards No. 5,
Accounting for
Contingencies.
This segmentation is accomplished by grouping loans of similar product types, risk
characteristics and industry concentration into homogeneous pools. A range of losses for each pool
is then established based upon historical loss ratios. This historical net charge-off amount is
then analyzed and adjusted based on historical delinquency trends as well as the current economic,
political, regulatory and interest rate environment and used to estimate the current measure of
impairment.
22
The individual impairment measures along with the estimated range of losses for each
homogeneous pool are consolidated into one summary document. This summary schedule along with the
support documentation used to establish this schedule is presented to the Credit Committee on a
quarterly basis. The Credit Committee reviews the processes and documentation presented, reviews
the concentration of credit by industry and customer, discusses lending products, activity,
competition and collateral values, as well as economic conditions in general and in each market
area of the Company. Based on this review and discussion the appropriate amount of ALL is
estimated and any adjustments to reconcile the actual ALL with
this estimate are determined. In addition, the Credit Committee considers if any changes to
the methodology are needed. The Credit Committee also reviews and discusses the Companys
delinquency trends, nonperforming asset amounts and ALL levels and ratios compared to its peer
group as well as state and national statistics. Similarly, following the Credit Committees review
and approval, a review is performed by the Risk Management Committee of the Board of Directors.
In addition to the reviews by managements Credit Committee and the Board of Directors Risk
Management Committee, regulators from either the FDIC or the Pennsylvania Department of Banking
perform an extensive review on an annual basis for the adequacy of the ALL and its conformity with
regulatory guidelines and pronouncements. Any recommendations or enhancements from these
independent parties are considered by management and the Credit Committee and implemented
accordingly.
Management acknowledges that this is a dynamic process and consists of factors, many of which
are external and out of managements control, that can change often, rapidly and substantially.
The adequacy of the ALL is based upon estimates using all the information previously discussed as
well as current and known circumstances and events. There is no assurance that actual portfolio
losses will not be substantially different than those that were estimated.
Comparison of Operating Results for the Quarter Ended June 30, 2008 and 2007
Net income for the three months ended June 30, 2008 was $14.4 million, or $0.30 per diluted
share, an increase of $2.1 million, or 17.4%, from $12.3 million, or $0.25 per diluted share, for
the same quarter last year. The increase in net income resulted primarily from an increase in net
interest income of $8.2 million and an increase in noninterest income of $441,000, which were
partially offset by an increase in the provision for loan losses of $1.3 million, an increase in
noninterest expense of $3.7 million and an increase in income taxes of $1.5 million. A discussion
of each change follows.
Annualized, net income for the three months ended June 30, 2008 represents a 9.30% and 0.83%
return on average equity and return on average assets, respectively, compared to 8.21% and 0.73%
for the same quarter last year.
Interest Income
Total interest income decreased by $1.8 million, or 1.8%, on a taxable equivalent basis, to
$99.0 million due to a decrease in the average yield earned on interest earning assets, which was
partially offset by an increase in the average balance of interest earning assets. The average
yield on interest earning assets, on a taxable equivalent basis, decreased to 6.15% for the quarter
ended June 30, 2008 from 6.43% for the quarter ended June 30, 2007. The average yield on all
categories of interest earning assets, except investment securities, decreased from the previous
period. Average interest earning assets increased by $152.5 million, or 2.4%, to $6.427 billion
for the quarter ended June 30, 2008 from $6.275 billion for the quarter ended June 30, 2007.
Interest income on loans increased by $3.8 million, or 4.9%, on a taxable equivalent basis, to
$80.9 million for the quarter ended June 30, 2008 from $77.1 million for the quarter ended June 30,
2007. Average loans receivable increased by $401.3 million, or 8.8%, to $4.957 billion for the
quarter ended June 30, 2008 from $4.556 billion for the quarter ended June 30, 2007. This increase
is primarily attributable to strong loan
23
demand throughout the Companys market area, as well as
the acquisition of CSB Bank in June 2007. This increase in average loans receivable was partially
offset by a decrease in the average yield earned on loans, which decreased to 6.51% for the quarter
ended June 30, 2008 from 6.78% for the quarter ended June 30, 2007. This decrease is primarily
attributable to the Companys variable rate loans repricing in a generally lower interest rate
environment.
Interest income on mortgage-backed securities increased by $2.2 million, or 29.6%, to $9.5
million for the quarter ended June 30, 2008 from $7.3 million for the quarter ended June 30, 2007.
This increase is primarily the result of an increase in the average balance, which increased by
$211.4 million, or 35.8%, to $802.5 million for the quarter ended June 30, 2008 from $591.1 million
for the quarter ended June 30, 2007.
This increase in average balance was partially offset by a decrease in the average yield,
which decreased to 4.74% for the quarter ended June 30, 2008 from 4.97% for the quarter ended June
30, 2007. The increase in the average balance is primarily the result of the Company investing
cash flows from maturities in the investment portfolio into mortgage-backed securities, which
typically offer higher yields.
Interest income on investment securities decreased by $4.6 million, or 38.0%, to $7.6 million,
on a taxable equivalent basis, for the quarter ended June 30, 2008 from $12.2 million, on a taxable
equivalent basis, for the quarter ended June 30, 2007. The average balance decreased by $337.2
million, or 41.1%, to $482.7 million for the quarter ended June 30, 2008 from $819.9 million for
the quarter ended June 30, 2007. The decrease in average balance was partially offset by an
increase in the average yield, which increased to 6.27% for the quarter ended June 30, 2008 from
5.95% for the quarter ended June 30, 2007. The average balance decreased primarily as a result of
bonds maturing or being called during the end of 2007 and first half of 2008 as well as the
November 2007 sale of approximately $120.0 million of investment securities, the proceeds of which
were used to purchase mortgage-backed securities and to fund loans. The average yield increased to
6.27%, from 5.95%, on a taxable equivalent basis, as a result of tax-free assets, which have a
higher yield, comprising a larger percentage of the investment portfolio.
Interest income on interest-earning deposits decreased by $2.9 million, or 80.5%, as both the
average balance and the average yield decreased significantly. The average balance decreased by
$134.8 million, or 49.1%, to $139.5 million for the quarter ended June 30, 2008 from $274.3 for the
quarter ended June 30, 2007. The average balance decreased due to the funding of loan demand. The
average yield decreased to 2.01% from 5.26% as a result of decreases in the overnight federal funds
rate.
Interest Expense
Total interest expense decreased by $10.0 million, or 18.8%, to $43.4 million for the quarter
ended June 30, 2008 from $53.5 million for the quarter ended June 30, 2007. This decrease in
interest expense was due to a decrease in the average cost of interest-bearing liabilities to 2.99%
from 3.74%, which was partially offset by an increase in the average balance of interest-bearing
liabilities of $103.9 million, or 1.8%. Average interest-bearing liabilities increased to $5.837
billion for the quarter ended June 30, 2008 from $5.733 billion for the quarter ended June 30,
2007. The decrease in the cost of funds resulted primarily from a decrease in the level of market
interest rates.
Net Interest Income
Net interest income increased by $8.2 million, or 17.4%, on a taxable equivalent basis, to
$55.6 million for the quarter ended June 30, 2008 from $47.4 million for the quarter ended June 30,
2007. This increase in net interest income was attributable to the factors discussed above. The
Companys net interest rate spread increased to 3.16% for the quarter ended June 30, 2008 from
2.69% for the quarter ended June 30, 2007 while its net interest margin increased to 3.46% for the
quarter ended June 30, 2008 from 3.02% for the quarter ended June 30, 2007.
Provision for Loan Losses
The provision for loan losses increased by $1.3 million, or 64.3%, to $3.4 million for the
quarter ended June 30, 2008 from $2.1 million for the quarter ended June 30, 2007. Similarly, net
charge-offs increased by $1.3 million over the same periods. Management analyzes the allowance for
loan losses as
24
described in the section entitled Allowance for Loan Losses. The provision that
is recorded is sufficient, in managements judgment, to bring this reserve to a level that reflects
the losses inherent in the Companys loan portfolio relative to loan mix, economic conditions and
historical loss experience. Management believes, to the best of their knowledge, that all known
losses as of the balance sheet dates have been recorded.
Noninterest Income
Noninterest income increased by $441,000, or 3.9%, to $11.8 million for the quarter ended June
30, 2008 from $11.4 million for the quarter ended June 30, 2007. This increase was primarily due
to increases in service charges and fees and trust and other financial services income. Service
charges and fees increased
$1.6 million, or 25.3% as a result of the Companys continued focus on fee-producing products
and services. Trust and other financial services income increased $223,000, or 14.3%, primarily
due to the growth of assets under management. During the quarter ended June 30, 2008, the Company
recorded $1.2 million of additional other-than-temporary impairment charges on a trust preferred
security issued by another bank and Freddie Mac preferred securities. The Company routinely
monitors its investment portfolio for impairment and records write-downs when it has been
determined that an impairment is considered other-than-temporary.
Noninterest Expense
Noninterest expense increased by $3.7 million, or 9.8%, to $41.5 million for the quarter ended
June 30, 2008 from $37.8 million for the same quarter in the prior year. The largest increases
were in compensation and employee benefits, processing expenses, federal deposit insurance premiums
and amortization of intangible assets, while premises and occupancy costs, office operations and
advertising expenses remained flat. Compensation and employee benefits increased by $1.8 million,
or 9.2%, to $22.2 million for the quarter ended June 30, 2008 from $20.4 million for the quarter
ended June 30, 2007. This increase is primarily due to the addition of 60 full-time equivalent
employees and the continuing increase in healthcare cost. Processing expenses increased by $1.0
million, or 26.4%, to $4.7 million for the quarter ended June 30, 2008 from $3.7 million for the
quarter ended June 30, 2007. This increase is primarily attributable to the growth of the
Companys processing services, which also provide fee income. Federal deposit insurance premiums
increased to $1.0 million for the quarter ended June 30, 2008 from $165,000 for the quarter ended
June 30, 2007. This increase is a result of the FDICs assessment of insurance premiums to
federally-insured institutions beginning January 1, 2007 in an effort to replenish its insurance
fund. Northwest had credits that were used to reduce the premiums paid in 2007. Amortization of
intangible assets increased by $406,000, or 46.2%, to $1.3 million for the quarter ended June 30,
2008 as a result of the Companys acquisition of CSB Bank in June 2007.
Income Taxes
The provision for income taxes for the quarter ended June 30, 2008 increased by $1.5 million,
or 31.7%, compared to the same period last year. This increase in income tax is primarily a result
of an increase in income before income taxes of $3.6 million, or 21.3%. The Companys effective
tax rate for the quarter ended June 30, 2008 was 29.5% compared to 27.2% experienced in the same
quarter last year as a result of the percentage of income earned on tax-free assets decreasing
compared to the prior period.
25
Comparison of Operating Results for the Six Months Ended June 30, 2008 and 2007
Net income for the six months ended June 30, 2008 was $27.1 million, or $0.56 per diluted
share, an increase of $3.5 million, or 14.7%, from $23.6 million, or $0.47 per diluted share, for
the same period in the prior year. The increase in net income resulted from an increase in net
interest income of $11.8 million, or 13.1%, and an increase in noninterest income of $3.0 million,
or 13.6%, which were partially offset by an increase in the provision for loan losses of $1.6
million, or 39.7%, an increase in noninterest expense of $8.3 million, or 10.9% and an increase in
income tax expense of $1.4 million, or 16.1%.
Annualized, net income for the six months ended June 30, 2008 represents an 8.72% and 0.79%
return on average equity and return on average assets, respectively, compared to 7.82% and 0.71%
for the same period in the prior year.
Interest Income
Total interest income decreased by $868,000, or less than 1%, on a taxable equivalent basis,
to $197.7 million for the six-month period ended June 30, 2008 from $198.6 million for the
six-month period ended June 30, 2007 due to a decrease in the average yield, which was partially
offset by an increase in average balance of interest earning assets. The average yield on interest
earning assets decreased to 6.23% for the six-month period ended June 30, 2008 from 6.40% for the
six-month period ended June 30, 2007. The average yield on all categories of interest earning
assets, except investment securities, decreased from the previous period. Average interest earning
assets increased by $101.2 million, or 1.6%, to $6.324 billion for the six-month period ended June
30, 2008 from $6.222 billion for the six-month period ended June 30, 2007.
Interest income on loans increased by $10.3 million, or 6.8%, on a taxable equivalent basis,
to $162.2 million for the six-month period ended June 30, 2008 from $151.9 million for the
six-month period ended June 30, 2007. Average loans receivable increased by $396.4 million, or
8.8%, to $4.908 billion for the six-month period ended June 30, 2008 from $4.511 billion for the
six-month period ended June 30, 2007. This increase is primarily attributable to strong loan
demand throughout the Companys market area, as well as the acquisition of CSB Bank in June 2007.
The increase in average loans receivable was partially offset by a decrease in the average yield
earned on loans, which decreased to 6.58% for the six-month period ended June 30, 2008 from 6.76%
for the six-month period ended June 30, 2007. This decrease is primarily attributable the
Companys variable rate loans repricing in a lower general interest rate environment.
Interest income on mortgage-backed securities increased by $1.7 million, or 11.0%, to $16.7
million for the six-month period ended June 30, 2008 from $15.0 million for the six-month period
ended June 30, 2007. This increase is primarily the result of an increase in the average balance,
which increased by $82.5 million, or 13.6%, to $688.9 million for the six-month period ended June
30, 2008 from $606.4 million for the six-month period ended June 30, 2007. This increase in
average balance was partially offset by a decrease in the average yield, which decreased to 4.84%
for the six-month period ended June 30, 2008 from 4.96% for the six-month period ended June 30,
2007. The increase in the average balance is primarily the result of the Company investing cash
flows from the investment portfolio in these securities in an effort to receive a higher yield.
The decrease in the average yield is a result of the decrease in interest rates over the previous
year period as well as an emphasis on purchasing variable-rate securities, which currently offer
lower yields.
Interest income on investment securities decreased by $9.2 million, or 36.9%, to $15.6
million, on a taxable equivalent basis, for the six-month period ended June 30, 2008 from $24.8
million, on a taxable equivalent basis, for the six-month period ended June 30, 2007 as the average
balance decreased by $347.6 million, or 40.9%, to $502.4 million for the six-month period ended
June 30, 2008 from $850.0 million for the six-month period ended June 30, 2007. The decrease in
average balance was partially offset by an increase in the average yield, which increased to 6.21%
for the six-month period ended June 30, 2008 from 5.82% for the six-month period ended June 30,
2007. The average balance decreased primarily as a result of bonds maturing or being called during
the end of 2007 and first half of 2008 as well as the November 2007 sale of approximately $120.0
million of investment securities, the proceeds of which were used to fund the
purchase of mortgage-backed securities and the origination of loans. The average yield
increased as a result of tax-free assets with a higher yield comprising a larger percentage of the
investment portfolio.
26
Interest income on interest-earning deposits decreased by $3.4 million, or 57.3%, as both the
average balance and the average yield decreased. The average balance decreased by $35.2 million,
or 16.0%, to $185.3 million for the six-month period ended June 30, 2008 from $220.4 for the
six-month period ended June 30, 2007. The average yield decreased to 2.68% from 5.29% as a result
of decreases in the overnight federal funds rate.
Interest Expense
Total interest expense decreased by $12.5 million, or 12.0%, to $91.8 million for the
six-month period ended June 30, 2008 from $104.3 million for the six-month period ended June 30,
2007 due to a decrease in the average cost of interest-bearing liabilities to 3.21% from 3.71%,
which was partially offset by an increase in the average balance of interest-bearing liabilities of
$83.3 million, or 1.5%. Average interest-bearing liabilities increased to $5.751 billion for the
six-month period ended June 30, 2008 from $5.668 billion for the six-month period ended June 30,
2007. The decrease in the cost of funds resulted primarily from a decrease in the level of market
interest rates.
Net Interest Income
Net interest income increased by $11.6 million, or 12.3%, on a taxable equivalent basis, to
$105.9 million for the six-month period ended June 30, 2008 from $94.3 million for the six-month
period ended June 30, 2007. This increase in net interest income was attributable to the factors
discussed above. The Companys net interest rate spread increased to 3.02% for the six-month
period ended June 30, 2008 from 2.69% for the six-month period ended June 30, 2007 while its net
interest margin increased to 3.35% for the six-month period ended June 30, 2008 from 3.03% for the
six-month period ended June 30, 2007.
Provision for Loan Losses
The provision for loan losses increased by $1.6 million, or 39.7%, to $5.7 million for the
six-month period ended June 30, 2008 from the previous year. Similarly, net charge-offs increased
by $1.4 million over the same periods. Management analyzes the allowance for loan losses as
described in the section entitled Allowance for Loan Losses. The provision that is recorded is
sufficient, in managements judgment, to bring this reserve to a level that reflects the losses
inherent in the Companys loan portfolio relative to loan mix, economic conditions and historical
loss experience. Management believes, to the best of their knowledge, that all known losses as of
the balance sheet dates have been recorded.
Noninterest Income
Noninterest income increased by $2.9 million, or 13.6%, to $24.8 million for the current
six-month period from $21.9 million for the same period in the prior fiscal year. Service charges
and fees increased $3.3 million, or 26.2%, to $15.8 million for the six-month period ended June 30,
2008 from $12.5 million for the six-month period ended June 30, 2007. Trust and other financial
services income increased $513,000, or 17.0%, to $3.5 million for the six-month period ended June
30, 2008 from $3.0 million for the six-month period ended June 30, 2007 and a $971,000 gain on the
sale of investments was recorded in the current period, primarily do to the mandatory redemption of
Visa Inc. stock, with no gain recorded in the prior year period. These increases were largely
offset by other-than-temporary impairment charges of $1.5 million during the six-month period ended
June 30, 2008. Beginning in the fourth quarter of 2007, the Company has recorded cumulative
other-than-temporary impairment charges of $2.8 million related to its investment in Freddie Mac
preferred stock, with an original book value of $7.5 million. As of June 30, 2008 the Company has
a carrying value of Freddie Mac preferred stock of $4.7 million and continues to monitor these
investments for additional impairment.
Noninterest Expense
Noninterest expense increased by $8.2 million, or 10.9%, to $83.9 million from $75.7 million
for the same period in the prior year. All major expense categories, except advertising expense,
increased as a result of the growth of the Company and the expansion of the Companys products,
services and delivery channels.
27
The largest increase was in compensation and employee benefits expense. Compensation and
employee benefits increased as a result of increases in health care costs, normal annual merit
increases in salaries and the addition of employees used in the delivery of products and services.
Income Taxes
The provision for income taxes for the six months ended June 30, 2008 increased by $1.4
million, or 16.1%, compared to the same period last year. This increase in income tax expense is
primarily due to an increase in income before income taxes of $4.9 million, or 15.1%, to $37.1
million from $32.2 million. In addition, the Companys effective tax rate increased slightly to
27.0% from 26.8% as a smaller percentage of income was generated from tax-free assets.
28
Average Balance Sheet
(Dollars in Thousands)
The following table sets forth certain information relating to the Companys
average balance sheet and reflects the average yield on assets and average cost
of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively,
for the periods presented. Average balances are calculated using daily averages.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg.
|
|
|
|
|
|
|
|
|
|
|
|
Avg.
|
|
|
|
|
Average
|
|
|
|
|
|
|
Yield/
|
|
|
|
Average
|
|
|
|
|
|
|
Yield/
|
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost (h)
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost (h)
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (a) (b) (d)
|
|
|
$
|
4,957,008
|
|
|
|
80,914
|
|
|
|
6.51
|
%
|
|
|
|
4,555,680
|
|
|
|
77,106
|
|
|
|
6.78
|
%
|
Mortgage-backed securities (c)
|
|
|
|
802,465
|
|
|
|
9,514
|
|
|
|
4.74
|
%
|
|
|
|
591,116
|
|
|
|
7,343
|
|
|
|
4.97
|
%
|
Investment securities (c) (d) (e)
|
|
|
|
482,682
|
|
|
|
7,568
|
|
|
|
6.27
|
%
|
|
|
|
819,891
|
|
|
|
12,203
|
|
|
|
5.95
|
%
|
FHLB stock
|
|
|
|
45,648
|
|
|
|
306
|
|
|
|
2.68
|
%
|
|
|
|
33,841
|
|
|
|
506
|
|
|
|
5.98
|
%
|
Other interest earning deposits
|
|
|
|
139,500
|
|
|
|
710
|
|
|
|
2.01
|
%
|
|
|
|
274,275
|
|
|
|
3,649
|
|
|
|
5.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
|
6,427,303
|
|
|
|
99,012
|
|
|
|
6.15
|
%
|
|
|
|
6,274,803
|
|
|
|
100,807
|
|
|
|
6.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest earning assets (f)
|
|
|
|
508,488
|
|
|
|
|
|
|
|
|
|
|
|
|
462,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
6,935,791
|
|
|
|
|
|
|
|
|
|
|
|
|
6,737,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
|
|
783,099
|
|
|
|
2,303
|
|
|
|
1.18
|
%
|
|
|
|
810,792
|
|
|
|
2,919
|
|
|
|
1.44
|
%
|
Now accounts
|
|
|
|
748,735
|
|
|
|
1,578
|
|
|
|
0.85
|
%
|
|
|
|
700,052
|
|
|
|
2,934
|
|
|
|
1.68
|
%
|
Money market demand accounts
|
|
|
|
738,252
|
|
|
|
3,363
|
|
|
|
1.83
|
%
|
|
|
|
628,712
|
|
|
|
5,832
|
|
|
|
3.72
|
%
|
Certificate accounts
|
|
|
|
2,830,805
|
|
|
|
29,207
|
|
|
|
4.15
|
%
|
|
|
|
3,085,152
|
|
|
|
35,435
|
|
|
|
4.61
|
%
|
Borrowed funds (g)
|
|
|
|
627,431
|
|
|
|
5,837
|
|
|
|
3.74
|
%
|
|
|
|
404,414
|
|
|
|
4,574
|
|
|
|
4.54
|
%
|
Debentures
|
|
|
|
108,295
|
|
|
|
1,135
|
|
|
|
4.14
|
%
|
|
|
|
103,556
|
|
|
|
1,764
|
|
|
|
6.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
|
5,836,617
|
|
|
|
43,423
|
|
|
|
2.99
|
%
|
|
|
|
5,732,678
|
|
|
|
53,458
|
|
|
|
3.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing liabilities
|
|
|
|
477,733
|
|
|
|
|
|
|
|
|
|
|
|
|
405,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
6,314,350
|
|
|
|
|
|
|
|
|
|
|
|
|
6,137,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
621,441
|
|
|
|
|
|
|
|
|
|
|
|
|
599,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
$
|
6,935,791
|
|
|
|
|
|
|
|
|
|
|
|
|
6,737,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/ Interest rate spread
|
|
|
|
|
|
|
|
55,589
|
|
|
|
3.16
|
%
|
|
|
|
|
|
|
|
47,349
|
|
|
|
2.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest earning assets/ Net interest margin
|
|
|
$
|
590,686
|
|
|
|
|
|
|
|
3.46
|
%
|
|
|
|
542,125
|
|
|
|
|
|
|
|
3.02
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest earning assets to
interest bearing liabilities
|
|
|
|
1.10
|
X
|
|
|
|
|
|
|
|
|
|
|
|
1.09
|
X
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
|
|
(b)
|
|
Interest income includes accretion/ amortization of deferred loan fees/ expenses, which were not material.
|
|
(c)
|
|
Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
|
|
(d)
|
|
Interest income on tax-free investment securities and tax-free loans is presented on a fully taxable equivalent basis.
|
|
(e)
|
|
Average balances include Fannie Mae and FHLMC stock.
|
|
(f)
|
|
Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
|
|
(g)
|
|
Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings.
|
|
(h)
|
|
Annualized.
|
29
Rate/ Volume Analysis
(Dollars in Thousands)
The following table represents the extent to which changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities have affected the Companys interest income and
interest
expense during the periods indicated. Information is provided in each category with respect to (i) changes
attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume), (iii) the net change. Changes that cannot be
attributed to either rate or volume have been allocated to both rate and volume.
Three months ended June 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Change
|
|
Interest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
(3,075
|
)
|
|
|
6,883
|
|
|
|
3,808
|
|
Mortgage-backed securities
|
|
|
(455
|
)
|
|
|
2,626
|
|
|
|
2,171
|
|
Investment securities
|
|
|
652
|
|
|
|
(5,287
|
)
|
|
|
(4,635
|
)
|
FHLB stock
|
|
|
(377
|
)
|
|
|
177
|
|
|
|
(200
|
)
|
Other interest-earning deposits
|
|
|
(1,699
|
)
|
|
|
(1,240
|
)
|
|
|
(2,939
|
)
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
(4,954
|
)
|
|
|
3,159
|
|
|
|
(1,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
|
(522
|
)
|
|
|
(94
|
)
|
|
|
(616
|
)
|
Now accounts
|
|
|
(1,560
|
)
|
|
|
204
|
|
|
|
(1,356
|
)
|
Money market demand accounts
|
|
|
(3,485
|
)
|
|
|
1,016
|
|
|
|
(2,469
|
)
|
Certificate accounts
|
|
|
(3,412
|
)
|
|
|
(2,816
|
)
|
|
|
(6,228
|
)
|
Borrowed funds
|
|
|
(1,259
|
)
|
|
|
2,522
|
|
|
|
1,263
|
|
Debentures
|
|
|
(710
|
)
|
|
|
81
|
|
|
|
(629
|
)
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(10,948
|
)
|
|
|
913
|
|
|
|
(10,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income
|
|
$
|
5,994
|
|
|
|
2,246
|
|
|
|
8,240
|
|
|
|
|
|
|
|
|
|
|
|
30
Average Balance Sheet
(Dollars in Thousands)
The following table sets forth certain information relating to the Companys
average balance sheet and reflects the average yield on assets and average cost
of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively,
for the periods presented. Average balances are calculated using daily averages.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Avg.
|
|
|
|
|
|
|
|
|
|
|
|
Avg.
|
|
|
|
|
Average
|
|
|
|
|
|
|
Yield/
|
|
|
|
Average
|
|
|
|
|
|
|
Yield/
|
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost (h)
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Cost (h)
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (a) (b) (d)
|
|
|
$
|
4,907,866
|
|
|
|
162,191
|
|
|
|
6.58
|
%
|
|
|
|
4,511,499
|
|
|
|
151,908
|
|
|
|
6.76
|
%
|
Mortgage-backed securities (c)
|
|
|
|
688,911
|
|
|
|
16,684
|
|
|
|
4.84
|
%
|
|
|
|
606,439
|
|
|
|
15,036
|
|
|
|
4.96
|
%
|
Investment securities (c) (d) (e)
|
|
|
|
502,370
|
|
|
|
15,611
|
|
|
|
6.21
|
%
|
|
|
|
849,965
|
|
|
|
24,755
|
|
|
|
5.82
|
%
|
FHLB stock
|
|
|
|
39,174
|
|
|
|
717
|
|
|
|
3.66
|
%
|
|
|
|
34,004
|
|
|
|
1,009
|
|
|
|
5.93
|
%
|
Other interest earning deposits
|
|
|
|
185,255
|
|
|
|
2,506
|
|
|
|
2.68
|
%
|
|
|
|
220,441
|
|
|
|
5,868
|
|
|
|
5.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets
|
|
|
|
6,323,576
|
|
|
|
197,709
|
|
|
|
6.23
|
%
|
|
|
|
6,222,348
|
|
|
|
198,576
|
|
|
|
6.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest earning assets (f)
|
|
|
|
497,741
|
|
|
|
|
|
|
|
|
|
|
|
|
433,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
6,821,317
|
|
|
|
|
|
|
|
|
|
|
|
|
6,655,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
|
|
767,551
|
|
|
|
4,529
|
|
|
|
1.19
|
%
|
|
|
|
808,464
|
|
|
|
5,790
|
|
|
|
1.44
|
%
|
Now accounts
|
|
|
|
737,138
|
|
|
|
3,714
|
|
|
|
1.01
|
%
|
|
|
|
682,230
|
|
|
|
5,562
|
|
|
|
1.64
|
%
|
Money market demand accounts
|
|
|
|
721,558
|
|
|
|
8,628
|
|
|
|
2.40
|
%
|
|
|
|
617,780
|
|
|
|
11,369
|
|
|
|
3.71
|
%
|
Certificate accounts
|
|
|
|
2,913,135
|
|
|
|
62,410
|
|
|
|
4.31
|
%
|
|
|
|
3,054,985
|
|
|
|
69,023
|
|
|
|
4.56
|
%
|
Borrowed funds (g)
|
|
|
|
503,179
|
|
|
|
9,740
|
|
|
|
3.89
|
%
|
|
|
|
400,752
|
|
|
|
9,070
|
|
|
|
4.56
|
%
|
Debentures
|
|
|
|
108,303
|
|
|
|
2,789
|
|
|
|
5.09
|
%
|
|
|
|
103,326
|
|
|
|
3,501
|
|
|
|
6.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities
|
|
|
|
5,750,864
|
|
|
|
91,810
|
|
|
|
3.21
|
%
|
|
|
|
5,667,537
|
|
|
|
104,315
|
|
|
|
3.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing liabilities
|
|
|
|
449,991
|
|
|
|
|
|
|
|
|
|
|
|
|
385,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
6,200,855
|
|
|
|
|
|
|
|
|
|
|
|
|
6,052,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
620,462
|
|
|
|
|
|
|
|
|
|
|
|
|
603,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
6,821,317
|
|
|
|
|
|
|
|
|
|
|
|
|
6,655,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/ Interest rate spread
|
|
|
|
|
|
|
|
105,899
|
|
|
|
3.02
|
%
|
|
|
|
|
|
|
|
94,261
|
|
|
|
2.69
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest earning assets/ Net interest margin
|
|
|
$
|
572,712
|
|
|
|
|
|
|
|
3.35
|
%
|
|
|
|
554,811
|
|
|
|
|
|
|
|
3.03
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of interest earning assets to
interest bearing liabilities
|
|
|
|
1.10
|
X
|
|
|
|
|
|
|
|
|
|
|
|
1.10
|
X
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Average gross loans includes loans held as available-for-sale and loans placed on nonaccrual status.
|
|
(b)
|
|
Interest income includes accretion/ amortization of deferred loan fees/ expenses, which were not material.
|
|
(c)
|
|
Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.
|
|
(d)
|
|
Interest income on tax-free investment securities and tax-free loans is presented on a fully taxable equivalent basis.
|
|
(e)
|
|
Average balances include Fannie Mae and FHLMC stock.
|
|
(f)
|
|
Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.
|
|
(g)
|
|
Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings.
|
|
(h)
|
|
Annualized.
|
31
Rate/ Volume Analysis
(Dollars in Thousands)
The following table represents the extent to which changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities have affected the Companys interest income and
interest
expense during the periods indicated. Information is provided in each category with respect to (i) changes
attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to
changes in rate (changes in rate multiplied by prior volume), (iii) the net change. Changes that cannot be
attributed to either rate or volume have been allocated to both rate and volume.
Six months ended June 30, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
Rate
|
|
|
Volume
|
|
|
Change
|
|
Interest earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
(4,060
|
)
|
|
|
14,343
|
|
|
|
10,283
|
|
Mortgage-backed securities
|
|
|
(397
|
)
|
|
|
2,045
|
|
|
|
1,648
|
|
Investment securities
|
|
|
1,657
|
|
|
|
(10,801
|
)
|
|
|
(9,144
|
)
|
FHLB stock
|
|
|
(445
|
)
|
|
|
153
|
|
|
|
(292
|
)
|
Other interest-earning deposits
|
|
|
(2,663
|
)
|
|
|
(699
|
)
|
|
|
(3,362
|
)
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
(5,908
|
)
|
|
|
5,041
|
|
|
|
(867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts
|
|
|
(1,000
|
)
|
|
|
(261
|
)
|
|
|
(1,261
|
)
|
Now accounts
|
|
|
(2,296
|
)
|
|
|
448
|
|
|
|
(1,848
|
)
|
Money market demand accounts
|
|
|
(4,651
|
)
|
|
|
1,910
|
|
|
|
(2,741
|
)
|
Certificate accounts
|
|
|
(3,581
|
)
|
|
|
(3,032
|
)
|
|
|
(6,613
|
)
|
Borrowed funds
|
|
|
(1,647
|
)
|
|
|
2,317
|
|
|
|
670
|
|
Debentures
|
|
|
(881
|
)
|
|
|
169
|
|
|
|
(712
|
)
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
(14,056
|
)
|
|
|
1,551
|
|
|
|
(12,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net interest income
|
|
$
|
8,148
|
|
|
|
3,490
|
|
|
|
11,638
|
|
|
|
|
|
|
|
|
|
|
|
32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As the holding company for a savings bank, the Companys primary market risk is interest rate
risk. Interest rate risk is the sensitivity of net interest income to variations in interest rates
over a specified time period. The sensitivity results from differences in the time periods in
which interest rate sensitive assets and liabilities mature or reprice. The Company attempts to
control interest rate risk by matching, within acceptable limits, the repricing periods of its
assets and liabilities. Because the Companys interest sensitive deposits typically have repricing
periods or maturities of short duration, the Company has attempted to limit its exposure to
interest sensitivity by borrowing funds with fixed-rates and longer maturities and by shortening
the maturities of its assets by emphasizing the origination of short-term fixed rate consumer
loans, and adjustable rate mortgage loans and commercial loans. The Company also continues to
originate and sell a portion of its long-term, fixed-rate mortgage loans. In addition, the Company
has purchased shorter term or adjustable-rate investment securities and adjustable-rate
mortgage-backed securities.
The Company has an Asset/ Liability Committee consisting of several members of management
which meets monthly to review market interest rates, economic conditions, the pricing of interest
earning assets and interest bearing liabilities and the Companys balance sheet structure. On a
quarterly basis, this Committee also reviews the Companys interest rate risk position and the
Banks cash flow projections.
The Companys Board of Directors has a Risk Management Committee which meets quarterly and
reviews interest rate risks and trends, the Companys interest sensitivity position, the Companys
liquidity position and the market risk inherent in the Companys investment portfolio.
In an effort to assess market risk, the Company utilizes a simulation model to determine the
effect of immediate incremental increases and decreases in interest rates on net income and the
market value of the Companys equity. Certain assumptions are made regarding loan prepayments and
decay rates of passbook and NOW accounts. Because it is difficult to accurately project the market
reaction of depositors and borrowers, the effect of actual changes in interest on these assumptions
may differ from simulated results. The Company has established the following guidelines for
assessing interest rate risk:
Net income simulation
. Given a parallel shift of 2% in interest rates, the estimated net
income may not decrease by more than 20% within a one-year period.
Market value of equity simulation
. The market value of the Companys equity is the present
value of the Companys assets and liabilities. Given a parallel shift of 2% in interest rates, the
market value of equity may not decrease by more than 35% of total shareholders equity.
The following table illustrates the simulated impact of a 1% or 2% upward or 1% or 2% downward
movement in interest rates on net income, return on average equity, earnings per share and market
value of equity. This analysis was prepared assuming that interest-earning asset levels at June
30, 2008 remain constant. The impact of the rate movements was computed by simulating the effect
of an immediate and sustained shift in interest rates over a twelve-month period from June 30, 2008
levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
Decrease
|
Parallel shift in interest rates over the next 12 months
|
|
|
1.0
|
%
|
|
|
2.0
|
%
|
|
|
1.0
|
%
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected percentage increase/ (decrease) in net income
|
|
|
(5.8
|
)%
|
|
|
(12.5
|
)%
|
|
|
2.7
|
%
|
|
|
(1.7
|
)%
|
Projected increase/ (decrease) in return on average equity
|
|
|
(2.9
|
)%
|
|
|
(6.2
|
)%
|
|
|
1.4
|
%
|
|
|
(0.6
|
)%
|
Projected increase/ (decrease) in earnings per share
|
|
$
|
(0.09
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.03
|
)
|
Projected percentage increase/ (decrease) in market value of equity
|
|
|
(6.6
|
)%
|
|
|
(17.7
|
)%
|
|
|
12.0
|
%
|
|
|
15.8
|
%
|
33
The figures included in the table above represent projections that were computed based upon
certain assumptions including prepayment rates and decay rates. These assumptions are inherently
uncertain and, as a result, the Company cannot precisely predict the impact of changes in interest
rates. Actual results may differ significantly due to timing, magnitude and frequency of interest
rate changes and changes in market conditions.
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision of and with the participation of the Companys management, including the
Principal Executive Officer and Principal Financial Officer, the Company evaluated the
effectiveness of the design and operation of its disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report
(the Evaluation Date). Based upon that evaluation, the Principal Executive Officer and Principal
Financial Officer concluded that, as of the Evaluation Date, these disclosure controls and
procedures were effective in timely alerting them to the material information relating to the
Company (or the consolidated subsidiaries) required to be included in the Companys periodic SEC
filings.
There were no changes in the Companys internal controls over financial reporting during the
period covered by this report or in other factors that has materially affected, or is reasonably
likely to materially affect the Companys internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are subject to a number of asserted and unasserted claims
encountered in the normal course of business. Management believes that the aggregate liability, if
any, that may result from such potential litigation will not have a material adverse effect on the
Companys financial statements.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
a.) Not applicable.
|
|
|
b.) Not applicable.
|
|
|
c.) The following table discloses information regarding the Companys repurchases of shares
of common stock during the quarter ending
June 30, 2008:
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of
|
|
|
Maximum number
|
|
|
|
|
|
|
|
|
|
|
|
shares purchased as
|
|
|
of shares yet
|
|
|
|
|
|
|
|
|
|
|
|
part of a publicly
|
|
|
to be purchased
|
|
|
|
Number of shares
|
|
|
Average price
|
|
|
announced repurchase
|
|
|
under the plan
|
|
Month
|
|
purchased
|
|
|
paid per share
|
|
|
plan (1)
|
|
|
(1)
|
|
|
April
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
273,600
|
|
|
May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,600
|
|
|
June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This program, announced in June 2007, to repurchase up to 1,000,000 shares of common
stock is the Companys third repurchase program and does not have an expiration date.
|
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
|
(a)
|
|
The Company held its Annual Meeting of Shareholders on May 21, 2008
|
|
|
(b)
|
|
The name of each director elected at the Annual Meeting is as follows:
|
William J. Wagner
Thomas K. Creal, III.
A. Paul King
|
|
|
The name of each director whose term of office continued after the Annual Meeting is
as follows:
|
Richard L. Carr
John M. Bauer
Robert G. Ferrier
Joseph F. Long
Richard E. McDowell
Philip M. Tredway
|
(c)
|
|
The following matters were voted upon at the Annual Meeting:
|
|
(i)
|
|
Election of three directors of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Withheld
|
William J. Wagner
|
|
|
44,055,084
|
|
|
|
583,909
|
|
Thomas K. Creal, III.
|
|
|
43,978,924
|
|
|
|
660,069
|
|
A. Paul King
|
|
|
43,995,925
|
|
|
|
643,068
|
|
35
|
(ii)
|
|
Approval of the Northwest Bancorp, Inc. 2008 Stock Option Plan:
|
|
|
|
|
|
For
|
|
|
38,764,180
|
|
Against
|
|
|
1,432,649
|
|
Abstain
|
|
|
117,230
|
|
Broker non-votes
|
|
|
4,324,934
|
|
|
(iii)
|
|
Ratification of the appointment of KPMG LLP as the Companys
independent registered public accounting firm for the year ending December 31,
2008.
|
|
|
|
|
|
For
|
|
|
44,479,345
|
|
Against
|
|
|
81,541
|
|
Abstain
|
|
|
78,107
|
|
Broker non-votes
|
|
|
0
|
|
Item 5. Other Information
Not applicable.
Item 6. Exhibits
31.1
|
|
Certification of the Companys Chief Executive Officer pursuant to Rule 13a-15 or 15d-15 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
|
Certification of the Companys Chief Financial Officer pursuant to Rule 13a-15 or 15d-15 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1
|
|
Certification of the Companys Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
36
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed by the undersigned thereunto duly authorized.
NORTHWEST BANCORP, INC.
|
|
|
|
|
|
|
|
Date: August 11, 2008
|
By:
|
/s/ William J. Wagner
|
|
|
|
William J. Wagner
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date: August 11, 2008
|
By:
|
/s/ William W. Harvey, Jr.
|
|
|
|
William W. Harvey, Jr.
|
|
|
|
Chief Financial Officer
|
|
37
Northwest Bancorp (NASDAQ:NWSB)
Graphique Historique de l'Action
De Avr 2024 à Mai 2024
Northwest Bancorp (NASDAQ:NWSB)
Graphique Historique de l'Action
De Mai 2023 à Mai 2024