<PAGE>
<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 June 30, 1998
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)
(724) 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
August 13, 1998 was:
Common Stock, $5.00 par value - 11,135,291 shares outstanding
<PAGE>
<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:
June 30, 1998, December 31, 1997 and
June 30, 1997............................................4
Consolidated Statements of Income:
Three months ended June 30, 1998 and 1997................5
Consolidated Statements of Income:
Six months ended June 30, 1998 and 1997..................6
Consolidated Statements of Comprehensive Income:
Three and six months ended June 30, 1998
and 1997.................................................7
Consolidated Statements of Changes
in Shareholders' Equity:
Six months ended June 30, 1998 and 1997..................8
Consolidated Statements of Cash Flows:
Six months ended June 30, 1998 and 1997..................9
Notes to Consolidated Financial Statements...............10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............14
Item 3. Quantitative and Qualitative disclosures about
Market Risk..............................................28
Part II. Other Information:
Item 1. - Item 6.................................................28
Signature........................................................29
/TABLE
<PAGE>
<PAGE> 3
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 June 30, 1998 and
1997, and the related consolidated statements of income, comprehensive
income, changes in shareholders' equity, and cash flows for the three-month
and six-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, 1997, 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 23, 1998 (February 23, 1998 as to Note 23), 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, 1997 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 17, 1998
3
<PAGE>
<PAGE> 4
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS:
- -------
Cash and due from banks $ 60,043 $ 40,973 $ 46,218
------------- ------------ -------------
Interest-bearing deposits with other banks 1,600 6,836 1,855
------------- ------------ -------------
Securities available for sale
(amortized cost of $645,987, $316,146 and $333,146) 655,138 324,521 336,238
------------- ------------ -------------
Investment securities, held to maturity
(market value of $107,503, $101,289 and $102,214) 106,476 100,151 102,054
------------- ------------ -------------
Mortgage-backed securities, held to maturity
(market value of $106,509, $131,942 and $153,696) 107,132 132,673 155,467
------------- ------------ -------------
Loans held for sale 6,082 39,840 3,193
------------- ------------ -------------
Loans (net of unearned income of $38,850, $38,946 and $35,133) 1,073,256 1,046,363 1,030,903
Less: Allowance for possible loan losses 18,198 18,077 17,472
------------- ------------ -------------
Net loans 1,055,058 1,028,286 1,013,431
------------- ------------ -------------
Premises and equipment 24,038 20,996 19,740
------------- ------------ -------------
Bank-owned life insurance 25,697 25,000 -
------------- ------------ -------------
Intangible assets 63,026 9,280 6,406
------------- ------------ -------------
Other assets 18,638 15,521 18,168
------------- ------------ -------------
Total Assets $ 2,122,928 $ 1,744,077 $ 1,702,770
============= ============ =============
LIABILITIES:
- ------------
Deposits:
Noninterest-bearing demand $ 135,417 $ 100,653 $ 96,032
Interest-bearing demand 55,568 38,539 37,448
Savings 460,366 385,363 358,149
Time 873,866 667,784 692,908
------------- ------------ -------------
Total deposits 1,525,217 1,192,339 1,184,537
------------- ------------ -------------
Borrowed funds:
Federal funds purchased and other short-term borrowings 78,897 81,773 52,349
Repurchase agreements and secured lines of credit 129,214 121,756 128,589
Advances from the Federal Home Loan Bank 163,400 156,000 149,000
------------- ------------ -------------
Total borrowed funds 371,511 359,529 329,938
------------- ------------ -------------
Long-term debt 23,750 4,258 5,187
------------- ------------ -------------
Other liabilities 31,731 25,272 28,874
------------- ------------ -------------
Total Liabilities 1,952,209 1,581,398 1,548,536
------------- ------------ -------------
Corporation-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Corporation 23,857 23,837 23,817
------------- ------------ -------------
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,
11,837,157, 11,786,811 and 11,774,912 shares issued and
11,184,026, 11,132,253 and 11,164,283 shares outstanding 59,186 58,934 58,875
Additional paid-in capital 3,552 2,611 2,595
Retained earnings 90,941 84,647 78,450
Accumulated other comprehensive income 5,948 5,443 2,010
Treasury stock, 610,273, 611,700 and 559,200 shares at cost (12,015) (12,043) (10,613)
Unallocated common stock held by ESOP (at cost) (750) (750) (900)
------------- ------------ -------------
Total Shareholders' Equity 146,862 138,842 130,417
------------- ------------ -------------
Total Liabilities and Shareholders' Equity $ 2,122,928 $ 1,744,077 $ 1,702,770
============= ============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
4<PAGE>
<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
-----------------------------
June 30, June 31,
1998 1997
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 21,586 $ 21,733
Interest on deposits with other banks 20 40
Interest on securities available for sale 7,939 6,028
Interest and dividends on investment securities:
Taxable interest 333 271
Tax-exempt interest 988 1,043
Interest on mortgage-backed securities 1,687 2,463
Interest on federal funds sold 13 88
------------- -------------
Total Interest Income 32,566 31,666
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 165 198
Savings 2,367 1,935
Time 9,328 9,719
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 1,226 618
Repurchase agreements and secured lines of credit 2,324 2,102
Advances from the Federal Home Loan Bank 2,417 2,133
Interest on long-term debt 75 99
------------- -------------
Total Interest Expense 17,902 16,804
------------- -------------
NET INTEREST INCOME 14,664 14,862
Provision for possible loan losses 1,000 954
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 13,664 13,908
------------- -------------
OTHER INCOME:
- -------------
Trust fees 716 532
Service charges on deposit accounts 1,206 1,049
Net securities gains 9 20
Net gains on loan sales 355 697
Other operating income 1,274 1,283
------------- -------------
Total Other Income 3,560 3,581
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 4,047 3,743
Employee benefits 1,141 1,027
Net occupancy expense 844 737
Equipment rentals, depreciation and maintenance 669 593
Professional fees 354 458
Marketing 398 427
Minority interest expense 630 630
Other operating expense 3,544 2,740
------------- -------------
Total Other Expenses 11,627 10,355
------------- -------------
INCOME BEFORE INCOME TAXES 5,597 7,134
Income Taxes 1,569 2,254
------------- -------------
NET INCOME $ 4,028 $ 4,880
============= =============
BASIC EARNINGS PER SHARE $ 0.36 $ 0.43
============= =============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 11,176 11,230
============= =============
DILUTED EARNINGS PER SHARE $ 0.35 $ 0.43
============= =============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 11,406 11,425
============= =============
DIVIDENDS PER SHARE $ 0.15 $ 0.13
============= =============
/Table>
See Notes To Consolidated Financial Statements.
5<PAGE>
<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>
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 44,205 $ 44,247
Interest on deposits with other banks 49 186
Interest on securities available for sale 13,526 10,379
Interest and dividends on investment securities:
Taxable interest 624 547
Tax-exempt interest 1,984 2,075
Interest on mortgage-backed securities 3,558 5,003
Interest on federal funds sold 14 548
------------- -------------
Total Interest Income 63,960 62,985
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 478 415
Savings 4,307 3,732
Time 18,274 19,507
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 2,491 1,148
Repurchase agreements and secured lines of credit 4,143 4,722
Advances from the Federal Home Loan Bank 4,813 4,175
Interest on long-term debt 152 201
------------- -------------
Total Interest Expense 34,658 33,900
------------- -------------
NET INTEREST INCOME 29,302 29,085
Provision for possible loan losses 2,000 2,928
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 27,302 26,157
------------- -------------
OTHER INCOME:
- -------------
Trust fees 1,520 1,223
Service charges on deposit accounts 2,222 2,029
Net securities gains 58 20
Net gains on loan sales 1,774 5,490
Other operating income 3,614 2,375
------------- -------------
Total Other Income 9,188 11,137
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 8,191 7,625
Employee benefits 2,476 2,336
Net occupancy expense 1,664 1,527
Equipment rentals, depreciation and maintenance 1,337 1,163
Professional fees 805 945
Marketing 1,021 851
Minority interest expense 1,214 971
Other operating expense 6,347 5,911
------------- -------------
Total Other Expenses 23,055 21,329
------------- -------------
INCOME BEFORE INCOME TAXES 13,435 15,965
Income Taxes 3,788 5,213
------------- -------------
NET INCOME $ 9,647 $ 10,752
============= =============
BASIC EARNINGS PER SHARE $ 0.86 $ 0.95
============= =============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 11,163 11,328
============= =============
DILUTED EARNINGS PER SHARE $ 0.85 $ 0.93
============= =============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 11,391 11,511
============= =============
DIVIDENDS PER SHARE $ 0.30 $ 0.27
============= =============
/Table>
See Notes To Consolidated Financial Statements.
6<PAGE>
<PAGE> 7
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 4,028 $ 4,880
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period (103) 3,049
Less: reclassification adjustment for (gains) losses
included in net income (6) (13)
------------- -------------
Other comprehensive income (109) 3,036
------------- -------------
Comprehensive income $ 3,919 $ 7,916
============= =============
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 9,647 $ 10,752
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period 543 1,139
Less: reclassification adjustment for (gains) losses
included in net income (38) (13)
------------- -------------
Other comprehensive income 505 1,126
------------- -------------
Comprehensive income $ 10,152 $ 11,878
============= =============
</TABLE>
See Notes To Consolidated Financial Statements.
7<PAGE>
<PAGE> 8
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 Six Months Ended June 30, 1998
------------------------------------------------------------------------------
Common Stock
Accumulated Held by ESOP
Common Stock Other (at cost)
--------------- Retained Comprehensive Treasury ---------------
Shares Amount Surplus Earnings Income Stock Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1998 11,787 $58,934 $ 2,611 $84,647 $ 5,443 ($12,043) (43) ($750)
Net income - - - 9,647 - - - -
Cash dividends paid ($0.30 per share) - - - (3,353) - - - -
Exercise of options, net of shares redeemed 12 62 (21) - - - - -
Common stock issued for dividend reinvestment 37 184 894 - - - - -
Restricted shares issued 1 6 31 - - - - -
Value of ESOP shares to be allocated in excess
of cost - - 23 - - - - -
Treasury stock issued - - 14 - - 28 - -
Net change in unrealized appreciation
in securities available for sale,
net of tax - - - - 505 - - -
------------------------------------------------------------------------------
Balance - June 30, 1998 11,837 $59,186 $3,552 $90,941 $5,948 ($12,015) (43) ($750)
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1997
------------------------------------------------------------------------------
Common Stock
Accumulated Held by ESOP
Common Stock Other (at cost)
--------------- Retained Comprehensive Treasury ---------------
Shares Amount Surplus Earnings Income Stock Shares Amount
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1997 7,836 $39,179 $22,064 $70,736 $ 884 ($4,242) (34) ($900)
Net income - - - 10,752 - - - -
Cash dividends paid ($0.27 per share) - - - (3,038) - - - -
Exercise of options, net of shares redeemed 9 48 25 - - - - -
Common stock issued for dividend reinvestment 5 23 131 - - - - -
Treasury stock purchased - - - - - (6,371) - -
Fifty percent stock dividend declared on
July 15, 1997 3,925 19,625 (19,625) - - - 17 -
Net change in unrealized appreciation
in securities available for sale,
net of tax - - - - 1,126 - - -
------------------------------------------------------------------------------
Balance - June 30, 1997 11,775 $58,875 $2,595 $78,450 $2,010 ($10,613) (51) ($900)
==============================================================================
</TABLE>
See Notes To Consolidated Financial Statements.
8<PAGE>
<PAGE> 9
Part I. Item 1. Financial Information
<TABLE>
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Six Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------- -------------
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income $ 9,647 $ 10,752
------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,242 1,158
Amortization and accretion 1,102 979
Provision for possible loan losses 2,000 2,928
Gain on sale of securities (58) (20)
Gain on sale of loans (1,774) (5,490)
Gain on sale of branch offices (1,071) -
Proceeds from loan sales 132,852 116,146
Purchase of loans (187) (1,969)
Provision for deferred taxes 33 1,017
Increase in interest receivable (1,709) (1,903)
(Decrease) increase in interest payable (513) 610
Other - net (4,021) 290
------------- -------------
Total adjustments 127,896 113,746
------------- -------------
Net cash provided by operating activities 137,543 124,498
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sales of securities available for sale 5,127 4,293
Proceeds from maturity or paydown of securities available for sale 110,419 70,008
Purchase of securities available for sale (446,323) (203,984)
Proceeds from maturity or paydown of investment securities 40,207 21,965
Purchase of investment securities (20,901) (3,291)
Proceeds from sale of credit card loan portfolio - 21,801
Net increase in loans (53,269) (51,893)
Decrease (increase) in deposits with other banks 5,236 (85)
Decrease in federal funds sold - 37,400
Purchase of premises and equipment (2,646) (1,613)
Proceeds from sale of premises and equipment 94 215
Proceeds from sale of other real estate owned 576 710
Cash paid for branch office sale (40,884) -
Cash received for branch office purchases 258,830 -
------------- -------------
Net cash used in investing activities (143,534) (104,474)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Net (decrease) increase in deposits (4,258) 35,669
Net (decrease) increase in federal funds purchased and other
short-term borrowings (2,876) 19,147
Net increase (decrease) in repurchase agreements and secured lines of credit 7,458 (83,481)
Net increase in advances from the Federal Home Loan Bank 7,400 5,000
Proceeds from issuance of capital securities, net of issuance costs - 23,800
Proceeds from issuance of long-term debt 23,000 -
Payments on long-term debt (3,508) (780)
Proceeds from exercise of stock options 41 73
Proceeds from common stock issued 1,115 154
Treasury stock purchased - (6,371)
Treasury stock issued 42 -
Dividends paid on common stock (3,353) (3,038)
------------- -------------
Net cash provided by (used in) financing activities 25,061 (9,827)
------------- -------------
NET INCREASE IN CASH AND DUE FROM BANKS 19,070 10,197
CASH AND DUE FROM BANKS - Beginning of year 40,973 36,021
------------- -------------
CASH AND DUE FROM BANKS - End of period $ 60,043 $ 46,218
============= =============
</TABLE>
See Notes To Consolidated Financial Statements.
9<PAGE>
<PAGE> 10
Part I. Item 1. Financial Information
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(In thousands)
n (Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------
June 30, June 30,
1998 1997
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 35,171 $ 33,290
============= =============
Income taxes $ 3,262 $ 4,215
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deposits assumed in branch acquisition $ 383,842 $ -
============= =============
Loans acquired in branch acquisition $ 73,677 $ -
============= =============
Deposits sold in branch disposition $ 46,702 $ -
============= =============
Securities purchased settling after June 30 $ 1,006 $ 3,841
============= =============
Transfers to other real estate owned $ 1,043 $ 370
============= =============
Net change in unrealized appreciation (depreciation) in securities
available for sale, net of income tax effects $ 505 $ 1,126
============= =============
See Notes To Consolidated Financial Statements.
</TABLE>
10<PAGE>
<PAGE> 11
FIRST WESTERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(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 Trust Services Company ("Trust Services"); First Western
Investment Services Company ("Investment Services") and First Western
Capital Trust I ("Capital Trust"). All significant intercompany
transactions have been eliminated in consolidation.
The consolidated balance sheets as of June 30, 1998 and June 30, 1997,
and the related consolidated statements of income, comprehensive income,
changes in shareholders' equity, and cash flows for the three and six month
periods ended June 30, 1998 and 1997 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 1997 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. Earnings
per share amounts for 1997 have been restated to comply with Financial
Accounting Standards Board ("FASB") Statement No. 128, "Earnings Per
Share". All share information and 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 July 15, 1997 and distributed on August 15,
1997.
3. Recent Accounting Pronouncements:
In June 1997, FASB issued Statement No. 130, "Reporting Comprehensive
Income", which requires businesses to disclose comprehensive income and its
components in their general-purpose financial statements. This statement
requires the reporting of all items of comprehensive income in a financial
statement that is displayed with the same prominence as other financial
statements. This statement is effective for fiscal years beginning after
December 15, 1997, with reclassification of comparative financial
statements and is applicable to interim periods.
11 <PAGE>
<PAGE> 12
First Western has disclosed comprehensive income in a separate income
statement, in which the components of comprehensive income are displayed
net of income taxes. The following tables set forth the related tax
effects allocated to each element of comprehensive income for the three and
six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998 Three Months Ended June 30, 1997
-------------------------------------- --------------------------------------
Pre-tax Tax (Expense) Net-of-tax Pre-tax Tax (Expense) Net-of-tax
Amount or Benefit Amount Amount or Benefit Amount
--------- ------------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses) on
securities:
Unrealized holding gains
(losses) arising during
period $ (159) $ 56 $ (103) $ 4,691 $ (1,642) $ 3,049
Less: reclassification
adjustment for (gains)
losses realized in
net income (9) 3 (6) (20) 7 (13)
--------- ------------- ---------- --------- ------------- ----------
Net unrealized gains (losses) (168) 59 (109) 4,671 (1,635) 3,036
--------- ------------- ---------- --------- ------------- ----------
Other comprehensive income $ (168) $ 59 $ (109) $ 4,671 $ (1,635) $ 3,036
========= ============= ========== ========= ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998 Six Months Ended June 30, 1997
-------------------------------------- --------------------------------------
Pre-tax Tax (Expense) Net-of-tax Pre-tax Tax (Expense) Net-of-tax
Amount or Benefit Amount Amount or Benefit Amount
--------- ------------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses) on
securities:
Unrealized holding gains
(losses) arising during
period $ 835 $ (292) $ 543 $ 1,752 $ (613) $ 1,139
Less: reclassification
adjustment for (gains)
losses realized in
net income (58) 20 (38) (20) 7 (13)
--------- ------------- ---------- --------- ------------- ----------
Net unrealized gains (losses) 777 (272) 505 1,732 (606) 1,126
--------- ------------- ---------- --------- ------------- ----------
Other comprehensive income $ 777 $ (272) $ 505 $ 1,732 $ (606) $ 1,126
========= ============= ========== ========= ============= ==========
</TABLE>
The following table sets forth the components of accumulated other
comprehensive income for the six months ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1998 1997
------------- ------------
<S> <C> <C>
Beginning balance $ 5,443 $ 884
Net unrealized gains (losses) on securities, net of taxes 505 1,126
------------- ------------
Ending balance $ 5,948 $ 2,010
============= ============
</TABLE>
12 <PAGE>
<PAGE> 13
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which is effective for
financial statements for periods beginning after December 15, 1997.
Statement No. 131 redefines how operating segments are determined and
requires disclosure of certain financial and descriptive information about
a company's operating segments. First Western is not required to disclose
segment information in accordance with Statement No. 131 until its 1998
annual report, at which time it will restate prior years' segment
disclosures to conform to the Statement No. 131 segment presentation, if
applicable. In First Western's first quarter 1999 report, and in
subsequent quarters, First Western will present the interim disclosures
required by Statement No. 131 for both 1999 and 1998. First Western has not
completed its analysis of which operating segments it will report on, if
any.
In February 1998, the FASB issued Statement No. 132, "Employers'
Disclosure About Pension and Other Post-Retirement Benefits". This
statement will require certain footnote disclosures related to pension and
other retiree benefits and will have no impact on First Western's financial
position or results of operations. Implementation of this standard is
required for fiscal year 1998.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This statement addresses
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Management is in the process of evaluating the
impact of this statement on First Western's financial statements. This
statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
4. Branch Purchases and Sales:
In January 1998, First Western completed the sale of its three Lake
County, Ohio branches to FirstMerit Bank. These branches had approximately
$47 million in deposits. First Western realized a net gain of $1.1 million
on this transaction.
On June 19, 1998, First Western Bank, N.A. completed the purchase of
16 branches in western Pennsylvania from PNC Bank. The purchase included
branches, related deposits, consumer loans, small business banking
relationships and certain brokerage relationships of the following
branches: Farrell, Grove City, Hermitage, Sharon, Transfer and West
Middlesex (Mercer County); Beaver, Chippewa, Midland and New Brighton
(Beaver County); Ebensburg and Barnesboro (Cambria County); Evans City
(Butler County); McDonald (Washington County); Punxsutawney (Jefferson
County); and Kiski Valley (Westmoreland County). First Western acquired
approximately $384 million in deposits, $74 million in consumer and small
business loans, and $11 million in brokerage assets, along with related
fixed assets, leases, safe deposit business and other agreements. First
Western paid consideration of approximately $59 million for the deposit and
brokerage relationships and the right to acquire, at book value, the loan
portfolio and the real estate and related assets of the 16 branches. This
premium was recorded as an intangible asset and is being amortized over
twelve years.
13<PAGE>
<PAGE> 14
Part 1. Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of operations for the three and six months ended June 30, 1998
compared with the three and six months ended June 30, 1997:
First Western's earnings for the six months ended June 30, 1998
were $9.6 million, decreasing $1.2 million or 10.3% from $10.8 million for
the first six months of 1997. This decrease in net income was due to a
$3.7 million decrease in net gains on loan sales which was partially offset
by a $1.1 million gain realized on the sale of First Western's Lake County,
Ohio branches during the first quarter of 1998 along with a $928,000
decrease in the provision for possible loan losses. First Western's basic
and diluted earnings per share for the six months ended June 30, 1998 were
$0.86 and $0.85, respectively, compared with $0.95 and $0.93 for the first
six months of 1997 with this decrease in per share earnings due to the
factors discussed above. First Western's return on average assets and
return on average equity for the first six months of 1998 were 1.09% and
13.61%, respectively, compared with 1.27% and 16.86% for the first six
months of 1997, with the decrease in these ratios primarily attributable to
the lower net interest margin and lower net gains on loan sales.
For the three months ended June 30, 1998, First Western's net income
was $4.0 million compared with $4.9 million for the three months ended June
30, 1997. First Western's net income decreased $852,000 or 17.5% from the
second quarter of 1997 to the second quarter of 1998 primarily due to a
$1.3 million increase in operating expenses along with a $342,000 decrease
in net gains realized on loan sales. Operating expenses increased due in
part to the 16 PNC Bank branches acquired by First Western during the
second quarter of 1998. First Western's basic and diluted earnings per
share for the second quarter of 1998 were $0.36 and $0.35, respectively,
compared with $0.43 and $0.43 for the second quarter of 1997. First
Western's return on average assets and return on average equity for the
second quarter of 1998 were 0.88% and 11.16%, respectively, compared with
1.16% and 15.23% for the second quarter of 1997, with the decreases in
these ratios primarily attributable to the lower net interest margin and
lower net gains on loan sales realized during the second quarter of 1998.
Net Interest Income:
First Western's net interest income was $29.3 million for the six
months ended June 30, 1998, increasing $217,000 or 0.7% from $29.1 million
for the first six months of 1997. The increase in net interest income was
generated by an increase in average earning assets with this increase
partially offset by a decline in First Western's net interest margin.
First Western's net interest income for the first six months of 1998 was
also impacted by the purchase of bank-owned life insurance ("BOLI") in
December 1997. The BOLI purchase was funded by First Western reducing its
portfolio of securities which reduced First Western's net interest income
while the increase in the cash surrender value of the BOLI is included in
other income. The earnings on BOLI, which are exempt from taxes, were
$697,000 for the first six months of 1998. First Western's average earning
assets increased $41.7 million or 2.5% for the first six months of 1998
14<PAGE>
<PAGE> 15
compared with the first six months of 1997. The increase in average
earning assets was due to a $75.7 million increase in average securities
due to First Western purchasing securities during the second quarter of
1998 in anticipation of closing the PNC Bank branch acquisition in late
June 1998.
First Western's net interest income was $14.7 million for the three
months ended June 30, 1998, decreasing $198,000 or 1.3% from $14.9 million
for the second quarter of 1997. The decrease in net interest income was
due to a decrease in First Western's net interest margin along with the
impact of the purchase of BOLI in late 1997. The earnings on the BOLI for
the second quarter of 1998 were $346,000. First Western's average earning
assets increased $108.4 million or 6.6% for the second quarter of 1998
compared with the second quarter of 1997 due to a $118.2 million increase
in average securities related to the PNC Bank branch acquisition.
First Western's net interest margin or net interest income expressed
as a percentage of average earning assets was 3.65% for the first six
months of 1998 compared with 3.72% for the first six months of 1997. The
decrease in First Western's net interest margin was due to an eight basis
point decrease in First Western's yield on earning assets due primarily to
the securities purchased during the second quarter. First Western's cost
of funds decreased three basis points for the first six months of 1998
compared with the prior year due to decreases in the rates paid for
deposits partially offset by First Western increasing its level of borrowed
funds, which generally have a higher cost than retail deposits, to fund the
sale of the Lake County branches during the first quarter of 1998. The
purchase of BOLI in December 1997 reduced First Western's net interest
margin by approximately five basis points for the first six months of 1998
compared with the prior year since the earnings on BOLI are included in
other income while the cost of funding the BOLI is included in interest
expense.
First Western's net interest margin was 3.51% for the second quarter
of 1998 compared with 3.80% for the second quarter of 1997. This decrease
in the net interest margin was primarily due to First Western increasing
its portfolio of securities available for sale during the second quarter of
1998 in anticipation of the closing of the PNC Bank branch purchase in June
1998. The PNC Bank branch acquisition provided First Western with $259
million of investable funds. In order to have these funds fully invested
upon acquiring the PNC Bank branches, First Western purchased securities
during April and May 1998 and funded these purchases with temporary
borrowings. These borrowings were paid-off upon closing of the PNC Bank
branch purchase. This strategy added net income to First Western during
the second quarter of 1998, however, it also had a detrimental impact on
First Western's net interest margin since the spread between the yield
earned on the securities and the cost of the temporary borrowings was less
than First Western's historical net interest margin. These temporary
borrowings have been replaced by the deposits that were acquired from PNC
bank which have a lower cost of funds. The full impact of the PNC branches
will be seen beginning with the third quarter of 1998.
Provision for Possible Loan Losses:
First Western's provision for possible loan losses was $2.0 million
for the first six months of 1998, decreasing $928,000 from $2.9 million for
the first six months of 1997. The decrease in the
15<PAGE>
<PAGE> 16
provision for possible loan losses for the first six months of 1998
compared with the first six months of 1997 reflects a decrease in
delinquent and nonaccrual loans. First Western's net charge-offs for the
first six months of 1998 were $1.9 million or 0.36% of average loans,
compared with $1.5 million or 0.29% of average loans for the first six
months of 1997. Substantially all of First Western's charge-offs for the
first six months of 1998 and 1997 were consumer loans, primarily indirect
automobile loans. First Western's net charge-offs (recoveries) by loan type
are as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Commercial, financial and agricultural loans.......................... $ 10 $ (37)
Real estate construction loans........................................ - -
Real estate mortgage loans............................................ (28) 30
Installment loans..................................................... 1,897 1,517
---------- ----------
Total net charge-offs.............................................. $ 1,879 $ 1,510
========== ==========
Net charge-offs as a percentage of
average loans...................................................... 0.36% 0.29%
========== ==========
</TABLE>
Other Income and Other Expenses:
Other income decreased $1.9 million or 17.5% from $11.1 million for
the first six months of 1997 to $9.2 million for the first six months of
1998 primarily due to a $3.7 million decrease in net gains on loan sales.
Partially offsetting the decrease in net gains on loan sales for the first
six months of 1998 compared with the prior year was a $1.1 million gain
realized during the first quarter of 1998 on the sale of the three Lake
County, Ohio branches. First Western's other income was $3.6 million for
both the second quarter of 1998 and 1997 with increases in trust fees and
service charges on deposit accounts offsetting a $342,000 decrease in net
gains on loan sales.
Trust fees increased $297,000 or 24.3% from $1.2 million for the
first six months of 1997 to $1.5 million for the first six months of 1998
primarily due to an increase in trust assets managed by First Western. The
market value of the trust assets managed by First Western increased $224
million or 42% from $535 million at June 30, 1997 to $759 million at June
30, 1998. Trust fees increased $184,000 or 34.6 % from $532,000 for the
second quarter of 1997 to $716,000 for the second quarter of 1998 due to
the increase in trust assets under management along with a $61,000 increase
in estate fees.
Service charges on deposit accounts increased $193,000 or 9.5% for he
six months ended June 30 1998 compared with the prior year due to increases
in First Western's service charges beginning in March 1998. Service
charges on deposit accounts increased $157,000 or 15.0% for the second
quarter of 1998 compared with the prior year due to the increased fee
16<PAGE>
<PAGE> 17
schedule.
During the first six months of 1998, First Western realized net gains
on loan sales of $1.8 million compared with gains of $5.5 million for the
first six months of 1997. The gains on loan sales realized by First
Western during the first six months of 1998 were primarily the result of
First Western selling $92.3 million of residential mortgage loans during
the first quarter of 1998. Most of the gains during the first six months
of 1997 were the result of First Western completing the sale of its credit
card portfolio. First Western realized net gains of $355,000 during the
second quarter of 1998 as a result of the First Western selling some of
its current mortgage loan production while retaining the servicing on these
loans. First Western realized gains on loan sales of $697,000 during the
second quarter of 1997 as a result of the sale of the credit card portfolio
and the finalization of a mortgage loan sale.
Other operating income increased $1.2 million from $2.4 million for
the first six months of 1997 to $3.6 million for the first six months of
1998 due to a $1.1 million gain realized on the sale of First Western's
Lake County branches during the first quarter of 1998. First Western's
Lake County branches had deposits of $47 million when they were sold and
First Western received a total premium of approximately $5.3 million on
this sale with $4.2 million of this premium used to eliminate the remaining
intangible assets related to those branches. Other operating income also
increased due to $697,000 of income from bank-owned life insurance
recognized by First Western during the first six months of 1998. First
Western purchased $25 million of BOLI during the fourth quarter of 1997.
These increases in other operating income were partially offset by
decreases in income from loan servicing and credit card program fees due to
the completion of the sale of First Western's credit card program during
the first half of 1997.
Other operating income was $1.3 million for both the second quarter
of 1998 and 1997. Compared with the second quarter of 1997, First Western
had BOLI income of $346,000 and a $94,000 increase in loan prepayment
penalties with these increases offset by a $278,000 decrease in loan
servicing income and a $267,000 gain realized during the second quarter of
1997 resulting from the sale of First Western's merchant credit card
transaction processing business.
Total other expenses for the first six months of 1998 were $23.1
million, increasing $1.7 million or 8.1%, from $21.3 million due to
increases in salaries and employee benefits expense and minority interest
expense along with approximately $300,000 of start-up expenses related to
the purchase of the PNC Bank branches. Other expenses increased $1.3
million or 12.3% from $10.4 million for the second quarter of 1997 to
$11.6 million for the second quarter of 1998 due to the PNC branch related
expenses, a $418,000 increase in salaries and employee benefits expense,
increased shares tax expense and amortization of intangible assets expense.
First Western's salary and employee benefits expense increased a
combined $706,000 or 7.1% for the first six months of 1998 compared with
the first six months of 1997. Salaries and employee benefits expense
increased due to normal salary and wage increases with the increase in
salaries and wage expense partially offset by an increase in the deferral
of salaries and wages related to loan originations due to an increase in
loans originated, particularly residential mortgage loans due to the low,
long-term interest rates experienced during the first six months of 1998.
17<PAGE>
<PAGE> 18
First Western's occupancy and equipment expense increased a combined
$311,000 or 11.6% for the first six months of 1998 compared with the prior
year due to an increase in building maintenance costs related to new
facilities opened by First Western in the second half of 1997 along with an
increase in depreciation expense. For the three months ended June 30 1998,
occupancy and equipment expense increased a combined $183,000 or 13.8%
compared with the second quarter of 1997.
For the six month period ended June 30, 1998, First Western's
marketing expense increased $170,000 or 20.0% compared with the prior year
due to First Western undertaking a $1.5 million corporate image campaign.
This image campaign is intended to heighten the visibility of First Western
in its market areas with particular attention being given to markets where
First Western's surveys have indicated a low level of name recognition of
First Western by potential customers.
Minority interest expense increased $243,000 from $971,000 for the
first six months of 1997 to $1.2 million for the first six months of 1998
due to the trust preferred securities being issued approximately halfway
through the first quarter of 1997. In February 1997, First Western
completed the private placement of $25 million of trust preferred capital
securities issued by First Western's Delaware trust subsidiary, First
Western Capital Trust I. The distributions payable on the securities have
been recorded as minority interest expense.
Other operating expenses increased $436,000 or 7.4% from $5.9 million
for the first six months of 1997 to $6.3 million for the first six months
of 1998. This increase was due to approximately $300,000 of expenses
related to the branches acquired from PNC Bank along with a $185,000
increase in Pennsylvania bank shares tax with these increases partially
offset by a decrease in bad check and fraud losses and decreased credit
card program expenses due to the completion of the sale of First Western's
credit card programs during the first half of 1997. The expenses related
to the PNC Bank branches consist of the costs to produce and mail brochures
to the former PNC bank customers to explain First Western's products and
services, the cost to replace the former PNC Bank customers' checks and
various expenses to put these branches on to the First Western data
processing system. The increase in Pennsylvania bank shares tax expense
was a result of the merger of First Western's former thrift subsidiary,
First Western Bank, Federal Savings Bank ("First Western Bank, F.S.B."),
into First Western Bank, N.A. in September 1997. As a thrift, First
Western Bank, F.S.B. formerly paid state income tax instead of shares tax.
Other operating expenses increased $804,000 from $2.7 million for the
second quarter of 1997 to $3.5 million for the second quarter of 1998 due
to the expenses related to the PNC branches, a $115,000 increase in bad
check and fraud losses primarily due to a recovery of a fraud loss that was
recorded during the second quarter of 1997, an $89,000 increase in the
amortization of intangible assets expense due to the Chicora office
purchased in 1997 and also due in part to the recently acquired PNC Bank
branches and an $84,000 increase in Pennsylvania bank shares tax expense.
18<PAGE>
<PAGE> 19
Income Taxes:
First Western's income tax expense was $3.8 million for the first six
months of 1998 compared with $5.2 million for the first six months of 1997.
The decrease in First Western's income tax expense was due to a decrease in
pre-tax earnings along with the elimination of the state income taxes paid
by First Western's former thrift subsidiary. First Western's effective tax
rate for the six months ended June 30, 1998 was 28.2% compared with 32.7%
for the first six months of 1997. The decrease in First Western's
effective tax rate from 1997 to 1998 was due to First Western having a
decreased level of fully-taxable income as compared with pretax earnings as
a result of the decrease in gains on loan sales along with the increase in
tax-exempt income as a result of the BOLI purchased in late 1997 and also
due to the elimination of the state income tax on the former thrift
subsidiary.
19<PAGE>
<PAGE> 20
Financial Condition as of June 30, 1998 as compared with December 31, 1997
and June 30, 1997.
As of June 30, 1998, First Western's total assets were $2.123 billion
compared with $1.744 billion at December 31, 1997 and $1.703 billion at
June 30, 1997. During the first six months of 1998, First Western's total
assets increased $379 million or 21.7% due to the acquisition of 16
branches from PNC Bank. Total average assets for the first six months of
1998 were $1.784 billion compared with $1.703 billion for the first six
months of 1997, an increase of 4.7%.
Purchase of PNC Branches
On February 23, 1998, First Western Bank, N.A. agreed to purchase 16
branches in western Pennsylvania from PNC Bank. The agreement includes the
acquisition of the 16 branches, related deposits, consumer loans, small
business banking relationships and certain brokerage relationships of the
following branches: Farrell, Grove City, Hermitage, Sharon, Transfer and
West Middlesex (Mercer County); Beaver, Chippewa, Midland and New Brighton
(Beaver County); Ebensburg and Barnesboro (Cambria County); Evans City
(Butler County); McDonald (Washington County); Punxsutawney (Jefferson
County); and Kiski Valley (Westmoreland County). On June 19, 1998, First
Western acquired approximately $384 million in deposits, $74 million in
consumer and small business loans, and $11 million in brokerage assets,
along with related fixed assets, leases, safe deposit business and other
agreements. First Western paid consideration of approximately $59 million
for the deposit and brokerage relationships and the right to acquire, at
book value, the loan portfolio and the real estate and related assets of
the 16 branches. This premium was recorded as an intangible asset and is
being amortized over twelve years.
20<PAGE>
<PAGE> 21
Loan Portfolio:
Net loans, including loans held for sale, decreased $6.9 million or
0.6% during the first six months of 1998 with this decrease in loans
primarily due to the sale of approximately $92 million of residential
mortgage loans during the first quarter of 1998, partially offset by the
acquisition of $74 million of consumer and commercial loans from PNC Bank.
During the first quarter of 1998, First Western sold residential mortgage
loans in anticipation of an increase in prepayments due to the low, long-
term interest rate environment. First Western realized net gains of $1.4
million on these loan sales during the first quarter of 1998. The loans
acquired from PNC Bank consisted of $54 million of consumer installment
loans, $10 million of home equity loans, $6 million of commercial mortgage
loans and $4 million of commercial loans. The following table shows the
composition of First Western's loan portfolio, including loans held for
sale, at June 30, 1998, December 31, 1997 and June 30, 1997:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 June 30, 1997
------------------------ ---------------------- -----------------------
Amount Percent Amount Percent Amount Percent
------------ -------- ----------- -------- ----------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural:
Automobile floorplan loans....... $ 28,693 2.7% $ 31,013 2.8% $ 25,180 2.4%
Loans to municipalities.......... 4,894 0.5 6,140 0.6 9,571 0.9
Other commercial loans........... 115,589 10.7 105,323 9.7 98,309 9.5
------------ -------- ----------- -------- ----------- --------
Subtotal....................... 149,176 13.9 142,476 13.1 133,060 12.8
------------ -------- ----------- -------- ----------- --------
Real estate-construction............. 11,697 1.1 14,450 1.4 12,520 1.2
------------ -------- ----------- -------- ----------- --------
Real estate-mortgage:
1-4 Family residential............. 353,043 32.7 385,702 35.5 356,705 34.5
Multi-family residential........... 26,865 2.5 29,331 2.7 37,635 3.6
Home equity........................ 71,135 6.6 56,811 5.2 52,268 5.1
Commercial and other............... 178,827 16.6 172,559 15.9 160,011 15.5
------------ -------- ----------- -------- ----------- --------
Subtotal......................... 629,870 58.4 644,403 59.3 606,619 58.7
------------ -------- ----------- -------- ----------- --------
Installment and other................ 288,595 26.6 284,874 26.2 281,897 27.3
------------ -------- ----------- -------- ----------- --------
Total................................ $ 1,079,338 100.0% $ 1,086,203 100.0% $ 1,034,096 100.0%
============ ======== =========== ======== =========== ========
</TABLE>
21<PAGE>
<PAGE> 22
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 bank subsidiary.
In addition, a formal, ongoing loan review program, which concentrates
principally on commercial credits, has been established to help monitor the
loan portfolio. 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 June 30, 1998, December 31, 1997 and
June 30, 1997:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Loans delinquent and still accruing interest:
Loans past due 30 to 89 days ........................... $ 4,645 $ 8,703 $ 6,931
Loans past due 90 days or more ......................... 1,762 2,466 1,011
------------- ------------ -------------
Total loan delinquencies ............................. $ 6,407 $ 11,169 $ 7,942
============= ============ =============
Nonaccrual loans ......................................... $ 2,066 $ 2,634 $ 4,290
Other real estate owned .................................. 905 382 193
------------- ------------ -------------
Total nonperforming assets ............................... $ 2,971 $ 3,016 $ 4,483
============= ============ =============
Total nonperforming assets and loans
past due 90 days or more ............................... $ 4,733 $ 5,482 $ 5,494
============= ============ =============
Nonaccrual loans to total loans .......................... 0.19 % 0.24 % 0.41 %
Nonperforming assets to total loans
and other real estate owned ............................ 0.28 % 0.28 % 0.43 %
Nonperforming assets to total assets ..................... 0.14 % 0.17 % 0.26 %
Nonperforming assets and loans past due
90 days or more to total assets ........................ 0.22 % 0.31 % 0.32 %
Nonaccrual loans and loans past due
90 days or more to total loans ......................... 0.35 % 0.47 % 0.51 %
Allowance for possible loan losses
to nonaccrual loans .................................... 880.72 % 686.33 % 407.27 %
Allowance for possible loan losses
to loans past due 90 days or more
and nonaccrual loans ................................... 475.35 % 354.43 % 329.60 %
Allowance for possible loan losses to
total loans ............................................ 1.69 % 1.66 % 1.69 %
</TABLE>
22<PAGE>
<PAGE> 23
First Western's total delinquencies, excluding nonaccrual loans,
decreased $4.8 million from $11.2 million at December 31, 1997 to $6.4
million at June 30, 1998 due to a $4.1 million decrease in loans past due
30-89 days along with a $704,000 decrease in loans past due 90 days or
more. Consumer loan delinquencies decreased $2.2 million for the six
months ended June 30, 1998. Most of the decrease in delinquencies from
June 30, 1997 to June 30, 1998 has been due to decreased delinquencies of
consumer loans and residential mortgage loans. First Western's delinquent
loans by type are as follows at June 30, 1998, December 31, 1997 and June
30, 1997:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 June 30, 1997
------------------ ----------------- ------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Commercial, financial and
agricultural....................... $ 8 $ 592 $ 831
------------------ ----------------- ------------------
Real estate-mortgage:
1-4 Family residential............. 516 974 717
Home equity........................ 52 54 125
Commercial and other............... - 1,517 -
------------------ ----------------- ------------------
Subtotal......................... 568 2,545 842
------------------ ----------------- ------------------
Installment and other................ 5,831 8,032 6,269
------------------ ----------------- ------------------
Total................................ $ 6,407 $ 11,169 $ 7,942
================== ================= ==================
</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
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
$18.2 million at June 30, 1998 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 June 30, 1998.
23<PAGE>
<PAGE> 24
Investment Securities, Mortgage-Backed Securities, and Securities Available
for Sale:
Securities available for sale increased $330.6 million or 101.9%
during the first six months of 1998 with this increase the result of First
Western purchasing securities available for sale with the funds provided by
the acquisition of the PNC Bank branches along with the sales of
residential mortgage loans. Securities available for sale increased $318.9
million from $336.2 million at June 30, 1997 to $655.1 million at June 30,
1998 with this increase due to the purchase of securities using the funds
provided by the PNC Bank branch acquisition along with loan sales. At June
30, 1998, First Western had net unrealized appreciation on securities
available for sale of $9.2 million compared with unrealized appreciation of
$8.4 million and $3.1 million at December 31, 1997 and June 30, 1997,
respectively.
Investment securities and mortgage-backed securities decreased a
combined $19.2 million or 8.3% during the first six months of 1998 with
this decrease due to maturities and paydowns. The market value of First
Western's investment securities and mortgage-backed securities held to
maturity was a combined $214.0 million, $404,000 or 0.2% above the
amortized cost of $213.6 million. First Western's portfolio of investment
securities and mortgage-backed securities had a market value above
amortized cost of $407,000 or 0.2% at December 31, 1997.
Deposits:
Total deposits increased $332.9 million or 27.9% from $1.192 billion
at December 31, 1997 to $1.525 billion at June 30, 1998. Deposits
increased during the first six months of 1998 primarily due to the purchase
of the 16 PNC Bank branches with this increase partially offset by the sale
of First Western's three branches in Lake County, Ohio. The PNC Bank
branches had approximately $384 million of deposits and the Lake County
branches had approximately $47 million of deposits. First Western's
deposits increased $340.7 million from June 30, 1997 to June 30, 1998 with
most of this increase attributable to the factors discussed above.
Long-term Debt:
During the second quarter of 1998, First Western obtained a loan from
an unrelated bank for $23 million in order to provide a capital
contribution to the First Western Bank, N.A. subsidiary. During the second
quarter of 1998, First Western entered into a $25 million revolving credit
agreement with an unrelated bank. This revolving credit agreement expires
in June 2003. The loans made under this revolving credit agreement bear
interest at either a fixed rate for periods up to one year or variable
rates as selected by First Western. The capital contribution from the
holding company to First Western Bank, N.A. was necessary to restore First
Western Bank, N.A.'s capital ratios back to "well capitalized" levels after
the acquisition of the 16 PNC Bank branches.
Trust Preferred Capital Securities:
On February 11, 1997, First Western completed the private placement
of $25 million of
24<PAGE>
<PAGE> 25
9.875% capital securities due February 1, 2027 issued by First Western's
newly formed Delaware trust subsidiary, Capital Trust. These securities
were sold in an offering under Rule 144A of the Securities Act of 1933.
Securities of this type received approval in October 1996 from the Federal
Reserve Board to qualify as Tier I capital and interest payable thereon is
currently considered to be tax-deductible. Proceeds of the issue were
invested by Capital Trust in junior subordinated debentures issued by First
Western. Net proceeds from the sale of the debentures have been used for
general corporate purposes, including but not limited to, repurchase of
shares of First Western's common stock and investments in and advances to
First Western's subsidiaries.
Shareholders' Equity:
Shareholders' equity increased $8.0 million during the first six
months of 1998 primarily due to the retention of earnings, the issuance of
shares under First Western's dividend reinvestment plan and a $505,000
increase in the market value of securities available for sale, net of
income tax effects. First Western's capital ratios declined from December
31, 1997 to June 30, 1998 as a result of the increase in total assets and
intangible assets resulting from the purchase of the PNC Bank branches.
The following table presents First Western's capital ratios at June 30,
1998 and December 31, 1997:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- ------------
(Dollars in Thousands)
<S> <C> <C>
Tier I:
Common shareholders' equity .............................. $ 146,862 $ 138,842
Non-exempt intangible assets and
other deductions from Tier I capital.................... (63,115) (9,262)
Trust preferred capital securities........................ 23,857 23,837
Unrealized appreciation in securities
available for sale ..................................... (5,948) (5,443)
------------- ------------
Total Tier I ......................................... 101,656 147,974
------------- ------------
Tier II:
Qualifying allowance for possible loan losses ............ 15,043 13,658
------------- ------------
Total Tier II ........................................ 15,043 13,658
------------- ------------
Total capital .............................................. $ 116,699 $ 161,632
============= ============
Risk weighted assets ....................................... $ 1,200,249 $ 1,088,249
============= ============
Tier I capital ratio ....................................... 8.47% 13.60%
============= ============
Required Tier I capital ratio .............................. 4.00% 4.00%
============= ============
Total capital ratio ........................................ 9.72% 14.85%
============= ============
Required total capital ratio ............................... 8.00% 8.00%
============= ============
Tier I leverage ratio ...................................... 5.71% 8.73%
============= ============
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>
25<PAGE>
<PAGE> 26
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 $61.6 million at June 30, 1998
as compared with $47.8 million at December 31, 1997 and $48.1 million at
June 30, 1997. 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 subsidiary had $16.1 million of unused
overnight credit lines available at June 30, 1998.
First Western's operating activities provided cash flows of $137.5
million during the first six months of 1998 compared with $124.5 million
during the first six months of 1997. Loan sales provided $132.9 million
and $116.1 million of the cash flows from operating activities for the six
months ended June 30, 1998 and 1997, respectively.
Investing activities used cash flows of $143.5 million during the
first six months of 1998 compared with using cash flows of $104.5 million
for the first six months of 1997. The growth of the portfolio of
securities available for sale during the first six months of 1998 used net
cash flows of $330.8 million compared with $129.7 million for the first six
months of 1997. The cash flows to fund the increase in securities
available for sale during the first six months of 1998 came from the PNC
Bank branch purchase which provided net cash flows of $258.8 million. The
growth of the portfolio of loans not designated as held for sale used net
cash flows of $53.3 million during the first six months of 1998 compared
with $51.9 million for the first six months of 1997. During the first
quarter of 1998, First Western sold three branches which used cash flows of
$40.9 million.
Financing activities provided cash flows of $25.1 million during the
first six months of 1998 primarily due to an increase in long-term debt
providing net cash flows of $19.5 million and a net increase in borrowings
providing cash flows of $12.0 million. During the first six months of 1997,
financing activities used $9.8 million of cash flows with deposit growth
providing $35.7 million and the trust preferred offering providing $23.8
million with these increases offset by a $59.3 million decrease in borrowed
funds.
Year 2000 Data Processing Considerations:
First Western's management has completed an assessment of the
vulnerability of First Western's computer systems to potential year 2000
processing problems. First Western has completed year 2000 testing of
approximately one-half of its mission critical systems with the remaining
mission critical systems to be tested by year-end 1998. First Western has
contingency plans in place for its mission critical systems. Management
has also required all of First Western's software vendors and material
customers to assess their year 2000 readiness. First Western has
26<PAGE>
<PAGE> 27
not incurred and does not anticipate incurring material expenses to ensure
First Western's readiness for the year 2000 beyond the regularly scheduled
software and hardware upgrades; however, further testing could uncover
potential problems that may result in significant costs for First Western.
Other:
Certain of the statements and information in this Form 10-Q may be
forward looking statements. For a discussion of the factors that may
affect these statements refer to the Management's Discussion and Analysis
of Financial Condition and Results of Operations in First Western's Annual
Report on Form 10-K for the year ended December 31, 1997.
On August 13, 1998, First Western Bancorp, Inc. announced that
Richard L. Stover has been appointed president. Stover, who has been
executive vice president and chief lending officer of First Western since
November 1996, will assume some of the duties that previously were handled
by Thomas J. O'Shane, First Western's chief executive officer and chairman
of the board. O'Shane had served as president since 1991.
27<PAGE>
<PAGE> 28
Part I. Item 3. Quantitative and Qualitative Disclosures about Market Risk
Since December 31, 1997, there have been no significant changes in
First Western's exposure to interest rate risk. A complete discussion of
market risk is included in First Western's 1997 report on Form 10-K.
Part II. Other Information
Item 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits:
10.1 Revolving Credit Agreement between First Western
Bancorp, Inc. and The Northern Trust Company
15.1 Letter re: Unaudited Interim Financial Information
27.1 Financial Data Schedule
b. Reports on Form 8-K: None.
28<PAGE>
<PAGE> 29
c. 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)
August 13, 1998 /s/ Robert H. Young
-----------------------
Robert H. Young
Executive Vice President-
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
29<PAGE>
<PAGE> 30
FIRST WESTERN BANCORP, INC.
EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
- ------- -------------------------------------- ---------
<S> <C> <C>
10.1 Revolving Credit Agreement between Filed
First Western Bancorp, Inc. and herewith
The Northern Trust Company
15.1 Letter re: Unaudited Interim Financial Filed
Information herewith
27.1 Financial Data Schedule Filed
herewith
</TABLE>
<PAGE>
<PAGE> 1
Exhibit 10.1
REVOLVING CREDIT AGREEMENT
(Bank Holding Company)
Dated as of June 26, 1998
This Agreement is between FIRST WESTERN BANCORP, INC., a
corporation formed under the laws of the State of Pennsylvania
("Borrower"), and THE NORTHERN TRUST COMPANY, an Illinois banking
corporation ("Lender"), with a banking office at 50 South LaSalle
Street, Chicago, Illinois 60675.
SECTION 1 LOANS
SECTION 1.1 LOANS. Subject to the terms and conditions of this
Agreement, Lender agrees to make loans to Borrower, from time to time
from the date of this Agreement through the Termination Date, at such
times and in such amounts, not to exceed the Commitment (as defined
below) at any one time outstanding, as Borrower may request (the
"Loan(s)"). During such period Borrower may borrow, repay and reborrow
hereunder. Each borrowing shall be in the amount of at least $100,000
or the remaining unused amount of the Commitment.
SECTION 1.2 NOTE. The Loans shall be evidenced by a promissory
note (the "Note"), substantially in the form of Exhibit A, with
appropriate insertions, dated the date hereof, payable to the order of
Lender and in the principal amount of the Commitment. Lender may at any
time and from time to time at Lender's sole option attach a schedule
(grid) to the Note and endorse thereon notations with respect to each
Loan specifying the date and principal amount thereof, the Interest
Period (as defined below)(if applicable), the applicable interest rate
and rate option, and the date and amount of each payment of principal
and interest made by Borrower with respect to each such Loan. Lender's
endorsements as well as its records relating to Loans shall be
rebuttably presumptive evidence of the outstanding principal and
interest on the Loans, and, in the event of inconsistency, shall prevail
over any records of Borrower and any written confirmations of the Loans
given by Borrower. The principal of the Note shall be payable on or
before the Termination Date.
SECTION 2 INTEREST AND FEES
SECTION 2.l INTEREST RATE. Borrower agrees to pay interest on
the unpaid principal amount from time to time outstanding hereunder at
the following rate per year:
(a) before maturity of any Loan, whether by acceleration or
otherwise, at the option of Borrower, subject to the terms hereof at a
rate equal to:
1<PAGE>
<PAGE> 2
(i) The "Prime-Based Rate", which shall mean the Prime Rate
(as hereinafter defined) minus the Prime Rate Margin (as
defined below);
(ii) The "Bank Offered Rate", which shall be equal to that
rate of interest offered by Lender and accepted by Borrower
and fixed for periods of up to one year; or
(iii) "Federal Funds Rate", which shall mean the weighted
average of the rates on overnight Federal funds transactions,
with members of the Federal Reserve System only, arranged by
Federal funds brokers, plus the Federal Funds Margin (as
defined below). The Federal Funds Rate shall be determined
by the Lender on the basis of reports by Federal funds
brokers to, and published daily by, the Federal Reserve Bank
of New York in the Composite Closing Quotations for U.S.
Government Securities. If such publication is unavailable or
the Federal Funds Rate is not set forth therein, the Federal
Funds Rate shall be determined on the basis of any other
source reasonably selected by the Lender. The Federal Funds
Rate applicable each day shall be the Federal Funds Rate
reported as applicable to Federal funds transactions on that
date. In the case of Saturday, Sunday or legal holiday, the
Federal Funds Rate shall be the rate applicable to Federal
funds transactions on the immediately preceding day for which
the Federal Funds Rate is reported.
(b) After the maturity of any Loan, whether by acceleration
or otherwise, such Loan shall bear interest until paid at a rate
equal to two percent (2%) in addition to the rate in effect
immediately prior to maturity (but in any event not less than the
Prime Rate in effect at maturity).
SECTION 2.2 RATE SELECTION. Borrower shall select and change
its selection of the interest rate as among the Bank Offered Rate,
the Federal Funds Rate and the Prime-Based Rate, as applicable, to
apply to at least $100,000 and in integral multiples of $100,000
thereafter of any Loan or portion thereof, subject to the
requirements herein stated:
(a) At the time any Loan is made;
(b) At the expiration of a particular Bank Offered Rate
selected for the outstanding principal balance of any
Loan or portion of any Loan currently bearing interest
at the Bank Offered Rate; and
(c) At any time for the outstanding principal balance
of any Loan or portion thereof currently bearing
interest at the Prime-Based Rate or the Federal Funds
Rate.
SECTION 2.3 RATE CHANGES AND NOTIFICATIONS.
2 <PAGE>
<PAGE> 3
(a) Bank Offered Rate. If the Borrower wishes to borrow funds at
the Bank Offered Rate or to change the rate of interest on any Loan
or portion thereof to the Bank Offered Rate, it shall, at or before
l0:00 A.M., Chicago time on the date such borrowing or change is to
take effect, which shall be a Banking Day (as hereinafter defined)
of the Lender, give written or telephonic notice thereof, which
shall be irrevocable. Such notice shall specify the Loan or
portion thereof to which the Bank Offered Rate is to apply and the
desired Interest Period (but not to exceed the Termination Date).
The Lender shall then in its sole discretion offer or decline to
offer a Bank Offered Rate (and if it offers a Bank Offered Rate,
the rate of such Bank Offered Rate shall be in the Lender's sole
discretion), and the Borrower shall irrevocably accept or decline
such particular Bank Offered Rate and the related Loan or portion
thereof and confirm such acceptance in writing by letter or other
written communication dated and sent the date of such borrowing or
change. Without limiting the Borrower's obligations under any
other document or instrument, the Lender may in offering such Bank
Offered Rate and the related Loan or portion thereof rely without
inquiry upon any person whom it reasonably believes to be a party
authorized to accept or decline such Bank Offered Rate and the
related Loan or portion thereof.
(b) Federal Funds Rate and Prime-Based Rate. If the
Borrower wishes to borrow funds at the Federal Funds
Rate or the Prime-Based Rate or to change the rate of
interest on any Loan to either the Federal Funds Rate or
the Prime-Based Rate, it shall, at or before l0:00 A.M.,
Chicago time on the date such borrowing or change is to
take effect, which shall be a banking day of the Lender,
give written or telephonic notice thereof, which shall
be irrevocable. Such notice shall specify the advance
and the desired interest rate option.
(c) Failure to Notify. If Borrower does not notify
Lender at the expiration of a selected Interest Period
with respect to any principal outstanding at the Bank
Offered Rate, then in the absence of such notice
Borrower shall be deemed to have elected to have such
principal accrue interest after the respective Bank
Offered Rate Interest Period at the Federal Funds Rate.
If Borrower does not notify Lender as to its selection
of the interest rate option with respect to any new
Loan, then in the absence of such notice Borrower shall
be deemed to have elected to have such initial advance
accrue interest at the Federal Funds Rate.
SECTION 2.4 INTEREST PAYMENT DATES. Accrued interest shall
be paid in respect of each portion of principal to which the Prime-
Based Rate or the Federal Funds Rate applies on the last day of
each month of each year, beginning with the first of such dates to
occur after the date of the first Loan or portion thereof, at
maturity, and upon payment in full, and to each portion of
principal to which any other interest rate option applies, the end
of each respective Interim Maturity Date, every three months, at
maturity, and upon payment in full, whichever is earlier or more
frequent. After maturity of any installment, interest shall be
payable upon demand.
3<PAGE>
<PAGE> 4
SECTION 2.5 ADDITIONAL PROVISIONS WITH RESPECT TO BANK
OFFERED RATE AND FEDERAL FUNDS RATE LOANS.
The selection by Borrower of the Bank Offered Rate or the
Federal Funds Rate and the maintenance of Loans or portions thereof
at such rate shall be subject to the following additional terms and
conditions:
(a) Availability of Deposits at a Determinable Rate.
If, after Borrower has elected to borrow or maintain any
Loan or portion thereof at the Federal Funds Rate,
Lender notifies Borrower that reasonable means do not
exist for Lender to determine the Federal Funds Rate for
the amount and maturity requested, as determined by the
Lender in its sole discretion, then the principal
subject to the Federal Funds Rate shall accrue or shall
continue to accrue interest at the Prime-Based Rate.
(b) Prohibition of Making, Maintaining, or Repayment of
Principal at the Federal Funds Rate. If any treaty,
statute, regulation, interpretation thereof, or any
directive, guideline, or otherwise by a central bank or
fiscal authority (whether or not having the force of
law) shall either prohibit or extend the time at which
any principal subject to the Federal Funds Rate may be
purchased, maintained, or repaid, then on and as of the
date the prohibition becomes effective, the principal
subject to that prohibition shall continue at the Prime-
Based Rate.
(c) Payments of Principal and Interest to be Inclusive
of Any Taxes or Costs. All payments of principal and
interest shall include any taxes and costs incurred by
Lender resulting from having principal outstanding
hereunder at the Bank Offered Rate or the Federal Funds
Rate. Without limiting the generality of the preceding
obligation, illustrations of such taxes and costs are:
(i) Taxes (or the withholding of amounts for
taxes) of any nature whatsoever including income,
excise, and interest equalization taxes (other than
income taxes imposed by the United States or any
state thereof on the income of Lender), as well as
all levies, imposts, duties, or fees whether now in
existence or resulting from a change in, or
promulgation of, any treaty, statute, regulation,
interpretation thereof, or any directive,
guideline, or otherwise, by a central bank or
fiscal authority (whether or not having the force
of law) or a change in the basis of, or time of
payment of, such taxes and other amounts resulting
therefrom;
(ii) Any other costs resulting from compliance
with treaties, statutes, regulations,
interpretations, or any directives or guidelines,
or otherwise
4<PAGE>
<PAGE> 5
by a central bank or fiscal authority
(whether or not having the force of law);
(iii) Any loss (including loss of anticipated
profits) or expense incurred by reason of the
liquidation or re-employment of deposits acquired
by Lender;
(A) To make a Loan or portion thereof or
maintain principal outstanding at the Federal
Funds Rate or the Bank Offered Rate; or
(B) As the result of a voluntary prepayment
at a date other than the Interim Maturity Date
selected for principal outstanding at the Bank
Offered Rate; or
(C) As the result of a mandatory repayment
at a date other than that Interim Maturity
Date selected for principal outstanding at the
Bank Offered Rate as a result of the
occurrence of an Event of Default and the
acceleration of any portion of the
indebtedness hereunder; or
(D) As the result of a prohibition on
making, maintaining, or repaying principal
outstanding at the Bank Offered Rate or the
Federal Funds Rate.
If Lender incurs any such taxes or costs, Borrower, upon
demand in writing specifying such taxes and costs, shall
promptly pay them; save for manifest error Lender's
specification shall be presumptively deemed correct.
SECTION 2.6 BASIS OF COMPUTATION. Interest shall be computed
for the actual number of days elapsed on the basis of a year
consisting of 360 days, including the date a Loan is made and
excluding the date a Loan or any portion thereof is paid or
prepaid.
SECTION 2.7 COMMITMENT FEE, REDUCTION OF COMMITMENT.
Borrower agrees to pay Lender a commitment fee (the "Commitment
Fee") of 0.15% per year on the average daily unused amount of the
Commitment. The Commitment Fee shall commence to accrue on the
date of this Agreement and shall be paid on the last day of each
March, June, September and December in each year, beginning with
the first of such dates to occur after the date of this Agreement,
at maturity and upon payment in full. At any time or from time to
time, upon at least ten days prior written notice, which shall be
irrevocable, Borrower may reduce the Commitment in the amount of at
least $1,000,000 or in full. Upon any such reduction of any part
of the unused Commitment,
5<PAGE>
<PAGE> 6
the Commitment Fee on the part reduced shall be paid in full as of
the date of such reduction.
SECTION 3 PAYMENTS AND PREPAYMENTS
SECTION 3.1 PREPAYMENTS. Borrower may prepay without penalty
or premium any principal bearing interest at the Prime-Based Rate
or the Federal Funds Rate. If Borrower prepays any principal
bearing interest at the Bank Offered Rate in whole or in part, or
if the maturity of any such Bank Offered Rate principal is
accelerated, then, to the fullest extent permitted by law Borrower
shall also pay Lender for all losses (including but not limited to
interest rate margin and any other losses of anticipated profits)
and expenses incurred by reason of the liquidation or re-employment
of deposits acquired by Lender to make the Loan or maintain
principal outstanding at the Bank Offered Rate. The losses shall
be determined based on a present value of the positive difference
(if any) between the Bank Offered Rate applicable to the Loan or
portion of the Loan prepayed and the Lender's reinvestment rate.
Upon Lender's demand in writing specifying such losses and
expenses, Borrower shall promptly pay them; Lender's specification
shall be deemed correct in the absence of obvious error. All Loans
or portions thereof made at the Bank Offered Rate shall be
conclusively deemed to have been funded by or on behalf of Lender
by the purchase of deposits corresponding in amount and maturity to
the amount and interest periods selected (or deemed to have been
selected) by Borrower under this Agreement. Any partial repayment
or prepayment shall be in an amount of at least $100,000.
SECTION 3.2 MANDATORY PREPAYMENTS. The Borrower shall
immediately repay the Loans at any time or from time to time when
the aggregate amount of Loans outstanding hereunder exceeds the
Commitment on such day so that, after giving effect to such
repayment, the aggregate amount of Loans outstanding hereunder is
at all times equal to or less than the Commitment on such date.
SECTION 3.3 FUNDS. All payments of principal, interest and
Commitment Fee shall be made in immediately available funds to
Lender at its banking office indicated above or as otherwise
directed by Lender.
SECTION 4 REPRESENTATIONS AND WARRANTIES
To induce Lender to make each of the Loans, Borrower
represents and warrants to Lender that:
SECTION 4.l ORGANIZATION. Borrower is existing and in good
standing as a duly qualified and organized bank holding company.
Borrower and any Subsidiary (as defined below) are existing and in
good standing under the laws of their respective jurisdiction, and
are duly qualified, in good standing and authorized to do business
in each jurisdiction where failure to do so might have a material
adverse impact on the
6<PAGE>
<PAGE> 7
consolidated assets, condition or prospects of Borrower. Borrower
and any Subsidiary have the power and authority to own their
properties and to carry on their businesses as now being conducted.
SECTION 4.2 AUTHORIZATION; NO CONFLICT. The execution,
delivery and performance of this Agreement and all related
documents and instruments: (a) are within Borrower's powers; (b)
have been authorized by all necessary corporate action; (c) have
received any and all necessary governmental approval; and (d) do
not and will not contravene or conflict with any provision of law
or charter or by-laws of Borrower or any agreement affecting
Borrower or its property.
SECTION 4.3 FINANCIAL STATEMENTS. Borrower has supplied
copies of the following financial or other statements to Lender:
(a) The Borrower's unaudited consolidated financial
statements as at March 31, 1998; and
(b) The Borrower's audited consolidated and
consolidating financial statements as at December 31,
1997.
Such statements have been furnished to Lender, have been prepared
in conformity with generally accepted accounting principles applied
on a basis consistent with that of the preceding fiscal year, and
fairly present the financial condition of Borrower and any
Subsidiary as at such dates and the results of their operations for
the respective periods then ended. Since the date of those
financial statements, no material adverse change in the business,
condition, properties, assets, operations, or prospects of Borrower
or any Subsidiary has occurred of which Lender has not been advised
in writing before this Agreement was signed. There is no known
contingent liability of Borrower or any Subsidiary which is known
to be in an amount in excess of $1,000,000 (excluding loan
commitments, letters of credit, and other contingent liabilities
incurred in the ordinary course of the banking business) in excess
of insurance for which the insurer has confirmed coverage in
writing which is not reflected in such financial statements or of
which Lender has not been advised in writing before this Agreement
was signed.
SECTION 4.4 TAXES. Borrower and any Subsidiary have filed
or caused to be filed all federal, state and local tax returns
which, to the knowledge of Borrower or any Subsidiary, are required
to be filed, and have paid or have caused to be paid all taxes as
shown on such returns or on any assessment received by them, to the
extent that such taxes have become due (except for current taxes
not delinquent and taxes being contested in good faith and by
appropriate proceedings for which adequate reserves have been
provided on the books of Borrower or the appropriate Subsidiary,
and as to which no foreclosure, sale or similar proceedings have
been commenced). Borrower and any Subsidiary have set up reserves
which are adequate for the payment of additional taxes for years
which have not been audited by the respective tax authorities.
7<PAGE>
<PAGE> 8
SECTION 4.5 LIENS. None of the assets of Borrower or any
Subsidiary are subject to any mortgage, pledge, title retention
lien, or other lien, encumbrance or security interest: except: (a)
for current taxes not delinquent or taxes being contested in good
faith and by appropriate proceedings; (b) for liens arising in the
ordinary course of business for sums not due or sums being
contested in good faith and by appropriate proceedings, but not
involving any deposits or Loan or portion thereof or borrowed money
or the deferred purchase price of property or services; (c) to the
extent specifically shown in the financial statements referred to
above; (d) for liens in favor of Lender; and (e) liens and security
interests securing deposits of public funds, repurchase agreements,
Federal funds purchased, trust assets, and other similar liens
granted in the ordinary course of the banking business.
SECTION 4.6 ADVERSE CONTRACTS. Neither Borrower nor any
Subsidiary is a party to any agreement or instrument or subject to
any charter or other corporate restriction, nor is it subject to
any judgment, decree or order of any court or governmental body,
which may have a material and adverse effect on the business,
assets, liabilities, financial condition, operations or business
prospects of Borrower and its Subsidiaries taken as a whole or on
the ability of Borrower to perform its obligations under this
Agreement or the Note. Neither Borrower nor any Subsidiary has,
nor with reasonable diligence should have had, knowledge of or
notice that it is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any such agreement, instrument, restriction, judgment,
decree or order.
SECTION 4.7 REGULATION U. Borrower is not engaged
principally in, nor is one of Borrower's important activities, the
business of extending credit for the purpose of purchasing or
carrying "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System as now and from
time to time hereinafter in effect.
SECTION 4.8 LITIGATION AND CONTINGENT LIABILITIES. No
litigation (including derivative actions), arbitration proceedings
or governmental proceedings are pending or threatened against
Borrower which would (singly or in the aggregate), if adversely
determined, have a material and adverse effect on the financial
condition, continued operations or prospects of Borrower or any
Subsidiary, except as and if set forth (including estimates of the
dollar amounts involved) in a schedule furnished by Borrower to
Lender before this Agreement was signed.
SECTION 4.9 FDIC INSURANCE. The deposits of each Subsidiary
Bank of the Borrower are insured by the FDIC and no act has
occurred which would adversely affect the status of such Subsidiary
Bank as an FDIC insured bank.
8<PAGE>
<PAGE> 9
SECTION 4.10 INVESTIGATIONS. Neither the Borrower nor any
Subsidiary Bank is under investigation by, or is operating under
the restrictions imposed by or agreed to in connection with, any
regulatory authority.
SECTION 4.11 SUBSIDIARIES. Attached hereto as Exhibit B is
a correct and complete list of all Subsidiaries of Borrower.
SECTION 4.12 YEAR 2000.
(a) Borrower has:
(i) conducted an analysis of all of its products,
services, businesses and operations, including
without limitation surveys of Borrower's Systems
(as defined below) and surveys of and discussions
with customers, suppliers and vendors, to determine
the extent to which Borrower or its Subsidiaries
may be adversely affected by the Borrower's or its
Subsidiaries' failure to be Year 2000 Compliant (as
defined below);
(ii) developed a plan (the "Year 2000 Plan") to
become Year 2000 Compliant and remedy any material
loss it may suffer if it fails to be Year 2000
Compliant on a timely basis; and
(iii) implemented and continues to proceed with the
Year 2000 Plan materially in accordance with its
terms and timetables.
(b) Borrower reasonably believes that the Year 2000
Plan, if implemented in accordance with its terms,
will result in the Borrower being Year 2000
Compliant on a timely basis.
(c) Borrower reasonably believes that each of its
customers, suppliers and vendors whose failure to
be Year 2000 Compliant would have a material and
adverse effect on the Borrower, is Year 2000
Compliant or has developed a plan to become Year
2000 Compliant and remedy any material loss such
person may suffer if it fails to be Year 2000
Compliant on a timely basis with respect to all of
its own computer systems and applications.
Borrower acknowledges and agrees that this Agreement and any other
representation, warranty, schedule, certificate, statement, report,
notice or other writing now or hereafter furnished by or on behalf
of Borrower to the Lender in connection with being Year 2000
Compliant or its Year 2000 Plan is material to the Lender and that
the Lender has relied and will continue to rely thereon. The
Borrower agrees to provide such information, financial, technical
or otherwise, concerning Borrower's Year 2000 Plan as Lender may
reasonably request from time to time.
SECTION 5 COVENANTS
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Until all obligations of Borrower hereunder and under the Note are
paid and fulfilled in full, Borrower agrees that it shall, and shall
cause any Subsidiary to, comply with the following covenants, unless
Lender consents otherwise in writing:
SECTION 5.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Borrower
shall furnish (or cause to be furnished) to Lender:
(a) Interim Reports. Within forty-five (45) days after the end
of each quarter of each fiscal year of Borrower, a copy of an
unaudited financial statement of Borrower and any Subsidiary
prepared on a consolidated basis consistent with the
consolidated financial statements of Borrower and any
Subsidiary referred to above, signed by an authorized officer
of Borrower and consisting of at least: (i) a balance sheet
as at the close of such quarter; and (ii) a statement of
earnings and source and application of funds for such quarter
and for the period from the beginning of such fiscal year to
the close of such quarter.
(b) Audit Report. Within 90 days after the end of each fiscal
year of Borrower, a copy of an annual report of Borrower and
any Subsidiary prepared on a consolidating and consolidated
basis and in conformity with generally accepted accounting
principles applied on a basis consistent with the
consolidating and consolidated financial statements of
Borrower and any Subsidiary referred to above, duly audited
by independent certified public accountants of recognized
standing satisfactory to Lender, accompanied by an opinion
without significant qualification.
(c) Certificates. Contemporaneously with the furnishing of a
copy of each annual report and of each quarterly statement
provided for in this Section, a certificate dated the date of
such annual report or such quarterly statement and signed by
either the President, the Chief Financial Officer or the
Treasurer of Borrower, to the effect that no Event of Default
or Unmatured Event of Default has occurred and is continuing,
or, if there is any such event, describing it and the steps,
if any, being taken to cure it, and containing (except in the
case of the certificate dated the date of the annual report)
a computation of, and showing compliance with, any financial
ratio or restriction contained in this Agreement.
(d) Reports to SEC and to Shareholders. Copies of each filing
and report made by Borrower or any Subsidiary with or to any
securities exchange or the Securities and Exchange
Commission, except in respect of any single shareholder, and
of each communication from Borrower or any Subsidiary to
shareholders generally, promptly upon the filing or making
thereof.
(e) Notice of Default, Litigation and ERISA Matters. Immediately
upon learning of the occurrence of any of the following,
written notice describing the same and
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the steps being taken by Borrower or any Subsidiary affected in respect
thereof: (i) the occurrence of an Event of Default or an Unmatured Event
of Default; (ii) the institution of, or any adverse determination in,
any litigation, arbitration or governmental proceeding which is material
to Borrower or any Subsidiary on a consolidated basis; (iii) the
occurrence of a reportable event under, or the institution of steps by
Borrower or any Subsidiary to withdraw from, or the institution of any
steps to terminate, any employee benefit plans as to which Borrower or
any of its Subsidiaries may have any liability and which may have a
material adverse impact on the ability of Borrower to repay the Loans in
full on a timely basis; or (iv) the issuance of any cease and desist
order, memorandum of understanding, cancellation of insurance, or
proposed disciplinary action from the FDIC or other regulatory entity.
(f) Acquisition Documents. Within ten (10) days after
the date hereof, evidence of consummation of the
Borrower's acquisition of 16 branches from PNC Bank, N.A.
in form and substance satisfactory to Lender and its
counsel.
(g) Notice of Change of Ownership. Within ten (10) days
thereafter, written notice of any liquidation,
dissolution, or merger, or consolidation by the Borrower
or any Subsidiary with or into any other entity, or sale,
lease, transfer or other disposition of all or a
substantial part of their assets other than in the
ordinary course of business as now conducted.
(h) Other Information. From time to time such other
information, financial or otherwise, concerning Borrower
or any Subsidiary as Lender may reasonably request.
SECTION 5.2 INSPECTION. At Borrower's expense if an Event of
Default or Unmatured Event of Default has occurred or is continuing,
Borrower and any Subsidiary shall permit Lender and its agents at any
time during normal business hours to inspect their properties and to
inspect and make copies of their books and records.
SECTION 5.3 FINANCIAL REQUIREMENTS.
(a) Net Worth. The Borrower shall maintain at all times
a minimum consolidated Tangible Net Worth (as defined
below) equal to at least the Tangible Net Worth Amount
(as defined below). The parties hereto agree that the
Tangible Net Worth Amount as at June 30, 1998 shall be
deemed to be $100,000,000.
(b) Total Debt to Net Worth. The Borrower's total
indebtedness for borrowed money (specifically excluding
the Capital Securities Indebtedness and the indebtedness
for borrowed money of the Borrower's Subsidiaries) shall
not at any time exceed thirty percent (30%) of its
Tangible Net Worth (provided that nothing
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in this paragraph shall permit the Borrower to borrow except as
specifically permitted elsewhere in this Agreement).
(c) Leverage Ratio. The Borrower shall maintain at all
times a Leverage Ratio of at least four and three-fourths
of one percent (4.75%), calculated on a consolidated
basis. Each Subsidiary Bank shall maintain at all times
a Leverage Ratio at least five percent (5%).
(d) Total Capital Ratio. The Borrower shall maintain at
all times a Total Capital Ratio of not less than nine
percent (9%), calculated on a consolidated basis. Each
Subsidiary Bank shall maintain at all times a Total
Capital Ratio of not less than ten percent (10%).
(e) Tier 1 Capital Ratio. The Borrower shall maintain at
all times a Tier 1 Capital Ratio of not less than six
percent (6%), calculated on a consolidated basis. Each
Subsidiary Bank shall maintain at all times a Tier 1
Capital Ratio of not less than six percent (6%).
(f) Nonperforming Assets. All assets of all Subsidiary
Banks and other Subsidiaries classified as "non-
performing" (which shall include all loans in non-accrual
status, more than ninety (90) days past due in principal
or interest, restructured or renegotiated, or listed as
"other restructured" or "other real estate owned") on the
FDIC or other regulatory agency call report shall not
exceed at any time three percent (3%) of the loans of the
Borrower and its Subsidiaries on a consolidated basis.
(h) Net Chargeoffs to Loans. The Subsidiary Banks on a
consolidated basis shall not incur Net Chargeoffs in an
amount greater than eighty-five one-hundredths of one
percent (0.85%) of its average loans, calculated on a
rolling four quarters basis as at the last day of each
calendar quarter.
(i) Loan Loss Reserves Ratio. Each Subsidiary Bank
shall maintain at all times on a consolidated basis a
ratio of loan loss reserves to non-performing loans of
not less than one hundred percent (100%).
SECTION 5.4 INDEBTEDNESS, LIENS AND TAXES. Borrower and any
Subsidiary shall:
(a) Indebtedness. Not incur, permit to remain
outstanding, assume or in any way become committed for
indebtedness in respect of borrowed money (specifically
including but not limited to indebtedness in respect of
money borrowed from financial institutions but excluding
deposits), except: (i) indebtedness incurred hereunder or
to Lender; (ii) indebtedness existing on the date of this
Agreement shown on the financial statements furnished to
Lender before this Agreement was
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signed; and (iii) indebtedness of the Subsidiary Banks arising
in the ordinary course of the banking business of the
Subsidiary Banks.
(b) Liens. Not create, suffer or permit to exist any
lien or encumbrance of any kind or nature upon any of
their assets now or hereafter owned or acquired
(specifically including but not limited to the capital
stock of any of the Subsidiary Banks), or acquire or
agree to acquire any property or assets of any character
under any conditional sale agreement or other title
retention agreement, but this Section shall not be deemed
to apply to: (i) liens existing on the date of this
Agreement of which Lender has been advised in writing
before this Agreement was signed; (ii) liens of
landlords, contractors, laborers or supplymen, tax liens,
or liens securing performance or appeal bonds, or other
similar liens or charges arising out of Borrower's
business, provided that tax liens are removed before
related taxes become delinquent and other liens are
promptly removed, in either case unless contested in good
faith and by appropriate proceedings, and as to which
adequate reserves shall have been established and no
foreclosure, sale or similar proceedings have commenced;
(iii) liens in favor of Lender; (iv) liens in an
aggregate amount at any time or from time to time not to
exceed $2,500,000 and (v) liens on the assets of any
Subsidiary Bank arising in the ordinary course of the
banking business of such Subsidiary Bank.
(c) Taxes. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon them, upon
their income or profits or upon any properties belonging
to them, prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials and
supplies when due, except that no such tax, assessment,
charge, levy or claim need be paid which is being
contested in good faith by appropriate proceedings as to
which adequate reserves shall have been established, and
no foreclosure, sale or similar proceedings have
commenced.
(d) Guaranties. Not assume, guarantee, endorse or
otherwise become or be responsible in any manner (whether
by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or loan or any portion
thereof any funds, assets, goods or services, or
otherwise) with respect to the obligation of any other
person or entity, except: (i) by the endorsement of
negotiable instruments for deposit or collection in the
ordinary course of business, issuance of letters of
credit or similar instruments or documents in the
ordinary course of business; (ii) the Capital Securities
Guarantee; and (iii) except as permitted by this
Agreement.
SECTION 5.5 INVESTMENTS AND LOANS. Neither Borrower nor any
Subsidiary shall make any loan, advance, extension of credit or capital
contribution to, or purchase or otherwise acquire for a consideration,
evidences of indebtedness, capital stock or other securities of any
legal entity, except that Borrower and any Subsidiary may:
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(a) purchase or otherwise acquire and own short-term
money market items (specifically including but not
limited to preferred stock mutual funds);
(b) invest, by way of purchase of securities or capital
contributions, in the Subsidiary Banks or any other bank
or banks, and upon Borrower's purchase or other
acquisition of twenty-five percent (25%) or more of the
stock of any bank, such bank shall thereupon become a
"Subsidiary Bank" for all purposes under this Agreement;
(c) invest, by way of loan, advance, extension of credit
(whether in the form of lease, conditional sales
agreement, or otherwise), purchase of securities, capital
contributions, or otherwise, in Subsidiaries other than
banks or Subsidiary Banks; and
(d) make any investment permitted by applicable
governmental laws and regulations.
Nothing in this Section 5.5 shall prohibit the Borrower or any
Subsidiary Bank from making loans, advances, or other extensions of
credit in the ordinary course of banking upon substantially the same
terms as heretofore extended by them in such business or upon such terms
as may at the time be customary in the banking business.
SECTION 5.6 CAPITAL STRUCTURE. Borrower shall continue to own,
directly or indirectly, the same (or greater) percentage of the stock
and partnership, joint venture, or other equity interest in each
Subsidiary that it held on the date of this Agreement, and no Subsidiary
shall issue any additional stock or partnership, joint venture or other
equity interests, options or warrants in respect thereof, or securities
convertible into such securities or interests, other than to Borrower.
SECTION 5.7 MAINTENANCE OF PROPERTIES. Borrower and any
Subsidiary shall maintain, or cause to be maintained, in good repair,
working order and condition, all their properties (whether owned or held
under lease), and from time to time make or cause to be made all needed
and appropriate repairs, renewals, replacements, additions, and
improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 5.8 INSURANCE. Borrower and any Subsidiary shall maintain
insurance in responsible companies in such amounts and against such
risks as is required by law and such other insurance, in such amount and
against such hazards and liabilities, as is customarily maintained by
bank holding companies and banks similarly situated. Each Subsidiary
Bank shall have deposits insured by the FDIC.
SECTION 5.9 USE OF PROCEEDS.
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(a) General. Borrower and any Subsidiary shall not use
or permit any proceeds of the Loans to be used, either
directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of "purchasing or
carrying any margin stock" within the meaning of
Regulations U or X of the Board of Governors of the
Federal Reserve System, as amended from time to time. If
requested by Lender, Borrower and any Subsidiary will
furnish to Lender a statement in conformity with the
requirements of Federal Reserve Form U-1. No part of the
proceeds of the Loans will be used for any purpose which
violates or is inconsistent with the provisions of
Regulation U or X of the Board of Governors.
(b) Tender Offers and Going Private. Neither Borrower
nor any Subsidiary shall use (or permit to be used) any
proceeds of the Loans to acquire any security in any
transaction which is subject to Section 13 or 14 of the
Securities Exchange Act of 1934, as amended, or any
regulations or rulings thereunder.
SECTION 5.10 COMPLIANCE WITH LAW. The Borrower and each
Subsidiary shall be in material compliance with all laws and regulations
(whether federal, state or local and whether statutory, administrative,
judicial or otherwise) and with every lawful governmental order or
similar actions (whether administrative or judicial), specifically
including but not limited to all requirements of the Bank Holding
Company Act of 1956, as amended, and with the existing regulations of
the Board of Governors of the Federal Reserve System relating to bank
holding companies.
SECTION 5.11 CAPITAL SECURITIES OBLIGATIONS. The Borrower shall
not, and shall not permit any Subsidiary to, (a) purchase, accelerate
the maturity date of, prepay or defease any of the Capital Securities
Indebtedness or the Capital Securities or (b) supplement, modify or
amend any term or provision of the Capital Securities Issuer's
Certificate of Trust, the Indenture, the Capital Securities Guarantee,
or any other agreement, document or instrument creating or evidencing
the Capital Securities Indebtedness, the Capital Securities Guarantee or
the Capital Securities. The Borrower shall continue to own all of the
Common Securities of the Capital Securities Issuer while the Capital
Securities, the Capital Securities Guarantee or the Capital Securities
Indebtedness are outstanding. The Borrower shall provide prompt notice
to the Lender of (a) any change in the Trustee under the Indenture and
(b) any change in the address for notice to such Trustee thereunder.
SECTION 6 CONDITIONS OF LENDING
SECTION 6.l DOCUMENTATION; NO DEFAULT. The obligation of Lender
to make any Loan is subject to the following conditions precedent:
(a) Initial Documentation. Lender shall have received
all of the following promptly upon the execution and
delivery hereof, each duly executed and dated the date
hereof, in form and substance satisfactory to Lender and
its counsel, at
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the expense of Borrower, and in such number of signed
counterparts as Lender may request (except for the Note, of
which only the original shall be signed):
(i) Note. The Note in the form of Exhibit A, with
appropriate insertions;
(ii) Resolution; Certificate of Incumbency. A copy
of a resolution of the Board of Directors of
Borrower authorizing or ratifying the execution,
delivery and performance, respectively, of this
Agreement, the Note and the other documents provided
for in this Agreement, certified by an appropriate
officer of Borrower, together with a certificate of
an appropriate officer of Borrower, certifying the
names of the officer(s) of Borrower authorized to
sign this Agreement, the Note and the other
documents provided for in this Agreement, together
with a sample of the true signature of each such
person (Lender may conclusively rely on such
certificate until formally advised by a like
certificate of any changes therein);
(iii) Governing Documents. A copy of the articles
of incorporation and by-laws of Borrower, certified
by an appropriate officer of Borrower;
(iv) Certificate of No Default. A certificate
signed by an appropriate officer of Borrower to the
effect that: (A) no Event of Default or Unmatured
Event of Default has occurred and is continuing or
will result from the making of the first Loan; and
(B) the representations and warranties of Borrower
contained herein are true and correct as at the date
of the first Loan as though made on that date;
(v) Opinion of Counsel to Borrower. An opinion of
counsel to Borrower to such effect as Lender may
require; and
(vi) Miscellaneous. Such other documents and
certificates as Lender may reasonably request.
(b) Representations and Warranties True. At the date of
each Loan, Borrower's representations and warranties set
forth herein shall be true and correct as of such date as
though made on such date.
(c) No Default. At the time of each Loan, and
immediately after giving effect to such Loan, no Event of
Default or Unmatured Event of Default shall have occurred
and be continuing at the time of such Loan, or would
result from the making of such Loan.
SECTION 6.2 AUTOMATIC UPDATE OF REPRESENTATIONS AND WARRANTIES AND
NO-DEFAULT CERTIFICATE; CERTIFICATE AT LENDER'S OPTION. The request by
Borrower for any Loan shall be deemed a
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representation and warranty by Borrower that the statements in
subsections (b) and (c) of Section 6.l are true and correct on and as at
the date of each succeeding Loan, as the case may be. Upon receipt of
each Loan request Lender in its sole discretion shall have the right to
request that Borrower provide to Lender, prior to Lender's funding of
the Loan, a certificate executed by Borrower's President, Treasurer, or
Chief Financial Officer to such effect.
SECTION 7 DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an "Event of Default":
(a) failure to pay, when and as due, any principal,
interest or other amounts payable hereunder; or
(b) any default, event of default, or similar event shall
occur or continue under any other instrument, document,
note, agreement, or guaranty delivered to Lender in
connection with this Agreement, or any such instrument,
document, note, agreement, or guaranty shall not be, or
shall cease to be, enforceable in accordance with its
terms; or
(c) there shall occur any default or event of default, or
any event or condition that might become such with notice
or the passage of time or both, or any similar event, or
any event that requires the prepayment of borrowed money
or the acceleration of the maturity thereof, under the
terms of any evidence of indebtedness or other agreement
issued or assumed or entered into by Borrower, any
Subsidiary or any Guarantor, or under the terms of any
indenture, agreement, or instrument under which any such
evidence of indebtedness or other agreement is issued,
assumed, secured, or guaranteed, and such event shall
continue beyond any applicable period of grace; or
(d) any representation, warranty, schedule, certificate,
financial statement, report, notice, or other writing
furnished by or on behalf of Borrower, any Subsidiary or
any Guarantor to Lender is false or misleading in any
material respect on the date as of which the facts
therein set forth are stated or certified; or
(e) Borrower or any Subsidiary shall fail to comply with
Section 5.2(f) hereof; or failure to comply with or
perform any agreement or covenant of Borrower contained
herein, which failure does not otherwise constitute an
Event of Default, and such failure shall continue
unremedied for thirty (30) days after notice thereof to
Borrower by Lender; or
(f) Any Guarantor shall dissolve, liquidate, merge,
consolidate, or cease to be in existence for any reason;
or
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(g) any proceeding (judicial or administrative) shall be
commenced against Borrower, any Subsidiary or any
Guarantor, or with respect to any assets of Borrower, any
Subsidiary or any Guarantor which shall reasonably
threaten to have a material and adverse effect on the
assets, condition or prospects of Borrower, any
Subsidiary or any Guarantor; or final judgment(s) and/or
settlement(s) in an aggregate amount in excess of
$1,000,000 in excess of insurance for which the insurer
has confirmed coverage in writing, a copy of which
writing has been furnished to Lender, shall be entered or
agreed to in any suit or action commenced against
Borrower, any Subsidiary or any Guarantor; or
(h) the FDIC or other regulatory entity shall issue or
agree to enter into a letter agreement, memorandum of
understanding, or a cease and desist order with or
against the Borrower or any Subsidiary; or the FDIC or
other regulatory entity shall issue or enter into an
agreement, order, or take any similar action with or
against the Borrower or any Subsidiary materially adverse
to the business or operation of the Borrower or any
Subsidiary; or
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, liquidation, dissolution, or
similar proceeding, domestic or foreign, is instituted
by or against Borrower, any Subsidiary or any Guarantor;
or Borrower, any Subsidiary or any Guarantor shall take
any steps toward, or to authorize, such a proceeding; or
(j) Borrower, any Subsidiary or any Guarantor shall
become insolvent, generally shall fail or be unable to
pay its debts as they mature, shall admit in writing its
inability to pay its debts as they mature, shall make a
general assignment for the benefit of its creditors,
shall enter into any composition or similar agreement, or
shall suspend the transaction of all or a substantial
portion of its usual business.
SECTION 7.2 DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any
Event of Default specified in Section 7.l (a)-(h), Lender
at its option may declare the Note (principal, interest
and other amounts) and any other amounts owed to the
Lender, including without limitation any accrued but
unpaid Commitment Fee, immediately due and payable
without prior notice or demand of any kind. Upon the
occurrence of any Event of Default specified in Section
7.l (i)-(j), the Note (principal, interest and other
amounts) and any other amounts owed to the Lender,
including without limitation any accrued but unpaid
Commitment Fee, shall be immediately and automatically
due and payable without action of any kind on the part of
Lender. Upon the occurrence and during the continuance
of any Event of Default, any obligation of Lender to make
any Loan shall immediately and
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automatically terminate without action of any kind on the part
of Lender, and Lender may exercise any rights and remedies
under this Agreement, the Note, any related document or
instrument (including without limitation any pertaining to
collateral), and at law or in equity.
(b) Lender may, by written notice to Borrower, at any
time and from time to time, waive any Event of Default or
Unmatured Event of Default, which shall be for such
period and subject to such conditions as shall be
specified in any such notice. In the case of any such
waiver, Lender and Borrower shall be restored to their
former position and rights hereunder, and any Event of
Default or Unmatured Event of Default so waived shall be
deemed to be cured and not continuing; but no such waiver
shall extend to or impair any subsequent or other Event
of Default or Unmatured Event of Default. No failure to
exercise, and no delay in exercising, on the part of
Lender of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The
rights and remedies of Lender herein provided are
cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8 DEFINITIONS
SECTION 8.1 GENERAL. As used herein:
(a) The term "Banking Day" means a day on which Lender
is open at its main office for the purpose of conducting
a commercial banking business and is not authorized to
close.
(b) The term "Capital Securities" shall mean capital
securities issued by the Capital Securities Issuer (i)
which do not exceed $25,000,000 in aggregate principal
amount, (ii) which are subject to mandatory redemption
not earlier than the date 30 years after issuance, and
(iii) which may not be optionally redeemed earlier than
10 years after issuance (except upon the occurrence of
specific conditions provided for in connection therewith.
(c) The term "Capital Securities Guarantee" shall mean,
collectively, the Series A Capital Securities Guarantee
Agreement dated February 11, 1997 relating to the Series
A Capital Securities between the Borrower and The Chase
Manhattan Bank, as Guarantee Trustee and the Common
Securities Guarantee Agreement dated February 11, 1997
relating to the Common Securities.
(d) The term "Capital Securities Indebtedness" shall
mean Series A Junior Subordinated Debentures and the
Series B Junior Subordinated Debentures issued as a
separate series under the Indenture, payable to the
Capital Securities Issuer.
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(e) The term "Capital Securities Issuer" shall mean
First Western Capital Trust I, a trust formed under the
laws of the State of Delaware.
(f) The term "Commitment" means: (i) $25,000,000.00 from
the date hereof through but not after June 30, 2000; (ii)
$21,666,666.00 from July 1, 2000 through but not after
June 30, 2001; (iii) $18,333,333.00 from July 1, 2001
through but not after June 30, 2002; and (iv)
$15,000,000.00 from July 1, 2002 and thereafter.
(g) The term "Common Securities" shall mean the common
securities of the Capital Securities Issuer referred to
in the Indenture.
(h) The term "FDIC" means the Federal Deposit Insurance
Corporation and any successor thereof.
(i) The term "Federal Funds Margin" means for any day a
rate equal to: (i) 1% for those days when the Borrower
has a Level I Status (as defined below); (ii) 1.125% for
those days when the Borrower has a Level II Status (as
defined below); or (iii) 1.25% for those days when the
Borrower has a Level III Status (as defined below).
(j) The term "Guarantor" means any person or entity, or
any persons or entities severally, now or hereafter
guarantying payment or collection of all or any part of
the Loans or any other liabilities owed by Borrower to
Lender.
(k) The term "Indenture" means the Indenture dated as of
February 11, 1997, as amended and supplemented from time
to time, between the Borrower and The Chase Manhattan
Bank, as trustee.
(l) The term "Interest Period" means, with regard to
Bank Offered Rate Loans, the amount of days from the date
an interest rate is to be in effect to the date such
interest period matures according to its terms.
(m) The term "Interim Maturity Date" means the last day
of any Interest Period.
(n) The term "Level I Status" exists at any date if, at
such date: (i) the Borrower's Leverage Ratio is greater
than 7%; (ii) the Borrower's Tier 1 Capital Ratio is
greater than 8%; and (iii) the Borrower's Total Capital
Ratio is greater than 12%.
(o) The term "Level II Status" exists at any date if, at
such date a Level I Status does not exist and: (i) the
Borrower's Leverage Ratio is greater than 5%; (ii) the
Borrower's Tier 1 Capital Ratio is greater than 6%; and
(iii) the Borrower's Total Capital Ratio is greater than
10%.
20<PAGE>
<PAGE> 21
(p) The term "Level III Status" exists at any date if,
at such date a Level I Status and Level II Status does
not exist.
(q) The term "Leverage Ratio" means a ratio of Tier 1
Capital to average quarterly assets less all non-
qualified intangible assets of such entity.
(r) The term "Net Chargeoffs" shall mean for any given
fiscal year the consolidated total of gross loan
chargeoffs for such fiscal year net of recoveries made
during such fiscal year.
(s) The term "Prime Rate" means that rate of interest
announced from time to time by Lender called its prime
rate, which rate may not at any time be the lowest rate
charged by Lender. Changes in the rate of interest on
the Loans resulting from a change in the Prime Rate shall
take effect on the date set forth in each announcement of
a change in the Prime Rate.
(t) The term "Prime Rate Margin" means for any day a
rate equal to: (i) 1% for those days when the Borrower
has a Level I Status (as defined below); (ii) 0.75% for
those days when the Borrower has a Level II Status (as
defined below); or (iii) 0.5% for those days when the
Borrower has a Level III Status (as defined below).
(u) The term "Risk-Weighted Assets" means the same as
that determined under the capital formula currently used
by the Federal Reserve Board.
(v) The term "Subsidiary" means any corporation,
partnership, joint venture, trust, or other legal entity
of which Borrower owns directly or indirectly twenty-five
percent (25%) or more of the outstanding voting stock or
interest, or of which Borrower has effective control, by
contract or otherwise (including, without limitation, the
Capital Securities Issuer). The term Subsidiary includes
each Subsidiary Bank unless stated otherwise explicitly.
(w) The term "Subsidiary Bank" means each Subsidiary
which is a bank.
(x) The term "Tangible Net Worth" means at any date the
total shareholders' equity (including all classes of
capital stock, capital surplus, additional paid-in
capital, retained earnings, contingencies, and capital
reserves plus the amount of the Capital Securities to the
extent treated as Tier 1 Capital of the Borrower), minus
the cost of common stock reacquired by the Borrower and
other capital accounts of the Borrower at such date,
minus goodwill, patents, trademarks, service marks, trade
names, copyrights, and all intangible assets (including
without limitation "core-deposit intangibles" and
unidentifiable intangibles resulting from acquisitions)
and all items that are treated as intangible assets
21<PAGE>
<PAGE> 22
under generally accepted accounting principles or that
otherwise fit within the definition of "intangible assets" in
the instructions for the call report of the FDIC.
(y) The term "Tangible Net Worth Amount" means (a) the
Tangible Net Worth Amount calculated and applied for
purposes of Section 5.3(a) of this Agreement to the
Borrower's four fiscal quarters ending on the last day of
each June, September, December and March immediately
preceding each Tangible Net Worth Calculation Date plus
(b) 50% of the amount (if positive) of the after tax net
earnings of the Borrower for the Borrower's four fiscal
quarters ending on the last day of each June, September,
December and March immediately preceding each Tangible
Net Worth Calculation Date.
(z) The term "Tangible Net Worth Calculation Date" means
the last day of each June of each year.
(aa) The term "Termination Date" means June 30, 2003, or
such earlier date on which the Commitment is terminated
pursuant to Section 7.2 hereinabove.
(bb) The term "Tier 1 Capital" means the same as that
determined under the capital formula currently used by
the Federal Reserve Board.
(cc) The term "Tier 1 Capital Ratio" means a ratio of
Tier 1 Capital to Risk-Weighted Assets of such entity.
(dd) The term "Total Capital" means the same as that
determined under the capital formula currently used by
the Federal Reserve Board.
(ee) The term "Total Capital Ratio" means a ratio of
Total Capital to Risk-Weighted Assets of such entity.
(ff) The term "Trust Agreement" means the Declaration of
Trust dated February 4, 1997, as amended by the Amended
and Restated Declaration of Trust dated February 11, 1997
relating to the Trust among the Borrower, as Sponsor, The
Chase Manhattan Bank, as Property Trustee, Chase
Manhattan Bank Delaware, as Delaware Trustee, and the
Administrative Trustees named therein.
(gg) The term "Unmatured Event of Default" means an
event or condition which would become an Event of Default
with notice or the passage of time or both.
(hh) The term "Year 2000 Compliant" means that all of such
person(s) computer systems and applications, including without
limitation software and hardware ("Systems"), will function
prior to, during, and after the calendar year 2000, and that
no change in or to such calendar year will have a material
effect on the performance of the Systems or on the functioning
of such person's business.
22<PAGE>
<PAGE> 23
(ii) Except as and unless otherwise specifically
provided herein, all accounting terms shall have the
meanings given to them by generally accepted accounting
principles and shall be applied and all reports required
by this Agreement shall be prepared, in a manner
consistent with the financial statements referred to
above.
SECTION 8.2 APPLICABILITY OF SUBSIDIARY REFERENCES. Terms hereof
pertaining to any Subsidiary shall apply only during such times as
Borrower has any Subsidiary.
SECTION 9 NO INTEREST OVER LEGAL RATE.
Borrower does not intend or expect to pay, nor does Lender intend
or expect to charge, accept or collect any interest which, when added to
any fee or other charge upon the principal which may legally be treated
as interest, shall be in excess of the highest lawful rate. If
acceleration, prepayment or any other charges upon the principal or any
portion thereof, or any other circumstance, result in the computation or
earning of interest in excess of the highest lawful rate, then any and
all such excess is hereby waived and shall be applied against the
remaining principal balance. Without limiting the generality of the
foregoing, and notwithstanding anything to the contrary contained herein
or otherwise, no deposit of funds shall be required in connection
herewith which will, when deducted from the principal amount outstanding
hereunder, cause the rate of interest hereunder to exceed the highest
lawful rate.
SECTION l0 PAYMENTS, ETC.
All payments hereunder shall be made in immediately available
funds, and shall be applied first to accrued interest and then to
principal; however, if an Event of Default occurs, Lender may, in its
sole discretion, and in such order as it may choose, apply any payment
to interest, principal and/or lawful charges and expenses then accrued.
Borrower shall receive immediate credit on payments received during
Lender's normal banking hours if made in cash, immediately available
funds, or by debit to available balances in an account at Lender;
otherwise payments shall be credited after clearance through normal
banking channels. Borrower authorizes Lender to charge any account of
Borrower maintained with Lender for any amounts of principal, interest,
taxes, duties, or other charges or amounts due or payable hereunder,
with the amount of such payment subject to availability of collected
balances in Lender's discretion; unless Borrower instructs otherwise,
all Loans shall be credited to an account(s) of Borrower with Lender.
LENDER AT ITS OPTION MAY MAKE LOANS HEREUNDER UPON TELEPHONIC
INSTRUCTIONS AND IN SO DOING SHALL BE FULLY ENTITLED TO RELY SOLELY UPON
INSTRUCTIONS, INCLUDING INSTRUCTIONS TO MAKE TRANSFERS TO THIRD PARTIES,
REASONABLY BELIEVED BY LENDER TO HAVE BEEN GIVEN BY AN AUTHORIZED
PERSON, WITHOUT INDEPENDENT INQUIRY OF ANY TYPE. All payments shall be
made without
23<PAGE>
<PAGE> 24
deduction for or on account of any present or future taxes, duties or
other charges levied or imposed on this Agreement, the Note, the Loans
or the proceeds, Lender or Borrower by any government or political
subdivision thereof. Borrower shall upon request of Lender pay all such
taxes, duties or other charges in addition to principal and interest,
including without limitation all documentary stamp and intangible taxes,
but excluding income taxes based solely on Lender's income.
SECTION ll SETOFF.
At any time and without notice of any kind, any account, deposit or
other indebtedness owing by Lender to Borrower, and any securities or
other property of Borrower delivered to or left in the possession of
Lender or its nominee or bailee, may be set off against and applied in
payment of any obligation hereunder, whether due or not.
SECTION 12 NOTICES
All notices, requests and demands to or upon the respective parties
hereto shall be deemed to have been given or made when deposited in the
mail, postage prepaid, addressed if to Lender to its office indicated
above (Attention: Division Head, Correspondent Services Division), and
if to Borrower to its address set forth below, or to such other address
as may be hereafter designated in writing by the respective parties
hereto or, as to Borrower, may appear in Lender's records.
SECTION l3 MISCELLANEOUS.
This Agreement and any document or instrument executed in
connection herewith shall be governed by and construed in accordance
with the internal law of the State of Illinois, and shall be deemed to
have been executed in the State of Illinois. Unless the context
requires otherwise, wherever used herein the singular shall include the
plural and vice versa, and the use of one gender shall also denote the
other. Captions herein are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof; references
herein to Sections or provisions without reference to the document in
which they are contained are references to this Agreement. This
Agreement shall bind Borrower successors and assigns, and shall inure to
the benefit of Lender, its successors and assigns, except that Borrower
may not transfer or assign any of its rights or interest hereunder
without the prior written consent of Lender. Borrower agrees to pay
upon demand all reasonable expenses (including without limitation
attorneys' fees, legal costs and expenses, and time charges of attorneys
who may be employees of Lender, in each case whether in or out of court,
in original or appellate proceedings or in bankruptcy) incurred or paid
by Lender or any holder hereof in connection with the enforcement or
preservation of its rights hereunder or under any document or instrument
executed in connection herewith. Except as otherwise specifically
provided herein, Borrower expressly and irrevocably waives presentment,
protest, demand and notice of any kind in connection herewith. Lender
may, by written notice to Borrower, at any time
24<PAGE>
<PAGE> 25
and from time to time, waive any Event of Default or Unmatured Event of
Default, which shall be for such period and subject to such conditions
as shall be specified in any such notice. In the case of any such
waiver, Lender and Borrower shall be restored to their former position
and rights hereunder and under the Note, respectively, and any Event of
Default or Unmatured Event of Default so waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to or impair
any subsequent or other Event of Default or Unmatured Event of Default.
No failure to exercise, and no delay in exercising, on the part of
Lender of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies of Lender herein provided
are cumulative and not exclusive of any rights or remedies provided by
law.
SECTION 14 WAIVER OF JURY TRIAL, ETC.
BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE
AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS WITH
RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT
TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER COOK
COUNTY, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN OR HAVING
JURISDICTION OVER SUCH COUNTY, AND HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE
THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT BY LENDER IN
ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY SUCH PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25<PAGE>
<PAGE> 26
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed and delivered by their
respective duly authorized officer as of the day and year
first above written.
FIRST WESTERN BANCORP, INC.
By: /s/Robert H. Young
------------------
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Address for notices:
101 E. Washington Street
New Castle, Pennsylvania 16101
Attention: Chief Financial Officer
THE NORTHERN TRUST COMPANY
By: /s/ T.E. Bernhardt
------------------
Title: Vice President
<PAGE>
<PAGE> 27
REVOLVING CREDIT NOTE
(Bank Holding Company)
Chicago, Illinois
June 26, 1998
FOR VALUE RECEIVED, on or before the Termination Date (as
defined in the Agreement), FIRST WESTERN BANCORP, INC., a
corporation formed under the laws of the State of Pennsylvania
("Borrower"), promises to pay to the order of THE NORTHERN
TRUST COMPANY, an Illinois banking corporation (hereafter,
together with any subsequent holder hereof, called "Lender"),
at its main banking office at 50 South LaSalle Street,
Chicago, Illinois 60675, or at such other place as Lender may
direct, the aggregate unpaid principal balance of each advance
(a "Loan" and collectively the "Loans") made by Lender to
Borrower hereunder. The total principal amount of Loans
outstanding at any one time hereunder shall not exceed the
Commitment (as defined in the Agreement).
Lender is hereby authorized by Borrower at any time and
from time to time at Lender's sole option to attach a schedule
(grid) to this Note and to endorse thereon notations with
respect to each Loan specifying the date and principal amount
thereof, and the date and amount of each payment of principal
and interest made by Borrower with respect to each such Loan.
Lender's endorsements as well as its records relating to Loans
shall be rebuttably presumptive evidence of the outstanding
principal and interest on the Loans, and, in the event of
inconsistency, shall prevail over any records of Borrower and
any written confirmations of Loans given by Borrower.
Borrower agrees to pay interest on the unpaid principal
amount from time to time outstanding hereunder at on the dates
and at the rate or rates as set forth in the Agreement (as
hereinafter defined).
Payments of both principal and interest are to be made in
immediately available funds in lawful money of the United
States of America.
This Note evidences indebtedness incurred under a
Revolving Credit Agreement dated as of the date hereof
executed by and between the Borrower and Lender (and, if
amended, restated or replaced, all amendments, restatements
and replacements thereto or therefor, if any)(the
"Agreement"), to which Agreement reference is hereby made for
a statement of its terms and provisions, including without
limitation those under which this Note may be paid prior to
its due date, be subject to a mandatory prepayment or have its
due date accelerated.
This Note and any document or instrument executed in
connection herewith shall be governed by and construed in
accordance with the internal law of the State of Illinois, and
shall be deemed to have been executed in the State of
Illinois. Unless the
1<PAGE>
<PAGE> 28
context requires otherwise, wherever used herein the singular
shall include the plural and vice versa, and the use of one
gender shall also denote the other. Captions herein are for
convenience of reference only and shall not define or limit
any of the terms or provisions hereof; references herein to
Sections or provisions without reference to the document in
which they are contained are references to this Note. This
Note shall bind Borrower successors and assigns, and shall
inure to the benefit of Lender, its successors and assigns,
except that Borrower may not transfer or assign any of its
rights or interest hereunder without the prior written consent
of Lender. Borrower agrees to pay upon demand all reasonable
expenses (including without limitation attorneys' fees, legal
costs and expenses, and time charges of attorneys who may be
employees of Lender, in each case whether in or out of court,
in original or appellate proceedings or in bankruptcy)
incurred or paid by Lender or any holder hereof in connection
with the enforcement or preservation of its rights hereunder
or under any document or instrument executed in connection
herewith. Borrower expressly and irrevocably waives
presentment, protest, demand and notice of any kind in
connection herewith.
FIRST WESTERN BANCORP, INC.
By: /s/ Stephen R. Sant
-------------------
Title: Executive Vice President
<PAGE>
<PAGE> 1
Exhibit 15.1
August 10, 1998
To the Board of Directors and Shareholders 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 June 30, 1998 and 1997, as
indicated in our report dated July 17, 1998; 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 June 30, 1998,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 Forms S-8 (Nos. 33-00528 and
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 LLP
Pittsburgh, Pennsylvania
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000740876
<NAME> First Western Bancorp Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 60,043
<INT-BEARING-DEPOSITS> 1,600
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 655,138
<INVESTMENTS-CARRYING> 213,608
<INVESTMENTS-MARKET> 214,012
<LOANS> 1,079,338
<ALLOWANCE> 18,198
<TOTAL-ASSETS> 2,122,928
<DEPOSITS> 1,525,217
<SHORT-TERM> 371,511
<LIABILITIES-OTHER> 31,731
<LONG-TERM> 47,607
<COMMON> 59,186
0
0
<OTHER-SE> 87,676
<TOTAL-LIABILITIES-AND-EQUITY> 2,122,928
<INTEREST-LOAN> 44,205
<INTEREST-INVEST> 19,692
<INTEREST-OTHER> 63
<INTEREST-TOTAL> 63,960
<INTEREST-DEPOSIT> 23,059
<INTEREST-EXPENSE> 34,658
<INTEREST-INCOME-NET> 29,302
<LOAN-LOSSES> 2,000
<SECURITIES-GAINS> 58
<EXPENSE-OTHER> 23,055
<INCOME-PRETAX> 13,435
<INCOME-PRE-EXTRAORDINARY> 13,435
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,647
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.85
<YIELD-ACTUAL> 7.79
<LOANS-NON> 2,066
<LOANS-PAST> 1,762
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 18,077
<CHARGE-OFFS> 2,320
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