Registration No. 333-31687
As filed with the Securities and Exchange Commission on
October 9, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHWEST BANCORP, INC.
(Exact name of registrant as specified in charter)
Pennsylvania 6712 To be applied for
- -----------------------------------------------------------------
(State or other (Primary SIC No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
Liberty and Second Streets
Warren, Pennsylvania 16365
(814) 726-2140
--------------------------------------------
(Address, including Zip Code, and telephone number,
including area code of Registrant's principal executive offices)
Eric Luse, Esq.
Kenneth R. Lehman, Esq.
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
(202) 274-2000
-----------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale of the
securities to the public:
As soon as practicable after receipt of all regulatory approvals.
If the securities being registered on this form are being offered
in connection with the formation of a holding company and there
is compliance with General Instruction G, check the following
box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class Proposed maximum
of securities to Amount to be offering price Proposed maximum Amt. of
be registered registered per unit offering price reg. fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 7,300,000 $16.255(1) $118,625,000 $35,947
$.10 par value shares
Common Stock, 690,000 $11.70(2) $8,073,000 $ 2,447
$.10 par value shares -------
TOTAL FEE PAID $38,394(3)
(1) Pursuant to Rule 457(f), the registration fee is based upon
the average of the high and low prices of the common stock of
Northwest Savings Bank on July 21, 1997, the date of the
original filing of the Form S-4.
(2) Represents shares underlying options. Such options have an
exercise price of $11.70 per share.
(3) Fee previously paid with original filing on July 21, 1997.
</TABLE>
<PAGE>
[NORTHWEST LOGO]
October 10, 1997
Dear Stockholder:
We cordially invite you to attend the 1997 Annual Meeting of
Stockholders of Northwest Savings Bank (the "Bank"). The Annual
Meeting will be held at the Knights of Columbus Hall, located at
219 2nd Avenue, Warren, Pennsylvania, at 11:00 a.m. (Pennsylvania
time) on November 19, 1997.
The enclosed Notice of Annual Meeting and Proxy
Statement/Prospectus describe the formal business to be
transacted. During the Annual Meeting we will also report on the
operations of the Bank. Directors and officers of the Bank, as
well as a representative of our independent auditors, will be
present to respond to any questions that stockholders may have.
The business to be conducted at the Annual Meeting includes the
election of two directors, and consideration of the proposal
relating to an Agreement and Plan of Reorganization pursuant to
which the Bank will reorganize into a "two-tier" mutual holding
company structure. In addition, stockholders will be requested
to ratify the appointment of KPMG Peat Marwick LLP as auditors
for the Bank's 1998 fiscal year.
The Board of Directors of the Bank has determined that the
matters to be considered at the Annual Meeting are in the best
interest of the Bank and its stockholders. For the reasons set
forth in the Proxy Statement/Prospectus, the Board of Directors
unanimously recommends a vote "FOR" each matter to be considered.
Also enclosed for your review is our 1997 Annual Report to
Stockholders, which serves as the Bank's annual disclosure
statement required by FDIC regulations, and contains detailed
information concerning the activities and operating performance
of the Bank. On behalf of the Board of Directors, we urge you to
sign, date and return the enclosed proxy card as soon as possible
even if you currently plan to attend the Annual Meeting. This
will not prevent you from voting in person, but will assure that
your vote is counted if you are unable to attend the Annual
Meeting.
Sincerely,
John O. Hanna
President and Chief Executive Officer
<PAGE>
NORTHWEST SAVINGS BANK
Liberty and Second Streets
Warren, Pennsylvania 16365-2353
(814) 726-2140
NOTICE OF
1997 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 19, 1997
Notice is hereby given that the 1997 Annual Meeting of
Northwest Savings Bank, (the "Bank") will be held at the Knights
of Columbus Hall, 219 2nd Avenue, Warren, Pennsylvania, on
November 19, 1997 at 11:00 a.m. Pennsylvania time.
A Proxy Card and a Proxy Statement/Prospectus for the
Meeting are enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. The election of two directors of the Bank;
2. The approval of an Agreement and Plan of Reorganization
(the "Plan of Reorganization") providing for the establishment of
Northwest Bancorp, Inc. (the "Stock Holding Company") as a stock
holding company parent. The Stock Holding Company will be
majority owned by Northwest Bancorp, M.H.C. (the "Mutual Holding
Company"), the Bank's mutual holding company. Pursuant to the
Plan of Reorganization: (i) the Bank will become a wholly owned
subsidiary of the Stock Holding Company; (ii) the Stock Holding
Company will become a majority owned subsidiary of the Mutual
Holding Company; and (iii) each outstanding share of common
stock, par value $.10 per share, of the Bank will be converted
into one share of common stock, par value $.10 per share, of the
Stock Holding Company;
3. The ratification of the appointment of KPMG Peat
Marwick LLP as auditors for the Bank for the fiscal year ending
June 30, 1998; and
such other matters as may properly come before the Meeting, or
any adjournments thereof. The Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to
which the Meeting may be adjourned. Stockholders of record at
the close of business on October 3, 1997, are the stockholders
entitled to vote at the Meeting, and any adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY
PROXY GIVEN BY THE STOCKHOLDER MAY BE REVOKED AT ANY TIME BEFORE
IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING WITH THE
SECRETARY OF THE BANK A WRITTEN REVOCATION OR A DULY EXECUTED
PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE
MEETING MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH
MATTER BROUGHT BEFORE THE MEETING. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU
WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE PERSONALLY AT THE MEETING.
By Order of the Board of Directors
Gregory C. LaRocca
Senior Vice President and Corporate
Secretary
Warren, Pennsylvania
October 10, 1997
- -----------------------------------------------------------------
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
- -----------------------------------------------------------------
<PAGE>
INDEX
Page
REVOCATION OF PROXIES 1
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 1
MARKET INFORMATION 2
DIVIDEND POLICY 3
General 3
Dividend Waivers by the Holding Company 3
PROPOSAL I-ELECTION OF DIRECTORS 4
Executive Officers who are not Directors 7
Meetings and Committees of the Board of Directors 7
Ownership Reports by Officers and Directors 8
Compensation Committee Interlocks and Insider
Participation 8
Report of the Board of Directors on Executive
Compensation 8
Performance Graph 9
Executive Compensation 11
Directors' Compensation 12
Employment Agreement 13
Defined Benefit Plan 14
Supplemental Executive Retirement Plan 14
1995 Stock Option Plan 15
Transactions With Certain Related Persons 16
PROPOSAL II-THE APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION 17
Summary 17
Reasons for the Stock Holding Company Reorganization 17
Plan of Reorganization 18
Capitalization 19
The Corry Acquisition 21
Regulatory Capital 21
Effective Date 22
Optional Exchange of Stock Certificates 22
Rights of Dissenting Stockholders 22
Tax Consequences 23
Consequences Under Federal Securities Laws 23
Conditions to the Reorganization 23
Effect of the Reorganization on any Future
Mutual-to-Stock Conversion of the Mutual
Holding Company 24
Effect of the Reorganization on Stock Benefit Plans
of the Bank 24
Amendment, Termination or Waiver 24
Business of the Stock Holding Company 24
Management of the Stock Holding Company 25
Indemnification of Officers and Directors and
Limitation of Liability 25
Comparison of Stockholder Rights and Certain
Anti-Takeover Provisions 28
Regulation of the Stock Holding Company 31
Description of Capital Stock of the Stock Holding
Company 33
<PAGE>
Common Stock 34
Preferred Stock 34
Accounting Treatment 34
Vote Required 35
PROPOSAL III-RATIFICATION OF APPOINTMENT OF AUDITORS 35
STOCKHOLDER PROPOSALS 35
MISCELLANEOUS 35
EXPERTS 36
AVAILABLE INFORMATION 36
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 36
EXHIBIT A--Agreement and Plan of Reorganization
EXHIBIT B--Articles of Incorporation of Northwest Bancorp, Inc.
EXHIBIT C--Bylaws of Northwest Bancorp, Inc.
<PAGE>
Proxy Statement/Prospectus
NORTHWEST SAVINGS BANK
Liberty and Second Streets
Warren, Pennsylvania 16365-2353
(814) 726-2140
1997 ANNUAL MEETING OF STOCKHOLDERS
November 19, 1997
This Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies on behalf of the Board of
Directors of Northwest Savings Bank (the "Bank") to be used at
the 1997 Annual Meeting of Stockholders of Northwest Savings Bank
(the "Meeting"), which will be held at the Knights of Columbus
Hall, 219 2nd Avenue, Warren, Pennsylvania, on November 19, 1997,
at 11:00 a.m., Pennsylvania time, and all adjournments of the
Meeting. The accompanying Notice of Annual Meeting of
Stockholders and this Proxy Statement/Prospectus are first being
mailed to stockholders on or about October 10, 1997.
One of the proposales to be submitted to a vote of
securityholders pursuant to this Proxy Statement/Prospectus
relates to the approval of a Plan of Reorganization that involves
the issuance of shares of common stock. In connection with this
issuance please make note of the following:
THE SECURITIES ISSUED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE
PENNSYLVANIA DEPARTMENT OF BANKING, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY STATE SECURITIES AUTHORITY. NOR HAS ANY SUCH
COMMISSION, OFFICE OR AUTHORITY PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A FEDERAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE COMMON
STOCK IS NOT GUARANTEED BY THE BANK, THE STOCK HOLDING COMPANY,
OR THE MUTUAL HOLDING COMPANY. THERE CAN BE NO ASSURANCE THAT
THE TRADING PRICE OF THE COMMON STOCK OFFERED HEREBY WILL NOT
DECREASE AT ANY TIME.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SEE "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE." THESE DOCUEMTNS ARE
AVAILABLE UPON WRITTEN REQUEST FROM GREGORY C. LAROCCA, CORPORATE
SECRETARY, LIBERTY AND SECOND STREETS, WARREN, PENNSYLVANIA
16365-2353 (TELEPHONE NUMBER 814/726-2140). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT
LEAST FIVE DAYS PRIOR TO THE DATE OF THE ANNUAL MEETING.
<PAGE>
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited
hereby retain the right to revoke them in the manner described
below. Unless so revoked, the shares represented by such proxies
will be voted at the Meeting and all adjournments thereof.
Proxies solicited on behalf of the Board of Directors of the Bank
will be voted in accordance with the directions given thereon.
You must sign and return your Proxy to the Bank in order for your
vote to be counted. Proxies received by the Bank which are
signed, but contain no instructions for voting will be voted
"FOR" the proposals set forth in this Proxy Statement/Prospectus
for consideration at the Meeting.
Proxies may be revoked by sending written notice of
revocation to the Secretary of the Bank, Gregory C. LaRocca, at
the address of the Bank shown above, or by returning a duly
executed proxy bearing a later date. The presence at the Meeting
of any stockholder who had given a proxy shall not revoke such
proxy unless the stockholder delivers his or her ballot in person
at the Meeting or delivers a written revocation to the Secretary
of the Bank prior to the voting of such proxy.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Holders of record of the Bank's common stock, par value $.10
per share (the "Bank Common Stock"), as of the close of business
on October 3, 1997 (the "Record Date") are entitled to one vote
for each share then held. As of the Record Date, there were
23,374,560 shares of Bank Common Stock issued and outstanding,
16,200,000 of which were held by Northwest Bancorp, MHC (the
"Mutual Holding Company"), and 7,174,560 of which were held by
stockholders other than the Holding Company ("Minority
Stockholders"). The presence in person or by proxy of a majority
of the outstanding shares of Bank Common Stock entitled to vote
is necessary to constitute a quorum at the Meeting. Directors
are elected by a plurality of votes cast. The affirmative vote
of two-thirds of the votes eligible to be cast by the Bank's
stockholders, in person or by proxy, is required for approval of
the Plan of Reorganization. Shares represented by all properly
executed proxies received prior to the Meeting and not revoked
prior to exercise will be voted in the manner specified by the
holder thereof. Executed proxies which do not contain voting
instructions will be voted in favor of approval of the Plan of
Reorganization. Abstentions may be specified on the Proxy Card.
Nonvoting shares, abstention and proxies without specified
instructions delivered to brokers by beneficial owners of shares
held in street name by such brokers ("broker non-votes") will not
be counted as votes cast for purposes of determining whether a
majority has been attained and therefore will have no effect of
the vote to approve the Plan of Reorganization. The affirmative
vote of holders of a majority of the total votes present at the
Meeting in person or by proxy, without regard to broker non-
votes, is required for the ratification of KPMG Peat Marwick LLP
as auditors for the fiscal year ending June 30, 1998. Shares as
to which the "Abstain" box has been selected on the proxy card
will be counted as shares present and entitled to vote and will
have the same effect of a vote against the matter. The Mutual
Holding Company intends to vote in favor of all of the items
being presented to a vote of stockholders, and, accordingly
approval of all proposals is assumed.
Persons and groups who beneficially own in excess of 5% of
the Common Stock are required to file certain reports with the
Federal Deposit Insurance Corporation (the "FDIC") regarding such
ownership pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"). The following table sets forth, as of August 1,
1997, the shares of Common Stock beneficially owned by executive
officers and directors as a group and by each person who was the
beneficial owner of more than 5% of the Bank's outstanding shares
of Common Stock.
<TABLE>
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership (1) Outstanding
- -------------------------------------------------------------------------
<S> <C> <C>
Northwest Bancorp, MHC (2) 16,200,000 69.3%
Liberty and Second Streets
Warren, Pennsylvania 16365-2353
All Directors and Executive Officers 536,984 2.3%
as a Group (15 persons) (2)
</TABLE>
<PAGE>
- ----------------------------
(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) The Bank's executive officers and directors are also
executive officers and trustees of Northwest Bancorp, MHC. The
total number of shares beneficially owned by the Mutual Holding
Company and its Trustees and Executive Officers (who are also
Directors and Executive Officers of the Bank) is 16,736,984
shares, or 71.6% of the outstanding shares of Bank Common Stock.
MARKET INFORMATION
The Bank Common Stock is listed on the Nasdaq National
Market under the symbol "NWSB." As of August 1, 1997, the Bank
had eight registered market makers, 4,362 stockholders of record
(excluding the number of persons or entities holding stock in
street name through various brokerage firms), and 23,374,560
shares outstanding. The following table sets forth market price
and dividend information for the Bank Common Stock for each
quarter of the previous two calendar years. All information has
been revised to reflect the Bank's May 22, 1996 two-for-one stock
split.
<TABLE>
Quarter Ended High Low Dividends
------------- ---- --- ---------
<S> <C> <C> <C>
1995
March 31 $ 8-7/8 $ 7-1/2 $.075
June 30 $ 9-7/8 $ 8-3/8 $.075
September 30 $12 $ 9-5/8 $.075
December 31 $13-1/2 $11-3/4 $.075
1996
March 31 $12-3/4 $11-1/8 $.075
June 30 $12-1/2 $11-1/8 $.08
September 30 $12-1/4 $10-3/4 $.08
December 31 $13-3/4 $13 $.08
1997
March 31 $15-5/8 $15 $.08
June 30 $15-3/4 $14-1/4 $.08
</TABLE>
The last trade of the Bank Common Stock on November 12,
1996, the date immediately prior to the Bank's announcement of
its intention to reorganize pursuant to the Plan of
Reorganization, was at a price of $12 per share. The last
trade of Bank Common Stock on September 30, 1997 was at a price
of $25.625 per share.
DIVIDEND POLICY
General
The Bank has paid quarterly cash dividends every quarter
since the completion of its mutual holding company reorganization
and minority stock issuance in November 1994. Although the Stock
Holding Company expects to continue to pay cash dividends in the
same amount per share as the Bank, its principal source of income
will initially consist of dividends from the Bank. Dividends
paid by the Stock Holding Company will be determined by the Stock
Holding Company's Board of Directors and will be based upon its
consolidated financial condition, results of operations, tax
considerations, economic conditions, regulatory restrictions
which affect the payment of dividends by the Bank to the Stock
Holding Company, and other factors. In addition, the Stock
Holding Company's ability to pay dividends is subject to
limitations under Pennsylvania law. There can be no assurance
that dividends will be paid on Holding Company Common Stock or
that, if paid, such dividends will not be reduced or eliminated
in the future. See "Proposal II--Approval of the Agreement and
Plan of Reorganization."
The Stock Holding Company will not be subject to FRB
regulatory restrictions on the payment of dividends to its
stockholders other than with respect to maintaining minimum
levels of capital, although the source of such dividends will be
dependent upon the factors set forth above. The Stock Holding
Company is subject, however, to
<PAGE>
the requirements of Pennsylvania law with respect to the payment
of dividends. See "Proposal II--Approval of the Agreement and
Plan of Reorganization."
Dividend Waivers by the Holding Company
In connection with the FRB's approval of the Bank's
formation of the Mutual Holding Company, the FRB imposed certain
conditions on the waiver by the Mutual Holding Company of
dividends paid on Bank Common Stock. These conditions will
continue to apply to any waiver by the Mutual Holding Company of
dividends paid on Holding Company Common Stock. In particular,
the Mutual Holding Company must obtain prior FRB approval before
it may waive any dividends. The amount of any waived dividends
will not be available for payment to Minority Stockholders and
will be excluded from capital for purposes of calculating
dividends payable to Minority Stockholders. Moreover, the
cumulative amount of waived dividends must be maintained in a
restricted capital account which would be added to any
liquidation account of the Bank, and would not be available for
distribution to Minority Stockholders. The restricted capital
account and liquidation account amounts would not be reflected in
the Bank's financial statements or the notes thereto, but would
be considered as a notational or memorandum account of the Bank,
and would be maintained in accordance with the rules, regulations
and policy of the Office of Thrift Supervision ("OTS") except
that such rules would be administered by the FRB, and any other
rules and regulations adopted by the FRB. As of the date hereof,
the FRB had not given its approval to any waiver, and the Mutual
Holding Company had not waived any dividends paid by the Bank.
The Reorganization is not expected to have an effect on
whether or not the Mutual Holding Company applies to the FRB for
approval to waive dividends. After the Reorganization, if the
Mutual Holding Company decides that it is in its best interest to
waive a particular dividend to be paid by the Stock Holding
Company, and the FRB approves such waiver, then the Stock Holding
Company would pay such dividend only to Minority Stockholders,
and the amount of the dividend waived by the Mutual Holding
Company would be treated in the manner described above. The
Mutual Holding Company's decision as to whether or not to waive a
particular dividend, if such waiver is approved by the FRB, will
depend on a number of factors, including the Mutual Holding
Company's capital needs, the investment alternatives available to
the Mutual Holding Company as compared to those available to the
Bank, and regulatory approvals. Management believes that, after
the Reorganization, the factors considered by the Mutual Holding
Company in deciding whether or not to waive dividends are not
likely to change, except that it will also consider the
investment alternatives available to the Stock Holding Company,
which, after the Reorganization, will include the repurchase of
Holding Company Common Stock. There can be no assurance (i) that
after the Reorganization the Mutual Holding Company will waive
dividends paid by the Stock Holding Company, (ii) that the FRB
will approve any dividend waivers by the Mutual Holding Company
or (iii) of the terms that may be imposed by the FRB on any
dividend waiver.
PROPOSAL I-ELECTION OF DIRECTORS
The Bank's Board of Directors consists of ten members. The
Bank's bylaws provide that approximately one-third of the
directors are to be elected annually. Directors of the Bank are
generally elected to serve for a three-year period or until their
respective successors shall have been elected and shall qualify.
Two directors will be elected at the Meeting and will serve until
their successors have been elected and qualified. The Nominating
Committee has nominated John O. Hanna and Richard L. Carr to
serve as directors for a three year term. Both nominees are
currently members of the Board of Directors.
The table below sets forth certain information regarding the
composition of the Bank's Board of Directors as of June 30, 1997,
including the terms of office of Board members. It is intended
that the proxies solicited on behalf of the Board of Directors
(other than proxies in which the vote is withheld as to the
nominee) will be voted at the Meeting for the election of the
nominees identified below. If the nominee is unable to serve,
the shares represented by all such proxies will be voted for the
election of such substitute as the Board of Directors may
recommend. At this time, the Board of Directors knows of no
reason why the nominees might be unable to serve, if elected.
Except as indicated herein, there are no arrangements or
understandings between the nominees and any other person pursuant
to which such nominees were selected.
<PAGE>
<TABLE>
Shares of
Positions Common Stock
Held in the Director Current Term Beneficially Percent
Name (1) Age Bank Since (2) to Expire Owned (3) Of Class
NOMINEE
<S> <C> <C> <C> <C> <C> <C>
John O. Hanna 65 President, Chief Executive 1970 1997 164,487(4) *
Officer and Director
Richard L. Carr 56 Director 1982 1997 16,412(5) *
DIRECTORS CONTINUING IN OFFICE
William J. Wagner 43 Executive Vice President, 1994 1999 47,107(6) *
Chief Operating Officer
Chief Financial Officer and Director
Director
Robert G. Ferrier 57 Director 1980 1998 25,900(5) *
Richard E. McDowell 53 Director 1972 1998 40,400(5) *
Joseph T. Stadler 65 Director 1970 1998 12,400(5) *
Walter J. Yahn 69 Director 1972 1998 25,258(5) *
Thomas K. Creal, III 58 Director 1982 1999 14,000(5) *
John J. Doyle 69 Director 1970 1999 20,400(5) *
John S. Young 70 Director 1972 1999 23,036(5) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
John M. Blair 61 Senior Vice President- N/A N/A 32,212(7) *
Mortgage Lending
Gregory C. LaRocca 46 Senior Vice President- N/A N/A 26,808(8) *
Administration and
Corporate Secretary
Robert A. Ordiway 49 Senior Vice President- N/A N/A 29,423(8) *
Community Banking
Raymond R. Parry 60 Senior Vice President- N/A N/A 32,692(7) *
Consumer Lending
James E. Vecellio 49 Senior Vice President- N/A N/A 26,449(9) *
Operations
</TABLE>
- -------------------------------
* Less than 1%.
(1) The mailing address for each person listed is Liberty Street
and Second Avenue, Warren, Pennsylvania 16365-2353.
(2) Reflects initial appointment to the Board of Trustees of the
Bank's mutual predecessor. Each director of the Bank is also a
trustee of Northwest Bancorp, MHC, which owns the majority of the
issued and outstanding shares of Bank Common Stock.
(3) See definition of "beneficial ownership" in the table in
"Voting Securities and Principal Holders Thereof."
(4) Includes options to purchase 60,000 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 34,500
restricted shares which had not vested as of the date beneficial
ownership is being determined.
(5) Includes options to purchase 4,400 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 3,600
restricted shares which had not vested as of the date beneficial
ownership is being determined.
(6) Includes options to purchase 16,000 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 9,600
restricted shares which had not vested as of the date beneficial
ownership is being determined.
<PAGE>
(7) Includes options to purchase 8,000 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 6,000
restricted shares which had not vested as of the date beneficial
ownership is being determined.
(8) Includes options to purchase 5,600 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 4,200
restricted shares which had not vested as of the date beneficial
ownership is being determined.
(9) Includes options to purchase 8,800 shares of Bank Common
Stock which are exercisable within 60 days of the date as of
which beneficial ownership is being determined and 6,600
restricted shares which had not vested as of the date beneficial
ownership is being determined.
The principal occupation during the past five years of each
director of the Bank is set forth below. All directors have held
their present positions for five years unless otherwise stated.
John O. Hanna has been employed by the Bank since 1960, and
has been Chief Executive Officer since 1972. Mr. Hanna is also a
director of the Pennsylvania Association of Community Bankers;
the Heritrust Corporation; the Blair Corporation, a mail order
company, and serves as Chairman of the Distribution Committee of
the Warren Foundation. Mr. Hanna is also a Director of Jamestown
Savings Bank, the majority owned subsidiary of the Mutual Holding
Company.
William J. Wagner has been the Chief Financial Officer for
the Bank since 1984 and was named Chief Operating Officer in
1996. Mr. Wagner was appointed Executive Vice President in 1992
and was elected to the Board of Directors in 1994. Mr. Wagner is
a certified public accountant. Mr. Wagner is also a Director of
Jamestown Savings Bank.
Thomas K. Creal, III has been a partner in the architectural
firm of Creal, Hyde & Larson, in Warren, Pennsylvania since 1969.
John J. Doyle has been President of Perry Construction
Company, Erie, Pennsylvania, since 1989.
John S. Young was President and Sales Manager for Young
Brothers Electronics, Inc. from 1953 through 1983, Sales
Representative for Lee Distributing Company from 1983 through
1987, and Sales Agent for Paul C. Nunes Associates from 1987
through 1992, when he retired.
Richard L. Carr served as Superintendent of the Titusville
Area School District, Titusville, Pennsylvania from 1986 until
his retirement in 1996. Since his retirement, he has served as a
consultant to the University of Findlay located in Findlay, Ohio.
<PAGE>
Robert G. Ferrier has been President of Ferrier Hardware,
Inc. since 1957 and President of Drexel Realty, Erie,
Pennsylvania since 1972.
Richard E. McDowell has served as President of the
University of Pittsburgh at Bradford, Bradford, Pennsylvania
since 1970. Dr. McDowell is also a director of Bradford
Educational Foundation, the Blaisdell Foundation, and the
Bradford Regional Medical Center.
Joseph T. Stadler retired in January 1995. Prior to that
time, he served as Vice President-Manufacturing of Superior
Bronze Corporation in Erie, Pennsylvania.
Walter J. Yahn is Chairman of the Board, founder, and Chief
Executive Officer of the Erie Advanced Manufacturing Company,
Erie, Pennsylvania. He has served in this capacity since 1971.
Executive Officers who are not Directors
John M. Blair has been employed by the Bank since 1961, most
recently as Senior Vice President in charge of Mortgage Lending.
Gregory C. LaRocca has been employed by the Bank since 1992,
most recently as Senior Vice President of Administration and
Corporate Secretary. He was previously Chief Executive Officer
of American Federal Savings, which merged with the Bank in March
of 1992.
Robert A. Ordiway has been employed by the Bank since 1975,
most recently as Senior Vice President of Community Banking. Mr.
Ordiway is also a Director of Jamestown Savings Bank.
Raymond R. Parry has been employed by the Bank since 1981,
most recently as Senior Vice President of Consumer Lending and
President of Northwest Consumer Discount Company, a wholly owned
subsidiary of the Bank.
James E. Vecellio has been employed by the Bank since 1977,
most recently as Senior Vice President-Operations.
Meetings and Committees of the Board of Directors
The business of the Bank is conducted at regular and special
meetings of the full Board and its standing committees. The
standing committees consist of the Executive, Audit, Personnel
and Pension, Asset/Liability, Long Range Planning and Community
Reinvestment Committees. The full Board of Directors acts as
Nominating Committee for the Bank. Mr. Hanna, President of the
Bank, is an ex officio member of each of the committees, except
for the Audit Committee. During the fiscal year ended June 30,
1997, the Board of Directors met at 12 regular meetings and 2
special meetings called in accordance with the Bylaws. No member
of the Board or any committee thereof attended less than 75% of
said meetings.
The Executive Committee of the Board of Directors consists
of directors Hanna, who serves as Chairman, Wagner, Creal,
McDowell, Yahn and Stadler, and meets to conduct the business and
affairs of the Bank during the interval between meetings of the
Board. All actions of the Executive Committee are reviewed by
the entire Board; however, the Executive Committee has decision-
making authority as assigned by the Board. The Executive
Committee met 10 times during the fiscal year ended June 30,
1997.
The Audit Committee consists of directors Carr, who serves
as Chairman, Doyle, Young and Stadler. This committee meets with
the internal auditor to review audit programs and the results of
audits of specific areas as well as other regulatory compliance
issues. In addition, the Audit Committee meets with the
independent certified public accountants to review the results of
the annual audit and other related matters. The Audit Committee
met 4 times during the fiscal year ended June 30, 1997.
The Personnel and Pension Committee of the Board of
Directors consists of directors Young, who serves as Chairman,
Hanna, Carr, Creal and Stadler. The committee meets when needed
to review all employment policies and
<PAGE>
the performance and remuneration of the officers and employees of
the Bank, and to review and approve all compensation and benefit
programs implemented by the Bank and all matters relating to
pension plan administration. The committee met 2 times during
the fiscal year ended June 30, 1997.
The Risk Management Committee consists of directors Creal,
Doyle, Hanna, Wagner, Yahn and Young. This committee meets
quarterly to review the maturity and repricing of the Bank's
assets and liabilities in an effort to manage the Bank's interest
rate risk, ensure compliance with the Bank's interest rate risk
policy and review and amend strategies for interest rate risk
management. The committee met 4 times during the fiscal year
ended June 30, 1997. In September 1997, this committee became
the Risk Management Committee.
Other Board committees include the Long Range Planning
Committee, which consists of directors Ferrier, who serves as
Chairman, Hanna, Carr, Doyle, Yahn, and Wagner, and the Community
Reinvestment Committee, which consists of directors Ferrier, who
serves as Chairman, Hanna, Young, Carr and Doyle.
Ownership Reports by Officers and Directors
The Common Stock of the Bank is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). The officers and directors of the Bank and
beneficial owners of greater than 10% of the Bank's Common Stock
("10% beneficial owners") are required to file reports on Forms
F-7, F-8 and F-8A with the FDIC disclosing beneficial ownership
and changes in beneficial ownership of the Common Stock. FDIC
rules require disclosure in the Bank's Proxy Statement/Prospectus
and Annual Report on Form F-2 of the failure of an officer,
director or 10% beneficial owner of the Bank's Common Stock to
file a Form F-7, F-8 or F-8A on a timely basis. Based on the
Bank's review of such ownership reports, Mr. Vecellio failed to
file on a timely basis one report relating to one transaction
involving the purchase by an affiliate of 1,000 shares of Bank
common stock, and no other officer, director or 10% beneficial
owner of the Bank failed to file such ownership reports on a
timely basis for the fiscal year ended June 30, 1997.
Compensation Committee Interlocks and Insider Participation
The Bank's Personnel and Pension Committee determines the
salaries to be paid each year to the officers of the Bank. The
Personnel and Pension Committee consists of directors Young, who
serves as Chairman, Hanna, Carr, Creal and Stadler. Mr. Hanna is
also President and Chief Executive Officer of the Bank. The Bank
leases approximately 13,000 square feet of office space from Mr.
Hanna at an annual rent of $47,600. The leasing value of the
property was appraised by two outside appraisers at the time the
Bank and Mr. Hanna entered into the lease. The Federal Home Loan
Bank Board (the Bank's principal federal regulator at such time)
reviewed the terms of the lease and did not object to the lease
arrangement.
Report of the Board of Directors on Executive Compensation
Under rules established by the Securities and Exchange
Commission, as administered by the FDIC, the Bank is required to
provide certain data and information in regard to the
compensation and benefits provided to its Chief Executive Officer
and other executive officers. The disclosure requirements for
the Chief Executive Officer and other executive officers include
the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this
requirement, the Bank's Personnel and Pension Committee, has
prepared the following report for inclusion in this Proxy
Statement/Prospectus.
The Personnel and Pension Committee annually reviews the
performance of the Chief Executive Officer and other executive
officers, and approves changes to base compensation as well as
the level of bonus, if any, to be awarded to executive officers
other than Mr. Hanna. Mr. Hanna's compensation is adjusted
annually through 1998 by a formula fixed by the terms of his
employment agreement. In determining whether the base salary of
other executive officers should be adjusted, the Bank's Personnel
and Pension Committee takes into account individual performance,
performance of the Bank, the size of the Bank and the complexity
of its operations, and information regarding compensation paid to
executives performing similar duties for financial institutions
in the Bank's market area.
<PAGE>
While the Personnel and Pension Committee does not use
strict numerical formulas to determine changes in compensation
and while it weighs a variety of different factors in its
deliberations, it has emphasized and will continue to emphasize
earnings, profitability, capital position and income level, and
return on average assets as factors in setting the compensation.
Other non-quantitative factors considered by the Bank's Personnel
and Pension Committee in fiscal 1997 included general management
oversight of the Bank, the quality of communication with the
Personnel and Pension Committee, and the productivity of
employees. Finally, the Personnel and Pension Committee
considered the standing of the Bank with customers and the
community, as evidenced by the level of customer/community
complaints and compliments. While each of the quantitative and
non-quantitative factors described above was considered by the
Personnel and Pension Committee, such factors were not assigned a
specific weight in evaluating the performance of the Bank's
executives. Rather, all factors were considered, and based upon
the effectiveness of such officers in addressing each of the
factors, and the range of compensation paid to officers of peer
institutions, the Personnel and Pension Committee approved salary
increases for the Bank's three executive officers not covered by
an employment agreement.
This report has been provided by the Personnel and Pension
Committee consisting of directors John S. Young, Chairman, and
John O. Hanna, John J. Carr, Thomas K. Creal, III, and Joseph T.
Stadler.
Performance Graph
Set forth hereunder is a performance graph comparing (a) the
cumulative total return on the Bank's Common Stock for the period
beginning with the last trade of the Bank's stock on November 7,
1994, or $9.00 per share (as adjusted), as reported by the Nasdaq
National Market, through June 30, 1997, (b) the cumulative total
return on stocks included in the Nasdaq Bank Index over such
period, and (c) the cumulative total return on stocks included in
the Nasdaq Composite Index over such period. Cumulative return
assumes the reinvestment of dividends.
There can be no assurance that the Bank's stock performance
will continue in the future with the same or similar trend
depicted in the graph. The Bank will not make or endorse any
predictions as to future stock performance.
<PAGE>
Cumulative Return on the Bank's Common Stock
<TABLE>
11/7/94 6/39/95 6/39/96 6/30/97
<S> <C> <C> <C> <C>
Nasdaq Composite Index 100 123 158 193
Nasdaq Bank Index 100 118 154 241
Northwest Savings Bank 100 109 130 184
</TABLE>
<PAGE>
Executive Compensation
The following table sets forth for the fiscal years ended
June 30, 1997, 1996, and 1995, certain information as to the
total remuneration paid by the Bank to the President and Chief
Executive Officer, and Executive Vice President and Chief
Financial Officer of the Bank, and for the fiscal year ended June
30, 1997 certain information is to the total renumeration paid by
the Bank to the five most highly compensated executive officers
other than the Chief Executive Officer and the Executive Vice
President ("Named Executive Officers").<PAGE>
<TABLE>
Long-Term Compensation
Annual Compensation Awards Payouts
Restricted
Year Other Annual Stock Options/ LTIP All Other
Name and Ended Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position 6/30 ($) ($) ($)(1) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John O. Hanna 1997 $399,984 $107,990 $ --- $ --- --- --- $40,266
President and Chief 1996 374,819 101,500 --- 58,000(5) 150,000(6) --- 43,137
Executive Officer 1995 374,800 98,500 --- --- --- --- 39,700
William J. Wagner 1997 171,826 41,966 --- --- --- --- 20,721
Executive Vice 1996 146,615 35,830 --- 16,000(5) 40,000(6) --- 20,177
President, Chief 1995 125,000 35,800 --- --- --- --- 20,800
Operating Officer
and Chief Financial
Officer
John M. Blair 1997 87,966 18,673 --- --- --- --- 10,228
Senior Vice President 1996
Mortgage Lending(7) 1995
Gregory C. LaRocca 1997 87,968 18,698 --- --- --- --- 10,269
Senior Vice President 1996
and Corporate 1995
Secretary (7)
Robert A. Ordiway 1997 87,915 17,345 --- --- --- --- 9,722
Senior Vice President 1996
Community Banking (7) 1995
Raymond R. Parry 1997 87,956 18,623 --- --- --- --- 10,172
Senior Vice President 1996
Consumer Lending (7) 1995
James E. Vecellio 1997 92,471 19,736 --- --- --- --- 11,131
Senior Vice President 1996
Operations (7) 1995
/TABLE
<PAGE>
(1) No other executive officer received salary and bonuses that
in the aggregate exceeded $100,000.
(2) Includes amounts deferred at the election of named officers
pursuant to the Northwest Retirement Savings Plan (the "401(k)
Plan").
(3) Adjusted for the May 22, 1996, two-for-one stock split.
(4) Includes shares awarded pursuant to the Bank's employee
stock ownership plan, amounts paid for life insurance premiums,
and Bank contributions to the 401(k) Plan. For the fiscal year
ended June 30, 1996, there were no perquisites exceeding the
lesser of $50,000 or 10% of the individual's total salary and
bonus for the year.
(5) Includes shares of common stock awarded pursuant to the
Northwest Savings Bank and Northwest Bancorp, MHC 1995
Recognition and Retention Plan for Employees and Outside
Directors (the "Recognition Plan"), which shares vest in five
annual installments. Dividends on such shares are paid to the
recipient. The value of such shares was determined by multiplying
the number of shares awarded by the last sale price of Bank
Common Stock on the day prior to the award. At June 30, 1997,
Messers. Hanna, Wagner, Blair, LaRocca, Ordiway, Parry and
Vecellio held 34,500, 9,600, 6,000, 4,200, 4,200, 6,000 and 6,600
shares of Bank Common Stock, respectively, that remain subject to
restrictions under the Recognition Plan. The fair market value
of such restricted stock on such date (based on the price of the
last sale reported on the Nasdaq National Market) was
approximately $534,750, $148,800, $93,000, $65,100, $65,100,
$93,000 and $102,300, respectively.
(6) Includes options awarded pursuant to the Northwest Savings
Bank and Northwest Bancorp, MHC 1995 Stock Option Plan. The
options vest in five equal annual installments, and the exercise
price of such options is $11.75.
<PAGE>
(7) No disclosure is provided for the fiscal years ended June
30, 1996 and 1995, as such executive officer's total annual
salary and bonus did not exceed $100,000.
Directors' Compensation
As of July 1, 1997, nonemployee directors are paid an annual
retainer of $7,800 plus $900 per Board meeting attended or $800
if participating via conference call. Nonemployee members of the
Executive, Audit, Asset/Liability, Long Range Planning, Personnel
and Pension, and Community Reinvestment Committees are paid $500
per meeting attended, or $400 per meeting if such committee
meeting is held on a day of a regularly scheduled Board meeting
or if the meeting is held via conference call.
The Bank sponsors a non-tax qualified deferred compensation
plan for directors (the "Deferred Compensation Plan") that
enables a director to elect to defer all or a portion of his
directors' fees. The amounts deferred are credited with interest
at the rate paid on the Bank's 5 year Certificate of Deposit.
Deferred amounts are payable upon retirement of a director on or
after attaining age 59-1/2 but no later than age 72, in the form
of a lump sum or in five or ten equal installments. Payments to
a director, or to his designated beneficiary, may also be made
from the Deferred Compensation Plan upon the director's death,
total and permanent disability, or termination of service from
the Board. Participants in the Deferred Compensation Plan would
not recognize taxable income with respect to the Deferred
Compensation Plan benefits until the assets are actually
distributed.
The Bank maintains a retirement plan for outside directors
(the "Directors Plan"). Directors who have served the Board for
five years or more and are not Bank employees are eligible to
receive benefits under the Directors Plan. Upon a director's
retirement from the Board on or after five years of service and
the attainment of age 60, the director is entitled to receive a
retirement benefit equal to sixty percent of the annual retainer
paid immediately prior to retirement plus sixty percent of the
board meeting fees paid for the director's attendance at board
meetings at the annual rate which was in effect immediately prior
to his retirement. If a director retires after five years or
more of service but before attaining age 60, the director is
entitled to one-half of the benefits otherwise available to him.
Retirement benefits commence on the first day of the calendar
quarter following the director's attainment of age 65, or if
retirement occurs later, on the first day of the calendar quarter
following retirement. Such retirement benefits are paid for a
period equal to the lesser of the number of a director's
completed full years of service, his life, or ten years. No
survivor benefits are payable under the Directors Plan. During
the fiscal year ended June 30, 1997, the expense to the Bank of
the Directors Plan was $47,982.
1995 Stock Option Plan. During the fiscal year ended June
30, 1996, the Bank adopted the Northwest Savings Bank and
Northwest Bancorp, MHC 1995 Stock Option Plan (the "1995 Stock
Option Plan"). The 1995 Stock Option Plan was approved by a
majority of the Bank's Minority Stockholders present at the 1995
Annual Meeting. The 1995 Stock Option Plan is a
self-administering plan that granted to nonemployee directors
Ferrier, McDowell, Stadler, Yahn, Creal, Doyle, Young, Carr and
three former directors nonstatutory options for each such
director to purchase 11,000 (split adjusted) shares of Common
Stock. Such shares vest in five equal annual installments over a
five year period beginning on December 20, 1995. The 1995 Stock
Option Plan further provides that each new non-employee director
shall be granted options to purchase 500 shares of Common Stock
to the extent options remain available in, or are returned to,
the 1995 Stock Option Plan. The exercise price per share for
each option is equal to the fair market value of the Common Stock
on the date the option was granted, or in the case of all options
awarded during the fiscal year ended June 30, 1996, $11.75 per
share (as adjusted). All options granted under the 1995 Stock
Option Plan expire upon the earlier of ten years following the
date of grant or one year following the date the optionee ceases
to be a director. However, in the event of termination of service
or employment due to death, disability, normal retirement or a
change of control of the Bank, nonstatutory stock options may be
exercised for up to five years. Under any of the foregoing
circumstances, incentive stock options are exercisable for up to
five years, but must be exercised within three months of
termination in order for the optionee to receive incentive tax
treatment (except in the event of disability or death, in which
cases incentive stock options may be exercised within 1 year and
5 years, respectively).
1995 Directors Recognition and Retention Plan. During the
fiscal year ended June 30, 1996, the Bank adopted the Northwest
Savings Bank and Northwest Bancorp, MHC Recognition and Retention
Plan for Employees and Outside Directors (the "1995 Recognition
Plan"). The 1995 Recognition Plan was approved by a majority of
Minority
<PAGE>
Stockholders present at the 1995 Annual Meeting. During the
fiscal year ended June 30, 1996, the Bank contributed sufficient
funds to the 1995 Recognition Plan to enable it to purchase
138,000 shares of Common Stock from the Bank, a total of 66,000
(split adjusted) shares of which were awarded to nonemployee
directors Ferrier, McDowell, Stadler, Yahn, Creal, Doyle, Young,
Carr and three former directors. Such awards of Common Stock
("Restricted Stock") are restricted by the terms of the 1995
Recognition Plan. Participants earn (become vested in) shares of
Restricted Stock covered by an award, and all restrictions lapse
in five equal annual installments, commencing on either December
20, 1995 or January 5, 1996. Awards become fully vested upon a
participant's disability, death, or following termination of
service in connection with a change in control of the Bank.
Unvested shares of Restricted Stock are forfeited by a director
who is not an employee upon failure to seek reelection, failure
to be reelected, or resignation from the Board. Prior to
vesting, recipients of awards under the 1995 Recognition Plan
receives dividends and may vote the shares of Restricted Stock
allocated to them. The Committee will vote shares as to which no
instructions are received and any unallocated shares in the same
proportion as allocated shares for which instructions are given.
Employment Agreement
As of November 1993 the Bank renewed a five-year employment
agreement with John O. Hanna, President and Chief Executive
Officer of the Bank, which was originally entered into in
November 1985. The current employment agreement provides for a
five-year term, and continues through November 1998. The
agreement provides that the base salary of Mr. Hanna shall be at
the top quartile of compensation of executives in the Bank's peer
group. As of June 30, 1997, Mr. Hanna's base salary was
$400,000. In addition to the base salary, the employment
agreement provides that Mr. Hanna is to receive in lieu of the
group life insurance benefit, a life insurance benefit equal to
$1.0 million plus one year's annual salary. Under the employment
agreement, Mr. Hanna is also entitled to certain perquisites and
other personal benefits. In the event of his death, the
employment agreement requires the Bank to continue to pay Mr.
Hanna's salary to his beneficiaries for one year, and continue
medical benefits for his spouse for her lifetime. A benefit will
also be paid under the employment agreement in the event of Mr.
Hanna's disability prior to retirement.
The employment agreement provides for termination by the
Bank for just cause at any time, and in such event, no
compensation or other benefits would be due under the agreement.
The Bank may terminate his employment for reasons other than just
cause upon twelve months written notice to the executive. In
such event, Mr. Hanna would be entitled to 100% of his annual
compensation for the two-year period following termination,
computed in accordance with the formula used to increase the
executive's salary each year during employment (as determined in
accordance with the Compensation Survey); 60% of his compensation
for the third year following termination; and 40% of his
compensation for the fourth year following such termination. In
the event of a reorganization, merger, or consolidation, as
defined in the employment agreement, the executive is entitled to
terminate his employment upon twelve months written notice to the
Bank, and receive a lump-sum payment equal to three times his
annual compensation. Payments under the employment agreement are
limited so that they will not constitute an excess parachute
payment under Section 280G of the Internal Revenue Code of 1986.
Under the employment agreement, as amended, on completion of
30 years' service after age 60 but before November 30, 1997, Mr.
Hanna may terminate his employment upon 12 months notice to the
Bank. In such event, he is entitled to receive his present
salary and all benefits (other than bonuses) for two years
following termination. The employment agreement provides for a
reduction or complete elimination of benefits should the
executive commence employment for another employer during the
two-year period after termination of employment with the Bank.
Defined Benefit Plan
The Bank maintains a noncontributory defined benefit plan
("Retirement Plan"). All employees age 21 or older who have
worked at the Bank for a period of one year and have been
credited with 1,000 or more hours of employment with the Bank
during the year are eligible to accrue benefits under the
Retirement Plan. The Bank annually contributes an amount to the
Retirement Plan necessary to satisfy the actuarially determined
minimum funding requirements in accordance with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). At
June 30, 1997, the Retirement Plan fully met its funding
requirements under Section 412 of the Code.
<PAGE>
At the normal retirement age of 65, the plan is designed to
provide a life annuity for a minimum payment period of ten years.
The retirement benefit provided is an amount equal to 1.6% of a
participant's average monthly salary based on the average of the
five consecutive years of the last ten calendar years providing
the highest monthly average multiplied by the participant's years
of service to the normal retirement date (up to a maximum of 25
years) plus: (i) .6% of such average monthly compensation in
excess of one-twelfth of covered compensation (as defined in the
plan) multiplied by the participant's total number of years of
service up to a maximum of 25 years, and (ii) for participants
who retire on or after June 1, 1995, .6% of such participant's
average monthly compensation multiplied by the participant's
number of years of service between 25 years and 35 years.
Retirement benefits are also payable upon retirement due to early
and late retirement, disability or death. A reduced benefit is
payable upon early retirement at or after age 55 and the
completion of fifteen years of service with the Bank (or after 25
years of service and no minimum age). Upon termination of
employment other than as specified above, a participant who was
employed by the Bank for a minimum of five years is eligible to
receive his or her accrued benefit commencing, generally, on such
participant's normal retirement date. Benefits under the
Retirement Plan are payable in various annuity forms. For the
plan year ended December 31, 1996, the Bank made a contribution
to the Retirement Plan of $1,000,900.
The following table indicates the annual retirement benefit
that would be payable under the Retirement Plan upon retirement
at age 65 in calendar year 1996, expressed in the form of a
single life annuity for the final average salary and benefit
service classifications specified below.
<TABLE>
Average Years of Service and Annual Benefit Payable at Retirement
Compensation 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$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 $19,821 $26,428 $33,035 $35,285 $37,535 $37,535
$100,000 $28,071 $37,428 $46,785 $49,785 $52,785 $52,785
$125,000 $36,321 $48,428 $60,535 $64,285 $68,035 $68,035
$150,000 plus $44,571 $59,428 $74,285 $78,785 $83,285 $83,285
</TABLE>
As of the plan year ended December 31, 1996, Messers. Hanna,
Wagner, Blair, LaRocca, Ordiway, Parry and Vecellio had 35, 14,
35, 12, 23, 16 and 21 years of credited service (i.e., benefit
service), respectively.
The accrued annual pension benefit as of June 30, 1997 for
Messers. Hanna, Wagner, Blair, LaRocca, Ordiway, Parry and
Vecellio are $109,980, $36,612, $36,825, $12,847, $22,962,
$21,398 and $28,830, respectively. Mr. Hanna's benefit is
greater than indicated in the table above because his pre-1994
average monthly compensation is grandfathered and not limited by
the $150,000 cap on compensation which became effective beginning
January 1, 1994.
Supplemental Executive Retirement Plan
The Bank has adopted a non-qualified supplemental executive
retirement plan ("SERP") for certain executives of the Bank to
compensate those executive participants in the Bank's Retirement
Plan whose benefits are limited by Section 415 of the Code (which
caps annual benefits at $120,000 in 1996) or Section 401(a)(17)
of the Code (which caps compensation at $150,000 beginning in
1994). The SERP provides the designated executives with
retirement benefits generally equal to the difference between the
benefit that would be available under the Retirement Plan but for
the limitations imposed by Code Sections 401(a)(17) and 415 and
that which is actually funded as a result of the limitations.
Pre-retirement survivor benefits are provided for designated
beneficiaries of participants who do not survive until retirement
in an amount equal to the lump sum actuarial equivalent of the
participant's accrued benefit under the SERP. Pre-retirement
benefits are payable in 120 equal monthly installments. The SERP
is considered an unfunded plan for tax and ERISA purposes. All
obligations arising under the SERP are payable from the general
assets of the Bank.
<PAGE>
The benefits paid under the SERP supplement the benefits
paid by the Retirement Plan. The following table indicates the
expected aggregate annual retirement benefit payable from the
Retirement Plan and SERP to SERP participants, expressed in the
form of a single life annuity with a 10-year guaranteed payment
for the final average salary and benefit service classifications
specified below:
<TABLE>
Average Years of Service and Annual Benefit Payable at Retirement
Compensation 15 20 25 30 35 40
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 28,071 $ 37,428 $ 46,785 $ 49,785 $ 52,785 $ 52,785
$125,000 $ 36,321 $ 48,428 $ 60,535 $ 64,285 $ 68,035 $ 68,035
$150,000 $ 44,571 $ 59,428 $ 74,285 $ 78,785 $ 83,285 $ 83,285
$175,000 $ 52,821 $ 70,428 $ 88,035 $ 93,285 $ 98,535 $ 98,535
$200,000 $ 61,071 $ 81,428 $101,785 $107,785 $113,785 $113,785
<PAGE>
$250,000 $ 77,571 $103,428 $129,285 $136,785 $144,285 $144,285
$300,000 $ 94,071 $125,428 $156,785 $165,785 $174,785 $174,785
$350,000 $110,571 $147,428 $184,285 $194,785 $205,285 $205,285
$400,000 $127,071 $169,428 $211,785 $223,785 $235,785 $235,785
</TABLE>
At June 30, 1997, John O. Hanna had 37 years of credited
service under the SERP. Mr. Wagner is a new participant in the
SERP because his income exceeded the amounts permitted under
Sections 401(a)(17) of the Code. The Bank's pension cost
attributable to the SERP was approximately $67,624 for the fiscal
year ended June 30, 1997.
1995 Stock Option Plan
During the fiscal year ended June 30, 1996, the Bank adopted
the Northwest Savings Bank and Northwest Bancorp, MHC 1995 Stock
Option Plan (the "1995 Stock Option Plan"). The 1995 Stock
Option Plan was approved at the 1995 Annual Meeting by the
majority of the Bank's Minority Stockholders present at such
meeting. No options were granted to the Named Executive Officers
under the 1995 Stock Option Plan during the fiscal year ended
June 30, 1997. Set forth below is certain information concerning
exercised and unexercisable options during the fiscal year ended
June 30, 1997, by the Named Executive Officers.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Unexercised Value of Unexercised In-
Shares Acquired Value Options at The-Money Optins at
Name Upon Exercise Realized Fiscal Year-End(1) Fiscal Year-End(2)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
John O. Hanna --- --- 60,000,90,000 $225,000/$337,500
William J. Wagner --- --- 16,000/24,000 $60,000/$90,000
John M. Blair --- --- 8,000/12,000 $30,000/$45,000
Gregory C. LaRocca --- --- 5,600/8,400 $21,000/$31,500
Raymond R. Parry --- --- 8,000/12,000 $30,000/$45,000
Robert A. Ordiway --- --- 5,600/8,400 $21,000/$31,500
James E. Vecellio --- --- 8,800/13,200 $33,000/$49,500
- --------------------
(1) Adjusted for the May 22, 1996, two-for-one stock split.
(2) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Bank Common Stock that would
be received upon exercise, assuming such exercise occurred on June 30, 1997, at
which date the last sale of the Bank Common Stock as quoted on the Nasdaq
National Market was at $15.50
</TABLE>
<PAGE>
Transactions With Certain Related Persons
Federal law requires that all loans or extensions of credit
to executive officers and directors must be made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the
general public and must not involve more than the normal risk of
repayment or present other unfavorable features. However, recent
regulations now permit executive officers and directors to
receive the same terms through benefit or compensation plans that
are widely available to other employees, as long as the director
or executive officer is not given preferential treatment compared
to the other participating employees. The Bank's policy is that
loans made to a director in excess of $100,000 for non-
residential purposes must be approved in advance by a majority of
the disinterested members of the Board of Directors. Loans to
executive officers must be approved by the full Board of
Directors regardless of amounts. In addition, loans to the
Bank's current directors, principal officers, nominees for
election as directors, securityholders known by the Bank to own
more than 5% of the Bank's outstanding common stock, or
associates of such persons (together, "specified persons"), are
also made in the ordinary course of business on substantially the
same terms as those prevailing at the time for comparable
transactions with other than specified persons, and do not
involve more than a normal risk of collectibility or present
other unfavorable features. The aggregate amount of extensions
of credit outstanding at any time during the fiscal year ended
June 30, 1996, to a specified person did not exceed $5.0 million.
In addition, the Bank leases approximately 13,000 square
feet of office space from Mr. Hanna at an annual rent of $47,600.
The leasing value of the property was appraised by two outside
appraisers at the time the Bank and Mr. Hanna entered into the
lease. The FHLBB (the Bank's principal federal regulator at such
time) reviewed the terms of the lease and did not object to the
lease arrangement.
The Bank intends that, except as described above, all
transactions between the Bank and its executive officers,
directors, holders of 10% or more of the shares of any class of
its common stock and affiliates thereof, will contain terms no
less favorable to the Bank than could have been obtained by it in
arms-length negotiations with unaffiliated persons and will be
approved by a majority of independent outside directors of the
Bank not having any interest in the transaction.
PROPOSAL II-THE APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION
Summary
The formation of the Stock Holding Company will be
accomplished under the Plan of Reorganization, pursuant to which
the Bank will become a wholly owned subsidiary of the Stock
Holding Company, a newly formed Pennsylvania stock corporation
which will be majority owned by the Mutual Holding Company.
Under the terms of the proposed reorganization (the
"Reorganization"), each outstanding share of Bank Common Stock
will be converted into one share of Holding Company Common Stock,
and the holders of Bank Common Stock will become the holders of
all of the outstanding Holding Company Common Stock.
Accordingly, as a result of the Reorganization, the Minority
Stockholders will become minority stockholders of the Stock
Holding Company. The Stock Holding Company was incorporated in
April 1997 as a wholly owned subsidiary of the Bank, solely for
the purpose of becoming a bank holding company and has no prior
operating history. The Reorganization will have no impact on the
operations of the Bank and the Mutual Holding Company. The Bank
will continue its operations at the same locations, with the same
management, and subject to all the rights, obligations and
liabilities of the Bank existing immediately prior to the
Reorganization.
Reasons for the Stock Holding Company Reorganization
The Board of Directors of the Bank believes that the
formation of the Stock Holding Company as a subsidiary of the
Mutual Holding Company will be in the best interests of
stockholders and will offer greater operating flexibility than is
currently available to the Bank in its existing mutual holding
company structure. The Mutual Holding Company does not operate
as a traditional holding company at the present time because it
is a mutual organization and represents only the mutual ownership
interest in the Bank. Establishing the Stock Holding Company as
a subsidiary of the Mutual Holding Company will permit the Stock
Holding Company to conduct activities and make investments for
the benefit of all stockholders. It will also provide greater
flexibility to structure and complete
<PAGE>
acquisitions of other financial institutions, repurchase shares
of Holding Company Common Stock as market conditions permit, and
diversify the Stock Holding Company's business activities.
Enhanced Ability to Invest Through the Stock Holding
Company. Under the existing mutual holding company structure the
Mutual Holding Company cannot make investments in other financial
institutions or business enterprises for the benefit of all
stockholders of the Bank, and the Bank itself is limited by law
or regulation in its permissible investment activities. For
example, if the Mutual Holding Company invests in 5% of the
common stock of another bank or thrift holding company, any gain
on such investment would accrue only to the Mutual Holding
Company, not to Minority Stockholders. The Reorganization will
permit the entity that issues stock (i.e. the Stock Holding
Company) to make investments, diversify business activities, or
acquire other financial institutions, for the benefit of all
stockholders.
Facilitate Mergers and Acquisitions. The Reorganization
will also facilitate the approval and completion of mergers and
acquisitions since the Stock Holding Company, acting as the sole
stockholder of the Bank, will be able to approve mergers and
acquisitions involving the Bank. This is consistent with the way
other stock holding companies are able to approve mergers of
their bank or savings institution subsidiaries. Moreover, the
Reorganization will enable the Stock Holding Company to acquire
other financial institutions and to operate them as separate
subsidiaries for the benefit of all stockholders of the Stock
Holding Company.
Stock Repurchases. The Reorganization will enable the Stock
Holding Company to repurchase Stock Holding Company Common Stock
which, particularly in recent years, has been an important, if
not essential, means for banks and savings institutions to
enhance shareholder value and invest capital resources.
Historically, the Bank has used the percentage of taxable income
method for establishing its bad debt reserves for tax purposes.
Federal tax laws generally require that thrift institutions
recapture into income and pay the tax on their excess bad debt
reserves in the event of certain distributions and redemptions,
such as stock repurchases. Accordingly, if the Bank were to
repurchase any of its outstanding shares of common stock, it
would cause recapture of all or part of its pre-1988 excess tax
bad debt reserves. Since entities, such as the Stock Holding
Company, that have not used the percentage of taxable income
method for computing bad debt reserves are not subject to
recapture, the Stock Holding Company will be permitted to
repurchase Holding Company Common Stock without causing any
recapture of the Bank's tax bad debt reserves. The ability to
repurchase Holding Company Common Stock is an important means of
enhancing stockholder value and investing capital resources. See
"Regulation of the Stock Holding Company-Repurchases of Holding
Company Common Stock."
Stock Holding Company Powers. The Stock Holding Company
would be permitted to engage in the activities that are
permissible for bank holding companies under the Bank Holding
Company Act (i.e. activities that are closely related to banking)
these include several activities in which the Bank is not
permitted to engage, such as investing in certain equity
securities and holding other savings banks as subsidiaries. See
"-Stock Holding Company Regulation."
Although the Reorganization will enable the Stock Holding
Company's stockholders to share in the rewards of the increased
operating flexibility, stockholders should also consider that the
Stock Holding Company's stockholders will also bear the risk that
the transactions that are facilitated by the increased operating
flexibility may not prove to be advantageous to the Stock Holding
Company and its stockholders.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED
THE REORGANIZATION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE PLAN OF REORGANIZATION.
Plan of Reorganization
The Reorganization will be accomplished under the Plan of
Reorganization, which is attached as Exhibit A hereto and is
incorporated herein by reference. The following discussion is
qualified in its entirety by reference to the Plan of
Reorganization. The Plan of Reorganization was unanimously
approved by the Board of Directors on May 15, 1996.
The Reorganization and the establishment of the Stock
Holding Company will be accomplished as follows: (i) the Stock
Holding Company has been organized as a wholly owned subsidiary
of the Bank; (ii) the Stock Holding
<PAGE>
Company will organize an interim Pennsylvania stock savings bank
("Interim") as a wholly owned subsidiary; (iii) Interim will
merge into the Bank, with the Bank as the surviving corporation;
and (iv) in connection with the merger in step (iii) above, all
of the issued and outstanding shares of Holding Company Common
Stock held by the Bank prior to the Reorganization will be
canceled, all of the issued and outstanding shares of Bank Common
Stock will be converted into and become an equal number of shares
of Holding Company Common Stock, and all of the issued and
outstanding shares of Interim, which are held by the Stock
Holding Company, will automatically be converted by operation of
law into common stock of the Bank. As a result of the steps
described above, the Bank will become the wholly owned subsidiary
of the Stock Holding Company, the Stock Holding Company will
become the majority owned subsidiary of the Mutual Holding
Company, and Minority Stockholders will become minority
stockholders of the Stock Holding Company.
The following diagram sets forth the Bank's current mutual
holding company structure:
- -------------------------
| Northwest Bancorp, |
| M.H.C. |
| (69.3% of Bank |
| Common Stock) |
- -------------------------|
|
|
|
- ------------------------- -------------------
| Northwest Savings | | Minority |
| Bank | | Shareholders |
| |-------------- | (30.7% of Bank |
| | | Common Stock) |
- -------------------------| -------------------|
The following diagram sets forth the Bank's proposed mutual
holding company structure following completion of the
Reorganization:
- -------------------------
| Northwest Bancorp, |
| M.H.C. |
| (69.3% of Holding |
| Company Common Stock) |
- -------------------------|
|
|
|
- ------------------------- -------------------
| Northwest Bancorp, Inc.| | |
| | | Minority |
| | | Shareholders |
| |-------------- |(30.7% of Holding |
| | | Company Common |
| | | Stock) |
- -------------------------| -------------------|
|
|100% Owned
|
- -------------------------
| Northwest Savings |
| Bank |
- -------------------------|
Capitalization
The Board of Directors of the Bank presently intends to
capitalize the Stock Holding Company with up to $10.0 million,
subject to the receipt of any required regulatory approvals. The
Stock Holding Company is being capitalized in such amount so that
it will be in a position to take advantage of investment
opportunities as they arise from time to time. These
opportunities may include investments in equity securities,
acquisitions of other financial institutions and repurchases of
shares of Holding Company Common Stock.
<PAGE>
The $10.0 million contributed to the Stock Holding Company
will reduce the Bank's capital in a like amount, although the
Stock Holding Company's consolidated total stockholders' equity
immediately subsequent the Reorganization will be equal to the
Bank's consolidated total stockholders' equity immediately prior
to the Reorganization. The following table sets forth the
historical capitalization of the Bank and the pro forma
capitalization of the Bank and the Stock Holding Company as of
June 30, 1997.
Set forth below is the historical and pro forma
capitalization of the Bank as of June 30, 1997 showing the
effects of the Reorganization upon the Bank.
<TABLE>
Pro Forma
Consolidated
Historical Pro Forma Capitalization
Capitalization Capitalization of Stock Holding
of Bank of Bank Company
(In Thousands)
<S> <C> <C> <C>
Liabilities:
Deposits $1,640,815 $1,640,815 $1,640,815
Borrowed funds 223,458 223,458 223,458
Other liabilities 28,596 28,596 28,596
Total liabilities $1,892,869 $1,892,869 $1,892,869
Capital Stock:
Common Stock, par value
$.10 per share (1) $ 2,338 $ - $ 2,338
Paid in capital 67,854 67,854 77,854
Retained earnings 131,423 121,423 121,423
Net unrealized gain
(loss) on securities
available for sale,
net of income taxes 1,026 1,026 1,026
Unearned ESOP shares (2,358) (2,358) (2,358)
Unearned Recognition and Retention
Plan Shares (1,789) (1,789) (1,789)
Total stockholders'
equity (2) $ 198,494 $ 188,494 $ 198,494
Stockholders' equity
per share $ 8.49 $ 8.06 $ 8.49
</TABLE>
- -----------------------
(1) The Bank has 50,000,000 shares of Bank Common Stock
authorized for issuance, 23,376,000 shares issued and outstanding
as of June 30, 1997, and 100 assumed pro forma shares
outstanding. The Stock Holding Company has 100,000,000 shares of
Holding Company Common Stock authorized for issuance, and
23,376,000 assumed pro forma shares outstanding.
(2) Estimated expenses of $100,000 will be capitalized and
amortized over a five year period, therefore the table does not
reflect a reduction to stockholders' equity for such expenses.
Future capitalization of the Stock Holding Company will
depend upon earnings and dividends declared by the Bank and any
issuance of debt or equity securities. As of the date hereof,
other than an issuance planned in connection with the proposed
acquisition of Corry Savings Bank (see "-The Corry Acquisition"),
the Board of Directors of the Stock Holding Company has adopted
no plan or agreement with respect to any future issuance of
securities. Furthermore, under Pennsylvania law, as long as the
Mutual Holding Company is in existence it must own a majority of
the Stock Holding Company's outstanding voting stock.
Accordingly, the Stock Holding Company would not be permitted to
issue shares of voting stock to persons other than the Mutual
Holding Company if the issuance of such shares would result in
the Mutual Holding Company owning less than a majority of such
shares.
Following the Reorganization, unless the Bank receives the
nonobjection of the FDIC, the Bank may not issue to any person
other than Stock Holding Company (i) Bank Common Stock, or (ii)
any equity security that would give the holder the right to
acquire any equity security of the Bank or that would give the
holder an interest in the retained earnings of the Bank. In
addition, so long as the Mutual Holding Company is in existence,
no additional shares of Bank Common Stock shall be offered for
sale by the Bank to any person other than Stock Holding Company
unless the depositors of the Bank are given the rights set forth
in the FDIC's Rules and Regulations relating to mutual-to-stock
conversions of state-chartered savings banks. The Board of
Directors of the Bank has no present plans or intentions with
respect to any future issuance of securities of the Bank.
<PAGE>
After the Reorganization, the Bank will continue its
existing business and operations as a wholly owned subsidiary of
the Stock Holding Company, and the consolidated capital, assets,
liabilities, and form of financial statements of the Stock
Holding Company immediately following the Reorganization will be
substantially the same as those of the Bank immediately prior to
consummation of the Reorganization. The Articles of Incorporation
and the Bylaws of the Bank will continue in effect, and will not
be affected in any manner by the Reorganization. The Bank will
continue to utilize the name "Northwest Savings Bank." The
corporate existence of the Bank will be unaffected by the
Reorganization.
The Corry Acquisition
On June 19, 1997, the Bank and Corry Savings Bank ("Corry"),
a Pennsylvania mutual savings bank with assets of $28.7 million
and a net worth of $3.0 million as of June 30, 1997, entered into
an agreement and plan of merger (the "Corry Agreement").
Pursuant to the Corry Agreement, Corry will be merged with and
into the Bank, with the Bank as the surviving institution (the
"Corry Merger"). Upon the consummation of the Corry Merger, the
separate existence of Corry shall cease, and the Bank shall
continue as the surviving institution. In connection with the
Corry Merger, the Bank, or, should the Reorganization be
completed prior to such time, the Stock Holding Company, will
offer for sale shares of the common stock of the Bank or the
Stock Holding Company (the "Northwest Common Stock") to certain
Corry depositors and the Bank's tax-qualified employee plans
pursuant to rules of the FDIC and the Department (the "Corry
Stock Offering"). As part of the Corry Stock Offering, Corry will
obtain an independent valuation (the "Corry Valuation") of its
pro forma market value assuming a merger into the Bank. The Bank
intends to issue a number of shares of Northwest Common Stock
equal to the Corry Valuation divided by the trading price of the
Northwest Common Stock, as determined pursuant to the Corry
Agreement. The Bank intends to offer for sale a portion of such
shares of Northwest Common Stock to Corry's depositors (some of
whom may be permitted to purchase such shares at a 10% discount)
and intends to issue remaining shares to the Mutual Holding
Company. Pursuant to the Corry Agreement, the Bank may modify
the structure of the Corry Merger.
In addition, the Bank and Corry intend to establish a
charitable foundation (the "Charitable Foundation") for the
purpose of providing charitable contributions to Corry,
Pennsylvania and in other market areas served by the Bank. The
Corry Advisory Board established pursuant to the Corry Agreement
will advise the foundation manager of the Charitable Foundation
on appropriate charities and appropriate distribution of the
annual income, and such principal as may be deemed appropriate,
from the Charitable Foundation.
The Corry Merger will require the approval or nonobjection
of the FDIC and the Department, and may require the approval of
the FRB. In addition, the Corry Agreement will be put to a vote
of Corry's depositors at a special meeting of depositors, and
approval of the Corry Agreement will require the affirmative vote
of a majority of the total votes entitled to be cast. The Corry
Agreement will also require the affirmative vote of at least two-
thirds of the stockholders of the Bank. If the Reorganization
is completed prior to the completion of the Corry Merger, the
Stock Holding Company will own 100% of the common stock of the
Bank and will be able to vote all its shares in favor of the
Corry Agreement. If the Reorganization is not completed prior to
the completion of the Corry Merger, the Mutual Holding Company
will own more than two-thirds of the Bank's common stock and will
be able to vote all its shares in favor of the Corry Agreement.
Because of the size of Corry in relation to the Bank
(Corry's assets will represent less than 1.4% of the combined
entity following the Corry Merger), and the size of the Corry
Stock Offering (the shares issued in the Corry Stock Offering are
expected to be less than 2.0% of the total shares of Northwest
Common Stock outstanding after the Corry Merger), the Bank does
not believe that the Corry Merger will have a material effect on
the operations and financial condition of the Bank, or a material
dilutive effect on current shareholders' interests.
Regulatory Capital
<PAGE>
Set forth below is a summary of the Bank's historical and
pro forma regulatory capital at June 30, 1997. The table does
not give effect to the Corry Acquisition. Following completion
of the Reorganization, the Bank will exceed all regulatory
capital requirements imposed by the FDIC.
<TABLE>
Actual Proforma
<S> <C> <C>
Total shareholders' equity or GAAP capital $ 198,494 $ 188,494
Less: unrealized gain on securities available for sale (1,026) (1,026)
Less: intangible assets (11,278) (11,278)
FDIC leverage capital 186,190 176,190
Plus: FDIC tier 2 capital (1) 13,605 13,605
Total FDIC risk-based capital $ 199,795 $ 189,795
FDIC quarterly average total assets for leverage ratio $ 2,043,977 $ 2,033,977
FDIC net risk-weighted assets including off-balance
sheet items $ 1,088,391 $ 1,088,391
FDIC leverage capital ratio 9.11% 8.66%
Minimum requirement 3.00% to 5.00% (2) 3.00% to 5.00%(2)
FDIC risk-based capital ratio 18.36% 17.44%
Minimum requirement 8.00% 8.00%
</TABLE>
- --------------------------
(1) Tier 2 capital consists entirely of the allowance for loan
losses, which is limited to 1.25% of total risk-weighted assets
as detailed under regulations of the FDIC.
(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. As of June 30, 1997, the Bank had not been advised of
any additional requirements in this regard.
The Bank is also subject to Pennsylvania Department of
Banking ("Department") capital guidelines. Although not adopted
in regulation form, the Department utilized capital standards
requiring a minimum of 6% leverage capital and 10% risk-based
capital. The components of leverage and risk-based capital are
substantially the same as those defined by the FDIC.
Effective Date
The "Effective Date" of the Reorganization will be the date
upon which the Articles of Merger are filed with the Pennsylvania
Department of State.
Optional Exchange of Stock Certificates
After the Effective Date stock certificates evidencing
shares of Bank Common Stock will represent, by operation of law,
the same number of shares of Holding Company Common Stock.
Former holders of the Bank Common Stock will not be required to
exchange their Bank Common Stock certificates for Holding Company
Common Stock certificates, but will have the option to do so. DO
NOT SEND YOUR STOCK CERTIFICATES TO THE BANK AT THIS TIME. Any
stockholder desiring more information about such exchange may
request additional information from the Bank by writing the
Secretary of the Bank, Gregory C. LaRocca, 301 Second Avenue,
Warren, Pennsylvania 16365 (telephone number 814-726-2140).
<PAGE>
Rights of Dissenting Stockholders
Pennsylvania law applicable to the Bank generally provides
that a stockholder of a Pennsylvania-chartered savings bank which
engages in a merger transaction shall have the right to demand
from the savings bank the payment of the fair or appraised value
of his or her stock in the savings bank, subject to the
satisfaction of specified procedural requirements. The statute
also provides that stockholders of a Pennsylvania savings bank
are not entitled to dissenters' rights if their common stock is
either listed on a national securities exchange or held of record
by more than 2,000 shareholders. Since the Bank Common Stock is
held of record by more than 2,000 persons, stockholders will not
have dissenters' rights of appraisal in connection with the
Reorganization.
Tax Consequences
The Bank has received an opinion of its special counsel,
Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., as
to certain federal income tax consequences of the Reorganization.
This opinion of counsel, which is not binding upon the Internal
Revenue Service, provides substantially as follows: (i) the
merger of Interim with and into the Bank will constitute a
reorganization under Section 368 of the Internal Revenue Code of
1986, as amended ("Code"), and the Stock Holding Company, the
Bank and Interim will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code, provided that
the merger of Interim with and into Bank qualifies as a statutory
merger under applicable law, after the transaction, the Bank will
hold substantially all of the assets of Interim and Bank
stockholders exchange solely for Holding Company Common Stock an
amount of Bank Common Stock constituting "control" of the Bank;
(ii) no gain or loss will be recognized by Bank stockholders on
the exchange of Bank Common Stock for Holding Company Common
Stock; (iii) no gain or loss will be recognized by the Stock
Holding Company on the receipt by it of Bank Common Stock solely
in exchange for Holding Company Common Stock; (iv) the basis of
Holding Company Common Stock received by the Bank's stockholders
will be the same as the basis of the Bank Common Stock
surrendered in exchange therefor; (v) the holding period of
Holding Company Common Stock to be received by Bank stockholders
will include the holding period of the Bank Common Stock
surrendered in exchange therefor, provided the Bank Common Stock
was held as a capital asset on the date of the exchange; and (vi)
no gain or loss will be recognized by the Bank stockholders as a
result of conversion of their Bank stock options into options to
purchase Holding Company Common Stock.
Each Bank stockholder should consult his own tax counsel as
to specific federal, state and local tax consequences of the
Reorganization, if any, to such stockholder.
Consequences Under Federal Securities Laws
The Bank Common Stock is registered under Section 12 of the
Exchange Act as administered by the FDIC. Upon consummation of
the Reorganization, the Stock Holding Company will register the
Common Stock under the Section 12 of the Exchange Act as
administered by the SEC. The Exchange Act will apply to the
Stock Holding Company to the same degree that it currently
applies to the Bank, except that the powers, functions and duties
to administer and enforce the Exchange Act requirements,
including periodic and other reports, proxies, tender offers, and
short swing profits, and certain other requirements that are
vested in the FDIC with respect to securities of insured banks
such as the Bank, are vested in the SEC with respect to
securities of corporations such as the Stock Holding Company. In
carrying out its responsibility to administer such requirements,
however, the FDIC is generally required by law to issue
substantially similar regulations to those adopted by the SEC.
The issuance of Holding Company Common Stock will be registered
with the SEC under the Securities Act of 1933.
<PAGE>
Conditions to the Reorganization
The Plan of Reorganization sets forth a number of conditions
to the completion of the Reorganization, including: (i) approval
of the Plan of Reorganization by the holders of two-thirds of the
outstanding shares of Bank Common Stock; (ii) receipt of an
opinion of counsel that the Reorganization will be treated as a
non-taxable transaction for federal income tax purposes; and
(iii) receipt of any and all regulatory approvals necessary for
the lawful consummation of the Reorganization. All required
regulatory approvals have been received.
The Mutual Holding Company, which owns more than two-thirds
of the outstanding shares of Bank Common Stock, intends to vote
its shares in favor of the Plan of Reorganization thereby
assuring stockholder approval of the Plan of Reorganization.
Furthermore, the Bank has received an opinion of special counsel
that the Reorganization will be treated as a non-taxable
transaction for federal income tax purposes.
Effect of the Reorganization on any Future Mutual-to-Stock
Conversion of the Mutual Holding Company
The Reorganization and the establishment of the Stock
Holding Company is not expected to have a material effect on the
rights of Minority Stockholders in the event of a mutual-to-stock
conversion of the Mutual Holding Company. The Mutual Holding
Company has no current intention to engage in a mutual-to-stock
conversion.
Effect of the Reorganization on Stock Benefit Plans of the Bank
Upon completion of the Reorganization each share of
restricted Bank Common Stock awarded to the Bank's employees
under the Bank's restricted stock plans will be converted into a
share of Holding Company Common Stock, and will continue to be
subject to the same restrictions. Shares awarded pursuant to the
Bank's Employee Stock Ownership Plan (the "ESOP") and unallocated
shares held by the ESOP trust will be converted into shares of
Holding Company Common Stock. Options to purchase shares of Bank
Common Stock will be converted into and become options to
purchase Holding Company Common Stock on the same terms that
shares of Bank Common Stock could have been purchased prior to
the Reorganization.
Amendment, Termination or Waiver
The Board of Directors of the Bank may cause the Plan of
Reorganization to be amended or terminated if the Board
determines for any reason that such amendment or termination
would be advisable. Such amendment or termination may occur at
any time prior to the filing of Articles of Merger with the
Department, provided that no such amendment may be made to the
Plan of Reorganization after stockholder approval if such
amendment is deemed to be materially adverse to the stockholders
of the Bank. Additionally, any of the terms or conditions of the
Plan of Reorganization may be waived by the party which is
entitled to the benefit thereof.
Business of the Stock Holding Company
General. The Stock Holding Company was formed only recently
and currently has no business activities. Upon the completion of
the Reorganization, the Bank will become a wholly owned
subsidiary of the Stock Holding Company and each stockholder of
the Bank will become a stockholder of the Stock Holding Company
with the same ownership interest therein as such stockholder's
ownership interest in the Bank immediately prior to the
Reorganization.
Immediately after consummation of the Reorganization, it is
expected that the Stock Holding Company will not engage in any
business activity other than to hold all of the stock of the
Bank. The Stock Holding Company does not presently have any
arrangements or understandings regarding any acquisition or
merger opportunities. It is anticipated, however, in the future
that the Stock Holding Company may pursue other investment
opportunities, including possible diversification through
acquisitions and mergers.
<PAGE>
Property. The Stock Holding Company is not expected to own
real or personal property initially. Instead, it intends
initially to utilize the premises, equipment and furniture of the
Bank and will pay a rental fee to the Bank for such use, which
fee will be based on the amount of time such property is utilized
for matters relating to the business of the Stock Holding
Company.
Legal Proceedings. Since its organization, the Stock
Holding Company has not been a party to any legal proceedings.
Employees. At the present time, the Stock Holding Company
does not intend to employ any persons other than senior officers
of the Bank. It will utilize the support staff of the Bank from
time to time. If the Stock Holding Company acquires other
financial institutions or pursues other lines of business, it may
hire additional employees at such time. The Bank will be paid a
fee for services rendered to the Stock Holding Company by its
employees based on an estimate of the percentage of such person's
time that will be spent performing services for the Stock Holding
Company.
Competition. It is expected that for the immediate future
the primary business of the Stock Holding Company will be the
ownership of the Bank Common Stock. Therefore, the competitive
conditions to be faced by the Stock Holding Company will be the
same as those faced by the Bank.
Management of the Stock Holding Company
Directors. The directors of the Stock Holding Company are,
and upon completion of the Reorganization will continue to be,
the same persons who are at present the directors of the Bank.
The three-year terms of the directors are staggered to provide
for the election of approximately one-third of the board members
each year.
Executive Officers. The executive officers of the Stock
Holding Company are, and upon completion of the Reorganization
will be, the same persons who are at present the executive
officers of the Bank.
Remuneration. Since the formation of the Stock Holding
Company, none of its executive officers or directors has received
any remuneration from the Stock Holding Company. It is expected
that initially no compensation will be paid to its directors and
officers in addition to compensation paid to them by the Bank.
However, the Stock Holding Company may determine that separate
and additional compensation is appropriate in the future.
Indemnification of Officers and Directors and Limitation of
Liability
General. Certain provisions of the Articles of
Incorporation of the Stock Holding Company and the Bank seek to
ensure that directors are able to exercise their best business
judgment in managing corporate affairs, subject to their
continuing fiduciary duties, and are not unreasonably impeded by
exposure to the potentially high personal costs or other
uncertainties of litigation. The nature of the responsibilities
of directors and officers often requires them to make difficult
decisions which can expose such persons to personal liability,
but from which they will acquire no personal benefit (other than
as stockholders). In recent years, litigation against
corporations and their directors and officers, often amounting to
mere "second guessing" of good-faith judgments and involving no
allegations of personal wrongdoing, has become common. Such
litigation often claims damages in large amounts which bear no
relationship to the amount of compensation received by the
directors or officers, particularly in the case of directors who
are not officers of the corporation, and the expense of defending
such litigation, regardless of whether it is well founded, can be
enormous. Individual directors and officers can seldom bear
either the legal defense costs involved or the risk of a large
judgment.
In order to attract and retain competent and conscientious
directors and officers in the face of these potentially serious
risks, corporations have historically provided for corporate
indemnification and limitation of liability in their articles of
incorporation or bylaws, and have obtained liability insurance
protecting the company and its directors and officers against the
cost of litigation and related expenses. Such indemnification
and limitation of liability provisions may also benefit
stockholders who indirectly assume the expense of litigation and
directors and officers liability insurance. The Bank currently
has insurance coverage for its directors and officers, and the
Bank's management anticipates that the Stock Holding Company will
be able to obtain such coverage for its directors and officers.
The
<PAGE>
individual members of the Stock Holding Company's Board of
Directors will benefit from the inclusion of the indemnification
and limitation of liability provisions in the Stock Holding
Company's Articles of Incorporation at the potential expense of
stockholders.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Stock Holding Company pursuant to the following
provisions, the Stock Holding Company has been informed that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable. In addition, Federal banking regulations restrict
the Bank or the Stock Holding Company from indemnifying officers
and directors for civil monetary penalties or judgments resulting
from administrative or civil actions instituted by any Federal
banking agency, or any other liability or legal expense with
regard to any administrative proceeding or civil action
instituted by any Federal banking agency, which results in a
final order or settlement pursuant to which such person is
assessed a civil monetary penalty, removed from office or
prohibited from participating in the conduct of the affairs of an
insured depository institution, or required to cease and desist
from or take certain actions.
Limitation of Liability under the Bank's Articles of
Incorporation. Under the Bank's Articles of Incorporation a
director of the Bank may not be personally liable for monetary
damages for any action taken or any failure to take any action as
a director, except to the extent applicable law requires that a
director's liability for monetary damages may not be limited.
Except in the case of criminal statutes or liability for taxes,
Pennsylvania law permits limitation of liability for monetary
damages unless the director has breached or failed to perform the
fiduciary duties of his office under Pennsylvania law and such
breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. Federal banking and securities laws
may limit the effect of such provisions.
Limitation of Liability under the Stock Holding Company's
Articles of Incorporation. The Stock Holding Company's Articles
of Incorporation provide that the personal liability of a
director or officer of the Stock Holding Company for monetary
damages shall be eliminated to the fullest extent permitted by
the Business Corporation Law of 1988, as amended, of the
Commonwealth of Pennsylvania (the "BCL") as it exists on the
effective date of the Articles of Incorporation or as such law
may be thereafter in effect. The Articles of Incorporation also
state that in no event shall a director be personally liable for
monetary damages for any action taken unless the director has
breached or failed to perform the duties of his office under the
BCL and the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness. This latter
provision regarding limitation of a director's personal liability
is specifically permitted by Pennsylvania law.
These provisions may reduce the likelihood of derivative
litigation against directors and discourage or deter stockholders
or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if
successful, might otherwise have been beneficial to the Bank or
the Stock Holding Company and its stockholders. The provisions
will not, however, affect the right to pursue equitable remedies
for breach of the duty of care, although such remedies might not
be available as a practical matter. Federal banking and
securities laws may limit the effect of such limitation of
liability provisions.
To the best of management's knowledge, there is currently no
pending litigation involving directors of the Bank that might
have been affected by the limitation of liability provision in
the Stock Holding Company's Articles of Incorporation had it been
in effect at the time of the litigation, although the Bank and
the Bank's directors were recently involved in litigation for
which indemnification may be sought. This litigation involves a
complaint that was filed on December 13, 1994, in United States
District Court, Western District of Pennsylvania, by an
individual who purported to have subscribed for stock in the
Bank's mutual holding company reorganization and stock offering
(the "Offering") that was completed in November 1994. The named
defendants in the complaint included the Bank, the Mutual Holding
Company, the Bank's Board of Directors, and the selling agent and
independent appraiser in the Offering. The plaintiff sought to
represent persons who subscribed for and purchased stock in the
Offering. The complaint alleged that the appraisal used in the
Bank's Offering was inappropriately increased at the completion
of the Offering, and that, among other things, the Bank violated
the federal securities laws (including section 10 of the Exchange
Act and section 12(2) of the Securities Act) and regulations
thereunder, violated Pennsylvania securities law, breached a
fiduciary duty owed to plaintiff, and breached a contract with
plaintiff. Similar claims were asserted against the other
defendants. Money damages and other relief were sought. On
November 17, 1995, the District Court dismissed all Federal
claims against the defendants with prejudice, and dismissed the
remaining claims without
<PAGE>
prejudice. On February 13, 1997, the United States Court of
Appeals for the Third Circuit denied the plaintiff's appeal of
the District Court's dismissal, and on April 7, 1997, it denied
plaintiff's petition for rehearing. As of the date of this Proxy
Statement/Prospectus, plaintiff has not sought further review or
initiated additional proceedings. Management intends to continue
to vigorously defend any such proceedings.
Indemnification Provisions of the Bank's Articles of
Incorporation. As regards third party actions, the Bank's
Articles of Incorporation require that the Bank indemnify any
employee, officer, or director who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Bank), by reason of the fact that he is or was a
representative of the Bank, or is or was serving at the request
of the Bank as a representative of another entity, against
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with the action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Bank and, with respect
to any criminal proceeding, had no reasonable cause to believe
his conduct was unlawful. The Articles provide that the
termination of any action or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its
equivalent does not of itself create a presumption that the
person did not act in good faith and in a manner that he
reasonably believed to be in, or not opposed to, the best
interests of the Bank and, with respect to any criminal
proceeding, had reasonable cause to believe that his conduct was
unlawful.
As regards derivative and corporate actions, the Bank's
Articles of Incorporation require that the Bank indemnify any
employee, officer, or director who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action by or in the right of the Bank to procure a
judgment in its favor by reason of the fact that he is or was a
representative of the Bank, or is or was serving at the request
of the Bank as a representative of another entity, against
expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of
the action if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best
interests of the Bank. The Articles require that indemnification
not be made in respect of any claim, issue or matter as to which
the person has been adjudged to be liable to the Bank unless and
only to the extent that the applicable court determines upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, the employee, officer,
or director is fairly and reasonably entitled to indemnity for
the expenses that the court deems proper.
Unless ordered by a court, the indemnification described
above shall be made by the Bank only as authorized in the
specific case upon a determination that indemnification of the
representative is proper in the circumstances because he has met
the applicable standard of conduct set forth above. The
determination shall be made: (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to the action or proceeding; (2) if such a quorum is not
obtainable or if obtainable and a majority vote of a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion; or (3) by the shareholders.
The Bank's Articles of Incorporation provide that reasonable
expenses incurred by an officer or director of the Bank in
defending a civil or criminal action, suit or proceeding
described above shall be paid by the Bank in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that the person is not
entitled to be indemnified by the Bank.
The Articles of Incorporation further provide that the
indemnification and advancement of expenses described above shall
not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, Pennsylvania law,
any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official
capacity and as to actions in another capacity while holding an
office and shall continue as to a person who has ceased to be
director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
Indemnification Provisions of the Stock Holding Company's
Bylaws. The Stock Holding Company's Bylaws provide that the
Stock Holding Company shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened,
pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the Stock Holding Company), by reason of
the fact that he
<PAGE>
is or was a director or officer of the Stock Holding Company, or
is or was serving at the request of the Stock Holding Company as
a representative of another entity, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
incurred by him in connection with the action or proceeding if he
acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Stock Holding
Company and, with respect to any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. The Bylaws
further provide that the Stock Holding Company shall not be
liable for any amounts which may be due to any such person in
connection with a settlement of any action or proceeding
initiated by any such person (other than an action or proceeding
to enforce rights to indemnification hereunder).
As regards derivative and corporate actions, the Stock
Holding Company's Bylaws provide that the Stock Holding Company
shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action by or in the right of the Stock Holding Company
to procure a judgment in its favor by reason of the fact that he
is or was a director or officer of the Stock Holding Company or
is or was serving at the request of the Stock Holding Company as
a representative of another entity, against expenses (including
attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of the action if he
acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Stock Holding
Company. The Bylaws further provide that no indemnification shall
not be made under such provisions of the Bylaws in respect of any
claim, issue or matter as to which the person has been adjudged
to be liable to the Stock Holding Company unless and only to the
extent that the court of common pleas of the judicial district
embracing the county in which the registered office of the Stock
Holding Company is located or the court in which the action was
brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, the person is fairly and reasonably entitled to
indemnity for the expenses that the court of common pleas or
other court deems proper.
Unless ordered by a court, any indemnification described
above shall be made by the Stock Holding Company only as
authorized in the specific case upon a determination that
indemnification of the representative is proper in the
circumstances because he has met the applicable standard of
conduct set forth above. The determination shall be made: (1) by
the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to the action or proceeding;
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion; or (3) by the
stockholders.
The Bylaws provide that expenses (including attorneys' fees)
incurred in defending any action or proceeding referred to above
shall be paid by the Stock Holding Company in advance of the
final disposition of the action or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined that he is not entitled
to be indemnified by the Stock Holding Company.
The duties of the Stock Holding Company to indemnify and to
advance expenses to a director or officer are in the nature of a
contract between the Stock Holding Company and each such person,
and no amendment or repeal of any provision of the Bylaws may
alter, to the detriment of such person, the right of such person
to the advance of expenses or indemnification related to a claim
based on an act or failure to act which took place prior to such
amendment or repeal.
Comparison of Stockholder Rights and Certain Anti-Takeover
Provisions
Introduction. As a result of the Reorganization, holders of
Bank Common Stock will become stockholders of the Stock Holding
Company. Accordingly, after the Reorganization, stockholders'
rights will be governed by the BCL and the Articles of
Incorporation and Bylaws of the Stock Holding Company, and by the
Banking Code of 1965 (the "Banking Code") to the extent the
Banking Code addresses rights of stockholders of Pennsylvania-
chartered savings bank holding companies. Certain differences
arise from this change of governing law, as well as from
distinctions between the Articles of Incorporation and Bylaws of
the Bank and the Stock Holding Company. The following discussion
is not intended to be a complete statement of the differences
affecting the rights of stockholders, but summarizes certain
significant differences. The Articles of Incorporation and
Bylaws of the Stock Holding Company are attached hereto as
Exhibits B and C, respectively, and should be reviewed for more
detailed information.
<PAGE>
A number of provisions of the Articles of Incorporation and
Bylaws of the Bank and the Stock Holding Company deal with
matters of corporate governance and certain rights of
stockholders. The following discussion is a general summary of
certain of these provisions and certain other statutory and
regulatory provisions relating to stock ownership and transfers,
and business combinations. Some of these provisions may be
deemed to have potential anti-takeover effects in that they may
have the effect of discouraging a future takeover attempt or
change of control which is not approved by the Board of Directors
but which a majority of individual stockholders may deem to be in
their best interests or in which stockholders may receive a
substantial premium for their shares over then current market
prices. As a result, stockholders who desire to participate in
such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of the current Board of
Directors or management more difficult. The following is a
general description of the material provisions of the Stock
Holding Company's Articles of Incorporation and Bylaws, which are
incorporated herein by reference.
Issuance of Capital Stock. The Bank's Articles of
Incorporation authorizes the issuance of 50,000,000 shares of
common stock, par value $.10 per share, and 10,000,000 shares of
preferred stock. The Articles of Incorporation of the Stock
Holding Company authorizes the issuance of 100,000,000 shares of
Common Stock, par value $.10 per share, and 10,000,000 shares of
serial preferred stock. Following the Reorganization, there
will be the same number of shares of the Holding Company Common
Stock outstanding as there were shares of Bank Common Stock
outstanding immediately prior to the Reorganization.
Other than in connection with the Corry Merger, the Stock
Holding Company has adopted no plan or agreement to issue
additional shares of stock at this time, other than upon the
exercise of stock options. If the Stock Holding Company issues
authorized but unissued shares of Holding Company Common Stock or
preferred stock it would not be required to obtain a vote of its
stockholders or the Bank's depositors, or, unless otherwise
required by the FRB, give any such person to right to purchase
such shares. If additional authorized but unissued shares of
Holding Company Common Stock are issued in the future, the
percentage ownership interests of existing stockholders would be
reduced and, depending on the terms pursuant to which new shares
are issued, the book value and earnings per share of outstanding
Stock Holding Company Common Stock might be diluted. Moreover,
such additional share issuances could be construed as having an
anti-takeover effect. The ability to issue additional shares,
which exists under both the Articles of Incorporation of the Bank
and the Stock Holding Company, gives management greater
flexibility in financing corporate operations. Under
Pennsylvania law, as long as the Mutual Holding Company is in
existence it must own at least a majority of the outstanding
voting stock of the Stock Holding Company. Accordingly,
Pennsylvania law would not permit the Stock Holding Company to
issue shares of voting stock if after such issuance stockholders
other than the Mutual Holding Company would own more than a
majority of the Stock Holding Company's outstanding voting stock.
Payment of Dividends. The Banking Code states that
Pennsylvania savings banks may declare and pay dividends only out
of accumulated net earnings and may not declare or pay dividends
unless surplus (shareholders equity) is at least equal to
capital. Also, dividends may not be declared or paid if the Bank
is in default in payment of any assessment due to the FDIC. The
ability of the Bank to pay dividends on Bank Common Stock is
restricted by tax considerations related to state savings banks
and by federal regulations applicable to state chartered savings
banks. Income appropriated to bad debt reserves and deducted for
federal income tax purposes may not be used to pay cash dividends
without the payment of federal income taxes by the Bank on the
amount of such income removed from reserves for such purpose at
the then current income tax rate. Additionally, the Bank is
precluded from paying dividends on its Bank Common Stock if its
regulatory capital would thereby be reduced below the regulatory
capital requirements prescribed for a state savings bank under
federal law. The Bank currently satisfies its applicable
regulatory capital requirements.
After the Reorganization, the Stock Holding Company's
principal source of income will initially consist of dividends,
if any, paid to the Stock Holding Company by the Bank and
earnings on such dividends, and earnings on the funds contributed
to the Stock Holding Company in connection with or after the
Reorganization. Although the Stock Holding Company will not be
subject to the above dividend restrictions regarding dividend
payments to its stockholders, the restrictions on the Bank's
ability to pay dividends to the Stock Holding Company will
continue in effect. In addition, the Stock Holding Company will
be subject to FRB capital adequacy regulations that will restrict
the ability of the Stock Holding Company to pay dividends in the
event the Stock Holding Company does not maintain sufficient
capital. See "- Regulation of the Stock Holding Company."
<PAGE>
Special Meetings of Stockholders. For a period of five
years following completion of its mutual holding company
reorganization, (i.e., until November 1999), special meetings of
the holders of the Bank's common stock may be called only by the
chairman of the board, the president or a majority of the Board
of Directors. After November 1999, a special meeting may be
called upon the written request of shareholders entitled to cast
at least one-fifth of the votes which all shareholders are
entitled to cast at a particular meeting. The Articles of
Incorporation of the Stock Holding Company provide that special
meetings of the stockholders of the Stock Holding Company may be
called only by the Board of Directors pursuant to a resolution
approved by the affirmative vote of a majority of directors then
in office.
Cumulative Voting. Neither the Bank's nor the Stock Holding
Company's Articles of Incorporation provide for cumulative
voting. The absence of cumulative voting rights means that the
holders of a majority of the shares voted at a meeting of
stockholders may elect all directors of the Stock Holding Company
thereby precluding minority stockholder representation on the
Board of Directors.
Rights of Stockholders to Dissent. Under the BCL,
stockholders of a Pennsylvania savings bank, such as the Bank,
and a Pennsylvania corporation, such as the Stock Holding
Company, are generally not entitled to dissenters' rights of
appraisal if the their common stock is held of record by more
than 2,000 stockholders, except where shares are converted by a
plan, if the shares are not converted solely into shares of the
acquiring, surviving, new or other corporation, or solely into
such shares and money in lieu of fractional shares, and in
certain other circumstances.
Vacancies on the Board of Directors. Any vacancy occurring
in the Bank's Board of Directors may be filled by the affirmative
vote of a majority of the remaining directors. A director elected
to fill a vacancy shall be elected to serve until the next
election of directors by the stockholders. Any directorship to be
filled by reason of an increase in the number of directors may be
filled by a vote of the majority of the board of directors for a
term of office continuing only until the next election of
directors by the stockholders.
The Stock Holding Company's Articles of Incorporation
provide that any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the
number of directors, shall be filled by a majority vote of the
directors then in office, or by a sole remaining director, and
any director so chosen shall serve until the term of the class to
which he was appointed shall expire and until his successor is
elected and qualified. When the number of directors is changed,
the Board of Directors shall determine the class or classes to
which the increased or decreased number of directors shall be
apportioned, provided that no decrease in the number of directors
shall shorten the term of any incumbent director.
Number and Term of Directors. The Bank's Articles of
Incorporation provides that the Board of Directors shall consist
of not less than five nor more than 20 members, as set forth in
the Bylaws. The Stock Holding Company's Bylaws provide that the
Board of Directors shall consist of between 5 and 15 members, the
exact number to be determined by the Board of Directors. The
Board of Directors of the Stock Holding Company has set the
number of directors at 10 persons. Although the Stock Holding
Company has no present intention of reducing its number of
directors below its present ten members, the Board of Directors
believes that the ability to reduce the number of directors will
result in greater flexibility in the event of vacancies on the
current Board.
The Bank's Articles of Incorporation provides for a
classified board of directors, consisting of three substantially
equal classes of directors, each serving for a three year term,
with the term of each class of directors ending in successive
years. The Stock Holding Company's Article of Incorporation also
provides for a classified board of directors.
Presentation of New Business at Meetings of Stockholders.
The Bank's Bylaws do not specifically provide for stockholders'
nomination for the election of directors or proposals for new
business at a meeting of stockholders. The Stock Holding
Company's Bylaws provide that any stockholder entitled to vote
generally in an election of directors may nominate one or more
persons for election as directors at a meeting, and, if properly
brought, may bring other business before an annual meeting of the
Stock Holding Company. For nominations or other business to be
properly brought before an annual meeting, written notice of such
stockholder's intent must be given not later than (i) 90 days
prior to the anniversary date of the mailing of proxy materials
by the Stock Holding Company in connection with the immediately
preceding annual meeting of stockholders of the Stock Holding
Company or, in the
<PAGE>
case of the first annual meeting of stockholders of the Stock
Holding Company following the Reorganization, ninety days prior
to the anniversary date of the mailing of proxy materials by the
Bank in connection with the immediately preceding annual meeting
of the Bank prior to such acquisition, and (ii) with respect to a
nomination relating to an election of directors at a special
meeting of stockholders, the close of business on the tenth day
following the date on which notice of such meeting is first given
to stockholders. The Stock Holding Company's Bylaws specify
further procedural requirements that must be satisfied for notice
to be properly given.
Mutual Holding Company Ownership. So long as the Mutual
Holding Company is in existence, the Mutual Holding Company must
own at least a majority of the outstanding voting stock of the
Bank, and, following the Reorganization, of the Stock Holding
Company. The Mutual Holding Company currently is able to elect
the Bank's directors and direct the affairs and business
operations of the Bank. After the Reorganization, the Mutual
Holding Company will be able to elect directors and direct the
affairs and business operations of the Stock Holding Company.
Limitation on Voting Rights. The Articles of incorporation
of the Bank provide that for a period of five years following the
Bank's organization in November 1994, no person other than the
Mutual Holding Company, shall directly or indirectly offer to
acquire or acquire the beneficial ownership of more than 10% of
any class of any equity security of the Bank. In the event
shares are acquired in violation of this provision, all shares
beneficially owned by any person in excess of 10% shall be
considered "excess shares" and shall not be counted as shares
entitled to vote and shall not be voted by any person or counted
as voting shares in connection with any matters submitted to the
stockholders for a vote. The Articles provide that this
limitation shall not apply to a transaction in which the Bank
forms a stock holding company without change in the respective
beneficial ownership interest of its stockholders. The Stock
Holding Company's Articles of Incorporation contain a similar
provision that is not limited to a five year period.
Amendment of Articles of Incorporation and Bylaws.
Amendments to the Stock Holding Company's Articles of
Incorporation must be approved by a majority vote of its Board of
Directors and, if required by applicable law, generally by a
majority vote of stockholders. The amendment of certain
provisions of the Articles relating to directors, meetings of
stockholders and action without a meeting, liability of directors
and officers, restrictions on acquisitions of the Stock Holding
Company's equity securities, and amendments to the Articles,
however, requires a 75% vote of the Stock Holding Company's
stockholders if such amendments are not approved by the
affirmative vote of 80% of the Stock Holding Company's Board of
Directors.
The Stock Holding Company's Bylaws provide that the Board of
Directors, to the extent permitted by law, or stockholders may
amend the Bylaws. Such action by the Board of Directors requires
the affirmative vote of a majority of the directors then in
office at any regular or special meeting. Such action by the
stockholders generally requires the affirmative vote of the
majority of the shares of the Stock Holding Company entitled to
vote in an election of directors, provided that the affirmative
vote of at least 75% of the shares of the Stock Holding Company
entitled to vote in an election of directors is required to amend
provisions of the Bylaws which are inconsistent with certain
provisions of the Articles of Incorporation relating to
directors, meetings of stockholders and action without a meeting,
liability of directors and officers, restrictions on acquisitions
of the Stock Holding Company's equity securities, and amendments
to the Articles of the Stock Holding Company and which are not
approved by the affirmative vote of 80% of the members of the
Stock Holding Company's Board of Directors.
The Bank's Articles may be amended only after such amendment
is proposed by the Bank's Board of Directors, approved by a
majority of votes eligible to be cast by stockholders, and
submitted to the Department. The Bank's Bylaws may be amended by
a majority vote of the Board of Directors or by a majority vote
of the votes cast by stockholders at any legal meeting.
Regulation of the Stock Holding Company
General. Upon completion of the Reorganization, the Stock
Holding Company will become a registered bank holding company
pursuant to the Bank Holding Company Act of 1956, as amended (the
"BHCA"). The Stock Holding Company will be subject to
examination, regulation and periodic reporting under the BHCA, as
administered by the FRB. The Mutual Holding Company is currently
regulated by the FRB. The FRB has adopted capital adequacy
guidelines for bank holding companies (on a consolidated basis)
substantially similar to those of the FDIC. The Stock Holding
Company's pro forma capital exceeds these requirements.
<PAGE>
BHCA Activities and Other Limitations. The BHCA prohibits a
bank holding company from acquiring direct or indirect ownership
or control of more than 5% of the voting shares of any bank, or
increasing such ownership or control of any bank, without prior
approval of the FRB. In determining whether to authorize a bank
holding company (or a company that will become a bank holding
company) to acquire control of a bank, the FRB takes into
consideration the financial and managerial resources of the bank
holding company, as well as those of the bank to be acquired, and
considers whether the acquisition is likely to have anti-
competitive effects or other adverse effects. No approval under
the BHCA is required, however, for a bank holding company already
owning or controlling 50% or more of the voting shares of a bank
to acquire additional shares of such bank.
The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring more than 5% of the voting shares of
any company that is not a bank and from engaging in any business
other than banking or managing or controlling banks. Under the
BHCA, the FRB is authorized to approve the ownership of shares by
a bank holding company in any company, the activities of which
the FRB has determined to be so closely related to banking or to
managing or controlling banks as to be a proper incident thereto.
In making such determinations, the FRB is required to weigh
expected benefits to the public, such as greater convenience,
increased competition or gains in efficiency, against the
possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest
or unsound banking practices.
The FRB has by regulation determined that certain activities
are closely related to banking within the meaning of the BHCA,
including: operating a mortgage company, a finance company, a
credit card company, a factoring company, a trust company or a
saving association; performing certain data processing
operations; providing limited securities brokerage services;
acting as an investment or financial advisor; leasing personal
property on a full-payout (and, to a limited extent, less than
full-payout), non-operating basis; providing tax planning and
preparation services; and operating a collection agency. The FRB
also has determined that certain other activities, including real
estate brokerage and syndication, property management and
underwriting of life insurance not related to credit
transactions, are closely related to banking or a proper incident
thereto.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the BHCA on extensions of credit
to the bank holding company or any of its subsidiaries, on
investments in the stock or other securities of the bank holding
company or its subsidiaries, and on the taking of such stock or
securities as collateral for loans to any borrower. Furthermore,
under amendments to the BHCA and regulations of the FRB, a bank
holding company and its subsidiaries are prohibited from engaging
in certain tie-in arrangements in connection with any extension
of credit or provision of credit or providing any property or
services. Generally, this provision provides that a bank may not
extend credit, lease or sell property, or furnish any service to
a customer on the condition that the customer provide additional
credit or service to the bank, to the bank holding company, or to
any other subsidiary of the bank holding company or on the
condition that the customer not obtain other credit or service
from a competitor of the bank, the bank holding company, or any
subsidiary of the bank.
Regulatory Capital Requirements. The FRB has capital
adequacy guidelines pursuant to which it assesses the adequacy of
capital in examining and supervising a bank holding company and
in analyzing applications to it under the BHCA. The FRB capital
adequacy guidelines generally require bank holding companies to
maintain total capital equal to 8% of total risk-adjusted assets,
with at least one-half of that amount consisting of Tier 1 and up
to one-half of that amount consisting of Tier 2 or supplementary
capital. Tier 1 capital for bank holding companies generally
consists of the sum of common shareholders' equity and perpetual
preferred stock (subject in the latter case to limitations on the
kind and amount of preferred stock which may be included as Tier
1 capital), less goodwill. Tier 2 capital generally consists of
hybrid capital instruments; perpetual preferred stock which is
not eligible to be included as Tier 1 capital; term subordinated
debt and intermediate-term preferred stock; and, subject to
limitations, general allowances for loan losses. Assets are
adjusted under the risk-based guidelines to take into account
different risk characteristics, with the categories ranging from
0% (requiring no additional capital) for assets such as cash to
100% for the bulk of assets which are typically held by a bank
holding company, including multi-family residential and
commercial real estate loans, commercial business loans and
consumer loans. One- to four- family residential first mortgage
loans which are not 90 days or more past due or nonperforming and
which have been made in accordance with prudent underwriting
standards are assigned a 50% level in the risk-weighting system,
as are certain privately-issued mortgage-backed securities
representing indirect ownership loans. Off-balance sheet items
also are adjusted
<PAGE>
to take into account certain risk characteristics. The FRB has
indicated that bank holding companies anticipating significant
growth will be expected to maintain capital ratios in excess of
the required minimums.
In addition to the risk-based capital requirements, the FRB
requires bank holding companies to maintain a minimum leverage
capital ratio of Tier 1 capital to total assets of 3.0%. Total
assets for this purpose does not include goodwill and any other
intangible assets and investments that the FRB determines should
be deducted from Tier 1 capital. The FRB has announced that the
3.0% Tier 1 leverage capital ratio requirement is the minimum for
the top-rated bank holding companies without any supervisory,
financial or operational weaknesses or deficiencies or those
which are not experiencing or anticipating significant growth.
Other bank holding companies will be expected to maintain Tier 1
leverage capital ratios of at least 4.0% to 5.0% or more,
depending on their overall condition.
Repurchases of Holding Company Common Stock. Regulations
promulgated by the FRB provide that a bank holding company must
file written notice with the FRB prior to any repurchase of its
equity securities if the gross consideration for the purchase,
when aggregated with the net consideration paid by the bank
holding company for all repurchases during the preceding 12
months, is equal to 10% or more of the bank holding company's
consolidated net worth. This notice requirement is not
applicable, however, to a bank holding company, such as the Stock
Holding Company, that exceeds the thresholds established for a
well capitalized state member bank and that satisfies certain
other regulatory requirements.
Commitments to Affiliated Depository Institutions. Under FRB
policy, the Stock Holding Company will be expected to act as a
source of financial strength to the Bank and to commit resources
to support the Bank in circumstances when it might not do so
absent such policy. The enforceability and precise scope of this
policy is unclear. However, in light of recent judicial
precedent, should the Bank require the support of additional
capital resources, is expected that the Stock Holding Company
would be required to respond with any such resources available to
it. In addition, under the Federal Deposit Insurance Act, any
depository institution shall be liable for any loss incurred by
the FDIC in connection with the default of a commonly controlled
insured depository institution or assistance provided by the FDIC
to any commonly controlled depository institution in danger of
default.
Federal Securities Law. The Stock Holding Company will be
subject to the information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.
Riegle-Neal Interstate Banking Act. On September 29, 1994,
the President signed into law the Riegle-Neal Interstate Banking
and Branching Efficiency Act ("Riegle-Neal Act"). The Riegle-Neal
Act permits bank holding companies to acquire banks in any state
on or after September 29, 1995, unless the state elected to opt
out of the Act, and beginning July 1, 1997, holding companies
with banks in more than one state may convert all of their out-
of-state banks into interstate branches of one bank. Once a bank
establishes a branch in another state through an interstate
acquisition or merger, such bank may establish and acquire
additional branches throughout the state. The Riegle-Neal Act
permits an interstate acquisition of only a branch (without
acquisition of an entire bank) only if the laws of the state in
which the branch is located permits out-of-state banks to acquire
a branch of a bank in such state without acquiring the Bank.
Pennsylvania did not opt out of the provision permitting out-of-
state bank holding companies to acquire banks in the state prior
to September 29, 1995, and the state is not expected to opt out
of the provisions which will permit interstate branches beginning
July 1, 1997.
Description of Capital Stock of the Stock Holding Company
The Stock Holding Company is authorized to issue 100.0
million shares of Common Stock having a par value of $.10 per
share and 10.0 million shares of serial preferred stock (the
"Preferred Stock"). In the Reorganization the Stock Holding
Company will issue a number of shares of Holding Company Common
Stock equal to the number of shares of Bank Common Stock
outstanding immediately prior to the Reorganization, and no
shares of Preferred Stock. Each share of Holding Company Common
Stock will have the same relative rights as, and will be
identical in all respects with, each other share of Holding
Company Common Stock.
The Holding Company Common Stock will represent
nonwithdrawable capital, will not be an account of an insurable
type, and will not be insured by the FDIC or any government
agency.
<PAGE>
Common Stock
Dividends. The Stock Holding Company can pay dividends if,
as and when declared by its Board of Directors, subject to
compliance with limitations which are imposed by law. See
"Proposed Formation of the Stock Holding Company-Comparison of
Stockholders Rights and Certain Anti-takeover Provisions -
Payment of Dividends." The holders of Holding Company Common
Stock will be entitled to receive and share equally in such
dividends as may be declared by the Board of Directors of the
Stock Holding Company out of funds legally available therefor.
If the Stock Holding Company issues Preferred Stock, the holders
thereof may have priority over the holders of the Holding Company
Common Stock with respect to dividends.
Voting Rights. Upon completion of the Reorganization, the
holders of Holding Company Common Stock will possess exclusive
voting rights in the Stock Holding Company. They will elect the
Stock Holding Company's Board of Directors and act on such other
matters as are required to be presented to them under
Pennsylvania law or the Stock Holding Company's Articles of
Incorporation or as are otherwise presented to them by the Board
of Directors. Except as discussed in "Proposed Formation of the
Stock Holding Company-Comparison of Stockholders Rights and
Certain Anti-takeover Provisions- Limitations on Voting Rights,"
each holder of Common Stock will be entitled to one vote per
share and will not have any right to cumulate votes in the
election of directors. If the Stock Holding Company issues
Preferred Stock, holders of the Preferred Stock may also possess
voting rights.
Liquidation. In the event of any liquidation, dissolution
or winding up of the Bank, the Stock Holding Company, as holder
of the Bank's capital stock, would be entitled to receive, after
payment or provision for payment of all debts and liabilities of
the Bank (including all deposit accounts and accrued interest
thereon) and after distribution of the balance in the special
liquidation account established in connection with any
acquisition by the Bank subsequent to the mutual holding company
reorganization, all assets of the Bank available for
distribution. In the event of liquidation, dissolution or
winding up of the Stock Holding Company, the holders of Holding
Company Common Stock would be entitled to receive, after payment
or provision for payment of all its debts and liabilities, all of
the assets of the Stock Holding Company available for
distribution. If Preferred Stock is issued, the holders thereof
may have a priority over the holders of the Common Stock in the
event of liquidation or dissolution.
Preemptive Rights. Holders of Holding Company Common Stock
will not be entitled to preemptive rights with respect to any
shares which may be issued. The Holding Company Common Stock is
not subject to involuntary redemption.
Preferred Stock
None of the shares of the Stock Holding Company's authorized
Preferred Stock will be issued in the Reorganization. Such stock
may be issued with such preferences and designations as the Board
of Directors may from time to time determine. The Board of
Directors can, without shareholder approval, issue Preferred
Stock with voting, dividend, liquidation and conversion rights
which could dilute the voting strength of the holders of Holding
Company Common Stock and may assist management in impeding an
unfriendly takeover or attempted change in control.
Accounting Treatment
The Reorganization will be treated similar to a pooling of
interests for accounting purposes. Therefore, the consolidated
capitalization, assets, liabilities, income and financial
statements of the Stock Holding Company immediately following the
Reorganization will be substantially the same as those of the
Bank immediately prior to consummation of the Reorganization, all
of which will be shown on the Stock Holding Company's books at
their historical recorded values. The Bank's 1997 Annual Report
to Stockholders which includes the consolidated financial
statements of the Bank, is incorporated by reference into this
Proxy Statement/Prospectus. Financial statements of the Stock
Holding Company are not included because the Stock Holding
Company was incorporated in April 1997 as a wholly owned
subsidiary of the Bank solely for the purpose of becoming a bank
holding company and has no prior operating history.
A representative of KPMG Peat Marwick LLP is expected to
attend the Meeting to respond to appropriate questions and to
make a statement if he so desires.
<PAGE>
Vote Required
Approval of the Plan of Reorganization requires the
affirmative vote of two-thirds of the total votes eligible to be
cast at the Special Meeting. Failure to vote or a vote to
abstain is equivalent to voting against the Plan of
Reorganization. The Board of Directors recommends a vote "FOR"
the approval of the Plan of Reorganization. Approval of the Plan
is assured because the Mutual Holding Company intends to vote its
shares in favor of the Plan.
This description of the material terms of the proposed Stock
Holding Company for the Bank does not purport to be complete, but
is qualified in its entirety by the Plan of Reorganization and
Articles of Incorporation and Bylaws of the Stock Holding Company
attached as Exhibits A, B and C, respectively, to this Proxy
Statement/Prospectus.
PROPOSAL III-RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Bank has approved the
engagement of KPMG Peat Marwick LLP to be the Bank's auditors for
the fiscal year ending June 30, 1998, subject to the ratification
of the engagement by the Bank's stockholders. At the Meeting,
the stockholders will consider and vote on the ratification of
the engagement of KPMG Peat Marwick LLP for the Bank's fiscal
year ending June 30, 1998. A representative of KPMG Peat Marwick
LLP is expected to attend the Meeting to respond to appropriate
questions and to make a statement if he so desires.
In order to ratify the selection of KPMG Peat Marwick LLP as
the auditors for the fiscal year ending June 30, 1998, the
proposal must receive at least a majority of the votes cast,
without regard to broker non-votes, either in person or by proxy,
in favor of such ratification. The Board of Directors recommends
a vote "FOR" the ratification of KPMG Peat Marwick LLP as
auditors for the 1998 fiscal year.
STOCKHOLDER PROPOSALS
In the event the Reorganization is not completed, in order
to be eligible for inclusion in the Bank's proxy materials for
the Bank's 1998 Annual Meeting of Stockholders, any stockholder
proposal to take action at such meeting must be received at the
Bank's executive office, 301 Second Avenue, Warren, Pennsylvania
16365, no later than June 10, 1998. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the
Exchange Act as administered by the FDIC. In the event that the
Reorganization is completed and the Stock Holding Company holds
an annual meeting of stockholders in 1998, to be eligible for
inclusion in the Stock Holding Company's proxy materials for the
Stock Holding Company's 1998 Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be
received at the Stock Holding Company's executive office, 301
Second Avenue, Warren, Pennsylvania 16365, no later than June 10,
1998. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Exchange Act as administered by
the SEC.
MISCELLANEOUS
The Board of Directors is not aware of any business to come
before the Special Meeting other than the matters described above
in the Proxy Statement/Prospectus.
EXPERTS
The consolidated financial statements of the Bank and its
subsidiaries, included in the Annual Report on Form F-2 of the
Bank for the fiscal year ended June 30, 1997, which have been
filed by the Stock Holding Company as an exhibit to the
registration statement of which this Proxy Statement/Prospectus
is a part, have been audited by KPMG Peat Marwick LLP,
independent accountants, as set forth in their report dated
August 15, 1997 accompanying such financial statements, and are
incorporated herein by reference in reliance upon the report of
such firm, which report is given upon their authority as experts
in accounting and auditing.
Any financial statements and schedules hereafter
incorporated by reference in the registration statement that have
been audited and are the subject of a report by independent
accountants will be so incorporated by reference in
<PAGE>
reliance upon such reports and upon the authority of such firms
as experts in accounting and auditing to the extent covered by
consents filed with the SEC.
AVAILABLE INFORMATION
The Stock Holding Company has filed with the SEC a
registration statement (the "Registration Statement"), of which
the Proxy Statement/Prospectus is a part, under the Securities
Act. As permitted by the rules and regulations of the SEC, this
Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement. Such
information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street,
N.W., Washington, D.C. 20549 and copies of such material can be
obtained from the SEC at prescribed rates. The SEC also
maintains a Web site at http://www.sec.gov that contains copies
of reports, proxy and information statements and other
information regarding registrants, including the Stock Holding
Company, that file electronically with the SEC. The statements
contained herein as to the contents of any contract or other
documents filed as an exhibit to the Registration Statement are
of necessary brief descriptions thereof and are not necessarily
complete. Each such statement is qualified by reference to such
contract or document.
The Bank is subject to the information, reporting and proxy
statement requirements of the Exchange Act and, in accordance
therewith and with the rules and regulations of the FDIC, files
reports, proxy statements and other information with the FDIC.
Copies of such materials may be obtained at prescribed rates from
the FDIC's Registration, Disclosure and Operations Unit, 550 17th
Street, N.W., Washington, D.C. Upon completion of the
Reorganization, the Stock Holding Company will become subject to
the information, reporting and proxy statement requirements under
the Exchange Act and in accordance therewith and the rules and
regulations of the SEC will file reports, proxy statements and
other information with the SEC. Such materials will be available
for inspection and copying as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Bank's Annual Report on Form F-2 for the year ended June
30, 1997 filed with the FDIC by the Bank pursuant to the Exchange
Act and filed by the Stock Holding Company as an exhibit to the
Registration Statement, is incorporated by reference in this
Proxy Statement/Prospectus.
All documents and reports filed with the FDIC by the Bank
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Proxy Statement/Prospectus and prior to
the completion of the Reorganization will also be filed with the
SEC by the Stock Holding Company and shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and
to be part hereof from the date of filing of such documents or
reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by
reference that are not presented herein or delivered herewith.
These documents (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference) are
available upon request to each person to whom a copy of this
Prospects/Information Statement is delivered, without charge,
upon written or telephone request to Greg LaRocca, Secretary,
Northwest Bancorp, Inc., 301 Second Avenue, Warren, Pennsylvania
16365-2353 (telephone number (814) 726-2140).
<PAGE>
A COPY OF THE BANK'S ANNUAL REPORT ON FORM F-2 FOR THE FISCAL
YEAR ENDED JUNE 30, 1997, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO
GREGORY C. LAROCCA, SECRETARY, NORTHWEST SAVINGS BANK, LIBERTY AT
SECOND, WARREN, PENNSYLVANIA 16365-2353.
BY ORDER OF THE BOARD OF DIRECTORS
Gregory C. La Rocca
Secretary
Warren, Pennsylvania
September __, 1997
<PAGE>
NORTHWEST SAVINGS BANK
ANNUAL MEETING OF STOCKHOLDERS
November 19, 1997
The undersigned hereby appoints the full Board of Directors
of the Bank, with full powers of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of
capital stock of Northwest Savings Bank (the "Bank") which the
undersigned is entitled to vote at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Knights of
Columbus, located at 219 2nd Avenue, Warren, Pennsylvania on
November 19, 1997 at 11:00 a.m., Pennsylvania time, and at any
and all adjournments and postponements thereof.
1. The election as directors for three year terms of all
nominees listed below:
/ / FOR (except as marked / / VOTE WITHHELD
to the contrary)
INSTRUCTION: To withhold your vote for any individual
nominee(s), strike a line through nominee's
name below.
JOHN O. HANNA
RICHARD L. CARR
2. The approval of an Agreement and Plan of Reorganization (the
"Plan of Reorganization") providing for the establishment of
Northwest Bancorp, Inc. (the "Stock Holding Company") as a stock
holding company parent of the Bank which stock holding company
will be majority owned by Northwest Bancorp, M.H.C. (the "Mutual
Holding Company"), the Bank's mutual holding company. Pursuant
to the Plan of Reorganization: (i) the Bank will become a wholly
owned subsidiary of the Stock Holding Company; (ii) the Stock
Holding Company will become a majority owned subsidiary of the
Mutual Holding Company; and (iii) each outstanding share of
common stock, par value $.10 per share, of the Bank will be
converted into one share of common stock, par value $.10 per
share, of the Stock Holding Company; and
/ / FOR / / AGAINST / / ABSTAIN
3. The ratification of the appointment of KPMG Peat Marwick LLP
as auditors for the Bank for the fiscal year ending June 30,
1998.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote on
any other business that may properly come before the Meeting or
any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS AND
EACH OF THE NOMINEES LISTED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT
THE MEETING.
The Board of Directors recommends a vote "FOR" the proposal
and the election of the nominees listed above.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and choose to vote at the
Meeting or at any adjournments or postponements thereof, and
after notification to the Secretary of the Bank at the Meeting of
the stockholder's decision to terminate this proxy, then the
power of such attorneys or proxies shall be deemed terminated and
of no further force and effect. This proxy may also be revoked
by filing a written notice of revocation with the Secretary of
the Bank or by duly executing a proxy bearing a later date.
The undersigned acknowledges receipt from the Bank, prior to
the execution of this proxy, of notice of the Meeting, a Proxy
Statement/Prospectus and an Annual Report to Stockholders.
Dated: ----------------, 1997 ------------------------------
Signature of Stockholder
Please sign exactly as your
name(s) appear(s) to the
left. When signing as
attorney, executor,
administrator, trustee or
guardian, please give your
full title. If shares are
held jointly, each holder
should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article VI of the Registrant's Articles of
Incorporation provides for the following indemnification for
Directors and Officers.
6.1 Third Party Actions. The Corporation shall indemnify
any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director
or officer of the Corporation, or is or was serving at the
request of the Corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit,
partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with the action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with
respect to any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful, provided that the Corporation
shall not be liable for any amounts which may be due to any such
person in connection with a settlement of any action or
proceeding effected without its prior written consent or any
action or proceeding initiated by any such person (other than an
action or proceeding to enforce rights to indemnification
hereunder).
6.2 Derivative and Corporate Actions. The Corporation shall
indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action
by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or
officer of the Corporation or is or was serving at the request of
the Corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership,
joint venture, trust or other enterprise, against expenses
(including attorney's fees) actually and reasonably incurred by
him in connection with the defense or settlement of the action if
he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation,
provided that the Corporation shall not be liable for any amounts
which may be due to any such person in connection with a
settlement of any action or proceeding affected without its prior
written consent. Indemnification shall not be made under this
Section 6.2 in respect of any claim, issue or matter as to which
the person has been adjudged to be liable to the Corporation
unless and only to the extent that the court of common pleas of
the judicial district embracing the county in which the
registered office of the Corporation is located or the court in
which the action was brought determines upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for the expenses that the court of common
pleas or other court deems proper.
6.3 Mandatory Indemnification. To the extent that a
representative of the Corporation has been successful on the
merits or otherwise in defense of any action or proceeding
referred to in Section 6.1 or Section 6.2 or in defense of any
claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
6.4 Procedure for Effecting Indemnification. Unless ordered
by a court, any indemnification under Section 6.1 or Section 6.2
shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
representative is proper in the circumstances because he has met
the applicable standard of conduct set forth in those sections.
The determination shall be made:
<PAGE>
(1) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to the action
or proceeding;
(2) if such a quorum is not obtainable, or if obtainable
and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or
(3) by the stockholders.
6.5 Advancing Expenses. Expenses (including attorneys'
fees) incurred in defending any action or proceeding referred to
in this Article VI shall be paid by the Corporation in advance of
the final disposition of the action or proceeding upon receipt of
an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized in
this Article VI or otherwise.
6.6 Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or
was a representative of the Corporation or is or was serving at
the request of the Corporation as a representative of another
domestic or foreign corporation for profit or not-for-profit,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against
that liability under the provisions of this Article VI.
6.7 Modification. The duties of the Corporation to
indemnify and to advance expenses to a director or officer
provided in this Article VI shall be in the nature of a contract
between the Corporation and each such person, and no amendment or
repeal of any provision of this Article VI shall alter, to the
detriment of such person, the right of such person to the advance
of expenses or indemnification related to a claim based on an act
or failure to act which took place prior to such amendment or
repeal.
Item 21. Exhibits and Financial Statement Schedules
The exhibits and financial statements filed as part of this
Registration Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the attached
Exhibits.
(b) Financial Statements
Not applicable.
(c) Report or Appraisal
Not applicable.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement; (i) to include any prospectus required by
Section 10(a)(3) of the
<PAGE>
Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or most recent post effective amendment
thereof) which individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be a bona fide
offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b)(1) The undersigned registrant hereby undertakes
as follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately
preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will not
be used until such amendment is effective, and for the purpose of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of, and included in the
registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in Warren, Pennsylvania, on October 2, 1997.
NORTHWEST BANCORP, INC.
By: /s/ John O. Hanna
------------------------------
John O. Hanna, President and
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned Directors of Northwest Bancorp, Inc.
severally constitute and appoint John O. Hanna with full power of
substitution, our true and lawful attorney and agent, to do any
and all things and acts in our names in the capacities indicated
below which said John O. Hanna may deem necessary or advisable to
enable Northwest Bancorp, Inc. to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the
Registration Statement on Form S-4 relating to the offering of
Northwest Bancorp, Inc. Common Stock, including specifically, but
not limited to, power and authority to sign for us or any of us
in our names in the capacities indicated below the Registration
Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that
said John O. Hanna shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
By: /s/ John O. Hanna By: /s/ William J. Wagner
------------------------- -------------------------
John O. Hanna, President, William J. Wagner,
Chief Executive Officer and Vice President, Chief
Director (Principal Executive Financial Officer, Chief
Officer) Operating Officer and
Director (Principal
Financial and Accounting
Officer)
Date: October 2, 1997 Date: October 2, 1997
By: /s/ Richard L. Carr By: /s/ Thomas K. Creal, III
------------------------- -------------------------
Richard L. Carr, Director Thomas K. Creal, III,
Director
Date: October 2, 1997 Date: October 2, 1997
By: /s/ John J. Doyle By: /s/ Robert G. Ferrier
------------------------- -------------------------
John J. Doyle, Director Robert G. Ferrier,
Director
Date: October 2, 1997 Date: October 2, 1997
By: /s/ Richard E. McDowell By: /s/ Joseph T. Stadler
------------------------- -------------------------
Richard E. McDowell, Joseph T. Stadler,
Director Director
Date: October 2, 1997 Date: October 2, 1997
By: /s/ Walter J. Yahn By: /s/ John S. Young
------------------------- -------------------------
Walter J. Yahn, Director John S. Young, Director
Date: October 2, 1997 Date: October 2, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
Exhibit
Number Description of Document
<S> <C>
2 Agreement and Plan of Reorganization*
3.1 Articles of Incorporation of Northwest
Bancorp, Inc.*
3.2 Bylaws of Northwest Bancorp, Inc.*
4 Form of Stock Certificate of Northwest
Bancorp, Inc.*
5.1 Form of Opinion of Luse Lehman Gorman
Pomerenk & Schick, A Professional Corporation
regarding legality of securities*
5.2 Form of Tax Opinion of Luse Lehman Gorman
Pomerenk & Schick, A Professional
Corporation*
10.1 Deferred Compensation Plan for Directors, as
amended*
10.2 Retirement Plan for Outside Directors*
10.3 Northwest Savings Bank Nonqualified
Supplemental Retirement Plan*
10.4 Employment Agreement between the Bank and
John O. Hanna, President and Chief Executive
Officer, as amended*
10.5 Northwest Savings Bank and Northwest Bancorp,
MHC Stock Option Plan*
10.6 Recognition and Retention Plan for Employees
and Outside Directors*
21 Subsidiaries of the Registrant*
24.1 Consent of Luse Lehman Gorman Pomerenk &
Schick, A Professional Corporation*
24.2 Consent of KPMG Peat Marwick LLP
24.3 Power of Attorney*
99.1 Northwest Savings Bank Annual Report on Form
10-K for fiscal year ended June 30, 1997**
- -------------------
*Previously filed
**To be filed by amendment
<PAGE>
</TABLE>
EXHIBIT 24.2
<PAGE>
[KPMG PEAT MARWICK LLP LETTERHEAD]
Independent Auditors' Consent
The Board of Directors
Northwest Savings Bank:
We consent to the inclusion in this Amendment No. 1 to the
Registration Statement on Form S-4 of Northwest Bancorp, Inc., of
our report dated August 15, 1997, with respect to the
consolidated financial statements of Northwest Savings Bank and
subsidiaries as of June 30, 1997 and 1996, and for each of the
years in the three-year period ended June 30, 1997, and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
/s/ KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
October 7, 1997
<PAGE>
