<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 March 31, 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 practical date.
The number of shares outstanding of the issuer's common stock as of April 25,
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
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1998 1997 1997
-------------- -------------- --------------
ASSETS
<S> <C> <C> <C>
Cash and due from banks $ 4,746,625 $ 4,718,516 $ 4,820,609
Due from banks - interest bearing 5,105,644 96,967 1,552,903
-------------- -------------- --------------
Total cash and cash equivalents 9,852,269 4,815,483 6,373,512
Federal funds sold 6,307,000 6,932,000 6,405,000
Investment securities
Available for sale (at market value) 39,405,326 40,665,808 45,807,114
Held to maturity - Market value of
$5,486,551 at March 31, 1998 ;
$4,837,574 at December 31, 1997;
and $ 6,390,130 at March 31, 1997 5,425,406 4,778,146 6,399,647
Loans, net of unearned income 97,321,531 95,373,653 81,032,143
Less allowance for possible loan losses (1,200,533) (1,217,763) (1,169,918)
-------------- -------------- --------------
Net loans 96,120,998 94,155,890 79,862,225
Premises and equipment, net 3,016,192 3,085,087 3,213,726
Accrued income receivable 1,094,101 1,075,701 1,215,820
Other assets 724,057 630,420 829,749
Intangible assets 3,036 4,048 7,084
-------------- -------------- --------------
Total assets $ 161,948,385 $ 156,142,583 $ 150,113,877
============== ============== ==============
LIABILITIES
Noninterest bearing deposits:
Demand $ 14,668,860 $ 14,142,125 $ 13,102,522
Interest bearing deposits:
Demand 23,159,630 22,908,421 25,758,795
Savings 43,900,998 42,037,038 38,631,124
Time 59,141,424 57,957,229 53,255,460
-------------- -------------- --------------
Total deposits 140,870,912 137,044,813 130,747,901
-------------- -------------- --------------
Repurchase agreements 5,540,917 4,074,996 5,756,675
Accrued interest on deposits 450,687 432,870 364,933
Other liabilities 690,172 460,909 552,257
-------------- -------------- --------------
Total liabilities 147,552,688 142,013,588 137,421,766
-------------- -------------- --------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,209,085 shares issued at
March 31, 1998 and December 31, 1997 and
806,107 shares issued at March 31, 1997 6,045,425 6,045,425 4,030,535
Surplus 3,764,000 3,764,000 3,764,000
Retained Earnings 4,534,453 4,196,076 5,250,689
Accumulated other comprehensive income 51,819 123,494 (353,113)
-------------- -------------- --------------
Total stockholders' equity 14,395,697 14,128,995 12,692,111
-------------- -------------- --------------
Total liabilities and stockholders' equity $ 161,948,385 $ 156,142,583 $ 150,113,877
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
4
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1998 1997
---------- ----------
(Unaudited)
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,127,606 $1,771,968
Tax-exempt 50,419 24,319
Investment Securities:
Taxable 644,903 701,399
Tax-exempt 71,820 70,715
Dividends 6,150 5,174
Other interest income 11,388 18,215
Interest on Federal Funds Sold 105,006 106,549
---------- ----------
Total interest income 3,017,292 2,698,339
INTEREST EXPENSE
Deposits 1,224,975 1,035,731
Other borrowings 51,964 52,238
---------- ----------
Total interest expense 1,276,939 1,087,969
---------- ----------
Net interest income 1,740,353 1,610,370
PROVISION FOR POSSIBLE LOAN LOSSES 46,500 25,500
---------- ----------
Net interest income after provision
for possible loan losses 1,693,853 1,584,870
NONINTEREST INCOME
Service charges and other fees 107,685 91,324
Securities gains (losses) (1,608) -
Other operating income 83,819 82,782
---------- ----------
Total noninterest income 189,896 174,106
NONINTEREST EXPENSES
Salary and employee benefits 605,882 574,922
Net occupancy expense of premises 200,778 184,192
Other operating expenses 302,934 285,773
---------- ----------
Total noninterest expense 1,109,594 1,044,887
---------- ----------
Income before income taxes 774,155 714,089
---------- ----------
INCOME TAXES 254,415 237,482
---------- ----------
Net income $ 519,740 $ 476,607
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,209,085 1,209,085
========== ==========
EARNINGS PER COMMON SHARE $ 0.43 $ 0.39
========== ==========
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
Accumulated
Common Stock 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 three months
ended March 31, 1998 - - - 519,740 519,740 - 519,740
Other comprehensive income, net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) - - - (71,675) - (71,675) (71,675)
-----------
Comprehensive income $ 448,065
===========
Cash dividend
($.15 per share) - - - (181,363) - (181,363)
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 (Unaudited) $ 1,209,085 $ 6,045,425 $ 3,764,000 $ 4,534,453 $ 51,819 $14,395,697
=========== =========== =========== =========== =========== ===========
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ (72,689)
Less: reclassification adjustment for
gains (losses) included in net income (1,014)
-----------
Net unrealized gains (losses) on securities $ (71,675)
===========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Common Stock 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 three months
ended March 31, 1997 - - - $ 476,607 476,607 - 476,607
Other comprehensive income, net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) - - - (272,553) - (272,553) (272,553)
-----------
Comprehensive income $ 204,054
===========
Cash dividend
($.13 per share) - - - (161,221) - (161,221)
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 (Unaudited) $ 806,107 $ 4,030,535 $ 3,764,000 $ 5,250,689 $ (353,113) $ 12,692,111
=========== =========== =========== =========== =========== ===========
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ (272,553)
Less: reclassification adjustment for
gains (losses) included in net income -
-----------
Net unrealized gains (losses) on securities $ (272,553)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
6
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
1998 1997
------------ ------------
(Unaudited)
OPERATING ACTIVITIES
Net Income $ 519,740 $ 476,607
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 46,500 25,500
Depreciation and amortization 93,347 91,668
Amortization of investment securities, net (17,666) (13,793)
Investment security losses (gains) 1,608 -
Decrease (increase) in interest receivable (18,400) (267,794)
Increase (decrease) in interest payable 17,817 (20,356)
Other, net 177,665 80,823
------------ ------------
Net cash provided by operating activities 820,611 372,655
------------ ------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 625,000 (944,000)
Net (increase) decrease in loans,
net of charge offs (2,015,901) (636,251)
Proceeds from sales of securities
available for sale 2,595 -
Proceeds from maturities of securities
available for sale 9,715,000 3,500,000
Proceeds from maturities of securities
held to maturity 300,000 100,000
Principal collected on mortgage-backed securities 608,227 146,028
Purchases of securities available for sale (9,162,743) (4,990,119)
Purchases of securities held to maturity (947,513) (937,404)
Recoveries on loans previously charged-off 4,293 4,904
Purchases of premises and equipment (23,440) (54,957)
------------ ------------
Net cash used by investing activities (894,482) (3,811,799)
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 3,826,099 5,476,833
Dividends paid (181,363) (161,221)
Increase (decrease) in short term borrowings 1,465,921 (174,016)
------------ ------------
Net cash provided by financing
activities $ 5,110,657 $ 5,141,596
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,036,786 1,702,452
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 4,815,483 4,671,060
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 9,852,269 $ 6,373,512
============ ============
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
March 31, 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 March 31, 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 $519,740 for the three
months ended March 31, 1998, as compared to $476,607 for the same period
during 1997. The increase in earnings during 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 $.43 in 1998, an increase
of 9.1% over the $.39 earned in 1997.
Operational earnings improved with net interest income increasing
$129,983 or 8.1%, to $1,740,353 during the three months ended March 31,
1998 as compared to the same period in 1997. The increase resulted
primarily from the growth in the loan portfolio.
Return on average assets (ROA) measures the effectiveness of asset
utilization to produce net income. For the three month period ended
March 31, 1998, the ROA was 1.32%, up from 1.31% during the same period
in 1997. Return on average equity (ROE) measures the return on the
stockholders' investment. The ROE was 14.87% for the three months
ended March 31, 1998 and 14.99% at March 31, 1997.
Table One presents 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
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)
<TABLE>
<CAPTION>
First West Virginia Bancorp, Inc.
Three months ended Years ended
March 31, December 31,
---------------------- ----------------------------------------------
1998 1997 1997 1996 1995 1994
--------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 3,017 $ 2,698 $ 11,507 $ 10,067 $ 8,937 $ 7,783
Total interest expense 1,277 1,088 4,745 3,925 3,421 2,868
Net interest income 1,740 1,610 6,762 6,142 5,516 4,915
Provision for loan losses 46 25 131 71 50 77
Total other income 190 174 639 568 738 725
Total other expenses 1,110 1,045 4,377 4,182 4,007 3,641
Income before income taxes 774 714 2,893 2,457 2,198 1,922
Net income 520 477 1,931 1,644 1,470 1,288
PER SHARE DATA (1)
Net income $ .43 $ .39 $ 1.60 $ 1.36 $ 1.22 $ 1.07
Cash dividends declared (2) .15 .13 .54 .47 .34 .37
Book value per share 11.91 10.50 11.69 10.46 9.68 8.58
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $ 96,067 $ 79,828 $ 86,609 $ 74,469 $ 66,058 $ 56,991
Investment securities 46,908 51,073 51,754 48,557 46,020 50,282
Deposits - Interest Bearing 124,158 115,606 120,589 112,768 100,488 95,980
Long-term debt - - - - - 44
Stockholders' equity 14,181 12,902 13,400 12,186 11,170 10,253
Total Assets 159,702 148,235 153,290 137,810 124,145 117,996
BALANCE SHEET
Investments $ 44,831 $ 52,207 $ 45,444 $ 50,440 $ 45,996 $ 45,551
Loans 97,322 81,032 95,374 80,417 72,006 61,667
Other Assets 19,795 16,875 15,325 13,689 9,953 9,445
--------- -------- -------- --------- --------- --------
Total Assets $ 161,948 $150,114 $156,143 $ 144,546 $ 127,955 $116,663
========= ======== ======== ========== ========= ========
Deposits $ 140,871 $130,748 $137,045 $ 125,271 $ 114,895 $ 105,730
Repurchase Agreements 5,541 5,757 4,075 5,931 749 105
Other Liabilities 1,140 917 894 695 602 460
Shareholders' Equity 14,396 12,692 14,129 12,649 11,709 10,368
--------- -------- -------- --------- --------- --------
Total Liabilities and
Shareholders' Equity $ 161,948 $150,114 $156,143 $ 144,546 $ 127,955 $ 116,663
========= ======== ======== ========== ========= ========
SELECTED RATIOS
Return on average assets 1.32% 1.31% 1.26% 1.19% 1.18% 1.09%
Return on average equity 14.87% 14.99% 14.41% 13.49% 13.16% 12.56%
Average equity to average assets 8.88% 8.70% 8.74% 8.84% 9.00% 8.69%
Dividend payout ratio (1) (2) 34.88% 33.33% 33.75% 34.56% 27.87% 34.58%
Loan to Deposit ratio 69.09% 61.98% 69.59% 64.19% 62.67% 58.32%
</TABLE>
(1) Adjusted for 3 for 2 stock split in the effect of a fifty (50) percent
common stock dividend, declared September 9, 1997, payable on October 27,
1997 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
- -------------------
Net interest income, which is the difference between interest earned
on loans and investments and interest paid on deposits and other liabilities,
is the primary source of earnings for the Holding Company. 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.
Table 2 presents the change in net interest income for the three months ended
March 31, 1998, and 1997.
Net interest income was $1,740,353 for the three months ended March 31,
1998, an increase of $129,983 or 8.1%, over the same period in 1997. Net
interest income increased primarily due to the growth in the loan portfolio.
Interest and fees on loans and lease financing increased $381,738 or 21.3%
for the three month period ended March 31, 1998 as compared to the same
period a year earlier. The increased interest income on loans and lease
financing resulted primarily from an increase in the average loan volume.
Increases in commercial, installment, and residential real estate loans
primarily contributed to the loan growth during the three month period
ended March 31, 1998. The average yield on loans increased .04% from 9.15%
at December 31, 1997 to 9.19% at March 31, 1998.
Interest income on investment securities decreased $54,415 or 7.0% for
the three months ended March 31, 1998 as compared to the same period in the
prior year. The decrease was primarily the result of the decline in the
average volume of investment securities. The average yield earned on
investment securities increased to 6.25% at March 31, 1998 as compared
to 6.17% at December 31, 1997.
Interest expense increased $188,970 or 17.4% for the three months ended
March 31, 1998 as compared to the same period of the prior year. The increase
in interest expense was the result of an increase in the average rates paid
and the increased average volume of interest bearing liabilities. The average
yield paid on interest bearing liabilities increased .22%, from 3.77% at
December 31, 1997 to 3.99% at March 31, 1998. The increase in the average
yield on interest bearing liabilities during the three months ended March 31,
1998 was primarily the result of an increase in average rates paid on savings
and certificates of deposit. The average volume of interest bearing
liabilities at March 31, 1998 increased $4,245,000 or 3.4% from December 31,
1997. The increase in the average volume of interest bearing liabilities
during the three month period ended March 31, 1998 was primarily the result
of the growth in certificates of deposit.
The changes in the volume and mix of earning assets and interest bearing
liabilities combined with the changes in the market rates of interest resulted
in net interest yields on average earning assets of 4.87% for the three months
ended March 31, 1998, as compared to 4.83% earned during 1997.
Noninterest Income
- -------------------
Noninterest income increased $15,790 or 9.1% for the three months ended
March 31, 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 $16,361 during the three month period ended March 31, 1998,
up 17.9%, 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. The investment securities loss during
the three month period ended March 31, 1998 was attributable to the holding
company's sale of marketable equity securities available for sale.
Non-Interest Expense
- --------------------
Noninterest expense increased $64,707 or 6.2% for the three months ended
March 31, 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 March 31, 1998, salary and employee benefits increased
$30,960 or 5.4%. 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 $17,161,
or 6.0%, for the three month period ended March 31, 1998 as compared to the
same period in the prior year. Increased stationery and supplies expense,
postage expense, and service expense, offset in part by decreased other
expenses primarily contributed to the increase in other operating expenses
during 1998.
Income Taxes
- ------------
Income tax expense for the three month period ended March 31, 1998 was
$254,415, an increase of $ 16,933 over the same period in 1997. The increase
was primarily due to the increase in pre-taxable income of $ 60,066.
For federal income tax purposes, tax-exempt income is based on qualified
state, county, and municipal bonds and loans. Tax-exempt income was $122,239
and $95,034 for the three month period ended March 31, 1998 and 1997.
Federal income tax rates were consistent at 34% for the quarter ended
March 31, 1998 and 1997. West Virginia corporate net income tax rates also
were consistent at 9.0% for the three month periods ended 1998 and 1997.
<PAGE>
11
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Two
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
March 31, 1998 and March 31, 1997 and the year ended December 31, 1997.
Average balance sheet information as of March 31, 1998 and March 31, 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 three month periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, 1998 December 31, 1997 March 31, 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 $ 40,028 $ 638 6.46% $ 45,157 $ 2,861 6.34% $ 44,245 $ 689 6.32%
Obligations of states and
political subdivisions 5,949 72 4.91% 5,470 264 4.83% 5,664 71 5.08%
Other securities 931 13 5.66% 1,127 69 6.12% 1,164 18 6.27%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total Investment securities: 46,908 723 6.25% 51,754 3,194 6.17% 51,073 778 6.18%
Interest bearing deposits 903 11 4.94% 533 28 5.25% 1,414 18 5.16%
Federal funds sold 7,729 105 5.51% 6,561 357 5.44% 8,224 106 5.23%
Loans, net of unearned income 96,067 2,178 9.19% 86,609 7,928 9.15% 79,828 1,796 9.12%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total earning assets 151,607 3,017 8.07% 145,457 11,507 7.91% 140,539 2,698 7.79%
Cash and due from banks 4,462 4,104 4,031
Bank premises and equipment 3,051 3,178 3,241
Other assets 1,816 1,741 1,592
Allowance for possible loan losses (1,234) (1,190) (1,168)
-------- -------- --------
Total Assets $159,702 $153,290 $148,235
======== ======== ========
LIABILITIES
Certificates of deposit $ 58,814 $ 803 5.54% $ 55,149 $ 2,945 5.34% $ 52,448 $ 672 5.20%
Savings deposits 42,403 306 2.93% 41,376 1,102 2.66% 38,035 233 2.48%
Interest bearing demand deposits 22,941 116 2.05% 24,064 509 2.12% 25,123 131 2.11%
Federal funds purchased and
Repurchase agreements 5,794 52 3.64% 5,118 189 3.69% 6,159 52 3.42%
-------- -------- ----- -------- -------- ----- -------- -------- -----
Total interest bearing liabilities 129,952 1,277 3.99% 125,707 4,745 3.77% 121,765 1,088 3.62%
Demand deposits 14,511 13,235 12,709
Other liabilities 1,058 948 859
======== ======== ========
Total Liabilities 145,521 139,890 135,333
STOCKHOLDERS' EQUITY 14,181 13,400 12,902
======== ======== ========
Total Liabilities
and Stockholders' Equity $159,702 $153,290 $148,235
======== ======== ========
Net yield on earning assets $ 1,740 4.65% $ 6,762 4.65% $ 1,610 4.65%
======== ===== ======== ===== ======== =====
</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
March 31, 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 $ 5,949 $ 120 8.18% $ 5,470 $ 440 8.04% $ 5,664 $ 118 8.47%
Loans 96,067 2,212 9.34% 86,609 8,018 9.26% 79,828 1,812 9.21%
======== ======== ===== ======== ======== ===== ======== ======== =====
Total earning assets $151,607 $ 3,099 8.29% $145,457 $ 11,773 8.09% $140,539 $ 2,761 7.97%
======== ======== ===== ======== ======== ===== ======== ======== =====
Taxable equivalent net yield on
earning assets $ 1,822 4.87% $ 7,028 4.83% $ 1,673 4.83%
======== ===== ======== ===== ======== =====
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
12
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 decreased $613,222 or 1.3% from $45,443,954
at December 31, 1997, to $44,830,732 at March 31, 1998. Taxable securities
comprised 86.8% of total securities at March 31, 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
March 31, 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 March 31, 1998, the Holding Company had approximately 88% of the
investment portfolio classified as available for sale, while 12% 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 $82,214
and $195,928 at March 31, 1998 and December 31, 1997, respectively. The
market value of securities classified as held to maturity was above book
value by $61,145 and $59,428 at March 31, 1998 and December 31, 1997,
respectively.
Table Three
Investment Portfolio
The following table presents the book values of investment securities at
March 31, 1998 and 1997 and at December 31, 1997:
(in thousands) (Unaudited):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1998 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
Securities held to maturity:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ - $ - $ 800
Obligations of states
and political subdivisions 5,426 4,778 5,600
--------- --------- ---------
Total held to maturity $ 5,426 $ 4,778 $ 6,400
--------- --------- ---------
Securities available for sale :
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 30,285 $ 32,027 $ 40,441
Obligations of states
and political subdivisions 514 516 505
Corporate debt securities 208 209 508
Mortgage-backed securities 7,688 7,287 3,743
Equity Securities 710 627 610
--------- --------- ---------
Total available for sale 39,405 40,666 45,807
--------- --------- ---------
Total $ 44,831 $ 45,444 $ 52,207
========= ========= =========
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
13
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Four
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 March 31, 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>
March 31, 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> <C> <C> <C>
U.S. Treasury and other U.S.
Government Agencies
Within One Year $ - - % $ 9,650 6.03% $ - -% $ 7,794 6.11%
After One But
Within Five Years - - 16,159 6.32 - - 21,970 6.38
After Five But
Within Ten Years - - 4,476 6.39 - - 2,263 6.94
After Ten Years - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- --------
- - 30,285 6.24 - - 32,027 6.35
States & Political Subdivisions
Within One Year 440 6.31 - - 436 6.31 - -
After One But
Within Five Years 3,738 7.01 - - 3,238 7.16 - -
After Five But
Within Ten Years 1,085 7.46 514 7.48 941 7.55 516 7.46
After Ten Years 163 7.72 - - 163 7.72 - -
-------- -------- -------- -------- -------- -------- -------- --------
5,426 7.06 514 7.48 4,778 7.18 516 7.46
Corporate Debt Securities
Within One Year - - - - - - - -
After One But
Within Five Years - - 208 7.86 - - 209 7.83
-------- -------- -------- -------- -------- -------- -------- --------
- - 208 7.86 - - 209 7.83
Mortgage-Backed Securities - - 7,688 6.61 - - 7,287 6.55
Equity Securities - - 710 5.01 - - 627 5.45
-------- -------- -------- -------- -------- -------- -------- --------
Total $ 5,426 7.06% $ 39,405 6.31% $ 4,778 7.18% $ 40,666 6.39%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ------------------------------------------------------------------------------
<PAGE>
14
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Loans
- -----
Loans as of March 31, 1998 were $97,321,531 as compared to $95,373,653 as
of December 31, 1997, an increase of 2.0%. The loan growth can be attributed
primarily to increases in commercial loans, installment loans and residential
real estate loans which increased approximately $1,282,000, $663,000, and
$68,000, respectively. Increases in third party paper with various automobile
dealers contributed to the increase in installment loans during the first
quarter of 1998. Commercial loans increased during the three month period
ended were primarily as a result of expansion of area businesses due to the
extension of a subsidiary bank's market area. 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-four
percent (34%) of the loan portfolio. Commercial loans which include real
estate secured by non-farm, non residential and commercial and industrial
loans comprise thirty-eight percent (38%) 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 March 31,
1998 were a 1% increase in installment loans, and a 1% 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 Five
Loan Portfolio
(Unaudited)
Loans outstanding are as follows (in thousands) :
March 31, December 31,
------------------------- ----------
1998 1997 1997
Real Estate - Residential
Real estate-construction $ 359 $ 592 $ 334
Real estate-farmland 94 11 122
Real estate-residential 32,681 29,667 32,610
---------- ---------- ----------
$ 33,134 $ 30,270 $ 33,066
---------- ---------- ----------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 25,581 $ 21,054 $ 23,925
Commercial & industrial 12,003 10,030 12,377
---------- ---------- ----------
$ 37,584 $ 31,084 $ 36,302
---------- ---------- ----------
Installment
Installment and other
loans to individuals $ 23,150 $ 17,739 $ 22,487
---------- ---------- ----------
Others
Nonrated industrial
development obligations $ 3,503 $ 1,435 $ 3,517
Direct Financing Leases 47 225 70
Other loans 13 369 40
---------- ---------- ----------
$ 3,563 $ 2,029 $ 3,627
---------- ---------- ----------
Total 97,431 81,122 95,482
Less unearned interest 109 90 108
---------- ---------- ----------
$ 97,322 $ 81,032 $ 95,374
========== ========== ==========
<PAGE>
15
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Six
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 March 31, 1998
and December 31, 1997 (in thousands) (Unaudited):
March 31, 1998
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- -----------
Commercial $ 1,081 $ 7,613 $ 3,309
Real Estate - construction 359 - -
----------- ----------- -----------
Total $ 1,440 $ 7,613 $ 3,309
=========== =========== ===========
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 March 31, 1998 and December 31, 1997 along with the contractual maturities
of loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
December 31, 1997
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- -----------
Fixed Rates $ 1,293 $ 6,197 $ 1,250
Variable Rates 147 1,416 2,059
----------- ----------- -----------
Total $ 1,440 $ 7,613 $ 3,309
=========== =========== ===========
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>
16
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 $731,000 at March 31, 1998 and $839,000
at December 31, 1997, a decrease of 12.9%. Loans classified as non-accrual
were $423,000 or .4% of total loans as of March 31, 1998, as compared to
$540,000 or .6% of total loans at December 31, 1997. There were no loans
classified as renegotiated as of March 31, 1998 and 1997, respectively. The
loans past due 90 days or more increased $53,000 to $272,000 at March 31, 1998
as compared to $219,000 at December 31, 1997. Other real estate owned
decreased $44,000 during the first quarter due to the sale of the properties
by the subsidiary banks. Management continues to monitor the non-performing
assets to ensure against deterioration in collateral values.
Table Seven
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):
March 31, December 31,
----------------- ------------
1998 1997 1997
Past Due 90 Days or More:
Real Estate - residential $ 90 $ 123 $ 45
Commercial 117 7 70
Installment 65 51 104
------- ------- ------------
$ 272 $ 181 $ 219
------- ------- ------------
Non-accrual:
Real Estate - residential $ 53 $ 24 $ 139
Commercial 321 292 353
Installment 49 36 48
------- ------- ------------
$ 423 $ 352 $ 540
------- ------- ------------
Other Real Estate $ 36 $ 49 $ 80
------- ------- ------------
Total non-performing assets $ 731 $ 582 $ 839
======= ======= ============
Total non-performing assets
to total loans and
other real estate 0.75% 0.72% 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 $12,100
and $7,800 for the periods ended March 31, 1998 and 1997, respectively.
As of March 31, 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>
17
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 Eight presents a summary of the Allowance for
Possible Loan Losses. The provision for loan losses increased to $46,500
during the three months ended March 31, 1998, from $25,500 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 1.2% and 1.3% of loans outstanding as of March 31, 1998 and
December 31, 1997, respectively. Net loan charge-offs were $64,000 during the
first quarter of 1998. The net charge-offs during the three month period
ended March 31, 1998 was primarily residential real estate 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 Eight
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
-------------------------------------
March 31, 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 53 - 18
Commercial - - -
Installment 15 20 67
-------- -------- ----------
68 20 85
Recoveries:
Real Estate - residential - - -
Commercial - 3 3
Installment 4 2 9
-------- -------- ----------
4 5 12
Net Charge-offs 64 15 73
Additions Charged to Operations 47 25 131
-------- -------- ----------
Balance at end of period: $ 1,201 $ 1,170 $ 1,218
======== ======== ==========
Average Loans Outstanding $ 96,067 $ 79,828 $ 86,609
======== ======== ==========
Ratio of net charge-offs
to Average loans
outstanding for the period .07% .02% .08%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.23% 1.44% 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>
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 - 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 Nine
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
three month period ended March 31, 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>
March 31, 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 $ 191 34.0% $ 202 34.6% $ 192 36.5% $ 215 39.9% $ 216 43.1% $ 216 43.1%
Commercial 622 38.6 622 38.0 619 39.1 618 36.5 420 34.7 382 35.9
Installment 337 23.8 343 23.6 298 21.6 265 20.0 260 19.3 248 17.6
Others 20 3.6 20 3.8 20 2.8 20 3.6 20 2.9 20 3.4
Unallocated 31 -- 31 -- 31 -- 31 -- 31 -- 30 --
------ ------ ------ ------ ------ ----- ------ ----- ------ ----- ------ -----
Total $1,201 100.0% $1,218 100.0% $1,160 100.0% $1,149 100.0% $ 947 100.0% $ 896 100.0%
====== ====== ====== ====== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
<PAGE>
19
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Deposits
- --------
Total deposits were $140,870,912 at March 31, 1998 as compared to
$137,044,813 at December 31, 1997, an increase of 2.8%. 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 Ten
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>
March 31, 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 $ 2,338 $ 725 $ 3,674 $ 4,439 $ 11,176
</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>
Repurchase Agreements
- ----------------------
Repurchase agreements represent short-term borrowings, usually overnight
to 30 days. Repurchase agreements were $5,540,917 at March 31, 1998, an
increase of $1,465,921, 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>
20
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 2.4% in during the first
quarter of 1998 entirely from current earnings after quarterly dividends, and
a decrease of .5% resulting from the effect of the change in the net
unrealized gain (loss) on securities available for sale. Stockholders' equity
amounted to 8.9% of total assets at March 31, 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 guidelines establish 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 March 31, 1998, March 31, 1997, and December 31, 1997:
March 31, Dec. 31
-------------- ------
Ratio Minimum 1998 1997 1997
- ---------------------- -------- ------ ------ ------
Leverage Ratio 3% 8.7 8.6 8.7
Risk Based Capital
Tier 1 (core) 4% 14.1 14.7 14.2
Tier 2 (total) 8% 15.3 15.9 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
$39,405,326 classified as available for sale at March 31, 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
March 31, 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
March 31, 1998 there were no borrowings outstanding pursuant to these
agreements.
At March 31, 1998 and March 31, 1997, the Holding Company had outstanding
loan commitments and unused lines of credit totaling $7,834,000 and
$7,441,000, respectively. As of March 31, 1998, management placed a high
probability for required funding within one year of approximately $5,497,000.
Approximately $2,211,000 is principally unused home equity and credit card
lines on which management places a low probability for required funding.
<PAGE>
21
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. The matters discussed in 4c. were submitted to a vote of security
holders at the April 14, 1998, Annual Meeting of Shareholders.
b. Inapplicable
c. Election of Directors
SHARES VOTED
- ----------------------------------------------------------------------------
Against/ Abstentions
NAME For Withheld Broker Non-Votes
R. Clark Morton 1,021,676 2,161 0
William G. Petroplus 1,021,676 2,161 0
Ronald L. Solomon 1,021,676 2,161 0
d. Inapplicable
Item 5 Other Information
- -----------------------------------
Inapplicable
<PAGE>
22
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 three month period ended March 31, 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 March 31,
1998.
(c) Exhibits
--------
The exhibits listed in the Exhibit Index on page 24 of this FORM 10-Q are
incorporated by reference and/or filed herewith.
<PAGE>
23
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: April 25, 1998
<PAGE>
24
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>
25
EXHIBIT 11.1
Statement Regarding Computation of Per Share Earnings
<PAGE>
26
Computation of Earnings Per Share
- ---------------------------------
The following formula was used to calculate the earnings per share,
Consolidated Statements of Income for the three months ended March 31, 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
Three months ended
March 31,
1998 1997
---------- ----------
Weighted Average
Shares Outstanding 1,209,085 1,209,085
Net Income 519,740 476,607
Per Share Amount .43 .39
No common stock equivalents exist.
<PAGE>
27
EXHIBIT 13.3
Summarized Quarterly Financial Information
<PAGE>
28
- ------------------------------------------------------------------------------
First West Virginia Bancorp, Inc.
Summarized Quarterly Financial Information
- ------------------------------------------------------------------------------
A summary of selected quarterly financial information follows:
First
1998 Quarter
--------------
Total interest income $ 3,017,292
Total interest expense 1,276,939
Net interest income 1,740,353
Provision for loan losses 46,500
Investment Securities gain (loss) (1,608)
Total other income 191,504
Total other expenses 1,109,594
Income before income taxes 774,155
Net income 519,740
Net income per share (1) .43
<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, payable October 27,
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 4,746
<INT-BEARING-DEPOSITS> 5,106
<FED-FUNDS-SOLD> 6,307
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,405
<INVESTMENTS-CARRYING> 5,426
<INVESTMENTS-MARKET> 5,487
<LOANS> 97,322
<ALLOWANCE> 1,201
<TOTAL-ASSETS> 161,948
<DEPOSITS> 140,871
<SHORT-TERM> 5,541
<LIABILITIES-OTHER> 1,141
<LONG-TERM> 0
0
0
<COMMON> 6,045
<OTHER-SE> 8,350
<TOTAL-LIABILITIES-AND-EQUITY> 161,948
<INTEREST-LOAN> 2,178
<INTEREST-INVEST> 723
<INTEREST-OTHER> 116
<INTEREST-TOTAL> 3,017
<INTEREST-DEPOSIT> 1,225
<INTEREST-EXPENSE> 1,277
<INTEREST-INCOME-NET> 1,740
<LOAN-LOSSES> 46
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 1,110
<INCOME-PRETAX> 774
<INCOME-PRE-EXTRAORDINARY> 774
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 520
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 4.87
<LOANS-NON> 423
<LOANS-PAST> 272
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,218
<CHARGE-OFFS> 68
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 1,201
<ALLOWANCE-DOMESTIC> 1,201
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 31
</TABLE>
