<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, 1999
[ ] 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 April 30,
1999: Common Stock, $5.00 Par Value, shares outstanding 1,257,252 shares
- ---------------------------------------------------------------------
<PAGE>
2
FIRST WEST VIRGINIA BANCORP, INC.
PART I
FINANCIAL INFORMATION
2
<PAGE>
3
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
-------------- -------------- --------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks $ 4,200,013 $ 4,720,682 $ 4,746,625
Due from banks - interest bearing 4,645,913 299,430 5,105,644
-------------- --------------- --------------
Total cash and cash equivalents 8,845,926 5,020,112 9,852,269
Federal funds sold 4,568,000 4,092,000 6,307,000
Investment securities
Available for sale (at fair value) 44,256,415 43,385,571 39,405,326
Held to maturity - fair value of
$11,831,436 at March 31, 1999;
$11,424,327 at December 31, 1998;
and $5,486,551 at March 31, 1998 11,763,945 11,349,829 5,425,406
Loans, net of unearned income 103,847,602 103,555,319 97,321,531
Less allowance for possible loan losses (1,120,994) (1,122,912) (1,200,533)
-------------- -------------- --------------
Net loans 102,726,608 102,432,407 96,120,998
Premises and equipment, net 3,139,932 3,204,730 3,016,192
Accrued income receivable 1,298,173 1,242,606 1,094,101
Other assets 847,113 667,824 727,093
-------------- -------------- --------------
Total assets $ 177,446,112 $ 171,395,079 $ 161,948,385
============== =============== ==============
LIABILITIES
Noninterest bearing deposits:
Demand $ 14,200,622 $ 15,141,249 $ 14,668,860
Interest bearing deposits:
Demand 28,075,369 25,130,312 23,159,630
Savings 47,429,104 45,275,810 43,900,998
Time 63,813,478 62,237,448 59,141,424
-------------- --------------- --------------
Total deposits 153,518,573 147,784,819 140,870,912
-------------- --------------- --------------
Repurchase agreements 7,032,098 6,994,024 5,540,917
Accrued interest on deposits 488,139 472,097 450,687
Other liabilities 771,291 683,201 690,172
-------------- --------------- --------------
Total liabilities 161,810,101 155,934,141 147,552,688
-------------- --------------- --------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,257,252 shares issued at
March 31, 1999 and December 31, 1998 and
1,209,085 shares issued at March 31, 1998 6,286,260 6,286,260 6,045,425
Surplus 4,739,381 4,739,381 3,764,000
Retained Earnings 4,622,305 4,275,249 4,534,453
Accumulated other comprehensive income (11,935) 160,048 51,819
-------------- --------------- --------------
Total stockholders' equity 15,636,011 15,460,938 14,395,697
-------------- --------------- --------------
Total liabilities and stockholders' equity $ 177,446,112 $ 171,395,079 $ 161,948,385
============== =============== ==============
</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
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,206,071 $2,127,606
Tax-exempt 49,359 50,419
Investment Securities:
Taxable 639,637 644,903
Tax-exempt 136,057 71,820
Dividends 8,012 6,150
Other interest income 23,999 11,388
Interest on Federal Funds Sold 53,955 105,006
---------- ----------
Total interest income 3,117,090 3,017,292
INTEREST EXPENSE
Deposits 1,263,261 1,224,975
Other borrowings 57,978 51,964
---------- ----------
Total interest expense 1,321,239 1,276,939
---------- ----------
Net interest income 1,795,851 1,740,353
PROVISION FOR POSSIBLE LOAN LOSSES 76,500 46,500
---------- ----------
Net interest income after provision
for possible loan losses 1,719,351 1,693,853
NONINTEREST INCOME
Service charges and other fees 116,128 107,685
Securities gains (losses) 9,153 (1,608)
Other operating income 82,866 83,819
---------- ----------
Total noninterest income 208,147 189,896
NONINTEREST EXPENSES
Salary and employee benefits 608,469 605,882
Net occupancy expense of premises 188,149 200,778
Other operating expenses 336,668 302,934
---------- ----------
Total noninterest expense 1,133,286 1,109,594
---------- ----------
Income before income taxes 794,212 774,155
---------- ----------
INCOME TAXES 245,996 254,415
---------- ----------
Net income $ 548,216 $ 519,740
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,257,252 1,257,252
========== ==========
EARNINGS PER COMMON SHARE $ 0.44 $ 0.41
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
5
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
----------------------------- Retained Comprehensive Comprehensive
Shares Amount Surplus Earnings Income Income Total
------------ ------------ ------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 1,257,252 $ 6,286,260 $ 4,739,381 $ 4,275,249 $ 160,048 $ $15,460,938
Comprehensive income
Net income for the three months
ended March 31, 1999 -- -- -- 548,216 -- 548,216 5 48,216
Other comprehensive income,
net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) -- -- -- -- (171,983) (171,983) (171,983)
Comprehensive income $ 376,233
============
Cash dividend
($.16 per share -- -- -- (201,160) -- (201,160)
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 1999 (Unaudited 1,257,252 $ 6,286,260 $ 4,739,381 $ 4,622,305 $ (11,935) $15,636,011
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
----------------------------- Retained Comprehensive Comprehensive
Shares Amount Surplus Earnings Income 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
($.14 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
============ ============= ============ ============= ============== ===========
For the three months ended
March 31,
1999 1998
---------- ----------
<S> <C> <C>
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ (162,830) $ (72,689)
Less: reclassification adjustment for
gains (losses) included in net income 9,153 (1,014)
------------ ----------
Net unrealized gains (losses) on securities $ (171,983) $ (71,675)
============ ==========
</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
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------------- ---------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 548,216 $ 519,740
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 76,500 46,500
Depreciation and amortization 94,416 93,347
Amortization of investment securities, net (24,733) (17,666)
Investment security losses (gains) (9,153) 1,608
Decrease (increase) in interest receivable (55,567) (18,400)
Increase (decrease) in interest payable 16,042 17,817
Other, net 9,678 177,665
----------------- ---------------
Net cash provided by operating activities 655,399 820,611
----------------- ---------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (476,000) 625,000
Net (increase) decrease in loans, net of charge offs (374,284) (2,015,901)
Proceeds from sales of securities available for sale 102,696 2,595
Proceeds from maturities of securities available for sale 9,750,000 9,715,000
Proceeds from maturities of securities held to maturity 505,000 300,000
Principal collected on mortgage-backed securities 1,286,438 608,227
Purchases of securities available for sale (12,247,673) (9,162,743)
Purchases of securities held to maturity (920,396) (947,513)
Recoveries on loans previously charged-off 3,584 4,293
Purchases of premises and equipment (29,618) (23,440)
----------------- ---------------
Net cash used by investing activities (2,400,253) (894,482)
----------------- ---------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 5,733,754 3,826,099
Dividends paid (201,160) (181,363)
Increase (decrease) in short term borrowings 38,074 1,465,921
----------------- ---------------
Net cash provided by financing activities $ 5,570,668 $ 5,110,657
----------------- ---------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,825,814 5,036,786
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 5,020,112 4,815,483
----------------- ---------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 8,845,926 $ 9,852,269
================= ===============
</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
March 31, 1999 AND 1998
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, 1998, 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 1999
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, 1999 and 1998. 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 1998 financial statements, the notes thereto and
the related Management's Discussion and Analysis.
OVERVIEW
The Holding Company reported net income of $548,216 for the three months
ended March 31, 1999, as compared to $519,740 for the same period during
1998. The increase in earnings during 1999 over 1998 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 $.44 in 1999, an increase of 5.5% over the $.41
earned in 1998. Net interest income increased $55,498 or 3.2%, to $1,795,851
during the three months ended March 31, 1999 as compared to the same period
in 1998.
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, was 1.28%, at March 31, 1999 and 1.32%
during the same period in 1998. Return on average equity (ROE) measures the
return on the stockholders' investment, was 14.36% at March 31, 1999 and
14.87% at March 31, 1998. 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)
First West Virginia Bancorp, Inc.
<TABLE>
<CAPTION>
Three months ended Years ended
March 31, December 31,
---------------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995
--------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 3,117 $ 3,017 $ 12,452 $ 11,507 $ 10,067 $ 8,937
Total interest expense 1,321 1,277 5,324 4,745 3,925 3,421
Net interest income 1,796 1,740 7,128 6,762 6,142 5,516
Provision for loan losses 77 46 256 131 71 50
Total other income 208 190 787 639 568 738
Total other expenses 1,133 1,110 4,674 4,377 4,182 4,007
Income before income taxes 794 774 2,985 2,893 2,457 2,198
Net income 548 520 2,033 1,931 1,644 1,470
PER SHARE DATA (1)
Net income $ .44 $ .41 $ 1.62 $ 1.54 $ 1.31 $ 1.17
Cash dividends declared (2) .16 .14 .58 .52 .46 .33
Book value per share 12.44 11.45 12.30 11.24 10.06 9.31
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $ 103,747 $ 96,067 $ 99,345 $ 86,609 $ 74,469 $ 66,058
Investment securities 55,154 46,908 48,543 51,754 48,557 46,020
Deposits - Interest Bearing 134,740 124,158 127,520 120,589 112,768 100,488
Stockholders' equity 15,474 14,181 14,697 13,400 12,186 11,170
Total Assets 173,993 159,702 164,630 153,290 137,810 124,145
BALANCE SHEET
Investments $ 56,020 $ 44,831 $ 54,735 $ 45,444 $ 50,440 $ 45,996
Loans 103,848 97,322 103,555 95,374 80,417 72,006
Other Assets 17,578 19,795 13,105 15,325 13,689 9,953
--------- -------- -------- --------- ---------- --------
Total Assets $ 177,446 $161,948 $171,395 $ 156,143 $144,546 $127,955
========= ======== ======== ========== ======== ========
Deposits $ 153,519 $140,871 $147,785 $ 137,045 $125,271 $114,895
Repurchase Agreements 7,032 5,541 6,994 4,075 5,931 749
Other Liabilities 1,259 1,140 1,155 894 695 602
Shareholders' Equity 15,636 14,396 15,461 14,129 12,649 11,709
--------- -------- -------- ---------- --------- --------
Total Liabilities and
Shareholders' Equity $ 177,446 $161,948 $171,395 $ 156,143 $144,546 $127,955
========= ======== ======== ========== ========= ========
SELECTED RATIOS
Return on average assets 1.28% 1.32% 1.23% 1.26% 1.19% 1.18%
Return on average equity 14.36% 14.87% 13.83% 14.41% 13.49% 13.16%
Average equity to average assets 8.89% 8.88% 8.93% 8.74% 8.84% 9.00%
Dividend payout ratio (1) (2) 36.36% 34.15% 35.80% 33.75% 35.11% 28.21%
Loan to Deposit ratio 67.65% 69.09% 70.07% 69.59% 64.19% 62.67%
</TABLE>
(1) Adjusted for a 4 percent common stock dividend to stockholders of record
as of October 1, 1998, a 3 for 2 stock split in the effect of a fifty (50)
percent common stock to shareholders 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.
(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, 1999 and 1998.
Net interest income was $1,795,851 for the three months ended March 31,
1999, an increase of $55,498 or 3.2%, over the same period in 1998. Net
interest income increased primarily due to the growth in the loan and
investment portfolios. Interest and fees on loans and lease financing
increased $77,405 or 3.6% for the three month period ended March 31, 1999 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. Increased residential real estate loans primarily contributed to
the loan growth at March 31, 1999. The taxable equivalent yield on loans
decreased .3% from 9.28% at December 31, 1998 to 8.95% at March 31, 1999.
Interest income on investment securities increased $60,833 or 8.4% for
the three months ended March 31, 1999 as compared to the same period in the
prior year. The increase was primarily the result of an increase in the
average volume of investment securities. The taxable equivalent yield earned
on investment securities decreased to 6.43% at March 31, 1999 as compared to
6.51% at December 31, 1998.
Interest expense increased $44,300 or 3.5% for the three months ended
March 31, 1999 as compared to the same period of the prior year. The
increase in interest expense was the result of an increase in the average
volume of interest bearing liabilities. The average yield paid on interest
bearing liabilities decreased .22%, from 3.97% at December 31, 1998 to 3.75%
at March 31, 1999. The decrease in the average yield on interest bearing
liabilities during the three months ended March 31, 1999 was primarily the
result of a decrease in average rates paid on savings and time deposits. The
average volume of interest bearing liabilities at March 31, 1999 increased
$8,777,000 or 6.5% from December 31, 1998. The increase in the average
volume of interest bearing liabilities during the three month period ended
March 31, 1999 was primarily the result of the growth in time and savings
deposits.
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 4.70% for the
three months ended March 31, 1999, as compared to 4.87% earned during the
same period in 1998.
Noninterest Income
- -------------------
Noninterest income increased $18,251 or 9.6% for the three months ended
March 31, 1999 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 $8,443 during the three month period ended March 31, 1999,
up 7.8%, as compared to the same period of the prior year. The increase in
service charges in 1999 was primarily due to an increase in the number of
charges assessed on deposit accounts. The investment securities gain of
$9,153 during the three month period ended March 31, 1999 was attributable to
the holding company's sale of marketable equity securities available for sale.
Non-Interest Expense
- --------------------
Noninterest expense increased $23,692 or 2.1% for the three months ended
March 31, 1999 as compared to the same period of the prior year. Salary and
employee benefits is the largest component of noninterest expense. During
the quarter ended March 31, 1999, salary and employee benefits increased
$2,587. 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 $33,734, or 11.1%, for
the three month period ended March 31, 1999 as compared to the same period in
the prior year. Increased other operating expenses, service expense and
advertising expense primarily contributed to the increase in other operating
expenses during 1999.
Income Taxes
- ------------
Income tax expense for the three month period ended March 31, 1999 was
$245,996, a decrease of $8,419 over the same period in 1998. The decrease
was primarily due to the increase in tax exempt income during the three
months ended March 31, 1999. For federal income tax purposes, tax-exempt
income is based on qualified state, county, and municipal bonds and loans.
Tax-exempt income was $185,416 and $122,239 for the three month period ended
March 31, 1999 and 1998.
Federal income tax rates were consistent at 34% for the quarter ended
March 31, 1999 and 1998. West Virginia corporate net income tax rates also
were consistent at 9.0% for the three month periods ended 1999 and 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
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, 1999 and March 31, 1998 and the year ended December 31, 1998.
Average balance sheet information as of March 31, 1999 and March 31, 1998 and
the year ended December 31, 1998 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, 1999 and 1998.
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
March 31, 1999 December 31, 1998 March 31, 1998
--------------------------- --------------------------- ---------------------------
Average Average Average Average Average Average
Volume Interest Rate Volume Interest Rate Volume Interest Rate
-------- -------- ------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 40,029 $ 605 6.13% $ 38,387 $ 2,399 6.25% $ 40,028 $ 638 6.46%
Obligations of states and
political subdivisions 12,292 136 4.49% 8,155 382 4.68% 5,949 72 4.91%
Other securities 2,833 43 6.16% 2,001 124 6.20% 931 13 5.66%
-------- -------- ------- -------- -------- -------- -------- -------- -------
Total Investment securities: 55,154 784 5.76% 48,543 2,905 5.98% 46,098 723 6.25%
Interest bearing deposits 2,034 24 4.79% 2,607 138 5.29% 903 11 4.94%
Federal funds sold 4,621 54 4.74% 6,085 330 5.42% 7,729 105 5.51%
Loans, net of unearned income 103,747 2,255 8.81% 99,345 9,078 9.14% 96,067 2,178 9.19%
-------- -------- ------- -------- -------- -------- -------- -------- -------
Total earning assets 165,556 3,117 7.64% 156,580 12,451 7.95% 151,607 3,017 8.07%
Cash and due from banks 4,408 4,369 4,462
Bank premises and equipment 3,171 3,056 3,051
Other assets 1,993 1,785 1,816
Allowance for possible loan losses (1,135) (1,160) (1,234)
-------- -------- --------
Total Assets $173,993 $164,630 $159,702
======== ======== ========
LIABILITIES
Certificates of deposit $ 63,686 $ 853 5.43% $ 60,277 $ 3,356 5.57% $ 58,814 $ 803 5.54%
Savings deposits 45,969 302 2.66% 43,418 1,270 2.93% 42,403 306 2.93%
Interest bearing demand deposits 25,085 108 1.75% 23,825 471 1.98% 22,941 116 2.05%
Federal funds purchased and
Repurchase agreements 8,157 58 2.88% 6,600 227 3.44% 5,794 52 3.64%
-------- -------- ------- -------- ------- -------- -------- -------- -------
Total interest bearing liabilities 142,897 1,321 3.75% 134,120 5,324 3.97% 129,952 1,277 3.99%
Demand deposits 14,442 14,720 14,511
Other liabilities 1,180 1,093 1,058
-------- -------- --------
Total Liabilities 158,519 149,933 145,521
STOCKHOLDERS' EQUITY 15,474 14,697 14,181
-------- -------- --------
Total Liabilities
and Stockholders' Equity $173,993 $164,630 $159,702
======== ======== ========
Net yield on earning assets $ 1,796 4.40% $ 7,127 4.55% $ 1,740 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, 1999 and 1998, and the year ended December 31, 1998, respectively.
The effect of this adjustment is presented below (in thousands).
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Obligations of states and
political subdivisions:
Investment securities $ 12,292 $ 227 7.48% $ 8,155 $ 637 7.81% $ 5,949 $ 120 8.18%
Loans 103,747 2,288 8.95% 99,345 9,215 9.28% 96,067 2,212 9.34%
======== ======== ====== ======== ======= ====== ======== ======== =======
Total earning assets $165,556 $ 3,241 7.94% $156,580 $12,843 8.20% $151,607 $ 3,099 8.29%
======== ======== ====== ======== ======= ======== ======== ======== =======
Taxable equivalent net yield on
earning assets $ 1,920 4.70% $ 7,519 4.80% $ 1,822 4.87%
======== ====== ======= ======== ======== =======
</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 increased $1,284,960 or 2.3% from $54,735,400 at
December 31, 1998, to $56,020,360 at March 31, 1999. Taxable securities
comprised 78.1% of total securities at March 31, 1999, as compared to 78.3%
at December 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, 1999, the Holding Company had approximately 79% of the
investment portfolio classified as available for sale, while 21% 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 have declined since December 31, 1998, the carrying value
of securities available for sale was decreased by $18,937 at March 31, 1999.
At December 31, 1998, the carrying value of securities available for sale was
increased by $253,924. The market value of securities classified as held to
maturity was above book value by $67,491 and $74,498 at March 31, 1999 and
December 31, 1998, respectively.
Table Three
Investment Portfolio
The following table presents the book values of investment securities at
March 31, 1999 and 1998 and at December 31, 1998:
(in thousands) (Unaudited):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
----------- ----------- ------------
<S> <C> <C> <C>
Securities held to maturity:
Obligations of states
and political subdivisions $ 11,764 $ 11,350 $ 5,426
-------- -------- --------
Total held to maturity $ 11,764 $ 11,350 $ 5,426
-------- -------- --------
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 36,935 $ 35,107 $ 30,285
Obligations of states
and political subdivisions 516 516 514
Corporate debt securities 697 455 208
Mortgage-backed securities 5,211 6,503 7,688
Equity Securities 897 804 710
-------- -------- --------
Total available for sale 44,256 43,385 39,405
-------- -------- --------
Total $ 56,020 $ 54,735 $ 44,831
======== ======== ========
</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, 1999 and December 31, 1998 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, 1999 December 31, 1998
--------------------------------------------- ----------------------------------------
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 $ -- -- % $ 6,070 5.56 % $ -- -- % $ 5,775 6.01 %
After One But
Within Five Years -- -- 18,004 5.86 -- -- 18,815 5.92
After Five But
Within Ten Years -- -- 12,861 6.28 -- -- 10,517 6.23
After Ten Years -- -- -- -- -- -- -- --
------- ------- -------- ------- -------- ------ -------- ------
-- -- 36,935 5.96 -- -- 35,107 6.03
States & Political Subdivisions
Within One Year 950 7.71 -- -- 950 7.71 -- --
After One But
Within Five Years 5,082 6.42 -- -- 5,099 6.52 -- --
After Five But
Within Ten Years 5,114 6.60 516 7.46 5,121 6.48 516 7.45
After Ten Years 618 6.38 -- -- 180 6.06 -- --
------- ------- -------- ------- -------- ------ -------- ------
11,764 6.60 516 7.46 11,350 6.59 516 7.45
Corporate Debt Securities
Within One Year -- -- 591 5.48 -- -- 349 5.94
After One But
Within Five Years -- -- 106 8.08 -- -- 106 7.98
------- ----- -------- ------- -------- ------ -------- ------
-- -- 697 5.88 -- -- 455 6.42
Mortgage-Backed Securities -- -- 5,211 6.40 -- -- 6,503 6.35
Equity Securities -- -- 897 5.83 -- -- 804 5.30
------- ----- -------- ------- -------- ------ -------- ------
Total $11,764 6.60 % $ 44,256 6.03 % $ 11,350 6.59 % $ 43,385 6.09 %
======== ======= ======== ======= ======== ======= ======== ======
</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, 1999 were $103,847,602 as compared to $103,555,319
as of December 31, 1998. Residential real estate loans and installment loans
increased approximately $897,000 and $341,000, respectively and contributed
to the overall increase in loans.
Real estate residential loans which include real estate construction,
real estate farmland, and real estate residential loans comprise thirty-five
percent (35%) 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 (3%) of the loan portfolio. The changes
in the composition of the loan portfolio from December 31, 1998 to March 31,
1999 were a 1% increase in residential real estate loans, and a 1% decrease
in other 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)
<TABLE>
<CAPTION>
Loans outstanding are as follows (in thousands) :
March 31, December 31,
--------------------------- ------------
1999 1998 1998
<S> <C> <C> <C>
Real Estate - Residential
Real estate-construction $ 122 $ 359 $ 41
Real estate-farmland 110 94 133
Real estate-residential 36,092 32,681 35,253
----------- ----------- -----------
$ 36,324 $ 33,134 $ 35,427
----------- ----------- -----------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 25,194 $ 25,581 $ 25,866
Commercial & industrial 13,886 12,003 13,261
----------- ----------- -----------
$ 39,080 $ 37,584 $ 39,127
----------- ----------- -----------
Installment
Installment and other
loans to individuals $ 25,063 $ 23,150 $ 24,722
----------- ----------- -----------
Others
Nonrated industrial
development obligations $ 3,444 $ 3,503 $ 3,563
Direct Financing Leases -- 47 --
Other loans 39 13 819
----------- ----------- -----------
$ 3,483 $ 3,563 $ 4,382
----------- ----------- -----------
Total 103,950 97,431 103,658
Less unearned interest 102 109 103
----------- ----------- -----------
$ 103,848 $ 97,322 $ 103,555
=========== =========== ===========
</TABLE>
<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,
1999 and December 31, 1998 (in thousands) (Unaudited):
<TABLE>
<CAPTION>
March 31, 1999
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
<S> <C> <C> <C>
Commercial $ 928 $ 6,044 $ 6,914
Real Estate - construction 122 -- --
---------- ---------- ----------
Total $ 1,050 $ 6,044 $ 6,914
========== ========== ==========
December 31, 1998
----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 858 $ 6,024 $ 6,379
Real Estate - construction 41 -- --
---------- ---------- ----------
Total $ 899 $ 6,024 $ 6,379
========== ========== ==========
</TABLE>
The following table presents an analysis of fixed and variable rate loans as
of March 31, 1999 and December 31, 1998 along with the contractual maturities
of loans other than installment loans and residential mortgages (in
thousands) (Unaudited):
<TABLE>
<CAPTION>
March 31, 1999
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
<S> <C> <C> <C>
Fixed Rates $ 743 $ 4,856 $ 2,646
Variable Rates 307 1,188 4,268
---------- ---------- ----------
Total $ 1,050 $ 6,044 $ 6,914
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------------------------------------
<S> <C> <C> <C>
Fixed Rates $ 626 $ 4,922 $ 2,266
Variable Rates 273 1,102 4,113
---------- ---------- ----------
Total $ 899 $ 6,024 $ 6,379
========== ========== ==========
</TABLE>
<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 $665,000 at March 31, 1999 and $664,000
at December 31, 1998. Loans classified as non-accrual were $564,000 or .5%
of total loans as of March 31, 1999, as compared to $396,000 or .4% of total
loans at December 31, 1998. There were no loans classified as renegotiated
as of March 31, 1999 and 1998, respectively. The loans past due 90 days or
more decreased $167,000 to $101,000 at March 31, 1999 as compared to $268,000 at
December 31, 1998. There was no other real estate owned at March 31, 1999 or
December 31, 1998. 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):
<TABLE>
<CAPTION>
March 31, December 31,
----------------- ------------
1999 1998 1998
<S> <C> <C> <C>
Past Due 90 Days or More:
Real Estate - residential $ 29 $ 90 $ 76
Commercial 18 117 4
Installment 54 65 188
-------- -------- -------------
$ 101 $ 272 $ 268
-------- -------- -------------
Non-accrual:
Real Estate - residential $ 75 $ 53 $ 106
Commercial 305 321 184
Installment 184 49 106
-------- -------- -------------
$ 564 $ 423 $ 396
-------- -------- -------------
Other Real Estate $ -- $ 36 $ --
-------- -------- -------------
Total non-performing assets $ 665 $ 731 $ 664
======== ========= =============
Total non-performing assets
to total loans and
other real estate 0.64% 0.75% 0.64%
</TABLE>
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 $17,000
and $12,100 for the periods ended March 31, 1999 and 1998, respectively.
As of March 31, 1999, 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 $76,500
during the three months ended March 31, 1999, from $46,500 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 1.1% and 1.2% of loans outstanding as of March 31, 1999
and December 31, 1998, respectively. Net loan charge-offs were $79,000
during the first quarter of 1999. The net charge-offs during the three month
period ended March 31, 1999 was primarily consumer loans. The increase in
personal bankruptcies has contributed to the increase in net charge-offs on
consumer type 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).
<TABLE>
<CAPTION>
Summary of Loan Loss Experience
-----------------------------------
March 31, December 31,
------------------- ------------
1999 1998 1998
<S> <C> <C> <C>
Balance at Beginning of period
Allowance for Possible
Loan Losses $ 1,123 $ 1,218 $ 1,218
Loans Charged Off:
Real Estate - residential -- 53 65
Commercial -- -- 134
Installment 82 15 173
--------- --------- ----------
82 68 372
Recoveries:
Real Estate - residential -- -- 5
Commercial -- -- --
Installment 3 4 16
--------- --------- ----------
3 4 21
Net Charge-offs 79 64 351
Additions Charged to Operations 77 46 256
--------- --------- ----------
Balance at end of period: $ 1,121 $ 1,201 $ 1,123
========= ========= ==========
Average Loans Outstanding $ 103,747 $ 96,067 $ 99,345
========= ========= ==========
Ratio of net charge-offs
to Average loans
outstanding for the period .08% .07% .35%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.08% 1.23% 1.08%
</TABLE>
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 1999 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, 1998 , and the
three month period ended March 31, 1999 ( 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,
--------------- -----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------------- --------------- ---------------- -------------- ---------------- ------------------
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 $ 208 35.0 % $ 208 34.2% $ 202 34.6% $ 192 36.5% $ 215 39.9% $ 216 43.1%
Commercial 490 37.6 490 37.8 622 38.0 619 39.1 618 36.5 420 34.7
Installment 372 24.1 374 23.8 343 23.6 298 21.6 265 20.0 260 19.3
Others 20 3.3 20 4.2 20 3.8 20 2.8 20 3.6 20 2.9
Unallocated 31 -- 31 -- 31 -- 31 -- 31 -- 31 --
------ -------- -------- ------ ------ ------ ------ ------ ------ ------- ------ -------
Total $1,121 100.0 % $ 1,123 100.0% $1,218 100.0% $1,160 100.0% $1,149 100.0% $ 947 100.0%
====== ======== ======== ====== ====== ====== ====== ====== ====== ======= ====== =======
</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 $153,518,573 at March 31, 1999 as compared to
$147,784,819 at December 31, 1998, an increase of 3.9%. Deposit growth
increased primarily in savings and interest bearing demand deposits. At March
31, 1999, noninterest bearing deposits comprised 9% of total deposits and
interest bearing deposits which include NOW, money market, savings and time
deposits comprised 91% of total deposits. The changes in the deposit mix
from December 31, 1998 to March 31, 1999 were a 1% increase in interest
bearing deposits and 1% decrease in noninterest bearing deposits.
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, 1999
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 $ 1,924 $ 744 $ 3,821 $ 3,815 $ 10,304
December 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 $ 2,906 $ 1,173 $ 2,077 $ 4,102 $ 10,258
</TABLE>
Repurchase Agreements
- ----------------------
Repurchase agreements represent short-term borrowings, usually
overnight to 30 days. Repurchase agreements were $7,032,098 at March 31,
1999, an increase of $38,074, as compared to December 31, 1998. 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 2.2% in during the first
quarter of 1999 entirely from current earnings after quarterly dividends, and
a decrease of 1.1% resulting from the effect of the change in the net
unrealized gain (loss) on securities available for sale. Stockholders'
equity amounted to 8.8% of total assets at March 31, 1999 as compared to 9.0%
at December 31, 1998.
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, 1999, March 31, 1998, and December 31, 1998:
<TABLE>
<CAPTION>
March 31, Dec. 31
-------------- -------
Ratio Minimum 1999 1998 1998
- ---------------------- -------- ------- ----- -----
<S> <C> <C> <C> <C>
Leverage Ratio 3% 8.7 8.7 8.7
Risk Based Capital
Tier 1 (core) 4% 14.0 14.1 13.9
Tier 2 (total) 8% 15.1 15.3 15.0
</TABLE>
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
$44,256,415 classified as available for sale at March 31, 1999. 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, 1999, 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,
1999 there were no borrowings outstanding pursuant to these agreements.
At March 31, 1999 and December 31, 1998, the Holding Company had
outstanding loan commitments and unused lines of credit totaling $8,725,000 and
$8,070,000, respectively. As of March 31, 1999, management placed a high
probability for required funding within one year of approximately $5,366,000.
Approximately $2,984,000 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.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Year 2000 Readiness Disclosure
First West Virginia Bancorp, Inc. and its subsidiary banks are heavily
dependent on technology to process information. Therefore, the banks need to
ensure that information systems and applications are century compliant,
supporting the Year 2000. The Board of Directors and management of First West
Virginia Bancorp, Inc. and its subsidiary banks have established a Year 2000
Plan, ("the Plan"). Accordingly, a Year 2000 Project committee has been
formed to develop an overall strategy and to monitor the Plan's reporting
requirements. The Plan involves five phases which include: Awareness,
Assessment, Renovation, Validation, and Implementation. The Awareness Phase
provided for the establishment of a Year 2000 committee and to develop an
overall strategy for the banks. The Assessment Phase included the
identification of all hardware, software, networks, automated teller machines,
mission critical systems and customer and vendor interdependencies affected by
Year 2000. The committee has identified software and hardware which will be
affected by the Year 2000 change. We have contacted our vendors and continue
to monitor their progress on a quarterly basis. Additionally, large
commercial customers have been assessed for Year 2000 risk and assigned a risk
rating. Customers with high risk ratings are being reviewed on a periodic
basis. Any new material commercial customers are evaluated for Year 2000 risk.
The Year 2000 Project Committee has identified the bank's mission critical
systems. The committee has established the following definition of Year 2000
compliance: A vendor or software system would be classified as Year 2000
compliant if certification from the vendor was received stating that the
product will correctly process, provide and/or receive date data for the Year
2000 and that the product performs accurately in a test conducted by the bank
with the product interfacing with all relevant systems. Internal testing is a
crucial part of the Plan. We have established our testing strategies,
methodology and have developed test scripts for our mission critical systems.
In order to facilitate testing, we have created a testing environment which
mirrors our production system. Testing of in-house applications, including ACH
processing, was completed during the third and fourth quarters of 1998.
Verification of the testing was completed by December 31, 1998. Based on our
Year 2000 definition, we have concluded that our mission critical hardware and
software systems are Year 2000 compliant.
The Company has also established a business resumption plan which will be
reviewed on a quarterly basis. The estimated costs of the Year 2000 issue are
not expected to have a material impact to the results of operations, liquidity
and capital resources of the Company.
<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. The Company is unaware of any litigation other
than ordinary routine litigation incidental to the business of the Company,
to which it or any of its subsidiaries is a party or of which any of 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 13, 1999, Annual Meeting of Shareholders.
b. Inapplicable
c. Election of Directors
<TABLE>
<CAPTION>
SHARES VOTED
-------------------------------------------------------------------
Against/ Abstentions
NAME For Withheld Broker Non-Votes
<S> <C> <C> <C>
George F. Beneke 1,111,580 3,608 0
Laura G. Inman 1,114,876 312 0
Karl W. Neumann 1,110,222 4,966 0
</TABLE>
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 three month period ended March 31, 1999, 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,
1999.
(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: April 30, 1999
<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, 1999 between
First West Virginia Bancorp, Inc. and Ronald L. Solomon.
Incorporated herein by reference.
10.2 Employment Contract dated January 1, 1999 between
First West Virginia Bancorp, Inc. and Charles K. Graham.
Incorporated herein by reference.
10.3 Employment Contract dated January 1, 1999 between
First West Virginia Bancorp, Inc. and Beverly A. Barker.
Incorporated herein by reference.
10.4 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.
10.5 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.
10.6 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.
10.7 Lease dated May 20, 1998 between Progressive Bank, N.A.
and Robert Scott Lumber Company. 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
EX-11.1
COMPUTATION OF PER SHARE EARNINGS
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 three months ended March 31, 1999 and 1998,
included in this report as Exhibit 13.3
Earnings Per Share
Net Income /
Weighted average shares of common stock outstanding for the period
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------- -------
<S> <C> <C>
Weighted Average
Shares Outstanding 1,257,252 1,257,252
Net Income 548,216 519,740
Per Share Amount .44 .41
</TABLE>
No common stock equivalents exist.
EX-13.3
SUMMARIZED QUARTERLY FINANCIAL INFORMATION
<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:
<TABLE>
<CAPTION>
First
1999 Quarter
-------------
<S> <C>
Total interest income $ 3,117,090
Total interest expense 1,321,239
Net interest income 1,795,851
Provision for loan losses 76,500
Investment Securities gain (loss) 9,153
Total other income 198,994
Total other expenses 1,133,286
Income before income taxes 794,212
Net income 548,216
Net income per share (1) .44
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total interest income $ 3,017,292 $ 3,062,636 $ 3,148,133 $ 3,224,052
Total interest expense 1,276,939 1,325,792 1,363,263 1,357,847
Net interest income 1,740,353 1,736,844 1,784,870 1,866,205
Provision for loan losses 46,500 56,500 76,500 76,500
Investment Securities Gain (1,608) -- 2,786 --
Total other income 191,504 183,293 215,373 195,010
Total other expenses 1,109,594 1,125,921 1,172,069 1,266,218
Income before income taxes 774,155 737,716 754,460 718,497
Net income 519,740 501,192 515,715 496,378
Net income per share (1) .41 .40 .41 .40
</TABLE>
<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) .38 .38 .40 .38
</TABLE>
(1) Adjusted for the 4 percent common stock dividend to stockholders of
record as of October 1, 1998; the 3 for 2 stock split in the effect of a 50%
stock dividend to stockholders of record as of October 1, 1997; and the 4
percent common stock dividend to stockholders of record as of December 2, 1996.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,200
<INT-BEARING-DEPOSITS> 4,646
<FED-FUNDS-SOLD> 4,568
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,256
<INVESTMENTS-CARRYING> 11,764
<INVESTMENTS-MARKET> 11,831
<LOANS> 103,848
<ALLOWANCE> 1,121
<TOTAL-ASSETS> 177,446
<DEPOSITS> 153,519
<SHORT-TERM> 7,032
<LIABILITIES-OTHER> 1,259
<LONG-TERM> 0
0
0
<COMMON> 6,286
<OTHER-SE> 9,350
<TOTAL-LIABILITIES-AND-EQUITY> 177,446
<INTEREST-LOAN> 2,255
<INTEREST-INVEST> 784
<INTEREST-OTHER> 78
<INTEREST-TOTAL> 3,117
<INTEREST-DEPOSIT> 1,263
<INTEREST-EXPENSE> 1,321
<INTEREST-INCOME-NET> 1,796
<LOAN-LOSSES> 77
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 1,133
<INCOME-PRETAX> 794
<INCOME-PRE-EXTRAORDINARY> 794
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 548
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 4.70
<LOANS-NON> 564
<LOANS-PAST> 101
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,123
<CHARGE-OFFS> 82
<RECOVERIES> 3
<ALLOWANCE-CLOSE> 1,121
<ALLOWANCE-DOMESTIC> 1,121
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 31
</TABLE>
