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Registration File N0. 333-161805
PROXY STATEMENT OF NORTHWEST BANCORP, INC.
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100 Liberty Street
P.O. Box 128
Warren, Pennsylvania 16365
(814) 726-2140
1. | The approval of a plan of conversion and reorganization pursuant to which: (a) Northwest Bancorp, Inc. will convert to an interim federal stock savings association and merge with and into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (b) Northwest Bancorp, MHC, which currently owns approximately 63.0% of the common stock of Northwest Bancorp, Inc., will convert to an interim federal stock savings association and merge with and into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (c) an interim stock savings association will be formed as a subsidiary of Northwest Bancshares, Inc., a Maryland corporation recently formed to be the holding company for Northwest Savings Bank, and then will merge into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (d) the outstanding shares of Northwest Bancorp, Inc., other than those held by Northwest Bancorp, MHC, will be converted into shares of common stock of Northwest Bancshares, Inc.; and (e) Northwest Bancshares, Inc. will offer shares of its common stock for sale in a subscription offering, and, if necessary, a community offering or syndicated community offering; | ||
2. | The establishment of the Northwest Charitable Foundation, a Delaware non-stock corporation that will be dedicated to charitable purposes within the communities in which Northwest Savings Bank conducts its business, and the contribution to the foundation by Northwest Bancshares, Inc. of $1.0 million in cash and shares of common stock with an aggregate value of cash and stock equal to 2% of the common stock sold by Northwest Bancshares, Inc. in the offering; | ||
3. | The approval of the adjournment of the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the plan of conversion and reorganization and/or the establishment and funding of the Northwest Charitable Foundation; | ||
4. | The following informational proposals: |
4a. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the ability of stockholders to remove directors; | ||
4b. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation requiring a super-majority vote to approve certain amendments to Northwest Bancshares, Inc.’s articles of incorporation; | ||
4c. | Approval of a provision in Northwest Bancshares, Inc.’s bylaws requiring a super-majority vote of stockholders to approve stockholder-proposed amendments to Northwest Bancshares, Inc.’s bylaws; |
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4d. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Northwest Bancshares, Inc.’s outstanding voting stock; and |
5. | Such other business that may properly come before the meeting. |
Corporate Secretary
November 12, 2009
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FOR STOCKHOLDERS OF NORTHWEST BANCORP, INC.
REGARDING THE PLAN OF CONVERSION AND REORGANIZATION
Q. | WHAT ARE STOCKHOLDERS BEING ASKED TO APPROVE? | |
A. | Northwest Bancorp, Inc. stockholders as of October 30, 2009 are being asked to vote on the plan of conversion pursuant to which Northwest Bancorp, MHC will convert from the mutual to the stock form of organization. As part of the conversion, a newly formed Maryland corporation, Northwest Bancshares, Inc., is offering its common stock to eligible depositors of Northwest Savings Bank and Keystone State Savings Bank (which was recently merged with Northwest Savings Bank), to stockholders of Northwest Bancorp, Inc. as of October 30, 2009 and to the public. The shares offered represent Northwest Bancorp, MHC’s current 63% ownership interest in Northwest Bancorp, Inc. Voting for approval of the plan of conversion will also include approval of the exchange ratio and the articles of incorporation and bylaws of Northwest Bancshares, Inc. (including the anti-takeover provisions and provisions limiting stockholder rights).Your vote is important. Without sufficient votes “FOR” its adoption, we cannot implement the plan of conversion. | |
Northwest Bancorp, Inc. stockholders are also being asked to approve the establishment and funding of the Northwest Charitable Foundation with $1.0 million in cash and shares of common stock with an aggregate value equal to 2% of the common stock sold by Northwest Bancshares, Inc. in the offering.Your vote is important. | ||
In addition, Northwest Bancorp, Inc. stockholders are being asked to approve the adjournment of the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the plan of conversion and/or the establishment and funding of the charitable foundation. | ||
Stockholders also are asked to vote on the following informational proposals with respect to the articles of incorporation and bylaws of Northwest Bancshares, Inc.: |
• | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the ability of stockholders to remove directors; | ||
• | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation requiring a super-majority vote to approve certain amendments to Northwest Bancshares, Inc.’s articles of incorporation; | ||
• | Approval of a provision in Northwest Bancshares, Inc.’s bylaws requiring a super-majority vote of stockholders to approve stockholder-proposed amendments to Northwest Bancshares, Inc.’s bylaws; and |
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• | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Northwest Bancshares, Inc.’s outstanding voting stock. |
The provisions of Northwest Bancshares, Inc.’s articles of incorporation and bylaws that are included as informational proposals were approved as part of the process in which our board of directors approved the plan of conversion. These proposals are informational in nature only, because the Office of Thrift Supervision’s regulations governing mutual-to-stock conversions do not provide for votes on matters other than the plan of conversion and the establishment and funding of the charitable foundation. While we are asking you to vote with respect to each of the informational proposals listed above, the proposed provisions for which an informational vote is requested will become effective if stockholders approve the plan of conversion, regardless of whether stockholders vote to approve any or all of the informational proposals. The provisions of Northwest Bancshares, Inc.’s articles of incorporation and bylaws which are summarized above as informational proposals may have the effect of deterring, or rendering more difficult, attempts by third parties to obtain control of Northwest Bancshares, Inc. if such attempts are not approved by the board of directors, or may make the removal of the board of directors or management, or the appointment of new directors, more difficult. | ||
Your vote is important. Without sufficient votes “FOR” adoption of the plan of conversion, we cannot implement the plan of conversion and the related stock offering. We also cannot establish and fund the charitable foundation without sufficient votes “FOR” that proposal. | ||
Q. | WHAT ARE THE REASONS FOR THE CONVERSION AND RELATED OFFERING? | |
A. | Our primary reasons for converting and raising additional capital through the offering are: |
• | to finance the acquisition of financial institutions or other financial service companies primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any understandings or agreements regarding any specific acquisition transaction except for a letter of intent executed with respect to the acquisition of an insurance agency with annual revenue of approximately $2.0 million; | ||
• | to improve our capital position during a period of significant economic uncertainty, especially for the financial services industry (although, as of June 30, 2009, Northwest Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to a directive or recommendation to raise capital from the Federal Deposit Insurance Corporation or the Pennsylvania Department of Banking to raise capital); | ||
• | to support internal growth through lending in the communities we serve; | ||
• | to finance the acquisition of branches from other financial institutions or build or lease new branch facilities primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any agreements or understandings regarding any specific branch acquisition transaction; |
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• | to enhance existing products and services, and support the development of new products and services by investing, for example, in technology to support growth and enhanced customer service; | ||
• | to improve the liquidity of our shares of common stock and stockholder returns through higher earnings and more flexible capital management strategies; | ||
• | to form a charitable foundation to benefit the communities we serve; and | ||
• | to use the additional capital for other general corporate purposes. |
As a fully converted stock holding company, we will have greater flexibility in structuring mergers and acquisitions, including the form of consideration that we can use to pay for an acquisition. Our current mutual holding company structure limits our ability to offer shares of our common stock as consideration for a merger or acquisition since Northwest Bancorp, MHC is required to own a majority of our shares of common stock. Potential sellers often want stock for at least part of the purchase price. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination of stock and cash, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. | ||
Q. | WHAT ARE THE REASONS FOR ESTABLISHING AND FUNDING THE CHARITABLE FOUNDATION? | |
A. | Northwest Savings Bank has a long-standing commitment to charitable contributions within the communities in which we conduct our business. The new foundation will enhance our ability to support community development and charitable causes. | |
Q. | HOW WILL THE ESTABLISHMENT AND FUNDING OF THE CHARITABLE FOUNDATION AFFECT THE NEW STOCK HOLDING COMPANY AND ITS STOCKHOLDERS? | |
A. | The issuance of shares and the contribution of cash to the charitable foundation will dilute the voting interests of stockholders and will result in an expense, and a related reduction in earnings, for the new holding company for the quarter in which the conversion is completed. | |
Q. | WHAT WILL STOCKHOLDERS RECEIVE FOR THEIR EXISTING NORTHWEST BANCORP, INC. SHARES? | |
A. | As more fully described in “Proposal 1 — Approval of the Plan of Conversion and Reorganization — Share Exchange Ratio,” depending on the number of shares sold in the offering, each share of common stock that you own at the time of the completion of the conversion will be exchanged for between 1.7632 shares at the minimum and 2.3855 shares at the maximum of the offering range (or 2.7433 at the adjusted maximum of the offering range) of Northwest Bancshares, Inc. common stock (cash will be paid in lieu of any fractional shares). For example, if you own 100 shares of Northwest Bancorp, Inc. common stock, and the exchange ratio is 2.0743 (at the midpoint of the offering range), after the conversion you will receive 207 shares of Northwest Bancorp, Inc. common stock and $4.30 in cash, the value of the fractional share, based on the $10.00 per share purchase price of stock in the offering. | |
After completion of the conversion, stockholders who hold shares in street-name at a brokerage firm or other nominee do not need to take any action to exchange their shares of common stock. |
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Your shares will be automatically exchanged within your account. Stockholders with Northwest Bancorp, Inc. stock certificates will receive a transmittal form from our exchange agent with instructions on how to surrender stock certificates to receive new stock certificates representing shares of Northwest Bancshares, Inc. You should not submit a stock certificate until you receive a transmittal form. | ||
Q. | WHY WILL THE SHARES THAT I RECEIVE BE BASED ON A PRICE OF $10.00 PER SHARE RATHER THAN THE TRADING PRICE OF THE COMMON STOCK PRIOR TO COMPLETION OF THE CONVERSION? | |
A. | The $10.00 per share price was selected primarily because it is a commonly selected per share price for mutual-to-stock conversion offerings. The amount of common stock Northwest Bancshares, Inc. will issue at $10.00 per share in the offering and the exchange is based on an independent appraisal of the estimated market value of Northwest Bancshares, Inc., assuming the conversion and offering are completed. RP Financial, LC., an appraisal firm experienced in appraisal of financial institutions, has estimated that, as of August 28, 2009, this market value ranged from $866.8 million to $1,173.1 million, with a midpoint of $1,020.0 million. Based on this valuation, the number of shares of common stock of Northwest Bancshares, Inc. that existing public stockholders of Northwest Bancorp, Inc. will receive in exchange for their shares of Northwest Bancorp, Inc. common stock will range from approximately 31.73 million to 42.93 million, with a midpoint of 37.33 million (with a value of approximately $317.3 million to $493.6 million, with a midpoint of $430.0 million, at $10.00 per share). The number of shares received by the existing public stockholders of Northwest Bancorp, Inc. is intended to maintain their existing 37.0% ownership in our organization (excluding any new shares purchased by them in the offering, their receipt of cash in lieu of fractional exchange shares and the effect of shares issued to the charitable foundation). The independent appraisal is based in part on Northwest Bancorp, Inc.’s financial condition and results of operations, the pro forma impact of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of ten publicly traded savings bank and thrift holding companies that RP Financial, LC. considered comparable to Northwest Bancorp, Inc. | |
Q. | DOES THE EXCHANGE RATIO DEPEND ON THE TRADING PRICE OF NORTHWEST BANCORP, INC. COMMON STOCK? | |
A. | No, the exchange ratio will not be based on the market price of Northwest Bancorp, Inc. common stock. Therefore, changes in the price of Northwest Bancorp, Inc. common stock between now and the completion of the conversion and offering will not affect the calculation of the exchange ratio. | |
Q. | WHY DOESN’T NORTHWEST BANCORP, INC. WAIT TO CONDUCT THE CONVERSION AND OFFERING UNTIL THE STOCK MARKET IMPROVES SO THAT CURRENT STOCKHOLDERS CAN RECEIVE A HIGHER EXCHANGE RATIO? | |
A. | The board of directors believes that because the stock holding company form of organization offers important advantages and that it is in the best interest of our stockholders to complete the conversion and offering sooner rather than later. There is no way to know when market conditions will change, when regulations governing conversion to stock form will change, or how they might change, or how changes in market conditions might affect stock prices for financial institutions. The board of directors concluded that it would be better to complete the conversion and offering now, under existing Office of Thrift Supervision conversion regulations and under a |
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valuation that offers a fair exchange ratio to existing stockholders and an attractive price to new investors, rather than wait an indefinite amount of time for market conditions that would result in a higher exchange ratio but a less attractive valuation for new investors. | ||
Q. | SHOULD I SUBMIT MY STOCK CERTIFICATES NOW? | |
A. | No. If you hold stock certificate(s), instructions for exchanging the certificates will be sent to you by our exchange agentaftercompletion of the conversion. If your shares are held in “street name” (e.g.,in a brokerage account) rather than in certificate form, or held in an account with the Northwest Bancorp, Inc. Dividend Reinvestment and Cash Investment Plan, the share exchange will be reflected automatically in your account upon completion of the conversion. | |
Q. | HOW DO I VOTE? | |
A. | Mark your vote, sign each proxy card enclosed and return the card(s) to us, in the enclosed proxy reply envelope. If you prefer, you may vote by using the telephone or Internet. For information on submitting your proxy or voting by telephone or Internet, please refer to instructions on the enclosed proxy card.YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY. | |
Q. | IF MY SHARES ARE HELD IN STREET NAME, WILL MY BROKER, BANK OR OTHER NOMINEE AUTOMATICALLY VOTE ON THE PLAN AND THE ESTABLISHMENT AND FUNDING OF THE FOUNDATION ON MY BEHALF? | |
A. | No. Your broker, bank or other nominee will not be able to vote your shares without instructions from you. You should instruct your broker, bank or other nominee to vote your shares, using the directions that they provide to you. | |
Q. | WHAT HAPPENS IF I DON’T VOTE? | |
A. | Your vote is very important. Not voting all the proxy card(s) you receive will have the same effect as voting“against”the plan of conversion and“against”the establishment and funding of the charitable foundation.Without sufficient favorable votes“for”the plan of conversion, we will not proceed with the conversion and offering. Without sufficient favorable votes“for”the establishment and funding of the charitable foundation, we cannot establish and fund the charitable foundation. | |
Q. | WHAT IF I DO NOT GIVE VOTING INSTRUCTIONS TO MY BROKER, BANK OR OTHER NOMINEE? | |
A. | Your vote is important. If you do not instruct your broker, bank or other nominee to vote your shares, the unvoted proxy will have the same effect as a vote“against”the plan of conversion and“against”the establishment and funding of the charitable foundation. | |
Q. | MAY I PLACE AN ORDER TO PURCHASE SHARES IN THE OFFERING, IN ADDITION TO THE SHARES THAT I WILL RECEIVE IN THE EXCHANGE? | |
A. | Yes. If you would like to receive a prospectus and stock order form, you must call our Stock Information Center at 1-800-697-2126, Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Stock Information Center is closed weekends and bank holidays. |
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Eligible depositors of Northwest Savings Bank and Keystone State Savings Bank (which was recently merged with Northwest Savings Bank) have priority subscription rights allowing them to purchase common stock in a subscription offering. Shares not purchased in the subscription offering may be available for sale to the public, including Northwest Bancorp, Inc. stockholders, in a community offering, as described herein. In the event orders for Northwest Bancshares, Inc. common stock in a community offering exceed the number of shares available for sale, shares may be allocated (to the extent shares remain available) first to cover orders of natural persons residing in Pennsylvania; the Florida county of Broward; the Maryland counties of Anne Arundel, Baltimore and Howard, as well as Baltimore City, Maryland; the New York counties of Cattaraugus, Chautuaqua, Erie and Monroe; and the Ohio counties of Lake, Geauga and Ashtabula; second to cover orders of Northwest Bancorp, Inc. stockholders as of October 30, 2009; and thereafter to cover orders of the general public. Stockholders of Northwest Bancorp, Inc. are subject to an ownership limitation. | ||
Shares of common stock purchased in the offering by a stockholder and his or her associates or individuals acting in concert with the stockholder,plusany shares a stockholder and these individuals receive in the exchange for existing shares of Northwest Bancorp, Inc. common stock, may not exceed 5% of the total shares of common stock of Northwest Bancshares, Inc. to be issued and outstanding after the completion of the conversion. | ||
Q. | WILL THE CONVERSION HAVE ANY EFFECT ON DEPOSIT AND LOAN ACCOUNTS AT NORTHWEST SAVINGS BANK? | |
A. | No. The account number, amount, interest rate and withdrawal rights of deposit accounts will remain unchanged. Deposits will continue to be federally insured by the Federal Deposit Insurance Corporation up to the legal limit. Loans and rights of borrowers will not be affected. Depositors will no longer have voting rights in the mutual holding company, which will cease to exist, after the conversion and offering. Only stockholders of Northwest Bancshares, Inc. will have voting rights after the conversion and offering. | |
Q. | WHAT IF THE PLAN OF CONVERSION AND REORGANIZATION IS APPROVED BUT THE FUNDING OF THE CHARITABLE FOUNDATION IS NOT APPROVED. | |
A. | The charitable foundation will only be established and funded if both proposals are approved. If the funding of the charitable foundation is not approved, our board of directors will retain the ability to complete the conversion and stock offering without the funding of the charitable foundation, or it may determine to terminate the conversion and stock offering. |
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1. | The approval of a plan of conversion and reorganization pursuant to which: (a) Northwest Bancorp, Inc. will convert to an interim federal stock savings association and merge with and into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (b) Northwest Bancorp, MHC, which currently owns approximately 63.0% of the common stock of Northwest Bancorp, Inc., will convert to an interim federal stock savings association and merge with and into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (c) an interim stock savings association will be formed as a subsidiary of Northwest Bancshares, Inc., a Maryland corporation recently formed to be the holding company for Northwest Savings Bank, and then will merge into Northwest Savings Bank, with Northwest Savings Bank being the surviving entity; (d) the outstanding shares of Northwest Bancorp, Inc., other than those held by Northwest Bancorp, MHC, will be converted into shares of common stock of Northwest Bancshares, Inc.; and (e) Northwest Bancshares, Inc. will offer shares of its common stock for sale in a subscription offering, and, if necessary, a community offering or syndicated community offering; | ||
2. | The establishment of the Northwest Charitable Foundation, a Delaware non-stock corporation that will be dedicated to charitable purposes within the communities in which Northwest Savings Bank conducts its business, and the contribution to the foundation by Northwest Bancshares, Inc. of $1.0 million in cash and shares of common stock with an aggregate value equal to 2% of the common stock sold by Northwest Bancshares, Inc. in the offering; | ||
3. | The approval of the adjournment of the special meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the plan of conversion and reorganization and/or the establishment and funding of the Northwest Charitable Foundation; and | ||
4. | The following informational proposals: |
4a. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the ability of stockholders to remove directors; |
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4b. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation requiring a super-majority vote to approve certain amendments to Northwest Bancshares, Inc.’s articles of incorporation; | ||
4c. | Approval of a provision in Northwest Bancshares, Inc.’s bylaws requiring a super-majority vote of stockholders to approve stockholder-proposed amendments to Northwest Bancshares, Inc.’s bylaws; | ||
4d. | Approval of a provision in Northwest Bancshares, Inc.’s articles of incorporation to limit the voting rights of shares beneficially owned in excess of 10% of Northwest Bancshares, Inc.’s outstanding voting stock; and |
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• | to finance the acquisition of financial institutions or other financial service companies primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any understandings or agreements regarding any specific acquisition transaction except for an executed letter of intent with respect to the acquisition of an insurance agency with annual revenue of approximately $2.0 million ; | ||
• | to improve our capital position during a period of significant economic uncertainty, especially for the financial services industry (although, as of June 30, 2009, Northwest Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to any directive or recommendation from the Federal Deposit Insurance Corporation or the Pennsylvania Department of Banking to raise capital); | ||
• | to support internal growth through lending in the communities we serve; | ||
• | to finance the acquisition of branches from other financial institutions or build or lease new branch facilities primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any agreements or understandings regarding any specific acquisition transaction; | ||
• | to enhance existing products and services, and support the development of new products and services by investing, for example, in technology to support growth and enhanced customer service; | ||
• | to improve the liquidity of our shares of common stock and stockholder returns through higher earnings and more flexible capital management strategies; | ||
• | to form a charitable foundation to benefit the communities we serve; and | ||
• | to use the additional capital for other general corporate purposes. |
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• | The plan of conversion is approved by at leasta majority of votes eligibleto be cast by members of Northwest Bancorp, MHC (depositors of Northwest Savings Bank) as of October 26, 2009; | ||
• | The plan of conversion is approved by a vote of at leasttwo-thirds of the outstanding sharesof common stock of Northwest Bancorp, Inc. as of October 30, 2009, including shares held by Northwest Bancorp, MHC. (Because Northwest Bancorp, MHC owns 63.0% of the outstanding shares of Northwest Bancorp, Inc. common stock, we expect that Northwest Bancorp, MHC and our directors and executive officers will control the outcome of this vote.); | ||
• | The plan of conversion is approved by a vote of at leasta majority of the outstanding sharesof common stock of Northwest Bancorp, Inc. as of October 30, 2009, excluding those shares held by Northwest Bancorp, MHC; | ||
• | We sell at least the minimum number of shares of common stock offered; | ||
• | We receive the final approval of the Office of Thrift Supervision to complete the conversion; however, such approval does not constitute a recommendation or endorsement of the plan of conversion by that agency; and | ||
• | We receive the final approval of the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation for the merger of interim savings banks into Northwest Savings Bank as part of the conversion; however, such approvals do not constitute recommendations or endorsements of the plan of conversion by those agencies. |
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New | ||||||||||||||||||||||||||||||||||||||||
Shares | ||||||||||||||||||||||||||||||||||||||||
Total Shares of | That | |||||||||||||||||||||||||||||||||||||||
Common Stock | Equivalent | Would be | ||||||||||||||||||||||||||||||||||||||
New Shares to be | to be | Per Share | Received | |||||||||||||||||||||||||||||||||||||
Exchanged for Existing | Outstanding | Current | for 100 | |||||||||||||||||||||||||||||||||||||
New Shares to be Sold | Shares of Northwest | Shares to be issued | After the | Exchange | Market | Existing | ||||||||||||||||||||||||||||||||||
in this Offering | Bancorp, Inc. | to the Foundation | Offering | Ratio | Price (1) | Shares | ||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||
Minimum | 53,975,000 | 62.27 | % | 31,727,243 | 36.60 | % | 979,500 | 1.13 | % | 86,681,743 | 1.7632 | $ | 17.63 | 176 | ||||||||||||||||||||||||||
Midpoint | 63,500,000 | 62.25 | % | 37,326,168 | 36.60 | % | 1,170,000 | 1.15 | % | 101,996,168 | 2.0743 | $ | 20.74 | 207 | ||||||||||||||||||||||||||
Maximum | 73,025,000 | 62.25 | % | 42,925,093 | 36.59 | % | 1,360,500 | 1.16 | % | 117,310,593 | 2.3855 | $ | 23.85 | 238 | ||||||||||||||||||||||||||
Adjusted Maximum | 83,978,750 | 62.24 | % | 49,363,857 | 36.59 | % | 1,579,575 | 1.17 | % | 134,922,182 | 2.7433 | $ | 27.43 | 274 |
(1) | Represents the value of shares of Northwest Bancshares, Inc. received in the conversion by a holder of one share of Northwest Bancorp, Inc. at the exchange ratio, assuming the market price of $10.00 per share. |
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Company Name and Ticker Symbol | Exchange | Headquarters | Total Assets | |||||
(in thousands) | ||||||||
Brookline Bancorp, Inc. (BRKL) | NASDAQ | Brookline, MA | $ | 2,641,113 | ||||
ESB Financial Corp (ESBF) | NASDAQ | Ellwood City, PA | $ | 1,963,389 | ||||
ESSA Bancorp, Inc. (ESSA) | NASDAQ | Stroudsburg, PA | $ | 1,052,942 | ||||
First Defiance Financial Corp. (FDEF) | NASDAQ | Defiance, OH | $ | 2,023,563 | ||||
First Niagara Financial Group (FNFG) | NASDAQ | Lockport, NY | $ | 11,577,171 | ||||
NewAlliance Bancshares (NAL) | NYSE | New Haven, CT | $ | 8,581,440 | ||||
Peoples United Financial (PBCT) | NASDAQ | Bridgeport, CT | $ | 20,811,500 | ||||
Provident New York Bancorp (PBNY) | NASDAQ | Montebello, NY | $ | 2,824,356 | ||||
Provident Financial Services, Inc. (PFS) | NYSE | Jersey City, NJ | $ | 6,668,844 | ||||
TrustCo Bank Corp NY (TRST) | NASDAQ | Glenville, NY | $ | 3,584,717 |
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Price-to-core earnings | Price-to-book | Price-to-tangible | ||||||||||
multiple (1) | value ratio | book value ratio | ||||||||||
Northwest Bancshares, Inc. (on a pro forma basis, assuming completion of the conversion) | ||||||||||||
Minimum | 15.58x | 78.19 | % | 92.94 | % | |||||||
Midpoint | 18.11x | 85.47 | % | 100.30 | % | |||||||
Maximum | 20.57x | 91.74 | % | 106.50 | % | |||||||
Maximum, as adjusted | 23.33x | 98.04 | % | 112.49 | % | |||||||
Valuation of peer group companies, as ofAugust 28, 2009 | ||||||||||||
Averages | 26.92x | 108.41 | % | 146.44 | % | |||||||
Medians | 28.48x | 105.21 | % | 147.87 | % |
(1) | Information is derived from the RP Financial report and is based upon estimated core earnings for the twelve months ended June 30, 2009. These ratios are different form the ratios in “Pro Forma Data.” |
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• | $303.7 million (50.0% of the net proceeds) will be invested in Northwest Savings Bank; | ||
• | $25.9 million (4.3% of the net proceeds) will be loaned by Northwest Bancshares, Inc. to the employee stock ownership plan trustee to fund its purchase of our shares of common stock; | ||
• | $1.0 million (0.2% of the net proceeds) will be contributed by Northwest Bancshares, Inc. to the Northwest Charitable Foundation; and | ||
• | $276.8 million (45.5% of the net proceeds) will be retained by Northwest Bancshares, Inc. |
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Number of Shares to be Granted or Purchased (1) | Value of Grants (2) | |||||||||||||||||||||||
As a | ||||||||||||||||||||||||
Percentage | Dilution | |||||||||||||||||||||||
of Common | Resulting | |||||||||||||||||||||||
Stock to be | From | |||||||||||||||||||||||
At | Sold in the | Issuance of | At | |||||||||||||||||||||
At | Maximum | Offering and | Shares for | At | Maximum | |||||||||||||||||||
Minimum of | as adjusted | Issued to the | Stock-Based | Minimum | as adjusted | |||||||||||||||||||
Offering | of Offering | Charitable | Incentive | of Offering | of Offering | |||||||||||||||||||
Range | Range | Foundation | Plans (3) | Range | Range | |||||||||||||||||||
Employee stock ownership plan | 2,198,180 | 3,422,333 | 4.0 | % | 0.00 | % | $ | 21,982 | $ | 34,223 | ||||||||||||||
Restricted stock awards | 2,198,180 | 3,422,333 | 4.0 | 2.47 | % | 21,982 | 34,223 | |||||||||||||||||
Stock options | 5,495,450 | 8,555,833 | 10.0 | 5.96 | % | 11,156 | 17,368 | |||||||||||||||||
Total | 9,891,810 | 15,400,499 | 18.0 | % | 8.15 | % | $ | 55,120 | $ | 85,814 | ||||||||||||||
(1) | The table assumes that the stock-based incentive plan awards a number of options and restricted stock equal to 10% and 4% of the shares of common stock sold in the offering and issued to the foundation, respectively, as if the plan is implemented within one year after the completion of the conversion and offering. If the stock-based incentive plan is implemented more than 12 months after the completion of the conversion and offering, grants of options and restricted stock may exceed these percentage limitations. | |
(2) | The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value for stock awards is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $2.03 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; an expected option life of eight years; a dividend yield of 4.56%; an interest rate of 2.16%; and a volatility rate of 20.37% based on an index of publicly traded thrift institutions. The actual value of option grants will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. | |
(3) | Represents the dilution of stock ownership interest. No dilution is reflected for the employee ownership because such shares are assumed to be purchased in the offering. |
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Percentage of | ||||||||||||||
Shares | ||||||||||||||
Estimated Value | Outstanding | |||||||||||||
Existing and New Stock-Based | of | After the | ||||||||||||
Incentive Plans | Participants | Shares | Shares | Conversion | ||||||||||
Existing employee stock ownership plan | Employees | 2,633,592 | (1) | $ | 26,355,920 | 2.24 | % | |||||||
New employee stock ownership plan | Employees | 2,975,420 | 29,754,200 | 2.54 | ||||||||||
Total employee stock ownership plan | Employees | 5,609,012 | 56,090,120 | |||||||||||
Existing shares of restricted stock | Directors, Officers and Employees | 692,320 | (2) | 6,923,200 | (3) | 0.59 | ||||||||
New shares of restricted stock | Directors, Officers and Employees | 2,975,420 | 29,754,200 | 2.54 | ||||||||||
Total shares of restricted stock | Directors, Officers and Employees | 3,667,740 | 36,677,400 | |||||||||||
Existing stock options | Directors, Officers and Employees | 7,813,829 | (4) | 15,862,073 | 6.66 | |||||||||
New stock options (6) | Directors, Officers and Employees | 7,438,550 | 15,100,257 | (5) | 6.34 | |||||||||
Total stock options | Directors, Officers and Employees | 15,252,379 | 30,962,329 | |||||||||||
Total of stock-based incentive plans | 25,153,607 | $ | 129,974,609 | 20.91 | % | |||||||||
(1) | As of June 30, 2009, Northwest Bancorp, Inc.’s existing employee stock ownership plan held 1,104,000 shares, all of which have been allocated. | |
(2) | Represents shares of restricted stock authorized for grant under our existing recognition and retention plans, excluding the 1995 plan, for which OTS has granted us a waiver to exclude. | |
(3) | The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share. | |
(4) | Represents shares authorized for grant under our existing stock option plans, excluding the 1995 plan, for which OTS has granted us a waiver to exclude. | |
(5) | The fair value of stock options to be granted under the new stock-based incentive plan has been estimated based on an index of publicly traded thrift institutions at $2.03 per option using the Black-Scholes option pricing model with the following assumptions; exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 4.56%; expected life, eight years; expected volatility, 20.37%; and interest rate, 2.16%. | |
(6) | The number of stock options set forth in the table would exceed regulatory limits if the stock option plan were adopted within one year of the completion of the conversion. Accordingly, the number of new stock options set forth in the table would have to be reduced such that the aggregate amount of outstanding stock options would be 10% or less, unless we obtain a waiver from the OTS. |
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2,198,180 Shares | 2,586,800 Shares | 2,975,420 Shares | 3,422,333 Shares | |||||||||||||
Awarded at Minimum of | Awarded at Midpoint of | Awarded at Maximum of | Awarded at Maximum of | |||||||||||||
Share Price | Range | Range | Range | Range, As Adjusted | ||||||||||||
$8.00 | $ | 17,585,440 | $ | 20,694,400 | $ | 23,803,360 | $ | 27,386,664 | ||||||||
10.00 | 21,981,800 | 25,868,000 | 29,754,200 | 34,233,330 | ||||||||||||
12.00 | 26,378,160 | 31,041,600 | 35,705,040 | 41,079,996 | ||||||||||||
14.00 | 30,774,520 | 36,215,200 | 41,655,880 | 47,926,662 |
5,495,450 Options | 6,467,000 Options | 7,438,550 Options | 8,555,833 Options | |||||||||||||||||
Grant-Date Fair | at Minimum of | at Midpoint of | at Maximum of | at Maximum of | ||||||||||||||||
Exercise Price | Value Per Option | Range | Range | Range | Range, As Adjusted | |||||||||||||||
$8.00 | $ | 1.62 | $ | 8,902,629 | $ | 10,476,540 | $ | 12,050,451 | $ | 13,860,449 | ||||||||||
10.00 | 2.03 | 11,155,764 | 13,128,010 | 15,100,257 | 17,368,341 | |||||||||||||||
12.00 | 2.44 | 13,408,898 | 15,779,480 | 18,150,062 | 20,876,233 | |||||||||||||||
14.00 | 2.84 | 15,607,078 | 18,366,280 | 21,125,482 | 24,298,566 |
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• | dilute the ownership interests of purchasers of shares of our common stock in the stock offering; |
• | dilute the voting interests of purchasers of shares of our common stock in the stock offering; and |
• | result in an expense, and a reduction in our earnings during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, offset in part by a corresponding tax benefit equal to 39% of such contribution. |
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• | Office of Thrift Supervision Regulations.Office of Thrift Supervision regulations prohibit for three years following the completion of a conversion, the direct or indirect acquisition of more than 10% of any class of equity security of a savings institution or holding company regulated by the Office of Thrift Supervision without the prior approval of the Office of Thrift Supervision. | ||
• | Articles of incorporation and statutory provisions.Provisions of the articles of incorporation and bylaws of Northwest Bancshares, Inc. and Maryland law may make it more difficult and expensive to pursue a takeover attempt that management opposes, even if the takeover is favored by a majority of our stockholders. These provisions also would make it more difficult to remove our current board of directors or management, or to elect new directors. Specifically, under Maryland law, any person who acquires more than 10% of the common stock of Northwest Bancshares, Inc. without the prior approval of its board of directors would be prohibited from engaging in any type of business combination with Northwest Bancshares, Inc. for a five-year period. Any business combination after the five year prohibition would be subject to super-majority shareholder approval or minimum price requirements. Additional provisions include limitations on voting rights of beneficial owners of more than 10% of our common stock, the election of directors to staggered terms of three years and not permitting cumulative voting in the election of directors. Our bylaws also contain provisions regarding the timing and content of stockholder proposals and nominations and qualification for service on the board of directors. | ||
• | Articles of incorporation of Northwest Savings Bank.The articles of incorporation of Northwest Savings Bank provide that for a period of five years from the closing of the conversion and offering, no person other than Northwest Bancshares, Inc. may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Northwest Savings Bank. This provision does not apply to any tax-qualified employee benefit plan of Northwest Savings Bank or Northwest Bancshares, Inc. or to an underwriter or member of an underwriting or selling group involving the public sale or resale of securities of Northwest Bancshares, Inc. or any of its subsidiaries, so long as after the sale or resale, no underwriter or member of the selling group is a beneficial owner, directly or indirectly, of more than 10% of any class of equity securities of Northwest Savings Bank. In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote. | ||
• | Issuance of stock options and restricted stock.We also intend to issue stock options and shares of restricted stock to key employees and directors that will require payments to these persons in the event of a change in control of Northwest Bancshares, Inc. These payments may have the effect of increasing the costs of acquiring Northwest Bancshares, Inc., thereby discouraging future takeover attempts. | ||
• | Employment agreements.Northwest Bancorp, Inc. has employment agreements with each of its executive officers which will remain in effect following the stock offering. |
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These agreements may have the effect of increasing the costs of acquiring Northwest Bancshares, Inc., thereby discouraging future takeover attempts. |
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(i) | First, to depositors with accounts at Northwest Savings Bank or Keystone State Savings Bank (which was recently merged with Northwest Savings Bank) with aggregate balances of at least $50.00 at the close of business on June 30, 2008. | ||
(ii) | Second, to our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, which will receive nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering and issued to the charitable foundation. We expect our employee stock ownership plan to purchase up to 4% of the shares of common stock sold in the offering and contributed to the charitable foundation. | ||
(iii) | Third, to depositors with accounts at Northwest Savings Bank or Keystone State Savings Bank with aggregate balances of at least $50.00 at the close of business on September 30, 2009. | ||
(iv) | Fourth, to depositors of Northwest Savings Bank at the close of business on October 26, 2009. |
(i) | Natural persons residing in Pennsylvania; the Florida county of Broward; the Maryland counties of Anne Arundel, Baltimore and Howard, as well as Baltimore City, Maryland; the New York counties of Cattaraugus, Chautuaqua, Erie and Monroe; and the Ohio counties of Lake, Geauga and Ashtabula; and |
(ii) | Northwest Bancorp, Inc.’s public stockholders as of October 30, 2009. |
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• | to finance the acquisition of financial institutions or other financial service companies primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any understandings or agreements regarding any specific acquisition transaction, except for an executed letter of intent with respect to the acquisition of an insurance agency with annual revenue of approximately $2.0 million; | ||
• | to improve our capital position during a period of significant economic uncertainty, especially for the financial services industry (although, as of June 30, 2009, Northwest Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to a directive or recommendation from the Federal Deposit Insurance Corporation or the Pennsylvania Department of Banking to raise capital); | ||
• | to support internal growth through lending in the communities we serve; | ||
• | to finance the acquisition of branches from other financial institutions or build or lease new branch facilities primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any agreements or understandings regarding any specific acquisition transaction; | ||
• | to enhance existing products and services, and support the development of new products and services by, for example, investing in technology to support growth and enhanced customer service; |
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• | to improve the liquidity of our shares of common stock and stockholder returns through higher earnings and more flexible capital management strategies; | ||
• | to form a charitable foundation to benefit the communities we serve; and | ||
• | to use the additional capital for other general corporate purposes. |
• | The plan of conversion and reorganization is approved by at leasta majority of votes eligibleto be cast by members of Northwest Bancorp, MHC (depositors of Northwest Savings Bank) as of October 26, 2009; | ||
• | The plan of conversion and reorganization is approved by a vote of at leasttwo-thirds of the outstanding sharesof common stock of Northwest Bancorp, Inc. as of October 30, 2009, including shares held by Northwest Bancorp, MHC. (Because Northwest Bancorp, MHC owns 63.0% of the outstanding shares of Northwest Bancorp, Inc. common stock, we expect that Northwest Bancorp, MHC and our directors and executive officers will control the outcome of this vote.); | ||
• | The plan of conversion and reorganization is approved by a vote of at leasta majority of the outstanding sharesof common stock of Northwest Bancorp, Inc. as of October 30, 2009, excluding those shares held by Northwest Bancorp, MHC; | ||
• | We sell at least the minimum number of shares of common stock offered; | ||
• | We receive the final approval of the Office of Thrift Supervision to complete the conversion; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency; and | ||
• | We receive the final approval of the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation for the merger of interim savings banks into Northwest Savings Bank as part of the conversion; however, such approvals do not constitute recommendations or endorsements of the plan of conversion and reorganization by those agencies. |
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New | ||||||||||||||||||||||||||||||||||||||||
Shares | ||||||||||||||||||||||||||||||||||||||||
Total Shares of | That | |||||||||||||||||||||||||||||||||||||||
Common Stock | Equivalent | Would be | ||||||||||||||||||||||||||||||||||||||
New Shares to be | to be | Per Share | Received | |||||||||||||||||||||||||||||||||||||
Exchanged for Existing | Outstanding | Current | for 100 | |||||||||||||||||||||||||||||||||||||
New Shares to be Sold | Shares of Northwest | Shares to be issued to | After the | Exchange | Market | Existing | ||||||||||||||||||||||||||||||||||
in this Offering | Bancorp, Inc. | the Foundation | Offering | Ratio | Price (1) | Shares | ||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||
Minimum | 53,975,000 | 62.27 | % | 31,727,243 | 36.60 | % | 979,500 | 1.13 | % | 86,681,743 | 1.7632 | $ | 17.63 | 176 | ||||||||||||||||||||||||||
Midpoint | 63,500,000 | 62.25 | % | 37,326,168 | 36.60 | % | 1,170,000 | 1.15 | % | 101,996,168 | 2.0743 | $ | 20.74 | 207 | ||||||||||||||||||||||||||
Maximum | 73,025,000 | 62.25 | % | 42,925,093 | 36.59 | % | 1,360,500 | 1.16 | % | 117,310,593 | 2.3855 | $ | 23.85 | 238 | ||||||||||||||||||||||||||
Adjusted Maximum | 83,978,750 | 62.24 | % | 49,363,857 | 36.59 | % | 1,579,575 | 1.17 | % | 134,922,182 | 2.7433 | $ | 27.43 | 274 |
(1) | Represents the value of shares of Northwest Bancshares, Inc. received in the conversion by a holder of one share of Northwest Bancorp, Inc. at the exchange ratio, assuming the market price of $10.00 per share. |
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• | the present results and financial condition of Northwest Bancorp, Inc. and the projected results and financial condition of Northwest Bancshares, Inc.; | ||
• | the economic and demographic conditions in Northwest Bancorp, Inc.’s existing market area; | ||
• | certain historical, financial and other information relating to Northwest Bancorp, Inc.; | ||
• | the impact of the offering on Northwest Bancshares, Inc.’s stockholders’ equity and earnings potential; | ||
• | the proposed dividend policy of Northwest Bancshares, Inc.; | ||
• | the trading market for securities of comparable institutions and general conditions in the market for such securities; and | ||
• | the issuance of shares and contribution of cash to the charitable foundation. |
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• | Northwest Bancorp, Inc.’s financial condition and results of operations; | ||
• | comparison of financial performance ratios of Northwest Bancorp, Inc. to those of other financial institutions of similar size; | ||
• | market conditions generally and in particular for financial institutions; and | ||
• | the historical trading price of the publicly held shares of Northwest Bancorp, Inc. common stock. |
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(i) | Natural persons residing in Pennsylvania; the Florida county of Broward; the Maryland counties of Anne Arundel, Baltimore and Howard, as well as Baltimore City, Maryland; the New York counties of Cattaraugus, Chautuaqua, Erie and Monroe; and the Ohio counties of Lake, Geauga and Ashtabula; | ||
(ii) | Northwest Bancorp, Inc.’s public stockholders as of October 30, 2009; and | ||
(iii) | Other members of the general public. |
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(i) | No person may purchase fewer than 25 shares of common stock; | ||
(ii) | The maximum number of shares of common stock that may be purchased by a person or persons exercising subscription rights through a single qualifying deposit account held jointly is 150,000 shares; | ||
(iii) | Our tax-qualified employee stock benefit plans, including our employee stock ownership plan and 401(k) plan, may purchase in the aggregate up to 10% of the shares of common stock sold in the offering and issued to the charitable foundation, including shares sold and issued in the event of an increase in the offering range of up to 15%; | ||
(iv) | Except for the tax-qualified employee stock benefit plans, including our employee stock ownership plan and 401(k) plan, as described above, no person or entity, together with associates or persons acting in concert with such person or entity, may |
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purchase more than $6.0 million (600,000 shares) of common stock in all categories of the offering combined; | |||
(v) | Current stockholders of Northwest Bancorp, Inc. are subject to an ownership limitation. As previously described, current stockholders of Northwest Bancorp, Inc. will receive shares of Northwest Bancshares, Inc. common stock in exchange for their existing shares of Northwest Bancorp, Inc. common stock at the conclusion of the offering. The number of shares of common stock that a stockholder may purchase in the offering, together with associates or persons acting in concert with such stockholder, when combined with the shares that the stockholder and his or her associates will receive in exchange for existing Northwest Bancorp, Inc. common stock, may not exceed 5% of the shares of common stock of Northwest Bancshares, Inc. to be issued and outstanding at the completion of the conversion; and | ||
(vi) | The maximum number of shares of common stock that may be purchased in all categories of the offering by executive officers and directors of Northwest Savings Bank and their associates, in the aggregate, when combined with shares of common stock issued in exchange for existing shares, may not exceed 25% of the shares of Northwest Bancshares, Inc. common stock outstanding upon completion of the conversion. |
(i) | to fill subscriptions by the tax-qualified employee stock benefit plans, including the employee stock ownership plan, for up to 10% of the total number of shares of common stock sold in the offering and issued to the charitable foundation; | ||
(ii) | in the event that there is an oversubscription at the Eligible Account Holder, Supplemental Eligible Account Holder or Other Depositor levels, to fill unfulfilled subscriptions of these subscribers according to their respective priorities; and | ||
(iii) | to fill unfulfilled subscriptions in the community offering, with preference given first to natural persons residing in Pennsylvania; the Florida county of Broward; the Maryland counties of Anne Arundel, Baltimore and Howard, as well as Baltimore City, Maryland; the New York counties of Cattaraugus, Chautuaqua, Erie and Monroe; and the Ohio counties of Lake, Geauga and Ashtabula; then to Northwest Bancorp, Inc.’s public stockholders as of October 30, 2009, and then to members of the general public. |
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(i) | any corporation or organization, other than Northwest Bancorp, MHC, Northwest Bancorp, Inc., Northwest Savings Bank or a majority-owned subsidiary of Northwest Bancorp, Inc. or Northwest Savings Bank, of which the person is a senior officer, partner or beneficial owner, directly or indirectly, of 10% or more of any equity security; | ||
(ii) | any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity; provided, however, that for the purposes of subscriptions in the offering and restrictions on the sale of stock after the conversion, the term “associate” does not include a person who has a substantial beneficial interest in an employee stock benefit plan of Northwest Savings Bank, or who is a trustee or fiduciary of such plan, and for purposes of aggregating total shares that may be held by officers, trustees and directors of Northwest Bancorp, MHC, Northwest Bancorp, Inc. or Northwest Savings Bank, the term “associate” does not include any tax-qualified employee stock benefit plan of Northwest Savings Bank; and | ||
(iii) | any blood or marriage relative of the person, who either has the same home as the person or who is a director, trustee or officer of Northwest Bancorp, MHC, Northwest Bancorp, Inc. or Northwest Savings Bank. |
(i) | knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or | ||
(ii) | a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. |
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(i) | acting as our conversion advisor for the offering; | ||
(ii) | providing administrative services and managing the Stock Information Center; | ||
(iii) | educating our employees regarding the offering; | ||
(iv) | targeting our sales efforts, including assisting in the preparation of marketing materials; and | ||
(v) | soliciting orders for common stock. |
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(i) | personal check, bank check or money order, made payable to Northwest Bancshares, Inc.; or | ||
(ii) | authorization of withdrawal from the types of Northwest Savings Bank deposit accounts designated on the stock order form. |
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1. | The conversion of Northwest Bancorp, Inc. to a federally chartered interim stock savings bank will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code. | ||
2. | The merger of Northwest Bancorp, Inc. with and into Northwest Savings Bank qualifies as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code. Neither Northwest Bancorp, Inc. nor Northwest Savings Bank will recognize gain or loss as a result of such merger. (Sections 361(a) and 1032(a) of the Internal Revenue Code). | ||
3. | The basis of the assets of Northwest Bancorp, Inc. and the holding period of such assets to be received by Northwest Savings Bank will be the same as the basis and holding period in such assets in the hands of Northwest Bancorp, Inc. immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code). | ||
4. | The conversion of Northwest Bancorp, MHC, to a federally chartered interim stock savings bank will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code. | ||
5. | The merger of Northwest Bancorp, MHC with and into Northwest Savings Bank qualifies as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code. | ||
6. | The exchange of Eligible Account Holders’ and Supplemental Account Holders’ interests in Northwest Bancorp, MHC for interests in a liquidation account established in Northwest Savings Bank will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax regulations. |
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7. | None of Northwest Bancorp, MHC, Northwest Savings Bank, Eligible Account Holders nor Supplemental Eligible Account Holders, will recognize any gain or loss on the transfer of the assets of Northwest Bancorp, MHC to Northwest Savings Bank in exchange for an interest in a liquidation account established in Northwest Savings Bank for the benefit of such persons who remain depositors of Northwest Savings Bank. | ||
8. | The basis of the assets of Northwest Bancorp, MHC and the holding period of such assets to be received by Northwest Savings Bank will be the same as the basis and holding period of such assets in the hands of Northwest Bancorp, MHC immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code.) | ||
9. | Current stockholders of Northwest Bancorp, Inc. will not recognize any gain or loss upon their constructive exchange of Northwest Bancorp, Inc. common stock for shares of Northwest Savings Bank which will in turn be exchanged for new shares of Northwest Bancshares, Inc. common stock. | ||
10. | Each stockholder’s aggregate basis in shares of Northwest Bancshares, Inc. common stock (including fractional share interests) received in the exchange will be the same as the aggregate basis of Northwest Bancorp, Inc. common stock surrendered in the exchange. | ||
11. | Each stockholder’s holding period in his or her Northwest Bancshares, Inc. common stock received in the exchange will include the period during which the Northwest Bancorp, Inc. common stock surrendered was held, provided that the Northwest Bancorp, Inc. common stock surrendered is a capital asset in the hands of the stockholder on the date of the exchange. | ||
12. | Cash received by any current stockholder of Northwest Bancorp, Inc. in lieu of a fractional share interest in shares of Northwest Bancshares, Inc. common stock will be treated as having been received as a distribution in full payment in exchange for a fractional share interest of Northwest Bancshares, Inc. common stock, which such stockholder would otherwise be entitled to receive. Accordingly, a stockholder will recognize gain or loss equal to the difference between the cash received and the basis of the fractional share. If the common stock is held by the stockholder as a capital asset, the gain or loss will be capital gain or loss. | ||
13. | It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Northwest Bancshares, Inc. common stock is zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or Other Depositors upon distribution to them of nontransferable subscription rights to purchase shares of Northwest Bancshares, Inc. common stock. Eligible Account Holders, Supplemental Eligible Account Holders and Other Depositors will not realize any taxable income as the result of the exercise by them of the nontransferable subscriptions rights. | ||
14. | It is more likely than not that the basis of the shares of Northwest Bancshares, Inc. common stock purchased in the offering by the exercise of nontransferable subscription rights will be the purchase price. The holding period of the Northwest Bancshares, Inc. common stock purchased pursuant to the exercise of nontransferable subscription rights will commence on the date on which the right to acquire such stock was exercised. |
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15. | No gain or loss will be recognized by Northwest Bancshares, Inc. on the receipt of money in exchange for Northwest Bancshares, Inc. common stock sold in the offering. |
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(1) | any dividends that may be paid on our shares of common stock in the future; | ||
(2) | within the limits of applicable federal and state laws, loans collateralized by the shares of common stock; or | ||
(3) | the proceeds of the sale of any of the shares of common stock in the open market from time to time. |
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Adjusted Maximum of | ||||||||||||||||||||||||||||||||
Minimum of Offering Range | Midpoint of Offering Range | Maximum of Offering Range | Offering Range | |||||||||||||||||||||||||||||
With | Without | With | Without | With | Without | With | Without | |||||||||||||||||||||||||
Foundation | Foundation | Foundation | Foundation | Foundation | Foundation | Foundation | Foundation | |||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Estimated stock offering amount | $ | 539,750 | $ | 548,250 | $ | 635,000 | $ | 645,000 | $ | 730,250 | $ | 741,750 | $ | 839,788 | $ | 853,013 | ||||||||||||||||
Estimated full value | 866,817 | 870,519 | 1,019,962 | 1,024,140 | 1,173,106 | 1,177,761 | 1,349,222 | 1,354,425 | ||||||||||||||||||||||||
Total assets | 7,569,136 | 7,573,217 | 7,653,903 | 7,658,718 | 7,738,670 | 7,744,220 | 7,836,152 | 7,842,546 | ||||||||||||||||||||||||
Total liabilities | 6,459,756 | 6,459,756 | 6,459,756 | 6,459,756 | 6,459,756 | 6,459,756 | 6,459,756 | 6,459,756 | ||||||||||||||||||||||||
Pro forma stockholders’ equity | 1,109,380 | 1,113,461 | 1,194,147 | 1,198,962 | 1,278,914 | 1,284,464 | 1,376,396 | 1,382,790 | ||||||||||||||||||||||||
Pro forma net income | 21,530 | 21,619 | 21,877 | 21,982 | 22,224 | 22,346 | 22,623 | 22,764 | ||||||||||||||||||||||||
Pro forma stockholders’ equity per share | 12.80 | 12.79 | 11.71 | 11.71 | 10.90 | 10.91 | 10.20 | 10.21 | ||||||||||||||||||||||||
Pro forma tangible stockholders’ equity per share | 10.76 | 10.76 | 9.97 | 9.98 | 9.39 | 9.41 | 8.89 | 8.90 | ||||||||||||||||||||||||
Pro forma net income per share | 0.25 | 0.25 | 0.22 | 0.22 | 0.19 | 0.19 | 0.17 | 0.17 | ||||||||||||||||||||||||
Pro forma pricing ratios: | ||||||||||||||||||||||||||||||||
Offering price as a percentage of pro forma stockholders’ equity per share | 78.13 | % | 78.19 | % | 85.40 | % | 85.40 | % | 91.74 | % | 91.66 | % | 98.04 | % | 97.94 | % | ||||||||||||||||
Offering price as a percentage of pro forma tangible stockholders’ equity per share | 92.94 | 92.94 | 100.30 | 100.20 | 106.50 | 106.27 | 112.49 | 112.36 | ||||||||||||||||||||||||
Offering price to pro forma net income per share | 20.00x | 20.00x | 22.73x | 22.73x | 26.32x | 26.32x | 29.41x | 29.41x | ||||||||||||||||||||||||
Pro forma financial ratios: | ||||||||||||||||||||||||||||||||
Return on assets (annualized) | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | % | 0.58 | % | 0.58 | % | 0.58 | % | ||||||||||||||||
Return on equity (annualized) | 3.88 | 3.88 | 3.66 | 3.67 | 3.48 | 3.48 | 3.29 | 3.29 | ||||||||||||||||||||||||
Equity to assets | 14.66 | 14.70 | 15.60 | 15.65 | 16.53 | 16.59 | 17.56 | 17.63 | ||||||||||||||||||||||||
Tangible equity ratio | 12.61 | 12.66 | 13.60 | 13.66 | 14.57 | 14.63 | 15.66 | 15.73 |
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• | the Office of Thrift Supervision may examine the charitable foundation at the foundation’s expense; | ||
• | the charitable foundation must comply with all supervisory directives imposed by the Office of Thrift Supervision; | ||
• | the charitable foundation must provide annually to the Office of Thrift Supervision a copy of the annual report that the charitable foundation submits to the Internal Revenue Service; | ||
• | the charitable foundation must operate according to written policies adopted by its board of directors, including a conflict of interest policy; | ||
• | the charitable foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and | ||
• | the charitable foundation must vote its shares of our common stock in the same ratio as all of the other shares voted on each proposal considered by our stockholders. |
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ARTICLES OF INCORPORATION AND BYLAWS OF NORTHWEST BANCSHARES, INC.
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• | the purchase of shares by underwriters in connection with a public offering; or | ||
• | the purchase of shares by any employee benefit plans of Northwest Bancorp, Inc. or any subsidiary. |
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At | ||||||||||||||||||||||||||||
June 30, | At December 31, | At June 30, | ||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2005 | 2004 | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Selected Consolidated Financial Data: | ||||||||||||||||||||||||||||
Total assets | $ | 7,092,291 | $ | 6,930,241 | $ | 6,663,516 | $ | 6,527,815 | $ | 6,447,307 | $ | 6,330,482 | $ | 6,343,248 | ||||||||||||||
Investment securities held-to-maturity (1) | — | — | — | 465,312 | 444,407 | 467,303 | 209,241 | |||||||||||||||||||||
Investment securities available-for-sale | 334,293 | 393,531 | 601,620 | 388,546 | 289,871 | 290,702 | 444,676 | |||||||||||||||||||||
Mortgage-backed securities held-to-maturity (1) | — | — | — | 251,655 | 189,851 | 235,676 | 392,301 | |||||||||||||||||||||
Mortgage-backed securities available-for-sale | 675,089 | 745,639 | 531,747 | 378,968 | 323,965 | 384,481 | 411,003 | |||||||||||||||||||||
Loans receivable net: | ||||||||||||||||||||||||||||
Real estate (2) | 4,460,338 | 4,508,393 | 4,172,850 | 3,926,859 | 4,100,754 | 3,888,287 | 3,583,302 | |||||||||||||||||||||
Consumer | 250,544 | 261,398 | 261,598 | 253,490 | 366,488 | 348,672 | 324,897 | |||||||||||||||||||||
Commercial | 380,636 | 372,101 | 361,174 | 232,092 | 155,027 | 139,925 | 145,742 | |||||||||||||||||||||
Total loans receivable, net | 5,091,518 | 5,141,892 | 4,795,622 | 4,412,441 | 4,622,269 | 4,376,884 | 4,053,941 | |||||||||||||||||||||
Deposits | 5,345,739 | 5,038,211 | 5,542,334 | 5,366,750 | 5,228,479 | 5,187,946 | 5,191,621 | |||||||||||||||||||||
Advances from Federal Home Loan Bank and other borrowed funds | 897,063 | 1,067,945 | 339,115 | 392,814 | 417,356 | 410,344 | 449,147 | |||||||||||||||||||||
Shareholders’ equity | 632,535 | 613,784 | 612,878 | 604,561 | 585,658 | 582,190 | 550,472 |
(1) | In 2007, we divested investment securities that we deemed to have a deteriorating risk profile, including several classified as held-to-maturity, which required us to reclassify all investment securities as available-for-sale. | |
(2) | Includes one- to four-family residential mortgage loans, home equity loans and commercial real estate loans. |
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For the Six | ||||||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||||||
For the Six Months Ended | Ended | For the Year Ended | ||||||||||||||||||||||||||||||
June 30, | For the Year Ended December 31, | December 31, | June 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | 2005 | 2005 | 2004 | |||||||||||||||||||||||||
(Dollars in Thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
Selected Consolidated | ||||||||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||
Total interest income | $ | 183,759 | $ | 193,686 | $ | 388,659 | $ | 396,031 | $ | 368,573 | $ | 170,449 | $ | 321,824 | $ | 300,230 | ||||||||||||||||
Total interest expense | 69,387 | 91,810 | 169,293 | 211,015 | 191,109 | 79,414 | 138,047 | 134,466 | ||||||||||||||||||||||||
Net interest income | 114,372 | 101,876 | 219,366 | 185,016 | 177,464 | 91,035 | 183,777 | 165,764 | ||||||||||||||||||||||||
Provision for loan losses | 17,517 | 5,689 | 22,851 | 8,743 | 8,480 | 4,722 | 9,566 | 6,860 | ||||||||||||||||||||||||
Net interest income after provision for loan losses | 96,855 | 96,187 | 196,515 | 176,273 | 168,984 | 86,313 | 174,211 | 158,904 | ||||||||||||||||||||||||
Noninterest income | 21,456 | 24,822 | 38,752 | 43,022 | 46,026 | 19,851 | 32,004 | 31,862 | ||||||||||||||||||||||||
Noninterest expense | 91,270 | 83,915 | 170,128 | 152,742 | 143,682 | 66,317 | 128,659 | 128,805 | ||||||||||||||||||||||||
Income before income tax expense | 27,041 | 37,094 | 65,139 | 66,553 | 71,328 | 39,847 | 77,556 | 61,961 | ||||||||||||||||||||||||
Income tax expense | 7,448 | 10,030 | 16,968 | 17,456 | 19,792 | 10,998 | 22,741 | 19,829 | ||||||||||||||||||||||||
Net income | $ | 19,593 | $ | 27,064 | $ | 48,171 | $ | 49,097 | $ | 51,536 | $ | 28,849 | $ | 54,815 | $ | 42,132 | ||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.40 | $ | 0.56 | $ | 1.00 | $ | 1.00 | $ | 1.03 | $ | 0.57 | $ | 1.10 | $ | 0.88 | ||||||||||||||||
Diluted | $ | 0.40 | $ | 0.56 | $ | 0.99 | $ | 0.99 | $ | 1.03 | $ | 0.56 | $ | 1.09 | $ | 0.87 | ||||||||||||||||
At or for | ||||||||||||||||||||||||||||||||
the Six | ||||||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||||||
At or For the Six | Ended | |||||||||||||||||||||||||||||||
Months Ended | At or For the Year Ended | December | At or for the Year | |||||||||||||||||||||||||||||
June 30, (1) | December 31, | 31, | Ended June 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | 2005 (1) | 2005 | 2004 | |||||||||||||||||||||||||
Selected Financial Ratios and Other Data: | ||||||||||||||||||||||||||||||||
Return on average assets (2) | 0.56 | % | 0.79 | % | 0.70 | % | 0.73 | % | 0.79 | % | 0.91 | % | 0.86 | % | 0.68 | % | ||||||||||||||||
Return on average equity (3) | 6.26 | % | 8.72 | % | 7.75 | % | 8.18 | % | 8.60 | % | 9.81 | % | 9.74 | % | 8.17 | % | ||||||||||||||||
Average capital to average assets | 8.93 | % | 9.10 | % | 9.04 | % | 8.96 | % | 9.19 | % | 9.23 | % | 8.87 | % | 8.27 | % | ||||||||||||||||
Capital to total assets | 8.92 | % | 9.00 | % | 8.86 | % | 9.20 | % | 9.26 | % | 9.04 | % | 9.20 | % | 8.68 | % | ||||||||||||||||
Tangible equity to tangible assets | 6.48 | % | 6.44 | % | 6.36 | % | 6.50 | % | 6.79 | % | 6.66 | % | 6.93 | % | 6.34 | % | ||||||||||||||||
Net interest rate spread (4) | 3.36 | % | 3.02 | % | 3.25 | % | 2.74 | % | 2.77 | % | 2.99 | % | 3.07 | % | 2.83 | % | ||||||||||||||||
Net interest margin (5) | 3.63 | % | 3.36 | % | 3.57 | % | 3.10 | % | 3.06 | % | 3.21 | % | 3.24 | % | 2.98 | % | ||||||||||||||||
Noninterest expense to average assets | 2.60 | % | 2.46 | % | 2.48 | % | 2.28 | % | 2.20 | % | 2.08 | % | 2.03 | % | 2.06 | % | ||||||||||||||||
Efficiency ratio | 67.20 | % | 66.23 | % | 65.91 | % | 66.98 | % | 64.29 | % | 59.81 | % | 59.62 | % | 65.18 | % | ||||||||||||||||
Noninterest income to average assets | 0.61 | % | 0.73 | % | 0.56 | % | 0.64 | % | 0.71 | % | 0.63 | % | 0.50 | % | 0.51 | % | ||||||||||||||||
Net interest income to noninterest expense | 1.25x | 1.21x | 1.29x | 1.21x | 1.24x | 1.37x | 1.43x | 1.29x | ||||||||||||||||||||||||
Dividend payout ratio (6) | 110.00 | % | 78.57 | % | 88.89 | % | 84.85 | % | 67.96 | % | 53.57 | % | 44.04 | % | 45.98 | % | ||||||||||||||||
Nonperforming loans to net loans receivable | 2.41 | % | 1.38 | % | 1.93 | % | 1.03 | % | 0.92 | % | 0.93 | % | 0.77 | % | 0.80 | % | ||||||||||||||||
Nonperforming assets to total assets | 1.95 | % | 1.12 | % | 1.67 | % | 0.87 | % | 0.72 | % | 0.74 | % | 0.64 | % | 0.57 | % | ||||||||||||||||
Allowance for loan losses to nonperforming loans | 54.49 | % | 62.72 | % | 55.37 | % | 84.22 | % | 92.92 | % | 77.67 | % | 93.91 | % | 94.35 | % | ||||||||||||||||
Allowance for loan losses to net loans receivable | 1.31 | % | 0.87 | % | 1.07 | % | 0.87 | % | 0.85 | % | 0.72 | % | 0.72 | % | 0.76 | % | ||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 1.11x | 1.10x | 1.10x | 1.10x | 1.09x | 1.09x | 1.08x | 1.06x | ||||||||||||||||||||||||
Number of full-service offices | 168 | 166 | 167 | 166 | 160 | 153 | 153 | 152 | ||||||||||||||||||||||||
Number of consumer finance offices | 49 | 51 | 51 | 51 | 51 | 50 | 49 | 49 |
(1) | Ratios are annualized where appropriate. | |
(2) | Represents net income divided by average total assets. | |
(3) | Represents net income divided by average equity. | |
(4) | Represents average yield on interest-earning assets less average cost of interest-bearing liabilities. | |
(5) | Represents net interest income as a percentage of average interest-earning assets. |
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(6) | The dividend payout ratio represents dividends declared per share divided by net income per share. The following table sets forth aggregate cash dividends paid per period, which is calculated by multiplying the dividend declared per share by the number of shares outstanding as of the applicable record date: |
For the Six | ||||||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||||||
For the Six Months Ended | Ended | For the Year Ended | ||||||||||||||||||||||||||||||
June 30, | For the Year Ended December 31, | December | June 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | 31, 2005 | 2005 | 2004 | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Dividends paid to public stockholders | $ | 7,903 | $ | 7,880 | $ | 15,771 | $ | 15,696 | $ | 13,727 | $ | 6,119 | $ | 9,600 | $ | 7,151 | ||||||||||||||||
Dividends paid to Northwest Bancorp, MHC | — | — | — | — | — | — | 10,571 | 2,812 | ||||||||||||||||||||||||
Total dividends paid | $ | 7,903 | $ | 7,880 | $ | 15,771 | $ | 15,696 | $ | 13,727 | $ | 6,119 | $ | 20,171 | $ | 9,963 | ||||||||||||||||
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(Unaudited) | ||||||||
At September 30, | At December 31, | |||||||
2009 | 2008 | |||||||
(In thousands) | ||||||||
Selected Financial Condition Data: | ||||||||
Total assets | $ | 7,132,041 | $ | 6,930,241 | ||||
Cash and cash equivalents | 280,166 | 79,922 | ||||||
Investment securities available for sale, at fair value | 1,126,430 | 1,139,170 | ||||||
Loans receivable, net | 5,149,821 | 5,141,892 | ||||||
Deposits | 5,387,832 | 5,038,211 | ||||||
Advances from Federal Home Loan Bank and other borrowed funds | 896,644 | 1,067,945 | ||||||
Shareholders’ equity | 652,920 | 613,784 |
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
Selected Operating Data: | ||||||||||||||||
Total interest income | $ | 90,428 | $ | 97,361 | $ | 274,187 | $ | 291,047 | ||||||||
Total interest expense | 33,586 | 39,819 | 102,973 | 131,629 | ||||||||||||
Net interest income | 56,842 | 57,542 | 171,214 | 159,418 | ||||||||||||
Provision for loan losses | 9,830 | 6,950 | 27,347 | 12,639 | ||||||||||||
Net interest income after provision for loan losses | 47,012 | 50,592 | 143,867 | 146,779 | ||||||||||||
Noninterest income | 13,985 | 5,110 | 35,441 | 29,932 | ||||||||||||
Noninterest expense | 44,987 | 42,739 | 136,257 | 126,654 | ||||||||||||
Income before income tax expense | 16,010 | 12,963 | 43,051 | 50,057 | ||||||||||||
Income tax expense | 3,956 | 3,140 | 11,404 | 13,170 | ||||||||||||
Net income | $ | 12,054 | $ | 9,823 | $ | 31,647 | $ | 36,887 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.25 | $ | 0.20 | $ | 0.65 | $ | 0.76 | ||||||||
Diluted | $ | 0.25 | $ | 0.20 | $ | 0.65 | $ | 0.76 | ||||||||
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At or For the Three Months | At or For the Nine Months | |||||||||||||||
Ended September 30,(1) | Ended September 30,(1) | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Selected Financial Ratios and Other Data: | ||||||||||||||||
Return on average assets(2) | 0.68 | % | 0.57 | % | 0.60 | % | 0.72 | % | ||||||||
Return on average equity(3) | 7.48 | % | 6.31 | % | 6.68 | % | 7.92 | % | ||||||||
Average capital to average assets | 9.02 | % | 8.98 | % | 8.96 | % | 9.06 | % | ||||||||
Capital to total assets | 9.15 | % | 9.03 | % | 9.15 | % | 9.03 | % | ||||||||
Tangible equity to tangible assets | 6.74 | % | 6.49 | % | 6.74 | % | 6.49 | % | ||||||||
Net interest rate spread(4) | 3.29 | % | 3.42 | % | 3.33 | % | 3.14 | % | ||||||||
Net interest margin(5) | 3.54 | % | 3.71 | % | 3.60 | % | 3.48 | % | ||||||||
Noninterest expense to average assets | 2.52 | % | 2.47 | % | 2.58 | % | 2.46 | % | ||||||||
Efficiency ratio | 63.52 | % | 68.22 | % | 65.93 | % | 66.89 | % | ||||||||
Noninterest income to average assets | 0.78 | % | 0.29 | % | 0.67 | % | 0.58 | % | ||||||||
Net interest income to noninterest expense | 1.26x | 1.35x | 1.26x | 1.26x | ||||||||||||
Dividend payout ratio(6) | 88.00 | % | 110.00 | % | 101.54 | % | 86.84 | % | ||||||||
Nonperforming loans to net loans receivable | 2.27 | % | 1.87 | % | 2.27 | % | 1.87 | % | ||||||||
Nonperforming assets to total assets | 1.92 | % | 1.50 | % | 1.92 | % | 1.50 | % | ||||||||
Allowance for loan losses to nonperforming loans | 57.86 | % | 50.47 | % | 57.86 | % | 50.47 | % | ||||||||
Allowance for loan losses to net loans receivable | 1.32 | % | 0.94 | % | 1.32 | % | 0.94 | % | ||||||||
Average interest-earning assets to average interest-bearing liabilities | 1.12x | 1.11x | 1.12x | 1.10x | ||||||||||||
Number of full-service offices | 170 | 167 | 170 | 167 | ||||||||||||
Number of consumer finance offices | 49 | 51 | 50 | 51 |
(1) | Ratios are annualized where appropriate. | |
(2) | Represents net income divided by average total assets. | |
(3) | Represents net income divided by average equity. | |
(4) | Represents average yield on interest-earning assets less average cost of interest-bearing liabilities. | |
(5) | Represents net interest income as a percentage of average interest-earning assets. | |
(6) | The dividend payout ratio represents dividends declared per share divided by net income per share. |
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At | At | |||||||
September 30, 2009 | December 31, 2008 | |||||||
(Dollars in Thousands) | ||||||||
Loans accounted for on a nonaccrual basis: | ||||||||
One- to four-family residential loans | $ | 30,846 | $ | 20,435 | ||||
Multi-family and commercial real estate loans | 49,336 | 43,828 | ||||||
Consumer loans | 11,551 | 9,756 | ||||||
Commercial business loans | 25,405 | 25,184 | ||||||
Total | $ | 117,138 | $ | 99,203 | ||||
Total nonperforming loans as a percentage of loans | 2.25 | % | 1.91 | % | ||||
Total real estate acquired through foreclosure and other real estate owned (“REO”) | 19,838 | 16,844 | ||||||
Total nonperforming assets | $ | 136,976 | $ | 116,047 | ||||
Total nonperforming assets as a percentage of total assets | 1.92 | % | 1.67 | % |
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Price-to-earnings multiple | Price-to-book | Price-to-tangible | ||||||||||
(1) | value ratio | book value ratio | ||||||||||
Northwest Bancshares, Inc. (on a pro forma basis, assuming completion of the conversion) | ||||||||||||
Minimum | 18.29x | 76.75 | % | 90.99 | % | |||||||
Midpoint | 21.43x | 83.96 | % | 98.33 | % | |||||||
Maximum | 24.19x | 90.25 | % | 104.49 | % | |||||||
Maximum, as adjusted | 27.78x | 96.62 | % | 110.62 | % |
(1) | For the nine months ending September 30, 2009, annualized. |
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• | statements of our goals, intentions and expectations; | ||
• | statements regarding our business plans, prospects, growth and operating strategies; | ||
• | statements regarding the asset quality of our loan and investment portfolios; and | ||
• | estimates of our risks and future costs and benefits. |
• | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; | ||
• | general economic conditions, either nationally or in our market areas, that are worse than expected; | ||
• | competition among depository and other financial institutions; | ||
• | inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; | ||
• | adverse changes in the securities markets; | ||
• | our ability to enter new markets successfully and capitalize on growth opportunities; | ||
• | our ability to successfully integrate acquired entities, if any; | ||
• | changes in consumer spending, borrowing and savings habits; | ||
• | changes in our organization, compensation and benefit plans; | ||
• | our ability to continue to increase and manage our commercial and residential real estate, multi-family, and commercial and industrial loans; | ||
• | possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises; |
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• | the level of future deposit premium assessments; | ||
• | the impact of the current recession on our loan portfolio (including cash flow and collateral values), investment portfolio, customers and capital market activities; | ||
• | the impact of the current governmental effort to restructure the U.S. financial and regulatory system; | ||
• | changes in the financial performance and/or condition of our borrowers; and | ||
• | the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters. |
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Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||||||||||||||||||
53,975,000 Shares | 63,500,000 Shares | 73,025,000 Shares | 83,978,750 Shares (1) | |||||||||||||||||||||||||||||
Percent | Percent | Percent | Percent of | |||||||||||||||||||||||||||||
of Net | of Net | of Net | Net | |||||||||||||||||||||||||||||
Amount | Proceeds | Amount | Proceeds | Amount | Proceeds | Amount | Proceeds | |||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||
Offering proceeds | $ | 539,750 | $ | 635,000 | $ | 730,250 | $ | 839,788 | ||||||||||||||||||||||||
Less offering expenses | 24,214 | 27,668 | 31,121 | 35,093 | ||||||||||||||||||||||||||||
Net offering proceeds | $ | 515,536 | 100.0 | % | $ | 607,332 | 100.0 | % | $ | 699,129 | 100.0 | % | $ | 804,695 | 100.0 | % | ||||||||||||||||
Distribution of net proceeds: | ||||||||||||||||||||||||||||||||
To Northwest Savings Bank | $ | 257,768 | 50.0 | % | $ | 303,666 | 50.0 | % | $ | 349,564 | 50.0 | % | $ | 402,347 | 50.0 | % | ||||||||||||||||
To fund the loan to employee stock ownership plan | $ | 21,982 | 4.3 | % | $ | 25,868 | 4.3 | % | $ | 29,754 | 4.3 | % | $ | 34,223 | 4.3 | % | ||||||||||||||||
Cash contributed to foundation | $ | 1,000 | 0.2 | % | $ | 1,000 | 0.2 | % | $ | 1,000 | 0.1 | % | $ | 1,000 | 0.1 | % | ||||||||||||||||
Retained by Northwest Bancshares, Inc. | $ | 234,786 | 45.5 | % | $ | 276,798 | 45.5 | % | $ | 318,811 | 45.6 | % | $ | 367,125 | 45.6 | % |
(1) | As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market or general financial conditions following the commencement of the offering. |
• | to fund a loan to the employee stock ownership plan to purchase shares of common stock in the offering; | ||
• | to finance the acquisition of financial institutions or other financial service companies as opportunities arise, primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although, except for an executed letter of intent with respect to the acquisition of an insurance agency with annual revenue of approximately $2.0 million, we do not currently have any agreements or understandings regarding any specific acquisition transaction and it is impossible to determine when, if ever, such opportunities may arise; | ||
• | to pay cash dividends to stockholders; | ||
• | to repurchase shares of our common stock for, among other things, the funding of our stock-based incentive plan; |
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• | to invest in securities; and | ||
• | for other general corporate purposes. |
• | to fund new loans, including commercial real estate, commercial and residential construction loans, commercial business loans, one- to four-family residential mortgage loans and consumer loans; | ||
• | to finance the acquisition of financial institutions or other financial service companies primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although, except as previously described, we do not currently have any understandings or agreements regarding any specific acquisition transaction; | ||
• | to acquire branches from other financial institutions or build or lease new branch facilities primarily in, or adjacent to, Pennsylvania, New York, Ohio, Maryland and Florida, although we do not currently have any agreements or understandings regarding any specific branch acquisition transaction; | ||
• | to enhance existing products and services and to support the development of new products and services by investing, for example, in technology to support growth and enhanced customer service; | ||
• | to invest in securities; and | ||
• | for other general corporate purposes. |
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Year Ending December 31, 2009 | High | Low | Dividend Paid Per Share | |||||||||
Fourth quarter (through November 6, 2009) | $ | 23.79 | $ | 21.25 | $ | — | ||||||
Third quarter | 24.70 | 18.21 | 0.22 | |||||||||
Second quarter | 20.59 | 16.02 | 0.22 | |||||||||
First quarter | 21.59 | 13.07 | 0.22 |
Year Ended December 31, 2008 | High | Low | Dividend Paid Per Share | |||||||||
Fourth quarter | $ | 29.86 | $ | 18.80 | $ | 0.22 | ||||||
Third quarter | 34.34 | 20.05 | 0.22 | |||||||||
Second quarter | 28.10 | 21.78 | 0.22 | |||||||||
First quarter | 30.16 | 23.50 | 0.22 |
Year Ended December 31, 2007 | High | Low | Dividend Paid Per Share | |||||||||
Fourth quarter | $ | 30.03 | $ | 25.76 | $ | 0.22 | ||||||
Third quarter | 29.75 | 25.51 | 0.22 | |||||||||
Second quarter | 28.99 | 26.08 | 0.20 | |||||||||
First quarter | 28.31 | 25.26 | 0.20 |
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Northwest Savings | ||||||||||||||||||||||||||||||||||||||||
Bank Historical at | Pro Forma at June 30, 2009 Based Upon the Sale at $10.00 Per Share | |||||||||||||||||||||||||||||||||||||||
June 30, 2009 | 53,975,000 Shares | 63,500,000 Shares | 73,025,000 Shares | 83,978,750 Shares (1) | ||||||||||||||||||||||||||||||||||||
Percent of | Percent of | Percent of | Percent of | Percent of | ||||||||||||||||||||||||||||||||||||
Amount | Assets (2) | Amount | Assets (2) | Amount | Assets (2) | Amount | Assets (2) | Amount | Assets (2) | |||||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||
Equity capital | $ | 717,129 | 10.03 | % | $ | 932,996 | 12.59 | % | $ | 971,121 | 13.03 | % | $ | 1,009,247 | 13.45 | % | $ | 1,053,092 | 13.94 | % | ||||||||||||||||||||
Core (leverage) capital | $ | 562,620 | 8.15 | % | $ | 778,487 | 10.87 | % | $ | 816,612 | 11.33 | % | $ | 854,738 | 11.78 | % | $ | 898,583 | 12.29 | % | ||||||||||||||||||||
Core (leverage) requirement (3) | 276,172 | 4.00 | % | 286,565 | 4.00 | % | 288,401 | 4.00 | % | 290,237 | 4.00 | % | 292,348 | 4.00 | % | |||||||||||||||||||||||||
Excess | $ | 286,448 | 4.15 | % | $ | 491,922 | 6.87 | % | $ | 528,212 | 7.33 | % | $ | 564,501 | 7.78 | % | $ | 606,235 | 8.29 | % | ||||||||||||||||||||
Tier 1 risk-based capital (4) | $ | 562,620 | 12.43 | % | $ | 778,487 | 17.01 | % | $ | 816,612 | 17.81 | % | $ | 854,738 | 18.60 | % | $ | 898,583 | 19.51 | % | ||||||||||||||||||||
Tier 1 requirement (3) | 180,996 | 4.00 | % | 183,075 | 4.00 | % | 183,442 | 4.00 | % | 183,809 | 4.00 | % | 184,231 | 4.00 | % | |||||||||||||||||||||||||
Excess | $ | 381,624 | 8.43 | % | $ | 595,412 | 13.01 | % | $ | 633,170 | 13.81 | % | $ | 670,929 | 14.60 | % | $ | 714,352 | 15.51 | % | ||||||||||||||||||||
Total risk-based capital (4) | $ | 619,369 | 13.69 | % | $ | 835,236 | 18.25 | % | $ | 873,361 | 19.04 | % | $ | 911,487 | 19.84 | % | $ | 955,332 | 20.74 | % | ||||||||||||||||||||
Risk-based requirement | 452,490 | 10.00 | % | 457,687 | 10.00 | % | 458,605 | 10.00 | % | 459,523 | 10.00 | % | 460,579 | 10.00 | % | |||||||||||||||||||||||||
Excess | $ | 166,879 | 3.69 | % | $ | 377,549 | 8.25 | % | $ | 414,756 | 9.04 | % | $ | 451,964 | 9.84 | % | $ | 494,753 | 10.74 | % | ||||||||||||||||||||
Reconciliation of capital infused into Northwest Savings Bank: | ||||||||||||||||||||||||||||||||||||||||
Net proceeds | $ | 257,768 | $ | 303,666 | $ | 349,564 | $ | 402,347 | ||||||||||||||||||||||||||||||||
Add: Northwest Bancorp, MHC capital contribution | 2,062 | 2,062 | 2,062 | 2,062 | ||||||||||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||
Common stock acquired by employee stock ownership plan | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||||||||||||||||||||||||||
Common stock acquired by stock-based incentive plan | (21.982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||||||||||||||||||||||||||
Pro forma increase in GAAP and regulatory capital (5) | $ | 215,867 | $ | 253,992 | $ | 292,118 | $ | 335,963 | ||||||||||||||||||||||||||||||||
(1) | As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for the shares, or changes in market or general financial conditions following the commencement of the offering. | |
(2) | Tangible and core capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets. | |
(3) | Although not adopted in regulation form, the Pennsylvania Department of Banking utilizes capital standards of 6% leverage capital and 10% risk-based capital. In addition, the Federal Deposit Insurance Corporation requires a Tier 1 risk-based capital ratio of 4% or greater. | |
(4) | Pro forma capital levels assume that we fund the stock-based incentive plans with purchases in the open market equal to 4% of the shares of common stock sold in the stock offering and issued to the charitable foundation at a price equal to the price for which the shares of common stock are sold in the stock offering, and that the employee stock ownership plan purchases 4% of the shares of common stock sold in the stock offering and issued to the charitable foundation with funds we lend. Pro forma GAAP and regulatory capital have been reduced by the amount required to fund both of these plans. See “Management” for a discussion of the stock-based benefit plan and employee stock ownership plan. We may award shares of common stock under one or more stock-based incentive plans in excess of this amount if the stock-based incentive plans are adopted more than one year following the stock offering. | |
(5) | Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk weighting. |
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Northwest | ||||||||||||||||||||
Bancorp, Inc. | Northwest Bancshares, Inc. $10.00 Per Share Pro Forma Based on the Sale of | |||||||||||||||||||
Historical at | 53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | ||||||||||||||||
June 30, 2009 | Shares | Shares | Shares | Shares (1) | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Deposits (2) | $ | 5,345,739 | $ | 5,343,681 | $ | 5,343,681 | $ | 5,343,681 | $ | 5,343,681 | ||||||||||
Borrowed funds | 897,063 | 897,063 | 897,063 | 897,063 | 897,063 | |||||||||||||||
Trust preferred securities | 108,249 | 108,249 | 108,249 | 108,249 | 108,249 | |||||||||||||||
Total deposits and borrowed funds | $ | 6,351,051 | $ | 6,348,993 | $ | 6,348,993 | $ | 6,348,993 | $ | 6,348,993 | ||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized (post-conversion) (3) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Common stock $0.01 par value, 500,000,000 shares authorized (post-conversion); shares to be issued as reflected (3) (4) | 5,126 | 867 | 1,020 | 1,173 | 1,349 | |||||||||||||||
Paid-in capital (3) | 219,335 | 748,925 | 842,474 | 936,022 | 1,043,602 | |||||||||||||||
Retained earnings (5) | 503,692 | 503,692 | 503,692 | 503,692 | 503,692 | |||||||||||||||
Accumulated other comprehensive loss | (26,195 | ) | (26,195 | ) | (26,195 | ) | (26,195 | ) | (26,195 | ) | ||||||||||
Plus: | ||||||||||||||||||||
Northwest Bancorp, MHC capital contribution | — | 2,062 | 2,062 | 2,062 | 2,062 | |||||||||||||||
Less: | ||||||||||||||||||||
Treasury stock | (69,423 | ) | (69,423 | ) | (69,423 | ) | (69,423 | ) | (69,423 | ) | ||||||||||
After-tax expense of contribution to charitable foundation (6) | — | (6,585 | ) | (7,747 | ) | (8,909 | ) | (10,246 | ) | |||||||||||
Common stock to be acquired by the ESOP (7) | — | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | |||||||||||
Common stock to be acquired by the stock-based incentive plan (8) | — | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | |||||||||||
Total stockholders’ equity | $ | 632,535 | $ | 1,109,380 | $ | 1,194,147 | $ | 1,278,914 | $ | 1,376,396 | ||||||||||
Shares outstanding: | ||||||||||||||||||||
Total shares outstanding | 48,607,046 | 86,681,743 | 101,996,168 | 117,310,593 | 134,922,182 | |||||||||||||||
Exchange shares issued | — | 31,727,243 | 37,326,168 | 42,925,093 | 49,363,857 | |||||||||||||||
Shares offered for sale | — | 53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | |||||||||||||||
Shares issued to charitable foundation | — | 979,500 | 1,170,000 | 1,360,500 | 1,579,575 | |||||||||||||||
Total stockholders’ equity as a percentage of total assets | 8.92 | % | 14.66 | % | 15.60 | % | 16.53 | % | 17.56 | % | ||||||||||
Tangible equity ratio | 6.59 | % | 12.61 | % | 13.60 | % | 14.57 | % | 15.66 | % |
(1) | As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for the shares, or changes in market or general financial conditions following the commencement of the offering. | |
(2) | Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the offering other than a deposit of $2.1 million of Northwest Bancorp, MHC held at Northwest Savings Bank. These withdrawals would reduce pro forma deposits by the amount of the withdrawals. On a pro forma basis, it also reflects a transfer to equity of $2.1 million in Northwest Bancorp, MHC deposits held at Northwest Savings Bank. | |
(3) | Northwest Bancorp, Inc. currently has 50,000,000 authorized shares of preferred stock and 500,000,000 authorized shares of common stock, par value $0.10 per share. On a pro forma basis, Northwest Bancshares, Inc. common stock and additional paid-in capital have been revised to reflect the number of shares of Northwest Bancshares, Inc. common stock to be outstanding, which is 86,681,743 shares, 101,996,168 shares, 117,310,593 shares and 134,922,182 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively. |
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(4) | No effect has been given to the issuance of additional shares of Northwest Bancshares, Inc. common stock pursuant to stock options to be granted under a stock-based incentive plan. If this plan is implemented within one year of the completion of the offering, an amount up to 10% of the shares of Northwest Bancshares, Inc. common stock sold in the offering and issued to the charitable foundation will be reserved for issuance upon the exercise of options. We may exceed this limit if the plan is implemented more than one year following the completion of the offering. No effect has been given to the exercise of options currently outstanding. See “Management—Benefits to be Considered Following Completion of the Conversion.” | |
(5) | The retained earnings of Northwest Savings Bank will be substantially restricted after the conversion. See “Proposal 1—Approval of the Plan of Conversion and Reorganization—Liquidation Rights” and “Supervision and Regulation.” | |
(6) | Represents the expense of the contribution to the charitable foundation based on a 39% tax rate. The realization of the deferred tax benefit is limited annually to a maximum deduction for charitable foundations equal to 10% of our annual taxable income, subject to our ability to carry forward for Federal or state purposes any unused portion of the deduction for the years following the year in which the contribution is made. | |
(7) | Assumes that 4% of the shares sold in the offering and issued to the charitable foundation will be acquired by the employee stock ownership plan financed by a loan from Northwest Bancshares, Inc. The loan will have a term of 20 years and an interest rate equal to the prime rate as published inThe Wall Street Journal, and be repaid principally from Northwest Savings Bank’s contributions to the employee stock ownership plan. Since Northwest Bancshares, Inc. will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on Northwest Bancshares, Inc.’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity. | |
(8) | Assumes at the minimum, midpoint, the maximum and the maximum as adjusted, of the offering range that a number of shares of common stock equal to 4% of the shares of common stock to be sold in the offering and issued to the charitable foundation will be purchased by the stock-based incentive plan in open market purchases. The stock-based incentive plan will be submitted to a vote of stockholders following the completion of the offering. The funds to be used by the stock-based incentive plan to purchase the shares will be provided by Northwest Bancshares, Inc. The dollar amount of common stock to be purchased is based on the $10.00 per share offering price and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As Northwest Bancshares, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the stock-based incentive plan, the credit to capital will be offset by a charge to operations. Implementation of the stock-based incentive plan will require stockholder approval. If the shares to fund the plan (restricted stock awards and stock options) are assumed to come from authorized but unissued shares of Northwest Bancshares, Inc., the number of outstanding shares at the minimum, midpoint, maximum and the maximum, as adjusted, of the offering range would be 94,375,373, 111,049,968, 127,724,563 and 146,900,348, respectively, total stockholders’ equity would be $1,131 million, $1,220 million, $1,309 million and $1,411 million, respectively, and total stockholders’ ownership in Northwest Bancshares, Inc. would be diluted by approximately 8.15% at the maximum of the offering range. |
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(i) | one-third of all shares of common stock will be sold in the subscription and community offerings, including shares purchased by insiders, with the remaining shares to be sold in the syndicated community offering; | ||
(ii) | 55,500 shares of common stock will be purchased by our executive officers and directors, and their associates; | ||
(iii) | our employee stock ownership plan will purchase 4% of the shares of common stock sold in the offering, and contributed to the charitable foundation with a loan from Northwest Bancshares, Inc. The loan will be repaid in substantially equal payments of principal and interest over a period of 20 years; | ||
(iv) | Stifel, Nicolaus & Company, Incorporated will receive a fee equal to 1% of all shares of common stock sold in the subscription and community offerings and a fee equal to 5% of all shares sold in the syndicated community offering. No fee will be paid with respect to shares of common stock purchased by our qualified and non-qualified employee stock benefit plans, or stock purchased by our officers, directors and employees, and their immediate families; and | ||
(v) | total expenses of the offering, including the marketing fees to be paid to Stifel, Nicolaus & Company, Incorporated, will be between $24.2 million at the minimum of the offering range and $35.1 million at the maximum of the offering range, as adjusted. |
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• | withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the stock offering; | ||
• | our results of operations after the stock offering; or | ||
• | changes in the market price of the shares of common stock after the stock offering. |
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At or for the Six Months Ended June 30, 2009 | ||||||||||||||||
Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||
53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | |||||||||||||
Shares | Shares | Shares | Shares (1) | |||||||||||||
(Dollars in Thousands, except per share amounts) | ||||||||||||||||
Gross proceeds of offering | $ | 539,750 | $ | 635,000 | $ | 730,250 | $ | 839,788 | ||||||||
Market value of shares issued to charitable foundation | 9,795 | 11,700 | 13,605 | 15,796 | ||||||||||||
Market value of shares issued in the exchange | 317,272 | 373,262 | 429,251 | 493,639 | ||||||||||||
Pro forma market capitalization | $ | 866,817 | $ | 1,019,962 | $ | 1,173,106 | $ | 1,349,222 | ||||||||
Gross proceeds of offering | $ | 539,750 | $ | 635,000 | $ | 730,250 | $ | 839,788 | ||||||||
Less: Expenses | 24,214 | 27,668 | 31,121 | 35,093 | ||||||||||||
Estimated net proceeds | $ | 515,536 | $ | 607,332 | $ | 699,129 | $ | 804,695 | ||||||||
Less: Common stock purchased by employee stock ownership plan | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: Cash contribution to charitable foundation | (1,000 | ) | (1,000 | ) | (1,000 | ) | (1,000 | ) | ||||||||
Less: Common stock purchased by the stock-based incentive plan | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Plus: Northwest Bancorp, MHC capital contribution | 2,058 | 2,058 | 2,058 | 2,058 | ||||||||||||
Estimated net proceeds, as adjusted | $ | 472,630 | $ | 556,654 | $ | 640,679 | $ | 737,307 | ||||||||
For the Six Months Ended June 30, 2009 | ||||||||||||||||
Consolidated net income: | ||||||||||||||||
Historical | $ | 19,593 | $ | 19,593 | $ | 19,593 | $ | 19,593 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Income on adjusted net proceeds | 4,685 | 5,518 | 6,351 | 7,309 | ||||||||||||
Employee stock ownership plan (2) | (335 | ) | (395 | ) | (454 | ) | (522 | ) | ||||||||
Shares granted under the stock-based incentive plan (3) | (1,341 | ) | (1,578 | ) | (1,815 | ) | (2,088 | ) | ||||||||
Options granted under the stock-based incentive plan (4) | (1,072 | ) | (1,262 | ) | (1,451 | ) | (1,669 | ) | ||||||||
Pro forma net income | $ | 21,530 | $ | 21,877 | $ | 22,224 | $ | 22,623 | ||||||||
Net income per share (5): | ||||||||||||||||
Historical | $ | 0.22 | $ | 0.19 | $ | 0.16 | $ | 0.14 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Income on adjusted net proceeds | 0.06 | 0.06 | 0.06 | 0.06 | ||||||||||||
Employee stock ownership plan (2) | — | — | — | — | ||||||||||||
Shares granted under the stock-based incentive plan (3) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||
Options granted under the stock-based incentive plan (4) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
Pro forma net income per share (5) (6) | $ | 0.25 | $ | 0.22 | $ | 0.19 | $ | 0.17 | ||||||||
Offering price to pro forma net income per share (annualized) | 20.00 | x | 22.73 | x | 26.32 | x | 29.41 | x | ||||||||
Number of shares used in net income per share calculations (5) | 84,538,517 | 99,474,038 | 114,409,559 | 131,585,408 | ||||||||||||
At June 30, 2009 | ||||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Historical | $ | 632,535 | $ | 632,535 | $ | 632,535 | $ | 632,535 | ||||||||
Estimated net proceeds | 515,536 | 607,332 | 699,129 | 804,695 | ||||||||||||
Northwest Bancorp, MHC capital contribution | 2,062 | 2,062 | 2,062 | 2,062 | ||||||||||||
Stock contribution to charitable foundation | 9,795 | 11,700 | 13,605 | 15,796 | ||||||||||||
Tax benefit of contribution of charitable foundation | 4,210 | 4,953 | 5,696 | 6,550 | ||||||||||||
Less: Common stock acquired by employee stock ownership plan (2) | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: Common stock acquired by the stock-based incentive plan (3) | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: After-tax effect of contribution to charitable foundation | (10,795 | ) | (12,700 | ) | (14,605 | ) | (16,796 | ) | ||||||||
Pro forma stockholders’ equity | $ | 1,109,380 | $ | 1,194,147 | $ | 1,278,914 | $ | 1,376,396 | ||||||||
Less: Intangible assets | (177,088 | ) | (177,088 | ) | (177,088 | ) | (177,088 | ) | ||||||||
Pro forma tangible stockholders’ equity | $ | 932,292 | $ | 1,017,059 | $ | 1,101,826 | $ | 1,199,308 | ||||||||
Stockholders’ equity per share (7): | ||||||||||||||||
Historical | $ | 7.29 | $ | 6.20 | $ | 5.37 | $ | 4.67 | ||||||||
Estimated net proceeds | 5.95 | 5.95 | 5.96 | 5.96 | ||||||||||||
Northwest Bancorp, MHC capital contribution | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||||||
Stock contribution to charitable foundation | 0.11 | 0.11 | 0.12 | 0.12 | ||||||||||||
Tax benefit of contribution to charitable foundation | 0.05 | 0.05 | 0.05 | 0.05 | ||||||||||||
Less: Common stock acquired by employee stock ownership plan (2) | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.25 | ) |
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At or for the Six Months Ended June 30, 2009 | ||||||||||||||||
Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||
53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | |||||||||||||
Shares | Shares | Shares | Shares (1) | |||||||||||||
(Dollars in Thousands, except per share amounts) | ||||||||||||||||
Less: Common stock acquired by the stock-based incentive plan (3) | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.25 | ) | ||||||||
Less: After-tax effect of contribution to charitable foundation | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | ||||||||
Pro forma stockholders’ equity per share (7) | $ | 12.80 | $ | 11.71 | $ | 10.90 | $ | 10.20 | ||||||||
Less: Intangible assets | (2.04 | ) | (1.74 | ) | (1.51 | ) | (1.31 | ) | ||||||||
Pro forma tangible stockholders’ equity per share (7) | $ | 10.76 | $ | 9.97 | $ | 9.39 | $ | 8.89 | ||||||||
Offering price as percentage of pro forma stockholders’ equity per share | 78.13 | % | 85.40 | % | 91.74 | % | 98.04 | % | ||||||||
Offering price as percentage of pro forma tangible stockholders’ equity per share | 92.94 | % | 100.30 | % | 106.50 | % | 112.49 | % | ||||||||
Number of shares outstanding for pro forma book value per share calculations (8) | 86,681,743 | 101,996,168 | 117,310,593 | 134,992,182 |
(1) | As adjusted to give effect to an increase in the number of shares that could occur due to a 15% increase in the offering range to reflect demand for the shares, or changes in market or financial conditions following the commencement of the offering. | |
(2) | Assumes that 4% of shares of common stock sold in the offering and issued to the charitable foundation will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Northwest Bancshares, Inc. The loan will have a term of 20 years and an interest rate equal to the prime rate as published inThe Wall Street Journal. Northwest Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Northwest Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 20 equal annual installments of principal and interest. Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans” (“SOP 93-6”), requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that: (i) the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Northwest Savings Bank; (ii) the fair value of the common stock remains equal to the $10.00 subscription price; and (iii) the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 39%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 54,955, 64,670, 74,386 and 85,558 shares were committed to be released during the period at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of net income per share calculations. | |
(3) | Gives effect to the grant of stock awards pursuant to the stock-based incentive plan expected to be adopted by Northwest Bancshares, Inc. following the offering and presented to stockholders for approval not earlier than six months after the completion of the offering. We have assumed that at the minimum, midpoint, maximum and maximum as adjusted, of the offering range this plan acquires a number of shares of restricted common stock equal to 4% of the shares sold in the offering and issued to the charitable foundation, either through open market purchases, from authorized but unissued shares of common stock or treasury stock of Northwest Bancshares, Inc. Funds used by the stock-based incentive plan to purchase the shares of common stock will be contributed by Northwest Bancshares, Inc. In calculating the pro forma effect of the stock-based incentive plan, it is assumed that the shares of common stock were acquired by the plan in open market purchases at the beginning of the period presented for a purchase price equal to the price for which the shares are sold in the offering, and that 10.0% of the amount contributed was an amortized expense (20.0% annually based upon a five-year vesting period) during the six months ended June 30, 2009. There can be no assurance that the actual purchase price of the shares of common stock granted under the stock-based incentive plan will be equal to the $10.00 subscription price. If shares are acquired from authorized but unissued shares of common stock or from treasury shares of Northwest Bancshares, Inc., our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of approximately 2.47% (at the maximum of the offering range) on the ownership interest of stockholders. The impact on pro forma net income per share and pro forma stockholders’ equity per share is not material. The following table shows pro forma net income per share for the six months ended June 30, 2009 and pro forma stockholders’ equity per share at June 30, 2009, based on the sale of the number of shares indicated, assuming all the shares of common stock to fund the stock awards are obtained from authorized but unissued shares. |
At or For the Six Months Ended June 30, 2009 | 53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | ||||||||||||
Pro forma net income per share | $ | 0.25 | $ | 0.22 | $ | 0.19 | $ | 0.17 | ||||||||
Pro forma stockholders’ equity per share | $ | 12.73 | $ | 11.67 | $ | 10.88 | $ | 10.20 |
(4) | Gives effect to the granting of options pursuant to the stock-based incentive plan, which is expected to be adopted by Northwest Bancshares, Inc. following the offering and presented to stockholders for approval not earlier than six months after the completion of the offering. We have assumed that options will be granted to acquire shares of common stock equal to 10% of the shares sold in the offering and issued to the charitable foundation. In calculating the pro forma effect of the stock options, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, and the estimated grant-date fair value pursuant to the application of the Black-Scholes option pricing model was $2.03 for each option. The pro forma net income assumes that the options granted under the stock-based incentive plan have a value of $2.03 per option, which was determined using the Black-Scholes option pricing formula using the following assumptions: (i) the trading price on date of grant was $10.00 per share; (ii) exercise price is equal to |
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the trading price on the date of grant; (iii) dividend yield of 4.56%; (iv) expected life of eight years; (v) expected volatility of 20.37%; and (vi) risk-free interest rate of 2.16%. If the fair market value per share on the date of grant is different than $10.00, or if the assumptions used in the option pricing formula are different from those used in preparing this pro forma data, the value of options and the related expense recognized will be different. The aggregate grant date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based incentive plan is obtained from the issuance of authorized but unissued shares of common stock, our net income and stockholders’ equity per share will decrease. This also will have a dilutive effect of up to 5.96% on the ownership interest of persons who purchase shares of common stock in the offering. | ||
(5) | The number of shares used to calculate pro forma net income per share is equal to the estimated weighted average shares outstanding as of the date of this prospectus, including the effect of the shares issued in connection with the acquisition of Keystone State Savings Bank, multiplied by the exchange ratio at the minimum, midpoint, maximum and maximum, as adjusted, plus the shares contributed to the charitable foundation, and subtracting the employee stock ownership plan shares which have not been committed for release during the respective periods in accordance with SOP 93-6. See footnote 2, above. | |
(6) | The retained earnings of Northwest Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “Proposal 1—Approval of the Plan of Conversion and Reorganization—Liquidation Rights” and “Supervision and Regulation.” | |
(7) | Per share figures include publicly held shares of Northwest Bancorp, Inc. common stock that will be exchanged for shares of Northwest Bancshares, Inc. common stock in the conversion. Stockholders’ equity per share calculations are based upon the sum of (i) the number of subscription shares assumed to be sold in the offering; (ii) shares issued to the charitable foundation and (iii) shares to be issued in exchange for publicly held shares. | |
(8) | The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering. |
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At or for the Year Ended December 31, 2008 | ||||||||||||||||
Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||
53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | |||||||||||||
Shares | Shares | Shares | Shares (1) | |||||||||||||
(Dollars in Thousands, except per share amounts) | ||||||||||||||||
Gross proceeds of offering | $ | 539,750 | $ | 635,000 | $ | 730,250 | $ | 839,788 | ||||||||
Market value of shares issued to charitable foundation | 9,795 | 11,700 | 13,605 | 15,796 | ||||||||||||
Market value of shares issued in the exchange | 317,272 | 373,262 | 429,251 | 493,639 | ||||||||||||
Pro forma market capitalization | $ | 866,817 | $ | 1,019,692 | $ | 1,173,106 | $ | 1,349,222 | ||||||||
Gross proceeds of offering | $ | 539,750 | $ | 635,000 | $ | 730,250 | $ | 839,788 | ||||||||
Less: Expenses | 24,214 | 27,668 | 31,121 | 35,093 | ||||||||||||
Estimated net proceeds | $ | 515,536 | $ | 607,332 | $ | 699,129 | $ | 804,695 | ||||||||
Less: Common stock purchased by employee stock ownership plan | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: Cash contribution to charitable foundation | (1,000 | ) | (1,000 | ) | (1,000 | ) | (1,000 | ) | ||||||||
Less: Common stock purchased by the stock-based incentive plan | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Plus: Northwest Bancorp, MHC capital contribution | 2,223 | 2,223 | 2,223 | 2,223 | ||||||||||||
Estimated net proceeds, as adjusted | $ | 472,795 | $ | 556,819 | $ | 640,844 | $ | 737,472 | ||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||
Consolidated net income: | ||||||||||||||||
Historical | $ | 48,171 | $ | 48,171 | $ | 48,171 | $ | 48,171 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Income on adjusted net proceeds | 9,373 | 11,039 | 12,705 | 14,620 | ||||||||||||
Employee stock ownership plan (2) | (670 | ) | (789 | ) | (908 | ) | (1,044 | ) | ||||||||
Shares granted under the stock-based incentive plan (3) | (2,682 | ) | (3,156 | ) | (3,630 | ) | (4,175 | ) | ||||||||
Options granted under the stock-based incentive plan (4) | (2,144 | ) | (2,523 | ) | (2,902 | ) | (3,338 | ) | ||||||||
Pro forma net income | $ | 52,048 | $ | 52,742 | $ | 53,436 | $ | 54,234 | ||||||||
Net income per share (5): | ||||||||||||||||
Historical | $ | 0.58 | $ | 0.49 | $ | 0.42 | $ | 0.37 | ||||||||
Pro forma adjustments: | ||||||||||||||||
Income on adjusted net proceeds | 0.11 | 0.11 | 0.11 | 0.11 | ||||||||||||
Employee stock ownership plan (2) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||
Shares granted under the stock-based incentive plan (3) | (0.03 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | ||||||||
Options granted under the stock-based incentive plan (4) | (0.03 | ) | (0.03 | ) | (0.03 | ) | (0.03 | ) | ||||||||
Pro forma net income per share (5) (6) | $ | 0.62 | $ | 0.53 | $ | 0.47 | $ | 0.41 | ||||||||
Offering price to pro forma net income per share | 16.13 | x | 18.87 | x | 21.28 | x | 24.39 | x | ||||||||
Number of shares used in net income per share calculations (5) | 84,593,472 | 99,538,708 | 114,483,944 | 131,670,966 | ||||||||||||
At December 31, 2008 | ||||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Historical | $ | 613,784 | $ | 613,784 | $ | 613,784 | $ | 613,784 | ||||||||
Estimated net proceeds | 515,536 | 607,332 | 699,129 | 804,695 | ||||||||||||
Northwest Bancorp, MHC capital contribution | 2,217 | 2,217 | 2,217 | 2,217 | ||||||||||||
Stock contribution to charitable foundation | 9,795 | 11,700 | 13,605 | 15,796 | ||||||||||||
Tax benefit of contribution of charitable foundation | 4,210 | 4,953 | 5,696 | 6,550 | ||||||||||||
Less: Common stock acquired by employee stock ownership plan (2) | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: Common stock acquired by the stock-based incentive plan (3) | (21,982 | ) | (25,868 | ) | (29,754 | ) | (34,223 | ) | ||||||||
Less: After-tax effect of contribution to charitable foundation | (10,795 | ) | (12,700 | ) | (14,605 | ) | (16,796 | ) | ||||||||
Pro forma stockholders’ equity | $ | 1,090,784 | $ | 1,175,551 | $ | 1,260,318 | $ | 1,357,800 | ||||||||
Less: Intangible assets | (178,758 | ) | (178,758 | ) | (178,758 | ) | (178,758 | ) | ||||||||
Pro forma tangible stockholders’ equity | $ | 912,026 | $ | 996,793 | $ | 1,081,560 | $ | 1,179,042 | ||||||||
Stockholders’ equity per share (7): | ||||||||||||||||
Historical | $ | 7.06 | $ | 6.02 | $ | 5.21 | $ | 4.53 | ||||||||
Estimated net proceeds | 5.95 | 5.95 | 5.96 | 5.96 | ||||||||||||
Northwest Bancorp, MHC capital contribution | 0.03 | 0.02 | 0.02 | 0.02 | ||||||||||||
Stock contribution to charitable foundation | 0.11 | 0.11 | 0.12 | 0.12 | ||||||||||||
Tax benefit of contribution to charitable foundation | 0.05 | 0.05 | 0.05 | 0.05 | ||||||||||||
Less: Common stock acquired by employee stock ownership plan (2) | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.25 | ) | ||||||||
Less: Common stock acquired by the stock-based incentive plan (3) | (0.25 | ) | (0.25 | ) | (0.25 | ) | (0.25 | ) |
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At or for the Year Ended December 31, 2008 | ||||||||||||||||
Based Upon the Sale at $10.00 Per Share of | ||||||||||||||||
53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | |||||||||||||
Shares | Shares | Shares | Shares (1) | |||||||||||||
(Dollars in Thousands, except per share amounts) | ||||||||||||||||
Less: After-tax effect of contribution to charitable foundation | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | ||||||||
Pro forma stockholders’ equity per share (7) | $ | 12.58 | $ | 11.53 | $ | 10.74 | $ | 10.06 | ||||||||
Intangible assets | (2.06 | ) | (1.75 | ) | (1.52 | ) | (1.32 | ) | ||||||||
Pro forma tangible stockholders’ equity per share (7) | $ | 10.52 | $ | 9.78 | $ | 9.22 | $ | 8.74 | ||||||||
Offering price as percentage of pro forma stockholders’ equity per share | 79.49 | % | 86.73 | % | 93.11 | % | 99.40 | % | ||||||||
Offering price as percentage of pro forma tangible stockholders’ equity per share | 95.06 | % | 102.25 | % | 108.46 | % | 114.42 | % | ||||||||
Number of shares outstanding for pro forma book value per share calculations (8) | 86,681,743 | 101,996,168 | 117,310,593 | 134,922,182 |
(1) | As adjusted to give effect to an increase in the number of shares that could occur due to a 15% increase in the offering range to reflect demand for the shares, or changes in market and financial conditions following the commencement of the offering. | |
(2) | Assumes that 4% of shares of common stock sold in the offering and issued to the charitable foundation will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Northwest Bancshares, Inc. The loan will have a term of 20 years and an interest rate equal to the prime rate as published inThe Wall Street Journal. Northwest Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Northwest Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 20 equal annual installments of principal and interest. SOP 93-6 requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that: (i) the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Northwest Savings Bank; (ii) the fair value of the common stock remains equal to the $10.00 subscription price; and (iii) the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 39%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 109,909, 129,340, 148,771 and 171,117 shares were committed to be released during the year at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the year were considered outstanding for purposes of net income per share calculations. | |
(3) | Gives effect to the grant of stock awards pursuant to the stock-based incentive plan expected to be adopted by Northwest Bancshares, Inc. following the offering and presented to stockholders for approval not earlier than six months after the completion of the offering. We have assumed that at the midpoint, maximum and maximum as adjusted, of the offering range this plan acquires a number of shares of restricted common stock equal to 4% of the shares sold in the stock offering and issued to the charitable foundation, either through open market purchases, from authorized but unissued shares of common stock or treasury stock of Northwest Bancshares, Inc. Funds used by the stock-based incentive plan to purchase the shares of common stock will be contributed by Northwest Bancshares, Inc. In calculating the pro forma effect of the stock-based incentive plan, it is assumed that the shares of common stock were acquired by the plan in open market purchases at the beginning of the period presented for a purchase price equal to the price for which the shares are sold in the offering, and that 20.0% of the amount contributed was an amortized expense (based upon a five-year vesting period) during the year ended December 31, 2008. There can be no assurance that the actual purchase price of the shares of common stock granted under the stock-based incentive plan will be equal to the $10.00 subscription price. If shares are acquired from authorized but unissued shares of common stock or from treasury shares of Northwest Bancshares, Inc., our net income per share and stockholders’ equity per share will decrease. This will also have a dilutive effect of approximately 2.47% (at the maximum of the offering range) on the ownership interest of stockholders. The impact on pro forma net income per share and pro forma stockholders’ equity per share is not material. The following table shows pro forma net income per share for the year ended December 31, 2008 and pro forma stockholders’ equity per share at December 31, 2008, based on the sale of the number of shares indicated, assuming all the shares of common stock to fund the stock awards are obtained from authorized but unissued shares. |
At or For the Year Ended December 31, 2008 | 53,975,000 | 63,500,000 | 73,025,000 | 83,978,750 | ||||||||||||
Pro forma net income per share | $ | 0.60 | $ | 0.52 | $ | 0.46 | $ | 0.41 | ||||||||
Pro forma stockholders’ equity per share | $ | 12.52 | $ | 11.47 | $ | 10.73 | $ | 10.06 |
(4) | Gives effect to the granting of options pursuant to the stock-based incentive plan, which is expected to be adopted by Northwest Bancshares, Inc. following the offering and presented to stockholders for approval not earlier than six months after the completion of the offering. We have assumed that options will be granted to acquire shares of common stock equal to 10% of the shares sold in the offering and issued to the charitable foundation. In calculating the pro forma effect of the stock options, it is assumed that the exercise price of the stock options and the trading price of the stock at the date of grant were $10.00 per share, and the estimated grant date fair value pursuant to the application of the Black-Scholes option pricing model was $2.03 for each option. The pro forma net income assumes that the options granted under the stock-based incentive plan have a value of $2.03 per option, which was determined using the Black-Scholes option pricing formula using the following assumptions: (i) the trading price on date of grant was $10.00 per share; (ii) exercise price is equal to the trading price on the date of grant; (iii) dividend yield of 4.56% ; (iv) expected life of eight years; (v) expected volatility of 20.73%; and (vi) risk-free interest rate of 2.16%. If the fair market value per share on the date of grant is different than $10.00, or if the assumptions |
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used in the option pricing formula are different from those used in preparing this pro forma data, the value of options and the related expense recognized will be different. The aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based incentive plan is obtained from the issuance of authorized but unissued shares of common stock, our net income and stockholders’ equity per share will decrease. This also will have a dilutive effect of up to 5.96% on the ownership interest of persons who purchase shares of common stock in the offering. | ||
(5) | The number of shares used to calculate pro forma net income per share is equal to the estimated weighted average shares outstanding as of the date of this prospectus, including the effect of the shares issued in connection with the acquisition of Keystone State Savings Bank, multiplied by the exchange ratio at the minimum, midpoint, maximum and maximum, as adjusted, plus the shares contributed to the charitable foundation, and subtracting the employee stock ownership plan shares which have not been committed for release during the respective periods in accordance with SOP 93-6. See footnote 2, above. | |
(6) | The retained earnings of Northwest Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “Proposal 1—Approval of the Plan of Conversion and Reorganization—Liquidation Rights” and “Supervision and Regulation.” | |
(7) | Per share figures include publicly held shares of Northwest Bancorp, Inc. common stock that will be exchanged for shares of Northwest Bancshares, Inc. common stock in the conversion. Stockholders’ equity per share calculations are based upon the sum of (i) the number of subscription shares assumed to be sold in the offering; (ii) shares issued to the charitable foundation; and (iii) shares to be issued in exchange for publicly held shares. The number of subscription shares actually sold and the corresponding number of exchange shares may be more or less than the assumed amounts. | |
(8) | The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering. |
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AND RESULTS OF OPERATIONS
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• | Maintaining a strong and experienced management team, and attracting and retaining dedicated and qualified personnel to support the growth of our franchise.Achieving our strategic objectives requires an experienced and dedicated management team, which we have developed and maintained over the years. Our management team has been an integral part of the continued growth and success of Northwest Savings Bank. | ||
• | Being recognized as an employer of choice in all of our markets by providing employees with exceptional opportunities for advancement and growth in an attractive |
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business environment.A strong management team requires the support of dedicated and experienced employees. Our commitment to our employees, as well as the career opportunities offered by our sustained growth, has made Northwest Savings Bank a preferred employer in the markets we serve. | |||
• | Our ability and our reputation as an experienced and successful acquirer.Since 1994, we have completed 25 acquisition transactions. During this period, our total banking offices have increased from 41 to 170, and our assets have increased from $1.4 billion to $7.1 billion at June 30, 2009. | ||
• | Our track record of creating value for our stockholders.As a publicly traded mutual holding company, we have strived to create value for our stockholders while meeting the needs of our banking customers. Common stock purchased in our initial offering in 1994 has appreciated 410% in value as of August 31, 2009 (excluding dividends paid). We will continue to focus on creating shareholder value as we transition to a fully converted stock holding company. |
• | Complementary acquisitions.We believe that acquisition opportunities exist both within and beyond our current market area. We will consider pursuing acquisition opportunities on a selective basis in contiguous or near contiguous market areas that will afford us the opportunity to add complementary products to our existing business or expand our franchise geographically. | ||
• | De novo branching.We have opened de novo branches to provide better service for our customers and to add to or fill in gaps in our geographic footprint. For example, we recently opened three new branches in Rochester, New York, and plan to open a fourth new branch in Rochester during the fourth quarter of 2009. |
• | Asset mix diversification.Historically, we have emphasized the origination of single family residential mortgage loans and we will continue to emphasize these loans in the future. However, loan diversification improves our net interest margin because consumer loans and commercial business loans generally have shorter terms and higher interest rates than residential mortgage loans. | ||
• | Managing interest rate risk.Diversifying our asset mix not only improves our margin but also reduces the exposure of our net interest income and earnings to interest rate risk. We will continue to manage our interest rate risk by diversifying the type and maturity of assets in our loan and investment portfolios. |
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• | Fee income.We have been focusing on increasing our fee income by offering new products and services. For example, we offer business deposits which are a source of low-cost funds and fee income, as well as investment management, brokerage and trust services with almost $1.0 billion of managed assets. | ||
• | Investment in our infrastructure.Over the past five years, we have significantly upgraded our technology capabilities by offering Internet and mobile banking, an expanded ATM network, debit cards, surcharge-free ATM capabilities and electronic check clearing. We intend to capitalize on our technology capabilities to improve operating efficiencies and enhance customer service. |
• | Reducing our cost of funds and our exposure to interest rate risk by offering and attracting more checking accounts, transaction accounts and other low cost deposits. Transaction accounts generally are our least costly source of funds, and therefore improve our interest rate spread and the interest rate risk associated with deposits repricing more quickly than loans and investments in a rising interest rate environment. |
• | Maintaining a quality loan portfolio while exercising prudent loan underwriting and administration standards.While the delinquencies in our loan portfolio have increased during the current economic recession, we intend to maintain conservative loan underwriting and administration standards in the future. |
• | Using the capital raised in the stock offering to take advantage of strategic growth and acquisition opportunities.Management believes that the current economic recession will increase the rate of consolidation in the banking industry. After raising additional capital from the conversion and stock offering, we will be better positioned to take advantage of growth and acquisition opportunities that arise. | ||
• | Using the capital raised in the stock offering to increase our capital levels that may be required by the federal banking regulators in the current economic environment.The current severe economic recession has underscored the importance of capital strength. It is expected that existing minimum regulatory capital ratios will be increased by the bank regulatory agencies in response to market conditions and the recession. |
• | Operating as a regional community banking organization offering a broad range of financial products and services.As a community bank, we are uniquely positioned to understand the financial needs of our local customers. Our Community Banking Division has implemented a new sales process that emphasizes the building and fostering of customer relationships. Our new fully-integrated service and sales system will improve customer service and our operating performance. | ||
• | Our newly established charitable foundation will strengthen our commitment to the communities we serve.The charitable foundation will be initially funded with $9.8 |
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million to $15.8 million of stock and $1.0 million in cash to benefit the communities we serve. |
(i) | the employee stock ownership plan will acquire 2,975,420 shares of common stock with a $29.8 million loan from Northwest Bancshares, Inc. that is expected to be repaid over 20 years, resulting in an annual expense (pre-tax) of approximately $1.5 million (assuming that the shares of common stock maintain a value of $10.00 per share); | ||
(ii) | if adopted more than one year following the offering, the new stock-based incentive plan may award a number of shares of restricted stock equal to or in excess of 4% of the shares sold in the offering and issued to the charitable foundation, or 2,975,420 shares, to eligible participants (reduced by amounts purchased in the stock offering by our 401(k) plan using its purchase priority in the stock offering), and such awards will be expensed as the awards vest. Assuming all shares are awarded under the stock- based incentive plan at a price of $10.00 per share, and that the awards vest over a minimum of five years, the corresponding annual expense (pre-tax) associated with shares awarded under the stock-based incentive plan will be approximately $6.0 million; and | ||
(iii) | if adopted more than one year following the offering, the new stock-based incentive plan may award options to purchase a number of shares equal to or in excess of 10% of the shares sold in the offering and issued to the charitable foundation, or 7,438,550 shares, to eligible participants, and such options will be expensed as the options vest. Assuming all options are awarded under the stock-based incentive plan at a price of $10.00 per share, and that the options vest over a minimum of five years, we applied the Black-Scholes option pricing model to estimate a grant-date fair value of $2.03 per option. (We also assumed an estimated volatility rate of 20.37% for the shares of common stock, a dividend yield of 4.56%, an expected option life of eight years and a risk-free interest rate of 2.16%.) The corresponding annual expense (pre-tax) associated with options awarded under the stock-based incentive plan will be approximately $3.0 million. |
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At June 30, | At December 31, | |||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||||||
One- to four-family | $ | 2,396,623 | 45.4 | % | $ | 2,492,940 | 47.2 | % | $ | 2,430,117 | 48.9 | % | $ | 2,411,024 | 53.5 | % | ||||||||||||||||
Home equity | 1,038,323 | 19.7 | 1,035,954 | 19.6 | 992,335 | 20.0 | 887,352 | 19.7 | ||||||||||||||||||||||||
Multi-family and commercial | 1,191,107 | 22.5 | 1,100,218 | 20.8 | 906,594 | 18.3 | 701,951 | 15.6 | ||||||||||||||||||||||||
Total real estate loans | 4,626,053 | 87.6 | 4,629,112 | 87.6 | 4,329,046 | 87.2 | 4,000,327 | 88.8 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Automobile | 102,519 | 1.9 | 102,267 | 2.0 | 125,298 | 2.5 | 138,401 | 3.1 | ||||||||||||||||||||||||
Education loans | 25,807 | 0.5 | 38,152 | 0.7 | 14,551 | 0.3 | 11,973 | 0.3 | ||||||||||||||||||||||||
Loans on savings accounts | 11,576 | 0.2 | 11,191 | 0.2 | 10,563 | 0.2 | 10,313 | 0.2 | ||||||||||||||||||||||||
Other (1) | 116,852 | 2.2 | 115,913 | 2.2 | 117,831 | 2.4 | 109,303 | 2.4 | ||||||||||||||||||||||||
Total consumer loans | 256,754 | 4.8 | 267,523 | 5.1 | 268,243 | 5.4 | 269,990 | 6.0 | ||||||||||||||||||||||||
Commercial business | 400,926 | 7.6 | 387,145 | 7.3 | 367,459 | 7.4 | 235,311 | 5.2 | ||||||||||||||||||||||||
Total loans receivable, gross | 5,283,733 | 100.0 | % | 5,283,780 | 100.0 | % | 4,964,748 | 100.0 | % | 4,505,628 | 100.0 | % | ||||||||||||||||||||
Deferred loan fees | (5,978 | ) | (5,041 | ) | (4,179 | ) | (3,027 | ) | ||||||||||||||||||||||||
Undisbursed loan proceeds | (119,460 | ) | (81,918 | ) | (123,163 | ) | (52,505 | ) | ||||||||||||||||||||||||
Allowance for loan losses (real estate loans) | (40,277 | ) | (33,760 | ) | (28,854 | ) | (17,936 | ) | ||||||||||||||||||||||||
Allowance for loan losses (other loans) | (26,500 | ) | (21,169 | ) | (12,930 | ) | (19,719 | ) | ||||||||||||||||||||||||
Total loans receivable net | $ | 5,091,518 | $ | 5,141,892 | $ | 4,795,622 | $ | 4,412,441 | ||||||||||||||||||||||||
(1) | Consists primarily of secured and unsecured personal loans. |
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At June 30 | ||||||||||||||||||||||||
At December 31, 2005 | 2005 | 2004 | ||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||
One- to four-family | $ | 2,805,900 | 59.5 | % | $ | 2,693,174 | 60.3 | % | $ | 2,615,328 | 63.1 | % | ||||||||||||
Home equity | 780,451 | 16.5 | 737,619 | 16.5 | 588,192 | 14.2 | ||||||||||||||||||
Multi-family and commercial | 594,503 | 12.6 | 534,224 | 11.9 | 454,606 | 11.0 | ||||||||||||||||||
Total real estate loans | 4,180,854 | 88.6 | 3,965,017 | 88.7 | 3,658,126 | 88.3 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Automobile | 144,519 | 3.1 | 138,102 | 3.1 | 120,887 | 2.9 | ||||||||||||||||||
Education loans | 120,504 | 2.5 | 112,462 | 2.5 | 95,599 | 2.3 | ||||||||||||||||||
Loans on savings accounts | 9,066 | 0.2 | 8,500 | 0.2 | 8,038 | 0.2 | ||||||||||||||||||
Other(1) | 106,390 | 2.3 | 102,787 | 2.3 | 112,163 | 2.7 | ||||||||||||||||||
Total consumer loans | 380,479 | 8.1 | 361,851 | 8.1 | 336,687 | 8.1 | ||||||||||||||||||
Commercial business | 157,572 | 3.3 | 142,391 | 3.2 | 149,509 | 3.6 | ||||||||||||||||||
Total loans receivable, gross | 4,718,905 | 100.0 | % | 4,469,259 | 100.0 | % | 4,144,322 | 100.0 | % | |||||||||||||||
Deferred loan fees | (3,877 | ) | (4,257 | ) | (6,630 | ) | ||||||||||||||||||
Undisbursed loan proceeds | (59,348 | ) | (56,555 | ) | (53,081 | ) | ||||||||||||||||||
Allowance for loan losses (real estate loans) | (16,875 | ) | (15,918 | ) | (15,113 | ) | ||||||||||||||||||
Allowance for loan losses (other loans) | (16,536 | ) | (15,645 | ) | (15,557 | ) | ||||||||||||||||||
Total loans receivable net | $ | 4,622,269 | $ | 4,376,884 | $ | 4,053,941 | ||||||||||||||||||
(1) | Consists primarily of secured and unsecured personal loans. |
Commercial | ||||||||||||||||||||||||||||||||
business and | ||||||||||||||||||||||||||||||||
One- to four-family | Consumer and | commercial | ||||||||||||||||||||||||||||||
mortgage (1) | Percentage | home equity (2) | Percentage | real estate (3) | Percentage | Total (4) | Percentage | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
State | ||||||||||||||||||||||||||||||||
Pennsylvania | $ | 2,013,821 | 85.6 | % | 1,168,682 | 90.3 | % | 989,493 | 65.6 | % | 4,171,996 | 80.8 | % | |||||||||||||||||||
New York | 132,988 | 5.6 | 71,854 | 5.5 | 279,683 | 18.5 | 484,525 | 9.4 | ||||||||||||||||||||||||
Ohio | 15,670 | 0.7 | 13,065 | 1.0 | 7,406 | 0.5 | 36,141 | 0.7 | ||||||||||||||||||||||||
Maryland | 156,027 | 6.6 | 29,712 | 2.3 | 174,056 | 11.5 | 359,795 | 7.0 | ||||||||||||||||||||||||
Florida | 34,827 | 1.5 | 11,765 | 0.9 | 59,246 | 3.9 | 105,838 | 2.1 | ||||||||||||||||||||||||
Total | $ | 2,353,333 | 100.0 | % | 1,295,078 | 100.0 | % | 1,509,884 | 100.0 | % | 5,158,295 | 100.0 | % | |||||||||||||||||||
(1) | Percentage of total mortgage loans. | |
(2) | Percentage of total consumer loans. | |
(3) | Percentage of total commercial loans. | |
(4) | Percentage of total loans. |
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Due after | Due after | Due after | ||||||||||||||||||||||
Due in one | one year | two years | three years | |||||||||||||||||||||
year or | through | through | through | Due after | ||||||||||||||||||||
less | two years | three years | five years | five years | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
At June 30, 2009: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
One-to four-family residential | $ | 190,901 | $ | 126,516 | $ | 115,058 | $ | 229,379 | $ | 1,734,769 | $ | 2,396,623 | ||||||||||||
Multi-family and commercial | 420,091 | 123,190 | 131,849 | 415,076 | 100,901 | 1,191,107 | ||||||||||||||||||
Consumer loans | 381,021 | 123,946 | 113,954 | 203,888 | 472,268 | 1,295,077 | ||||||||||||||||||
Commercial business loans | 141,403 | 41,466 | 44,380 | 139,714 | 33,963 | 400,926 | ||||||||||||||||||
Total loans | $ | 1,133,416 | $ | 415,118 | $ | 405,241 | $ | 988,057 | $ | 2,341,901 | $ | 5,283,733 | ||||||||||||
Due after | Due after | Due after | ||||||||||||||||||||||
Due in one | one year | two years | three years | |||||||||||||||||||||
year or | through | through | through | Due after | ||||||||||||||||||||
less | two years | three years | five years | five years | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
At December 31, 2008: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
One-to four-family residential | $ | 194,953 | $ | 128,566 | $ | 117,431 | $ | 234,006 | $ | 1,817,984 | $ | 2,492,940 | ||||||||||||
Multi-family and commercial | 374,641 | 131,556 | 109,381 | 381,377 | 103,263 | 1,100,218 | ||||||||||||||||||
Consumer loans | 382,501 | 129,440 | 117,265 | 205,306 | 468,965 | 1,303,477 | ||||||||||||||||||
Commercial business loans | 131,829 | 46,292 | 38,489 | 134,199 | 36,336 | 387,145 | ||||||||||||||||||
Total loans | $ | 1,083,924 | $ | 435,854 | $ | 382,566 | $ | 954,888 | $ | 2,426,548 | $ | 5,283,780 | ||||||||||||
Fixed | Adjustable | Total | ||||||||||
(In Thousands) | ||||||||||||
At June 30, 2009: | ||||||||||||
Real estate loans: | ||||||||||||
One-to four-family residential | $ | 2,204,859 | $ | 57,446 | $ | 2,262,305 | ||||||
Multi-family and commercial | 386,471 | 646,214 | 1,032,685 | |||||||||
Consumer loans | 882,884 | 159,802 | 1,042,686 | |||||||||
Commercial business loans | 135,366 | 212,235 | 347,601 | |||||||||
Total loans | $ | 3,609,580 | $ | 1,075,697 | $ | 4,685,277 | ||||||
Fixed | Adjustable | Total | ||||||||||
(In Thousands) | ||||||||||||
At December 31, 2008: | ||||||||||||
Real estate loans: | ||||||||||||
One-to four-family residential | $ | 2,296,290 | $ | 68,091 | $ | 2,364,381 | ||||||
Multi-family and commercial | 343,645 | 608,986 | 952,631 | |||||||||
Consumer loans | 879,576 | 159,992 | 1,039,568 | |||||||||
Commercial business loans | 126,324 | 208,888 | 335,212 | |||||||||
Total loans | $ | 3,645,835 | $ | 1,045,957 | $ | 4,691,792 | ||||||
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At December 31, | ||||||||||||||||||||||||||||||||
At June 30, 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
Amortized | Amortized | Amortized | Amortized | |||||||||||||||||||||||||||||
Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Mortgage-backed securities available for sale: | ||||||||||||||||||||||||||||||||
Fixed-rate pass through certificates | $ | 160,821 | $ | 166,268 | $ | 186,659 | $ | 193,099 | $ | 73,284 | $ | 73,992 | $ | 68,720 | $ | 67,430 | ||||||||||||||||
Variable-rate pass through certificates | 250,939 | 257,451 | 276,121 | 277,183 | 306,886 | 309,054 | 199,442 | 198,365 | ||||||||||||||||||||||||
Fixed-rate CMOs | 48,165 | 45,375 | 60,119 | 57,480 | 73,514 | 71,793 | 87,946 | 85,402 | ||||||||||||||||||||||||
Variable-rate CMOs | 208,772 | 205,995 | 228,917 | 217,877 | 76,886 | 76,908 | 27,613 | 27,771 | ||||||||||||||||||||||||
Total mortgage-backed securities available for sale | $ | 668,697 | $ | 675,089 | $ | 751,816 | $ | 745,639 | $ | 530,569 | $ | 531,747 | $ | 383,721 | $ | 378,968 | ||||||||||||||||
Investment securities available for sale: | ||||||||||||||||||||||||||||||||
U.S. Government, agency and GSEs | $ | 77,651 | $ | 81,322 | $ | 97,884 | $ | 108,908 | $ | 286,359 | $ | 292,546 | $ | 214,031 | $ | 212,525 | ||||||||||||||||
Municipal securities | 240,258 | 236,983 | 268,616 | 267,548 | 262,895 | 267,120 | 14,553 | 14,604 | ||||||||||||||||||||||||
Corporate debt issues | 28,173 | 14,904 | 25,165 | 15,961 | 37,225 | 35,075 | 63,114 | 60,577 | ||||||||||||||||||||||||
Equity securities and mutual funds | 954 | 1,084 | 954 | 1,114 | 6,478 | 6,879 | 95,548 | 100,840 | ||||||||||||||||||||||||
Total investment securities available for sale | $ | 347,036 | $ | 334,293 | $ | 392,619 | $ | 393,531 | $ | 592,957 | $ | 601,620 | $ | 387,246 | $ | 388,546 | ||||||||||||||||
At December 31, | ||||||||||||||||||||||||||||||||
At June 30, 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
Amortized | Amortized | Amortized | Amortized | |||||||||||||||||||||||||||||
Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Mortgage-backed securities held to maturity: | ||||||||||||||||||||||||||||||||
Fixed-rate pass through certificates | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 9,097 | $ | 8,965 | ||||||||||||||||
Variable-rate pass through certificates | — | — | — | — | — | — | 188,700 | 188,382 | ||||||||||||||||||||||||
Fixed-rate CMOs | — | — | — | — | — | — | 4,484 | 4,249 | ||||||||||||||||||||||||
Variable-rate CMOs | — | — | — | — | — | — | 49,374 | 49,335 | ||||||||||||||||||||||||
Total mortgage-backed securities held to maturity | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 251,655 | $ | 250,931 | ||||||||||||||||
At June 30, | At December 31, | |||||||||||||||
2009 | 2008 | 2007 | 2006 | |||||||||||||
(In Thousands) | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||
Fannie Mae | $ | 256,344 | $ | 288,082 | $ | 165,391 | $ | 205,127 | ||||||||
Ginnie Mae | 87,622 | 99,354 | 88,428 | 120,799 | ||||||||||||
Freddie Mac | 302,176 | 320,297 | 229,960 | 249,685 | ||||||||||||
Other (non-agency) | 28,947 | 37,906 | 47,968 | 55,012 | ||||||||||||
Total mortgage-backed securities | $ | 675,089 | $ | 745,639 | $ | 531,747 | $ | 630,623 | ||||||||
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At June 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||
One Year or Less | One Year to Five Years | Five to Ten Years | More than Ten Years | Total | ||||||||||||||||||||||||||||||||||||||||
Annualized | Annualized | Annualized | Annualized | Annualized | ||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||||||
Amortized | Average | Amortized | Average | Amortized | Average | Amortized | Average | Amortized | Average | |||||||||||||||||||||||||||||||||||
Cost | Yield | Cost | Yield | Cost | Yield | Cost | Yield | Cost | Fair Value | Yield | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Investment securities available for sale Government sponsored entities | $ | 995 | 5.34 | % | $ | 1,972 | 5.37 | % | $ | 22,613 | 5.39 | % | $ | 51,991 | 5.26 | % | $ | 77,571 | $ | 81,245 | 5.30 | % | ||||||||||||||||||||||
U.S. Government and agency obligations | 80 | 1.20 | % | — | — | — | — | — | — | 80 | 77 | 1.20 | % | |||||||||||||||||||||||||||||||
Municipal securities | — | — | 913 | 4.03 | % | 39,929 | 4.18 | % | 199,416 | 4.50 | % | 240,258 | 236,983 | 4.44 | % | |||||||||||||||||||||||||||||
Corporate debt issues | — | — | 500 | 2.91 | % | — | — | 27,673 | 4.33 | % | 28,173 | 14,904 | 4.30 | % | ||||||||||||||||||||||||||||||
Equity securities and mutual funds | — | — | — | — | — | — | 954 | 5.09 | % | 954 | 1,084 | 5.09 | % | |||||||||||||||||||||||||||||||
Total investment securities available for sale | 1,075 | 5.03 | % | 3,385 | 4.64 | % | 62,542 | 4.62 | % | 280,034 | 4.62 | % | 347,036 | 334,293 | 4.62 | % | ||||||||||||||||||||||||||||
Mortgage-backed securities available for sale: | ||||||||||||||||||||||||||||||||||||||||||||
Pass through certificates | 251,059 | 4.69 | % | 11,925 | 4.57 | % | 8,536 | 4.89 | % | 140,240 | 5.43 | % | 411,760 | 423,719 | 4.94 | % | ||||||||||||||||||||||||||||
CMOs | 208,772 | 1.70 | % | — | — | 18,936 | 4.81 | % | 29,229 | 4.34 | % | 256,937 | 251,370 | 2.23 | % | |||||||||||||||||||||||||||||
Total mortgage-backed securities available for sale | 459,831 | 3.33 | % | 11,925 | 4.57 | % | 27,472 | 4.84 | % | 169,469 | 5.24 | % | 668,697 | 675,089 | 3.90 | % | ||||||||||||||||||||||||||||
Total investment securities and mortgage-backed securities | $ | 460,906 | 3.34 | % | $ | 15,310 | 4.59 | % | $ | 90,014 | 4.69 | % | $ | 449,503 | 4.85 | % | $ | 1,015,733 | $ | 1,009,382 | 4.15 | % | ||||||||||||||||||||||
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Gross Unrealized | Gross Unrealized | |||||||||||||||
Amortized Cost | Holding Gains | Holding Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Debt issued by the U.S. Government and agencies: | ||||||||||||||||
Due in one year or less | $ | 80 | $ | — | $ | (3 | ) | $ | 77 | |||||||
Debt issued by government-sponsored enterprises: | ||||||||||||||||
Due in one year or less | 995 | 13 | — | 1,008 | ||||||||||||
Due in greater than one year to five years | 1,972 | 172 | — | 2,144 | ||||||||||||
Due in greater than five years to ten years | 22,613 | 1,553 | — | 24,166 | ||||||||||||
Due after ten years | 51,991 | 2,043 | (107 | ) | 53,927 | |||||||||||
Equity securities | 954 | 211 | (81 | ) | 1,084 | |||||||||||
Municipal securities: | ||||||||||||||||
Due in greater than one year to five years | 913 | 18 | — | 931 | ||||||||||||
Due in greater than five years to ten years | 39,929 | 739 | (1 | ) | 40,667 | |||||||||||
Due after ten years | 199,416 | 1,930 | (5,961 | ) | 195,385 | |||||||||||
Corporate debt issues: | ||||||||||||||||
Due in greater than one year to five years | 500 | — | — | 500 | ||||||||||||
Due after ten years | 27,673 | 117 | (13,386 | ) | 14,404 | |||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Fixed-rate pass-through | 160,821 | 5,458 | (11 | ) | 166,268 | |||||||||||
Variable-rate pass-through | 250,939 | 6,651 | (139 | ) | 257,451 | |||||||||||
Fixed-rate non-agency CMO | 22,329 | — | (3,035 | ) | 19,294 | |||||||||||
Fixed-rate agency CMO | 25,836 | 639 | (394 | ) | 26,081 | |||||||||||
Variable-rate non-agency CMO | 11,833 | — | (2,964 | ) | 8,869 | |||||||||||
Variable-rate agency CMO | 196,939 | 985 | (798 | ) | 197,126 | |||||||||||
Total residential mortgage-backed securities | 668,697 | 13,733 | (7,341 | ) | 675,089 | |||||||||||
Total marketable securities available for sale | $ | 1,015,733 | $ | 20,529 | $ | (26,880 | ) | $ | 1,009,382 | |||||||
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Gross Unrealized | Gross Unrealized | |||||||||||||||
Amortized Cost | Holding Gains | Holding Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Debt issued by the U.S. Government and agencies: | ||||||||||||||||
Due in one year or less | $ | 91 | $ | — | $ | (3 | ) | $ | 88 | |||||||
Debt issued by government-sponsored enterprises: | ||||||||||||||||
Due in one year or less | 2,985 | 50 | — | 3,035 | ||||||||||||
Due in greater than one year to five years | 2,962 | 208 | — | 3,170 | ||||||||||||
Due in greater than five years to ten years | 30,352 | 2,066 | — | 32,418 | ||||||||||||
Due after ten years | 61,494 | 8,712 | (9 | ) | 70,197 | |||||||||||
Equity securities | 954 | 160 | — | 1,114 | ||||||||||||
Municipal securities: | ||||||||||||||||
Due in greater than one year to five years | 460 | 1 | — | 461 | ||||||||||||
Due in greater than five years to ten years | 43,160 | 822 | (86 | ) | 43,896 | |||||||||||
Due after ten years | 224,996 | 2,707 | (4,512 | ) | 223,191 | |||||||||||
Corporate debt issues: | ||||||||||||||||
Due after ten years | 25,165 | 214 | (9,418 | ) | 15,961 | |||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Fixed-rate pass-through | 186,659 | 6,447 | (7 | ) | 193,099 | |||||||||||
Variable-rate pass-through | 276,121 | 3,136 | (2,074 | ) | 277,183 | |||||||||||
Fixed-rate non-agency CMO | 25,683 | — | (2,938 | ) | 22,745 | |||||||||||
Fixed-rate agency CMO | 34,436 | 445 | (146 | ) | 34,735 | |||||||||||
Variable-rate non-agency CMO | 17,069 | — | (2,710 | ) | 14,359 | |||||||||||
Variable-rate agency CMO | 211,848 | 48 | (8,378 | ) | 203,518 | |||||||||||
Total residential mortgage-backed securities | 751,816 | 10,076 | (16,253 | ) | 745,639 | |||||||||||
Total marketable securities available for sale | $ | 1,144,435 | $ | 25,016 | $ | (30,281 | ) | $ | 1,139,170 | |||||||
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Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government and agencies | $ | 7,967 | $ | (97 | ) | $ | 188 | $ | (10 | ) | $ | 8,155 | $ | (107 | ) | |||||||||
Municipal securities | 64,183 | (2,339 | ) | 52,613 | (3,623 | ) | 116,796 | (5,962 | ) | |||||||||||||||
Corporate issuer | 8,073 | (7,545 | ) | 1,964 | (5,841 | ) | 10,037 | (13,386 | ) | |||||||||||||||
Equity securities | 298 | (81 | ) | — | — | 298 | (81 | ) | ||||||||||||||||
Residential mortgage-backed securities – non-agency | — | — | 28,163 | (5,999 | ) | 28,163 | (5,999 | ) | ||||||||||||||||
Residential mortgage-backed securities – agency | 42,718 | (296 | ) | 73,271 | (1,049 | ) | 115,989 | (1,345 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 123,239 | $ | (10,358 | ) | $ | 156,199 | $ | (16,522 | ) | $ | 279,438 | $ | (26,880 | ) | |||||||||
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government and agencies | $ | — | $ | — | $ | 1,094 | $ | (12 | ) | $ | 1,094 | $ | (12 | ) | ||||||||||
Municipal securities | 109,255 | (4,598 | ) | — | — | 109,255 | (4,598 | ) | ||||||||||||||||
Corporate issuer | 8,618 | (7,055 | ) | 2,573 | (2,363 | ) | 11,191 | (9,418 | ) | |||||||||||||||
Residential mortgage-backed securities – non-agency | 15,256 | (2,550 | ) | 21,848 | (3,098 | ) | 37,104 | (5,648 | ) | |||||||||||||||
Residential mortgage-backed securities – agency | 269,831 | (9,075 | ) | 58,256 | (1,530 | ) | 328,087 | (10,605 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 402,960 | $ | (23,278 | ) | $ | 83,771 | $ | (7,003 | ) | $ | 486,731 | $ | (30,281 | ) | |||||||||
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Total | ||||||||||||||||
Unrealized | Moody’s/Fitch | |||||||||||||||
Description | Class | Book Value | Fair Value | Losses | Ratings | |||||||||||
(In thousands) | ||||||||||||||||
North Fork Capital (1) | N/A | $ | 1,009 | $ | 416 | $ | (503 | ) | Baa1/BBB+ | |||||||
Bank Boston Capital Trust(2) | N/A | 988 | 484 | (504 | ) | A2/BB | ||||||||||
Reliance Capital Trust | N/A | 1,000 | 835 | (165 | ) | Not rated | ||||||||||
Huntington Capital Trust | N/A | 1,419 | 597 | (822 | ) | Baa3/BBB | ||||||||||
MM Community Funding I | Mezzanine | 1,000 | 74 | (926 | ) | Caa2/CCC | ||||||||||
MM Community Funding II | Mezzanine | 389 | 42 | (347 | ) | Baa2/BBB | ||||||||||
I-PreTSL I | Mezzanine | 1,500 | 168 | (1,332 | ) | Not rated/A- | ||||||||||
I-PreTSL II | Mezzanine | 1,500 | 183 | (1,317 | ) | Not rated/A- | ||||||||||
PreTSL XIX | Senior A-1 | 8,954 | 4,323 | (4,631 | ) | A3/AAA | ||||||||||
PreTSL XX | Senior A-1 | 5,664 | 2,915 | (2,749 | ) | Baa1/AAA | ||||||||||
$ | 23,423 | $ | 10,037 | $ | (13,386 | ) | ||||||||||
(1) | North Fork Bank was acquired by Capital One Financial Corporation | |
(2) | Bank Boston was acquired by Bank of America |
Additional | ||||||||||||||||
Immediate | ||||||||||||||||
Defaults Before | ||||||||||||||||
Current | Causing an | |||||||||||||||
Deferrals and | Performing | Interest | ||||||||||||||
Description | Total collateral | Defaults | Collateral | Shortfall | ||||||||||||
(In thousands) | ||||||||||||||||
I-PreTSL I | $ | 211,000 | $ | 35,000 | $ | 176,000 | $ | 50,500 | ||||||||
I-PreTSL II | $ | 378,000 | $ | — | $ | 378,000 | $ | 137,500 | ||||||||
PreTSL XIX | $ | 700,535 | $ | 96,000 | $ | 604,535 | $ | 259,500 | ||||||||
PreTSL XX | $ | 604,154 | $ | 83,000 | $ | 521,154 | $ | 243,500 |
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Total | Impairment | |||||||||||||||
Unrealized | Recorded in | |||||||||||||||
Description | Book Value | Fair Value | Losses | Earnings | ||||||||||||
(In thousands) | ||||||||||||||||
AMAC 2003-6 2A2 | $ | 1,194 | $ | 1,180 | $ | (14 | ) | $ | — | |||||||
AMAC 2003-6 2A8 | 2,471 | 2,449 | (22 | ) | — | |||||||||||
AMAC 2003-7 A3 | 1,415 | 1,385 | (30 | ) | — | |||||||||||
BOAMS 2005-11 1A8 | 6,497 | 5,690 | (807 | ) | — | |||||||||||
CWALT 2005-J14 A3 | 7,147 | 5,038 | (2,109 | ) | (59 | ) | ||||||||||
CFSB 2003-17 2A2 | 2,008 | 1,965 | (43 | ) | — | |||||||||||
WAMU 2003-S2 A4 | 1,596 | 1,586 | (10 | ) | — | |||||||||||
CMLTI 2005-10 1A5B | 2,659 | 1,233 | (1,426 | ) | (2,007 | ) | ||||||||||
CSFB 2003-21 1A13 | 250 | 238 | (12 | ) | — | |||||||||||
FHASI 2003-8 1A24 | 4,401 | 4,022 | (379 | ) | — | |||||||||||
SARM 2005-21 4A2 | 2,767 | 1,901 | (866 | ) | (2,224 | ) | ||||||||||
WFMBS 2003-B A2 | 1,757 | 1,476 | (281 | ) | — | |||||||||||
$ | 34,162 | $ | 28,163 | $ | (5,999 | ) | $ | (4,290 | ) | |||||||
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At June 30, 2009 | At December 31, 2008 | |||||||||||||||||||||||
Balance | Percent (1) | Rate (2) | Balance | Percent (1) | Rate (2) | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Savings accounts | $ | 841,868 | 15.7 | % | 0.76 | % | $ | 760,245 | 15.1 | % | 1.14 | % | ||||||||||||
Checking accounts | 1,178,616 | 22.1 | 0.23 | % | 1,100,131 | 21.8 | 0.37 | % | ||||||||||||||||
Money market accounts | 744,132 | 13.9 | 1.25 | % | 720,375 | 14.3 | 1.58 | % | ||||||||||||||||
Certificates of deposit: | ||||||||||||||||||||||||
Maturing within 1 year | 1,555,170 | 29.1 | 2.71 | % | 1,285,695 | 25.5 | 2.88 | % | ||||||||||||||||
Maturing 1 to 3 years | 784,113 | 14.7 | 3.52 | % | 829,776 | 16.5 | 3.74 | % | ||||||||||||||||
Maturing more than 3 years | 241,840 | 4.5 | 4.13 | % | 341,989 | 6.8 | 4.11 | % | ||||||||||||||||
Total certificates | 2,581,123 | 48.3 | 3.09 | % | 2,457,460 | 48.8 | 3.34 | % | ||||||||||||||||
Total deposits | $ | 5,345,739 | 100.0 | % | 1.81 | % | $ | 5,038,211 | 100.0 | % | 2.08 | % | ||||||||||||
At December 31 | |||||||||||||||||||||||||||
2007 | 2006 | ||||||||||||||||||||||||||
Balance | Percent (1) | Rate (2) | Balance | Percent (1) | Rate (2) | ||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Savings accounts | $ | 745,430 | 13.4 | % | 1.20 | % | $ | 807,873 | 15.1 | % | 1.44 | % | |||||||||||||||
Checking accounts | 1,079,093 | 19.5 | 0.85 | % | 994,783 | 18.5 | 1.05 | % | |||||||||||||||||||
Money market accounts | 681,115 | 12.3 | 3.63 | % | 594,472 | 11.1 | 3.62 | % | |||||||||||||||||||
Certificates of deposit: | |||||||||||||||||||||||||||
Maturing within 1 year | 2,541,053 | 45.9 | 4.70 | % | 2,024,850 | 37.7 | 4.47 | % | |||||||||||||||||||
Maturing 1 to 3 years | 379,183 | 6.8 | 4.31 | % | 801,156 | 14.9 | 4.50 | % | |||||||||||||||||||
Maturing more than 3 years | 116,460 | 2.1 | 4.62 | % | 143,616 | 2.7 | 4.56 | % | |||||||||||||||||||
Total certificates | 3,036,696 | 54.8 | 4.65 | % | 2,969,622 | 55.3 | 4.48 | % | |||||||||||||||||||
Total deposits | $ | 5,542,334 | 100.0 | % | 3.29 | % | $ | 5,366,750 | 100.0 | % | 3.26 | % | |||||||||||||||
(1) | Represents percentage of total deposits. | |
(2) | Represents weighted average nominal rate at fiscal year end. |
State | Balance | Percent | ||||||
(Dollars in thousands) | ||||||||
Pennsylvania | $ | 4,485,447 | 83.9 | % | ||||
New York | 448,739 | 8.3 | ||||||
Ohio | 55,571 | 1.0 | ||||||
Maryland | 307,942 | 5.8 | ||||||
Florida | 48,040 | 0.9 | ||||||
Total | $ | 5,345,739 | 100.0 | % | ||||
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At December 31, | ||||||||||||||||
At June 30, | ||||||||||||||||
2009 | 2008 | 2007 | 2006 | |||||||||||||
(In thousands) | ||||||||||||||||
Interest Rate: | ||||||||||||||||
Less than 2.00% | $ | 468,550 | $ | 149,140 | $ | 9,607 | $ | 13,891 | ||||||||
2.00% to 2.99% | 686,448 | 855,120 | 26,063 | 100,667 | ||||||||||||
3.00% to 3.99% | 848,466 | 771,932 | 517,064 | 791,206 | ||||||||||||
4.00% to 4.99% | 544,794 | 640,500 | 1,362,512 | 1,191,995 | ||||||||||||
5.00% or higher | 32,865 | 40,768 | 1,121,450 | 871,863 | ||||||||||||
Total | $ | 2,581,123 | $ | 2,457,460 | $ | 3,036,696 | $ | 2,969,622 | ||||||||
At June 30, 2009 | ||||||||||||||||||||||||
Period to Maturity | ||||||||||||||||||||||||
Less Than or | More Than | More Than | ||||||||||||||||||||||
Equal to | One to | Two to | More Than | Percent of | ||||||||||||||||||||
One Year | Two Years | Three Years | Three Years | Total | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest Rate Range: | ||||||||||||||||||||||||
Less than 2.00% | $ | 410,999 | $ | 52,643 | $ | 3,997 | $ | 11 | $ | 467,650 | 18.1 | % | ||||||||||||
2.00% to 2.99% | 550,571 | 86,119 | 36,341 | 14,317 | 687,348 | 26.6 | ||||||||||||||||||
3.00% to 3.99% | 475,853 | 32,745 | 289,920 | 49,948 | 848,466 | 32.9 | ||||||||||||||||||
4.00% to 4.99% | 106,370 | 93,630 | 171,128 | 173,666 | 544,794 | 21.1 | ||||||||||||||||||
5.00% or higher | 11,377 | 7,820 | 9,770 | 3,898 | 32,865 | 1.3 | ||||||||||||||||||
Total | $ | 1,555,170 | $ | 272,957 | $ | 511,156 | $ | 241,840 | $ | 2,581,123 | 100.0 | % | ||||||||||||
Maturity Period | Certificates of Deposit | |||
(In thousands) | ||||
Three months or less | $ | 78,178 | ||
Over three months through six months | 45,323 | |||
Over six months through twelve months | 217,076 | |||
Over twelve months | 246,791 | |||
Total | $ | 587,368 | ||
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During the Six Months Ended | ||||||||||||||||||||
June 30, | During the Years Ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||
Federal Home Loan Bank of Pittsburgh borrowings: | ||||||||||||||||||||
Average balance outstanding | $ | 893,033 | $ | 414,834 | $ | 625,707 | $ | 305,597 | $ | 352,596 | ||||||||||
Maximum outstanding at end of any month during period | $ | 954,439 | $ | 632,758 | $ | 972,018 | $ | 332,160 | $ | 377,592 | ||||||||||
Balance outstanding at end of period | $ | 817,332 | $ | 632,758 | $ | 972,018 | $ | 257,025 | $ | 332,196 | ||||||||||
Weighted average interest rate during period | 3.76 | % | 4.15 | % | 3.89 | % | 4.59 | % | 4.62 | % | ||||||||||
Weighted average interest rate at end of period | 4.04 | % | 3.99 | % | 3.49 | % | 4.64 | % | 4.58 | % | ||||||||||
Reverse repurchase agreements: | ||||||||||||||||||||
Average balance outstanding | $ | 82,257 | $ | 83,715 | $ | 88,349 | $ | 70,875 | $ | 44,860 | ||||||||||
Maximum outstanding at end of any month during period | $ | 87,615 | $ | 87,447 | $ | 98,108 | $ | 83,432 | $ | 55,705 | ||||||||||
Balance outstanding at end of period | $ | 79,731 | $ | 86,928 | $ | 91,436 | $ | 77,452 | $ | 55,705 | ||||||||||
Weighted average interest rate during period | 1.23 | % | 2.05 | % | 1.75 | % | 4.01 | % | 4.03 | % | ||||||||||
Weighted average interest rate at end of period | 1.38 | % | 1.50 | % | 1.02 | % | 3.25 | % | 4.25 | % | ||||||||||
Other borrowings: | ||||||||||||||||||||
Average balance outstanding | $ | 2,566 | $ | 4,630 | $ | 4,602 | $ | 4,790 | $ | 5,333 | ||||||||||
Maximum outstanding at end of any month during period | $ | 4,496 | $ | 4,652 | $ | 4,652 | $ | 4,923 | $ | 5,660 | ||||||||||
Balance outstanding at end of period | $ | — | $ | 4,619 | $ | 4,491 | $ | 4,638 | $ | 4,913 | ||||||||||
Weighted average interest rate during period | 4.99 | % | 4.99 | % | 4.99 | % | 4.99 | % | 4.99 | % | ||||||||||
Weighted average interest rate at end of period | — | 4.99 | % | 4.99 | % | 4.99 | % | 4.99 | % | |||||||||||
Total borrowings: | ||||||||||||||||||||
Average balance outstanding | $ | 977,856 | $ | 503,179 | $ | 718,657 | $ | 381,262 | $ | 402,789 | ||||||||||
Maximum outstanding at end of any month during period | $ | 1,009,586 | $ | 724,305 | $ | 1,067,945 | $ | 408,596 | $ | 424,766 | ||||||||||
Balance outstanding at end of period | $ | 897,063 | $ | 724,305 | $ | 1,067,945 | $ | 339,115 | $ | 392,814 | ||||||||||
Weighted average interest rate during period | 3.57 | % | 3.89 | % | 3.74 | % | 4.52 | % | 4.59 | % | ||||||||||
Weighted average interest rate at end of period | 3.81 | % | 3.70 | % | 3.29 | % | 4.33 | % | 4.54 | % |
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For the Six Months Ended June 30, | ||||||||||||||||||||||||||||
At June 30, | 2009 | 2008 | ||||||||||||||||||||||||||
2009 | Average | Average | Average | Average | ||||||||||||||||||||||||
Average | Outstanding | Yield/ Cost | Outstanding | Yield/ Cost | ||||||||||||||||||||||||
Yield/Cost | Balance | Interest | (12) | Balance | Interest | (12) | ||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||
Loans receivable (includes FTE adjustments of $834 and $783, respectively)(1)(2)(3) | 6.28 | % | $ | 5,194,221 | $ | 161,597 | 6.21 | % | $ | 4,907,866 | $ | 162,478 | 6.58 | % | ||||||||||||||
Mortgage-backed securities (5) | 3.92 | % | 711,842 | 14,278 | 4.01 | % | 688,911 | 16,684 | 4.84 | % | ||||||||||||||||||
Investment securities (includes FTE adjustments of $3,047 and $3,241, respectively) | 6.21 | % | 370,922 | 11,603 | 6.26 | % | 502,370 | 15,611 | 6.21 | % | ||||||||||||||||||
Federal Home Loan Bank stock (7) | — | 63,143 | — | — | 39,174 | 717 | 3.66 | % | ||||||||||||||||||||
Interest-earning deposits | 0.25 | % | 175,431 | 162 | 0.18 | % | 185,255 | 2,506 | 2.68 | % | ||||||||||||||||||
Total interest-earning assets (includes FTE adjustments of $3,881 and $4,204, respectively)(4)(5) | 5.64 | % | 6,515,559 | 187,640 | 5.75 | % | 6,323,576 | 197,996 | 6.23 | % | ||||||||||||||||||
Non-interest-earning assets (8) | 496,152 | 497,741 | ||||||||||||||||||||||||||
Total assets | $ | 7,011,711 | $ | 6,821,317 | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||
Savings deposits | 0.76 | % | $ | 812,396 | 3,058 | 0.76 | % | $ | 767,551 | $ | 4,529 | 1.19 | % | |||||||||||||||
NOW accounts | 0.23 | % | 727,614 | 1,547 | 0.43 | % | 737,138 | 3,714 | 1.01 | % | ||||||||||||||||||
Money market accounts | 1.24 | % | 717,288 | 4,795 | 1.35 | % | 721,558 | 8,628 | 2.40 | % | ||||||||||||||||||
Certificate accounts | 3.09 | % | 2,504,253 | 39,683 | 3.20 | % | 2,913,135 | 62,410 | 4.31 | % | ||||||||||||||||||
Borrowed funds (9) | 3.81 | % | 977,856 | 17,355 | 3.57 | % | 503,179 | 9,740 | 3.89 | % | ||||||||||||||||||
Junior subordinated deferrable interest debentures | 5.49 | % | 108,249 | 2,949 | 5.42 | % | 108,303 | 2,789 | 5.09 | % | ||||||||||||||||||
Total interest-bearing liabilities | 2.16 | % | 5,847,656 | 69,387 | 2.39 | % | 5,750,864 | 91,810 | 3.21 | % | ||||||||||||||||||
Non-interest-bearing liabilities | 538,188 | 449,991 | ||||||||||||||||||||||||||
Total liabilities | 6,385,844 | 6,200,855 | ||||||||||||||||||||||||||
Shareholders’ equity | 625,867 | 620,462 | ||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 7,011,711 | $ | 6,821,317 | ||||||||||||||||||||||||
Net interest income | $ | 118,253 | $ | 106,186 | ||||||||||||||||||||||||
Net interest rate spread (10) | 3.36 | % | 3.02 | % | ||||||||||||||||||||||||
Net earning assets (6) | $ | 667,903 | $ | 572,712 | ||||||||||||||||||||||||
Net interest margin (11) | 3.63 | % | 3.36 | % | ||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 1.11 | x | 1.10 | x | ||||||||||||||||||||||||
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For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | ||||||||||||||||||||||||||||||||
Outstanding | Yield/ Cost | Outstanding | Yield/ Cost | Outstanding | Average | |||||||||||||||||||||||||||||||
Balance | Interest | (13) | Balance | Interest | (13) | Balance | Interest | Yield/ Cost | ||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans receivable (includes FTE adjustments of $1,559, $1,751 and $1,721, respectively) (1)(2)(3) | $ | 5,016,694 | $ | 328,687 | 6.50 | % | $ | 4,660,693 | $ | 317,321 | 6.78 | % | $ | 4,395,274 | 288,037 | 6.59 | % | |||||||||||||||||||
Mortgage-backed securities (5) | 732,281 | 34,694 | 4.74 | % | 584,053 | 29,385 | 5.03 | % | 660,986 | 31,523 | 4.77 | % | ||||||||||||||||||||||||
Investment securities (includes FTE adjustments of $6,597, $6,798 and $6,992, respectively) (4)(5)(6) | 478,933 | 29,250 | 6.11 | % | 820,337 | 47,990 | 5.85 | % | 861,411 | 49,450 | 5.74 | % | ||||||||||||||||||||||||
Federal Home Loan Bank stock (7) | 48,167 | 1,428 | 2.96 | % | 33,348 | 2,017 | 6.05 | % | 34,292 | 1,692 | 4.93 | % | ||||||||||||||||||||||||
Interest-earning deposits | 104,895 | 2,756 | 2.59 | % | 150,665 | 7,867 | 5.15 | % | 133,218 | 6,584 | 4.87 | % | ||||||||||||||||||||||||
Total interest-earning assets (includes FTE adjustments of $8,156, $8,549 and $8,713, respectively) | 6,380,970 | 396,815 | 6.18 | % | 6,249,096 | 404,580 | 6.45 | % | 6,085,181 | 377,286 | 6.20 | % | ||||||||||||||||||||||||
Non-interest-earning assets (8) | 488,579 | 453,922 | 437,607 | |||||||||||||||||||||||||||||||||
Total assets | $ | 6,869,549 | $ | 6,703,018 | $ | 6,522,788 | ||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Savings deposits | $ | 778,341 | 9,159 | 1.18 | % | $ | 793,172 | 10,909 | 1.38 | % | $ | 882,974 | 12,619 | 1.43 | % | |||||||||||||||||||||
NOW accounts | 732,097 | 6,434 | 0.88 | % | 698,585 | 11,038 | 1.58 | % | 663,046 | 9,396 | 1.42 | % | ||||||||||||||||||||||||
Money market accounts | 720,713 | 14,726 | 2.04 | % | 637,983 | 23,551 | 3.69 | % | 574,820 | 19,446 | 3.38 | % | ||||||||||||||||||||||||
Certificate accounts | 2,716,815 | 106,742 | 3.93 | % | 3,076,693 | 141,042 | 4.58 | % | 2,850,548 | 115,524 | 4.05 | % | ||||||||||||||||||||||||
Borrowed funds (9) | 718,657 | 26,893 | 3.74 | % | 381,262 | 17,225 | 4.52 | % | 402,789 | 18,508 | 4.59 | % | ||||||||||||||||||||||||
Junior subordinated deferrable interest debentures | 108,287 | 5,339 | 4.86 | % | 105,850 | 7,250 | 6.76 | % | 203,413 | 15,616 | 7.57 | % | ||||||||||||||||||||||||
Total interest-bearing liabilities | 5,774,910 | 169,293 | 2.93 | % | 5,693,545 | 211,015 | 3.71 | % | 5,577,590 | 191,109 | 3.43 | % | ||||||||||||||||||||||||
Non-interest-bearing liabilities | 473,410 | 409,096 | 346,016 | |||||||||||||||||||||||||||||||||
Total liabilities | 6,248,320 | 6,102,641 | 5,923,606 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 621,229 | 600,377 | 599,182 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,869,549 | $ | 6,703,018 | $ | 6,522,788 | ||||||||||||||||||||||||||||||
Net interest income | $ | 227,522 | $ | 193,565 | $ | 186,177 | ||||||||||||||||||||||||||||||
Net interest rate spread (10) | 3.25 | % | 2.74 | % | 2.77 | % | ||||||||||||||||||||||||||||||
Net interest earning assets (6) | $ | 555,551 | $ | 507,591 | ||||||||||||||||||||||||||||||||
Net interest margin (11) | $ | 606,060 | 3.57 | % | 3.10 | % | 3.06 | % | ||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities | 1.10 | x | 1.10 | x | 1.09 | x | ||||||||||||||||||||||||||||||
(1) | Average gross loans receivable includes loans held as available-for-sale and loans placed on nonaccrual status. | |
(2) | Interest income includes accretion/amortization of deferred loan fees/expenses, which were not material. | |
(3) | Interest income on tax-free loans is presented on a taxable equivalent basis including the adjustments indicated. | |
(4) | Interest income on tax-free investment securities is presented on a taxable equivalent basis including the adjustments indicated. |
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(5) | Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale. | |
(6) | Average balances include Fannie Mae and Freddie Mac stock. | |
(7) | During the quarter ended December 31, 2008, the Federal Home Loan Bank of Pittsburgh suspended dividends until further notice. | |
(8) | Average balances include the effect of unrealized gains or losses on securities held as available-for-sale. | |
(9) | Average balances include Federal Home Loan Bank advances, securities sold under agreements to repurchase and other borrowings. | |
(10) | Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. | |
(11) | Net interest margin represents net interest income as a percentage of average interest-earning assets. | |
(12) | 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 – 6.18% and 6.55%; respectively, Investment securities – 4.61% and 4.92%; respectively, interest-earning assets – 5.63% and 6.10%; respectively, GAAP basis net interest rate spreads were 3.24% and 2.89%, respectively and GAAP basis net interest margins were 3.51% and 3.23%, respectively. | |
(13) | Shown on a FTE basis. GAAP basis yields were: Loans – 6.47%, 6.75% and 6.55%, respectively, Investment securities – 4.73%, 5.02% and 4.93%, respectively, interest-earning assets – 6.05%, 6.32% and 6.06%, respectively, GAAP basis net interest rate spreads were 3.12%, 2.61% and 2.63%, respectively, and GAAP basis net interest margins were 3.44%, 2.97% and 2.92%, respectively. |
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Six Months Ended June 30, | Years Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||
2009 vs. 2008 | 2008 vs. 2007 | 2007 vs. 2006 | ||||||||||||||||||||||||||||||||||
Increase (Decrease) | Total | Increase (Decrease) | Total | Increase (Decrease) Due | Total | |||||||||||||||||||||||||||||||
Due to | Increase | Due to | Increase | to | Increase | |||||||||||||||||||||||||||||||
Rate | Volume | (Decrease) | Rate | Volume | (Decrease) | Rate | Volume | (Decrease) | ||||||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans receivable | $ | (10,302 | ) | $ | 9,421 | $ | (881 | ) | $ | (12,864 | ) | $ | 24,230 | $ | 11,366 | $ | 10,072 | $ | 19,212 | $ | 29,284 | |||||||||||||||
Mortgage-backed securities | (2,961 | ) | 555 | (2,406 | ) | (2,149 | ) | 7,458 | 5,309 | 1,733 | (3,871 | ) | (2,138 | ) | ||||||||||||||||||||||
Investment securities | 104 | (4,112 | ) | (4,008 | ) | 2,110 | (20,850 | ) | (18,740 | ) | 943 | (2,403 | ) | (1,460 | ) | |||||||||||||||||||||
Federal Home Loan Bank stock | (717 | ) | — | (717 | ) | (1,485 | ) | 896 | (589 | ) | 382 | (57 | ) | 325 | ||||||||||||||||||||||
Interest-earning deposits | (2,266 | ) | (78 | ) | (2,344 | ) | (3,314 | ) | (1,797 | ) | (5,111 | ) | 396 | 887 | 1,283 | |||||||||||||||||||||
Total interest-earning assets | (16,142 | ) | 5,786 | (10,356 | ) | (17,702 | ) | 9,937 | (7,765 | ) | 13,526 | 13,768 | 27,294 | |||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Savings accounts | (1,735 | ) | 264 | (1,471 | ) | (1,560 | ) | (190 | ) | (1,750 | ) | (451 | ) | (1,259 | ) | (1,710 | ) | |||||||||||||||||||
Interest-bearing demand accounts | (2,128 | ) | (39 | ) | (2,167 | ) | (5,134 | ) | 530 | (4,604 | ) | 1,109 | 533 | 1,642 | ||||||||||||||||||||||
Money market demand accounts | (3,782 | ) | (51 | ) | (3,833 | ) | (11,879 | ) | 3,054 | (8,825 | ) | 1,870 | 2,235 | 4,105 | ||||||||||||||||||||||
Certificate accounts | (15,033 | ) | (7,694 | ) | (22,727 | ) | (18,981 | ) | (15,319 | ) | (34,300 | ) | 15,752 | 9,766 | 25,518 | |||||||||||||||||||||
Borrowed funds | (1,568 | ) | 9,183 | 7,615 | (5,575 | ) | 15,243 | 9,668 | (302 | ) | (981 | ) | (1,283 | ) | ||||||||||||||||||||||
Junior subordinated deferrable interest debentures | 176 | (16 | ) | 160 | (2,078 | ) | 167 | (1,911 | ) | (1,280 | ) | (7,086 | ) | (8,366 | ) | |||||||||||||||||||||
Total interest-bearing liabilities | (24,070 | ) | 1,647 | (22,423 | ) | (45,207 | ) | 3,485 | (41,722 | ) | 16,698 | 3,208 | 19,906 | |||||||||||||||||||||||
Net change in net interest income | $ | 7,928 | $ | 4,139 | $ | 12,067 | $ | 27,505 | $ | 6,452 | $ | 33,957 | $ | (3,172 | ) | $ | 10,560 | $ | 7,388 | |||||||||||||||||
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At June 30, 2009 | At December 31 | At June 30, | ||||||||||||||||||||||||||||||
Number | Balance | 2008 | 2007 | 2006 | 2005 | 2005 | 2004 | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Loans past due 30 days to 59 days: | ||||||||||||||||||||||||||||||||
One- to four-family residential loans | 71 | $ | 3,206 | $ | 32,988 | $ | 27,270 | $ | 24,078 | $ | 26,290 | $ | 3,941 | $ | 5,765 | |||||||||||||||||
Multi-family and commercial real estate loans | 99 | 19,977 | 18,901 | 11,331 | 7,975 | 4,924 | 5,198 | 2,201 | ||||||||||||||||||||||||
Consumer loans | 822 | 7,987 | 11,295 | 10,550 | 9,096 | 12,053 | 5,611 | 4,877 | ||||||||||||||||||||||||
Commercial business loans | 48 | 3,847 | 7,770 | 9,947 | 4,325 | 2,450 | 1,000 | 782 | ||||||||||||||||||||||||
Total loans past due 30 days to 59 days | 1,040 | 35,017 | 70,884 | 59,098 | 45,474 | 45,717 | 15,750 | 13,625 | ||||||||||||||||||||||||
Loans past due 60 days to 89 days: | ||||||||||||||||||||||||||||||||
One- to four-family residential loans | 78 | 6,307 | 7,599 | 6,077 | 5,970 | 9,156 | 4,687 | 4,925 | ||||||||||||||||||||||||
Multi-family and commercial real estate loans | 54 | 9,152 | 8,432 | 4,984 | 3,846 | 3,399 | 8,156 | 1,023 | ||||||||||||||||||||||||
Consumer loans | 311 | 2,858 | 2,836 | 2,676 | 2,833 | 3,773 | 3,134 | 2,032 | ||||||||||||||||||||||||
Commercial business loans | 40 | 8,995 | 3,801 | 2,550 | 501 | 263 | 279 | 309 | ||||||||||||||||||||||||
Total loans past due 60 days to 89 days | 483 | 27,312 | 22,668 | 16,287 | 13,150 | 16,591 | 16,256 | 8,289 | ||||||||||||||||||||||||
Loans past due 90 days or more: (1) | ||||||||||||||||||||||||||||||||
One- to four-family residential loans | 263 | 27,670 | 20,435 | 12,542 | 10,334 | 12,179 | 11,507 | 11,322 | ||||||||||||||||||||||||
Multi-family and commercial real estate loans | 198 | 52,601 | 43,828 | 24,323 | 18,982 | 21,013 | 15,610 | 13,823 | ||||||||||||||||||||||||
Consumer loans | 692 | 10,569 | 9,756 | 7,582 | 4,578 | 8,322 | 5,514 | 4,536 | ||||||||||||||||||||||||
Commercial business loans | 139 | 31,717 | 25,184 | 5,163 | 6,631 | 1,502 | 979 | 2,824 | ||||||||||||||||||||||||
Total loans past due 90 days or more | 1,292 | 122,557 | 99,203 | 49,610 | 40,525 | 43,016 | 33,610 | 32,505 | ||||||||||||||||||||||||
Total loans 30 days or more past due | 2,815 | $ | 184,886 | $ | 192,755 | $ | 124,995 | $ | 99,149 | $ | 105,324 | $ | 65,616 | $ | 54,419 | |||||||||||||||||
Total real estate owned | 125 | $ | 15,890 | $ | 16,844 | $ | 8,667 | $ | 6,653 | $ | 4,872 | $ | 6,685 | $ | 3,951 | |||||||||||||||||
Total loans 90 days or more past due and real estate owned | 1,417 | $ | 138,447 | $ | 116,047 | $ | 58,277 | $ | 47,178 | 47,888 | $ | 40,295 | $ | 36,456 | ||||||||||||||||||
Total loans 90 days or more past due to net loans receivable | 2.41 | % | 1.93 | % | 1.03 | % | 0.92 | % | 0.93 | % | 0.77 | % | 0.80 | % | ||||||||||||||||||
Total loans 90 days or more past due and real estate owned to total assets | 1.95 | % | 1.67 | % | 0.87 | % | 0.72 | % | 0.74 | % | 0.64 | % | 0.57 | % |
(1) | We classify as nonperforming all loans 90 days or more delinquent. |
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Commercial | ||||||||||||||||||||||||||||||||
business | ||||||||||||||||||||||||||||||||
One- to four- | Consumer | and | ||||||||||||||||||||||||||||||
family | Percentage | and home | Percentage | commercial | Percentage | Percentage | ||||||||||||||||||||||||||
mortgage | (1) | equity | (2) | real estate | (3) | Total | (4) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
State | ||||||||||||||||||||||||||||||||
Pennsylvania | $ | 19,863 | 1.0 | % | $ | 8,128 | 0.7 | % | $ | 54,775 | 5.5 | % | $ | 82,766 | 2.0 | % | ||||||||||||||||
New York | 102 | 0.1 | % | 412 | 0.6 | % | 1,230 | 0.4 | % | 1,744 | 0.4 | % | ||||||||||||||||||||
Ohio | 108 | 0.7 | % | 72 | 0.6 | % | 180 | 2.4 | % | 360 | 1.0 | % | ||||||||||||||||||||
Maryland | 595 | 0.4 | % | 555 | 1.9 | % | 9,389 | 5.4 | % | 10,539 | 2.9 | % | ||||||||||||||||||||
Florida | 7,003 | 20.1 | % | 1,401 | 11.9 | % | 18,744 | 31.6 | % | 27,148 | 25.7 | % | ||||||||||||||||||||
Total | $ | 27,671 | 1.2 | % | $ | 10,568 | 0.8 | % | $ | 84,318 | 5.6 | % | $ | 122,557 | 2.4 | % | ||||||||||||||||
(1) | Percentage of mortgage loans in specified geographic area. | |
(2) | Percentage of consumer loans in specified geographic area. | |
(3) | Percentage of commercial loans in specified geographic area. | |
(4) | Percentage of total loans in specified geographic area. |
At June 30, | At December 31, | |||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Thousands) | ||||||||||||
Substandard assets | $ | 176,963 | $ | 155,245 | $ | 85,526 | ||||||
Doubtful assets | 4,248 | 3,596 | 4,374 | |||||||||
Loss assets | 62 | 64 | 388 | |||||||||
Total classified assets | $ | 181,273 | $ | 158,905 | $ | 90,288 | ||||||
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Six Months | ||||||||||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||||||||||
Six Months Ended June 30, | Years Ended December 31, | December 31, | Years Ended June 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | 2005 | 2005 | 2004 | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Net loans receivable | $ | 5,091,518 | $ | 4,997,910 | $ | 5,141,892 | $ | 4,795,622 | $ | 4,412,441 | $ | 4,622,269 | $ | 4,376,884 | $ | 4,053,941 | ||||||||||||||||
Average loans outstanding | $ | 5,194,221 | $ | 4,907,866 | $ | 5,016,694 | $ | 4,660,693 | $ | 4,395,274 | $ | 4,532,523 | $ | 4,234,241 | $ | 3,846,261 | ||||||||||||||||
Allowance for loan losses Balance at beginning of period | $ | 54,929 | $ | 41,784 | $ | 41,784 | $ | 37,655 | $ | 33,411 | $ | 31,563 | $ | 30,670 | $ | 27,166 | ||||||||||||||||
Provision for loan losses | 17,517 | 5,689 | 22,851 | 8,743 | 8,480 | 4,722 | 9,566 | 6,860 | ||||||||||||||||||||||||
Charge offs: | ||||||||||||||||||||||||||||||||
Real estate loans | (2,407 | ) | — | (3,962 | ) | (2,042 | ) | (1,148 | ) | (282 | ) | (676 | ) | (176 | ) | |||||||||||||||||
Consumer loans | (2,770 | ) | (4,996 | ) | (6,290 | ) | (5,175 | ) | (5,543 | ) | (3,314 | ) | (5,726 | ) | (5,113 | ) | ||||||||||||||||
Commercial loans | (1,067 | ) | — | (1,358 | ) | (973 | ) | (926 | ) | (43 | ) | (3,071 | ) | (461 | ) | |||||||||||||||||
Total charge-offs | (6,244 | ) | (4,996 | ) | (11,610 | ) | (8,190 | ) | (7,617 | ) | (3,639 | ) | (9,473 | ) | (5,750 | ) | ||||||||||||||||
Recoveries: | ||||||||||||||||||||||||||||||||
Real estate loans | 22 | — | 140 | 250 | 123 | 4 | 1 | — | ||||||||||||||||||||||||
Consumer loans | 520 | 816 | 1,060 | 1,073 | 1,214 | 455 | 750 | 562 | ||||||||||||||||||||||||
Commercial loans | 33 | — | 704 | 134 | 62 | 51 | 49 | 502 | ||||||||||||||||||||||||
Total recoveries | 575 | 816 | 1,904 | 1,457 | 1,399 | 510 | 800 | 1,064 | ||||||||||||||||||||||||
Acquired through acquisitions | — | — | — | 2,119 | 1,982 | 255 | — | 1,330 | ||||||||||||||||||||||||
Balance at end of period | $ | 66,777 | $ | 43,293 | $ | 54,929 | $ | 41,784 | $ | 37,655 | $ | 33,411 | $ | 31,563 | $ | 30,670 | ||||||||||||||||
Allowance for loan losses as a percentage of net loans receivable | 1.31 | % | 0.87 | % | 1.07 | % | 0.87 | % | 0.85 | % | 0.72 | % | 0.72 | % | 0.76 | % | ||||||||||||||||
Net charge-offs as a percentage of average loans outstanding | 0.22 | % | 0.17 | % | 0.19 | % | 0.14 | % | 0.14 | % | 0.14 | % | 0.20 | % | 0.12 | % | ||||||||||||||||
Allowance for loan losses as a percentage of nonperforming loans | 54.49 | % | 62.72 | % | 55.37 | % | 84.22 | % | 92.92 | % | 77.67 | % | 93.91 | % | 94.35 | % | ||||||||||||||||
Allowance for loan losses as a percentage of nonperforming loans and real estate owned | 48.23 | % | 55.91 | % | 47.33 | % | 71.70 | % | 79.81 | % | 69.77 | % | 78.33 | % | 84.13 | % |
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At December 31, | ||||||||||||||||||||||||||||||||
At June 30, 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||
% of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
Amount | Loans (1) | Amount | Loans (1) | Amount | Loans (1) | Amount | Loans (1) | |||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||
Balance at end of period applicable to: | �� | |||||||||||||||||||||||||||||||
Real estate loans | $ | 36,082 | 87.5 | % | $ | 29,115 | 87.6 | % | $ | 28,854 | 87.2 | % | $ | 17,936 | 88.8 | % | ||||||||||||||||
Consumer loans | 6,210 | 4.9 | 6,125 | 5.1 | 6,645 | 5.4 | 16,500 | 6.0 | ||||||||||||||||||||||||
Commercial business loans | 20,290 | 7.6 | 15,044 | 7.3 | 6,285 | 7.4 | 3,219 | 5.2 | ||||||||||||||||||||||||
Total allocated allowance | 62,582 | 50,284 | 41,784 | 37,655 | ||||||||||||||||||||||||||||
Unallocated | 4,195 | — | 4,645 | — | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 66,777 | 100.0 | % | $ | 54,929 | 100.0 | % | $ | 41,784 | 100.0 | % | $ | 37,655 | 100.0 | % | ||||||||||||||||
At December 31, | At June 30, | |||||||||||||||||||||||
2005 | 2005 | 2004 | ||||||||||||||||||||||
% of Total | % of Total | % of Total | ||||||||||||||||||||||
Amount | Loans (1) | Amount | Loans (1) | Amount | Loans (1) | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Balance at end of period applicable to: | ||||||||||||||||||||||||
Real estate loans | $ | 16,875 | 88.6 | % | $ | 15,918 | 88.7 | % | $ | 15,113 | 88.3 | % | ||||||||||||
Consumer loans | 13,991 | 8.1 | 13,179 | 8.1 | 11,790 | 8.1 | ||||||||||||||||||
Commercial business loans | 2,545 | 3.3 | 2,466 | 3.2 | 3,767 | 3.6 | ||||||||||||||||||
Total allocated allowance | 33,411 | 31,563 | 30,670 | |||||||||||||||||||||
Unallocated | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | 33,411 | 100.0 | % | $ | 31,563 | 100.0 | % | $ | 30,670 | 100.0 | % | ||||||||||||
(1) | Represents percentage of loans in each category to total loans. |
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At June 30, | At December 31, | |||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in Thousands) | ||||||||||||
Total shareholders’ equity (GAAP capital) | $ | 717,129 | $ | 706,610 | $ | 714,160 | ||||||
Less: accumulated other comprehensive (income)/loss | 22,579 | 22,017 | (931 | ) | ||||||||
Less: nonqualifying intangible assets | (177,088 | ) | (178,758 | ) | (183,396 | ) | ||||||
Leverage capital | $ | 562,620 | $ | 549,869 | $ | 529,833 | ||||||
Plus: Tier 2 capital (1) | 56,749 | 54,198 | 41,952 | |||||||||
Total risk-based capital | $ | 619,369 | $ | 604,067 | $ | 571,785 | ||||||
Average total assets for leverage ratio | $ | 6,904,293 | $ | 6,829,557 | $ | 6,454,343 | ||||||
Net risk-weighted assets including off-balance sheet items | $ | 4,524,804 | $ | 4,329,431 | $ | 4,053,803 | ||||||
Leverage capital ratio | 8.15 | % | 8.05 | % | 8.21 | % | ||||||
Minimum requirement (2) | 3.00% to 5.00% | 3.00% to 5.00% | 3.00% to 5.00% | |||||||||
Risk-based capital ratio | 13.69 | % | 13.95 | % | 14.10 | % | ||||||
Minimum requirement | 8.00 | % | 8.00 | % | 8.00 | % |
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(1) | Tier 2 capital consist of the allowance for loan losses, which is limited to 1.25% of total risk-weighted assets as detailed under regulations of the FDIC, and 45% of pre-tax net unrealized gains on securities available-for-sale. | |
(2) | The FDIC has indicated that the most highly rated institutions which meet certain criteria will be required to maintain a ratio of 3.00%, and all other institutions will be required to maintain an additional cushion of 100 to 200 basis points. |
Payments Due | ||||||||||||||||||||
One year to | Three years to | |||||||||||||||||||
Less than | less than three | less than five | Five years or | |||||||||||||||||
one year | years | years | greater | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Contractual Obligations at June 30, 2009 | ||||||||||||||||||||
Long-term debt (1) | $ | 116,316 | $ | 270,000 | $ | 285,095 | $ | 225,652 | $ | 897,063 | ||||||||||
Junior subordinated debentures (2) | 5,155 | 103,094 | 108,249 | |||||||||||||||||
Operating leases (3) | 4,120 | 6,626 | 4,459 | 9,939 | 25,144 | |||||||||||||||
Total | $ | 125,591 | $ | 276,626 | $ | 289,554 | $ | 338,685 | $ | 1,030,456 | ||||||||||
Commitments to extend credit | $ | 149,272 | $ | — | $ | — | $ | — | $ | 149,272 | ||||||||||
(1) | See Note 11 to the consolidated financial statements, Borrowed Funds, for additional information. | |
(2) | See Note 22 to the consolidated financial statements, Junior Subordinated Debentures/Trust Preferred Securities, for additional information. | |
(3) | See Note 8 to the consolidated financial statements, Premises and Equipment, for additional information. |
Payments Due | ||||||||||||||||||||
One year to | Three years to | |||||||||||||||||||
Less than | less than three | less than five | Five years or | |||||||||||||||||
one year | years | years | greater | Total | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Contractual Obligations at December 31, 2008 | ||||||||||||||||||||
Long-term debt (1) | $ | 285,635 | $ | 196,532 | $ | 270,000 | $ | 315,778 | $ | 1,067,945 | ||||||||||
Junior subordinated debentures (2) | — | — | — | 108,254 | 108,254 | |||||||||||||||
Operating leases (3) | 4,280 | 6,931 | 4,366 | 10,310 | 25,887 | |||||||||||||||
Total | $ | 289,915 | $ | 203,463 | $ | 274,366 | $ | 434,342 | $ | 1,202,086 | ||||||||||
Commitments to extend credit | $ | 116,330 | $ | — | $ | — | $ | — | $ | 116,330 | ||||||||||
(1) | See Note 11 to the consolidated financial statements, Borrowed Funds, for additional information. | |
(2) | See Note 22 to the consolidated financial statements, Junior Subordinated Debentures/Trust Preferred Securities, for additional information. | |
(3) | See Note 8 to the consolidated financial statements, Premises and Equipment, for additional information. |
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Non-Parallel Shift in Interest Rates | ||||||||||||||||
Increase | Decrease | |||||||||||||||
Shift in interest rates over the next 12 months | 1.0 | % | 2.0 | % | 1.0 | % | 2.0 | % | ||||||||
Projected percentage increase/(decrease) in net income | 14.9 | % | 19.8 | % | 0.9 | % | (5.0 | )% | ||||||||
Projected increase/(decrease) in return on average equity | 1.0 | % | 1.4 | % | 0.1 | % | (0.3 | )% | ||||||||
Projected increase/(decrease) in earnings per share | $ | 0.14 | $ | 0.18 | $ | 0.01 | $ | (0.05 | ) | |||||||
Projected percentage increase/(decrease) in market value of equity | (2.9 | )% | (8.0 | )% | (4.5 | )% | (11.4 | )% |
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(i) | the approval of interstate supervisory acquisitions by savings and loan holding companies; and |
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(ii) | the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition. |
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Name | Positions Held | |
William J. Wagner | President and Chief Executive Officer | |
William W. Harvey, Jr. | Executive Vice President and Chief Financial Officer | |
Gregory C. LaRocca | Executive Vice President and Corporate Secretary | |
Steven G. Fisher | Executive Vice President — Banking Services | |
Gerald J. Ritzert | Senior Vice President and Controller |
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Largest Aggregate | ||||||||||||||||||||||
Nature | Balance from | Principal | Principal Paid | Interest Paid | ||||||||||||||||||
Of | 01/01/08 to | Interest | Balance | 01/01/08 to | 01/01/09 to | |||||||||||||||||
Name | Position | Transaction | 06/30/09 | Rate | 06/30/09 | 06/30/09 | 06/30/09 | |||||||||||||||
Robert G. Ferrier | Director | Mortgage Fixed Term | $ | 319,925 | 4.875% Fixed | $ | 278,180 | $ | 41,751 | $ | 22,145 | |||||||||||
Home Equity Line of Credit | $ | 46,586 | Prime + 2.50% Variable | $ | 28,375 | $ | 59,000 | $ | 3,931 |
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• | provide a total compensation program that is aligned with the interests of our stockholders; | ||
• | attract and retain talent needed in a competitive market environment; | ||
• | assist in balancing the sometimes competing needs of external competitiveness, internal consistency, organizational economics, management flexibility, ease of understanding and simplicity of administration; | ||
• | ensure all employees (including executive officers) receive rewards based on performance and value added to the organization in an environment built on shared leadership; and | ||
• | use long-term equity programs to motivate and reward performance that increases our market value over time, align senior management interests with the organization’s strategic business objectives and to provide a retention incentive. |
• | the framework for executive officer compensation supports our business strategy and corporate compensation philosophy; | ||
• | the overall compensation package is competitive, including the mix of base salary, annual cash bonuses and equity awards; and | ||
• | the overall program is aligned with stockholders’ interests. |
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1st Source Bank | Addison Avenue Federal Credit Union | Affinity Bank | ||
Affinity Plus Federal Credit Union | Amalgamated Bank of Chicago | American Bank | ||
American Chartered Bank | American Marine Bank | American National Bank | ||
American National Bank of Texas | American Savings Bank | AmTrust Bank | ||
Anchor Bank N.A. | Arvest Bank Group | Bank Mutual | ||
Bank of Blue Valley | Bank of Hawaii | Bank of Nevada | ||
The Bank of Tampa | Bank of the West | BankAtlantic | ||
Bankers Bank | Boeing Employees Credit Union | Canandaigua National Bank | ||
Capital City Bank | Celtic Insurance | Centris Federal Credit Union | ||
City National Bank | Colonial Bank | Columbia Bank | ||
Comerica Bank | De Lage Landen Financial Services | Deere & Company Canada |
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Dort Federal Credit Union | Eastern Bank | Educational Employees Credit Union– | ||
Edward Jones & Company | Elevations Credit Union | Ft. Worth | ||
EverBank | The Farmers Bank | ESL Federal Credit Union | ||
Federal Reserve Bank of Boston | Federal Reserve Bank of Chicago | Federal Reserve Bank of Atlanta | ||
Federal Reserve Bank of Minneapolis | Federal Reserve Bank of Philadelphia | Federal Reserve Bank of Dallas | ||
First Bank | First Banks, Inc. | Federal Reserve Bank of St. Louis | ||
First Citizens Bank of South Carolina | First Community Bank | First Citizens Bank | ||
First Hawaiian Bank | First Midwest Bank | First Federal S&L Association | ||
First National Bank of Alaska | First State Bank & Trust | First National Bank in Sioux Falls | ||
Fulton Financial Corporation | Hancock Bank | Frost National Bank | ||
Johnson Financial Group | Lockheed Federal Credit Union | Hillcrest Bank | ||
Mid-Wisconsin Bank | Moneygram International, Inc. | Marshall & Ilsley Corporation | ||
Mutual Federal Savings Bank | National Penn Bank | Mountain American Credit Union | ||
Nordstrom | Old Second National Bank | NBT Bancorp | ||
Ocean First Bank | Peoples Bank | NRUCFC | ||
Park Bank | Principal Financial Group | Pacific Continental Bank | ||
Portage Community Bank | Rockland Trust Company | Plains Capital Corporation | ||
Provident Bank | SCCU | Progressive Bank | ||
Sandy Spring Bank | Star Financial Bank | SAC Federal Credit Union | ||
The South Financial Group | Sterling Bank | Simmons First National Corp | ||
State Farm Insurance | Technology Credit Union | StarOne Credit Union | ||
TD Banknorth | Tri Counties Bank | Sterling Savings Bank | ||
TierOne Bank | University Federal Credit Union | Thrivent Financial for Lutherans | ||
United Bank | Virginia Credit Union | Trust Company of America | ||
Valley National Bank | Westerra Credit Union | UW Credit Union | ||
Washington Trust Company | Washington Trust Bank | Wright-Patt Credit Union, Inc. |
First Niagara Financial Group, Inc.
F.N.B. Corporation
National Penn Bancshares, Inc.
Provident Bancshares Corporation
S&T Bancorp, Inc.
Susquehanna Bancshares, Inc.
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Bonus Level Under Management Bonus Plan | ||||||
Level 2 | Level 5 | Level 8 | ||||
(10% of | (23% of | (35% of | ||||
Base Salary) | Base Salary) | Base Salary) | ||||
Performance Measure | ||||||
Return on Average Assets | 0.75% to 0.79% | 0.90% to 0.94% | Greater than 1.10% | |||
Return on Average Equity | 9.00% to 9.99% | 12.00% to 12.99% | Greater than 15.00% | |||
Return on Average Tangible Equity | 12.00% to 12.99% | 15.00% to 16.99% | Greater than 18.00% | |||
Percentage Growth in Earnings Per Share | 9.00% to 9.99% | 12.00% to 12.99% | Greater than 15.00% | |||
Retail Asset Growth | 4.00% to 5.99% | 10.00% to 11.99% | Greater than 15.00% |
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SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||||||
pension value | ||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||
nonqualified | ||||||||||||||||||||||||||||||||
deferred | ||||||||||||||||||||||||||||||||
compensation | All other | |||||||||||||||||||||||||||||||
Name and principal | Stock awards | Option | earnings | compensation | ||||||||||||||||||||||||||||
position | Year | Salary ($) | Bonus ($) | ($)(1) | awards ($)(2) | ($)(3) | ($)(4) | Total ($) | ||||||||||||||||||||||||
William J. Wagner, | 2008 | 473,322 | 110,466 | 65,117 | 166,245 | 160,039 | 27,303 | 1,002,492 | ||||||||||||||||||||||||
Chairman of the | 2007 | 457,190 | 69,359 | 65,117 | 52,964 | 76,415 | 33,956 | 755,001 | ||||||||||||||||||||||||
Board, President and | 2006 | 441,741 | 66,987 | 65,117 | 45,862 | 161,926 | 32,402 | 814,035 | ||||||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||||||
William W. Harvey, Jr. | 2008 | 209,769 | 50,988 | 51,408 | 30,172 | 24,790 | 11,328 | 378,455 | ||||||||||||||||||||||||
Executive Vice | 2007 | 180,388 | 28,519 | 51,408 | 28,955 | 9,407 | 13,232 | 308,009 | ||||||||||||||||||||||||
President-Finance and | 2006 | 152,900 | 20,945 | 51,408 | 23,066 | 14,862 | 13,093 | 276,274 | ||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
Gregory C. LaRocca, | 2008 | 212,307 | 51,115 | 30,845 | 35,248 | 61,764 | 15,953 | 407,232 | ||||||||||||||||||||||||
Executive Vice | 2007 | 190,527 | 29,526 | 30,845 | 29,383 | 33,102 | 16,652 | 326,035 | ||||||||||||||||||||||||
President and | 2006 | 176,867 | 23,343 | 30,845 | 42,766 | 52,169 | 16,365 | 342,355 | ||||||||||||||||||||||||
Corporate Secretary | ||||||||||||||||||||||||||||||||
Robert A. Ordiway, | 2008 | 216,166 | 51,308 | 30,845 | 35,248 | 71,712 | 16,793 | 422,072 | ||||||||||||||||||||||||
Executive Vice | 2007 | 203,116 | 30,956 | 30,845 | 29,383 | 48,952 | 14,968 | 354,020 | ||||||||||||||||||||||||
President, Marketing | 2006 | 193,913 | 25,596 | 30,845 | 42,766 | 91,729 | 15,124 | 399,973 | ||||||||||||||||||||||||
and Facilities (5) | ||||||||||||||||||||||||||||||||
Steven G. Fisher, | 2008 | 209,769 | 50,988 | 30,845 | 91,419 | 68,005 | 13,229 | 464,255 | ||||||||||||||||||||||||
Executive Vice | 2007 | 180,388 | 35,111 | 30,845 | 26,092 | 32,178 | 12,392 | 306,514 | ||||||||||||||||||||||||
President, Banking | 2006 | 152,900 | 20,945 | 30,845 | 21,391 | 43,904 | 11,860 | 281,845 | ||||||||||||||||||||||||
Services |
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(1) | Reflects the value of all stock awards that vested during the applicable year that were granted on March 16, 2005 under the Northwest Bancorp, Inc. 2004 Recognition and Retention Plan. The value is the amount recognized for financial statement reporting purposes in accordance with Statement of Financial Accounting Standards (“SFAS”) 123(R). The assumptions used in the valuation of these awards for 2008, 2007 and 2006 are included in Notes 1(o) and 15(d) to our audited financial statements for the years ended December 31, 2008, 2007 and 2006 included in our Annual Reports on Form 10-K for the years ended December 31, 2008, 2007 and 2006, respectively, as filed with the Securities and Exchange Commission. | |
(2) | Reflects the value of option awards that had been granted under the Northwest Bancorp, Inc. 2000, 2004 and 2008 Stock Option Plans. The value is the amount recognized for financial statement reporting purposes in accordance with SFAS 123(R), including the immediate expense for those executive officers that qualify for normal retirement (all Named Executive Officers except for Mr. Harvey). The assumptions used in the valuation of these awards for 2008, 2007 and 2006 are included in Notes 1(o) and 15(e) to our audited financial statements for the years ended December 31, 2008, 2007 and 2006 included in our Annual Reports on Form 10-K for the years ended December 31, 2008, 2007 and 2006, respectively, as filed with the Securities and Exchange Commission. | |
(3) | Reflects change in pension value only. | |
(4) | The compensation represented by the amounts for 2008 set forth in the All Other Compensation column for the Named Executive Officers is detailed in the following table. |
Company | ||||||||||||||||
Contributions to | Company | |||||||||||||||
Qualified Defined | Paid Life | Restricted | ||||||||||||||
Contribution | Insurance | Stock | Total All Other | |||||||||||||
Name | Plan (a) | Premiums (b) | Dividends (c) | Compensation | ||||||||||||
William J. Wagner | $ | 5,125 | $ | 17,496 | $ | 4,682 | $ | 27,303 | ||||||||
William W. Harvey, Jr. | $ | 6,293 | $ | 1,339 | $ | 3,696 | $ | 11,328 | ||||||||
Gregory C. LaRocca | $ | 6,110 | $ | 7,625 | $ | 2,218 | $ | 15,953 | ||||||||
Robert A. Ordiway | $ | 6,485 | $ | 8,090 | $ | 2,218 | $ | 16,793 | ||||||||
Steven G. Fisher | $ | 6,293 | $ | 4,718 | $ | 2,218 | $ | 13,229 |
(a) | Reflects contributions by Northwest Savings Bank to qualified defined contribution plans. Northwest Savings Bank makes matching contributions equal to 50% of the employee’s 401(k) contributions, up to 3% of the employee’s eligible compensation. For the year ended December 31, 2008, Northwest Savings Bank did not make a discretionary contribution to the employee stock ownership plan. | |
(b) | Reflects excess premiums and/or payments for life insurance reported as taxable compensation on the Named Executive Officer’s Form W-2. | |
(c) | Reflects dividends on shares of unvested restricted common stock, which are reported as taxable compensation on the Named Executive Officer’s Form W-2. |
(5) | Mr. Ordiway retired as an executive officer effective January 30, 2009. |
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GRANTS OF PLAN-BASED AWARDS FOR THE YEAR ENDED DECEMBER 31, 2008 | ||||||||||||||||||||||||||||||||||||
All other | ||||||||||||||||||||||||||||||||||||
All other | option | Exercise | Grant | |||||||||||||||||||||||||||||||||
stock | awards: | or base | Closing | Date Fair | ||||||||||||||||||||||||||||||||
Estimated future payouts under equity- | awards: | number of | price of | Market | Value of | |||||||||||||||||||||||||||||||
incentive plan awards | number of | securities | option | Price on | Stock and | |||||||||||||||||||||||||||||||
Threshold | Maximum | shares or | underlying | awards | Date of | Option | ||||||||||||||||||||||||||||||
Name | Grant date | (#) | Target (#) | (#) | units (#) | options (#) | ($/Sh) | Grant | Awards ($) | |||||||||||||||||||||||||||
William J. Wagner | (1 | ) | 4,750 | 9,500 | 9,500 | — | — | 16.84 | 16.50 | 13,870 | ||||||||||||||||||||||||||
William W. Harvey, Jr. | (1 | ) | 2,875 | 5,750 | 5,750 | — | — | 16.84 | 16.50 | 8,395 | ||||||||||||||||||||||||||
Gregory C. LaRocca | (1 | ) | 2,875 | 5,750 | 5,750 | — | — | 16.84 | 16.50 | 8,395 | ||||||||||||||||||||||||||
Robert A. Ordiway | (1 | ) | 2,875 | 5,750 | 5,750 | — | — | 16.84 | 16.50 | 8,395 | ||||||||||||||||||||||||||
Steven G. Fisher | (1 | ) | 2,875 | 5,750 | 5,750 | — | — | 16.84 | 16.50 | 8,395 |
(1) | On an annual basis, Named Executive Officers are eligible to receive stock options under our stock option plans. Equity incentive plan awards for the year ended December 31, 2008 were made pursuant to the Northwest Bancorp, Inc. 2008 Stock Option Plan. |
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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008 | ||||||||||||||||||||||||||||||||||||
Option awards | Stock awards | |||||||||||||||||||||||||||||||||||
Equity incentive | Equity incentive | |||||||||||||||||||||||||||||||||||
plan awards: | Equity incentive | plan awards: | ||||||||||||||||||||||||||||||||||
Number of | Number of | number of | plan awards: | market or | ||||||||||||||||||||||||||||||||
securities | securities | securities | Number of | Market value of | number of | payout value of | ||||||||||||||||||||||||||||||
underlying | underlying | underlying | shares or units | shares or units | unearned shares, | unearned shares, | ||||||||||||||||||||||||||||||
unexercised | unexercised | unexercised | Option | of stock that | of stock that | units or other | units or other | |||||||||||||||||||||||||||||
options (#) | options (#) | unearned options | exercise price | Option | have not vested | have not vested | rights that have | rights that have | ||||||||||||||||||||||||||||
Name | exercisable | unexercisable | (#) | ($) | expiration date | (#) | ($) | not vested (#) | not vested ($) | |||||||||||||||||||||||||||
William J. Wagner | 8,600 | — | — | 9.780 | 10/17/11 | 6,080 | (6) | 129,990 | — | — | ||||||||||||||||||||||||||
11,000 | — | — | 13.302 | 08/21/12 | ||||||||||||||||||||||||||||||||
11,000 | — | — | 16.590 | 08/20/13 | ||||||||||||||||||||||||||||||||
11,000 | — | — | 25.490 | 12/15/14 | ||||||||||||||||||||||||||||||||
5,700 | 3,800 | (1) | — | 22.930 | 01/19/15 | |||||||||||||||||||||||||||||||
3,800 | 5,700 | (2) | — | 22.180 | 01/18/16 | |||||||||||||||||||||||||||||||
1,900 | 7,600 | (3) | — | 25.890 | 01/17/17 | |||||||||||||||||||||||||||||||
— | 9,500 | (4) | — | 25.030 | 01/16/18 | |||||||||||||||||||||||||||||||
— | 9,500 | (5) | — | 22.030 | 11/19/18 | |||||||||||||||||||||||||||||||
William W. Harvey, Jr. | 4,300 | — | — | 9.780 | 10/17/11 | 4,800 | (6) | 102,624 | — | — | ||||||||||||||||||||||||||
5,100 | — | — | 13.302 | 08/21/12 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 16.590 | 08/20/13 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 25.490 | 12/15/14 | ||||||||||||||||||||||||||||||||
3,450 | 2,300 | (1) | — | 22.930 | 01/19/15 | |||||||||||||||||||||||||||||||
2,300 | 3,450 | (2) | — | 22.180 | 01/18/16 | |||||||||||||||||||||||||||||||
1,150 | 4,600 | (3) | — | 25.890 | 01/17/17 | |||||||||||||||||||||||||||||||
— | 5,750 | (4) | — | 25.030 | 01/16/18 | |||||||||||||||||||||||||||||||
— | 5,750 | (5) | — | 22.030 | 11/19/18 | |||||||||||||||||||||||||||||||
Gregory C. LaRocca | 4,300 | — | — | 9.780 | 10/17/11 | 2,880 | (6) | 61,574 | — | — | ||||||||||||||||||||||||||
5,100 | — | — | 13.302 | 08/21/12 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 16.590 | 08/20/13 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 25.490 | 12/15/14 | ||||||||||||||||||||||||||||||||
2,700 | 1,800 | (1) | — | 22.930 | 01/19/15 | |||||||||||||||||||||||||||||||
1,800 | 2,700 | (2) | — | 22.180 | 01/18/16 | |||||||||||||||||||||||||||||||
1,150 | 4,600 | (3) | — | 25.890 | 01/17/17 | |||||||||||||||||||||||||||||||
— | 5,750 | (4) | — | 25.030 | 01/16/18 | |||||||||||||||||||||||||||||||
— | 5,750 | (5) | — | 22.030 | 11/19/18 | |||||||||||||||||||||||||||||||
Robert A. Ordiway | 4,300 | — | — | 9.780 | 10/17/11 | 2,880 | (6) | 61,574 | — | — | ||||||||||||||||||||||||||
5,100 | — | — | 13.302 | 08/21/12 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 16.590 | 08/20/13 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 25.490 | 12/15/14 | ||||||||||||||||||||||||||||||||
2,700 | 1,800 | (1) | — | 22.930 | 01/19/15 | |||||||||||||||||||||||||||||||
1,800 | 2,700 | (2) | — | 22.180 | 01/18/16 | |||||||||||||||||||||||||||||||
1,150 | 4,600 | (3) | — | 25.890 | 01/17/17 | |||||||||||||||||||||||||||||||
— | 5,750 | (4) | — | 25.030 | 01/16/18 | |||||||||||||||||||||||||||||||
— | 5,750 | (5) | — | 22.030 | 11/19/18 |
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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008 | ||||||||||||||||||||||||||||||||||||
Option awards | Stock awards | |||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Equity incentive | incentive plan | Equity incentive | ||||||||||||||||||||||||||||||||||
plan awards: | awards: | plan awards: | ||||||||||||||||||||||||||||||||||
Number of | Number of | number of | number of | market or | ||||||||||||||||||||||||||||||||
securities | securities | securities | Number of | unearned | payout value of | |||||||||||||||||||||||||||||||
underlying | underlying | underlying | shares or units | Market value of | shares, units or | unearned shares, | ||||||||||||||||||||||||||||||
unexercised | unexercised | unexercised | Option | of stock that | shares or units of | other rights | units or other | |||||||||||||||||||||||||||||
options (#) | options (#) | unearned options | exercise price | Option | have not vested | stock that have | that have not | rights that have | ||||||||||||||||||||||||||||
Name | exercisable | unexercisable | (#) | ($) | expiration date | (#) | not vested ($) | vested (#) | not vested ($) | |||||||||||||||||||||||||||
Steven G. Fisher | 4,300 | — | — | 9.780 | 10/17/11 | 2,880 | (6) | 61,574 | — | — | ||||||||||||||||||||||||||
5,100 | — | — | 13.302 | 08/21/12 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 16.590 | 08/20/13 | ||||||||||||||||||||||||||||||||
5,100 | — | — | 25.490 | 12/15/14 | ||||||||||||||||||||||||||||||||
2,700 | 1,800 | (1) | — | 22.930 | 01/19/15 | |||||||||||||||||||||||||||||||
1,800 | 2,700 | (2) | — | 22.180 | 01/18/16 | |||||||||||||||||||||||||||||||
1,150 | 4,600 | (3) | — | 25.890 | 01/17/17 | |||||||||||||||||||||||||||||||
— | 5,750 | (4) | — | 25.030 | 01/16/18 | |||||||||||||||||||||||||||||||
— | 5,750 | (5) | — | 22.030 | 11/19/18 |
(1) | Remaining unexercisable options will vest equally on January 19, 2009 and 2010. | |
(2) | Remaining unexercisable options will vest equally on January 18, 2009, 2010 and 2011. | |
(3) | Remaining unexercisable options will vest equally on January 17, 2009, 2010, 2011 and 2012. | |
(4) | Remaining unexercisable options will vest equally over a seven-year period beginning January 16, 2009. | |
(5) | Remaining unexercisable options will vest equally over a seven-year period beginning November 19, 2009. | |
(6) | Unvested 2004 Recognition and Retention Plan shares will vest equally on March 16, 2009 and 2010. |
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OPTION EXERCISES AND STOCK VESTED FOR THE YEAR ENDED | ||||||||||||||||
DECEMBER 31, 2008 | ||||||||||||||||
Option awards | Stock awards | |||||||||||||||
Number of shares | Number of shares | |||||||||||||||
acquired on exercise | Value realized on | acquired on vesting | Value realized on | |||||||||||||
Name | (#) | exercise ($) | (#) | vesting ($)(2) | ||||||||||||
William J. Wagner | — | — | 3,040 | 82,749 | ||||||||||||
William W. Harvey, Jr. | 2,500 | 41,400 | (1) | 2,400 | 65,328 | |||||||||||
Gregory C. LaRocca | — | — | 1,440 | 39,197 | ||||||||||||
Robert A. Ordiway | — | — | 1,440 | 39,197 | ||||||||||||
Steven G. Fisher | — | — | 1,440 | 39,197 |
(1) | Based on the difference between the $24.27 per share trading price on May 20, 2008 and the exercise price of $7.81. | |
(2) | Based on the $27.22 per share trading price of our common stock on March 16, 2008. |
PENSION BENEFITS AT AND FOR THE YEAR ENDED DECEMBER 31, 2008 | ||||||||||||
Present value of | ||||||||||||
Number of years | accumulated benefit | Payments during last | ||||||||||
Name | Plan name | credited service (#) | ($) | fiscal year ($) | ||||||||
William J. Wagner | Northwest Savings Bank Pension Plan | 25 | 581,691 | — | ||||||||
Northwest Savings Bank Non-Qualified Supplemental Retirement Plan | 25 | 644,456 | — | |||||||||
William W. Harvey, Jr. | Northwest Savings Bank Pension Plan | 13 | 93,924 | — | ||||||||
Gregory C. LaRocca | Northwest Savings Bank Pension Plan | 23 | 415,381 | — | ||||||||
Robert A. Ordiway | Northwest Savings Bank Pension Plan | 34 | 781,097 | — | ||||||||
Steven G. Fisher | Northwest Savings Bank Pension Plan | 25 | 316,598 | — |
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NONQUALIFIED DEFERRED COMPENSATION AT AND FOR THE YEAR ENDED DECEMBER 31, 2008 | ||||||||||||||||||||
Executive | Registrant | Aggregate | Aggregate | Aggregate balance | ||||||||||||||||
contributions in | contributions in | earnings in last | withdrawals/ | at last fiscal year | ||||||||||||||||
Name | last fiscal year ($) | last fiscal year ($) | fiscal year ($) | distributions ($) | end ($) | |||||||||||||||
William J. Wagner | — | — | 613 | (1) | — | 17,520 | (1) | |||||||||||||
William W. Harvey, Jr. | — | — | — | — | — | |||||||||||||||
Gregory C. LaRocca | — | — | — | — | — | |||||||||||||||
Robert A. Ordiway | — | — | — | — | — | |||||||||||||||
Steven G. Fisher | — | — | — | — | — |
(1) | Amounts listed as earnings and included in the aggregate balance at last fiscal year end have not been reported as compensation in Summary Compensation Tables because the earnings are not “above market.” |
(i) | pay Mr. Wagner severance pay equal to three times the sum of his highest rate of base salary, plus his highest rate of cash bonus paid during the prior three years; and | ||
(ii) | continue life, health and dental coverage for 36 months from the date of termination, unless Mr. Wagner obtains similar benefits from a new employer. |
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(i) | reduction in the executive’s base salary or benefits and perquisites, other than a general reduction that applies to all executives, unless such reduction is coincident with or following a “change in control” (as defined below); | ||
(ii) | in the case of Mr. Wagner, failure to re-elect, re-appoint or re-nominate him to his position as President and Chief Executive Officer and as director or trustee of Northwest Bancorp, Inc., Northwest Bancorp, MHC and Northwest Savings Bank or a change in Mr. Wagner’s functions, duties or responsibilities that would cause his position to become one of lesser responsibility, importance or scope; | ||
(iii) | in the case of the other executives, reduction in their duties, responsibilities or status, such that there is a reduction in the executive’s pay grade level in effect on the date of the employment agreement of more than three levels (in accordance with Northwest Savings Bank’s normal personnel practices, as circulated annually to officers of Northwest Savings Bank); | ||
(iv) | a relocation of the executive’s principal place of employment by more than 30 miles; | ||
(v) | liquidation or dissolution of Northwest Bancorp, Inc. or Northwest Savings Bank other than reorganizations that do not affect the status of the executive; or | ||
(vi) | breach of the employment agreement by Northwest Bancorp, Inc. or Northwest Savings Bank. |
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(i) | would be required to be reported in response to Item 1(a) of Form 8-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); | ||
(ii) | results in a change in control of Northwest Bancorp, Inc., Northwest Bancorp, MHC or Northwest Savings Bank within the meaning of the Bank Holding Company Act, as amended, and the applicable rules and regulations thereunder; or | ||
(iii) | a change in control shall be deemed to have occurred at such time as: |
(a) | any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than Northwest Bancorp, MHC is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Northwest Bancorp, Inc. representing 25% or more of the combined voting power of Northwest Bancorp, Inc.’s outstanding securities except for any securities purchased by Northwest Savings Bank’s employee stock ownership plan or trust; | ||
(b) | individuals who constitute the board of directors on the effective date of the employment agreement (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date of the employment agreement whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by Northwest Bancorp, Inc.’s stockholders was approved by the same nominating committee serving under the Incumbent Board, shall be, for purposes of this clause (b), considered as though he were a member of the Incumbent Board; | ||
(c) | a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of Northwest Bancorp, Inc., Northwest Bancorp, MHC or Northwest Savings Bank or similar transaction in which Northwest Bancorp, Inc. or Northwest Savings Bank is not the surviving institution occurs; | ||
(d) | a proxy statement soliciting proxies from stockholders of Northwest Bancorp, Inc., by someone other than the current management of Northwest Bancorp, Inc., seeking stockholder approval of a plan of reorganization, merger or consolidation of Northwest Bancorp, Inc. or similar transaction with one or more corporations or financial institutions, and as a result of such proxy solicitation, a plan of reorganization, merger or consolidation or similar transaction involving Northwest Bancorp, Inc. is approved by Northwest Bancorp, Inc.’s board of directors or the requisite vote of Northwest Bancorp, Inc.’s stockholders; or | ||
(e) | a tender offer is made for 25% or more of the voting securities of Northwest Bancorp, Inc. and the shareholders owning beneficially or of record 25% or more of the outstanding securities of Northwest Bancorp, Inc. have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror. |
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William J. Wagner | ||||||||||||||||||||||||
Involuntary Termination or | ||||||||||||||||||||||||
Termination for Good Reason | ||||||||||||||||||||||||
Before Change in Control or | ||||||||||||||||||||||||
Voluntary Termination Upon | ||||||||||||||||||||||||
Type of | or Any Time After Change in | Voluntary | Termination | |||||||||||||||||||||
Benefit | Control | Termination | for Cause | Death | Disability | Retirement | ||||||||||||||||||
Severance pay | $ | 1,445,400 | — | — | $ | 481,800 | $ | 905,400 | — | |||||||||||||||
Bonus payment | $ | 210,498 | $ | 70,166 | — | $ | 70,166 | $ | 70,166 | $ | 70,166 | |||||||||||||
Stock option vesting acceleration | — | — | — | — | — | — | ||||||||||||||||||
Health care and other benefits continuation | $ | 43,073 | — | — | $ | 38,789 | — | — |
William W. Harvey, Jr. | ||||||||||||||||||||||||
Involuntary Termination or | ||||||||||||||||||||||||
Termination for Good Reason | ||||||||||||||||||||||||
Before Change in Control or | ||||||||||||||||||||||||
Voluntary Termination Upon | ||||||||||||||||||||||||
Type of | or Any Time After Change in | Voluntary | Termination | |||||||||||||||||||||
Benefit | Control | Termination | for Cause | Death | Disability | Retirement | ||||||||||||||||||
Severance pay | $ | 675,000 | — | — | $ | 225,000 | $ | 270,000 | — | |||||||||||||||
Bonus payment | $ | 29,988 | $ | 29,988 | — | $ | 29,988 | $ | 29,988 | $ | 29,988 | |||||||||||||
Stock option vesting acceleration | — | — | — | — | — | — | ||||||||||||||||||
Health care and other benefits continuation | $ | 21,536 | — | — | $ | 38,789 | — | — |
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Gregory C. LaRocca | ||||||||||||||||||||||||
Involuntary Termination or | ||||||||||||||||||||||||
Termination for Good Reason | ||||||||||||||||||||||||
Before Change in Control or | ||||||||||||||||||||||||
Voluntary Termination Upon | ||||||||||||||||||||||||
Type of | or Any Time After Change in | Voluntary | Termination | |||||||||||||||||||||
Benefit | Control | Termination | for Cause | Death | Disability | Retirement | ||||||||||||||||||
Severance pay | $ | 675,000 | — | — | $ | 225,000 | $ | 270,000 | — | |||||||||||||||
Bonus payment | $ | 30,615 | $ | 30,615 | — | $ | 30,615 | $ | 30,615 | $ | 30,615 | |||||||||||||
Stock option vesting acceleration | — | — | — | — | — | — | ||||||||||||||||||
Health care and other benefits continuation | $ | 21,536 | — | — | $ | 14,113 | — | — |
Robert A. Ordiway | ||||||||||||||||||||||||
Involuntary Termination or | ||||||||||||||||||||||||
Termination for Good Reason | ||||||||||||||||||||||||
Before Change in Control or | ||||||||||||||||||||||||
Voluntary Termination Upon | ||||||||||||||||||||||||
Type of | or Any Time After Change in | Voluntary | Termination | |||||||||||||||||||||
Benefit | Control | Termination | for Cause | Death | Disability | Retirement | ||||||||||||||||||
Severance pay | $ | 675,000 | — | — | $ | 225,000 | $ | 270,000 | — | |||||||||||||||
Bonus payment | $ | 31,608 | $ | 31,608 | — | $ | 31,608 | $ | 31,608 | $ | 31,608 | |||||||||||||
Stock option vesting acceleration | — | — | — | — | — | — | ||||||||||||||||||
Health care and other benefits continuation | $ | 21,536 | — | — | $ | 38,789 | — | — |
Steven G. Fisher | ||||||||||||||||||||||||
Involuntary Termination or | ||||||||||||||||||||||||
Termination for Good Reason | ||||||||||||||||||||||||
Before Change in Control or | ||||||||||||||||||||||||
Voluntary Termination Upon | ||||||||||||||||||||||||
Type of | or Any Time After Change in | Voluntary | Termination | |||||||||||||||||||||
Benefit | Control | Termination | for Cause | Death | Disability | Retirement | ||||||||||||||||||
Severance pay | $ | 675,000 | — | — | $ | 225,000 | $ | 270,000 | — | |||||||||||||||
Bonus payment | $ | 29,988 | $ | 29,988 | — | $ | 29,988 | $ | 29,988 | $ | 29,988 | |||||||||||||
Stock option vesting acceleration | — | — | — | — | — | — | ||||||||||||||||||
Health care and other benefits continuation | $ | 21,536 | — | — | $ | 38,789 | — | — |
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Average | Years of Service and Annual Benefit Payable at Retirement | |||||||||||||||||||||||||||
Compensation | 15 | 20 | 25 | 30 | 35 | 40 | ||||||||||||||||||||||
$ | 25,000 | $ | 6,000 | $ | 8,000 | $ | 10,000 | $ | 10,750 | $ | 11,500 | $ | 11,500 | |||||||||||||||
$ | 50,000 | $ | 12,000 | $ | 16,000 | $ | 20,000 | $ | 21,500 | $ | 23,000 | $ | 23,000 | |||||||||||||||
$ | 75,000 | $ | 18,000 | $ | 24,000 | $ | 30,000 | $ | 32,250 | $ | 34,500 | $ | 34,500 | |||||||||||||||
$ | 100,000 | $ | 25,051 | $ | 33,402 | $ | 41,752 | $ | 44,752 | $ | 47,752 | $ | 47,752 | |||||||||||||||
$ | 125,000 | $ | 33,301 | $ | 44,402 | $ | 55,502 | $ | 59,252 | $ | 63,002 | $ | 63,002 | |||||||||||||||
$ | 150,000 | $ | 41,551 | $ | 55,402 | $ | 69,252 | $ | 73,752 | $ | 78,252 | $ | 78,252 | |||||||||||||||
$ | 175,000 | $ | 49,801 | $ | 66,402 | $ | 83,002 | $ | 88,252 | $ | 93,502 | $ | 93,502 | |||||||||||||||
$ | 200,000 | $ | 58,051 | $ | 77,402 | $ | 96,752 | $ | 102,752 | $ | 108,752 | $ | 108,752 | |||||||||||||||
$ | 230,000 | plus | $ | 67,951 | $ | 90,602 | $ | 113,252 | $ | 120,152 | $ | 127,052 | $ | 127,052 |
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Average | Years of Service and Annual Benefit Payable at Retirement | |||||||||||||||||||||||||||
Compensation | 15 | 20 | 25 | 30 | 35 | 40 | ||||||||||||||||||||||
$ | 100,000 | $ | 25,051 | $ | 33,402 | $ | 41,752 | $ | 44,752 | $ | 47,752 | $ | 47,752 | |||||||||||||||
$ | 125,000 | $ | 33,301 | $ | 44,402 | $ | 55,502 | $ | 59,252 | $ | 63,002 | $ | 63,002 | |||||||||||||||
$ | 150,000 | $ | 41,551 | $ | 55,402 | $ | 69,252 | $ | 73,752 | $ | 78,252 | $ | 78,252 | |||||||||||||||
$ | 175,000 | $ | 49,801 | $ | 66,402 | $ | 83,002 | $ | 88,252 | $ | 93,502 | $ | 93,502 | |||||||||||||||
$ | 200,000 | $ | 58,051 | $ | 77,402 | $ | 96,752 | $ | 102,752 | $ | 108,752 | $ | 108,752 | |||||||||||||||
$ | 250,000 | $ | 74,551 | $ | 99,402 | $ | 124,252 | $ | 131,752 | $ | 139,252 | $ | 139,252 | |||||||||||||||
$ | 300,000 | $ | 91,051 | $ | 121,402 | $ | 151,752 | $ | 160,752 | $ | 169,752 | $ | 169,752 | |||||||||||||||
$ | 350,000 | $ | 107,551 | $ | 143,402 | $ | 179,252 | $ | 189,752 | $ | 200,252 | $ | 200,252 | |||||||||||||||
$ | 400,000 | $ | 124,051 | $ | 165,402 | $ | 206,752 | $ | 218,752 | $ | 230,752 | $ | 230,752 |
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Director Compensation Table For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
Change in pension value | ||||||||||||||||||||||||||||
Non-equity | and nonqualified deferred | All other | ||||||||||||||||||||||||||
Fees earned or | Stock awards | Option awards | incentive plan | compensation earnings | compensation | |||||||||||||||||||||||
Name | paid in cash ($) | ($)(1) | ($)(2) | compensation ($) | ($)(3) | ($)(4) | Total ($) | |||||||||||||||||||||
John M. Bauer | 56,400 | 17,136 | (5) | 35,350 | (5) | — | 23,573 | 1,584 | 134,043 | |||||||||||||||||||
Richard L. Carr | 69,500 | 17,136 | (6) | 35,350 | (6) | — | 21,976 | 1,584 | 145,546 | |||||||||||||||||||
Thomas K. Creal, III | 62,700 | 17,136 | (7) | 35,350 | (7) | — | 27,354 | 1,584 | 144,124 | |||||||||||||||||||
Robert G. Ferrier | 54,800 | 17,136 | (8) | 35,350 | (8) | — | 27,305 | 1,584 | 136,175 | |||||||||||||||||||
A. Paul King | 53,400 | 17,136 | (9) | 35,350 | (9) | — | 19,258 | 1,584 | 126,728 | |||||||||||||||||||
Joseph F. Long | 61,300 | 17,136 | (10) | 35,350 | (10) | — | 21,057 | 1,584 | 136,427 | |||||||||||||||||||
Richard E. McDowell | 57,600 | 17,136 | (11) | 35,350 | (11) | — | 23,369 | 1,584 | 135,039 | |||||||||||||||||||
Philip M. Tredway | 56,100 | 4,494 | (12)(13) | 2,587 | (12)(14) | — | 8,548 | 634 | 72,363 |
(1) | For all directors other than Mr. Tredway, reflects expense related to an award of 4,000 shares of restricted stock granted to each director on March 16, 2005 with a grant date fair value of $85,680 (based on a grant date fair value of $21.42 per share). This award vests equally over a five-year period beginning March 16, 2006. All values listed (including the value for Mr. Tredway) are the amounts recognized for financial statement reporting purposes in accordance with SFAS 123(R). The assumptions used in the valuation of these awards are included in Notes 1(o) and 15(d) to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission. | |
(2) | Reflects expense related to an award of 3,000 stock options granted to each director on November 19, 2008 with a grant date fair value of $8,550 (based on a grant date fair value of $2.85 per stock option). This award vests equally over a seven-year period beginning November 19, 2009. These options have an exercise price of $22.03 per option. In addition, for all directors other than Mr. Tredway, reflects expense related to an award of 10,000 stock options granted to each director on January 19, 2005 with a grant date fair value of $67,000 (based on a grant date fair value of $6.70 per stock option). This award vests equally over a five-year period beginning January 19, 2006. Options have an exercise price of $22.93 per option. All values listed are the amounts recognized for financial statement reporting purposes in accordance with SFAS 123(R), including the immediate expense for those directors that qualify for normal retirement, which includes all directors except Mr. Tredway. The assumptions used in the valuation of these awards are included in Notes 1(o) and 15(e) to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission. | |
(3) | Reflects change in pension value and nonqualified deferred compensation for each director as follows: Mr. Bauer, $20,323 and $3,250; Mr. Carr. $20,206 and $1,770; Mr. Creal, $24,347 and $3,007; Mr. Ferrier, $22,426 and $4,879; Mr. King, $17,034 and $2,224; Mr. Long $20,166 and $891; Mr. McDowell, $17,046 and $6,323; and Mr. Tredway, $8,312 and $236. | |
(4) | Reflects dividends on unvested restricted stock awards. | |
(5) | At December 31, 2008, Mr. Bauer had 20,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(6) | At December 31, 2008, Mr. Carr had 23,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(7) | At December 31, 2008, Mr. Creal had 13,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(8) | At December 31, 2008, Mr. Ferrier had 23,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(9) | At December 31, 2008, Mr. King had 25,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(10) | At December 31, 2008, Mr. Long had 25,000 stock options outstanding and 1,600 unvested shares of restricted common stock | |
(11) | At December 31, 2008, Mr. McDowell had 23,000 stock options outstanding and 1,600 unvested shares of restricted common stock. | |
(12) | At December 31, 2008, Mr. Tredway had 5,000 stock options outstanding and 640 unvested shares of restricted stock. | |
(13) | Reflects expense related to an award of 800 shares of restricted stock granted on June 20, 2007 with a grant date fair value of $22,472 (based on a grant date fair value of $28.09 per share). This award vests equally over a five-year period beginning June 20, 2008. | |
(14) | In addition to the 3,000 options granted on November 19, 2008 as described in footnote (2) above, reflects expense related to an award of 2,000 stock options granted on June 20, 2007 with a grant date fair value of $11,600 (based on a grant date fair value of $5.80 per option). This award vests equally over a five-year period beginning June 20, 2008. Options have an exercise price of $28.09 per option. |
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• | non-employee directors in the aggregate may not receive more than 30% of the options and restricted stock awards authorized under the plan; | ||
• | any one non-employee director may not receive more than 5% of the options and restricted stock awards authorized under the plan; | ||
• | any officer or employee may not receive more than 25% of the options and restricted stock awards authorized under the plan; | ||
• | any tax-qualified employee stock benefit plans and management stock award plans, in the aggregate, may not hold more than 10% of the shares sold in the offering, unless Northwest Savings Bank has tangible capital of 10% or more, in which case any tax- |
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qualified employee stock benefit plans and management stock award plans, may be increased to up to 12% of the shares sold in the offering; |
• | stock options and restricted stock awards may not vest more rapidly than 20% per year, beginning on the first anniversary of the grant; | ||
• | accelerated vesting is not permitted except for death, disability or upon a change in control of Northwest Savings Bank or Northwest Bancshares, Inc.; and | ||
• | our executive officers or directors must exercise or forfeit their options in the event that Northwest Savings Bank becomes critically undercapitalized, is subject to enforcement action or receives a capital directive. |
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Largest | ||||||||||||||||||||||
Aggregate | Principal | |||||||||||||||||||||
Nature | Balance From | Principal | Paid | Interest Paid | ||||||||||||||||||
of | 01/01/09 to | Interest | Balance | 01/01/08 to | 01/01/08 to | |||||||||||||||||
Name | Position | Transaction | 06/30/09 | Rate | 06/30/09 | 06/30/09 | 06/30/09 | |||||||||||||||
Robert G. Ferrier | Director | Mortgage Fixed Term | $ | 319,925 | 4.875% Fixed | $ | 278,180 | $ | 41,751 | $ | 22,145 | |||||||||||
Home Equity Line of Credit | $ | 46,586 | Prime + 2.50% Variable | $ | 28,375 | $ | 59,000 | $ | 3,931 | |||||||||||||
Robert A. Ordiway | EVP | Mortgage Fixed Term | $ | 177,580 | 4.875% Fixed | $ | 169,130 | $ | 8,450 | $ | 14,726 | |||||||||||
Visa Platinum Credit Card | $ | 7,624 | Prime + 2.50% Variable | $ | 7,624 | 50,905 | $ | 25 |
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Amount of Shares | ||||||||
Owned and Nature | Percent of Shares | |||||||
Name and Address of | of Beneficial | of Common Stock | ||||||
Beneficial Owners | Ownership (1) | Outstanding | ||||||
Northwest Bancorp, MHC | 30,612,563 | 63.0 | % | |||||
100 Liberty Street Warren, Pennsylvania 16365 | ||||||||
Northwest Bancorp, MHC, | 31,415,164 | 64.3 | % | |||||
and all directors and executive officers of Northwest Bancorp, Inc. and Northwest Savings Bank as a group (13 directors and officers) (2) |
(1) | In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of any shares of common stock if he has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares, and includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting or investment power. | |
(2) | Includes shares of common stock held by Northwest Bancorp, MHC, of which our directors are also trustees. Excluding shares of common stock held by Northwest Bancorp, MHC, directors and executive officers of Northwest Bancorp, Inc. and Northwest Savings Bank owned 791,600 shares of common stock, or 1.6% of the outstanding shares. |
Shares of Common | Options Exercisable | |||||||||||
Name (1) | Stock Held (2) | Within 60 Days | Total | |||||||||
Directors: | ||||||||||||
John M. Bauer | 18,359 | 15,429 | 33,788 | |||||||||
Richard L. Carr | 40,745 | 18,429 | 59,174 | |||||||||
Thomas K. Creal, III | 805 | 8,429 | 9,234 | |||||||||
Robert G. Ferrier | 14,946 | 18,429 | 33,375 | |||||||||
A. Paul King | 16,235 | 20,429 | 36,664 | |||||||||
Joseph F. Long | 29,831 | 20,429 | 50,260 | |||||||||
Richard E. McDowell | 57,729 | 18,429 | 76,158 | |||||||||
Philip M. Tredway | 2,157 | 829 | 2,986 | |||||||||
William J. Wagner | 170,435 | 62,500 | 232,935 | |||||||||
Named Executive Officers: | ||||||||||||
Gregory C. LaRocca | 85,324 | 30,171 | 115,495 | |||||||||
William W. Harvey, Jr. | 20,739 | 31,921 | 52,660 | |||||||||
Steven G. Fisher | 63,000 | 25,871 | 88,871 | |||||||||
All Directors and Executive Officers as a Group (13 Persons) | 524,694 | 277,907 | 802,601 |
* | Less than 1%. | |
(1) | The mailing address for each person listed is 100 Liberty Street, Warren, Pennsylvania 16365-2353. |
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(2) | In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of any shares of common stock if he has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares, and includes all shares held directly as well as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting or investment power. |
(i) | the number of exchange shares to be held upon consummation of the conversion, based upon their beneficial ownership of Northwest Bancorp, Inc. common stock as of November 6, 2009; | ||
(ii) | the proposed purchases of subscription shares, assuming sufficient shares of common stock are available to satisfy their subscriptions; and | ||
(iii) | the total amount of Northwest Bancshares, Inc. common stock to be held upon consummation of the conversion. |
Proposed Purchases of Stock in the | ||||||||||||||||||||
Offering (1) | Total Common Stock to be Held | |||||||||||||||||||
Number of Exchange | Percentage of | |||||||||||||||||||
Shares to be Held | Number of | Total | ||||||||||||||||||
Name of Beneficial Owner | (2) | Shares | Amount | Number of Shares | Outstanding (2) | |||||||||||||||
Directors: | ||||||||||||||||||||
William J. Wagner | 483,177 | 15,000 | $ | 150,000 | 498,177 | * | ||||||||||||||
John M. Bauer | 70,086 | 500 | 5,000 | 70,586 | * | |||||||||||||||
Richard L. Carr | 122,745 | 2,000 | 20,000 | 124,745 | * | |||||||||||||||
Thomas K. Creal, III | 19,154 | 1,000 | 10,000 | 20,154 | * | |||||||||||||||
Robert G. Ferrier | 69,230 | 4,000 | 40,000 | 73,230 | * | |||||||||||||||
A. Paul King | 76,052 | 5,000 | 50,000 | 81,052 | * | |||||||||||||||
Joseph F. Long | 104,254 | 1,000 | 10,000 | 105,254 | * | |||||||||||||||
Richard E. McDowell | 157,975 | 5,000 | 50,000 | 162,975 | * | |||||||||||||||
Philip M. Tredway | 6,194 | 500 | 5,000 | 6,694 | * | |||||||||||||||
Total | 1,108,867 | 34,000 | $ | 340,000 | 1,142,867 | 1.1 | % | |||||||||||||
Executive Officers: | ||||||||||||||||||||
Gregory C. LaRocca | 239,571 | 10,000 | $ | 100,000 | 249,571 | * | ||||||||||||||
William W. Harvey | 109,233 | 1,000 | 10,000 | 110,233 | * | |||||||||||||||
Steven G. Fisher | 184,345 | 10,000 | 100,000 | 194,345 | * | |||||||||||||||
Gerald J. Ritzert | 22,819 | 500 | 5,000 | 23,319 | * | |||||||||||||||
Total | 555,968 | 21,500 | $ | 215,000 | 577,468 | 0.6 | % | |||||||||||||
Total for Directors and Executive Officers | 1,664,835 | 55,500 | $ | 555,000 | 1,720,335 | 1.7 | % | |||||||||||||
* | Less than 1%. | |
(1) | Includes proposed subscriptions, if any, through the director or officer’s 401(k) account and by associates. | |
(2) | Based on information presented in “Beneficial Ownership of Common Stock” and assumes an exchange ratio of 2.0743 shares for each share of Northwest Bancorp, Inc. and that 101,996,168 shares are outstanding after the conversion. Includes shares that may be acquired upon the exercise of stock options. |
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STOCKHOLDERS OF NORTHWEST BANCORP, INC.
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(i) | it does not involve an interim savings institution; | ||
(ii) | Northwest Bancorp, Inc.’s federal stock charter is not changed; | ||
(iii) | each share of Northwest Bancorp, Inc.’s stock outstanding immediately prior to the effective date of the transaction will be an identical outstanding share or a treasury share of Northwest Bancorp, Inc. after such effective date; and |
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(iv) | either: |
(a) | no shares of voting stock of Northwest Bancorp, Inc. and no securities convertible into such stock are to be issued or delivered under the plan of combination; or | ||
(b) | the authorized but unissued shares or the treasury shares of voting stock of Northwest Bancorp, Inc. to be issued or delivered under the plan of combination, plus those initially issuable upon conversion of any securities to be issued or delivered under such plan, do not exceed 15% of the total shares of voting stock of Northwest Bancorp, Inc. outstanding immediately prior to the effective date of the transaction. |
• | the economic effect, both immediate and long-term, upon Northwest Bancshares, Inc.’s stockholders, including stockholders, if any, who do not participate in the transaction; |
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• | the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Northwest Bancshares, Inc. and its subsidiaries and on the communities in which Northwest Bancshares, Inc. and its subsidiaries operate or are located; | ||
• | whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of Northwest Bancshares, Inc.; | ||
• | whether a more favorable price could be obtained for Northwest Bancshares, Inc.’s stock or other securities in the future; | ||
• | the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Northwest Bancshares, Inc. and its subsidiaries; | ||
• | the future value of the stock or any other securities of Northwest Bancshares, Inc. or the other entity to be involved in the proposed transaction; | ||
• | any antitrust or other legal and regulatory issues that are raised by the proposal; | ||
• | the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and | ||
• | the ability of Northwest Bancshares, Inc. to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations. |
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(i) | The limitation on voting rights of persons who directly or indirectly beneficially own more than 10% of the outstanding shares of common stock; | ||
(ii) | The division of the board of directors into three staggered classes; | ||
(iii) | The ability of the board of directors to fill vacancies on the board; | ||
(iv) | The requirement that at least a majority of the votes eligible to be cast by stockholders must vote to remove directors, and can only remove directors for cause; | ||
(v) | The ability of the board of directors to amend and repeal the bylaws; | ||
(vi) | The ability of the board of directors to evaluate a variety of factors in evaluating offers to purchase or otherwise acquire Northwest Bancshares, Inc.; | ||
(vii) | The authority of the board of directors to provide for the issuance of preferred stock; | ||
(viii) | The validity and effectiveness of any action lawfully authorized by the affirmative vote of the holders of a majority of the total number of outstanding shares of common stock; | ||
(ix) | The number of stockholders constituting a quorum or required for stockholder consent; | ||
(x) | The indemnification of current and former directors and officers, as well as employees and other agents, by Northwest Bancshares, Inc.; | ||
(xi) | The limitation of liability of officers and directors to Northwest Bancshares, Inc. for money damages; | ||
(xii) | The inability of stockholders to cumulate their votes in the election of directors; | ||
(xiii) | The advance notice requirements for stockholder proposals and nominations; and | ||
(xiv) | The provision of the articles of incorporation requiring approval of at least 80% of the outstanding voting stock to amend the provisions of the articles of incorporation provided in (i) through (xiii) of this list. |
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• | the economic effect, both immediate and long-term, upon Northwest Bancshares, Inc.’s stockholders, including stockholders, if any, who do not participate in the transaction; | ||
• | the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Northwest Bancshares, Inc. and its subsidiaries and on the communities in which Northwest Bancshares, Inc. and its subsidiaries operate or are located; | ||
• | whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of Northwest Bancshares, Inc.; | ||
• | whether a more favorable price could be obtained for Northwest Bancshares, Inc.’s stock or other securities in the future; | ||
• | the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Northwest Bancshares, Inc. and its subsidiaries; | ||
• | the future value of the stock or any other securities of Northwest Bancshares, Inc. or the other entity to be involved in the proposed transaction; |
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• | any antitrust or other legal and regulatory issues that are raised by the proposal; | ||
• | the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and | ||
• | the ability of Northwest Bancshares, Inc. to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations. |
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(i) | the acquisition would result in a monopoly or substantially lessen competition; | ||
(ii) | the financial condition of the acquiring person might jeopardize the financial stability of the institution; or | ||
(iii) | the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person. |
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KPMG LLP Suite 2500 One Mellon Center Pittsburgh, PA 15219-2598 |
Northwest Bancorp, Inc.:
member firm of KPMG International, a Swiss cooperative.
F-2
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(Amounts in thousands, excluding share data)
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 43,841 | 55,815 | 75,905 | ||||||||
Interest-earning deposits in other financial institutions | 369,840 | 16,795 | 153,160 | |||||||||
Federal funds sold and other short-term investments | 1,385 | 7,312 | 1,551 | |||||||||
Marketable securities available-for-sale (amortized cost of $1,015,733, $1,144,435 and $1,123,526) | 1,009,382 | 1,139,170 | 1,133,367 | |||||||||
Loans receivable, net of allowance for loan losses of $66,777, $54,929 and $41,784 | 5,091,518 | 5,141,892 | 4,795,622 | |||||||||
Accrued interest receivable | 25,852 | 27,252 | 27,084 | |||||||||
Real estate owned, net | 15,890 | 16,844 | 8,667 | |||||||||
Federal Home Loan Bank stock, at cost | 63,143 | 63,143 | 31,304 | |||||||||
Premises and equipment, net | 119,943 | 115,842 | 110,894 | |||||||||
Bank owned life insurance | 125,867 | 123,479 | 118,682 | |||||||||
Goodwill | 171,363 | 171,363 | 171,614 | |||||||||
Other intangible assets | 5,725 | 7,395 | 11,782 | |||||||||
Mortgage servicing rights | 7,917 | 6,280 | 8,955 | |||||||||
Other assets | 40,625 | 37,659 | 14,929 | |||||||||
Total assets | $ | 7,092,291 | 6,930,241 | 6,663,516 | ||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Liabilities: | ||||||||||||
Deposits | $ | 5,345,739 | 5,038,211 | 5,542,334 | ||||||||
Borrowed funds | 897,063 | 1,067,945 | 339,115 | |||||||||
Advances by borrowers for taxes and insurance | 30,268 | 26,190 | 24,159 | |||||||||
Accrued interest payable | 4,955 | 5,194 | 4,356 | |||||||||
Other liabilities | 73,482 | 70,663 | 32,354 | |||||||||
Junior subordinated deferrable interest debentures held by trusts that issued guaranteed capital debt securities | 108,249 | 108,254 | 108,320 | |||||||||
Total liabilities | 6,459,756 | 6,316,457 | 6,050,638 | |||||||||
Commitments and contingent liabilities: | ||||||||||||
Shareholders’ equity: | ||||||||||||
Preferred stock, $0.10 par value. 50,000,000 shares authorized; no shares issued | — | — | — | |||||||||
Common stock, $0.10 par value. 500,000,000 shares authorized; shares issued 51,259,687, 51,244,974 and 51,191,109, respectively | 5,126 | 5,124 | 5,119 | |||||||||
Paid-in capital | 219,335 | 218,332 | 214,606 | |||||||||
Retained earnings, substantially restricted | 503,692 | 490,326 | 458,425 | |||||||||
Accumulated other comprehensive (loss)/ income, net | (26,195 | ) | (30,575 | ) | 816 | |||||||
Treasury stock of 2,742,800, 2,742,800 and 2,610,800 shares, respectively, at cost | (69,423 | ) | (69,423 | ) | (66,088 | ) | ||||||
Total shareholders’ equity | 632,535 | 613,784 | 612,878 | |||||||||
Total liabilities and shareholders’ equity | $ | 7,092,291 | 6,930,241 | 6,663,516 | ||||||||
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(Amounts in thousands, excluding share data)
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Interest income: | ||||||||||||||||||||
Loans receivable | $ | 160,763 | 161,409 | 327,128 | 315,570 | 286,316 | ||||||||||||||
Mortgage-backed securities | 14,278 | 16,684 | 34,694 | 29,385 | 31,523 | |||||||||||||||
Taxable investment securities | 2,896 | 7,066 | 11,828 | 30,583 | 31,164 | |||||||||||||||
Tax-free investment securities | 5,660 | 6,021 | 12,253 | 12,626 | 12,986 | |||||||||||||||
Interest-earning deposits | 162 | 2,506 | 2,756 | 7,867 | 6,584 | |||||||||||||||
Total interest income | 183,759 | 193,686 | 388,659 | 396,031 | 368,573 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 49,083 | 79,281 | 137,061 | 186,540 | 156,985 | |||||||||||||||
Borrowed funds | 20,304 | 12,529 | 32,232 | 24,475 | 34,124 | |||||||||||||||
Total interest expense | 69,387 | 91,810 | 169,293 | 211,015 | 191,109 | |||||||||||||||
Net interest income | 114,372 | 101,876 | 219,366 | 185,016 | 177,464 | |||||||||||||||
Provision for loan losses | 17,517 | 5,689 | 22,851 | 8,743 | 8,480 | |||||||||||||||
Net interest income after provision for loan losses | 96,855 | 96,187 | 196,515 | 176,273 | 168,984 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Impairment losses on securities | (8,690 | ) | (1,472 | ) | (16,004 | ) | (8,412 | ) | — | |||||||||||
Noncredit related losses on securities not expected to be sold (recognized in other comprehensive income) | 4,400 | — | — | — | — | |||||||||||||||
Net impairment losses | (4,290 | ) | (1,472 | ) | (16,004 | ) | (8,412 | ) | — | |||||||||||
Gain on sale of investments, net | 280 | 971 | 6,037 | 4,958 | 368 | |||||||||||||||
Service charges and fees | 15,984 | 15,791 | 32,432 | 27,754 | 24,459 | |||||||||||||||
Trust and other financial services income | 2,853 | 3,531 | 6,718 | 6,223 | 5,321 | |||||||||||||||
Insurance commission income | 1,308 | 1,163 | 2,376 | 2,705 | 2,550 | |||||||||||||||
Gain on sale of loans, net | — | — | — | 728 | 4,832 | |||||||||||||||
(Loss)/ gain on sale of real estate owned, net | (3,872 | ) | (341 | ) | (428 | ) | (83 | ) | 735 | |||||||||||
Income from bank owned life insurance | 2,388 | 2,369 | 4,797 | 4,460 | 4,344 | |||||||||||||||
Mortgage banking income | 3,724 | 671 | 665 | 1,578 | 684 | |||||||||||||||
Non-cash (impairment)/ recovery of mortgage servicing asset | 1,390 | — | (2,165 | ) | 65 | (205 | ) | |||||||||||||
Other operating income | 1,691 | 2,139 | 4,324 | 3,046 | 2,938 | |||||||||||||||
Total noninterest income | 21,456 | 24,822 | 38,752 | 43,022 | 46,026 | |||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Compensation and employee benefits | 46,665 | 44,966 | 91,129 | 84,217 | 78,611 | |||||||||||||||
Premises and occupancy costs | 11,202 | 11,043 | 21,924 | 21,375 | 20,368 | |||||||||||||||
Office operations | 6,305 | 6,520 | 13,237 | 12,788 | 12,411 | |||||||||||||||
Processing expenses | 10,262 | 8,919 | 18,652 | 15,019 | 12,051 | |||||||||||||||
Professional services | 1,231 | 1,330 | 2,582 | 2,778 | 2,877 | |||||||||||||||
Amortization of intangible assets | 1,670 | 2,586 | 4,387 | 4,499 | 3,876 | |||||||||||||||
Advertising | 2,944 | 2,409 | 5,500 | 3,742 | 2,818 | |||||||||||||||
Federal deposit insurance premiums | 3,780 | 1,844 | 3,884 | 663 | 685 | |||||||||||||||
FDIC special assessment | 3,288 | — | — | — | — | |||||||||||||||
Loss on early extinguishment of debt | — | 705 | 705 | — | 3,124 | |||||||||||||||
Other expenses | 3,923 | 3,593 | 8,128 | 7,661 | 6,861 | |||||||||||||||
Total noninterest expense | 91,270 | 83,915 | 170,128 | 152,742 | 143,682 | |||||||||||||||
Income before income taxes | 27,041 | 37,094 | 65,139 | 66,553 | 71,328 | |||||||||||||||
Provision for income taxes: | ||||||||||||||||||||
Federal | 6,327 | 8,555 | 14,739 | 15,597 | 16,840 | |||||||||||||||
State | 1,121 | 1,475 | 2,229 | 1,859 | 2,952 | |||||||||||||||
Total provision for income taxes | 7,448 | 10,030 | 16,968 | 17,456 | 19,792 | |||||||||||||||
Net income | $ | 19,593 | 27,064 | 48,171 | 49,097 | 51,536 | ||||||||||||||
Basic earnings per share | $ | 0.40 | 0.56 | 1.00 | 1.00 | 1.03 | ||||||||||||||
Diluted earnings per share | $ | 0.40 | 0.56 | 0.99 | 0.99 | 1.03 | ||||||||||||||
F-4
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Accumulated | ||||||||||||||||||||||||
other | Total | |||||||||||||||||||||||
Common | Paid-in | Retained | comprehensive | Treasury | shareholders’ | |||||||||||||||||||
stock | capital | earnings | income (loss), net | stock | equity | |||||||||||||||||||
Balance at December 31, 2005 | $ | 5,108 | 208,132 | 389,985 | (384 | ) | (17,183 | ) | $ | 585,658 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | 51,536 | — | — | 51,536 | ||||||||||||||||||
Other comprehensive loss, net of tax of $561 | — | — | — | (859 | ) | — | (859 | ) | ||||||||||||||||
Total comprehensive income | — | — | 51,536 | (859 | ) | — | 50,677 | |||||||||||||||||
Treasury stock repurchases | — | — | — | — | (8,080 | ) | (8,080 | ) | ||||||||||||||||
Prior period adjustments — adoption of SAB 108 | — | — | (2,770 | ) | — | — | (2,770 | ) | ||||||||||||||||
Exercise of stock options | 6 | 867 | — | — | — | 873 | ||||||||||||||||||
Stock compensation | — | 2,296 | — | — | — | 2,296 | ||||||||||||||||||
Adjustment for adoption of revised pension accounting rules | — | — | — | (10,366 | ) | — | (10,366 | ) | ||||||||||||||||
Dividends paid ($0.70 per share) | — | — | (13,727 | ) | — | — | (13,727 | ) | ||||||||||||||||
Balance at December 31, 2006 | 5,114 | 211,295 | 425,024 | (11,609 | ) | (25,263 | ) | 604,561 | ||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | 49,097 | — | — | 49,097 | ||||||||||||||||||
Other comprehensive income, net of tax of ($7,915) | — | — | — | 12,425 | — | 12,425 | ||||||||||||||||||
Total comprehensive income | — | — | 49,097 | 12,425 | — | 61,522 | ||||||||||||||||||
Treasury stock repurchases | — | — | — | — | (40,825 | ) | (40,825 | ) | ||||||||||||||||
Exercise of stock options | 5 | 857 | — | — | — | 862 | ||||||||||||||||||
Stock compensation | — | 2,454 | — | — | — | 2,454 | ||||||||||||||||||
Dividends paid ($0.84 per share) | — | — | (15,696 | ) | — | — | (15,696 | ) | ||||||||||||||||
Balance at December 31, 2007 | 5,119 | 214,606 | 458,425 | 816 | (66,088 | ) | 612,878 | |||||||||||||||||
Effect of adoption of pension accounting rules, net of tax of ($319) and $361, respectively | — | — | (499 | ) | 572 | — | 73 | |||||||||||||||||
Beginning balance as adjusted | 5,119 | 214,606 | 457,926 | 1,388 | (66,088 | ) | 612,951 | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | 48,171 | — | — | 48,171 | ||||||||||||||||||
Other comprehensive loss, net of tax of $19,575 | — | — | — | (31,963 | ) | — | (31,963 | ) | ||||||||||||||||
Total comprehensive income | — | — | 48,171 | (31,963 | ) | — | 16,208 | |||||||||||||||||
Treasury stock repurchases | — | — | — | — | (3,335 | ) | (3,335 | ) | ||||||||||||||||
Exercise of stock options | 5 | 995 | — | — | — | 1,000 | ||||||||||||||||||
Stock compensation | — | 2,731 | — | — | — | 2,731 | ||||||||||||||||||
Dividends paid ($0.88 per share) | — | — | (15,771 | ) | — | — | (15,771 | ) | ||||||||||||||||
Balance at December 31, 2008 | 5,124 | 218,332 | 490,326 | (30,575 | ) | (69,423 | ) | 613,784 | ||||||||||||||||
Effect of adoption of investment impairment accounting rules, net of tax of $903 | — | — | 1,676 | (1,676 | ) | — | — | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | — | — | 19,593 | — | — | 19,593 | ||||||||||||||||||
Other comprehensive income, net of tax of ($3,261) | — | — | — | 6,056 | — | 6,056 | ||||||||||||||||||
Total comprehensive income | — | — | 19,593 | 6,056 | — | 25,649 | ||||||||||||||||||
Exercise of stock options | 2 | 114 | — | — | — | 116 | ||||||||||||||||||
Stock compensation | — | 889 | — | — | — | 889 | ||||||||||||||||||
Dividends paid ($0.44 per share) | — | — | (7,903 | ) | — | — | (7,903 | ) | ||||||||||||||||
Balance at June 30, 2009 | $ | 5,126 | 219,335 | 503,692 | (26,195 | ) | (69,423 | ) | $ | 632,535 | ||||||||||||||
F-5
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(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income | $ | 19,593 | 27,064 | 48,171 | 49,097 | 51,536 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
Provision for loan losses | 17,517 | 5,689 | 22,851 | 8,743 | 8,480 | |||||||||||||||
Net (gain)/ loss on sales of assets | (4,769 | ) | 54 | (3,468 | ) | (4,638 | ) | (4,550 | ) | |||||||||||
Loss on early extinguishment of debt | — | — | — | — | 3,124 | |||||||||||||||
Net depreciation, amortization, and accretion | 8,797 | 7,667 | 16,222 | 14,572 | 10,828 | |||||||||||||||
(Increase)/ decrease in other assets | (6,645 | ) | 2,627 | (2,007 | ) | (11,119 | ) | (10,945 | ) | |||||||||||
Increase in other liabilities | 10,342 | 5,553 | 3,997 | 3,799 | 5,353 | |||||||||||||||
Net amortization of discounts/premiums on marketable securities | (1,939 | ) | (3,626 | ) | (6,382 | ) | (4,396 | ) | (1,334 | ) | ||||||||||
Noncash compensation expense related to stock benefit plans | 889 | 1,295 | 2,731 | 2,454 | 2,296 | |||||||||||||||
Noncash other-than-temporary impairment of investment securities | 4,290 | 1,472 | 16,004 | 8,412 | — | |||||||||||||||
Noncash impairment of real estate owned | 3,862 | — | — | — | — | |||||||||||||||
Noncash impairment/ (recovery) of mortgage servicing rights | — | — | 2,165 | (65 | ) | 205 | ||||||||||||||
Deferred income tax expense/ (benefit) | (585 | ) | (141 | ) | (6,480 | ) | (750 | ) | 8,775 | |||||||||||
Origination of loans held for sale | (383,800 | ) | (108,030 | ) | (234,973 | ) | (252,810 | ) | (153,354 | ) | ||||||||||
Proceeds from loan sales | 388,843 | 105,228 | 212,535 | 250,295 | 143,340 | |||||||||||||||
Net cash provided by operating activities | 56,395 | 44,852 | 71,366 | 63,594 | 63,754 | |||||||||||||||
Investing activities: | ||||||||||||||||||||
Purchase of marketable securities held-to-maturity | — | — | — | — | (201,912 | ) | ||||||||||||||
Purchase of marketable securities available-for-sale | (24,838 | ) | (406,697 | ) | (457,776 | ) | (49,102 | ) | (280,459 | ) | ||||||||||
Proceeds from maturities and principal reductions of marketable securities held-to-maturity | — | — | — | 151,374 | 115,550 | |||||||||||||||
Proceeds from maturities and principal reductions of marketable securities available-for-sale | 154,048 | 240,755 | 319,051 | 182,454 | 138,640 | |||||||||||||||
Proceeds from sales of marketable securities available-for-sale | — | 1,042 | 113,484 | 105,361 | 5,333 | |||||||||||||||
Proceeds from sales of marketable securities held-to-maturity | — | — | — | 15,652 | — | |||||||||||||||
Loan originations | (732,247 | ) | (883,700 | ) | (1,649,652 | ) | (1,489,646 | ) | (1,334,596 | ) | ||||||||||
Proceeds from loan maturities and principal reductions | 756,254 | 673,198 | 1,283,980 | 1,234,511 | 1,118,372 | |||||||||||||||
Proceeds from sale of portfolio loans | — | — | — | — | 481,301 | |||||||||||||||
Redemption/(purchase) of Federal Home Loan Bank stock | — | (18,764 | ) | (31,839 | ) | 3,715 | (979 | ) | ||||||||||||
Proceeds from sale of real estate owned | 2,639 | 3,822 | 7,176 | 5,316 | 6,771 | |||||||||||||||
Sale/(purchase) of real estate owned for investment | 77 | 77 | 155 | (101 | ) | 66 | ||||||||||||||
Purchase of premises and equipment | (10,232 | ) | (8,765 | ) | (15,655 | ) | (11,411 | ) | (13,071 | ) | ||||||||||
Acquisitions, net of cash received | — | — | — | (25,150 | ) | (2,605 | ) | |||||||||||||
Net cash (used in)/ provided by investing activities | 145,701 | (399,032 | ) | (431,076 | ) | 122,973 | 32,411 |
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(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Financing activities: | ||||||||||||||||||||
(Decrease)/ increase in deposits, net | $ | 307,528 | (155,987 | ) | (504,123 | ) | 9,737 | 54,948 | ||||||||||||
Proceeds from long-term borrowings | — | 460,000 | 645,000 | — | — | |||||||||||||||
Repayments of long-term borrowings | (4,566 | ) | (84,134 | ) | (84,270 | ) | (75,180 | ) | (47,759 | ) | ||||||||||
Net increase in short-term borrowings | (166,205 | ) | 9,476 | 168,484 | 9,342 | 24,025 | ||||||||||||||
Increase/ (decrease) in advances by borrowers for taxes and insurance | 4,078 | 9,540 | 2,031 | 1,476 | (2,142 | ) | ||||||||||||||
Treasury stock repurchases | — | (3,335 | ) | (3,335 | ) | (40,825 | ) | (8,080 | ) | |||||||||||
Repayment of junior subordinated debentures | — | — | — | — | (102,062 | ) | ||||||||||||||
Cash dividends paid | (7,903 | ) | (7,880 | ) | (15,771 | ) | (15,696 | ) | (13,727 | ) | ||||||||||
Proceeds from options exercised, including tax benefit realized | 116 | 243 | 1,000 | 862 | 873 | |||||||||||||||
Net cash provided by/ (used in) financing activities | 133,048 | 227,923 | 209,016 | (110,284 | ) | (93,924 | ) | |||||||||||||
Net (decrease)/ increase in cash and cash equivalents | $ | 335,144 | (126,257 | ) | (150,694 | ) | 76,283 | 2,241 | ||||||||||||
Cash and cash equivalents at beginning of period | $ | 79,922 | 230,616 | 230,616 | 154,333 | 152,092 | ||||||||||||||
Net (decrease)/ increase in cash and cash equivalents | 335,144 | (126,257 | ) | (150,694 | ) | 76,283 | 2,241 | |||||||||||||
Cash and cash equivalents at end of period | $ | 415,066 | 104,359 | 79,922 | 230,616 | 154,333 | ||||||||||||||
Cash paid during the period for: | ||||||||||||||||||||
Interest on deposits and borrowings (including interest credited to deposit accounts of $41,429, $69,036, $129,275, $160,291 and $136,319, respectively) | $ | 69,626 | 91,636 | 168,455 | 210,697 | 191,458 | ||||||||||||||
Income taxes | 13,299 | 6,155 | 22,541 | 16,684 | 6,940 | |||||||||||||||
Noncash activities: | ||||||||||||||||||||
Business acquisitions: | ||||||||||||||||||||
Fair value of assets acquired | $ | — | — | — | 211,846 | 86,673 | ||||||||||||||
Net cash paid | — | — | — | (25,150 | ) | (2,605 | ) | |||||||||||||
Liabilities assumed | $ | — | — | — | 186,696 | 84,068 | ||||||||||||||
Loan foreclosures and repossessions | $ | 5,557 | 3,903 | 15,780 | 6,975 | 7,817 | ||||||||||||||
Loans transferred to held for investment from loans held for sale | — | — | 24,827 | — | — | |||||||||||||||
Sale of real estate owned financed by the Company | 232 | 260 | 614 | 1,013 | 768 |
F-7
Table of Contents
(1) | Summary of Significant Accounting Policies |
(a) | Nature of Operations |
(b) | Principles of Consolidation |
(c) | Cash and Cash Equivalents |
(d) | Investment Securities |
F-8
Table of Contents
(e) | Loans Receivable |
(f) | Allowance for Loan Losses and Provision for Loan Losses |
(g) | Real Estate Owned |
F-9
Table of Contents
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
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F-14
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F-15
Table of Contents
(3) | Marketable Securities | |
Marketable securities at June 30, 2009 (unaudited) are as follows: |
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Amortized | holding | holding | Market | |||||||||||||
cost | gains | losses | value | |||||||||||||
Available-for-sale: | ||||||||||||||||
U.S. government and agencies: | ||||||||||||||||
Due in one year or less | $ | 80 | — | (3 | ) | 77 | ||||||||||
Government sponsored enterprises: | ||||||||||||||||
Due in one year or less | 995 | 13 | — | 1,008 | ||||||||||||
Due in one year – five years | 1,972 | 172 | — | 2,144 | ||||||||||||
Due in five years – ten years | 22,613 | 1,553 | — | 24,166 | ||||||||||||
Due after ten years | 51,991 | 2,043 | (107 | ) | 53,927 | |||||||||||
Equity securities | 954 | 211 | (81 | ) | 1,084 | |||||||||||
Municipal securities: | ||||||||||||||||
Due in one year – five years | 913 | 18 | — | 931 | ||||||||||||
Due in five years – ten years | 39,929 | 739 | (1 | ) | 40,667 | |||||||||||
Due after ten years | 199,416 | 1,930 | (5,961 | ) | 195,385 | |||||||||||
Corporate debt issues: | ||||||||||||||||
Due in one year – five years | 500 | — | — | 500 | ||||||||||||
Due after ten years | 27,673 | 117 | (13,386 | ) | 14,404 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Fixed rate pass-through | 160,821 | 5,458 | (11 | ) | 166,268 | |||||||||||
Variable rate pass-through | 250,939 | 6,651 | (139 | ) | 257,451 | |||||||||||
Fixed rate non-agency CMO | 22,329 | — | (3,035 | ) | 19,294 | |||||||||||
Fixed rate agency CMO | 25,836 | 639 | (394 | ) | 26,081 | |||||||||||
Variable rate non-agency CMO | 11,833 | — | (2,964 | ) | 8,869 | |||||||||||
Variable rate agency CMO | 196,939 | 985 | (798 | ) | 197,126 | |||||||||||
Total mortgage- backed securities | 668,697 | 13,733 | (7,341 | ) | 675,089 | |||||||||||
Total securities available-for-sale | $ | 1,015,733 | 20,529 | (26,880 | ) | 1,009,382 | ||||||||||
F-16
Table of Contents
Marketable securities at December 31, 2008 are as follows: |
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Amortized | holding | holding | Market | |||||||||||||
cost | gains | losses | value | |||||||||||||
Available-for-sale: | ||||||||||||||||
U.S. government and agencies: | ||||||||||||||||
Due in one year or less | $ | 91 | — | (3 | ) | 88 | ||||||||||
Government sponsored enterprises: | ||||||||||||||||
Due in one year or less | 2,985 | 50 | — | 3,035 | ||||||||||||
Due in one year – five years | 2,962 | 208 | — | 3,170 | ||||||||||||
Due in five years – ten years | 30,352 | 2,066 | — | 32,418 | ||||||||||||
Due after ten years | 61,494 | 8,712 | (9 | ) | 70,197 | |||||||||||
Equity securities | 954 | 160 | — | 1,114 | ||||||||||||
Municipal securities: | ||||||||||||||||
Due in one year – five years | 460 | 1 | — | 461 | ||||||||||||
Due in five years – ten years | 43,160 | 822 | (86 | ) | 43,896 | |||||||||||
Due after ten years | 224,996 | 2,707 | (4,512 | ) | 223,191 | |||||||||||
Corporate debt issues: | ||||||||||||||||
Due after ten years | 25,165 | 214 | (9,418 | ) | 15,961 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Fixed rate pass-through | 186,659 | 6,447 | (7 | ) | 193,099 | |||||||||||
Variable rate pass-through | 276,121 | 3,136 | (2,074 | ) | 277,183 | |||||||||||
Fixed rate CMO | 60,119 | 445 | (3,084 | ) | 57,480 | |||||||||||
Variable rate CMO | 228,917 | 48 | (11,088 | ) | 217,877 | |||||||||||
Total mortgage- backed securities | 751,816 | 10,076 | (16,253 | ) | 745,639 | |||||||||||
Total securities available-for-sale | $ | 1,144,435 | 25,016 | (30,281 | ) | 1,139,170 | ||||||||||
F-17
Table of Contents
Marketable securities at December 31, 2007 are as follows: |
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Amortized | holding | holding | Market | |||||||||||||
cost | gains | losses | value | |||||||||||||
Available-for-sale: | ||||||||||||||||
U.S. government and agencies: | ||||||||||||||||
Due in one year or less | $ | 368 | — | (3 | ) | 365 | ||||||||||
Government sponsored enterprises: | ||||||||||||||||
Due in one year or less | 6,959 | 35 | — | 6,994 | ||||||||||||
Due in one year – five years | 42,352 | 259 | — | 42,611 | ||||||||||||
Due in five years – ten years | 56,406 | 194 | (50 | ) | 56,550 | |||||||||||
Due after ten years | 180,274 | 5,945 | (193 | ) | 186,026 | |||||||||||
Equity securities | 6,478 | 401 | — | 6,879 | ||||||||||||
Municipal securities: | ||||||||||||||||
Due in one year – five years | 816 | 1 | — | 817 | ||||||||||||
Due in five years – ten years | 33,217 | 388 | (63 | ) | 33,542 | |||||||||||
Due after ten years | 228,862 | 4,019 | (120 | ) | 232,761 | |||||||||||
Corporate debt issues: | ||||||||||||||||
Due after ten years | 37,225 | 546 | (2,696 | ) | 35,075 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
Fixed rate pass-through | 73,284 | 998 | (290 | ) | 73,992 | |||||||||||
Variable rate pass-through | 306,885 | 2,263 | (494 | ) | 309,054 | |||||||||||
Fixed rate CMO | 73,514 | 248 | (1,969 | ) | 71,793 | |||||||||||
Variable rate CMO | 76,886 | 416 | (394 | ) | 76,908 | |||||||||||
Total mortgage- backed securities | 530,569 | 4,325 | (3,147 | ) | 531,747 | |||||||||||
Total securities available-for-sale | $ | 1,123,526 | 16,113 | (6,272 | ) | 1,133,367 | ||||||||||
F-18
Table of Contents
The following table presents information regarding the issuers and the carrying value of the Company’s mortgage-backed securities at June 30, 2009 and December 31, 2008 and 2007: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Mortgage-backed securities: | ||||||||||||
FNMA | $ | 256,344 | 288,082 | 165,391 | ||||||||
GNMA | 87,622 | 99,354 | 88,428 | |||||||||
FHLMC | 302,176 | 320,297 | 229,960 | |||||||||
Other (nonagency) | 28,947 | 37,906 | 47,968 | |||||||||
Total mortgage-backed securities | $ | 675,089 | 745,639 | 531,747 | ||||||||
Marketable securities having a carrying value of $571,231,000 and $388,599,000 at June 30, 2009 and December 31, 2008, respectively, were pledged under collateral agreements. During the six-month periods ended June 30, 2009 and 2008 and years ended December 31, 2008, 2007 and 2006 the Company sold marketable securities classified as available-for-sale for $0, $1,042,000, $113,484,000, $105,361,000 and $5,333,000, respectively. The gross realized gains on these sales were $0, $0, $6,037,000, $7,397,000 and $368,000, respectively. The gross realized losses on the sales for the six-month periods ended June 30, 2009 and 2008 and years ended December 31, 2008, 2007 and 2006 were $0, $0, $0, $2,439,000 and $0, respectively. During 2007, due to deterioration in the credit markets, the Company sold the majority of its non-agency corporate debt portfolio. Included therein was $15,277,000 of securities classified as held-to-maturity. The held-to-maturity securities were sold for a net gain of $375,000. In conjunction with the sale of held-to-maturity securities, the Company was required under generally accepted accounting principles to transfer the remaining held-to-maturity portfolio of $649,658,000 to available-for-sale. At the time of transfer, the transferred securities had an unrealized gain of $4,690,000. During the six-month periods ended June 30, 2009 and 2008 and years ended December 31, 2008 and 2007 the Company recognized noncash other-than-temporary impairment in its investment portfolio resulting in write-downs of $4,290,000, $1,472,000, $16,004,000 and $8,412,000, respectively. |
F-19
Table of Contents
The following table shows the fair value and gross unrealized losses on investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2009 (unaudited): |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair value | losses | Fair value | losses | Fair value | losses | |||||||||||||||||||
U.S. government and agencies | $ | 7,967 | (97 | ) | 188 | (10 | ) | $ | 8,155 | (107 | ) | |||||||||||||
Municipal securities | 64,183 | (2,339 | ) | 52,613 | (3,623 | ) | 116,796 | (5,962 | ) | |||||||||||||||
Corporate issues | 8,073 | (7,545 | ) | 1,964 | (5,841 | ) | 10,037 | (13,386 | ) | |||||||||||||||
Equities | 298 | (81 | ) | — | — | 298 | (81 | ) | ||||||||||||||||
Residential mortgage-backed securities — non-agency | — | — | 28,163 | (5,999 | ) | 28,163 | (5,999 | ) | ||||||||||||||||
Residential mortgage-backed securities — agency | 42,718 | (296 | ) | 73,271 | (1,049 | ) | 115,989 | (1,345 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 123,239 | (10,358 | ) | 156,199 | (16,522 | ) | $ | 279,438 | (26,880 | ) | |||||||||||||
The decline in the fair value of securities primarily resulted from changes in the levels of interest rates and the illiquidity in the marketplace. Regularly, the Company performs an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired other-than-temporarily. The assessment considers many factors including the severity and duration of the impairment; recent events specific to the issuer or industry; and for debt securities, external credit ratings, underlying collateral position and recent downgrades. For asset backed securities, the Company evaluates current characteristics of each security such as delinquency and foreclosure levels, credit enhancement and projected losses and coverage. It is possible that the underlying collateral of these securities will perform worse than current expectations, which may lead to adverse changes in cash flows on these securities and potential future other-than-temporary impairment losses. Events that may trigger material declines in fair values for these securities in the future would be, but are not limited to; deterioration of credit metrics, significantly higher levels of default and severity of loss on the underlying collateral, deteriorating credit enhancement and loss coverage ratios, or further illiquidity. For debt securities, credit related other-than-temporary impairment is recognized in earnings, while noncredit related other-than-temporary impairment on securities not expected to be sold is recognized in other comprehensive income. The Company asserts that it does not have the intent to sell these securities and it is more likely than not that it will not have to sell these securities before a recovery of its cost basis. For these reasons, the Company considers the unrealized losses to be temporary impairment losses. There are approximately 256 positions that are temporarily impaired at June 30, 2009. The aggregate carrying amount of cost-method investments, included in available-for-sale, at June 30, 2009 was $1,009,382,000 of which all were evaluated for impairment. |
As of June 30, 2009, we had seven investments in corporate issues with total book value of $7,805,000 and total fair value of $1,964,000, where book value exceeded carrying value for more than 12 months. These investments were three single issuer trust preferred investments and four pooled trust preferred investments. The single issuer trust preferred investments were 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 U.S. governments Troubled Asset Relief Program. None of the issuers have deferred interest payments or announced the intention to defer interest payments, nor have any been downgraded. We believe the decline in fair value is related to the |
F-20
Table of Contents
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. We concluded the impairment of these investments was considered temporary. In making that determination, we also considered the duration and the severity of the losses. The pooled trust preferred investments were evaluated for other-than-temporary impairment considering duration and severity of losses, actual cash flows, projected cash flows, performing collateral, the class of securities we owned and the amount of additional defaults the structure could withstand prior to the security experiencing a disruption in cash flows. None of these investments are projecting a cash flow disruption, nor have any of the investments experienced a cash flow disruption. | ||
As of June 30, 2009, we had three investments with a total book value of $15,618,000 and total fair value of $8,073,000, where the book value exceeded the carrying value for less than 12 months. One investment, a single issuer trust preferred investment, was evaluated for other-than-temporary impairment by determining the strength of the underlying issuer. The underlying issuer was “well-capitalized” for regulatory purposes and was a participant in the government’s TARP program. The issuer has not 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 two investments were pooled trust preferred investments. These securities were evaluated for other-than-temporary impairment considering duration and severity of the losses, actual cash flows, projected cash flows, performing collateral, the class of securities owned by the Company and the amount of additional defaults the structure could withstand prior to the security experiencing a disruption in cash flows. Neither of these securities project cash flow disruption, nor have they experienced a cash flow disruption. None of the three investments were downgraded during the quarter ended June 30, 2009. | ||
We concluded, based on all facts evaluated, the impairment of these investments was considered temporary and management asserts that we do not have the intent to sell these investments and that it is more likely than not we will not have to sell the investments before recovery of their cost basis. |
F-21
Table of Contents
Total | ||||||||||||||||
Book | Fair | Unrealized | Moody’s/ Fitch | |||||||||||||
Description | Class | Value | Value | Losses | Ratings | |||||||||||
North Fork Capital (1) | N/A | $ | 1,009 | 416 | (593 | ) | Baa1/ BBB+ | |||||||||
Bank Boston Capital Trust (2) | N/A | 988 | 484 | (504 | ) | A2/ BB | ||||||||||
Reliance Capital Trust | N/A | 1,000 | 835 | (165 | ) | Not rated | ||||||||||
Huntington Capital Trust | N/A | 1,419 | 597 | (822 | ) | Baa3/ BBB | ||||||||||
MM Community Funding I | Mezzanine | 1,000 | 74 | (926 | ) | Caa2/ CCC | ||||||||||
MM Community Funding II | Mezzanine | 389 | 42 | (347 | ) | Baa2/ BBB | ||||||||||
I-PreTSL I | Mezzanine | 1,500 | 168 | (1,332 | ) | Not rated/ A- | ||||||||||
I-PreTSL II | Mezzanine | 1,500 | 183 | (1,317 | ) | Not rated/ A- | ||||||||||
PreTSL XIX | Senior A-1 | 8,954 | 4,323 | (4,631 | ) | A3/ AAA | ||||||||||
PreTSL XX | Senior A-1 | 5,664 | 2,915 | (2,749 | ) | Baa1/ AAA | ||||||||||
$ | 23,423 | 10,037 | (13,386 | ) | ||||||||||||
(1) | North Fork Bank was acquired by Capital One Financial Corporation | |
(2) | Bank Boston was acquired by Bank of America |
Additional | ||||||||||||||||
Immediate | ||||||||||||||||
defaults before | ||||||||||||||||
Current | causing an | |||||||||||||||
Total | deferrals | Performing | interest | |||||||||||||
Description | Collateral | and defaults | Collateral | shortfall | ||||||||||||
I-PreTSL I | $ | 211,000 | 35,000 | 176,000 | 50,500 | |||||||||||
I-PreTSL II | 378,000 | — | 378,000 | 137,500 | ||||||||||||
PreTSL XIX | 700,535 | 96,000 | 604,535 | 259,500 | ||||||||||||
PreTSL XX | 604,154 | 83,000 | 521,154 | 243,500 |
F-22
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Total | Impairment | |||||||||||||||
Book | Fair | Unrealized | recorded in | |||||||||||||
Description | Value | Value | Losses | earnings | ||||||||||||
AMAC 2003-6 2A2 | $ | 1,194 | 1,180 | (14 | ) | — | ||||||||||
AMAC 2003-6 2A8 | 2,471 | 2,449 | (22 | ) | — | |||||||||||
AMAC 2003-7 A3 | 1,415 | 1,385 | (30 | ) | — | |||||||||||
BOAMS 2005-11 1A8 | 6,497 | 5,690 | (807 | ) | — | |||||||||||
CWALT 2005-J14 A3 | 7,147 | 5,038 | (2,109 | ) | (59 | ) | ||||||||||
CFSB 2003-17 2A2 | 2,008 | 1,965 | (43 | ) | — | |||||||||||
WAMU 2003-S2 A4 | 1,596 | 1,586 | (10 | ) | — | |||||||||||
CMLTI 2005-10 1A5B | 2,659 | 1,233 | (1,426 | ) | (2,007 | ) | ||||||||||
CSFB 2003-21 1A13 | 250 | 238 | (12 | ) | — | |||||||||||
FHASI 2003-8 1A24 | 4,401 | 4,022 | (379 | ) | — | |||||||||||
SARM 2005-21 4A2 | 2,767 | 1,901 | (866 | ) | (2,224 | ) | ||||||||||
WFMBS 2003-B A2 | 1,757 | 1,476 | (281 | ) | — | |||||||||||
$ | 34,162 | 28,163 | (5,999 | ) | (4,290 | ) |
Total | Accumulated | |||||||||||||||
Book | Fair | Unrealized | impairment | |||||||||||||
Category | Value | Value | Gain/ (Loss) | charges | ||||||||||||
Freddie Mac preferred shares | $ | 76 | 183 | 107 | (7,424 | ) | ||||||||||
Trust preferred investments | 16,131 | 8,825 | (7,306 | ) | (7,902 | ) | ||||||||||
Non-agency CMOs | 12,573 | 8,172 | (4,401 | ) | (4,290 | ) | ||||||||||
$ | 28,780 | 17,180 | (11,600 | ) | (19,616 | ) | ||||||||||
F-23
Table of Contents
Prior to | After | Effect of | ||||||||||
Adoption | Adoption | Adoption | ||||||||||
Impairment losses on securities | $ | (8,690 | ) | (4,290 | ) | 4,400 | ||||||
Noncredit related losses on securities not expected to be sold (recognized in other comprehensive income) | — | 4,400 | 4,400 | |||||||||
Net income | 4,431 | 7,291 | 2,860 | |||||||||
Basic earnings per share | 0.35 | 0.40 | 0.05 | |||||||||
Diluted earnings per share | 0.34 | 0.40 | 0.06 | |||||||||
Accumulated other comprehensive loss | (23,335 | ) | (26,195 | ) | (2,860 | ) |
Beginning balance as of January 1, 2009 (a) | $ | 7,902 | ||
Credit losses on debt securities for which other-than-temporary impairment was not perviously recognized | 4,290 | |||
Additional credit losses on debt securities for which other-than-temporary impairment was previously recognized | — | |||
Ending balance as of June 30, 2009 | $ | 12,192 |
(a) | The beginning balance represents credit losses included in other-than-temporary impairment charges recognized on debt securities in prior periods. |
F-24
Table of Contents
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair value | losses | Fair value | losses | Fair value | losses | |||||||||||||||||||
U.S. government and agencies | $ | — | — | 1,094 | (12 | ) | $ | 1,094 | (12 | ) | ||||||||||||||
Municipal securities | 109,255 | (4,598 | ) | — | — | 109,255 | (4,598 | ) | ||||||||||||||||
Corporate issues | 8,618 | (7,055 | ) | 2,573 | (2,363 | ) | 11,191 | (9,418 | ) | |||||||||||||||
Mortgage-backed securities | 285,087 | (11,625 | ) | 80,104 | (4,628 | ) | 365,191 | (16,253 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 402,960 | (23,278 | ) | 83,771 | (7,003 | ) | $ | 486,731 | (30,281 | ) | |||||||||||||
Percentage of total | 83 | % | 17 | % | 100 | % | ||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair value | losses | Fair value | losses | Fair value | losses | |||||||||||||||||||
U.S. government and agencies | $ | — | — | 30,225 | (246 | ) | $ | 30,225 | (246 | ) | ||||||||||||||
Municipal securities | 24,775 | (96 | ) | 5,928 | (87 | ) | 30,703 | (183 | ) | |||||||||||||||
Corporate issues | 24,533 | (2,551 | ) | 847 | (145 | ) | 25,380 | (2,696 | ) | |||||||||||||||
Mortgage-backed securities | 59,032 | (495 | ) | 130,731 | (2,652 | ) | 189,763 | (3,147 | ) | |||||||||||||||
Total temporarily impaired securities | $ | 108,340 | (3,142 | ) | 167,731 | (3,130 | ) | $ | 276,071 | (6,272 | ) | |||||||||||||
Percentage of total | 39 | % | 61 | % | 100 | % | ||||||||||||||||||
F-25
Table of Contents
(4) | Loans Receivable | |
Loans receivable at June 30, 2009 and December 31, 2008 and 2007 are summarized in the table below: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Real estate loans: | ||||||||||||
One-to-four family | $ | 2,396,623 | 2,492,940 | 2,430,117 | ||||||||
Home equity | 1,038,323 | 1,035,954 | 992,335 | |||||||||
Multi-family and commercial | 1,191,107 | 1,100,218 | 906,594 | |||||||||
Total real estate loans | 4,626,053 | 4,629,112 | 4,329,046 | |||||||||
Consumer loans: | ||||||||||||
Automobile | 102,519 | 102,267 | 125,298 | |||||||||
Education | 25,807 | 38,152 | 14,551 | |||||||||
Loans on savings accounts | 11,576 | 11,191 | 10,563 | |||||||||
Other | 116,852 | 115,913 | 117,831 | |||||||||
Total consumer loans | 256,754 | 267,523 | 268,243 | |||||||||
Commercial loans | 400,926 | 387,145 | 367,459 | |||||||||
Total loans receivable, gross | 5,283,733 | 5,283,780 | 4,964,748 | |||||||||
Deferred loan fees | (5,978 | ) | (5,041 | ) | (4,179 | ) | ||||||
Allowance for loan losses | (66,777 | ) | (54,929 | ) | (41,784 | ) | ||||||
Undisbursed loan proceeds (real estate loans) | (119,460 | ) | (81,918 | ) | (123,163 | ) | ||||||
Total Loans receivable, net | $ | 5,091,518 | 5,141,892 | 4,795,622 | ||||||||
F-26
Table of Contents
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Loan commitments | $ | 149,272 | 116,330 | 69,851 | ||||||||
Undisbursed lines of credit | 313,679 | 273,670 | 328,373 | |||||||||
Standby letters of credit | 17,663 | 15,821 | 14,955 | |||||||||
$ | 480,614 | 405,821 | 413,179 | |||||||||
F-27
Table of Contents
F-28
Table of Contents
Net | ||||||||||||
Carrying | ||||||||||||
Servicing | Valuation | Value and | ||||||||||
Rights | Allowance | Fair Value | ||||||||||
Balance at December 31, 2008 | $ | 8,660 | (2,380 | ) | 6,280 | |||||||
Additions/ (reductions) | 2,904 | 1,390 | 4,294 | |||||||||
Amortization | (2,657 | ) | — | (2,657 | ) | |||||||
Balance at June 30, 2009 | $ | 8,907 | (990 | ) | 7,917 | |||||||
(5) | Accrued Interest Receivable | |
Accrued interest receivable as of June 30, 2009 and December 31, 2008 and 2007 is presented in the following table: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Investment securities | $ | 2,874 | 3,672 | 5,455 | ||||||||
Mortgage-backed securities | 2,536 | 2,997 | 2,818 | |||||||||
Loans receivable | 20,442 | 20,583 | 18,811 | |||||||||
$ | 25,852 | 27,252 | 27,084 | |||||||||
(6) | Allowance for Loan Losses |
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Balance, beginning of period | $ | 54,929 | 41,784 | 41,784 | 37,655 | 33,411 | ||||||||||||||
Provision | 17,517 | 5,689 | 22,851 | 8,743 | 8,480 | |||||||||||||||
Charge-offs | (6,244 | ) | (4,996 | ) | (11,610 | ) | (8,190 | ) | (7,617 | ) | ||||||||||
Acquisitions | — | — | — | 2,119 | 1,982 | |||||||||||||||
Recoveries | 575 | 816 | 1,904 | 1,457 | 1,399 | |||||||||||||||
Balance, end of period | $ | 66,777 | 43,293 | 54,929 | 41,784 | 37,655 | ||||||||||||||
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(7) | Federal Home Loan Bank Stock | |
The Company’s banking subsidiary is a member of the Federal Home Loan Bank system. As a member, Northwest maintains an investment in the capital stock of the FHLB, at cost, in an amount not less than 4.75% of borrowings outstanding plus 0.75% of unused FHLB borrowing capacity. During the quarter ended December 31, 2008, the FHLB suspended paying dividends on its capital stock. Published reports indicate that the FHLB may be subject to accounting rules and asset quality risks that could result in materially lower regulatory capital levels. In an extreme situation, it is possible that the capitalization of the FHLB could be substantially diminished or reduced to zero. Consequently, there is a risk that our investment in the FHLB common stock could be deemed other-than-temporarily impaired in the future. | ||
(8) | Premises and Equipment | |
Premises and equipment at June 30, 2009 and December 31, 2008 and 2007 are summarized by major classification in the following table: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Land and land improvements | $ | 16,232 | 14,292 | 14,139 | ||||||||
Office buildings and improvements | 111,662 | 106,561 | 99,438 | |||||||||
Furniture, fixtures, and equipment | 85,834 | 82,574 | 74,013 | |||||||||
Leasehold improvements | 10,920 | 10,990 | 11,186 | |||||||||
Total, at cost | 224,648 | 214,417 | 198,776 | |||||||||
Less accumulated depreciation and amortization | (104,705 | ) | (98,575 | ) | (87,882 | ) | ||||||
Premises and equipment, net | $ | 119,943 | 115,842 | 110,894 | ||||||||
2009 | $ | 4,280 | ||
2010 | 3,678 | |||
2011 | 3,253 | |||
2012 | 2,438 | |||
2013 | 1,928 | |||
Thereafter | 10,310 | |||
$ | 25,887 | |||
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Rental expense for the six-month periods ended June 30, 2009 and 2008 and the years ended December 31, 2008, 2007 and 2006 was $2,446,000, $2,495,0000, $5,017,000, $4,555,000 and $4,142,000, respectively. | ||
(9) | Goodwill and Other Intangible Assets | |
The following table provides information for intangible assets subject to amortization for the six-month period ended June 30, 2009 and years ended December 31, 2008 and 2007: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Amortized intangible assets: | ||||||||||||
Core deposit intangibles — gross | $ | 30,275 | 30,275 | 24,475 | ||||||||
Acquisitions | — | — | 5,800 | |||||||||
Less accumulated amortization | (24,800 | ) | (23,172 | ) | (19,318 | ) | ||||||
Core deposit intangibles — net | $ | 5,475 | 7,103 | 10,957 | ||||||||
Customer contract intangible assets — gross | $ | 1,731 | 1,731 | 831 | ||||||||
Acquisitions | — | — | 900 | |||||||||
Less accumulated amortization | (1,481 | ) | (1,439 | ) | (906 | ) | ||||||
Customer contract intangible assets — net | $ | 250 | 292 | 825 | ||||||||
For the six months ended 6/30/09 | $ | 1,670 | ||
For the six months ended 6/30/08 | 2,586 | |||
For the year ended 12/31/06 | 3,876 | |||
For the year ended 12/31/07 | 4,499 | |||
For the year ended 12/31/08 | 4,387 | |||
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 | |||
For the year ending 12/31/14 | 104 |
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Community | Consumer | |||||||||||
banks | finance | Total | ||||||||||
Balance at December 31, 2006 | $ | 154,458 | 1,313 | 155,770 | ||||||||
Goodwill acquired | 15,843 | — | 15,844 | |||||||||
Impairment losses | — | — | — | |||||||||
Balance at December 31, 2007 | 170,301 | 1,313 | 171,614 | |||||||||
Goodwill acquired | — | — | — | |||||||||
Tax adjustment | (251 | ) | — | (251 | ) | |||||||
Impairment losses | — | — | — | |||||||||
Balance at December 31, 2008 | 170,050 | 1,313 | 171,363 | |||||||||
Goodwill acquired | — | — | — | |||||||||
Balance at June 30, 2009 (unaudited) | $ | 170,050 | 1,313 | 171,363 | ||||||||
We have performed the required goodwill impairment tests and have determined that goodwill is not impaired as of June 30, 2009, December 31, 2008 and 2007. | ||
(10) | Deposits | |
Deposit balances at June 30, 2009 and December 31, 2008 and 2007 are shown in the table below: |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Savings accounts | $ | 841,868 | 760,245 | 745,430 | ||||||||
Interest-bearing checking accounts | 745,440 | 706,120 | 717,991 | |||||||||
Noninterest-bearing checking accounts | 433,176 | 394,011 | 361,102 | |||||||||
Money market deposit accounts | 744,132 | 720,375 | 681,115 | |||||||||
Certificates of deposit | 2,581,123 | 2,457,460 | 3,036,696 | |||||||||
$ | 5,345,739 | 5,038,211 | 5,542,334 | |||||||||
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(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Due within 12 months | $ | 1,555,170 | 1,285,695 | 2,541,053 | ||||||||
Due between 12 and 24 months | 272,957 | 590,849 | 253,957 | |||||||||
Due between 24 and 36 months | 511,156 | 238,927 | 125,226 | |||||||||
Due between 36 and 48 months | 205,643 | 289,001 | 50,759 | |||||||||
Due between 48 and 60 months | 21,422 | 37,905 | 44,959 | |||||||||
After 60 months | 14,775 | 15,083 | 20,742 | |||||||||
$ | 2,581,123 | 2,457,460 | 3,036,696 | |||||||||
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Savings accounts | $ | 3,058 | 4,529 | 9,159 | 10,908 | 12,619 | ||||||||||||||
Interest-bearing checking accounts | 1,547 | 3,714 | 6,434 | 11,038 | 9,396 | |||||||||||||||
Money market deposit accounts | 4,795 | 8,628 | 14,726 | 23,551 | 19,446 | |||||||||||||||
Certificate accounts | 39,683 | 62,410 | 106,742 | 141,043 | 115,524 | |||||||||||||||
$ | 49,083 | 79,281 | 137,061 | 186,540 | 156,985 | |||||||||||||||
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(11) | Borrowed Funds | |
Borrowed funds at June 30, 2009 and December 31, 2008 and 2007 are presented in the following table: |
(Unaudited) | ||||||||||||||||||||||||
June 30, | December 31 | |||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Avg. | Avg. | Avg. | ||||||||||||||||||||||
Amount | rate | Amount | rate | Amount | rate | |||||||||||||||||||
Term notes payable to the FHLB of Pittsburgh: | ||||||||||||||||||||||||
Due within one year | $ | 36,585 | 4.45 | % | 43,708 | 3.87 | % | 84,031 | 5.00 | % | ||||||||||||||
Due between one and two years | 135,000 | 4.17 | % | 36,532 | 4.36 | % | 35,588 | 4.63 | % | |||||||||||||||
Due between two and three years | 135,000 | 3.78 | % | 160,000 | 4.11 | % | 36,567 | 4.36 | % | |||||||||||||||
Due between three and four years | 160,000 | 3.96 | % | 145,000 | 3.90 | % | 65,000 | 5.02 | % | |||||||||||||||
Due between four and five years | 125,095 | 3.98 | % | 125,000 | 3.85 | % | 35,000 | 4.55 | % | |||||||||||||||
Due between five and ten years | 225,652 | 4.21 | % | 315,778 | 4.11 | % | 839 | 2.81 | % | |||||||||||||||
817,332 | 826,018 | 257,025 | ||||||||||||||||||||||
Revolving line of credit, Federal Home Loan Bank of Pittsburgh | — | 0.00 | % | 146,000 | 0.59 | % | — | — | ||||||||||||||||
Investor notes payable, due various dates in 2009 | — | 0.00 | % | 4,491 | 4.99 | % | 4,638 | 4.99 | % | |||||||||||||||
Securities sold under agreement to repurchase, due within one year | 79,731 | 1.38 | % | 91,436 | 1.02 | % | 77,452 | 3.25 | % | |||||||||||||||
Total borrowed funds | $ | 897,063 | 1,067,945 | 339,115 | ||||||||||||||||||||
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(12) | Income Taxes | |
Total income tax was allocated for the six-month periods ended June 30, 2009 and 2008 and the years ended December 31, 2008, 2007 and 2006 as follows: |
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Income before income taxes | $ | 7,448 | 10,030 | 16,968 | 17,456 | 19,792 | ||||||||||||||
Goodwill for prior acquisition | — | — | (251 | ) | — | — | ||||||||||||||
Shareholders’ equity for unrealized (loss)/gain on securities available-for-sale | (422 | ) | (4,844 | ) | (5,916 | ) | 4,672 | (627 | ) | |||||||||||
Shareholders’ equity for tax benefit for excess of fair value above cost of stock benefit plans | — | — | (349 | ) | (300 | ) | (305 | ) | ||||||||||||
Shareholders’ equity for pension adjustment | — | 365 | (9,099 | ) | 3,311 | (6,628 | ) | |||||||||||||
Shareholders’ equity for swap fair value adjustment | (1,781 | ) | — | (4,590 | ) | — | — | |||||||||||||
Shareholders’ equity for prior period adjustments | — | — | — | — | (1,492 | ) | ||||||||||||||
$ | 5,245 | 5,551 | (3,237 | ) | 25,139 | 10,740 | ||||||||||||||
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Current | $ | 10,477 | 10,170 | 23,448 | 18,206 | 11,017 | ||||||||||||||
Deferred | (3,029 | ) | (140 | ) | (6,480 | ) | (750 | ) | 8,775 | |||||||||||
$ | 7,448 | 10,030 | 16,968 | 17,456 | 19,792 | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Expected tax rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||
Tax-exempt interest income | (8.4 | )% | (7.1 | )% | (7.4 | )% | (7.3 | )% | (7.0 | )% | ||||||||||
State income tax, net of federal benefit | 2.7 | % | 2.6 | % | 2.2 | % | 1.9 | % | 2.6 | % | ||||||||||
Bank-owned life insurance | (3.1 | )% | (2.2 | )% | (2.6 | )% | (2.3 | )% | (2.1 | )% | ||||||||||
Other | 1.3 | % | (1.3 | )% | (1.2 | )% | (1.1 | )% | (0.8 | )% | ||||||||||
Effective tax rate | 27.5 | % | 27.0 | % | 26.0 | % | 26.2 | % | 27.7 | % | ||||||||||
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(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Deferred tax assets: | ||||||||||||
Deferred fee income | $ | 537 | 527 | 499 | ||||||||
Deferred compensation expense | 3,031 | 2,980 | 1,719 | |||||||||
Net operating loss carryforwards | 1,352 | 1,352 | 3,716 | |||||||||
Bad debts | 16,166 | 14,002 | 10,438 | |||||||||
Accrued postretirement benefit cost | 710 | 682 | 698 | |||||||||
Stock benefit plans | 392 | 375 | 375 | |||||||||
Marketable securities available for sale | 2,495 | 2,078 | — | |||||||||
Writedown of investment securities | 5,340 | 6,243 | 665 | |||||||||
Reserve for uncollected interest | 3,159 | 1,894 | 844 | |||||||||
Pension expense | 2,253 | 559 | 1,013 | |||||||||
Pension and postretirement benefits | 12,060 | 12,060 | 3,317 | |||||||||
Alternative minimum tax credit carryforwards | — | 371 | 1,950 | |||||||||
Unrealized loss on the fair value of derivatives | 1,780 | 4,590 | — | |||||||||
Other | 471 | 379 | 142 | |||||||||
49,746 | 48,092 | 25,376 | ||||||||||
Deferred tax liabilities: | ||||||||||||
Marketable securities available for sale | — | — | 3,838 | |||||||||
Purchase accounting | 2,032 | 2,487 | 3,451 | |||||||||
Intangible asset | 11,819 | 10,952 | 9,228 | |||||||||
Mortgage servicing rights | 2,770 | 2,198 | 3,134 | |||||||||
Fixed assets | 6,521 | 6,630 | 5,993 | |||||||||
Other | 591 | 621 | 613 | |||||||||
23,733 | 22,888 | 26,257 | ||||||||||
Net deferred tax asset/ (liability) | $ | 26,013 | 25,204 | (881 | ) | |||||||
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Balance at January 1, 2008 | $ | 967 | ||
Additions based on tax positions related to the current year | — | |||
Additions for tax positions of prior years | — | |||
Reductions for tax positions of prior years | (967 | ) | ||
Settlements | — | |||
Balance at December 31, 2008 | $ | — | ||
The balance at June 30, 2009 and December 31, 2008 reflects no unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate. The Company recognizes interest accrued and penalties (if any) related to unrecognized tax benefits in income tax expense. During the six-month period ended June 30, 2009 and the year ended December 31, 2008, the Company did not accrue any interest. At June 30, 2009 and December 31, 2008 the Company had no amount accrued for interest or the payment of penalties. | ||
The Company is subject to routine audits of our tax returns by the Internal Revenue Service as well as all states in which the Company conducts business. The Internal Revenue Service commenced an examination of our federal income tax returns for the year ended June 30, 2005, the six-month period ended December 31, 2005 and the years ended December 31, 2006 and 2007 in January of 2008 that was completed during 2009. There was no material change to our financial position due to the settlement of this audit. The Company is subject to audit by any state in which we conduct business for the tax periods ended June 30, 2005, December 31, 2005, December 31, 2006 and December 31, 2007. | ||
(13) | Shareholders’ Equity | |
Retained earnings are partially restricted in connection with regulations related to the insurance of savings accounts, which requires Northwest to maintain certain statutory reserves. Northwest may not pay dividends on or repurchase any of their common stock if the effect thereof would reduce retained earnings below the level of adequate capitalization as defined by federal and state regulators. | ||
In tax years prior to fiscal 1997, Northwest was permitted, under the Internal Revenue Code (the Code), to deduct an annual addition to a reserve for bad debts in determining taxable income, subject to certain limitations. Bad debt deductions for income tax purposes are included in taxable income of later years only if the bad debt reserve is used subsequently for purposes other than to absorb bad debt losses. Because Northwest does not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes have been provided prior to fiscal 1987. Retained earnings at June 30, 2009 and December 31, 2008 and 2007 include approximately $39,107,000 representing such bad debt deductions for which no deferred income taxes have been provided. |
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(14) | Earnings Per Share | |
Basic earnings per common share (“EPS”) is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period, without considering any dilutive items. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For the six months ended June 30, 2009, 1,189,999 options with a weighted average strike price of $23.91 per share were outstanding but were excluded from the calculation of earnings per share because they were anti-dilutive. For the six months ended June 30, 2008, 587,673 options with a weighted average strike price of $25.47 per share were outstanding but were excluded from the calculation of earnings per share because they were anti-dilutive. For the year ended December 31, 2008, 213,686 options with a strike price of $25.49 per share, 179,806 options with a strike price of $25.89 per share, 2,000 options with a strike price of $28.09 per share and 191,709 options with a strike price of $25.03 per share were excluded from the calculation of earnings per share because they were anti-dilutive. There were no anti-dilutive options during 2007 or 2006. The computation of basic and diluted earnings per share for the six-month periods ended June 30, 2009 and 2008 and the years ended December 31, 2008, 2007 and 2006 follows: |
(Unaudited) | ||||||||||||||||||||
Six months ended | ||||||||||||||||||||
June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Net income available to common shareholders | $ | 19,593 | 27,064 | 48,171 | 49,097 | 51,536 | ||||||||||||||
Weighted average common shares outstanding | 48,437 | 48,345 | 48,363 | 49,041 | 49,879 | |||||||||||||||
Dilutive potential shares due to effect of stock options | 120 | 238 | 235 | 313 | 257 | |||||||||||||||
Total weighted average common shares and dilutive potential shares | 48,557 | 48,583 | 48,598 | 49,354 | 50,136 | |||||||||||||||
Basic earnings per share | $ | 0.40 | 0.56 | 1.00 | 1.00 | 1.03 | ||||||||||||||
Diluted earnings per share | $ | 0.40 | 0.56 | 0.99 | 0.99 | 1.03 | ||||||||||||||
(15) | Employee Benefit Plans |
(a) | Pension Plans | ||
The Company maintains noncontributory defined benefit pension plans covering substantially all employees and the members of its board of directors. Retirement benefits are based on certain compensation levels, age, and length of service. Contributions are based on an actuarially determined amount to fund not only benefits attributed to service to date but also for those expected to be earned in the future. In addition, the Company has an unfunded Supplemental Executive Retirement Plan (“SERP”) to compensate those executive participants eligible for the Company’s defined benefit pension plan whose benefits are limited by Section 415 of the Internal Revenue Code. | |||
The Company also sponsors a retirement savings plan in which substantially all employees participate. The Company provides a matching contribution of 50% of each employee’s contribution to a maximum of 6% of the employee’s compensation. |
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Total expense for all retirement plans, including defined benefit pension plans, was approximately $5,957,000, $6,639,000 and $6,310,000, for the years ended December 31, 2008, 2007 and 2006, respectively. | ||
Components of net periodic pension cost and other amounts recognized in other comprehensive income: | ||
The following tables set forth the net periodic pension cost for the Company’s defined benefit pension plans for the six-month periods ended June 30, 2009 and 2008 and the years ended December 31, 2008, 2007 and 2006: |
(Unaudited) | ||||||||
Six months ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
Service cost | $ | 2,646 | 2,510 | |||||
Interest cost | 2,396 | 2,280 | ||||||
Expected return on plan assets | (1,934 | ) | (2,494 | ) | ||||
Net amortization and deferral | 838 | 88 | ||||||
Netperiodicpensioncost | $ | 3,946 | 2,384 | |||||
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Service cost | $ | 5,022 | 4,958 | 4,555 | ||||||||
Interest cost | 4,559 | 4,094 | 3,492 | |||||||||
Expected return on plan assets | (4,988 | ) | (4,409 | ) | (3,601 | ) | ||||||
Net amortization and deferral | 175 | 825 | 793 | |||||||||
Netperiodicpensioncost | $ | 4,768 | 5,468 | 5,239 | ||||||||
The following table sets forth other changes in the Company’s defined benefit pension plans’ plan assets and benefit obligations recognized in other comprehensive income: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net loss (gain) | $ | 25,675 | (8,391 | ) | — | |||||||
Prior service cost (credit) | (2,184 | ) | — | — | ||||||||
Amortization of prior sevice cost | (51 | ) | (77 | ) | — | |||||||
Total recognized in other comprehensiveincome | $ | 23,440 | (8,468 | ) | — | |||||||
Total recognized in net periodic pension costandothercomprehensiveincome/(loss) | $ | 28,208 | (3,000 | ) | 5,239 | |||||||
The estimated net loss and prior service cost for the Company’s defined benefit pension plan that will be amortized |
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from accumulated other comprehensive income into net periodic cost over the next year are $1,677,000 and $125,000, respectively. |
The following table sets forth information for the Company’s defined benefit pension plans’ funded status at December 31, 2008 and 2007: |
December 31 | ||||||||
2008 | 2007 | |||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 73,708 | 71,891 | |||||
Service cost | 5,022 | 4,958 | ||||||
Interest cost | 4,559 | 4,094 | ||||||
Actuarial (gain) loss | (675 | ) | (5,630 | ) | ||||
Benefits paid | (1,845 | ) | (1,605 | ) | ||||
Benefit obligation at end of year | $ | 80,769 | 73,708 | |||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | $ | 62,943 | 55,622 | |||||
Actual return on plan assets | (18,394 | ) | 6,461 | |||||
Employer contributions | 6,332 | 2,465 | ||||||
Benefits paid | (1,845 | ) | (1,605 | ) | ||||
Fair value of plan assets at end of period | $ | 49,036 | 62,943 | |||||
Funded status at end of year | $ | (31,733 | ) | (10,765 | ) | |||
The following table sets forth the assumptions used to develop the net periodic pension cost: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 6.25 | % | 5.75 | % | 5.75 | % | ||||||
Expected long-term rate of return on assets | 8.00 | % | 8.00 | % | 8.00 | % | ||||||
Rate of increase in compensation levels | 4.00 | % | 4.00 | % | 4.00 | % |
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The following table sets forth the assumptions used to determine benefit obligations at the end of each period: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 6.00 | % | 6.25 | % | 5.75 | % | ||||||
Expected long-term rate of return on assets | 8.00 | % | 8.00 | % | 8.00 | % | ||||||
Rate of increase in compensation levels | 4.00 | % | 4.00 | % | 4.00 | % |
The expected long-term rate of return on assets is based on the expected return of each of the asset categories, weighted based on the median of the target allocation for each category. |
The accumulated benefit obligation for the funded defined benefit pension plan was $57,146,000, $51,010,000 and $48,325,000 at December 31, 2008, 2007 and 2006, respectively. The accumulated benefit obligation for all unfunded defined benefit plans was $3,844,000, $3,659,000 and $4,014,000 at December 31, 2008, 2007 and 2006, respectively. |
The following table sets forth information for pension plans with an accumulated benefit obligation in excess of plan assets: |
December 31, | ||||||||
2008 | 2007 | |||||||
Projected benefit obligation | $ | 80,769 | 73,708 | |||||
Accumulated benefit obligation | $ | 60,990 | 54,668 | |||||
Fair value of plan assets | $ | 49,036 | 62,943 |
The Company anticipates making contributions to its defined benefit pension plan between $2 million and $8 million during the fiscal year ending December 31, 2009. |
The investment policy as established by the Plan Administrative Committee, to be followed by the Trustee, is to invest assets based on the target allocations shown in the table below. To meet target allocation ranges set forth by the Plan Administrative Committee, periodically, the assets are reallocated by the Trustee. The investment policy is reviewed periodically to determine if the policy should be changed. Pension assets are conservatively invested with the goal of providing market or better returns with below market risks. Assets are invested in a balanced portfolio composed primarily of equities, fixed income, and cash or cash equivalent investments. The Trustee tries to maintain an approximate asset mix position of 30% to 60% equities and 20% to 50% bonds. |
A maximum of 10% may be invested in any one stock, including the stock of Northwest Bancorp, Inc. The objective of holding equity securities is to provide capital appreciation consistent with the ownership of the common stocks of medium to large companies. Acceptable bond investments are direct or agency obligations of the U.S. Government or investment grade corporate bonds. The average maturity of the bond portfolio shall not exceed 10 years. |
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The following table sets forth the weighted average asset allocation of defined benefit plans: |
Target | December 31 | |||||||||||
Asset category | allocation | 2008 | 2007 | |||||||||
Debt securities | 20 – 50 | % | 38 | % | 39 | % | ||||||
Equity securities | 30 – 60 | % | 60 | % | 58 | % | ||||||
Other | 5 – 50 | % | 2 | % | 3 | % | ||||||
Total | 100 | % | 100 | % | ||||||||
The benefits expected to be paid in each year from 2009 to 2013 are $1,959,000, $2,144,000, $2,286,000, $2,517,000, and $2,933,000, respectively. The aggregate benefits expected to be paid in the five years from 2014 to 2018 are $19,823,000. The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligations at December 31, 2008 and include estimated future employee service. | ||
(b) | Postretirement Healthcare Plan | |
In addition to pension benefits, the Company provides postretirement healthcare benefits for certain employees who were employed by the Company as of October 1, 1993 and were at least 55 years of age on that date. The Company accounts for these benefits in accordance with Statement of Financial Accounting Standards No. 106,Employers’ Accounting for Postretirement Benefits Other than Pensions(SFAS 106). SFAS 106 requires the accrual method of accounting for postretirement benefits other than pensions. | ||
Components of net periodic benefit cost and other amounts recognized in other comprehensive income: | ||
The following tables set forth the net periodic benefit cost for the Company’s postretirement healthcare benefits plan for the six-month periods ended June 30, 2009 and 2008 and December 31, 2008, 2007 and 2006: |
(Unaudited) | ||||||||
Six months ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
Service cost | $ | — | — | |||||
Interest cost | 50 | 48 | ||||||
Amortization of net loss | 28 | 22 | ||||||
Net periodic benefit cost | $ | 78 | 70 | |||||
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Service cost | $ | — | — | — | ||||||||
Interest cost | 98 | 93 | 91 | |||||||||
Recognized actuarial gain | 43 | 42 | 34 | |||||||||
Net periodic benefit cost | $ | 141 | 135 | 125 | ||||||||
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The following table sets forth other changes in the Company’s postretirement healthcare plan’s plan assets and benefit obligations recognized in other comprehensive income: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net loss (gain) | $ | 204 | (22 | ) | — | |||||||
Total recognized in other comprehensive income | $ | 204 | (22 | ) | — | |||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | 345 | 113 | 125 | ||||||||
The estimated net loss for the postretirement healthcare benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year is $57,000. |
The following table sets forth the funded status of the Company’s postretirement healthcare benefit plan at December 31, 2008 and 2007: |
December 31 | ||||||||
2008 | 2007 | |||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 1,637 | 1,701 | |||||
Service cost | — | — | ||||||
Interest cost | 98 | 93 | ||||||
Actuarial (gain) loss | 218 | 20 | ||||||
Benefits paid | (186 | ) | (177 | ) | ||||
Benefit obligation at end of year | 1,767 | 1,637 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | $ | — | — | |||||
Employer contributions | 186 | 177 | ||||||
Benefits paid | (186 | ) | (177 | ) | ||||
Fair value of plan assets at end of year | $ | — | — | |||||
Funded status at year end | $ | (1,767 | ) | (1,637 | ) | |||
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The assumptions used to develop the preceding information for postretirement healthcare benefits are as follows: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Discount rate | 6.00 | % | 5.75 | % | 5.75 | % | ||||||
Monthly cost of healthcare insurance per beneficiary(1) | $ | 305 | 274 | 257 | ||||||||
Annual rate of increase in healthcare costs | 4.00 | % | 4.00 | % | 4.00 | % |
(1) | Not in thousands |
If the assumed rate of increase in healthcare costs was increased by one percentage point to 5% from the level of 4% presented above, the service and interest cost components of net periodic postretirement healthcare benefit cost would increase by $12,000, in the aggregate, and the accumulated postretirement benefit obligation for healthcare benefits would increase by $80,000. |
The following table sets forth amounts recognized in accumulated other comprehensive income: |
Years ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net loss/ (gain) | $ | 204 | 634 | 656 | ||||||||
The accumulated benefit obligation for the Company’s postretirement healthcare benefit plan at December 31, 2008 and 2007 was $1,767,000 and $1,637,000, respectively. |
The following table sets forth information for plans with an accumulated benefit obligation in excess of plan assets: |
December 31, | ||||||||
2008 | 2007 | |||||||
Projected benefit obligation | $ | 1,767 | 1,637 | |||||
Accumulated benefit obligation | $ | 1,767 | 1,637 | |||||
Fair value of plan assets | $ | — | — |
(c) | Employee Stock Ownership Plan | |
The Company has an employee stock ownership plan (ESOP) for employees who have attained age 21 and who have completed a 12-month period of employment with the Company during which they worked at least 1,000 hours. The Company can make contributions to the ESOP at the board’s discretion. Company shares would then be purchased periodically in the open market and allocated to employee accounts based on each employee’s relative portion of the Company’s total eligible compensation recorded during the year. | ||
No contributions were made and no expense was recognized during the six-months ended June 30, 2009 or the years ended December 31, 2008, 2007 and 2006. |
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(d) | Recognition and Retention Plan | |
On November 17, 2004, the Company established a Recognition and Retention Plan for Employees and Outside Directors (RRP) with 290,220 shares authorized. The objective of the RRP is to enable the Company to provide directors, officers, and employees with a proprietary interest in the Company. On March 16, 2005, 278,231 shares were issued with a weighted average grant date fair value per share of $21.42 (total market value of $5,959,000 at issuance). Total common shares forfeited were 8,322, of which, 685, 3,058 and 1,644 shares were forfeited during the years ended December 31, 2008, 2007, and 2006, respectively. During 2007, 4,300 shares were issued with a weighted average grant date fair value per share of $27.04 (total market value of $116,000 at issuance). Shares of common stock granted pursuant to the RRP were in the form of restricted stock and generally vest over a five-year period at the rate of 20% per year, commencing one year after the award date. As of June 30, 2009, 80% of the March 16, 2005 issuance vested and 40% of the 2007 issuances have vested. As of December 31, 2008, 60% of the March 16, 2005 issuance vested and 20% of the 2007 issuances have vested. Once shares have vested, they are no longer restricted. Compensation expense, in the amount of the fair market value of the common stock at the date of the grant, will be recognized pro rata over the five years during which the shares are payable. While restricted, the recipients are entitled to all voting and other shareholder rights, except that the shares may not be sold, pledged, or otherwise disposed of and are required to be held in a trust. | ||
(e) | Stock Option Plans | |
On November 21, 1995, the Company adopted the 1995 Stock Option Plan. The objective of the Stock Option Plan is to provide an additional performance incentive to the Company’s employees and outside directors. The Stock Option Plan authorized the grant of stock options and limited stock appreciation rights for 1,380,000 shares of the Company’s common stock. On December 20, 1995, the Company granted 242,000 nonstatutory stock options to its outside directors at an exercise price of $5.58 per share (95% of the Company’s common stock fair market value per share at grant date) and 923,200 incentive stock options to employees at an exercise price of $5.875 per share. On March 22, 1996, the Company granted 122,800 incentive stock options to employees at an exercise price of $5.625 per share. On December 16, 1998, the Company granted 15,086 incentive stock options to employees at an exercise price of $9.875 per share. On October 20, 1999, the Company granted 2,000 nonstatutory stock options to an outside director and 57,700 incentive stock options to employees at an exercise price of $7.812 per share. On June 21, 2000, the Company granted the remaining 17,214 incentive stock options as well as 786 previously forfeited options at an exercise price of $6.875 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing with the grant date. | ||
On November 17, 2000, the Company adopted the 2000 Stock Option Plan. This Plan authorized the grant of stock options and limited stock rights for 800,000 shares of the Company’s common stock. On October 17, 2001, the Company granted 84,000 nonstatutory stock options to its outside directors and 143,845 incentive stock options to employees at an exercise price of $9.780 per share. On August 21, 2002, the Company granted 162,940 incentive stock options to employees at an exercise price of $13.30 per share. On August 20, 2003, the Company granted 182,000 incentive stock options to employees at an exercise price of $16.59 per share. On December 15, 2004, the Company granted 220,780 incentive stock options to employees at an exercise price of $25.49 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing with the grant date. | ||
On November 17, 2005, the Company adopted the 2005 Stock Option Plan. This Plan authorizes the grant of stock options and limited stock rights for 725,552 shares of the Company’s common stock. On January 19, 2005, the Company granted 70,000 nonstatutory stock options to its outside directors and 154,546 incentive stock options to employees at an exercise price of $22.93 per share. On January 18, 2006 the Company granted 158,333 incentive stock options to employees at an exercise price of $22.18 per share. On January 17, 2007 the Company granted 179,806 stock options to employees at an exercise price of $25.89 per share. On June 20, 2007 the Company |
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granted 2,000 stock options to a new director at an exercise price of $28.09 per share. On January 16, 2008 the Company granted the remaining 160,867 incentive stock options as well as 30,842 previously forfeited incentive stock options to employees at an exercise price of $25.03 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting at the rate of 20% per year commencing one year from the grant date. |
On May 21, 2008, the Company adopted the 2008 Stock Option Plan. This Plan authorized the grant of stock options and limited stock rights for 1,750,000 shares of the Company’s common stock. On November 19, 2008 the Company granted 24,000 nonstatutory stock options to its outside directors and 202,068 incentive stock options to employees at an exercise price of $22.03 per share. On February 19, 2009 the Company granted 24,000 nonstatutory stock options to its outside directors and 195,759 incentive stock options to employees at an exercise price of $16.84 per share. These options are exercisable for a period of ten years from the grant date with each recipient vesting over a seven year period commencing one year from the grant date. |
The following table summarizes the activity in the Company’s option plans during the years ended December 31, 2008, 2007 and 2006: |
Years Ended December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
average | average | average | ||||||||||||||||||||||
exercise | exercise | exercise | ||||||||||||||||||||||
Number | price | Number | price | Number | price | |||||||||||||||||||
Balance at beginning of year | 1,236,358 | $ | 19.96 | 1,112,858 | $ | 18.65 | 1,019,189 | $ | 17.55 | |||||||||||||||
Granted | 417,777 | 23.41 | (a) | 181,806 | 25.91 | (a) | 158,333 | 22.18 | (a) | |||||||||||||||
Exercised | (54,367 | ) | 12.20 | (b) | (52,572 | ) | 12.66 | (b) | (63,064 | ) | 10.14 | (b) | ||||||||||||
Forfeited | — | 0.00 | (5,734 | ) | 22.14 | (1,600 | ) | 5.63 | ||||||||||||||||
Balance at end of year | 1,599,768 | 21.12 | 1,236,358 | 19.96 | 1,112,858 | 18.65 | ||||||||||||||||||
Exercisable at end of year | 853,167 | 18.88 | 796,270 | 17.61 | 651,415 | 15.78 |
(a) | Weighted average fair value of options at grant date: $3.05, $5.12, and $4.75, respectively. | |
(b) | The total intrinsic value of options exercised was $692,000, $773,000 and $898,000, respectively. |
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Exercise | Exercise | Exercise | Exercise | Exercise | Exercise | Exercise | ||||||||||||||||||||||
Price | Price | Price | Price | Price | Price | Price | ||||||||||||||||||||||
$6.875 | $ 7.812 | $ 9.780 | $ 13.302 | $ 16.590 | $ 16.840 | $ 22.030 | ||||||||||||||||||||||
Options outstanding: | ||||||||||||||||||||||||||||
Number of options | 4,800 | 11,200 | 123,976 | 108,004 | 144,314 | 219,759 | 226,068 | |||||||||||||||||||||
Weighted average remaining contract life (years) | 1.00 | 0.50 | 2.25 | 3.50 | 4.50 | 9.50 | 9.25 | |||||||||||||||||||||
Options exercisable: | ||||||||||||||||||||||||||||
Number of options | 4,800 | 11,200 | 123,976 | 108,004 | 144,314 | — | — | |||||||||||||||||||||
Weighted average remaining term — vested (years) | 1.00 | 0.50 | 2.25 | 3.50 | 4.50 | 9.50 | 9.25 | |||||||||||||||||||||
Exercise | Exercise | Exercise | Exercise | Exercise | Exercise | |||||||||||||||||||||||
Price | Price | Price | Price | Price | Price | Total | ||||||||||||||||||||||
$ 22.180 | $ 22.930 | $ 25.030 | $ 25.490 | $ 25.890 | $28.090 | $ 20.710 | ||||||||||||||||||||||
Options outstanding: | ||||||||||||||||||||||||||||
Number of options | 155,801 | 220,929 | 191,709 | 213,686 | 179,806 | 2,000 | 1,802,052 | |||||||||||||||||||||
Weighted average remaining contract life (years) | 6.50 | 5.50 | 8.50 | 5.50 | 7.50 | 7.50 | 6.60 | |||||||||||||||||||||
Options exercisable: | ||||||||||||||||||||||||||||
Number of options | 93,069 | 176,288 | 38,342 | 213,686 | 71,922 | 400 | 986,002 | |||||||||||||||||||||
Weighted average remaining term — vested (years) | 6.50 | 5.50 | 8.50 | 5.50 | 7.50 | 7.50 | 3.38 |
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Exercise | Exercise | Exercise | Exercise | Exercise | Exercise | |||||||||||||||||||
Price | Price | Price | Price | Price | Price | |||||||||||||||||||
$6.875 | $ 7.812 | $ 9.780 | $ 13.302 | $ 16.590 | $ 22.030 | |||||||||||||||||||
Options outstanding: | ||||||||||||||||||||||||
Number of options | 4,800 | 16,400 | 134,201 | 110,054 | 144,314 | 226,068 | ||||||||||||||||||
Weighted average remaining contract life (years) | 1.50 | 1.00 | 2.75 | 4.00 | 5.00 | 9.75 | ||||||||||||||||||
Options exercisable: | ||||||||||||||||||||||||
Number of options | 4,800 | 16,400 | 134,201 | 110,054 | 144,314 | — | ||||||||||||||||||
Weighted average remaining term — vested (years) | 1.50 | 1.00 | 2.75 | 4.00 | 5.00 | 9.75 |
Exercise | Exercise | Exercise | Exercise | Exercise | Exercise | |||||||||||||||||||||||
Price | Price | Price | Price | Price | Price | Total | ||||||||||||||||||||||
$ 22.180 | $ 22.930 | $ 25.030 | $ 25.490 | $ 25.890 | $28.090 | $ 21.120 | ||||||||||||||||||||||
Options outstanding: | ||||||||||||||||||||||||||||
Number of options | 155,801 | 220,929 | 191,709 | 213,686 | 179,806 | 2,000 | 1,599,768 | |||||||||||||||||||||
Weighted average remaining contract life (years) | 7.00 | 6.00 | 9.00 | 6.00 | 8.00 | 8.00 | 6.65 | |||||||||||||||||||||
Options exercisable: | ||||||||||||||||||||||||||||
Number of options | 61,703 | 131,648 | — | 213,686 | 35,961 | 400 | 853,167 | |||||||||||||||||||||
Weighted average remaining term — vested (years) | 7.00 | 6.00 | 9.00 | 6.00 | 8.00 | 8.00 | 4.19 |
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(16) | Disclosures About Fair Value of Financial Instruments |
(Unaudited) | ||||||||||||||||||||||||
June 30, | December 31 | |||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Carrying | Estimated | Carrying | Estimated | Carrying | Estimated | |||||||||||||||||||
amount | fair value | amount | fair value | amount | fair value | |||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||
Cash and equivalents | $ | 415,066 | 415,066 | 79,922 | 79,922 | 230,616 | 230,616 | |||||||||||||||||
Securities available-for-sale | 1,009,382 | 1,009,382 | 1,139,170 | 1,139,170 | 1,133,367 | 1,133,367 | ||||||||||||||||||
Loans receivable, net | 5,091,518 | 5,347,557 | 5,141,892 | 5,446,835 | 4,795,622 | 4,941,215 | ||||||||||||||||||
Accrued interest receivable | 25,852 | 25,852 | 27,252 | 27,252 | 27,084 | 27,084 | ||||||||||||||||||
FHLB stock | 63,143 | 63,143 | 63,143 | 63,143 | 31,304 | 31,304 | ||||||||||||||||||
Total financial assets | $ | 6,604,961 | 6,861,000 | 6,451,379 | 6,756,322 | 6,217,993 | 6,363,586 | |||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||
Savings and checking | $ | 2,764,616 | 2,764,616 | 2,580,751 | 2,580,751 | 2,505,638 | 2,505,638 | |||||||||||||||||
Time deposits | 2,581,123 | 2,645,965 | 2,457,460 | 2,500,410 | 3,036,696 | 3,071,514 | ||||||||||||||||||
Borrowed funds | 897,063 | 886,354 | 1,067,945 | 1,049,399 | 339,115 | 338,671 | ||||||||||||||||||
Trust-preferred securities | 108,249 | 113,603 | 108,254 | 116,783 | 108,320 | 108,320 | ||||||||||||||||||
Cash flow hedges — swaps | 5,352 | 5,352 | 13,114 | 13,114 | — | — | ||||||||||||||||||
Accrued interest payable | 4,955 | 4,955 | 5,194 | 5,194 | 4,356 | 4,356 | ||||||||||||||||||
Total financial liabilities | $ | 6,361,358 | 6,420,845 | 6,232,718 | 6,265,651 | 5,994,125 | 6,028,499 | |||||||||||||||||
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• | 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: |
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 and other information from brokers or other external sources where the inputs are not deemed observable. |
Total assets at | ||||||||||||||||
Level 1 | Level 2 | Level 3 | fair value | |||||||||||||
Equity securities — available for sale | $ | 864 | — | 220 | 1,084 | |||||||||||
Debt securities — available for sale | — | 1,001,060 | 7,238 | 1,008,298 | ||||||||||||
Derivative fair value of interest rate swap | — | (5,352 | ) | — | (5,352 | ) | ||||||||||
Total assets | $ | 864 | 995,708 | 7,458 | 1,004,030 | |||||||||||
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Total assets at | ||||||||||||||||
Level 1 | Level 2 | Level 3 | fair value | |||||||||||||
Equity securities — available for sale | $ | 894 | — | 220 | 1,114 | |||||||||||
Debt securities — available for sale | — | 1,132,119 | 5,937 | 1,138,056 | ||||||||||||
Derivative fair value of interest rate swap | — | (13,114 | ) | — | (13,114 | ) | ||||||||||
Total assets | $ | 894 | 1,119,005 | 6,157 | 1,126,056 | |||||||||||
Equity | ||||||||
securities | Debt 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 as OTTI | — | — | ||||||
Included in other comprehensive income | — | 801 | ||||||
Purchases and sales | — | 500 | ||||||
Net transfers in (out) of Level 3 | — | — | ||||||
Balance at June 30, 2009 | $ | 220 | 7,238 | |||||
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Equity | ||||||||
securities | Debt 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 as OTTI | — | (9,522 | ) | |||||
Included in other comprehensive income | — | (1,234 | ) | |||||
Purchases and sales | — | — | ||||||
Net transfers in (out) of Level 3 | — | (5,676 | ) | |||||
Balance at December 31, 2008 | $ | 220 | 5,937 | |||||
Total assets | ||||||||||||||||
Level 1 | Level 2 | Level 3 | at fair value | |||||||||||||
Loans held for sale | $ | 25,042 | — | — | 25,042 | |||||||||||
Loans measured for impairment | — | — | 55,808 | 55,808 | ||||||||||||
Real estate owned | — | — | 15,890 | 15,890 | ||||||||||||
Mortgage servicing rights | — | — | 3,532 | 3,532 | ||||||||||||
Total assets | $ | 25,042 | — | 75,230 | 100,272 | |||||||||||
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Total assets | ||||||||||||||||
Level 1 | Level 2 | Level 3 | at fair value | |||||||||||||
Loans held for sale | $ | 18,738 | — | — | 18,738 | |||||||||||
Loans measured for impairment | — | — | 9,130 | 9,130 | ||||||||||||
Mortgage servicing rights | — | — | 5,481 | 5,481 | ||||||||||||
Total assets | $ | 18,738 | — | 14,611 | 33,349 | |||||||||||
(17) | Regulatory Capital Requirements |
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June 30, 2009 (Unaudited) | ||||||||||||||||||||||||
Minimum capital | Well capitalized | |||||||||||||||||||||||
Actual | requirements | requirements | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Total capital (to risk weighted assets): | $ | 619,369 | 13.69 | % | $ | 361,992 | 8.00 | % | $ | 452,490 | 10.00 | % | ||||||||||||
Tier I capital (to risk weighted assets): | 562,620 | 12.43 | % | 180,996 | 4.00 | % | 271,494 | 6.00 | % | |||||||||||||||
Tier I capital (leverage) (to average assets): | 562,620 | 8.15 | % | 207,129 | 3.00 | %* | 345,215 | 5.00 | % |
December 31, 2008 | ||||||||||||||||||||||||
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 | % |
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December 31, 2007 | ||||||||||||||||||||||||
Minimum capital | Well capitalized | |||||||||||||||||||||||
Actual | requirements | requirements | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Total capital (to risk weighted assets): | $ | 571,785 | 14.10 | % | $ | 324,304 | 8.00 | % | $ | 405,380 | 10.00 | % | ||||||||||||
Tier I capital (to risk weighted assets): | 529,833 | 13.07 | % | 162,152 | 4.00 | % | 243,228 | 6.00 | % | |||||||||||||||
Tier I capital (leverage) (to average assets): | 529,833 | 8.21 | % | 193,630 | 3.00 | %* | 322,717 | 5.00 | % |
* | The FDIC has indicated that the most highly rated institutions, which meet certain criteria, will be required to maintain a ratio of 3%, and all other institutions will be required to maintain an additional capital cushion of 100 to 200 basis points. As of June 30, 2009 and December 31, 2008, the Company had not been advised of any additional requirements in this regard. |
(18) | Contingent Liabilities |
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(19) | Components of Comprehensive Income |
(Unaudited) | ||||||||||||||||||||
Six months ended | ||||||||||||||||||||
June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Unrealized (loss) gain on marketable securities available-for-sale, net of tax of $(658), $4,850, $3,809, $(6,511) and $298, respectively | $ | 1,222 | (7,817 | ) | (5,957 | ) | 10,184 | (466 | ) | |||||||||||
Reclassification adjustment for gains included in net income, net of tax of $(1,426), $(147), $2,035 $1,877 and $263, respectively | 2,649 | 230 | (3,183 | ) | (2,938 | ) | (393 | ) | ||||||||||||
Change in fair value of interest rate swaps, net of tax of $(2,717), $0, $4,590 $0 and $0, respectively | 5,045 | — | (8,524 | ) | — | — | ||||||||||||||
Other-than-temporary impairment on securities recorded in other comprehensive income, net of tax of $1,540, $0, $0, $0 and $0, respectively | (2,860 | ) | — | — | — | — | ||||||||||||||
Defined benefit plans: | ||||||||||||||||||||
Net (loss)/ gain, net of tax of $0, $0, $9,161, $(3,281) and $0, respectively | — | — | (14,330 | ) | 5,132 | — | ||||||||||||||
Amortization of prior service costs, net of tax of $0, $0, $(20), $(30) and $0, respectively | — | — | 31 | 47 | — | |||||||||||||||
Other comprehensive income | $ | 6,056 | (7,587 | ) | (31,963 | ) | 12,425 | (859 | ) | |||||||||||
(Unaudited) | ||||||||||||
June 30, | December 31, | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Unrealized (loss) gain on marketable securities available-for-sale | (3,854 | ) | (3,189 | ) | 6,003 | |||||||
Fair value of interest rate swaps | (3,479 | ) | (8,524 | ) | — | |||||||
Defined benefit pension plans | (18,862 | ) | (18,862 | ) | (5,187 | ) | ||||||
Other comprehensive income | $ | (26,195 | ) | (30,575 | ) | 816 | ||||||
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(20) | Northwest Bancorp, Inc. (Parent Company Only) |
(Unaudited) | ||||||||||||
June 30, | December 31 | |||||||||||
2009 | 2008 | 2007 | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 21,875 | 20,695 | 3,618 | ||||||||
Marketable securities available-for-sale | 62 | 73 | 96 | |||||||||
Investment in bank subsidiary | 717,129 | 706,610 | 714,160 | |||||||||
Other assets | 7,231 | 8,021 | 3,582 | |||||||||
Total assets | $ | 746,297 | 735,399 | 721,456 | ||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Liabilities: | ||||||||||||
Debentures payable | $ | 108,249 | 108,249 | 108,249 | ||||||||
Other liabilities | 5,513 | 13,366 | 329 | |||||||||
Total liabilities | 113,762 | 121,615 | 108,578 | |||||||||
Shareholders’ equity | 632,535 | 613,784 | 612,878 | |||||||||
Total liabilities and shareholders’ equity | $ | 746,297 | 735,399 | 721,456 | ||||||||
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Statements of Income | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Income: | ||||||||||||||||||||
Interest income | $ | 88 | 182 | 359 | 480 | 3,891 | ||||||||||||||
Dividends from bank subsidiary | 13,000 | 26,000 | 39,000 | 49,000 | 45,000 | |||||||||||||||
Undistributed earnings from equity investment in bank subsidiary | 8,612 | 2,934 | 12,722 | 4,838 | 16,551 | |||||||||||||||
Total income | 21,700 | 29,116 | 52,081 | 54,318 | 65,442 | |||||||||||||||
Expense: | ||||||||||||||||||||
Compensation and benefits | 207 | 185 | 380 | 366 | 378 | |||||||||||||||
Other expense | 40 | 87 | 105 | 159 | 182 | |||||||||||||||
Loss on early extinquishment of debt | — | — | — | — | 3,124 | |||||||||||||||
Interest expense | 2,948 | 2,789 | 5,339 | 7,250 | 15,616 | |||||||||||||||
Total expense | 3,195 | 3,061 | 5,824 | 7,775 | 19,300 | |||||||||||||||
Income before income taxes | 18,505 | 26,055 | 46,257 | 46,543 | 46,142 | |||||||||||||||
Federal and state income taxes | (1,088 | ) | (1,009 | ) | (1,914 | ) | (2,554 | ) | (5,394 | ) | ||||||||||
Net income | $ | 19,593 | 27,064 | 48,171 | 49,097 | 51,536 | ||||||||||||||
Statements of Cash Flows | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Six months ended June 30, | Years ended December 31, | |||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | ||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income | $ | 19,593 | 27,064 | 48,171 | 49,097 | 51,536 | ||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
Undistributed earnings of subsidiary | (8,612 | ) | (2,934 | ) | (12,722 | ) | (4,838 | ) | (16,551 | ) | ||||||||||
Loss on early extinguishment | — | — | — | — | 3,124 | |||||||||||||||
Noncash stock benfit plan expense | 889 | 1,295 | 2,731 | �� | 2,454 | 2,296 | ||||||||||||||
Net change in other assets/ liabilities | (2,903 | ) | (1,515 | ) | (2,997 | ) | 1,636 | (3,242 | ) | |||||||||||
Net cash provided by operating activities | 8,967 | 23,910 | 35,183 | 48,349 | 37,163 | |||||||||||||||
Investing activities: | ||||||||||||||||||||
Acquisitions, net of cash received | — | — | — | 5,048 | — | |||||||||||||||
Financing activities: | ||||||||||||||||||||
Cash dividends paid | (7,903 | ) | (7,880 | ) | (15,771 | ) | (15,696 | ) | (13,727 | ) | ||||||||||
Treasury stock repurchases | — | (3,335 | ) | (3,335 | ) | (40,825 | ) | (8,080 | ) | |||||||||||
Redemption of trust preferred stock | — | — | — | — | (102,062 | ) | ||||||||||||||
Proceeds from options exercised | 116 | 243 | 1,000 | 862 | 873 | |||||||||||||||
Net cash used in financing activities | (7,787 | ) | (10,972 | ) | (18,106 | ) | (55,659 | ) | (122,996 | ) | ||||||||||
Net increase/ (decrease) in cash | $ | 1,180 | 12,938 | 17,077 | (2,262 | ) | (85,833 | ) | ||||||||||||
Cash at beginning of year | 20,695 | 3,618 | 3,618 | 5,880 | 91,713 | |||||||||||||||
Net increase/ (decrease) in cash | $ | 1,180 | 12,938 | 17,077 | (2,262 | ) | (85,833 | ) | ||||||||||||
Cash at end of year | $ | 21,875 | 16,556 | 20,695 | 3,618 | 5,880 | ||||||||||||||
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(21) | Business Segments | |
The Company has identified two reportable business segments based upon the operating approach currently used by management. The Community Banking segment includes the savings bank subsidiary of the Company, Northwest Savings Bank, as well as the subsidiaries of the savings bank that provide similar products and services. The savings bank is a community-oriented institution that offers a full array of traditional deposit and loan products, including mortgage, consumer, and commercial loans as well as trust, investment management, actuarial and benefit plan administration, and brokerage services typically offered by a full service financial institution. The Consumer Finance segment is comprised of Northwest Consumer Discount Company, a subsidiary of Northwest Savings Bank, which operates offices in Pennsylvania and New York. This subsidiary compliments the services of the bank by offering personal installment loans for a variety of consumer and real estate products. This activity is funded primarily through its intercompany borrowing relationship with Allegheny Services, Inc. Net income is primarily used by management to measure segment performance. The following tables provide financial information for these segments. The All Other column represents the parent company, other nonbank subsidiaries, and elimination entries necessary to reconcile to the consolidated amounts presented in the financial statements. |
At or for the six months | Community | Consumer | All | |||||||||||||
ended June 30, 2009 (unaudited) | banking | finance | other* | Consolidated | ||||||||||||
External interest income | $ | 173,668 | 10,080 | 11 | $ | 183,759 | ||||||||||
Intersegment interest income | 1,551 | — | (1,551 | ) | — | |||||||||||
Interest expense | 66,395 | 1,626 | 1,366 | 69,387 | ||||||||||||
Provision for loan losses | 16,000 | 1,517 | — | 17,517 | ||||||||||||
Noninterest income | 20,311 | 1,097 | 48 | 21,456 | ||||||||||||
Noninterest expense | 85,152 | 5,871 | 247 | 91,270 | ||||||||||||
Income tax expense (benefit) | 7,638 | 898 | (1,088 | ) | 7,448 | |||||||||||
Net income | $ | 20,345 | 1,265 | (2,017 | ) | $ | 19,593 | |||||||||
Total assets | $ | 6,963,326 | 115,381 | 13,584 | $ | 7,092,291 | ||||||||||
At or for the six months | Community | Consumer | All | |||||||||||||
ended June 30, 2008 (unaudited) | banking | finance | 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 | ||||||||||
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At or for the year ended | Community | Consumer | All | |||||||||||||
December 31, 2008 | banking | finance | other* | Consolidated | ||||||||||||
External interest income | $ | 368,201 | 20,452 | 6 | $ | 388,659 | ||||||||||
Intersegment interest income | 4,959 | — | (4,959 | ) | — | |||||||||||
Interest expense | 163,922 | 5,186 | 185 | 169,293 | ||||||||||||
Provision for loan losses | 19,500 | 3,351 | — | 22,851 | ||||||||||||
Noninterest income | 36,324 | 2,269 | 159 | 38,752 | ||||||||||||
Noninterest expense | 158,652 | 10,990 | 486 | 170,128 | ||||||||||||
Income tax expense (benefit) | 17,646 | 1,236 | (1,914 | ) | 16,968 | |||||||||||
Net income | $ | 49,764 | 1,958 | (3,551 | ) | $ | 48,171 | |||||||||
Total assets | $ | 6,792,735 | 115,463 | 22,043 | $ | 6,930,241 | ||||||||||
At or for the year ended | Community | Consumer | All | |||||||||||||
December 31, 2007 | banking | finance | other* | Consolidated | ||||||||||||
External interest income | $ | 375,761 | 20,266 | 4 | $ | 396,031 | ||||||||||
Intersegment interest income | 7,991 | — | (7,991 | ) | — | |||||||||||
Interest expense | 195,533 | 8,232 | 7,250 | 211,015 | ||||||||||||
Provision for loan losses | 6,000 | 2,743 | — | 8,743 | ||||||||||||
Noninterest income | 40,250 | 2,552 | 220 | 43,022 | ||||||||||||
Noninterest expense | 143,878 | 8,339 | 525 | 152,742 | ||||||||||||
Income tax expense (benefit) | 18,607 | 1,403 | (2,554 | ) | 17,456 | |||||||||||
Net income | $ | 59,984 | 2,101 | (12,988 | ) | $ | 49,097 | |||||||||
Total assets | $ | 6,629,725 | 122,657 | (88,866 | ) | $ | 6,663,516 | |||||||||
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At or for the year ended | Community | Consumer | All | |||||||||||||
December 31, 2006 | banking | finance | other* | Consolidated | ||||||||||||
External interest income | $ | 349,964 | 18,605 | 4 | $ | 368,573 | ||||||||||
Intersegment interest income | 8,234 | — | (8,234 | ) | — | |||||||||||
Interest expense | 178,634 | 8,494 | 3,981 | 191,109 | ||||||||||||
Provision for loan losses | 6,000 | 2,480 | — | 8,480 | ||||||||||||
Noninterest income | 42,988 | 2,515 | 523 | 46,026 | ||||||||||||
Noninterest expense | 131,847 | 8,150 | 3,685 | 143,682 | ||||||||||||
Income tax expense (benefit) | 24,435 | 751 | (5,394 | ) | 19,792 | |||||||||||
Net income | $ | 60,270 | 1,245 | (9,979 | ) | $ | 51,536 | |||||||||
Total assets | $ | 6,493,770 | 124,993 | (90,948 | ) | $ | 6,527,815 | |||||||||
* | Eliminations consist of intercompany interest income and interest expense. |
(22) | Guaranteed Preferred Beneficial Interests in Company’s Junior Subordinated Deferrable Interest Debentures (Trust-Preferred Securities) and Interest Rate Swap Agreements | |
The Company has three statutory business trusts: Northwest Bancorp Capital Trust III, a Delaware statutory business trust, and Northwest Bancorp Statutory Trust IV, a Connecticut statutory business trust and Penn Laurel Financial Corp. Trust I, a Delaware statutory business trust (the Trusts). The Penn Laurel Financial Corp, Trust I was assumed with the acquisition of Penn Laurel Financial Corporation in June 2007. 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 trust securities in an equivalent amount of debentures of the Company, and engage in other activities that are incidental to those previously listed. The aforementioned trusts are not consolidated in accordance with FIN 46 (R),Consolidation of Variable Interest Entities and Interpretation of ARB No.51. Northwest Bancorp Capital 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 and a floating rate of interest, which is reset quarterly, equal to three-month LIBOR plus 1.38%. Northwest Bancorp Statutory 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 and a floating rate of interest, 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 and floating rate of interest, which is reset quarterly, equal to three-month LIBOR plus 2.80%. | ||
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. Northwest Bancorp Statutory Trust III holds $51,547,000 of the Company’s junior subordinated debentures due December 30, 2035 with a floating rate of interest, reset quarterly, of three-month LIBOR plus 1.38%. The rate in effect at December 31, 2008 was 2.85%. Northwest Bancorp Statutory Trust IV holds $51,547,000 of the Company’s junior subordinated debentures due December 15, 2035 with a floating rate of interest, reset quarterly, of three-month LIBOR plus 1.38%. The rate in effect at December 31, 2008 was 3.38%. Penn Laurel Financial Corp. Trust I holds $5,155,000 of the Company’s junior subordinated debentures due January 23, 2034 with a floating rate of interest, reset quarterly, of three-month LIBOR plus |
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2.80%. The rate in effect at December 31, 2008 was 6.27%. These subordinated debentures are the sole assets of the Trusts. The Company called the Penn Laurel Financial Corp. Trust I, at par, on July 23, 2009. | ||
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 securities also are deferred. Interest on the subordinated debentures and distributions on the trust securities is cumulative. The Company obligation constitutes a full, irrevocable, and unconditional guarantee on a subordinated basis of the obligations of the trust under the preferred securities. | ||
The Trusts must redeem the preferred securities when the debentures are paid at maturity or upon an earlier redemption of the debentures to the extent the debentures are redeemed. All or part of the debentures may be redeemed at any time on or after December 31, 2010. Also, the debentures may be redeemed at any time if existing laws or regulations, or the interpretation or application of these laws or regulations, change causing: |
• | the interest on the debentures to no longer be deductible by the Company for federal income tax purposes; | ||
• | the trust to become subject to federal income tax or to certain other taxes or governmental charges; | ||
• | the trust to register as an investment company; and | ||
• | the Company to become subject to capital requirements and the preferred securities do not qualify as Tier I capital. |
The Company may, at any time, dissolve any of the Trusts and distribute the debentures to the trust security holders, subject to receipt of any required regulatory approval(s). | ||
During the quarter ended September 30, 2008, the Company entered into four interest rate swap agreements (swaps). The Company designated the swaps as a cash flow hedge and they are intended to protect against the variability of cash flows associated with Trust III and Trust IV. The first two swaps hedge the interest rate risk 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 hedge the interest rate risk 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 June 30, 2009 and December 31, 2008, the fair value of the swap agreements was $(5,352,000) and $(13,114,000) and was the amount the Company would have expected to pay if the contracts were terminated. There was no material hedge ineffectiveness for this swap. |
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Liability derivatives | ||||||||
(included in Other liabilites) | ||||||||
June 30, | December 31, | |||||||
2009 (unaudited) | 2008 | |||||||
Cash flow hedges — swaps | ||||||||
Fair value | $ | 5,352 | 13,114 | |||||
Notional amount | 100,000 | 100,000 | ||||||
Collateral posted | 5,352 | 13,114 |
The following table sets forth a summary of guaranteed capital debt securities and junior subordinated deferrable interest debentures held by the trusts’ as of June 30, 2009 and December 31, 2008 and 2007 |
Capital | (Unaudited) | |||||||||||||||
Debt | June 30, | December 31, | ||||||||||||||
Securities | 2009 | 2008 | 2007 | |||||||||||||
Northwest Bancorp Capital Trust III | $ | 50,000 | 51,547 | 51,547 | 51,547 | |||||||||||
Northwest Bancorp Statutory Trust IV | 50,000 | 51,547 | 51,547 | 51,547 | ||||||||||||
Penn Laurel Financial Corp, Trust I | 5,000 | 5,155 | 5,160 | 5,226 | ||||||||||||
Total | $ | 105,000 | 108,249 | 108,254 | 108,320 | |||||||||||
(23) | Selected Quarterly Financial Data (Unaudited) |
Three months ended | ||||||||
March 31 | June 30 | |||||||
(In thousands, except per share data) | ||||||||
2009: | ||||||||
Interest income | $ | 92,793 | 90,966 | |||||
Interest expense | 34,826 | 34,561 | ||||||
Net interest income | 57,967 | 56,405 | ||||||
Provision for loan losses | 5,781 | 11,736 | ||||||
Noninterest income | 9,474 | 11,982 | ||||||
Noninterest expenses | 44,266 | 47,004 | ||||||
Income before income taxes | 17,394 | 9,647 | ||||||
Income taxes | 5,092 | 2,356 | ||||||
Net income | $ | 12,302 | 7,291 | |||||
Basic earnings per share | $ | 0.25 | 0.15 | |||||
Diluted earnings per share | $ | 0.25 | 0.15 |
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Three months ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
2008: | ||||||||||||||||
Interest income | $ | 96,821 | 97,152 | 97,519 | 97,167 | |||||||||||
Interest expense | 48,387 | 43,423 | 39,819 | 37,664 | ||||||||||||
Net interest income | 48,434 | 53,729 | 57,700 | 59,503 | ||||||||||||
Provision for loan losses | 2,294 | 3,395 | 6,950 | 10,212 | ||||||||||||
Noninterest income | 12,891 | 11,644 | 4,952 | 9,265 | ||||||||||||
Noninterest expenses | 42,427 | 41,488 | 42,739 | 43,474 | ||||||||||||
Income before income taxes | 16,604 | 20,490 | 12,963 | 15,082 | ||||||||||||
Income taxes | 3,982 | 6,048 | 3,140 | 3,798 | ||||||||||||
Net income | $ | 12,622 | 14,442 | 9,823 | 11,284 | |||||||||||
Basic earnings per share | $ | 0.26 | 0.30 | 0.20 | 0.23 | |||||||||||
Diluted earnings per share | $ | 0.26 | 0.30 | 0.20 | 0.23 |
Three months ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
2007: | ||||||||||||||||
Interest income | $ | 95,592 | 98,827 | 101,558 | 100,054 | |||||||||||
Interest expense | 50,857 | 53,458 | 54,468 | 52,232 | ||||||||||||
Net interest income | 44,735 | 45,369 | 47,090 | 47,822 | ||||||||||||
Provision for loan losses | 2,006 | 2,066 | 2,149 | 2,522 | ||||||||||||
Noninterest income | 10,489 | 11,366 | 5,247 | 15,920 | ||||||||||||
Noninterest expenses | 37,876 | 37,777 | 38,481 | 38,608 | ||||||||||||
Income before income taxes | 15,342 | 16,892 | 11,707 | 22,612 | ||||||||||||
Income taxes | 4,045 | 4,592 | 2,121 | 6,698 | ||||||||||||
Net income | $ | 11,297 | 12,300 | 9,586 | 15,914 | |||||||||||
Basic earnings per share | $ | 0.23 | 0.25 | 0.20 | 0.33 | |||||||||||
Diluted earnings per share | $ | 0.23 | 0.25 | 0.20 | 0.33 |
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Three months ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
2006: | ||||||||||||||||
Interest income | $ | 89,402 | 91,316 | 93,365 | 94,490 | |||||||||||
Interest expense | 43,542 | 46,532 | 49,404 | 51,631 | ||||||||||||
Net interest income | 45,860 | 44,784 | 43,961 | 42,859 | ||||||||||||
Provision for loan losses | 2,099 | 2,067 | 2,237 | 2,077 | ||||||||||||
Noninterest income | 13,965 | 10,207 | 11,372 | 10,482 | ||||||||||||
Noninterest expenses | 35,203 | 34,897 | 35,278 | 38,304 | ||||||||||||
Income before income taxes | 22,523 | 18,027 | 17,818 | 12,960 | ||||||||||||
Income taxes | 6,711 | 5,000 | 4,961 | 3,120 | ||||||||||||
Net income | $ | 15,812 | 13,027 | 12,857 | 9,840 | |||||||||||
Basic earnings per share | $ | 0.32 | 0.26 | 0.26 | 0.20 | |||||||||||
Diluted earnings per share | $ | 0.32 | 0.26 | 0.26 | 0.20 |
(24) | Subsequent events — Plan of Conversion and Reorganization — (Unaudited) | |
The Board of Directors of the MHC, the Company and the Northwest adopted a Plan of Conversion and Reorganization (the “Plan”) on August 27, 2009. Pursuant to the Plan, the MHC will convert from the mutual holding company form of organization to the fully public form. The MHC will be merged into Northwest, and the MHC will no longer exist. Pursuant to the Plan, the Company, which owns 100% of Northwest, also will be succeeded by a new Maryland corporation, named Northwest Bancshares, Inc. As part of the conversion, the MHC’s ownership interest of the Company will be offered for sale in a public offering. The existing publicly held shares of the Company, which represents the remaining ownership interest in the Company, will be exchanged for new shares of common stock of Northwest Bancshares, Inc., the new Maryland corporation. The exchange ratio will ensure that immediately after the conversion and public offering, the public shareholders of the Company will own the same aggregate percentage of Northwest Bancshares, Inc. common stock that they owned immediately prior to that time. When the conversion and public offering are completed, all of the capital stock of Northwest will be owned by Northwest Bancshares, Inc. The Plan provides for the establishment, upon the completion of the reorganization, of a special “liquidation account” for the benefit of certain depositors of Northwest in an amount equal to the greater of the MHC’s ownership interest in the retained earnings of the Company as of the date of the latest balance sheet contained in the prospectus or the retained earnings of Northwest at the time it reorganized into the MHC in 1994. Following the completion of the reorganization, under the rules of the Office of Thrift Supervision, Northwest will not be permitted to pay dividends on its capital stock to Northwest Bancshares, Inc., its sole shareholder, if Northwest’s shareholders’ equity would be reduced below the amount of the liquidation account. In addition, Northwest Bancshares, Inc. intends to establish a charitable foundation in connection with the conversion and contribute to it $1.0 million in cash and a number of shares of common stock with an aggregate value of cash and stock equal to 2% of the shares sold in the offering. |
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Direct costs of the conversion and public offering will be deferred and reduce the proceeds from the shares sold in the public offering. If the conversion and public offering are not completed, all costs will be charged to expense in the period in which the public offering is terminated. No costs have been incurred related to the conversion as of June 30, 2009. |
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