<PAGE> 1
VANDALIA NATIONAL CORPORATION
344 HIGH STREET
MORGANTOWN, WEST VIRGINIA 26505
(304) 284-2400
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 17, 1996
TO THE SHAREHOLDERS OF VANDALIA NATIONAL CORPORATION:
Notice is hereby given that a special meeting (the "Special
Meeting") of the shareholders of Vandalia National Corporation
("Vandalia") will be held on Tuesday, December 17, 1996,
at 4:00 P.M., in the principal office of The National Bank of
West Virginia, 344 High Street, Morgantown, West Virginia, for
the purpose of considering and voting on the following matters:
1. Approval of the Agreement and Plan of Merger by and
between Wesbanco, Inc., ("Wesbanco"), Vandalia, VNC Corporation,
a wholly owned subsidiary of Wesbanco ("VNC"), and Wesbanco Bank
Fairmont, Inc. ("Wesbanco Fairmont"), dated as of July 18, 1996 (the
"Agreement and Plan of Merger"), in the form attached to the
accompanying Proxy Statement/Prospectus as Appendix II, providing
for (i) the merger of VNC with and into Vandalia, (ii) the merger
of The National Bank of West Virginia, a wholly owned subsidiary
of Vandalia, with and into Wesbanco Fairmont, and (iii) the
exchange of each share of common stock, par value $1.00 per
share, of Vandalia for 1.2718 shares of common stock of Wesbanco,
par value $2.0833 per share, or, at such shareholder's election,
cash in the amount of $34.34 per share, all on the terms
described in the Agreement and Plan of Merger and summarized in
the Proxy Statement/Prospectus; and
2. Such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on
October 30, 1996, will be entitled to notice of and to vote at
the Special Meeting and any adjournment or postponement thereof.
The vote of each shareholder, regardless of the number of
shares held, is important. The failure of a holder of common
stock to vote will constitute a vote against the proposed Merger.
Accordingly, if you cannot attend the Special Meeting in person,
please mark, sign and date the accompanying Proxy and return it
promptly in the enclosed envelope, which requires no postage if
mailed in the United States. It is important that proxies be
mailed promptly. If the enclosed Proxy is executed and returned,
it may be revoked at any time prior to the voting of the Proxy by
written notice to the Secretary of Vandalia, by a duly executed
later-dated Proxy, or orally by the shareholder at the Special
Meeting.
Dated: November 8, 1996
By Order of the Board of Directors
/s/ John W. Fisher, II
Secretary
IMPORTANT
Whether you expect to attend the meeting or not, please mark,
sign, date, and return the enclosed Proxy in the enclosed self-
addressed envelope as promptly as possible.
<PAGE> 2
PROXY STATEMENT/PROSPECTUS
VANDALIA NATIONAL CORPORATION
344 HIGH STREET
MORGANTOWN, WV 26505
Special Meeting of the Shareholders to be held December 17, 1996.
This Proxy Statement, which is also a Prospectus of
Wesbanco, Inc. ("Wesbanco") (the "Proxy Statement/Prospectus") is
being furnished to holders of common stock of Vandalia National
Corporation, a Delaware corporation ("Vandalia"), in connection
with the solicitation of proxies by the Board of Directors of
Vandalia for use at the Special Meeting of Shareholders to be
held on December 17, 1996, and any adjournments or postponements
thereof, to consider and take action upon the proposed merger of
Vandalia with VNC Corporation ("VNC"), a wholly-owned subsidiary
of Wesbanco (the "Merger"), as described in this Proxy
Statement/Prospectus. As used in this Proxy
Statement/Prospectus, the terms "Vandalia" and "Wesbanco" refer
to such corporations, respectively, and where the context
requires, such entities and their subsidiaries.
All information contained in this Proxy Statement/Prospectus
with respect to Vandalia has been supplied by Vandalia, and all
information with respect to Wesbanco and Wesbanco Fairmont has
been supplied by Wesbanco. This Proxy Statement/Prospectus, the
attached Notice and the enclosed Letter to Shareholders and Proxy
are first being mailed to shareholders of Vandalia on or about
November 8, 1996.
Wesbanco has filed a Registration Statement pursuant to the
Securities Act of 1933, as amended, (the "1933 Act") covering a
maximum of 360,186 shares of common stock (par value $2.0833) of
Wesbanco which may be issued in connection with the Merger (the
"Registration Statement").
No person is authorized to give any information or to make
any representations not contained in this Proxy
Statement/Prospectus, and, if given or made, such information or
representation should not be relied upon as having been
authorized. This Proxy Statement/Prospectus does not constitute
an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Proxy Statement/Prospectus, or the
solicitation of a Proxy, in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation of any
offer or proxy solicitation in such jurisdiction. Neither the
delivery of this Proxy Statement/Prospectus nor any distribution
of the securities to which this Proxy Statement/Prospectus
relates shall, under any circumstances, create any implication
that there has been no change in the affairs of Vandalia or
Wesbanco since the date of this Proxy Statement/Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is November 8, 1996.
<PAGE> 3
AVAILABLE INFORMATION
Wesbanco is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files
reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission").
Information, as of particular dates, concerning directors and
officers of Wesbanco, their compensation, the principal holders
of securities and any material interest of such persons in
transactions with their respective companies is disclosed in
proxy statements distributed to shareholders and filed with the
Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C., 20549; and at the Commission's Regional offices
at 7 World Trade Center, New York, New York, 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C., 20549 at prescribed
rates, or via Internet Access at http:\\www.sec.gov.
Wesbanco's common stock is listed on the National Market
System of the Nasdaq Stock Market and accordingly periodic
reports, proxy and information statements concerning Wesbanco may
be inspected at the offices of the Nasdaq Stock Market, National
Market System, 1735 K Street, N.W., Washington, D.C. 20006
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE FILED BY WESBANCO WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST
WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN
OR ORAL REQUEST TO SHIRLEY A. BUCAN, SECRETARY, WESBANCO, INC.,
ONE BANK PLAZA, WHEELING, WEST VIRGINIA, 26003, (TELEPHONE (304)
234-9228). IN ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY DECEMBER 10, 1996.
<PAGE> 4
PROXY STATEMENT/PROSPECTUS
--------------------------
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . 3
SUMMARY INFORMATION . . . . . . . . . . . . . . . . . 7
MARKET PRICES AND SELECTED FINANCIAL INFORMATION . . . 15
Market Prices. . . . . . . . . . . . . . . . . . 15
SELECTED FINANCIAL INFORMATION FOR WESBANCO . . . . . 16
SELECTED FINANCIAL INFORMATION FOR VANDALIA . . . . . 17
INTRODUCTION . . . . . . . . . . . . . . . . . . . . 18
VOTING INFORMATION. . . . . . . . . . . . . . . . . . 18
Date, Time and Place of the Special Meeting. . . 18
Voting and Revocation of Proxies . . . . . . . . 18
Solicitation of Proxies . . . . . . . . . . . . . 19
Accountants . . . . . . . . . . . . . . . . . . . 20
Date for Submission of Shareholder Proposals .. . 20
THE MERGER . . . . . . . . . . . . . . . . . . . . . . 20
General . . . . . . . . . . . . . . . . . . .. . 20
Background of the Merger . . . . . . . . . . . . 21
Recommendation of the Boards of Directors . . . . 21
Vandalia Reasons for the Merger . . . . . . . . . 22
Wesbanco Reasons for the Merger . . . . . . . . . 23
Interest of Certain Persons in the Merger . . . . 23
Opinion of Ferris, Baker Watts, Incorporated. . . 25
Effective Time. . . . . . . . . . . . . . . . . . 29
Conversion of Vandalia Common Stock. . . . . . .. 30
Exchange of Certificates. . . . . . . . . . . . . 30
Election to Receive Cash . . . . . . . . . . . .. 31
Wesbanco, Wesbanco Fairmont and VNC
Shareholder Approval. . . . . . . . . . . . . 31
Effects of the Mergers: The Surviving
Corporations . . . . . . . . . . . . . . . . 31
Conditions and Covenants. . . . . . . . . . . . . 33
Approval by Vandalia Shareholders . . . . . . . . 33
Government Approvals . . . . . . . . . . . . . . . 33
Covenants. . . . . . . . . . . . . . . . . . . . . 34
Other Conditions . . . . . . . . . . . . . . . . . 35
Waiver and Amendment . . . . . . . . . . . . . . . 36
Termination. . . . . . . . . . . . . . . . . . . . 36
The Stockholder Agreement . . . . . . . . . . . . 36
<PAGE> 5
PROXY STATEMENT/PROSPECTUS
--------------------------
TABLE OF CONTENTS
(Continued)
PAGE
----
Appraisal Rights of Dissenting Shareholders . . . 37
Resales of Wesbanco Common Stock. . . . . . . . . 40
Expenses . . . . . . . . . . . . . . . . . . . .. 41
Accounting Treatment . . . . . . . . . . . . . . . . . . 41
Certain Federal Income Tax Consequences of the Merger . 41
COMPARATIVE STOCK PRICES AND DIVIDENDS . . . . . . . . . . . 44
Wesbanco Stock Prices and Dividends . . . . . . . . . .. 44
Stock Price Range . . . . . . . . . . . . . . . . . . .. 44
Dividends Paid. . . . . . . . . . . . . . . . . . . . . 44
Wesbanco Common Stock Dividend Policy . . . . . . . . .. 45
Vandalia Stock Price Range and Dividends . . . . . . . . 45
Vandalia Dividend Policy. . . . . . . . . . . . . . . . 46
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . 47
Description of Wesbanco Capital Stock . . . . . . . . . 47
Description of Vandalia Capital Stock . . . . . . . . . 48
Comparison of Rights of Wesbanco and Vandalia
Shareholders . . . . . . . . . . . . . . . . . . .. . 49
PRO FORMA DATA . . . . . . . . . . . . . . . . . . . . . .. . 53
Notes to Pro Forma Financial Information . . . . . . . . 57
INFORMATION WITH RESPECT TO WESBANCO . . . . . . . . . . .. . 59
History. . . . . . . . . . . . . . . . . . . . . . . . . 59
Recent Acquisitions. . . . . . . . . . . . . . . . . . . 60
Future Acquisitions . . . . . . . . . . . . . . . . .. . 61
Operations . . . . . . . . . . . . . . . . . . . . . . . 62
Competition . . . . . . . . . . . . . . . . . . . . . 63
Principal Shareholders . . . . . . . . . . . . . . . .. 64
Wesbanco KSOP. . . . . . . . . . . . . . . . . . . . . . 65
Changes in West Virginia Taxes. . . . . . . . . . . . . 68
Directors and Executive Officers . . . . . . . . . . . . 68
Executive Compensation. . . . . . . . . . . . . . . . . 68
Certain Relationships and Related Transactions . . . . . 68
INFORMATION WITH RESPECT TO VANDALIA. . . . . . . . . . . . . 69
History . . . . . . . . . . . . . . . . . . . . . . . . . 69
Banking Services . . . . . . . . . . . . . . . . . . . . 69
Competition . . . . . . . . . . . . . . . . . . . . . . . 70
Economic Conditions . . . . . . . . . . . . . . . . . . . 70
Properties of Vandalia. . . . . . . . . . . . . . . . . . 70
<PAGE> 6
PROXY STATEMENT/PROSPECTUS
--------------------------
TABLE OF CONTENTS
(Continued)
PAGE
----
Legal Proceedings . . . . . . . . . . . . . . . . . . . 71
Principal Shareholders. . . . . . . . . . . . . . . . . 71
Directors and Executive Officers of Vandalia. . . . . . 72
Executive Officers . . . . . . . . . . . . . . . . . . 76
Compensation of Executive Officers. . . . . . . . . . . 77
401(k) Profit Sharing Plan. . . . . . . . . . . . . . . 77
Employment Agreements . . . . . . . . . . . . . . . . . 78
Meetings of the Board of Directors and Compensation of
Members . . . . . . . . . . . . . . . . . . . . . . 78
Certain Relationships and Related Transactions . . . . . 78
GOVERNMENT REGULATION . . . . . . . . . . . . . . . . . . . 80
Holding Company Structure . . . . . . . . . . . . . . . 80
Dividend Restrictions. . . . . . . . . . . . . . . . . . 81
FDIC Insurance. . . . . . . . . . . . . . . . . . . . . 82
Capital Requirements . . . . . . . . . . . . . . . . . . 83
Federal Deposit Insurance Corporation Improvement
Act of 1991 . . . . .. . . . . . . . . . . . . . . . 85
Environmental Issues . . . . . . . . . . . . . . . . . . 87
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . 88
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS . . . . . . . . . . 90
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 90
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 91
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 92
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . .. .
I. Statutory Excerpts Concerning Shareholder
Appraisal Rights 145
II. Agreement and Plan of Merger 150
III. Stockholders Agreement 223
IV. Wesbanco's 1995 Financial Statements, Notes to
Financial Statements and Management,s Discussion
and Analysis, restated to include Bank of Weirton 227
<PAGE> 7
SUMMARY INFORMATION
The following is a brief summary of certain information with
respect to matters to be considered at the Special Meeting of
Shareholders of Vandalia. This summary is necessarily incomplete
and is qualified in its entirety by the more detailed information
and financial statements contained in this Proxy
Statement/Prospectus and in the Agreement and Plan of Merger and
the Stockholders Agreement attached as Appendices II and III,
respectively, to this Proxy Statement/Prospectus. Shareholders
are urged to read the entire Proxy Statement/Prospectus before
deciding on how to vote their shares.
Date, Time, and Place of
the Special Meeting. . . The meeting of the shareholders of
Vandalia will be held on Tuesday,
December 17, 1996, at 4:00 P.M.
Eastern Standard Time in the
principal office of The National
Bank of West Virginia at 344 High
Street, Morgantown, West Virginia,
26505. See "Voting Information".
Purpose of the Special Vandalia's meeting will be to
Meeting. . . . . consider and vote upon the Agreement
and Plan of Merger dated as of July
18, 1996, (the "Agreement"),
providing for (i) the merger (the
"Merger") of VNC with and into
Vandalia, (ii) the merger (the "Bank
Merger") of The National Bank of
West Virginia, the sole subsidiary
bank of Vandalia ("NBWV") with and
into Wesbanco Bank Fairmont, Inc., a
wholly owned subsidiary of Wesbanco
("Wesbanco Fairmont"), and (iii) the
exchange of each outstanding share
of common stock, par value $1.00 per
share ("Vandalia Common Stock") for
1.2718 shares of Wesbanco common
stock, par value $2.0833 per share
("Wesbanco Common Stock"), or at the
election of such shareholder an
exchange of such Vandalia Common
Stock for cash in the amount of
$34.34 per share, or part cash and
part stock, as above provided. See
"Voting Information" and "The
Merger".
Parties to the Merger. . . Wesbanco is a multi-bank holding
company incorporated under the laws
of the State of West Virginia which
conducts a general commercial
banking and trust business through
its bank subsidiaries. It owns six
subsidiary banks located in West
Virginia and Eastern Ohio with one
of its principal banking
subsidiaries being Wesbanco
Fairmont. Wesbanco's principal
executive offices are
<PAGE> 8
located at One Bank Plaza, Wheeling,
West Virginia, 26003, telephone
(304) 234-9000. See "Information
with Respect to Wesbanco".
Wesbanco Fairmont is a West Virginia
banking corporation and is a wholly
owned subsidiary of Wesbanco which
operates banking facilities in
Fairmont, Bridgeport, Morgantown,
Shinnston and Kingwood.
Vandalia is a one bank holding
company incorporated under the laws
of the State of Delaware which
conducts a general commercial
banking business through its banking
subsidiary, NBWV. It operates three
banking facilities in the City of
Morgantown. Its principal executive
offices are located at 344 High
Street, Morgantown, West Virginia,
26507, telephone (304) 284-2400.
See "Information with Respect to
Vandalia".
Wesbanco Anti-Takeover The Agreement provides for the
Provisions. . . . . . . . exchange of each share of Vandalia
Common Stock for 1.2718 shares of
Wesbanco Common Stock. The Articles
of Incorporation of Wesbanco contain
certain anti-takeover provisions,
including, among others, a super
majority voting provision and a
staggered Board of Directors
provision as more fully explained
herein. Additionally, the Articles
of Incorporation of Wesbanco provide
that the Board of Directors of
Wesbanco may issue, without
shareholder approval, up to
1,000,000 shares of preferred stock
in one or more series, with such
preferences, voting rights,
conversion rights and other special
rights as the Board may determine.
The rights of holders of Wesbanco
Common Stock are subject to the
rights and preferences of any
preferred stock issued by the
Wesbanco Board of Directors to the
extent set forth in a resolution
fixing such terms and conditions.
Under certain circumstances,
additional shares of Wesbanco Common
Stock or shares of Wesbanco
preferred stock which are authorized
but not issued could be used to
create voting impediments or to
frustrate persons seeking to gain
control of Wesbanco through
acquisition of a substantial number
of shares of Wesbanco Common Stock.
See "Comparative Rights
<PAGE> 9
of Shareholders - Comparison of Rights
of Wesbanco and Vandalia Shareholders".
These anti-takeover provisions provide the
continuity and stability
of management that are considered
essential to providing shareholders
with long-term value on their
investments, allow the Board greater
flexibility, and permit the issuance
of additional common and preferred
shares without the expense and delay
of a shareholders' meeting. These
provisions also constitute defensive
measures which are designed, in part
to discourage and insulate
Wesbanco against certain hostile
takeover efforts, which the
Wesbanco Board might determine are
not in Wesbanco's best interests and
the best interests of its
shareholders. The staggered board
provision makes it more difficult to
change the full Board of Directors
of Wesbanco at any one time and
makes it more difficult to amend the
specific provisions of the Articles
of Incorporation which deal with the
classification of directors. The
staggered board provision reduces
the number of directors to be
elected at each annual meeting, so
that minority shareholders may be in
a less favorable position to elect
directors through cumulative voting.
Such provisions may also be
beneficial to management in a
hostile takeover attempt and
adversely affect shareholders who
might wish to participate in such a
takeover. See "Comparative Rights
of Shareholders".
Vote Required for Merger. Approval of the Merger requires the
affirmative vote of the holders of a
majority of the outstanding shares
of Vandalia Common Stock entitled to
vote as of October 30, 1996, the
record date for the Special Meeting
(the "Record Date").
As of the Record Date, the directors
and officers of Vandalia
beneficially owned 162,590 shares of
Vandalia Common Stock representing
57.45% of the outstanding shares.
See "Information with Respect to
Vandalia - Principal Shareholders"
and "Voting Information - Voting and
Revocation of Proxies".
Approval of the Merger also requires
the affirmative vote of the sole
shareholder of Wesbanco Fairmont and
VNC. The authorization for the
issuance of additional Wesbanco
Common Stock also requires
<PAGE> 10
the affirmative vote of the Board of
Directors of Wesbanco. See "The
Merger - Wesbanco, VNC and Wesbanco
Fairmont Shareholder Approval".
Terms of the Merger . . . Upon the effective date of the
Merger, each out-standing share of
Vandalia Common Stock will be
converted into 1.2718 shares of
Wesbanco Common Stock, or, at the
election of such shareholder into
cash in the amount of $34.34 per
share. Cash will also be paid in
lieu of issuing fractional shares
of Wesbanco Common Stock, in connection
with the Merger based on a whole
share value of $27.00 per share, or
at the election of each shareholder,
such shareholder may elect to
purchase the remaining fraction of
such share, at the aforesaid value.
For additional information
concerning the treatment of Vandalia
shares in the Merger, and the effect
of the Merger upon Vandalia
shareholders, see "The Merger". It
is contemplated that VNC, a wholly
owned subsidiary of Wesbanco, will
be merged with Vandalia, with
Vandalia being the surviving
corporation under the Articles of
Incorporation of Vandalia. It is
also contemplated that NBWV will be
merged with and into Wesbanco
Fairmont with Wesbanco Fairmont as
the surviving corporation. Wesbanco
Fairmont will maintain its separate
identity and continue its operations
as an affiliate of Wesbanco. The
Merger will be accounted for as a
"purchase" by Wesbanco of Vandalia.
If the Merger had been concluded on
September 30, 1996, Vandalia would have
constituted 3.9% of deposits, 3.5%
of assets, 2.0% of equity, and the
former shareholders of Vandalia
would hold 3.5% (assuming all
Vandalia shareholders elect to
receive stock) of the total
outstanding shares of Wesbanco on a
consolidated pro forma basis. In
addition, Vandalia would have
contributed 3.8% of net interest
and 1.3% of net income of Wesbanco
on a consolidated pro forma basis as
of September 30, 1996. See "The Merger -
Effects of the Mergers: The
Surviving Corporations" and
"Selected Pro Forma Financial
Information".
Appraisal Rights. . . . . Stockholders of Vandalia who dissent
from the Merger pursuant to the
provisions of the Delaware General
Corporation Law, Section 262, are
entitled to
<PAGE> 11
receive the fair value
of their shares in cash as
determined in accordance with such
law. Holders of Wesbanco Common
Stock will not be entitled to
dissenters' rights in the
transaction. See "The Merger -
Appraisal Rights of Dissenting
Shareholders", and "Appendix I". It
is a condition to the obligations of
Wesbanco and Vandalia to consummate
the Merger that the holders of not
more than 10% of Vandalia Common
Stock exercise their appraisal
rights. See "The Merger -
Conditions and Covenants".
Federal Income Tax Consummation of the Merger is
Consequences. . conditioned upon receipt of
an opinion of counsel, that,
among other things, the Merger will
be treated as a tax free
reorganization for Federal Income
Tax purposes upon consummation of
the Merger except to the extent
shareholders elect to receive cash
for their shares and for dissenting
shareholders and shareholders who
receive cash for fractional shares.
See "The Merger - Certain Federal
Income Tax Consequences of the
Merger".
Regulatory Approvals. . . Notwithstanding approval by the
shareholders of Vandalia, VNC and
Wesbanco Fairmont, the consummation
of the Merger and the Bank Merger
are subject to certain conditions,
including approval of the Board of
Governors of the Federal Reserve
System, the Federal Deposit
Insurance Corporation, and the Board
of Banking and Financial
Institutions of the State of West
Virginia. Applications for approval
with the regulatory authorities were
filed shortly after execution of the
Agreement and the applicable regulatory
agencies have each now approved the
Merger and the Bank Merger.
See "The Merger - Conditions and
Covenants" and "Termination".
Effective Date of Merger. The Effective Date of the Merger is
anticipated to occur shortly after
the Special Meeting upon receipt of
all approvals and
satisfaction of all conditions in
the Agreement and in such approvals.
See "The Merger - Effective Time".
Shareholders Entitled to On October 30, 1996, there were
Vote. . . . . . 282,994 shares of Vandalia Common
Stock outstanding. Only holders of
record of Vandalia Common Stock at
the close of
<PAGE> 12
business on October 30,
1996, are entitled to vote at
the Special Meeting. See "Voting
Information".
Exchange of Certificates. As promptly as practicable after the
Effective Date, instructions on how
to effect the exchange of
certificates of Vandalia Common
Stock for certificates of Wesbanco
Common Stock or cash will be sent to
each Vandalia shareholder of record
as of the Effective Date. See
"The Merger - Exchange of
Certificates". Vandalia
shareholders should not send in
stock certificates until they
receive instructions to do so.
Wesbanco Common Stock . . Holders of Wesbanco Common Stock are
entitled to one vote per share on
all matters voted upon by
shareholders, are entitled to
cumulative voting rights in the
election of directors and do not
have preemptive rights for the
purchase of additional shares of any
class of Wesbanco Common Stock or
preferred stock. Holders of
Wesbanco Common Stock are entitled
to receive such dividends as may be
declared by Wesbanco's Board of
Directors out of funds legally
available therefor. In the event of
the liquidation or winding up of the
affairs of Wesbanco, holders of
Wesbanco Common Stock would be
entitled to share ratably in all
assets remaining after payment to
creditors. See "Comparative Rights
of Shareholders".
Conditions to Consummation
Termination. . . . . . . . Consummation of the Merger is
subject to various conditions,
including, among others, approvals
by the above noted regulatory
authorities, the holders of Vandalia
Common Stock, and receipt of the tax
opinion mentioned above.
Wesbanco and Vandalia have also
reserved the right to terminate the
Merger if the holders of more than
10% of Vandalia Common Stock
exercise appraisal rights with
respect to their stock. Vandalia has
also reserved the right to terminate
the Merger if the closing has not
occurred by January 31, 1997; and if
the market value of Wesbanco Common
Stock should fall below $25.00 per
share (based on the average price of
Wesbanco for
<PAGE> 13
the 30 calendar days
preceding five business days before
closing), in addition to other
conditions. See "The Merger -
Conditions and Covenants and
Termination".
Interest of Certain
Persons in the The Agreement provides that Reed J.
Merger. . . . . . . . . . Tanner, a director of Vandalia, will
become a director of
Wesbanco on the Effective Date.
Also, the Agreement provides that C.
Barton Loar, Vaughn L. Kiger, Robert
D'Alessandri, John W. Fisher, II,
Roger E. King and Reed J. Tanner,
all Vandalia directors,
will become directors of Wesbanco
Fairmont on the Effective Date, and
further, that Mr. Loar and Mr. Kiger
will become members of the Executive
Committee of the Board of Directors
of Wesbanco Fairmont. In addition,
it is a condition to consummation of
the Merger that C. Barton Loar,
President of Vandalia, enter into an
Employment Agreement with NBWV. See
"The Merger - Interest of Certain
Persons in the Merger".
Stockholder Agreement. . . Certain Stockholders of Vandalia
entered into a Stockholder Agreement
as of July 18, 1996, whereby each
such stockholder agreed, among other
things, not to sell, pledge,
transfer or otherwise dispose of his
shares of Vandalia Common Stock
prior to the Special Meeting of
Shareholders and to vote such shares
in favor of the Merger. The
shareholders who signed the Agreement
constitute all of the members of the Board
of Directors and own individually
and beneficially 57.45% of the
outstanding Vandalia Common Stock.
See "The Merger - The Stockholder
Agreement".
Financial Information. . . Financial Statements for the interim
period ended September 30, 1996, for
Vandalia and Wesbanco (including
Weirton) are included herein. See
"Index to Financial Statements", and
"Pro Forma Data."
For the nine months ended September 30,
1996, Wesbanco's net income was
$16,073,000 or $1.58 per share.
Total assets were approximately
$1,600,769,000, total deposits were
approximately $1,271,512,000 and
total shareholders' equity was
approximately $214,426,000.
<PAGE> 14
For the nine months ended September 30,
1996, Vandalia's net income was
$213,000 or $.75 per share. Total
assets were approximately
$57,414,000, total deposits were
approximately $52,174,000 and total
stockholders' equity was
approximately $4,375,000.
<PAGE> 15
MARKET PRICES AND SELECTED FINANCIAL INFORMATION
Market Prices
Wesbanco Common Stock is quoted in the over-the-counter
market and is reported through the Nasdaq Stock Market on the
National Market System. There is no established public trading
market for Vandalia Common Stock. The information set forth
below for Vandalia represents only the per share equivalent based
on the market price of Wesbanco Common Stock as of the dates
indicated. These stock price ranges may not necessarily
represent actual transactions. See "Comparative Stock Prices and
Dividends".
Market Price Per Share: Wesbanco Vandalia
-------- --------
Bid Asked Bid Asked
--- ----- --- -----
As of October 30, 1996 $29.75 $30.50 $38.31(1) None
As of July 18, 1996 (2) $26.50 $27.00 None(4) None (4)
Pro Forma Equivalent (3) $34.02 None
(1) Based solely on the conversion ratio multiplied by the average of the
bid and asked prices for Wesbanco Common Stock on such date.
(2) July 18, 1996, is the date immediately preceding public announcement
of the proposed Merger.
(3) The pro forma equivalent was computed by multiplying the exchange ratio
by the by the average of the bid and ask price of Wesbanco as of
July 18, 1996. The exchange ratio is 1.2718 shares of Wesbanco Common
Stock for each share of Vandalia Common Stock.
(4) Vandalia Common Stock had no bid or asked price for the reported date.
Vandalia is not aware of any trades in Vandalia Common Stock during 1996.
Selected Financial Information
The following pages present selected financial information
for the years ended December 31, 1991 through 1995, and for the
six months ended June 30, 1995 and 1996, for Wesbanco (including
Weirton) and for Vandalia.
The information should be read in conjunction with the more
detailed information in the financial statements contained or
incorporated herein by reference, including the Notes thereto.
See "Index to Financial Statements", "Incorporation of Certain
Documents by Reference", and "Pro Forma Data".
<PAGE> 16
WESBANCO INC.
Selected Financial Information
(In thousands, except for share and per share data)
(Unaudited)(2)
<TABLE>
For the nine months ended For the years ended
September 30, December 31,
--------------------- -----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $83,644 $80,175 $108,082 $101,720 $105,268 $112,851 $121,486
Interest expense 35,723 34,319 46,570 39,660 43,727 53,661 66,702
----------------------------------------------------------------------------------------------
Net Interest income 47,921 45,856 61,512 62,060 61,541 59,190 54,784
----------------------------------------------------------------------------------------------
Provision for loan losses 2,848 1,687 2,788 6,073 3,247 3,297 2,976
----------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 45,073 44,169 58,724 55,987 58,294 55,893 51,808
Total other income 8,701 8,710 11,366 11,028 10,367 10,272 9,456
Total other expense 31,446 31,310 42,130 42,840 41,873 40,610 39,645
----------------------------------------------------------------------------------------------
Income before income taxes and
effect of change in accounting
for post-retirement benefits 22,328 21,569 27,960 24,175 26,788 25,555 21,619
Provision for income taxes 6,255 6,107 7,656 6,283 7,070 7,044 5,609
----------------------------------------------------------------------------------------------
Income before effect of change in
accounting for postretirement
benefits 16,073 15,462 20,304 17,892 19,718 18,511 16,010
Effect of change in accounting
for postretirement benefits (592)
----------------------------------------------------------------------------------------------
Net Income $16,073 $15,462 $20,304 $17,892 $19,718 $17,919 $16,010
==============================================================================================
Earnings per share of
common stock: (1)
Net Income $1.58 $1.51 $1.98 $1.72 $1.88 $1.71 $1.52
Average shares outstanding 10,186,456 10,166,882 10,160,328 10,280,878 10,379,499 10,397,197 10,394,537
Preferred stock dividends
and discount accretion 0 137 164 183 184 184 184
Total Assets $1,600,769 $1,538,332 $1,549,019 $1,532,832 $1,534,101 $1,500,687 $1,448,597
Total Deposits $1,271,512 $1,246,903 $1,254,844 $1,254,586 $1,265,677 $1,245,978 $1,203,349
Total Equity $214,426 $202,081 $206,996 $192,305 $191,922 $180,762 $169,859
Cash dividends declared
per share 0.80 0.71 0.96 0.86 0.785 0.70 0.675
Book value per share 20.97 20.02 20.32 18.86 18.52 17.41 16.67
</TABLE>
(1) Per share information has been retroactively adjusted for the April 1993
two for one stock split.
(2) Bank of Weirton financial information was not audited prior to
December 31, 1993.
<PAGE> 17
VANDALIA NATIONAL CORPORATION
Selected Financial Information
(In thousands, except for share and per share data)
<TABLE>
<CAPTION>
For the nine months ended
September 30, For the years ended
--------------------------- December 31,
1996 1995 ----------------------------------------------------------
---- ---- 1995 1994 1993 1992 1991(1)
(Unaudited) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $3,703 $3,629 $4,892 $3,928 $3,533 $2,613 $1,170
Interest expense 1,789 1,783 2,387 1,821 1,778 1,383 635
--------------------------------------------------------------------------------------------
Net Interest income 1,914 1,846 2,505 2,107 1,755 1,230 535
--------------------------------------------------------------------------------------------
Provision for loan losses 345 93 123 62 556 213 144
--------------------------------------------------------------------------------------------
Net interest income after
provision for possible loan
losses 1,569 1,753 2,382 2,045 1,199 1,017 391
Total other income 288 210 279 214 246 157 56
Total other expense 1,573 1,577 2,162 2,056 1,502 1,160 937
-------------------------------------------------------------------------------------------
Income (loss) before income
taxes and cumulative change in 284 386 499 203 (57) 14 (490)
accounting principle
Income tax provision (benefit) 71 117 155 63 (79) 0 0
Cumulative change in accounting
principle 170
-------------------------------------------------------------------------------------------
Net Income (Loss) $213 $269 $344 $140 $192 $14 ($490)
===========================================================================================
Earnings per share of
common stock:
Net Income (Loss) $0.75 $0.95 $1.22 $0.50 $0.68 $0.05 ($1.74)
Average shares outstanding 282,994 282,994 282,994 282,991 282,930 282,599 282,546
Total Assets $57,414 $58,023 $58,230 $51,228 $48,557 $39,992 $22,104
Total Deposits 52,174 52,255 52,245 46,089 40,142 35,243 18,027
Total Equity 4,375 4,045 4,276 3,378 3,843 3,648 3,629
Cash dividends declared per share N/A N/A N/A N/A N/A N/A N/A
Book value per share 15.46 14.29 15.11 11.94 13.58 12.91 12.85
</TABLE>
(1) Vandalia commenced operations in November 1990.
<PAGE> 18
INTRODUCTION
This Proxy Statement/Prospectus and the accompanying proxy
are being mailed to the shareholders of Vandalia on or about
November 8, 1996, in connection with the solicitation of
proxies by the Board of Directors of Vandalia of the holders of
Vandalia Common Stock to be voted at the Special Meeting of
Vandalia shareholders (the "Special Meeting") called to consider
and vote upon the Agreement and Plan of Merger dated July 18,
1996, (the "Agreement") providing for (i) the Merger of VNC with
and into Vandalia, (ii) the Bank Merger of NBWV with and into
Wesbanco Fairmont, a wholly owned subsidiary of Wesbanco, and
(iii) the exchange of each outstanding share of Vandalia Common
Stock for 1.2718 shares of Wesbanco Common Stock, or, at the
election of the holder thereof, cash in the amount of $34.34 per
share. The Boards of Directors of Vandalia and Wesbanco
unanimously have approved the Agreement, and the Board of
Directors of Vandalia unanimously recommends that its
shareholders vote FOR approval thereof. For information
concerning the background of, reasons for and terms and
conditions of the Merger and the interests of certain persons,
including members of the Board of Directors of Vandalia in the
Merger, see "THE MERGER", including "Background of the Merger",
"Recommendation of the Boards of Directors", "Wesbanco Reasons
for the Merger", "Vandalia Reasons for the Merger", and "Interest
of Certain Persons in the Merger."
A copy of the Agreement is attached to this Proxy
Statement/Prospectus as Appendix II and is incorporated by
reference herein in its entirety. See also the following
subheadings under "THE MERGER": "Conditions and Covenants,"
"Waiver and Amendment" and "Termination". All information
concerning Vandalia contained herein has been supplied by
Vandalia, and all information concerning Wesbanco contained
herein has been supplied by Wesbanco.
VOTING INFORMATION
Date, Time and Place of the Special Meeting
The Special Meeting of Vandalia will be held on Tuesday,
December 17, 1996, at 4:00 P.M., Eastern Standard Time, in the
principal office of NBWV, at 344 High Street in Morgantown, West
Virginia.
Voting and Revocation of Proxies
Only holders of record of Vandalia Common Stock on October 30,
1996, the Record Date, will be entitled to notice of and to
vote at the Special Meeting of Vandalia and any adjournments or
postponements thereof. On the Record Date, there were
outstanding and entitled to vote 282,994 shares of Vandalia
Common Stock with each share entitled to one vote. As of
October 30, 1996, Vandalia Common Stock was held by
approximately 290 shareholders of record. As of October 30,
1996, Wesbanco Common Stock was held by approximately 4,019
shareholders of record.
<PAGE> 19
The presence, in person or by proxy, of the holders of a
majority of the 282,994 shares of Vandalia Common Stock entitled
to vote is necessary to constitute a quorum at the Special
Meeting. The affirmative vote of the holders of at least a
majority of the outstanding 282,994 shares of Vandalia Common
Stock entitled to vote at the Special Meeting, or 141,498 shares
is required for approval of the Agreement and the Merger. With
respect to the Vandalia Common Stock, abstentions and broker
non-votes will have the effect of a vote against approval of the
Agreement and the Merger.
As of the Record Date, the directors and officers of
Vandalia beneficially owned approximately, in the aggregate,
162,590 shares of Vandalia Common Stock, constituting in the
aggregate approximately 57.45% of the outstanding Vandalia Common
Stock as of such date. See "The Merger - The Stockholder
Agreement."
As of October 30, 1996, Wesbanco held no shares of Vandalia
Common Stock. Directors, executive officers and affiliates of
Wesbanco owned no shares of Vandalia Common Stock as of such
date, except for Ernest S. Fragale who owns 375 shares of
Vandalia Common Stock.
All shares of Vandalia Common Stock represented at the
Special Meeting by properly executed proxies received prior to or
at the Special Meeting, and not revoked, will be voted at the
Special Meeting in accordance with the instructions on the
proxies. If no instructions are indicated, properly executed
proxies will be voted to approve the Agreement and authorize the
Merger in accordance with the terms and conditions of the
Agreement.
The Boards of Directors of Vandalia and Wesbanco do not know
of any matters, other than as described in the Notice of Special
Meeting, which are to come before the Special Meeting. If any
other matters are properly presented at the Special Meeting for
action, the persons named in the enclosed form of proxy and
acting thereunder, both of whom are shareholders of Vandalia,
will have the authority to vote on such matters in their
discretion.
A shareholder giving a proxy has the right to revoke it at
any time before it is voted by filing with the Secretary of
Vandalia a written notice of revocation or a duly executed later-
dated proxy, or orally at the Special Meeting.
Solicitation of Proxies
Proxies are being solicited by the Board of Directors of
Vandalia for use at the Special Meeting. Vandalia will bear the
cost of the solicitation of proxies from the holders of its
shareholders in connection with its Special Meeting, except that
Wesbanco will bear substantially all the costs relating to the
printing and mailing of the Proxy Statement/Prospectus. In
addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of Vandalia in
person or by telephone or telegram. Such directors, officers and
employees will not be additionally compensated but may be
reimbursed for out-of-pocket expenses they incur in connection
with the solicitation. Arrangements will also be made with
custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial
<PAGE> 20
owners of Vandalia Common Stock held of record by such persons, and
Vandalia may reimburse such custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses they incur in connection therewith.
Accountants
Arnett & Foster, independent certified public accountants,
have provided auditing services to Vandalia since 1990.
Representatives of Arnett & Foster are expected to be present at
the Vandalia Special Meeting to respond to appropriate questions
and will also have the opportunity to make a statement if they
desire to do so. See "Relationship With Independent Accountants"
and "Experts".
Ernst & Young LLP serves as Wesbanco's independent
accountant for the year 1996. It is expected that representatives
of Ernst & Young may be present at the Special Meeting. Such
representatives will have the opportunity to make a statement if
they desire to do so and will be available to respond to
questions.
Date for Submission of Shareholder Proposals
In the event that the Merger has not been consummated by the
date of the next Vandalia annual meeting, shareholder proposals
may be submitted to the attention of John W. Fisher, II,
Secretary, Vandalia National Corporation, 344 High Street,
Morgantown, West Virginia, 26505. Such proposals are to be
received by Vandalia no later than the 22nd day of December,
1996.
THE MERGER
The following description of the terms of the Merger is
qualified in its entirety by reference to the provisions of the
Agreement and the Stockholder Agreement, which are attached
hereto as Appendices II and III, respectively, and are
incorporated herein by reference in their entirety. Shareholders
of Vandalia are strongly encouraged to read the Agreement and the
Stockholder Agreement for a more complete description of the
terms of the Merger.
General
Pursuant to the Agreement, Vandalia will merge with VNC, a
wholly owned subsidiary of Wesbanco, the Merger, and NBWV, the
wholly owned banking subsidiary of Vandalia, will merge with and
into Wesbanco Fairmont, a wholly owned subsidiary of Wesbanco
which will be the surviving corporation, the Bank Merger. Under
the Agreement, each outstanding share of Vandalia Common Stock
will be converted into 1.2718 shares of Wesbanco Common Stock,
with cash, or the opportunity to buy an additional fraction,
sufficient to result in a whole share for any resulting fraction,
except for shares held by dissenting Vandalia Shareholders.
Alternatively, each shareholder may elect to receive cash for
part or all of such shareholder's Vandalia Common Stock in the
amount of $34.34 for each share for which such an election is
made. See "Rights of Dissenting Shareholders" below. The
conversion is more fully described below. See "Conversion of
Vandalia Common Stock".
<PAGE> 21
Background of the Merger
For the last several years, the Morgantown economy has been
growing. As a result, the business of NBWV has grown rapidly
since it began operations in November 1990.
Starting in 1993, the rapid growth of NBWV created the need
to raise additional capital for NBWV. In the fourth quarter of
1994 and again in the third quarter of 1995, Vandalia had made
preparations to sell additional shares of its capital stock. The
purpose of both offerings was to provide additional capital to
NBWV to enable it to grow with the local Morgantown economy,
maintaining and expanding its deposit base and lending
relationships, without the restrictions imposed by the size of
its capital base.
The proposed 1994 offering was abandoned when Vandalia
received an unsolicited offer for the purchase of the company.
The 1995 offering was abandoned when it became clear that several
directors of Vandalia, including the company's largest
shareholder, desired, for estate planning and other reasons, to
liquidate their investment in Vandalia through an acquisition of
the company.
In the first quarter of 1996, efforts began to solicit
offers for the sale of Vandalia. Management discussed the sale
of the company with a number of bank holding companies, most
headquartered in West Virginia but some headquartered outside of
West Virginia. At the May meeting of Vandalia's Board of
Directors, the Board discussed the offers that had been received
but reached no decision. In addition, after discussion of
various candidates, the Board authorized the engagement of an
investment banker to assist the Board in evaluating the offers
with respect to the fairness of the financial terms offered.
At the meeting of Vandalia's Board on June 28, 1996, the
Board again reviewed the offers for the company. The Board also
received the advice of its investment banker, Ferris, Baker
Watts, Incorporated. After discussion, the Board selected to
pursue the offer of Wesbanco.
By action of July 18, 1996, Vandalia's Board authorized its
management to enter into the Agreement. Also on that date all of
the directors of Vandalia entered into the Stockholder's
Agreement whereby each agreed to vote for the acquisition of
Vandalia by Wesbanco as contemplated in the Agreement. See
"The Stockholder Agreement" below.
For additional information regarding the reasons for the
decision of Vandalia's Board to select the Wesbanco offer, see
"Vandalia's Reasons for the Merger" below.
Recommendation of the Boards of Directors
The Boards of Directors of Vandalia and Wesbanco have
approved the Agreement by unanimous vote of the directors of the
respective corporations and recommend that the Vandalia
<PAGE> 22
shareholders vote for approval of the Agreement and the exchange
of stock or cash, as the case may be. The Boards of Directors of
Vandalia and Wesbanco have determined that the Agreement is in
the best interests of their respective companies, shareholders
and employees, and that the Merger will enhance the ability of
Wesbanco and Vandalia to serve the financial needs of their
respective customers.
The Boards of Directors of Wesbanco and Vandalia believe
that the Merger will produce a stronger combined entity better
able to compete with banks and a variety of non-bank institutions
including securities companies, insurance companies, thrift
institutions and retailers, in a financial services industry that
has changed and is in the process of changing further.
Vandalia's Reasons for the Merger
The Vandalia Board selected to pursue an acquisition by
Wesbanco over the competing offers it had received, some of which
were for prices which exceeded the price offered by Wesbanco. In
making its determination to proceed with a transaction with
Wesbanco, the Board of Directors of Vandalia considered a number
of factors, including (i) the operating history, financial and
future prospects of Wesbanco and the other competing offerors,
(ii) financial information concerning the offerors, including,
among other things, various financial ratios, earnings and
dividends per share, (iii) a comparison of the price being paid
in this Merger to other comparable bank mergers, based, among
other things, on multiples of book value and earnings, (iv) the
historical dividends on Wesbanco Common Stock, as well as
prospects for future dividends, as compared to dividend
information regarding competing offers, (v) the tax-free nature
of the transaction while permitting a limited
shareholder election to receive cash in exchange for his or her
stock, (see, generally, "Certain Federal Income Tax Consequences
of the Merger" below), (vi) the historical trading prices for Vandalia
Common Stock and Wesbanco Common Stock, (vii) the thinness of the
trading markets for the common stock of competing offerors, and
(viii) the provisions of the Agreement allowing Vandalia to
terminate the Agreement if certain conditions, including certain
Wesbanco market price tests and the obtaining of a fairness
opinion by Vandalia, are not met at the Closing (See "Conditions
and Covenants", "Termination" and "Opinion of Ferris, Baker
Watts, Incorporated" below).
In reviewing comparable bank mergers, the Board of Directors
considered other transactions which had a variety of ranges in
book value multiples and earnings multiples.
The Board of Directors of Vandalia also took into account
that the Vandalia shareholders would have the opportunity to
participate in the future growth of Wesbanco by obtaining
Wesbanco Common Stock in the Merger. The Board noted that
Vandalia, as part of a multi-bank holding company of greater size
than Vandalia and with a substantial trust department and other
resources, should be able to provide its customers with a greater
range of services and should become a stronger competitor in its
existing markets. Since it is anticipated that Vandalia's
offices will continue to be operated, Vandalia will be able to
continue to be responsive to the needs of the local communities
it serves. At the same time, Vandalia and Wesbanco will each
have the benefit of the resources and skills of the other
institution, and Wesbanco's Board will be increased to include a
Vandalia director, namely, Reed J. Tanner. (See "Effects of the
Merger:
<PAGE> 23
The Surviving Corporation" below). As shareholders of
Wesbanco, the shareholders of Vandalia (other than Vandalia
shareholders electing cash and dissenting Vandalia shareholders
who would receive only cash in the proposed transaction) would
continue to be able to participate in any future growth from the
combination of Vandalia and Wesbanco (See "Effects of the
Merger: The Surviving Corporation" below).
After reviewing all relevant facts, the Vandalia Board of
Directors determined to approve the Agreement and recommend the
Merger to the Vandalia Shareholders. If any conditions to
Closing are not met (see "Conditions and Covenants" and
"Termination" below), the Vandalia Board of Directors will make
an independent determination, after consultation with counsel,
where appropriate, as to whether or not to terminate the
Agreement and abandon the Merger.
Wesbanco Reasons for the Merger
Wesbanco's Board of Directors believes that the proposed
Merger will allow Wesbanco to combine its resources with those of
Vandalia, thereby affording the resulting combined institution
better opportunities to compete with other financial and non-
financial institutions (including other commercial banks, thrift
institutions, finance companies, credit unions, money market
mutual funds, brokerage firms, investment companies, credit
companies, insurance companies and retail stores that maintain
their own credit operations) in the markets in which Vandalia and
Wesbanco's subsidiary banks conduct their business. The Merger
will provide Wesbanco with a greater presence in the North
Central markets of West Virginia which will provide Wesbanco with
an opportunity for future growth in that market. Moreover, the
affiliation should permit a greater investment in data processing
systems, accounting and other support services, as well as
provide greater economies of scale. Benefits to the combined
entity will also be available through the elimination of
duplicative expenses.
Wesbanco will be able to offer a broader range of services
than those currently available to Vandalia customers, in
particular trust services, and the combined entity will be able
to offer a broader loan program and, through participations by
the subsidiary banks, to service larger loan transactions. In
summary, Wesbanco's Board of Directors believes that the Merger
will enable both Vandalia and Wesbanco's subsidiaries to better
serve the financial needs of their communities, and the Merger
will enable Wesbanco to obtain these benefits at a cost that,
under all the facts and circumstances, is reasonable.
Interest of Certain Persons in the Merger
Directors and officers of Vandalia, beneficially owned, in
the aggregate, approximately 162,590 shares, or 57.45% of
Vandalia Common Stock as of October 30, 1996.
All of Vandalia's directors and officers will, as a result
of the Merger, obtain an equity interest in Wesbanco in exchange
for their shares of Vandalia Common Stock to the extent they do
not elect to receive cash. Each of them will receive the same
number of shares of Wesbanco Common Stock for each share of
Vandalia Common Stock owned by him or her as every other Vandalia
shareholder. Certain affiliates of Vandalia will, however, be
subject to certain
<PAGE> 24
restrictions on any resale of Wesbanco stock
received by them pursuant to the Merger. See "Resales of Wesbanco
Common Stock". The directors of Vandalia do not own any shares of
Wesbanco Common Stock, except for Charles S. Armistead, a director
of Vandalia, who owns 2,000 shares of Wesbanco Common Stock.
The Agreement also provides that each holder of an
outstanding warrant convertible into Vandalia Common Stock at the
exercise price of $16.00 per share ("Warrants") shall be entitled
to receive the difference between the exercise price and $34.34,
in cash. As of July 18, 1996, there were 32,764 Warrants
outstanding, all of which were owned by directors and officers of
Vandalia. See "Information With Respect To Vandalia - Ownership
of Securities by Directors and Officers."
As a result of the Merger each five-percent shareholder of
Vandalia will receive, in exchange for the Vandalia Common Stock
beneficially owned by them, the amount and percentage of shares
of Wesbanco Common Stock set forth in "Information With Respect
to Vandalia-Principal Shareholders", unless such shareholder
elects to receive cash.
Under the Agreement, Reed J. Tanner, a director of Vandalia,
will become a director of Wesbanco on the Effective Date. Also,
C. Barton Loar, Vaughn L. Kiger, Robert D'Alessandri, John W.
Fisher, II, Roger E. King and Reed J. Tanner will become
directors of Wesbanco Fairmont on the Effective Date, and Mr.
Loar and Mr. Kiger will become members of the Wesbanco Fairmont
Executive Committee. See "Effects of the Merger: The Surviving
Corporation" below. It is also a condition to Wesbanco's
obligations to consummate the Merger that C. Barton Loar,
President of Vandalia, enter into an employment agreement with
NBWV, as described in the section entitled "Conditions and
Covenants", below. There are no agreements that the other
individuals who serve as directors and officers of Vandalia will
remain in their respective positions following the Merger. See
"Effects of the Merger: The Surviving Corporation" below.
C. Barton Loar does not presently have an Employment
Agreement with Vandalia. The proposed Employment Agreement for
Mr. Loar would have a revolving three year term commencing on the
Effective Date of the Merger at a salary not less than the salary
in effect for Mr. Loar as of the Effective Date of the Merger.
The contract also contains a "make whole" clause which protects
Mr. Loar against any loss of benefits currently provided by Vandalia
or NBWV. The agreement also requires NBWV to provide the same
benefits to Mr. Loar which it provides to other executive
employees, during the period of his employment. The agreement
contains a termination for cause provision and a termination on
death clause. In the event of the death of the employee during
the term of the agreement, NBWV is required to pay to Mr. Loar's
spouse an amount equal to six months of his base salary at his
then current base rate. In the event NBWV attempts to terminate
Mr. Loar's employment other than for cause, or due to the death
of the employee, or by mutual consent with the employee, Mr. Loar
is entitled to receive an amount equal to the greater of six
months base salary or the base salary payable under the remaining
term of the agreement. Wesbanco is a party to such contract and
will unconditionally guarantee the performance of the bank
thereunder. The agreement also provides that upon consummation
of the Bank Merger, Mr. Loar shall serve as the President of the
Monongalia
<PAGE> 25
Division of Wesbanco Fairmont.
As of October 30, 1996, Wesbanco held no shares of Vandalia
Common Stock. Except for Mr. Fragale, directors, executive officers
and affiliates of Wesbanco owned no shares of Vandalia Common Stock
as of such date. The Merger will have no effect on the positions of
the present directors and officers of Wesbanco, and except for the
stock ownership of Vandalia described herein and for counsel fees
paid to a director of Wesbanco in the ordinary course of business
in connection with this transaction, no directors, officers or
affiliates of Wesbanco have any special interest in the Merger or
are receiving any special consideration or compensation as a
result of the Merger.
It is not anticipated that any outstanding transactions
between Vandalia or Wesbanco and their respective affiliates, and
any directors, officers, or principal shareholders of Vandalia or
Wesbanco or their respective associates, including any
outstanding loans or trust relationships, will be affected by the
Merger.
Opinion of Ferris, Baker Watts, Incorporated
As described in more detail under "Recommendation of the
Boards of Directors" and "Vandalia Reasons for the Merger" above,
in its role as an advisor, Ferris, Baker gave the Board of
Vandalia its preliminary advice based on the information then
available, that the terms of the Merger were fair, from a
financial point of view, to Vandalia and its shareholders. On
July 18, 1996, Ferris, Baker rendered a definitive written
opinion to that effect. Vandalia has requested Ferris, Baker to
update its opinion which was done as of November 1, 1996. The full
text of Ferris, Baker's updated opinion, which sets forth the assumptions
made, matters considered and limitations on the review undertaken in
connection with such opinion, is set forth below and should be read in
its entirety.
<PAGE> 26
FERRIS Ferris, Baker Watts, Incorporated
BAKER Investments
WATTS Member NYSE, SIPC
100 Light Street
Baltimore, Maryland 21202
(410) 685-2600
November 1, 1996
The Board of Directors
Vandalia National Corporation
P.O. Box 616
Morgantown, WV 26507
Gentlemen:
You have requested an opinion as to the fairness, from a
financial point of view, to the holders of the outstanding Common
Stock of Vandalia National Corporation (the "Company") of the
proposed consideration offered by Wesbanco, Inc. ("Wesbanco")
described in the draft Agreement and Plan of Merger as of July 18,
1996, by and between Wesbanco, the Company, VNC Corporation
and Wesbanco Bank Fairmont, Inc. (the "Agreement"). We were
retained by the Board of Directors of the Company and commenced
our investigation of the Company on June 7, 1996.
Pursuant to the Agreement, each shareholder of the Company will
have the option to receive $34.34 in cash for each share of the
Company or 1.2718 shares of Wesbanco for each share of the
Company. If the average share price of Wesbanco for the thirty
calendar days preceding the five business days before the closing
date falls below $25.00, the Company may terminate the Agreement.
In connection with this opinion, we have reviewed, among other
things, (i) the letter of intent, (ii) the Agreement, (iii) annual
reports for the six fiscal years ended December 31, 1995, (iv) expected
financial results for the current fiscal year, and (v) projected
financial results for the years 1996 through 1998. We have held
discussions with the members of the management of the Company regarding
its past and current business operations, financial condition and future
prospects. We have reviewed the reported price and trading
activity for the shares of Wesbanco; compared certain financial
and stock market information concerning the Company with similar
information for certain other regional community banks, the
securities of which are publicly traded; reviewed the terms of
recent banking combinations; and have performed such other
studies and analysis as we considered appropriate.
We periodically prepare research reports on the banking industry.
Ferris, Baker Watts, Incorporated, its clients, its officers or
its employees, in the normal course of business, may have a
position in the common stock of the Company and Wesbanco.
<PAGE> 27
In rendering our opinion, we have assumed and relied upon the
accuracy and completeness of all financial and other information
reviewed by us for purposes of this opinion whether publicly
available or provided to us by the Company and Wesbanco, and we
have not assumed any responsibility for independent verification
of such information. We express no opinion as to the consideration
to be received by holders of shares who may perfect dissenters'
statutory fair appraisal remedies. Based upon the forgoing and based
upon such other matters that we consider relevant, it is our opinion
that as of the date hereof, the consideration to be received by the
shareholders of the Company as a result of the Agreement is fair from
a financial point of view.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to
us as of, November 1, 1996. It is understood that subsequent
developments may affect the conclusions reached in this opinion
and that we do not have any obligation to update, revise or reaffirm
this opinion.
Very truly yours,
FERRIS, BAKER WATTS, INC.
/s/ Ferris, Baker Watts, Inc.
<PAGE> 28
Ferris, Baker is a nationally recognized, regional
investment banking firm headquartered in Washington, D.C., and is
regularly engaged in the valuation of banks and other financial
institutions and their securities.
Ferris, Baker was retained by the Board of Directors of
Vandalia on June 7, 1996, to advise and assist management in the
analysis and evaluation of acquisition proposals from Wesbanco
and others, including a review of Vandalia's current and
prospective financial position and its current acquisition value,
the evaluation of the financial terms of the proposals for the
Board of Directors, and, the rendering of an opinion as to the
fairness, from a financial point of view, of the terms of the
proposed Merger to Vandalia and its shareholders. See
"Recommendation of the Boards of Directors" and "Vandalia Reasons
for the Merger" above for additional discussion of Ferris,
Baker's role in advising the Vandalia Board of Directors.
The Board of Directors authorized the selection of Ferris,
Baker after a review of several candidates on the basis of its
experience in the valuation of financial institutions and their
securities and familiarity with the commercial banking industry,
bank securities, and merger and acquisition transactions in the
region, and on the basis of cost. No limitations were imposed by
Vandalia or Wesbanco with respect to the opinion rendered by
Ferris, Baker, or the scope of its investigation.
The terms of the Merger were not determined by Ferris,
Baker, but instead were established by the respective boards of
directors of Vandalia and Wesbanco.
Ferris, Baker arrived at its opinion after discussions with
senior officers of Vandalia and Wesbanco; a review of pertinent
financial information concerning Vandalia and Wesbanco; a review
of the trading history of Vandalia Common Stock and Wesbanco
Common Stock; a review of the dividend record of Vandalia and
Wesbanco; a comparison of the financial terms of the Merger with
the terms of other recent business combinations involving banks
and bank holding companies; a comparison of financial and market
information of selected banks and bank holding companies with
that of Vandalia and Wesbanco; a review of the Stockholder
Agreement, the Agreement, and the Proxy Statement/Prospectus; and
such other analyses, studies and investigations as Ferris, Baker
deemed relevant.
In rendering its opinion, Ferris, Baker assumed that in the
course of obtaining the necessary regulatory approvals for the
Merger, no restrictions would be imposed on Wesbanco that would
have a material adverse effect on the contemplated benefits of
the Merger to Vandalia. Ferris, Baker also assumed that there
would not occur any change in applicable law or regulation that
would cause a material adverse change in the prospects or
operations of Wesbanco after the Merger.
Ferris, Baker did not assume any responsibility for the
independent verification of the information used in arriving at
its opinion and assumed the accuracy and completeness of all such
information. Also, Ferris, Baker did not assume responsibility
to obtain an independent
<PAGE> 29
appraisal of the assets or liabilities of Vandalia or Wesbanco.
Ferris, Baker did review other third party proposals in evaluating
the offer by Wesbanco.
For its financial services, including rendering the opinion
included herein, Ferris, Baker has received a fee of $35,000,
plus expenses. Vandalia has also agreed to reimburse Ferris, Baker
for its reasonable out-of-pocket expenses and to indemnify Ferris,
Baker against certain liabilities, including liabilities arising
under Federal Securities Laws, which may arise in connection with
the performance of its services for Vandalia. The amount of the
consideration was determined as a result of negotiations between
Vandalia and Ferris, Baker.
Ferris, Baker has had no other material relationship with
Vandalia, Wesbanco or any of their respective affiliates in the
past two years.
FERRIS BAKER'S OPINION IS DIRECTED ONLY TO THE EXCHANGE
RATIO IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY VANDALIA SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE
AT THE VANDALIA SPECIAL MEETING. THE SUMMARY OF THE OPINION OF
FERRIS, BAKER SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
Ferris, Baker's opinion was based solely upon information
available to it and provided by Vandalia and Wesbanco, the
economic market and other conditions as they existed as of the
date its opinion was rendered.
Effective Time
The Merger and the Bank Merger will become effective (the
"Effective Time") on the effective date specified in the
Certificate of Merger to be issued by the Delaware Secretary of
State as to the Merger, and the West Virginia Secretary of State
as to the Bank Merger, which will occur as soon as practicable
after the closing (the "Closing"). It is anticipated that the
Closing will be held and such Certificate will be issued on the
date which is the latest of: (i) the second business day after
the meeting of the shareholders of Vandalia at which the
Agreement is approved; (ii) the fifteenth (15th) day after the
approval of Wesbanco's acquisition of Vandalia by the Federal
Reserve Board or the approval of the Bank Merger by the Federal
Deposit Insurance Corporation ("FDIC"); (iii) the day after any
stay of the Federal Reserve Board's approval of the acquisition
of Vandalia or the FDIC's approval of the Bank Merger shall be
vacated or shall have expired or the day after any injunction
against the closing of the Merger or the Bank Merger shall be
lifted, discharged or dismissed; (iv) the day after the approval
of the transaction by the West Virginia Department of Banking and
Financial Institutions; (v) the second business day after the
date on which the conditions set forth in the Agreement are
satisfied or waived; or (vi) such other date as shall be mutually
agreed to by Wesbanco and Vandalia. It is presently anticipated
that if the shareholders of Vandalia approve the Agreement at the
Special Meeting, and all other conditions to the Merger are
satisfied or waived, the Merger will become effective by
December 30, 1996. See "Conditions and Covenants" and
"Termination" below.
<PAGE> 30
Conversion of Vandalia Common Stock
Each share of Vandalia Common Stock issued and outstanding
immediately prior to the Effective Time, other than shares for
which such holder has elected to receive cash, shares held by
dissenting Vandalia shareholders and shares held by Vandalia or
Wesbanco, other than in a fiduciary capacity, will, at the
Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into 1.2718 shares
of Wesbanco Common Stock, except for those shareholders who elect
to receive cash. See "Election to Receive Cash", below.
All issued and outstanding shares of Wesbanco Fairmont will
continue to be held by Wesbanco and will be the issued and
outstanding shares of the Surviving Corporation.
No certificates for fractional shares of Wesbanco Common
Stock will be issued to any holder of Vandalia Common Stock in
the Merger. Wesbanco will pay cash in lieu of any fractional
share to which any shareholder of Vandalia Common Stock may
otherwise be entitled in an amount based on a value of $27.00 per
whole share of Wesbanco Common Stock or, at the option of such
shareholder, such shareholder may purchase the remaining fraction
of such share from Wesbanco at the same price and receive a whole
share of Wesbanco Common Stock.
For a discussion of the treatment of shares held by Vandalia
shareholders who elect to exercise their dissenters' rights, see
"Rights of Dissenting Shareholders" below, and for a discussion
of the treatment of shares held by Vandalia shareholders who
elect to receive cash, see "Election to Receive Cash" below.
Exchange of Certificates
As promptly as practicable after the Effective Time of the
Merger, each holder of any outstanding certificate or
certificates for Vandalia Common Stock (other than Vandalia
shareholders who elect to receive cash or exercise their
dissenters' rights) upon surrender of their certificates,
together with a duly executed letter of transmittal, to Wesbanco
Bank Wheeling ("Wesbanco Wheeling"), which is acting as Exchange
Agent for Wesbanco, shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of
whole shares of Wesbanco Common Stock, into which the shares of
outstanding Vandalia Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been
converted, together with a check for cash in lieu of fractional
shares of common stock or, if the proper amount of cash is
submitted for the remaining fraction, an additional whole share
of Wesbanco Common Stock. See "Conversion of Vandalia Common
Stock" above.
Whenever a dividend is declared by Wesbanco on Wesbanco
Common Stock after the Effective Date, the dividend will apply to
all shares of Wesbanco Common Stock into which shares of Vandalia
Common Stock have been converted by virtue of the Merger. See
"Comparative Stock Prices and Dividends". No former Vandalia
shareholder will be entitled to receive such dividend, however,
until he or she has exchanged the certificates representing his
or her Vandalia Common Stock for certificates representing
Wesbanco Common Stock, upon which
<PAGE> 31
exchange he or she will be entitled to receive such dividend
(without interest thereon and less the amount of taxes, if any,
which may have been imposed or paid thereon).
SHAREHOLDERS OF VANDALIA SHOULD NOT RETURN CERTIFICATES
REPRESENTING VANDALIA COMMON STOCK WITH THE ENCLOSED PROXY CARD.
Instructions for surrendering such certificates will be sent to
shareholders of Vandalia promptly after the Effective Time.
Election to Receive Cash
To the extent permitted to maintain the tax-free treatment of
Vandalia shareholders receiving Wesbanco Common Stock, each shareholder
of Vandalia Common Stock may elect to exchange part or all
of such shareholder's shares for cash in the amount of $34.34 per share.
If cash elections exceed the permitted limits to maintain the transaction's
tax-free character, all Vandalia shareholder's electing cash will receive
a proportionate reduction of the amount of their Vandalia Common Stock
to be exchanged for cash. See "Certain Federal Income Tax Consequences
of the Merger" below. Instructions for making such an election are
included on the form of Proxy for the meeting. Absent an affirmative
election for each shareholder, each shareholder will receive Wesbanco
Common Stock by reason of the exchange. Instructions for surrendering
the certificates representing Vandalia Common Stock will be sent to
shareholders of Vandalia promptly after the Effective Time.
Wesbanco, Wesbanco Fairmont and VNC Shareholder Approval:
Wesbanco shareholder approval of the Agreement is not
required under West Virginia corporation law or the Articles of
Incorporation of Wesbanco.
The Boards of Directors of Wesbanco, Wesbanco Wheeling and
VNC have approved the Agreement. Wesbanco has also agreed, as
sole shareholder of Wesbanco Fairmont and VNC, to vote all of the
outstanding shares of said corporations in favor of the Merger
and the Bank Merger.
Effects of the Mergers: The Surviving Corporations
At the Effective Time, the separate existence of VNC will
cease. Vandalia will be the surviving corporation (sometimes
referred to as the "Surviving Corporation"). The assets,
liabilities, and capital of VNC will be merged into Vandalia and
these assets, liabilities, and capital will then constitute part
of the assets, liabilities, and capital of Vandalia. Vandalia
will operate under the Articles of Incorporation and Bylaws of
Vandalia effective as of the day of the Merger.
Also at the Effective Time of the Bank Merger, the separate
existence of NBWV will cease. Wesbanco Fairmont will be the
surviving corporation (sometimes referred to as the "Surviving
Banking Corporation"). The assets, liabilities, and capital of
NBWV will be merged into Wesbanco Fairmont and these assets,
liabilities and capital will then constitute part of the
<PAGE> 32
assets, liabilities and capital of Wesbanco Fairmont. Wesbanco
Fairmont will continue to operate under its Articles of Incorporation
and Bylaws effective as of the day of the Bank Merger.
The Articles of Incorporation and Bylaws of Wesbanco will be
unaffected by the Merger, and the individuals who served as
directors and officers of Wesbanco immediately prior to the
Merger will continue to serve as directors and officers of
Wesbanco after the Effective Time, until their successors shall
have been elected and qualified or until their resignation or
removal according to law. For information concerning Wesbanco's
current management, see Wesbanco's Proxy Statement for its annual
meeting of stockholders held on April 17, 1996, which has been
incorporated by reference into this Proxy Statement/Prospectus
and a copy of which is being delivered herewith. See
"Incorporation Of Certain Documents By Reference" and
"Information With Respect to Wesbanco - Recent Acquisitions." In
addition, however, pursuant to the Agreement, Wesbanco will
appoint as a director of Wesbanco, as of the Effective Date, Reed
J. Tanner to serve until the next annual meeting of Wesbanco
shareholders and will nominate for the position of Wesbanco
director and solicit proxies for such person from its
shareholders until such person has served a full three year term
as a Wesbanco director. The above identified individual is a
director of Vandalia. See "Information with Respect to Vandalia
- - Directors."
NBWV will be merged with and into Wesbanco Fairmont, which
is a wholly-owned subsidiary of Wesbanco in the Bank Merger.
While Wesbanco has advised Vandalia that the officers and
employees of NBWV immediately after the Merger will be the same
as the officers and employees now holding such positions, there
are no agreements to that effect, except as noted in the C. Barton
Loar employment contract. See "The Merger - Interest of Certain
Persons in the Merger". The present executive officers of NBWV
will also become executive officers of Wesbanco Fairmont.
Wesbanco and Wesbanco Fairmont have agreed to elect to the Board
of Directors of Wesbanco Fairmont, as of the Effective Date, C.
Barton Loar, Vaughn L. Kiger, Robert D'Alessandri, John W.
Fisher, II, Roger E. King and Reed J. Tanner, and to appoint C.
Barton Loar and Vaughn L. Kiger to the Executive Committee of
Wesbanco Fairmont. It is anticipated that after the Effective
Date, there will be a close liaison and a high level of
cooperation among all Wesbanco subsidiaries, including the
officers of NBWV, which can be expected to result in improved
services to their respective customers and greater efficiency.
If the Merger had occurred as of September 30, 1996, Vandalia
would have, on a pro forma consolidated basis, constituted 3.9%
of deposits, 3.5% of assets, 2.0% of equity, and its
shareholders would have held 3.5% of the total outstanding
shares of Wesbanco on a pro forma consolidated basis. In
addition, for the nine months ended September 30, 1996, Vandalia would
have contributed 3.8% of net interest income and 1.3% of net
income to Wesbanco on a pro forma consolidated basis. These
percentages reflect the relative size of Vandalia as of September 30,
1996. These percentages may change with the normal variances in
the rates of growth for deposits and loans for all Wesbanco
affiliates. Additionally, it is contemplated that Wesbanco may
combine with other financial institutions in the future and these
mergers may affect the percentages shown above. However,
Wesbanco is not presently involved in any other material merger
transactions for which definitive agreements or letters of intent
have been executed, other than the recently completed acquisition
of Bank of Weirton which is reflected in the financial
<PAGE> 33
information. See "Pro Forma Data" and "Information With Respect
To Wesbanco - Recent Acquisitions".
Conditions and Covenants
The Agreement provides that the Merger will not take place
unless and until certain conditions are met, or, in some cases,
waived.
Approval by Vandalia Shareholders
Approval by the affirmative vote of the holders of at least
a majority of the shares of Vandalia Common Stock entitled to
vote at the Special Meeting of Vandalia, and approval by Wesbanco
as sole shareholder of Wesbanco Fairmont and VNC (which approval
Wesbanco has agreed to give) is required by law and must be
obtained before the Merger and the Bank Merger can be
consummated. As of the Record Date, October 30, 1996, the
directors and officers of Vandalia beneficially owned, in the
aggregate, approximately 162,590 shares or 57.45% of the
outstanding shares of Vandalia Common Stock . See "Voting
Information - Voting and Revocation of Proxies" and "The Merger -
Interest of Certain Persons in the Merger" above, and
"Information with Respect to Vandalia - Ownership of Securities
by Directors and Officers".
Government Approvals
- --------------------
The completion of the Merger is also conditioned upon the
approval of the acquisition by the Federal Reserve Board and the
West Virginia Department of Banking, and the approval of the Bank
Merger is conditioned upon the approval of the Merger by the FDIC
and the West Virginia Department of Banking.
The Merger was subject to approval by the Federal Reserve
Board under the provisions of the Bank Holding Company Act of
1956, as amended. Applications for such approval were filed with
the Federal Reserve Board on July 25, 1996, and the application
was approved on September 20, 1996.
Under the Bank Holding Company Act, the Federal Reserve
Board could have withheld approval of the Merger if it found that the
Merger would have resulted in a monopoly or be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize
the business of banking in any geographical area. In addition,
the Federal Reserve Board could not have approved the Merger if it found
that the effect of the Merger would have substantially lessened
competition or tended to create a monopoly or would in any other
manner be in restraint of trade, unless it found that the
anticompetitive effects of the proposed transaction were clearly
outweighed in the public interest by the probable effects of the
transaction in meeting the convenience and needs of the
communities to be served. In ruling upon the application, the
Federal Reserve Board also had to take into consideration the
financial and managerial resources and future prospects of
Vandalia and Wesbanco.
<PAGE> 34
Under the Bank Holding Company Act, the Merger could not be
consummated before the fifteenth calendar day after the date of
such approval by the Federal Reserve Board, during which time the
Department of Justice of the United States could have challenged the
Merger under the antitrust laws.
The Merger was also subject to the approval of the Board of
Banking and Financial Institutions of the State of West Virginia
under the provisions of Code 31A-8A-5. The Board of Banking
and Financial Institutions could not approve the Merger if it found
that the effects of the Merger would be similar to those which
required disapproval in accordance with the Bank Holding Company
Act set forth above. In addition, under the state statute, the
Board was required to act on the application within 120 days after
receipt of a completed application, except that the Board may
extend such time frame under certain circumstances set forth in
the statute. Applications for approval were confirmed as filed
with the West Virginia Board of Banking and Financial
Institutions and the application was approved at the hearing held
on September 9, 1996, by the West Virginia Board of Banking and
Financial Institutions.
Applications for approval of the Bank Merger were filed with
the FDIC and the West Virginia Department of Banking on July 25,
1996, and were confirmed as filed by the FDIC on the 12th day of
August, 1996, and the Department of Banking on the 20th day of
August, 1996. The Bank Merger was approved by the West Virginia
Board of Banking and Financial Institutions on September 9, 1996,
and the FDIC on October 8, 1996.
The mergers could not have proceeded in the absence of the requisite
regulatory approvals. Although there was no assurance that these
regulatory approvals would be obtained, the management of Wesbanco
and Vandalia believed that the required governmental approvals
would be obtained, and that the Department of Justice would not
object to the Merger or the Bank Merger.
Covenants
In the Agreement, Vandalia agrees to take certain actions
and to refrain from taking certain actions in connection with its
business from July 18, 1996, until the Effective Time or until
the Agreement is terminated. Among other things, the Agreement
generally requires Vandalia to conduct its business only in the
ordinary course and in a manner consistent with past practice and
to keep Wesbanco advised of any material adverse changes in the
financial condition, assets, business or operations of Vandalia.
The Agreement further prohibits Vandalia from making certain
distributions to its shareholders and engaging in certain
corporate transactions or transactions with others outside of the
ordinary course of its business operations without the consent of
Wesbanco, including with certain exceptions, (i) issuing shares
of its Common Stock, or warrants, options, convertible securities
or the rights to purchase the same; (ii) issuing long-term debt;
(iii) changing its authorized capital stock; (iv) purchasing or
otherwise acquiring shares of its capital stock; (v) entering
into or amending any employment, pension, retirement, stock
option, profit sharing, deferred compensation or similar plan in
respect of any of its directors, officers or employees or
increasing its contribution to any such plan
<PAGE> 35
except as provided in the Agreement; (vi) acquiring or merging with
any other company; (vii) mortgaging, pledging or subjecting to a lien
or disposing of any of its material assets; (viii) amending its
Articles of Incorporation or Bylaws; or (ix) taking any action
materially and adversely affecting the financial condition,
business, properties or operations of Vandalia. The Agreement
also prohibits dividends or other distributions on Vandalia
Common Stock.
Vandalia further agrees in the Agreement that it will not,
and will not permit any person acting on behalf of it, to
directly or indirectly, take any action to support, encourage or
accept any offer from any other person to acquire Vandalia, or
its assets. Vandalia further agrees to notify Wesbanco if any
such offer is made.
Other Conditions
The consummation of the Merger is subject to a number of
further conditions which must be met or may be waived by the
party or parties to be benefited thereby.
The obligations of both Wesbanco and Vandalia are subject to
a number of conditions, including: (i) the effectiveness of the
Registration Statement and compliance with applicable state
securities laws; (ii) the receipt of all required consents and
approvals and the expiration of any related delay periods; (iii)
holders of no more than 10% of the shares of Vandalia Common
Stock entitled to vote at its Special Meeting shall have filed
written objections to the Merger as dissenting shareholders and
requested appraisal rights in compliance with Delaware law; (iv)
the receipt of an opinion of counsel on certain tax consequences
of the Merger (See "Certain Federal Income Tax Consequences of
the Merger" below); (v) the absence of any action, proceeding,
regulation or legislation to enjoin, restrain, prohibit, or to
obtain substantial damages with respect to, the Agreement or the
consummation of the transactions contemplated thereby; and (vi)
the performance by the other party of its obligations under the
Agreement.
Wesbanco's obligations are also subject to other conditions
to be met by Vandalia including: (i) the accuracy of certain
representations and warranties made by Vandalia (including, among
other things, representations as to organization, authority to
enter into the Agreement, financial statements, absence of
material litigation, capitalization, material contracts, ERISA
and tax matters, adequacy of the loan loss reserve, and the
absence of materially adverse changes in areas such as financial
condition, results of operations, material assets, authorized,
issued or outstanding capital stock, certain personnel expenses,
and material expenditures for assets or other material
obligations outside of the ordinary course of business) as of the
Closing; (ii) opinions of counsel on such matters as
organization, authority and stock issuances; (iii) receipt, or
best efforts of Vandalia to cause the receipt of, letters from
certain affiliates whose stock will be restricted (See "Resales
of Wesbanco Common Stock" below); and (iv) absence of any suit,
action or proceeding against Vandalia or its officers or
directors in their capacity as such which, in the reasonable
judgment of Wesbanco would, if successful, have a material
adverse effect on the financial condition or operations of
Vandalia.
Vandalia's obligations are also subject to certain other
conditions to be met, in part, by Wesbanco, including: (i) the
accuracy of certain representations and warranties made by
<PAGE> 36
Wesbanco (including, among other things, representations as to
organization, actions to be taken in connection with Wesbanco
Fairmont, authority to enter into the Agreement and to issue
shares in the Merger, financial statements, absence of material
litigation, capitalization, material contracts, ERISA and tax
matters, adequacy of loan loss reserves, and the absence of
materially adverse changes in areas such as financial condition,
results of operations, material assets, authorized, issued or
outstanding capital stock, certain changes in Articles or Bylaws,
and material expenditures for assets or other material
obligations (outside of the ordinary course of business) as of
the Closing; (ii) opinions of counsel on such matters as
organization, authority, and the legality of the shares to be
issued in the Merger; (iii), the absence of any suit, action or
proceeding against Wesbanco, any of its subsidiaries, or their
officers or directors in their capacities as such which, in the
reasonable judgment of Vandalia, would, if successful, have a
material adverse effect on the financial condition or operations
of Wesbanco or any of its subsidiaries; (iv) the furnishing of a
fairness opinion by Ferris, Baker (See "Opinion of Ferris, Baker
Watts, Incorporated" above), and at Vandalia's option, an update
of said opinion as of the closing if the closing is held more
than five days after the Vandalia Special Meeting; (v) unless
waived by Vandalia, the market value of Wesbanco Common Stock
shall fall below $25.00 per share as of the closing date (market
value defined to mean the average bid price for the 30 calendar
days preceding five business days before closing; and (vi) the
closing date has not occurred by January 31, 1997.
Waiver and Amendment
The Agreement provides that any of the terms or conditions
thereof may be waived by action of the Board of Directors of the
party which is, or the shareholders of which are, entitled to the
benefits thereof. The parties may also amend or modify the
Agreement in whole or in part at any time prior to Closing,
provided that the conversion ratio for Vandalia Common Stock in
the Merger or the cash price therefor, and any other material
terms of the Merger cannot be amended after its Special Meeting,
unless the amended terms are resubmitted to the shareholders of
Vandalia.
Termination
The Agreement and the transactions contemplated thereby may
be terminated at any time prior to the Effective Time by mutual
consent of Vandalia and Wesbanco or by either of them if: (i) any
of the conditions to that party's obligation to close have not
been met or waived; (ii) the Merger would violate any non-
appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; (iii) the
requisite vote of the shareholders is not obtained; (iv) the
Closing has not been held by January 31, 1997; or (v) the
requisite market price for Wesbanco Common Stock is not
maintained.
The Stockholder Agreement
In conjunction with the Agreement, Wesbanco entered into a
Stockholder Agreement dated as of July 18, 1996, with the
directors, one of whom is the chief executive officer, of
Vandalia. Each such director and the chief executive officer of
Vandalia, in his capacity as a
<PAGE> 37
shareholder of Vandalia agreed, among other things, not to sell,
pledge, transfer or otherwise dispose of his shares of Vandalia stock
prior to the Special Meeting of shareholders at which the Merger is
considered and to vote such shares of stock in favor of the Merger.
The directors of Vandalia own beneficially 57.45% of the Vandalia Common
Stock without exercise of the outstanding Warrants and, accordingly,
can provide the requisite vote to approve the Merger.
Appraisal Rights of Dissenting Shareholders
The following summary does not purport to be a complete
statement of the procedures to be followed by Vandalia
shareholders desiring to exercise dissenters' rights and is
qualified in its entirety by reference to the provisions of
Delaware General Corporation Law ("DCL") Section 262, the full
text of which is attached as Appendix I to this Proxy Statement.
As the preservation and the exercise of appraisal rights
require strict adherence to the provisions of these laws, each
Vandalia shareholder who might desire to exercise such rights
should review such laws carefully, timely consult his own legal
advisor and strictly adhere to the provisions thereof.
Any holder of record of Vandalia Common Stock has the right
under Section 262 of the DCL to dissent from the Merger, to have
his shares of Vandalia Common Stock appraised by the Delaware
Court of Chancery, and to receive the appraised value from the
surviving corporation. The following information is qualified in
its entirety by reference to Section 262.
In order for a holder of Vandalia Common Stock to exercise
his appraisal rights, he must satisfy all of the following conditions:
(1) Before the holders of Vandalia Common Stock vote on the
proposal to approve and adopt the Merger, the shareholder of
record must deliver to Vandalia at 344 High Street, Morgantown,
West Virginia, 26505, Attn. Secretary, a written demand for the
appraisal of his shares of Vandalia Common Stock. This demand
must:
(a) Be made by the shareholder of record (or
the duly authorized representative of the
shareholder of record) and not by someone who is
merely a beneficial owner of the shares (i.e.,
cannot be made by the beneficial owner if he does
not own the shares of record);
(b) Identify the shareholder;
(c) State that the shareholder thereby
demands the appraisal of his shares of Vandalia
Common Stock; and
(d) Be separate from and in addition to any
proxy or vote against the merger.
<PAGE> 38
Merely voting, or delivering a proxy directing a vote, against
approval of the Merger will not satisfy this condition; a written
demand for appraisal is essential. The written demand must be
signed by the shareholder of record (or his duly authorized
representative) exactly as his name appears on the form of
proxy accompanying this Proxy Statement/Prospectus. A demand for
appraisal of shares owned jointly by more than one person must
identify and be signed by all such holders. Any person signing a
demand for appraisal on behalf of a partnership or corporation or
in any other representative capacity (such as attorney in fact,
executor, administrator, trustee, or guardian) must indicate his
title and, if Vandalia so requests, must furnish proof of his
capacity and his authority to sign the demand. Demands for
appraisal should be sent to Vandalia (preferably by certified or
registered mail, return receipt requested) at the address noted
above.
(2) The shareholder must not vote in favor of the approval
of the Merger, whether in person, by proxy, or by written
consent. A failure to vote will satisfy this condition, but a
vote in favor of the approval of the Merger will constitute a
waiver of the shareholder's right of appraisal and will, in
effect, cancel his demand for appraisal. If a shareholder
returns his proxy and does not vote against the Merger, and
thereafter does not revoke his proxy, it will be voted for the
Merger and the shareholder will be deemed to have waived his
rights as a dissenting shareholder.
(3) Within 120 days after the effectiveness of the Merger,
a shareholder of record may file a petition in the Delaware Court
of Chancery demanding a determination of the value of Vandalia
Common Stock held by all Vandalia shareholders who have satisfied
conditions (1) and (2) above, unless the surviving corporation or
another shareholder shall have filed such a petition within that
period of time; provided that during the first 60 days after the
effectiveness of the Merger, a shareholder who has demanded
appraisal has the right to withdraw such demand and accept 1.2718
shares of Wesbanco Common Stock or cash in the amount of $34.34
per share under the Agreement. Within 120 days after the
effectiveness of the Merger, any shareholder who has satisfied
conditions (1) and (2) above, upon written request made to
Vandalia at the address shown above shall be entitled to receive
a statement setting forth the aggregate number of shares not
voted in favor of the Merger and with respect to which demands
for appraisal have been received and the aggregate number of
holders of such shares. Such written statement will be mailed to
the shareholder within 10 days after receipt of his written
request for same or within 10 days after the Special Meeting,
whichever is later. Within 10 days after the effectiveness of
the Merger, the surviving corporation will notify each
shareholder who has satisfied conditions (1) and (2) above of the
date on which the Merger became effective. If neither the
surviving corporation or any shareholder of Vandalia files a
petition for appraisal within 120 days after that date, the
appraisal rights of Vandalia shareholders will cease, and they
will only be entitled to receive 1.2718 shares of Wesbanco Common
Stock in exchange for each of their respective shares of Vandalia
Common Stock. At the present time, Vandalia's management expects
that the surviving corporation will not file such a petition in
the event a demand for appraisal is made. A final decision on
that matter will be made if and when the occasion arises and will
be based on the circumstances then existing.
(4) If the Delaware Court of Chancery so requires, the
shareholders of record must submit their Vandalia Common Stock
certificates to the Register in Chancery for notation
<PAGE> 39
thereon of the pendency of the appraisal proceedings. If the Court
invokes such a requirement and a shareholder fails to comply with
it, the Court may dismiss the appraisal proceedings as to that
shareholder, and he will lose his appraisal rights.
Since only holders of Vandalia Common Stock of record may
exercise appraisal rights, persons who beneficially own shares
which are held of record by brokers, fiduciaries, nominees, or
others and who wish to exercise their appraisal rights must
instruct the record holders of their shares to satisfy the
conditions outlined above. If a shareholder of record does not
satisfy within the time limits allowed all of the conditions
outlined above, the appraisal rights for the shares of Vandalia
Common Stock held by him will be lost, and each of such shares
will be converted into the right to receive 1.2718 shares of
Wesbanco Common Stock per share of Vandalia Common Stock on the
effectiveness of the Merger, as provided in the Agreement.
If the surviving corporation or any holder of Vandalia
Common Stock files a petition in accordance with condition (3)
above, the Delaware Court of Chancery will hold a hearing on the
petition, will determine the shareholders entitled to an
appraisal and the fair value of the shares of Vandalia Common
Stock owned by such shareholders, exclusive of any element of
value arising from the accomplishment or expectation of the
Merger (such fair value could be determined to be more or less
than the value of Wesbanco Common Stock per share to be exchanged
in the Merger or the cash alternative per share offered in the
Agreement). The Court will then direct the surviving corporation
to pay the appraised value of those shares, together with
interest (if any), to the shareholders entitled thereto upon
their surrender to the surviving corporation of the certificates
representing such shares.
The Court will determine the amount of interest, if any, to
be paid on the value of the Vandalia Common Stock owned by the
dissenting shareholders. In making its determination with
respect to interest, the Court may consider all relevant factors,
including the rate of interest which the surviving corporation
has paid for money it has borrowed, if any, during the pendency
of the appraisal proceeding.
The cost of the appraisal proceeding may be determined by
the Court and taxed to the parties in such manner as the Court
deems equitable under the circumstances. Upon application of a
dissenting shareholder, the Court may order all or a portion of
the expenses incurred by any dissenting shareholder in connection
with the appraisal proceeding (including, without limitation,
reasonable attorney fees and the fees and expenses of experts) to
be charged pro rata against the value of all shares of Vandalia
Common Stock entitled to an appraisal.
After the Effective Date of the Merger, any holder of
Vandalia Common Stock who has demanded his appraisal rights in
accordance with condition (1) above will thereafter not be
entitled to vote Vandalia Common Stock for any purpose nor be
entitled to receive any dividends or other distributions on such
stock (except any dividends or distributions payable to
shareholders of record as of a time prior to the effectiveness of
the Merger) as long as his appraisal rights continue in
existence. However, if such shareholder delivers to the
surviving corporation an acceptance of the Merger and a written
withdrawal of his appraisal demand within sixty days after the
effectiveness of the Merger (or thereafter with the written
approval of the
<PAGE> 40
surviving corporation), then such shareholder's right to an
appraisal of his Vandalia Common Stock will cease, and he will
be entitled to receive 1.2718 shares of Wesbanco Common Stock
for each share of Vandalia Common Stock as a result of the Merger.
No appraisal proceeding in the Court of Chancery, however, may be
dismissed as to any Vandalia shareholders without the approval of
the Court, and the Court may condition any such approval on such
terms as it deems just.
The foregoing does not purport to be a complete statement of
the procedures to be followed by shareholders desiring to
exercise appraisal rights. To exercise such rights, strict
adherence to the provisions of those sections of the law of the
State of Delaware referred to above is required. EACH
SHAREHOLDER WHO MAY DESIRE TO EXERCISE SUCH RIGHTS SHOULD CONSULT
SUCH LAWS AND ADHERE TO THE PROVISIONS THEREOF. As in all legal
matters, you would be well advised to seek the guidance of an
attorney at law.
The receipt of cash for shares of Vandalia Common Stock held
by a Dissenting Shareholder will be a taxable transaction to the
Dissenting Shareholder for Federal income tax purposes. The
amount of gain or loss and its character as ordinary or capital
gain or loss will be determined in accordance with Sections 302
and 1001 (and in certain cases, other provisions) of the Internal
Revenue Code of 1986. Any Vandalia shareholder contemplating the
possible exercise of appraisal rights is urged to consult a tax
advisor as to the Federal (and any applicable state and local)
income tax consequences resulting from such an election.
Resales of Wesbanco Common Stock
The shares of Wesbanco Common Stock issuable upon the
consummation of the Merger will be registered with the Commission
under the Securities Act of 1933 (the "Securities Act"). Under
current law, each holder of Vandalia Common Stock who is not an
affiliate of Wesbanco or Vandalia within the meaning of Rule 144
or 145 under the Securities Act, may sell or transfer any shares
of Wesbanco Common Stock such holder receives in the Merger
without need of further registration under the Securities Act.
This Proxy Statement/Prospectus does not cover and may not be
used in connection with any resales of Wesbanco Common Stock by
such affiliates.
Shares of Wesbanco Common Stock issued to Vandalia
shareholders who may be deemed to be affiliates of Vandalia
before the Merger or affiliates of Wesbanco after the Merger may
be resold only in transactions permitted by Rules 145 and 144
under the Securities Act, pursuant to an effective registration
statement or in transactions exempt from registration. Generally
a shareholder who is an executive officer, director or a
principal shareholder or other control person of a company may be
deemed to be an affiliate for these purposes, while other
shareholders would not be deemed to be affiliates. Rules 144 and
145, insofar as relevant to shares acquired in the Merger, impose
restrictions on the manner in which affiliates may make resales
and also on the quantity of resales that such affiliates, and
others with whom they might act in concert, may make within any
three-month period.
<PAGE> 41
It is a condition to Wesbanco's obligation to consummate the
Merger that Vandalia (i) deliver to Wesbanco a schedule
specifying the persons who may be deemed to be "affiliates" of
Vandalia within the meaning of Rule 145 under the Securities Act
("Affiliates"); and (ii) use its best efforts to cause each
Affiliate to deliver to Wesbanco, prior to Closing, a letter,
substantially in the form of Exhibit A to the Agreement (which is
set forth in Appendix II hereto) providing that the shares of
Wesbanco Common Stock issued pursuant to the Merger in exchange
for shares of Vandalia Common Stock held by or for the benefit of
such Affiliate (a) will not be sold or otherwise disposed of
except in accordance with Rule 145 (where the Affiliate has given
Wesbanco evidence of compliance with the Rule reasonably
satisfactory to it) or pursuant to an effective registration
statement under the Securities Act unless such person has
furnished to Wesbanco a no-action or interpretive letter from the
Commission or an opinion of counsel reasonably satisfactory to
Wesbanco that such transaction is exempt from or otherwise
complies with the registration requirements of the Securities
Act; and (b) may be represented by certificates which bear an
appropriate legend.
Expenses
Wesbanco and Vandalia will each bear and pay their
respective costs and expenses incurred in connection with the
Merger; however, all costs and expenses incurred in the printing
and mailing of the Proxy Statement/Prospectus are being borne by
Wesbanco. If the Merger is consummated, any expense
incurred but not paid prior to the Effective Time will become the
obligation of the Surviving Corporation by reason of the Merger.
Accounting Treatment
The Merger will be accounted for as a "purchase" by Wesbanco
of Vandalia. The results of this accounting treatment are shown
in the summary unaudited combined pro forma financial data
included elsewhere in this Proxy Statement/Prospectus. See "Pro
Forma Data".
Certain Federal Income Tax Consequences of the Merger
The Merger is conditional upon receipt of an opinion of counsel,
as to the principal federal income tax consequences expected to result
from the Merger. An opinion of counsel will be provided by counsel for
Vandalia, Spilman, Thomas & Battle, as to the tax consequences of the Merger.
The following is a summary of such opinion. This summary is
qualified in its entirety by reference to the full text of such
opinion, including the assumptions upon which such opinion is
based. Such opinion is included as an exhibit to the
Registration Statement. Neither such opinion nor this summary
address any tax considerations under foreign, state or local
laws, or the tax considerations to shareholders other than
individual United States citizens who hold their shares of
Vandalia Common Stock as a capital asset within the meaning of
Section 1221 of the Code.
<PAGE> 42
No rulings have been requested from the Internal Revenue
Service as to the federal income tax consequences of the Merger.
Vandalia shareholders should be aware that the opinion of
Spilman, Thomas & Battle is not binding on the Internal Revenue
Service and the Internal Revenue Service is not precluded from
taking a different position. Vandalia shareholders should also
be aware that some of the tax consequences of the Merger are
governed by provisions of the Code as to which there are no final
regulations and little or no judicial or administrative guidance.
The opinion of Spilman, Thomas & Battle is based upon the federal
income tax laws as in effect on the date of such opinion and as
those laws are currently interpreted. There can be no assurance
that future legislation, regulations, administrative rulings or
court decisions will not adversely affect the accuracy of the
statements contained herein.
The federal income tax consequences discussed below are
conditioned upon, and the opinion of Spilman, Thomas & Battle is
based upon, the accuracy, as of the date hereof and at, as of and
after the effective time of the Merger, of certain assumptions,
including, but not limited to, the following (taking into account
for purposes hereof all events that are contemplated under the
agreement): (A) that, pursuant to the Merger, the former
shareholders of Vandalia receive shares of Wesbanco Common Stock
having a value on the date on which the effective time of the
Merger occurs of not less than fifty percent (50%) of the value
of Vandalia Common Stock as of the same date; (B) that following
the Merger, Wesbanco will continue the historic business of
Vandalia or use a significant portion of Vandalia's historic
business assets in a business; (C) that a bona fide corporate
business purpose exists for the Merger; and (D) that the holders
of 80% of the Vandalia Common Stock will exchange that stock for Wesbanco
Common Stock; and (E) each Vandalia shareholder receives either all
cash or, other than cash for fractional shares, all Wesbanco Common
Stock in exchange for the shareholder's Vandalia Common Stock.
Wesbanco and Vandalia believe that all of the foregoing
assumptions are accurate as of the date hereof, and will be
accurate at, as of and after the effective time of the Merger.
If either Wesbanco or Vandalia learns before the effective time
of the Merger that such assumptions are false and that its
counsel therefore believes that the Merger is unlikely to be
treated as a tax-free reorganization, then additional shareholder
approval will be obtained before consummation of the Merger.
Spilman, Thomas & Battle will render an opinion to Wesbanco
and Vandalia, based upon the assumptions set forth therein, that
the Merger will have the following federal income tax
consequences:
(i) The statutory merger of Vandalia with VNC
and the statutory merger of the NBWV with Wesbanco
Fairmont will each constitute a reorganization
within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986 ("IRC"), and
Wesbanco, Vandalia, VNC, NBWV and Wesbanco Fairmont
will each be a "party to a reorganization" as
defined in IRC Section 368(b);
<PAGE> 43
(ii) No gain or loss will be recognized by
Wesbanco, Vandalia, VNC, NBWV or Wesbanco Fairmont
as a result of the transactions contemplated in the
Agreement;
(iii) No gain or loss will be recognized
by the shareholders of Vandalia as a result of
their exchange of Vandalia Common Stock for
Wesbanco Common Stock, except to the extent any
shareholder elects to receive cash, or receives
cash in lieu of a fractional share or as a
dissenting shareholder;
(iv) The holding period of the Wesbanco Common
Stock received by each holder of Vandalia Common
Stock will include the period during which the
stock of Vandalia surrendered in exchange therefor
was held, provided such stock was a capital asset
in the hands of the holder on the date of exchange;
(v) The Federal Income Tax basis of the
Wesbanco Common Stock received by each holder of
Vandalia Common Stock will be the same as the basis
of the stock exchanged therefor;
(vi) A Vandalia shareholder who dissents from
the proposed Merger and receives solely cash in
exchange for that shareholder's shares of Vandalia
Common Stock will be treated as having received
that cash as a distribution in redemption of those
shares subject to the provisions and limitations of
Section 302 of the Code. If the distribution is
eligible for treatment as a distribution in
redemption of that shareholder's shares, that
shareholder will recognize gain to the extent of
the consideration received less that shareholder's
adjusted basis in those shares; and
(vii) The receipt by a Vandalia
shareholder of cash in lieu of a fractional share
of Wesbanco Common Stock will be treated as if
those shares or that fractional share was issued to
that holder in the Merger and thereafter redeemed
by Wesbanco for cash. The receipt of cash by a
Vandalia shareholder will be treated as a
distribution by Wesbanco in full payment in
exchange for the fractional share as provided in
Section 302(a) of the Code. If the distribution
is eligible for treatment as a distribution in
redemption of a Vandalia shareholder's fractional
share, that shareholder will recognize gain to the
extent of the consideration received less that
shareholder's allocable adjusted basis in those shares.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER
AND OTHER FACTORS, EACH SHAREHOLDER IS URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES OF THE MERGER TO THAT SHAREHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN INCOME,
PROPERTY, TRANSFER AND OTHER TAX LAWS.
<PAGE> 44
COMPARATIVE STOCK PRICES AND DIVIDENDS
Wesbanco Stock Prices and Dividends
On May 11, 1987, Wesbanco Common Stock became quoted on the
Nasdaq Stock Market under the symbol WSBC. The following
Wesbanco stock prices represent the range of published quotations
by the Nasdaq Stock Market during each quarter. The most recent
high and low prices on Wesbanco Common Stock were $30.50 and
$29.75 as of October 30, 1996.
Stock Price Range
Wesbanco(1)
-------------
High Low
------- -------
1994: First Quarter $29.50 $27.50
Second Quarter $28.25 $25.75
Third Quarter $29.00 $26.00
Fourth Quarter $29.25 $23.25
1995: First Quarter $25.75 $22.75
Second Quarter $26.50 $23.25
Third Quarter $29.50 $25.75
Fourth Quarter $30.00 $26.75
1996: First Quarter $28.75 $26.25
Second Quarter $27.25 $25.75
Third Quarter $28.50 $26.25
(1) On July 18, 1996, the date immediately preceding public announcement
of the proposed Merger, the published high and low price reported by
the Nasdaq Stock Market for Wesbanco stock was 26-1/2 and 26-1/2,
respectively.
Dividends Paid
The following table summarizes the quarterly cash dividends
per share on Wesbanco Common Stock declared by Wesbanco.
Wesbanco
--------
1994: First Quarter $ .21
Second Quarter .21
Third Quarter .22
Fourth Quarter .22
<PAGE> 45
Wesbanco
--------
1995: First Quarter $ .23
Second Quarter .23
Third Quarter .25
Fourth Quarter .25
1996: First Quarter .26
Second Quarter .26
Third Quarter .28
On August 15, 1996, Wesbanco's Board of Directors declared a
third quarter dividend of $.28 per share, with a record date of
September 13, 1996, payable October 1, 1996.
Wesbanco Common Stock Dividend Policy
It has been the policy of Wesbanco to declare and pay cash
dividends on a quarterly basis. However, declaration and payment
of future dividends will depend upon the earnings of Wesbanco and
its subsidiaries, their financial condition and other factors,
including applicable governmental regulations and policies. The
principal sources of Wesbanco's income are dividends from its
subsidiary banks. For a description of parent company liquidity,
see "Index to Financial Statements-Wesbanco."
Dividends may be paid on Wesbanco Common Stock at the
discretion of Wesbanco's Board of Directors out of any funds
legally available therefor. Under the West Virginia Corporation
Act, dividends may be paid out of unreserved and unrestricted
earned surplus, and, additionally, in certain circumstances and
with the affirmative vote of holders of a majority of its
outstanding shares, out of capital surplus, provided, however,
that in no event may dividends be paid if Wesbanco is at the time
insolvent or would be insolvent after payment of such dividends.
The amount and timing of any future dividends will depend upon
the earnings of Wesbanco and its subsidiaries, their financial
condition, and other relevant factors. See "Government
Regulation - Dividend Restrictions".
Vandalia Stock Price Range and Dividends
There is no established public trading market for Vandalia
Common Stock; and Vandalia is not aware of any trades by private
individuals or organizations in its stock during the periods
presented. The information below is compiled from information
furnished by various broker sources as reported to management of
Vandalia, although no attempt has been made to verify or
determine the accuracy of the information furnished to Vandalia.
This information is based solely on that of which management is
aware.
The following table sets forth the range of high and low bid
and asked prices per share for Vandalia Common Stock and the cash
dividends declared per share for the periods indicated:
<PAGE> 46
Cash
Stock Price Range Dividends
----------------- Paid Per
High Low Share
------ ----- ---------
1994 First Quarter None None None
Second Quarter None None None
Third Quarter None None None
Fourth Quarter None None None
1995 First Quarter None None None
Second Quarter None None None
Third Quarter None None None
Fourth Quarter None None None
1996 First Quarter None None None
Second Quarter None None None
Third Quarter None None None
On July 18, 1996, the last business day immediately
preceding public announcement of the proposed Merger, there were
no bid or ask prices for Vandalia Common Stock and no trades of
which Vandalia is aware. On October 30, 1996, the pro forma
equivalent price per share for Vandalia Common Stock, based on
the price of Wesbanco Common Stock on that date, was $38.31.
As of October 30, 1996, Vandalia had approximately 290
shareholders of record of its common stock.
Vandalia Dividend Policy
It has been the policy of Vandalia not to pay cash dividends
on Vandalia Common Stock due to its need to meet regulatory
capital requirements. The declaration and payment of future
dividends will depend upon the earnings of Vandalia, its
financial condition, and other factors, including applicable
governmental regulations and policies. The principal source of
Vandalia's income is from its banking operations. See "Index to
Financial Statements - Vandalia".
Dividends may be paid on Vandalia Common Stock at the
discretion of Vandalia's Board of Directors out of any funds
legally available therefor. Under the DCL, dividends may be paid
out of unreserved and unrestricted earned surplus, and,
additionally, in certain circumstances and with the affirmative
vote of the holders of a majority of its outstanding shares, out
of capital surplus, provided, however, that in no event may
dividends be paid if Vandalia is at the time insolvent or would
be insolvent after payment of such dividends. The amount and
timing of any future dividends will depend upon the earnings of
Vandalia, its financial condition and other relevant factors.
See "Government Regulation - Dividend Restrictions".
<PAGE> 47
The Agreement provides that Vandalia may not pay or declare
dividends or other distributions on Vandalia Common Stock. See
"The Merger - Conditions and Covenants".
COMPARATIVE RIGHTS OF SHAREHOLDERS
Description of Wesbanco Capital Stock
The authorized capital stock of Wesbanco consists of
25,000,000 shares of common stock of the par value of $2.0833 per
share, and 1,000,000 shares of preferred stock without par value.
The shares of Wesbanco Common Stock now outstanding are fully
paid and nonassessable. As of October 30, 1996, there were
approximately 4,019 holders of record of the common stock of
Wesbanco. Of the 25,000,000 shares of authorized common stock,
10,243,747 shares were issued and outstanding as of October 30,
1996. For a description of Wesbanco dividend rights, see
"Comparative Stock Prices and Dividends - Wesbanco Common Stock
Dividend Policy".
As of October 30, 1996, there were no shares of preferred
stock outstanding. Shares of preferred stock may be issued in
one or more classes or series with such preferences, voting
rights, full or limited, but not to exceed one vote per share,
conversion rights and other special rights as the Board of
Directors may fix in the resolution providing for the issuance of
the shares. The issuance of shares of preferred stock could
affect the relative rights of the common stock. Depending upon
the exact terms, limitations and relative rights and preferences,
if any, of the shares of preferred stock as determined by the
Board of Directors at the time of issuance, the holders of
preferred stock may be entitled to a higher dividend rate than
that paid on the common stock, a prior claim on funds available
for the payment of dividends, a fixed preferential payment in the
event of liquidation and dissolution of the company, redemption
rights, rights to convert their preferred stock into shares of
common stock, and voting rights which would tend to dilute the
voting control of the company by the holders of common stock.
Subject to the above limitations, in the event of any
liquidation, dissolution or winding up of Wesbanco, and subject
to the application of state and federal laws, holders of Wesbanco
Common Stock are entitled to share ratably in the assets
available for distribution to stockholders remaining after
payment of the corporation's obligations.
Each share of Wesbanco Common Stock is entitled to one vote,
and to cumulate votes in the election of directors. No holder of
shares of Wesbanco Common Stock has any preemptive right to
subscribe for or purchase any other securities of Wesbanco, and
there are no conversion rights or redemption or sinking fund
provisions applicable to Wesbanco Common Stock. However,
Wesbanco elects directors on a staggered basis by class with
terms of three years. This provision of its Articles of
Incorporation requires a super majority vote of its shareholders
to change. See "Comparison of Rights of Wesbanco and Vandalia
Shareholders".
<PAGE> 48
Description of Vandalia Capital Stock
The authorized capital stock of Vandalia consists of
1,000,000 shares of common stock, par value of $1.00 per share.
The shares of Vandalia Common Stock now outstanding are fully
paid and nonassessable. As of October 30, 1996, there were 290
shareholders of record of Vandalia Common Stock with 282,994
shares issued and outstanding. Additionally, there were 32,764
Warrants convertible into common stock at the exercise price of
$16.00 per share, all of which are owned by directors and
officers of Vandalia.
Each share of common stock has the same relative rights and
is identical in all respects with each other share of common
stock. The common stock is not subject to call for redemption.
The holders of common stock possess exclusive voting rights
in Vandalia. Each holder of common stock is entitled to one vote
for each share held, and a proportionate vote for any fractional
share held, on all matters voted upon by stockholders.
Stockholders are not permitted to cumulate their votes in the
election of directors.
The holders of the common stock are entitled to such
dividends as may be declared from time to time by the Board of
Directors of Vandalia out of funds legally available therefor.
See "Comparative Stock Prices and Dividends - Vandalia Dividend
Policy."
Holders of the common stock have preemptive rights to
acquire unissued or treasury shares of common stock or securities
convertible into such shares or carrying a right to subscribe to
or acquire such shares which are issued for cash by Vandalia in a
public offering or private placement of such securities, subject
to certain exceptions. Only stockholders of record on the date
of commencement of such public offering or private placement are
entitled to exercise such preemptive rights. Such stockholders
of record are entitled to subscribe for and purchase such
securities in the proportion in which their holdings of stock in
Vandalia bear to the total issued and outstanding capital stock
of Vandalia at the time of the commencement of the public
offering or private placement. The issuance for cash of
authorized but unissued shares of common stock is subject to
preemptive rights, provided that preemptive rights do not apply
to issuances of common stock to newly appointed or elected
directors of NBWV who are purchasing sufficient shares of common
stock to qualify as a director or to the issuance of common stock
upon exercise of the Warrants granted to directors in connection
with the organization of Vandalia or any stock option or stock
purchase or bonus plans intended for the benefit of employees, or
for the sale of any common stock representing 10% or less of the
total issued and outstanding shares of common stock for cash, or
in connection with the expansion of an existing or potential
business relationship between Vandalia and the purchaser of the
common stock.
In the event of any liquidation, dissolution or winding up
of Vandalia, the holders of the common stock would be entitled to
receive, after payment of all debts and liabilities of Vandalia,
all assets of Vandalia available for distribution, subject to the
rights of the holder of any preferred stock which may be issued
with a priority in liquidation or dissolution over the holders of
common stock. No shares of preferred stock are currently
authorized by the Articles.
<PAGE> 49
Comparison of Rights of Wesbanco and Vandalia Shareholders
The rights of the Vandalia shareholders and the Wesbanco
shareholders are governed by the respective Articles of
Incorporation and Bylaws of each corporation and Delaware law, as
to Vandalia, and West Virginia law, as to Wesbanco. In some
respects, the rights of Vandalia shareholders and Wesbanco
shareholders are similar. Holders of common stock of each
corporation are entitled to one vote for each share of common
stock and to receive prorata any assets distributed to
shareholders upon liquidation. The affirmative vote of the
holders of the majority of the outstanding common stock of either
corporation is required to approve major corporate transactions
including mergers and consolidations. Both corporations utilize
a three year classification of terms of office for their
respective Boards of Directors. The members of the Boards serve
for a term of three years so that only one-third of the members
is elected in any one year. However, Vandalia has taken steps to
eliminate the three year term which would be phased in through
1999. The shareholders of both corporations have the right to
dissent from certain corporate transactions and to elect
dissenters' rights or appraisal rights. See "Proposed Merger -
Appraisal Rights of Dissenting Shareholders".
(i) Differences in Rights:
There are, however, a number of differences between the
rights of Vandalia shareholders and Wesbanco shareholders. For
example, Wesbanco's Bylaws require that shareholders who intend
to nominate candidates for election to the Board of Directors
must give written notice of such intent at least 30 days prior to
the date of any shareholders meeting called for such purpose.
Vandalia's Bylaws require 90 days prior written notice of
shareholder nominations for directors.
The Directors of both corporations are elected for staggered
terms of three years, with no more than one-third of the
Directors being elected in any one year. Wesbanco, however,
permits cumulative voting in the election of Directors. Vandalia
does not permit cumulative voting. Furthermore, Wesbanco's
Articles of Incorporation contain certain "super majority
provisions". These provisions provide that the affirmative vote
of the holders of not less than 75% of the outstanding shares of
the voting stock of the corporation will be required to amend or
repeal the Articles of Incorporation provision dealing with the
classification of the Directors into three separate classes, each
to serve for staggered terms of three years. Vandalia's Articles
of Incorporation require only a majority vote of the shareholders
to elect the directors of the corporation and to amend the
Articles of Incorporation.
In addition, Wesbanco may issue preferred stock without
approval of the stockholders which could affect the voting
rights, funds available for dividends, redemption rights,
conversion rights, or distribution of assets to the holders of
the common stock of Wesbanco. Vandalia has no class of preferred
stock.
Shareholders of Vandalia have preemptive rights to acquire
additional shares of Vandalia Common Stock in proportion to their
holdings in the event Vandalia issues additional shares.
Wesbanco shareholders do not have preemptive rights.
Additionally, the Board of Directors of
<PAGE> 50
Wesbanco is authorized to issue additional shares of Wesbanco Common
Stock and Preferred Stock with such preferences, rights and privileges
as the Wesbanco Board shall determine.
As a Delaware corporation, Vandalia is subject to Section
203 of the DCL. Section 203 of the DCL ("Section 203") restricts
certain transactions between a corporation organized under
Delaware law (or its majority-owned subsidiaries) and any person
holder of 15% or more of the corporation's outstanding voting
stock, together with the affiliates or associates of such person
(an "Interested Stockholder").
Section 203 prevents, for a period of three years following
the date that a person becomes an Interested Stockholder, the
following types of transactions between the corporation and the
Interested Stockholder (unless certain conditions, described
below, are met): (a) mergers or consolidations, (b) sales,
leases, exchanges or other transfers of 10% or more of the
aggregate assets of the corporation, (c) issuances or transfers
by the corporation of any stock of the corporation which would
have the effect of increasing the Interested Stockholder's
proportionate share of the stock of any class or series of the
corporation, (d) any other transaction which has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation which is owned by the Interested
Stockholder, and (e) receipt by the Interested Stockholder of the
benefit (except proportionately as a stockholder) of loans,
advances, guarantees, pledges or other financial benefits
provided by the corporation.
The three-year ban does not apply if either the proposed
transaction or the transaction by which the Interested
Stockholder became an Interested Stockholder is approved by the
Board of Directors of the corporation prior to the date such
stockholder becomes an Interested Stockholder. Additionally, an
Interested Stockholder may avoid the statutory restriction if,
upon the consummation of the transaction whereby such stockholder
becomes an Interested Stockholder, the stockholder owns at least
85% of the outstanding voting stock of the corporation without
regard to those shares owned by the corporation's officers and
directors or certain employee stock plans. Business combinations
are also permitted within the three-year period if approved by
the Board of Directors and authorized at an annual or special
meeting of shareholders by the holders of at least 66-2/3% of the
outstanding voting stock not owned by the Interested Stockholder.
In addition, any transaction is exempt from the statutory ban if
it is proposed at a time when the corporation has proposed, and a
majority of certain continuing directors of the corporation have
approved, a transaction with a party who is not an Interested
Stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves (a) certain
mergers or consolidations involving the corporation, (b) a sale
or other transfer of over 50% of the aggregate assets of the
corporation, or (c) a tender or exchange offer for 50% or more of
the outstanding voting stock of the corporation.
A corporation may, at its option, exclude itself from the
coverage of Section 203 by amending its certificate of
incorporation or bylaws by action of its shareholders to exempt
itself from coverage, provided that such bylaw or charter
amendment shall not become effective until 12 months after the
date it is adopted. Vandalia has not adopted such a charter or
bylaw amendment. Wesbanco is not subject to such a similar
provision under West Virginia law.
<PAGE> 51
Vandalia's Articles contain a provision that limits the
liability of its directors for breaches of their fiduciary duties
as directors to the fullest extent permitted by the DCL. As a
result, directors will not be liable, in certain circumstances,
to Vandalia or its stockholders for monetary damages arising from
a breach of their fiduciary duties as directors. Such limitation
does not, however, affect the liability of a director (i) for any
transaction from which the director derives an improper personal
benefit, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law,
(iii) for improper payment of dividends or redemption of shares,
or (iv) for any breach of the director's duty of loyalty to Vandalia
or its stockholders.
Vandalia's Articles and Bylaws contain provisions that any
director, officer, employee or agent of Vandalia, or any person
serving at Vandalia's request in such capacity with any other
entity, will be indemnified to the fullest extent permitted by
law for any judgments, fines or other amounts incurred by such
person in connection with claims arising against such person by
reason of the fact that such person is or was a director,
officer, employee or agent of Vandalia, or was serving at
Vandalia's request in such capacity with any other entity.
Wesbanco's Bylaws require the corporation to indemnify each
officer and director against all costs and expenses reasonably
incurred by such individual in connection with any proceeding to
which he may be made a party by reason of his position as a
director or officer, except in relation to matters as to which he
shall have been adjudged derelict in the performance of his
duties. West Virginia law permits the corporation to indemnify a
director or officer if the individual acted in good faith and in
a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and as to criminal matters, if
he had no reasonable cause to believe his conduct was unlawful.
(ii) Advantages of Wesbanco Anti-Takeover Provisions:
The provisions constitute defensive measures which are
designed in part, to discourage, and to insulate the corporation
against, hostile takeover efforts, which the Wesbanco Board might
determine are not in the best interests of Wesbanco and its
shareholders. The provisions are designed as reasonable
precautions to protect against, and to assure the opportunity to
assess and evaluate such confrontations.
(iii) Disadvantages of Wesbanco Anti-Takeover Provisions:
The classification of the Board makes it more difficult to
change Directors since they are elected for terms of three years
rather than one year, and at least two annual meetings instead of
one are required to change a majority of the Board. Furthermore,
due to the smaller number of Directors to be elected at each
annual meeting, holders of a minority of the voting stock may be
in a less favorable position to elect Directors through the use
of cumulative voting. The super majority provision makes it more
difficult for shareholders to effect changes in the
classification of Directors. The ability of the Board of
Directors to issue additional shares of common and preferred
stock also permits the Board to authorize issuances of stock
which may be dilutive and, in the case of preferred stock, which
may affect the substantive rights of shareholders without
<PAGE> 52
requiring an additional shareholder vote. Collectively, the
provisions may be beneficial to management in a hostile takeover
attempt, making it more difficult to effect changes, and at the
same time, adversely affecting shareholders who might wish to
participate in such a takeover attempt.
The foregoing identification of certain specific differences
between the rights of Wesbanco and Vandalia shareholders is not
intended to indicate that other equally or more significant
differences do not exist. This summary is qualified in its
entirety by reference to the West Virginia Corporations Act, the
General Corporation Laws of the State of Delaware, and the
articles and bylaws of Vandalia and Wesbanco referred to above.
<PAGE> 53
PRO FORMA DATA
Certain Information about the Unaudited
Pro Forma Combined Financial Data
Notes to Pro Forma Financial Information
The following unaudited Pro Forma Consolidated
Balance Sheet as of September 30, 1996 and the Pro Forma
Consolidated Statements of Income were prepared as if each
transaction occurred on January 1 of the periods presented and
are for informational purposes only. The pro forma information
is based on the historical financial statements of WesBanco, and
Vandalia. These pro forma statements may not be indicative of the
results that actually would have occurred if the acquisition
had been in effect on the dates indicated or which may be
obtained in the future. Minor differences may result from
rounding. The pro forma financial information should be
read in conjunction with the other financial information
presented herein, incorporated by reference and with the
separate historical and supplemental financial statements,
including the notes thereto, of each institution. Expenses
relating to the acquisition of Vandalia are estimated within
a range of $125,000 to $150,000.
The Vandalia acquisition will be accounted for under
the purchase method of accounting. Under the terms of the
transaction, Vandalia shareholders will have the option to
elect cash in the amount of $34.34 per share, or to elect
WesBanco common stock at an exchange ratio of 1.2718 shares
for each share of Vandalia common stock. In addition
approximately 32,764 outstanding warrants will be
purchased for approximately $601,000 in cash. The total
transaction value approximates $10,319,000. To complete the
acquisition, WesBanco anticipates issuing up to 359,912 shares
of common stock from treasury, with approximately 200,000 of
these shares being acquired in the the market place. The total
number of shares to be purchased is dependent upon the number
of Vandalia shareholders will receive stock in exchange verses
those who elect cash. The acquisition of these shares, which will
be acquired over a time period from approximately October 1, 1996
through January 31, 1997 was approved by the WesBanco Board of
Directors at the August 15, 1996 meeting. The following pro forma
financial information assumes all Vandalia stockholders will elect
to receive WesBanco shares.
<PAGE> 54
<TABLE>
WESBANCO, INC.
PRO FORMA COMBINED BALANCE SHEET
September 30, 1996
[In thousands, except for book value per share]
[Unaudited]
Note 1 WesBanco Inc.
Vandalia Adjustments Proforma
WesBanco, Inc. National Corp. Dr Cr Combined
-----------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
A $5,745
Cash and due from banks $60,570 $1,534 K $3,949 B 601 $59,707
Due from banks -
interest bearing 297 818 1,115
Federal funds sold 29,500 29,500
Securities available G 21 D 214
for sale 249,828 7,492 K 3,949 253,178
Securities held to
maturity 249,270 850 250,120
Investment in subsidiary 0 B 10,319 C 10,319 0
Loans held for sale 1,234 1,234
Loans 963,315 45,464 H 22 E 133 1,008,668
Less: valuation reserve (14,597) (759) (15,356)
-------------------------------------------------------------------------
Net loans 949,952 44,705 22 133 993,312
Bank premises and
equipment 29,745 1,181 30,926
C 5,944
E 133
Goodwill and D 214 J 304
other intangibles 593 F 82 P 106 6,556
Q 18
Other assets 31,014 834 P 139 L 120 31,849
-------------------------------------------------------------------------
TOTAL ASSETS $1,600,769 $57,414 $20,823 $21,509 $1,657,497
=========================================================================
LIABILITIES
Deposits:
Non interest bearing $144,918 $6,424 $151,342
Interest bearing 1,126,594 45,750 I $15 F $82 1,172,411
---------------------------------------------------------------------------
Total deposits 1,271,512 52,174 15 82 1,323,753
Liabilities for
borrowed money 102,427 $550 102,977
Q 6
Other liabilities 12,404 315 M 48 P 33 12,698
---------------------------------------------------------------------------
TOTAL LIABILITIES 1,386,343 53,039 69 115 1,439,428
SHAREHOLDERS' EQUITY
Preferred stock 0 0 0
Common stock 21,608 283 C 283 21,608
B 31
Capital surplus 31,207 4,143 C 4,143 31,176
N 330
Retained Earnings 166,682 116 C 116 166,352
Treasury stock (4,004) A 5,745 B 9,749 0
Net unrealized
losses on available-
for-sale securities (1,067) (167) C 167 (1,067)
----------------------------------------------------------------------------
TOTAL SHAREHOLDERS'
EQUITY 214,426 4,375 10,648 9,916 218,069
---------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,600,769 $57,414 $10,717 $10,031 $1,657,497
============================================================================
Book value per share $20.97 $21.03
========== ===========
</TABLE>
See notes to Proforma Combined Financial Information
<PAGE> 55
WESBANCO INC.
PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1996
(In Thousands, except for share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Note 1 WesBanco Inc.
Vandalia Adjustments Proforma
WesBanco, Inc. National Corp. Dr Cr Combined
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees
on loans $60,046 $3,270 H $22 $63,338
Interest on investment
securities 22,305 433 L 120 G 21 22,639
Interest on federal
funds sold 1,293 0 1,293
-----------------------------------------------------------------------
Total interest income 83,644 3,703 120 43 87,270
INTEREST EXPENSE
Interest on deposits 33,010 1,736 I 15 34,731
Interest on other
borrowings 2,713 53 2,766
-----------------------------------------------------------------------
Total interest expense 35,723 1,789 0 15 37,497
-----------------------------------------------------------------------
NET INTEREST INCOME 47,921 1,914 120 58 49,773
Provision for possible
loan losses 2,848 345 3,193
-----------------------------------------------------------------------
NET INTEREST INCOME
AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 45,073 1,569 120 58 46,580
OTHER INCOME
Trust fees 4,039 0 4,039
Service charges and
other income 4,713 291 5,004
Net securities
transaction gains (51) (3) (54)
-----------------------------------------------------------------------
Total other income 8,701 288 0 0 8,989
OTHER EXPENSE
Salaries, wages, and
fringe benefits 17,406 789 18,195
Premises and
equipment - net 4,354 273 4,627
Goodwill amortization 6 0 J 304 310
Other operating 9,680 511 10,191
-----------------------------------------------------------------------
Total other expense 31,446 1,573 304 0 33,323
-----------------------------------------------------------------------
Income before income
taxes 22,328 284 424 58 22,246
Income tax provision
(benefit) 6,255 71 Q 12 M 48 6,290
-----------------------------------------------------------------------
Net Income $16,073 $213 $436 $106 $15,956
=======================================================================
Earnings Per Share $1.58 $1.54
Average Shares
Outstanding 10,186,456 10,346,368
</TABLE>
See Notes to Proforma Combined Financial Information
<PAGE> 56
WESBANCO INC.
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1995
(In Thousands, except for share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Vandalia Note 1 Wesbanco
National Adjustments Proforma
WesBanco, Inc. Corp. Dr Cr Combined
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees
on loans $74,452 $4,074 H $45 $78,481
Interest on invest-
ment securities 31,138 818 L 161 G $37 31,832
Interest on federal
funds sold 2,492 0 2,492
------------------------------------------------------
Total interest income 108,082 4,892 206 37 112,805
INTEREST EXPENSE
Interest on deposits 43,403 2,310 I 58 45,655
Interest on other
borrowings 3,167 77 3,244
------------------------------------------------------
Total interest expense 46,570 2,387 0 58 48,899
------------------------------------------------------
NET INTEREST INCOME 61,512 2,505 206 95 63,906
Provision for possible
loan losses 2,788 123 2,911
------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE
LOAN LOSSES 58,724 2,382 206 95 60,995
OTHER INCOME
Trust fees 4,716 0 4,716
Service charges and
other income 6,213 307 6,520
Net securities
transaction gains 437 (28) 409
------------------------------------------------------
Total other income 11,366 279 0 0 11,645
OTHER EXPENSE
Salaries, wages, and
fringe benefits 23,217 1,072 24,289
Premises and equipment-net 5,133 408 5,541
Goodwill amortization 0 0 J 426 426
Other operating 13,780 682 14,462
------------------------------------------------------
Total other expense 42,130 2,162 426 0 44,718
------------------------------------------------------
Income before income taxes 27,960 499 632 95 27,922
Provision for income taxes 7,656 155 Q 16 M 65 7,762
------------------------------------------------------
Net Income $20,304 $344 $648 $160 $20,160
======================================================
Earnings Per Share $1.98 $1.94
Preferred Stock Dividends
and Discount Accretion 164 164
Average Shares Outstanding 10,160,328 10,320,240
</TABLE>
See Notes to Proforma Combined Financial Information
<PAGE> 57
WESBANCO, INC.
NOTES TO PRO FORMA COMBINED
Financial Information
(Unaudited)
NOTE 1
The following represents the estimated pro forma and purchase accounting
adjustments related to the acquisition of the net assets of Vandalia National
Corporation. Under the purchase method of accounting, the acquiring company
records the net assets received at their fair value at the time of the
business combination. Excess of the cost over the fair value of the
net assets acquired is allocated to goodwill and amortized over a period of
fifteen years. These statements and purchase accounting adjustments are
primarily estimates and are not intended to reflect the final valuations at
the effective date of the acquisition.
(A) To record the purchase of treasury stock for use in the acquisition
of Vandalia National Corporation.
(B) To record investment in Vandalia National Corporation through the
issuance of treasury stock valued at $9,718,000 and cash of $601,000 to
acquire 32,764 warrants outstanding.
(C) Reflects the entries to eliminate the shareholders equity on Vandalia
National Corporation's books and reflects the excess over purchase price of
assets acquired of Vandalia (goodwill), before the effects of the purchase
accounting adjustments.
(D) Reflects the estimated market valuation adjustment of Vandalia's
securities held to maturity.
(E) Reflects the estimated market valuation adjustment of Vandalia's
loan portfolio.
(F) Reflects the estimated market valuation adjustment of Vandalia's
interest bearing deposits.
(G) Reflects the current period accretion of Vandalia's market value
adjustments of U.S. and agency securities over the estimated remaining
life using the straight line method.
(H) Reflects the current period accretion for the six months ended September
30, 1996 and amortization for the year ended December 31, 1995, of Vandalia's
estimated market value adjustments of loans over the estimated remaining
life using the straight line method.
(I) Reflects the current period amortization of Vandalia's estimated market
value adjustments of deposits over the estimated remaining life using the
straight line method.
(J) Reflects the amortization of Vandalia goodwill over a period of 15 years.
(K) Reflects the sale of available for sale securities to maintain a level of
cash in WesBanco to complete the transaction. No gain or loss
was recognized on the sale of available for sale securities.
(L) Reflects the reduction in interest income due to the sale of securities
using a 4.04% average yield, the average yield of the portfolio.
(M) Reflects Federal & State tax adjustment for the reduction in interest
income (L) at a 40% rate.
(N) Reflects the change in net income caused by the proforma and purchase
accounting adjustments.
<PAGE> 58
WESBANCO, INC.
NOTES TO PRO FORMA COMBINED
Financial Information (continued)
(Unaudited)
(P) Reflects the net deferred tax adjustments at a tax rate of 40% (combined
Federal & State tax rate)for the purchase adjustments.
(Q) Reflects the net amortization of the deferred tax adjustments at a tax
rate of 40% for the purchase accounting adjustments.
NOTE 2
Under the purchase method of accounting, Vandalia's assets and liabilities
will be adjusted to their fair value. The estimated fair value
adjustments included in the proforma financial statements have been
determined by WesBanco based upon information available. WesBanco cannot
be sure that such estimated fair values represent the fair values that will
ultimately result when the proposed transaction is consummated. The actual
valuation will depend upon the composition of the assets and liabilities,
the weighted average remaining life, the weighted average interest rate and
the general level of interest rates in the market at the time of purchase.
The following is a summary of the consideration received by Vandalia
shareholders from WesBanco and the pro forma adjustments made with respect
to estimated fair values. Vandalia stockholders have the option to elect
cash, stock, or a combination of the same. This summary makes the
assumption that the stockholders of Vandalia would elect all stock. (Dollars
in thousands).
SUMMARY OF CONSIDERATION:
100% of Vandalia's common stock outstanding 282,994
Exchange ratio 1.2718
--------
WesBanco common shares to be exchanged 359,912
Value of Wesbanco stock $27.00
--------
Consideration $ 9,718
Cash given for outstanding warrants 601
--------
TOTAL CONSIDERATION $10,319
========
<PAGE> 59
INFORMATION WITH RESPECT TO WESBANCO
History
Wesbanco is a multi-bank holding company chartered under the
laws of the State of West Virginia. As of September 30, 1996, Wesbanco
had six banking affiliates located in Wheeling, Parkersburg,
Charleston, Fairmont and Kingwood in West Virginia and
Barnesville, Ohio. On a consolidated historical basis, as of
September 30, 1996, Wesbanco had total assets of $1,600,769,000,
net loans of $950,000,000, deposits of $1,271,512,000 and shareholders
equity of $214,426,000. As of October 30, 1996, Wesbanco had
approximately 4,019 shareholders, and 10,243,747 shares of common stock
outstanding. Wesbanco has no preferred stock issued and outstanding.
Wesbanco had been inactive since its incorporation in 1968,
but was activated on December 31, 1976, and exchanged its common
stock on a share for share basis with the former holders of
common stock of Wheeling Dollar Savings & Trust Co. During 1984,
Wesbanco acquired three financial institutions with combined
assets approximating $57,000,000 as of December 31, 1984. During
1985, Wesbanco acquired one financial institution with assets as
of December 31, 1985, of approximately $41,000,000 and merged
Wheeling Dollar Savings & Trust Co. with the Citizens National
Bank of Follansbee, which was one of the banks acquired in 1984.
The name of the resulting institution was changed to Wheeling
Dollar Bank. During 1987, Wesbanco acquired four financial
institutions with combined assets of approximately $215,567,000.
During 1988, Wesbanco acquired one financial institution with
assets as of the date of acquisition of approximately
$68,280,000. During 1991 Wesbanco acquired one financial
institution with assets as of the date of acquisition of
approximately $95,510,000. During 1992, Wesbanco acquired two
financial institutions, one with assets of approximately
$144,849,000 in assets, and one of approximately $18,127,000 in
assets, as of the dates of acquisition. During 1994, Wesbanco
acquired four banks, all affiliates of First Fidelity Bancorp,
Inc. with approximate total assets of $309,911,000. On August 30,
1996, Wesbanco acquired the Bank of Weirton with approximate
total assets of $178,789,000. See, "Recent Acquisitions" and
"Pro Forma Data." Effective July 1, 1991, Wesbanco changed the
name of its affiliate banks to Wesbanco Bank plus the name of the
location of the Bank. Banks which have been acquired subsequent
to that date have likewise changed their names.
Wesbanco is a decentralized banking operation, with
affiliates acting autonomously in day to day decisions. The
principal role of the holding company is to provide management,
leadership and access to specialized staff resources in areas
such as: asset/liability management, regulations, lending
policies, data processing, accounting, investment and budgeting.
Dividends received from affiliates are Wesbanco's major
source of income. Dividend payments by the banking affiliates
depend primarily on their earnings and are limited by various
regulatory restrictions. On September 30, 1996, the affiliates,
without prior approval from the regulators, could have
distributed dividends of approximately $4,213,000. Wesbanco has
not issued debt securities as a source of funding for the assets
of the affiliate banks.
Wesbanco has reported to its stockholders that it may engage
in other activities of a finacial nature authorized by the Board
of Governors of the Federal Reserve System either
<PAGE> 60
directly through a subsidiary or through acquisition of established
companies, though no specific proposals are underway. As of
September 30, 1996, neither the parent corporation nor any of the
subsidiaries were engaged in any operation in foreign countries
and have had no material transactions with customers in foreign
countries.
Recent Acquisitions
Wesbanco entered into an Agreement and Plan of
Reorganization dated May 30, 1996 (the "Reorganization
Agreement") with Universal Mortgage Company ("Universal")
pursuant to which a wholly-owned subsidiary of Wesbanco (Wesbanco
Mortgage Company) acquired the assets, goodwill and business of
Universal in exchange for Wesbanco Common Stock and assumed
certain liabilities of Universal. A total of 30,089 shares of
Wesbanco Common Stock were issued at closing which occurred on
August 20, 1996. The number of shares issued to Universal was
determined by dividing the closing price of Wesbanco Common Stock
(average for last ten business days prior to closing, or $26.5875
per share) into $800,000. The Reorganization Agreement also provided
for the issuance of additional shares based on the net book value of
Universal in excess of $250,000. The calculation of the net book value in
excess of $250,000 was made based on audited financial statements which
were delivered within 45 days of closing. As a result of the audited
financial statements 2,374 additional shares were issued.
Ernest F. Fragale, the Chief Executive Officer and sole
shareholder of Universal, as a part of the transaction, entered
into an Employment Agreement with Wesbanco and its mortgage
company subsidiary. The Reorganization Agreement provided
customary representations and warranties regarding the operations
of Universal and the accuracy and completeness of those
representations were a condition to the closing by Wesbanco. In
addition to other customary conditions to the closing, and a
further review of the business of Universal by Wesbanco, the
transaction was conditioned upon approval by the Federal Reserve
Board. Application for such approval was filed on June 18, 1996,
and the approval of the Federal Reserve Board was issued on July
18, 1996.
Universal was a home loan mortgage lender with business
operations in Bridgeport, South Charleston, Huntington and
Elkins, West Virginia. Universal specialized in single-family
mortgage loans and offered Veterans Administration and Federal
Housing Administration home loans, as well as home buyer loans
facilitated through the West Virginia Housing Development Fund
which provides assistance for low to moderate income families.
For the calendar years ended December 31, 1995 and 1994,
Universal reported income (before income taxes) of $10,784 and
$71,067, respectively. Revenues for Universal (arising
principally from interest and fee income on loans originated by
Universal) amounted to $895,960 for 1995 and $1,183,460 for 1994,
respectively. The year-end audited financial statements of
Universal at December 31, 1995, reflected a net book value for
Universal of approximately $296,686.
In addition, under the terms of the Reorganization
Agreement, Mr. Fragale was elected as a director of Wesbanco.
Mr. Fragale is age 49 and has served as the President and chief
executive officer of Universal Mortgage Company since August,
1992. Mr. Fragale was
<PAGE> 61
formerly an executive officer with Reliable Mortgage Company.
Mr. Fragale owns 32,463 shares of Wesbanco Common Stock.
The Pro Forma Data included above in this Proxy
Statement/Prospectus does not reflect financial information for
the transaction with Universal as the operations and financial
information for Universal were immaterial to that presentation.
The acquisition of Universal's assets by Wesbanco was accounted
for as a purchase.
On August 30, 1996, Wesbanco completed the acquisition of
Bank of Weirton by means of a statutory merger with and into
Wesbanco Bank Wheeling. Bank of Weirton had total assets of
approximately $178,789,000, total equity of approximately
$37,586,000 and net income of $1,032,000 as of June 30, 1996.
Bank of Weirton was a state banking corporation with its
principal office located at 333 Penco Road, Weirton, West
Virginia. The bank also operated a branch facility in downtown
Weirton at 3425 Main Street. Both locations are full service
banking operations with drive-in facilities and are continuing to
be operated by Wesbanco subsequent to the merger.
Under the terms of the merger, Wesbanco issued 1,690,000
shares of Wesbanco Common Stock in exchange for the 13,000 shares
of Weirton Common Stock outstanding at the time of the
transaction. In addition, Wesbanco elected to the Board of
Directors of Wesbanco R. Peterson Chalfant and George M. Molnar.
R. Peterson Chalfant, a former director of the Bank of Weirton
who is age 55, is a lawyer and partner in the law firm of
Chalfant, Henderson & Dondzila located in Steubenville, Ohio. R.
Peterson Chalfant is the owner of 4,550 shares of Wesbanco Common
Stock individually. In addition, Mr. Chalfant's father, Clyde
Chalfant is the owner of 91,000 shares and his mother, Mary
Peterson Chalfant, is the owner of 135,200 shares of Wesbanco
Common Stock. George M. Molnar was the President and CEO of Bank
of Weirton and has served in that capacity for a number of years.
Mr. Molnar is age 70 and will continue as the President of the
Weirton office of Wesbanco Bank Wheeling. Mr. Molnar owns 52,000
shares of Wesbanco Common Stock and Mr. Molnar's wife, Margaret
A. Molnar, owns an additional 13,000 shares.
Future Acquisitions
Wesbanco continues to foster discussion with respect to
additional acquisitions of banks, thrifts and thrift and bank
holding companies. The tentative nature of such discussions,
however, makes it impossible to predict the number or size of any
future acquisitions.
<PAGE> 62
Operations
Wesbanco, through its subsidiaries, conducts a general
banking, commercial and trust business. Its full service banks
offer, among other things, retail banking services, such as
demand, savings and time deposits; commercial, mortgage and
consumer installment loans; credit card services through VISA and
MasterCard; personal and corporate trust services; discount
brokerage services; and travel services. Most affiliates are
participating in or will be participating in local partnerships
which operate banking machines in those local regions under the
name of MAC. The banking machines are linked to CIRRUS, a
nationwide banking network.
The principal operations of Wesbanco are conducted at the
main offices of Wesbanco and Wesbanco Bank Wheeling located at
Bank Plaza, Wheeling, West Virginia. This facility was
constructed in 1976, and consists of a modern eight story glass
enclosed commercial building with a main lobby for banking
operations and an integral four-lane drive-in facility with
additional space for customer parking. The structure provides
office space for Wesbanco and Wesbanco Bank Wheeling.
Wesbanco Bank Wheeling (formerly Wheeling Dollar Bank), a
state banking corporation is the largest banking subsidiary of
Wesbanco and represents approximately 50.4% of the consolidated
assets and 49.5% of the consolidated net income as of September 30,
1996. It is a full service bank offering a wide range of
services to consumers, businesses and government bodies,
including but not limited to, checking and savings accounts,
certificates of deposit, consumer loans, mortgage loans,
commercial loans, personal and corporate trusts, data processing
and other banking services. The bank has approximately 396 full-
time equivalent employees. The bank's Trust Department is one
of the largest in the State of West Virginia and offers a wide
range of services as Executor, Trustee, Guardian and Agent. It
serves as Transfer Agent and Registrar for corporations and
performs fiduciary services for municipalities. Total market
value of assets under management in the Trust Department was
approximately $1.4 billion as of September 30, 1996. The Bank also
operates fourteen branch offices, five of which are located in
Wheeling, two of which are located in Follansbee, two in New
Martinsville, one in Pine Grove, one in Sistersville, one in
Wellsburg and two in Weirton, West Virginia. All branch offices
of the bank also operate drive-in facilities.
Wesbanco Bank South Hills (formerly South Hills Bank) is a
state banking corporation located in Charleston, West Virginia.
The bank also provides general banking services similar to the
services provided by Wesbanco Bank Wheeling. The bank operates a
drive-in facility which is located at its main banking facility
and a full service facility with drive-in lanes in Sissonville.
As of September 30, 1996, the bank had total assets of approximately
$97,100,000, deposits of approximately $82,902,000 and 40 full
time equivalent employees.
Wesbanco Bank Parkersburg (formerly Mountain State Bank) is
also a state banking corporation located in Parkersburg, West
Virginia. The bank also provides general banking and trust
services similar to the services provided by Wesbanco Bank
Wheeling. The bank also operates a drive-in facility which is
located at its main banking facility and two full service
branches which are located at Mineral Wells and Elizabeth, West
Virginia. As of September 30,
<PAGE> 63
1996, the bank had approximately $117,252,000 in assets, $99,524,000
in deposits, and 70 full time equivalent employees.
Wesbanco Bank Kingwood is a West Virginia banking
corporation located in Kingwood, West Virginia. The bank also
provides general banking and trust services similar to the
services provided by Wesbanco Bank Wheeling. The bank operates
two full service branch offices at Masontown and Bruceton Mills,
West Virginia. As of September 30, 1996, the bank had approximately
$109,745,000 in assets and, $89,795,000 in deposits, and 51 full
time employees.
Wesbanco Bank Barnesville is an Ohio banking corporation
located in Barnesville, Ohio, the bank also provides general
banking and trust services similar to the services provided by
Wesbanco Bank Wheeling. The bank operates out of its principal
office located at 101 E. Main Street, Barnesville, Ohio, and also
operates branch facilities in Beallsville, Bethesda and
Woodsfield, Ohio. As of September 30, 1996, the bank had
approximately $145,730,000 in assets and $124,482,000 in
deposits, and 62 full time employees.
Wesbanco Bank Fairmont is a West Virginia banking
corporation located in Fairmont, West Virginia. The bank also
provides general banking and trust services. The bank operates
out of its principal office located at 301 Adams Street,
Fairmont, West Virginia, and also operates eleven branch offices
in Monongalia, Marion and Harrison Counties, in West Virginia.
As of September 30, 1996, the bank had approximately $328,264,000 in
assets and $261,560,000 in deposits and 235 full-time employees.
Competition
The 1980's was a period of significant legislative change in
West Virginia for banks and bank holding companies. Prior to
1982, West Virginia was a unit banking State and prohibited multi-
bank holding companies and branch banking. As a result of
legislation enacted in 1982, banks were permitted to establish a
limited number of branches by purchase, merger or consolidation
with another banking institution and to establish an additional
branch by the construction, lease or acquisition of branch
facilities in the unbanked areas within the county of its
principal office. In 1984, legislation further eased these
restriction by removing the "unbanked area" limitation on county
wide branching effective June 7, 1984, and by providing for the
phased implementation of branch banking throughout the State
beginning in 1987, with unlimited branch banking after 1991.
As a result of legislation adopted in the 1986 session of
the Legislature, West Virginia further eased or eliminated
restrictions on branch banking and joined the growing number of
states that permit interstate acquisitions of banks and bank
holding companies on a reciprocal basis. Specifically, the
legislation permits West Virginia bank holding companies to
acquire banks and bank holding companies in other states and out-
of-state bank holding companies to acquire West Virginia banks or
bank holding companies on a reciprocal basis; however, the entry
by out-of-state bank holding companies is permitted only by the
acquisition of an existing institution which has operated in West
Virginia for two years prior to acquisition. Similar provisions
were enacted to allow reciprocal interstate acquisitions by thrift
institutions such as savings and loan holding companies, savings and
loan associations, savings banks, and building and loan associations.
<PAGE> 64
The legislation also accelerated the effective date of state-
wide unlimited branch banking from 1991 to January 1, 1987.
Under the legislation, interstate banking activities were delayed
until January 1, 1988, in order to permit West Virginia
institutions one year to branch and make other acquisitions state-
wide before the advent of interstate banking. The legislation
does not permit the chartering and formation of de novo banks in
West Virginia by out-of-state bank holding companies nor does it
permit West Virginia banks to establish branch banks across state
lines (either de novo or by formation or merger).
The BHC Act was amended by the interstate banking provisions
of the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Banking Act"), which became
effective on September 29, 1995. The Interstate Banking Act
repealed the prior statutory restrictions on interstate
acquisitions of banks by bank holding companies, such that
Wesbanco and any other bank holding company located in West
Virginia or another state may now acquire a bank located in any
other state, and any bank holding company located outside West
Virginia may lawfully acquire any West Virginia-based bank,
regardless of state law to the contrary subject to certain
deposit-percentage, aging requirements, and other restrictions.
The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch
interstate through acquisitions of banks in other states. By
adopting legislation prior to that date, a state has the ability
either to "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate
branching altogether.
West Virginia adopted comprehensive legislation on this
issue in 1996 with Senate Bill 280, signed by the Governor on
April 1, 1996, and went into effect ninety (90) days from
passage. The Bill conforms the interstate provisions of state
law with the mandatory requirements of the Interstate Banking
Act. Senate Bill 280 provides the full range of additional
interstate branching opportunities permitted by the Interstate
Banking Act, including de novo branching and interstate branch
acquisitions. The interstate branching sections of the Bill were
effective May 31, 1996. In addition, Senate Bill 280 revises
elements of the law addressing the maximum level of insured
deposits which any affiliated group may control within West
Virginia. The new language defines the deposits included in the
calculation and precludes an acquisition transaction which would
result in the control of 25% or greater of such deposits.
Each bank faces strong competition for local business in its
respective market areas. Competition exists in efforts to obtain
new deposits, in the scope and types of services offered, and the
interest rates paid on time deposit and charged on loans, and in
other aspects of banking. Banks encounter substantial
competition not only from other commercial banks but also from
other financial institutions. Savings banks, savings and loan
associations, and credit unions actively compete for deposits.
Such institutions, as well as consumer finance companies,
brokerage firms, insurance companies and other enterprises, are
important competitors for various types of business. In
addition, personal and corporate trust services and investment
counseling services are offered by insurance companies,
investment counseling firms and other business firms and
individuals.
Principal Shareholders
To the best of management's knowledge, the Trust Department
of Wesbanco Bank
<PAGE> 65
Wheeling, Bank Plaza, Wheeling, West Virginia, 26003, is the only
holder or beneficial owner of more than 5% of the common stock of
the Corporation. As of October 30, 1996, 923,815 shares of the
common stock of the Corporation, representing 9.01% of the shares
outstanding, were held in various capacities in the Trust Department.
Of these shares, the Bank does not have voting control of 203,588 shares,
representing 1.98% of the shares outstanding, has partial voting control
of 31,147 shares, representing 0.30% of the shares outstanding, and
sole voting control of 689,079 shares, representing 6.72% of the
shares outstanding. In accordance with its general practice,
shares of the common stock of the Corporation over which the Bank
has sole voting control will be voted in accordance with the
recommendations of management. Shares over which the Bank has
partial voting control will be similarly voted if the Bank has
the concurrence of the co-fiduciary or co-fiduciaries.
The following table lists each stockholder known to Wesbanco
to be the beneficial owner of more than 5% of Wesbanco's common
stock as of October 30, 1996, as more fully described above:
Name &
Address of Amount and Nature
Title Beneficial of Beneficial Percent
Class Owner Ownership of Class
- ------ -------------------- ------------------- ---------
Common Wesbanco Bank
Wheeling Trust Dept.
Bank Plaza
Wheeling, WV 26003 923,815* 9.01%
*Nature of beneficial ownership more fully described in text
immediately preceding table.
Holders of Wesbanco Common Stock will not experience a
change in the number of Wesbanco shares held by them as a result
of the Merger; however, their percentage ownership will decrease.
Based on stock ownership as of October 30, 1996, and assuming a
total of 10,603,933 shares of Wesbanco Common Stock outstanding
immediately after the Merger, the Trust Department of Wesbanco
Bank Wheeling would own 8.71%, with sole voting and investment
power over 6.49%, and 0.29% with shared power. Directors and
Officers, as a group, would beneficially hold 7.12% or more of
the outstanding common stock of Wesbanco. For stock ownership of
Wesbanco Directors and Officers see the Wesbanco Proxy Statement
for the Annual Meeting of Shareholders for April 17, 1996,
incorporated herein by reference and delivered herewith. See
"Incorporation of Certain Documents by Reference."
Wesbanco KSOP
The Wesbanco Employee Stock Ownership and 401(k) Plan (the
"Plan") is a qualified non-contributory employee stock ownership
plan with a deferred savings plan feature under Section 401(k) of
the Internal Revenue Code. The employee stock ownership feature
of the Plan (the "ESOP") was adopted by the Corporation on
December 31, 1986, and subsequently amended and restated
effective January 1, 1996, to add 401(k) pre-tax savings features
(the "KSOP"). All employees of Wesbanco, together with all
employees of the subsidiary companies
<PAGE> 66
which adopt the Plan, are eligible to participate in the Plan upon
completion of a year of service and attaining age 21. All affiliate
banks are participants in the Plan, except for the two recent
acquisitions, which will be enrolled in the coming year. The Plan is
administered by a Committee appointed by the Board of Directors
of the Corporation.
No contributions are made to the ESOP portion of the Plan by
the employees. All contributions are made by the Corporation,
and the amount thereof is determined annually by the Board of
Directors of the Corporation. The Trustee of the ESOP Trust is
authorized to borrow funds upon terms and conditions not
inconsistent with Section 4975 of the Internal Revenue Code and
the regulations thereunder, for the purpose of purchasing stock
of the Corporation, from the Corporation or any shareholder. In
the event that such a loan is obtained, the employer
contributions must be made in an amount sufficient to amortize
the loan. Otherwise, employer contributions may be paid in the
form of cash or shares.
At the present time, the ESOP Trust holds 105,936 shares of
Wesbanco Common Stock. The ESOP Trustee has currently
outstanding $777,405 borrowed from an affiliated financial
institution. The loan originated in 1995 and is structured as a
revolving line of credit, and the unpaid balance is amortized
over a five-year period at an interest rate equal to the lender's
base rate. Wesbanco is required to make annual payments to
principal equal to 20% of the January 1st balance each year. Any
balance due at maturity will be paid in full or refinanced. The
ESOP Trustee pledged the shares of employer securities purchased
with the proceeds of the loan as security for the loan. Wesbanco
guaranteed the loan issuing a contribution commitment letter. As
such securities are allocated to the accounts of participating
employees, and the loan balance paid down, they will be released
by the secured party.
Employer securities purchased with the proceeds of the loan
are placed in a suspense account and released, prorata, from such
suspense account under a formula which considers the amount of
principal and interest paid for a given period over the amount of
principal and interest anticipated to be paid for that period and
all future periods. Shares released from the suspense account,
employer contributions, if any, and forfeitures are each
allocated, prorata, subject to limits imposed by the Code, to the
accounts of individual participants under a format which
considers the amount of the participant's compensation over the
aggregate compensation of all participants.
Participants become vested in their accounts upon
retirement, death or disability or upon completion of five years
of service from and after December 31, 1986, or, with respect to
affiliate banks, five years from the date of initial
participation. Distributions upon retirement, death or
disability are normally made in the form of substantially equal
annual installments over a period of 10 years commencing as soon
as practicable after such retirement, death or disability.
Distributions upon other separation from service are normally
made in the form of installments commencing upon the earlier of
the date the former employee attains age 65, his or her death, or
after a one year break in service. With the consent of the
Committee, distributions may be made in the form of a lump sum.
Participants may demand distributions in the form of whole shares
of employer securities. If demand is not timely made, however,
distributions may be made in cash.
The assets of the ESOP Trust will be invested and accounted
for primarily in shares of employer securities. However, from
time to time, the ESOP Trustee may hold assets in other
<PAGE> 67
forms, either (i) as required for the proper administration of the
ESOP or (ii) as directed by participants as set forth in Section
401(a)(28) of the Code.
During the year 1995, Wesbanco contributed a total of
$350,012 to the ESOP on behalf of its employees.
The following table sets forth, with respect to those
persons named in the Compensation Table, and for all executive
officers as a group, the number of shares of the Corporation's
common stock allocated to such individuals during 1995:
Value of
Name Shares Allocated Allocated Shares
- ---------------- ---------------- ----------------
Edward M. George 181 $ 5,074
Paul M. Limbert 166 $ 4,670
Dennis P. Yaeger 166 $ 4,669
Frank R. Kerekes 96 $ 2,707
Jerome B. Schmitt 140 $ 3,922
Officers of the 1,615 $ 45,220
Corporation (17 persons)
as a group
The KSOP feature of the Plan permits participants to make
pre-tax elective contributions through payroll deductions in
increments of 1% of compensation up to a maximum of 15% of
compensation, subject to certain maximum dollar limitations
imposed by the Internal Revenue Code (i.e. for 1996 the maximum
amount is $9,500.00). The Corporation provides matching
contributions on a quarterly basis subject to certain
limitations. The Corporation's matching contribution is 50% of
the first 2% of compensation electively deferred, and 25% of the
next 2% of compensation electively deferred. No matching
contributions are made by the Corporation for elective deferrals
in excess of 4% of compensation.
Employees are 100% vested in all pre-tax elective deferrals,
or contributions, to the Plan and likewise are 100% vested in all
matching employer contributions. KSOP contributions are
invested by the employee selecting the percentage of contributions
to be invested among seven (7) different investment funds.
No contributions were made under the KSOP feature by the
Corporation for calendar year 1995.
<PAGE> 68
Changes in West Virginia Taxes
West Virginia tax legislation, which was effective July 1,
1987, greatly changed the way banks and bank holding companies
are taxed by the State. As of July 1, 1987, the gross receipts-
based Business and Occupation ("B & O") Tax was repealed with
regard to banking institutions and most other entities engaging
in business in West Virginia. In place of the B & O Tax, the West
Virginia Legislature broadened the Corporation Net Income Tax
("CNIT") and enacted a new Business Franchise Tax.
The most significant state tax law change with respect to
banks is that, for taxable periods after July 1, 1987, banks must
pay CNIT. Banks and other financial institutions were exempt
from the CNIT for taxable periods prior to July 1, 1987. The
CNIT rate applied to West Virginia taxable income was increased
to 9.75% beginning July 1, 1987 (reduced by 0.15% annually for
five successive years until it reached 9% on July 1, 1992).
Also effective July 1, 1987, was the Business Franchise Tax,
imposed on the capital of partnerships and corporations which
currently is at a rate of 0.75%. The Business Franchise Tax
provides a mechanism for certain exclusions and credits, such as
excluding from taxable capital certain obligations of the United
States and the State of West Virginia and certain residential
mortgage loans.
Directors and Executive Officers
The information with respect to directors and executive
officers of Wesbanco is set forth in the Wesbanco Annual Proxy
Statement for the Annual Meeting of Shareholders held on April
17, 1996, and is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference". Three
additional directors of Wesbanco have been elected to the Board
since the Annual Meeting. These directors include George M.
Molnar, R. Peterson Chalfant and Ernest S. Fragale. See "Recent
Acquisitions", above.
Executive Compensation
The information with respect to executive compensation is
set forth in the Wesbanco Annual Proxy Statement for the Annual
Meeting of Shareholders held on April 17, 1996, and is
incorporated herein by reference. See "Incorporation of Certain
Documents by Reference."
Certain Relationships and Related Transactions
The information with respect to certain relationships and
related transactions is set forth in the Wesbanco Annual Proxy
Statement for the Annual Meeting of Shareholders held on April
17, 1996, and is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference".
<PAGE> 69
INFORMATION WITH RESPECT TO
VANDALIA
History
Vandalia was chartered in October 1989 in Delaware, as a
bank holding company, and has one subsidiary, NBWV, which opened
its doors in November 1990. NBWV provides credit and depository
services to individuals and small to medium businesses throughout
its primary service area of Morgantown, West Virginia, and its
surrounding communities. NBWV places emphasis on anticipating
and responding to the financial needs of its target client base
through quality products and personal service.
NBWV has offered a full range of traditional banking
services from 1991 through the current date and has grown to a
total of $57,000,000 in assets at September 30, 1996. The two
original facilities with which it opened are still in service and
a third facility consisting of a full service branch was opened
in August 1994. The bank continues to gain market share, though
its rate of growth is more restrained than in the earlier years.
See "Selected Financial Information."
Profitability was reached in the 17th month of operation,
and the cumulative loss due to organization and operation was
recouped before the end of the 5th year of operation.
Banking Services
NBWV offers a full spectrum of traditional banking products
and services to include checking and savings accounts,
certificates of deposits, individual retirement accounts and
holiday and vacation club accounts. In addition, the bank has
linked with third party venders to provide discount brokerage
services and products utilizing electronic media for product
delivery. The ratio of non-interest bearing deposits to total
deposits is in the range of 12% of the total, with market
interest rates being offered to customers for time and savings
deposits.
The deposits of customers and the bank's capital are
invested in a portfolio of U. S. Treasury securities and U. S.
Government Agency securities in an amount sufficient to manage
liquidity requirements, with all funds in excess of those
requirements invested in loans. The bank's primary lending area
is Monongalia County and surrounding areas. The bank offers
consumer loans of all types for all traditional purposes, as well
as loans for the construction or purchase of housing. Loans are
available to small and mid-size businesses for all traditional
business purposes such as inventory, plant and equipment, real
estate acquisition, and the carrying of accounts receivable and
administration of contracts.
The bank emphasizes the flexibility of its customer service
and speed of response to loan requests as its competitive edge,
and targets its interest rates to the average of the market for
similar products. As of September 30, 1996, the bank had total assets
of $57,414,000, deposits of $52,174,000 and total loans of
$44,705,000. As of September 30, 1996, Vandalia and NBWV had total
employees of 39.
<PAGE> 70
Competition
NBWV is the fifth largest of six banks in the local market.
In addition, there are two savings banks and a number of credit
unions present in the market, as well as insurance company
offices and brokerage offices which compete for the same deposit
customers and borrowers. The market is considered a competitive
one with a narrow margin for pricing variation. All of the
larger institutions in the market are multi-city companies with
resources much greater than NBWV has available. Consequently,
competitive advantage must be gained through speed and
responsiveness, and the flexibility of its products.
Economic Conditions
The local economy of Monongalia County has become very much
a service and professional market over the last several years.
Mining installation and glass factories have closed over the last
decade, and the primary development of employment gain in the
economy has been in the areas of higher education, health care,
state and federal government expansion, and the support business
and service business that surround those types of economic
development. The real estate market is quite active and
resilient, and is generally indicative of the unemployment rate
of 4-5% which is less than the national average and considerably
under the average for the state of West Virginia. Local
initiatives in making Morgantown a center for software
generation, healthcare delivery, and a retirement community have
begun to come to fruition, providing a vibrant economic growth in
many segments of the economy.
Properties of Vandalia
Neither Vandalia nor NBWV owns any real estate. NBWV leases
the buildings it occupies for banking facilities, and has
purchased leasehold improvements, fixtures and equipment with
respect thereto.
The main office of NBWV is located in a leased building at
344 High Street, Morgantown, West Virginia. This building is a
three story masonry building totaling 12,000 square feet. The
lease, dated January 8, 1990, currently in its first renewal
period, provides for a monthly rental of $3,500 until March 2000.
The lease further provides for two additional 5-year renewal
periods beginning March 2000 at a monthly rental of $3,750 until
March 2005, and $4,000 per month until March 2010. The lease
also grants the Bank the right of first refusal to purchase the
property, upon the same terms and conditions as any offer
received by the lessor from a third party. See "Certain
Relationships and Related Transactions" below.
NBWV's drive-through facility is located in downtown
Morgantown, West Virginia, and involves two parcels of real
estate. A lot at the corner of Spruce and Pleasant Streets is
leased under an agreement dated March 30, 1990, currently in its
first renewal period, requiring a monthly rental amount of $1,430
per month until March 2000. This lease allows for two additional
5-year renewal periods at the same monthly rental amount as
adjusted by the "Revised Consumers Price Index-Cities (1967 =
100)" through March 2010. The lease grants NBWV an option
to purchase the property for $120,000, increasing at a rate
of 1% per year during the term of the lease. In the event
NBWV does not elect to renew the lease and does not exercise its right to
purchase the property, it will be obligated to pay the lessors
liquidated damages in an amount
<PAGE> 71
equal to one year's rent under the lease. The offices of the
drive-through facility are housed in a building at 229 Spruce Street
and are leased under an agreement, currently in its first renewal
period, dated March 30, 1990, requiring a monthly rental payment of
$566. This lease also allows for two additional 5-year renewal periods
at the same monthly rent as adjusted by the same index through March 2010.
The lease grants NBWV an option to purchase the property for $83,200 during
the term thereof. See "Certain Relationships and Related Transactions" below.
In August 1994 NBWV opened a full service branch office at
3051 University Avenue, in the Suncrest area of Morgantown, West
Virginia. NBWV constructed an approximately 3,600 square foot
facility, which includes a drive-in facility, on leased land.
The lease, dated August 9, 1993, requires a monthly rental amount
of $1,000 until June 1995, at which time the lease was renewed
for four 4-year renewal periods, with the monthly rental amount
to be adjusted every two years by the Consumer Price Index
(revised CPI-W 1967 = 100) through June 2011. The rent has been
adjusted to date to the amount of $1,055 per month. The lease
grants NBWV the right of first refusal to purchase the land, upon
the same terms and conditions as any offer accepted by the lessor
from a third party. NBWV also has a non-exclusive right of first
refusal to purchase the property that is contiguous to the branch
facility, upon the same terms and conditions as any offer
accepted by the lessor from a third party, through October 1998.
NBWV can extend such right for a second 5-year period through the
payment of a nominal fee.
Legal Proceedings
Vandalia is involved in routine legal proceedings occurring
in the ordinary course of business. In the opinion of
management, final disposition of these lawsuits will not have a
material adverse effect on the financial condition or results of
operations of Vandalia.
Principal Shareholders
The following table shows the number and percentage of
shares of Vandalia Common Stock beneficially owned as of August
30, 1996, by each person known by Vandalia to own beneficially
more than 5% of the outstanding shares of Vandalia Common Stock:
Pro Forma
Percent of
Name and Address of Number of Beneficially Percent Wesbanco
Beneficial Owner Owned Shares of Class Common Stock
- -------------------- ----------------------- -------- -------------
James H. Harless (1) 137,500(1) 48.59%(1) 1.71%
State Route 10
Drawer D
Gilbert, WV 25621
(1) Represents percentage of 282,994 shares issued and
outstanding as of August 30, 1996. It does not include the
5,625 warrants owned by Mr. Harless and exercisable for
Vandalia Common Stock.
<PAGE> 72
Directors and Executive Officers of Vandalia
The following table sets forth the name and age of each
person who is currently a Director or Executive Officer of
Vandalia and the year during which such person's term on the
Board of Directors of Vandalia expires. Also set forth below is
certain information as of August 30, 1996, with respect to
Vandalia Common Stock beneficially owned by each Director and
Executive Officer and by Directors and Executive Officers of
Vandalia as a group. Except as indicated in the notes following
the table below, the beneficial owners have sole voting and
investment power with respect to the shares listed.
[CAPTION]
<TABLE>
Shares of Pro Forma
Common Percent of
Age on Term as Stock Wesbanco
June 30, Director Beneficially Percent of Common
Name 1996 Expires Owned Class(1) Stock
- ----- -------- -------- ------------- ---------- ----------
Directors:
<S> <C> <C> <C> <C> <C>
Charles S. Armistead(2) 82 1997 6,562 2.32% *
Robert D'Alessandri, M.D. 51 1999 312 .11% *
John W. Fisher, II(3) 53 1997 779 .28% *
James H. Harless(4) 76 1997 137,500 48.59% 1.71%
Vaughn L. Kiger(5) 51 1999 3,562 1.26% *
Roger E. King, M.D.(6) 56 1999 3,187 1.13% *
Ralph E. Massullo(7) 64 1998 2,500 .88% *
Reed Tanner(8) 43 1998 1,749 .62% *
Executive Officers:
C. Barton Loar(9) 54 1998 6,312 2.23% *
President, Chief
Executive Officer &
Director
Scott Batt(10) 30 1 * *
Assistant Vice President
- -Commercial Lending
Frederick L. Cason(11) 48 1 * *
Controller
<PAGE> 73
Shares of Pro Forma
Common Percent of
Age on Term as Stock Wesbanco
June 30, Director Beneficially Percent of Common
Name 1996 Expires Owned Class(1) Stock
- ----- -------- -------- ------------- ---------- ----------
Jennifer L. Kinty(12) 31 1 * *
Cashier
Albert Yocum(13) 57 124 * *
Vice President -
Retail Lending
------------ ----------
All directors and executive
officers as a group
(13 persons) 162,590 57.45%(14)
</TABLE>
______________________
*Represents less than 1%
(1) Represents percentage of 282,994 shares issued and
outstanding as of August 30, 1996. The percentage has not
been adjusted for individuals holding immediately
exercisable warrants to acquire shares of Common Stock. All
of the outstanding warrants ("Warrants") to purchase shares
of Common Stock are immediately exercisable at $16.00 per
share and expire in April 2001. The ownership of such
Warrants which will be exchanged for cash in accordance with
the terms of the Agreement is disclosed in the following
footnotes.
(2) This amount includes 1,562 shares owned by Mr. Armistead's
wife, as to which he disclaims beneficial ownership, and
excludes 4,452 shares which may be acquired upon the
exercise of Warrants.
(3) Includes shares held jointly by Mr. Fisher and his wife and
children, shares held in Mr. Fisher's and his wife's IRA
accounts, but excludes 2,695 shares which may be acquired
upon the exercise of Warrants.
(4) Excludes 5,625 shares which may be acquired upon the
exercise of Warrants.
(5) Includes shares held jointly by Mr. Kiger and his children,
500 shares owned by his wife, 250 shares held in his SEP
account, but excludes 3,000 shares which may be acquired
upon the exercise of Warrants.
(6) Excludes 3,281 shares which may be acquired upon the
exercise of Warrants.
(7) Excludes 2,875 shares which may be acquired upon the
exercise of Warrants.
<PAGE> 74
(8) Includes 624 shares held by Mr. Tanner as custodian for his
minor children. Does not include 250 shares representing
Mr. Tanner's proportional interest in the Stephen D. Tanner
Trust or shares beneficially owned by Stephen D. Tanner, Mr.
Tanner's father.
(9) Includes 1,250 shares held jointly with Mr. Loar's wife, but
excludes 4,024 shares which may be acquired upon the
exercise of Warrants.
(10) Mr. Batt joined NBWV in March 1994; prior to that time he
served as a commercial loan officer at Huntington
Bancshares, Inc.
(11) Mr. Cason joined NBWV in March 1994; prior to that time he
served as the Assistant Vice President - Funds Management of
CB&T Financial Corp., a bank holding company located in
Fairmont, West Virginia. Mr. Cason serves as Controller of
the Bank. Additionally, Mr. Cason performs the functions of
Chief Financial Officer of Vandalia, although he has no
official position with Vandalia.
(12) Ms. Kinty has served in her present capacity with NBWV since
April 1994, and as NBWV's internal auditor from November
1992 until April 1994; prior to joining NBWV, Ms. Kinty
owned her own accounting service and from December 1985
through May 1991 she served as the auditor of First National
Bank of Morgantown.
(13) Mr. Yocum joined NBWV in September, 1990; prior to that time
he served as Assistant Vice President and Consumer Loan
Manager at First National Bank of Morgantown, Morgantown,
West Virginia.
(14) Represents percentage of 282,994 shares issued and
outstanding as of August 30, 1996, excluding the number of
shares with respect to which all directors and executive
officers as a group hold Warrants.
The principal occupation and business experience during the
last five years of each of the Directors of Vandalia is as
follows: With the exception of Dr. D'Alessandri and Mr. Reed
Tanner, each of the Directors was an organizer of the Company and
the Bank.
Charles S. Armistead. Mr. Armistead has been a director of
Vandalia and a director of the Bank since each entity's
organization. He served as Chairman of the Board of both
organizations until April 1995. Mr. Armistead is an attorney at
law in Morgantown, West Virginia. He is also a former member of
the Board of Directors of C & P Telephone.
Robert D'Alessandri, M.D. Dr. D'Alessandri has been a
director of Vandalia since 1992 and a director of the Bank since
1991. He has been a member of the faculty of the West Virginia
University School of Medicine since 1977, and has for the last
three years served as Vice President of Health Sciences at the
Robert C. Byrd Health Sciences Center and for the last six years
as Dean of the School of Medicine at the West Virginia
University. Dr. D'Alessandri also
<PAGE> 75
serves as a member of the Board of Directors of West Virginia
University Hospitals, Inc. and West Virginia Medical Corporation.
John W. Fisher, II. Mr. Fisher has been a director of
Vandalia and a director of the Bank since each entity's
organization. He serves as Secretary of the Board of Directors
of both organizations. Mr. Fisher has been a professor of law at
West Virginia University since 1971 and served as Associate Dean
of the College of Law during 1992 and 1993. He served as
administrative assistant to the President of West Virginia
University from 1982 to 1986, and served as counsel to Facilities
Management Corporation, a non-profit corporation affiliated with
West Virginia University Hospitals, Inc.
James H. Harless. Mr. Harless has been a director of
Vandalia and a director of the Bank since each entity's
organization. He serves as Vice-Chairman of the Board of
Directors of both organizations. He is an entrepreneur and
industrialist, and is Chairman of International Industries, Inc.,
a coal and lumber company. He is a director of Matewan
Bancshares, Inc., a bank holding company headquartered in
Matewan, West Virginia, and a former member of the Board of
Directors of C & P Telephone.
Vaughn L. Kiger. Mr. Kiger has been a director of Vandalia
and a director of the Bank since each entity's organization, and
has served as Chairman of the Board of both organizations since
June 30, 1995. Since 1979, he has been president of Dorsey &
Kiger, Inc., Realtors, a selling, listing and real estate
management firm in Morgantown, West Virginia. Mr. Kiger
presently serves as chairman of the West Virginia Real Estate
Commission. He is a director of the Morgantown area Chamber of
Commerce and a former director and President of the West Virginia
University Alumni Association.
Robert E. King, M.D. Dr. King has been a director of
Vandalia and a director of the Bank since each entity's
organization. He has been a physician in private practice in
Morgantown, West Virginia, for the past 20 years. He is Fellow
of the American College of Surgeons and a member of many other
local and national medical societies.
C. Barton Loar. Mr. Loar has been a director of Vandalia
and a director of the Bank since each entity's organization. He
serves as President and Chief Executive Officer of both
organizations. Mr. Loar has been employed by the Bank since
1990, and prior to that time was employed by the First National
Bank of Morgantown in various capacities since 1969, including as
a Senior Vice President from July 1983 through May 1989.
Ralph E. Massullo. Mr. Massullo has been a director of
Vandalia since 1991 and was a director of the Bank from its
organization until April 1994. He serves as Vice President and
Treasurer of the Company. Mr. Massullo retired in July 1993 as
general manager of Daniel's, Inc., a retail men's clothing store
in Morgantown, West Virginia.
Reed J. Tanner. Mr. Tanner has been a director of Vandalia
and NBWV since August 1995 when he was appointed to the Board to
fill the vacancy caused by the death of Douglas H.
<PAGE> 76
Tanner, his uncle. Mr. Tanner is a certified public accountant and
a partner with Tanner & Tanner, Certified Public Accountants, a public
accounting firm in Morgantown, West Virginia.
Commencing with each entity's organization, neither the
directors of Vandalia nor NBWV, whose principal occupations are
outside Vandalia or NBWV, receive payment or remuneration for
service or attendance at Board or committee meetings.
Executive Officers
Name and Title Age Business Experience
- --------------------------- --- ------------------------
C. Barton Loar, Pres. & CEO 54 Chief Executive Officer, formerly
Sr. Vice Pres. and Sr. Lending
Officer of First National Bank of
Morgantown, CEO, Suncrest
National Bank, Morgantown.
Scott A. Batt, Asst. Vice Pres. 30 Commercial Loan Officer, formerly
commercial lender for Huntington
Banks of West Virginia
Frederick L. Cason, Controller 48 Investment Officer and Chief
Financial Officer, formerly
Assistant Vice Pres. for Funds
Management and Investment
Portfolio Management for CB&T
Financial Corp.
Jennifer L. Kinty, Cashier 31 Chief Operations Officer and
Compliance Officer, formerly
Auditor for The National Bank of
West Virginia and First National
Bank of Morgantown
Albert L. Yocum, Vice Pres. 57 Senior Lender in charge of retail and
consumer loans, formerly Assistant
Vice Pres. and Consumer Loan
Manager for First National Bank of
Morgantown
<PAGE> 77
Compensation of Executive Officers
- ----------------------------------
SUMMARY COMPENSATION TABLE
The following table sets forth, on an accrual basis, for the
three fiscal years ended December 31, 1995, the compensation paid
to Vandalia's Chief Executive Officer. No officer or employee of
Vandalia earned in excess of $100,000 during the last calendar
year.
Annual Compensation(1)
----------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation(2)
- ------------------ ---- ------ ----- ----------------
C. Barton Loar, 1995 $70,000 $100 $2,810
President and CEO 1994 $70,000 $100 $2,240
1993 $66,000 $100 $1,653
(1) Mr. Loar did not receive any prerequisites or other personal
benefits, the aggregate amount of which exceeded the lesser
of either $50,000 or 10% of his total annual salary and
bonus reported for 1995 in the Summary Compensation Table.
(2) Included in Other Annual Compensation is a tax deferred
contribution for Mr. Loar to the Company's 401(k) Profit
Sharing Plan. The amount reflects only contributions made
during each of the calendar years that vested during the
year.
401(k) Profit Sharing Plan
During 1993 Vandalia adopted a defined contribution 401(k)
profit-sharing plan for all employees of Vandalia who have at
least one year of service, work at least 1,000 hours during any
plan year and are over 21 years old. Voluntary employee
contributions under the plan for 1995 were limited to the greater
of $9,240 or 10% of annual compensation; maximum contribution
limits increase in later years. Under the plan, Vandalia is
required to match the employee contributions as follows:
- 100% of the employee's contribution up to 3.0% of total
annual compensation.
- 50% of the employee's contribution above 3.0% and up
to 5.0% of total annual compensation.
Vandalia may also elect to make additional contributions to the
plan as approved by the Board of Directors. Any additional
contributions are allocated among all participating employees on
a pro rata basis, by annual compensation of each employee for the
plan year in question. Employee contributions vest immediately upon
payment, while contributions from Vandalia vest ratably over a four year
period until such time as participating employees have at least four years of
<PAGE> 78
service. Thereafter, contributions from Vandalia vest immediately.
Contributions to the plan charged to Vandalia's operations for the year ended
December 31, 1995, totaled $16,769. The amount of that total which was
credited to Mr. Loar was $2,810.
Employment Agreements
As of August 30, 1996, neither Vandalia nor the NBWV had any
written employment agreement or other compensation contracts or
arrangements in existence.
Meetings of the Board of Directors and Compensation of Members
Vandalia has a board of directors composed of eight outside
members and Mr. Loar as CEO. The board meets on a regular
quarterly basis or more frequently as necessary. The board met
eight times during 1995. Standing committees consist of an
Executive Committee of five members which met twice, an Audit
Committee of four members which met four times, a Personnel
Committee of four members which met once, and a Facilities
Committee of five members which did not meet during 1995.
NBWV Board of Directors consists of seven outside members
and Mr. Loar, the CEO. The board meets regularly on the third
Thursday of each month or upon special notice. The board met a
total of 12 times during 1995. Standing committees consist of
the Audit Committee of four members which met four times, the
Building and Facilities Committee of four members which did not
meet, the Personnel and Benefits Committee of four members which
met two times during 1995. The most active committees are the
Asset/Liability Management Committee of four directors and four
members of management which meets quarterly or more frequently as
necessary, and the Loan Committee composed of five directors
which meets weekly or more frequently as necessary.
The membership of the boards of directors of the two
corporations overlaps, and all directors have served without
remuneration or compensation since the organization of the
companies.
Certain Relationships and Related Transactions
NBWV has had and expects to have in the future, banking
transactions in the ordinary course of business with some of its
and Vandalia's directors, officers, employees and promoters, and
their associates. In the past, substantially all of such
transactions have been on the same terms, including interest
rates, maturities and collateral requirements as those prevailing
at the time for comparable transactions with non-affiliated
persons and did not involve more than the normal risk of
collectibility or present other unfavorable features.
Loans to officers, directors and affiliates of Vandalia and
NBWV represented 7.39% of Vandalia's total shareholders' equity
at December 31, 1995. In the opinion of Vandalia's Board
of Directors, the terms of these loans are no less favorable to NBWV
than terms of loans from NBWV to unaffiliated parties. On June
30, 1996, $255,000 of loans were outstanding to individuals who
were officers, directors and affiliated parties of Vandalia and
NBWV. At the time each loan was made, management believed the
loan involved no more than the normal risk
<PAGE> 79
of collectibility nor
presented other unfavorable features. None of such outstanding
loans are classified as Substandard, Doubtful or Loss. At June
30, 1996, directors, executive officers and their related
interests maintained an aggregate of approximately $1,361,000 of
deposits with Vandalia.
The main office of NBWV is leased from R & S Rentals, a
general partnership including Mr. Ralph Massullo, one of the
directors of Vandalia. This building at 344 High Street,
Morgantown, West Virginia, is a three-story masonry building
totaling 12,000 square feet. The lease, dated January 8, 1990,
currently in its first renewal term, provides for a monthly
rental of $3,500 until March 2000. The lease further provides
for two additional 5-year renewal periods beginning March 2000 at
a monthly rental of $3,750 until March 2005, and $4,000 per month
until March 2010. The lease also grants NBWV the right of first
refusal to purchase the property, upon the same terms and
conditions as any offer received by the lessor from a third
party.
NBWV's drive-through facility in downtown Morgantown, West
Virginia, is leased from Mr. Vaughn L. Kiger, a director of NBWV
and Vandalia, and his wife. The lease involves two parcels of
real estate. A lot at the corner of Spruce and Pleasant Streets
is leased under an agreement dated March 30, 1990, currently in
its first renewal term, requiring a monthly rental amount of
$1,430 per month until March 2000. This lease allows for two
additional 5-year renewal periods at the same monthly rental
amount as adjusted by the "Revised Consumer Price Index-Cities
(1967 = 100)" through March 2010. The lease grants NBWV an
option to purchase the property for $120,000, increasing at a
rate of 1% per year during the term of the lease. In the event
NBWV does not elect to renew the lease and does not exercise its
right to purchase the property, it will be obligated to pay the
lessors liquidated damages in an amount equal to one year's rent
under the lease. The offices of the drive-through facility are
housed in a building at 229 Spruce Street, also owned by Mr. Kiger
and his wife, and are leased under an agreement dated March 30, 1990,
currently in its first renewal term, requiring a monthly rental
payment of $566. This lease also allows for two additional 5-year
renewal periods at the same monthly rent as adjusted by the same
index through March 2010. The lease grants NBWV an option to purchase
the property for $83,200 during the term thereof.
All of the above lease arrangements were appraised by an
independent certified real estate appraiser prior to NBWV's
originally entering into same in 1990 and were determined, at
that time, to be on lease terms that were the same or more
favorable to NBWV than those available for any arms-length
transactions for similar facilities or like properties.
<PAGE> 80
GOVERNMENT REGULATION
As a registered bank holding company, Wesbanco and Vandalia
are subject to the supervision of the Federal Reserve Board and
are required to file with the Federal Reserve Board reports and
other information regarding their business operations and the
business operations of their subsidiaries. They are also subject
to examination by the Federal Reserve Board and required to
obtain Federal Reserve Board approval prior to acquiring,
directly or indirectly, ownership or control of voting shares of
any bank, if, after such acquisition, it would own or control
more than 5% of the voting stock of such bank. In addition,
pursuant to federal law and regulations promulgated by the
Federal Reserve Board, they may only engage in, or own or control
companies that engage in, activities deemed by the Federal
Reserve Board to be so closely related to banking as to be a
proper incident thereto. Prior to engaging in most new business
activities, Wesbanco and Vandalia must obtain approval from the
Federal Reserve Board.
Both Wesbanco's and Vandalia's banking subsidiaries have
deposits insured by the Bank Insurance Fund ("BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"), and are
subject to supervision, examination, and regulation by the state
banking authorities and the FDIC, the Comptroller and the Federal
Reserve Board. In addition to the impact of federal and state
supervision and regulation, the banking and non-banking
subsidiaries of Wesbanco and Vandalia are affected significantly
by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to
influence the economy.
To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its
entirety by reference to such statutory or regulatory provisions.
Holding Company Structure
Both Wesbanco's depository institution subsidiaries and
Vandalia's depository institution subsidiary are subject to
affiliate transaction restrictions under federal law which limit
the transfer of funds by the subsidiary banks to their respective
parents and any nonbanking subsidiaries, whether in the form of
loans, extensions of credit, investments or asset purchases.
Such transfers by any subsidiary bank to its parent corporation
or to any nonbanking subsidiary are limited in amount to 10% of
the institution's capital and surplus and, with respect to such
parent and all such nonbanking subsidiaries, to an aggregate of
20% of any such institution's capital and surplus. Furthermore,
such loans and extensions of credit are required to be secured in
specified amounts. Under applicable regulation, at September 30,
1996, approximately $38,304,000 was available for loans to
Wesbanco from its subsidiary banks and $875,000 was available for
loans to Vandalia from its subsidiary bank.
The Federal Reserve Board has a policy to the effect that a
bank holding company is expected to act as a source of financial
and managerial strength to each of its subsidiary banks and to
commit resources to support each such subsidiary bank. Under the
source of strength doctrine, the Federal Reserve Board may
require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company
with engaging in unsafe and unsound practices for failure to commit
resources to such a subsidiary
<PAGE> 81
bank. This capital injection may be required at times when Wesbanco
and Vandalia may not have the resources to provide it. Any capital
loans by a holding company to any of the subsidiary banks are subordinate
in right of payment to deposits and to certain other indebtedness of
such subsidiary bank. Moreover, in the event of a bank holding
company's bankruptcy, any commitment by such holding company to a
federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
In 1989, the United States Congress passed comprehensive
financial institutions legislation known as the Financial
Institution Reform, Recovery, and Enforcement Act ("FIRREA").
FIRREA established a new principle of liability on the part of
depository institutions insured by the FDIC for any losses
incurred by, or reasonably expected to be incurred by, the FDIC
after August 9, 1989, in connection with (i) the default of a
commonly controlled FDIC-insured depository institution, or (ii)
any assistance provided by the FDIC to a commonly controlled FDIC-
insured depository institution in danger of default. "Default""
is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is
likely to occur in the absence of regulatory assistance.
Accordingly, in the event that any insured bank subsidiary of
Wesbanco causes a loss to the FDIC, other bank subsidiaries of
that parent could be required to compensate the FDIC by
reimbursing to it the amount of such loss.
Federal law permits the OCC to order the pro rata assessment
of shareholders of a national bank whose capital stock has become
impaired, by losses or otherwise to relieve a deficiency in such
national bank's capital stock. This statute also provides for
the enforcement of any such pro rata assessment of shareholders
of such national bank to cover such impairment of capital stock
by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly,
the laws of certain states provide for such assessment and sale
with respect to the subsidiary banks chartered by such states.
Dividend Restrictions
There are statutory limits on the amount of dividends the
depository institution subsidiaries of Wesbanco and Vandalia can
pay to their respective parent corporations without regulatory
approval. Under applicable federal regulations, appropriate bank
regulatory agency approval is required if the total of all
dividends declared by a bank in any calendar year exceeds the
available retained earnings and exceeds the aggregate of the
bank's net profits (as defined by regulatory agencies) for that
year and its retained net profits for the preceding two years,
less any required transfers to surplus or a fund for the
retirement of any preferred stock.
In addition, national banks may not pay a dividend in an
amount greater than such bank's net profits after deducting its
losses and bad debts. For this purpose, bad debts are defined to
include, generally, loans which have matured and are in arrears
with respect to interest by six months or more, other than such
loans which are well secured and in the process of collection.
Under these provisions and in accordance with the above-described
formula, Wesbanco's subsidiary banks could, without regulatory
approval, declare dividends as of September 30, 1996, of approximately
$4,213,000, and Vandalia's subsidiary bank could declare dividends
of $390,000.
<PAGE> 82
If, in the opinion of the applicable regulatory authority, a
bank under its jurisdiction is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the
financial condition of the bank, could include the payment of
dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal
Reserve Board, the OCC and the FDIC have issued policy statements
which provide that insured banks and bank holding companies
should generally only pay dividends out of current operating
earnings.
FDIC Insurance
Pursuant to FDICIA, the FDIC adopted a risk based assessment
system for insured depository institutions that takes into
account risks attributable to different categories and
concentrations of assets and liabilities. An institution is
assigned by the FDIC into one of three capital categories: 1 -
well capitalized; 2 - adequately capitalized; 3 -
undercapitalized. An institution is also assigned to one of
three supervisory subgroups within each capital group. The
supervisory subgroup is based on a supervisory evaluation
provided by the primary federal regulator. An institution
insurance assessment rate is then determined based upon capital
and the supervisory category to which it is assigned. Under this
risk based assessment system, there are nine assessment risk
categories to which different assessment rates are applied.
The Federal Deposit Insurance Act required the Bank
Insurance Fund to be recapitalized until the reserves reached a
designated ratio of at least 1.25% of deposits. That ratio was
met during May 1995. In August 1995, the FDIC reduced the
assessment rates for financial institutions which are subject to
the requirements of the Bank Insurance Fund. Under the revised
assessment schedule which was effective May 14, 1996, financial
institutions pay assessments ranging from .00% of deposits to
.31% of deposits, with an average assessment rate of .29%
(subject to the statutory minimum of $2,000 per institution per
year). Wesbanco is considered to be in the well capitalized
category requiring the minimum legal annual assessments as
required by the FDIC. The assessment rate for Vandalia is .03%.
The FDIC recognizes that the disparity may have adverse
consequences for such institutions in the higher risk categories
including reduced earnings and impaired ability to raise funds on
the capital markets and to attract deposits. It is not currently
known whether institutions that are required to pay insurance
premiums will be required to pay higher deposit insurance
premiums in the future. It is impossible to predict whether
future regulations will be enacted or if enactment will require
financial institutions to contribute to the Savings Association
Insurance Fund or if these regulations may require additional
payments by Wesbanco into the Bank Insurance Fund.
<PAGE> 83
Capital Requirements
The Federal Reserve Board has issued risk-based capital
guidelines for bank holding companies, such as Wesbanco and
Vandalia. The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more
sensitive to differences in risk profiles among banking
organizations, takes off-balance sheet exposures into explicit
account in assessing capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets. Under the
guidelines and related policies, bank holding companies must
maintain capital sufficient to meet both a risk-based asset ratio
test and leverage ratio test on a consolidated basis. The risk-
based ratio is determined by allocating assets and specified off-
balance sheet commitments into four weighted categories, with
higher levels of capital being required for categories perceived
as representing greater risk. The leverage ratio is determined
by relating core capital (as described below) to total assets
adjusted as specified in the guidelines. All of Wesbanco's
depository institution subsidiaries and NBWV are subject to
substantially similar capital requirements adopted by applicable
regulatory agencies.
Generally, under the applicable guidelines, the financial
institution's capital is divided into two tiers. "Tier 1", or
core capital, includes common equity, noncumulative perpetual
preferred stock (excluding auction rate issues) and minority
interests in equity accounts of consolidated subsidiaries, less
goodwill. Bank holding companies, however, may include
cumulative perpetual preferred stock in their Tier 1 capital, up
to a limit of 25% of such Tier 1 capital. "Tier 2", or
supplementary capital, includes, among other things, cumulative
and limited-life preferred stock, hybrid capital instruments,
mandatory convertible securities, qualifying subordinated debt,
and the allowance for loan losses, subject to certain
limitations, less required deductions. "Total capital" is the
sum of Tier 1 and Tier 2 capital.
Financial institutions are required to maintain a risk-based
ratio of 8%, of which 4% must be Tier 1 capital. The appropriate
regulatory authority may set higher capital requirements when an
institution's particular circumstances warrant.
Financial institutions that meet certain specified criteria,
including excellent asset quality, high liquidity, low interest
rate exposure and the highest regulatory rating, are required to
maintain a minimum leverage ratio of 3%. Financial institutions
not meeting these criteria are required to maintain a leverage
ratio which exceeds 3% by a cushion of at least 100 to 200 basis
points.
The guidelines also provide that financial institutions
experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above
the minimum supervisory levels, without significant reliance on
intangible assets. Furthermore, the Federal Reserve Board's
guidelines indicate that the Federal Reserve Board will continue
to consider a "tangible Tier 1 leverage ratio" in evaluating
proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital,
less all intangibles, to total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject
the financial institution to a variety of enforcement remedies
available to the federal regulatory authorities, including
<PAGE> 84
limitations on the ability to pay dividends, the issuance by the
regulatory authority of a capital directive to increase capital
and the termination of deposit insurance by the FDIC, as well as
to the measures described under "Federal Deposit Insurance
Corporation Improvement Act of 1991" as applicable to
undercapitalized institutions.
As of September 30, 1996, the Tier 1 risk-based ratio, total risk-
based ratio and total assets leverage ratio for combined Wesbanco and
Vandalia were as follows:
Regulatory Pro Forma
Requirements Wesbanco Vandalia Combined
------------- ---------- -------- ----------
Tier 1 Risk-Based
Ratio 4% 20.4% 10.3% 19.6%
Total Risk-Based
Ratio 8% 21.7% 11.6% 20.8%
Total Assets
Leverage Ratio 3% 13.4% 7.3% 12.9%
________________
As of September 30, 1996, all of Wesbanco's banking subsidiaries,
and Vandalia's banking subsidiary had capital in excess of all applicable
requirements.
The Federal Reserve Board, as well as the FDIC and the OCC
have adopted changes to their risk-based and leverage ratio
requirements that require that all intangible assets, with
certain exceptions, be deducted from Tier 1 capital. Under the
Federal Reserve Board's rules, the only types of intangible
assets that may be included in (i.e., not deducted from) a bank
holding company's capital are readily marketable purchased
mortgage servicing rights ("PMSRs") and purchased credit card
relationships ("PCCRs"), provided that, in the aggregate, the
total amount of PMSRs and PCCRs included in capital does not
exceed 50% of Tier 1 capital. PCCRs are subject to a separate
sublimit of 25% of Tier 1 capital. The amount of PMSRs and PCCRs
that a bank holding company may include in its capital is limited
to the lesser of (i) 90% of such assets' fair market value (as
determined under the guidelines), or (ii) 100% of such assets'
book value, each determined quarterly. Identifiable intangible
assets (i.e., intangible assets other than goodwill) other than
PMSRs and PCCRs, including core deposit intangibles, acquired on
or before February 19, 1992 (the date the Federal Reserve Board
issued its original proposal for public comment), generally will
not be deducted from capital for supervisory purposes, although
they will continue to be deducted for purposes of evaluating
applications filed by bank holding companies. These revisions
became effective for periods commencing after March 15, 1993, and
are reflected in Wesbanco's and Vandalia's capital ratios as of
September 30, 1996.
<PAGE> 85
Federal Deposit Insurance Corporation Improvement Act of 1991
In December 1991, Congress enacted the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), which
substantially revised the bank regulatory and funding provisions
of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
Among other things, FDICIA requires federal bank regulatory
authorities to take "prompt corrective action" with respect to
depository institutions that do not meet minimum capital
requirements. For these purposes, FDICIA established five
capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
under capitalized.
The regulatory authorities have adopted regulations to
implement the prompt corrective action provisions of FDICIA.
Among other things, the regulations define the relevant capital
measures for the five capital categories. An institution is
deemed to be "well capitalized" if it has a total risk-based
capital ratio of 10% or greater, a Tier 1 risk-based capital
ratio of 6% or greater and a Tier 1 leverage ratio of 5% or
greater and is not subject to a regulatory order, agreement or
directive to meet and maintain a specific capital level for any
capital measure. An institution is deemed to be "adequately
capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater and,
generally, a Tier 1 leverage ratio of 4% or greater and the
institution does not meet the definition of a "well capitalized"
institution. An institution that does not meet one or more of
the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based
capital ratio that is less than 6% , a Tier 1 risk-based capital
ratio that is less than 3%, or a leverage ratio that is less than
3%, it is deemed to be "significantly undercapitalized".
Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or
less than 2%.
"Undercapitalized" institutions are subject to growth
limitations and are required to submit a capital restoration
plan. If an "undercapitalized" institution fails to submit an
acceptable plan, it is treated as if it is significantly
undercapitalized. "Significantly undercapitalized" institutions
may be subject to a number of requirements and restrictions,
including orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets and
cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions may not, beginning 60
days after becoming "critically undercapitalized" make any
payment of principal or interest on their subordinated debt. In
addition, "critically undercapitalized" institutions are subject
to appointment of a receiver or conservator.
Under FDICIA, a depository institution that is not "well
capitalized" is generally prohibited from accepting brokered
deposits and offering interest rates on deposits higher than the
prevailing rate in its market. All of Wesbanco's depository
institution subsidiaries and Bank of Weirton currently meet the
FDIC's definition of a "well capitalized" institution for purposes of
accepting brokered deposits. For the purposes of the brokered
deposit rules, a bank is defined to be "well capitalized" if it
maintains a ratio of Tier 1 capital to risk-adjusted assets of at
least 6%, a ratio of total capital to risk-adjusted assets of at
least 10% and a Tier 1 leverage ratio of at least
<PAGE> 86
5% and is not otherwise in a "troubled condition" as
specified by its appropriate federal regulatory agency. On
October 25, 1993, the FDIC published a final rule providing for
purposes of its brokered deposit rules the definitions of "well
capitalized", "adequately capitalized" and "undercapitalized" as
previously adopted by the bank regulatory agencies under the
prompt corrective action rules described above. Neither Wesbanco
nor Vandalia believes that adoption of the definition of capital
levels under the prompt corrective action rules will adversely
affect their ability to accept brokered deposits. Neither
Wesbanco nor Vandalia have any significant brokered deposits.
The Federal Deposit Insurance Act, as amended by FDICIA and
the Riegle Community Development and Regulatory Improvement Act
of 1994, requires the federal bank regulatory agencies to
prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate
risk exposure, asset growth, asset quality, earnings, stock
valuation and compensation, fees and benefits and such other
operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted,
effective August 9, 1995, a set of guidelines prescribing safety
and soundness standards pursuant to FDICIA, as amended. The
guidelines establish general standards relating to internal
controls and information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset
growth and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures
specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable
or disproportionate to the services performed by an executive
officer, employee, director or principal shareholders. The
federal banking agencies determined that stock valuation
standards were not appropriate. In addition, the agencies
adopted regulations that authorize, but do not require, an agency
to order an institution that has been given notice by an agency
that it is not satisfying any of such safety and soundness
standards to submit a compliance plan. If, after being so
notified, an institution fails to submit an acceptable compliance
plan or fails in any material respect to implement an accepted
compliance plan, the agency must issue an order directing action
to correct the deficiency and may issue an order directing other
actions of the types to which an undercapitalized institution is
subject under the "prompt correction action" provisions of
FDICIA. If an institution fails to comply with such an order,
the agency may seek to enforce such order in judicial proceedings
and to impose civil money penalties. The federal bank regulatory
agencies also proposed guidelines for asset quality and earnings
standards.
FDICIA also contains a variety of other provisions that may
affect the operations of Wesbanco's and Vandalia's depository
institution subsidiaries, including new reporting requirements,
revised regulatory standards for real estate lending, "truth in
savings" provisions and the requirements that a depository
institution give 90 days prior notice to customers and regulatory
authorities before closing any branch.
<PAGE> 87
In addition to FDICIA, there have been proposed a number of
legislative and regulatory proposals designed to strengthen the
federal deposit insurance system and to improve the overall
financial stability of the United States banking system. These
include proposals to increase capital requirements above
presently published guidelines, to place assessments on
depository institutions to increase funds available to the FDIC
and to allow national banks to branch on an interstate basis. It
is impossible to predict whether or in what form these proposals
may be adopted in the future and, if adopted, what their effect
would be on Wesbanco. It is likewise impossible to predict what
the competitive effect on Wesbanco's or Vandalia's bank
subsidiaries will be of the recent action taken by the Office of
Thrift Supervision to allow certain thrift institutions to engage
in interstate branching on a nationwide basis.
Environmental Issues
As lenders, banks can be potentially liable under the
Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), 42 U.S.C. 9601 et seq., for cleanup of hazardous
substances from property on which the bank forecloses or in which
it has a security interest. CERCLA imposes liability for removal
and remediation of hazardous substances on various types of
parties, including "owners or operators" of a contaminated site.
See 42 U.S.C. 9607(a). In the definition of "owners or
operators," CERCLA exempts from liability those who, without
participating in the management of a facility, hold indicia of
ownership in the facility primarily to protect a security
interest. See 42 U.S.C. 9601(2)(A). However, CERCLA's secured
creditor exemption from liability has been narrowed by recent
judicial interpretation. In a recent decision, the United States
Court of Appeals for the Eleventh Circuit held that a lender
could be liable for cleanup costs if its involvement in the
financial management of the facility was broad enough to support
an inference that it could have affected hazardous waste disposal
decisions. See United States v. Fleet Factors Corp., 901 F.2d
1550 (11th Cir. 1990), cert. denied, 111 S.Ct. 752 (1991). A
federal district court had earlier held that CERCLA's secured
creditor exemption did not insulate from liability a mortgagee
that had foreclosed and later acquired secured property. See
United States v. Maryland Bank & Trust Co., 632 F. Supp. 573 (D.
Md. 1986). More recently, however, the Ninth Circuit rejected
the "capacity to influence" test of Fleet Factors and held that
the mere unexercised power of a lender to get involved in a
borrower's management was not enough to impose CERCLA liability
on a secured lender. See Bergsoe Metal v. East Asiatic Co., 910
F.2d 668 (9th Cir. 1990). The United States Court of Appeals for
the Fourth Circuit, which has jurisdiction over Wesbanco, has
also recently confirmed a lender exemption from liability under
CERCLA pursuant to the security interest exemption. See United
States v. McLamb, 5 F.3d 69 (4th Cir. 1993), as amended (October
18, 1993). The Court opined that because the lender took title
to property at a foreclosure sale solely to protect its security
interest and then acted reasonably promptly to divest itself of
ownership, it met CERCLA's secured creditor exemption. Id. at
73. Wesbanco does attempt to screen loan applicants concerning
environmental matters with respect to collateral pledged to it as
security for loans. Wesbanco is not aware of any specific
collateral pledged to it on which there are hazardous materials
or potential liability under CERCLA. However, there can be no
assurances that liability under CERCLA or otherwise for cleanup
of hazardous materials will not occur in the future. In the
event that such liability occurs, it could have a material
adverse effect on the financial position and results of
operations of Wesbanco.
<PAGE> 88
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions thereof filed by
Wesbanco with the Commission under the Securities Exchange Act of
1934 (the "1934 Act") are hereby incorporated by reference in
this Proxy Statement/Prospectus:
Wesbanco Documents (Commission File No. 0-8467):
(1) Wesbanco Proxy Statement for the annual
meeting of shareholders held on April 17, 1996.*
(2) Wesbanco's Quarterly Reports on Form 10-Q
for the quarterly periods ended March 31, 1996,
June 30, 1996, and September 30, 1996.
(3) Wesbanco's Current Report on Form 8-K
dated February 20, 1996.
(4) Wesbanco's Current Report on Form 8-K
dated April 10, 1996.
(5) Wesbanco's Current Report on Form 8-K
dated June 5, 1996.
(6) Wesbanco's Current Report on Form 8-K
dated July 18, 1996.
(7) Wesbanco's Current Report on Form 8-K
dated September 4, 1996.
(8) Wesbanco's Current Report on Form 8-K/A dated
November 4, 1996, including Wesbanco's restated Consolidated
Balance Sheet as of December 31, 1995 and 1994, restated
Consolidated Statement of Income for the three years ended
December 31, 1995, restated Notes to Financial Statements and
Selected Financial schedules.(Wesbanco's restated 1995 Financial
Statements, Notes to Financial Statements, and Management Discussion
and Analysis are being delivered with the Proxy Statement/Prospectus).
(9) Wesbanco's Registration Statement on Form S-4,
file Number 333-3905, pages 22 and 115 through 144.
All documents filed by Wesbanco pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act subsequent to the date hereof
and prior to the Special Meeting are hereby incorporated by
reference into this Joint Proxy Statement/Prospectus and shall be
deemed a part hereof from the date of filing of such documents.
<PAGE> 89
Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein
(or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or
superseded.
*Indicates the document is being delivered with this Proxy
Statement/Prospectus.
<PAGE> 90
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors of Wesbanco, Inc. has retained Ernst
& Young LLP to serve as the corporation's independent accountants
for the year 1996. Price Waterhouse LLP served as the
corporation's independent accountants for the years 1994 and
1995. The services rendered by Price Waterhouse LLP during the
year 1995 involved primarily auditing and accounting service and
completion of the audit of the consolidated financial statements
of the corporation for the year 1995. It is expected that a
representative of the accounting firms may have the opportunity
to make a statement if such representatives desire to do so and
may be available to respond to appropriate questions from the
stockholders who are present at the Special Meeting.
The firm of Arnett & Foster, independent certified public
accountants, audited the financial statements of Vandalia for the
year ended December 31, 1995, 1994 and 1993. A representative of
Arnett & Foster will attend the special meeting and will be
available to answer questions.
LEGAL MATTERS
Certain matters will be passed upon for Wesbanco by its
counsel, Phillips, Gardill, Kaiser & Altmeyer, 61 Fourteenth
Street, Wheeling, WV, 26003. As of December 31, 1995, the
members of Phillips, Gardill, Kaiser & Altmeyer participating in
the preparation of this Proxy Statement/Prospectus owned an
aggregate of 28,892 shares of Wesbanco Common Stock. James C.
Gardill, a partner in said firm, serves as Chairman and as a
director of Wesbanco, and as a director of its subsidiary,
Wesbanco Bank Wheeling. Certain matters will be passed upon for
Vandalia by its counsel, Spilman, Thomas & Battle, 300 Kanawha
Blvd., E. Charleston, WV, 25302.
EXPERTS
The consolidated financial statements of Wesbanco, Inc.
incorporated in this Prospectus by reference to the Current Report
on Form 8-K/A dated November 4, 1996 as of and for the three years
ended December 31, 1995, have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of Vandalia as of and for the three
years ended December 31, 1995, included in this Prospectus, have been
so included in reliance on the report of Arnett & Foster,
independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements of Weirton incorporated in this Prospectus
by reference to the Current Report on Form 8-K/A dated November 4, 1996,
as of and for the three years ended December 31, 1995, have been
so incorporated in reliance on the report of Grant Thornton LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
<PAGE> 91
LEGAL PROCEEDINGS
Wesbanco and its subsidiaries are defendants in various
legal proceedings arising in the normal course of business. In
the opinion of management, based on the advice of legal counsel,
the ultimate resolution of these proceedings will not have a
material effect on the financial position of Wesbanco or its
subsidiaries.
<PAGE> 92
INDEX TO FINANCIAL STATEMENTS
Page
Number
------
WESBANCO, INC.
Consolidated Balance Sheet as of September 30, 1996 (unaudited)
and December 31, 1995 94
Consolidated Statement of Income for the three and nine months
ended September 30, 1996 and 1995 (unaudited) 95
Consolidated Statement of Changes in Shareholders' Equity for
the nine months ended September 30, 1996 and 1995 (unaudited) 96
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1996 and 1995 (unaudited) 97
Notes to Consolidated Financial Statements as of September 30, 1996
(unaudited) 98
Management Discussion and Analysis for the nine months ended
September 30, 1996 (unaudited) 100
VANDALIA NATIONAL CORPORATION
Consolidated Balance Sheets as of September 30, 1996 (unaudited)
and December 31, 1995 111
Consolidated Statements of Income for the three and nine months
ended September 30, 1996 and 1995 (unaudited) 112
Consolidated Statements of Changes in Stockholders' Equity for the
nine months ended September 30, 1996 and 1995 (unaudited) 113
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 (unaudited) 114
Notes to Consolidated Financial Statements as of September 30,
1996 (unaudited) 115
Page
Number
------
Independent Auditor's Report 116
Consolidated Balance Sheets as of December 31, 1995
and 1994 117
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993 118
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993 120
Consolidated Statements of Cash Flow for the years ended December 31,
1995, 1994 and 1993 121
Notes to Consolidated Financial Statements as of December 31, 1995 123
<PAGE> 93
WesBanco, Inc. - FINANCIAL INFORMATION
Consolidated Balance Sheets at September 30, 1996
(unaudited) and December 31, 1995, Consolidated Statements of
Income, Consolidated Statements of Changes in Shareholders'
Equity and Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 (unaudited) are set
forth on the following pages. On August 30, 1996, WesBanco
consummated its merger of the Bank of Weirton. All previously
presented financial information has been restated to include the
Bank of Weirton. For further information, see Footnote 3. In
the opinion of management of the Registrant, all adjustments,
consisting of normal recurring accruals, necessary for a fair
presentation of the financial information referred to above for
such periods, have been made. The results of operations for the
nine months ended September 30, 1996 are not necessarily
indicative of what results will be for the entire year. For
further information, refer to the 1995 Annual Report to
Shareholders, which includes consolidated financial statements
and footnotes thereto on Form 8-K/A.
Earnings per share for the nine months ended September 30,
1996 and 1995 were computed by dividing net income less preferred
stock dividends and discount accretion, where applicable, by the
weighted average number of common shares outstanding during the
period. Effective November 15, 1995 WesBanco redeemed its Series
A 8% Cumulative Preferred stock. Prior to redemption, preferred
stock dividends were cumulative and payable quarterly at an
annual rate of $15.20 per share. The fully dilutive effect of
preferred stock for the nine months ended September 30, 1995 was
less than 3%.
<PAGE> 94
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
September 30, December 31,
1996 1995
------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 60,570 $ 54,163
Due from banks - interest bearing 297 301
Federal funds sold 29,500 37,230
Securities:
Securities available for sale 249,828 172,137
Securities held to maturity (market
value of $249,686 and $353,760) 249,270 350,151
----------- -----------
Total securities 499,098 522,288
Loans:
Loans (net of unearned income of
$4,485 and $8,459) 965,783 893,919
Less: Allowance for possible loan
losses (14,597) (13,439)
---------- -----------
Net loans 951,186 880,480
Bank premises and equipment - net 29,745 28,395
Accrued interest receivable 12,743 12,708
Other assets 17,630 13,454
----------- -----------
TOTAL ASSETS $1,600,769 $1,549,019
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing demand $ 144,918 $ 143,872
Interest bearing demand 261,161 279,217
Savings deposits 331,963 337,706
Certificates of deposit 533,470 494,049
---------- ----------
Total deposits 1,271,512 1,254,844
Federal funds purchased and repurchase
agreements 84,651 70,457
Short-term borrowings 7,804 1,402
Other borrowings 5,777 777
Accrued interest payable 7,109 7,091
Other liabilities 9,490 7,452
---------- ----------
TOTAL LIABILITIES 1,386,343 1,342,023
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000
shares authorized; none outstanding --- ---
Common stock, $2.0833 par value;
25,000,000 shares authorized;
10,372,103 shares issued 21,608 21,608
Capital surplus 31,207 31,237
Market value adjustment on investments
available for sale - net of tax effect (1,067) 849
Retained earnings 167,883 159,483
Less: Treasury stock at cost (148,196
and 186,131 shares, respectively) (4,004) (5,038)
--------- ---------
215,627 208,139
Deferred benefits for employees and directors (1,201) (1,143)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 214,426 206,996
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,600,769 $1,549,019
=========== ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
<PAGE> 95
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
---------------------- ---------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 20,684 $ 18,839 $ 60,046 $ 54,616
Interest on investment securities 7,451 7,756 22,305 23,600
Other interest income 329 537 1,293 1,959
---------- ---------- --------- ----------
Total interest income 28,464 27,132 83,644 80,175
---------- ---------- --------- ----------
INTEREST EXPENSE:
Interest on deposits 11,215 11,018 33,010 32,062
Interest on other borrowings 944 784 2,713 2,257
---------- ---------- --------- ----------
Total interest expense 12,159 11,802 35,723 34,319
---------- ---------- --------- ----------
NET INTEREST INCOME 16,305 15,330 47,921 45,856
Provision for possible loan losses 1,298 834 2,848 1,687
---------- ---------- --------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 15,007 14,496 45,073 44,169
---------- ---------- --------- ----------
OTHER INCOME:
Trust fees 1,204 1,027 4,039 3,495
Service charges and other income 1,692 1,703 4,713 4,778
Net securities transaction gains (losses) (167) 37 (51) 437
--------- ---------- --------- ----------
Total other income 2,729 2,767 8,701 8,710
--------- ---------- --------- ----------
OTHER EXPENSES:
Salaries, wages and fringe benefits 6,076 5,686 17,406 17,170
Premises and equipment - net 1,402 1,232 4,354 3,876
Other operating 3,356 3,312 9,686 10,264
--------- ---------- --------- ----------
Total other expenses 10,834 10,230 31,446 31,310
--------- ---------- --------- ----------
Income before provision for income taxes 6,902 7,033 22,328 21,569
Provision for income taxes 1,749 1,986 6,255 6,107
---------- ---------- ---------- ----------
NET INCOME $ 5,153 $ 5,047 $ 16,073 $ 15,462
========== ========== ========== ==========
Preferred stock dividends and discount
accretion $ --- $ 46 $ --- $ 137
========== ========== ========== ==========
Net income available to common
shareholders $ 5,153 $ 5,001 $ 16,073 $ 15,325
========== ========== ========== ==========
Earnings per share of common stock 0.50 0.49 1.58 1.51
========== ========== ========== ==========
Average shares outstanding 10,211,730 10,116,601 10,186,456 10,166,882
========== ========== ========== ==========
Dividends per share $ 0.28 $ 0.25 $ 0.80 $ 0.71
========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 96
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(dollars in thousands)
For the nine months ended
September 30,
--------------------------
1996 1995
------------ -----------
Total Shareholders' Equity
Balance, beginning of period $206,996 $192,305
---------- ----------
Net Income 16,073 15,462
Cash dividends:
Common (7,673) (6,568)
Preferred --- (114)
Accretion of preferred stock --- (23)
Net treasury stock activity 1,004 (2,817)
Change in market value adjustment on
investments available for sale-net
of tax effect (1,916) 4,305
Change in deferred benefits for employees
and directors (58) (469)
---------- ----------
Net change in Shareholders' Equity 7,430 9,776
---------- ----------
Total Shareholders' Equity
Balance, end of period $214,426 $202,081
========== ==========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
<PAGE> 97
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(dollars in thousands)
For the nine months ended
September 30,
----------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net income $ 16,073 $ 15,462
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,984 1,777
Provision for possible loan losses 2,848 1,687
Net amortization and accretion 2,298 3,715
Gain on sales of investment securities 51 (437)
Deferred income taxes (329) (49)
Other - net (244) 195
Increase or decrease in assets and
liabilities:
Interest receivable (35) (530)
Other assets (1,353) (2,585)
Interest payable 18 1,279
Other liabilities 1,861 772
--------- ---------
Net cash provided by operating activities 23,172 21,286
--------- ---------
Investing Activities:
Investment securities held to maturity:
Payments for purchases (38,306) (57,795)
Proceeds from maturities and calls 81,093 63,592
Investment securities available for sale:
Payments for purchases (121,848) (41,134)
Proceeds from sales 70,513 46,610
Proceeds from maturities, calls
and prepayments 26,228 38,098
Net increase in loans (73,525) (64,097)
Purchases of premises and equipment-net (3,260) (2,631)
--------- ---------
Net cash used by investing activities (59,105) (17,357)
--------- ---------
Financing activities:
Net increase in certificates of deposit 39,421 31,394
Net decrease in demand and savings accounts (22,753) (39,079)
Increase (decrease) in federal funds
purchased and repurchase agreements 14,194 (2,410)
Increase in short-term borrowings 6,402 3,364
Increase in other borrowings 5,000 ---
Dividends paid (6,937) (6,441)
Net purchases of treasury stock (721) (2,817)
Other --- 129
--------- ---------
Net cash provided (used) by financing
activities 34,606 (15,860)
--------- ---------
Net decrease in cash and cash equivalents (1,327) (11,931)
--------- ---------
Cash and cash equivalents at beginning of
period 91,694 94,546
---------- -----------
Cash and cash equivalents at end of period $ 90,367 $ 82,615
========== ===========
For the nine months ended September 30, 1996 and 1995, WesBanco
paid $35,359 and $33,041 in interest on deposits and other
borrowings and $6,220 and $6,105 for income taxes, respectively.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
<PAGE> 98
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
NOTE 1 - BASIS OF PRESENTATION:
- -------------------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
The consolidated financial statements include the accounts
of WesBanco, Inc. and its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated in
consolidation. All previously presented financial information
has been restated to include the Bank of Weirton.
NOTE 2 - MERGERS AND ACQUISITIONS:
- ----------------------------------
On July 18, 1996, WesBanco, Inc. announced the signing of a
Definitive Agreement and Plan of Merger providing for the
acquisition of Vandalia National Corporation, Morgantown, West
Virginia. Under the terms of the Agreement, shareholders of
Vandalia will receive 1.2718 shares of WesBanco common stock or,
at such shareholders' election, $34.34 in cash. Also, holders of
Vandalia warrants convertible in Vandalia common stock at $18 per
share shall receive cash in the amount of $16.34 per warrant. To
complete this transaction, WesBanco anticipates issuing up to
359,912 shares of WesBanco common stock from Treasury with
approximately 200,000 of those shares being acquired in the
marketplace. The Board of Directors of WesBanco approved the
repurchase of up to 200,000 shares of WesBanco common stock for
such purpose which can be acquired over a time period from
approximately October 1, 1996 through January 31, 1997. The
acquisition, which is based
<PAGE> 99
upon a fixed exchange ratio, will be accounted for as a purchase
transaction, with an approximate value of $10,319,000. Vandalia
reported total assets of approximately $57,414,000 and shareholders'
equity of approximately $4,375,000 as of September 30, 1996. The
transaction is expected to be completed before year end. The
merger is subject to approval of the shareholders of Vandalia.
All regulatory approvals have now been received.
NOTE 3 - COMPLETED MERGERS:
- ---------------------------
On August 30, 1996, WesBanco consummated its acquisition of
the Bank of Weirton through the merger of the Bank of Weirton
into WesBanco Bank Wheeling, an affiliate of WesBanco. Bank of
Weirton had assets totaling approximately $177,877,000, and the
transaction was accounted for as a pooling-of-interests. In
connection with this transaction, the Corporation issued
1,690,000 shares of common stock. The consolidated balance
sheets as of September 30, 1996 and December 31, 1995, and
consolidated statements of income for the nine months ended
September 30, 1996 and 1995, include the accounts of the Bank of
Weirton for all periods presented.
The following supplemental information reflects the separate
results of the combined entities for the periods prior to the
acquisition: (in thousands, except per share amounts)
For the six months ended
June 30, 1996
-----------------------------------------
As
Previously Bank of
Presented Weirton Consolidated
----------- ---------- ------------
Net interest income $ 28,934 $ 2,682 $ 31,616
Net income 9,888 1,032 10,920
Earnings per common share 1.17 79.38 1.08
On August 20, 1996, the Corporation acquired the assets and
assumed certain liabilities of Universal Mortgage Company, and
formed a new mortgage banking affiliate operating under the name
of WesBanco Mortgage Company. Universal Mortgage Company had
assets totaling approximately $1,185,000 and
<PAGE> 100
the transaction was accounted for as a purchase. In connection
with this transaction, WesBanco issued 32,463 shares of common stock
from Treasury valued at approximately $856,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS (Dollars in thousands except per share amounts)
- ---------------------
The following discussion and analysis presents in further
detail the financial condition and results of operations of
WesBanco, Inc. and its subsidiaries. This discussion and
analysis should be read in conjunction with the consolidated
financial statements and notes presented in this report.
Financial Condition
-------------------
Total assets of WesBanco as of September 30, 1996 were
$1,600,769 as compared to $1,549,019 as of December 31, 1995, an
increase of 3.3%. The increase in assets consisted of an 8.0%
increase in loans. Total deposits increased 1.3% while
securities declined 4.4% during the comparative period.
Securities:
- -----------
The following table shows the composition of WesBanco's
securities portfolio at September 30, 1996 and December 31, 1995:
September 30, December 31,
1996 1995
------------- -------------
Securities Available for Sale (at market):
- ------------------------------------------
U.S. Treasury and Federal Agency
securities $165,550 $157,505
Obligations of states and political
subdivisions 14,145 5,667
Mortgage-backed securities 66,979 6,610
Other debt and equity securities 3,154 2,355
-------- --------
Total available for sale 249,828 172,137
-------- --------
Securities Held to Maturity (at cost):
- --------------------------------------
U.S. Treasury and Federal Agency
securities 109,969 219,719
Obligations of states and political
subdivisions 137,602 129,074
Other debt securities 1,699 1,358
-------- --------
Total held to maturity (market value
of $249,686 and $353,760, respectively) 249,270 350,151
-------- --------
Total securities $499,098 $522,288
======== ========
Representing a source of funds for increasing loan demand,
securities decreased by $23,190 between September 30, 1996 and
December 31, 1995. During
<PAGE> 101
the period, maturities, calls, prepayments and sales aggregated
$177,834, while investment purchases totaled $160,154. To comply
with WesBanco's investment policies, approximately $54,948,000 in U.S.
Treasury securities, from the Bank of Weirton merger, were reclassified
from the held to maturity to the available for sale portfolio. During
the third quarter 1996, WesBanco sold approximately $43,441,000 of
U.S. Treasury securities to take advantage of the yield
opportunities in the mortgage-backed securities market. The U.S.
Treasury securities sold resulted in net losses of approximately
$167,000 in the third quarter which the Corporation anticipates
will be recovered by the additional interest income generated
from the higher-yielding securities.
The market value adjustments, before tax effect, in the
available for sale securities portfolio resulted in unrealized
net losses of $1,750 and unrealized net gains of $1,392 as of
September 30, 1996 and December 31, 1995, respectively. These
adjustments represent market value fluctuations caused by general
changes in market rates and the length of time to respective
maturity dates. If these securities are held until their
respective maturity date, no market value adjustment would be
realized.
<PAGE> 102
Loans:
- ------
The following table shows the composition of WesBanco's loan
portfolio at September 30, 1996 and December 31, 1995:
September 30, 1996 December 31, 1995
------------------ ------------------
Amount Percent Amount Percent
------- ------- ------ -------
Loans:
Commercial $162,686 16.8% $176,809 19.5%
Real Estate-Construction 20,853 2.1% 16,544 1.8%
Real Estate-Mortgage 481,963 49.7% 424,917 47.0%
Consumer 304,766 31.4% 284,108 31.7%
-------- ------ -------- ------
Total Loans $970,268 100.0% $902,378 100.0%
Less:
Unearned income (4,485) (8,459)
Allowance for possible loan
losses (14,597) (13,439)
--------- ---------
Net loans $951,186 $880,480
========= =========
Net loans increased $70,706 or 8.0% between September 30,
1996 and December 31, 1995. Overall loan growth was primarily
attributable to consumer lending. During the first nine months
of 1996 and throughout 1995, WesBanco experienced steady growth
in this area as a result of offering attractive rates on
residential and automobile loans.
WesBanco monitors the overall quality of its loan portfolio
through various methods. Underwriting policies and guidelines
have been established for all types of credits and management
continually monitors the portfolio for adverse trends in
delinquent and nonperforming loans.
Loans are considered impaired under FAS 114 when it is
determined that WesBanco will be unable to collect all principal
and interest due, according to the contractual terms of the
loans. Impaired loans, which include all nonperforming loans,
are as follows:
September 30, December 31,
1996 1995
------------- ------------
Nonaccrual $4,395 $5,199
Renegotiated and other 5,290 2,092
--------- ---------
Total impaired loans $9,685 $7,291
========= =========
The average balance of impaired loans during the periods ended
<PAGE> 103
September 30, 1996 and December 31, 1995, were approximately $11,380
and $6,773, respectively.
Specific allowances are allocated for impaired loans based
on the present value of expected future cash flows, or the fair
value of the collateral for loans that are collateral dependent.
Related allowances for possible loan losses on impaired loans
were $1,992 and $334 as of September 30, 1996 and December 31,
1995, respectively.
Other real estate totaled $3,605 as of September 30, 1996,
compared to $4,137 as of December 31, 1995. Loans past due 90
days or more was $3,831 or .4% of total loans as of September 30,
1996, as compared to $3,034 or .3% of total loans as of December
31, 1995.
Lending by WesBanco banks is guided by written lending
policies which allow for various types of lending. Normal
lending practices do not include the acquisition of high yield
non-investment grade loans or "highly leveraged transactions"
("HLT") from outside the primary market area.
Allowance for Possible Loan Losses
- ----------------------------------
Activity in the allowance for possible loan losses is
summarized as follows:
For the nine months
ended September 30,
--------------------
1996 1995
--------- --------
Balance, at beginning of period $13,440 $12,960
Recoveries credited to allowance 372 513
Provision for possible loan losses 2,848 1,687
Losses charged to allowance (2,063) (1,733)
--------- ---------
Balance, at end of period $14,597 $13,427
========= =========
The provision for possible loan losses increased $1,161 due
to an increase in net charge-offs and loan growth during 1996.
Net charge-offs increased to $1,691 as of September 30, 1996 from
$1,220 as of September 30, 1995. The allowance for possible loan
losses as a percentage of total loans was 1.5% as of September 30, 1996
and December 31, 1995. Amounts allocated to
<PAGE> 104
the allowance for loan losses are based upon management's evaluation of
the loan portfolio.
Deposits:
- ---------
Total deposits increased $16,668 between September 30, 1996
and December 31, 1995 primarily due to growth in certificates of
deposit. Customer preference for higher yielding products
coupled with competitive pricing have contributed to the steady
certificate of deposit growth. In addition, WesBanco's retail
banking program called "Good Neighbor Banking", has contributed
to the increase in deposits. The program is designed to build
customer relationships by offering a series of pricing bonuses,
which vary according to the customer's number of qualifying
services. This relationship building is key to long term deposit
growth and customer profitability.
During the comparative period, a shift occurred in deposit
mix from demand and savings deposits, which decreased $23,799 or
3.8%, to certificates of deposit, which increased $39,421 or
7.9%. The shift in deposit balances reflects the customer's
preference for higher-yielding products, primarily in the Good
Neighbor Banking program which offers a tiered pricing structure
based on account balance and number of qualifying services.
Liquidity and Capital Resources
- -------------------------------
WesBanco manages its liquidity position to meet its funding
needs, including deposit outflows and loan principal
disbursements. WesBanco also manages its liquidity position to
meet its asset and liability management objectives.
In addition to funds provided from operations, WesBanco's
primary sources of funds are deposits, principal repayments on
loans and matured or called investment securities. Scheduled
loan repayments and maturing investment securities are relatively
predictable sources of funds. However, deposit flows and
prepayments on loans are significantly influenced by changes
<PAGE> 105
in market interest rates, economic conditions, and competition.
WesBanco strives to manage the pricing of its deposits to
maintain a balance of cash flows commensurate with loan
commitments and other funding needs.
WesBanco is subject to risk-based capital guidelines that
measure capital relative to risk-adjusted assets and off-balance
sheet financial instruments. The Corporation's Tier I, total
risk-based capital and leverage ratios are well above the
required minimum levels of 4%, 8% and 3%, respectively. At
September 30, 1996, all of WesBanco's affiliate banks exceeded
the minimum regulatory levels. Capital adequacy ratios are
summarized as follows:
September 30, December 31,
1996 1995
------------- ------------
Capital Ratios:
Primary capital 14.2% 14.1%
Tier 1 capital 20.4% 21.7%
Total risk-based capital 21.7% 22.9%
Leverage 13.4% 13.4%
Comparison of the nine months ended September 30, 1996 and 1995
---------------------------------------------------------------
Earnings Summary
----------------
Net income for the nine months ended September 30, 1996 was
$16,073, a 4.0% increase over the same period in 1995. Earnings
per share of common stock for the nine months ended September 30,
1996 and 1995 were $1.58 and $1.51 respectively. Net income
increased primarily due to an increase in net interest income and
an increase in trust fees for the nine months ended
September 30, 1996 as compared to the same period in 1995.
Return on average assets was 1.36% for the nine months ended
September 30, 1996 and 1995. Return on average equity was 10.25%
compared to 10.38% for the nine months ended September 30, 1996
and 1995, respectively.
Net Interest Income
- -------------------
Net interest income before the provision for possible loan
losses, for
<PAGE> 106
the nine months ended September 30, 1996 increased
$2,065 or 4.5% over the same period for 1995. The increase
resulted from an increase in the net tax equivalent yield
combined with volume growth in both average earning assets of
$42,411 and interest bearing liabilities of $42,659. The growth
in average earning assets was comprised primarily of an increase
in loans. As interest rates generally declined during 1995,
offering lower rates on mortgage and consumer loan products
contributed to a 10.1% increase in average loans. During the
nine months ended September 30, 1996, most banks' primary lending
rates averaged 8.3% compared to 8.9% for the corresponding period
in 1995. Average interest bearing liabilities increased
primarily due to growth in certificates of deposit and repurchase
agreements.
Net tax equivalent yield on average earning assets increased
to 4.8% from 4.6% for the nine months ended September 30, 1996
and 1995. The increase in the net yield was due to a shift in
the mix of assets from investment securities to higher-yielding
loans as well as a reduction of interest rates on demand and
savings products in January 1996.
Interest Income
- ---------------
Total interest income increased $3,469 or 4.3% between the
nine month periods ended September 30, 1996 and 1995. Interest
and fees on loans increased $5,430 or 9.9% primarily due to both
an increase in the average rates earned and the average balance
of loans outstanding. Average rates earned on loans decreased
approximately .07% while average loan balances increased by
approximately $83,057 or 10.1%. Interest on taxable investments
decreased $764 or 4.2%. The decline was due to a decrease in the
average outstanding balance of approximately $40,206, partially
offset by an increase in the average yield of .33% between the
nine month periods ending September 30, 1996 and 1995. The
decrease in taxable investments resulted from the funding of
excess loan demand with scheduled investment maturities.
<PAGE> 107
Interest earned on nontaxable investments decreased by $531 or
9.3%. Increases in the average balance of this type of investment
approximated $9,110 while the average yield declined .84%.
Interest Expense
- ----------------
Total interest expense increased $1,404 or 4.1% between the
nine month periods ended September 30, 1996 and 1995. Interest
expense on deposits increased $948 or 2.9% during the comparative
period as the average rate on interest-bearing deposits remained
stable at 3.9% and average interest-bearing deposit balances
increased by approximately $19,124 or 5.9%. The increase in
average interest-bearing deposit balances resulted from growth in
certificates of deposit of $41,299 or 8.8%. Customers were
attracted to the higher-yielding certificate of deposit products
and the introduction of the Good Neighbor Banking Program in the
fourth quarter of 1995. Interest expense on certificates of
deposit increased $2,662 or 14.5% reflecting the growth in
average balances. Interest expense on interest bearing demand
deposits decreased $756 or 12.7% primarily due to a decrease in
the average rate of approximately .43%. Interest on savings
accounts decreased $958 or 12.3% primarily due to a decrease in
the average balances of $27,843 combined with a .14% average rate
decrease. Interest on other borrowings, which consists
primarily of repurchase agreements, increased $456 or 20.2% due to an
increase in average balances outstanding of $23,536. Rates paid
on repurchase agreements closely follow the direction of interest
rates in the federal funds market.
Other Income
- ------------
Other income decreased $9 or .1%. Trust fee income
increased $544 primarily due to increases in the market values
and new trust business during the first nine months of 1996. The
market value of trust assets approximated $1,499,930 as of
September 30, 1996, an increase of $238,476 over
<PAGE> 108
September 30, 1995. Service charges and other income decreased $65
between the nine month periods ended September 30, 1996 and 1995.
WesBanco recognized net securities transaction losses of $51 for
the nine months ended September 30, 1996 compared to net security
transaction gains of $437 for the same period in 1995. During
the third quarter 1996, certain U.S. Treasury securities were
sold at a loss in order to take advantage of higher yielding
investment opportunities. In 1995, the Corporation recognized
security gains of approximately $279, resulting from a decision
to divest an equity position which no longer had a strategic
value.
Other Expenses
- --------------
Total other expenses decreased $136 or .4%. Salaries and
employee benefits increased 1.4% during this period primarily due
to normal salary adjustments partially offset by a reduction in
pension expense. Premises and equipment expense increased $478
or 12.3% due to technological advancements, including a wide area
network, designed to enhance customer service. Other operating
expenses decreased $578 or 5.6% primarily due to a reduction in
FDIC insurance expense of $1,340. However, the decrease was
partially offset by expenses totaling $255 in an asset classified
as real estate held for resale coupled with increases in professional
fees associated with acquisition activity.
Income Taxes
- ------------
A reconciliation of the average federal statutory tax rate
to the reported effective tax rate attributable to income from
operations follows:
For the nine months
ended September 30,
----------------------------
1996 1995
------------- ------------
Federal statutory tax rate $7,814 35% $7,549 35%
Tax-exempt interest income from
securities of states and political
subdivisions (1,915) (8) (1,951) (9)
State income tax - net of federal
tax effect 668 3 628 3
<PAGE> 109
Alternative minimum tax credit
carryforward recognized (364) (2) (98) (1)
All other - net 52 0 (21) 0
------------ ------------
Effective tax rate $6,255 28% $6,107 28%
------------ ------------
As of September 30, 1996, the Corporation has credits for
prior years minimum taxes of approximately $364,000 available in
future years to reduce regular taxes payable.
Comparison of the three months ended September 30, 1996 and 1995
- ----------------------------------------------------------------
Total interest income increased $1,332 or 4.9% between the
three month periods ending September 30, 1996 and 1995. Interest
and fees on loans increased $1,845 due to an increase in the
average volume of loans outstanding, partially offset by a
decrease in the average rate. Interest on taxable investments
increased $193 due to a decrease in average balances partially
offset by an increase in average rates. Interest on non-taxable
investments decreased $493 primarily due to a decrease in average
rates. Other interest income, primarily interest on federal
funds sold, decreased $213 due to a decrease in the average
balance outstanding and a decrease in average rates.
Total interest expense increased $357 between the three
month periods ending September 30, 1996 and 1995. Interest on
deposits increased $197 due to an increase in the average
interest bearing deposit balances outstanding of approximately
$18,342, partially offset by a decrease in the average rates paid
on deposits. Interest on other borrowings increased $160 for the
three months ended September 30, 1996 and 1995, primarily due to
an increase in the average volume of repurchase agreements of
approximately $35,239.
Total other income decreased by $38 primarily due to a
decrease in net security gain transactions of $204. During the
third quarter 1996, certain U.S. Treasury securities were sold at
a loss in order to take advantage of higher yielding investment
opportunities. Trust fees increased by $177 during
<PAGE> 110
the comparative period.
Total other expense increased by $604. Salaries and
employee benefits increased $390 due to normal salary
adjustments. Premises and equipment expense increased $170 due
to continued technological costs. Other operating expenses
increased by $44 primarily due to increases in marketing and
professional fees combined with a reduction in FDIC insurance
expense.
<PAGE> 111
VANDALIA NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------
September 30, December 31,
1996 1995
---------- -------------
ASSETS (Unaudited)
Cash and due from banks $ 1,533,723 $ 1,590,965
Interest bearing deposits with other
banks 817,741 1,393,834
Securities available for sale 7,491,512 9,687,553
Securities held to maturity -
estimated market value
1996, $646,640 and 1995, $573,371 850,000 850,000
Loans, net of allowance for loan
losses 1996, $759,216 and
1995, $475,688 44,705,002 42,786,190
Bank premises and equipment - net 1,180,627 1,281,020
Accrued interest receivable and
other assets 834,993 640,789
------------ ------------
TOTAL ASSETS $ 57,413,598 $ 58,230,351
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand, non-interest bearing $ 6,424,267 $ 6,720,403
NOW and money market 45,750,041 45,524,209
------------ ------------
Total deposits 52,174,308 52,244,612
Securities sold under agreements to
repurchase 550,000 550,000
Other borrowings 0 1,000,000
Other liabilities 314,207 160,182
------------ -----------
TOTAL LIABILITIES 53,038,515 53,954,794
------------ -----------
STOCKHOLDERS' EQUITY
Common stock - $ 1.00 par value;
authorized 1,000,000 shares
issued and outstanding 1996,
282,994, and 1995, 282,994 282,994 282,994
Surplus 4,142,683 4,142,683
Retained earnings (deficit) 116,031 (97,097)
Net unrealized gain (loss)
on securities (166,625) (53,023)
------------ ----------
TOTAL STOCKHOLDERS' EQUITY 4,375,083 4,275,557
------------ ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 57,413,598 $ 58,230,351
============ ============
See Notes to Consolidated Financial Statements.
<PAGE> 112
VANDALIA NATIONAL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
- ---------------------------------------------------------------------------
<CAPTION>
</TABLE>
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 1,111,737 $ 1,065,980 $ 3,270,457 $ 2,988,670
Interest on investment
securities
Taxable 130,298 188,105 399,178 573,662
Exempt from federal
income tax 0 0 0 0
Interest on federal
funds sold 3,344 23,762 33,653 66,756
----------- ---------- ----------- ----------
Total interest income 1,245,379 1,277,847 3,703,288 3,629,088
Interest expense
Interest on deposits 580,316 616,592 1,735,928 1,726,683
Interest on securities sold
under agreement to repurchase 20,721 8,044 36,868 20,219
Interest on other borrowings 8,066 12,150 16,260 36,485
--------- --------- --------- ---------
Total interest expense 609,103 636,786 1,789,056 1,783,387
--------- --------- --------- ---------
Net interest income 636,276 641,061 1,914,232 1,845,701
Provision for loan losses 0 30,000 345,000 93,000
--------- --------- --------- ---------
Net interest income after
provision for loan losses 636,276 611,061 1,569,232 1,752,701
Other Operating income
Service charges and other
income 100,614 74,458 290,997 220,491
Realized security gains (losses) 0 (2,315) (3,018) (10,670)
--------- --------- --------- --------
Total operating income 100,614 72,143 287,979 209,821
Other Operating expenses
Salaries and employee
benefits 260,719 245,909 789,074 802,712
Net Occupancy expense 31,377 36,769 99,565 102,818
Equipment rentals, depreci-
ation, and maintenance 57,894 75,784 173,251 208,931
Other expenses 192,327 143,515 511,193 462,366
---------- ---------- ---------- ----------
Total operating expenses 542,317 501,977 1,573,083 1,576,827
---------- ---------- ---------- ----------
Income before income taxes 194,573 181,227 284,128 385,695
Income tax expense (benefit) 81,000 61,996 71,000 116,968
---------- ---------- ---------- ---------
NET INCOME $ 113,573 $ 119,231 $ 213,128 $ 268,727
========== ========== ========== =========
Earnings per common share $ 0.40 $ 0.42 $ 0.75 $ 0.95
========== ========== ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 113
[CAPTION]
<TABLE>
VANDALIA NATIONAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Nine months ended September 30, 1996 and 1995
- -----------------------------------------------------------------------------------------------
Net unrealized
Common Undivided gain (loss)
Stock Surplus Profits on securities Total
--------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 282,994 $4,142,683 $(97,097) $ (53,023) $4,275,557
Change in unrealized
gain/(loss) on securities (113,602) (113,602)
Net income 213,128 213,128
--------- ---------- --------- ---------- ----------
Balance at September 30, 1996 $ 282,994 $4,142,683 $116,031 $(166,625) $4,375,083
========= ========== ========= ========== ==========
Net unrealized
Common Undivided gain (loss)
Stock Surplus Profits on securities Total
--------- ---------- --------- ---------- ----------
Balance at January 1, 1995 $ 282,994 $4,142,683 $(441,174) $(606,536) $3,377,967
Change in unrealized
gain/(loss) on securities 398,160 398,160
Net income 268,727 268,727
--------- ---------- ---------- ---------- ----------
Balance at September 30, 1995 $ 282,994 $4,142,683 $(172,447) $(208,376) $4,044,854
========= ========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 114
VANDALIA NATIONAL CORPORATION
STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended
- -----------------------------------------------------------------------
September 30,
-----------------------
1996 1995
------- --------
Cash flows from operating activities:
Net income $213,129 $268,727
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 116,836 146,480
Provision for loan losses 345,000 93,000
Net amortization and accretion 13,131 987
Loss on sale of investment
securities 3,018 10,670
Deferred income taxes (benefit) (165,720) 18,037
Amortization of organization costs - 8,591
Decrease in accrued interest
receivable and other assets 46,326 36,990
Increase in accrued expenses and
other liabilities 154,024 35,825
--------- --------
Total adjustments 512,615 350,580
--------- --------
Net cash provided by
operating activities 725,744 619,307
--------- --------
Cash flows from investing activities:
Purchase of investment available for sale (1,043,650) (2,041,716)
Proceeds from sales and maturity of
investment securities available for sale 3,035,130 2,146,095
Net increase in loans (2,263,812) (4,956,372)
Purchases of premises and equipment (16,443) (29,883)
(Purchase of) proceeds from interest
bearing deposits with other banks 576,093 (1,643,620)
---------- ----------
Net cash used by investing activities 287,318 (6,525,496)
---------- ----------
Cash flows from financing activities:
Net increase in certificates of deposit 2,929,204 6,788,517
Net decrease in deposits other tha time (2,999,508) (622,848)
Principal payments on other borrowings (1,000,000) (73,000)
Net cash provided (used) by
financing activities (1,070,304) 6,092,669
----------- ----------
Net increase (decrease) in cash
and cash equivalents (57,242) 186,480
Cash and cash equivalents at beginning of
period 1,590,965 1,201,865
----------- -----------
Cash and cash equivalents at end of period $ 1,533,723 $ 1,388,345
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the nine months ended September 30 for:
Interest $ 1,791,082 $ 1,764,022
Income taxes 66,000 45,000
The accompanying notes are an integral part of these statements.
<PAGE> 115
Vandalia National Corporation
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1996 and 1995
NOTE 1 - Basis of Presentation
These interim financial statements should be read in conjunction with the
annual financial statements of Vandalia National Corporation and the
accompanying footnotes. In the opinion of management, the unaudited interim
financial statements include all adjustments (consisting of only normal
recurring adjustments) necessary for the fair presentation of the accompanying
statement condition as of September 30, 1996 and the related statements of
income, changes in stockholders' equity and cash flows for the nine months
ended September 30, 1996 and 1995. The results of the nine months ended
September 30, 1996 and 1995 are not necessarily indicative of the results to
be expected for the entire year.
The accompanying consolidated financial statements include the accounts of
Vandalia Corporation, and its subsidiary, the National Bank of West Virginia.
All significant intercompany accounts and transaction have been eliminated
in consolidation.
NOTE B - ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses for the six months ended June 30,
are summarized as follows:
1996 1995
--------- --------
Balance at January 1 $475,688 $449,559
Loans written off (159,000) (63,000)
Loans recovered 97,528 12,898
Provision for loan losses 345,000 93,000
--------- --------
Balance at September 30 $759,216 $492,457
========= ========
<PAGE> 116
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Vandalia National Corporation and Subsidiary
Morgantown, West Virginia
We have audited the accompanying consolidated balance sheets
of Vandalia National Corporation and subsidiary as of December
31, 1995 and 1994, and the related consolidated statements of
income, shareholders' equity and cash flows for the years ended
December 31, 1995, 1994 and 1993. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Vandalia National Corporation and
subsidiary at December 31, 1995 and 1994, and the results of
their operations and cash flows for the years ended December 31,
1995, 1994 and 1993, in conformity with generally accepted
accounting principles.
As more fully described in Notes 2 and 8 to the consolidated
financial statements, the Company changed its methods of
accounting for income taxes in 1993 and for securities in 1994 to
comply with the requirements of new accounting pronouncements.
ARNETT & FOSTER, P.L.L.C.
/s/ Arnett & Foster, P.L.L.C.
Charleston, West Virginia
January 19, 1996
<PAGE> 117
VANDALIA NATIONAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
---- ----
ASSETS
Cash and due from banks 1,590,965 1,201,865
Interest bearing deposits with other banks 1,393,834 364,091
Securities available for sale 9,687,553 9,004,554
Securities held to maturity (estimated fair
value 1995, $573,371; 1994, $2,393,459) 850,000 2,761,989
Loans, less allowance for loan losses of
$475,688 and $449,559, respectively 42,786,190 35,409,705
Bank premises and equipment, net 1,281,020 1,432,205
Accrued interest receivable 382,975 348,930
Other assets 257,814 704,715
----------- -----------
Total assets $58,230,351 $51,228,054
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non interest bearing $ 6,720,403 $ 5,170,243
Interest bearing 45,524,209 40,918,810
----------- -----------
Total deposits 52,244,612 46,089,053
Securities sold under agreements
to repurchase 550,000 623,000
Other borrowings 1,000,000 1,000,000
Other liabilities 160,182 138,034
---------- ----------
Total liabilities 53,954,794 47,850,087
---------- ----------
Commitments and Contingencies
Shareholders' Equity
Common stock, par value $1.00,
authorized 1,000,000 shares,
issued and outstanding in
1995 and 1994 282,994 282,994 282,994
Capital surplus 4,142,683 4,142,683
Retained earnings (deficit) (97,097) (441,174)
Net unrealized gain (loss) on securities (53,023) (606,536)
---------- ----------
Total shareholders' equity 4,275,557 3,377,967
---------- ----------
Total liabilities and
shareholders' equity $58,230,351 $51,228,054
=========== ===========
See Notes to Consolidated Financial Statements
<PAGE> 118
[CAPTION]
<TABLE>
VANDALIA NATIONAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $4,073,290 $3,180,421 $2,884,660
Interest and dividends on investment
securities:
Taxable 818,423 747,202 648,520
Tax-exempt --- 630 187
Other interest income --- --- 29
---------- ---------- ----------
Total interest income 4,891,713 3,928,253 3,533,396
---------- ---------- ----------
Interest expense:
Interest on deposits 2,310,218 1,697,635 1,672,328
Interest on other borrowings 76,590 122,982 105,190
---------- ---------- ----------
Total interest expense 2,386,808 1,820,617 1,777,518
Net interest income 2,504,905 2,107,636 1,755,878
Provision for loan losses 123,000 62,000 556,000
---------- ---------- ----------
Net interest income after
provision for loan losses 2,381,905 2,045,636 1,199,878
---------- ---------- ----------
Other income:
Service charges and fees 250,806 175,168 133,220
Securities gain (losses) (27,557) (6,594) 66,015
Other income 56,091 45,488 46,322
---------- ---------- ----------
279,340 214,062 245,557
Other expenses:
Salaries and employee benefits 1,072,380 940,264 684,167
Net occupancy expense 135,072 119,110 105,449
Equipment rentals, depreciation and
maintenance 273,344 239,375 192,040
Federal Deposit Insurance Corporation
premiums 67,451 100,368 81,352
ATM expense 73,122 54,246 30,691
Advertising 57,314 93,165 74,943
Other expenses 483,742 508,996 333,211
--------- --------- ---------
2,162,425 2,055,524 1,501,853
Net income (loss) before income tax expense
and cumulative effect of change in
accounting principle 498,820 204,174 (56,418)
Income tax expense (benefit) 154,743 63,201 (79,112)
--------- --------- ---------
Income (loss) before cumulative effect of
change in accounting principle 344,077 140,973 22,694
Cumulative effect of change in
accounting for income taxes --- --- 170,150
---------- --------- ---------
Net income $ 344,077 $ 140,973 $ 192,844
========== ========= =========
</TABLE>
(Continued)
<PAGE> 119
CONSOLIDATED STATEMENTS OF INCOME - Continued
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Earnings per common share: ---- ---- ----
Earnings per common share before
cumulative effect of change in
accounting principle $ 1.22 $ .50 $ .08
Cumulative effect of change in
accounting for income taxes --- --- .60
--------- -------- --------
Earnings per common share $ 1.22 $ .50 $ .68
========= ======== ========
Average common shares outstanding 282,994 282,991 282,930
========= ======== ========
See Notes to Consolidated Financial Statements
<PAGE> 120
VANDALIA NATIONAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
Net
Unrealized
Retained Gain Total
Common Stock Capital Earnings (Loss) on Shareholders'
Shares Amount Surplus (Deficit) Securities Equity
------ ------ ------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 282,643 $282,643 $4,139,534 $(774,655) --- $3,647,522
Sale of 313 shares of
common stock 313 313 2,687 --- --- 3,000
Net income --- --- --- 192,844 --- 192,844
------- -------- ---------- --------- ------- -----------
Balance, December 31, 1993 282,956 282,956 4,142,221 (581,811) --- 3,843,366
Sale of 38 shares of
common stock 38 38 462 --- --- 500
Cash payment on fractional
shares resulting from
stock dividend --- --- --- (336) --- (336)
Net unrealized gain (loss)
on securities upon adoption
of SFAS 115 --- --- --- --- 51,399 51,399
Change in unrealized gain
(loss) on securities --- --- --- --- (657,935) (657,935)
Net income --- --- --- 140,973 --- 140,973
------- ------- ---------- --------- --------- -----------
Balance, December 31, 1994 282,994 282,994 4,142,683 (441,174) (606,536) 3,377,967
Change in unrealized gain
(loss) on securities --- --- --- --- 553,513 553,513
Net income --- --- --- 344,077 --- 344,077
-------- -------- ---------- -------- --------- ----------
Balance, December 31, 1995 $282,994 $282,994 $4,142,683 $(97,097) $(53,023) $4,275,557
======== ======== ========== ========= ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 121
VANDALIA NATIONAL CORPORATION
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $344,077 $140,973 $192,844
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Cumulative effect of change in
accounting for income taxes --- --- (170,150)
Provision for loan losses 123,000 62,000 556,000
Deferred income tax expense (benefit) 63,220 63,201 (79,112)
Depreciation 200,798 171,882 138,861
Amortization of premium and accretion of
discount (net) on securities and interest
bearing deposits with other banks 14,281 (3,667) 44,304
Amortization of organization costs 10,714 12,856 12,826
Loans purchased for resale (7,868,013) (10,939,420) (24,377,555)
Proceeds from the sale of loans 7,072,784 13,302,006 20,704,252
Gain (loss) on sales of securities 27,557 6,594 (66,015)
(Increase) decrease in other assets 43,704 (41,546) 49,556
(Increase) decrease in accrued interest
receivable (34,045) (72,506) (34,275)
Increase (decrease) in other
liabilities 22,148 16,484 20,277
---------- ---------- --------
Net cash provided by (used in)
operating activities 20,225 2,718,857 (3,008,187)
---------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities held to
maturity --- (489,983) (12,180,800)
Purchase of securities available for
sale (2,046,366) (4,295,000) ---
Proceeds from maturities of securities
held to maturity --- 800,000 2,000,000
Proceeds from sales of securities
available for sale 3,090,699 1,989,053 4,063,766
Proceeds from maturities of securities
available for sale 1,000,000 --- ---
Principal payments received on
securities 56,802 420,789 1,809,680
(Purchase of) proceeds from interest bear-
ing deposits with other banks, net (1,029,743) (121,546) 1,303,132
Loans made to customers, net (6,735,463) (3,683,753) (1,940,873)
Proceeds from sales of certificate of
deposit --- 211,100 ---
Purchases of premises and equipment (49,613) (489,006) (249,358)
---------- ---------- --------
Net cash (used in) investing
activities (5,713,684) (5,658,346) (5,194,453)
---------- ---------- ----------
(Continued)
<PAGE> 122
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
For the years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in demand deposits, NOW
accounts and savings accounts 3,034,312 141,370 4,730,013
Proceeds from sales of (payments for
matured) time deposits, net 3,121,247 5,805,332 169,467
Proceeds from exercise of stock warrants
1994 38 shares, 1993 313 shares --- 500 3,000
Proceeds from (payments for) securities
sold under agreements to repurchase,
net (73,000) 73,000 550,000
Proceeds from other borrowings --- --- 2,900,000
Principal payments on other borrowings --- (2,900,000) ---
Payments on fractional shares resulting
from 25% stock dividend --- (336) ---
---------- ---------- --------
Net cash provided by financing
activities 6,082,559 3,119,866 8,352,480
---------- ---------- --------
Increase (decrease) in cash and due
from banks 389,100 180,377 149,840
Cash and due from banks:
Beginning 1,201,865 1,021,488 871,648
---------- ---------- --------
Ending $1,590,965 $1,201,865 $1,021,488
========== =========== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash payments for:
Interest on deposits $2,299,442 $1,676,714 $1,665,035
========== ========== ========
Interest on long term debt $ 48,800 $ 103,486 $ 96,451
========== ========== ========
Interest on repurchase
agreements $ 27,790 $ 25,146 $ ---
========== ========== ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Other repossessed assets acquired
in settlement of loans $ 31,207 $ 25,702 $ 26,435
========== ========== ==========
See Notes to Consolidated Financial Statements
<PAGE> 123
VANDALIA NATIONAL CORPORATION
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
The accounting and reporting policies of Vandalia National
Corporation and its subsidiary, conform to generally accepted
accounting principles and to general practices within the banking
industry. The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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. The following is a summary of the Company's more
significant accounting policies.
Principles of consolidation: The accompanying consolidated
- ----------------------------
financial statements include the accounts of Vandalia National
Corporation, and its subsidiary, the National Bank of West
Virginia. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Presentation of cash flows: For purposes of reporting cash
- ---------------------------
flows, cash and due from banks includes cash on hand and amounts
due from banks (including cash items in process of clearing).
Cash flows from demand deposits, NOW accounts, savings accounts
and Federal funds purchased and sold are reported net since their
original maturities are less than three months. Cash flows from
loans and certificates of deposits and other time deposits are
reported net.
Securities: Effective January 1, 1994, the Bank adopted
- -----------
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
No. 115). Under SFAS No. 115, securities are classified as "held
to maturity", "available for sale" or "trading." The appropriate
classification is determined at the time of purchase of each
security and re-evaluated at each reporting date. (Note 2)
Securities held to maturity - Debt securities for which the
---------------------------
Bank has the positive intent and ability to hold to maturity
are reported at cost, adjusted for amortization of premiums
and accretion of discounts.
Securities available for sale - Securities not classified as
-----------------------------
"held to maturity" or as "trading" are classified as
"available for sale." Securities classified as "available
for sale" are those securities the Bank intends to hold for
an indefinite period of time, but not necessarily to
maturity. "Available for sale" securities are reported at
estimated fair value, net of unrealized gains or losses,
which are adjusted for applicable income taxes, and reported
as a separate component of shareholders' equity.
<PAGE> 124
Trading securities - There are no securities classified as
------------------
"trading" in the accompanying financial statements.
Realized gains and losses on sales of securities are recognized
on the specific identification method. Amortization of premiums
and accretion of discounts are computed using the interest
method.
Loans and allowance for loan losses: Loans are stated at the
- ------------------------------------
amount of unpaid principal reduced by an allowance for loan
losses.
Interest income on loans is accrued and credited to operations
using methods that approximate a level yield on principal amounts
outstanding.
As more fully discussed in Note 3, the subsidiary bank purchases
certain single family mortgage loans for resale to another large
financial institution. The sales price of these loans equals the
balance of unpaid principal plus any accrued interest at the time
of sale, and it is generally set at the date of purchase.
Accordingly, no provision for declines in the market value of
these loans is considered to be necessary.
The allowance for loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged to
operating expense and reduced by net charge-offs. The Bank makes
continuous credit reviews of the loan portfolio and considers
current economic conditions, historical loan loss experience from
peer groups, review of specific problem loans and other factors
in determining the adequacy of the allowance for loan losses.
Loans are charged against the allowance for loan losses when
management believes that collectibility is unlikely.
In 1995, the Company adopted Statements of Financial Accounting
Standards Nos. 114 and 118 (SFAS Nos. 114 and 118) "Accounting by
Creditors for Impairment of a Loan" and "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure",
respectively. Under SFAS Nos. 114 and 118, a loan is impaired
when, based on current information and events, it is probable
that the Company will be unable to collect all amounts due in
accordance with the contractual terms of the specific loan
agreement. Impaired loans, other than certain large groups of
smaller-balance homogeneous loans that are collectively evaluated
for impairment, are required to be reported at the present value
of expected future cash flows discounted using the loan's
original effective interest rate or, alternatively, at the loan's
observable market price, or at the fair value of the loan's
collateral if the loan is collateral dependent. The method
selected to measure impairment is made on a loan-by-loan basis,
unless foreclosure is deemed to be probable, in which case the
fair value of the collateral method is used.
<PAGE> 125
Generally, after management's evaluation, loans are placed on non-
accrual status when principal or interest is greater than 90 days
past due based upon the loan's contractual terms. Interest is
accrued daily on impaired loans unless the loan is placed on non-
accrual status. Impaired loans are placed on non-accrual status
when the payments of principal and interest are in default for a
period of 90 days, unless the loan is both well-secured and in
the process of collection. Interest on non-accrual loans is
recognized primarily using the cost-recovering method. The
implementation of the requirements of SFAS No. 114 and 118 did
not have a significant impact on the accompanying financial
statements.
Certain loan fees and direct loan costs are recognized as income
or expense when incurred. Whereas, Statement Number 91 of the
Financial Accounting Standards Board requires that such fees and
costs be deferred and amortized as adjustments to the subsidiary
Bank's related loan's yield over the contractual life of the
loan. This method of recognition of loan fees and direct loan
costs produces results that are not materially different from
those that would be recognized had Statement Number 91 been
adopted.
Bank premises and equipment: Bank premises and equipment are
- ----------------------------
stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method for bank premises and
equipment over the estimated useful lives of the assets. Repairs
and maintenance expenditures are charged to operating expenses as
incurred. Major improvements and additions to premises and
equipment are capitalized.
Organization costs: Organization costs, which are insignificant,
- -------------------
are being amortized on a straight-line basis over a period of
five years.
Income taxes: The consolidated provision for income taxes
- -------------
includes Federal and state income taxes and is based on pretax
income reported in the consolidated financial statements,
adjusted for transactions that may never enter into the
computation of income taxes payable. Deferred tax assets and
liabilities are determined based on differences between the
financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based
on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Deferred
tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Valuation allowances are established when deemed necessary to
reduce deferred tax assets to the amount expected to be realized.
Earnings per share: The earnings per share amount is based on
- -------------------
the weighted average number of shares outstanding of 282,994,
282,991 and 282,930 for 1995, 1994 and 1993, respectively.
<PAGE> 126
NOTE 2. Securities
During 1995, concurrent with the adoption of the Special Report "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" issued by the Financial Accounting Standards Board, the
subsidiary bank reassessed the classifications of its securities and
transferred securities with an amortized cost of $1,952,253 and estimated fair
value of $1,916,587 from the held to maturity category to the available for
sale category. Accordingly, shareholders' equity was increased $24,966, net of
deferred income taxes of $10,700, to reflect the net unrealized holding gain on
such securities. This reclassification did not have an impact on the
accompanying consolidated statements of income.
In connection with the adoption of SFAS No. 115, certain securities totaling
$10,042,398 (at amortized cost) were classified as available for sale.
Accordingly, shareholders' equity at January 1, 1994, was increased by $51,399,
net of applicable income taxes of $15,353, to reflect the net unrealized
holding gains of such securities. The adoption of SFAS No. 115 had no
significant impact on the accompanying statements of income.
The amortized cost, unrealized gains, unrealized losses and estimated fair
values of securities at December 31, 1995 and 1994, are summarized as follows:
[CAPTION]
<TABLE>
1995
-------------------------------------------------
Carrying
Value Estimated
(Amortized Unrealized Fair
Cost) Gains Losses Value
----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Government agencies
and corporations $ 850,000 $ --- $ 276,629 $ 573,371
========== ========== ========== ==========
Available for sale:
U.S. Treasury Securities $1,104,939 $ 3,665 $ 3,863 $1,104,741
U.S. Government agencies
and corporations 6,079,217 14,096 22,672 6,070,641
Mortgage-backed securities-
U.S. Government agencies
and corporations 2,301,835 --- 71,564 2,230,271
Federal Reserve Bank Stock 120,000 --- --- 120,000
Federal Home Loan Bank Stock 161,900 --- --- 161,900
--------- --------- ---------- ---------
Total $9,767,891 $ 17,761 $ 98,099 $9,687,553
========== ========= ========== =========
</TABLE>
<PAGE> 127
[CAPTION]
<TABLE>
1994
-------------------------------------------------
Carrying
Value Estimated
(Amortized Unrealized Fair
Cost) Gains Losses Value
----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Treasury Securities $1,088,921 $ --- $ 35,713 $1,053,208
U.S. Government agencies
and corporations 1,673,068 --- 332,817 1,340,251
---------- ---------- --------- ----------
Total $2,761,989 $ --- $ 368,530 $2,393,459
========== ========== ========= ==========
Carrying
Value
Estimated
Amortized Unrealized Fair
Cost Gains Losses Value
----------- --------- -------- ----------
Available for sale:
U.S. Government agencies
and corporations $6,914,521 $ --- $ 524,075 $6,390,446
Mortgage-backed securities-U.S.
Government agencies and
corporations 2,760,131 --- 422,123 2,338,008
Federal Reserve Bank Stock 110,900 --- --- 110,900
Federal Home Loan Bank stock 165,200 --- --- 165,200
---------- ---------- --------- ----------
Total $9,950,752 $ --- $ 946,198 $9,004,554
========== ========== ========= ==========
</TABLE>
Mortgage-backed obligations of U. S. Government agencies and corporations are
included in securities at December 31, 1995 and 1994, respectively. These
obligations having contractual maturities ranging from 2 to 28 years are
reflected in the following maturity distribution schedule based on their
anticipated average life to maturity, which ranges from 1 to 16 years.
Accordingly, discounts are accreted and premiums are amortized over the
anticipated average life to maturity of the specific obligation.
The maturities, amortized cost and estimated fair values of securities at
December 31, 1995 are summarized as follows:
Held to Maturity Available for Sale
------------------- -------------------
Carrying
Carrying Value
Value Estimated (Estimated
(Amortized Fair Amortized Fair
Cost) Value Cost Value)
---------- ---------- ---------- --------
Due within 1 year $ --- $ --- $1,955,555 $1,949,089
Due after 1 but within 5 years --- --- 4,857,232 4,827,065
Due after 5 but within 10 years 850,000 573,371 2,594,657 2,559,202
Due after 10 years --- --- 360,447 352,197
---------- ---------- ---------- ----------
Total $ 850,000 $ 573,371 $9,767,891 $9,687,553
========== ========== ========== ==========
<PAGE> 128
The proceeds from sales and maturities of securities, principal payments
received on mortgage backed obligations, and the related gross gains and
losses realized are as follows:
For the Proceeds From Gross
Year Ended ------------------------------------ ------------------
December 31, Principal Gains Losses
Sales Maturities Payments Realized Realized
1995 ---------- ---------- ---------- -------- --------
Securities held to
maturity $ --- $ --- $ --- $ --- $ ---
Securities available
for sale 3,090,699 1,000,000 56,802 $ 1,231 $ 28,788
---------- ---------- --------- -------- --------
Total $3,090,699 $1,000,000 $ 56,802 $ 1,231 $ 28,788
========== ========== ========== ======== ========
1994
Securities held to
maturity $ --- $ 800,000 $ --- $ --- $ ---
Securities available
for sale 1,989,053 --- 420,789 7,570 14,164
---------- ---------- ---------- -------- --------
Total $1,989,053 $ 800,000 $ 420,789 $ 7,570 $ 14,164
========== ========== ========== ======== ========
1993 $4,063,766 $2,000,000 $1,809,680 $ 69,709 $ 3,694
========== ========== ========== ======== ========
During 1994, securities with an amortized cost of $1,963,886
and an estimated fair value of $1,909,554 were transferred
from securities available for sale to securities held to
maturity. In accordance with generally accepted accounting
principles, the securities were transferred at their
estimated fair value on the date of transfer. The fair
value adjustment totaling $54,332 on these securities at the
date of transfer is amortized to the maturities of the
specific instruments using the interest method. The
remaining unamortized fair value adjustment on the date of
transfer, $48,117 is included in net unrealized losses on
securities in shareholders' equity in the accompanying
consolidated financial statement at December 31, 1994.
At December 31, 1995 and 1994, securities carried at
$2,250,000 and $2,560,112, respectively, with estimated fair
values of $2,139,436 and $2,241,931, respectively, were
pledged to secure public deposits, and for other purposes
required or permitted by law.
<PAGE> 129
NOTE 3. Loans
Loans are summarized as follows:
1995 1994
----------- -----------
Commercial, financial and agricultural $15,996,630 $13,231,666
Real estate - construction 2,336,588 2,708,299
Real estate - mortgage 17,553,880 14,404,752
Installment loans 5,514,196 4,627,325
Loans held for resale 949,329 154,100
Other 911,255 733,122
----------- -----------
Total loans 43,261,878 35,859,264
Less allowance for loan losses (475,688) (449,559)
----------- -----------
Loans, net $42,786,190 $35,409,705
=========== ===========
Included in the balance of net loans, are non-accrual loans
amounting to $185,219 and $22,183 at December 31, 1995 and
1994, respectively. If interest on non-accrual loans had
been accrued, such income would have approximated $12,565,
$3,595 and $0 for the years ended December 31, 1995, 1994
and 1993, respectively.
The maturities of loans at December 31, 1995, are as follows:
Balance
After 1 But December 31,
Within 1 Year Within 5 Years After 5 Years 1995
------------- -------------- ------------- ------------
Total loans due $10,218,076 $27,371,944 $5,671,858 $43,261,878
============= ============== ============= ============
Loans due after one year with:
Variable rates $17,634,460
Fixed rates 15,409,342
-----------
Total $33,043,802
===========
Loans held for resale: Loans held for resale represent
- ----------------------
mortgage loans purchased by the bank from a loan origination
company. The loans are funded after they have met the
underwriting standards of the subsidiary bank and have been
accepted for resale to another large financial institution.
During the year ended December 31, 1995 and 1994, the bank
funded approximately $7,868,013 and $10,939,420 of these
loans which are typically held for 30-60 days prior to
resale (Note 11).
<PAGE> 130
Concentration of credit risk: The subsidiary bank grants
- -----------------------------
commercial and consumer loans to customers primarily located
in Monongalia County, West Virginia. The bank strives to
maintain a diverse loan portfolio, however, a substantial
portion of the local economy is dependent upon the financial
activities and student enrollment of West Virginia
University.
Loans to related parties: The subsidiary bank has made
- -------------------------
loans, in the normal course of business, to its directors,
officers and employees, and will continue to make such loans
in the future. At December 31, 1995 and 1994, outstanding
loans of this nature totaled $412,676 and $558,490. These
loans were granted at substantially the same terms and
conditions as offered to the public.
The following presents the activity with respect to related
party loans aggregating $60,000 or more to any one related
party during 1995 and 1994. Other changes represent loans
included in the beginning balance that were not in excess of
$60,000 at December 31, 1995 and 1994, or whose status as
reportable related parties changed during the years then
ended.
1995 1994
-------- ---------
Balance, beginning $123,724 $ 53,346
Additions 8,091 192,445
Amounts collected (20,947) (81,968)
Other (42,517) (40,099)
---------- ----------
Balance, ending $ 68,351 $ 123,724
========== ==========
NOTE 4. Allowance for Loan Losses and New Accounting Pronouncement
An analysis of the allowance for loan losses for the years
ended December 31, 1995, 1994 and 1993, is as follows:
1995 1994 1993
--------- --------- ---------
Balance, beginning of year $ 449,559 $ 681,558 $ 322,478
Losses:
Commercial, financial and
agricultural 56,117 270,595 400,352
Installment loans 53,289 87,836 34,087
Other 9,132 2,535 3,399
-------- --------- ---------
Total 118,538 360,966 437,838
-------- --------- ---------
Recoveries:
Commercial, financial and
agricultural --- 47,598 225,000
Installment loans 20,191 19,369 15,918
Other 1,476 --- ---
-------- --------- ---------
Total 21,667 66,967 240,918
-------- --------- ---------
Net losses (96,871) (293,999) (196,920)
Provision for loan loss 123,000 62,000 556,000
-------- --------- ---------
Balance, end of year $475,688 $449,559 $681,558
======== ========= =========
As explained in Note 1, the Bank adopted SFAS Nos. 114 and
118 in 1995. The Company's total recorded investment in
impaired loans at December 31, 1995, approximated $936,584
for which the related allowance for credit losses determined
in accordance with SFAS Nos. 114 and 118 approximated
$268,500. The Company's average investment in such loans
approximated $1,040,044
<PAGE> 131
for the year ended December 31, 1995.
For purposes of SFAS Nos. 114 and 118, the Company considers
groups of smaller-balance homogeneous loans to include:
mortgage loans secured by residential property, other than
those which significantly exceed the bank's typical
residential mortgage loan amount (currently those in excess
of $100,000); and installment loans to individuals,
exclusive of those loans in excess of $50,000.
For the year ended December 31, 1995, the Company recognized
approximately $116,808 in interest income on impaired loans.
Using a cash-basis method of accounting, the Company would
have recognized approximately $106,834 in interest on such
loans.
NOTE 5. Bank Premises and Equipment
The major categories of bank premises and equipment and
accumulated depreciation at December 31, 1995 and 1994 are
as follows:
1995 1994
Bank building $ 299,165 $ 294,659
Leasehold improvements 790,305 778,809
Furniture & equipment 505,500 487,747
Computer equipment 415,772 391,412
Construction in process 8,156 16,658
Bank vehicles 11,645 11,645
----------- -----------
2,030,543 1,980,930
Less accumulated depreciation,
including amounts applicable
to leasehold improvements,
1995 $188,286; 1994 $147,380 749,523 548,725
----------- -----------
Bank premises and equipment, net $ 1,281,020 $ 1,432,205
=========== ===========
Depreciation expense for the years ended December 31, 1995,
1994 and 1993 totaled $200,798, $171,882 and $138,861,
respectively.
<PAGE> 132
NOTE 6. Deposits
The following is a summary of interest bearing deposits by
type as of December 31, 1995 and 1994:
1995 1994
------------ ------------
NOW and Super NOW accounts $ 2,148,745 $ 1,842,115
Money market accounts 5,366,692 2,954,120
Savings deposits 9,475,404 10,710,454
Regular certificates of deposit 27,750,226 23,890,913
Individual Retirement Accounts
and other time deposits 783,142 1,521,208
------------ ------------
Total $ 45,524,209 $ 40,918,810
============ ============
Concentration: The subsidiary bank has obtained certain
- --------------
time deposits through the use of a broker. The total amount
of such deposits at December 31, 1995 and 1994 was $198,000
and $495,000, respectively.
Time certificates of deposit in denominations of $100,000 or
more totaled $8,440,214 and $7,182,816 at December 31, 1995
and 1994, respectively. Interest on time certificates of
deposit in denominations of $100,000 or more was $388,612,
$338,942 and $327,076 for the years ended December 31, 1995,
1994 and 1993, respectively.
The following is a summary of the maturity distribution of
certificates of deposit in denominations of $100,000 or more
as of December 31, 1995.
Amount Percent
----------- -------
Three months or less $1,997,478 23.7
Three through six months 1,647,185 19.5
Six through twelve months 2,334,036 27.6
Over twelve months 2,461,515 29.2
---------- -----
Total $8,440,214 100.0
========== =====
<PAGE> 133
NOTE 7. Borrowings
Details regarding short-term borrowings during the years
ended December 31, 1995 and 1994 are presented below:
1995
----------------------------
Repurchase
Agreements FHLB
----------- ------------
Average amount outstanding during year $ 569,451 $ 11,513
Maximum amount outstanding at any
month end $ 623,000 $ ---
Balance at year end $ 550,000 $ ---
Weighted average interest rate 4.92% 5.21%
1994
----------------------------
Repurchase
Agreements FHLB
----------- ------------
Average amount outstanding during year $ 639,917 $ 420,833
Maximum amount outstanding at any
month end $ 788,000 $ 2,000,000
Balance at year end $ 623,000 $ ---
Weighted average interest rate 4.12% 4.36%
The subsidiary bank is a member of the Federal Home Loan
Bank of Pittsburgh (FHLB). As a member, the subsidiary bank
obtained commitments, composed of a Flexline and a repurchase
option, from the FHLB for $5,073,800 to finance loan growth
and/or meet liquidity needs. Any borrowing will bear interest
at the interest rate posted by the FHLB on the day of the
borrowing and is subject to change daily. This line of credit
is secured by a blanket lien on all unpledged and unencumbered
assets of the Bank and expires January 2, 1997, however, Bank
management intends to renew this line of credit at the maturity
date.
Notes payable is summarized as follows:
1995 1994
---- ----
Federal Home Loan Bank of Pittsburgh, secured by
a blanket lien on all unpledged and unencumbered
assets of the Bank, 4.82% interest due monthly,
principal balance due February 20, 1996 $1,000,000 $1,000,000
========== ==========
The loan agreements contain various general restrictions, all of which
were complied with during the years ended December 31, 1995 and 1994.
<PAGE> 134
NOTE 8. Income Taxes
The components of applicable income tax expense (benefit)
for the years ended December 31, 1995, 1994 and 1993, are as
follows:
1995 1994 1993
-------- -------- ---------
Current (Federal and state) $ 91,523 $ --- $ ---
Deferred (Federal and state) 63,220 63,201 (79,112)
-------- -------- ----------
Total $154,743 $ 63,201 $ (79,112)
======== ======== ==========
A reconciliation between the amount of reported income tax
expense and the amount computed by multiplying the statutory
income tax rate by book pretax income for the years ended
December 31, 1995, 1994 and 1993, is as follows:
[CAPTION]
<TABLE>
1995 1994 1993
------------------ ------------------ -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Computed tax at applicable
statutory rates $149,646 30.0 $61,252 30.0 $(19,182) (34.0)
Increase (decrease) in taxes
resulting from:
(Increase) decrease in
appliable income tax rates --- --- 37,360 18.3 (144,181) (255.5)
Increase (decrease) in
deferred tax asset
valuation allowance (10,400) (2.1) (67,600) (33.1) 84,686 150.1
Other, net 15,497 3.1 32,189 15.8 (435) (.8)
-------- ------ ------- ------ ------- ------
Applicable income tax
(benefits) $154,743 31.0 $63,201 31.0 $(79,112) (140.2)
======== ====== ======= ====== =========
</TABLE>
During 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS No. 109), which changed the criteria for measuring the
provisions for income taxes and recognizing deferred tax
assets and liabilities.
In connection with the adoption of SFAS No. 109 in 1993, the
Company recognized $44,052 and $35,060 of Federal and state
deferred tax benefits.
Deferred income taxes for 1995 and 1994 which are determined
in accordance with SFAS No. 109 reflect the impact of
"temporary differences" between amounts of assets and
liabilities for financial reporting purposes and such
amounts as measured for tax purposes. Deferred tax assets
and liabilities represent the future tax return consequences
of temporary differences, which will either be taxable or
deductible when the related assets and liabilities are
recovered or settled.
The tax effects of temporary differences which give rise to
the Company's deferred tax assets and liabilities as of
December 31, 1995 and 1994 are as follows:
<PAGE> 135
1995 1994
---- ----
Deferred tax assets:
Allowance for loan losses $ 91,619 $ 82,035
Deferred loan origination fees 30,002 31,490
NOL carryforwards 51,324 127,013
Net unrealized loss on securities 27,314 387,785
Organizational costs --- 9,743
--------- ---------
200,259 638,066
Less valuation allowance (45,000) (55,400)
--------- ---------
155,259 582,666
Deferred tax liability:
Depreciation 5,096 8,812
--------- ---------
Net deferred tax asset $ 150,163 $ 573,854
========= =========
Current income tax expense of $91,523 was recognized during
1995. No current income tax expense was recognized during
the years ended December 31, 1994 and 1993 due to the
generation and utilization of net operating losses during
those years. In 1995 and 1994, the Company recognized
$47,268 and $15,952 and $53,389 and $9,812 of Federal and
state deferred tax expense, respectively.
In accordance with the provisions of SFAS No. 109, the
Company recognized the remaining benefits related to the
Company's tax operating loss carryforwards as part of the
cumulative effect of the change in accounting for income
taxes. During 1993, approximately $332,000 and $139,000 of
Federal and state income tax losses were utilized to offset
current taxes. Accordingly, the effects of such are
reflected within deferred tax expense for the year ended
December 31, 1993.
As of December 31, 1995, the Company had approximately
$570,000 state income tax loss carryforwards which expire in
the years 2006 and 2007.
The income tax expense (benefit) on realized securities
gains (losses) was $(8,549), $(2,041) and $26,406, for the
years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 9. Employee Benefit Plan
During 1993, the Company adopted a profit-sharing thrift
plan, which includes 401(k) provisions for substantially all
employees of the Company. Voluntary employee contributions
are limited by certain provisions of current Federal income
tax laws. The Company is required to match the employee
contributions as follows:
<PAGE> 136
- Match 100% of the employee's contribution up to
3.0% of the total annual compensation.
- Match 50% of the employee's contribution above 3.0%
and up to 5% of total annual compensation.
The Company may also elect to make additional contributions
to the plan as approved by the Board of Directors. Employee
contributions vest immediately upon payment while employer
contributions vest ratably over a four year period.
Employer contributions to the Plan which were charged to
operations and are included in the accompanying consolidated
statements of income totaled $16,769, $12,824 and $8,718 for
the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 10. Leases and Total Rental Expense
The Company has exercised options on four noncancellable
leases in order to obtain certain bank premises for the main
office, drive-in and branch bank locations. Three of the
four leases are with related parties of the Company and the
subsidiary bank. The original terms of the leases expire
from February 1, 1995 to June 1997, with renewal options
available through the year 2013. The renewal options on
three of the four leases provide for escalation of the
minimum lease payments based on the consumer price index
increase from the base year of each lease. The fourth lease
provides for escalation of the minimum lease payments based
upon scheduled increases for each renewal period. These
leases primarily require the lessee to pay for all
utilities, normal maintenance and insurance of the
properties.
The total minimum rental commitment at December 31, 1995,
under the agreements mentioned above is $288,625 which is
due as follows:
For the year ending
December 31, Amount
-------------------- ----------
1996 $ 76,500
1997 70,500
1998 64,500
1999 64,500
2000 12,625
---------
Total $ 288,625
=========
Total rental expense incurred and paid under the above
leases for the years ended December 31, 1995, 1994 and 1993,
was $83,188, $73,005 and $64,500, respectively, of which
$63,900, $60,800 and $59,500, respectively, was paid to
related parties.
<PAGE> 137
NOTE 11. Financial Instruments with Off-Balance-Sheet Risk
The subsidiary bank is a party of financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial
instruments consist of commitments to extend credit. Those
instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in
the statement of financial position. The contract amounts
of those instruments reflect the extent of involvement the
subsidiary bank has in particular classes of financial
instruments.
Financial instruments whose contract Contract Amount
amounts represent credit risk 1995 1994
- ------------------------------------ ---------- ----------
Commitments to extend credit $2,370,718 $3,172,336
Real estate - construction 1,625,940 2,083,964
Credit card commitments 1,217,903 574,035
Standby letters of credit 533,838 131,000
---------- ----------
Total $5,748,399 $5,961,335
========== ==========
The subsidiary bank's exposure to credit loss in the event
of nonperformance by the other party to the financial
instrument for commitments to extend credit, standby letters
of credit, credit card commitments, real estate construction
and commitments to fund loans held for resale is represented
by the contractual amount of those instruments. The
subsidiary bank uses the same credit policies in making
commitments and conditional obligations as it does for on-
balance sheet instruments.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. The subsidiary bank evaluates
each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by
the subsidiary bank upon extension of credit, is based on
management's credit evaluation. Collateral held varies but
may include accounts receivable, inventory, equipment or
real estate. The credit card commitments are unsecured
lines of credit.
Standby letters of credit are conditional commitments issued
by the subsidiary bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily
issued to support private borrowing arrangements. The
credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans.
Collateral held varies, but primarily includes real estate.
Commitments to fund loans to be held for resale are
commitments to purchase loans which will subsequently be
sold to another large financial institution at face value
plus accrued interest. The subsidiary bank evaluates these
loans on a case by case basis. The collateral for these
loans is residential real estate. (Note 3)
<PAGE> 138
On September 30, 1993, the Board of Directors of the Bank
committed to specific corrective actions related to various
aspects of the Bank's operations and agreed to maintain
minimum capital ratios. In June 1995, this agreement was
terminated by the Bank's regulatory agency.
NOTE 12. Regulatory Restrictions on Capital and Dividends
The primary source of funds for future dividends to be paid
by the Company is dividends received from its subsidiary
bank. Dividends paid by the subsidiary bank are subject to
restrictions by banking regulations. The most restrictive
provision requires approval by the regulatory agency if
dividends declared in any year exceed the year's net
retained profits, as defined, plus the net retained profits
of the two preceding years. During 1996, the net retained
profits available for distribution to the parent company was
$176,587 plus net retained income for the interim period
through the date of declaration. The Bank is required to
maintain minimum amounts of capital to total "risk weighted"
assets, as defined by banking regulations. A comparison of
the Bank's capital as of December 31, 1995 with the minimum
requirements as mandated by current bank regulations is
presented as follows:
Minimum
Actual Requirements
------ ------------
Tier 1 Risk - based Capital 10.30% 4.0%
Total Risk - based Capital 11.51% 8.0%
Leverage Ratio 6.96% 4.0%
NOTE 13. Shareholders' Equity
Stock Warrants: As part of the initial public offering of
- ---------------
the Company's common stock, the organizers committed to
purchase a minimum number of shares which entitled them to
receive warrants to purchase an additional share for each
four shares acquired in the initial offering. Also, as part
of the initial offering, each of the eight organizers were
granted an additional 2,500 warrants. At December 31, 1995
and 1994, 32,764 warrants remain unexercised. During 1994
and 1993, 38 and 313 warrants, respectively, were exercised
at the $16 offering price. All warrants must be exercised at
the $16 offering price by April, 2001, or the warrants will
expire. No warrants were exercised during 1995.
Stock Dividend: The Company's Board of Directors declared a
- ---------------
25 percent stock split, effective in the form of a dividend,
payable June 15, 1994, to the shareholders of record on
March 21, 1994. In conjunction with the split, an
additional 56,560 shares of $1.00 par value common stock
were issued. Fractional shares were paid in cash the
amount. Accordingly, all references in the consolidated
financial statements to common shares and the related per
share data have been adjusted to reflect this stock split,
effected in the form of a dividend.
<PAGE> 139
On April 21, 1994, the Company's shareholders voted to
increase the authorized shares of the Company's common stock
from 500,000 to 1,000,000 shares.
During 1994, the Company planned a public offering of common
stock, and filed a registration statement with the SEC.
However, after the registration statement was filed and
become effective, the Board of Directors evaluated current
market conditions including consolidation of the banking
industry through mergers and other trends in the industry
which could, or would, impact the Company's stock offering
and decided to postpone the stock offering. In connection
therewith, the Company incurred costs approximating $83,600,
which have been charged to other expenses in the
accompanying consolidated statement of income for the year
ended December 31, 1994. Also, in 1995, the Company planned
a public offering of common stock. However, due to
evaluation of unforeseen circumstances and changing
conditions, the Board of Directors decided not to proceed
with the stock offering in 1995. In connection therewith,
the Company incurred costs approximating $44,979 which have
been charged to other expenses in the accompanying
consolidated statement of income for the year ended
December 31, 1995.
NOTE 14. Fair Value of Financial Instruments
The following summarizes the methods and significant
assumptions used by the Company in estimating its fair value
disclosures for financial instruments.
Cash and due from banks: The carrying values of cash and
- ------------------------
due from banks approximate their estimated fair value.
Interest bearing deposits with other banks: The fair values
- -------------------------------------------
of interest deposits with other banks are estimated by
discounting scheduled future receipts of principal and
interest at the current rates offered on similar instruments
with similar remaining maturities.
Federal funds sold: The carrying values of Federal funds
- -------------------
sold approximate their estimated fair values.
Securities: Estimated fair values of securities are based
- -----------
on quoted market prices, where available. If quoted market
prices are not available, estimated fair values are based on
quoted market prices of comparable securities.
Loans: The estimated fair values for loans are computed
- ------
based on scheduled future cash flows of principal and
interest, discounted at interest rates currently offered for
loans with similar terms to borrowers of similar credit
quality. No prepayments of principal are assumed.
Deposit: The estimated fair values of demand deposit (i.e.
- --------
noninterest bearing checking, NOW, Super NOW, money market
and savings accounts) and other variable rate deposits
approximate their carrying values. Fair values of fixed
maturity deposits are estimated using a discounted cash flow
methodology at rates currently offered for deposits with
similar remaining maturities. Any intangible value of long-
term relationships with depositors is not considered in
estimating the fair values disclosed.
<PAGE> 140
Short-term borrowings: The carrying values of short-term
- ---------------------
borrowings approximate their estimated fair values.
Long-term borrowings: The fair values of long-term
- ---------------------
borrowings are estimated by discounting scheduled future
payments of principal and interest at current rates
available on borrowings with similar terms.
Off-balance sheet instruments: The fair values of
- ------------------------------
commitments to extend credit and standby letters of credit
are estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms
of the agreements and the present credit standing of the
counterparties. The amounts of fees currently charged on
commitments and standby letters of credit are deemed
insignificant and therefore, the estimated fair values and
carrying values are not shown below.
The carrying values and estimated fair values of the
Company's financial instruments are summarized below:
December 31, 1995
------------------------------
Estimated
Carrying Fair
Value Value
------------- -------------
Financial assets:
Cash and due from banks $ 1,590,965 $ 1,590,965
Interest bearing deposits other banks 1,393,834 1,393,834
Securities available for sale 9,687,553 9,687,553
Securities held to maturity 850,000 573,371
Loans 42,786,190 42,987,031
------------ ------------
$ 56,308,542 $ 56,232,754
============ ============
Financial liabilities:
Deposits $ 52,244,612 $ 52,476,694
Short-term borrowings 550,000 550,000
Long-term borrowings 1,000,000 1,000,000
------------ ------------
$ 53,794,612 $ 54,026,694
============ ============
NOTE 15. Condensed Financial Statements of Parent Company
The investment of the Company in its wholly-owned subsidiary
is presented on the equity method of accounting.
Information relative to the Company's balance sheets at
December 31, 1995 and 1994, and the related statements of
income and cash flows for the years ended December 31, 1995,
1994 and 1993, are presented below:
<PAGE> 141
December 31,
--------------------
Balance Sheets 1995 1994
---- ----
Assets
Cash $ 199,699 $ 188,111
Prepaid taxes --- 15,000
Investment in bank subsidiary,
eliminated in consolidation 4,123,564 3,167,505
Organization costs, net --- 1,168
Other 150 9,743
---------- ----------
Total assets $4,323,413 $3,381,527
========== ==========
Liabilities and shareholders' equity
Liabilities
Miscellaneous liabilities $ 47,856 $ 3,560
---------- ----------
Shareholders' equity:
Common stock, par value $1.00;
authorized 1,000,000 shares;
issued 1995 and 1994, 282,994 282,994 282,994
Capital surplus 4,142,683 4,142,683
Retained earnings (deficit) (97,097) (441,174)
Net unrealized gain (loss) on
securities (53,023) (606,536)
---------- ----------
Total shareholders' equity 4,275,557 3,377,967
---------- ----------
Total liabilities and
shareholders' equity $4,323,413 $3,381,527
========== ==========
Statements of Income 1995 1994 1993
- -------------------- ---- ---- ----
Income
Interest income $ 7,076 $ 7,251 $ 8,013
Expenses -------- -------- --------
Salaries and employee benefits 4,595 4,255 3,956
Lease rental --- --- 4,500
Other operating 51,207 84,998 6,809
-------- -------- --------
Total 55,802 89,253 15,265
-------- -------- --------
(Loss) before equity in net
income of bank subsidiary (48,726) (82,002) (7,252)
Equity in net income
of subsidiary bank before
cumulative effect of change
in accounting principle 402,546 236,602 26,950
<PAGE> 142
Equity in net income of subsidiary
bank resulting from cumulative
effect of change in accounting
for income taxes --- --- 149,775
-------- -------- --------
Equity in net income of subsidiary
bank 402,546 236,602 176,725
---------- -------- --------
Net income before income tax expense
and cumulative effect of change in
accounting principle 353,820 154,600 169,473
Income tax benefit (expense) (9,743) (13,627) 2,996
Cumulative effect of change in
accounting for income taxes --- --- 20,375
-------- -------- --------
Net income $344,077 $140,973 $192,844
======== ======== ========
Statements of Cash Flows
- ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
1995 1994 1993
---- ---- ----
Net Income $344,077 $140,973 $192,844
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Cumulative effect of change in
accounting for income taxes --- --- (20,375)
Deferred income tax expense
(benefit) 9,743 13,627 (2,996)
Equity in undistributed net
income of subsidiary bank (402,546) (236,602) (176,725)
Amortization of organization
costs 1,168 1,402 1,402
(Increase) decrease in other
assets (150) 6,483 2,798
Increase (decrease) in other
liabilities 44,296 457 2,174
Decrease (increase) in
prepaid taxes 15,000 (15,000) ---
------- ------- -------
Net cash provided by (used
in) operating activities 11,588 (88,660) (878)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock
warrant, 38 shares 1994 and
313 shares 1993 --- 500 3,000
Payment on fractional shares
resulting from stock dividend --- (336) ---
------- ------- -------
Net cash provided by financing
activities --- 164 3,000
------- ------- -------
Increase (decrease) in cash 11,588 (88,496) 2,122
Cash:
Beginning 188,111 276,607 274,485
-------- -------- --------
Ending $199,699 $188,111 $276,607
======== ======== ========
<PAGE> 143
Vandalia National Corporation accounts for its investment in its subsidiary
bank by the equity method. During the years ended December 31, 1995, 1994
and 1993, changes in the investment were as follows:
Number of shares owned - The National Bank of West Virginia 400,000
Percent of shares owned - The National Bank of West Virginia 100%
Balance at December 31, 1992 $3,360,714
Equity in net income of subsidiary bank 176,725
----------
Balance at December 31, 1993 3,537,439
Equity in net income of subsidiary bank 236,602
Net unrealized gains (losses) on securities held
by subsidiary (606,536)
----------
Balance at December 31, 1994 3,167,505
Equity in net income of subsidiary bank 402,546
Net unrealized gains (losses) on securities held
by subsidiary 553,513
----------
Balance at December 31, 1995 $4,123,564
==========
<PAGE> 144
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<PAGE> 145
APPENDIX I
Delaware Code Annotated, Title 8, Corporations, Chapter 1,
General Corporation Law, Subchapter IX, Merger or Consolidation.
262 Appraisal Rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such
shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in
writing pursuant to 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his
shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to 251, 252,
254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal
rights under this section shall be available for
the shares of any class or series of stock, which
stock, or depository receipts in respect thereof,
at the record date fixed to determine the
stockholder entitled to receive notice of and to
vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
designated as a national market system security on
an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii)
held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be
available for any shares of stock of the
constituent corporation surviving a merger if the
merger did not require for its approval the vote of
the stockholders of the surviving corporation as
provided in subsections (f) or (g) of 251 of this
title.
(2) Notwithstanding paragraph (1) of this
subsection, appraisal rights under this section
shall be available for the shares of any class or
series of stock of a constituent corporation if the
holders thereof are required by the terms of an
agreement of merger or consolidation pursuant to 251,
<PAGE> 146
252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the
corporation surviving or resulting from
such merger or consolidation, or
depository receipts in respect thereof;
b. Shares of stock of any other
corporation, or depository receipts in
respect thereof, which shares of stock
or depository receipts at the effective
date of the merger or consolidation will
be either listed on a national
securities exchange or designated as a
national market system security on an
interdealer quotation system by the
National Association of Securities
Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional
shares or fractional depository receipts
described in the foregoing subparagraphs
a. and b. of this paragraph; or
d. Any combination of the shares
of stock, depository receipts and cash
in lieu of fractional shares or
fractional depository receipts described
in the foregoing subparagraphs a., b.,
and c. of this paragraph.
(3) In the event all of the stock of a
subsidiary Delaware corporation party to a merger
effected under 253 of this title is not owned by
the parent corporation immediately prior to the
merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for
which appraisal rights are provided under this
section is to be submitted for approval at a
meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, shall notify
each of its stockholders who was such on the record
<PAGE> 147
date for such meeting with respect to shares for
which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the
constituent corporations, and shall include in such
notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not
constitute such a demand. A stockholder electing
to take such action must do so by a separate
written demand as herein provided. Within 10 days
after the effective date of such merger or
consolidation, the surviving or resulting
corporation shall notify each stockholder of each
constituent corporation who has complied with this
subsection and has not voted in favor of or
consented to the merger or consolidation of the
date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was
approved pursuant to 228 or 253 of this title,
the surviving or resulting corporation, either
before the effective date of the merger or
consolidation or within 10 days thereafter, shall
notify each of the stockholders entitled to
appraisal rights of the effective date of the
merger or consolidation and that appraisal rights
are available for any or all of the shares of the
constituent corporation, and shall include in such
notice a copy of this section. The notice shall be
sent by certified or registered mail, return
receipt requested, addressed to the stockholder at
his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of
mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of
his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger
or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days
after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the
<PAGE> 148
aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by one or more publications at least one week
before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the
notices by mail and by publication shall be approved by the
court, and the costs thereof shall be borne by the surviving or
resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining their
fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest
which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trail upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights
under this section.
<PAGE> 149
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive payment
of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of
the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
(1) The shares of the surviving or resulting
corporation to which the shares of such objecting
stockholders would have been converted had they
assented to the merger or consolidation shall have
the status of authorized and unissued shares of the
surviving or resulting corporation.
<PAGE> 150
APPENDIX II
-----------
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called
"Agreement"), made and entered into as of the 18th day of July,
1996, by and between WESBANCO, INC., a West Virginia corporation,
with its principal place of business located at Bank Plaza,
Wheeling, West Virginia (hereinafter called "Wesbanco"), party of
the first part, VANDALIA NATIONAL CORPORATION, a Delaware
corporation, with its principal place of business located at 344
High Street, Morgantown, West Virginia, 26507, (hereinafter
called "Vandalia") party of the second part, VNC CORPORATION
(hereinafter called "VNC"), a corporation to be formed under the
laws of the State of West Virginia by Wesbanco as its wholly-
owned subsidiary solely for the purpose of effecting the
acquisition contemplated by this Agreement, party of the third
part, (effective as of its organization and execution of this
Agreement) and WESBANCO BANK FAIRMONT, INC., a West Virginia
banking corporation, with its principal place of business located
at 301 Adams Street, Fairmont, WV, 26555, party of the fourth
part (hereinafter called "Fairmont").
WHEREAS, Wesbanco is a West Virginia corporation duly
organized and validly existing under the laws of the State of
West Virginia, and is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, and
WHEREAS, Vandalia is a Delaware corporation duly organized
and validly existing under the laws of the State of Delaware, and
is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended, which owns one subsidiary,
namely, The National Bank of West Virginia (hereinafter also
referred to as "Subsidiary"), and
<PAGE> 151
WHEREAS, VNC will be a corporation duly organized and
validly existing under the laws of the State of West Virginia
which corporation shall be organized to effect the terms and
conditions of this Agreement, and
WHEREAS, the Board of Directors of Wesbanco, by a majority
vote of all the members thereof, has approved this Agreement and
has authorized the execution hereof in counterparts; the Board of
Directors of VNC shall, prior to the execution hereof by VNC,
have by a majority vote of all of the members and shareholders
thereof, approved this Agreement and authorized the execution
hereof in counterparts, all upon the issuance of VNC's Charter as
hereinafter provided, and
WHEREAS, Wesbanco desires to acquire Vandalia and the Board
of Directors of Vandalia has determined that, subject to all of
the conditions of this Agreement, including but not limited to
the requirement that certain tax rulings and fairness opinions be
obtained, it would be in the best interests of Vandalia and its
shareholders for Vandalia to enter into this Agreement to become
affiliated with Wesbanco, and
WHEREAS, it is proposed that Wesbanco, Vandalia, VNC and
Fairmont enter into this Agreement whereby VNC will merge with
and into Vandalia (the "Merger") and the outstanding shares of
common stock of Vandalia, par value $1.00, ("Vandalia Common
Stock"), will be converted into shares of common stock of
Wesbanco, par value $2.0833, ("Wesbanco Common Stock") at an
exchange ratio of 1.2718 shares of Wesbanco Common Stock for each
share of Vandalia Common Stock exchanged therefor, or, at the
election of such shareholder, will be exchanged for the right to
receive $34.34 per share in cash, and the Subsidiary will be
merged with and into Fairmont with Fairmont as the surviving
corporation (the "Bank Merger").
<PAGE> 152
NOW, THEREFORE, for and in consideration of the mutual
promises and covenants hereinafter set forth, and in accordance
with the provisions of applicable law, and intending to be
legally bound hereby, the parties hereto do hereby agree as
follows:
SECTION 1
VNC
---
1.1 Formation. Wesbanco shall promptly cause VNC to be
---------
duly organized as a business corporation under the laws of the
State of West Virginia. VNC will be wholly-owned by Wesbanco at
all times through the closing of the transactions contemplated by
this Agreement.
1.2 Conduct of Business. Wesbanco shall not permit VNC to
--------------------
conduct any business operations other than such activities which
are necessary to consummate the merger contemplated in the
Agreement.
1.3 Execution of Agreement. Promptly after the
-----------------------
organization of VNC, Wesbanco shall cause VNC to take all
necessary and proper action to ratify, approve, adopt and execute
the Agreement and to undertake the performance of all of the
terms and conditions of the Agreement to be performed by VNC.
1.4 Voting of VNC Shares. Promptly after the organization
---------------------
of VNC, Wesbanco, as sole shareholder of VNC, shall vote all of
the shares of VNC in favor of the Merger.
SECTION 2
THE MERGER
----------
2.1 The Merger. At the Effective Time (as defined in
Section 2.5), subject to the provisions of this Agreement, VNC
shall merge with Vandalia, under the charter of Vandalia.
<PAGE> 153
Vandalia shall be the surviving corporation (hereinafter also
called the "Surviving Corporation").
2.2 Effect of Merger. At the Effective Time, the corporate
-----------------
existence of VNC, with all of its purposes, powers and objects,
and all of its rights, assets, liabilities and obligations, shall
cease. Vandalia as the Surviving Corporation shall continue
unaffected and unimpaired by the Merger. Vandalia as the
Surviving Corporation shall also succeed to all of the rights,
assets, liabilities and obligations of VNC in accordance with the
General Corporation Law of Delaware ("DCA"). Upon the Effective
Date, (as defined in Section 12.5 hereof), the separate existence
and corporate organization of VNC shall cease.
2.3 Closing. Wesbanco, Vandalia and VNC will jointly
--------
request the Secretary of State of Delaware to issue a Certificate
of Merger on the date of the closing described in Section 12.4
hereof (the "Closing" and the "Closing Date").
2.4 VNC's Obligations. VNC shall at any time, or from time
------------------
to time, as and when requested by the Surviving Corporation, or
by its successors and assigns, execute and deliver, or cause to
be executed and delivered in its name by its last acting
officers, or by the corresponding officers of the Surviving
Corporation, all such conveyances, assignments, transfers, deeds,
or other instruments, and shall take or cause to be taken such
further or other action as the Surviving Corporation, its
successors or assigns, may deem necessary or desirable in order
to evidence the transfer, vesting or devolution of any property,
right, privilege or franchise or to vest or perfect in or confirm
to the Surviving Corporation, its successors and assigns, title
to and possession of all the property, rights, privileges,
powers, immunities, franchises and interests referred to in this
Agreement and otherwise to carry out the intent and purposes
hereof, all at the expense of the Surviving Corporation.
<PAGE> 154
2.5 Articles of Merger. Subject to the terms and
-------------------
conditions herein provided, Articles of Merger, incorporating
this Agreement, shall be executed to comply with the applicable
filing requirements of the DCA at the Closing and on the Closing
Date. On the Closing Date, such Articles of Merger shall be
filed with the Secretary of State of the State of Delaware, who
will duly issue a Certificate of Merger. The Surviving
Corporation shall record said Certificate of Merger in the office
of the Clerk of the County Commission of Monongalia County. The
Merger shall become effective on the date (the "Effective Date")
and at the time (which time is hereinafter called the "Effective
Time") when such Certificate of Merger is issued by the Secretary
of State.
SECTION 3
THE BANK MERGER
---------------
3.1 The Bank Merger. At the Effective Time of the Bank
----------------
Merger (as defined in Section 3.5), subject to the provisions of
this Agreement, the Subsidiary shall merge with Fairmont, under
the charter of Fairmont. Fairmont shall be the surviving
corporation (hereinafter also called the "Surviving Bank
Corporation").
3.2 Effect of Merger. At the Effective Time, the corporate
-----------------
existence of Fairmont, with all of its purposes, powers and
objects, and all of its rights, assets, liabilities and
obligations, shall continue unaffected and unimpaired by the
Merger, and Fairmont as the Surviving Bank Corporation shall
continue to be governed by the laws of the State of West
Virginia. Fairmont as the Surviving Bank Corporation shall also
succeed to all of the rights, assets, liabilities and obligations
of the Subsidiary in accordance with the West Virginia
Corporation Act ("WVCA"). Upon the Effective Date of the Bank
Merger (as defined in Section 12.5 hereof, the separate
<PAGE> 155
existence and corporate organization of the Subsidiary shall cease.
This section shall not be construed (i) to limit the ability of
Wesbanco and its subsidiaries to terminate the employment of any
employee of the Subsidiary or to review employee benefit programs
from time to time and to make such changes as Wesbanco deems
appropriate, or (ii) to require Wesbanco or its subsidiaries to
provide employees or former employees of the Subsidiary with post-
retirement medical benefits.
3.3 Closing. Fairmont and the Subsidiary will jointly
--------
request the Secretary of State of West Virginia to issue a
Certificate of Merger on the date of the closing described in
Section 12.4 hereof (the "Closing" and the "Closing Date").
3.4 Subsidiary's Obligations. The Subsidiary shall at any
-------------------------
time, or from time to time, as and when requested by the
Surviving Bank Corporation, or by its successors and assigns,
execute and deliver, or cause to be executed and delivered in its
name by its last acting officers, or by the corresponding
officers of the Surviving Bank Corporation, all such conveyances,
assignments, transfers, deeds, or other instruments, and shall
take or cause to be taken such further or other action as the
Surviving Bank Corporation, its successors or assigns, may deem
necessary or desirable in order to evidence the transfer, vesting
or devolution of any property, right, privilege or franchise or
to vest or perfect in or confirm to the Surviving Bank
Corporation, its successors and assigns, title to and possession
of all the property, rights, privileges, powers, immunities,
franchises and interests referred to in this Agreement and
otherwise to carry out the intent and purposes hereof, all at the
expense of the Surviving Bank Corporation.
3.5 Articles of Merger. Subject to the terms and
-------------------
conditions herein provided, Articles of Merger, incorporating
this Agreement, shall be executed to comply with the applicable filing
<PAGE> 156
requirements of the WVCA at the Closing and on the Closing
Date. On the Closing Date, such Articles of Merger shall be
filed with the Secretary of State of the State of West Virginia,
who will duly issue a Certificate of Merger. The Surviving Bank
Corporation shall record said Certificate of Merger in the office
of the Clerk of the County Commission of Marion County. The
Merger shall become effective on the date (the "Effective Date")
and at the time (which time is hereinafter called the "Effective
Time") when such Certificate of Merger is issued by the Secretary
of State.
SECTION 4
ARTICLES OF INCORPORATION;
BYLAWS; BOARD OF DIRECTORS AND OFFICERS
---------------------------------------
4.1 Vandalia. The Articles of Incorporation of Vandalia,
---------
as organized, shall constitute the Articles of Incorporation of
the Surviving Corporation. The Bylaws of Vandalia as in effect
on the Effective Date shall constitute the Bylaws of the
Surviving Corporation. The directors and officers of VNC on the
Effective Date shall become the directors and officers of the
Surviving Corporation. Any vacancy in the Board of Directors or
officers may be filled in the manner provided in the Bylaws of
the Surviving Corporation. The directors and officers shall hold
office as prescribed in the Bylaws.
4.2 Fairmont. The Articles of Incorporation of Fairmont
---------
and the Bylaws of Fairmont, as in effect on the Effective Date,
shall continue as the Articles of Incorporation and Bylaws of
Fairmont until the same shall thereafter be altered, amended or
repealed in accordance with law, such Articles of Incorporation
or said Bylaws. The directors and officers of Fairmont on the
Effective Date shall continue as the directors and officers of
Fairmont after the Bank Merger and shall hold office as
prescribed in the Bylaws of Fairmont and applicable law, until their
<PAGE> 157
successors shall have been elected and shall qualify.
4.3 Fairmont Directors. Wesbanco covenants and agrees that
-------------------
as of the Effective Date it will appoint, as additional directors
of Fairmont, C. Barton Loar, Vaughn L. Kiger, Robert
D'Alessandri, John W. Fisher, II, Roger E. King and Reed J.
Tanner. Such individuals shall serve until their successors
shall have been duly elected and qualified. Wesbanco also
covenants and agrees that as of the Effective Date it will
appoint C. Barton Loar and Vaughn L. Kiger as members of the
Executive Committee of the Board of Directors of Fairmont and
covenants and agrees that it will continue to appoint or elect
said individuals to the Executive Committee of the Board for so
long as such individuals serve as Directors of Fairmont.
4.4 Wesbanco Director. Wesbanco covenants and agrees that
------------------
as of the Effective Date it will appoint, as an additional
director of Wesbanco, Reed J. Tanner. Such individual shall
serve until the next annual meeting of shareholders, and Wesbanco
shall include such person on the list of nominees for the
position of director for which the Board shall solicit proxies at
its next annual meeting of shareholders for a full three year
term.
SECTION 5
SHAREHOLDER APPROVALS
---------------------
5.1 Vandalia Shareholders' Meeting. Subject to the receipt
-------------------------------
by Vandalia of the fairness opinion described in Section 12.3(c)
hereof, Vandalia shall submit the Agreement to its shareholders
in accordance with the DCA at a meeting duly called, properly
noticed and held at the earliest practicable date (considering
the regulatory approvals required to be obtained) after the
receipt of such opinion. In connection with such meeting,
Vandalia shall send to its shareholders the Proxy Statement
referred to in Section 14.1 hereof. Subject to the fiduciary
<PAGE> 158
duties of the Board of Directors of Vandalia to Vandalia and its
shareholders, the Board of Directors of Vandalia shall recommend
a vote in favor of the Merger and shall use its best efforts to
obtain at such meeting the affirmative vote of the Vandalia
shareholders required to effectuate the transactions contemplated
by the Agreement.
5.2 VNC and Fairmont Shareholder Meetings. VNC and Fairmont
--------------------------------------
shall promptly submit the Agreement to their shareholders,
Wesbanco and FFB Corporation, for approval in accordance with the
WVCA. Wesbanco agrees to vote, or to cause the vote of, the
shares of such subsidiary corporations in favor of the proposed
transactions.
5.3 Subsidiary Shareholders Meeting. The Subsidiary shall
--------------------------------
promptly submit the Agreement to its shareholder, Vandalia, for
approval in accordance with the laws of the United States
applicable to National Banks. Vandalia agrees to vote the shares
of such subsidiary corporation in favor of the proposed
transaction.
SECTION 6
CONVERSION OF SHARES
--------------------
6.1 Conversion, Ratio and Option. The manner of converting
-----------------------------
or exchanging the shares of Vandalia, VNC and the Subsidiary
shall be as follows:
(a) Each share of Vandalia Common Stock
issued and outstanding immediately prior to the
Effective Time, except shares of Vandalia Common
Stock issued and held in treasury of Vandalia or
beneficially owned by VNC or Wesbanco, other than
in a fiduciary capacity by Wesbanco for others, and
shares as to which appraisal rights are exercised
pursuant to Section 262 of the DCA, shall by virtue
of the Merger
<PAGE> 159
and at the Effective Time of the
Merger be converted into, without action on the
part of the holder thereof, the right to receive,
the whole number of shares of Wesbanco Common Stock
equal to the Exchange Ratio into which such stock
shall have been converted by reason of the Merger,
or at the election of such holder be exchanged for
cash at the rate of $34.34 for each share of
Vandalia Common Stock. The "Exchange Ratio",
subject to any adjustment thereto made in
accordance with Subsection (c) hereof, shall be
equal to 1.2718 shares of Wesbanco Common Stock for
each share of Vandalia Common Stock. In the
absence of such an election, the shares shall be
converted into Wesbanco Common Stock at the
Exchange Ratio above provided.
(b) No fractional shares of Wesbanco Common
Stock will be issued in connection with the Merger.
In lieu thereof each stockholder of Vandalia
otherwise entitled to a fractional share of
Wesbanco will receive cash therefore in an amount
based on a value of $27.00 per whole share of
Wesbanco stock, at the time of the exchange, or at
the election of such holder, shall be entitled to
purchase the remaining fraction of such share from
Wesbanco based on such price.
(c) In the event of any change in Wesbanco
Common Stock by reason of stock dividends, split-
ups, mergers, recapitalizations, combinations,
exchanges of shares (by Wesbanco shareholders) or
the like, the type and number of shares to be
issued pursuant to Section 6.1(a) hereof
<PAGE> 160
shall be adjusted proportionately.
(d) Each outstanding warrant of Vandalia
issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and
at the Effective Time of the Merger, be converted
into, without action on the part of the holder
thereof, the right to receive $18.34 in cash.
(e) Each share of the common stock of VNC
issued and outstanding immediately prior to the
Effective Date shall, on the Effective Date of the
merger, be converted into an equal number of issued
and outstanding shares of the Surviving
Corporation.
(f) Each share of the common stock of the
Subsidiary issued and outstanding immediately prior
to the Effective Date of the Bank Merger shall, on
the Effective Date, be converted into an equal
number of issued and outstanding shares of the
Surviving Bank Corporation.
6.2 Shares Owned by Vandalia, Wesbanco or VNC. Each share
------------------------------------------
of Vandalia Common Stock issued and held in the treasury of
Vandalia or beneficially owned by Wesbanco or VNC, other than in
a fiduciary capacity, at the Effective Time of the Merger shall
be canceled and no cash or other property shall be delivered in
exchange therefore.
6.3 Exchange for Stock. On and after the Effective Date of
-------------------
the Merger, each holder of Vandalia Common Stock, upon
presentation and surrender of a certificate or certificates
therefore to the Exchange Agent (Wesbanco Bank Wheeling), shall
be entitled to receive in exchange therefore (i) a certificate or
certificates representing the number of shares of Wesbanco Common
Stock to which he or she is entitled as provided herein, and
payment in cash for any
<PAGE> 161
fractional share of common stock which he
is entitled to receive, without interest, should such shareholder
not elect to purchase the remaining fraction of such share of
common stock at the price above set forth, or, (ii) at the
election of such holder, cash in the amount of $34.34 for each
share of Vandalia Common Stock held. Until so presented and
surrendered in exchange for a certificate representing Wesbanco
Common Stock or cash as above provided, each certificate which
represented issued and outstanding shares of Vandalia Common
Stock immediately prior to the Effective Time shall be deemed for
all purposes to evidence ownership of the number of shares of
Wesbanco Common Stock into which such shares of stock have been
converted pursuant to the Merger. Until surrender of such
certificates in exchange for certificates representing the
converted stock, the holder thereof shall not receive any
dividend or other distribution payable to holders of shares of
such stock; provided, however, that upon surrender of such
certificates representing such converted stock in exchange for
certificates representing the stock into which it has been
converted, there shall be paid to the record holder of the
certificate representing Wesbanco Common Stock issued upon such
surrender, the amount of dividends or other distributions
(without interest) which theretofore became payable with respect
to the number of shares of such stock represented by the
certificate or certificates to be issued upon such surrender,
together with payment of cash for any fractional share to which
such holder is entitled, as above set forth.
6.4 Closing of Stock Transfer Books. On the Effective
--------------------------------
Date, the stock transfer books of Vandalia shall be closed, and
no shares of Vandalia Common Stock outstanding the day prior to
the Effective Date shall thereafter be transferred.
6.5 Directors' Qualifying Shares. Immediately upon
-----------------------------
completion of the mergers
<PAGE> 162
provided for above, the newly elected Directors of Fairmont shall
maintain at least the minimum number of shares of Wesbanco Common
Stock as are required to be held as directors' qualifying shares under
applicable law for membership on the Board of Directors of Fairmont.
SECTION 7
APPRAISAL RIGHTS
----------------
7.1 Subject to the rights of Wesbanco and Vandalia, as
permitted by Section 12.1(j) of the Agreement, to terminate the
Agreement and abandon the Merger in the event that the number of
Objecting Shares (as hereinafter defined) shall exceed 10% of the
shares of Vandalia issued and outstanding on the date of the
shareholders' meeting described in Sections 5.1 and 14.1 of this
Agreement and entitled to vote on this Agreement (hereinafter,
"Voting Shares"), the rights and remedies of a dissenting
shareholder under the DCA shall be afforded to any shareholder of
Vandalia who makes written demand for appraisal of his shares in
a timely manner in accordance with the DCA, and who takes the
necessary steps in a timely manner in accordance with the DCA to
perfect such shareholder's rights as a dissenting shareholder
(such shareholder being hereafter referred to as a "Dissenting
Shareholder"). The Surviving Corporation will make such payments
as are required to be made to Dissenting Shareholders in the
exercise of such rights. The term "Objecting Shares" shall mean
the shares of those holders of Vandalia stock who shall make
written demand with respect to such shares, in a timely manner in
accordance with the DCA, and shall not vote in favor of the
Agreement, in accordance with Section 262 of the DCA. The
Objecting Shares held by shareholders who do not become
Dissenting Shareholders shall be converted into Wesbanco Common
Stock in accordance with Section 6 hereof.
SECTION 8
<PAGE> 163
REPRESENTATIONS, WARRANTIES AND COVENANTS OF VANDALIA
-----------------------------------------------------
Vandalia represents and warrants to and covenants with
Wesbanco and VNC, in its own right and with respect to its wholly
owned Subsidiary, that:
8.1 Organization and Qualification of Vandalia. Vandalia is
-------------------------------------------
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the full
corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted,
and neither the ownership of its property nor the conduct of its
business requires it or its Subsidiary to be qualified to do
business in any other jurisdiction, except where the failure to
be so qualified, considering all such cases in the aggregate,
does not involve a material risk to the business, properties,
financial position or results of operations of Vandalia and its
Subsidiary taken as a whole.
8.2 Authorization of Agreement. The Board of Directors of
---------------------------
Vandalia has authorized the execution of this Agreement as set
forth herein, and subject to the approval of this Agreement by
the shareholders of Vandalia as provided in the Articles of
Incorporation and Bylaws of Vandalia and applicable Delaware law,
Vandalia has the corporate power and is duly authorized to merge
with VNC pursuant to this Agreement, and this Agreement is a
valid and binding agreement of Vandalia enforceable in accordance
with its terms, except as enforceability may be subject to
applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and
to any equitable principles limiting the right to obtain specific
performance of certain obligations thereunder.
8.3 No Violation of Other Instruments. Subject to
----------------------------------
obtaining any required consent (which consents will be obtained
by Vandalia prior to Closing), the execution and delivery of
<PAGE> 164
this Agreement do not, and the consummation of the Merger and the Bank
Merger and the transactions contemplated hereby will not, violate
any provisions of Vandalia's Articles of Incorporation or Bylaws,
or any provision of, or result in the acceleration of any
obligation under, any material mortgage, deed of trust, note,
lien, lease, franchise, license, permit, agreement, instrument,
law, order, arbitration award, judgment or decree or in the
termination of any material license, franchise, lease or permit
to which Vandalia or the Subsidiary are a party or by which they
are bound. After the approval of this Agreement by the
shareholders of the common stock of Vandalia, the Board of
Directors and the shareholders of Vandalia will have taken all
corporate action required by applicable law, the Articles of
Incorporation of Vandalia, its Bylaws or otherwise to authorize
the execution and delivery of this Agreement and to authorize the
Merger of Vandalia and VNC pursuant to this Agreement.
8.4 Financial Statements. Vandalia has delivered to
---------------------
Wesbanco copies of its consolidated statements of condition as of
December 31, 1995, 1994, and 1993 and the interim period ended
March 31, 1996, and its consolidated statements of income,
consolidated statements of changes in shareholders' equity and
consolidated statements of changes in financial position for the
three year period ended December 31, 1995, and the interim period
ended March 31, 1996, together with the notes thereto,
accompanied by an audit report relating to the financial
statements for the three years ended December 31, 1995, of Arnett
& Foster, Certified Public Accountants. Such statements,
together with the related notes to all of said financial
statements, present fairly the consolidated financial position of
Vandalia and the Subsidiary and the consolidated results of their
operations as of the dates and for the periods ended on the dates
specified in accordance with generally accepted accounting
principles consistently applied
<PAGE> 165
throughout the periods indicated,
except as may be specifically disclosed in those financial
statements, including the notes to the financial statements
attached thereto and subject to normal recurring year end
adjustments.
8.5 Subsidiary of Vandalia. The sole subsidiary
-----------------------
corporation of Vandalia is The National Bank of West Virginia,
Morgantown, West Virginia, a national banking association. Such
corporation is duly organized, validly existing, and in good
standing under the laws of the United States, and has the
requisite corporate power and authority to own and lease its
properties and to conduct its business as it is now being
conducted and is currently contemplated to be conducted.
Vandalia owns 100% of the issued and outstanding stock of such
corporation. All issued and outstanding shares of stock of the
Subsidiary have been fully paid, were validly issued and are
nonassessable.
8.6 No Action, Etc. Except as disclosed in the Disclosure
---------------
Schedule of Vandalia dated not more than 30 days from the date
hereof (the "Vandalia Disclosure Schedule"), and as supplemented
on the Effective Date, there are no suits, actions, proceedings,
claims or investigations (formal or informal) pending, or to the
knowledge of Vandalia, threatened against or relating to
Vandalia, its Subsidiary, their business or any of their
properties or against any of their officers or directors (in
their capacity as such) in law or in equity or before any
governmental agency. There are no suits, actions, proceedings,
claims or investigations against Vandalia, its Subsidiary, their
properties or against any of their officers or directors (in
their capacity as such) in law or in equity or before any
governmental agency which, individually or in the aggregate,
would, or is reasonably likely to, if determined adversely to
such party, materially adversely affect the financial condition
(present or prospective), businesses, properties or
<PAGE> 166
operations of Vandalia or its Subsidiary or the ability of Vandalia
or its Subsidiary to conduct their business as presently conducted or
to consummate the transactions contemplated hereby, and Vandalia
does not know of any basis for any such action or proceeding.
Except as disclosed in the Vandalia Disclosure Schedule, Vandalia
and its Subsidiary are not parties or subject to any cease and
desist order, agreement or similar arrangement with a regulatory
authority which restricts their operations or requires any
action, and neither Vandalia nor its Subsidiary is transacting
business in material violation of any applicable law, ordinance,
requirement, rule, regulation or order.
8.7 Capitalization. The authorized capital stock of
---------------
Vandalia consists of 1,000,000 shares of common stock, par value
of $1.00 per share, of which 282,994 shares are duly authorized,
validly issued and outstanding and are fully paid and
nonassessable as of the date hereof. There are also 32,764
warrants convertible into common stock at the exercise price of
$16.00 per share. There are no other options, warrants, calls or
commitments of any kind entitling any person to acquire, or
securities convertible into, Vandalia Common Stock, except as
provided in the Option Agreement dated the date hereof to be
issued in accordance with this Agreement. Vandalia has sufficient
authorized common stock to issue to Wesbanco if the Option
Agreement dated the date hereof is exercised by Wesbanco.
8.8 Copies of All Contracts, Leases, Etc. Vandalia has
-------------------------------------
furnished, or provided access, to Wesbanco true and complete
copies of all material contracts, leases and other agreements to
which Vandalia is a party or by which it is bound and of all
employment, pension, retirement, stock option, profit sharing,
deferred compensation, consultant, bonus, group insurance or
similar plans with respect to any of the directors, officers or
other employees of Vandalia and its
<PAGE> 167
Subsidiary. A list of all
such documents is set forth in the Vandalia Disclosure Schedule,
and as updated on the Effective Date.
8.9 Materially Adverse Contracts. Neither Vandalia nor its
-----------------------------
Subsidiary is a party to or otherwise bound by any contract,
agreement, plan, lease, license, commitment or undertaking which
is materially adverse, materially onerous or materially harmful
to Vandalia and its Subsidiary taken as a whole. There is no
breach or default by any party of or with respect to any material
provision of any material contract to which Vandalia or its
Subsidiary are a party that would have a material adverse effect
upon the financial condition, operations, results of operations,
business or prospects of Vandalia and its Subsidiary taken as a
whole.
8.10 Undisclosed Liabilities. Vandalia and its Subsidiary
------------------------
have no material liabilities other than those liabilities
disclosed on or provided for in the financial statements
delivered pursuant to Section 8.4 hereof, or as disclosed in the
Vandalia Disclosure Schedule attached hereto and made a part
hereof.
8.11 Title to Properties. Except for capitalized leases,
--------------------
liens and encumbrances not material to the property, liens and
encumbrances on property acquired by Vandalia and its Subsidiary
in foreclosure of loans and existing at the time of foreclosure,
Vandalia and its Subsidiary have good and marketable title to all
of the property, interests in properties and other assets, real
and personal, set forth in their consolidated balance sheet as of
December 31, 1995, and applicable interim period balance sheets
or acquired since the date thereof, other than property disposed
of since such dates, subject to no material liens, mortgages,
pledges, encumbrances or charges of any kind except liens
reflected on said balance sheets or set forth in the financial
statements delivered pursuant to Section 8.4 hereof, and all of
their material leases
<PAGE> 168
are in full force and effect and neither
Vandalia nor its Subsidiary is in material default thereunder.
No asset included in the financial statements referred to above
has been valued in such statements in excess of its cost less
depreciation or, in the case of investment securities, in excess
of cost, adjusted for amortization of premiums or accretion of
discounts. All material real and tangible personal property
owned by Vandalia or its Subsidiary and used or leased by
Vandalia or its Subsidiary in their business is in good
condition, normal wear and tear excepted, and is in good
operating order. All of such property is insured against loss
for at least 80% of the full replacement value thereof (less
applicable deductibles) by reputable insurance companies
authorized to transact business in the State of West Virginia.
8.12 Proxy Statement. The Proxy Statement referred to in
----------------
Section 14 or any amendment or supplement thereto mailed to the
holders of the common stock of Vandalia will not contain any
untrue statement of a material fact concerning Vandalia or omit
to state a material fact concerning Vandalia required to be
stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were
made, not misleading with respect to Vandalia, and will comply,
as to form in all material respects, with the requirements of the
United States and West Virginia securities laws and any other
applicable Blue Sky Laws.
8.13 ERISA. Except as disclosed in the Vandalia Disclosure
------
Schedule, (i) each employee benefit plan subject to Titles I
and/or IV of ERISA and established or maintained for persons
including employees or former employees of Vandalia, or its
Subsidiary, (hereinafter collectively referred to as "Plan") has
been maintained, operated, administered and funded in accordance
with its terms and with all material provisions of ERISA and the
Internal Revenue
<PAGE> 169
Code ("IRC") applicable thereto; (ii) no event
reportable under Section 4043 of ERISA has occurred and is
continuing with respect to any Plan; (iii) no liability to PBGC
has been incurred with respect to any Plan, other than for
premiums due and payable, and all premiums required to have been
paid to PBGC as of the date hereof have and as of the Effective
Date will have been paid; (iv) no Plan has been terminated, no
proceedings have been instituted to terminate any Plan, and no
decision has been made to terminate or institute proceedings to
terminate any Plan; (v) no Plan is a multi-employer Plan; (vi)
there has been no cessation of, and no decision has been made to
cease, operations at a facility or facilities where such
cessation could reasonably be expected to result in a separation
from employment of more than 20% of the total number of employees
who are participants under any plan; (vii) each Plan which is an
employee pension plan meets the requirements of "qualified plans"
under Section 401(a) of the IRC; (viii) no accumulated funding
deficiency within the meaning of Section 412 of the IRC or
Section 302 of ERISA has been incurred with respect to any Plan
subject to the funding standards of those provisions; (ix) with
respect to each Plan, there have been no prohibited transactions
as defined in Section 406 of ERISA or Section 4975 of the IRC,
and there are no actions, suits or claims with respect to the
assets thereof (other than routine claims for benefits) pending
or threatened; and (x) all required reports, descriptions and
notices (including, but not limited to, Form 5500 Annual Reports,
Summary Annual Reports and Summary Plan Descriptions) have been
appropriately filed or distributed with respect to each Plan.
8.14 Exchange Act Reports. Vandalia is not required to file
---------------------
annual or other periodic reports under the Securities Exchange
Act of 1934 (the "Act").
8.15 Labor Disputes. Neither Vandalia nor its Subsidiary is
---------------
directly or indirectly
<PAGE> 170
involved in or threatened with any labor
dispute, including, without limitation, matters regarding
discrimination by reason of race, creed, sex, handicap or
national origin, which would materially and adversely affect
their financial condition, assets, businesses or operations taken
as a whole. No collective bargaining representatives represent
any employees of Vandalia or the employees of its Subsidiary, and
no petition for election of any collective bargaining
representative has been filed and to the knowledge of Vandalia
and its Subsidiary no organizational campaign on behalf of any
collective bargaining unit has been undertaken by or on behalf of
the employees of Vandalia or its Subsidiary.
8.16 Reserve for Possible Loan Losses. The reserve for
---------------------------------
possible loan losses shown on the consolidated balance sheets of
Vandalia and its Subsidiary as of December 31, 1995, and the
interim period ending March 31, 1996, delivered pursuant to this
Agreement, which financial statements are attached to the
Vandalia Disclosure Schedule, are adequate in all material
respects as of the respective dates thereof.
8.17 Taxes. Except as disclosed in the Vandalia Disclosure
------
Schedule:
(a) Vandalia and its Subsidiary have timely
and properly filed all Federal Income Tax Returns
and all other federal, state, municipal and other
tax returns which they are required to file, either
on their own behalf or on behalf of their employees
or other persons or entities, all such returns and
reports being true and correct and complete in all
material respects, and have paid all taxes,
including penalties and interest, if any, which
have become due pursuant to such returns or reports
or forms or pursuant to assessments received by
them;
<PAGE> 171
(b) Neither the Internal Revenue Service nor
any other taxing authority is now asserting against
Vandalia or its Subsidiary, or, to its knowledge,
threatening to assert against them, or any of them,
any material deficiency or claim for additional
taxes, interest or penalty;
(c) There is no pending or, to its knowledge,
threatened examination of the Federal Income Tax
Returns of Vandalia or its Subsidiary, and, except
for tax years still subject to the assessment and
collection of additional Federal income taxes under
the three year period of limitations prescribed in
IRC Section 6501(a), no tax year of Vandalia or its
Subsidiary remains open to the assessment and
collection of additional material Federal Income
Taxes; and
(d) There is no pending or, to its knowledge,
threatened examination of the West Virginia
Business Franchise Tax Returns of Vandalia or its
Subsidiary, and, except for tax years still subject
to the assessment and collection of additional
Business Franchise Taxes under the three year
period of limitations prescribed in W.Va. Code
Annot. Section 11-10-15, no tax year of Vandalia or
its Subsidiary remains open to the assessment and
collection of additional Business Franchise Taxes.
(e) Vandalia, and its Subsidiary, have
properly accrued and reflected on their December
31, 1995, consolidated balance sheet, delivered
pursuant to Section 8.4 hereof, and have thereafter
to the date hereof properly accrued, and will from
the date hereof through the Closing Date
<PAGE> 172
properly accrue, all liabilities for taxes and assessments,
and will timely and properly file all such federal,
state, local and foreign tax returns and reports
and forms which they are required to file, either
on their own behalf or on behalf of their employees
or other persons or entities, all such returns and
reports and forms to be true and correct and
complete in all respects, and will pay or cause to
be paid when due all taxes, including penalties and
interest, if any, which have become due pursuant to
such returns or reports or forms or pursuant to
assessments received by them, all such accruals
being in the aggregate sufficient for payment of
all such taxes and assessments.
8.18 Absence of Certain Changes. Except as may be disclosed
---------------------------
in the Vandalia Disclosure Schedule, or except in connection
with the transactions contemplated by this Agreement, since
December 31, 1995:
(a) There has been no change in the material
assets, financial condition or liabilities
(contingent or otherwise), business, or results of
operations of Vandalia and its Subsidiary which has
had, or changes which in the aggregate have had, a
materially adverse effect on such material assets,
financial condition or results of operations of
Vandalia and its Subsidiary taken as a whole, nor
to their knowledge, has any event or condition
occurred which may result in such change or
changes;
(b) There has not been any material damage,
destruction or loss by reason of fire, flood,
accident or other casualty (whether insured or not
<PAGE> 173
insured) materially and adversely affecting the
assets, financial condition, business or operations
of Vandalia or its Subsidiary taken as a whole;
(c) Other than in the ordinary course of
business, neither Vandalia nor its Subsidiary has
disposed of, or agreed to dispose of, any of their
material properties or assets, nor have they leased
to others, or agreed to so lease, any of such
material properties or assets;
(d) There has not been any change in the
authorized, issued or outstanding capital stock or
warrants of Vandalia except as provided for in this
Agreement, or any material change in the
outstanding debt of Vandalia or its Subsidiary,
other than changes due to payments in accordance
with the terms of such debt or changes in deposits,
Federal funds purchased, repurchase agreements or
other short- term borrowings in the ordinary course
of business;
(e) Except as otherwise disclosed in this
Agreement, Vandalia has not granted any warrant,
option or right to acquire, or agreed to
repurchase, redeem or otherwise acquire, any shares
of its capital stock or any other of its securities
whatsoever;
(f) Vandalia and its Subsidiary have, and
shall have at Closing, personnel sufficient to
adequately staff all key positions within their
respective operations. Other than as disclosed by
Vandalia, there has not been any material increase
in the compensation or fees payable by Vandalia or
its Subsidiary to their respective directors or
officers for services in their
<PAGE> 174
capacities as such, other than increases in the regular
course of business in accordance with past practices or
the personnel policies of Vandalia or its Subsidiary,
respectively, nor any material increase in
expenditures for any bonus, insurance, pension or
other employee benefit plan, payment or arrangement
for or with any of such directors or officers other
than increases in the regular course of business in
accordance with past practices or the personnel
policies of Vandalia or its Subsidiary;
(g) Neither Vandalia nor its Subsidiary has
made any material loan or advance other than in the
ordinary course of business;
(h) Neither Vandalia nor its Subsidiary has
made any expenditure or major commitment for the
purchase, acquisition, construction or improvement
of any material asset or assets which in the
aggregate would be material other than in the
ordinary course of business;
(i) Neither Vandalia nor its Subsidiary has
entered into any other material transaction,
contract or lease or incurred any other material
obligation or liability other than in the ordinary
course of business;
(j) There has not been any other event,
condition or development of any kind which
materially and adversely affects the material
assets, financial condition or results of
operations of Vandalia or its Subsidiary, taken as
a whole, and neither Vandalia nor its Subsidiary
has knowledge of any such event, condition or
development which may materially and adversely
affect the assets, financial condition or results of
<PAGE> 175
operations of Vandalia and its Subsidiary, taken
as a whole.
8.19 Fidelity Bonds. The Subsidiary has continuously
--------------
maintained a fidelity bond insuring it against acts of dishonesty
by its officers and employees in such amounts as are required by
law and as are customary, usual and prudent for a bank of its
size. Since January 1, 1996, there have been no claims under
such bond and, except as disclosed in the Vandalia Disclosure
Schedule, neither Vandalia nor its Subsidiary is aware of any
facts which would form the basis of a claim under such bonds.
Neither Vandalia nor its Subsidiary has any reason to believe
that its fidelity coverage will not be renewed by the applicable
carrier on substantially the same terms as its existing coverage.
8.20 Negative Covenants. Except as otherwise contemplated
-------------------
hereby, between the date hereof and the Effective Date, or the
time when this Agreement terminates as provided herein, Vandalia
will not, except as contemplated by this Agreement, without the
prior written approval of Wesbanco:
(a) Make any change in its authorized capital
stock;
(b) Issue any shares of its common stock,
securities convertible into its common stock, or
any long term debt securities;
(c) Issue or grant any options, warrants or
other rights to purchase shares of its common
stock;
(d) Declare or pay any dividends or other
distributions on any shares of common stock;
(e) Purchase or otherwise acquire, or agree
to acquire, for a consideration any share of its
capital stock (other than in a fiduciary
<PAGE> 176
capacity);
(f) Except as otherwise contemplated by this
Agreement or as disclosed in or permitted by or
under the conditions set forth in Section 8.18(f)
above and except for any amendments required by
law, enter into or amend any employment, pension,
retirement, stock option, profit sharing, deferred
compensation, consultant, bonus, group insurance or
similar plan in respect of any of its directors,
officers or other employees for services in their
capacities as such or materially increase its
contribution to any pension plan, except as
disclosed in the Vandalia Disclosure Schedule,
regarding pension or retirement plans or increases
in accordance with past practices;
(g) Take any action materially and adversely
affecting the financial condition (present or
prospective), businesses, properties or operations
of Vandalia or its Subsidiary, taken as a whole;
(h) Acquire or merge with any other company
or acquire any branch or, other than in the
ordinary course of business, any assets of any
other company;
(i) Except in the ordinary course of business
as heretofore conducted, and except as hereinabove
provided, mortgage, pledge or subject to a lien or
any other encumbrance any of its material assets,
dispose of any of its material assets, incur or
cancel any material debts or claims, or increase
any compensation or benefits payable to its
officers or employees (other than as permitted in
Sections 8.18(f) and 8.20(f) hereof), except in the
<PAGE> 177
ordinary course of business as heretofore
conducted, or take any other action not in the
ordinary course of its business as heretofore
conducted or incur any material obligation or enter
into any material contract; or
(j) Amend its Articles of Incorporation or
Bylaws, except as may be necessary to carry out
this Agreement or as required by law.
8.21. Additional Covenants. Except as otherwise
---------------------
contemplated by this Agreement, Vandalia covenants and agrees:
(a) That it will promptly advise Wesbanco in
writing of the name and address of, and the number
of shares of Vandalia stock held by, each
stockholder who elects to exercise his or her
appraisal rights pursuant to Section 262 of the
DCA;
(b) Subsequent to the date of this Agreement
and prior to the Effective Date, that it will
operate its business only in the ordinary course
and in a manner consistent with past practice;
(c) To the extent consistent with the
fiduciary duties of the Board of Directors to
Vandalia and its shareholders and in compliance
with applicable law, that it will use its best
efforts to take or cause to be taken all action
required under this Agreement on its part to be
taken as promptly as practicable so as to permit
the consummation of the Merger at the earliest
possible date and to cooperate fully with the other
parties to that end;
(d) Vandalia will not, and will not permit
any person acting on behalf of Vandalia or its
Subsidiary to, directly or indirectly, initiate or
<PAGE> 178
solicit any acquisition proposal by any person,
corporation or entity. For the purposes of this
subsection, "acquisition proposal" means any
proposal to merge or consolidate with, or acquire
all or any substantial portion of the assets of,
Vandalia or its Subsidiary, or any tender or
exchange offer (or proposal to make any tender or
exchange offer) for any shares of stock of
Vandalia, or any proposal to acquire more than 5%
of the outstanding shares of stock of Vandalia or
any options, warrants or rights to acquire, or
securities convertible into or exchangeable for,
more than 5% of the outstanding shares of stock of
Vandalia. Vandalia will give Wesbanco notice by
telephone, promptly after receipt thereof, of all
material facts relating to any acquisition proposal
or any inquiry with respect to any acquisition
proposal and shall confirm such notice in writing
immediately thereafter;
(e) To promptly advise Wesbanco of any
material adverse change in the financial condition,
assets, businesses or operations of Vandalia or its
Subsidiary, taken as a whole, or any material
changes or inaccuracies in data provided to
Wesbanco pursuant to this Agreement;
(f) To maintain in full force and effect its
and its Subsidiary's present fire, casualty, public
liability, employee fidelity and other insurance
coverages or replacement insurance coverage at
substantially the same premium and insurance
levels;
(g) To cooperate with Wesbanco in furnishing
such information
<PAGE> 179
concerning the business and affairs of Vandalia, its
Subsidiary and their respective directors and officers as
is reasonably necessary or requested in order to prepare
and file any application for regulatory or governmental
approvals, including, but not limited to, an
application to the Federal Reserve Board, the
Federal Deposit Insurance Corporation and the West
Virginia Department of Banking for prior approval
of the acquisition of Vandalia by Wesbanco as
contemplated hereunder. Consistent with its
fiduciary duties, Vandalia will use its best
efforts to obtain the approval or consent of any
federal, state or other regulatory agency having
jurisdiction and of any other party to the extent
that such approvals or consents are required to
effect the Merger and the transactions contemplated
hereby or are required with respect to the
documents described in Section 8.3 hereof; and
(h) To cooperate with Wesbanco in furnishing
such information concerning the business of
Vandalia and its Subsidiary as is reasonably
necessary or requested in order to prepare and file
any Proxy Statement to be prepared in connection
with the Merger as provided in Section 14 hereof.
SECTION 9
REPRESENTATIONS, WARRANTIES AND COVENANTS OF WESBANCO AND VNC
-------------------------------------------------------------
Wesbanco and VNC represent and warrant to Vandalia and
covenant with Vandalia that:
9.1 Corporate Organization of Wesbanco and Subsidiaries.
----------------------------------------------------
Wesbanco is, and upon execution hereof VNC will be, a corporation
duly organized, validly existing and in good
<PAGE> 180
standing under the laws of the State of West Virginia, with full
corporate power and authority to carry on its business as it is now
being conducted and as contemplated by the Agreement and to own the
properties and assets which it owns, and neither the ownership of its
property nor the conduct of its business requires it, or any of
its subsidiaries, to be qualified to do business in any other
jurisdiction except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve a
material risk to the business, properties, financial position or
results of operations of Wesbanco and its subsidiaries taken as a
whole. Each of Wesbanco's subsidiaries ("Wesbanco Subs"), other
than VNC, is a West Virginia or Ohio corporation, duly organized
and validly existing in good standing under the laws of Ohio or
West Virginia, as the case may be, with full corporate power and
authority to carry on its business as it is now being conducted
and to own the properties and assets which it owns. All issued
and outstanding shares of stock of VNC and the Wesbanco Subs are
held, beneficially and of record, by Wesbanco and have been or,
as to VNC, on the date of its execution hereof, will have been,
fully paid, were validly issued and are nonassessable. There are
no options, warrants to purchase or contracts to issue, or
contracts or any other rights entitling anyone to acquire, any
other stock of VNC or any of the Wesbanco Subs or securities
convertible into shares of stock of VNC or any of the Wesbanco
Subs.
9.2 Authorization of Agreement. The Board of Directors of
---------------------------
Wesbanco has authorized the execution of this Agreement as set
forth herein, and, without further action by its Board of
Directors or shareholders, Wesbanco has the corporate power and
is duly authorized to execute and deliver this Agreement and
consummate the transactions contemplated herein, pursuant to this
Agreement, and this Agreement is a valid and binding agreement of
Wesbanco enforceable
<PAGE> 181
in accordance with its terms, except as
enforceability may be subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and to any equitable
principles limiting the right to obtain specific performance of
certain obligations thereunder. Upon execution hereof by VNC and
Fairmont and subject to the approval hereof by Wesbanco and FFB
Corporation as their sole shareholder, VNC and Fairmont have the
corporate power to execute and deliver this Agreement and have
taken all action required by law, their Articles of
Incorporation, their Bylaws or otherwise to authorize and approve
such execution and delivery, the performance of the Agreement,
the Merger, the Bank Merger and the consummation of the
transactions contemplated hereby; and this Agreement is a valid
and binding agreement of VNC and Fairmont enforceable in
accordance with its terms, except as enforceability may be
subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and to any equitable principles limiting the right to
obtain specific performance of certain obligations thereunder.
9.3 Transfer of Cash to Exchange Agent Prior to, or as of
-----------------------------------------------------
the Closing Date. Prior to, or at the Closing Date, Wesbanco
- -----------------
will deliver to the Exchange Agent, Wesbanco Bank Wheeling, for
the benefit of the shareholders and holders of the warrants of
Vandalia, an amount of cash sufficient to meet the necessary
amount of cash into which such common stock or warrants shall
have been converted pursuant to Section 6.
9.4 No Violation of Other Instruments. Subject to
----------------------------------
obtaining any required consents (which consents will be obtained
by Wesbanco prior to the Closing), the execution and delivery of
this Agreement do not, and the consummation of the Merger and the
Bank Merger and the transactions contemplated hereby will not,
violate any provision of the Articles of Incorporation
<PAGE> 182
or Bylaws of Wesbanco or any of the Wesbanco Subs or any provision
of, or result in the acceleration of any obligation under, any material
mortgage, Deed of Trust, note, lien, lease, franchise, license,
permit, agreement, instrument, law, order, arbitration award,
judgment or decree, or in the termination of any material
license, franchise, lease or permit, to which Wesbanco or any of
the Wesbanco Subs, is a party or by which they are bound.
9.5 Application for VNC. Wesbanco shall cause to be filed
--------------------
with the West Virginia Secretary of State an application to
organize and incorporate VNC as a West Virginia corporation, in
accordance with the provisions of the West Virginia Code, and
upon the approval of such application and the issuance of a
Certificate of Incorporation for VNC by the Secretary of State of
West Virginia, Wesbanco shall cause VNC and Fairmont to execute
and enter into this Agreement and cause VNC and Fairmont to take
such action as is provided in this Agreement on their part to be
taken.
9.6 Good Faith. Wesbanco shall use its best efforts in
-----------
good faith to take or cause to be taken all action required under
this Agreement on its part to be taken as promptly as practicable
so as to permit the consummation of this Agreement at the
earliest possible date and cooperate fully with the other parties
to that end.
9.7 Exchange Act Reports. Wesbanco has delivered to
---------------------
Vandalia true and correct copies of its Form 10-K (Annual Report)
for the year ended December 31, 1995, and its Form 10-Q
(Quarterly Report) for the quarter ended March 31, 1996, as filed
with the SEC, all of which were prepared and filed in accordance
with the applicable requirements and regulations of the SEC.
Wesbanco has also delivered to Vandalia true and correct copies
of all documents and reports filed by Wesbanco with the SEC
pursuant to the Exchange Act since January 1, 1996 (the
<PAGE> 183
"Wesbanco Reports"). Wesbanco has filed and will continue to file
all reports and other documents required to be filed with the SEC
pursuant to the Exchange Act in a timely manner. All of the
Wesbanco Reports complied in all material respects with the Act
and did not contain, as of their respective dates, any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light
of the circumstances under which they were made.
9.8 Subsidiaries of Wesbanco. In addition to VNC, the
-------------------------
subsidiaries of Wesbanco are Wesbanco Bank Wheeling, a West
Virginia banking corporation, Wesbanco Bank Fairmont, Inc., a
West Virginia banking corporation, FFB Corporation, a West
Virginia corporation, Wesbanco Bank South Hills, a West Virginia
banking corporation, Wesbanco Bank Parkersburg, a West Virginia
banking corporation, Wesbanco Bank Kingwood, Inc., a West
Virginia corporation, Wesbanco Bank Barnesville, an Ohio banking
corporation, and Wesbanco Mortgage Company, a West Virginia
corporation. All have the requisite corporate power and
authority to own and lease their respective properties and to
conduct their respective businesses as they are now being
conducted and are currently contemplated to be conducted.
Wesbanco owns 100% of the issued and outstanding stock of all
such corporations.
9.9 Registered Bank Holding Company. Wesbanco is a duly
--------------------------------
registered bank holding company under the Bank Holding Company
Act of 1956, as amended.
9.10 Authority to Issue Cash. The cash to be paid by
------------------------
Wesbanco pursuant to this Agreement will be duly authorized by
all necessary corporate action at the time the Merger is
consummated.
9.11 Financial Statements. Wesbanco has delivered to Vandalia copies
--------------------
of its
<PAGE> 184
consolidated balance sheets as of December 31, 1995, 1994 and
1993 and the interim period ended March 31, 1996, and its consolidated
statements of income, consolidated statements of changes in shareholders'
equity and consolidated statements of changes in financial position for
the three year period ended December 31, 1995, and the interim period ended
March 31, 1996, together with the notes thereto, accompanied by
an audit report of Price Waterhouse, independent auditors. Such
statements and the related notes to all of said financial
statements, present fairly the consolidated financial position of
Wesbanco and its consolidated subsidiaries and the consolidated
results of their operations as of the dates and for the periods
ended on the dates specified in accordance with generally
accepted accounting principles consistently applied throughout
the periods indicated, except as may be specifically disclosed in
those financial statements, including the notes to the financial
statements attached thereto, and subject to normal recurring year
end adjustments.
9.12 No Action, Etc. Except as disclosed in the Wesbanco
---------------
Disclosure Schedule, dated not more than 30 days from the date
hereof (the "Wesbanco Disclosure Schedule"), and as supplemented
on the Effective Date, there are no suits, actions, proceedings,
claims or investigations (formal or informal) pending, or to the
knowledge of Wesbanco pending or threatened, against or relating
to Wesbanco, its subsidiaries, its businesses or any of its
properties or against any of their officers or directors (in
their capacity as such) in law or in equity or before any
governmental agency. There are no suits, actions, proceedings,
claims or investigations against or relating to Wesbanco, its
subsidiaries, its businesses, its properties or against any of
their officers or directors (in their capacity as such) in law or
in equity or before any governmental agency, which, individually
or in the aggregate, would, or is reasonably likely to,
<PAGE> 185
if determined adversely to such party, materially adversely affect
the financial condition (present or prospective), businesses,
properties or operations of Wesbanco or its subsidiaries or the
ability of Wesbanco or its subsidiaries to conduct its business
as presently conducted or consummate the transaction contemplated
hereby, and Wesbanco does not know of any basis for any such
action or proceeding. Neither Wesbanco nor any of its
subsidiaries are a party or subject to any cease and desist
order, agreement or similar arrangement with a regulatory
authority which restricts its operations or requires any action
and neither Wesbanco nor any of its subsidiaries are transacting
business in material violation of any applicable law, ordinance,
requirement, rule, order or regulation.
9.13 Capitalization. The authorized capital stock of
---------------
Wesbanco consists of 25,000,000 shares of common stock, par value
of $2.0833 per share, of which 8,469,574 shares are duly
authorized, validly issued and outstanding (as of June 17, 1996)
and are fully paid and nonassessable, and 1,000,000 shares of
preferred stock, without par value, none of which are issued or
outstanding. There are no options, warrants, calls or
commitments of any kind entitling any person to acquire, or
securities convertible into, Wesbanco Common Stock, except as
disclosed on the Wesbanco Disclosure Schedule. At March 31,
1996, Wesbanco held 211,031 shares of its common stock as
treasury stock. Wesbanco has no other reserve commitments with
respect to its common stock.
Upon execution hereof by VNC, the authorized capital stock
of VNC consists of 100 shares of common stock, par value of
$25.00 per share, all of which such shares will be duly
authorized and validly issued and outstanding and will be fully
paid and nonassessable. There are no options, warrants, calls or
commitments of any kind relating to, or securities convertible
<PAGE> 186
into VNC Common Stock.
9.14 Undisclosed Liabilities. Wesbanco and the Wesbanco
------------------------
Subs have no material liabilities other than those liabilities
disclosed on or provided for in the financial statements
delivered pursuant to Section 9.11 of this Agreement, or on the
Wesbanco Disclosure Schedule.
9.15 Title to Properties. Except for capitalized leases and
--------------------
liens and encumbrances not material to the property and liens and
encumbrances on property acquired by Wesbanco Subs in foreclosure
of loans and existing at the time of foreclosure, Wesbanco and
its subsidiaries have good and marketable title to all of the
property, interest in properties and other assets, real or
personal, set forth in its consolidated balance sheet as of
December 31, 1995, and applicable interim periods, or acquired
since that date, subject to no material liens, mortgages,
pledges, encumbrances, or charges of any kind except liens
reflected on said balance sheets, and all of its leases are in
full force and effect and neither Wesbanco nor any of its
subsidiaries is in material default thereunder. No asset
included in the financial statements referred to above has been
valued in such statements in excess of cost less depreciation or,
in the case of investment securities, in excess of cost, adjusted
for amortization of premiums or accretion of discounts. All real
and tangible personal property owned by Wesbanco or its
subsidiaries and used or leased by Wesbanco or its subsidiaries,
or for its business is in good condition, normal wear and tear
excepted, and is in good operating order. All of such property
is insured against loss for at least 80% of the full replacement
value thereof (less applicable deductibles) by reputable
insurance companies authorized to transact business in the States
of West Virginia and Ohio.
9.16 Registration Statement. The Registration Statement
-----------------------
referred to in Section 14.2 of this Agreement or any amendment or
supplement thereto mailed to the holders of the common
<PAGE> 187
stock of Vandalia will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading with
respect to Wesbanco, and will comply as to form in all material
respects with the requirements of the United States and West
Virginia securities laws and any other applicable Blue Sky laws.
9.17 ERISA. Except as disclosed in the Wesbanco Disclosure
------
Schedule (i) each employee benefit plan subject to Titles I
and/or IV of ERISA and established or maintained for persons
including employees or former employees of Wesbanco, or any of
its subsidiaries, (hereinafter referred to as "Plan") has been
maintained, operated, administered and funded in accordance with
its terms and with all material provisions of ERISA and the IRC
applicable thereto; (ii) no event reportable under Section 4043
of ERISA has occurred and is continuing with respect to any Plan;
(iii) no liability to PBGC has been incurred with respect to any
Plan, other than for premiums due and payable and all premiums
required to have been paid to PBGC as of the date hereof have
been and as of the Effective Date will have been paid; (iv) other
than the termination of the defined benefit pension plans of
Wheeling Dollar Bank, First National Bank and Trust Company, Wirt
County Bank, First-Tyler Bank & Trust Company, Brooke National
Bank, First National Bank of Barnesville, Albright National Bank
and First
<PAGE> 188
Fidelity Bancorp, Inc., no Plan has been terminated, no
proceedings have been instituted to terminate any Plan, and no
decision has been made to terminate or institute proceedings to
terminate any Plan; (v) with respect to the termination of the
defined benefit pension plans of Wheeling Dollar Bank, First
National Bank and Trust Company, Wirt County Bank, First-Tyler
Bank & Trust Company, Brooke National Bank, First National Bank
of Barnesville, Albright National Bank and First Fidelity
Bancorp, Inc., all required governmental and regulatory approvals
of such terminations have been obtained, all participants in such
Plans or their beneficiaries have received single premium annuity
contracts or other benefits which will provide those participants
or beneficiaries with the retirement income calculated under the
terms and conditions of such Plans, all liabilities of such Plans
have been paid, released, discharged or merged, and any surplus
assets remaining in such Plans after satisfaction of all of its
liabilities have been recovered by Wesbanco or its subsidiaries;
(vi) neither Wesbanco nor any of its subsidiaries currently are a
participating employer in any multi-employer or multiple employer
employee benefit pension plan (including any multi-employer plans
as defined in Section 3(37) of ERISA) and, with respect to any
multi-employer or multiple employer plan in which Wesbanco or any
of its subsidiaries was a participating employer, all
contributions due from Wesbanco or any of its subsidiaries to any
such multi-employer or multiple employer plan have been timely
paid and any additional contributions due on or before the
Effective Date shall have been paid; (vii) with respect to any
multi-employer pension plan subject to the Multi-Employer Pension
Plan Amendments Act of 1980 in which Wesbanco or any of its
subsidiaries was a participating employer, neither Wesbanco nor
any of its subsidiaries have incurred or will incur any
withdrawal liability, complete or partial, under Section 4201,
4203, or 4205 of ERISA, as a consequence of discontinuing
participating in such multi-employer pension plan; (viii) there
has been no cessation of, and no decision has been made to cease,
operations at a facility or facilities where such cessation could
reasonably be expected to result in a separation from employment
of more than 20% of the total number of employees who are
participants under any Plan; (ix) each Plan which is an employee
pension plan meets the requirements of "qualified plans" under Section
<PAGE> 189
401(a) of the IRC; (x) no accumulated funding deficiency
within the meaning of Section 412 of the IRC or Section 302 of
ERISA has been incurred with respect to any Plan subject to the
funding standards of those provisions; (xi) with respect to each
Plan, there have been no prohibited transactions as defined in
Section 406 of ERISA or Section 4975 of the IRC, and there are no
actions, suits or claims with respect to the assets thereof
(other than routine claims for benefits) pending or threatened;
and (xii) all required reports, descriptions and notices
(including, but not limited to, Form 5500 Annual Reports, Summary
Annual Reports and Summary Plan Descriptions) have been
appropriately filed with the government or distributed to
participants with respect to each Plan.
9.18 Labor Disputes. Except as disclosed in the Wesbanco
---------------
Disclosure Schedule, neither Wesbanco nor any of its subsidiaries
are directly or indirectly involved in or threatened with any
labor dispute, including, without limitation, matters regarding
discrimination by reason of race, creed, sex, handicap or
national origin, which would materially and adversely effect
their financial condition, assets, businesses or operations taken
as a whole. No collective bargaining representatives represent
employees of Wesbanco, VNC or the Wesbanco Subs, and no petition
for election of any collective bargaining representative has been
filed and, to the knowledge of Wesbanco and its subsidiaries, no
organizational campaign on behalf of any collective bargaining
unit has been undertaken by or on behalf of any Wesbanco, VNC or
Wesbanco Subs employees.
9.19 Reserve for Possible Loan Losses. The reserve for
---------------------------------
possible loan losses shown on the consolidated balance sheet of
Wesbanco and its subsidiaries as of December 31, 1995, delivered
pursuant to this Agreement is adequate in all material respects
as of the date thereof.
<PAGE> 190
9.20 Taxes. Except as disclosed in the Wesbanco Disclosure
------
Schedule:
(a) Wesbanco and its subsidiaries have timely
and properly filed all Federal Income Tax Returns
and all other federal, state, municipal and other
tax returns which they are required to file, either
on their own behalf or on behalf of their employees
or other persons or entities, all such returns and
reports being true and correct and complete in all
material respects, and have paid all taxes,
including penalties and interest, if any, which
have become due pursuant to such returns or reports
or forms or pursuant to assessments received by
them;
(b) Neither the Internal Revenue Service nor
any other taxing authority is now asserting against
Wesbanco or any of its subsidiaries, or, to its
knowledge, threatening to assert against them, or
any of them, any material deficiency or claim for
additional taxes, interest or penalty;
(c) There is no pending or, to its knowledge,
threatened examination of the Federal Income Tax
Returns of Wesbanco or any of its subsidiaries,
and, except for tax years still subject to the
assessment and collection of additional federal
income taxes under the three-year period of
limitations prescribed in IRC Section 6501(a), no
tax year of Wesbanco or any of its subsidiaries
remains open to the assessment and collection of
additional material Federal Income Taxes; and
(d) There is no pending or, to its knowledge,
threatened examination of the West Virginia
Business Franchise Tax Returns of
<PAGE> 191
Wesbanco or any of its subsidiaries, and, except for tax
years still subject to the assessment and collection of
additional Business Franchise Taxes under the three-
year period of limitations prescribed in W.Va. Code
Annot. Section 11-10-15, no tax year of Wesbanco or
any of its subsidiaries remains open to the
assessment and collection of additional Business
Franchise Taxes.
(e) Wesbanco, and its subsidiaries, have
properly accrued and reflected on their December
31, 1995, consolidated balance sheet, delivered
pursuant to Section 9.11 hereof, and have
thereafter to the date hereof properly accrued, and
will, from the date hereof, through the Closing
Date, properly accrue all liabilities for taxes and
assessments, and will timely and properly file all
such federal, state, local and foreign tax returns
and reports and forms which they are required to
file, either on their own behalf or on behalf of
their employees or other persons or entities, all
such returns and reports and forms to be true and
correct and complete in all respects, and will pay
or cause to be paid when due all taxes, including
penalties and interest, if any, which have become
due pursuant to such returns or reports or forms or
pursuant to assessments received by them, all such
accruals being in the aggregate sufficient for
payment of all such taxes and assessments.
9.21 Absence of Certain Changes. Except as may be disclosed
---------------------------
in the Wesbanco Disclosure Schedule, or except in connection with
the transactions contemplated by this
<PAGE> 192
Agreement, since December 31, 1995:
(a) There has been no change in the material
assets, financial condition, liabilities
(contingent or otherwise), business or results of
operation of Wesbanco and its subsidiaries which
has had, or changes in the aggregate which have
had, a materially adverse effect on the material
assets, financial condition or results of
operations of Wesbanco, nor, to its knowledge, has
any event or condition occurred which may result in
such change or changes;
(b) There has not been any material damage,
destruction, or loss by reason of fire, flood,
accident or other casualty (whether insured or not
insured) materially and adversely affecting the
assets, financial condition, business or operations
of Wesbanco or any of its subsidiaries taken as a
whole;
(c) Other than in the ordinary course of
business, neither Wesbanco nor any of its
subsidiaries have disposed of, or agreed to dispose
of, any of their material properties or assets, nor
have they leased to others, or agreed to so lease,
any of such material properties or assets;
(d) There has not been any change in the
authorized, issued or outstanding capital stock of
Wesbanco, except as provided for in this Agreement
or as disclosed in the Wesbanco Disclosure
Schedule, or any material change in the outstanding
debt of Wesbanco or any of its subsidiaries, other
than changes due to payments in accordance with the
<PAGE> 193
terms of such debt or changes in deposits, federal
funds purchased, repurchase agreements or other
short-term borrowings in the ordinary course of
business;
(e) Except for the redemption of its Series A
8% Cumulative Convertible Preferred Stock and the
purchases of its common stock pursuant to its
previously announced stock repurchase programs,
Wesbanco has not granted any warrant, option or
right to acquire, or agreed to repurchase, redeem
or otherwise acquire, any shares of its capital
stock or any other of its securities whatsoever;
(f) Neither Wesbanco nor any of its
subsidiaries have made any material loan or advance
other than in the ordinary course of business;
(g) Neither Wesbanco nor any of its
subsidiaries has entered into any other material
transaction, contract or lease or incurred any
other material obligation or liabilities other than
in the ordinary course of business;
(h) Neither Wesbanco nor any of its
subsidiaries have made any expenditure or major
commitment for the purchase, acquisition,
construction or improvement of any material asset
or assets which in the aggregate would be material
other than in the ordinary course of business;
(i) There have not been any dividends or
other distributions declared or paid on any shares
of Wesbanco Common Stock or preferred stock of
Wesbanco which, taken in the aggregate with all other such
<PAGE> 194
distributions declared or paid in the
same tax year, exceed 50% of the after-tax income
of Wesbanco for the tax year in which paid;
(j) Business has been conducted by Wesbanco
in the ordinary course and in a manner consistent
with past practice;
(k) There has been no change in the Articles
of Incorporation or Bylaws of Wesbanco which would
in the reasonable opinion of Vandalia have a
material adverse effect on the rights of holders of
Wesbanco Common Stock; and
(l) There has not been any other event,
condition or development of any kind which
materially and adversely affects the material
assets, financial condition or results of
operations of Wesbanco or any of its subsidiaries,
and neither Wesbanco nor any of its subsidiaries
have knowledge of any such event, condition or
development which may materially and adversely
affect the material assets, financial condition or
results of operations of Wesbanco and its
subsidiaries.
9.22 Fidelity Bonds. Each of the Wesbanco Subs has
---------------
continuously maintained fidelity bonds insuring it against acts
of dishonesty by each of its officers and employees in such
amounts as are required by law and as are customary, usual and
prudent for a bank of its size. Since January 1, 1996, there
have been no claims under such bonds (except as disclosed in the
Wesbanco Disclosure Schedule) and, except as disclosed in writing
to Vandalia, neither Wesbanco nor any Wesbanco Subs are aware of
any facts which would form the basis of a claim under such bonds.
Neither Wesbanco nor any Wesbanco Subs have any reason to believe
that
<PAGE> 195
any fidelity coverage will not be renewed by their carriers
on substantially the same terms as the existing coverage.
9.23 Additional Covenants. Except as otherwise contemplated
---------------------
by this Agreement, Wesbanco covenants and agrees:
(a) That it will use its best efforts in good
faith to take, or cause to be taken all action
required under this Agreement on its part, or VNC's
or Fairmont's part, to be taken as promptly as
practicable so as to permit the consummation of the
Merger at the earliest possible date and to
cooperate fully with the other parties to that end,
and that it will, in all such efforts, give
priority to this acquisition of Vandalia;
(b) To deliver to Vandalia all Forms 10-K, 10-
Q and 8-K filed for periods ending after the date
of this Agreement within seven (7) days after the
filing of each such report with the SEC;
(c) To promptly advise Vandalia of any
material adverse change in the financial condition,
assets, businesses or operations of Wesbanco or any
of its subsidiaries, or any material changes or
inaccuracies in data provided to Vandalia pursuant
to this Agreement or any "acquisition proposal"
with respect to Wesbanco received by Wesbanco;
(d) To cooperate with Vandalia in furnishing
such information concerning the business and
affairs of Wesbanco and its subsidiaries and its
directors and officers as is reasonably necessary
or requested in order to prepare and file any
application for regulatory or governmental approvals,
<PAGE> 196
including but not limited to an
application to the Federal Reserve Board, the
Federal Deposit Insurance Corporation and the West
Virginia Department of Banking for prior approval
of the acquisition of Vandalia by Wesbanco as
contemplated hereunder. Wesbanco will use its best
efforts to obtain the approval or consent of any
federal, state or other regulatory agency having
jurisdiction and of any other party to the extent
that such approvals or consents are required to
effect the Merger and the transactions contemplated
hereby or are required with respect to the
documents described in Section 9.4 hereof; and
(e) To cooperate with Vandalia in furnishing
such information concerning the business of
Wesbanco and its subsidiaries as is reasonably
necessary or requested in order to prepare any
Proxy Statement to be prepared in connection with
the Merger.
9.24 Transfer of Securities to Exchange Agent Prior to, or
-----------------------------------------------------
as of the Closing Date. Prior to, or at the Closing Date,
- -----------------------
Wesbanco will deliver to the Exchange Agent, Wesbanco Bank
Wheeling, for the benefit of the holders of the common stock of
Vandalia, an amount of common stock of Wesbanco and cash
sufficient to meet the necessary amount of securities and cash
required pursuant to Section 6.
9.25 Authority to Issue Shares. The shares of common stock
--------------------------
of Wesbanco to be issued pursuant to this Agreement will be duly
authorized at the time the Merger is consummated. When issued
upon the terms and conditions specified in this Agreement, such
shares shall be validly issued, fully paid, and nonassessable.
The shareholders of Wesbanco have, and will have, no preemptive
rights with respect to the issuance of the shares of Wesbanco to
be authorized and issued in the transaction contemplated in this
Agreement.
<PAGE> 197
SECTION 10
INVESTIGATION
-------------
Subject to the conditions set forth in this Section 10,
prior to the Effective Time, Wesbanco and Vandalia may directly
and through their representatives, make such investigation of the
assets and business of Wesbanco and Vandalia and their
subsidiaries as each deems necessary or advisable. Wesbanco and
Vandalia and their representatives, including, without
limitation, their accountants and investment advisors, shall
have, at reasonable times after the date of execution by Wesbanco
and Vandalia hereof, full access to the premises and to all the
property, documents, material contracts, books and records of
each, and its subsidiaries, and to all documents, information and
working papers concerning each held by such party's accountants,
without interfering in the ordinary course of business of such
entity, and the officers of each will furnish to the other such
financial and operating data and other information with respect
to the business and properties of each other and their
subsidiaries as each shall from time to time reasonably request;
provided, however, that neither party shall be required to give
such access or information to the other party to the extent that
it is prohibited therefrom by rule, regulation, or order of any
regulatory body, and further provided that confidential
information of individual banking customers shall not be
photocopied or removed from the premises of such institution.
All data and information received by Wesbanco and its authorized
representatives from Vandalia and by Vandalia and its authorized
representatives from Wesbanco shall be held in strict confidence
by such party and its authorized representatives, and neither
party nor its authorized representatives will use such data or
information or disclose the same to others except with the
written permission of the other party. For a period of 30 days
after the date of execution hereof, or prior completion of the
investigation herein provided, this Agreement may be
<PAGE> 198
terminated by each such corporation if such investigation reveals to
the other any information concerning the other which in the opinion
of such corporation would have a material adverse effect on the
present or future value of the other such corporation and its
subsidiaries' assets, net worth, business or income taken as a
whole. Each such corporation shall provide prompt written notice
to the other of such decision and the matters relied on
therefore.
SECTION 11
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------
The representations and warranties included or provided
herein shall not survive the Effective Date.
SECTION 12
CONDITIONS PRECEDENT; CLOSING DATE AND EFFECTIVE DATE
-----------------------------------------------------
12.1 Conditions Precedent of Wesbanco and Vandalia. The
----------------------------------------------
consummation of this Agreement by Wesbanco and Vandalia and the
Merger is conditioned upon the following:
(a) The shareholders of Vandalia, VNC and
Fairmont shall have approved this Agreement by such
vote as required by law;
(b) The West Virginia Banking Board (i) shall
have granted its final approval of the
incorporation and organization of VNC as a West
Virginia corporation, the Merger and the Bank
Merger and (ii) shall not, within 120 days from the
date of Wesbanco's submission to the Banking Board
pursuant to West Virginia Code Section 31A-8A-
4(a), have entered an order disapproving the
acquisition of Vandalia by Wesbanco pursuant to
this Agreement;
<PAGE> 199
(c) The Secretary of State of West Virginia
shall have issued a Certificate of Incorporation
for VNC;
(d) The Board of Governors of the Federal
Reserve System shall have approved the application
of Wesbanco to acquire Vandalia; and of the Merger
of VNC pursuant to this Agreement;
(e) The Federal Deposit Insurance Corporation
shall have approved the Bank Merger of the
Subsidiary with and into Fairmont;
(f) The Registration Statement of Wesbanco
shall be effective on the date of the Closing and
all post-effective amendments filed shall have
been declared effective or shall have been
withdrawn by that date. No stop orders suspending
the effectiveness thereof shall have been issued
which remain in effect on the date of the Closing
or shall have been threatened, and no proceedings
for that purpose shall, before the Closing, have
been initiated or, to the knowledge of Wesbanco,
threatened by the SEC. All state securities and
"Blue Sky" permits or approvals required (in the
opinion of Wesbanco and Vandalia to carry out the
transaction contemplated in this Agreement) shall
have been received.
(g) No order to restrain, enjoin or otherwise
prevent the consummation of the transactions
contemplated in this Agreement shall have been
entered by any court or administrative body which
remains in effect on the date of the Closing.
(h) Wesbanco, Vandalia, VNC and Fairmont
shall have
<PAGE> 200
received, in form and substance
satisfactory to Wesbanco's and Vandalia's counsel,
all consents, federal, state, governmental,
regulatory and other approvals and permissions, and
the satisfaction of all the requirements prescribed
by law which are necessary to the carrying out of
the transactions contemplated hereby shall have
been procured, including the filing of an effective
Registration Statement with the Securities and
Exchange Commission and in addition, Wesbanco and
Vandalia shall have received any and all consents
required with respect to the documents described
pursuant to Section 8.3 and Section 9.4 hereof;
(i) All delay periods and all periods for
review, objection or appeal of or to any of the
consents, approvals or permissions required with
respect to the consummation of the Merger and the
Bank Merger and this Agreement shall have expired;
(j) Unless waived by Wesbanco and Vandalia,
the holders of not more than ten percent (10%) of
the outstanding common stock of Vandalia shall
have made written demand for appraisal rights in
accordance with DCA, not have voted in favor of the
Agreement at the special meeting of Vandalia
shareholders referred to in Section 14.1 hereof and
have otherwise exercised such rights of appraisal
pursuant to Section 262 of the DCA;
(k) On or before the Closing Date, there
shall have been received from the Internal Revenue
Service a ruling or rulings, or, at the option of
Vandalia, in lieu thereof, an opinion from counsel
for Vandalia substantially
<PAGE> 201
to the effect that for Federal Income Tax purposes:
(i) The statutory merger of
Vandalia with VNC and the statutory
merger of the Subsidiary with Fairmont
will each constitute a reorganization
within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986
("IRC"), and Wesbanco, Vandalia, VNC and
Fairmont will each be a "party to a
reorganization" as defined in IRC
Section 368(b);
(ii) No gain or loss will be
recognized by Wesbanco, Vandalia, VNC or
Fairmont as a result of the transactions
contemplated in the Agreement;
(iii) No gain or loss will be
recognized by the shareholders of
Vandalia as a result of their exchange
of Vandalia's Common Stock for
Wesbanco's Common Stock, except to the
extent any shareholder receives cash in
lieu of a fractional share or as a
dissenting shareholder;
(iv) The holding period of the
Wesbanco Common Stock received by each
holder of Vandalia Common Stock will
include the period during which the
stock of Vandalia surrendered in
exchange therefor was held, provided
such stock was a capital asset in the
hands of the holder on the date of
exchange; and
<PAGE> 202
(v) The Federal Income Tax basis
of the Wesbanco Common Stock received by
each holder of Vandalia Common Stock
will be the same as the basis of the
stock exchanged therefore.
(l) No action, proceeding, regulation or
legislation shall have been instituted before any
court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain
substantial damages with respect to, the Agreement
or the consummation of the transactions
contemplated hereby, which, in the reasonable
judgment of Wesbanco or Vandalia would make it
inadvisable to consummate such transactions (it
being understood and agreed that a written request
by governmental authorities for information with
respect to the Merger or the Bank Merger may not be
deemed by either party to be a threat of material
litigation or proceeding, regardless of whether
such request is received before or after execution
of the Agreement).
(m) The approvals referred to in
subparagraphs (b), (d) or (e) of Subsection 12.1
herein shall not have required the divestiture or
cessation of any significant part of the present
operations conducted by Wesbanco, Vandalia or any
of their subsidiaries, and shall not have imposed
any other condition, which divestiture, cessation
or condition Wesbanco reasonably deems to be
materially disadvantageous or burdensome.
12.2 Conditions Precedent of Wesbanco. The consummation of
---------------------------------
this Agreement by
<PAGE> 203
Wesbanco and the Merger is also conditioned upon the following:
(a) Unless waived by Wesbanco, the
representations and warranties of Vandalia
contained in this Agreement shall be correct on and
as of the Effective Date with the same effect as
though made on and as of such date, except for
representations and warranties expressly made only
as of a particular date and except for changes
which have been consented to by Wesbanco or which
are not, in the aggregate, material and adverse, to
the financial condition, businesses, properties or
operations of Vandalia and its Subsidiary taken as
a whole, or which are the result of expenses or
transactions contemplated or permitted by the
Agreement; and Vandalia shall have performed in all
material respects all of its obligations and
agreements hereunder theretofore to be performed by
it; and Wesbanco and VNC shall have received on the
Effective Date an appropriate certificate (in
affidavit form) dated the Effective Date and
executed on behalf of Vandalia by one or more
appropriate executive officers of Vandalia to the
effect that such officers have no knowledge of the
nonfulfillment of the foregoing condition;
(b) Opinion of Vandalia Counsel. An opinion
----------------------------
of Spilman Thomas & Battle, counsel for Vandalia,
shall have been delivered to Wesbanco, dated the
Closing Date, and in form and substance
satisfactory to Wesbanco and its counsel, to the
effect that:
(i) Vandalia is a corporation duly
organized,
<PAGE> 204
validly existing and in good
standing under the laws of the State of
Delaware and has the full corporate
power and authority to own all of its
properties and assets and to carry on
its business as it is now being
conducted, and neither the ownership of
its property nor the conduct of its
business requires it, or its Subsidiary,
to be qualified to do business in any
other jurisdiction except where the
failure to be so qualified, considering
all such cases in the aggregate, does
not involve a material risk to the
business, properties, financial position
or results of operations of Vandalia and
its Subsidiary, taken as a whole.
(ii) Vandalia has the full
corporate power to execute and deliver
the Agreement. All corporate action of
Vandalia required to duly authorize the
Agreement and the actions contemplated
thereby has been taken, and the
Agreement is valid and binding on
Vandalia in accordance with its terms,
subject, as to the enforcement of
remedies, to applicable bankruptcy,
insolvency, reorganization, fraudulent
conveyance, receivership, moratorium, or
other similar laws affecting the
enforcement of creditors' rights
generally from time to time in effect,
whether state or federal; subject to
application of the public policy of the
<PAGE> 205
State of West Virginia; and subject to
any equitable principles limiting the
right to obtain specific performance of
certain obligations thereunder, whether
such enforcement is considered in a
proceeding in equity or at law.
(iii) All shares of common
stock of Vandalia issued and
outstanding as of the Effective Date are
duly authorized, validly issued, fully
paid and nonassessable.
(iv) The consummation of the Merger
and the Bank Merger contemplated by the
Agreement will not violate any provision
of Vandalia's Articles of Incorporation
or Bylaws, or violate any provision of,
or result in the acceleration of any
material obligation under, any material
mortgage, loan agreement, order,
judgment, law or decree known to such
counsel to which Vandalia is a party or
by which it is bound and will not
violate or conflict with any other
material restriction of any kind or
character known to such counsel to which
Vandalia is subject, which would have a
materially adverse effect on the assets,
business or operations of Vandalia,
taken as a whole.
(v) Vandalia's Subsidiary is a
national banking association and is duly
organized, validly existing and in
<PAGE> 206
good standing under the laws of the United
States, and it has the requisite
corporate power and authority to own and
lease its properties and to conduct its
business as it is now being conducted.
To the best of such counsel's knowledge
Vandalia owns 100% of the issued and
outstanding stock of such corporation.
(vi) To the best of such counsel's
knowledge, as of the date hereof neither
Vandalia nor its Subsidiary was involved
in any litigation against them (with
possible exposure of $100,000.00 or
more), pending or threatened.
(c) C. Barton Loar shall have duly executed
and delivered the employment agreement with the
Subsidiary, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit A.
(d) Vandalia shall have delivered to Wesbanco
a schedule identifying all persons who may be
deemed to be "affiliates" of Vandalia under Rule
145 of the Securities Act of 1933, as amended, and
shall use its best efforts to cause each affiliate
to deliver to Wesbanco prior to the Effective Date
a letter substantially in the form attached hereto
as Exhibit "B".
(e) Vandalia shall have furnished Wesbanco
with a certified copy of resolutions duly adopted
by the Board of Directors and the shareholders of
Vandalia approving the Agreement and authorizing the
<PAGE> 207
Merger and the transactions contemplated
hereby.
(f) Unless waived by Wesbanco, on the Closing
Date, there shall not be pending against Vandalia
or its Subsidiary or the officers or directors of
Vandalia or its Subsidiary in their capacity as
such, any suit, action or proceeding which, in the
reasonable judgment of Wesbanco, if successful,
would have material adverse effect on the financial
condition or operations of Vandalia or its
Subsidiary.
(g) Vandalia shall have executed and
delivered to Wesbanco a Stockholder Agreement,
substantially in the form attached hereto as
Exhibit C, dated the date of this Agreement, and
incorporated herein by reference.
12.3 Conditions Precedent of Vandalia. The consummation of
---------------------------------
this Agreement by Vandalia and the Merger is also conditioned
upon the following:
(a) Unless waived by Vandalia the
representations and warranties of Wesbanco and VNC
contained in this Agreement shall be correct on and
as of the Effective Date with the same effect as
though made on and as of such date, except for
representations and warranties expressly made only
as of a particular date and except for changes
which have been consented to by Vandalia or which
are not in the aggregate material and adverse to
the financial condition, businesses, properties or
operations of Wesbanco and VNC or which are the
result of expenses or transactions contemplated or
permitted by this Agreement, and Wesbanco and VNC
shall have performed in all material respects all
of their obligations and
<PAGE> 208
agreements hereunder theretofore to be performed by them;
and Vandalia shall have received on the Effective Date an
appropriate certificate (in affidavit form) dated
the Effective Date and executed on behalf of
Wesbanco and VNC by one or more appropriate
executive officers of each of them to the effect
that such officers have no knowledge of the
nonfulfillment of the foregoing conditions;
(b) Opinion of Wesbanco Counsel. An opinion
of Phillips, Gardill, Kaiser & Altmeyer, counsel
for Wesbanco, shall have been delivered to
Vandalia, dated the Closing Date, and in form and
substance satisfactory to Vandalia and its counsel,
to the effect that:
(i) Wesbanco, VNC and Fairmont are
corporations duly organized, validly
existing and in good standing under the
laws of the State of West Virginia and
have the full corporate power and
authority to own all of their properties
and assets and to carry on their
businesses as they are now being
conducted, and neither the ownership of
their property nor the conduct of their
businesses require them, or any of their
subsidiaries, to be qualified to do
business in any other jurisdiction
except where the failure to be so
qualified, considering all such cases in
the aggregate, does not involve a
material risk to the business,
properties, financial position or
results of operations of
<PAGE> 209
Wesbanco, VNC and Fairmont, taken as a whole.
(ii) Wesbanco, VNC and Fairmont
have the full corporate power to execute
and deliver the Agreement. All
corporate action of Wesbanco, VNC and
Fairmont required to duly authorize the
Agreement and the actions contemplated
thereby have been taken, and the
Agreement is valid and binding on
Wesbanco, VNC and Fairmont in accordance
with its terms, subject, as to the
enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, or
other similar laws affecting the
enforcement of creditors' rights
generally from time to time in effect,
and subject to any equitable principles
limiting the right to obtain specific
performance of certain obligations
thereunder.
(iii) The consummation of the
mergers contemplated by the Agreement
will not violate any provision of
Wesbanco's, VNC's or Fairmont's Articles
of Incorporation or Bylaws, or violate
any provision of, or result in the
acceleration of any material obligation
under, any material mortgage, loan
agreement, order, judgment, law or
decree known to such counsel to which Wesbanco,
VNC or Fairmont are a party or
by which they are bound,
<PAGE> 210
and will not violate or conflict with any
other material restriction of any kind or
character known to such counsel to which
Wesbanco, VNC or Fairmont are subject
which would have a material adverse
effect on the assets, business or
operations of Wesbanco, VNC and Fairmont
taken as a whole.
(iv) Each of Wesbanco's
subsidiaries is duly organized, validly
existing and in good standing under the
laws of the state of its organization
and has the requisite corporate power
and authority to own and lease its
properties and to conduct its business
as it is now being conducted. To the
best of such counsel's knowledge,
Wesbanco owns 100% of the issued and
outstanding stock of each such
corporation.
(v) To the best of such counsel's
knowledge, as of the date hereof,
neither Wesbanco nor any of its
subsidiaries were involved in any
litigation against them (with possible
exposure of $100,000.00 or more),
pending or threatened, that has not been
disclosed to Vandalia.
(vi) The shares of Wesbanco Common
Stock to be issued to Vandalia's
shareholders pursuant to the Agreement,
when issued as described therein, will
be duly
<PAGE> 211
authorized, validly issued, fully paid and
nonassessable.
(c) Ferris Baker Watts, Inc., financial
advisors to Vandalia, shall have furnished to
Vandalia an opinion, or an updating of any opinion
rendered after the date of the Agreement, dated on
or prior to the distribution date of the Proxy
Statement described in Section 14.1 of this
Agreement, and at the election of Vandalia, updated
as of the Closing if the Closing is held more than
five (5) days after the Vandalia meeting of
shareholders, to the effect that the Merger and the
transactions contemplated by this Agreement are
fair, from a financial point of view, to Vandalia
and its shareholders.
(d) Wesbanco, VNC and Fairmont shall have
furnished Vandalia with certified copies of
resolutions duly adopted by the Boards of Directors
of Wesbanco, VNC and Fairmont and the shareholders
of VNC and Fairmont approving the Agreement and
authorizing the Merger, the Bank Merger and
transactions contemplated hereby.
(e) Unless waived by Vandalia, on the Closing
Date, there shall not be pending against Wesbanco
or any of its subsidiaries or the officers or
directors of Wesbanco or any of its subsidiaries in
their capacity as such, any suit, action or
proceeding which, in the reasonable judgment of
Vandalia, if successful, would have a material
adverse effect on the financial condition or
operations of Wesbanco or any of its subsidiaries.
<PAGE> 212
12.4 Closing Date. The Closing shall be effected as soon as
-------------
practicable after all of the conditions contained herein shall
have been satisfied on the Closing Date as defined in Section 2.3
hereof, which Closing Date shall be the latest of:
(a) The second business day after the meeting
of the shareholders of Vandalia at which the
Agreement is approved;
(b) The fifteenth (15th) day after the
approval of the acquisition of Vandalia by the
Board of Governors of the Federal Reserve System
(the "Federal Reserve Board");
(c) The fifteenth (15th) day after the
approval of the Bank Merger by the Federal Deposit
Insurance Corporation (the "FDIC");
(d) The day after any stay of the Federal
Reserve Board's approval of the acquisition of
Vandalia or the FDIC's approval of the Bank Merger
shall be vacated or shall have expired or the day
after any injunction against the closing of the
Merger or the Bank Merger shall be lifted,
discharged or dismissed;
(e) The day after the approval of the
acquisition of Vandalia by the West Virginia
Department of Banking is received by Wesbanco;
(f) The second business day after the date on
which the last condition set forth in Section 12 is
satisfied or waived;
(g) Such other date as shall be mutually
agreed to by Wesbanco and Vandalia.
The Closing shall be held in Morgantown, West Virginia, at such
time and place as the parties may agree upon. The date and time
of closing are herein called the "Closing Date". Promptly
<PAGE> 213
after the Closing, the Articles of Merger with respect to the Merger,
and the Bank Merger, shall be filed with the Secretary of State
of West Virginia.
12.5 Effective Date. The Merger, and the Bank Merger, shall
---------------
become effective (the "Effective Date") on the date on which the
Certificates of Merger approving the mergers are issued by the
Secretary of State of West Virginia and the Secretary of State of
Delaware. The surviving corporations shall record said
Certificates of Merger in the office of the Clerk of the County
Commission of Monongalia and Marion Counties.
SECTION 13
TERMINATION OF AGREEMENT
-------------------------
13.1 Grounds for Termination. This Agreement and the
------------------------
transactions contemplated hereby may be terminated at any time
prior to the Closing Date either before or after the meeting of
the shareholders of Vandalia:
(a) By mutual consent of Vandalia and
Wesbanco;
(b) By either Vandalia or Wesbanco if
any of the conditions hereto to such party's
obligations to close have not been met as of
the Closing Date and the same has not been
waived by the party adversely affected
thereby;
(c) By either Vandalia or Wesbanco if
the Merger shall violate any nonappealable
final order, decree or judgment of any court
or governmental body having competent
jurisdiction;
(d) By Vandalia or Wesbanco, if the
Closing Date has not occurred by January 31,
1997;
<PAGE> 214
(e) By Vandalia, unless waived by Vandalia,
if the Market Value of Wesbanco stock shall fall
below Twenty-five Dollars ($25.00) per share as of
the Closing Date. Market Value, for purposes of
this paragraph, shall mean the average bid price of
Wesbanco Common Stock (as quoted on Nasdaq Stock
Market) for the 30 calendar days preceding five
business days before the Closing.
(f) By either party in the event that
the shareholders of Vandalia vote against
consummation of the Merger.
(g) By Wesbanco or Vandalia within 30
days of the date hereof pursuant to the
provisions of Section 10 of this Agreement.
13.2 Effect of Terminating; Right to Proceed. In the event
----------------------------------------
this Agreement shall be terminated pursuant to Section 13.1, all
further obligations of Wesbanco and Vandalia under this
Agreement, except Sections 10, 13.1, 13.2 and 20 hereof, shall
terminate without further liability of Wesbanco and VNC to
Vandalia or of Vandalia to Wesbanco and VNC.
13.3 Return of Documents in Event of Termination. In the
--------------------------------------------
event of termination of this Agreement for any reason, Wesbanco
and Vandalia shall each promptly deliver to the other all
documents, work papers and other material obtained from each
other relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, including
information obtained pursuant to Section 10 hereof, and will take
all practicable steps to have any information so obtained kept
confidential, and thereafter, except for any breach of the
continuing sections of the Agreement, each party shall be
mutually released and discharged from
<PAGE> 215
liability to the other party or to any third parties hereunder, and
no party shall be liable to any other party for any costs or expenses
paid or incurred in connection herewith.
SECTION 14
MEETING OF SHAREHOLDERS OF VANDALIA
14.1 Subject to receipt by Vandalia of the fairness opinion
described in Section 12.3(c) hereof, Vandalia shall take all
steps necessary to call and hold a special meeting of its
shareholders, in accordance with applicable law and the Articles
of Incorporation and Bylaws of Vandalia as soon as practicable
(considering the regulatory approvals required to be obtained)
for the purpose of submitting this Agreement to its shareholders
for their consideration and approval and will send to its
shareholders for purposes of such meeting a Proxy Statement which
will not contain any untrue statement of a material fact with
respect to Vandalia or omit to state a material fact with respect
to Vandalia required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances
under which they were made, not misleading, and which otherwise
materially complies as to form with all applicable laws, rules
and regulations.
14.2 It is understood that as an integral part of the
transaction contemplated by this Agreement, Wesbanco shall file a
Registration Statement with respect to the offering of its common
shares to be issued in the Merger. The term "Registration
Statement" as used in this Agreement includes all preliminary
filings, post-effective amendments and any Proxy Statement of
Vandalia. Accordingly, Wesbanco and Vandalia agree to assist and
cooperate fully with each other in the preparation of the
Registration Statement. Both Vandalia and Wesbanco further agree
to deliver to each other, both as of the Effective Date of the
Registration Statement and as
<PAGE> 216
of the Closing, a letter, in form and substance satisfactory to the
other party and its counsel, stating that, to the best of their knowledge
and belief, all of the facts with respect to either Wesbanco or Vandalia,
as the case may be, set forth in the Registration Statement, are true
and correct in all material respects, and that the Registration
Statement does not omit any material fact necessary to make the
facts stated therein with respect to such party not misleading in
light of the circumstances under which they were made.
SECTION 15
BROKERS
-------
Vandalia represents and warrants to Wesbanco and Wesbanco
represents and warrants to Vandalia that no broker or finder has
been employed, or is entitled to a fee, commission or other
compensation, with respect to this Agreement or the transactions
contemplated hereby, other than fees due from Vandalia to Ferris
Baker Watts, Inc., its financial advisor.
<PAGE> 217
SECTION 16
GOVERNING LAW; SUCCESSORS AND
ASSIGNS; COUNTERPARTS; ENTIRE AGREEMENT
---------------------------------------
This Agreement (a) shall be governed by and construed under
and in accordance with the laws of the State of West Virginia;
(b) shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns,
provided, however, that this Agreement may not be assigned by any
party without the written consent of the other parties hereto;
(c) may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become
effective and binding as to Wesbanco and Vandalia when one or
more counterparts shall have been signed and delivered by
Wesbanco and Vandalia and shall become effective and binding as
to VNC when VNC receives its Certificate of Incorporation and its
officers execute the Agreement; and (d) embodies the entire
Agreement and understanding of the parties with respect to the
subject matter hereof; and (e) supersedes all prior agreements
and understandings, written or oral, between Vandalia and
Wesbanco relating to the subject matter hereof.
SECTION 17
EFFECT OF CAPTIONS
------------------
The captions of this Agreement are included for convenience
only and shall not in any way affect the interpretation or
construction of any of the provisions hereof.
SECTION 18
NOTICES
-------
Except as specifically provided in Section 8.21(d) hereof,
any notices or other communication required or permitted
hereunder shall be sufficiently given if delivered
<PAGE> 218
personally or sent by first class, registered or certified mail
postage prepaid, with return receipt requested addressed as follows:
To Vandalia:
Vandalia National Corporation
344 High Street
Morgantown, WV 26505
ATTENTION: C. Barton Loar, President
With a copy to:
David B. Shapiro, Esq.
Spilman Thomas & Battle
300 Kanawha Blvd. E
Charleston, WV 25302
To Wesbanco:
Wesbanco, Inc.
One Bank Plaza
Wheeling, WV 26003
ATTENTION: Edward M. George, President
With a copy to:
James C. Gardill, Esq.
Phillips, Gardill, Kaiser & Altmeyer
61 Fourteenth Street
Wheeling, WV 26003
or such other addresses as shall be furnished in writing by
either party to the other party. Any such notice or
communication shall be deemed to have been given as of the date
so mailed.
SECTION 19
AMENDMENTS
----------
Any of the terms or conditions of the Agreement may be
waived at any time by the party which is, or the shareholders of
which are, entitled to the benefit thereof, by action taken by
<PAGE> 219
the Board of Directors of such party, or any of such terms or
conditions may be amended or modified in whole or in part at any
time as follows. This Agreement may be amended in writing
(signed by all parties hereto) before or after the meeting of
Vandalia shareholders at any time prior to the Closing Date with
respect to any of the terms contained herein, provided, however,
that if amended after such meeting of shareholders, the
conversion ration per share at which each share of common stock
of Vandalia shall be converted and the cash payment per warrant
at which each warrant of Vandalia shall be converted in the
Merger and any other material terms of the Merger shall not be
amended after the meeting of Vandalia shareholders unless the
amended terms are resubmitted to the shareholders for approval.
Neither the Agreement nor any provisions hereof, may be changed,
waived, discharged or terminated orally, or by the passage of
time, except by a statement in writing signed by the party
against which the enforcement of such change, waiver, discharge
or termination is sought.
SECTION 20
EXPENSES
--------
Each party to this Agreement shall pay its own legal and
accounting fees and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby.
SECTION 21
MISCELLANEOUS
-------------
21.1 Publicity. The parties will not publicly release any
----------
information about the transactions contemplated hereby except as
they may mutually agree or as may be required by law.
<PAGE> 220
21.2 Incorporation by Reference. Any and all schedules,
---------------------------
exhibits, annexes, statements, reports, certificates or other
documents or instruments referred to herein or attached hereto
are incorporated herein by reference as though fully set forth at
the point referred to in the Agreement.
21.3 Material Adverse Change. In determining whether there
------------------------
has been a material adverse change for purposes of this
Agreement, costs and expenses of the transactions contemplated
hereby shall not be taken into account provided, however, that
only the first $100,000 of such expenses shall be so excluded.
21.4 Binding Date. This Agreement is effective and binding
-------------
as to Wesbanco and Vandalia upon the date first above written and
effective and binding as to VNC upon execution hereof by VNC.
IN WITNESS WHEREOF, WESBANCO, INC., VANDALIA NATIONAL
CORPORATION, VNC CORPORATION and WESBANCO BANK FAIRMONT, INC.
have each caused this Agreement to be executed on their behalf by
their officers thereunto duly authorized all as of the day and
year first above written.
WESBANCO, INC., a West Virginia
corporation
By /s/E.M. George
-----------------
Its President
------------
(SEAL)
ATTEST:
/s/ Shirley A. Bucan
- ------------------------
Secretary
<PAGE> 221
VANDALIA NATIONAL CORPORATION,
a Delaware corporation
By /s/ C. Barton Loar
----------------------
Its President
---------------
(SEAL)
ATTEST:
/s/ John W. Fisher, II
- -------------------------
Secretary
VNC CORPORATION, a West Virginia
corporation as of the 23rd day ofJuly, 1996.
By /s/ E.M. George
---------------------
Its President
--------------
(SEAL)
ATTEST:
/s/ Shirley A. Bucan
- -----------------------
Secretary
<PAGE> 222
WESBANCO BANK FAIRMONT, INC.,
a West Virginia corporation
By /s/ Frank R. Kerekes
------------------------
Its President
------------------
(SEAL)
ATTEST:
/s/ E. Jean Lambert
- ----------------------
Secretary
<PAGE> 223
APPENDIX III
------------
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT, dated as of July 18th, 1996, by and
among
WESBANCO, INC. (the "Acquiror"), a West Virginia corporation, and
certain stockholders of VANDALIA NATIONAL CORPORATION (the
"Company"), a Delaware corporation, named on Schedule A attached
hereto (collectively the "Stockholders" and individually
"Stockholder").
WITNESSETH: that for and in consideration of the mutual
promises and covenants hereinafter contained, the parties hereto
do hereby agree as follows:
WHEREAS, the Acquiror and the Company have entered into an
Agreement and Plan of Merger, dated as of the date hereof (the
"Agreement"), which is being executed simultaneously with the
execution of this Stockholder Agreement and provides for, among
other things, the merger of the Company with an affiliate
corporation of the Acquiror (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the
Agreement, each of the Stockholders agrees to, among other
things, vote in favor of the Agreement in their capacities as
stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements set forth herein and other good and
valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Ownership of Company Common Stock. Each Stockholder
represents and warrants that the Stockholder has or shares the
right to vote and dispose of the number of shares of common stock
of the Company, par value $1.00 per share ("Company Common
Stock"), set forth opposite such Stockholder's name on Schedule A
attached hereto.
2. Agreements of the Stockholders. Each Stockholder
covenants and agrees that:
(a) such Stockholder shall, at any
meeting of the Company's stockholders called for
the purpose, vote, or cause to be voted, all shares
of Company Common Stock in which such stockholder has
the right to vote (whether owned as of the date
hereof or hereafter acquired) in favor of the
Agreement and against any plan or proposal pursuant
to which the Company is to be acquired by or merged
with, or pursuant to which the Company proposes to
sell all or substantially all of its assets and
liabilities to, any person, entity or group (other
than the Acquiror or any affiliate thereof);
(b) except as otherwise expressly
permitted hereby, such
<PAGE> 224
Stockholder shall not, prior to the meeting of the
Company's stockholders referred to in Section 2(a)
hereof or the earlier termination of the Agreement
in accordance with its terms, sell, pledge, transfer
or otherwise dispose of the Stockholder's shares of
Company Common Stock;
(c) such Stockholder shall not in his
capacity as a stockholder of the Company directly
or indirectly encourage or solicit or hold
discussions or negotiations with, or provide any
information to, any person, entity or group (other
than the Acquiror or an affiliate thereof)
concerning any merger, sale of substantial assets
or liabilities not in the ordinary course of
business, sale of shares of capital stock or
similar transactions involving the Company or any
subsidiary of the Company (provided that nothing
herein shall be deemed to affect the ability of any
Stockholder to fulfill his duties as a director or
officer of the Company); and
(d) such Stockholder shall use his best
efforts to take or cause to be taken all action,
and to do or cause to be done all things,
necessary, proper or advisable under applicable
laws and regulations to consummate and make
effective the agreements contemplated by this
Stockholder Agreement.
3. Successors and Assigns. A Stockholder may sell,
pledge, transfer or otherwise dispose of his shares of Company
Common Stock, provided that such Stockholder obtains the prior
written consent of the Acquiror and that any acquiror of such
Company Common Stock agree in writing to be bound by the terms of
this Stockholder Agreement.
4. Termination. The parties agree and intend that this
Stockholder Agreement be a valid and binding agreement
enforceable against the parties hereto and that damages and other
remedies at law for the breach of this Stockholder Agreement are
inadequate. This Stockholder Agreement may be terminated at any
time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically
terminated in the event that the Agreement is terminated in
accordance with its terms.
5. Notices. Notices may be provided to the Acquiror and
the Stockholders in the manner specified in Section 18 of the
Agreement, with all notices to the Stockholders being provided to
them at the Company in the manner specified in such section.
6. Governing Law. This Stockholder Agreement shall be
governed by the laws of the State of West Virginia without giving
effect to the principles of conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same and each of which shall be deemed an
original.
8. Headings and Gender. The Section headings contained
herein are for reference
<PAGE> 225
purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine
gender herein shall be considered to represent the masculine, feminine
or neuter gender whenever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized
officer, and each of the Stockholders have caused this
Stockholder Agreement to be executed as of the day and year first
above written.
WESBANCO, INC.
By/s/ Edward M. George
----------------------
Its President
/s/ Vaughn L. Kiger
----------------------
VAUGHN L. KIGER
/s/ James H. Harless
----------------------
JAMES H. HARLESS
/s/ C. Barton Loar
----------------------
C. BARTON LOAR
/s/ John W. Fisher II
----------------------
JOHN W. FISHER II
/s/ Ralph E. Massullo
----------------------
RALPH E. MASSULLO
/s/ Charles S. Armistead
-------------------------
CHARLES S. ARMISTEAD
/s/ Robert D'Alessandri, M.D.
------------------------------
ROBERT D'ALESSANDRI, M.D.
/s/ Robert E. King, M.D.
------------------------
ROGER E. KING, M.D.
/s/ Reed J. Tanner, CPA
------------------------
REED J. TANNER, CPA
<PAGE> 226
SCHEDULE A
----------
NUMBER OF SHARES OF COMPANY COMMON STOCK(1)(2)
----------------------------------------------
NAME OF NUMBER OF COMMON STOCK PERCENT
STOCKHOLDER WARRANTS BENEFICIALLY OWNED OF CLASS(3)
- ------------- ---------- ------------------ ------------
Vaughn L. Kiger 3,000 3,562 2.29
James H. Harless 5,625 137,500 49.60
C. Barton Loar 4,024 6,312 3.60
John W. Fisher II 2,695 779 1.21
Ralph E. Massullo 2,875 2,500 1.88
Charles S. Armistead 4,452 6,562 3.70
Robert D'Alessandri, M.D. --- 312 *
Roger E. King, M.D. 3,281 3,187 2.26
Reed J. Tanner, CPA --- 1,249 *
(1) Does not include shares held in a fiduciary capacity by the
Bank, or by any of such shareholders.
(2) Information is presented as of July 1, 1996, and is subject
to update.
(3) Represents percentage of 282,994 shares issued and
outstanding, except with respect to individuals holding immediately
exercisable warrants to acquire shares of Common Stock, in which event
represents percentage of shares issued and outstanding plus the warrants
with respect to which such individual holds immediately exercisable warrants.
* Represents less than 1%.
<PAGE> 227
APPENDIX IV
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- ----------------------------------------------------------------------------
(in thousands, except for shares)
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks (Note 3) $ 54,163 $ 53,879
Due from banks _ interest bearing 301 297
Federal funds sold 37,230 40,370
Investment securities: (Note 5)
Held to maturity (market values of $353,760, and $375,125,respectively) 350,151 385,248
Available for sale carried at market value 172,137 202,705
- ---------------------------------------------------------------------------------------------------
Total investment securities 522,288 587,953
- ---------------------------------------------------------------------------------------------------
Loans: (Note 4) 902,378 820,949
Unearned income (8,459) (9,576)
Reserve for possible loan losses (Note 8) (13,439) (12,960)
- ---------------------------------------------------------------------------------------------------
Net loans 880,480 798,413
- ---------------------------------------------------------------------------------------------------
Bank premises and equipment (Note 9) 28,395 27,507
Accrued interest receivable 12,708 13,581
Other assets (Note 10) 13,454 10,832
- ---------------------------------------------------------------------------------------------------
Total Assets $1,549,019 $1,532,832
===================================================================================================
LIABILITIES
Deposits:
Non-interest bearing demand $ 143,872 $ 149,540
Interest bearing demand 279,217 290,082
Savings deposits 337,706 357,960
Certificates of deposit (Note 11) 494,049 457,004
- ---------------------------------------------------------------------------------------------------
Total deposits 1,254,844 1,254,586
- ---------------------------------------------------------------------------------------------------
Federal funds purchased and repurchase agreements 70,457 65,750
Short-term borrowings 1,402 4,444
Accrued interest payable 7,091 5,623
Other liabilities 8,229 8,264
- ---------------------------------------------------------------------------------------------------
Total Liabilities 1,342,023 1,338,667
- ---------------------------------------------------------------------------------------------------
Redeemable Preferred Stock (Series A, 8% Cumulative, $1.25
par value: none in 1995; 10,000 shares issued, 9,925 shares
outstanding in 1994) (Note 17) ---- 1,860
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000 shares authorized;
none outstanding ---- ----
Common stock ($2.0833 par value; 25,000,000 shares
authorized; 10,372,103 shares issued) 21,608 21,608
Capital surplus 31,237 32,447
Retained earnings 159,483 148,316
Less: Treasury stock (186,131 and 172,145 shares,respectively, at cost) (5,038) (4,735)
Market value adjustment on investments available for sale-
net of tax effect 849 (4,482)
- ---------------------------------------------------------------------------------------------------
208,139 193,154
Deferred benefits for directors and employees (1,143) (849)
- ---------------------------------------------------------------------------------------------------
Total Shareholders' Equity 206,996 192,305
- ---------------------------------------------------------------------------------------------------
Total Liabilities, Redeemable Preferred Stock and Shareholders' Equity $1,549,019 $1,532,832
===================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 228
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- -----------------------------------------------------------------------------
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $74,452 $64,906 $65,735
- ----------------------------------------------------------------------------------------------------
Interest on investment securities:
U.S. Treasury and Federal Agency securities 23,040 26,092 27,869
States and political subdivisions 7,524 8,196 8,311
Other investments 574 488 1,178
- ----------------------------------------------------------------------------------------------------
Total interest on investment securities 31,138 34,776 37,358
- ----------------------------------------------------------------------------------------------------
Other interest income 2,492 2,038 2,175
- ----------------------------------------------------------------------------------------------------
Total interest income 108,082 101,720 105,268
- ----------------------------------------------------------------------------------------------------
Interest expense:
Interest bearing demand deposits 7,936 8,173 8,989
Savings deposits 10,333 10,448 11,792
Certificates of deposit 25,134 19,082 20,997
- ----------------------------------------------------------------------------------------------------
Total interest on deposits 43,403 37,703 41,778
Other borrowings 3,167 1,957 1,949
- ----------------------------------------------------------------------------------------------------
Total interest expense 46,570 39,660 43,727
- ----------------------------------------------------------------------------------------------------
Net interest income 61,512 62,060 61,541
Provision for possible loan losses (Note 8) 2,788 6,073 3,247
- ----------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 58,724 55,987 58,294
- ----------------------------------------------------------------------------------------------------
Other income:
Trust fees 4,716 4,425 4,160
Charge card discounts and fees 1,039 922 958
Service charges and other income 5,174 5,315 5,085
Net investment securities transaction gains 437 366 164
- ----------------------------------------------------------------------------------------------------
Total other income 11,366 11,028 10,367
- ----------------------------------------------------------------------------------------------------
Other expenses:
Salaries and wages 18,272 18,711 17,622
Pension and other employee benefits (Note 14) 4,945 4,549 4,365
Net occupancy expense (Note 9) 2,672 2,625 2,663
Equipment expense 2,461 2,381 2,418
Other operating expense (Note 15) 13,780 14,574 14,805
- -----------------------------------------------------------------------------------------------------
Total other expenses 42,130 42,840 41,873
- -----------------------------------------------------------------------------------------------------
Income before provision for income taxes 27,960 24,175 26,788
Provision for income taxes (Note 16) 7,656 6,283 7,070
- -----------------------------------------------------------------------------------------------------
Net Income $20,304 $17,892 $19,718
=====================================================================================================
Earnings per share of common stock: (Note 1)
Earnings per share $1.98 $1.72 $1.88
Preferred stock dividends and discount accretion $ 164 $ 183 $ 184
Average number of shares 10,160,328 10,280,878 10,379,499
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 229
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(in thousands, except for shares)
<TABLE>
<CAPTION>
For the years ended December 31, 1995, 1994 and 1993
---------------------------------------------------------------------------------------
Market Value Deferred
Adjustment on Benefits for
Shares Common Capital Retained Treasury Investments Directors &
Outstanding Stock Surplus Earnings Stock Available for Sale Employees Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 10,385,778 $21,668 $33,136 $126,618 $(221) _ $(560) $180,641
Net Income 19,718 19,718
Cash dividends:
Common ($.785 per share) (5,178) (5,178)
Common by pooled bank
prior to acquisition (2,173) (2,173)
Preferred by pooled bank
prior to acquisition (152) (152)
Accretion of preferred stock by pooled
bank prior to acquisition (32) (32)
Common stock issued through
dividend reinvestment plan by
pooled bank prior to acquisition 11,365 23 253 276
Net treasury shares purchased (35,000) (1,102) (1,102)
ESOP borrowing (422) (422)
Principal payment on ESOP debt 225 225
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 10,362,143 21,691 33,389 138,801 (1,323) _ (757) 191,801
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 17,892 17,892
Cash dividends:
Common ($.86 per share) (7,389) (7,389)
Common by pooled bank
prior to acquisition (805) (805)
Preferred (151) (151)
Accretion of preferred stock (32) (32)
Treasury stock used for ESOP 2,000 (16) 63 47
Net treasury shares purchased
or retired (164,185) (83) (926) (3,475) (4,484)
ESOP borrowing (246) (246)
Principal payment on ESOP debt 154 154
Market value adjustment on
investments available for sale -
net of tax effect $(4,482) (4,482)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 10,199,958 21,608 32,447 148,316 (4,735) (4,482) (849) 192,305
- --------------------------------------------------------------------------------------------------------------------------------
Net Income 20,304 20,304
Cash dividends:
Common ($.96 per share) (8,139) (8,139)
Common by pooled bank
prior to acquisition (834) (834)
Preferred (138) (138)
Accretion of preferred stock (26) (26)
Treasury stock used for ESOP 3,500 96 96
Net treasury shares purchased (128,597) (3,456) (3,456)
Redemption of preferred stock 111,111 (1,210) 3,057 1,847
ESOP borrowing (129) (129)
Principal payment on ESOP debt 200 200
Deferred benefits for directors (365) (365)
Market value adjustment on
investments available for sale -
net of tax effect 5,331 5,331
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 10,185,972 $21,608 $31,237 $159,483 $(5,038) $849 $(1,143) $206,996
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
There was no activity, or outstanding balances in the Nonredeemable
Preferred Stock during the years ended December 31, 1995, 1994 and 1993.
See Note 17 for discussion on Redeemable Preferred Stock.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements
<PAGE> 230
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $20,304 $17,892 $19,718
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation 2,433 2,335 2,227
Provision for possible loan losses 2,788 6,073 3,247
Investment amortization - net 4,736 6,717 7,070
Gains on sales of investment securities - net (437) (366) (164)
Deferred income taxes 82 (107) (141)
Other - net 269 (1) (142)
Increase or decrease in assets and liabilities:
Interest receivable 873 628 1.154
Other assets (6,115) (1,095) (360)
Interest payable 1,468 (124) (797)
Other liabilities (906) 400 (545)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 25,495 32,352 31,267
- ---------------------------------------------------------------------------------------------------------------
Investing activities:
Investment securities held to maturity:
Proceeds from sales ---- ---- 5,596
Proceeds from maturities and calls 80,059 77,374 93,222
Payments for purchases (67,026) (130,584) (194,189)
Investment securities available for sale:
Proceeds from sales 59,291 67,002 31,981
Proceeds from maturities and calls 47,901 52,364 90,435
Payments for purchases (50,145) (64,917) (35,344)
Other investing activities:
Net increase in loans (85,754) (45,387) (37,084)
Net decrease in charge card loans 939 27 1,271
Purchases of premises and equipment - net (3,215) (1,547) (2,102)
- ---------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (17,950) (45,668) (46,214)
- ---------------------------------------------------------------------------------------------------------------
Financing activities:
Net increase (decrease) in certificates of deposit 37,045 14,794 (31,228)
Net increase (decrease) in demand deposits and savings accounts (36,787) (25,884) 50,927
Increase in federal funds purchased and repurchase agreements 4,707 14,524 721
Increase (decrease) in short-term borrowings (3,042) (6,010) 2,563
Net proceeds (payments) related to ESOP debt (71) 92 197
Dividends paid (8,854) (7,790) (7,059)
Purchases of treasury stock - net (3,456) (4,484) (1,102)
Other - net 57 33 (8)
- ---------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (10,401) (14,725) 15,011
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,856) (28,041) 64
Cash and cash equivalents at beginning of year 94,249 122,290 122,226
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $91,393 $94,249 $122,290
===============================================================================================================
</TABLE>
During 1995, 1994 and 1993, WesBanco paid $45,103, $39,785 and $44,523 in
interest on deposits and other borrowings and $8,113, $6,415 and $7,539 for
income taxes, respectively.
During 1995, there were 9,925 shares of preferred stock redeemed, of which
9,723 shares were exchanged for 111,111 shares of WesBanco common stock in a
non-cash transaction. The remaining 202 shares were redeemed for cash at
$190 per share and are included in other financing activities.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 231
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1: ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
WesBanco, Inc. and its subsidiary banks provide banking and trust services
primarily in the West Virginia and Eastern Ohio markets. The significant
accounting principles employed in the preparation of the accompanying
consolidated financial statements are summarized below:
Principles of consolidation:
The Consolidated Financial Statements of WesBanco, Inc. (the "Corporation")
include the accounts of the Corporation and its wholly owned subsidiaries.
Material intercompany transactions and accounts have been eliminated.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Investment securities:
Investments Held to Maturity:
Investment securities consisting principally of debt securities, which
are generally held to maturity, are stated at cost, adjusted for amortization
of premiums and accretion of discounts. These securities are purchased with
the intent and ability to hold until their maturity.
Investments Available for Sale:
U. S. Treasury and Agency debt securities with a maturity date extending
beyond three years of the purchase date, with the exception of U.S. Treasuries
from the pooled bank, mortgage backed securities, corporate securities,
obligations of state and political subdivisions held by the parent company and
marketable equity securities are classified as available for sale. These
securities may be sold at any time based upon management's assessment of
changes in economic or financial market conditions, interest rate or prepayment
risks, liquidity considerations, and other factors. These securities are
stated at market value, with the market value adjustment, net of tax, reported
as a separate component of shareholders' equity. No permanent writedowns on
these securities have been required.
Investments Available for Trading:
The Corporation did not have a trading portfolio during either of the two
years ended December 31, 1995 and 1994.
Gains and Losses:
Net realized gains and losses on sale of investment securities are
included in the statement of income. The cost of these securities sold is
based on the specific identification method.
Amortization and Accretion:
Amortization of premiums and accretion of discounts are included in
interest on investment securities in the Consolidated Statement of Income.
Loans:
Interest is accrued as earned on loans except where doubt exists as to
collectability, in which case recognition of income is discontinued. Net loan
fees and deferrable costs are not material.
The Corporation adopted Financial Accounting Standard (FAS) No. 114 (as
amended by FAS No. 118), "Accounting by Creditors for Impairment of a Loan,"
on January 1, 1995. Under the new standard, a loan is considered impaired,
based on current information and events, if it is probable that the
Corporation will be unable to collect the scheduled payments of principal and
interest when due according to the contractual terms of the loan agreement.
Reserve for possible loan losses:
The reserve for possible loan losses is maintained at a level considered
adequate by mnagement to provide for potential loan losses. The reserve is
increased by provisions charged to operating expenses and reduced by loan
losses net of recoveries. The amount of reserve is based on management's
evaluation of the loan portfolio, as well as prevailing
<PAGE> 232
and anticipated economic conditions, past loan loss experience, current
delinquency factors, changes in the character of the loan portfolio,
specific problem loans and other relevant factors.
The reserve for possible loan losses related to loans that are identified
for evaluation, in accordance with FAS No. 114, is based on discounted cash
flows using the loan's initial effective interest rate or the fair value of
the collateral for certain collateral dependent loans. If the valuation is
less than the recorded value of the loan, an impairment reserve must be
established for the difference.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Bank premises and equipment are depreciated over their
estimated useful lives using either the straight-line or an accelerated method.
Useful lives are revised when a change in life expectancy becomes apparent.
Maintenance and repairs are charged to expense and betterments are
capitalized. Gains and losses on bank premises and equipment retired or
otherwise disposed of are charged to expense when incurred.
Income taxes:
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to temporary differences between the carrying
amounts of assets and liabilities and their tax bases. In addition, such
deferred tax asset and liability amounts are adjusted for the effects of
enacted changes in tax laws or rates.
Earnings per share:
Earnings per share are calculated based upon dividing net income, less
preferred stock dividends and accretion, by the weighted average number of
shares of common stock outstanding during the year.
Trust assets and income:
Assets held by the subsidiary banks in fiduciary or agency capacities for
their customers are not included as assets in the accompanying Consolidated
Balance Sheet. Trust fees are reported on the cash basis of accounting in
accordance with customary banking practice. Reporting of trust income on an
accrual basis would not materially affect net income. Certain trust assets
are held on deposit at subsidiary banks.
Statement of cash flows:
For the purpose of reporting cash flows, cash and cash equivalents
include cash and due from banks, and federal funds sold. Generally, federal
funds are sold for one day periods.
Reclassification:
Certain amounts in prior years have been reclassified to conform with
the current year's presentation. The reclassifications had no effect on
net income.
New accounting standards to be adopted:
FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires an entity to review an asset
for impairment whenever circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is to be recognized when the sum of
expected future cash flows from the asset, on an undiscounted basis, is less
than the asset's carrying amount. The amount of the loss is measured based
on the fair value of the asset which contemplates the time value of money.
Subsequent restoration of previously recognized impairment losses is
prohibited. FAS No. 121 is effective for calendar year 1996 financial
statements. Management does not anticipate that the adoption of this
statement will have a material impact on the Corporation's consolidated
financial statements.
NOTE 2: ACQUISITIONS AND MERGERS
- -------------------------------------------------------------------------------
On February 28, 1994, WesBanco, Inc. acquired First Fidelity Bancorp, Inc.
which had total assets as of the acquisition date of approximately
$309,911,000. In accordance with terms of the merger, WesBanco issued
2,093,815 shares of common stock and 10,000 shares of redeemable preferred
stock. WesBanco
<PAGE> 233
retired and used as part of the transaction 40,000 shares of treasury stock.
The acquisition was accounted for as a pooling-of-interests and accordingly,
the consolidated financial statements include the accounts of First Fidelity
Bancorp for all periods presented. First Fidelity's dividend reinvestment
plan was replaced by the WesBanco plan following the merger.
NOTE 3: RESTRICTED CASH BALANCES
- -------------------------------------------------------------------------------
Federal Reserve regulations require depository institutions to maintain
cash reserves with the Federal Reserve Bank. The average amounts of required
reserve balances were approximately $7,618,000 and $7,190,000 during 1995 and
1994, respectively.
NOTE 4: LOANS
- -------------------------------------------------------------------------------
The following is a summary of total loans:
(in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Loans:
Commercial $176,809 $166,084
Real estate - construction 16,544 25,575
Real estate - mortgage 424,917 383,097
Installment 284,108 246,193
- -------------------------------------------------------------------------------
Total Loans $902,378 $820,949
===============================================================================
</TABLE>
Most lending is with customers who are located within the state of West
Virginia and Eastern Ohio. There is no significant concentration of credit
risk by industry or by individual borrowers, no significant exposure to highly
leveraged loan transactions, nor any foreign loans. At December 31, 1995,
loans that are considered to be impaired under FAS No. 114 were $7,291,000
(of which $5,199,000 were on a nonaccrual basis). Included in this amount was
$1,999,000 of impaired loans for which the related reserve for possible loan
losses was $334,000 and $5,292,000 of impaired loans that, as a result of
collateral values, did not require a reserve for loan losses. The average
balance of impaired loans during the year ended December 31, 1995 was
approximately $6,773,000. For the purpose of this standard, impaired loans
include all nonperforming loans. For the period ended December 31, 1995, the
interest income recognized on impaired loans did not have a material effect
on the results of operations. Loans aggregating $8,357,000, were classified as
renegotiated or nonaccrual as of December 31, 1994.
Interest and fees on loans would have been increased by approximately
$565,000, $715,000 and $593,000 for the years 1995, 1994 and 1993,
respectively, if renegotiated and nonaccrual loans had earned their stated
interest for the entire year. The amount of interest included in net
interest income from renegotiated and nonaccrual loans was $142,000,
$300,000, and $645,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
The subsidiary banks, in the ordinary course of business, grant loans to
related parties at terms which do not vary from terms that would have been
required if the transactions had been with unrelated parties. Indebtedness of
related parties aggregated approximately $46,809,000, $46,911,000 and
$43,051,697 as of December 31, 1995, 1994 and 1993, respectively. Activity
for the year ended December 31, 1995 is summarized as follows:
<PAGE> 234
(in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
<S> <C>
Balance, beginning of year $46,911
Additions 35,953
Cash payments and other reductions (36,055)
- ---------------------------------------------------------------------
Balance, end of year $46,809
=====================================================================
</TABLE>
NOTE 5: INVESTMENT SECURITIES
- -----------------------------------------------------------------------------
Effective January 1, 1994, the Corporation adopted the provisions of FAS
No. 115. Under the new rules, debt securities for which the company has both
the positive intent and ability to hold to maturity are carried at amortized
cost. Debt securities that the company does not have the positive intent and
ability to hold to maturity and all marketable equity securities are classified
as available for sale and carried at fair value. The market value adjustment
on securities classified as available for sale is carried as a separate
component of shareholders' equity. The following tables summarize amortized
cost and fair values of held to maturity and available for sale securities:
(in thousands)
<TABLE>
<CAPTION>
Held to Maturity
-------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994
-------------------------------------------- --------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
- --------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal Agency
Securities $219,719 $1,792 $384 $221,127 $244,967 $ 52 $ 7,524 $237,495
Obligations of
states and political
subdivisions 129,074 2,455 254 131,275 139,021 1,006 3,657 136,370
Other debt
securities 1,358 --- --- 1,358 1,260 --- --- 1,260
- ---------------------------------------------------------------- --------------------------------------------
Totals $350,151 $4,247 $ 638 $353,760 $385,248 $1,058 $11,181 $375,125
================================================================ ============================================
</TABLE>
<TABLE>
<CAPTION>
Available for Sale
-----------------------------------------------------------------------------------------------
December 31, 1995 December 31, 1994
---------------------------------------------- ----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Agency
Securities $156,241 $1,806 $(542) $157,505 $200,440 $285 $(7,611) $193,114
Obligations of
states and political
subdivisions 5,698 13 (44) 5,667 --- --- --- ---
US Corporate
securities 4 --- --- 4 919 1 (5) 915
Mortgage-backed
securities 6,636 19 (45) 6,610 8,113 26 (351) 7,788
Other debt
securities 24 --- --- 24 24 --- --- 24
- ----------------------------------------------------------------- ----------------------------------------------
Total debt
securities 168,603 1,838 (631) 169,810 209,496 312 (7,967) 201,841
Equity securities 2,142 190 (5) 2,327 551 317 (4) 864
- ----------------------------------------------------------------- ----------------------------------------------
Totals $170,745 $2,028 $(636) $172,137 $210,047 $629 $(7,971) $202,705
================================================================= ==============================================
</TABLE>
<PAGE> 235
The following table shows amortized cost and estimated fair value of
securities by maturity at December 31, 1995:
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------------
Held to Maturity Available for Sale
--------------------- -----------------------
Estimated Estimated
Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within one year $117,117 $117,400 $ 33,053 $ 33,112
After one year, but within five 173,662 175,927 116,873 117,899
After five years, but within ten 52,764 53,780 17,847 17,991
After ten years 6,608 6,653 2,972 3,135
- ----------------------------------------------------------------------------------------------------------------
Total $350,151 $353,760 $170,745 $172,137
================================================================================================================
</TABLE>
Mortgage-backed securities are assigned to maturity categories based on
estimated average lives. Available for sale securities in the after 10
year category include securities with no stated maturity. Securities with
prepayment provisions are categorized based on contractual maturity.
In accordance with the FASB's Special Report, "A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities," on December 29, 1995 obligations of states and political
subdivisions held by the Parent Company with a book value of $5,698,000 and a
market value of $5,667,000 were transferred from the held to maturity category
to the available for sale category.
Investment securities with par values aggregating $158,888,000 at
December 31, 1995 and $145,962,000 at December 31, 1994 were pledged to secure
public and trust funds. Gross gains of $513,000, $403,000 and $252,000 and
gross losses of $76,000, $37,000 and $88,000 were realized for the years ended
December 31, 1995, 1994 and 1993, respectively.
NOTE 6: TRANSACTIONS WITH RELATED PARTIES
- -------------------------------------------------------------------------------
Some officers and directors (including their affiliates, families and
entities in which they are principal owners) of the Corporation and its
subsidiaries are customers of those subsidiaries and have had, and are
expected to have, transactions with the subsidiaries in the ordinary course
of business. In addition, some officers and directors are also officers and
directors of corporations which are customers of the banks and have had, and
are expected to have, transactions with the banks in the ordinary course of
business. In the opinion of management, such transactions are consistent with
prudent banking practices and are within applicable banking regulations.
The amount of transactions with related parties including loans and legal
fees aggregated approximately $46,881,000 at December 31, 1995. These related
party transactions equal 25% of shareholders' equity at December 31, 1995.
NOTE 7: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
- -------------------------------------------------------------------------------
Individual banks within the Corporation incur off-balance-sheet risks in
the normal course of business in order to meet financing needs of their
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized
in the financial statements.
In the normal course of business, there are outstanding various
commitments to extend credit approximating $66,717,000 and standby letters of
credit of $10,221,000 as of December 31, 1995. The banks' exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby letters of credit
is represented by the contractual amount of those instruments. The banks use
the same credit and collateral policies in making commitments and conditional
obligations as for all other lending. Collateral which
<PAGE> 236
secures these types of commitments is the same type as collateral for other
types of lending, such as accounts receivable, inventory and fixed assets.
Commitments to extend credit are commitments to lend to a customer as
long as there is no violation of any condition established in the loan
agreement. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The banks evaluate each customer's credit worthiness on a case-by-case basis.
Standby letters of credit are conditional commitments issued by the banks
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including normal business activities, bond financing and similar transactions.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loans to customers. Collateral securing these
types of transactions is similar to collateral securing the banks' commercial
loans.
NOTE 8: RESERVE FOR POSSIBLE LOAN LOSSES
- --------------------------------------------------------------------------------
The activity in the reserve for possible loan losses is as follows:
(in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $12,960 $12,483 $11,308
Provision 2,788 6,073 3,247
Loan recoveries 793 452 614
Loan losses (3,102) (6,048) (2,686)
- --------------------------------------------------------------------------------------
Balance, end of year $13,439 $12,960 $12,483
======================================================================================
</TABLE>
NOTE 9: BANK PREMISES AND EQUIPMENT
- ------------------------------------------------------------------------------
Bank premises and equipment include: (in thousands)
<TABLE>
<CAPTION>
December 31,
Estimated ---------------------
useful life 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and improvements (3-10 years) $ 6,386 $ 6,509
Buildings and improvements (4-50 years) 30,837 30,241
Furniture and equipment (2-25 years) 18,903 17,161
- --------------------------------------------------------------------------------------
56,126 53,911
Less - Accumulated depreciation (27,731) (26,404)
- --------------------------------------------------------------------------------------
Total $28,395 $27,507
======================================================================================
</TABLE>
Note 10: OTHER ASSETS
- -------------------------------------------------------------------------------
Other Assets includes property acquired through a foreclosure proceeding,
acceptance of a deed-in-lieu of foreclosure, and loans classified as
in-substance foreclosures. In accordance with FAS No. 114, a loan is
classified as an in-substance foreclosure when the Corporation has taken
possession of the collateral. Loans previously classified as in-substance
foreclosures, which the Corporation had not taken possession of the
collateral, have been reclassified to loans. This reclassification did not
significantly impact the Corporation's financial condition. Other Real Estate
Owned, included in other assets, is carried at the lower of cost or fair
market value.
<PAGE> 237
NOTE 11: CERTIFICATES OF DEPOSIT
- -------------------------------------------------------------------------------
Maturities of certificates of deposit in denominations of $100,000 or more is
as follows: (in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------
Maturity 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Under three months $27,042 $26,607
Three to six months 6,771 10,785
Six to twelve months 6,513 6,387
Over twelve months 35,760 21,878
- -------------------------------------------------------------------------------
Total $76,086 $65,657
===============================================================================
</TABLE>
Interest expense on certificates of deposit of $100,000 or more was
approximately $4,042,000 in 1995, $2,589,000 in 1994 and $2,610,000 in 1993.
NOTE 12: ESOP AND LONG TERM BORROWINGS
- -------------------------------------------------------------------------------
The Corporation has a qualified noncontributory Employee Stock Ownership
Plan (ESOP) and Trust Agreement for the purpose of investing in the common
stock of WesBanco on behalf of its employees. Substantially all employees were
included in the ESOP plan as of January 1, 1995, with the exception of WesBanco
Weirton. Currently, the ESOP Trust holds 105,936 shares of WesBanco common
stock. Approximately 75,103 shares of stock were allocated to specific
employee accounts as of December 31, 1995.
During November 1995, the WesBanco ESOP Trust renegotiated its existing
line of credit with an affiliated lender. Conditions in the loan agreement
remain the same, providing for a line of credit in the aggregate amount of
$1,000,000 to facilitate purchases of WesBanco common stock in the open
market. The ESOP Trust utilized the line of credit during the year to
purchase an additional 5,000 shares of stock for $128,750, pledging those
shares as collateral. The loan bears interest at a rate equal to the
lender's base rate and requires annual repayments of principal equal to 20%
of the balance at January 1 of each year. The loan has a final maturity date
of 5 years from date of inception. The $1,000,000 revolving line of credit
has a balance of $777,000 and $849,000 as of December 31, 1995 and 1994,
respectively.
Total contributions to the ESOP during 1995 were $350,012, which included
cash contributions of $254,200 and an additional stock contribution valued at
$95,812. Contributions during 1994 and 1993 were $231,956 and $246,000,
respectively.
Effective January 1, 1996, WesBanco expanded the existing ESOP to include
401(k) provisions. Under the 401(k) provisions, substantially all employees
are eligible to participate. The Corporation makes matching contributions to
the 401(k), up to a maximum of 1.5% of employees' compensation, subject to
regulatory limitations.
NOTE 13: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
Fair value estimates of financial instruments are based on present value
of expected future cash flows, quoted market prices of similar financial
instruments, if available, and other valuation techniques. These valuations are
significantly affected by the discount rates, cash flow assumptions, and risk
assumptions used. Therefore, the fair value estimates may not be substantiated
by comparison to independent markets and are not intended to reflect the
proceeds that may be realizable in an immediate settlement of the instruments.
The aggregate fair value of amounts presented do not represent the
underlying value of the Corporation. Management does not have the intention
to dispose of a significant portion of its financial instruments and,
therefore, the unrealized gains or losses should not be interpreted as a
forecast of future earnings and cash flows.
<PAGE> 238
The following table represents the estimates of fair value of financial
instruments: (in thousands)
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1995 1994
------------------ -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 91,694 $ 91,694 $ 94,546 $ 94,546
Investment securities - held to maturity 350,151 353,760 385,248 375,125
Investment securities - available for sale 172,137 172,137 202,705 202,705
Net loans 880,480 892,031 798,413 790,051
Financial liabilities:
Deposits 1,254,844 1,260,075 1,254,586 1,255,707
Short-term borrowings 71,859 71,859 70,194 70,194
Redeemable preferred stock --- --- 1,860 2,627
=========================================================================================
</TABLE>
The following methods and assumptions are used to estimate the fair value of
like kinds of financial instruments:
Cash and Short-Term Investments:
The carrying amount for cash and short-term investments is a reasonable
estimate of fair value. Short-term investments consist of federal funds sold.
Investment Securities:
Fair values for investment securities are based on quoted market prices,
if available. If market prices are not available, then quoted market prices of
similar instruments are used.
Net Loans:
Fair values for loans with interest rates that fluctuate as current rates
change are generally valued at carrying amounts. The fair values for
residential mortgage loans are based on quoted market prices of securitized
financial instruments, adjusted for remaining maturity and differences in
loan characteristics. Fair values of commercial real estate, construction and
consumer loans are based on a discounted value of the estimated future cash
flows expected to be received. The current interest rates applied in the
discounted cash flow method reflect rates used to price new loans of similar
type, adjusted for relative risk and remaining maturity. The fair value of
credit cards is estimated based on the anticipated average cost of soliciting
a new account and the present credit quality of the outstanding balances. For
nonaccrual loans, fair value is estimated by discounting expected future
principal cash flows only.
Deposits:
The carrying amount is considered a reasonable estimate of fair value for
demand and savings deposits and other variable rate deposit accounts. The fair
value of fixed maturity certificates of deposit is estimated by a discounted
cash flow method using the rates currently offered for deposits of similar
remaining maturities.
Short-Term Borrowings:
For short-term borrowings, which include federal funds purchased,
repurchase agreements, and other short-term borrowings, the carrying amount
is a reasonable approximation of fair value.
Redeemable Preferred Stock:
The fair value of redeemable preferred stock is estimated using discounted
cash flow analyses based on estimated incremental borrowing rates for similar
types of arrangements.
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 credit standing of the counterparties.
The amount of fees currently charged on commitments is determined to be
insignificant and therefore the fair value and carrying value of off-balance
sheet instruments are not shown.
<PAGE> 239
NOTE 14: RETIREMENT AND BENEFIT PLANS
- -------------------------------------------------------------------------------
At December 31, 1995, substantially all employees are participants in the
WesBanco defined benefit pension plan. The plan covers those employees who
satisfy minimum age and length of service requirements. Benefits of the
WesBanco defined benefit plan are generally based on the years of service and
the employee's compensation during the last five years of employment. The
WesBanco plan's funding policy has been to contribute annually the maximum
amount that can be deducted for federal income tax purposes. Contributions
are intended to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future.
During 1995, all assets and liabilities of the First Fidelity Bancorp
defined benefit pension plan were merged into the WesBanco plan. Prior to the
merger, First Fidelity Bancorp's defined benefit plan formula used length of
service and the employee's compensation to determine benefits. Contributions
provided for benefits attributed to employee service to date and for those
benefits expected to be earned in the future.
Net periodic pension cost for the defined benefit plans in 1995, 1994 and
1993 include the following components:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during year $ 913 $ 974 $ 851
Interest cost on projected benefit obligation 1,543 1,411 1,264
Actual return on plan assets (3,714) 113 (1,854)
Net amortization and deferral 2,318 (1,506) 618
- --------------------------------------------------------------------------------------
Net periodic pension cost $ 1,060 $ 992 $ 879
======================================================================================
</TABLE>
The following table sets forth the defined benefit pension plans' funded
status and the asset reflected in the Consolidated Balance Sheet at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
December 31,
-------------------
(in thousands) 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $ 13,988 $ 13,326
Accumulated benefit obligation 15,518 14,705
======================================================================================
Projected benefit obligation $(18,092) $(19,403)
Plan assets at current market value, primarily listed
stocks, bonds and cash equivalents 21,847 17,962
- --------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected benefit obligation 3,755 (1,441)
Unrecognized prior service cost (2,309) 1,102
Unrecognized net loss (176) 634
Unrecognized obligation 40 60
- --------------------------------------------------------------------------------------
Net pension asset $ 1,310 $ 355
======================================================================================
</TABLE>
<TABLE>
<CAPTION> December 31,
------------------
1995 1994(1)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Assumptions used in the accounting for the WesBanco plan were:
Weighted average discount rates 7.5% 8.0%
Rates of increase in compensation levels 4.5% 5.0%
Weighted average expected long-term return on assets 8.75% 8.0%
- --------------------------------------------------------------------------------------
</TABLE>
(1) Assumptions used in First Fidelity Bancorp's plan were 7%, 4%, and 8.5%
for discount rates, increase in compensation levels and expected long-term
return on assets, respectively. Assumptions used in Bank of Weirton were 8.0%
and 7.25% for discount rates and 8.5% and 8.0% for expected long-term return
and assets in 1995 and 1994, respectively. The Bank of Weirton rates of
compensation increases are based on a decreasing percentage scale as age
increases.
<PAGE> 240
WesBanco currently provides a death benefit and a contributory health
insurance plan for all retirees. WesBanco's contribution toward health
insurance is a fixed amount which may be changed at its sole discretion.
During 1995, the Corporation increased its health insurance benefit from $70
to $90 per month, or 28.6%, and its death benefit from $5,000 to $7,500, or 50%.
Effective January 1, 1995, First Fidelity Bancorp was included in the
WesBanco postretirement medical and death benefit programs. First Fidelity
had no significant nonpension postretirement benefits for the years 1994 and
1993.
- -----------------------------------------------------------------------------
Net periodic postretirement benefit costs other than pension costs in 1995,
1994 and 1993 include the following components:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost _ benefits earned during year $ 71 $ 49 $ 42
Interest cost on projected benefit obligation 173 92 94
Prior service cost 57 --- ---
Net amortization and deferral --- 6 5
- ------------------------------------------------------------------------------------
Net periodic postretirement benefit cost other than pensions $301 $147 $141
====================================================================================
</TABLE>
The following table sets forth the liability reflected in the Consolidated
Balance Sheet at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
-------------------
(in thousands) 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $1,019 $ 781
Fully eligible active plan participants 1,468 481
- -----------------------------------------------------------------------------------
Total 2,487 1,262
Unrecognized prior service cost (918) ---
Unrecognized net loss (150) (69)
- -----------------------------------------------------------------------------------
Net postretirement benefit liability $1,419 $1,193
===================================================================================
Assumptions used in the accounting were:
Weighted average discount rate 7.5% 8.0%
===================================================================================
</TABLE>
Postretirement benefits are funded as incurred resulting in cash payments
of approximately $75,000, $51,000 and $50,000 for the years ended December 31,
1995, 1994 and 1993, respectively.
The Corporation's portion of the cost of health care benefits is expected
to increase during 1996. An assumption of a 1% per year increase in the
benefit level would increase the expense in health care benefits by $79,829 or
28% for the year ended 1995 and increase the accumulated postretirement
benefit obligation by $445,552 or 21% as of December 31, 1995.
NOTE 15: OTHER OPERATING EXPENSE
- -------------------------------------------------------------------------------
Other operating expenses for the years 1995, 1994 and 1993 include:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer and office supplies $ 1,291 $ 1,512 $ 1,437
Postage and freight 1,047 1,032 1,003
Legal and accounting fees 998 1,124 1,036
Marketing media 1,303 1,125 1,133
Miscellaneous taxes 1,787 1,735 1,687
FDIC Insurance 1,462 2,865 2,837
Other 5,892 5,181 5,672
- -------------------------------------------------------------------------------
Total $13,780 $14,574 $14,805
===============================================================================
</TABLE>
<PAGE> 241
NOTE 16: INCOME TAXES
- -------------------------------------------------------------------------------
Pre-tax income from operations for the years ended December 31, 1995, 1994
and 1993 was $27,960,000, $24,175,000 and $26,788,000, respectively. A
reconciliation of the federal statutory tax rate to the reported effective tax
rate is as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35% 35% 35%
Tax-exempt interest income from securities of
states and political subdivisions (9) (11) (11)
State income taxes 3 3 3
Other - net (2) (1) (1)
- --------------------------------------------------------------------------------
Effective tax rate 27% 26% 26%
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The provision for income taxes in the Consolidated Statement of Income
consists of the following: (in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current - Federal $6,363 $5,427 $6,123
State 1,208 963 1,089
Deferred - Federal 87 (106) (251)
State (2) (1) 110
- --------------------------------------------------------------------------------
Total $7,656 $6,283 $7,071
================================================================================
Tax expense applicable to securities transactions $ 174 $ 142 $ 64
================================================================================
</TABLE>
The Corporation's Federal and State income tax returns have been examined
through 1990 with no significant adjustments proposed by the Internal Revenue
Service or the State Tax Department. At December 31, 1995, the Corporation
has credits for prior year minimum taxes of approximately $1,321,000
available in future years to reduce regular taxes payable.
<PAGE> 242
Deferred tax assets and liabilities are comprised of the following at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reserve for possible loan losses $4,532 $4,105
Tax effect of market value adjustment on
investment securities available for sale --- 2,860
Postretirement and pension expense 84 356
Deferred compensation 355 419
Other 33 52
- -----------------------------------------------------------------------------
Gross deferred tax assets 5,004 7,792
- -----------------------------------------------------------------------------
Deferred tax liabilities:
Tax effect of market value adjustment on
investment securities available for sale 542 ---
Depreciation 925 802
Purchase accounting adjustments 167 161
Accretion on investments 136 82
Postretirement and pension expense --- ---
Other 257 283
- -----------------------------------------------------------------------------
Gross deferred tax liabilities 2,027 1,328
- -----------------------------------------------------------------------------
Deferred tax asset valuation allowance --- ---
- -----------------------------------------------------------------------------
Net deferred tax assets $2,977 $6,464
=============================================================================
</TABLE>
NOTE 17: REDEEMABLE PREFERRED STOCK
- -------------------------------------------------------------------------------
On February 28, 1994, in connection with the acquisition of First Fidelity
Bancorp, Inc., WesBanco issued 10,000 shares of redeemable preferred stock.
During 1994, 75 shares were purchased and retired.
Effective November 15, 1995, WesBanco redeemed its Series A 8% Cumulative
Preferred Stock. The holders of the preferred stock had the right to elect to
convert the preferred stock to common stock, $2.0833 par value, at the
conversion ratio of 11.43 shares of common stock for each share of preferred
stock or cash in the amount of $190 per share. Periodic accretion using the
straight-line method increased the value of the stock to the redemption price
of $190 per share. The accretion was charged against retained earnings. The
holders of 9,723 shares elected to convert their preferred shares to common
shares resulting in the issuance of 111,111 shares held in treasury. A total
of 202 shares were redeemed for cash.
<PAGE> 243
NOTE 18: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Presented below are the condensed Balance Sheet, Statement of Income and
Statement of Cash Flows for the Parent Company: (in thousands)
<TABLE>
<CAPTION>
BALANCE SHEET
December 31,
--------------------
1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 2,543 $ 1
Investment in subsidiary banks (at equity in net assets) 189,799 185,683
Investment securities:
Held to maturity (market values of $0 and $6,603, respectively) --- 6,795
Available for sale carried at market value 7,994 2,621
Dividends receivable 9,750 2,000
Other assets 205 151
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $210,291 $197,251
==========================================================================================
LIABILITIES
Long-term borrowings (Note 12) $ 777 $ 849
Other liabilities 2,518 2,237
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,295 3,086
REDEEMABLE PREFERRED STOCK --- 1,860
TOTAL SHAREHOLDERS' EQUITY 206,996 192,305
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY $210,291 $197,251
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
For the years ended December 31,
---------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME:
Dividends from subsidiary banks $20,500 $13,550 $13,464
Income from investments 361 273 134
Other income 312 22 2
- -------------------------------------------------------------------------------------------
TOTAL INCOME 21,173 13,845 13,600
- -------------------------------------------------------------------------------------------
TOTAL EXPENSES 809 842 719
- -------------------------------------------------------------------------------------------
Income before income tax benefit and undistributed
net income of subsidiary banks 20,364 13,003 12,881
Income tax benefit 145 303 396
- -------------------------------------------------------------------------------------------
Income before undistributed net income of subsidiary banks 20,509 13,306 13,277
Undistributed net income (excess dividends) of subsidiary banks (205) 4,586 6,441
- -------------------------------------------------------------------------------------------
NET INCOME $20,304 $17,892 $19,718
===========================================================================================
</TABLE>
<PAGE> 244
NOTE 18: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
For the years ended December 31,
-----------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net Income $20,304 $17,892 $19,718
Undistributed (net income) excess dividends of subsidiary banks 205 (4,586) (6,441)
Increase in other assets (7,795) (154) (425)
Other-net (163) (7) (242)
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,551 13,145 12,610
- ------------------------------------------------------------------------------------------------
Investing activities:
Investments available for sale:
Proceeds from sales 2,267 31 1,001
Proceeds from maturities and calls 852 5,983 3,992
Payments for purchases (1,671) (6,835) (6,072)
Investments held to maturity:
Proceeds from maturities and calls 1,883 314 1,053
Payments for purchases (1,848) (4,471) (2,461)
- ------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 1,483 (4,978) (2,487)
- ------------------------------------------------------------------------------------------------
Financing activities:
Principal payments on ESOP related debt (200) (154) (225)
Proceeds from ESOP related borrowings 129 246 422
Purchases of treasury stock - net (3,456) (4,484) (1,102)
Dividends paid (8,022) (6,984) (6,279)
Other 57 33 (292)
- ------------------------------------------------------------------------------------------------
Net cash used by financing activities (11,492) (11,343) (7,476)
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 2,542 (3,176) 2,647
Cash at beginning of year 1 3,177 530
- ------------------------------------------------------------------------------------------------
Cash at end of year $ 2,543 $ 1 $ 3,177
================================================================================================
</TABLE>
During 1995 there were 9,925 shares of Preferred Stock redeemed. Of these
shares, 9,723 shares were exchanged for 111,111 shares of WesBanco common
stock in a non-cash transaction. The remaining 202 shares were redeemed for
cash at $190 per share and are included in other financing activities.
The operations of the subsidiary banks are subject to Federal and state
statutes which limit the banks' ability to pay dividends or otherwise transfer
funds to the Parent Company. At December 31, 1995 the banks, without prior
approval from the regulators, could have distributed dividends of approximately
$8,849,000.
NOTE 19: SUBSEQUENT EVENT - COMPLETED MERGER
- -------------------------------------------------------------------------------
On August 30, 1996, WesBanco consummated its acquisition of the Bank of
Weirton through the merger of Bank of Weirton into WesBanco Bank Wheeling, an
affiliate of WesBanco. In connection with the transaction,WesBanco exchanged
130 shares of WesBanco's common stock for each share of Weirton's common stock
outstanding in a tax free exchange. A total of 1,690,000 common shares were
issued in the transaction. The merger, which is based on a fixed exchange
ratio, was accounted for as a pooling-of-interests. Accordingly, the
consolidated financial statements include the accounts of Bank of Weirton
for all periods presented.
<PAGE> 245
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements and the information pertaining to those
statements are the responsibility of management. The financial statements
have been prepared in conformity with generally accepted accounting
principles, applied on a consistent basis.
The accounting systems of the Corporation and its subsidiaries include
internal controls and procedures which provide reasonable assurance as to the
reliability of the financial records. Internal control systems are generally
supported by written policies and procedures. The internal auditing staff
systematically performs audits of operations, reviews procedures, monitors
adherence to bank policies and submits written audit reports to the Audit
Committee. The Audit Committee of the Board of Directors is composed of only
outside directors. The Audit Committee meets regularly with management,
internal audit and our independent accountants to review accounting, auditing
and financial matters. The internal auditors, Federal and State examiners,
and Price Waterhouse LLP have full access to the Audit Committee to discuss
any appropriate matters.
Independent accountants provide an objective review of management's
discharge of its financial responsibilities relating to the preparation of the
financial statements. The independent accountant's report is based on an audit
in accordance with generally accepted auditing standards. This report
expresses an informed judgement as to whether management's financial
statements present fairly, in conformity with generally accepted accounting
principles, the Corporation's financial position, results of operations and
cash flows.
<PAGE> 246
Report of Independent Accountants
To the Shareholders and Board of Directors of WesBanco, Inc.
In our opinion, based upon our audits and the reports of other
auditors, the accompanying consolidated balance sheets and the
related statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the
financial position of WesBanco, Inc., and its subsidiaries (the
Corporation) at December 31, 1995 and 1994, the results of its
operations and its cash flows for each of the 3 years in the
period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Corporation's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial
statements of First Fidelity Bancorp, Inc. for 1993, which
statements reflect net interest income of $13,913,000 for the
year ended December 31, 1993. Those statements were audited by
other auditors whose report thereon has been furnished to us, and
our opinion expressed herein, insofar as it relates to the
amounts included for First Fidelity Bancorp, Inc. for 1993 is
based solely on the report of other auditors. As described in
Note 19, on August 30, 1996, the Corporation merged with Bank of
Weirton in a transaction accounted for as a pooling of interests.
The accompanying financial statements give retroactive effect to
the merger of the Corporation with Bank of Weirton. We did not
audit the financial statements of the Bank of Weirton which
statements reflect total assets of $177,226,000 and $181,864,000
at December 31, 1995 and 1994, respectively, and net interest
income of $5,483,000, $5,664,000 and $5,268,000 for each of the
years ended December 31, 1995, 1994 and 1993, respectively. Those
statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Bank of Weirton
is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits and the reports of other auditors provide a reasonable
basis for the opinion expressed above.
As discussed in Note 1 and Note 5, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 114, (as
amended by SFAS No. 118), "Accounting by Creditors for Impairment
of a Loan," and SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," during 1995 and 1994,
respectively.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
January 25, 1996, except as to Note 19, the pooling of
interests with Bank of Weirton, which is as of August 30, 1996.
<PAGE> 247
WESBANCO, INC.
CONDENSED QUARTERLY STATEMENT OF INCOME
- -----------------------------------------------------------------------------
(in thousands, except for earnings per share)
<TABLE>
<CAPTION>
1995 Quarter ended
--------------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $26,102 $26,940 $27,133 $27,907 $108,082
Interest expense 10,980 11,536 11,804 12,250 46,570
- --------------------------------------------------------------------------------------------------
Net interest income 15,122 15,404 15,329 15,657 61,512
Provision for possible loan losses 381 472 834 1,101 2,788
- --------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 14,741 14,932 14,495 14,556 58,724
Other income 2,958 2,986 2,766 2,656 11,366
Other expenses 10,421 10,660 10,229 10,820 42,130
- --------------------------------------------------------------------------------------------------
Income before income taxes 7,278 7,258 7,032 6,392 27,960
Provision for income taxes 2,092 2,029 1,985 1,550 7,656
- --------------------------------------------------------------------------------------------------
Net Income $ 5,186 $ 5,229 $ 5,047 $ 4,842 $ 20,304
==================================================================================================
Earnings per share of common stock $ .50 $ .51 $ .49 $ .48 $ 1.98
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1994 Quarter ended
----------------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $24,869 $25,523 $25,582 $25,746 $101,720
Interest expense 9,692 9,748 9,893 10,327 39,660
- ---------------------------------------------------------------------------------------------------
Net interest income 15,177 15,775 15,689 15,419 62,060
Provision for possible loan losses 711 433 4,382 547 6,073
- ---------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 14,466 15,342 11,307 14,872 55,987
Other income 2,961 2,561 2,690 2,816 11,028
Other expenses 10,341 10,590 10,818 11,091 42,840
- ---------------------------------------------------------------------------------------------------
Income before income taxes 7,086 7,313 3,179 6,597 24,175
Provision for income taxes 2,005 2,075 528 1,675 6,283
- ---------------------------------------------------------------------------------------------------
Net Income $ 5,081 $ 5,238 $ 2,651 $ 4,922 $ 17,892
===================================================================================================
Earnings per share of common stock $ .49 $ .51 $ .26 $ .46 $ 1.72
===================================================================================================
</TABLE>
<PAGE> 248
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Management's discussion and analysis represents an overview of the
financial condition and results of operations of WesBanco, Inc. This
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes thereto. Following is the five year Selected
Financial Summary.(1)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
(in thousands, except for share and per share amounts) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash dividends declared(2) $ .96 $ .86 $ .79 $ .70 $ .675
Book value(2) 20.32 18.86 18.52 17.41 16.67
Average common shares outstanding(2) 10,160,328 10,280,878 10,379,499 10,397,197 10,394,537
Selected Balance Sheet Information:
Total Investments $ 522,288 $ 587,953 $ 602,888 $ 601,681 $ 506,710
Net Loans 880,480 798,413 759,318 726,114 706,243
Total Assets 1,549,019 1,532,832 1,534,131 1,500,687 1,448,597
Total Deposits 1,254,844 1,254,586 1,265,677 1,245,978 1,203,349
Total Shareholders' Equity 206,996 192,305 191,922 180,762 169,859
Selected Ratios:
Return on Average Assets 1.33% 1.17% 1.30% 1.21% 1.13%
Return on Average Equity 10.15 9.32 10.59 10.21 9.72
Dividend Payout Ratio 44.19 45.80 37.28 36.68 35.70
Average Equity to Average Assets 14.11 13.34 13.20 12.69 12.33
</TABLE>
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary Statement of Income:
Interest income $ 108,082 $ 101,720 $ 105,268 $ 112,851 $ 121,486
Interest expense 46,570 39,660 43,727 53,661 66,702
- -------------------------------------------------------------------------------------------------------------------
Net interest income 61,512 62,060 61,541 59,190 54,784
Provision for possible loan losses 2,788 6,073 3,247 3,297 2,976
- -------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 58,724 55,987 58,294 55,893 51,808
Other income 11,366 11,028 10,367 10,272 9,456
Other expenses 42,130 42,840 41,873 40,610 39,645
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes and effect of
prior years' postretirement benefits 27,960 24,175 26,788 25,555 21,619
Provision for income taxes 7,656 6,283 7,070 7,044 5,609
- -------------------------------------------------------------------------------------------------------------------
Income before effect of prior years'
postretirement benefits 20,304 17,892 19,718 18,511 16,010
Effect of prior years' postretirement
benefits - net of tax effect --- --- --- (592) ---
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 20,304 $ 17,892 $ 19,718 $ 17,919 $ 16,010
===================================================================================================================
Per Share: (2)
Income before effect of prior years'
postretirement benefits $ 1.98 $ 1.72 $ 1.88 $ 1.76 $ 1.52
Effect of prior years' postretirement
benefits - net of tax effect --- --- --- (.05) ---
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 1.98 $ 1.72 $ 1.88 $ 1.71 $ 1.52
===================================================================================================================
</TABLE>
(1) See Note 1 of the Notes to Consolidated Financial Statements.
(2) Adjusted for two-for-one stock split which occurred during April 1993.
<PAGE> 249
EARNINGS SUMMARY
- ------------------------------------------------------------------------------
WesBanco's net income rose 13.5% to $20,304,000 for the year ended
December 31, 1995 as compared to $17,892,000 and $19,718,000 for the years
ended December 31, 1994 and 1993, respectively. The 1995 increase reflects
a reduction in both the provision for loan losses and non-interest expense.
The decrease in 1994 net income was primarily due to an increase of $2,826,000
in the provision for loan losses relating to a writedown on a commercial loan.
Profitability measures improved with return on assets (ROA) increasing to 1.33%
from 1.17% in 1994 and return on equity (ROE) increasing to 10.15% from 9.32%
in 1994. For 1993, ROA and ROE were 1.30% and 10.59%, respectively.
The following table presents a comparative average balance sheet and
interest rate analysis.
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
- ------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------------------------------------------------------
1995 1994 1993
----------------------------- ------------------------- ---------------------------
Average Average Average Average Average Average
Volume Interest Rate Volume Interest Rate Volume Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans $836,699 $ 74,452 8.90% $769,084 $ 64,906 8.44% $740,581 $ 65,735 8.88%
Investment securities:
Taxable 416,646 23,614 5.67 468,907 26,580 5.67 481,670 29,047 6.03
Non-taxable 135,211 7,524 5.56 146,836 8,196 5.57 129,074 8,311 6.44
- ------------------------------------------------------------------------------------------------------------------------
Total investment securities 551,857 31,138 5.64 615,743 34,776 5.65 610,744 37,358 6.12
Federal funds sold 41,591 2,492 5.99 48,889 2,038 4.17 69,379 2,175 3.13
- ------------------------------------------------------------------------------------------------------------------------
Total earning assets $1,430,147 $108,082 7.56% $1,433,716 $101,720 7.10% $1,420,704 $105,268 7.41%
- ------------------------------------------------------------------------------------------------------------------------
Cash and due from banks $ 45,893 $ 49,216 $ 49,606
Other assets 51,657 43,814 50,644
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $1,527,697 $1,526,746 $1,520,954
========================================================================================================================
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Interest bearing demand $ 280,063 $ 7,936 2.83% $ 299,263 $ 8,173 2.73% $ 297,346 $ 8,989 3.02%
Savings deposits 352,674 10,333 2.93 382,166 10,448 2.73 369,096 11,792 3.19
Certificates of deposit 470,668 25,134 5.34 438,129 19,082 4.36 456,968 20,997 4.59
- ------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 1,103,405 43,403 3.93 1,119,558 37,703 3.37 1,123,410 41,778 3.72
Federal funds purchased and
repurchase agreements 55,272 2,957 5.35 53,189 1,812 3.41 54,426 1,784 3.28
Other borrowings 4,825 210 4.35 4,706 145 3.08 7,394 165 2.23
- -------------------------------------------------------------------------------------------------------------------------
Total interest
bearing liabilities $1,163,502 $46,570 4.00% $1,177,453 $ 39,660 3.37% $1,185,230 $43,727 3.69%
- -------------------------------------------------------------------------------------------------------------------------
Noninterest bearing demand $ 145,397 $ 146,215 $ 132,308
Other liabilities 17,177 9,216 15,351
Redeemable Preferred Stock 1,670 1,851 1,827
Shareholders' Equity 199,951 192,011 186,238
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Redeemable
Preferred Stock &
Shareholders' Equity $1,527,697 $1,526,746 $1,520,954
=========================================================================================================================
Net yield on earning assets $61,512 4.30% $ 62,060 4.33% $61,541 4.33%
=========================================================================================================================
Taxable equivalent net yield
on earning assets $65,559 4.58% $ 66,470 4.64% $66,023 4.65%
=========================================================================================================================
</TABLE>
Nonaccrual loans were included in the average volume for the entire year.
Loan fees included in interest on loans are not material. Average yields
on investment securities available for sale have been calculated based on
amortized cost. Taxable equivalent basis is calculated on non-taxable
securities using a tax rate of 35% for 1995, 34.3% for 1994 and 1993.
<PAGE> 250
NET INTEREST INCOME
- -----------------------------------------------------------------------------
In 1995, net interest income was $61,512,000, a decrease of $548,000 or
0.9% from 1994, following a slight increase in 1994 over 1993. The 1995
decrease resulted from a lower net yield on earning assets. The net yield
declined to 4.30% for 1995, from 4.33% for 1994 and 1993.
Interest income growth for 1995 was caused primarily by an increase in
loan balances coupled with higher loan yields and changes in the mix of
assets. The average yield on earning assets increased 0.5% to 7.6% in 1995.
Loan yields increased 0.5% to 8.9%, while investment yields decreased slightly.
The 1995 nationwide bank base lending rate averaged 8.6%, up from 7% in 1994
and 6% in 1993.
Interest expense increased in 1995 due to rising interest rates in late
1994 and early 1995, customers' preference for certificates of deposits, and
pricing pressure to compete for funds in the marketplace. These factors led
to an increase in the average rate paid on interest bearing liabilities of 0.5%
to 3.9% during 1995.
The decline in interest rates during 1993 and early 1994 caused the
average earning asset yield to decrease to 7.1% during 1994 from 7.4% for
1993. During the same period the average rate paid on interest bearing
liabilities decreased to 3.4% in 1994 from 3.7% in 1993.
INVESTMENTS
- ------------------------------------------------------------------------------
Taxable investment securities averaged $416,646,000 during 1995, a
decrease of 11% over 1994. Non-taxable securities decreased 8% to
$135,211,000 over the same period. During 1994, average taxable securities
decreased $12,763,000 or 3% over 1993, while average non-taxable securities
increased $17,762,000 or 14% over the same period. For 1995 and 1994, the
decreases in total average investment securities were required to fund loan
growth.
WesBanco's available for sale portfolio at fair market value was
$172,137,000 or 33% of total investment securities as of December 31, 1995,
compared to $202,705,000 or 34% of investment securities for the same period
in 1994. The general decline in interest rates during 1995 led to an increase
in the market value of the available for sale portfolio. The market value
adjustment as of December 31, 1995 reflected an unrealized gain, net of tax of
$849,000, recorded as an adjustment to shareholders' equity. As of December
31, 1994, securities available for sale had an unrealized loss, net of tax, of
$4,482,000. These market value adjustments represent temporary market value
fluctuations which depend upon general changes in market rates. WesBanco can
adjust the volatility of the market value adjustment by managing both the
volume of securities classified as available for sale and average maturities.
If securities are held to their maturity dates, no net gain or loss would be
realized. At December 31, 1995, the available for sale portfolio had an
average yield of 5.7% and an average maturity of 3.1 years.
Held to maturity securities, at cost, totaled $350,151,000 or 67% of total
investment securities as of December 31, 1995, compared to $385,248,000 or 66%
for the same period in 1994. At December 31, 1995, the held to maturity
portfolio had an average yield of 5.6% and an average maturity of 2.7 years.
In accordance with the Financial Accounting Standards Board Special Report
allowing for a one-time transfer of securities, WesBanco reclassified
securities held by the Parent Company with a market value of $5,667,000 from
the held to maturity category to available for sale during the fourth quarter
of 1995.
During 1995 and 1994, as loan demand exceeded deposit growth, matured,
called or sold investment securities represented a primary source of
liquidity. Investment securities with a total carrying value of $127,960,000
either matured or were called during 1995 as compared to $129,738,000 during
1994. Investment securities of $59,291,000 and $67,002,000 were sold during
1995 and 1994, respectively. The average maturity of total investment
<PAGE> 251
securities at December 31, 1995 was 2.8 years as compared to 3.1 years and
3.0 years as of December 31, 1994 and 1993, respectively. During 1996,
securities totaling $158,822,000 or 29% of total securities are expected to
mature, providing for potential liquidity needs.
Investment income declined by $3,638,000 during 1995 after declining by
$2,582,000 during 1994. The 1995 decline was primarily due to a decrease in
average investment balances of $63,886,000 or 10%. The average yield on
taxable securities, excluding the effects of the market value adjustment on
available for sale securities, remained stable at 5.7% for 1995 and 1994, down
from 6.0% for 1993. The average yield on non-taxable securities, not adjusted
for tax equivalency, was 5.6% for 1995 and 1994, down from 6.4% for 1993.
Net realized securities gains totaled $437,000 in 1995 compared to
$366,000 and $164,000 in 1994 and 1993, respectively. During 1995, net gains
of $126,000 were realized through a decision to divest of an equity position
which no longer had a strategic value to the Corporation. Gains and losses
on securities are dependent upon the changing bond market conditions and the
composition of the securities.
LOANS
- ------------------------------------------------------------------------------
At December 31, 1995, loans outstanding were $893,919,000, representing
an increase of 10.2% from December 31, 1994. This follows a 3.8% increase in
loans for the corresponding period in 1994. The strong growth can be
attributed to mortgage and consumer loans, which had individual portfolio
increases of 10.9% and 15.4%, respectively. The increase in mortgage loans
was largely due to refinancing activity caused by a declining interest rate
environment during 1995. Consumer loans increased as a result of offering
attractive rates on automobile loans originated through dealers. However,
the increase was partially offset by the sale of student loans. During 1995
and 1994, the Corporation sold substantially all of its student loan portfolio,
which totaled approximately $9,000,000. Commercial loans increased 6.5% during
1995, after a decrease of .9% during 1994. As of December 31, 1995, commercial
loans comprised 20% of total loans outstanding, real estate secured loans
comprise 48.9%, and consumer-type loans comprise 31.1%. WesBanco's lending
limit to a single customer was $24,839,000 as of December 31, 1995.
Interest on loans increased $9,546,000 or 15% during 1995, after a
decrease of $829,000 during 1994. The 1995 increase was due to growth in
average loans of $67,615,000 or 8.7%, combined with an increase in the
average loan yield of 0.5% to 8.9%. Average loan yields for 1994 and 1993
were 8.4% and 8.9%, respectively. Rates offered on loan products generally
increased during the second half of 1994 into early 1995, causing an increase
in loan yields during 1995. The majority of commercial and mortgage loans
reprice monthly or annually based on changes in national indices such as prime
rate or the U.S. Treasury Bill rate.
On January 1, 1995, WesBanco adopted FAS No. 114 "Accounting by Creditors
for Impairment of a Loan." A loan is considered impaired when it is probable
that the lender will be unable to collect all principal and interest amounts
due according to the contractual terms of the loan agreement. At December 31,
1995 impaired loans included all nonperforming loans.
Loans classified as nonperforming declined to $7,319,000 or .8% of loans
outstanding as of December 31, 1995 as compared to $8,378,000 or 1.0% as of
December 31, 1994. The decline in 1995 was primarily due to the
reclassification of a nonaccrual commercial loan to other assets, where the
property is recorded at fair market value. Nonaccrual loans are generally
secured by collateral believed to have adequate market values to protect
against significant losses. The Corporation
<PAGE> 252
continues to monitor the nonperforming assets to ensure against
deterioration in collateral values.
Net charge-offs and the provision for possible loan losses in 1995
decreased primarily due to a 1994 writeoff of a commercial real estate loan
approximating $4,000,000. Net loan charge-offs were $2,309,000 in 1995 as
compared to $5,596,000 in 1994 and $2,072,000 in 1993. The provision for
possible loan losses decreased to $2,788,000 in 1995 from $6,073,000 and
$3,247,000 in 1994 and 1993, respectively. The reserve for possible loan
losses is considered adequate to provide for future losses in the loan
portfolio. In determining the adequacy of the reserve for possible loan
losses, the Corporation exceeds the minimum guidelines as set forth by the
Office of the Comptroller of the Currency. Amounts charged to earnings were
based on periodic management evaluations of the loan portfolio, specific
problem loans and other factors.
DEPOSITS
- ------------------------------------------------------------------------------
As of December 31, 1995 total deposits increased to $1,254,844,000 from
$1,254,586,000 as of December 31, 1994. The increase can be attributed to
fourth quarter deposit growth related to the introduction of a new retail
banking program called Good Neighbor Banking. The program offers a series of
pricing bonuses which vary according to the customer's service relationship.
Average deposits decreased $16,971,000 or 1.3% to $1,248,802,000 in 1995,
after an increase of $10,055,000 or .8% between 1994 and 1993. The decrease in
average deposits during 1995 and the slight growth in 1994 can be attributed
to the competition for funds in the local market and consumers seeking
nonbank investment alternatives. Certificates of deposit increased $32,539,000
or 7.4% during 1995, reflecting a change in deposit mix as customers moved from
demand and savings products into certificates of deposit. As interest rates
rose during late 1994 and early 1995, customers were attracted to the
higher-yielding certificate of deposit products during 1995.
Interest expense on deposits increased $5,700,000 or 15.1% during 1995 as
compared to a decrease of $4,075,000 during 1994. The 1995 increase is
reflected in the average rate paid on interest bearing deposits which rose to
3.9% during 1995 as compared to 3.4% in 1994 and 3.7% in 1993, due primarily
to the rising interest rate environment during late 1994, coupled with a shift
in deposit mix from demand and savings balances to the higher-yielding
certificates of deposit. During 1995, certificates of deposit comprised 37.7%
of average deposits, up from 34.6% in 1994.
CAPITAL ADEQUACY
- ------------------------------------------------------------------------------
On December 31, 1995 shareholders' equity totaled $206,996,000, an
increase of $14,691,000 from 1994. The increase can be attributed to
earnings growth in 1995 combined with a change in the market value adjustment
on investments available for sale of $5,331,000, from a net unrealized loss
of $4,482,000 at December 31, 1994 to a net unrealized gain of $849,000 at
December 31, 1995.
During the third quarter 1995 the Corporation completed a $7,000,000
common stock repurchase plan that began in April 1994, and announced the start
of a $10,000,000 common stock repurchase plan. The plan, which may be
discontinued or suspended at any time, will provide shares for general
corporate purposes. At December 31, 1995, approximately $971,882 of the stock
repurchase plan had been utilized.
During the fourth quarter 1995, WesBanco redeemed its Series A 8%
Cumulative Preferred Stock. The holders of 9,723 shares elected to convert
their preferred shares into common shares, resulting in the issuance of
111,111 shares previously held in treasury.
<PAGE> 253
Effective April 1, 1995 the quarterly per share dividend rate was
increased to $.23 from $.22 and on October 1, 1995 was increased to $.25.
The dividend payout ratio for 1995 was 44%, down slightly from 46% in 1994.
The decrease in the ratio was due to the increased level of earnings during
1995.
WesBanco is subject to risk-based capital guidelines that measure capital
relative to risk-adjusted assets and off-balance sheet financial instruments.
The Corporation's Tier 1, total risk-based capital and leverage ratios are well
above the required minimum levels of 4%, 8%, and 3%, respectively. At
December 31, 1995, all of WesBanco's affiliate banks exceeded the minimum
regulatory levels. Capital adequacy ratios are summarized as follows:
<TABLE>
<CAPTION>
As of December 31,
---------------------
Ratio 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Primary capital (1) 14.1% 13.3%
Tier 1 capital (2) 21.7% 23.1%
Total risk-based capital (3) 22.9% 24.3%
Leverage (4) 13.4% 12.8%
- ------------------------------------------------------------------------------
</TABLE>
(1) Equity plus the reserve for loan losses, including the market value
adjustment on investments available for sale; as a percentage of total assets
plus the reserve for loan losses.
(2) Equity, excluding the market value adjustment on investments available
for sale, less certain intangibles; as a percentage of risk-adjusted assets.
(3) Tier 1 capital plus qualifying reserve for loan losses; as a percentage
of risk-adjusted assets.
(4) Tier 1 capital; as a percentage of average assets.
INTEREST RATE MANAGEMENT AND LIQUIDITY
- -------------------------------------------------------------------------------
Interest rate management measures the sensitivity of net interest earnings
to changes in the level of interest rates. As interest rates change in the
market, rates earned on interest earning assets and rates paid on interest-
bearing liabilities do not necessarily move concurrently. Differing rate
sensitivities may arise because fixed rate assets and liabilities may not have
the same maturities or because variable rate assets and liabilities differ in
the timing of rate changes.
The affiliate banks review their interest rate sensitivity on a periodic
basis. The analysis presented below classifies interest earning assets and
interest bearing liabilities into maturity categories and measures the
differences between maturing assets and liabilities in each category (interest
sensitivity gap). At December 31, 1995, the Corporation was in a liability
sensitive position as summarized in the table below (in thousands):
<TABLE>
<CAPTION>
Under Three Six Nine Over
Three to Six to Nine Months to One
Months Months Months One Year Year Total
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Due from banks/interest bearing --- --- --- $ 104 $ 197 $ 301
Loans $194,067 $ 50,452 $ 59,064 56,298 534,038 893,919
Investment securities(1) 45,486 38,913 26,040 48,383 362,074 520,896
Federal funds sold 37,230 --- --- --- --- 37,230
- -------------------------------------------------------------------------------------------------------
Total interest earning assets 276,783 89,365 85,104 104,785 896,309 1,452,346
- -------------------------------------------------------------------------------------------------------
LIABILITIES
Savings and NOW accounts 536,270 --- --- --- --- 536,270
All other interest bearing deposits 198,495 71,690 39,218 34,737 230,562 574,702
Short term and other borrowings 60,498 5,835 2,228 2,948 350 71,859
- -------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 795,263 77,525 41,446 37,685 230,912 1,182,831
- -------------------------------------------------------------------------------------------------------
Interest sensitivity gap $(518,480) $ 11,840 $ 43,658 $ 67,100 $665,397 $ 269,515
=======================================================================================================
Cumulative interest sensitivity gap $(518,480) $(506,640) $(462,982) $(395,882) $269,515
=======================================================================================================
</TABLE>
(1) Securities are categorized above by expected maturity at amortized cost.
The changing interest rate environment can substantially impact the
Corporation's net interest income and profitability. The Asset/Liability
Committee believes the Corporation's interest sensitivity position provides
for a changing interest rate environment. During the next twelve months, the
sensitivity position is $(518,480,000), $11,840,000, $43,658,000 and
$67,100,000 Corporation's net interest
<PAGE> 254
during the periods under three months, three to six months,
six to nine months and nine months to one year, respectively. The
liability sensitive position in the under three month time period is caused by
savings and NOW deposits. Interest rates on these deposit instruments are
subject to periodic adjustment at management's discretion. Rates on savings
and NOW deposits ranged from 2.0% to 3.0% during 1995 as compared to 2.5% to
3.0% during 1994.
The Corporation's short-term liability sensitive position would suggest
exposure of the net interest margin to changing interest rates. An increase
in interest rates may cause a decline in the net interest margin while
decreasing interest rates may have the opposite effect. The Corporation may
reduce its short-term liability sensitive position making its net interest
margin less vulnerable to rising interest rates by shortening asset maturities,
primarily through federal funds and investment maturities. In addition,
management may emphasize attracting longer-term deposits by not increasing
the rates paid on savings and NOW accounts, while increasing rates on term
certificates of deposit.
The Corporation manages its liquidity position to ensure that sufficient
funds are available to meet customer needs for borrowing and deposit
withdrawals. The Corporation's primary source of liquidity is its strong
core deposit base. The growth in deposits is somewhat dependent upon interest
rates of competitive financial instruments. Short-term liquidity is maintained
through the use of federal funds sold, which represents one day investments
and cash balances. As of December 31, 1995, federal funds sold and cash
balances were $91,694,000 or 5.9% of total assets as compared to $94,546,000
or 6.1% of total assets as of December 31, 1994. Additional short-term
liquidity is maintained through investments with expected maturities of less
than one year which, during 1996, approximate $158,822,000 or 10.3% of total
assets. During 1995 investment maturities and calls of $127,960,000 became
available for reinvestment.
As of December 31, 1995 the Corporation had outstanding commitments to
extend credit in the ordinary course of business approximating $66,717,000.
On a historical basis only a small portion of these commitments result in
expended funds.
The Corporation has commitments for planned additions to fixed assets
of approximately $2,000,000 during 1996, which includes the construction of a
new branch facility, new integrated banking software, and the phase-in of a
local and wide area networking system.
OTHER INCOME
- ------------------------------------------------------------------------------
Other income, excluding securities transactions, increased $267,000 or
2.5% over 1994, due primarily to an increase in trust fee revenue. Trust
fee revenue was $4,716,000 for 1995, an increase of $291,000 or 6.6% over
1994. Trust fee revenue increased $265,000 or 6.4% between 1994 and 1993.
This steady increase in trust fees can be attributed to the increased number
of accounts under administration and increased market values. The market
value of trust assets at December 31, 1995 approximated $1,283,218,000 as
compared to $1,113,416,000 at December 31, 1994. Service charges and other
income totaled $5,174,000 for 1995, a decrease of $141,000 over 1994.
Contributing to the decrease were fee discounts associated with Good Neighbor
Banking. Service charges and other income increased $230,000 between 1994 and
1993 due to increases in the fees associated with deposit accounts.
OTHER EXPENSES
- ------------------------------------------------------------------------------
Other expenses decreased $710,000 or 1.6% in 1995 to $42,130,000. The
decline from last year was primarily due to a reduction in the FDIC insurance
rate. During 1994 other expenses increased $967,000 or 2.3% from 1993,
to increased personnel costs. Increases in health insurance, pension costs,
and the primarily due
<PAGE> 255
recognition of employment contracts for two First
Fidelity executive officers contributed to the increase during 1994.
Salaries and benefits for 1995 remained at approximately the same level
as 1994, decreasing $43,000 or .2% as compared to an increase of $1,273,000
or 5.8% in 1994. During 1995, the number of full-time equivalent employees
decreased to 794 from 815, causing a 2.6% reduction in salary expenses.
Internal bank consolidations have reduced staffing levels in different areas
of the Corporation. The reduction in salary expenses was partially offset by
an increase in benefits, primarily in employer expenses for health care and
retirement benefits.
The Corporation expects employee benefits to continue to rise in 1996.
In addition to anticipated increases in health insurance costs, effective
January 1, 1996 WesBanco expanded its existing ESOP to include 401(k)
provisions. The Corporation will make matching contributions on behalf of each
participant, up to a maximum of 1.5% of the employee's pay, subject to
regulatory limitations.
Occupancy and equipment expenses increased approximately 2.5% in 1995 and
decreased 1.5% in1994. The increases can be attributed to the construction of
a new branch facility in Bridgeport, WV and technological advancements to
enhance customer service through the phase-in of a local area network and loan
platform automation.
Other operating expenses decreased $794,000 or 5.4%, after decreasing
$231,000 or 1.6% during 1994. The 1995 decrease was primarily due to a
reduction in FDIC insurance expense, partially offset by increases in
marketing expenses associated with the introduction of the Good Neighbor
Banking Program. In addition, the Corporation has experienced improved
operating efficiencies through internal consolidations of affiliate banks.
Internal consolidations reduced the number of affiliate banks to six in 1995
from thirteen in early 1994. Affiliate bank consolidations are planned
throughout 1996.
INCOME TAXES
- ------------------------------------------------------------------------------
Federal income tax expense increased $1,129,000 to $6,450,000 during 1995,
after decreasing $536,000 to $5,321,000 during 1994. In 1995, the tax expense
increased due to increased pretax earnings. The decrease in tax expense for
1994 was affected primarily by the decrease in pretax earnings and the level
of nontaxable income.
The effective tax rate for the Corporation was 27% for 1995, 26% for
1994 and 1993. The changes in the effective tax rate are representative of
the change in the level of taxable income and to a lesser extent the changing
state tax rates. The alternative minimum tax will affect WesBanco only if a
significant amount of non-taxable income exists when compared to taxable
income.
During 1993, Congress enacted the Omnibus Budget Reconciliation Act of
1993 which included increasing certain corporate income tax rates retroactive
to January 1, 1993. The change in the corporate tax rate was increased to 35%
from 34% for corporations with income over $15,000,000.
The State of West Virginia has a corporate net income tax based upon
federal taxable income, adjusted for certain items not subject to state
taxation. The state tax rate for 1995 was 9.0%. State income tax included
in the provision for income taxes was $1,206,000 for 1995 as compared to
$962,000 and $1,213,000 for 1994 and 1993, respectively. The State of Ohio
does not have a corporate income tax, but rather, businesses are subject to
an Ohio corporate franchise tax which is included in other operating expenses.
<PAGE> 256
ACQUISITIONS
- ------------------------------------------------------------------------------
During February 1994, the Corporation acquired all of the outstanding
stock of First Fidelity Bancorp, Inc. (Fidelity). The acquisition was
accounted for as a pooling-of-interests which requires that all amounts
included in the proforma financial statements be restated as if the acquisition
had occurred on the first day of each year presented. Fidelity had net income
of $3,179,000 for the year ended December 31, 1993. On a proforma basis, the
acquisition of Fidelity caused dilution in earnings per share of $.18 for the
year ended December 31, 1993. Book value was diluted by $.87 for 1993.
On February 9, 1996, WesBanco, Inc. announced the signing of a definitive
Agreement and Plan of Merger providing for the merger of the Bank of Weirton
with WesBanco Bank Wheeling, an affiliate of WesBanco, Inc. The transaction,
which is subject to, among other things, approval by the appropriate regulatory
authorities and the stockholders of Bank of Weirton, is expected to be
completed during the third quarter of 1996. See Note 19 in the Notes to
Consolidated Financial Statements for additional information associated with
the merger agreement.
MARKET OF COMMON STOCK AND RELATED SHAREHOLDER MATTERS
- ------------------------------------------------------------------------------
WesBanco's common stock is quoted on The Nasdaq Stock Market (Nasdaq),
with a trading symbol of WSBC. As reported by Nasdaq, the price information
reflects high and low sales prices.
The approximate number of holders of WesBanco's $2.0833 par value common
stock as of December 31, 1995 was 4,094.
Effective with the April 1, 1996 dividend, the quarterly dividend will be
increased from $ .25 to $.26 per share. The new dividend amount represents an
annualized dividend of $1.04 per share.
The following represents reported high and low trading prices and
dividends declared during the respective quarter:
<TABLE>
<CAPTION>
Dividend
High Low Declared
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
4th quarter $30.00 $26.75 $.25
3rd quarter 29.50 25.75 .25
2nd quarter 26.50 23.25 .23
1st quarter 25.75 22.75 .23
1994
4th quarter $29.25 $23.25 $.22
3rd quarter 29.00 26.00 .22
2nd quarter 28.25 25.75 .21
1st quarter 29.50 27.50 .21
</TABLE>
OTHER MATTERS
- ------------------------------------------------------------------------------
Certain information in "Management's Discussion and Analysis" and other
statements contained in this report which are not historical facts may be
forward-looking statements that involve risks and uncertainties. Such
statements are subject to important factors that could cause actual results
to important factors 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; credit risks of commercial, real estate, consumer and
other lending activities; changes in federal and state regulations; the
presence in the Company's market area of competitors with greater financial
resources than the Company; or other unanticipated external developments
materially impacting the Company's operational and financial performance.
