First West Virginia Bancorp (FWV) 10-Q 2005 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

For the Quarterly Period Ended September 30, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            .

Commission File No. 1-13652

First West Virginia Bancorp, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	55-6051901
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1701 Warwood Avenue

Wheeling, West Virginia 26003

(Address of principal executive offices)

Registrant’s telephone number, including area code: (304) 277-1100

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check-mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    ¨  Yes    x  No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    ¨  Yes    ¨  No    x  N/A

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practible date.

The number of shares outstanding of the issuer’s common stock as of November 7, 2005:

Common Stock, $5.00 Par Value, shares outstanding 1,538,443 shares

FORM 10-Q INDEX

PART I - Financial Information
Item 1	Financial Statements and Accompanying Notes	3-10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-26
Item 3	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4	Controls and Procedures	27
PART II - Other Information
Item 1	Legal Proceedings	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3	Defaults upon Senior Securities	28
Item 4	Submission of matters to a Vote of Security Holders	28
Item 5	Other Information	28
Item 6	Exhibits and Reports on Form 8-K	28
	Exhibit Index	30
	Reports on Form 8-K	28
	Signatures	29
Certifications		35-39

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FIRST WEST VIRGINIA BANCORP, INC.

PART I

FINANCIAL INFORMATION

First West Virginia Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

	September 30, 2005			December 31, 2004
	(Unaudited)
ASSETS
Cash and due from banks	$	5,881,882		$	5,474,000
Due from banks - interest bearing		1,036,949			491,166
Federal funds sold		5,082,000			2,155,000
Total cash and cash equivalents		12,000,831			8,120,166
Investment securities:
Available-for-sale (at fair value)		98,264,818			103,736,472
Held-to-maturity (fair value of $2,869,248 and $2,927,330, respectively)		2,817,742			2,824,579
Loans		140,179,947			154,331,037
Less allowance for loan losses		(2,481,432	)		(2,356,101	)
Net loans		137,698,515			151,974,936
Premises and equipment, net		4,193,763			3,855,870
Accrued income receivable		1,219,983			1,259,205
Other intangible assets		214,482			281,046
Goodwill		1,644,119			1,644,119
Bank owned life insurance		3,166,190			3,080,724
Other assets		2,968,168			3,024,628
Total assets	$	264,188,611		$	279,801,745
LIABILITIES
Noninterest bearing deposits:
Demand	$	27,404,610		$	26,288,924
Interest bearing deposits:
Demand		38,506,517			37,493,712
Savings		73,463,432			86,900,317
Time		83,085,525			85,488,054
Total deposits		222,460,084			236,171,007
Federal funds purchased and securities sold under agreements to repurchase		11,808,668			15,759,200
Federal Home Loan Bank borrowings		2,395,127			2,425,111
Other borrowings		2,000,000			—
Accrued interest payable		362,584			349,357
Other liabilities		890,460			1,144,034
Total liabilities		239,916,923			255,848,709
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,538,443 shares issued at September 30, 2005 and December 31, 2004		7,692,215			7,692,215
Treasury stock - 10,000 shares at cost		(228,100	)		(228,100	)
Surplus		4,982,606			4,982,606
Retained earnings		12,236,261			11,437,407
Accumulated other comprehensive income (loss)		(411,294	)		68,908
Total stockholders’ equity		24,271,688			23,953,036
Total liabilities and stockholders’ equity	$	264,188,611		$	279,801,745

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 3

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended, September 30,					Nine Months Ended, September 30,
	2005		2004			2005		2004
	(Unaudited)					(Unaudited)
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	2,146,352	$	2,297,095		$	6,453,573	$	6,691,667
Tax-exempt		156,390		163,317			485,812		469,645
Debt securities:
Taxable		730,862		761,919			2,264,076		2,287,872
Tax-exempt		155,125		178,706			465,117		485,471
Dividends		7,954		2,435			12,184		7,886
Other interest income		3,621		4,785			21,867		16,888
Federal funds sold		46,159		20,287			120,831		45,392
Total interest and dividend income		3,246,463		3,428,544			9,823,460		10,004,821
INTEREST EXPENSE
Deposits		884,089		943,531			2,650,469		2,872,073
Federal funds purchased and repurchase agreements		64,202		76,285			225,984		194,589
FHLB and other borrowings		60,096		29,043			129,060		87,143
Total interest expense		1,008,387		1,048,859			3,005,513		3,153,805
Net interest income		2,238,076		2,379,685			6,817,947		6,851,016
PROVISION FOR POSSIBLE LOAN LOSSES		—		90,000			180,000		210,000
Net interest income after provision for possible loan losses		2,238,076		2,289,685			6,637,947		6,641,016
NONINTEREST INCOME
Service charges and other fees		207,161		200,174			561,856		602,512
Net gain (loss) on available for sale securities		38,309		(880	)		118,554		3,046
Other operating income		129,407		136,234			373,682		324,421
Total noninterest income		374,877		335,528			1,054,092		929,979
NONINTEREST EXPENSE
Salary and employee benefits		924,297		913,492			2,802,395		2,646,814
Net occupancy expense of premises		283,945		250,542			864,080		779,055
Other operating expenses		615,686		543,776			1,945,326		1,534,276
Total noninterest expense		1,823,928		1,707,810			5,611,801		4,960,145
Income before income taxes		789,025		917,403			2,080,238		2,610,850
INCOME TAXES		175,470		209,430			410,171		618,558
Net income	$	613,555	$	707,973		$	1,670,067	$	1,992,292
WEIGHTED AVERAGE SHARES OUTSTANDING		1,528,443		1,528,443			1,528,443		1,528,443
EARNINGS PER COMMON SHARE	$	0.40	$	0.46		$	1.09	$	1.30

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 4

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock			Surplus		Retained Earnings			Treasury Stock			Accumulated Other Compre- hensive Income (loss)			Compre- hensive Income			Total
	Shares	Amount
BALANCE, DECEMBER 31, 2004	1,538,443	$	7,692,215	$	4,982,606	$	11,437,407		$	(228,100	)	$	68,908					$	23,953,036
Comprehensive income:
Net income	—		—		—		1,670,067			—			—		$	1,670,067			1,670,067
Other comprehensive loss, net of tax
Unrealized losses on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			(480,202	)		(480,202	)		(480,202	)
Comprehensive income															$	1,189,865
Cash dividend ($.57 per share)	—		—		—		(871,213	)		—			—						(871,213	)
BALANCE, SEPTEMBER 30, 2005	1,538,443	$	7,692,215	$	4,982,606	$	12,236,261		$	(228,100	)	$	(411,294	)				$	24,271,688
	Common Stock			Surplus		Retained Earnings			Treasury Stock			Accumulated Other Compre- hensive Income (loss)			Compre- hensive Income			Total
	Shares	Amount
BALANCE, DECEMBER 31, 2003	1,538,443	$	7,692,215	$	4,982,606	$	9,961,698		$	(228,100	)	$	622,196					$	23,030,615
Comprehensive income:
Net income	—		—		—		1,992,292			—			—		$	1,992,292			1,992,292
Other comprehensive income, net of tax
Unrealized losses on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			(209,456	)		(209,456	)		(209,456	)
Comprehensive income															$	1,782,836
Cash dividend ($.57 per share)	—		—		—		(871,213	)		—			—						(871,213	)
BALANCE, SEPTEMBER 30, 2004	1,538,443	$	7,692,215	$	4,982,606	$	11,082,777		$	(228,100	)	$	412,740					$	23,942,238

	For the Nine Months Ended September 30,
	2005			2004
Disclosure of reclassification amount, net of tax:
Unrealized holding losses arising during the period	$	(406,260	)	$	(207,556	)
Less reclassification adjustment for gains included in net income		73,942			1,900
Net unrealized losses on securities	$	(480,202	)	$	(209,456	)

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 5

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2005			2004
OPERATING ACTIVITIES
Net income	$	1,670,067		$	1,992,292
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		180,000			210,000
Depreciation and amortization		344,016			328,895
Amortization of investment securities, net		251,677			446,555
Investment security gains		(118,554	)		(3,046	)
Net gains on sales of premises and equipment		(9,835	)		(3,726	)
Increase in cash surrender value of bank-owned life insurance		(85,466	)		(50,032	)
Decrease (increase) in interest receivable		39,222			(177,653	)
Increase (decrease) in interest payable		13,227			(10,739	)
Other, net		92,606			(411,817	)
Net cash provided by operating activities		2,376,960			2,320,729
INVESTING ACTIVITIES
Net (increase) decrease in loans, net of charge-offs		14,075,742			(9,219,737	)
Proceeds from sales of securities available-for-sale		3,142,150			8,399,785
Proceeds from maturities of securities available-for-sale		190,790,250			58,382,194
Proceeds from maturities of securities held-to-maturity		—			610,000
Principal collected on mortgage-backed securities		9,595,198			14,049,953
Purchases of securities available-for-sale		(198,952,154	)		(68,040,258	)
Recoveries on loans previously charged-off		20,680			45,108
Purchases of premises and equipment		(621,035	)		(243,548	)
Purchase of bank owned life insurance		—			(3,000,000	)
Proceeds from sales of premises and equipment		15,525			14,101
Net cash used in investing activities		18,066,356			997,598
FINANCING ACTIVITIES
Net decrease in deposits		(13,710,923	)		(1,215,603	)
Dividends paid		(871,212	)		(871,212	)
Increase (decrease) in short-term borrowings		(3,950,532	)		4,664,105
Proceeds from long-term borrowings		2,000,000			—
Principal payments on FHLB borrowings		(29,984	)		(28,593	)
Net cash provided by (used in) financing activities		(16,562,651	)		2,548,697
INCREASE IN CASH AND CASH EQUIVALENTS		3,880,665			5,867,024
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		8,120,166			7,024,394
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	12,000,831		$	12,891,418
Supplemental Disclosures:
Cash Paid for Interest	$	3,018,740		$	3,164,544
Cash Paid for Income Taxes	$	542,822		$	786,571

The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 6

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2005 AND 2004

(Unaudited)

Note 1 - Critical Accounting Policies

The accounting and reporting policies of First West Virginia Bancorp, Inc. ( the “Company”) and its subsidiary were prepared in accordance with accounting principles generally accepted in the United States of America, (“US GAAP”) and to general practices within the financial services industry. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management has identified the accounting policies described below as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s consolidated financial statements and management’s discussion and analysis.

INCOME RECOGNITION

The Company recognizes interest income by methods conforming to US GAAP that include general accounting practices within the financial services industry. Interest income on loans and investment securities is recognized by methods that result in level rates of return on principal amounts outstanding, including yield adjustments resulting from the amortization of loan costs and premiums on investment securities and accretion of loan fees and discounts on investment securities.

In the event management believes collection of all or a portion of contractual interest on a loan has become doubtful, which generally occurs after the loan is 90 days past due, the accrual of interest is discontinued. In addition, previously accrued interest deemed uncollectible that was recognized in income is reversed. Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured. A nonaccrual loan is restored to accrual status when it is brought current or has performed in accordance with contractual terms for a reasonable period of time, and the collectibility of the total contractual principal and interest is no longer doubtful.

ALLOWANCE FOR LOAN LOSSES

In general, determining the amount of the allowance for loan losses requires significant judgment and the use of estimates by management. The Company maintains an allowance for loan losses to absorb probable losses in the loan portfolio based on a quarterly analysis of the portfolio. This formal analysis determines an appropriate level and allocation of the allowance for loan losses among loan types and resulting provision for loan losses by considering factors affecting loan losses, including specific losses, levels and trends in impaired and nonperforming loans, historical loan loss experience, current national and local economic conditions, volume, growth and composition of the portfolio, regulatory guidance and other relevant factors. Management continually monitors the loan portfolio through reviews of past due loans and all significant loans which are considered to be potential problem loans on a monthly basis. The internal loan review function provides for an independent review to evaluate the adequacy of the allowance. The provision could increase or decrease each quarter based upon the results of management’s formal analysis.

The amount of the allowance for loan losses for the various loan types represents management’s estimate of expected losses from existing loans based upon specific allocations for individual lending relationships and historical loss experience for each category of homogeneous loans. Impaired loans are commercial and commercial real estate loans for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap. The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectibility while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral. While allocations are made to specific loans and pools of loans, the allowance is available for all loan losses.

Page 7

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2005 AND 2004

(Unaudited)

Note 1 - Critical Accounting Policies - (Continued)

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed. Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $2,481,432 at September 30, 2005, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectibility of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be based on changes in economic conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause the Company to experience increases in problem assets, delinquencies and losses on loans.

INVESTMENT SECURITIES

Investment securities are classified at the time of purchase, based on management’s intention and ability, as securities available for sale or held to maturity. Debt securities classified as held to maturity are stated at cost adjusted for amortization of premium and accretion of discount which are computed using the interest method and recognized as adjustments of interest income. Certain other debt and equity securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

Common stock of the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank represents ownership interest in institutions that are wholly owned by other financial institutions. These equity securities are accounted for at cost and are classified with other assets.

While temporary changes in the market value of available-for-sale securities are not recognized in earnings, a decline in fair value below amortized cost deemed to be other-than-temporary results in an adjustment to the cost basis of the investment, with a corresponding loss charged against earnings. Management evaluates the investment securities for other-than-temporary declines in estimated fair value on a quarterly basis. This analysis requires management to consider various factors in order to determine if a decline in estimated fair value is temporary or other-than-temporary. These factors include duration and magnitude of the decline in value, the financial condition of the issuer, and the company’s ability and intent to continue holding the investment for a period of time sufficient to allow for any anticipated recovery in market value. At September 30, 2005, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods.

GOODWILL AND OTHER INTANGIBLE ASSETS

The Company purchased the deposits of another financial institution in 2001. An identifiable intangible asset resulted from the purchase of the core deposits and, as such, are amortized into noninterest expense on the straight-line basis over the period the Company expects to benefit from such assets (7 years). While management feels the assumptions and variables used to value the acquisition was reasonable, the use of different, but still reasonable, assumptions could produce different results. The Company recognized amortization expense of $22,188 in both of the three months ended September 30, 2005 and 2004. The unamortized balance from the purchase of these core deposit intangible assets is $214,482 and $281,046 at September 30, 2005 and December 31, 2004, respectively.

The Company has approximately $1.6 million of goodwill, resulting from the purchase of a less-than-whole financial institution. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods. Goodwill and other intangibles are periodically reviewed for impairment. No impairment losses were recognized. Additionally, future events could cause management to conclude that impairment indicators exist and that the goodwill is impaired, which would result in the Company recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on the Company’s financial condition and results of operations.

Page 8

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2005 AND 2004

(Unaudited)

Note 1 - Critical Accounting Policies - (Continued)

INCOME TAXES

The Company and its subsidiary file a consolidated federal income tax return. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period. The provision for income taxes during the current period is at a rate which management believes will approximate the effective rate for the year.

CASH FLOWS

Cash and cash equivalents consist of cash and due from banks and federal funds sold.

COMPREHENSIVE INCOME

The Company is required to present comprehensive income in a full set of general-purpose financial statements for all periods presented. The following represents comprehensive income for the three months ended September 30, 2005, and September 30, 2004. Other comprehensive income comprises unrealized holding gains (losses) on the available-for-sale securities portfolio. The Company has elected to report the effects of other comprehensive income as part of the Consolidated Statement of Changes in Stockholders’ Equity.

The following table represents other comprehensive income before tax and net of tax:

	For the three months ended September 30,
	2005			2004
Before-tax amount	$	(245,033	)	$	1,574,231
Tax effect		92,206			(592,383	)
Net of tax effect		(152,827	)		981,848
Net income as reported		613,555			707,973
Total comprehensive income	$	460,728		$	1,689,821

NOTE 2 - REGULATORY MATTERS

In December, 2004, the Company’s subsidiary bank entered into an agreement with the Office of the Comptroller of the Currency (OCC) relating to the results of its most recent report of examination. The Formal Agreement contains certain required actions and certain restrictions. The agreement requires the subsidiary bank to develop plans, programs, policies, and procedures relating to management and board supervision, long-term strategic goals, loan portfolio, criticized assets, capital, internal audit and internal loan review by certain dates and then to implement and follow those plans, programs, policies and procedures. A review and evaluation of certain groups of loans and correction of deficiencies is also required. Additionally, the formal agreement mandates that the subsidiary bank achieve and maintain a 7.50% Tier 1 leverage ratio and 13.0% Tier 1 capital ratio by March 31, 2005. As of September 30, 2005 and at June 30, 2005 the Tier 1 leverage and capital ratio requirements were met by the subsidiary bank. Under the terms of the Formal agreement, the board of directors of the subsidiary bank is responsible for the proper and sound management of the Bank and must appoint a compliance committee from among their independent members, and report monthly to the OCC on the progress in complying with the agreement. The subsidiary bank board has appointed a compliance committee and has filed monthly reports with the OCC.

The Company’s board of directors also adopted a resolution with the Federal Reserve Bank of Cleveland, under authority given it by the Board of Governors of the Federal Reserve System, the federal regulatory agency for the Company. As with the agreement of the OCC, the Federal Reserve resolution necessitates certain actions and restrictions. Without prior Federal Reserve approval and a 30 day prior notice requirement, the resolution prohibits the Company from paying dividends, incurring debt, or participating in the acquisition of treasury stock. In addition, prior written approval is required before engaging in any non-bank activities. To date, the Company has taken, and intends to continue to take, all appropriate steps to comply with the Federal Reserve requirements.

Page 9

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30, 2005 AND 2004

(Unaudited)

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In April, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123R). The Statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued. FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006 and is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB No. 107”), Share-Based Payment, providing guidance on option valuation methods, the accounting for income tax effects of share-based payment arrangements upon adoption of FAS No. 123R, and the disclosures in MD&A subsequent to the adoption. The Company will provide SAB No. 107 required disclosures upon adoption of FAS No. 123R on January 1, 2006 and is currently evaluating the impact the adoption of the standard will have on the Company’s financial condition, results of operations, and cash flows.

In December 2004, FASB issued FAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. FAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of FAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2005, the FASB issued FAS No. 154, “Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20 and FAS No. 3”. The Statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. FAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impractical. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. FAS No.154 improves the financial reporting because its requirements enhance the consistency of financial reporting between periods.

Page 10

First West Virginia Bancorp, Inc.

Management’s Discussion and Analysis of the Financial Condition and

Results of Holding Company Operations

First West Virginia Bancorp, Inc., a West Virginia corporation headquartered in Wheeling, West Virginia, has one wholly-owned subsidiary: Progressive Bank, N.A., which operates in Wheeling, Wellsburg, Moundsville, New Martinsville, Buckhannon and Weston, West Virginia and Bellaire, Ohio. Following is a discussion and analysis of the significant changes in the financial condition and results of operations of First West Virginia Bancorp, Inc., (the Company), and its subsidiary for the three and nine months ended September 30, 2005 and 2004. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, Notes, and tables contained in this report, as well as with the Holding Company’s Annual Report contained on Form 10-K for the year ended December 31, 2004.

Forward-Looking Information

Certain information contained in this report, which are not historical facts, may be forward-looking statements that involve risks and uncertainties. These statements are subject to important factors that could cause action results to differ materially from those contemplated by such statements, including without limitation, the effect of changing economic conditions, changes in interest rates, changes in lending activities, changes in state and federal regulations, and other external factors which may materially impact the Company’s operational and financial performance.

Critical Accounting Policies

The accounting and reporting policies of First West Virginia Bancorp, Inc. ( the “Company”) and its subsidiary were prepared in accordance with accounting principles generally accepted in the United States of America, (“US GAAP”) and to general practices within the financial services industry. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management has identified the significant accounting policies and they are included in Note 1 to the Consolidated Financial Statements. The significant accounting policies are those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s consolidated financial statements and management’s discussion and analysis.

OVERVIEW

The Company reported net income of $1,670,067 or $1.09 per share for the nine months ended September 30, 2005 compared to $1,992,292 or $1.30 per share for the same period during 2004. The decrease of $322,225 or 16.2% in earnings was primarily due to the increase in noninterest expenses and the decrease in net interest income, offset in part by the increase in noninterest income and the decrease in the provision for loan losses for the nine months ended September 30, 2005 as compared to the same period in 2004. For the first nine months of 2005, the Company’s return on average assets (ROA) was .82% as compared to .94% for the same period in 2004. The annualized return on average equity (ROE) was 9.20% for the nine months ended September 30, 2005 as compared to 11.63% for the same period in 2004.

For the third quarter of 2005, net income was $613,555 or $.40 per share as compared to $707,973 or $.46 per share for the same period in 2004. The decrease in earnings of $94,418 or 13.3% was primarily due to the decrease in net interest income combined with the increase in noninterest expenses, offset in part by the decrease in the provision for loan losses and the increase in noninterest income. The ROA was .92% for the three months ended September 30, 2005 as compared to .98% for the same period of the prior year. For the three months ended September 30, 2005 compared to September 30, 2004, the ROE was 9.93% and 12.16%, respectively.

The Company ended the third quarter of 2005 with total assets of $264,188,611, down 5.6% over the year ended December 31, 2004. Loans decreased during the first nine months of 2005 by $14,151,090, or 9.2%, to $140,179,947. Total deposits decreased by $13,710,923, or 5.8% since December 31, 2004 and was primarily due to the decreases in savings and time deposits, offset by increases in interest bearing and noninterest bearing demand deposits.

The allowance for loan losses amounted to $2,481,432 or 1.8% of total loans at September 30, 2005, compared to $2,356,101 or 1.5% of total loans at December 31, 2004. Non-performing assets were $2,141,000 at September 30, 2005, as compared to $1,642,000 at December 31, 2004. The increase in non-performing assets was primarily due to addition of two commercial loans and one residential real estate loan placed in nonaccrual during the first nine months of 2005.

Table One is a summary of Selected Financial Data of the Company. The sections that follow discuss in more detail the information summarized in Table One.

Page 11

Table One

SELECTED FINANCIAL DATA(Dollars in thousands, except per share data)

	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,						Years ended December 31,
	2005			2004			2005			2004			2004			2003			2002
SUMMARY OF OPERATIONS
Total interest income	$	3,246		$	3,429		$	9,823		$	10,005		$	13,406		$	13,319		$	14,309
Total interest expense		1,008			1,049			3,005			3,154			4,195			4,603			5,101
Net interest income		2,238			2,380			6,818			6,851			9,211			8,716			9,208
Provision for loan losses		—			90			180			210			300			435			540
Total other income		375			335			1,054			930			1,284			1,346			1,033
Total other expenses		1,824			1,708			5,612			4,960			6,747			6,342			6,062
Income before income taxes		789			917			2,080			2,611			3,448			3,285			3,639
Net income		614			708			1,670			1,992			2,637			2,518			2,674
PER SHARE DATA
Net income	$	0.40		$	0.46		$	1.09		$	1.30		$	1.73		$	1.64		$	1.74
Cash dividends declared		0.19			0.19			0.57			0.57			0.76			0.73			0.69
Book value per share		15.88			15.66			15.88			15.66			15.67			15.07			14.60
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	142,302		$	152,314		$	146,484		$	150,725		$	151,562		$	137,826		$	131,383
Investment securities		99,175			110,781			103,454			111,113			110,528			117,758			93,962
Deposits - interest bearing		196,222			216,008			203,143			216,844			215,937			217,064			200,170
Stockholders’ equity		24,535			23,172			24,278			22,882			23,092			21,884			20,302
Total assets		264,169			286,230			272,744			284,077			284,930			277,952			252,543
SELECTED RATIOS
Return on average assets		0.92	%		0.98	%		0.82	%		0.94	%		0.93	%		0.91	%		1.06	%
Return on average equity		9.93	%		12.16	%		9.20	%		11.63	%		11.42	%		11.51	%		13.17	%
Average equity to average assets		9.29	%		8.10	%		8.90	%		8.05	%		8.10	%		7.87	%		8.04	%
Dividend payout ratio		47.50	%		41.30	%		52.29	%		43.85	%		43.93	%		44.51	%		39.66	%
Loan to Deposit ratio		63.01	%		64.65	%		63.01	%		64.65	%		65.35	%		60.64	%		59.11	%

	(Unaudited) September 30,				December 31,
	2005		2004		2004		2003		2002
BALANCE SHEET
Investments	$	101,083	$	109,770	$	106,561	$	119,245	$	108,065
Loans		140,180		155,633		154,331		146,711		136,772
Other assets		22,926		23,838		18,910		18,155		19,517
Total Assets	$	264,189	$	289,241	$	279,802	$	284,111	$	264,354
Deposits	$	222,460	$	240,732	$	236,171	$	241,947	$	231,376
Federal funds purchased and repurchase agreements		11,809		19,753		15,759		15,089		9,038
FHLB borrowings		2,395		2,435		2,425		2,464		—
Long term debt		2,000		—		—		—		—
Other liabilities		1,253		2,379		1,494		1,580		1,480
Stockholders’ equity		24,272		23,942		23,953		23,031		22,460
Total Liabilities and Stockholders’ equity	$	264,189	$	289,241	$	279,802	$	284,111	$	264,354

Page 12

EARNINGS ANALYSIS - For the nine months ended September 30, 2005

Net Interest Income

Net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities, is the primary source of earnings for the Holding Company. Changes in the volume and mix of earning assets and interest bearing liabilities combined with changes in market rates of interest greatly effect net interest income. Table Two presents the average balance sheets and an interest rate analysis for the nine months ended September 30, 2005 and 2004 and the year ended December 31, 2004.

For the nine months ended September 30, 2005, net interest income was $6,817,947, a decrease of $33,069 or .5%, from the same period in 2004. The decrease in net interest income was primarily due to the decline in interest and fees on loans and investment securities combined with the increased interest expense paid on repurchase agreements and other borrowings, offset in part by the decrease in interest paid on deposits and the increase in interest income on federal funds. The changes in the volume and mix of earning assets and interest bearing liabilities combined with the changes in the market rates of interest resulted in taxable equivalent net interest yields on average earning assets of 3.88% for the nine months ended September 30, 2005, as compared to 3.73% at December 31, 2004 and 3.71% at September 30, 2004.

During the nine months ended September 30, 2005, interest expense decreased $148,292 or 4.7% as compared to the same period in 2004. The decline in the average volume of interest bearing liabilities primarily in savings and time deposits combined with the decrease in interest rates paid on savings deposits contributed to the decrease in interest expense during the nine month period ended September 30, 2005. The average yield paid on interest bearing liabilities increased .04%, from 1.78% at December 31, 2004 to 1.82% at September 30, 2005. The increase in the average yield on interest bearing liabilities was primarily due to the increase in the interest rates paid on certificates of deposit, repurchase agreements and other borrowings.

Noninterest Income

Noninterest income increased $124,113 or 13.4% for the nine months ended September 30, 2005 as compared to same period of the prior year. The increase in noninterest income was primarily due to the increase in gains on sales of investment securities combined with an increase in other operating income, offset in part by a decrease in service charges and other fee income. The Company and its subsidiary bank accounted for securities gains of $144,770 and securities losses of $26,216 during the nine month period ended September 30, 2005 and those sales were attributable to sales of marketable debt and equity securities. Service charges decreased $40,656 during the nine months ended September 30, 2005, down 6.8%, from the same period in 2004. The decrease in service charges primarily resulted from a decline in overdraft fees assessed on deposit accounts as compared to the prior year. Other operating income represents fees from safe deposit box rentals, sales of checkbooks, sales of cashiers’ checks and money orders, utility collections, ATM charges and card fees, home equity credit line fees, credit life commissions, credit card fees and commissions and various other charges and fees related to normal customer banking relationships. For the nine month period ended September 30, 2005, other operating income increased $49,261 or 15.2% compared to the same period in 2004. The increase in other operating income resulted primarily from the earnings related to the cash surrender value of the bank owned life insurance on its key officers, gains on sales of assets and ATM fees, offset in part by a decrease in miscellaneous income and other credit card fees.

Noninterest Expense

Noninterest expense increased $651,656 or 13.1% for the nine months ended September 30, 2005 as compared to same period of the prior year. The increase in noninterest expense was primarily due to increases in other operating expenses, salary and employee benefits, and net occupancy expense.

Other operating expense amounted to $1,945,326, an increase of $411,050, or 26.8%, compared to the same period of the prior year and was attributable primarily to the subsidiary bank’s compliance with the Formal Agreement, compliance with the Sarbanes-Oxley Act Section 404, a loss on the sale of other real estate owned which amounted to $59,032 and the outsourcing of investment securities portfolio management, offset in part by decreased advertising expense and other taxes.

Other operating expenses for the nine months ended September 30 included the following:

Unaudited	2005		2004
Directors’ fees	$	134,575	$	97,427
Stationery and supplies		130,033		103,992
Regulatory assessment and deposit insurance		133,627		88,341
Advertising		101,139		131,980
Postage and transportation		164,021		156,156
Other taxes		117,669		135,890
Service expense		399,699		265,923
Other		764,563		554,567
Total	$	1,945,326	$	1,534,276

Page 13

EARNINGS ANALYSIS - Forthe nine months ended September 30, 2005 (Continued)

Noninterest Expense - (continued)

Salary and employee benefits increased $155,581 or 5.9% during the nine months ended September 30, 2005 over the same period in 2004. The increased salary and employee benefit expense in 2005 compared to 2004 was primarily due to the hiring of additional personnel to enhance lending development and operations, increased employee benefit costs and normal annual merit adjustments. Occupancy expenses increased $85,025 or 10.9% during the nine months ended September 30, 2005 compared to the same period in 2004. Increased building and maintenance costs and equipment repair and maintenance costs primarily contributed to the increase in occupancy expenses in 2005 as compared to 2004. In January 2005 the Company’s subsidiary bank leased office space for its executives in Wheeling, WV which contributed to the increased building and maintenance costs as compared to the prior year.

Income Taxes

Income tax expense for the nine month period ended September 30, 2005 was $410,171, declining 33.7% compared to the same period in 2004. Income tax expense decreased primarily due to the decrease in pre-taxable income of $530,612 during the first nine months of 2005 over the same period in 2004. Components of the income tax expense for September 30, 2005 were $322,238 for federal taxes and $87,933 for West Virginia corporate net income taxes.

Federal income tax rates and West Virginia corporate net income tax rates remain consistent at 34% and 9%, respectively, for the nine months ended September 30, 2005 and 2004 and for the year ended December 31, 2004.

Page 14

Table Two Average Balance Sheets and Interest Rate Analysis(dollars in thousands)

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the nine months ended September 30, 2005 and 2004 and the year ended December 31, 2004. Average balance sheet information for the periods ended September 30, 2005 and 2004 and December 31, 2004 was compiled using the daily average balance sheet. Loan fees and unearned discounts were included in income for average rate calculation purposes. Average yields on investment securities available for sale have been calculated based on amortized cost. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification.

	(Unaudited) September 30, 2005							December 31, 2004							(Unaudited) September 30, 2004
	Average Volume			Interest		Average Rate		Average Volume			Interest		Average Rate		Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. Treasury and U. S. Government agencies	$	46,522		$	1,119	3.22	%	$	47,484		$	1,457	3.07	%	$	48,293		$	1,101	3.05	%
Mortgage backed securities		37,273			1,068	3.83	%		39,313			1,346	3.42	%		39,145			989	3.37	%
States and political subdivisions		18,617			509	3.66	%		20,005			728	3.64	%		19,836			537	3.62	%
Other securities		1,042			33	4.23	%		3,726			193	5.18	%		3,839			146	5.08	%
Total Investment securities:		103,454			2,729	3.53	%		110,528			3,724	3.37	%		111,113			2,773	3.33	%
Interest bearing deposits		638			13	2.72	%		993			11	1.11	%		1,156			9	1.04	%
Federal funds sold		5,577			121	2.90	%		6,041			77	1.27	%		5,752			46	1.07	%
Loans, net of unearned income		146,484			6,939	6.33	%		151,562			9,572	6.32	%		150,725			7,161	6.35	%
Other earning assets		775			21	3.62	%		930			22	2.37	%		932			16	2.29	%
Total earning assets		256,928			9,823	5.11	%		270,054			13,406	4.96	%		269,678			10,005	4.96	%
Cash and due from banks		6,128							6,055							5,919
Bank premises and equipment		4,092							3,876							3,880
Other assets		8,056							7,221							6,861
Allowance for loan losses		(2,460	)						(2,276	)						(2,261	)
Total Assets	$	272,744						$	284,930						$	284,077
LIABILITIES
Time deposits	$	83,639		$	2,021	3.23	%	$	87,972		$	2,786	3.17	%	$	88,711		$	2,112	3.18	%
Savings deposits		80,822			538	0.89	%		88,786			879	0.99	%		89,132			666	1.00	%
Interest bearing demand deposits		38,682			91	0.31	%		39,179			127	0.32	%		39,001			94	0.32	%
Federal funds purchased and repurchase agreements		14,309			226	2.11	%		16,906			286	1.69	%		15,879			195	1.64	%
Long term debt		938			43	6.13	%		—			—	—			—			—	—
FHLB borrowings		2,410			86	4.77	%		2,444			117	4.79	%		2,449			87	4.75	%
Total interest bearing liabilities		220,800			3,005	1.82	%		235,287			4,195	1.78	%		235,172			3,154	1.79	%
Demand deposits		26,214							24,885							24,378
Other liabilities		1,452							1,666							1,645
Total Liabilities		248,466							261,838							261,195
STOCKHOLDERS’ EQUITY		24,278							23,092							22,882
Total Liabilities and Stockholders’ Equity	$	272,744						$	284,930						$	284,077
Net yield on earning assets				$	6,818	3.55	%				$	9,211	3.41	%				$	6,851	3.39	%
The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the nine months ended September 30, 2005 and 2004, and the year ended December 31, 2004, respectively. The effect of this adjustment is presented below.
Investment securities	$	103,454		$	3,039	3.93	%	$	110,528		$	4,165	3.77	%	$	111,113		$	3,097	3.72	%
Loans		146,484			7,263	6.63	%		151,562			10,000	6.60	%		150,725			7,474	6.62	%
Total earning assets	$	256,928		$	10,457	5.44	%	$	270,054		$	14,275	5.29	%	$	269,678		$	10,642	5.27	%
Taxable equivalent net yield on earning assets				$	7,452	3.88	%				$	10,080	3.73	%				$	7,488	3.71	%

Page 15

EARNINGS ANALYSIS - For the three months ended September 30, 2005

Net Interest Income

For the three months ended September 30, 2005, net interest income was $2,238,076, a decrease of $141,609 or 6.0%, from the same period in 2004. The decrease in net interest income was primarily due to the decline in interest and fees on loans and investment securities combined with the increased interest expense paid on repurchase agreements and other borrowings, offset in part by the decrease in interest paid on deposits and the increase in interest income on federal funds. The changes in the volume and mix of earning assets and interest bearing liabilities combined with the changes in the market rates of interest resulted in taxable equivalent net interest yields on average earning assets of 3.91% for the three months ended September 30, 2005, as compared to 3.84% at September 30, 2004. Table Three presents the average balance sheets and an interest rate analysis for the three months ended September 30, 2005 and 2004.

During the three months ended September 30, 2005, interest expense decreased $40,472 or 3.9% as compared to the same period in 2004. The decrease in the average volume of interest bearing liabilities, offset in part by an increase in the interest paid on interest bearing liabilities primarily resulted in the decline in interest expense. The average yield paid on interest bearing liabilities increased .11%, from 1.77% at September 30, 2004 to 1.88% at September 30, 2005. The increase in the average yield on interest bearing liabilities was primarily due to the increase in the interest rates paid on repurchase agreements and time deposits.

Noninterest Income

Noninterest income increased $39,349 or 11.7% for the three months ended September 30, 2005 as compared to same period of the prior year. The increase in noninterest income was primarily due to the increase in gains on sales of investment securities combined with an increase in service charges and other fee income, offset in part by a decrease in other operating income. The Company and its subsidiary bank accounted for securities gains of $49,570 and securities losses of $11,261 during the three month period ended September 30, 2005 and those sales were attributable to sales of marketable debt and equity securities. Service charges increased $6,987 during the three months ended September 30, 2005, up 3.5%, from the same period in 2004. The increase in service charges primarily resulted from an increase in overdraft fees assessed on deposit accounts as compared to the prior year. Other operating income represents fees from safe deposit box rentals, sales of checkbooks, sales of cashiers’ checks and money orders, utility collections, ATM charges and card fees, home equity credit line fees, credit life commissions, credit card fees and commissions and various other charges and fees related to normal customer banking relationships. For the three month period ended September 30, 2005, other operating income decreased $6,827 or 5.0% compared to the same period in 2004. The decrease in other operating income resulted primarily from the decrease in earnings related to the cash surrender value of the bank owned life insurance on its key officers, and decreases in miscellaneous income and other credit card fees, offset in part by gains on sales of assets and ATM fees.

Noninterest Expense

Noninterest expense increased $116,118 or 6.8% for the three months ended September 30, 2005 as compared to same period of the prior year. The increase in noninterest expense was primarily due to increases in other operating expenses and net occupancy expenses of premises. Other operating expense amounted to $615,686, an increase of $71,910, or 13.2%, compared to the same period of the prior year and was attributable primarily to the subsidiary bank’s compliance with the Formal Agreement, increased audit fees for compliance with the Sarbanes-Oxley Act Section 404, and increased regulatory assessment and deposit insurance costs, offset in part by decreased advertising expense.

Other operating expenses for the three months ended September 30 included the following:

Unaudited	2005		2004
Directors’ fees	$	51,275	$	29,050
Stationery and supplies		39,576		33,845
Regulatory assessment and deposit insurance		54,792		29,172
Advertising		30,942		36,396
Postage and transportation		56,033		53,857
Other taxes		44,710		43,952
Service expense		108,322		108,397
Other		230,036		209,107
Total	$	615,686	$	543,776

Salary and employee benefits increased $10,805 or 1.2% during the three months ended September 30, 2005 over the same period in 2004. The increased salary and employee benefit expense in 2005 compared to 2004 was primarily due to the hiring of additional personnel to enhance lending operations and normal annual merit adjustments.

Income Taxes

Income tax expense for the three month period ended September 30, 2005 was $175,470, declining 16.2% compared to the same period in 2004. Income tax expense decreased primarily due to the decrease in pre-taxable income of $128,378 during the three month period ended September 30, 2005 over the same period in 2004. Components of the income tax expense for the three months ended September 30, 2005 were $141,573 for federal taxes and $33,897 for West Virginia corporate net income taxes.

Page 16

Table Three Average Balance Sheets and Interest Rate Analysis(dollars in thousands)

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the three months ended September 30, 2005 and 2004. Average balance sheet information for the periods ended September 30, 2005 and 2004 was compiled using the daily average balance sheet. Loan fees and unearned discounts were included in income for average rate calculation purposes. Average yields on investment securities available for sale have been calculated based on amortized cost. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification. Average rates were annualized for the three month periods ended September 30, 2005 and 2004.

	(Unaudited) September 30, 2005							(Unaudited) September 30, 2004
	Average Volume			Interest		Average Rate		Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. treasury and other U.S. Government agencies	$	44,369		$	363	3.25	%	$	46,065		$	358	3.09	%
Mortgage backed securities		35,674			350	3.89	%		39,196			336	3.41	%
Obligations of states and political subdivisions		18,634			170	3.62	%		21,241			196	3.67	%
Other securities		498			3	2.39	%		4,279			51	4.74	%
Total Investment securities:		99,175			886	3.54	%		110,781			941	3.38	%
Interest bearing deposits		635			5	3.12	%		546			2	1.46	%
Federal funds sold		5,384			46	3.39	%		5,534			20	1.44	%
Loans, net of unearned income		142,302			2,303	6.42	%		152,314			2,461	6.43	%
Other earning assets		796			6	2.99	%		926			5	2.15	%
Total earning assets		248,292			3,246	5.19	%		270,101			3,429	5.05	%
Cash and due from banks		6,095							6,292
Bank premises and equipment		4,227							3,896
Other assets		8,071							8,206
Allowance for loan losses		(2,516	)						(2,265	)
Total Assets	$	264,169						$	286,230
LIABILITIES
Time deposits	$	82,743		$	687	3.29	%	$	86,385		$	676	3.11	%
Savings deposits		75,432			160	0.84	%		89,916			231	1.02	%
Interest bearing demand deposits		38,047			37	0.39	%		39,707			37	0.37	%
Federal funds purchased and repurchase agreements		11,581			64	2.19	%		17,719			76	1.71	%
Long-term debt		2,000			32	6.35	%		—			—	—
FHLB borrowings		2,400			28	4.63	%		2,441			29	4.73	%
Total interest bearing liabilities		212,203			1,008	1.88	%		236,168			1,049	1.77	%
Demand deposits		26,009							25,318
Other liabilities		1,422							1,572
Total Liabilities		239,634							263,058
STOCKHOLDERS’ EQUITY		24,535							23,172
Total Liabilities and Stockholders’ Equity	$	264,169						$	286,230
Net yield on earning assets				$	2,238	3.58	%				$	2,380	3.51	%

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the three months ended September 30, 2005 and 2004, respectively. The effect of this adjustment is presented below.

Investment securities	$	99,175	$	989	3.96	%	$	110,781	$	1,060	3.81	%
Loans		142,302		2,407	6.71	%		152,314		2,569	6.71	%
Total earning assets	$	248,292	$	3,453	5.52	%	$	270,101	$	3,656	5.38	%
Taxable equivalent net yield on earning assets			$	2,445	3.91	%			$	2,607	3.84	%

Page 17

Balance Sheet Analysis

Investments

Investment securities decreased $5,478,491 or 5.1% from December 31, 2004 to September 30, 2005. The investment portfolio is managed to attempt to achieve an optimum mix of asset quality, liquidity and maximum yield on investments. Taxable securities comprised 81.6% and 82.3% of total securities at September 30, 2005 and December 31, 2004, respectively. Other than the normal risks inherent in purchasing U.S. Treasury securities, U.S. Government corporation and agencies securities, and obligations of states and political subdivisions, i.e. interest rate risk, management has no knowledge of other market or credit risk involved in these investments. The Company does not have any high risk hybrid/derivative instruments.

Investment securities that are classified available for sale are available for sale at any time based upon management’s assessment of changes in economic or financial market conditions. These securities are carried at fair value and the unrealized holding gains and losses, net of taxes, are reflected as a separate component of stockholder’s equity until realized. Available for sale securities, at fair value decreased $5,471,654 or 5.3% from December 31, 2004, and represented 97.2% of the investment portfolio at September 30, 2005. The decrease was primarily due to maturities and calls of U.S. Treasury and U.S. Government corporation and agency securities and obligations of states and political subdivisions and sales of corporate debt securities. The held to maturity securities decreased $6,837 or .2% from December 31, 2004 and represented 2.8% of the investment portfolio as of September 30, 2005. As the investment portfolio consists primarily of fixed rate debt securities, changes in the market rates of interest will effect the carrying value of securities available for sale, adjusted upward or downward under the requirements of FAS 115 and represent temporary adjustments in values. The carrying value of securities available for sale was decreased by $659,442 at September 30, 2005 and increased by $110,482 at December 31, 2004. The fair value of securities classified as held to maturity was above book value by $51,506 and $102,751 at September 30, 2005 and December 31, 2004, respectively.

Table Four - Investment Portfolio

The following table presents the book values of investment securities (in thousands):

	(Unaudited) September 30, 2005		December 31, 2004
Securities held to maturity:
Obligations of States & Political Subdivisions	$	2,818	$	2,825
Total held to maturity	$	2,818	$	2,825
Securities available for sale:
U.S. Treasury securities and obligations of U.S. Government corporations and Agencies	$	46,716	$	43,590
Obligations of States & Political Subdivisions		16,939		17,263
Corporate Debt Securities		—		2,848
Mortgage-Backed Securities		34,216		39,390
Equity Securities		394		645
Total available for sale	$	98,265	$	103,736
Total	$	101,083	$	106,561

Page 18

Investments - Continued

Table Five - Maturity distribution of Investment Portfolio

(dollars in thousands)

The maturity distribution using book value including accretion of discounts and amortization of premiums and approximate yield of investment securities at September 30, 2005 and December 31, 2004 are presented in the following table. Tax equivalent yield basis was used on tax exempt obligations. Approximate yield was calculated using a weighted average of yield to maturities.

	(Unaudited) September 30, 2005								December 31, 2004
	Securities Held to Maturity				Securities Available for Sale				Securities Held to Maturity				Securities Available for Sale
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
U.S. Treasury and other U.S. Government Agencies
Within One Year	$	—	—	%	$	16,593	2.63	%	$	—	—	%	$	11,058	2.24	%
After One But Within Five Years		—	—			27,397	3.55			—	—			27,141	3.22
After Five But Within Ten Years		—	—			2,507	4.33			—	—			5,163	4.27
After Ten Years		—	—			219	3.76			—	—			228	2.39
		—	—			46,716	3.27			—	—			43,590	3.09
States & Political Subdivisions Within One Year		1,322	5.89			932	5.76			1,049	5.96			536	4.29
After One But Within Five Years		1,398	6.64			5,363	4.22			1,679	6.46			6,597	4.42
After Five But Within Ten Years		98	7.95			7,282	5.09			97	7.95			8,009	5.14
After Ten Years		—	—			3,362	5.98			—	—			2,121	6.06
		2,818	6.33			16,939	5.03			2,825	6.33			17,263	4.95
Corporate Debt Securities Within One Year		—	—			—	—			—	—			1,811	6.29
After One But Within Five Years		—	—			—	—			—	—			1,037	5.76
		—	—			—	—			—	—			2,848	6.10
Mortgage-Backed Securities		—	—			34,216	4.25			—	—			39,390	3.95
Equity Securities		—	—			394	2.71			—	—			645	2.13
Total	$	2,818	6.33	%	$	98,265	3.91	%	$	2,825	6.33	%	$	103,736	3.80	%

Page 19

Loans

Loans represent the largest asset on the Company’s balance sheet. Total loans, net of unearned income, decreased approximately $14.2 million or 9.2% from December 31, 2004 to September 30, 2005. The decline in the loan portfolio during 2005 was primarily due to decreases of approximately $5.3 million in residential real estate loans, $6.7 million in commercial loans, $1.1 million in installment loans, and $1.1 million in other loans. The decline in loans is primarily attributable to the increased competition for quality loans in the markets served by the subsidiary bank. Additionally, approximately $1.5 million in loans were participated to other financial institutions to assist in the attainment of the risk based capital requirements under the terms of the Formal Agreement.

Real estate residential loans which include real estate construction, real estate farmland, and real estate residential loans comprised thirty-three percent (33%) of the loan portfolio. Commercial loans which include real estate secured by non-farm, non-residential and commercial and industrial loans comprised forty-five percent (45%) of the loan portfolio. Installment loans comprised twelve percent (12%) of the loan portfolio. Other loans which include non-rated industrial development obligations, direct financing leases and other loans comprised ten percent (10%) of the loan portfolio. The changes in the composition of the loan portfolio since December 31, 2004 were a 1% increase in other loans and a 1% decrease in real estate residential loans.

Table Six - Loan Portfolio

Loans outstanding are as follows:(in thousands)

	(Unaudited)
	September 30, 2005		December 31, 2004
Real Estate - residential:
Real Estate - construction	$	1,265	$	1,841
Real Estate - farmland		412		263
Real Estate - residential		44,858		49,754
	$	46,535	$	51,858
Commercial:
Real Estate-secured by nonfarm nonresidential	$	48,781	$	51,699
Commercial and industrial		14,365		18,092
	$	63,146	$	69,791
Installment:
Installment and other loans to individuals	$	17,263	$	18,324
Other:
Nonrated industrial development obligations	$	13,378	$	14,538
Other loans		63		40
	$	13,441	$	14,578
Total		140,385		154,551
Less unearned interest		205		220
	$	140,180	$	154,331

Page 20

Table Seven

Loan Portfolio - Maturities and sensitivities of Loans to Changes in Interest Rates

(dollars in thousands)

The following table presents the contractual maturities of loans other than installment loans and residential mortgages as of September 30, 2005 and December 31, 2004:

	September 30, 2005						December 31, 2004
	In one Year or Less		After one Year Through Five Years		After Five Years		In one Year or Less		After one Year Through Five Years		After Five Years
Real estate construction	$	325	$	579	$	361	$	515	$	752	$	574
Commercial real estate - secured by nonfarm, nonresidential property		1,965		1,898		44,918		1,544		2,263		47,892
Commercial and industrial		817		6,973		6,575		1,310		7,866		8,916
Nonrated industrial development obligations		1,568		3,193		8,617		1,585		3,638		9,315
Total	$	4,675	$	12,643	$	60,471	$	4,954	$	14,519	$	66,697

The following table presents an analysis of fixed and variable rate loans as of September 30, 2005 and December 31, 2004 along with the contractual maturities of loans other than installment loans and residential mortgages:

	September 30, 2005						December 31, 2004
	In one Year or Less		After one Year Through Five Years		After Five Years		In one Year or Less		After one Year Through Five Years		After Five Years
Fixed Rates	$	1,934	$	7,692	$	11,632	$	2,951	$	9,378	$	12,817
Variable Rates		2,741		4,951		48,839		2,003		5,141		53,880
Total	$	4,675	$	12,643	$	60,471	$	4,954	$	14,519	$	66,697

Non-performing assets include non-accrual loans on which the collectibility of the full amount of interest is uncertain; loans which have been renegotiated to provide for a reduction or deferral of interest on principal because of a deterioration in the financial position of the borrower; loans past due ninety days or more as to principal or interest; and other real estate owned. A summary of nonperforming assets is presented in Table Eight.

Total non-performing loans were $2,141,000 at September 30, 2005 as compared to $1,642,000 at December 31, 2004. The increase in non-performing loans was primarily due to the addition of two commercial loans and one residential real estate loan placed in non-accrual during the first nine months of 2005. Loans past due 90 days or more and still accruing interest were $94,000 at September 30, 2005, as compared to $17,000 at December 31, 2004.

Loans are placed in non-accrual when the principal or interest is past due 90 days or more, unless the loan is both well secured and in the process of collection. Non-accrual loans were at $1,994,000 or 1.4% of total loans outstanding as of September 30, 2005, as compared to $1,441,000 or .9% of total loans at December 31, 2004. Management continues to monitor the nonperforming assets to ensure against deterioration in collateral values.

Page 21

Loans - Continued

Table Eight - Risk Elements

Loans which are in the process of collection, but are contractually past due 90 days or more as to interest or principal, renegotiated, non-accrual loans and other real estate are as follows:

	(Unaudited) September 30,						December 31, 2004
(dollars in thousands)	2005			2004
Past Due 90 Days or More:
Real Estate - residential	$	87		$	—		$	—
Commercial		—			—			6
Installment		7			16			11
	$	94		$	16		$	17
Non-accrual:
Real Estate - residential	$	463		$	4		$	74
Commercial		1,478			1,169			1,357
Installment		53			10			10
	$	1,994		$	1,183		$	1,441
Other Real Estate	$	53		$	184		$	184
Total non-performing assets	$	2,141		$	1,383		$	1,642
Total non-performing assets to total loans and other real estate		1.53	%		0.89	%		1.06	%

Generally, all banks recognize interest income on the accrual basis, except for certain loans which are placed on a non-accrual status. Loans are placed on a non-accrual status, when in the opinion of management doubt exists as to its collectibility. In accordance with the Office of the Comptroller of the Currency Policy, banks may not accrue interest on any loan which either the principal or interest is past due 90 days or more unless the loan is both well secured and in the process of collection. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was approximately $109,400, $77,100 and $105,700 for the nine months ended September 30, 2005 and 2004 and for the year ended December 31, 2004, respectively.

Page 22

Table Nine

Analysis of Allowance for Possible Loan Losses

(dollars in thousands)

The following table presents a summary of loans charged off and recoveries of loans previously charged off by type of loan.

	(Unaudited) September 30,						December 31, 2004
	2005			2004
Allowance for loan losses:
Balance at beginning of period:	$	2,356		$	2,305		$	2,305
Loans Charged Off:
Real Estate - residential		12			3			3
Commercial		15			229			229
Installment		49			65			70
		76			297			302
Recoveries:
Real Estate - residential		2			17			17
Commercial		1			14			20
Installment		18			14			16
		21			45			53
Net Charge-offs		55			252			249
Additions Charged to Operations		180			210			300
Balance at end of period:	$	2,481		$	2,263		$	2,356
Average Loans Outstanding	$	146,484		$	150,725		$	151,562
Ratio of net charge-offs to Average loans outstanding for the period		0.04	%		0.17	%		0.16	%
Ratio of the Allowance for Loan Losses to Loans Outstanding for the period		1.77	%		1.45	%		1.53	%

The additions to the allowance for loan losses are based on management’s evaluation of characteristics of the loan portfolio, current and anticipated economic conditions, past loan experiences, net loans charged-off, specific problem loans and delinquencies, and other factors.

Page 23

Allowance for Loan Losses

In all lending activities there is an inherent risk that borrowers will be unable to repay their obligations. The Company maintains an allowance for loan losses to absorb probable loan losses. The Company has historically maintained the allowance for loan losses at a level greater than actual charge-offs. Although a subjective evaluation is determined by management, the Company believes it has appropriately assessed the risk of loans in the loan portfolio and has provided for an allowance which is adequate based on that assessment. Because the allowance is an estimate, any change in the economic conditions of the Company’s market area could result in new estimates which could affect the Company’s earnings. Management monitors the quality of the loan portfolio through reviews of past due loans and all significant loans which are considered to be potential problem loans on a monthly basis. The internal loan review function provides for an independent review of commercial, real estate, and installment loans in order to measure the asset quality of the portfolio. Management’s review of the loan portfolio has not indicated any material loans, not disclosed in the accompanying tables and discussions which are known to have possible credit problems that cause management to have serious doubts as to the ability of each borrower to comply with their present loan repayment terms.

The allowance for loan losses increased $125,331 or 5.3%, since December 31, 2004. The allowance for loan losses represented 1.8% and 1.5% of outstanding loans as of September 30, 2005 and December 31, 2004, respectively. Net loan charge-offs were $54,668 for the nine month period ended September 30, 2005, compared to $251,710 for the same period in 2004. The net loan charge-offs during the first nine months of 2005 were primarily consumer loans. The provision for possible loan losses was $180,000 and $210,000 for the nine month periods ended September 30, 2005 and 2004, respectively. The credit quality of the loan portfolio combined with the recent level of net charge-offs and nonperforming assets continue to be considered in the calculation of the provision for loan losses. The Company has allocated the allowance for possible loan losses to specific portfolio segments based upon historical net charge-off experience, changes in the level of nonperforming assets, local economic conditions and management’s experience as presented in Table Ten.

Table Ten

Loan Portfolio - Allocation of allowance for possible loan losses

(dollars in thousands)

The following table presents an allocation of the allowance for possible loan losses at each of the four year periods ended December 31, 2004, and the nine month period ended September 30, 2005. The allocation presented below is based on the historical average of net charge offs per category combined with the change in loan growth and management’s review of the loan portfolio.

	September 30,				December 31,
	2005				2004				2003				2002				2001
	Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans		Amount		Percent of loans in each category to total loans
Real estate - residential	$	327	33.1	%	$	325	33.5	%	$	311	36.0	%	$	276	37.5	%	$	263	37.3	%
Commercial		1,605	45.0			1,520	45.2			1,429	43.0			1,161	41.7			821	40.0
Installment		528	12.3			490	11.9			544	12.9			569	12.9			541	16.1
Others		21	9.6			21	9.4			21	8.1			21	7.9			21	6.6
Total	$	2,481	100.0	%	$	2,356	100.0	%	$	2,305	100.0	%	$	2,027	100.0	%	$	1,646	100.0	%

Page 24

Deposits

A stable core deposit base is the major source of funds for the Company’s subsidiary bank. The deposit mix depends upon many factors including competition from other financial institutions, depositor interest in certain types of deposits, changes in the interest rate and the Company’s need for certain types of deposit growth. Total deposits were $222,460,084 at September 30, 2005, down 5.8% since December 31, 2004. Since year end the decline in deposits was primarily in savings and time deposits, offset in part by an increase in non-interest bearing and interest bearing demand deposits. Time and savings deposits decreased primarily as a result of customers seeking higher yielding and shorter term non-maturity deposits. At September 30, 2005, noninterest bearing deposits comprised 12% of total deposits and interest bearing deposits which include NOW, money market, savings and time deposits comprised 88% of total deposits. Since December 31, 2004 the only change in the deposit mix was a 1% increase in non-interest bearing demand deposits and 1% decrease in interest bearing deposits.

Table Eleven

The following table presents other time deposits of $100,000 or more issued by domestic offices by time remaining until maturity of 3 months or less; over 3 through 6 months; over 6 through 12 months; and over 12 months.(In thousands)

	Maturities of Time Deposits in Excess of $100,000
	(Unaudited) September 30, 2005		December 31, 2004
Three Months or Less	$	1,395	$	1,514
Over Three and Less than Six Months		2,647		3,638
Over Six and Less than Twelve Months		4,772		3,217
Over Twelve Months		10,612		11,757
Total	$	19,426	$	20,126

Federal Funds Purchased and Repurchase Agreements

Federal funds purchased and repurchase agreements represent borrowings of a short duration, usually less than 30 days. For repurchase agreements, the securities underlying the agreements remained under the Bank’s control. There were no Federal funds purchased at September 30, 2005 and December 31, 2004. Repurchase agreements decreased approximately $4 million or 25.1%, since December 31, 2004 and was primarily due to a decline in the balances maintained by commercial customers.

Federal Home Loan Bank and other borrowings

The subsidiary bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). The FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans or securities with a market value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at September 30, 2005 was approximately $100.2 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $2,395,127 and $2,425,111 at September 30, 2005 and December 31, 2004, respectively, with an interest rate of 4.76%. The borrowings will mature in 2018. The FHLB funding was utilized to mitigate the impact of rising interest rates for a long term fixed rate loan commitment. The subsidiary bank also has a one year line of credit agreement with the FHLB. The maximum credit available under this agreement is $7 million and expires December, 2005.

During the second quarter, the Holding Company obtained a $3 million non-revolving line of credit from a local financial institution to provide for the capitalization of the subsidiary bank as required under the terms of the Formal Agreement. The loan is secured by 126,200 shares of Progressive Bank, N.A. stock. The note bears an interest rate of prime and will be adjusted on a quarterly basis. Under the terms of the note, interest only will be required for the first three years and principal and interest payments will be required in subsequent years. The loan matures in 2015. At September 30, 2005 the Company had borrowings in the amount of $2 million at an interest rate of 6.5%.

Capital Resources

Stockholders’ equity increased 3.3% during the nine month period ended September 30, 2005 entirely from current earnings after quarterly dividends, and a 2.0% decrease in accumulated other comprehensive income. The decrease in accumulated other comprehensive income is primarily attributable to the effect of the change in the net unrealized loss on securities available for sale. Stockholders’ equity amounted to 9.2% of total assets at September 30, 2005 and 8.6% at December 31, 2004.

Page 25

Capital Resources (continued)

The Company’s primary source of funds for payment of dividends to shareholders is from the dividends from its subsidiary bank. In December 2004, the subsidiary bank entered into a Formal agreement with the Office of the Comptroller of the Currency. Under the terms of the Formal Agreement, the subsidiary bank cannot declare a dividend in 2005 without approval of the Comptroller of the Currency. The Board of Directors also adopted a resolution with the Federal Reserve Bank of Cleveland which prohibits the Company from paying dividends or participating in the acquisition of treasury stock without prior Federal Reserve approval and a 30 day prior notice requirement. The Company has taken, and intends to continue to take, all appropriate steps to comply with the Federal Reserve requirements.

The Company and its subsidiary bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk, weighting, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to adjusted total assets (as defined).

As of September 30, 2005, the most recent notifications from the Office of the Comptroller of the Currency categorized the bank as adequately capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes has changed the capital category. The capital ratios and the regulatory framework for adequately capitalized institutions are depicted as set forth in the following table:

(Amounts Expressed in Thousands)	Actual				For Capital Adequacy Purposes
	Amount		Ratio		Amount		Ratio
As of December 31, 2004
Holding Company Total Capital (to Risk Weighted Assets)	$	22,745	12.97	%	$	14,033	8.0	%
Holding Company Tier I Capital (to Risk Weighted Assets)		20,561	11.72	%		7,016	4.0	%
Holding Company Tier I Capital (to Adjusted Total Assets)		20,561	7.24	%		11,366	4.0	%
Subsidiary Bank Total Capital (to Risk Weighted Assets)	$	22,417	12.84	%	$	13,965	8.0	%
Subsidiary Bank Tier I Capital (to Risk Weighted Assets)		20,233	11.59	%		6,983	4.0	%
Subsidiary Bank Tier I Capital (to Adjusted Total Assets)		20,233	7.14	%		11,332	4.0	%
As of September 30, 2005
Holding Company Total Capital (to Risk Weighted Assets)	$	24,814	15.58	%	$	12,744	8.0	%
Holding Company Tier I Capital (to Risk Weighted Assets)		22,824	14.33	%		6,372	4.0	%
Holding Company Tier I Capital (to Adjusted Total Assets)		22,824	8.70	%		10,492	4.0	%
Subsidiary Bank Total Capital (to Risk Weighted Assets)	$	26,396	16.63	%	$	12,699	8.0	%
Subsidiary Bank Tier I Capital (to Risk Weighted Assets)		24,406	15.38	%		6,349	4.0	%
Subsidiary Bank Tier I Capital (to Adjusted Total Assets)		24,406	9.34	%		10,458	4.0	%

The “Formal Agreement” requires Tier 1 capital at least equal to thirteen percent (13%) of risk-weighted assets and Tier 1 capital at least equal to seven and one half percent (7.5%) of adjusted total assets by March 31, 2005.

Liquidity

Liquidity management ensures that funds are available to meet loan commitments, deposit withdrawals, and operating expenses. Funds are provided by loan repayments, investment securities maturities, or deposits, and can be raised by liquidating assets or through additional borrowings. The Holding Company had investment securities with an estimated fair value of $98,264,818 classified as available for sale at September 30, 2005. These securities are available for sale at any time based upon management’s assessment in order to provide necessary liquidity should the need arise. In addition, the Company’s subsidiary bank, Progressive Bank, N.A., is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). Membership in the FHLB provides an additional source of funding, in the form of collateralized advances. At September 30, 2005, the subsidiary bank had a short term line of credit available with the FHLB in the aggregate amount of approximately $7 million. There were no short term borrowings outstanding pursuant to this agreement as of September 30, 2005.

At September 30, 2005 and December 31, 2004, the Company had outstanding loan commitments and unused lines of credit totaling $15,465,000 and $20,581,000, respectively. As of September 30, 2005, management placed a high probability for required funding within one year of approximately $10.2 million. Approximately $3.6 million is principally unused home equity and credit card lines on which management places a low probability for required funding.

Page 26

FIRST WEST VIRGINIA BANCORP, INC.

PART I

Item 3 Quantitative and Qualitative Disclosures About Market Risk

The Company’s subsidiary bank uses an asset/liability model to measure the impact of changes in interest rates on net interest income on a periodic basis. Assumptions are made to simulate the impact of future changes in interest rates and/or changes in balance sheet composition. The effect of changes in future interest rates on the mix of assets and liabilities may cause actual results to differ from simulated results. Guidelines established by the Company’s subsidiary bank provides that the estimated net interest income may not change by more than 10% in a one year period given a +/- 200 basis point parallel shift in interest rates. Excluding the potential effect of interest rate changes on assets and liabilities of the Holding Company which are not deemed material, the anticipated impact on net interest income of the subsidiary bank at September 30, 2005 was as follows: given a 200 basis point increase scenario net interest income would be reduced by approximately 2.8%, and given a 200 basis point decrease scenario net interest income would be reduced by approximately 8.8%. The results using a +/-100 basis point interest rate scenario are also presented. Under the 100 basis point increase scenario net interest income would be reduced by approximately 1.2%, and given a 100 basis point decrease scenario net interest income would be reduced by 1.1%. The projections provided by the model are not intended as an actual forecast of the bank’s performance in a particular rate environment, and should not be relied upon. Actual changes in the interest rate environment normally do not take place instantaneously, but over a period of time, and do not occur in a parallel fashion. Additionally, the balance sheet composition, spread relationships for new dollars invested, non interest income and expenses, investment practices, and deposit practices all change as a result of changes in interest rates and would need to be considered by the Asset Liability committee.

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Chairman, President and Chief Executive Officer, Sylvan J. Dlesk, and Executive Vice President, Chief Administrative Officer and Chief Financial Officer, Francie P. Reppy, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of this report (the “Evaluation Date”), have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Controls

During the quarter, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

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FIRST WEST VIRGINIA BANCORP, INC.

PART II

OTHER INFORMATION

Item 1 Legal Proceedings

The nature of the business of the Holding Company’s subsidiary generates a certain amount of litigation involving matters arising in the ordinary course of business. The Company is unaware of any litigation other than ordinary routine litigation incidental to the business of the Company, to which it or its subsidiary is a party or of which any of their property is subject.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Inapplicable

Item 3 Defaults Upon Senior Securities

Inapplicable

Item 4 Submission of Matters to Vote of Security Holders

a. Inapplicable

b. Inapplicable

c. Inapplicable

d. Inapplicable

Item 5 Other Information

Inapplicable

Item 6 Exhibits and Reports on Form 8-K

(a) Reports on Form 8-K

On August 15, 2005 a report on Form 8-K was filed which contained a press release dated August 12, 2005 that reported the earnings of First West Virginia Bancorp, Inc. for the second quarter ended June 30, 2005.

On September 12, 2005 a report on Form 8-K was filed and reported that on August 17, 2005 the Board of Directors of the Company were advised by the Federal Reserve Bank of Cleveland that they had no objection to Sylvan J. Dlesk continuing to serve as Interim President and Chief Executive Officer of the Company for a period of up to an additional 120 days or until December 23, 2005.

(b) Exhibits

The exhibits listed in the Exhibit Index on page 30 of this FORM 10-Q are incorporated by reference and/or filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

First West Virginia Bancorp, Inc.
(Registrant)
By:	/s/ Sylvan J. Dlesk
	Sylvan J. Dlesk
	Chairman
By:	/s/ Francie P. Reppy
	Francie P. Reppy
	Executive Vice President and Chief Financial Officer

Dated: November 7, 2005

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EXHIBIT INDEX

The following exhibits are filed herewith and/or are incorporated herein by reference.

Exhibit Number	Description
3.1	Certificate and Articles of Incorporation of First West Virginia Bancorp, Inc. Incorporated herein by reference.
3.2	Bylaws of First West Virginia Bancorp, Inc. Incorporated herein by reference.
10.3	Lease dated July 20, 1993 between Progressive Bank, N.A., formerly known as “First West Virginia Bank, N.A.”, and Angela I. Stauver. Incorporated herein by reference.
10.4	Banking Services License Agreement dated October 26, 1994 between Progressive Bank, N.A., formerly known as “First West Virginia Bank, N.A.”, and The Kroger Co. Incorporated herein by reference.
10.5	Lease dated November 14, 1995 between Progressive Bank, N.A. - Buckhannon and First West Virginia Bancorp, Inc. and O. V. Smith & Sons of Big Chimney, Inc. Incorporated herein by reference.
10.6	Lease dated May 20, 1998 between Progressive Bank, N.A. and Robert Scott Lumber Company. Incorporated herein by reference.
10.7	Lease dated May 12, 2001 between Progressive Bank, N.A. and Sylvan J. Dlesk and Rosalie J. Dlesk doing business as Dlesk Realty & Investment Company. Incorporated herein by reference.
10.8	Lease dated January 1, 2005 between Progressive Bank, N.A. and Elm Grove Properties LLC. Incorporated herein by reference.
11.1	Statement regarding computation of per share earnings. Filed herewith and incorporated herein by reference.
13.3	Summarized Quarterly Financial Information. Filed herewith and incorporated herein by reference.
15	Letter re unaudited interim financial information. Incorporated herein by reference. See Part 1, Notes to Consolidated Financial Statements
31	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Executive Officer pursuant to section 302 of the Securities and Exchange Act of 1934. Filed herewith and incorporated herein by reference.
31.1	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Financial Officer pursuant to section 302 of the Securities and Exchange Act of 1934. Filed herewith and incorporated herein by reference.
32	Certification pursuant to 18 U.S.C. §1350,as adopted pursuant to section 906 of the SARBANES-OXLEY ACT of 2002. Filed herewith and incorporated herein by reference.
99.1	Independent Accountant’s Report. Filed herewith and incorporated herein by reference.

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