Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
FWV > SEC Filings for FWV > Form 10-Q on 13-Nov-2012All Recent SEC Filings

Show all filings for FIRST WEST VIRGINIA BANCORP INC

Form 10-Q for FIRST WEST VIRGINIA BANCORP INC


13-Nov-2012

Quarterly Report

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

Table One

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



                                       Three Months Ended            Nine Months Ended                        Years ended
                                         September 30,                 September 30,                         December 31,
                                      2012           2011           2012           2011           2011           2010           2009
SUMMARY OF OPERATIONS
Total interest income               $   2,455      $   2,807      $   7,475      $   8,551         11,207         11,858      $  12,914
Total interest expense                    430            546          1,377          1,710          2,229          3,056          4,328
Net interest income                     2,025          2,261          6,098          6,841          8,978          8,802          8,586
Provision for loan losses                  -              -              -             600            600            220            184
Total other income                        307            722          1,273          1,554          2,034          1,977          1,791
Total other expenses                    1,870          1,894          5,702          5,705          7,626          7,723          7,592
Income before income taxes                462          1,089          1,669          2,090          2,786          2,836          2,601
Net income                                483            859          1,623          1,818          2,454          2,339          2,305
PER SHARE DATA (1)
Net income                          $    0.29      $    0.52      $    0.98      $    1.10           1.48           1.42      $    1.39
Cash dividends declared                  0.19           0.19           0.57           0.57           0.76           0.73           0.73
Book value per share                    21.75          20.47          21.75          20.47          20.89          18.82          18.64
AVERAGE BALANCE SHEET SUMMARY
Total loans, net                    $ 103,539      $ 115,559      $ 105,846      $ 117,036        115,415        124,074      $ 128,206
Investment securities                 158,684        135,203        153,017        133,999        136,409        116,990        112,142
Deposits - interest bearing           208,335        206,508        208,034        205,152        204,616        198,042        190,981
Stockholders' equity                   31,747         30,514         31,481         30,351         30,498         29,415         28,192
Total assets                          294,328        286,100        292,505        283,260        283,734        273,778        266,414
SELECTED RATIOS
Return on average assets                 0.65 %         1.19 %         0.74 %         0.86 %         0.86 %         0.85 %         0.87 %
Return on average equity                 6.05 %        11.17 %         6.89 %         8.01 %         8.05 %         7.95 %         8.18 %
Average equity to average assets        10.79 %        10.67 %        10.76 %        10.71 %        10.75 %        10.74 %        10.58 %
Dividend payout ratio (1)               65.52 %        36.54 %        58.16 %        51.82 %        51.35 %        51.41 %        52.52 %
Loan to Deposit ratio                   42.09 %        48.54 %        42.09 %        48.54 %        45.75 %        53.12 %        58.12 %

                                         September 30,                         December 31,
                                      2012           2011           2011           2010           2009
BALANCE SHEET
Investments                         $ 166,464      $ 143,207      $ 150,961      $ 133,169      $ 115,997
Loans                                 100,726        114,286        109,428        121,367        128,581
Allowance for loan losses              (2,513 )       (2,525 )       (2,504 )       (2,059 )       (1,894 )
Other assets                           36,335         36,900         35,373         25,482         28,447

Total Assets                        $ 301,012      $ 291,868      $ 293,258      $ 277,959      $ 271,131

Deposits                            $ 239,321      $ 235,460      $ 239,177      $ 228,475      $ 221,246
Federal funds purchased and
repurchase agreements                  18,570         16,912         14,013         13,477         11,025
FHLB borrowings                         3,628          3,714          3,693          3,776          7,354
Other liabilities                       3,537          1,955          1,848          1,130            700
Stockholders' equity                   35,956         33,827         34,527         31,101         30,806

Total Liabilities and
Stockholders' equity                $ 301,012      $ 291,868      $ 293,258      $ 277,959      $ 271,131

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


Table of Contents

First West Virginia Bancorp, Inc.

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

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

The Company's critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of September 30, 2012 have remained unchanged from the disclosures presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 under the section "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Forward-Looking Information: Certain information contained in this report, which are not historical facts, may be forward-looking statements that involve risks and uncertainties. These statements are subject to important factors that could cause action results to differ materially from those contemplated by such statements, including without limitation, the effect of changing economic conditions, changes in interest rates, changes in lending activities, changes in state and federal regulations, and other external factors which may materially impact the Company's operational and financial performance. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effect of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to the parent company and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform; competitive conditions in the financial services industry; rapidly changing technology affecting financial services, and/or other external developments materially impacting the Company's operational and financial performance. The Company does not assume any duty to update forward-looking statements.

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

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

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

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

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

OVERVIEW

The Company reported net income of $1,622,860 or $.98 per share for the nine months ended September 30, 2012 compared to $1,817,974 or $1.10 per share for the same period during 2011. The decrease in net income for the nine months ended September 30, 2012 as compared to the same period in 2011 of $195,114 or 10.7% was primarily the result of the decrease in net interest income combined with the decrease in noninterest income, offset in part by the decrease in the provision for loan losses and in noninterest expenses and income tax expense. Net interest income decreased $742,622 or 10.9%, primarily due to decreases in the interest and fees earned on loans and in the interest earned on investment securities, offset in part by the decrease in the interest expense paid on interest bearing liabilities. Noninterest income decreased $281,395 or 18.1% primarily due to the decrease in the net gains on sales of investment securities combined with the decline in service charges and fees earned on deposit accounts, which were offset in part by the increase in other operating income. The provision for loan losses decreased $600,000 during the nine month period ended September 30, 2012 as compared to the same period in 2011 primarily due to a specific reserve allocation for one impaired commercial real estate loan in 2011. Noninterest expenses decreased $2,644 or .1% during the nine month period ended September 30, 2012 as compared to the same period in 2011 primarily due to decreases in salary and employee benefits expenses and other operating expenses, offset in part by the increase in occupancy expenses. The ROA was .74% for the nine months ended September 30, 2012 as compared to .86% for the same period of the prior year. For the nine months ended September 30, 2012 compared to September 30, 2011, the ROE was 6.89% and 8.01%, respectively.


Table of Contents

First West Virginia Bancorp, Inc.

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

For the third quarter of 2012, net income was $482,826 or $.29 per share as compared to $858,932 or $.52 per share for the same period in 2011. The decrease in net income for the three months ended September 30, 2012 as compared to the same period in 2011 of $376,106 or 43.8% was primarily the result of the decrease in noninterest income combined with the decrease in net interest income, offset in part by the decrease in the provision for loan losses and the decrease in noninterest expenses and in income tax expense. Noninterest income fell $415,345 or 57.5% for the three months ended September 30, 2012 as compared to same period of the prior year and was primarily due to the decrease in the net gains on sales of investment securities combined with declines in other operating income and in service charges and fees earned on deposit accounts. Net interest income decreased $236,323 or 10.5%, primarily due to the decrease in the interest and fees earned on loans and in the interest earned on investment securities, offset in part by the decrease in the interest expense paid on interest bearing liabilities. There was no change in the provision for loan losses during the three month period ended September 30, 2012 as compared to the same period in 2011. Noninterest expenses decreased $24,375 or 1.3% during the three month period ended September 30, 2012 as compared to the same period in 2011 primarily due to the decline in salary and employee benefits expenses, offset by the increases in occupancy expenses and in other operating expenses.

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

EARNINGS ANALYSIS - For the nine months ended September 30, 2012

Net Interest Income

Net interest income, which is the primary source of earnings for the Company, is the difference between interest earned on loans and investments and interest paid on deposits and other liabilities. Changes in the volume and mix of earning assets and interest bearing liabilities combined with changes in market rates of interest greatly effect net interest income. Table Two presents the average balance sheets and an interest rate analysis for the nine months ended September 30, 2012 and 2011.

For the nine months ended September 30, 2012, net interest income was $6,098,357, a decrease of $742,622 or 10.9%, from the same period in 2011. Net interest income declined primarily due to the decrease in the yield on earning assets offset in part by the increase in average volume of earning assets. The taxable equivalent net yield on earning assets decreased 44 basis points from 3.95% at September 30, 2011 to 3.51% at September 30, 2012. The average earning assets increased approximately $9.1 million or 3.4% from September 30, 2011 to 2012.

Interest income on investment securities during the first nine months of 2012 fell $402,920 or 11.3% as compared to the same period of the prior year. The decrease in interest income on investment securities during the first nine months of 2012 was primarily due to the decline in the yields earned which was partially offset by a rise in the average volume. The taxable equivalent yield on investment securities fell 62 basis points in 2012, from 4.13% at December 31, 2011 to 3.51% at September 30, 2012 and decreased 75 basis points from September 30, 2011. The average volume of investment securities have increased approximately $16.6 million or 12.2% since December 31, 2011.

Interest and fees on loans decreased $676,339 or 13.6%, from the same period in 2011 primarily due to the decrease in the average loan volume combined with the decline in the average yield on loans. The taxable equivalent yield on loans fell 23 basis points in 2012 from 5.93% at December 31, 2011 to 5.70% at September 30, 2012 and fell 27 basis points from September 30, 2011. The average loan volume decreased approximately $9.6 million or 8.3% since December 31, 2011.

During the nine months ended September 30, 2012, interest expense declined $333,417 or 19.5% as compared to the same period in 2011. The decrease in the average yield paid on interest bearing liabilities, partially offset by an increase in the average volume of interest bearing liabilities primarily contributed to the decrease in interest expense during the nine month period ended September 30, 2012. The average yield paid on interest bearing liabilities fell 20 basis points from 1.00% at December 31, 2011 to .80% at September 30, 2012. The average volume of interest bearing liabilities increased approximately $5.6 million or 2.5% since December 31, 2011.

Noninterest Income

Noninterest income decreased $281,395 or 18.1% for the nine months ended September 30, 2012 as compared to same period of the prior year. The decrease in noninterest income was primarily due to the decrease in the net gains on sales of investment securities combined with the decline in service charges and other fee income, offset in part by the increase in other operating income.

The net gains on investment securities decreased $299,047 or 46.5% for the nine month period ended September 30, 2012 as compared to the same period in 2011. The change in net gains on sales of investment securities was primarily attributable to sales recorded by the Company and its subsidiary bank. The Company's subsidiary bank sold approximately $9.6 million of mortgage-backed investment securities during the second quarter of 2012 in order to reinvest into mortgage backed investment securities with a slower more stable cash flow for the current market interest rate environment. The Company's subsidiary bank sold approximately $17.7 million of investment securities during the first nine months of 2011 to take advantage of the current market interest rate environment. The Company accounted for securities gains of $344,265 and securities losses of $315 during the nine month period ended September 30, 2012 and securities gains of $659,008 and securities losses of $16,011 during the nine month period ended September 30, 2011.

Other operating income represents fees from safe deposit box rentals, sales of checkbooks, sales of cashiers' checks and money orders, utility collections, ATM charges and card fees, home equity credit line fees, credit life commissions, credit card fees and commissions and various other charges and fees related to normal customer banking relationships. For the nine month period ended September 30, 2012, other operating income increased $34,584 or 6.3% compared to the same period in 2011. The increase in other operating income was primarily due to increases in ATM fees and FHLB fee income, a gain on sale of other real estate owned and in the earnings related to the cash surrender value of the bank owned life insurance on its key officers, offset in part by decreases in the gains on sales of mortgage servicing rights, checkbook sales, safe deposit box rent and filing fee income.

Service charges and other fees represent charges that are earned from assessments made on checking and savings accounts. Service charges and other fee income fell $16,932 in the first nine months of 2012 as compared to the same period in 2011, down 4.7%, from 2011.


Table of Contents

First West Virginia Bancorp, Inc.

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

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

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the nine months ended September 30, 2012 and 2011. Average balance sheet information for the periods ended September 30, 2012 and 2011 was compiled using the daily averages. Loan fees and unearned discounts were included in income for average rate calculation purposes. Average yields on investment securities available for sale have been calculated based on amortized cost. Non-accrual loans were included in the average balance computations; however, no interest was included in income subsequent to the non-accrual status classification.

                                              (Unaudited)                                   (Unaudited)
                                       For the nine months ended                     For the nine months ended
                                           September 30, 2012                            September 30, 2011
                                 Average                        Average        Average                        Average
                                  Volume         Interest        Rate           Volume         Interest        Rate
ASSETS:
Investment securities:
U.S. Treasury and U. S.
Government agencies             $   37,586      $      539          1.92 %    $   38,025      $      834          2.93 %
Mortgage backed securities          71,587           1,321          2.46 %        60,667           1,622          3.57 %
States and political
subdivisions                        43,732           1,295          3.96 %        35,099           1,101          4.19 %
Other securities                       112               2          2.39 %           208               3          1.93 %

Total Investment securities:       153,017           3,157          2.76 %       133,999           3,560          3.55 %
Interest bearing deposits           13,633              24          0.24 %        12,310              22          0.24 %
Loans, net of unearned income      105,846           4,282          5.40 %       117,036           4,958          5.66 %
Other earning assets                 1,246              12          1.29 %         1,338              11          1.10 %

Total earning assets               273,742           7,475          3.65 %       264,683           8,551          4.32 %
Other assets                        21,270                                        20,770
Allowance for loan losses           (2,507 )                                      (2,193 )

Total Assets                    $  292,505                                    $  283,260

LIABILITIES
Time deposits                   $   72,391      $      876          1.62 %    $   77,154      $    1,152          2.00 %
Savings deposits                    90,226             241          0.36 %        83,126             295          0.47 %
Interest bearing demand
deposits                            45,417              42          0.12 %        44,872              50          0.15 %
Federal funds purchased and
repurchase agreements               16,906              87          0.69 %        14,249              79          0.74 %
FHLB and other long-term
borrowings                           3,660             131          4.78 %         3,744             134          4.79 %

Total interest bearing
liabilities                        228,600           1,377          0.80 %       223,145           1,710          1.02 %
Demand deposits                     31,464                                        28,864
Other liabilities                      960                                           900

Total Liabilities                  261,024                                       252,909
STOCKHOLDERS' EQUITY                31,481                                        30,351

Total Liabilities and
Stockholders' Equity            $  292,505                                    $  283,260

Net yield on earning assets                     $    6,098          2.98 %                    $    6,841          3.46 %

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the nine months ended September 30, 2012 and 2011, respectively. The effect of this adjustment is presented below.

Investment securities                   $ 153,017     $ 4,020       3.51 %    $ 133,999     $ 4,270       4.26 %
Loans                                     105,846       4,518       5.70 %      117,036       5,227       5.97 %

Total earning assets                    $ 273,742     $ 8,574       4.18 %    $ 264,683     $ 9,530       4.81 %

Taxable equivalent net yield on
earning assets                                        $ 7,197       3.51 %                  $ 7,820       3.95 %


Table of Contents

First West Virginia Bancorp, Inc.

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

EARNINGS ANALYSIS - For the nine months ended September 30, 2012 (continued)

Noninterest Expense

Noninterest expense decreased $2,644 or .1% for the nine months ended September 30, 2012 as compared to same period of the prior year. The decrease in noninterest expense was primarily due to the decreases in salary and employee benefits expenses and in other operating expenses, offset in part by an increase in occupancy expenses.

Salary and employee benefits expenses fell $55,478 or 2.0% during the nine months ended September 30, 2012 over the same period in 2011. Salary and employee benefit expense in 2012 compared to 2011 decreased primarily as a result of a reduction in salary expenses, offset in part by increases in employee benefits expenses and payroll taxes.

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

                                                                       Net Increase          Percent Increase
(Unaudited)                        2012               2011              (Decrease)              (Decrease)
Directors' fees                 $    77,700        $    84,150        $       (6,450 )                    (7.7 )%
Stationery and supplies             127,958            113,030                14,928                      13.2 %
Regulatory assessment and
deposit insurance                   203,671            279,175               (75,504 )                   (27.0 )%
Advertising                         162,372             98,649                63,723                      64.6 %
Postage and transportation          122,016            122,921                  (905 )                    (0.7 )%
Other taxes                         126,322            129,430                (3,108 )                    (2.4 )%
Service expense                     356,172            289,953                66,219                      22.8 %
Other                               592,948            662,551               (69,603 )                   (10.5 )%

Total                           $ 1,769,159        $ 1,779,859        $      (10,700 )                    (0.6 )%

. . .

  Add FWV to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for FWV - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.