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~~March 3031, ~~2008~~2009


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

(Registrant’s 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 ishas asubmitted ~~large~~electronically ~~accelerated~~and ~~filer,~~posted anon ~~accelerated~~its ~~filer,~~corporate aWeb ~~non-accelerated filer~~site, orif aany, ~~smaller~~every ~~reporting~~Interactive ~~company.~~Data ~~See~~File ~~definition~~required ofto ~~“large accelerated~~be ~~filer,”~~submitted ~~“accelerated filer”~~ and ~~“smaller~~posted pursuant ~~reporting~~to ~~company”~~Rule 405 inof ~~Rule~~Regulation ~~12b~~S-2T ofduring the ~~Exchange~~ ~~Act.~~preceding 12 months (~~Check~~or ~~one~~for such shorter period that the registrant was required to submit and post such files):. Yes o No o

~~Large~~ Indicate ~~Accelerated~~by ~~Filer~~check omark ~~Accelerated~~whether ~~Filer~~the þregistrant ~~Non~~is a large accelerated filer, an accelerated filer, a non-~~Accelerated~~accelerated ~~Filer~~filer, oor ~~Smaller~~a smaller reporting company. See othe ~~(Do~~definitions ~~not~~of ~~check~~“large accelerated iffiler,” a“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 (Do not check if a smaller reporting company)		Smaller reporting company o

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 issuer’s classes of common stock, as of the latest practicable date:

Common Stock ($0.10 par value) 48,~~468~~511,~~475~~093 shares outstanding as of ~~July~~ April 3130, ~~2008~~2009

NORTHWEST BANCORP, INC.
INDEX

	PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Financial Condition as of June 30, 2008 and December 31, 2007		1
Consolidated Statements of Financial Condition as of March 31, 2009 and December 31, 2008		1
Consolidated Statements of Income for the three months and six months ended June 30, 2008 and 2007		2
Consolidated Statements of Income for the three months ended March 31, 2009 and 2008		2
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended June 30, 2008 and 2007		3
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2009 and 2008		3
Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2008 and 2007		4
Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008		4
Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2008 and 2007		5
Notes to Consolidated Financial Statements — Unaudited		6
Notes to Consolidated Financial Statements — Unaudited		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures about Market Risk		32
Item 3. Quantitative and Qualitative Disclosures about Market Risk		33
Item 4. Controls and Procedures		33
Item 4. Controls and Procedures		34
PART II OTHER INFORMATION		33
PART II OTHER INFORMATION
Item 1. Legal Proceedings		33
Item 1. Legal Proceedings		34
Item 1A. Risk Factors		33
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3. Defaults Upon Senior Securities		3534
Item 4. Submission of Matters to a Vote of Security Holders		3534
Item 5. Other Information		3634
Item 6. Exhibits		3634
Signatures		3735
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,
	March 31,			December 31,
	2008			2007
	2009			2008
Assets
Cash and due from banks	$	9840,~~548~~963			7555,~~905~~815
Interest-earning deposits in other financial institutions		—223,714			~~153~~16,~~160~~795
Federal funds sold and other short-term investments		51,~~811~~043			17,~~551~~312
Marketable securities available-for-sale (amortized cost of $1,290,881 and $1,125,426)		1,288,291			1,133,367
Marketable securities available-for-sale (amortized cost of $1,078,557 and $1,144,435)		1,074,370			1,139,170
Total cash and investments		1,~~392~~340,~~650~~090			1,~~363~~219,~~983~~092
Loans held for sale		332,~~396~~666			2818,~~412~~738
Mortgage loans — one- to four- family		2,~~468~~390,~~293~~173			2,~~386~~447,506
Home equity loans		1,~~001~~004,~~529~~223			~~973~~1,~~161~~013,876
Consumer loans		~~284~~294,~~801~~747			~~272~~289,~~867~~602
Commercial real estate loans		~~940~~1,~~104~~101,141			~~845~~1,~~397~~071,182
Commercial business loans		~~343~~374,~~080~~756			~~331~~355,~~063~~917
Total loans		5,~~041~~197,~~203~~706			45,~~837~~196,~~406~~821
Allowance for loan losses		(4357,~~293~~487	)		(4154,~~784~~929	)
Total loans, net		45,~~997~~140,~~910~~219			45,~~795~~141,~~622~~892
Federal Home Loan Bank stock, at cost		5063,~~068~~143			3163,~~304~~143
Accrued interest receivable		26,~~489~~910			27,~~084~~252
Real estate owned, net		813,~~407~~848			816,~~667~~844
Premises and equipment, net		~~115~~117,~~266~~092			~~110~~115,~~894~~842
Bank owned life insurance		~~121~~124,~~051~~667			~~118~~123,~~682~~479
Goodwill		171,363			171,~~614~~363
Mortgage servicing rights		8,821			8,955
Mortgage servicing assets		6,259			6,280
Other intangible assets		96,~~196~~551			117,~~782~~395
Other assets		1531,~~112~~709			1437,~~929~~659
Total assets	$	67,~~916~~041,~~333~~851			6,~~663~~930,~~516~~241
Liabilities and Shareholders’ equity
Liabilities:
Noninterest-bearing demand deposits	$	~~393~~425,~~408~~272			~~361~~394,~~102~~011
Interest-bearing demand deposits		~~731~~723,~~169~~999			~~717~~706,~~991~~120
Savings deposits		1,545,~~131~~974			1,~~426~~480,~~545~~620
Time deposits		2,~~716~~515,~~639~~769			32,~~036~~457,~~696~~460
Total deposits		5,~~386~~211,~~347~~014			5,~~542~~038,~~334~~211
Borrowed funds		~~724~~994,~~305~~802			~~339~~1,~~115~~067,945
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities		108,~~287~~249			108,~~320~~254
Advances by borrowers for taxes and insurance		3325,~~699~~860			2426,~~159~~190
Accrued interest payable		45,~~530~~059			45,~~356~~194
Other liabilities		3672,~~414~~462			3270,~~354~~663
Total liabilities		6,~~293~~417,~~582~~446			6,~~050~~316,~~638~~457
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
Common stock, $0.10 par value: 500,000,000 shares authorized, 51,251,318 and 51,244,974 issued, respectively		5,125			5,124
Paid-in capital		~~216~~218,~~142~~830			~~214~~218,~~606~~332
Retained earnings		~~477~~498,~~110~~677			~~458~~490,~~425~~326
Accumulated other comprehensive (loss)/ income		(6,199	)		816
Accumulated other comprehensive loss		(28,804	)		(30,575	)
Treasury stock, at cost, 2,742,800 and 2,610,800 shares, respectively		(69,423	)		(66,088	)
Treasury stock, at cost, 2,742,800 shares		(69,423	)		(69,423	)
		622,751			612,878
		624,405			613,784
Total liabilities and shareholders’ equity	$	67,~~916~~041,~~333~~851			6,~~663~~930,~~516~~241

See accompanying notes to consolidated financial statements — unaudited

NORTHWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share amounts)

Three months ended

~~Six months ended~~

June 30,

March 31,

2008

2007

2008

2007

2009

2008

Interest income:

Loans

80,~~520~~871

7681,~~812~~013

~~161,409~~

~~151,178~~

Mortgage-backed securities

97,~~514~~405

7,~~344~~170

~~16,684~~

~~15,036~~

Taxable investment securities

31,~~217~~546

73,~~887~~849

~~7,066~~

~~15,969~~

Tax-free investment securities

32,~~028~~932

32,~~134~~993

~~6,021~~

~~6,367~~

Interest-earning deposits

~~710~~39

31,~~650~~796

~~2,506~~

~~5,869~~

Total interest income

9692,~~989~~793

9896,~~827~~821

~~193,686~~

~~194,419~~

Interest expense:

Deposits

3624,~~451~~637

4742,~~120~~830

~~79,281~~

~~91,744~~

Borrowed funds

610,~~972~~189

65,~~338~~557

~~12,529~~

~~12,571~~

Total interest expense

4334,~~423~~826

5348,~~458~~387

~~91,810~~

~~104,315~~

Net interest income

5357,~~566~~967

4548,~~369~~434

~~101,876~~

~~90,104~~

Provision for loan losses

35,~~395~~781

2,~~066~~294

~~5,689~~

~~4,072~~

Net interest income after provision for loan losses

5052,~~171~~186

4346,~~303~~140

~~96,187~~

~~86,032~~

Noninterest income:

Service charges and fees

87,~~153~~708

67,~~509~~514

~~15,791~~

~~12,517~~

Trust and other financial services income

1,~~783~~348

1,~~560~~748

~~3,531~~

~~3,018~~

Insurance commission income

~~583~~549

~~752~~580

~~1,163~~

~~1,244~~

Gain on sale of loans, net

—

150

—

634

Loss on real estate owned, net

(3,879

)

(87

)

Gain/ (loss) on sale of real estate owned, net

(254

)

(23

)

(341

)

Gain on sale of investments, net

903

Gain on sale of investments, net

—

971

—

Other -than-temporary impairment of investments securities

—

(320

)

Other -than-temporary impairment of investments securities

(1,152

)

—

(1,472

)

—

Income from bank owned life insurance

1,187

1,192

Income from bank owned life insurance

1,177

1,098

2,369

2,167

Mortgage banking income

1,724

442

Mortgage banking income

329

462

671

719

Non-cash recovery/ (impairment) of servicing assets

(100

)

Other operating income

~~1,120~~705

~~858~~1,019

~~2,139~~

~~1,500~~

Total noninterest income

119,~~807~~474

1112,~~366~~891

~~24,822~~

~~21,855~~

Noninterest expense:

Compensation and employee benefits

2223,~~244~~926

2022,~~375~~722

~~44,966~~

~~42,029~~

Premises and occupancy costs

5,~~318~~978

5,~~326~~725

~~11,043~~

~~10,787~~

Office operations

3,~~263~~013

3,~~352~~257

~~6,520~~

~~6,137~~

Processing expenses

45,~~715~~308

34,~~729~~204

~~8,919~~

~~7,280~~

Advertising

~~1,430~~929

~~1,375~~979

~~2,409~~

~~2,499~~

Federal deposit insurance premiums

1,~~020~~890

~~165~~824

~~1,844~~

~~329~~

Professional services

~~595~~641

~~534~~735

~~1,330~~

~~1,063~~

Amortization of other intangible assets

~~1,284~~844

~~878~~1,302

~~2,586~~

~~1,781~~

Loss on early extinguishment of debt

—

—705

~~705~~

—

Other expenses

1,~~619~~737

21,~~043~~974

~~3,593~~

~~3,748~~

Total noninterest expense

4144,~~488~~266

3742,~~777~~427

~~83,915~~

~~75,653~~

Income before income taxes

2017,~~490~~394

16,~~892~~604

~~37,094~~

~~32,234~~

Federal and state income taxes

65,~~048~~092

43,~~592~~982

~~10,030~~

~~8,637~~

Net income

1412,~~442~~302

12,~~300~~622

~~27,064~~

~~23,597~~

Basic earnings per share

0.3025

0.2526

~~0.56~~

~~0.48~~

Diluted earnings per share

0.3025

0.2526

~~0.56~~

~~0.47~~

See accompanying notes to unaudited consolidated financial statements

NORTHWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

(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

Three months ended March 31, 2008

											Accumulated
											Other						Total
	Common Stock					Paid-in		Retained			Comprehensive			Treasury			Shareholders’
Three months ended June 30, 2008	Shares			Amount		Capital		Earnings			Loss			Stock			Equity
	Shares			Amount		Capital		Earnings			Income/ (loss)			Stock			Equity
Beginning balance at March 31, 2008		48,454,438		$	5,120		215,532		466,609			2,987			(69,423	)		620,825
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		—			—		—		(499	)		572			—			73
December 31, 2007 balance, as adjusted		48,580,309			5,119		214,606		457,926			1,388			(66,088	)		612,951
Comprehensive income:
Net income		—			—		—		1412,~~442~~622			—			—			1412,~~442~~622
Change in unrealized loss on securities, net of tax of $(5,873)		—			—		—		—			(9,186	)		—			(9,186	)
Change in unrealized gain on securities, net of tax of $1,022		—			—		—		—			1,599			—			1,599
Total comprehensive income		—			—		—		1412,~~442~~622			(91,~~186~~599	)		—			514,~~256~~221
Exercise of stock options		136,~~512~~129			1		~~151~~90		—			—			—			~~152~~91
Stock-based compensation expense		—			—		~~459~~836		—			—			—			~~459~~836
Purchase of treasury stock		—(132,000	)		—		—		—			—			—(3,335	)		—(3,335	)
Dividends paid ($0.22 per share)		—			—		—		(3,~~941~~939	)		—			—			(3,~~941~~939	)
Ending balance at June 30, 2008		48,467,950		$	5,121		216,142		477,110			(6,199	)		(69,423	)		622,751
Ending balance at March 31, 2008		48,454,438		$	5,120		215,532		466,609			2,987			(69,423	)		620,825

Three months ended March 31, 2009


										Accumulated
										Other						Total
	Common Stock				Paid-in		Retained			Comprehensive			Treasury			Shareholders’
	Shares		Amount		Capital		Earnings			Income/ (loss)			Stock			Equity
Beginning balance at December 31, 2008		48,502,174	$	5,124		218,332		490,326			(30,575	)		(69,423	)		613,784

Comprehensive income:
Net income		—		—		—		12,302			—			—			12,302
Change in fair value of interest rate swaps, net of tax of $(613)		—		—		—		—			1,138			—			1,138
Change in unrealized loss on securities, net of tax of $(405)		—		—		—		—			633			—			633

Total comprehensive income		—		—		—		12,302			1,771			—			14,073

Exercise of stock options		6,344		1		57		—			—			—			58

Stock-based compensation expense		—		—		441		—			—			—			441

Dividends paid ($0.22 per share)		—		—		—		(3,951	)		—			—			(3,951	)


Ending balance at March 31, 2009		48,508,518	$	5,125		218,830		498,677			(28,804	)		(69,423	)		624,405

See accompanying notes to unaudited consolidated financial statements

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

NORTHWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

	Three months ended						~~Six months ended~~
	June 30,						June 30,
	March 31,
	2008			2007			2008			2007
	2009			2008
OPERATING ACTIVITIES:
Net Income	$	1412,~~442~~302			12,~~300~~622			~~27,064~~			~~23,597~~
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		35,~~395~~781			2,~~066~~294			~~5,689~~			~~4,072~~
Net (gain)/ loss on sale of assets		~~544~~(1,102	)		~~(311~~182	)		~~726~~			~~(528~~	)
Net gain on Visa Inc. share redemption		—			—(672	)		~~(672~~	)		—
Net depreciation, amortization and accretion		4,~~026~~718			3,~~251~~641			~~7,667~~			~~6,999~~
Decrease (increase) in other assets		1,549			(8,365	)		2,627			(8,025	)
Decrease in other assets		4,082			1,078
(Decrease)/ increase in other liabilities		(709	)		1,920			5,553			4,984
Increase in other liabilities		3,415			6,262
Net amortization of premium/ discount on marketable securities		(~~1,892~~933	)		(1,~~098~~734	)		~~(3,626~~	)		~~(2,057~~	)
Deferred income tax expense (benefit)		—			1,034			(141	)		1,209
Deferred income tax benefit		(75	)		(141	)
Noncash write-down of investment securities		~~1,152~~—			—320			~~1,472~~			—
Origination of loans held for sale		(33,416	)		(51,771	)		(108,030	)		(99,282	)
Noncash write-down of REO		3,862			—
Proceeds from sale of loans held for sale		34,875			55,602			105,228			104,613
Origination of loans held for sale		(183,054	)		(74,614	)
Noncash compensation expense related to stock benefit plans		459			526			1,295			1,447
Proceeds from sale of loans held for sale		159,697			70,353
Net cash provided by operating activities		24,425			15,154			44,852			37,029
Noncash compensation expense related to stock benefit plans		441			836
INVESTING ACTIVITIES:
Net cash provided by operating activities		9,134			20,427
Purchase of marketable securities available-for-sale		(102,787	)		(19,859	)		(406,697	)		(32,662	)
INVESTING ACTIVITIES:
Proceeds from maturities and principal reductions of marketable securities held-to-maturity		—			26,762			—			52,400
Purchase of marketable securities available-for-sale		—			(303,910	)
Proceeds from maturities and principal reductions of marketable securities available-for-sale		7566,~~732~~854			23165,~~953~~023			~~240,755~~			~~71,652~~
Proceeds from sale of marketable securities available-for-sale		~~1,042~~—			—			~~1,042~~			—
Loan originations		(~~528~~332,~~668~~029	)		(~~434~~355,~~236~~032	)		~~(883,700~~	)		~~(739,283~~	)
Proceeds from loan maturities and principal reductions		~~361~~349,~~529~~299			~~313~~311,~~781~~669			~~673,198~~			~~566,065~~
Net (purchase) sale of FHLB stock		(9,658	)		378			(18,764	)		501
Net purchase of FHLB stock		—			(9,106	)
Proceeds from sale of real estate owned		21,~~866~~447			~~1,547~~956			~~3,822~~			~~2,575~~
Net (purchase) sale of real estate owned for investment		38			39			77			(178	)
Net sale of real estate owned for investment		38			39
Purchase of premises and equipment		(54,~~569~~442	)		(13,~~704~~196	)		~~(8,765~~	)		~~(4,079~~	)
Acquisitions, net of cash received		—			(25,150	)		—			(25,150	)
Net cash provided by/ (used in) investing activities		81,167			(193,557	)
Net cash used by investing activities		(205,475	)		(114,489	)		(399,032	)		(108,159	)

NORTHWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued) (in thousands)

	Three months ended						~~Six months ended~~
	June 30,						June 30,
	March 31,
	2008			2007			2008			2007
	2009			2008
FINANCING ACTIVITIES:
Increase (decrease) in deposits, net		(169,321	)		21,276			(155,987	)		205,659
Increase in deposits, net	$	172,803			13,334
Proceeds from long-term borrowings		~~225,000~~—			—235,000			~~460,000~~			—
Repayments of long-term borrowings		(6769	)		(2584,~~032~~067	)		~~(84,134~~	)		~~(25,047~~	)
Net increase/ (decrease) in short-term borrowings		2,827			(10,110	)		9,476			261
Net (decrease) /increase in short-term borrowings		(73,014	)		6,649
Increase in advances by borrowers for taxes and insurance		6,365			6,543			9,540			9,268
(Decrease) /increase in advances by borrowers for taxes and insurance		(330	)		3,175
Cash dividends paid		(3,~~941~~951	)		(3,~~776~~939	)		~~(7,880~~	)		~~(7,669~~	)
Purchase of treasury stock		—			(183,~~992~~335	)		~~(3,335~~	)		~~(25,093~~	)
Proceeds from stock options exercised		~~152~~58			~~124~~91			~~243~~			~~285~~
Net cash provided by financing activities		6195,~~015~~497			~~(29~~166,~~967~~908	)		~~227,923~~			~~157,664~~
Net (decrease)/ increase in cash and cash equivalents		(120,035	)		(129,302	)		(126,257	)		86,534
Net increase/ (decrease) in cash and cash equivalents	$	185,798			(6,222	)
Cash and cash equivalents at beginning of period	$	~~224~~79,~~394~~922			~~370~~230,~~169~~616			~~230,616~~			~~154,333~~
Net (decrease)/ increase in cash and cash equivalents		(120,035	)		(129,302	)		(126,257	)		86,534
Net increase/ (decrease) in cash and cash equivalents		185,798			(6,222	)
Cash and cash equivalents at end of period	$	~~104~~265,~~359~~720			~~240~~224,~~867~~394			~~104,359~~			~~240,867~~
Cash and cash equivalents:
Cash and due from banks	$	9840,~~548~~963			8983,~~479~~628			~~98,548~~			~~89,479~~
Interest-earning deposits in other financial institutions		—223,714			~~148~~126,~~647~~198			—			~~148,647~~
Federal funds sold and other short-term investments		51,~~811~~043			214,~~741~~568			~~5,811~~			~~2,741~~
Total cash and cash equivalents	$	~~104~~265,~~359~~720			~~240~~224,~~867~~394			~~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
Interest on deposits and borrowings (including interest credited to deposit accounts of $20,769 and $37,527, respectively)		34,961			49,044
Income taxes		51,~~754~~707			~~3,791~~401			~~6,155~~			~~4,454~~
Business acquisitions:
Non-cash activities:
Fair value of assets acquired		—			211,846			—			211,846
Loans transferred to real estate owned		2,330			1,647
Cash paid		—			(25,150	)		—			(25,150	)
Sale of real estate owned financed by the Company		129			101
Liabilities assumed		—			186,696			—			186,696
Loans transferred to held for investment from loans held for sale		—			—
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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — ~~UNAUDITED~~unaudited

(1) Basis of Presentation and Informational Disclosures

The Northwest ~~group~~family of companies, headquartered in Warren, Pennsylvania, is organized in a two-tier holding company structure. Northwest Bancorp, MHC, a federal mutual holding company regulated by the Office of Thrift Supervision (“OTS”), 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 also 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~~March 3031, ~~2008~~2009, Northwest operated ~~166~~168 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~~subsidiary, Northwest, and Northwest’s subsidiaries 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 Company’s 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 Company’s Annual Report on Form 10-K for the year ended December 31, ~~2007~~2008.

Certain items previously reported have been reclassified to conform to the current period’s ~~reporting~~ format. The reclassifications had no material effect on the Company’s financial condition or results of operations. The results of operations for the three ~~and six~~ months ended ~~June~~March 3031, ~~2008~~ 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2008~~ 2009.

Stock-Based Compensation

On ~~January~~February 1618, ~~2008~~2009 the Company awarded employees ~~191~~195,~~709~~759 stock options and directors 24,000 stock options with an exercise price of $2516.0384 and a grant date fair value of $31.2846 per stock option. Awarded stock options vest over a ~~five~~ seven-year period beginning onwith 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~~441,000 and $~~526~~836,000 for the three months ended ~~June~~March 3031, ~~2008~~ 2009 and ~~2007~~2008, respectively, was recognized in compensation expense relating to the Company’s RRP and stock option plans. ~~Stock-based~~ At March 31, 2009 there was compensation expense of $1.37 million and $~~1.4 million~~ 901,000 for the ~~six~~stock ~~months~~option ~~ended~~plans ~~June 30,~~and ~~2008~~RRP ~~and 2007~~stock award plan, respectively, ~~was~~remaining ~~recognized in compensation expense relating~~ to ~~the~~be ~~Company’s RRP and stock option plans~~recognized.

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~~6 ~~as a result of the implementation of FIN 48. As of January 1, 2008, the Company had a liability for~~

~~unrecognized~~ No ~~tax~~adjustments ~~benefits~~were ofrecorded ~~$1.1 million,~~as ofa ~~which~~result ~~$706,000,~~of ~~when recognized in March 2008, impacted~~ the ~~effective~~implementation ~~tax~~of ~~rate~~FIN 48. As of ~~June~~March 3031, ~~2008~~ 2009, 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~~March 3031, ~~2008~~2009. 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~~ December 3031, 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~~2007.

Recently Issued Accounting Standards

Fair Value ~~Measurements~~: In ~~September~~April ~~2006,~~2009 the Financial Accounting Standards Board (“FASB”) issued ~~Statement~~FASB Staff Position (“FSP”) No. FAS 157-4, Determining Fair Value When the Volume and Level of ~~Financial~~Activity ~~Accounting~~for ~~Standards~~the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”), FSP No. ~~157~~FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“FSP 115-2 and 124-2”) and FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value ~~Measurements~~of Financial Instruments (“~~SFAS~~FSP ~~157~~107-1”). ~~SFAS~~FSP 157-4 ~~provides~~clarifies that ~~guidance~~the ~~for~~measurement ~~using~~objective in determining fair value towhen ~~measure~~the ~~assets~~volume and ~~liabilities~~level of activity for the asset or liability have significantly decreased, ~~but~~is ~~does~~the ~~not~~price ~~expand~~that would be received to sell the ~~use~~asset ofin ~~fair~~an orderly transaction between willing market participants under current market conditions and not the value in ~~any circumstance~~a hypothetical active market. ~~SFAS~~FSP 157-4 ~~also~~includes ~~requires~~additional factors ~~expanded~~for ~~disclosures~~determining ~~about~~whether there has been a significant decrease in the ~~effect~~volume ofand ~~fair~~level ~~value~~of ~~measurements~~activity onfor an ~~entity’s~~asset ~~financial~~or ~~statements.~~liability ~~This~~compared ~~statement~~to ~~applies~~normal ~~when~~activity ~~other~~for ~~standards require~~that asset or ~~permit~~liability (or similar assets ~~and~~or liabilities) toand beprovides ~~measured~~additional atguidance in estimating fair value in those instances. ~~SFAS~~An entity is ~~effective~~required ~~for~~to base its conclusion about whether a transaction was not ~~financial~~orderly ~~statements~~on ~~issued~~the ~~for~~weight ~~fiscal~~of ~~years~~the ~~beginning~~evidence. ~~after~~FSP ~~November 15,~~157-4 ~~2007~~requires an entity to disclose any change in valuation techniques, the related inputs and ~~interim~~the ~~periods within~~effect ~~those~~resulting ~~fiscal~~from ~~years~~the application of the FSP. FSP ~~Additionally~~115-2 and 124-2 replaces the existing requirement for debt securities, that in ~~February 2008~~order for an entity to conclude impairment is not other-than-temporary, it must have the ~~FASB~~intent ~~issued~~and ability to hold an impaired security for a period sufficient to allow for recovery in value of the investment. To conclude impairment is not other-than-temporary, FSP ~~157~~115-2, ~~Effective~~and 124-2 requires management assert ~~Date~~that it does not have the intent to sell the security and that it is more likely than not it will not have to sell the security before recovery of ~~FASB~~its ~~Statement~~cost Nobasis. ~~157~~ (“FSP ~~157~~115-2~~”),~~ ~~which~~and ~~delays~~124-2 also changes the ~~effective~~presentation ~~date~~in the financial statements of ~~SFAS~~non-credit ~~157~~related impairment amounts for ~~non-recurring~~instruments within its scope. When an entity asserts it does not have the intent to sell the security and it is more likely than not it will not have to sell the security before recovery of its cost basis, only the credit related impairment losses are to be recorded in earnings, non-~~financial~~credit ~~instruments~~losses are to ~~fiscal~~be ~~years~~recorded ~~beginning~~in ~~after~~accumulated ~~November 15,~~other ~~2008~~comprehensive income. ~~The~~FSP 115-2 and ~~Company~~124-2 ~~adopted~~also expands and increases the ~~non~~frequency of existing disclosures about other-~~delayed~~than-temporary impairments ~~provisions~~for ofdebt ~~SFAS~~and ~~157~~equity onsecurities. ~~January~~ FSP 107-1, ~~2008.~~amends ~~See~~FASB ~~Footnote~~Statement 8No. 107 ~~for~~to ~~further~~require ~~analysis~~disclosures ofabout ~~the~~fair ~~impact~~value of ~~the~~financial ~~adoption~~instruments for interim reporting periods of publicly ~~this~~traded ~~standard~~companies that were previously only required in annual financial statements.

~~Fair~~These ~~Value~~FSPs ~~Option:~~are Ineffective ~~February 2007,~~for ~~the~~interim ~~FASB~~and ~~issued~~annual ~~Statement~~reporting ofperiods ~~Financial~~ending ~~Accounting Standards~~after ~~No.~~June ~~159~~15, ~~The~~2009 with ~~Fair~~early ~~Value~~adoption ~~Option~~permitted for ~~Financial~~periods ~~Assets~~ending ~~and~~after ~~Financial Liabilities – Including an Amendment of FASB Statement No.~~March ~~115~~15, ~~(“SFAS 159”)~~2009. ~~SFAS~~The ~~159~~Company ~~permits~~will ~~entities to choose to~~adopt ~~measure~~these ~~many~~FSPs ~~financial~~for ~~instruments~~the ~~and~~interim ~~certain~~period ~~other~~ending ~~items~~on atJune 30, ~~fair value~~2009. The ~~objective~~Company ofhas ~~SFAS 159~~not isdetermined ~~to improve financial reporting by providing entities with~~ the ~~opportunity to mitigate~~ ~~volatility~~effect inof ~~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~~ adoption of ~~fair~~these ~~value~~FSPs ~~measurement~~yet, ~~which~~but isdoes ~~consistent~~not ~~with~~expect the ~~FASB’s~~adoption ~~long-term~~to ~~measurement objectives for accounting for financial instruments. SFAS 159 became effective January 1, 2008. We~~ have ~~not elected~~a ~~to value any assets or liabilities (not otherwise measured at fair value) under SFAS 159.~~material Weeffect ~~continue~~on ~~to evaluate~~ the ~~impact~~Company’s results of ~~SFAS~~operations ~~159 should we elect fair value measurement for any asset~~ or ~~liability~~financial ~~in the future~~position.

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,~~

amortgage ~~subsidiary~~and ofconsumer ~~Northwest~~loans, ~~operating~~as 48well ~~offices~~as inbrokerage ~~Pennsylvania~~and investment management and ~~two~~trust services. ~~offices~~The inConsumer Finance segment, which is comprised of Northwest Consumer Discount Company, ~~southwestern~~a ~~New~~subsidiary ~~York~~of Northwest, operates 49 offices in Pennsylvania and 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 000’s)

Banks

Finance

All Other *

Consolidated

March 31, 2009 ($ in 000’s)

Banking

Finance

All Other *

Consolidated

External interest income

9187,~~973~~784

5,~~016~~000

—9

9692,~~989~~793

Intersegment interest income

~~1,214~~751

—

(~~1,214~~751

)

—

Interest expense

4233,~~288~~300

~~1,272~~806

~~(137~~720

)

4334,~~423~~826

Provision for loan losses

25,~~500~~000

~~895~~781

—

35,~~395~~781

Noninterest income

118,~~247~~957

~~525~~493

3524

119,~~807~~474

Noninterest expense

3841,~~692~~117

23,~~674~~010

~~122~~139

4144,~~488~~266

Income tax expense (benefit)

65,~~202~~273

~~254~~372

(~~408~~553

)

65,~~048~~092

Net income

1412,~~752~~802

~~446~~524

(~~756~~1,024

)

1412,~~442~~302

Total assets

6,~~795~~908,~~617~~912

~~116~~113,~~949~~402

319,~~767~~537

67,~~916~~041,~~333~~851

Community

Consumer

June 30, 2007 ($ in 000’s)

Banks

Finance

All Other *

Consolidated

March 31, 2008 ($ in 000’s)

Banking

Finance

All Other *

Consolidated

External interest income

9491,~~134~~611

45,~~693~~208

—2

9896,~~827~~821

Intersegment interest income

21,~~037~~567

—

(21,~~037~~567

)

—

Interest expense

4946,~~597~~716

21,~~097~~623

~~1,764~~48

5348,~~458~~387

Provision for loan losses

1,500

~~566~~794

—

2,~~066~~294

Noninterest income

1012,~~581~~275

~~730~~566

5550

1112,~~366~~891

Noninterest expense

3539,~~632~~527

12,~~993~~749

~~152~~151

3742,~~777~~427

Income tax expense (benefit)

4,~~914~~384

~~305~~199

(~~627~~601

)

43,~~592~~982

Net income

1513,~~109~~326

~~462~~409

(31,~~271~~113

)

12,~~300~~622

Total assets

6,~~865~~731,~~125~~580

~~122~~117,~~454~~614

~~(89~~3,~~418~~337

)

6,~~898~~852,~~161~~531


*		Eliminations consist of intercompany loans, interest income and interest expense.

(3) Corporate securities with unrealized losses

As of March 31, 2009, the Company had two investments with total book value of $2.0 million and total fair value of $869,000, where the book value exceeded the carrying value for more than 12 months. These investments were single issuer trust preferred investments, evaluated for other-than-temporary impairment by determining the strength of the underlying issuer. In each case, the underlying issuer was “well-capitalized” for regulatory purposes and was a participant in the government’s TARP program. Neither of the issuers have deferred interest payments or announced the intention to defer interest payments, nor have either been downgraded. The decline in fair value is related to the spread over three month LIBOR, on which the quarterly interest payments are based, as the spread over LIBOR is significantly lower than current market spreads. The Company concluded the impairment of these investments was considered temporary. In making that determination the Company also considered the duration and the severity of the losses.

As of March 31, 2009, the Company had eight investments with total book value of $16.3 million and total fair value of $5.5 million where the book value exceeded the carrying value for less than 12 months. Two of these investments were single issuer trust preferred investments, evaluated for other-than-temporary impairment by determining the strength of the underlying issuer. In each case, the underlying issuer was “well-capitalized” for regulatory purposes and was a participant in the government’s TARP program. Neither of the issuers have deferred interest payments or announced the intention to defer interest payments. The Company concluded that the decline in fair value was related to the spread over three month LIBOR, on which the quarterly interest payments are based. The spread over LIBOR is significantly lower than current market spreads. The other six investments were pooled trust preferred investments. These securities were evaluated for other-than-temporary impairment considering actual cash flows, projected cash flows, performing collateral and the amount of additional defaults the duration and severity of the losses, structure could withstand prior to the security experiencing a disruption in cash flows and the class of securities owned by the Company. None of these securities are projecting a cash flow disruption, nor have any of the securities experienced a cash flow disruption. Two of the securities, MM Community Funding I And PreTSL XX, were downgraded by a rating agency. These downgrades were considered as part of the Company’s analysis. The Company concluded, based on all factors evaluated, the impairment of these investments was considered temporary.

AsThe following oftables orprovides class, back value, fair value and ratings information for the ~~six~~Company’s ~~months~~portfolio ~~ended~~of corporate securities that have an unrealized loss as of March 31, 2009 (in thousands):

	Community		Consumer
June 30, 2008 ($ in 000’s)	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

As of March 31, 2009

	Community			Consumer
			Total
June 30, 2007 ($ in 000’s)	Banks			Finance			All Other *			Consolidated
			Book	Fair		Unrealized	Moody’s/ Fitch
External interest income	$	184,852			9,565			2			194,419
Description	Class		Value	Value		Losses	Ratings
Intersegment interest income		4,083			—			(4,083	)		—
North Fork Capital (1)	N/A		1,009	432		(577)	Baa1/ BBB+
Interest expense		96,610			4,204			3,501			104,315
Bank Boston Capital Trust (2)	N/A		988	437		(551)	A2/ BB
Provision for loan losses		3,000			1,072			—			4,072
Reliance Capital Trust	N/A		1,000	892		(108)	Not rated
Noninterest income		20,546			1,202			107			21,855
Huntington Capital Trust	N/A		825	510		(315)	Baa3/ BBB
Noninterest expense		71,137			4,190			326			75,653
MM Community Funding I	Mezzanine		267	69		(198)	Caa2/ CCC
Income tax expense (benefit)		9,370			518			(1,251	)		8,637
MM Community Funding II	Mezzanine		42	40		(2)	Baa2/ BBB
Net income		29,364			783			(6,550	)		23,597
I-PreTSL I	Mezzanine		1,106	127		(979)	Not rated/ A-
Total assets	$	6,865,125			122,454			(89,418	)		6,898,161
I-PreTSL II	Mezzanine		1,008	127		(881)	Not rated/ A-
PreTSL XIX	Senior A-1		7,457	2,278		(5,179)	A3/ AAA
PreTSL XX	Senior A-1		4,612	1,495		(3,117)	Baa1/ AAA
			18,314	6,407		(11,907)

* Eliminations consist of intercompany loans, interest income and interest expense.


(1)		— North Fork Bank was acquired by Capital One Financial Corporation.

(2)		— Bank Boston was acquired by Bank of America.

~~(3)~~The following ~~Goodwill~~table ~~and~~provides ~~Other~~collateral ~~Intangible~~information ~~Assets~~on pooled trust preferred securities included in the previous table as of March 31, 2009 (in thousands):

~~The~~As ~~following~~of ~~table~~March 31, ~~provides information for intangible assets subject to amortization at the~~2009 ~~dates indicated (in thousands):~~

	June 30,			December 31,
									Additional
	2008			2007
									Immediate
Amortizable intangible assets:
									defaults before
Core deposit intangibles – gross	$	30,275			30,275
				Current					causing an
Less: accumulated amortization		(21,412	)		(19,318	)
	Total			deferrals			Performing		interest
Core deposit intangibles – net		8,863			10,957
Description	Collateral			and defaults			Collateral		shortfall
Customer and Contract intangible assets – gross		2,781			2,781
I-PreTSL I		211,000			35,000			176,000		93,000
Less: accumulated amortization		(2,448	)		(1,956	)
I-PreTSL II		402,000			20,000			382,000		140,500
Customer and Contract intangible assets – net	$	333			825
PreTSL XIX		700,535			68,000			632,535		278,000
PreTSL XX		604,154			71,000			533,154		220,000

~~The~~(4) ~~following~~Goodwill ~~information shows the actual aggregate amortization expense for the current quarter, the prior year’s quarter, the current six-month period~~ and ~~the~~Other ~~prior~~Intangible ~~year six-month period~~Assets ~~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 intangible assets subject to amortization at the dates indicated (in thousands):


	March 31,			December 31,
	2009			2008
Amortizable intangible assets:
Core deposit intangibles — gross	$	30,275			30,275
Less: accumulated amortization		(23,995	)		(23,172	)

Core deposit intangibles — net		6,280			7,103

Customer and Contract intangible assets — gross		1,731			1,731
Less: accumulated amortization		(1,460	)		(1,439	)

Customer and Contract intangible assets — net	$	271			292

The following table shows the actual aggregate amortization expense for the current quarter and prior year’s quarter 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 March 31, 2009	$	844
For the three months ended March 31, 2008		1,302
For the year ending December 31, 2009		2,847
For the year ending December 31, 2010		1,896
For the year ending December 31, 2011		1,445
For the year ending December 31, 2012		693
For the year ending December 31, 2013		355
For the year ending December 31, 2014		104

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
Balance at December 31, 2007	$	170,301			1,313		171,614
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
Balance at December 31, 2008		170,050			1,313		171,363
Goodwill acquired		—			—		—
Impairment losses		—			—		—
Balance at March 31, 2009	$	170,050			1,313		171,363

(45) Borrowed Funds

~~Borrowed~~The ~~funds~~following footnote provides the detail of the Company’s borrowings at ~~June~~March 3031, ~~2008~~2009 and December 31, ~~2007~~2008 ~~are presented~~ (in ~~the following table~~thousands):

	June 30, 2008					December 31, 2007
	March 31, 2009					December 31, 2008
			Average					Average
	Amount		rate			Amount		rate
Term notes payable to the FHLB of Pittsburgh:
Due within one year	$	~~159~~36,636		24.6731	%		8443,~~031~~708		53.0087	%
Due between one and two years		3695,~~790~~000		4.1465	%		3536,~~588~~532		4.6336	%
Due between two and three years		135,000		4.1711	%		36160,~~567~~000		4.3611	%
Due between three and four years		~~100~~160,000		3.7890	%		65145,000		53.0290	%
Due between four and five years		125,~~000~~100		3.9685	%		35125,000		43.5585	%
Due between five and ten years		~~235~~265,~~809~~662		34.9911	%		~~839~~315,778		24.8111	%
		632,758					257,025
		817,398					826,018
Revolving line of credit, FHLB of Pittsburgh		—		—			—		—
Less than 90 day Federal Reserves borrowings		87,000		0.25	%		—		—
Investor notes payable, due various dates through 2009		4,619		4.99	%		4,638		4.99	%
Revolving line of credit, FHLB of Pittsburgh		—		—			146,000		0.59	%
Securities sold under agreement to repurchase, due within one year		86,928		1.50	%		77,452		3.25	%
Investor notes payable, due various dates through 2009		4,482		4.99	%		4,491		4.99	%
Total borrowed funds	$	724,305					339,115
Securities sold under agreement to repurchase, due within one year		85,922		1.46	%		91,436		1.02	%
Total borrowed funds	$	994,802					1,067,945

Borrowings from the FHLB of Pittsburgh are secured by the Company’s 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.

~~The~~(6) ~~revolving line of credit with the FHLB of Pittsburgh carries a commitment of $150.0~~Guarantees ~~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.~~

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 Company’s 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 management’s credit assessment of the customer. At March 31, 2009, the maximum potential amount of future payments the Company could be required to make under these standby letters of credit was $16.3 million, of which $13.7 million is fully collateralized. At March 31, 2009, the Company had a liability (5deferred income) ~~Guarantees~~of $174,000 related to the standby letters of credit. There are no recourse provisions that would enable the Company to recover any amounts from third parties.

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~~7) ofEarnings ~~$137,000~~Per ~~related to the standby~~Share ~~letters of credit. There are no recourse provisions that would enable the Company to recover any amounts from third parties.~~

Basic earnings per common share (6EPS) is ~~Earnings~~computed ~~Per~~by ~~Share~~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 1,189,999 shares of common stock with a weighted average exercise price of $23.91 per share were outstanding during the three months ended March 31, 2009 but were not included in the computation of diluted earnings per share for this period 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 ended March 31, 2008. The computation of basic and diluted earnings per share follows (in thousands, except per share amounts):

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
	March 31,
	2009		2008
Reported net income	$	12,302		12,622

Weighted average common shares outstanding		48,412		48,330
Dilutive potential shares due to effect of stock options		113		276


Total weighted average common shares and dilutive potential shares		48,525		48,606


Basic earnings per share:	$	0.25		0.26


Diluted earnings per share:	$	0.25		0.26

	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

(78) 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

Components of Net Periodic Benefit Cost

	Six months ended June 30,
	Three months ended March 31,
	Pension Benefits						Other Post-retirement Benefits
	2008			2007			2008		2007
	2009			2008			2009		2008
Service cost	$	21,~~510~~323			21,~~479~~255			—		—
Interest cost		21,~~280~~183			21,~~047~~140			4822		4724
Expected return on plan assets		(~~2,494~~967	)		(21,~~205~~247	)		—		—
Amortization of transition asset		—			—			—		—
Amortization of prior service cost		(39	)		13			—		—
Amortization of prior service cost		26			39			—		—
Amortization of the net loss		458			31			14		11
Amortization of the net (gain) loss		62			374			22		21
Net periodic benefit cost	$	1,958			1,192			36		35
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~~quarter ~~months~~ ended ~~June~~March 3031, ~~2008~~2009. ~~The~~Once determined, the Company anticipates making a tax-deductible contribution to to its defined benefit pension plan for the year ending December 31, ~~2008~~2009.

(89) Fair Value Measurements

~~Effective~~Financial ~~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 are accounted for in accordance with SFAS 157. 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

	•		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 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:

Quotes from brokers or other external sources that are not considered binding;

~~traded.~~o ~~Level~~Quotes 2from ~~also~~brokers ~~includes~~or ~~pricing~~other ~~models~~external insources ~~which~~where ~~the~~it ~~inputs~~can ~~are~~not ~~corroborated~~be bydetermined that market ~~data,~~participants ~~for~~would ~~example,~~in ~~matrix~~fact ~~pricing.~~transact ~~• Level 3 – Financial assets and liabilities~~ for ~~which~~the ~~values~~asset ~~are based on prices~~ or ~~valuation~~liability ~~techniques~~at ~~that~~the ~~require~~quoted ~~inputs~~price; ~~that~~o ~~are~~Quotes ~~both unobservable~~ and ~~significant~~other toinformation ~~the~~from ~~overall~~brokers ~~fair~~or ~~value~~other ~~measurement.~~external ~~Level~~sources 3where the inputs ~~include~~are ~~the~~not ~~following:~~deemed observable.

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~~March 3031, ~~2008~~2009 (in thousands):

								Total
								assets at
Investment securities — available for sale	Level 1		Level 2			Level 3		fair value
	Level 1		Level 2			Level 3		fair value
Equity securities — available for sale	$	~~6,080~~844		—			220		61,~~300~~064
Debt securities — available for sale		—		1,~~261~~069,~~790~~138			204,~~201~~168		1,~~281~~073,~~991~~306
Total assets	$	6,080		1,261,790			20,421		1,288,291
Derivative fair value of interest rate swap		—		(11,363	)		—		(11,363	)
Total assets	$	844		1,057,775			4,388		1,063,007

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~~do anot ~~combination~~have ofan ~~multiple~~active market and as such the ~~securities,~~broker ~~including~~pricing anreceived ~~investor~~by ~~note~~the ~~(Level~~Company 2)uses alternative methods, anincluding ~~income~~use ~~note~~of ~~(Level~~cash 3)flow estimates. ~~and~~Accordingly, ~~agency~~these ~~zero~~securities ~~coupon bond~~are ~~(Level~~included 2)herein as level 3 assets. The fair value of other debt securities are determined by the ~~various~~Company ~~components~~using ofa ~~these~~discounted ~~securities~~cash isflow ~~determined~~model using market ~~Level~~assumptions, 2which generally include cash flow, collateral and ~~Level~~other 3market ~~techniques~~assumptions. As such, these ~~the overall~~ securities are ~~classified~~included herein as ~~Level~~level 3 assets.

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~~Interest ~~table~~rate ~~below~~swap ~~presents~~agreements a(Swaps) ~~reconciliation~~— The fair value of ~~all~~the ~~assets~~swaps ~~and~~was ~~liabilities~~the ~~measured~~amount the atCompany ~~fair~~would ~~value~~have expected to pay to terminate the agreements and onwas abased ~~recurring~~upon ~~basis~~the ~~using~~present ~~significant~~value ~~unobservable~~of ~~inputs~~the ~~(Level~~expected 3)future ~~for~~cash flows using the ~~three~~LIBOR ~~months~~swap ~~ended June 30~~curve, the ~~2008~~basis ~~(in~~for ~~thousands):~~the underlying interest rate.

	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 quarter ended March 31, 2009 (in thousands):

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 December 31, 2008	$	220		5,937

Total net realized investment gains/ (losses) and net change in unrealized appreciation/ (depreciation):
Included in net income		—		—
Included in other comprehensive income		—		(1,769	)

Purchases and sales		—		—
Net transfers in (out) of Level 3		—		—


Balance at March 31, 2009	$	220		4,168

	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 March 31, 2009 (in thousands):


							Total
							assets at
	Level 1		Level 2		Level 3		fair value
Loans measured for impairment	$	—		—		50,378		50,378
Real estate owned	$	—		—		13,848		13,848
Mortgage servicing rights		—		—		4,666		4,666

Total assets	$	—		—		68,892		68,892

							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

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 or discounted cash flows when collateral does not exist. 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.

Real Estate Owned — Real estate owned is comprised of property acquired through foreclosure or voluntarily conveyed by delinquent borrowers. These assets are recorded on the date acquired at the lower of the related loan balance or fair value, less cost disposition costs, with the fair value being

~~Loans~~determined ~~held~~by ~~for~~appraisal. ~~sale~~Subsequently, –foreclosed ~~Mortgage~~assets ~~loans held for sale~~ are ~~recorded~~valued at the lower of ~~carrying~~ ~~value~~the oramount ~~market~~recorded ~~value.~~at ~~The~~acquisition ~~fair~~date ~~value~~or ~~of mortgage loans held for sale in based on what secondary markets are currently offering. As the~~ fair value. isThe ~~determined by a quoted price from Freddie Mac, and the~~ Company ~~has~~classifies ~~open~~Real ~~delivery contracts with Freddie Mac, the Company classifies~~estate ~~loans~~owned ~~held for sale~~ as nonrecurring Level 13.

~~Impaired~~Mortgage ~~loans~~servicing –rights A— ~~loan~~Mortgage isservicing ~~considered~~rights torepresent bethe ~~impaired~~value of servicing residential mortgage loans, when itthe ismortgage ~~probable~~loans ~~that~~have ~~all~~been of sold into the ~~principal~~secondary market and ~~interest~~the ~~due~~associated ~~under~~servicing ~~the~~has ~~original~~been ~~terms~~retained ofby the ~~loan~~Company. ~~may~~The ~~not~~value beis ~~collected.~~determined ~~Impairment~~through isa ~~measured~~discounted ~~based~~cash ~~on the~~flow ~~fair~~analysis, ~~value~~which ofuses ~~the~~interest ~~underlying~~rates, ~~collateral~~prepayment speeds and delinquency rate assumptions as inputs. ~~The~~All ~~Company~~of ~~measures~~these ~~impairment~~assumptions onrequire ~~all~~a significant degree of ~~nonaccrual~~management ~~commercial~~judgment. Servicing rights and ~~commercial~~the ~~real~~related ~~estate~~mortgage loans ~~for~~are ~~which~~segregated itinto categories ~~has~~or ~~established~~homogeneous ~~specific reserves~~pools asbased ~~part~~upon ofcommon characteristics. Adjustments are only made when the ~~specific~~estimated ~~allocated~~discounted ~~allowance~~future ~~component~~cash offlows are less than the ~~allowance~~carrying ~~for~~value, ~~loan~~as ~~losses.~~determined by ~~The~~individual ~~Company~~pool. ~~classifies~~As ~~impaired~~such, ~~loans~~mortgage servicing rights are classified as nonrecurring Level 3.

~~Mortgage~~(10) ~~servicing~~Guaranteed ~~rights~~Preferred –Beneficial ~~Mortgage~~Interests ~~servicing~~in ~~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.’s ~~The~~Junior ~~value~~Subordinated isDeferrable ~~determined~~Interest ~~through a~~Debentures ~~discounted~~(Trust ~~cash~~Preferred ~~flow~~Securities) ~~analysis, which uses interest rates, prepayment speeds~~ and ~~delinquency~~Interest ~~rate assumptions~~Rate 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. Swaps

The Company has three statutory business trusts: Northwest Bancorp Capital Trust III, a Delaware statutory business trust, Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust and Penn Laurel Financial Corp. Trust I, a Delaware statutory business trust (“Trusts”). These trusts exist solely to issue preferred securities to third parties for cash, issue common securities to the Company in exchange for capitalization of the Trusts, invest the proceeds from the sale of the trust securities in an equivalent amount of debentures of the Company, and engage in other activities that are incidental to those previously listed.

Northwest Bancorp Capital Trust III (Trust III) issued 50,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on December 5, 2006 (liquidation value of $1,000 per preferred security or $50,000,000) with a stated maturity of December 30, 2035. These securities carry a floating interest rate, which is reset quarterly, equal to three-month LIBOR plus 1.38%.

Northwest Bancorp Statutory Trust IV (Trust IV) issued 50,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on December 15, 2006 (liquidation value of $1,000 per preferred security or $50,000,000) with a stated maturity of December 15, 2035. These securities carry a floating interest rate, which is reset quarterly, equal to three-month LIBOR plus 1.38%.

Penn Laurel Financial Corp. Trust I issued 5,000 cumulative trust preferred securities in a private transaction to a pooled investment vehicle on January 23, 2004 (liquidation value of $1,000 per preferred security or $5,000,000) with a stated maturity of January 23, 2034. These securities carry a floating interest rate, which is reset quarterly, equal to three-month LIBOR plus 2.80%. This trust was assumed by the Company with the acquisition of Penn Laurel Financial Corporation in June 2007. The Company intends to call this issuance effective July 23, 2009.

The Trusts have invested the proceeds of the offerings in junior subordinated deferrable interest debentures issued by the Company. The structure of these debentures mirrors the structure of the trust-preferred securities. Trust III holds $51,547,000 of the Company’s junior subordinated debentures, Trust IV holds $51,547,000 of the Company’s junior subordinated debentures and Penn Laurel Financial Corp. Trust I holds $5,155,000 of the Company’s junior subordinated debentures. These subordinated debentures are the sole assets of the Trusts.

Cash distributions on the trust securities are made on a quarterly basis to the extent interest on the debentures is received by the Trusts. The Company has the right to defer payment of interest on the subordinated debentures at any time, or from time-to-time, for periods not exceeding five years. If interest payments on the subordinated debentures are deferred, the distributions on the trust preferred are also

deferred. Interest on the subordinated debentures and distributions on the trust securities is cumulative. The Company’s obligation constitutes a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the trust under the preferred securities.

The Company entered into four interest rate swap agreements (swaps), designating the swaps as cash flow hedges. The swaps are intended to protect against the variability of cash flows associated with Trust III and Trust IV. The first two swaps modify the repricing characteristics of Trust III, wherein the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.20% to the same counterparty calculated on a notional amount of $25.0 million and the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.61% to the same counterparty calculated on a notional amount of $25.0 million. The terms of these two swaps are five years and ten years, respectively. The second two swaps modify the repricing characteristics of Trust IV, wherein the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 3.85% to the same counterparty calculated on a notional amount of $25.0 million and the Company receives interest of LIBOR from a counterparty and pays a fixed rate of 4.09% to the same counterparty calculated on a notional amount of $25.0 million. The terms of these two swaps are seven years and ten years, respectively. The swap agreements were entered into with a counterparty that met the Company’s credit standards and the agreements contain collateral provisions protecting the at-risk party. The Company believes that the credit risk inherent in the contracts is not significant. At March 31, 2009, $11.4 million was pledged as collateral to the counterparty.

At March 31, 2009, the fair value of the swap agreements was $(11.4) million and was the amount the Company would have expected to pay if the contracts were terminated. There was no material hedge ineffectiveness for these swaps.

ITEM 2. MANAGEMENT’S 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 management’s 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 or investment securities portfolio and the resulting credit risk-related losses and/ or market value adjustments; • 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.~~

1718

	•		Sources of liquidity;

	•		Changes in costs and expenses; and

	•		Our success in managing the risks involved in the foregoing.

Overview of Critical Accounting Policies Involving Estimates

The Company’s critical accounting policies involve accounting estimates that: a) require assumptions about highly uncertain matters, and b) could vary sufficiently enough to ~~cause~~have a material effect on the Company’s financial condition or results of operations.

Allowance for Loan Losses. InThe ~~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 management’s estimate of probable losses based on all available information. The allowance for loan losses is based on management’s 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 Company’s 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 Company’s 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~~previously ~~above~~discussed. Any material increase in the allowance for loan losses ~~may~~ may adversely affect the Company’s 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.~~Valuation 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~~Investment ~~reporting unit be compared to its carrying amount, including goodwill~~Securities. ~~Reporting~~All ~~units are identified based upon analyzing each~~ of the Company’s ~~individual~~investment ~~operating~~securities ~~segments.~~are ~~A reporting unit is defined~~ classified as ~~any~~available ~~distinct, separately identifiable component of an operating segment~~ for ~~which~~sale ~~complete,~~and ~~discrete~~recorded ~~financial~~at ~~information is~~current ~~available~~fair ~~that~~value ~~management~~on ~~regularly reviews. Goodwill is allocated to~~ the ~~carrying~~Consolidated ~~value~~Statement of Financial ~~each~~Condition. ~~reporting~~Unrealized ~~unit~~gains ~~based~~or onlosses, ~~its~~net ~~relative~~of ~~fair~~deferred ~~value~~taxes, atare ~~the~~reported ~~time~~in itother ~~is acquired. Determining the~~comprehensive ~~fair~~income ~~value~~as of a ~~reporting~~separate ~~unit~~component ~~requires a high degree~~ of ~~subjective~~shareholders’ ~~management judgment~~equity. ~~A discounted~~In ~~cash~~general, ~~flow valuation model is used to determine the~~ fair value ofis ~~each~~based ~~reporting unit.~~upon ~~The~~quoted ~~discounted~~market ~~cash~~prices ~~flow model incorporates such variables as growth~~ of ~~net~~identical ~~income~~assets, ~~interest~~when ~~rates and terminal values~~available. ~~Based~~If ~~upon~~quoted ~~an evaluation of key data and~~ market ~~factors,~~prices ~~management~~are ~~selects~~not ~~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~~available, ~~which could give rise to declines in the estimated~~ fair value ofis ~~the~~based ~~reporting~~upon ~~unit.~~valuation ~~Declines~~models inthat ~~fair value~~use ~~could~~cash ~~result~~flow, insecurity ~~impairment~~structure ~~being identified. The Company has established June~~and ~~30th~~other ofobservable ~~each year as the date for conducting its annual goodwill impairment assessment~~information. ~~The~~ ~~variables~~Where ~~are~~sufficient ~~selected~~data ~~as of that date and the valuation model~~ is ~~run~~not available to ~~determine~~produce ~~the~~a fair ~~value~~ ~~of each reporting unit. At June 30~~valuation, ~~2008, the Company did not identify any individual~~ ~~reporting~~fair ~~unit~~value ~~where~~is ~~the~~based ~~fair~~on ~~value~~broker ~~was~~quotes ~~less~~for ~~than~~similar ~~the~~assets. ~~carrying~~Broker ~~value.~~quotes

1819

may be adjusted to ensure that financial instruments are recorded at fair value. Adjustments may include unobservable parameters, among other things.

The Company conducts a quarterly review and evaluation of our investment securities to determine if any declines in fair value are other than temporary. In making this determination, we consider the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, the financial condition of the issuer, if applicable, and the delinquency or default rates of underlying collateral. In addition, we consider our intent and ability to hold the investment securities currently in an unrealized loss position until they mature or for a sufficient period of time to allow for a recovery in fair value. Any valuation decline that we determine to be other than temporary would require us to write down the security to fair value through a charge to earnings.

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 Company’s 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. 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. The Company has engaged an independent third party to assist the Company in performing an impairment test on the Company’s goodwill as of June 30, 2009.

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~~20

The Company’s 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.

~~Total~~appraisals, ~~shareholders’~~or ~~equity~~internal atvaluations ~~June 30,~~based ~~2008~~on ~~was~~discounted ~~$622.8 million,~~cash anflow ~~increase~~analyses ofor ~~$9.9 million~~other valuation techniques, orwhich ~~1.6%,~~are ~~from~~inherently ~~$612~~subjective.~~9 million~~ atCore ~~December 31,~~deposit ~~2007.~~and ~~This~~other intangible ~~increase~~assets ~~was~~are ~~primarily~~recorded ~~attributable~~in topurchase ~~net income~~accounting ofwhen ~~$27.1 million~~a ~~for~~premium ~~this~~is ~~six~~paid ~~month~~to ~~period,~~acquire ~~which~~other entities ~~was~~or ~~partially~~deposits. ~~offset~~Other byintangible aassets, ~~decrease~~which ~~in other~~are ~~comprehensive~~determined ~~income~~to ofhave ~~$7.6 million~~finite lives, ~~dividends~~are amortized ~~paid~~based ofon ~~$7.9 million and~~ the ~~purchase~~period of ~~132,000~~ ~~treasury~~estimated ~~shares~~economic atbenefits areceived, ~~total~~primarily ~~cost~~on ofan $3accelerated basis.~~3 million.~~

~~Effective~~Executive ~~January 1,~~Summary ~~2008, the Company adopted SFAS 157, which defines fair value, establishes a consistent framework for measuring fair value~~ and ~~expands~~Comparison ~~the~~of ~~disclosure~~Financial ~~requirements related to~~Condition 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~~The onCompany’s ~~the~~total ~~nature~~assets ofat ~~the~~March 31, ~~asset~~2009 orwere ~~liability~~$7.042 billion, ~~the~~an ~~Company~~increase ~~uses~~of ~~various valuation~~$111.6 ~~techniques~~million, ~~and~~or ~~assumptions~~1.6%, ~~when~~from ~~estimating~~$6.930 billion ~~fair~~at ~~value~~December 31, 2008. ~~SFAS~~This ~~157~~increase ~~requires~~in anassets ~~entity~~is primarily attributed to ~~maximize~~an ~~the use~~increase ofin ~~observable~~cash ~~inputs~~ and ~~minimize~~cash ~~the~~equivalents ~~use~~ of ~~unobservable~~$185.8 million, ~~inputs~~funded ~~when~~by ~~measuring~~an ~~fair~~increase ~~value.~~in ~~The~~deposits ~~adoption~~ of ~~SFAS~~$172.8 million, ~~157~~or ~~did not have a material impact on the operations of the Company~~3.4%.

~~Northwest~~Total iscash ~~subject~~and toinvestments ~~various~~increased ~~regulatory capital requirements administered~~ by ~~state~~$121.0 million, ~~and federal~~or ~~banking agencies~~9.9%, ~~Failure~~ to ~~meet~~$1.340 billion ~~minimum~~at ~~capital requirements can initiate certain~~March ~~mandatory~~31, ~~and possibly additional discretionary~~2009, ~~actions~~from by$1.219 billion ~~the~~at ~~regulators that~~December 31, if2008. ~~undertaken, could~~This ~~have~~increase is a ~~direct~~result ~~material~~of ~~effect on~~ the Company’s ~~financial~~building ~~statements.~~liquidity ~~Under~~from ~~capital~~strong ~~adequacy guidelines~~deposit ~~and~~growth ~~the regulatory framework~~ for ~~prompt~~the ~~corrective~~quarter ~~action,~~to ~~Northwest~~repay ~~must meet specific~~$87.0 million ~~capital guidelines that involve quantitative measures~~ of ~~its assets, liabilities and certain off~~short-~~balance~~term ~~sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments made by the regulators about components~~borrowings, ~~risk-weighting~~ ~~and~~due ~~other~~in ~~factors~~April 2009.

Loans receivable remained flat for the quarter at approximately $5.197 billion. Loan demand continued to be strong, with originations of approximately $515.1 million for the quarter ended March 31, 2009, however, the Company sold $159.7 million of one-to four-family first mortgage loans originated during the quarter to assist with liquidity and lessen interest-rate risk. During the quarter ended March 31, 2009 commercial loans increased by $48.8 million, or 3.4%, mortgage loans decreased by $43.4 million, or 1.8% and consumer and home equity loans decreased by $4.5 million, or less than 1.0%.

Deposit balances increased across all of our products and all of our regions as consumer spending decreased and the rate of consumer savings increased across the nation. Deposits increased by $172.8 million, or 3.4%, to $5.211 billion at March 31, 2009 from $5.038 billion at December 31, 2008. Noninterest-bearing demand deposits increased by $31.3 million, or 7.9%, to $425.3 million at March 31, 2009 from $394.0 million at December 31, 2008, interest-bearing demand deposits increased by $17.9 million, or 2.5%, to $724.0 million at March 31, 2009 from $706.1 million at December 31, 2008, savings deposits increased by $65.4 million, or 4.4%, to $1.546 billion at March 31, 2009 from $1.481 billion at December 31, 2008 and time deposits increased by $58.3 million, or 2.4%, to $2.516 billion at March 31, 2009 from $2.457 billion at December 31, 2008.

Borrowings decreased by $73.1 million, or 6.8%, to $994.8 million at March 31, 2009 from $1.068 billion at December 31, 2008. This decrease is a result of the Company using strong deposit growth to repay short-term borrowings.

Total shareholders’ equity at March 31, 2009 was $624.4 million, or $12.87 per share, an increase of $10.6 million, or 1.7%, from $613.8 million, or $12.65 per share, at December 31, 2008. This increase was primarily attributable to net income of $12.3 million and $1.8 million of other comprehensive income for the quarter ended March 31, 2009, which was partially offset by dividends paid of $4.0 million.

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 Company’s 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	%

March 31, 2009

December 31, 2007
						Minimum Capital					Well Capitalized
	Actual					Requirements					Requirements
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to risk weighted assets)	$	~~571~~619,~~785~~504		14.1008	%		~~324~~351,~~304~~902		8.00	%		~~405~~439,~~380~~878		10.00	%
Tier I Capital (to risk weighted assets)		~~529~~564,~~833~~385		1312.0783	%		~~162~~175,~~152~~951		4.00	%		~~243~~263,~~228~~927		6.00	%
Tier I Capital (leverage) (to average assets)		~~529~~564,~~833~~385		8.2119	%		~~193~~206,~~630~~656		3.00	%*		~~322~~344,~~717~~426		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%December 31, ~~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.~~


						Minimum Capital					Well Capitalized
	Actual					Requirements					Requirements
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to risk weighted assets)	$	604,067		13.95	%		346,354		8.00	%		432,943		10.00	%
Tier I Capital (to risk weighted assets)		549,869		12.70	%		173,177		4.00	%		259,766		6.00	%
Tier I Capital (leverage) (to average assets)		549,869		8.05	%		204,887		3.00	%*		341,478		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 March 31, 2009, the Company had not been advised of any additional requirements in this regard.

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”). Northwest’s liquidity ratio at March 31, 2009 was 16.7%. 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. As of March 31, 2009 the Bank had $2.2 billion of additional borrowing capacity available with the FHLB, including $150.0 million on an overnight line of credit, $200.0 million of borrowing capacity available with the Federal Reserve Bank and $75.0 million with a correspondent bank.

The Company paid $4.0 million and $3.9 million in cash dividends during the quarters ended March 31, 2009 and 2008, 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 88.0% and 84.6% for the quarters ended March 31, 2009 and 2008, respectively, on dividends of $0.22 per share in each quarter. As a result of Northwest Bancorp, MHC waiving its receipt of dividend payments, actual dividends paid to minority shareholders represented 32.1% and 31.2% of net income for the quarters ended March 31, 2009 and 2008, respectively. The Company has declared a dividend of $0.22 per share payable on May 14, 2009 to shareholders of record as of April 30, 2009. This represents the 58^th consecutive quarter the Company has paid a cash dividend.

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 Company’s 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
	March 31, 2009			December 31, 2008
	(Dollars in Thousands)
Loans accounted for on a nonaccrual basis:
One-to-four family residential loans	$	1221,~~599~~004			1220,~~542~~435
Multifamily and commercial real estate loans		2347,~~104~~779			2443,~~323~~828
Consumer loans		69,~~984~~617			79,~~582~~756
Commercial business loans		2627,~~336~~133			525,~~163~~184
Total		69105,~~023~~533			4999,~~610~~203
Total nonperforming loans as a percentage of loans		12.3703	%		1.0391	%
Total real estate acquired through foreclosure and other real estate owned		8,407			8,667
Total real estate acquired through foreclosure and other real estate owned (“REO”)		13,848			16,844
Total nonperforming assets	$	77119,~~430~~381			58116,~~277~~047
Total nonperforming assets as a percentage of total assets		1.1270	%		01.8767	%

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 loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, a specific reserve is allocated for the impairment. Impaired loans at March 31, 2009 and December 31, 2008 were $105.5 million and $99.2 million, respectively.

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 loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of collateral if the loan is collateral dependent. If the measure of the impaired loan is less than the recorded investment in the loan, a specific reserve is allocated for the impairment. Impaired loans at June 30, 2008 and December 31, 2007 were $69.0 million and $49.6 million, respectively.

Allowance for Loan Losses

The Company’s 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 Company’s 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 Company’s 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.

“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 loan’s effective interest rate; (2) the loan’s 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. AHistorical ~~range of losses for each pool is then established based upon historical~~ loss ratios. ~~This historical net charge-off amount is~~are ~~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 loss 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, 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 Company’s 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 Committee’s review and approval, a review is performed by the Risk Management Committee of the Board of Directors.

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 Company’s 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 Committee’s review and approval, a review is performed by the Risk Management Committee of the Board of Directors.

In addition to the reviews by management’s 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 management’s 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

demand throughout the Company’s 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 Company’s 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 Company’s 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

~~described~~ Management inacknowledges ~~the~~that ~~section~~this ~~entitled~~is ~~“Allowance~~a ~~for~~dynamic ~~Loan~~process ~~Losses.”~~and ~~The~~consists ~~provision~~of ~~that~~factors, many of which isare ~~recorded~~external isand ~~sufficient,~~out inof management’s ~~judgment~~control, tothat ~~bring~~can ~~this~~change ~~reserve~~often, torapidly aand ~~level that reflects~~substantially. ~~the~~The ~~losses~~adequacy ~~inherent~~of in the ~~Company’s~~ALL ~~loan~~is ~~portfolio~~based ~~relative~~upon toestimates ~~loan~~using ~~mix,~~all ~~economic~~the ~~conditions~~information ~~and~~previously discussed as ~~historical~~well ~~loss~~as ~~experience.~~current ~~Management~~and ~~believes,~~known tocircumstances ~~the~~and ~~best~~events. ofThere ~~their~~is ~~knowledge,~~no assurance that ~~all~~actual ~~known~~portfolio losses aswill ofnot ~~the~~be ~~balance~~substantially ~~sheet~~different ~~dates~~than ~~have~~those ~~been~~that ~~recorded~~were estimated.

~~Noninterest~~ Management ~~Income~~utilizes a consistent methodology each period when analyzing the adequacy of the allowance for loan losses and the related provision for loan losses. As part of the analysis, management considered the deteriorating economic data in our markets such as the continued increases in unemployment and bankruptcies as well as the declines in real estate collateral values. In addition, management considered the negative trend in asset quality, loan charge-offs, and the allowance for loan losses as a percentage of non performing loans. As a result, the Company increased the allowance for loan losses during the period by $2.6 million, or 4.7%, to $57.5 million, or 1.11% of total loans, at March 31, 2009 from $54.9 million, or 1.06% of total loans, at December 31, 2008. The increase in the allowance for loan losses and the related provision for loan losses is primarily attributed to the deterioration of a commercial business loan to a moving and storage company/ new car dealer in our Pennsylvania market requiring an additional reserve of approximately $1.8 million. In addition, management considered how the continued increase in nonperforming loans and historical charge-offs have influenced the amount of allowance for loan losses. Nonperforming loans of $105.5 million, or 2.03% of total loans, at March 31, 2009 increased $6.3 million, or 6.4%, from $99.2 million, or 1.91% of total loans, at December 31, 2008 and increased $46.4 million, or 78.4%, from $59.2 million, or 1.21% of total loans, at March 31, 2008. As a percentage of average loans, annualized net charge-offs also increased to 0.25% for the quarter ended March 31, 2009 from 0.15% for the quarter ended March 31, 2008 and from 0.19% for the year ended December 31, 2008.

~~Noninterest~~In ~~income~~addition, ~~increased~~the byincrease ~~$441,000,~~in orthe ~~3.9%,~~allowance tofor ~~$11.8 million~~loan ~~for~~losses is related to the ~~quarter~~growth ~~ended~~in ~~June~~the ~~30,~~loan ~~2008~~portfolio ~~from~~and ~~$11.4 million~~in ~~for~~particular the ~~quarter~~increase ~~ended~~in ~~June~~commercial loans. The commercial loan portfolio increased almost $50.0 30million, ~~2007~~or 3.4%, ~~This~~during ~~increase~~the ~~was~~quarter ~~primarily due~~ to ~~increases~~$1.5 billion inat ~~service~~March 31, ~~charges~~2009 ~~and~~from $1.4 billion ~~fees~~at ~~and~~December 31, ~~trust~~2008 and ~~other~~over ~~financial~~the ~~services~~twelve ~~income.~~months ~~Service charges~~has ~~and~~grown ~~fees~~by ~~increased~~ $1262.65 million, or 2521.36%. Commercial asloans atend ~~result~~to ofbe ~~the~~larger ~~Company’s~~in ~~continued~~size ~~focus on fee-producing products~~ and ~~services.~~generally ~~Trust~~more ~~and~~vulnerable ~~other~~to ~~financial~~economic ~~services~~slowdowns. Nonperforming ~~income~~commercial loans increased $~~223~~5.9 million,~~000,~~ or 148.35%, ~~primarily due~~ to ~~the~~$74.9 million, ~~growth~~or ~~of assets under management~~5.1% ~~During~~of commercial ~~the~~loans ~~quarter~~at ~~ended June~~March 3031, ~~2008,~~2009 ~~the~~from ~~Company recorded~~ $169.20 million, ofor ~~additional~~4.8% ~~other-than-temporary~~of ~~impairment~~commercial ~~charges~~loans onat ~~a trust preferred~~December 31, ~~security~~2008 ~~issued by another bank~~ and ~~Freddie~~increased ~~Mac~~$35.5 million, ~~preferred~~or ~~securities~~90.0%, ~~The~~from ~~Company~~$39.5 million, ~~routinely monitors~~or ~~its~~3.2%, ~~investment~~of ~~portfolio~~commercial ~~for~~loans ~~impairment and records write-downs when it has been~~at ~~determined~~March 31, ~~that an impairment is considered other-than-temporary~~2008.

~~Noninterest~~ When ~~Expense~~determining the adequacy of the allowance for loan losses, historical loss experience is adjusted for certain qualitative factors. In the current year, the estimate for losses was increased to account for the deterioration of economic factors such as the increase in unemployment and bankruptcies in our markets as well as a decrease in consumer spending, consumer confidence and collateral values. After reviewing the historical loss experience as adjusted for the qualitative factors mentioned, an additional allowance for loan losses of approximately $1.0 million was provided during the first quarter of 2009.

~~Noninterest~~Management ~~expense~~believes ~~increased~~all byknown ~~$3.7 million,~~losses 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 Company’s 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 FDIC’s 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 ~~Company’s~~balance ~~acquisition~~sheet ofdates ~~CSB~~have ~~Bank~~been ~~in June 2007~~recorded.

~~Income~~Comparison ~~Taxes~~of Operating Results for the Quarter Ended March 31, 2009 and 2008

~~The~~Net ~~provision for~~ income ~~taxes~~ for the ~~quarter~~three months ended ~~June~~March 3031, ~~2008~~2009 ~~increased~~was by $112.53 million, or $0.25 per diluted share, a decrease of $320,000, or 312.75%, ~~compared~~from to$12.6 million, ~~the~~or $0.26 per diluted share, for the same ~~period~~quarter last year. ~~This~~The ~~increase~~decrease in net income ~~tax~~resulted is primarily afrom ~~result of~~ an increase in ~~income~~the provision ~~before~~for ~~income~~loan ~~taxes~~losses of $3.65 million, ora ~~21.3%.~~write-down ~~The~~of ~~Company’s~~an ~~effective tax~~REO ~~rate~~property ~~for~~located ~~the~~in ~~quarter~~Florida ~~ended June~~of $3.9 30million, ~~2008~~an ~~was~~increase ~~29.5% compared to 27.2% experienced~~ in ~~the~~noninterest ~~same quarter~~expense ~~last~~of ~~year~~$1.8 million asand aan ~~result~~increase ofin ~~the~~income ~~percentage~~taxes of $1.1 million. ~~income~~These ~~earned~~items onwere ~~tax-free~~partially ~~assets~~offset ~~decreasing~~by ~~compared to the prior period.~~

~~Comparison~~an increase in net interest income of ~~Operating~~$9.6 million ~~Results~~and ~~for~~an ~~the~~increase ~~Six~~in ~~Months~~noninterest ~~Ended~~income ~~June 30~~of $445,000. ~~2008~~A ~~and~~discussion ~~2007~~of each significant change follows.

~~Net~~Annualized, net income for the ~~six~~three months ended ~~June~~March 3031, ~~2008~~2009 ~~was~~represents ~~$27.1 million,~~a ~~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~~93%, and ~~an increase in noninterest income of $3.~~0 ~~million, or 13~~.670%, return ~~which~~on ~~were~~average ~~partially~~equity ~~offset~~and byreturn anon ~~increase~~average ~~in the provision for loan losses of $1.6 million~~assets, ~~or 39.7%~~respectively, ancompared ~~increase~~to ~~in noninterest expense of $~~8.~~3 million, or 10.9~~15% and ~~an increase in~~0.75% ~~income~~for ~~tax~~the ~~expense~~same ofquarter ~~$1.4 million,~~last ~~or 16~~year.~~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~~4.0 million,~~000,~~ or ~~less than 1~~4.2%, ~~on a taxable equivalent basis,~~ to $~~197~~92.78 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 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 decreased to 65.2373% for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from 6.4021% for the ~~six-month~~ ~~period~~quarter ended ~~June~~March 3031, ~~2007~~ 2008. 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~~253.28 million, or 14.61%, to $6.~~324~~473 billion for the ~~six-month~~quarter ~~period~~ ended ~~June 30~~March 31, ~~2008~~2009 from $6.~~222~~219 billion for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~2008.

Interest income on loans ~~increased~~decreased by $~~10.3 million~~142,000, or ~~6.8%,~~less onthan ~~a taxable equivalent basis~~1%, to $~~162~~80.29 million for the quarter ~~six-month period~~ ended ~~June~~March 3031, ~~2008~~2009, from $~~151~~81.90 million for the ~~six-month~~ ~~period~~quarter ended ~~June~~March ~~30,~~31 ~~2007~~2008. ~~Average~~The average yield on loans receivable ~~increased~~decreased byto ~~$396~~6.~~4 million, or 8.8~~23%, ~~to $4.908 billion~~ for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from $46.~~511 billion~~62% for ~~the~~ ~~six-month~~the ~~period~~quarter ended ~~June~~March 3031, ~~2007~~2008. ~~This~~The ~~increase~~decrease in average yield is primarily attributable to ~~strong loan demand throughout~~ the Company’s ~~market~~variable ~~area,~~rate loans adjusting downward as prime and short-term interest rates decreased as well as the ~~acquisition~~origination of ~~CSB~~new ~~Bank~~loans in ~~June 2007~~a generally lower interest rate environment. ~~The~~ ~~increase~~This indecrease in average ~~loans~~yield ~~receivable~~ was partially offset by aan ~~decrease~~increase in the average ~~yield earned~~balance onof loans receivable. Average loans receivable increased by $349.7 million, ~~which~~or ~~decreased~~7.2%, to 6$5.~~58%~~209 billion for the ~~six-month period~~ quarter ended ~~June~~March 3031, ~~2008~~2009 from 6$4.~~76%~~ 859 billion for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~2008. This ~~decrease~~increase is primarily attributable to continued strong loan demand throughout the Company’s ~~variable~~market ~~rate~~area. ~~loans~~The Company ~~repricing~~had inloan aoriginations ~~lower~~of ~~general~~$515.1 million ~~interest~~for ~~rate~~the ~~environment~~quarter ended March 31, 2009 compared to $429.6 million for the quarter ended March 31, 2008.

Interest income on mortgage-backed securities increased by $~~1.7 million~~235,000, or 113.03%, to $~~16.~~7 .4 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from $157.02 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~2008. This increase is primarily the result of an increase in the average balance, which increased by $82163.5 6 million, or 1328.65%, to $~~688~~738.91 million for the ~~six-month~~quarter ~~period~~ ended ~~June 30~~March 31, ~~2008~~2009 from $~~606~~574.46 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~2008. ~~This~~The increase in average balance ~~was~~is ~~partially~~a ~~offset~~result byof areinvesting ~~decrease~~the funds inreceived from the ~~average~~maturity ~~yield,~~and ~~which~~calls ~~decreased~~of toother ~~4.84% for~~long ~~the~~term ~~six-month~~debt ~~period~~securities ~~ended~~into ~~June 30,~~government sponsored ~~2008~~mortgage-backed ~~from 4~~securities.~~96%~~ ~~for~~These ~~the~~securities ~~six-month~~assist ~~period~~with ~~ended~~interest ~~June 30, 2007.~~rate ~~The~~risk ~~increase~~management by inproviding ~~the~~a ~~average~~more ~~balance~~stable isand ~~primarily~~predictable ~~the~~cash ~~result~~flow ofas ~~the~~well ~~Company~~as ~~investing~~variable ~~cash flows~~rates ~~from~~of ~~the~~interest. ~~investment~~This increase ~~portfolio~~ in ~~these~~average ~~securities~~balance inwas anpartially ~~effort~~offset toby ~~receive~~ a ~~higher yield. The~~ decrease in the average yield, iswhich decreased ato ~~result~~4.01% offor the ~~decrease~~quarter inended ~~interest~~March 31, ~~rates~~2009 ~~over~~from 4.99% for the ~~previous~~quarter ended March 31, ~~year~~2008. ~~period~~The asdecrease ~~well~~in asaverage anyield ~~emphasis~~resulted onfrom ~~purchasing~~the reduction in interest rates for variable- rate securities, ~~which~~during ~~currently~~this ~~offer~~ period of generally lower ~~yields~~interest rates.

Interest income on investment securities decreased by $9.2.3 million, or 3634.96%, to $154.6 5 million~~, on a taxable equivalent basis,~~ for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from $246.8 million, onfor athe ~~taxable~~quarter ~~equivalent~~ended ~~basis~~March 31, ~~for~~2008. ~~the~~This decrease ~~six-month~~is ~~period~~due ~~ended~~to ~~June 30,~~the ~~2007~~decrease asin the average balance ~~decreased~~ by $~~347~~135.68 million, or 4026.90%, to $~~502~~386.4 1 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~ March 3031, ~~2008~~2009 from $~~850~~521.09 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~ 2008. The decrease in average balance ~~was~~is ~~partially~~primarily ~~offset~~attributable byto anthe ~~increase~~Company investing cash flow from investment securities in ~~the~~loans and government sponsored mortgage-backed securities instead of reinvesting cash flow in non-mortgage related debt securities. The average yield, ~~which~~decreased ~~increased~~ to 6 4.2164% , for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from 54.8293%, for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~ 2008. The average ~~balance~~yield decreased primarily as a result of ~~bonds maturing or being called during~~ the ~~end~~Company’s ~~of 2007 and first half of 2008 as well as the November 2007~~ sale of ~~approximately~~zero ~~$120.0 million~~coupon oftreasury ~~investment~~strips ~~securities,~~during the ~~proceeds~~previous ofyear, which ~~were used to fund the~~had ~~purchase~~yields ofthat ~~mortgage-backed~~were ~~securities~~greater ~~and~~than ~~the origination of loans~~5. ~~The average yield~~0% ~~increased as a result of tax-free assets with a higher yield comprising a larger percentage of the investment portfolio.~~

~~Interest~~During ~~income~~the onfourth ~~interest-earning~~quarter ~~deposits~~of ~~decreased by $3.4 million~~2008, orthe ~~57.3%,~~FHLB asof ~~both~~Pittsburgh suspended the ~~average~~ ~~balance~~dividends ~~and~~paid ~~the~~on member ~~average~~owned ~~yield decreased~~stock. ~~The~~This ~~average~~suspension ~~balance~~was ~~decreased~~due byto ~~$35.2 million, or~~concern ~~16.0%,~~over tothe ~~$185.3 million~~FHLB ~~for~~of ~~the~~Pittsburgh’s ~~six-month~~capital position ~~period~~as ~~ended~~a ~~June 30,~~result ~~2008~~of ~~from~~possible ~~$220.4~~impairment ~~for~~on ~~the six~~certain non-~~month~~agency ~~period~~mortgage-backed ~~ended~~securities. ~~June 30~~As a result, ~~2007.~~dividends ~~The~~on ~~average~~FHLB ~~yield~~of Pittsburgh stock decreased to ~~2.68%~~zero ~~from~~for ~~5.29%~~the asquarter aended ~~result~~March 31, of2009 ~~decreases~~from in$411,000 for the ~~overnight~~quarter ~~federal~~ended ~~funds~~March 31, ~~rate~~2008.

Interest income on interest-earning deposits decreased by $1.7 million, or 100.0%, to $39,000 for the quarter ended March 31, 2009 from $1.8 million for the quarter ended March 31, 2008. The average balance decreased by $154.1 million, or 66.7%, to $76.9 million for the quarter ended March 31, 2009 from $231.0 for the quarter ended March 31, 2008. The average balance decreased due to using the cash flows from this portfolio to fund loan demand. The average yield decreased to 0.20% from 3.11% as a result of decreases in the overnight federal funds rate.

Interest Expense

~~Total~~Interest ~~interest~~ expense decreased by $1213.56 million, or 1228.0%, to $9134.8 million for the ~~six-month~~ ~~period~~quarter ended ~~June~~ March 3031, ~~2008~~2009 from $~~104~~48.34 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, 2008. This decrease in interest ~~2007~~expense was due to a decrease in the average cost of interest-bearing liabilities to 32.2142% from 3.7144%, which was partially offset by an increase in the average balance of interest-bearing liabilities. ofAverage interest-bearing liabilities increased by $83161.31 million, or 12.58%., ~~Average interest-bearing liabilities increased~~ to $5.~~751~~826 billion for the ~~six-month~~ ~~period~~quarter ended ~~June~~March 3031, ~~2008~~ 2009 from $5.~~668~~665 billion for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007~~ 2008. The decrease in the cost of funds resulted primarily from a decrease in the level of market interest rates which enabled the Company to reduce the rate of interest paid on all deposit products. The increase in liabilities resulted from an increase in deposits as the average American chose to save more of their disposable income.

Net Interest Income

Net interest income increased by $119.6 million, or 1219.37%, ~~on a taxable equivalent basis,~~ to $~~105~~58.90 million for the ~~six-month period~~ quarter ended ~~June~~March 3031, ~~2008~~2009 from $9448.34 million for the ~~six-month period~~quarter ended ~~June~~March 3031, ~~2007~~2008. This increase in net interest income was attributable to the factors discussed above. The Company’s net interest rate spread increased to 3.0231% for the ~~six-month period~~quarter ended ~~June~~March 3031, ~~2008~~2009 from 2.6978% for the ~~six-month~~quarter ~~period~~ ended ~~June~~ March 3031, ~~2007~~2008, ~~while~~and ~~its~~the Company’s net interest margin increased to 3.3558% for the ~~six-month~~quarter ~~period~~ ended ~~June~~ March 3031, ~~2008~~2009 from 3.0312% for the ~~six-month~~ ~~period~~quarter ended ~~June~~March 3031, ~~2007~~2008.

Provision for Loan Losses

The provision for loan losses increased by $13.65 million, or 39152.70%, to $5.78 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from $2.3 million for the ~~previous~~quarter ~~year.~~ended ~~Similarly~~March 31, ~~net~~2008. ~~charge-offs~~This ~~increased~~increase is primarily a result of increasing the specific reserve on one loan by $1.8 million, resulting in reserves on this $2.7 million loan totaling $2.4 million, ~~over~~and deterioration in the ~~same~~general ~~periods.~~economic factors ~~Management~~used ~~analyzes~~in the ~~allowance~~formulation of the reserve for loan losses ~~as described~~along with an increase in ~~the~~troubled loans. ~~section~~Loans ~~entitled~~with ~~“Allowance~~payments ~~for~~90 days ~~Loan~~or ~~Losses.”~~more ~~The~~delinquent ~~provision~~have ~~that~~increased isto ~~recorded~~$105.5 million isat March ~~sufficient~~31, in2009 ~~management’s~~from ~~judgment~~$59.2 million at March 31, to2008. ~~bring~~In ~~this~~determining ~~reserve~~the toamount aof ~~level~~the ~~that~~current ~~reflects~~period provision, the ~~losses~~Company considered the deteriorating economic conditions in our markets, including ~~inherent~~increases in ~~the~~unemployment ~~Company’s~~and ~~loan~~bankruptcy ~~portfolio~~filings, ~~relative~~and todeclines in real estate values. Net loan charge-offs ~~mix~~increased by $1.4 million, ~~economic~~or ~~conditions~~76.8%, ~~and~~to ~~historical~~$3.2 million for the quarter ended March 31, ~~loss~~2009 ~~experience~~from $1.8 million ~~Management~~for ~~believes~~the quarter ended March 31, 2008. Annualized net charge-offs to average loans increased to 25 basis points for the ~~best~~quarter ofended ~~their~~March 31, ~~knowledge~~2009 from 15 basis points for the quarter ended March 31, ~~that~~2008. ~~all~~Management ~~known~~analyzes the allowance for loan losses as ofdescribed in the ~~balance~~section ~~sheet~~entitled ~~dates~~“Allowance ~~have~~for ~~been~~Loan ~~recorded~~Losses.” The provision that is recorded is sufficient, in management’s judgment, to bring this reserve to a level that reflects the losses inherent in the Company’s

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~~decreased by $23.94 million, or 1326.65%, to $249.85 million for the ~~current~~quarter ended ~~six-month~~March 31, ~~period~~2009 from $2112.9 million for the ~~same~~quarter ~~period~~ended inMarch 31, ~~the~~2008. ~~prior~~Trust ~~fiscal~~and ~~year.~~other ~~Service charges~~financial ~~and~~services ~~fees~~income ~~increased~~decreased by $~~3.3 million~~400,000, or 2622.29%, to $151.83 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2008~~2009 from $121.57 million for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 3031, ~~2007.~~2008, ~~Trust~~gain ~~and~~on ~~other~~sale ~~financial services~~of ~~income~~investments ~~increased~~decreased by $~~513~~861,000, or 1795.03%, to $~~3.5 million~~42,000 for the ~~six-month~~quarter ~~period~~ ended ~~June~~March 31, 2009 from $903,000 for the 30quarter ended March 31, 2008 ~~from~~and REO write-downs increased by $3.08 million, to $3.9 million for the quarter ~~six-month~~ended ~~period~~March 31, 2009 from $87,000 for the quarter ended ~~June~~March 3031, ~~2007~~2008. Trust and aother financial ~~$971~~services income decreased due to the effects of the stock markets. The stock markets have declined approximately 38% as of March 31,~~000~~ ~~gain~~2009 onfrom the levels as of March 31, 2008. Gain on sale of investments ~~was~~decreased ~~recorded~~as in the ~~current~~Company ~~period,~~experienced ~~primarily~~a dolarge tovolume of security calls during the ~~mandatory~~previous ~~redemption~~year and redeemed shares of Visa, Inc. during March 2008 in conjunction with Visa, Inc.’s ~~stock~~initial public offering. During the quarter ended March 31, ~~with~~2009, nothe ~~gain~~Company ~~recorded~~ordered and received an updated appraisal for a parcel of land located in Florida previously taken into REO through foreclosure. Based on the ~~prior~~updated ~~year~~appraisal, ~~period~~the Company recorded a write-down of approximately $3.9 million ~~These~~during ~~increases~~the ~~were~~quarter ~~largely~~ended March 31, 2009. These decreases were partially offset by increases in service charges and fees and mortgage banking income and a decrease in other-than-temporary impairment of investment securities. Service charges and offees increased by $1194,000, or 2.56%, to $7.7 million ~~during~~for the ~~six-month~~quarter ~~period~~ ended March 31, 2009 from ~~June~~$7.5 30million for the quarter ended March 31, 2008, mortgage banking income increased by $1.3 million, ~~Beginning~~or in290.0 ~~the~~%, ~~fourth~~to $1.7 million for the quarter ofended ~~2007~~March 31, ~~the~~2009 ~~Company~~from ~~has~~$442,000 ~~recorded~~for ~~cumulative~~the quarter ended March 31, 2008 and there was no other-than-temporary impairment ~~charges~~ of ~~$2.8 million~~investment securities ~~related~~in the current quarter compared to ~~its~~a ~~investment~~$320,000 inloss ~~Freddie~~last ~~Mac~~year. Service charges and fees ~~preferred~~increased ~~stock~~as a result of the overall growth of the Company, ~~with~~mortgage anbanking ~~original~~income ~~book~~increased ~~value~~a result of ~~$7.5 million.~~the Asincreased volume of ~~June 30,~~loans ~~2008~~originated and sold through the Company’s ~~has~~wholesale lending adepartment ~~carrying~~and ~~value~~other-than-temporary ofimpairment ~~Freddie~~decreased ~~Mac~~as ~~preferred~~the ~~stock~~Company determined that all fair value adjustments as of ~~$4.7~~March ~~million~~31, ~~and~~2009 ~~continues~~were toconsidered ~~monitor~~temporary. ~~these~~The Company routinely monitors ~~investments~~its investment portfolio for ~~additional~~impairment and records write-downs when it has been determined that impairment is considered other-than-temporary.

Noninterest Expense

Noninterest expense increased by $81.29 million, or 104.93%, to $8344.93 million for the quarter ended March 31, 2009 from $7542.74 million for the same ~~period~~quarter in the prior year. ~~All~~The ~~major~~largest ~~expense~~increases were ~~categories~~in compensation and employee benefits, ~~except~~processing expenses and federal deposit insurance premiums, while premises and occupancy costs, office operations and advertising ~~expense~~expenses remained comparable to the prior year, and amortization of intangibles and loss on early extinguishment of debt decreased. Compensation and employee benefits increased asby $1.2 million, or 5.3%, to $23.9 million for the quarter ended March 31, 2009 from $22.7 million for the quarter ended March 31, 2008. This increase is primarily a result of increased pension expense. Processing expenses increased by $1.1 million, or 26.3%, to $5.3 million for the ~~growth~~quarter ended March 31, 2009 from $4.2 million for the quarter ended March 31, 2008. This increase is primarily a result of the Company’s continued ~~and~~implementation of new technology, including the ~~expansion~~deployment of a new customer service platform. Federal deposit insurance premiums increased by $1.1 million, or 129.4%, to $1.9 million for the ~~Company~~quarter ended March 31, 2009 from $824,000 for the quarter ended March 31, 2008. Deposit insurance increased as a result of the FDIC’s ~~products~~industry-wide increase in deposit insurance premiums, ~~services~~which ~~and~~became ~~delivery~~effective ~~channels~~on January 1, 2009. Amortization of intangible assets decreased by $458,000, or 35.2%, to $844,000 for the quarter ended March 31, 2009 from $1.3 million for the quarter ended March 31, 2008 as the remaining balance of unamortized intangible assets has been greatly reduced due to the use of accelerated amortization. There was no loss on the early extinguishment

2728

~~The~~of ~~largest~~debt ~~increase~~this ~~was~~year incompared ~~compensation~~to ~~and employee benefits expense. Compensation and employee benefits increased as~~ a ~~result~~loss of ~~increases in health care costs~~$705,000 ~~normal~~for ~~annual merit increases in salaries and~~ the ~~addition~~quarter ofended ~~employees~~March 31, 2008 ~~used~~when in the ~~delivery~~Company ofprepaid ~~products~~FHLB ~~and services~~advances.

Income Taxes

The provision for income taxes for the ~~six~~quarter ~~months~~ ended ~~June~~March 3031, ~~2008~~2009 increased by $1.4 1 million, or 1627.19%, compared to the same period last year. This increase in income tax ~~expense~~ is primarily ~~due~~a toresult of an increase in income before income taxes of $~~4.9 million~~790,000, or 154.18%, toa ~~$37.1~~lower percentage of earnings ~~million~~derived from ~~$32.2 million.~~tax-free Inassets ~~addition~~and the reversal of $706,000 of tax reserves during the quarter ended March 31, 2008. The Company’s effective tax rate for ~~increased~~the ~~slightly~~quarter ~~to 27.0%~~ended ~~from~~March 31, 262009 was 29.83% ascompared ato ~~smaller~~24.0% ~~percentage~~experienced ofin ~~income~~the ~~was~~same quarter ~~generated~~last ~~from tax-free assets~~year.

2829

Average Balance Sheet
(Dollars in Thousands)

The following table sets forth certain information relating to the Company’s 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,
	Three months ended March 31,
			2008												2007
		2009											2008
									Avg.	~~Avg.~~											Avg.		~~Avg.~~
		Average	~~Average~~						Yield/	~~Yield/~~			Average		~~Average~~						Yield/		~~Yield/~~
		Balance	~~Balance~~			Interest	~~Interest~~		Cost (g)	~~Cost (h)~~			Balance		~~Balance~~		Interest		~~Interest~~		Cost (g)		~~Cost (h)~~
ASSETS:
Interest earning assets:
Loans (a) (b) (d)			$	4,957,008				80,914			6.51	%				4,555,680				77,106				6.78	%
Loans (a) (b) (includes FTE adjustments of $420 and $387, respectively)		$	5,208,603				81,291			6.26	%			4,858,928				81,400				6.65	%
Mortgage-backed securities (c)			738,132	~~802,465~~			7,405	~~9,514~~		4.01	~~4.74~~%	%		574,556		~~591,116~~		7,170		~~7,343~~		4.99	%	~~4.97~~	%
Investment securities (c) (d) (e)				482,682				7,568			6.27	%				819,891				12,203				5.95	%
Investment securities (c) (d) (includes FTE adjustments of $1,579 and $1,613, respectively)			386,097				6,057			6.28	%			521,948				8,044				6.16	%
FHLB stock			63,143	~~45,648~~			—	~~306~~		0.00	~~2.68~~%	%		32,664		~~33,841~~		411		~~506~~		5.03	%	~~5.98~~	%
Other interest earning deposits			76,937	~~139,500~~			39	~~710~~		0.20	~~2.01~~%	%		231,010		~~274,275~~		1,796		~~3,649~~		3.11	%	~~5.26~~	%
Total interest earning assets				6,427,303				99,012			6.15	%				6,274,803				100,807				6.43	%
Total interest earning assets (includes FTE adjustments of $1,999 and $2,000, respectively)			6,472,912				94,792			5.87	%			6,219,106				98,821				6.32	%
Noninterest earning assets (f)				508,488												462,310
Noninterest earning assets (e)			515,476											516,356
TOTAL ASSETS			6,988,388	~~6,935,791~~										6,735,462		~~6,737,113~~
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Interest bearing liabilities:
Savings accounts			790,467	~~783,099~~			1,453	~~2,303~~		0.75	~~1.18~~%	%		751,939		~~810,792~~		2,226		~~2,919~~		1.19	%	~~1.44~~	%
Now accounts			709,351	~~748,735~~			806	~~1,578~~		0.46	~~0.85~~%	%		725,657		~~700,052~~		2,136		~~2,934~~		1.18	%	~~1.68~~	%
Money market demand accounts			704,752	~~738,252~~			2,523	~~3,363~~		1.45	~~1.83~~%	%		704,856		~~628,712~~		5,265		~~5,832~~		3.00	%	~~3.72~~	%
Certificate accounts			2,469,283	~~2,830,805~~			19,855	~~29,207~~		3.26	~~4.15~~%	%		2,995,551		~~3,085,152~~		33,203		~~35,435~~		4.46	%	~~4.61~~	%
Borrowed funds (g)				627,431				5,837			3.74	%				404,414				4,574				4.54	%
Borrowed funds (f)			1,043,501				8,699			3.38	%			378,191				3,903				4.15	%
Debentures			108,249	~~108,295~~			1,490	~~1,135~~		5.51	~~4.14~~%	%		108,312		~~103,556~~		1,654		~~1,764~~		6.04	%	~~6.74~~	%
Total interest bearing liabilities			5,825,603	~~5,836,617~~			34,826	~~43,423~~		2.42	~~2.99~~%	%		5,664,506		~~5,732,678~~		48,387		~~53,458~~		3.44	%	~~3.74~~	%
Noninterest bearing liabilities			541,899	~~477,733~~										451,473		~~405,027~~
Total liabilities			6,367,502	~~6,314,350~~										6,115,979		~~6,137,705~~
Shareholders’ equity			620,886	~~621,441~~										619,483		~~599,408~~
TOTAL LIABILITIES AND EQUITY		$	$6,988,388	~~6,935,791~~										6,735,462		~~6,737,113~~
Net interest income/ Interest rate spread							59,966	~~55,589~~		3.45	~~3.16~~%	%						50,434		~~47,349~~		2.88	%	~~2.69~~	%
Net interest earning assets/ Net interest margin		$	$647,309	~~590,686~~						3.71	~~3.46~~%	%		554,600		~~542,125~~						3.24	%	~~3.02~~	%
Ratio of interest earning assets to interest bearing liabilities			1.11X	~~1.10~~	X									1.10X		~~1.09~~	X

(a) Average gross loans ~~includes~~include 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. (fe) Average balances include the effect of unrealized gains or losses on securities held as available-for-sale. (gf) Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings. (hg) Annualized. Shown on a fully tax-equivalent basis (“FTE”). The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory rate of 35%for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts. GAAP basis yields were: Loans — 6.23% and 6.62%, respectively, Investment securities — 4.64% and 4.93%, respectively, interest-earning assets — 5.73% and 6.21%, respectively. GAAP basis net interest rate spreads were 3.31% and 2.78%, respectively and GAAP basis net interest margins were 3.58% and 3.12%, respectively.

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 Company’s 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

~~Average~~Rate/ ~~Balance~~Volume ~~Sheet~~Analysis (Dollars in Thousands)

The following table ~~sets~~represents ~~forth~~the ~~certain~~extent ~~information relating~~ to ~~the~~which ~~Company’s average~~changes ~~balance~~in ~~sheet~~interest rates and changes ~~reflects~~in the ~~average~~volume ~~yield~~of oninterest-earning assets and ~~average~~interest-bearing ~~cost of~~ liabilities have ~~for~~affect the ~~periods~~Company’s interest income and interest expense during the periods indicated. ~~Such~~Information ~~yields~~is ~~and~~provided ~~costs~~in ~~are~~each ~~derived~~category bywith respect to (i) changes ~~dividing~~attributable ~~income~~to orchanges ~~expense~~in byvolume ~~the~~(changes ~~average~~in ~~balance~~volume ofmultiplied ~~assets~~by orprior ~~liabilities~~rate), (ii) ~~respectively~~changes attributable to changes in rate (changes in rate multiplied by prior volume), ~~for~~and ~~the~~(iii) net ~~periods presented~~change. ~~Average~~Changes ~~balances~~that ~~are~~cannot ~~calculated~~be ~~using~~attributed ~~daily~~to ~~averages~~either rate or volume have been allocated to both rate and volume.

	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

Three months ended March 31, 2009 and 2008

(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.


							Net
	Rate			Volume			Change
Interest earning assets:
Loans	$	(5,922	)		5,813			(109	)
Mortgage-backed securities		(1,806	)		2,041			235
Investment securities		144			(2,131	)		(1,987	)
FHLB stock		(411	)		—			(411	)
Other interest-earning deposits		(1,119	)		(638	)		(1,757	)

Total interest-earning assets		(9,114	)		5,085			(4,029	)

Interest-bearing liabilities:
Savings accounts		(887	)		114			(773	)
Now accounts		(1,288	)		(42	)		(1,330	)
Money market demand accounts		(2,741	)		(1	)		(2,742	)
Certificate accounts		(8,202	)		(5,146	)		(13,348	)
Borrowed funds		(2,013	)		6,809			4,796
Debentures		(163	)		(1	)		(164	)

Total interest-bearing liabilities		(15,294	)		1,733			(13,561	)


Net change in net interest income	$	6,180			3,352			9,532

Rate/ Volume Analysis (Dollars in Thousands)

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As the holding company for a savings bank, the Company’s 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 Company’s 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 Company’s balance sheet structure. On a quarterly basis, this Committee also reviews the Company’s interest rate risk position and the Bank’s cash flow projections.

The Company’s Board of Directors has a Risk Management Committee which meets quarterly and reviews interest rate risks and trends, the Company’s interest sensitivity position, the Company’s liquidity position and the market risk inherent in the Company’s 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 Company’s 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 Company’s equity is the present value of the Company’s 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~~32 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	%

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 September 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 March 31, 2009 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		4.7	%		5.0	%		3.4	%		2.2	%
Projected increase/ (decrease) in return on average equity		0.4	%		0.4	%		0.3	%		0.2	%
Projected increase/ (decrease) in earnings per share	$	0.05		$	0.06		$	0.04		$	0.03
Projected percentage increase/ (decrease) in market value of equity		(7.1	)%		(13.6	)%		(4.9	)%		(9.9	)%

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 Company’s 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 Company’s periodic SEC filings.

There were no changes in the Company’s 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 Company’s 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 Company’s financial statements.

Item 1A. Risk Factors

Not applicable.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~33

a.) Not applicable. b.) Not applicable. c.) The following table discloses information regarding the Company’s repurchases of shares of common stock during the quarter ending June 30, 2008:

					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
		—	$	—

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(1a.) ~~This~~Not ~~program,~~applicable. ~~announced~~b.) inNot ~~June~~applicable. ~~2007,~~c.) toThe ~~repurchase~~following uptable todiscloses ~~1,000,000~~information ~~shares~~regarding ~~of common stock is~~ the Company’s ~~third~~repurchases ~~repurchase~~of ~~program~~shares ~~and~~of ~~does~~common ~~not~~stock ~~have~~during anthe ~~expiration~~quarter ~~date.~~ending March 31, 2009:


					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)

January		—	$	—		—		273,600
February		—		—		—		273,600
March		—		—		—		273,600

		—	$	—


(1)		This program, announced in June 2007, to repurchase up to 1,000,000 shares of common stock is the Company’s third repurchase program and does not have an expiration date. On April 20, 2009, the Company announced a fourth repurchase program to repurchase up to an additional 1,000,000 shares of the Company’s common stock. This program 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:

Not applicable.

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

(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

(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 Company’s 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 Company’s 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 Company’s 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 Company’s 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.

3634

~~Signatures~~Signature

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.


		NORTHWEST BANCORP, INC.
		(Registrant)

Date:	May 11, 2009	By:	/s/ Gerald J. Ritzert
			Gerald J. Ritzert
			Controller
			(Duly Authorized Officer and Principal
			Accounting Officer of the Registrant)

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

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