First West Virginia Bancorp (FWV) 10-K 2006 FY Annual report

EXHIBIT 13.1

Annual Report to Shareholders

(FIRST WEST VIRGINIA BANCORP LETTERHEAD)

P.O. Box 6671

Wheeling, WV 26003

TO OUR SHAREHOLDERS:

I am pleased for the opportunity to present you with the financial performance contained in the 2006 Annual Report of First West Virginia Bancorp, Inc. Consolidated net income for 2006 was $2,143,824 or $1.40 per share, as compared to $2,262,265 or $1.48 per share a year earlier. Total assets for the Holding Company decreased 4.4% over the prior year to $254,437,561 at December 31, 2006 as compared to $266,213,400 at December 31, 2005. Total stockholders’ equity increased 5.5% to $25,276,954 as compared to $23,958,629 reported in 2005. The book value per share was $16.54 at December 31, 2006 as compared to $15.68 a year earlier.

The Board of Directors declared and paid cash dividends of $.76 per share during 2006 and 2005.

This year it is with deep sorrow that I mention the passing of Edward P. Otte, Director Emeritus of the Company’s subsidiary bank, Progressive Bank, N.A. Mr. Otte served as a member of the bank’s Board of Directors since 1970. Mr. Otte made a significant contribution to the progress of our Company over the years and his experience, support, and dedication will be missed.

On December 15, 2004, the Office of the Comptroller of the Currency entered into a formal agreement with the Company’s subsidiary bank, Progressive Bank, N.A. The Board of Directors immediately developed strategies to address every article of this agreement. The management under the auspices of its Board of Directors worked both diligently and tirelessly to strengthen the infrastructure of this bank. The Board of Directors remained committed to augmenting every area of our bank (i.e. infrastructure, risk management quality, exterior profile, interior design, and new marketing philosophies) all of which have resulted in very favorable results. The Office of the Comptroller of the Currency recognized the conspicuous accomplishments achieved as a result of the bank’s efforts and thus terminated the formal agreement December 13, 2006. The Comptroller of the Currency believes the protection of our depositors and the safety and soundness of our bank operations has been ensured and any future banking activities with other customers and shareholders will result in sound and secure banking practices.

The Board of Directors is extremely grateful to our employees for their concern and commitment to the success of our Company, the undying faithfulness of our customers, and the devotion and unfaltering support from our shareholders throughout our arduous times. The Board of Directors will be forever grateful for this unified demonstration of dedication to the success of our Company.

Furthermore, the Board of Directors, having emerged from the formal agreement with all its consequences, is delighted our Company is a stronger institution in all the pertinent areas. Hence, with our vision unobscured, our mission intact, we shall stay the course of not only insuring the strength of our organization but furthermore enhancing our commitment to provide our customers with outstanding service in every community we serve.

Also, the Board of Directors remains steadfast and unmovable in the commitment to our Company as it abounds to new horizons. Thank you for your encouragement and support throughout the years and especially the last two years.

Earnestly,

/s/ Sylvan J. Dlesk

Sylvan J. Dlesk

Chairman of the Board

President and Chief Executive Officer

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006			2005
ASSETS
Cash and due from banks	$	6,650,406		$	5,929,513
Due from banks - interest bearing		668,230			1,066,142
Federal funds sold		4,053,000			4,753,000
Total cash and cash equivalents		11,371,636			11,748,655
Investment securities:
Available-for-sale (at fair value)		109,921,387			106,222,137
Held-to-maturity (fair value of $989,241 and $1,810,834, respectively)		972,855			1,776,295
Loans		120,709,320			135,214,258
Less allowance for loan losses		(2,296,958	)		(2,319,871	)
Net loans		118,412,362			132,894,387
Premises and equipment, net		4,334,131			4,166,929
Accrued income receivable		1,263,335			1,255,328
Other intangible assets		103,543			192,295
Goodwill		1,644,119			1,644,119
Bank owned life insurance		3,307,711			3,193,977
Other assets		3,106,482			3,119,278
Total assets	$	254,437,561		$	266,213,400
LIABILITIES
Noninterest bearing deposits:
Demand	$	25,586,509		$	26,044,841
Interest bearing deposits:
Demand		33,070,271			36,891,497
Savings		54,606,775			70,288,524
Time		97,144,860			85,592,439
Total deposits		210,408,415			218,817,301
Federal funds purchased and securities sold under agreements to repurchase		15,240,158			19,084,324
Federal Home Loan Bank borrowings		2,342,718			2,384,893
Other long-term borrowings		—			1,000,000
Accrued interest payable		597,457			404,372
Other liabilities		571,859			563,881
Total liabilities		229,160,607			242,254,771
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,538,443 shares issued at December 31, 2006 and 2005		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		13,520,264			12,538,056
Accumulated other comprehensive loss		(690,031	)		(1,026,148	)
Total stockholders’ equity		25,276,954			23,958,629
Total liabilities and stockholders’ equity	$	254,437,561		$	266,213,400

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

2

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2006		2005		2004
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	8,125,629	$	8,558,205	$	8,930,710
Tax-exempt		576,861		649,553		641,440
Debt securities:
Taxable		3,876,233		3,047,213		3,064,050
Tax-exempt		780,952		637,600		660,330
Dividends		34,489		16,452		10,864
Other interest income		97,705		41,147		21,941
Interest on federal funds sold		279,904		178,087		76,784
Total interest and dividend income		13,771,773		13,128,257		13,406,119
INTEREST EXPENSE
Deposits		4,144,645		3,574,439		3,791,975
Federal funds purchased and repurchase agreements		656,063		311,763		286,053
FHLB and other long-term borrowings		141,754		184,299		116,561
Total interest expense		4,942,462		4,070,501		4,194,589
Net interest income		8,829,311		9,057,756		9,211,530
PROVISION FOR LOAN LOSSES		—		180,000		300,000
Net interest income after provision for loan losses		8,829,311		8,877,756		8,911,530
NONINTEREST INCOME
Service charges and other fees		914,891		775,588		799,593
Net gains on available for sale securities		45,668		118,433		4,765
Other operating income		472,580		483,682		479,258
Total noninterest income		1,433,139		1,377,703		1,283,616
NONINTEREST EXPENSE
Salary and employee benefits		4,051,274		3,768,693		3,563,858
Net occupancy expense of premises		1,133,895		1,133,282		1,050,851
Other operating expenses		2,428,858		2,549,450		2,132,098
Total noninterest expense		7,614,027		7,451,425		6,746,807
Income before income taxes		2,648,423		2,804,034		3,448,339
INCOME TAXES		504,599		541,769		811,014
Net income	$	2,143,824	$	2,262,265	$	2,637,325
WEIGHTED AVERAGE SHARES OUTSTANDING		1,528,443		1,528,443		1,528,443
EARNINGS PER COMMON SHARE	$	1.40	$	1.48	$	1.73
DIVIDENDS PER COMMON SHARE	$	0.76	$	0.76	$	0.76

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

3

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

	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	—		—		—		2,637,325			—			—		$	2,637,325			2,637,325
Other comprehensive income, net of tax
Unrealized loss on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			(553,288	)		(553,288	)		(553,288	)
Comprehensive income															$	2,084,037
Cash dividend ($.76 per share)	—		—		—		(1,161,616	)		—			—						(1,161,616	)
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	—		—		—		2,262,265			—			—		$	2,262,265			2,262,265
Other comprehensive income, net of tax
Unrealized loss on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			(1,095,056	)		(1,095,056	)		(1,095,056	)
Comprehensive income															$	1,167,209
Cash dividend ($.76 per share)	—		—		—		(1,161,616	)		—			—						(1,161,616	)
BALANCE, DECEMBER 31, 2005	1,538,443		7,692,215		4,982,606		12,538,056			(228,100	)		(1,026,148	)					23,958,629
Comprehensive income:
Net income	—		—		—		2,143,824			—			—		$	2,143,824			2,143,824
Other comprehensive income, net of tax
Unrealized gain on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			336,117			336,117			336,117
Comprehensive income															$	2,479,941
Cash dividend ($.76 per share)	—		—		—		(1,161,616	)		—			—						(1,161,616	)
BALANCE, DECEMBER 31, 2006	1,538,443	$	7,692,215	$	4,982,606	$	13,520,264		$	(228,100	)	$	(690,031	)				$	25,276,954

	2006		2005			2004
Disclosure of reclassification amount:
Unrealized holding gains (losses) arising during the period	$	364,600	$	(1,021,189	)	$	(550,316	)
Less reclassification adjustment for gains included in net income		28,483		73,867			2,972
Net unrealized gains (losses) on securities	$	336,117	$	(1,095,056	)	$	(553,288	)

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

4

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005			2004
OPERATING ACTIVITIES
Net income	$	2,143,824		$	2,262,265		$	2,637,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		—			180,000			300,000
Depreciation and amortization		435,235			453,351			441,131
Amortization (accretion) of investment securities, net		(124,624	)		288,848			575,997
Investment security gains		(45,668	)		(118,433	)		(4,765	)
Gain on sales of assets		—			(9,835	)		(45,570	)
Increase in cash surrender value of bank-owned life insurance		(113,734	)		(113,253	)		(80,724	)
Decrease (increase) in interest receivable		(8,007	)		3,877			16,641
Decrease (increase) in interest payable		193,085			55,015			(35,460	)
Other, net		(182,018	)		(14,118	)		(450,299	)
Net cash provided by operating activities		2,298,093			2,987,717			3,354,276
INVESTING ACTIVITIES
Net (increase) decrease in loans, net of charge-offs		14,430,462			18,850,853			(7,922,825	)
Proceeds from sales of securities available-for-sale		385,888			3,142,149			8,408,557
Proceeds from maturities of securities available-for-sale		93,984,071			234,723,686			62,972,732
Proceeds from maturities of securities held-to-maturity		805,000			1,040,000			1,150,000
Principal collected on mortgage-backed securities		9,884,629			12,314,801			17,518,653
Purchases of securities available-for-sale		(107,246,196	)		(254,584,173	)		(75,114,282	)
Recoveries on loans previously charged-off		51,563			49,696			53,515
Purchase of bank owned life insurance		—			—			(3,000,000	)
Purchases of premises and equipment		(513,686	)		(681,349	)		(290,874	)
Proceeds from sales of assets		—			15,525			271,946
Net cash provided by investing activities		11,781,731			14,871,188			4,047,422
FINANCING ACTIVITIES
Net decrease in deposits		(8,408,886	)		(17,353,706	)		(5,776,323	)
Dividends paid		(1,161,616	)		(1,161,616	)		(1,161,616	)
Proceeds from issuance of long term debt		—			2,000,000			—
Repayment of long term debt		(1,000,000	)		(1,000,000	)		—
(Decrease) increase in short-term borrowings		(3,844,166	)		3,325,124			670,366
Decrease in FHLB borrowings		(42,175	)		(40,218	)		(38,353	)
Net cash used in financing activities		(14,456,843	)		(14,230,416	)		(6,305,926	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(377,019	)		3,628,489			1,095,772
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		11,748,655			8,120,166			7,024,394
CASH AND CASH EQUIVALENTS, END OF YEAR	$	11,371,636		$	11,748,655		$	8,120,166
Supplemental Disclosures:
Cash Paid for Interest	$	4,749,377		$	4,015,486		$	4,230,049
Cash Paid for Income Taxes		612,000			645,000			990,000

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

5

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting and reporting policies applied in the presentation of the accompanying financial statements follows.

Nature of Operations and Basis of Presentation: First West Virginia Bancorp, Inc. (the “Company”) is a West Virginia Company. The Company provides a variety of banking services to individuals and businesses through the branch network of its affiliate bank (the “Bank”). The Bank operates ten full service branches located in Wheeling (3), Wellsburg, Moundsville (2), New Martinsville, Buckhannon, and Weston, West Virginia and Bellaire, Ohio. Primary deposit products consist of checking accounts, savings accounts, and certificates of deposit. Primary lending products consist of commercial and residential real estate loans, consumer loans, and business loans.

Principles of Consolidation: The consolidated financial statements of the Company include the financial statements of the parent and its wholly-owned subsidiary, Progressive Bank, N.A. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to material change in the near term relate to the determination of the allowance for loan losses and the valuation of deferred tax assets.

Cash and cash equivalents: Cash and cash equivalents consist of cash on hand and amounts due from banks and federal funds sold.

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.

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 December 31, 2006, 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.

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.

Loans and Loans Held for Sale: Loans are generally reported at the principal balance outstanding, net of unearned income. Interest income on loans is accrued based on the principal outstanding. It is the Company’s policy to discontinue the accrual of interest when 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 Company accounts for impaired loans in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 114 and No. 118, “Accounting for Creditors for Impairment of a Loan.” It is the Company’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the contractual life of the related loans or commitments as an adjustment of the related loan’s yield. Loans held for sale are carried at the lower of cost or estimated market value in the aggregate. There were no loans held for sale as of December 31, 2006 and 2005, respectively.

The Company has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which the bank may sell conforming one-to-four family residential mortgage loans to the FHLB. The agreement provides for a maximum commitment of $5,000,000. Loans sold to the FHLB are sold with limited recourse or credit risk up to a maximum amount of $125,000 based upon utilization of the original commitment. The bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold under this agreement is $1,487,168 as of December 31, 2006 which are subject to recourse obligation or credit risk in the amount of $31,385. The amount of income recognized as of a result of this agreement was $10,317 and $1,426 for the years ending December 31, 2006 and 2005, respectively. There was no income recognized in 2004 as a result of this agreement.

Allowance for Loan Losses: The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses that is charged to operations. The provision is based on management’s evaluation of the adequacy of the allowance for loan losses which encompasses the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the near term.

6

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 1 - SUMMARY OF SIGNIFICANT 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.

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.

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 $2,296,958 at December 31, 2006, 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.

Goodwill and Other Intangible Assets Goodwill resulted from the Company’s purchase of a less-than-whole financial institution (the “branch”). The goodwill value of $1.6 million 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.

An identifiable intangible asset resulted from the purchase of the core deposits of another financial institution in 2001 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). The Company recognized amortization expense of $88,751 in the periods ending December 31, 2006, 2005 and 2004. The unamortized balance from the purchase of these core deposit intangible assets is $103,543 and $192,295 at December 31, 2006 and 2005, respectively. The estimated aggregate amortization expense for each of the succeeding years is as follows: $88,751 in 2007 and $14,792 in 2008. While management feels the assumptions and variables used to value the acquisition were reasonable, the use of different, but still reasonable, assumptions could produce different results.

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.

Premises and Equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. Provisions for depreciation and amortization are computed generally using the straight-line method over the estimated useful lives of the assets. When units of property are disposed of, the premises and equipment accounts are relieved of the cost and the accumulated depreciation related to such units. Any resulting gains or losses are credited to or charged against income. Cost of repairs and maintenance is charged to expense as incurred. Additions and improvements are capitalized at cost.

Other Real Estate Owned: Other real estate owned are carried at the lower of cost or their estimated current fair value, less estimated costs to sell and are included in other assets. Other real estate owned consist primarily of properties acquired through, or in lieu of foreclosures. Any subsequent declines in fair value, and gains or losses on the disposition of these assets are credited to or charged against income.

Bank-owned Life Insurance: Bank owned life insurance consists of investments in life insurance policies on executive officers and other members of the bank’s management. The policies are carried at their net cash surrender value. Changes in the policy value are recorded as an adjustment to the carrying value with the corresponding amount recognized as non-interest income or expense. Earnings on these policies are based on the net earnings on the cash surrender value of the policies. The net cash surrender value of bank-owned life insurance was $3,307,711 and $3,193,977 at December 31, 2006 and 2005, respectively. The face value of the bank-owned life insurance at December 31, 2006 was $9.3 million. An agreement has been executed with all officers whereby a $40,000 death benefit is payable upon the participant’s death while employed by the Company to their designated beneficiary.

7

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 1 - SUMMARY OF SIGNIFICANT 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.

Advertising Costs: Advertising costs are expensed as the costs are incurred. Advertising expenses amounted to $165,706, $133,403 and $189,855 for 2006, 2005, and 2004, respectively.

Reclassifications:Certain prior year amounts have been reclassified to conform to the 2006 presentation. The reclassifications had no effect on income.

Earnings Per Common Share: Earnings per common share are calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the year. The Company has no securities which would be considered potential common stock.

Comprehensive Income: The Company is required to present comprehensive income in a full set of general-purpose financial statements for all periods presented. 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:

	2006			2005			2004
Before-tax amount	$	538,908		$	(1,755,742	)	$	(887,106	)
Tax effect		(202,791	)		660,686			333,818
Net of tax effect		336,117			(1,095,056	)		(553,288	)
Net income as reported		2,143,824			2,262,265			2,637,325
Total comprehensive income	$	2,479,941		$	1,167,209		$	2,084,037

Recent Accounting Pronouncements: In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting (“FAS”) No. 155,Accounting for Certain Hybrid Instruments, as an amendment of FASB Statements No. 133 and 140. FAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In March 2006, the FASB issued FAS No. 156,Accounting for Servicing of Financial Assets. This Statement, which is an amendment to FAS No. 140, will simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Specifically, FAS No. 156 addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability; requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable; and permits an entity with a separately recognized servicing asset or servicing liability to choose either of the amortization or fair value methods for subsequent measurement. The provisions of FAS No. 156 are effective as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In September 2006, the FASB issued FAS No. 157,Fair Value Measurements, which provides enhanced guidance for using fair value to measure assets and liabilities. The standard applies whenever other standards require or permit assets or liabilities to be measured at fair value. The Standard does not expand the use of fair value in any new circumstances. FAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption is permitted. 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 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”),Accounting for Uncertainty in Income Taxes. FIN 48 is an interpretation of FAS No. 109,Accounting for Income Taxes, and it seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. This Interpretation clarifies that management is expected to evaluate an income tax position taken or expected to be taken for likelihood of realization before recording any amounts for such position in the financial statement. FIN No. 48 also requires expanded disclosure with respect to income tax positions taken that are not certain to be realized. This Interpretation is effective for fiscal years beginning after December 15, 2006, and will require management to evaluate every open tax position that exists in every jurisdiction on the date of initial adoption. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or disclosures.

8

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In September 2006, the FASB issued FAS No. 158,Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). FAS No. 158 requires that a company recognize the overfunded or underfunded status of its defined benefit post retirement plans (other than multiemployer plans) as an asset or liability in its statement of financial position and that it recognize changes in the funded status in the year in which the changes occur through other comprehensive income. FAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the fiscal year end, in addition to footnote disclosures. FAS No. 158 is effective for fiscal years ending after December 15, 2006. The adoption of this standard did not have a material effect on the Company’s financial position.

In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 06-4 (“EITF 06-4”),Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. The guidance is applicable to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policy, that are associated with a postretirement benefit. EITF 06-4 requires that for a split-dollar life insurance arrangement within the scope of the issue, an employer should recognize a liability for future benefits in accordance with FAS No. 106 (if, in substance, a postretirement benefit plan exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in substance, an individual deferred compensation contract) based on the substantive agreement with the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations or financial condition.

In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task Force Issue 06-5 (“EITF 06-5”),Accounting for Purchases of Life Insurance—Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance. EITF 06-5 states that a policyholder should consider any additional amounts included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized under the insurance contract. EITF 06-5 also states that a policyholder should determine the amount that could be realized under the life insurance contract assuming the surrender of an individual-life by individual-life policy (or certificate by certificate in a group policy). EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations or financial condition.

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are as follows at December 31, 2006 and 2005:

	(Expressed in thousands) December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities held-to-maturity:
Obligations of states and political subdivisions	$	973	$	16	$	—		$	989
Total held-to-maturity		973		16		—			989
Securities available-for-sale:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
		36,723		29		(555	)		36,197
Obligations of states and political subdivisions		21,744		99		(159	)		21,684
Mortgage-backed securities		52,199		91		(625	)		51,665
Equity securities		362		13		—			375
Total available-for-sale		111,028		232		(1,339	)		109,921
Total	$	112,001	$	248	$	(1,339	)	$	110,910

9

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

	(Expressed in thousands) December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities held-to-maturity:
Obligations of states and political subdivisions	$	1,776	$	35	$	—		$	1,811
Total held-to-maturity		1,776		35		—			1,811
Securities available-for-sale:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
		41,351		21		(782	)		40,590
Obligations of states and political subdivisions		20,280		57		(349	)		19,988
Mortgage-backed securities		45,912		56		(714	)		45,254
Equity securities		324		85		(19	)		390
Total available-for-sale		107,867		219		(1,864	)		106,222
Total	$	109,643	$	254	$	(1,864	)	$	108,033

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual securities have been in a continuous unrealized loss position, at December 31, 2006 and 2005:

	(Expressed in thousands) 2006
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Treasury securities and U.S. Government corporations and agencies
	$	2,662	$	(7	)	$	27,090	$	(548	)	$	29,752	$	(555	)
Obligations of states and political subdivisions
		4,782		(8	)		7,443		(151	)		12,225		(159	)
Mortgage-backed securities		16,332		(88	)		22,771		(537	)		39,103		(625	)
Total debt securities		23,776		(103	)		57,304		(1,236	)		81,080		(1,339	)
Equity securities		—		—			—		—			—		—
Total	$	23,776	$	(103	)	$	57,304	$	(1,236	)	$	81,080	$	(1,339	)

	(Expressed in thousands) 2005
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Treasury securities and U.S. Government corporations and agencies	$	16,217	$	(287	)	$	19,426	$	(491	)	$	35,643	$	(778	)
Obligations of states and political subdivisions		10,582		(173	)		5,317		(176	)		15,899		(349	)
Mortgage-backed securities		20,949		(305	)		13,999		(413	)		34,948		(718	)
Total debt securities		47,748		(765	)		38,742		(1,080	)		86,490		(1,845	)
Equity securities		89		(1	)		77		(18	)		166		(19	)
Total	$	47,837	$	(766	)	$	38,819	$	(1,098	)	$	86,656	$	(1,864	)

10

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

The Company’s investment securities portfolio contains unrealized losses of direct obligations of the U.S. Treasury and U.S. Government agency securities, including mortgage-related instruments issued or backed by the full faith and credit of the United States government or are generally viewed as having the implied guarantee of the U.S. government, and debt obligations of a U.S. state or political subdivision.

On a monthly basis, the Company evaluates the severity and duration of impairment for its investment securities portfolio unless the company has the ability to hold the security to maturity without incurring a loss. Generally, impairment is considered other than temporary when an investment security has sustained a decline in market value of ten percent or more for a period of six months. The Company has concluded that any impairment of its investment securities portfolio is not other than temporary but is the result of interest rate changes that are not expected to result in the noncollection of principal and interest during the period. There are 162 positions that are temporarily impaired at December 31, 2006.

The amortized cost and estimated fair value of investment securities at December 31, 2006, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(Expressed in thousands)
	Securities Held-to-Maturity				Securities Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	310	$	312	$	6,256	$	6,191
Due after one year through five years		663		677		36,323		35,774
Due after five years through ten years		—		—		6,837		6,837
Due after ten years		—		—		9,051		9,079
		973		989		58,467		57,881
Mortgage-backed securities		—		—		52,199		51,665
Equity securities		—		—		362		375
Total	$	973	$	989	$	111,028	$	109,921

Proceeds from sales of securities available-for-sale during the years ended December 31, 2006, 2005, and 2004, were $385,888, $3,142,149, and $8,408,557, respectively. Gross gains of $67,074 and gross losses of $21,406 in 2006; gross gains of $144,771 and gross losses of $26,338 in 2005; and gross gains of $14,277 and gross losses of $9,512 in 2004, were realized on those sales. Assets carried at $42,987,000 and $44,021,000 at December 31, 2006 and 2005, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

NOTE 3 - LOANS AND LEASES

Loans outstanding at December 31, 2006 and 2005, are as follows:

	(Expressed in Thousands)
	2006		2005
Real estate - construction	$	1,205	$	759
Real estate - farmland		378		405
Real estate - residential		41,759		44,042
Real estate-secured by non-farm, non-residential		44,110		46,587
Commercial and industrial loans		8,219		13,721
Installment and other loans to individuals		13,473		16,648
Non-rated industrial development obligations		11,655		13,213
Other loans		88		43
Total	$	120,887	$	135,418
Less unearned interest and deferred fees		178		204
Net loans	$	120,709	$	135,214

Non-accrual loans amounted to $3,380,170 and $1,366,960 at December 31, 2006 and 2005, respectively. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $204,100 and $117,900 for 2006 and 2005, respectively.

11

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses is summarized as follows:

	December 31,
	2006		2005		2004
Balance at beginning of year	$	2,319,871	$	2,356,101	$	2,304,868
Additions charged to operating expense		—		180,000		300,000
Recoveries		51,563		49,696		53,515
Total		2,371,434		2,585,797		2,658,383
Less loans charged-off		74,476		265,926		302,282
Balance at end of year	$	2,296,958	$	2,319,871	$	2,356,101

The following is a summary of information pertaining to impaired and non-accrual loans:

	(Expressed in Thousands)
	December 31,
	2006		2005		2004
Impaired loans without a valuation allowance	$	1,200	$	381	$	343
Impaired loans with a valuation allowance		2,180		986		1,098
Total impaired loans	$	3,380	$	1,367	$	1,441
Valuation allowance related to impaired loans	$	314	$	80	$	269

	(Expressed in Thousands)
	December 31,
	2006		2005		2004
Total non-accrual loans	$	3,380	$	1,367	$	1,441
Total loans past-due 90 days or more and still accruing	$	3	$	90	$	17

	(Expressed in Thousands)
	December 31,
	2006		2005		2004
Average investment in impaired loans	$	1,691	$	1,840	$	1,678
Interest income recognized on impaired loans		—		—		—
Interest income recognized on a cash basis on impaired loans		—		—		—

No additional funds are committed to be advanced in connection with impaired loans.

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation, as follows:

	December 31,				Original Useful Life Years
	2006		2005
Land	$	1,983,014	$	1,935,514
Land improvements		302,583		296,527	20
Leasehold improvements		404,598		404,598	25
Buildings		4,150,614		3,766,478	20-50
Furniture, fixtures & equipment		3,398,209		3,322,215	3 - 8
Total		10,239,018		9,725,332
Less accumulated depreciation		5,904,887		5,558,403
Premises and equipment, net	$	4,334,131	$	4,166,929

Charges to operations for depreciation approximated $346,485, $364,600, and $352,380 for 2006, 2005, and 2004, respectively.

12

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 6 - DEPOSITS

The composition of the Bank’s deposits at December 31 follows:

	(Expressed in Thousands)
	2006
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	24,749	$	29,161	$	53,856	$	95,220
United States Government		11		—		—		—
States and political subdivisions		740		3,910		751		1,775
Commercial banks and other depository institutions		86		—		—		150
Total	$	25,586	$	33,071	$	54,607	$	97,145

	(Expressed in Thousands)
	2005
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	25,339	$	32,087	$	68,597	$	82,856
United States Government		29		—		—		—
States and political subdivisions		553		4,804		1,692		2,586
Commercial banks and other depository institutions		124		—		—		150
Total	$	26,045	$	36,891	$	70,289	$	85,592

Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $28,389,000 and $22,355,000 at December 31, 2006 and 2005, respectively. Interest expense on certificates of deposit of $100,000 or more was $952,000, $671,000 and $675,000 at December 31, 2006, 2005, and 2004, respectively.

A maturity distribution of time certificates of deposit at December 31, 2006, follows:

Due in 2007	$	63,047,000
Due in 2008		8,945,000
Due in 2009		7,651,000
Due in 2010		10,971,000
Due in 2011		6,413,000
Due in 2012 and thereafter		118,000
Total	$	97,145,000

NOTE 7 - 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. Information related to repurchase agreements and federal funds purchased are summarized below:

	Repurchase Agreements						Federal Funds Purchased
	2006			2005			2006
Balance at end of year	$	15,240,158		$	19,084,324		$	—
Average balance during the year		18,786,058			13,890,199			105,616
Maximum month-end balance		19,569,721			19,084,324			2,000,000
Weighted-average rate during the year		3.46	%		2.24	%		5.53	%
Rate at December 31		2.62	%		2.80	%		—

The subsidiary bank had no significant activity in federal funds purchased during 2005.

13

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 8 - FEDERAL HOME LOAN BANK 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 December 31, 2006 was approximately $90.1 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $2,342,718 and $2,384,893 at December 31, 2006 and 2005, respectively, with a weighted average interest rate of 4.76%.

The subsidiary bank also has a one year line of credit agreement with the Federal Home Loan Bank (“FHLB”). The maximum credit available under this agreement is $7.0 million and expires December 2011. There were no borrowings outstanding under this agreement at December 31, 2006 and 2005, respectively.

Contractual maturities of FHLB borrowings as of December 31, 2006 were as follows:

December 31, 2007	$	44,226
December 31, 2008		46,378
December 31, 2009		48,634
December 31, 2010		50,999
December 31, 2011		53,481
Thereafter		2,099,000
	$	2,342,718

NOTE 9 - OTHER BORROWINGS

The Company has a non-revolving line of credit of $3.0 million from a financial institution. The line of credit is secured by 126,200 shares of Progressive Bank, N.A. stock. The note bears an interest rate of prime and is adjustable quarterly. The note matures in May 2015. The Company’s initial borrowing under the loan amounted to $2.0 million. There were no outstanding borrowings as of December 31, 2006 and as of December 31, 2005 outstanding borrowings amounted to $1.0 million with an interest rate of 7.25%.

NOTE 10 - CONCENTRATIONS OF CREDIT RISK

Most of the affiliate Bank’s loans and commitments have been granted to customers in the Bank’s primary market area of Northern and Central West Virginia, Eastern Ohio, and Southwestern Pennsylvania. In the normal course of business, however, the Bank has purchased participations and originated loans outside of its primary market area. The aggregate loan balances outstanding in any one geographic area, other than the Bank’s primary lending areas, do not exceed 10 percent of total loans. Concentrations of credit are measured by categorizing loans by the North American Industry Classification codes. Loans equal to or exceeding 25% of Tier I Capital are considered concentrations of credit. At December 31, 2006 concentrations of credit were as follows:

	Amount		Percent of Tier 1 Capital
Lessors of Residential Buildings and Dwellings	$	8,746,928	36.7	%
Lessors of Nonresidential Buildings		8,648,210	36.3	%

NOTE 11 - RELATED PARTY TRANSACTIONS

Directors and officers of the Company and its subsidiary, and their associates, were customers of, and had other transactions with the subsidiary bank in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectibility. Such loans totaled $1,592,083 at December 31, 2006, and $3,394,123 at December 31, 2005.

The following is an analysis of loan activity to directors, executive officers, and associates of the Company and its subsidiary:

	December 31,
	2006			2005
Balance, January 1	$	3,394,123		$	4,978,829
New loans during the period		477,100			631,503
Repayments during the period		(2,279,140	)		(2,216,209	)
Ending balance	$	1,592,083		$	3,394,123

The Company’s subsidiary bank entered into a lease agreement to rent property for use as banking premises from a company owned by one of the Company’s directors. The lease has an initial term of 5 years, at an annual rental fee of $57,600, with options to renew for eight 5-year terms.

14

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The subsidiary Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The following represents financial instruments whose contract amounts represent credit risk:

	2006		2005
Commitments to extend credit	$	16,174,000	$	14,202,000
Standby letters of credit		94,000		539,000

As of December 31, 2006, approximately $3,997,000 are fixed interest rate commitments and $12,271,000 are variable interest rate commitments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The standby letters of credit in the amount of $15,000 expire in 2007, $9,000 in 2008 and $70,000 in 2015. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

The Company and its subsidiary are parties to various legal and administrative proceedings and claims. Although any litigation contains an element of uncertainty, management believes that the outcome of these events will not have a material effect on the financial position of the Company.

NOTE 13 - LEASES

The Company’s Bank affiliates leased certain land used for banking purposes under long-term leases, expiring at various dates. These leases contain renewal options and generally provide that the Company will pay for insurance, taxes, and maintenance.

As of December 31, 2006, the future minimum rental payments required under noncancelable operating leases with initial terms in excess of one year are as follows:

December 31, 2007	$	162,657
December 31, 2008		93,877
December 31, 2009		87,277
December 31, 2010		45,097
December 31, 2011		45,097
Thereafter		67,645

Rental expense under operating leases approximated $212,711 in 2006; $214,092 in 2005; and $165,000 in 2004.

NOTE 14 - EMPLOYEE BENEFIT PLANS

The Company has a non-contributory profit sharing plan for employees meeting certain service requirements. The Company makes annual contributions to the profit sharing plan based on income of the Company as defined. Total expenses for the plan were $102,500, $98,070, and $172,000 for the years ended December 31, 2006, 2005, and 2004, respectively.

The Company also offers a 401(k) plan in which it matches a portion of the employee’s contribution up to 4 percent of their salary. The expense related to the 401(k) plan was $22,494, $23,726, and $24,209 in 2006, 2005, and 2004, respectively.

15

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 15 - INCOME TAX

The provisions for income taxes at December 31 consist of:

	2006			2005		2004
Currently payable:
Federal	$	434,266		$	422,522	$	752,530
State		128,803			116,913		191,962
Deferred:
Federal		(47,501	)		1,837		(113,970	)
State		(10,969	)		497		(19,508	)
Income tax expense	$	504,599		$	541,769	$	811,014

The following temporary differences gave rise to the deferred tax asset at December 31:

	2006			2005
Allowance for loan losses	$	807,121		$	825,112
Deferred loan fees		60,357			69,426
Accrued interest on nonperforming loans		209,154			156,350
Deferred compensation		125,301			113,382
Deferred directors’ fees		—			9,588
Depreciation		61,922			38,287
Amortization		93,879			77,785
Deferred state income tax		(74,675	)		(70,946	)
Total deferred tax asset - federal		1,283,059			1,218,984
Total deferred tax asset - state		219,634			208,665
		1,502,693			1,427,649
Deferred tax assets arising from market adjustments of securities available for sale:
Federal		355,470			528,622
State		60,849			90,489
Net deferred tax assets	$	1,919,012		$	2,046,760

A reconciliation between the amount of reported income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the year ended December 31 is as follows:

	2006					2005					2004
	Amount			Percent		Amount			Percent		Amount			Percent
Computed tax at statutory federal rate	$	900,464		34.0	%	$	953,372		34.0	%	$	1,172,435		34.0	%
Plus state income taxes net of federal tax benefits		77,817		2.9	%		77,491		2.8	%		98,892		2.9	%
		978,281		36.9	%		1,030,863		36.8	%		1,271,327		36.9	%
Increase (decrease) in taxes resulting from:
Tax exempt income		(461,564	)	(17.4	)%		(437,632	)	(15.6	)%		(443,697	)	(12.9	)%
Nontaxable goodwill		(37,267	)	(1.4	)%		(37,267	)	(1.3	)%		(37,267	)	(1.1	)%
Nondeductible interest expense		43,079		1.6	%		32,396		1.1	%		32,256		0.9	%
Bank-owned life insurance		(38,670	)	(1.5	)%		(38,506	)	(1.4	)%		(27,446	)	(0.8	)%
Other - net		20,740		0.9	%		(8,085	)	(0.3	)%		15,841		0.5	%
Actual tax expense	$	504,599		19.1	%	$	541,769		19.3	%	$	811,014		23.5	%

NOTE 16 - RESTRICTION ON CASH

The subsidiary bank is required to maintain an average reserve balance with the Federal Reserve Bank or in cash on hand. The average required reserve balances for the years ended December 31, 2006 and 2005, were $1,973,000 and $2,618,000, respectively.

NOTE 17 - LIMITATIONS ON DIVIDENDS

The approval of the Comptroller of the Currency is required to pay dividends if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits (as defined) for the year, combined with its retained net profits of the preceding two years. Under this formula, the Company’s subsidiary bank can declare dividends in 2007, without approval of the Comptroller of the Currency, of approximately $250,000, plus an additional amount equal to the bank’s net profit for 2007 up to the date of any such dividend declaration. The subsidiary bank is the primary source of funds to pay dividends to the stockholders of First West Virginia Bancorp, Inc.

16

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 18 - OTHER OPERATING EXPENSES

Other operating expenses at December 31 included the following:

	2006		2005		2004
Directors’ fees	$	148,525	$	178,575	$	126,175
Stationery and supplies		172,268		170,350		141,031
Regulatory assessment and deposit insurance		212,922		187,384		117,354
Advertising		165,706		133,403		189,855
Postage and transportation		205,600		220,214		207,795
Other taxes		207,878		168,975		165,153
Service Expense		448,450		510,623		376,041
Other		867,509		979,926		808,694
Total	$	2,428,858	$	2,549,450	$	2,132,098

NOTE 19 - REGULATORY MATTERS

The Company’s subsidiary bank entered into a Formal Agreement with the Office of the Comptroller of the Currency (OCC) in December 2004. The Formal Agreement contained certain required actions and certain restrictions. This agreement was terminated by the OCC on December 13, 2006. The Company 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 necessitated certain actions and restrictions. Without prior Federal Reserve approval and a 30 day prior notice requirement, the resolution prohibited 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. The resolution was terminated by the Federal Reserve Bank of Cleveland effective as of January 30, 2007.

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 December 31, 2006, the most recent notifications from the Office of the Comptroller of the Currency categorized the bank as well 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 of the Company and its subsidiary bank, along with the regulatory framework for adequately capitalized and well capitalized institutions are depicted as set forth in the following table:

	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
(Amounts Expressed in Thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
First West Virginia Bancorp, Inc.
As of December 31, 2006
Total Capital (to Risk Weighted Assets)	$	26,014	18.20	%	$	11,436	8.0	%	$	14,296	10.0	%
Tier I Capital (to Risk Weighted Assets)		24,227	16.95	%		5,718	4.0	%		8,577	6.0	%
Tier I Capital (to Adjusted Total Assets)		24,227	9.41	%		10,301	4.0	%		12,876	5.0	%
As of December 31, 2005
Total Capital (to Risk Weighted Assets)	$	25,073	16.08	%	$	12,476	8.0	%	$	15,595	10.0	%
Tier I Capital (to Risk Weighted Assets)		23,124	14.83	%		6,238	4.0	%		9,357	6.0	%
Tier I Capital (to Adjusted Total Assets)		23,124	8.83	%		10,480	4.0	%		13,100	5.0	%
Progressive Bank, N.A.
As of December 31, 2006
Total Capital (to Risk Weighted Assets)	$	25,636	18.00	%	$	11,396	8.0	%	$	14,245	10.0	%
Tier I Capital (to Risk Weighted Assets)		23,849	16.74	%		5,698	4.0	%		8,547	6.0	%
Tier I Capital (to Adjusted Total Assets)		23,849	9.27	%		10,287	4.0	%		12,859	5.0	%
As of December 31, 2005
Total Capital (to Risk Weighted Assets)	$	25,701	16.53	%	$	12,442	8.0	%	$	15,552	10.0	%
Tier I Capital (to Risk Weighted Assets)		23,752	15.27	%		6,221	4.0	%		9,331	6.0	%
Tier I Capital (to Adjusted Total Assets)		23,752	9.09	%		10,449	4.0	%		13,061	5.0	%

17

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 20 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The reported fair values of financial instruments are based on a variety of factors. Where possible, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk. Intangible values assigned to customer relationships are not reflected in the reported fair values. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of year end or that will be realized in the future.

The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amount for cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans: Fair values for net loans are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, real estate, and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and non-performing categories. The fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated discount rates which reflect credit and interest rate risks inherent to the loan.

Bank Owned Life Insurance: The carrying amount of bank owned life insurance represents the cash surrender value of the underlying insurance policies, if such policies were terminated. Management believes that the carrying amount approximates the fair value.

Accrued interest receivable: The carrying amount of accrued interest receivable approximates its fair value.

Deposits: The carrying amount for noninterest bearing and interest bearing demand deposits and savings deposits is considered to be a reasonable estimate of fair value. Fair values for time deposits are estimated using discounted cash flow analysis. Discount rates reflect rates currently offered for deposits of similar remaining maturities.

Federal Funds Purchased and Repurchase Agreements: The carrying amount for federal funds purchased and repurchase agreements are considered to be a reasonable estimate of fair value.

Federal Home Loan Bank and other long term borrowings: The fair value of FHLB and other long term borrowings is based on the interest rates currently charged for borrowings with similar terms and maturities.

Accrued Interest Payable: The carrying amount of accrued interest payable approximates it fair value.

Off-Balance-Sheet Instruments: The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The amount of fees currently charged on commitments is determined to be insignificant and, therefore, the carrying value and fair value of off-balance-sheet instruments are not shown.

The estimates of fair values of financial instruments are summarized as follows at December 31:

	2006				2005
(Amounts Expressed in Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	11,372	$	11,372	$	11,749	$	11,749
Investment securities		110,895		110,911		107,998		108,033
Loans		118,412		117,560		132,894		130,642
Bank owned life insurance		3,308		3,308		3,194		3,194
Accrued interest receivable		1,263		1,263		1,255		1,255
Financial liabilities:
Deposits		210,409		208,464		218,817		216,859
Federal funds purchased and repurchase agreements		15,240		15,239		19,084		19,080
FHLB and other long term borrowings		2,343		2,343		3,385		3,385
Accrued interest payable		597		597		404		404

18

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 21 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

Presented below are the condensed statements of financial condition, statements of income, and statements of cash flows for First West Virginia Bancorp, Inc.

BALANCE SHEETS

	December 31,
	2006		2005
ASSETS
Cash	$	212,344	$	116,792
Investment securities available-for-sale (at fair value)		381,354		399,308
Investment in subsidiary bank		24,898,678		24,520,762
Other assets		154,140		255,243
Total assets	$	25,646,516	$	25,292,105
LIABILITIES
Deferred compensation	$	369,562	$	333,476
Other borrowings		—		1,000,000
Total liabilities		369,562		1,333,476
STOCKHOLDERS’ EQUITY		25,276,954		23,958,629
Total liabilities and stockholders’ equity	$	25,646,516	$	25,292,105

STATEMENTS OF INCOME

	Year Ended December 31,
	2006		2005		2004
INCOME
Dividends from subsidiary bank	$	2,185,784	$	2,090,512	$	1,186,280
Gains (losses) on sales of investment securities		45,668		47,469		(1,708	)
Other income		155,071		117,241		180,100
Total income		2,386,523		2,255,222		1,364,672
EXPENSES
Salary and employee benefits		88,638		69,192		48,994
Interest expense		29,194		69,778		—
Other expenses		164,224		153,447		142,334
Total expenses		282,056		292,417		191,328
Income before income taxes and undistributed net income of subsidiary		2,104,467		1,962,805		1,173,344
Income tax benefit		30,622		52,930		974
Equity in undistributed net income of subsidiary		8,735		246,530		1,463,007
NET INCOME	$	2,143,824	$	2,262,265	$	2,637,325

19

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004

NOTE 21 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005			2004
OPERATING ACTIVITIES
Net income	$	2,143,824		$	2,262,265		$	2,637,325
Adjustments to reconcile net income to net cash provided by operating activities:
Change in deferred tax benefit		(13,192	)		109,755			(3,845	)
Undistributed earnings of affiliate		(8,735	)		(246,530	)		(1,463,007	)
Changes in operating assets and liabilities:
Other assets		134,243			257,529			(41,936	)
Deferred compensation		36,085			(260,578	)		(20,388	)
Other liabilities		—			(183,391	)		51,552
Net (gains) losses on sales of investment securities		(45,668	)		(47,469	)		1,708
Net cash provided by operating activities		2,246,557			1,891,581			1,161,409
INVESTING ACTIVITIES
Payments for investments in subsidiary		—			(2,000,000	)		—
Proceeds from sales of securities		447,067			406,440			73,046
Purchases of investment securities		(436,456	)		(99,489	)		(106,879	)
Net cash provided by (used in) investing		10,611			(1,693,049	)		(33,833	)
FINANCING ACTIVITIES
Proceeds from borrowings		—			2,000,000			—
Repayment of borrowings		(1,000,000	)		(1,000,000	)		—
Dividends paid		(1,161,616	)		(1,161,616	)		(1,161,616	)
Net cash used in financing activities		(2,161,616	)		(161,616	)		(1,161,616	)
Net increase (decrease) in cash and cash equivalents		95,552			36,916			(34,040	)
Cash and cash equivalents at beginning of year		116,792			79,876			113,916
Cash and cash equivalents at end of year	$	212,344		$	116,792		$	79,876
Supplemental disclosures:
Cash paid for interest	$	32,111		$	66,861		$	—
Cash paid for income taxes		—			—			500

20

Management’s Responsibility For Financial Statements

The Company’s consolidated financial statements and the related information appearing in this Annual Report were prepared by management in accordance with generally accepted accounting principles and where appropriate reflect management’s best estimates and judgment. The financial statements and the information related to those statements contained in the Annual Report are the responsibility of management.

The accounting systems of the Company include internal accounting controls which safeguard the Company’s assets from material loss or misuse and ensure that transactions are properly authorized and recorded in its financial records, and designed to provide reasonable assurance as to the integrity and reliability of the financial records. There are inherent limitations in all systems of internal control based on the recognition that the cost of such systems should not exceed the benefits to be derived. The accounting system and related controls are reviewed by a program of internal audits performed by the internal auditor and independent auditors.

Our independent auditors are responsible for auditing the Company’s financial statements in accordance with generally accepted auditing standards and to provide an objective, independent review of the fairness of reported operating results and financial position of the Company.

The Company’s internal auditor and independent auditors have direct access to the Audit committee of the Board of Directors. This committee meets periodically with the internal auditor, the independent auditors, and management to ensure the financial accounting and audit process is properly conducted.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

First West Virginia Bancorp, Inc.

Wheeling, West Virginia

We have audited the accompanying consolidated balance sheets of First West Virginia Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First West Virginia Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the results of its operations, and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ S.R. Snodgrass, A.C.

Wheeling, West Virginia

February 28, 2007

S.R. Snodgrass, A.C.

980 National Road Wheeling, WV 26003-6400 Phone: 304-233-5030 Facsimile: 304-233-3062

21

Table One

SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data)

	December 31,
	2006			2005			2004			2003			2002
SUMMARY OF OPERATIONS
Total interest income	$	13,772		$	13,128		$	13,406		$	13,319		$	14,309
Total interest expense		4,943			4,070			4,195			4,603			5,101
Net interest income		8,829			9,058			9,211			8,716			9,208
Provision for loan losses		—			180			300			435			540
Total other income		1,433			1,378			1,284			1,346			1,033
Total other expenses		7,614			7,451			6,747			6,342			6,062
Income before income taxes		2,648			2,804			3,448			3,285			3,639
Net income		2,144			2,262			2,637			2,518			2,674
PER SHARE DATA
Net income	$	1.40		$	1.48		$	1.73		$	1.64		$	1.74
Cash dividends declared		0.76			0.76			0.76			0.73			0.69
Book value per share		16.54			15.68			15.67			15.07			14.60
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	129,997		$	144,528		$	151,562		$	137,826		$	131,383
Investment securities		109,533			102,882			110,528			117,758			93,962
Deposits - interest bearing		190,160			200,902			215,937			217,064			200,170
Stockholders’ equity		25,416			24,409			23,092			21,884			20,302
Total assets		262,946			270,500			284,930			277,952			252,543
BALANCE SHEET
Investments	$	110,894		$	107,998		$	106,561		$	119,245		$	108,065
Loans		120,709			135,214			154,331			146,711			136,772
Allowance for loan losses		(2,297	)		(2,320	)		(2,356	)		(2,305	)		(2,027	)
Other assets		25,132			25,321			21,266			20,460			21,544
Total Assets	$	254,438		$	266,213		$	279,802		$	284,111		$	264,354
Deposits	$	210,409		$	218,817		$	236,171		$	241,947		$	231,376
Federal funds purchased and repurchase agreements		15,240			19,084			15,759			15,089			9,038
FHLB borrowings		2,343			2,385			2,425			2,464			—
Other long-term borrowings		—			1,000			—			—			—
Other liabilities		1,169			968			1,494			1,580			1,480
Stockholders’ equity		25,277			23,959			23,953			23,031			22,460
Total Liabilities and Stockholders’ equity	$	254,438		$	266,213		$	279,802		$	284,111		$	264,354
SELECTED RATIOS
Return on average assets		0.82	%		0.84	%		0.93	%		0.91	%		1.06	%
Return on average equity		8.44	%		9.27	%		11.42	%		11.51	%		13.17	%
Average equity to average assets		9.67	%		9.02	%		8.10	%		7.87	%		8.04	%
Dividend payout ratio		54.29	%		51.35	%		43.93	%		44.51	%		39.66	%
Loan to Deposit ratio		57.37	%		61.79	%		65.35	%		60.64	%		59.11	%

22

First West Virginia Bancorp, Inc.

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

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 Company’s accounting policies are integral to understanding the results reported. The accounting policies are described in detail in Note 1 of the Consolidated Financial Statements. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. Detailed policies and control procedures have been established and are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of our current accounting policies involving significant management valuation judgments.

Other Than Temporary Impairment of Equity Securities: Equity securities are evaluated periodically to determine whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other than temporary” is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

Allowance for Loan Losses: Arriving at an appropriate level of allowance for loan losses involves a high degree of judgment. The Company’s allowance for loan losses provides for probable losses based upon evaluations of known, and inherent risks in the loan portfolio. Management uses historical information to assess the adequacy of the allowance for loan losses as well as the prevailing business environment; as it is affected by changing economic conditions and various external factors, which may impact the portfolio in ways currently unforeseen. The allowance is increased by provisions for loan losses and by recoveries of loans previously charged-off and reduced by loans charged-off. For a full discussion of the Company’s methodology of assessing the adequacy of the reserve for loan losses, refer to Note 1 of the Consolidated Financial Statements.

Goodwill and Other Intangible Assets: As discussed in Note 1 of the notes to the Consolidated Financial Statements, the Company must assess goodwill and other intangible assets each year for impairment. This assessment involves estimating cash flows for future periods. If the future cash flows were less than the recorded goodwill and other intangible assets balances, we would be required to take a charge against earnings to write down the assets to the lower value.

Deferred Tax Assets: The Company uses an estimate of future earnings to support its position that the benefit of the deferred tax assets will be realized. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be realized and our net income will be reduced. The deferred tax assets are described further in Note 1 of the Consolidated Financial Statements.

OVERVIEW

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 years ended December 31, 2006, 2005 and 2004. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes, thereto.

The Company reported net income of $2,143,824 or $1.40 per share for the year ended December 31, 2006 as compared to $2,262,265 or $1.48 per share for the year ended December 31, 2005. The decline in net income during 2006 over 2005 of $118,441 or 5.2% was primarily the result of a decline in net interest income combined with an increase in noninterest expenses which were offset in part by an increase in noninterest income and the decrease in the provision for loan losses. During 2006 as compared to 2005, net interest income fell primarily due to an increase in the interest paid on interest bearing liabilities combined with a decline in the interest earned on loans, offset in part by an increase in the interest earned on investment securities. Noninterest expenses rose $162,602 or 2.2% in 2006 over 2005 and was primarily due to increased salary and employee benefit costs which were offset in part by a decline in other operating expenses. Noninterest income increased $55,436 or 4.0% and was primarily attributable to the increase in service charges and other fee income which were offset in part by a decrease in net gains on sales of investment securities and other operating income. Operating expenses fell $120,592 or 4.7% in 2006 over 2005 and was primarily due to the reduction in service expenses, director fees, postage and transportation expenses and other expenses which were partially offset by increases in other taxes, advertising expenses and regulatory assessments. The provision for loan losses decreased $180,000 in 2006 over 2005 and was primarily the result of the decline in the loan volume combined with the improvement in the asset quality of the loan portfolio. The return on average assets was .82% as of December 31, 2006 compared to .84% in 2005. The return on average equity was 8.44% at December 31, 2006 compared to 9.27% in 2005. The Board of Directors declared and paid cash dividends of $.76 per share during 2006.

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.

23

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Table Two - Average Balance Sheets and Interest Rate Analysis

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 years ended December 31, 2006, 2005, and 2004. Average balance sheet information as of December 31, 2006, 2005, and 2004 was compiled using the daily average balance sheet. Total loans are gross of the allowance for loan losses, net of unearned income and include loans held for sale. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification. 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.

(dollars in thousands)	December 31, 2006						December 31, 2005						December 31, 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	$	40,506	$	1,577	3.89	%	$	45,684	$	1,492	3.27	%	$	47,484	$	1,457	3.07	%
Mortgage backed securities		46,682		2,228	4.77	%		37,239		1,460	3.92	%		39,313		1,346	3.42	%
States and political subdivisions		22,003		812	3.69	%		19,050		697	3.66	%		20,005		728	3.64	%
Other securities		342		40	11.70	%		909		36	3.96	%		3,726		193	5.18	%
Total Investment securities:		109,533		4,657	4.25	%		102,882		3,685	3.58	%		110,528		3,724	3.37	%
Interest bearing deposits		1,623		83	5.11	%		881		29	3.29	%		993		11	1.11	%
Federal funds sold		5,701		280	4.91	%		5,646		178	3.15	%		6,041		77	1.27	%
Loans, net of unearned income		129,997		8,703	6.69	%		144,528		9,208	6.37	%		151,562		9,572	6.32	%
Other earning assets		887		49	5.52	%		1,257		28	2.23	%		930		22	2.37	%
Total earning assets		247,741		13,772	5.56	%		255,194		13,128	5.14	%		270,054		13,406	4.96	%
Other assets		15,205						15,306						14,876
Total Assets	$	262,946					$	270,500					$	284,930
LIABILITIES
Time deposits	$	92,141	$	3,495	3.79	%	$	83,666	$	2,750	3.29	%	$	87,972	$	2,786	3.17	%
Savings deposits		61,757		522	0.85	%		78,648		704	0.90	%		88,786		879	0.99	%
Interest bearing demand deposits		36,262		128	0.35	%		38,588		120	0.31	%		39,179		127	0.32	%
Federal funds purchased and repurchase agreements		18,891		656	3.47	%		13,894		312	2.25	%		16,906		286	1.69	%
FHLB and other long-term borrowings		2,753		142	5.16	%		3,501		184	5.26	%		2,444		117	4.79	%
Total interest bearing liabilities		211,804		4,943	2.33	%		218,297		4,070	1.86	%		235,287		4,195	1.78	%
Noninterest bearing demand deposits		24,537						26,388						24,885
Other liabilities		1,189						1,406						1,666
Total Liabilities		237,530						246,091						261,838
STOCKHOLDERS’ EQUITY		25,416						24,409						23,092
Total Liabilities and Stockholders’ Equity	$	262,946					$	270,500					$	284,930
Net yield on earning assets			$	8,829	3.56	%			$	9,058	3.55	%			$	9,211	3.41	%

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 2006, 2005, and 2004, respectively. The effect of this adjustment is presented below.

Investment securities	$	109,533	$	5,178	4.73	%	$	102,882	$	4,110	3.99	%	$	110,528	$	4,165	3.77	%
Loans		129,997		9,087	6.99	%		144,528		9,641	6.67	%		151,562		10,000	6.60	%
Total earning assets	$	247,741	$	14,677	5.92	%	$	255,194	$	13,986	5.48	%	$	270,054	$	14,275	5.29	%
Taxable equivalent net yield on earning assets			$	9,734	3.93	%			$	9,916	3.89	%			$	10,080	3.73	%

24

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

EARNINGS ANALYSIS

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 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. Tables Two and Three analyze the changes in net interest income for the three years ended December 31, 2006, 2005, and 2004.

Net interest income decreased $228,445 or 2.5% in 2006 compared to 2005, and follows a decrease in 2005 of $153,774 or 1.7% from 2004. During 2006, the decrease in net interest income was primarily due to a decline in the interest earned on loans combined with the increase in the interest paid on interest bearing liabilities, offset in part by an increase in the interest earned on investment securities. The decrease in net interest income in 2005 was primarily due to the decline in the interest earned on loans and investment securities, offset in part by a decrease in the average volume of interest bearing liabilities. 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 3.93% for 2006, as compared to 3.89% and 3.73% earned during 2005 and 2004, respectively.

Interest and fees on loans decreased $505,268 or 5.5% from 2005 to 2006, after decreasing $364,392 or 3.8% from 2004 to 2005. Interest and fees on loans declined in 2006 as compared to 2005 primarily due to the decline in the average volume of loans which was partially offset by an increase in the yield earned on the loan portfolio. The average loan volume decreased $14.5 million or 10.1% in 2006 as compared to 2005 after declining $7.0 million or 4.6% in 2005 as compared to 2004. During 2006, the decline in loan volume was primarily due to loan payoffs and the decreased demand for quality loans as a result of the higher interest rate environment and the increased competition from other lending companies and institutions. The taxable equivalent yield on loans rose 32 basis points in 2006, from 6.67% in 2005 to 6.99% in 2006, after rising 7 basis points in 2005, from 6.60% in 2004 to 6.67% in 2005.

Interest income on investment securities in 2006 increased $972,372 or 26.4% over 2005, and follows a decrease of $39,567 or 1.1% over 2004. The increase in the interest rates earned on investment securities combined with an increase in the average volume of investment securities contributed to the increase in interest income on investment securities. The taxable equivalent yield on investment securities rose 74 basis points in 2006, from 3.99% in 2005 to 4.73% in 2006, and follows an increase in 2005 of 22 basis points, from 3.77% in 2004 to 3.99% in 2005. The activity of the investment securities portfolio also increased with the average volume increasing $6.7 million or 6.5% in 2006 as compared to 2005, and follows a decrease of $7.6 million or 6.9% in 2005 as compared to 2004. In 2005, the decline in the average volume of investment securities offset in part by the increase in the interest rates earned contributed to the decrease in interest earned on investment securities.

Interest expense in 2006 increased $871,961 or 21.4% from 2005, compared to a decrease in 2005 of $124,088 or 3.0% from 2004. In 2006, the rise in interest expense was primarily due to an increase in the average rates paid on interest bearing liabilities. During 2006, the rates paid on interest bearing liabilities rose primarily due to the rise in interest rates paid on deposit products to meet competitive market pressures in a higher interest rate environment and due to a change in the deposit mix from savings deposits to certificates of deposit as result of customers seeking higher yielding deposit products. The increase in the average volume of time deposits and repurchase agreements offset in part by the decline in the average volume of savings deposits and FHLB borrowings also contributed to the rise in interest expense in 2006. In 2005, the decline in the average volume of interest bearing liabilities which was offset in part by the rise in interest rates primarily contributed to the overall decline in interest expense. The average yield paid on interest bearing liabilities during 2006 increased 47 basis points, from 1.86% in 2005 to 2.33% in 2006, and follows an increase in 2005 of 8 basis points, from 1.78% in 2004 to 1.86% in 2005. The average volume of interest bearing liabilities declined $6.5 million or 3.0% in 2006 compared to 2005, after decreasing $17.0 million or 7.2% in 2005 as compared to 2004.

Noninterest Income

Noninterest income is comprised of service charges, investment securities gains and losses, and other operating income. Noninterest income increased $55,436 or 4.0%, in 2006 as compared to an increase of $94,087 or 7.3% in 2005. The increase in noninterest income in 2006 as compared to 2005 was primarily due to an increase in service charges and other fees which was offset in part by declines in the gains on sales of investment securities and other operating income. In 2005, noninterest income primarily increased due to the nonrecurring gains on sales of investment securities offset in part by a decline in service charges and other fee income.

Service charges and other fees represent the major component of noninterest income. These charges are earned from assessments made on checking and savings accounts. Service charges increased $139,303 in 2006, up 18.0%, from 2005, as compared to an decrease of 3.0% from 2004 to 2005. The increase in service charges primarily resulted from the additional fee income from the overdraft protection program implemented in December 2005. The decrease in service charges during 2005 as compared to 2004 primarily resulted from a decline in the service charge fees and overdraft fees assessed on deposit accounts.

Sales of investment securities by the subsidiary bank are generally limited to the needs established under the liquidity policies. Net gains on sales of investment securities decreased $72,765 or 61.4% in 2006 as compared to 2005. The decline in net gains on sales of investment securities was primarily attributable to the nonrecurring sales realized in 2005. During 2006, the Company accounted for securities gains of $67,074 and securities losses of $21,406 which were attributable to sales of securities available for sale. In 2005, the Company and its subsidiary bank accounted for securities gains of $144,770 and securities losses of $26,337 which were attributable to sales of securities available for sale. During 2004, securities gains of 14,277 and securities losses of $9,512 which were sales of securities available for sale were recorded by the Company and its subsidiary bank.

25

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Table Three - Rate Volume Analysis of Changes in Interest Income and Expense

The effect on interest income and interest expense for the years ended December 31, 2006 and 2005 due to changes in average volume and rate from the prior year, is presented below. The effect of a change in average volume has been determined by applying the average rate to the change in volume. The change in rate has been determined by applying the average volume in the earlier year by the change in rate. The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of change in each.

(in thousands)	2006 Compared to 2005									2005 Compared to 2004
	Increase (Decrease) Due to Change in:									Increase (Decrease) Due to Change in:
	Average Volume			Rate			Net increase (decrease)			Average Volume			Rate			Net increase (decrease)
INTEREST INCOME FROM:
U.S. Treasury and other U. S.
Government agencies	$	(169	)	$	254		$	85		$	(55	)	$	90		$	35
Mortgage backed securities		370			398			768			(71	)		185			114
Obligations of states and political subdivisions		108			7			115			(35	)		4			(31	)
Other securities		(22	)		26			4			(146	)		(11	)		(157	)
Total investment securities		287			685			972			(307	)		268			(39	)
Interest bearing deposits		24			30			54			(1	)		19			18
Federal funds sold		2			100			102			(5	)		106			101
Loans, net of unearned income		(926	)		421			(505	)		(444	)		80			(364	)
Other earning assets		(8	)		29			21			7			(1	)		6
Total interest earned		(621	)		1,265			644			(750	)		472			(278	)
INTEREST EXPENSE ON:
Time deposits		279			466			745			(136	)		100			(36	)
Savings deposits		(151	)		(31	)		(182	)		(100	)		(75	)		(175	)
Interest bearing demand deposits		(7	)		15			8			(2	)		(5	)		(7	)
Federal funds purchased and repurchase agreements		112			232			344			(51	)		77			26
FHLB and other long-term borrowings		(39	)		(3	)		(42	)		50			17			67
Total interest paid		194			679			873			(239	)		114			(125	)
Net interest differential	$	(815	)	$	586		$	(229	)	$	(511	)	$	358		$	(153	)

Presented below is the effect on volume and rate variances of the adjustment of interest income on obligations of states and political subdivisions to the fully taxable equivalent basis using a combined Federal and State corporate income tax rate of 40% for the years ended 2006, 2005, and 2004, respectively.

Investment securities	$	266		$	802	$	1,068		$	(288	)	$	233	$	(55	)
Loans		(969	)		415		(554	)		(464	)		105		(359	)
Total interest earned	$	(685	)	$	1,376	$	691		$	(751	)	$	462	$	(289	)
Net interest differential	$	(879	)	$	697	$	(182	)	$	(512	)	$	348	$	(164	)

26

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Noninterest Income - Continued

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, income earned on bank owned life insurance and various other charges and fees related to normal customer banking relationships. Other operating income decreased $11,102 or 2.3% in 2006 as compared to 2005. During 2006, the decline in other operating income was primarily due to a reduction in nonrecurring gains on sales of assets and other miscellaneous income, offset in part by increases in ATM fees and income earned on loans sold to the FHLB. Other operating income increased $4,424 or .9% in 2005 as compared to 2004. During 2005, the increase in other operating income resulted primarily from an increase in earnings related to the cash surrender value of the bank owned life insurance on its key officers and ATM fees, offset in part by the reduction in nonrecurring gains on sales of assets and a decrease in income related to the sales of checkbooks and other credit card fees.

Noninterest Expense

Noninterest expenses are comprised of salaries and employee benefits, net occupancy of premises and other operating expenses. In 2006, noninterest expenses increased $162,602 or 2.2% over 2005, and follows an increase of $704,618 or 10.4% in 2005 over 2004. The increase in noninterest expenses in 2006 over 2005 was primarily due to an increase in salary and employee benefits and were offset in part by a decline in other operating expenses. The increase in noninterest expense in 2005 as compared to 2004 was primarily due to increases in other operating expenses, salary and employee benefits, and net occupancy expense.

Salary and employee benefits represent the largest component of noninterest expense. Salary and employee benefits increased $282,581 or 7.5% in 2006 over 2005. The increase in salary and employee benefit expense in 2006 was primarily due to the full year impact of hiring of additional personnel for lending development and operations, salary adjustments for key officers, the purchase of uniforms for bank personnel and normal annual merit adjustments. During 2005, salary and employee benefits increased $204,835 or 5.8% as compared to 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.

The major components of other operating expenses include: stationery and supplies, directors’ fees, service expense, postage and transportation, other taxes, advertising, and regulatory assessments and deposit insurance. Other operating expense decreased $120,592 or 4.7%, compared to the same period of the prior year. The decrease in other operating expense was primarily due a reduction in service expenses, directors fees, postage and transportation expense and in other expenses, offset in part by increases in other taxes, advertising, regulatory assessments, and stationery and supplies expense. During 2005, other operating expense increased $417,352, or 19.6%, over 2004 and was attributable primarily to the subsidiary bank’s compliance with the Formal Agreement resulting in increased service expenses and directors fees; compliance with the Sarbanes-Oxley Act Section 404 which resulted in increased internal audit fees and legal expenses; a loss on the sale of other real estate owned which amounted to $59,032; increased regulatory assessments; and the outsourcing of investment securities portfolio management, offset in part by decreased advertising expense and other taxes.

Occupancy expenses increased $613 or .1% in 2006 over 2005, and follows a increase of $82,431 or 7.8% in 2005 over 2004. Occupancy expenses have remained consistent with the previous year’s expense. 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 period ended December 31, 2006 was $504,599, a decrease of $37,170 or 6.9% over 2005 as compared to the decrease of $269,245 or 33.2% from 2004 to 2005. The decrease in pre-taxable income combined with the increase in tax exempt income primarily contributed to the reduction in income tax expense in 2006. The decrease in pre-taxable income primarily contributed to the reduction in income tax expense in 2005.

For federal income tax purposes, tax-exempt income is based on qualified state, county, and municipal bonds and loans. Tax-exempt income was $1,357,813 in 2006; $1,287,153 in 2005; and $1,301,770 in 2004. The state of West Virginia recognizes tax-exempt income based on the average of certain investments and loans held during the tax reporting period. Nontaxable items included are federal obligations and securities, obligations of West Virginia and West Virginia political subdivisions, investments of loans primarily secured by liens or security agreements on residential property and other real estate in the form of a mobile home, modular home or double-wide located in West Virginia. Nontaxable West Virginia income attributable to the foregoing items was approximately $1,113,000 in 2006; $1,271,000 in 2005; and $1,602,000 in 2004.

Components of the income tax expense for December 31, 2006 were $386,695 for federal taxes and $117,904 for West Virginia corporate net income taxes. Federal income tax rates and West Virginia corporate net income tax rates were consistent at 34% and 9%, respectively, for the years ended December 31, 2006, 2005 and 2004. Additional information regarding income taxes is contained in Note 15 to the Consolidated financial statements.

27

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

BALANCE SHEET ANALYSIS

Investments

Investment securities increased $2,895,810 or 2.7% from 2005, and followed an increase in 2005 of $1,437,381 or 1.4% from 2004. The investment portfolio is managed to attempt to achieve an optimum mix of asset quality, liquidity and maximum yield on investment. The investment portfolio consists of U.S. Treasury securities, U.S. Government agency and corporation securities, obligations of states and political subdivisions, mortgage-backed securities and equity securities. Taxable securities comprised 80.0% of total securities at December 31, 2006, as compared to 79.6% at December 31, 2005. Other than the normal risks inherent in purchasing U.S. Treasury securities, U.S. Government agency and corporation 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 stockholders’ equity until realized. Available for sale securities, at fair value increased $3,699,250 or 3.5% from 2005, and represented 99% of the investment portfolio at December 31, 2006. The increase in the available for sale securities was primarily due to the purchase of mortgage-backed securities and obligations of states and political subdivisions, offset in part by the maturities and calls of the U.S. Treasury and other U.S. government agency and corporation securities and equity securities. Investment securities held to maturity are securities purchased with the intent and ability to hold until their maturity. Securities classified as held to maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts. The held to maturity securities decreased $803,440 or 45.2% from 2005 and represented 1% of the investment portfolio as of December 31, 2006. The decrease in the held to maturity securities was primarily the result of maturities and calls of tax exempt municipal securities. As the investment portfolio consists primarily of fixed rate debt securities, changes in the market rates of interest will affect the carrying value of securities available for sale, adjusted upward or downward under the requirements of FAS 115 and represent temporary adjustments in value. The carrying values of securities available for sale were decreased by $1,106,350 and $1,645,259 at December 31, 2006 and 2005, respectively. The fair value of securities classified as held to maturity was above book value by $16,386 and by $34,539 at December 31, 2006 and 2005, respectively.

Table Four - Investment Portfolio

The maturity distribution using book value including accretion of discounts and amortization of premiums and approximate yield of investment securities at December 31, 2006 and December 31, 2005 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.

	December 31, 2006								December 31, 2005
	Securities Held to Maturity				Securities Available for Sale				Securities Held to Maturity				Securities Available for Sale
(dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
U. S. Treasury and other U.S. Government Agencies
Within One Year	$	—	—	%	$	5,051	3.12	%	$	—	—	%	$	8,722	2.65	%
After One But Within Five Years		—	—			30,819	4.37			—	—			30,659	3.91
After Five But Within Ten Years		—	—			141	5.95			—	—			1,017	4.43
After Ten Years		—	—			186	5.88			—	—			192	4.39
		—	—			36,197	4.21			—	—			40,590	3.65
States & Political Subdivisions
Within One Year		310	6.37			1,140	3.97			645	5.74			1,272	5.46
After One But Within Five Years		663	7.23			4,955	4.31			1,034	6.91			5,339	4.71
After Five But Within Ten Years		—	—			6,696	5.50			97	7.95			6,742	5.21
After Ten Years		—	—			8,893	5.76			—	—			6,635	6.09
		973	6.96			21,684	5.25			1,776	6.54			19,988	5.38
Mortgage-Backed Securities		—	—			51,665	5.07			—	—			45,254	4.70
Equity Securities		—	—			375	10.80			—	—			390	2.57
Total	$	973	6.96	%	$	109,921	4.84	%	$	1,776	6.54	%	$	106,222	4.42	%

28

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Loans

Loans represent the largest asset on the Company’s balance sheet. Total loans, net of unearned income, decreased $14,504,938 or 10.7% from 2005 to 2006. Total loans declined in 2006 primarily due to decreases in commercial loans, installment loans, residential real estate loans and other loans which decreased approximately $7,979,000, $3,175,000, $1,864,000 and $1,513,000, respectively. The decline in loans during 2006 was primarily attributed to a decreased demand for quality commercial loans as a result of increased competition from other lending companies and institutions, as well as the rise in the prime lending rate. From 2004 to 2005, total loans decreased $19,116,779 or 12.4%. The decline in loan volume in 2005 was primarily in commercial loans, residential real estate loans, installment loans and other loans which decreased approximately $9,483,000, $6,652,000, $1,676,000 and $1,322,000, respectively. The decrease in loans in 2005 was primarily due to large paydowns and payoffs to competitors, as well as initiated reductions to improve the asset quality of the loan portfolio. Other loans were also participated to financial institutions in order to restructure the bank’s balance sheet to achieve the minimum capital ratios established by the regulators.

Real estate residential loans which include real estate construction, real estate farmland, real estate residential loans and multi-family residential properties comprised thirty-six percent (36%) of the loan portfolio. Commercial loans which include real estate secured by non-farm, non-residential properties and commercial and industrial loans comprised forty-three percent (43%) of the loan portfolio. Installment loans comprised eleven percent (11%) 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 from 2005 to 2006 were a 3% increase in real estate residential loans, a 2% decrease in commercial loans and a 1% decrease in installment loans. From 2004 to 2005, the changes in the composition of the loan portfolio were a 1% increase in other loans and a 1% decrease in real estate residential loans.

Table Five

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

The following table presents the contractual maturities of loans other than installment loans and residential mortgages as of December 31, 2006 and 2005:

	December 31, 2006						December 31, 2005
(dollars in thousands)	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	$	430	$	400	$	375	$	31	$	369	$	359
Commercial real estate - secured by nonfarm, nonresidential property		1,977		3,247		38,886		1,273		1,966		43,348
Commercial and industrial		2,437		3,390		2,392		559		7,205		5,957
Nonrated industrial development obligations		526		2,944		8,185		402		3,027		9,784
Total	$	5,370	$	9,981	$	49,838	$	2,265	$	12,567	$	59,448

The following table presents an analysis of fixed and variable rate loans as of December 31, 2006 and 2005 along with the contractual maturities of loans other than installment loans and residential mortgages:

	December 31, 2006						December 31, 2005
(dollars in thousands)	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	$	2,110	$	5,804	$	8,609	$	747	$	7,805	$	9,156
Variable Rates		3,260		4,177		41,229		1,518		4,762		50,292
Total	$	5,370	$	9,981	$	49,838	$	2,265	$	12,567	$	59,448

29

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Loans Held for Sale

The Company has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which the bank may sell conforming one-to-four family residential mortgage loans to the FHLB. The agreement provides for a maximum commitment of $5,000,000. Loans sold to the FHLB are sold with limited recourse or credit risk up to a maximum amount of $125,000 based upon utilization of the original commitment. The bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold under this agreement is $1,487,168 as of December 31, 2006 which are subject to recourse obligation or credit risk in the amount of $31,385.

Non-performing Loans

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 five-year summary of nonperforming assets is presented in Table Six.

Total non-performing loans were $3,383,000 at December 31, 2006 as compared to $1,510,000 at December 31, 2005. Non-performing loans increased $1,873,000 in 2006, after decreasing $132,000 in 2005. An increase in non-accrual loans, offset by the decreases in loans past due 90 days or more and other real estate owned, primarily contributed to the overall increase in non-performing loans in 2006.

Table Six - 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:

	December 31,
(dollars in thousands)	2006			2005		2004		2003			2002
Past Due 90 Days or More:
Real Estate - residential	$	—		85		—		$	52		$	61
Commercial		—		—		6			—			—
Installment		3		5		11			6			15
		3		90		17		$	58		$	76
Non-accrual:
Real Estate - residential	$	958		64		74		$	12		$	115
Commercial		2,409		1,262		1,357			2,052			1,443
Installment		13		41		10			35			9
	$	3,380		1,367		1,441		$	2,099		$	1,567
Other Real Estate	$	—		53		184		$	12		$	39
Total non-performing assets	$	3,383		1,510		1,642		$	2,169		$	1,682
Total non-performing assets to total loans and other real estate		2.80	%	1.12	%	1.06	%		1.48	%		1.23	%

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 $3,380,000 or 2.8% of total loans outstanding as of December 31, 2006, as compared to $1,367,000 or 1.0% of total loans outstanding as of December 31, 2005. Non-accrual loans increased in 2006 over 2005 primarily due to the addition of two commercial loan customers into non-accrual status by the subsidiary bank. Loans past due 90 days or more and still accruing interest were $3,000 at December 31, 2006, as compared to $90,000 at December 31, 2005. There was no balance in other real estate owned at December 31, 2006 as compared to $53,000 at December 31, 2005. Other real estate owned decreased $53,000 and $131,000 in 2006 and 2005, respectively. Management continues to monitor the nonperforming assets to ensure against deterioration in collateral values.

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 on nonaccrual loans had the loans performed in accordance with their original terms was $204,093 and $117,900 for the periods ended December 31, 2006 and 2005, respectively.

30

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

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. Table Seven presents a five-year summary of the Allowance for 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 decreased $22,913 or 1.0%, between December 31, 2006 and December 31, 2005. The allowance for loan losses represented 1.9% and 1.7% of outstanding loans as of December 31, 2006 and 2005, respectively. Net loan charge-offs were $22,913 in 2006, compared to $216,230 in 2005 and $248,767 in 2004. The net loan charge-offs remain within historical ranges. The net loan charge-offs in 2006, 2005 and 2004 were primarily commercial and consumer loans. There was no allocation to the provision for loan losses in 2006 compared to $180,000, and $300,000 at December 31, 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 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. 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 Eight.

Table Seven - Analysis of Allowance for Possible Loan Losses

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

	December 31,
(dollars in thousands)	2006			2005			2004			2003			2002
Allowance for loan losses:
Balance at beginning of period:	$	2,320		$	2,356		$	2,305		$	2,027		$	1,646
Loans Charged Off:
Real Estate - residential		—			12			3			13			2
Commercial		18			183			229			77			134
Installment		56			71			70			76			63
		74			266			302			166			199
Recoveries:
Real Estate - residential		—			—			17			3			—
Commercial		36			29			20			—			29
Installment		15			21			16			6			11
		51			50			53			9			40
Net Charge-offs		23			216			249			157			159
Additions Charged to Operations		—			180			300			435			540
Balance at end of period:	$	2,297		$	2,320		$	2,356		$	2,305		$	2,027
Average Loans Outstanding	$	129,997		$	144,528		$	151,562		$	137,826		$	131,383
Ratio of net charge-offs to Average loans outstanding for the period		0.02	%		0.15	%		0.16	%		0.11	%		0.12	%
Ratio of the Allowance for Loan Losses to Loans Outstanding for the period		1.90	%		1.72	%		1.53	%		1.57	%		1.48	%

31

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Table Eight

Loan Portfolio - Allocation of allowance for possible loan losses

The following table presents an allocation of the allowance for possible loan losses at each of the five year periods ended December 31, 2006. 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.

	December 31,
(dollars in thousands)	2006				2005				2004				2003				2002
	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	35.8	%	$	327	33.4	%	$	325	33.5	%	$	311	36.0	%	$	276	37.5	%
Commercial		1,483	43.3	%		1,465	44.5	%		1,520	45.2	%		1,429	43.0	%		1,161	41.7	%
Installment		466	11.2	%		507	12.3	%		490	11.9	%		544	12.9	%		569	12.9	%
Others		21	9.7	%		21	9.8	%		21	9.4	%		21	8.1	%		21	7.9	%
Total	$	2,297	100.0	%	$	2,320	100.0	%	$	2,356	100.0	%	$	2,305	100.0	%	$	2,027	100.0	%

Deposits

A stable core deposit base is the major source of funds for the Holding 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 decreased approximately $8.4 million or 3.8% in 2006. The decrease in total deposits was primarily due to the decline in savings and interest bearing demand deposits offset by the increase in time deposits. Savings deposits decreased approximately $15.7 million, or 22.3%, during 2006 while time deposits increased approximately $11.6 million, or 13.5%. This change from savings to time deposits is primarily a result of deposit customers seeking higher yielding deposit products as well as a special certificate of deposit promotion offered during the third quarter of 2006. This promotion generated an increase in time deposits of approximately $13.9 million during the third quarter of 2006.

At December 31, 2006, 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. There was no change in the deposit mix from December 31, 2005 to December 31, 2006. The change in the deposit mix from 2004 to 2005 was a 1% increase in noninterest bearing deposits and a 1% decrease in interest bearing deposits.

Federal Funds Purchased and Repurchase Agreements

Federal funds purchased and repurchase agreements are short-term borrowings. There were no Federal funds purchased as of December 31, 2006 and 2005. Repurchase agreements decreased $3,844,166 or 20.1%, from $19,084,324 at December 31, 2005 to $15,240,158 at December 31, 2006. The 2006 decrease in repurchase agreements was primarily due to the reduction in the balances maintained by commercial customers.

Federal Home Loan Bank and Other Long-term Borrowings

Federal Home Loan Bank (“FHLB”) borrowings were $2,342,718 and $2,384,893 at December 31, 2006 and 2005, respectively, with an interest rate of 4.76%. The FHLB borrowings are collateralized by a blanket collateral agreement which assigns a security interest in capital stock, deposits, mortgage loans, securities and FHLB stock of the subsidiary bank. 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 Company obtained a $3 million non-revolving line of credit from a financial institution in 2005 to provide for the capitalization of the subsidiary Bank as required under the terms of the Formal Agreement. The line of credit is secured by 126,200 shares of Progressive Bank, N.A. stock. The note bears an interest rate of prime and is adjusted on a quarterly basis. The line of credit expires in May 2015 and is to be repaid in quarterly interest only payments for the first three years and quarterly principal and interest payments thereafter. The Company’s initial borrowing on the note amounted to $2 million. At December 31, 2005 the outstanding borrowings amounted to $1 million with an interest rate of 7.25%. During 2006, the Company repaid the $1 million borrowing. There were no outstanding borrowings under the line of credit at December 31, 2006.

32

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Table Nine Contractual Maturities of Long term Obligations and Operating Leases

The following table presents the contractual maturities of long term obligations and operating leases:

(dollars in thousands)	Payments due by period
	< 1 year		1-3 years		3-5 years		> 5 years		Total
Contractual Obligations:
Federal Home Loan Bank and other long term borrowings	$	44	$	95	$	105	$	2,099	$	2,343
Operating Leases		163		181		90		68		502
	$	207	$	276	$	195	$	2,167	$	2,845

Table Ten Contractual Maturities of Commitments and Contingencies

The following table presents the maturities of commitments and contingencies:

(dollars in thousands)	Amount of Commitment Expiration Per Period
	< 1 year		1-3 years		3-5 years		> 5 years		Total
Off-Balance Sheet arrangements:
Commitments to extend credit	$	2,664	$	2,879	$	87	$	10,544	$	16,174
Standby letters of credit		15		9		—		70		94
	$	2,679	$	2,888	$	87	$	10,614	$	16,268

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 Company had investment securities with an estimated fair value of $109,921,387 classified as available for sale at December 31, 2006. These securities are available for sale at any time based upon management’s assessment in order to provide necessary liquidity should the need arise. The fair value of temporarily impaired investment securities that the company has the intent and ability to hold until the anticipated recovery in market value is $81,080,000. 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 December 31, 2006, the subsidiary bank had a short term line of credit in the aggregate amount of approximately $7 million available with the FHLB. There were no short term borrowings outstanding pursuant to this agreement as of December 31, 2006. At December 31, 2006 and December 31, 2005, the Company had outstanding loan commitments and unused lines of credit totaling $16,268,000 and $14,741,000, respectively. As of December 31, 2006, management placed a high probability for required funding within one year of approximately $10.0 million. Approximately $3.5 million is principally unused home equity and credit card lines on which management places a low probability for required funding.

Capital Resources

Stockholders’ equity increased 3.9% in 2006 entirely from current year earnings after quarterly dividends, and a 1.6% increase in accumulated other comprehensive income. The increase in accumulated other comprehensive income is primarily attributable to the effect of the change in the net unrealized losses on available for sale investment securities. The increase in stockholders’ equity in 2006 follows an increase of 4.6% in 2005 entirely from current earnings after quarterly dividends, and an decrease of 4.6% resulting from the effect of the change in the net unrealized gain on available for sale investment securities. Stockholders’ equity amounted to 9.9% and 9.0% of total assets at the end of 2006 and 2005, respectively. The Company paid dividends of $.76 per share in 2006 and 2005.

The Holding Company’s primary source of funds for payment of dividends to shareholders is from the dividends from its subsidiary bank. As previously discussed in Note 17 of the Consolidated Financial Statements, the Board of Directors adopted a resolution with the Federal Reserve Bank of Cleveland which prohibited 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. This resolution was terminated by the Federal Reserve Bank of Cleveland on January 30, 2007.

The Holding Company and its subsidiary bank are subject to regulatory risk-based capital guidelines administered by the Federal Reserve Board and the Office of the Comptroller of the Currency. These risk-based capital guidelines establish minimum capital ratios of Total capital, Tier 1 Capital, and Leverage to assess the capital adequacy of bank holding companies. Additional information on capital amounts, ratios and minimum regulatory requirements for the Company and its subsidiary bank can be found in Note 19 of the Consolidated Financial Statements.

Interest Rate Risk

Changes in interest rates can affect the level of income of a financial institution depending on the repricing characteristics of its assets and liabilities. This is termed interest rate risk. If a financial institution is asset sensitive, more of its assets will reprice in a given time frame than liabilities. This is a favorable position in a rising rate environment and would enhance income. If an institution is liability sensitive, more of its liabilities will reprice in a given time frame than assets. This is a favorable position in a falling rate environment. Financial institutions allocate significant time and resources to managing interest rate risk because of the impact that changes in interest rates can have to earnings. The initial step in the process of maintaining a Company’s interest rate sensitivity involves the preparation of a basic “gap” analysis of earning assets and interest bearing liabilities as reflected in the following table. The analysis measures the difference or the “gap” between the amount of assets and liabilities repricing within a given time period.

33

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

This information is used to manage a Company’s asset and liability positions. Management uses this information as a factor in decisions made about maturities of investment of cash flows, classification of investment securities purchases as available-for-sale or held-to-maturity, emphasis of variable rate or fixed rate loans and short or longer term deposit products in marketing campaigns, and deposit account pricing to alter asset and liability repricing characteristics. The overall objective is to minimize the impact to the margin of any significant change in interest rates.

The information presented in the following Interest Rate Risk table contains assumptions and estimates used by management in determining repricing characteristics and maturity distributions. As noted in the following table, the cumulative gap at one year is negative at approximately $24,499,000, which indicates the Company’s interest bearing liabilities reprice sooner than earning assets at December 31, 2006. As the table presented is as of a point in time and conditions change on a daily basis, any conclusions made may not be indicative of future results.

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 December 31, 2006 was as follows: given a 200 basis point increase scenario net interest income would be reduced by approximately 4.4%, and given a 200 basis point decrease scenario net interest income would be reduced by approximately 1.2%. 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.

Interest Rate Risk Table - December 31, 2006

(dollars in thousands)	Less than Three Months			Four to Twelve Months			One to Three Years			Greater than Three Years			Non- Interest Bearing			Total
ASSETS:
Cash and cash equivalents	$	4,721		$	—		$	—		$	—		$	6,651		$	11,372
Investment securities		4,991			11,951			40,848			54,210			(1,106	)		110,894
Loans		18,231			32,029			42,976			24,271			3,202			120,709
Other assets		4,227			—			—			—			9,533			13,760
Allowance for loan losses		—			—			—			—			(2,297	)		(2,297	)
Total assets	$	32,170		$	43,980		$	83,824		$	78,481		$	15,983		$	254,438
LIABILITIES AND CAPITAL
NOW and savings accounts	$	8,647		$	6,014		$	9,731		$	49,854		$	—		$	74,246
Money Market Accounts (MMDA’s)		7,656			—			5,775			—			—			13,431
Certificates of deposit < $100,000		11,357			31,653			12,607			13,139			—			68,756
Certificates of deposit > $100,000		3,929			16,109			3,989			4,362			—			28,389
Noninterest bearing demand deposits		—			—			—			—			25,587			25,587
Federal funds purchased and repurchase agreements		15,240			—			—			—			—			15,240
FHLB borrowings		11			33			95			2,204			—			2,343
Other liabilities		—			—			—			—			1,169			1,169
Stockholders’ equity		—			—			—			—			25,277			25,277
Total liabilities and capital	$	46,840		$	53,809		$	32,197		$	69,559		$	52,033		$	254,438
GAP		(14,670	)		(9,829	)		51,627			8,922			(36,050	)
GAP/ Total Assets		(5.77	)%		(3.86	)%		20.29	%		3.51	%		(14.17	)%
Cumulative GAP		(14,670	)		(24,499	)		27,128			36,050			0
Cumulative GAP/Total Assets		(5.77	)%		(9.63	)%		10.66	%		14.17	%		0.00	%

The above analysis contains repricing and maturity assumptions and estimates used by management.

34

Management’s Discussion and Analysis of the Financial Condition and Results of Holding Company Operations

Market Information of Common Stock

First West Virginia Bancorp, Inc’s common stock has been traded on the American Stock Exchange primary list since June 20, 1995, and began trading under the symbol of FWV. The following table sets forth the high and low sales prices of the common stock during the respective quarters.

		First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2006	High	$	19.40	$	19.20	$	20.25	$	20.80
	Low	$	18.75	$	18.65	$	18.70	$	19.60
2005	High	$	23.90	$	21.40	$	20.07	$	19.35
	Low	$	20.81	$	19.51	$	18.10	$	17.40

Summarized Quarterly Financial Information

A summary of selected quarterly financial information follows:

2006	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Total interest income	$	3,361,053		$	3,441,719	$	3,518,234		$	3,450,767
Total interest expense		1,122,867			1,147,188		1,288,661			1,383,746
Net interest income		2,238,186			2,294,531		2,229,573			2,067,021
Provision for loan losses		—			—		—			—
Investment securities gain (loss)		(106	)		44,215		778			781
Total other income		327,055			338,524		368,824			353,068
Total other expenses		1,813,711			2,003,925		1,834,969			1,961,422
Income before income taxes		751,424			673,345		764,206			459,448
Net income		600,043			549,433		591,693			402,655
Net income per share		0.39			0.36		0.39			0.26
2005	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Total interest income	$	3,305,715		$	3,271,283	$	3,246,463		$	3,304,796
Total interest expense		987,271			1,009,855		1,008,387			1,064,988
Net interest income		2,318,444			2,261,428		2,238,076			2,239,808
Provision for loan losses		90,000			90,000		—			—
Investment securities gain (loss)		77,856			2,390		38,309			(122	)
Total other income		295,072			303,896		336,568			323,734
Total other expenses		1,930,503			1,857,371		1,823,928			1,839,623
Income before income taxes		670,869			620,343		789,025			723,797
Net income		545,728			510,783		613,555			592,199
Net income per share		0.36			0.33		0.40			0.39
2004	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Total interest income	$	3,312,275		$	3,264,003	$	3,428,544		$	3,401,297
Total interest expense		1,065,824			1,039,123		1,048,859			1,040,783
Net interest income		2,246,451			2,224,880		2,379,685			2,360,514
Provision for loan losses		30,000			90,000		90,000			90,000
Investment securities gain (loss)		(2,501	)		6,427		(880	)		1,719
Total other income		289,355			301,170		336,408			351,918
Total other expenses		1,624,134			1,628,201		1,707,810			1,786,662
Income before income taxes		879,171			814,276		917,403			837,489
Net income		658,740			625,579		707,973			645,033
Net income per share		0.43			0.41		0.46			0.43

35

FIRST WEST VIRGINIA BANCORP, INC. DIRECTORS

Nada E. Beneke

Assistant Secretary, First West Virginia Bancorp, Inc.

Assistant Secretary, Progressive Bank, N.A.

Registered Sanitarian, Ohio County Health Department

President, Beneke Corporation

Sylvan J. Dlesk

Chairman of the Board, First West Virginia Bancorp, Inc.

President and Chief Executive Officer, First West Virginia Bancorp, Inc.

President and Chief Executive Officer, Progressive Bank, N.A

Owner, Dlesk Realty and Investments

President, Dlesk, Inc.

President, Ohio Valley Carpeting, Inc.

Gary W. Glessner

Certified Public Accountant

President/Owner, Glessner & Associates, PLLC

Laura G. Inman

Vice Chairman of the Board, First West Virginia Bancorp, Inc.

James C. Inman, Jr.

Retired Bank Executive

R. Clark Morton

Chairman of the Board, Progressive Bank, N.A.

Attorney at Law

Retired Partner, Herndon, Morton, Herndon & Yaeger

Thomas A. Noice

Retired Bank Executive

Treasurer, Belmont Community Hospital

William G. Petroplus

Attorney at Law

Member/Partner Petroplus & Gaudino

Thomas L. Sable

Owner, Bellaire Hardware

Managing Partner, The Summit Atlantic Group, LLC

FIRST WEST VIRGINIA BANCORP, INC. OFFICERS

Sylvan J. Dlesk

Chairman, President and Chief Executive Officer

Laura G. Inman

Vice Chairman

Francie P. Reppy

Executive Vice President and Chief Financial Officer

Chief Administrative Officer

Treasurer

Nancy J. Ritter

Vice President

Connie R. Tenney

Vice President

Stephanie A. LaFlam

Secretary

Nada E. Beneke

Assistant Secretary

PROGRESSIVE BANK, N.A. DIRECTORS

Nada E. Beneke

Dr. Clyde D. Campbell

Robert R. Cicogna

Sylvan J. Dlesk

Gary W. Glessner

Elizabeth H. Hestick

Robert B. Hunnell, Jr.

J. Burton Hunter, III

James C. Inman, Jr.

Laura G. Inman

Tulane B. Mensore

R. Clark Morton

Thomas A. Noice

William G. Petroplus

David R. Rexroad

Thomas L. Sable

DIRECTOR EMERITUS    Dale F. Riggs

36

PROGRESSIVE BANK, N.A. OFFICERS

R. Clark Morton

Chairman of the Board

Sylvan J. Dlesk

President

Chief Executive Officer

Francie P. Reppy

Executive Vice President

Chief Administrative Officer

Chief Financial Officer

Nancy J. Ritter

Senior Vice President Operations

Cashier

Connie R. Tenney

Senior Vice President

Brad D. Winwood

Senior Vice President

Senior Accounting &

Investment Officer

Michael J. Taylor

Vice President

Senior Loan Officer

Dennis W. Biearman

Vice President

Credit Administration

Gary S. Martin

Vice President

Retail Lending

David E. Wharton

Vice President

Information Technology Officer

Data Security Officer

Deborah A. Kloeppner

Vice President

Compliance and CRA Officer

Michele L. Stanley

Vice President

Bank Secrecy & OFAC Officer

Susan E. Reinbeau

Vice President

Branch Administrator

Stephanie A. LaFlam

Vice President

Human Resource Manager

Secretary

Laura A. Schmidt

Assistant Vice President

Accounting Officer

James W. Gasperowich

Assistant Vice President

Credit Analyst

Todd J. Hayes

Assistant Vice President

Business Development Officer

Anthony J. Collaros

Assistant Vice President

Business Development Officer

Kerrie A. Weisenborn

Assistant Vice President

Business Development Officer

Janey S. Longwell

Assistant Vice President

Office Manager New Martinsville

Debra M. Tomlin

Assistant Vice President

Loan Officer

Rebecca A. Palmer

Assistant Vice President

Manager Data Processing

Kimberly A. Hughes

Loan Review Officer

Harold O. Thomas

Senior Business Development

Officer

Beth A. Heyman

Office Manager Woodsdale

Michelle R. Pierce

Office Manager Bellaire

Johanna Sanders

Office Manager Wellsburg

Susan M. Scotka

Office Manager Moundsville

Vickie D. Poling

Loan Officer

Nada E. Beneke

Assistant Secretary

STOCKHOLDER INFORMATION

Corporate Office:

First West Virginia Bancorp, Inc.

1701 Warwood Avenue

Wheeling, WV 26003

Phone: (304) 277-1100

Fax: (304) 242-9628

www.progbank.com

Stock Registrar and Transfer Agent:

Any inquiries related to stockholder records, stock transfers, changes of ownership, and changes of address should be sent to the transfer agent at the following address:

Investor Relations Department

Registrar and Transfer Company

10 Commerce Drive

Cranford, New Jersey 07016-9982

(800) 368-5948

www.rtco.com

Stock Trading Information:

First West Virginia Bancorp, Inc.’s common stock is traded on the American Stock Exchange, Inc. primary list under the symbol FWV.

Annual Meeting

The Annual Meeting of Stockholders will be held at 4:00 p.m, on Tuesday, April 10, 2007, at the Warwood Office of Progressive Bank, N.A., 1701 Warwood Avenue, Wheeling, WV 26003.

Form 10-K

Upon written request any shareholder of record on December 31, 2006, may obtain a copy of the Corporation’s 2006 Form 10-K Report (to be filed with the Securities and Exchange Commission before March 31, 2007) by writing to the Secretary, First West Virginia Bancorp, Inc., 1701 Warwood Avenue, Wheeling, WV 26003. An electronic version of Form 10-K may also be obtained by visiting the Progressive Bank, N.A. website atwww.progbank.com in the section entitled “Investor Relations” or at the Securities and Exchange’s website at www.sec.gov.

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