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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, 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
- --------------------------------------------------------------------------------
(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 August 5,
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
June 30, December 31, June 30,
2002 2001 2001
------------- ------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 5,914,474 $ 6,419,402 $ 5,138,125
Due from banks - interest bearing 9,043,779 9,075,314 1,612,997
------------- ------------- -------------
Total cash and cash equivalents 14,958,253 15,494,716 6,751,122
Federal funds sold 5,414,000 7,632,000 6,645,000
Investment securities
Available for sale (at fair value) 83,684,009 73,348,310 63,829,992
Held to maturity - fair value of
$8,693,464 at June 30, 2002;
$9,011,951 at December 31, 2001;
and $10,084,384 at June 30, 2001 8,438,014 8,853,851 9,894,812
Loans 130,743,354 120,943,839 119,318,404
Less allowance for possible loan losses (1,865,363) (1,645,972) (1,542,641)
------------- ------------- -------------
Net loans 128,877,991 119,297,867 117,775,763
Premises and equipment, net 4,319,546 4,005,353 3,867,164
Accrued income receivable 1,293,379 1,252,143 1,352,312
Intangible assets 2,088,324 547,300 591,675
Other assets 1,560,431 1,598,585 1,613,564
------------- ------------- -------------
Total assets $ 250,633,947 $ 232,030,125 $ 212,321,404
============= ============= =============
LIABILITIES
Noninterest bearing deposits:
Demand $ 23,089,306 $ 20,875,835 $ 16,977,145
Interest bearing deposits:
Demand 29,910,915 31,452,855 25,814,427
Savings 70,706,576 69,545,369 65,520,923
Time 97,291,739 81,897,895 77,277,661
------------- ------------- -------------
Total deposits 220,998,536 203,771,954 185,590,156
------------- ------------- -------------
Federal funds purchased and
repurchase agreements 6,953,611 6,537,648 5,955,074
Accrued interest on deposits 519,238 519,399 590,096
Other liabilities 924,626 952,156 823,447
------------- ------------- -------------
Total liabilities 229,396,011 211,781,157 192,958,773
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common Stock - 2,000,000 shares authorized at
$5 par value 1,538,443 shares issued at
June 30, 2002, December 31, 2001,and
June 30, 2001 7,692,215 7,692,215 7,692,215
Surplus 4,982,606 4,982,606 4,982,606
Retained Earnings 7,678,479 6,954,229 6,250,280
Accumulated other comprehensive income 884,636 619,918 437,530
------------- ------------- -------------
Total stockholders' equity 21,237,936 20,248,968 19,362,631
------------- ------------- -------------
Total liabilities and stockholders' equity $ 250,633,947 $ 232,030,125 $ 212,321,404
============= ============= =============
The accompanying notes are an integral part of the financial statements
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
INTEREST INCOME
Interest and fees on loans and lease financing:
Taxable $2,404,739 $2,460,662 $4,666,971 $4,880,619
Tax-exempt 127,030 88,911 246,352 159,532
Investment securities:
Taxable 901,946 928,972 1,723,952 1,881,384
Tax-exempt 154,253 158,685 314,413 289,149
Dividends 5,615 8,568 13,185 17,950
Other interest income 38,350 71,195 78,046 186,408
Interest on federal funds sold 27,788 73,945 59,125 156,782
---------- ---------- ---------- ----------
Total interest income 3,659,721 3,790,938 7,102,044 7,571,824
INTEREST EXPENSE
Deposits 1,268,883 1,597,876 2,517,719 3,251,936
Other borrowings 31,605 77,339 56,243 215,811
---------- ---------- ---------- ----------
Total interest expense 1,300,488 1,675,215 2,573,962 3,467,747
---------- ---------- ---------- ----------
Net interest income 2,359,233 2,115,723 4,528,082 4,104,077
PROVISION FOR POSSIBLE LOAN LOSSES 150,000 141,000 300,000 282,000
---------- ---------- ---------- ----------
Net interest income after provision
for possible loan losses 2,209,233 1,974,723 4,228,082 3,822,077
NONINTEREST INCOME
Service charges and other fees 170,156 155,044 308,251 282,128
Securities gains (losses) (4,974) 6,244 12,503 7,891
Other operating income 70,974 87,961 161,938 166,821
---------- ---------- ---------- ----------
Total noninterest income 236,156 249,249 482,692 456,840
NONINTEREST EXPENSES
Salary and employee benefits 792,129 674,033 1,490,108 1,307,248
Net occupancy and equipment expenses 261,426 220,272 482,563 423,270
Other operating expenses 506,798 482,510 1,007,980 862,625
---------- ---------- ---------- ----------
Total noninterest expense 1,560,353 1,376,815 2,980,651 2,593,143
---------- ---------- ---------- ----------
Income before income taxes 885,036 847,157 1,730,123 1,685,774
---------- ---------- ---------- ----------
INCOME TAXES 248,679 243,939 482,802 500,391
---------- ---------- ---------- ----------
Net income $ 636,357 $ 603,218 $1,247,321 $1,185,383
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,538,443 1,538,443 1,538,443 1,538,443
========== ========== ========== ==========
EARNINGS PER COMMON SHARE $ 0.41 $ 0.39 $ 0.81 $ 0.77
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements
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 six months
ended June 30, 2002 -- -- -- 1,247,321 -- 1,247,321 1,247,321
Other comprehensive income,
net of tax
Unrealized gains (losses) on
securities, net of
reclassification adjustment
(see disclosure) -- -- -- -- 264,718 264,718 264,718
-------------
Comprehensive income $ 1,512,039
=============
Cash dividend
($.34 per share) -- -- -- (523,071) -- (523,071)
---------- ----------- ----------- ----------- ------------- ------------
Balance, June 30, 2002 (Unaudited) 1,538,443 $ 7,692,215 $ 4,982,606 $ 7,678,479 $ 884,636 $ 21,237,936
========== =========== =========== =========== ============= ============
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
========== =========== =========== =========== ============= ============
For the six months ended
June 30,
2002 2001
----------- -----------
Disclosure of reclassification amount, net of tax:
Unrealized holding gains (losses)
arising during the period $ 272,555 $ 480,164
Less: reclassification adjustment for
gains (losses) included in net income 7,837 4,946
----------- -----------
Net unrealized gains (losses) on securities $ 264,718 $ 475,218
=========== ===========
The accompanying notes are an integral part of the financial statements
First West Virginia Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
2002 2001
-------------- --------------
(Unaudited)
OPERATING ACTIVITIES
Net Income $ 1,247,321 $ 1,185,383
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 300,000 282,000
Depreciation and amortization 265,905 154,311
Amortization (accretion) of investment securities, net (3,605) (28,108)
Investment security losses (gains) (12,503) (7,891)
Decrease (increase) in interest receivable (41,236) 190,812
Increase (decrease) in interest payable (161) (8,139)
Other, net (279,173) (148,493)
-------------- --------------
Net cash provided by operating activities 1,476,548 1,619,875
-------------- --------------
INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 2,218,000 (2,249,000)
Net (increase) decrease in loans, net of charge offs (9,899,169) (5,334,294)
Loans acquired in purchase of branch office 5,078,284 --
Proceeds from sales of securities available for sale 3,756,465 1,108,060
Proceeds from maturities of securities available for sale 124,322,000 53,763,241
Proceeds from maturities of securities held to maturity 415,000 985,000
Principal collected on mortgage-backed securities 6,916,799 3,901,387
Purchases of securities available for sale (144,891,703) (60,446,147)
Purchases of securities held to maturity -- --
Recoveries on loans previously charged-off 19,044 27,490
Cash acquired in purchase of branch office 9,063,066 8,990,870
Purchases of premises and equipment (477,004) (1,266,735)
-------------- --------------
Net cash used or provided by investing activities (3,479,218) (520,128)
-------------- --------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 17,226,582 11,921,578
Deposits acquired in purchase of branch office (15,653,267) (9,612,129)
Dividends paid (523,071) (523,070)
Increase (decrease) in short term borrowings 415,963 (8,571,254)
-------------- --------------
Net cash used or provided by financing activities $ 1,466,207 $ (6,784,875)
-------------- --------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (536,463) (5,685,128)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 15,494,716 12,436,250
-------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 14,958,253 $ 6,751,122
============== ==============
The accompanying notes are an integral part of the financial statements
First West Virginia Bancorp, Inc. and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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.
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, 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 $636,357 for the three months ended
June 30, 2002 as compared to $603,218 for the same period during 2001. The
increase in earnings during the second quarter of 2002 over 2001 was primarily
attributed to the increased net interest income, offset in part by a decrease in
noninterest income and increases in operating expenses and the provision for
loan losses. Earnings per share were $.41 in the second quarter of 2002, as
compared to $.39 earned during the second quarter of 2001.
Net income for the six months ended June 30, 2002 was $1,247,321 compared to
$1,185,383 for the same period during 2001. The increase in earnings for the six
months ended June 30, 2002 as compared to the same period in 2001 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 $.81 for the first six months of 2002 as compared to $.77 earned
during the same period during 2001.
Return on average assets (ROA) measures the effectiveness of asset utilization
to produce net income. ROA was 1.01% for the three month period ended June 30,
2002 as compared to 1.11% for the same period of the prior year. For the six
months ended June 30, 2002 compared to June 30, 2001, ROA was 1.04% and 1.12%,
respectively. Return on average equity (ROE) measures the return on the
stockholders' investment. The holding company's ROE was 12.70% for the three
months ended June 30, 2002 and 12.85% at June 30, 2001. For the six months ended
June 30, 2002 compared to June 30, 2001, ROE was 12.63% and 12.87%,
respectively.
During the first quarter of 2002, 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, 2002 had total assets of $250,633,947 an
increase of 8.0% over the $232,030,125 reported for the year ended December 31,
2001. Loans net of the allowance for possible loan losses grew by $9,580,124 or
8.0% to $128,877,991, as compared to $119,297,867 reported at December 31, 2001.
Total deposits increased in 2002 by $17,226,582, from $203,771,954 at December
31, 2001 to $220,998,536 at June 30, 2002. The allowance for loan losses
amounted to 1.4% of total loans at June 30, 2002, compared to 1.4% of total
loans at December 31, 2001.
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.
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, 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,
---------------------- --------------------- ----------------------------------
2002 2001 2002 2001 2001 2000 1999
--------- -------- --------- -------- --------- --------- --------
SUMMARY OF OPERATIONS
Total interest income $ 3,659 $ 3,791 $ 7,102 $ 7,572 $ 14,772 $ 14,869 $ 13,207
Total interest expense 1,300 1,675 2,574 3,468 6,422 7,155 5,602
Net interest income 2,359 2,116 4,528 4,104 8,350 7,714 7,605
Provision for loan losses 150 141 300 282 573 436 348
Total other income 236 249 483 457 942 880 1,073
Total other expenses 1,560 1,377 2,981 2,593 5,324 4,816 4,740
Income before income taxes 885 847 1,730 1,686 3,395 3,341 3,590
Net income 636 603 1,247 1,185 2,412 2,326 2,450
PER SHARE DATA (1)
Net income $ 0.41 $ 0.39 $ 0.81 $ 0.77 $ 1.57 $ 1.51 $ 1.59
Cash dividends declared 0.17 0.17 0.34 0.34 0.68 0.64 0.54
Book value per share 13.80 12.59 13.80 12.59 13.16 11.85 10.44
AVERAGE BALANCE SHEET SUMMARY
Total loans, net $131,062 $118,066 $127,482 $116,195 $ 118,224 $ 112,579 $105,775
Investment securities 91,742 75,899 86,049 73,519 73,639 69,548 59,716
Deposits - interest bearing 200,168 168,865 192,186 164,276 168,820 155,172 141,768
Stockholders' equity 20,092 18,822 19,911 18,566 18,902 17,448 16,087
Total assets 251,694 217,215 242,331 213,645 217,006 203,529 183,436
SELECTED RATIOS
Return on average assets 1.01% 1.11% 1.04% 1.12% 1.11% 1.14% 1.34%
Return on average equity 12.70% 12.85% 12.63% 12.87% 12.76% 13.33% 15.23%
Average equity to average assets 7.98% 8.67% 8.22% 8.69% 8.71% 8.57% 8.77%
Dividend payout ratio (1) 41.46% 43.59% 41.98% 44.16% 43.31% 42.38% 33.96%
Loan to Deposit ratio 59.16% 64.29% 59.16% 64.29% 59.35% 65.67% 68.39%
BALANCE SHEET June 30, December 31,
--------------------- ---------------------------------
2002 2001 2001 2000 1999
---------- ---------- ---------- --------- ----------
Investments $ 92,122 $ 73,725 $ 82,202 $ 72,242 $ 59,394
Loans 130,743 119,319 120,944 114,053 110,489
Other assets 27,769 19,277 28,884 21,598 19,290
---------- --------- ---------- --------- ----------
Total Assets $ 250,634 $ 212,321 $ 232,030 $ 207,893 $ 189,173
========== ========= ========== ========= ==========
Deposits $ 220,998 $ 185,590 $ 203,772 $ 173,669 $ 161,558
Federal funds purchased and
repurchase agreements 6,954 5,955 6,538 14,526 10,274
Other liabilities 1,444 1,413 1,471 1,473 1,285
Stockholders' equity 21,238 19,363 20,249 18,225 16,056
---------- --------- ---------- --------- ----------
Total Liabilities and
Stockholders' Equity $ 250,634 $ 212,321 $ 232,030 $ 207,893 $ 189,173
========== ========= ========== ========= ==========
(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.
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, 2002 and 2001.
Net interest income was $2,359,233 for the three months ended June 30, 2002, an
increase of $243,510 or 11.5%, from the same period in 2001. Net interest income
increased during the second 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 a decrease in the interest earned on loans and investment
securities.
During the three months ended June 30, 2002, interest expense decreased $374,727
or 22.4% 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 1.08%, from
3.59% at December 31, 2001 to 2.51% during the three months ended June 30, 2002.
The decrease in the average yield on interest bearing liabilities during the
second 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 $31,458 or 2.9% during the
three months ended June 30, 2002 over 2001. The average yield on investment
securities declined, from 5.62% at December 31, 2001 to 4.62% during the three
month period ended June 30, 2002.
Interest and fees on loans decreased $17,804 or .7% for the three month period
ended June 30, 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 7.75% during the three months ended June 30, 2002.
For the six months ended June 30, 2002, net interest income was $4,528,082, an
increase of $424,005 or 10.3%, from the same period in 2001. The increase in net
interest income was primarily due to the decline in interest rates paid on
deposit liabilities, offset in part by a decrease in the interest earned on
loans and investment securities. Interest and fees on loans decreased $126,828
or 2.5% for the six month period ended June 30, 2002 as compared to the same
period in 2001. Interest income on investment securities decreased $132,168 or
6.1% during the six months ended June 30, 2002 over 2001. The average yield on
investment securities decreased .84%, from 5.62% at December 31, 2001 to 4.78%
at June 30, 2002. During the six months ended June 30, 2002, interest expense
decreased $893,785 or 25.8% as compared to the same period in 2001. The average
yield paid on interest bearing liabilities decreased .99%, from 3.59% at
December 31, 2001 to 2.60% at June 30, 2002.
Noninterest Income
Noninterest income was $236,156 for the three months ended June 30, 2002, a
decrease of $13,093 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 $15,112 during the three months ended June 30, 2002,
up 9.8%, from the same period in 2001. 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 three months ended June 30, 2002, other operating income was $70,974,
a decrease of $16,987 or 19.3% compared to the same period in 2001. The decrease
in other operatingincome resulted primarily from a gain on sale of assets
amounting to $11,461 during 2001 and a decrease in checkbook sales during the
three month period ended June 30, 2002 as compared to the prior year.
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
Noninterest Income - continued
For the six months ended June 30, 2002, noninterest income was $482,692, an
increase of $25,852 as compared to the same period of the prior year. Service
charges and other fees increased $26,123 or 9.3% over the same period in 2001.
Sales of investment securities for the six month periods ended June 30, 2002
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 $1,107 during the period ended June 30, 2002 and securities
gains of $21,018 and securities losses of $11,859 during the period ended June
30, 2001 and those sales were attributable to sales of marketable equity
securities. The subsidiary banks accounted for securities gains of $28,341 and
securities losses of $16,075 during the period ended June 30, 2002 and
securities gains of $7,865 and securities losses of $9,133 during the period
ended June 30, 2001 and those sales were attributable to sales of securities
available for sale.
Non-Interest Expense
Noninterest expense increased $183,538 or 13.3% for the three months ended June
30, 2002 as compared to the same period of the prior year. During the quarter
ended June 30, 2002, salary and employee benefits increased $118,096 or 17.5%.
The increase was primarily attributable to hiring of personnel for the New
Martinsville, West Virginia office 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 $24,288, or 5.0%, for the three
month period ended June 30, 2002 as compared to the same period in the prior
year. Increased service expense, postage and transportation expense, deposit
premium amortization, advertising expense, regulatory assessment and deposit
insurance, offset in part by decreased other taxes, directors' fees, stationery
and supplies expense and other operating expenses primarily contributed to the
increase in other operating expenses during the three month period ended June
30, 2002.
For the six months ended June 30, 2002, noninterest expense increased $387,508
or 14.9% as compared to the same period of the prior year. Salary and employee
benefits increased $182,860 or 14.0%. The increase was primarily attributable to
the hiring of personnel for the New Martinsville and Bethlehem, West Virginia
offices combined with the normal annual merit adjustments. Other operating
expenses increased $145,355 or 16.9%, for the six month period ended June 30,
2002 as compared to the same period in the prior year. Increased service
expense, postage and transportation expense, deposit premium amortization,
advertising expense, regulatory assessment and deposit insurance, other taxes
and other operating expenses, offset in part by decreased directors' fees and
stationery and supplies expense primarily contributed to the increase in other
operating expenses in 2002.
Income Taxes
Income tax expense for the three months ended June 30, 2002 was $248,679, an
increase of 1.9% over the same period in 2001. The increase was primarily due to
the increase in pre-taxable income of $37,879 for the period ended June 30, 2002
over 2001. For the six months ended June 30, 2002, income tax expense decreased
3.5% compared to 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 June 30, 2002
were $391,202 for federal taxes and $91,600 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 $281,283 and
$247,596 for the three month periods ended June 30, 2002 and 2001, respectively.
For the six months ended June 30, 2002 and 2001, tax exempt income was $560,765
and $448,681, 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, 2002 and 2001 and for the year ended December 31, 2001.
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, 2002
and June 30, 2001 and the year ended December 31, 2001. Average balance sheet
information as of June 30, 2002 and June 30, 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 six month periods ended
June 30, 2002 and 2001.
For the six For the six
months ended months ended
June 30, 2002 December 31, 2001 June 30, 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 $ 30,473 $ 627 4.15% $ 29,143 $ 1,624 5.57% $ 33,851 $1,014 6.04%
Mortgage-backed securities 31,608 847 5.40% 22,952 1,454 6.33% 20,150 667 6.68%
Obligations of states and
political subdivisions 16,076 347 4.35% 15,578 704 4.52% 14,340 333 4.68%
Other securities 7,892 217 5.54% 5,966 353 5.92% 5,178 157 6.11%
-------- ------- ---- -------- -------- ---- -------- ------ ----
Total Investment securities: 86,049 2,038 4.78% 73,639 4,135 5.62% 73,519 2,171 5.95%
Interest bearing deposits 9,066 73 1.62% 7,869 295 3.75% 7,094 181 5.15%
Federal funds sold 7,432 59 1.60% 6,594 241 3.65% 6,465 157 4.90%
Loans, net of unearned income 127,482 4,913 7.77% 118,224 10,054 8.50% 116,195 5,040 8.75%
Other earning assets 709 19 5.40% 707 47 6.65% 705 23 6.58%
-------- ------- ---- -------- -------- ---- -------- ------ ----
Total earning assets 230,738 7,102 6.21% 207,033 14,772 7.14% 203,978 7,572 7.49%
Cash and due from banks 5,285 4,811 4,672
Bank premises and equipment 4,203 3,786 3,634
Other assets 3,862 2,893 2,786
Allowance for possible loan losses (1,757) (1,517) (1,425)
-------- -------- --------
Total Assets $242,331 $217,006 $213,645
======== ======== ========
LIABILITIES
Certificates of deposit $ 91,179 $ 1,968 4.35% $ 77,214 $ 4,273 5.53% $ 75,749 $2,166 5.77%
Savings deposits 69,834 448 1.29% 64,360 1,579 2.45% 63,161 944 3.01%
Interest bearing demand deposits 31,173 102 0.66% 27,246 280 1.03% 25,365 142 1.13%
Federal funds purchased and
Repurchase agreements 7,647 56 1.48% 10,034 290 2.89% 12,566 216 3.47%
-------- ------- ---- -------- -------- ---- -------- ------ ----
Total interest bearing liabilities 199,833 2,574 2.60% 178,854 6,422 3.59% 176,841 3,468 3.95%
Demand deposits 21,055 17,844 17,051
Other liabilities 1,532 1,406 1,187
-------- -------- --------
Total Liabilities 222,420 198,104 195,079
STOCKHOLDERS' EQUITY 19,911 18,902 18,566
-------- -------- --------
Total Liabilities
and Stockholders' Equity $242,331 $217,006 $213,645
======== ======== ========
Net yield on earning assets $ 4,528 3.96% $ 8,350 4.03% $4,104 4.06%
======= ==== ======== ==== ====== ====
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, 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 $ 16,076 $ 557 6.99% $ 15,578 $ 1,119 7.18% $ 14,340 $ 482 6.78%
Loans 127,482 5,078 8.03% 118,224 10,301 8.71% 116,195 5,147 8.93%
========= ======= ===== ========= ======= ====== ======= ======= =====
Total earning assets $ 230,738 $ 7,477 6.53% $ 207,033 $15,434 7.45% $203,978 $ 7,828 7.74%
========= ======= ===== ========= ======= ====== ======= ======= =====
Taxable equivalent net yield on
earning assets $ 4,903 4.29% $ 9,012 4.35% $ 4,360 4.31%
======= ====== ======= ====== ======= =====
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,
2002 and June 30, 2001. Average balance sheet information as of June 30, 2002
and June 30, 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
June 30, 2002 and 2001.
For the Three For the Three
Months ended Months ended
June 30, 2002 June 30, 2001
---------------------------------- --------------------------------
Average Average Average Average
Volume Interest Rate Volume Interest Rate
----------- --------- ------- ----------- -------- -------
ASSETS:
Investment securities:
U.S. Treasury and other U. S.
Government agencies $ 31,493 $ 311 3.96% $ 29,146 $ 414 5.70%
Mortgage backed securities 36,815 471 5.13% 24,024 392 6.54%
Obligations of states and
political subdivisions 15,886 170 4.29% 15,842 179 4.53%
Other securities 7,548 104 5.53% 6,887 103 6.00%
----------- --------- ------- ------------ -------- -------
Total Investment Securities 91,742 1,056 4.62% 75,899 1,088 5.75%
Interest bearing deposits 9,007 36 1.60% 5,761 68 4.73%
Federal funds sold 6,667 28 1.68% 6,801 74 4.36%
Loans, net of unearned income 131,062 2,532 7.75% 118,066 2,550 8.66%
Other earning assets 716 8 4.48% 709 11 6.22%
----------- --------- ------- ------------ -------- -------
Total earning assets 239,194 3,660 6.14% 207,236 3,791 7.34%
Cash and due from banks 5,475 4,604
Bank premises and equipment 4,307 3,892
Other earning assets 4,534 2,963
Allowance for possible loan losses (1,816) (1,480)
----------- ------------
Total Assets $ 251,694 $ 217,215
=========== ============
LIABILITIES
Certificates of deposit $ 97,011 $ 981 4.06% $ 77,930 $ 1,097 5.65%
Savings deposits 71,365 234 1.32% 64,811 433 2.68%
Interest bearing demand deposits 31,792 53 0.67% 26,125 68 1.04%
Federal funds purchased and
Repurchase agreements 7,961 32 1.61% 10,477 77 2.95%
----------- --------- ------- ------------ -------- -------
Total interest bearing liabilities 208,129 1,300 2.51% 179,343 1,675 3.75%
Demand deposits 21,933 17,630
Other liabilities 1,540 1,421
----------- ------------
Total Liabilities 231,602 198,394
SHAREHOLDERS' EQUITY 20,092 18,821
----------- ------------
Total Liabilities
and Shareholders' Equity $ 251,694 $ 217,215
=========== ============
Net yield on earning assets $ 2,360 3.96% $ 2,116 4.10%
========= ======= ======== =======
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, 2002
and 2001, respectively. The effect of this adjustment is presented below (in
thousands).
Obligations of states and
political subdivisions:
Investment securities $ 15,886 $ 273 6.89% $ 15,842 $ 265 6.71%
Loans 131,062 2,616 8.01% 118,066 2,609 8.86%
=========== ========= ======== ============ ======== =======
Total earning assets $ 239,194 $ 3,847 6.45% $ 207,236 $ 3,936 7.62%
=========== ========= ======== ============ ======== =======
Taxable equivalent net yield on
earning assets $ 2,547 4.27% $ 2,261 4.38%
========= ======== ======== =======
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 $9,919,862 or 12.1% from $82,202,161 at
December 31, 2001, to $92,122,023 at June 30, 2002. Taxable securities comprised
83.4% of total securities at June 30, 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 fair value increased $10,335,699 or 14.1%
from December 31, 2001, and represented 91% of the investment portfolio at June
30, 2002. The increase was primarily due to purchases of mortgage-backed
securities. The held to maturity securities decreased $415,837 or 4.7% from
December 31, 2001 and represented 9% of the investment portfolio as of June 30,
2002. The decrease was primarily the result of maturities of non-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 $1,411,347
at June 30, 2002 and increased by $989,018 at December 31, 2001. The market
value of securities classified as held to maturity was above book value by
$255,450 and $158,100 at June 30, 2002 and December 31, 2001, respectively.
Table Four
Investment Portfolio
The following table presents the book values of investment securities:
(in thousands) (Unaudited):
June 30, December 31,
2002 2001
---------- ------------
Securities held to maturity:
Obligations of states
and political subdivisions $ 8,438 $ 8,854
---------- ------------
Total held to maturity $ 8,438 $ 8,854
---------- ------------
Securities available for sale :
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies 30,943 $ 31,353
Obligations of states
and political subdivisions 7,871 7,917
Corporate debt securities 6,246 8,086
Mortgage-backed securities 38,148 25,535
Equity Securities 476 457
---------- ------------
Total available for sale 83,684 73,348
---------- ------------
Total $ 92,122 $ 82,202
========== ============
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 June 30, 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.
June 30, 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 $ -- --% $ 3,252 3.41% $ -- --% $ 12,264 2.89%
After One But
Within Five Years -- -- 24,490 4.05 -- -- 15,284 4.38
After Five But
Within Ten Years -- -- 2,043 5.38 -- -- 2,521 6.43
After Ten Years -- -- 1,158 2.39 -- -- 1,284 3.03
-------- -------- -------- -------- -------- ------- -------- -------
-- -- 30,943 4.01 -- -- 31,353 3.91
States & Political Subdivisions
Within One Year 895 6.26 2,630 4.77 960 6.46 1,499 4.65
After One But
Within Five Years 3,840 6.11 3,952 5.17 4,043 6.21 4,914 5.43
After Five But
Within Ten Years 3,703 6.65 1,035 5.99 3,851 6.65 1,260 6.30
After Ten Years -- -- 254 6.40 -- -- 244 6.66
-------- -------- -------- -------- -------- ------- -------- -------
8,438 6.36 7,871 5.18 8,854 6.43 7,917 5.46
Corporate Debt Securities
Within One Year -- -- -- -- -- -- 1,251 2.85
After One But
Within Five Years -- -- 4,589 5.44 -- -- 5,871 5.49
After Five But
Within Ten Years -- -- 1,657 6.31 -- -- 964 7.05
-------- -------- -------- -------- -------- ------- -------- -------
-- -- 6,246 5.67 -- -- 8,086 5.27
Mortgage-Backed Securities -- -- 38,148 5.26 -- -- 25,535 5.75
Equity Securities -- -- 476 2.33 -- -- 457 2.67
-------- -------- -------- -------- -------- ------- -------- -------
Total $ 8,438 6.36% $ 83,684 4.80% $ 8,854 6.43% $ 73,348 4.86%
======== ======== ======== ======== ======== ======= ======== =======
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 $9,799,515 or 8.1% from December 31,
2001. The additional growth in the loan portfolio during the first six months of
2002 was primarily due to increases in residential real estate loans, commercial
loans, and other 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-nine percent
(39%) 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
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 June 30, 2002 were a
2% increase in residential real estate loans, a 1% decrease in installment loans
and a 1% decrease in commercial 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,
--------------------- -------------
2002 2001 2001
Real Estate - Residential
Real estate-construction $ 719 $ 283 $ 395
Real estate-farmland 193 153 212
Real estate-residential 50,098 42,904 44,554
-------- -------- --------
$ 51,010 $ 43,340 $ 45,161
-------- -------- --------
Commercial
Real estate-secured by
nonfarm, nonresidential $ 36,915 $ 32,045 $ 34,525
Commercial & industrial 13,698 14,312 13,889
-------- -------- --------
$ 50,613 $ 46,357 $ 48,414
-------- -------- --------
Installment
Installment and other
loans to individuals $ 19,268 $ 22,997 $ 19,517
-------- -------- --------
Others
Nonrated industrial
development obligations $ 9,935 $ 6,495 $ 7,784
Other loans 33 217 187
-------- -------- --------
$ 9,968 $ 6,712 $ 7,971
-------- -------- --------
Total 130,859 119,406 121,063
Less unearned interest 116 87 119
-------- -------- --------
$130,743 $119,319 $120,944
======== ======== ========
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, 2002
and December 31, 2001 (in thousands) (Unaudited):
June 30, 2002
----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ ----------
Commercial $ 1,969 $ 6,794 $ 4,935
Real Estate - construction 328 22 369
---------- ---------- ----------
Total $ 2,297 $ 6,816 $ 5,304
========== ========== ==========
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
June 30, 2002 and December 31, 2001 along with the contractual maturities of
loans other than installment loans and residential mortgages (in thousands)
(Unaudited):
June 30, 2002
-----------------------------------------
After one
In one Year Through After
Year or Less Five Years Five Years
------------ ------------ -----------
Fixed Rates $ 1,999 $ 4,385 $ 2,347
Variable Rates 298 2,431 2,957
---------- ---------- ----------
Total $ 2,297 $ 6,816 $ 5,304
========== ========== ==========
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
========== ========== ==========
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 $1,222,000 at June 30, 2002 and $1,317,000
at December 31, 2001. Loans classified as non-accrual were $1,185,000 or .9% of
total loans as of June 30, 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
June 30, 2002 and December 31, 2001. The loans past due 90 days or more
decreased $61,000 to $12,000 at June 30, 2002. Other real estate owned was
$25,000 at June 30, 2002 as compared to $60,000 at 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):
June 30, December 31,
----------------------- ------------
2002 2001 2001
Past Due 90 Days or More:
Real Estate - residential $ 0 $ 133 $ 21
Commercial 0 407 26
Installment 12 104 26
--------- --------- ---------
$ 12 $ 644 $ 73
--------- --------- ---------
Non-accrual:
Real Estate - residential $ 36 $ -- $ 27
Commercial 1,132 985 1,124
Installment 17 54 33
--------- --------- ---------
$ 1,185 $ 1,039 $ 1,184
--------- --------- ---------
Other Real Estate $ 25 $ 77 $ 60
--------- --------- ---------
Total non-performing assets $ 1,222 $ 1,760 $ 1,317
========= ========= =========
Total non-performing assets
to total loans and
other real estate .93% 1.47% 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 $54,900, $55,100 and
$96,600 for the periods ended June 30, 2002 and 2001 and December 31, 2001,
respectively.
As of June 30, 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.
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 $300,000 during the six
months ended June 30, 2002, as compared to $282,000 during the same period of
the prior year. The allowance for possible loan losses represented 1.4% of total
loans outstanding at June 30, 2002 and December 31, 2001, 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,
----------------------- ------------
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 2 -- --
Commercial 55 30 95
Installment 43 38 164
--------- --------- ---------
100 68 259
Recoveries:
Real Estate - residential 0 4 4
Commercial 11 11 12
Installment 8 12 14
--------- --------- ---------
19 27 30
Net Charge-offs 81 41 229
Additions Charged to Operations 300 282 573
--------- --------- ---------
Balance at end of period: $ 1,865 $ 1,543 $ 1,646
========= ========= =========
Average Loans Outstanding $ 127,482 $ 116,195 $ 118,224
========= ========= =========
Ratio of net charge-offs
to Average loans
outstanding for the period .06% .04% .19%
Ratio of the Allowance for Loan
Losses to Loans Outstanding for
the period 1.43% 1.29% 1.36%
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 six
month period ended June 30, 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.
June 30, 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 $ 271 38.1% $ 263 37.3% $ 241 37.9% $ 238 36.2% $ 208 34.2% $ 202 34.6%
Commercial 987 40.3 821 40.0 549 37.0 490 38.7 490 37.8 622 38.0
Installment 586 14.7 541 16.1 492 20.9 400 22.2 374 23.8 343 23.6
Others 21 6.9 21 6.6 20 4.2 20 2.9 20 4.2 20 3.8
Unallocated -- -- -- -- -- -- -- -- 31 -- 31 -
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $1,865 100.0% $1,646 100.0% $1,302 100.0% $1,148 100.0% $1,123 100.0% $1,218 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
First West Virginia Bancorp, Inc.
Management's Discussion and Analysis of the Financial Condition and
Results of Holding Company Operations
Deposits
Total deposits were $220,998,536 at June 30, 2002 as compared to
$203,771,954 at December 31, 2001, an increase of 8.5%. Approximately $15.7
million or 7.7% of the increase in deposits primarily was due to the acquisition
of the deposits of Wheeling National Bank's New Martinsville branch office which
occurred during the first quarter of 2002. Deposit growth increased primarily in
time deposits. At June 30, 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 June 30, 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)
June 30, 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 $ 2,961 $ 2,558 $ 5,583 $ 13,271 $ 24,373
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 $6,953,611 at June 30, 2002, an increase of $415,963,
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.
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 2002 entirely from current earnings after quarterly dividends, and increased
1.3% resulting from the effect of the change in the net unrealized gain on
securities available for sale. Stockholders' equity amounted to 8.5% of total
assets at June 30, 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 June 30, 2002, June 30, 2001, and December 31, 2001:
June 30, Dec. 31
--------------- -------
Ratio Minimum 2002 2001 2001
- ---------------------- -------- ------- ------ -----
Leverage Ratio 3% 7.1 8.2 8.4
Risk Based Capital
Tier 1 (core) 4% 11.6 13.2 13.1
Tier 2 (total) 8% 12.8 14.3 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 $83,684,009
classified as available for sale at June 30, 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 $10,596,000 at June 30,
2002. As of June 30, 2002 there were no borrowings outstanding pursuant to these
agreements.
At June 30, 2002 and December 31, 2001, the Holding Company had outstanding
loan commitments and unused lines of credit totaling $21,232,000 and
$19,511,000, respectively. As of June 30, 2002, management placed a high
probability for required funding within one year of approximately $16,720,000.
Approximately $3,697,000 is principally unused home equity and credit card lines
on which management places a low probability for required funding.
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,
2002 were as follows: given a 200 basis point increase scenario net interest
income would be increased by approximately .8%, and given a 200 basis point
decrease scenario net interest income would be reduced by approximately 9.8%.
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 9, 2002, Annual Meeting of Shareholders.
b. Inapplicable
c. Election of Directors
The following directors were elected to the Board of Directors as Class I,
for terms expiring at the annual meeting in 2005: Laura G. Inman and Karl
W. Neumann
The results of the election were as follows:
SHARES VOTED
--------------------------------------------------------
Against/ Abstentions
NAME For Withheld Broker Non-Votes
Laura G. Inman 1,442,150 * 79,897 0
Karl W. Neumann 1,312,452 * 209,595 0
* Cumulative Shares Voted
Continuing directors were as follows:
Terms Expiring
Charles K. Graham 2003
Laura G. Inman 2005
Karl W. Neumann 2005
Sylvan J. Dlesk 2003
James C. Inman, Jr. 2003
Thomas A. Noice 2003
Nada E. Beneke 2004
R. Clark Morton 2004
William G. Petroplus 2004
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, 2002, 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,
2002.
(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.
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, 2002
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.
99.2 Certification pursuant to 18 U.S.C. (S)1350, as adopted
pursuant to section 906 of the SARBANES-OXLEY ACT of 2002