First West Virginia Bancorp (FWV) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2010

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

For the transition period from            to            .

Commission File No. 1-13652

First West Virginia Bancorp, Inc.

(Exact name of registrant as specified in its charter)

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

1701 Warwood Avenue

Wheeling, West Virginia 26003

(Address of principal executive offices)

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

N/A

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ¨  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  ¨          Accelerated Filer  ¨          Non-accelerated filer  ¨          Smaller Reporting Company  x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

The number of shares outstanding of the issuer’s common stock as of November 12, 2010: Common Stock, $5.00 Par Value, shares outstanding: 1,589,411 shares

FORM 10-Q INDEX

PART I - Financial Information
Item 1	Financial Statements and Accompanying Notes	3-13
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-30
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	31
PART II - Other Information
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults upon Senior Securities	32
Item 4	(Removed and Reserved)	32
Item 5	Other Information	32
Item 6	Exhibits and Reports on Form 8-K
	Reports on Form 8-K	32
	Signatures	33
	Exhibit Index	34

PAGE 2

FIRST WEST VIRGINIA BANCORP, INC.

PART I

FINANCIAL INFORMATION

PAGE 3

First West Virginia Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

	September 30, 2010			December 31, 2009
ASSETS
	(Unaudited)
Cash and due from banks	$	23,642,921		$	4,714,371
Due from banks - interest bearing		2,039,375			1,569,418
Federal funds sold		—			7,070,000
Total cash and cash equivalents		25,682,296			13,353,789
Investment securities:
Available-for-sale (at fair value)		120,746,289			115,997,044
Loans		123,462,168			128,581,422
Less allowance for loan losses		(1,936,989	)		(1,894,361	)
Net loans		121,525,179			126,687,061
Premises and equipment, net		5,734,909			4,798,975
Accrued income receivable		1,207,305			1,203,635
Goodwill		1,644,119			1,644,119
Bank owned life insurance		3,389,049			3,310,587
Other assets		2,773,827			4,135,399
Total assets	$	282,702,973		$	271,130,609
LIABILITIES
Noninterest bearing deposits:
Demand	$	27,182,718		$	26,580,001
Interest bearing deposits:
Demand		43,939,705			40,589,903
Savings		75,402,183			67,556,655
Time		83,191,716			86,519,438
Total deposits		229,716,322			221,245,997
Federal funds purchased and securities sold under agreements to repurchase		15,283,869			11,025,432
Federal Home Loan Bank borrowings		3,795,618			7,354,309
Accrued interest payable		292,919			404,449
Other liabilities		821,556			294,185
Total liabilities		249,910,284			240,324,372
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,599,411 shares issued at September 30, 2010 and December 31, 2009		7,997,055			7,997,055
Treasury stock - 10,000 shares at cost:		(228,100	)		(228,100	)
Surplus		5,609,357			5,609,357
Retained earnings		16,599,429			15,589,770
Accumulated other comprehensive income		2,814,948			1,838,155
Total stockholders’ equity		32,792,689			30,806,237
Total liabilities and stockholders’ equity	$	282,702,973		$	271,130,609

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

PAGE 4

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended, September 30,					Nine Months Ended, September 30,
	2010		2009			2010		2009
	(Unaudited)					(Unaudited)
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	1,634,138	$	1,840,880		$	5,012,275	$	5,442,308
Tax-exempt		144,590		128,760			396,248		398,937
Debt securities:
Taxable		865,695		939,369			2,653,029		3,244,888
Tax-exempt		287,675		280,854			868,105		653,275
Dividends		—		—			—		—
Other interest income		11,537		3,761			37,202		12,017
Federal funds sold		—		221			8		556
Total interest and dividend income		2,943,635		3,193,845			8,966,867		9,751,981
INTEREST EXPENSE
Deposits		647,944		913,780			2,068,686		2,884,901
Federal funds purchased and repurchase agreements		31,634		35,963			85,244		92,527
FHLB and other long-term borrowings		58,857		105,231			239,612		376,833
Total interest expense		738,435		1,054,974			2,393,542		3,354,261
Net interest income		2,205,200		2,138,871			6,573,325		6,397,720
PROVISION FOR LOAN LOSSES		30,000		30,000			90,000		40,000
Net interest income after provision for loan losses		2,175,200		2,108,871			6,483,325		6,357,720
NONINTEREST INCOME
Service charges and other fees		149,039		187,412			461,350		521,144
Net gains (losses) on available for sale securities		308,096		(21,429	)		561,363		157,123
Other operating income		338,339		153,679			644,642		419,827
Total noninterest income		795,474		319,662			1,667,355		1,098,094
NONINTEREST EXPENSE
Salary and employee benefits		989,102		916,372			2,854,130		2,761,376
Net occupancy expense of premises		340,696		306,562			1,075,060		950,042
Other operating expenses		592,687		677,999			1,823,294		1,864,580
Total noninterest expense		1,922,485		1,900,933			5,752,484		5,575,998
Income before income taxes		1,048,189		527,600			2,398,196		1,879,816
INCOME TAXES		261,251		59,352			482,573		341,749
Net income	$	786,938	$	468,248		$	1,915,623	$	1,538,067
WEIGHTED AVERAGE SHARES OUTSTANDING		1,589,411		1,589,411			1,589,411		1,589,411
EARNINGS PER COMMON SHARE	$	0.50	$	0.30		$	1.21	$	0.97
DIVIDENDS PER COMMON SHARE	$	0.19	$	0.19		$	0.57	$	0.57

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

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First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock						Retained			Treasury			Accumulated Other Compre- hensive		Compre- hensive		Total
	Shares		Amount		Surplus		Earnings			Stock			Income		Income
BALANCE, DECEMBER 31, 2009		1,599,411	$	7,997,055	$	5,609,357	$	15,589,770		$	(228,100	)	$	1,838,155			$	30,806,237
Comprehensive income:
Net income		—		—		—		1,915,623			—			—	$	1,915,623		1,915,623
Other comprehensive income, net of tax
Unrealized gains on securities net of reclassification adjustment (see disclosure)		—		—		—		—			—			976,793		976,793		976,793
Comprehensive income															$	2,892,416
Cash dividend ($.57 per share)		—		—		—		(905,964	)		—			—				(905,964	)
BALANCE, SEPTEMBER 30, 2010		1,599,411	$	7,997,055	$	5,609,357	$	16,599,429		$	(228,100	)	$	2,814,948			$	32,792,689
	Common Stock						Retained			Treasury			Accumulated Other Compre- hensive		Compre- hensive		Total
	Shares		Amount		Surplus		Earnings			Stock			Income		Income
BALANCE, DECEMBER 31, 2008		1,599,411	$	7,997,055	$	5,609,357	$	14,492,736		$	(228,100	)	$	865,510			$	28,736,558
Comprehensive income:
Net income		—		—		—		1,538,067			—			—	$	1,538,067		1,538,067
Other comprehensive income, net of tax
Unrealized gains on securities net of reclassification adjustment (see disclosure)		—		—		—		—			—			1,600,578		1,600,578		1,600,578
Comprehensive income															$	3,138,645
Cash dividend ($.57 per share)		—		—		—		(905,964	)		—			—				(905,964	)
BALANCE, SEPTEMBER 30, 2009		1,599,411	$	7,997,055	$	5,609,357	$	15,124,839		$	(228,100	)	$	2,466,088			$	30,969,239
					For the Nine Months Ended September 30,
					2010		2009
Disclosure of reclassification amount, net of tax:
Unrealized holding gains arising during the period					$	1,326,915	$	1,698,576
Less reclassification adjustment for gains included in net income						350,122		97,998
Net unrealized gains on securities					$	976,793	$	1,600,578

PAGE 6

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2010			2009
OPERATING ACTIVITIES
Net income	$	1,915,623		$	1,538,067
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		90,000			40,000
Depreciation and amortization		378,712			331,936
Amortization (accretion) of investment securities, net		59,542			(95,828	)
Investment security gains		(561,363	)		(157,123	)
Increase in cash surrender value of bank-owned life insurance		(78,462	)		(87,695	)
Increase in interest receivable		(3,670	)		(32,733	)
Decrease in interest payable		(111,530	)		(134,102	)
Other, net		1,299,608			2,351,102
Net cash provided by operating activities		2,988,460			3,753,624
INVESTING ACTIVITIES
Net (increase) decrease in loans, net of charge-offs		5,067,024			(4,836,600	)
Proceeds from sales of securities available-for-sale		17,564,973			7,089,031
Proceeds from maturities of securities available-for-sale		38,968,408			35,105,997
Proceeds from maturities of securities held-to-maturity		—			321,000
Principal collected on mortgage-backed securities		9,388,005			11,126,393
Purchases of securities available-for-sale		(68,602,682	)		(58,567,020	)
Recoveries on loans previously charged-off		4,858			6,902
Purchases of premises and equipment		(1,314,646	)		(407,596	)
Net cash provided by (used in) investing activities		1,075,940			(10,161,893	)
FINANCING ACTIVITIES
Net increase in deposits		8,470,325			9,819,926
Dividends paid		(905,964	)		(905,964	)
Increase in short-term borrowings		4,258,437			3,269,240
Decrease in FHLB and other long-term borrowings		(3,558,691	)		(3,555,958	)
Net cash provided by financing activities		8,264,107			8,627,244
INCREASE IN CASH AND CASH EQUIVALENTS		12,328,507			2,218,975
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		13,353,789			9,100,734
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	25,682,296		$	11,319,709
Supplemental Disclosures:
Cash Paid for Interest	$	2,505,072		$	3,488,363
Cash Paid for Income Taxes	$	157,918		$	425,000

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

PAGE 7

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Subsequent Events: The Company assessed events occurring subsequent to September 30, 2010 through November 12, 2010 for potential recognition and disclosure in the consolidated financial statements. No events were identified that would require adjustments to or disclosure in the financial statements.

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 September 30, 2010 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.

PAGE 8

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. 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 September 30, 2010 and December 31, 2009, 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 current agreement dated December 28, 2009 provides for a maximum commitment amount of $5,000,000. This commitment expires on December 28, 2010. As of September 30, 2010, the amount funded under this commitment amounted to $1,822,490. Loans sold to the FHLB are sold with limited recourse or credit risk up to a maximum amount 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 and outstanding to the FHLB was $5,228,612 and $3,820,570 as of September 30, 2010 and December 31, 2009, respectively. These loans are also subject to recourse obligation or credit risk in the amount of $191,925 and $108,668 at September 30, 2010 and December 31, 2009, respectively. The amount of income recognized as of a result of this agreement was $40,058 and $15,126 for the period ending September 30, 2010 and 2009, respectively.

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 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 $1,936,989 at September 30, 2010, 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.

PAGE 9

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allowance for Loan Losses:(Continued) 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.

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.

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 $3,389,049 and $3,310,587 at September 30, 2010 and December 31, 2009, respectively. The face value of the bank-owned life insurance at September 30, 2010 was $8.7 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.

Goodwill: 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.

Goodwill is 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.

Other Real Estate Owned: Other real estate owned is 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 consists 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.

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 $21,083 and $37,591 for the three-month periods ended September 30, 2010 and 2009, respectively. For the nine-month periods ended September 30, 2010 and 2009 advertising expenses amounted to $48,809 and $126,116, 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. The following represents comprehensive income for the three and nine month periods ended September 30, 2010 and September 30, 2009. 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.

PAGE 10

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

	For the three months ended September 30,						For the nine months ended September 30,
	2010			2009			2010			2009
Before-tax amount	$	117,323		$	2,697,546		$	1,566,126		$	2,566,262
Tax effect		(44,149	)		(1,015,087	)		(589,333	)		(965,684	)
Net of tax effect		73,174			1,682,459			976,793			1,600,578
Net income as reported		786,938			468,248			1,915,623			1,538,067
Total comprehensive income (loss)	$	860,112		$	2,150,707		$	2,892,416		$	3,138,645

NOTE 2 - FAIR VALUE MEASUREMENTS:

The Company adopted accounting guidance in 2008, which, among other things, required enhanced disclosures about assets and liabilities carried at fair value. This guidance establishes a hierarchal disclosure framework associated with the level of pricing observably utilized in measuring assets and liabilities at fair value. The three broad levels defined under the literature are as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly. Level 2 inputs include quoted prices for similar assets in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, within which the fair value measurement in its entirety falls, has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset.

As of September 30, 2010, the Company did not have any assets measured at fair value on a nonrecurring basis. The measurement of fair value should be consistent with one of the following valuation techniques: market approach, income approach, and/or cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range the appropriate multiple falls requires judgment, considering factors specific to the measurement (qualitative and quantitative). Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities. As of September 30, 2010 and December 31, 2009 all of the financial assets measured at fair value utilized the market approach.

The following table presents the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of September 30, 2010 and December 31, 2009 by level within the fair value hierarchy. As required by the current accounting guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2010
	Level I		Level II		Level III		Total
	(In thousands)
Assets:
Securities available for sale	$	243	$	120,503	$	—	$	120,746
Impaired loans	$	—	$	4,991	$	—	$	4,991
	December 31, 2009
	Level I		Level II		Level III		Total
	(In thousands)
Assets:
Securities available for sale	$	252	$	115,745	$	—	$	115,997
Impaired loans	$	—	$	3,896	$	—	$	3,896

PAGE 11

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

NOTE 3 - FAIR VALUE DISCLOSURE 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 assets in similar markets.

Loans: The fair value for net loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value.

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: Noninterest bearing and interest bearing demand deposits and savings deposits are valued at the amount payable on demand. The fair values for time deposits are based on discounted value of cash flows. The discount rates are estimated using rates currently offered for similar instruments with 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:

	September 30, 2010				December 31, 2009
(Amounts Expressed in Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	25,682	$	25,682	$	13,354	$	13,354
Investment securities		120,746		120,746		115,997		115,997
Loans		123,462		123,586		126,687		126,197
Bank owned life insurance		3,389		3,389		3,311		3,311
Accrued interest receivable		1,207		1,207		1,204		1,204
Financial liabilities:
Deposits		229,716		217,000		221,246		200,282
Federal funds purchased and repurchase agreements		15,284		15,284		11,025		11,025
FHLB and other long term borrowings		3,796		3,796		7,354		7,354
Accrued interest payable		293		293		404		404

PAGE 12

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010 AND 2009

(Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS:

In January 2010, the FASB issued ASU No. 2010-06,Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company has presented the necessary disclosures in the Note 2 and 3 herein.

In February 2010, the FASB issued ASU 2010-08,Technical Corrections to Various Topics. ASU 2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operation.

In March 2010, the FASB issued ASU 2010-11,Derivatives and Hedging. ASU 2010-11 provides clarification and related additional examples to improve financial reporting by resolving potential ambiguity about the breadth of the embedded credit derivative scope exception in ASC 815-15-15-8. ASU 2010-11 is effective at the beginning of the first fiscal quarter beginning after June 15, 2010. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

In April 2010, the FASB issued ASU 2010-18,Receivables (Topic 310): Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single Asset – a consensus of the FASB Emerging Issues Task Force. ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets. Refinancing or restructuring the loan does not make it eligible for removal from the pool, the FASB said. The amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later and is not expected to have a significant impact on the Company’s financial statements.

In July 2010, FASB issued ASU No. 2010-20,Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company is currently evaluating the impact the adoption of this guidance will have on the Company’s financial position or results of operations.

In August 2010, the FASB issued ASU 2010-21,Accounting for Technical Amendments to Various SEC Rules and Schedules. This ASU amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules, and Codification of Financial Reporting Policies and is not expected to have significant impact on the Company’s financial statements.

In August 2010, the FASB issued ASU 2010-22,Technical Corrections to SEC Paragraphs – An announcement made by the staff of the U.S. Securities and Exchange Commission.This ASU amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics and is not expected to have a significant impact on the Company’s financial statements.

PAGE 13

First West Virginia Bancorp, Inc.

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

Table One

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

	(Unaudited)						(Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,						Years ended December 31,
	2010			2009			2010			2009			2009			2008			2007
SUMMARY OF OPERATIONS
Total interest income	$	2,944		$	3,194		$	8,967		$	9,752		$	12,914		$	13,514		$	13,708
Total interest expense		739			1,055			2,394			3,354			4,328			5,275			5,431
Net interest income		2,205			2,139			6,573			6,398			8,586			8,239			8,277
Provision for loan losses		30			30			90			40			184			—			(100	)
Total other income		795			320			1,667			1,098			1,791			1,488			1,410
Total other expenses		1,922			1,901			5,752			5,576			7,592			7,009			7,272
Income before income taxes		1,048			528			2,398			1,880			2,601			2,718			2,515
Net income		787			468			1,916			1,538			2,305			2,206			2,036
PER SHARE DATA
Net income	$	0.50		$	0.30		$	1.21		$	0.97		$	1.45		$	1.39		$	1.28
Cash dividends declared		0.19			0.19			0.57			0.57			0.76			0.74			0.73
Book value per share		20.63			19.48			20.63			19.48			19.38			18.08			17.12
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	121,956		$	128,794		$	124,347		$	127,910		$	128,206		$	120,722		$	120,409
Investment securities		119,511			112,756			115,869			111,463			112,142			108,114			109,278
Deposits - interest bearing		200,288			192,321			196,876			190,204			190,981			182,450			182,682
Stockholders’ equity		29,198			28,285			29,232			28,103			28,192			27,295			26,223
Total assets		276,545			268,357			272,432			265,881			266,414			258,275			253,930
SELECTED RATIOS
Return on average assets		1.13	%		0.69	%		0.94	%		0.77	%		0.87	%		0.85	%		0.80	%
Return on average equity		10.69	%		6.56	%		8.76	%		7.32	%		8.18	%		8.08	%		7.76	%
Average equity to average assets		10.56	%		10.54	%		10.73	%		10.57	%		10.58	%		10.57	%		10.33	%
Dividend payout ratio		38.00	%		63.33	%		47.11	%		58.76	%		52.41	%		53.24	%		57.03	%
Loan to Deposit ratio		53.75	%		59.86	%		53.75	%		59.86	%		58.12	%		60.39	%		59.93	%
	(Unaudited)
	September 30,						December 31,
	2010			2009			2009			2008			2007
BALANCE SHEET
Investments	$	120,746		$	120,110		$	115,997		$	112,366		$	106,647
Loans		123,462			129,412			128,581			124,635			121,739
Allowance for loan losses		(1,937	)		(1,911	)		(1,894	)		(1,923	)		(2,043	)
Other assets		40,432			24,479			28,447			23,086			26,844
Total Assets	$	282,703		$	272,090		$	271,131		$	258,164		$	253,187
Deposits	$	229,716		$	216,205		$	221,246		$	206,385		$	203,127
Federal funds purchased and repurchase agreements		15,284			14,283			11,025			11,013			12,196
FHLB borrowings		3,796			7,373			7,354			10,929			9,298
Other liabilities		1,114			3,259			700			1,100			1,351
Stockholders’ equity		32,793			30,970			30,806			28,737			27,215
Total Liabilities and Stockholders’ equity	$	282,703		$	272,090		$	271,131		$	258,164		$	253,187

PAGE 14

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 loss 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: As discussed in Note 1 of the notes to the Consolidated Financial Statements, the Company must assess goodwill each year for impairment. This assessment involves estimating cash flows for future periods. If the future cash flows were less than the recorded goodwill balance, we would be required to take a charge against earnings to write down the asset 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

The Company reported net income of $1,951,623 or $1.21 per share for the nine months ended September 30, 2010 compared to $1,538,067 or $.97 per share for the same period during 2009. The increase in net income for the nine months ended September 30, 2010 as compared to the same period in 2009 of $377,556 or 24.6% was primarily the result of increases in net interest income and noninterest income combined with the increase in income tax expense, offset in part by the increases in noninterest expenses and in the provision for loan losses. Net interest income increased $175,605 or 2.7%, primarily due to the decrease in the interest expense paid on interest bearing liabilities, offset in part by a decline in the interest and fees earned on loans and investment securities. Noninterest income increased $569,261 or 51.8%, primarily due to the increase in net gains on investment securities combined with an increase in other operating income, which were offset in part by a decline in service charges and fees earned on deposit accounts. Noninterest expenses increased $176,486 or 3.2% during the nine month period ended September 30, 2010 as compared to the same period in 2009 primarily due to the increases in occupancy expenses combined with the increase in salary and employee benefits expense, offset in part by a decline in other operating expenses. The ROA was .94% for the nine months ended September 30, 2010 as compared to .77% for the same period of the prior year. For the nine months ended September 30, 2010 compared to September 30, 2009, the ROE was 8.76% and 7.32%, respectively.

PAGE 15

First West Virginia Bancorp, Inc.

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

OVERVIEW - (Continued)

For the third quarter of 2010, net income was $786,938 or $.50 per share as compared to $468,248 or $.29 per share for the same period in 2009. The increase in earnings was primarily due to increases in net interest income and noninterest income, offset in part by increases in noninterest expense, the provision for loan losses, and income taxes. Net interest income increased $66,329 or 3.1%, primarily due to the decrease in the interest expense paid on interest bearing liabilities, offset in part by a decline in the interest and fees earned on loans and investment securities. Noninterest income increased $475,812 or 148.9% for the three months ended September 30, 2010 as compared to same period of the prior year and was primarily due to the increase in the net gains on sales of investment securities combined with the increase in other operating income, which were offset in part by the decline in service charges and fees earned on deposit accounts. Noninterest expenses increased by $21,552 or 1.1% during the three month period ended September 30, 2010 as compared to the same period in 2009 primarily due to the increases in occupancy expenses and salary and employee benefits expense, offset in part by the decrease in other operating expenses.

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

EARNINGS ANALYSIS - For the nine months ended September 30, 2010

Net Interest Income

Net interest income, which is the primary source of earnings for the Company, is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. Changes in the volume and mix of earning assets and interest bearing liabilities combined with changes in market rates of interest greatly effect net interest income. Table Two presents the average balance sheets and an interest rate analysis for the nine months ended September 30, 2010 and 2009 and the year ended December 31, 2009.

For the nine months ended September 30, 2010, net interest income was $6,573,325, an increase of $175,605 or 2.7%, from the same period in 2009. Net interest income rose primarily due to the increase in average volume of earning assets combined with an increase in the taxable equivalent net yield on earning assets. The average earning assets increased approximately $3.8 million or 1.5% from September 30, 2009 to 2010. The taxable equivalent net yield on earning assets increased from 3.80% at September 30, 2009 to 3.91% at September 30, 2010.

Interest income on investment securities during the first nine months of 2010 declined $377,029 or 9.7% as compared to the same period of the prior year. The decrease in interest income on investment securities during the first nine months of 2010 was primarily due to a decline in the yields earned which was partially offset by rise in the average volume. The taxable equivalent yield on investment securities fell 39 basis points in 2010, from 5.12% at December 31, 2009 to 4.73% at September 30, 2010 and decreased 47 basis points from September 30, 2009. The average volume of investment securities has increased approximately $3.7 million or 3.3% since December 31, 2009.

Interest and fees on loans decreased $432,722 or 7.4%, from the same period in 2009 primarily due to the decline in the average yield on loans combined with the decrease in the average loan volume. The taxable equivalent yield on loans fell 24 basis points in 2010 from 6.34% at December 31, 2009 to 6.10% at September 30, 2010 and fell 28 basis points from September 30, 2009. The average loan volume decreased approximately $3.9 million or 3.0% since December 31, 2009.

During the nine months ended September 30, 2010, interest expense fell $960,719 or 28.6% as compared to the same period in 2009. The decrease in the average yield paid on interest bearing liabilities, partially offset by an increase in the average volume of interest bearing liabilities primarily contributed to the decrease in interest expense during the nine month period ended September 30, 2010. The average yield paid on interest bearing liabilities fell 55 basis points from 2.03% at December 31, 2009 to 1.48% at September 30, 2010 and decreased 63 basis points since September 30, 2009.

Noninterest Income

Noninterest income increased $569,261 or 51.8% for the nine months ended September 30, 2010 as compared to same period of the prior year. The increase in noninterest income was primarily due to the increase in the net gains on sales of investment securities combined with the increase in other operating income, partially offset by the decline in service charges and other fee income.

The net gains on investment securities increased $404,240 or 257.3% for the nine month period ended September 30, 2010 as compared to the same period in 2009. The increase in net gains on sales of investment securities was primarily attributable to sales recorded by the Company and its subsidiary bank. During the second and third quarters of 2010, the Company’s subsidiary bank sold approximately $17.0 million of investment securities to take advantage of the current market interest rate environment. The Company accounted for securities gains of $562,619 and securities losses of $1,256 during the nine-month period ended September 30, 2010 and securities gains of $189,215 and securities losses of $32,092 during the nine-month period ended September 30, 2009.

PAGE 16

First West Virginia Bancorp, Inc.

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 and various other charges and fees related to normal customer banking relationships. For the nine month period ended September 30, 2010, other operating income increased $224,815 or 53.6% compared to the same period in 2009. The increase in other operating income was primarily the result of a gain on the sale of other real estate owned of approximately $186,000, which occurred during the third quarter of 2010. Additionally, other operating income increased due to increases in ATM fees, FHLB fee income and checkbook sales, offset in part by decreases in other miscellaneous income and in the earnings related to the cash surrender value of the bank owned life insurance on its key officers.

Service charges and other fees are earned from assessments made on checking and savings accounts. Service charges and other fee income fell $59,794 in the first nine months of 2010 as compared to the same period in 2009, down 11.5%, from 2009. Approximately $47,103 of the decrease related primarily to the decline in overdraft charges.

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

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the nine months ended September 30, 2010 and 2009 and the year ended December 31, 2009. Average balance sheet information for the periods ended September 30, 2010 and 2009 and December 31, 2009 was compiled using the daily averages. Loan fees and unearned discounts were included in income for average rate calculation purposes. Average yields on investment securities available for sale have been calculated based on amortized cost. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification.

	(Unaudited) For the nine months ended September 30, 2010								December 31, 2009								(Unaudited) For the nine months ended September 30, 2009
	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	$	29,856		$	723		3.24	%	$	23,321		$	910		3.90	%	$	23,664		$	735		4.15	%
Mortgage backed securities		57,849			1,901		4.39	%		63,068			3,125		4.96	%		63,407			2,402		5.06	%
States and political subdivisions		27,925			893		4.28	%		23,993			989		4.12	%		22,611			689		4.07	%
Other securities		239			3		1.68	%		1,760			94		5.34	%		1,781			72		5.41	%
Total Investment securities:		115,869			3,520		4.06	%		112,142			5,118		4.56	%		111,463			3,898		4.68	%
Interest bearing deposits		11,909			26		0.29	%		1,403			1		0.07	%		1,732			1		0.08	%
Federal funds sold		78			—		—			7,115			1		0.01	%		7,306			1		0.02	%
Loans, net of unearned income		124,347			5,409		5.82	%		128,206			7,779		6.07	%		127,910			5,841		6.11	%
Other earning assets		1,492			11		0.99	%		1,476			15		1.02	%		1,471			11		1.00	%
Total earning assets		253,695			8,966		4.73	%		250,342			12,914		5.16	%		249,882			9,752		5.22	%
Other assets		20,652								17,961								17,897
Allowance for loan losses		(1,915	)							(1,889	)							(1,898	)
Total Assets	$	272,432							$	266,414							$	265,881
LIABILITIES
Time deposits	$	84,261		$	1,626		2.58	%	$	92,544		$	3,100		3.35	%	$	93,848		$	2,416		3.44	%
Savings deposits		72,760			374		0.69	%		61,047			499		0.82	%		59,507			367		0.82	%
Interest bearing demand deposits		39,855			69		0.23	%		37,390			132		0.35	%		36,849			102		0.37	%
Federal funds purchased and repurchase agreements		13,302			85		0.85	%		12,623			128		1.01	%		12,450			92		0.99	%
FHLB and other long-term borrowings		6,478			240		4.95	%		9,377			469		5.00	%		10,055			377		5.01	%
Total interest bearing liabilities		216,656			2,394		1.48	%		212,981			4,328		2.03	%		212,709			3,354		2.11	%
Demand deposits		25,608								24,252								24,038
Other liabilities		936								989								1,031
Total Liabilities		243,200								238,222								237,778
STOCKHOLDERS’ EQUITY		29,232								28,192								28,103
Total Liabilities and Stockholders’ Equity	$	272,432							$	266,414							$	265,881
Net yield on earning assets				$	6,572		3.47	%				$	8,586		3.43	%				$	6,398		3.42	%

PAGE 17

First West Virginia Bancorp, Inc.

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

EARNINGS ANALYSIS - For the nine months ended September 30, 2010 - (Continued)

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the nine months ended September 30, 2010 and 2009, and the year ended December 31, 2009, respectively. The effect of this adjustment is presented below.

Investment securities	$	115,869	$	4,100	4.73	%	$	112,142	$	5,747	5.12	%	$	111,463	$	4,334	5.20	%
Loans		124,347		5,673	6.10	%		128,206		8,131	6.34	%		127,910		6,107	6.38	%
Total earning assets	$	253,695	$	9,810	5.17	%	$	250,342	$	13,895	5.55	%	$	249,882	$	10,454	5.59	%
Taxable equivalent net yield on earning assets			$	7,416	3.91	%			$	9,567	3.82	%			$	7,100	3.80	%

Noninterest Expense

Noninterest expense increased $176,486 or 3.2% for the nine months ended September 30, 2010 as compared to same period of the prior year. The increase in noninterest expense was primarily due to increases in occupancy expenses and salary and employee benefits expenses, offset in part by the decline in other operating expenses

Net occupancy expenses of premises increased $125,018 or 13.2% during the nine months ended September 30, 2010 compared to the same period in 2009. The increases in leasing costs for bank premises, depreciation expenses and other building maintenance costs and utilities expense contributed to the increase in occupancy expenses in 2010 as compared to 2009.

Salary and employee benefits expenses increased $92,754 or 3.4% during the nine months ended September 30, 2010 over the same period in 2009. Salary and employee benefit expense increased in 2010 compared to 2009 primarily as a result of the increase in payroll expenses as a result of normal annual merit adjustments in salaries and an increase in employee benefit expenses.

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

Unaudited	2010		2009		Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	87,075	$	76,450		10,625			13.9	%
Stationery and supplies		117,536		98,063		19,473			19.9	%
Regulatory assessment and deposit insurance		324,801		406,737		(81,936	)		(20.1	)%
Advertising		48,809		126,116		(77,307	)		(61.3	)%
Postage and transportation		123,821		122,305		1,516			1.2	%
Other taxes		146,654		141,322		5,332			3.8	%
Service expense		262,341		286,147		(23,806	)		(8.3	)%
Other		712,257		607,440		104,817			17.3	%
Total	$	1,823,294	$	1,864,580		(41,286	)		(2.2	)%

Income Taxes

Income tax expense for the nine-month period ended September 30, 2010 was $482,573, increasing $140,824 or 41.2% compared to the same period in 2009. The increase in pre-taxable income of $518,380 was offset in part by an increase in tax-exempt income, primarily contributed to the increase in income tax expense during the first nine months of 2010 over the same period in 2009. Components of the income tax expense for September 30, 2010 were $386,950 for federal taxes and $95,623 for West Virginia corporate net income taxes. Federal income tax rates and West Virginia corporate net income tax rates remain consistent at 34% and 9%, respectively, for the nine months ended September 30, 2010 and 2009 and for the year ended December 31, 2009.

PAGE 18

First West Virginia Bancorp, Inc.

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

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

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the three months ended September 30, 2010 and 2009. Average balance sheet information for the periods ended September 30, 2010 and 2009 was compiled using the daily averages. Loan fees and unearned discounts were included in income for average rate calculation purposes. Average yields on investment securities available for sale have been calculated based on amortized cost. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification. Average rates were annualized for the three-month periods ended September 30, 2010 and 2009.

	(Unaudited) For the three months ended September 30, 2010								(Unaudited) For the three months ended September 30, 2009
	Average Volume			Interest		Average Rate			Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. Treasury and other U.S. Government agencies	$	34,496		$	264		3.04	%	$	19,961		$	159		3.16	%
Mortgage backed securities		56,965			591		4.12	%		63,501			749		4.68	%
Obligations of states and political subdivisions		27,814			297		4.24	%		27,524			290		4.18	%
Other securities		236			1		1.68	%		1,770			24		5.38	%
Total Investment securities:		119,511			1,153		3.83	%		112,756			1,222		4.30	%
Interest bearing deposits		13,815			7		0.20	%		708			—		0.00	%
Federal funds sold		—			—		—			8,645			—		0.00	%
Loans, net of unearned income		121,956			1,779		5.79	%		128,794			1,969		6.07	%
Other earning assets		1,492			4		1.06	%		1,492			3		0.80	%
Total earning assets		256,774			2,943		4.55	%		252,395			3,194		5.02	%
Other assets		21,698								17,862
Allowance for loan losses		(1,927	)							(1,900	)
Total Assets	$	276,545							$	268,357
LIABILITIES
Time deposits	$	83,422		$	509		2.42	%	$	92,579		$	747		3.20	%
Savings deposits		74,470			117		0.62	%		61,986			130		0.83	%
Interest bearing demand deposits		42,396			22		0.21	%		37,756			37		0.39	%
Federal funds purchased and repurchase agreements		14,962			31		0.82	%		14,066			36		1.02	%
FHLB and other long-term borrowings		4,794			59		4.88	%		8,371			105		4.98	%
Total interest bearing liabilities		220,044			738		1.33	%		214,758			1,055		1.95	%
Demand deposits		25,829								24,262
Other liabilities		1,120								1,052
Total Liabilities		246,993								240,072
STOCKHOLDERS’ EQUITY		29,552								28,285
Total Liabilities and Stockholders’ Equity	$	276,545							$	268,357
Net yield on earning assets				$	2,205		3.41	%				$	2,139		3.36	%

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the three months ended September 30, 2010 and 2009, respectively. The effect of this adjustment is presented below.

Investment securities	$	119,511	$	1,345	4.46	%	$	112,756	$	1,407	4.95	%
Loans		121,956		1,875	6.10	%		128,794		2,055	6.33	%
Total earning assets	$	256,774	$	3,231	4.99	%	$	252,395	$	3,465	5.45	%
Taxable equivalent net yield on earning assets			$	2,493	3.85	%			$	2,410	3.79	%

PAGE 19

First West Virginia Bancorp, Inc.

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

EARNINGS ANALYSIS - For the three months ended September 30, 2010

Net Interest Income

For the three months ended September 30, 2010, net interest income was $2,205,200, increasing $66,329 or 3.1%, from the same period in 2009. The increase in net interest income was primarily due to the decrease in the interest paid on interest bearing liabilities, offset in part by the decrease in the interest earned on investment securities combined with the decline in the interest earned on loans. The taxable equivalent net yield on earnings assets increased from 3.79% at September 30, 2009 to 3.85% at September 30, 2010. Table Three presents the average balance sheets and an interest rate analysis for three months ended September 30, 2010 and 2009.

Interest expense paid on deposit liabilities fell $316,539 or 30.0% during the three months ended September 30, 2010 as compared to the same period in 2009. The decline in interest expense was primarily due to decreases in the average yield paid on interest bearing liabilities, which were offset in part by an increase in average balances. The average yield paid on interest bearing liabilities was down 62 basis points, from 1.95% at September 30, 2009 to 1.33% at September 30, 2010. The average volume of interest bearing liabilities rose approximately $5.3 million or 2.5%, from September 30, 2009 to September 30, 2010 primarily due to an increase in the balances maintained in savings deposits, interest bearing demand deposits and repurchase agreements, offset in part by the decline in time deposits and Federal Home Loan Bank borrowings.

Interest and fees on loans decreased $190,912 or 9.7% for the three month period ended September 30, 2010 as compared to the same period in 2009 due to the decline in the average yield on loans combined with the decrease in the average volume of loans. The taxable equivalent yield on loans fell 24 basis points, to 6.10% at September 30, 2010 from 6.34% at December 31, 2009 and decreased 23 basis points from September 30, 2009.

Interest income on investment securities decreased $66,853 or 5.5% during the third quarter of 2010 compared to the same period of the prior year. The decrease in interest income on investment securities was primarily due to the decline in the yield earned, offset in part by the rise in the average volume. The activity of the investment portfolio increased with the average volume increasing approximately $7.4 million or 6.6% since December 31, 2009 and $6.8 million or 6.0% since September 30, 2009. The taxable equivalent yield earned on investment securities declined 49 basis points, to 4.46% for the three months ended September 30, 2010 as compared to 4.95% for the same period in 2009.

Noninterest Income

Noninterest income increased $475,812 or 148.9% for the three months ended September 30, 2010 as compared to same period of the prior year. The increase in noninterest income was primarily due to the change in the net gains on sales of investment securities combined with the increase in other operating income, offset in part by the decrease in service charges and other fee income.

The net gains on investment securities increased $329,525 for the three-month period ended September 30, 2010 as compared to the same period in 2009. The increase in investment securities gains was primarily attributable to sales recorded by the Company and its subsidiary bank. The Company’s subsidiary bank sold approximately $9.5 million of investment securities during the third quarter of 2010 to take advantage of the current market interest rate environment. A net gain was recorded related to those sales of investment securities and amounted to $308,204. The Company accounted for securities gains of $308,795 and securities losses of $700 during the three-month period ended September 30, 2010 and securities gains of $1,853 and securities losses of $23,282 during the three-month period ended September 30, 2009.

For the third quarter of 2010, other operating income increased $184,660 or 120.2% as compared to same period of the prior year. The increase in other operating income during the three-month period ended September 30, 2010 as compared to the same period in the prior year was primarily due to increases in gains on sales of other real estate owned of approximately $186,000. Additionally, during the three month period ended September 30, 2010 as compared to the same period of the prior year other operating income increased as a result of increases in FHLB fee income and sales of checkbooks, offset in part by decreases in other miscellaneous income, ATM fees and a decline in the earnings related to the cash surrender value of the bank owned life insurance on its key officers.

Service charges and other fee income decreased $38,373 during the three months ended September 30, 2010, down 20.5%, from the same period in 2009. The decline in service charges and other fee income was primarily due to the decrease in overdraft fees on deposit accounts.

PAGE 20

First West Virginia Bancorp, Inc.

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

Noninterest Expense

Noninterest expense increased $21,552 or 1.1% for the three months ended September 30, 2010 as compared to same period of the prior year. The increase in noninterest expense was primarily due to the increase in salary and employee benefits expenses and occupancy expense of premises offset in part by the decrease in other operating expenses.

Net occupancy expenses of premises increased $34,134 or 11.1% during the three months ended September 30, 2010 compared to the same period in 2009. The increases in utilities expense, lease expense, depreciation expenses and other building maintenance costs contributed to the increase in occupancy expenses in 2010 as compared to 2009.

Salary and employee benefits increased $72,730 or 7.9% during the three months ended September 30, 2010 over the same period in 2009. The increase in salary and employee benefit expense in 2010 compared to 2009 was primarily as a result of the increase in payroll expenses as a result of normal annual merit adjustments in salaries and an increase in employee benefits expenses.

Other operating expense fell $85,312, or 12.6%, compared to the same period of the prior year. The decrease in other operating expenses during the three month period ended September 30, 2010 as compared to 2009 was attributable primarily due to the decreases in regulatory assessments and deposit insurance, advertising expenses, stationery and supplies expenses, and service expenses, which were offset in part by increases in director fees, postage and transportation expenses, other taxes and other expenses.

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

Unaudited	2010		2009		Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	34,150	$	24,075		10,075			41.8	%
Stationery and supplies		30,595		41,093		(10,498	)		(25.5	)%
Regulatory assessment and deposit insurance		110,502		172,139		(61,637	)		(35.8	)%
Advertising		21,083		37,591		(16,508	)		(43.9	)%
Postage and transportation		43,427		42,896		531			1.2	%
Other taxes		42,646		41,771		875			2.1	%
Service expense		89,141		99,288		(10,147	)		(10.2	)%
Other		221,143		219,146		1,997			.9	%
Total	$	592,687	$	677,999		(85,312	)		(12.6	)%

Income Taxes

Income tax expense for the three-month period ended September 30, 2010 was $261,251, increasing 340.2% compared to the same period in 2009. Income tax expense increased primarily due to the increase in pre-taxable income of $520,589 offset in part by the increase in tax-exempt income of $22,651 during the three-month period ended September 30, 2010 over the same period in 2009. Components of the income tax expense for the three months ended September 30, 2010 were $219,240 for federal taxes and $42,011 for West Virginia corporate net income taxes.

Balance Sheet Analysis

Investments

Investment securities increased approximately $4.7 million or 4.1% from December 31, 2009 to September 30, 2010. 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. Government agency and corporation securities, obligations of states and political subdivisions, mortgage-backed securities and equity securities. Taxable securities comprised 75.8% of total securities at September 30, 2010, as compared to 75.4% at December 31, 2009. Other than the normal risks inherent in purchasing U.S. Government agency and corporation securities, mortgage-backed securities and obligations of states and political subdivisions, i.e., interest rate risk, management has no knowledge of other market or credit risk involved in these investments. The Company does not have any high-risk hybrid/derivative instruments.

Investment securities that are classified available for sale are available for sale at any time based upon management’s assessment of changes in economic or financial market conditions. These securities are carried at fair value and the unrealized holding gains and losses, net of taxes, are reflected as a separate component of stockholder’s equity until realized. 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 and represent temporary adjustments in values. The carrying value of securities available for sale was above book value by $4,513,306 and $2,947,178 at September 30, 2010 and December 31, 2009, respectively. There were no securities classified as held to maturity at September 30, 2010 and December 31, 2009.

PAGE 21

First West Virginia Bancorp, Inc.

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

Table Four - Investment Portfolio

The following table presents the book values of investment securities.

	(Unaudited)
(dollars in thousands)	September 30, 2010		December 31, 2009
Securities available-for-sale:
U.S. Government corporations and agencies		29,279		26,434
Obligations of states and political subdivisions		29,759		29,041
Mortgage-backed securities		61,473		60,283
Equity securities		235		239
Total available-for-sale		120,746		115,997

Table Five - Information on unrealized losses of investment securities

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 September 30, 2010:

	(Expressed in thousands) September 30, 2010
	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. Government corporations and agencies	$	—	$	—	$	—	$	—		$	—	$	—
Obligations of states and political subdivisions		—		—		—		—			—		—
Mortgage-backed securities		—		—		278		(2	)		278		(2	)
Total debt securities		—		—		278		(2	)		278		(2	)
Equity securities		—		—		27		(2	)		27		(2	)
Total	$	—	$	—	$	305	$	(4	)	$	305	$	(4	)

	(Expressed in thousands) December 30, 2009
	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. Government corporations and agencies	$	14,783	$	(109	)	$	—	$	—		$	14,783	$	(109	)
Obligations of states and political subdivisions		483		(9	)		1007		(44	)		1,490		(53	)
Mortgage-backed securities		5,309		(15	)		314		(3	)		5,623		(18	)
Total debt securities		20,575		(133	)		1,321		(47	)		21,896		(180	)
Equity securities		—		—			61		(6	)		61		(6	)
Total	$	20,575	$	(133	)	$	1,382	$	(53	)	$	21,957	$	(186	)

The Company’s investment securities portfolio contains unrealized losses of direct obligations of the 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 non-collection of principal and interest during the period. There are 4 and 19 positions that were temporarily impaired at September 30, 2010 and December 31, 2009, respectively.

PAGE 22

First West Virginia Bancorp, Inc.

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

Investments - (Continued)

Table Six - Maturity distribution of Investment Portfolio

The maturity distribution using book value including accretion of discounts and amortization of premiums and approximate yield of investment securities at September 30, 2010 and December 31, 2009 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. 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.

	(Unaudited) September 30, 2010										December 31, 2009
	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. Government corporations and agencies
Within One Year	$	—		—	%	$	8		—	%	$	—		—	%	$	1,022		4.94	%
After One But Within Five Years		—		—			7,124		2.86			—		—			18,097		2.69
After Five But Within Ten Years		—		—			22,144		2.38			—		—			7,311		3.59
After Ten Years		—		—			3		0.87			—		—			4		0.88
		—		—			29,279		2.50			—		—			26,434		3.03
States & Political Subdivisions
Within One Year		—		—			674		4.53			—		—			281		6.46
After One But Within Five Years		—		—			3,977		5.34			—		—			4,892		5.22
After Five But Within Ten Years		—		—			4,924		5.49			—		—			4,040		5.69
After Ten Years		—		—			20,184		6.08			—		—			19,828		6.41
		—		—			29,759		5.85			—		—			29,041		6.11
Mortgage-Backed Securities		—		—			61,473		4.00			—		—			60,283		4.58
Equity Securities		—		—			235		2.86			—		—			239		2.45
Total	$	—		—	%	$	120,746		4.09	%	$	—		—	%	$	115,997		4.60	%

Assets carried at $32,213,000 and $28,959,000 at September 30, 2010 and December 31, 2009, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

Loans

Total loans, net of unearned income, declined approximately $5.1 million or 5.2% from December 31, 2009 to September 30, 2010. The decrease in loans during the first nine months of 2010 was primarily due to decreases in residential real estate loans, installment loans, and commercial loans, which fell approximately $2,862,000, $2,234,000 and $1,819,000, respectively, offset in part by increases in other loans which rose approximately $1,782,000. The decrease in commercial loans was primarily due to the decreased demand for commercial real estate and commercial loans. The decrease in residential real estate loans was primarily due to the decline in loans secured by one-to-four family residential properties. Installment loans declined primarily due to the decreased demand for consumer loans. Other loans increased primarily due to the increased demand for loans to states and political subdivisions.

Real estate residential loans, which include real estate construction, real estate farmland, and real estate residential loans comprised thirty-four percent (34%) of the loan portfolio. Commercial loans, which include real estate secured by non-farm, non-residential and commercial and industrial loans comprised forty-six percent (46%) of the loan portfolio. Installment loans comprised nine percent (9%) of the loan portfolio. Other loans, which include non-rated industrial development obligations, direct financing leases and other loans, comprised eleven percent (11%) of the loan portfolio. The changes in the composition of the loan portfolio since December 31, 2009 were a 2% increase in other loans, a 1% decrease in real estate residential loans and a 1% decrease in installment loans.

PAGE 23

First West Virginia Bancorp, Inc.

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

Table Seven - Loan Portfolio

Loans outstanding are as follows:

(dollars in thousands)	(Unaudited) September 30, 2010		December 31, 2009
Real Estate - residential:
Real estate - construction	$	622	$	605
Real estate - farmland		255		278
Real estate - residential		41,819		44,675
	$	42,696	$	45,558
Commercial:
Real estate-secured by nonfarm nonresidential	$	48,794	$	49,335
Commercial and industrial		7,751		9,029
	$	56,545	$	58,364
Installment:
Installment and other loans to individuals	$	10,934	$	13,168
Other:
Nonrated industrial development obligations	$	13,407	$	11,632
Other loans		29		22
	$	13,436	$	11,654
Total		123,611		128,744
Less unearned interest		149		163
	$	123,462	$	128,581

Table Eight - 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 September 30, 2010 and December 31, 2009:

(dollars in thousands)	September 30, 2010						December 31, 2009
	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	$	257	$	233	$	132	$	222	$	249	$	134
Commercial real estate - secured by nonfarm, nonresidential property		898		5,403		42,493		687		5,586		43,062
Commercial and industrial		1,718		3,097		2,936		2,565		3,029		3,435
Nonrated industrial development obligations		975		6,005		6,427		869		5,753		5,010
Total	$	3,848	$	14,738	$	51,988	$	4,343	$	14,617	$	51,641

The following table presents an analysis of fixed and variable rate loans as of September 30, 2010 and December 31, 2009 along with the contractual maturities of loans other than installment loans and residential mortgages:

(dollars in thousands)	September 30, 2010						December 31, 2009
	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	$	2,474	$	10,607	$	9,186	$	2,570	$	10,229	$	7,429
Variable Rates		1,374		4,131		42,802		1,773		4,388		44,212
Total	$	3,848	$	14,738	$	51,988	$	4,343	$	14,617	$	51,641

PAGE 24

First West Virginia Bancorp, Inc.

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

Loans - (Continued)

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

Total non-performing loans were $4,999,000 at September 30, 2010 as compared to $4,265,000 at December 31, 2009. The increase in non-performing loans was primarily due to an increase in non-accrual loans offset in part by a decline in other real estate. 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 $4,991,000 or 4.0% of total loans outstanding as of September 30, 2010, as compared to $4,092,000 or 3.2% of total loans at December 31, 2009. The increase in non-accrual loans during the first nine months of 2010 was primarily due to the addition of one commercial real estate loan totaling approximately $2.4 million, two residential real estate loans totaling approximately $134,000 and four installment loans totaling approximately $24,000, offset in part by payments and/or charge-offs. Other real estate decreased $165,000 since December 31, 2009. Management continues to monitor the nonperforming assets to ensure against deterioration in collateral values.

Table Nine - 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:

(dollars in thousands)	(Unaudited) September 30, 2010			December 31, 2009
Past Due 90 Days or More:
Real estate - residential	$	—		$	—
Commercial		—			—
Installment		—			—
	$	—		$	—
Non-accrual:
Real estate - residential	$	660		$	1,819
Commercial		4,306			2,254
Installment		25			19
	$	4,991		$	4,092
Other Real Estate	$	8		$	173
Total non-performing assets	$	4,999		$	4,265
Total non-performing assets to total loans and other real estate		4.05	%		3.31	%

Generally, all banks recognize interest income on the accrual basis, except for certain loans, which are placed on a non-accrual status. Loans are placed on a non-accrual status, when in the opinion of management doubt exists as to its collectibility. In accordance with the Office of the Comptroller of the Currency Policy, banks may not accrue interest on any loan which either the principal or interest is past due 90 days or more unless the loan is both well secured and in the process of collection. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was approximately $286,300, $201,800 and $249,500 for the nine months ended September 30, 2010 and 2009 and for the year ended December 31, 2009, respectively.

PAGE 25

First West Virginia Bancorp, Inc.

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

Table Ten - Analysis of Allowance for Loan Losses

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

	(Unaudited) September 30,						December 31, 2009
(dollars in thousands)	2010			2009
Allowance for loan losses:
Balance at beginning of period:	$	1,894		$	1,923		$	1,923
Loans charged off:
Real estate - residential		—			—			—
Commercial		14			1			165
Installment		38			59			66
		52			45			231
Recoveries:
Real estate - residential		—			—			—
Commercial		1			3			11
Installment		4			4			7
		5			7			18
Net charge-offs		47			52			213
Additions charged to operations		90			40			184
Balance at end of period:	$	1,937		$	1,911		$	1,894
Average loans outstanding	$	124,347		$	127,910		$	128,206
Ratio of net charge-offs to average loans outstanding for the period		0.04	%		0.04	%		0.17	%
Ratio of the allowance for loan losses to loans outstanding for the period		1.57	%		1.48	%		1.47	%

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.

Allowance for Loan Losses

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

The allowance for loan losses increased $42,628 or 2.3%, since December 31, 2009. The allowance for loan losses represented 1.6% and 1.5% of outstanding loans as of September 30, 2010 and December 31, 2009, respectively. Net loan charge-offs amounted to $47,000 for the nine month period ended September 30, 2010, compared to loan charge-offs of $52,000 for the same period in 2009. During the first nine months of 2010, a provision was made to the allowance for loan losses in the amount of $90,000 as compared to $40,000 during the first nine months of 2009. The credit quality of the loan portfolio combined with the recent level of net charge-offs and nonperforming assets continue to be considered in the calculation of the provision for loan losses. The Company has allocated the allowance for possible loan losses to specific portfolio segments based upon historical net charge-off experience, changes in the level of nonperforming assets, local economic conditions and management’s experience as presented in Table Eleven.

PAGE 26

First West Virginia Bancorp, Inc.

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

Table Eleven - Allocation of allowance for possible loan losses

The following table presents an allocation of the allowance for possible loan losses at each of the four-year periods ended December 31, 2009, and the three-month period ended September 30, 2010. 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.

(dollars in thousands)	(Unaudited) September 30, 2010					December 31,
						2009					2008					2007					2006
	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	$	533		34.5	%	$	412		35.3	%	$	298		35.8	%	$	298		38.3	%	$	327		35.8	%
Commercial		1,232		45.8			1,333		45.4			1,184		43.0			1,277		41.2			1,483		43.3
Installment		70		8.8			79		10.2			420		11.3			447		10.5			466		11.2
Others		102		10.9			70		9.1			21		9.9			21		10.0			21		9.7
Total	$	1,937		100.0	%	$	1,894		100.0	%	$	1,923		100.0	%	$	2,043		100.0	%	$	2,297		100.0	%

Deposits

A stable core deposit base is the major source of funds for the Company’s subsidiary bank. The deposit mix depends upon many factors including competition from other financial institutions, depositor interest in certain types of deposits, changes in the interest rate and the Company’s need for certain types of deposit growth. Total deposits increased approximately $8.5 million or 3.8% during the first nine months of 2010. Since year-end the rise in total deposits was primarily due to increases in interest bearing and noninterest bearing demand deposits and savings deposits, which increased approximately $3,350,000, $603,000 and $7,845,000, respectively, offset in part by a decrease in time deposits of $3,328,000. At September 30, 2010, 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 were no changes in the deposit mix from December 31, 2009 to September 30, 2010.

Table Twelve - Maturity Distribution of Time Certificates of Deposit

A maturity distribution of time certificates of deposit at September 30, 2010 and December 31, 2009, follows:

	Maturities of Time Deposits
(dollars in thousands)	(Unaudited) September 30, 2010		December 31, 2009
Due in 2010	$	16,221	$	57,681
Due in 2011		35,686		13,728
Due in 2012		15,669		7,891
Due in 2013		5,081		3,553
Due in 2014		5,306		3,659
Due in 2015 and thereafter		5,229		7
Total	$	83,192	$	86,519

Time deposits include certificates of deposit issued in denominations of $100,000 or more, which amounted to $25,535,000 and $23,781,000 at September 30, 2010 and December 31, 2009, respectively. Interest expense on certificates of deposit of $100,000 or more was $467,120 and $705,000 at September 30, 2010 and 2009, respectively.

PAGE 27

First West Virginia Bancorp, Inc.

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

Table Thirteen - Maturity of Time Deposits of $100,000 or more

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

	Maturities of Time Deposits in Excess of $100,000
(dollars in thousands)	(Unaudited) September 30, 2010		December 31, 2009
Three Months or Less	$	4,369	$	7,053
Over Three and Less than Six Months		3,774		3,212
Over Six and Less than Twelve Months		4,933		6,888
Over Twelve Months		10,459		6,628
Total	$	23,535	$	23,781

Federal Funds Purchased and Repurchase Agreements

Federal funds purchased and repurchase agreements represent borrowings of a short duration, usually less than 30 days. For repurchase agreements, the securities underlying the agreements remained under the Bank’s control. There were no Federal funds purchased at September 30, 2010 and December 31, 2009. Repurchase agreements increased $4,258,437 or 38.6%, from December 31, 2009 to September 30, 2010. The increase in repurchase agreements since year-end was primarily due to the increase in the balances maintained by existing commercial customers.

Federal Home Loan Bank and Other Long-term Borrowings

The subsidiary Bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). The FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans or securities with a market value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at September 30, 2010 was approximately $46.5 million subject to the purchase of additional FHLB stock. The FHLB borrowings were $3,795,618 and $7,354,309 at September 30, 2010 and December 31, 2009, respectively.

The Bank has three fixed rate amortizing advances with a weighted average interest rate of 4.78%, of which approximately $2.2 million will mature in 2018 and $1.7 million will mature in 2023.

Progressive 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 September 30, 2010 and December 31, 2009, respectively.

Contractual maturities of FHLB borrowings as of September 30, 2010 were as follows:

2010	$	20,034
2011		82,570
2012		86,602
2013		90,832
2014		95,267
Thereafter		3,420,313
	$	3,795,618

PAGE 28

First West Virginia Bancorp, Inc.

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

Capital Resources

Stockholders’ equity increased 3.3% during the nine-month period ended September 30, 2010 entirely from current earnings after quarterly dividends, and a 3.2% 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 gain on securities available for sale. Stockholders’ equity amounted to 10.9% and 11.4% of total assets at September 30, 2010 and December 31, 2009, respectively. The Company paid dividends of $.57 per share during the nine-month periods ended September 30, 2010 and September 30, 2009.

The Company’s primary source of funds for payment of dividends to shareholders is from the dividends from its subsidiary bank. 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 2010, without approval of the Comptroller of the Currency, of approximately $2,179,000, plus an additional amount equal to the bank’s net profit for 2010 up to the date of any such dividend declaration.

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

As of September 30, 2010, 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 September 30, 2010
Total Capital (to Risk Weighted Assets)	$	30,188		20.39	%	$	12,211		8.0	%	$	15,264		10.0	%
Tier I Capital (to Risk Weighted Assets)		28,340		19.14	%		6,105		4.0	%		9,158		6.0	%
Tier I Capital (to Adjusted Total Assets)		28,340		10.30	%		10,816		4.0	%		13,520		5.0	%
As of December 31, 2009
Total Capital (to Risk Weighted Assets)	$	29,217		19.11	%	$	12,230		8.0	%	$	15,288		10.0	%
Tier I Capital (to Risk Weighted Assets)		27,323		17.87	%		6,115		4.0	%		9,173		6.0	%
Tier I Capital (to Adjusted Total Assets)		27,323		10.25	%		10,660		4.0	%		13,325		5.0	%
Progressive Bank, N.A.
As of September 30, 2010
Total Capital (to Risk Weighted Assets)	$	29,915		20.24	%	$	12,193		8.0	%	$	15,241		10.0	%
Tier I Capital (to Risk Weighted Assets)		28,067		18.99	%		6,097		4.0	%		9,145		6.0	%
Tier I Capital (to Adjusted Total Assets)		28,067		10.22	%		10,807		4.0	%		13,508		5.0	%
As of December 31, 2009
Total Capital (to Risk Weighted Assets)	$	28,934		18.97	%	$	12,202		8.0	%	$	15,253		10.0	%
Tier I Capital (to Risk Weighted Assets)		27,040		17.73	%		6,101		4.0	%		9,152		6.0	%
Tier I Capital (to Adjusted Total Assets)		27,040		10.17	%		10,640		4.0	%		13,300		5.0	%

PAGE 29

First West Virginia Bancorp, Inc.

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

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 $120,746,289 classified as available for sale at September 30, 2010. 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 $305,000. 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. The remaining maximum borrowing capacity with the FHLB at September 30, 2010 was approximately $46.5 million subject to the purchase of additional FHLB stock. At September 30, 2010, 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 September 30, 2010.

At September 30, 2010 and December 31, 2009, the Company had outstanding loan commitments and unused lines of credit totaling $18,514,000 and $12,497,000, respectively. As of September 30, 2010, management placed a high probability for required funding within one year of approximately $14.1 million. Approximately $4.0 million is principally unused home equity and credit card lines on which management places a low probability for required funding.

PAGE 30

FIRST WEST VIRGINIA BANCORP, INC.

PART I

Item 3 Quantitative and Qualitative Disclosures About Market Risk

The Company’s subsidiary bank uses an asset/liability model to measure the impact of changes in interest rates on net interest income on a periodic basis. Assumptions are made to simulate the impact of future changes in interest rates and/or changes in balance sheet composition. The effect of changes in future interest rates on the mix of assets and liabilities may cause actual results to differ from simulated results. Guidelines established by the Company’s subsidiary bank provides that the estimated net interest income may not change by more than 10% in a one year period given a +/- 200 basis point parallel shift in interest rates. Excluding the potential effect of interest rate changes on assets and liabilities of the Holding Company which are not deemed material, the anticipated impact on net interest income of the subsidiary bank at September 30, 2010 was as follows: given a 200 basis point increase scenario net interest income would be increased by approximately 1.2%, and given a 200 basis point decrease scenario net interest income would be decreased by approximately .1%. The results using +/- 100 basis point interest rate scenarios are also presented. Under the 100 basis point increase scenario net interest income would be increased by approximately 2.3%, and given a 100 basis point decrease scenario net interest income would be increased by 1.1%. The projections provided by the model are not intended as an actual forecast of the bank’s performance in a particular rate environment, and should not be relied upon. Actual changes in the interest rate environment normally do not take place instantaneously, but over a period of time, and do not occur in a parallel fashion. Additionally, the balance sheet composition, spread relationships for new dollars invested, non interest income and expenses, investment practices, and deposit practices all change as a result of changes in interest rates and would need to be considered by the Asset Liability committee.

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls

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

PAGE 31

FIRST WEST VIRGINIA BANCORP, INC.

PART II

OTHER INFORMATION

Item 1 Legal Proceedings

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

Item 1A Risk Factors

Please refer to the Company’s report on Form 10-K for the year ended December 31, 2009 for disclosures with respect to risk factors. There have been no material changes since year-end 2009 in the specified risk factors disclosed in the Annual Report on Form 10-K.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Inapplicable

Item 3 Defaults Upon Senior Securities

Inapplicable

Item 4 (Removed and Reserved)

Item 5 Other Information

Inapplicable

Item 6 Exhibits and Reports on Form 8-K

(a) Reports on Form 8-K

On August 16, 2010 a report on Form 8-K was filed which contained a press release dated August 13, 2010 that reported the announcement of First West Virginia Bancorp Inc.’s second quarter earnings.

On August 31, 2010 a report on Form 8-K was filed under ITEM 5.02 that reported the announcement of First West Virginia Bancorp Inc.’s two new directors.

(b) Exhibits

The exhibits listed in the Exhibit Index on page 36 of this FORM 10-Q are incorporated by reference and/or filed herewith.

PAGE 32

SIGNATURES

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

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

Dated: November 12, 2010

PAGE 33

EXHIBIT INDEX

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

Exhibit Number	Description
3.1	Certificate and Articles of Incorporation of First West Virginia Bancorp, Inc. Incorporated herein by reference.*
3.2	Bylaws of First West Virginia Bancorp, Inc. Incorporated herein by reference.*
10.3	Lease dated July 20, 1993 between Progressive Bank, N.A., formerly known as “First West Virginia Bank, N.A.”, and Angela I. Stauver. Incorporated herein by reference.*
10.4	Lease dated March 7, 2006 between Progressive Bank, N.A. and O. V. Smith & Sons of Big Chimney, Inc. Incorporated herein by reference.*
10.5	Lease dated May 12, 2001 between Progressive Bank, N.A. and Sylvan J. Dlesk and Rosalie J. Dlesk doing business as Dlesk Realty & Investment Company. Incorporated herein by reference.*
10.6	Lease dated January 1, 2005 between Progressive Bank, N.A. and Elm Grove Properties LLC. Incorporated herein by reference.*
10.7	Lease dated December 1, 2009 between Progressive Bank, N.A. and Richard J. Dlesk, Sr. And Sharon G. Neis-Dlesk. Incorporated herein by reference.*
11.1	Statement regarding computation of per share earnings. Filed herewith and incorporated herein by reference.
13.3	Summarized Quarterly Financial Information. Filed herewith and incorporated herein by reference.
15	Letter re unaudited interim financial information. Incorporated herein by reference. See Part 1, Notes to Consolidated Financial Statements
31	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Executive Officer pursuant to section 302 of the Securities and Exchange Act of 1934. Filed herewith and incorporated herein by reference.
31.1	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Financial Officer pursuant to section 302 of the Securities and Exchange Act of 1934. Filed herewith and incorporated herein by reference.
32	Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to section 906 of the SARBANES-OXLEY ACT of 2002. Filed herewith and incorporated herein by reference.
99.1	Report of Independent Registered Public Accounting Firm. Filed herewith and incorporated herein by reference.

* Incorporated by reference to an identically numbered exhibit to the Form 10-K (File No. 001-13652) filed with the SEC on March 31, 2010.

PAGE 34