UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

For the Quarterly Period Ended September 30, 2015

¨ 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 incorporation or organization)	(I.R.S. Employer Identification No.)

1701 Warwood Avenue

Wheeling, West Virginia 26003

(Address of principal executive offices)

Registrant’s telephone number, including area code: (304) 277-1100

N/A

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-accelerated Filer	¨	Smaller Reporting Company	x

Indicate by check mark whether the Registrant is a shell company as defined by Rule 12b-2 of the Exchange Act.    ¨  Yes    x  No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    ¨  Yes    ¨  No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the issuer’s common stock as of September 30, 2015: Common Stock, $5.00 Par Value, shares outstanding: 1,728,730 shares.

FORM 10-Q INDEX

		Page No.
PART I - Financial Information
Item 1.	Financial Statements		3-30
	Consolidated Balance Sheets at September 30, 2015 (unaudited) and December 31, 2014		4
	Consolidated Statements of Income for the three and nine months ended September 30, 2015 and September  30, 2014 (unaudited)		5
	Consolidated Statements of Comprehensive Income for the three and nine months ended September  30, 2015 and September 30, 2014 (unaudited)		6
	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September  30, 2015 and 2014 (unaudited)		7
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (unaudited)		8
	Condensed Notes to the Consolidated Financial Statements (unaudited)		9-30
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31-43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item 4.	Controls and Procedures		44
PART II - Other Information
Item 1.	Legal Proceedings		45
Item 1A.	Risk Factors		45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3.	Defaults Upon Senior Securities		45
Item 4.	Mine Safety Disclosures		45
Item 5.	Other Information		45
Item 6.	Exhibits		45
SIGNATURES			46

2

FIRST WEST VIRGINIA BANCORP, INC.

PART I

FINANCIAL INFORMATION

3

Item 1 - Financial Statements

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

	September 30, 2015			December 31, 2014
(in thousands, except shares)	(Unaudited)
ASSETS
Cash and due from banks	$	5,557		$	5,348
Due from banks - interest bearing		27,833			15,048
Total cash and cash equivalents		33,390			20,396
Investment securities:
Available-for-sale (at fair value)		196,830			197,079
Loans		101,635			99,217
Less allowance for loan losses		(1,791	)		(1,813	)
Net loans		99,844			97,404
Premises and equipment, net		8,087			8,413
Accrued income receivable		1,082			1,015
Goodwill		1,644			1,644
Bank owned life insurance		3,922			3,840
Other assets		2,245			2,599
Total assets	$	347,044		$	332,390
LIABILITIES
Noninterest bearing deposits:
Demand	$	37,430		$	41,556
Interest bearing deposits:
Demand		57,088			55,459
Savings		117,364			112,756
Time		60,001			62,372
Total deposits		271,883			272,143
Securities sold under agreements to repurchase		28,048			21,051
Federal Home Loan Bank borrowings		3,346			3,420
Accrued interest payable		104			120
Other liabilities		7,698			784
Total liabilities		311,079			297,518
COMMITMENTS AND CONTINGENT LIABILITIES
Commitments and contingent liabilities		—			—
STOCKHOLDERS’ EQUITY
Common stock - 2,000,000 shares authorized at $5 par value:
1,728,730 shares issued at September 30, 2015 and December 31, 2014		8,644			8,644
Treasury stock - 10,000 shares at cost		(228	)		(228	)
Surplus		6,966			6,966
Retained earnings		19,246			18,655
Accumulated other comprehensive income		1,337			835
Total stockholders’ equity		35,965			34,872
Total liabilities and stockholders’ equity	$	347,044		$	332,390

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

4

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended, September 30,					Nine Months Ended, September 30,
	2015			2014		2015		2014
(in thousands, except shares and per share amounts)	(Unaudited)					(Unaudited)
INTEREST AND DIVIDEND INCOME
Loans, including fees:
Taxable	$	1,094		$	1,114	$	3,511	$	3,188
Tax-exempt		126			120		381		377
Debt securities:
Taxable		796			740		2,264		2,124
Tax-exempt		290			427		916		1,450
Other interest and dividend income		19			24		89		76
Total interest and dividend income		2,325			2,425		7,161		7,215
INTEREST EXPENSE
Deposits		250			278		764		838
Federal funds purchased and repurchase agreements		54			46		158		124
Federal Home Loan Bank borrowings		40			41		121		124
Total interest expense		344			365		1,043		1,086
Net interest income		1,981			2,060		6,118		6,129
PROVISION FOR LOAN LOSSES		30			—		30		—
Net interest income after provision for loan losses		1,951			2,060		6,088		6,129
NONINTEREST INCOME
Service charges and other fees		83			100		232		279
Net gains on available for sale securities		—			608		1,156		869
Other-than-temporary losses on securities
Total other-than-temporary losses		—			—		—		(49	)
Portion of loss recognized in other comprehensive income (before taxes)		—			—		—		—
Net impairment losses recognized in earnings		—			—		—		(49	)
Other operating income		157			157		476		479
Total noninterest income		240			865		1,864		1,578
NONINTEREST EXPENSE
Salary and employee benefits		1,042			1,036		3,046		2,883
Net occupancy expense of premises		406			396		1,270		1,246
Other operating expenses		581			582		1,823		1,820
Total noninterest expense		2,029			2,014		6,139		5,949
Income before income taxes		162			911		1,813		1,758
INCOME TAX EXPENSE (BENEFIT)		(90	)		137		191		—
Net income	$	252		$	774	$	1,622	$	1,758
WEIGHTED AVERAGE SHARES OUTSTANDING		1,718,730			1,718,730		1,718,730		1,718,730
EARNINGS PER COMMON SHARE	$	0.14		$	0.45	$	0.94	$	1.02
DIVIDENDS PER COMMON SHARE	$	0.20		$	0.20	$	0.60	$	0.60

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

5

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended, September 30,						Nine Months Ended, September 30,
	2015			2014			2015			2014
(in thousands)	(Unaudited)						(Unaudited)
Net Income	$	252		$	774		$	1,622		$	1,758
Other comprehensive income (loss):
Investment securities available for sale
Unrealized holding gains (losses) arising during the period		1,912			(173	)		1,961			4,849
Income tax effect		(720	)		65			(738	)		(1,825	)
Reclassification of gains recognized in earnings		—			(608	)		(1,156	)		(820	)
Income tax effect		—			229			435			309
Total other comprehensive income (loss)	$	1,192		$	(487	)	$	502		$	2,513
Comprehensive income	$	1,444		$	287		$	2,124		$	4,271

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

6

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except shares and per share amounts)

													Accumulated
													Other
	Common Stock				Treasury					Retained			Comprehensive
	Shares		Amount		Stock			Surplus		Earnings			Income			Total
BALANCE, DECEMBER 31, 2014		1,728,730	$	8,644	$	(228	)	$	6,966	$	18,655		$	835		$	34,872
Net Income		—		—		—			—		1,622			—			1,622
Other comprehensive income		—		—		—			—		—			502			502
Cash dividend ($.60 per share)		—		—		—			—		(1,031	)		—			(1,031	)
BALANCE, SEPTEMBER 30, 2015		1,728,730	$	8,644	$	(228	)	$	6,966	$	19,246		$	1,337		$	35,965
													Accumulated
													Other
	Common Stock				Treasury					Retained			Comprehensive
	Shares		Amount		Stock			Surplus		Earnings			Income (Loss)			Total
BALANCE, DECEMBER 31, 2013		1,728,730	$	8,644	$	(228	)	$	6,966	$	18,126		$	(2,718	)	$	30,790
Net Income		—		—		—			—		1,758			—			1,758
Other comprehensive income		—		—		—			—		—			2,513			2,513
Cash dividend ($.60 per share)		—		—		—			—		(1,031	)		—			(1,031	)
BALANCE, SEPTEMBER 30, 2014		1,728,730	$	8,644	$	(228	)	$	6,966	$	18,853		$	(205	)	$	34,030

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

7

First West Virginia Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
(in thousands)	2015			2014
OPERATING ACTIVITIES
Net income	$	1,622		$	1,758
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		30			—
Depreciation and amortization		472			451
Amortization of investment securities, net		583			343
Investment security gains		(1,156	)		(869	)
Other-than-temporary losses on securities		—			49
Net gains on sales of mortgage loans		—			(2	)
Loss on disposal of premises and equipment		9			6
Increase in cash surrender value of bank-owned life insurance		(82	)		(80	)
Originations of mortgage loans held for sale		—			(85	)
Proceeds from sales of mortgage loans		—			87
Increase in interest receivable		(67	)		(30	)
Decrease in interest payable		(16	)		(16	)
Increase in deferred taxes		(61	)		(54	)
Other, net		(30	)		(1,355	)
Net cash provided by operating activities		1,304			203
INVESTING ACTIVITIES
Net increase in loans, net of charge-offs		(2,484	)		(3,039	)
Recoveries on loans previously charged-off		14			4
Proceeds from sales of securities available-for-sale		52,075			22,596
Proceeds from maturities, prepayments, and calls of securities available-for-sale		24,504			17,525
Purchases of securities available-for-sale		(67,896	)		(32,481	)
Purchases of premises and equipment		(155	)		(1,638	)
Net cash provided by investing activities		6,058			2,967
FINANCING ACTIVITIES
Net decrease in deposits		(260	)		(13,027	)
Dividends paid		(1,031	)		(1,031	)
Increase in short-term borrowings		6,997			1,861
Repayment of Federal Home Loan Bank borrowings		(74	)		(71	)
Net cash provided by (used in) financing activities		5,632			(12,268	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		12,994			(9,098	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		20,396			31,875
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	33,390		$	22,777
Supplemental Disclosures:
Cash paid for interest	$	1,059		$	1,102
Cash paid for income taxes		26			8
Loans transferred to other real estate owned		—			208
Non-cash investing activities using trade date accounting		7,055			—

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

8

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows.

Nature of Operations and Basis of Presentation: First West Virginia Bancorp, Inc. (the “Company”) is a West Virginia company. The Company provides a variety of banking services to individuals and businesses through the branch network of its affiliate bank (the “Bank”). The Bank operates nine full service branches located in Wheeling (3), Wellsburg, Moundsville, New Martinsville, Buckhannon, and Weston, West Virginia and Bellaire, Ohio. Primary deposit products consist of checking accounts, savings accounts, and certificates of deposit. Primary lending products consist of commercial and residential real estate loans, consumer loans, and business loans.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Company included in the Annual Report on Form 10-K for the year ended December 31, 2014. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the nine month period ended September 30, 2015, are not necessarily indicative of the results which may be expected for the entire year or any other period. The consolidated balance sheet of the Company as of December 31, 2014 has been derived from the audited consolidated balance sheet of the Company as of that date.

Principles of Consolidation: The consolidated financial statements of the Company include the financial statements of the parent and its wholly-owned subsidiary, Progressive Bank, N.A. All significant intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to material change in the near term relate to the determination of the allowance for loan losses, valuation of deferred tax assets, other-than-temporary impairments (OTTI), and fair values of financial instruments.

Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand and amounts due from banks and federal funds sold with maturities of less than 90 days. At September 30, 2015, the Company’s cash accounts exceeded federally insured limits by approximately $956,000. Additionally, the Company had approximately $26,727,000 on deposit with the Federal Reserve Bank and the Federal Home Loan Bank of Pittsburgh as of September 30, 2015.

Investment Securities: Investment securities are classified at the time of purchase, based on management’s intention and ability, as securities available for sale or held to maturity. The Company did not have any securities classified as held to maturity at September 30, 2015 or December 30, 2014. Certain debt and equity securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses for available-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

        Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and extent to which the market value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and management’s intent and ability to hold the security for a period of time sufficient to allow for a recovery in market value. Among the factors that are considered in determining management’s intent and ability is a review of the Company’s capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a decline in value is determined to be other-than-temporary, if the investor does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. There were no investment securities identified by management to be other-than-temporarily impaired at September 30, 2015 and December 31, 2014. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods.

Federal Reserve and Federal Home Loan Bank stock are required investments for institutions that are members of the Federal Reserve and Federal Home Loan Bank systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

9

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loans and Loans Held for Sale: Loans are generally reported at the principal balance outstanding, net of unearned income. Interest income on loans is accrued based on the principal outstanding. It is the Company’s policy to discontinue the accrual of interest when either the principal or interest is past due 90 days or more, unless the loan is both well secured and in the process of collection. It is the Company’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. A nonaccrual loan may be returned to accrual status when none of its principal and interest payments are due and there has been a sustained period of repayment performance. Loans are considered past due when contractually required principal and interest payments have not been made on the due dates. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the contractual life of the related loans or commitments as an adjustment of the related loan’s yield. Loans held for sale are carried at the lower of cost or estimated market value in the aggregate. There were no loans held for sale as of September 30, 2015 and December 31, 2014.

Consumer loans are fully charged off or charged down to net realizable value when deemed uncollectible due to bankruptcy or other factors or no later than a defined number of days past due. Consumer loans not secured by real estate are charged off or charged down to net realizable value at 120 days past due for closed-end loans and 180 days past due for open-end loans. Residential real estate loans are charged down to net realizable value at 120 days past due for closed-end loans and 180 days past due for open-end loans. Commercial loans are fully charged off or charged down to net realizable value when management judges the loan to be uncollectible.

The Company has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which the bank may sell conforming one-to-four family residential mortgage loans to the FHLB. The current agreement dated December 28, 2013 provides for a maximum commitment of $5,000,000. This commitment expires on December 28, 2015. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. The bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding to the FHLB were $7,695,000 and $8,501,000 as of September 30, 2015 and December 31, 2014, respectively. These loans were also subject to recourse obligation or credit risk in the amount of $314,000 and $323,000 at September 30, 2015 and December 31, 2014, respectively. No liability has been recorded for the recourse obligation as the likelihood of incurring the liability is considered remote. The amount of income recognized as a result of this agreement was $6,000 for each of the three months ended September 30, 2015 and 2014, and $18,000 and $19,000 for the nine months ended September 30, 2015 and 2014, respectively.

Allowance for Loan Losses: The allowance for loan losses represents the amount which management estimates is adequate to provide for probable losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses that is charged to operations. The provision is based on management’s evaluation of the adequacy of the allowance for loan losses which encompasses the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the near term.

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

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

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

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

10

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Allowance for Loan Losses: (Continued)

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

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

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the size of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in losses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $1,791,000 at September 30, 2015, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectibility of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be based on changes in economic conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause the Company to experience increases in problem assets, delinquencies and losses on loans.

Goodwill: Goodwill resulted from the Company’s purchase of a less-than-whole financial institution (the “branch”). The goodwill value of $1,644,000 is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill is periodically reviewed for impairment. No impairment losses were recognized as of September 30, 2015 and 2014. Additionally, future events could cause management to conclude that impairment indicators exist and that the goodwill is impaired, which would result in the Company recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on the Company’s financial condition and results of operations.

Mortgage Servicing Rights (“MSRs”): The Company has agreements for the express purpose of selling loans in the secondary market. The Company maintains all servicing rights for these loans. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio. Impairment is evaluated based on the fair value of the right, which is based on portfolio interest rates and prepayment characteristics.

Bank-owned Life Insurance: Bank-owned life insurance consists of investments in life insurance policies on executive officers and other members of the bank’s management. The policies are carried at their net cash surrender value. Changes in the policy value are recorded as an adjustment to the carrying value with the corresponding amount recognized as non-interest income or expense. Earnings on these policies are based on the net earnings on the cash surrender value of the policies. The net cash surrender value of bank-owned life insurance was $3,922,000 and $3,840,000 at September 30, 2015 and December 31, 2014, respectively. The death benefit value of the bank-owned life insurance at September 30, 2015 and December 31, 2014 was $8.7 million and $8.8 million, respectively. An agreement has been executed with all officers whereby a $40,000 death benefit is payable upon the participant’s death while employed by the Company to their designated beneficiary.

Advertising Costs: Advertising costs are expensed as the costs are incurred. Advertising expenses amounted to $50,000 and $51,000 for the three months ended September 30, 2015 and September 30, 2014, respectively. For the nine month periods ended September 30, 2015 and 2014, advertising expenses amounted to $150,000 and $140,000, respectively.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation and amortization. Provisions for depreciation and amortization are computed generally using the straight-line method over the estimated useful lives of the assets. When units of property are disposed of, the premises and equipment accounts are relieved of the cost and the accumulated depreciation related to such units. Any resulting gains or losses are credited to or charged against income. Cost of repairs and maintenance is charged to expense as incurred. Additions and improvements are capitalized at cost.

11

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosures are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The assets are subsequently accounted for at the lower of cost or fair value, less estimated costs to sell. Any subsequent declines in fair value and gains or losses on the disposition of these assets are credited to or charged against income. Other real estate owned is included in other assets. The recorded investment in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled approximately $72,000 at September 30, 2015.

Income Taxes: The Company and its subsidiary file a consolidated federal income tax return. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Statement of Income. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred income tax expenses or benefits are based on the changes in the deferred tax asset or liability from period to period. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Earnings Per Common Share: Earnings per common share are calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the year. The Company has no securities which would be considered potential common stock.

Change in Accounting Estimate: During the third quarter of 2015, management assessed its method for amortizing premiums and accreting discounts on mortgage-backed securities. The original estimate used the level yield as a bullet method for mortgage-backed securities. Under this method, the percentage of amortization based on the paydown was calculated. Next, a new book yield was calculated based on the previous month’s book price and the new average life date. The average life date was updated monthly based on projected prepayment speeds. The new yield was used to calculate the book value as of the end of the month. The difference between the beginning book value and ending book value was the month to date amortization or accretion recorded. Effective August 2015, management revised its original estimate and began using the level yield as an amortizing instrument method for mortgage-backed securities. This method works the same as the level yield as a bullet method except actual cash flows are used to estimate the timing of principal and interest payments for calculating the new book yield rather than using the average life date as the redemption date for the entire balance. The effects of reflecting this change in accounting estimate on the September 30, 2015 financial statements are as follows:

	For the three months ended		For the nine months ended
	September 30, 2015		September 30, 2015
Increase in net income (in thousands)	$	47	$	47
Increase in earnings per share	$	0.02	$	0.02

Legal Proceedings: The nature of the business of the Holding Company’s subsidiary generates a certain amount of litigation involving matters arising in the ordinary course of business. The Company is unaware of any litigation other than ordinary routine litigation incidental to the business of the Company, to which it or its subsidiary is a party or of which any of their property is subject.

Recent Accounting Pronouncements: In August 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This ASU adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires the presentation of debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

12

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements: (Continued)

In September 2015, FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement to retrospectively account for those adjustments. U.S. GAAP currently requires that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The acquirer also must revise comparative information for prior periods presented in financial statements as needed, including revising depreciation, amortization, or other income effects as a result of changes made to provisional amounts. The amendments require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The only disclosures required at transition should be the nature of and reason for the change in accounting principle. An entity should disclose that information in the first annual period of adoption and in the interim periods within the first annual period if there is a measurement-period adjustment during the first annual period in which the changes are effective. Adoption of the ASU is not expected to have a significant effect on the Company’s consolidated financial statements.

13

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are as follows at September 30, 2015 and December 31, 2014:

	(Expressed in thousands)
	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Obligations of U.S. Government corporations and agencies	$	48,751	$	59	$	(44	)	$	48,766
Obligations of states and political subdivisions		32,155		1,751		(29	)		33,877
Mortgage-backed securities		113,604		841		(456	)		113,989
Equity securities		176		27		(5	)		198
Total available-for-sale	$	194,686	$	2,678	$	(534	)	$	196,830

	(Expressed in thousands)
	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale:
Obligations of U.S. Government corporations and agencies	$	44,595	$	13	$	(602	)	$	44,006
Obligations of states and political subdivisions		40,349		2,144		(71	)		42,422
Mortgage-backed securities		110,626		818		(1,001	)		110,443
Equity securities		171		38		(1	)		208
Total available-for-sale	$	195,741	$	3,013	$	(1,675	)	$	197,079

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2015 and December 31, 2014, was approximately $53,950,000 and $92,305,000, which is approximately 27.4% and 46.8%, respectively, of the Company’s available-for-sale investment portfolio.

The Company’s investment securities portfolio contains unrealized losses of direct obligations of the U.S. Government agency securities, including mortgage-related instruments issued or backed by the full faith and credit of the United States government or are generally viewed as having the implied guarantee of the U.S. government, and debt obligations of a U.S. state or political subdivision.

The unrealized losses on the Company’s investments in direct obligations of U.S. government corporations and agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

The unrealized losses on the Company’s investments in residential mortgage-backed securities were caused by interest rate increases. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

The unrealized losses on the Company’s investments in securities of state and political subdivisions were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

14

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

On a quarterly basis, the Company evaluates the severity and duration of impairment for its investment securities portfolio and the Company’s ability to hold the securities until they recover. Generally, impairment is considered other-than-temporary when an investment security has sustained a decline in market value for a period of twelve months. The Company has concluded that any impairment of its investment securities portfolio is not other-than-temporary but is the result of interest rate changes that are not expected to result in the noncollection of principal and interest during the period. There are 33 positions that are temporarily impaired at September 30, 2015.

The following tables show the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2015 and December 31, 2014:

	(Expressed in thousands)
	September 30, 2015
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Government corporations and agencies	$	4,989	$	(11	)	$	7,969	$	(33	)	$	12,958	$	(44	)
Obligations of states and political subdivisions		2,975		(29	)		—		—			2,975		(29	)
Mortgage-backed securities		8,178		(23	)		29,782		(433	)		37,960		(456	)
Total debt securities		16,142		(63	)		37,751		(466	)		53,893		(529	)
Equity securities		28		(4	)		29		(1	)		57		(5	)
Total	$	16,170	$	(67	)	$	37,780	$	(467	)	$	53,950	$	(534	)

	(Expressed in thousands)
	December 31, 2014
	Less than Twelve Months					Twelve Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. Government corporations and agencies	$	5,486	$	(9	)	$	36,006	$	(593	)	$	41,492	$	(602	)
Obligations of states and political subdivisions		766		(7	)		5,000		(64	)		5,766		(71	)
Mortgage-backed securities		7,193		(12	)		37,835		(989	)		45,028		(1,001	)
Total debt securities		13,445		(28	)		78,841		(1,646	)		92,286		(1,674	)
Equity securities		19		(1	)		—		—			19		(1	)
Total	$	13,464	$	(29	)	$	78,841	$	(1,646	)	$	92,305	$	(1,675	)

The following is a tabular rollforward of the amount of credit related OTTI recognized in earnings (in thousands):

	For the three months ended				For the nine months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
Balance at beginning of period	$	—	$	—	$	—	$	—
Additions for credit-related OTTI not previously recognized		—		—		—		49
Reductions for securities sold during the period (realized)		—		—		—		(49	)
Balance at end of period	$	—	$	—	$	—	$	—

No other-than-temporary impairment losses were recognized in accumulated other comprehensive income as of September 30, 2015 and 2014.

15

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

The amortized cost and fair value of investment securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(Expressed in thousands) September 30, 2015
	Amortized Cost		Fair Value
Due in one year or less	$	730	$	746
Due after one year through five years		24,227		24,363
Due after five years through ten years		40,555		41,060
Due after ten years		15,394		16,474
		80,906		82,643
Mortgage-backed securities		113,604		113,989
Equity securities		176		198
Total	$	194,686	$	196,830

Proceeds from sales of securities available-for-sale during the nine month periods ended September 30, 2015 and 2014, were $52,075,000 and $22,596,000, respectively. Gross gains of $1,156,000 were realized during the nine months ended September 30, 2015. Gross losses realized during the nine months ended September 30, 2015 were less than $500 and not considered material for financial reporting and disclosure purposes. Gross gains of $906,000 and gross losses of $37,000 were realized during the nine months ended September 30, 2014. Proceeds from sales of securities available-for-sale during the three month periods ended September 30, 2015 and 2014, were $1,000 and $10,387,000, respectively. There were no gross gains realized during the three months ended September 30, 2015, and gross losses realized during the same period were less than $500 and not considered material for financial reporting and disclosure purposes. Gross gains of $608,000 and no gross losses were realized during the three months ended September 30, 2014. Assets carried at $76,195,000 and $63,856,000 at September 30, 2015 and December 31, 2014, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

NOTE 3 - LOANS AND LEASES

Loans outstanding at September 30, 2015 and December 31, 2014, are as follows:

	(Expressed in thousands)
	September 30, 2015		December 31, 2014
Consumer Real Estate:
Construction	$	1,558	$	3,519
Farmland		76		93
Residential 1-4 family		22,738		23,737
Home equity loans		829		1,207
Home equity lines of credit		4,471		3,966
Total Consumer Real Estate		29,672		32,522
Commercial Real Estate:
Non-farm, non-residential		39,485		37,411
Multifamily (5 or more) residential properties		8,616		9,538
Total Commercial Real Estate		48,101		46,949
Commercial and Other Loans:
Commercial		10,587		5,720
Non-rated industrial development obligations		10,636		11,384
Other loans		28		19
Total Commercial and Other Loans		21,251		17,123
Consumer Loans:
Installment and other loans to individuals		2,322		2,261
Credit cards		439		503
Total Consumer Loans		2,761		2,764
Total Loans		101,785		99,358
Less unearned interest and deferred fees		150		141
Gross Loans		101,635		99,217
Less allowance for loan losses		1,791		1,813
Net Loans	$	99,844	$	97,404

16

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

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

The Company originates direct and indirect consumer loans including principally residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans using a credit analysis as part of the underwriting process. Each loan type has a separate underwriting criteria, which consists of several factors including debt to income, type of collateral, credit history and customer relationship with the Company. Credit risk is driven by factors such as the creditworthiness of a borrower and general economic conditions in the Company’s market area that might impact the borrower’s personal income, employment, or collateral value. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

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

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

Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the economic conditions in the Company’s market areas.

Non-accrual loans amounted to $2,314,000 and $1,032,000 at September 30, 2015 and December 31, 2014, respectively. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $43,000 and $10,000 for the three months ended September 30, 2015 and September 30, 2014, respectively. For the nine months ended September 30, 2015 and 2014 and for the year ended December 31, 2014, the amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $64,000, $47,000 and $63,000, respectively.

17

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

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

	September 30, 2015
	Current			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans			90 Days or More Past Due and Accruing
Commercial and other loans	$	21,213		$	18	$	—	$	20	$	38	$	21,251		$	—
Commercial real estate		47,694			100		1		306		407		48,101			—
Consumer real estate		29,168			73		269		162		504		29,672			—
Consumer		2,755			6		—		—		6		2,761			—
Unearned interest and deferred fees		(150	)		—		—		—		—		(150	)		—
Total loans	$	100,680		$	197	$	270	$	488	$	955	$	101,635		$	—
Non-accrual loans included above are as follows:
Commercial and other loans	$	—		$	—	$	—	$	20	$	20	$	20		$	—
Commercial real estate		1,632			—		1		306		307		1,939			—
Consumer real estate		163			30		—		162		192		355			—
Consumer		—			—		—		—		—		—			—
Total non-accrual loans	$	1,795		$	30	$	1	$	488	$	519	$	2,314		$	—

	December 31, 2014
	Current			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans			90 Days or More Past Due and Accruing
Commercial and other loans	$	17,078		$	6	$	—	$	39	$	45	$	17,123		$	—
Commercial real estate		46,246			—		13		690		703		46,949			—
Consumer real estate		32,384			71		—		67		138		32,522			—
Consumer		2,742			5		3		14		22		2,764			14
Unearned interest and deferred fees		(141	)		—		—		—		—		(141	)		—
Total loans	$	98,309		$	82	$	16	$	810	$	908	$	99,217		$	14
Non-accrual loans included above are as follows:
Commercial and other loans	$	—		$	—	$	—	$	39	$	39	$	39		$	—
Commercial real estate		—			—		13		690		703		703			—
Consumer real estate		223			—		—		67		67		290			—
Consumer		—			—		—		—		—		—			—
Total non-accrual loans	$	223		$	—	$	13	$	796	$	809	$	1,032		$	—

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Risk ratings are assigned to individual credit exposures as an aspect of the credit approval and are adjusted thereafter to reflect changes in risk exposure as the borrower’s condition changes. The most significant factor used to determine the risk rating is the borrower’s primary source of repayment which includes a cash flow analysis. Other items considered in the loan review include secondary sources of repayment, financial trends, collateral value and characteristics, the size of the loan, and external factors impacting the borrower’s repayment ability.

18

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

Loans rated as “Pass” include those that have minimal, modest, acceptable, and higher risk. Minimal risk loans are fully secured by marketable securities or cash collateral, or loans supported by the United States Treasury. Modest risk loans have borrowers with stable cash flows over an extended period of time and extensive access to credit from several sources. Acceptable risk loans include individual borrowers with substantial liquid assets and commercial borrowers with strong cash flow. Higher risk loans have adequate sources of repayment and no current identifiable risk for repayment and loans that are slightly below average due to any number of factors such as income, collateral, or the lack of sufficient financial information.

Problem and potential problem loans are classified as “Special Mention,” “Substandard,” and “Doubtful.” Substandard loans are inadequately protected by the current worth and paying capacity of the borrower or the collateral pledged, if any. These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.

The following tables present the risk category of loans by class of loans based on the most recent analysis performed as of September 30, 2015 and December 31, 2014 (in thousands):

September 30, 2015	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and other	$	21,231	$	—	$	20	$	—	$	21,251
Commercial real estate		44,899		—		3,202		—		48,101
Total	$	66,130	$	—	$	3,222	$	—	$	69,352
December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Total
Commercial and other	$	17,084	$	—	$	39	$	—	$	17,123
Commercial real estate		41,679		1,170		4,100		—		46,949
Total	$	58,763	$	1,170	$	4,139	$	—	$	64,072

For consumer and consumer real estate loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in those loan classes based on payment activity as of September 30, 2015 and December 31, 2014 (in thousands):

September 30, 2015	Performing		Non-performing		Total
Consumer	$	2,761	$	—	$	2,761
Consumer real estate		28,967		705		29,672
Total	$	31,728	$	705	$	32,433
December 31, 2014	Performing		Non-performing		Total
Consumer	$	2,750	$	14	$	2,764
Consumer real estate		32,232		290		32,522
Total	$	34,982	$	304	$	35,286

19

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

The Company also evaluates problem loans for impairment. A loan is considered to be impaired if it is probable that the Company will not be able to collect the payments for principal and interest when due according to the contractual terms of the loan agreement. Impaired loans generally include all non-accrual loans and troubled debt restructurings (TDRs).

Impaired loans at September 30, 2015 and December 31, 2014 are set forth in the following tables (in thousands):

	September 30, 2015
	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial and other loans	$	20	$	—	$	20	$	20	$	20
Commercial real estate		1,939		1,711		228		1,939		77
Consumer real estate		420		70		350		420		9
Total	$	2,379	$	1,781	$	598	$	2,379	$	106
	December 31, 2014
	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial and other loans	$	39	$	—	$	39	$	39	$	39
Commercial real estate		744		474		270		744		78
Consumer real estate		493		143		350		493		9
Consumer		18		—		11		11		1
Total	$	1,294	$	617	$	670	$	1,287	$	127

	Average Recorded Investment				Interest Income Recognized				Interest Income Recognized Cash Basis
	For the three months ended				For the three months ended				For the three months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
Commercial and other loans	$	19	$	22	$	—	$	—	$	—	$	—
Commercial real estate		585		656		—		1		16		—
Consumer real estate		419		531		5		5		1		—
Total	$	1,023	$	1,209	$	5	$	6	$	17	$	—
	Average Recorded Investment				Interest Income Recognized				Interest Income Recognized Cash Basis
	For the nine months ended				For the nine months ended				For the nine months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
Commercial and other loans	$	26	$	23	$	—	$	—	$	—	$	—
Commercial real estate		626		812		—		2		268		—
Consumer real estate		445		325		16		7		4		—
Total	$	1,097	$	1,160	$	16	$	9	$	272	$	—

20

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

Loan Modifications

The Company’s loan portfolio also includes certain loans that have been modified in a troubled debt restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonaccrual at the time of restructure and may only be returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs on accrual status may remain in accrual status after they have been restructured as long as they continue to perform in accordance with their modified terms. There was one TDR in accrual status at September 30, 2015 and two TDRs in accrual status at December 31, 2014.

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

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

	September 30, 2015						December 31, 2014
Troubled Debt Restructurings	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment
Commercial and other loans		—	$	—	$	—		—	$	—	$	—
Commercial real estate		1		223		223		—		—		—
Consumer real estate		2		417		417		1		350		350
Total		3	$	640	$	640		1	$	350	$	350
Troubled Debt Restructurings That Subsequently Defaulted Within 12 Months After Restructuring
Commercial and other loans		—	$	—	$	—		—	$	—	$	—
Commercial real estate		—		—		—		—		—		—
Consumer real estate		—		—		—		1		350		350
Total		—	$	—	$	—		1	$	350	$	350

The following tables include new TDRs by type of modification (in thousands):

	September 30, 2015
Troubled Debt Restructurings	Interest Only		Term		Combination		Total Modification
Commercial and other loans	$	—	$	—	$	—	$	—
Commercial real estate		—		—		223		223
Consumer real estate		—		417		—		417
Total	$	—	$	417	$	223	$	640

21

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 3 - LOANS AND LEASES (CONTINUED)

	December 31, 2014
Troubled Debt Restructurings	Interest Only		Term		Combination		Total Modification
Commercial and other loans	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—
Consumer real estate		—		350		—		350
Total	$	—	$	350	$	—	$	350

At September 30, 2015 there were no funds committed to be advanced to customers whose loans were classified as TDRs. At December 31, 2014 there were funds of $33,000 committed to be advanced to customers whose loans were classified as TDRs.

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The following table summarizes the primary segments of the ALL, segregated into the amount for loans individually evaluated for impairment by class of loans for the nine months ended as of September 30, 2015 and September 30, 2014 (in thousands):

September 30, 2015	Commercial and Other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance, January 1, 2015	$	281		$	1,254		$	263		$	15		$	1,813
Charge-offs		(57	)		—			—			(9	)		(66	)
Recoveries		5			2			—			7			14
Provision		136			(82	)		(26	)		2			30
Ending Balance, September 30, 2015	$	365		$	1,174		$	237		$	15		$	1,791
Loans individually evaluated for impairment	$	20		$	77		$	9		$	—		$	106
Loans collectively evaluated for impairment		345			1,097			228			15			1,685
Ending Balance	$	365		$	1,174		$	237		$	15		$	1,791
September 30, 2014	Commercial and Other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance, January 1, 2014	$	260		$	1,315		$	263		$	27		$	1,865
Charge-offs		(5	)		(36	)		—			(16	)		(57	)
Recoveries		—			—			—			4			4
Provision		(17	)		(15	)		31			1			—
Ending Balance, September 30, 2014	$	238		$	1,264		$	294		$	16		$	1,812
Loans individually evaluated for impairment	$	39		$	100		$	34		$	—		$	173
Loans collectively evaluated for impairment		199			1,164			260			16			1,639
Ending Balance	$	238		$	1,264		$	294		$	16		$	1,812

22

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 4 - ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The following table summarizes the primary segments of the ALL for the three months ended as of September 30, 2015 and September 30, 2014 (in thousands):

September 30, 2015	Commercial and Other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance, July 1, 2015	$	344		$	1,143		$	256		$	15		$	1,758
Charge-offs		—			—			—			(3	)		(3	)
Recoveries		5			—			—			1			6
Provision		16			31			(19	)		2			30
Ending Balance, September 30, 2015	$	365		$	1,174		$	237		$	15		$	1,791
September 30, 2014	Commercial and Other			Commercial Real Estate			Consumer Real Estate			Consumer			Total
Allowance for Loan Losses:
Beginning Balance, July 1, 2014	$	240		$	1,270		$	330		$	24		$	1,864
Charge-offs		(5	)		(36	)		—			(12	)		(53	)
Recoveries		—			—			—			1			1
Provision		3			30			(36	)		3			—
Ending Balance, September 30, 2014	$	238		$	1,264		$	294		$	16		$	1,812

The following table presents loans individually and collectively evaluated for impairment by class of loans as of September 30, 2015 and December 31, 2014 (in thousands):

September 30, 2015	Commercial and Other		Commercial Real Estate		Consumer Real Estate		Consumer		Unearned Discounts			Total
Loans individually evaluated	$	20	$	1,939	$	420	$	—	$	—		$	2,379
Loans collectively evaluated		21,231		46,162		29,252		2,761		(150	)		99,256
Ending Balance	$	21,251	$	48,101	$	29,672	$	2,761	$	(150	)	$	101,635
December 31, 2014
Loans individually evaluated	$	39	$	744	$	493	$	11	$	—		$	1,287
Loans collectively evaluated		17,084		46,205		32,029		2,753		(141	)		97,930
Ending Balance	$	17,123	$	46,949	$	32,522	$	2,764	$	(141	)	$	99,217

23

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation, as follows (in thousands):

	September 30, 2015		December 31, 2014		Estimated Useful Life Years
Land	$	1,984	$	1,984
Land improvements		421		419		5 - 20
Leasehold improvements		1,089		1,087		5 - 20
Buildings		6,998		6,998		5 - 50
Furniture, fixtures & equipment		4,306		4,228		3 - 30
Total		14,798		14,716
Less accumulated depreciation		6,711		6,303
Premises and equipment, net	$	8,087	$	8,413

Charges to operations for depreciation approximated $155,000 and $147,000 for the three months ended September 30, 2015 and 2014, respectively. Depreciation expenses were $472,000 and $451,000 for the nine months ended September 30, 2015 and 2014, respectively.

NOTE 6 - DEPOSITS

The composition of the Company’s deposits at September 30, 2015 and December 31, 2014 follows (in thousands):

	September 30, 2015
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	36,929	$	45,748	$	112,708	$	57,231
States and political subdivisions		499		11,340		4,656		2,287
Commercial banks and other depository institutions		2		—		—		483
Total	$	37,430	$	57,088	$	117,364	$	60,001
	December 31, 2014
	Demand
	Noninterest Bearing		Interest Bearing		Savings		Time
Individuals, partnerships and corporations (includes certified and official checks)	$	41,102	$	48,583	$	108,108	$	59,400
States and political subdivisions		384		6,876		4,617		2,490
Commercial banks and other depository institutions		70		—		31		482
Total	$	41,556	$	55,459	$	112,756	$	62,372

A maturity distribution of time certificates of deposit at September 30, 2015 follows:

(dollars in thousands)	Maturities of Time Deposits
	September 30, 2015
Due in 2015	$	9,101
Due in 2016		27,889
Due in 2017		8,808
Due in 2018		4,668
Due in 2019		3,507
Due in 2020 and thereafter		6,028
Total	$	60,001

24

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 6 - DEPOSITS - (CONTINUED)

Time deposits include certificates of deposit issued in denominations of $100,000 or more which amounted to $20,638,000 and $21,348,000 at September 30, 2015 and December 31, 2014, respectively. Interest expense on certificates of deposit of $100,000 or more was $57,000 and $70,000 for the three months ended September 30, 2015 and 2014, respectively. Interest expense on certificates of deposit of $100,000 or more was $174,000 and $203,000 for the nine months ended September 30, 2015 and 2014, respectively. The following table sets forth the remaining maturity of time certificates of deposit of $100,000 or more:

	Maturities of Time Deposits in Excess of $100,000
(dollars in thousands)	September 30, 2015
Three Months or Less	$	2,505
Over Three and Less than Six Months		4,152
Over Six and Less than Twelve Months		5,578
Over Twelve Months		8,403
Total	$	20,638

NOTE 7 - FEDERAL HOME LOAN BANK BORROWINGS

The subsidiary Bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). The FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans or securities with a market value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at September 30, 2015 was approximately $41.5 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $3,346,000 and $3,420,000 at September 30, 2015 and December 31, 2014, respectively. At September 30, 2015 the subsidiary bank had three fixed rate amortizing advances which totaled $3,346,000 with interest rates ranging from 4.65% to 4.89% of which $1,874,000 will mature through 2018 and $1,472,000 will mature through 2023. The collateral securing these borrowings totaled $3,501,000 at September 30, 2015. The bank also has a line of credit agreement with the Federal Home Loan Bank which matures on May 2, 2016. The maximum credit available is $21.4 million under the agreement. There were no borrowings outstanding under this agreement at September 30, 2015 and December 31, 2014, respectively.

Contractual maturities of FHLB borrowings as of September 30, 2015 were as follows (in thousands):

Due in 2015	$	25
Due in 2016		105
Due in 2017		110
Due in 2018		1,760
Due in 2019		43
Due in 2020 and thereafter		1,303
Total	$	3,346

NOTE 8 - REPURCHASE AGREEMENTS

The Company transfers various securities to customers in exchange for cash at the end of each business day and agrees to reacquire the securities at the end of the next business day for the cash exchanged plus interest. The process is repeated at the end of each business day until the agreement is terminated. The securities underlying the agreements remained under the Company’s control. The risk involved in this type of transaction is that the fair value of the securities transferred may decline below the amount of the Company’s obligation which would require the Company to pledge additional amounts. The Company attempts to manage this risk by monitoring the fair value of securities pledged compared to the repurchase agreement amounts. The following table shows repurchase agreements accounted for as secured borrowings (in thousands):

	September 30, 2015
	Remaining Contractual Maturity
Repurchase Agreements Accounted for as Secured Borrowings	Overnight and Continuous
U.S. Government corporations and agencies	$	7,111
Obligations of states and political subdivisions		6,358
Mortgage-backed securities		21,861
Total securities pledged for repurchase agreements	$	35,330
Gross amount of recognized liabilities for repurchase agreements	$	28,048

25

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The activity in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2015 and 2014 is as follows:

(dollars in thousands)	Accumulated Other Comprehensive Income (Loss) (1) Unrealized Gains (Losses) on Securities Available for Sale
	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015			2014
Beginning Balance	$	145	$	282		$	835		$	(2,718	)
Other comprehensive income (loss) before reclassifications		1,192		(108	)		1,223			3,024
Amounts reclassified from accumulated other comprehensive income		—		(379	)		(721	)		(511	)
Period Change		1,192		(487	)		502			2,513
Ending Balance	$	1,337	$	(205	)	$	1,337		$	(205	)

⁽¹⁾  All amounts are net of tax. Related income tax expense or benefit is calculated using a combined Federal and State income tax rate approximating 39.5%.

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Details about Accumulated Other Comprehensive Income (Loss) Components	For the three months ended September 30,						Affected Line Item in the Statement of Income
(dollars in thousands)	2015			2014
Securities available for sale (1):
Net securities gains reclassified into earnings	$	—		$	(608	)	Net gains on available for sale securities
Related income tax expense		—			229		Income tax expense (benefit)
Net effect on accumulated other comprehensive income (loss) for the period	$	—		$	(379	)	Net of tax
Total reclassifications for the period	$	—		$	(379	)	Net of tax
	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Details about Accumulated Other Comprehensive Income (Loss) Components	For the nine months ended September 30,						Affected Line Item in the Statement of Income
(dollars in thousands)	2015			2014
Securities available for sale (1):
Net securities gains reclassified into earnings	$	(1,156	)	$	(869	)	Net gains on available for sale securities
Other-than-temporary losses reclassified into earnings		—			49		Other-than-temporary losses on securities
Related income tax expense		435			309		Income tax expense (benefit)
Net effect on accumulated other comprehensive income (loss) for the period	$	(721	)	$	(511	)	Net of tax
Total reclassifications for the period	$	(721	)	$	(511	)	Net of tax

⁽¹⁾  For additional detail related to unrealized gains (losses) on securities and related amounts reclassified from accumulated other comprehensive income (loss) see Note 2 “Investment Securities.”

26

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 10 - REGULATORY MATTERS

The Company’s subsidiary bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the bank must meet specific capital guidelines that involve quantitative measures of the bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to adjusted total assets (as defined). For September 30, 2015, Interim Final Basel III rules require the bank to maintain minimum amounts and ratios of common equity Tier I capital (as defined in the regulations) to risk-weighted assets (as defined). Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. For December 31, 2014, regulatory capital ratios were calculated under Basel I rules.

As of September 30, 2015, the most recent notifications from the Office of the Comptroller of the Currency categorized the bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes has changed the capital category. The capital ratios of the Company’s subsidiary bank, along with the regulatory framework for adequately capitalized and well capitalized institutions are depicted as set forth in the following table:

(Amounts Expressed in Thousands)	Actual					For Capital Adequacy Purposes					To be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Progressive Bank, N.A.
As of September 30, 2015
Total Capital (to Risk Weighted Assets)	$	33,476		22.90	%	$	11,693		8.0	%	$	14,616		10.0	%
Tier I Capital (to Risk Weighted Assets)		31,685		21.68	%		8,770		6.0	%		11,693		8.0	%
Common Equity Tier I Capital (to Risk Weighted Assets)		31,685		21.68	%		6,577		4.5	%		9,501		6.5	%
Tier I Capital (to Adjusted Total Assets)		31,685		9.54	%		13,287		4.0	%		16,609		5.0	%
As of December 31, 2014
Total Capital (to Risk Weighted Assets)	$	32,700		21.29	%	$	12,290		8.0	%	$	15,362		10.0	%
Tier I Capital (to Risk Weighted Assets)		30,887		20.11	%		6,145		4.0	%		9,217		6.0	%
Tier I Capital (to Adjusted Total Assets)		30,887		9.30	%		13,280		4.0	%		16,600		5.0	%

NOTE 11 - FAIR VALUE MEASUREMENTS

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

•	Level I:	Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
•	Level II:	Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
•	Level III:	Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available.

Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include observable inputs employed by certified appraisers or an internal evaluator for similar assets classified as Level III inputs adjusted for qualitative factors and estimated liquidation expenses.

27

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 11 - FAIR VALUE MEASUREMENTS - (CONTINUED)

The following table presents the assets reported on the balance sheet at their fair value as of September 30, 2015 and December 31, 2014, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

(dollars in thousands)	September 30, 2015
	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Securities available for sale:
U.S. Government corporations and agencies	$	—	$	48,766	$	—	$	48,766
Obligations of states and political subdivisions		—		33,877		—		33,877
Mortgage-backed securities		—		113,989		—		113,989
Equity securities		198		—		—		198
Total securities available for sale:	$	198	$	196,632	$	—	$	196,830
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	—	$	493	$	493
(dollars in thousands)	December 31, 2014
	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
Securities available for sale:
U.S. Government corporations and agencies	$	—	$	44,006	$	—	$	44,006
Obligations of states and political subdivisions		—		42,422		—		42,422
Mortgage-backed securities		—		110,443		—		110,443
Equity securities		208		—		—		208
Total securities available for sale:	$	208	$	196,871	$	—	$	197,079
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	—	$	503	$	503

NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Level III inputs were used in determining fair value.

(dollars in thousands)	Quantitative Information about Level III Fair Value Measurements
September 30, 2015	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	$	493	Appraisal of collateral (1)	Appraisal adjustments (2)	-100.0% to 0.0% (-14.4%)
				Liquidation expenses (2)	0.0% to 9.0% (9.0%)
(dollars in thousands)	Quantitative Information about Level III Fair Value Measurements
December 31, 2014	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired Loans	$	503	Appraisal of collateral (1)	Appraisal adjustments (2)	-30.0% to 0.0% (-11.5%)
				Liquidation expenses (2)	0.0% to 9.0% (8.8%)

(1) The fair value is determined through independent appraisals by certified appraisers or internal evaluators of the underlying collateral.

(2) Appraisals and evaluations may be adjusted by management for qualitative factors and estimated liquidation expenses. The range and weighted average of liquidation expenses are expressed as a percent of discounted collateral value and other appraisal adjustments are presented as a percentage of the appraised amounts.

28

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

Collateral-dependent Impaired Loans

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level III of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.

Financial Instruments

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

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

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

Investment Securities Available-for-sale: Where quoted market prices are available in an active market, securities are classified within Level I of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters. Such securities are classified in Level II of the valuation hierarchy.

Loans: The fair value for net loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality.

Accrued Interest Receivable: The carrying amount of accrued interest receivable approximates its fair value.

Deposits: Noninterest bearing and interest bearing demand deposits and savings deposits are valued based on the discounted value of cash flows after estimating the weighted average remaining term and adding estimated wholesale borrowing costs to the rate. The fair values for time deposits are based on discounted value of cash flows.

Repurchase Agreements: The carrying amount of repurchase agreements is considered to be a reasonable estimate of fair value.

Federal Home Loan Bank Borrowings: The discounted cash flow method is used to estimate the fair value of Federal Home Loan Bank borrowings.

Accrued Interest Payable: The carrying amount of accrued interest payable approximates its fair value.

Off-Balance-Sheet Instruments: The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The amount of fees currently charged on commitments is determined to be insignificant and, therefore, the carrying value and fair value of off-balance-sheet instruments are not shown.

29

First West Virginia Bancorp, Inc. and Subsidiary

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

(Unaudited)

NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)

The estimates of fair values of financial instruments are summarized as follows at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Carrying		Estimated Fair Value
(Amounts Expressed in Thousands)	Amount		Level I		Level II		Level III		Total
Financial assets:
Cash and cash equivalents	$	33,390	$	33,390	$	—	$	—	$	33,390
Investment securities		196,830		198		196,632		—		196,830
Loans, net		99,844		—		—		101,084		101,084
Accrued interest receivable		1,082		1,082		—		—		1,082
Financial liabilities:
Deposits		271,883		202,275		59,836		—		262,111
Repurchase agreements		28,048		28,048		—		—		28,048
Federal Home Loan Bank borrowings		3,346		—		3,619		—		3,619
Accrued interest payable		104		104		—		—		104

	December 31, 2014
	Carrying		Estimated Fair Value
(Amounts Expressed in Thousands)	Amount		Level I		Level II		Level III		Total
Financial assets:
Cash and cash equivalents	$	20,396	$	20,396	$	—	$	—	$	20,396
Investment securities		197,079		208		196,871		—		197,079
Loans, net		97,404		—		—		98,445		98,445
Accrued interest receivable		1,015		1,015		—		—		1,015
Financial liabilities:
Deposits		272,143		199,444		62,289		—		261,733
Repurchase agreements		21,051		21,051		—		—		21,051
Federal Home Loan Bank borrowings		3,420		—		3,714		—		3,714
Accrued interest payable		120		120		—		—		120

NOTE 13 - SUBSEQUENT EVENTS

The Company’s common stock is currently listed for trading on the NYSE MKT under the symbol “FWV.” On November 5, 2015, the Company filed a Form 25, Notification of Removal from Listing and/or Registration under Section 12(b) of the Securities Exchange Act of 1934, with the Securities and Exchange Commission (“SEC”). The Company anticipates that the Form 25 will become effective 10 days following its filing. On or after the effective date of delisting, the Company intends to file a Form 15 with the SEC to voluntarily effect the deregistration of its common stock. The Company’s decision to delist and deregister the common stock was not based on the receipt of any notice that the Company had failed to satisfy any rule or standard for the continued listing of its common stock on the NYSE or asserting any material non-compliance with the NYSE. The Company is eligible to deregister by filing Form 15 because it has fewer than 300 holders of record of its common stock. Upon the filing of the Form 15, the Company’s obligations to file certain reports with the SEC, including Forms 10-K, 10-Q, and 8-K, will immediately be suspended. Following delisting from the NYSE, the common stock will no longer be quoted on a stock exchange. The Company anticipates that the common stock will be quoted on the OTC Bulletin Board or the Pink Sheets following delisting but there is no assurance that the common stock will be quoted on any over-the-counter market.

The Company’s Board of Directors made this decision after careful consideration and review of the cumulative costs and advantages and disadvantages of being a listed company registered with the Securities Exchange Commission (“SEC”). The decision of the Company’s Board of Directors to delist and deregister the Common Stock was based on consideration of a number of factors, including (1) the costs and administrative burdens of preparing and filing periodic reports with the SEC, (2) the demands placed on management and the Company to comply with registration requirements, and (3) the low trading volume of the Company’s stock. Prior to the passage of the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company’s SEC reporting obligations would be reinstated if the number of its shareholders increased to 300 shareholders of record. The JOBS Act increased the threshold number of shareholders that would reinstate the Company’s SEC reporting obligations from 300 to 1,200 shareholders of record. This change provided additional comfort to the Company’s Board of Directors that the Company would not become subject to SEC reporting obligations following its delisting and deregistration.

30

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Table One

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Years Ended December 31,
	2015			2014			2015			2014			2014			2013			2012
SUMMARY OF OPERATIONS
Total interest income	$	2,325		$	2,425		$	7,161		$	7,215		$	9,601		$	9,414		$	9,838
Total interest expense		344			365			1,043			1,086			1,449			1,524			1,789
Net interest income		1,981			2,060			6,118			6,129			8,152			7,890			8,049
Provision (credit) for loan losses		30			—			30			—			—			(400	)		(248	)
Total other income		240			865			1,864			1,578			1,877			1,440			2,352
Total other expenses		2,029			2,014			6,139			5,949			8,060			7,672			7,604
Income before income taxes		162			911			1,813			1,758			1,969			2,058			3,045
Net income		252			774			1,622			1,758			1,904			2,241			2,538
PER SHARE DATA (1)
Net income	$	0.14		$	0.45		$	0.94		$	1.02		$	1.11		$	1.30		$	1.48
Cash dividends declared		0.20			0.20			0.60			0.60			0.80			0.76			0.73
Book value per share		20.93			19.80			20.93			19.80			20.29			17.91			20.77
AVERAGE BALANCE SHEET SUMMARY
Total loans, net	$	103,901		$	95,342		$	102,300		$	92,720		$	94,103		$	97,374		$	104,566
Investment securities		192,679			199,438			192,342			200,910			199,571			177,809			154,755
Deposits - interest bearing		232,927			231,891			232,632			229,931			230,440			218,229			208,308
Stockholders’ equity		34,504			33,866			34,448			33,614			33,767			32,597			31,608
Total assets		335,259			335,321			334,908			335,534			335,515			316,172			293,601
SELECTED RATIOS
Return on average assets		0.30	%		0.92	%		0.65	%		0.70	%		0.57	%		0.71	%		0.86	%
Return on average equity		2.90	%		9.07	%		6.30	%		6.99	%		5.64	%		6.87	%		8.03	%
Average equity to average assets		10.29	%		10.10	%		10.29	%		10.02	%		10.06	%		10.31	%		10.77	%
Dividend payout ratio (1)		142.86	%		44.44	%		63.83	%		58.82	%		72.07	%		58.46	%		49.32	%
Loan to deposit ratio		37.38	%		35.32	%		37.38	%		35.32	%		36.46	%		32.67	%		40.33	%
	September 30,						December 31,
	2015			2014			2014			2013			2012
BALANCE SHEET
Investments	$	196,830		$	196,822		$	197,079		$	199,955		$	178,208
Loans		101,635			96,384			99,217			93,402			99,387
Allowance for loan losses		(1,791	)		(1,812	)		(1,813	)		(1,865	)		(2,181	)
Other assets		50,370			41,774			37,907			50,653			31,133
Total Assets	$	347,044		$	333,168		$	332,390		$	342,145		$	306,547
Deposits	$	271,883		$	272,850		$	272,143		$	285,877		$	246,462
Federal funds purchased and repurchase agreements		28,048			22,076			21,051			20,215			18,767
FHLB borrowings		3,346			3,445			3,420			3,516			3,606
Other liabilities		7,802			767			904			1,747			2,009
Stockholders’ equity		35,965			34,030			34,872			30,790			35,703
Total Liabilities and Stockholders’ Equity	$	347,044		$	333,168		$	332,390		$	342,145		$	306,547

(1) Adjusted for the 4 percent common stock dividend to stockholders of record as of December 19, 2012.

31

Management’s Discussion and Analysis of Financial Condition and Results of 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, 2015 have remained unchanged from the disclosures presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Holding Company 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 actual 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 Investment Securities: Investment 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: As discussed in Note 1 of the notes to the Consolidated Financial Statements, the Company must assess goodwill each year for impairment. This assessment involves estimating cash flows for future periods. If the future cash flows were less than the recorded goodwill balance, 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.

32

Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The Company reported net income of $1,622,000 or $0.94 per share for the nine months ended September 30, 2015 compared to $1,758,000 or $1.02 per share for the same period during 2014. The decrease in net income for the nine months ended September 30, 2015 as compared to the same period in 2014 of $136,000 or 7.7% was primarily the result of the increases in income tax expense, noninterest expenses, and the provision for loan losses as well as a slight decrease in net interest income, offset in part by an increase in noninterest income. Income tax expense increased $191,000 for the nine months ended September 30, 2015 as compared to the same period in 2014 primarily due to the increase in taxable income and decrease in tax-exempt income. Noninterest expenses increased $190,000 or 3.2% during the nine month period ended September 30, 2015 as compared to the same period in 2014 primarily due to increases in salary and employee benefits expenses as well as slight increases in occupancy expenses and other operating expenses. Net interest income decreased $11,000 or .2%, primarily due to the decrease in the interest earned on investment securities, offset in part by the increase in the interest and fees earned on loans and the decrease in the interest expense paid on interest bearing liabilities. Noninterest income increased $286,000 or 18.1% primarily due to the increase in the net gains on sales of investment securities and no other-than-temporary losses on investments being recorded in 2015, offset in part by the decrease in service charges and fees earned on deposit accounts. The ROAA was .65% for the nine months ended September 30, 2015 as compared to .70% for the same period of the prior year. For the nine months ended September 30, 2015 compared to September 30, 2014, the ROAE was 6.30% and 6.99%, respectively.

For the third quarter of 2015, net income was $252,000 or $0.14 per share as compared to $774,000 or $0.45 per share for the same period in 2014. The decrease in net income for the three months ended September 30, 2015 as compared to the same period in 2014 of $522,000 or 67.4% was primarily the result of the decreases in noninterest income and net interest income combined with the increases in the provision for loan losses and noninterest expenses, offset in part by a decrease in income tax expense. Noninterest income decreased $625,000 for the three months ended September 30, 2015 as compared to the same period of the prior year primarily due to the decrease in the net gains on sales of investment securities as well as by a slight decrease in service charges and fees earned on deposit accounts. Net interest income decreased $79,000 or 3.8% primarily due to the decreases in the interest earned on investment securities and loans, offset in part by the decrease in the interest expense paid on interest bearing liabilities. Noninterest expense increased $15,000 or .7% during the three month period ended September 30, 2015 as compared to the same period in 2014 primarily due to the slight increases in occupancy expenses and salary and employee benefits expenses. The decrease in income tax expense of $227,000 which resulted in an income tax benefit at September 30, 2015, was the result of the decline in pre-taxable income primarily due to the decrease in the net gains on sales of investment securities.

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, 2015

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 interest 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, 2015 and 2014.

For the nine months ended September 30, 2015, net interest income was $6,118,000, a decrease of $11,000 or .2%, from the same period in 2014. This decrease was primarily due to the decrease in the interest earned on investment securities, offset in part by the increase in the interest and fees earned on loans and the decrease in the interest expense paid on interest bearing liabilities. The changes in the volume and mix of earning assets and interest bearing liabilities combined with changes in market rates of interest resulted in a taxable equivalent net yield on average earning assets of 2.97% for the nine months ended September 30, 2015 as compared to 3.12% for the same period in 2014. There was a slight decrease in the average volume of earning assets of $254,000, or .1%.

Interest income on investment securities during the first nine months of 2015 decreased $394,000 or 11.0% as compared to the same period of the prior year. This decrease was primarily due to the decline in the average volume combined with the decrease in the taxable equivalent yield. The average volume of investment securities decreased approximately $8.6 million or 4.3% compared to the nine months ended September 30, 2014. The taxable equivalent yield on investment securities decreased 38 basis points, from 3.02% at September 30, 2014 to 2.64% at September 30, 2015. Effective August 2015, management changed its method for amortizing premiums and accreting discounts on mortgage-backed securities from the level yield as a bullet method to the level yield as an amortizing instrument method which resulted in an increase in net income of $47,000 for the nine months ended September 30, 2015. For additional information on this change in accounting estimate, see Note 1 “Summary of Significant Accounting Policies.”

Interest and fees on loans increased $327,000 or 9.2%, from the same period in 2014 primarily due to the increase in the average loan volume offset in part by the decline in the average yield on loans. The average loan volume increased approximately $9.6 million or 10.3% as compared to the nine months ended September 30, 2014. The taxable equivalent yield on loans fell 8 basis points from 5.50% at September 30, 2014 to 5.42% at September 30, 2015.

During the nine months ended September 30, 2015, interest expense declined $43,000 or 4.0% as compared to the same period in 2014. 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, 2015. The average yield paid on interest bearing liabilities fell 3 basis points from .57% at September 30, 2014 to .54% at September 30, 2015. The average volume of interest bearing liabilities increased approximately $6.2 million or 2.4% compared to the nine months ended September 30, 2014.

33

Management’s Discussion and Analysis of Financial Condition and Results of 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, 2015 and 2014. Average balance sheet information for the periods ended September 30, 2015 and 2014 was compiled using the daily average balance sheet. Total loans are gross of the allowance for loan losses, net of unearned income and include loans held for sale, if applicable. 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 yields on investment securities available for sale have been calculated based on amortized cost.

	(Unaudited) For the nine months ended September 30, 2015								(Unaudited) For the nine months ended September 30, 2014
	Average Volume			Interest		Average Rate			Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. Treasury and U. S. Government agencies	$	45,903		$	620		1.81	%	$	49,313		$	665		1.80	%
Mortgage backed securities		112,562			1,574		1.87	%		98,574			1,428		1.94	%
Obligations of states and political subdivisions
Taxable		2,212			66		3.99	%		829			28		4.52	%
Non-taxable		31,492			916		3.89	%		52,028			1,450		3.73	%
Other securities		173			4		3.09	%		166			3		2.42	%
Total Investment securities:		192,342			3,180		2.21	%		200,910			3,574		2.38	%
Interest bearing deposits		19,231			33		0.23	%		20,037			37		0.25	%
Loans, net of unearned income		102,300			3,892		5.09	%		92,720			3,565		5.14	%
Other earning assets		853			56		8.78	%		1,313			39		3.97	%
Total earning assets		314,726			7,161		3.04	%		314,980			7,215		3.06	%
Other assets		21,979								22,416
Allowance for loan losses		(1,797	)							(1,862	)
Total Assets	$	334,908							$	335,534
LIABILITIES
Time deposits	$	60,684		$	429		0.95	%	$	65,588		$	516		1.05	%
Savings deposits		115,348			282		0.33	%		111,073			274		0.33	%
Interest bearing demand deposits		56,600			53		0.13	%		53,270			48		0.12	%
Federal funds purchased and repurchase agreements		23,998			158		0.88	%		20,403			124		0.81	%
FHLB and other long-term borrowings		3,382			121		4.78	%		3,479			124		4.77	%
Total interest bearing liabilities		260,012			1,043		0.54	%		253,813			1,086		0.57	%
Noninterest bearing demand deposits		39,427								47,603
Other liabilities		1,021								504
Total Liabilities		300,460								301,920
STOCKHOLDERS’ EQUITY		34,448								33,614
Total Liabilities and Stockholders’ Equity	$	334,908							$	335,534
Net yield on earning assets				$	6,118		2.60	%				$	6,129		2.60	%

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, 2015 and 2014, respectively. The effect of this adjustment is presented below.

Investment securities	$	192,342	$	3,791	2.64	%	$	200,910	$	4,541	3.02	%
Loans		102,300		4,146	5.42	%		92,720		3,817	5.50	%
Total earning assets	$	314,726	$	8,026	3.41	%	$	314,980	$	8,434	3.58	%
Taxable equivalent net yield on earning assets			$	6,983	2.97	%			$	7,348	3.12	%

34

Management’s Discussion and Analysis of Financial Condition and Results of Operations

EARNINGS ANALYSIS - For the nine months ended September 30, 2015 (continued)

Noninterest Income

Noninterest income increased $286,000 or 18.1% for the nine months ended September 30, 2015 as compared to same period of the prior year. This increase was primarily due to the increase in the net gains on sales of investment securities and no other-than-temporary losses on investments being recorded in 2015, offset in part by the decrease in service charges and fees earned on deposit accounts.

The net gains on investment securities increased $287,000 for the nine month period ended September 30, 2015 as compared to the same period in 2014. These sales occurred as part of the Company’s deferred tax asset strategy and to take advantage of favorable market conditions. The Company accounted for securities gains of $1,156,000 and securities losses less than $500 during the nine month period ended September 30, 2015 and securities gains of $906,000 and securities losses of $37,000 during the nine month period ended September 30, 2014.

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 $47,000 in the first nine months of 2015 as compared to the same period in 2014, down 16.8% from 2014. This decline was primarily in overdraft charges which fluctuate based on customer activity.

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, 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, 2015, other operating income decreased $3,000 or .6% compared to the same period in 2014.

Noninterest Expense

Noninterest expense increased $190,000 or 3.2% for the nine months ended September 30, 2015 as compared to the same period of the prior year. The increase in noninterest expense was primarily due to increases in salary and employee benefits expenses as well as slight increases in occupancy expenses and other operating expenses.

Salary and employee benefits expenses increased $163,000 or 5.7% during the nine months ended September 30, 2015 over the same period in 2014. This increase was primarily a result of a rise in salary expenses and payroll taxes, offset in part by a slight decrease in employee benefits expenses.

Net occupancy expenses of premises increased $24,000 or 1.9% during the nine months ended September 30, 2015 compared to the same period in 2014. Increases in depreciation expenses, real estate taxes, banking house expenses, and utilities, offset in part by the decline in furniture and fixtures expenses and insurance expenses contributed to the increase in occupancy expenses in 2015 as compared to 2014.

Other operating expenses increased $3,000, or .2% for the nine months ended September 30, 2015 as compared to September 30, 2014. The most significant fluctuation in operating expenses was the $41,000 decline in other taxes which was primarily due to the elimination of the West Virginia business franchise tax in 2015. Other operating expenses for the nine months ended September 30 included the following (in thousands):

	2015		2014		Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	135	$	106	$	29			27.4	%
Stationery and supplies		102		108		(6	)		(5.6	)%
Regulatory assessment and deposit insurance		215		223		(8	)		(3.6	)%
Advertising		150		140		10			7.1	%
Postage and transportation		119		116		3			2.6	%
Other taxes		47		88		(41	)		(46.6	)%
Service expense		375		382		(7	)		(1.8	)%
Other		680		657		23			3.5	%
Total	$	1,823	$	1,820	$	3			0.2	%

Income Taxes

Income tax expense for the nine month period ended September 30, 2015 was $191,000 while income tax expense for the nine month period ended September 30, 2014 was less than $1,000 and not considered material for financial reporting purposes. The increase in income tax expense was primarily due to the increase in taxable income and decrease in tax-exempt income. The Company has a strategy to reduce non-taxable securities in order to manage the deferred tax asset. Components of the income tax expense for September 30, 2015 were $143,000 for federal income tax expense and $48,000 for West Virginia corporate net income tax expense. Federal income tax rates remain consistent at 34% for the nine months ended September 30, 2015 and 2014 and for the year ended December 31, 2014. West Virginia corporate net income tax rates were 6.50% in 2015 and 2014.

Under U.S. GAAP, a valuation allowance is required to be recognized if it is “more likely than not” that a deferred tax asset will not be realized. A valuation allowance was recorded in 2014 due to the Company’s concern that a deferred tax asset may not be realized. The determination of the realizability of the deferred tax asset is highly subjective and dependent on judgment. At September 30, 2015, the valuation allowance of $225,000 was considered to be adequate based on the Company’s projections of future taxable income and tax planning strategies.

35

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The following table presents an average balance sheet, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the three months ended September 30, 2015 and 2014. Average balance sheet information for the periods ended September 30, 2015 and 2014 was compiled using the daily average balance sheet. Total loans are gross of the allowance for loan losses, net of unearned income and include loans held for sale, if applicable. 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 yields on investment securities available for sale have been calculated based on amortized cost. Average rates were annualized for the three month periods ended September 30, 2015 and 2014.

	(Unaudited) For the three months ended September 30, 2015								(Unaudited) For the three months ended September 30, 2014
	Average Volume			Interest		Average Rate			Average Volume			Interest		Average Rate
ASSETS:
Investment securities:
U.S. Treasury and U. S. Government agencies	$	46,479		$	214		1.83	%	$	48,160		$	213		1.75	%
Mortgage backed securities		113,846			558		1.94	%		104,382			507		1.93	%
Obligations of states and political subdivisions
Taxable		2,212			23		4.13	%		1,800			19		4.19	%
Non-taxable		29,966			290		3.84	%		44,930			427		3.77	%
Other securities		176			1		2.25	%		166			1		2.39	%
Total Investment securities:		192,679			1,086		2.24	%		199,438			1,167		2.32	%
Interest bearing deposits		17,556			9		0.20	%		17,428			10		0.23	%
Loans, net of unearned income		103,901			1,220		4.66	%		95,342			1,234		5.13	%
Other earning assets		852			10		4.66	%		1,310			14		4.24	%
Total earning assets		314,988			2,325		2.93	%		313,518			2,425		3.07	%
Other assets		22,048								23,661
Allowance for loan losses		(1,777	)							(1,858	)
Total Assets	$	335,259							$	335,321
LIABILITIES
Time deposits	$	59,695		$	136		0.90	%	$	64,831		$	166		1.02	%
Savings deposits		116,885			95		0.32	%		112,637			94		0.33	%
Interest bearing demand deposits		56,347			19		0.13	%		54,423			18		0.13	%
Federal funds purchased and repurchase agreements		24,364			54		0.88	%		21,649			46		0.84	%
FHLB and other long-term borrowings		3,358			40		4.73	%		3,456			41		4.71	%
Total interest bearing liabilities		260,649			344		0.52	%		256,996			365		0.56	%
Noninterest bearing demand deposits		38,770								43,982
Other liabilities		1,336								477
Total Liabilities		300,755								301,455
STOCKHOLDERS’ EQUITY		34,504								33,866
Total Liabilities and Stockholders’ Equity	$	335,259							$	335,321
Net yield on earning assets				$	1,981		2.50	%				$	2,060		2.61	%

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the three months ended September 30, 2015 and 2014 respectively. The effect of this adjustment is presented below.

Investment securities	$	192,679	$	1,279	2.63	%	$	199,438	$	1,452	2.89	%
Loans		103,901		1,304	4.98	%		95,342		1,313	5.46	%
Total earning assets	$	314,988	$	2,602	3.28	%	$	313,518	$	2,789	3.53	%
Taxable equivalent net yield on earning assets			$	2,258	2.84	%			$	2,424	3.07	%

36

Management’s Discussion and Analysis of Financial Condition and Results of Operations

EARNINGS ANALYSIS - For the three months ended September 30, 2015

Net Interest Income

For the three months ended September 30, 2015, net interest income was $1,981,000, decreasing $79,000 or 3.8%, from the same period in 2014. This decline was primarily due to the decreases in the interest earned on investment securities and loans, offset in part by the decrease in the interest expense paid on interest bearing liabilities. The taxable equivalent net yield on earning assets decreased from 3.07% at September 30, 2014 to 2.84% at September 30, 2015. Table Three presents the average balance sheets and an interest rate analysis for the three months ended September 30, 2015 and 2014.

Interest income on investment securities fell $81,000 or 6.9% during the third quarter of 2015 compared to the same period of the prior year. This decrease was primarily the result of the declines in the average volume and yield earned. The investment portfolio average volume decreased approximately $6.8 million or 3.4% for the three months ended September 30, 2015 as compared to the third quarter of 2014. The taxable equivalent yield earned on investment securities declined 26 basis points, to 2.63% for the three months ended September 30, 2015 as compared to 2.89% for the same period in 2014. Effective August 2015, management changed its method for amortizing premiums and accreting discounts on mortgage-backed securities from the level yield as a bullet method to the level yield as an amortizing instrument method which resulted in an increase in net income of $47,000 for the third quarter of 2015. For additional information on this change in accounting estimate, see Note 1 “Summary of Significant Accounting Policies.”

Interest and fees on loans decreased $14,000 or 1.1% for the three month period ended September 30, 2015 as compared to the same period in 2014 due to the decline in the average yield offset in part by an increase in the average volume. The taxable equivalent yield on loans fell 48 basis points, to 4.98% at September 30, 2015 from 5.46% at September 30, 2014. The average loan volume increased approximately $8.6 million or 9.0% for the third quarter of 2015 as compared to the same period in 2014.

Interest expense paid on interest bearing liabilities fell $21,000 or 5.8% during the three months ended September 30, 2015 as compared to the same period in 2014. The decrease in interest expense was primarily due to the decline in the average yield paid on interest bearing liabilities, which was offset in part by an increase in the average balances of interest bearing liabilities. The average yield paid on interest bearing liabilities was down 4 basis points, from .56% at September 30, 2014 to .52% at September 30, 2015. The average volume of interest bearing liabilities rose approximately $3.7 million or 1.4%, from the third quarter of 2014 to the third quarter of 2015 primarily due to an increase in the balances maintained in savings deposits, interest bearing demand deposits, and repurchase agreements offset in part by the decline in time deposits and Federal Home Loan Bank borrowings.

Noninterest Income

Noninterest income decreased $625,000 for the three months ended September 30, 2015 as compared to the 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 as well as by a slight decrease in service charges and other fees earned on deposit accounts.

The net gains on investment securities decreased $608,000 for the three month period ended September 30, 2015 as compared to the same period in 2014. Sales on investment securities were minimal in the third quarter of 2015 and resulted in realized gross losses of less than $500 which was not considered material for financial reporting and disclosure purposes. The Company accounted for securities gains of $608,000 and no securities losses for the third quarter of 2014.

Service charges and other fee income fell $17,000 during the third quarter of 2015 as compared to the same period in 2014, down 17.0% from 2014. This decline was primarily due to overdraft charges which fluctuate based on customer activity.

Noninterest Expense

Noninterest expense increased $15,000 or .7% for the three months ended September 30, 2015 as compared to the same period of the prior year. This increase was primarily due to slight increases in occupancy expenses and salary and employee benefits expenses.

Net occupancy expense of premises increased $10,000 or 2.5% during the three months ended September 30, 2015 compared to the same period in 2014. The increase in net occupancy expenses was primarily due to the increase in real estate taxes, depreciation expenses, and utilities, offset in part by decreases in furniture and fixture expenses, banking house expenses, and insurance expenses.

Salary and employee benefits expenses increased $6,000 or .6% during the three months ended September 30, 2015 over the same period in 2014. The increase was primarily a result of an increase in salary expenses and payroll taxes, offset in part by the decrease in employee benefits expenses.

Other operating expenses decreased $1,000 or .2% for the third quarter of 2015 as compared to the same period in 2014. The most significant fluctuation in operating expenses was the $12,000 decline in other taxes which was primarily due to the elimination of the West Virginia business franchise tax in 2015.

37

Management’s Discussion and Analysis of Financial Condition and Results of Operations

EARNINGS ANALYSIS - For the three months ended September 30, 2015 (continued)

Noninterest Expense - (continued)

Other operating expenses for the three months ended September 30 included the following (in thousands):

	2015			2014			Net Increase (Decrease)			Percent Increase (Decrease)
Directors’ fees	$	38		$	41		$	(3	)		(7.3	)%
Stationery and supplies		33			37			(4	)		(10.8	)%
Regulatory assessment and deposit insurance		69			71			(2	)		(2.8	)%
Advertising		50			51			(1	)		(2.0	)%
Postage and transportation		45			39			6			15.4	%
Other taxes		(13	)		(1	)		(12	)		1200.0	%
Service expense		124			126			(2	)		(1.6	)%
Other		235			218			17			7.8	%
Total	$	581		$	582		$	(1	)		(0.2	)%

Income Taxes

For the three month period ended September 30, 2015, income tax benefit was $90,000, an increase of $227,000 from the income tax expense of $137,000 for the three month period ended September 30, 2014. This was the result of the decline in pre-taxable income primarily due to the decrease in the net gains on sales of investment securities.

BALANCE SHEET ANALYSIS

Investments

Investment securities decreased approximately $249,000 or .1% from December 31, 2014 to September 30, 2015. The investment portfolio is managed to attempt to achieve an optimum mix of asset quality, liquidity and maximum yield on investment. The investment portfolio consists of U.S. Government agency and corporation securities, obligations of states and political subdivisions, corporate debt securities, mortgage-backed securities and equity securities. Taxable securities comprised 84.0% of total securities at September 30, 2015, as compared to 79.6% at December 31, 2014. The Company’s subsidiary bank sold non-taxable state and political subdivision securities with an amortized cost of approximately $5.1 million, agency securities with an amortized cost of approximately $6.5 million, and mortgage-backed securities with an amortized cost of approximately $39.3 million in the first nine months of 2015 and reinvested the proceeds primarily in mortgage-backed securities. These sales occurred as part of the Company’s deferred tax asset strategy and to take advantage of favorable market conditions. Other than the normal risks inherent in purchasing U.S. Government agency and corporation securities, corporate debt securities, mortgage-backed securities and obligations of states and political subdivisions, i.e., interest rate risk, management has no knowledge of other market risk involved in these investments. The Company does not have any high risk hybrid/derivative instruments.

Investment securities that are classified available for sale are available for sale at any time based upon management’s assessment of changes in economic or financial market conditions. These securities are carried at fair value and the unrealized holding gains and losses, net of taxes, are reflected as a separate component of stockholders’ equity until realized. Available for sale securities, at fair value, represented 100% of the investment portfolio at September 30, 2015 and December 31, 2014. As the investment portfolio consists primarily of fixed rate debt securities, changes in the market rates of interest will affect the carrying value of securities available for sale, adjusted upward or downward and represent temporary adjustments in value. The carrying value of securities available for sale was above amortized cost by $2,144,000 at September 30, 2015 and $1,338,000 at December 31, 2014, respectively.

38

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Investments - (continued)

Table Four - Investment Portfolio

The maturity distribution using book value including accretion of discounts and amortization of premiums and approximate yield of investment securities at September 30, 2015 and December 31, 2014 are presented in the following table. Tax equivalent yield basis was used on tax exempt obligations. Approximate yield was calculated using a weighted average of yield to maturities. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(dollars in thousands)	September 30, 2015							December 31, 2014
	Amortized Cost		Fair Value		Yield			Amortized Cost		Fair Value		Yield
U.S. Government corporations and agencies
Within One Year	$	2	$	2		0.01	%	$	1	$	1		0.01	%
After One But Within Five Years		21,597		21,616		1.55			22,095		21,899		1.58
After Five But Within Ten Years		27,152		27,148		2.18			22,499		22,106		1.83
		48,751		48,766		1.90			44,595		44,006		1.71
States & Political Subdivisions
Within One Year		728		744		6.44			604		607		6.81
After One But Within Five Years		2,630		2,747		5.89			2,998		3,125		6.12
After Five But Within Ten Years		13,403		13,912		5.16			16,782		17,343		5.18
After Ten Years		15,394		16,474		6.13			19,965		21,347		5.91
		32,155		33,877		5.72			40,349		42,422		5.64
Mortgage-Backed Securities		113,604		113,989		2.11			110,626		110,443		2.16
Equity Securities		176		198		2.76			171		208		4.32
Total	$	194,686	$	196,830		2.68	%	$	195,741	$	197,079		2.81	%

Loans

Total loans, net of unearned income, increased $2,418,000 or 2.4% from December 31, 2014 to September 30, 2015. The increase in total loans in 2015 was primarily due to increases in commercial and other loans and commercial real estate of $4,128,000 and $1,152,000, respectively, offset in part by the decrease in consumer real estate loans of $2,850,000. The increase in commercial and other loans during 2015 was primarily due to an increase in commercial loans, offset slightly by a decrease in non-rated development obligations. Commercial real estate loans increased in the non-farm, non-residential loan type while multi-family residential loans decreased. The decline in consumer real estate loans was primarily the result of decreases in constructions loans, residential 1-4 family loans, and home equity loans, offset slightly by an increase in home equity lines of credit. Consumer loans remained stable, decreasing only $3,000 due to the decline in credit cards which was mostly offset by the increase in installment and other loans to individuals.

Commercial real estate loans which include real estate loans secured by non-farm, non-residential properties and multi-family residential property loans comprised forty-seven percent (47%) of the loan portfolio. Consumer real estate loans which include construction, farmland, real estate residential loans, and home equity loans comprised twenty-nine percent (29%) of the loan portfolio. Commercial and other loans which include commercial and industrial loans and non-rated industrial development obligations comprised twenty-one percent (21%) of the loan portfolio. Consumer loans which include installment and other loans to individuals and credit cards comprised three percent (3%) of the loan portfolio. The changes in the composition of the loan portfolio from December 31, 2014 to September 30, 2015 were a 4% increase in commercial and other loans and a 4% decrease in consumer real estate loans.

39

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Loans - (continued)

Table Five - Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table presents the contractual maturities of loans other than installment loans and residential mortgages as of September 30, 2015 and December 31, 2014:

	(Unaudited)						(Unaudited)
(dollars in thousands)	September 30, 2015						December 31, 2014
	In One Year or Less		After  One Year Through Five Years		After Five Years		In One Year or Less		After  One Year Through Five Years		After Five Years
Commercial real estate	$	1,014	$	7,725	$	39,362	$	866	$	8,932	$	37,151
Commercial and other loans		1,484		3,734		16,033		928		4,299		11,896
Total	$	2,498	$	11,459	$	55,395	$	1,794	$	13,231	$	49,047

The following table presents an analysis of fixed and variable rate loans other than installment loans and residential mortgages as of September 30, 2015 and December 31, 2014 due to mature after one year:

	(Unaudited)						(Unaudited)
(dollars in thousands)	September 30, 2015						December 31, 2014
	Fixed Rate		Variable Rate		Total Due After One Year		Fixed Rate		Variable Rate		Total Due After One Year
Commercial real estate	$	10,968	$	36,119	$	47,087	$	12,101	$	33,982	$	46,083
Commercial and other loans		12,842		6,925		19,767		8,859		7,336		16,195
Total	$	23,810	$	43,044	$	66,854	$	20,960	$	41,318	$	62,278

Loans Held for Sale

The Company has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which the bank may sell conforming one-to-four family residential mortgage loans to the FHLB. The agreement provides for a maximum commitment of $5,000,000. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. The bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding under this agreement was $7,695,000 and $8,501,000 as of September 30, 2015 and December 31, 2014, respectively. The loans which were sold were also subject to a recourse obligation or credit risk in the amount of $314,000 and $323,000 at September 30, 2015 and December 31, 2014, respectively. No liability has been recorded for the recourse obligation as the likelihood of incurring the liability is considered remote.

Non-performing Loans

Non-performing assets include non-accrual loans on which the collectibility of the full amount of interest is uncertain; loans which have been renegotiated to provide for a reduction or deferral of interest on principal because of a deterioration in the financial position of the borrower; loans past due 90 days or more as to principal or interest; and other real estate owned. A summary of nonperforming assets is presented in the following table. Total non-performing loans were $2,664,000 at September 30, 2015 as compared to $1,437,000 at December 31, 2014. The increase in non-performing loans in 2015 was primarily due to an increase in non-accrual loans, offset in part by slight decreases in renegotiated loans and loans past due 90 days or more and still accruing interest.

40

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Non-performing Loans - (continued)

Table Six - Risk Elements

Loans which are in the process of collection, but are contractually past due 90 days or more as to interest or principal, renegotiated, non-accrual loans and other real estate are as follows:

(dollars in thousands)	September 30,			December 31,
	2015			2014			2013			2012			2011
Past due 90 days or more, still accruing:
Commercial and other loans	$	—		$	—		$	—		$	—		$	—
Commercial real estate		—			—			—			—			—
Consumer real estate		—			—			—			—			—
Consumer		—			14			—			—			—
	$	—		$	14		$	—		$	—		$	—
Renegotiated:
Commercial and other loans	$	—		$	—		$	—		$	—		$	—
Commercial real estate		—			41			44			—			—
Consumer real estate		350			350			—			—			—
Consumer		—			—			—			—			—
	$	350		$	391		$	44		$	—		$	—
Non-accrual:
Commercial and other loans	$	20		$	39		$	26		$	31		$	39
Commercial real estate		1,939			703			885			3,115			3,533
Consumer real estate		355			290			355			388			447
Consumer		—			—			4			17			27
	$	2,314		$	1,032		$	1,270		$	3,551		$	4,046
Other real estate	$	—		$	—		$	—		$	—		$	138
Total non-performing assets	$	2,664		$	1,437		$	1,314		$	3,551		$	4,184
Total non-performing assets to total loans and other real estate		2.62	%		1.45	%		1.41	%		3.57	%		3.82	%

Generally, all banks recognize interest income on the accrual basis, except for certain loans which are placed on a non-accrual status. A loan is 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 when either the principal or interest is past due 90 days or more unless the loan is both well secured and in the process of collection. Non-accrual loans were $2,314,000 or 2.3% of total loans outstanding as of September 30, 2015, as compared to $1,032,000 or 1.0% of total loans outstanding as of December 31, 2014. Non-accrual loans increased in 2015 primarily due to one large loan relationship being transferred to non-accrual status. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $43,000 and $10,000 for the three months ended September 30, 2015 and September 30, 2014, respectively. For the nine months ended September 30, 2015 and 2014 and for the year ended December 31, 2014, the amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $64,000, $47,000 and $63,000, respectively. Management continues to monitor the nonperforming assets to ensure against deterioration in collateral values.

Allowance for Loan Losses

In all lending activities there is an inherent risk that borrowers will be unable to repay their obligations. The Company maintains an allowance for loan losses to absorb probable loan losses. The Company has historically maintained the allowance for loan losses at a level greater than actual charge-offs. Although a subjective evaluation is determined by management, the Company believes it has appropriately assessed the risk of loans in the loan portfolio and has provided for an allowance which is adequate based on that assessment. Because the allowance is an estimate, any change in the economic conditions of the Company’s market area could result in new estimates which could affect the Company’s earnings. Management monitors the quality of the loan portfolio through reviews of past due loans and all significant loans which are considered to be potential problem loans on a monthly basis. The internal loan review function provides for an independent review of commercial, real estate, and installment loans in order to measure the asset quality of the portfolio. Management’s review of the loan portfolio has not indicated any material loans, not disclosed in the accompanying tables and discussions which are known to have possible credit problems that cause management to have serious doubts as to the ability of each borrower to comply with their present loan repayment terms. The allowance for loan losses decreased $22,000 or 1.2%, since December 31, 2014. The allowance for loan losses represented 1.8% of outstanding loans as of September 30, 2015 and December 31, 2014. Charge-offs amounted to $66,000 and recoveries were $14,000 for the nine month period ended September 30, 2015. A provision of $30,000 was made to the allowance for loan losses during 2015. The credit quality of the loan portfolio combined with the recent level of net charge-offs and nonperforming assets continue to be considered in the calculation of the provision for loan losses. The additions and deletions to the allowance for loan losses are based on management’s evaluation of characteristics of the loan portfolio, current and anticipated economic conditions, past loan experiences, net loans charged-off, specific problem loans and delinquencies, and other factors.

41

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Allowance for Loan Losses - (continued)

The following table presents a summary of loans charged off and recoveries of loans previously charged off by type of loan.

Table Seven - Analysis of Allowance for Possible Loan Losses

(dollars in thousands)	September 30,			December 31,
	2015			2014			2013			2012			2011
Allowance for loan losses:
Balance at beginning of period:	$	1,813		$	1,865		$	2,181		$	2,504		$	2,059
Loans charged-off:
Commercial and other loans		57			5			—			—			8
Commercial real estate		—			36			—			87			156
Consumer real estate		—			—			—			—			28
Consumer		9			16			12			9			19
Total		66			57			12			96			211
Recoveries:
Commercial and other loans		5			—			—			—			2
Commercial real estate		2			—			84			15			45
Consumer real estate		—			—			—			—			—
Consumer		7			5			12			6			9
Total		14			5			96			21			56
Net charge-offs (recoveries)		52			52			(84	)		75			155
Provision (credit) charged to operations		30			—			(400	)		(248	)		600
Balance at end of period:	$	1,791		$	1,813		$	1,865		$	2,181		$	2,504
Average loans outstanding	$	102,300		$	94,103		$	97,374		$	104,566		$	115,415
Ratio of net charge-offs to average loans outstanding for the period		0.05	%		0.06	%		-0.09	%		0.07	%		0.13	%
Ratio of the allowance for loan losses to loans outstanding for the period		1.76	%		1.83	%		2.00	%		2.19	%		2.29	%

The following table presents an allocation of the allowance for possible loan losses at September 30, 2015 and each of the four year periods ended December 31, 2014. The allocation presented below is based on the historical average of net charge offs per category combined with the change in loan growth, level of nonperforming assets, and local economic conditions, and management’s review of the loan portfolio.

	September					December 31,
	2015					2014					2013					2012					2011
(dollars in thousands)	Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans
Commercial and other loans	$	365		20.9	%	$	281		17.2	%	$	260		17.9	%	$	179		15.7	%	$	179		14.6	%
Commercial real estate		1,174		47.3	%		1,254		47.3	%		1,315		47.1	%		1,762		50.4	%		2,082		51.5	%
Consumer real estate		237		29.1	%		263		32.7	%		263		31.3	%		193		28.6	%		193		27.4	%
Consumer		15		2.7	%		15		2.8	%		27		3.7	%		47		5.3	%		50		6.5	%
Total	$	1,791		100.0	%	$	1,813		100.0	%	$	1,865		100.0	%	$	2,181		100.0	%	$	2,504		100.0	%

42

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Deposits

A stable core deposit base is the major source of funds for the Company’s subsidiary bank. The deposit mix depends upon many factors including competition from other financial institutions, depositor interest in certain types of deposits, changes in the interest rate and the Company’s need for certain types of deposit growth. Total deposits decreased approximately $260,000 during the first nine months of 2015. Since year end the decrease in total deposits was primarily due to decreases in noninterest bearing demand deposits and certificates of deposit which fell approximately $4.1 million and $2.4 million, respectively, offset in part by increases in savings deposits and interest bearing demand deposits of $4.6 million and $1.6 million, respectively. At September 30, 2015, noninterest bearing deposits comprised 14% of total deposits and interest bearing deposits which include NOW, money market, savings and time deposits comprised 86% of total deposits. The changes in the composition of the deposit mix since December 31, 2014 were a 1% decrease in noninterest bearing deposits and a 1% increase in interest bearing deposits.

Repurchase Agreements

Repurchase agreements represent borrowings of a short duration, usually overnight, and are repeated each business day until the agreement is terminated. The securities underlying the agreements remained under the Bank’s control. Repurchase agreements increased $6,997,000 or 33.2%, from December 31, 2014 to September 30, 2015 primarily due to the increase in the balances maintained by existing commercial customers.

Other Liabilities

Other liabilities increased approximately $6,914,000 during the nine month period ended September 30, 2015 primarily due to investment purchases recorded based on trade dates.

Capital Resources

Stockholders’ equity increased 3.1% during the nine month period ended September 30, 2015 and was primarily due to the 1.4% increase in accumulated other comprehensive income combined with the 1.7% increase from current earnings after quarterly dividends. The increase in accumulated other comprehensive income is primarily attributable to the effect of the change in the net unrealized gains (losses) on securities available-for-sale. Stockholders’ equity amounted to 10.4% and 10.5% of total assets at September 30, 2015 and December 31, 2014, respectively. The Company paid dividends of $.60 per share during each of the nine month periods ended September 30, 2015 and September 30, 2014. The Company paid dividends of $.20 per share during each of the three month periods ended September 30, 2015 and September 30, 2014.

The Company’s primary source of funds for payment of dividends to shareholders is from the dividends from its subsidiary bank. The approval of the Comptroller of the Currency is required to pay dividends if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits (as defined) for the year, combined with its retained net profits of the preceding two years. Under this formula, the Company’s subsidiary bank can declare dividends in 2015, without approval of the Comptroller of the Currency, of approximately $1,500,000, plus an additional amount equal to the bank’s net profit for 2015 up to the date of any such dividend declaration.

Liquidity

Liquidity management ensures that funds are available to meet loan commitments, deposit withdrawals, and operating expenses. Funds are provided by loan repayments, investment securities maturities, or deposits, and can be raised by liquidating assets or through additional borrowings. The Company had investment securities with an estimated fair value of $196,830,000 classified as available-for-sale at September 30, 2015. These securities are available for sale at any time based upon management’s assessment in order to provide necessary liquidity should the need arise. The fair value of temporarily impaired investment securities that the Company has the intent and ability to hold until the anticipated recovery in market value is $53,950,000. In addition, the Company’s subsidiary bank, Progressive Bank, N.A., is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). Membership in the FHLB provides an additional source of funding in the form of collateralized advances. The remaining maximum borrowing capacity with the FHLB at September 30, 2015 was approximately $41.5 million subject to the purchase of additional FHLB stock. The subsidiary bank had short term lines of credit in the aggregate amount of approximately $21.4 million and $19.8 million available with the FHLB at September 30, 2015 and December 31, 2014, respectively. There were no short term borrowings outstanding pursuant to these agreements as of September 30, 2015 and December 31, 2014. The subsidiary bank also has an agreement with a financial institution for an available line of credit in the amount of $4,000,000 to be used for federal funds borrowings. There were no borrowings outstanding related to this agreement as of September 30, 2015 and December 31, 2014. The subsidiary bank also has pledged investment securities in the amount of $19.7 million to secure the ability to borrow from the Federal Reserve discount window should the need arise. There were no borrowings outstanding from the Federal Reserve as of September 30, 2015. At September 30, 2015 and December 31, 2014, the Company had outstanding loan commitments and unused lines of credit totaling $13,820,000 and $23,155,000, respectively. As of September 30, 2015, management placed a high probability for required funding within one year of approximately $5.2 million. Approximately $7.3 million is principally unused overdraft, home equity and credit card lines on which management places a low probability for required funding.

43

FIRST WEST VIRGINIA BANCORP, INC.

PART I

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

The Company’s subsidiary bank uses an asset/liability model to measure the impact of changes in interest rates on net interest income on a periodic basis. Assumptions are made to simulate the impact of future changes in interest rates and/or changes in balance sheet composition. The effect of changes in future interest rates on the mix of assets and liabilities may cause actual results to differ from simulated results. Guidelines established by the Company’s subsidiary bank provides that the estimated net interest income may not change by more than 10% in a one year period given a +/- 200 basis point parallel shift in interest rates. Excluding the potential effect of interest rate changes on assets and liabilities of the Holding Company which are not deemed material, the anticipated impact on net interest income of the subsidiary bank at September 30, 2015 was as follows: given a 200 basis point increase scenario net interest income would increase by approximately 4.4%, and given a 200 basis point decrease scenario net interest income would be reduced by approximately 14.6%. The results using a +/-100 basis point interest rate scenario are also presented. Under the 100 basis point increase scenario net interest income would increase by approximately 5.2%, and given a 100 basis point decrease scenario net interest income would be reduced by 6.4%. The projections provided by the model are not intended as an actual forecast of the bank’s performance in a particular rate environment, and should not be relied upon. Actual changes in the interest rate environment normally do not take place instantaneously, but over a period of time, and do not occur in a parallel fashion. Additionally, the balance sheet composition, spread relationships for new dollars invested, non interest income and expenses, investment practices, and deposit practices all change as a result of changes in interest rates and would need to be considered by the Asset Liability Committee.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s President and Chief Executive Officer, William G. Petroplus, and Executive Vice President, Chief Administrative Officer and Chief Financial Officer, Francie P. Reppy, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to the filing of this report (the “Evaluation Date”), have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Controls

During the quarter, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

44

FIRST WEST VIRGINIA BANCORP, INC.

PART II

OTHER INFORMATION

Item 1 Legal Proceedings

The nature of the business of the Holding Company’s subsidiary generates a certain amount of litigation involving matters arising in the ordinary course of business. The Company is unaware of any litigation other than ordinary routine litigation incidental to the business of the Company, to which it or its subsidiary is a party or of which any of their property is subject.

Item 1A Risk Factors

Not applicable to Smaller Reporting Companies

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Inapplicable

Item 3 Defaults Upon Senior Securities

Inapplicable

Item 4 Mine Safety Disclosures

None

Item 5 Other Information

Inapplicable

Item 6 Exhibits and Reports on Form 8-K

(a) Reports on Form 8-K

On August 4, 2015 a report on Form 8-K was filed which contained a press release dated July 31, 2015 that reported the announcement of First West Virginia Bancorp Inc.’s second quarter earnings.

(b) Exhibits

The exhibits listed in the Exhibit Index on page 47 of this FORM 10-Q are incorporated by reference and/or filed herewith.

45

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/ William G. Petroplus
	William G. Petroplus
	President and Chief Executive Officer
By:	/s/ Francie P. Reppy
	Francie P. Reppy
	Executive Vice President, Chief Administrative Officer and Chief Financial Officer

Dated: November 12, 2015

46

EXHIBIT INDEX

The following exhibits are filed herewith and/or are incorporated herein by reference.

				Incorporated by Reference
Exhibit Number	Description	Filed Herewith		Form		File No.		Exhibit		Filing Date
3.1	Certificate and Restated Articles of Incorporation of First West Virginia Bancorp, Inc.				10-Q		001-13652		3.1		8/14/15
3.2	Amended and Restated Bylaws of First West Virginia Bancorp, Inc.				8-K		001-13652		3.2		12/23/13
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.				10-K		001-13652		10.3		3/31/10
10.4	Lease dated March 7, 2006 between Progressive Bank, N.A. and O.V. Smith & Sons of Big Chimney, Inc.				10-K		001-13652		10.4		3/31/10
10.5	Lease dated May 12, 2001 between Progressive Bank, N.A. and Sylvan J. Dlesk and Rosalie J. Dlesk doing business as Dlesk Realty & Investment Company.				10-K		001-13652		10.5		3/31/10
10.7	Lease dated December 1, 2009 between Progressive Bank, N.A. and Richard J. Dlesk, Sr. and Sharon G. Neis-Dlesk.				10-K		001-13652		10.7		3/31/10
10.8	Amendment to Lease and Notice of Exercise dated July 3, 2012 between Progressive Bank, N.A., formerly known as “First West Virginia Bank, N.A.,” and Angela I. Stauver.				10-K		001-13652		10.8		3/29/13
11.1	Statement regarding computation of per share earnings.		X
13.3	Summarized Quarterly Financial Information.		X
15	Letter re unaudited interim financial information. See Part 1, Notes to Consolidated Financial Statements.		X
31.1	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Executive Officer.		X
31.2	Rule 13a-14(a) / 15d/14(a) Certifications - Certification of Chief Financial Officer.		X
32	Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer.		X
99.1	Independent Accountant’s Report.		X
101	Interactive Data File.		X

47