<PAGE> 1
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 September 30, 2000
[ ] 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
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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
----------------
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 November 6,
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>
September 30, December 31, September 30,
2000 1999 1999
------------- ------------ --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 4,572,134 $ 5,335,861 $ 4,949,377
Due from banks - interest bearing 4,657,756 6,478,406 6,060,432
------------- ------------- -------------
Total cash and cash equivalents 9,229,890 11,814,267 11,009,809
Federal funds sold 4,004,000 2,485,000 4,075,000
Investment securities
Available for sale (at fair value) 65,299,262 49,449,312 52,516,728
Held to maturity - fair value of
$11,272,632 at September 30, 2000;
$10,436,842 at December 31, 1999;
and $10,660,316 at September 30, 1999 11,312,170 10,646,112 10,787,539
Loans, net of unearned income 113,762,560 110,488,432 107,812,186
Less allowance for possible loan losses (1,239,475) (1,147,720) (1,174,164)
------------- ------------- -------------
Net loans 112,523,085 109,340,712 106,638,022
Premises and equipment, net 2,722,449 2,841,337 2,906,852
Accrued income receivable 1,474,451 1,356,419 1,368,459
Other assets 1,483,960 1,239,475 1,245,957
------------- ------------- -------------
Total assets $ 208,049,267 $ 189,172,634 $ 190,548,366
============= ============= =============
LIABILITIES
Noninterest bearing deposits:
Demand $ 14,421,462 $ 14,780,305 $ 14,956,423
Interest bearing deposits:
Demand 25,433,511 23,961,233 26,107,420
Savings 58,208,036 52,872,689 50,409,864
Time 75,082,154 69,943,705 70,780,522
------------- ------------- -------------
Total deposits 173,145,163 161,557,932 162,254,229
------------- ------------- -------------
Federal funds purchased and
repurchase agreements 16,170,808 10,273,925 11,122,282
Accrued interest on deposits 607,628 499,352 512,332
Other liabilities 835,475 785,953 751,818
------------- ------------- -------------
Total liabilities 190,759,074 173,117,162 174,640,661
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common stock - 2,000,000 shares authorized at
$5 par value 1,508,526 shares issued at
September 30, 2000, December 31, 1999
and September 30, 1999 7,542,630 7,542,630 7,542,630
Surplus 4,739,381 4,739,381 4,739,381
Retained earnings 5,662,993 4,638,742 4,261,749
Accumulated other comprehensive income (654,811) (865,281) (636,055)
------------- ------------- -------------
Total stockholders' equity 17,290,193 16,055,472 15,907,705
------------- ------------- -------------
Total liabilities and stockholders' equity $ 208,049,267 $ 189,172,634 $ 190,548,366
============= ============= =============
</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 Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
2000 1999 2000 1999
---------- ---------- ----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and
lease financing:
Taxable $2,451,089 $2,385,517 $ 7,177,690 $6,815,385
Tax-exempt 66,666 44,282 173,687 148,881
Investment securities:
Taxable 971,288 773,617 2,697,553 2,112,828
Tax-exempt 134,765 121,364 392,636 384,537
Dividends 11,297 10,213 33,189 27,113
Other interest income 97,784 47,248 277,613 109,867
Interest on federal funds sold 97,797 73,470 228,094 194,642
---------- ---------- ----------- ----------
Total interest income 3,830,686 3,455,711 10,980,462 9,793,253
INTEREST EXPENSE
Deposits 1,708,586 1,365,616 4,758,706 3,907,301
Other borrowings 172,077 75,278 431,995 195,600
---------- ---------- ----------- ----------
Total interest expense 1,880,663 1,440,894 5,190,701 4,102,901
---------- ---------- ----------- ----------
Net interest income 1,950,023 2,014,817 5,789,761 5,690,352
PROVISION FOR POSSIBLE LOAN LOSSES 100,500 97,500 295,500 250,500
---------- ---------- ----------- ----------
Net interest income after provision
for possible loan losses 1,849,523 1,917,317 5,494,261 5,439,852
NONINTEREST INCOME
Service charges and other fees 146,666 133,768 396,791 375,078
Securities gains (losses) -- 54 23,443 12,519
Gain on sale of building and land -- -- -- 301,862
Other operating income 84,784 65,251 233,202 200,684
---------- ---------- ----------- ----------
Total noninterest income 231,450 199,073 653,436 890,143
NONINTEREST EXPENSES
Salary and employee benefits 657,144 640,778 1,940,706 1,872,468
Net occupancy and equipment expenses 191,746 196,631 589,381 580,472
Other operating expenses 355,549 447,014 1,106,232 1,142,224
---------- ---------- ----------- ----------
Total noninterest expense 1,204,439 1,284,423 3,636,319 3,595,164
---------- ---------- ----------- ----------
Income before income taxes 876,534 831,967 2,511,378 2,734,831
---------- ---------- ----------- ----------
INCOME TAXES 272,594 265,450 763,035 875,908
---------- ---------- ----------- ----------
Net income $ 603,940 $ 566,517 $ 1,748,343 $1,858,923
========== ========== =========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,508,526 1,508,526 1,508,526 1,508,526
========== ========== =========== ==========
EARNINGS PER COMMON SHARE $ 0.40 $ 0.38 $ 1.16 $ 1.23
========== ========== =========== ==========
</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 nine
months ended
September 30, 2000 -- -- -- 1,748,343 -- 1,748,343 1,748,343
Other comprehensive income,
net of tax
Unrealized gains (losses)
on securities, net of
reclassification adjustment
(see disclosure) -- -- -- -- 210,470 210,470 210,470
-----------
Comprehensive income $ 1,958,813
===========
Cash dividend
($.48 per share) -- -- -- (724,092) -- (724,092)
----------- ----------- ----------- ----------- ------------ ------------
Balance, September 30,
2000 (Unaudited) 1,508,526 $ 7,542,630 $ 4,739,381 $ 5,662,993 $ (654,811) $ 17,290,193
=========== =========== =========== =========== ============ ============
</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 nine
months ended
September 30, 1999 -- -- -- 1,858,923 -- 1,858,923 1,858,923
Other comprehensive income,
net of tax
Unrealized gains (losses)
on securities, net of
reclassification adjustment
(see disclosure) -- -- -- -- (796,103) (796,103) (796,103)
-----------
Comprehensive income $ 1,062,820
===========
Cash dividend
($.41 per share) -- -- -- (616,053) -- (616,053)
20% common stock dividend
at par value 251,274 1,256,370 (1,256,370)
----------- ----------- ----------- ----------- ------------ ------------
Balance, September 30,
1999 (Unaudited) 1,508,526 $ 7,542,630 $ 4,739,381 $ 4,261,749 $ (636,055) $ 15,907,705
=========== =========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended
September 30,
2000 1999
--------- ----------
<S> <C> <C>
Disclosure of reclassification amount:
Unrealized holding gains (losses)
arising during the period $ 225,164 $ (803,950)
Less: reclassification adjustment for
gains (losses) included in net income 14,694 7,847
--------- ----------
Net unrealized gains (losses) on securities $ 210,470 $ (796,103)
========= ==========
</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>
Nine Months Ended September 30,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,748,343 $ 1,858,923
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 295,500 250,500
Depreciation and amortization 253,066 272,851
Amortization of investment securities, net (247,172) (83,319)
Investment security losses (gains) (23,443) (12,519)
(Gain) loss on disposal of premises and equipment 579 (301,862)
Decrease (increase) in interest receivable (118,032) (125,853)
Increase (decrease) in interest payable 108,276 40,235
Other, net (320,277) (36,933)
------------ ------------
Net cash provided by operating activities 1,696,840 1,862,023
------------ ------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (1,519,000) 17,000
Net (increase) decrease in loans, net of charge offs (3,504,232) (4,475,244)
Proceeds from sales of securities available for sale 886,964 1,165,057
Proceeds from maturities of securities available
for sale 34,614,000 38,515,000
Proceeds from maturities of securities held to
maturity 1,200,000 2,380,000
Principal collected on mortgage-backed securities 2,417,699 3,765,631
Purchases of securities available for sale (53,160,453) (53,746,083)
Purchases of securities held to maturity (1,867,819) (1,821,321)
Recoveries on loans previously charged-off 26,359 19,129
Purchases of premises and equipment (134,757) (91,262)
Proceeds from sales of premises and equipment -- 418,152
------------ ------------
Net cash used by investing activities (21,041,239) (13,853,941)
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 11,587,231 14,469,410
Dividends paid (724,092) (616,053)
Increase (decrease) in short term borrowings 5,896,883 4,128,258
------------ ------------
Net cash provided by financing activities $ 16,760,022 $ 17,981,615
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,584,377) 5,989,697
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 11,814,267 5,020,112
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 9,229,890 $ 11,009,809
============ ============
</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
September 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
September 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 $603,940 for the three months ended
September 30, 2000 as compared to $566,517 for the same period during 1999. The
increase in earnings during the third quarter of 2000 over 1999 was primarily
attributed to an increase in noninterest income combined with the decrease in
operating expenses, offset in part by a decrease in net interest income and an
increase in the provision for loan losses. Earnings per share were $.40 in the
third quarter of 2000, as compared to $.38 earned during the third quarter of
1999.
Net income for the nine months ended September 30, 2000 was $1,748,343 compared
to $1,858,923 for the same period during 1999. The decrease in earnings for the
nine months ended September 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 $1.16 for the first nine months of 2000 as
compared to $1.23 earned during the same period during 1999. Noninterest income
decreased $236,707 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 September 30, 2000, net interest income
decreased primarily from the increased interest paid on savings deposits
combined with the increase in the average volume of savings and time deposits,
offset in part by the increase in the average volume of investment securities
and loans.
For the nine month period ended September 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 1.16% for the three month period ended September
30, 2000 as compared to 1.20% for the same period of the prior year. For the
nine months ended September 30, 2000 compared to September 30, 1999, ROA was
1.16% and 1.37%, respectively. Return on average equity (ROE) measures the
return on the stockholders' investment. The holding company's ROE was 13.58% for
the three months ended September 30, 2000 and 13.82% at September 30, 1999. For
the nine months ended September 30, 2000 compared to September 30, 1999, ROE was
13.44% and 15.61%, respectively.
The Holding Company as of September 30, 2000 had total assets of $208,049,267 an
increase of 10.0% over the $189,172,634 reported for the year ended December 31,
1999. Loans net of reserves grew by $3,182,373 to $112,523,085, as compared to
$109,340,712 reported at December 31, 1999. Total deposits increased in 2000 by
$11,587,231, from $161,557,932 at December 31, 1999 to $173,145,163 at September
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 September 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
------------------------------------------------------------------------------
Table One
SELECTED FINANCIAL DATA
(Unaudited, in thousands, except per share data)
First West Virginia Bancorp, Inc.
<TABLE>
<CAPTION>
Three months ended Nine months ended Years ended
September 30, September 30, December 31,
--------------------- -------------------- ------------------------------------
2000 1999 2000 1999 1999 1998 1997
-------- -------- -------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income $ 3,831 $ 3,456 $ 10,980 $ 9,793 $ 13,207 $ 12,452 $ 11,507
Total interest expense 1,881 1,441 5,191 4,103 5,602 5,324 4,745
Net interest income 1,950 2,015 5,789 5,690 7,605 7,128 6,762
Provision for loan losses 100 98 295 250 348 256 131
Total other income 231 199 653 890 1,073 787 639
Total other expenses 1,204 1,284 3,636 3,595 4,740 4,674 4,377
Income before income taxes 877 832 2,511 2,735 3,590 2,985 2,893
Net income 604 567 1,748 1,859 2,450 2,033 1,931
PER SHARE DATA (1)
Net income $ 0.40 $ 0.38 $ 1.16 $ 1.23 $ 1.62 $ 1.35 $ 1.28
Cash dividends declared 0.16 0.14 0.48 0.41 0.55 0.49 0.43
Book value per share 11.46 10.55 11.46 10.55 10.64 10.25 9.37
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $113,762 $106,451 $112,371 $104,944 $ 105,775 $ 99,345 $ 86,609
Investment securities 73,246 62,664 69,353 59,247 60,405 48,543 51,754
Deposits - interest bearing 158,621 144,865 154,040 140,106 141,768 127,520 120,589
Stockholders' equity 17,693 16,283 17,374 15,922 16,087 14,697 13,400
Total assets 207,611 187,478 201,054 181,000 183,436 164,630 153,290
SELECTED RATIOS
Return on average assets 1.16% 1.20% 1.16% 1.37% 1.34% 1.23% 1.26%
Return on average equity 13.58% 13.82% 13.44% 15.61% 15.23% 13.83% 14.41%
Average equity to average assets 8.52% 8.69% 8.64% 8.80% 8.77% 8.93% 8.74%
Dividend payout ratio (1) 40.00% 36.84% 41.38% 33.33% 33.95% 36.30% 33.59%
Loan to Deposit ratio 65.70% 66.45% 65.70% 66.45% 68.39% 70.07% 69.59%
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET September 30, December 31,
------------------------- ------------------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investments $ 76,611 $ 63,304 $ 60,095 $ 54,735 $ 45,444
Loans 113,762 107,812 110,489 103,555 95,374
Other assets 17,676 19,432 18,589 13,105 15,325
-------- -------- -------- -------- --------
Total Assets $208,049 $190,548 $189,173 $171,395 $156,143
======== ======== ======== ======== ========
Deposits $173,145 $162,254 $161,558 $147,785 $137,045
Federal funds purchased and
repurchase agreements 16,171 11,122 10,274 6,994 4,075
Other liabilities 1,443 1,264 1,285 1,155 894
Stockholders' equity 17,290 15,908 16,056 15,461 14,129
-------- -------- -------- -------- --------
Total Liabilities and
Stockholders' Equity $208,049 $190,548 $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.
<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 nine months ended September 30, 2000 and 1999.
Net interest income decreased $64,794 or 3.2%, during the three months ended
September 30, 2000 as compared to the same period in 1999. The decrease in net
interest income was primarily attributable to the increase interest paid on
deposits and other borrowings. Interest and dividend income on investment
securities increased $212,156 or 23.4%, for the three months ended September 30,
2000 over 1999 primarily due to the increase in the average volume of investment
securities. Interest and fees on loans increased $87,956 or 3.6% during the
three month period ended September 30, 2000 as compared to the same period in
1999 and resulted primarily from an increase in average loan volume. Interest
expense increased $439,769 or 30.5% primarily due to the increase in the average
volume of savings and time deposits combined with the increase in rates paid on
savings deposits and time deposits.
For the nine months ended September 30, 2000, net interest income was
$5,789,761, an increase of $99,409 or 1.7%, 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 volume of savings deposits and the average rates paid on
savings and time deposits. Interest and dividend income on investment securities
increased $598,900 or 23.7% during the nine months ended September 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 .29%, from 5.73% at December 31, 1999 to 6.02%
at September 30, 2000. Interest and fees on loans increased $387,111 or 5.6% for
the nine month period ended September 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 8.74% at September 30, 2000. During the nine
months ended September 30, 2000, interest expense increased $1,087,800 or 26.5%
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 .43%, from 3.72% at December 31,
1999 to 4.15% at September 30, 2000.
Noninterest Income
Noninterest income was $231,450 for the three months ended September 30, 2000,
an increase of $32,377 as compared to the same period of the prior year. Service
charges increased $12,898 during the three months ended September 30, 2000, up
9.6%, from the same period in 1999.
For the nine months ended September 30, 2000, noninterest income was $653,436, a
decrease of $236,707 as compared to the same period of the prior year. The
decrease in noninterest income resulted primarily from a gain on the sale of
building and land by the holding company occurring during the nine months ended
September 30, 1999. Service charges and other fees increased $21,713 or 5.8%
over the same period in 1999. Sales of investment securities for the nine months
ended September 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 nine months ended September 30, 2000
and securities gains of $11,526 and a securities loss of $662 during 1999. The
holding company sales were attributable to sales of marketable equity
securities. Additionally, for the nine months ended September 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 decreased $79,984 or 6.2% for the three months ended
September 30, 2000 as compared to the same period of the prior year. During the
quarter ended September 30, 2000, salary and employee benefits increased $16,366
or 2.6%. The increase was primarily attributable to normal annual merit
adjustments in salaries. The major components of other operating expenses
include: office supplies, directors fees, service expense, postage and
transportation, other taxes, advertising, and regulatory assessment and deposit
insurance. Other operating expenses decreased $91,465, or 20.5%, for the three
month period ended September 30, 2000 as compared to the same period in the
prior year. Decreased other operating expense, service expense and office
supplies expense primarily contributed to the overall decrease in other
operating expenses during the three month period ended September 30, 2000.
For the nine months ended September 30, 2000, noninterest expense increased
$41,155 or 1.1% as compared to the same period of the prior year. Salary and
employee benefits increased $68,238 or 3.6%. The increase was primarily
attributable to normal annual merit adjustments in salaries. Other operating
expenses decreased $35,992 or 3.2%, for the nine month period ended September
30, 2000 as compared to the same period in the prior year. Decreased other
operating expenses, other taxes and service expense offset in part by the
increased advertising expense, regulatory assessments and directors fees
primarily contributed to the decrease in other operating expenses in 2000.
Income Taxes
Income tax expense for the three months ended September 30, 2000 was $272,594,
an increase of 2.7% over the same period in 1999. The increase was primarily due
to the increase in pre-taxable income of $44,567 for the three month period
ended September 30, 2000 over 1999. Components of the income tax expense for
September 30, 2000 were $226,799 for federal taxes and $45,795 for West Virginia
corporate net income taxes. For the nine months ended September 30, 2000, income
tax expense decreased 12.9% compared to the same period in 1999. The decrease
was primarily due to the decrease in pre-taxable income of $223,453 during the
nine months ended September 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 $201,431 and
$165,646 for the three month periods ended September 30, 2000 and 1999,
respectively. For the nine months ended September 30, 2000 and 1999, tax exempt
income was $566,323 and $533,418, respectively.
Federal income tax rates and West Virginia corporate net income tax rates remain
consistent at 34% and 9%, respectively, for the three and nine months ended
September 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 nine months ended September 30, 2000 and September 30, 1999 and the year
ended December 31, 1999. Average balance sheet information as of September 30,
2000 and September 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 nine month periods ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
For the Nine For the Nine
Months ended Months ended
September 30, 2000 December 31, 1999 September 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 $ 53,713 $ 2,536 6.31% $ 46,283 $ 2,799 6.05% $ 45,105 $2,034 6.03%
Obligations of states and
political subdivisions 12,269 422 4.59% 11,546 507 4.39% 11,693 385 4.40%
Other securities 3,371 165 6.54% 2,576 156 6.06% 2,449 105 5.73%
-------- ------- ------ -------- ------- ------- -------- ------ ------
Total Investment securities: 69,353 3,123 6.02% 60,405 3,462 5.73% 59,247 2,524 5.70%
Interest bearing deposits 6,039 278 6.15% 3,861 195 5.05% 2,985 110 4.93%
Federal funds sold 4,913 228 6.20% 4,923 244 4.96% 5,357 195 4.87%
Loans, net of unearned income 112,371 7,351 8.74% 105,775 9,306 8.80% 104,944 6,964 8.87%
-------- ------- ------ --------- -------- ------- -------- ------ ------
Total earning assets 192,676 10,980 7.61% 174,964 13,207 7.55% 172,533 9,793 7.59%
Cash and due from banks 4,635 4,628 4,553
Bank premises and equipment 2,777 2,994 3,036
Other assets 2,189 2,005 2,023
Allowance for possible loan losses (1,223) (1,155) (1,145)
-------- --------- --------
Total Assets $201,054 $ 183,436 $181,000
======== -======== ========
LIABILITIES
Certificates of deposit $ 72,599 $ 2,973 5.47% $ 67,309 $ 3,535 5.25% $ 66,249 $ 2,617 5.28%
Savings deposits 56,270 1,501 3.56% 48,752 1,368 2.81% 48,041 984 2.74%
Interest bearing demand deposits 25,171 285 1.51% 25,707 406 1.58% 25,816 306 1.58%
Federal funds purchased and
Repurchase agreements 13,097 432 4.41% 9,012 293 3.25% 8,520 196 3.08%
-------- ------- ------ --------- -------- ------- --------- -------- ------
Total interest bearing liabilities 167,137 5,191 4.15% 150,780 5,602 3.72% 148,626 4,103 3.69%
Demand deposits 15,066 15,241 15,161
Other liabilities 1,477 1,328 1,291
-------- --------- --------
Total Liabilities 183,680 167,349 165,078
STOCKHOLDERS' EQUITY 17,374 16,087 15,922
-------- --------- --------
Total Liabilities
and Stockholders' Equity $201,054 $ 183,436 $181,000
======== ========= ========
Net yield on earning assets $ 5,789 4.01% $ 7,605 4.35% $ 5,690 4.41%
======= ====== ======= ====== ======= =====
</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 nine months ended September 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 $ 12,269 $ 683 7.44% $ 11,546 $ 845 7.32% $ 11,693 $ 641 7.33%
Loans 112,371 7,467 8.88% 105,775 9,434 8.92% 104,944 7,064 9.00%
========= ======= ===== ========= ======= ====== -======= ======= =====
Total earning assets $ 192,676 $11,357 7.87% $ 174,964 $13,673 7.81% $172,533 $10,149 7.86%
========= ======= ===== ========= ======= ====== -======= ======= -====
Taxable equivalent net yield on
earning assets $ 6,166 4.28% $ 8,071 4.61% $ 6,046 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 September 30, 2000 and September 30, 1999. Average
balance sheet information as of September 30, 2000 and September 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 September 30, 2000 and
1999.
<TABLE>
<CAPTION>
For the Three For the Three
Months ended Months ended
September 30, 2000 September 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 $ 56,849 $ 909 6.36% $ 49,193 $ 747 6.02%
Obligations of states and
political subdivisions 12,941 151 4.64% 11,222 121 4.28%
Other securities 3,456 57 6.56% 2,249 37 6.53%
--------- ------- ------ --------- -------- ------
Total Investment Securities 73,246 1,117 6.07% 62,664 905 5.73%
Interest bearing deposits 6,022 98 6.47% 3,889 47 4.79%
Federal funds sold 5,988 98 6.51% 5,949 74 4.94%
Loans, net of unearned income 113,762 2,518 8.81% 106,451 2,430 9.06%
--------- ------- ------ --------- -------- ------
Total earning assets 199,018 3,831 7.66% 178,953 3,456 7.66%
Cash and due from banks 4,825 4,695
Bank premises and equipment 2,743 2,931
Other assets 2,290 2,056
Allowance for possible loan losses (1,265) (1,157)
--------- ---------
Total Assets $ 207,611 $ 187,478
-======== =========
LIABILITIES
Certificates of deposit $ 74,967 $ 1,066 5.66% $ 68,798 $ 914 5.27%
Savings deposits 57,458 544 3.77% 49,817 356 2.84%
Interest bearing demand deposits 26,197 99 1.50% 26,250 96 1.45%
Federal funds purchased and
Repurchase agreements 14,615 172 4.68% 9,093 75 3.27%
--------- ------- ------ --------- -------- ------
Total interest bearing liabilities 173,237 1,881 4.32% 153,958 1,441 3.71%
Demand deposits 15,093 15,857
Other liabilities 1,588 1,380
--------- ---------
Total Liabilities 189,918 171,195
SHAREHOLDERS' EQUITY 17,693 16,283
--------- ---------
Total Liabilities
and Shareholders' Equity $ 207,611 $ 187,478
========= =========
Net yield on earning assets $ 1,950 3.90% $ 2,015 4.47%
======= -===== ------- =====
</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 September 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 $ 12,941 $ 241 7.41% $ 11,222 $ 202 7.13%
Loans 113,762 2,562 8.96% 106,451 2,459 9.17%
-======= ======= ===== =-======= ====== ====
Total earning assets $199,018 $ 3,965 7.93% $ 178,953 $3,566 7.91%
-======= ======= ===== ========= ====== ====
Taxable equivalent net yield on
earning assets $ 2,084 4.17% $2,125 4.71%
======= ===== ====== ====
</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 $16,516,008 or 27.5% from $60,095,424 at
December 31, 1999, to $76,611,432 at September 30, 2000. Taxable securities
comprised 84.5% of total securities at September 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 $15,849,950 or
32.1% from December 31, 1999, and represented 85% of the investment portfolio at
September 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 $666,058 or 6.3% from December 31, 1999 and
represented 15% of the investment portfolio as of September 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 $1,044,684 and
$1,380,468 at September 30, 2000 and December 31, 1999, respectively. The market
value of securities classified as held to maturity was below book value by
$39,538 and $209,270 at September 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>
September 30, December 31, September 30,
2000 1999 1999
----------- ----------- ------------
<S> <C> <C> <C>
Securities held to maturity:
Obligations of states
and political subdivisions $11,312 $10,646 $10,787
------- ------- -------
Total held to maturity $11,312 $10,646 $10,787
------- ------- -------
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 47,756 $40,700 $44,699
Obligations of states
and political subdivisions 1,628 507 508
Corporate debt securities 101 102 602
Mortgage-backed securities 14,728 7,049 5,644
Equity Securities 1,086 1,091 1,064
------- ------- -------
Total available for sale 65,299 49,449 52,517
------- ------- -------
Total $76,611 $60,095 $63,304
======= ======= =======
</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 September 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>
September 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 $ -- --% $ 14,310 6.14% $ -- --% $ 4,504 5.25%
After One But
Within Five Years -- -- 21,870 6.32 -- -- 18,750 6.16
After Five But
Within Ten Years -- -- 11,576 6.71 -- -- 17,446 6.78
------- ----- -------- ------ ------ ------ ------- ----
-- -- 47,756 6.36 -- -- 40,700 6.33
States & Political Subdivisions
Within One Year 1,749 6.75 -- -- 1,020 6.40 -- --
After One But
Within Five Years 3,355 6.38 772 7.37 3,626 6.67 -- --
After Five But
Within Ten Years 6,112 6.39 856 7.27 5,467 6.64 507 7.59
After Ten Years 96 7.82 -- -- 533 6.81 -- --
------- ----- -------- ----- -------- ------ ------- -----
11,312 6.45 1,628 7.32 10,646 6.64 507 7.59
Corporate Debt Securities
Within One Year -- -- 101 8.41 -- -- -- --
After One But
Within Five Years -- -- -- -- -- -- 102 8.42
------- ----- -------- ----- -------- ------ ------- -----
-- -- 101 8.41 -- -- 102 8.42
Mortgage-Backed Securities -- -- 14,728 7.30 -- -- 7,049 6.44
Equity Securities -- -- 1,086 5.40 -- -- 1,091 5.29
------- ----- -------- ----- -------- ------ ------- ----
Total $11,312 6.45% $ 65,299 6.58% $ 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 $3,274,128 or 3.0% from December 31,
1999. The loan growth during the first nine months of 2000 can be attributed
primarily to the increases in residential real estate loans, other loans and
commercial 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-eight percent (38%) of the loan portfolio. Installment loans comprise
twenty-one percent (21%) 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 September 30, 2000
were a 1% increase in residential real estate loans, a 1% increase in other
loans, a 1% decrease in installment loans and a 1% decrease in commercial 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):
September 30, December 31,
------------------------- ------------
2000 1999 1999
-------- -------- ------------
<S> <C> <C> <C>
Real Estate - Residential
Real estate-construction $ 100 $ 73 $ 73
Real estate-farmland 89 81 79
Real estate-residential 42,168 38,587 39,898
-------- -------- --------
$ 42,357 $ 38,741 $ 40,050
-------- -------- --------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 28,837 $ 27,711 $ 29,218
Commercial & industrial 14,109 13,048 13,542
-------- -------- --------
$ 42,946 $ 40,759 $ 42,760
-------- -------- --------
Installment
Installment and other
loans to individuals $ 23,691 $ 25,024 $ 24,513
-------- -------- --------
Others
Nonrated industrial
development obligations $ 4,587 $ 2,948 $ 2,867
Other loans 270 439 396
-------- -------- --------
$ 4,857 $ 3,387 $ 3,263
-------- -------- --------
Total 113,851 107,911 110,586
Less unearned interest 89 99 97
-------- -------- --------
$113,762 $107,812 $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 September 30,
2000 and December 31, 1999 (in thousands) (Unaudited):
<TABLE>
<CAPTION>
September 30, 2000
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
<S> <C> <C> <C>
Commercial $607 $6,408 $7,094
Real Estate - construction 100 -- --
---- ------ ------
Total $707 $6,408 $7,094
==== ====== ======
</TABLE>
<TABLE>
<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
September 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>
September 30, 2000
---------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ -----------
<S> <C> <C> <C>
Fixed Rates $677 $4,548 $ 785
Variable Rates 30 1,860 6,309
---- ------ ------
Total $707 $6,408 $7,094
==== ====== ======
</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 $550,000 at September 30, 2000 and $892,000
at December 31, 1999. Loans classified as non-accrual were $276,000 or .2% of
total loans as of September 30, 2000, as compared to $573,000 or .5% of total
loans at December 31, 1999. There were no loans classified as renegotiated as of
September 30, 2000 and December 31, 1999. The loans past due 90 days or more
decreased $191,000 to $128,000 at September 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>
September 30, December 31,
---------------- ------------
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Past Due 90 Days or More:
Real Estate - residential $ 9 $ 88 $ 66
Commercial 22 32 11
Installment 97 153 242
---- ---- ----
$128 $273 $319
---- ---- ----
Non-accrual:
Real Estate - residential $ 1 $ 2 $ 17
Commercial 232 460 440
Installment 43 75 116
---- ---- ----
$276 $537 $573
---- ---- ----
Other Real Estate $146 $ -- $ --
---- ---- ----
Total non-performing assets $550 $810 $892
==== ==== ====
Total non-performing assets
to total loans and
other real estate .48% 0.75% 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 $26,100 and
$30,200 for the periods ended September 30, 2000 and 1999, respectively.
As of September 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 $295,500 during the nine
months ended September 30, 2000, as compared to $250,500 during the same period
of the prior year. The allowance for possible loan losses at September 30, 2000
represents 1.1% of total loans outstanding. Net loan charge-offs for the nine
months ended September 30, 2000 were primarily consumer loans. Personal
bankruptcies continues 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
-----------------------------------------------
September 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 20 14 14
Commercial 68 16 16
Installment 142 188 315
-------- -------- --------
230 218 345
Recoveries:
Real Estate - residential -- -- --
Commercial -- -- --
Installment 26 19 22
-------- -------- --------
26 19 22
Net Charge-offs 204 199 323
Additions Charged to Operations 295 250 348
-------- -------- --------
Balance at end of period: $ 1,239 $ 1,174 $ 1,148
======== ======== ========
Average Loans Outstanding $112,371 $104,944 $105,775
======== ======== ========
Ratio of net charge-offs
to Average loans
outstanding for the period .18% .19% .31%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.09% 1.09% 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 nine
month period ended September 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>
September 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 $ 241 37.2% $ 238 36.2% $ 208 34.2% $ 202 34.6% $ 192 36.5% $ 215 39.9%
Commercial 487 37.7 490 38.7 490 37.8 622 38.0 619 39.1 618 36.5
Installment 491 20.8 400 22.2 374 23.8 343 23.6 298 21.6 265 20.0
Others 20 4.3 20 2.9 20 4.2 20 3.8 20 2.8 20 3.6
Unallocated -- -- -- -- 31 -- 31 -- 31 -- 31 -
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $1,239 100.0% $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 $173,145,163 at September 30, 2000 as compared to
$161,557,932 at December 31, 1999, an increase of 7.2%. 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 September 30, 2000, noninterest
bearing deposits comprised 8% of total deposits and interest bearing deposits
which include NOW, money market, savings and time deposits comprised 92% of
total deposits. Since December 31, 1999, the changes in the deposit mix were a
1% decrease in noninterest bearing deposits and a 1% increase in interest
bearing deposits.
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>
September 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 $ 5,596 $ 2,255 $ 4,223 $ 6,081 $ 18,155
</TABLE>
<TABLE>
<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 $16,170,808 at September 30, 2000, an increase of
$6,246,883, 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 6.4% during the first nine months
of 2000 entirely from current earnings after quarterly dividends, and an
increase of 1.3% 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 September 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 September 30, 2000, September 30, 1999, and December 31, 1999:
September 30, Dec. 31
------------- -------
Ratio Minimum 2000 1999 1999
---------------------- -------- ---- ---- ----
Leverage Ratio 3% 8.2 8.4 8.4
Risk Based Capital
Tier 1 (core) 4% 13.9 13.8 13.8
Tier 2 (total) 8% 14.9 14.8 14.8
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 $65,299,262
classified as available for sale at September 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 September 30, 2000,
Progressive Bank, N.A. and Progressive Bank, N.A.- Buckhannon, had an available
line of approximately $8,500,000 and $1,700,000, respectively, without
purchasing any additional capital stock from the FHLB. As of September 30, 2000
there were no borrowings outstanding pursuant to these agreements.
At September 30, 2000 and December 31, 1999, the Holding Company had
outstanding loan commitments and unused lines of credit totaling $13,031,000 and
$11,071,000, respectively. As of September 30, 2000, management placed a high
probability for required funding within one year of approximately $9,657,000.
Approximately $3,053,000 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 September 30, 2000 were as follows: given a 200 basis point increase
scenario net interest income would be decreased by approximately 5.4%, and given
a 200 basis point decrease scenario net interest income would be reduced by
approximately 2.4%. 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 nine month periods ended September 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 September 30,
2000.
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: November 6, 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.
