<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, 1998
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
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WESBANCO, INC.
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(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
Dealers, Inc.
Nonredeemable Preferred Stock 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 26,
1999 was approximately $509,801,104.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of February 26, 1999, there were 20,534,227 shares of WesBanco, Inc.
Common stock $2.0833 par value, outstanding.
Page 1 of 89
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WESBANCO, INC.
TABLE OF CONTENTS
ITEM # ITEM PAGE(S)
- ------ ---- -------
Part I
------
1 Business 3
2 Properties 7
3 Legal proceedings 7
4 Submission of matters to a vote of security holders N/A
Part II
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5 Market for the registrant's common equity and
related stockholder matters 8
6 Selected financial data 9
7 Management's discussion and analysis of financial
condition and results of operations 9
8 Financial statements and supplementary data 24
9 Changes in and disagreements with accountants on
accounting and financial disclosure N/A
Part III
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10 Directors and Executive Officers of the registrant 46
11 Executive compensation 46
12 Security ownership of certain beneficial owners and
management 47
13 Certain relationships and related transactions 47
Part IV
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14 Exhibits, financial statement schedules and reports
on Form 8-K 47
<PAGE> 3
PART I
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Item 1. Business
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General
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WesBanco, a multi-bank holding company headquartered in Wheeling, WV,
offers a full range of financial services including retail banking, corporate
banking, personal and corporate trust services, brokerage, mortgage banking
and insurance. Most affiliates operate automated teller machines primarily
under the name of MAC. The banking machines are linked to CIRRUS, a
nationwide banking network.
The Corporation's primary business function is the operation of four
banking affiliates through 59 offices located in West Virginia and Eastern
Ohio. The four banking affiliates are headquartered in major West Virginia
cities and include, WesBanco Bank Wheeling, WesBanco Bank Fairmont, WesBanco
Bank Parkersburg and WesBanco Bank Charleston with total assets as of
December 31, 1998 of $1.1 billion, $515.6 million, $439.2 million and $146.0
million, respectively. WesBanco provides trust services through one of the
largest trust departments in West Virginia. As of December 31, 1998, the
market value of trust assets was $2.8 billion.
Other business activity occurs through the Corporation's non-bank
affiliates. WesBanco Mortgage Company, a mortgage banking affiliate that
originated approximately $100 million in residential mortgage loans during
1998, is headquartered in South Charleston. Hunter Agency, Inc. is a
multi-line independent insurance agency specializing in property, casualty
and life insurance for personal and commercial clients. Hunter was acquired
during 1998 and is headquartered in Shinnston, WV. CommBanc Investments, Inc.,
a full service brokerage affiliate that was part of the acquisition of
Commercial BancShares, is located in Marietta, Ohio.
There are approximately 1,093 full time equivalent employees employed by
all WesBanco affiliates as of December 31, 1998.
On March 31, 1998, WesBanco completed its acquisition of Commercial
BancShares, Incorporated issuing 4,594,134 shares of stock in a transaction
accounted for as a pooling of interests. All previously presented financial
information has been restated to include Commercial BancShares. As of the
transaction date, Commercial BancShares reported total assets of approximately
$466.1 million.
On November 10, 1998, WesBanco and The Heritage Bank of Harrison County
announced the execution of a definitive Agreement and Plan of merger providing
for the merger of Heritage, a unit-bank located in Clarksburg, WV, with and
into WesBanco Bank Fairmont. The transaction, which will be accounted for
under the purchase method of accounting, is expected to be completed during
the second quarter of 1999. As of December 31, 1998, Heritage reported total
assets of approximately $33.1 million.
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, 1998, none of the affiliates were engaged in any
operations in foreign countries and none has had transactions with customers
in foreign countries.
Competition
- -----------
Each affiliate faces strong competition for local business in its
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 and loans. 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
<PAGE> 4
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.
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 principle of
liability on the part of depository institutions insured by the FDIC for any
losses incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989, in connection with (i) the default of a commonly controlled
FDIC-insured depository institution, or (ii) any assistance provided by the
FDIC to a commonly controlled FDIC-insured depository institution in danger
of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a "default" is likely
to occur in the absence of regulatory assistance. Accordingly, in the event
that any insured bank subsidiary of WesBanco causes a loss to the FDIC, other
bank subsidiaries of 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> 5
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 1.20%
during 1998. No assessment was paid to the BIF for 1998.
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%.
At December 31, 1998, 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 hearing) 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
<PAGE> 6
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.
Capital Requirements
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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, 1998, all of WesBanco's banking subsidiaries had
capital in excess of all applicable requirements.
Interstate Banking Act
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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> 7
Item 2. Properties
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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 Wheeling, McMechen, Follansbee,
Wellsburg, Weirton, New Martinsville, Paden City, Sistersville, Elizabeth,
Charleston, South Charleston, Dunbar, Sissonville, Parkersburg, Ravenswood,
Ripley, Pennsboro, Ellenboro, Harrisville, Cairo, Kingwood, Fairmont,
Morgantown, Shinnston, Bridgeport and Masontown. The Ohio bank offices are
located in Marietta, Barlow, Devola, 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,
1998 was $48.0 million.
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. During 1998, an office building
located adjacent to the main office was acquired by WesBanco Properties, an
affiliate of WesBanco. A portion of the building, which is currently being
renovated, will be used for expansion of the main office operations.
At various building locations, WesBanco rents and will continue to look
for opportunities to rent office space to unrelated businesses. Rental income
increased substantially during 1998 due to new rental agreements at several
locations. Rental income generated during 1998 totaled $545,000 compared
to $244,000 during 1997.
Item 3. Legal Proceedings
- --------------------------
Reference has been made in prior filings to the case styled Tankovits v.
Glessner, et al., Civil Action No. 96-C-59(W), presently pending in the
Circuit Court of Ohio County, West Virginia. This is a suit by a trust
beneficiary against the Wesbanco Bank Wheeling, the Plaintiff's uncle, the
Plaintiff's mother and certain family owned corporations, and arises out of
the administration of the estate of the Plaintiff's grandfather. The
Plaintiff's uncle and mother served as Co-Executors of the grandfather's
estate, and the Complaint alleges various torts, including self-dealing,
breach of fiduciary duty and negligence. The bank is a Co-Trustee, along
with the mother and the uncle, of two trusts which were to receive benefits
upon completion of the administration of the estate. The Co-Executors
elected to pay the estate tax in installments over a 15-year period and,
accordingly, made no distributions to the trust from the estate. The
Complaint has asserted a duty on the part of the bank to supervise the
Co-Executors in the administration of the estate, even though the bank had
no fiduciary capacity in the administration of the estate. The Complaint
seeks certain equitable relief, compensatory and punitive damages in the
amount of $10,000,000.00. The case continues in discovery and the bank is
vigorously defending the case. The bank believes that it did not breach any
fiduciary duties owed to the Plaintiff under the circumstances of the case
and believes that it did not have a duty, as a matter of law, to supervise
the administration of the estate by the Co-Executors.
Wesbanco Bank Wheeling has also been named as a Defendant in a case
styled Travelers v. Wesbanco Bank Wheeling and Coopers & Lybrand, under Civil
Action No. 98-C-225, presently pending in the Circuit Court of Ohio County,
West Virginia. In this action, Travelers, as subrogee of Wheeling-Nisshin,
seeks to recover certain losses incurred by it over the embezzlement of funds
by a former financial officer of Wheeling-Nisshin. The losses were generated
through forged checks. Travelers has sued the bank alleging a violation of
the properly payable rule of the Uniform Commercial Code, even though the
officer involved was a designated financial officer of Wheeling-Nisshin,
reconciled checking accounts and had access to facsimile signatures used by
Wheeling-Nisshin. The bank believes that it has a substantial defense to the
claims of Travelers and is vigorously defending the case. The claimed losses
are equivalent to the amount of the loss incurred by Travelers, $750,000.00,
plus interest. The bank has filed a Motion to Dismiss the case which is
pending hearing before the Court.
A Declaratory Judgment suit was filed on behalf of affiliate bank,
Wesbanco Bank Parkersburg, in the United States District Court for the
Southern District of West Virginia, under Civil Action No. 6:98-097, seeking
to determine the benefits payable to certain former employees under an
executive supplemental income plan maintained by several former affiliate
banks of Commercial BancShares, Incorporated acquired by Wesbanco on March 31,
1998. The Complaint seeks a determination of the rights of the participants
under this supplemental benefit plan. The Bank believes that it has correctly
interpreted and applied the benefit plan in accordance with the terms of the
plan and has relied upon the recommendations of its third party administrator
in making such determinations. Certain named former employees who are
participants in the plan have filed a counterclaim asserting a different
interpretation of the plan. The case is currently
<PAGE> 8
in discovery. It is not anticipated that the parties will be able to
amicably reconcile the differences in interpretation of the plan provisions.
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
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Matters
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WesBanco's common stock is quoted on The Nasdaq Stock Market (Nasdaq),
with a trading symbol of WSBC. The approximate number of holders of
WesBanco's $2.0833 par value common stock as of December 31, 1998 was 5,577.
The number of holders does not include WesBanco 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.
Quarterly price information, reflecting high and low sales prices as reported
by Nasdaq and quarterly dividends per share for 1998 and 1997 are as presented
below:
1998 1997
---------------------------- ------------------------
Dividend Dividend
High Low Declared High Low Declared
------------------------------------------------------
4th quarter $30.00 $25.38 $.210 $31.25 $27.50 $.200
3rd quarter 28.25 22.00 .210 30.50 25.75 .200
2nd quarter 30.94 23.88 .210 27.17 21.33 .193
1st quarter 31.13 27.00 .210 22.17 21.17 .193
=============================================================================
<PAGE> 9
Item 6. Selected Financial Data
- --------------------------------
FIVE YEAR SELECTED FINANCIAL SUMMARY
- -----------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
December 31,
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1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Information:
Cash dividends declared per share $0.84 $0.786 $0.72 $0.64 $0.573
Book value per share 14.35 13.97 13.17 12.33 11.37
Average common shares outstanding 20,867,193 20,461,742 19,855,791 19,824,740 19,966,919
Selected Balance Sheet Information:
Total Investment Securities $ 680,550 $ 629,218 $ 600,330 $ 609,712 $ 672,043
Net Loans 1,353,920 1,321,640 1,305,766 1,140,950 1,051,385
Total Assets 2,242,712 2,211,543 2,090,750 1,934,675 1,905,055
Total Deposits 1,787,642 1,779,867 1,702,660 1,595,428 1,578,545
Total Shareholders' Equity 296,483 287,995 268,527 245,199 225,913
Selected Ratios:
Return on Average Assets 1.26% 1.18% 1.31% 1.31% 1.18%
Return on Average Equity 9.55 8.99 10.48 10.53 9.85
Dividend Payout Ratio 61.76 63.90 54.96 50.79 51.16
Average Equity to Average Assets 13.16 13.15 12.47 12.48 11.98
Trust Assets, at market value 2,774,906 2,099,821 1,712,280 1,450,257 1,205,802
For the years ended December 31,
----------------------------------------------------------
Summary Statement of Income: 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------
Interest income $162,718 $157,790 $144,383 $138,507 $128,653
Interest expense 73,925 70,005 61,612 59,122 49,281
- ------------------------------------------------------------------------------------------------
Net interest income 88,793 87,785 82,771 79,385 79,372
Provision for loan losses 4,392 5,574 4,795 3,206 6,490
- ------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 84,401 82,211 77,976 76,179 72,882
Other income 25,715 17,701 15,657 14,385 13,043
Other expenses 68,308 65,182 57,043 55,683 55,826
- ------------------------------------------------------------------------------------------------
Income before income taxes 41,808 34,730 36,590 34,881 30,099
Provision for income taxes 13,495 9,519 10,648 9,832 7,809
- ------------------------------------------------------------------------------------------------
Net Income $28,313 $25,211 $25,942 $25,049 $22,290
================================================================================================
Preferred stock dividends and accretion $ --- $ --- $ --- $ 164 $ 387
Net Income applicable to common stock 28,313 25,211 25,942 24,885 21,903
Earnings per share 1.36 1.23 1.31 1.26 1.12
================================================================================================
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations
---------------------
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, presented in Part II, item 8 of this
document.
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, and
consumer loan customers and their lending activities; changes in federal and
state
<PAGE> 10
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.
OVERVIEW
- -----------------------------------------------------------------------------
Earnings for 1998 were $28.3 million or $1.36 per share, up 12.3% from
$25.2 million or $1.23 per share in 1997. The increase in earnings was
highlighted by an increase in activity charges and Trust fees, a $4.6 million
gain on the sale of Union Bank of Tyler County, a moderate improvement in net
interest income driven primarily by balance sheet growth, gains on sales of
securities and a reduction in the provision for loan losses reflecting
improved credit quality. Partially offsetting these improvements to earnings
was an increase in non-interest expenses, which resulted primarily from the
business combination with Commercial BancShares.
The average balance sheet reflected increases in average earning assets
of 5.8% and average interest bearing liabilities of 5.3% between 1998 and 1997.
Growth in earning assets occurred in the securities portfolio early in the
year, however, by the third and fourth quarter had shifted to business and
mortgage loans. Growth in interest bearing liabilities was affected early
in the year by increases in WesBanco's Prime Rate Money Market deposits and
Good Neighbor Banking CD's. This trend moderated during the second half of
the year.
During 1998, WesBanco continued its expansion efforts through its
business combination with Commercial BancShares, acquisitions of Hunter
Agency and Simons Insurance Agency, and the signing of an Agreement to merge
Heritage Bank of Harrison County into a WesBanco affiliate. Additionally,
the Corporation initiated a stock repurchase plan to repurchase up to one
million shares of WesBanco common stock, introduced two new WesMark mutual
funds and began extensive construction projects; renovating a building to
expand office capacity in Wheeling, WV and constructing a new branch facility
in Charleston, WV.
Historical financial results have been restated to reflect WesBanco's
pooling of interests business combination with Commercial BancShares. However,
prior periods have not been restated to reflect the divestiture of Union Bank
of Tyler County on June 30, 1998, as well as the purchase acquisitions of
Vandalia National Corporation, acquired December 30, 1996, and Shawnee Bank,
Inc., acquired June 30, 1997. The purchase acquisitions and divestiture
impacted performance comparisons between 1998 and prior periods. Where
material, the impact of these events is discussed.
RESULTS OF OPERATIONS
NET INTEREST INCOME
- -----------------------------------------------------------------------------
Following a period of stability during much of 1997 through the third
quarter of 1998, short-term interest rates declined during the fourth quarter
of 1998, reflecting the Federal Reserve's action to lower the Federal funds
rate 100 basis points. Long-term interest rates steadily declined during 1997
and 1998. WesBanco and most other banks reacted to these declining trends by
lowering its base lending rate in the fourth quarter of 1998 to 7.75% from
8.50%. Previously, the base rate had not changed since early 1997.
Taxable equivalent net interest income rose $1.3 million or 1.4% during
1998, caused by deposit growth early in the year and strong third and fourth
quarter loan growth which changed the mix of earning assets. Average earning
assets increased $115.7 million or 5.8% in 1998 compared to 1997. The net
yield on earning assets (taxable equivalent net interest income as a
percentage of earning assets) decreased 20 basis points during 1998,
reflecting a slowdown in loan demand early in the year, a shift in deposits
to higher-priced products, and a decline in interest rates.
Taxable equivalent interest income rose $5.2 million or 3.2% during 1998,
reflecting growth in average securities of $94.3 million or 15.7%. The taxable
equivalent yield on average securities decreased 22 basis points from 6.85% to
6.63% during the year, a result of maturities in higher yielding securities
and lower rate reinvestment opportunities. Average loan growth was moderate
for the year, increasing only $18.2 million or 1.4%. Average loan yields
decreased approximately 10 basis points to 8.77% for 1998 compared to 8.87%
for 1997. Loan growth during the second half of 1998, occurring primarily
in the mortgage and business loan portfolios, changed the mix of assets and
stabilized the net yield on earning assets in the fourth quarter.
<PAGE> 11
Management expects the strong fourth quarter loan demand to extend
through 1999. However, the positive net interest margin impact expected from
this loan growth will be softened by competitive pressure to make interest
rate adjustments on loan and deposit products.
Interest expense increased $3.9 million or 5.6% during 1998, driven by
growth in Prime Rate Money Market deposits. During the year, average
interest-bearing liabilities increased $86.0 million or 5.3% over 1997.
Average interest-bearing demand deposits, which include Prime Rate MMDA's,
increased $100.8 million or 25.6% over the prior year, while average savings
balances declined by $40.2 million or 10.9%, creating a change in the mix of
deposits. The average rate paid on interest-bearing liabilities was consistent
with the 1997 level of 4.3%.
The average balance sheet and analysis of net interest income are as follows:
<TABLE>
For the years ended December 31,
---------------------------------------------------------------------------------------
1998 1997 1996
--------------------------- -------------------------- ----------------------------
Average Average Average Average Average Average
(dollars in thousands) Volume Interest Rate Volume Interest Rate Volume Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Total loans $1,354,680 $118,766 8.77% $1,336,469 $118,540 8.87% $1,215,508 $107,428 8.84%
Investment securities:
Taxable 502,379 31,205 6.21 420,825 27,045 6.43 445,834 26,471 5.94
Tax-exempt 191,363 9,592 5.01 178,597 9,121 5.11 159,346 8,352 5.24
- ---------------------------------------------------------------------------------------------------------------------------
Total investment securities 693,742 40,797 5.88 599,422 36,166 6.03 605,180 34,823 5.75
Federal funds sold 58,474 3,155 5.40 55,320 3,084 5.57 39,148 2,132 5.45
- ---------------------------------------------------------------------------------------------------------------------------
Total earning assets 2,106,896 $162,718 7.72% 1,991,211 $157,790 7.92% 1,859,836 $144,383 7.76%
- ---------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 63,872 62,371 65,673
Other assets 82,854 77,774 58,666
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets $2,253,622 $2,131,356 $1,984,175
===========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $494,278 $16,693 3.38% $393,480 $12,335 3.13% $328,873 $8,370 2.55%
Savings deposits 327,342 7,852 2.40 367,583 9,520 2.59 403,170 11,059 2.74
Certificates of deposit 765,750 43,067 5.62 766,981 43,041 5.61 701,914 38,083 5.43
- ---------------------------------------------------------------------------------------------------------------------------
Total interest bearing deposits 1,587,370 67,612 4.26 1,528,044 64,896 4.25 1,433,957 57,512 4.01
Federal funds purchased,
repurchase agreements,
and other borrowings 126,362 6,313 5.00 99,659 5,109 5.13 87,228 4,100 4.70
- ---------------------------------------------------------------------------------------------------------------------------
Total interest
bearing liabilities 1,713,732 $73,925 4.31% 1,627,703 $70,005 4.30% 1,521,185 $61,612 4.05%
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest bearing
demand deposits 221,304 202,671 191,971
Other liabilities 22,105 20,661 23,525
Shareholders' Equity 296,481 280,321 247,494
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,253,622 $2,131,356 $1,984,175
===========================================================================================================================
Net yield on earning assets $88,793 4.21% $87,785 4.40% $82,771 4.45%
===========================================================================================================================
Taxable equivalent net yield
on earning assets $93,959 4.46% $92,696 4.66% $87,268 4.69%
===========================================================================================================================
</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.
<PAGE> 12
The effect on interest income and interest expense for the years ended
December 31, 1998, 1997 and 1996, due to changes in average volume and rate
from the prior year, is presented below. 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.
<TABLE>
1998 Compared to 1997 1997 Compared to 1996
----------------------------- ------------------------------
Net Increase Net Increase
(in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Total loans $ 1,605 $(1,379) $ 226 $10,727 $ 385 $11,112
Taxable securities 5,092 (932) 4,160 (1,534) 2,108 574
Tax-exempt securities 642 (171) 471 988 (219) 769
Federal funds sold 172 (101) 71 900 52 952
- -------------------------------------------------------------------------------------------------------
Total interest income change 7,511 (2,583) 4,928 11,081 2,326 13,407
- -------------------------------------------------------------------------------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits 3,348 1,010 4,358 1,819 2,146 3,965
Savings deposits (996) (673) (1,669) (943) (596) (1,539)
Certificates of deposit (69) 95 26 3,619 1,339 4,958
Federal funds purchased, repurchase
agreements, and other borrowings 1,337 (132) 1,205 617 392 1,009
- -------------------------------------------------------------------------------------------------------
Total interest expense change 3,620 300 3,920 5,112 3,281 8,393
- -------------------------------------------------------------------------------------------------------
Net interest income increase (decrease) $ 3,891 $(2,883) $1,008 $ 5,969 $ (955) $ 5,014
=======================================================================================================
</TABLE>
OTHER INCOME
- -----------------------------------------------------------------------------
Excluding the $4.6 million gain on the sale of Union and net securities
gains, other income increased $2.4 million or 14.1% over 1997, due to
increases in trust fees and activity fees on deposit accounts.
Trust fees increased $1.4 million or 18.7% over 1997, a result of
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 1998. The market value of trust
assets at December 31, 1998 was $2.8 billion as compared to $2.1 billion at
December 31, 1997, an increase of 32.1%.
Activity charges and other income, excluding the gain on the sale of
Union, totaled $10.5 million for 1998, an increase of $1.0 million or 10.4%
over 1997, reflecting an increase in deposit activity charges. Enhancements
to the monitoring system for collecting fees primarily contributed to the
increase over 1997.
Net securities gains increased $0.9 million or 192.6% in comparison to
1997 due to sales of callable Agency and mortgage-backed securities during the
third and fourth quarters of 1998. During this period of declining interest
rates, the Corporation was able to realize gains while minimizing the risk of
reinvestment at lower yields.
OTHER EXPENSES
- -----------------------------------------------------------------------------
Other expenses, excluding special charges of $1.6 million related to
WesBanco's business combination with Commercial BancShares, increased $1.5
million or 2.4% over 1997, due to technology enhancement projects and the
purchase acquisition of Shawnee. These factors were partially offset by
reductions in other expenses resulting from the sale of Union on June 30, 1998
and improved operating efficiencies occurring primarily through the integration
of Commercial BancShares, which includes the closing of four offices.
During the first half of 1998, WesBanco incurred and paid approximately
$1.6 million in expenses (special charges) related to its business combination
with Commercial BancShares. These special charges consisted of $0.8 million
in salary and employee benefit costs and $0.8 million in conversion,
integration and professional expenses. Conversion and integration costs
included the conversion of Commercial's mainframe computer systems into the
WesBanco systems during the second quarter of 1998.
<PAGE> 13
Technology enhancements during 1998, which included upgrades to the
Corporation's wide area network and conversion of the Trust Department's
operating system, affected the other expense categories through overtime,
equipment, consulting and training costs.
Salaries and employee benefits, excluding the special charges, decreased
$0.3 million or .8% during 1998, reflecting a decrease in full-time
equivalent employees to 1,093 as of December 31, 1998 from 1,112 as of
December 31, 1997. The decrease in employees resulted from the sale of Union
and the integration of Commercial BancShares, which included the closing of
four offices. Employee benefits decreased due to cost savings obtained from
postretirement benefit plans.
Other operating expenses, excluding the special charges, increased $1.4
million or 6.8% during 1998, reflecting increases in consulting and training
costs associated with technology enhancements.
Management expects continued improvement in operating efficiencies during
1999, as expense reductions created through both the integration of Commercial
BancShares and other internal restructuring, are effective for the entire year.
INCOME TAXES
- -----------------------------------------------------------------------------
Federal income tax expense increased $3.5 million to $11.3 million during
1998 from $7.8 million during the prior year. The effective tax rate for the
Corporation increased to 32% during 1998 from 27% during 1997, a result of
utilizing approximately $1.0 million in alternative minimum tax credits during
1997.
The Corporation's 1997 and 1996 Federal income tax returns were subject
to an Internal Revenue Service (IRS) examination during 1998. Currently,
WesBanco is in disagreement with the IRS regarding certain issues. Should
WesBanco not prevail, approximately $1.7 million in Federal and State income
tax payments would be accelerated. There would be no material effect on net
income of the Corporation.
WesBanco's West Virginia affiliates are subject to a corporate net income
tax, which is based upon federal taxable income, adjusted for certain items
not subject to state taxation. The statutory West Virginia tax rate for 1998
was 9.0%. West Virginia income tax included in the provision for income taxes
was $2.2 million for 1998 compared to $1.7 million for 1997.
WesBanco's offices located in Ohio are subject to an Ohio franchise tax,
rather than a corporate income tax. Ohio franchise taxes are included in
other operating expenses.
FINANCIAL CONDITION
INVESTMENT SECURITIES
- -----------------------------------------------------------------------------
Investment securities increased $51.3 million between December 31, 1998
and 1997, a result of reinvesting federal funds sold balances into Federal
Agency and mortgage-backed securities. Available for sale securities, at
fair value, increasing $82.7 million from 1997, represented 68% of total
securities at December 31, 1998, while held to maturity securities, decreasing
$31.4 million from 1997, represented 32% of total investment securities at
December 31, 1998. The decrease in the held to maturity portfolio resulted
from paydowns and maturities which were reinvested in securities available
for sale.
During 1998, securities available for sale increased through purchases of
Federal Agency and mortgage-backed securities. At December 31, 1998 the
average yield of the available for sale portfolio was 6.1%, with an average
maturity of 3.6 years. For the same period, the held to maturity portfolio
had an average yield of 7.0% and an average maturity of 4.4 years.
Unrealized after-tax gains on available for sale securities (market value
adjustments) increased to $3.6 million as of December 31, 1998 from $1.8
million as of December 31, 1997, reflecting a decrease in long-term interest
rates during the year. These market value adjustments represent temporary
fluctuations resulting from changes in market rates in relation to 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.
Investment securities represent a primary source of liquidity. During
1998, investment securities with a total carrying value of $313.2 million
either matured or were called. Available for sale securities of $71.6
million were sold during 1998. During 1999, with only moderate deposit growth
expected, securities may become a significant source of funding for an
anticipated increase in loan volume.
<PAGE> 14
Book values of investment securities are as follows:
<TABLE>
December 31,
----------------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments Held to Maturity (at amortized cost):
- -------------------------------------------------
U.S. Treasury and Federal
Agency securities $ 41,961 $ 79,220 $ 115,110
Obligations of states and
political subdivisions (3) 169,552 164,684 158,617
Other debt securities (1) 3,332 2,304 2,067
- -----------------------------------------------------------------------------------
Total investments held to maturity 214,845 246,208 275,794
- -----------------------------------------------------------------------------------
Securities Available for Sale (at market):
- ------------------------------------------
U.S. Treasury and Federal
Agency securities 276,260 247,042 193,229
Obligations of states and
political subdivisions (3) 24,712 20,638 15,103
Mortgage-backed and other securities (2) 164,733 115,330 116,204
- -----------------------------------------------------------------------------------
Total securities available for sale 465,705 383,010 324,536
- -----------------------------------------------------------------------------------
Total investment securities $ 680,550 $ 629,218 $ 600,330
===================================================================================
</TABLE>
(1) Includes Federal Reserve Bank Stock and Federal Home Loan Bank securities.
(2) Includes equity interests in business corporations.
(3) There are no individual securities included in obligations of states and
political subdivisions or other securities, which individually or in the
aggregate exceed ten percent of shareholders' equity.
The maturity distribution, using book value including accretion of
discounts and the amortization of premiums and approximate yield of investment
securities at December 31, 1998, is presented in the following table.
Approximate yield was calculated using a weighted average yield to maturity:
<TABLE>
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
--------------- ----------------- ---------------- ----------------
(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments Held to Maturity:
- -----------------------------
U.S. Treasury and Federal
Agency securities $ 29,257 6.23% $ 12,704 6.16% ---- ---- ---- ----
Obligations of states and
political subdivisions (4) 17,474 7.25 63,314 7.18 $52,191 7.17% $36,573 7.09%
Other debt securities (1) --- --- --- --- --- --- 3,332 6.37
- ---------------------------------------------------------------------------------------------------
Total held to maturity 46,731 6.61 76,018 7.01 52,191 7.17 39,905 7.03
- ---------------------------------------------------------------------------------------------------
Securities Available for Sale: (2)
- ----------------------------------
U.S. Treasury and Federal
Agency securities 107,808 5.97 122,942 6.29 41,707 6.71 ---- ----
Obligations of states and
political subdivisions (4) 5,746 5.91 13,611 5.95 3,861 6.36 1,158 9.48
Mortgage-backed and other
securities (1) (3) 16,765 5.26 60,774 6.25 74,426 6.05 10,881 4.56
- ---------------------------------------------------------------------------------------------------
Total available for sale 130,319 5.88 197,327 6.25 119,994 6.29 12,039 5.04
- ---------------------------------------------------------------------------------------------------
Total investment securities $177,050 6.07% $273,345 6.46% $172,185 6.56% $51,944 6.57%
===================================================================================================
</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.
(4) Average yields on obligations of states and political subdivisions have
been calculated on a taxable equivalent basis.
<PAGE> 15
LOANS
- -----------------------------------------------------------------------------
Loan Portfolio:
Loans, net of unearned income at December 31, 1998 increased $31.1
million or 2.3% compared to December 31, 1997, reflecting strong third and
fourth quarter growth in mortgage, home equity and business loans. This
period of growth followed a slowdown in loan demand that started in the fourth
quarter of 1997. The slowdown reflected seasonal adjustments and the economy
in the Upper Ohio Valley, as well as competitive pressure in the marketplace
to lower interest rates on loan products.
Commercial loans, at December 31, 1998, increased $46.2 million, while
personal loans, net of unearned income, decreased $20.1 million, compared to
the prior year. The decrease in personal loans reflected a continuation of
competitive pressures and tightening of credit standards. Real estate loans,
which declined during the first quarter, increased steadily throughout the
remainder of 1998, driven by WesBanco's home equity products and attractive
pricing of residential mortgage loan products.
WesBanco Mortgage Company, the Corporation's mortgage banking affiliate,
originates residential mortgage loans and sells its fixed rate mortgage loans
to the secondary market. For 1998, the mortgage company increased its loan
originations 70% over 1997 to approximately $100.0 million.
Loans outstanding, including loans held for sale, are as follows:
<TABLE>
December 31,
--------------------------------------------------------
(in thousands) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans:*
Commercial $ 484,269 $ 438,055 $ 490,428 $ 438,838 $ 407,828
Real Estate-construction 46,033 37,743 35,910 27,725 35,159
Real Estate 520,393 521,222 412,324 359,445 324,736
Personal 313,490 334,671 389,383 340,355 309,883
Loans held for sale 9,280 11,705 983 --- ---
- -------------------------------------------------------------------------------------
Total loans $1,373,465 $1,343,396 $1,329,028 $1,166,363 $1,077,606
=====================================================================================
</TABLE>
*Gross of allowance for loan losses and unearned income on personal loans.
WesBanco's real estate loans, at 39% 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 area.
Each bank within the Corporation has standard loan policies governing
extensions of real estate-construction loans. Except for construction of
spec homes by reliable builders, real estate-construction loans are only made
when the affiliate banks also commit to the permanent financing of the project
or have a takeout commitment from another lender for the permanent loan.
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 23% 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, including commercial loans secured by real estate,
represent 35% of total loans. These loans are not concentrated in any single
industry, but reflect a broad range of businesses in West Virginia and Eastern
Ohio. 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.
Renewals of commercial loans above certain pre-approved dollar limits
must be reviewed by a credit 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.
<PAGE> 16
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, 1998:
After One
In One Year through After
(in thousands) Year or Less Five Years Five Years
- ---------------------------------------------------------------------------
Commercial $ 175,479 $ 92,002 $ 216,788
Real estate:
Construction 8,345 2,094 35,594
Other real estate 23,030 27,374 146,548
- ---------------------------------------------------------------------------
Total $ 206,854 $ 121,470 $ 398,930
- ---------------------------------------------------------------------------
Fixed rates $ 65,109 $ 78,985 $ 165,055
Variable rates 141,745 42,485 233,875
- ---------------------------------------------------------------------------
Total $ 206,854 $ 121,470 $ 398,930
===========================================================================
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 real
property or personal property.
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:
Non-performing assets consist of loans classified as impaired
(nonaccrual, renegotiated and certain loans internally classified as
substandard or doubtful) and other real estate owned. At December 31, 1998,
non-performing assets decreased to $19.9 million or 1.5% of total loans from
$20.2 million or 1.5% of total loans at December 31, 1997. Nonaccrual loans
are generally secured by collateral believed to have adequate market values
to protect against significant losses. Management anticipates that of the
$10.5 million in nonaccrual loans outstanding at December 31, 1998,
approximately $5.9 million will be paid off during the first four months of
1999 with no additional writedowns. These loans are subject to agreed upon
contracts or agreements between the borrower and other independent parties
which will result in the sale of the business or liquidation of the collateral
for amounts sufficient to pay the remaining balances in full. However, there
can be no assurances that such events will be consummated in the timeframe,
or in the manner, anticipated based on current circumstances. The Corporation
continues to monitor its non-performing assets to ensure against deterioration
in collateral values.
<PAGE> 17
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:
December 31,
-------------------------------------------
(in thousands) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------
Nonaccrual:
Personal $ 128 $ 105 $ 90 $ 171 $ 36
Commercial 8,687 6,309 4,135 4,099 7,250
Real Estate 1,673 1,999 945 1,750 1,706
- -----------------------------------------------------------------------------
Total 10,488 8,413 5,170 6,020 8,992
- -----------------------------------------------------------------------------
Renegotiated:
Personal --- 46 --- 22 32
Commercial --- 1,307 1,527 2,361 1,394
Real Estate 695 1,070 3,010 70 81
- -----------------------------------------------------------------------------
Total 695 2,423 4,537 2,453 1,507
- -----------------------------------------------------------------------------
Other classified loans: (1)
Commercial 5,285 3,765 3,057 341 ---
Real Estate --- --- 414 697 ---
- -----------------------------------------------------------------------------
Total 5,285 3,765 3,471 1,038 ---
- -----------------------------------------------------------------------------
Total non-performing loans 16,468 14,601 13,178 9,511 10,499
Other real estate owned 3,486 5,620 4,511 5,789 1,941
- -----------------------------------------------------------------------------
Total non-performing assets $19,954 $20,221 $17,689 $15,300 $12,440
- -----------------------------------------------------------------------------
Percentage of non-performing
assets to loans outstanding 1.5% 1.5% 1.3% 1.3% 1.2%
- -----------------------------------------------------------------------------
Past Due 90 Days or More:
Personal $ 1,184 $ 1,611 $ 1,580 $ 934 $ 991
Commercial 4,317 1,121 1,381 1,199 1,246
Real Estate 1,453 599 1,395 1,891 774
- -----------------------------------------------------------------------------
Total past due 90 days or more $ 6,954 $ 3,331 $ 4,356 $ 4,024 $ 3,011
=============================================================================
(1)Includes loans internally classified as doubtful and substandard (as
defined by banking regulations) that meet the definition of impaired loans.
At December 31, 1998, non-performing loans, which included all impaired
loans increased $1.9 million over 1997. The increase was primarily
attributable to an increase in nonaccrual commercial and commercial real
estate loans. The $2.1 million decrease in other real estate owned resulted
from the sale of a large commercial real estate property. At December 31, 1996,
the increase of $3.6 million in nonperforming loans over December 31, 1995
was primarily attributable to a commercial loan that was classified as
substandard under the definition of an impaired loan. At December 31, 1995,
nonaccrual loans decreased $3.0 million 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 foreclosure on a parcel of commercial property. Contributing to the
increase in renegotiated loans during 1995 were certain performing loans
classified as impaired, in accordance with FAS No. 114.
Nonaccrual loans are generally secured by collateral believed to have
adequate market values to protect the Corporation from significant losses.
Allowance for Loan Losses:
The allowance for loan losses is available to absorb future charge-offs.
The allowance is reduced by losses, net of recoveries, and increased by
charging a provision to operations to maintain the allowance at a level
determined appropriate by management. There can be no assurance that WesBanco
will not sustain losses in future periods, which could be substantial in
relation to the size of the allowance.
At December 31, 1998, the allowance for loan losses to loans was 1.4%,
down from 1.5% as of December 31, 1997. Net charge-offs in 1998 were
$5.5 million compared to $4.7 million in 1997. The provision for loan losses
was $4.4 million in 1998, down $1.2 million from 1997. The increase in loan
charge-offs during 1998 resulted primarily from losses of $1.5 million
recognized on two business loans. The increase in loan charge-offs during
1997 reflected a rise in personal bankruptcies in WesBanco's market area.
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.
<PAGE> 18
The historical relationship between average loans, loan losses and
recoveries and the provision for loan losses is presented in the following
table:
For the years ended December 31,
--------------------------------------------
(dollars in thousands) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------
Beginning balance -
Allowance for loan losses $20,261 $19,102 $16,955 $16,390 $15,621
Allowance for loan losses of
acquired (sold) banks-net (37) 269 707 --- ---
Loans charged off:
Commercial 1,933 1,016 920 1,411 4,602
Real Estate 515 254 231 246 567
Personal 3,952 4,523 2,807 1,873 1,124
- ------------------------------------------------------------------------------
Total loans charged off 6,400 5,793 3,958 3,530 6,293
- ------------------------------------------------------------------------------
Recovery of loans previously
charged off:
Commercial 522 314 113 409 224
Real Estate 39 90 71 110 32
Personal 321 705 419 370 316
- ------------------------------------------------------------------------------
Total recoveries 882 1,109 603 889 572
- ------------------------------------------------------------------------------
Net loans charged off 5,518 4,684 3,355 2,641 5,721
- ------------------------------------------------------------------------------
Provision for loan losses 4,392 5,574 4,795 3,206 6,490
- ------------------------------------------------------------------------------
Ending balance -
Allowance for loan losses $19,098 $20,261 $19,102 $16,955 $16,390
==============================================================================
Ratio of net loans charged off
to average Loans outstanding
for the period .41% .35% .28% .24% .60%
==============================================================================
Ratio of the allowance for loan
losses to Loans outstanding at
the end of the period 1.41% 1.51% 1.44% 1.46% 1.53%
==============================================================================
The adequacy of the allowance is monitored quarterly. Specific reserves
are established when warranted for impaired commercial loans over $50,000.
The determination of specific reserves takes into consideration the
anticipated future cash flows available to pay the loan and/or the realizable
value of the collateral pledged and other secondary repayment sources, if any.
For consumer loans and all other commercial loans not specifically reserved,
management uses historical net charge-off experience relative to loans
outstanding to predict future losses. Management further allocates against
the reserve, when appropriate, based on economic conditions, changes in
underwriting standards or practices, delinquency and other trends in the
portfolio, specific industry conditions, the results of recent internal loan
reviews or regulatory examinations, and other relevant factors that impact
the loan portfolio.
The following represents the allocation of the allowance for loan losses:
<TABLE>
December 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ------------- ------------- ------------- --------------
% of % of % of % of % of
(dollars in thousands) 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 $11,311 35% $10,358 33% $10,994 37% $11,879 38% $11,918 38%
Real Estate-construction --- 3 --- 2 --- 2 17 2 16 2
Real Estate 3,229 39 4,016 39 3,439 32 2,501 32 2,051 30
Personal 4,558 23 5,887 26 4,669 29 2,558 28 2,405 30
- ----------------------------------------------------------------------------------------------------------
Total $19,098 100% $20,261 100% $19,102 100% $16,955 100% $16,390 100%
==========================================================================================================
</TABLE>
<PAGE> 19
Loan Risk Elements and Credit Quality:
The banks extend credit to individuals for various consumer purposes,
which include residential mortgage loans, construction loans, home equity
lines of credit, credit cards, installment loans to purchase automobiles, and
other personal loans. The banks also extend credit to businesses of all types
to purchase assets, including commercial real estate, or to finance expansion,
as well as revolving lines of credit to finance operations and short-term
loans for other purposes. Credit risk, that is the risk that a borrower will
default on a loan, is inherent in all lending activities. WesBanco's primary
goal in managing credit risk is to minimize the impact of default by an
individual borrower or group of borrowers. Credit risk is managed both
through the initial underwriting process as well as through ongoing
monitoring and administration of the loan portfolio.
WesBanco has established standard credit policies to provide for
consistent underwriting of loans as well as procedures to assist in
maintaining and monitoring the overall quality of its loan portfolio. These
standard policies and procedures are to be followed by all its banking
subsidiaries. Credit policy establishes: (1) underwriting guidelines for all
types of loans; (2) lending authorities; (3) exposure limits to individual
borrowers or groups of borrowers, as well as loan type, industry, and
geographic concentrations; and (4) loan portfolio administration procedures.
Underwriting guidelines require an appropriate evaluation of the
creditworthiness of each borrower; the adequacy of collateral, if any, to
secure the loan; and other factors unique to each loan that may increase
or mitigate its risks. Individual lending officers approve loans up to
predetermined limits depending on the type of loan. Loans above individual
lending authorities require approval by a loan committee or the Board of
Directors, depending on the amount of credit exposure to the particular
borrower. Exceptions to credit policy are permissible, but only after
careful evaluation of the risks associated with each exception and the
factors that mitigate those risks.
Subsequent to origination, the process used to measure and monitor the
level of credit risk is dependent upon the type of loan. Consumer loans,
including residential mortgages, are generally smaller in amount and spread
over a larger number of diverse individual borrowers. Accordingly, credit
risk in the consumer portfolio can generally be managed effectively by
monitoring the level and trend of delinquent loans, and economic conditions
that may impact a borrower or group of borrowers, or a particular geographic
territory. Conversely, commercial loans can be extended for substantially
larger amounts and the potential for loss as a result of default by any one
borrower can be significant. Therefore, credit risk in the commercial
portfolio also requires periodic review of large borrowing relationships and
a loan grading system to help management identify adverse trends and evaluate
the quality of the portfolio.
WesBanco maintains a loan grading system that categorizes commercial
loans according to their level of credit risk. All commercial loans are
assigned a grade at their inception, and grades are regularly reviewed and
evaluated for all commercial borrowers with credit exposure above $200,000.
When the risk of a loan increases beyond that which is considered acceptable
in the normal course of lending, its grade is adjusted to reflect the change
in its risk.
Classified loans are those loans that exhibit clear and defined
weaknesses that may jeopardize their recoverability. Loans are classified as
"substandard" when they are no longer adequately protected by the sound net
worth and paying capacity of the borrower or of the collateral pledged.
Substandard loans are characterized by the distinct possibility that
the bank may sustain some loss. Loans are classified as "doubtful" when the
risk that a loss may occur has increased, or at least a portion of the loan
may require charge-off if liquidated at present. Both substandard and
doubtful loans include some loans that are delinquent or on nonaccrual
status and may also include loans whose terms have been renegotiated.
The loan grading process provides management with an effective early
warning system of potential problems and also facilitates evaluating the
adequacy of the allowance for loan losses. WesBanco also maintains a formal,
ongoing internal loan review program, which concentrates principally on
commercial loans, to monitor credit risk. The loan review process further
identifies areas that require management's attention, evaluates the adequacy
of loan administration and documentation, helps to ensure compliance with
loan policies, and validates the reliability of the loan grading system.
There are no significant loans made to customers outside the general
market area of each affiliate bank except for one lending relationship
secured in part by an assignment of Trust assets. At times, in order to
maintain loan volumes, loans are purchased from correspondent banks. These
loans aggregate less than $4,400,000 as of December 31, 1998. Each bank
within the Corporation follows its usual loan analysis procedures before a
determination is made to purchase loans from correspondent banks. There were
no loan concentrations in excess of 10% of total consolidated loans.
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. Periodic review of significant loans are
completed by personnel independent of the loan function.
<PAGE> 20
DEPOSITS
- -----------------------------------------------------------------------------
Deposits increased $7.8 million or 0.4% between December 31, 1998 and
1997. WesBanco experienced strong deposit growth for the first half of 1998,
primarily through its Prime Rate Money Market accounts and Good Neighbor
Banking CD's, followed by a declining trend in the second half of the year.
The declining trend resulted from increased competition for funds and managing
the balance sheet during a slowdown in loan demand. An increase in average
interest bearing deposits of $59.3 million or 3.9% reflected the early year
growth in interest bearing deposit balances. However, in comparing year end
outstanding balances, a decrease of $14.2 million in interest bearing deposits
reflected the moderating trend during the second half of 1998.
During 1998 a change in deposit mix similar to 1997 trends continued, as
customers shifted funds from savings products into higher yielding Prime Rate
Money Market accounts. This change in deposit mix has contributed to a
narrowing of the net yield on earning assets, as the average deposit rate
remained unchanged from 1997 levels, while the earning asset yield declined
20 basis points.
During 1999, management believes the change in deposit mix along with a
moderate growth trend will continue, as customers shop for higher-rate
investment alternatives in a low interest rate environment.
Maturities of certificates of deposit in denominations of $100,000 or more are
as follows:
December 31,
---------------------------
(in thousands) 1998 1997
- ---------------------------------------------------------------------------
Maturity
Under three months $ 19,983 $ 32,906
Three to six months 19,120 27,047
Six to twelve months 33,470 29,978
Over twelve months 52,920 44,322
- ---------------------------------------------------------------------------
Total $125,493 $134,253
===========================================================================
Interest expense on certificates of deposit of $100,000 or more was
approximately $7,921,000 in 1998, $7,512,000 in 1997, and $5,466,000 in 1996.
CAPITAL ADEQUACY
- -----------------------------------------------------------------------------
Shareholders' equity increased to $296.5 million at December 31, 1998
from $288.0 million at December 31, 1997 due to the retention of earnings and
a net increase in the market value adjustment on securities available for sale.
These additions to equity were partially offset by an increase in Treasury
stock, reflecting shares acquired through a stock repurchase plan initiated
during the fourth quarter of 1998.
On October 15, 1998, WesBanco announced a stock repurchase plan to
repurchase up to 1.0 million shares of WesBanco common stock in the open
market. As of December 31, 1998, WesBanco had purchased 269,236 shares under
the plan. The shares are being purchased for general corporate purposes which
may include potential acquisitions, dividend reinvestment and employee benefit
plans. Timing, price and quantity of purchases are at the discretion of the
Corporation and the plan may be discontinued or suspended at any time.
Ending primary capital to assets for 1998 was 14.0% compared to 13.8% for
1997, 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 growth in dividends,
increasing to 61.76% in 1998 from 51.16% in 1994.
The Corporation announced cash dividend increases in the first quarter of
1999 and 1998. On February 18, 1999, the quarterly dividend per share,
payable April 1, 1999, was increased to $.22 representing the fourteenth
consecutive year of common stock cash dividend increases for WesBanco.
During the previous year, the quarterly dividend per share was increased
to $.21 from $.20, payable April 1, 1998.
WesBanco is subject to risk-based capital guidelines that measure capital
relative to risk-weigted assets and off-balance sheet instruments. WesBanco,
and its banking subsidiaries, maintain Tier 1, 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.
<PAGE> 21
INTEREST RATE MANAGEMENT AND LIQUIDITY
- -----------------------------------------------------------------------------
Interest rate management measures and monitors 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 rate sensitive assets
and rates paid on interest rate sensitive 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 and/or the percentage of
rate changes.
WesBanco and its banking subsidiaries review their interest rate
sensitivity on a periodic basis. This review is performed by analyzing the
maturity and repricing relationships between rate sensitive assets and rate
sensitive liabilities at a specific point in time (GAP) and by using a
simulation model to estimate the impact on net interest income of changing
interest rates over a twelve month projected period.
At December 31, 1998, the Corporation's GAP position is 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>
RATE SENSITIVE ASSETS
Due from banks/interest
Bearing $ 5,174 ---- ---- ---- ---- $ 5,174
Federal funds sold 38,055 ---- ---- ---- ---- 38,055
Investment securities(1) 64,222 $ 40,905 $ 36,005 $ 35,918 $ 497,474 674,524
Loans 350,022 90,276 78,520 76,359 777,841 1,373,018
- ----------------------------------------------------------------------------------------------------------
Total rate sensitive assets 457,473 131,181 114,525 112,277 1,275,315 2,090,771
- ----------------------------------------------------------------------------------------------------------
RATE SENSITIVE LIABILITIES
Money market deposit accounts 234,376 ---- 10,000 ---- 28,547 272,923
Savings and NOW accounts 546,718 ---- ---- ---- ---- 546,718
Certificates of deposit 133,648 129,389 97,180 113,317 267,118 740,652
Other borrowings 91,505 4,977 2,278 402 35,543 134,705
- ----------------------------------------------------------------------------------------------------------
Total rate sensitive liabilities 1,006,247 134,366 109,458 113,719 331,208 1,694,998
- ----------------------------------------------------------------------------------------------------------
Interest sensitivity gap $ (548,774) $ (3,185) $ 5,067 $ (1,442) $944,107 $ 395,773
==========================================================================================================
Cumulative interest sensitivity gap $ (548,774) $(551,959) $(546,892) $(548,334) $395,773 ----
==========================================================================================================
</TABLE>
(1) Securities are categorized above by expected maturity at amortized cost.
The liability sensitive position in the under three month time period is
primarily a result of $546.7 million in Savings and NOW account balances.
Interest rates on these deposit instruments are subject to periodic adjustment
at management's discretion.
Beginning in 1997, WesBanco experienced an increase in its short-term
liability sensitive position due to growth in its Prime Rate Money Market
Product. In an effort to manage this additional interest sensitivity,
WesBanco has entered into various interest rate swap agreements with notional
values totaling approximately $38.5 million. The swap agreements effectively
fixed the interest rate on a portion of the money market deposits for an
average life of 4.9 years.
The GAP is a relatively simple analysis of the Corporation's Consolidated
Balance Sheet, but does not quantify the magnitude of the interest rate risk
in terms of changes in net interest income as interest rates change.
Therefore, management also considers the results of net interest income
simulations using a variety of interest rate changes. Key assumptions used in
income simulation include loan and deposit growth, pricing, interest
sensitivity, and the level of interest rate or balance changes on deposit
products with no stated maturity 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, at December 31, 1998, the
Corporation would expect an increase in net interest income of $2.0 million
and a decrease of $2.1 million from an immediate and sustained 200 basis point
increase and decrease, respectively, in interest rates over a twelve month
projection 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, 1998, federal funds sold
and cash balances were $106.2 million or 4.7% of total assets as compared to
<PAGE> 22
$161.3 million or 7.3% of total assets as of December 31, 1997. The decrease
in short-term liquidity resulted from a $48.3 million decrease in federal
funds sold, reflecting loan growth and an increase in investment
securities. Additional short-term liquidity is maintained through investments
with expected maturities of less than one year which, during 1999, approximate
$177.0 million or 7.9% of total assets.
As of December 31, 1998 the Corporation had outstanding commitments to
extend credit in the ordinary course of business approximating $109.8 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
$7.0 million during 1999.
COMPARISON OF 1997 VERSUS 1996
- -----------------------------------------------------------------------------
Net income decreased 2.8% to $25.2 million for the year ended December
31, 1997 compared to 1996, reflecting an increase in operating expenses and
the provision for loan losses, partially offset by increases in Trust fees,
net interest income and an alternative minimum tax credit which reduced the
federal income tax provision.
Net interest income on a taxable equivalent basis increased $5.4 million
or 6.2% over 1996, resulting from average growth in earning assets of $131.4
million or 7.1% and average growth in interest bearing liabilities of $106.5
million or 7.0%. Average balance sheet growth was driven by Prime Rate Money
Market deposit accounts and Good Neighbor Banking CD's. This deposit growth
was used to fund growth in business and mortgage loans. Purchase acquisitions
contributed $61.4 million to the increase in average earning assets and $43.4
million to the increase in average interest bearing liabilities.
The taxable equivalent net yield on earning assets approximated 1996 levels
at 4.7%.
The provision for loan losses increased to $5.6 million from $4.8 million
in 1996, reflecting an increase in net charge-offs which resulted from a rise
in personal bankruptcies in WesBanco's market area and an analysis of risks
in Commercial BancShare's loan portfolio.
Other income, excluding securities transactions, increased $1.8 million
or 11.6% over 1996. The increase was primarily due to a $1.5 million or 23.6%
increase in trust fees over 1996.
Other expenses increased $8.1 million or 14.3% over 1996. The increase
resulted from purchase acquisitions and Commercial BancShares acquisition-
related expenses, which totaled $3.5 million and $1.7 million, respectively.
Acquisition-related expenses incurred by Commercial included $0.7 million
in litigation expenses, $0.5 million in employee benefit adjustments and $0.5
million in legal and professional fees. The increase in other expenses was
further affected by equipment, training, and overtime costs associated with
technology enhancement projects. These projects included the continued
expansion of a wide area network and a new mainframe computer banking
software system.
BUSINESS COMBINATIONS AND DIVESTITURE
- -----------------------------------------------------------------------------
On November 10, 1998 WesBanco and Heritage Bank of Harrison County
entered into a definitive Agreement and Plan of Merger providing for Heritage
to merge with and into a WesBanco affiliate. The transaction, which will be
accounted for as a purchase transaction, is scheduled to be completed during
the second quarter of 1999.
On June 30, 1998, WesBanco divested of the Union Bank of Tyler County in
order to fulfill a regulatory condition. Union became affiliated with
WesBanco as a result of WesBanco's business combination with Commercial.
Union reported total assets of $46.9 million as of the sale date.
During the three year period ended December 31, 1998, WesBanco completed
the following business combinations:
Hunter Agency - On June 18, 1998, WesBanco completed its purchase
acquisition of Hunter Agency, located in Shinnston, WV, with and into a
WesBanco affiliated company. During the third quarter of 1998, Hunter Agency
expanded its operation to Morgantown, WV, through the purchase acquisition of
Simons Insurance Agency.
Commercial BancShares, Incorporated - On March 31, 1998 WesBanco
completed its business combination with Commercial BancShares, Incorporated,
located in Parkersburg, WV. The transaction was accounted for as a pooling of
interests and included Commercial's March 9, 1998 acquisition of Gateway
Bancshares, Inc. Commercial and Gateway reported total combined assets as
of the acquisition date of $466.1 million.
Shawnee Bank, Inc. - On June 30, 1997, WesBanco completed the purchase
acquisition of Shawnee Bank, Inc., located in Dunbar, WV. Shawnee reported
total assets as of the acquisition date of $34.7 million.
Vandalia National Corporation - On December 30, 1996, WesBanco completed
the purchase acquisition of Vandalia National Corporation, located in
Morgantown, WV. Vandalia reported total assets as of the acquisition date of
$55.4 million.
<PAGE> 23
Bank of Weirton - On August 30, 1996, WesBanco completed its business
combination with Bank of Weirton, located in Weirton, WV., in a transaction
accounted for as a pooling of interests. Bank of Weirton reported total
assets as of the acquisition date of $177.9 million.
Universal Mortgage Company - On August 20, 1996, WesBanco completed
the purchase acquisition of certain assets of Universal Mortgage Company,
located in South Charleston, WV, and organized a new corporation under the
name, WesBanco Mortgage Company.
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.
WesBanco's Year 2000 Task Force, which includes independent consultants
and an outside Board member, has completed the Awareness, Assessment,
Remediation and 66% of the Validation and Implementation phases of this
project.
WesBanco estimates that total external and internal costs of becoming
Year 2000 ready will approximate $600,000. These costs include operating
expenses incurred and paid through December 31, 1998 of $270,000, estimated
future capital expenditures of $20,000 and estimated future operating
expenses of $310,000.
Mission critical vendor supplied and maintained application software,
which is defined as application software that 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. Currently, WesBanco
is 89% complete with testing its mission critical application software and
66% complete with its overall-testing schedule. Testing of existing systems
is projected to be substantially complete by March 31, 1999, however, planned
system enhancements during the second and third quarters of 1999, will be
tested subsequent to 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, telephones, communication lines and other
systems with embedded technology are compliant. All exceptions have been
documented and are expected to be resolved by March 31, 1999.
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
our vendors and obtained a reasonable quantity of responses. 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.
Further contact will occur based on survey results.
Contingency plans, which set forth procedures for handling the most
likely worst case scenario, are currently being developed. These
plans include; a Remediation Plan for all mission critical software
applications, 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 are expected to be completed by March 31, 1999 and
tested by June 30, 1999. Contingency plans will be continuously monitored
and updated as conditions change throughout 1999 and into the Year 2000.
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 held 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
<PAGE> 24
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.
Although WesBanco has not yet completed all necessary phases of the Year
2000 Program, management believes it is taking the appropriate steps to
identify and resolve Year 2000 issues in a timely manner. WesBanco
anticipates modifications to third party systems and applicable testing will
be complete by the end of the first quarter 1999, but has no means of
ensuring that third parties (suppliers and major commercial customers) 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 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.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
Financial Statements
- --------------------
Consolidated financial statements, accompanying notes to the consolidated
financial statements of WesBanco and the Report of Independent Auditor are
presented as follows:
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended December 31, 1998,
1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996
Notes to Consolidated Financial Statements
Report of Independent Auditor
<PAGE> 25
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- -----------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
December 31,
--------------------------
1998 1997
- -----------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 62,989 $ 73,412
Due from banks - interest bearing 5,174 1,515
Federal funds sold 38,055 86,363
Investment securities:
Held to maturity (market values of $220,699
and $249,517, respectively) 214,845 246,208
Available for sale carried at market value 465,705 383,010
- -----------------------------------------------------------------------------
Total investment securities 680,550 629,218
- -----------------------------------------------------------------------------
Loans, net of unearned income 1,373,018 1,341,901
Allowance for loan losses (19,098) (20,261)
- -----------------------------------------------------------------------------
Net loans 1,353,920 1,321,640
- -----------------------------------------------------------------------------
Bank premises and equipment 47,999 45,068
Accrued interest receivable 14,837 15,579
Other assets 39,188 38,748
- -----------------------------------------------------------------------------
Total Assets $2,242,712 $2,211,543
=============================================================================
LIABILITIES
Deposits:
Non-interest bearing demand $ 227,349 $ 205,399
Interest bearing demand 510,662 432,050
Savings deposits 308,979 366,572
Certificates of deposit 740,652 775,846
- -----------------------------------------------------------------------------
Total deposits 1,787,642 1,779,867
- -----------------------------------------------------------------------------
Federal funds purchased and repurchase agreements 112,511 93,342
Other borrowings 22,194 26,927
Accrued interest payable 6,669 7,224
Other liabilities 17,213 16,188
- -----------------------------------------------------------------------------
Total Liabilities 1,946,229 1,923,548
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000
shares authorized; none outstanding --- ---
Common stock ($2.0833 par value; 50,000,000
and 25,000,000 shares authorized; 20,996,531
and 20,666,185 shares issued, respectively) 43,742 43,055
Capital surplus 60,283 57,997
Retained earnings 198,782 187,424
Treasury stock (336,296 and 56,381 shares,
respectively, at cost) (9,421) (1,675)
Accumulated other comprehensive income
(market value adjustments) 3,610 1,783
Deferred benefits for directors and employees (513) (589)
- -----------------------------------------------------------------------------
Total Shareholders' Equity 296,483 287,995
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,242,712 $2,211,543
=============================================================================
See Notes to Consolidated Financial Statements.
<PAGE> 26
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- -----------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
For the years ended December 31,
-----------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 118,766 $ 118,540 $ 107,428
- ------------------------------------------------------------------------------
Interest on investment securities:
Taxable 31,205 27,045 26,471
Tax-exempt 9,592 9,121 8,352
- ------------------------------------------------------------------------------
Total interest on investment securities 40,797 36,166 34,823
- ------------------------------------------------------------------------------
Other interest income 3,155 3,084 2,132
- ------------------------------------------------------------------------------
Total interest income 162,718 157,790 144,383
- ------------------------------------------------------------------------------
Interest expense:
Interest bearing demand deposits 16,693 12,335 8,370
Savings deposits 7,852 9,520 11,059
Certificates of deposit 43,067 43,041 38,083
- ------------------------------------------------------------------------------
Total interest on deposits 67,612 64,896 57,512
Other borrowings 6,313 5,109 4,100
- ------------------------------------------------------------------------------
Total interest expense 73,925 70,005 61,612
- ------------------------------------------------------------------------------
Net interest income 88,793 87,785 82,771
Provision for loan losses 4,392 5,574 4,795
- ------------------------------------------------------------------------------
Net interest income after provision
for loan losses 84,401 82,211 77,976
- ------------------------------------------------------------------------------
Other income:
Trust fees 9,066 7,640 6,180
Service charges and other income 15,139 9,545 9,212
Net securities gains 1,510 516 265
- ------------------------------------------------------------------------------
Total other income 25,715 17,701 15,657
- ------------------------------------------------------------------------------
Other expense:
Salaries and wages 28,596 27,169 24,918
Employee benefits 6,799 7,644 6,424
Net occupancy expense 3,641 3,518 3,511
Equipment expense 5,876 5,615 4,068
Other operating expense 23,396 21,236 18,122
- ------------------------------------------------------------------------------
Total other expense 68,308 65,182 57,043
- ------------------------------------------------------------------------------
Income before provision for income taxes 41,808 34,730 36,590
Provision for income taxes 13,495 9,519 10,648
- ------------------------------------------------------------------------------
Net Income $ 28,313 $ 25,211 $ 25,942
==============================================================================
Earnings per share $ 1.36 $ 1.23 $ 1.31
Average shares outstanding 20,867,193 20,461,742 19,855,791
==============================================================================
See Notes to Consolidated Financial Statements.
<PAGE> 27
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
For the years ended December 31, 1998, 1997, and 1996
------------------------------------------------------------------------------------------
Accumulated Deferred
Common Stock Other Benefits for
------------------- Capital Retained Treasury Comprehensive Directors &
Shares Amount Surplus Earnings Stock Income Employees Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 14,362,533 $30,464 $39,947 $179,714 $(5,038) $1,210 $(1,143) $245,154
- ---------------------------------------------------------------------------------------------------------------------
Net Income 25,942 25,942
Net market value adjustment on
securities available for
sale - net of tax effect (1,164) (1,164)
------
Comprehensive Income 24,778
Cash dividends:
Common ($.72 per share) (10,529) (10,529)
Common by pooled bank
prior to acquisition (1,764) (1,764)
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)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 14,698,415 30,812 45,659 193,363 (544) 46 (855) 268,481
- ---------------------------------------------------------------------------------------------------------------------
Net Income 25,211 25,211
Net market value adjustment on
securities available for
sale - net of tax effect 1,737 1,737
------
Comprehensive Income 26,948
Cash dividends:
Common ($.786 per share) (12,474) (12,474)
Common by pooled bank
prior to acquisition (1,929) (1,929)
Stock issued for acquisitions 323,175 366 7,519 4,901 12,786
Net treasury shares purchased (186,362) 82 (6,032) (5,950)
Retirement of pooled stock
held by WesBanco (17) (116) (133)
Stock dividend by pooled bank 417,573 733 4,853 (5,586)
Stock issued for a 3 for 2
split effected in the form
of a 50% stock dividend 5,357,003 11,161 (11,161)
Principal payment of ESOP debt 450 450
ESOP borrowing (134) (134)
Deferred benefits for directors (50) (50)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 20,609,804 43,055 57,997 187,424 (1,675) 1,783 (589) 287,995
- ---------------------------------------------------------------------------------------------------------------------
Net Income 28,313 28,313
Net market value adjustment on
securities available for
sale - net of tax effect 1,827 1,827
------
Comprehensive Income 30,140
Cash dividends:
Common ($.84 per share) (16,470) (16,470)
Common by pooled bank
prior to acquisition (485) (485)
Net treasury shares purchased (342,415) (97) (9,629) (9,726)
Stock issued for acquisitions 392,846 687 2,383 1,883 4,953
Principal payment on ESOP debt 97 97
Deferred benefits for directors (21) (21)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 20,660,235 $43,742 $60,283 $198,782 $(9,421) $3,610 $(513) $296,483
=====================================================================================================================
There was no activity in Preferred Stock for the years ended December 31, 1998, 1997 and 1996.
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 28
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 1998 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 28,313 $ 25,211 $ 25,942
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,406 6,341 6,509
Provision for loan losses 4,392 5,574 4,795
Gains on sales of investment securities-net (1,510) (516) (265)
Gain on sale of branch offices (4,605) --- ---
Deferred income taxes (243) (387) (343)
Other - net 248 439 (385)
Net change in assets and liabilities:
Interest receivable 460 (1,103) 1,155
Other assets and other liabilities (1,488) 4,748 (3,101)
Interest payable (469) (151) (1,307)
- ------------------------------------------------------------------------------------
Net cash provided by operating activities 30,504 40,156 33,000
- ------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment securities held to maturity:
Proceeds from maturities and calls 116,675 103,537 122,640
Payments for purchases (98,062) (54,261) (69,463)
Securities available for sale:
Proceeds from sales 71,578 42,234 89,749
Proceeds from maturities and calls 196,492 65,487 66,419
Payments for purchases (344,867) (174,357) (199,869)
Sale of branch offices, net of cash (2,726) --- ---
Purchase of subsidiaries, net of cash 4,951 6,635 2,127
Net increase in loans (59,154) (2,674) (123,840)
Purchases of premises and equipment-net (8,953) (7,498) (7,111)
- ------------------------------------------------------------------------------------
Net cash used in investing activities (124,066) (20,897) (119,348)
- ------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 47,210 48,634 56,980
Increase in federal funds purchased
and repurchase agreements 19,169 9,413 10,086
Increase (decrease) in borrowings (2,253) 10,245 15,280
Net payments related to ESOP debt (97) (316) (365)
Dividends paid (15,813) (14,045) (11,563)
Purchases of treasury shares-net (9,726) (5,950) (1,367)
Other-net --- (19) 864
- ------------------------------------------------------------------------------------
Net cash provided by financing activities 38,490 47,962 69,915
- ------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (55,072) 67,221 (16,433)
Cash and cash equivalents at beginning of year 161,290 94,069 110,502
- ------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 106,218 $ 161,290 $ 94,069
====================================================================================
During 1998, 1997 and 1996, WesBanco paid $74,393, $69,463, and $61,388 in interest
on deposits and other borrowings and $13,609, $10,221, and $10,888 for income
taxes, respectively.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 29
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, mortgage banking, insurance and brokerage
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 1998. 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-interest bearing and federal funds sold.
Generally, federal funds are sold for one day periods.
Investment securities:
Securities Available for Trading:
The Corporation did not have a trading portfolio during the two year
period ended December 31, 1998.
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.
Securities 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 accumulated other comprehensive
income. 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 and loans held for sale:
Interest is accrued as earned on loans except where doubt exists as to
collectability, in which case recognition of income is discontinued. Loans
originated and intended for sale in the secondary market are carried at the
lower of cost or estimated market value in the aggregate. Losses are recorded
in other income based on the difference between the market value and the
aggregate cost.
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
loans on the cash basis.
Allowance for loan losses:
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. Management's determination of the adequacy of the
allowance is based on evaluation of the loan portfolio, as well as prevailing
economic conditions, past loan loss experience, current delinquency factors,
changes in the character of the loan portfolio, specific problem loans and
other relevant factors. This evaluation is inherently subjective as it
requires
<PAGE> 30
material estimates that may be susceptible to significant change.
While management has allocated the allowance to different loan categories,
the allowance is general in nature and is available for the loan portfolio
in its entirety.
Premises and equipment:
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 capitalized. Gains and losses on 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:
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 is increased by the number of shares which would be issued
assuming the exercise of common stock options. There was no dilutive effect
from the stock options and accordingly, basic and diluted earnings per share
are the same.
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.
Comprehensive income:
During 1998, WesBanco adopted SFAS No. 130, "Reporting Comprehensive
Income", which required reclassification of the Consolidated Statement of
Changes in Shareholders' Equity for earlier periods. Sources of comprehensive
income not included in net income are limited to unrealized gains and losses
(net market value adjustments) on securities available for sale.
Reclassification adjustments between unrealized gains and losses from prior
periods and realized gains and losses included in earnings in the current
period are not considered material in the current presentation of comprehensive
income.
New Accounting Standards:
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for years beginning after June 15, 1999. This
Statement, which provides new accounting treatment for derivative transactions,
is not expected to have a significant impact on WesBanco's financial condition
or results of operations.
During 1998, WesBanco adopted the provisions of SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". This Statement,
which requires companies to disclose certain information about reporting
operating segments, did not materially effect WesBanco's financial position
or results of operations since management views the Corporation as one segment,
community banking.
NOTE 2: AGREEMENT TO MERGE
- -----------------------------------------------------------------------------
On November 10, 1998, WesBanco and The Heritage Bank of Harrison County
("Heritage") jointly announced that they have entered into a definitive
Agreement and Plan of Merger providing for Heritage, a unit-bank located in
Clarksburg, West Virginia, to merge with and into a WesBanco affiliate. Under
the terms of the definitive Agreement and Plan of Merger, WesBanco will
exchange common stock based upon its market value as of the determination
date. In accordance with the terms of the agreement, WesBanco will issue a
minimum of 1.515 shares and a maximum of 1.923 shares for each share of
Heritage common stock in a tax free exchange. The merger will be accounted
for as a purchase transaction.
The transaction, which is subject to, among other things, approval by
the stockholders of Heritage and Federal and State Regulators, is expected to
be completed during the second quarter of 1999.
<PAGE> 31
At December 31, 1998, Heritage reported total assets of approximately
$33,049,000, deposits of $28,685,000, and shareholders' equity of $4,219,000.
NOTE 3: COMPLETED BUSINESS COMBINATIONS AND DIVESTITURE
- -----------------------------------------------------------------------------
On March 31, 1998, WesBanco completed its business combination with
Commercial BancShares, Incorporated issuing 4,594,134 shares of stock in a
transaction accounted for as a pooling of interests. Prior years' financial
information has been restated to reflect the pooling of interests transaction.
As of the transaction date, Commercial BancShares reported total assets of
approximately $466,137,000, deposits of $395,504,000 and shareholders' equity
of $46,358,000.
The following financial information presents combined net interest income
and net income results of WesBanco and Commercial Bancshares as if the
acquisition had occurred as of the beginning of 1996 and 1997: (in thousands)
WesBanco
For the years ended as previously Commercial
December 31, presented BancShares WesBanco
- -----------------------------------------------------------------------------
Net interest income:
1997 $68,756 $19,029 $87,785
1996 64,720 18,051 82,771
Net income:
1997 22,274 2,937 25,211
1996 21,161 4,781 25,942
- -----------------------------------------------------------------------------
The following table summarizes WesBanco's material purchase acquisitions,
accounted for under the purchase method of accounting, for the three year
period ended December 31, 1998:
(dollars in thousands)
<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
- -------------------------------------------------------------------------------------------------------
</TABLE>
On June 30, 1998, WesBanco fulfilled the regulatory requirement that it
divest of Union Bank of Tyler County ("Union"). Union was a subsidiary of
Commercial BancShares, with total assets of $46,873,000 as of the divestiture
date. WesBanco recognized a gain of $4,605,000 on the sale of Union, which
is included in Other Income.
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, 1998 December 31, 1997
-------------------------------------------- --------------------------------------------
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 $ 41,961 $ 457 --- $ 42,418 $ 79,220 $ 361 $ 11 $ 79,570
Obligations of states
and political
subdivisions 169,552 5,405 $ 8 174,949 164,684 3,388 430 167,642
Other debt securities 3,332 --- --- 3,332 2,304 1 --- 2,305
- --------------------------------------------------------------------------------------------------------------------
Total $214,845 $5,862 $ 8 $220,699 $246,208 $3,750 $ 441 $249,517
====================================================================================================================
</TABLE>
<PAGE> 32
<TABLE>
Available for Sale
------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
-------------------------------------------- --------------------------------------------
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 $272,457 $ 3,839 $ 36 $ 276,260 $245,655 $ 1,906 $ 519 $247,042
Obligations of
states and political
subdivisions 24,376 336 --- 24,712 20,646 122 130 20,638
Mortgage-backed
& other debt
securities 158,387 1,193 109 159,471 108,568 1,124 192 109,500
- -------------------------------------------------------------------------------------------------------------------
Total debt securities 455,220 5,368 145 460,443 374,869 3,152 841 377,180
Equity securities 4,459 860 57 5,262 5,204 703 77 5,830
- -------------------------------------------------------------------------------------------------------------------
Total $459,679 $6,228 $202 $465,705 $380,073 $3,855 $918 $383,010
===================================================================================================================
</TABLE>
The following table summarizes amortized cost and estimated fair value of
securities by maturity:
December 31, 1998
-------------------------------------------
Held to Maturity Available for Sale
--------------------- -------------------
Estimated Estimated
Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value
- -----------------------------------------------------------------------------
Within one year $ 46,731 $ 47,111 $130,319 $130,949
After one year, but within five 76,018 78,253 197,327 200,749
After five years, but within ten 52,191 54,306 119,994 121,085
After ten years 39,905 41,029 12,039 12,922
- -----------------------------------------------------------------------------
Total $214,845 $220,699 $459,679 $465,705
=============================================================================
Mortgage-backed securities are assigned to maturity categories based on
estimated average lives. Available for sale securities in the after 10 year
category include securities with no stated maturity. Securities with
prepayment provisions are categorized based on contractual maturity.
Investment securities with par values aggregating $244,715,000 at
December 31, 1998 and $195,165,000 at December 31, 1997 were pledged to
secure public and trust funds. Gross security gains of $1,512,000, $562,000,
and $635,000 and gross security losses of $2,000, $46,000 and $370,000 were
realized for the years ended December 31, 1998, 1997 and 1996, respectively.
NOTE 5: LOANS
- -----------------------------------------------------------------------------
The following table is a summary of total loans:
December 31,
----------------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Loans:
Commercial $ 484,269 $ 438,055
Real estate - construction 46,033 37,743
Real estate 520,393 521,222
Personal, net of unearned income 313,043 333,176
Loans held for sale 9,280 11,705
- -----------------------------------------------------------------------------
Loans, net of unearned income $1,373,018 $1,341,901
=============================================================================
<PAGE> 33
The following table represents changes in the allowance for loan losses:
For the years ended December 31,
--------------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
Balance, beginning of year $20,261 $19,102 $16,955
Allowance for loan losses of
acquired(sold) banks - net (37) 269 707
Provision for loan losses 4,392 5,574 4,795
Losses charged to the allowance (6,400) (5,793) (3,958)
Recoveries 882 1,109 603
- -----------------------------------------------------------------------------
Net losses charged to the allowance (5,518) (4,684) (3,355)
- -----------------------------------------------------------------------------
Balance, end of year $19,098 $20,261 $19,102
=============================================================================
The following tables summarize loans classified as impaired:
December 31,
--------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Nonaccrual $ 10,488 $ 8,413
Renegotiated 695 2,423
Other classified loans:
Doubtful 115 ---
Substandard 5,170 3,765
- -----------------------------------------------------------------------------
Total impaired loans $ 16,468 $ 14,601
=============================================================================
Impaired loans with a related allowance for loan losses $ 11,873 $ 10,877
Allowance for loan losses on impaired loans 2,165 2,550
=============================================================================
For the years ended December 31,
--------------------------------
(in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------
Average impaired loans $19,429 $17,514 $12,717
Amount of contractual interest
income on impaired loans 796 922 718
Amount of interest income recognized
on a cash basis 391 202 178
============================================================================
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 $32,946,000,
$47,123,000, and $56,028,000 as of December 31, 1998, 1997 and 1996,
respectively. During 1998, $54,896,000 of loans were funded and $69,073,000
of loans were repaid. Loans repaid included $11,309,000 in loans to directors
and executive officers of Commercial BancShares who are no longer in those
positions, or have discontinued their affiliation with the Corporation.
NOTE 6: BANK PREMISES AND EQUIPMENT
- -----------------------------------------------------------------------------
Bank premises and equipment include: December 31,
Estimated -------------------
(in thousands) useful life 1998 1997
- -----------------------------------------------------------------------------
Land and improvements (3-10 years) $11,491 $ 9,554
Buildings and improvements (4-50 years) 48,973 46,263
Furniture and equipment (2-25 years) 36,059 33,383
- -----------------------------------------------------------------------------
96,523 89,200
Less - Accumulated depreciation (48,524) (44,132)
- -----------------------------------------------------------------------------
Total $47,999 $45,068
=============================================================================
<PAGE> 34
NOTE 7: CERTIFICATES OF DEPOSIT
- -----------------------------------------------------------------------------
Certificates of deposit in denominations of $100,000 or more were
$125,493,000, and $134,253,000 as of December 31, 1998 and 1997, respectively.
Related interest expense was $7,921,000 in 1998 and $7,512,000 in 1997.
At December 31, 1998, the scheduled maturities of certificates of deposit
are as follows:
(in thousands)
--------------------------------------
1999 $473,534
2000 179,532
2001 42,962
2002 21,033
2003 and thereafter 23,591
--------------------------------------
Total $740,652
======================================
NOTE 8: REPURCHASE AGREEMENTS AND OTHER BORROWINGS
- -----------------------------------------------------------------------------
Federal funds purchased and securities sold under agreements to
repurchase represent short-term borrowings which generally mature within one
to four days from the transaction date. Other borrowings consist principally
of long-term advance agreements with the Federal Home Loan Bank (FHLB). These
borrowings are collateralized by FHLB stock and a blanket collateral
agreement which assigns a security interest in capital stock, deposits,
mortgage loans, and investment securities. At December 31, 1998, FHLB
borrowings, which are variable rate instruments with a weighted average yield
of 5.6%, have the following maturity dates (in thousands):
------------------------------------
2001 $10,255
2002 5,000
2004 and thereafter 3,995
------------------------------------
Total $19,250
====================================
Information concerning securities sold under agreements to repurchase is
summarized as follows:
For the years ended
December 31,
------------------------------
(dollars in thousands) 1998 1997 1996
- --------------------------------------------------------------------------
Outstanding balance at year end $111,029 $ 92,560 $ 74,064
Average balance during the year 99,099 79,132 71,774
Maximum month-end balance during the year 123,277 92,560 88,648
Average interest rate at year end 4.56% 5.61% 5.48%
Average interest rate during the year 4.78 5.01 4.82
==========================================================================
NOTE 9: EMPLOYEE BENEFIT PLANS
- -----------------------------------------------------------------------------
In 1998 WesBanco adopted SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits". This statement requires
revised disclosures about pension and other post-retirement benefit plans,
but does not impact the measurement or recognition of those plans. As such,
adoption of this statement did not impact WesBanco's financial condition or
results of operations.
Defined Benefit Pension Plan:
At December 31, 1998, 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 years of service and 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.
<PAGE> 35
Commercial BancShares had no defined benefit pension plan. Employees of
Commercial have been included in the WesBanco Plan as of the acquisition date,
with no credited prior years of service.
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.
Other postretirement benefits:
WesBanco provides a postretirement contributory health insurance and a
death benefit plan for retirees and active employees who were initially
employed by the Corporation prior to March 30, 1998. The contribution
related to health insurance is a fixed amount which may be changed at the
Corporation's sole discretion. For 1998 and 1997, the health insurance
benefit was $100 per month and death benefit was $7,500. As of December 31,
1998, the benefit obligation of $2,031,000 for the health insurance and death
benefit was merged into the defined benefit pension plan.
Net periodic pension cost (benefit) for the defined benefit plan include the
following components:
For the years ended
December 31,
-------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
Service cost - benefits earned during year $ 808 $ 773 $ 755
Interest cost on projected benefit obligation 1,621 1,406 1,380
Expected return on plan assets (2,415) (3,582) (3,313)
Net amortization and deferral (162) 1,194 1,329
- -----------------------------------------------------------------------------
Net periodic pension cost (benefit) $ (148) $ (209) $ 151
=============================================================================
Net periodic costs of other postretirement benefits other than pensions
include the following components:
For the years ended December 31,
--------------------------------
(in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
Service cost - benefits earned during year $ 98 $ 99 $ 128
Interest cost on projected benefit obligation 215 209 191
Prior service cost 70 70 70
- ------------------------------------------------------------------------------
Net periodic postretirement benefit cost, other
than pensions $ 383 $ 378 $ 389
==============================================================================
Postretirement benefits resulted in cash payments of approximately
$220,000, $181,000, and $138,000 for the years ended December 31, 1998, 1997
and 1996, respectively.
The following tables summarize the activity in the projected benefit
obligation and plan assets:
For the years ended
December 31,
-------------------
(in thousands) 1998 1997
- -----------------------------------------------------------------------------
Projected benefit obligation, at beginning of year $ 20,830 $ 19,642
Service cost 808 773
Interest cost 1,621 1,406
Benefits paid (1,911) (1,258)
Change in interest rate assumptions 924 803
Plan amendments - other postretirement benefits 3,287 ---
Actuarial(gain)loss 1,988 (536)
- -----------------------------------------------------------------------------
Projected benefit obligation, at end of year $ 27,547 $ 20,830
=============================================================================
<PAGE> 36
For the years ended
December 31,
----------------------
(in thousands) 1998 1997
- ------------------------------------------------------------------------------
Fair value of plan assets, at beginning of year $ 27,680 $ 24,928
Actual return on assets 2,649 3,582
Market value adjustment 376 ---
Contributions --- 428
Benefits paid (1,911) (1,258)
- ------------------------------------------------------------------------------
Fair value of plan assets, at end of year $ 28,794 $ 27,680
==============================================================================
Plan assets consist of debt and equity securities which include U.S.
Agency and Treasury issues, Corporate bonds and notes, listed common stocks
including shares of WesBanco common stock (comprising less than 10% of Plan
assets), and short-term cash equivalent instruments.
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) 1998 1997
- ------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation $ 1,247 $ 6,850
Unrecognized prior service cost (864) (1,479)
Unrecognized net gain (loss) 770 (2,342)
Unrecognized obligation 20 27
- ------------------------------------------------------------------------------
Net pension asset $ 1,173 $ 3,056
==============================================================================
The actuarial present value of benefit obligations is as follows:
December 31,
---------------------
(in thousands) 1998 1997
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Vested benefit obligation $ 21,048 $ 16,041
Accumulated benefit obligation 23,936 17,611
==============================================================================
Actuarial assumptions used in the determination of the projected benefit
obligation in the plan are as follows:
For the years ended December 31,
---------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------
Weighted average discount rates 7.00% 7.25% 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
==============================================================================
KSOP: (Employee Stock Ownership and 401(k) Plan)
Substantially all employees are included in either the WesBanco or
Commercial BancShares KSOP Plans. Both KSOP plans consist of non-contributory
employee stock ownership (ESOP) and 401(k) Plans. Under the 401(k) provisions,
the Corporation makes various matching contributions based upon employees'
contribution subject to regulatory limitations. Effective January 1, 1999,
Commercial BancShares' KSOP was merged into WesBanco's KSOP.
As of December 31, 1998, the combined plans hold 657,419 shares of
WesBanco stock, all allocated to specific employee accounts. During 1995,
WesBanco's ESOP established a line of credit with an affiliated lender.
Conditions in the loan agreement provide for a revolving 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
was reduced to a zero balance at December 31, 1998 from $97,000 at
December 31, 1997.
Total contributions to the Plans during 1998 were $1,046,000.
Contributions during 1997 and 1996 were $1,156,000 and $1,031,000,
respectively.
<PAGE> 37
Commercial BancShares Executive Supplemental Income Plan:
The Executive Supplemental Income Plan is a non-contributory plan covering
certain officers with benefits which include death and retirement benefits.
This Plan funded future benefit payments through an insurance investment with
fair values of $4,660,000 and $5,070,000 as of December 31, 1998 and 1997,
respectively. The net expense recorded to provide these benefits was $142,000,
$947,000 and $523,000 for the years ended December 31, 1998, 1997 and 1996,
respectively. WesBanco does not anticipate providing this benefit to any
additional employees.
Key Executive Incentive Bonus & Option Plan:
The Key Executive Incentive Bonus & Option Plan is a non-qualified plan
which includes three components, an Annual Bonus, a Long-Term Incentive Bonus
and a Stock Option component. The three components allow for payments of
cash, or a mixture of cash and stock, or granting of stock options, depending
upon the component of the plan in which the award is earned through the
attainment of certain performance goals. Performance goals are established
by WesBanco's Board of Directors.
Compensation expense incurred in 1998 for the Annual Bonus component of
the plan was $364,000. There were no awards or payments made for the
Long-Term Bonus component of the plan.
The Stock Option component provides for granting of stock options to
eligible employees. The Board of Directors provided for the issuance of
150,000 shares of common stock for this component of the Plan. As of
December 31, 1998, 28,000 shares have been granted at an option price of
$29.50 per share, which was the fair market price on the date of grant.
Vesting of stock options is based upon achievement of performance goals,
which include improvements in earnings per share. At December 31, 1998,
9,331 shares were vested. Employees generally have a 10-year period to
exercise the vested options. No options have been exercised. All granted
options become immediately vested in the event of a change in control of the
Corporation.
The Corporation is accounting for the plan in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees". Since the exercise price
equals the market price of the underlying stock on December 31, 1998 and the
date of grant, no compensation expense has been recognized. Under the expense
recognition provisions of SFAS No. 123, compensation expense of $96,000 would
have been recognized. A fair value of $6.17 per share was estimated using
the Black-Scholes option pricing model using a weighted-average expected life
of the option of 6 years, risk free interest rate of 5.48%, dividend yield of
2.8% and a volatility factor of 18.1%.
NOTE 10: OTHER OPERATING EXPENSE
- -----------------------------------------------------------------------------
Other operating expense consists of the following:
For the years ended December 31,
--------------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
Customer and office supplies $ 2,215 $ 1,744 $ 1,844
Postage and freight 1,802 1,467 1,507
Legal and accounting fees 1,120 1,689 1,227
Marketing media 1,935 1,937 2,137
Miscellaneous taxes 3,247 2,800 2,344
Goodwill amortization 1,048 769 18
Other 12,029 10,830 9,045
- -----------------------------------------------------------------------------
Total $23,396 $21,236 $18,122
=============================================================================
<PAGE> 38
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,
--------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------
Federal statutory tax rate 35% 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (7) (8) (8)
State income taxes 3 3 3
Other - net 1 (3) (1)
- -----------------------------------------------------------------------------
Effective tax rate 32% 27% 29%
=============================================================================
The provision for income taxes consists of the following:
For the years ended December 31,
--------------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
Current - Federal $11,446 $8,174 $9,321
State 2,293 1,733 1,670
Deferred - Federal (189) (319) (289)
State (55) (69) (54)
- -----------------------------------------------------------------------------
Total $13,495 $ 9,519 $10,648
=============================================================================
Tax expense applicable to securities
transactions $ 609 $ 208 $ 106
=============================================================================
Deferred tax assets and liabilities are comprised of the following:
December 31,
---------------------------------
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $ 7,075 $ 7,010 $ 6,361
Deferred compensation 1,199 922 800
Other 47 51 167
- -----------------------------------------------------------------------------
Gross deferred tax assets 8,321 7,983 7,328
- -----------------------------------------------------------------------------
Deferred tax liabilities:
Tax effect of market value adjustment on
investment securities available for sale (2,380) (1,139) (49)
Depreciation (1,484) (1,513) (1,338)
Purchase accounting adjustments (695) (458) (214)
Accretion on investments (205) (215) (143)
Other --- --- (237)
- -----------------------------------------------------------------------------
Gross deferred tax liabilities (4,764) (3,325) (1,981)
- -----------------------------------------------------------------------------
Net deferred tax assets $3,557 $4,658 $5,347
=============================================================================
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 discount rates, cash flow assumptions, and
risk assumptions used. Therefore, 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.
<PAGE> 39
The following table represents the estimates of fair value of financial
instruments:
<TABLE>
December 31,
------------------------------------------
1998 1997
------------------- --------------------
Carrying Fair Carrying Fair
(in thousands) Amount Amount Value Amount
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and short-term investments $ 106,218 $ 106,218 $ 161,290 $ 161,290
Investment securities held to maturity 214,845 220,699 246,208 249,517
Securities available for sale 465,705 465,705 383,010 383,010
Net loans (including loans held for sale) 1,353,920 1,364,404 1,321,640 1,326,850
Financial liabilities:
Deposits 1,787,642 1,792,970 1,779,867 1,780,645
Federal funds purchased, repurchase
agreements and other borrowings 134,705 135,029 120,269 120,269
Off balance sheet financial instruments:
Interest rate swaps (loss) --- (590) --- (26)
=====================================================================================
</TABLE>
The following methods and assumptions are used to estimate the fair
value of like kinds of financial instruments:
Cash and short-term Investments:
The carrying amount for cash and short-term investments is a reasonable
estimate of fair value. Short-term investments consist of federal funds sold.
Investment Securities:
Fair values for investment securities are based on quoted market prices,
if available. If market prices are not available, then quoted market prices
of similar instruments are used.
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.
Federal funds purchased, repurchase agreements and other borrowings:
For federal funds purchased and repurchase agrements, which represent
short-term borrowings, the carrying amount is a reasonable approximation of
fair value. For longer term Federal Home Loan Bank advances, fair value is
based on rates currently available to WesBanco for borrowings with similar
terms and remaining maturities.
Off-Balance Sheet Instruments:
Off-balance sheet instruments consist of commitments to extend credit,
standby letters of credit and interest rate swap agreements. 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 estimated fair value of commitments to extend credit is immaterial
and therefore not presented in the above table.
Fair values for interest rate swaps are estimated by obtaining quotes
from brokers. The values represent the amount the Corporation would receive
or pay to terminate the agreement considering current interest rates.
<PAGE> 40
NOTE 13: COMMITTMENTS AND CONTINGENT LIABILITIES
- -----------------------------------------------------------------------------
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 various commitments outstanding to extend credit
approximating $109,841,000 and $111,177,000 and standby letters of credit of
$9,986,000 and $9,604,000 as of December 31, 1998 and 1997, 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.
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.
The following summarizes WesBanco's interest rate swap agreements:
December 31,
------------------------
(dollars in thousands) 1998 1997
- -----------------------------------------------------------------------------
Notional amount $38,500 $10,000
Unrealized losses (590) (26)
Weighted average receive variable rate 5.14% 5.29%
Weighted average pay fixed rate 4.55% 5.10%
Life (years) 4.85 1.52
- -----------------------------------------------------------------------------
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.
<PAGE> 41
NOTE 15: REGULATORY MATTERS
- -----------------------------------------------------------------------------
WesBanco (Parent Company) is a legal entity separate and distinct from
its subsidiaries. There are various legal limitations on the extent to which
WesBanco's banking subsidiaries may extend credit, pay dividends or otherwise
supply funds to WesBanco. Certain restrictions under Federal and State law
exist regarding the ability of certain subsidiaries to pay dividends to
WesBanco. Approval is required if total dividends declared by a bank
subsidiary, in any calendar year, exceeds net profits for that year combined
with its retained net profits for the preceding two years. In determining to
what extent to pay dividends, each bank subsidiary must also consider the
effect of dividend payments on applicable risk-based capital and leverage
ratio requirements. During the fourth quarter of 1998, Federal and State
regulatory agencies granted approval to declare a special dividend to
WesBanco for the purpose of funding a 1,000,000 share repurchase plan. As
of December 31, 1998, WesBanco's banking subsidiaries could not have declared
any dividends to be paid to WesBanco without prior approval from regulatory
agencies.
Federal Reserve regulations require depository institutions to maintain
cash reserves with the Federal Reserve Bank. The average amounts of required
reserve balances were approximately $16,846,000 and $12,216,000 during 1998
and 1997, respectively.
WesBanco is subject to various regulatory capital requirements
(risk-based capital ratios) administered by 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 material effect on the Corporation's financial
results.
All banks are required to have core capital (Tier 1) of at least 4% of
risk weighted assets, total capital of at least 8% of risk-weighted assets,
and a minimum Tier 1 leverage ratio of 3% of adjusted quarterly average
assets. Tier 1 capital consists principally of shareholders' equity,
excluding unrealized gains and losses on securities available for sale, less
goodwill and certain other intangibles. Total capital consists of Tier 1
capital plus the allowance for loan losses subject to limitation. The
regulations also define well-capitalized levels of Tier 1, total capital, and
Tier 1 leverage as 6%, 10%, and 5%, respectively. WesBanco and each of its
banking subsidiaries are categorized as well-capitalized under the regulatory
framework for prompt corrective action at December 31, 1998 and 1997.
The following table summarizes risk-based capital amounts and ratios for
WesBanco and its largest bank subsidiary:
(dollars in thousands)
December 31,
---------------------------------
1998 1997
--------------- ----------------
WesBanco, Inc. Amount Ratio Amount Ratio
- -----------------------------------------------------------------------------
Total Capital to Risk-Weighted Assets $296,732 19.8% $290,396 20.0%
Tier 1 Capital to Risk-Weighted Assets 277,976 18.5 272,244 18.8
Tier 1 Leverage 277,976 12.5 272,244 12.6
WesBanco Wheeling
- -----------------
Total Capital to Risk-Weighted Assets 112,789 16.1 129,293 20.6
Tier 1 Capital to Risk-Weighted Assets 104,289 14.9 121,430 19.3
Tier 1 Leverage 104,289 9.2 121,430 11.7
=============================================================================
<PAGE> 42
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,
--------------------
1998 1997
- ---------------------------------------------------------------------------
ASSETS
Cash $ 2,299 $ 105
Investment in subsidiaries (at equity in net assets) 239,845 263,589
Securities available for sale carried at market value 28,494 21,174
Dividends receivable 30,900 6,500
Other assets 211 406
- ---------------------------------------------------------------------------
Total Assets $301,749 $291,774
===========================================================================
LIABILITIES
Long-term borrowings --- $ 97
Dividends payable and other liabilities $ 5,266 3,682
- ---------------------------------------------------------------------------
Total Liabilities 5,266 3,779
SHAREHOLDERS' EQUITY 296,483 287,995
- ---------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $301,749 $291,774
===========================================================================
STATEMENT OF INCOME
For the years ended December 31,
--------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------
Dividends from subsidiaries $ 56,234 $ 21,000 $ 19,900
Income from investment securities 831 761 594
Other income 4,674 135 285
- -----------------------------------------------------------------------------
Total Income 61,739 21,896 20,779
- -----------------------------------------------------------------------------
Total Expenses 1,372 1,058 1,059
- -----------------------------------------------------------------------------
Income before income tax provision (benefit)
and undistributed net income of subsidiaries 60,367 20,838 19,720
Income tax provision (benefit) 1,485 (285) (303)
- -----------------------------------------------------------------------------
Income before undistributed net income
of subsidiaries 58,882 21,123 20,023
Undistributed net income (excess dividends)
of subsidiaries (30,569) 4,088 5,919
- -----------------------------------------------------------------------------
Net Income $ 28,313 $ 25,211 $ 25,942
=============================================================================
<PAGE> 43
STATEMENT OF CASH FLOWS
For the years ended December 31,
--------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $ 28,313 $ 25,211 $ 25,942
Exsess dividends (undistributed net income)
of subsidiaries 30,569 (4,088) (5,919)
(Increase) decrease in other assets (24,142) (847) 4,103
Other-net (4,282) 347 151
- -----------------------------------------------------------------------------
Net cash provided by operating activities 30,458 20,623 24,277
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Securities available for sale:
Proceeds from sales 4,287 3,874 2,927
Proceeds from maturities and calls 907 1,909 1,703
Payments for purchases (11,981) (8,319) (15,315)
Acquisitions and additional capitalization
of subsidiaries 3,747 (2,003) (2,605)
- -----------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (3,040) (4,539) (13,290)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Payments on ESOP related debt (97) (316) (364)
Purchases of treasury stock-net (9,726) (5,950) (1,367)
Dividends paid (15,401) (12,118) (9,396)
Other --- (19) 21
- -----------------------------------------------------------------------------
Net cash used in financing activities (25,224) (18,403) (11,106)
- -----------------------------------------------------------------------------
Net increase (decrease) in cash 2,194 (2,319) (119)
Cash at beginning of year 105 2,424 2,543
- -----------------------------------------------------------------------------
Cash at end of year $ 2,299 $ 105 $ 2,424
=============================================================================
<PAGE> 44
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, 1998 and 1997 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. 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. We did not audit the financial statements of
Commercial BancShares, Inc., a wholly owned subsidiary, which statements
reflect total assets constituting 19% in 1997, and total revenues constituting
21% in 1997 and 22% in 1996, of the related consolidated totals. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to data included for Commercial
BancShares, Inc., is based solely on the report of the other auditors.
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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of WesBanco,
Inc. and subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
January 27, 1999
Pittsburgh, Pennsylvania
<PAGE> 45
Supplemental Financial Data
- ---------------------------
WESBANCO, INC.
CONDENSED QUARTERLY STATEMENT OF INCOME
- -----------------------------------------------------------------------------
(in thousands, except per share amounts)
<TABLE>
1998 Quarter ended
-----------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $40,690 $41,348 $40,748 $39,932 $162,718
Interest expense 18,595 19,038 18,672 17,620 73,925
- ---------------------------------------------------------------------------------
Net interest income 22,095 22,310 22,076 22,312 88,793
Provision for loan losses 753 1,649 503 1,487 4,392
- ---------------------------------------------------------------------------------
Net interest income after
provision for loan losses 21,342 20,661 21,573 20,825 84,401
Other income 5,135 9,463 5,259 5,858 25,715
Other expenses 16,175 18,615 15,804 17,714 68,308
- ---------------------------------------------------------------------------------
Income before income taxes 10,302 11,509 11,028 8,969 41,808
Provision for income taxes 3,260 3,720 3,602 2,913 13,495
- ---------------------------------------------------------------------------------
Net Income $ 7,042 $ 7,789 $ 7,426 $ 6,056 $ 28,313
=================================================================================
Earnings per share $ 0.34 $ 0.37 $ 0.36 $ 0.29 $ 1.36
=================================================================================
</TABLE>
<TABLE>
1997 Quarter ended
-----------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $38,085 $38,965 $40,066 $40,674 $157,790
Interest expense 16,466 17,168 17,878 18,493 70,005
- ---------------------------------------------------------------------------------
Net interest income 21,619 21,797 22,188 22,181 87,785
Provision for loan losses 1,211 1,005 1,020 2,338 5,574
- ---------------------------------------------------------------------------------
Net interest income after
provision for loan losses 20,408 20,792 21,168 19,843 82,211
Other income 3,993 4,141 4,502 5,065 17,701
Other expenses 15,222 15,213 15,897 18,850 65,182
- ---------------------------------------------------------------------------------
Income before income taxes 9,179 9,720 9,773 6,058 34,730
Provision for income taxes 2,580 2,745 2,647 1,547 9,519
- ---------------------------------------------------------------------------------
Net Income $ 6,599 $ 6,975 $ 7,126 $ 4,511 $ 25,211
=================================================================================
Earnings per share $ 0.32 $ 0.35 $ 0.34 $ 0.22 $ 1.23
=================================================================================
</TABLE>
<PAGE> 46
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The following persons presently serving as executive officers of WesBanco,
Inc. are as followings:
Name Age Position
---- --- --------
James C. Gardill 52 Chairman of the Board
Robert H. Martin 65 Vice Chairman
William E. Mildren,
Jr.(1) 54 Vice Chairman
Edward M. George 62 President and Chief Executive Officer
Paul M. Limbert 51 Executive Vice President and Chief
Financial Officer
Dennis P. Yaeger 48 Executive Vice President and Chief
Operating Officer
Jerome B. Schmitt 49 Executive Vice President - Investments & Trusts
Stephen F. Decker 46 Executive Vice President & Senior Loan Officer
John W. Moore, Jr. 50 Senior Vice President-Human Resources
Edward G. Sloane 60 Vice President-Management Information Systems
Peter W. Jaworski (2) 43 Senior Vice President - Credit Administration
Wyatt K. Hoffman (3) 43 Vice President - Credit Quality
James C. Porter 45 Vice President - Compliance
Larry G. Johnson (4) 51 Secretary
(1) Mr. Mildren was appointed Vice Chairman of the Corporation on March 31,
1998. The appointment was pursuant to the Agreement and Plan of merger
between WesBanco and Commercial BancShares. Prior to that time, Mr. Mildren
was Chairman, President and Chief Executive Officer of Commercial BancShares.
(2) Mr. Jaworski was appointed Senior Vice President - Credit Administration
in January 1998. Prior to that time, Mr. Jaworski was Vice President - Credit
Risk Management of WesBanco Bank Wheeling from July 1997 and Senior Loan
Review Officer of WesBanco Bank Wheeling from June 1995. Before joining
WesBanco in June 1995, Mr. Jaworski was Senior Vice President and Senior
Credit Officer of Bank One.
(3) Mr. Hoffman was appointed Vice President - Credit Quality in July 1997.
Before joining WesBanco in July 1997, Mr. Hoffman was a Corporate Compliance
Officer for Bank One.
(4) Mr. Johnson was appointed Secretary on March 31, 1998. Prior to that
time, Mr. Johnson was Executive Vice President and Chief Financial Officer
of Commercial BancShares.
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.
Additional information contained under the caption "Election of Directors"
and "Continuing Directors" will be found in the Company's Proxy Statement
for the 1999 Annual Meeting is incorporated herein by reference.
Item 11. Executive Compensation
- --------------------------------
Information contained under the caption "Compensation of Executive
Officers" in the WesBanco's Proxy Statement is incorporated herein by
reference.
<PAGE> 47
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Information contained under the caption "Ownership of Securities by
Directors, Nominees and Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in WesBanco's Proxy Statement is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information contained under the caption "Transactions with Directors and
Officers" in WesBanco's Proxy Statement is incorporated herein by reference.
Additional information concerning related party transactions is contained on
page 40 of this document under the caption "Note 14: Transactions with
Related Parties".
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
----------------------------------------------------
(2) Financial Statement Schedules Page(s)
-----------------------------------------------------------------
The following consolidated financial statements
and report of independent auditor of WesBanco are
included in Part II, Item 8 of this document:
Consolidated Balance Sheets as of December 31, 25
1998 and 1997.
Consolidated Statements of Income for the years 26
ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Changes in Shareholders' 27
Equity for the years ended December 31, 1998,
1997 and 1996.
Consolidated Statement of Cash Flows for the years 28
ended December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements 29
Report of Ernst & Young LLP, Independent Auditors 44
(3) Exhibit Listing
--------------------
Exhibit Document
- -----------------------------------------------------------------------------
3.1 Articles of Incorporation of WesBanco, Inc., restated as of
November 17, 1995 (1)
3.2 Articles of Amendment to the Articles of Incorporation of
WesBanco, Inc. (7)
3.3 Bylaws of WesBanco, Inc. (1)
4.1 Specimen Certificate of WesBanco, Inc. Common Stock (2)
10.1 The Restated WesBanco Directors' Deferred Compensation Plan
Effective December 15, 1994 (1)
<PAGE> 48
Exhibit Document
- -----------------------------------------------------------------------------
10.2 Key Executive Incentive Bonus and Option Plan (5)
10.3 Employment Agreement Between Ernest S. Fragale, WesBanco Mortgage
Company and WesBanco, Inc. dated the 20th Day of August, 1996 (4)
10.4 Employment Agreement Between Frank R. Kerekes, First National Bank
in Fairmont and WesBanco, dated February 28, 1994 (3)
10.5 Employment Agreement Effective January 1, 1993, By and Between
Edward M. George, WesBanco and WesBanco Bank Wheeling (3)
10.6 Employment Agreement Effective January 1, 1993, By and Between
Paul M. Limbert, WesBanco and WesBanco Bank Wheeling (3)
10.7 Employment Agreement Effective January 1, 1993, By and Between
Dennis P. Yaeger, WesBanco and WesBanco Bank Wheeling (3)
10.8 Employment Agreement Effective January 1, 1993, By and Between
Jerome B. Schmitt, WesBanco and WesBanco Bank Wheeling (3)
10.9 Employment Agreement Effective December 2, 1991, By and Between
Stephen F. Decker, Albright National Bank of Kingwood, and
WesBanco (3)
10.10 Employment Agreement Effective December 1, 1993, By and Between
John W. Moore, Jr., WesBanco and WesBanco Bank Wheeling (3)
10.11 Employment Agreement Effective March 31, 1998, By and Between
William E. Mildren, Jr., WesBanco, Inc. and WesBanco Bank
Commercial (6)
10.12 Employment Agreement Effective March 31, 1998, By and Between
Larry G. Johnson, WesBanco, Inc. and WesBanco Bank Commercial (6)
10.13 Employment Continuity Agreement between Commercial BancShares,
Incorporated, and William E. Mildren, Jr., effective November 1,
1996
10.14 Employment Continuity Agreement between Commercial BancShares,
Incorporated, and Larry G. Johnson, effective November 1, 1996
10.15 Employment Agreement Effective January 2, 1998, By and Between J.
Christopher Thomas, WesBanco Bank Chaleston and WesBanco, Inc.
11 Computation of Earnings Per Share
12 Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
<PAGE> 49
Exhibit Document
- -----------------------------------------------------------------------------
23.2 Consent of Harman, Thompson, Mallory & Ice, A.C.
24 Power of Attorney
27 Financial Data Schedule
99.1 Report of Harman, Thompson, Mallory & Ice, A.C., dated
March 6, 1998.
(1) Incorporated by reference 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) Incorporated by reference to a prior Registration Statement filed by the
Registrant of Form S-4 under Registration No. 33-42157 which was filed
with the Securities and Exchange Commission on August 9, 1991
(3) Incorporated by reference 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
(4) Incorporated by reference 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
(5) Incorporated by reference to Schedule 14A Definitive Proxy Statement
(Appendix A) filed by the Registrant with the Securities and Exchange
Commission on March 13, 1998
(6) Incorporated by reference to Form 8-K filed by the Registrant with the
Securities and Exchange Commission on April 15, 1998
(7) Incorporated by reference to Form 10-Q filed by the Registrant with the
Securities and Exchange Commission on May 15, 1998
(b) Reports on Form 8-K
- ------------------------
No reports of Form 8K were filed during the quarter ended December 31, 1998.
<PAGE> 50
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 February 18,
1999.
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 February 18, 1999.
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.
By: /s/ James C. Gardill
----------------------
James C. Gardill
Attorney-in-fact
James E. Altmeyer John W. Kepner
Earl C. Atkins Frank R. Kerekes
James G. Bradley Robert H. Martin
Ray A. Byrd William E. Mildren, Jr.
R. Peterson Chalfant Eric Nelson
John H. Cheffy Richard K. Riederer
Christopher V. Criss Joan C. Stamp
Stephen F. Decker Carter W. Strauss
James D. Entress Reed J. Tanner
Ernest S. Fragale Robert K. Tebay
James C. Gardill J. Christopher Thomas
Edward M. George John A. Welty
Larry G. Johnson William E. Witschey
<PAGE> 51
EXHIBIT INDEX
Exhibit Page
Number Document Number
- ------ -------- ------
10.13 Employment Continuity Agreement between Commercial BancShares,
Incorporated, and William E. Mildren, Jr. effective November 1,
1996 52
10.14 Employment Continuity Agreement between Commercial BancShares,
Incorporated, and Larry G. Johnson, effective November 1, 1996 63
10.15 Employment Agreement Effective January 2, 1998, By and Between
J. Christopher Thomas, WesBanco Bank Charleston and WesBanco, Inc. 74
11 Computation of Earning Per Share 81
12 Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends 82
21 Subsidiaries of the Registrant 83
23.1 Consent of Ernst & Young LLP 84
23.2 Consent of Harman, Thompson, Mallory & Ice, A.C. 85
24 Power of Attorney 86
27 Financial Data Schedule (for electronic filing only) N/A
99.1 Report of Harman, Thompson, Mallory & Ice, A.C., dated
March 6, 1998. 89
<PAGE> 52
EXHIBIT 10.13
11/20/96
COMMERCIAL BANCSHARES, INCORPORATED
EMPLOYMENT CONTINUITY AGREEMENT
THIS EMPLOYMENT CONTINUITY AGREEMENT (this "Agreement") is between
COMMERCIAL BANCSHARES, INCORPORATED, a West Virginia corporation (referred
to in this Agreement as the "Company," which term includes any subsidiary of
the Company where the context so requires), and William E. Mildren, Jr.
("Executive") and is effective as of November 1, 1996.
The Company's Board of Directors (the "Board") acknowledges that
Executive's contributions to the past and future growth and success of
the Company have been and will continue to be substantial. As a publicly
held corporation, the Board recognizes that there exists a possibility of a
change in control of the Company. The Board also recognizes that the
possibility of such a change in control may contribute to uncertainty on the
part of senior management and may result in the departure or distraction of
senior management from their operating responsibilities.
Outstanding management of the Company is essential to advancing the best
interests of the Company and its shareholders. In the event of a threat or
occurrence of a bid to acquire or change control of the Company or to effect
a business combination, it is particularly important that the Company's
business be continued with a minimum of disruption. The Board believes that
the objective of securing and retaining outstanding management will be
achieved if the Company's key management employees are given assurances of
employment security so they will not be distracted by personal uncertainties
and risks created by such circumstances.
The Board believes that such assurances will secure the continued
services of the Company's key operational and management executives in the
performance of both their regular duties and such extra duties as may be
required of them during such periods of uncertainty, enable the Company to
rely on such executives to manage its affairs during any such period with
less concern for their personal risks, and enhance the Company's ability to
attract new key executives as needed.
The Executive Committee (the "Committee") of the Board has recommended,
and the Board has approved, entering into employment continuity agreements
with the Company's key management executives, including Executive, in order
to achieve the foregoing objectives; and Executive is a key management
executive of the Company.
<PAGE> 53
The Company and Executive enter into this Agreement to induce Executive
to remain an employee of the company and to continue to devote his full energy
to the Company's affairs.
1. Employment.
-----------
(a) Effective Date. The Company and Executive hereby
agree that Executive's employment shall continue on and after November 1, 1996
(the "Effective Date"). The Terms and conditions of Executive's employment
are further described in
Section 2.
- ----------
(b) Employment Period. If Executive is employed by the
Company on the Control Change Date, the Company further agrees that the
Company shall continue to employ Executive and Executive further agrees that
Executive shall continue as an employee of the Company for the Employment
Period. For purposes of this Agreement, the Employment Period begins on the
Control Change Date and ends on the earlier of the third anniversary of the
Control Change Date or on Executive's Normal Retirement Date (as defined under
the Company's Employee Stock Ownership Plan, as in effect on the Effective
Date or as amended prior to the Control Change Date). During the Employment
Period, the terms and conditions of Executive's employment are described in
Section 3.
- ----------
(c) Change in Control and Control Change Date. For
purposes of this Agreement, a Change in Control occurs if: (i) after the
Effective Date, any Person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company) becomes the owner
or beneficial owner of Company securities having 20% or more of the combined
voting power of the then outstanding Company securities that may be cast for
the election of the Company's directors (other than as a result of an issuance
of securities initiated by the Company, or open market purchases approved by
the Board, as long as the majority of the Board approving the purchases are
directors at the time the purchases are made); or (ii) as the direct or
indirect result of, or in connection with, a cash tender, or exchange offer,
a merger or other business combination, a sale of assets, a contested election
of directors, or any combination of these transactions, the Continuing
Directors cease to constitute a majority of the Company's Board, or any
successor's board, within two years of the last of such transactions. For
purposes of the preceding sentence, "Continuing Director" means any member of
the Company's Board while a member of the Board, and who (i) was a director
of the Company before the transactions described in the preceding sentence or
(ii) whose subsequent nomination for election or election to the Board was
recommended or approved by a majority of the Continuing Directors; and
"Person" means any individual, firm, corporation, partnership or other entity,
including a "group" as defined in subsection 13(d)(3) of the Securities
Exchange Act of 1934, and any successor (by merger or otherwise) of such
entity. For purposes of this Agreement, the Control Change Date is the date
on which an event described in (i) or (ii) of the first sentence of this
Section 1(c) occurs. If a Change in Control occurs on account of a series
of transactions, the Control Change Date is the date of the last of such
transactions.
<PAGE> 54
2. Terms of Employment Before a Control Change Date
------------------------------------------------
(a) General Duties. Excluding periods of vacation and
sick leave to which Executive is entitled, Executive shall continue to
exercise such authority and perform such executive duties as are commensurate
with the authority being exercised and duties being performed by Executive
immediately before the Effective Date.
(b) Place of Employment. Executive's services shall be
performed at the location where Executive was employed immediately before the
Effective Date. If the Company and Executive agree, however, the location of
Executive's employment may be changed without affecting Executive's rights
under this Agreement.
(c) Working Facilities and Support Staff. Executive is
entitled to an office of a size and with furnishings and other appointments
at least equal to those provided to Executive before the Effective Date.
Executive is entitled to secretarial and other assistance, and to such other
facilities, equipment, and supplies at least equal to those provided to
Executive before the Effective Date.
(d) Expenses Generally. Executive is entitled to receive
prompt reimbursement for all reasonable expenses incurred by Executive.
Reimbursement shall be made in accordance with the Company's policies and
procedures, in effect on the Effective Date or amended prior to the Control
Change Date.
(e) Meetings, Conventions, and Seminars. Executive is
encouraged and is expected to attend seminars, professional meetings and
conventions, and educational courses. The cost of travel, tuition or
registration, food, and lodging for attending those activities shall be paid
by the Company. Other costs shall be paid by Executive, unless the Company
authorizes those costs. If those other costs are authorized expenses,
Executive shall be reimbursed after satisfying the Company's policies and
procedures for such reimbursement.
(f) Promotional Expenses. Executive is encouraged and is
expected, from time to time, to incur reasonable expenses for promoting the
Company's business. Such promotional expenses include travel, entertainment
(including memberships in social and athletic clubs), professional advancement,
and community service expenses. Executive agrees to bear those expenses
except to the extent that those expenses are incurred at the Company's
specific direction or those expenses are specifically authorized by the
Company as expenses that the Company may pay directly or indirectly through
reimbursement to Executive.
(g) Outside Activities. Executive may (i) serve on
corporate, civic, or charitable boards or committees; (ii) deliver lectures,
fulfill speaking engagements, or teach at educational institutions; and (iii)
manage personal investments, provided that such activities do not
significantly interfere with the performance of Executive's responsibilities
for the Company. To the extent that any such activities have been conducted
by Executive before the Effective Date, such prior conduct of activities and
any subsequent conduct of
<PAGE> 55
activities similar in nature and scope shall not be deemed to interfere with
the performance of Executive's responsibilities for the Company.
(h) Compensation and Fringe Benefits. Executive's
compensation (including his annual base salary and incentive compensation)
and benefits generally are the same as those in effect on the Effective Date.
Executive's compensation and benefits are, however, subject to periodic review
and adjustment by the Company. This subsection 2(h) does not change the terms
of any fringe benefit program or employee benefit plan maintained by the
Company and does not give Executive any additional vested interest in any
compensation or benefit to which Executive is not already entitled under any
such program or plan on the Effective Date. Generally, Executive's benefits
include the following items, all of which are subject to periodic review and
adjustment: (i) Executive is entitled to fringe benefits, including use of
an automobile and payment of related expenses, and payment of country club
dues, both in accordance with the Company's policies in effect on the Effective
Date or as amended prior to a Control Change Date; (ii) Executive is entitled
to receive all group life, accidental death and dismemberment, long-term
disability, and medical insurance benefits available to Executive according
to Company policies and Company maintained employee benefit plans in effect
on the Effective Date or as amended prior to a Control Change Date; (iii)
Executive is entitled to paid vacation in accordance with the Company's
policies in effect on the Effective Date or as amended prior to a Control
Change date; and (iv) Executive is entitled to sick leave in accordance
with the Company's policies in effect on the Effective Date or as amended
prior to a Control Change Date; and (v) Executive is entitled to participate
in the Company's supplemental income program.
(i) Disability.
-----------
(i) The Company may terminate this Agreement
if Executive becomes Disabled by giving to Executive written notice of its
intention to terminate Executive's employment. If Executive become Disabled
and does not return to full-time performance of his duties for the Company
within (90) days after Executive receives the Company's notice, Executive's
employment with the Company shall terminate effective on the (90th) day after
receipt of such notice (the "Disability Effective Date"). For purposes of
this Agreement, "Disabled" means that Executive is entitled to receive
benefits under a long-term disability insurance policy maintained by the
Company.
(ii) If Executive's employment is terminated
because Executive is Disabled, Executive is entitled after the Disability
Effective Date to receive disability and other benefits on a basis comparable
to those provided by the Company to disabled employees and their families in
accordance with such plans, programs, and policies relating to disability, if
any, as in effect on the Effective Date or as amended prior to a Control
Change Date.
(j) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge, or data relating to the Company and its business,
which is obtained by Executive during Executive's
<PAGE> 56
employment by the Company and which is not public knowledge (other than by
acts by Executive or his representatives in violation of this Agreement).
After the termination of Executive's employment with the Company, Executive
shall not, without the Company's prior written consent, communicate or
divulge any such information, knowledge, or data to anyone other than the
Company and those designated by it to receive such information, knowledge, or
data. In no event may an asserted violation of this subsection 2(j)
constitute a basis for deferring or withholding any amounts otherwise
payable to Executive under this Agreement.
(k) Records and Files. All records and files concerning
the Company or the Company's clients and customers belong to and remain the
property of the Company.
3. Terms of Employment After the Control Change Date.
--------------------------------------------------
(a) General. During the Employment Period, the terms and
conditions of Executive's employment, as described in Section 2, continue in
effect, except that such terms and conditions are fixed as of the day before
the Control Change Date and Executive's compensation and benefits are
governed by subsection (3)(b).
(b) Compensation and Fringe Benfits. During the
Employment Period, the Company shall (i) continue to pay Executive an
annual base salary not less than Executive's annual base salary on the day
before the Control Change Date, (ii) pay Executive bonuses in amounts not
less in amount than those paid to Executive during the 12-month period
preceding the day before the Control Change Date, and (iii) continue
employee benefit plans and programs as to Executive at levels in effect on
the day before the Control Change Date (to the extent practicable and subject
to such reductions as may be required to maintain such plans in compliance
with applicable nondiscrimination and other federal laws regulating employee
benefit plans and programs) or pay Executive an amount necessary to provide
essentially comparable benefits (assuming, in the case of insured benefits,
that Executive is then insurable at standard rates).
4. Liquidated Damages Upon Termination of Employment.
--------------------------------------------------
(a) General. Executive is entitled to receive Continued
Compensation according to the remaining provisions of this Section if
Executive's employment with the Company terminates during the Employment
Period because of an event described in subsection 4(b) or 4(c), but subject
to Executive's offer to work that is rejected by the Company. If Executive's
employment terminates during the Employment Period and if an event described
in subsection 4(b) or 4(c) has not occurred, this Agreement terminates.
(b) Termination by the Company. Subject to the conditions
of Section 4(h), Executive is entitled to receive Continued Compensation if
Executive's employment is terminated by the Company without cause ("cause"
being limited to Executive's acts of theft, embezzlement, fraud, or moral
turpitude).
<PAGE> 57
(c) Voluntary Termination.
----------------------
(i) Subject to the conditions of subsection 4(h),
Executive is entitled to receive Continued Compensation if Executive
voluntarily terminates employment after (A) Executive does not receive salary
increases, bonuses, and incentive awards comparable to the salary increases,
bonuses, and incentive awards that Executive received in prior years or, if
greater, that other executives in comparable positions receive in the current
year; or (B) Executive's compensation or employment related benefits are
reduced; or (C) Executive's status, title(s), office(s), working conditions,
or management responsibilities are diminished (other than changes in reporting
or management responsibilities required by applicable federal or state law);
or (D) Executive's place of employment is changed in any way without
Executive's consent. Executive will be entitled to receive Continued
Compensation on account of his voluntary termination under this subsection
4(c)(i) only if such voluntary termination occurs within six months after an
event described in (A), (B), (C), or (D), or within six months after the last
in a series of such events.
(ii) Anything in this Agreement to the contrary
notwithstanding, within 12 months after a Control Change Date Executive may
voluntarily terminate his employment with the Company and, in such event, will
be entitled to receive Continued Compensation equal to one times Executive's
Base Period Income, paid in 12 equal monthly installments. During such period
of payment of Continued Compensation, Executive shall not be required to
comply with subsection 4(h), it being the intention of the parties that if
Executive is receiving Continued Compensation under this subsection 4(c)(ii),
he shall be free to compete with the Company during such period (and
thereafter) by being employed by another financial institution in Wood County,
West Virginia or Washington County, Ohio.
(d) Continued Compensation. Continued Compensation equal
to three times Executive's Base Period Income shall be paid in 36 equal monthly
installments. Continued Compensation payments to Executive shall commence on
the first day of the month following Executive's termination of employment
with the Company because of an event described in subsection 4(b) or 4(c)(i)
and shall continue on the first day of each of the next thirty-five months,
subject to receipt by the Company of notification from the Accounting Firm
(defined below) of its determination regarding the reduction, if any, of
Continued Compensation according to subsection 4(g).
(e) Base Period Income. Executive's Base Period Income
equals his annual base salary as of Executive's termination date, plus an
amount equal to the bonus awarded to Executive for the fiscal year immediately
prior to the fiscal year in which Executive's termination date occurs (but in
no event shall such amount be less than the bonus amount required to be paid
during the Employment period under subsection 3(b)(ii)). Amounts of such base
salary and bonus that Executive has elected to defer during the relevant
period are included in Base Period Income.
<PAGE> 58
(f) Other Payments or Benefits. In addition to any
payments provided under this Agreement or under any other arrangement between
the Company and Executive, Executive is entitled to (i) any cash or property
due him as a result of the exercise of a stock option granted under the
Company's Employee Stock Ownership Plan or an earlier plan or a successor
plan, and (ii) during any period in which Continued Compensation is paid, any
other payments or benefits due him, whether or not "parachute payments" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") (but subject to Section 4(g)) including amounts that Executive is
entitled to receive under Company maintained tax-qualified plans and any
health care coverage under Company maintained welfare plans for which
Executive pays the cost.
(g) Certain Reduction of Continued Compensation.
--------------------------------------------
(i) For purposes of this subsection 4(g),
(A) A "Payment" means any amount that, if
paid, would be a payment or distribution in the nature of compensation
to or for the benefit of Executive, whether paid or payable pursuant
to this Agreement or otherwise;
(B) "Continued Compensation" means a
Payment paid or payable pursuant to subsection 4(d) (calculated as if
there were no reduction of Continued Compensation according to this
subsection 4(g));
(C) "Reduced Amount" means the largest
amount of Payments that may be paid that will result in no portion of
any Payments being Subject to the excise tax imposed by Section 4999
of the Code.
(ii) Despite any other Section of this Agreement,
if Harman, Thompson, Mallory & Ice, A.C., the accounting firm that is at the
time engaged to audit the Company's financial statements (the "Accounting
Firm") determines that receipt of all Payments would subject Executive to tax
under Section 4999 of the Code, it shall determine the amount of Payments that
would meet the definition of a "Reduced Amount." In that event, one or more
Payments shall be reduced to that Reduced Amount, but not below zero. If any
reduction of Payments is required by the preceding sentence, (A) Payments
other than Continued Compensation shall be reduced first, and (B) Continued
Compensation shall be reduced in a manner that shortens the period over which
Continued Compensation is paid (and, thus, the number of monthly installments
payable) but does not reduce the amount of a monthly installment that would be
paid but for this subsection 4(g).
(iii) If the Accounting Firm determines that one or
more Payments should be reduced to the Reduced Amount, the Company shall
promptly notify Executive of that determination, sending a copy of the
detailed calculations by the Accounting Firm. All determinations made by the
Accounting Firm under this subsection 4(g) are binding upon the Company and
Executive and shall be made within 60 days after Executive's employment
termination, unless reasonable cause requires an extension of time. The
Accounting Firm
<PAGE> 59
shall furnish written notice to the Company and Executive of any required
extension before the end of the 60-day period; but the Accounting Firm shall
make its determinations under this Section as soon as possible and not later
than six months after Executive's employment termination.
(iv) It is the intention of the Company and
Executive to reduce one or more Payments only to avoid the excise tax imposed
by Section 4999 of the Code. However, it is possible that, as a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm under this Section, amounts shall
have been paid or distributed to or for the benefit of Executive, which
amounts should not have been so paid or distributed ("Overpayment"), or that
additional amounts not paid or distributed to or for the benefit of Executive
could have been so paid or distributed ("Underpayment'), in each case,
consistent with the calculation of the Reduced Amount. If the Accounting
Firm, based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive, which assertion the Accounting Firm
believes has a high probability of success or controlling precedent or other
substantial authority, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan ab initio to Executive,
which loan Executive shall repay to the Company together with interest at the
applicable federal rate under Section 7872(f)(2) of the Code; provided,
however, that no such loan shall be deemed to have been made and no amount is
payable by Executive to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which Executive is subject to
tax under Section 1 or 4999 of the Code or generate a refund of such taxes.
If the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, the Accounting Firm
shall promptly notify the Company of the amount of the Underpayment. The
Company shall take action to address the Underpayment in a manner that as
nearly as possible restores Executive to the position he would have been in if
there had been no Underpayment.
(h) Covenant Not to Compete.
------------------------
(i) Executive agrees that if his employment
terminates for any reason during the Employment Period, then during the
period in which Executive is entitled to Continued Compensation under Section
4, he shall not serve as an employee of, or become a director of, or render
advisory or other services for, or in connection with, or make any substantial
financial investment in a bank or other financial institution that has an
office in Wood County, West Virginia, and Washington County, Ohio. Executive
further agrees that during the period in which Executive is entitled to
Continued Compensation under Section 4, he shall not actively induce any
Company employee to terminate employment with the Company in favor of
promised or prospective employment with or on behalf of Executive or
Executive's post-termination employer.
<PAGE> 60
(ii) Executive agrees and acknowledges that any
beach or threatened violation of the covenants contained in this subsection
4(h) shall cause irreparable injury to the Company, and that the remedy at
law for any such breach or threatened violation shall be inadequate, and that
the Company shall be entitled to appropriate equitable relief.
(iii) The covenants contained in this subsection
4(h) shall inure to the benefit of the Company and its affiliated employers
and subsidiaries and their successors.
(iv) The restrictions contained in this subsection
4(h) are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
(v) Notwithstanding subsections 3(a), 3(b) or
Section 4, if Executive violates subsection 4(h), any unpaid Continued
Compensation shall immediately be forfeited as of the date of any violation
unless it is being paid pursuant to subsection 4(c)(ii), in which event it
shall continue.
5. Legal Fees and Expenses. The Company shall pay all legal fees
and expenses, if any, incurred by Executive in obtaining, enforcing, or
defending any right or benefit provided by this Agreement, whether successful
or not. Payments under this Section are not Continued Compensation and are
not subject to reduction under any other Section of this Agreement.
6. Governing Law. This Agreement and performance hereunder and
all suits, actions and other proceedings hereunder shall be construed in
accordance with and under and pursuant to the laws of the State of West
Virginia, (except its choice of law provisions to the extent that they would
require the application of the laws of a state other than the State of West
Virginia), and in any suit, action or other proceeding that may be brought
arising out of, in connection with, or by reason of this Agreement, the laws
of the State of West Virginia (except its choice of law provisions to the
extent that they would require the application of the laws of a state other
than the State of West Virginia) shall be applicable and shall govern to the
exclusion of the law of any other forum, without regard to the jurisdiction
in which any suit, action or other proceeding may be instituted.
7. Amendment. This Agreement may not be amended except by the
written agreement of Executive and the Company (with the Company acting by
adoption of a resolution by the Board recommended by the Committee).
8. Binding Effect. The parties agree that this Agreement is
enforceable under the laws of the State of West Virginia. This Agreement is
binding on the Company, its successors, and assigns and on Executive and his
personal representatives; and the Company will not consolidate or merge into
or with another corporation, or transfer all or substantially all of its
assets to another corporation (the "Successor Corporation") unless the
Successor Corporation shall assume this Agreement, and upon such assumption,
Executive and the
<PAGE> 61
Successor Corporation shall become obligated to perform the terms and
conditions of this Agreement. This Agreement inures to the benefit of and
is enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
Executive dies while any amounts are payable under this Agreement, all such
amounts, unless otherwise provided, shall be paid in accordance with the terms
of this Agreement to Executive's spouse, or if none, to his devisee, legatee,
or other designee or, if there be no such designee, to his estate.
9. Notice. For purposes of this Agreement, notices and all other
communications shall be in writing and are effective when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid,
addressed to Executive or his personal representative at his last known
address. All notices to the Company shall be directed to the attention of
the Chairman of the Board. Such other addresses may be used as either party
may have furnished to the other in writing. Notices of change of address are
effective only upon receipt.
10. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is
agreed to in writing signed by Executive and the Company. A waiver of any
breach of or compliance with any provision or condition of this Agreement is
not a wavier of similar or dissimilar provisions or conditions. The invalidity
or unenforceability of any provision of this Agreement does not affect the
validity or enforceability of any other provision of this Agreement, which
remains in full force and effect.
11. No Assignment. Executive may not assign, alienate, anticipate,
or otherwise encumber any rights, duties, or amounts that he might be entitled
to receive under this Agreement.
12. Term. Upon execution by the Company and Executive, this
Agreement is effective as of the Effective Date. This Agreement automatically
continues in effect through December 31, 1996, and thereafter through each
successive December 31 unless the Company notifies Executive in writing 30
days before the end of any calendar year that is Agreement shall terminate as
of the end of that calendar year. After a Change in Control of the Company
(as defined in subsection 1(c)), the Company may not terminate this Agreement
for 36 months from the Control Change Date (although this Agreement may
terminate automatically under subsection 4(a)); and this Agreement
automatically continues in effect from year to year thereafter unless the
Company notifies Executive in writing thirty days before the end of the
initial 36-month period or thirty days before any anniversary of the end of
that period that this Agreement shall terminate as of that date.
<PAGE> 62
The parties have executed this Agreement effective as of the 1st day
of November, 1996.
COMMERCIAL BANCSHARES, INCORPORATED
By: /s/ William E. Mildren, Jr.
---------------------------
Name: William E. Mildren, Jr.
Title: Chairman, President and
Chief Executive Officer
EXECUTIVE
/s/ William E. Mildren, Jr.
----------------------------
William E. Mildren, Jr.
<PAGE> 63
EXHIBIT 10.14
11/20/96
COMMERCIAL BANCSHARES, INCORPORATED
EMPLOYMENT CONTINUITY AGREEMENT
THIS EMPLOYMENT CONTINUITY AGREEMENT (this "Agreement") is between
COMMERCIAL BANCSHARES, INCORPORATED, a West Virginia corporation (referred
to in this Agreement as the "Company," which term includes any subsidiary of
the Company where the context so requires), and Larry G. Johnson ("Executive")
and is effective as of November 1, 1996.
The Company's Board of Directors (the "Board") acknowledges that
Executive's contributions to the past and future growth and success of
the Company have been and will continue to be substantial. As a publicly
held corporation, the Board recognizes that there exists a possibility of a
change in control of the Company. The Board also recognizes that the
possibility of such a change in control may contribute to uncertainty on the
part of senior management and may result in the departure or distraction of
senior management from their operating responsibilities.
Outstanding management of the Company is essential to advancing the best
interests of the Company and its shareholders. In the event of a threat or
occurrence of a bid to acquire or change control of the Company or to effect
a business combination, it is particularly important that the Company's
business be continued with a minimum of disruption. The Board believes that
the objective of securing and retaining outstanding management will be
achieved if the Company's key management employees are given assurances of
employment security so they will not be distracted by personal uncertainties
and risks created by such circumstances.
The Board believes that such assurances will secure the continued
services of the Company's key operational and management executives in the
performance of both their regular duties and such extra duties as may be
required of them during such periods of uncertainty, enable the Company to
rely on such executives to manage its affairs during any such period with
less concern for their personal risks, and enhance the Company's ability to
attract new key executives as needed.
The Executive Committee (the "Committee") of the Board has recommended,
and the Board has approved, entering into employment continuity agreements
with the Company's key management executives, including Executive, in order
to achieve the foregoing objectives; and Executive is a key management
executive of the Company.
<PAGE> 64
The Company and Executive enter into this Agreement to induce Executive
to remain an employee of the company and to continue to devote his full energy
to the Company's affairs.
1. Employment.
-----------
(a) Effective Date. The Company and Executive hereby
agree that Executive's employment shall continue on and after November 1, 1996
(the "Effective Date"). The Terms and conditions of Executive's employment
are further described in
Section 2.
- ----------
(b) Employment Period. If Executive is employed by the
Company on the Control Change Date, the Company further agrees that the
Company shall continue to employ Executive and Executive further agrees that
Executive shall continue as an employee of the Company for the Employment
Period. For purposes of this Agreement, the Employment Period begins on the
Control Change Date and ends on the earlier of the third anniversary of the
Control Change Date or on Executive's Normal Retirement Date (as defined under
the Company's Employee Stock Ownership Plan, as in effect on the Effective
Date or as amended prior to the Control Change Date). During the Employment
Period, the terms and conditions of Executive's employment are described in
Section 3.
- ----------
(c) Change in Control and Control Change Date. For
purposes of this Agreement, a Change in Control occurs if: (i) after the
Effective Date, any Person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company) becomes the owner
or beneficial owner of Company securities having 20% or more of the combined
voting power of the then outstanding Company securities that may be cast for
the election of the Company's directors (other than as a result of an issuance
of securities initiated by the Company, or open market purchases approved by
the Board, as long as the majority of the Board approving the purchases are
directors at the time the purchases are made); or (ii) as the direct or
indirect result of, or in connection with, a cash tender, or exchange offer,
a merger or other business combination, a sale of assets, a contested election
of directors, or any combination of these transactions, the Continuing
Directors cease to constitute a majority of the Company's Board, or any
successor's board, within two years of the last of such transactions. For
purposes of the preceding sentence, "Continuing Director" means any member of
the Company's Board while a member of the Board, and who (i) was a director
of the Company before the transactions described in the preceding sentence or
(ii) whose subsequent nomination for election or election to the Board was
recommended or approved by a majority of the Continuing Directors; and
"Person" means any individual, firm, corporation, partnership or other entity,
including a "group" as defined in subsection 13(d)(3) of the Securities
Exchange Act of 1934, and any successor (by merger or otherwise) of such
entity. For purposes of this Agreement, the Control Change Date is the date
on which an event described in (i) or (ii) of the first sentence of this
Section 1(c) occurs. If a Change in Control occurs on account of a series
of transactions, the Control Change Date is the date of the last of such
transactions.
<PAGE> 65
2. Terms of Employment Before a Control Change Date
------------------------------------------------
(a) General Duties. Excluding periods of vacation and
sick leave to which Executive is entitled, Executive shall continue to
exercise such authority and perform such executive duties as are commensurate
with the authority being exercised and duties being performed by Executive
immediately before the Effective Date.
(b) Place of Employment. Executive's services shall be
performed at the location where Executive was employed immediately before the
Effective Date. If the Company and Executive agree, however, the location of
Executive's employment may be changed without affecting Executive's rights
under this Agreement.
(c) Working Facilities and Support Staff. Executive is
entitled to an office of a size and with furnishings and other appointments
at least equal to those provided to Executive before the Effective Date.
Executive is entitled to secretarial and other assistance, and to such other
facilities, equipment, and supplies at least equal to those provided to
Executive before the Effective Date.
(d) Expenses Generally. Executive is entitled to receive
prompt reimbursement for all reasonable expenses incurred by Executive.
Reimbursement shall be made in accordance with the Company's policies and
procedures, in effect on the Effective Date or amended prior to the Control
Change Date.
(e) Meetings, Conventions, and Seminars. Executive is
encouraged and is expected to attend seminars, professional meetings and
conventions, and educational courses. The cost of travel, tuition or
registration, food, and lodging for attending those activities shall be paid
by the Company. Other costs shall be paid by Executive, unless the Company
authorizes those costs. If those other costs are authorized expenses,
Executive shall be reimbursed after satisfying the Company's policies and
procedures for such reimbursement.
(f) Promotional Expenses. Executive is encouraged and is
expected, from time to time, to incur reasonable expenses for promoting the
Company's business. Such promotional expenses include travel, entertainment
(including memberships in social and athletic clubs), professional advancement,
and community service expenses. Executive agrees to bear those expenses
except to the extent that those expenses are incurred at the Company's
specific direction or those expenses are specifically authorized by the
Company as expenses that the Company may pay directly or indirectly through
reimbursement to Executive.
(g) Outside Activities. Executive may (i) serve on
corporate, civic, or charitable boards or committees; (ii) deliver lectures,
fulfill speaking engagements, or teach at educational institutions; and (iii)
manage personal investments, provided that such activities do not
significantly interfere with the performance of Executive's responsibilities
for the Company. To the extent that any such activities have been conducted
by Executive before the Effective Date, such prior conduct of activities and
any subsequent conduct of
<PAGE> 66
activities similar in nature and scope shall not be deemed to interfere with
the performance of Executive's responsibilities for the Company.
(h) Compensation and Fringe Benefits. Executive's
compensation (including his annual base salary and incentive compensation)
and benefits generally are the same as those in effect on the Effective Date.
Executive's compensation and benefits are, however, subject to periodic review
and adjustment by the Company. This subsection 2(h) does not change the terms
of any fringe benefit program or employee benefit plan maintained by the
Company and does not give Executive any additional vested interest in any
compensation or benefit to which Executive is not already entitled under any
such program or plan on the Effective Date. Generally, Executive's benefits
include the following items, all of which are subject to periodic review and
adjustment: (i) Executive is entitled to fringe benefits, including use of
an automobile and payment of related expenses, and payment of country club
dues, both in accordance with the Company's policies in effect on the Effective
Date or as amended prior to a Control Change Date; (ii) Executive is entitled
to receive all group life, accidental death and dismemberment, long-term
disability, and medical insurance benefits available to Executive according
to Company policies and Company maintained employee benefit plans in effect
on the Effective Date or as amended prior to a Control Change Date; (iii)
Executive is entitled to paid vacation in accordance with the Company's
policies in effect on the Effective Date or as amended prior to a Control
Change date; and (iv) Executive is entitled to sick leave in accordance
with the Company's policies in effect on the Effective Date or as amended
prior to a Control Change Date; and (v) Executive is entitled to participate
in the Company's supplemental income program.
(i) Disability.
-----------
(i) The Company may terminate this Agreement
if Executive becomes Disabled by giving to Executive written notice of its
intention to terminate Executive's employment. If Executive become Disabled
and does not return to full-time performance of his duties for the Company
within (90) days after Executive receives the Company's notice, Executive's
employment with the Company shall terminate effective on the (90th) day after
receipt of such notice (the "Disability Effective Date"). For purposes of
this Agreement, "Disabled" means that Executive is entitled to receive
benefits under a long-term disability insurance policy maintained by the
Company.
(ii) If Executive's employment is terminated
because Executive is Disabled, Executive is entitled after the Disability
Effective Date to receive disability and other benefits on a basis comparable
to those provided by the Company to disabled employees and their families in
accordance with such plans, programs, and policies relating to disability, if
any, as in effect on the Effective Date or as amended prior to a Control
Change Date.
(j) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge, or data relating to the Company and its business,
which is obtained by Executive during Executive's
<PAGE> 67
employment by the Company and which is not public knowledge (other than by
acts by Executive or his representatives in violation of this Agreement).
After the termination of Executive's employment with the Company, Executive
shall not, without the Company's prior written consent, communicate or
divulge any such information, knowledge, or data to anyone other than the
Company and those designated by it to receive such information, knowledge, or
data. In no event may an asserted violation of this subsection 2(j)
constitute a basis for deferring or withholding any amounts otherwise
payable to Executive under this Agreement.
(k) Records and Files. All records and files concerning
the Company or the Company's clients and customers belong to and remain the
property of the Company.
3. Terms of Employment After the Control Change Date.
--------------------------------------------------
(a) General. During the Employment Period, the terms and
conditions of Executive's employment, as described in Section 2, continue in
effect, except that such terms and conditions are fixed as of the day before
the Control Change Date and Executive's compensation and benefits are
governed by subsection (3)(b).
(b) Compensation and Fringe Benfits. During the
Employment Period, the Company shall (i) continue to pay Executive an
annual base salary not less than Executive's annual base salary on the day
before the Control Change Date, (ii) pay Executive bonuses in amounts not
less in amount than those paid to Executive during the 12-month period
preceding the day before the Control Change Date, and (iii) continue
employee benefit plans and programs as to Executive at levels in effect on
the day before the Control Change Date (to the extent practicable and subject
to such reductions as may be required to maintain such plans in compliance
with applicable nondiscrimination and other federal laws regulating employee
benefit plans and programs) or pay Executive an amount necessary to provide
essentially comparable benefits (assuming, in the case of insured benefits,
that Executive is then insurable at standard rates).
4. Liquidated Damages Upon Termination of Employment.
--------------------------------------------------
(a) General. Executive is entitled to receive Continued
Compensation according to the remaining provisions of this Section if
Executive's employment with the Company terminates during the Employment
Period because of an event described in subsection 4(b) or 4(c), but subject
to Executive's offer to work that is rejected by the Company. If Executive's
employment terminates during the Employment Period and if an event described
in subsection 4(b) or 4(c) has not occurred, this Agreement terminates.
(b) Termination by the Company. Subject to the conditions
of Section 4(h), Executive is entitled to receive Continued Compensation if
Executive's employment is terminated by the Company without cause ("cause"
being limited to Executive's acts of theft, embezzlement, fraud, or moral
turpitude).
<PAGE> 68
(c) Voluntary Termination.
----------------------
(i) Subject to the conditions of subsection 4(h),
Executive is entitled to receive Continued Compensation if Executive
voluntarily terminates employment after (A) Executive does not receive salary
increases, bonuses, and incentive awards comparable to the salary increases,
bonuses, and incentive awards that Executive received in prior years or, if
greater, that other executives in comparable positions receive in the current
year; or (B) Executive's compensation or employment related benefits are
reduced; or (C) Executive's status, title(s), office(s), working conditions,
or management responsibilities are diminished (other than changes in reporting
or management responsibilities required by applicable federal or state law);
or (D) Executive's place of employment is changed in any way without
Executive's consent. Executive will be entitled to receive Continued
Compensation on account of his voluntary termination under this subsection
4(c)(i) only if such voluntary termination occurs within six months after an
event described in (A), (B), (C), or (D), or within six months after the last
in a series of such events.
(ii) Anything in this Agreement to the contrary
notwithstanding, within 12 months after a Control Change Date Executive may
voluntarily terminate his employment with the Company and, in such event, will
be entitled to receive Continued Compensation equal to one times Executive's
Base Period Income, paid in 12 equal monthly installments. During such period
of payment of Continued Compensation, Executive shall not be required to
comply with subsection 4(h), it being the intention of the parties that if
Executive is receiving Continued Compensation under this subsection 4(c)(ii),
he shall be free to compete with the Company during such period (and
thereafter) by being employed by another financial institution in Wood County,
West Virginia or Washington County, Ohio.
(d) Continued Compensation. Continued Compensation equal
to three times Executive's Base Period Income shall be paid in 36 equal monthly
installments. Continued Compensation payments to Executive shall commence on
the first day of the month following Executive's termination of employment
with the Company because of an event described in subsection 4(b) or 4(c)(i)
and shall continue on the first day of each of the next thirty-five months,
subject to receipt by the Company of notification from the Accounting Firm
(defined below) of its determination regarding the reduction, if any, of
Continued Compensation according to subsection 4(g).
(e) Base Period Income. Executive's Base Period Income
equals his annual base salary as of Executive's termination date, plus an
amount equal to the bonus awarded to Executive for the fiscal year immediately
prior to the fiscal year in which Executive's termination date occurs (but in
no event shall such amount be less than the bonus amount required to be paid
during the Employment period under subsection 3(b)(ii)). Amounts of such base
salary and bonus that Executive has elected to defer during the relevant
period are included in Base Period Income.
<PAGE> 69
(f) Other Payments or Benefits. In addition to any
payments provided under this Agreement or under any other arrangement between
the Company and Executive, Executive is entitled to (i) any cash or property
due him as a result of the exercise of a stock option granted under the
Company's Employee Stock Ownership Plan or an earlier plan or a successor
plan, and (ii) during any period in which Continued Compensation is paid, any
other payments or benefits due him, whether or not "parachute payments" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") (but subject to Section 4(g)) including amounts that Executive is
entitled to receive under Company maintained tax-qualified plans and any
health care coverage under Company maintained welfare plans for which
Executive pays the cost.
(g) Certain Reduction of Continued Compensation.
--------------------------------------------
(i) For purposes of this subsection 4(g),
(A) A "Payment" means any amount that, if
paid, would be a payment or distribution in the nature of compensation
to or for the benefit of Executive, whether paid or payable pursuant
to this Agreement or otherwise;
(B) "Continued Compensation" means a
Payment paid or payable pursuant to subsection 4(d) (calculated as if
there were no reduction of Continued Compensation according to this
subsection 4(g));
(C) "Reduced Amount" means the largest
amount of Payments that may be paid that will result in no portion of
any Payments being Subject to the excise tax imposed by Section 4999
of the Code.
(ii) Despite any other Section of this Agreement,
if Harman, Thompson, Mallory & Ice, A.C., the accounting firm that is at the
time engaged to audit the Company's financial statements (the "Accounting
Firm") determines that receipt of all Payments would subject Executive to tax
under Section 4999 of the Code, it shall determine the amount of Payments that
would meet the definition of a "Reduced Amount." In that event, one or more
Payments shall be reduced to that Reduced Amount, but not below zero. If any
reduction of Payments is required by the preceding sentence, (A) Payments
other than Continued Compensation shall be reduced first, and (B) Continued
Compensation shall be reduced in a manner that shortens the period over which
Continued Compensation is paid (and, thus, the number of monthly installments
payable) but does not reduce the amount of a monthly installment that would be
paid but for this subsection 4(g).
(iii) If the Accounting Firm determines that one or
more Payments should be reduced to the Reduced Amount, the Company shall
promptly notify Executive of that determination, sending a copy of the
detailed calculations by the Accounting Firm. All determinations made by the
Accounting Firm under this subsection 4(g) are binding upon the Company and
Executive and shall be made within 60 days after Executive's employment
termination, unless reasonable cause requires an extension of time. The
Accounting Firm
<PAGE> 70
shall furnish written notice to the Company and Executive of any required
extension before the end of the 60-day period; but the Accounting Firm shall
make its determinations under this Section as soon as possible and not later
than six months after Executive's employment termination.
(iv) It is the intention of the Company and
Executive to reduce one or more Payments only to avoid the excise tax imposed
by Section 4999 of the Code. However, it is possible that, as a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm under this Section, amounts shall
have been paid or distributed to or for the benefit of Executive, which
amounts should not have been so paid or distributed ("Overpayment"), or that
additional amounts not paid or distributed to or for the benefit of Executive
could have been so paid or distributed ("Underpayment'), in each case,
consistent with the calculation of the Reduced Amount. If the Accounting
Firm, based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive, which assertion the Accounting Firm
believes has a high probability of success or controlling precedent or other
substantial authority, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan ab initio to Executive,
which loan Executive shall repay to the Company together with interest at the
applicable federal rate under Section 7872(f)(2) of the Code; provided,
however, that no such loan shall be deemed to have been made and no amount is
payable by Executive to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which Executive is subject to
tax under Section 1 or 4999 of the Code or generate a refund of such taxes.
If the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, the Accounting Firm
shall promptly notify the Company of the amount of the Underpayment. The
Company shall take action to address the Underpayment in a manner that as
nearly as possible restores Executive to the position he would have been in if
there had been no Underpayment.
(h) Covenant Not to Compete.
------------------------
(i) Executive agrees that if his employment
terminates for any reason during the Employment Period, then during the
period in which Executive is entitled to Continued Compensation under Section
4, he shall not serve as an employee of, or become a director of, or render
advisory or other services for, or in connection with, or make any substantial
financial investment in a bank or other financial institution that has an
office in Wood County, West Virginia, and Washington County, Ohio. Executive
further agrees that during the period in which Executive is entitled to
Continued Compensation under Section 4, he shall not actively induce any
Company employee to terminate employment with the Company in favor of
promised or prospective employment with or on behalf of Executive or
Executive's post-termination employer.
<PAGE> 71
(ii) Executive agrees and acknowledges that any
beach or threatened violation of the covenants contained in this subsection
4(h) shall cause irreparable injury to the Company, and that the remedy at
law for any such breach or threatened violation shall be inadequate, and that
the Company shall be entitled to appropriate equitable relief.
(iii) The covenants contained in this subsection
4(h) shall inure to the benefit of the Company and its affiliated employers
and subsidiaries and their successors.
(iv) The restrictions contained in this subsection
4(h) are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
(v) Notwithstanding subsections 3(a), 3(b) or
Section 4, if Executive violates subsection 4(h), any unpaid Continued
Compensation shall immediately be forfeited as of the date of any violation
unless it is being paid pursuant to subsection 4(c)(ii), in which event it
shall continue.
5. Legal Fees and Expenses. The Company shall pay all legal fees
and expenses, if any, incurred by Executive in obtaining, enforcing, or
defending any right or benefit provided by this Agreement, whether successful
or not. Payments under this Section are not Continued Compensation and are
not subject to reduction under any other Section of this Agreement.
6. Governing Law. This Agreement and performance hereunder and
all suits, actions and other proceedings hereunder shall be construed in
accordance with and under and pursuant to the laws of the State of West
Virginia, (except its choice of law provisions to the extent that they would
require the application of the laws of a state other than the State of West
Virginia), and in any suit, action or other proceeding that may be brought
arising out of, in connection with, or by reason of this Agreement, the laws
of the State of West Virginia (except its choice of law provisions to the
extent that they would require the application of the laws of a state other
than the State of West Virginia) shall be applicable and shall govern to the
exclusion of the law of any other forum, without regard to the jurisdiction
in which any suit, action or other proceeding may be instituted.
7. Amendment. This Agreement may not be amended except by the
written agreement of Executive and the Company (with the Company acting by
adoption of a resolution by the Board recommended by the Committee).
8. Binding Effect. The parties agree that this Agreement is
enforceable under the laws of the State of West Virginia. This Agreement is
binding on the Company, its successors, and assigns and on Executive and his
personal representatives; and the Company will not consolidate or merge into
or with another corporation, or transfer all or substantially all of its
assets to another corporation (the "Successor Corporation") unless the
Successor Corporation shall assume this Agreement, and upon such assumption,
Executive and the
<PAGE> 72
Successor Corporation shall become obligated to perform the terms and
conditions of this Agreement. This Agreement inures to the benefit of and
is enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
Executive dies while any amounts are payable under this Agreement, all such
amounts, unless otherwise provided, shall be paid in accordance with the terms
of this Agreement to Executive's spouse, or if none, to his devisee, legatee,
or other designee or, if there be no such designee, to his estate.
9. Notice. For purposes of this Agreement, notices and all other
communications shall be in writing and are effective when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid,
addressed to Executive or his personal representative at his last known
address. All notices to the Company shall be directed to the attention of
the Chairman of the Board. Such other addresses may be used as either party
may have furnished to the other in writing. Notices of change of address are
effective only upon receipt.
10. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is
agreed to in writing signed by Executive and the Company. A waiver of any
breach of or compliance with any provision or condition of this Agreement is
not a wavier of similar or dissimilar provisions or conditions. The invalidity
or unenforceability of any provision of this Agreement does not affect the
validity or enforceability of any other provision of this Agreement, which
remains in full force and effect.
11. No Assignment. Executive may not assign, alienate, anticipate,
or otherwise encumber any rights, duties, or amounts that he might be entitled
to receive under this Agreement.
12. Term. Upon execution by the Company and Executive, this
Agreement is effective as of the Effective Date. This Agreement automatically
continues in effect through December 31, 1996, and thereafter through each
successive December 31 unless the Company notifies Executive in writing 30
days before the end of any calendar year that is Agreement shall terminate as
of the end of that calendar year. After a Change in Control of the Company
(as defined in subsection 1(c)), the Company may not terminate this Agreement
for 36 months from the Control Change Date (although this Agreement may
terminate automatically under subsection 4(a)); and this Agreement
automatically continues in effect from year to year thereafter unless the
Company notifies Executive in writing thirty days before the end of the
initial 36-month period or thirty days before any anniversary of the end of
that period that this Agreement shall terminate as of that date.
<PAGE> 73
The parties have executed this Agreement effective as of the 1st day
of November, 1996.
COMMERCIAL BANCSHARES, INCORPORATED
By: /s/ William E. Mildren, Jr.
---------------------------
Name: William E. Mildren, Jr.
Title: Chairman, President and
Chief Executive Officer
EXECUTIVE
/s/ Larry G. Johnson
--------------------
Larry G. Johnson
<PAGE> 74
EXHIBIT 10.15
AGREEMENT
---------
THIS AGREEMENT, made and entered into this 2nd day of January, 1998, by
and between WESBANCO BANK CHARLESTON, hereinafter referred to as "Bank", and
J. CHRISTOPHER THOMAS, hereinafter referred to as "Employee", and WESBANCO,
INC., a West Virginia corporation, hereinafter referred to as "Wesbanco".
WHEREAS, Employee is serving as an executive officer of the Bank as of
the date hereof; and
WHEREAS, the Bank wishes to assure itself of the Employee's full time
employment and continuing services in an executive capacity.
WITNESSETH THAT: In consideration of the mutual promises and undertakings
hereinafter set forth, the parties hereto agree as follows:
1. OFFER OF EMPLOYMENT. The Bank agrees to, and hereby does, continue
the employment of Employee at Bank in an executive capacity. In that capacity,
Employee shall be answerable to the Board of Directors of the Bank and such
other officers of Wesbanco, the parent company of the Bank, as the Board of
Directors of Wesbanco shall direct. Employee shall perform such duties,
compatible with his employment under the Agreement, as the Bank, and Wesbanco,
from time to time may assign to him.
2. COMPENSATION. As compensation for the performance of the services
specified in Paragraph (1) and the observance of all of the provisions of
this Agreement, the Bank agrees to pay Employee, and Employee agrees to accept,
the following amounts and benefits during his term of employment:
(A) Salary at a rate to be determined by the Board of Directors of
the Bank, with notice to be given to employee in April of each calendar
<PAGE> 75
year, but in no event shall Employee's salary be less than One Hundred
Forty-five Thousand Dollars ($145,000.00) per year, plus any increases
granted by the Board of Directors after the date hereof, and payable in
equal biweekly installments; and
(B) Such other miscellaneous benefits and perquisites as the Bank
provides to its executive employees generally.
3. ACCEPTANCE OF EMPLOYMENT. Employee accepts the employment provided
for herein, at the salary set forth above, and agrees to devote his talents
and best efforts to the diligent, faithful, and efficient discharge of the
duties of his employment, and in furtherance of the operations and best
interests of Bank, and observe and abide by all rules and regulations
promulgated by Bank for the guidance and direction of its employees and the
conduct of its business, operations, and activities.
4. TERM OF AGREEMENT. The employment term provided for herein shall
consist of a revolving period of three years, with the initial term beginning
on the 1st day of January, 1998, and ending on the 31st day of December, 2001.
The term of this Agreement shall automatically be extended on each anniversary
of the beginning date of the term hereof for an additional one year, thereby
creating a new three year term, unless written notice of termination hereof
is given by either party at least ninety (90) days prior to the anniversary
date of the beginning date of this Agreement. Any such notice of non-renewal
shall not affect the continuation of the term of this Agreement existing at
the time of such non-renewal.
5. CONFIDENTIALITY. Employee agrees that such information concerning the
business, affairs, and records of Bank as he may acquire in the course of, or
as incident to, his employment hereunder, shall be regarded and treated as
being of a confidential nature, and that he will not disclose any such
information to any person, firm, or corporation, for his own benefit
<PAGE> 76
or to the detriment of Bank, during the term of his employment under this
Agreement or at any time following the termination thereof.
6. MISCELLANEOUS BENEFITS. This Agreement is not intended, and shall not
be deemed to be in lieu of any rights, benefits, and privileges to which
Employee may be entitled as an Employee of Bank under any retirement, pension,
profit sharing, insurance, hospital, bonus, vacation, or other plan or plans
which may now be in effect or which may hereafter be adopted by Bank, it being
understood that Employee shall have the same rights and privileges to
participate in such plans and benefits, as any other employee, during the
period of his employment.
7. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon Bank's successors and assigns, including, without limitation,
any company or corporation which may acquire substantially all of Bank's
assets or business, or with, or into which Bank may be merged or otherwise
consolidated.
8. TERMINATION. The Employee's employment hereunder shall terminate upon
the earliest to occur of any one of the following:
(A) The expiration of the initial term of this Agreement, or any
extended term of this Agreement by written notice of termination as
provided in Paragraph (4) hereof; or
(B) By the Bank for cause, after thirty (30) days written notice to
Employee. Cause for purposes of this Agreement shall mean as follows:
(i) An act of dishonesty, willful disloyalty or fraud by the
Employee that the Bank determines is detrimental to the best
interests of the Bank; or
<PAGE> 77
(ii) The Employee's continuing inattention to, neglect of, or
inability to perform, the duties to be performed under this
Agreement, or
(iii) Any other breach of the Employee's covenants contained
herein or of any of the other terms and provisions of this
Agreement, or
(iv) The deliberate and intentional engaging by the Employee
in gross misconduct which is materially and demonstrably injurious
to the Bank.
(C) Employee shall have the right to terminate this Agreement
and his active employment hereunder at any time upon ninety (90) days
written notice to the Bank.
(D) Upon the death of Employee, this Agreement shall automatically
terminate.
9. EFFECT OF TERMINATION. In the event of a termination of this
Agreement, Employee shall be paid the following severance benefits, payable
promptly after the date of termination of his employment, in the following
manner:
(A) In the event that this Agreement is terminated by the death of
Employee, this Agreement shall be deemed to have been terminated as of
the date of such death except, however, that Bank shall pay to the
surviving spouse of Employee, or in lieu thereof, to Employee's estate,
an amount equal to six months of the base salary at his then current
base rate, provided, however, that if such death occurs within six
months of the normal retirement date as provided by the Bank's defined
benefit pension plan, or
<PAGE> 78
after such normal retirement date, so that a pension distribution or
benefit is payable to the surviving spouse of Employee, such payment
shall be reduced to an amount equal to one month of the base salary
at his then current base rate.
(B) In the event that this Agreement is terminated by Employee
and Bank by mutual agreement, then Bank shall pay such severance benefits,
if any, as shall have been agreed upon by Bank and Employee.
(C) In the event that Bank attempts to terminate this Agreement,
other than for cause, death of Employee, or by mutual agreement with
Employee, in addition to any other rights or remedies which Employee
may have, Employee shall receive an amount equal to the greater of
(i) six months of base salary at his then current base rate, or (ii) the
base salary Employee would have received had he continued to be employed
pursuant to this Agreement throughout the end of the then existing term
of employment hereunder.
(D) In the event Bank terminates this Agreement for cause, no
severance benefits shall be payable hereunder.
10. ENTIRE UNDERSTANDING; AMENDMENT. This Agreement supersedes all
previous agreements between Employee and Bank and contains the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and cannot be amended, modified, or supplemented in any
respect except by a subsequent written agreement executed by both parties.
11. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of West Virginia.
<PAGE> 79
12. CERTAIN OBLIGATIONS OF WESBANCO. While the parties acknowledge that
certain provisions of this Agreement may be unenforceable in some respects
against the Bank, pursuant to applicable banking law, it is nonetheless the
intention of the parties to create pursuant to this Agreement a valid
employment for a definite term with specified benefits. As an inducement for
Employee and Bank to enter into this Agreement whereby Employee would be
employed by Bank for a definite term, Wesbanco hereby undertakes the
independent, separate and unconditional obligation to Employee to pay all
amounts which are or may become due to Employee under this Agreement as set
forth herein, regardless of the status of the direct or indirect
enforceability or validity of Bank's obligation to pay any or all such
amounts as may be due hereunder to Employee; provided, however, that for
purposes of this Paragraph 12, Wesbanco shall be obligated to the Employee
for any bonuses or any increases in base salary in excess of the rate of One
Hundred Forty-five Thousand Dollars ($145,000.00) per annum only to the extent
that it has consented to such bonuses or increases. Wesbanco also acknowledges
that it may or may not be entitled to indemnification or contribution from
Bank or to be subrogated to the claim of Employee hereunder for any payments
Wesbanco may make to Employee; and Wesbanco hereby specifically waives any
rights it may otherwise have to indemnification or contribution from Bank or
to be subrogated to the claim of Employee hereunder in the event that such
payments as are made by Wesbanco would be unenforceable or invalid for any
reason against Bank.
13. MISCELLANEOUS. The invalidity or unenforceability of any term or
provision of this Agreement as against any one or more parties hereto, shall
not impair or effect the other provisions hereof or the enforceability of
said term or provision against the other parties hereto, and notwithstanding
any such invalidity or unenforceability, each term or provision hereof shall
remain in full force and effect to the full extent consistent with law.
<PAGE> 80
IN WITNESS WHEREOF, Bank and Wesbanco have caused these presents to be
signed and their corporate seals to be hereto affixed, and Employee has hereto
affixed his signature and seal, at Wheeling, West Virginia, as of the day and
year first above written.
WESBANCO BANK CHARLESTON
By /s/ Brenda H. Robertson
-----------------------
Its Director
------------
(SEAL)
ATTEST:
Thomas L. Jones
- ---------------
Secretary
/s/ J. CHRISTOPHER THOMAS
-------------------------------
J. CHRISTOPHER THOMAS, EMPLOYEE
WESBANCO, INC.
By /s/ Edward M. George
-------------------------
Its President
---------
(SEAL)
ATTEST:
/s/ Shirley A. Bucan
- --------------------
Secretary
<PAGE> 81
EXHIBIT 11
WesBanco, Inc.
Computation of Earnings Per Share
<TABLE>
For the years ended December 31,
---------------------------------
(dollars in thousands, except per share amounts) 1998 1997 1996
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to common stock $ 28,313 $ 25,211 $ 25,942
- -----------------------------------------------------------------------------------
Average common shares outstanding 20,867,193 20,461,742 19,855,791
- -----------------------------------------------------------------------------------
Earnings per share $ 1.36 $ 1.23 $ 1.31
===================================================================================
</TABLE>
<PAGE> 82
EXHIBIT 12
WesBanco, Inc.
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
For the years ended December 31,
--------------------------------------------------
(dollars in thousands) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
Net income $ 28,313 $ 25,211 $ 25,942 $ 25,049 $ 22,290
Provision for income taxes 13,495 9,519 10,648 9,832 7,809
- -------------------------------------------------------------------------------
Earnings before provision
for income taxes 41,808 34,730 36,590 34,881 30,099
- -------------------------------------------------------------------------------
Preferred stock dividend
requirements --- --- --- 164 387
Ratio of pretax income to net
income 1.48% 1.38% 1.41% 1.39% 1.35%
- -------------------------------------------------------------------------------
Preferred dividend factor $ 0 $ 0 $ 0 $ 228 $ 523
Ratio of pretax net income
to preferred dividends 0% 0% 0% 152.7% 57.6%
- -------------------------------------------------------------------------------
WesBanco has no fixed charges as defined by Regulation S-K Item 503-Summary;
Risk Factors; Ratio of Earnings to Fixed Charges.
<PAGE> 83
EXHIBIT 21
WesBanco, Inc. Subsidiaries State of Incorporation
- ----------------------------------------- ----------------------
WesBanco, Inc. West Virginia
WesBanco Bank Wheeling West Virginia
WesBanco Bank Fairmont West Virginia
Hunter Insurance Agency (non-bank) West Virginia
WesBanco Bank Parkersburg West Virginia
WesBanco Bank Charleston West Virginia
WesBanco Mortgage Company (non-bank) West Virginia
WesBanco Properties, Inc. (non-bank) West Virginia
CommBanc Investments (non-bank) Ohio
Hometown Finance (non-bank) West Virginia
Vandalia National Corporation (inactive) Delaware
CBI Holding Company (non-bank) West Virginia
Hometown Insurance Company (inactive) West Virginia
NOTE: All direct subsidiaries of the Registrant are 100% owned.
<PAGE> 84
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. and in the related Prospectus of
our report dated January 27, 1999, with respect to the consolidated financial
statements of WesBanco, Inc. included in this Annual Report (Form 10-K) for
the year ended December 31, 1998.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 8, 1999
<PAGE> 85
EXHIBIT 23.2
Consent of Harman, Thompson, Mallory and Ice, A.C., Independent Auditors
As independent auditors, we hereby consent to the incorporation by reference
in this Annual Report (Form 10-K) of our report dated March 6, 1998 with
respect to the consolidated financial statements of Commercial
BancShares, Inc. and Subsidiaries at December 31, 1997 and 1996 and for the
three years ended December 31, 1997, prior to their restatement for the 1998
pooling-of-interests with WesBanco,Inc., included in this Annual Report for
the year ended December 31, 1998 filed with the SEC.
/s/ Harman, Thompson, Mallory & Ice, A.C.
Parkersburg, West Virginia
March 8, 1999
<PAGE> 86
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 1998 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 18, 1999
Frank K. Abruzzino
/s/ James E. Altmeyer Director February 18, 1999
- ---------------------
James E. Altmeyer
/s/ Earl C. Atkins Director February 18, 1999
- ------------------
Earl C. Atkins
/s/ James G. Bradley Director February 18, 1999
- --------------------
James G. Bradley
/s/ Ray A. Byrd Director February 18, 1999
- ---------------
Ray A. Byrd
/s/ R. Peterson Chalfant Director February 18, 1999
- ------------------------
R. Peterson Chalfant
/s/ John H. Cheffy Director February 18, 1999
- ------------------
John H. Cheffy
/s/ Christopher V. Criss Director February 18, 1999
- ------------------------
Christopher V. Criss
/s/ Stephen F. Decker Director February 18, 1999
- ---------------------
Stephen F. Decker
<PAGE> 87
/s/ James D. Entress Director February 18, 1999
- --------------------
James D. Entress
/s/ Ernest S. Fragale Director February 18, 1999
- ---------------------
Ernest S. Fragale
/s/ James C. Gardill Director February 18, 1999
- --------------------
James C. Gardill
/s/ Edward M. George Director February 18, 1999
- --------------------
Edward M. George
_______________ Director February 18, 1999
Roland L. Hobbs
/s/ Larry G. Johnson Director February 18, 1999
- --------------------
Larry G. Johnson
/s/ John W. Kepner Director February 18, 1999
- ------------------
John W. Kepner
/s/ Frank R. Kerekes Director February 18, 1999
- --------------------
Frank R. Kerekes
/s/ Robert H. Martin Director February 18, 1999
- --------------------
Robert H. Martin
/s/ William E. Mildren, Jr. Director February 18, 1999
- ---------------------------
William E. Mildren, Jr.
___________________________ Director February 18, 1999
George M. Molnar
/s/ Eric Nelson Director February 18, 1999
- ---------------
Eric Nelson
/s/ Richard K. Riederer Director February 18, 1999
- -----------------------
Richard K. Riederer
________________________ Director February 18, 1999
Melvin C. Snyder, Jr.
/s/ Joan C. Stamp Director February 18, 1999
- -----------------
Joan C. Stamp
<PAGE> 88
/s/ Carter W. Strauss Director February 18, 1999
- ---------------------
Carter W. Strauss
_______________________ Director February 18, 1999
James W. Swearingen
/s/ Reed J. Tanner Director February 18, 1999
- ------------------
Reed J. Tanner
/s/ Robert K. Tebay Director February 18, 1999
- -------------------
Robert K. Tebay
/s/ J. Christopher Thomas Director February 18, 1999
- -------------------------
J. Christopher Thomas
/s/ John A. Welty Director February 18, 1999
- -----------------
John A. Welty
/s/ William E. Witschey Director February 18, 1999
- -----------------------
William E. Witschey
<PAGE> 89
EXHIBIT 99.1
Harman, Thompson, Mallory and Ice, A.C.
Certified Public Accountants
Independent Auditors' Report
Board of Directors
Commercial BancShares, Inc.
Parkersburg, West Virginia
We have audited the accompanying consolidated balance sheets of
Commerical BancShares, 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 years ended December 31, 1997,
1996 and 1995. These consolidated financial statements are the responsibility
of management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Commercial BancShares, Inc. and Subsidiaries as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years ended December 31, 1997, 1996 and 1995 in conformity
with generally accepted accounting principles.
/s/ Harman, Thompson, Mallory & Ice, A.C.
Parkersburg, West Virginia
March 6, 1998
Towne Square, Parkersburg, West Virginia 26102
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 62,989
<INT-BEARING-DEPOSITS> 5,174
<FED-FUNDS-SOLD> 38,055
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 465,705
<INVESTMENTS-CARRYING> 214,845
<INVESTMENTS-MARKET> 220,699
<LOANS> 1,373,018
<ALLOWANCE> 19,098
<TOTAL-ASSETS> 2,242,712
<DEPOSITS> 1,787,642
<SHORT-TERM> 115,455
<LIABILITIES-OTHER> 23,882
<LONG-TERM> 19,250
0
0
<COMMON> 43,742
<OTHER-SE> 252,741
<TOTAL-LIABILITIES-AND-EQUITY> 2,242,712
<INTEREST-LOAN> 118,766
<INTEREST-INVEST> 40,797
<INTEREST-OTHER> 3,155
<INTEREST-TOTAL> 162,718
<INTEREST-DEPOSIT> 67,612
<INTEREST-EXPENSE> 73,925
<INTEREST-INCOME-NET> 88,793
<LOAN-LOSSES> 4,392
<SECURITIES-GAINS> 1,510
<EXPENSE-OTHER> 68,308
<INCOME-PRETAX> 41,808
<INCOME-PRE-EXTRAORDINARY> 41,808
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,313
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<YIELD-ACTUAL> 4.21
<LOANS-NON> 10,488
<LOANS-PAST> 6,954
<LOANS-TROUBLED> 695
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 20,261
<CHARGE-OFFS> 6,400
<RECOVERIES> 882
<ALLOWANCE-CLOSE> 19,098
<ALLOWANCE-DOMESTIC> 19,098
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,279
</TABLE>
