First West Virginia Bancorp (FWV) 10-Q 2011 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, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT 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).    x  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 practicable date.

The number of shares outstanding of the issuer’s common stock as of November 14, 2011: Common Stock, $5.00 Par Value, shares outstanding: 1,652,814 shares

FORM 10-Q INDEX

PART I - Financial Information
Item 1	Financial Statements and Accompanying Notes	3-26
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27-37
Item 3	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4	Controls and Procedures	38
PART II - Other Information
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3	Defaults upon Senior Securities	39
Item 4	(Removed and Reserved)	39
Item 5	Other Information	39
Item 6	Exhibits and Reports on Form 8-K
	Reports on Form 8-K	39
	Signatures	40
	Exhibit Index	41

PAGE 2

FIRST WEST VIRGINIA BANCORP, INC.

PART I

FINANCIAL INFORMATION

PAGE 3

First West Virginia Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

	September 30, 2011			December 31, 2010
ASSETS
	(Unaudited)
Cash and due from banks	$	4,668,448		$	4,622,677
Due from banks - interest bearing		17,619,656			5,309,936
Total cash and cash equivalents		22,288,104			9,932,613
Investment securities:
Available-for-sale (at fair value)		143,206,933			133,168,794
Loans		114,285,507			121,367,066
Less allowance for loan losses		(2,524,749	)		(2,059,025	)
Net loans		111,760,758			119,308,041
Premises and equipment, net		5,734,592			5,714,121
Accrued income receivable		1,214,430			1,094,835
Goodwill		1,644,119			1,644,119
Bank owned life insurance		3,492,176			3,415,247
Other assets		2,526,896			3,680,882
Total assets	$	291,868,008		$	277,958,652
LIABILITIES
Noninterest bearing deposits:
Demand	$	29,483,494		$	28,319,278
Interest bearing deposits:
Demand		45,262,809			42,112,794
Savings		84,570,576			78,678,200
Time		76,142,881			79,364,466
Total deposits		235,459,760			228,474,738
Federal funds purchased and securities sold under agreements to repurchase		16,912,195			13,477,420
Federal Home Loan Bank borrowings		3,714,027			3,775,583
Accrued interest payable		212,673			276,662
Other liabilities		1,742,487			853,063
Total liabilities		258,041,142			246,857,466
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,662,814 shares issued at September 30, 2011 and December 31, 2010		8,314,070			8,314,070
Treasury stock - 10,000 shares at cost:		(228,100	)		(228,100	)
Surplus		6,288,403			6,288,403
Retained earnings		16,598,183			15,722,313
Accumulated other comprehensive income		2,854,310			1,004,500
Total stockholders’ equity		33,826,866			31,101,186
Total liabilities and stockholders’ equity	$	291,868,008		$	277,958,652

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,
	2011		2010		2011		2010
	(Unaudited)				(Unaudited)
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	1,506,060	$	1,634,138	$	4,554,523	$	5,012,275
Tax-exempt		125,556		144,590		403,624		396,248
Debt securities:
Taxable		813,718		865,695		2,495,816		2,653,029
Tax-exempt		348,766		287,675		1,064,237		868,105
Other interest income		12,755		11,537		33,095		37,202
Federal funds sold		—		—		—		8
Total interest and dividend income		2,806,855		2,943,635		8,551,295		8,966,867
INTEREST EXPENSE
Deposits		473,119		647,944		1,497,405		2,068,686
Federal funds purchased and repurchase agreements		28,306		31,634		79,091		85,244
FHLB and other long-term borrowings		44,528		58,857		133,820		239,612
Total interest expense		545,953		738,435		1,710,316		2,393,542
Net interest income		2,260,902		2,205,200		6,840,979		6,573,325
PROVISION FOR LOAN LOSSES		—		30,000		600,000		90,000
Net interest income after provision for loan losses		2,260,902		2,175,200		6,240,979		6,483,325
NONINTEREST INCOME
Service charges and other fees		133,155		149,039		363,081		461,350
Net gains on available for sale securities		375,121		308,096		642,997		561,363
Other operating income		213,736		338,339		548,316		644,642
Total noninterest income		722,012		795,474		1,554,394		1,667,355
NONINTEREST EXPENSE
Salary and employee benefits		971,599		989,102		2,844,320		2,854,130
Net occupancy expense of premises		375,984		340,696		1,080,720		1,075,060
Other operating expenses		546,254		592,687		1,779,859		1,823,294
Total noninterest expense		1,893,837		1,922,485		5,704,899		5,752,484
Income before income taxes		1,089,077		1,048,189		2,090,474		2,398,196
INCOME TAX EXPENSE		230,145		261,251		272,500		482,573
Net income	$	858,932	$	786,938	$	1,817,974	$	1,915,623
WEIGHTED AVERAGE SHARES OUTSTANDING		1,652,814		1,652,814		1,652,814		1,652,814
EARNINGS PER COMMON SHARE	$	0.52	$	0.48	$	1.10	$	1.16
DIVIDENDS PER COMMON SHARE	$	0.19	$	0.18	$	0.57	$	0.55

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				Surplus		Retained Earnings			Treasury Stock			Accumulated Other Compre- hensive Income (loss)		Compre- hensive Income		Total
	Shares		Amount
BALANCE, DECEMBER 31, 2010		1,662,814	$	8,314,070	$	6,288,403	$	15,722,313		$	(228,100	)	$	1,004,500			$	31,101,186
Comprehensive income:
Net income		—		—		—		1,817,974			—			—	$	1,817,974		1,817,974
Other comprehensive income, net of tax
Unrealized gains on securities net of reclassification adjustment (see disclosure)		—		—		—		—			—			1,849,810		1,849,810		1,849,810
Comprehensive income															$	3,667,784
Cash dividend ($.57 per share)		—		—		—		(942,104	)		—			—				(942,104	)
BALANCE, September 30, 2011		1,662,814	$	8,314,070	$	6,288,403	$	16,598,183		$	(228,100	)	$	2,854,310			$	33,826,866
	Common Stock				Surplus		Retained Earnings			Treasury Stock			Accumulated Other Compre- hensive Income (loss)		Compre- hensive Income		Total
	Shares		Amount
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 ($.55 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
					For the Nine Months Ended September 30,
					2011		2010
Disclosure of reclassification amount, net of tax:
Unrealized holding gains arising during the period					$	2,250,847	$	1,326,915
Less reclassification adjustment for gains included in net income						401,037		350,122
Net unrealized gains on securities					$	1,849,810	$	976,793

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

PAGE 6

First West Virginia Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2011			2010
OPERATING ACTIVITIES
Net income	$	1,817,974		$	1,915,623
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600,000			90,000
Depreciation and amortization		362,390			378,712
Amortization (accretion) of investment securities, net		177,273			59,542
Investment security gains		(642,997	)		(561,363	)
Increase in cash surrender value of bank-owned life insurance		(76,929	)		(78,462	)
Increase in interest receivable		(119,595	)		(3,670	)
Decrease in interest payable		(63,989	)		(111,530	)
Other, net		927,355			1,299,608
Net cash provided by operating activities		2,981,482			2,988,460
INVESTING ACTIVITIES
Net decrease in loans, net of charge-offs		6,895,105			5,067,024
Proceeds from sales of securities available-for-sale		18,299,847			17,564,973
Proceeds from maturities of securities available-for-sale		33,350,126			38,968,408
Principal collected on mortgage-backed securities		14,302,668			9,388,005
Purchases of securities available-for-sale		(72,559,191	)		(68,602,682	)
Recoveries on loans previously charged-off		52,178			4,858
Purchases of premises and equipment		(382,861	)		(1,314,646	)
Net cash provided by (used in) investing activities		(42,128	)		1,075,940
FINANCING ACTIVITIES
Net increase in deposits		6,985,022			8,470,325
Dividends paid		(942,104	)		(905,964	)
Increase in short-term borrowings		3,434,775			4,258,437
Payments of FHLB and other long-term borrowings		(61,556	)		(3,558,691	)
Net cash provided by financing activities		9,416,137			8,264,107
INCREASE IN CASH AND CASH EQUIVALENTS		12,355,491			12,328,507
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		9,932,613			13,353,789
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	22,288,104		$	25,682,296
Supplemental Disclosures:
Cash Paid for Interest	$	1,774,304		$	2,505,072
Cash Paid for Income Taxes	$	161,183		$	157,918

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, 2011 AND 2010

(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 and the valuation of deferred tax assets.

Cash and cash equivalents: Cash and cash equivalents consist of cash on hand and amounts due from banks and federal funds sold with maturities of less than 90 days.

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.

Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and extent to which the market value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and management’s intent and ability to hold the security for a period of time sufficient to allow for a recovery in market value. Among the factors that are considered in determining management’s intent and ability is a review of the Company’s capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a decline in value is determined to be other than temporary, if the investor does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. At September 30, 2011 and December 31, 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. The Bank is a member of the FHLB and, as such, is required to maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from and sold to the FHLB based upon its $100 par value. The stock does not have a readily determinable fair value and, as such, is classified as restricted stock, carried at cost and evaluated by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared with the capital stock amount and the length of time this situation has persisted, (b) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance, (c) the impact of legislative and regulatory changes on the customer base of the FHLB, and (d) the liquidity position of the FHLB.

PAGE 8

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The FHLB has incurred losses in the prior two years and has suspended the payments of dividends. The losses are primarily attributable to impairment of investment securities associated with the extreme economic conditions in place over the last two years. Management evaluated the stock and concluded that the stock was not impaired for the periods presented herein. More consideration was given to the long-term prospects for the FHLB as opposed to the recent stress caused by the extreme economic conditions the world is facing. Management also considered that the FHLB’s regulatory capital ratios have increased from the prior year, liquidity appears adequate, and new shares of FHLB stock continue to exchange hands at $100 par value.

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. Nonaccrual loans may be returned to accrual status when none of its principal and interest payments are due and there has been a sustained period of repayment performance. 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, 2011 and December 31, 2010, 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 of $10,000,000. This commitment expires on December 28, 2011. 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 were $8,474,164 and $6,758,928 as of September 30, 2011 and December 31, 2010, respectively. These loans were also subject to recourse obligation or credit risk in the amount of $303,366 and $232,888 at September 30, 2011 and December 31, 2010, respectively. The amount of income recognized as of a result of this agreement was $50,330 and $40,058 for the nine month periods ended September 30, 2011 and 2010, 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.

Management tracks and assigns a historical loss percentage for each loan rating category within each loan type. A rolling three-year historical loss ratio is used, calculated on a quarterly basis.

Management currently utilizes nine qualitative factors that are adjusted based on changes in the lending environment and economic conditions. The qualitative factors include the following: levels of and trends in delinquencies, non-accruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and local economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of underlying collateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the risk no longer applies. Each loan type will have its own risk profile and management will evaluate and adjust each qualitative factor for each loan type quarterly, if necessary. For example, if one area of the loan portfolio is experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan portfolio would be increased for that loan type. As levels of delinquencies and non-accrual loans decline for commercial real estate and commercial loans it is likely that factor would be reduced.

In terms of the Company’s’s loan portfolio, the commercial and industrial loans and commercial real estate loans are deemed to have more risk than the consumer real estate loans and other consumer loans in the portfolio. The commercial loans not secured by real estate are highly dependent on financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. More recently, commercial real estate has been negatively impacted by devaluation so these commercial loans carry a higher qualitative factor for changes in the value of collateral. The commercial loans and commercial real estate loans have historically been responsible for the majority of the Company’s delinquencies, non-accrual loans, and charge-offs so both of these categories carry higher qualitative factors than consumer real estate loans and other consumer loans. The Company has historically experienced very low levels of consumer real estate and consumer loan charge-offs so these qualitative factors are set lower than the commercial real estate and commercial and industrial loans.

PAGE 9

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allowance for Loan Losses: (Continued)

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Impaired loans are loans for which it is probable the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. The Company individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap.

The Company may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectibility while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or as a practical expedient in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the fair value of the collateral.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $2,524,749 at September 30, 2011, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectibility of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be based on changes in economic conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause the Company to experience increases in problem assets, delinquencies and losses on loans.

Goodwill and Other Intangible Assets Goodwill resulted from the Company’s purchase of a less-than-whole financial institution (the “branch”). The goodwill value of $1.6 million is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill and other intangibles are periodically reviewed for impairment. No impairment losses were recognized. Additionally, future events could cause management to conclude that impairment indicators exist and that the goodwill is impaired, which would result in the Company recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on the Company’s financial condition and results of operations.

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 $3,492,176 and $3,415,247 at September 30, 2011 and December 31, 2010, respectively. The death benefit value of the bank-owned life insurance at September 30, 2011 and at December 31, 2010 was $8.7 million and $8.8 million, respectively. 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.

Advertising Costs: Advertising costs are expensed as the costs are incurred. Advertising expenses amounted to $40,280 and $21,083 for the three month periods ended September 30, 2011 and 2010, respectively. For the nine month periods ended September 30, 2011 and 2010 advertising expenses amounted to $98,650 and $48,809, respectively.

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.

PAGE 10

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

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

Income Taxes: The Company and its subsidiary file a consolidated federal income tax return. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Statement of Income. 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.

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.

Stock Dividends:On October 13, 2010, the Company declared a 4% stock dividend to stockholders of record on December 20, 2010. All common share data includes the effect of the stock dividends.

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, 2011 and September 30, 2010. Other comprehensive income comprises unrealized holding gains (losses) on the available-for-sale securities portfolio. The Company has elected to report the effects of other comprehensive income as part of the Consolidated Statement of Changes in Stockholders’ Equity. The following table represents other comprehensive income before tax and net of tax:

	For the three months ended September 30,						For the nine months ended September 30,
	2011			2010			2011			2010
Before-tax amount	$	1,712,615		$	117,323		$	2,965,865		$	1,566,126
Tax effect		(644,457	)		(44,149	)		(1,116,055	)		(589,333	)
Net of tax effect		1,068,158			73,174			1,849,810			976,793
Net income as reported		858,932			786,938			1,817,974			1,915,623
Total comprehensive income (loss)	$	1,927,090		$	860,112		$	3,667,784		$	2,892,416

Recent Accounting Pronouncements: 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 did not have a significant impact on the Company’s financial statements.

In July 2010, the Financial Accounting Standards Board (“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 has provided the necessary disclosures in Note 4.

PAGE 11

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In December, 2010, the FASB issued ASU 2010-28,When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating an impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments in this Update are effective for fiscal year, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities may early adopt the amendments using the effective date for public entities. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2010, the FASB issued ASU 2010-29,Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In April 2011, the FASB issued ASU 2011-02,Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this Update provide additional guidance or clarification to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this Update are effective for the first interim or annual reporting period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. The Company has provided the necessary disclosures in Note 3.

In April 2011, the FASB issued ASU 2011-03,Reconsideration of Effective Control for Repurchase Agreements. The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this Update apply to all entities, both public and nonpublic. The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

PAGE 12

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08,Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU is not expected to have a significant impact on the Company’s financial statements.

PAGE 13

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are as follows at September 30, 2011 and December 31, 2010:

	(Expressed in thousands)
	September 30, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Obligations of U.S. Government corporations and agencies	$	34,259	$	156	$	(21	)	$	34,394
Obligations of states and political subdivisions		37,432		2,308		(4	)		39,736
Mortgage-backed securities U.S. sponsored entities		66,724		2,175		(44	)		68,855
Equity securities		216		8		(2	)		222
Total available-for-sale		138,631		4,647		(71	)		143,207
Total	$	138,631	$	4,647	$	(71	)	$	143,207
	(Expressed in thousands)
	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Obligations of U.S. Government corporations and agencies	$	36,024	$	120	$	(446	)	$	35,698
Obligations of states and political subdivisions		33,738		678		(125	)		34,291
Mortgage-backed securities U.S. sponsored entities		61,580		1,828		(458	)		62,950
Equity securities		216		14		—			230
Total available-for-sale		131,558		2,640		(1,029	)		133,169
Total	$	131,558	$	2,640	$	(1,029	)	$	133,169

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 quarterly basis, the Company evaluates the severity and duration of impairment for its investment securities portfolio and the Company’s ability to hold the securities till they recover. Generally, impairment is considered other than temporary when an investment security has sustained a decline in market value for a period of twelve months. The Company has concluded that any impairment of its investment securities portfolio is not other than temporary but is the result of interest rate changes that are not expected to result in the noncollection of principal and interest during the period. There were 9 and 30 positions that were temporarily impaired at September 30, 2011 and December 31, 2010, respectively.

PAGE 14

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

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, 2011 and December 31, 2010:

	(Expressed in thousands)
	September 30, 2011
	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	$	2,979	$	(21	)	$	—	$	—		$	2,979	$	(21	)
Obligations of states and political subdivisions		374		(4	)		—		—			374		(4	)
Mortgage-backed securities U.S. sponsored entities		5,159		(44	)		—		—			5,159		(44	)
Total debt securities		8,512		(69	)		—		—			8,512		(69	)
Equity securities		55		(2	)		—		—			55		(2	)
Total	$	8,567	$	(71	)	$	—	$	—		$	8,567	$	(71	)
	(Expressed in thousands)
	December 31, 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	$	15,542	$	(446	)	$	—	$	—		$	15,542	$	(446	)
Obligations of states and political subdivisions		6,056		(125	)		—		—			6,056		(125	)
Mortgage-backed securities U.S. sponsored entities		17,291		(457	)		266		(1	)		17,557		(458	)
Total debt securities		38,889		(1,028	)		266		(1	)		39,155		(1,029	)
Equity securities		—		—			—		—			—		—
Total	$	38,889	$	(1,028	)	$	266	$	(1	)	$	39,155	$	(1,029	)

The amortized cost and fair value of investment securities available for sale at September 30, 2011 and December 31, 2010, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(Expressed in thousands)
	September 30, 2011				December 31, 2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	1,211	$	1,221	$	1,008	$	1,016
Due after one year through five years		5,023		5,074		13,265		13,412
Due after five years through ten years		41,969		42,750		33,211		33,022
Due after ten years		23,488		25,085		22,278		22,539
		71,691		74,130		69,762		69,989
Mortgage-backed securities		66,724		68,855		61,580		62,950
Equity securities		216		222		216		230
Total	$	138,631	$	143,207	$	131,558	$	133,169

Proceeds from sales of securities available-for-sale during the nine month periods ended September 30, 2011 and 2010, were $18,299,847 and $17,564,973 respectively. During the nine months ended September 30, 2011, gross gains of $659,008 and gross losses of $16,011 were realized on those sales. Gross gains of $562,619 and gross losses of $1,256 were realized on those sales during the nine months ended September 30, 2010. Proceeds from sales of securities available-for-sale for the three month periods ended September 30, 2011 and 2010, were $5,323,801 and $9,808,695 respectively. For the three months ended September 30, 2011, gross gains of $375,212 and gross losses of $91 were realized on those sales. Gross gains of $308,795 and gross losses of $699 were realized during the three months ended September 30, 2010. Assets carried at $56,363,000 and $31,931,000 at September 30, 2011 and December 31, 2010, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

PAGE 15

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

The maturity distribution using book value including accretion of discounts and amortization of premiums and approximate yield of investment securities at September 30, 2011 and December 31, 2010 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.

(dollars in thousands)	September 30, 2011							December 31, 2010
	Amortized Cost		Fair Value		Yield			Amortized Cost		Fair Value		Yield
U.S. Government corporations and agencies
Within One Year	$	1	$	1		0.01	%	$	18	$	18		0.20	%
After One But Within Five Years		3,013		2,992		1.37			10,020		10,090		2.79
After Five But Within Ten Years		31,242		31,398		2.91			25,984		25,586		2.92
After Ten Years		3		3		0.87			4		4		0.88
		34,259		34,394		2.78			36,026		35,698		2.88
States & Political Subdivisions
Within One Year		1,210		1,219		4.94			990		999		4.39
After One But Within Five Years		2,010		2,082		5.52			3,246		3,322		5.57
After Five But Within Ten Years		10,727		11,353		5.71			7,227		7,435		5.78
After Ten Years		23,485		25,082		6.32			22,274		22,535		6.38
		37,432		39,736		6.06			33,737		34,291		6.11
Mortgage-Backed Securities		66,724		68,855		3.20			61,580		62,950		3.98
Equity Securities		216		222		2.36			215		230		2.44
Total	$	138,631	$	143,207		3.89	%	$	131,558	$	133,169		4.23	%

NOTE 3 - LOANS AND LEASES

Loans outstanding at September 30, 2011 and December 31, 2010 are as follows:

	(Expressed in Thousands)
	September 30, 2011		December 31, 2010
Consumer Real Estate:
Construction	$	274	$	308
Farmland		219		246
Residential 1-4 Family		25,840		28,089
Home Equity Loans		2,626		2,976
Home Equity Lines of Credit		2,348		2,447
Total Consumer Real Estate		31,307		34,066
Commercial Real Estate:
Non-farm, non-residential		51,091		49,195
Multifamily (5 or more) residential properties		7,338		7,458
Total Commercial Real Estate		58,429		56,653
Commercial and Other Loans:
Commercial		5,619		7,033
Non-rated industrial development obligations		11,140		13,460
Other loans		50		39
Total Commercial and Other Loans		16,809		20,532
Consumer Loans:
Installment and other loans to individuals		7,301		9,696
Credit Cards		564		573
Total Consumer Loans		7,865		10,269
Total loans	$	114,410	$	121,520
Less unearned interest and deferred fees		124		153
Net loans	$	114,286	$	121,367

PAGE 16

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. These policies and procedures are reviewed by management and approved by the Board of Directors on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentration of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

The Company originates direct and indirect consumer loans including principally residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans using a credit analysis as part of the underwriting process. Each loan type has a separate underwriting criteria, which consists of several factors including debt to income, type of collateral, credit history and customer relationship with the Company.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing the loan may fluctuate in value. Minimum standards and underwriting guidelines have been established for commercial loan types.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by the general economy or conditions specific to the real estate market such as geography and/or property type.

Non-accrual loans amounted to $4,208,924 and $4,902,515 at September 30, 2011 and December 31, 2010, respectively. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $227,335, $286,300 and $289,590 for the nine months ended September 30, 2011 and 2010 and for the year ended December 31, 2010, respectively.

The following tables present the contractual aging of the recorded investment in past due loans by class of loans (in thousands):

	September 30, 2011
	Current			Loans 30-59 days Past Due		Loans 60-89 days Past Due		Loans 90 or  more days Past Due		Total Past Due		Non - Accrual		Total Loans
Commercial and Other Loans	$	16,768		$	—	$	—	$	—	$	—	$	41	$	16,809
Commercial real estate		54,422			367		—		—		367		3,640		58,429
Consumer real estate		30,596			131		30		37		198		513		31,307
Consumer		7,810			19		14		7		40		15		7,865
Unearned interest and deferred fees		(124	)		—		—		—		—		0		(124	)
Total	$	109,472		$	517	$	44	$	44	$	605	$	4,209	$	114,286
	December 31, 2010
	Current			Loans 30-59 days Past Due		Loans 60-89 days Past Due		Loans 90 or  more days Past Due		Total Past Due		Non - Accrual		Total Loans
Commercial and Other Loans	$	20,369		$	109	$	—	$	—	$	109	$	54	$	20,532
Commercial real estate		52,451			29		26		—		55		4,147		56,653
Consumer real estate		33,247			103		—		28		131		688		34,066
Consumer		10,218			34		3		—		37		14		10,269
Unearned interest and deferred fees		(153	)		—		—		—		—		—		(153	)
Total	$	116,132		$	275	$	29	$	28	$	332	$	4,903	$	121,367

PAGE 17

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention”, “Substandard”, and “Doubtful.” Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans. The following tables present the risk category of loans by class of loans based on the most recent analysis performed and the contractual aging as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Other	$	16,768	$	—	$	41	$	—	$	16,809
Commercial Real Estate		44,522		6,247		6,931		729		58,429
Construction and Land Development		493		—		—		—		493
Total	$	61,783	$	6,247	$	6,972	$	729	$	75,731
Current	$	61,746	$	6,247	$	3,690	$	—	$	71,683
Past Due 30-59 days		37		—		330		—		367
Past Due 60-89 days		—		—		—		—		—
Past Due 90 days or more		—		—		—		—		—
Non-accrual		—		—		2,952		729		3,681
Total	$	61,783	$	6,247	$	6,972	$	729	$	75,731
December 31, 2010	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and Other	$	19,735	$	743	$	54	$	—	$	20,532
Commercial Real Estate		42,050		6,388		8,215		—		56,653
Construction and Land Development		399		—		155		—		554
Total	$	62,184	$	7,131	$	8,424	$	—	$	77,739
Current	$	62,184	$	7,131	$	4,194	$	—	$	73,509
Past Due 30-59 days		—		—		29		—		29
Past Due 60-89 days		—		—		—		—		—
Past Due 90 days or more		—		—		—		—		—
Non-accrual		—		—		4,201		—		4,201
Total	$	62,184	$	7,131	$	8,424	$	—	$	77,739

For consumer and residential real estate loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011	Performing		Non- performing		Total
Consumer	$	7,843	$	22	$	7,865
Consumer Real Estate		30,757		550		31,307
Total	$	38,600	$	572	$	39,172

PAGE 18

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

December 31, 2010	Performing		Non- performing		Total
Consumer	$	10,255	$	14	$	10,269
Consumer Real Estate		32,796		716		33,512
Total	$	43,051	$	730	$	43,781

	(Expressed in Thousands)
	September 30, 2011		December 31, 2010
Average investment in impaired loans	$	4,274	$	5,062
Related allowance for loan losses		851		256
Partial charge-offs		—		—
Interest income recognized on a cash basis on impaired loans		—		—

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

Impaired loans at September 30, 2011 and December 31, 2010 are set forth in the following tables. No interest income was recognized on impaired loans subsequent to their classification as impaired (in thousands):

	September 30, 2011
	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and Other Loans	$	41	$	41	$	—	$	41	$	—	$	44
Commercial real estate		3,662		1,124		2,538		3,662		851		3,883
Consumer real estate		328		328		—		328		—		347
Total	$	4,031	$	1,493	$	2,538	$	4,031	$	851	$	4,274
	December 31, 2010
	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and Other Loans	$	54	$	54	$	—	$	54	$	—	$	57
Commercial real estate		4,147		1,701		2,446		4,147		256		4,613
Consumer real estate		364		364		—		364		—		392
Total	$	4,565	$	2,119	$	2,446	$	4,565	$	256	$	5,062

Loan Modifications

The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonaccrual at the time of restructure and may only be returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDR’s on accrual status may remain in accrual status after they have been restructured as long as they continue to perform in accordance with their modified terms. There were no TDR’s in accrual status at September 30, 2011 and December 31, 2010.

PAGE 19

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

When the Company modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or a charge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The following tables include the recorded investment and number of modifications for modified loans, as of the respective dates. The Company reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured.

	September 30, 2011						December 31, 2010
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial and Other Loans		—	$	—	$	—		—	$	—	$	—
Commercial real estate		4		3,935		2,658		4		3,935		2,825
Consumer real estate		1		23		23		—		—		—
Total		5	$	3,958	$	2,681		4	$	3,935	$	2,825
Troubled Debt Restructurings That subsequently defaulted
Commercial and Other Loans		—	$	—	$	—		—	$	—	$	—
Commercial real estate		3		3,680		2,443		3		3,680		2,581
Consumer real estate		1		23		23		—		—		—
Total		4	$	3,703	$	2,466		3	$	3,680	$	2,581

No additional funds are committed to be advanced to customers whose loans were classified as TDR’s

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

	September 30, 2011		December 31, 2010
Balance at beginning of year	$	2,059,025	$	1,894,361
Additions charged to operating expense		600,000		220,000
Recoveries		52,178		10,108
Total		2,711,203		2,124,469
Less loans charged-off		186,454		65,444
Balance at end of period	$	2,524,749	$	2,059,025

PAGE 20

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 4 - ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The following table summarizes the primary segments of the ALL, segregated into the amount for loans individually evaluated for impairment by class of loans as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011	Commercial and other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance	$	212		$	1,511		$	272		$	64		$	2,059
Charge-offs		(8	)		(156	)		(7	)		(15	)		(186	)
Recoveries		2			45			—			5			52
Provision		(37	)		775			(131	)		(7	)		600
Ending Balance	$	169		$	2175		$	134		$	47		$	2,525
Loans individually evaluated for impairment	$	—		$	851		$	—		$	—		$	851
Loans collectively evaluated for impairment		169			1,324			134			47			1,674
Ending Balance	$	169		$	2,175		$	134		$	47		$	2,525
December 31, 2010	Commercial and other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance	$	203		$	1,345		$	267		$	79		$	1,894
Charge-offs		(14	)		—			—			(51	)		(65	)
Recoveries		—			—			—			10			10
Provision		23			166			5			26			220
Ending Balance	$	212		$	1,511		$	272		$	64		$	2,059
Loans individually evaluated for impairment	$	—		$	256		$	—		$	—		$	256
Loans collectively evaluated for impairment		212			1,255			272			64			1,803
Ending Balance	$	212		$	1,511		$	272		$	64		$	2,059

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2011 and December 31, 2010 (in thousands):

September 30, 2011	Commercial and other		Commercial Real Estate		Consumer Real Estate		Consumer		Unearned Discounts			Total
Loans individually evaluated	$	—	$	2,538	$	—	$	—	$	—		$	2,538
Loans collectively evaluated		16,809		55,891		31,307		7,865		(124	)		111,748
Ending Balance	$	16,809	$	58,429	$	31,307	$	7,865	$	(124	)	$	114,286
December 31, 2010
Loans individually evaluated	$	—	$	2,446	$	—	$	—	$	—		$	2,446
Loans collectively evaluated		20,532		54,207		34,066		10,269		(153	)		118,921
Ending Balance	$	20,532	$	56,653	$	34,066	$	10,269	$	(153	)	$	121,367

PAGE 21

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 5 - DEPOSITS

The composition of the Bank’s deposits at September 30, 2011 and December 31, 2010 follows:

	(Expressed in Thousands)
	September 30, 2011
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	28,486	$	37,235	$	79,610	$	72,570
United States Government		—		—		—		—
States and political subdivisions		961		8,028		4,645		3,083
Commercial banks and other depository institutions		36		—		316		490
Total	$	29,483	$	45,263	$	84,571	$	76,143
	(Expressed in Thousands)
	December 31, 2010
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	27,598	$	36,814	$	73,873	$	75,527
United States Government		12		—		—		—
States and political subdivisions		682		5,299		4,583		3,248
Commercial banks and other depository institutions		27		—		222		590
Total	$	28,319	$	42,113	$	78,678	$	79,365

A maturity distribution of time certificates of deposit at September 30, 2011 and December 31, 2010, follows:

	Maturities of Time Deposits
(dollars in thousands)	September 30, 2011		December 31, 2010
Due in 2011	$	11,958	$	42,104
Due in 2012		37,769		19,751
Due in 2013		8,392		5,365
Due in 2014		6,243		5,389
Due in 2015		6,502		6,749
Due in 2016 and thereafter		5,279		7
Total	$	76,143	$	79,365

Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $22,897,000 and $23,351,000 at September 30, 2011 and December 31, 2010, respectively. Interest expense on certificates of deposit of $100,000 or more was $122,591 and $154,633 for the three months ended September 30, 2011 and 2010, respectively. Interest expense on certificates of deposit of $100,000 or more was $347,879 and $467,120 for the nine months ended September 30, 2011 and 2010, respectively.

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)	September 30, 2011		December 31, 2010
Three Months or Less	$	3,490	$	4,217
Over Three and Less than Six Months		4,679		2,842
Over Six and Less than Twelve Months		5,933		5,798
Over Twelve Months		8,795		10,494
Total	$	22,897	$	23,351

PAGE 22

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 6 - FEDERAL HOME LOAN BANK BORROWINGS

The subsidiary Bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). The FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans or securities with a market value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at September 30, 2011 was approximately $37.9 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $3,714,027 and $3,775,583 at September 30, 2011 and December 31, 2010, respectively. At September 30, 2011 the subsidiary bank had three fixed rate amortizing advances which totaled $3,714,027 with a weighted average interest rate of 4.78% of which $2,112,609 will mature in 2018 and $1,601,418 will mature in 2023.

The subsidiary bank also has a one year line of credit agreement with the Federal Home Loan Bank (“FHLB”). The maximum credit available under this agreement is $7.0 million and expires December 2011. There were no borrowings outstanding under this agreement at September 30, 2011 and December 31, 2010, respectively.

Contractual maturities of FHLB borrowings as of September 30, 2011 were as follows:

December 31, 2011	$	21,014
December 31, 2012		86,602
December 31, 2013		90,832
December 31, 2014		95,267
December 31, 2015		99,919
Thereafter		3,320,393
	$	3,714,027

NOTE 7 - REGULATORY MATTERS

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, 2011, 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, 2011
Total Capital (to Risk Weighted Assets)	$	31,177		21.14	%	$	11,798		8.00	%	$	14,748		10.00	%
Tier I Capital (to Risk Weighted Assets)		29,328		19.89	%		5,899		4.00	%		8,849		6.00	%
Tier I Capital (to Adjusted Total Assets)		29,328		10.25	%		11,444		4.00	%		14,305		5.00	%
As of December 31, 2010
Total Capital (to Risk Weighted Assets)	$	30,377		19.78	%	$	12,289		8.0	%	$	15,361		10.0	%
Tier I Capital (to Risk Weighted Assets)		28,462		18.53	%		6,144		4.0	%		9,217		6.0	%
Tier I Capital (to Adjusted Total Assets)		28,462		10.31	%		11,045		4.0	%		13,806		5.0	%
Progressive Bank, N.A.
As of September 30, 2011
Total Capital (to Risk Weighted Assets)	$	30,946		21.02	%	$	11,776		8.00	%	$	14,720		10.00	%
Tier I Capital (to Risk Weighted Assets)		29,097		19.77	%		5,888		4.00	%		8,832		6.00	%
Tier I Capital (to Adjusted Total Assets)		29,097		10.18	%		11,431		4.00	%		14,289		5.00	%
As of December 31, 2010
Total Capital (to Risk Weighted Assets)	$	30,121		19.68	%	$	12,241		8.0	%	$	15,302		10.0	%
Tier I Capital (to Risk Weighted Assets)		28,206		18.43	%		6,121		4.0	%		9,181		6.0	%
Tier I Capital (to Adjusted Total Assets)		28,206		10.23	%		11,032		4.0	%		13,789		5.0	%

PAGE 23

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 8 - FAIR VALUE MEASUREMENTS

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels defined by U.S. generally accepted accounting principles are as follows:

• Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

• Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.

• Level III: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available.

The following table presents the assets reported on the balance sheet at their fair value as of September 30, 2011 and December 31, 2010, by level within the fair value hierarchy. 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, 2011
(dollars in thousands)	Level I		Level II		Level III		Total
Assets:
Assets measured on a recurring basis:
Securities available for sale:
U.S. Government corporations and agencies	$	—	$	34,394	$	—	$	34,394
Obligations of states and political subdivisions		—		39,736		—		39,736
Mortgage-backed securities
U.S. Sponsored entities		—		68,855		—		68,855
Private Label		—		—		—		—
Subtotal mortgage-backed securities		—		68,855		—		68,855
Equity securities		222		—		—		222
Total securities available for sale:	$	222	$	142,985	$	—	$	143,207
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	4,209	$	—	$	4,209
	December 31, 2010
(dollars in thousands)	Level I		Level II		Level III		Total
Assets:
Assets measured on a recurring basis:
Securities available for sale:
U.S. Government corporations and agencies	$	—	$	35,698	$	—	$	35,698
Obligations of states and political subdivisions		—		34,291		—		34,291
Mortgage-backed securities
U.S. Sponsored entities		—		62,950		—		62,950
Private Label		—		—		—		—
Subtotal mortgage-backed securities		—		62,950		—		62,950
Equity securities		230		—		—		230
Total securities available for sale:	$	230	$	132,939	$	—	$	133,169
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	4,903	$	—	$	4,903

NOTE 9 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

PAGE 24

First West Virginia Bancorp, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 AND 2010

(Unaudited)

NOTE 9 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

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

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

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

Loans: 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 as of year end. 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 at September 30, 2011 and December 31, 2010:

	September 30, 2011				December 31, 2010
(Amounts Expressed in Thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	22,288	$	22,288	$	9,933	$	9,933
Investment securities		143,207		143,207		133,169		133,169
Loans		111,761		111,779		119,308		120,493
Bank owned life insurance		3,492		3,492		3,415		3,415
Accrued interest receivable		1,214		1,214		1,095		1,095
Financial liabilities:
Deposits		235,460		224,916		228,475		208,813
Federal funds purchased and repurchase agreements		16,912		16,912		13,477		13,477
FHLB and other long term borrowings		3,714		3,714		3,776		3,776
Accrued interest payable		213		213		277		277

PAGE 25

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,
	2011			2010			2011			2010			2010			2009			2008
SUMMARY OF OPERATIONS
Total interest income	$	2,807		$	2,944		$	8,551		$	8,967			11,858		$	12,914		$	13,514
Total interest expense		546			739			1,710			2,394			3,056			4,328			5,275
Net interest income		2,261			2,205			6,841			6,573			8,802			8,586			8,239
Provision for loan losses		—			30			600			90			220			184			—
Total other income		722			795			1,554			1,667			1,977			1,791			1,488
Total other expenses		1,894			1,922			5,705			5,752			7,723			7,592			7,009
Income before income taxes		1,089			1,048			2,090			2,398			2,836			2,601			2,718
Net income		859			787			1,818			1,916			2,339			2,305			2,206
PER SHARE DATA (1)
Net income	$	0.52		$	0.48		$	1.10		$	1.16			1.42		$	1.39		$	1.33
Cash dividends declared		0.19			0.18			0.57			0.55			0.73			0.73			0.71
Book value per share		20.47			19.84			20.47			19.84			18.82			18.64			17.39
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	115,559		$	121,956		$	117,036		$	124,347			124,074		$	128,206		$	120,722
Investment securities		135,203			119,511			133,999			115,869			116,990			112,142			108,114
Deposits - interest bearing		206,508			200,288			205,152			196,876			198,042			190,981			182,450
Stockholders’ equity		30,514			29,198			30,351			29,232			29,415			28,192			27,295
Total assets		286,100			276,545			283,260			272,432			273,778			266,414			258,275
SELECTED RATIOS
Return on average assets		1.19	%		1.14	%		0.86	%		0.94	%		0.85	%		0.87	%		0.85	%
Return on average equity		11.17	%		10.81	%		8.01	%		8.76	%		7.95	%		8.18	%		8.08	%
Average equity to average assets		10.67	%		10.56	%		10.71	%		10.73	%		10.74	%		10.58	%		10.57	%
Dividend payout ratio (1)		36.54	%		37.50	%		51.82	%		47.41	%		51.41	%		52.52	%		53.38	%
Loan to Deposit ratio		48.54	%		53.75	%		48.54	%		53.75	%		53.12	%		58.12	%		60.39	%
	(Unaudited)
	September 30,						December 31,
	2011			2010			2010			2009			2008
BALANCE SHEET
Investments	$	143,207		$	120,746		$	133,169		$	115,997		$	112,366
Loans		114,286			123,462			121,367			128,581			124,635
Allowance for loan losses		(2,525	)		(1,937	)		(2,059	)		(1,894	)		(1,923	)
Other assets		36,900			40,432			25,482			28,447			23,086
Total Assets	$	291,868		$	282,703		$	277,959		$	271,131		$	258,164
Deposits	$	235,460		$	229,716		$	228,475		$	221,246		$	206,385
Federal funds purchased and repurchase agreements		16,912			15,284			13,477			11,025			11,013
FHLB borrowings		3,714			3,796			3,776			7,354			10,929
Other liabilities		1,955			1,114			1,130			700			1,100
Stockholders’ equity		33,827			32,793			31,101			30,806			28,737
Total Liabilities and Stockholders’ equity	$	291,868		$	282,703		$	277,959		$	271,131		$	258,164

(1) Adjusted for the 4 percent common stock dividend to stockholders of record as of December 20, 2010 and the 4 percent common stock dividend to shareholders of record on October 1, 2008.

PAGE 26

First West Virginia Bancorp, Inc.

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

The following discussion and analysis provides further detail to the financial condition and results of operations of the Company. The section should be read in conjunction with the notes and financial statements presented elsewhere in this report.

The Company’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2011 have remained unchanged from the disclosures presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 under the section “Management’s Discussion and Analysis of Financial Condition and Results of 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. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effect of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to the parent company and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform; competitive conditions in the financial services industry; rapidly changing technology affecting financial services, and/or other external developments materially impacting the Company’s operational and financial performance. The Company does not assume any duty to update forward-looking statements.

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

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

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

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

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

OVERVIEW

The Company reported net income of $1,817,974 or $1.10 per share for the nine months ended September 30, 2011 compared to $1,915,623 or $1.16 per share for the same period during 2010. The decrease in net income for the nine months ended September 30, 2011 as compared to the same period in 2010 of $97,649 or 5.1% was primarily the result of the increase in the provision for loan losses combined with the decrease in noninterest income, offset in part by the increase in net interest income and decreases in noninterest expenses and in income tax expense. Net interest income increased $267,654 or 4.1%, primarily due to the decrease in the interest expense paid on interest bearing liabilities combined with the increase in the interest earned on investment securities, offset in part by a decline in the interest and fees earned on loans. The provision for loan losses increased $510,000 during the nine month period ended September 30, 2011 as compared to the same period in 2010 primarily due to a specific reserve allocation for one impaired commercial real estate loan. Noninterest income decreased $112,961 or 6.8% primarily due to the decline in service charges and fees earned on deposit accounts combined with the decrease in other operating income, which were offset in part by an increase in the net gains on sales of investment securities. Noninterest expenses decreased $47,585 or .8% during the nine month period ended September 30, 2011 as compared to the same period in 2010 primarily due to the decrease in other operating expenses and salary and employee benefits expenses, offset in part by increases in occupancy expenses. The ROA was .86% for the nine months ended September 30, 2011 as compared to .94% for the same period of the prior year. For the nine months ended September 30, 2011 compared to September 30, 2010, the ROE was 8.01% and 8.76%, respectively.

PAGE 27

First West Virginia Bancorp, Inc.

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

For the third quarter of 2011, net income was $858,932 or $.52 per share as compared to $786,938 or $.48 per share for the same period in 2010. The increase in net income for the three months ended September 30, 2011 as compared to the same period in 2010 of $71,994 or 9.2% was primarily the result of the increase in net interest income combined with decreases in noninterest expenses, income tax expense and the provision for loan losses offset in part by the decrease in noninterest income. Net interest income increased $55,702 or 2.5%, primarily due to the decrease in the interest expense paid on interest bearing liabilities combined with the increase in the interest earned on investment securities, offset in part by a decline in the interest and fees earned on loans. The provision for loan losses decreased $30,000 during the three month period ended September 30, 2011 as compared to the same period in 2010. Noninterest income decreased $73,462 or 9.2% for the three months ended September 30, 2011 as compared to same period of the prior year and was primarily due to the decline in service charges and fees earned on deposit accounts combined with the decrease in other operating income, which were offset in part by an increase in the net gains on sales of investment securities. Noninterest expenses were reduced by $28,648 or 1.5% during the three month period ended September 30, 2011 as compared to the same period in 2010 primarily due to decreases in other operating expenses and salary and employee benefits expenses, offset in part by increases in occupancy expenses.

The sections that follow discuss in more detail the information contained in the summary of Selected Financial Data of the Company.

EARNINGS ANALYSIS - For the nine months ended September 30, 2011

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 six months ended September 30, 2011 and 2010 and the year ended December 31, 2010.

For the nine months ended September 30, 2011, net interest income was $6,840,979, an increase of $267,654 or 4.1%, from the same period in 2010. 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 $11.0 million or 4.3% from September 30, 2010 to 2011. The taxable equivalent net yield on earning assets increased from 3.91% at September 30, 2010 to 3.95% at September 30, 2011.

Interest income on investment securities during the first nine months of 2011 increased $38,919 or 1.1% as compared to the same period of the prior year. The increase in interest income on investment securities during the nine month period ended September 30, 2011 was primarily due to the rise in the average volume which was partially offset by a decline in the yields earned. The taxable equivalent yield on investment securities fell 36 basis points in 2011, from 4.62% at December 31, 2010 to 4.26% at September 30, 2011 and decreased 47 basis points from September 30, 2010. The average volume of investment securities have increased approximately $17.0 million or 14.5% since December 31, 2010.

Interest and fees on loans decreased $450,376 or 8.3%, from the same period in 2010 primarily due to the decrease in the average loan volume combined with the decline in the average yield on loans. The taxable equivalent yield on loans fell 11 basis points in 2011 from 6.08% at December 31, 2010 to 5.97% at September 30, 2011 and fell 13 basis points from September 30, 2010. The average loan volume decreased approximately $7.0 million or 5.7% since December 31, 2010.

During the nine months ended September 30, 2011, interest expense fell $683,226 or 28.5% as compared to the same period in 2010. 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 39 basis points from 1.41% at December 31, 2010 to 1.02% at September 30, 2011 and decreased 46 basis points since September 30, 2010. The average volume of interest bearing liabilities increased approximately $5.9 million or 2.7% since December 31, 2010.

Noninterest Income

Noninterest income decreased $112,961 or 6.8% for the nine months ended September 30, 2011 as compared to same period of the prior year. The decrease in noninterest income was primarily due to the decline in service charges and other fee income combined with the decrease in other operating income, partially offset by the increase in the net gains on sales of investment securities.

Service charges and other fees represent charges that are earned from assessments made on checking and savings accounts. Service charges and other fee income fell $98,269 in the first nine months of 2011 as compared to the same period in 2010, down 21.3%, from 2010. Approximately $88,095 or 89.7% of the decrease related primarily to the decline in overdraft charges.

The net gains on investment securities increased $81,634 or 14.5% for the nine month period ended September 30, 2011 as compared to the same period in 2010. The increase in net gains on sales of investment securities was primarily attributable to sales recorded by the Company and its subsidiary bank. The Company’s subsidiary bank sold approximately $17.7 million of investment securities during the first nine months of 2011 to take advantage of the current market interest rate environment. During the nine months ended September 30, 2010, the Company’s subsidiary bank sold approximately $17.0 million of investment securities for liquidity. The Company accounted for securities gains of $659,008 and securities losses of $16,011 during the nine month period ended September 30, 2011 and securities gains of $562,619 and securities losses of $1,256 during the nine month period ended September 30, 2010.

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, 2011, other operating income decreased $96,326 or 14.9% compared to the same period in 2010. The decline 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 in the third quarter of 2010. Changes in other components of other operating income were increases in ATM fees, FHLB fee income, checkbook sales and credit card fees and gains on sales of mortgage servicing rights, 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.

PAGE 28

First West Virginia Bancorp, Inc.

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

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, 2011 and 2010 and the year ended December 31, 2010. Average balance sheet information for the periods ended September 30, 2011 and 2010 and December 31, 2010 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)																(Unaudited)
	For the nine months ended																For the nine months ended
	September 30, 2011								December 31, 2010								September 30, 2010
	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	$	38,025		$	834		2.93	%	$	30,220		$	953		3.15	%	$	29,856		$	723		3.24	%
Mortgage backed securities		60,667			1,622		3.57	%		58,419			2,470		4.23	%		57,849			1,901		4.39	%
States and political subdivisions		35,099			1,101		4.19	%		28,116			1,199		4.26	%		27,925			893		4.28	%
Other securities		208			3		1.93	%		235			4		1.70	%		239			3		1.68	%
Total Investment securities:		133,999			3,560		3.55	%		116,990			4,626		3.95	%		115,869			3,520		4.06	%
Interest bearing deposits		12,310			22		0.24	%		12,416			35		0.28	%		11,909			26		0.29	%
Federal funds sold		—			—		—			58			—		—			78			—		—
Loans, net of unearned income		117,036			4,958		5.66	%		124,074			7,182		5.79	%		124,347			5,409		5.82	%
Other earning assets		1,338			11		1.10	%		1,481			15		1.01	%		1,492			11		0.99	%
Total earning assets		264,683			8,551		4.32	%		255,019			11,858		4.65	%		253,695			8,966		4.73	%
Other assets		20,770								20,818								20,652
Allowance for loan losses		(2,193	)							(2,059	)							(1,915	)
Total Assets	$	283,260							$	273,778							$	272,432
LIABILITIES
Time deposits	$	77,154		$	1,152		2.00	%	$	83,399		$	2,085		2.50	%	$	84,261		$	1,626		2.58	%
Savings deposits		83,126			295		0.47	%		73,936			484		0.65	%		72,760			374		0.69	%
Interest bearing demand deposits		44,872			50		0.15	%		40,707			89		0.22	%		39,855			69		0.23	%
Federal funds purchased and repurchase agreements		14,249			79		0.74	%		13,437			112		0.83	%		13,302			85		0.85	%
FHLB and other long-term borrowings		3,744			134		4.79	%		5,799			286		4.93	%		6,478			240		4.95	%
Total interest bearing liabilities		223,145			1,710		1.02	%		217,278			3,056		1.41	%		216,656			2,394		1.48	%
Demand deposits		28,864								26,030								25,608
Other liabilities		900								1,055								936
Total Liabilities		252,909								244,363								243,200
STOCKHOLDERS’ EQUITY		30,351								29,415								29,232
Total Liabilities and Stockholders’ Equity	$	283,260							$	273,778							$	272,432
Net yield on earning assets				$	6,841		3.46	%				$	8,802		3.45	%				$	6,572		3.47	%

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, 2011 and 2010, and the year ended December 31, 2010, respectively. The effect of this adjustment is presented below.

Investment securities	$	133,999	$	4,270	4.26	%	$	116,990	$	5,402	4.62	%	$	115,869	$	4,100	4.73	%
Loans		117,036		5,227	5.97	%		124,074		7,539	6.08	%		124,347		5,673	6.10	%
Total earning assets	$	264,683	$	9,530	4.81	%	$	255,019	$	12,991	5.09	%	$	253,695	$	9,810	5.17	%
Taxable equivalent net yield on earning assets			$	7,820	3.95	%			$	9,935	3.90	%			$	7,416	3.91	%

PAGE 29

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, 2011 (Continued)

Noninterest Expense

Noninterest expense decreased $47,585 or .8% for the nine months ended September 30, 2011 as compared to same period of the prior year. The decrease in noninterest expenses was primarily due to the decreases in other operating expenses and salary and employee benefits expenses, offset in part by increases in occupancy expenses.

Other operating expense fell $43,435, or 2.4%, compared to the same period of the prior year. The decrease in other operating expenses during the nine month period ended September 30, 2011 as compared to 2010 was attributable primarily due to the decreases in director fees, stationery and supplies expenses, regulatory assessments and deposit insurance, postage and transportation expenses, other taxes and other expenses, which were offset in part by increases in advertising expenses and service expenses.

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

Unaudited	2011		2010		Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	84,150	$	87,075	$	(2,925	)		(3.4	)%
Stationery and supplies		113,030		117,536		(4,506	)		(3.8	)%
Regulatory assessment and deposit insurance		279,175		324,801		(45,626	)		(14.0	)%
Advertising		98,649		48,809		49,840			102.1	%
Postage and transportation		122,921		123,821		(900	)		(0.7	)%
Other taxes		129,430		146,654		(17,224	)		(11.7	)%
Service expense		289,953		262,341		27,612			10.5	%
Other		662,551		712,257		(49,706	)		(7.0	)%
Total	$	1,779,859	$	1,823,294	$	(43,435	)		(2.4	)%

Salary and employee benefits expenses decreased $9,810 or .3% during the nine months ended September 30, 2011 over the same period in 2010. Salary and employee benefit expense in 2011 compared to 2010 decreased primarily as a result of the decline in employee benefits expenses, offset in part by normal annual merit pay adjustments.

Net occupancy expenses of premises increased $5,660 or .5% during the nine months ended September 30, 2011 compared to the same period in 2010. Increases in furniture and fixture and banking premises depreciation expenses, real estate taxes, insurance expense for banking premises and associated with other real estate owned, offset in part by a decline in banking premise lease expenses contributed to the decline in occupancy expenses in 2011 as compared to 2010.

Income Taxes

Income tax expense for the nine month period ended September 30, 2011 was $272,500, decreasing $210,073 or 43.5% compared to the same period in 2010. The decrease in income tax expense was primarily due to the decrease in pre-taxable income combined with the increase in tax-exempt income during the first nine months of 2011 over the same period in 2010. Components of the income tax expense for September 30, 2011 were $188,135 for federal taxes and $84,365 for West Virginia corporate net income taxes. Federal income tax rates and West Virginia corporate net income tax rates remain consistent at 34% and 8.5%, respectively, for the nine months ended September 30, 2011 and 2010 and for the year ended December 31, 2010.

PAGE 30

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, 2011 and 2010. Average balance sheet information for the periods ended September 30, 2011 and 2010 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, 2011 and 2010.

	(Unaudited)								(Unaudited)
	For the three months ended September 30, 2011								For the three months ended September 30, 2010
	Average Volume			Interest		Average Rate			Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. Treasury and other U. S. Government agencies	$	39,068		$	279		2.83	%	$	34,496		$	264		3.04	%
Mortgage backed securities		59,650			497		3.31	%		56,965			591		4.12	%
Obligations of states and political subdivisions		36,268			385		4.21	%		27,814			297		4.24	%
Other securities		217			1		1.83	%		236			1		1.68	%
Total Investment securities:		135,203			1,162		3.41	%		119,511			1,153		3.83	%
Interest bearing deposits		15,107			9		0.24	%		13,815			7		0.20	%
Loans, net of unearned income		115,559			1,632		5.60	%		121,956			1,779		5.79	%
Other earning assets		1,277			4		1.24	%		1,492			4		1.06	%
Total earning assets		267,146			2,807		4.17	%		256,774			2,943		4.55	%
Other assets		21,488								21,698
Allowance for loan losses		(2,534	)							(1,927	)
Total Assets	$	286,100							$	276,545
LIABILITIES
Time deposits	$	76,080		$	365		1.90	%	$	83,422		$	509		2.42	%
Savings deposits		84,755			92		0.43	%		74,470			117		0.62	%
Interest bearing demand deposits		45,673			16		0.14	%		42,396			22		0.21	%
Federal funds purchased and repurchase agreements		15,083			28		0.74	%		14,962			31		0.82	%
FHLB and other long-term borrowings		3,724			45		4.79	%		4,794			59		4.88	%
Total interest bearing liabilities		225,315			546		0.96	%		220,044			738		1.33	%
Demand deposits		29,282								25,829
Other liabilities		989								1,120
Total Liabilities		255,586								246,993
STOCKHOLDERS’ EQUITY		30,514								29,552
Total Liabilities and Stockholders’ Equity	$	286,100							$	276,545
Net yield on earning assets				$	2,261		3.36	%				$	2,205		3.41	%

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the three months ended September 30, 2011 and 2010, respectively. The effect of this adjustment is presented below.

Investment securities	$	135,203	$	1,395	4.09	%	$	119,511	$	1,345	4.46	%
Loans		115,559		1,715	5.89	%		121,956		1,875	6.10	%
Total earning assets	$	267,146	$	3,123	4.64	%	$	256,774	$	3,231	4.99	%
Taxable equivalent net yield on earning assets			$	2,577	3.83	%			$	2,493	3.85	%

PAGE 31

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, 2011

Net Interest Income

For the three months ended September 30, 2011, net interest income was $2,260,902, increasing $55,702 or 2.5%, from the same period in 2010. The increase in net interest income was primarily due to the decrease in the interest paid on interest bearing liabilities combined with the increase in the interest earned on investment securities, offset in part by the decrease in the interest earned on loans. The taxable equivalent net yield on earning assets declined slightly from 3.85% at September 30, 2010 to 3.83% at September 30, 2011. Table Three presents the average balance sheets and an interest rate analysis for three months ended September 30, 2011 and 2010.

Interest expense paid on interest bearing liabilities fell $192,482 or 26.1% during the three months ended September 30, 2011 as compared to the same period in 2010. The decrease in interest expense was primarily due to the decline in the average yield paid on interest bearing liabilities, which was offset in part by an increase in average balances. The average yield paid on interest bearing liabilities was down 37 basis points, from 1.33% at September 30, 2010 to .96% at September 30, 2011. The average volume of interest bearing liabilities rose approximately $5.3 million or 2.4%, from September 30, 2010 to September 30, 2011 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 income on investment securities increased $9,114 or .8% during the third quarter of 2011 compared to the same period of the prior year. The increase in interest income on investment securities was primarily due to the rise in the average volume, offset in part by the decline in the yield earned. The activity of the investment portfolio increased with the average volume increasing approximately $18.2 million or 15.6% since December 31, 2010 and $15.7 million or 13.1% since September 30, 2010. The taxable equivalent yield earned on investment securities declined 37 basis points, to 4.09% for the three months ended September 30, 2011 as compared to 4.46% for the same period in 2010.

Interest and fees on loans decreased $147,112 or 8.3% for the three month period ended September 30, 2011 as compared to the same period in 2010 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 19 basis points, to 5.89% at September 30, 2011 from 6.08% at December 31, 2010 and decreased 21 basis points from September 30, 2010. The activity of the loan portfolio fell with the average volume decreasing approximately $8.5 million or 6.9% since December 31, 2010 and $6.4 million or 5.3% since September 30, 2010.

Noninterest Income

Noninterest income decreased $73,462 or 9.2% for the three months ended September 30, 2011 as compared to same period of the prior year. The decrease in noninterest income was primarily due to declines in service charges and other fee income and other operating income, partially offset by an increase in the net gains on sales of investment securities.

Service charges and other fee income decreased $15,884 during the three months ended September 30, 2011, down 10.7%, from the same period in 2010. The decrease in service charges and other fee income was primarily due to the decline in overdraft fees on deposit accounts which declined .

The net gains on investment securities increased $67,025 or 21.8% for the three month period ended September 30, 2011 as compared to the same period in 2010. The increase in investment securities gains was primarily attributable to sales recorded by the Company and its subsidiary bank. The increase in net gains on sales of investment securities was primarily attributable to sales recorded by the Company and its subsidiary bank. The Company’s subsidiary bank sold approximately $4.9 million of investment securities during the third quarter of 2011 to take advantage of the current market interest rate environment. During the third quarter of 2010, the Company’s subsidiary bank sold approximately $9.5 million of investment securities for liquidity. The Company accounted for securities gains of $375,212 and securities losses of $91 during the three month period ended September 30, 2011 and securities gains of $308,795 and securities losses of $699 during the three month period ended September 30, 2010.

During the third quarter of 2011, other operating income decreased $124,603 or 36.8% as compared to same period of the prior year. The decrease in other operating income during the three month period ended September 30, 2011 as compared to the same period in the prior year was primarily the result of a gain on the sale of other real estate owned of approximately $186,000, which occurred in the third quarter of 2010. Changes in other components of other operating income were increases in ATM fees, FHLB fee income, checkbook sales, credit card fees and gains on sales of mortgage servicing rights, 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.

Noninterest Expense

Noninterest expense declined $28,648 or 1.5% for the three months ended September 30, 2011 as compared to same period of the prior year. The decrease in noninterest expenses was primarily due to the decreases in other operating expenses and salary and employee benefits expenses, offset in part by increases in occupancy expenses.

Salary and employee benefits expenses decreased $17,503 or 1.8% during the three months ended September 30, 2011 over the same period in 2010. Salary and employee benefit expense in 2011 compared to 2010 decreased primarily as a result of the decline in employee benefits expenses, offset in part by normal annual merit pay adjustments.

Net occupancy expenses of premises increased $35,288 or 10.4% during the three months ended September 30, 2011 compared to the same period in 2010. The increase in net occupancy expenses in 2011 as compared to 2010 was primarily due to the increase in expenses for other real estate owned property combined with the increase in real estate taxes, offset in part by the decline in building lease expense.

PAGE 32

First West Virginia Bancorp, Inc.

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

Noninterest Expense - (continued)

Other operating expense fell $46,433, or 7.8%, compared to the same period of the prior year. The decrease in other operating expenses during the three month period ended September 30, 2011 as compared to 2010 was attributable primarily due to the decreases in director fees, regulatory assessments and deposit insurance, postage and transportation expenses, other taxes and other expenses, which were offset in part by increases in advertising expenses, service expenses, and stationery and supplies expenses.

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

Unaudited	2011		2010		Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	26,100	$	34,150	$	(8,050	)		(23.6	)%
Stationery and supplies		36,129		30,595		5,534			18.1	%
Regulatory assessment and deposit insurance		70,872		110,502		(39,630	)		(35.9	)%
Advertising		40,280		21,083		19,197			91.1	%
Postage and transportation		35,657		43,427		(7,770	)		(17.9	)%
Other taxes		35,152		42,646		(7,494	)		(17.6	)%
Service expense		99,131		89,141		9,990			11.2	%
Other		202,933		221,143		(18,210	)		(8.2	)%
Total	$	546,254	$	592,687	$	(46,433	)		(7.8	)%

Income Taxes

Income tax expense for the three month period ended September 30, 2011 decreased $31,106 or 11.9% compared to the same period in 2010. Income tax expense was primarily reduced due to the increase in tax-exempt income during the three month period ended September 30, 2011 over the same period in 2010.

Balance Sheet Analysis

Investments

Investment securities increased approximately $10.0 million or 7.5% from December 31, 2010 to September 30, 2011. 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, corporate debt securities, mortgage-backed securities and equity securities. Taxable securities comprised 72.3% of total securities at September 30, 2011, as compared to 74.6% at December 31, 2010. Other than the normal risks inherent in purchasing U.S. Government agency and corporation securities, corporate debt 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 stockholders’ equity until realized. Available for sale securities, at fair value, represented 100% of the investment portfolio at September 30, 2011 and December 31, 2010. The increase in the available for sale securities was primarily due to the purchase of obligations of U.S Government agency and corporation securities , obligations of states and political subdivisions and mortgage backed securities. The Company did not have any investment securities classified as held to maturity securities at September 30, 2011 and December 31, 2010. 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 value. The carrying values of securities available for sale was above book value by $4,576,414 and $1,610,549 at September 30, 2011 and December 31, 2010, respectively.

Loans

Total loans, net of unearned income, declined $7,081,559 or 5.8% from December 31, 2010 to September 30, 2011. The decrease in total loans in 2011 was primarily due to the decreases in consumer loans, consumer real estate loans, and commercial and other loans which decreased $2,404,000 $2,759,000 and $3,723,000, respectively, offset in part by the increase in commercial real estate loans which increased $1,776,000. The decrease in consumer loans during the first nine months of 2011 was primarily due to the decline in installment loans to individuals. The decline in consumer real estate loans in 2011 was primarily in residential real estate loans and home equity loans and lines of credit. Commercial loans declined during 2011 primarily in commercial and industrial loans and in non-rated industrial development obligations. The increase in commercial real estate loans was primarily due to the increase in loans secured by non-farm, non-residential commercial real estate.

Commercial real estate loans which include real estate loans secured by non-farm, non-residential properties and multi-family residential property loans comprised fifty-one percent (51%) of the loan portfolio. Consumer real estate loans which include construction, farmland, real estate residential loans, and home equity loans comprised twenty-seven percent (27%) of the loan portfolio. Commercial and other loans which include commercial and industrial loans and non-rated industrial development obligations comprised fifteen percent (15%) of the loan portfolio. Consumer loans which include installment and other loans to individuals and credit cards comprised seven percent (7%) of the loan portfolio. The changes in the composition of the loan portfolio from December 31, 2010 to September 30, 2011 were a 4% increase in commercial real estate loans, a 2% decrease in commercial and other loans, a 1% decrease in consumer real estate loans and a 1% decrease in consumer loans.

PAGE 33

First West Virginia Bancorp, Inc.

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

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, 2011 and December 31, 2010:

	(Unaudited)
	September 30, 2011						December 31, 2010
(dollars in thousands)	In one Year or Less		After one Year Through Five Years		After Five Years		In one Year or Less		After one Year Through Five Years		After Five Years
Construction	$	—	$	15	$	259	$	155	$	21	$	132
Commercial real estate - nonfarm, nonresidential property		2,695		4,010		44,386		736		6,097		42,362
Commercial		899		2,871		1,849		1,519		2,875		2,638
Nonrated industrial development obligations		339		4,460		6,341		997		5,770		6,694
Total	$	3,933	$	11,356	$	52,835	$	3,407	$	14,763	$	51,826

The following table presents an analysis of fixed and variable rate loans as of September 30, 2011 and December 31, 2010 along with the contractual maturities of loans other than installment loans and residential mortgages:

	(Unaudited)
	September 30, 2011						December 31, 2010
(dollars in thousands)	In one Year or Less		After one Year Through Five Years		After Five Years		In one Year or Less		After one Year Through Five Years		After Five Years
Fixed Rates	$	2,987	$	7,038	$	9,164	$	2,197	$	10,503	$	9,607
Variable Rates		946		4,318		43,671		1,210		4,260		42,219
Total	$	3,933	$	11,356	$	52,835	$	3,407	$	14,763	$	51,826

Loans Held for Sale

The Company has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which the bank may sell conforming one-to-four family residential mortgage loans to the FHLB. The agreement provides for a maximum commitment of $10,000,000. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. The bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold under this agreement is $8,474,164 and $6,758,928 as of September 30, 2011 and December 31, 2010, respectively. The loans which were sold were also subject to a recourse obligation or credit risk in the amount of $303,366 and $232,888 at September 30, 2011 and December 31, 2010, respectively.

Non-performing Loans

Non-performing assets include non-accrual loans on which the collectibility of the full amount of interest is uncertain; loans which have been renegotiated to provide for a reduction or deferral of interest on principal because of a deterioration in the financial position of the borrower; loans past due ninety days or more as to principal or interest; and other real estate owned. A summary of nonperforming assets is presented in the following table. Total non-performing loans were $4,486,000 at September 30, 2011 as compared to $4,939,000 at December 31, 2010. Non-performing loans decreased $453,000 in 2011. The decrease in non-performing loans in 2011 was primarily due to decreases in non-accrual loans, offset in part by the increase in other real estate loans and loans pas due 90 days or more.

PAGE 34

First West Virginia Bancorp, Inc.

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

Non-performing Loans (Continued)

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:

	September 30,			December 31, 2010
(dollars in thousands)	2011			2010			2009				2008			2007
Past Due 90 Days or More:
Commercial and Other Loans	$	—		$	—		$	—			$	—		$	19
Commercial real estate		—			—			—				—			—
Consumer real estate		37			28			—				—			—
Consumer		7			—			—				—			7
		44			28			—				—			26
Non-accrual:
Commercial and Other Loans	$	41		$	54		$	2,254			$	111		$	79
Commercial real estate		3,640			4,147			1,195				2,866			2,165
Consumer real estate		513			688			624				282			192
Consumer		15			14			19				16			1
										��
	$	4,209		$	4,903		$	4,092			$	3,275		$	2,437
Other Real Estate	$	233		$	8		$	173			$	8		$	—
Total non-performing assets	$	4,486		$	4,939		$	4,265			$	3,283		$	2,463
Total non-performing assets to total loans and other real estate		3.92	%		4.07	%		3.31	%			2.63	%		2.02	%

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 $4,208,924 or 3.7% of total loans outstanding as of September 30, 2011, as compared to $4,903,000 or 4.0% of total loans outstanding as of December 31, 2010. Non-accrual loans decreased in 2011 primarily due to loans transferring into other real estate owned and by payments applied to nonaccrual loans. Loans past due 90 days or more and still accruing interest were $44,000 and $28,000 at September 30, 2011 and December 31, 2010. Other real estate owned totaled $233,000 and $8,000 at September 30, 2011 and December 31, 2010, respectively. Management continues to monitor the nonperforming assets to ensure against deterioration in collateral values.

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 $465,724 or 22.6%, since December 31, 2010. The allowance for loan losses represented 2.2% and 1.7% of outstanding loans as of September 30, 2011 and at December 31, 2010, respectively. Net loan charge-offs amounted to $134,000 for the nine month period ended September 30, 2011, compared to loan charge-offs of $47,000 for the same period in 2010. There was a provision in the amount of $600,000 and $90,000 made to the allowance for loan losses during the nine months ended September 30, 2011 and 2010. 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.

PAGE 35

First West Virginia Bancorp, Inc.

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

Allowance for Loan Losses (Continued)

The following table presents an allocation of the allowance for possible loan losses at each of the four year periods ended December 31, 2010, and the nine month period ended September 30, 2011. 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.

	(Unaudited)					December 31,
	September 30, 2011					2010					2009					2008					2007
(dollars in thousands)	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
Commercial and Other Loans	$	169		14.7	%	$	212		16.9	%	$	203		16.1	%	$	202		17.7	%	$	147		16.4	%
Commercial real estate		2,175		51.1			1,511		46.5			1,345		45.5			1,350		41.8			1,498		43.0
Consumer real estate		134		27.3			272		28.1			267		28.2			267		29.2			267		30.0
Consumer		47		6.9			64		8.5			79		10.2			104		11.3			131		10.6
Total	$	2,525		100.0	%	$	2,059		100.0	%	$	1,894		100.0	%	$	1,923		100.0	%	$	2,043		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 $7.0 million or 3.1% during the first nine months of 2011. Since year end the increase in total deposits was primarily due to increases in noninterest bearing demand deposits, interest bearing demand deposits and savings deposits which increased approximately $1.2 million, $3.2 million and $5.9 million, respectively, offset in part by the decrease in certificates of deposit which fell $3.2 million. At September 30, 2011, noninterest bearing deposits comprised 13% of total deposits and interest bearing deposits which include NOW, money market, savings and time deposits comprised 87% of total deposits. The changes in the composition of the deposit mix since December 31, 2010 were a 1% increase in noninterest bearing deposits and a 1% decrease in interest bearing deposits.

Federal Funds Purchased and Repurchase Agreements

Federal funds purchased and repurchase agreements 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, 2011 and December 31, 2010. Repurchase agreements increased $3,434,775 or 25.5%, from December 31, 2010 to September 30, 2011. The increase in repurchase agreements since year end was primarily due to the increase in the balances maintained by existing commercial customers.

Capital Resources

Stockholders’ equity increased 2.8% during the nine month period ended September 30, 2011 entirely from current earnings after quarterly dividends, and a 6.0% 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 11.6% and 11.2% of total assets at September 30, 2011 and December 31, 2010, respectively. The Company paid dividends of $.57 per share during the nine month period ended September 30, 2011 as compared to the $.55 per share paid in the nine month period ended September 30, 2010. The Company paid dividends of $.19 and $.18 per share during the three month periods ended September 30, 2011 and September 30, 2010, respectively.

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 2011, without approval of the Comptroller of the Currency, of approximately $2,272,000, plus an additional amount equal to the bank’s net profit for 2011 up to the date of any such dividend declaration.

PAGE 36

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 $143,206,933 classified as available for sale at September 30, 2011. 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 $8,567,000. 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, 2011 was approximately $37.9 million subject to the purchase of additional FHLB stock. At September 30, 2011, 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, 2011 and December 31, 2010. The subsidiary Bank also has an agreement with a financial institution for an available line of credit in the amount of $4,000,000 to be used for federal funds borrowings. There were no borrowings outstanding related to this agreement as of September 30, 2011 and December 31, 2010. During the third quarter of 2011, the subsidiary bank pledged investment securities in the amount of $16 million to secure the ability to borrow from the Federal Reserve discount window should the need arise. There were no borrowings outstanding from the Federal Reserve as of September 30, 2011. At September 30, 2011 and December 31, 2010, the Company had outstanding loan commitments and unused lines of credit totaling $14,867,000 and $18,484,000, respectively. As of September 30, 2011, management placed a high probability for required funding within one year of approximately $6.8 million. Approximately $3.9 million is principally unused home equity and credit card lines on which management places a low probability for required funding.

PAGE 37

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, 2011 was as follows: given a 200 basis point increase scenario net interest income would be increased by approximately 1.1%, and given a 200 basis point decrease scenario net interest income would be decreased by approximately 1.4%. The results using a +/-100 basis point interest rate scenario are also presented. Under the 100 basis point increase scenario net interest income would be increased by approximately 1.2%, and given a 100 basis point decrease scenario net interest income would be reduced by .5%. 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 38

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

Not applicable to Smaller Reporting Companies

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 5, 2011 a report on Form 8-K was filed which contained a press release dated August 3, 2011 that reported the announcement of First West Virginia Bancorp Inc.’s second quarter earnings.

(b) Exhibits

The exhibits listed in the Exhibit Index on page 41 of this FORM 10-Q are incorporated by reference and/or filed herewith.

PAGE 39

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 14, 2011

PAGE 40

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.*
10.7	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.
13.3	Summarized Quarterly Financial Information. Filed herewith.
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.
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.
32	Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to section 906 of the SARBANES-OXLEY ACT of 2002. Filed herewith.
99.1	Independent Accountant’s Report. Filed herewith.
101	Interactive Data File (XBRL).

* Incorporated by reference to an identically numbered exhibit to the Form 10 - K (File No. 001-13652) filed with the SEC on March 31, 2011.

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