<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 September 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
November 12, 1998 was:
Common Stock, $5.00 par value - 11,126,072 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:
September 30, 1998, December 31, 1997 and
September 30, 1997.......................................4
Consolidated Statements of Income:
Three months ended September 30, 1998 and 1997...........5
Consolidated Statements of Income:
Nine months ended September 30, 1998 and 1997............6
Consolidated Statements of Comprehensive Income:
Three and Nine months ended September 30, 1998
and 1997.................................................7
Consolidated Statements of Changes
in Shareholders' Equity:
Nine months ended September 30, 1998 and 1997............8
Consolidated Statements of Cash Flows:
Nine months ended September 30, 1998 and 1997............9
Notes to Consolidated Financial Statements...............11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............15
Item 3. Quantitative and Qualitative Disclosures about
Market Risk..............................................31
Part II. Other Information:
Item 1. - Item 6.................................................31
Signature........................................................32
/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 September 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 nine-month
periods then ended. These financial statements are the responsibility of the
Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and of making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope than
an audit conducted in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of First Western Bancorp,
Inc. and subsidiaries as of December 31, 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
October 13, 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>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS:
- -------
Cash and due from banks $ 45,670 $ 40,973 $ 35,365
------------- ------------ -------------
Interest-bearing deposits with other banks 1,639 6,836 1,489
------------- ------------ -------------
Securities available for sale
(amortized cost of $717,000, $316,146 and $336,248) 725,673 324,521 343,007
------------- ------------ -------------
Investment securities, held to maturity
(market value of $106,572, $101,289 and $108,336) 104,901 100,151 107,488
------------- ------------ -------------
Mortgage-backed securities, held to maturity
(market value of $94,397, $131,942 and $143,856) 94,993 132,673 144,837
------------- ------------ -------------
Loans held for sale 7,718 39,840 3,622
------------- ------------ -------------
Loans (net of unearned income of $39,390, $38,946 and $37,616) 1,106,014 1,046,363 1,031,268
Less: Allowance for possible loan losses 18,466 18,077 17,672
------------- ------------ -------------
Net loans 1,087,548 1,028,286 1,013,596
------------- ------------ -------------
Premises and equipment 24,365 20,996 20,668
------------- ------------ -------------
Bank-owned life insurance 26,055 25,000 -
------------- ------------ -------------
Intangible assets 61,603 9,280 9,624
------------- ------------ -------------
Other assets 22,974 15,521 16,100
------------- ------------ -------------
Total Assets $ 2,203,139 $ 1,744,077 $ 1,695,796
============= ============ =============
LIABILITIES:
- ------------
Deposits:
Noninterest-bearing demand $ 133,014 $ 100,653 $ 99,458
Interest-bearing demand 52,922 38,539 40,922
Savings 467,557 385,363 349,952
Time 867,235 667,784 690,332
------------- ------------ -------------
Total deposits 1,520,728 1,192,339 1,180,664
------------- ------------ -------------
Borrowed funds:
Federal funds purchased and other short-term borrowings 96,661 81,773 58,071
Repurchase agreements and secured lines of credit 229,643 121,756 113,215
Advances from the Federal Home Loan Bank 133,400 156,000 144,000
------------- ------------ -------------
Total borrowed funds 459,704 359,529 315,286
------------- ------------ -------------
Long-term debt 23,750 4,258 4,798
------------- ------------ -------------
Other liabilities 27,127 25,272 35,658
------------- ------------ -------------
Total Liabilities 2,031,309 1,581,398 1,536,406
------------- ------------ -------------
Corporation-obligated mandatorily redeemable capital securities of subsidiary
trust holding solely junior subordinated debentures of the Corporation 23,867 23,837 23,827
------------- ------------ -------------
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,
11,852,593, 11,786,811 and 11,781,535 shares issued and
11,124,462, 11,132,253 and 11,158,406 shares outstanding 59,263 58,934 58,908
Additional paid-in capital 3,931 2,611 2,613
Retained earnings 94,031 84,647 81,469
Accumulated other comprehensive income 5,638 5,443 4,393
Treasury stock, 685,273, 611,700 and 571,700 shares at cost (14,150) (12,043) (10,920)
Unallocated common stock held by ESOP (at cost) (750) (750) (900)
------------- ------------ -------------
Total Shareholders' Equity 147,963 138,842 135,563
------------- ------------ -------------
Total Liabilities and Shareholders' Equity $ 2,203,139 $ 1,744,077 $ 1,695,796
============= ============ =============
</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
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 22,909 $ 22,515
Interest on deposits with other banks 31 29
Interest on securities available for sale 12,168 5,863
Interest and dividends on investment securities:
Taxable interest 376 333
Tax-exempt interest 1,004 1,035
Interest on mortgage-backed securities 1,526 2,310
Interest on federal funds sold 2 6
------------- -------------
Total Interest Income 38,016 32,091
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 277 227
Savings 2,951 1,995
Time 12,055 9,759
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 1,143 875
Repurchase agreements and secured lines of credit 2,931 1,740
Advances from the Federal Home Loan Bank 2,040 2,146
Interest on long-term debt 414 94
------------- -------------
Total Interest Expense 21,811 16,836
------------- -------------
NET INTEREST INCOME 16,205 15,255
Provision for possible loan losses 1,000 954
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 15,205 14,301
------------- -------------
OTHER INCOME:
- -------------
Trust fees 630 486
Service charges on deposit accounts 1,488 1,055
Net securities gains 973 17
Net gains on loan sales 271 169
Income from bank owned life insurance 358 -
Other operating income 1,002 1,039
------------- -------------
Total Other Income 4,722 2,766
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 4,567 3,953
Employee benefits 1,176 1,019
Net occupancy expense 946 800
Equipment rentals, depreciation and maintenance 751 568
Amortization of intangible assets 1,415 256
Minority interest expense 631 640
Supplies 449 413
Data processing services 522 352
Professional fees 495 405
Marketing 279 444
Other operating expense 2,107 1,700
------------- -------------
Total Other Expenses 13,338 10,550
------------- -------------
INCOME BEFORE INCOME TAXES 6,589 6,517
Income Taxes 1,833 1,846
------------- -------------
NET INCOME $ 4,756 $ 4,671
============= =============
BASIC EARNINGS PER SHARE $ 0.43 $ 0.42
============= =============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 11,143 11,165
============= =============
DILUTED EARNINGS PER SHARE $ 0.42 $ 0.41
============= =============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 11,351 11,383
============= =============
DIVIDENDS PER SHARE $ 0.15 $ 0.15
============= =============
/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 Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
INTEREST INCOME:
- ----------------
Interest and fees on loans $ 67,114 $ 66,762
Interest on deposits with other banks 80 215
Interest on securities available for sale 25,694 16,242
Interest and dividends on investment securities:
Taxable interest 1,000 880
Tax-exempt interest 2,988 3,110
Interest on mortgage-backed securities 5,084 7,313
Interest on federal funds sold 16 554
------------- -------------
Total Interest Income 101,976 95,076
------------- -------------
INTEREST EXPENSE:
- -----------------
Interest on deposits:
Demand 755 642
Savings 7,258 5,727
Time 30,329 29,266
Interest on borrowed funds:
Federal funds purchased and other short-term borrowings 3,634 2,023
Repurchase agreements and secured lines of credit 7,074 6,462
Advances from the Federal Home Loan Bank 6,853 6,321
Interest on long-term debt 566 295
------------- -------------
Total Interest Expense 56,469 50,736
------------- -------------
NET INTEREST INCOME 45,507 44,340
Provision for possible loan losses 3,000 3,882
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 42,507 40,458
------------- -------------
OTHER INCOME:
- -------------
Trust fees 2,150 1,709
Service charges on deposit accounts 3,710 3,084
Net securities gains 1,031 37
Net gains on loan sales 2,045 5,659
Income from bank owned life insurance 1,055 -
Other operating income 3,919 3,414
------------- -------------
Total Other Income 13,910 13,903
------------- -------------
OTHER EXPENSES:
- ---------------
Salaries and wages 12,758 11,578
Employee benefits 3,652 3,355
Net occupancy expense 2,610 2,327
Equipment rentals, depreciation and maintenance 2,088 1,731
Amortization of intangible assets 1,957 768
Minority interest expense 1,845 1,611
Supplies 1,430 1,209
Data processing services 1,348 1,179
Professional fees 1,300 1,350
Marketing 1,300 1,295
Other operating expense 6,105 5,476
------------- -------------
Total Other Expenses 36,393 31,879
------------- -------------
INCOME BEFORE INCOME TAXES 20,024 22,482
Income Taxes 5,621 7,059
------------- -------------
NET INCOME $ 14,403 $ 15,423
============= =============
BASIC EARNINGS PER SHARE $ 1.29 $ 1.37
============= =============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 11,156 11,274
============= =============
DILUTED EARNINGS PER SHARE $ 1.27 $ 1.34
============= =============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 11,378 11,468
============= =============
DIVIDENDS PER SHARE $ 0.45 $ 0.41
============= =============
/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
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 4,756 $ 4,671
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period 322 2,394
Less: reclassification adjustment for (gains) losses
included in net income (632) (11)
------------- -------------
Other comprehensive income (310) 2,383
------------- -------------
Comprehensive income $ 4,446 $ 7,054
============= =============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 14,403 $ 15,423
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period 865 3,533
Less: reclassification adjustment for (gains) losses
included in net income (670) (24)
------------- -------------
Other comprehensive income 195 3,509
------------- -------------
Comprehensive income $ 14,598 $ 18,932
============= =============
</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 Nine Months Ended September 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 - - - 14,403 - - - -
Cash dividends paid ($0.45 per share) - - - (5,019) - - - -
Exercise of options, net of shares redeemed 12 62 (21) - - - - -
Common stock issued for dividend reinvestment 51 255 1,202 - - - - -
Treasury stock purchased - - - - - (2,135) - -
Restricted shares issued 3 12 55 - - - - -
Value of ESOP shares to be allocated in excess
of cost - - 70 - - - - -
Treasury stock issued - - 14 - - 28 - -
Net change in unrealized appreciation
in securities available for sale,
net of tax - - - - 195 - - -
------------------------------------------------------------------------------
Balance - September 30, 1998 11,853 $59,263 $3,931 $94,031 $5,638 ($14,150) (43) ($750)
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 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 - - - 15,423 - - - -
Cash dividends paid ($0.41 per share) - - - (4,690) - - - -
Exercise of options, net of shares redeemed 14 71 53 - - - - -
Common stock issued for dividend reinvestment 5 23 131 - - - - -
Treasury stock purchased - - - - - (6,678) - -
Fifty percent stock dividend declared on
July 15, 1997 3,927 19,635 (19,635) - - - (17) -
Net change in unrealized appreciation
in securities available for sale,
net of tax - - - - 3,509 - - -
------------------------------------------------------------------------------
Balance - September 30, 1997 11,782 $58,908 $2,613 $81,469 $4,393 ($10,920) (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 Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income $ 14,403 $ 15,423
------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,941 1,728
Amortization and accretion 2,635 1,512
Income from bank owned life insurance (1,055) -
Provision for possible loan losses 3,000 3,882
Gain on sale of securities (1,031) (37)
Gain on sale of loans (2,045) (5,659)
Gain on sale of branch offices (1,071) (325)
Proceeds from loan sales 150,912 124,564
Purchase of loans (187) (2,869)
Provision for deferred taxes (49) (378)
Increase in interest receivable (3,819) (1,045)
Increase in interest payable 436 451
Other - net (5,553) 1,470
------------- -------------
Total adjustments 144,114 123,294
------------- -------------
Net cash provided by operating activities 158,517 138,717
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sales of securities available for sale 7,745 5,344
Proceeds from maturity or paydown of securities available for sale 165,500 96,500
Purchase of securities available for sale (572,207) (227,596)
Proceeds from maturity or paydown of investment securities 57,579 35,768
Purchase of investment securities (24,341) (12,014)
Proceeds from sale of credit card loan portfolio - 21,801
Net increase in loans (106,503) (61,408)
Decrease in deposits with other banks 5,197 281
Decrease in federal funds sold - 37,400
Purchase of premises and equipment (3,579) (3,191)
Proceeds from sale of premises and equipment - 298
Proceeds from sale of other real estate owned 1,076 1,182
Cash paid for branch office sale (40,884) (3,302)
Cash received for branch office purchases 251,221 33,760
------------- -------------
Net cash used in investing activities (259,196) (75,177)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Net decrease increase in deposits (8,744) (1,751)
Net increase in federal funds purchased and other short-term borrowings 14,888 24,869
Net increase (decrease) in repurchase agreements and secured lines of credit 107,887 (98,855)
Net decrease in advances from the Federal Home Loan Bank (22,600) -
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) (1,169)
Proceeds from exercise of stock options 41 124
Proceeds from common stock issued 1,524 154
Treasury stock purchased (2,135) (6,678)
Treasury stock issued 42 -
Dividends paid on common stock (5,019) (4,690)
------------- -------------
Net cash provided by (used in) financing activities 105,376 (64,196)
------------- -------------
NET INCREASE IN CASH AND DUE FROM BANKS 4,697 (656)
CASH AND DUE FROM BANKS - Beginning of year 40,973 36,021
------------- -------------
CASH AND DUE FROM BANKS - End of period $ 45,670 $ 35,365
============= =============
</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)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 56,033 $ 50,285
============= =============
Income taxes $ 7,766 $ 6,367
============= =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deposits assumed in branch acquisition $ 383,842 $ 37,296
============= =============
Loans acquired in branch acquisition $ 73,677 $ -
============= =============
Deposits sold in branch disposition $ 46,702 $ 3,731
============= =============
Securities purchased settling after September 30, $ 3,234 $ 11,017
============= =============
Transfers to other real estate owned $ 1,407 $ 878
============= =============
Net change in unrealized appreciation in securities
available for sale, net of income tax effects $ 195 $ 3,509
============= =============
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 NINE MONTHS ENDED SEPTEMBER 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 Investment Services Company ("Investment Services") and First Western
Capital Trust I ("Capital Trust"). Effective September 10, 1998, First
Western Trust Services Company ("Trust Services") was merged into First
Western Bank, N.A. All significant intercompany transactions have been
eliminated in consolidation.
The consolidated balance sheets as of September 30, 1998 and September
30, 1997, and the related consolidated statements of income, comprehensive
income, changes in shareholders' equity, and cash flows for the three and
nine month periods ended September 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 nine
months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998 Three Months Ended September 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 $ 495 $ (173) $ 322 $ 3,683 $ (1,289) $ 2,394
Less: reclassification
adjustment for (gains)
losses realized in
net income (973) 341 (632) (17) 6 (11)
--------- ------------- ---------- --------- ------------- ----------
Net unrealized gains (losses) (478) 168 (310) 3,666 (1,283) 2,383
--------- ------------- ---------- --------- ------------- ----------
Other comprehensive income $ (478) $ 168 $ (310) $ 3,666 $ (1,283) $ 2,383
========= ============= ========== ========= ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998 Nine Months Ended September 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 $ 1,331 $ (466) $ 865 $ 5,435 $ (1,902) $ 3,533
Less: reclassification
adjustment for (gains)
losses realized in
net income (1,031) 361 (670) (37) 13 (24)
--------- ------------- ---------- --------- ------------- ----------
Net unrealized gains (losses) 300 (105) 195 5,398 (1,889) 3,509
--------- ------------- ---------- --------- ------------- ----------
Other comprehensive income $ 300 $ (105) $ 195 $ 5,398 $ (1,889) $ 3,509
========= ============= ========== ========= ============= ==========
</TABLE>
12 <PAGE>
<PAGE> 13
The following table sets forth the components of accumulated other
comprehensive income for the nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
------------- ------------
<S> <C> <C>
Beginning balance $ 5,443 $ 884
Net unrealized gains (losses) on securities, net of taxes 195 3,509
------------- ------------
Ending balance $ 5,638 $ 4,393
============= ============
</TABLE>
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 annual
report for 1998, 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.
13<PAGE>
<PAGE> 14
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.
On October 14, 1998, First Western announced the sale of the recently
acquired Punxsutawney, Ebensburg, Barnesboro and Kiski Valley branches to two
unrelated banks. As part of this transaction, First Western will acquire the
deposits and consumer loans of a branch in Moon Township, Allegheny County,
Pennsylvania from one of these banks. First Western sold these branches
because they were not located near First Western's core banking markets.
These branches were acquired in June 1998 from PNC Bank as part of a 16
branch purchase. The remaining twelve branches from the PNC branch purchase
are located within First Western's strategic market. The four branches that
are being sold have approximately $139 million of deposits and $25 million of
consumer loans. The Moon Township branch to be acquired by First Western has
approximately $10 million of deposits and $2.7 million of consumer loans.
The sales and purchase are subject to regulatory approval and are expected to
be completed by February 1999.
14<PAGE>
<PAGE> 15
Part 1. Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
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.
Results of operations for the three and nine months ended September 30, 1998
compared with the three and nine months ended September 30, 1997:
First Western's earnings for the nine months ended September 30, 1998
were $14.4 million, decreasing $1.0 million or 6.6% from $15.4 million for
the first nine months of 1997. This decrease in net income was due to a $4.5
million increase in other expenses and a $3.6 million decrease in net gains
on loan sales with these decreases in income partially offset by a $1.2
million increase in net interest income, a $1.1 million gain realized on the
sale of First Western's Lake County, Ohio branches during the first quarter
of 1998, an $882,000 decrease in the provision for possible loan losses and
a $1.1 million increase in income from bank owned life insurance. The
increases in net interest income, other expenses and service charges on
deposits for the nine months ended September 30, 1998 compared with the prior
year were primarily due to the acquisition of the 16 PNC Bank branches and
related deposits and loans in June 1998. First Western's basic and diluted
earnings per share for the nine months ended September 30, 1998 were $1.29
and $1.27, respectively, compared with $1.37 and $1.34 for the first nine
months of 1997 with these decreases 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 nine months of 1998 were 1.01% and 13.38%,
respectively, compared with 1.21% and 15.86% for the first nine 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 September 30, 1998, First Western's net
income was $4.8 million compared with $4.7 million for the three months ended
September 30, 1997. First Western's net income increased $85,000 or 1.8%
from the third quarter of 1997 to the third quarter of 1998 primarily due to
a $956,000 increase in net securities gains, a $950,000 increase in net
interest income and increases in service charges on deposits and other
operating income with these increases offset by a $2.8 million increase in
other expenses. 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 third quarter of 1998
were $0.43 and $0.42, respectively, compared with $0.42 and $0.41 for the
third quarter of 1997. First Western's return on average assets and return
on average equity for the third quarter of 1998 were 0.87% and 12.95%,
respectively, compared with 1.10% and 13.95% for the third 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 third
quarter of 1998.
15<PAGE>
<PAGE> 16
Net Interest Income:
First Western's net interest income was $45.5 million for the nine
months ended September 30, 1998, increasing $1.2 million or 2.6% from $44.3
million for the first nine months of 1997. The increase in net interest
income was generated by a 9.6% 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 nine 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 $1.1
million for the first nine months of 1998. First Western's average earning
assets increased $156.7 million or 9.6% for the first nine months of 1998
compared with the first nine months of 1997. The increase in average earning
assets was due to a $162.6 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.
Average securities also increased due to First Western implementing a $102
million leverage strategy during the third quarter of 1998 that involved
purchasing U. S. government agency securities and funding these securities
with repurchase agreements.
First Western's net interest income was $16.2 million for the three
months ended September 30, 1998, increasing $950,000 or 6.2% from $15.3
million for the third quarter of 1997. The increase in net interest income
was due to a $383 million or 23.5% increase in average earning assets with
this increase partially offset by a decline in First Western's net interest
margin. First Western's average earning assets increased for the third
quarter of 1998 compared with the third quarter of 1997 due to the PNC Bank
branch acquisition along with the leverage strategy implemented during the
third quarter of 1998.
First Western's net interest margin or net interest income expressed as
a percentage of average earning assets was 3.53% for the first nine months of
1998 compared with 3.77% for the first nine months of 1997. The purchase of
the PNC branches and the $102 million leverage strategy both had a
detrimental impact on First Western's net interest margin since the spread
between the yield on earning assets and the cost of funds on these
transactions was less than First Western's net interest margin. The purchase
of BOLI in December 1997 reduced First Western's net interest margin by
approximately seven basis points for the first nine 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 3.33% for the third quarter of
1998 compared with 3.88% for the third quarter of 1997 and 3.80% and 3.51%
for the first and second quarters of 1998, respectively. The decrease in the
net interest margin was due to the acquisition of the PNC branches late in
the second quarter of 1998 along with the implementation of a $102 million
leverage strategy during the third quarter of 1998. Excluding the PNC branch
acquisition and the leverage strategy, First Western's net interest margin
would have been approximately 3.68% for the third quarter of 1998.
16<PAGE>
<PAGE> 17
Provision for Possible Loan Losses:
First Western's provision for possible loan losses was $3.0 million for
the first nine months of 1998, decreasing $882,000 from $3.9 million for the
first nine months of 1997. First Western's net charge-offs for the first
nine months of 1998 were $2.6 million or 0.33% of average loans, compared
with $2.3 million or 0.29% of average loans for the first nine months of
1997. Substantially all of First Western's charge-offs for the first nine
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>
Nine Months ended September 30,
-------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Commercial, financial and agricultural loans.......................... $ 7 $ (40)
Real estate construction loans........................................ - -
Real estate mortgage loans............................................ (25) 84
Installment loans..................................................... 2,629 2,220
---------- ----------
Total net charge-offs.............................................. $ 2,611 $ 2,264
========== ==========
Net charge-offs as a percentage of
average loans...................................................... 0.33% 0.29%
========== ==========
</TABLE>
Other Income and Other Expenses:
Other income was $13.9 million for both the first nine months of 1998
and 1997 with increases in income from bank owned life insurance, net
securities gains, gains on branch sales and increases in service charges on
deposits and trust fees offsetting a $3.6 million decrease in net gains on
loan sales. First Western's other income was $4.7 million for the third
quarter of 1998, increasing $1.9 million from $2.8 million for the third
quarter of 1997 due to a $956,000 increase in net securities gains along with
increased service charges on deposits, increased income from bank owned life
insurance and increased trust fees. The 16 PNC branches that were acquired
in late June 1998 accounted for approximately $384,000 and $438,000 of First
Western's other income for the three and nine month periods ended September
30, 1998, respectively. Most of the other income generated by the former PNC
branches was service charges on deposits.
Trust fees increased $441,000 or 25.8% from $1.7 million for the first
nine months of 1997 to $2.2 million for the first nine months of 1998
primarily due to an increase in trust assets managed by First Western. Trust
fees increased $144,000 or 29.6 % from $486,000 for the third quarter of 1997
to $630,000 for the third quarter of 1998 due to the increase in trust assets
under management.
Service charges on deposit accounts increased $626,000 or 20.3% for the
nine months ended September 30 1998 compared with the prior year due to the
additional branches acquired
17<PAGE>
<PAGE> 18
from PNC Bank along with increases in First Western's service charges
beginning in March 1998. The former PNC Bank branches contributed
approximately $341,000 of the service charges on deposits for the nine months
ended September 30, 1998 with most of these service charges collected during
the third quarter. Service charges on deposit accounts increased $433,000 or
41.0% for the third quarter of 1998 compared with the prior year due to the
former PNC branches and the increased fee schedule.
During the third quarter of 1998, First Western realized security gains
of $973,000 primarily as a result of the sale of an investment in another
bank holding company's common stock.
During the first nine months of 1998, First Western realized net gains
on loan sales of $2.0 million compared with gains of $5.7 million for the
first nine months of 1997. The gains on loan sales realized by First Western
during the first nine 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 nine months of 1997 were
the result of First Western completing the sale of its credit card portfolio.
First Western realized net gains of $271,000 and $169,000 during the third
quarters of 1998 and 1997, respectively, as a result of the First Western
selling some of its current mortgage loan production while retaining the
servicing on these loans.
During the fourth quarter of 1997, First Western purchased $25 million
of BOLI. The increase in the cash surrender value of the BOLI is included in
other income. The income from BOLI for the three and nine month periods
ended September 30, 1998 was $358,000 and $1.1 million, respectively.
Other operating income increased $505,000 from $3.4 million for the
first nine months of 1997 to $3.9 million for the first nine months of 1998
primarily as a result of a $1.1 million gain realized on the sale of First
Western's Lake County branches during the first nine months of 1998 compared
with First Western realizing a gain of $325,000 from the sale of its Slippery
Rock branch during the first nine months of 1997 . 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. This increase in other operating income
was 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.
Total other expenses for the first nine months of 1998 were $36.4
million, increasing $4.5 million or 14.2%, from $31.9 million for the first
nine months of 1997 primarily due to the additional expense of operating the
16 PNC Bank branches that were acquired in June 1998. Other expenses
increased $2.8 million or 26.4% from $10.6 million for the third quarter of
1997 to $13.3 million for the third quarter of 1998 primarily due to the PNC
branches.
First Western's salary and employee benefits expense increased a
combined $1.5 million or 9.9% for the first nine months of 1998 compared with
the first nine months of 1997. Approximately $473,000 of this increase was
attributable to the PNC Bank branches with the remaining increase 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
18<PAGE>
<PAGE> 19
originations due to an increase in loans originated, particularly residential
mortgage loans due to the low, long-term interest rates experienced during
the first nine months of 1998. The PNC branches accounted for $459,000 of
the $771,000 increase in salaries and benefits expense for the third quarter
of 1998 compared with the third quarter of 1997.
First Western's occupancy and equipment expense increased a combined
$640,000 or 15.8% for the first nine months of 1998 compared with the prior
year with $275,000 of the increase due to the recently acquired PNC Bank
branches and the remaining increase 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 September 30, 1998, occupancy and equipment expense
increased a combined $329,000 or 24.0% compared with the third quarter of
1997 with most of this increase due to the PNC Bank branches. In October
1998, First Western closed four branches where the branches acquired from PNC
Bank were located close to existing First Western offices and the customers
of these branches were moved to other nearby branches. On October 19, 1998,
First Western entered into agreements to sell the four eastern branches that
were acquired from PNC. These branch sales should close in the first quarter
of 1999. The elimination of these eight branch offices should reduce
occupancy and equipment expense in future periods.
For the nine months ended September 30, 1998, First Western's
amortization of intangible assets expense increased $1.2 million from
$768,000 for the first nine months of 1997 to $2.0 million for the first nine
months of 1998. For the third quarter of 1998, First Western's amortization
of intangible assets expense was $1.4 million compared with $256,000 for the
third quarter of 1997 with this increase in amortization expense the result
of the purchase of the Chicora, Pennsylvania office in September 1997 along
with the 16 PNC Bank branches in June 1998. The PNC Bank branch purchase
increased First Western's intangible assets by $59 million.
Minority interest expense increased $234,000 from $1.6 million for the
first nine months of 1997 to $1.8 million for the first nine 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.
First Western's supplies expense increased $221,000 from $1.2 million
for the first nine months of 1997 to $1.4 million for the first nine months
of 1998 due to the supplies necessary to convert the PNC Bank branches to
First Western's data processing systems. The expenses related to the PNC Bank
branches consisted 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 add
these branches to the First Western data processing system.
Other operating expenses increased $629,000 or 11.5% from $5.5 million
for the first nine months of 1997 to $6.1 million for the first nine months
of 1998. This increase was primarily due to a $338,000 increase in
Pennsylvania bank shares tax. The increase in Pennsylvania bank shares tax
expense was a result of the merger of First Western's former thrift
subsidiary, First Western
19<PAGE>
<PAGE> 20
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 $407,000 from $1.7 million for the
third quarter of 1997 to $2.1 million for the third quarter of 1998 due to
the expenses related to the PNC Bank branches, a $106,000 increase in bad
check and fraud losses and an $153,000 increase in Pennsylvania bank shares
tax expense.
Income Taxes:
First Western's income tax expense was $5.6 million for the first nine
months of 1998 compared with $7.0 million for the first nine 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 nine months ended September 30, 1998 was 28.1% compared with 31.4%
for the first nine 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.
20<PAGE>
<PAGE> 21
Financial Condition as of September 30, 1998 as compared with December 31,
1997 and September 30, 1997.
As of September 30, 1998, First Western's total assets were $2.203
billion compared with $1.744 billion at December 31, 1997 and $1.696 billion
at September 30, 1997. During the first nine months of 1998, First Western's
total assets increased $459 million or 26.3% primarily due to the acquisition
of 16 branches from PNC Bank. First Western's total average assets for the
first nine months of 1998 were $1.915 billion compared with $1.699 billion
for the first nine months of 1997, an increase of 12.7%.
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. 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.
On October 14, 1998, First Western announced the sale of four of the
recently acquired branches to two unrelated banks. As part of this
transaction, First Western will acquire the deposits and consumer loans of a
branch in Moon Township, Allegheny County, Pennsylvania from one of these
banks. First Western sold these branches because they were not located near
First Western's core banking markets. The remaining twelve branches from the
PNC branch purchase are located within First Western's strategic market. The
four branches that are being sold have approximately $139 million of deposits
and $25 million of consumer loans. The Moon Township branch to be acquired
by First Western has approximately $10 million of deposits and $2.7 million
of consumer loans. The sales and purchase are subject to regulatory approval
and are expected to be completed by February 1999.
21<PAGE>
<PAGE> 22
Loan Portfolio:
Net loans, including loans held for sale, increased $27.5 million or
2.5% during the first nine months of 1998 with this increase in loans
primarily due to an increase in commercial loans along with the acquisition
of $74 million of consumer and commercial loans from PNC Bank with these
increases partially offset by the sale of approximately $92 million of
residential mortgage loans during the first quarter of 1998. 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 September 30,
1998, December 31, 1997 and September 30, 1997:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 September 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....... $ 29,203 2.6% $ 31,013 2.8% $ 17,905 1.7%
Loans to municipalities.......... 4,641 0.4 6,140 0.6 5,661 0.5
Other commercial loans........... 126,524 11.4 105,323 9.7 96,063 9.3
------------ -------- ----------- -------- ----------- --------
Subtotal....................... 160,368 14.4 142,476 13.1 119,629 11.5
------------ -------- ----------- -------- ----------- --------
Real estate-construction............. 10,584 1.0 14,450 1.4 14,183 1.4
------------ -------- ----------- -------- ----------- --------
Real estate-mortgage:
1-4 Family residential............. 372,822 33.5 385,702 35.5 379,431 36.7
Multi-family residential........... 26,354 2.4 29,331 2.7 27,620 2.7
Home equity........................ 73,462 6.6 56,811 5.2 55,078 5.3
Commercial and other............... 176,223 15.8 172,559 15.9 163,954 15.8
------------ -------- ----------- -------- ----------- --------
Subtotal......................... 648,861 58.3 644,403 59.3 626,083 60.5
------------ -------- ----------- -------- ----------- --------
Installment and other................ 293,919 26.3 284,874 26.2 274,995 26.6
------------ -------- ----------- -------- ----------- --------
Total................................ $ 1,113,732 100.0% $ 1,086,203 100.0% $ 1,034,890 100.0%
============ ======== =========== ======== =========== ========
</TABLE>
22<PAGE>
<PAGE> 23
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 September 30, 1998, December 31, 1997
and September 30, 1997:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1998 1997 1997
------------- ------------ -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Loans delinquent and still accruing interest:
Loans past due 30 to 89 days ........................... $ 6,731 $ 8,703 $ 5,922
Loans past due 90 days or more ......................... 2,153 2,466 1,844
------------- ------------ -------------
Total loan delinquencies ............................. $ 8,884 $ 11,169 $ 7,766
============= ============ =============
Nonaccrual loans ......................................... $ 1,587 $ 2,634 $ 2,942
Other real estate owned .................................. 771 382 218
------------- ------------ -------------
Total nonperforming assets ............................... $ 2,358 $ 3,016 $ 3,160
============= ============ =============
Total nonperforming assets and loans
past due 90 days or more ............................... $ 4,511 $ 5,482 $ 5,004
============= ============ =============
Nonaccrual loans to total loans .......................... 0.14 % 0.24 % 0.28 %
Nonperforming assets to total loans
and other real estate owned ............................ 0.21 % 0.28 % 0.31 %
Nonperforming assets to total assets ..................... 0.11 % 0.17 % 0.19 %
Nonperforming assets and loans past due
90 days or more to total assets ........................ 0.20 % 0.31 % 0.30 %
Nonaccrual loans and loans past due
90 days or more to total loans ......................... 0.34 % 0.47 % 0.46 %
Allowance for possible loan losses
to nonaccrual loans .................................... 1,163.93 % 686.33 % 600.68 %
Allowance for possible loan losses
to loans past due 90 days or more
and nonaccrual loans ................................... 493.74 % 354.43 % 369.24 %
Allowance for possible loan losses to
total loans ............................................ 1.66 % 1.66 % 1.71 %
</TABLE>
23<PAGE>
<PAGE> 24
First Western's total delinquencies, excluding nonaccrual loans,
decreased $2.3 million from $11.2 million at December 31, 1997 to $8.9
million at September 30, 1998 due to a $2.0 million decrease in loans past
due 30-89 days along with a $313,000 decrease in loans past due 90 days or
more. First Western's total delinquencies increased $2.5 million during the
third quarter with most of this increase in consumer loans past due 30-89
days. Consumer loan delinquencies decreased $899,000 for the nine months
ended September 30, 1998. Most of the increase in delinquencies from
September 30, 1997 to September 30, 1998 has been due to increased
delinquencies of consumer loans. First Western's delinquent loans by type
are as follows at September 30, 1998, December 31, 1997 and September 30,
1997:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997 September 30, 1997
------------------ ----------------- ------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Commercial, financial and
agricultural....................... $ 220 $ 592 $ 572
------------------ ----------------- ------------------
Real estate-mortgage:
1-4 Family residential............. 1,136 974 1,044
Home equity........................ 18 54 65
Commercial and other............... 377 1,517 -
------------------ ----------------- ------------------
Subtotal......................... 1,531 2,545 1,109
------------------ ----------------- ------------------
Installment ......................... 7,133 8,032 6,085
------------------ ----------------- ------------------
Total................................ $ 8,884 $ 11,169 $ 7,766
================== ================= ==================
</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
$18.5 million at September 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 September 30, 1998.
24<PAGE>
<PAGE> 25
Investment Securities, Mortgage-Backed Securities, and Securities Available
for Sale:
Securities available for sale increased $401.2 million from $324.5
million at December 31, 1997 to $725.7 million at September 30, 1998 with
this increase due to the purchase of securities using the funds provided by
the PNC Bank branch acquisition along with First Western implementing a $102
million leverage strategy in July 1998. The leverage strategy involved the
purchase of U.S. government agency securities which were funded with
repurchase agreements. At September 30, 1998, First Western had net
unrealized appreciation on securities available for sale of $8.7 million
compared with unrealized appreciation of $8.4 million and $6.8 million at
December 31, 1997 and September 30, 1997, respectively.
Investment securities and mortgage-backed securities decreased a
combined $32.9 million or 14.1% during the first nine 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 $201.0 million, $1.1 million or 0.5% above the
amortized cost of $199.9 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 $328.4 million or 27.5% from $1.192 billion at
December 31, 1997 to $1.521 billion at September 30, 1998. Deposits
increased during the first nine 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 $340.1 million from September 30, 1997 to September 30, 1998 with
most of this increase attributable to the factors discussed above.
Borrowed Funds and Long-term Debt:
First Western's wholesale borrowed funds increased $100.2 million
during the first nine months of 1998 as a result of the implementation of a
securities leverage strategy in July 1998. During the second quarter of
1998, First Western entered into a $25 million revolving credit agreement
with an unrelated bank. In June 1998, First Western borrowed $23 million on
this facility in order to provide a capital contribution to the First
Western Bank, N.A. subsidiary. 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.
25<PAGE>
<PAGE> 26
Trust Preferred Capital Securities:
On February 11, 1997, First Western completed the private placement of
$25 million of 9.875% capital securities due February 1, 2027 issued by First
Western's 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 $9.1 million during the first nine
months of 1998 primarily due to the retention of earnings and the issuance of
shares under First Western's dividend reinvestment plan. During the third
quarter of 1998, First Western repurchased 75,000 shares of common stock at a
cost of $2.1 million. First Western's capital ratios declined from December
31, 1997 to September 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 September 30, 1998
and December 31, 1997:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Dollars in Thousands)
<S> <C> <C>
Tier I capital ........................................... $ 104,466 $ 147,974
Tier II capital .......................................... 16,798 13,658
------------- ------------
Total capital ............................................ $ 121,264 $ 161,632
============= ============
Risk weighted assets ....................................... $ 1,218,135 $ 1,088,249
============= ============
Tier I capital ratio ....................................... 8.58% 13.60%
============= ============
Required Tier I capital ratio .............................. 4.00% 4.00%
============= ============
Total capital ratio ........................................ 9.95% 14.85%
============= ============
Required total capital ratio ............................... 8.00% 8.00%
============= ============
Tier I leverage ratio ...................................... 4.95% 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>
26<PAGE>
<PAGE> 27
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 $47.3 million at September 30, 1998 as
compared with $47.8 million at December 31, 1997 and $36.9 million at
September 30, 1997. Another source of liquidity is borrowing capability.
First Western's banking subsidiary has a variety of sources of short-term
liquidity available to it, 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 $29.3 million of unused
overnight credit lines available at September 30, 1998.
First Western's operating activities provided cash flows of $158.5
million during the first nine months of 1998 compared with $138.7 million
during the first nine months of 1997. Loan sales provided $150.9 million and
$124.6 million of the cash flows from operating activities for the nine
months ended September 30, 1998 and 1997, respectively.
Investing activities used cash flows of $259.2 million during the first
nine months of 1998 compared with using cash flows of $75.2 million for the
first nine months of 1997. The growth of the portfolio of securities
available for sale during the first nine months of 1998 used net cash flows
of $399.0 million compared with $125.8 million for the first nine months of
1997. The cash flows to fund the increase in securities available for sale
during the first nine months of 1998 came from the PNC Bank branch purchase
which provided net cash flows of $251.2 million along with an increase in
borrowed funds. The growth of the portfolio of loans not designated as held
for sale used net cash flows of $106.5 million during the first nine months
of 1998 compared with $61.4 million for the first nine 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 $105.4 million during the
first nine months of 1998 primarily due to a net increase in borrowings
providing cash flows of $100.2 million and an increase in long-term debt
providing net cash flows of $19.5 million. The increase in borrowings
occurred primarily during the third quarter of 1998 as a result of First
Western purchasing securities as part of a leverage strategy. During the
first nine months of 1997, financing activities used $64.2 million of cash
flows due to borrowings being reduced by $74.0 million with this decrease
partially offset by a trust preferred offering providing cash flows of $23.8
million.
Year 2000 Data Processing Considerations:
First Western has reviewed its mission critical systems to determine
their readiness for the year 2000. The mission critical systems identified
by First Western include: the mainframe computer hardware and operating
system, the item capture system, the core banking software applications and
the trust department accounting system.
27<PAGE>
<PAGE> 28
First Western performs its own data processing for most bank operations
using an IBM AS/400 computer and the OS/400 operating system. First Western
has completed testing on its AS/400 computer and OS/400 operating system and
has determined that they will process year 2000 dates correctly.
First Western processes its own checks for collection from other
financial institutions ("item capture"). The hardware and software used to
perform First Western's item capture have been tested for year 2000
compliance and certain minor modifications are required. These modifications
will be made and tested during the fourth quarter of 1998.
First Western uses the Fiserve CBS software for its core banking
systems such as loan and deposit processing. First Western's core banking
system software provider has provided First Western with year 2000 compliant
software. Installation of this software is underway and will be completed
during the fourth quarter of 1998. First Western has received reports from
other financial institutions that use this software that it has passed their
year 2000 testing. First Western will test its version of this software
during the fourth quarter of 1998.
First Western's trust department uses an outside vendor for data
processing. The trust department will be changing data processing vendors
during the second quarter of 1999, therefore, First Western has not tested
the year 2000 readiness of its current trust data processing provider. The
trust data processing provider that First Western will be changing to in 1999
has certified its year 2000 compliance.
Although First Western believes that its mission critical systems will
be year 2000 compliant, any undetected flaws could result in a business
interruption that could have a material adverse effect on First Western's
financial condition or results of operations.
First Western has prepared a remediation contingency plan to be
followed if any of its mission critical systems cannot be updated to achieve
year 2000 compliance. As of September 30, 1998, progress in correcting the
mission critical systems was sufficient that none of the actions in the
contingency plan have been triggered. First Western is in the process of
preparing a year 2000 business recovery plan to address potential failures of
automated information systems; intermittent and isolated failures in public
infrastructure (electric, telephone, water, gas, etc.) and liquidity concerns
due to public demand for cash.
First Western is currently in the process of testing its non-mission
critical systems for year 2000 compliance. Any systems that are found to be
non-compliant will be replaced.
First Western has reviewed its non-information technology ("non-IT")
systems and has not found any significant year 2000 problems. Most of the
non-IT year 2000 problems discovered by First Western consisted of non-
compliant security systems and automated teller machines. This non-compliant
equipment has either already been replaced or will be replaced before the
year 2000. The estimated cost of replacing the non-compliant equipment is
less than $100,000.
28<PAGE>
<PAGE> 29
First Western has contacted all of its significant commercial loan
customers to alert them to the importance of being prepared for year 2000
issues and to determine the state of their year 2000 readiness. If a loan
customer suffers a business interruption as a result of a year 2000 problem
it could result in a loss for First Western which could be material. First
Western is not aware of any of its loan customers having a significant year
2000 compliance problem, however, there is no assurance that these customers
will not have year 2000 related business interruptions that may have a
material adverse effect on First Western's financial condition or results of
operations.
First Western has contacted all of its material vendors and
correspondent banks to determine their year 2000 readiness. First Western
has not been notified by any third party vendor or correspondent bank of a
year 2000 compliance problem, however, there is still a risk that a provider
of services to First Western, such as telecommunications or electricity, may
suffer a business interruption which, may in turn, result in a business
interruption for First Western that may have a material adverse effect on
First Western's financial condition or results of operations.
As of September 30, 1998, First Western has incurred cumulative year
2000 compliance costs of approximately $304,000, of which $16,000 was for
outside consultants to test First Western's mission critical systems and the
remaining $288,000 represented the salaries and benefit costs of First
Western's employees working on year 2000 issues. For the past nine months,
approximately one-half of First Western's computer programming and systems
personnel have been working on year 2000 testing and remediation. First
Western estimates that the remaining year 2000 testing will result in
additional expenditures of approximately $446,000 over the next 15 months
with this amount consisting primarily of the salaries and benefits of First
Western's employees. Since the amount expended by First Western for year
2000 compliance consisted primarily of the salaries and benefits of existing
First Western employees, First Western has not experienced a significant
increase in other operating expenses as a result of year 2000 remediation
efforts. Most of the corrections to First Western's year 2000 problems were
incorporated into regularly scheduled software and hardware upgrades,
therefore there were not significant expenditures above First Western's
regular software and hardware costs. First Western did not postpone any
specific projects as a result of dedicating certain employees to year 2000
concerns, however, it is impossible to measure what these employees could
have accomplished if they had not been dedicated to year 2000 concerns.
Other:
On October 20, 1998, First Western appointed Dr. Fiona M. Scott Morton
as a director. Dr. Scott Morton is an Assistant Professor of Economics and
Strategy at the University of Chicago's Graduate School of Business.
On October 20, 1998, First Western announced that the company undertook
a Profitability Improvement Initiative which has resulted in a plan to reduce
costs. First Western will implement this plan beginning in the fourth
quarter of 1998 and anticipates that the
29<PAGE>
<PAGE> 30
annualized, pretax cost savings from this plan, to be fully realized by the
end of 1999, will be in the range of $3.5 to $4.5 million. First Western
eliminated approximately 70 positions, including part-time positions, as a
result of this initiative. A one-time, pretax charge between $1.0 and $1.5
million is anticipated in the fourth quarter of 1998 to cover severance and
all other costs necessary to accomplish this initiative.
30<PAGE>
<PAGE> 31
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:
3.1 Bylaws
10.1 Extension of Change in Control Agreement between
Thomas J. O'Shane and First Western Bancorp, Inc.
10.2 Extension of Change in Control Agreement between
Robert H. Young and First Western Bancorp, Inc.
10.3 Extension of Change in Control Agreement between
Stephen R. Sant and First Western Bancorp, Inc.
10.4 Extension of Change in Control Agreement between
Richard L. Stover and First Western Bancorp, Inc.
10.5 Change in Control Agreement between John A. Zercher
and First Western Bancorp, Inc.
15.1 Letter re: Unaudited Interim Financial Information
27.1 Financial Data Schedule
b. Reports on Form 8-K: None.
31<PAGE>
<PAGE> 32
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)
November 12, 1998 /s/ Kenneth J. Romig
---------------------
Kenneth J. Romig
Chief Financial Officer,
(Principal Financial Officer)
32<PAGE>
<PAGE> 33
FIRST WESTERN BANCORP, INC.
EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
- ------- -------------------------------------------------- ---------
<S> <C> <C>
3.1 Bylaws Filed
herewith
10.1 Extension of Change in Control Agreement between Filed
Thomas J. O'Shane and First Western Bancorp, Inc. herewith
10.2 Extension of Change in Control Agreement between Filed
Robert H. Young and First Western Bancorp, Inc. herewith
10.3 Extension of Change in Control Agreement between Filed
Stephen R. Sant and First Western Bancorp, Inc. herewith
10.4 Extension of Change in Control Agreement between Filed
Richard L. Stover and First Western Bancorp, Inc. herewith
10.5 Change in Control Agreement between John A. Filed
Zercher and First Western Bancorp, Inc. herewith
15.1 Letter re: Unaudited Interim Financial Filed
Information herewith
27.1 Financial Data Schedule Filed
herewith
</TABLE>
<PAGE> 1 Adopted-July 20, 1993
Revised-September 15, 1998
FIRST WESTERN BANCORP, INC.
BY-LAWS
ARTICLE I
Meetings of Shareholders
Section 1.1 Annual Meeting. The regular annual meeting of the
shareholders to elect directors and transact whatever other business may
properly come before the meeting, shall be held at the main office of the
Corporation located at 101 East Washington Street, New Castle, Pennsylvania
16101 or such other place as the Board of Directors may designate, on such
date as the Board of Directors shall designate. Notice of such meeting
shall be mailed, postage prepaid, at least ten (10) days prior to the date
thereof, addressed to each shareholder at his address appearing on the
books of the Corporation. If, from any cause, an election of Directors is
not made on the designated day, the Board of Directors shall order the
election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall
be given in the manner herein provided for the Annual Meeting.
Section 1.2 Special Meetings. Special meetings of the shareholders
may be called for any purpose at any time by the Board of Directors. Every
such special meeting, unless otherwise provided by law, shall be called by
mailing, postage prepaid, not less than ten (10) days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the Corporation, a notice stating the purpose of the meeting.
Special meetings may also be called by the shareholders of the Corporation
in accordance with applicable law.
Section 1.3 Nominations for Director. Nominations for election to
the Board of Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors. Nominations, other than
those made by or on behalf of the Board of Directors of the Corporation,
shall be made in writing and shall be delivered or mailed to the Chairman
of the Corporation no later than January 31 for an election to be held at
the annual meeting that year and no later than forty-five (45) days prior
to any other meeting of shareholders called for the election of
-1-<PAGE>
<PAGE> 2
directors; provided however, that if less than twenty-one (21) days notice
of the other meeting is given to shareholders, such nominations shall be
mailed or delivered to the Chairman of the Corporation not later than the
close of business on the seventh day following the day on which the notice
of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name
and address of each proposed nominee; (b) the principle occupation of each
proposed nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the number of
shares of capital stock of the Corporation owned by the notifying
shareholder. Nominations not made in accordance herewith may, in the
discretion of the chairperson of the meeting, be disregarded, and upon the
chairperson's instructions, the judges of election shall disregard all
votes cast for each such nominee.
Section 1.4 Judges of Election. Every election of directors shall
be managed by three (3) judges, who shall be appointed from among the
shareholders by the Board of Directors. The judges of election shall hold
and conduct the election at which they are appointed to serve; and, after
the election, they shall file with the Secretary of the Corporation a
certificate under their hands, certifying the result thereof and the names
of the directors elected. The judges of election, at the request of the
Chairperson of the meeting, shall act as inspectors of any other vote by
ballot taken at such meeting, and shall certify the result thereof.
Section 1.5 Record Date. The Board of Directors may fix a time prior
to the date of any meeting of the shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting. Except in the case of an adjourned meeting, the record date shall
be not more than ninety (90) days prior to the date of the meeting of the
shareholders. Only shareholders of record on the record date shall be so
entitled to notice of, or to vote at, the meeting notwithstanding any
transfer of shares on the books of the Corporation after the record date.
When a determination of shareholders of record has been made as provided
herein for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the
adjourned meeting. If a record date is not fixed by the Board of
Directors: (i) the record date for determining shareholders entitled to
notice of or to vote at a meeting of the shareholders shall be at the close
of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day immediately
preceding the day on which the meeting is held; and (ii) the record date
for determining shareholders entitled to express consent or dissent to
corporate action in writing without a meeting, when prior action by the
Board of Directors is not necessary, shall be the close of business on the
day on which the first written consent or dissent is filed with the
Secretary of the Corporation.
-2-<PAGE>
<PAGE> 3
Section 1.6 Quorum; Adjournments. The presence of shareholders
entitled to cast at least a majority of the votes that all shareholders are
entitled to cast on a particular matter to be acted upon at a meeting of
the shareholders shall be required in order to constitute a quorum for the
purposes of consideration and action on the matter. Adjournments of any
meeting of the shareholders may be taken even though a quorum may be
present, but any meeting at which directors are to be elected shall be
adjourned only for periods not exceeding fifteen (15) days each as the
shareholders present and entitled to vote shall direct, until the directors
have been elected; and those shareholders entitled to vote who attend a
meeting called for the election of directors that has been previously
adjourned for periods of at least fifteen (15) days because of a lack of
a quorum, although less than a quorum as fixed in this Section, shall
nevertheless constitute a quorum for the purpose of electing directors.
Adjournments of any meeting of shareholders may be taken at any point in
a meeting whether or not the shareholders have acted on any or all of the
matters before the meeting.
Section 1.7 Action by Shareholders. Except as otherwise required by
law or by the Articles of Incorporation of the Corporation or these By-
laws, whenever any corporate action is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
duly organized meeting of the shareholders by the holders of shares
entitled to vote thereon. However, unless otherwise provided in a By-law
adopted by the shareholders, whenever the By-laws require a specific number
or percentage of votes in order for the shareholders to take any action,
the provision of the By-laws setting forth that requirement shall not be
amended or repealed by any lesser number or percentage of votes. For the
purposes of these By-laws, the term "cast" does not include recording the
fact of abstention or failing to vote for a candidate or for approval or
disapproval of a matter, whether or not the person entitled to vote
characterizes the conduct as voting or casting a vote. In an election of
directors, the candidates receiving the highest number of votes, up to the
number of directors to be elected, shall be elected.
-3-<PAGE>
<PAGE> 4
ARTICLE II
Directors
Section 2.1 Board of Directors. Except as otherwise provided by
statute, the Articles of Incorporation or a By-law adopted by the
shareholders, all powers vested by law in the Corporation shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of
Directors.
Section 2.2 Number. The board shall consist of not fewer than five
(5) persons, the exact number to be fixed and determined from time to time
by resolution of a majority of the full Board or by resolution of the
shareholders at any meeting thereof.
Section 2.3 Age. No one shall be elected as a director of this
Corporation if, at the time of the election, such person has reached his
70th birthday, but a director reaching age 70 may complete his term of
office, serving until his successor is duly elected and qualified;
provided, however, the foregoing provisions of this section to the contrary
notwithstanding, any person who has served this Corporation in the capacity
of President and/or Chairperson of the Board of Directors may be elected
to a one year term if nominated for such position by the Board.
Section 2.4 Term. The Board of Directors of the Corporation shall
be divided into three (3) classes as nearly equal in number as may be, with
the term of office of one class expiring each year; at each succeeding
Annual Meeting of shareholders of the Corporation, successors to the class
of Directors whose term expires at such Annual Meeting shall be elected for
a three year term. The number of Directors shall be so apportioned among
the classes so as to maintain the classes as nearly equal in number as
possible, and any additional Director of any class shall hold office for
a term which shall coincide with the term of such class. The foregoing
provisions to the contrary notwithstanding, if, following reaching age 70,
a former President and/or Chairperson is elected to the Board after being
nominated by the Board for such position, the term of such former President
and/or Chairperson shall be one year and such person shall be placed in the
class of directors whose term expires at the next annual meeting.
A Director shall hold office until the Annual Meeting of the
shareholders of the Corporation for the year in which his term expires, and
until his successor shall be duly elected and qualified, subject, however,
to the prior death, resignation, retirement, disqualification or removal
from office of a Director. If any vacancy occurs in the Board of Directors
of the Corporation caused by death, resignation, retirement,
disqualification or removal from office of any Director or otherwise or by
an increase in the number of Directors, a majority of the Directors then
in office, even if less than a quorum, may choose a successor to fill such
vacancy. Normally any Director elected to fill a vacancy should have the
same term as that of his predecessor, if any, but a Director elected to
fill a vacancy may be elected
-4-<PAGE>
<PAGE> 5
to a different class from his predecessor provided that such Director shall
not have a longer term than that of his predecessor.
Section 2.5 Regular Meetings. The regular meetings of the Board
shall be held, without notice, on the third Tuesday of each calendar
quarter, such meeting to be at the main office of the Corporation or at
such other place as the Board may designate. When any regular meeting of
the Board falls upon a holiday, the meeting shall be held on the next
business day unless the Board shall designate another day.
Section 2.6 Special Meeting. Special meetings of the Board may be
called by the Chairperson of the Board or by the President of the
Corporation, or by a majority of the Directors. Each member of the Board
shall be given written notice of the special meeting as promptly as
possible but not less than 24 hours prior to the meeting. Such notice may
be by telegram, telefacsimile, letter, or in person, and shall state the
date, time and place of the special meeting. Directors may participate in
special meetings of the Board through conference telephone or similar
equipment whereby each director can hear and communicate with each other
director, and the Corporation shall have such equipment available for such
purpose.
Section 2.7 Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less
number may adjourn any meeting, from time to time, and the meeting may be
held, as adjourned, without further notice. A director cannot vote by
proxy, or otherwise act by proxy at a meeting of the Board.
Section 2.8 Directors Fees. Each director who is not a salaried
officer of the Corporation or any of its subsidiaries may receive a
retainer and/or a fee for attendance at each meeting of the Board, or any
committee thereof, in such amount as the Board may, from time to time,
determine.
Section 2.9 Directors Emeritus. The Board may appoint, each year,
such number of directors emeritus as the Board may, from time to time,
determine. In order to qualify as a director emeritus, a person must have
served as a duly elected director and have retired as such duly elected
director at age 65 or older. Directors emeritus may, in an advisory
capacity, attend the meetings of the Board, and may, as designated by the
Board or appointed by the Chairman of the Board, attend meetings of
committees of the Board, but such directors emeritus shall not be entitled
to vote nor be counted for purposes of determining a quorum. Directors
emeritus shall receive the same fees as members of the board and, when
serving on committees where a fee is provided, shall be paid such fee
during such time of service.
Article II, Secs. 2.3, 2.4 - Rev. 02/21/95 - Article II, Sec.2.5 -
Rev. 04/18/95 Article II, Sec.2.6 - Rev. 04/16/96
-5-<PAGE>
<PAGE> 6
ARTICLE III
Committees of the Board
Section 3.1 Policy and Oversight Committee. The Board shall annually
elect not fewer than three (3) persons nor more than seven (7) persons to
serve on the Policy and Oversight Committee. No director who receives a
salary or other significant compensation from the Corporation or from any
of its subsidiaries shall serve as a voting member of this Committee. The
Committee shall periodically review the compensation and performance of the
Chief Executive Officer of the Corporation. Meetings for this purpose
shall be called by the Chairperson of the Committee. Meetings of the
Committee shall also be called by the Chairperson of the Committee on his
own initiative or at the request of the President of the Corporation, the
Chairperson of the Board, or by any two (2) directors (whether or not
members of the Committee) to address questions regarding shareholder
issues, the implementation of board policy, corporate governance issues or
reviewing alternative corporate initiatives if such questions need further
investigation or otherwise are not ripe for discussion by the full board.
A majority of the Committee shall constitute a quorum. The Committee shall
choose its own Chairperson.
Section 3.2 Audit Committee. There shall be an Audit Committee
composed entirely of outside Directors of the Corporation and its lending
subsidiaries. The Audit Committee shall, upon the concurrence of the
Boards of Directors of the Corporation's lending subsidiaries, be a
combined Audit Committee serving the Corporation and such lending
subsidiaries.
Section 3.3 Compensation Committee. There shall be a Compensation
Committee of the Board none of whose members shall be an employee of First
Western or of any subsidiary of First Western nor eligible to participate
in First Western's Incentive Stock Option Plan for Key Officers. The
Compensation Committee shall serve at the pleasure of the Board and shall
review and set the compensation for all executive officers and shall review
and pass on all contracts for services with persons serving as members of
the Board of First Western or of any of its subsidiaries. The Compensation
Committee may also review all benefit programs sponsored by First Western
and/or any of its subsidiaries to determine the adequacy thereof and shall
recommend to the Board any changes, additions or deletions that it feels
are appropriate for the corporation and its employees. The Compensation
Committee shall perform such other duties as may be delegated to it by the
Board. The Compensation Committee shall report its actions in writing to
the Board. Meetings of the Compensation Committee may be called at any
time by its Chairperson, by the Chairperson of the Board of Directors or
by the President of the Corporation (even if not a member of the
Compensation Committee) or by any other member or members authorized by the
Compensation Committee to call such meetings, and such meetings shall be
held at such time and place as may be designated by the person or persons
calling the meeting provided if such meeting place is not at First
Western's headquarters, it not be
-6-<PAGE>
<PAGE> 7
inconvenient to any member. Three (3) members of the Compensation
Committee shall constitute a quorum. The Compensation Committee may adopt
its own rules of procedure.
Section 3.4 Other Committees. The Board may appoint, from time to
time, such other committees for such purposes and with such powers as the
Board may determine; provided, however, that no committee may authorize
distributions of assets or dividends; approve actions required to be
approved by the shareholders; fill vacancies in the Board or any of its
committees; amend the Articles of Corporation; or adopt, amend or repeal
these By-laws.
Section 3.5 Fees. Each member of any committee who does not receive
a salary from the Corporation or any of its subsidiaries shall be entitled
to receive for each committee meeting which he shall attend such fee as the
Board shall, from time to time, determine, or such retainer or annual fee,
in lieu of a meeting fee or in combination therewith, as the Board may
determine.
Art. III-Rev 05/17/94 Art. III Sec.3.1 Rev. 04/16/96 Art.111 Sec.3.3
Rev. 9/15/98
-7-<PAGE>
<PAGE> 8
ARTICLE IV
Officers and Employees
Section 4.1 Chairperson and Vice Chairperson of the Board. The Board
shall appoint one of its member to be Chairperson of the Board to serve at
the pleasure of the Board. The Chairperson shall be the Chief Executive
Officer of the Corporation and shall have and may exercise any and all
other powers and duties pertaining by law, regulation, or practice, to the
office of the Chief Executive Officer, or imposed by these By-laws. Such
person shall preside at all meetings of the Board. The Board may also
designate a member to be Vice Chairperson. The Vice Chairperson, if any,
shall preside at all meetings of the Board in the absence of the
Chairperson. The Vice Chairperson, if any, shall have such other duties
as assigned by the Chief Executive Officer of the Corporation or by the
Board.
Section 4.2 President. The Board shall appoint a President of the
Corporation. In the absence of the Chairperson, and any Vice Chairperson,
the President shall preside at any meeting of the Board. The President may
exercise such powers and duties as from time to time may be conferred, or
assigned by the Chief Executive Officer of the Corporation or by the Board.
Section 4.3 Executive Vice Presidents and Senior Vice Presidents.
The Board may appoint one or more Executive Vice Presidents and/or Senior
Vice Presidents who shall have such powers and duties as may be assigned
by the Board or by the Chief Executive Officer.
Section 4.4 Secretary. The Board shall appoint a Secretary of the
board and of the Corporation, and who shall keep accurate minutes of all
meetings. The Secretary shall attend to the giving of all notices required
by these By-laws to be given; shall be custodian of the corporate seal,
records, documents and papers of the Corporation; shall provide for the
keeping of proper records of all transactions of the Corporation; shall
have and may exercise any and all other powers and duties pertaining by
law, regulation or practice, to the office of Secretary, or imposed by
these By-laws; and shall also perform such other duties as may be assigned
from time to time, by the Board or by the Chief Executive Officer.
Section 4.5 Treasurer. The Board shall appoint a Treasurer who shall
have custody of the Corporation's funds and securities, keep full and
accurate accounts of the receipts and disbursements of the Corporation in
books belonging to the Corporation, shall deposit all moneys and other
valuable effects of the Corporation in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors, and shall also have such other powers and perform such other
duties as are incident to the office of the treasurer of a corporation or
as shall be prescribed from time to time by, or pursuant to authority
delegated by, the Board of Directors.
-8-<PAGE>
<PAGE> 9
Section 4.6 Other Officers. The Chief Executive Officer may appoint
one or more Vice Presidents, Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers, and other officers and attorneys-in-
fact, and/or remove the same from office, as from time to time may appear
to the Chief Executive Officer to be required or desirable to transact the
business of the Corporation. Such officers shall respectively exercise
such powers and perform such duties as pertain to their several offices,
or as may be conferred upon, or assigned to, them by the Chief Executive
Officer.
Section 4.7 Tenure of Office. The Chairperson and all other
Executive Officers (those officers appointed by the Board) shall hold
office until the next annual meeting of the Board, unless any such
executive officer shall resign, is disqualified, or is removed by the
Board; and any vacancy occurring in the office of Chairperson shall be
filled promptly by the Board. All officers other than Executive Officers
shall hold office at the pleasure of the Chief Executive Officer.
Art. IV -Sec.4.1, 4.2, 4.3, 4.4, 4.6,4.7 Rev. 9/15/98
-9-<PAGE>
<PAGE> 10
ARTICLE V
Stock and Stock Certificates
Section 5.1 Transfers. Shares of stock shall be transferable on the
books of the Corporation, and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder
by such transfer shall, in proportion to his shares, succeed to all rights
of the prior holder of such shares.
Section 5.2 Stock Certificates. Certificates of stock shall bear the
manual or facsimile signature of the Chairman, any Vice Chairman, the
President, any Executive Vice President or any Senior Vice President, and
shall be signed manually or by facsimile process by the Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer, and the seal of the
Corporation shall be engraved thereon. Each certificate shall recite on
its face that the stock represented thereby is transferable only upon the
books of the Corporation properly endorsed.
-10-<PAGE>
<PAGE> 11
ARTICLE VI
Directors' Liability
Section 6.1 Directors' Personal Liability. A director of the
Corporation shall not be personally liable, as such, for monetary damages
for any action taken, or any failure to take any action; provided, however,
that this provision shall not eliminate or limit the liability of a
director to the extent that such elimination or limitation of liability is
expressly prohibited by Section 1713 of the Pennsylvania Business
Corporation Law of 1988 or any successor statute as in effect at the time
of the alleged action or failure to take action by such director.
Section 6.2 Preservation of Rights. Any repeal or modification of
this Article shall not adversely affect any right or protection existing
at the time of such repeal or modification to which any director or former
director may be entitled under this Article. The rights conferred by this
Article shall continue as to any person who has ceased to be a director of
the Corporation and shall inure to the benefit of the heirs and personal
representatives of such person.
-11-<PAGE>
<PAGE> 12
ARTICLE VII
Indemnification
Section 7.1 Mandatory Indemnification of Directors and Officers. The
Corporation shall indemnify, to the fullest extent now or hereafter
permitted by law (including but not limited to the indemnification provided
by Chapter 17, Subchapter D, of the Pennsylvania Business Corporation Law
of 1988), each director or officer (including each former director or
officer) of the Corporation who was or is made a party to or a witness in
or is threatened to be made a party to or a witness in any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is
or was an authorized representative of the Corporation, against all
expenses (including attorneys' fees and disbursements), judgments, fines
(including excise taxes and penalties) and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action or proceeding.
Section 7.2 Mandatory Advancement of Expenses to Directors and
Officers. The Corporation shall pay all expenses (including attorneys'
fees and disbursements) incurred by a director or officer (including a
former director or officer) referred to in Section 7.1 hereof in defending
or appearing as a witness in any action or proceeding described in Section
7.1 hereof in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of such person to repay all
amounts advanced if it is ultimately determined that he or she is not
entitled to be indemnified by the corporation as provided in Section 7.4
hereof.
Section 7.3 Permissive Indemnification and Advancement of Expenses.
The Corporation may, as determined by the Board from time to time,
indemnify to the fullest extent now or hereafter permitted by law, any
person who was or is made a party to or a witness in or is threatened to
be made a party to or a witness in, or was or is otherwise involved in, any
threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was an authorized representative of the Corporation, both as
to action in such person's official capacity and as to action in another
capacity while holding such office or position, against all expenses
(including attorneys' fees and disbursements), judgments, fines (including
excise taxes and penalties), and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action or
proceeding. The Corporation may, as determined by the Board from time to
time, pay expenses incurred by any such person by reason of his or her
participation in an action or proceeding referred to in this Section 7.3
in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the Corporation as provided in Section 7.4 hereof.
-12-<PAGE>
<PAGE> 13
Section 7.4 Scope of Indemnification. Indemnification under this
Article shall not be made by the Corporation in any case where a court
determines that the alleged act or failure to act giving rise to the claim
for indemnification is expressly prohibited by Chapter 17, Subchapter D,
of the Pennsylvania Business Corporation Law of 1988 or any successor
statute as in effect at the time of such alleged action or failure to take
action.
Section 7.5 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of
the Corporation, or is or was an authorized representative of the
Corporation, against any liability asserted against or incurred by such
person in any such capacity, or arising out of the status of such person
as such, whether or not the Corporation would have the power to indemnify
such person against any liability under the provisions of this Article.
Section 7.6 Funding to Meet Indemnification Obligations. The Board,
without approval of the shareholders, shall have the power to borrow money
on behalf of the Corporation, including the power to pledge the assets of
the Corporation, from time to time to discharge the Corporation's
obligations with respect to indemnification, the advancement and
reimbursement of expenses, and the purchase and maintenance of insurance
referred to in this Article. The Corporation may, in lieu of or in
addition to the purchase and maintenance of insurance referred to in
Section 7.5 hereof, establish and maintain a fund of any nature or
otherwise secure or insure in any manner its indemnification obligations,
whether arising under or pursuant to this Article or otherwise.
Section 7.7 Miscellaneous. Each director, officer or other
authorized representative of the Corporation shall be deemed to act in such
capacity in reliance upon such rights of indemnification and advancement
of expenses as are provided in this Article. The rights of indemnification
and advancement of expenses provided by this Article shall not be deemed
exclusive of any other rights to which any person seeking indemnification
or advancement of expenses may be entitled under any agreement, vote of
shareholders or disinterested directors, statue or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office or position, and shall continue as to
a person who has ceased to be an authorized representative of the
Corporation and shall inure to the benefit of the heirs and personal
representatives of such person. Indemnification and advancement of
expenses under this Article shall be provided whether or not the
indemnified liability arises or arose from any threatened, pending or
completed action by or in the right of the Corporation.
-13-<PAGE>
<PAGE> 14
Section 7.8 Definition of Corporation. For purposes of this Article,
references to "the Corporation" shall include all constituent associations
absorbed in a consolidation, merger or division, as well as the surviving
or new associations surviving or resulting therefrom, so that (i) any
person who is or was an authorized representative of a constituent,
surviving or new association shall stand in the same position under the
provisions of this Article with respect to the surviving or new association
as such person would if he or she had served the surviving or new
association in the same capacity and (ii) any person who is or was an
authorized representative of the Corporation shall stand in the same
position under the provisions of this Article with respect to the surviving
or new association as such person would with respect to the Corporation if
its separate existence had continued.
Section 7.9 Definition of Authorized Representative. For the
purposes of this Article, the term "authorized representative" shall mean
a director, officer, employee or agent of the Corporation or of any
subsidiary of the Corporation, or a trustee, custodian, administrator,
committeeman or fiduciary of any employee benefit plan established and
maintained by the Corporation or by any subsidiary of the Corporation, or
a person serving another association, corporation, partnership, joint
venture, trust or other enterprise in any of the foregoing capacities at
the request of the Corporation.
Section 7.10 Repeal or Modification. Any repeal or modification of
this Article shall not adversely affect any right or protection existing
at the time of such repeal or modification to which any person may be
entitled under this Article.
-14-<PAGE>
<PAGE> 15
ARTICLE VIII
Corporate Seal
Section 8.1 Corporate Seal.The Chairman, any Vice Chairman, the
President, any Executive Vice President, any Senior Vice President, any
Vice President, any Assistant Vice President, the Secretary or any
Assistant Secretary, the Treasurer or any Assistant Treasurer, or any other
officer thereunto designated by the Board or by the President, shall have
authority to affix the corporate seal to any document requiring such seal,
and to attest the same. Such seal shall be substantially in the following
form:
-15-
<PAGE>
<PAGE> 16
ARTICLE IX
Miscellaneous Provisions
Section 9.1 Fiscal Year. The fiscal year of the Corporation shall
be the calendar year.
Section 9.2 Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations,
receipts, discharges, releases, satisfactions, settlements, petitions,
schedules, accounts, affidavits, bonds, undertakings, proxies and other
instruments or documents may be signed, executed, acknowledged, verified,
delivered or accepted in behalf of the Corporation by the Chairman, any
Vice Chairman, the President, any Executive Vice President, any Senior Vice
President, any Vice President or Assistant Vice President, the Secretary
or any Assistant Secretary, or the Treasurer or any Assistant Treasurer.
Any such instruments may also be executed, acknowledged, verified,
delivered or accepted in behalf of the Corporation in such manner and by
such other officers as the Board may from time to time direct. The
provision of this Section 9.2 are supplementary to any other provision of
these By-laws.
Section 9.3 Records. The Articles of Incorporation, the By-Laws, and
the proceedings of all meetings of the shareholders, the Board, standing
committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by
the Secretary, or by such other officer appointed to act as Secretary of
the meeting.
Section 9.4 Control-Share Acquisitions. The provisions of Subchapter
G of Chapter 25 of Title 15 Pa.C.S. (15 Pa.C.S. Sections 2561-2567) as
amended by Act No. 1990-36 (regarding Control-share Acquisitions) shall not
be applicable to this Corporation. (Originally adopted July 16, 1990.)
Section 9.5 Disgorgement by Certain Controlling Shareholders. The
provisions of Subchapter H of Chapter 25 of Title 15 Pa.C.S. (15 Pa.C.S.
Sections 2571-2575) as amended by Act No. 1990-36 (regarding Disgorgement
by Certain Controlling Shareholders Following Attempts to Acquire Control)
shall not be applicable to this Corporation. (Originally adopted July 16,
1990.)
-16-<PAGE>
<PAGE> 17
ARTICLE X
By-Laws
Section 10.1 Inspection. A copy of the By-laws, with all amendments
thereto, shall at all times be kept in a convenient place at the main
office of the Corporation, and shall be open for inspection to all
shareholders during business hours.
Section 10.2 Amendments. The By-laws may be amended, modified or
repealed at any regular meeting of the Board by a vote of a majority of the
whole number of the Directors, provided at least ten (10) days written
notice of the proposed amendment has been given to each director prior to
the meeting. The By-laws may be amended, modified or repealed by the
shareholders of the Corporation in accordance with applicable law.
-17-
<PAGE> 1
EXTENSION AGREEMENT
This Agreement made this 31st day of July, 1998, by and between:
FIRST WESTERN BANCORP, INC., a Pennsylvania corporation, hereinafter
referred to as (the "Company")
AND
ThOMAS J. O'SHANE, an employee of the Company, and hereinafter
referred to as the (the "Executive")
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an Agreement dated
July 18, 1995 which agreement is commonly referred to as "change in
control" agreement and which agreement is due to expire on July 31, 1998;
and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has been reviewing all change in control contracts and the concepts
behind the same to determine whether to recommend that the Company extend
the Employee's change in control contract and if so, upon what terms and
conditions; and
WHEREAS, the Compensation Committee has not been able to reach a
recommendation to the board of directors of the Company regarding extending
or renewing the Executive's change in control contract, but the Company has
authorized this Extension Agreement under which the Executive's current
change in control contract will be extended to December 31, 1998, at which
time, notwithstanding Paragraph 24 to the contrary, the change in control
agreement will lapse and become null and void;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Company and Executive hereby
agree as follows:
1. Paragraph 24 of the Agreement dated July 18, 1995, by and
between the Company and the Executive is hereby amended to read
in its entirety as follows:
24. Notwithstanding anything to the contrary contained above,
this Agreement shall remain in effect through December 31,
1998 at which time, if there has not been a change in
control, this Agreement shall lapse and become null and
void unless extended by the Company.
2. The Executive understands that this Extension Agreement in no
way obligates the Company to either extend or renew the
Executive's change in control agreement. The Executive further
understands that in the event the company should decide to
<PAGE>
<PAGE> 2
extend to the Executive a new change in control agreement,
such new agreement may contain terms and condition
materially different from the terms and conditions set
forth in the change in control agreement dated January 16,
1996.
3. Except for amending and restating in its entirety Paragraph 24
of the agreement as set forth in Paragraph 1 above and except
for the understanding set forth in Paragraph 2 above, the
agreement dated July 18, 1995 shall remain in full force and
effect until its expiration on December 31, 1998 unless
otherwise amended by agreement between the company and the
Executive.
IN WITNESS WHEREOF, the undersigned has set their hand and seal or
caused this Agreement to be signed by a duly authorized officer, on the day
first set out above.
FIRST WESTERN BANCORP, INC.
By: /s/Robert C. Duvall
-------------------
Robert C. Duvall, Chairman
Compensation Committee of the
Board of Directors
ATTEST:
/s/Robert H. Young
- ------------------
Secretary
EXECUTIVE
By: /s/Thomas J. O'Shane
--------------------
Thomas J. O'Shane
WITNESS:
/s/Holly L. Turk
- ----------------
doc\tsm\extagr,tjo
<PAGE>
EXTENSION AGREEMENT
This Agreement made this 31st day of July, 1998, by and between:
FIRST WESTERN BANCORP, INC., a Pennsylvania corporation, hereinafter
referred to as (the "Company")
AND
ROBERT H. YOUNG, an employee of the Company, and hereinafter referred
to as the (the "Executive")
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an Agreement dated
July 18, 1995 which agreement is commonly referred to as "change in
control" agreement and which agreement is due to expire on July 31, 1998;
and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has been reviewing all change in control contracts and the concepts
behind the same to determine whether to recommend that the Company extend
the Employee's change in control contract and if so, upon what terms and
conditions; and
WHEREAS, the Compensation Committee has not been able to reach a
recommendation to the board of directors of the Company regarding extending
or renewing the Executive's change in control contract, but the Company has
authorized this Extension Agreement under which the Executive's current
change in control contract will be extended to December 31, 1998, at which
time, notwithstanding Paragraph 24 to the contrary, the change in control
agreement will lapse and become null and void;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Company and Executive hereby
agree as follows:
1. Paragraph 24 of the Agreement dated July 18, 1995, by and
between the Company and the Executive is hereby amended to read
in its entirety as follows:
24. Notwithstanding anything to the contrary contained above,
this Agreement shall remain in effect through December 31,
1998 at which time, if there has not been a change in
control, this Agreement shall lapse and become null and
void unless extended by the Company.
2. The Executive understands that this Extension Agreement in no
way obligates the Company to either extend or renew the
Executive's change in control agreement. The Executive further
understands that in the event the company should decide to<PAGE>
<PAGE> 2
extend to the Executive a new change in control agreement,
such new agreement may contain terms and condition
materially different from the terms and conditions set
forth in the change in control agreement dated January 16,
1996.
3. Except for amending and restating in its entirety Paragraph 24
of the agreement as set forth in Paragraph 1 above and except
for the understanding set forth in Paragraph 2 above, the
agreement dated July 18, 1995 shall remain in full force and
effect until its expiration on December 31, 1998 unless
otherwise amended by agreement between the company and the
Executive.
IN WITNESS WHEREOF, the undersigned has set their hand and seal or
caused this Agreement to be signed by a duly authorized officer, on the day
first set out above.
FIRST WESTERN BANCORP, INC.
By: /s/Robert C. Duvall
-------------------
Robert C. Duvall, Chairman
Compensation Committee of the
Board of Directors
ATTEST:
/s/Thomas S. Mansell
- --------------------
Asst. Secretary
EXECUTIVE
By: /s/Robert H. Young
------------------
Robert H. Young
WITNESS:
/s/ Joann A. Lombardo
- ---------------------
doc\tsm\extagr.rhy
<PAGE> 1
EXTENSION AGREEMENT
This Agreement made this 31st day of July, 1998, by and between:
FIRST WESTERN BANCORP, INC., a Pennsylvania corporation, hereinafter
referred to as (the "Company")
AND
STEPHEN R. SANT, an employee of the Company, and hereinafter referred
to as the (the "Executive")
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an Agreement dated
January 16, 1996 which agreement is commonly referred to as "change in
control" agreement and which agreement is due to expire on July 31, 1998;
and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has been reviewing all change in control contracts and the concepts
behind the same to determine whether to recommend that the Company extend
the Employee's change in control contract and if so, upon what terms and
conditions; and
WHEREAS, the Compensation Committee has not been able to reach a
recommendation to the board of directors of the Company regarding extending
or renewing the Executive's change in control contract, but the Company has
authorized this Extension Agreement under which the Executive's current
change in control contract will be extended to December 31, 1998, at which
time, notwithstanding Paragraph 24 to the contrary, the change in control
agreement will lapse and become null and void;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Company and Executive hereby
agree as follows:
1. Paragraph 24 of the Agreement dated January 16, 1996, by and
between the Company and the Executive is hereby amended to read
in its entirety as follows:
24. Notwithstanding anything to the contrary contained above,
this Agreement shall remain in effect through December 31,
1998 at which time, if there has not been a change in
control, this Agreement shall lapse and become null and
void unless extended by the Company.
2. The Executive understands that this Extension Agreement in no
way obligates the Company to either extend or renew the
Executive's change in control agreement. The Executive further
understands that in the event the company should decide to<PAGE>
<PAGE> 2
extend to the Executive a new change in control agreement,
such new agreement may contain terms and condition
materially different from the terms and conditions set
forth in the change in control agreement dated January 16,
1996.
3. Except for amending and restating in its entirety Paragraph 24
of the agreement as set forth in Paragraph 1 above and except
for the understanding set forth in Paragraph 2 above, the
agreement dated January 16, 1996 shall remain in full force and
effect until its expiration on December 31, 1998 unless
otherwise amended by agreement between the company and the
Executive.
IN WITNESS WHEREOF, the undersigned has set their hand and seal or
caused this Agreement to be signed by a duly authorized officer, on the day
first set out above.
FIRST WESTERN BANCORP, INC.
By: /s/Robert C. Duvall
-------------------
Robert C. Duvall, Chairman
Compensation Committee of the
Board of Directors
ATTEST:
/s/Robert H. Young
- ------------------
Secretary
EXECUTIVE
By: /s/Stephen R. Sant
------------------
Stephen R. Sant
WITNESS:
/s/Holly L. Turk
- ----------------
doc\tsm\extagr
<PAGE> 1
EXTENSION AGREEMENT
This Agreement made this 31st day of July, 1998, by and between:
FIRST WESTERN BANCORP, INC., a Pennsylvania corporation, hereinafter
referred to as (the "Company")
AND
RICHARD L. STOVER, an employee of the Company, and hereinafter
referred to as the (the "Executive")
W I T N E S S E T H:
WHEREAS, the Company and the Employee entered into an Agreement dated
November 4, 1996 which agreement is commonly referred to as "change in
control" agreement and which agreement is due to expire on July 31, 1998;
and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company has been reviewing all change in control contracts and the concepts
behind the same to determine whether to recommend that the Company extend
the Employee's change in control contract and if so, upon what terms and
conditions; and
WHEREAS, the Compensation Committee has not been able to reach a
recommendation to the board of directors of the Company regarding extending
or renewing the Executive's change in control contract, but the Company has
authorized this Extension Agreement under which the Executive's current
change in control contract will be extended to December 31, 1998, at which
time, notwithstanding Paragraph 24 to the contrary, the change in control
agreement will lapse and become null and void;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Company and Executive hereby
agree as follows:
1. Paragraph 24 of the Agreement dated January 16, 1996, by and
between the Company and the Executive is hereby amended to read
in its entirety as follows:
24. Notwithstanding anything to the contrary contained above,
this Agreement shall remain in effect through December 31,
1998 at which time, if there has not been a change in
control, this Agreement shall lapse and become null and
void unless extended by the Company.
2. The Executive understands that this Extension Agreement in no
way obligates the Company to either extend or renew the
Executive's change in control agreement. The Executive further
understands that in the event the company should decide to<PAGE>
<PAGE> 2
extend to the Executive a new change in control agreement,
such new agreement may contain terms and condition
materially different from the terms and conditions set
forth in the change in control agreement dated January 16,
1996.
3. Except for amending and restating in its entirety Paragraph 24
of the agreement as set forth in Paragraph 1 above and except
for the understanding set forth in Paragraph 2 above, the
agreement dated January 16, 1996 shall remain in full force and
effect until its expiration on December 31, 1998 unless
otherwise amended by agreement between the company and the
Executive.
IN WITNESS WHEREOF, the undersigned has set their hand and seal or
caused this Agreement to be signed by a duly authorized officer, on the day
first set out above.
FIRST WESTERN BANCORP, INC.
By: /s/Robert C. Duvall
-------------------
Robert C. Duvall, Chairman
Compensation Committee of the
Board of Directors
ATTEST:
/s/Robert H. Young
- ------------------
Secretary
EXECUTIVE
By: /s/Richard L. Stover
--------------------
Richard L. Stover
WITNESS:
/s/Joann A. Lombardo
doc\tsm\extagr.rls
<PAGE> 1
AGREEMENT
THIS AGREEMENT made this 15th day of September, 1998, by and
between:
FIRST WESTERN BANCORP, INC., a Pennsylvania corporation which
is hereinafter referred to as the "Company",
AND
JOHN A. ZERCHER, an employee of the Company, and hereinafter
referred to as the "Executive";
W I T N E S S E T H:
WHEREAS, the Executive serves in the capacity of, and performs
the duties of, an Executive Officer for the Company; and
WHEREAS, the Board of Directors of the Company considers it to
be in the best interest of the Company and the stockholders of the
Company that the Executive continue to serve in an executive capacity of
the Company; and
WHEREAS, the Company desires to assure the continuing services
of the Executive on behalf of the Company on an objective and impartial
basis and without distraction or conflict of interest due to the
uncertainties of his position in the event of an actual, attempted or
threatened Change in Control (as such Change in Control is hereinafter
defined in Paragraph 1); and
WHEREAS, in view of the foregoing, the Company desires to
provide the Executive with a degree of employment security in the event
of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Company and
the Executive hereby agree as follows:
1. as used herein, the following definitions apply:
(a) "Bank" means First Western Bank, National Association, or any
successor thereto.
(b) "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act.
(c) "Board" means the Board of Directors of the Company and/or the
Board of Directors of the Bank, as indicated by the context in
which the term is used.
(d) "Change in Control" shall be deemed to have occurred as of the
first day that any one or more of the following conditions shall
have been satisfied:
(i) Final regulatory approval is obtained for any Person (other
than those Persons in control of the Company and/or the Bank,
as applicable, as of the effective date of this Agreement, or
other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company and/or the Bank,
as applicable, or a
Page 1<PAGE>
<PAGE> 2
corporation owned directly or indirectly by the
stockholders of the Company and/or the Bank, as
applicable, in substantially the same proportions as
their ownership of stock of the Company and/or the
Bank), to become the Beneficial Owner, directly or
indirectly, of securities of the Company and/or the
Bank, as applicable, representing twenty (20) percent
or more of the combined voting power of the Company's
(or the Bank's as applicable) then outstanding
securities; or
(ii) During any period of two (2) consecutive years (not including
any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the
Board of the Company and/or the Board of the Bank (and any new
Director, whose election by the Company's stockholders or the
Bank's stockholders, as applicable, was approved by a vote of
at least two-thirds (2/3) of the Directors then still in
office who either were Directors at the beginning of the
period or whose election or nomination for election was so
approved), cease for any reason to constitute a majority
thereof; or
(iii) Final regulatory approval is obtained with respect to:
(A) a plan of complete liquidation of the Company or
the Bank; or (B) an agreement for the sale or
disposition of all or substantially all the Company's
or the Bank's assets; or (C) a merger, consolidation,
or reorganization of the Company and/or the Bank with
or involving any other corporation, other than a
merger, consolidation, or reorganization that would
result in the voting securities of the Company or the
Bank (as applicable) outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), at least fifty
(50) percent of the combined voting power of the voting
securities of the Company of the Bank (as applicable)
(or such surviving entity) outstanding immediately
after such merger, consolidation, or reorganization.
Notwithstanding the foregoing, in no event shall a Change in
Control be deemed to have occurred, with respect to the
Executive, if the Executive is part of a purchasing group which
consummates the Change in Control transaction. The Executive
shall be deemed "part of a purchasing company or group (except
for: (A) passive ownership of less than three (3) percent of
the stock of the purchasing company or group which is otherwise
not significant, as determined prior to the Change in Control by
a majority of the nonemployed continuing Directors of the
Company or the Bank, as applicable).
(e) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(f) "Person" shall have the meaning ascribed to such term in Sec.
3(a)(9) of the Exchange Act and used in Sec. 13(d) and Sec.
14(d) thereof, including a "group" as defined in Sec. 13(d).
The term Person shall not include the Company or the Bank, any
executive officer or Director of the Company, the Bank, or a
subsidiary of the Company or Bank, or a group controlled by
such Directors or executive officers, or any employee benefit
plan of the Company, the Bank, or a subsidiary of the Company
or Bank; provided, however, that the term Person shall include
any individual who is a Director on the effective date of this
Agreement beneficially owned five (5) percent or more of the
voting shares of common stock of the Company, or a group
controlled by such a Director.
2. If at the time of a Change in Control the Executive is still
serving in the capacity of, and performing the duties of, an
Executive Officer for the Company or the Bank, the
PAGE 2<PAGE>
<PAGE> 3
Company shall continue to employ the Executive in an executive
position during his "Term of Employment" which, for purposes of
this Agreement is defined as the earliest of (i) the date upon
which the Executive would attain age 65 ("Normal Retirement Age"),
(ii) the date upon which the Executive's elected early retirement
is scheduled to begin and (iii) the date that is thirty-six (36)
months after the date of the Change in Control, such employment to
be all upon the terms and conditions hereinafter set forth.
3. During the Term of Employment the Company shall:
(a) pay the Executive, during the first year of the Term of
Employment (or such portion thereof if the Term of Employment is
less than a year), a monthly salary at least equal to the
Executive's highest salary for any month during the twelve (12)
months immediately preceding the Change in Control and, during
each subsequent year of the Term of Employment, an annual salary
(payable on at least a monthly basis) at least equal to the
Executive's salary for the immediately preceding year plus an
amount calculated in a manner at least as favorable to the
Executive as the manner in which the pay increases for other
Company executives or of new Company executives are calculated,
or in the case of an implemented salary freeze or decrease
across the board, an increase calculated in accordance with the
prior twelve (12) months' increase in the U.S. Government
Consumer Price Index;
(b) pay the Executive an annual bonus calculated in a manner at
least as favorable to the Executive as the manner in which (i)
the last annual bonus paid to the Executive prior to the Change
in Control was calculated, or (ii) the annual bonus paid to the
Executive by the Company in the immediately preceding year was
calculated (whichever would result in a greater payment to the
Executive); this annual bonus may be pro-rated for that portion
of the year covered by the Term of Employment if the Term of
Employment expires prior to year end;
(c) provide and maintain in full force and effect through existing
plans or through equivalent plans at least the types and amounts
of group insurance coverages (including conversion features) and
benefits, including life, health, disability and hospitalization
insurance, and other health care benefits, including medical,
hospital and surgical benefits and health care benefits for the
Executive's family (collectively "Insurance and Health Care
Benefits"), to which the Executive was entitled immediately
prior to the Change in Control or the Insurance and Health Care
Benefits provided by the Company or its successor to its other
executives after a Change in Control (whichever would result in
greater Insurance and Health Care Benefits to the Executive);
(d) continue to provide benefits to the Executive under the
Company's pension plan, profit sharing plan (including Section
401(k) election and matching contribution provisions), ESOP
plans and other fringe benefits programs and arrangements,
including employee benefit plans, as in effect immediately prior
to the Change in Control or, if such plans, programs or
arrangements are discontinued or superseded, provide benefits to
the Executive on the same basis as such benefits are provided to
the other executives of the Company or its successor after a
Change in Control; and
(e) provide and maintain in full force and effect at least those
additional executive benefits and perquisites which the
Executive was entitled to from the Company immediately prior to
the Change in Control, including any social and/or club
memberships and any Company provided automobiles (which
automobiles may be purchased at termination at the lower of fair
market value per NADA blue book wholesale value or at book value
on the Company's books and records).
PAGE 3<PAGE>
<PAGE> 4
4. "Termination of Employment", for the purposes of this Agreement,
shall occur if the Executive's employment in an executive position
is terminated during the Term of Employment:
(i) by the Company for any reason, including disability or
incapacity, but excepting a termination for "cause," as shall be
determined by the Board of the Company and the Board of the
Bank, in exercise of good faith and reasonable judgment, upon
the occurrences of any one or more of the following:
(a) the Executive's conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony; or
(b) the willful engaging by the Executive in gross misconduct
materially and demonstrably injurious to the Company and/or
the Bank; however, no act or failure to act, on the
Executive's part shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in
the best interest of the Company and/or the Bank; or
(c) the conviction of the Executive of any criminal offense or act
involving dishonesty or a breach of trust which requires the
Company or the Bank to terminate the employment of the
Executive, and/or precludes the payment of severance
compensation under Federal law; or
(d) any conduct, act, or omission by the Executive which would
constitute grounds for the imposition upon the Executive, the
Company or the Bank of a civil penalty under Sec. 8(i)(2)(B)
or (C) of the Federal Deposit Insurance Act; or
(ii) by the Executive for "good reason," which shall mean, without
the Executive's express written consent, the occurrence after a
Change in Control of the Company or the Bank of any one or more
of the following:
(a) the assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles, and
reporting requirements) as an officer of the Company and/or
the Bank, or a reduction or alteration in the nature or status
of the Executive's authorities, duties, or responsibilities
form those in effect as of ninety (90) days prior to the
Change in Control, other than an insubstantial and inadvertent
act that this remedied by the Company and/or the Bank promptly
after receipt of notice thereof given by the Executive, and
other than any such alteration which is consented to by the
Executive in writing;
(b) the Company's requiring the Executive to be based at a
location in excess of thirty-five (35) miles from the location
of the Executive's principal job location or office
immediately prior to the Change in Control; except for
required travel on the Company's and/or the Bank's business to
an extent substantially consistent with the Executive's
present business obligations; and further except as may be
waived by the Executive provided the Company pays all expenses
related to a move, including purchasing any existing house
used by the Executive as his principal residence which the
Executive is not able to sell within One-Hundred Twenty (120)
days of listing at fair market value as fair market value is
determined by two (2) independent appraisals;
PAGE 4<PAGE>
<PAGE> 5
(c) a material reduction by the Company or the Bank of the
Executive's compensation or benefits; and
(d) the failure of the Company or the Bank to obtain a
satisfactory agreement from any successor to the Company or
the Bank to assume and agree to perform the Company's and the
Bank's obligations under this Agreement.
The Executive's right to terminate employment for good reason
shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued
employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting good
reason herein.
5. In the event of a Termination of Employment, the Company shall pay
or cause to be paid to the Executive or after the Executive's death
to his designated beneficiary, or if there be none, to his personal
representative, executor or administrator (for the purposes of this
Paragraph 5 the term "Executive" shall include the Executive's
designated beneficiary, personal representative, executor or
administrator) a single lump sum payment in an amount equal to the
present value of the total amount calculated below, such present
value to be determined by discount based upon an interest rate two
(2) percentage points less than the Pittsburgh prime rate in effect
at the date of Termination of Employment. The Company shall pay
the Executive such lump sum amount within thirty (30) days
following the date of Termination of Employment. The total amount
upon which the present value is to be determined, shall be
calculated as follows:
The sum of:
(a) the equivalent of all monthly salaries during the "Payment
Period" with each monthly salary being equal to the greater of
the Executive's highest salary from the Company for any month
during the twelve (12) months immediately preceding (A) the
change of control and (B) the termination of employment ("Annual
Base Compensation"), plus
(b) the greater of the average of the annual bonuses received by the
Executive from the Company during the three (3) calendar years
immediately preceding (A) the change in control and (B) the
Termination of Employment ("Annual Bonus"), plus
(c) the cost of any social and/or club memberships and the cost of
any Company provided automobiles.
The "Payment Period", for purposes of this Agreement, is defined to be
the period beginning on the date of Termination of Employment and
ending on the earlier of (i) the date upon which the Executive would
attain Normal Retirement Age and (ii) the date that is thirty-six (36)
months from the date of the Change of Control.
The Executive's right to receive compensation from the Company
pursuant to this Paragraph 5 shall not be affected by the Executive's
receipt of compensation in connection with any subsequent employment
by any other corporation or entity.
6. In the event that during the Term of Employment following a Change
in Control the Executive ceases to be employed by the Company for
any reason, including retirement at or at any time before Normal
Retirement Age, Termination of Employment or dismissal by the
Company for reasons other than for cause (pursuant to Paragraph 4
hereof), the Executive and/or his spouse shall continue to receive
from the Company, until the date the Executive attains or would
have attained Normal Retirement Age, insurance and health care
benefits equivalent to the greater of the insurance and health care
benefits to which the Executive was entitled (i) immediately
preceding the date the Executive ceased to be
PAGE 5<PAGE>
<PAGE> 6
employed by the Company and (ii) immediately preceding the
Change in Control (provided that the Company may reduce such
insurance and health care benefits to the extent of any
duplication of the types and amounts of coverages and benefits
provided to the Executive in connection with any subsequent
employment by any other corporation or other entity prior to the
Executive attaining Normal Retirement Age), and from and after
the date the Executive attains or would have attained Normal
Retirement Age, the Executive and/or his spouse shall
receive the insurance and health care benefits, if any, to which
he would be entitled as a retired executive employee under the
Company's benefit plans and programs in effect immediately prior
to the Change in Control or immediately prior to the date the
Executive ceased to be employed by the Company (whichever would
result in greater benefits to the Executive).
7. In the event that during the Term of Employment following a Change
in Control the Executive ceases to be employed by the Company for
any reason, including retirement at or at any time before Normal
Retirement Age, Termination of Employment or dismissal by the
Company for reasons other than for cause (pursuant to Paragraph 4
hereof), the Executive shall receive retirement benefits in
accordance with the Company's retirement plans, including any
supplemental executive retirement plan (the "Retirement Plan") as
in effect immediately prior to the Change in Control or immediately
prior to the Termination of Employment (whichever would result in
greater benefits for the Executive ). In the event of a
Termination of Employment prior to the date the Executive attains
Normal Retirement Age, in addition to benefits payable to the
Executive pursuant to the Retirement Plan, the Executive shall be
entitled to receive supplemental retirement benefits from the
Company equal in value to the difference between:
(i) the benefits to which the Executive would have been entitled
under the Retirement Plan assuming years of Service under the
Retirement Plan equal to the Executive's years of Service under
the Retirement Plan to the Termination of Employment plus the
number of years of Service that the Executive would have earned
by continuing employment with the Company until the termination
of the Payment Period (at an assumed annual salary during each
year of assumed Service following the date of the Termination of
Employment equal to the Executive's compensation including bonus
club memberships and the like as set forth in par.3 above), and
(ii) the benefits which the Executive is entitled to receive under
the Retirement Plan.
Any supplemental retirement benefits payable by the Company shall
be payable to the same extent and in the same form as, and
commencing on the date on which, benefit payments commence under
the Retirement Plan (including payment pursuant to any option
thereunder, including early retirement or any early retirement
program where years may be added or included for early retirement
benefit calculations, payment elections and beneficiary
designations).
8. In the event of the death of the Executive during the Term of
Employment, in addition to the amounts, if any, payable pursuant to
Paragraphs 5, 6 or 7 hereof, the estate of the Executive shall
receive benefits at least equal to the greater of:
(i) such other benefits which would have been payable to the estate
of the Executive by the Company if such event had occurred
immediately prior to the date of the Change in Control and
(ii) such other benefits payable to the estate of the Executive under
benefit plans and programs of the Company existing as of the
date of the Executive's death.
PAGE 6<PAGE>
<PAGE> 7
9. In the event any excise tax under Section 4999 (or any successor
section) of the Internal Revenue Code (the "Excise Tax") is
levied at any time on any amount paid pursuant to Paragraphs 3,
5, 6 or 7 of this Agreement, in addition to the amounts payable
to the Executive pursuant to Paragraphs 3, 5, 6 or 7 of this
Agreement, the Company shall promptly pay the Executive an
amount designated as the "Gross-Up Amount" such that the Gross-
Up Amount minus the Excise Tax on the Gross-Up Amount equals the
Excise Tax on the amounts payable to the Executive pursuant to
such Paragraphs.
10. Notwithstanding any provision of this Agreement to the contrary,
this Agreement and any payments, benefits or rights of the
Executive as provided herein are subject to Sec. 18(k) of the
Federal Deposit Insurance Act, as amended, and any applicable
regulations thereunder.
11. Unless specifically provided otherwise herein, the Company's and
the Bank's obligation to make the payments and the arrangements
provided for herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including, without
limitation, any offset, counterclaim, recoupment, defense or other
right which the Company or the bank may have against the Executive
or any other party. All amounts payable by the Company and the
Bank hereunder shall be paid without notice or demand. Each and
every payment made hereunder by the Company and the Bank shall be
final, and neither the Company nor the Bank shall seek to recover
all or any part of such payment from the Executive or from
whomsoever may be entitled thereto, for any reasons whatsoever.
12. This Agreement establishes and vests in the Executive a contractual
right to the benefits to which he is entitled hereunder. However,
nothing herein contained shall require or be deemed to require, or
prohibit or be deemed to prohibit, the Company or the Bank to
segregate, earmark, or otherwise set aside any funds or other
assets, in trust or otherwise, to provide for any payments to be
made or required hereunder.
13. In the event that it shall be necessary or desirable for the
Executive to retain legal counsel and/or incur other costs and
expenses in connection with the enforcement of any or all of his
rights under this Agreement, and provided that the executive
substantially prevails in the enforcement of such rights, the
Company or the Bank, as applicable, shall pay (or the Executive
shall be entitled to recover from the Company or the Bank, as the
case may be) the Executive's reasonable attorneys' fees, costs and
expenses in connection with the enforcement of his rights including
the enforcement of any arbitration award.
14. The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the Company's
or the Bank's obligations to make the payments and arrangements
required to be made under this Agreement, except to the extent
otherwise specifically provided herein.
15. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in the City
of Pittsburgh in accordance with the laws of the Commonwealth of
Pennsylvania by three (3) arbitrators, one of whom shall be
appointed by the Company or the Bank, as applicable, one by the
Executive, and the third of whom shall be appointed by the first
two (2) arbitrators. If the first two (2) arbitrators cannot agree
on the appointment of a third arbitrator, then the third arbitrator
shall be
PAGE 7<PAGE>
<PAGE> 8
appointed by the American Arbitration Association. The
arbitration shall be conducted in accordance with the rules of
the American Arbitration Association, except with respect to the
selection of arbitrators which shall be as provided in this Sec.
7.1. The cost of any arbitration proceeding hereunder shall be
borne equally by the Company or the Bank, as applicable, and the
Executive. The award of the arbitrators shall be binding upon
the parties. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction
thereof.
16. The Executive, the Company, and the Bank acknowledge that, except
as may be provided under any other agreement between the Executive
and the Company or the Bank, the employment of the Executive by the
Company and the Bank is "at will," and, prior to the effective date
of a Change in Control, may be terminated by either the Executive,
the Company, or the Bank, at any time. Upon a termination of the
Executive's employment prior to the effective date of a Change in
Control, there shall be no further rights under this Agreement;
provided, however, that if such an employment termination shall
arise in connection with, or in anticipation of, a Change in
Control, then the Executive's rights shall be the same as if the
termination had occurred during the Term of Employment hereunder.
17. All notices, requests, demands, and other communications hereunder
must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by
first-class certified mail, return receipt requested, postage
prepaid, to the other party, addressed as follows:
(a) as to the Company:
101 East Washington Street
New Castle, PA 16103-1488
(b) if to the Executive:
R.R. #1
Box 1194
Pulaski, PA 16143
18. The compensation and benefits provided pursuant to Paragraph 5
hereof, to the extent received by the Executive, are granted to the
Executive in lieu of any compensation, benefits or amounts the
Executive might otherwise be entitled to under the Company's
severance policy or otherwise from the Company by reason of a
Termination of Employment. Except as otherwise set forth herein,
this Agreement shall not in any way alter the rights and
obligations of the Company and the Executive under any of the
Company's benefit plans.
19. The rights of the Executive under this Agreement shall not be
transferable by assignment or otherwise, shall not be subject to
commutation or encumbrance and shall not be subject to the claims
of the creditors of the Executive.
20. This Agreement shall be binding upon and inure to the benefit of
the Executive, his designated beneficiary, personal representative,
executor or administrator, the Company and any successor, including
any organization which shall succeed to substantially all of the
business and property of the Company, whether by means of merger,
consolidation, acquisition or substantially all of the assets of
the Company or otherwise, including by operation of law (a
"Successor Organization"). The Company shall not merge,
reorganize, consolidate, sell all or substantially all of its
assets,
PAGE 8<PAGE>
<PAGE>9
combine by operation of law or otherwise combine, to or with any
Successor Organization, unless, as a condition to such
transaction, the Successor Organization assumes the obligations
of the Company under this Agreement. For purposes of this
Agreement the term Company shall include any Successor
Organization.
21. This Agreement has been made in and shall be governed and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
22. The invalidity of any term of this Agreement shall not invalidate
or otherwise affect any other term of this Agreement.
23. All costs and expenses, including attorneys' fees and court costs,
reasonably incurred by the Executive to enforce this Agreement or
defend the validity of this Agreement shall be paid by the Company.
24. (a) Notwithstanding anything to the contrary contained above, this
Agreement shall remain in effect through December 31, 1998 at
which time, if there has not been a Change in Control, this
Agreement shall lapse and become null and void unless extended
by the Company.
(b) The Executive understands that the Company is in no way
obligated to either extend or renew the Executive's change in
control agreement. The Executive further understands that in
the event the Company should decide to extend to the Executive
a new change in control agreement, such new agreement may
contain terms and conditions materially different from the
terms and conditions set forth in this change in control
agreement.
25. This Agreement supersedes and makes void any prior agreement
between the parties and sets forth the entire agreement and
understanding of the parties hereto with respect to the matters
covered hereby and may not be amended or modified except by further
written agreement of the parties. Any beneficiary designation, or
any termination or amendment to any existing designation under this
Agreement shall be by written instrument executed by the Executive
and delivered to the Company.
IN WITNESS WHEREOF, the undersigned have set their hands and seals
or caused this Agreement to be signed by a duly authorized officer, on
the date first set out above.
ATTEST: FIRST WESTERN BANCORP, INC.
/s/Holly L. Turk BY: /s/Thomas J. O'Shane
- ---------------- --------------------
THOMAS J. O 'SHANE, CHAIRMAN
& C.E.O.
WITNESS: EXECUTIVE:
/s/Holly L. Turk /s/John A. Zercher
- ---------------- ------------------
John A. Zercher
doc\tsm96\Zercher.agr
PAGE 9
<PAGE> 1
Exhibit 15.1
November 12, 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 September 30, 1998 and 1997, as
indicated in our report dated October 13, 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 September 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
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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<EXPENSE-OTHER> 36,393
<INCOME-PRETAX> 20,024
<INCOME-PRE-EXTRAORDINARY> 20,024
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,403
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 7.73
<LOANS-NON> 1,587
<LOANS-PAST> 2,153
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 18,077
<CHARGE-OFFS> 3,265
<RECOVERIES> 654
<ALLOWANCE-CLOSE> 18,466
<ALLOWANCE-DOMESTIC> 6,766
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,432
</TABLE>
