<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------ AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-8467
WESBANCO, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0571723
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
304-234-9000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or, for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. WesBanco had 18,866,546
shares outstanding at July 31, 2000.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
------------------------------
Consolidated Balance Sheets at June 30, 2000 and December 31, 1999, and
Consolidated Statements of Income for the three and six-month periods ended
June 30, 2000 and 1999, and Consolidated Statements of Changes in Shareholders'
Equity and Consolidated Statements of Cash Flows for the six-months ended
June 30, 2000 and 1999 are set forth on the following pages.
In the opinion of management of the Registrant, all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the financial information referred to above for such periods, have been made.
The results of operations for the six-months ended June 30, 2000 are not
necessarily indicative of what results may be attained for the entire year.
For further information, refer to the 1999 Annual Report to Shareholders,
which includes consolidated financial statements and footnotes thereto and
WesBanco, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1999.
<PAGE> 3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
June 30, December 31,
2000 1999
----------- -----------
ASSETS
Cash and due from banks $ 67,147 $ 67,166
Due from banks - interest bearing 527 4,653
Federal funds sold 21,600 9,535
Securities:
Held to maturity (fair values of $201,264
and $211,009, respectively) 203,313 213,253
Available for sale, carried at fair value 337,405 354,675
---------- ----------
Total securities 540,718 567,928
---------- ----------
Loans, net of unearned income 1,570,799 1,523,446
Allowance for loan losses (20,209) (19,752)
---------- ----------
Net loans 1,550,590 1,503,694
---------- ----------
Premises and equipment 55,619 56,201
Accrued interest receivable 14,805 15,661
Other assets 56,401 44,888
---------- ----------
Total Assets $2,307,407 $2,269,726
========== ==========
LIABILITIES
Deposits:
Non-interest bearing demand $ 222,581 $ 216,574
Interest bearing demand 578,067 585,483
Savings deposits 267,509 274,052
Certificates of deposit 784,717 737,892
---------- ----------
Total deposits 1,852,874 1,814,001
---------- ----------
Other borrowings 175,087 173,453
Accrued interest payable 8,955 6,165
Other liabilities 13,370 6,443
---------- ----------
Total Liabilities 2,050,286 2,000,062
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000
shares authorized; none outstanding --- --- -
Common stock, $2.0833 par value; 50,000,000
shares authorized; 20,996,531 shares issued 43,742 43,742
Capital surplus 59,857 60,133
Retained earnings 213,626 208,508
Treasury stock (1,941,322 and 1,206,606 shares,
respectively, at cost) (51,012) (34,311)
Accumulated other comprehensive loss (fair
value adjustments) (8,108) (7,456)
Deferred benefits for directors and employees (984) (952)
---------- ----------
Total Shareholders' Equity 257,121 269,664
---------- ----------
Total Liabilities and Shareholders' Equity $2,307,407 $2,269,726
========== ==========
See Notes to Consolidated Financial Statements.
<PAGE> 4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
<TABLE>
For the three months ended For the six months ended
June 30, June 30,
-------------------------- ------------------------
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 31,774 $ 28,713 $ 62,454 $ 57,085
Securities:
Taxable 6,032 7,240 12,003 14,450
Tax-exempt 2,390 2,578 4,858 5,055
----------- ----------- ---------- -----------
Total interest on securities 8,422 9,818 16,861 19,505
----------- ----------- ---------- -----------
Federal funds sold 165 220 372 568
----------- ----------- ---------- -----------
Total interest income 40,361 38,751 79,687 77,158
----------- ----------- ---------- -----------
INTEREST EXPENSE
Interest bearing demand deposits 5,276 4,361 10,329 8,505
Savings deposits 1,336 1,511 2,689 3,011
Certificates of deposit 10,679 9,624 20,776 19,467
----------- ----------- ---------- -----------
Total interest on deposits 17,291 15,496 33,794 30,983
Other borrowings 2,025 1,554 3,991 2,949
----------- ----------- ---------- -----------
Total interest expense 19,316 17,050 37,785 33,932
----------- ----------- ---------- -----------
Net interest income 21,045 21,701 41,902 43,226
Provision for loan losses 880 1,290 1,447 2,696
----------- ----------- ---------- -----------
Net interest income after
provision for loan losses 20,165 20,411 40,455 40,530
----------- ----------- ---------- -----------
NON-INTEREST INCOME
Trust fees 2,848 2,586 5,967 5,353
Service charges on deposits 2,153 1,610 3,894 3,128
Other income 515 1,099 1,206 2,037
Net securities gains 221 124 217 239
Non-recurring income --- 3,479 --- 3,479
----------- ----------- ---------- -----------
Total non-interest income 5,737 8,898 11,284 14,236
----------- ----------- ---------- -----------
NON-INTEREST EXPENSE
Salaries and wages 7,078 7,020 13,770 13,873
Employee benefits 1,121 1,809 2,635 3,641
Net occupancy 948 830 1,888 1,725
Equipment 1,534 1,511 3,137 3,142
Other operating 5,314 5,784 10,507 10,816
----------- ----------- ---------- -----------
Total non-interest expense 15,995 16,954 31,937 33,197
----------- ----------- ---------- -----------
Income before provision for
income taxes 9,907 12,355 19,802 21,569
Provision for income taxes 3,226 4,335 6,191 6,732
----------- ----------- ---------- -----------
Net Income $ 6,681 $ 8,020 $ 13,611 $ 14,837
=========== =========== ========== ===========
Earnings per share $ 0.35 $ 0.40 $ 0.70 $ 0.73
Average shares outstanding 19,215,808 20,324,700 19,431,770 20,439,741
Dividends per share $ .225 $ .22 $ .445 $ .44
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
<TABLE>
Accumulated Deferred
Common Stock Other Benefits for
---------------------- Capital Retained Treasury Comprehensive Directors &
Shares Amount Surplus Earnings Stock Income/(Loss) Employees Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 20,660,235 $ 43,742 $ 60,283 $ 198,782 $ (9,421) $ 3,610 $ (513) $ 296,483
----------------------------------------------------------------------------------------------------------------------------------
Net Income 14,837 14,837
Net fair value adjustment on
securities available for
sale - net of tax effect (7,484) (7,484)
---------
Comprehensive income 7,353
Cash dividends ($.44 per share) (9,024) (9,024)
Treasury shares purchased - net (766,561) 95 (22,507) (22,412)
Stock issued for acquisition 422,916 (182) 12,153 11,971
KSOP borrowing (1,000) (1,000)
Deferred benefits for
directors - net (48) (48)
----------------------------------------------------------------------------------------------------------------------------------
June 30, 1999 20,316,590 $ 43,742 $ 60,196 $ 204,595 $ (19,775) $ (3,874) $ (1,561) $ 283,323
==================================================================================================================================
----------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 19,789,925 $ 43,742 $ 60,133 $ 208,508 $ (34,311) $ (7,456) $ (952) $ 269,664
----------------------------------------------------------------------------------------------------------------------------------
Net Income 13,611 13,611
Net fair value adjustment on
securities available for
sale - net of tax effect (652) (652)
----------
Comprehensive income 12,959
Cash dividends ($.445 per share) (8,493) (8,493)
Treasury shares purchased - net (734,716) (276) (16,701) (16,977)
Deferred benefits for
directors - net (32) (32)
----------------------------------------------------------------------------------------------------------------------------------
June 30, 2000 19,055,209 $ 43,742 $ 59,857 $ 213,626 $ (51,012) $ (8,108) $ (984) $ 257,121
==================================================================================================================================
Comprehensive income for the three-month periods ended June 30, 2000 and 1999
was $7,023 and $2,695, respectively.
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------
(Unaudited, in thousands)
Increase (Decrease) in Cash and Cash Equivalents For the six months ended
June 30,
------------------------
2000 1999
----------- ----------
Cash Flows From Operating Activities:
Net Income $ 13,611 $ 14,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,447 2,757
Net amortization and accretion 291 800
Provision for loan losses 1,447 2,696
Gain on sale of credit card portfolio --- (3,479)
Gains on sales of securities - net (217) (239)
Deferred income taxes (304) (429)
Other - net (102) ---
Net change in assets and liabilities:
Interest receivable 856 37
Other assets and other liabilities 673 2,569
Interest payable 2,789 (739)
----------- ----------
Net cash provided by operating activities 21,491 18,810
----------- ----------
Cash Flows From Investing Activities:
Securities held to maturity:
Proceeds from maturities and calls 10,327 32,164
Payments for purchases (488) (37,445)
Securities available for sale:
Proceeds from sales 9,273 28,394
Proceeds from maturities and calls 29,905 94,605
Payment for purchases (22,958) (76,696)
Proceeds from the sale of credit cards --- 18,400
Purchase of subsidiary net of cash acquired --- 2,809
Net increase in loans (48,343) (63,008)
Purchases of premises and equipment-net (1,764) (4,575)
Purchases of bank-owned life insurance (4,400) ---
----------- ----------
Net cash used by investing activities (28,448) (5,352)
----------- ----------
Cash Flows From Financing Activities:
Net increase in deposits 38,873 88
Increase in other borrowings 1,634 6,669
Dividends paid (8,653) (8,874)
Purchases of treasury shares-net (16,977) (22,412)
----------- ----------
Net cash provided (used) by financing activities 14,877 (24,529)
----------- ----------
Net increase (decrease) in cash and cash equivalents 7,920 (11,071)
Cash and cash equivalents at beginning of period 81,354 106,218
----------- ----------
Cash and cash equivalents at end of period $ 89,274 $ 95,147
=========== ==========
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 34,996 $ 34,676
Income taxes paid 6,315 6,470
See Notes to Consolidated Financial Statements
<PAGE> 7
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------
Note 1 - Accounting policies
----------------------------
Basis of presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
The consolidated financial statements include the accounts of WesBanco, Inc.
("the Corporation") and its wholly-owned subsidiaries. Significant
intercompany transactions have been eliminated in consolidation.
Business combinations: Business combinations, which have been accounted for
under the purchase method of accounting, include the results of operations of
the acquired business from the date of acquisition. Net assets of the
companies acquired were recorded at their estimated fair value as of the date
of acquisition.
Cash and cash equivalents: For the purpose of reporting cash flows, cash and
cash equivalents include cash and due from banks, due from banks - interest
bearing and federal funds sold. Generally, federal funds are sold for one-day
periods.
Earnings per share: Basic earnings per share are calculated by dividing net
income by the weighted average number of shares of common stock outstanding
during each period. For diluted earnings per share, the weighted average
number of shares for each period assumes the exercise of stock options.
There was no dilutive effect from the stock options and accordingly, basic
and diluted earnings per share are the same.
<PAGE> 8
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------------------------------------
The following discussion and analysis presents in further detail the
financial condition and results of operations of WesBanco, Inc. and its
subsidiaries. This discussion and analysis should be read in conjunction
with the consolidated financial statements and notes presented in this report.
Certain information in Management's Discussion and other statements
contained in this report, constitute forward-looking statements with respect
to WesBanco and its subsidiaries. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors. Such statements
are subject to factors that could cause actual results to differ materially
from those contemplated by such statements including, without limitation, the
effect of changing regional and national economic conditions; changes in
interest rates; credit risks of business, real estate, and consumer lending
activities; changes in federal and state regulations; the presence in the
Corporation's market area of competitors; or other unanticipated external
developments materially impacting the Corporation's operational and financial
performance.
Earnings Summary
----------------
Comparison of the six-months ended June 30, 2000 and 1999
---------------------------------------------------------
Net income for the six-months ended June 30, 2000 was $13.6 million or
$.70 per share compared to $14.8 million or $.73 per share for the six-months
ended June 30, 1999. Net income for the second quarter of 1999 included a
gain of $3.5 million from the sale of WesBanco's credit card portfolio. This
non-recurring gain (after-tax) contributed $.11 to net income per share for
the six-months ended June 30, 1999.
WesBanco's core earnings, which excludes amortization of goodwill, net
securities gains and non-recurring items, for the six-months ended June 30,
2000 increased 8.4 % to $14.2 million compared to $13.1 million for the
six-months ended June 30, 1999. Core earnings per share increased 14.1% to
$.73 compared to $.64 for the same comparative period. Core earnings
performance yielded an annualized return on average assets of 1.3% and a
return on average equity of 10.9% for the six-months ended June 30, 2000
compared to a return on average assets of 1.2% and a return on average equity
of 9.2% for the same period in 1999. Increases in trust revenue and deposit
activity charges along with decreases in loan losses and non-interest expense
for the same comparative period contributed to WesBanco's improved core
earnings. These positive factors were partially offset by a decline in net
interest income, reflecting continued competitive pricing pressure for both
loans and deposits.
<PAGE> 9
TABLE 1 AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
<TABLE>
Three months ended June 30, Six months ended June 30,
----------------------------------------- ---------------------------------------
2000 1999 2000 1999
------------------- ------------------- ------------------- ------------------
(dollars in thousands) Average Average Average Average Average Average Average Average
Volume Rate Volume Rate Volume Rate Volume Rate
-------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned income $1,550,229 8.24% $1,416,263 8.13% $1,539,213 8.16% $1,400,650 8.22%
Securities:
Taxable 370,583 6.51% 449,912 6.44% 373,198 6.43% 461,695 6.26%
Tax-exempt 192,212 7.65% 204,925 7.74% 195,638 7.64% 202,416 7.68%
-------------------- ------------------- ------------------- ------------------
Total securities 562,795 6.90% 654,837 6.85% 568,836 6.85% 664,111 6.69%
Federal funds sold 10,787 6.15% 17,779 4.96% 12,475 6.00% 23,362 4.90%
-------------------- ------------------- ------------------- ------------------
Total earning assets 2,123,811 7.89% 2,088,879 7.71% 2,120,524 7.81% 2,088,123 7.71%
-------------------- ------------------- ------------------- ------------------
Other assets 156,784 157,239 151,103 150,072
---------- ---------- ---------- ----------
Total Assets $2,280,595 $2,246,118 $2,271,627 $2,238,195
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $ 599,780 3.54% $ 533,521 3.28% $ 600,474 3.46% $ 526,235 3.26%
Savings deposits 271,613 1.98% 304,027 1.99% 272,967 1.98% 304,738 1.99%
Certificates of deposit 774,439 5.55% 726,128 5.32% 764,137 5.47% 730,290 5.38%
-------------------- ------------------- ------------------- ------------------
Total interest bearing deposits 1,645,832 4.23% 1,563,676 3.97% 1,637,578 4.15% 1,561,263 4.00%
Other borrowings 140,703 5.79% 140,669 4.43% 142,088 5.65% 138,907 4.28%
-------------------- ------------------- ------------------- ------------------
Total interest bearing liabilities 1,786,535 4.35% 1,704,345 4.01% 1,779,666 4.27% 1,700,170 4.02%
-------------------- ------------------- ------------------- ------------------
Other Liabilities and Equity 494,060 541,773 491,961 538,025
---------- ---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $2,280,595 $2,246,118 $2,271,627 $2,238,195
========== ========== ========== ==========
Taxable equivalent net yield
on earning assets 4.23% 4.45% 4.22% 4.44%
======== ======= ======= =======
</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 period.
Loan fees included in interest on loans are not material.
Average yields on 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.
TABLE 2 RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
<TABLE>
Three months ended June 30, Six months ended June 30,
2000 compared to 1999 2000 compared to 1999
----------------------------------- ---------------------------------
(in thousands)
Net Increase Net Increase
Volume Rate (Decrease) Volume Rate (Decrease)
----------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Loans, net of unearned income $ 2,673 $ 388 $ 3,061 $ 5,773 $ (404) $ 5,369
Taxable securities (1,356) 148 (1,208) (2,837) 390 (2,447)
Tax-exempt securities (244) (46) (290) (259) (44) (303)
Federal funds sold (100) 45 (55) (304) 108 (196)
----------------------------------- ----------------------------------
Total interest income change 973 535 1,508 2,373 50 2,423
----------------------------------- ----------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits 559 356 915 1,271 553 1,824
Savings deposits (163) (12) (175) (305) (17) (322)
Certificates of deposit 639 416 1,055 956 353 1,309
Other borrowings --- 471 471 70 972 1,042
----------------------------------- ----------------------------------
Total interest expense change 1,035 1,231 2,266 1,992 1,861 3,853
----------------------------------- ----------------------------------
Taxable equivalent net interest
income increase (decrease) $ (62) $ (696) $ (758) $ 381 $ (1,811) $ (1,430)
=================================== ==================================
Decrease in taxable equivalent adjustment (101) (106)
--------- ---------
Net interest income decrease $ (657) $ (1,324)
========= =========
</TABLE>
Changes to rate/volume are allocated to both rate and volume on a
proportionate dollar basis.
<PAGE> 10
Net Interest Income
-------------------
As shown in Table 2, net interest income, on a taxable equivalent basis
("TE"), for the six-months ended June 30, 2000 declined $1.4 million or 3.2%
compared to the same period in 1999. The decrease in net interest income was
due to the declining net (TE) yield on average earning assets to 4.2% from
4.4% during the comparative period. Average interest bearing liabilities
increased 4.7%, which was due to the growth of certificates of deposits and
the competitively priced Prime Rate Money Market product between the
comparable periods. Other factors affecting the average balance sheet between
six-months ended June 30, 2000 and 1999 included the purchase acquisition of
the Heritage Bank on April 30, 1999, which added earning assets of $29.2
million and interest bearing liabilities of $25.7 million and the sale of
$15.2 million in credit card receivables on June 7, 1999. Market interest
rates in general, are at higher levels during the current year compared to
1999. Similar to industry trends, the net yield on earning assets continued
to decline due to competitive pricing pressure to adjust rates on loan and
deposit products and a continued shifting of deposits into higher yielding
products.
Interest income (TE) increased $2.4 million or 3.0% between the
six-months ended June 30, 2000 and 1999. As shown in Table 2, the
majority of the increase in interest income (TE) for the comparative
six-months ended June 30, 2000 and 1999 was due to increases in average loan
volume. Average loan growth of $138.6 million or 9.9% was partially funded
by decreases of $95.3 million and $10.9 million in securities and federal
funds sold, respectively. This shifting of balances into higher yielding
loan products contributed to the increase in the yield (TE) on average
earning assets to 7.8% from 7.7%. The decrease in the average loan yield
for the six-month comparable periods resulted from the sale of the credit
card portfolio in June 1999.
Interest expense increased $3.8 million or 11.4% between the six-months
ended June 30, 2000 and 1999, resulting from an increase in the rates paid on
average interest bearing liabilities to 4.3% from 4.0%. During this period of
rising interest rates, average interest bearing liabilities grew 4.7% between
comparative periods. Customers shifted savings balances into the competitively
priced Prime Rate Money Market product and certificates of deposit. Average
savings deposits decreased $31.8 million or 10.4% while average interest
bearing demand deposits, which includes the Prime Rate Money Market product,
increased $74.2 million or 14.1% and average certificates of deposit increased
$33.8 million or 4.6%. As noted in Table 2, interest expense on other
borrowings increased $1.0 million primarily due to an average rate increase
to 5.7% from 4.3% during the comparative period.
<PAGE> 11
Non-interest Income
-------------------
Excluding non-recurring income, non-interest income for the six-months
ended June 30, 2000 increased $1.4 million or 14.0% compared to the same
period in 1999, resulting primarily from increases in trust fees and deposit
activity charges. The continued strong growth in trust fees was attributed
to increases in the number of accounts under administration; increases in
investment advisory fees and an increase in the market value of trust assets.
Activity charges on deposits increased $0.8 million while other income,
consisting primarily of other banking fees and non-banking income, decreased
$0.8 million. The decrease in other income was due to the reduction in credit
card activity fees of approximately $0.7 million during the comparative
period. The reduction was partially offset by an increase in non-bank
subsidiary brokerage trading revenue of $0.3 million for the comparable
periods.
Non-interest Expense
--------------------
Non-interest expense for the six-months ended June 30, 2000 decreased
$1.3 million or 3.8% compared to the same period of 1999. The majority of the
decrease occurred in employee benefits, which declined $1.0 million or 27.6%
during the comparative period. This reduction resulted primarily from a
decrease in post-retirement expenses and partially from the consolidation
of WesBanco's four banking affiliates and mortgage company affiliate into a
single bank. Average full-time equivalent employees decreased to 1,066 at
June 30, 2000 from 1,107 at June 30, 1999. Net occupancy and equipment
expense remained relatively stable during the comparative period, while
other operating expenses decreased $0.3 million or 2.9%. The decrease in
other operating expenses was primarily due to the reduction of credit card
processing costs and the elimination of Year 2000 readiness costs that were
incurred in 1999.
<PAGE> 12
TABLE 3 Reconciliation of Income Tax Rates
For the six months ended
June 30,
------------------------
2000 1999
----------- ----------
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (7) (7)
State income tax - net of federal tax effect 4 4
All other - net (1) (1)
----------- ----------
Effective tax rate 31% 31%
=========== ==========
WesBanco's federal income tax returns for 1997 and 1996 were subject to
an Internal Revenue Service ("IRS") examination during the first quarter of
1999. In the final report, the IRS disallowed certain tax deductions for
acquisition-related expenses and disagrees with the timing of certain loan
origination costs taken in those years. WesBanco relied in part on the
rational of a Tax Court Case styled PNC Bancorp, Inc. v. Commissioner,
110 T.C. 349 (1998). This case was recently reversed on appeal by the
taxpayer by the Court of Appeals (2000 U.S. App. Lexis 11084). WesBanco
is waiting for the IRS to determine its position in light of the reversal
of the decision. If the IRS's position is ultimately upheld, the projected
impact on the results of operations is approximately $0.1 million.
Financial Condition
-------------------
Total assets of WesBanco were $2.3 billion as of June 30, 2000, which
approximated total assets as of December 31, 1999. Total loans grew $47.4
million or 3.1% due primarily to competitive pricing of WesBanco's commercial,
residential mortgages, home equity products and consumer loans during this
six-month period. WesBanco experienced deposit growth of $38.9 million or
2.1%, during this six-month period, led by the growth in certificates of
deposit and Prime Rate Money Market accounts.
<PAGE> 13
TABLE 4 Composition of Securities
June 30, December 31,
(in thousands) 2000 1999
--------- ------------
Securities held to maturity (at amortized cost):
------------------------------------------------
U.S. Treasury and federal agency securities $ 10,350 $ 13,346
Obligations of states and political subdivisions 175,004 182,005
Other debt securities 17,959 17,902
---------- ----------
Total securities held to maturity (fair
value of $201,264 and $211,009, respectively) 203,313 213,253
---------- ----------
Securities available for sale (at fair value):
----------------------------------------------
U.S. Treasury and federal agency securities 186,997 189,593
Obligations of states and political subdivisions 14,455 18,298
Corporate securities 3,040 3,068
Mortgage-backed and other debt securities 132,913 143,716
---------- ----------
Total securities available for sale 337,405 354,675
---------- ----------
Total securities $ 540,718 $ 567,928
========== ==========
Proceeds from the sale or maturity of securities represent a source of
liquidity for WesBanco. During the six-months ended June 30, 2000, moderate
deposit growth and proceeds from the sale and maturity of securities served
as an additional source of funds for loan growth.
Reflecting an increase in market interest rates, the fair value
adjustment, before tax effect, in the available for sale securities portfolio
reflected an unrealized net loss of $13.3 million as of June 30, 2000
compared to an unrealized net loss of $12.3 million as of December 31, 1999.
These adjustments represent temporary market value fluctuations caused by
general changes in market rates and the length of time to respective maturity
dates. If these securities were held until their respective maturity date,
no fair value adjustment would be realized.
<PAGE> 14
TABLE 5 Composition of Loans
June 30, December 31,
(in thousands) 2000 1999
----------- -----------
Commercial $ 530,954 $ 521,450
Real estate - construction 31,331 31,742
Real estate 657,263 630,939
Personal, net of unearned income 348,702 329,562
Loans held for sale 2,549 9,753
----------- -----------
Loans, net of unearned income $ 1,570,799 $ 1,523,446
=========== ===========
Loans, net of unearned income increased $47.4 million or 3.1% between
June 30, 2000 and December 31, 1999. Loan growth, which occurred primarily
in the commercial, real estate and personal loan categories, were partially
offset by a decrease of $7.2 million in loans held for sale. Real estate
loans increased steadily during the first half of 2000, led by WesBanco's
home equity products and residential mortgage loan products. Personal loan
growth, which occurred in indirect auto loans, was due to attractive pricing.
TABLE 6 Non-performing, Classified and Loans Past Due 90 Days or More
June 30, December 31,
(in thousands) 2000 1999
---------- ------------
Nonaccrual loans $ 4,706 $ 4,158
Renegotiated loans --- 813
Other classified loans (1) 8,159 8,706
---------- ---------
Total non-performing and classified loans 12,865 13,677
Other real estate owned 4,024 3,512
---------- ---------
Total non-performing and classified assets $ 16,889 $ 17,189
========== =========
Loans past due 90 days or more $ 4,078 $ 6,032
========== =========
(1) Includes loans internally classified as doubtful and substandard that
meet the definition of impaired loans.
<PAGE> 15
WesBanco's continued improvement in the level and trend of non-performing
and classified assets, which decreased $0.3 million in comparison to December
31, 1999. Non-performing and classified assets as a percentage of total loans
and other real estate owned reflects this improvement, reducing to 1.07% as of
June 30, 2000 from 1.13% as of December 31, 1999. The improving trend between
June 30, 2000 and December 31, 1999 resulted primarily from the
reclassification of two commercial loans totaling $0.8 million from
renegotiated to a performing loan status. This trend was partially offset by
the reclassification of three real estate loans totaling $0.5 million from
a performing loan status to other real estate owned due to foreclosures
during the second quarter of 2000.
WesBanco monitors the overall quality of its loan portfolio through
various methods. Underwriting policies and guidelines have been established
for all types of credits and management continually monitors the portfolio
for adverse trends in delinquent and non-performing loans. Loans are
considered impaired when it is determined that WesBanco may not be able to
collect all principal and interest due according to the contractual terms of
the loans. All loans considered impaired are included in non-performing loans.
Specific allowances for loan losses are allocated for impaired loans based on
the present value of expected future cash flows, or a fair value of the
collateral for loans that are collateral dependent.
Lending by WesBanco is guided by written lending policies, which allow
for various types of lending. Normal lending practices do not include the
acquisition of high yield non-investment grade loans or "highly leveraged
transactions" ("HLT") from outside the primary market.
TABLE 7 Allowance for Loan Losses
For the six months ended
June 30,
(in thousands) ------------------------
2000 1999
----------- ----------
Balance, at beginning of period $ 19,752 $ 19,098
Allowance for loan losses of acquired bank --- 193
Allowance for loan losses allocated to credit cards --- (450)
Charge-offs (1,667) (3,025)
Recoveries 677 730
----------- ---------
Net charge-offs (990) (2,295)
Provision for loan losses 1,447 2,696
----------- ---------
Balance, at end of period $ 20,209 $ 19,242
=========== =========
<PAGE> 16
The allowance for loan losses is maintained at a level considered
adequate by management. Amounts allocated to the allowance for loan losses
are based upon management's evaluation of the credit risk in the loan
portfolio. While management has allocated the allowance for loan losses to
each loan category, the allowance is general in nature and available for
the loan portfolio in its entirety.
The allowance for loan losses as a percentage of total loans remained
at 1.3% as of June 30, 2000 compared to June 30, 1999. The decline in the
level of net charge-offs for the comparative six-month periods was due to the
sale of WesBanco's credit card portfolio in June 1999 and loans charged-off
from an acquired financial institution during the first six months of 1999.
WesBanco decreased the allowance for loan losses by $0.45 million, representing
a portion of the allowance allocated to the credit card portfolio.
The provision for loan losses is based on periodic management
evaluation of the loan portfolio as well as prevailing economic conditions,
net loans charged off, past loan loss experience, current delinquency factors,
changes in the character of the loan portfolio, specific problem loans and
other factors.
Deposits and Other Borrowings
-----------------------------
Deposits increased $38.9 million or 2.1% between June 30, 2000 and
December 31, 1999, reflecting growth in certificates of deposits and Prime
Rate Money Market accounts. This growth was partially offset by reductions
in savings and NOW account balances. This shifting of funds reflects our
customer's preference for a variety of competitively priced deposit
alternatives in this period of rising interest rates.
Other borrowings, which include repurchase agreements, Federal funds
purchased and Federal Home Loan Bank borrowings, representing a source of
funds during this year-to-date period, increased $1.6 million or 0.9%.
Repurchase agreements increased $13.7 million while Federal funds purchased
decreased $22.0 million and Federal Home Bank borrowings increased $9.9
million, respectively, for the six-months ended June 30, 2000. WesBanco's
increased reliance on Federal Home Loan Bank borrowings was due to a
combination of loan growth in excess of deposit growth and stock repurchase
funding for the six-month period.
<PAGE> 17
Liquidity and Capital Resources
-------------------------------
WesBanco manages its liquidity position to meet its funding needs,
including potential deposit outflows and loan principal disbursements, and
to meet its asset and liability management objectives.
In addition to funds provided from operations, WesBanco's primary
sources of funds are deposits, principal repayments on loans and matured or
called securities. Scheduled loan repayments and maturing securities are
relatively predictable sources of funds. However, deposit flows and
prepayments on loans can be significantly influenced by changes in market
interest rates, economic conditions, and competition. WesBanco strives to
manage the pricing of its deposits to maintain a balance of cash flows
commensurate with loan commitments and other funding needs.
Shareholders' equity decreased $12.5 million between June 30, 2000
and December 31, 1999, resulting from the acquisition of treasury stock and
the after-tax fair value adjustment on securities available for sale. As of
July 31, 2000, 439,399 shares of WesBanco common stock have been repurchased
under the stock repurchase program, which began on May 1, 2000. Up to one
million shares of WesBanco common stock may be purchased under the program.
The timing, price and quantity of purchases are at the discretion of the
Corporation and the program may be discontinued or suspended at anytime.
TABLE 8 Capital Adequacy Ratios
June 30, December 31,
2000 1999
-------- -----------
Tier I capital 14.7% 15.7%
Total risk-based capital 16.0% 17.0%
Leverage 10.8% 11.3%
WesBanco is subject to risk-based capital guidelines that measure
capital relative to risk-adjusted assets and off-balance sheet financial
instruments. As shown in Table 8, the Corporation's Tier I, total
risk-based capital and leverage ratios are well above the required minimum
levels of 4%, 8% and 4%, respectively. At June 30, 2000 and December 31,
1999, WesBanco's affiliate bank, WesBanco Bank, Inc., also exceeded the
minimum regulatory levels.
<PAGE> 18
Earnings Summary
----------------
Comparison of the three-months ended June 30, 2000 and 1999
-----------------------------------------------------------
Net income for the three-months ended June 30, 2000 was $6.7 million
or $.35 per share compared to $8.0 million or $.40 per share for the
three-months ended June 30, 1999. Net income for the second quarter of
1999 included a gain of $3.5 million from the sale of WesBanco's credit card
portfolio. This non-recurring gain (after-tax) contributed $.11 to net income
per share for the three-months ended June 30, 1999.
WesBanco's core earnings, which excludes amortization of goodwill, net
securities gains and non-recurring items, for the three-months ended June 30,
2000 increased 15.4% to $7.0 million compared to $6.0 million for the three-
months ended June 30, 1999. Core earnings per share increased 20.0% to $.36
compared to $.30 for the same comparative period. Core earnings performance
yielded an annualized return on average assets of 1.3% and a return on average
equity of 10.9% for the three-months ended June 30, 2000 compared to a return
on average assets of 1.2% and a return on average equity of 8.5% for the same
period in 1999. Increases in trust fees along with deposit activity charges
and decreases in loan losses and non-interest expense for the same comparative
period contributed to WesBanco's improved core earnings. These positive
factors were partially offset by a decline in net interest income, reflecting
continued competitive pricing pressure for both loans and deposits.
Net Interest Income
-------------------
As shown in Table 2, net interest income, on a taxable equivalent basis
("TE"), for the three-months ended June 30, 2000 decreased $0.8 million or
3.3% compared to the same period in 1999. The decrease in net interest
income was due to the declining net (TE) yield on average earning assets to
4.2% from 4.5% during the comparative period. Competitive pricing pressure
for loan and deposit products and a continued shifting of deposits into
higher yielding products has resulted in a narrowing spread.
Interest income (TE) increased $1.5 million or 3.8% between the
three-months ended June 30, 2000 and 1999, reflecting an increase in the
yield (TE) on average earning assets to 7.9% from 7.7%. As shown in Table 2,
average volume increases of $1.0 million or 1.7% and average rate increases
of $0.5 million or 2.3% favorably impacted interest income (TE) during the
comparative period. Other factors affecting the average balance sheet for
the comparative period included the purchase acquisition of the Heritage Bank
in April 1999 and the sale of the credit card receivables in June 1999.
Interest expense increased $2.3 million or 13.3% between the
three-months ended June 30, 2000 and 1999, resulted primarily from an
increase in the rates paid on average interest bearing liabilities to
<PAGE> 19
4.4% from 4.0%. As presented in Table 2, a combination of average volume
and average rate caused interest expense to increase for the comparative
period. Competitive pressure to increase rates on deposit products coupled
with the continued shifting of deposits into higher yielding products has
resulted in a higher cost of funds during this period of rising interest
rates.
Non-interest Income
-------------------
Excluding non-recurring income, non-interest income for the three-months
ended June 30, 2000 increased $0.2 million or 4.2% compared the same period
in 1999, resulting primarily from increases in trust fees and deposit activity
charges. Trust fees increased $0.3 million or 10.1% while deposit activity
charges increased $0.5 million or 33.7% for the three-months ended June 30,
2000 compared to the same period in 1999. The decrease in other income was
due to the reduction in credit card activity fees of approximately $0.4
million between the comparative periods. The reduction was partially offset
by an increase in brokerage trading revenue of $0.2 million between the
comparable periods.
Non-interest Expense
--------------------
Non-interest expense for the three-months ended June 30, 2000 decreased
$1.0 million or 6.0% compared to the same period of 1999. The majority of the
decrease occurred in employee benefits, which declined $0.7 million or 38.0%
during the comparative period. This reduction resulted primarily from a
decrease in post-retirement expenses and partially from the consolidation
of WesBanco's four banking affiliates and mortgage company affiliate into a
single bank. Net occupancy and equipment expense increased $0.2 million or
6.0% while other operating expenses decreased $0.5 million or 8.1% between
the comparable periods. The decrease in other operating expenses was primarily
due to the reduction of credit card processing costs and the elimination of
Year 2000 readiness costs that were incurred in 1999.
Forward-Looking Statements
--------------------------
Balance sheet:
--------------
During the remainder of 2000, management expects moderate loan and
deposit growth. Recent increases in interest rates by the Federal Reserve
are expected to result in a softening of real estate, commercial and
personal loan growth. Deposit growth and increases in other borrowings
should fund new loan demand. The shift in the composition of deposits is
expected to continue, reflecting our customer's preference for competitively
priced certificates of deposits and Prime Rate Money Market accounts.
<PAGE> 20
Statement of income:
--------------------
Net interest income: During the remainder of 2000 the positive effects of
this growth on net interest income could be mitigated by changing interest
rates and competitive pressure to make interest rate adjustments on loans
and deposits. If interest rates continue to rise, net interest income may
be negatively affected.
Non-interest income and expense: For the remainder of 2000, management
expects trust fees and non-banking income to exceed prior year levels. Growth
in trust fees should reflect increases in the number of accounts under
administration; increases in investment advisory fees and an increase in the
market value of trust assets. Non-banking income will be positively impacted
by an increase in brokerage fees associated with WesBanco Securities, Inc.
The growth in these non-interest income categories will be partially offset
by a decrease in loan origination fees from mortgage lending activities.
For the remainder of 2000, management expects non-interest expense to
decrease compared to prior year levels. The expected reduction in
non-interest expense, will result from the consolidation of WesBanco's four
banking affiliates and mortgage company affiliate into a single bank and the
elimination of Year 2000 readiness costs incurred in 1999. These factors
will be partially offset by the cost of technology-related projects such as
a check imaging system, an on-line teller system and Internet banking.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Through June 30, 2000, there have been no material changes to the
information on this topic as presented in the 1999 Annual Report.
<PAGE> 21
Part II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
--------------------------
Wesbanco Bank, Inc. is 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 filed a Motion to Dismiss the case which was granted
by the Court on June 7, 2000, dismissing the Bank. Travelers has filed a
Motion asking the Court to reconsider the ruling which is now pending before
the Court.
A Declaratory Judgment suit was filed on behalf of 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 proposed interpretation by the former
employees would increase the benefit cost significantly. Discovery is now
complete and the case has been submitted to the Court on Summary Judgement
Motions. A decision should be rendered by the tax Court in the near future.
Item 3, 5 - Not Applicable
--------------------------
Item 6(a) - Exhibits
--------------------
27 - Financial Data Schedule required by Article 9 of Regulation S-X.
Item 6(b) - Reports on Form 8-K
-------------------------------
The Registrant filed no current reports on Form 8-K during the quarter
ended June 30, 2000.
<PAGE> 22
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESBANCO, INC.
--------------
/s/ Edward M. George
Date: August 11, 2000 -----------------------------------
------------------ Edward M. George
President and Chief Executive Officer
/s/ Paul M. Limbert
Date: August 11, 2000 -----------------------------------
------------------ Paul M. Limbert
Executive Vice President and Chief
Financial Officer
