<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 September 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 18,715,335
shares outstanding at October 31, 2000.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
------------------------------
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999,
and Consolidated Statements of Income for the three and nine-month periods
ended September 30, 2000 and 1999, and Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the
nine-months ended September 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 nine-months ended September 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)
September 30, December 31,
2000 1999
------------- ------------
ASSETS
Cash and due from banks $ 67,672 $ 67,166
Due from banks - interest bearing 413 4,653
Federal funds sold 5,000 9,535
Securities:
Held to maturity (fair values of
$196,923 and $211,009, respectively) 197,569 213,253
Available for sale, carried at fair value 336,528 354,675
------------ ------------
Total securities 534,097 567,928
------------ ------------
Loans, net of unearned income 1,581,037 1,523,446
Allowance for loan losses (20,142) (19,752)
------------ ------------
Net loans 1,560,895 1,503,694
------------ ------------
Premises and equipment 54,454 56,201
Accrued interest receivable 15,796 15,661
Other assets 54,658 44,888
------------ ------------
Total Assets $ 2,292,985 $ 2,269,726
============ ============
LIABILITIES
Deposits:
Non-interest bearing demand $ 213,502 $ 216,574
Interest bearing demand 591,417 585,483
Savings deposits 258,715 274,052
Certificates of deposit 792,783 737,892
------------ ------------
Total deposits 1,856,417 1,814,001
------------ ------------
Other borrowings 158,467 173,453
Accrued interest payable 10,365 6,165
Other liabilities 12,958 6,443
------------ ------------
Total Liabilities 2,038,207 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 59,761 60,133
Retained earnings 215,845 208,508
Treasury stock (2,269,413 and 1,206,606
shares, respectively, at cost) (58,699) (34,311)
Accumulated other comprehensive loss
(fair value adjustments) (4,879) (7,456)
Deferred benefits for directors and employees (992) (952)
------------ ------------
Total Shareholders' Equity 254,778 269,664
------------ ------------
Total Liabilities and Shareholders' Equity $ 2,292,985 $ 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 nine months ended
September 30, September 30,
-------------------------- -------------------------
2000 1999 2000 1999
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 32,793 $ 29,672 $ 95,247 $ 86,757
Securities:
Taxable 5,925 6,617 17,928 21,067
Tax-exempt 2,366 2,594 7,224 7,649
--------- --------- --------- ---------
Total interest on securities 8,291 9,211 25,152 28,716
--------- --------- --------- ---------
Federal funds sold 489 180 861 748
--------- --------- --------- ---------
Total interest income 41,573 39,063 121,260 116,221
--------- --------- --------- ---------
INTEREST EXPENSE
Interest bearing demand deposits 5,456 4,606 15,785 13,111
Savings deposits 1,314 1,496 4,003 4,507
Certificates of deposit 11,437 9,524 32,213 28,991
--------- --------- --------- ---------
Total interest on deposits 18,207 15,626 52,001 46,609
Other borrowings 2,686 1,716 6,677 4,665
--------- --------- --------- ---------
Total interest expense 20,893 17,342 58,678 51,274
--------- --------- --------- ---------
Net interest income 20,680 21,721 62,582 64,947
Provision for loan losses 732 679 2,179 3,375
--------- --------- --------- ---------
Net interest income after
provision for loan losses 19,948 21,042 60,403 61,572
--------- --------- --------- ---------
NON-INTEREST INCOME
Trust fees 2,698 2,334 8,665 7,687
Service charges on deposits 2,095 1,814 5,989 4,942
Other income 606 583 1,812 2,620
Net securities gains 25 77 242 316
Non-recurring income --- 82 --- 3,561
--------- --------- --------- ---------
Total non-interest income 5,424 4,890 16,708 19,126
--------- --------- --------- ---------
NON-INTEREST EXPENSE
Salaries and wages 7,024 7,419 20,794 21,292
Employee benefits 1,419 1,766 4,054 5,407
Net occupancy 933 865 2,821 2,590
Equipment 1,725 1,493 4,862 4,635
Other operating 5,159 5,531 15,666 16,347
--------- --------- --------- ---------
Total non-interest expense 16,260 17,074 48,197 50,271
--------- --------- --------- ---------
Income before provision for
income taxes 9,112 8,858 28,914 30,427
Provision for income taxes 2,724 2,706 8,915 9,438
--------- --------- --------- ---------
Net Income $ 6,388 $ 6,152 $ 19,999 $ 20,989
========= ========= ========= =========
Earnings per share $ 0.34 $ 0.30 $ 1.04 $ 1.03
Average shares outstanding 18,846,117 20,143,848 19,235,127 20,340,026
Dividends per share $ .225 $ .22 $ .67 $ .66
</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) $296,483
------------------------------------------------------------------------------------------------------------------------
Net Income 20,989 20,989
Net fair value adjustment on
securities available for
sale-net of tax effect (8,718) (8,718)
---------
Comprehensive income 12,271
Cash dividends ($.66 per share) (13,533) (13,533)
Treasury shares purchased-net (1,089,297) 116 (31,792) (31,676)
Stock issued for acquisition 422,916 (182) 12,153 11,971
KSOP (1,000) (1,000)
Deferred benefits for
directors-net (71) (71)
------------------------------------------------------------------------------------------------------------------------
September 30, 1999 19,993,854 $43,742 $60,217 $206,238 $(29,060) $(5,108) $(1,584) $274,445
========================================================================================================================
------------------------------------------------------------------------------------------------------------------------
December 31, 1999 19,789,925 $43,742 $60,133 $208,508 $(34,311) $(7,456) $ (952) $269,664
------------------------------------------------------------------------------------------------------------------------
Net Income 19,999 19,999
Net fair value adjustment on
securities available for
sale-net of tax effect 2,577 2,577
---------
Comprehensive Income 22,576
Cash dividends ($.67 per share) (12,662) (12,662)
Treasury shares purchased-net (1,062,807) (372) (24,388) (24,760)
Deferred benefits for
directors-net (40) (40)
------------------------------------------------------------------------------------------------------------------------
September 30, 2000 18,727,118 $43,742 $59,761 $215,845 $(58,699) $(4,879) $ (992) $254,778
========================================================================================================================
</TABLE>
Comprehensive income for the three-month periods ended September 30, 2000 and
1999 was $9,617 and $4,918, respectively.
See Notes to Consolidated Financial Statements.
<PAGE> 6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------------
(Unaudited, in thousands)
For the nine months ended
Increase (Decrease) in Cash and Cash Equivalents September 30,
-------------------------
2000 1999
------------ -----------
Cash Flows From Operating Activities:
Net Income $ 19,999 $ 20,989
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,703 4,155
Net amortization and accretion 354 1,117
Provision for loan losses 2,179 3,375
Gain on sale of credit card portfolio --- (3,561)
Gains on sales of securities-net (242) (316)
Deferred income taxes (218) (854)
Other-net (107) (3)
Net change in:
Interest receivable (135) (804)
Other assets and other liabilities (79) 988
Interest payable 4,200 (815)
----------- -----------
Net cash provided by operating activities 28,654 24,271
----------- -----------
Cash Flows From Investing Activities:
Securities held to maturity:
Proceeds from maturities and calls 16,011 34,841
Payments for purchases (475) (45,623)
Securities available for sale:
Proceeds from sales 17,243 44,103
Proceeds from maturities and calls 40,915 111,447
Payment for purchases (35,715) (83,344)
Proceeds from the sale of credit cards --- 18,789
Purchase of subsidiary net of cash acquired --- 2,809
Net increase in loans (59,380) (107,197)
Purchases of premises and equipment-net (848) (7,031)
Purchase of bank-owned life insurance (4,400) ---
----------- -----------
Net cash used by investing activities (26,649) (31,206)
----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits 42,416 (1,002)
Increase (decrease) in other borrowings (14,986) 33,720
Dividends paid (12,944) (13,379)
Purchases of treasury shares-net (24,760) (31,676)
----------- -----------
Net cash used by financing activities (10,274) (12,337)
----------- -----------
Net decrease in cash and cash equivalents (8,269) (19,272)
Cash and cash equivalents at beginning of period 81,354 106,218
----------- -----------
Cash and cash equivalents at end of period $ 73,085 $ 86,946
=========== ===========
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 54,478 $ 51,974
Income taxes paid 9,335 9,235
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 nine-months ended September 30, 2000 and 1999
---------------------------------------------------------------
Net income for the nine-months ended September 30, 2000 was $20.0
million or $1.04 per share compared to $21.0 million or $1.03 per share for
the nine-months ended September 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 contributed $.11 to net income per
share for the nine-months ended September 30, 1999.
WesBanco's core earnings, which excludes amortization of goodwill, net
securities gains and non-recurring items, for the nine-months ended September
30, 2000 were $20.9 million or $1.09 per share compared to $19.5 million or
$.96 per share for the nine-months ended September 30, 1999, a 13.5% increase
in core earnings per share. Core earnings performance reflected a return on
average assets of 1.2% and a return on average equity of 10.8% for the
nine-months ended September 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.
WesBanco's improved core earnings were primarily due to decreases in
non-interest expense and loan loss provision and increases in trust revenue
and deposit activity charges. 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 September 30, Nine months ended September 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 $1,570,826 8.31% $1,457,175 8.10% $1,549,828 8.21% $1,419,698 8.17%
Securities:
Taxable 362,645 6.53% 413,804 6.40% 369,648 6.47% 450,688 6.23%
Tax-exempt 187,511 7.77% 208,960 7.64% 192,910 7.68% 204,621 7.67%
------------------- ------------------- ------------------- -------------------
Total securities 550,156 6.95% 622,764 6.81% 562,558 6.88% 655,309 6.68%
Federal funds sold 28,804 6.76% 13,949 5.13% 17,958 6.40% 20,189 4.95%
------------------- ------------------- ------------------- -------------------
Total earning assets 2,149,786 7.94% 2,093,888 7.67% 2,130,344 7.84% 2,095,196 7.68%
------------------- ------------------- ------------------- -------------------
Other assets 160,106 163,704 154,328 149,104
----------- ----------- ----------- -----------
Total Assets $2,309,892 $2,257,592 $2,284,672 $2,244,300
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $ 591,161 3.67% $ 578,876 3.17% $ 597,347 3.53% $ 563,175 3.11%
Savings deposits 264,272 1.98% 297,082 2.00% 270,047 1.98% 302,158 1.99%
Certificates of deposit 792,802 5.74% 720,595 5.26% 773,761 5.56% 727,023 5.33%
------------------- ------------------- ------------------- -------------------
Total interest bearing deposits 1,648,235 4.39% 1,596,553 3.89% 1,641,155 4.23% 1,592,356 3.91%
Other borrowings 173,179 6.17% 138,936 4.91% 152,527 5.85% 139,043 4.49%
------------------- ------------------- ------------------- -------------------
Total interest
bearing liabilities 1,821,414 4.56% 1,735,489 3.96% 1,793,682 4.37% 1,731,399 3.96%
------------------- ------------------- ------------------- -------------------
Non-interest bearing
demand deposits 212,006 227,870 213,825 210,028
Other liabilities 22,186 17,065 18,062 19,188
Shareholders' Equity 254,286 277,168 259,103 283,685
----------- ----------- ----------- -----------
Total Liabilities and
Shareholders' Equity $2,309,892 $2,257,592 $2,284,672 $2,244,300
=========== =========== =========== ===========
Taxable equivalent net yield
on earning assets 4.07% 4.38% 4.16% 4.41%
======= ======= ======= =======
</TABLE>
Total loans are gross of allowance for loan losses, net of unearned income,
and include loans held for sale.
Non-accrual 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 September 30, Nine months ended September 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 $ 2,358 $ 763 $ 3,121 $ 8,071 $ 419 $ 8,490
Taxable securities (833) 141 (692) (3,906) 767 (3,139)
Tax-exempt securities (417) 66 (351) (674) 20 (654)
Federal funds sold 238 71 309 (89) 202 113
--------------------------------- ----------------------------------
Total interest income change 1,346 1,041 2,387 3,402 1,408 4,810
--------------------------------- ----------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits 100 750 850 833 1,841 2,674
Savings deposits (163) (19) (182) (472) (32) (504)
Certificates of deposit 1,000 913 1,913 1,930 1,292 3,222
Other borrowings 476 494 970 487 1,525 2,012
--------------------------------- ----------------------------------
Total interest expense change 1,413 2,138 3,551 2,778 4,626 7,404
--------------------------------- ----------------------------------
Taxable equivalent net interest
income increase (decrease) $ (67) $(1,097) $ (1,164) $ 624 $(3,218) $ (2,594)
================================= ==================================
Decrease in taxable equivalent adjustment (123) (229)
--------- ----------
Net interest income decrease $ (1,041) $ (2,365)
========= ==========
</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 nine-months ended September 30, 2000 declined $2.6
million or 3.8% compared to the same period in 1999. The net (TE) yield on
average earning assets was 4.2% compared to 4.4%. 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 the effects of rising interest rates early this year,
competitive pricing pressure to adjust rates on loan and deposit products
and a continued shifting of deposits into higher yielding products.
Factors affecting the average balance sheet between nine-months ended
September 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.
Interest income (TE) increased $4.8 million or 4.0% between the
nine-months ended September 30, 2000 and 1999. As shown in Table 2, the
majority of the increase in interest income (TE) was due to increases in
average loan volume and average loan rates. Average loan growth of $130.1
million or 9.2% was partially funded by decreases of $92.8 million and $2.2
million in average securities and federal funds sold, respectively. Rising
interest rates combined with the shifting of securities and federal fund
sold balances into higher yielding loan products and an increase in average
earning assets of 1.7% contributed to the increase in the yield (TE) on
average earning assets to 7.8% from 7.7%.
Interest expense increased $7.4 million or 14.4% between the nine-months
ended September 30, 2000 and 1999, resulting from an increase in rates paid
on average interest bearing liabilities to 4.4% from 4.0%. Customers shifted
savings and NOW balances into the competitively priced Prime Rate Money
Market product and certificates of deposit. Average savings deposits
decreased $32.1 million or 10.6% while average interest bearing demand
deposits, which includes the Prime Rate Money Market product, increased $34.2
million or 6.1%. Average certificates of deposit increased $46.7 million or
6.4%, and average other borrowings increased $13.5 million or 9.7%. As noted
in Table 2, interest expense on other borrowings increased $2.0 million
primarily due to an average rate increase to 5.8% from 4.5%.
Non-interest Income
-------------------
Non-interest income, excluding net securities gains and non-recurring,
increased 7.4% to $16.5 million for the nine-months ended September 30, 2000
compared to $15.2 million for the nine-months ended September 30, 1999.
Trust revenue increased 12.7% while deposit activity charges increased 21.2%.
Growth in trust revenue reflected increases in the number of accounts under
<PAGE> 11
administration, increases in investment advisory fees and an increase in the
market value of trust assets. Deposit activity charges increased due to
increases in the fees charged. Other income decreased $.8 million due to
the reduction in credit card activity fees.
Non-interest Expense
--------------------
Non-interest expense for the nine-months ended September 30, 2000
decreased 4.1% to $48.2 million compared to $50.3 million for the nine-months
ended September 30, 1999. The majority of the decrease occurred in wages and
benefits, which declined 6.9% or $1.9 million. This reduction resulted from
the consolidation of WesBanco's four banking affiliates and mortgage company
affiliate into a single bank and decreases in health care costs and
post-retirement expense. Average full-time equivalent employees decreased
to 1,023 at September 30, 2000 from 1,099 at September 30, 1999. Other
operating expense decreased 4.2% or $.7 million primarily due to the
reduction in credit card processing costs and the elimination of Year 2000
readiness costs that were incurred in 1999. Net occupancy and equipment
expense increased 6.3% or $.5 million primarily due to technology-related
projects.
TABLE 3 Reconciliation of Income Tax Rates
For the nine months ended
September 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) (0)
---- ----
Effective tax rate 31% 32%
==== ====
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 disagreed with the timing of certain loan
origination costs taken in those years. The IRS 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 Third Circuit in PNC Bancorp, Inc. v. Commissioner,
212 F. 3rd 822 (3rd Cir. 2000). WesBanco is waiting for the IRS to determine
its position in light of the reversal of the decision. If the
<PAGE> 12
IRS's position is ultimately upheld, the projected impact on the results of
operations is approximately $.1 million.
Financial Condition
-------------------
Total assets of WesBanco were $2.3 billion as of September 30, 2000,
which approximated total assets as of December 31, 1999. Total loans grew
$57.6 million or 3.8% due primarily to competitive pricing of WesBanco's
commercial, home equity products and consumer loans during this nine-month
period. WesBanco experienced deposit growth of $42.4 million or 2.3%, led
by the growth in certificates of deposit and Prime Rate Money Market accounts.
TABLE 4 Composition of Securities
September 30, December 31,
(in thousands) 2000 1999
------------- ------------
Securities held to maturity (at amortized cost):
------------------------------------------------
U.S. Treasury and federal agency securities $ 8,355 $ 13,346
Obligations of states and political subdivisions 171,255 182,005
Other debt securities 17,959 17,902
--------- ---------
Total securities held to maturity (fair value
of $196,923 and $211,009, respectively) 197,569 213,253
--------- ---------
Securities available for sale (at fair value):
----------------------------------------------
U. S. Treasury and federal agency securities 190,554 189,593
Obligations of states and political subdivisions 13,640 18,298
Corporate securities 3,044 3,068
Mortgage-backed and other debt securities 129,290 143,716
--------- ---------
Total securities available for sale 336,528 354,675
--------- ---------
Total securities $ 534,097 $ 567,928
========= =========
Proceeds from the sale or maturity of securities represent a source
of liquidity for WesBanco. During the nine-months ended September 30, 2000,
moderate deposit growth and proceeds from the sale and maturity of securities
served as an additional source of funds for loan growth. The fair value
adjustment in the available for sale securities portfolio reflected an
unrealized net loss of $8.0 million as of September 30, 2000 compared to an
unrealized net loss of $12.3 million as of December 31, 1999. This
adjustment represents 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
TABLE 5 Composition of Loans
September 30, December 31,
(in thousands) 2000 1999
------------- ------------
Commercial $ 536,530 $ 521,450
Real estate - construction 31,185 31,742
Real estate 656,667 630,939
Personal, net of unearned income 354,588 329,562
Loans held for sale 2,067 9,753
---------- ----------
Loans, net of unearned income $1,581,037 $1,523,446
========== ==========
Loans, net of unearned income increased $57.6 million or 3.8% between
September 30, 2000 and December 31, 1999. Commercial loans grew 2.9% or
$15.1 million, real estate loans grew 2.6% or $17.5 million, due to WesBanco's
home equity products, and personal loans grew 7.6% or $25.0 million due to
attractive pricing of indirect auto loans. The composition of loans as a
percentage of total loans consist of commercial at 34%, real estate at
44% and personal loans at 22% as of September 30, 2000.
TABLE 6 Non-performing, Classified and Loans Past Due 90 Days or More
September 30, December 31,
(in thousands) 2000 1999
------------- ------------
Non-accrual loans $ 5,281 $ 4,158
Renegotiated loans --- 813
Other classified loans (1) 9,746 8,706
-------- --------
Total non-performing and classified loans 15,027 13,677
Other real estate owned 3,547 3,512
-------- --------
Total non-performing and classified assets $ 18,574 $ 17,189
======== ========
Loans past due 90 days or more $ 5,515 $ 6,032
======== ========
(1) Includes loans internally classified as doubtful and substandard that
meet the definition of impaired loans.
WesBanco's level of non-performing and classified assets increased $1.4
million in comparison to December 31, 1999. Non-performing and classified
assets as a percentage of total loans and other real estate owned increased
to 1.17% as of September 30, 2000 from 1.13% as of December 31, 1999. This
<PAGE> 14
increase resulted primarily from the reclassification of three commercial
loans totaling $2.2 million from a performing loan status to a non-accrual
status and one commercial loan totaling $1.2 million from a performing
status to a classified status. The increase in non-performing and classified
loans were partially offset by 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. All non-performing loans are considered impaired. 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 nine months ended
September 30,
(in thousands) -------------------------
2000 1999
------------ ----------
Balance, at beginning of period $ 19,752 $ 19,098
Allowance for loan losses of acquired bank --- 192
Allowance for loan losses allocated to credit cards --- (450)
Charge-offs (2,710) (3,874)
Recoveries 921 1,058
--------- ---------
Net charge-offs (1,789) (2,816)
Provision for loan losses 2,179 3,375
--------- ---------
Balance, at end of period $ 20,142 $ 19,399
========= =========
<PAGE> 15
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 September 30, 2000 compared to September 30, 1999. Net loan
charge-offs decreased $1.0 million or 36.5%. This reduction was partially
due to the sale of WesBanco's credit card portfolio in June 1999 and loans
charged-off from an acquired financial institution during the second quarter
of 1999. WesBanco decreased the allowance for loan losses by $.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 $42.4 million or 2.3% between September 30, 2000 and
December 31, 1999, reflecting growth in certificates of deposit and Prime
Rate Money Market accounts. The growth in these categories was partially
offset by reductions in savings and NOW account balances. This shifting of
funds reflects our customers' 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 decreased $15.0 million or
8.6%, represented a use of funds during this year-to-date period. Repurchase
agreements increased $10.2 million, while Federal funds purchased decreased
$24.4 million and Federal Home Bank borrowings decreased $.8 million.
WesBanco's decreased reliance on other borrowings was due to a combination of
moderate deposit growth and proceeds from the sale and maturity of securities
serving as alternative sources of funds.
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.
<PAGE> 16
In addition to funds provided from operations, WesBanco's primary sources
of funds are deposits, principal repayments on loans and matured or called
securities. WesBanco's Federal Home Loan Bank Borrowing credit line of
$536.8 million, of which $488.1 million remains unused, provides an additional
source of funds and liquidity. 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 $14.9 million between September 30, 2000
and December 31, 1999. Shareholders' equity increased $7.3 million due to
net income after dividends and $2.6 million due to the fair value adjustment,
after tax effect, in the available for sale securities portfolio. WesBanco's
corporate stock repurchase program reduced shareholders' equity for the
three-months and nine-months ended September 30, 2000 by $8.3 million and
$21.2 million, respectively, and added treasury shares of 351,310 and
911,212, respectively. As of September 30, 2000, 566,727 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
September 30, December 31,
2000 1999
------------- ------------
Tier I capital 14.3% 15.7%
Total risk-based capital 15.6% 17.0%
Leverage 10.4% 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 September 30, 2000 and December 31, 1999,
WesBanco's affiliate bank, WesBanco Bank, Inc., also exceeded the minimum
regulatory levels.
<PAGE> 17
Earnings Summary
----------------
Comparison of the three-months ended September 30, 2000 and 1999
----------------------------------------------------------------
Net income for the three-months ended September 30, 2000 was $6.4
million or $.34 per share compared to $6.2 million or $.30 per share for
the three-months ended September 30, 1999, a 13.3% increase in net income
per share.
WesBanco's core earnings, which excludes amortization of goodwill,
net securities gains and non-recurring items, for the three-months ended
September 30, 2000 increased 4.7% to $6.8 million compared to $6.4 million
for the three-months ended September 30, 1999. Core earnings per share
increased 12.5% to $.36 compared to $.32. Core earnings performance yielded
an annualized return on average assets of 1.2% and a return on average equity
of 10.6% for the three-months ended September 30, 2000 compared to a return
on average assets of 1.1% and a return on average equity of 9.2% for the same
period in 1999. Increases in trust fees along with deposit activity charges
and decreases in non-interest expense 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 September 30, 2000 decreased
$1.2 million or 5.0% compared to the same period in 1999. The net (TE)
yield on average earning assets was 4.1% compared to 4.4%. The effects
of rising interest rates early this year, competitive pricing pressure
for loan and deposit products and a continued shifting of deposits into
higher yielding products has resulted in a narrowing spread.
Factors affecting the average balance sheet between three-months
ended September 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.
Interest income (TE) increased $2.4 million or 5.9% between the
three-months ended September 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 $1.3 million or 3.3% and
average rate increases of $1.0 million or 2.6% favorably impacted
interest income (TE).
Interest expense increased $3.6 million or 20.5% between the
three-months ended September 30, 2000 and 1999, to 4.6% from 4.0%. As
presented in Table 2, a combination of increases in average
<PAGE> 18
volume and average rate caused interest expense to increase. 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
-------------------
Non-interest income, excluding net securities gains and non-recurring
income, for the three-months ended September 30, 2000 increased $.7 million
or 14.1% compared to the same period in 1999, resulting primarily from
increases in trust fees and deposit activity charges. Trust fees increased
$.4 million or 15.6% while deposit activity charges increased $.3 million
or 15.5%.
Non-interest Expense
--------------------
Non-interest expense for the three-months ended September 30, 2000
decreased $.8 million or 4.8% compared to the same period of 1999. The
majority of the decrease occurred in wages and benefits, which declined
$.7 million or 8.1%. This reduction resulted from the consolidation of
WesBanco's four banking affiliates and mortgage company affiliate into
a single bank and decreases in health care costs and post-retirement
expense. Other operating expense decreased $.4 million or 6.7% primarily
due to the reduction in credit card processing costs and the elimination of
Year 2000 readiness costs that were incurred in 1999. Net occupancy and
equipment expense increased $.3 million or 12.7% primarily due to
technology-related projects.
Forward-Looking Statements
--------------------------
Balance Sheet:
--------------
Over the next twelve months, management expects moderate loan and
deposit growth in a range of 1.0% to 4.0%. Loan composition and asset
quality ratios should be consistent with the levels experienced through
three-quarters of 2000. Management anticipates a softening of commercial
and personal loan growth if market interest rates remain at current levels.
Estimated loan growth will be funded by deposit growth, proceeds from
maturities of securities and increases in other borrowings. Management
expects the shift in the composition of deposits to continue, reflecting
our customers' preference for competitively priced certificates of deposit
and Prime Rate Money Market accounts. Management expects the level and
trend of shareholders' equity to remain strong with a primary capital to
asset ratio above 11.0%. Shareholders' equity and average common shares
outstanding may be impacted due to the continuation of our Corporate
stock repurchase program.
<PAGE> 19
Statement of Income:
--------------------
Net Interest Income: Management expects net interest income to compare
favorably to general industry trends during the next twelve months.
Changing interest rates and competitive pressure to make interest rate
adjustments on loans and deposits could mitigate the positive effects
of balance sheet growth on net interest income.
Non-interest Income and Expense: For the next twelve months, management
expects trust revenue to increase between 3.0% to 8.0% and deposit
activity charges and non-banking income to improve modestly. Growth in
trust revenue may 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 non-interest
income categories could be offset by decreases in loan origination fees
from mortgage lending activities if market interest rates continue to
rise and the modest growth in revenue expected from non-banking
subsidiaries.
For the remainder of 2000, management expects continued cost
reductions resulting from the unit bank consolidation. Non-interest
expense should remain at the present levels for the year 2001.
The level of non-interest expense may be impacted by the cost of
technology-related projects and normal personnel expense increases
during 2001.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Through September 30, 2000, there have been no material changes to
the information on this topic as presented in the 1999 Annual Report.
<PAGE> 20
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
filed a Motion asking the Court to reconsider the ruling and the Court
denied Travelers' Motion by Order entered September 27, 2000. It is
uncertain whether Travelers will appeal this decision.
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, styled Wesbanco Bank Parkersburg, Inc. v. First Southern
Trust Company, et al., 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
-------------------------------
On September 11, 2000, WesBanco filed a current report on Form 8-K
announcing presentation on financial information presented at the
Friedman, Billings, Ramsey & Co., Inc. Seventh Annual Investors
Conference, held in Washington, D.C. on September 11-12, 2000.
<PAGE> 21
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: November 13, 2000 ------------------------------------
Edward M. George
President and Chief Executive Officer
/s/ Paul M. Limbert
Date: November 13, 2000 ------------------------------------
Paul M. Limbert
Executive Vice President and Chief
Financial Officer
