1
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 June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________.
Commission File No. 1-13652
First West Virginia Bancorp, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-6051901
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1701 Warwood Avenue
Wheeling, West Virginia 26003
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(Address of principal executive offices)
Registrant's telephone number, including area code: (304) 277-1100
----------------
N/A
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(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
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 practical date.
The number of shares outstanding of the issuer's common stock as of August 9,
2001: Common Stock, $5.00 Par Value, shares outstanding 1,538,443 shares
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2
FIRST WEST VIRGINIA BANCORP, INC.
PART I
FINANCIAL INFORMATION
2
3
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, December 31, June 30,
2001 2000 2000
------------- ------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 5,138,125 $ 4,944,650 $ 4,595,841
Due from banks - interest bearing 1,612,997 7,491,600 3,207,699
------------- ------------- -------------
Total cash and cash equivalents 6,751,122 12,436,250 7,803,540
Federal funds sold 6,645,000 4,396,000 4,343,000
Investment securities
Available for sale (at fair value) 63,829,992 61,364,015 56,460,009
Held to maturity-fair value of $10,084,384
at June 30, 2001;
$10,920,799 at December 31, 2000;
and $12,024,432 at June 30, 2000 9,894,812 10,878,166 12,169,097
Loans 119,318,404 114,053,003 113,893,716
Less allowance for possible loan losses (1,542,641) (1,302,044) (1,249,571)
------------- ------------- -------------
Net loans 117,775,763 112,750,959 112,644,145
Premises and equipment, net 3,867,164 2,754,739 2,763,547
Accrued income receivable 1,352,312 1,543,124 1,472,747
Other assets 2,205,239 1,769,956 2,384,141
------------- ------------- -------------
Total assets $ 212,321,404 $ 207,893,209 $ 200,040,226
============= ============= =============
LIABILITIES
Noninterest bearing deposits:
Demand $ 16,977,145 $ 16,518,451 $ 15,089,702
Interest bearing deposits:
Demand 25,814,427 24,055,457 23,714,794
Savings 65,520,923 59,943,940 57,484,449
Time 77,277,661 73,150,730 73,236,954
------------- ------------- -------------
Total deposits 185,590,156 173,668,578 169,525,899
------------- ------------- -------------
Federal funds purchased and
repurchase agreements 5,955,074 14,526,328 12,654,483
Accrued interest on deposits 590,096 598,235 560,867
Other liabilities 823,447 874,968 744,986
------------- ------------- -------------
Total liabilities 192,958,773 189,668,109 183,486,235
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,538,443 shares issued at
June 30, 2001 and December 31, 2000;
1,508,526 shares issued at June 30, 2000 7,692,215 7,692,215 7,542,630
Surplus 4,982,606 4,982,606 4,739,381
Retained Earnings 6,250,280 5,587,967 5,300,417
Accumulated other comprehensive income 437,530 (37,688) (1,028,437)
------------- ------------- -------------
Total stockholders' equity 19,362,631 18,225,100 16,553,991
------------- ------------- -------------
Total liabilities and stockholders' equity $ 212,321,404 $ 207,893,209 $ 200,040,226
============= ============= =============
The accompanying notes are an integral part of the financial statements
4
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,460,662 $2,387,687 $4,880,619 $4,726,600
Tax-exempt 88,911 55,342 159,532 107,021
Investment securities:
Taxable 928,972 904,169 1,881,384 1,725,336
Tax-exempt 158,685 129,055 289,149 257,871
Dividends 8,568 8,610 17,950 17,338
Other interest income 71,195 90,506 186,408 185,313
Interest on federal funds sold 73,945 77,069 156,782 130,297
---------- ---------- ---------- ----------
Total interest income 3,790,938 3,652,438 7,571,824 7,149,776
INTEREST EXPENSE
Deposits 1,597,876 1,573,703 3,251,936 3,050,120
Other borrowings 77,339 143,768 215,811 259,918
---------- ---------- ---------- ----------
Total interest expense 1,675,215 1,717,471 3,467,747 3,310,038
---------- ---------- ---------- ----------
Net interest income 2,115,723 1,934,967 4,104,077 3,839,738
PROVISION FOR POSSIBLE LOAN LOSSES 141,000 97,500 282,000 195,000
---------- ---------- ---------- ----------
Net interest income after provision
for possible loan losses 1,974,723 1,837,467 3,822,077 3,644,738
NONINTEREST INCOME
Service charges and other fees 155,044 137,035 282,128 250,125
Securities gains (losses) 6,244 -- 7,891 23,443
Other operating income 87,961 54,325 166,821 148,418
---------- ---------- ---------- ----------
Total noninterest income 249,249 191,360 456,840 421,986
NONINTEREST EXPENSES
Salary and employee benefits 674,033 631,183 1,307,248 1,283,562
Net occupancy and equipment expenses 220,272 190,348 423,270 397,635
Other operating expenses 482,510 382,938 862,625 750,683
---------- ---------- ---------- ----------
Total noninterest expense 1,376,815 1,204,469 2,593,143 2,431,880
---------- ---------- ---------- ----------
Income before income taxes 847,157 824,358 1,685,774 1,634,844
---------- ---------- ---------- ----------
INCOME TAXES 243,939 239,498 500,391 490,441
---------- ---------- ---------- ----------
Net income $ 603,218 $ 584,860 $1,185,383 $1,144,403
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,538,443 1,538,443 1,538,443 1,538,443
========== ========== ========== ==========
EARNINGS PER COMMON SHARE $ 0.39 $ 0.38 $ 0.77 $ 0.74
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements
5
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Common Stock Other
------------------------- Retained Comprehensive Comprehensive
Shares Amount Surplus Earnings Income Income Total
------ ------ ------- -------- ------ ------ -----
Balance, December 31, 2000 1,538,443 $7,692,215 $4,982,606 $5,587,967 $(37,688) $ $18,225,100
Comprehensive income
Net income for the six months
ended June 30, 2001 -- -- -- 1,185,383 -- 1,185,383 1,185,383
Other comprehensive income,
net of tax
Unrealized gains (losses) on
securities, net of
reclassification adjustment
(see disclosure) -- -- -- -- 475,218 475,218 475,218
-----------
Comprehensive income $ 1,660,601
===========
Cash dividend
($.34 per share) -- -- -- (523,070) -- (523,070)
--------- ---------- ---------- ---------- -------- -----------
Balance, June 30, 2001 (Unaudited) 1,538,443 $7,692,215 $4,982,606 $6,250,280 $437,530 $19,362,631
========= ========== ========== ========== ======== ===========
Accumulated
Common Stock Other
------------------------- Retained Comprehensive Comprehensive
Shares Amount Surplus Earnings Income Income Total
------ ------ ------- -------- ------ ------ -----
Balance, December 31, 1999 1,508,526 $7,542,630 $4,739,381 $4,638,742 $(865,281) $ $16,055,472
Comprehensive income
Net income for the six months
ended June 30, 2000 -- -- -- 1,144,403 -- 1,144,403 1,144,403
Other comprehensive income,
net of tax
Unrealized gains (losses) on
securities, net of
reclassification adjustment
(see disclosure) -- -- -- -- (163,156) (163,156) (163,156)
----------
Comprehensive income $ 981,247
==========
Cash dividend
($.32 per share) -- -- -- (482,728) -- (482,728)
--------- ---------- ---------- ---------- ----------- -----------
Balance, June 30, 2000 (Unaudited) 1,508,526 $7,542,630 $4,739,381 $5,300,417 $(1,028,437) $16,553,991
========= ========== ========== ========== =========== ===========
For the six months ended
June 30,
2001 2000
---------- ----------
Disclosure of reclassification amount, net of tax:
Unrealized holding gains (losses)
arising during the period $ 480,164 $(148,462)
Less: reclassification adjustment for
gains (losses) included in net income 4,946 14,694
---------- ---------
Net unrealized gains (losses) on securities $ 475,218 $(163,156)
========== =========
The accompanying notes are an integral part of the financial statements
6
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2001 2000
------------ ------------
(Unaudited)
OPERATING ACTIVITIES
Net Income $ 1,185,383 $ 1,144,403
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 282,000 195,000
Depreciation and amortization 154,311 168,711
Amortization (Accretion) of investment securities, net (25,108) (132,085)
Investment security losses (gains) (7,891) (23,443)
(Gain) loss on disposal of premises and equipment -- 579
Decrease (increase) in interest receivable 190,812 (116,328)
Increase (decrease) in interest payable (8,139) 61,515
Other, net (148,493) (385,888)
------------ ------------
Net cash provided by operating activities 1,619,875 912,464
------------ ------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (2,249,000) (1,858,000)
Net (increase) decrease in loans, net of charge offs (5,334,294) (3,521,932)
Proceeds from sales of securities available for sale 1,108,060 882,333
Proceeds from maturities of securities available for sale 53,763,241 7,090,000
Proceeds from maturities of securities held to maturity 985,000 340,000
Principal collected on mortgage-backed securities 3,901,387 1,631,817
Purchases of securities available for sale (60,446,147) (17,417,387)
Purchases of securities held to maturity -- (1,867,818)
Recoveries on loans previously charged-off 27,490 23,499
Purchases of premises and equipment (1,226,735) (91,500)
Cash acquired in purchase of branch office 8,990,870 --
------------ ------------
Net cash used or provided by investing activities (520,128) (14,788,988)
------------ ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 11,921,578 7,967,967
Deposits acquired in purchase of branch office (9,612,129) --
Dividends paid (523,070) (482,728)
Increase (decrease) in short term borrowings (8,571,254) 2,380,558
------------ ------------
Net cash used or provided by financing activities $ (6,784,875) $ 9,865,797
------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (5,685,128) (4,010,727)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 12,436,250 11,814,267
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,751,122 $ 7,803,540
============ ============
The accompanying notes are an integral part of the financial statements
7
First West Virginia Bancorp, Inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001 AND 2000
1. The accompanying financial statements are unaudited. However in the opinion
of management, they contain the adjustments ( all of which are normal and
recurring in nature) necessary to present fairly the financial position and the
results of operations. The notes to the financial statements contained in the
annual report for December 31, 2000, should be read in conjunction with these
financial statements.
2. The provision for income taxes is at a rate which management believes will
approximate the effective rate for the year.
3. Certain prior year amounts have been reclassified to conform to the 2001
presentation.
8
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
---------------------------------------------------------------
First West Virginia Bancorp, Inc., a West Virginia corporation headquartered in
Wheeling, West Virginia commenced operations in July, 1973 and has two
wholly-owned subsidiaries: Progressive Bank, N.A., which operates in Wheeling,
Wellsburg, Moundsville, and New Martinsville, West Virginia and Bellaire, Ohio;
and Progressive Bank, N.A.-Buckhannon, which operates in Buckhannon and Weston,
West Virginia. Following is a discussion and analysis of the significant changes
in the financial condition and results of operations of First West Virginia
Bancorp, Inc., (the Holding Company), and its subsidiaries for the three and six
months ended June 30, 2001 and 2000. This discussion and analysis should be read
in conjunction with the Consolidated Financial Statements, Notes, and tables
contained in this report, as well as with the Holding Company's 2000 financial
statements, the notes thereto and the related Management's Discussion and
Analysis.
OVERVIEW
The Holding Company reported net income of $603,218 for the three months ended
June 30, 2001 as compared to $584,860 for the same period during 2000. The
increase in earnings during the second quarter of 2001 over 2000 was primarily
attributed to the increased net interest income and noninterest income, offset
in part by increased operating expenses and the provision for loan losses.
Earnings per share were $.39 in the second quarter of 2001, as compared to $.38
earned during the second quarter of 2000. Net interest income increased during
the three month period ended June 30, 2001 primarily from an increase in the
average volume of loans and investment securities and the decreased interest
rates paid on interest bearing liabilities.
Net income for the six months ended June 30, 2001 was $1,185,383 compared to
$1,144,403 for the same period during 2000. The increase in earnings for the six
months ended June 30, 2001 as compared to the same period in 2000 was primarily
due to increased net interest income and noninterest income, offset in part by
increased operating expenses and the provision for loan losses. Earnings per
share were $.77 for the first six months of 2001 as compared to $.74 earned
during the same period during 2000. For the six month period ended June 30,
2001, the increase in net interest income was primarily due to the increased
interest earned on the average volume of loans and investment securities, offset
in part by the increase in the average volume of savings and time deposits.
Return on average assets (ROA) measures the effectiveness of asset utilization
to produce net income. ROA was 1.11% for the three month period ended June 30,
2001 as compared to 1.17% for the same period of the prior year. For the six
months ended June 30, 2001 compared to June 30, 2000, ROA was 1.12% and 1.16%,
respectively. Return on average equity (ROE) measures the return on the
stockholders' investment. The holding company's ROE was 12.85% for the three
months ended June 30, 2001 and 13.53% at June 30, 2000. For the six months ended
June 30, 2001 compared to June 30, 2000, ROE was 12.87% and 13.37%,
respectively.
During the first quarter of 2001, the Corporation's subsidiary, Progressive
Bank, N.A., opened two full-service offices in West Virginia, one in
Moundsville, and one in New Martinsville. In October, 2000, Progressive Bank,
N.A. entered into a Purchase and Assumption Agreement with United National Bank
to purchase the building and deposits of United's New Martinsville, West
Virginia branch office located at 425 Third Street. Progressive Bank also
entered into a Real Estate Purchase Agreement to purchase the building and land
of United's Moundsville, West Virginia branch office located at 809 Lafayette
Avenue. The acquisition of the two offices added approximately $11.5 million in
assets during the first quarter of 2001. Total deposits acquired in the New
Martinsville transaction were approximately $9.6 million.
The Holding Company as of June 30, 2001 had total assets of $212,321,404 an
increase of 2.1% over the $207,893,209 reported for the year ended December 31,
2000. Loans net of the allowance for possible loan losses grew by $5,024,804 or
4.5% to $117,775,763, as compared to $112,750,959 reported at December 31, 2000.
Total deposits increased in 2001 by $11,921,578, from $173,668,578 at December
31, 2000 to $185,590,156 at June 30, 2001. The allowance for loan losses
amounted to 1.3% of total loans at June 30, 2001, compared to 1.1% of total
loans at December 31, 2000.
Table One is a summary of Selected Financial Data of the holding company. The
sections that follow discuss in more detail the information summarized in Table
One.
9
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
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Table One
SELECTED FINANCIAL DATA
(Unaudited, in thousands, except per share data)
First West Virginia Bancorp, Inc.
Three months ended Six months ended Years ended
June 30, June 30, December 31,
---------------------- ----------------------- ------------------------------------
2001 2000 2001 2000 2000 1999 1998
-------- -------- -------- -------- -------- -------- --------
SUMMARY OF OPERATIONS
Total interest income $ 3,791 $ 3,652 $ 7,572 $ 7,150 $ 14,869 $ 13,207 $ 12,452
Total interest expense 1,675 1,717 3,468 3,310 7,155 5,602 5,324
Net interest income 2,116 1,935 4,104 3,840 7,714 7,605 7,128
Provision for loan losses 141 98 282 195 436 348 256
Total other income 249 191 457 422 880 1,073 787
Total other expenses 1,377 1,204 2,593 2,432 4,816 4,740 4,674
Income before income taxes 847 824 1,686 1,635 3,341 3,590 2,985
Net income 603 585 1,185 1,144 2,326 2,450 2,033
PER SHARE DATA (1)
Net income $ 0.39 $ 0.38 $ .77 $ 0.74 $ 1.51 $ 1.59 $ 1.32
Cash dividends declared 0.17 0.16 0.34 0.32 0.64 0.54 0.48
Book value per share 12.59 10.76 12.59 10.76 11.85 10.44 10.05
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $118,066 $112,572 $116,195 $111,668 $112,579 $105,775 $ 99,345
Investment securities 75,899 69,039 73,519 66,682 69,548 59,716 47,911
Deposits - interest bearing 168,865 154,100 164,276 151,724 155,172 141,768 127,520
Stockholders' equity 18,822 17,393 18,566 17,212 17,448 16,087 14,697
Total assets 217,215 200,924 213,645 197,881 203,529 183,436 164,630
SELECTED RATIOS
Return on average assets 1.11% 1.17% 1.12% 1.16% 1.14% 1.34% 1.23%
Return on average equity 12.85% 13.53% 12.87% 13.37% 13.33% 15.23% 13.83%
Average equity to average assets 8.67% 8.66% 8.69% 8.70% 8.57% 8.77% 8.93%
Dividend payout ratio (1) 43.59% 42.11% 44.16% 43.24% 42.38% 33.96% 36.36%
Loan to Deposit ratio 64.29% 67.18% 64.29% 67.18% 65.67% 68.39% 70.07%
BALANCE SHEET June 30, December 31,
----------------------- --------------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- -------- --------
Investments $ 73,725 $ 68,629 $ 72,242 $ 59,394 $ 54,080
Loans 119,319 113,894 114,053 110,489 103,555
Other assets 19,277 17,517 21,598 19,290 13,760
-------- -------- -------- -------- --------
Total Assets $212,321 $200,040 $207,893 $189,173 $171,395
======== ======== ======== ======== ========
Deposits $185,590 $169,526 $173,669 $161,558 $147,785
Federal funds purchased and
repurchase agreements 5,955 12,654 14,526 10,274 6,994
Other liabilities 1,413 1,306 1,473 1,285 1,155
Stockholders' equity 19,363 16,554 18,225 16,056 15,461
-------- -------- -------- -------- --------
Total Liabilities and
Stockholders' Equity $212,321 $200,040 $207,893 $189,173 $171,395
======== ======== ======== ======== ========
(1) Adjusted for the 2 percent common stock dividend to stockholders of record
as of December 1, 2000, a 6 for 5 stock split in the effect of a twenty
(20) percent common stock dividend, declared October 12, 1999 to
shareholders of record as of November 1, 1999, a 4 percent common stock
dividend to stockholders of record as of October 1, 1998.
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10
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- -------------------------------------------------------------------------------
EARNINGS ANALYSIS
Net Interest Income
Net interest income, which is the difference between interest earned on loans
and investments and interest paid on deposits and other liabilities, is the
primary source of earnings for the Holding Company. Changes in the volume and
mix of earning assets and interest bearing liabilities combined with changes in
market rates of interest greatly effect net interest income. Tables Two and
Three present the average balance sheet and interest rate analysis for the three
and six months ended June 30, 2001 and 2000.
Net interest income was $2,115,723 for the three months ended June 30, 2001, an
increase of $180,756 or 9.3%, from the same period in 2000. The increase in net
interest income was primarily attributable to the increase in the interest
earned on loans and investment securities combined with the decrease in the
interest paid on deposits and repurchase agreements. Interest and fees on loans
increased $106,544 or 4.4% during the three month period ended June 30, 2001 as
compared to the same period in 2000 and resulted primarily from an increase in
average loan volume. Interest income on investment securities increased $54,433
or 5.3%, for the three months ended June 30, 2001 over 2000 primarily due to the
increase in the average volume of investment securities. Interest expense
decreased $42,256 or 2.5% primarily due to the decreased rates paid on savings
deposits and repurchase agreements combined with the decrease in the average
volume of repurchase agreements offset in part by the increased average volume
of savings and time deposits.
For the six months ended June 30, 2001, net interest income was $4,104,077, an
increase of $264,339 or 6.9%, from the same period in 2000. The increase in net
interest income was primarily attributable to the increase in loans and
investment securities combined with the decrease in the average rates paid on
savings deposits and repurchase agreements. Interest and fees on loans increased
$206,530 or 4.3% for the six month period ended June 30, 2001 as compared to the
same period in 2000. The increased interest income on loans resulted primarily
from an increase in the average loan volume. Increases in commercial and in
other loans primarily contributed to the loan growth. Interest income on
investment securities increased $187,326 or 9.4% during the six months ended
June 30, 2001 over 2000. The increase in the average volume of investment
securities primarily contributed to the increase in net interest income. The
average yield on investment securities decreased .08%, from 6.03% at December
31, 2000 to 5.95% at June 30, 2001. During the six months ended June 30, 2001,
interest expense increased $157,709 or 4.8% as compared to the same period in
2000. Interest expense increased primarily as a result of the increase in the
volume of savings and time deposits. The average yield paid on interest bearing
liabilities decreased .28%, from 4.23% at December 31, 2000 to 3.95% at June 30,
2001.
Noninterest Income
Noninterest income was $249,249 for the three months ended June 30, 2001, an
increase of $57,889 as compared to the same period of the prior year. Service
charges and other fees represent the major component of noninterest income.
These charges are earned from assessments made on checking and savings accounts.
Service charges increased $18,009 during the three months ended June 30, 2001,
up 13.1%, from the same period in 2000.
For the six months ended June 30, 2001, noninterest income was $456,840, an
increase of $34,854 as compared to the same period of the prior year. Service
charges and other fees increased $32,003 or 12.8% over the same period in 2000.
Sales of investment securities for the six months ended June 30, 2001, and 2000
were primarily the result of sales by the holding company. The holding company
accounted for securities gains of $21,018 and securities losses of $11,859
during the six months ended June 30, 2001 and securities gains of $37,940 and a
securities losses of $14,508 during 2000. The holding company sales were
attributable to sales of marketable equity securities.
11
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- -------------------------------------------------------------------------------
Non-Interest Expense
Noninterest expense increased $172,346 or 14.3% for the three months ended June
30, 2001 as compared to the same period of the prior year. During the quarter
ended June 30, 2001, salary and employee benefits increased $42,850 or 6.8%. The
increase was primarily attributable to hiring of personnel for the Moundsville
and New Martinsville, West Virginia offices combined with normal annual merit
adjustments in salaries. The major components of other operating expenses
include: stationery and supplies, directors fees, service expense, postage and
transportation, other taxes, advertising, and regulatory assessment and deposit
insurance. Other operating expenses increased $99,572, or 26.0%, for the three
month period ended June 30, 2001 as compared to the same period in the prior
year. Increased stationery and supplies expense, other taxes, deposit premium
amortization, postage expense and other operating expenses primarily contributed
to the increase in other operating expenses during the three month period ended
June 30, 2001.
For the six months ended June 30, 2001, noninterest expense increased $161,263
or 6.6% as compared to the same period of the prior year. Salary and employee
benefits increased $23,686 or 1.8%. The increase was primarily attributable to
normal annual merit adjustments in salaries. Other operating expenses increased
$111,942 or 14.9%, for the six month period ended June 30, 2001 as compared to
the same period in the prior year. Increased stationery and supplies expense,
other taxes, other operating expenses and postage and transportation expense,
offset in part by decreased advertising expense primarily contributed to the
increase in other operating expenses in 2001.
Income Taxes
Income tax expense for the three months ended June 30, 2001 was $243,939, an
increase of 1.9% over the same period in 2000. The increase was primarily due to
the increase in pre-taxable income of $22,799 for the period ended June 30, 2001
over 2000. Components of the income tax expense for June 30, 2001 were $200,770
for federal taxes and $43,169 for West Virginia corporate net income taxes. For
the six months ended June 30, 2001, income tax expense increased 2.0% compared
to the same period in 2000. The increase was primarily due to the increase in
pre-taxable income of $50,930 for the during the six months ended June 30, 2001
over 2000.
For federal income tax purposes, tax-exempt income is based on qualified state,
county, and municipal bonds and loans. Tax-exempt income was $247,596 and
$184,397 for the three month periods ended June 30, 2001 and 2000, respectively.
For the six months ended June 30, 2001 and 2000, tax exempt income was $448,681
and $364,892, respectively.
Federal income tax rates and West Virginia corporate net income tax rates remain
consistent at 34% and 9%, respectively, for the three and six months ended June
30, 2001 and 2000 and for the year ended December 31, 2000.
12
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- -------------------------------------------------------------------------------
Table Two
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and
Interest Differential
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 six months ended June 30, 2001
and June 30, 2000 and the year ended December 31, 2000. Average balance sheet
information as of June 30, 2001 and June 30, 2000 and the year ended December
31, 2000 was compiled using the daily average balance sheet. Loan fees and
unearned discounts were included in income for average rate calculation
purposes. 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 six month periods ended
June 30, 2001 and 2000.
For the six For the six
months ended months ended
June 30, 2001 December 31, 2000 June 30, 2000
----------------------------- ------------------------------ ----------------------------
Average Average Average Average Average Average
Volume Interest Rate Volume Interest Rate Volume Interest Rate
-------- -------- ------- ------- -------- -------- -------- -------- ------
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 33,851 $1,014 6.04% $ 42,503 $ 2,675 6.29% $ 43,239 $1,329 6.18%
Mortgage-backed securities 20,150 667 6.68% 12,123 778 6.42% 8,884 299 6.77%
Obligations of states and
political subdivisions 14,340 333 4.68% 12,431 576 4.63% 11,928 270 4.55%
Other securities 5,178 157 6.11% 2,491 162 6.50% 2,632 85 6.49%
-------- ------ ---- -------- ------- ---- -------- ------ ----
Total Investment securities: 73,519 2,171 5.95% 69,548 4,191 6.03% 66,683 1,983 5.98%
Interest bearing deposits 7,094 181 5.15% 6,375 398 6.24% 6,048 180 5.99%
Federal funds sold 6,465 157 4.90% 6,041 380 6.29% 4,370 130 5.98%
Loans, net of unearned income 116,195 5,040 8.75% 112,579 9,853 8.75% 111,668 4,834 8.71%
Other earning assets 705 23 6.58% 702 47 6.70% 701 23 6.60%
-------- ------ ---- -------- ------- ---- -------- ------ ----
Total earning assets 203,978 7,572 7.49% 195,245 14,869 7.62% 189,470 7,150 7.59%
Cash and due from banks 4,672 4,602 4,680
Bank premises and equipment 3,634 2,777 2,795
Other assets 2,786 2,148 2,138
Allowance for possible loan losses (1,425) (1,243) (1,202)
-------- -------- --------
Total Assets $213,645 $203,529 $197,881
======== ======== ========
LIABILITIES
Certificates of deposit $ 75,749 $2,166 5.77% $ 73,128 $ 4,065 5.56% $ 71,402 $1,907 5.37%
Savings deposits 63,161 944 3.01% 56,940 2,080 3.65% 55,669 957 3.46%
Interest bearing demand deposits 25,365 142 1.13% 25,104 374 1.49% 24,653 186 1.52%
Federal funds purchased and
Repurchase agreements 12,566 216 3.47% 14,067 637 4.53% 12,330 260 4.24%
-------- ------ ---- -------- ------- ---- -------- ------ ----
Total interest bearing liabilities 176,841 3,468 3.95% 169,239 7,156 4.23% 164,054 3,310 4.06%
Demand deposits 17,051 15,301 15,193
Other liabilities 1,187 1,541 1,422
-------- -------- --------
Total Liabilities 195,079 186,081 180,669
STOCKHOLDERS' EQUITY 18,566 17,448 17,212
-------- -------- --------
Total Liabilities
and Stockholders' Equity $213,645 $203,529 $197,881
======== ======== ========
Net yield on earning assets $4,104 4.06% $ 7,713 3.95% $3,840 4.08%
====== ==== ======= ==== ====== ====
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 six months ended June 30, 2001
and 2000, and the year ended December 31, 2000, respectively. The effect of this
adjustment is presented below (in thousands).
Obligations of states and
political subdivisions:
Investment securities $ 14,340 $ 482 6.78% $ 12,431 $ 925 7.44% $ 11,928 $ 442 7.45%
Loans 116,195 5,147 8.93% 112,579 10,012 8.89% 111,668 4,905 8.83%
======== ====== ==== ======== ======= ==== ======== ====== ====
Total earning assets $203,978 $7,828 7.74% $195,245 $15,377 7.88% $189,470 $7,393 7.85%
======== ====== ==== ======== ======= ==== ======== ====== ====
Taxable equivalent net yield on
earning assets $4,360 4.31% $ 8,221 4.21% $4,083 4.33%
====== ==== ======= ==== ====== ====
13
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
Table Three
Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and
Interest Differential (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 June 30,
2001 and June 30, 2000. Average balance sheet information as of June 30, 2001
and June 30, 2000 was compiled using the daily average balance sheet. Loan fees
and unearned discounts were included in income for average rate calculation
purposes. 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
June 30, 2001 and 2000.
For the Three For the Three
Months ended Months ended
June 30, 2001 June 30, 2000
------------------------------- -------------------------------
Average Average Average Average
Volume Interest Rate Volume Interest Rate
------ -------- ---- ------ -------- ----
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 29,146 $ 414 5.70% $ 43,540 $ 681 6.29%
Mortgage backed securities 24,024 392 6.54% 10,468 167 6.42%
Obligations of states and
political subdivisions 15,842 179 4.53% 12,281 141 4.62%
Other securities 6,887 103 6.00% 2,750 44 6.44%
-------- ------ ---- -------- ------ ----
Total Investment Securities 75,899 1,088 5.75% 69,039 1,033 6.02%
Interest bearing deposits 5,761 68 4.73% 5,558 88 6.37%
Federal funds sold 6,801 74 4.36% 4,955 77 6.25%
Loans, net of unearned income 118,066 2,550 8.66% 112,572 2,443 8.73%
Other earning assets 709 11 6.22% 702 12 6.88%
-------- ------ ---- -------- ------ ----
Total earning assets 207,236 3,791 7.34% 192,826 3,653 7.62%
Cash and due from banks 4,604 4,403
Bank premises and equipment 3,892 2,776
Other earning assets 2,963 2,140
Allowance for possible loan losses (1,480) (1,221)
-------- --------
Total Assets $217,215 $200,924
======== ========
LIABILITIES
Certificates of deposit $ 77,930 $1,097 5.65% $ 72,317 $ 974 5.42%
Savings deposits 64,811 433 2.68% 57,182 507 3.57%
Interest bearing demand deposits 26,125 68 1.04% 24,601 93 1.52%
Federal funds purchased and
Repurchase agreements 10,477 77 2.95% 12,848 144 4.51%
-------- ------ ---- -------- ------ ----
Total interest bearing liabilities 179,343 1,675 3.75% 166,948 1,718 4.14%
Demand deposits 17,630 15,147
Other liabilities 1,421 1,436
-------- --------
Total Liabilities 198,394 183,531
SHAREHOLDERS' EQUITY 18,821 17,393
-------- --------
Total Liabilities
and Shareholders' Equity $217,215 $200,924
======== ========
Net yield on earning assets $2,116 4.10% $1,935 4.04%
====== ==== ====== ====
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 June 30, 2001
and 2000, respectively. The effect of this adjustment is presented below (in
thousands).
Obligations of states and
political subdivisions:
Investment securities $ 15,842 $ 265 6.71% $ 12,281 $ 227 7.43%
Loans 118,066 2,609 8.86% 112,572 2,480 8.86%
======== ====== ==== ======== ====== ====
Total earning assets $207,236 $3,936 7.62% $192,826 $3,776 7.88%
======== ====== ==== ======== ====== ====
Taxable equivalent net yield on
earning assets $2,261 4.38% $2,058 4.29%
====== ==== ====== ====
14
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- -------------------------------------------------------------------------------
Balance Sheet Analysis
Investments
Investment securities increased $1,482,623 or 2.1% from $72,242,181 at
December 31, 2000, to $73,724,804 at June 30, 2001. Taxable securities comprised
78.1% of total securities at June 30, 2001, as compared to 84.3% at December 31,
2000. Other than the normal risks inherent in purchasing U.S. Treasury
securities, U.S. Government corporation and agencies securities, and obligations
of states and political subdivisions, i.e. interest rate risk, management has no
knowledge of other market or credit risk involved in these investments. The
corporation does not have any high risk hybrid/derivative instruments.
Available for sale securities, at market value increased $2,465,977 or 4.0%
from December 31, 2000, and represented 87% of the investment portfolio at June
30, 2001. The increase was primarily due to purchases of mortgage-backed
securities, municipal securities and corporate debt securities. The held to
maturity securities decreased $983,354 or 9.0% from December 31, 2000 and
represented 13% of the investment portfolio as of June 30, 2001. The decrease
was primarily the result of maturities of taxable municipal securities. As the
investment portfolio consists primarily of fixed rate debt securities, changes
in the market rates of interest will effect the carrying value of securities
available for sale, adjusted upward or downward under the requirements of FAS
115 and represent temporary adjustments in values. The carrying value of
securities available for sale was increased by $698,036 at June 30, 2001 and
decreased by $60,128 at December 31, 2000. The market value of securities
classified as held to maturity was above book value by $189,572 and $42,633 at
June 30, 2001 and December 31, 2000, respectively.
Table Four
Investment Portfolio
The following table presents the book values of investment securities:
(in thousands) (Unaudited):
June 30, December 31,
2001 2000
----------- -----------
Securities held to maturity:
Obligations of states
and political subdivisions $ 9,895 $10,878
------- -------
Total held to maturity $ 9,895 $10,878
------- -------
Securities available for sale :
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 23,934 $43,047
Obligations of states
and political subdivisions 7,574 2,051
Corporate debt securities 6,194 592
Mortgage-backed securities 25,648 15,286
Equity Securities 480 388
------- -------
Total available for sale 63,830 61,364
------- -------
Total $73,725 $72,242
======= =======
- -------------------------------------------------------------------------------
15
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Investment Portfolio (Continued)
(in thousands)
The maturity distribution using book value including accretion of discounts and
amortization of premiums (expressed in thousands) and approximate yield of
investment securities at June 30, 2001 and December 31, 2000 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.
June 30, 2001 December 31, 2000
-------------------------------------------- --------------------------------------
Securities Securities Securities Securities
Held to Maturity Available for Sale Held to Maturity Available for Sale
------------------ ------------------ ---------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Unaudited)
U.S. Treasury and other U.S.
Government Agencies
Within One Year $ -- --% $ 5,680 4.97% $ -- --% $ 8,843 6.13%
After One But
Within Five Years -- -- 10,535 5.54 -- -- 24,422 6.20
After Five But
Within Ten Years -- -- 6,281 6.47 -- -- 9,782 6.57
After Ten Years -- -- 1,438 4.99 -- -- -- --
------ ---- ------- ---- ------- ---- ------- ----
-- -- 23,934 5.62 -- -- 43,047 6.27
States & Political Subdivisions
Within One Year 1,030 6.07 200 4.56 2,008 6.74 -- --
After One But
Within Five Years 4,055 6.22 5,523 5.42 3,745 6.28 985 7.39
After Five But
Within Ten Years 4,714 6.58 1,604 6.38 5,029 6.52 1,066 6.93
After Ten Years 96 7.81 247 6.58 96 7.82 -- --
------ ---- ------- ---- ------- ---- ------- ----
9,895 6.39 7,574 5.64 10,878 6.49 2,051 7.15
Corporate Debt Securities
Within One Year -- -- 253 6.18 -- -- 100 8.44
After One But
Within Five Years -- -- 3,992 6.07 -- -- 492 7.36
After Five But
Within Ten Years -- -- 1,949 6.56 -- -- -- --
------ ---- ------- ---- ------- ---- ------- ----
-- -- 6,194 6.23 -- -- 592 7.54
Mortgage-Backed Securities -- -- 25,648 6.46 -- -- 15,286 7.01
Equity Securities -- -- 480 2.72 -- -- 388 2.94
------ ---- ------- ---- ------- ---- ------- ----
Total $9,895 6.39% $63,830 6.00% $10,878 6.49% $61,364 6.47%
====== ==== ======= ==== ======= ==== ======= ====
- ------------------------------------------------------------------------------
16
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Loans
- -----
Loans net of unearned income increased $5,265,401 or 4.6% from December 31,
2000. The additional growth in the loan portfolio during the first six months of
2001 was primarily due to increases in commercial loans, other loans, and
residential real estate loans, offset in part by the decrease in installment
loans.
Real estate residential loans which include real estate construction, real
estate farmland, and real estate residential loans comprise thirty-six percent
(36%) of the loan portfolio. Commercial loans which include real estate secured
by non-farm, non residential and commercial and industrial loans comprise
thirty-nine percent (39%) of the loan portfolio. Installment loans comprise
nineteen percent (19%) of the loan portfolio. Other loans include nonrated
industrial development obligations, direct financing leases and other loans
comprise six percent (6%) of the loan portfolio. The changes in the composition
of the loan portfolio from December 31, 2000 to June 30, 2001 were a 2% increase
in commercial loans, a 2% increase in other loans, a 2% decrease in installment
loans and a 2% decrease in residential real estate loans.
The loan portfolio is not dominated by concentrations of credit within any
one industry; therefore, the impact of a weakening economy on any particular
industry should be minimal. Management believes that the loan portfolio does not
contain any excessive or abnormal elements of risk.
Table Five
Loan Portfolio
(Unaudited)
Loans outstanding are as follows (in thousands) :
June 30, December 31,
---------------------- ------------
2001 2000 2000
-------- -------- --------
Real Estate - Residential
Real estate-construction $ 283 $ 259 $ 119
Real estate-farmland 153 91 106
Real estate-residential 42,904 41,803 42,960
-------- -------- --------
$ 43,340 $ 42,153 $ 43,185
-------- -------- --------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 32,045 $ 30,142 $ 28,391
Commercial & industrial 14,312 14,135 13,845
-------- -------- --------
$ 46,357 $ 44,277 $ 42,236
-------- -------- --------
Installment
Installment and other
loans to individuals $ 22,997 $ 23,198 $ 23,896
-------- -------- --------
Others
Nonrated industrial
development obligations $ 6,495 $ 4,029 $ 4,610
Other loans 217 327 216
-------- -------- --------
$ 6,712 $ 4,356 $ 4,826
-------- -------- --------
Total 119,406 113,984 114,143
Less unearned interest 87 90 90
-------- -------- --------
$119,319 $113,894 $114,053
======== ======== ========
17
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Six
Loan Portfolio - Maturities and sensitivities of Loans to Changes in
Interest Rates
The following table presents the contractual maturities of loans other than
installment loans and residential mortgages for all banks as of June 30, 2001
and December 31, 2000 (in thousands) (Unaudited):
June 30, 2001
--------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $1,254 $6,236 $6,822
Real Estate - construction 236 7 40
------ ------ ------
Total $1,490 $6,243 $6,862
====== ====== ======
December 31, 2000
--------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 746 $5,815 $7,284
Real Estate - construction 119 -- --
------ ------ ------
Total $ 865 $5,815 $7,284
====== ====== ======
The following table presents an analysis of fixed and variable rate loans as of
June 30, 2001 and December 31, 2000 along with the contractual maturities of
loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
June 30, 2001
----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Fixed Rates $1,306 $4,267 $1,700
Variable Rates 184 1,976 5,162
------ ------ ------
Total $1,490 $6,243 $6,862
====== ====== ======
December 31, 2000
----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Fixed Rates $ 802 $4,380 $ 638
Variable Rates 63 1,435 6,646
------ ------ ------
Total $ 865 $5,815 $7,284
====== ====== ======
- ---------------------------------------------------------------------------
18
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
------------------------------------------------------------------------------
Total non-performing loans were $1,760,000 at June 30, 2001 and $2,283,000
at December 31, 2000. Loans classified as non-accrual were $1,039,000 or .9% of
total loans as of June 30, 2001, as compared to $1,248,000 or 1.1% of total
loans at December 31, 2000. There were no loans classified as renegotiated as of
June 30, 2001 and December 31, 2000. The loans past due 90 days or more
decreased $260,000 to $644,000 at June 30, 2001. Other real estate owned was
$77,000 at June 30, 2001 as compared to $131,000 at December 31, 2000.
Management continues to monitor the non-performing assets to ensure against
deterioration in collateral values.
Table Seven
Risk Elements
(UNAUDITED)
The following table presents loans which are in the process of collection, but
are contractually past due 90 days or more as to interest or principal,
non-accrual loans and other real estate ( in thousands):
June 30, December 31,
------------------- ------------
2001 2000 2000
------ ------ ------
Past Due 90 Days or More:
Real Estate - residential $ 133 $ 68 $ 48
Commercial 407 60 711
Installment 104 60 145
------ ------ ------
$ 644 $ 188 $ 904
------ ------ ------
Non-accrual:
Real Estate - residential $ -- $ 55 $ 14
Commercial 985 1,022 1,202
Installment 54 53 32
------ ------ ------
$1,039 $1,130 $1,248
------ ------ ------
Other Real Estate $ 77 $ 214 $ 131
------ ------ ------
Total non-performing assets $1,760 $1,532 $2,283
====== ====== ======
Total non-performing assets
to total loans and
other real estate 1.47% 1.34% 2.00%
Generally, all Banks recognize interest income on the accrual basis, except for
certain loans which are placed on a non-accrual status. Loans are placed on a
non-accrual status, when in the opinion of management doubt exists as to its
collectibility. In accordance with the Office of the Comptroller of the Currency
Policy, banks may not accrue interest on any loan which either the principal or
interest is past due 90 days or more unless the loan is both well secured and in
the process of collection.
The amount of interest income that would have been recognized had the loans
performed in accordance with their original terms was $55,100 and $28,000 for
the periods ended June 30, 2001 and 2000, respectively.
As of June 30, 2001, there are no loans known to management other than those
previously disclosed about which management has any information about possible
credit problems of borrowers which causes management to have serious doubts as
to the borrower's ability to comply with present loan repayment terms.
- ------------------------------------------------------------------------------
19
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Allowance for Possible Loan Losses
- ----------------------------------
The corporation maintains an allowance for possible loan losses to absorb
probable loan losses. The provision for loan losses was $282,000 during the
six months ended June 30, 2001, as compared to $195,000 during the same period
of the prior year. The allowance for possible loan losses represented 1.3% and
1.1% of total loans outstanding at June 30, 2001 and December 31, 2000,
respectively. The reserve for possible loan losses is considered to be adequate
to provide for future losses in the portfolio. The amount charged to earnings is
based upon management's evaluations of the loan portfolio, as well as current
and anticipated economic conditions, net loans charged off, past loan
experiences, changes in character of the loan portfolio, specific problem loans
and delinquencies and other factors.
Table Eight
Analysis of Allowance for Possible Loan Losses
(UNAUDITED)
The following table presents a summary of loans charged off and recoveries of
loans previously charged off by type of loan (in thousands).
Summary of Loan Loss Experience
------------------------------------
June 30, December 31,
--------------------- ------------
2001 2000 2000
-------- -------- --------
Balance at Beginning of period
Allowance for Possible
Loan Losses $ 1,302 $ 1,148 $ 1,148
Loans Charged Off:
Real Estate - residential -- -- 20
Commercial 30 -- 107
Installment 38 117 189
-------- -------- --------
68 117 316
Recoveries:
Real Estate - residential 4 -- --
Commercial 11 -- 5
Installment 12 24 29
-------- -------- --------
27 24 34
Net Charge-offs 41 93 282
Additions Charged to Operations 282 195 436
-------- -------- --------
Balance at end of period: $ 1,543 $ 1,250 $ 1,302
======== ======== ========
Average Loans Outstanding $116,195 $111,668 $112,579
======== ======== ========
Ratio of net charge-offs
to Average loans
outstanding for the period .04% .08% .25%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.29% 1.10% 1.14%
- ------------------------------------------------------------------------------
20
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Allowance for Possible Loan Losses - continued
- -----------------------------------------------
The corporation has allocated the allowance for possible loan losses to specific
portfolio segments based upon historical net charge-off experience, changes in
the level of non-performing assets, local economic conditions and management
experience as presented in Table Nine. The Corporation has historically
maintained the allowance for loan losses at a level greater than actual
charge-offs. In determining the allocation of the allowance for possible loan
losses, charge-offs for 2001 are anticipated to be within the historical ranges.
Although a subjective evaluation is determined by management, the corporation
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 corporation's market area could result in new estimates which could affect
the corporation's earnings. Management monitors loan quality 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 amount of 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.
Table Nine
Loan Portfolio - Allocation of allowance for possible loan losses
The following table presents an allocation of the allowance for possible loan
losses at each of the five year periods ended December 31, 2000, and the six
month period ended June 30, 2001 ( expressed in thousands). 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.
June 30, December 31,
--------------- -----------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996
--------------- --------------- ---------------- -------------- ---------------- ------------------
Percent Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans of loans
in each in each in each in each in each in each
category category category category category category
to total to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans Amount loans
------- ------- ------- ------- ------- -------- ----- -------- ------- -------- ----- --------
Real estate -
residential $ 245 36.3% $ 241 37.9% $ 238 36.2% $ 208 34.2% $ 202 34.6% $ 192 36.5%
Commercial 766 38.8 549 37.0 490 38.7 490 37.8 622 38.0 619 39.1
Installment 512 19.3 492 20.9 400 22.2 374 23.8 343 23.6 298 21.6
Others 20 5.6 20 4.2 20 2.9 20 4.2 20 3.8 20 2.8
Unallocated -- -- -- -- -- -- 31 -- 31 -- 31 --
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $1,543 100.0% $1,302 100.0% $1,148 100.0% $1,123 100.0% $1,218 100.0% $1,160 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
21
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Deposits
- --------
Total deposits were $185,590,156 at June 30, 2001 as compared to
$173,668,578 at December 31, 2000, an increase of 6.9%. Approximately $9.6
million or 5.5% of the increase in deposits during 2001 primarily was due to the
acquisition of the deposits of United National Bank's New Martinsville branch
office. Deposit growth increased primarily in savings and time deposits. At June
30, 2001, noninterest bearing deposits comprised 9% of total deposits and
interest bearing deposits which include NOW, money market, savings and time
deposits comprised 91% of total deposits. The change in the deposit mix from
December 31, 2000 to June 30, 2001 was a 1% increase in interest bearing
deposits and a 1% decrease in noninterest bearing deposits.
Table Ten
Deposits
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. (Unaudited)
June 30, 2001
Maturities of Time Deposits in Excess of $100,000
--------------------------------------------------
In Three Over Three Over Six Over
Months And Less Than And Less Than Twelve
Or Less Six Months Twelve Months Months TOTAL
------- ------------ ------------- ------ -----
(Expressed in Thousands)
Time Certificates
of Deposit $ 1,599 $ 3,813 $ 5,833 $ 5,538 $ 16,783
December 31, 2000
Maturities of Time Deposits in Excess of $100,000
--------------------------------------------------
In Three Over Three Over Six Over
Months And Less Than And Less Than Twelve
Or Less Six Months Twelve Months Months TOTAL
------- ------------ ------------- ------ -----
(Expressed in Thousands)
Time Certificates
of Deposit $ 4,614 $ 2,808 $ 3,863 $ 6,171 $ 17,456
Federal funds purchased and repurchase agreements
- --------------------------------------------------
Federal funds purchased and repurchase agreements are short-term
borrowings, of which repurchase agreements represent the largest component.
Repurchase agreements were $5,955,074 at June 30, 2001, a decrease of
$8,571,254, as compared to December 31, 2000. The decrease in repurchase
agreements was primarily due to the reduction in the balance maintained by one
commercial customer.
- ------------------------------------------------------------------------------
22
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Capital Resources
- -----------------
A strong capital base is vital to continued profitability because it
promotes depositor and investor confidence and provides a solid foundation for
future growth. Stockholders' equity increased 3.6% during the first six months
of 2001 entirely from current earnings after quarterly dividends, and an
increase of 2.6% resulting from the effect of the change in the net unrealized
gain (loss) on securities available for sale. Stockholders' equity amounted to
9.1% of total assets at June 30, 2001 as compared to 8.8% at December 31, 2000.
The Holding Company's primary source of funds for payment of dividends to
shareholders is from the dividends from its subsidiary banks. Earnings from
subsidiary bank operations are expected to remain adequate to fund payment of
stockholders' dividends and internal growth. In management's opinion, the
subsidiary banks have the capability to upstream sufficient dividends to meet
the cash requirements of the Holding Company.
The Holding Company is subject to regulatory risk-based capital guidelines
administered by the Federal Reserve Board. These risk-based capital guidelines
establish minimum capital ratios of Total capital, Tier 1 Capital, and Leverage
to assess the capital adequacy of bank holding companies.
The following chart shows the regulatory capital levels for the
company at June 30, 2001, June 30, 2000, and December 31, 2000:
June 30, Dec. 31
-------------- -------
Ratio Minimum 2001 2000 2000
- ---------------------- -------- ------- ----- -----
Leverage Ratio 3% 8.2 8.2 8.3
Risk Based Capital
Tier 1 (core) 4% 13.2 13.5 14.3
Tier 2 (total) 8% 14.3 14.5 15.4
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 corporation
had investment securities with an estimated market value of $63,829,992
classified as available for sale at June 30, 2001. These securities are
available for sale at any time based upon management's assessment in order to
provide necessary liquidity should the need arise. In addition, the Holding
Company's subsidiary banks, Progressive Bank, N.A., and Progressive Bank, N.A.-
Buckhannon, are members of the Federal Home Loan Bank of Pittsburgh (FHLB).
Membership in the FHLB provides an additional source of short-term and long-term
funding, in the form of collateralized advances. The subsidiary banks had an
available line with the FHLB in the aggregate amount of $10,446,000 at June 30,
2001. As of June 30, 2001 there were no borrowings outstanding pursuant to these
agreements.
At June 30, 2001 and December 31, 2000, the Holding Company had outstanding
loan commitments and unused lines of credit totaling $15,618,000 and
$14,307,000, respectively. As of June 30, 2001, management placed a high
probability for required funding within one year of approximately $10,778,000.
Approximately $3,220,000 is principally unused home equity and credit card lines
on which management places a low probability for required funding.
23
FIRST WEST VIRGINIA BANCORP, INC.
PART I
Item 3 Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The Company's subsidiary banks use 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 banks provide 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
banks at June 30, 2001 were as follows: given a 200 basis point increase
scenario net interest income would be decreased by approximately 2.1%, and given
a 200 basis point decrease scenario net interest income would be reduced by
approximately 3.4%. Under both interest rate scenarios the subsidiary banks were
within the established guideline.
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
- -----------------------------------
The nature of the business of the Holding Company's subsidiaries
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 any of its subsidiaries is a party or of which any of their property is
subject.
Item 2 Changes in Securities
- ---------------------------------------
Inapplicable
Item 3 Defaults Upon Senior Securities
- -------------------------------------------------
Inapplicable
Item 4 Submission of Matters to Vote of Security Holders
- -------------------------------------------------------------------
a. The matters discussed in 4c. were submitted to a vote of security
holders at the April 10, 2001, Annual Meeting of Shareholders.
b. Inapplicable
24
c. Election of Directors
The following directors were elected to the Board of Directors as
Class III, for terms expiring at the annual meeting in 2004: Nada E.
Beneke, R. Clark Morton, and William G. Petroplus
The results of the election were as follows:
SHARES VOTED
-----------------------------------------------------
Against/ Abstentions
NAME For Withheld Broker Non-Votes
---- --- -------- ----------------
Nada E. Beneke 1,493,119 * 4,975 0
R. Clark Morton 1,273,196 19,691 0
William G. Petroplus 1,487,934 * 10,158 0
* Cumulative Shares Voted
Continuing directors were as follows:
Terms Expiring
--------------
Charles K. Graham 2002
George F. Beneke 2002
Laura G. Inman 2002
Karl W. Neuman 2002
Sylvan J. Dlesk 2003
Benjamin R. Honecker 2003
James C. Inman, Jr. 2003
Thomas A. Noice 2003
d. Inapplicable
Item 5 Other Information
- -----------------------------------
Inapplicable
Item 6 Exhibits and Reports on Form 8-K
- --------------------------------------------------
(a) Financial
----------
The consolidated financial statements of First West Virginia Bancorp,
Inc. and subsidiaries, for the three and six month periods ended June 30, 2001,
are incorporated by reference in Part I: ------
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the quarter ended June
30, 2001.
(c) Exhibits
--------
The exhibits listed in the Exhibit Index on page 26 of this FORM 10-Q
are incorporated by reference and/or filed herewith.
25
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/ Charles K. Graham
------------------------------------
Charles K. Graham
President and Chief
Executive Officer/Director
By: /s/ Francie P. Reppy
------------------------------------
Francie P. Reppy
Senior Vice President and
Chief Financial Officer
Dated: August 9, 2001
26
EXHIBIT INDEX
The following exhibits are filed herewith and/or are incorporated herein by
reference.
Exhibit
Number Description
- ------- -----------
10.1 Employment Contract dated December 31, 2000 between First West
Virginia Bancorp, Inc. and Charles K. Graham. Incorporated herein by
reference.
10.2 Employment Contract dated December 31, 2000 between First West
Virginia Bancorp, Inc. and Beverly A. Barker. Incorporated herein by
reference.
10.4 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.
10.5 Banking Services License Agreement dated October 26, 1994 between
Progressive Bank, N.A., formerly known as "First West Virginia Bank,
N.A.", and The Kroger Co. Incorporated herein by reference.
10.6 Lease dated November 14, 1995 between Progressive Bank, N.A.
- Buckhannon and First West Virginia Bancorp, Inc. and O. V. Smith
& Sons of Big Chimney, Inc. Incorporated herein by reference.
10.7 Lease dated May 20, 1998 between Progressive Bank, N.A. and Robert
Scott Lumber Company. Incorporated herein by reference.
11.1 Statement regarding computation of per share earnings. Filed herewith
and incorporated herein by reference.
13.3 Summarized Quarterly Financial Information. Filed herewith and
incorporated herein by reference.
15 Letter re unaudited interim financial information. Incorporated
herein by reference. See Part 1, Notes to Consolidated Financial
Statements
99.1 Independent Accountant's Report. Filed herewith and incorporated
herein by reference.