<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the Quarterly Period Ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________.
Commission File No. 1-13652
First West Virginia Bancorp, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-6051901
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1701 Warwood Avenue
Wheeling, West Virginia 26003
- ------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (304) 277-1100
----------------
N/A
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report) Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months ( or for such
shorter period that the registrant was required to file such report(s), and
(2) has been subject to such filing requirements for the past 90 days. [X] Yes
[ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No [X] N/A
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practible date. The number of shares
outstanding of the issuer's common stock as of July 28, 1998: Common Stock,
$5.00 Par Value, shares outstanding 1,209,085 shares
- -----------------------------------------------------------------------------
<PAGE>
2
FIRST WEST VIRGINIA BANCORP, INC.
PART I
FINANCIAL INFORMATION
<PAGE>
3
<TABLE>
<CAPTION>
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, December 31, June 30,
1998 1997 1997
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 4,611,232 $ 4,718,516 $ 4,564,501
Due from banks - interest bearing 65,593 96,967 80,999
-------------- -------------- --------------
Total cash and cash equivalents 4,676,825 4,815,483 4,645,500
Federal funds sold 6,773,000 6,932,000 1,986,000
Investment securities
Available for sale (at market value) 38,481,030 40,665,808 48,564,245
Held to maturity - Market value of
$7,194,266 at June 30, 1998 ;
$4,837,574 at December 31, 1997;
and $ 5,549,659 at June 30, 1997 7,132,998 4,778,146 5,522,065
Loans, net of unearned income 100,752,760 95,373,653 86,142,661
Less allowance for possible loan losses (1,068,680) (1,217,763) (1,189,645)
-------------- -------------- -------------
Net loans 99,684,080 94,155,890 84,953,016
Premises and equipment, net 3,021,260 3,085,087 3,153,863
Accrued income receivable 1,092,385 1,075,701 1,112,938
Other assets 608,856 630,420 677,335
Intangible assets 2,025 4,048 6,072
-------------- -------------- --------------
Total assets $ 161,472,459 $ 156,142,583 $ 150,621,034
============== ============== ==============
LIABILITIES
Noninterest bearing deposits:
Demand $ 14,163,024 $ 14,142,125 $ 12,588,960
Interest bearing deposits:
Demand 22,640,625 22,908,421 21,985,330
Savings 44,055,613 42,037,038 44,009,051
Time 59,791,663 57,957,229 54,820,977
-------------- -------------- --------------
Total deposits 140,650,925 137,044,813 133,404,318
-------------- -------------- --------------
Repurchase agreements 5,143,871 4,074,996 3,153,100
Accrued interest on deposits 448,924 432,870 383,327
Other liabilities 452,601 460,909 375,364
-------------- -------------- --------------
Total liabilities 146,696,321 142,013,588 137,316,109
-------------- -------------- --------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,209,085 shares issued at
June 30, 1998 and December 31, 1997 and
806,107 shares issued at June 30, 1997 6,045,425 6,045,425 4,030,535
Surplus 3,764,000 3,764,000 3,764,000
Retained Earnings 4,854,283 4,196,076 5,563,952
Accumulated other comprehensive income 112,430 123,494 (53,562)
-------------- -------------- --------------
Total stockholders' equity 14,776,138 14,128,995 13,304,925
-------------- -------------- --------------
Total liabilities and stockholders' equity $ 161,472,459 $ 156,142,583 $ 150,621,034
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
4
<TABLE>
<CAPTION>
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,187,246 $1,890,729 $4,314,852 $3,662,697
Tax-exempt 48,899 29,054 99,318 53,373
Investment securities:
Taxable 594,383 760,015 1,239,287 1,461,414
Tax-exempt 86,043 66,252 157,863 136,967
Dividends 11,875 5,371 18,025 10,545
Interest on deposits in banks 45,616 6,014 57,003 24,229
Interest on federal funds sold 88,574 87,730 193,580 194,279
--------- ---------- --------- ----------
Total interest income 3,062,636 2,845,165 6,079,928 5,543,504
INTEREST EXPENSE
Deposits 1,269,441 1,109,993 2,494,416 2,145,724
Other borrowings 56,351 51,359 108,315 103,597
--------- ---------- --------- ----------
Total interest expense 1,325,792 1,161,352 2,602,731 2,249,321
--------- ---------- --------- ----------
Net interest income 1,736,844 1,683,813 3,477,197 3,294,183
PROVISION FOR POSSIBLE LOAN LOSSES 56,500 36,000 103,000 61,500
--------- ---------- --------- ----------
Net interest income after provision
for possible loan losses 1,680,344 1,647,813 3,374,197 3,232,683
NONINTEREST INCOME
Service charges 117,480 104,717 225,165 196,041
Securities gains (losses) -- -- (1,608) --
Other operating income 65,813 48,977 149,632 131,759
--------- ---------- --------- ----------
Total noninterest income 183,293 153,694 373,189 327,800
NONINTEREST EXPENSES
Salary and employee benefits 588,544 567,580 1,194,426 1,142,502
Net occupancy and equipment expenses 191,054 190,155 391,832 374,347
Other operating expenses 346,323 333,781 649,257 619,554
--------- ---------- --------- ----------
Total noninterest expense 1,125,921 1,091,516 2,235,515 2,136,403
--------- ---------- --------- ----------
Income before income taxes 737,716 709,991 1,511,871 1,424,080
--------- ---------- --------- ----------
INCOME TAXES 236,524 235,506 490,939 472,988
--------- ---------- --------- ----------
Net income $ 501,192 $ 474,485 $1,020,932 $ 951,092
========= ========== ========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,209,085 1,209,085 1,209,085 1,209,085
========= ========== ========= ==========
EARNINGS PER COMMON SHARE $ 0.41 $ 0.39 $ 0.84 $ 0.79
========= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
5
<TABLE>
<CAPTION>
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Accumulated Other
------------------------- Comprehensive Retained Comprehensive
Shares Amount Surplus Income Earnings Income Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 1,209,085 $ 6,045,425 $ 3,764,000 $ -- $ 4,196,076 $ 123,494 $14,128,995
Comprehensive income
Net income for the six months
ended June 30, 1998 -- -- -- 1,020,932 1,020,932 -- 1,020,932
Other comprehensive income, net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) -- -- -- (11,064) -- (11,064) (11,064)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive income $ 1,009,868
===========
Cash dividend
($.30 per share) -- -- -- (362,725) -- (362,725)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1998
(Unaudited) 1,209,085 $ 6,045,425 $ 3,764,000 $ 4,854,283 $ 112,430 $14,776,138
=========== =========== =========== =========== =========== ===========
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ (12,078)
Less: reclassification adjustment for
gains (losses) included in net income (1,014)
-----------
Net unrealized gains (losses) on securities $ (11,064)
============
</TABLE>
<TABLE>
<CAPTION>
Common Stock Accumulated Other
------------------------- Comprehensive Retained Comprehensive
Shares Amount Surplus Income Earnings Income Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 806,107 $ 4,030,535 $ 3,764,000 $ -- $ 4,935,303 $ (80,560) $12,649,278
Comprehensive income
Net income for the six months
ended June 30, 1997 -- -- -- $ 951,092 $ 951,092 $ -- $ 951,092
Other comprehensive income, net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) -- -- -- $ 26,998 $ -- $ 26,998 $ 26,998
-----------
Comprehensive income $ 978,090
===========
Cash dividend
($.27 per share) -- -- -- (322,443) -- (322,443)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997
(Unaudited) 806,107 $ 4,030,535 $ 3,764,000 $ 5,563,952 $ (53,562) $13,304,925
=========== =========== =========== =========== =========== ===========
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ 26,998
Less: reclassification adjustment for --
gains (losses) included in net income
-----------
Net unrealized gains (losses) on securities $ 26,998
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
6
<TABLE>
<CAPTION>
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,020,932 $ 951,092
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 103,000 61,500
Depreciation and amortization 186,695 183,335
Amortization of investment securities, net (34,767) (19,567)
Investment security losses (gains) 1,608 --
Decrease (increase) in interest receivable (16,684) (164,912)
Increase (decrease) in interest payable 16,054 (1,962)
Other, net 21,616 (115,084)
------------ ------------
Net cash provided by operating activities 1,298,454 894,402
------------ ------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 159,000 3,475,000
Net (increase) decrease in loans, net of charge offs (5,641,389) (5,765,663)
Proceeds from sales of securities available for sale 2,595 --
Proceeds from maturities of securities
available for sale 21,448,170 6,550,000
Proceeds from maturities of securities
held to maturity 635,000 1,200,000
Principal collected on mortgage-backed securities 1,371,117 353,965
Purchases of securities available for sale (20,621,494) (10,524,617)
Purchases of securities held to maturity (2,989,855) (1,163,639)
Recoveries on loans previously charged-off 10,199 7,525
Purchases of premises and equipment (122,717) (85,749)
------------ ------------
Net cash used by investing activities (5,749,374) (5,953,178)
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 3,606,112 8,133,250
Dividends paid (362,725) (322,443)
Increase (decrease) in short term borrowings 1,068,875 (2,777,591)
------------ ------------
Net cash provided by financing activities $ 4,312,262 $ 5,033,216
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (138,658) (25,560)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 4,815,483 4,671,060
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,676,825 $ 4,645,500
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
7
First West Virginia Bancorp, Inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 AND 1997
1. The accompanying financial statements are unaudited. However in the
opinion of management, they contain the adjustments ( all of which are normal
and recurring in nature) necessary to present fairly the financial position
and the results of operations. The notes to the financial statements
contained in the annual report for December 31, 1997, should be read in
conjunction with these financial statements.
2. The provision for income taxes is at a rate which management believes will
approximate the effective rate for the year.
3. Certain prior year amounts have been reclassified to conform to the 1998
presentation.
<PAGE>
8
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
---------------------------------------------------------------
First West Virginia Bancorp, Inc., a West Virginia corporation
headquartered in Wheeling, West Virginia commenced operations in July, 1973
and has two wholly-owned subsidiaries: Progressive Bank, N.A., which operates
in Wheeling, Wellsburg, and Moundsville, West Virginia and Bellaire, Ohio; and
Progressive Bank, N.A.-Buckhannon, which operates in Buckhannon and Weston,
West Virginia. Following is a discussion and analysis of the significant
changes in the financial condition and results of operations of First West
Virginia Bancorp, Inc., (the Holding Company), and its subsidiaries for the
three months ended June 30, 1998 and 1997. This discussion and analysis
should be read in conjunction with the Consolidated Financial Statements,
Notes, and tables contained in this report, as well as with the Holding
Company's 1997 financial statements, the notes thereto and the related
Management's Discussion and Analysis.
OVERVIEW
The Holding Company reported net income of $501,192 for the three
months ended June 30, 1998 as compared to $474,485 for the same period during
1997. The increase in earnings during the second quarter of 1998 over 1997
can be primarily attributed to increased net interest income and noninterest
income, offset in part by increased operating expenses and the provision for
loan losses. Earnings per share were $.41 in the second quarter of 1998, an
increase of 5.6% over the $.39 earned during the second quarter of 1997.
Net income for the six months ended June 30, 1998 was $1,020,932
compared to $951,092 for the same period during 1997. The increase in
earnings for the six months ended June 30, 1998 as compared to the same period
in 1997 was primarily due to increased net interest income and noninterest
income, offset in part by increased noninterest expenses and the provision for
loan losses. Earnings per share were $.84 for the first six months of 1998,
an increase of 7.3%, as compared to $.79 earned during the same period during
1997.
Operational earnings were improved with net interest income
increasing $53,031 or 3.1%, for the three months ended June 30, 1998 as
compared to the same period in 1997. During the three month period ended June
30, 1998, net interest income increased primarily from the increase in the
average volume of loans, offset in part by the increased interest paid on time
deposits and the decrease in the average volume of investment securities.
During the six month period ended June 30, 1998, the increase in net interest
income was primarily due to the increased interest earned on the average
volume of loans, offset in part by the increase in the interest paid on the
average volume of time deposits.
Return on average assets (ROA) measures the effectiveness of asset
utilization to produce net income. ROA was 1.24% for the three month period
ended June 30, 1998 as compared to 1.25% for the same period of the prior
year. The ROA was 1.28% for both of the six month periods ended June 30, 1998
and 1997. Return on average equity (ROE) measures the return on the
stockholders' investment. The Holding Company's ROE was 13.80% for the three
months ended June 30, 1998 and 14.39% at June 30, 1997. For the six months
ended June 30, 1998 compared to June 30, 1997, ROE was 14.39% and 14.69%,
respectively.
Table One is a summary of Selected Financial Data of the Holding
Company. The sections that follow discuss in more detail the information
summarized in Table One.
<PAGE>
9
<TABLE>
<CAPTION>
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Table One
SELECTED FINANCIAL DATA
(Unaudited, figures in thousands, except per share data)
First West Virginia Bancorp, Inc.
Three months ended Six months ended Years ended
June 30, June 30, December 31,
--------------------- -------------------- ---------------------------------
1998 1997 1998 1997 1997 1996 1995
--------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 3,063 $ 2,845 $ 6,080 $ 5,543 $ 11,507 $ 10,067 $ 8,937
Total interest expense 1,326 1,161 2,603 2,249 4,745 3,925 3,421
Net interest income 1,737 1,684 3,477 3,294 6,762 6,142 5,516
Provision for loan losses 56 36 103 62 131 71 50
Total other income 183 154 373 328 639 568 738
Total other expenses 1,126 1,092 2,235 2,136 4,377 4,182 4,007
Income before income taxes 738 710 1,512 1,424 2,893 2,457 2,198
Net income 501 474 1,021 951 1,931 1,644 1,470
PER SHARE DATA (1)
Net income $ 0.41 $ 0.39 $ 0.84 $ 0.79 $ 1.60 $ 1.36 $ 1.22
Cash dividends declared (2) 0.15 0.14 0.30 0.27 0.54 0.47 0.34
Book value per share 12.22 11.00 12.22 11.00 11.69 10.46 9.68
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $ 98,882 $ 83,860 $ 97,482 $ 81,855 $ 86,609 $ 74,469 $ 66,058
Investment securities 46,086 54,007 46,494 52,548 51,754 48,557 46,020
Deposits - Interest Bearing 126,430 120,021 125,300 117,826 120,589 112,768 100,488
Long-term debt -- -- -- -- -- -- --
Stockholders' equity 14,557 13,209 14,304 13,056 13,400 12,186 11,170
Total Assets 162,415 152,450 161,000 150,354 153,290 137,810 124,145
SELECTED RATIOS
Return on average assets 1.24% 1.25% 1.28% 1.28% 1.26% 1.19% 1.18%
Return on average equity 13.80% 14.39% 14.39% 14.69% 14.41% 13.49% 13.16%
Average equity to average assets 8.96% 8.66% 8.88% 8.68% 8.74% 8.84% 9.00%
Dividend payout ratio (1) (2) 36.59% 35.90% 35.71% 34.18% 33.75% 34.56% 27.87%
Loan to Deposit ratio 71.63% 64.57% 71.63% 64.57% 69.59% 64.19% 62.67%
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET June 30, December 31,
---------------------- -----------------------------------
1998 1997 1997 1996 1995
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investments $ 45,614 $ 54,086 $ 45,444 $ 50,440 $ 45,996
Loans 100,753 86,143 95,374 80,417 72,006
Other Assets 15,105 10,392 15,325 13,689 9,953
---------- ---------- ---------- ---------- ----------
Total Assets $ 161,472 $ 150,621 $ 156,143 $ 144,546 $ 127,955
========== ========== ========== ========== ==========
Deposits $ 140,651 $ 133,404 $ 137,045 $ 125,271 $ 114,895
Repurchase agreements 5,144 3,153 4,075 5,931 749
Other Liabilities 901 759 894 695 602
Shareholders' Equity 14,776 13,305 14,129 12,649 11,709
---------- ---------- ---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $ 161,472 $ 150,621 $ 156,143 $ 144,546 $ 127,955
========== ========== ========== ========== ==========
</TABLE>
(1) Adjusted for 3 for 2 stock split in the effect of a fifty (50) percent
common stock dividend to shareholders of record as of October 1, 1997; the 4
percent common stock dividend to stockholders of record as of December 2,
1996, a 2 percent common stock dividend to stockholders of record as of
December 1, 1995 and the two-for-one stock split effective April 15, 1994.
(2) Cash dividends and the related payout ratio are based on historical
results of the Holding Company and do not include cash dividends of acquired
subsidiaries prior to the dates of consummation.
<PAGE>
10
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Earnings Analysis
Net Interest Income
- -------------------
The primary source of earnings for the Holding Company is net
interest income, which is the difference between interest earned on loans and
investments and interest paid on deposits and other liabilities. Changes in
the volume and mix of earning assets and interest bearing liabilities combined
with changes in market rates of interest greatly affect net interest income.
Tables Two and Three analyze the changes in net interest income for the three
months ended June 30, 1998 and 1997 and for the six months ended June 30, 1998
and 1997, respectively.
Net interest income increased $53,031 or 3.1%, during the three
month period ended June 30, 1998 as compared to 1997. The increase in net
interest income resulted primarily from the increased interest earned on loans
offset in part by the decreased interest earned on investment securities and
the increased interest paid on time deposits. Interest and fees on loans
increased $316,362 or 16.5% during the three month period ended June 30, 1998
as compared to the same period in 1997 due to the increase in average loan
volume. Interest and dividend income on investment securities decreased
$139,337, or 16.8% for the three months ended June 30, 1998 as compared to the
same period in 1997 primarily due to the decrease in the average volume of
investments. Interest expense increased $164,440, or 14.2%, during the three
month period ended June 30, 1998, as compared to the same period in 1997
primarily due to the increase in the average volume of time deposits.
For the six months ended June 30, 1998, net interest income
increased $183,014 or 5.6%, as compared to 1997. This increase was largely
due to the increased interest earned on loans offset in part by the decreased
interest earned on investment securities and the increased interest paid on
time deposits. Comparing the six month period ended June 30, 1998 to the same
period in 1997, interest and fees on loans increased $698,100 or 18.8%
primarily due to the increase in the average loan volume. For the six months
ended June 30, 1998, interest and dividends on investment securities decreased
$193,751 or 12.0% as compared to the same period in 1997. Interest expense
for the six months ended June 30, 1998 increased $353,410 or 15.7% primarily
due to the increase in the average volume of time deposits.
Noninterest Income
- -------------------
Noninterest income increased $29,599 or 19.3% for the three months ended
June 30, 1998 as compared to the same period of the prior year. Service
charges represent the major component of noninterest income. These charges
are earned from assessments made on checking and savings accounts. Service
charges increased $12,763 during the three month period ended June 30, 1998,
up 12.2%, as compared to the same period of the prior year. The increase in
service charges in 1998 was primarily due to an increase in the number of
charges assessed on deposit accounts. Other operating income increased
$16,836 or 34.4% primarily due to the increased automated teller
machine(ATM)fees.
For the six months ended June 30, 1998, noninterest income increased
$45,389 or 13.8% as compared to the same period in 1997. Service charges on
checking and savings accounts contributed to the increased noninterest income.
Service charges increased $29,124 or 14.9%, as compared to the same period in
1997. Other operating income increased $17,873 during the six months ended
June 30, 1998 as compared to the same period of the prior year and was
primarily attributable to the increased ATM fees. The investment securities
loss during the six month period ended June 30, 1998 was attributable to the
holding company's sale of marketable equity securities available for sale.
Non-Interest Expense
- --------------------
Noninterest expense increased $34,405 or 3.2% for the three months ended
June 30, 1998 as compared to the same period of the prior year. Salary and
employee benefits is the largest component of non-interest expense. During
the quarter ended June 30, 1998, salary and employee benefits increased
$20,964 or 3.7%. The increase was primarily attributable to normal annual
merit adjustments in salaries.
Noninterest expense increased $99,112 or 4.6% for the six months ended
June 30, 1998 as compared to the same period of the prior year. Salary and
employee benefits is the largest component of noninterest expense. During the
six months ended June 30, 1998, salary and employee benefits increased $51,924
or 4.5%. The increase was primarily attributable to normal annual merit
adjustments in salaries. The major components of other operating expenses
include: stationery and supplies, directors fees, service expense, postage and
transportation, other taxes, advertising, and regulatory assessment and
deposit insurance. Other operating expenses increased $29,703, or 4.8%, for
the six month period ended June 30, 1998 as compared to the same period in the
prior year. Increased stationery and supplies expense, service expense, and
postage expense, offset in part by decreased other expenses and directors fees
primarily contributed to the increase in otheroperating expenses during 1998.
<PAGE>
11
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Two
Average Balance Sheets and Interest Rate Analysis (in thousands)
The following table presents an average balance sheet, interest earned on
interest bearing assets, interest paid on interest bearing liabilities,
average interest rates and interest differentials for the six months ended
June 30, 1998 and June 30, 1997 and the year ended December 31, 1997. Average
balance sheet information as of June 30, 1998 and June 30, 1997 and the year
ended December 31, 1997 was compiled using the daily average balance sheet.
Loan fees and unearned discounts were included in income for average rate
calculation purposes. Non-accrual loans were included in the average balance
computations; however, no interest was included in income subsequent to the
non-accrual status classification. Average rates were annualized for the six
month periods ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
For the Six For the Six
Months ended Months ended
June 30, 1998 December 31, 1997 June 30, 1997
--------------------------- ---------------------------- ---------------------------
Average Average Average Average Average Average
Volume Interest Rate Volume Interest Rate Volume Interest Rate
-------- -------- ----- --------- -------- ----- -------- -------- -----
(expressed in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 38,985 $ 1,232 6.37% $ 45,157 $ 2,861 6.34% $ 45,753 $ 1,436 6.33%
Obligations of states and
political subdivisions 6,597 158 4.83% 5,470 264 4.83% 5,638 137 4.90%
Other securities 912 25 5.53% 1,127 69 6.12% 1,157 36 6.27%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total Investment securities: 46,494 1,415 6.14% 51,754 3,194 6.17% 52,548 1,609 6.17%
Interest bearing deposits 2,098 57 5.48% 533 28 5.25% 924 24 5.24%
Federal funds sold 7,095 194 5.51% 6,561 357 5.44% 7,280 194 5.37%
Loans, net of unearned income 97,482 4,414 9.13% 86,609 7,928 9.15% 81,855 3,716 9.15%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total earning assets 153,169 6,080 8.00% 145,457 11,507 7.91% 142,607 5,543 7.84%
Cash and due from banks 4,290 4,104 4,031
Bank premises and equipment 3,040 3,178 3,219
Other assets 1,711 1,741 1,671
Allowance for possible loan losses (1,210) (1,190) (1,174)
-------- -------- --------
Total Assets $161,000 $153,290 $150,354
======== ======== ========
LIABILITIES
Certificates of deposit $ 59,301 $ 1,632 5.55% $ 55,149 $ 2,945 5.34% $ 53,633 $ 1,392 5.23%
Savings deposits 42,770 627 2.96% 41,376 1,102 2.66% 39,344 493 2.53%
Interest bearing demand deposits 23,230 236 2.05% 24,064 509 2.12% 24,849 261 2.12%
Federal funds purchased and
Repurchase agreements 5,972 108 3.65% 5,118 189 3.69% 5,733 103 3.62%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total interest bearing liabilities 131,273 2,603 4.00% 125,707 4,745 3.77% 123,559 2,249 3.67%
Demand deposits 14,389 13,235 12,858
Other liabilities 1,034 948 881
-------- -------- --------
Total Liabilities 146,696 139,890 137,298
STOCKHOLDERS' EQUITY 14,304 13,400 13,056
-------- -------- --------
Total Liabilities
and Stockholders' Equity $161,000 $153,290 $150,354
======== ======== ========
Net yield on earning assets $ 3,477 4.58% $ 6,762 4.65% $ 3,294 4.66%
======== ===== ======== ===== ======== =====
</TABLE>
The fully taxable equivalent basis of interest income from obligations of
states and political subdivisions has been determined using a combined Federal
and State corporate income tax rate of 40% for the six months ended June 30,
1998 and 1997, and the year ended December 31, 1997, respectively. The effect
of this adjustment is presented below (in thousands).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Obligations of states and
political subdivisions:
Investment securities $ 6,597 $ 263 8.05% $ 5,470 $ 440 8.04% $ 5,638 $ 228 8.17%
Loans 97,482 4,480 9.27% 86,609 8,018 9.26% 81,855 3,752 9.24%
======== ======== ===== ======== ======== ===== ======== ======== =====
Total earning assets $ 153,169 $ 6,251 8.23% $ 145,457 $ 11,773 8.09% $142,607 $ 5,670 8.02%
======== ======== ===== ======== ======== ===== ======== ======== =====
Taxable equivalent net yield on
earning assets $ 3,648 4.80% $ 7,028 4.83% $ 3,421 4.84%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------------------------------------------------------------------
<PAGE>
12
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Three
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates
and Interest Differential
The following table presents an average balance sheet, interest earned on
interest bearing assets, interest paid on interest bearing liabilities,
average interest rates and interest differentials for the three months ended
June 30, 1998 and June 30, 1997. Average balance sheet information as of June
30, 1998 and June 30, 1997 was compiled using the daily average balance sheet.
Loan fees and unearned discounts were included in income for average rate
calculation purposes. Non-accrual loans were included in the average balance
computations; however, no interest was included in income subsequent to the
non-accrual status classification. Average rates were annualized for the
three month periods ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
June 30, 1998 June 30, 1997
-------------------------------- --------------------------------
Average Average Average Average
Volume Interest Rate Volume Interest Rate
---------- ---------- ----- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 37,871 $ 593 6.28% $ 47,244 $ 747 6.34%
Obligations of states and
political subdivisions 7,239 86 4.77% 5,615 66 4.71%
Other securities 976 13 5.34% 1,148 18 6.29%
---------- ---------- ----- ---------- ---------- -----
Total Investment Securities 46,086 692 6.02% 54,007 831 6.17%
Interest bearing deposits 3,280 46 5.63% 440 6 5.47%
Federal funds sold 6,467 89 5.52% 6,347 88 5.56%
Loans, net of unearned income 98,882 2,236 9.07% 83,860 1,920 9.18%
---------- ---------- ----- ---------- ---------- -----
Total earning assets 154,715 3,063 7.94% 144,654 2,845 7.89%
Cash and due from banks 4,120 4,020
Bank premises and equipment 3,029 3,196
Other assets 1,738 1,761
Allowance for possible loan losses (1,187) (1,181)
---------- ----------
Total Assets $ 162,415 $ 152,450
========= =========
LIABILITIES
Certificates of deposit $ 59,782 $ 829 5.56% $ 54,806 $ 720 5.27%
Savings deposits 43,132 321 2.99% 40,638 260 2.57%
Interest bearing demand deposits 23,516 119 2.03% 24,577 130 2.12%
Federal funds purchased and
Repurchase agreements 6,150 57 3.72% 5,312 51 3.85%
---------- ---------- ----- ---------- ---------- -----
Total interest bearing liabilities 132,580 1,326 4.01% 125,333 1,161 3.72%
Demand deposits 14,268 13,005
Other liabilities 1,010 903
---------- -----------
Total Liabilities 147,858 139,241
SHAREHOLDERS' EQUITY 14,557 13,209
---------- ----------
Total Liabilities
and Shareholders' Equity $ 162,415 $ 152,450
========= ==========
Met yield on earning assets $ 1,737 4.50% $ 1,684 4.67%
========== ===== ========== =====
</TABLE>
The fully taxable equivalent basis of interest income from obligations of
states and political subdivisions has been determined using a combined Federal
and State corporate income tax rate of 40% for the three months ended June 30,
1998 and 1997, respectively. The effect of this adjustment is presented below
(in thousands).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Obligations of states and
political subdivisions:
Investment securities $ 7,239 $ 143 7.94% $ 5,615 $ 110 7.86%
Loans 98,882 2,269 9.20% 83,860 1,939 9.27%
========== ========== ===== ========== ========== =====
Total earning assets $ 154,715 $ 3,153 8.17% $ 144,654 $ 2,908 8.06%
========== ========== ===== ========== ========== =====
Taxable equivalent net yield on
earning assets $ 1,827 4.74% $ 1,747 4.84%
========== ====== ========== ======
</TABLE>
<PAGE>
13 First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Balance Sheet Analysis
Investments
- -----------
Investment securities increased $170,074 or .4% from $45,443,954 at
December 31, 1997, to $45,614,028 at June 30, 1998. Taxable securities
comprised 83.2% of total securities at June 30, 1998, as compared to 88.4% at
December 31, 1997. The corporation does not have any securities of issuers,
other than U.S. Government and U.S. Government agencies and corporations,
which exceed 10 percent of stockholders' equity as of June 30, 1998. Other
than the normal risks inherent in purchasing U.S. Treasury securities, U.S.
Government corporation and agencies securities, and obligations of states and
political subdivisions, i.e. interest rate risk, management has no knowledge
of other market or credit risk involved in these investments. The corporation
does not have any high risk hybrid/derivative instruments.
As of June 30, 1998, the Holding Company had approximately 84% of the
investment portfolio classified as available for sale, while 16% was
classified as held to maturity. As the investment portfolio consists
primarily of fixed rate debt securities, changes in the market rates of
interest will effect the carrying value of securities available for sale,
adjusted upward or downward under the requirements of FAS 115. As market
rates of interest were improved, the carrying value of securities available
for sale was increased by $178,377 and $195,928 at June 30, 1998 and December
31, 1997, respectively. The market value of securities classified as held to
maturity was above book value by $61,268 and $59,428 at June 30, 1998 and
December 31, 1997, respectively.
Table Four
Investment Portfolio
The following table presents the book values of investment securities at June
30, 1998 and 1997 and at December 31, 1997:
(in thousands) (Unaudited):
June 30, December 31, June 30,
1998 1997 1997
------- ------- -------
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ -- $ -- $ 500
Obligations of states
and political subdivisions 7,133 4,778 5,022
------- ------- -------
Total held to maturity $ 7,133 $ 4,778 $ 5,522
------- ------- -------
Securities available for sale :
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 30,385 $32,027 $42,845
Obligations of states
and political subdivisions 514 516 509
Corporate debt securities 207 209 508
Mortgage-backed securities 6,573 7,287 4,080
Equity Securities 802 627 622
------- ------- -------
Total available for sale 38,481 40,666 48,564
------- ------- -------
Total $45,614 $45,444 $54,086
======= ======= =======
- -----------------------------------------------------------------------
<PAGE>
14
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Five
Investment Portfolio ( Continued)
(in thousands)
The maturity distribution using book value including accretion of discounts
and amortization of premiums (expressed in thousands) and approximate yield
of investment securities at June 30, 1998 and December 31, 1997 are presented
in the following table. Tax equivalent yield basis was used on tax exempt
obligations. Approximate yield was calculated using a weighted average of
yield to maturities.
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
--------------------------------------------- ----------------------------------------
Securities Securities Securities Securities
Held to Maturity Available for Sale Held to Maturity Available for Sale
-------------------- -------------------- -------------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government Agencies
Within One Year $ -- -- % $ 6,312 6.14 % $ -- -- % $ 7,794 6.11 %
After One But
Within Five Years -- -- 13,920 6.10 -- -- 21,970 6.38
After Five But
Within Ten Years -- -- 10,153 6.40 -- -- 2,263 6.94
After Ten Years -- -- -- -- -- -- -- --
------- ----- ------- ------ -------- ------ -------- ----
-- -- 30,385 6.21 -- -- 32,027 6.35
States & Political Subdivisions
Within One Year 695 8.59 -- -- 436 6.31 -- --
After One But
Within Five Years 3,309 6.64 -- -- 3,238 7.16 -- --
After Five But
Within Ten Years 2,691 7.15 514 7.48 941 7.55 516 7.46
After Ten Years 438 7.00 -- -- 163 7.72 -- --
------- ----- ------- ------ -------- ------ -------- ----
7,133 7.04 514 7.48 4,778 7.18 516 7.46
Corporate Debt Securities
Within One Year -- -- 101 7.73 -- -- -- --
After One But
Within Five Years -- -- 106 8.02 -- -- 209 7.83
------- ----- ------- ------ -------- ------ -------- ----
-- -- 207 7.88 -- -- 209 7.83
Mortgage-Backed Securities -- -- 6,573 6.54 -- -- 7,287 6.55
Equity Securities -- -- 802 5.90 -- -- 627 5.45
------- ----- ------- ------ -------- ------ ------- -----
Total $ 7,133 7.04% $38,481 6.29% $ 4,778 7.18% $40,666 6.39%
======= ====== ======= ====== ======== ====== ======== =====
</TABLE>
<PAGE>
15
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Loans
- -----
Loans as of June 30, 1998 were $100,752,760 as compared to $95,373,653 as
of December 31, 1997, an increase of 5.6%. The loan growth can be attributed
primarily to increases in commercial loans, installment loans and residential
real estate loans which increased approximately $3,065,000, $1,693,000, and
$436,000, respectively. The increase in commercial loans were primarily the
result of expansion of area businesses due to the extension of a subsidiary
bank's market area. Increases in third party paper with various automobile
dealers contributed to the increase in installment loans. Loan growth was
funded principally through the increase in deposits.
Real estate residential loans which include real estate construction,
real estate farmland, and real estate residential loans comprise thirty-three
percent (33%) of the loan portfolio. Commercial loans which include real
estate secured by non-farm, non residential and commercial and industrial
loans comprise thirty-nine percent (39%) of the loan portfolio. Installment
loans comprise twenty-four percent (24%) of the loan portfolio. Other loans
include nonrated industrial development obligations, direct financing leases
and other loans comprise four percent (4%) of the loan portfolio. The changes
in the composition of the loan portfolio from December 31, 1997 to June 30,
1998 were a 1% increase in commercial loans, a 1% increase in installment
loans, and a 2% decrease in real estate residential loans.
The loan portfolio is not dominated by concentrations of credit within
any one industry; therefore, the impact of a weakening economy on any
particular industry should be minimal. Management believes that the loan
portfolio does not contain any excessive or abnormal elements of risk.
Table Six
Loan Portfolio
(Unaudited)
Loans outstanding are as follows (in thousands) :
June 30, December 31,
------------------------- ----------
1998 1997 1997
Real Estate - Residential
Real estate-construction $ 150 $ 357 $ 334
Real estate-farmland 156 125 122
Real estate-residential 33,196 30,248 32,610
---------- ---------- ----------
$ 33,502 $ 30,730 $ 33,066
---------- ---------- ----------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 26,740 $ 22,068 $ 23,925
Commercial & industrial 12,627 11,020 12,377
---------- ---------- ----------
$ 39,367 $ 33,088 $ 36,302
---------- ---------- ----------
Installment
Installment and other
loans to individuals $ 24,180 $ 20,131 $ 22,487
---------- ---------- ----------
Others
Nonrated industrial
development obligations $ 3,752 $ 2,045 $ 3,517
Direct Financing Leases 47 206 70
Other loans 14 39 40
---------- ---------- ----------
$ 3,813 $ 2,290 $ 3,627
---------- ---------- ----------
Total 100,862 86,239 95,482
Less unearned interest 109 96 108
---------- ---------- ----------
$ 100,753 $ 86,143 $ 95,374
========= ========= =========
<PAGE>
16
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Seven
Loan Portfolio - Maturities and sensitivities of Loans to Changes in
Interest Rates
The following table presents the contractual maturities of loans other than
installment loans and residential mortgages for all banks as of June 30, 1998
and December 31, 1997 (in thousands) (Unaudited):
June 30, 1998
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 1,949 $ 6,655 $ 4,023
Real Estate - construction 150 -- --
--------- --------- ---------
Total $ 2,099 $ 6,655 $ 4,023
======== ======== ========
December 31, 1997
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 1,088 $ 7,769 $ 3,520
Real Estate - construction 333 -- --
--------- --------- ---------
Total $ 1,421 $ 7,769 $ 3,520
======== ======== ========
The following table presents an analysis of fixed and variable rate loans as
of June 30, 1998 and December 31, 1997 along with the contractual maturities
of loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
June 30, 1998
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ -----------
Fixed Rates $ 1,301 $ 6,110 $ 1,163
Variable Rates 798 545 2,860
--------- --------- ---------
Total $ 2,099 $ 6,655 $ 4,023
======== ======== ========
December 31, 1997
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
---------------------------- ----------
Fixed Rates $ 1,122 $ 6,326 $ 1,237
Variable Rates 299 1,443 2,283
--------- --------- ---------
Total $ 1,421 $ 7,769 $ 3,520
======== ======== ========
- ---------------------------------------------------------------------------
<PAGE>
17
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Total non-performing loans were $672,000 at June 30, 1998 and $839,000 at
December 31, 1997, a decrease of 20.0%. Loans classified as non-accrual were
$482,000 or .5% of total loans as of June 30, 1998, as compared to $540,000 or
.6% of total loans at December 31, 1997. There were no loans classified as
renegotiated as of June 30, 1998 and 1997, respectively. The loans past due
90 days or more decreased $45,000 to $174,000 at June 30, 1998 as compared to
$219,000 at December 31, 1997. Other real estate owned decreased $20,000
during the second quarter due to the sale of property by a subsidiary bank.
Management continues to monitor the non-performing assets to ensure against
deterioration in collateral values.
Table Eight
Risk Elements
(UNAUDITED)
The following table presents loans which are in the process of collection, but
are contractually past due 90 days or more as to interest or principal,
non-accrual loans and other real estate ( in thousands):
June 30, December 31,
----------------- ------------
1998 1997 1997
Past Due 90 Days or More:
Real Estate - residential $ 24 $ 304 $ 45
Commercial 16 139 70
Installment 134 56 104
------- ------- ------------
$ 174 $ 499 $ 219
------- ------- ------------
Non-accrual:
Real Estate - residential $ 181 $ 120 $ 139
Commercial 272 170 353
Installment 29 14 48
------- ------- ------------
$ 482 $ 304 $ 540
------- ------- ------------
Other Real Estate $ 16 $ 49 $ 80
------- ------- ------------
Total non-performing assets $ 672 $ 852 $ 839
======= ======= ===========
Total non-performing assets
to total loans and
other real estate 0.67% 0.99% 0.88%
Generally, all Banks recognize interest income on the accrual basis, except
for certain loans which are placed on a non-accrual status. Loans are placed
on a non-accrual status, when in the opinion of management doubt exists as to
its collectibility. In accordance with the Office of the Comptroller of the
Currency Policy, banks may not accrue interest on any loan which either the
principal or interest is past due 90 days or more unless the loan is both well
secured and in the process of collection.
The amount of interest income that would have been recognized had the loans
performed in accordance with their original terms was approximately $30,500
and $9,200 for the periods ended June 30, 1998 and 1997, respectively.
As of June 30, 1998, there are no loans known to management other than those
previously disclosed about which management has any information about possible
credit problems of borrowers which causes management to have serious doubts as
to the borrower's ability to comply with present loan repayment terms.
- ------------------------------------------------------------------------------
<PAGE>
18
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Allowance for Possible Loan Losses
- ----------------------------------
The corporation maintains an allowance for possible loan losses to absorb
probable loan losses. Table Nine presents a summary of the Allowance for
Possible Loan Losses. The provision for loan losses increased to $56,500
during the three months ended June 30, 1998, from $36,000 during the same
period of the prior year. The increased loan growth combined with the
increase in net charge-offs and non-performing assets has prompted the
increase in the provision for loan losses. The allowance for possible loan
losses represented 1.1% and 1.3% of loans outstanding as of June 30, 1998 and
December 31, 1997, respectively. Net loan charge-offs were $188,000 during
the second quarter of 1998. The net charge-offs during the three month period
ended June 30, 1998 were primarily commercial and installment loans. The
reserve for possible loan losses is considered to be adequate to provide for
future losses in the portfolio. The amount charged to earnings is based upon
management's evaluations of the loan portfolio, as well as current and
anticipated economic conditions, net loans charged off, past loan experiences,
changes in character of the loan portfolio, specific problem loans and
delinquencies and other factors.
Table Nine
Analysis of Allowance for Possible Loan Losses
(UNAUDITED)
The following table presents a summary of loans charged off and recoveries of
loans previously charged off by type of loan (in thousands).
Summary of Loan Loss Experience
-----------------------------------
June 30, December 31,
------------------- ------------
1998 1997 1997
Balance at Beginning of period
Allowance for Possible
Loan Losses $ 1,218 $ 1,160 $ 1,160
Loans Charged Off:
Real Estate - residential 65 -- 18
Commercial 134 1 --
Installment 63 39 67
-------- -------- ----------
262 40 85
Recoveries:
Real Estate - residential 5 -- --
Commercial -- 3 3
Installment 5 5 9
-------- -------- ----------
10 8 12
Net Charge-offs 252 32 73
Additions Charged to Operations 103 62 131
-------- -------- ----------
Balance at end of period: $ 1,069 $ 1,190 $ 1,218
======= ======= =========
Average Loans Outstanding $ 97,482 $ 81,855 $ 86,609
======= ======= =========
Ratio of net charge-offs
to Average loans
outstanding for the period .26% .04% .08%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.06% 1.38% 1.28%
The additions to the allowance for loan losses are based on management's
evaluation of characteristics of the loan portfolio, current and anticipated
economic conditions, past loan experiences, net loans charged-off, specific
problem loans and delinquencies, and other factors.
- ------------------------------------------------------------------------------
<PAGE>
19
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Allowance for Possible Loan Losses - continued
- -----------------------------------------------
The corporation has allocated the allowance for possible loan losses to
specific portfolio segments based upon historical net charge-off experience,
changes in the level of non-performing assets, local economic conditions and
management experience as presented in Table Nine. The Corporation has
historically maintained the allowance for loan losses at a level greater than
actual charge-offs. In determining the allocation of the allowance for
possible loan losses, charge-offs for 1998 are anticipated to be within the
historical ranges. Although a subjective evaluation is determined by
management, the corporation believes it has appropriately assessed the risk of
loans in the loan portfolio and has provided for an allowance which is
adequate based on that assessment. Because the allowance is an estimate, any
change in the economic conditions of the corporation's market area could
result in new estimates which could affect the corporation's earnings.
Management monitors loan quality through reviews of past due loans and all
significant loans which are considered to be potential problem loans on a
monthly basis. The internal loan review function provides for an independent
review of commercial, real estate, and installment loans in order to measure
the asset quality of the portfolio. Management's review of the loan portfolio
has not indicated any material amount of loans, not disclosed in the
accompanying tables and discussions which are known to have possible credit
problems that cause management to have serious doubts as to the ability of
each borrower to comply with their present loan repayment terms.
Table Ten
Loan Portfolio - Allocation of allowance for possible loan losses
The following table presents an allocation of the allowance for possible loan
losses at each of the five year periods ended December 31, 1997 , and the six
month period ended June 30, 1998 ( expressed in thousands). The allocation
presented below is based on the historical average of net charge offs per
category combined with the change in loan growth and management's review of
the loan portfolio.
<TABLE>
<CAPTION>
June 30, December 31,
------------- --------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ----------- --------- ---------- ---------- -----------
Percent Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans of loans
in each in each in each in each in each in each
category category category category category category
to total to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans Amount loans
------- ------ ------ ------ ------ ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate -
residential $ 193 33.2% $ 202 34.6% $ 192 36.5% $ 215 39.9% $216 43.1% $216 43.1%
Commercial 490 39.0 622 38.0 619 39.1 618 36.5 420 34.7 382 35.9
Installment 335 24.0 343 23.6 298 21.6 265 20.0 260 19.3 248 17.6
Others 20 3.8 20 3.8 20 2.8 20 3.6 20 2.9 20 3.4
Unallocated 31 -- 31 -- 31 -- 31 -- 31 -- 30 -
------ ----- ------ ----- ---- ----- ---- ----- ---- ------ ---- ------
Total $1,069 100.0% $1,218 100.0% $1,160 100.0% $1,149 100.0% $947 100.0% $896 100.0%
====== ===== ====== ===== ==== ===== ===== ===== ==== ====== ==== ======
</TABLE>
20
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Deposits
- --------
Total deposits were $140,650,925 at June 30, 1998 as compared to
$137,044,813 at December 31, 1997, an increase of 2.6%. Deposit growth
increased primarily in savings and time deposits. Savings and time deposits
grew primarily as a result of consumers selecting higher yielding products and
the special promotions of time deposits offered by the subsidiary banks.
Table Eleven
Deposits
The following table presents other time deposits of $100,000 or more issued by
domestic offices by time remaining until maturity of 3 months or less; over 3
through 6 months; over 6 through 12 months; and over 12 months. (Unaudited)
<TABLE>
<CAPTION>
June 30, 1998
Maturities of Time Deposits in Excess of $100,000
--------------------------------------------------
In Three Over Three Over Six Over
Months And Less Than And Less Than Twelve
Or Less Six Months Twelve Months Months TOTAL
------- ------------ ------------- ------ -----
(Expressed in Thousands)
<S> <C> <C> <C> <C> <C>
Time Certificates
of Deposit $ 1,455 $ 1,500 $ 3,124 $ 4,231 $ 10,310
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
Maturities of Time Deposits in Excess of $100,000
--------------------------------------------------
In Three Over Three Over Six Over
Months And Less Than And Less Than Twelve
Or Less Six Months Twelve Months Months TOTAL
------- ------------ ------------- ------ -----
(Expressed in Thousands)
<S> <C> <C> <C> <C> <C>
Time Certificates
of Deposit $ 4,297 $ 1,128 $ 1,668 $ 4,854 $ 11,947
</TABLE>
<PAGE>
Repurchase Agreements
- ----------------------
Repurchase agreements represent short-term borrowings, usually
overnight to 30 days. Repurchase agreements were $5,143,871 at June 30, 1998,
an increase of $1,068,875, as compared to December 31, 1997. The increase of
repurchase agreements was primarily due to the increase in the balances
maintained by existing commercial customers.
- ------------------------------------------------------------------------------
<PAGE>
21
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Capital Resources
- -----------------
A strong capital base is vital to continued profitability because it
promotes depositor and investor confidence and provides a solid foundation for
future growth. Stockholders' equity increased 4.7% during the first six
months of 1998 entirely from current earnings after quarterly dividends, and a
decrease of .1% resulting from the effect of the change in the net unrealized
gain (loss) on securities available for sale. Stockholders' equity amounted
to 9.2% of total assets at June 30, 1998 as compared to 9.0% at December 31,
1997.
The Holding Company's primary source of funds for payment of dividends to
shareholders is from the dividends from its subsidiary banks. Earnings from
subsidiary bank operations are expected to remain adequate to fund payment of
stockholders' dividends and internal growth. In management's opinion, the
subsidiary banks have the capability to upstream sufficient dividends to meet
the cash requirements of the Holding Company.
The Holding Company is subject to regulatory risk-based capital
guidelines administered by the Federal Reserve Board. These risk-based
capital guidelinesestablish minimum capital ratios of Total capital, Tier 1
Capital, and Leverage to assess the capital adequacy of bank holding
companies.
The following chart shows the regulatory capital levels for the
company at June 30, 1998, June 30, 1997, and December 31, 1997:
June 30, Dec. 31
-------------- -------
Ratio Minimum 1998 1997 1997
- ---------------------- -------- ------- ----- -----
Leverage Ratio 3% 8.8 8.6 8.7
Risk Based Capital
Tier 1 (core) 4% 14.0 14.6 14.2
Tier 2 (total) 8% 15.0 15.8 15.4
Liquidity
- ---------
Liquidity management ensures that funds are available to meet loan
commitments, deposit withdrawals, and operating expenses. Funds are provided
by loan repayments, investment securities maturities, or deposits, and can be
raised by liquidating assets or through additional borrowings. The
corporation had investment securities with an estimated market value of
$38,481,030 classified as available for sale at June 30, 1998. These
securities are available for sale at any time based upon management's
assessment in order to provide necessary liquidity should the need arise. In
addition, the Holding Company's subsidiary banks, Progressive Bank, N.A., and
Progressive Bank, N.A.- Buckhannon, are members of the Federal Home Loan Bank
of Pittsburgh (FHLB). Membership in the FHLB provides an additional source of
short-term and long-term funding, in the form of collateralized advances. At
June 30, 1998, Progressive Bank, N.A. and Progressive Bank, N.A.- Buckhannon,
had an available line of approximately $2,570,000 and $694,000, respectively,
without purchasing any additional capital stock from the FHLB. As of
June 30, 1998 there were no borrowings outstanding pursuant to these
agreements.
At June 30, 1998 the Holding Company had outstanding loan commitments and
unused lines of credit totaling $7,491,000. As of June 30, 1998, management
placed a high probability for required funding within one year of
approximately $5,114,000. Approximately $2,229,000 is principally unused home
equity and credit card lines on which management places a low probability for
required funding.
<PAGE>
22
FIRST WEST VIRGINIA BANCORP, INC.
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
- -----------------------------------
The nature of the business of the Holding Company's subsidiaries generates a
certain amount of litigation involving matters arising in the ordinary course
of business. However, there are no proceedings now pending or threatened
before any court or administrative agency to which the Holding Company or its
subsidiaries are a party or to which their property is subject.
Item 2 Changes in Securities
- ---------------------------------------
Inapplicable
Item 3 Defaults Upon Senior Securities
- -------------------------------------------------
Inapplicable
Item 4 Submission of Matters to Vote of Security Holders
- -------------------------------------------------------------------
a. Inapplicable
b. Inapplicable
c. Inapplicable
d. Inapplicable
Item 5 Other Information
- -----------------------------------
Inapplicable
<PAGE>
23
Item 6 Exhibits and Reports on Form 8-K
- --------------------------------------------------
(a) Financial
----------
The consolidated financial statements of First West Virginia Bancorp, Inc.
and subsidiaries, for the six month period ended June 30, 1998, are
incorporated by reference in Part I:
------
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the quarter ended June 30,
1998.
(c) Exhibits
--------
The exhibits listed in the Exhibit Index on page 25 of this FORM 10-Q are
incorporated by reference and/or filed herewith.
<PAGE>
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
First West Virginia Bancorp, Inc
--------------------------------
(Registrant)
By: /s/ Ronald L. Solomon
---------------------------------------------------------------
Ronald L. Solomon
President and Chief Executive Officer/Director
By: /s/ Francie P. Reppy
---------------------------------------------------------------
Francie P. Reppy
Controller
Dated: July 28, 1998
<PAGE>
25
EXHIBIT INDEX
The following exhibits are filed herewith and/or are incorporated herein by
reference.
Exhibit
Number Description
- ------- -----------
10.1 Employment Contract dated January 1, 1998 between First West
Virginia Bancorp, Inc. and Ronald L. Solomon. Incorporated herein by
reference.
10.2 Employment Contract dated January 1, 1998 between First West
Virginia Bancorp, Inc. and Charles K. Graham. Incorporated herein by
reference.
10.3 Lease dated July 20, 1993 between Progressive Bank, N.A., formerly
known as "First West Virginia Bank, N.A.", and Angela I. Stauver.
Incorporated herein by reference.
10.4 Lease dated March 26, 1992 between First West Virginia Bancorp, Inc.
and the estate of Thomas L. Stockert, Jr., and the Tom Stockert Corporation.
Incorporated herein by reference.
10.6 Banking Services License Agreement dated October 26, 1994 between
Progressive Bank, N.A., formerly known as "First West Virginia Bank, N.A.",
and The Kroger Co. Incorporated herein by reference.
10.7 Lease dated November 14, 1995 between Progressive Bank, N.A.
Buckhannon and First West Virginia Bancorp, Inc and O. V. Smith & Sons of Big
Chimney, Inc. Incorporated herein by reference.
11.1 Statement regarding computation of per share earnings. Filed
herewith and incorporated herein by reference.
13.3 Summarized Quarterly Financial Information. Filed herewith and
incorporated herein by reference.
15 Letter re unaudited interim financial information. Incorporated
herein by reference. See Part 1, Notes to Consolidated Financial Statements
27 Financial Data Schedule. Filed herewith and incorporated herein by
reference.
<PAGE>
26
EXHIBIT 11.1
Statement Regarding Computation of Per Share Earnings
<PAGE>
27
Computation of Earnings Per Share
- ---------------------------------
The following formula was used to calculate the earnings per share,
Consolidated Statements of Income for the six months ended June 30, 1998 and
1997, included in this report as Exhibit 13.3
Earnings Per Share
Net Income/Weighted average shares of common stock outstanding for the period
Six months ended
June 30,
1998 1997
------- -------
Weighted Average
Shares Outstanding 1,209,085 1,209,085
Net Income 501,192 474,485
Per Share Amount .41 .39
No common stock equivalents exist.
<PAGE>
28
EXHIBIT 13.3
Summarized Quarterly Financial Information
<PAGE>
29
- ------------------------------------------------------------------------------
First West Virginia Bancorp, Inc.
Summarized Quarterly Financial Information
- ------------------------------------------------------------------------------
A summary of selected quarterly financial information follows:
First Second
1998 Quarter Quarter
------------- -------------
Total interest income $ 3,017,292 3,062,636
Total interest expense 1,276,939 1,325,792
Net interest income 1,740,353 1,736,844
Provision for loan losses 46,500 56,500
Investment Securities gain (loss) (1,608) --
Total other income 191,504 183,293
Total other expenses 1,109,594 1,125,921
Income before income taxes 774,155 737,716
Net income 519,740 501,192
Net income per share (1) .43 .41
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total interest income $ 2,698,339 $ 2,845,165 $ 2,954,722 $ 3,008,583
Total interest expense 1,087,969 1,161,352 1,224,185 1,270,941
Net interest income 1,610,370 1,683,813 1,730,537 1,737,642
Provision for loan losses 25,500 36,000 34,500 34,500
Investment Securities Gain (Loss) -- -- -- (1,291)
Total other income 174,106 153,694 172,615 139,807
Total other expenses 1,044,887 1,091,516 1,116,343 1,124,623
Income before income taxes 714,089 709,991 752,309 717,035
Net income 476,607 474,485 502,677 476,799
Net income per share (1) .39 .39 .42 .40
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total interest income $ 2,372,377 $ 2,473,455 $ 2,556,220 $ 2,665,006
Total interest expense 916,012 958,753 993,702 1,056,942
Net interest income 1,456,365 1,514,702 1,562,518 1,608,064
Provision for loan losses 14,400 14,400 16,800 25,000
Investment Securities Gain (Loss) (1,050) 339 -- --
Total other income 136,416 143,670 148,902 139,487
Total other expenses 1,016,692 1,040,824 1,038,297 1,085,853
Income before income taxes 560,639 603,487 656,323 636,698
Net income 374,361 405,277 435,046 429,310
Net income per share (1) .31 .34 .36 .35
</TABLE>
(1) Adjusted for the 3 for 2 stock split in the effect of a 50% stock
dividend to stockholders of record as of October 1, 1997, a 4 percent common
stock dividend to stockholders of record as of December 2, 1996, and a 2
percent common stock dividend to stockholders of record as of December 1, 1995.
- ---------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 4,611
<INT-BEARING-DEPOSITS> 66
<FED-FUNDS-SOLD> 6,773
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 38,481
<INVESTMENTS-CARRYING> 7,133
<INVESTMENTS-MARKET> 7,194
<LOANS> 100,753
<ALLOWANCE> 1,069
<TOTAL-ASSETS> 161,472
<DEPOSITS> 140,651
<SHORT-TERM> 5,144
<LIABILITIES-OTHER> 901
<LONG-TERM> 0
0
0
<COMMON> 6,045
<OTHER-SE> 8,731
<TOTAL-LIABILITIES-AND-EQUITY> 161,472
<INTEREST-LOAN> 4,414
<INTEREST-INVEST> 1,415
<INTEREST-OTHER> 251
<INTEREST-TOTAL> 6,080
<INTEREST-DEPOSIT> 2,494
<INTEREST-EXPENSE> 2,603
<INTEREST-INCOME-NET> 3,477
<LOAN-LOSSES> 103
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 2,236
<INCOME-PRETAX> 1,512
<INCOME-PRE-EXTRAORDINARY> 1,512
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,021
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
<YIELD-ACTUAL> 4.80
<LOANS-NON> 482
<LOANS-PAST> 174
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,218
<CHARGE-OFFS> 262
<RECOVERIES> 10
<ALLOWANCE-CLOSE> 1,069
<ALLOWANCE-DOMESTIC> 1,069
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 31
</TABLE>
