<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the Quarterly Period Ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 1-13652
First West Virginia Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
West Virginia 55-6051901
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1701 Warwood Avenue
Wheeling, West Virginia 26003
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(Address of principal executive offices)
Registrant's telephone number, including area code: (304) 277-1100
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months ( or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No [X] N/A
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practible date.
The number of shares outstanding of the issuer's common stock as of July 31,
2000:
Common Stock, $5.00 Par Value, shares outstanding 1,508,526 shares
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<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>
June 30, December 31, June 30,
2000 1999 1999
-------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 4,595,841 $ 5,335,861 $ 4,533,799
Due from banks - interest bearing 3,207,699 6,478,406 4,726,768
-------------- -------------- --------------
Total cash and cash equivalents 7,803,540 11,814,267 9,260,567
Federal funds sold 4,343,000 2,485,000 2,613,000
Investment securities
Available for sale (at fair value) 57,162,609 49,449,312 49,774,539
Held to maturity - fair value of
$12,024,432 at June 30, 2000;
$10,436,842 at December 31, 1999;
and $10,774,640 at June 30, 1999 12,169,097 10,646,112 10,854,616
Loans, net of unearned income 113,893,716 110,488,432 105,249,268
Less allowance for possible loan losses (1,249,571) (1,147,720) (1,128,278)
-------------- -------------- --------------
Net loans 112,644,145 109,340,712 104,120,990
Premises and equipment, net 2,763,547 2,841,337 2,939,499
Accrued income receivable 1,472,747 1,356,419 1,349,168
Other assets 1,681,541 1,239,475 1,124,950
-------------- -------------- --------------
Total assets $ 200,040,226 $ 189,172,634 $ 182,037,329
============== ============== ==============
LIABILITIES
Noninterest bearing deposits:
Demand $ 15,089,702 $ 14,780,305 $ 15,494,893
Interest bearing deposits:
Demand 23,714,794 23,961,233 23,760,881
Savings 57,484,449 52,872,689 50,362,044
Time 73,236,954 69,943,705 66,085,265
-------------- -------------- --------------
Total deposits 169,525,899 161,557,932 155,703,083
-------------- -------------- --------------
Federal funds purchased and
repurchase agreements 12,654,483 10,273,925 9,481,904
Accrued interest on deposits 560,867 499,352 476,118
Other liabilities 744,986 785,953 706,597
-------------- -------------- --------------
Total liabilities 183,486,235 173,117,162 166,367,702
-------------- -------------- --------------
STOCKHOLDERS' EQUITY
Common stock - 2,000,000 shares authorized at
$5 par value 1,508,526 shares issued at
June 30, 2000 and December 31, 1999;
1,257,252 shares issued at June 30, 1999 7,542,630 7,542,630 6,286,260
Surplus 4,739,381 4,739,381 4,739,381
Retained earnings 5,300,417 4,638,742 5,165,335
Accumulated other comprehensive income (1,028,437) (865,281) (521,349)
-------------- -------------- --------------
Total stockholders' equity 16,553,991 16,055,472 15,669,627
-------------- -------------- --------------
Total liabilities and stockholders' equity $ 200,040,226 $ 189,172,634 $ 182,037,329
============== ============== ==============
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,387,687 $2,223,797 $4,726,601 $4,429,868
Tax-exempt 55,342 55,240 107,021 104,599
Investment securities:
Taxable 904,602 699,574 1,726,265 1,339,211
Tax-exempt 129,055 127,116 257,871 263,173
Dividends 10,919 8,888 21,892 16,900
Other interest income 87,764 38,620 179,829 62,619
Interest on federal funds sold 77,069 67,217 130,297 121,172
---------- ---------- ---------- ----------
Total interest income 3,652,438 3,220,452 7,149,776 6,337,542
INTEREST EXPENSE
Deposits 1,573,704 1,278,424 3,050,120 2,541,685
Other borrowings 143,767 62,344 259,918 120,322
---------- ---------- ---------- ----------
Total interest expense 1,717,471 1,340,768 3,310,038 2,662,007
---------- ---------- ---------- ----------
Net interest income 1,934,967 1,879,684 3,839,738 3,675,535
PROVISION FOR POSSIBLE LOAN LOSSES 97,500 76,500 195,000 153,000
---------- ---------- ---------- ----------
Net interest income after provision
for possible loan losses 1,837,467 1,803,184 3,644,738 3,522,535
NONINTEREST INCOME
Service charges and other fees 137,035 125,181 250,125 241,309
Securities gains (losses) -- 3,312 23,443 12,465
Gain on sale of building and land -- 301,862 -- 301,862
Other operating income 54,325 52,568 148,418 135,434
---------- ---------- ---------- ----------
Total noninterest income 191,360 482,923 421,986 691,070
NONINTEREST EXPENSES
Salary and employee benefits 631,183 623,221 1,283,562 1,231,690
Net occupancy and equipment expenses 190,348 195,692 397,635 383,841
Other operating expenses 382,938 358,542 750,683 695,210
---------- ---------- ---------- ----------
Total noninterest expense 1,204,469 1,177,455 2,431,880 2,310,741
---------- ---------- ---------- ----------
Income before income taxes 824,358 1,108,652 1,634,844 1,902,864
---------- ---------- ---------- ----------
INCOME TAXES 239,498 364,462 490,441 610,458
---------- ---------- ---------- ----------
Net income $ 584,860 $ 744,190 $1,144,403 $1,292,406
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,508,526 1,508,526 1,508,526 1,508,526
========== ========== ========== ==========
EARNINGS PER COMMON SHARE $ 0.39 $ 0.49 $ 0.76 $ 0.86
========== ========== ========== ==========
</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 Stock Surplus Earnings Income Income Total
---------- ----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 1,508,526 $ 7,542,630 $ 4,739,381 $ 4,638,742 $ (865,281) $ $ 16,055,472
Comprehensive income
Net income for the six
months ended
June 30, 2000 -- -- -- 1,144,403 -- 1,144,403 1,144,403
Other comprehensive
income, net of tax
Unrealized gains (losses)
on securities,net of
reclassification
adjustment
(see disclosure) -- -- -- -- (163,156) (163,156) (163,156)
----------
Comprehensive income $ 981,247
==========
Cash dividend
($.32 per share) -- -- -- (482,728) -- (482,728)
---------- ----------- ----------- ----------- ----------- ------------
Balance, June 30, 2000
(Unaudited) 1,508,526 $ 7,542,630 $ 4,739,381 $ 5,300,417 $(1,028,437) $ 16,553,991
========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
------------------------ Retained Comprehensive Comprehensive
Shares Stock 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 six
months ended
June 30, 1999 -- -- -- 1,292,406 -- 1,292,406 1,292,406
Other comprehensive
income,net of tax
Unrealized gains
(losses) on securities,
net of reclassification
adjustment
(see disclosure) -- -- -- -- (681,397) (681,397) (681,397)
-----------
Comprehensive income $ 611,009
===========
Cash dividend
($.27 per share) -- -- -- (402,320) -- (402,320)
---------- ----------- ----------- ----------- ------------ ------------
Balance, June 30,1999
(Unaudited) $1,257,252 $ 6,286,260 $ 4,739,381 $ 5,165,335 $ (521,349) $ 15,669,627
========== =========== =========== =========== ============ ============
For the six months ended
June 30,
2000 1999
---------- ----------
<S> <C> <C>
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ (148,462) $ (673,540)
Less: reclassification adjustment for
gains (losses) included in net income 14,694 7,857
---------- ----------
Net unrealized gains (losses) on securities $ (163,156) $ (681,397)
========== ==========
</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>
Six Months Ended June 30,
2000 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,144,403 $ 1,292,406
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 195,000 153,000
Depreciation and amortization 168,711 185,421
Amortization of investment securities, net (132,085) (47,361)
Investment security losses (gains) (23,443) (12,465)
(Gain) loss on disposal of premises and equipment 579 (301,862)
Decrease (increase) in interest receivable (116,328) (106,562)
Increase (decrease) in interest payable 61,515 4,021
Other, net (385,888) (34,059)
-------------- --------------
Net cash provided by operating activities 912,464 1,132,539
-------------- --------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (1,858,000) 1,479,000
Net (increase) decrease in loans, net of charge offs (3,521,932) (1,859,346)
Proceeds from sales of securities available for sale 882,333 1,154,104
Proceeds from maturities of securities available for sale 7,090,000 15,015,000
Proceeds from maturities of securities held to maturity 340,000 1,580,000
Principal collected on mortgage-backed securities 1,631,817 2,372,154
Purchases of securities available for sale (17,417,387) (25,949,371)
Purchases of securities held to maturity (1,867,818) (1,086,884)
Recoveries on loans previously charged-off 23,499 17,763
Purchases of premises and equipment (91,500) (36,480)
Proceeds from sales of premises and equipment -- 418,152
-------------- --------------
Net cash used by investing activities (14,788,988) (6,895,908)
-------------- --------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 7,967,967 7,918,264
Dividends paid (482,728) (402,320)
Increase (decrease) in short term borrowings 2,380,558 2,487,880
-------------- --------------
Net cash provided by financing activities $ 9,865,797 $ 10,003,824
-------------- --------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,010,727) 4,240,455
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11,814,267 5,020,112
-------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,803,540 $ 9,260,567
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 7
First West Virginia Bancorp, Inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 AND 1999
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, 1999, 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 2000
presentation.
<PAGE> 8
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
---------------------------------------------------------------
First West Virginia Bancorp, Inc., a West Virginia corporation headquartered
in Wheeling, West Virginia commenced operations in July, 1973 and has two
wholly-owned subsidiaries: Progressive Bank, N.A., which operates in
Wheeling, Wellsburg, and Moundsville, West Virginia and Bellaire, Ohio; and
Progressive Bank, N.A.-Buckhannon, which operates in Buckhannon and Weston,
West Virginia. Following is a discussion and analysis of the significant
changes in the financial condition and results of operations of First West
Virginia Bancorp, Inc., (the Holding Company), and its subsidiaries for the
three months ended June 30, 2000 and 1999. 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 1999 financial statements, the notes thereto and the related
Management's Discussion and Analysis.
OVERVIEW
The Holding Company reported net income of $584,860 for the three months ended
June 30, 2000 as compared to $744,190 for the same period during 1999. The
decrease in earnings during the second quarter of 2000 over 1999 was primarily
attributed to the decreased noninterest income combined with increased
operating expenses and the provision for loan losses, offset in part by
increased net interest income. Earnings per share were $.39 in the second
quarter of 2000, as compared to $.49 earned during the second quarter of 1999.
The significant decrease in noninterest income resulted primarily from the
$301,862 gain on the sale of building and land by the holding company in 1999.
Net income for the six months ended June 30, 2000 was $1,144,403 compared to
$1,292,406 for the same period during 1999. The decrease in earnings for the
six months ended June 30, 2000 as compared to the same period in 1999 was
primarily due to decreased noninterest income and increased operating expenses
and the provision for loan losses, offset in part by increased net interest
income. Earnings per share were $.76 for the first six months of 2000 as
compared to $.86 earned during the same period during 1999. Noninterest
income decreased $269,084 due primarily to the gain on the sale of building
and land by the holding company during the second quarter of 1999.
During the three month period ended June 30, 2000, net interest income
increased primarily from the increase in the average volume of investment
securities and loans, offset in part by the increased interest paid on savings
deposits combined with the increase in the average volume of savings and time
deposits.
For the six month period ended June 30, 2000, the increase in net interest
income was primarily due to the increased interest earned on the average
volume of investment securities and loans, offset in part by the increase in
the average volume of savings and time deposits combined with the increase in
the interest rates paid on savings deposits.
Return on average assets (ROA) measures the effectiveness of asset utilization
to produce net income. ROA was 1.17% for the three month period ended June
30, 2000 as compared to 1.65% for the same period of the prior year. For the
six months ended June 30, 2000 compared to June 30, 1999, ROA was 1.16% and
1.47%, respectively. Return on average equity (ROE) measures the return on
the stockholders' investment. The holding company's ROE was 13.53% for the
three months ended June 30, 2000 and 18.77% at June 30, 1999. For the six
months ended June 30, 2000 compared to June 30, 1999, ROE was 13.37% and
16.59%, respectively.
The Holding Company as of June 30, 2000 had total assets of $200,040,226 an
increase of 5.7% over the $189,172,634 reported for the year ended December
31, 1999. Loans net of reserves grew by $3,303,433 to $112,644,145, as
compared to $109,340,712 reported at December 31, 1999. Total deposits
increased in 2000 by $7,967,967, from $161,557,932 at December 31, 1999 to
$169,525,899 at June 30, 2000, primarily due to the increase in time and
savings deposits. The allowance for loan losses amounted to 1.1% of total
loans at June 30, 2000, compared to 1.0% of total loans at December 31, 1999.
Table One is a summary of Selected Financial Data of the holding company. The
sections that follow discuss in more detail the information summarized in
Table One.
<PAGE> 9
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
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Table One
SELECTED FINANCIAL DATA
(Unaudited, in thousands, except per share data)
First West Virginia Bancorp, Inc.
<TABLE>
<CAPTION>
Three months ended Six months ended Years ended
June 30, June 30, December 31,
--------------------- -------------------- -----------------------------------
2000 1999 2000 1999 1999 1998 1997
-------- -------- -------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 3,652 $ 3,220 $ 7,150 $ 6,338 $ 13,207 $ 12,452 $11,507
Total interest expense 1,717 1,341 3,310 2,662 5,602 5,324 4,745
Net interest income 1,935 1,879 3,840 3,676 7,605 7,128 6,762
Provision for loan losses 98 76 195 153 348 256 131
Total other income 191 483 422 691 1,073 787 639
Total other expenses 1,204 1,177 2,432 2,311 4,740 4,674 4,377
Income before income taxes 824 1,109 1,635 1,903 3,590 2,985 2,893
Net income 585 744 1,144 1,292 2,450 2,033 1,931
PER SHARE DATA (1)
Net income $ 0.39 $ 0.49 $ .76 $ 0.86 $ 1.62 $ 1.35 $ 1.28
Cash dividends declared 0.16 0.14 0.32 0.27 0.55 0.49 0.43
Book value per share 10.97 10.39 10.97 10.39 10.64 10.25 9.37
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $112,572 $104,020 $111,668 $103,884 $ 105,775 $ 99,345 $ 86,609
Investment securities 69,741 58,941 67,384 57,058 60,405 48,543 51,754
Deposits - interest bearing 154,100 139,587 151,724 137,177 141,768 127,520 120,589
Stockholders' equity 17,393 15,895 17,212 15,709 16,087 14,697 13,400
Total assets 200,924 180,427 197,881 177,251 183,436 164,630 153,290
SELECTED RATIOS
Return on average assets 1.17% 1.65% 1.16% 1.47% 1.34% 1.23% 1.26%
Return on average equity 13.53% 18.77% 13.37% 16.59% 15.23% 13.83% 14.41%
Average equity to average assets 8.66% 8.81% 8.70% 8.86% 8.77% 8.93% 8.74%
Dividend payout ratio (1) 41.03% 28.57% 42.11% 31.40% 33.95% 36.30% 33.59%
Loan to Deposit ratio 67.18% 67.60% 67.18% 67.60% 68.39% 70.07% 69.59%
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET June 30, December 31,
--------------------- ---------------------------------
2000 1999 1999 1998 1997
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Investments $ 69,332 $ 60,629 $ 60,095 $ 54,735 $ 45,444
Loans 113,894 105,249 110,489 103,555 95,374
Other assets 16,814 16,159 18,589 13,105 15,325
---------- --------- ---------- --------- ----------
Total Assets $ 200,040 $ 182,037 $ 189,173 $ 171,395 $ 156,143
========== ========= ========== ========= ==========
Deposits $ 169,526 $ 155,703 $ 161,558 $ 147,785 $ 137,045
Federal funds purchased and
repurchase agreements 12,654 9,482 10,274 6,994 4,075
Other liabilities 1,306 1,183 1,285 1,155 894
Stockholders' equity 16,554 15,669 16,056 15,461 14,129
---------- --------- ---------- --------- ----------
Total Liabilities and
Stockholders' Equity $ 200,040 $ 182,037 $ 189,173 $ 171,395 $ 156,143
========== ========= ========== ========= ==========
</TABLE>
(1) Adjusted for 6 for 5 stock split in the effect of a twenty (20) percent
common stock dividend, declared October 12, 1999 to shareholders of
record as of November 1, 1999, a 4 percent common stock dividend to
stockholders of record as of October 1, 1998, and a 3 for 2 stock split
in the effect of a fifty (50) percent common stock dividend to
shareholders of record as of October 1, 1997.
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<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
Changes in the volume and mix of earning assets and interest bearing
liabilities combined with changes in market rates of interest greatly effect
net interest income. Tables Two and Three present the average balance sheet
and interest rate analysis for the three and six months ended June 30, 2000
and 1999.
Net interest income increased $55,283 or 2.9%, during the three months ended
June 30, 2000 as compared to the same period in 1999. The increase in net
interest income was primarily attributable to the increase in the interest
earned on investment securities and loans offset in part by an increase in the
interest paid on deposits and other borrowings. Interest and dividend income
on investment securities increased $208,998 or 25.0%, for the three months
ended June 30, 2000 over 1999 primarily due to the increase in the average
volume of investment securities. Interest and fees on loans increased
$163,992 or 7.2%during the three month period ended June 30, 2000 as compared
to the same period in 1999 and resulted primarily from an increase in average
loan volume. Interest expense increased $376,703 or 28.1% primarily due to
the increase in the average volume of savings and time deposits combined with
the increase in rates paid on savings deposits.
For the six months ended June, 30, 2000, net interest income was $3,839,738,
an increase of $164,203 or 4.5%, from the same period in 1999. The increase
in net interest income was primarily attributable to the increase in
investment securities and the growth in the loan portfolio offset in part by
the increase in the average rates paid on savings deposits. Interest and
dividend income on investment securities increased $386,744 or 23.9% during
the six months ended June 30, 2000 over 1999. The increase in the average
volume of investment securities primarily contributed to the increase in net
interest income. The average yield on investment securities increased .26%,
from 5.73% at December 31, 1999 to 5.99% at June 30, 2000. Interest and fees
on loans increased $299,155 or 6.6% for the six month period ended June 30,
2000 as compared the same period in 1999. The increased interest income on
loans resulted primarily from an increase in the average loan volume which was
partially offset by a decrease in average rates earned. Increases in real
estate residential loans and commercial loans primarily contributed to the
loan growth. The average yield on loans decreased from 8.80% at December 31,
1999 to 8.71% at June 30, 2000. During the six months ended June 30, 2000,
interest expense increased $648,031 or 24.3% as compared to the same period in
1999. Interest expense increased as a result of the increase in the volume of
interest bearing liabilities combined with the increase in the average
interest rates paid on interest bearing liabilities. Average volume increases
of interest bearing liabilities were primarily the result of the growth in
time deposits and savings deposits. The average yield paid on interest
bearing liabilities increased .34%, from 3.72% at December 31, 1999 to 4.06%
at June 30, 2000.
Noninterest Income
Noninterest income was $191,360 for the three months ended June 30, 2000, a
decrease of $291,563 as compared to the same period of the prior year and was
primarily the result of the $301,862 gain on the sale of building and land by
the holding company. Service charges and other fees are earned from
assessments made on checking and savings accounts. Service charges increased
$11,854 during the three months ended June 30, 2000, up 9.5%, from the same
period in 1999.
For the six months ended June 30, 2000, noninterest income was $421,986, a
decrease of $269,084 as compared to the same period of the prior year. The
decrease in noninterest income resulted primarily from the gain on the sale of
building and land by the holding company. Service charges and other fees
increased $8,816 or 3.7% over the same period in 1999. Sales of investment
securities for the six months ended June 30, 2000, and 1999 were primarily the
result of sales by the holding company. The holding company accounted for
securities gains of $37,940 and securities losses of $14,508 during the six
months ended June 30, 2000 and securities gains of $11,470 and a securities
loss of $660 during 1999. The holding company sales were attributable to
sales of marketable equity securities. Additionally, for the six months ended
June 30, 1999, a subsidiary bank also accounted for securities gains of
$11,109 and securities losses of $9,454 and those sales were attributable to
sales of securities available for sale.
<PAGE> 11
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Non-Interest Expense
Noninterest expense increased $27,014 or 2.3% for the three months ended June
30, 2000 as compared to the same period of the prior year. During the quarter
ended June 30, 2000, salary and employee benefits increased $7,962 or 1.3%.
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 $24,396, or 6.8%, for
the three month period ended June 30, 2000 as compared to the same period in
the prior year. Increased advertising, service expense, regulatory
assessments and other operating expenses offset in part by other taxes
primarily contributed to the increase in other operating expenses during the
three month period ended June 30, 2000.
For the six months ended June 30, 2000, noninterest expense increased $121,139
or 5.2% as compared to the same period of the prior year. Salary and employee
benefits increased $51,872 or 4.2%. The increase was primarily attributable
to normal annual merit adjustments in salaries. Other operating expenses
increased $55,473 or 8.0%, for the six month period ended June 30, 2000 as
compared to the same period in the prior year. Increased advertising, service
expense, other operating expense, regulatory assessments, and postage and
transportation expense, offset in part by decreased other taxes primarily
contributed to the increase in other operating expenses in 2000.
Income Taxes
Income tax expense for the three months ended June 30, 2000 was $239,498, a
decrease of 34.3% over the same period in 1999. The decrease was primarily
due to the decrease in pre-taxable income of $284,294 for the period ended
June 30, 2000 over 1999. Components of the income tax expense for June 30,
2000 were $218,731 for federal taxes and $20,767 for West Virginia corporate
net income taxes. For the six months ended June 30, 2000, income tax expense
decreased 19.7% compared to the same period in 1999. The decrease was
primarily due to the decrease in pre-taxable income of $268,020 for the during
the six months ended June 30, 2000 over 1999.
For federal income tax purposes, tax-exempt income is based on qualified
state, county, and municipal bonds and loans. Tax-exempt income was $184,397
and $182,356 for the three month periods ended June 30, 2000 and 1999,
respectively. For the six months ended June 30, 2000 and 1999, tax exempt
income was $364,892 and $367,772, respectively.
Federal income tax rates and West Virginia corporate net income tax rates
remain consistent at 34% and 9%, respectively, for the three and six months
ended June 30, 2000 and 1999 and for the year ended December 31, 1999.
<PAGE> 12
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 (in thousands) The following table presents an
average balance sheet, interest earned on interest bearing assets, interest
paid on interest bearing liabilities, average interest rates and interest
differentials for the six months ended June 30, 2000 and June 30, 1999 and the
year ended December 31, 1999. Average balance sheet information as of June
30, 2000 and June 30, 1999 and the year ended December 31, 1999 was compiled
using the daily average balance sheet. Loan fees and unearned discounts were
included in income for average rate calculation purposes. Non-accrual loans
were included in the average balance computations; however, no interest was
included in income subsequent to the non-accrual status classification.
Average rates were annualized for the six month periods ended June 30, 2000
and 1999.
<TABLE>
<CAPTION>
For the Six For the Six
Months ended Months ended
June 30, 2000 December 31, 1999 June 30, 1999
----------------------------- ------------------------------ ----------------------------
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 $ 52,128 $ 1,628 6.28% $ 46,283 $ 2,799 6.05% $ 42,643 $1,288 6.09%
Obligations of states and
political subdivisions 11,928 270 4.55% 11,546 507 4.39% 11,954 263 4.44%
Other securities 3,328 108 6.53% 2,576 156 6.06% 2,461 68 5.57%
-------- ------- ------- -------- -------- ------ -------- ------ ------
Total Investment securities: 67,384 2,006 5.99% 60,405 3,462 5.73% 57,058 1,619 5.72%
Interest bearing deposits 6,048 180 5.99% 3,861 195 5.05% 2,652 63 4.79%
Federal funds sold 4,370 130 5.98% 4,923 244 4.96% 5,183 121 4.71%
Loans, net of unearned income 111,668 4,834 8.71% 105,775 9,306 8.80% 103,884 4,535 8.80%
-------- ------- ------- -------- -------- ------ -------- ------ ------
Total earning assets 189,470 7,150 7.59% 174,964 13,207 7.55% 168,777 6,338 7.57%
Cash and due from banks 4,680 4,628 4,528
Bank premises and equipment 2,795 2,994 3,092
Other assets 2,138 2,005 1,991
Allowance for possible loan losses (1,202) (1,155) (1,137)
-------- -------- --------
Total Assets $197,881 $ 183,436 $177,251
======== ========= ========
LIABILITIES
Certificates of deposit $ 71,402 $ 1,907 5.37% $ 67,309 $ 3,535 5.25% $ 64,434 $ 1,707 5.34%
Savings deposits 55,669 957 3.46% 48,752 1,368 2.81% 47,069 625 2.68%
Interest bearing demand deposits 24,653 186 1.52% 25,707 406 1.58% 25,674 210 1.65%
Federal funds purchased and
Repurchase agreements 12,330 260 4.24% 9,012 293 3.25% 8,302 120 2.91%
-------- ------- ------- -------- -------- ------ -------- ------ ------
Total interest bearing liabilities 164,054 3,310 4.06% 150,780 5,602 3.72% 145,479 2,662 3.69%
Demand deposits 15,193 15,241 14,824
Other liabilities 1,422 1,328 1,239
-------- -------- --------
Total Liabilities 180,669 167,349 161,542
STOCKHOLDERS' EQUITY 17,212 16,087 15,709
-------- -------- --------
Total Liabilities
and Stockholders' Equity $197,881 $183,436 $177,251
======== ======== ========
Net yield on earning assets $ 3,840 4.08% $ 7,605 4.35% $3,676 4.39%
======= ======= ======== ====== ====== ======
</TABLE>
The fully taxable equivalent basis of interest income from obligations of
states and political subdivisions has been determined using a combined
Federal and State corporate income tax rate of 40% for the six months ended
June 30, 2000 and 1999, and the year ended December 31, 1999, 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 $ 11,928 $ 442 7.45% $ 11,546 $ 845 7.32% $ 11,954 $ 438 7.39%
Loans 111,668 4,905 8.83% 105,775 9,434 8.92% 103,884 4,604 8.94%
======== ======= ======= ======== ======== ====== ======== ====== ======
Total earning assets $189,470 $ 7,393 7.85% $174,964 $13,673 7.81% $168,777 $6,582 7.86%
======== ======= ======= ======== ======== ====== ======== ====== ======
Taxable equivalent net yield on
earning assets $ 4,083 4.33% $ 8,071 4.61% $3,920 4.68%
======= ======= ======== ====== ====== ======
</TABLE>
<PAGE> 13
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
Table Three
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates
and Interest Differential (in thousands)
The following table presents an average balance sheet, interest earned on
interest bearing assets, interest paid on interest bearing liabilities,
average interest rates and interest differentials for the three months ended
June 30, 2000 and June 30, 1999. Average balance sheet information as of June
30, 2000 and June 30, 1999 was compiled using the daily average balance sheet.
Loan fees and unearned discounts were included in income for average rate
calculation purposes. Non-accrual loans were included in the average balance
computations; however, no interest was included in income subsequent to the
non-accrual status classification. Average rates were annualized for the
three month periods ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
June 30, 2000 June 30, 1999
----------------------------------- --------------------------------
Average Average Average Average
Volume Interest Rate Volume Interest Rate
----------- -------- ------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 54,008 $ 848 6.32% $ 45,188 $ 680 6.04%
Obligations of states and
political subdivisions 12,281 141 4.62% 11,620 127 4.38%
Other securities 3,452 56 6.52% 2,133 29 5.45%
----------- -------- ------- ------------ -------- -------
Total Investment Securities 69,741 1,045 6.03% 58,941 836 5.69%
Interest bearing deposits 5,558 88 6.37% 3,262 39 4.80%
Federal funds sold 4,955 77 6.25% 5,739 67 4.68%
Loans, net of unearned income 112,572 2,443 8.73% 104,020 2,279 8.79%
----------- -------- ------- ------------ -------- -------
Total earning assets 192,826 3,653 7.62% 171,962 3,221 7.51%
Cash and due from banks 4,403 4,646
Bank premises and equipment 2,776 3,015
Other assets 2,140 1,943
Allowance for possible loan losses (1,221) (1,139)
----------- ------------
Total Assets $ 200,924 $ 180,427
=========== ============
LIABILITIES
Certificates of deposit $ 72,317 $ 974 5.42% $ 65,174 $ 854 5.26%
Savings deposits 57,182 507 3.57% 48,156 323 2.69%
Interest bearing demand deposits 24,601 93 1.52% 26,257 102 1.56%
Federal funds purchased and
Repurchase agreements 12,848 144 4.51% 8,446 62 2.94%
----------- -------- ------- ------------ -------- -------
Total interest bearing liabilities 166,948 1,718 4.14% 148,033 1,341 3.63%
Demand deposits 15,147 15,201
Other liabilities 1,436 1,298
----------- ------------
Total Liabilities 183,531 164,532
SHAREHOLDERS' EQUITY 17,393 15,895
----------- ------------
Total Liabilities
and Shareholders' Equity $ 200,924 $ 180,427
=========== ============
Net yield on earning assets $ 1,935 4.04% $ 1,880 4.39%
========= ======= ======== =======
</TABLE>
The fully taxable equivalent basis of interest income from obligations of states
and political subdivisions has been determined using a combined Federal and
State corporate income tax rate of 40% for the three months ended June 30, 2000
and 1999, respectively. The effect of this adjustment is presented below (in
thousands).
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Obligations of states and
political subdivisions:
Investment securities $ 12,281 $ 227 7.43% $ 11,620 $ 212 7.31%
Loans 112,572 2,480 8.86% 104,020 2,316 8.93%
=========== ======== ======= =========== ======== =======
Total earning assets $ 192,826 $ 3,776 7.88% $ 171,962 $ 3,343 7.80%
========== ========= ======= =========== ======== =======
Taxable equivalent net yield on
earning assets $ 2,058 4.29% $ 2,002 4.67%
========= ======= ======== =======
</TABLE>
<PAGE> 14
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 $9,236,282 or 15.4% from $60,095,424
at December 31, 1999, to $69,331,706 at June 30, 2000. Taxable securities
comprised 83.1% of total securities at June 30, 2000, as compared to 81.4%
at December 31, 1999. 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.
Available for sale securities, at market value increased $7,713,297
or 15.6% from December 31, 1999, and represented 82% of the investment
portfolio at June 30, 2000. The increase was primarily due to the purchase of
U.S. Government agency securities and mortgage backed securities. The held to
maturity securities increased $1,522,985 or 14.3% from December 31, 1999 and
represented 18% of the investment portfolio as of June 30, 2000. The increase
was primarily the result of purchases of taxable municipal securities. 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 and represent temporary adjustments in values. The carrying value of
securities available for sale was decreased by $1,640,769 and $1,380,468 at
June 30, 2000 and December 31, 1999, respectively. The market value of
securities classified as held to maturity was below book value by $144,665 and
$209,270 at June 30, 2000 and December 31, 1999, respectively.
Table Three
Investment Portfolio
The following table presents the book values of investment securities:
(in thousands) (Unaudited):
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
-------- ----------- --------
<S> <C> <C> <C>
Securities held to maturity:
Obligations of states
and political subdivisions $ 12,169 $ 10,646 $ 10,855
-------- -------- --------
Total held to maturity $ 12,169 $ 10,646 $ 10,855
-------- -------- --------
Securities available for sale :
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 44,472 $ 40,700 $ 43,116
Obligations of states
and political subdivisions 767 507 510
Corporate debt securities 101 102 103
Mortgage-backed securities 10,732 7,049 4,968
Equity Securities 1,091 1,091 1,077
-------- -------- --------
Total available for sale 57,163 49,449 49,774
-------- -------- --------
Total $ 69,332 $ 60,095 $ 60,629
======== ======== ========
</TABLE>
--------------------------------------------------------------------------
<PAGE> 15
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 June 30, 2000 and December 31, 1999 are presented in
the following table. Tax equivalent yield basis was used on tax exempt
obligations. Approximate yield was calculated using a weighted average of yield
to maturities.
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
---------------------------------------------- ------------------------------------------
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 $ -- -- % $ 10,261 5.73 % $ -- -- % $ 4,504 5.25 %
After One But
Within Five Years -- -- 20,406 6.38 -- -- 18,750 6.16
After Five But
Within Ten Years -- -- 13,805 6.88 -- -- 17,446 6.78
-------- ------ -------- ------ -------- ------ -------- ------
-- -- 44,472 6.39 -- -- 40,700 6.33
States & Political Subdivisions
Within One Year 1,761 6.78 -- -- 1,020 6.40 -- --
After One But
Within Five Years 3,410 6.30 120 7.20 3,626 6.67 -- --
After Five But
Within Ten Years 5,964 6.44 647 7.16 5,467 6.64 507 7.59
After Ten Years 1,034 6.40 -- -- 533 6.81 -- --
-------- ------ -------- ------ -------- ------ -------- ------
12,169 6.45 767 7.17 10,646 6.64 507 7.59
Corporate Debt Securities
Within One Year -- -- 101 8.46 -- -- -- --
After One But
Within Five Years -- -- -- -- -- -- 102 8.42
-------- ------ -------- ------ -------- ------ -------- ------
-- -- 101 8.46 -- -- 102 8.42
Mortgage-Backed Securities -- -- 10,732 7.22 -- -- 7,049 6.44
Equity Securities -- -- 1,091 5.35 -- -- 1,091 5.29
-------- ------ -------- ------ -------- ------ -------- ------
Total $ 12,169 6.45 % $ 57,163 6.54 % $ 10,646 6.64 % $49,449 6.34 %
======== ====== ======== ====== ======== ====== ======= ======
</TABLE>
------------------------------------------------------------------------------
<PAGE> 16
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Loans
-----
Loans net of unearned income increased $3,405,284 or 3.1% from December
31, 1999. The loan growth during the first six months of 2000 can be
attributed primarily to the increases in residential real estate loans,
commercial loans and other loans, offset in part by the decrease in
installment loans.
Real estate residential loans which include real estate construction,
real estate farmland, and real estate residential loans comprise thirty-seven
percent (37%) of the loan portfolio. Commercial loans which include real
estate secured by non-farm, non residential and commercial and industrial
loans comprise thirty-nine percent (39%) of the loan portfolio. Installment
loans comprise twenty percent (20%) 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 only
changes in the composition of the loan portfolio from December 31, 1999 to
June 30, 2000 were a 1% increase in other loans, a 1% increase in residential
real estate loans and a 2% decrease in installment loans.
The loan portfolio is not dominated by concentrations of credit within
any one industry; therefore, the impact of a weakening economy on any
particular industry should be minimal. Management believes that the loan
portfolio does not contain any excessive or abnormal elements of risk.
Table Six
Loan Portfolio
(Unaudited)
<TABLE>
<CAPTION>
Loans outstanding are as follows (in thousands):
June 30, December 31,
--------------------------- ------------
2000 1999 1999
<S> <C> <C> <C>
Real Estate - Residential
Real estate-construction $ 259 $ 238 $ 73
Real estate-farmland 91 100 79
Real estate-residential 41,803 37,105 39,898
----------- ----------- -----------
$ 42,153 $ 37,443 $ 40,050
----------- ----------- -----------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 30,142 $ 25,237 $ 29,218
Commercial & industrial 14,135 14,017 13,542
----------- ----------- -----------
$ 44,277 $ 39,254 $ 42,760
----------- ----------- -----------
Installment
Installment and other
loans to individuals $ 23,198 $ 25,167 $ 24,513
----------- ----------- -----------
Others
Nonrated industrial
development obligations $ 4,029 $ 3,041 $ 2,867
Other loans 327 442 396
----------- ----------- -----------
$ 4,356 $ 3,483 $ 3,263
----------- ----------- -----------
Total 113,984 105,347 110,586
Less unearned interest 90 98 97
----------- ----------- -----------
$ 113,894 $ 105,249 $ 110,489
=========== =========== ===========
</TABLE>
<PAGE> 17
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Table Seven
Loan Portfolio - Maturities and sensitivities of Loans to Changes in
Interest Rates
The following table presents the contractual maturities of loans other than
installment loans and residential mortgages for all banks as of June 30, 2000
and December 31, 1999 (in thousands) (Unaudited):
<TABLE>
<CAPTION>
June 30, 2000
------------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- ----------
<S> <C> <C> <C>
Commercial $ 708 $ 6,938 $ 6,489
Real Estate - construction 259 -- --
----------- ---------- ----------
Total $ 967 $ 6,938 $ 6,489
=========== ========== ==========
<CAPTION>
December 31, 1999
------------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- ----------
<S> <C> <C> <C>
Commercial $ 712 $ 7,564 $ 5,266
Real Estate - construction 73 -- --
----------- ---------- ----------
Total $ 785 $ 7,564 $ 5,266
=========== ========== ==========
</TABLE>
The following table presents an analysis of fixed and variable rate loans as
of June 30, 2000 and December 31, 1999 along with the contractual maturities of
loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
<TABLE>
<CAPTION>
June 30, 2000
------------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- ----------
<S> <C> <C> <C>
Fixed Rates $ 764 $ 5,164 $ 766
Variable Rates 203 1,774 5,723
---------- ---------- ----------
Total $ 967 $ 6,938 $ 6,489
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
----------- ----------- ----------
<S> <C> <C> <C>
Fixed Rates $ 586 $ 5,564 $ 1,150
Variable Rates 199 2,000 4,116
----------- ---------- ----------
Total $ 785 $ 7,564 $ 5,266
=========== ========== ==========
</TABLE>
---------------------------------------------------------------------------
<PAGE> 18
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 $1,532,000 at June 30, 2000 and $892,000
at December 31, 1999. Loans classified as non-accrual were $1,130,000 or .8%
of total loans as of June 30, 2000, as compared to $573,000 or .5% of total
loans at December 31, 1999. Non-accrual loans at June, 30, 2000 include a
commercial real estate loan in the amount of $802,000 which is partially
guaranteed by the U.S. government. The guaranteed portion of the loan is
approximately $601,000. There were no loans classified as renegotiated as
of June 30, 2000 and December 31, 1999. The loans past due 90 days or more
decreased $131,000 to $188,000 at June 30, 2000 as compared to $319,000 at
December 31, 1999. Management continues to monitor the non-performing assets
to ensure against deterioration in collateral values.
Table Eight
Risk Elements
(UNAUDITED)
The following table presents loans which are in the process of collection,
but are contractually past due 90 days or more as to interest or principal,
non-accrual loans and other real estate ( in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
----------------- ------------
2000 1999 1999
<S> <C> <C> <C>
Past Due 90 Days or More:
Real Estate - residential $ 68 $ 90 $ 66
Commercial 60 372 11
Installment 60 107 242
------ ------ ---------
$ 188 $ 569 $ 319
------ ------ ---------
Non-accrual:
Real Estate - residential $ 55 $ 59 $ 17
Commercial 1,022 301 440
Installment 53 107 116
------ ------ ---------
$1,130 $ 467 $ 573
------ ------ ---------
Other Real Estate $ 214 $ -- $ --
------ ------ ---------
Total non-performing assets $1,532 $1,036 $ 892
====== ====== ==========
Total non-performing assets
to total loans and
other real estate 1.34% 0.98% 0.81%
</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 $16,200
and $18,700 for the periods ended June 30, 2000 and 1999, respectively.
As of June 30, 2000, 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> 19
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Allowance for Possible Loan Losses
----------------------------------
The corporation maintains an allowance for possible loan losses to absorb
probable loan losses. The provision for loan losses was $195,000 during the
six months ended June 30, 2000, as compared to $153,000 during the same period
of the prior year. The allowance for possible loan losses at June 30, 2000
represents 1.1% of total loans outstanding. Net loan charge-offs for the six
months ended June 30, 2000 were primarily consumer loans. Personal
bankruptcies continue to contribute 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 Nine
Analysis of Allowance for Possible Loan Losses
(UNAUDITED)
The following table presents a summary of loans charged off and recoveries of
loans previously charged off by type of loan (in thousands).
<TABLE>
<CAPTION>
Summary of Loan Loss Experience
-----------------------------------
June 30, December 31,
------------------ ------------
2000 1999 1999
<S> <C> <C> <C>
Balance at Beginning of period
Allowance for Possible
Loan Losses $ 1,148 $ 1,123 $ 1,123
Loans Charged Off:
Real Estate - residential -- -- 14
Commercial -- 16 16
Installment 117 149 315
--------- --------- ---------
117 165 345
Recoveries:
Real Estate - residential -- -- --
Commercial -- -- --
Installment 24 17 22
--------- --------- ---------
24 17 22
Net Charge-offs 93 148 323
Additions Charged to Operations 195 153 348
--------- --------- ---------
Balance at end of period: $ 1,250 $ 1,128 $ 1,148
========= ========= =========
Average Loans Outstanding $ 111,668 $ 103,884 $ 105,775
========= ========= =========
Ratio of net charge-offs
to Average loans
outstanding for the period .08% .14% .31%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.10% 1.07% 1.04%
</TABLE>
------------------------------------------------------------------------------
<PAGE> 20
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 Ten.
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 2000 are
anticipated to be within the historical ranges. Although a subjective
evaluation is determined by management, the corporation believes it has
appropriately assessed the risk of loans in the loan portfolio and has
provided for an allowance which is adequate based on that assessment.
Because the allowance is an estimate, any change in the economic
conditions of the corporation's market area could result in new
estimates which could affect the corporation's earnings. Management
monitors loan quality through reviews of past due loans and all
significant loans which are considered to be potential problem loans
on a monthly basis. The internal loan review function provides for
an independent review of commercial, real estate, and installment loans
in order to measure the asset quality of the portfolio. Management's
review of the loan portfolio has not indicated any material amount of
loans, not disclosed in the accompanying tables and discussions which
are known to have possible credit problems that cause management to
have serious doubts as to the ability of each borrower to comply with
their present loan repayment terms.
Table Ten
Loan Portfolio - Allocation of allowance for possible loan losses
The following table presents an allocation of the allowance for possible loan
losses at each of the five year periods ended December 31, 1999, and the six
month period ended June 30, 2000 ( expressed in thousands). The allocation
presented below is based on the historical average of net charge offs per
category combined with the change in loan growth and management's review of
the loan portfolio.
<TABLE>
<CAPTION>
June 30, December 31,
--------------- -----------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------------- --------------- ---------------- -------------- ---------------- ------------------
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 $ 251 37.0% $ 238 36.2% $ 208 34.2% $ 202 34.6% $ 192 36.5% $ 215 39.9%
Commercial 510 38.9 490 38.7 490 37.8 622 38.0 619 39.1 618 36.5
Installment 469 20.3 400 22.2 374 23.8 343 23.6 298 21.6 265 20.0
Others 20 3.8 20 2.9 20 4.2 20 3.8 20 2.8 20 3.6
Unallocated -- -- -- -- 31 -- 31 -- 31 -- 31 -
------ ------ ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $1,250 100.0% $1,148 100.0% $1,123 100.0% $1,218 100.0% $1,160 100.0% $1,149 100.0%
====== ====== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
<PAGE> 21
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Deposits
--------
Total deposits were $169,525,899 at June 30, 2000 as compared to
$161,557,932 at December 31, 1999, an increase of 4.9%. Deposit growth
increased primarily in savings and time deposits. The growth in savings
deposits was mainly due to the increased demand for the Progressive Gold
money market product by depositors. The increase in time deposits was
primarily the result of special promotions offered by the subsidiary banks.
At June 30, 2000, 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. There were no
changes in the deposit mix from December 31, 1999 to June 30, 2000.
Table Eleven
Deposits
The following table presents other time deposits of $100,000 or more issued by
domestic offices by time remaining until maturity of 3 months or less; over 3
through 6 months; over 6 through 12 months; and over 12 months. (Unaudited)
<TABLE>
<CAPTION>
June 30, 2000
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 $ 4,536 $ 2,195 $ 4,327 $ 6,635 $ 17,693
<CAPTION>
December 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 $ 6,862 $ 2,129 $ 2,916 $ 3,696 $ 15,603
</TABLE>
Federal funds purchased and repurchase agreements
-------------------------------------------------
Federal funds purchased and repurchase agreements are short-term
borrowings, of which repurchase agreements represent the largest component.
Repurchase agreements were $12,654,483 at June 30, 2000, an increase of
$2,730,558, as compared to December 31, 1999. The increase of repurchase
agreements was primarily due to the increase in the balances maintained by
existing commercial customers.
------------------------------------------------------------------------------
<PAGE> 22
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
--------------------------------------------------------------------------
Capital Resources
-----------------
A strong capital base is vital to continued profitability because it
promotes depositor and investor confidence and provides a solid foundation for
future growth. Stockholders' equity increased 4.1% during the first six
months of 2000 entirely from current earnings after quarterly dividends, and a
decrease of 1.0% resulting from the effect of the change in the net unrealized
gain (loss) on securities available for sale. Stockholders' equity amounted
to 8.3% of total assets at June 30, 2000 as compared to 8.5% at December 31,
1999.
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 June 30, 2000, June 30, 1999, and December 31, 1999:
<TABLE>
<CAPTION>
June 30, Dec. 31
-------------- -------
Ratio Minimum 2000 1999 1999
---------------------- ------- ------- ----- -----
<S> <C> <C> <C> <C>
Leverage Ratio 3% 8.2 8.6 8.4
Risk Based Capital
Tier 1 (core) 4% 13.5 14.1 13.8
Tier 2 (total) 8% 14.5 15.2 14.8
</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
$57,162,609 classified as available for sale at June 30, 2000. These
securities are available for sale at any time based upon management's
assessment in order to provide necessary liquidity should the need arise.
In addition, the Holding Company's subsidiary banks, Progressive Bank, N.A.,
and Progressive Bank, N.A.- Buckhannon, are members of the Federal Home Loan
Bank of Pittsburgh (FHLB). Membership in the FHLB provides an additional
source of short-term and long-term funding, in the form of collateralized
advances. At June 30, 2000, Progressive Bank, N.A. and Progressive Bank,
N.A.- Buckhannon, had an available line of approximately $8,560,000 and
$1,700,000, respectively, without purchasing any additional capital stock from
the FHLB. As of June 30, 2000 there were no borrowings outstanding pursuant
to these agreements.
At June 30, 2000 and December 31, 1999, the Holding Company had
outstanding loan commitments and unused lines of credit totaling $13,914,000
and $11,071,000, respectively. As of June 30, 2000, management placed a high
probability for required funding within one year of approximately $8,759,000.
Approximately $3,072,000 is principally unused home equity and credit card
lines on which management places a low probability for required funding.
<PAGE> 23
FIRST WEST VIRGINIA BANCORP, INC.
PART I
Item 3 Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
The Company's subsidiary banks use an asset/liability model to measure
the impact of changes in interest rates on net interest income on a periodic
basis. Assumptions are made to simulate the impact of future changes in
interest rates and/or changes in balance sheet composition. The effect of
changes in future interest rates on the mix of assets and liabilities may
cause actual results to differ from simulated results. Guidelines established
by the Company's subsidiary banks provide that the estimated net interest
income may not change by more than 10% in a one year period given a +/- 200
basis point parallel shift in interest rates. Excluding the potential effect
of interest rate changes on assets and liabilities of the Holding Company
which are not deemed material, the anticipated impact on net interest income
of the subsidiary banks at June 30,2000 were as follows: given a 200
basis point increase scenario net interest income would be decreased by
approximately 3.7%, and given a 200 basis point decrease scenario net interest
income would be reduced by approximately 1.0%. Under both interest rate
scenarios the subsidiary banks were within the established guideline.
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
-------------------------------------------------------------------
Inapplicable
Item 5 Other Information
-----------------------------------
Inapplicable
<PAGE> 24
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 and six month periods ended June 30, 2000, are
incorporated by reference in Part I:
------
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the quarter ended June 30,
2000.
(c) Exhibits
--------
The exhibits listed in the Exhibit Index on page 26 of this FORM 10-Q are
incorporated by reference and/or filed herewith.
<PAGE> 25
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/ Charles K. Graham
---------------------------------------------------------------
Charles K. Graham
President and Chief Executive Officer/Director
By: /s/ Francie P. Reppy
---------------------------------------------------------------
Francie P. Reppy
Senior Vice President and Chief Financial Officer
Dated: July 30, 2000
<PAGE> 26
EXHIBIT INDEX
The following exhibits are filed herewith and/or are incorporated herein by
reference.
Exhibit
Number Description
------- -----------
10.2 Employment Contract dated December 28, 1999 between
First West Virginia Bancorp, Inc. and Charles K. Graham.
Incorporated herein by reference.
10.3 Employment Contract dated December 28, 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.
99.1 Independent Accountant's Report. Filed herewith and incorporated
herein by reference.
