<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 19,270,617
shares outstanding at April 30, 2000.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Consolidated Balance Sheets at March 31, 2000 and December 31, 1999,
and Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the three
months ended March 31, 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 three months ended March 31, 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)
March 31, December 31,
2000 1999
----------- ------------
ASSETS
Cash and due from banks $ 55,919 $ 67,166
Due from banks - interest bearing 775 4,653
Federal funds sold 19,305 9,535
Securities:
Held to maturity (fair values of $208,387
and $211,009, respectively) 210,767 213,253
Available for sale, carried at fair value 338,015 354,675
----------- -----------
Total securities 548,782 567,928
----------- -----------
Loans, net of unearned income 1,533,821 1,523,446
Allowance for loan losses (19,778) (19,752)
----------- -----------
Net loans 1,514,043 1,503,694
----------- -----------
Bank premises and equipment 55,871 56,201
Accrued interest receivable 14,754 15,661
Other assets 55,326 44,888
----------- -----------
Total Assets $ 2,264,775 $ 2,269,726
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing demand $ 212,558 $ 216,574
Interest bearing demand 604,693 585,483
Savings deposits 275,525 274,052
Certificates of deposit 764,059 737,892
----------- -----------
Total deposits 1,856,835 1,814,001
----------- -----------
Federal funds purchased and
repurchase agreements 113,000 131,865
Other borrowings 11,853 41,588
Accrued interest payable 7,231 6,165
Other liabilities 14,628 6,443
----------- -----------
Total Liabilities $ 2,003,547 $ 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 60,061 60,133
Retained earnings 211,101 208,508
Treasury stock (1,641,936 and 1,206,606
shares, respectively, at cost) (44,263) (34,311)
Accumulated other comprehensive loss (fair
value adjustments) (8,450) (7,456)
Deferred benefits for directors and employees (963) (952)
----------- -----------
Total Shareholders' Equity 261,228 269,664
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,264,775 $ 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)
For the three months ended
March 31,
--------------------------
2000 1999
------------- -----------
INTEREST INCOME
Loans, including fees $ 30,522 $ 28,372
Securities:
Taxable 5,971 7,210
Tax-exempt 2,468 2,477
----------- -----------
Total interest on securities 8,439 9,687
----------- -----------
Federal funds sold 207 348
----------- -----------
Total interest income 39,168 38,407
----------- -----------
INTEREST EXPENSE
Interest bearing demand deposits 5,053 4,144
Savings deposits 1,353 1,500
Certificates of deposit 10,097 9,843
----------- -----------
Total interest on deposits 16,503 15,487
Other borrowings 1,966 1,395
----------- -----------
Total interest expense 18,469 16,882
----------- -----------
Net interest income 20,699 21,525
Provision for loan losses 567 1,406
----------- -----------
Net interest income after provision for loan losses 20,132 20,119
----------- -----------
NON-INTEREST INCOME
Trust fees 3,119 2,767
Service charges on deposits 1,741 1,518
Other income 849 938
Net securities gains/(losses) (4) 115
----------- -----------
Total non-interest income 5,705 5,338
----------- -----------
NON-INTEREST EXPENSE
Salaries and wages 6,692 6,847
Employee benefits 1,514 1,838
Net occupancy 940 895
Equipment 1,603 1,631
Other operating 5,193 5,032
----------- -----------
Total non-interest expense 15,942 16,243
----------- -----------
Income before provision for income taxes 9,895 9,214
Provision for income taxes 2,965 2,397
----------- -----------
Net Income $ 6,930 $ 6,817
=========== ===========
Earnings per share $ 0.35 $ 0.33
Average shares outstanding 19,647,732 20,556,151
See Notes to Consolidated Financial Statements.
<PAGE> 5
<TABLE>
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------
(Unaudited, in thousands, except per share amounts)
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 6,817 6,817
Net fair value adjustment on
securities available for
sale-net of tax effect (2,159) (2,159)
---------
Comprehensive income 4,658
Cash dividends: ($.22 per share) (4,533) (4,533)
Treasury shares purchased-net (216,528) 67 (6,367) (6,300)
Deferred benefits for directors-net (12) (12)
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, 1999 20,443,707 $ 43,742 $ 60,350 $ 201,066 $ (15,788) $ 1,451 $ (525) $ 290,296
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 19,789,925 $ 43,742 $ 60,133 $ 208,508 $ (34,311) $ (7,456) $ (952) $ 269,664
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income 6,930 6,930
Net fair value adjustment on
securities available for
sale-net of tax effect (994) (994)
---------
Comprehensive income 5,936
Cash dividends: ($.22 per share) (4,337) (4,337)
Treasury shares purchased-net (435,330) (72) (9,952) (10,024)
Deferred benefits for directors-net (11) (11)
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, 2000 19,354,595 $ 43,742 $ 60,061 $ 211,101 $ (44,263) $ (8,450) $ (963) $ 261,228
==================================================================================================================================
See Notes to Consolidated Financial Statements.
<PAGE> 6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------
(Unaudited, in thousands)
For the three months ended
March 31,
--------------------------
Increase (Decrease) in Cash and Cash Equivalents 2000 1999
------------ -----------
Cash Flows From Operating Activities:
Net Income $ 6,930 $ 6,817
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,275 1,376
Net amortization and accretion 178 370
Provision for loan losses 567 1,406
(Gains)/losses on sales of securities-net 4 (115)
Deferred income taxes 100 (191)
Other - net (136) ---
Net change in assets and liabilities:
Interest receivable 907 (525)
Other assets and other liabilities (1,686) 2,303
Interest payable 1,066 (448)
------------ -----------
Net cash provided by operating activities 9,205 10,993
------------ -----------
Cash Flows From Investing Activities:
Securities held to maturity:
Proceeds from maturities and calls 2,502 10,114
Payments for purchases (71) (11,611)
Securities available for sale:
Proceeds from sales 7,368 834
Proceeds from maturities and calls 11,930 63,501
Payment for purchases (4,407) (41,967)
Net increase in loans (10,916) (22,236)
Purchases of premises and equipment-net (809) (2,306)
------------ -----------
Net cash provided (used) by investing activities 5,597 (3,671)
------------ -----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits 42,834 (5,624)
Decrease in federal funds purchased and
repurchase agreements (29,735) (527)
Increase (decrease) in borrowings (18,865) 140
Dividends paid (4,367) (4,355)
Purchases of treasury shares-net (10,024) (6,300)
------------ ----------
Net cash used by financing activities (20,157) (16,666)
------------ ----------
Net decrease in cash and cash equivalents (5,355) (9,344)
Cash and cash equivalents at beginning of period 81,354 106,218
------------ ----------
Cash and cash equivalents at end of period $ 75,999 $ 96,874
============ ==========
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 17,403 $ 17,331
Income taxes paid --- ---
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 three months ended March 31, 2000 and 1999
------------------------------------------------------------
WesBanco's net income for the three months ended March 31, 2000, was
$6.9 million compared to $6.8 million for the same period in 1999. Earnings
per share for the three months ended March 31, 2000, and 1999, were $0.35 and
$0.33, respectively. Core earnings per share, which excludes amortization of
goodwill, net securities gains/losses and non-recurring items, were $0.37 and
$0.34 for the three months ended March 31, 2000, and 1999, respectively. The
improvement in earnings during the period resulted from several factors; a
decrease in loan losses, increases in trust services and investment management
income and a decrease in non-interest expense. These positive factors were
partially offset by a decline in net interest income, reflecting continued
competitive pressure to make interest rate adjustments to loan and deposit
products. Annualized return on average assets was 1.2% for each of the three-
month periods ended March 31, 2000 and 1999. Annualized return on average
equity was 10.4% for the three months ended March 31, 2000 and 9.3% for the
same period in 1999.
<PAGE> 9
Net Interest Income
-------------------
Net interest income, on a taxable equivalent basis ("TE"), for the three
months ended March 31, 2000 declined $.8 million or 3.6% from the same period
in 1999. Affecting the decline in net interest income was a decrease in the
net (TE) yield on average earning assets to 4.2% from 4.5% during the
comparative period. Average earning assets remained relatively flat while
average interest bearing liabilities increased 4.5%. Average interest bearing
liabilities increased due to the growth of longer-term certificates of deposit
products, the competitively priced Prime Rate Money Market product and the
increased utilization of average Federal Home Loan Bank borrowings during the
comparative period. However, Federal Home Loan Bank borrowings as of March 31,
2000 decreased significantly to $11.9 million compared to $43.7 million as of
December 31, 1999 due to the strong deposit growth for the first quarter of
2000. Other factors affecting the average balance sheet between the three
months ended March 31, 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 in June 1999. Similar to industry trends,
the net yield on earning assets continued to decline in this period of rising
interest rates. The earning asset yield, while positively impacted by strong
loan growth during 1999, declined due to competitive pressure to lower rates
on loan products. This effect on the earning asset yield coupled with a
continued shifting of deposits into higher yielding product has resulted in
a narrowing spread between loan and deposit products.
Interest income (TE) increased $.8 million or 2.0% between the three
months ended March 31, 2000 and 1999, reflecting a stable yield (TE) on
average earning assets of 7.7% for each three-month period. During the
comparable periods, the yield on average loans declined 28 basis points while
the yield (TE) on average securities increased 19 basis points and the yield
on average federal funds sold increased 101 basis points. The decrease in
the average loan yield resulted from competitive interest rate adjustments on
loan products during 1999 and the sale of the credit card portfolio in
June 1999. Average loans increased $143.5 million or 10.4% while average
total securities decreased $92.5 million or 13.9% and average federal funds
sold declined by $14.8 million or 51.2% during the comparative periods.
Interest expense increased $1.6 million or 9.4% between the three months
ended March 31, 2000 and 1999, resulting from an increase in the rates paid
on average interest bearing liabilities to 4.2% from 4.0%. During this
period of rising interest rates, the rate on average interest bearing demand
deposits increased 14 basis points, average savings rate remained stable,
average certificates of deposit rate decreased slightly by 4 basis points and
average other borrowings rate increased 137 basis points. Average interest
bearing liabilities grew 4.5% between comparative periods, as customers
shifted
<PAGE> 10
balances into the competitively priced Prime Rate Money Market product and
longer-term certificates of deposit. Average interest bearing demand deposits,
which includes the Prime Rate Money Market product, increased $82.3 million
or 15.9%, average savings deposits decreased $31.1 million or 10.2% and
average certificates of deposit increased $19.3 million or 2.6%. Average other
borrowings, consisting of federal funds purchased, repurchase agreements and
Federal Home Loan Bank borrowings, increased $6.5 million or 4.8% reflecting
growth primarily in Federal Home Loan Bank borrowings.
Non-interest Income
-------------------
Excluding non-recurring income, non-interest income increased $0.5
million or 9.3% between the three months ended March 31, 2000 and 1999
resulting primarily from an increase in trust revenue. The continued strong
growth in trust revenue 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. The market value of trust assets grew to
$3.2 billion as of March 31, 2000, an increase of $390.1 million or 13.8% in
comparison to March 31, 1999. Service charges on deposits increased $0.2
million while other income, consisting primarily of activity fees and
non-banking income, decreased $0.1 million. The decrease in other income was
due to the reduction in credit card activity fees of approximately $0.4
million during the comparative period. The reduction was partially offset by
an increase in non-bank subsidiary brokerage trading revenue of $0.2 million
for the comparable periods.
Non-interest Expense
--------------------
Non-interest expense for the three months ended March 31, 2000 decreased
$0.3 million or 1.9% compared to the same period of 1999. The majority of the
decrease occurred in salaries, wages and employee benefits, which declined
$0.5 million or 5.5% during the comparative period. This reduction resulted
primarily from a decrease in post-retirement expenses and partially due to the
consolidation of WesBanco's four banking affiliates and mortgage company
affiliate into a single bank. Average full-time equivalent employees decreased
to 1,080 from 1,093 compared to the same period last year. Net occupancy and
equipment expense remained relatively stable during the comparative period,
while other operating expenses increased $0.2 million or 3.2%. The increase in
other operating expenses was partially offset by the reduction of credit card
processing cost and the elimination of Year 2000 readiness costs that were
incurred in 1999.
<PAGE> 11
Income Taxes
------------
A reconciliation of the average federal statutory tax rate to the reported
effective tax rate attributable to income from operations follows:
For the three months ended
March 31,
--------------------------
2000 1999
------------ ----------
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (7) (8)
State income tax - net of federal tax effect 4 4
All other - net (2) (5)
------------ ---------
Effective tax rate 30% 26%
============ =========
The increase in the Corporation's effective tax rate for three months
ended March 31, 2000 compared to the same period in 1999, resulted from
adjustments to the 1999 provision reflecting the final tax filings associated
with Commercial BancShares, Incorporated.
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 is currently awaiting final
IRS approval of a negotiated settlement. If the IRS approves the negotiated
settlement, 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 March 31, 2000, which
approximated total assets as of December 31, 1999. Total loans during the
three-month period, grew $10.4 million or annualized at 2.7%, primarily due
to attractive pricing of WesBanco's home equity products and residential
mortgage loans. WesBanco experienced strong deposit growth of $42.8 million
or annualized at 9.4% during this three-month period, driven by growth in
longer-term certificates of deposit and Prime Rate Money Market accounts.
<PAGE> 12
Securities
----------
The following table shows the composition of the securities portfolio:
March 31 December 31,
(in thousands) 2000 1999
----------------------
Held to Maturity (at cost):
- ---------------------------
U.S. Treasury and federal agency securities $ 13,348 $ 13,346
Obligations of states and political subdivisions 179,446 182,005
Other debt securities 17,973 17,902
---------- ---------
Total held to maturity (fair value of $208,387
and $211,009, respectively) 210,767 213,253
---------- ---------
Available for Sale (at fair value):
- -----------------------------------
U. S. Treasury and federal agency securities 181,266 189,593
Obligations of states and political subdivisions 15,800 18,298
Corporate securities 3,045 3,068
Mortgage-backed and other debt securities 137,904 143,716
---------- ---------
Total available for sale 338,015 354,675
---------- ---------
Total securities $ 548,782 $ 567,928
=========== =========
Proceeds from the sale or maturity of securities represent a source of
liquidity for WesBanco. During the three months ended March 31, 2000, with
significant deposit growth, proceeds from the sale and maturity of agency
securities and obligations of states and political subdivisions in the
available for sale portfolio were used to paydown other borrowings and
increase sales of federal funds. Security acquisition activity was limited
to agency securities, which represented favorable yield opportunities.
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 $13.9 million as of March 31, 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> 13
Loans
-----
The following table shows the composition of the loan portfolio:
March 31, December 31,
(in thousands) 2000 1999
Loans: -------------------------
- ------
Commercial $ 526,315 $ 521,450
Real estate - construction 32,257 31,742
Real estate 642,270 630,939
Personal, net of unearned income 324,217 329,562
Loans held for sale 8,762 9,753
----------- -----------
Loans, net of unearned income $ 1,533,821 $ 1,523,446
=========== ===========
Loans, net of unearned income increased $10.4 million or annualized at
2.7% between March 31, 2000 and December 31, 1999. Loan growth, which
occurred primarily in the commercial and real estate loan categories, was
partially offset by a decrease of $5.3 million in personal loans. Real
estate loans increased steadily during the first quarter of 2000, driven by
WesBanco's home equity products and attractive pricing of residential
mortgage loan products. The decrease in personal loans reflected a
continuation of competitive pressures and more conservative credit standards.
Non-performing and Classified Assets
-------------------------------------
Non-performing and classified assets are summarized as follows:
March 31, December 31,
(in thousands) 2000 1999
Non-performing and classified assets: --------------------------
- -------------------------------------
Nonaccrual loans $ 4,467 $ 4,158
Renegotiated loans --- 813
Other classified loans (1) 8,049 8,706
--------- ---------
Total non-performing and classified loans 12,516 13,677
Other real estate owned 3,431 3,512
--------- ---------
Total non-performing and classified assets $ 15,947 $ 17,189
========= =========
Loans past due 90 days or more $ 5,217 $ 6,032
========= =========
(1) Includes loans internally classified as doubtful and substandard (as
defined by banking regulations) that meet the definition of impaired loans.
<PAGE> 14
WesBanco continues to experience improvement in the level and trend of
non-performing and classified assets, which decreased $1.2 million in
comparison to December 31, 1999 and $3.3 million in comparison to March 31,
1999. Non-performing and classified assets as a percentage of total loans and
other real estate owned reflects this improvement, reducing to 1.04% as of
March 31, 2000 from 1.13% and 1.37% as of December 31, 1999 and March 31, 1999,
respectively. The declining trend between March 31, 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.
WesBanco monitors the overall quality of its loan portfolio through
various methods. Underwriting policies and guidelines have been established
for all types of credits and management continually monitors the portfolio
for adverse trends in delinquent and non-performing loans. Loans are
considered impaired when it is determined that WesBanco may not be able to
collect all principal and interest due according to the contractual terms of
the loans.
Specific allowances for loan losses are allocated for impaired loans
based on the present value of expected future cash flows, or a fair value of
the collateral for loans that are collateral dependent. Allowances for loan
losses on impaired loans remained stable at $3.9 million for March 31, 2000
and December 31, 1999.
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.
Allowance for Loan Losses
-------------------------
Activity in the allowance for loan losses is summarized as follows:
For the three months ended
March 31,
---------------------------
(in thousands) 2000 1999
Allowance for loan losses: ------------ ------------
- --------------------------
Balance, at beginning of period $ 19,752 $ 19,098
Charge-offs (912) (1,424)
Recoveries 371 191
--------- ---------
Net charge-offs (541) (1,233)
Provision for loan losses 567 1,406
--------- ---------
Balance, at end of period $ 19,778 $ 19,271
========= =========
<PAGE> 15
The allowance for loan losses is maintained at a level considered
adequate by management to provide for probable loan losses. 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 losses to different loan categories, the allowance is general in nature
and is available for the loan portfolio in its entirety.
The allowance for loan losses as a percentage of total loans was 1.3% as
of March 31, 2000 and 1.4% as of March 31, 1999. Contributing to the decline
in the allowance to loans percentage was the June 7, 1999 sale of the credit
card portfolio, which resulted in a $0.45 million reduction to the allowance
for loan losses. This adjustment was based on management's evaluation of the
delinquency factors and net charge-off experience associated with the credit
card receivables. Additionally, the decline in the allowance as a percentage
of loans ratio reflects improved loan quality, as measured by reductions in
non-performing and classified assets and loans past due 90 days or more
between March 31, 2000 and 1999.
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 experience, current delinquency factors, changes in
the character of the loan portfolio, specific problem loans and other factors.
Deposits and Other Borrowings
-----------------------------
Deposits increased $42.8 million or annualized at 9.4% between March 31,
2000 and December 31, 1999, reflecting growth in longer-term certificates of
deposits and Prime Rate Money Market accounts. These factors were partially
offset by reductions in short-term certificates of deposit balances. This
shifting of funds reflects our customer's preference for competitively priced
long and short-term investment alternatives in this period of rising interest
rates.
Federal funds purchased, repurchase agreements and other borrowings,
representing a use of funds during this year-to-date period, decreased $48.6
million or 28.0%. Short-term borrowings and federal funds purchased decreased
$51.1 million while repurchase agreements increased $2.5 million, respectively,
for the three-month period. The significant growth of deposits for the
quarter enabled WesBanco to reduce its reliance on other borrowings.
<PAGE> 16
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 principal
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 $8.4 million between March 31, 2000
and December 31, 1999, resulting from the acquisition of treasury stock and
the after-tax fair value adjustment on securities available for sale. On
April 28, 2000,WesBanco completed the acquisition of one million shares of
common stock under a stock repurchase program and began a new program,
approved on April 20, 2000 to repurchase up to one million shares of WesBanco
common stock on the open market. The timing, price, and quantity of purchases
under the plan are at the discretion of the Corporation and the plan may be
discontinued or suspended at any time.
Capital adequacy ratios are summarized as follows:
March 31, December 31,
2000 1999
Capital adequacy ratios: -------------------------
- ------------------------
Tier I capital 15.4% 15.7%
Total risk-based capital 16.6% 17.0%
Leverage 11.1% 11.3%
WesBanco is subject to risk-based capital guidelines that measure
capital relative to risk-adjusted assets and off-balance sheet financial
instruments. The Corporation's Tier I, total risk-based capital and leverage
ratios are well above the required minimum levels of 4%, 8% and 4%,
respectively. At March 31, 2000 and December 31, 1999, WesBanco's affiliate
bank, WesBanco Bank, Inc., exceeded the minimum regulatory levels.
<PAGE> 17
Forward-Looking Statements
--------------------------
Balance sheet:
- --------------
During the remainder of 2000, assuming rising interest rates, management
expects limited loan growth, moderate federal funds sold and securities growth
and strong deposit growth. Recent increases in interest rates by the Federal
Reserve are expected to result in a softening of real estate and commercial
loan growth. The strong deposit growth that is projected for 2000 should
serve as a primary source of liquidity for new loan demand, security purchases
and paydowns on other borrowings. The shift in the composition of deposits is
expected to continue, reflecting the customer's preference for competitively
priced longer-term certificates of deposits and short-term Prime Rate Money
Market accounts during this period of rising interest rates.
Statement of income:
- --------------------
Net interest income: During the remainder of 2000, the positive effects of
the strong loan growth that occurred in 1999 and the anticipated deposit
growth in 2000 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 is expected to be less than
prior year levels.
Non-interest income and expense: For the remainder of 2000, management expects
trust revenue and non-banking income to exceed prior year levels. Growth in
trust revenue 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. The growth in these other non-interest income
categories, however, will be partially offset by a decrease in credit card
activity fees due to the sale of the credit card portfolio in June 1999.
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, platform automation and
internet banking.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Through March 31, 2000, there have been no material changes to the
information on this topic as presented in the 1999 Annual Report.
<PAGE> 18
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 has filed a Motion to Dismiss the case which is pending hearing before
the Court. No decision has yet been issued on the motion.
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 it is anticipated that the case will be submitted to the Court
on Summary Judgement Motions.
Item 3, 5 - Not Applicable
- --------------------------
Item 4 - Results of votes of security holders
- ---------------------------------------------
On April 19, 2000 the Annual Meeting of the Stockholders of WesBanco, Inc.
was held.
The following directors were re-elected to the Board of Directors for a term
of three years expiring at the annual stockholders meeting in 2003: Ray A.
Byrd, James D. Entress, Ernest S. Fragale, Edward M. George, Carter W.
Strauss, Reed J. Tanner, Robert K. Tebay and William E. Witschey.
The following director was re-elected to the Board of Directors for an
unexpired term of two years expiring at the annual stockholders meeting
in 2002: Thomas J. Hansberry.
<PAGE> 19
Item 6(a) - Exhibits
- --------------------
27 Financial Data Schedule required by Article 9 of Regulation S-X.
99 Press release dated April 20, 2000, announcing a stock repurchase
program to purchase up to 1,000,000 shares of WesBanco common
stock.
Item 6(b) - Reports on Form 8-K
- -------------------------------
On March 13, 2000, WesBanco filed a current report on Form 8-K announcing
the resignation of Mr. Frank Abruzzino from the Board of Directors of
WesBanco, Inc.
<PAGE> 20
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: May 12, 2000 -------------------------------------
---------------- Edward M. George
President and Chief Executive Officer
/s/ Paul M. Limbert
Date: May 12, 2000 -------------------------------------
---------------- Paul M. Limbert
Executive Vice President and Chief
Financial Officer
</TABLE>
Exhibit 99
NEWS For Immediate Release
April 20, 2000 For Further Information Contact:
Edward M. George
President & CEO (304) 234-9208
Nasdaq Trading Symbol: WBSC
WesBanco, Inc. President & CEO, Edward M. George, today announced that
WesBanco is nearing completion of the acquisition of one million shares
of its stock, which were authorized by the WesBanco Board of Directors on
May 19, 1999. A portion of the shares repurchased were used to complete the
acquisition of the Heritage Bank of Harrison County, Inc., Clarksburg, West
Virginia, and for the shareholder dividend reinvestment plan.
In connection with the completion of the previous stock repurchase program,
the Board of Directors has approved a plan, effective immediately, to
repurchase up to 1,000,000 additional shares of WesBanco common stock on
the open market. The timing, price and quantity of purchases will be at the
discretion of the Corporation and the program may be discontinued or
suspended at any time.
The WesBanco Board believes that the stock repurchase program presents an
attractive opportunity for the Corporation at this time. The shares will be
available for general corporate purposes.
WesBanco, Inc. has assets of $2.2 billion and operates 60 offices in West
Virginia and Ohio.
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