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 March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________.
Commission File No. 1-13652
First West Virginia Bancorp, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-6051901
- -------------------------------------------------------------------------------
(State or other jurisdiction of (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
- -------------------------------------------------------------------------------
(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 practible date.
The number of shares outstanding of the issuer's common stock as of May 10,
2002:
Common Stock, $5.00 Par Value, shares outstanding 1,538,443 shares
- ---------------------------------------------------------------------
FIRST WEST VIRGINIA BANCORP, INC.
PART I
FINANCIAL INFORMATION
2
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, December 31, March 31,
2002 2001 2001
-------------- --------------- --------------
(Unaudited)
ASSETS
Cash and due from banks $ 5,953,542 $ 6,419,402 $ 5,052,957
Due from banks - interest bearing 9,122,040 9,075,314 9,345,209
------------- --------------- -------------
Total cash and cash equivalents 15,075,582 15,494,716 14,398,166
Federal funds sold 7,442,000 7,632,000 6,770,000
Investment securities
Available for sale (at fair value) 82,951,989 73,348,310 69,501,917
Held to maturity - fair value of
$8,619,040 at March 31, 2002;
$9,011,951 at December 31, 2001;
and $10,388,938 at March 31, 2001 8,443,362 8,853,851 10,180,277
Loans, net of unearned income 130,372,616 120,943,839 114,761,411
Less allowance for possible loan losses (1,752,156) (1,645,972) (1,400,543)
------------- --------------- -------------
Net loans 128,620,460 119,297,867 113,360,868
Premises and equipment, net 4,303,610 4,005,353 3,914,424
Accrued income receivable 1,401,383 1,252,143 1,524,899
Intangible assets 2,037,029 547,300 613,863
Other assets 1,892,063 1,598,585 1,614,455
------------- --------------- -------------
Total assets $ 252,167,478 $ 232,030,125 $ 221,878,869
============= =============== =============
LIABILITIES
Noninterest bearing deposits:
Demand $ 21,559,708 $ 20,875,835 $ 16,366,235
Interest bearing deposits:
Demand 31,671,285 31,452,855 25,733,278
Savings 72,703,547 69,545,369 64,959,200
Time 96,786,779 81,897,895 77,768,710
------------- --------------- -------------
Total deposits 222,721,319 203,771,954 184,827,423
------------- --------------- -------------
Federal funds purchased and
repurchase agreements 7,457,884 6,537,648 16,509,818
Accrued interest on deposits 558,622 519,399 645,826
Other liabilities 1,221,212 952,156 960,833
------------- --------------- -------------
Total liabilities 231,959,037 211,781,157 202,943,900
------------- --------------- -------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,538,443 shares issued at
March 31, 2002, December 31, 2001,
and March 31, 2001 7,692,215 7,692,215 7,692,215
Surplus 4,982,606 4,982,606 4,982,606
Retained Earnings 7,303,658 6,954,229 5,908,598
Accumulated other comprehensive income 229,962 619,918 351,550
------------- --------------- -------------
Total stockholders' equity 20,208,441 20,248,968 18,934,969
------------- --------------- -------------
Total liabilities and stockholders' equity $ 252,167,478 $ 232,030,125 $ 221,878,869
============= =============== =============
The accompanying notes are an integral part of the financial statements
3
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
2002 2001
---------- ----------
(Unaudited)
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,262,232 $2,419,957
Tax-exempt 119,322 70,621
Investment Securities:
Taxable 822,006 952,412
Tax-exempt 160,160 130,464
Dividends 7,570 9,382
Other interest income 39,696 115,213
Interest on Federal Funds Sold 31,337 82,837
--------- ----------
Total interest income 3,442,323 3,780,886
INTEREST EXPENSE
Deposits 1,248,836 1,654,060
Other borrowings 24,638 138,472
--------- ----------
Total interest expense 1,273,474 1,792,532
--------- ----------
Net interest income 2,168,849 1,988,354
PROVISION FOR POSSIBLE LOAN LOSSES 150,000 141,000
--------- ----------
Net interest income after provision
for possible loan losses 2,018,849 1,847,354
NONINTEREST INCOME
Service charges and other fees 138,095 127,084
Securities gains (losses) 17,477 1,647
Other operating income 90,964 78,860
--------- ----------
Total noninterest income 246,536 207,591
NONINTEREST EXPENSES
Salary and employee benefits 697,979 633,215
Net occupancy expense of premises 221,137 202,998
Other operating expenses 501,182 380,115
--------- ----------
Total noninterest expense 1,420,298 1,216,328
--------- ----------
Income before income taxes 845,087 838,617
--------- ----------
INCOME TAXES 234,123 256,452
--------- ----------
Net income $ 610,964 $ 582,165
========= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,538,443 1,538,443
========= ==========
EARNINGS PER COMMON SHARE $ 0.40 $ 0.38
========= ==========
The accompanying notes are an integral part of the financial statements
4
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, 2001 1,538,443 $ 7,692,215 $ 4,982,606 $ 6,954,229 $ 619,918 $ $20,248,968
Comprehensive income
Net income for the three months
ended March 31, 2002 -- -- -- 610,964 -- 610,964 610,964
Other comprehensive income,
net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) -- -- -- -- (389,956) (389,956) (389,956)
----------
Comprehensive income $ 221,008
==========
Cash dividend
($.17 per share) -- -- -- (261,535) -- (261,535)
----------- ------------ ------------ ------------ ----------- -------------
Balance, March 31, 2002(Unaudited) 1,538,443 $ 7,692,215 $ 4,982,606 $ 7,303,658 $ 229,962 $ 20,208,441
=========== ============ ============ =========== =========== =============
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 three months
ended March 31, 2001 -- -- -- 582,165 -- 582,165 582,165
Other comprehensive income,
net of tax
Unrealized gains (losses) on securities,
net of reclassification adjustment
(see disclosure) -- -- -- -- 389,238 389,238 389,238
----------
Comprehensive income $ 971,403
==========
Cash dividend
($.17 per share) -- -- -- (261,534) -- (261,534)
--------- ----------- ----------- ---------- ----------- -----------
Balance, March 31, 2001(Unaudited) 1,538,443 $ 7,692,215 $ 4,982,606 $5,908,598 $ 351,550 $18,934,969
========= =========== =========== ========== =========== ===========
For the three months ended
March 31,
2002 2001
---------- ----------
Disclosure of reclassification amount, net of tax:
Unrealized holding gains (losses)
arising during the period $ (379,001) $ 390,270
Less: reclassification adjustment for
gains included in net income 10,955 1,032
---------- ----------
Net unrealized gains (losses) on securities $ (389,956) $ 389,238
========== ==========
The accompanying notes are an integral part of the financial statements
5
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
2002 2001
----------------- ---------------
(Unaudited)
OPERATING ACTIVITIES
Net Income $ 610,964 $ 582,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 150,000 141,000
Depreciation and amortization 103,043 76,650
Amortization of investment securities, net (45,663) (81,317)
Investment security losses (gains) (17,477) (1,647)
Decrease (increase) in interest receivable (149,240) 18,225
Increase (decrease) in interest payable 39,223 47,591
Other, net 207,759 17,008
---------------- ------------
Net cash provided by operating activities 898,609 799,675
---------------- ------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 190,000 (2,374,000)
Net (increase) decrease in loans, net of charge offs (9,485,353) (759,732)
Loans acquired in purchase of branch office 5,078,284 --
Proceeds from sales of securities available for sale 1,557,359 558,334
Proceeds from maturities of securities available for sale 65,780,000 30,188,923
Proceeds from maturities of securities held to maturity 410,000 700,000
Principal collected on mortgage-backed securities 3,694,867 1,417,050
Purchases of securities available for sale (81,194,412) (39,600,364)
Purchases of securities held to maturity -- --
Recoveries on loans previously charged-off 12,759 8,823
Cash acquired in purchase of branch office 9,063,066 8,990,870
Purchases of premises and equipment (379,112) (1,236,335)
---------------- ------------
Net cash used by investing activities (5,272,542) (2,106,431)
---------------- ------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 18,949,365 11,158,845
Deposits acquired in purchase of branch office (15,653,267) (9,612,129)
Dividends paid (261,535) (261,534)
Increase (decrease) in short term borrowings 920,236 1,983,490
---------------- ------------
Net cash provided by financing activities $ 3,954,799 $ 3,268,672
---------------- ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (419,134) 1,961,916
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 15,494,716 12,436,250
---------------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 15,075,582 $ 14,398,166
================ ============
The accompanying notes are an integral part of the financial statements
6
First West Virginia Bancorp, Inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 AND 2001
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, 2001, 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 2002
presentation.
7
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, 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 months ended
March 31, 2002 and 2001. 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 2001 financial
statements, the notes thereto and the related Management's Discussion and
Analysis.
OVERVIEW
The Holding Company reported net income of $610,964 for the three months ended
March 31, 2002 as compared to $582,165 for the same period during 2001. The 5.0%
increase in earnings during the first quarter of 2002 over 2001 can be primarily
attributed to increased net interest income and noninterest income, partially
offset by the increase in noninterest expense and the provision for loan losses.
Earnings per common share were $.40 in 2002 compared to $.38 in 2001.
Operational earnings improved with net interest income increasing $180,495 or
9.1%, to $2,168,849 during the three months ended March 31, 2002 as compared to
the same period in 2001. Net interest income increased primarily due to the
decline in the average rates paid on interest bearing liabilities offset in part
by the decrease in the average interest earned on loans and investment
securities.
The return on average assets (ROA), which measures the effectiveness of asset
utilization to produce net income, was 1.06% and 1.12% at March 31, 2002 and
2001, respectively. The return on average equity (ROE), which measures the
return on the stockholders' investment, was 12.56% and 12.90% at March 31, 2002
and 2001, respectively. The Board of Directors declared and paid cash dividends
of $.17 per share during the first quarter of 2002 as compared to $.17 during
the same period in 2001.
During the first quarter of 2002, the Corporation's subsidiary, Progressive
Bank, N.A., opened a full-service office at 1090 East Bethlehem Boulevard in
Wheeling, West Virginia. Also, Progressive Bank, N.A. completed its transaction
with Wheeling National Bank to purchase its New Martinsville branch office. In
2001 Progressive Bank, N.A. entered into a Purchase and Assumption Agreement
with Wheeling National Bank to purchase the building, loans and deposits of
Wheeling National's New Martinsville, West Virginia branch office located at 631
Third Street. Upon consummation of the transaction the facility was closed and
consolidated with Progressive Bank's existing branch office located at 425 Third
Street, New Martinsville, West Virginia. Total deposits acquired in the New
Martinsville transaction were approximately $15.7 million and total loans were
approximately $5.1 million.
The Holding Company as of March 31, 2002 had total assets of $252,167,478 an
increase of 8.7% over the $232,030,125 reported for the year ended December 31,
2001. Loans net of reserves increased during the first quarter of 2002 by
$9,322,593 to $128,620,460, as compared to $119,297,867 reported at December 31,
2001. Total deposits increased in 2002 by $18,949,365, from $203,771,954 at
December 31, 2001 to $222,721,319 at March 31, 2002.
The allowance for loan losses amounted to $1,752,156 at March 31, 2002 or 1.3%
of total loans, compared to $1,645,972 or 1.4% of total loans at December 31,
2001. Non-performing assets were $1,369,000 at March 31, 2002, as compared to
$1,317,000 at December 31, 2001.
Table One is a five-year summary of Selected Financial Data of the Holding
Company. The sections that follow discuss in more detail the information
summarized in Table One.
8
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- -----------------------------------------------------------------------------
Table One
SELECTED FINANCIAL DATA
(Unaudited, figures in thousands, except per share data)
First West Virginia Bancorp, Inc.
Three months ended Years ended
March 31, December 31,
---------------------- ----------------------------------------------
2002 2001 2001 2000 1999 1998
--------- -------- -------- --------- --------- ---------
SUMMARY OF OPERATIONS
Total interest income $ 3,442 $ 3,781 $ 14,772 $ 14,869 $ 13,207 $ 12,452
Total interest expense 1,273 1,793 6,422 7,155 5,602 5,324
Net interest income 2,169 1,988 8,350 7,714 7,605 7,128
Provision for loan losses 150 141 573 436 348 256
Total other income 246 208 942 880 1,073 787
Total other expenses 1,420 1,216 5,324 4,816 4,740 4,674
Income before income taxes 845 839 3,395 3,341 3,590 2,985
Net income 611 582 2,412 2,326 2,450 2,033
PER SHARE DATA (1)
Net income $ .40 $ .38 $ 1.57 $ 1.51 $ 1.59 $ 1.32
Cash dividends declared .17 .17 .68 .64 .54 .48
Book value per share 13.14 12.31 13.16 11.85 10.44 10.05
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $ 123,877 $114,303 $118,224 $ 112,579 $105,775 $ 99,345
Investment securities 80,292 71,112 73,639 69,548 59,716 47,911
Deposits - Interest Bearing 184,116 159,635 168,820 155,172 141,768 127,520
Stockholders' equity 19,727 18,292 18,902 17,448 16,087 14,697
Total Assets 232,862 209,977 217,006 203,529 183,436 164,630
BALANCE SHEET
Investments $ 91,395 $ 79,682 $ 82,202 $ 72,242 $ 59,394 $ 54,080
Loans 130,372 114,761 120,944 114,053 110,489 103,555
Other Assets 30,400 27,436 28,884 21,598 19,290 13,760
-------- ------- ------- --------- ------- --------
Total Assets $ 252,167 $221,879 $232,030 $ 207,893 $189,173 $ 171,395
======== ======= ======= ========= ======= ========
Deposits $ 222,721 $184,827 $203,772 $ 173,669 $161,558 $ 147,785
Federal funds purchased and
Repurchase Agreements 7,458 16,510 6,538 14,526 10,274 6,994
Other Liabilities 1,780 1,607 1,471 1,473 1,285 1,155
Shareholders' Equity 20,208 18,935 20,249 18,225 16,056 15,461
-------- ------- ------- --------- ------- --------
Total Liabilities and
Shareholders' Equity $ 252,167 $221,879 $232,030 $ 207,893 $189,173 $ 171,395
======== ======= ======= ========= ======= ========
SELECTED RATIOS
Return on average assets 1.06% 1.12% 1.11% 1.14% 1.34% 1.23%
Return on average equity 12.56% 12.90% 12.76% 13.33% 15.23% 13.83%
Average equity to average assets 8.47% 8.71% 8.71% 8.57% 8.77% 8.93%
Dividend payout ratio (1) 42.50% 44.74% 43.31% 42.38% 33.96% 36.36%
Loan to Deposit ratio 58.54% 62.09% 59.35% 65.67% 68.39% 70.07%
(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.
- ------------------------------------------------------------------------------
9
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.
Table Two presents the average balance sheets and an interest rate analysis
for the three months ended March 31, 2002 and 2001.
Net interest income was $2,168,849 for the three months ended March 31, 2002, an
increase of $180,495 or 9.1%, from the same period in 2001. Net interest income
increased during the first quarter of 2002 compared to the same period in 2001
primarily due to the decline in interest rates paid on deposit liabilities,
offset in part by the decrease in interest earned on loans and investment
securities.
During the three months ended March 31, 2002, interest expense decreased
$519,058 or 29.0% as compared to the same period in 2001. Interest expense
decreased as a result of a decrease in the average rates paid on interest
bearing liabilities. The average yield paid on interest bearing liabilities
decreased .89%, from 3.59% at December 31, 2001 to 2.70% at March 31, 2002.
The decrease in the average yield on interest bearing liabilities during the
first quarter of 2002 was primarily due to the decrease in the interest rates
paid on savings deposits and time deposits.
Interest income on investment securities decreased $100,710 or 9.3% during the
three months ended March 31, 2002 over 2001. The decrease in the interest earned
on investment securities primarily contributed to the increase in net interest
income during the first quarter of 2002. The average volume of investment
securities increased $6,653,000 since December 31, 2001. The average yield on
investment securities decreased .66%, from 5.62% at December 31, 2001 to 4.96%
at March 31, 2002.
Interest and fees on loans decreased $109,024 or 4.4% for the three month
period ended March 31, 2002 as compared the same period in 2001. The
decreased interest income on loans and lease financing resulted primarily
from a decrease in the average rates earned. The average yield on loans
decreased from 8.50% at December 31, 2001 to 7.80% at March 31, 2002.
The changes in the volume and mix of earning assets and interest bearing
liabilities combined with the changes in the market rates of interest
resulted in taxable equivalent net interest yields on average earning assets
of 4.30% at March 31, 2002, as compared to 4.35% at December 31, 2001 and
4.24% at March 31, 2001.
10
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Noninterest Income
Service charges and other fees represent the major component of noninterest
income. These charges are earned from assessments made on checking and
savings accounts. Service charges increased $11,011 during the three months
ended March 31, 2002, up 8.7%, from the same period in 2001.
Sales of investment securities for the three month periods ended March 31, 2002
and 2001 were primarily the result of sales by the Holding Company and by the
subsidiary banks. The Holding Company accounted for securities gains of $1,344
and securities losses of $1,096 during the period ended March 31, 2002 and
securities gains of $11,129 and securities losses of $9,387 during the period
ended March 31, 2001 and those sales were attributable to sales of marketable
equity securities. The subsidiary banks accounted for securities gains of
$17,717 and securities losses of $488 during the period ended March 31, 2002 and
securities gains of $365 and securities losses of $460 during the period ended
March 31, 2001 and those sales were attributable to sales of securities
available for sale.
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. During the first
quarter of 2002, other operating income was $90,964, an increase of $12,104
or 15.4% compared to the same period in 2001. The increase in other operating
income resulted primarily from an increase in ATM fees and an increase in
checkbook sales during the first quarter of 2002.
Non-Interest Expense
Salary and employee benefits is the largest component of noninterest
expense. Salary and employee benefits increased $64,764 or 10.2% during
the three months ended March 31, 2002 over the same period in 2001. The
increase in salary and employee benefits in 2002 compared to 2001 was
primarily due to the hiring of personnel for the Moundsville, New
Martinsville and Bethlehem, West Virginia offices combined with the
normal annual merit adjustments.
The major components of other operating expenses include: stationery and
supplies, directors' fees, service expense, postage and transportation, other
taxes, advertising, and regulatory assessment and deposit insurance. Other
operating expenses increased $121,067 or 31.9% for the three months ended March
31, 2002 over 2001. The increase in other operating expenses during the first
quarter of 2002 was primarily due to the increases in deposit premium
amortization, service expense, postage and transportation expense, stationery
and supplies expense, other taxes, director's fees, advertising, and other
expenses.
Income Taxes
Income tax expense for the period ended March 31, 2002 was $234,123, a
decrease of 8.7% over the same period in 2001. Income tax expense
decreased primarily due to an increase in tax exempt income during the
first quarter of 2002 over the same period in 2001. Components of the
income tax expense for March 31, 2002 were $189,386 for federal taxes
and $44,737 for West Virginia corporate net income taxes.
For federal income tax purposes, tax-exempt income is based on qualified
state, county, and municipal bonds and loans. Tax-exempt income was $279,482
and $201,085 for the three month periods ended March 31, 2002 and 2001,
respectively.
Federal income tax rates and West Virginia corporate net income tax rates
remain consistent at 34% and 9%, respectively, for the three months ended
March 31, 2002 and 2001 and for the year ended December 31, 2001.
11
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 three months ended March 31,
2002 and March 31, 2001 and the year ended December 31, 2001. Average balance
sheet information as of March 31, 2002 and March 31, 2001 and the year ended
December 31, 2001 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
March 31, 2002 and 2001.
For the three For the three
months ended months ended
March 31, 2002 December 31, 2001 March 31, 2001
----------------------------- ------------------------------ ----------------------------
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 $ 29,440 $ 316 4.35% $ 29,143 $ 1,624 5.57% $ 38,605 $ 600 6.30%
Mortgage-backed securities 26,343 376 5.79% 22,952 1,454 6.33% 16,233 276 6.90%
Obligations of states and
political subdivisions 16,269 177 4.41% 15,578 704 4.52% 12,821 153 4.84%
Other securities 8,240 113 5.56% 5,966 353 5.92% 3,453 54 6.34%
------- ------ ------ ------- ------- ------- ------- ----- ------
Total Investment securities: 80,292 982 4.96% 73,639 4,135 5.62% 71,112 1,083 6.18%
Interest bearing deposits 9,126 37 1.64% 7,869 295 3.75% 8,441 112 5.38%
Federal funds sold 8,205 31 1.53% 6,594 241 3.65% 6,124 83 5.50%
Loans, net of unearned income 123,877 2,382 7.80% 118,224 10,054 8.50% 114,303 2,491 8.84%
Other earning assets 703 10 5.77% 707 47 6.65% 703 12 6.92%
------- ------ ------ ------- ------- ------- ------- ----- ------
Total earning assets 222,203 3,442 6.28% 207,033 14,772 7.14% 200,683 3,781 7.64%
Cash and due from banks 5,092 4,811 4,740
Bank premises and equipment 4,098 3,786 3,374
Other assets 3,166 2,893 2,549
Allowance for possible loan losses (1,697) (1,517) (1,369)
------- ------- -------
Total Assets $232,862 $ 217,006 $209,977
======== ======= =======
LIABILITIES
Certificates of deposit $ 85,282 $ 987 4.69% $ 77,214 $ 4,273 5.53% $ 73,543 $ 1,070 5.90%
Savings deposits 68,286 213 1.27% 64,360 1,579 2.45% 61,494 511 3.37%
Interest bearing demand deposits 30,548 48 0.64% 27,246 280 1.03% 24,598 74 1.22%
Federal funds purchased and
Repurchase agreements 7,329 25 1.38% 10,034 290 2.89% 14,678 138 3.81%
------- ------ ------ ------- ------- ------- ------- ----- ------
Total interest bearing liabilities 191,445 1,273 2.70% 178,854 6,422 3.59% 174,313 1,793 4.17%
Demand deposits 20,166 17,844 15,836
Other liabilities 1,524 1,406 1,536
------- ------- -------
Total Liabilities 213,135 198,104 191,685
STOCKHOLDERS' EQUITY 19,727 18,902 18,292
------- ------- -------
Total Liabilities
and Stockholders' Equity $232,862 $ 217,006 $209,977
======= ======= =======
Net yield on earning assets $2,169 3.96% $ 8,350 4.03% $ 1,988 4.02%
====== ====== ======= ====== ====== =====
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 March 31, 2002
and 2001, and the year ended December 31, 2001, respectively. The effect of this
adjustment is presented below (in thousands).
Obligations of states and
political subdivisions:
Investment securities $ 16,269 $ 284 7.08% $ 15,578 $ 1,119 7.18% $ 12,821 $ 217 6.85%
Loans 123,877 2,461 8.06% 118,224 10,301 8.71% 114,303 2,538 9.00%
======== ====== ==== ======== ====== ===== ======= ====== =====
Total earning assets $ 222,203 $ 3,628 6.62% $ 207,033 $15,434 7.45% $200,683 $ 3,892 7.86%
======== ====== ==== ======== ====== ===== ======= ====== =====
Taxable equivalent net yield on
earning assets $ 2,355 4.30% $ 9,012 4.35% $ 2,099 4.24%
====== ==== ====== ===== ====== =====
12
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 $9,193,190 or 11.2% from $82,202,161
at December 31, 2001, to $91,395,351 at March 31, 2002. Taxable securities
comprised 85.2% of total securities at March 31, 2002, as compared to 81.0%
at December 31, 2001. 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 $9,603,679
or 13.1% from December 31, 2001, and represented 91% of the investment portfolio
at March 31, 2002. The increase was primarily due to the purchase of mortgage-
backed securities. The held to maturity securities decreased $410,489 or 4.6%
from December 31, 2001 and represented 9% of the investment portfolio as of
March 31, 2002. The decrease was primarily the result of maturities of 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 $366,882 and
$989,018 at March 31, 2002 and December 31, 2001, respectively. The market value
of securities classified as held to maturity was above book value by $175,678
and $158,100 at March 31, 2002 and December 31, 2001, respectively.
Table Three
Investment Portfolio
The following table presents the book values of investment securities:
(in thousands) (Unaudited):
March 31, December 31, March 31,
2002 2001 2001
----------- ----------- ---------
Securities held to maturity:
Obligations of states
and political subdivisions $ 8,443 $ 8,854 $ 10,180
------- ------ -------
Total held to maturity $ 8,443 $ 8,854 $ 10,180
------- ------ -------
Securities available for sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 33,922 $ 31,353 $ 38,443
Obligations of states
and political subdivisions 7,252 7,917 3,270
Corporate debt securities 7,192 8,086 6,053
Mortgage-backed securities 34,053 25,535 21,282
Equity Securities 533 457 454
------ ------- -------
Total available for sale 82,952 73,348 69,502
------ ------- -------
Total $ 91,395 $ 82,202 $ 79,682
====== ======= =======
- -------------------------------------------------------------------------------
13
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Table Four
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 March 31, 2002 and December 31, 2001 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.
March 31, 2002 December 31, 2001
--------------------------------------------- ----------------------------------------
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 $ -- --% $ 11,981 2.50% $ -- --% $ 12,264 2.89%
After One But
Within Five Years -- -- 19,744 4.08 -- -- 15,284 4.38
After Five But
Within Ten Years -- -- 1,020 6.39 -- -- 2,521 6.43
After Ten Years -- -- 1,177 2.42 -- -- 1,284 3.03
------ ----- ------ ----- ------ ---- ------- -----
-- -- 33,922 3.53 -- -- 31,353 3.91
States & Political Subdivisions
Within One Year 895 6.26 2,637 4.77 960 6.46 1,499 4.65
After One But
Within Five Years 3,846 6.11 3,100 5.13 4,043 6.21 4,914 5.43
After Five But
Within Ten Years 3,702 6.67 1,269 6.26 3,851 6.65 1,260 6.30
After Ten Years -- -- 246 6.60 -- -- 244 6.66
------ ----- ------ ----- ------ ---- ------- -----
8,443 6.37 7,252 5.25 8,854 6.43 7,917 5.46
Corporate Debt Securities
Within One Year -- -- -- -- -- -- 1,251 2.85
After One But
Within Five Years -- -- 5,624 5.67 -- -- 5,871 5.49
After Five But
Within Ten Years -- -- 1,568 6.67 -- -- 964 7.05
------ ----- ------ ----- ------ ---- ------- -----
-- -- 7,192 5.89 -- -- 8,086 5.27
Mortgage-Backed Securities -- -- 34,053 5.62 -- -- 25,535 5.75
Equity Securities -- -- 533 2.39 -- -- 457 2.67
------ ----- ------ ----- ------ ---- ------- -----
Total $ 8,443 6.37% $ 82,952 4.74% $ 8,854 6.43% $ 73,348 4.86%
====== ==== ====== ===== ====== ==== ======= =====
- ------------------------------------------------------------------------------
14
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Loans
- -----
Loans increased $9,428,777 or 7.8% from December 31, 2001.
The loan growth during the first quarter of 2002 can be attributed primarily to
the increases in residential real estate loans, commercial loans and other
loans, offset in part by the decrease in consumer loans.
Real estate residential loans which include real estate construction, real
estate farmland, and real estate residential loans comprise thirty-eight percent
(38%) of the loan portfolio. Commercial loans which include real estate secured
by non-farm, non residential and commercial and industrial loans comprise forty
percent (40%) of the loan portfolio. Installment loans comprise fifteen percent
(15%) of the loan portfolio. Other loans include nonrated industrial development
obligations, direct financing leases and other loans comprise seven percent (7%)
of the loan portfolio. The changes in the composition of the loan portfolio from
December 31, 2001 to March 31, 2002 were a 1% increase in residential real
estate loans and a 1% decrease in installment 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) :
March 31, December 31,
--------------------------- -----------
2002 2001 2001
Real Estate - Residential
Real estate-construction $ 449 $ 183 $ 395
Real estate-farmland 193 128 212
Real estate-residential 49,073 42,596 44,554
---------- ---------- ----------
$ 49,715 $ 42,907 $ 45,161
---------- ---------- ----------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 38,464 $ 29,732 $ 34,525
Commercial & industrial 14,020 14,093 13,889
---------- ---------- ----------
$ 52,484 $ 43,825 $ 48,414
---------- ---------- ----------
Installment
Installment and other
loans to individuals $ 19,196 $ 23,047 $ 19,517
---------- ---------- ----------
Others
Nonrated industrial
development obligations $ 9,067 $ 4,880 $ 7,784
Other loans 29 191 187
---------- ---------- ----------
$ 9,096 $ 5,071 $ 7,971
---------- ---------- ----------
Total 130,491 114,850 121,063
Less unearned interest 119 89 119
---------- ---------- ----------
$ 130,372 $ 114,761 $ 120,944
========== ========== ==========
15
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 March 31, 2002
and December 31, 2001 (in thousands) (Unaudited):
March 31, 2002
-----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 1,122 $ 7,022 $ 5,876
Real Estate - construction 175 5 269
--------- --------- ---------
Total $ 1,297 $ 7,027 $ 6,145
========= ========= =========
December 31, 2001
-----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 966 $ 6,465 $ 6,458
Real Estate - construction 165 6 224
--------- --------- ---------
Total $ 1,131 $ 6,471 $ 6,682
========= ========= =========
The following table presents an analysis of fixed and variable rate loans as of
March 31, 2002 and December 31, 2001 along with the contractual maturities of
loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
March 31, 2002
-----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Fixed Rates $ 1,178 $ 4,270 $ 1,715
Variable Rates 119 2,757 4,430
--------- --------- ---------
Total $ 1,297 $ 7,027 $ 6,145
========= ========= =========
December 31, 2001
-----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Fixed Rates $ 1,095 $ 4,585 $ 1,557
Variable Rates 36 1,886 5,125
---------- --------- ---------
Total $ 1,131 $ 6,471 $ 6,682
========== ======== ========
- ---------------------------------------------------------------------------
16
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 $1,369,000 at March 31, 2002 and $1,317,000
at December 31, 2001. Loans classified as non-accrual were $1,261,000 or 1.0% of
total loans as of March 31, 2002, as compared to $1,184,000 or 1.0% of total
loans at December 31, 2001. There were no loans classified as renegotiated as of
March 31, 2002 and December 31, 2001. The loans past due 90 days or more
decreased $25,000 to $48,000 at March 31, 2002. Other real estate owned was
$60,000 at March 31, 2002 and December 31, 2001. 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):
March 31, December 31,
------------------ ------------
2002 2001 2001
Past Due 90 Days or More:
Real Estate - residential $ 44 $ 7 $ 21
Commercial 4 1,520 26
Installment - 144 26
------- ------- -----------
$ 48 $ 1,671 $ 73
------- ------- -----------
Non-accrual:
Real Estate - residential $ 63 $ 20 $ 27
Commercial 1,160 880 1,124
Installment 38 42 33
------- ------- -----------
$ 1,261 $ 942 $ 1,184
------- ------- -----------
Other Real Estate $ 60 $ 80 $ 60
------- ------- -----------
Total non-performing assets $ 1,369 $ 2,693 $ 1,317
====== ======= ===========
Total non-performing assets
to total loans and
other real estate 1.05% 2.35% 1.09%
Generally, all Banks recognize interest income on the accrual basis, except for
certain loans which are placed on a non-accrual status. Loans are placed on a
non-accrual status, when in the opinion of management doubt exists as to its
collectibility. In accordance with the Office of the Comptroller of the
Currency Policy, banks may not accrue interest on any loan which either the
principal or interest is past due 90 days or more unless the loan is both well
secured and in the process of collection.
The amount of interest income that would have been recognized had the loans
performed in accordance with their original terms was approximately $27,700 and
$27,000 for the periods ended March 31, 2002 and 2001, respectively.
As of March 31, 2002, 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.
- ------------------------------------------------------------------------------
17
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 $150,000 during the
three months ended March 31, 2002, as compared to $141,000 during the same
period of the prior year. The allowance for possible loan losses represented
1.3% and 1.4% of total loans outstanding at March 31, 2002 and December 31,
2001, respectively. Net loan charge-offs for the three months ended March 31,
2002 were primarily commercial loans. 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
------------------------------------
March 31, December 31,
------------------ ------------
2002 2001 2001
Balance at Beginning of period
Allowance for Possible
Loan Losses $ 1,646 $ 1,302 $ 1,302
Loans Charged Off:
Real Estate - residential -- -- --
Commercial 55 30 95
Installment 2 21 164
-------- -------- ---------
57 51 259
Recoveries:
Real Estate - residential - 1 4
Commercial 10 1 12
Installment 3 6 14
-------- -------- ---------
13 8 30
Net Charge-offs 44 43 229
Additions Charged to Operations 150 141 573
-------- -------- ---------
Balance at end of period: $ 1,752 $ 1,400 $ 1,646
======== ======== =========
Average Loans Outstanding $ 123,877 $ 114,303 $ 118,224
======== ======== =========
Ratio of net charge-offs
to Average loans
outstanding for the period .04% .04% .19%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.34% 1.22% 1.36%
- ------------------------------------------------------------------------------
18
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 2002 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, 2001, and the three
month period ended March 31, 2002 ( 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.
March 31, December 31,
--------------- -----------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997
--------------- --------------- ---------------- -------------- ---------------- ------------------
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 $ 266 35.0% $ 263 37.3% $ 241 37.9% $ 238 36.2% $ 208 34.2% $ 202 34.6%
Commercial 883 37.6 821 40.0 549 37.0 490 38.7 490 37.8 622 38.0
Installment 582 24.1 541 16.1 492 20.9 400 22.2 374 23.8 343 23.6
Others 21 3.3 21 6.6 20 4.2 20 2.9 20 4.2 20 3.8
Unallocated -- -- -- -- -- -- -- -- 31 -- 31 --
------ ----- ------ ----- ---- ----- ---- ----- ---- ----- ----- -----
Total $1,752 100.0% $1,646 100.0% $1,302 100.0% $1,148 100.0% $1,123 100.0% $1,218 100.0%
====== ===== ====== ===== ===== ===== ===== ===== ===== ===== ===== =====
19
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
- ------------------------------------------------------------------------------
Deposits
- --------
Total deposits were $222,721,319 at March 31, 2002 as compared to
$203,771,954 at December 31, 2001, an increase of 9.3%. Approximately
$15.7 million or 7.7% of the increase in deposits during the first quarter
of 2002 primarily was due to the acquisition of the deposits of Wheeling
National Bank's New Martinsville branch office. Deposit growth increased
primarily in time deposits. At March 31, 2002, noninterest bearing
deposits comprised 10% of total deposits and interest bearing deposits which
include NOW, money market, savings and time deposits comprised 90% of total
deposits. There was no change in the deposit mix from December 31, 2001 to
March 31, 2002.
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)
March 31, 2002
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 $ 4,420 $ 2,573 $ 3,769 $13,399 $ 24,161
December 31, 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 $ 3,876 $ 3,578 $ 3,200 $10,932 $ 21,586
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 $7,457,884 at March 31, 2002, an increase of
$920,236, as compared to December 31, 2001. The increase of repurchase
agreements was primarily due to an increase in the balances maintained by
existing commercial customers.
- ------------------------------------------------------------------------------
20
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 1.8% during the first three months
of 2002 entirely from current earnings after quarterly dividends, and decreased
2.0% resulting from the effect of the change in the net unrealized gain on
securities available for sale. Stockholders' equity amounted to 8.0% of total
assets at March 31, 2002 as compared to 8.7% at December 31, 2001.
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
March 31, 2002, March 31, 2001, and December 31, 2001:
March 31, Dec. 31
-------------- -------
Ratio Minimum 2002 2001 2001
- ---------------------- -------- ------- ----- -----
Leverage Ratio 3% 7.5 8.3 8.4
Risk Based Capital
Tier 1 (core) 4% 11.4 13.3 13.1
Tier 2 (total) 8% 12.5 14.4 14.3
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 $82,951,989
classified as available for sale at March 31, 2002. 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 $10,046,000 at March 31,
2002. As of March 31, 2002 there were no borrowings outstanding pursuant to
these agreements.
At March 31, 2002 and December 31, 2001, the Holding Company had
outstanding loan commitments and unused lines of credit totaling $19,042,000 and
$19,511,000, respectively. As of March 31, 2002, management placed a high
probability for required funding within one year of approximately $13,868,000.
Approximately $3,665,000 is principally unused home equity and credit card lines
on which management places a low probability for required funding.
21
FIRST WEST VIRGINIA BANCORP, INC.
PART I
Item 3 Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
The quantitative and qualitative disclosures about market risk at
March 31, 2002 have not materially changed from the information presented
in Item 7A of Form 10-K for the year ended December 31, 2001.
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
- -------------------------------------------------------------------
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 month period ended March 31, 2002, are incorporated
by reference in Part I:
------
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the quarter ended March 31,
2002.
(c) Exhibits
--------
The exhibits listed in the Exhibit Index on page 24 of this FORM 10-Q are
incorporated by reference and/or filed herewith.
22
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: May 10, 2002
23
EXHIBIT INDEX
The following exhibits are filed herewith and/or are incorporated herein by
reference.
Exhibit
Number Description
- ------- -----------
10.1 Employment Contract dated December 21, 2001 between
First West Virginia Bancorp, Inc. and Charles K. Graham.
Incorporated herein by reference.
10.2 Employment Contract dated December 21, 2001 between
First West Virginia Bancorp, Inc. and Beverly A. Barker.
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 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.
10.5 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.
10.6 Lease dated May 20, 1998 between Progressive Bank, N.A.
and Robert Scott Lumber Company. Incorporated herein by reference.
10.7 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.
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.
24