<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
( X ) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1995
OR
( ) 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. 0-13882
FIRST WESTERN BANCORP, INC.
---------------------------
(Exact name of Registrant as specified in its charter)
Commonwealth of Pennsylvania 25-1461570
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
101 East Washington Street, New Castle, Pennsylvania 16101
(Address of principal executive offices) (Zip Code)
(412) 652-8550
(Registrant's telephone number, including area code)
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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
The number of shares outstanding of the Registrant's common stock as of May 5,
1995 was:
Common Stock, $5.00 par value - 5,182,239 shares outstanding
<PAGE> 2
FIRST WESTERN BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Independent Accountants' Report......................... 3
Consolidated Balance Sheets:
March 31, 1995, December 31, 1994 and
March 31, 1994......................................... 4
Consolidated Statements of Income:
Three months ended March 31, 1995
and three months ended March 31, 1994 ................. 5
Consolidated Statements of Changes
in Shareholders' Equity:
Three months ended March 31, 1995
and three months ended March 31, 1994.................. 6
Consolidated Statements of Cash Flows:
Three months ended March 31, 1995
and three months ended March 31, 1994.................. 7
Notes to Consolidated Financial Statements.............. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 10
Part II. Other Information:
Item 1. - Item 6. ............................................... 22
Signature........................................................ 23
</TABLE>
<PAGE> 3
DELOITTE &
TOUCHE LLP
- ----------
------------------------------------------------------------------
2500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders
of First Western Bancorp, Inc.
We have reviewed the accompanying consolidated balance sheets of First Western
Bancorp, Inc. and subsidiaries as of March 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for the three-month periods then ended. These financial statements are
the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of First Western Bancorp, Inc. and
subsidiaries as of December 31, 1994, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated January 27, 1995, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1994 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/s/ DELOITTE & TOUCHE LLP
April 17, 1995
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
<PAGE> 4
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
- -------
Cash and due from banks $ 49,742 $ 42,903 $ 36,842
---------- ---------- ----------
Interest-bearing deposits with other banks 887 872 475
---------- ---------- ----------
Securities available for sale
(amortized cost of $162,747, $71,041 and $122,661) 162,508 67,670 123,634
---------- ---------- ----------
Investment securities (market value of $128,607, $128,712 and $127,753) 131,215 134,356 129,168
---------- ---------- ----------
Mortgage-backed securities (market value of $190,943, $188,258
and $196,231) 197,909 202,041 199,994
---------- ---------- ----------
Loans (net of unearned income of $37,345, $34,920 and $29,975) 1,016,824 978,562 861,100
Less: Allowance for possible loan losses 13,223 12,943 11,482
---------- ---------- ----------
Net loans 1,003,601 965,619 849,618
---------- ---------- ----------
Premises and equipment 19,006 17,900 18,056
---------- ---------- ----------
Other assets 25,479 23,212 26,303
---------- ---------- ----------
Total Assets $1,590,347 $1,454,573 $1,384,090
========== ========== ==========
LIABILITIES:
- ------------
Deposits:
Noninterest-bearing demand $ 96,440 $ 97,242 $ 95,071
Interest-bearing demand 109,471 101,659 105,051
Savings 305,481 281,953 280,818
Time 669,448 548,555 494,509
---------- ---------- ----------
Total deposits 1,180,840 1,029,409 975,449
---------- ---------- ----------
Borrowed funds:
Federal funds purchased and other short-term borrowings 14,472 34,847 17,850
Repurchase agreements and secured lines of credit 117,399 128,461 130,072
Advances from the Federal Home Loan Bank 138,121 128,121 120,950
---------- ---------- ----------
Total borrowed funds 269,992 291,429 268,872
---------- ---------- ----------
Long-term debt 9,778 10,318 11,246
---------- ---------- ----------
Other liabilities 18,981 17,338 27,672
---------- ---------- ----------
Total Liabilities 1,479,591 1,348,494 1,283,239
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
- ---------------------
Preferred stock, no stated value, 4,000,000
shares authorized, none issued - - -
Common stock, $5.00 par value, 20,000,000
shares authorized, 5,182,239, 5,180,172 and 5,166,832 shares
issued and outstanding 25,911 25,901 25,834
Additional paid-in capital 34,442 34,431 34,431
Retained earnings 50,581 47,961 40,062
Unrealized (depreciation) appreciation in securities available for sale (155) (2,191) 633
Unallocated common stock held by ESOP (at cost) (23) (23) (109)
---------- ---------- ----------
Total Shareholders' Equity 110,756 106,079 100,851
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $1,590,347 $1,454,573 $1,384,090
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
March 31, March 31,
1995 1994
------- -------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $21,225 $17,275
Interest on deposits with other banks 11 4
Interest on securities available for sale 1,659 2,772
Interest and dividends on investment securities:
Taxable interest 813 475
Tax-exempt interest 1,010 966
Interest on mortgage-backed securities 3,016 2,498
Interest on federal funds sold 74 3
------- -------
Total Interest Income 27,808 23,993
------- -------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 501 491
Savings 1,971 1,709
Time 8,064 5,614
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 241 168
Repurchase agreements and secured lines of credit 1,643 1,296
Advances from the Federal Home Loan Bank 1,857 1,434
Interest on long-term debt 199 160
------- -------
Total Interest Expense 14,476 10,872
------- -------
NET INTEREST INCOME 13,332 13,121
Provision for possible loan losses 730 862
------- -------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 12,602 12,259
------- -------
OTHER INCOME:
- -------------
Trust fees 573 587
Service charges on deposit accounts 686 635
Credit card program fees 296 261
Net securities (losses) gains (66) 599
Other operating income 730 283
------- -------
Total Other Income 2,219 2,365
------- -------
OTHER EXPENSES:
- ---------------
Salaries and wages 3,271 3,141
Employee benefits 1,030 1,066
Net occupancy expense 696 697
Equipment rentals, depreciation and maintenance 572 560
Federal deposit insurance 598 550
Outside examination, legal fees and consulting 316 294
Advertising and promotion 377 311
Supplies 331 454
Outside data processing services 320 282
Other operating expense 1,674 1,538
------- -------
Total Other Expenses 9,185 8,893
------- -------
INCOME BEFORE INCOME TAXES 5,636 5,731
Income Taxes 1,669 1,797
------- -------
NET INCOME $3,967 $3,934
======= =======
EARNINGS PER SHARE $0.76 $0.75
======= =======
DIVIDENDS PER SHARE $0.26 $0.22
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING AND COMMON SHARE EQUIVALENTS 5,238 5,232
======= =======
</TABLE>
See Notes To Consolidated Financial Statements.
5
<PAGE> 6
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1995
------------------------------------------------------------------------
Unrealized
Appreciation Common Stock
(Depreciation) Held by ESOP
Common Stock in Securities (at Cost)
---------------- Retained Available ----------------
Shares Amount Surplus Earnings for Sale Shares Amount
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1995 5,180 $25,901 $34,431 $47,961 ($2,191) (1) ($23)
Net income - - - 3,967 - - -
Cash dividends paid ($0.26 per share) - - - (1,347) - - -
Exercise of options, net of shares redeemed 2 10 11 - - - -
Net change in unrealized appreciation
(depreciation) in securities available for sale - - - - 2,036 - -
------------------------------------------------------------------------
Balance - March 31, 1995 5,182 $25,911 $34,442 $50,581 ($155) (1) ($23)
========================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1994
------------------------------------------------------------------------
Unrealized
Appreciation Common Stock
(Depreciation) Held by ESOP
Common Stock in Securities (at Cost)
---------------- Retained Available ----------------
Shares Amount Surplus Earnings for Sale Shares Amount
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994 5,153 $25,763 $34,158 $37,263 $2,925 (7) ($109)
Net income - - - 3,934 - - -
Cash dividends paid ($0.22 per share) - - - (1,135) - - -
Exercise of options 4 20 21 - - - -
Common stock issued for dividend reinvestment 10 51 252 - - - -
Net change in unrealized appreciation
(depreciation) in securities available for sale - - - - (2,292) - -
------------------------------------------------------------------------
Balance - March 31, 1994 5,167 $25,834 $34,431 $40,062 $633 (7) ($109)
========================================================================
</TABLE>
See Notes To Consolidated Financial Statements.
6
<PAGE> 7
Part I. Item 1. Financial Information
<TABLE>
<CAPTION>
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three Months Ended
--------------------------
March 31, March 31,
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income $ 3,967 $ 3,934
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 548 547
Amortization and accretion (123) 318
Provision for possible loan losses 730 862
Loss (gain) on sale of securities 66 (599)
(Gain) loss on sale of real estate owned (326) 24
Loss on sale of premises and equipment 39 23
Gain on sale of loans (2) -
Provision for deferred tax benefit (98) (133)
Increase in interest receivable (751) (184)
Increase in interest payable 1,483 1,135
Other - net (746) (262)
-------- --------
Total adjustments 820 1,731
-------- --------
Net cash provided by operating activities 4,787 5,665
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sales of securities available for sale 10,204 67,050
Proceeds from maturity or paydown of securities available for sale 1,609 19,421
Purchase of securities available for sale (98,370) (1,717)
Proceeds from maturity or paydown of investment securities 7,516 12,399
Purchase of investment securities (230) (35,907)
Purchase of loans (14,540) (12,160)
Proceeds from sale of loans 10,807 -
Net increase in loans (34,814) (34,069)
(Increase) decrease in deposits with other banks (14) 337
Purchase of premises and equipment (467) (188)
Proceeds from sale of premises and equipment 39 -
Proceeds from sale of other real estate owned 828 154
Cash received in branch purchases 88,021 13,968
-------- --------
Net cash (used in) provided by investing activities (29,411) 29,288
-------- --------
CASH FLOWS FROM FINANCING ACTIVITES:
- ------------------------------------
Net increase (decrease) in deposits 54,767 (59)
Net decrease in federal funds purchased and other short-term borrowings (20,375) (17,450)
Net decrease in repurchase agreements and secured lines of credit (11,062) (16,616)
Net increase in advances from the Federal Home Loan Bank 10,000 -
Payments on long-term debt (541) (151)
Proceeds from exercise of stock options 21 41
Proceeds from common stock issued for dividend reinvestment plan - 303
Dividends paid on common stock (1,347) (1,135)
-------- --------
Net cash provided by (used in) financing activities 31,463 (35,067)
-------- --------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 6,839 (114)
CASH AND DUE FROM BANKS - Beginning of year 42,903 36,956
-------- --------
CASH AND DUE FROM BANKS - End of period $ 49,742 $ 36,842
======== ========
</TABLE>
See Notes To Consolidated Financial Statements.
7
<PAGE> 8
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $12,517 $ 9,737
======= =======
Income taxes $ 291 $ 600
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Securities purchased settling after March 31 $ 215 $12,886
======= =======
Securities sold settling after March 31 $ 49 $11,060
======= =======
Transfers to other real estate owned and in substance foreclosed $ 160 $ 363
======= =======
Net change in unrealized appreciation (depreciation) in securities
available for sale, net of income tax effects $ 2,036 ($2,292)
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Deposits assumed in branch acquisitions $96,681 $14,426
======= =======
See Notes To Consolidated Financial Statements.
</TABLE>
8
<PAGE> 9
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
1. Principles of Consolidation:
The consolidated financial statements include the accounts of First
Western Bancorp, Inc. (First Western) and its wholly-owned subsidiaries, First
Western Bank, National Association (First Western Bank, N.A.), First Western
Bank, Federal Savings Bank (First Western Bank, F.S.B.), First Western Trust
Services Company (Trust Services) and Residential Mortgage Company of America.
All significant intercompany transactions have been eliminated in
consolidation.
The consolidated balance sheets as of March 31, 1995 and March 31,
1994, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the three month periods ended March
31, 1995 and 1994 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form
10-Q. The interim statements are unaudited and should be read in conjunction
with the financial statements and notes thereto contained in First Western's
1994 Annual Report on Form 10-K.
2. Earnings Per Share:
Earnings per common share are based on the weighted average number of
common shares outstanding and common share equivalents in each period.
Weighted average shares outstanding include common share equivalents under
First Western's Incentive Stock Option Plan for Key Officers.
3. Recent Accounting Pronouncements:
During the first quarter of 1995, First Western adopted Statements of
Financial Accounting Standards No. 114 "Accounting by Creditors for Impairment
of a Loan" and No. 118 "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure". The effect of adopting these statements on
First Western's financial statements was not material.
9
<PAGE> 10
Part 1. Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of operations for the three months ended March 31, 1995 compared with
the three months ended March 31, 1994:
For the three months ended March 31, 1995, First Western's net income
was $4.0 million, slightly greater than $3.9 million for the three months ended
March 31, 1994. First Western's earnings per share were $0.76 for the three
months ended March 31, 1995, comparable to $0.75 for the three months ended
March 31, 1994. For the first quarter of 1995, earnings increased from the
prior year due to increased net interest income after provision for loan losses
which was offset partially by increased operating expenses and decreased other
income. Other income decreased $146,000 from the prior year primarily due to
First Western realizing a $66,000 loss on security sales during the first three
months of 1995 compared with realizing gains on securities sales of $599,000
during the first three months of 1994. This decrease in other income from
securities transactions was partially offset by gains on sales of other real
estate owned of $326,000 during the first three months of 1995 compared with
losses on sales of other real estate owned of $24,000 during the first three
months of 1994. Earnings for the three months ended March 31, 1995 and March
31, 1994, exclusive of net securities gains and losses and other real estate
owned gains and losses, would have been approximately $0.73 per share and $0.68
per share, respectively. First Western's return on average assets was 1.08%
for the three months ended March 31, 1995, compared with the 1.16% for the
first three months of 1994. The decrease in First Western's return on average
assets was due primarily to a decline in First Western's net interest margin
for the first three months of 1995 compared with the prior year.
During the first quarter of 1995, First Western completed the
acquisition of the Andover, Ohio banking office of Peoples Bank, N.A. of
Ashtabula, Ohio along with the acquisition of four banking offices located in
northeastern Ohio in Lake and Ashtabula Counties from Union Federal Savings
Bank of Indianapolis, Indiana. The acquisition of these branches added $96.7
million of deposits to First Western's existing deposit base. First Western
paid a premium of $7.6 million in order to acquire these branches and this
premium paid increased First Western's intangible assets during the first
quarter of 1995.
10
<PAGE> 11
Net Interest Income:
First Western's net interest income was $13.3 million for the three
months ended March 31, 1995, increasing $211,000 or 1.6% from $13.1 million for
the first three months of 1994. The increase in net interest income was
generated by a $109.4 million or 8.3% increase in average earning assets which
was partially offset by a decline in First Western's net interest margin from
4.20% for the first three months of 1994 to 3.95% for the first three months of
1995. The increase in average earning assets was due to a $149.9 million or
18.0% increase in average loans outstanding. Average loans outstanding
increased due to strong loan growth experienced throughout 1994. Average
securities decreased $45.6 million or 9.4% for the first three months of 1995
compared with the first three months of 1994 as First Western sold securities
during 1994 in response to increasing interest rates. Most of the growth in
average earning assets was funded by a $113.9 million or 11.9% increase in
average deposits due to the deposits acquired during the first quarter of 1995
and also due to strong growth of time deposits which resulted from an increase
in overall interest rates and a more aggressive pricing strategy implemented by
First Western during 1995.
First Western's net interest margin or net interest income expressed
as a percentage of average earning assets was 3.95% for the first three months
of 1995 compared with 4.20% for the first three months of 1994. First
Western's net interest margin declined as the cost of funds increased more than
the yield on earning assets during a period of rising interest rates during the
last six months of 1994 and the first three months of 1995. The growth of the
loan portfolio helped to mitigate the compression on the net interest margin
since loans generally have higher yields than other components of earning
assets. The loan portfolio comprised 68.7% of average earning assets for the
first three months of 1995 compared with 63.1% for the first three months of
1994. First Western's yield on average earning assets was 8.05% for the first
three months of 1995 compared with 7.54% for the first three months of 1994, an
increase of 51 basis points, while the cost of funds increased 86 basis points
from 3.78% to 4.64%.
11
<PAGE> 12
Provision for Possible Loan Losses:
First Western's provision for possible loan losses was $730,000 for
the first three months of 1995 compared with $862,000 for the first three
months of 1994. Net charge-offs for the first three months of 1995 were
$450,000 compared with $482,000 for the first three months of 1994. First
Western's net charge-offs for the first three months of 1995 are lower than the
prior year due to decreased commercial loan charge-offs. Installment loan
charge-offs increased $124,000 or 34.9% from $355,000 for the first three
months of 1994 to $479,000 for the first three months of 1995 due to an
increase in consumer loans during this period. First Western's net charge-offs
by loan type are as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1995 1994
------ -------
<S> <C> <C>
Commercial, financial and agricultural loans.......................... $ (26) $ 119
Real estate construction loans........................................ - -
Real estate mortgage loans............................................ (3) 8
Installment loans..................................................... 479 355
------ -------
Total net charge-offs.............................................. $ 450 $ 482
====== =======
Net charge-offs as a percentage of
average loans...................................................... 0.19% 0.23%
====== =======
</TABLE>
Other Income and Other Expenses:
Other income decreased $146,000 or 6.2% from $2.4 million for the
first three months of 1994 to $2.2 million for the first three months of 1995
due primarily to net securities gains and losses. First Western realized
$599,000 of net securities gains during the first three months of 1994
resulting from First Western reducing its portfolio of securities available for
sale. During the first three months of 1995, First Western realized net
securities losses of $66,000. The decline in other income for the first
quarter of 1994 to the first quarter of 1995 due to securities gains and losses
was partially offset by sales of other real estate owned which generated gains
of $326,000 during the first three months of 1995.
Trust fees were $573,000 for the first three months of 1995,
approximately even with $587,000 for the first three months of 1994. Service
charges on deposit accounts increased $51,000 or 8.0% for the first three
months of 1995 compared with the prior year. The increase in service charges
on deposit accounts reflects an increased service
12
<PAGE> 13
charge schedule implemented by First Western during the first quarter of 1995.
First Western's credit card program fees increased $35,000 or 13.4% from
$261,000 for the first three months of 1994 to $296,000 for the first three
months of 1995. Other operating income increased $447,000 or 158.0% from
$283,000 for the three months ended March 31, 1994 to $730,000 for the three
months ended March 31, 1995 with most of this increase due to gains on sales of
other real estate owned. Customer check fees, credit insurance fees and
automated teller machine ("ATM") card fees also increased in the first three
months of 1995 compared with the prior year.
Total other expenses increased $292,000 or 3.3% from $8.9 million for
the first three months of 1994 to $9.2 million for the first three months of
1995. The five branch offices acquired by First Western during the first
quarter of 1995 resulted in most of the increase in other expenses.
First Western's salary and employee benefits expense increased a
combined $94,000 or 2.2% for the first three months of 1995 compared with the
first three months of 1994. This increase in salaries and employee benefits
was attributable to the additional employees resulting from the five branch
offices acquired and also due to normal salary and wage increases. The
increase in salaries and wages expense was partially offset by decreases in the
costs of certain employee benefit programs such as pension and profit sharing
expense.
Occupancy and equipment expense increased a combined $11,000 or 1.0%
from the first three months of 1994 to the first three months of 1995. The five
branch offices acquired during the first quarter of 1995 did not have a
significant impact on occupancy and equipment expense since the branches were
acquired late in the first quarter.
Federal deposit insurance expense increased $48,000 or 8.7% from
$550,000 for the first three months of 1994 to $598,000 for the first three
months of 1995. This increase was attributable to an increase in First
Western's insured deposits. Currently, there are several proposals to change
the rates paid for deposit insurance. The proposed rate changes for deposits
insured by the Federal Deposit Insurance Corporation's Bank Insurance Fund
("BIF") is for the lowest premium to decrease 83%. Approximately 61% of First
Western's deposits are insured by the BIF. If this rate change occurs as
proposed it will result in a decrease in First Western's deposit insurance
expense of approximately $1.2 million annually. Any future decreases in
insurance expense for the deposits insured by the BIF could be offset by
possible rate increases or special assessments by the Savings Association
Insurance Fund which insures the remaining 39% of First Western's deposits.
Supplies expense decreased $123,000 or 27.1% from the first three
months of 1994 to the first three months of 1995 with most of this decrease
relating to additional supplies necessary for the name changes that occurred at
First Western's subsidiaries in late 1993 and early 1994.
13
<PAGE> 14
First Western's advertising and promotion expense increased $66,000 or
21.2% from $311,000 for the first three months of 1994 to $377,000 for the
first three months of 1995. This increase in advertising and promotion expense
is primarily related to various promotions run in the market areas of the newly
acquired branches.
Other operating expenses increased $136,000 or 8.8% from $1.5 million
for the first three months of 1994 to $1.7 million for the first three months
of 1995. The amortization of the intangible assets due to the recent branch
acquisitions contributed $75,000 of the increase in other expenses. The
amortization of intangible assets will increase in future quarters since the
new branches were not owned by First Western for the full quarter. Another
factor increasing other operating expense was the increase in postal rates.
First Western's postage expense increased $23,000 or 9.9% for the first quarter
of 1995 compared with the first quarter of 1994.
Income Taxes:
First Western's income tax expense decreased $128,000 or 7.1% from
$1.8 million for the first three months of 1994 to $1.7 million for the first
three months of 1995. This decrease was a result of a decrease in First
Western's pretax earnings along with an increase in First Western's tax-exempt
interest income. First Western's effective tax rate for the first three months
of 1995 was 29.6%, comparable to 31.4% for the first three months of 1994.
Financial Condition as of March 31, 1995 as compared with December 31, 1994
and March 31, 1994.
As of March 31, 1995, First Western's total assets were $1.590 billion
compared with $1.455 billion at December 31, 1994 and $1.384 billion at March
31, 1994. Most of the increase from March 31, 1994 was due to the growth of
the loan portfolio funded by a $205.4 million or 21.1% increase in deposits
from five recently acquired branch offices and also due to a more aggressive
deposit pricing strategy. The $135.8 million increase in assets during the
first three months of 1995 was due primarily to the deposits acquired with the
branch acquisitions with those funds used to purchase securities available for
sale. Total average assets for the first three months of 1995 were $1.488
billion compared with $1.374 billion for the first three months of 1994, an
increase of 8.3%.
14
<PAGE> 15
Loan Portfolio:
Net loans increased $38.3 million or 3.9% during the first three
months of 1995. Real estate-mortgage loans increased $26.4 million during the
first three months of 1995 primarily as a result of First Western purchasing
$14.5 million of residential mortgage loans. Installment loans increased $1.4
million during the first three months of 1995, which is net of the sale of
$10.8 million of student loans. During the last twelve months, most of First
Western's loan growth has been in mortgages and installment loans. Mortgage
loans have increased as a result of First Western purchasing mortgage loans and
also as a result of First Western expanding its use of third-party mortgage
loan originators. Installment loans increased as a result of First Western
expanding its network of indirect auto lending into new market areas. The
following table shows the composition of First Western's loan portfolio at
March 31, 1995, December 31, 1994 and March 31, 1994:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994 March 31, 1994
------------------------ ----------------------- ------------------------
Amount Percent Amount Percent Amount Percent
------------ -------- ----------- --------- ----------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural:
Automobile floorplan loans....... $ 24,953 2.5 % $ 25,229 2.6 % $ 22,107 2.6 %
Loans to municipalities.......... 11,915 1.2 10,307 1.1 11,759 1.4
Other commercial loans........... 74,078 7.3 63,662 6.5 55,927 6.5
---------- ----- -------- ----- -------- -----
Subtotal....................... 110,946 11.0 99,198 10.2 89,793 10.5
---------- ----- -------- ----- -------- -----
Real estate-construction............. 17,394 1.7 18,721 1.9 12,689 1.5
---------- ----- -------- ----- -------- -----
Real estate-mortgage:
1-4 Family residential............. 394,110 38.8 370,582 37.8 343,627 39.8
Multi-family residential........... 29,962 2.9 30,923 3.2 33,224 3.9
Home equity........................ 36,618 3.6 37,129 3.8 35,956 4.2
Commercial and other............... 131,546 12.9 127,176 13.0 110,015 12.8
---------- ----- -------- ----- -------- -----
Subtotal......................... 592,236 58.2 565,810 57.8 522,822 60.7
---------- ----- -------- ----- -------- -----
Installment:
Credit cards....................... 35,822 3.5 39,412 4.0 28,119 3.3
Installment and other.............. 260,426 25.6 255,421 26.1 207,677 24.0
---------- ----- -------- ----- -------- -----
Subtotal......................... 296,248 29.1 294,833 30.1 235,796 27.3
---------- ----- -------- ----- -------- -----
Total............................ $1,016,824 100.0 % $978,562 100.0 % $861,100 100.0 %
========== ===== ======== ===== ======== =====
</TABLE>
First Western has several procedures in place to assist in maintaining
the overall quality of its loan portfolio. First Western has established
underwriting guidelines to be followed by its subsidiaries. In addition, a
formal, ongoing loan review program, which concentrates principally on
commercial credits, has been established to help monitor the loan portfolios of
the subsidiaries. First Western also regularly monitors its delinquency levels
for any negative or adverse trends and particularly monitors credits which have
total exposures of $1.5 million or more.
15
<PAGE> 16
First Western's delinquent loans, nonaccrual loans and nonperforming
assets consisted of the following at March 31, 1995, December 31, 1994 and
March 31, 1994:
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
--------- ----------- ---------
(Dollars in Thousands)
<S> <C> <C> <C>
Loans delinquent and still accruing interest:
Loans past due 30 to 89 days ........................... $ 5,592 $ 7,370 $ 5,218
Loans past due 90 days or more ......................... 1,611 1,870 1,683
--------- -------- ---------
Total loan delinquencies ............................. $ 7,203 $ 9,240 $ 6,901
========= ======== =========
Nonaccrual loans ......................................... $ 3,735 $ 2,875 $ 5,023
Other real estate owned and in-substance
foreclosed ............................................. 843 1,185 1,881
--------- -------- ---------
Total nonperforming assets ............................... $ 4,578 $ 4,060 $ 6,904
========= ======== =========
Total nonperforming assets and loans
past due 90 days or more ............................... $ 6,189 $ 5,930 $ 8,587
========= ======== =========
Nonaccrual loans to total loans .......................... 0.37 % 0.29 % 0.58 %
Nonperforming assets to total loans
and other real estate owned ............................ 0.45 % 0.41 % 0.80 %
Nonperforming assets to total assets ..................... 0.29 % 0.28 % 0.50 %
Nonperforming assets and loans past due
90 days or more to total assets ........................ 0.39 % 0.41 % 0.62 %
Nonaccrual loans and loans past due
90 days or more to total loans ......................... 0.53 % 0.48 % 0.78 %
Allowance for possible loan losses
to nonaccrual loans .................................... 354.03 % 450.16 % 228.59 %
Allowance for possible loan losses
to loans past due 90 days or more
and nonaccrual loans ................................... 247.34 % 272.78 % 171.22 %
Allowance for possible loan losses to
total loans ............................................ 1.30 % 1.32 % 1.33 %
</TABLE>
In order to determine the adequacy of the allowance for possible loan
losses, management considers the risk classification of loans, delinquency
trends, charge-off experience, credit concentrations, economic conditions and
other factors. Specific reserves are established for each classified credit
taking into consideration the credit's delinquency status, current operating
status, pledged collateral and plan of action for resolving any deficiencies.
For nonclassified loans and smaller loans not individually reviewed, management
considers historical charge-off experience in determining the amount to be
allocated to the allowance. An unallocated or
16
<PAGE> 17
general reserve is also established which takes into consideration, among other
things, unfunded commitments, concentrations of credit, economic conditions,
delinquency and nonaccrual trends, management experience and trends in volume
and terms of loans. The allowance is maintained at a level determined
according to this methodology by charging a provision to operations.
First Western believes that the allowance for possible loan losses of
$13.2 million at March 31, 1995 is adequate to cover losses inherent in the
portfolio as of such date. However, there can be no assurance that First
Western will not sustain losses in future periods, which could be substantial
in relation to the size of the allowance at March 31, 1995.
Investment Securities, Mortgage-Backed Securities, and Securities Available for
Sale:
Investment securities and mortgage-backed securities decreased a
combined $7.3 million for the first three months of 1995 with this decrease due
to maturities and paydowns of securities. The market value of First Western's
investment securities and mortgage-backed securities held to maturity was a
combined $319.6 million, $9.5 million or 2.9% below the amortized cost of
$329.1 million. First Western's portfolio of investment securities and
mortgage-backed securities had a market value below amortized cost of $19.4
million or 5.8% at December 31, 1994.
Securities available for sale increased $94.8 million or 140.1% during
the first three months of 1995 as First Western purchased securities with the
funds provided by the branch acquisitions. Securities available for sale
increased $38.9 million from $123.6 million at March 31, 1994 to $162.5 million
at March 31, 1995 with most of this increase due to the purchase of securities
during the first three months of 1995. First Western's net unrealized
depreciation on securities available for sale decreased from net unrealized
depreciation of $3.4 million at December 31, 1994 to $239,000 at March 31, 1995
primarily as a result of a decline in intermediate and long-term interest rates
during the first three months of 1995.
Deposits:
Total deposits increased $151.4 million or 14.7% from $1.029 billion
at December 31, 1994 to $1.181 billion at March 31, 1995 with approximately
$96.7 million of this increase due to the deposits acquired with the five
branch offices that First Western purchased during the first quarter of 1995.
Deposits also increased due to First Western implementing a more aggressive
pricing strategy for time deposit products in order to increase deposits.
First Western continues to experience a shifting in deposits from demand and
savings
17
<PAGE> 18
accounts to time accounts due to the increased rates paid on time deposits
resulting from recent market interest rate increases. First Western's deposits
increased $205.4 million from March 31, 1994 to March 31, 1995 with most of
this growth attributable to the deposits acquired in the first quarter of 1995,
along with the more aggressive pricing strategy.
Borrowed Funds:
First Western's borrowed funds decreased $21.4 million during the
first three months of 1995 from $291.4 million at December 31, 1994 to $270.0
million at March 31, 1995. This reduction in borrowed funds, primarily
short-term borrowings and repurchase agreements, was the result of increased
deposits. Total borrowed funds only increased $1.1 million or 0.4% from March
31, 1994 to March 31, 1995 as increased deposits provided the funds necessary
for the growth of the loan portfolio and the increase in the portfolio of
securities available for sale.
18
<PAGE> 19
Shareholders' Equity:
Shareholders' equity increased $4.7 million during the first three
months of 1995 primarily as a result of the retention of earnings of $2.6
million, net of cash dividends paid to shareholders. Also increasing
shareholders' equity was a $2.0 million decrease in net unrealized depreciation
in securities available for sale, net of income tax effects. First Western's
capital ratios declined from December 31, 1994 to March 31, 1995 primarily as a
result of the branches that were acquired in the first quarter of 1995. The
branch acquisition decreased First Western's capital ratios due to the
intangible assets which decreased First Western's Tier I capital. The branch
acquisitions also increased First Western's total assets with no additional
shareholders' equity. The following table presents First Western's capital
ratios at March 31, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Tier I:
Common shareholders' equity .............................. $110,756 $106,079
Non-exempt intangible assets ............................. (8,029) (504)
Unrealized depreciation in securities
available for sale ..................................... 155 2,191
-------- --------
Total Tier I ......................................... 102,882 107,766
-------- --------
Tier II:
Qualifying long term debt ................................ 0 301
Qualifying allowance for possible loan losses ............ 12,133 11,528
-------- --------
Total Tier II ........................................ 12,133 11,829
-------- --------
Total capital .............................................. $115,015 $119,595
======== ========
Risk weighted assets ....................................... $961,561 $922,235
======== ========
Tier I capital ratio ....................................... 10.70% 11.69%
======== ========
Required Tier I capital ratio .............................. 4.00% 4.00%
======== ========
Total capital ratio ........................................ 11.96% 12.97%
======== ========
Required total capital ratio ............................... 8.00% 8.00%
======== ========
Tier I leverage ratio ...................................... 6.95% 7.60%
======== ========
Required Tier I leverage ratio * ........................... 3.00% 3.00%
======== ========
<FN>
* For all but the most highly rated, low risk profile organizations, the
minimum Tier I leverage ratio is to be 3% plus a cushion of 100 to 200 basis
points.
</TABLE>
19
<PAGE> 20
Liquidity and Cash Flows:
Liquidity is the ability to provide the cash necessary to meet
customer credit needs, satisfy depositor withdrawal requirements and to pay-off
short-term borrowings. One source of liquidity is cash and due from banks and
short-term assets such as interest-bearing deposits in other banks and federal
funds sold, which totaled $50.6 million at March 31, 1995 as compared with
$43.8 million at December 31, 1994 and $37.3 million at March 31, 1994.
Another source of liquidity is borrowing capability. First Western's banking
subsidiaries have a variety of sources of short-term liquidity available to
them, including federal funds purchased from correspondent banks, sales of
securities available for sale, sales of securities under agreements to
repurchase, the Federal Reserve discount window, interbank deposits, FHLB
advances and loan participations or sales. First Western also generates
liquidity from the regular principal payments and prepayments made on its
portfolio of loans and mortgage-backed securities. First Western's banking
subsidiaries had $32.1 million of unused overnight credit lines available at
March 31, 1995.
First Western's operating activities provided cash flows of $4.8
million during the first three months of 1995 compared with $5.7 million for
the first three months of 1994. The primary source of operating cash flows
for the first three months of 1995 was net income combined with noncash
expenses such as the provision for possible loan losses and depreciation.
Investing activities used cash flows of $29.4 million in the first
three months of 1995 compared with providing $29.3 million for the first three
months of 1994. The five branch offices acquired during the first quarter of
1995 provided First Western with net cash flows of $88.0 million which
represents the deposit liabilities assumed by First Western net of the premium
paid for the deposits and the assets that were purchased. Most of the funds
provided by the acquisition of the branches were used to purchase securities
available for sale. The growth of the portfolio of securities available for
sale used net cash flows of $86.6 million during the first three months of
1995. The growth of the loan portfolio during the first three months of 1995
used net cash flows of $38.5 million. During the first three months of 1994,
sales and maturities of securities available for sale provided cash flows of
$84.8 million with these cash flows used to fund loan growth and also to
purchase investment securities held to maturity.
Financing activities provided cash flows of $31.5 million in the first
three months of 1995 primarily as a result of an increase in deposits. First
Western used the cash flows provided by increased deposits to fund loan growth
and also to decrease borrowings during the first three months of 1995. During
the first three months of 1994, financing activities used cash flows of $35.1
million primarily as a result of decreases in repurchase agreements and federal
funds purchased and other short-term borrowings. The cash flows used to
20
<PAGE> 21
decrease borrowings during the first three months of 1994 were provided by the
sales of the securities available for sale during that time period.
21
<PAGE> 22
Part II. Other Information
Items 1-3. Not applicable.
Item 4. Result of Votes of Securities Holders:
First Western's Annual Meeting of Shareholders was held on April
18, 1995. The matters voted on at the Annual Meeting were as follows:
(i) The election of Robert N. Chambers, Louis J. Kasing, Jr.,
John P. O'Leary, Jr., Wendell H. Boyd, and Robert C. Duvall
as directors for three year terms expiring in 1998. The
election of John W. Sant as a director for a one year term
expiring in 1996.
(ii) The reapproval of the First Western Bancorp, Inc. Incentive
Stock Compensation Plan for Key Officers, as amended.
Item (ii) was approved as follows:
Votes for 3,508,847
Votes against 385,947
Abstain 197,412
Item 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
10.1 First Western Bancorp, Inc. Deferred Compensation Plan
for Directors as amended and restated effective
July 1, 1995.
15.1 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedule
b. Reports on Form 8-K: None.
22
<PAGE> 23
Signature
Pursuant to the requirements 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 WESTERN BANCORP, INC.
(Registrant)
May 5, 1995 /s/ Robert H. Young
------------------------------
Robert H. Young
Senior Vice President-Finance,
Secretary and Treasurer
(Principal Financial Officer)
23
<PAGE> 24
FIRST WESTERN BANCORP, INC.
EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
- ------- -------------------------------------- ---------
<S> <C> <C>
10.1 First Western Bancorp, Inc. Deferred Filed
Compensation Plan for Directors as herewith
amended and restated effective page __/__
July 1, 1995
15.1 Letter re: Unaudited Interim Financial Filed
Information herewith
page __/__
</TABLE>
<PAGE> 1
Exhibit 10.1
FIRST WESTERN BANCORP, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
AS AMENDED AND RESTATED EFFECTIVE JULY 1, 1995
----------------------------------------------
ARTICLE I. NAME AND PURPOSE; PRIOR PLANS
-----------------------------
The name of this plan is the First Western Bancorp, Inc. Deferred
Compensation Plan for Directors (the "PLAN"). Its purpose is to provide
members of the Board of Directors ("DIRECTORS") of First Western Bancorp, Inc.
(the "COMPANY") or any subsidiary of the Company ("SUBSIDIARY") with the
opportunity to defer fees earned as a Director. This Plan became effective
January 1, 1994 (the "EFFECTIVE DATE"), and is amended and restated in its
entirety effective July 1, 1995 (the "RESTATEMENT DATE").
Prior to the Effective Date, the Company and its Subsidiaries maintained
certain other deferred compensation arrangements for the benefit of Directors
(the "PRIOR PLANS"). As of the Effective Date, no further deferrals shall be
made under the Prior Plans. The amounts credited to the accounts of Directors
under the Prior Plans (the "PRIOR PLAN ACCOUNTS") immediately prior to the
Effective Date shall continue to be credited with interest in accordance with
Article IV hereof and shall be distributable in accordance with Article V
hereof.
ARTICLE II. PARTICIPANTS
------------
Any Director of the Company or any Subsidiary shall be eligible to
participate in the Plan. Any such Director who elects to participate in the
Plan is hereinafter called a "PARTICIPANT." The Company shall establish for
each Participant one or more unfunded deferred compensation accounts ("DEFERRAL
ACCOUNTS") as specified in Article IV.
ARTICLE III. ELECTION OF DEFERRAL
--------------------
3.01 TIMING OF ELECTIONS. On or before December 31 of any calendar year,
each Director shall be entitled to make an irrevocable election to defer
receipt of all or a specified portion of the fees otherwise payable to such
Director for services as a member of the Board of Directors of the Company or
any Subsidiary, or any Committee thereof, or as a consultant to
<PAGE> 2
the Company or any Subsidiary ("FEES"); provided, however, that by submitting
an irrevocable election prior to the Restatement Date, a Director who did not
previously elect to defer any portion of his Fees for 1995 may elect to defer
all or a portion of his Fees earned during the period from the Restatement Date
through December 31, 1995.
3.02 CONTENT OF DEFERRAL ELECTIONS. Each deferral election filed pursuant
to Section 3.01 shall include an irrevocable election as to the percentage or
amount of the Participant's Fees to be deferred for the applicable period. The
initial deferral election of a Participant shall also include an election as to
the method of distribution desired for amounts deferred during the initial
deferral period and all future periods, i.e., in a lump sum payment or in 40
quarterly installments payable as described in Section 5.01. Such election of
a distribution method shall be irrevocable, except that by filing a new
distribution method election prior to the commencement of a calendar year, a
Participant can change the distribution method prospectively, i.e., with
respect to Fees deferred for calendar years beginning after the date the new
election is filed and interest on such deferred Fees.
ARTICLE IV. DEFERRAL ACCOUNTS
-----------------
4.01 ESTABLISHMENT OF DEFERRAL ACCOUNTS. Separate Deferral Accounts shall
be established and maintained for each Participant reflecting the amount
deferred in accordance with the Participant's deferral election form(s). In
the event a Participant elects to change distribution methods prospectively as
permitted in Section 3.02 above, a new Deferral Account shall be established
for the Participant to record separately the deferred Fees and interest subject
to the new distribution method.
4.02 CREDITS TO ACCOUNTS. As of the last day of each calendar quarter, an
amount shall be credited to each Participant's Deferral Account equal to the
Fees otherwise payable during said calendar quarter but deferred pursuant to
the Plan by such Participant. The amount credited to a Participant's Deferral
Accounts and his Prior Plan Account, if any (hereinafter referred to
collectively as his "ACCOUNTS"), shall, at the Participant's election, be
allocated in whole percentages between a cash sub-account (the "CASH
SUB-ACCOUNT") and/or a stock sub-account (the "STOCK SUB-ACCOUNT"). Amounts
allocated to the Cash Sub-Account shall be credited with deemed investment
income computed by using the average variable interest rate paid on 18-month
Individual Retirement Accounts by those Subsidiaries that provide such
accounts. Such deemed investment income shall be credited to the Participant's
Cash Sub-Account as of the last day of each quarter and as of such other dates
as the Company may determine (each such date, a "VALUATION DATE"), based upon
the
- 2 -
<PAGE> 3
balance credited to each such Cash Sub-Account on such Valuation Date after
reducing the Account balance to reflect any distributions made since the
immediately preceding Valuation Date from such Cash Sub-Account and before
crediting the Account to reflect any new deferrals added thereto. Amounts
allocated to the Stock Sub-Account shall, unless the Company otherwise
determines, be contributed by the Company as soon as practicable to a grantor
trust (the "TRUST") established by the Company in connection with the Plan.
Such contributed amounts shall be used by the Trustee of the Trust to purchase
shares of Common Stock of the Company in accordance with the terms of the
applicable Trust Agreement. No more than once each calendar year, as of a
Valuation Date, a Director may elect to have all or any portion of the balance
then credited to his Cash Sub-Account transferred to his Stock Sub-Account,
which transferred amount shall be contributed by the Company to the Trust as
soon as practicable after the applicable Valuation Date. Amounts allocated to
a Director's Stock Sub-Account, however, must remain allocated to such
Sub-Account until distributed in accordance with Article V. For purposes of
determining the amount distributable to the Director or his beneficiary in
accordance with Article V, the Director's Stock Sub-Account shall consist of
that number of shares of Company Common Stock, and the amount of cash and other
assets, if any, credited to the Director's separate investment account under
the Trust.
ARTICLE V. METHOD OF DISTRIBUTION OF DEFERRED COMPENSATION
-----------------------------------------------
5.01 DISTRIBUTION UPON CESSATION OF DIRECTOR STATUS. This Section 5.01
governs distributions to Directors upon cessation of Director status for
reasons other than death, and Section 5.02 governs distributions upon the death
of a Director, whether such death occurs before or after benefit payments have
commenced. The amount credited to a Participant's Deferral Accounts shall be
payable in accordance with the method selected by the Participant pursuant to
Section 3.02 above, and the amount credited to a Participant's Prior Plan
Account, if any, shall be payable in accordance with the distribution method
elected and in effect under the applicable Prior Plan immediately prior to the
Effective Date. Such payment shall be made (in the case of a lump sum
distribution) or commenced (in the case of an installment distribution) as soon
as practicable after the end of the calendar quarter in which Director status
ceases. An individual must no longer be a voting member of the Boards of
Directors of the Company and all Subsidiaries in order to be entitled to
receive a distribution pursuant to this Section 5.01. If installments are
elected for any deferral period, the first payment shall be a fraction of the
amount credited to the applicable Accounts as of the last day of the calendar
quarter in which Director status ceases, the numerator of which fraction is one
and the denominator of which is the total number of installments to be paid.
The amount of each subsequent payment
- 3 -
<PAGE> 4
shall be a fraction of the amount credited to the applicable Accounts as of the
last day of the calendar quarter (or semi-annual period, in the case of
elections of semi-annual installments under a Prior Plan) preceding the date of
each subsequent payment, the numerator of which is one and the denominator of
which is the total number of installments to be paid minus the number of
installments previously paid.
5.02 DISTRIBUTION UPON DEATH. If a Participant dies before receiving all
amounts credited to his Accounts, the unpaid amounts in the Participant's
Accounts shall be paid to the Participant's beneficiary or beneficiaries
identified in the last effective beneficiary designation form filed by the
Participant with the Company. Such unpaid amounts shall be paid to the
beneficiary in accordance with the method selected by the Participant pursuant
to Section 3.02 above; provided, however, that if the beneficiary is the
Participant's estate, the distribution shall be made in one lump sum.
Distribution to the beneficiary shall be made or commenced as soon as
practicable after the end of the calendar quarter in which the Participant
dies. Each Participant shall file with the Company a form indicating the
person, persons or entity which are to receive the Participant's benefits under
the Plan if he dies before receiving all the balances in his Accounts. A
Participant's beneficiary designation may be changed at any time prior to his
death by execution and delivery of a new beneficiary designation form. If a
Participant has failed to designate a beneficiary or no designated beneficiary
survives the Participant, payment shall be made in a lump sum to the estate of
the Participant.
5.03 FORM OF PAYMENT. Upon any distribution to a Participant (or
beneficiary) hereunder, the balance of the Participant's Accounts allocated to
the Stock Sub-Account shall be paid to such Participant (or beneficiary) in the
form of whole shares of Common Stock of the Company (with the value of a
fractional share being paid in cash) and the balance allocated to the Cash
Sub-Account shall be paid in cash; provided, however, that if elected by the
Participant (or beneficiary). the entire distribution shall be paid in cash.
ARTICLE VI. PARTICIPANTS' RIGHTS
--------------------
Establishment of the Plan shall not be construed to give any Participant the
right to be retained as a Director or to any benefits not specifically provided
by the Plan. A Participant (or beneficiary) shall not have any interest in the
deferred compensation and earnings credited to his Accounts until the amounts
credited to such Accounts are distributed in accordance with the Plan. All
amounts deferred or otherwise held for the account of a Participant (or
beneficiary) under the Plan shall remain the sole property of the Company,
subject to the claims of its general creditors and available for its use for
- 4 -
<PAGE> 5
whatever purposes are desired. All Accounts under the Plan shall be for
bookkeeping purposes only and shall not represent a claim against specific
assets of the Company. Nothing contained in this Plan shall be deemed to
create a trust of any kind or create any fiduciary relationship between the
Company and any person. With respect to amounts deferred or otherwise held for
the account of a Participant (or beneficiary), the Participant (or beneficiary)
is merely a general creditor of the Company, and the obligation of the Company
hereunder is purely contractual and shall not be required to be funded or
secured in any way. Any investments which the Company and/or the Trust make
with respect to the assets allocated to the Accounts shall remain, until
distributed to Participants and their beneficiaries in accordance with the
terms of the Plan, assets of the Company and subject to the general creditors
of the Company.
ARTICLE VII. NON-ALIENABILITY AND NON-TRANSFERABILITY
----------------------------------------
The rights of a Participant (or beneficiary) to the payment of deferred
compensation as provided in the Plan shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation or
anticipation. No Participant (or beneficiary) may borrow against his Account.
No Account shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, whether voluntary or involuntary, including any liability
which is for alimony or other payments for the support of a spouse or former
spouse, or for any other relative of any Participant (or beneficiary).
ARTICLE VIII. AMENDMENT AND TERMINATION
-------------------------
The Plan may, at any time, be amended, modified or terminated by the Board
of Directors of the Company. No amendment, modification or termination shall,
without the consent of a Participant, adversely affect such Participant's right
with respect to amounts accrued in his Accounts.
ARTICLE IX. GENERAL PROVISIONS
------------------
9.01 NOTICES. All notices to the Company hereunder shall be delivered to
the attention of the Secretary of the Company. Any notice or filing required
or permitted to be given to the Company under this Plan shall be sufficient if
in writing and hand delivered, or sent by registered or certified mail, to the
Company at its principal executive office. Such notice shall be deemed given
as of the date of delivery or, if delivery is made by mail, as of the date
shown on the postmark or the receipt for registration or certification.
- 5 -
<PAGE> 6
9.02 CONTROLLING LAW. The laws of the Commonwealth of Pennsylvania, other
than the conflict of laws provisions thereof, shall be controlling in all
matters relating to the Plan.
9.03 GENDER AND NUMBER. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the plural shall include
the singular and the singular shall include the plural.
9.04 CAPTIONS. The captions of Articles and Sections of this Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
9.05 ACTION BY THE COMPANY. Any action required or permitted by the
Company under the Plan shall be by resolution of its Board of Directors or any
person or persons authorized by resolution of its Board of Directors.
9.07 FACILITY OF PAYMENT. Any amounts payable hereunder to any person
under legal disability or who, in the judgment of the Company, is unable to
properly manage his financial affairs may be paid to the legal representative
of such person or may be applied for the benefit of such person in any manner
which the Company may select.
9.08 SEVERABILITY. Whenever possible, each provision of the Plan shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Plan shall be held to be prohibited by or invalid
under applicable law, then (a) such provision shall be deemed amended to
contain, and to have contained from the outset, such language as shall be
necessary to accomplish the objectives of the provision as originally written
to the fullest extent permitted by law and (b) all other provisions of the Plan
shall remain in full force and effect.
9.09 NO STRICT CONSTRUCTION. No rule of strict construction shall be
applied against the Company, the Board of Directors or any other person in the
interpretation of any of the terms of the Plan.
9.10 SUCCESSORS. The provisions of the Plan shall bind and inure to the
benefit of the Company and its successors and assigns. The term "successors"
as used herein shall include any corporation or other business entity which
shall by merger, consolidation, purchase or otherwise, acquire all or
substantially all of the business and assets of the Company and successors of
any such corporation or other business entity.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, First Western Bancorp, Inc. has caused its corporate
seal to be hereunto affixed and has caused its name to be signed hereto by its
President and attested by its Secretary, pursuant to due authority of its Board
of Directors, this 18th day of April, 1995.
FIRST WESTERN BANCORP, INC.
By: Thomas J. O'Shane
------------------------
President
Attest:
Robert H. Young
- ------------------------
Secretary
(Corporate Seal)
- 7 -
<PAGE> 1
DELOITTE & Exhibit 15.1
TOUCHE LLP
- ----------
-----------------------------------------------------------------
2500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380
May 4, 1995
To the Shareholders and
Board of Directors
First Western Bancorp, Inc.
New Castle, Pennsylvania 16103
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of First Western Bancorp, Inc. and subsidiaries for the periods
ended March 31, 1995 and 1994, as indicated in our report dated April 17, 1995;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is
incorporated by reference in the Registration Statements of First Western
Bancorp, Inc. on Form S-8 (No. 33-46923) for the First Western Bancorp, Inc.
401(k) Profit-Sharing and Stock Bonus Plan, on Form S-8 (No. 33-50372) for the
First Western Bancorp, Inc. Incentive Stock Option Plan for Key Employees and
on Form S-3 (No. 33-40596) for the First Western Bancorp, Inc. Dividend
Reinvestment and Additional Stock Purchase Plan.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statements prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ DELOITTE & TOUCHE LLP
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- ---------------
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000740876
<NAME> First Western Bancorp Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 49,742
<INT-BEARING-DEPOSITS> 887
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 162,508
<INVESTMENTS-CARRYING> 329,124
<INVESTMENTS-MARKET> 319,550
<LOANS> 1,016,824
<ALLOWANCE> 13,223
<TOTAL-ASSETS> 1,590,347
<DEPOSITS> 1,180,840
<SHORT-TERM> 269,992
<LIABILITIES-OTHER> 18,981
<LONG-TERM> 9,778
<COMMON> 25,911
0
0
<OTHER-SE> 84,845
<TOTAL-LIABILITIES-AND-EQUITY> 1,590,347
<INTEREST-LOAN> 21,225
<INTEREST-INVEST> 6,498
<INTEREST-OTHER> 85
<INTEREST-TOTAL> 27,808
<INTEREST-DEPOSIT> 10,536
<INTEREST-EXPENSE> 14,476
<INTEREST-INCOME-NET> 13,332
<LOAN-LOSSES> 730
<SECURITIES-GAINS> (66)
<EXPENSE-OTHER> 9,185
<INCOME-PRETAX> 5,636
<INCOME-PRE-EXTRAORDINARY> 3,967
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,967
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
<YIELD-ACTUAL> 8.05
<LOANS-NON> 3,735
<LOANS-PAST> 1,611
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,943
<CHARGE-OFFS> 545
<RECOVERIES> 95
<ALLOWANCE-CLOSE> 13,223
<ALLOWANCE-DOMESTIC> 7,853
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,370
</TABLE>
