<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1997
- - -----------------------------------------------------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------- SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ____________
Commission File Number 0-8467
------
WESBANCO, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
WEST VIRGINIA 55-0571723
- - ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 304-234-9000
------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each Exchange on which registered
- - ------------------------------ -----------------------------------------
Common Stock $2.0833 Par Value National Association of Securities
Nonredeemable Preferred Stock Dealers, Inc.
None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. _____
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
------- ------
The aggregate market value of voting stock computed using the average of the
bid and ask prices held by non-affiliates of the Registrant on February 27,
1998 was approximately $405,804,147.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of February 27, 1998, there were 15,964,362 shares of WesBanco, Inc.
Common stock $2.0833 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of WesBanco, Inc.'s 1997 Annual Report to Shareholders - Parts II
and III
Portions of the Registrant's definitive proxy statement to be filed pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
(December 31, 1997) are incorporated by reference in Part III.
Page 1 of 64
<PAGE> 2
WESBANCO, INC.
TABLE OF CONTENTS
ITEM # ITEM PAGE(S)
- - ------ ---- ------
Part I
------
1 Business 3-17
2 Properties 18
3 Legal proceedings 18
4 Submission of matters to a vote of security holders N/A
Part II
-------
5 Market for the registrant's common equity and related
stockholder matters 19,55
6 Selected financial data 45-46
7 Management's discussion and analysis of financial
condition and results of operations 46-55
8 Financial statements and supplementary data 27-44
9 Changes in and disagreements with accountants on
accounting and financial disclosure N/A
Part III
--------
10 Directors and Executive Officers of the registrant 19 *
11 Executive compensation *
12 Security ownership of certain beneficial owners and
management *
13 Certain relationships and related transactions *
Part IV
-------
14 Exhibits, financial statement schedules, and reports
on Form 8-K 20
* Incorporated by reference to WesBanco, Inc.'s Proxy
Statement dated March 13, 1998, for Annual Meeting of
Stockholders to be held April 15, 1998.
This Form contains a total of 64 pages.
<PAGE> 3
PART I
Item 1. Business
- - -----------------
General
- - -------
As of December 31, 1997, the Corporation had four banking affiliates
located in Wheeling, Charleston, Parkersburg, and Fairmont, West Virginia.
The Registrant had one banking affiliate in Barnesville, Ohio. WesBanco
Wheeling has fourteen offices, all in West Virginia, five located in Wheeling,
two located in Follansbee, three in New Martinsville, one in Sistersville,
one in Wellsburg and two in Weirton. WesBanco Barnesville has six offices,
two located in Barnesville and one each in St. Clairsville, Bethesda,
Woodsfield and Beallsville, Ohio. WesBanco Parkersburg has three offices,
one located in Parkersburg, one located in Elizabeth and one in Mineral Wells.
WesBanco Charleston has four offices, one located in South Hills, one in South
Charleston, one in Dunbar and one in Sissonville. WesBanco Fairmont has four
offices located in Fairmont, five offices located in Morgantown, three offices
located in Bridgeport, two in Shinnston and one each in Nutter Fort, Kingwood,
Masontown and Bruceton Mills, West Virginia. The Corporation's mortgage
banking affiliate has offices located in Bridgeport, South Charleston,
Barboursville, Elkins, Wheeling, and Weirton, West Virginia. There are
approximately 883 full time equivalent employees employed by all affiliates
as of December 31, 1997.
On September 30, 1997, WesBanco and Commercial Bancshares, Incorporated
jointly announced the signing of a definitive Agreement and Plan of Merger
providing for Commercial, a multibank holding company headquartered in
Parkersburg, West Virginia, to merge with WesBanco affiliated companies.
Commercial is the bank holding company for seven community banks with
seventeen offices located in West Virginia and Ohio. Under the terms
of the definitive Agreement and Plan of Merger, WesBanco will exchange 2.85
shares of WesBanco common stock for each share of Commercial common stock
outstanding in a tax free exchange. The merger, which is based on a fixed
exchange ratio, will be accounted for as a pooling of interests. This
transaction, which is subject to approval by the stockholders of Commercial
and WesBanco, is expected to be consummated on March 31, 1998.
WesBanco, Inc., through its subsidiaries, conducts general banking,
commercial, mortgage banking and trust business. Its full service banks
offer a wide range of services to commercial, consumer and government bodies,
including but not limited to, retail banking services, such as demand, savings
and time deposits; commercial, mortgage, and personal loans; credit card
services through VISA and MasterCard; personal and corporate trust services
and discount brokerage services. Most affiliates are participating in local
partnerships which operate banking machines in those local regions primarily
under the name of MAC. The banking machines are linked to CIRRUS, a
nationwide banking network.
The Corporation has reported to its shareholders that it may engage in
other activities of a financial nature authorized by the Federal Reserve Board
through a subsidiary, or through acquisition of established companies.
As of December 31, 1997, none of the affiliates were engaged in any
operation in foreign countries and none has had transactions with customers
in foreign countries.
<PAGE> 4
Item 1. Business (continued)
- - -----------------------------
General (continued)
- - -------------------
Competition
- - -----------
Each affiliate bank faces strong competition for local business in
their respective market areas. Competition exists for new loans and
deposits, in the scope and types of services offered, and the interest
rates paid on time deposits and charged on loans, mortgage banking services
and in other aspects of banking. The affiliate banks encounter substantial
competition not only from other commercial banks but also from other
financial institutions. Savings banks, savings and loan associations,
brokerage business and credit unions actively compete for deposits.
Such institutions, as well as consumer finance companies, insurance
companies and other enterprises, are important competitors for various
types of lending 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.
Supervision and Regulation
- - --------------------------
As a registered bank holding company, WesBanco is subject to the
supervision of the Federal Reserve Board and is required to file with
the Federal Reserve Board reports and other information regarding its
business operations and the business operations of its subsidiaries.
WesBanco is also subject to examination by the Federal Reserve Board and
is 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, WesBanco 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 must obtain approval from the Federal Reserve Board.
WesBanco'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 state
banking authorities and either the FDIC or the Federal Reserve Board. In
addition to the impact of federal and state supervision and regulation, the
banking subsidiaries of WesBanco 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.
WesBanco's depository institution subsidiaries are subject to affiliate
transaction restrictions under federal law which limit the transfer of funds
by the subsidiary banks to their parent 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 20% of any such institution's
capital and surplus. Furthermore, such loans and extensions of credit
are required to be secured in specified amounts.
<PAGE> 5
Item 1. Business (continued)
- - -----------------------------
Supervision and Regulation (continued)
- - --------------------------------------
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 bank. This capital injection may be required at times when
WesBanco 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 principal 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 WesBanco could be required to compensate the FDIC by
reimbursing to it the amount of such loss.
Dividend Restrictions
- - ---------------------
There are statutory limits on the amount of dividends WesBanco's
depository institution subsidiaries can pay to their parent corporation
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.
FDIC Insurance
- - --------------
The FDIC has the authority to raise the insurance premiums for
institutions in the BIF to a level necessary to achieve a target reserve
level of 1.25% of insured deposits within not more than 15 years. In
addition, the FDIC has the authority to impose special assessments in
certain circumstances. The level of deposit premiums affects the
profitability of subsidiary banks and thus the potential flow of dividends
to parent companies.
<PAGE> 6
Item 1. Business (continued)
- - -----------------------------
Under the risk-based insurance assessment system that became effective
January 1, 1994, the FDIC places each insured depository institution in one
of nine risk categories based on its level of capital and other relevant
information (such as supervisory evaluations). Regarding the assessment
rates under the assessment system, on November 20, 1996, the FDIC voted
to retain the existing Bank Insurance Fund ("BIF") assessment schedule of
0 to 0.27% (annual rate), and to collect an assessment against BIF assessable
deposits to be paid to the Financing Corporation ("FICO"). In addition, the
FDIC eliminated the statutory minimum annual assessment of $2,000. Each
WesBanco Bank was subject to the FICO special assessment at an annual rate
of 1.29% during 1997. No assessment was paid to the BIF for 1997.
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 makes 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
establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized.
Rules adopted by the Federal banking agencies under FDICIA provide that
an institution is deemed to be: "well capitalized" if the institution has a
total (Tier 1 plus Tier II) risk-based capital ratio of 10.0% or greater, a
Tier I risk-based ratio of 6.0% or greater, and a leverage ratio of 5.0% or
greater, and the institution is not subject to an order, written agreement,
capital directive, or prompt corrective action directive to meet and maintain
a specific level for any capital measure; "adequately capitalized" if the
institution has a Total risk-based capital ratio of 8.0% or greater, a Tier I
risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or
greater (or a leverage ratio of 3.0% or greater if the institution is rated
composite 1 in its most recent report of examination, subject to appropriate
Federal banking agency guidelines), and the institution does not meet the
definition of a well-capitalized institution; "undercapitalized" if the
institution has a Total risk-based capital ratio that is less than 8.0%,
a Tier I risk-based capital ratio that is less than 4.0% or a leverage ratio
that is less than 4.0% (or a leverage ratio that is less than 3.0% if the
institution is rated composite 1 in its most recent report of examination,
subject to appropriate Federal banking agency guidelines) and the institution
does not meet the definition of a significantly undercapitalized or critically
undercapitalized institution; "significantly undercapitalized" if the
institution has a Total risk-based capital ratio that is less than 6.0%, a
Tier I risk-based capital ratio that is less than 3.0%, or a leverage ratio
that is less than 3.0% and the institution does not meet the definition of a
critically undercapitalized institution; and "critically undercapitalized" if
the institution has a ratio of tangible equity to total assets that is equal
to or less than 2%.
<PAGE> 7
Item 1. Business (continued)
- - -----------------------------
At December 31, 1997, WesBanco and all of its bank subsidiaries qualified
as well-capitalized based on the ratios and guidelines noted above. A bank's
capital category, however, is determined solely for the purpose of applying
the prompt corrective action rules and may not constitute an accurate
representation of that bank's overall financial condition or prospects.
The appropriate Federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an
adequately capitalized or undercapitalized institution to comply with the
supervisory provisions as if the institutions were in the next lower category
(but not treat a significantly undercapitalized institution as critically
undercapitalized) based on supervisory information other than the capital
levels of the institution.
The statute provides that an institution may be reclassified if the
appropriate Federal banking agency determines (after notice and opportunity
for bearing) that the institution is in an unsafe and unsound condition or
deems the institution to be engaging in an unsafe or unsound practice.
FDICIA generally prohibits a depository institution from making any
capital distributions (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions
are subject to growth limitations and are required to submit a capital
restoration plan. The Federal banking agencies may not accept a capital
restoration plan without determining, among other things, that the plan
is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. In addition, for a capital restoration
plan to be acceptable, the depository institution's parent holding company
must guarantee that the institution will comply with such capital restoration
plan. The aggregate liability of the parent holding company is limited to
the lesser of (i) an amount equal to 5% of the depository institution's total
assets at the time it became undercapitalized, and (ii) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized.
Significantly undercapitalized depository 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 are subject to the appointment of a
receiver or conservator.
FDICIA also contains a variety of other provisions that may affect the
operation of WesBanco, including reporting requirements, regulatory standards
for real estate lending, "truth in savings" provisions, and the requirement
that a depository institution give 90 days' prior notice to customers and
regulatory authorities before closing any branch.
<PAGE> 8
Item 1. Business (continued)
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Capital Requirements
- - --------------------
The risk-based capital guidelines for bank holding companies and banks
adopted by the Federal banking agencies were phased in at the end of 1992.
The minimum ratio of qualifying total capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
under the fully phased-in guidelines is 8%. At least half of the total
capital is to be comprised of common stock, retained earnings, noncumulative
perpetual preferred stocks, minority interests and, for bank holding companies,
a limited amount of qualifying cumulative perpetual preferred stock, less
goodwill and certain other intangibles ("Tier I capital"). The remainder
("Tier II capital") may consist of other preferred stock, certain other
instruments, and limited amounts of subordinated debt and the reserve for
credit losses.
In addition, the Federal Reserve Board has established minimum leverage
ratio (Tier I capital to total average assets less goodwill and certain other
intangibles) guidelines for bank holding companies and banks. These
guidelines provide for a minimum leverage ratio of 3.0% for bank holding
companies and banks that meet certain specified criteria, including that they
have the highest regulatory rating. All other banking organizations are
required to maintain a leverage ratio of 3.0% plus an additional cushion
of at least 100 to 200 basis points. The guidelines also provide that
banking organizations 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 guidelines indicate that the Federal Reserve Board
will continue to consider a "tangible Tier I leverage ratio" in evaluating
proposals for expansion or new activities. The tangible Tier I leverage
ratio is the ratio of Tier I capital, less intangibles not deducted from
Tier I capital, to total assets, less all intangibles. Neither WesBanco nor
any of its bank subsidiaries has been advised of any specific minimum
leverage ratio applicable to it.
As of December 31, 1997, all of WesBanco's banking subsidiaries had
capital in excess of all applicable requirements.
Interstate Banking Act
- - ----------------------
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (hereinafter called "Interstate Banking Act") was signed into law by
President Clinton on September 29, 1994. The Act generally allows adequately
capitalized and managed bank holding companies to acquire banks in any state
starting one year after enactment. The Act also authorized interstate merger
transactions effective June 1, 1997. States are permitted, however, to pass
legislation providing for either earlier approval of mergers with out-of-state
banks or "opting-out" of interstate mergers entirely. The Act would permit
banks to acquire branches of out-of-state banks by converting their office
into branches of the resulting bank. The Act would also permit banks to
establish and operate "de novo branches" in any state that "opts-in" to de
novo branching. The Act also requires each Federal banking agency to
prescribe uniform regulations, including guidelines insuring that interstate
branches operated by out-of-state banks are reasonably helping to meet the
credit needs of communities where they operate.
WesBanco is incorporated under the laws of the State of West Virginia
and the West Virginia Legislature adopted substantial amendments to the West
Virginia banking laws in 1996 specifically permitting interstate branching
under Section 102 and 103 of the Interstate Banking Act, effective May 31,
1997. The State of Ohio, in which WesBanco has an affiliate bank, enacted
legislation in 1997 specifically permitting interstate branching.
<PAGE> 9
Item 1. Business (continued)
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Statistical Information
- - -----------------------
Except as noted, the following statistical data averages included in
Item I - Business were computed using daily averages for the years ended
December 31, 1997, 1996 and 1995. Statistical data not included in
Item I - Business have been omitted due to inclusion in the 1997 Annual
Report to Shareholders, incorporated herein by reference, or are not
applicable.
The effect on interest income and interest expense for the years ended
December 31, 1997, 1996 and 1995, due to changes in average volume and rate
from the prior year, is presented below. The average volumes and rates are
shown in the 1997 Annual Report to Shareholders. The effect of a change
in average volume has been determined by applying the average rate in the
earlier year to the change in volume. The change in rate has been determined
by applying the average volume in the earlier year to the change in rate.
The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of change in each. (in thousands):
1997 Compared to 1996
-------------------------------
Net Increase
Volume Rate (Decrease)
-------- ------- ------------
Loans $ 8,587 $ 431 $ 9,018
Taxable securities (1,054) 2,050 996
Tax-exempt securities 1,014 (182) 832
Federal funds sold 676 70 746
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Total interest earned 9,223 2,369 11,592
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Interest bearing demand (943) 4,363 3,420
Savings deposits (835) (531) (1,366)
Certificates of deposit 3,428 1,316 4,744
Federal funds purchased and
repurchase agreements 157 158 315
Other borrowings 193 250 443
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Total interest paid 2,000 5,556 7,556
------- ------- -------
Net Interest Differential $ 7,223 $(3,187) $ 4,036
======= ======= =======
1996 Compared to 1995
-------------------------------
Net Increase
Volume Rate (Decrease)
-------- ------- -----------
Loans $ 7,181 $ (184) $ 6,997
Taxable securities (2,398) 850 (1,548)
Tax-exempt securities 640 (522) 118
Federal funds sold (428) (283) (711)
------- ------- ---------
Total interest earned 4,995 (139) 4,856
------- ------- ---------
Interest bearing demand (175) (697) (872)
Savings deposits (587) (929) (1,516)
Certificates of deposit 2,944 473 3,417
Federal funds purchased and
repurchase agreements 978 (336) 642
Other borrowings 65 (88) (23)
------ ------- ---------
Total interest paid 3,225 (1,577) 1,648
------ ------- ---------
Net Interest Differential $1,770 $1,438 $3,208
====== ======= =========
<PAGE> 10
Item 1. Business (continued)
- - -----------------------------
Investment Portfolio
- - --------------------
The maturity distribution, using book value including accretion of
discounts and the amortization of premiums and approximate yield of investment
securities at December 31, 1997, is presented in the following table. Tax
equivalent yield basis was not used. Approximate yield was calculated using
a weighted average of yield to maturity (in thousands):
<TABLE>
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
--------------- ----------------- ---------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
Held to Maturity: ------ ----- ------ ----- ------ ----- ------ -----
- - -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and Federal Agency
securities $24,620 6.01% $42,980 6.19% ---- ---- ---- ----
States and political
subdivisions 14,962 5.14% 54,754 5.07% $52,896 5.12% $31,558 5.28%
Other debt securities (1) --- --- --- --- --- --- 2,277 7.06%
--------------------------------------------------------------------------
Total held to maturity 39,582 5.68% 97,734 5.56% 52,896 5.12% 33,835 5.40%
Available for Sale: (2)
- - -----------------------
U.S. Treasury and Federal Agency
securities 21,681 5.57% 98,382 6.23% 93,996 6.72% 766 7.28%
States and political
subdivisions 4,260 3.84% 12,709 4.28% 1,590 4.74% 527 4.65%
Mortgage-backed and other
securities (1) (3) 19,699 6.22% 67,106 6.66% 10,299 6.57% 3,206 2.32%
--------------------------------------------------------------------------
Total available for sale 45,640 5.86% 178,197 6.25% 105,885 6.68% 4,499 3.44%
--------------------------------------------------------------------------
Total Investment Securities $85,222 5.78% $275,931 6.01% $158,781 6.16% $38,334 5.17%
==========================================================================
</TABLE>
(1) Represents investments with no stated maturity date.
(2) Average yields on investment securities available for sale have been
calculated based on amortized cost.
(3) Mortgage-backed securities which have prepayment provisions are assigned
to maturity categories based on estimated average lives.
<PAGE> 11
Item 1. Business (continued)
- - -----------------------------
Investment Portfolio (continued)
- - --------------------------------
Book values of investment securities are as follows (in thousands):
December 31,
---------------------------------
1997 1996 1995
Investments Held to Maturity (at cost): ---- ---- ----
- - ---------------------------------------
U.S. Treasury and Federal
Agency securities $ 67,600 $ 99,457 $219,719
Obligations of states and
political subdivisions 154,170 147,643 129,074
Other debt securities (1) 2,277 2,008 1,358
-------- -------- --------
Total Held to Maturity 224,047 249,108 350,151
-------- -------- --------
Investments Available for Sale (at market):
- - -------------------------------------------
U.S. Treasury and Federal
Agency securities 215,908 161,817 157,505
Obligations of states and
political subdivisions 18,994 14,120 5,667
Mortgage-backed and other securities (2) 107,608 100,264 8,965
-------- -------- --------
Total Available for Sale 342,510 276,201 172,137
-------- -------- --------
Total Investments $566,557 $525,309 $522,288
======== ======== ========
(1) Includes Federal Reserve Bank Stock and Federal Home Loan Bank securities.
(2) Includes stocks of business corporations.
There are no issues included in obligations of state and political
subdivisions which individually or in the aggregate exceed ten percent of
shareholders' equity as of December 31, 1997.
Loan Portfolio
- - --------------
Loans outstanding, including loans held for sale, are as follows
(in thousands):
December 31,
------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Loans:*
Commercial $206,909 $177,136 $176,809 $170,164 $169,341
Real Estate--Construction 25,306 21,556 16,544 25,575 21,732
Real Estate--Mortgage 515,194 510,778 424,917 380,178 356,286
Personal 275,305 321,060 284,108 245,032 231,705
--------- --------- -------- -------- --------
Subtotal 1,022,714 1,030,530 902,378 820,949 779,064
Loans Held for Sale 11,705 983 0 0 0
--------- --------- -------- -------- --------
Total Loans $1,034,419 $1,031,513 $902,378 $820,949 $779,064
========= ========= ======== ======== ========
*Gross of allowance for loan losses. Does not include unearned income on
personal loans.
<PAGE> 12
Item 1. Business (continued)
- - -----------------------------
Loan Portfolio (continued)
- - --------------------------
WesBanco's real estate-mortgage loans, at 50% of total loans, comprise
the single largest loan type in the portfolio. This category consists
generally of conventional adjustable and fixed rate residential mortgages and
home equity loans located within the bank's general market areas. The risks
associated with real estate lending are principally influenced by real
property values which are affected by the general economic conditions in each
bank's market areas.
Loans held for sale consists of residential mortgage loans and are valued
at the lower of aggregate cost or market value.
Personal loans represent approximately 27% of total loans and consist
primarily of indirect vehicle loans originated through automobile dealers and
credit card outstanding balances. These loans are a smaller balance,
homogeneous group of loans which are not concentrated in a specific market
area. Risks in this lending category include the possibility of general
economic downturn which may cause an increase in credit losses.
The loan loss policy for consumer installment lending requires a
charge-off if the loan reaches 120 delinquency days. Any payments subsequent
to charge-off are reflected as recoveries.
Commercial loans, representing 20% of total loans are not concentrated
in any single industry, but reflect a broad range of business in West Virginia
and Eastern Ohio. These loans are predominantly in the manufacturing,
wholesaling and retail service industries. The credit risk associated with
commercial lending is principally influenced by general economic conditions
and the resulting impact on the borrower's operations, mitigated by
collateral values.
Each bank within the Corporation has its own renewal policies regarding
commercial and real estate-construction loans. However, real estate-
construction loans are generally not renewed at any bank. Commercial loans
above certain pre-approved dollar limits must be reviewed by the respective
credit review committee or senior management prior to extension of maturity
dates or rollover of the loan into a new loan. Renewals of commercial loans
below specified lending limitations may be approved by the respective bank
loan officer.
The following table presents the approximate maturities of loans other
than personal loans, residential mortgages, and loans held for sale,
for all affiliate banks as of December 31, 1997 (in thousands):
After one
In one year through After
year or less five years five years
------------ ------------ ----------
Commercial $ 98,862 $ 59,384 $ 48,663
Real estate:
Construction 5,395 987 11,784
Other real estate 12,084 9,769 63,356
--------- --------- ---------
Total $116,341 $ 70,140 $123,803
========= ========= =========
Fixed rates $ 23,380 $ 51,234 $ 39,155
Variable rates 92,961 18,906 84,648
--------- --------- ---------
Total $116,341 $ 70,140 $123,803
========= ========= =========
<PAGE> 13
Item 1. Business (continued)
- - -----------------------------
Loan Portfolio (continued)
- - --------------------------
WesBanco banks follow lending policies which require substantial down
payments along with current market appraisals on the collateral when the
loans are originated. The majority of loans are either secured by deeds of
trust on real property, security agreements on personal property, insurance
contracts from independent insurance companies or through marketable
securities. WesBanco Bank Wheeling has approximately 42% of consolidated
gross loans.
All affiliate banks generally recognize interest income on the accrual
basis, except for certain loans which are placed on a nonaccrual status, when
in the opinion of management, doubt exists as to collectability. All banks
must conform to the policies of the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of Currency which state that banks
may not accrue interest on any loan on which either the principal or interest
is past due 90 days or more unless the loan is both well secured and in the
process of collection. When a loan is placed on a nonaccrual status, interest
income may be recognized as cash payments are received.
Non-performing assets and secured loans which are in the process of
collection but are contractually past due 90 days or more as to interest or
principal are as follows (in thousands):
December 31,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Nonaccrual:
Personal $ 61 $ 53 $ 59 $ 12 $ 124
Commercial 4,662 3,683 3,467 6,766 9,496
Mortgage 1,935 928 1,673 1,475 1,620
------ ------ ------ ------ ------
6,658 4,664 5,199 8,253 11,240
------ ------ ------ ------ ------
Renegotiated:
Personal -- -- 9 -- --
Commercial -- 1,527 1,006 23 80
Mortgage 773 623 39 81 88
------ ------ ------ ------ ------
773 2,150 1,054 104 168
------ ------ ------ ------ ------
Other classified loans: (1)
Personal -- -- -- -- --
Commercial 3,765 3,057 341 -- --
Mortgage -- 414 697 -- --
------ ------ ------ ------ ------
3,765 3,471 1,038 -- --
------ ------ ------ ------ ------
Total non-performing loans 11,196 10,285 7,291 8,357 11,408
Other Real Estate Owned 4,202 3,555 4,137 612 801
------ ------ ------ ------ ------
Total non-performing assets $15,398 $13,840 $11,428 $8,969 $12,209
====== ====== ====== ====== ======
<PAGE> 14
Item 1. Business (continued)
- - -----------------------------
Loan Portfolio (continued)
- - --------------------------
December 31,
---------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Percentage of non-performing
assets to loans outstanding 1.5% 1.3% 1.3% 1.1% 1.6%
Past Due 90 Days or More:
Personal $1,379 $1,538 $ 863 $ 944 $ 857
Commercial 934 1,294 916 923 754
Real Estate 515 1,273 1,255 680 1,131
------ ------ ------ ------ ------
$2,828 $4,105 $3,034 $2,547 $2,742
====== ====== ====== ====== ======
(1) Includes loans internally classified as doubtful and substandard (as
defined by banking regulations) that meet the definition of impaired loans.
At December 31, 1997, nonperforming loans, which included all impaired
loans, totaled $11,196,000, an increase of $911,000 over 1996. The increase
was primarily attributable to an increase in nonaccrual commercial and
commercial real estate loans. At December 31, 1996 nonperforming loans totaled
$10,285,000, an increase of $2,994,000 over 1995. The increase was primarily
attributable to a commercial loan which was classified as substandard under
the definition of an impaired loan. At December 31, 1995, nonaccrual loans
decreased $3,054,000 to $5,199,000, primarily due to the reclassification of
a commercial real estate loan to other real estate owned. The action was
taken on November 1, 1995 by an affiliate through a transfer by deed in-lieu
of foreclosed commercial property. Contributing to the increase in
renegotiated loans during 1995 were certain performing loans classified as
impaired, in accordance with FAS No. 114. The 1994 decline in nonaccrual
loans was the result of a commercial real estate loan which was taken off of
nonaccrual status. Nonaccrual loans are generally secured by collateral
believed to have adequate market values to protect the Corporation from
significant losses.
Prior to 1995, loans totaling $3,666,000 which were classified as
in-substance forcelosures and included in other assets were reclassified to
loans in accordance with FAS No. 114. Management continues to monitor
nonperforming assets to ensure against deterioration in collateral values.
<PAGE> 15
Item 1. Business (continued)
- - ----------------------------
Summary of Loan Loss Experience
- - -------------------------------
The historical relationship between average loans, loan losses and
recoveries and the provision for loan losses is presented in the following
table (in thousands):
For the years ended December 31,
------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Beginning balance -
Allowance for loan losses $15,528 $13,439 $12,960 $12,483 $11,308
Allowance for loan losses of
purchased bank 269 707 --- --- ---
Loans charged off:
Commercial 950 639 1,263 4,521 1,229
Real Estate-Mortgage 254 222 220 524 183
Personal 4,288 2,613 1,619 1,003 1,274
------ ------ ------ ------ ------
Total loans charged off 5,492 3,474 3,102 6,048 2,686
------ ------ ------ ------ ------
Recovery of loans previously
charged off:
Commercial $ 212 $ 76 $ 377 $ 171 $ 184
Real Estate - Mortgage 42 67 97 25 36
Personal 658 377 319 256 394
------- ------- ------- ------- -------
Total recoveries 912 520 793 452 614
------- ------- ------- ------- -------
Net loans charged off 4,580 2,954 2,309 5,596 2,072
------- ------- ------- ------- -------
Provision for loan losses 4,314 4,336 2,788 6,073 3,247
Ending balance - ------- ------- ------- ------- -------
Allowance for loan losses $15,531 $15,528 $13,439 $12,960 $12,483
======= ======= ======= ======= =======
Ratio of net loans charged off to
average loans outstanding for
the period .44% .32% .27% .79% .28%
======== ======= ======= ======= =======
Ratio of the allowance for loan
losses to loans outstanding at
the end of the period 1.50% 1.51% 1.50% 1.61% 1.62%
======== ======= ======= ======= =======
The provision for loan losses is based on periodic management evaluation
of the loan portfolio as well as prevailing and anticipated economic
conditions, net loans charged off, past loan experience, current delinquency
factors, changes in the character of the loan portfolio, specific problem
loans and other factors. During 1997 and 1996, WesBanco experienced an
increase in personal loan charge offs. These increases reflect a rise in
personal bankruptcies consistent with national trends.
<PAGE> 16
Item 1. Business (continued)
- - ----------------------------
Allocation of the Allowance for Loan Losses
- - -------------------------------------------
The following represents the allocation of the allowance for loan losses
(dollars in thousands):
<TABLE>
December 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- -------------- -------------- --------------
% of % of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Specific Allowance:
Commercial and
Unallocated $ 8,404 20% $ 9,557 17% $10,480 20% $10,536 21% $10,468 22%
Real Estate-Construction -- 3 -- 2 17 2 16 3 16 3
Real Estate-Mortgage 2,256 50 2,124 50 1,232 47 871 46 750 45
Personal 4,871 27 3,847 31 1,710 31 1,537 30 1,249 30
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Total $15,531 100% $15,528 100% $13,439 100% $12,960 100% $12,483 100%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
</TABLE>
WesBanco has allocated the allowance for loan losses to specific
portfolio segments based upon historical net charge-off experience, changes
in the level of non-performing loans, average portfolio growth, local
economic conditions and management experience. During 1997, personal loans
as a percentage of total loans decreased as a result of a decline in
direct auto loan originations, while the increase in specific personal loan
allocations of the allowance reflects an expected continued rise in
personal bankruptcies. During 1996, the specific allowance for personal
loans increased due primarily to an increase in outstanding balance and an
increase in personal bankruptcies. Management deems the allowance for
loan losses at December 31, 1997 to be adequate.
Loan Risk Elements
- - ------------------
The Corporation has historically maintained an allowance for loans
losses which is greater than actual charge-offs.
Management maintains loan quality through monthly reviews of past due
loans, and a quarterly review of significant loans which are considered by
affiliate bank personnel to be potential problem loans. Periodic review of
significant loans are completed by personnel independent of the loan function.
There are no significant loans made to customers outside the general
market area of each affiliate bank. At times, in order to maintain loan
volumes, loans are purchased from correspondent banks. These loans aggregate
less than $4,500,000 as of December 31, 1997. Each bank within the
Corporation follows its usual loan analysis procedures before a determination
is made to purchase loans from correspondent banks.
Management's review of the loan portfolio has not indicated any material
amount of loans, not disclosed in the accompanying tables and discussions
which are known to have possible credit problems which cause management to
have serious doubts as to the ability of each borrower to comply with their
present loan repayment terms.
There were no loan concentrations in excess of 10% of total consolidated
loans.
<PAGE> 17
Item 1. Business (continued)
- - -----------------------------
Certificates of Deposit
- - -----------------------
Maturities of certificates of deposit in denominations of $100,000 or
more is as follows: (in thousands)
December 31,
------------------------
1997 1996
Maturity ---- ----
Under three months $25,325 $18,506
Three to six months 14,593 14,264
Six to twelve months 19,372 28,762
Over twelve months 44,322 30,804
-------- --------
Total $103,612 $92,336
======== ========
Interest expense on certificates of deposit of $100,000 or more was
approximately $5,901,000 in 1997, $4,658,000 in 1996, and $4,042,000 in 1995.
Short-Term Borrowings
- - ---------------------
Securities sold under agreement to repurchase have maturities which range
between one day and one year. The following table presents short-term
liabilities (dollars in thousands):
For the years ended December 31,
--------------------------------
1997 1996 1995
---- ---- ----
Securities sold under agreement
to repurchase:
Outstanding at year end $90,528 $72,587 $70,091
Average daily outstanding 77,304 69,975 54,791
Maximum outstanding at any month end 90,528 86,854 70,091
Average interest rate:
During year 5.00% 4.81% 5.17%
At year end 5.62 5.48 5.45
Return on Equity and Assets
- - ---------------------------
The following financial ratios are presented:
For the years ended December 31,
--------------------------------
1997 1996 1995
---- ---- ----
Net income to:
Average total assets 1.30% 1.34% 1.33%
Average shareholders' equity 9.38 10.02 10.15
Average shareholders' equity and
redeemable preferred stock 9.38 10.02 10.07
Dividend payout percentage (cash dividends,
including those of pooled banks, divided
by net income) 56.00 49.76 44.19
Equity to assets (average equity
divided by average assets) 13.85 13.33 13.09
Equity and redeemable preferred stock
to assets (average equity and redeemable
preferred stock dividend by average assets) 13.85 13.33 13.20
<PAGE> 18
Item 2. Properties
- - -------------------
The Registrant's affiliates generally own their respective offices,
related facilities and unimproved real property which is held for future
expansion. With certain branch office exceptions, all of the respective
West Virginia offices are located in downtown Wheeling, Follansbee, Wellsburg,
Weirton, New Martinsville, Sistersville, Elizabeth, Charleston, South
Charleston, Dunbar, Sissonville, Parkersburg, Kingwood, Fairmont, Morgantown,
Shinnston, Bridgeport and Masontown. The Ohio bank offices are located in
Barnesville, Bethesda, St. Clairsville, Woodsfield and Beallsville. During
the fourth quarter of 1997, WesBanco acquired property in Charleston, West
Virginia, where a new office will be constructed to facilitate WesBanco's
expansion in the downtown area. Consolidated investment in net bank premises
and equipment at December 31, 1997 was $34,436,000.
The main office of the Registrant is located at 1 Bank Plaza, Wheeling,
West Virginia, in a building owned by WesBanco Wheeling. The building
contains approximately 100,000 square feet.
At various building locations, WesBanco rents and will continue to look
for opportunities to rent office space to unrelated businesses. Rental
income generated during 1997 was not considered material.
Item 3. Legal Proceedings
- - --------------------------
WesBanco, Inc. and its affiliates are involved in various legal
proceedings presently pending which are incidental to the business of banking
in which they are engaged. These proceedings are pending in various
jurisdictions in which WesBanco, Inc. and its subsidiaries are engaged in
business. Based on the information which has been developed in such
proceedings as of the date hereof, and available to the Corporation,
management does not believe that any of such proceedings involve claims for
damages which expose it to a material liability on a consolidated basis.
The case previously reported in the 1995 Form 10-K, Tankovits v. Glessner,
et al., Civil Action No. 96-C-59(W) is still pending. Additional development
of the facts in the case has failed to disclose any significant actionable
conduct on the part of the Corporation's subsidiary bank. Plaintiff has
initiated some discovery in the case and motions to dismiss the case have
been filed by all defendants in the proceeding. While the development of
the Plaintiff's case is incomplete, and subject to that Contingency, counsel
has advised the Corporation that the factual allegations contained in the
Complaint do not appear to provide a basis for recovery by the Plaintiff.
<PAGE> 19
PART II
Item 5. Market for the Registrant's Common Equity and Related
- - -------------------------------------------------------------
Shareholder Matters
-------------------
(a) Approximate Number of Security Holders
-------------------------------------------
Set forth below is the approximate number of holders of record of the
Registrant's equity securities as of February 27, 1998.
Title of Class Number
-------------- ------
Common Stock ($2.0833 Par Value) 4,283
The number of holders listed above does not include WesBanco, Inc.
employees who have had stock allocated to them through the Corporation's KSOP.
All WesBanco employees who meet the eligibility requirements of the KSOP are
included in the Plan.
PART III
Item 10. Executive Directors of the Corporation
- - ------------------------------------------------
Name Age Position
- - ---- --- ---------
James C. Gardill 51 Chairman of the Board
Robert H. Martin 64 Vice Chairman
Edward M. George 61 President and Chief Executive Officer
Paul M. Limbert 50 Executive Vice President
and Chief Financial Officer
Dennis P. Yaeger 47 Executive Vice President and
Chief Operating Officer
Peter W. Jaworski 42 Senior Vice President-Credit Administration
John W. Moore, Jr. 49 Senior Vice President-Human Resources
Jerome B. Schmitt 48 Senior Vice President-Investments
Edward G. Sloane 59 Vice President-Management Information
Systems
Mr. Jaworski was appointed Senior Vice President-Credit Administration of
the Corporation on January 1, 1998. Prior to that time, Mr. Jaworski was Vice
President Credit Risk Management of WesBanco Bank Wheeling since July 1997.
From June 1995 to July 1997, he was Senior Loan Review Officer. Mr. Jaworski
joined WesBanco after serving as Senior Vice President and Senior Credit
Officer of Bank One.
Mr. Martin was appointed Vice Chairman of the Corporation on February 28,
1994. Prior to that time, Mr. Martin was Chairman of the Board of First
Fidelity Bancorp, Inc. since 1986.
Each of the remaining officers listed above have been an Executive
Officer of the Corporation or one of its subsidiaries during the past five
years.
<PAGE> 20
PART IV
Item 14. Exhibits, financial statement schedules and reports on Form 8-K
- - -------------------------------------------------------------------------
(a) Certain documents filed as part of the Form 10-K
----------------------------------------------------- Page(s)
-------
(1) Consolidated Balance Sheet as of December 31, 27
1997 and 1996.
Consolidated Statements of Income for the years 28
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Changes in Shareholders' 29
Equity for the years ended December 31, 1997,
1996 and 1995.
Consolidated Statement of Cash Flows for the years 30
ended December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements 31-43
Report of Ernst & Young LLP, Independent Auditors 44
(b) Reports on Form 8-K
------------------------
No reports of Form 8K were filed during the quarter ended
December 31, 1997.
<PAGE> 21
Item 14. Exhibits, financial statement schedules and reports on Form 8-K
- - -------------------------------------------------------------------------
(continued)
-----------
Exhibit Title Page(s)
- - ------- ----- -------
3.1 Articles of Incorporation of WesBanco, Inc., restated *
as of November 17, 1995 (1)
3.2 Bylaws of WesBanco, Inc. (1) *
4 Specimen Certificate of WesBanco, Inc. Common Stock (2) *
10.1 The Stock Option Agreement By and Between WesBanco, Inc. *
and Commercial Bancshares, Incorporated, dated
September 12, 1997 (7)
10.2 The Restated WesBanco Directors' Deferred Compensation *
Plan Effective December 15, 1994 (1)
10.3 Employment Agreement Between Robert H. Martin, First *
National Bank in Fairmont and WesBanco dated
February 28, 1994 (4)
10.4 Employment Agreement Between Ernest S. Fragale, WesBanco *
Mortgage Company and WesBanco, Inc. dated the 20th Day of
August, 1996 (5)
10.5 Employment Agreement Between Frank R. Kerekes, First *
National Bank in Fairmont and WesBanco, dated February 28,
1994 (4)
10.6 Employment Agreement Effective January 1, 1993, By and *
Between Edward M. George, WesBanco and WesBanco Bank
Wheeling (4)
10.7 Employment Agreement Effective January 1, 1993, By *
and Between Paul M. Limbert, WesBanco and WesBanco Bank
Wheeling (4)
10.8 Employment Agreement Effective January 1, 1993, By and *
Between Dennis P. Yeager, WesBanco and WesBanco Bank
Wheeling (4)
10.9 Employment Agreement Effective January 1, 1993, By and *
Between Jerome B. Schmitt, WesBanco and WesBanco Bank
Wheeling (4)
10.10 Employment Agreement Effective December 2, 1991, By and *
Between Stephen F. Decker, Albright National Bank of
Kingwood, and WesBanco (4)
10.11 Employment Agreement Effective December 2, 1991, By and *
Between Rudy F. Torjak, Albright National Bank of
Kingwood, and WesBanco (4)
10.12 Employment Agreement Effective December 1, 1993, By and *
Between Thomas L. Jones, WesBanco and WesBanco Bank South
Hills (4)
10.13 Employment Agreement Effective December 1, 1993, By and *
Between John W. Moore, Jr., WesBanco and WesBanco Bank
Wheeling (4)
<PAGE> 22
Item 14. Exhibits, financial statement schedules and reports on Form 8-K
- - -------------------------------------------------------------------------
(continued)
- - -----------
Exhibit Title Page(s)
- - ------- ----- -------
10.14 Employment Agreement By and Between The National Bank of *
West Virginia, WesBanco, Inc., and C. Barton Loar dated
December 30, 1996 (5)
10.15 Employment Agreement By and Between Brenda H. Robertson, *
WesBanco Bank South Hills and WesBanco and dated as of
June 30, 1997 (6)
11 Computation of Earnings Per Share 25
12 Ratio of Earnings to Combined Fixed Charges and 26
Preferred Stock Dividends
13 1997 Annual Report to Shareholders 27-55
The Consolidated Financial Statements, together
with the report thereon of Ernst & Young LLP dated
February 4, 1998, Management Discussion and Analysis
of the Consolidated Financial Statements included in
the accompanying 1997 Annual Report to Shareholders
are incorporated herein by reference. With the
exception of the aforementioned information, the 1997
Annual Report is not to be deemed filed as part of this
report. Financial statement schedules not included in
this Form 10-K Annual Report have been omitted because
they are not applicable or the required information is
shown in the Financial Statements or notes thereto.
21 Subsidiaries of the Registrant 56
22 Proxy Statement for the Annual Shareholders' meeting *
held April 15, 1998 (3)
23.1 Consent of Ernst & Young LLP 57
23.2 Consent of Price Waterhouse LLP 58
24 Power of Attorney 59-61
27 Financial Data Schedule 64
99.1 Report of Price Waterhouse LLP dated January 25, 62
1996, except as to the pooling-of-interests with
Bank of Weirton which is as of August 30, 1996, on
WesBanco, Inc. Consolidated Financial Statements as
of December 31, 1995 and for the year then ended
December 31, 1995
99.2 Report of Grant Thornton LLP dated October 17, 1996, 63
on Bank of Weirton Financial Statements as of
December 31, 1995 and for the year then ended
December 31, 1995, not presented separately herein.
<PAGE> 23
Item 14. Exhibits, financial statement schedules and reports on Form 8-K
- - -------------------------------------------------------------------------
(continued)
- - -----------
* Indicates document incorporated by reference.
(1) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4
under Registration No. 333-3905 which was filed with the Securities
and Exchange Commission on June 20, 1996.
(2) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4
under Registration No. 33-42157 which was filed with the Securities
and Exchange Commission on August 9, 1991.
(3) This exhibit is being incorporated by reference with respect to a
Schedule 14A, Definitive Proxy Statement, which was filed by the
Registrant with the Securities and Exchange Commission on March 13,
1998.
(4) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4
under Registration No. 33-72228 which was filed with the Securities
and Exchange Commission on November 30, 1993.
(5) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4
under Registration No. 333-11461 which was filed with the Securities
and Exchange Commission on November 6, 1996.
(6) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4
under Registration No. 333-24171 which was filed with the Securities
and Exchange Commission on April 25, 1997.
(7) Incorporated by reference to a schedule 13D filed by WesBanco with
the Securities and Exchange Commission on September 22, 1997.
<PAGE> 24
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 13, 1998.
WESBANCO, INC.
By: /s/ Edward M. George
__________________________
Edward M. George
President and Chief
Executive Officer
By: /s/ Paul M. Limbert
__________________________
Paul M. Limbert
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on March 13, 1998.
By: /s/ James C. Gardill
__________________________
James C. Gardill
Chairman of the Board
The Directors of WesBanco (listed below) executed a power of attorney
appointing James C. Gardill their attorney-in-fact, empowering him to sign
this report on their behalf.
James E. Altmeyer
Earl C. Atkins
Ray A. Byrd
R. Peterson Chalfant
Christopher V. Criss
James D. Entress
Ernest S. Fragale
James C. Gardill
Edward M. George
By: /s/James C. Gardill
John W. Kepner ___________________________
Frank R. Kerekes James C. Gardill
Robert H. Martin Attorney-in-fact
Eric Nelson
Melvin C. Snyder, Jr.
Joan C. Stamp
Carter W. Strauss
Reed J. Tanner
J. Christopher Thomas
John A. Welty
William E. Witschey
<PAGE> 25
EXHIBIT 11
WesBanco, Inc.
Computation of Earnings Per Share*
(Dollars in thousands, except per share amounts)
For the years ended December 31,
-----------------------------------
1997 1996 1995
---- ---- ----
Net Income $ 22,274 $ 21,161 $ 20,304
Less: Preferred dividends and
discount accretion --- --- 164
--------- --------- ---------
Net income applicable to common stock $ 22,274 $ 21,161 $ 20,140
========= ========= =========
Average common share outstanding 15,867,608 15,253,107 15,240,492
Earnings per share $ 1.40 $ 1.39 $ 1.32
- - ------------------------------------------------------------------------------
* Adjusted to reflect a 3 for 2 stock split effected in the form of a 50%
stock dividend, declared June 19, 1997. The Corporation adopted the
provision of SFAS No. 128, "Earnings per Share," during 1997.
<PAGE> 26
EXHIBIT 12
WesBanco, Inc.
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
(Dollar amounts in thousands)
For the years ended December 31,
---------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net income $22,274 $21,161 $20,304 $17,892 $19,718
Provision for income taxes 8,157 8,344 7,656 6,283 7,070
------- ------- ------- ------- -------
Earnings before provision for
income taxes 30,431 29,505 27,960 24,175 26,788
------- ------- ------- ------- -------
Preferred stock dividend
requirements --- --- 164 183 184
Ratio of pretax income to net
income 1.37% 1.39% 1.38% 1.35% 1.36%
------- ------- ------- ------- -------
Preferred dividend factor $ 0 $ 0 $ 226 $ 247 $ 250
Ratio of pretax net income to
preferred dividends 0% 0% 123.8% 97.8% 107.2%
======== ======= ======= ======= =======
WesBanco has no fixed charges as defined by Regulation S-K Item 503-Summary;
Risk Factors; Ratio of Earnings to Fixed Charges.
<PAGE> 27
EXHIBIT 13
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- - -----------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
December 31,
-------------------------
1997 1996
- - -----------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 56,446 $ 58,828
Due from banks - interest bearing 198 197
Federal funds sold 71,513 10,970
Investment securities:
Held to maturity (market values of $226,789
and $250,132, respectively) 224,047 249,108
Available for sale carried at market value 342,510 276,201
- - -----------------------------------------------------------------------------
Total investment securities 566,557 525,309
- - -----------------------------------------------------------------------------
Loans, net of unearned income 1,032,983 1,027,353
Allowance for loan losses (15,531) (15,528)
- - -----------------------------------------------------------------------------
Net loans 1,017,452 1,011,825
- - -----------------------------------------------------------------------------
Bank premises and equipment 34,436 32,670
Accrued interest receivable 12,942 11,748
Other assets 29,751 26,224
- - -----------------------------------------------------------------------------
Total Assets $1,789,295 $1,677,771
- - -----------------------------------------------------------------------------
LIABILITIES
Deposits:
Non-interest bearing demand $ 158,323 $ 159,176
Interest bearing demand 383,978 284,143
Savings deposits 276,341 323,673
Certificates of deposit 595,612 575,828
- - -----------------------------------------------------------------------------
Total deposits 1,414,254 1,342,820
- - -----------------------------------------------------------------------------
Federal funds purchased and repurchase agreements 90,881 81,089
Other short-term borrowings 15,804 11,682
Accrued interest payable 5,804 5,826
Other liabilities 13,002 8,822
- - -----------------------------------------------------------------------------
Total Liabilities 1,539,745 1,450,239
- - -----------------------------------------------------------------------------
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; 16,072,051 and 10,538,993
shares issued, respectively) 33,483 21,956
Capital surplus 44,550 36,949
Retained earnings 168,755 170,116
Treasury stock (56,381 and 17,139 shares,
respectively, at cost) (1,675) (544)
Market value adjustment on investments available
for sale-net of tax effect 5,026 (90)
Deferred benefits for directors and employees (589) (855)
- - -----------------------------------------------------------------------------
Total Shareholders' Equity 249,550 227,532
- - -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,789,295 $1,677,771
- - -----------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 28
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- - -----------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
For the years ended December 31,
--------------------------------
1997 1996 1995
- - ------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 90,467 $ 81,449 $ 74,452
- - ------------------------------------------------------------------------------
Interest on investment securities:
Taxable 23,062 22,066 23,614
Tax-exempt 8,474 7,642 7,524
- - ------------------------------------------------------------------------------
Total interest on investment securities 31,536 29,708 31,138
- - ------------------------------------------------------------------------------
Other interest income 2,527 1,781 2,492
- - ------------------------------------------------------------------------------
Total interest income 124,530 112,938 108,082
- - ------------------------------------------------------------------------------
Interest expense:
Interest bearing demand deposits 10,484 7,064 7,936
Savings deposits 7,451 8,817 10,333
Certificates of deposit 33,295 28,551 25,134
- - ------------------------------------------------------------------------------
Total interest on deposits 51,230 44,432 43,403
Other borrowings 4,544 3,786 3,167
- - ------------------------------------------------------------------------------
Total interest expense 55,774 48,218 46,570
- - ------------------------------------------------------------------------------
Net interest income 68,756 64,720 61,512
Provision for loan losses 4,314 4,336 2,788
- - ------------------------------------------------------------------------------
Net interest income after provision
for loan losses 64,442 60,384 58,724
- - ------------------------------------------------------------------------------
Other income:
Trust fees 6,833 5,442 4,716
Service charges and other income 7,350 6,592 6,213
Net gains on sales of securities 510 239 437
- - ------------------------------------------------------------------------------
Total other income 14,693 12,273 11,366
- - ------------------------------------------------------------------------------
Other expenses:
Salaries and wages 21,163 19,110 18,272
Employee benefits 4,610 4,500 4,945
Net occupancy expense 2,676 2,651 2,672
Equipment expense 4,464 3,135 2,461
Other operating expense 15,791 13,756 13,780
- - ------------------------------------------------------------------------------
Total other expenses 48,704 43,152 42,130
- - ------------------------------------------------------------------------------
Income before provision for income taxes 30,431 29,505 27,960
Provision for income taxes 8,157 8,344 7,656
- - ------------------------------------------------------------------------------
Net Income $ 22,274 $ 21,161 $ 20,304
- - ------------------------------------------------------------------------------
Preferred stock dividends and accretion - - $ 164
Net income applicable to common stock $ 22,274 $ 21,161 20,140
Earnings per share 1.40 1.39 1.32
Average shares outstanding 15,867,608 15,253,107 15,240,492
- - ------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 29
<TABLE>
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- - ------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
For the years ended December 31, 1997, 1996, and 1995
------------------------------------------------------------------------------
Market Value
Adjustment on Deferred
Investments Benefits for
Shares Common Capital Retained Treasury Available Directors &
Outstanding Stock Surplus Earnings Stock for Sale Employees Total
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 10,199,958 $21,608 $32,447 $148,316 $(4,735) $(4,482) $(849) $192,305
- - -----------------------------------------------------------------------------------------------------------
Net Income 20,304 20,304
Cash dividends:
Common ($.64 per share) (8,139) (8,139)
Common by pooled bank
prior to acquisition (834) (834)
Preferred dividends & accretion (164) (164)
ESOP contribution 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
- - -----------------------------------------------------------------------------------------------------------
Net Income 21,161 21,161
Cash dividends:
Common ($.72 per share) (10,125) (10,125)
Common by pooled bank
prior to acquisition (403) (403)
Stock issued for acquisitions 378,008 348 5,674 5,899 11,921
Net treasury shares purchased (42,126) 38 (1,405) (1,367)
Principal payment on ESOP debt 365 365
Deferred benefits for directors (77) (77)
Market value adjustment on
investments available for
sale-net of tax effect (939) (939)
- - -----------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 10,521,854 21,956 36,949 170,116 (544) (90) (855) 227,532
- - -----------------------------------------------------------------------------------------------------------
Net Income 22,274 22,274
Cash dividends:
Common ($.786 per share) (12,474) (12,474)
Net treasury shares purchased (186,362) 82 (6,032) (5,950)
Stock issued for a 3 for 2
stock split effected in
the form of a 50%
stock dividend 5,357,003 11,161 (11,161) ----
Stock issued for acquisition 323,175 366 7,519 4,901 12,786
ESOP borrowing (134) (134)
Principal payment on ESOP debt 450 450
Deferred benefits for directors (50) (50)
Market value adjustment on
investments available for
sale-net of tax effect 5,116 5,116
- - -----------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 16,015,670 $33,483 $44,550 $168,755 $(1,675) $5,026 $(589) $249,550
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
There was no activity or outstanding balances in Nonredeemable Preferred Stock
for the years ended December 31, 1997, 1996 and 1995.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 30
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- - ------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
For the years ended December 31,
----------------------------------
Increase (Decrease) in Cash and Cash Equivalents 1997 1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $22,274 $21,161 $20,304
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,245 5,563 7,169
Provision for loan losses 4,314 4,336 2,788
Gains on sales of investment
securities - net (510) (239) (437)
Deferred income taxes 373 (143) 82
Other - net 435 (387) 269
Net change in assets and liabilities:
Interest receivable (1,030) 960 873
Other assets 2,860 (3,461) (6,115)
Interest payable (302) (1,358) 1,468
Other liabilities 1,010 665 (906)
- - --------------------------------------------------------------------------------------
Net cash provided by operating activities 34,669 27,097 25,495
- - --------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment securities held to maturity:
Proceeds from maturities and calls 93,925 113,454 80,059
Payments for purchases (51,438) (66,161) (67,026)
Investment securities available for sale:
Proceeds from sales 41,735 89,075 59,291
Proceeds from maturities and calls 52,018 43,843 47,901
Payments for purchases (160,233) (183,065) (50,145)
Purchase of subsidiaries, net of
cash acquired 6,635 2,127 ---
Net (increase) decrease in loans 7,560 (89,004) (84,815)
Purchases of premises and equipment-net (4,783) (5,978) (3,215)
- - --------------------------------------------------------------------------------------
Net cash used by investing activities (14,581) (95,709) (17,950)
- - --------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 42,862 37,723 258
Increase in federal funds purchased
and repurchase agreements 9,491 9,681 4,707
Increase (decrease) in short-term borrowings 4,122 10,280 (3,042)
Net payments related to ESOP debt (316) (364) (71)
Dividends paid (12,117) (9,799) (8,854)
Purchases of treasury shares-net (5,950) (1,367) (3,456)
Other-net (19) 863 57
- - --------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 38,073 47,017 (10,401)
- - --------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 58,161 (21,595) (2,856)
Cash and cash equivalents at
beginning of year 69,798 91,393 94,249
- - --------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $127,959 $69,798 $91,393
- - --------------------------------------------------------------------------------------
During 1997, 1996 and 1995, WesBanco paid $55,797, $49,576, and $45,103 in
interest on deposits and other borrowings and $7,720, $8,578, and $8,113
for income taxes, respectively.
During 1997, and 1996, non cash activity consisted of common stock issued in
purchase acquisitions totaling $12,786 and $11,921, respectively.
During 1995, non-cash activity consisted of the redemption of 9,925 shares
of preferred stock. Of the total shares redeemed, 9,723 shares were
exchanged for 111,111 shares of WesBanco common stock in this transaction.
The remaining 202 shares were redeemed for cash at $190 per preferred share
and are included in other financing activities.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 31
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
NOTE 1: ACCOUNTING POLICIES
- - -----------------------------------------------------------------------------
WesBanco, Inc. is a multi-bank holding company offering a full
range of financial services, including trust and mortgage banking services,
through offices located in West Virginia and Eastern Ohio.
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.
Reclassification:
Certain prior year financial information has been reclassified to
conform to the presentation in 1997. The reclassifications had no effect
on net income.
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.
Cash and cash equivalents:
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.
Investment securities:
Investments Available for Trading:
The Corporation did not have a trading portfolio during the two year
period ended December 31, 1997.
Investments Held to Maturity:
Investment securities consisting principally of debt securities,
which are purchased with the positive intent and ability to hold until
their maturity, are stated at cost, adjusted for amortization of premiums
and accretion of discounts.
Investments Available for Sale:
Debt securities not classified as trading or held to maturity, and
marketable equity securities not classified as trading, 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.
Permanent declines in value on these securities are recognized in results of
operations.
Gains and Losses:
Net realized gains and losses on sales of securities are included in
other 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 securities.
Loans held for sale:
Loan originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate.
Losses, if any, are recorded in other income based on the difference between
the market value and the aggregate cost.
Loans:
Interest is accrued as earned on loans except where doubt exists
as to collectability, in which case recognition of income is discontinued.
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. Impaired loans include all
nonaccrual and renegotiated loans, as well as loans internally classified
as substandard or doubtful (as those terms are defined by banking regulations)
that meet the definition of impaired loans. The Corporation recognizes
interest income on nonaccrual impaired loans on the cash basis.
The allowance for loan losses is maintained at a level considered
adequate by management to provide for potential loan losses. The allowance
is increased by provisions charged to operating expenses and reduced by loan
losses, net of recoveries. The amount of allowance is based on management's
evaluation of the loan portfolio, as well as prevailing 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.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation, and 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
<PAGE> 32
NOTE 1: ACCOUNTING POLICIES (CONTINUED)
- - -----------------------------------------------------------------------------
capitalized. Gains and losses on bank premises and equipment retired or
otherwise disposed of are charged to expense when incurred.
Other real estate owned:
Other real estate owned consists primarily of properties acquired
through, or in lieu of, loan foreclosures. Valuations are performed
periodically and the real estate is carried at the lower of cost or
appraised value, less estimated costs to sell.
Purchase method of accounting:
Net assets of companies acquired in purchase transactions are
recorded at fair market value at the date of acquisition. The excess
of cost over net assets of affiliates purchased (goodwill) is amortized
over 15 years.
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:
The Corporation adopted the provisions of SFAS No. 128, "Earnings
Per Share," during 1997. Under the provisions of SFAS No. 128, previously
reported primary and fully diluted earnings per share were replaced with
basic and diluted earnings per share amounts, with restatement required for
all periods presented. Basic earnings per share is calculated by dividing
net income by the weighted average number of shares of common stock
outstanding during each period. Diluted earnings per share is calculated
by increasing the denominator for the assumed conversion of all potentially
dilutive securities. WesBanco does not have any dilutive securities,
therefore, basic and diluted earnings per share are the same.
On June 19, 1997, the Corporation's Board of Directors declared a
3 for 2 stock split effected in the form of a 50% stock dividend, payable
August 1, 1997. Average common shares outstanding and per common share data
in the consolidated financial statements have been retroactively adjusted
to reflect the common stock dividend.
Trust assets:
Assets held by subsidiary banks in fiduciary or agency capacities
for their customers are not included as assets in the accompanying
Consolidated Balance Sheet. Certain trust assets are held on deposit at
subsidiary banks.
New accounting standards:
SFAS No. 130, "Reporting Comprehensive Income," is effective for
fiscal years beginning after December 15, 1997. The statement establishes
standards for reporting and disclosure of comprehensive income and its
components. Comprehensive income includes net income and all other changes
in shareholders' equity except those resulting from investments and
distributions of owners.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" is effective for financial statements for periods
beginning after December 15, 1997. This Statements requires financial and
descriptive information about an entity's operating segments to be included
in the annual financial statements.
These standards, when implemented, are not expected to materially
impact the reported financial position or results of operations of the
Corporation.
NOTE 2: AGREEMENT TO MERGE
- - ------------------------------------------------------------------------------
On September 30, 1997, WesBanco and Commercial BancShares, Incorporated
jointly announced the signing of a definitive Agreement and Plan of Merger
providing for Commercial, a multibank holding company headquartered in
Parkersburg, West Virginia, to merge with WesBanco affiliated companies.
Under the terms of the definitive Agreement and Plan of Merger, WesBanco will
exchange 2.85 shares of common stock for each share of Commercial common stock
outstanding in a tax free exchange. The merger, which is based on a fixed
exchange ratio, will be accounted for as a pooling of interests. In addition,
Commercial has granted to WesBanco an option, exercisable under certain
conditions, to purchase up to 19.9% of Commercial's outstanding common shares.
The transaction, which is subject to, among other things, approval by
the stockholders of Commercial and WesBanco, is expected to be consummated on
March 31, 1998.
Prior to its agreement with WesBanco, Commercial executed a definitive
agreement to acquire Gateway Bancshares, Inc., located in McMechen, West
Virginia. The Gateway acquisition is expected to be consummated during
March 1998. As of December 31, 1997, Gateway reported total assets of
approximately $31 million, which represented 1.4% of the pro forma combined
assets of WesBanco and Commerical. Gateway is considered immaterial to the
transaction between WesBanco and Commercial.
<PAGE> 33
NOTE 2: AGREEMENT TO MERGE (CONTINUED)
- - ------------------------------------------------------------------------------
WesBanco, including Commercial, on a pro forma combined basis reflected
the following: (unaudited, in thousands)
Pro forma
December 31, 1997 WesBanco Commercial Combined
- - -----------------------------------------------------------------------------
Total Assets $1,789,295 $428,312 $2,217,255
Total Liabilities 1,539,745 386,114 1,925,789
For the year ended December 31, 1997
- - -----------------------------------------------------------------------------
Net interest income $68,756 $19,029 $87,785
Net income 22,274 2,937 25,211
- - -----------------------------------------------------------------------------
NOTE 3: COMPLETED BUSINESS COMBINATIONS
- - -----------------------------------------------------------------------------
On August 30, 1996, WesBanco consummated a pooling of interests
acquisition with the Bank of Weirton, issuing 1,690,000 shares of common
stock in the transaction. As of the acquisition date, Bank of Weirton
reported total assets of approximately $177,877,000.
The following financial information presents the combined results
of WesBanco and Bank of Weirton as if the acquisition had occurred as of the
beginning of 1995: (in thousands)
For the WesBanco, Inc.
year ended as previously Bank of
December 31, 1995 presented Weirton WesBanco, Inc.
- - -----------------------------------------------------------------------------
Net interest income $56,029 $5,483 $61,512
Net income 18,189 2,115 20,304
- - -----------------------------------------------------------------------------
The following table summarizes WesBanco's purchase acquisitions for the three
year period ended December 31, 1997:
(dollars in thousands)
</TABLE>
<TABLE>
- - ------------------------------------------------------------------------------------------------------
Purchase Assets
Date Entity price Consideration Goodwill Acquired
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/30/97 Shawnee Bank, Inc. $12,786 323,175 shares of common stock $6,498 $34,695
12/30/96 Vandalia National Corporation 12,046* 345,545 shares of common stock 7,783 55,372
8/20/96 Universal Mortgage Company 856 32,463 shares of common stock 538 1,185
- - ------------------------------------------------------------------------------------------------------
</TABLE>
*Includes cash for stock warrants of $981
NOTE 4: INVESTMENT SECURITIES
- - ------------------------------------------------------------------------------
The following tables summarize amortized cost and fair values of held to
maturity and available for sale securities: (in thousands)
<TABLE>
Held to Maturity
-----------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
------------------------------------------- --------------------------------------------
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 $ 67,600 $ 274 $ 4 $ 67,870 $ 99,457 $ 287 $ 38 $ 99,706
Obligations of
states and political
subdivisions 154,170 2,900 428 156,642 147,643 1,426 651 148,418
Other debt securities 2,277 _ _ 2,277 2,008 _ _ 2,008
- - -----------------------------------------------------------------------------------------------------------------
Totals $224,047 $3,174 $432 $226,789 $249,108 $1,713 $ 689 $250,132
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 34
NOTE 4: INVESTMENT SECURITIES (CONTINUED)
- - ----------------------------------------------------------------------------
<TABLE>
Available For Sale
-----------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
------------------------------------------- --------------------------------------------
Gross Gross Estimate 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 $214,825 $1,590 $507 $215,908 $161,838 $ 714 $ 735 $161,817
Obligations of
states and political
subdivisions 19,086 38 130 18,994 14,233 21 134 14,120
Mortgage-backed
& other debt
securities 97,133 6,711 98 103,746 99,003 405 624 98,784
- - ----------------------------------------------------------------------------------------------------------------
Total debt securities 331,044 8,339 735 338,648 275,074 1,140 1,493 274,721
Equity securities 3,177 689 4 3,862 1,271 209 _ 1,480
- - ----------------------------------------------------------------------------------------------------------------
Totals $334,221 $9,028 $739 $342,510 $276,345 $1,349 $1,493 $276,201
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes amortized cost and estimated fair value of
securities by maturity
December 31, 1997
----------------------------------------------
Held to Maturity Available for Sale
---------------------- ---------------------
Estimated Estimated
Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value
- - ------------------------------------------------------------------------------
Within one year $ 39,582 $ 39,700 $ 45,640 $ 47,708
After one year, but within five 97,734 98,772 178,197 182,845
After five years, but within ten 52,896 54,227 105,885 106,699
After ten years 33,835 34,090 4,499 5,258
- - ------------------------------------------------------------------------------
Total $224,047 $226,789 $334,221 $342,510
- - ------------------------------------------------------------------------------
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. Other securities
with prepayment provisions are categorized based on contractual maturity.
Investment securities with par values aggregating $178,550,000 at
December 31, 1997 and $156,876,000 at December 31, 1996 were pledged to
secure public and trust funds. Gross security gains of $552,000, $602,000,
and $513,000 and gross security losses of $42,000, $363,000 and $76,000
were realized for the years ended December 31, 1997, 1996 and 1995,
respectively.
NOTE 5: LOANS
- - ------------------------------------------------------------------------------
The following table is a summary of total loans:
December 31,
--------------------------
(in thousands) 1997 1996
- - ------------------------------------------------------------------------------
Loans:
Commercial $ 206,909 $ 177,136
Real estate - construction 25,306 21,556
Real estate - mortgage 515,194 510,778
Personal, net of unearned income 273,869 316,900
- - ------------------------------------------------------------------------------
1,021,278 1,026,370
Loans held for sale 11,705 983
- - ------------------------------------------------------------------------------
Loans, net of unearned income $1,032,983 $1,027,353
- - ------------------------------------------------------------------------------
<PAGE> 35
NOTE 5: LOANS (CONTINUED)
- - -----------------------------------------------------------------------------
The following table represents changes in the allowance for loan losses:
For the years ended December 31,
---------------------------------
(in thousands) 1997 1996 1995
- - -----------------------------------------------------------------------------
Balance, January 1 $15,528 $13,439 $12,960
Allowance for loan losses of purchased banks 269 707 _
Provision for loan losses 4,314 4,336 2,788
Losses charged to the allowance (5,492) (3,474) (3,102)
Recoveries 912 520 793
- - -----------------------------------------------------------------------------
Net losses charged to the allowance (4,580) (2,954) (2,309)
- - -----------------------------------------------------------------------------
Balance, December 31 $15,531 $15,528 $13,439
- - -----------------------------------------------------------------------------
The following tables summarize loans classified as impaired:
December 31,
-----------------------
(in thousands) 1997 1996
- - -----------------------------------------------------------------------------
Nonaccrual $ 6,658 $ 4,664
Renegotiated 773 2,150
Other classified loans:
Doubtful -- 94
Substandard 3,765 3,377
- - -----------------------------------------------------------------------------
Total impaired loans $11,196 $10,285
- - -----------------------------------------------------------------------------
Impaired loans with a related allowance for loan losses $7,291 $6,328
Allowance for loan losses on impaired loans 1,817 2,120
- - -----------------------------------------------------------------------------
For the years ended December 31,
--------------------------------
1997 1996 1995
- - -------------------------------------------------------------------------------
Average impaired loans $12,692 $11,541 $6,773
Amount of contractual interest income on impaired loans 676 595 382
Amount of interest income recognized on a cash basis 78 82 164
- - -------------------------------------------------------------------------------
Most lending occurs with customers located within West Virginia and
Eastern Ohio. No significant concentration of credit risk exists by industry
or by individual borrowers. The Corporation has no significant exposure to
highly leveraged loan transactions, nor any foreign loans.
Subsidiaries of WesBanco, 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 $32,507,000,
$40,114,000, and $46,809,000 as of December 31, 1997, 1996 and 1995,
respectively. During 1997 $25,358,000 of loans were funded and $32,965,000
of loans were repaid.
NOTE 6: BANK PREMISES AND EQUIPMENT
- - ------------------------------------------------------------------------------
Bank premises and equipment include:
Estimated December 31,
(in thousands) useful life 1997 1996
- - ------------------------------------------------------------------------------
Land and improvements (3-10 years) $ 7,330 $ 6,902
Buildings and improvements (4-50 years) 36,128 33,191
Furniture and equipment (2-25 years) 27,109 24,684
- - ------------------------------------------------------------------------------
70,567 64,777
Less - Accumulated depreciation (36,131) (32,107)
- - ------------------------------------------------------------------------------
Total $34,436 $32,670
- - ------------------------------------------------------------------------------
<PAGE> 36
NOTE 7: CERTIFICATES OF DEPOSIT
- - ------------------------------------------------------------------------------
Certificates of deposit in denominations of $100,000 or more were
$103,612,000, and $92,336,000 as of December 31, 1997 and 1996, respectively.
Related interest expense was $5,901,000 in 1997 and $4,658,000 in 1996.
At December 31, 1997, the scheduled maturities of certificates of
deposit are as follows: (in thousands)
1998 $352,319
1999 149,717
2000 56,821
2001 12,304
2002 and thereafter 24,451
- - -----------------------------------
Total $595,612
- - -----------------------------------
NOTE 8: REPURCHASE AGREEMENTS AND OTHER SHORT-TERM BORROWINGS
- - ------------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to
repurchase generally mature within one to four days from the transaction date.
Other short-term borrowings consist of treasury tax and loan deposits and a
$10,000,000 fixed rate commitment with the Federal Home Loan Bank of
Pittsburgh. The loan was entered into with an affiliate bank for liquidity
purposes to fund a growing loan demand in its market area. The loan has a
guaranteed interest rate of 6.1% and will mature on July 15, 1998.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
For the years ended
December 31,
---------------------------
(in thousands) 1997 1996
- - -----------------------------------------------------------------------------
Average balance during the year $77,304 $69,975
Average interest rate during the year 5.00% 4.81%
Maximum month-end balance during the year $90,528 $86,854
- - -----------------------------------------------------------------------------
NOTE 9: EMPLOYEE BENEFIT PLANS
- - -----------------------------------------------------------------------------
Defined benefit pension plan:
At December 31, 1997, substantially all employees were participants in
the WesBanco defined benefit pension plan ("The Plan"). The plan covers those
employees who satisfy minimum age and length of service requirements.
Benefits of the plan are generally based on the years of service and the
employee's compensation during the last five years of employment. The 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 1996, all the assets and liabilities of Bank of Weirton's
defined benefit plan were merged into the WesBanco plan. Prior to the
merger, Bank of Weirton had a non-contributory defined benefit pension plan.
The Bank of Weirton's plan benefit formula was based on length of service and
average employee compensation. Net periodic pension cost benefit for the
plans include the following components:
For the years ended December 31,
--------------------------------
(in thousands) 1997 1996 1995
- - ------------------------------------------------------------------------------
Service cost - benefits earned during year $ 773 $ 755 $ 913
Interest cost on projected benefit obligation 1,406 1,380 1,543
Actual return on plan assets (3,582) (3,313) (3,714)
Net amortization and deferral 1,194 1,329 2,318
- - ------------------------------------------------------------------------------
Net periodic pension cost (benefit) $ (209) $ 151 $1,060
- - ------------------------------------------------------------------------------
<PAGE> 37
NOTE 9: EMPLOYEE BENEFIT PLANS (CONTINUED)
- - ------------------------------------------------------------------------------
The following table sets forth the defined benefit pension plan's funded
status and the asset reflected in the Consolidated Balance Sheet:
December 31,
----------------------
(in thousands) 1997 1996
- - -----------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefit obligation $ 16,041 $ 15,296
Accumulated benefit obligation 17,611 17,001
- - -----------------------------------------------------------------------------
Projected benefit obligation $(20,830) $(19,642)
Plan assets at current market value, primarily
listed stocks, bonds and cash equivalents 27,680 24,928
- - -----------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 6,850 5,286
Unrecognized prior service cost (1,479) (1,655)
Unrecognized net gain (2,342) (1,245)
Unrecognized obligation 27 33
- - -----------------------------------------------------------------------------
Net pension asset $ 3,056 $ 2,419
- - -----------------------------------------------------------------------------
Actuarial assumptions used in the determination of the projected benefit
obligation in the plan are as follows:
For the years ended December 31,
-------------------------------
1997 1996 1995
- - ------------------------------------------------------------------------------
Weighted average discount rates 7.25% 7.50% 7.50%
Rates of increase in compensation levels 4.50 4.50 4.50
Weighted average expected long-term return on assets 8.75 8.75 8.75
- - ------------------------------------------------------------------------------
Assumptions used in the Bank of Weirton's plan were 8.0% for discount rates
in 1996 and 1995, and 8.0% and 8.5% for expected long term return on assets
in 1996 and 1995, respectively. The Bank of Weirton rates of compensation
are based on a decreasing percentage scale as age increases.
Postretirement medical and death benefit plan:
The Corporation currently provides a death benefit and a contributory
health insurance plan for all retirees. Contributions toward health
insurance are fixed amounts which may be changed at the Corporation's sole
discretion. For 1997, the health insurance benefit for retirees was $100
per month and the death benefit for retirees was $7,500.
As of December 31,1997 substantially all employees were included in
the post retirement medical and death benefit programs.
Net periodic postretirement benefit costs other than pension costs
include the following components:
<TABLE>
For the years ended December 31,
-------------------------------
(in thousands) 1997 1996 1995
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during year $ 99 $128 $ 71
Interest cost on projected benefit obligation 209 191 173
Prior service cost 70 70 57
- - -----------------------------------------------------------------------------------
Net periodic postretirement benefit cost other than pensions $378 $389 $301
- - -----------------------------------------------------------------------------------
</TABLE>
The following table sets forth the liability reflected in the Consolidated
Balance Sheet:
December 31,
--------------------
(in thousands) 1997 1996
- - ----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $1,375 $1,178
Fully eligible active plan participants 1,728 1,579
- - ----------------------------------------------------------------------------
Total 3,103 2,757
Unrecognized prior service cost (986) (1,056)
Unrecognized net loss (249) (31)
- - ----------------------------------------------------------------------------
Net postretirement benefit liability $1,868 $1,670
- - ----------------------------------------------------------------------------
<PAGE> 38
NOTE 9: EMPLOYEE BENEFIT PLANS (CONTINUED)
- - ------------------------------------------------------------------------------
Weighted average discount rate assumptions used in the accounting for
the WesBanco postretirement plan were 7.25%, 7.5% and 7.5% for 1997, 1996
and 1995, respectively.
Postretirement benefits are funded as incurred resulting in cash
payments of approximately $169,000, $138,000 and $126,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The Corporation's portion of the cost of health care benefits is
not expected to increase during 1998. An assumption of a 1% per year
increase in the benefit level would increase the expense in health care
benefits by $48,521 or 16% for the year ended 1997 and increase the
accumulated postretirement benefit obligation by $299,393 or 13% as of
December 31, 1997.
KSOP: (Employee Stock Ownership and 401(k) Plan)
The Corporation's KSOP consists of a qualified noncontributory
Employee Stock Ownership Plan and Trust Agreement, which was expanded on
January 1, 1996 to include the provisions of a 401(k). As of December 31,
1997, substantially all employees were included in the KSOP.
Under the 401(k) provisions, the Corporation makes matching
contributions to the 401(k), up to a maximum of 1.5% of employees' annual
compensation, subject to regulatory limitations. The employer's matching
contributions to the 401(k) plan during 1997 and 1996 were $236,000 and
$201,000, respectively.
Under the employee stock ownership portion of the Plan, a Trust
holds 162,375 shares of WesBanco common stock. Approximately 156,530
shares of stock were allocated to specific employee accounts as of December
31, 1997. During November 1995, the 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 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 had a balance
of $97,000 and $413,000 as of December 31, 1997 and 1996, respectively.
Total contributions to the employee stock ownership portion of the
Plan during 1997 were $490,000. Contributions during 1996 and 1995 were
$400,000 and $350,000, respectively.
NOTE 10: OTHER OPERATING EXPENSE
- - ----------------------------------------------------------------------------
Other operating expense consists of the following:
For the years ended December 31,
-----------------------------------
(in thousands) 1997 1996 1995
- - -----------------------------------------------------------------------------
Customer and office supplies $ 1,460 $ 1,465 $ 1,291
Postage and freight 1,221 1,229 1,047
Legal and accounting fees 870 944 998
Marketing media 1,630 1,732 1,303
Miscellaneous taxes 2,452 1,977 1,787
FDIC Insurance 168 12 1,462
Goodwill amortization 769 18 5
Other 7,221 6,379 5,887
- - -----------------------------------------------------------------------------
Total $15,791 $13,756 $13,780
- - -----------------------------------------------------------------------------
NOTE 11: INCOME TAXES
- - -----------------------------------------------------------------------------
A reconciliation of the federal statutory tax rate to the reported
effective tax rate is as follows:
For the years ended December 31,
-------------------------------
1997 1996 1995
- - -----------------------------------------------------------------------------
Federal statutory tax rate 35% 35% 35%
Tax-exempt interest income from securities of
states and political subdivisions (8) (8) (9)
State income taxes 3 3 3
Other - net (3) (2) (2)
- - -----------------------------------------------------------------------------
Effective tax rate 27% 28% 27%
- - -----------------------------------------------------------------------------
<PAGE> 39
NOTE 11: INCOME TAXES (CONTINUED)
- - -----------------------------------------------------------------------------
The provision for income taxes consists of the following:
For the years ended December 31,
--------------------------------
(in thousands) 1997 1996 1995
- - -----------------------------------------------------------------------------
Current - Federal $6,361 $7,142 $6,363
State 1,423 1,345 1,208
Deferred - Federal 332 (146) 87
State 41 3 (2)
- - -----------------------------------------------------------------------------
Total $8,157 $8,344 $7,656
- - -----------------------------------------------------------------------------
Tax expense applicable to securities transactions $206 $96 $174
- - -----------------------------------------------------------------------------
Deferred tax assets and liabilities are comprised of the following:
December 31,
-----------------------------
(in thousands) 1997 1996 1995
- - -----------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $5,521 $5,398 $4,532
Deferred compensation 338 335 355
Other 39 167 117
- - -----------------------------------------------------------------------------
Gross deferred tax assets 5,898 5,900 5,004
- - -----------------------------------------------------------------------------
Deferred tax liabilities:
Tax effect of market value adjustment on
investment securities available for sale 3,245 - 542
Depreciation 1,248 1,095 925
Purchase accounting adjustments 458 214 167
Accretion on investments 214 143 136
Postretirement and pension expense 456 252 -
Other - 237 257
- - -----------------------------------------------------------------------------
Gross deferred tax liabilities 5,621 1,941 2,027
- - -----------------------------------------------------------------------------
Deferred tax asset valuation allowance - - -
- - -----------------------------------------------------------------------------
Net deferred tax assets $ 277 $3,959 $2,977
- - -----------------------------------------------------------------------------
NOTE 12: 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 does 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. The following table represents
the estimates of fair value of financial instruments:
<TABLE>
December 31,
-----------------------------------------------
1997 1996
---------------------- ----------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 128,157 $ 128,157 $ 69,995 $ 69,995
Investment securities-held to maturity 224,047 226,789 249,108 250,132
Investment securities-available for sale 342,510 342,510 276,201 276,201
Net loans (including loans held for sale) 1,017,452 1,022,579 1,011,825 1,015,831
Financial liabilities:
Deposits 1,414,254 1,415,618 1,342,820 1,343,730
Short-term borrowings 106,685 106,685 92,771 92,771
- - --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 40
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
- - -----------------------------------------------------------------------------
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.
Loans Held For Sale:
The carrying amount for loans held for sale is a reasonable estimate
of fair value.
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 personal 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, a Federal Home Loan Bank commitment, and other
short-term borrowings, the carrying amount is a reasonable approximation
of fair value.
Off-Balance Sheet Instruments:
Off-balance sheet instruments consist of commitments to extend
credit, standby letters of credit and an interest rate swap agreement.
Fair values for commitments to extend 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 fair value for the interest rate swap agreement, which
has a notional value of $10 million is estimated by obtaining quotes from
brokers. The value represents the amount the Corporation would receive
or pay to terminate the agreement considering current interest rates. The
estimated fair value of the commitments to extend credit and the interest
rate swap are immaterial.
NOTE 13: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
- - ------------------------------------------------------------------------------
In the normal course of business, WesBanco offers off-balance-sheet
financial instruments to enable its customers to meet their financing
objectives. The Corporation also enters into these transactions to manage
its own risks arising from movement in interest rates. These financial
instruments include commitments to extend credit, standby letters of credit,
and interest rate swap agreements. Those instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the financial statements.
WesBanco has outstanding various commitments to extend credit
approximating $98,446,000 and $70,527,000 and standby letters of credit
of $8,224,000 and $7,909,000 as of December 31, 1997 and 1996, respectively.
WesBanco's exposure to credit loss in the event of non-performance
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 Corporation uses the same credit and collateral
policies in making commitments and conditional obligations as for all other
lending. Collateral which 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 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. Management evaluates
each customer's credit worthiness on a case-by-case basis.
<PAGE> 41
NOTE 13: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
- - -----------------------------------------------------------------------------
Standby letters of credit are conditional commitments issued by 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 Corporation's
commercial loans.
Interest rate swap agreements generally involve the exchange of fixed
and floating rate interest payments without the exchange of the underlying
notional amount, on which interest payments are calculated. Interest rate
swap agreements are entered into as part of the Corporation's interest rate
risk management strategy primarily to alter the interest rate sensitivity of
its deposit liabilities. As of December 31, 1997, the Corporation had an
interest rate swap agreement with a notional value of $10 million and a
fixed pay rate of 5.29%/variable receive rate of 60% of Bank Prime Rate, due
to mature in 1999.
The Corporation and its affiliates are parties to various legal and
administrative proceedings and claims. While any litigation contains an
element of uncertainty, management believes that the outcome of such
proceedings or claims pending or known to be threatened will not have a
material adverse effect on the Corporation's consolidated financial position.
NOTE 14: 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.
NOTE 15: REGULATORY MATTERS
- - ------------------------------------------------------------------------------
The operations of affiliate 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, 1997 the banks,
without prior approval from regulatory agencies, could have distributed
dividends of approximately $856,000.
Federal Reserve regulations require depository institutions to
maintain cash reserves with the Federal Reserve Bank. The average amounts
of required reserve balances were approximately $11,466,000 and $9,695,000
during 1997 and 1996, respectively.
WesBanco is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Corporation's financial statements. Under capital
guidelines and the regulatory framework for prompt corrective action, the
Corporation must meet specific capital guidelines that involve quantitative
measures of the Corporation's assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. WesBanco's
capital amounts and classification are also subject to qualitative judgments
by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Corporation to maintain minimum amounts and ratios of
Tier I and Total Capital to risk-weighted assets and of Tier I to average
assets (Leverage). As of December 31, 1997 and 1996, each of the affiliate
banks are categorized as well capitalized and meet all capital adequacy
requirements to which each respective entity is subject.
To be categorized as well capitalized the Corporation must maintain
minimum total risk based capital, Tier I capital, and leverage ratios as set
forth in the following table. There are no conditions or events that
management believes have changed WesBanco's category.
<PAGE> 42
NOTE 15: REGULATORY MATTERS (CONTINUED)
- - ------------------------------------------------------------------------------
The following table summarizes capital amounts and ratios for WesBanco and its
largest affiliate, WesBanco Wheeling:
(dollars in thousands)
<TABLE>
To Be Well
Capitalized Under
For Capital Corrective Action
Actual Adequacy Purposes: Provisions:
--------------- ------------------ -----------------
WesBanco Amount Ratio Amount Ratio Amount Ratio
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital to Risk-Weighted Assets $245,021 21.2% $92,491 8.0% $115,614 10.0%
Tier I Capital to Risk-Weighted Assets 230,556 19.9 46,246 4.0 69,369 6.0
Leverage 230,556 13.1 70,784 4.0 88,483 5.0
- - ------------------------------------------------------------------------------------------------
As of December 31, 1996:
Total Capital to Risk-Weighted Assets $233,139 21.0% $88,698 8.0% $110,872 10.0%
Tier I Capital to Risk-Weighted Assets 219,259 19.9 44,349 4.0 66,523 6.0
Leverage 219,259 13.8 63,875 4.0 79,844 5.0
- - ------------------------------------------------------------------------------------------------
WesBanco Wheeling
- - ------------------------------------------------------------------------------------------------
As of December 31, 1997:
Total Capital to Risk-Weighted Assets $112,717 21.8% $41,420 8.0% $51,775 10.0%
Tier I Capital to Risk-Weighted Assets 106,258 20.5 20,710 4.0 31,065 6.0
Leverage 106,258 12.2 34,804 4.0 43,505 5.0
- - ------------------------------------------------------------------------------------------------
As of December 31, 1996:
Total Capital to Risk-Weighted Assets $111,472 22.9% $38,879 8.0% $48,598 10.0%
Tier I Capital to Risk-Weighted Assets 105,394 21.7 19,439 4.0 29,159 6.0
Leverage 105,394 12.9 32,570 4.0 40,713 5.0
- - ------------------------------------------------------------------------------------------------
</TABLE>
NOTE 16: 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)
BALANCE SHEET
December 31,
-----------------------
1997 1996
- - -----------------------------------------------------------------------------
ASSETS
Cash $ 105 $ 2,424
Investment in subsidiaries (at equity in net assets) 224,862 204,095
Investment securities:
Available for sale carried at market value 21,526 18,679
Dividends receivable 6,500 5,500
Other assets 406 543
- - -----------------------------------------------------------------------------
Total Assets $253,399 $231,241
- - -----------------------------------------------------------------------------
LIABILITIES
Long-term borrowings $ 97 $ 413
Dividends payable and other liabilities 3,752 3,296
- - -----------------------------------------------------------------------------
Total Liabilities 3,849 3,709
SHAREHOLDERS' EQUITY 249,550 227,532
- - -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $253,399 $231,241
- - -----------------------------------------------------------------------------
<PAGE> 43
NOTE 16: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
STATEMENT OF INCOME
<TABLE>
For the years ended December 31,
--------------------------------
1997 1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from subsidiaries $21,000 $19,900 $20,500
Income from investment securities 761 594 361
Other income 135 285 312
- - -------------------------------------------------------------------------------------
Total Income 21,896 20,779 21,173
- - -------------------------------------------------------------------------------------
Total Expenses 1,058 1,059 809
- - -------------------------------------------------------------------------------------
Income before income tax benefit and
undistributed net income of subsidiaries 20,838 19,720 20,364
Income tax benefit 285 303 145
- - --------------------------------------------------------------------------------------
Income before undistributed net income of subsidiaries 21,123 20,023 20,509
Undistributed net income (excess dividends) of subsidiaries 1,151 1,138 (205)
- - --------------------------------------------------------------------------------------
Net Income $22,274 $21,161 $20,304
- - --------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CASH FLOWS
<TABLE>
For the years ended December 31,
-------------------------------
1997 1996 1995
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $22,274 $21,161 $20,304
Undistributed (net income) excess dividends of subsidiaries (1,151) (1,138) 205
Increase (decrease) in other assets (847) 4,103 (7,795)
Other-net 347 151 (163)
- - -------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,623 24,277 12,551
- - -------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment securities available for sale:
Proceeds from sales 3,874 2,927 2,267
Proceeds from maturities and calls 1,909 1,703 852
Payments for purchases (8,319) (15,315) (1,671)
Investments held to maturity:
Proceeds from maturities and calls - - 1,883
Payments for purchases - - (1,848)
Acquisitions and additional capitalization of subsidiaries (2,003) (2,605) -
- - -------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (4,539) (13,290) 1,483
- - -------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net payments on ESOP related debt (316) (364) (71)
Purchases of treasury stock-net (5,950) (1,367) (3,456)
Dividends paid (12,117) (9,396) (8,022)
Other (20) 21 57
- - -------------------------------------------------------------------------------------------
Net cash used in financing activities (18,403) (11,106) (11,492)
- - -------------------------------------------------------------------------------------------
Net increase (decrease) in cash (2,319) (119) 2,542
Cash at beginning of year 2,424 2,543 1
- - -------------------------------------------------------------------------------------------
Cash at end of year $ 105 $ 2,424 $ 2,543
- - -------------------------------------------------------------------------------------------
</TABLE>
During 1997 and 1996, non cash activity consisted of common stock issued in
purchase acquisitions totaling $12,786 and $11,921, respectively. During
1995, non-cash activity consisted of the redemption of 9,925 shares of
preferred stock. Of the total shares redeemed, 9,723 shares were exchanged
for 111,111 shares of WesBanco common stock in this transaction. The
remaining 202 shares were redeemed for cash at $190 per preferred share and
are included in other financing activities.
<PAGE> 44
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 controls are
generally supported by written policies and procedures. Internal audit
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 auditors to review accounting, auditing and
financial matters. The internal auditors, Federal and State examiners, and
Ernst & Young LLP have full access to the Audit Committee to discuss any
appropriate matters.
Independent auditors provide an objective review of management's
discharge of its financial responsibilities relating to the preparation of
the financial statements. The independent auditor's report is based on an
audit in accordance with generally accepted auditing standards. This report
expresses an informed judgment 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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- - ------------------------------------------------------------------------------
SHAREHOLDERS AND BOARD OF DIRECTORS
WESBANCO, INC.
We have audited the accompanying consolidated balance sheets of
WesBanco, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of income, changes in shareholders' equity,
and cash flows for the two years ended December 31, 1997. These financial
statements are the responsibility of the management of WesBanco, Inc. Our
responsibility is to express an opinion on these financial statements based
on our audits. The financial statements of WesBanco, Inc. for the year ended
December 31, 1995 were audited by other auditors whose report dated
January 25, 1996, except as to the Bank of Weirton transaction, which is as
of August 30, 1996, expressed an unqualified opinion on those statements.
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 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. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
WesBanco, Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the two
years ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 4, 1998
<PAGE> 45
WESBANCO, INC.
CONDENSED QUARTERLY STATEMENT OF INCOME
- - ------------------------------------------------------------------------------
(in thousands, except per share amounts)
<TABLE>
1997 Quarter ended
---------------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $29,915 $30,645 $31,748 $32,222 $124,530
Interest expense 12,995 13,632 14,345 14,802 55,774
- - ----------------------------------------------------------------------------------------------
Net interest income 16,920 17,013 17,403 17,420 68,756
Provision for loan losses 1,100 889 875 1,450 4,314
- - ----------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 15,820 16,124 16,528 15,970 64,442
Other income 3,270 3,383 3,758 4,282 14,693
Other expenses 11,630 11,741 12,261 13,072 48,704
- - ----------------------------------------------------------------------------------------------
Income before income taxes 7,460 7,766 8,025 7,180 30,431
Provision for income taxes 1,955 2,118 2,087 1,997 8,157
- - ----------------------------------------------------------------------------------------------
Net Income $ 5,505 $ 5,648 $ 5,938 $ 5,183 $ 22,274
- - ----------------------------------------------------------------------------------------------
Earnings per share $.35 $.36 $.37 $.32 $1.40
- - ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
1996 Quarter ended
---------------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $27,476 $27,704 $28,048 $29,710 $112,938
Interest expense 11,810 11,754 12,159 12,495 48,218
- - ----------------------------------------------------------------------------------------------
Net interest income 15,666 15,950 15,889 17,215 64,720
Provision for loan losses 869 681 1,298 1,488 4,336
- - ----------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 14,797 15,269 14,591 15,727 60,384
Other income 3,062 2,910 3,145 3,156 12,273
Other expenses 10,120 10,492 10,834 11,706 43,152
- - ----------------------------------------------------------------------------------------------
Income before income taxes 7,739 7,687 6,902 7,177 29,505
Provision for income taxes 2,366 2,140 1,749 2,089 8,344
- - ----------------------------------------------------------------------------------------------
Net Income $ 5,373 $ 5,547 $ 5,153 $ 5,088 $ 21,161
- - ----------------------------------------------------------------------------------------------
Earnings per share $.36 $.36 $.34 $.33 $1.39
- - ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 46
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
Management's Discussion and Analysis represents an overview of the
results of operations and financial condition of WesBanco, Inc. This
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
Certain information in Management's Discussion 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 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 their lending activities; changes in federal and state regulations; the
presence in the Corporation's market area of competitors with greater
financial resources than the Corporation; or other unanticipated external
developments materially impacting the Corporation's operational and financial
performance.
FIVE YEAR SELECTED FINANCIAL SUMMARY(1)
- - ------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash dividends declared per share(2) $ 0.786 $ 0.72 $ 0.64 $ 0.573 $ 0.527
Book value per share(2) 15.58 14.41 13.55 12.57 12.35
Average common shares outstanding(2) 15,867,608 15,253,107 15,240,492 15,421,317 15,569,249
Selected Balance Sheet Information:
Total Investments $ 566,557 $ 525,309 $ 522,288 $ 587,953 $ 602,888
Net Loans 1,017,452 1,011,825 880,480 798,413 759,318
Total Assets 1,789,295 1,677,771 1,549,019 1,532,832 1,534,131
Total Deposits 1,414,254 1,342,820 1,254,844 1,254,586 1,265,677
Total Shareholders' Equity 249,550 227,532 206,996 192,305 191,801
Selected Ratios:
Return on Average Assets 1.30% 1.34% 1.33% 1.17% 1.30%
Return on Average Equity 9.38 10.02 10.15 9.32 10.59
Dividend Payout Ratio 56.00 49.76 44.19 45.80 37.28
Average Equity to Average Assets 13.85 13.33 13.09 12.58 12.24
For the years ended December 31,
-------------------------------------------------------------
Summary Statement of Income: 1997 1996 1995 1994 1993
- - -----------------------------------------------------------------------------------------------------
Interest income $124,530 $112,938 $108,082 $101,720 $105,268
Interest expense 55,774 48,218 46,570 39,660 43,727
- - -----------------------------------------------------------------------------------------------------
Net interest income 68,756 64,720 61,512 62,060 61,541
Provision for loan losses 4,314 4,336 2,788 6,073 3,247
- - -----------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 64,442 60,384 58,724 55,987 58,294
Other income 14,693 12,273 11,366 11,028 10,367
Other expenses 48,704 43,152 42,130 42,840 41,873
- - -----------------------------------------------------------------------------------------------------
Income before income taxes 30,431 29,505 27,960 24,175 26,788
Provision for income taxes 8,157 8,344 7,656 6,283 7,070
- - -----------------------------------------------------------------------------------------------------
Net Income $22,274 $21,161 $20,304 $17,892 $19,718
- - -----------------------------------------------------------------------------------------------------
Preferred stock dividends and accretion - - $ 164 $ 183 $ 184
Net income applicable to common stock $22,274 $21,161 20,140 17,709 19,534
Earnings per share(2) 1.40 1.39 1.32 1.15 1.25
- - -----------------------------------------------------------------------------------------------------
</TABLE>
(1) See Note 1 of the Notes to Consolidated Financial Statements.
(2) Adjusted to reflect a 3 for 2 stock split effected in the form of a 50%
stock dividend, declared June 19, 1997.
<PAGE> 47
RESULTS OF OPERATIONS
- - ------------------------------------------------------------------------------
SUMMARY
- - ------------------------------------------------------------------------------
WesBanco's net income for 1997 was a record $22.3 million or $1.40 per
share, up 5.3% and 0.7%, respectively, from $21.2 million or $1.39 per share
in 1996. The increase resulted from a 6.2% increase in net interest income
and a 19.7% increase in other income partially offset by a 12.9% increase in
other expense. Contributing to the 1997 increase in income was a 7.6%
increase in average earning assets coupled with an increase in trust and
deposit fees.
WesBanco's results of operations and financial position have not been
restated to include the acquisitions of Vandalia National Corporation,
acquired December 30, 1996, and Shawnee Bank, Inc., acquired June 30, 1997,
which were accounted for using the purchase method of accounting. These
acquisitions impact performance comparisons between 1997 and prior periods.
Management's Discussion reflects the impact of these purchase acquisitions
NET INTEREST INCOME
- - ------------------------------------------------------------------------------
Net interest income, the spread between interest income on earning assets
and interest expense on liabilities to fund those assets, represents the
largest component of earnings to the Corporation. Net interest income is
affected by both changes in the level of interest rates and changes in the
amounts and mix of interest earning assets and interest bearing liabilities.
The net yield on earning assets (net interest income as a percentage of
interest earning assets) is a frequently used measurement of net interest
income.
For 1997, net interest income was $68.8 million, up $4.0 million or 6.2%
over 1996, reflecting an increase in average earning assets of $113.1 million
or 7.6%. Of this increase in earning assets, $61.4 million resulted from
the purchase acquisitions with the remaining growth in average loans.
Average loans increased $98.1 million or 10.5% over 1996 due to the
purchase acquisitions, which contributed $49.9 million, as well as, increases
in both loans held for sale and commercial loans. Residential mortgage and
personal loans, which increased significantly during 1996, declined during
1997 effectively slowing the growth rate in loans. Average loan yields
increased only 5 basis points to 8.75% compared to the prior year, reflecting
the stable interest rate environment during the year.
Average securities totaled $525.1 million for 1997, which approximated
1996 levels. Taxable securities declined during 1997 primarily through
maturity run-off, as proceeds were used to invest in tax-exempt securities.
Average federal funds sold, which increased $12.4 million over 1996,
represented a short-term use of funds. Average yields on securities improved
33 basis points to 6.01% between 1997 and 1996, while average yields on
federal funds sold increased 20 basis points over 1996.
Earning assets are funded primarily by deposits. During 1997, average
deposits increased to $1.4 billion, up $94.7 million or 7.4% over 1996.
Purchase acquisitions contributed $43.4 million to the growth in average
deposits, while additional funds were provided through growth in money market
deposit accounts and certificates of deposit. The average cost of interest
bearing liabilities was 4.28% for 1997, up 30 basis points from 1996,
reflecting a shift in the composition of deposits from savings and NOW
accounts to higher-yielding money market accounts and certificates of deposit.
The net yield on earning assets was 4.28% for 1997, reflecting a decline
of 6 basis points from 1996. An increase in the cost of interest bearing
deposits, caused by a shift in balances to higher-yielding deposit products,
contributed to the decline in the net yield.
<PAGE> 48
AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME
- - ------------------------------------------------------------------------------
(dollars in thousands)
<TABLE>
For the years ended December 31,
--------------------------------------------------------------------------------------
1997 1996 1995
------------------------------ --------------------------- -------------------------
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
Total loans $1,033,477 $ 90,467 8.75% $935,360 $81,449 8.70% $852,902 $74,452 8.73%
Investment securities:
Taxable 358,061 23,062 6.44 375,451 22,066 5.88 416,646 23,614 5.67
Tax-exempt 167,088 8,474 5.07 147,165 7,642 5.19 135,211 7,524 5.56
- - -------------------------------------------------------------------------------------------------------------------------
Total investment securities 525,149 31,536 6.01 522,616 29,708 5.68 551,857 31,138 5.64
Federal funds sold 46,306 2,527 5.46 33,880 1,781 5.26 41,591 2,492 5.99
- - -------------------------------------------------------------------------------------------------------------------------
Total earning assets 1,604,932 $124,530 7.76% 1,491,856 $112,938 7.57% 1,446,350 $108,082 7.47%
- - -------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 48,918 50,580 45,893
Other assets 59,503 42,558 35,454
- - -------------------------------------------------------------------------------------------------------------------------
Total Assets $1,713,353 $1,584,994 $1,527,697
- - -------------------------------------------------------------------------------------------------------------------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Interest bearing demand $328,544 $10,484 3.19% $273,790 $7,064 2.58% $280,063 $ 7,936 2.83%
Savings deposits 299,215 7,451 2.49 331,879 8,817 2.66 352,674 10,333 2.93
Certificates of deposit 585,996 33,295 5.68 524,938 28,551 5.44 470,668 25,134 5.34
- - -------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 1,213,755 51,230 4.22 1,130,607 44,432 3.93 1,103,405 43,403 3.93
Federal funds purchased and
repurchase agreements 78,393 3,914 4.99 75,183 3,599 4.79 55,272 2,957 5.35
Other borrowings 11,494 630 5.48 6,646 187 2.81 4,825 210 4.35
- - -------------------------------------------------------------------------------------------------------------------------
Total interest
bearing liabilities 1,303,642 $55,774 4.28% 1,212,436 $48,218 3.98% 1,163,502 $46,570 4.00%
- - -------------------------------------------------------------------------------------------------------------------------
Noninterest bearing demand 156,574 145,069 145,397
Other liabilities 15,772 16,241 17,177
Redeemable Preferred Stock &
Shareholders' Equity 237,365 211,248 201,621
- - -------------------------------------------------------------------------------------------------------------------------
Total Liabilities, Redeemable
Preferred Stock &
Shareholders' Equity $1,713,353 $1,584,994 $1,527,697
- - -------------------------------------------------------------------------------------------------------------------------
Net yield on earning assets $68,756 4.28% $64,720 4.34% $61,512 4.25%
- - -------------------------------------------------------------------------------------------------------------------------
Taxable equivalent net yield
on earning assets $73,319 4.57% $68,835 4.61% $65,559 4.53%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total loans are gross of allowance for loan losses, net of unearned income,
and include loans held for sale.
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 tax-exempt securities using a tax
rate of 35% for each year presented.
OTHER INCOME
- - ------------------------------------------------------------------------------
Other income, excluding securities transactions, increased $2.1 million
or 17.9% over 1996, due to increases in both trust fees and service charges
on deposit accounts. The impact of the purchase acquisitions on other
income included $0.2 million in service charges on deposit accounts.
Trust fees were $6.8 million for 1997, an increase of $1.4 million or
25.6% over 1996, reflecting increases in the number of accounts under
administration, the market value of trust assets and investment fees
associated with the WesMark mutual fund products which were introduced in
early 1997. The market value of trust assets at December 31, 1997 was $1.9
billion as compared to $1.6 billion at December 31, 1996, an increase of
20.6%.
Service charges and other income, excluding the purchase acquisitions,
totaled $7.2 million for 1997, an increase of $0.6 million or 8.5% over
1996, reflecting an increase in deposit service charges. Enhancements to
the monitoring system for collecting fees primarily contributed to the
increase over 1996.
<PAGE> 49
OTHER EXPENSE
- - ------------------------------------------------------------------------------
Other expense increased $5.6 million or 12.9% in 1997 to $48.7 million.
The 1997 increase in other expense was significantly affected by the
purchase acquisitions and related goodwill amortization. The purchase
acquisitions added $3.5 million in other expense during 1997, of which
$1.6 million was in salaries and employee benefits, $0.3 million in net
occupancy and equipment expense, $0.8 million in goodwill amortization and
$0.8 million in other operating expense. Full-time equivalent employees
related to purchase acquisitions totaled 17 as of December 31, 1997.
Excluding the $3.5 million in expense related to the purchase
acquisitions, other expense for 1997 totaled $45.2 million, an increase
of $2.1 million or 4.7% over 1996. The remaining other expense discussion
excludes the purchase acquisitions.
Salaries and employee benefits increased $0.6 million or 2.4% over the
prior year, reflecting annual salary adjustments and staffing increases
associated with expansion of WesBanco's mortgage banking affiliate, partially
offset by a reduction in pension costs. Full-time equivalent employees
increased to 866 as of December 31, 1997 from 860 as of December 31, 1996.
Occupancy and equipment expense increased $1.0 million or 18.2%,
reflecting corporate-wide enhancements in technology, which included the
expansion of a wide area network. These technology related expenses have
contributed to efficiencies in customer-related services as well as
non-customer support functions. Through the use of the wide area network,
efficiencies in communication between affiliate locations have improved
extensively, while the utilization of new computer software has enhanced
customer serviceability. The increase in occupancy and equipment also
reflected startup and operational costs of a new branch facility in St.
Clairsville, Ohio, which opened in early 1997.
Other operating expense for 1997 increased $0.4 million or 3.0%,
reflecting an increase in professional fees associated with improving fee
income levels and operational efficiencies.
INCOME TAXES
- - ------------------------------------------------------------------------------
Federal income tax expense decreased $0.3 million to $6.7 million during
1997 from $7.0 million during the prior year.
The effective tax rate for the Corporation decreased to 26.8% during 1997
from 28.3% during 1996. The decrease in the effective tax rate primarily
resulted from the utilization of $0.9 million in alternative minimum tax
credit, and to a lesser extent, changes in the level of taxable income and
the changing state effective tax rate. For 1998, the Corporation anticipates
an increase in the effective tax rate, as a result of full utilization of the
tax credit in 1997.
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 statutory state tax rate for 1997 was 9.0%. State income tax
included in the provision for income taxes was $1.5 million for 1997 compared
to $1.3 million for 1996. 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.
FINANCIAL CONDITION
- - ------------------------------------------------------------------------------
INVESTMENT SECURITIES
- - ------------------------------------------------------------------------------
Investment securities at December 31, 1997 totaled $566.6 million
compared to $525.3 million as of December 31, 1996. The increase in
investment securities as well as federal funds sold primarily resulted
from deposit growth which was in excess of loan growth. The increase in
federal funds sold, up $60.5 million at December 31, 1997 compared to the
prior year, further reflected the lack of short-term investment alternatives
during the year.
WesBanco's available for sale portfolio at fair market value was $342.5
million or 61% of total investment securities as of December 31, 1997 compared
to $276.2 million or 53% of total investment securities as of December 31,
1996. At December 31, 1997, the available for sale portfolio had an average
yield of 6.3% and an average maturity of 4.7 years, compared to
6.2% and 4.1 years, respectively as of December 31, 1996.
The market value adjustment, recorded on the Consolidated Balance Sheet
as an adjustment to Shareholders' Equity, reflected an unrealized after-tax
gain of $5.0 million, as of December 31, 1997 compared to an unrealized
after-tax loss of $90,000 as of December 31, 1996. These market value
adjustments represent temporary
<PAGE> 50
INVESTMENT SECURITIES (CONTINUED)
- - ------------------------------------------------------------------------------
market value fluctuations caused by changes in market rates in relation to
the average yields in the available for sale portfolio. 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 gain or loss would be
realized.
Held to maturity securities, at cost, totaled $224.0 million or 39% of
total investment securities as of December 31, 1997 compared to $249.1
million or 47% of total investment securities as of December 31, 1996. At
December 31, 1997, the held to maturity portfolio had an average yield of
5.5% and an average maturity of 4.8 years, compared to 5.5% and 3.8 years,
respectively as of December 31, 1996.
Total investment securities reflected an average yield of 6.0% as of
December 31, 1997, up slightly from 5.9% the prior year. Affected primarily
by extending maturities on agency securities purchased during 1997, the
total average maturity of investment securities at December 31, 1997 extended
to 4.7 years as compared to 4 years as of December 31, 1996. Investment
securities represent a primary source of liquidity. During 1997, investment
securities with a total carrying value of $145.9 million either matured or
were called. Available for sale securities of $41.7 million were sold
during 1997.
LOANS
- - ------------------------------------------------------------------------------
Loans, net of unearned income at December 31, 1997 totaled $1.0 billion,
which approximated 1996 levels. The lack of growth reflected competitive
pricing pressures which negatively impacted certain mortgage and personal
loan products, tightening of credit quality standards, and lack of economic
growth in the Upper Ohio Valley. These decreasing factors were offset by
increases resulting from the Shawnee Bank purchase acquisition, which added
approximately $11.2 million in total loans, and loans held for sale.
Commercial loans, at December 31, 1997, increased $29.8 million, while
personal loans decreased $43.0 million, compared to the prior year. The
decrease in personal loans reflected a decline in indirect auto loan
originations, which was impacted by a general downturn in auto financing by
banks. Mortgage loan originations through WesBanco's affiliate, WesBanco
Mortgage Company increased during 1997. The Mortgage Company originates
residential mortgage loans and sells its fixed rate mortgage loans to the
secondary market. For 1997, the Mortgage Company originated approximately
$58.4 million in residential mortgage loans.
As of December 31, 1997, commercial loans comprised 20% of total loans
outstanding, real estate secured loans comprised 53% and personal loans
comprised 27%.
Although market rates have remained stable during 1997, rates offered on
several loan products were lowered, reflecting the competitive environment.
The majority of commercial loans reprice monthly based on changes in prime
rate.
Impaired loans, at December 31, 1997 and 1996, included all nonaccrual
and renegotiated loans as well as loans internally classified as substandard
or doubtful. Loans classified as impaired increased to $11.2 million in 1997
or 1.1% of loans outstanding compared to $10.3 million in 1996 or 1% of
loans outstanding. Nonaccrual loans are generally secured by collateral
believed to have adequate market values to protect against significant
losses. The Corporation continues to monitor the nonperforming assets to
ensure against deterioration in collateral values.
Net charge-offs in 1997 were $4.6 million compared to $3.0 million in
1996. The increase resulted from a rise in personal bankruptcies in
WesBanco's market area, which are consistent with bankruptcy trends
nationally. During 1997, the Corporation tightened its credit
standards contributing to a decrease in personal loan volume. The provision
for loan losses was $4.3 million in 1997, consistent with 1996. The allowance
for loan losses to loans was 1.5% as of December 31, 1997, unchanged from
December 31, 1996. Amounts charged to earnings were based on periodic
management evaluations of the loan portfolio, specific problem loans and
other factors. The allowance for loan losses is considered adequate to provide
for future losses in the loan portfolio.
<PAGE> 51
DEPOSITS
- - ------------------------------------------------------------------------------
As of December 31, 1997, total deposits were $1.4 billion, reflecting an
increase of $71.4 million or 5.3% from December 31, 1996. The 1997 increase
was due in part to the acquisition of Shawnee Bank, which accounted for
approximately $28.6 million of the growth. The remaining portion of the
increase was the result of growth in Prime Rate Money Market accounts, which
averaged a rate of 5.22% during 1997, and certificates of deposits. These
deposit products, along with various pricing bonuses from the Good Neighbor
Banking Program, represented interest rate advantages to customers over other
deposit products in the marketplace.
During 1997, WesBanco continued to experience a change in deposit mix as
customers shifted funds from demand and savings products into the higher-
yielding Prime Rate Money Market account and certificates of deposit. This
change in deposit mix has contributed to a 30 basis point increase in the
cost of interest bearing deposits during 1997 coupled with an increase in
the rate sensitivity of the deposit base. As competition for deposits between
banks and nonbanks continues to intensify, the rising cost of deposits and
change in composition of deposits will also continue.
During 1998, the Corporation expects the change in deposit mix to
continue, as the focus will be on growth in higher-rate deposit products.
CAPITAL ADEQUACY
- - ------------------------------------------------------------------------------
Shareholders' equity increased to $249.6 million at December 31, 1997
from $227.5 million at December 31, 1996 due to the retention of earnings,
issuance of stock for the acquisition of Shawnee and the upward market
value adjustment on investment securities available for sale.
Ending capital to assets for 1997 was 14.7% compared to 14.4% for 1996,
reflecting WesBanco's strong capital position. The relatively high level
of capital coupled with strong earnings has enabled WesBanco to continue
its steady increase in dividends declared per share. Dividend payout ratios
over the last five years reflect the steady growth in dividends, increasing
to 56% in 1997 from 37% in 1993.
The Corporation announced cash dividend increases during 1997 and the
first quarter of 1998. On April 1, 1997 and October 1, 1997 the quarterly
dividend per share increased to $.193 and $.20, respectively, a 7% increase
from the January 1, 1997 quarterly dividend of $.187. On February 19, 1998,
the quarterly dividend per share, payable April 1, 1998 was increased to
$.21, representing the thirteenth consecutive year of common stock cash
dividend increases for WesBanco.
During 1997, common shares outstanding increased to 16.0 million from
10.5 million. This increase reflected the issuance of 5.4 million common
shares related to a 3 for 2 stock split effected in the form of a 50% stock
dividend and shares issued in the purchase acquisition of Shawnee Bank, Inc.
Throughout the Annual Report average shares and per share information have
been restated to reflect the 50% stock dividend.
WesBanco is subject to risk-based capital guidelines that measure capital
relative to risk-weighted assets and off-balance sheet instruments. WesBanco,
and its banking subsidiaries, maintain Tier I, Total Capital and Leverage
ratios well above minimum regulatory levels. See Note 15 of the Consolidated
Financial Statements for more information on capital amounts, ratios and
minimum regulatory requirements.
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.
WesBanco and its banking subsidiaries review their interest rate
sensitivity on a periodic basis. The following table 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).
<PAGE> 52
INTEREST RATE MANAGEMENT AND LIQUIDITY (CONTINUED)
- - ------------------------------------------------------------------------------
At December 31, 1997, the Corporation was in a liability sensitive position as
summarized in the table below:
<TABLE>
Under Three Six Nine Over
Three to Six to Nine Months to One
(in thousands) Months Months Months One Year Year Total
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Due from banks/interest
bearing $ 198 - - - - $ 198
Loans 265,484 $67,644 $61,777 $73,718 $564,360 1,032,983
Investment securities(1) 26,730 28,107 10,600 19,785 473,046 558,268
Federal funds sold 71,513 - - - - 71,513
- - -------------------------------------------------------------------------------------------------------
Total interest earning assets 363,925 95,751 72,377 93,503 1,037,406 1,662,962
- - -------------------------------------------------------------------------------------------------------
LIABILITIES
Savings and NOW accounts 483,564 - - - - 483,564
All other interest bearing
deposits 311,620 83,166 69,649 54,639 253,293 772,367
Short-term borrowings 91,036 3,218 11,665 509 257 106,685
- - -------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 886,220 86,384 81,314 55,148 253,550 1,362,616
- - -------------------------------------------------------------------------------------------------------
Interest sensitivity gap $(522,295) $ 9,367 $(8,937) $38,355 $783,856 $ 300,346
- - -------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap $(522,295) $(512,928) $(521,865) $(483,510) $300,346
- - -------------------------------------------------------------------------------------------------------
</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
Management Committee believes the Corporation's interest sensitivity (gap)
position provides for a changing interest rate environment. The liability
sensitive position in the under three month time period is primarily caused
by savings and NOW deposits. Interest rates on these deposit instruments are
subject to periodic adjustment at management's discretion.
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 a
decrease in 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 reinvestment into federal funds from investment
maturities or by extending deposit maturities.
During 1997, WesBanco experienced an increase in its short-term
liability sensitive position due to growth in the Prime Rate Money Market
Product. In an effort to manage this additional interest sensitivity, in
1997 WesBanco entered into an interest rate swap with a notional value of
$10 million, due to mature in 1999. The swap agreement effectively fixed
the interest rate on $10 million in short-term deposits for 2 years.
Another measure used to assess changes in net interest income resulting
from changing interest rates is income simulation. Key assumptions used in
income simulation include loan and deposit growth, pricing, interest
sensitivity, and the level of interest rate or balance changes on
indeterminate maturity deposit products such as savings and NOW deposits.
These assumptions have been developed through a combination of historical
analysis and future anticipated pricing behavior.
Based on the results of the income simulation, as of December 31, 1997,
the Corporation would expect an increase in net interest income of $0.2
million and a decrease of $1.6 million from an immediate and sustained 200
basis point increase and decrease, respectively, in interest rates over a
12-month period.
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, 1997, federal funds sold
and cash balances were $128.2 million or 7.2% of total assets as compared
to $70 million or 4.2% of total assets as of December 31, 1996. The increase
in short-term liquidity resulted from a $60.5 million increase in federal
funds sold, reflecting an excess of deposit growth over loan growth.
Additional short-term liquidity is maintained through investments with
expected maturities of less than one year which, during 1998, approximate
$85.2 million or 4.8% of total assets. During 1997 investment
<PAGE> 53
INTEREST RATE MANAGEMENT AND LIQUIDITY (CONTINUED)
- - ------------------------------------------------------------------------------
maturities and calls of $145.9 million became available for reinvestment.
As of December 31, 1997 the Corporation had outstanding commitments to
extend credit in the ordinary course of business approximating $98.5 million.
On an historical basis only a small portion of these commitments result in
expended funds.
The Corporation has planned additions to fixed assets of approximately
$5.5 million during 1998, of which commitments totaling $1.7 million have
been made.
COMPARISON OF 1996 VERSUS 1995
- - ------------------------------------------------------------------------------
Net income increased 4.2% to $21.2 million for the year ended December
31, 1996 compared to 1995, reflecting increases in net interest income and
service fees. Return on average assets was 1.3%, consistent with the prior
year, while return on average equity decreased to 10.0% from 10.2% in 1995.
Net interest income increased $3.2 million or 5.2% over 1995, reflecting
balance sheet growth and an improvement in the net yield on earning assets.
Average earning assets increased $45.5 million or 3.1%, while the net yield
improved to 4.34% from 4.25%. Mortgage and consumer loans contributed to
a 9.7% growth in average loans, which were funded, in part, by maturing
securities causing a change in asset mix. Average interest bearing
liabilities increased $48.9 million or 4.2%, reflecting an 11.5% increase
in average certificates of deposit. The increase in certificates of deposit
resulted from the competitively-priced Good Neighbor Banking Program and a
shift in deposits from demand and savings deposits. Influenced by falling
market rates, improvement in the net yield on earning assets during 1996
primarily resulted from a decrease in rates on short-term borrowing, demand
and savings deposits, partially offset by a change in deposit mix to
higher-yielding deposits.
The provision for loan losses increased to $4.3 million from $2.8 million
in 1995, reflecting an increase in net charge-offs and growth in the mortgage
and consumer loan portfolios. Net charge-offs increased to $3.0 million from
$2.3 million in the prior year. The allowance for loan losses to total loans
was 1.5% as of December 31, 1996, consistent with 1995.
Other income, excluding securities transactions, and other expense
increased $1.1 million or 10.1% and $1.0 million or 2.4%, respectively, over
1995. Other income increased primarily due to a $0.7 million or 15.4%
increase in trust fees. The other expense increase primarily resulted from
increases in equipment, training, and overtime costs associated with
technology enhancements, including the installation of a wide area network
and a new mainframe computer software system. Pension and other employee
benefits decreased in 1996, reflecting a reduction in pension costs caused
by market value appreciation of pension plan assets.
BUSINESS COMBINATIONS
- - ------------------------------------------------------------------------------
Commercial BancShares, Incorporated - On September 30, 1997, WesBanco and
Commercial BancShares, Incorporated, a multi-bank holding company located in
Parkersburg, WV, entered into a definitive Agreement and Plan of Merger. The
transaction will be accounted for as a pooling of interests. Please refer
to the following table for selected financial data on a pro forma combined
basis.
Shawnee Bank, Inc. - On June 30, 1997, WesBanco completed the acquisition
of Shawnee Bank, Inc., located in Dunbar, WV. The acquisition was accounted
for using the purchase method of accounting.
Vandalia National Corporation - On December 30, 1996, WesBanco completed
the acquisition of Vandalia National Corporation, located in Morgantown, WV.
The acquisition was accounted for using the purchase method of accounting.
Bank of Weirton - On August 30, 1996, WesBanco consummated its
acquisition of the Bank of Weirton. WesBanco issued 1,690,000 shares of
common stock to shareholders of Bank of Weirton, in a transaction accounted
for as a pooling of interests. Bank of Weirton reported net income of $2.1
million for the year ended December 31, 1995.
Universal Mortgage Company - On August 20, 1996, WesBanco completed the
acquisition of Universal Mortgage Company which was accounted for using the
purchase method of accounting.
<PAGE> 54
BUSINESS COMBINATIONS (CONTINUED)
- - ------------------------------------------------------------------------------
The following table sets forth WesBanco and Commercial BancShares selected
financial data on a pro forma combined basis:
<TABLE>
December 31, 1997
--------------------------------------------
Commercial
(unaudited, dollars in thousands, BancShares, Pro forma
except per share amounts) WesBanco, Inc. Incorporated Combined
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the year:
Interest income $124,530 $33,260 $157,790
Interest expense 55,774 14,231 70,005
- - --------------------------------------------------------------------------------------
Net interest income 68,756 19,029 87,785
Provision for loan losses 4,314 1,260 5,574
Other income 14,693 3,008 17,701
Other expense 48,704 16,478 65,182
- - --------------------------------------------------------------------------------------
Income before income taxes 30,431 4,299 34,730
Income taxes 8,157 1,362 9,519
- - --------------------------------------------------------------------------------------
Net Income $ 22,274 $ 2,937 $ 25,211
- - --------------------------------------------------------------------------------------
Earnings per share $1.40 $1.82 $1.23
Average shares outstanding 15,867,608 1,616,187 20,461,743
Return on average assets 1.3% 0.7% 1.2%
Return on average equity 9.4% 6.8% 9.0%
At year end:
- - --------------------------------------------------------------------------------------
Assets $1,789,295 $428,312 $2,217,255
Securities 566,557 68,725 634,930
Loans, net of unearned income 1,032,983 308,670 1,341,653
Allowance for loan losses 15,531 4,731 20,262
Deposits 1,414,254 365,612 1,779,866
Shareholders' equity 249,550 42,198 291,466
Book value per share 15.58 26.11 14.14
</TABLE>
YEAR 2000
- - ------------------------------------------------------------------------------
During 1997, WesBanco continued a corporate wide project to address
issues associated with the year 2000. Many computer programs were originally
designed to recognize only a two-digit date field. The issue is that instead
of recognizing the four-digit date of "2000", computer logic will cause
programs with a two-digit date to work as if the clock had been turned back
to the year 1900.
In early 1997, the Corporation assembled a task force, comprised of
representatives from each affiliate, to design and implement a corporate plan
which will identify systems affected by this issue, and apply corrective
measures for full year 2000 compliance. The task force, which meets monthly,
has made considerable progress toward completion of the corporate plan.
Currently, all major noncompliant systems have been identified. WesBanco
plans to either modify or replace these systems by the end of 1998. In
addition, a list of all vendor-supplied equipment and software has been
compiled for use in obtaining vendor certification or formal commitment to
become compliant. All computer software applications that manage our
customer banking systems have been certified year 2000 compliant by the
vendor.
The Corporation believes that modifications to existing systems,
conversion to new systems, and vendor compliance upgrades, will be resolved
on a timely basis, and related costs will not have a material impact on its
results of operations or financial condition.
<PAGE> 55
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, 1997 was 4,391.
On February 19, 1998, the quarterly dividend per share payable April 1,
1998 was increased to $.21.
The following represents reported high and low trading prices and
dividends declared during the respective quarter:
Dividend
High Low Declared
- - -------------------------------------------------------------
1997
4th quarter $31.25 $27.50 $.200
3rd quarter 30.50 25.75 .200
2nd quarter 27.17 21.33 .193
1st quarter 22.17 21.17 .193
1996
4th quarter $21.67 $18.33 $.187
3rd quarter 19.00 17.50 .187
2nd quarter 18.17 17.17 .173
1st quarter 19.17 17.50 .173
OTHER MATTERS
- - ------------------------------------------------------------------------------
As of December 31, 1997, WesBanco had approximately 58% of its assets in
the Upper Ohio Valley, an area that experienced a strike between the United
Steel Workers Union and Wheeling-Pittsburgh Steel Corporation. On August 12,
1997, a new contract was ratified between the Union and Wheeling-Pittsburgh
Steel.
The direct impact of the strike on the financial results of WesBanco is
not determinable. A rise in personal bankruptcies, consistent with national
trends, and the continued slow economic growth in the Upper Ohio Valley
represent external factors impacting WesBanco's market area, which may or may
not be directly related to the strike.
<PAGE> 56
EXHIBIT 21
WESBANCO SUBSIDIARIES
WesBanco, Inc.
WesBanco Properties, Inc. (non-bank)
WesBanco Mortgage Company (non-bank)
WesBanco Bank Wheeling
McLure Hotel, Inc. (non-bank)
WesBanco Bank Charleston
FFB Corporation
WesBanco Bank Fairmont
WesBanco Bank Barnesville
WesBanco Bank Parkersburg
Vandalia National Corporation (inactive)
NOTE: All direct subsidiaries of the Registrant are 100% owned.
<PAGE> 57
EXHIBIT 23.1
Consent of Ernst & Young LLP Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 333-06467) of WesBanco, Inc. of our report dated February 4,
1998, with respect to the consolidated financial statements of WesBanco, Inc.
and subsidiaries incorporated by reference in this Annual Report (Form 10-K)
for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 11, 1998
<PAGE> 58
EXHIBIT 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 (No. 333-06467)
of WesBanco, Inc. of our report dated January 25, 1996, except as to Note 2,
the pooling of interest with Bank of Weirton, which is as of August 30, 1996,
included as Exhibit 99.1 in WesBanco, Inc's Annual Report on Form 10-K. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
March 11, 1998
<PAGE> 59
EXHIBIT 24
POWER OF ATTORNEY FOR EXECUTION OF FORM 10-K
TO BE FILED WITH THE SECURITIES & EXCHANGE COMMISSION
We, the undersigned Directors of WesBanco, Inc., hereby severally
constitute and appoint James C. Gardill and/or Edward M. George, and each of
them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names and in the capacities
indicated below, the Annual Report of WesBanco to the Securities & Exchange
Commission on Form 10-K to be filed for the year 1997 and any and all
amendments thereto in our names and behalf in our capacities as Directors of
WesBanco to enable WesBanco to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Act of 1934, as amended, hereby ratifying and conforming our
signatures as they may be signed by our attorneys, or either of them, to
said Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Power of Attorney for purposes of executing the Form 10-K of WesBanco
has been signed by the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
- - --------- ----- ----
__________________ Director February 19, 1998
Frank K. Abruzzino
/s/James E. Altmeyer
- - --------------------- Director February 19, 1998
James E. Altmeyer
/s/ Earl C. Atkins
- - ------------------ Director February 19, 1998
Earl C. Atkins
/s/ Ray A. Byrd
- - -------------------- Director February 19, 1998
Ray A. Byrd
/s/ R. Peterson Chalfant
- - ------------------------- Director February 19, 1998
R. Peterson Chalfant
/s/ Christopher V. Criss
- - ------------------------- Director February 19, 1998
Christopher V. Criss
_____________________ Director February 19, 1998
Stephen F. Decker
<PAGE> 60
/s/ James D. Entress
- - --------------------- Director February 19, 1998
James D. Entress
/s/ Ernest S. Fragale
- - ---------------------- Director February 19, 1998
Ernest S. Fragale
/s/ James C. Gardill
- - ---------------------- Director February 19, 1998
James C. Gardill
/s/ Edward M. George
- - --------------------- Director February 19, 1998
Edward M. George
____________________ Director February 19, 1998
Roland L. Hobbs
/s/ John W. Kepner
- - ------------------- Director February 19, 1998
John W. Kepner
/s/ Frank R. Kerekes
- - --------------------- Director February 19, 1998
Frank R. Kerekes
/s/ Robert H. Martin
- - -------------------- Director February 19, 1998
Robert H. Martin
_____________________ Director February 19, 1998
George M. Molnar
/s/ Eric Nelson
- - -------------------- Director February 19, 1998
Eric Nelson
_____________________ Director February 19, 1998
Richard K. Riederer
_____________________ Director February 19, 1998
John R. Scheessele
/s/ Melvin C. Snyder, Jr.
- - ------------------------- Director February 19, 1998
Melvin C. Snyder, Jr.
/s/ Joan C. Stamp
- - --------------------- Director February 19, 1998
Joan C. Stamp
/s/ Carter W. Strauss
- - --------------------- Director February 19, 1998
Carter W. Strauss
<PAGE> 61
/s/ Reed J. Tanner
- - -------------------- Director February 19, 1998
Reed J. Tanner
/s/ J. Christopher Thomas
- - ------------------------- Director February 19, 1998
J. Christopher Thomas
/s/ John A. Welty
- - ------------------ Director February 19, 1998
John A. Welty
/s/ William E. Witschey
- - ----------------------- Director February 19, 1998
William E. Witschey
<PAGE> 62
Exhibit 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of WesBanco, Inc.
In our opinion, based upon our audits and the report of other auditors,
the consolidated statements of income, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the results of
operations and of cash flows of WesBanco, Inc., and its subsidiaries (the
Corporation) for the year 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. As
described in Note 2, 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 net interest
income of $5,483,000 for the year ended December 31, 1995. 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 audit 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
report of other auditors provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of the
Corporation for any period subsequent to December 31, 1995.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Pittsburgh, Pennsylvania
January 25, 1996, except as to Note 2, the pooling of
interests with Bank of Weirton, which is as of August 30, 1996.
<PAGE> 63
Exhibit 99.2
[Grant Thornton Logo]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Bank of Weirton
We have audited the statement of condition of the Bank of Weirton as of
December 31, 1995 and the related statements of income, changes in
stockholders' equity and cash flows for the one year period ended December 31,
1995, not presented separately herein. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Bank of
Weirton as of December 31, 1995, and the results of its operations and its
cash flows for the one year period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/ GRANT THORNTON LLP
Grant Thornton LLP
Chicago, Illinois
October 17, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 56,446
<INT-BEARING-DEPOSITS> 198
<FED-FUNDS-SOLD> 71,513
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 342,510
<INVESTMENTS-CARRYING> 224,047
<INVESTMENTS-MARKET> 226,789
<LOANS> 1,032,983
<ALLOWANCE> 15,531
<TOTAL-ASSETS> 1,789,295
<DEPOSITS> 1,414,254
<SHORT-TERM> 106,685
<LIABILITIES-OTHER> 18,709
<LONG-TERM> 97
0
0
<COMMON> 33,483
<OTHER-SE> 216,067
<TOTAL-LIABILITIES-AND-EQUITY> 1,789,295
<INTEREST-LOAN> 90,467
<INTEREST-INVEST> 31,536
<INTEREST-OTHER> 2,527
<INTEREST-TOTAL> 124,530
<INTEREST-DEPOSIT> 51,230
<INTEREST-EXPENSE> 55,774
<INTEREST-INCOME-NET> 68,756
<LOAN-LOSSES> 4,314
<SECURITIES-GAINS> 510
<EXPENSE-OTHER> 48,704
<INCOME-PRETAX> 30,431
<INCOME-PRE-EXTRAORDINARY> 30,431
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,274
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.28
<LOANS-NON> 6,658
<LOANS-PAST> 2,828
<LOANS-TROUBLED> 773
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 15,528
<CHARGE-OFFS> 5,492
<RECOVERIES> 912
<ALLOWANCE-CLOSE> 15,531
<ALLOWANCE-DOMESTIC> 15,531
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,258
</TABLE>
