<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
---------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
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 (I.R.S. Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
304-234-9000
--------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or, for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. WesBanco had 20,485,927
shares outstanding at April 30, 1999.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
- -------------------------------
Consolidated Balance Sheets at March 31, 1999 and December 31, 1998, and
Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998 are set forth on the following pages.
In the opinion of management of the Registrant, all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of the
financial information referred to above for such periods, have been made.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of what results may be attained for the entire year.
For further information, refer to the 1998 Annual Report to Shareholders
which includes consolidated financial statements and footnotes thereto and
WesBanco, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1998.
<PAGE> 3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
March 31, December 31,
1999 1998
--------- ------------
ASSETS
Cash and due from banks $ 69,220 $ 62,989
Due from banks - interest bearing 5,109 5,174
Federal funds sold 22,545 38,055
Investment securities:
Held to maturity (market value of $220,620 and
$220,669, respectively) 216,233 214,845
Available for sale, carried at market value 439,625 465,705
---------- ----------
Total securities 655,858 680,550
---------- ----------
Loans (net of unearned income of $342 and
$512, respectively) 1,394,021 1,373,018
Allowance for loan losses (19,271) (19,098)
---------- ----------
Net loans 1,374,750 1,353,920
---------- ----------
Bank premises and equipment 48,929 47,999
Accrued interest receivable 15,361 14,837
Other assets 39,117 39,188
---------- ----------
Total Assets $2,230,889 $2,242,712
========== ==========
LIABILITIES
Deposits:
Non-interest bearing demand $ 220,476 $ 227,349
Interest bearing demand 527,713 510,662
Savings 305,276 308,979
Certificates of deposit 728,553 740,652
--------- ---------
Total deposits 1,782,018 1,787,642
--------- ---------
Federal funds purchased and repurchase agreements 111,984 112,511
Other borrowings 22,334 22,194
Accrued interest payable 6,220 6,669
Other liabilities 18,037 17,213
--------- ---------
Total Liabilities 1,940,593 1,946,229
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000 shares
authorized; none outstanding --- ---
Common stock, $2.0833 par value; 50,000,000
shares authorized; 20,996,531 shares issued 43,742 43,742
Capital surplus 60,350 60,283
Retained earnings 200,541 198,269
Treasury stock, at cost (552,824 and 336,296
shares, respectively) (15,788) (9,421)
Other comprehensive income (market value adjustment) 1,451 3,610
---------- ----------
Total Shareholders' Equity 290,296 296,483
---------- ----------
Total Liabilities and Shareholders' Equity $2,230,889 $2,242,712
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE> 4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- ------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
For the three months ended
March 31,
---------------------------
1999 1998
------------ -----------
INTEREST INCOME
Interest and fees on loans $28,372 $29,650
Interest on investment securities:
Taxable 7,210 7,709
Tax-exempt 2,477 2,308
----------- -----------
Total interest on investment securities 9,687 10,017
Other interest income 348 1,023
----------- -----------
Total interest income 38,407 40,690
----------- -----------
INTEREST EXPENSE
Interest bearing demand deposits 4,144 3,938
Savings deposits 1,500 2,153
Certificates of deposit 9,843 11,098
----------- -----------
Total interest on deposits 15,487 17,189
Other borrowings 1,395 1,406
----------- -----------
Total interest expense 16,882 18,595
----------- -----------
Net interest income 21,525 22,095
Provision for loan losses 1,406 753
----------- -----------
Net interest income after provision for loan losses 20,119 21,342
----------- -----------
OTHER INCOME
Trust fees 2,767 2,424
Service charges and other income 2,456 2,436
Net securities gains 115 275
----------- -----------
Total other income 5,338 5,135
----------- -----------
OTHER EXPENSES
Salaries, wages and employee benefits 8,685 8,843
Net occupancy expense 895 870
Equipment expense 1,631 1,424
Other operating expense 5,032 5,038
----------- -----------
Total other expenses 16,243 16,175
----------- -----------
Income before provision for income taxes 9,214 10,302
Provision for income taxes 2,397 3,260
----------- -----------
Net Income $ 6,817 $ 7,042
=========== ===========
Earnings per share of common stock $ 0.33 $ 0.34
Average shares outstanding 20,556,151 20,901,998
Dividends per share $ 0.22 $ 0.21
See Notes to Consolidated Financial Statements.
<PAGE> 5
<TABLE>
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
(Unaudited, in thousands, except for shares)
Market Value
Common Stock Adjustment on
--------------------- Capital Retained Treasury Investments
Shares Amount Surplus Earnings Stock Available for Sale Total
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1997 20,609,805 $ 43,055 $ 57,997 $ 186,835 $ (1,675) $ 1,783 $287,995
- ------------------------------------------------------------------------------------------------------------------------
Net income 7,042 7,042
Net market value adjustment on
securities available for
sale - net of tax effect 623 623
-------
Comprehensive income 7,665
Cash dividends:
Common ($.21 per share) (3,348) (3,348)
Common-by pooled bank
prior to acquisition (485) (485)
Net treasury shares purchased (51,306) 21 (1,586) (1,565)
Stock issued for acquisition 330,346 688 2,613 3,301
Deferred benefits for directors (2) (2)
- ------------------------------------------------------------------------------------------------------------------------
March 31, 1998 20,888,845 $ 43,743 $ 60,631 $ 190,042 $ (3,261) $ 2,406 $293,561
========================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1998 20,660,235 $ 43,742 $ 60,283 $ 198,269 $ (9,421) $ 3,610 $296,483
- ------------------------------------------------------------------------------------------------------------------------
Net income 6,817 6,817
Net market value adjustment on
securities available for
sale - net of tax effect (2,159) (2,159)
--------
Comprehensive income 4,658
Cash dividends:
Common ($.22 per share) (4,533) (4,533)
Net treasury shares purchased (216,528) 67 (6,367) (6,300)
Deferred benefits for directors (12) (12)
- ------------------------------------------------------------------------------------------------------------------------
March 31, 1999 20,443,707 $ 43,742 $ 60,350 $ 200,541 $(15,788) $ 1,451 $290,296
========================================================================================================================
</TABLE>
<PAGE> 6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (unaudited, in thousands)
For the three months ended
March 31,
--------------------------
1999 1998
---------- ----------
Cash flows from operating activities:
Net Income $ 6,817 $ 7,042
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,376 1,236
Net amortization of securities 370 231
Amortization of goodwill 279 246
Provision for loan losses 1,406 753
Gains on sales of securities-net (115) (275)
Deferred income taxes (191) 179
Other -- net --- (23)
Net change in assets and liabilities:
Interest receivable (525) (2,613)
Other assets 46 439
Interest payable (448) (12)
Other liabilities 1,978 933
--------- ---------
Net cash provided by operating activities 10,993 8,136
--------- ---------
Cash flows from investing activities:
Securities held to maturity:
Proceeds from maturities and calls 10,114 10,977
Payments for purchase (11,611) (8,272)
Securities available for sale:
Proceeds from sales 834 11,058
Proceeds from maturities and calls 63,501 33,344
Payments for purchases (41,967) (134,620)
Purchase of subsidiary, net of cash acquired --- 5,137
Net (increase) decrease in loans (22,236) 15,203
Purchases of premises and equipment-net (2,306) (1,753)
--------- ---------
Net cash used in investing activities (3,671) (68,926)
--------- ---------
Cash flows from financing activities:
Net increase(decrease) in deposits (5,624) 35,470
Decrease in federal funds purchased and
repurchase agreements (527) (3,879)
Increase in borrowings 140 3,286
Dividends paid (4,355) (3,688)
Purchases of treasury shares-net (6,300) (1,565)
--------- ---------
Net cash provided by (used in) financing activities (16,666) 29,624
--------- ---------
Net decrease in cash and cash equivalents (9,344) (31,166)
Cash and cash equivalents at beginning of period 106,218 161,290
--------- ---------
Cash and cash equivalents at end of period $ 96,874 $ 130,124
========= =========
For the three month periods ended March 31, 1999 and 1998, WesBanco paid
$17,331 and $18,404 in interest on deposits and other borrowings, and $0 and
$143 for income taxes, respectively.
See Notes to Consolidated Financial Statements.
<PAGE> 7
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Note 1 - Accounting policies
- ----------------------------
Basis of presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements include the accounts of WesBanco, Inc. ("the Corporation") and its
wholly-owned subsidiaries. Significant intercompany transactions have been
eliminated in consolidation.
Cash and cash equivalents: For the purpose of reporting cash flows, cash and
cash equivalents include cash and due from banks, due from banks - interest
bearing and federal funds sold. Generally, federal funds are sold for one-day
periods.
Earnings per share: Basic earnings per share is calculated by dividing net
income by the weighted average number of shares of common stock outstanding
during each period. For diluted earnings per share, the weighted average
number of shares for each period assumes the exercise of stock options.
There was no dilutive effect from the stock options and accordingly, basic
and diluted earnings per share are the same.
Note 2 - Completed acquisition
- ------------------------------
On April 30, 1999, WesBanco consummated its acquisition of Heritage
Bank of Harrison County, Inc. ("Heritage") located in Clarksburg, West
Virginia, through a merger with and into WesBanco Bank Fairmont, a WesBanco
affiliate. Under the terms of the acquisition, WesBanco issued 1.76639
shares of WesBanco common stock for each share of Heritage common stock in a
transaction accounted for under the purchase method of accounting. A total
of 423,106 shares of common stock were issued from treasury in the transaction.
The purchase price, based on the closing stock price on the transaction date,
totaled approximately $12.1 million. The excess of the purchase price over
the estimated fair market value of the net assets (goodwill) of Heritage at
March 31, 1999 approximated $7.8 million. WesBanco anticipates amortizing
the goodwill over a period of 20 years. The calculation of goodwill is
subject to change based on final closing financial statements and fair market
value adjustments of Heritage as of April 30, 1999. As of March 31, 1999,
Heritage reported total assets of approximately $34.2 million, deposits of
$29.9 million, and shareholders' equity of $4.2 million.
<PAGE> 8
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
The following discussion and analysis presents in further detail the
financial condition and results of operations of WesBanco, Inc. and its
subsidiaries. This discussion and analysis should be read in conjunction
with the consolidated financial statements and notes presented in this report.
For comparative purposes, consideration should be given to the effects of the
June 30, 1998 sale of the Union Bank of Tyler County ("Union"), which
reported as of the sale date total assets of $46.9 million, loans of $22.8
million and deposits of $39.3 million. WesBanco's results of operations and
financial position have not been restated to reflect the sale of Union prior
to its divestiture date. Where significant, the effect of Union on the
Balance Sheet and Statement of Income comparisons will be discussed.
Certain information in Management's Discussion and other statements
contained in this report, constitute forward-looking statements with respect
to WesBanco and its subsidiaries. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors. Such statements
are subject to 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 business, real estate, and consumer lending
activities; changes in federal and state regulations; the presence in the
Corporation's market area of competitors; or other unanticipated external
developments materially impacting the Corporation's operational and
financial performance.
Earnings Summary
----------------
Comparison of the three months ended March 31, 1999 and 1998
------------------------------------------------------------
Net income for the three months ended March 31, 1999 was $6.8 million, a
3.2% decrease from the same period in 1998. Earnings per share of common
stock for the three months ended March 31, 1999 and 1998 were $0.33 and $0.34,
respectively. The decrease in earnings resulted from a decline in net
interest income and increase in the provision for loan losses. The decline in
net interest income reflects both a lower interest rate environment and
competitive pressures to adjust interest rates on loan and deposit products.
These decreasing net interest income factors were partially offset by a 14.1%
increase in trust fees, which primarily resulted from an increase in
investment fees associated with the introduction of two new WesMark mutual
funds in April 1998. Annualized return on average assets was 1.2% for the
three months ended March 31, 1999 and 1.3% for the same period in 1998.
Annualized return on average equity was 9.3% for the three months ended
March 31, 1999 and 9.7% for the same period in 1998.
<PAGE> 9
Net Interest Income
-------------------
Net interest income, on a taxable equivalent basis (TE), for the
three-month period ended March 31, 1999 declined $0.5 million or 2.0% from
the same period for 1998. Affecting the decline in net interest income were
decreases in average earning assets of $20.4 million or 1.0% and interest
bearing liabilities of $25.3 million or 1.5%, coupled with a decline in the
net yield(TE) on average earning assets to 4.4% from 4.5%. The June 30, 1998
sale of Union, with earning assets of $40.8 million and interest bearing
liabilities of $33.9 million as of the sale date, along with other factors
described below, contributed to the decline in the average balance sheet and
net interest income categories. Similar to industry trends, the net yield on
earning assets continued to decline in this period of lower interest rates.
The earning asset yield, while positively impacted by strong loan growth
during the last three quarterly periods, declined due to competitive pressure
to lower rates on loan products. This effect on the earning asset yield
coupled with a continued shifting of deposits into higher yielding products,
has resulted in a narrowing spread between loan and deposit products.
Interest income(TE) declined $2.2 million or 5.2% between the three
months ended March 31, 1999 and 1998, reflecting a decline in average earning
assets of $20.4 million or 1.0% as well as a decline in the yield(TE) on
average earning assets to 7.7% from 8.1%. The decline in average earning
assets resulted from decreases in average securities of $9.9 million or 1.5%
and average federal funds sold of $44.4 million or 60.5%. These declining
balances were partially offset by growth in average loans of $33.9 million or
2.5%, net of $23.2 million in average loans sold in the Union divestiture.
During the comparative period, yields on average securities and average
federal funds sold declined 11 and 78 basis points, respectively. Average
loan yields declined 59 basis points, reflecting competitive pressure to
lower interest rates, coupled with an increase in refinancing activity in the
real estate loan portfolio between the three months ended March 31, 1999 and
1998.
Interest expense declined $1.7 million or 9.2% between the three months
ended March 31, 1999 and 1998, the result of a decline in average interest
bearing liabilities of $25.3 million or 1.5% coupled with a 34 basis point
decline in the rate paid on interest bearing liabilities to 4.0% from 4.4%.
The decline in interest bearing liabilities consisted primarily of a decrease
in average interest bearing deposits of $43.7 million or 2.7%, of which $35.2
million represented deposits sold in the Union divestiture. An increase in
average interest bearing demand deposits of $52.8 million or 11.3% was more
than offset by reductions in average savings deposit balances of $37.0 million
or 10.8% and average certificates of deposit of $59.5 million or 7.5% between
the three months ended March 31, 1999 and 1998. The rate paid on average
interest bearing deposits decreased 32 basis points between the three months
ended March 31, 1999 and 1998, resulting from adjustments to the money market
rate and savings rate as well as lower rates offered on certificates of
deposit.
<PAGE> 10
Other Income
------------
Excluding net securities gains, other income increased $0.4 million or
7.5%. Trust fees increased $0.3 million or 14.1%, reflecting increases in
the number of accounts under administration, increases in the market value of
trust assets, and investment fees associated with two new WesMark mutual fund
products which were introduced in early 1998. The market value of trust
assets approximated $2.8 billion as of March 31, 1999, an increase of $352.9
million or 14.3% over March 31, 1998.
Other Expenses
--------------
Other expenses remained at a level consistent with the first quarter of
1998. Salaries and employee benefit expenses, along with certain other
non-interest expense categories, decreased over the first quarter of 1998,
reflecting the integration of Commercial BancShares and other internal
consolidations during the third quarter of 1998. WesBanco completed its
business combination with Commercial BancShares on March 31, 1998. Equipment
expenses increased as WesBanco continued its efforts to upgrade existing
information technology systems and introduce new technology into its
operations and customer delivery channels. Technology expenses include
upgrades to the Corporation's wide area network, implementation of a new
Trust operating system, consulting services, costs associated with becoming
Year 2000 compliant, and computer training and development classes for
employees.
Income Taxes
------------
A reconciliation of the average federal statutory tax rate to the reported
effective tax rate attributable to income from operations follows:
For the three months
ended March 31,
--------------------
1999 1998
--------- ---------
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (9) (8)
State income tax - net of federal tax effect 4 3
All other - net (4) 2
--------- ---------
Effective tax rate 26% 32%
========= =========
The decrease in the Corporation's effective tax rate primarily resulted
from final tax filings associated with Commercial BancShares, Incorporated.
<PAGE> 11
Financial Condition
-------------------
Total assets of WesBanco were $2.2 billion, as of March 31, 1999, which
approximated total assets as of December 31, 1998. WesBanco experienced loan
growth during the first quarter of 1999, a period typically affected by
seasonal declines. Reflecting attractive pricing on fixed rate products, the
majority of the loan growth occurred in the real estate loan portfolio.
During the same time period, deposits moved opposite to loan trends,
declining during the first quarter 1999.
Investment Securities
---------------------
The following table shows the composition of the securities portfolio:
March 31, December 31,
(in thousands) 1999 1998
--------- ---------
Investment Securities Held to Maturity (at cost):
U.S. Treasury and federal agency securities $ 36,109 $ 41,961
Obligations of states and political subdivisions 176,770 169,552
Other debt securities 3,354 3,332
--------- ---------
Total held to maturity (market value of $220,620
and $220,699, respectively) 216,233 214,845
--------- ---------
Securities Available for Sale (at market):
U. S. Treasury and federal agency securities 244,554 276,260
Obligations of states and political subdivisions 24,354 24,712
Corporate securities 8,115 5,262
Mortgage-backed and other debt securities 162,602 159,471
--------- ---------
Total available for sale 439,625 465,705
--------- ---------
Total securities $ 655,858 $ 680,550
========= =========
Proceeds from the sale or maturity of securities represent a source of
liquidity for WesBanco. With a decline in deposits and growth in loans during
the first quarter of 1999, proceeds from sales and maturities of securities
classified as available for sale became the primary source of funding for new
loan growth. Available for sale securities decreased $26.1 million, while
held to maturity securities increased slightly during the first quarter of
1999.
The market value adjustment, before tax effect, in the available for sale
securities portfolio reflected unrealized net gains of $2.5 million as of
March 31, 1999 compared to unrealized net gains of $6.0 million as of
December 31, 1998. These adjustments represent temporary market value
fluctuations caused by general changes in market rates and the length of time
to respective maturity dates. If these securities are held until their
respective maturity date, no market value adjustment would be realized.
<PAGE> 12
Loans
-----
The following table shows the composition of the loan portfolio:
March 31, December 31,
(in thousands) 1999 1998
----------- -----------
Loans:
Business $ 472,893 $ 484,269
Real Estate - Construction 44,637 46,033
Real Estate 553,053 520,393
Personal, net of unearned income 309,527 313,043
Loans held for sale 13,911 9,280
----------- -----------
Loans, net of unearned income $ 1,394,021 $ 1,373,018
=========== ===========
Loans, net of unearned income increased $21.0 million or 1.5% between
March 31, 1999 and December 31, 1998. Loan growth, which occurred primarily
in real estate loans, with a $32.6 million or 6.3% increase, was partially
offset by a decrease in business and personal loans. The decrease in personal
loans reflected a continuation of competitive pressures and more conservative
credit standards. Real estate loans increased steadily during the first
quarter of 1999, driven by home equity products and attractive pricing of
residential mortgage loan products.
Non-performing Assets
---------------------
Non-performing assets are summarized as follows:
March 31, December 31,
(in thousands) 1999 1998
--------- -----------
Nonaccrual loans $ 8,169 $ 10,488
Renegotiated loans 152 695
Other classified loans (1) 7,470 5,285
--------- ---------
Total impaired loans 15,791 16,468
Other real estate owned 3,414 3,486
--------- ---------
Total nonperforming assets $ 19,205 $ 19,954
========= =========
(1) Includes loan internally classified as doubtful and substandard (as
defined by banking regulations) that meet the definition of impaired loans.
The average balance of impaired loans during the three months ended
March 31, 1999 and year ended December 31, 1998, was approximately $15.4
million and $19.4 million, respectively.
WesBanco continues to experience improvement in the level of
nonperforming assets, which decreased $0.7 million over December 31, 1998
and $5.8 million over March 31, 1998. Nonperforming assets as a percentage
of loans and other real estate reflects this improvement, reducing to 1.37%
from 1.43% and 1.84% as of December 31, 1998 and March 31, 1998, respectively.
The declining trend
<PAGE> 13
resulted from reductions in nonaccrual loans and the sale of a large
commercial - real estate property classified as other real estate owned in
the fourth quarter of 1998.
WesBanco monitors the overall quality of its loan portfolio through
various methods. Underwriting policies and guidelines have been established
for all types of credits and management continually monitors the portfolio
for adverse trends in delinquent and non-performing loans. Loans are
considered impaired when it is determined that WesBanco may not be able to
collect all principal and interest due according to the contractual terms of
the loans.
Specific allowances for loan losses are allocated for impaired loans
based on the present value of expected future cash flows, or the fair value
of the collateral for loans that are collateral dependent. Allowances for
loan losses on impaired loans were $2.6 million and $2.2 million as of
March 31, 1999 and December 31, 1998, respectively.
Loans past due 90 days or more decreased to $3.7 million or 0.3% of
total loans as of March 31, 1999 compared to $7.0 million or 0.5% of total
loans as of December 31, 1998.
Lending by WesBanco banks is guided by written lending policies, which
allow for various types of lending. Normal lending practices do not include
the acquisition of high yield non-investment grade loans or "highly leveraged
transactions" ("HLT") from outside the primary market.
Allowance for Loan Losses
-------------------------
Activity in the allowance for loan losses is summarized as follows:
For the three months ended
March 31,
--------------------------
1999 1998
(in thousands) ------------ ------------
Balance, at beginning of period $ 19,098 $ 20,261
Allowance for loan losses of acquired bank --- 329
Charge-offs (1,424) (1,450)
Recoveries 191 332
--------- ---------
Net charge-offs (1,233) (1,118)
Provision for loan losses 1,406 753
--------- ---------
Balance, at end of period $ 19,271 $ 20,225
========= =========
The allowance for loan losses as a percentage of total loans was
1.38% as of March 31, 1999 and 1.50% as of March 31, 1998. Amounts allocated
to the allowance for loan losses are based upon management's evaluation of
the credit risk in the loan portfolio. 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. Management believes that
the allowance for loan losses as of March 31, 1999 is adequate to provide for
potential losses in the portfolio.
<PAGE> 14
Deposits
--------
Total deposits decreased $5.6 million or 0.3% between March 31, 1999 and
December 31, 1998. During this three-month period, WesBanco continued to
experience a change in the mix of deposits from the traditional savings and
certificates of deposit into its higher yielding prime rate money market
accounts.
Liquidity and Capital Resources
-------------------------------
WesBanco manages its liquidity position to meet its funding needs,
including potential deposit outflows and loan principal disbursements, and
to meet its asset and liability management objectives.
In addition to funds provided from operations, WesBanco's primary
sources of funds are deposits, principal repayments on loans and matured or
called securities. Scheduled loan repayments and maturing securities are
relatively predictable sources of funds. However, deposit flows and
prepayments on loans can be significantly influenced by changes in market
interest rates, economic conditions, and competition. WesBanco strives to
manage the pricing of its deposits to maintain a balance of cash flows
commensurate with loan commitments and other funding needs.
On October 15, 1998, WesBanco's Board approved a plan to repurchase up
to one million shares of WesBanco common stock on the open market. The timing,
price, and quantity of purchases under the plan are at the discretion of the
Corporation and the plan may be discontinued or suspended at any time.
As of April 30, 1999, WesBanco had purchased 925,114 shares under the plan.
WesBanco announced a cash dividend increase in the first quarter of 1999
to be paid on April 1, 1999. The quarterly dividend per share was increased
to $.22 from $.21 per share, representing the thirteenth consecutive year of
common stock cash dividend increases for WesBanco.
WesBanco is subject to risk-based capital guidelines that measure capital
relative to risk-adjusted assets and off-balance sheet financial instruments.
The Corporation's Tier I, total risk-based capital and leverage ratios are
well above the required minimum levels of 4%, 8% and 4%, respectively. At
March 31, 1999 and December 31, 1998, all of WesBanco's affiliate banks
exceeded the minimum regulatory levels.
Capital adequacy ratios are summarized as follows:
March 31, December 31,
1999 1998
--------------------------
Tier I capital 18.2% 18.5%
Total risk-based capital 19.4% 19.8%
Leverage 12.4% 12.5%
<PAGE> 15
Forward-Looking Statements
--------------------------
Balance sheet:
- --------------
During the remainder of 1999, assuming a stable interest rate forecast,
balance sheet growth is expected to be concentrated in real estate loans,
reflecting a lower-level of interest rates and attractive pricing of
residential mortgage and home equity loan products. A slowdown in personal
loan growth is anticipated, the result of continued competitive bank and
non-bank pressures as well as more conservative credit standards. With only
moderate deposit growth expected during the remainder of the year, funding of
new loan demand should be primarily from the securities portfolio. A shift
in composition of deposits is expected to continue, reflecting declines in
certificates of deposit and savings balances, offset by continued growth in
the competitively priced prime rate money market accounts.
Statement of income:
- --------------------
Net interest income: Management expects loan growth to continue during 1999,
however, the positive effects of this growth on net interest income will be
mitigated by competitive pressure to make interest rate adjustments on loan
and deposit products. As a result of this pressure, net interest income is
expected to be below prior year levels.
Other income and expense: Through the remainder of the year, management
expects trust fees and non-banking income to exceed 1998 levels. While trust
fees will be affected by increases in the number of accounts under
administration and investment fees associated with WesMark mutual funds,
non-banking income will be affected by an increase in insurance fees
associated with Hunter Agency, Inc., which was acquired in June 1998.
The June 1998 sale of Union as well as the integration of Commercial
BancShares into WesBanco Parkersburg will have a decreasing effect on
salaries and employee benefits in comparison to 1998. However, partially
offsetting these decreasing factors will be expenses related to the acquisition
of Heritage along with staffing and start-up costs associated with new branch
facilities in Charleston and Moundsville, West Virginia, which are scheduled
to open later in the year. Equipment expense and certain other non-interest
expense categories, will continue to be affected by increased technology
expenses. Late in 1999, WesBanco plans to implement a check imaging system,
which will improve operating efficiencies associated with the process of
preparing and distributing customers' checking statements.
Year 2000 Readiness Disclosure
------------------------------
The Year 2000 issue primarily results from computer software or hardware
that is date-sensitive and may recognize "00" as the Year 1900 instead of the
Year 2000 which may cause system failure, miscalculations and other temporary
disruptions of operations.
<PAGE> 16
WesBanco's Year 2000 Task Force, which includes independent consultants
and an outside Board member, has substantially completed the Awareness,
Assessment, Remediation, Validation and Implementation phases of this project.
WesBanco estimates that total external and internal costs of becoming
Year 2000 ready will approximate $660,000. These costs include operating
expenses incurred and paid through March 31, 1999 of $425,000, estimated
future capital expenditures of $20,000 and estimated future operating expenses
of $215,000.
Mission Critical vendor supplied and maintained application software,
which must be continuously operable to support WesBanco's customer processing
requirements, includes accounting systems for: deposits, loans, general ledger,
shareholders, Trust, credit cards and ATM/debit cards. Accounting systems for
loans, deposits, and general ledger have been certified as Year 2000 compliant
by an independent third party. Vendors of the other systems, noted above,
have represented to WesBanco that applicable Year 2000 testing has been
performed and they have determined their systems to be Year 2000 compliant.
WesBanco has elected to perform in-house testing, including future date
testing, on 100% of all software and banking equipment. WesBanco is
substantially complete with testing its mission critical application software
and substantially complete with its overall testing schedule. Planned system
enhancements during the remainder of 1999 will be tested in connection with
their installation.
Information technology ("IT") systems such as, mainframe computers,
network servers and microcomputers, have been successfully tested as Year 2000
compliant. The Year 2000 Task Force has completed a non-IT examination of
WesBanco's business offices, to provide assurance that security systems,
vault doors, calculators, HVAC systems and telephone systems have been
documented and exceptions have been resolved.
Large commercial customers and non-IT vendors have been assessed for
their capability to resolve the Year 2000 issues and attain compliance. Risk
ratings have been assigned to customers and non-IT vendors, with high-risk
accounts being revisited on a periodic basis. Year 2000 issues and readiness
are considered and evaluated for all new large customers and non-IT vendors.
During the fourth quarter of 1998, WesBanco initiated the second contact with
its vendors. In addition, a program was initiated to visit each municipality
and county government that serves our branch and ATM locations to complete a
survey on services provided.
Contingency plans, which set forth procedures for handling potential
disruptions to operations, are currently being developed. These plans
include: plans for all main customer products, services and Trust Fiduciary
accounts, and a Liquidity/Funding Contingency Plan to provide adequate cash
availability and the access to cash sources and credit lines. These
contingency plans have multiple
<PAGE> 17
phases, including a Business Impact-Analysis phase, a Detail Plan Development
phase and a Plan Validation phase. All phases are scheduled for completion
within regulatory time tables.
The Trust/Investments function ("Trust") of WesBanco has addressed Year
2000 issues directed at validating its main operating/accounting program for
Year 2000 compliance as well as evaluating accounts in a fiduciary capacity
for significant Year 2000 risks. An independent consultant was hired to
direct the Year 2000 validation of Trust's main operating/accounting software
application, a vendor supplied and maintained program. This application has
been effectively tested, found to be Year 2000 compliant and is fully
implemented. Trust is executing a plan to evaluate and/or assess fiduciary
account holdings with the objective of locating fiduciary accounts that may
contain significant Year 2000 risks to customers. WesBanco will continue to
evaluate fiduciary accounts throughout 1999, however, expects the majority of
the evaluation to be complete by September 30, 1999.
WesBanco has substantially completed all necessary phases of the Year
2000 Program and management believes it is taking the appropriate steps to
identify and resolve Year 2000 issues in a timely manner. WesBanco has no
means of ensuring that third parties (suppliers and major commercial customer)
with whom it interacts will be Year 2000 ready. The inability of those parties
to complete their Year 2000 process could impact the financial results of
WesBanco. Contingency plans will address the uncertainty of third parties
readiness.
Plans to complete Year 2000 compliance are based upon management's best
estimates, which are derived utilizing numerous assumptions of future events,
including availability of certain internal and external resources, the
anticipated ability of WesBanco's larger commercial customers to become Year
2000 compliant and the readiness of strategic third party vendors. There can
be no guarantee that these estimates will be achieved and actual results could
differ materially from these plans due to unforeseen circumstances.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Through March 31, 1999, there have been no material changes to the
information on this topic as presented in the 1998 Annual Report.
<PAGE> 18
Part II - OTHER INFORMATION
- ---------------------------
Item 1-3, 5 - Not Applicable
- ----------------------------
Item 4 - Results of votes of security holders
- ---------------------------------------------
On April 21, 1999 the Annual Meeting of the Stockholders of WesBanco, Inc.
was held.
The following directors were re-elected to the Board of Directors for a term
of three years expiring at the annual stockholders meeting in 2002: James G.
Bradley, John H. Cheffy, Frank R. Kerekes, Joan C. Stamp, R. Peterson Chalfant,
John W. Kepner, Robert H. Martin, and James W. Swearingen
Item 6(a) - Exhibits
- --------------------
27 Financial Data Schedule required by Article 9 of Regulation S-X.
Item 6(b) - Reports on Form 8-K
- -------------------------------
On May 7, 1999, WesBanco filed a current report on Form 8-K dated
April 30, 1999 to report the completion of the acquisition of the Heritage
Bank of Harrison County, Inc.
<PAGE> 19
SIGNATURES
----------
Pursuant to the requirement 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.
WESBANCO, INC.
--------------
Date: May 14, 1999 /s/ Edward M. George
-----------------------------
Edward M. George
President and Chief Executive Officer
Date: May 14, 1999 /s/ Paul M. Limbert
----------------------------------
Paul M. Limbert
Executive Vice President and Chief
Financial Officer
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