ITEM 1. BUSINESS
GENERAL
First Western Bancorp, Inc. ("First Western"), headquartered in New Castle, Pennsylvania, is a multi-institutional holding company which provides retail and commercial banking and trust services through 41 community banking offices in western Pennsylvania and northeastern Ohio. First Western was incorporated under the laws of the Commonwealth of Pennsylvania in 1982. First Western has two wholly-owned banking subsidiaries: First Western Bank, National Association ("First Western Bank, N.A."), and First Western Bank, Federal Savings Bank ("First Western Bank, F.S.B.") (These two subsidiaries are collectively referred to as the "Banking Subsidiaries"). First Western also has three wholly-owned nonbank subsidiaries: First Western Trust Services Company ("Trust Services"); First Western Investment Services Company ("Investment Services"); and First Western Capital Trust I, a Delaware business trust (The Banking Subsidiaries and the nonbanking subsidiaries are collectively referred to as the "Subsidiaries.") At December 31, 1996, First Western had total assets of $1.7 billion, net loans (including loans held for sale) of $1.1 billion, deposits of $1.1 billion and shareholders' equity of $128 million.
First Western offers a variety of financial services through its Subsidiaries. The Banking Subsidiaries provide a full range of retail and commercial banking products including personal and commercial checking accounts, savings and time deposit accounts, money market demand accounts, safe deposit facilities, credit cards, installment and other consumer loans, short and long-term credit facilities, and consumer and commercial mortgages to individuals and small to medium sized businesses. First Western also offers a number of products through Trust Services, including corporate trust, personal trust, custody and account administration services and financial services such as investment planning, managed assets, mutual fund sales and annuity sales.
THE SUBSIDIARIES
First Western Bank, N.A.
First Western Bank, N.A., traces its history in New Castle, Pennsylvania to 1855. First Western Bank, N.A. is a member of the Federal Reserve System, and most of its deposits are insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"), with certain deposits acquired from the Resolution Trust Corporation insured by the Savings Association Insurance Fund ("SAIF") of the FDIC. As of December 31, 1996, First Western Bank, N.A. had 22 community banking offices in Lawrence, Beaver, Butler and Allegheny Counties, Pennsylvania. At December 31, 1996, First Western Bank, N.A. had total assets of $1.1 billion.
First Western Bank, F.S.B.
First Western Bank, F.S.B. traces its history in Sharon, Pennsylvania to 1872. The deposits of First Western Bank, F.S.B. are insured by the SAIF. First Western Bank, F.S.B. has 19 community banking offices in Mercer, Erie, Butler and Venango Counties, Pennsylvania and Ashtabula and Lake Counties, Ohio. At December 31, 1996, First Western Bank, F.S.B. had total assets of approximately $599 million.
During the first quarter of 1995, First Western Bank, F.S.B. purchased the Andover, Ohio banking office of Peoples Bank, N.A. of Ashtabula, Ohio. This branch had approximately $13 million of deposits at the time of acquisition. Also during the first quarter of 1995, First Western Bank, F.S.B. purchased four banking offices located in northeastern Ohio in Lake and Ashtabula Counties from Union Federal Savings Bank of Indianapolis, Indiana. These branches had approximately $84 million of deposits at the time of acquisition. All of the acquired deposits are insured by the SAIF.
Trust Services
Trust Services, a Pennsylvania trust company, commenced operations in January 1991. At December 31, 1996, Trust Services held, as agent or fiduciary, trust assets of approximately $491 million in market value.
Trust Services maintains offices in New Castle, Beaver, Hermitage and Erie, Pennsylvania, at the offices of the Banking Subsidiaries. Trust Services provides personal and corporate trust services to customers in the market areas served by the Banking Subsidiaries, as well as financial services such as mutual fund and annuity sales, managed asset allocation, and other investment services.
Investment Services
Investment Services was formed on December 26, 1996 as a Delaware investment company for the purpose of holding investment securities for First Western.
First Western Capital Trust I
First Western Capital Trust I was formed in February 1997 in connection with the private placement of $25 million of 9.875% Capital Securities due February 1, 2027 of the trust.
COMPETITION
First Western's Subsidiaries are subject to intense competition in all aspects and areas of their business from banks and other financial institutions, including savings and loan associations, savings banks, finance companies, credit unions and other providers of financial services, such as mutual funds, brokerage firms, credit companies and insurance companies. The Subsidiaries also compete with nonfinancial institutions, including retail stores that maintain their own credit programs and governmental agencies that make available low cost or guaranteed loans to certain borrowers. First Western competes in its market areas with a number of much larger financial institutions with substantially greater resources, larger lending limits and a wider array of commercial banking services.
First Western's Subsidiaries have been able to compete effectively with other financial institutions in their respective market areas. The Subsidiaries emphasize customer service in an effort to establish long-term customer relationships and to build customer loyalty. First Western provides personnel, capital, a larger combined lending limit and consolidated services such as data processing, accounting, loan review and compliance, internal audit and trust services to the Banking Subsidiaries to enhance their ability to compete effectively in, and provide a wide variety of financial services to, their respective markets. First Western provides overall direction to the Banking Subsidiaries in the areas of credit policy and administration, strategic planning, investment portfolio management, asset/liability management, human resource and benefit plan administration and other financial and administrative services. With the centralization of these back-office and administrative services, First Western refers to itself as a supercommunity bank, providing efficient decentralized banking services and loan decision making through community offices.
EMPLOYEES
First Western and its Subsidiaries had the following full-time equivalent employees at December 31, 1996:
SUPERVISION AND REGULATION
First Western
Bank Holding Company Status. First Western is registered as a bank holding company under the Bank Holding Company Act of 1956 (the "Bank Holding Company Act"). As such, First Western is subject to the provisions of that legislation and to supervision by the Federal Reserve Board. First Western is required to obtain the prior approval of the Federal Reserve Board before it may acquire all or substantially all of the
assets of any bank, or acquire ownership or control of any voting securities of any bank, if, after giving effect to such acquisition, First Western would own or control more than 5% of the voting shares of such bank. A registered bank holding company is also prohibited, with limited exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank and from engaging directly or indirectly in any business not closely related to the business of banking or of managing or controlling banks. One of the exceptions to these prohibitions permits ownership of the shares of any company the activities of which the Federal Reserve Board, after due notice and opportunity for hearing, by regulation or order has determined to be so closely related to the business of banking and of managing or controlling banks as to be proper incident thereto. These activities include operating a mortgage brokerage company, finance company, credit card company, factoring company or securities brokerage company; performing certain data processing and other back office operations; providing investment and financial advice to financial and nonfinancial institutions and to certain high net worth individuals; acting as an insurance agent for certain types of credit-related insurance; leasing personal property on a full payout, nonoperating basis; limited powers to underwrite the issuance of certain debt instruments and certain equity offerings; and, as a result of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), the ability to acquire and operate savings and loan associations.
Under Federal Reserve Board regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve Board's policy that in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice or a violation of the Federal Reserve Board regulations or both. This doctrine has become known as the "source of strength" doctrine. Although the United States Court of Appeals for the Fifth Circuit struck down the Federal Reserve Board's source of strength doctrine in 1990, saying the Federal Reserve Board had no authority to assert the doctrine under the Bank Holding Company Act, the decision was reversed by the United States Supreme Court on procedural grounds. The validity of the source of strength doctrine is likely to continue to be the subject of litigation until definitively resolved by the courts or by Congress.
In August 1989, FIRREA was signed into law. Although FIRREA's primary thrust is directed at savings and loan associations, certain provisions also have a significant impact on bank holding companies and banks insured by the FDIC. One such provision imposes upon each depository institution potential liability for any loss incurred by the FDIC in connection with (i) the default of its "sister" institutions (controlled either by the institution or by the same holding company) or (ii) any FDIC assistance provided to a sister institution in danger of default. Thus, each Banking Subsidiary of First Western could be liable for any loss to the FDIC caused by the other Banking Subsidiary upon receipt of written notice from the FDIC within two years of such loss.
Effective in October 1989, the Federal Reserve Board amended Regulation Y to permit bank holding companies to acquire savings associations (healthy or otherwise) in accordance with the provisions of FIRREA. The acquisition of a savings association by a bank holding company is not considered to be an acquisition of a bank under the Bank Holding Company Act. Acquired savings associations must, however, limit their activities to those permissible for bank holding companies and their subsidiaries.
Effective in March 1990, the Pennsylvania Banking Code removed all restrictions concerning the number of banks that a Pennsylvania bank holding company may own or control in Pennsylvania.
The Pennsylvania Banking Code also provides for "reciprocal interstate banking," which, under certain circumstances, allows a bank holding company located in another state to acquire control of a bank or bank holding company in Pennsylvania. The other jurisdiction must authorize Pennsylvania bank holding companies to acquire banks or bank holding companies within its boundaries on terms and conditions substantially no more restrictive than those imposed on its own domestic bank holding companies. At present, a number of
states have adopted legislation permitting the acquisition by an out-of-state bank holding company of the shares of an in-state bank.
In September 1994, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was passed. This legislation significantly changes the laws governing interstate banking. Beginning on September 29, 1995, bank holding companies may acquire banks located in any state, despite former prohibitive state statutes, subject to certain conditions. Beginning on June 1, 1997, banks may merge or consolidate on an interstate basis. States may elect to "opt-out" of this provision by enacting legislation before June 1, 1997 that expressly prohibits interstate bank mergers. This act also permits banks to branch into other states on a de novo basis provided that the state has enacted a law that permits de novo interstate branch banking.
Savings and Loan Holding Company Regulation. By virtue of its acquisition of First Federal of Western Pennsylvania, now First Western Bank, F.S.B., in November 1990, First Western became subject to regulation by the Office of Thrift Supervision (the "OTS") as a savings and loan holding company. As such, First Western was subject to OTS examination and reporting requirements relating to savings and loan holding companies. On September 30, 1996, President Clinton signed into law the Economic Growth and Regulatory Paperwork Reduction Act, which exempts bank holding companies, such as First Western, from OTS examination and reporting requirements as savings and loan holding companies. Thus, First Western is no longer subject to supervision as a savings and loan holding company and is only subject to supervision as a bank holding company. First Western's bank holding company status is discussed above in the Bank Holding Company Status section.
Securities Regulation. First Western Common Stock is registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, as such, First Western is subject to various reporting and other requirements under the Exchange Act and to regulation by the Securities and Exchange Commission (the "Commission").
The Banking Subsidiaries
Federal and state laws and regulations govern many aspects of the business of First Western's Banking Subsidiaries, including permissible types, amounts, and terms of loans, investments, and acceptances, amounts of reserves against deposits and restrictions on dividends and other intercompany transactions. The abilities of the banking subsidiaries to pay dividends to First Western are described in Note 16 of the Notes to Consolidated Financial Statements included in First Western's 1996 Annual Report to Shareholders (the "1996 Annual Report"). The operations of such subsidiaries are subject to examination and regulation by one or more of the following: the Federal Reserve Board, the Office of the Comptroller of the Currency ("OCC"), the FDIC and the OTS.
First Western Bank, N.A. is a national bank and is subject to the supervision of, and regulation by, the OCC. First Western Bank, F.S.B. is a federally chartered savings bank and is subject to the supervision of, and regulation by, the OTS and the FDIC.
First Western Bank, N.A. and First Western Bank, F.S.B. are individually subject to regulatory capital requirements that are generally comparable to those imposed on First Western. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Shareholders' Equity and Capital Resources" in the 1996 Annual Report. In computing compliance with the requirements applicable to First Western Bank, F.S.B., however, certain of its investments in subsidiaries, goodwill and other assets are required to be deducted from total assets and, subject to certain phase-in provisions, from capital, and certain assets are weighted differently for purposes of calculating the risk weighted capital requirement. In addition, FIRREA imposed on all savings associations, including First Western Bank, F.S.B., a tangible capital requirement, mandating tangible capital of at least 1.5% of adjusted total assets. Tangible capital is generally defined in the same manner as Tier I capital and adjusted total assets are calculated on the same basis as for the leverage limit. Although OTS regulations currently prescribe a leverage requirement of 3% of Tier I capital to total assets for all savings associations, it is expected that the OTS, like the Federal Reserve Board, the OCC and the FDIC, will require an additional cushion of 100 to 200 basis points for all but the most highly rated institutions. At December 31, 1996, First Western Bank, N.A. and First Western Bank, F.S.B. met all applicable leverage requirements.
The deposits of First Western Bank, N.A. and First Western Bank, F.S.B. are insured up to $100,000 per insured depositor (as defined by law and regulation) by the FDIC through the Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF"), respectively. The FDIC has adopted regulations effective in 1993 that impose risk based insurance premiums on all insured depository institutions.
On September 30, 1996, the President signed into law the Deposit Insurance Funds Act of 1996 ("Funds Act") that, among other things, imposed a special one-time assessment on SAIF member institutions to recapitalize the SAIF. As required by the Funds Act, the FDIC imposed a special assessment of 65.7 basis points on SAIF assessable deposits held as of March 31, 1995, payable November 27, 1996 ("SAIF Special Assessments"). The SAIF Special Assessment was recognized by First Western Bank, F.S.B. and First Western Bank, N.A., as a expense in the quarter ended September 30, 1996 and was tax deductible. The SAIF Special Assessment recorded by First Western amounted to approximately $3.3 million on a pre-tax basis and approximately $2.0 million on an after-tax basis.
The Funds Act also spreads the obligations for payment of Financing Corporation ("FICO") bonds across all SAIF and BIF members. Beginning on January 1, 1997, BIF deposits are assessed for FICO payments at a rate of 20% of the rate assessed on SAIF deposits. BIF deposits will be assessed an annual FICO payment of approximately 1.3 basis points, while SAIF deposits will be assessed a payment of approximately 6.5 basis points. Full pro rata sharing of the FICO payments between BIF and SAIF members will occur on the earlier of January 1, 2000, or the date the BIF and SAIF are merged. As a result of the Funds Act, SAIF assessments have been lowered to a range between 0 and 27 basis points effective January 1, 1997, a range comparable to that paid by BIF members. However, SAIF members will continue to make the higher FICO payments described above.
First Western Bank, N.A. and First Western Bank, F.S.B. are subject to provisions of federal law restricting various aspects of their operations, including their ability to extend credit to, to engage in various other transactions with, or to invest in the stock or securities of, First Western.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), enacted on December 19, 1991, recapitalized the BIF and imposed certain supervisory and regulatory reforms on the banking industry. The following is a summary of certain key provisions of the FDICIA.
The FDICIA increased the FDIC's authorization to borrow from the United States Treasury from $5 billion to $30 billion for bank losses and authorized an additional $40 billion in borrowings from the United States Treasury for working capital purposes. Borrowings would be repaid from deposit insurance assessments, including special assessments, on banks such as First Western Bank, N.A., and the issuance of FDIC obligations to BIF member banks.
The FDICIA required the federal bank regulators to establish specific capital standards for five categories of insured depository institutions: "well capitalized", "adequately capitalized", "undercapitalized", "significantly undercapitalized" and "critically undercapitalized". Any institution classified as "undercapitalized," is required to submit a capital restoration plan to its federal bank regulator and is subject to operational restrictions. Greater restrictions, and ultimately, receivership, may be imposed with respect to institutions that are "significantly undercapitalized" or "critically undercapitalized". First Western Bank, N.A. and First Western Bank, F.S.B. are currently classified as "well capitalized".
The federal bank regulatory agencies are required to adopt uniform capital and accounting rules. The accounting rules require supplemental disclosure in reports to the banking agencies of mark to market valuation of assets and liabilities and of contingent assets and liabilities.
EXECUTIVE OFFICERS
The following table sets forth the names, ages (as of January 31, 1997), present positions and business experience of all executive officers of First Western. Immediately following the Annual Meeting of Shareholders to be held on April 15, 1997, the directors of First Western will elect executive officers to serve for the next year.
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(1) Stephen R. Sant, President and Chief Executive Officer of First Western Bank, N.A. is the nephew of John W. Sant, Director and former Chairman of First Western.
FIRST WESTERN
Thomas J. O'Shane
Chairman of the Board, First Western and First Western Bank, N.A. since April 1996; Vice Chairman, Trust Services since April 1996; Chief Executive Officer, First Western since January 1991; President, First Western since February 1990; Chairman, First Western Bank, F.S.B. since June 1991; Director, First Western Bank, N.A., First Western Bank, F.S.B. and Trust Services; Member of the Executive Committee of First Western; Director of First Western since 1988.
Richard L. Stover
Executive Vice President, Chief Lending Officer, First Western since November 1996; Principal, Stover & Associates from March 1994 until November 1996; Managing Director--Portfolio & Credit, Corporate
Finance Group, General Electric Capital Corporation from March 1993 until March 1994; Executive Vice President and Chief Credit Officer, Equimark Corporation from January 1991 until March 1993.
Robert H. Young
Executive Vice President, Chief Financial Officer, First Western since April 1996; Senior Vice President-Finance, First Western from January 1991 until April 1996; Secretary and Treasurer, First Western since June 1988.
Thomas S. Mansell
Senior Vice President, First Western since January 1991; Assistant Secretary and Legal Counsel, First Western; Senior Vice President-Officer in Charge of Trusts and Legal Counsel to First National, prior to 1991; Director, Trust Services; Director, First Western since 1990.
Robert E. Cimini
Senior Vice President-Marketing, First Western since January 1993; President and Chief Executive Officer, First National from June 1991 until September 1993; Director, First Western Bank, N.A.
Donald D. Wehn
Senior Vice President-Mortgage and Consumer Lending, First Western since January 1994; President and Chief Executive Officer, Residential Mortgage Company of America from May 1994 until December 1995; Vice President-Mortgage Lending, Strategic Planning and Special Projects, First Western from October 1992 until December 1993; Senior Vice President, Beaver Trust Company ("Beaver Trust") a predecessor of First Western Bank, N.A., from January 1991 until September 1992.
John A. Zercher
Senior Vice President-Management Information Services, First Western since January 1994; Vice President- Management Information Services, First Western from April 1989 until December 1993.
Richard L. Rausch
Vice President-Human Resources, First Western since April 1992; Senior Staff Assistant to Industrial Relations, General Motors prior to April 1992.
Kenneth J. Romig
Vice President, First Western since January 1992; Controller, First Western since June 1989; Treasurer, Trust Services since January 1991.
FIRST WESTERN BANK, N.A.
Stephen R. Sant
President and Chief Executive Officer, First Western Bank, N.A. since September 1993; Executive Vice President, Chief Operating Officer, First Western since April 1996; Senior Vice President-Retail Banking, First Western from January 1993 until April 1996; President and Chief Executive Officer, Beaver Trust from April 1992 until September 1993; President and Chief Executive Officer, First Federal of Western Pennsylvania ("First Federal"), a predecessor of First Western Bank, F.S.B., from December 1990 until April 1992.
FIRST WESTERN BANK, F.S.B.
Kathleen L. Lewis
President and Chief Executive Officer, First Western Bank, F.S.B. since April 1992; Senior Vice President-Community Office Management, First Western since April 1995; Vice President-Director of Human Resources, First Western from September 1991 until April 1992.
TRUST SERVICES
Fred J. Liskowski
President and Chief Executive Officer, Trust Services since April 1994; Investment Executive, Paine Webber from August 1992 until April 1994; Executive Vice President and Chief Financial Officer, Ellwood City Hospital, prior to August 1992.
Samuel I. Haines, Jr.
Executive Vice President and Trust Officer, Trust Services since April 1994; President and Chief Executive Officer, Trust Services from January 1991 until April 1994.
STATISTICAL DISCLOSURES BY BANK HOLDING COMPANIES
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
The required information is incorporated by reference to pages 47 through 48 of the 1996 Annual Report.
II. INVESTMENT PORTFOLIO
A. Book Value of Investment Portfolio:
B. Maturity and Yield Information
The required information is incorporated by reference to pages 56 through 57 in the 1996 Annual Report.
C. There are no issues included in obligations of states and political subdivisions or other securities which exceed ten percent of shareholders' equity.
III. LOAN PORTFOLIO
A. Types of Loans
The required information is incorporated by reference to page 53 in the 1996 Annual Report.
B. Maturities and sensitivities of loans to interest rates at December 31, 1996:
C. Risk Elements
The following table presents information concerning nonaccrual loans, restructured loans and loans past due 90 days or more. Commercial and mortgage loans are placed on nonaccrual status when in the opinion of management collection of principal or interest is doubtful and the loan is not both well secured and in the process of collection. Installment and credit card loans are generally charged off between 90 and 180 days past due or when deemed uncollectible in the opinion of management. Cash payments received while a loan is classified as nonaccrual are recorded as a reduction to principal as long as doubt exists as to collection. A loan is characterized as restructured if for reasons related to the borrower's financial difficulties a concession is granted that would not otherwise be considered.
The gross interest income that would have been recorded for 1996 for nonaccrual and restructured loans outstanding as of December 31, 1996 as though the loans had been current in accordance with their original terms was approximately $306,000. First Western recognized interest income of $28,000 during 1996 for nonaccrual and restructured loans.
The following table presents First Western's investment in loans considered to be impaired (in thousands):
First Western has not presented impaired loan information for periods prior to the effective date of FAS 114 "Accounting by Creditors for the Impairment of a Loan", as amended, which was effective in 1995. All of the loans deemed to be impaired were evaluated using the fair value of the collateral as the measurement standard.
There were no potential problem loans outstanding at the end of any period presented for which there was serious doubt as to the ability of the borrower to comply with present loan repayment terms except as discussed above.
At December 31, 1996, First Western did not have any concentrations of loans to borrowers engaged in similar activities exceeding 10% of total loans, net of unearned income.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. Analysis of Loan Loss Experience
The required information is incorporated by reference to page 49 of the 1996 Annual Report.
B. Allocation of the Allowance for Possible Loan Losses:
For additional information see "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 52 through 55 of the 1996 Annual Report.
V. DEPOSITS
A. Average deposits and rates paid by type:
B. Maturities of time deposits of $100,000 or more at December 31, 1996:
VI. RETURN ON EQUITY AND ASSETS
The required information is incorporated by reference to pages 42 through 43 of the 1996 Annual Report.
VII. SHORT-TERM BORROWINGS
The required information is incorporated by reference to page 58 of the 1996 Annual Report.
ITEM 2.
ITEM 2. PROPERTIES
The principal executive offices of First Western and the administrative offices of First Western Bank, N.A. are located at 101 East Washington Street, New Castle, Pennsylvania. In 1992, First Western purchased a building in downtown New Castle, which houses centralized data processing and certain other operations. During 1996, First Western purchased an office building in New Castle with the intention of renovating it to house certain of First Western's loan processing departments. First Western also owns property in Lawrence County, Pennsylvania, for possible future use as First Western's headquarters. It is not anticipated that this site will be developed in the immediate future.
First Western Bank, N.A., together with First Western, occupies approximately 75% of its six-story headquarters building. In addition to its main office, First Western Bank, N.A. owns an attached office building which houses First Western Bank, N.A.'s dealer center, credit card, marketing and other administrative departments. First Western Bank, N.A. also owns an office building at Third and Insurance Streets, Beaver, Pennsylvania, which formerly served as the headquarters of Beaver Trust. First Western Bank, N. A. occupies approximately one-fourth of this building with the remaining office space leased to unrelated parties. First Western Bank, N.A. also owns the office building adjacent to the former main office of Beaver Trust and First Western Bank, N.A. occupies approximately one-fourth of this building with the remaining space leased to unrelated parties. First Western Bank, N.A. owns 11 branch offices located in New Castle (Butler Avenue), New Wilmington, Pulaski, Ellwood City, Neshannock, Midland, Rochester (Adams Street), Beaver (Tuscarawas Office), Center Township, Monaca and Aliquippa. First Western Bank, N.A. leases eleven other properties, which have expirations, costs and renewal options as follows:
First Western closed its Coraopolis (West Hills Plaza) (closed during the first quarter of 1997) and Butler Township (Point Plaza) (closed during the fourth quarter of 1996) offices and transferred the deposit accounts to the Coraopolis (Moon Township) and Butler Township (Stirling Village) offices, respectively. During the fourth quarter of 1995, First Western Bank, N.A. closed its Hillsville office and transferred the deposit accounts to the recently opened Union Township office. First Western is currently attempting to sublet this office.
First Western Bank, F.S.B. conducts its business from its main office in Sharon, Pennsylvania and eighteen additional offices located in Mercer, Erie, Butler and Venango Counties, Pennsylvania and Ashtabula and Lake Counties, Ohio. First Western Bank, F.S.B. occupies approximately one-fourth of its main office in Sharon, Pennsylvania with the remaining office space leased to unrelated parties. First Western Bank, F.S.B. owns its offices located in Sharon, Hermitage, Mercer, Grove City, Greenville, Slippery Rock and Erie (Peach Street, Pittsburgh Avenue and Girard), Pennsylvania and Ashtabula, Jefferson, Orwell, Painesville and
Conneaut, Ohio. First Western Bank, F.S.B. leases five other properties. First Western Bank, F.S.B.'s Erie--Peach Street and Erie--Pittsburgh Avenue offices are located on leased ground. The leases have expirations, costs and renewal options as follows:
Trust Services has entered into formal lease agreements with, and leases space for its trust offices from, First Western Bank, N.A. in New Castle and Beaver, and First Western Bank, F.S.B. in Hermitage and Erie. Each lease is for a five year term.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There were no material legal proceedings pending against First Western or its Subsidiaries as of December 31, 1996.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1996.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The required information is incorporated by reference to page 61 of the 1996 Annual Report.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The required information is incorporated by reference to pages 42 through 43 of the 1996 Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The required information is incorporated by reference to pages 44 through 61 of the 1996 Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The required information is incorporated by reference to pages 15 through 43 of the 1996 Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The required information with respect to Directors of First Western is incorporated by reference to pages 5 through 9 of the 1997 Annual Proxy Statement to Shareholders (the "1997 Proxy Statement").
Information required to be furnished pursuant to this item with respect to Executive Officers is set forth in Part I, Item I of this report and is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The required information is incorporated by reference to pages 9 through 17 of the 1997 Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information is incorporated by reference to pages 5 through 9 of the 1997 Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The required information is incorporated by reference to page 18 of the 1997 Proxy Statement.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The Consolidated Financial Statements of First Western Bancorp, Inc. and its Subsidiaries together with the Independent Auditors' Report dated January 24, 1997 (February 13, 1997 as to Note 21) are referenced in Part II, Item 8 - -Financial Statements and Supplementary Data and are incorporated by reference to pages 15 through 43 of the 1996 Annual Report.
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or the required information is given in the Consolidated Financial Statements or notes thereto.
(3) Exhibits:
The exhibit index appears on page 17 of this Form-10K.
(b) Reports on Form 8-K:
A report on Form 8-K under Item 5 dated November 26, 1996 was filed to report the sale of First Western's credit card portfolio.
A report on Form 8-K under Item 5 dated December 16, 1996 was filed to report the resignation of two directors and the extension of First Western's Common Stock Repurchase Plan.
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 WESTERN BANCORP, INC.
By /s/ THOMAS J. O'SHANE ----------------------------------- Thomas J. O'Shane Chairman of the Board, President and Chief Executive Officer Date: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
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* Indicates exhibit is a management contract or compensation plan or arrangement.