First West Virginia Bancorp (FWV) 10-K 2007 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 2007 Annual Report of First West Virginia Bancorp, Inc. Consolidated net income for 2007 was $2,035,962 or $1.33 per share, as compared to $2,143,824 or $1.40 per share a year earlier. Total assets for the Holding Company decreased .5% over the prior year to $253,186,790 at December 31, 2007 as compared to $254,437,561 at December 31, 2006. Total stockholders’ equity increased 7.7% to $27,214,599 as compared to $25,276,954 reported in 2006. The book value per share was $17.81 at December 31, 2007 as compared to $16.54 a year earlier.

The Board of Directors declared and paid cash dividends of $.76 per share during 2007 and 2006.

This year it is with deep sorrow that I mention the passing of Dale F. Riggs, Director Emeritus of the Company’s subsidiary bank, Progressive Bank, N.A. Mr. Riggs served as a member of the bank’s Board of Directors since 1986. His experience, support, and dedication over the years has left its mark on the growth of our Company and he will be missed.

The year 2007 was very challenging and opportunistic dealing with a sagging economy created by increases in core household expenses outpacing consumer net income. The results affected consumer confidence and rippled throughout our subsidiary banks’ trading areas. The strong, gloomy overcast the subprime lending market has had on the real estate market, in addition to other blighted economic conditions, slowed customer activity in the fourth quarter.

Nevertheless, the Board of Directors is pleased with the decrease in noninterest expenses, Company earnings and other comprehensive income which resulted in an increase in stockholders’ equity as well as a $1.27 increase in our book value per share.

Furthermore, the Board of Directors made significant progress in our strategy to redesign, realign, and redefine all areas of our Company. The Board of Directors appreciates the commitment of our employees and their contributions to the success of our Company, our loyal customers throughout the years, as well as the continued support of our shareholders.

The Board of Directors has redefined our customer base and has a definite aim on our strategies to provide quality products and professional service in all the communities we serve.

Sincerely,

/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,
	2007			2006
ASSETS
Cash and due from banks	$	5,533,577		$	6,650,406
Due from banks - interest bearing		639,603			668,230
Federal funds sold		6,752,000			4,053,000
Total cash and cash equivalents		12,925,180			11,371,636
Investment securities:
Available-for-sale (at fair value)		105,983,126			109,921,387
Held-to-maturity (fair value of $675,604 and $989,241, respectively)		663,936			972,855
Loans		121,739,193			120,709,320
Less allowance for loan losses		(2,042,997	)		(2,296,958	)
Net loans		119,696,196			118,412,362
Premises and equipment, net		4,789,947			4,334,131
Accrued income receivable		1,236,153			1,263,335
Other intangible assets		14,792			103,543
Goodwill		1,644,119			1,644,119
Bank owned life insurance		3,429,560			3,307,711
Other assets		2,803,781			3,106,482
Total assets	$	253,186,790		$	254,437,561
LIABILITIES
Noninterest bearing deposits:
Demand	$	24,437,272		$	25,586,509
Interest bearing deposits:
Demand		33,232,800			33,070,271
Savings		50,969,862			54,606,775
Time		94,486,897			97,144,860
Total deposits		203,126,831			210,408,415
Federal funds purchased and securities sold under agreements to repurchase		12,196,144			15,240,158
Federal Home Loan Bank borrowings		9,298,492			2,342,718
Accrued interest payable		598,054			597,457
Other liabilities		752,670			571,859
Total liabilities		225,972,191			229,160,607
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,538,443 shares issued at December 31, 2007 and 2006		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		14,394,610			13,520,264
Accumulated other comprehensive income (loss)		373,268			(690,031	)
Total stockholders’ equity		27,214,599			25,276,954
Total liabilities and stockholders’ equity	$	253,186,790		$	254,437,561

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,
	2007			2006		2005
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	7,686,362		$	8,125,629	$	8,558,205
Tax-exempt		586,511			576,861		649,553
Debt securities:
Taxable		4,179,638			3,876,233		3,047,213
Tax-exempt		839,066			780,952		637,600
Dividends		43,511			34,489		16,452
Other interest income		99,192			97,705		41,147
Federal funds sold		274,216			279,904		178,087
Total interest and dividend income		13,708,496			13,771,773		13,128,257
INTEREST EXPENSE
Deposits		4,680,090			4,144,645		3,574,439
Federal funds purchased and repurchase agreements		485,978			656,063		311,763
FHLB and other long-term borrowings		265,432			141,754		184,299
Total interest expense		5,431,500			4,942,462		4,070,501
Net interest income		8,276,996			8,829,311		9,057,756
PROVISION FOR LOAN LOSSES		(100,000	)		—		180,000
Net interest income after provision for loan losses		8,376,996			8,829,311		8,877,756
NONINTEREST INCOME
Service charges and other fees		930,563			914,891		775,588
Net gains (losses) on available for sale securities		(22,255	)		45,668		118,433
Other operating income		502,170			472,580		483,682
Total noninterest income		1,410,478			1,433,139		1,377,703
NONINTEREST EXPENSE
Salary and employee benefits		3,833,170			4,051,274		3,768,693
Net occupancy expense of premises		1,105,406			1,133,895		1,133,282
Other operating expenses		2,333,668			2,428,858		2,549,450
Total noninterest expense		7,272,244			7,614,027		7,451,425
Income before income taxes		2,515,230			2,648,423		2,804,034
INCOME TAXES		479,268			504,599		541,769
Net income	$	2,035,962		$	2,143,824	$	2,262,265
WEIGHTED AVERAGE SHARES OUTSTANDING		1,528,443			1,528,443		1,528,443
EARNINGS PER COMMON SHARE	$	1.33		$	1.40	$	1.48
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 Comprehensive Income (loss)			Comprehensive Income			Total
	Shares	Amount
BALANCE, DECEMBER 31, 2004	1,538,443	$	7,692,215	$	4,982,606	$	11,437,407		$	(228,100	)	$	68,908					$	23,953,036
Comprehensive income:
Net income	—		—		—		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
Comprehensive income:
Net income	—		—		—		2,035,962			—			—		$	2,035,962			2,035,962
Other comprehensive income, net of tax
Unrealized gain on securities net of reclassification adjustment (see disclosure)	—		—		—		—			—			1,063,299			1,063,299			1,063,299
Comprehensive income															$	3,099,261
Cash dividend ($.76 per share)	—		—		—		(1,161,616	)		—			—						(1,161,616	)
BALANCE, DECEMBER 31, 2007	1,538,443	$	7,692,215	$	4,982,606	$	14,394,610		$	(228,100	)	$	373,268					$	27,214,599

	2007			2006		2005
Disclosure of reclassification amount:
Unrealized holding gains (losses) arising during the period	$	1,049,418		$	364,600	$	(1,021,189	)
Less reclassification adjustment for gains (losses) included in net income		(13,881	)		28,483		73,867
Net unrealized gains (losses) on securities	$	1,063,299		$	336,117	$	(1,095,056	)

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,
	2007			2006			2005
OPERATING ACTIVITIES
Net income	$	2,035,962		$	2,143,824		$	2,262,265
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in Provision for loan losses		(100,000	)		—			180,000
Depreciation and amortization		408,215			435,235			453,351
Amortization (accretion) of investment securities, net		(230,694	)		(124,624	)		288,848
Investment security (gains) losses		22,255			(45,668	)		(118,433	)
Loss (gain) on disposal of assets		14,836			—			(9,835	)
Increase in cash surrender value of bank-owned life insurance		(121,849	)		(113,734	)		(113,253	)
Decrease (increase) in interest receivable		27,182			(8,007	)		3,877
Decrease in interest payable		597			193,085			55,015
Other, net		(158,011	)		(182,018	)		(14,118	)
Net cash provided by operating activities		1,898,493			2,298,093			2,987,717
INVESTING ACTIVITIES
Net (increase) decrease in loans, net of charge-offs		(1,195,854	)		14,430,462			18,850,853
Proceeds from sales of securities available-for-sale		9,427,941			385,888			3,142,149
Proceeds from maturities of securities available-for-sale		226,195,913			93,984,071			234,723,686
Proceeds from maturities of securities held-to-maturity		310,000			805,000			1,040,000
Principal collected on mortgage-backed securities		8,787,745			9,884,629			12,314,801
Purchases of securities available-for-sale		(238,561,158	)		(107,246,196	)		(254,584,173	)
Recoveries on loans previously charged-off		12,020			51,563			49,696
Purchases of premises and equipment		(790,116	)		(513,686	)		(681,349	)
Proceeds from sales of assets		—			—			15,525
Net cash provided by investing activities		4,186,491			11,781,731			14,871,188
FINANCING ACTIVITIES
Net decrease in deposits		(7,281,584	)		(8,408,886	)		(17,353,706	)
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	)
Increase (decrease) in short-term borrowings		(3,044,014	)		(3,844,166	)		3,325,124
Increase (decrease) in FHLB borrowings		6,955,774			(42,175	)		(40,218	)
Net cash used in financing activities		(4,531,440	)		(14,456,843	)		(14,230,416	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,553,544			(377,019	)		3,628,489
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		11,371,636			11,748,655			8,120,166
CASH AND CASH EQUIVALENTS, END OF YEAR	$	12,925,180		$	11,371,636		$	11,748,655
Supplemental Disclosures:
Cash Paid for Interest	$	5,430,903		$	4,749,377		$	4,015,486
Cash Paid for Income Taxes		370,000			612,000			645,000

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, 2007, 2006, AND 2005

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 nine full service branches located in Wheeling (3), Wellsburg, Moundsville, 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, 2007, 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 lo1ans 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, 2007 and 2006, 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 were $1,981,231 and $1,487,168 as of December 31, 2007 and 2006, respectively. These loans which were also subject to recourse obligation or credit risk in the amount of $41,635. The amount of income recognized as of a result of this agreement was $8,848, $10,317 and $1,426 for the years ending December 31, 2007, 2006 and 2005, respectively.

6

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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 $2,042,997 at December 31, 2007, 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, 2007, 2006 and 2005. The unamortized balance from the purchase of these core deposit intangible assets is $14,792 and $103,543 at December 31, 2007 and 2006, respectively. The estimated amortization expense in 2008 is $14,792. 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 $3,429,560 and $3,307,711 at December 31, 2007 and 2006, respectively. The face value of the bank-owned life insurance at December 31, 2007 was $9.4 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, 2007, 2006, AND 2005

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 $258,861, $165,706 and $133,403 for 2007, 2006, and 2005, respectively.

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:

	2007			2006			2005
Before-tax amount	$	1,704,824		$	538,908		$	(1,755,742	)
Tax effect		(641,525	)		(202,791	)		660,686
Net of tax effect		1,063,299			336,117			(1,095,056	)
Net income as reported		2,035,962			2,143,824			2,262,265
Total comprehensive income	$	3,099,261		$	2,479,941		$	1,167,209

Recent Accounting Pronouncements: In December 2007, the FASB issued FAS No. 141 (revised 2007),Business Combinations (“FAS 141(R)”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. FAS No. 141(R) is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

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 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)). This Statement requires that employers measure plan assets and obligations as of the balance sheet date. This requirement is effective for fiscal years ending after December 15, 2008. The other provisions of the Statement were effective as of the end of the fiscal year ending after December 15, 2006, for public companies. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In February 2007, the FASB issued FAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115, which provides all entities with an option to report selected financial assets and liabilities at fair value. The objective of the FAS No. 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in earnings caused by measuring related assets and liabilities differently without having to apply the complex provisions of hedge accounting. FAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007 provided the entity also elects to apply the provisions of FAS No. 157,Fair Value Measurements. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In December 2007, the FASB issued FAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 FAS No. 160 amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. FAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

8

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

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 adoption of this EITF is not expected to have a material effect on the Company’s results of operations or financial position.

In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 (“EITF 06-10”),Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements. EITF 06-10 provides guidance for determining a liability for the postretirement benefit obligation as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007. The adoption of this EITF is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-11 (“EITF 06-11”),Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards. EITF 06-11 applies to share-based payment arrangements with dividend protection features that entitle employees to receive (a) dividends on equity-classified nonvested shares, (b) dividend equivalents on equity-classified nonvested share units, or (c) payments equal to the dividends paid on the underlying shares while an equity-classified share option is outstanding, when those dividends or dividend equivalents are charged to retained earnings under FAS No. 123R,Share-Based Payment, and result in an income tax deduction for the employer. A consensus was reached that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity-classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase in additional paid-in capital. EITF 06-11 is effective for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The adoption of this EITF is not expected to have a material effect on the Company’s results of operations or financial position.

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are as follows at December 31, 2007 and 2006:

	(Expressed in thousands) December 31, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities held-to-maturity:
Obligations of states and political subdivisions	$	664	$	12	$	—		$	676
Total held-to-maturity		664		12		—			676
Securities available-for-sale:
U.S. Treasury securities and obligations of U.S. Government corporations and agencies
		26,330		177		(30	)		26,477
Obligations of states and political subdivisions		22,024		170		(41	)		22,153
Mortgage-backed securities		56,691		463		(153	)		57,001
Equity securities		340		13		(1	)		352
Total available-for-sale		105,385		823		(225	)		105,983
Total	$	106,049	$	835	$	(225	)	$	106,659

9

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

	(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

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, 2007 and 2006:

	(Expressed in thousands) 2007
	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	$	—	$	—		$	10,967	$	(30	)	$	10,967	$	(30	)
Obligations of states and political subdivisions		1,618		(2	)		5,228		(39	)		6,846		(41	)
Mortgage-backed securities		1,323		(6	)		14,386		(147	)		15,709		(153	)
Total debt securities		2,941		(8	)		30,581		(216	)		33,522		(224	)
Equity securities		44		(1	)		—		—			44		(1	)
Total	$	2,985	$	(9	)	$	30,581	$	(216	)	$	33,566	$	(225	)

	(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	)

10

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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 86 positions that are temporarily impaired at December 31, 2007.

The amortized cost and estimated fair value of investment securities at December 31, 2007, 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	$	165	$	166	$	12,047	$	12,048
Due after one year through five years		499		510		21,447		21,592
Due after five years through ten years		—		—		5,895		5,963
Due after ten years		—		—		8,965		9,027
		664		676		48,354		48,630
Mortgage-backed securities		—		—		56,691		57,001
Equity securities		—		—		340		352
Total	$	664	$	676	$	105,385	$	105,983

Proceeds from sales of securities available-for-sale during the years ended December 31, 2007, 2006, and 2005, were $9,427,941, $385,888, and $3,142,149, respectively. Gross gains of $39,762 and gross losses of $62,017 in 2007; gross gains of $67,074 and gross losses of $21,406 in 2006; and gross gains of $144,771 and gross losses of $26,338 in 2005, were realized on those sales. Assets carried at $37,878,000 and $42,987,000 at December 31, 2007 and 2006, 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, 2007 and 2006, are as follows:

	(Expressed in Thousands)
	2007		2006
Real estate - construction	$	927	$	1,205
Real estate - farmland		318		378
Real estate - residential		45,449		41,759
Real estate - secured by non-farm, non-residential		42,350		44,110
Commercial and industrial loans		7,879		8,219
Installment and other loans to individuals		12,861		13,473
Non-rated industrial development obligations		12,045		11,655
Other loans		109		88
Total	$	121,938	$	120,887
Less unearned interest and deferred fees		199		178
Net loans	$	121,739	$	120,709

Non-accrual loans amounted to $2,436,690 and $3,380,170 at December 31, 2007 and 2006, respectively. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $156,500 and $204,100 for 2007 and 2006, respectively.

11

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

	December 31,
	2007			2006		2005
Balance at beginning of year	$	2,296,958		$	2,319,871	$	2,356,101
Additions (deletions) charged to operating expense		(100,000	)		—		180,000
Recoveries		12,020			51,563		49,696
Total		2,208,978			2,371,434		2,585,797
Less loans charged-off		165,981			74,476		265,926
Balance at end of year	$	2,042,997		$	2,296,958	$	2,319,871

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

	(Expressed in Thousands)
	December 31,
	2007		2006		2005
Impaired loans without a valuation allowance	$	1,143	$	1,200	$	381
Impaired loans with a valuation allowance		1,294		2,180		986
Total impaired loans	$	2,437	$	3,380	$	1,367
Valuation allowance related to impaired loans	$	270	$	314	$	80

	(Expressed in Thousands)
	December 31,
	2007		2006		2005
Total non-accrual loans	$	2,437	$	3,380	$	1,367
Total loans past-due 90 days or more and still accruing	$	26	$	3	$	90

	(Expressed in Thousands)
	December 31,
	2007		2006		2005
Average investment in impaired loans	$	3,173	$	1,691	$	1,840
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
	2007		2006
Land	$	1,983,014	$	1,983,014
Land improvements		218,005		302,583	20
Leasehold improvements		404,598		404,598	25
Buildings		4,363,266		4,150,614	20-50
Furniture, fixtures & equipment		3,816,470		3,398,209	3 - 8
Total		10,785,353		10,239,018
Less accumulated depreciation		5,995,406		5,904,887
Premises and equipment, net	$	4,789,947	$	4,334,131

Charges to operations for depreciation approximated $319,464, $346,485, and $364,600 for 2007, 2006, and 2005, respectively.

12

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 6 - DEPOSITS

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

	(Expressed in Thousands)
	2007
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	24,014	$	28,596	$	50,106	$	92,090
United States Government		68		—		—		—
States and political subdivisions		352		4,637		864		2,247
Commercial banks and other depository institutions		3		—		—		150
Total	$	24,437	$	33,233	$	50,970	$	94,487
	(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

Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $26,532,000 and $28,389,000 at December 31, 2007 and 2006, respectively. Interest expense on certificates of deposit of $100,000 or more was $1,178,000, $952,000 and $671,000 at December 31, 2007, 2006, and 2005, respectively.

A maturity distribution of time certificates of deposit at December 31, 2007, follows:

Due in 2008	$	45,687,000
Due in 2009		24,186,000
Due in 2010		12,242,000
Due in 2011		6,277,000
Due in 2012		6,071,000
Due in 2013 and thereafter		24,000
Total	$	94,487,000

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
	2007			2006			2007			2006
Balance at end of year	$	12,196,144		$	15,240,158		$	—		$	—
Average balance during the year		13,915,670			18,786,058			169,863			105,616
Maximum month-end balance		15,140,173			19,569,721			—			2,000,000
Weighted-average rate during the year		3.42	%		3.46	%		5.58	%		5.53	%
Rate at December 31		1.86	%		2.62	%		—			—

13

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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, 2007 was approximately $79.7 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $9,298,492 and $2,342,718 at December 31, 2007 and 2006, respectively. The increase in FHLB borrowings was due to the addition of two fixed rate bullet advances which totaled $7,000,000 during the second quarter of 2007. These advances carry an average interest rate of 5.08% and will mature in 2009 and 2010. The subsidiary bank also has two fixed rate amortizing advances with a weighted average interest rate of 4.76% which will mature in 2018.

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, 2007 and 2006, respectively.

Contractual maturities of FHLB borrowings as of December 31, 2007 were as follows:

December 31, 2008	$	46,378
December 31, 2009		3,548,634
December 31, 2010		3,550,999
December 31, 2011		53,481
December 31, 2012		56,082
Thereafter		2,042,918
	$	9,298,492

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, 2007 and as of December 31, 2006.

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, 2007 concentrations of credit were as follows:

	Amount		Percent of Tier 1 Capital
Lessors of Residential Buildings and Dwellings	$	14,397,619	57.9	%
Lessors of Nonresidential Buildings		9,812,207	39.5	%

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 $2,745,649 at December 31, 2007, and $1,592,083 at December 31, 2006.

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

	December 31,
	2007			2006
Balance, January 1	$	1,592,083		$	3,394,123
New loans during the period		2,124,903			477,100
Repayments during the period		(971,337	)		(2,279,140	)
Ending balance	$	2,745,649		$	1,592,083

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 was for an initial 5 year term at an annual rental fee of $57,600, This lease was renewed in 2007 for an additional 5-year term at an annual rental fee of $60,480 and has options to renew for seven 5-year terms.

14

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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:

	2007		2006
Commitments to extend credit	$	14,219,000	$	16,174,000
Standby letters of credit		116,000		94,000

As of December 31, 2007, approximately $6,343,000 are fixed interest rate commitments and $7,992,000 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 $31,000 expire in 2008, $15,000 in 2012 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, 2007, the future minimum rental payments required under noncancelable operating leases with initial terms in excess of one year are as follows:

December 31, 2008	$	159,323
December 31, 2009		106,640
December 31, 2010		106,640
December 31, 2011		106,640
December 31, 2012		51,200
Thereafter		23,080

Rental expense under operating leases approximated $190,509 in 2007; $212,711 in 2006; and $214,092 in 2005.

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 $92,700, $102,500, and $98,070 for the years ended December 31, 2007, 2006, and 2005, 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 $22,365, $22,494, and $23,726 in 2007, 2006, and 2005, respectively.

15

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

NOTE 15 - INCOME TAX

The provisions for income taxes at December 31 consist of:

	2007			2006			2005
Currently payable:
Federal	$	368,217		$	434,266		$	422,522
State		105,452			128,803			116,913
Deferred:
Federal		(1,516	)		(47,501	)		1,837
State		7,115			(10,969	)		497
Income tax expense	$	479,268		$	504,599		$	541,769

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

	2007			2006
Allowance for loan losses	$	742,055		$	807,121
Deferred loan fees		67,699			60,357
Accrued interest on nonperforming loans		239,887			209,154
Deferred compensation		118,009			125,301
Depreciation		73,393			61,922
Amortization		109,973			93,879
Goodwill		(37,267	)		—
AMT		56,089			—
Deferred state income tax		(72,256	)		(74,675	)
Total deferred tax asset - federal		1,297,582			1,283,059
Total deferred tax asset - state		212,518			219,634
		1,510,100			1,502,693
Deferred tax assets arising from market adjustments of securities available for sale:
Federal		(192,289	)		355,470
State		(32,916	)		60,849
Net deferred tax assets	$	1,284,895		$	1,919,012

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:

	2007					2006					2005
	Amount			Percent		Amount			Percent		Amount			Percent
Computed tax at statutory federal rate	$	855,179		34.0	%	$	900,464		34.0	%	$	953,372		34.0	%
Plus state income taxes net of federal tax benefits		67,538		2.7	%		77,817		2.9	%		77,491		2.8	%
		922,717		36.7	%		978,281		36.9	%		1,030,863		36.8	%
Increase (decrease) in taxes resulting from:
Tax exempt income		(483,880	)	(19.2	)%		(461,564	)	(17.4	)%		(437,632	)	(15.6	)%
Nontaxable goodwill		—		—			(37,267	)	(1.4	)%		(37,267	)	(1.3	)%
Nondeductible interest expense		50,946		2.0	%		43,079		1.6	%		32,396		1.1	%
Bank-owned life insurance		(41,429	)	(1.7	)%		(38,670	)	(1.5	)%		(38,506	)	(1.4	)%
Other - net		30,914		1.2	%		20,740		0.9	%		(8,085	)	(0.3	)%
Actual tax expense	$	479,268		19.0	%	$	504,599		19.1	%	$	541,769		19.3	%

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, 2007 and 2006, were $2,264,000 and $1,973,000, 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 2008, without approval of the Comptroller of the Currency, of approximately $915,000, plus an additional amount equal to the bank’s net profit for 2008 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, 2007, 2006, AND 2005

NOTE 18 - OTHER OPERATING EXPENSES

Other operating expenses at December 31 included the following:

	2007		2006		2005
Directors’ fees	$	132,350	$	148,525	$	178,575
Stationery and supplies		135,929		172,268		170,350
Regulatory assessment and deposit insurance		106,421		212,922		187,384
Advertising		258,861		165,706		133,403
Postage and transportation		187,289		205,600		220,214
Other taxes		187,693		207,878		168,975
Service Expense		434,452		448,450		510,623
Other		890,673		867,509		979,926
Total	$	2,333,668	$	2,428,858	$	2,549,450

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, 2007, 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:

(Amounts Expressed in Thousands)	Actual				For Capital Adequacy Purposes				To be Well Capitalized under Prompt Corrective Action Provisions
First West Virginia Bancorp, Inc.		Amount	Ratio			Amount	Ratio			Amount	Ratio
As of December 31, 2007
Total Capital (to Risk Weighted Assets)	$	26,956	18.98	%	$	11,362	8.0	%	$	14,203	10.0	%
Tier I Capital (to Risk Weighted Assets)		25,183	17.73	%		5,681	4.0	%		8,522	6.0	%
Tier I Capital (to Adjusted Total Assets)		25,183	9.91	%		10,170	4.0	%		12,712	5.0	%
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	%
Progressive Bank, N.A.
As of December 31, 2007
Total Capital (to Risk Weighted Assets)	$	26,620	18.80	%	$	11,325	8.0	%	$	14,156	10.0	%
Tier I Capital (to Risk Weighted Assets)		24,847	17.55	%		5,662	4.0	%		8,494	6.0	%
Tier I Capital (to Adjusted Total Assets)		24,847	9.80	%		10,141	4.0	%		12,676	5.0	%
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	%

17

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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 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:

(Amounts Expressed in Thousands)	2007				2006
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	12,925	$	12,925	$	11,372	$	11,372
Investment securities		106,647		106,659		110,895		110,911
Loans		119,696		120,877		118,412		117,560
Bank owned life insurance		3,430		3,430		3,308		3,308
Accrued interest receivable		1,236		1,236		1,263		1,263
Financial liabilities:
Deposits		203,127		203,671		210,409		208,464
Federal funds purchased and repurchase agreements		12,196		12,205		15,240		15,239
FHLB and other long term borrowings		9,298		9,279		2,343		2,343
Accrued interest payable		598		598		597		597

18

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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,
	2007		2006
ASSETS
Cash	$	177,304	$	212,344
Investment securities available-for-sale (at fair value)		358,784		381,354
Investment in subsidiary bank		26,871,259		24,898,678
Other assets		154,339		154,140
Total assets	$	27,561,686	$	25,646,516
LIABILITIES
Deferred compensation	$	347,087	$	369,562
Total liabilities		347,087		369,562
STOCKHOLDERS’ EQUITY		27,214,599		25,276,954
Total liabilities and stockholders’ equity	$	27,561,686	$	25,646,516

STATEMENTS OF INCOME

	Year Ended December 31,
	2007		2006		2005
INCOME
Dividends from subsidiary bank	$	1,161,040	$	2,185,784	$	2,090,512
Gains on sales of investment securities		939		45,668		47,469
Other income		137,517		155,071		117,241
Total income		1,299,496		2,386,523		2,255,222
EXPENSES
Salary and employee benefits		24,809		88,638		69,192
Interest expense		—		29,194		69,778
Other expenses		165,355		164,224		153,447
Total expenses		190,164		282,056		292,417
Income before income taxes and undistributed net income of subsidiary		1,109,332		2,104,467		1,962,805
Income tax benefit		17,864		30,622		52,930
Equity in undistributed net income of subsidiary		908,766		8,735		246,530
NET INCOME	$	2,035,962	$	2,143,824	$	2,262,265

19

First West Virginia Bancorp, Inc. and Subsidiary

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

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

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2007			2006			2005
OPERATING ACTIVITIES
Net income	$	2,035,962		$	2,143,824		$	2,262,265
Adjustments to reconcile net income to net cash provided by operating activities:
Change in deferred tax benefit		8,070			(13,192	)		109,755
Undistributed earnings of affiliate		(908,766	)		(8,735	)		(246,530	)
Changes in operating assets and liabilities:
Other assets		(7,958	)		134,243			257,529
Deferred compensation		(22,475	)		36,085			(260,578	)
Other liabilities		—			—			(183,391	)
Net gains on sales of investment securities		(939	)		(45,668	)		(47,469	)
Net cash provided by operating activities		1,103,894			2,246,557			1,891,581
INVESTING ACTIVITIES
Payments for investments in subsidiary		—			—			(2,000,000	)
Proceeds from sales of securities		118,743			447,067			406,440
Purchases of investment securities		(96,061	)		(436,456	)		(99,489	)
Net cash provided by (used in) investing		22,682			10,611			(1,693,049	)
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		(1,161,616	)		(2,161,616	)		(161,616	)
Net increase (decrease) in cash and cash equivalents		(35,040	)		95,552			36,916
Cash and cash equivalents at beginning of year		212,344			116,792			79,876
Cash and cash equivalents at end of year	$	177,304		$	212,344		$	116,792
Supplemental disclosures:
Cash paid for interest	$	—		$	32,111		$	66,861
Cash paid for income taxes		—			—			—

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, 2007 and 2006, 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, 2007. 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, 2007 and 2006, and the results of its operations, and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assertion about the effectiveness of First West Virginia Bancorp, Inc’s internal control over financial reporting as of December 31, 2007, which is included in Form 10-K and, accordingly, we do not express an opinion thereon.

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

Wheeling, West Virginia

February 26, 2008

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,
	2007			2006			2005			2004			2003
SUMMARY OF OPERATIONS
Total interest income	$	13,708		$	13,772		$	13,128		$	13,406		$	13,319
Total interest expense		5,431			4,943			4,070			4,195			4,603
Net interest income		8,277			8,829			9,058			9,211			8,716
Provision for loan losses		(100	)		—			180			300			435
Total other income		1,410			1,433			1,378			1,284			1,346
Total other expenses		7,272			7,614			7,451			6,747			6,342
Income before income taxes		2,515			2,648			2,804			3,448			3,285
Net income		2,036			2,144			2,262			2,637			2,518
PER SHARE DATA
Net income	$	1.33		$	1.40		$	1.48		$	1.73		$	1.64
Cash dividends declared		0.76			0.76			0.76			0.76			0.73
Book value per share		17.81			16.54			15.68			15.67			15.07
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	120,409		$	129,997		$	144,528		$	151,562		$	137,826
Investment securities		109,278			109,533			102,882			110,528			117,758
Deposits - interest bearing		182,682			190,160			200,902			215,937			217,064
Stockholders’ equity		26,223			25,416			24,409			23,092			21,884
Total assets		253,930			262,946			270,500			284,930			277,952
BALANCE SHEET
Investments	$	106,647		$	110,894		$	107,998		$	106,561		$	119,245
Loans		121,739			120,709			135,214			154,331			146,711
Allowance for loan losses		(2,043	)		(2,297	)		(2,320	)		(2,356	)		(2,305	)
Other assets		26,844			25,132			25,321			21,266			20,460
Total Assets	$	253,187		$	254,438		$	266,213		$	279,802		$	284,111
Deposits	$	203,127		$	210,409		$	218,817		$	236,171		$	241,947
Federal funds purchased and repurchase agreements		12,196			15,240			19,084			15,759			15,089
FHLB borrowings		9,298			2,343			2,385			2,425			2,464
Other long-term borrowings		—			—			1,000			—			—
Other liabilities		1,351			1,169			968			1,494			1,580
Stockholders’ equity		27,215			25,277			23,959			23,953			23,031
Total Liabilities and Stockholders’ equity	$	253,187		$	254,438		$	266,213		$	279,802		$	284,111
SELECTED RATIOS
Return on average assets		0.80	%		0.82	%		0.84	%		0.93	%		0.91	%
Return on average equity		7.76	%		8.44	%		9.27	%		11.42	%		11.51	%
Average equity to average assets		10.33	%		9.67	%		9.02	%		8.10	%		7.87	%
Dividend payout ratio		57.14	%		54.29	%		51.35	%		43.93	%		44.51	%
Loan to Deposit ratio		59.93	%		57.37	%		61.79	%		65.35	%		60.64	%

22