<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 September 30, 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
November 10, 1995 was:
Common Stock, $5.00 par value - 5,167,185 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:
September 30, 1995, December 31, 1994 and
September 30, 1994..................................... 4
Consolidated Statements of Income:
Three months ended September 30, 1995
and three months ended September 30, 1994.............. 5
Consolidated Statements of Income:
Nine months ended September 30, 1995
and nine months ended September 30, 1994............... 6
Consolidated Statements of Changes
in Shareholders' Equity:
Nine months ended September 30, 1995
and nine months ended September 30, 1994............... 7
Consolidated Statements of Cash Flows:
Nine months ended September 30, 1995
and nine months ended September 30, 1994............... 8
Notes to Consolidated Financial Statements.............. 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 12
Part II. Other Information:
Item 1. - Item 6. ........................................... 26
Signature.................................................... 27
</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 September 30, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the three-month and nine-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
October 17, 1995
- ---------------
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
- --------------- 3
<PAGE> 4
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS:
- -------
Cash and due from banks $ 34,564 $ 42,903 $ 40,797
------------- ------------ -------------
Interest-bearing deposits with other banks 661 872 679
------------- ------------ -------------
Securities available for sale
(amortized cost of $145,351, $71,041 and $82,507) 146,978 67,670 80,475
------------- ------------ -------------
Investment securities (market value of $126,056, $128,712 and $131,864) 125,846 134,356 135,357
------------- ------------ -------------
Mortgage-backed securities (market value of $190,323, $188,258
and $198,518) 192,754 202,041 208,349
------------- ------------ -------------
Loans available for sale (market value of $116,092) 115,421 - -
Loans (net of unearned income of $40,576, $34,920 and $33,790) 1,012,159 978,562 933,291
Less: Allowance for possible loan losses 13,855 12,943 12,638
------------- ------------ -------------
Net loans 1,113,725 965,619 920,653
------------- ------------ -------------
Premises and equipment 18,394 17,900 18,165
------------- ------------ -------------
Other assets 23,246 23,212 16,257
------------- ------------ -------------
Total Assets $ 1,656,168 $ 1,454,573 $ 1,420,732
============= ============ =============
LIABILITIES:
- ------------
Deposits:
Noninterest-bearing demand $ 99,827 $ 97,242 $ 98,754
Interest-bearing demand 98,344 101,659 104,422
Savings 273,476 281,953 288,828
Time 706,063 548,555 526,694
------------- ------------ -------------
Total deposits 1,177,710 1,029,409 1,018,698
------------- ------------ -------------
Borrowed funds:
Federal funds purchased and other short-term borrowings 77,632 34,847 29,356
Repurchase agreements and secured lines of credit 129,486 128,461 120,343
Advances from the Federal Home Loan Bank 119,191 128,121 121,550
------------- ------------ -------------
Total borrowed funds 326,309 291,429 271,249
------------- ------------ -------------
Long-term debt 8,674 10,318 10,859
------------- ------------ -------------
Other liabilities 26,412 17,338 15,369
------------- ------------ -------------
Total Liabilities 1,539,105 1,348,494 1,316,175
------------- ------------ -------------
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, 7,803,278, 5,180,172 and 5,174,430 shares
issued 39,016 25,901 25,872
Additional paid-in capital 21,547 34,431 34,457
Retained earnings 56,454 47,961 45,571
Unrealized appreciation (depreciation) in securities available for sale 1,057 (2,191) (1,320)
Treasury stock, 52,500 shares at cost (1,011) - -
Unallocated common stock held by ESOP (at cost) - (23) (23)
------------- ------------ -------------
Total Shareholders' Equity 117,063 106,079 104,557
------------- ------------ -------------
Total Liabilities and Shareholders' Equity $ 1,656,168 $ 1,454,573 $ 1,420,732
============= ============ =============
</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
-----------------------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 23,746 $ 18,864
Interest on deposits with other banks 11 6
Interest on securities available for sale 2,543 1,388
Interest and dividends on investment securities:
Taxable interest 750 842
Tax-exempt interest 1,004 1,046
Interest on mortgage-backed securities 2,996 3,003
Interest on federal funds sold 3 10
------------- -------------
Total Interest Income 31,053 25,159
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 464 513
Savings 1,745 1,836
Time 10,265 6,220
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 576 222
Repurchase agreements and secured lines of credit 2,034 1,438
Advances from the Federal Home Loan Bank 1,830 1,476
Interest on long-term debt 183 190
------------- -------------
Total Interest Expense 17,097 11,895
------------- -------------
NET INTEREST INCOME 13,956 13,264
Provision for possible loan losses 956 1,000
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 13,000 12,264
------------- -------------
OTHER INCOME:
- -------------
Trust fees 479 441
Service charges on deposit accounts 856 678
Credit card program fees 386 356
Net securities gains 479 67
Other operating income 807 388
------------- -------------
Total Other Income 3,007 1,930
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 3,459 3,192
Employee benefits 1,022 796
Net occupancy expense 805 659
Equipment rentals, depreciation and maintenance 561 544
Federal deposit insurance 259 562
Outside examination, legal fees and consulting 485 338
Advertising and promotion 384 320
Supplies 384 240
Outside data processing services 374 307
Other operating expense 1,946 1,559
------------- -------------
Total Other Expenses 9,679 8,517
------------- -------------
INCOME BEFORE INCOME TAXES 6,328 5,677
Income Taxes 1,948 1,707
------------- -------------
NET INCOME $ 4,380 $ 3,970
============= =============
EARNINGS PER SHARE $ 0.56 $ 0.51
============= =============
DIVIDENDS PER SHARE $ 0.17 $ 0.16
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING AND COMMON SHARE EQUIVALENTS 7,838 7,858
============= =============
</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 INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 67,676 $ 54,144
Interest on deposits with other banks 32 13
Interest on securities available for sale 7,314 5,730
Interest and dividends on investment securities:
Taxable interest 2,376 2,093
Tax-exempt interest 3,015 3,043
Interest on mortgage-backed securities 8,953 8,151
Interest on federal funds sold 117 16
------------- -------------
Total Interest Income 89,483 73,190
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 1,473 1,480
Savings 5,798 5,215
Time 28,291 17,624
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 1,048 590
Repurchase agreements and secured lines of credit 5,671 3,802
Advances from the Federal Home Loan Bank 5,583 4,413
Interest on long-term debt 572 528
------------- -------------
Total Interest Expense 48,436 33,652
------------- -------------
NET INTEREST INCOME 41,047 39,538
Provision for possible loan losses 2,626 2,737
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 38,421 36,801
------------- -------------
OTHER INCOME:
- -------------
Trust fees 1,489 1,522
Service charges on deposit accounts 2,410 1,997
Credit card program fees 1,029 910
Net securities gains 715 1,343
Other operating income 2,369 1,044
------------- -------------
Total Other Income 8,012 6,816
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 10,055 9,503
Employee benefits 3,079 2,927
Net occupancy expense 2,171 2,015
Equipment rentals, depreciation and maintenance 1,704 1,666
Federal deposit insurance 1,487 1,662
Outside examination, legal fees and consulting 1,063 956
Advertising and promotion 1,200 998
Supplies 1,169 1,026
Outside data processing services 1,029 912
Other operating expense 5,476 4,870
------------- -------------
Total Other Expenses 28,433 26,535
------------- -------------
INCOME BEFORE INCOME TAXES 18,000 17,082
Income Taxes 5,461 5,258
------------- -------------
NET INCOME $ 12,539 $ 11,824
============= =============
EARNINGS PER SHARE $ 1.60 $ 1.51
============= =============
DIVIDENDS PER SHARE $ 0.52 $ 0.45
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING AND COMMON SHARE EQUIVALENTS 7,849 7,854
============= =============
</TABLE>
See Notes To Consolidated Financial Statements.
6
<PAGE> 7
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 Nine Months Ended September 30, 1995
-------------------------------------------------------------------------------
Unrealized
Appreciation Common Stock
(Depreciation) Held by ESOP
Common Stock in Securities (at Cost)
--------------- Retained Available Treasury ---------------
Shares Amount Surplus Earnings for Sale Stock Shares Amount
------------------------------------------------------------------------------
<S> <C> <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 - - - 12,539 - - - -
Cash dividends paid ($0.52 per share) - - - (4,046) - - - -
Purchased stock allocated to ESOP
participants - - - - - - 1 23
Exercise of options, net of shares redeemed 15 75 (54) - - - - -
Common stock issued for dividend reinvestment 7 35 175 - - - - -
Treasury stock purchased - - - - - (1,011) - -
Net change in unrealized appreciation
(depreciation) in securities available
for sale - - - - 3,248 - - -
Fifty percent stock dividend declared
October 17, 1995 2,601 13,005 (13,005) - - - - -
------------------------------------------------------------------------------
Balance - September 30, 1995 7,803 $39,016 $21,547 $56,454 $1,057 $(1,011) - $-
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 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 - - - 11,824 - - -
Cash dividends paid ($0.45 per share) - - - (3,516) - - -
Purchased stock allocated to ESOP
participants - - - - - 6 86
Exercise of options, net of shares redeemed 10 54 29 - - - -
Common stock issued for dividend reinvestment 11 55 270 - - - -
Net change in unrealized appreciation
(depreciation) in securities available
for sale - - - - (4,245) - -
------------------------------------------------------------------------------
Balance - September 30, 1994 5,174 $25,872 $34,457 $45,571 $(1,320) (1) $(23)
=============================================================================
</TABLE>
See Notes To Consolidated Financial Statements.
7
<PAGE> 8
Part I. Item 1. Financial Information
<TABLE>
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months Ended
-----------------------------
September 30, September 30,
1995 1994
------------- -------------
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income $ 12,539 $ 11,824
------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,674 1,640
Amortization and accretion (15) 342
Provision for possible loan losses 2,626 2,737
Gain on sale of securities (715) (1,343)
Gain on sale of real estate owned (578) (4)
Loss on sale of premises and equipment 40 33
Gain on sale of loans (423) (5)
Provision for deferred tax benefit (48) (538)
(Increase) decrease in interest receivable (1,295) 129
Increase in interest payable 4,258 1,632
Other - net (967) (482)
------------- -------------
Total adjustments 4,557 4,141
------------- -------------
Net cash provided by operating activities 17,096 15,965
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sales of securities available for sale 56,695 117,638
Proceeds from maturity or paydown of securities available for sale 10,696 30,749
Purchase of securities available for sale (129,760) (11,772)
Proceeds from maturity or paydown of investment securities 32,715 33,107
Purchase of investment securities (15,085) (84,169)
Purchase of loans (30,761) (19,050)
Proceeds from sale of loans 28,056 6,366
Net increase in loans (146,937) (106,927)
Decrease in deposits with other banks 211 132
Purchase of premises and equipment (1,043) (1,535)
Proceeds from sale of premises and equipment 99 134
Proceeds from sale of other real estate owned 1,555 1,177
Cash received in branch purchases 88,021 13,968
------------- -------------
Net cash used in by investing activities (105,538) (20,182)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Net increase in deposits 51,671 43,307
Net increase (decrease) in federal funds purchased and other
short-term borrowings 42,785 (5,944)
Net increase (decrease) in repurchase agreements and secured lines of credit 1,025 (26,345)
Net (decrease) increase in advances from the Federal Home Loan Bank (8,930) 600
Payments on long-term debt (1,645) (538)
Proceeds from exercise of stock options 21 83
Proceeds from common stock issued for dividend reinvestment plan 210 325
Stock allocated to ESOP participants 23 86
Treasury stock purchased (1,011) -
Dividends paid on common stock (4,046) (3,516)
------------- -------------
Net cash provided by financing activities 80,103 8,058
------------- -------------
NET (DECREASE) INCREASE IN CASH AND DUE FROM BANKS (8,339) 3,841
CASH AND DUE FROM BANKS - Beginning of year 42,903 36,956
------------- -------------
CASH AND DUE FROM BANKS - End of period $ 34,564 $ 40,797
============= =============
</TABLE>
See Notes To Consolidated Financial Statements.
8
<PAGE> 9
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 Nine Months Ended
-----------------------------
September 30, September 30,
1995 1994
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 44,178 $ 32,020
============= =============
Income taxes $ 5,510 $ 4,672
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Securities purchased settling after September 30 $ 5,861 $ -
============= =============
Transfers to other real estate owned $ 254 $ 1,050
============= =============
Net change in unrealized appreciation (depreciation) in securities
available for sale, net of income tax effects $ 3,248 $ (4,245)
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Deposits assumed in branch acquisitions $ 96,681 $ 14,426
============= =============
See Notes To Consolidated Financial Statements.
</TABLE>
9
<PAGE> 10
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 1995 and September
30, 1994, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the three and nine month periods
ended September 30, 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. All per share
amounts have been restated for the effect of a three-for-two stock split
effected in the form of a 50% stock dividend declared on October 17, 1995
with a record date of October 30, 1995, to be paid on November 17, 1995.
3. Recent Accounting Pronouncements:
During the second quarter of 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" and SFAS No. 122 "Accounting for Mortgage
Servicing Rights". These Statements are effective for fiscal years beginning
after December 31, 1995 with earlier adoption encouraged. First Western will
adopt these statements on January 1, 1996 and is currently reviewing the
effects
10
<PAGE> 11
of adopting these statements. The effects of adopting these statements on
First Western's financial statements is not expected to be material.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires adoption no later than fiscal years beginning
after December 15, 1995. The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Pursuant to the
new standard, companies are encouraged, but not required, to adopt the fair
value method of accounting for employee stock-based transactions. Companies
are also permitted to continue to account for such transactions under
Accounting Principles Board Opinion No. 25, but would be required to disclose
in a note to the financial statements pro forma net income and, if presented,
earnings per share as if the company had applied the new method of
accounting. First Western has not yet determined if it will elect the fair
value method of accounting for stock options or elect to disclose such
information only in the notes to financial statements.
11
<PAGE> 12
Part 1. Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of operations for the three and nine months ended September 30, 1995
compared with the three and nine months ended September 30, 1994:
For the nine months ended September 30, 1995, First Western's net income
was $12.5 million, 6.0% greater than net income of $11.8 million for the nine
months ended September 30, 1994. First Western's earnings per share were
$1.60 for the nine months ended September 30, 1995, increasing 6.0% from
$1.51 for the nine months ended September 30, 1994. For the first nine
months of 1995, earnings increased from the prior year due to increased net
interest income after provision for loan losses and increased other income,
which was offset partially by increased operating expenses. Earnings for the
nine months ended September 30, 1995 and 1994, exclusive of net gains on
sales of securities and sales of loans and other real estate owned, would
have been approximately $1.46 per share and $1.39 per share, respectively.
First Western's return on average assets was 1.06% for the nine months ended
September 30, 1995, compared with the 1.15% for the first nine 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
nine months of 1995 compared with the prior year.
For the third quarter of 1995, First Western's net income was $4.4
million or $0.56 per share, compared with $4.0 million or $0.51 per share for
the third quarter of 1994. First Western's net income for the third quarter
of 1995 increased from the third quarter of 1994 due to increased other
income and net interest income which was offset partially by higher operating
expenses. Most of the increase in net interest income and other expenses was
due to the acquisition of five branch offices during the first quarter of
1995. Exclusive of the net gains on the sales of securities available for
sale and sales of loans and other real estate owned, First Western's net
income for the third quarter of 1995 would have been approximately $0.49 per
share compared with $0.50 for the third quarter of 1994.
12
<PAGE> 13
Net Interest Income:
First Western's net interest income was $41.0 million for the nine
months ended September 30, 1995, increasing $1.5 million or 3.8% from $39.5
million for the first nine months of 1994. The increase in net interest
income was generated by a $186.1 million or 14.0% increase in average earning
assets which was partially offset by a decline in First Western's net
interest margin from 4.17% for the first nine months of 1994 to 3.79% for the
first nine months of 1995. The increase in average earning assets was due to
a $165.8 million or 19.0% increase in average loans outstanding. Average
loans outstanding increased due to strong loan growth experienced throughout
1994 and during the first nine months of 1995. Most of the growth in average
earning assets was funded by a $162.7 million or 16.5% 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 a more
aggressive pricing strategy used by First Western primarily during early
1995.
Net interest income for the third quarter of 1995 was $14.0 million,
increasing $692,000 or 5.2% from $13.3 million for the third quarter of 1994.
This increase in net interest income was due to a 15.7% increase in average
earning assets, partially offset by a decline in the net interest margin.
First Western's net interest margin or net interest income expressed as
a percentage of average earning assets was 3.79% for the first nine months of
1995 compared with 4.17% for the first nine 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 late
1994 and early 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
68.6% of average earning assets for the first nine months of 1995 compared
with 65.7% for the first nine months of 1994. First Western's yield on
average earning assets was 8.07% for the first nine months of 1995 compared
with 7.55% for the first nine months of 1994, an increase of 52 basis points,
while the cost of funds increased 95 basis points from 3.85% to 4.80%.
First Western's net interest margin for the third quarter of 1995 was
3.71%, compared with 4.09% for the third quarter of 1994 and 3.73% for the
second quarter of 1995. The decline in the margin was due primarily to an
increase in the cost of funds triggered by rising short-term interest rates
during late 1994 and early 1995. The increase in interest rates had the
greatest impact on First Western's borrowed funds and certificates of
deposit. First Western's cost of short-term borrowings, repurchase
agreements and Federal Home Loan Bank advances increased 102 basis points to
an average cost of 5.83% for the third quarter of 1995, compared with 4.81%
for the third quarter of 1994. Similarly, the average cost of First
Western's
13
<PAGE> 14
certificates of deposit increased 98 basis points to 5.80% for the third
quarter of 1995, compared with 4.82% for the third quarter of 1994. Borrowed
funds and certificates of deposit constituted 70.1% of First Western's total
interest-bearing liabilities for the first nine months of 1995.
First Western monitors its exposure to interest rate changes by
performing simulation modeling which attempts to quantify the impact of
various interest rate scenarios on First Western's balance sheet and income
statement over a 24 month period. First Western's recent simulation modeling
indicates that First Western's net interest income will decline approximately
four percent over a 24 month period in a falling interest rate environment.
First Western's recent simulation modeling also indicates that a 200 basis
point rising interest rate environment will have a minimal impact on First
Western's net interest income over a 24 month period. The results of First
Western's recent simulation modeling are within First Western's
asset/liability strategy and board approved limits.
14
<PAGE> 15
Provision for Possible Loan Losses:
First Western's provision for possible loan losses was $2.6 million for
the first nine months of 1995, down slightly from $2.7 million for the first
nine months of 1994. Net charge-offs for the first nine months of 1995 were
$1.7 million compared with $1.2 million for the first nine months of 1994.
First Western's net charge-offs for the first nine months of 1995 are higher
than the prior year due to increased consumer loan charge-offs and also due
to a decrease in recoveries on commercial loans. Installment loan charge-
offs increased $362,000 or 26.1% from $1.4 million for the first nine months
of 1994 to $1.8 million for the first nine months of 1995 due primarily to a
22.7% increase in average consumer loans outstanding during this period and
also due to an increase in the percentage of consumer loans delinquent more
than 30 days. First Western's net charge-offs for the third quarter of 1995
were $692,000, compared with $414,000 for the third quarter of 1994. First
Western's net charge-offs by loan type are as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Commercial, financial and agricultural loans.......................... $ (30) $ (275)
Real estate construction loans........................................ - -
Real estate mortgage loans............................................ (7) 87
Installment loans..................................................... 1,751 1,389
---------- ----------
Total net charge-offs.............................................. $ 1,714 $ 1,201
========== ==========
Net charge-offs as a percentage of
average loans...................................................... 0.22% 0.18%
========== ==========
</TABLE>
Other Income and Other Expenses:
Other income increased $1.2 million or 17.5% from $6.8 million for the
first nine months of 1994 to $8.0 million for the first nine months of 1995
due primarily to gains on sales of other real estate owned and loans and
increased service charges on deposits, with these increases in income offset
partially by a decrease in net gains from sales of securities available for
sale. Net gains from sales of securities available for sale and gains
realized on the sale of other real estate owned were the primary contributors
to the increase in other income from $1.9 million for the third quarter of
1994 to $3.0 million for the third quarter of 1995.
Service charges on deposit accounts increased $413,000 or 20.7%
15
<PAGE> 16
for the first nine months of 1995 compared with the prior year. The increase
in service charges on deposit accounts reflected an increased service charge
schedule implemented by First Western during the first quarter of 1995 and
also the addition of approximately $97 million of deposits acquired with the
five branch offices purchased by First Western during the first quarter of
1995. The new service charge schedule and the acquired deposits were also
primarily responsible for increasing service charges on deposits $178,000 or
26.3% for the third quarter of 1995 compared with the third quarter of 1994.
First Western's credit card program fees increased $119,000 or 13.1% from
$910,000 for the first nine months of 1994 to $1.0 million for the first nine
months of 1995 reflecting the growth of First Western's credit card program.
Other operating income increased $1.3 million or 126.9% from $1.1
million for the first nine months of 1994 to $2.4 million for the first nine
months of 1995. For the third quarter of 1995, other income was $807,000,
increasing $419,000 or 108.0% from $388,000 for the third quarter of 1994.
Most of these increases in other operating income were due to gains realized
on the sales of loans and other real estate owned. Sales of other real
estate owned generated gains of $578,000 for the first nine months of 1995
with $245,000 of these gains realized during the third quarter of 1995.
During the first nine months of 1995, gains of $423,000 were realized as a
result of First Western selling its entire portfolio of student loans and
also from the sale of certain long-term, residential mortgage loans. First
Western realized gains on the sale of loans of $59,000 during the third
quarter of 1995. Other operating income also increased from the prior year
due to increased commissions on the sales of mutual funds and annuities,
increased Automated Teller Machine card fees and higher penalties on the
early withdrawal of certificates of deposit.
Total other expenses increased $1.9 million or 7.2% from $26.5 million
for the first nine months of 1994 to $28.4 million for the first nine months
of 1995. Total other expenses increased $1.2 million or 13.6% for the third
quarter of 1995 compared with the third quarter of 1994. The five branch
offices acquired by First Western during the first quarter of 1995 resulted
in approximately two-thirds of the increase in other expenses.
First Western's salary and employee benefits expense increased a
combined $704,000 or 5.7% for the first nine months of 1995 compared with the
first nine months of 1994 and $493,000 or 12.4% for the third quarter of 1995
compared with the prior year. Approximately one-half of the increase in
salaries and employee benefits was attributable to the additional employees
resulting from the five branch offices acquired. Salaries and benefits
expense also increased 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.
Occupancy and equipment expense increased a combined $194,000 or
16
<PAGE> 17
5.3% from the first nine months of 1994 to the first nine months of 1995. The
five branch offices acquired during the first quarter of 1995 resulted in
most of the increase in occupancy and equipment expense. During the third
quarter of 1995, First Western recorded a $100,000 charge as occupancy
expense to accrue for the estimated costs to abandon two leased branch
offices as these offices will soon be vacated with customer accounts being
transferred to newly constructed or renovated facilities nearby.
Federal deposit insurance expense decreased $175,000 or 10.5% from $1.7
million for the first nine months of 1994 to $1.5 million for the first nine
months of 1995. This decrease was attributable to a refund received from the
Federal Deposit Insurance Corporation's ("FDIC") Bank Insurance Fund ("BIF")
for the deposits insured by the BIF, with the impact of this refund partially
offset by an increase in First Western's insured deposits. The total refund
received by First Western from the BIF in September 1995 was $410,000 which
represents a refund of the overpayment of deposit insurance resulting from a
decrease in BIF insurance rates that was retroactive to June 1995. The
decrease in BIF insurance rates will also result in a reduction in First
Western's FDIC insurance expense for deposits insured by the BIF going
forward. Approximately 55% of First Western's deposits are insured by the
BIF. 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 ("SAIF") which insures the remaining
45% of First Western's deposits. There are currently several proposals in
Congress to change the insurance rates paid for deposits insured by the SAIF.
One prominent proposal calls for a special assessment on institutions with
funds insured by the SAIF. If this proposal for a special assessment on SAIF
insured deposits is adopted it could result in a one-time, pre-tax charge to
First Western of approximately $4.2 million at the currently proposed special
assessment rates of $0.85 per $100 of deposits insured by the SAIF.
First Western's advertising and promotion expense increased $202,000 or
20.2% from $998,000 for the first nine months of 1994 to $1.2 million for the
first nine 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 $606,000 or 12.4% from $4.9 million
for the first nine months of 1994 to $5.5 million for the first nine months
of 1995. Other expenses increased $387,000 or 24.8% for the third quarter of
1995 compared with the third quarter of 1994. The amortization of the
intangible assets due to the recent branch acquisitions added $480,000 and
$221,000 to the increase in other expenses for the nine and three month
periods, respectively, ended September 30, 1995 compared with the prior year.
17
<PAGE> 18
Income Taxes:
First Western's income tax expense was $5.5 million for the first nine
months of 1995 compared with $5.3 million for the first nine months of 1994.
This increase in income tax expense was a result of an increase in First
Western's pre-tax income. First Western's effective tax rate for the first
nine months of 1995 was 30.3%, comparable to 30.8% for the first nine months
of 1994.
As discussed in the footnotes to First Western's 1994 Annual Report,
should First Western convert its thrift subsidiary, First Western Bank ,
Federal Savings Bank, from a thrift charter to a bank charter, First Western
would, under present law, incur a liability for income taxes of $2.2 million
not previously recorded. In addition to the SAIF one-time payment proposal
noted above, Congress is currently proposing the elimination of the portion
of most thrifts' bad debt reserve liability related to such build-up in such
tax reserves prior to 1988. Should such proposals become law, this potential
liability related to thrift charter conversions would be removed, eliminating
this as an obstacle to changing the thrift charter or merging the thrift
subsidiary with the bank subsidiary under last year's interstate banking
legislation.
18
<PAGE> 19
Financial Condition as of September 30, 1995 as compared with December 31,
1994 and September 30, 1994.
As of September 30, 1995, First Western's total assets were $1.656
billion compared with $1.455 billion at December 31, 1994 and $1.421 billion
at September 30, 1994. Most of the increase from September 30, 1994 and
December 31, 1994 was due to the growth of the loan portfolio funded by an
increase in deposits from five recently acquired branch offices and also due
to a more aggressive deposit pricing strategy employed by First Western
during the first quarter of 1995. Total average assets for the first nine
months of 1995 were $1.575 billion compared with $1.380 billion for the first
nine months of 1994, an increase of 14.2%.
19
<PAGE> 20
Loan Portfolio:
Net loans increased $149.0 million or 15.2% during the first nine months
of 1995. Real estate-mortgage loans increased $110.5 million during the
first nine months of 1995 with most of this increase in residential mortgage
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 $18.5
million during the first nine months of 1995, which is net of the sale of
$10.8 million of student loans as First Western does not intend to hold
student loans in the future. During the last twelve months, most of First
Western's loan growth has been in mortgages and installment loans.
Installment loans increased as a result of First Western expanding its
network of indirect auto lending into new market areas. At September 30,
1995, First Western classified $115.4 million of the residential mortgage
loan portfolio as loans available for sale. The loans that are classified as
available for sale at September 30, 1995 consisted of $14.9 million of recent
fixed-rate loan originations that will be sold directly to the Federal Home
Loan Mortgage Corporation and $100.5 million of seasoned loans which First
Western will securitize with the intention of selling the resulting
securities during the fourth quarter of 1995. First Western will also
securitize an additional $14.6 million of seasoned loans, not currently
classified as available for sale, with no immediate intention of selling the
resulting securities. The following table shows the composition of First
Western's loan portfolio at September 30, 1995, December 31, 1994 and
September 30, 1994:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994 September 30, 1994
------------------------ ---------------------- ------------------------
Amount Percent Amount Percent Amount Percent
------------ -------- ----------- -------- ----------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural:
Automobile floorplan loans....... $ 24,529 2.2% $ 25,229 2.6% $ 17,778 1.9%
Loans to municipalities.......... 12,203 1.1 10,307 1.1 10,780 1.2
Other commercial loans........... 78,006 6.9 63,662 6.5 56,258 6.0
------------ -------- ----------- -------- ----------- --------
Subtotal....................... 114,738 10.2 99,198 10.2 84,816 9.1
------------ -------- ----------- -------- ----------- --------
Real estate-construction............. 23,171 2.1 18,721 1.9 17,063 1.8
------------ -------- ----------- -------- ----------- --------
Real estate-mortgage:
1-4 Family residential............. 463,905 41.1 370,582 37.8 359,893 38.6
Multi-family residential........... 36,034 3.2 30,923 3.2 31,622 3.4
Home equity........................ 39,544 3.5 37,129 3.8 36,793 3.9
Commercial and other............... 136,833 12.1 127,176 13.0 120,214 12.9
------------ -------- ----------- -------- ----------- --------
Subtotal......................... 676,316 59.9 565,810 57.8 548,522 58.8
------------ -------- ----------- -------- ----------- --------
Installment:
Credit cards....................... 39,167 3.5 39,412 4.0 34,457 3.7
Installment and other.............. 274,188 24.3 255,421 26.1 248,433 26.6
------------ -------- ----------- -------- ----------- --------
Subtotal......................... 313,355 27.8 294,833 30.1 282,890 30.3
------------ -------- ----------- -------- ----------- --------
Total............................ $ 1,127,580 100.0% $ 978,562 100.0% $ 933,291 100.0%
============ ======== =========== ======== =========== ========
</TABLE>
20
<PAGE> 21
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.
First Western's delinquent loans, nonaccrual loans and nonperforming
assets consisted of the following at September 30, 1995, December 31, 1994
and September 30, 1994:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------- ------------ -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Loans delinquent and still accruing interest:
Loans past due 30 to 89 days ........................... $ 8,323 $ 7,370 $ 5,272
Loans past due 90 days or more ......................... 1,973 1,870 1,745
------------- ------------ -------------
Total loan delinquencies ............................. $ 10,296 $ 9,240 $ 7,017
============= ============ =============
Nonaccrual loans ......................................... $ 5,108 $ 2,875 $ 3,018
Other real estate owned .................................. 97 1,185 1,572
------------- ------------ -------------
Total nonperforming assets ............................... $ 5,205 $ 4,060 $ 4,590
============= ============ =============
Total nonperforming assets and loans
past due 90 days or more ............................... $ 7,178 $ 5,930 $ 6,335
============= ============ =============
Nonaccrual loans to total loans .......................... 0.45 % 0.29 % 0.32 %
Nonperforming assets to total loans
and other real estate owned ............................ 0.46 % 0.41 % 0.49 %
Nonperforming assets to total assets ..................... 0.31 % 0.28 % 0.32 %
Nonperforming assets and loans past due
90 days or more to total assets ........................ 0.43 % 0.41 % 0.45 %
Nonaccrual loans and loans past due
90 days or more to total loans ......................... 0.63 % 0.48 % 0.51 %
Allowance for possible loan losses
to nonaccrual loans .................................... 271.23 % 450.16 % 418.75 %
Allowance for possible loan losses
to loans past due 90 days or more
and nonaccrual loans ................................... 195.66 % 272.78 % 265.34 %
Allowance for possible loan losses to
total loans ............................................ 1.23 % 1.32 % 1.35 %
</TABLE>
21
<PAGE> 22
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 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
$13.9 million at September 30, 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 September 30, 1995.
Investment Securities, Mortgage-Backed Securities, and Securities Available
for Sale:
Investment securities and mortgage-backed securities decreased a
combined $17.8 million for the first nine months of 1995 with this decrease
due to maturities and paydowns of securities offset partially by some
securities purchases. The market value of First Western's investment
securities and mortgage-backed securities held to maturity was a combined
$316.4 million, $2.2 million or 0.7% below the amortized cost of $318.6
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 $79.3 million or 117.2% during
the first nine months of 1995 as First Western purchased securities with the
funds provided by the branch acquisitions. Securities available for sale
increased $66.5 million from $80.5 million at September 30, 1994 to $147.0
million at September 30, 1995 with most of this increase due to the purchase
of securities using the funds provided by the acquisition of the branch
offices during the first quarter of 1995. At September 30, 1995, First
Western had net unrealized appreciation on securities available for sale of
$1.6 million compared with unrealized depreciation of $3.4 million at
December 31, 1994 and $2.0 million at September 30, 1995 primarily as a
result of a decline in intermediate and long-term interest rates during the
second and third quarters of 1995. First Western sold
22
<PAGE> 23
securities available for sale during the second and third quarters of 1995 in
order to provide funds for loan growth.
Deposits:
Total deposits increased $148.3 million or 14.4% from $1.029 billion at
December 31, 1994 to $1.178 billion at September 30, 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 during the first quarter of 1995
in order to increase deposits. First Western continues to experience a
shifting in deposits from demand and savings accounts to time accounts due to
the increased rates paid on time deposits. First Western's deposits
increased $159.0 million from September 30, 1994 to September 30, 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 increased $34.9 million during the first
nine months of 1995 from $291.4 million at December 31, 1994 to $326.3
million at September 30, 1995. This increase in borrowed funds, primarily
short-term borrowings, was the result of increased loan demand, particularly
during the second and third quarters of 1995. Total borrowed funds increased
$55.1 million or 20.3% from September 30, 1994 to September 30, 1995 as these
additional borrowings were necessary to fund the growth of the loan
portfolio.
Shareholders' Equity:
Shareholders' equity increased $11.0 million during the first nine
months of 1995 primarily as a result of the retention of earnings of $8.5
million, net of cash dividends paid to shareholders. Also increasing
shareholders' equity was a $3.2 million increase in the market value of
securities available for sale, net of income tax effects. On October 17,
1995, First Western's Board of Directors declared a three-for-two stock split
effected in the form of a 50% stock dividend with a record date of October
30, 1995, to be paid November 17, 1995. During the third quarter of 1995,
First Western repurchased 52,500 shares of common stock, restated for the
three-for-two stock split, at a cost of $1.0 million in accordance with a
common stock repurchase program approved by First Western's Board of
Directors in July 1995. At their meeting on October 17, 1995, First
Western's Board of Directors also authorized the repurchase of up to $2.0
million of First Western common stock for allocation to employees through the
current Employee Stock Ownership Plan using external
23
<PAGE> 24
financing sources.
First Western's capital ratios declined from December 31, 1994 to
September 30, 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 September 30, 1995
and December 31, 1994:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Dollars in Thousands)
<S> <C> <C>
Tier I:
Common shareholders' equity .............................. $ 117,063 $ 106,079
Non-exempt intangible assets ............................. (7,602) (504)
Unrealized (appreciation) depreciation in securities
available for sale ..................................... (1,057) 2,191
------------- ------------
Total Tier I ......................................... 108,404 107,766
------------- ------------
Tier II:
Qualifying long term debt ................................ - 301
Qualifying allowance for possible loan losses ............ 13,094 11,528
------------- ------------
Total Tier II ........................................ 13,094 11,829
------------- ------------
Total capital .............................................. $ 121,498 $ 119,595
============= ============
Risk weighted assets ....................................... $ 1,039,124 $ 922,235
============= ============
Tier I capital ratio ....................................... 10.43% 11.69%
============= ============
Required Tier I capital ratio .............................. 4.00% 4.00%
============= ============
Total capital ratio ........................................ 11.69% 12.97%
============= ============
Required total capital ratio ............................... 8.00% 8.00%
============= ============
Tier I leverage ratio ...................................... 6.70% 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>
24
<PAGE> 25
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 $35.2 million at September 30, 1995 as
compared with $43.8 million at December 31, 1994 and $41.5 million at
September 30, 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 $13.8 million of unused
overnight credit lines available at September 30, 1995.
First Western's operating activities provided cash flows of $17.1
million during the first nine months of 1995 compared with $16.0 million
during the first nine months of 1994. The primary source of operating cash
flows was net income combined with noncash expenses such as the provision for
possible loan losses and depreciation along with increased accrued interest
payable.
Investing activities used cash flows of $105.5 million during the first
nine months of 1995 compared with using cash flows of $20.2 million for the
first nine 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 initially used to
purchase securities available for sale. The growth of the portfolio of
securities available for sale used net cash flows of $62.4 million during the
first nine months of 1995. The growth of the loan portfolio during the first
nine months of 1995 used net cash flows of $149.6 million. During the first
nine months of 1994, sales and maturities of securities available for sale
provided cash flows of $136.6 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 $80.1 million in the first
nine months of 1995 with an increase in deposits providing $51.7 million of
these cash flows and increased borrowings providing $34.9 million. During
the first nine months of 1994, financing activities provided cash flows of
$8.1 million primarily as a result of an increase in deposits of $43.3
million, with some of these cash flows used to decrease repurchase agreements
and federal funds purchased and other short-term borrowings.
25
<PAGE> 26
Part II. Other Information
Items 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
15.1 Letter re: Unaudited Interim Financial Information.
27.1 Financial Data Schedule.
b. Reports on Form 8-K:
Registrant filed a Current Report on Form 8-K under Item 5,
dated July 18, 1995, in respect of the Board of Director's of
Registrant authorizing a common stock repurchase program.
26
<PAGE> 27
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)
November 10, 1995 /s/ Robert H. Young
Robert H. Young
Senior Vice President-Finance,
Secretary and Treasurer
(Principal Financial Officer)
27
<PAGE> 28
FIRST WESTERN BANCORP, INC.
EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
EXHIBIT INDEX
Exhibit Method of
Number Description Filing
15.1 Letter re: Unaudited Interim Financial Filed
Information herewith
27.1 Financial Data Schedule Filed
herewith
<PAGE> 1
DELOITTE & Exhibit 15.1
TOUCHE LLP
- ----------
- -----------------------------------------------------------------
2500 One PPG Place Telephone: (412) 338-7200
Pittsburgh, Pennsylvania 15222-5401 Facsimile: (412) 338-7380
November 10, 1995
To the Shareholders and
Board of Directors of
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 September 30, 1995 and 1994, as indicated in our report dated
October 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 September 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 34,564
<INT-BEARING-DEPOSITS> 661
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 146,978
<INVESTMENTS-CARRYING> 318,600
<INVESTMENTS-MARKET> 316,379
<LOANS> 1,127,580
<ALLOWANCE> 13,855
<TOTAL-ASSETS> 1,656,168
<DEPOSITS> 1,177,710
<SHORT-TERM> 326,309
<LIABILITIES-OTHER> 26,412
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<COMMON> 39,016
0
0
<OTHER-SE> 78,047
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<INTEREST-LOAN> 67,676
<INTEREST-INVEST> 21,658
<INTEREST-OTHER> 149
<INTEREST-TOTAL> 89,483
<INTEREST-DEPOSIT> 35,562
<INTEREST-EXPENSE> 48,436
<INTEREST-INCOME-NET> 41,047
<LOAN-LOSSES> 2,626
<SECURITIES-GAINS> 715
<EXPENSE-OTHER> 28,433
<INCOME-PRETAX> 18,000
<INCOME-PRE-EXTRAORDINARY> 12,539
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,539
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
<YIELD-ACTUAL> 8.07
<LOANS-NON> 5,108
<LOANS-PAST> 1,973
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 12,943
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<ALLOWANCE-CLOSE> 13,855
<ALLOWANCE-DOMESTIC> 8,904
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,951
</TABLE>
