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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1999
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_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ____________
Commission File Number 0-8467
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WESBANCO, INC.
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(Exact name of Registrant as specified in its charter)
WEST VIRGINIA 55-0571723
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 304-234-9000
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each Exchange on which registered
- ------------------------------ -----------------------------------------
Common Stock $2.0833 Par Value National Association of Securities
Dealers, Inc.
Nonredeemable Preferred Stock None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ______
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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The aggregate market value of voting stock computed using the average of
the bid and ask prices held by non-affiliates of the Registrant on February
29, 2000 was approximately $371,981,352.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of February 29, 2000, there were 19,664,338 shares of WesBanco, Inc.
Common stock $2.0833 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of WesBanco's 1999 Annual Report ("Annual Report to Shareholders")
are incorporated by reference into Parts I and II and portions of the
definitive Proxy Statement of WesBanco, Inc. for the annual meeting of
shareholders to be held on April 19, 2000 ("Proxy Statement") are
incorporated by reference into Part III of this Form 10-K.
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WESBANCO, INC.
TABLE OF CONTENTS
SEQUENTIAL
ITEM # ITEM PAGE NO.
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Part I
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1 Business 3
2 Properties 6
3 Legal proceedings 6
4 Submission of matters to a vote of security holders N/A
Part II
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5 Market for the registrant's common equity and related
stockholder matters 6
6 Selected financial data 7
7 Management's discussion and analysis of financial
condition and results of operations 7
8 Financial statements and supplementary data 7
9 Changes in and disagreements with accountants on
accounting and financial disclosure N/A
Part III
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10 Directors and Executive Officers of the registrant 7
11 Executive compensation 7
12 Security ownership of certain beneficial owners and
management 7
13 Certain relationships and related transactions 7
Part IV
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14 Exhibits, financial statement schedules and reports
on Form 8-K 8
Signatures 9
EXHIBIT INDEX 10
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PART I
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Item 1. Business
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General
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WesBanco, a bank holding company headquartered in Wheeling, WV, offers
a full range of financial services including retail banking, corporate
banking, personal and corporate trust services, brokerage, mortgage banking
and insurance. Its subsidiary banking organization operates automated teller
machines primarily under the name of MAC.
The Corporation's primary business function is the operation of a
commercial bank through 62 offices located in West Virginia and Eastern Ohio.
WesBanco restructured its banking and mortgage operations on January 14, 2000,
merging all of its banking subsidiaries and its mortgage subsidiary into one
state member banking corporation, WesBanco Bank, Inc., headquartered in
Wheeling with regional administrative offices in Fairmont, Parkersburg and
Charleston. The corporation previously maintained four separate banking
subsidiaries. Total assets of WesBanco Bank, Inc. as of December 31, 1999
approximated $2.2 billion.
During 1999, WesBanco also consolidated its individual bank trust
operations into a single operating division of its unit banking corporation
under the name "WesBanco Trust and Investment Services". The trust department
is one of the largest trust operations in West Virginia. As of December 31,
1999, the market value of trust assets was approximately $3.1 billion.
WesBanco also offers services through its non-banking affiliates.
WesBanco Insurance Services, Inc., which recently changed its name from
Hunter Agency, Inc., is a multi-line insurance agency specializing in
property, casualty and life insurance for personal and commercial clients.
WesBanco Securities, Inc. is a full service broker-dealer which also offers
discount brokerage services.
WesBanco also serves as investment adviser to a family of mutual funds
under the name "WesMark Funds" which include the WesMark Growth Fund, the
WesMark Balanced Fund, the WesMark Bond Fund, and the WesMark West Virginia
Municipal Bond Fund.
On April 30, 1999, WesBanco completed the acquisition of The Heritage
Bank of Harrison County, a unit bank located in Clarksburg, West Virginia.
Heritage Bank had total assets of approximately $33.3 million at the time of
its acquisition. This acquisition provided WesBanco with an important
downtown Clarksburg location to compliment its existing branch network in
North Central West Virginia.
Competition
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Each affiliate faces strong competition for local business in its
respective market areas. Competition exists for new loans and deposits, in
the scope and types of services offered, and the interest rates paid on time
deposits and charged on loans, mortgage banking services and in other aspects
of banking. WesBanco's banking subsidiary encounters substantial competition
not only from other commercial banks but also from other financial
institutions. Savings banks, savings and loan associations, brokerage
business and credit unions actively compete for deposits and loans. Such
institutions, as well as consumer finance companies, insurance companies and
other enterprises, are important competitors for various types of lending
business. In addition, personal and corporate trust services and investment
counseling services are offered by insurance companies, investment counseling
firms and other business firms and individuals.
Supervision and Regulation
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As a registered bank holding company, WesBanco is subject to the
supervision of the Federal Reserve Board and is required to file with the
Federal Reserve Board reports and other information regarding its business
operations and the business operations of its subsidiaries. WesBanco is also
subject to examination by the Federal Reserve Board and is required to obtain
Federal Reserve Board approval prior to acquiring, directly or indirectly,
ownership or control of voting shares of any bank, if, after such acquisition,
it would own or control more than 5% of the voting stock of such bank. In
addition, pursuant to federal law and regulations promulgated by the Federal
Reserve Board, WesBanco may only engage in, or own or control companies
that engage in, activities deemed by the Federal Reserve Board to be so
closely related to banking as to be a proper incident thereto. Prior to
engaging in most new business activities, WesBanco must obtain approval from
the Federal Reserve Board.
WesBanco's banking subsidiary has deposits insured by the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation (the "FDIC"), and
is subject to supervision, examination and regulation by state banking
authorities and the Federal Reserve Board. In addition to the impact of
federal and state supervision and regulation, the banking subsidiary of
WesBanco is affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit availability in
order to influence the economy.
WesBanco's depository institution subsidiary is subject to affiliate
transaction restrictions under federal law which limit the transfer of funds
by the subsidiary bank to its parent and any nonbanking subsidiaries, whether
in the form of loans, extensions of credit, investments or asset purchases.
Such transfers by any subsidiary bank to its parent corporation or to any
nonbanking subsidiary are limited in amount to 10% of the institution's
capital and surplus and, with respect to such parent and all such nonbanking
subsidiaries, to an aggregate 20% of any such institution's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specified amounts.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with
engaging in unsafe and unsound practices for failure to commit resources to
such a subsidiary bank. This capital injection may be required at times when
WesBanco may not have
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the resources to provide it. Any capital loans by a holding company to any
of the subsidiary banks are subordinate in right of payment to deposits and
to certain other indebtedness of such subsidiary bank. Moreover, in the
event of a bank holding company's bankruptcy, any commitment by such holding
company to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institution Reform, Recovery,
and Enforcement Act ("FIRREA"). FIRREA established a new principle of
liability on the part of depository institutions insured by the FDIC for any
losses incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989, in connection with (i) the default of a commonly controlled
FDIC-insured depository institution, or (ii) any assistance provided by the
FDIC to a commonly controlled FDIC-insured depository institution in danger
of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a "default" is likely to
occur in the absence of regulatory assistance. Accordingly, in the event
that any insured bank subsidiary of WesBanco causes a loss to the FDIC, other
bank subsidiaries of WesBanco could be required to compensate the FDIC by
reimbursing to it the amount of such loss.
The Gramm-Leach-Bliley Act of 1999 ("GLB Act") was signed by the
President and enacted into law on November 12, 1999. The GLB Act removes the
Glass-Steagall Act restrictions on affiliation between banks and securities
firms and it authorizes financial holding companies that own a bank to engage
in a full range of insurance activities. The result is that qualifying bank
holding companies may opt to become financial holding companies and thus to
hold subsidiaries that engage in banking, securities underwriting and dealing,
and insurance agency and underwriting. They may also engage in financial
activities listed in the GLB Act, including merchant banking or venture
capital activities, the distribution of mutual funds and securities lending.
Bank holding companies ("BHCs") now have the option under the GLB Act to
continue to operate as BHCs or, if they qualify, to act as Financial Holding
Companies ("FHCs"). It is important to note in this regard that both BHCs
and FHCs and their non-bank operating subsidiaries are subject to the full
panoply of affiliate transaction rules under Sections 23A and B of the
Federal Reserve Act. As a consequence, all transactions between affiliated
depository institutions and these entities will be restricted under the
provisions of those laws.
Under new Section 4(k), certain activities are listed as being "financial
in nature" including "underwriting, dealing in, or making a market in
securities," and "merchant banking." In addition, national banks and state
banks (if the state bank chartering authority permits) may engage in certain
"financial in nature" activities through financial services subsidiaries.
Activities prohibited to financial services subsidiaries include merchant
banking but not securities underwriting and dealing.
To engage in these new activities, all depository institutions of a
financial holding company must be well capitalized, well managed and have no
less than a satisfactory CRA rating. Assuming these conditions are met, a
financial holding company need only provide written notice to the Board
within 30 calendar days after commencing the financial in nature activity or
acquiring the firm engaging in that activity. If the activity is to be
undertaken through a financial subsidiary of a depository institution,
then that institution must meet essentially the same requirements.
WesBanco will be evaluating its option to elect to qualify as a financial
holding company under the GLB Act. In the interim, it will designate WesBanco
Insurance Services, Inc., a subsidiary of its banking corporation, as a
financial subsidiary under the GLB Act.
Dividend Restrictions
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There are statutory limits on the amount of dividends WesBanco's
depository institution subsidiaries can pay to their parent corporation
without regulatory approval. Under applicable federal regulations,
appropriate bank regulatory agency approval is required if the total of all
dividends declared by a bank in any calendar year exceeds the available
retained earnings and exceeds the aggregate of the bank's net profits (as
defined by regulatory agencies) for that year and its retained net profits
for the preceding two years, less any required transfers to surplus or a
fund for the retirement of any preferred stock.
FDIC Insurance
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The FDIC has the authority to raise the insurance premiums for
institutions in the BIF to a level necessary to achieve a target reserve
level of 1.25% of insured deposits within not more than 15 years. In
addition, the FDIC has the authority to impose special assessments in certain
circumstances. The level of deposit premiums affects the profitability of
subsidiary banks and thus the potential flow of dividends to parent companies.
Under the risk-based insurance assessment system that became effective
January 1, 1994, the FDIC places each insured depository institution in one
of nine risk categories based on its level of capital and other relevant
information (such as supervisory evaluations). Regarding the assessment
rates under the assessment system, on November 20, 1996, the FDIC voted
to retain the existing Bank Insurance Fund ("BIF") assessment schedule of
0 to 0.27% (annual rate), and to collect an assessment against BIF assessable
deposits to be paid to the Financing Corporation ("FICO"). In addition, the
FDIC eliminated the statutory minimum annual assessment of $2,000. Each
WesBanco Bank was subject to the FICO special assessment at an annual rate
of 1.20% during 1999. No assessment was paid to the BIF for 1999.
Federal Deposit Insurance Corporation Improvement Act of 1991
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In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised
the bank regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other federal banking statutes.
<PAGE> 5
Among other things, FDICIA requires federal bank regulatory authorities
to take "prompt corrective action" with respect to depository institutions
that do not meet minimum capital requirements. For these purposes, FDICIA
establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized.
Rules adopted by the Federal banking agencies under FDICIA provide
that an institution is deemed to be: "well capitalized" if the institution
has a total (Tier 1 plus Tier II) risk-based capital ratio of 10.0% or
greater, a Tier I risk-based ratio of 6.0% or greater, and a leverage ratio
of 5.0% or greater, and the institution is not subject to an order, written
agreement, capital directive, or prompt corrective action directive to meet
and maintain a specific level for any capital measure; "adequately
capitalized" if the institution has a Total risk-based capital ratio of 8.0%
or greater, a Tier I risk-based capital ratio of 4.0% or greater, and a
leverage ratio of 4.0% or greater (or a leverage ratio of 3.0% or greater if
the institution is rated composite 1 in its most recent report of examination,
subject to appropriate Federal banking agency guidelines), and the institution
does not meet the definition of a well-capitalized institution;
"undercapitalized" if the institution has a Total risk-based capital ratio
that is less than 8.0%, a Tier I risk-based capital ratio that is less than
4.0% or a leverage ratio that is less than 4.0% (or a leverage ratio that
is less than 3.0% if the institution is rated composite 1 in its most recent
report of examination, subject to appropriate Federal banking agency
guidelines) and the institution does not meet the definition of a
significantly undercapitalized or critically undercapitalized institution;
"significantly undercapitalized" if the institution has a Total risk-based
capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that
is less than 3.0%, or a leverage ratio that is less than 3.0% and the
institution does not meet the definition of a critically undercapitalized
institution; and "critically undercapitalized" if the institution has a ratio
of tangible equity to total assets that is equal to or less than 2%.
At December 31, 1999, WesBanco and all of its bank subsidiaries qualified
as well-capitalized based on the ratios and guidelines noted above. A bank's
capital category, however, is determined solely for the purpose of applying
the prompt corrective action rules and may not constitute an accurate
representation of that bank's overall financial condition or prospects.
The appropriate Federal banking agency may, under certain circumstances,
reclassify a well capitalized insured depository institution as adequately
capitalized. The appropriate agency is also permitted to require an
adequately capitalized or undercapitalized institution to comply with the
supervisory provisions as if the institutions were in the next lower category
(but not treat a significantly undercapitalized institution as critically
undercapitalized) based on supervisory information other than the capital
levels of the institution.
The statute provides that an institution may be reclassified if the
appropriate Federal banking agency determines (after notice and opportunity
for hearing) that the institution is in an unsafe and unsound condition or
deems the institution to be engaging in an unsafe or unsound practice.
FDICIA generally prohibits a depository institution from making any
capital distributions (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions
are subject to growth limitations and are required to submit a capital
restoration plan. The Federal banking agencies may not accept a capital
restoration plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. In addition, for a capital restoration
plan to be acceptable, the depository institution's parent holding company
must guarantee that the institution will comply with such capital restoration
plan. The aggregate liability of the parent holding company is limited to
the lesser of (i) an amount equal to 5% of the depository institution's total
assets at the time it became undercapitalized, and (ii) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is treated as
if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
FDICIA also contains a variety of other provisions that may affect the
operation of WesBanco, including reporting requirements, regulatory standards
for real estate lending, "truth in savings" provisions, and the requirement
that a depository institution give 90 days' prior notice to customers and
regulatory authorities before closing any branch.
Capital Requirements
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The risk-based capital guidelines for bank holding companies and banks
adopted by the Federal banking agencies were phased in at the end of 1992.
The minimum ratio of qualifying total capital to risk-weighted assets
(including certain off-balance sheet items, such as standby letters of credit)
under the fully phased-in guidelines is 8%. At least half of the total
capital is to be comprised of common stock, retained earnings, noncumulative
perpetual preferred stocks, minority interests and, for bank holding
companies, a limited amount of qualifying cumulative perpetual preferred
stock, less goodwill and certain other intangibles ("Tier I capital"). The
remainder ("Tier II capital") may consist of other preferred stock, certain
other instruments, and limited amounts of subordinated debt and the reserve
for credit losses.
In addition, the Federal Reserve Board has established minimum leverage
ratio (Tier I capital to total average assets less goodwill and certain other
intangibles) guidelines for bank holding companies and banks. These
guidelines provide for a minimum leverage ratio of 3.0% for bank holding
companies and banks that meet certain specified criteria, including that they
have the highest regulatory rating. All other banking organizations are
required to maintain a leverage ratio of 3.0% plus an additional cushion of
at least 100 to 200 basis points. The guidelines also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal
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Reserve Board will continue to consider a "tangible Tier I leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier I
leverage ratio is the ratio of Tier I capital, less intangibles not deducted
from Tier I capital, to total assets, less all intangibles. Neither WesBanco
nor any of its bank subsidiaries, at December 31, 1999, has been advised of
any specific minimum leverage ratio applicable to it.
As of December 31, 1999, all of WesBanco's banking subsidiaries had
capital in excess of all applicable requirements. Additional information
relating to risk-based capital calculations is set forth under the heading
"Note 14 Regulatory Matters" of the Annual Report to Shareholders and is
incorporated herein by reference.
Item 2. Properties
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The Registrant's affiliates generally own their respective offices,
related facilities and unimproved real property which is held for future
expansion. With certain branch office exceptions, all of the respective
West Virginia offices are located in Wheeling, McMechen, Moundsville,
Follansbee, Wellsburg, Weirton, New Martinsville, Paden City, Sistersville,
Elizabeth, Charleston, South Charleston, Dunbar, Sissonville, Parkersburg,
Ravenswood, Ripley, Pennsboro, Ellenboro, Harrisville, Cairo, Kingwood,
Fairmont, Morgantown, Shinnston, Bridgeport, Masontown and Clarksburg. The
Ohio bank offices are located in Marietta, Barlow, Devola, Barnesville,
Bethesda, St. Clairsville, Woodsfield and Beallsville. During 1999, WesBanco
constructed and is currently operating branch offices located in Charleston
and Moundsville, West Virginia. Through the acquisition of Heritiage Bank of
Harrison County during 1999, WesBanco operates a branch office located in
Clarksburg. Consolidated investment in net bank premises and equipment at
December 31, 1999 was $56.2 million compared to $48.0 million last year.
The main office of the Registrant is located at 1 Bank Plaza, Wheeling,
West Virginia, in a building owned by WesBanco Bank, Inc. The building
contains approximately 100,000 square feet. During 1998, an office building
located adjacent to the main office was acquired by WesBanco Properties, an
affiliate of WesBanco. WesBanco Bank, Inc. currently occupies approximately
one half of the office space available, with the remaining portion leased to
unrelated businesses. At various building locations, WesBanco provides
commercial office space and will continue to look for opportunities to rent
office space to unrelated businesses. Rental income totaled $0.81 million for
1999 compared to $0.55 million for 1998.
Item 3. Legal Proceedings
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Reference has been made in prior filings to the case styled Tankovits v.
Glessner, et al., Civil Action No. 96-C-59(W), presently pending in the
Circuit Court of Ohio County, West Virginia. This is a suit by a trust
beneficiary against Wesbanco Bank, Inc., the Plaintiff's uncle, the
Plaintiff's mother and certain family owned corporations, and arises out of
the administration of the estate of the Plaintiff's grandfather. The Bank has
settled this claim and the Court has approved the settlement agreement. The
Bank is no longer involved in the proceeding. The settlement has no material
impact on WesBanco.
Wesbanco Bank, Inc. is also a Defendant in a case styled Travelers v.
Wesbanco Bank Wheeling and Coopers & Lybrand, under Civil Action No. 98-C-225,
presently pending in the Circuit Court of Ohio County, West Virginia. In
this action, Travelers, as subrogee of Wheeling-Nisshin, seeks to recover
certain losses incurred by it over the embezzlement of funds by a former
financial officer of Wheeling-Nisshin. The losses were generated through
forged checks. Travelers has sued the Bank alleging a violation of the
properly payable rule of the Uniform Commercial Code, even though the
officer involved was a designated financial officer of Wheeling-Nisshin,
reconciled checking accounts and had access to facsimile signatures used by
Wheeling-Nisshin. The bank believes that it has a substantial defense to the
claims of Travelers and is vigorously defending the case. The claimed losses
are equivalent to the amount of the loss incurred by Travelers, $750,000.00,
plus interest. The bank has filed a Motion to Dismiss the case which is
pending hearing before the Court.
A Declaratory Judgment suit was filed on behalf of Wesbanco Bank, 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. Discovery is now complete and it is anticipated that the case will
be submitted to the Court on Summary Judgement Motions.
PART II
Item 5.
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Market for the Registrant's Common Equity and Related Shareholder Matters
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WesBanco's common stock is quoted on The Nasdaq Stock Market (Nasdaq),
with a trading symbol of WSBC. The approximate number of holders of
WesBanco's $2.0833 par value common stock as of December 31, 1999 was 5,739.
The number of holders does not include WesBanco employees who have had stock
allocated to them through the Corporation's KSOP. All WesBanco employees who
meet the eligibility requirements of the KSOP are included in the Plan.
<PAGE> 7
Quarterly price information, reflecting high and low sales prices as reported
by Nasdaq and quarterly dividends per share for 1999 and 1998 are as
presented below:
1999 1998
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Dividend Dividend
High Low Declared High Low Declared
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4th quarter $28.63 $21.50 $.22 $30.00 $25.38 $.21
3rd quarter 30.00 25.50 .22 28.25 22.00 .21
2nd quarter 30.25 27.50 .22 30.94 23.88 .21
1st quarter 31.25 26.50 .22 31.13 27.00 .21
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Item 6. Selected Financial Data
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Selected financial data is set forth under the heading "Table 1. Five
Year Selected Financial Summary" of the Annual Report to Shareholders and
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
---------------------
Discussion of the Corporation's financial position and results of
operations is set forth under the section "Management's Discussion and
Analysis of the Consolidated Financial Statements" of the Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
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The "Consolidated Financial Statements,""Notes to Consolidated Financial
Statements," "Report of Ernst & Young LLP, Independent Auditors" and
"Condensed Quarterly Statement of Income" of the Annual Report to Shareholders
are incorporated herein by reference.
PART III
Item 10. Directors and Executive Officers of the Registrant
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Information relating to the principal occupations of directors of the
Corporation, their ages, directorships in other companies and respective
terms of office is set forth under the heading "Election of Directors" and
"Continuing Directors" in the Proxy Statement and is incorporated herein by
reference. Information relating to executive officers of the Corporation is
set forth under the heading "Executive Officers of the Corporation" in the
Proxy Statement and is incorporated herein by reference.
Item 11. Executive Compensation
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Information relating to compensation of directors and executive officers
is set forth under the heading "Compensation of Executive Officers" in the
Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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Information relating to the beneficial ownership of the Corporation's
common stock by all directors, each executive officer named in the "Summary
Compensation Table" of the Proxy and all executive officers and directors as
a group is set forth under the heading "Ownership of Securities by Directors,
Nominees and Officers" of the Proxy and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
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Information relating to transactions and relationships with certain
directors and executive officers of the Corporation is set forth under the
heading "Transactions with Directors and Officers" of the Proxy Statement and
is incorporated herein by reference. Additional information concerning
related party transactions is set forth, under Note 13 of the Consolidated
Financial Statements of the Annual Report to Shareholders and is incorporated
herein by reference.
<PAGE> 8
PART IV
Item 14. Exhibits, financial statement schedules and reports on Form 8-K
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(a) Certain documents filed as part of the Form 10-K
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Sequential
(1) Financial Statements Page No.
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The following consolidated financial statements and report of
independent auditors of WesBanco of the Annual Report to
Shareholders are incorporated herein by reference:
Consolidated Balance Sheets as of December 31,
1999 and 1998. 26
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997. 27
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1999,
1998 and 1997. 28
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997. 29
Notes to Consolidated Financial Statements 30
Report of Ernst & Young LLP, Independent Auditors 42
Condensed Quarterly Statement of Income 43
(2) Financial Statement Schedules
---------------------------------
No financial statement schedules are being filed since the required
information is inapplicable or the information is presented in the
Consolidated Financial Statements or related Notes.
(3) Exhibit Listing
--------------------
Exhibits listed on the Exhibit Index on page 10 of this Form 10-K
are filed herewith or are incorporated herein by reference.
(b) Reports on Form 8-K
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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. No Form 8-K reports were filed during the quarter ended
December 31, 1999.
<PAGE> 9
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 29, 2000.
WESBANCO, INC.
By: /s/ Edward M. George
----------------------------------------
Edward M. George
President and Chief Executive Officer
By: /s/ Paul M. Limbert
----------------------------------------
Paul M. Limbert
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on March 29, 2000.
By: /s/ James C. Gardill
---------------------------------------
James C. Gardill
Chairman of the Board
The Directors of WesBanco (listed below) executed a power of attorney
appointing James C. Gardill their attorney-in-fact, empowering him to sign
this report on their behalf.
By: /s/ James C. Gardill
---------------------------------------
James C. Gardill
Attorney-in-fact
James E. Altmeyer Larry G. Johnson
Earl C. Atkins John W. Kepner
James G. Bradley Frank R. Kerekes
Ray A. Byrd Robert H. Martin
John H. Cheffy William E. Mildren, Jr.
Christopher V. Criss Eric Nelson
Stephen F. Decker Joan C. Stamp
James D. Entress Carter W. Strauss
Ernest S. Fragale James W. Swearingen
James C. Gardill Reed J. Tanner
Edward M. George Robert K. Tebay
Thomas J. Hansberry William E. Witschey
Roland L. Hobbs
<PAGE> 10
EXHIBIT INDEX
Exhibit Sequential
Number Document Page No.
- ------- -------- -----------
3.1 Articles of Incorporation of WesBanco, Inc. (1)
3.2 Articles of Amendment to the Articles of Incorporation
of WesBanco , Inc. (6)
3.3 Bylaws of WesBanco, Inc. (1)
4.1 Specimen Certificate of WesBanco, Inc. Common Stock (2)
10.1 Directors' Deferred Compensation Plan (1)
10.2 Key Executive Incentive Bonus and Option Plan. (4)
10.3 Employment Agreements. (3), (5)
10.4 Employment Continuity Agreement. (7)
10.5 First Amendment to Employment Continuity Agreement.* 11
10.6 Change in Control Agreements. (8)
10.7 Salary Continuation Agreement.* 12
10.8 Executive Supplemental Income Agreement. * (Three(3)
versions of the Agreement were executed - (A),(B)
and (C). WesBanco has filed herewith Version (A)
for an executive officer listed in the compensation
table of the Proxy Statement). 17
11 Computation of Earnings Per Share. * 24
12 Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends. * 25
13 Annual Report to Shareholders. * 26
21 Subsidiaries of the Registrant. * 58
22 Proxy Statement for the Annual Shareholders' Meeting
to be held April 19, 2000. (9)
23.1 Consent of Ernst & Young LLP. * 59
23.2 Consent of Harman, Thompson, Mallory & Ice, A.C. * 60
24 Power of Attorney. * 61
27 Financial Data Schedule. * 64
99.1 Report of Harman, Thompson, Mallory & Ice, A.C.,
dated March 6, 1998. * 63
* Filed herewith
Notes to Exhibit Listing:
- -------------------------
(1) Incorporated by reference to a prior Registration Statement on Form S-4
under Registration No. 333-3905 filed by the Registrant with the Securities
and Exchange Commission on June 20, 1996.
(2) Incorporated by reference to a prior Registration Statement on Form S-4
under Registration No. 33-42157 filed by the Registrant with the Securities
and Exchange Commission on August 9, 1991.
(3) Incorporated by reference to a prior Registration Statement on Form S-4
under Registration No. 33-72228 filed by the Registrant with the Securities
and Exchange Commission on November 30,1993.
(4) Incorporated by reference to Schedule 14A Definitive Proxy Statement
(Appendix A) filed by the Registrant with the Securities and Exchange
Commission on March 13, 1998.
(5) Incorporated by reference to Form 8-K filed by the Registrant with the
Securities and Exchange Commission on April 15, 1998.
(6) Incorporated by reference to Form 10-Q filed by the Registrant with the
Securities and Exchange Commission on May 15, 1998.
(7) Incorporated by reference to Form 10-K filed by the Registrant with the
Securities and Exchange Commission on March 11, 1999.
(8) Incorporated by reference to Form 10-Q filed by the Registrant with the
Securities and Exchange Commission on November 15, 1999.
(9) Incorporated by reference to Schedule 14A Definitive Proxy Statement
filed by the Registrant with the Securities and Exchange Commission on
March 15, 2000.
<PAGE> 11
EXHIBIT 10.5
FIRST AMENDMENT TO EMPLOYMENT CONTINUITY AGREEMENT
--------------------------------------------------
THIS AGREEMENT, made this 1st day of June, 1999, by and between CBI
HOLDING COMPANY, a West Virginia corporation (hereinafter referred to as
"Company"), party of the first part, and WILLIAM E. MILDREN, JR. (hereinafter
referred to as "Executive"), party of the second part.
WHEREAS, Commercial Bancshares, Incorporated, the predecessor corporation
to the Company, and the Executive heretofore entered into an Employment
Continuity Agreement dated November 1, 1996 ("Employment Continuity
Agreement"), and
WHEREAS, the Company succeeded to the obligations of Commercial
Bancshares, Incorporated, under the terms of said Employment Continuity
Agreement by merger on March 31, 1998, which triggered the Change in Control
provisions of said Employment Continuity Agreement thereby extending the term
of said Agreement for a period of thirty-six (36) months from March 31, 1998,
and
WHEREAS, the Company and the Executive desire to make certain mutually
agreeable changes to the Employment Continuity Agreement whereby the Executive
will reduce his normal work week to 3-1/2 days, running Monday through
Thursday at noon and in return for such reduced work week, his base
compensation shall be reduced from Two Hundred Twenty Thousand Dollars
($220,000.00) to One Hundred Fifty Thousand Dollars ($150,000.00) and the
term of the Agreement will be extended for an additional year to expire on
March 31, 2002.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH: That for and in consideration
of the mutual covenants and conditions hereinafter contained, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. Paragraphs 2(a) and 3(a) of said Employment Continuity Agreement are
hereby modified and amended to provide that notwithstanding the terms of said
agreement, the Executive's normal work week shall consist of a 3-1/2 day work
week, running from Monday through approximately noon on Thursday of each week.
The Executive understands and acknowledges, however, that it may be necessary,
from time to time, to perform services on days and times outside the normal
work week when necessary to meet customer needs or carry out the
responsibilities of the Executive to the Company in serving as an Executive
Officer of the Company.
2. Paragraph 2(h) and Paragraph 3(b) of said agreement are hereby
amended to provide that in consideration for the reduction in the normal work
week, the Executive's annual compensation shall be reduced from Two Hundred
Twenty Thousand Dollars ($220,000.00) to One Hundred Fifty Thousand Dollars
($150,000.00), annually, effective as of June 1, 1999.
3. Paragraph 12 of said agreement is hereby amended to extend the term
thereof for an additional twelve (12) months so that the agreement will
extend for a period of forty-eight (48) months from March 31, 1998. The
parties further acknowledge and agree that the Employment Continuity
Agreement shall thereupon terminate on March 31, 2002, without further
notice or election by either party to the other.
4. In all other respects, the terms and conditions of said Employment
Continuity Agreement are hereby ratified, confirmed and continued in full
force and effect.
CBI HOLDING COMPANY
By /s/ Edward M. George
-------------------------
Its President
/s/ William E. Mildren Jr.
---------------------------
WILLIAM E. MILDREN
<PAGE> 12
EXHIBIT 10.7
WESBANCO BANK, INC.
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made this ________ day of _______________, 2000, by
and between WESBANCO BANK, INC., a state-chartered commercial bank located
in Wheeling, West Virginia (the "Company") and _____________________ (the
"Executive").
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive.
The Company will pay the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:
1.1 "Change of Control" shall be deemed to have occurred as of the first
day that any one or more of the following conditions shall have been
satisfied, followed by Termination of Employment within the time period
hereinafter specified:
(a) Final regulatory approval is obtained for any Person (other
than those Persons in control of the Company as of the Effective Date,
or other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the
Beneficial Owner, directly or indirectly, or securities of the Company
representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities; or
(b) During any period of two (2) consecutive years (not including
any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board of the Company
(and any new Director, whose election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning of the period
or whose election or nomination for election was so approved), cease
for any reason to constitute a majority thereof; or
(c) Final regulatory approval is obtained with respect to: (A) a
plan of complete liquidation of the Company; or (B) an agreement for
the sale or disposition of all or substantially all the Company's
assets; or (C) a merger, consolidation, or reorganization of the
Company with or involving any other corporation, other than a merger,
consolidation, or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), at least
fifty percent (50%) of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.
However, in no event shall a Change of Control be deemed to have occurred,
with respect to the Executive, if the Executive is part of a purchasing group
which consummates the Change of Control transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent (3%) of the
stock of the purchasing company; or (ii) ownership of equity participation
in the purchasing company or group which is otherwise not significant, as
determined prior to the Change of Control by a majority of the non-employee
continuing Directors of the Company, as applicable).
The occurrence of a Change of Control as defined above shall also then be
followed within three (3) years by the Executive's Termination of Employment
for reasons other than death, Disability or retirement.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Disability" means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such policy
without regard to any waiting period. If the Executive is not covered by
such a policy, Disability means the Executive suffering a sickness, accident
or injury which, in the judgment of a physician satisfactory to the Company,
prevents the Executive from performing substantially all of the Executive's
normal duties for the Company. As a condition to
<PAGE> 13
receiving any Disability benefits, the Company may require the Executive to
submit to such physical or mental evaluations and tests as the Company's
Board of Directors deems appropriate.
1.4 "Early Termination" means the Termination of Employment before
Normal Retirement Age for reasons other than death, Disability, Termination
for Cause or following a Change of Control.
1.5 "Early Termination Date" means the month, day and year in which
Early Termination occurs.
1.6 "Effective Date" means ____________________________.
1.7 "Normal Retirement Age" means the Executive's 65th birthday.
1.8 "Normal Retirement Date" means the later of the Normal Retirement
Age or Termination of Employment.
1.9 "Plan Year" means a twelve-month period commencing on _____________
and ending on ________________ of each year. The initial Plan Year shall
commence on the effective date of this Agreement.
1.10 "Salary" means the annual remuneration the Executive receives as
base salary, but before deductions authorized by the Executive or required by
law to be withheld from the Executive by the Company such as income taxes or
Social Security taxes.
1.11 "Termination for Cause" See Section 5.2.
1.12 "Termination of Employment" means that the Executive ceases to be
employed by the Company for any reason whatsoever other than by reason of a
leave of absence, which is approved by the Company. For purposes of this
Agreement, if there is a dispute over the employment status of the Executive
or the date of the Executive's Termination of Employment, the Company shall
have the sole and absolute right to decide the dispute.
Article 2
Lifetime Benefits
2.1 Normal Retirement Benefit. Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company
shall pay to the Executive the benefit described in this Section 2.1 in lieu
of any other benefit under this Agreement.
2.1.1 Amount of Benefit. The annual benefit under this Section
2.1 is $__________ (________________________ Dollars).
2.1.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following the
Executive's Normal Retirement Date. The annual benefit shall be paid
to the Executive for 10 years.
2.2 Early Termination/Retirement Benefit. Upon Early
Termination/Retirement, the Company shall pay to the Executive the benefit
described in this Section 2.2 in lieu of any other benefit under this
Agreement.
2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the
Early Termination/Retirement Annual Benefit set forth in Schedule A for
the Plan Year ending immediately prior to the Termination of Employment,
determined by vesting the Executive in 100 percent of the Accrual
Balance. Any increase in the annual benefit under Section 2.1.1 shall
require the recalculation of this benefit on Schedule A.
2.2.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following Normal
Retirement Age. The annual benefit shall be paid to the Executive for
10 years. The Company, in its sole and absolute discretion, may begin
annual payments or make a lump sum payment of this benefit at any time,
calculating the present value of said benefit using a discount rate
equal to the 10-Year U.S. Treasury Bill rate and monthly compounding.
<PAGE> 14
2.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.3 in lieu of any other
benefit under this Agreement.
2.3.1 Amount of Benefit. The annual benefit under this Section
2.3 is the Disability Annual Benefit set forth in Schedule A for the
Plan Year ending immediately prior to the date in which the Termination
of Employment occurs, determined by vesting the Executive in the Normal
Retirement Benefit. Any increase in the annual benefit under Section
2.1.1 would require the recalculation of this benefit on Schedule A.
2.3.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following Normal
Retirement Age. The annual benefit shall be paid to the Executive for
10 years.
2.4 Change of Control Benefit. Upon a Change of Control, the Company
shall pay to the Executive the benefit described in this Section 2.4 in lieu
of any other benefit under this Agreement.
2.4.1 Amount of Benefit. The annual benefit under this Section
2.4 is the Change of Control Annual Benefit set forth in Schedule A
for the Plan Year ending immediately prior to the date in which
Termination of Employment occurs, determined by vesting the Executive
in the Normal Retirement Benefit. Any increase in the annual benefit
under Section 2.1.1 would require the recalculation of this benefit on
Schedule A.
2.4.2 Payment of Benefit. The Company shall pay the annual
benefit to the Executive in 12 equal monthly installments payable on
the first day of each month commencing with the month following Normal
Retirement Age. The annual benefit shall be paid to the Executive for
10 years.
Article 3
Death Benefits
3.1 Death Benefit. If the Executive dies while in the active service
of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in the Split Dollar Agreement and Endorsement attached as
Addendum A between the Company and the Executive in lieu of any other benefit
payable hereunder. The Company shall not pay a death benefit under this
Section 3.1 if the Executive is entitled to a Lifetime Benefit under Article 2.
3.2 Death During Benefit Period. If the Executive dies after any
Lifetime Benefit payments have commenced under this Agreement but before
receiving all such payments, the Company shall pay the remaining benefits
to the Executive's beneficiary at the same time and in the same amounts
they would have been paid to the Executive had the Executive survived and no
death benefit shall be payable under this Article 3.
3.3 Death After Termination of Employment But Before Benefit Payments
Commence. If the Executive is entitled to any Lifetime Benefit payments under
this Agreement, but dies prior to the commencement of said benefit payments,
the Company shall pay the benefit payments to the Executive's beneficiary
that the Executive was entitled to prior to death except that the benefit
payments shall commence on the first day of the month following the date of
the Executive's death.
Article 4
Beneficiaries
4.1 Beneficiary Designations. The Executive shall designate a
beneficiary by filing a written designation with the Company. The Executive
may revoke or modify the designation at any time by filing a new designation.
However, designations will only be effective if signed by the Executive and
accepted by the Company during the Executive's lifetime. The Executive's
beneficiary designation shall be deemed automatically revoked if the
beneficiary predeceases the Executive, or if the Executive names a spouse
as beneficiary and the marriage is subsequently dissolved. If the Executive
dies without a valid beneficiary designation, all payments shall be made to
the Executive's estate.
4.2 Facility of Payment. If a benefit is payable to a minor, to a
person declared incapacitated, or to a person incapable of handling the
disposition of his or her property, the Company may pay such benefit to the
guardian, legal representative or person having the care or custody of such
minor, incapacitated person or incapable person. The Company may require
proof of incapacity, minority or guardianship as it may deem appropriate
prior to distribution of the benefit. Such distribution shall completely
discharge the Company from all liability with respect to such benefit.
<PAGE> 15
Article 5
General Limitations
5.1 Excess Parachute Payment. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement to the extent the benefit would create an excise tax under the
excess parachute rules of Section 280G of the Code.
5.2 Termination for Cause. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement if the Company terminates the Executive's employment for:
(a) Gross negligence or gross neglect of duties;
(b) Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law
or significant Company policy committed in connection with the
Executive's employment and resulting in an adverse effect on the
Company.
5.3 Suicide or Misstatement. The Company shall not pay any benefit
under this Agreement if the Executive commits suicide within two years after
the date of this Agreement, or if the Executive has made any material
misstatement of fact on any application for life insurance purchased by the
Company thereby precluding coverage under any policies of insurance
contemplated hereunder.
Article 6
Claims and Review Procedures
6.1 Claims Procedure. The Company shall notify any person or entity
that makes a claim under this Agreement (the "Claimant") in writing, within
90 days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the
Company determines that the Claimant is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the
denial is based, (3) a description of any additional information or material
necessary for the Claimant to perfect his or her claim, and a description of
why it is needed, and (4) an explanation of this Agreement's claims review
procedure and other appropriate information as to the steps to be taken if
the Claimant wishes to have the claim reviewed. If the Company determines
that there are special circumstances requiring additional time to make a
decision, the Company shall notify the Claimant of the special circumstances
and the date by which a decision is expected to be made, and may extend the
time for up to an additional 90 days.
6.2 Review Procedure. If the Claimant is determined by the Company
not to be eligible for benefits, or if the Claimant believes that he or she
is entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition
for review with the Company within 60 days after receipt of the notice issued
by the Company. Said petition shall state the specific reasons which the
Claimant believes entitle him or her to benefits or to greater or different
benefits. Within 60 days after receipt by the Company of the petition, the
Company shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Company verbally or in writing, and the
Claimant (or counsel) shall have the right to review the pertinent documents.
The Company shall notify the Claimant of its decision in writing within the
60-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Agreement on which the decision is based. If, because of the need for
a hearing, the 60-day period is not sufficient, the decision may be deferred
for up to another 60 days at the election of the Company, but notice of this
deferral shall be given to the Claimant.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.
8.2 No Guarantee of Employment. This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company, nor does it interfere with the Company's right to
discharge the Executive. It also does not require the Executive to remain
an employee nor interfere with the Executive's right to terminate employment
at any time.
<PAGE> 16
8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 Reorganization. The Company shall not merge or consolidate into or
with another company, or reorganize, or sell substantially all of its assets
to another company, firm, or person unless such succeeding or continuing
company, firm, or person agrees to assume and discharge the obligations of
the Company under this Agreement. Upon the occurrence of such event, the
term "Company" as used in this Agreement shall be deemed to refer to the
successor or survivor company.
8.5 Tax Withholding. The Company shall withhold any taxes that
are required to be withheld from the benefits provided under this Agreement.
8.6 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of West Virginia, except to the extent
preempted by the laws of the United States of America.
8.7 Unfunded Arrangement. The Executive and any designated beneficiary
are general unsecured creditors of the Company for the payment of benefits
under this Agreement. The benefits represent the mere promise by the Company
to pay such benefits. The rights to benefits are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors. Any insurance on the Executive's
life is a general asset of the Company to which the Executive and beneficiary
have no preferred or secured claim, however, any insurance policy may be held
in the Wesbanco Bank, Inc. Rabbi Trust dated _________________________, and
subject to the terms and conditions of said trust.
8.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No
rights are granted to the Executive by virtue of this Agreement other than
those specifically set forth herein.
8.9 Administration. The Company shall have powers which are necessary
to administer this Agreement, including but not limited to:
(a) Interpreting the provisions of the Agreement;
(b) Establishing and revising the method of accounting for the
Agreement;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or
desirable to administer the Agreement.
8.10 Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under this Agreement. It may delegate to others certain aspects
of the management and operational responsibilities including the employment of
advisors and the delegation of ministerial duties to qualified individuals.
IN WITNESS WHEREOF, the Executive and the Company have signed this
Agreement.
EXECUTIVE: COMPANY:
WESBANCO BANK, INC.
_____________________________ By ________________________________
Title _________________________________
<PAGE> 17
EXHIBIT 10.8
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
(Combined)
AGREEMENT entered into this 29th day of May, 1986, by and between
COMMERCIAL BANKING AND TRUST COMPANY, PARKERSBURG, WEST VIRGINIA, hereinafter
called the "Bank," party of the first part, and WILLIAM E. MILDREN, JR.,
hereinafter called the "Officer," party of the second part.
W I T N E S S E T H :
WHEREAS, the Officer has been employed by the Bank and is currently employed
by the Bank in an executive capacity;
WHEREAS, the Bank desires to retain the valuable services and business
counsel of the Officer and to induce the Officer to remain in an executive
capacity with the Bank;
WHEREAS, the Bank wishes to retain the Officer in order to prevent the
substantial financial loss which the Bank would incur if the Officer were to
leave and were to enter the employment of a competitor;
WHEREAS, the Officer is considered a highly compensated officer or member of
a select management group of the Bank;
NOW, THEREFORE, the Bank promises to pay the Officer the benefits provided
herein, subject to the terms and conditions set forth hereinafter, in
consideration for the Officer's promise to remain in the continuous employment
of the Bank until the earlier of the date of his disability or retirement, or
voluntary termination or discharge without cause on or after the date on which
a Merger, Buyout, or Substantial Change in Ownership occurs; and the parties
hereto agree hereby that the following shall constitute the terms of this
Agreement:
ARTICLE 1. DEFINITIONS
For the purposes of this Agreement, whenever the context so indicates, the
singular or plural number and the masculine, feminine, or neuter gender shall
be deemed to include the other, the terms, "he," "his," and "him," shall
refer to the Officer, and the capitalized terms shall have the following
meanings:
Beneficiary: The person or persons the Officer has designated in writing
to the Bank; if none, then the Officer's Spouse, if living;
if none, then the Children of the Officer; if none, then the
Estate of the Officer.
Buyout: A transaction or series of transactions wherein the Bank is
sold, either through the sale of a controlling interest in
the Bank's voting stock or through the sale of substantially
all of the Bank's assets, to a party not having a
controlling interest in the Bank's voting stock on the date
of execution of this Agreement.
Children: The Officer's children, both natural and adopted, then
living at the time payments are due are the Children under
this Agreement.
<PAGE> 18
Deferred Compensation
Benefit: The benefit provided to the Officer at his Retirement Age,
provided he has satisfied the conditions and terms of this
Agreement, as calculated in Article 3.
Estate: Means the Estate of the Officer. The benefits remaining,
if any, after death of the Officer, the Officer's designated
Beneficiaries, Spouse, and Children shall be paid to the
Estate of the Officer.
Just Cause: Theft, fraud, embezzlement or willful misconduct causing
significant property damage to the Bank or personal injury
to another employee. In the event the Officer is discharged
for Just Cause, he agrees to consent to the revocation of
this Agreement. In the event of such revocation, this
Agreement shall be null and void and neither the Officer
nor his Beneficiaries shall have a claim against the Bank.
Merger: A transaction or series of transactions wherein the Bank is
combined with another business entity, and after which the
persons who had owned, either directly or indirectly, a
controlling interest in the Bank's voting stock on the date
of execution of this Agreement own less than a controlling
interest in the voting stock of the combined entity. For
the purposes of this Agreement, the term "Merger" shall
include any event or series of events as described in the
immediately preceding sentence, whether or not the combined
entity retains the name of the Bank, retains the name of
the business entity that acquired a controlling interest
in the Bank, or a new name is given to the combined entity.
Retirement Age: Normal Retirement Age shall be age 65, or later at election
of the Board. Early retirement may be elected by the
Officer at any time after age 55. Benefits payable under
this Agreement shall be actuarially reduced for retirement
prior to age 65.
Spouse: The individual to whom the Officer is legally married at
the time of the Officer's death.
Substantial
Change In
Ownership: A transaction or series of transactions in which fifteen
percent or more of the voting stock of the Bank is acquired
by or for a person or business entity, either of which did
not own, either directly or indirectly, a controlling
interest in the voting stock of the Bank on the date that
this Agreement was executed. The above shall not apply to
stock purchased by the Employee Stock Ownership Plan (ESOP)
at Commercial Banking and Trust Company.
Year of Service: Twelve full months of continuous employment by the Officer.
A fractional Year of Service shall accrue at a rate of
one-twelfth of a Year of Service for each full month of
continuous employment, and benefits under this Plan shall
be adjusted accordingly.
<PAGE> 19
The above definitions shall apply only to this Agreement and in any event
shall not be construed as applying to any employee benefit plan(s) qualified
under Section 401(a) of the Internal Revenue Code of 1954 as amended that the
Bank or an affiliated company maintains, currently maintains, or will maintain.
ARTICLE 2. PAYMENT OF PRE RETIREMENT (DEATH) BENEFITS
The Bank agrees that if the Officer dies prior to attaining Retirement
Age while covered by the provisions of this Agreement, then the Bank will pay
the Officer's Beneficiaries in the manner prescribed in Article 5 of this
Agreement, the sum of Sixty-One Thousand and no/100 Dollars ($61,000.00)
per annum for one year, payable monthly in twelve equal installments, to
commence on the first business day of the month following the month in which
the Officer died. The Bank further agrees that if the Officer dies prior to
attaining Retirement Age, then the Bank will pay the Officer's Beneficiaries
in the manner prescribed in Article 5 of this Agreement, the sum of Forty-Five
Thousand Seven Hundred Fifty and no/100 Dollars ($45,750.00) per annum for
four years, payable monthly in forty-eight equal installments, to commence
on the first business day of the month immediately following the date on
which the last payment was made under the provisions of the immediately
preceding sentence; and at the conclusion of this four year period, the Bank
will pay the sum of Thirty Thousand Five Hundred and no/100 Dollars
($30,500.00) per annum for ten years, payable monthly in one hundred twenty
equal installments. The payment of any amount under this Article 2 will be
subject to the conditions and limitations set out elsewhere in this Agreement,
and will be payable upon the first business day of each month.
ARTICLE 3. DEFERRED COMPENSATION
If the Officer is still in the employ of the Bank at retirement and
covered under this Agreement, whether or not temporarily or permanently
disabled, the Bank shall, after the Officer's retirement, commence payments
as provided in this Article 3 and set forth below. Subject to the provisions
and limitations of this Agreement, the Bank shall pay to the Officer a monthly
benefit which shall commence the first day of the month next following the
Officer's retirement date and shall be payable monthly thereafter until one
hundred eighty payments have been made.
A. At Retirement. Subject to the provisions and limitations of this
Agreement, the Bank shall pay to the Officer the sum of Forty-Eight Thousand
Four Hundred Forty-One and no/100 Dollars ($48,441.00) per annum payable in
twelve equal installments which shall commence the first day of the month
next following the officer's attainment of Retirement Age and shall be
payable monthly thereafter until all payments have been made.
B. Retirement Prior To Age 65. The Officer may retire after age 55
with the approval of the Board of Directors unless there has been a Buyout,
Merger, or Substantial Change in Ownership. If there has been a Buyout,
Merger, or Substantial Change in ownership, the Officer can retire at any
time after attaining age 55 without Board approval. The amount payable due
to early retirement will be the amount payable under Article 3A above
actuarially reduced. Such payments are to begin the first day of the month
next following the effective date of the Officer's retirement.
C. Death Benefit. In the event of death of the Officer while covered
by this Agreement on or after retirement regardless of age, payments as
stated in paragraph A of Article 3 above shall be made as provided in Article
5 commencing on the first day of the month after the Officer's death. In
the event the Officer dies while covered by this Agreement prior to
retirement, Article 2 shall control. However, in no
<PAGE> 20
event shall payments be made under provisions of Article 2 if payments are
being made under provisions of Article 3.
ARTICLE 4. CONDITIONS
A. Normal Employment. The payment of benefits under this Agreement to
the Officer or Officer's Beneficiaries is conditioned upon the continuous
employment (periods of temporary disability and authorized leave of absence
shall be considered as periods of employment) of the Officer by the Bank
from date of execution of this Agreement until the date the Officer attains
Retirement Age or becomes deceased, and upon the Officer's compliance with
the terms of this Agreement so long as he lives and payments are due under
terms of this Agreement; provided, however, in the event of a Buyout, Merger,
or Substantial Change in Ownership, continuous employment of the Officer
shall be required only until the date of the Officer's voluntary termination
or discharge without Just Cause.
B. Early Termination/Discharge. Notwithstanding paragraph A above,
the Officer or his Beneficiaries shall be entitled to payment at Retirement
Age of a portion of the benefit defined in Article 2 or Article 3 whichever
applies should he prior to Retirement Age voluntarily terminate his employment
on the date of or any date subsequent to a Buyout, Merger, or Substantial
Change in Ownership; become permanently disabled; or if he should be
discharged from employment by the Bank without Just Cause on the date of or
on any date subsequent to a Buyout, Merger, or Substantial Change in
ownership. The percentage payable shall be determined by reference to the
vesting schedule contained herein.
C. Vesting Schedule. In the event of a Buyout, Merger, or Substantial
Change in Ownership the following vesting schedule shall apply. The Officer
shall earn one year, or portion thereof, of benefit payments for each year,
or portion thereof, of service to the Bank up to a maximum of fifteen years.
In the event benefit payments are due under provisions of Article 2, the
vesting schedule shall apply to the first year's benefit first, then the
second, and continue until the Officer's vested service is exhausted. Such
service commences with the inclusion of the Officer in the Executive
Supplemental Income Plan.
ARTICLE 5. PAYMENTS TO BENEFICIARIES
For purposes of this Agreement, Beneficiaries shall mean the person or
persons designated by the Officer in writing on forms furnished by the Bank.
Such Officer may then from time to time change the designated Beneficiaries
by written notice to the Bank, and upon such change, the rights of all
previously designated Beneficiaries to receive any benefits under this
Agreement shall cease. If, at the date of death of the officer, no duly
designated Beneficiary exists, or if the officer has revoked a prior
designation by a writing filed with the Bank without having filed a new
designation, then for purposes of this Agreement, the legally recognized
Spouse of the officer living at his death shall be the beneficiary; if none,
then the Children, natural and adopted, then living; if none, then the
officer's Estate.
ARTICLE 6. FUNDING
The Bank's obligations under this Agreement shall be an unfunded and
unsecured promise to pay. The Bank shall not be obligated under any
circumstances to fund its obligations under this Agreement. The Bank may,
however, at its sole and exclusive option, elect to fund this Agreement in
whole or in part.
ARTICLE 7. OFFICER RIGHT TO ASSETS
The rights of the Officer or his Beneficiaries shall be solely those of
an unsecured general creditor of the Bank. The Officer or his Beneficiaries
shall only have the right to receive from the Bank those payments
<PAGE> 21
as specified under this Agreement. The Officer agrees that neither he nor
his Beneficiaries shall have any rights or interests whatsoever in any asset
of the Bank. Any asset used or acquired by the Bank in connection with the
liabilities the Bank has assumed under this Agreement, except as expressly
provided, shall not be deemed to be held under any trust for the benefit of
the Officer or his Beneficiaries, nor shall it be considered security for
the performance of the obligations of the Bank. It shall be, and remain, a
general, unpledged, and unrestricted asset of the Bank.
ARTICLE 8. ACCELERATION OF PAYMENT
The Bank may accelerate the payment of any benefits payable under this
Agreement with the consent of the Officer or his Beneficiaries. In the event
it is agreed to accelerate these payments, the present value of any future
payments shall be paid to the Officer or his Beneficiaries.
ARTICLE 9. LEAVES OF ABSENCE
The Bank may, in its sole discretion, permit the Officer to take a leave
of absence; each such period shall not exceed one year in length. During
such leave, the Officer shall be considered to be in the continuous
employment of the Bank for purposes of this Agreement.
ARTICLE 10. ASSIGNABILITY
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any benefits under this Agreement shall be valid or recognized
by the Bank.
ARTICLE 11. AMENDMENT/REVOCATION
Prior to retirement, this Agreement may be amended, modified, or revoked
at any time, in whole or part, by the Bank except in the event of a Buyout,
Merger, or Substantial Change in Ownership. On or after a Buyout, Merger, or
Substantial Change in Ownership, mutual consent of the Officer and the Bank
shall be required to amend, modify, or revoke this Agreement.
ARTICLE 12. LAW GOVERNING/ENFORCEMENT/PARTIES
This Agreement shall be governed by the laws of the state of West
Virginia. This Agreement is solely between the Bank and the Officer.
Furthermore, the Officer or his Beneficiaries shall only have recourse
against the Bank for enforcement of the Agreement. However, it shall be
binding upon the Beneficiaries, heirs, executors and administrators of the
Officer, and upon any and all successors and assigns of the Bank.
ARTICLE 13. SEVERABILITY
In the event that any of the provisions of this Agreement or portion
thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to
the intent manifested in the provision held invalid or inoperative, and (2)
the validity and enforceability of the remaining provisions will not be
affected thereby.
ARTICLE 14. INCOMPETENCY
If the Bank shall find that any person to whom any payment is payable
under this Agreement is unable to care for their affairs because of illness
or accident, or is a minor, any payment due (unless a prior claim therefore
shall have been made by a duly appointed guardian, committee, or other legal
representative) may be paid to the Spouse, a child, a parent, a brother or
sister, or a custodian determined pursuant to the Uniform Gift to Minors Act,
or to any person deemed by the Bank to have incurred expense for such person
otherwise entitled to payment, in such manner and proportions as the Bank may
<PAGE> 22
determine. Any such payment shall be a complete discharge of the liabilities
of the Bank under this Agreement.
ARTICLE 15. EXECUTION
This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies shall
together constitute one and the same instrument.
In witness hereof, the parties have caused this Agreement to be executed
on this 29th day of May, 1986.
/s/ William E. Mildren, Jr.
William E. Mildren, Jr.
COMMERCIAL BANKING AND TRUST COMPANY
PARKERSBURG, WEST VIRGINIA
BY:
/s/ Larry G. Johnson
Sr. VP
<PAGE> 23
COMMERCIAL BANK AND TRUST
PARKERSBURG, WEST VIRGINIA
ADDENDUM TO
EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT
This Addendum to the Executive Supplemental Income Agreement covering
WILLIAM E. MILDREN, JR. enumerates the dollar amount of death and retirement
benefits payable under the Executive Supplemental Income Agreement. All
rights and payment provisions are controlled by the Executive Supplemental
Income Agreement effective on the 7th day of February, 1994. This Addendum
revokes any previously dated Addendum.
ANNUAL PRE-RETIREMENT DEATH BENEFIT.
Year 1: $115,000
Years 2 - 5: $ 86,250
Years-6 - 15: $ 57,500
ANNUAL POST-RETIREMENT BENEFIT.
$48,441 payable for 15 years
IN WITNESS WHEREOF, the parties hereto have executed this Addendum this
7th day of February, 1994, each acknowledging receipt of a fully signed
original hereof.
/s/ William E. Mildren, Jr.
WILLIAM E. MILDREN, JR.
COMMERCIAL BANK AND TRUST
PARKERSBURG, WEST VIRGINIA
BY:
/s/ Daniel N. Canada
Director of Human Resources
<PAGE> 24
EXHIBIT 11
WesBanco, Inc.
Computation of Earnings Per Share
For the years ended December 31,
--------------------------------
(dollars in thousands,
except per share amounts) 1999 1998 1997
- -----------------------------------------------------------------------------
Net income applicable to common stock $ 27,638 $ 28,313 $ 25,211
- -----------------------------------------------------------------------------
Average common shares outstanding 20,229,524 20,867,193 20,461,742
- -----------------------------------------------------------------------------
Earnings per share $ 1.37 $ 1.36 $ 1.23
- -----------------------------------------------------------------------------
<PAGE> 25
EXHIBIT 12
WesBanco, Inc.
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
For the years ended December 31,
---------------------------------------------
(dollars in thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Net income $27,638 $28,313 $25,211 $25,942 $25,049
Provision for income taxes 11,465 13,495 9,519 10,648 9,832
- ------------------------------------------------------------------------------
Earnings before provision for
income taxes 39,103 41,808 34,730 36,590 34,881
- ------------------------------------------------------------------------------
Preferred stock dividend
requirements --- --- --- --- 164
Ratio of pretax income to net
income 1.41% 1.48% 1.38% 1.41% 1.39%
- ------------------------------------------------------------------------------
Preferred dividend factor $ 0 $ 0 $ 0 $ 0 $ 228
Ratio of pretax net income to
preferred dividends 0% 0% 0% 0% 152.7%
- ------------------------------------------------------------------------------
WesBanco has no fixed charges as defined by Regulation S-K Item 503-Summary;
Risk Factors; Ratio of Earnings to Fixed Charges.
<PAGE> 26
EXHIBIT 13
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
December 31,
------------------------------
1999 1998
- -----------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 67,166 $ 62,989
Due from banks - interest bearing 4,653 5,174
Federal funds sold 9,535 38,055
Securities:
Held to maturity (market values of $211,009
and $220,699, respectively) 213,253 214,845
Available for sale carried at market value 354,675 465,705
- -----------------------------------------------------------------------------
Total securities 567,928 680,550
- -----------------------------------------------------------------------------
Loans, net of unearned income 1,523,446 1,373,018
Allowance for loan losses (19,752) (19,098)
- -----------------------------------------------------------------------------
Net loans 1,503,694 1,353,920
- -----------------------------------------------------------------------------
Bank premises and equipment 56,201 47,999
Accrued interest receivable 15,661 14,837
Other assets 44,888 39,188
- -----------------------------------------------------------------------------
Total Assets $2,269,726 $2,242,712
=============================================================================
LIABILITIES
Deposits:
Non-interest bearing demand $ 216,574 $ 227,349
Interest bearing demand 585,483 510,662
Savings deposits 274,052 308,979
Certificates of deposit 737,892 740,652
- -----------------------------------------------------------------------------
Total deposits 1,814,001 1,787,642
- -----------------------------------------------------------------------------
Federal funds purchased and repurchase agreements 131,865 112,511
Other borrowings 41,588 22,194
Accrued interest payable 6,165 6,669
Other liabilities 6,443 17,213
- -----------------------------------------------------------------------------
Total Liabilities 2,000,062 1,946,229
- -----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value; 1,000,000 shares
authorized; none outstanding - -
Common stock ($2.0833 par value; 50,000,000
authorized: 20,996,531 shares issued) 43,742 43,742
Capital surplus 60,133 60,283
Retained earnings 208,508 198,782
Treasury stock (1,206,606 and 336,296 shares,
respectively, at cost) (34,311) (9,421)
Accumulated other comprehensive income (market
value adjustments) (7,456) 3,610
Deferred benefits for directors and employees (952) (513)
- -----------------------------------------------------------------------------
Total Shareholders' Equity 269,664 296,483
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,269,726 $2,242,712
=============================================================================
See Notes to Consolidated Financial Statements.
<PAGE> 27
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands, except per share amounts)
For the years ended December 31,
----------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------
Interest income:
Loans, including fees $ 117,508 $ 118,766 $ 118,540
- ------------------------------------------------------------------------------
Securities:
Taxable 27,269 31,205 27,045
Tax-exempt 10,182 9,592 9,121
- ------------------------------------------------------------------------------
Total interest on securities 37,451 40,797 36,166
- ------------------------------------------------------------------------------
Federal funds sold 902 3,155 3,084
- ------------------------------------------------------------------------------
Total interest income 155,861 162,718 157,790
- ------------------------------------------------------------------------------
Interest expense:
Interest bearing demand deposits 18,071 16,693 12,335
Savings deposits 5,936 7,852 9,520
Certificates of deposit 38,545 43,067 43,041
- ------------------------------------------------------------------------------
Total interest on deposits 62,552 67,612 64,896
Other borrowings 6,679 6,313 5,109
- ------------------------------------------------------------------------------
Total interest expense 69,231 73,925 70,005
- ------------------------------------------------------------------------------
Net interest income 86,630 88,793 87,785
Provision for loan losses 4,295 4,392 5,574
- ------------------------------------------------------------------------------
Net interest income after provision
for loan losses 82,335 84,401 82,211
- ------------------------------------------------------------------------------
Other income:
Trust fees 10,582 9,066 7,640
Service charges and other income 13,620 15,139 9,545
Net securities gains 379 1,510 516
- ------------------------------------------------------------------------------
Total other income 24,581 25,715 17,701
- ------------------------------------------------------------------------------
Other expense:
Salaries and wages 28,238 28,596 27,169
Employee benefits 7,107 6,799 7,644
Net occupancy 3,478 3,641 3,518
Equipment 6,300 5,876 5,615
Other operating 22,690 23,396 21,236
- ------------------------------------------------------------------------------
Total other expense 67,813 68,308 65,182
- ------------------------------------------------------------------------------
Income before provision for income taxes 39,103 41,808 34,730
Provision for income taxes 11,465 13,495 9,519
- ------------------------------------------------------------------------------
Net Income $ 27,638 $ 28,313 $ 25,211
==============================================================================
Earnings per share $1.37 $1.36 $1.23
Average shares outstanding 20,229,524 20,867,193 20,461,742
==============================================================================
See Notes to Consolidated Financial Statements.
<PAGE> 28
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share amounts)
<TABLE>
For the years ended December 31, 1999, 1998, and 1997
---------------------------------------------------------------------------------------
Accumulated Deferred
Common Stock Other Benefits for
-------------------- Capital Retained Treasury Comprehensive Directors &
Shares Amount Surplus Earnings Stock Income Employees Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1996 14,698,415 $ 30,812 $45,659 $193,363 $ (544) $ 46 $ (855) $268,481
- -------------------------------------------------------------------------------------------------------------------------
Net income 25,211 25,211
Net market value adjustment
on securities available for
sale -- net of tax effect 1,737 1,737
--------
Comprehensive income 26,948
Cash dividends:
Common ($.786 per share) (12,474) (12,474)
Common-by pooled bank
prior to acquisition (1,929) (1,929)
Stock issued for acquisitions 323,175 366 7,519 4,901 12,786
Net treasury shares purchased (186,362) 82 (6,032) (5,950)
Retirement of pooled bank stock
held by WesBanco (17) (116) (133)
Stock dividend by pooled bank 417,573 733 4,853 (5,586)
Stock issued for a 3 for 2 stock
split effected in the form of a
50% stock dividend 5,357,003 11,161 (11,161)
Net payments on ESOP debt 316 316
Deferred benefits for directors-net (50) (50)
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1997 20,609,804 43,055 57,997 187,424 (1,675) 1,783 (589) 287,995
- --------------------------------------------------------------------------------------------------------------------------
Net income 28,313 28,313
Net market value adjustment
on securities available for
sale -- net of tax effect 1,827 1,827
--------
Comprehensive income 30,140
Cash dividends:
Common ($.84 per share) (16,470) (16,470)
Common-by pooled bank
prior to acquisition (485) (485)
Stock issued for acquisitions 392,846 687 2,383 1,883 4,953
Net treasury shares purchased (342,415) (97) (9,629) (9,726)
Net payments on ESOP debt 97 97
Deferred benefits for directors-net (21) (21)
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1998 20,660,235 43,742 60,283 198,782 (9,421) 3,610 (513) 296,483
- --------------------------------------------------------------------------------------------------------------------------
Net income 27,638 27,638
Net market value adjustment
on securities available for
sale -- net of tax effect (11,066) (11,066)
--------
Comprehensive income 16,572
Cash dividends:
Common ($.88 per share) (17,912) (17,912)
Stock issued for acquisitions 422,916 (182) 12,153 11,971
Net treasury shares purchased (1,293,226) 32 (37,043) (37,011)
Net borrowings on ESOP debt (350) (350)
Deferred benefits for directors-net (89) (89)
- --------------------------------------------------------------------------------------------------------------------------
December 31, 1999 19,789,925 $43,742 $60,133 $208,508 $(34,311) $ (7,456) $ (952) $ 269,664
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
There was no activity in Preferred Stock during the years ended
December 31, 1999, 1998 and 1997.
See Notes to Consolidated Financial Statements.
<PAGE> 29
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
For the years ended December 31,
--------------------------------
Increase (decrease) in cash and cash equivalents 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 27,638 $ 28,313 $ 25,211
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 5,488 5,290 4,844
Net amortization and accretion 1,366 116 1,497
Provision for loan losses 4,295 4,392 5,574
Gains on sales of securities-net (379) (1,510) (516)
Gain on sale of credit card portfolio (3,561) --- ---
Gain on sale of branch offices --- (4,605) ---
Deferred income taxes 323 (243) (387)
Other - net 476 248 439
Net change in assets and liabilities:
Interest receivable (671) 460 (1,103)
Other assets and other liabilities (2,453) (1,488) 4,748
Interest payable (618) (469) (151)
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 31,904 30,504 40,156
- -----------------------------------------------------------------------------------------
Cash flows from investing activities:
Securities held to maturity:
Proceeds from maturities and calls 50,357 116,675 103,537
Payments for purchases (49,778) (98,062) (54,261)
Securities available for sale:
Proceeds from sales 47,772 71,578 42,234
Proceeds from maturities and calls 129,216 196,492 65,487
Payments for purchases (83,400) (344,867) (174,357)
Sale of branch offices, net of cash --- (2,726) ---
Acquisitions, net of cash 2,809 4,951 6,635
Proceeds from the sale of credit card portfolio 18,789 --- ---
Net increase in loans (143,142) (59,154) (2,674)
Purchases of premises and equipment-net (10,243) (8,953) (7,498)
- -----------------------------------------------------------------------------------------
Net cash used by investing activities (37,620) (124,066) (20,897)
- -----------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in deposits (3,133) 47,210 48,634
Increase in federal funds purchased and
repurchase agreements 19,354 19,169 9,413
Increase (decrease) in borrowings 19,394 (2,253) 10,245
Dividends paid (17,752) (15,813) (14,045)
Purchases of treasury shares-net (37,011) (9,726) (5,950)
Other - net --- (97) (335)
- -----------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (19,148) 38,490 47,962
- -----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (24,864) (55,072) 67,221
Cash and cash equivalents at beginning of period 106,218 161,290 94,069
- -----------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 81,354 $ 106,218 $ 161,290
=========================================================================================
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 69,735 $ 74,393 $ 69,463
Income taxes paid 13,135 13,609 10,221
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 30
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
NOTE 1: ACCOUNTING POLICIES
WesBanco, Inc. is a bank holding company offering a full range of
financial services, including trust, mortgage banking, insurance and
brokerage services, through offices located in West Virginia and Eastern
Ohio. WesBanco's only defined business segment is community banking. The
Corporation primarily evaluates its performance and allocates resources based
on the financial information of its community banking operations.
The significant accounting principles employed in the preparation of the
accompanying consolidated financial statements are summarized below:
Principles of consolidation: The Consolidated Financial Statements of WesBanco,
Inc. (the "Corporation") include the accounts of the Corporation and its
wholly-owned subsidiaries. Material intercompany transactions and accounts
have been eliminated.
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. Other business combinations have been accounted for under
the pooling of interests method of accounting which requires the assets,
liabilities and stockholders' equity of the merged entity to be retroactively
combined with the Corporation's respective accounts at recorded value. Prior
period financial statements have been restated to give effect to business
combinations accounted for under this method.
Reclassification: Certain prior year financial information has been
reclassified to conform to the presentation in 1999. The reclassifications
had no effect on net income.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Cash and cash equivalents: For the purpose of reporting cash flows, cash and
cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one day periods.
Securities:
Securities Available for Trading: The Corporation did not have a trading
portfolio during the two-year period ended December 31, 1999.
Securities Held to Maturity: Securities consisting principally of debt
securities, which are purchased with the positive intent and ability to hold
until their maturity, are stated at cost, adjusted for amortization of
premiums and accretion of discounts.
Securities Available for Sale: Debt securities not classified as trading or
held to maturity, and marketable equity securities not classified as trading,
are classified as available for sale. These securities may be sold at any
time based upon management's assessment of changes in economic or financial
market conditions, interest rate or prepayment risks, liquidity
considerations, and other factors. These securities are stated at market
value, with the market value adjustment, net of tax, reported as a separate
component of accumulated other comprehensive income. Permanent declines in
value on these securities are recognized in results of operations.
Gains and Losses: Net realized gains and losses on sales of securities are
included in other income. The cost of these securities sold is based on the
specific identification method.
Amortization and Accretion: Amortization of premiums and accretion of
discounts are included in interest on securities.
Loans and loans held for sale: Interest is accrued as earned on loans except
where doubt exists as to collectability, in which case recognition of income
is discontinued. Loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated market value in the
aggregate. Losses are recorded in other income based on the difference
between the market value and the aggregate cost.
A loan is considered impaired, based on current information and events,
if it is probable that the Corporation will be unable to collect the
scheduled payments of principal and interest when due according to the
contractual terms of the loan agreement.
<PAGE> 31
Impaired loans include all nonaccrual and renegotiated loans, as well as
loans internally classified as substandard or doubtful (as those terms are
defined by banking regulations) that meet the definition of impaired loans.
All loans considered impaired are included in non-performing loans. The
Corporation recognizes interest income on nonaccrual loans on the cash basis.
Loan origination fees and certain direct costs are amortized as an
adjustment to the yield over the estimated lives of the related loans.
Allowance for loan losses: The allowance for loan losses is maintained at a
level considered adequate by management to provide for probable loan losses.
The allowance is increased by provisions charged to operating expenses and
reduced by loan losses, net of recoveries. Management's determination of
the adequacy of the allowance is based on evaluation of the loan portfolio,
as well as prevailing economic conditions, past loan loss experience, current
delinquency factors, changes in the character of the loan portfolio, specific
problem loans and other relevant factors. This evaluation is inherently
subjective as it requires material estimates that may be susceptible to
significant change. While management has allocated the allowance to different
loan categories, the allowance is general in nature and is available for the
loan portfolio in its entirety.
Premises and equipment: Premises and equipment are stated at cost less
accumulated depreciation, and depreciated over their estimated useful lives
using either the straight-line or an accelerated method. Useful lives are
revised when a change in life expectancy becomes apparent. Maintenance and
repairs are charged to expense and betterments are capitalized. Gains and
losses on premises and equipment retired or otherwise disposed of are charged
to expense when incurred.
Other real estate owned: Other real estate owned consists primarily of
properties acquired through, or in lieu of, loan foreclosures. Valuations
are performed periodically and the real estate is carried at the lower of
cost or appraised value, less estimated costs to sell.
Mortgage servicing rights: Mortgage servicing rights, which are reported in
other assets, are amortized in proportion to, and over the period of, the
estimated future net servicing income of the underlying mortgage loans.
Capitalized mortgage servicing rights are evaluated for impairment based on
the fair value of those rights.
Goodwill: The excess of the purchase price over net identifiable tangible and
intangible assets acquired in a purchase business combination (goodwill) is
included in other assets. Goodwill is amortized on a straight-line basis over
varying periods not exceeding 20 years.
Income taxes: Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to temporary differences between
the carrying amounts of assets and liabilities and their tax bases. In
addition, such deferred tax asset and liability amounts are adjusted for the
effects of enacted changes in tax laws or rates.
Earnings per share: Basic earnings per share is calculated by dividing net
income by the weighted average number of shares of common stock outstanding
during each period. For diluted earnings per share, the weighted average
number of shares for each period is increased by the number of shares which
would be issued assuming the exercise of common stock options. There was
no dilutive effect from the stock options and accordingly, basic and diluted
earnings per share are the same.
Trust assets: Assets held by subsidiary banks in fiduciary or agency
capacities for their customers are not included as assets in the accompanying
Consolidated Balance Sheet. Certain trust assets are held on deposit at
subsidiary banks.
Comprehensive income: Sources of comprehensive income not included in net
income are limited to unrealized gains and losses (net market value
adjustments) on securities available for sale, net of tax.
Reclassification adjustments between unrealized gains and losses from prior
periods and realized gains and losses included in earnings in the current
period are not considered material in the presentation of comprehensive
income.
New accounting standards: SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of Effective
Date of FASB Statement No. 133", requires derivative instruments be carried
at fair value on the balance sheet. The Corporation plans to adopt the
provisions of this statement, as amended, beginning January 1, 2001, the
statements' effective date. The impact of adopting the provisions of this
statement on WesBanco's financial position and results of operations
subsequent to the effective date is not currently estimable and will depend
on the financial position of the Corporation and the nature and purpose of
the derivative instruments in use at that time.
<PAGE> 32
NOTE 2: COMPLETED BUSINESS COMBINATIONS AND DIVESTITURE
On March 31, 1998, WesBanco completed its business combination with
Commercial BancShares, Incorporated, issuing 4,594,134 shares of stock in a
transaction accounted for as a pooling of interests. Prior years' financial
information has been restated to reflect the pooling of interests transaction.
As of the transaction date, Commercial BancShares reported total assets of
approximately $466,137, deposits of $395,504 and shareholders' equity of
$46,358. For the year ended December 31, 1997, WesBanco and Commercial
BancShares separately reported net interest income of $68,756 and $19,029,
and net income of $22,274 and $2,937, respectively.
The following table summarizes WesBanco's material purchase acquisitions,
accounted for under the purchase method of accounting, for the three-year
period ended December 31, 1999:
<TABLE>
- ------------------------------------------------------------------------------------------------------------
Purchase Assets
Date Entity Price Consideration Goodwill Acquired
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/30/99 Heritage Bank of Harrison County $12,621 422,916 shares of common stock $8,206 $33,049
6/30/97 Shawnee Bank, Inc. 12,786 323,175 shares of common stock 6,498 34,695
- ------------------------------------------------------------------------------------------------------------
</TABLE>
On June 30, 1998, WesBanco fulfilled the regulatory requirement that it
divest of Union Bank of Tyler County ("Union"). Union was a subsidiary of
Commercial BancShares, with total assets of $46,873 as of the divestiture
date. WesBanco recognized a pretax gain of $4,605 on the sale of Union,
which is included in other income.
NOTE 3: SECURITIES
The following tables summarize amortized cost and fair values of held to
maturity and available for sale securities:
<TABLE>
Held to Maturity
-------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
---------------------------------------------- --------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal Agency
securities $ 13,346 $ 3 $ 70 $ 13,279 $ 41,961 $ 457 --- $ 42,418
Obligations of
states and political
subdivisions 182,005 976 3,153 179,828 169,552 5,405 $ 8 174,949
Other debt securities 17,902 --- --- 17,902 3,332 --- --- 3,332
- -----------------------------------------------------------------------------------------------------------------
Total $213,253 $ 979 $ 3,223 $211,009 $ 214,845 $ 5,862 $ 8 $ 220,699
=================================================================================================================
Available for Sale
-------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
---------------------------------------------- --------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------------------------------------------- --------------------------------------------
U.S. Treasury and
Federal Agency
securities $196,288 $ 37 $ 6,732 $189,593 $ 272,457 $ 3,839 $ 36 $ 276,260
Obligations of
states and political
subdivisions 18,482 13 197 18,298 24,376 336 --- 24,712
Mortgage-backed & other
debt securities 147,669 2 5,496 142,175 158,387 1,193 109 159,471
- -----------------------------------------------------------------------------------------------------------------
Total debt securities 362,439 52 12,425 350,066 455,220 5,368 145 460,443
Equity securities 4,502 463 356 4,609 4,459 860 57 5,262
- -----------------------------------------------------------------------------------------------------------------
Total $366,941 $ 515 $ 12,781 $354,675 $ 459,679 $ 6,228 $ 202 $ 465,705
=================================================================================================================
</TABLE>
<PAGE> 33
The following table summarizes amortized cost and estimated fair value of
securities by maturity:
December 31, 1999
-------------------------------------------
Held to Maturity Available for Sale
--------------------- -------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
- ------------------------------------------------------------------------------
Within one year $ 28,150 $ 28,232 $ 76,039 $ 74,364
After one year, but within five 55,910 56,373 107,131 104,738
After five years, but within ten 60,004 59,671 176,741 168,507
After ten years 69,189 66,733 7,030 7,066
- ------------------------------------------------------------------------------
Total $ 213,253 $211,009 $ 366,941 $ 354,675
==============================================================================
Mortgage-backed securities are assigned to maturity categories based on
estimated average lives. Available for sale securities in the after 10
year category include securities with no stated maturity. Other securities
with prepayment provisions are categorized based on contractual maturity.
Securities with par values aggregating $ 320,341 at December 31, 1999
and $244,715 at December 31, 1998 were pledged to secure public and trust
funds. Gross security gains of $404, $1,512, and $562 and gross security
losses of $25, $2 and $46 were realized for the years ended December 31, 1999,
1998 and 1997, respectively.
NOTE 4: LOANS
The following table is a summary of total loans:
December 31,
--------------------------
1999 1998
- -----------------------------------------------------------------------------
Loans:
Commercial $ 521,450 $ 484,269
Real estate - construction 31,742 46,033
Real estate - residential 630,939 520,393
Personal, net of unearned income 329,562 313,043
Loans held for sale 9,753 9,280
- -----------------------------------------------------------------------------
Loans, net of unearned income $1,523,446 $1,373,018
=============================================================================
The following table represents changes in the allowance for loan losses:
For the years ended December 31,
------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Balance, beginning of year $ 19,098 $ 20,261 $ 19,102
Allowance for loan losses of
acquired/(sold) banks - net 192 (37) 269
Allowance for loan losses allocated
to sold credit cards (450) --- ---
Provision for loan losses 4,295 4,392 5,574
Charge-offs (4,718) (6,400) (5,793)
Recoveries 1,335 882 1,109
- -----------------------------------------------------------------------------
Net charge-offs (3,383) (5,518) (4,684)
- -----------------------------------------------------------------------------
Balance, end of year $ 19,752 $ 19,098 $ 20,261
=============================================================================
The following tables summarize loans classified as impaired:
December 31,
--------------------
1999 1998
- -----------------------------------------------------------------------------
Nonaccrual $ 4,158 $ 10,488
Renegotiated 813 695
Other classified loans:
Doubtful 112 115
Substandard 8,594 5,170
- -----------------------------------------------------------------------------
Total impaired loans $ 13,677 $ 16,468
- -----------------------------------------------------------------------------
Impaired loans with a related allowance for loan losses $ 10,802 $ 11,873
Allowance for loan losses allocated to impaired loans 3,908 2,165
=============================================================================
<PAGE> 34
For the years ended December 31,
---------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Average impaired loans $ 17,173 $ 19,429 $ 17,514
Amount of contractual interest income on
impaired loans 334 796 922
Amount of interest income recognized on
a cash basis 77 391 202
=============================================================================
Most lending occurs with customers located within West Virginia and
Eastern Ohio. No significant concentration of credit risk exists by industry
or by individual borrowers. The Corporation has no significant exposure to
highly leveraged loan transactions, nor any foreign loans.
WesBanco's banking offices, in the ordinary course of business, grant
loans to related parties at terms which do not vary from terms that would
have been required if the transactions had been with unrelated parties.
Indebtedness of related parties aggregated approximately $49,425, $32,946,
and $47,123 as of December 31, 1999, 1998 and 1997, respectively. During
1999, $66,475 related party loans were funded and $49,996 were repaid.
NOTE 5: BANK PREMISES AND EQUIPMENT
Bank premises and equipment include:
December 31,
Estimated ----------------------
useful life 1999 1998
- ------------------------------------------------------------------------
Land and improvements (3-10 years) $ 12,739 $ 11,491
Buildings and improvements (4-50 years) 54,491 48,973
Furniture and equipment (2-25 years) 41,920 36,059
- ------------------------------------------------------------------------
109,150 96,523
Less - Accumulated depreciation (52,949) (48,524)
- ------------------------------------------------------------------------
Total $ 56,201 $ 47,999
========================================================================
NOTE 6: CERTIFICATES OF DEPOSIT
Certificates of deposit in denominations of $100 thousand or more totaled
$128,385, and $125,493 as of December 31, 1999 and 1998, respectively.
Related interest expense was $7,206 in 1999 and $7,921 in 1998.
At December 31, 1999, the scheduled maturities of total certificates of
deposit are as follows:
2000 $ 456,464
2001 182,703
2002 65,869
2003 17,254
2004 and thereafter 15,602
- ------------------------------------------------------------------------
Total $ 737,892
========================================================================
NOTE 7: REPURCHASE AGREEMENTS AND OTHER BORROWINGS
Federal funds purchased and securities sold under agreements to repurchase
represent short-term borrowings which generally mature within one to four
days from the transaction date. Other borrowings consist principally of
advances with the Federal Home Loan Bank (FHLB). These borrowings are
collateralized by FHLB stock and a blanket collateral agreement which assigns
a security interest in capital stock, deposits, mortgage loans, and investment
securities.
At December 31, 1999, FHLB borrowings, which are fixed rate instruments
with a weighted average yield of 5.8%, have the following maturity dates:
2000 $ 21,397
2001 10,000
2005 and thereafter 3,690
- ------------------------------------------------------------------------
Total $ 35,087
========================================================================
<PAGE> 35
Information concerning securities sold under agreements to repurchase is
summarized as follows:
For the years ended December 31,
---------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Outstanding balance at year end $ 107,795 $ 111,029 $ 92,560
Average balance during the year 113,008 99,099 79,132
Maximum month-end balance during the year 123,817 123,277 92,560
Average interest rate at year end 4.45% 4.56% 5.61%
Average interest rate during the year 4.48 4.78 5.01
=============================================================================
NOTE 8: EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plan and Other Postretirement Plans: At December 31,
1999, substantially all employees were participants in the WesBanco Defined
Benefit Pension Plan ("The Plan"). The Plan covers those employees who satisfy
minimum age and length of service requirements. Benefits of the Plan are
generally based on years of service and employee's compensation during the
last five years of employment. The Plan's funding policy has been to
contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for
benefits attributed to service to date, but also for those expected to be
earned in the future.
Prior to its merger with WesBanco, Commercial BancShares did not provide
a defined benefit pension plan to its employees. However, subsequent to the
merger, Commercial employees have been included in the WesBanco Plan, with no
credited prior years of service.
Retirees and active employees who were hired prior to March 30, 1998,
are provided a postretirement contributory health insurance and death benefit
plan. For reported years 1999 and 1998, the health insurance benefit was $0.1
per month and death benefit was $7.5. Effective December 31, 1998, the
related benefit obligation of $2,031 was merged into the defined benefit plan.
Postretirement benefits for 1999 are included with retirees pension payment
and for 1998 and 1997 resulted in payments of approximately $220 and $181,
respectively.
Net periodic pension cost for the defined benefit and other postretirement
plans include the following components:
For the years ended December 31,
--------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Service cost - benefits earned during year $ 1,138 $ 906 $ 872
Interest cost on projected benefit obligation 1,873 1,836 1,615
Expected return on plan assets (2,474) (2,415) (3,582)
Net amortization and deferral (35) (162) 1,194
- -----------------------------------------------------------------------------
Prior service costs --- 70 70
- -----------------------------------------------------------------------------
Net periodic pension cost $ 502 $ 235 $ 169
=============================================================================
For 1998 and 1997, includes the net periodic postretirement benefit cost,
other than pensions, of $383 and $378, respectively.
The following tables summarize the activity in the projected benefit
obligation and plan assets:
For the years ended
December 31,
--------------------
1999 1998
- -----------------------------------------------------------------------------
Projected benefit obligation, at beginning of year $ 27,547 $ 20,830
Service cost 1,138 808
Interest cost 1,873 1,621
Benefits paid (1,786) (1,911)
Change in interest rate assumptions --- 924
Plan amendments - other postretirement benefits --- 3,287
Actuarial (gain)/loss (4,770) 1,988
- -----------------------------------------------------------------------------
Projected benefit obligation, at end of year $ 24,002 $ 27,547
=============================================================================
For the years ended
December 31,
-------------------
1999 1998
- -----------------------------------------------------------------------------
Fair value of plan assets, at beginning of year $ 28,794 $ 27,680
Actual return on assets 6,447 2,649
Market value adjustment --- 376
Contributions 1,230 ---
Benefits paid (1,786) (1,911)
- -----------------------------------------------------------------------------
Fair value of plan assets, at end of year $ 34,685 $ 28,794
=============================================================================
Plan assets consist of debt and equity securities which include U.S. Agency
and Treasury issues, Corporate bonds and notes, listed common stocks including
shares of WesBanco common stock (comprising less than 10% of Plan assets) and
short-term cash equivalent instruments.
<PAGE> 36
The following table sets forth the defined benefit pension plan's funded
status and the asset reflected in the Consolidated Balance Sheet:
December 31,
---------------------
1999 1998
- -----------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation $ 10,683 $ 1,247
Unrecognized prior service cost (1,773) (864)
Unrecognized net (gain)/loss (7,023) 770
Unrecognized obligation 13 20
- -----------------------------------------------------------------------------
Net pension asset $ 1,900 $ 1,173
=============================================================================
Actuarial assumptions used in the determination of the projected benefit
obligation in the plan are as follows:
For the years ended December 31,
--------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------
Weighted average discount rates 8.25% 7.00% 7.25%
Rates of increase in compensation levels 4.50 4.50 4.50
Weighted average expected long-term return on assets 8.75 8.75 8.75
============================================================================
KSOP (Employee Stock Ownership and 401(k) Plan): Substantially all employees
are included in the WesBanco KSOP Plan. The KSOP plan consists of
non-contributory employee stock ownership (ESOP) and 401(k) Plan. The 401(k)
provisions require the Corporation to make matching contributions based upon
employees' contribution subject to regulatory limitations. Effective January
1, 1999, Commercial BancShares' KSOP was merged into WesBanco's KSOP.
As of December 31, 1999, the Plan holds 592,159 shares of WesBanco
stock, of which 579,854 shares are allocated to specific employee accounts
and 12,305 shares are unallocated. During 1995, WesBanco's ESOP established
a line of credit with an affiliated lender. Conditions in the loan agreement
provide for a revolving line of credit in the aggregate amount of $1,000 to
facilitate purchases of WesBanco common stock in the open market. The loan
bears interest at a rate equal to the lender's base rate and requires annual
repayments of principal equal to 20% of the balance at January 1 of each year.
The loan has a final maturity date of 5 years from date of inception. The
$1,000 revolving line of credit had an outstanding balance of $350 and zero
at December 31, 1999 and 1998, respectively.
Total contributions to the Plan for the three years ended December 31,
1999, 1998 and 1997 were $996, $1,046 and $1,156, respectively.
Commercial BancShares Executive Supplemental Income Plan: The Executive
Supplemental Income Plan is a non-contributory plan covering certain officers
with benefits which include death and retirement benefits. This Plan funded
future benefit payments through an insurance investment with fair values of
$5,304 and $5,203 as of December 31, 1999 and 1998, respectively. The net
expense recorded to provide these benefits was $377, $303 and $947 for the
years ended December 31, 1999, 1998 and 1997, respectively. WesBanco does
not anticipate providing this benefit to any additional employees.
Key Executive Incentive Bonus & Option Plan: The Key Executive Incentive
Bonus & Option Plan, which was started in 1998, is a non-qualified plan which
includes three components, an Annual Bonus, a Long-Term Incentive Bonus and
a Stock Option component. The three components allow for payments of cash,
or a mixture of cash and stock, or granting of stock options, depending upon
the component of the plan in which the award is earned through the attainment
of certain performance goals. Performance goals are established by WesBanco's
Board of Directors.
Compensation expense incurred in 1999 and 1998 for the Annual Bonus
component of the plan was $348 and $364, respectively. There were no awards
or payments made for the Long-Term Bonus component of the plan during the two
years ended December 31, 1999.
The Stock Option component provides for granting of stock options to
eligible employees. The Board of Directors provided for the issuance of
150,000 shares of common stock for this component of the Plan. During
1998, 28,000 shares were granted at an option price of $29.50 per share,
which was the fair market price on the date of grant. Vesting of stock
options is based upon achievement of performance goals, which include
improvements in earnings per share. Vested shares totaled 15,552 at December
31, 1999 and 9,331 shares at December 31, 1998. Employees generally have a
ten year period to exercise the vested options. No options have been
exercised. All granted options become immediately vested in the event of a
change in control of the Corporation.
The Corporation accounts for stock options in accordance with APB
Opinion No. 25 "Accounting for Stock Issued to Employees". Under APB No.
25, since the exercise price exceeds the market price of the underlying
stock as of December 31, 1999, no compensation expense has been recognized.
Under the expense recognition provisions of SFAS No. 123, compensation
expense of $32 and $96 would have been recognized during 1999 and 1998,
respectively. A fair value of $6.17 per share was estimated using the
Black-Scholes option pricing model using a weighted-average expected life
of the option of 6 years, risk free interest rate of 5.48%, dividend yield
of 2.8% and a volatility factor of 18.1%.
<PAGE> 37
NOTE 9: OTHER OPERATING EXPENSE
Other operating expense consists of the following:
For the years ended December 31,
---------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Professional fees $ 3,766 $ 3,711 $ 3,432
Marketing 2,315 1,927 1,905
General administrative 1,194 1,205 1,087
Supplies 1,993 2,185 1,744
Postage 1,804 1,803 1,467
Communication 1,996 1,455 1,215
Miscellaneous taxes 3,323 3,238 2,860
Goodwill amortization 1,389 1,049 769
Other 4,910 6,823 6,757
- ----------------------------------------------------------------------------
Total $ 22,690 $ 23,396 $ 21,236
============================================================================
NOTE 10: INCOME TAXES
A reconciliation of the federal statutory tax rate to the reported effective
tax rate is as follows:
For the years ended December 31,
--------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Federal statutory tax rate 35% 35% 35%
Tax-exempt interest income from securities of
states and political subdivisions (7) (7) (8)
State income taxes 4 3 3
Other - net (3) 1 (3)
- -----------------------------------------------------------------------------
Effective tax rate 29% 32% 27%
=============================================================================
The provision for income taxes consists of the following:
For the years ended December 31,
--------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Current - Federal $ 9,612 $ 11,446 $ 8,174
State 2,067 2,293 1,733
Deferred - Federal (282) (189) (319)
State 68 (55) (69)
- -----------------------------------------------------------------------------
Total $ 11,465 $ 13,495 $ 9,519
=============================================================================
Tax expense applicable to securities transactions $ 153 $ 609 $ 208
=============================================================================
Deferred tax assets and liabilities are comprised of the following:
December 31,
-----------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $ 7,358 $ 7,075 $ 7,010
Deferred compensation 663 1,199 922
Net operating loss carryforward 337 --- ---
Other 33 47 51
- -----------------------------------------------------------------------------
Gross deferred tax assets 8,391 8,321 7,983
- -----------------------------------------------------------------------------
Deferred tax liabilities:
Tax effect of market value adjustment on
Investment securities available for sale 4,844 (2,380) (1,139)
Depreciation (1,628) (1,484) (1,513)
Purchase accounting adjustments (472) (695) (458)
Accretion on investments (138) (205) (215)
- -----------------------------------------------------------------------------
Gross deferred tax liabilities 2,606 (4,764) (3,325)
- -----------------------------------------------------------------------------
Net deferred tax assets $ 10,997 $ 3,557 $ 4,658
=============================================================================
<PAGE> 38
NOTE 11: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates of financial instruments are based on present value
of expected future cash flows, quoted market prices of similar financial
instruments, if available, and other valuation techniques. These valuations
are significantly affected by discount rates, cash flow assumptions, and risk
assumptions used. Therefore, fair value estimates may not be substantiated by
comparison to independent markets and are not intended to reflect the proceeds
that may be realizable in an immediate settlement of the instruments.
The aggregate fair value of amounts presented does not represent the
underlying value of the Corporation. Management does not have the intention
to dispose of a significant portion of its financial instruments and,
therefore, the unrealized gains or losses should not be interpreted as a
forecast of future earnings and cash flows.
The following table represents the estimates of fair value of financial
instruments:
December 31,
------------------------------------------
1999 1998
--------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------
Financial assets:
Cash and short-term investments $ 81,354 $ 81,354 $ 106,218 $ 106,218
Securities held to maturity 213,253 211,099 214,845 220,699
Securities available for sale 354,675 354,675 465,705 465,705
Net loans (including loans
held for sale) 1,503,694 1,479,129 1,353,920 1,364,404
Financial liabilities:
Deposits 1,814,001 1,813,446 1,787,642 1,792,970
Federal funds purchased,
repurchase agreements and
other borrowings 173,453 173,086 134,705 135,029
Off balance sheet financial instruments:
Interest rate swaps gain/(loss) --- 1,031 --- (590)
==============================================================================
The following methods and assumptions are used to estimate the fair value of
like kinds of financial instruments:
Cash and short-term investments: The carrying amount for cash and short-term
investments is a reasonable estimate of fair value. Short-term investments
consist of federal funds sold.
Securities: Fair values for securities are based on quoted market prices, if
available. If market prices are not available, then quoted market prices of
similar instruments are used.
Loans held for sale: The carrying amount for loans held for sale is a
reasonable estimate of fair value.
Net loans: Fair values for loans with interest rates that fluctuate as current
rates change are generally valued at carrying amounts. The fair values for
residential mortgage loans are based on quoted market prices of securitized
financial instruments, adjusted for remaining maturity and differences in
loan characteristics. Fair values of commercial real estate, construction
and personal loans are based on a discounted value of the estimated future
cash flows expected to be received. The current interest rates applied in
the discounted cash flow method reflect rates used to price new loans of
similar type, adjusted for relative risk and remaining maturity. At December
31, 1998, fair value of credit cards is estimated based on the anticipated
average cost of soliciting a new account and the present credit quality of
the outstanding balances. For nonaccrual loans, fair value is estimated by
discounting expected future principal cash flows only.
Deposits: The carrying amount is considered a reasonable estimate of fair
value for demand and savings deposits and other variable rate deposit
accounts. The fair value of fixed maturity certificates of deposit is
estimated by a discounted cash flow method using the rates currently offered
for deposits of similar remaining maturities.
Federal funds purchased, repurchase agreements and other borrowings: For
federal funds purchased and repurchase agreements, which represent short-term
borrowings, the carrying amount is a reasonable approximation of fair value.
For longer term Federal Home Loan Bank advances, fair value is based on rates
currently available to WesBanco for borrowings with similar terms and
remaining maturities.
<PAGE> 39
Off-balance sheet instruments: Off-balance sheet instruments consist of
commitments to extend credit, standby letters of credit and interest rate
swap agreements. Fair values for commitments to extend credit are estimated
using the fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the present credit
standing of the counterparties. The estimated fair value of the commitments
to extend credit is immaterial and therefore not presented in the above table.
Fair values for interest rate swaps are estimated by obtaining quotes from
brokers. The values represent the amount the Corporation would receive or
pay to terminate the agreement considering current interest rates.
NOTE 12: COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, WesBanco offers off-balance sheet financial
instruments to enable its customers to meet their financing objectives. The
Corporation also enters into these transactions to manage its own risks
arising from movement in interest rates. These financial instruments include
commitments to extend credit, standby letters of credit, and interest rate
swap agreements. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
financial statements.
WesBanco has various commitments outstanding to extend credit
approximating $226,254 and $229,965 and standby letters of credit of $9,713
and $9,986 as of December 31, 1999 and 1998, respectively.
WesBanco's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Corporation uses the same credit and collateral
policies in making commitments and conditional obligations as for all other
lending. Collateral, which secures these types of commitments is the same
type as collateral for other types of lending, such as accounts receivable,
inventory and fixed assets.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Management evaluates
each customer's credit worthiness on a case-by-case basis.
Standby letters of credit are conditional commitments issued by banks to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including normal business activities, bond financing and similar transactions.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loans to customers. Collateral securing these
types of transactions is similar to collateral securing the Corporation's
commercial loans.
Interest rate swap agreements generally involve the exchange of fixed and
floating rate interest payments without the exchange of the underlying
notional amount, on which interest payments are calculated. Differences
between interest received and interest paid are reported as a component of
interest expense in the Consolidated Statement of Income. Interest rate swap
agreements are entered into as part of the Corporation's interest rate risk
management strategy primarily to alter the interest rate sensitivity of its
deposit liabilities.
The following summarizes WesBanco's interest rate swap agreements:
December 31,
------------------------
1999 1998
- -----------------------------------------------------------------------------
Notional amount $ 65,904 $ 38,500
Unrealized gain/(loss) 1,031 (590)
Weighted average receive variable rate 4.80% 4.55%
Weighted average pay fixed rate 4.98% 5.14%
Average life (years) 5.32 4.85
=============================================================================
The Corporation and its affiliates are parties to various legal and
administrative proceedings and claims. While any litigation contains an
element of uncertainty, management believes that the outcome of such
proceedings or claims pending or known to be threatened will not have a
material adverse effect on the Corporation's consolidated financial position.
NOTE 13: TRANSACTIONS WITH RELATED PARTIES
Some officers and directors (including their affiliates, families and
entities in which they are principal owners) of the Corporation and its
subsidiaries are customers of those subsidiaries and have had, and are
expected to have, transactions with the subsidiaries in the ordinary course
of business. In addition, some officers and directors are also officers and
directors of corporations which are customers of the bank and have had, and
are expected to have, transactions with the bank in the ordinary course of
business. In the opinion of management, such transactions are consistent
with prudent banking practices and are within applicable banking regulations.
<PAGE> 40
NOTE 14: REGULATORY MATTERS
WesBanco (Parent Company) is a legal entity separate and distinct from its
subsidiaries. There are various legal limitations on the extent to which
WesBanco's banking subsidiary may extend credit, pay dividends or otherwise
supply funds to WesBanco. Certain restrictions under Federal and State law
exist regarding the ability of a certain subsidiary to pay dividends to
WesBanco. Approval is required if total dividends declared by a bank
subsidiary, in any calendar year, exceeds net profits for that year combined
with its retained net profits for the preceding two years. In determining to
what extent to pay dividends, a bank subsidiary must also consider the effect
of dividend payments on applicable risk-based capital and leverage ratio
requirements. During the fourth quarter of 1998 and second quarter of 1999,
Federal and State regulatory agencies granted approval to declare special
dividends to WesBanco for the purpose of funding share repurchase plans. As
of December 31, 1999 and 1998, WesBanco's banking subsidiaries, in aggregate,
could not have declared any dividends to be paid to WesBanco without prior
approval from regulatory agencies.
Federal Reserve regulations require depository institutions to maintain
cash reserves with the Federal Reserve Bank. The average amounts of required
reserve balances were approximately $24,024 and $16,846 during 1999 and 1998,
respectively.
WesBanco is subject to various regulatory capital requirements
(risk-based capital ratios) administered by Federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory
and possibly additional discretionary actions by regulators that, if
undertaken, could have a material effect on the Corporation's financial
results.
All banks are required to have core capital (Tier 1) of at least 4% of
risk weighted assets, total capital of at least 8% of risk-weighted assets,
and a minimum Tier 1 leverage ratio of 3% of adjusted quarterly average
assets. Tier 1 capital consists principally of shareholders' equity,
excluding unrealized gains and losses on securities available for sale, less
goodwill and certain other intangibles. Total capital consists of Tier 1
capital plus the allowance for loan losses subject to limitation. The
regulations also define well-capitalized levels of Tier 1, total capital,
and Tier 1 leverage as 6%, 10%, and 5%, respectively. WesBanco and each of
its banking subsidiaries are categorized as well-capitalized under the
regulatory framework for prompt corrective action at December 31, 1999 and
1998.
The following table summarizes risk-based capital amounts and ratios for
WesBanco and its largest bank subsidiary:
December 31,
------------------------------------
1999 1998
---------------- ------------------
WesBanco, Inc. Amount Ratio Amount Ratio
- -----------------------------------------------------------------------------
Total Capital to Risk-Weighted Assets $ 275,113 17.0% $ 296,732 19.8%
Tier 1 Capital to Risk-Weighted Assets 255,361 15.7 277,976 18.5
Tier 1 Leverage 255,361 11.3 277,976 12.5
WesBanco Bank Wheeling
- -----------------------------------------------------------------------------
Total Capital to Risk-Weighted Assets $ 114,167 15.9% $ 112,789 16.1%
Tier 1 Capital to Risk-Weighted Assets 105,420 14.7 104,289 14.9
Tier 1 Leverage 105,420 9.5 104,289 9.2
WesBanco Bank, Inc. (Proforma) (1)
- -----------------------------------------------------------------------------
Total Capital to Risk-Weighted Assets $ 249,191 15.5% --- ---
Tier 1 Capital to Risk-Weighted Assets 229,443 14.3 --- ---
Tier 1 Leverage 229,443 10.3 --- ---
=============================================================================
(1) Effective January 14, 2000, WesBanco consolidated its four bank affiliates
and mortgage company affiliate into a single bank subsidiary, WesBanco Bank,
Inc.
<PAGE> 41
NOTE 15: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
Presented below are the condensed Balance Sheet, Statement of Income and
Statement of Cash Flows for the Parent Company:
BALANCE SHEET
December 31,
-----------------------
1999 1998
- -----------------------------------------------------------------------------
ASSETS
Cash and short-term investments $ 4,661 $ 2,299
Investment in subsidiaries (at equity in net assets) 250,250 239,845
Securities available for sale carried at market value 19,198 28,494
Dividends receivable 2,400 30,900
Other assets 523 211
- -----------------------------------------------------------------------------
Total Assets $ 277,032 $ 301,749
=============================================================================
LIABILITIES
Borrowings $ 2,350 ---
Dividends payable and other liabilities 5,018 $ 5,266
- -----------------------------------------------------------------------------
Total Liabilities 7,368 5,266
SHAREHOLDERS' EQUITY 269,664 296,483
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 277,032 $ 301,749
=============================================================================
STATEMENT OF INCOME
For the years ended December 31,
--------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Dividends from subsidiaries $ 21,133 $ 56,234 $ 21,000
Income from securities 748 831 761
Other income 618 4,674 135
- -----------------------------------------------------------------------------
Total Income 22,499 61,739 21,896
- -----------------------------------------------------------------------------
Total Expenses 1,474 1,372 1,058
- -----------------------------------------------------------------------------
Income before income tax provision (benefit)
and undistributed net income of subsidiaries 21,025 60,367 20,838
Income tax provision (benefit) (404) 1,485 (285)
- -----------------------------------------------------------------------------
Income before undistributed net income of
subsidiaries 21,429 58,882 21,123
Undistributed net income (excess dividends)
of subsidiaries 6,209 (30,569) 4,088
- -----------------------------------------------------------------------------
Net Income $ 27,638 $ 28,313 $ 25,211
=============================================================================
STATEMENT OF CASH FLOWS
For the years ended December 31,
-------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 27,638 $ 28,313 $ 25,211
Excess dividends (undistributed net
income) of subsidiaries (6,209) 30,569 (4,088)
(Increase) decrease in other assets 28,133 (24,142) (847)
Other - net 3,128 (4,282) 347
- -----------------------------------------------------------------------------
Net cash provided by operating activities 52,690 30,458 20,623
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Securities available for sale:
Proceeds from sales --- 4,287 3,874
Proceeds from maturities and calls 4,778 907 1,909
Payments for purchases (693) (11,981) (8,319)
(Acquisitions and additional
capitalization) or sale of subsidiaries (2,000) 3,747 (2,003)
- -----------------------------------------------------------------------------
Net cash provided (used) by investing activities 2,085 (3,040) (4,539)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (payments) related to ESOP debt 350 (97) (316)
Increase in borrowings 2,000 --- ---
Purchases of treasury stock - net (37,011) (9,726) (5,950)
Dividends paid (17,752) (15,401) (12,118)
Other --- --- (19)
- -----------------------------------------------------------------------------
Net cash used by financing activities (52,413) (25,224) (18,403)
- -----------------------------------------------------------------------------
Net increase (decrease) in cash 2,362 2,194 (2,319)
Cash and short-term investments at
beginning of year 2,299 105 2,424
- -----------------------------------------------------------------------------
Cash and short-term investments at end of year $ 4,661 $ 2,299 $ 105
=============================================================================
<PAGE> 42
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
WESBANCO, INC.
We have audited the accompanying consolidated balance sheets of WesBanco,
Inc. and subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the management of
WesBanco, Inc. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Commercial BancShares, Inc, which statements reflect total revenues
constituting 21% in 1997 of the related consolidated totals. Those statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to data included for Commercial BancShares,
Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of WesBanco, Inc. and
subsidiaries at December 31, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
January 28, 2000
Pittsburgh, Pennsylvania
<PAGE> 43
CONDENSED QUARTERLY STATEMENT OF INCOME
- ---------------------------------------
(in thousands, except per share amounts)
1999 Quarter ended
--------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- -----------------------------------------------------------------------------
Interest income $38,407 $38,751 $39,063 $39,640 $155,861
Interest expense 16,882 17,050 17,342 17,957 69,231
- -----------------------------------------------------------------------------
Net interest income 21,525 21,701 21,721 21,683 86,630
Provision for loan losses 1,406 1,290 679 920 4,295
- -----------------------------------------------------------------------------
Net interest income after
provision for loan losses 20,119 20,411 21,042 20,763 82,335
Other income 5,338 8,898 4,890 5,455 24,581
Other expenses 16,243 16,954 17,074 17,542 67,813
- -----------------------------------------------------------------------------
Income before income taxes 9,214 12,355 8,858 8,676 39,103
Provision for income taxes 2,397 4,335 2,706 2,027 11,465
- -----------------------------------------------------------------------------
Net Income $ 6,817 $ 8,020 $ 6,152 $ 6,649 $ 27,638
=============================================================================
Earnings per share $ 0.33 $ 0.40 $ 0.30 $ 0.34 $ 1.37
=============================================================================
1998 Quarter ended
--------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- -----------------------------------------------------------------------------
Interest income $40,690 $41,348 $40,748 $39,932 $162,718
Interest expense 18,595 19,038 18,672 17,620 73,925
- -----------------------------------------------------------------------------
Net interest income 22,095 22,310 22,076 22,312 88,793
Provision for loan losses 753 1,649 503 1,487 4,392
- -----------------------------------------------------------------------------
Net interest income after
provision for loan losses 21,342 20,661 21,573 20,825 84,401
Other income 5,135 9,463 5,259 5,858 25,715
Other expenses 16,175 18,615 15,804 17,714 68,308
- -----------------------------------------------------------------------------
Income before income taxes 10,302 11,509 11,028 8,969 41,808
Provision for income taxes 3,260 3,720 3,602 2,913 13,495
- -----------------------------------------------------------------------------
Net Income $ 7,042 $ 7,789 $ 7,426 $ 6,056 $ 28,313
=============================================================================
Earnings per share $ 0.34 $ 0.37 $ 0.36 $ 0.29 $ 1.36
=============================================================================
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS
Management's Discussion and Analysis represents an overview of the
results of operations and financial condition of WesBanco, Inc. This
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
Certain information in Management's Discussion and other statements
contained in this report, which are not historical facts, may be forward
looking statements that involve risks and uncertainties. Such statements are
subject to important factors that could cause actual results to differ
materially from those contemplated by such statements, including without
limitation, the effect of changing regional and national economic conditions;
changes in interest rates; credit risks of commercial, real estate, and
consumer loan customers and their lending activities; changes in federal and
state regulations; the presence in the Corporation's market area of competitors
with greater financial resources than the Corporation; or other unanticipated
external developments materially impacting the Corporation's operational and
financial performance.
TABLE 1. FIVE YEAR SELECTED FINANCIAL SUMMARY
- ----------------------------------------------
(dollars in thousands, except per share amounts)
<TABLE>
December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share information:
Dividends $ 0.88 $ 0.84 $ 0.786 $ 0.72 $ 0.64
Book value at year end 13.63 14.35 13.97 13.17 12.33
Average common shares outstanding 20,229,524 20,867,193 20,461,742 19,855,791 19,824,740
Selected balance sheet information:
Total securities $ 567,928 $ 680,550 $ 629,218 $ 600,330 $ 609,712
Net loans 1,503,694 1,353,920 1,321,640 1,305,766 1,140,950
Total assets 2,269,726 2,242,712 2,211,543 2,090,750 1,934,675
Total deposits 1,814,001 1,787,642 1,779,867 1,702,660 1,595,428
Total shareholders' equity 269,664 296,483 287,995 268,481 245,154
Selected ratios:
Return on average assets 1.23% 1.26% 1.18% 1.31% 1.31%
Return on average equity 9.85 9.55 8.99 10.48 10.53
Dividend payout 64.23 61.76 63.90 54.96 50.79
Average equity to average assets 12.47 13.16 13.15 12.47 12.48
Trust assets, market value
at year end $ 3,087,610 $ 2,774,906 $ 2,099,821 $ 1,712,280 $ 1,450,257
For the years ended December 31,
------------------------------------------------------------------
Summary statement of income: 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
Interest income $ 155,861 $ 162,718 $ 157,790 $ 144,383 $ 138,507
Interest expense 69,231 73,925 70,005 61,612 59,122
- --------------------------------------------------------------------------------------------------------
Net interest income 86,630 88,793 87,785 82,771 79,385
Provision for loan losses 4,295 4,392 5,574 4,795 3,206
- --------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 82,335 84,401 82,211 77,976 76,179
Other income 24,581 25,715 17,701 15,657 14,385
Other expenses 67,813 68,308 65,182 57,043 55,683
- --------------------------------------------------------------------------------------------------------
Income before income taxes 39,103 41,808 34,730 36,590 34,881
Provision for income taxes 11,465 13,495 9,519 10,648 9,832
- --------------------------------------------------------------------------------------------------------
Net Income $ 27,638 $ 28,313 $ 25,211 $ 25,942 $ 25,049
========================================================================================================
Preferred stock dividends and accretion --- --- --- --- $ 164
Net Income applicable to common stock $ 27,638 $ 28,313 $ 25,211 $ 25,942 24,885
Earnings per share 1.37 1.36 1.23 1.31 1.26
========================================================================================================
</TABLE>
<PAGE> 45
OVERVIEW
WesBanco's financial performance for 1999 was highlighted by strong loan
growth, decreases in both non-performing assets and net loan charge-offs, and
excellent growth in trust fees and trust assets under administration.
Earnings for 1999 were $27.6 million or $1.37 per share, compared to
$28.3 million or $1.36 per share in 1998. For the same comparative period,
core earnings per share, excluding goodwill amortization, net securities gains
and non-recurring items increased 3% to $1.32 from $1.28.
GRAPH: Earnings Per Share Core Earnings Per Share*
------------------ ------------------------
1995 $1.26 1995 $1.24
1996 $1.31 1996 $1.30
1997 $1.23 1997 $1.25
1998 $1.36 1998 $1.28
1999 $1.37 1999 $1.32
* Excludes goodwill amortization,
net securites gains and
non-recurring items.
Non-recurring items recorded in the Statement of Income included a pretax
gain of $3.5 million on the sale of credit card receivables in 1999 and a
pretax gain of $4.6 million on the sale of branch offices in 1998.
Additionally, special charges of $1.6 million, associated with the March 31,
1998 acquisition of Commercial BancShares, were recorded in various
non-interest expense categories during 1998.
Significant events, which impact the comparative analysis in management's
discussion, included the acquisitions of Heritage Bank of Harrison County,
Inc. on April 30, 1999, Hunter Agency, Inc. on June 18, 1998, and Shawnee
Bank, Inc., on June 30, 1997. Where material, the impact of these events will
be discussed.
Other uses of financial resources during the year included construction
of two branch offices and several technology-related projects including the
introduction of check imaging, an on-line teller system, internet trust
information services, and Y2K readiness.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Taxable equivalent net interest income decreased $1.8 million or 2% in
comparison to 1998. As shown in Table 2, the taxable equivalent net yield on
earning assets declined during 1999 in comparison to 1998, reflecting a trend
consistent with the banking industry during the year. Average earning assets
decreased slightly during the same period, while interest bearing liabilities
increased $30.8 million or 1.8%. Interest rates were stable during the first
half of 1999, following a 100 basis point decrease in the federal funds rate
in the fourth quarter of 1998. During the fourth quarter of 1998, WesBanco
lowered its base lending rate to 7.75% from 8.50%. During the third and
fourth quarters of 1999, as the Federal Reserve raised the federal funds rate,
WesBanco adjusted its base lending rate upward to 8.50% through year end.
Deposit rates generally followed the rise in lending rates.
Taxable equivalent interest income decreased $6.5 million or 3.9% from
1998, resulting primarily from a decline in average loan yields. Declining
yields in the real estate loan portfolio, reflecting refinancing activity and
competitive pricing, coupled with the yield impact from the sale of the
credit card portfolio were contributing factors to the overall reduction in
loan yields. Partially offsetting these yield changes were loan growth
factors, including an 18% increase in real estate loans and the purchase
acquisition of Heritage Bank, which added approximately $24.1 million in
loans during the second quarter of 1999. Total average loan growth, which
approximated 6.4% for the year, was funded primarily through a reduction in
taxable securities. Table 3 presents the impact of these changes in volume
and rate on interest income.
Interest expense decreased $4.7 million or 6.4% from 1998 resulting from
a decrease in rates on average interest bearing deposits and short-term
borrowings. Certificates of deposit rates decreased gradually in 1999 due
to the repricing of short-term CD's to lower rates early in the year.
Additionally, average rates on savings and NOW accounts decreased due to rate
adjustments in October 1998 and June 1999, respectively. Average rates on
short-term borrowings declined during the fourth quarter of 1998 in
connection with a drop in the federal funds rate. Referring to Table 3, the
decline in average deposit rates and their impact on interest expense during
1999 was partially offset by growth in interest bearing demand deposits,
primarily through the prime rate money market product.
Management expects continued loan and deposit rate pressure on net
interest income during 2000. However, it is expected that rate pressure on
net interest income will be offset by balance sheet growth. Higher rate
deposit products, such as certificates of deposit and prime rate money market
products are anticipated to serve as the primary sources of funds, while
moderate loan growth coupled with an increase in securities will represent
the primary uses of funds.
<PAGE> 46
TABLE 2. AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
<TABLE>
For the years ended December 31,
-----------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------- ------------------------------ -----------------------------
Average Average Average Average Average Average
(dollars in thousands) Volume Interest Rate Volume Interest Rate Volume Interest Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Total loans $1,441,172 $117,508 8.15% $1,354,680 $118,766 8.77% $1,336,469 $118,540 8.87%
Securities:
Taxable 436,501 27,269 6.25 502,379 31,205 6.21 420,825 27,045 6.43
Tax-exempt 204,697 10,182 4.97 191,363 9,592 5.01 178,597 9,121 5.11
- ------------------------------------------------------------------------------------------------------------------------
Total securities 641,198 37,451 5.84 693,742 40,797 5.88 599,422 36,166 6.03
Federal funds sold 17,905 902 5.04 58,474 3,155 5.40 55,320 3,084 5.57
- ------------------------------------------------------------------------------------------------------------------------
Total earning assets 2,100,275 $155,861 7.42% 2,106,896 $162,718 7.72% 1,991,211 $157,790 7.92%
- ------------------------------------------------------------------------------------------------------------------------
Cash and due from banks 64,093 63,872 62,371
Other assets 86,960 82,854 77,774
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $2,251,328 $2,253,622 $2,131,356
========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing
demand deposits $ 576,420 $ 18,071 3.14% $ 494,278 $ 16,693 3.38% $ 393,480 $ 12,335 3.13%
Savings deposits 297,759 5,936 1.99 327,342 7,852 2.40 367,583 9,520 2.59
Certificates of deposit 725,555 38,545 5.31 765,750 43,067 5.62 766,981 43,041 5.61
- ------------------------------------------------------------------------------------------------------------------------
Total interest
bearing deposits 1,599,734 62,552 3.91 1,587,370 67,612 4.26 1,528,044 64,896 4.25
Federal funds purchased,
repurchase agreements,
and other borrowings 144,774 6,679 4.61 126,362 6,313 5.00 99,659 5,109 5.13
- ------------------------------------------------------------------------------------------------------------------------
Total interest
bearing liabilities 1,744,508 $ 69,231 3.97% 1,713,732 $ 73,925 4.31% 1,627,703 $ 70,005 4.30%
- ------------------------------------------------------------------------------------------------------------------------
Non-interest bearing
demand deposits 207,520 221,304 202,671
Other liabilities 18,615 22,105 20,661
Shareholders' Equity 280,685 296,481 280,321
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $2,251,328 $2,253,622 $2,131,356
========================================================================================================================
Net yield on earning assets $ 86,630 4.12% $ 88,793 4.21% $ 87,785 4.40%
========================================================================================================================
Taxable equivalent net yield
on earning assets $ 92,113 4.39% $ 93,959 4.46% $ 92,696 4.66%
========================================================================================================================
</TABLE>
Total loans are gross of allowance for loan losses, net of unearned income,
and include loans held for sale.
Nonaccrual loans were included in the average volume for the entire year.
Loan fees included in interest on loans are not material.
Average yields on 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 3.RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
<TABLE>
1999 Compared to 1998 1998 Compared to 1997
----------------------------- -------------------------------
Net Increase Net Increase
(in thousands) Volume Rate (Decrease) Volume Rate (Decrease)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Total loans $ 7,330 $(8,588) $(1,258) $1,605 $(1,379) $ 226
Taxable securities (4,115) 179 (3,936) 5,092 (932) 4,160
Tax-exempt securities 664 (74) 590 642 (171) 471
Federal funds sold (2,056) (197) (2,253) 172 (101) 71
- -----------------------------------------------------------------------------------------------------------
Total interest income change 1,823 (8,680) (6,857) 7,511 (2,583) 4,928
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits 2,635 (1,257) 1,378 3,348 1,010 4,358
Savings deposits (668) (1,248) (1,916) (996) (673) (1,669)
Certificates of deposit (2,200) (2,322) (4,522) (69) 95 26
Federal funds purchased, repurchase
agreements, and other borrowings 874 (508) 366 1,337 (132) 1,205
- -----------------------------------------------------------------------------------------------------------
Total interest expense change 641 (5,335) (4,694) 3,620 300 3,920
- -----------------------------------------------------------------------------------------------------------
Net interest income increase (decrease) $1,182 $(3,345) $(2,163) $3,891 $(2,883) $1,008
===========================================================================================================
</TABLE>
Changes to rate/volume are allocated to both rate and volume on a
proportionate dollar basis.
<PAGE> 47
OTHER INCOME
Excluding non-recurring gains in 1999 and 1998 of $3.5 million and $4.6
million, respectively, and net securities gains, other income increased $1.0
million or 5.3% over 1998, due to increases in trust fees and insurance agency
fees. The increases, however, were partially offset by a reduction in credit
card activity fees due to the sale of the credit card portfolio in June 1999.
Trust fees increased $1.5 million or 16.7% over 1998, a result of
increases in the number of accounts under administration, the market value of
trust assets and investment fees associated with the WesMark mutual fund
products. The market value of trust assets at December 31, 1999 was $3.1
billion, an increase of $312.7 million or 11.3% from 1998.
GRAPH: (in thousands) Trust Fees
-----------------
1995 $ 5,400
1996 $ 6,180
1997 $ 7,640
1998 $ 9,066
1999 $10,582
Activity charges and other income, excluding nonrecurring gains,
decreased approximately $0.5 million or 4.5%, reflecting a reduction in
credit card activity fees. Service charges on deposit accounts approximated
1998 levels, while insurance agency fees increased 119.2% from last year,
reflecting a full year of activity from Hunter Agency, WesBanco's insurance
affiliate which was acquired in June 1998.
Net securities gains decreased $1.1 million or 74.9% in comparison to
1998. In 1999, securities gains decreased as rising interest rates limited
sales opportunities. During 1998, securities gains increased due to sales of
higher coupon callable Agency and mortgage-backed securities during the third
and fourth quarters of 1998. During this period of declining interest rates,
the Corporation was able to realize gains while minimizing the risk of
reinvestment at lower yields.
OTHER EXPENSES
Other expenses, excluding special charges of $1.6 million from 1998
related to WesBanco's business combination with Commercial BancShares,
increased $1.1 million or 1.6% over 1998, due to technology-related costs,
the purchase acquisition of Heritage Bank in April 1999, and opening two
branch offices. These factors were partially offset by reductions in activity
expenses from the sale of the credit card portfolio in June 1999, the
divestiture of Union Bank in June 1998, and improved operating efficiencies
occurring primarily through the integration of Commercial BancShares.
Technology-related projects during 1999, included continued expansion
of the Corporation's wide area network, a check-imaging system implemented
in the fourth quarter, development of on-line trust information services,
and Y2K readiness. The cost of technology impacts several non-interest
expense categories including human resources, service agreements, depreciation,
consulting and training.
Salaries and employee benefits, excluding the special charges from 1998,
increased $0.7 million or 2.2% during 1999, reflecting normal salary
adjustments and staffing of new branch facilities. These increasing factors
were partially offset by staff reductions through internal restructuring,
which included closing four branch offices associated with Commercial
BancShares, integration of the recently acquired Heritage Bank into a
WesBanco affiliate, and the consolidation of certain backoffice operations.
Full-time equivalent employees were 1,096 as of December 31, 1999 compared
to 1,093 as of December 31, 1998.
Other operating expenses, excluding the special charges from 1998,
approximated the prior year. During the year an increase in technology-
related costs, such as communication, consulting and training, were offset
by a reduction in credit card activity expenses, resulting from the sale of
the credit card portfolio in June 1999.
On January 14, 2000, WesBanco completed the consolidation of its four
banks and mortgage company affiliate into a single bank subsidiary. The
consolidation, which is expected to trim approximately $1.7 million in annual
non-interest expenses by the end of 2000, is designed to reduce the number of
administrative positions of separate entities, centralize backoffice operations
and redirect more senior management time to servicing customers.
INCOME TAXES
Federal income tax expense decreased $2.0 million to $9.3 million in
1999 from $11.3 million in 1998, reflecting a decline in the Corporation's
effective tax rate to 29% compared to 32% from the prior year. The decrease
in the effective tax rate resulted from an increase in tax-free income
coupled with settlement of deferred tax benefits associated with the business
combination with Commercial BancShares.
WesBanco's federal income tax returns for 1998 and 1997 were subject to
an Internal Revenue Service examination during the first quarter of 1999. In
its 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 has appealed the IRS ruling. Should
WesBanco not prevail, approximately $1.7 million in Federal and State income
tax payments would be accelerated. The projected impact on the results of
operation of the Corporation approximates $0.1 million.
WesBanco's West Virginia affiliates are subject to a corporate net
income tax, which is based upon federal taxable income, with certain
modifications. The statutory West Virginia tax rate was 9.0% for 1999 and
1998. West Virginia income tax included in the provision for income taxes
was $2.1 million for 1999 compared to $2.2 million for 1998.
WesBanco's offices located in Ohio are subject to an Ohio franchise tax,
rather than a corporate income tax. Ohio franchise taxes are included in
other operating expenses.
<PAGE> 48
FINANCIAL CONDITION
SECURITIES
Securities decreased $112.6 million between December 31, 1999 and 1998,
creating liquidity for the Corporation to fund loans and a stock repurchase
program. As shown in Table 4, available for sale securities, at fair value,
representing 62.4% of total securities at December 31, 1999, decreased $111.0
million from the same period in 1998, while held to maturity securities,
representing the remaining 37.6% of total securities, decreased $1.6 million
over the same corresponding periods.
During 1999, securities available for sale decreased through sales,
maturities, paydowns of Federal Agency and mortgage-backed securities and
market value adjustments. At December 31, 1999 the average yield of the
available for sale portfolio was 6.3%, with an average maturity of 5.5 years.
For the same period, the held to maturity portfolio had an average yield of
7.0% and an average maturity of 6.1 years.
Unrealized after-tax gains/losses on available for sale securities
(market value adjustments) resulted in a $12.3 million market loss as of
December 31, 1999 from a $6.0 million market gain as of December 31, 1998,
reflecting an increase in interest rates during 1999. These market value
adjustments represent temporary fluctuations resulting from changes in market
rates in relation to average yields in the available for sale portfolio.
WesBanco can adjust the volatility of the market value adjustment by managing
both the volume of securities classified as available for sale and average
maturities. If securities are held to their maturity dates, no gain or loss
would be realized.
Securities represent a source of liquidity for the Corporation. During
1999, securities with a total carrying value of $179.6 million either matured
or were called. Available for sale securities of $47.8 million were sold
during 1999. During 2000, WesBanco expects loan growth to moderate and
plans to manage its liquidity position using new deposit growth as a primary
source of funds.
TABLE 4. COMPOSITION OF SECURITIES
<TABLE>
December 31,
-----------------------------------
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities held to maturity (at amortized cost):
U.S. Treasury and Federal Agency securities $ 13,346 $ 41,961 $ 79,220
Obligations of states and political subdivisions 182,005 169,552 164,684
Other debt securities 17,902 3,332 2,304
- -----------------------------------------------------------------------------------------
Total securities held to maturity 213,253 214,845 246,208
- -----------------------------------------------------------------------------------------
Securities available for sale (at market):
U.S. Treasury and Federal Agency securities 189,593 276,260 247,042
Obligations of states and political subdivisions 18,298 24,712 20,638
Mortgage-backed and other securities 146,784 164,733 115,330
- -----------------------------------------------------------------------------------------
Total securities available for sale 354,675 465,705 383,010
- -----------------------------------------------------------------------------------------
Total securities $567,928 $680,550 $629,218
=========================================================================================
</TABLE>
Other debt securities include Federal Reserve Bank Stock and Federal Home
Loan Bank securities.
Other securities, classified as available for sale, include equity interests
in business corporations.
There are no individual securities included in obligations of states and
political subdivisions or other securities, which individually or in the
aggregate exceed ten percent of shareholders' equity.
<PAGE> 49
TABLE 5. MATURITY DISTRIBUTION AND YIELD ANALYSIS OF SECURITIES
<TABLE>
December 31, 1999
----------------------------------------------------------------------------
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
---------------- ----------------- ---------------- ---------------
(dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury and Federal
agency securities $ 8,999 6.11% $ 1,504 6.37% $ 2,843 7.25% --- ---
Obligations of states and
political subdivisions 19,151 7.10 54,406 7.16 57,161 7.17 $ 51,287 6.65%
Other debt securities --- --- --- --- --- --- 17,902 7.59
- --------------------------------------------------------------------------------------------------------------
Total held to maturity 28,150 6.78 55,910 7.14 60,004 7.17 69,189 6.89
- --------------------------------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasury and Federal
Agency securities 66,889 6.17 52,229 6.37 77,170 6.61 --- ---
Obligations of states and
political subdivisions 4,662 5.93 10,034 6.04 2,910 6.46 876 10.12
Mortgage-backed and
other securities 4,488 5.51 44,868 6.31 96,661 6.06 6,154 2.42
- --------------------------------------------------------------------------------------------------------------
Total available for sale 76,039 6.12 107,131 6.31 176,741 6.31 7,030 3.38
- --------------------------------------------------------------------------------------------------------------
Total securities $104,189 6.29% $163,041 6.60% $236,745 6.53% $76,219 6.57%
==============================================================================================================
</TABLE>
Yields are calculated using a weighted average yield to maturity.
Average yields on securities available for sale have been calculated based on
amortized cost.
Average yields on obligations of states and political subdivisions have been
calculated on a taxable equivalent basis.
Other debt securities include securities with no stated maturity date.
Mortgage-backed securities, which have prepayment provisions, are assigned to
maturity categories based on estimated average lives.
LOANS
Loan Portfolio:
As noted in Table 6, loans at December 31, 1999 increased $150.2 million or
10.9% compared to December 31, 1998, reflecting growth in all loan types,
with the largest gains in residential mortgages. This growth reflected a
continuation of increased loan activity which began in 1998 and was aided by
the acquisition of Heritage Bank of Harrison County in the second quarter of
1999, which added approximately $24.1 million to loans outstanding.
GRAPH: (in millions) Total Loans
---------------
1995 $1,166
1996 $1,329
1997 $1,343
1998 $1,373
1999 $1,524
Commercial loans increased $37.2 million or 7.7%, personal loans
increased $16.3 million or 5.2%, and real estate loans increased $110.5
million or 21.2% compared to the prior year. The most significant growth
came from real estate loans, which continued to be driven primarily by
attractive pricing of residential mortgage loan products. Growth in
commercial loans was largely reflective of the continuing strength of the
economy in general. Increases in personal loans reflected consumers' ongoing
confidence that the economy will remain strong, net of a reduction of
approximately $15.4 million from the sale of credit cards during the second
quarter of 1999.
WesBanco's mortgage banking division originates residential mortgage
loans and sells many of those loans to the secondary market. For 1999, the
mortgage division loan originations decreased 17.9% from 1998 to approximately
$82.1 million.
TABLE 6. COMPOSITION OF LOANS
<TABLE>
December 31,
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- ------------- ------------- -------------- ---------------
% of % of % of % of % of
(dollars in thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans:
Commercial $ 521,450 34% $ 484,269 35% $ 438,055 33% $ 490,428 37% $ 438,838 38%
Real estate -
construction 31,742 2 46,033 3 37,743 2 35,910 2 27,725 2
Real estate-residential 630,939 41 520,393 38 521,222 39 412,324 32 359,445 32
Personal 329,763 22 313,490 23 334,671 25 389,383 29 340,355 28
Loans held for sale 9,753 1 9,280 1 11,705 1 983 -- --- --
- -------------------------------------------------------------------------------------------------------------
Total loans $1,523,647 100% $1,373,465 100% $1,343,396 100% $1,329,028 100% $1,166,363 100%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Loans are presented gross of allowance for loan losses and unearned income on
personal loans.
<PAGE> 50
LOANS (Continued)
Referring to Table 6, residential real estate loans, at 41% of total
loans, comprise the single largest loan type in the portfolio. This category
consists generally of conventional adjustable and fixed rate residential
mortgages with terms of less than 15 years, and home equity loans. The risks
associated with real estate lending are principally influenced by real property
values, which are affected by the general economic conditions. Most of the
real estate loans in the portfolio are secured by properties located within
WesBanco's market areas.
Except for speculative development by builders with long-standing
relationships, real estate-construction loans are only made when WesBanco
also commits to the permanent financing of the project or has a takeout
commitment from another lender for the permanent loan.
Loans held for sale consist of residential mortgage loans and are valued
at the lower of aggregate cost or market value.
Personal loans represent approximately 22% of total loans and consist
primarily of indirect vehicle loans originated through automobile dealers and
other types of secured and unsecured consumer purpose loans. Credit cards
were also included in this category in prior years until the credit card
portfolio was sold in 1999. Personal loans are a smaller balance, homogeneous
group of loans which are not concentrated in a specific market area. Risks
in this lending category include the possibility of a general economic
downturn which may cause an increase in credit losses.
The loan loss policy for consumer installment lending requires a
charge-off if the loan reaches 120 delinquency days. Any payments subsequent
to charge-off are reflected as recoveries.
Commercial loans, including commercial loans secured by real estate,
represent 34% of total loans. These loans are not concentrated in any single
industry, but reflect a broad range of businesses located primarily within
WesBanco's market areas. Commercial real estate loans include both loans
that are secured by properties used in the operation of the borrower's
business as well as loans that are secured by income producing rental
properties. The credit risk associated with commercial lending is principally
influenced by general economic conditions and the resulting impact on the
borrower's operations. The credit risk associated with commercial real
estate lending is also influenced by real property values, as well as the
unique or single purpose nature of some properties.
TABLE 7. MATURITY DISTRIBUTION OF LOANS
December 31, 1999
--------------------------------------
After One
In One Year through After
(in thousands) Year or Less Five Years Five Years
- -------------------------------------------------------------------------
Commercial $169,738 $ 74,874 $ 90,758
Commercial real estate 64,504 28,966 92,610
Real estate - construction 13,873 3,739 14,130
- -------------------------------------------------------------------------
Total $248,115 $107,579 $197,498
=========================================================================
Fixed rates $ 41,111 $ 74,005 $ 73,982
Variable rates 207,004 33,574 123,516
- -------------------------------------------------------------------------
Total $248,115 $107,579 $197,498
=========================================================================
Excludes personal, residential mortgage and loans held for sale
WesBanco follows lending policies which establish, among other things,
criteria for determining the repayment capacity of the borrower, requirements
for down payments and current market appraisals or other valuations of the
collateral when the loans are originated. The majority of loans are either
secured by real property or personal property.
WesBanco generally recognizes interest income on the accrual basis,
except for certain loans which are placed on a nonaccrual status, when in the
opinion of management, doubt exists as to collectability. All banks must
conform to the policies of the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of Currency which state that banks
may not accrue interest on any loan on which either the principal or interest
is past due 90 days or more unless the loan is both well secured and in the
process of collection. When a loan is placed on a nonaccrual status, interest
income may be recognized as cash payments are received.
Non-performing Assets: Non-performing assets consist of loans classified as
impaired (nonaccrual, renegotiated and certain loans internally classified as
substandard or doubtful) and other real estate owned. As noted in Table 8,
at December 31, 1999, non-performing assets decreased 13.9% to $17.2 million
or 1.1% of total loans. This decrease is largely the result of a reduction
of $6.3 million in non-accrual loans, while other real estate owned remained
virtually unchanged. This improvement in non-performing loans reflects
WesBanco's continuing focus on maintaining credit quality while also growing
the loan portfolio. Non-performing loans are generally secured by collateral
believed to have adequate market values to protect against significant losses.
WesBanco continually monitors its non-performing assets for deterioration in
collateral values.
GRAPH: Non-Performing Assets
to Total Loans
---------------------
1995 1.31%
1996 1.33%
1997 1.50%
1998 1.45%
1999 1.13%
<PAGE> 51
TABLE 8. NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE
December 31,
--------------------------------------------
(dollars in thousands) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------
Nonaccrual:
Personal $ 36 $ 128 $ 105 $ 90 $ 171
Commercial 1,199 8,687 6,309 4,135 4,099
Real estate 2,923 1,673 1,999 945 1,750
- -----------------------------------------------------------------------------
Total 4,158 10,488 8,413 5,170 6,020
- -----------------------------------------------------------------------------
Renegotiated:
Personal 3 --- 46 --- 22
Commercial 783 --- 1,307 1,527 2,361
Real estate 27 695 1,070 3,010 70
- -----------------------------------------------------------------------------
Total 813 695 2,423 4,537 2,453
- -----------------------------------------------------------------------------
Other classified loans:
Commercial 8,706 5,285 3,765 3,057 341
Real estate --- --- --- 414 697
- -----------------------------------------------------------------------------
Total 8,706 5,285 3,765 3,471 1,038
- -----------------------------------------------------------------------------
Total non-performing loans 13,677 16,468 14,601 13,178 9,511
Other real estate owned 3,512 3,486 5,620 4,511 5,789
- -----------------------------------------------------------------------------
Total non-performing assets $17,189 $19,954 $20,221 $17,689 $15,300
=============================================================================
Percentage of non-performing
assets to loans outstanding 1.1% 1.5% 1.5% 1.3% 1.3%
- -----------------------------------------------------------------------------
Past due 90 days or more:
Personal $ 1,219 $ 1,184 $ 1,611 $ 1,580 $ 934
Commercial 3,176 4,317 1,121 1,381 1,199
Real estate 1,637 1,453 599 1,395 1,891
- -----------------------------------------------------------------------------
Total past due 90 day or more $ 6,032 $ 6,954 $ 3,331 $ 4,356 $ 4,024
=============================================================================
Other classified loans include loans internally classified as doubtful and
substandard (as defined by banking regulations) that meet the definition of
impaired loans.
Allowance for Loan Losses: The allowance for loan losses is available to
absorb probable charge-offs. The allowance is reduced by losses, net of
recoveries, and increased by charging a provision to operations to maintain
the allowance at a level determined appropriate by management. There can be
no assurance that WesBanco will not sustain credit losses in future periods,
which could be substantial in relation to the size of the allowance.
As shown in Table 9, at December 31, 1999, the allowance for loan losses
to total loans was 1.30%, down from 1.39% as of December 31, 1998. Net
charge-offs for 1999 were $3.4 million down from $5.5 million for 1998. The
decrease in net charge-offs reflects the continuing improvement in the credit
quality for all types of loans, as well as increased efforts to recover
personal loans charged off in prior periods.
The provision for loan losses was $4.3 million in 1999 compared to $4.4
million in 1998. Although net charge-offs decreased in 1999, additional
growth in the loan portfolio held the provision at approximately the same
level as 1998. The provision is based on management's periodic evaluation of
the loan portfolio as well as prevailing and anticipated economic conditions,
net loans charged off, past loan experience, current delinquency factors,
changes in the character of the loan portfolio, specific problem loans and
other factors.
<PAGE> 52
TABLE 9. ALLOWANCE FOR LOAN LOSSES
For the years ended December 31,
------------------------------------------------
(dollars in thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Beginning balance -
Allowance for loan losses $19,098 $20,261 $19,102 $16,955 $16,390
Allowance for loan losses of
Acquired (sold) banks-net 192 (37) 269 707 ---
Allowance for loan losses
Allocated to (sold)
credit cards (450) --- --- --- ---
Provision for loan losses 4,295 4,392 5,574 4,795 3,206
Charge-offs:
Commercial 2,024 1,933 1,016 920 1,411
Real estate 204 515 254 231 246
Personal 2,490 3,952 4,523 2,807 1,873
- ------------------------------------------------------------------------------
Total charge-offs 4,718 6,400 5,793 3,958 3,530
- ------------------------------------------------------------------------------
Recoveries:
Commercial 479 522 314 113 409
Real estate 64 39 90 71 110
Personal 792 321 705 419 370
- ------------------------------------------------------------------------------
Total recoveries 1,335 882 1,109 603 889
- ------------------------------------------------------------------------------
Net charge-offs 3,383 5,518 4,684 3,355 2,641
- ------------------------------------------------------------------------------
Ending balance -
Allowance for loan losses $19,752 $19,098 $20,261 $19,102 $16,955
==============================================================================
Ratio of net charged-offs
to average total loans
outstanding for the period .23% .41% .35% .28% .24%
==============================================================================
Ratio of the allowance for loan
losses to total loans outstanding
at the end of the period 1.30% 1.39% 1.51% 1.44% 1.46%
==============================================================================
The adequacy of the allowance for loan losses is evaluated quarterly.
Specific reserves are established when warranted for commercial loans greater
than $100,000. The determination of specific reserves takes into
consideration the anticipated future cash flows available to pay the loan
and/or the estimated realizable value of the collateral pledged and other
secondary repayment sources, if any. For consumer loans and all other
commercial loans not specifically reserved, management uses historical net
charge-off experience relative to loans outstanding to predict future losses.
Management further allocates against the reserve, when appropriate, based on
economic conditions, changes in underwriting standards or practices,
delinquency and other trends in the portfolio, specific industry conditions,
the results of recent internal loan reviews or regulatory examinations, and
other relevant factors that impact the loan portfolio.
Changes in the allocation of the allowance among the various loan types,
as noted in Table 10, are primarily the result of higher specific reserves on
certain commercial loans, lower net charge-offs in personal loans, growth in
real estate loans and the sale of the credit card portfolio.
TABLE 10. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31,
---------------------------------------------------
(dollars in thousands) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------
Commercial and
unallocated $15,792 $13,929 $13,740 $13,963 $13,616
Real estate - residential 749 611 634 470 781
Personal 3,211 4,558 5,887 4,669 2,558
- ------------------------------------------------------------------------------
Total $19,752 $19,098 $20,261 $19,102 $16,955
==============================================================================
No allocations were made for real estate-construction loans.
Management expects loan growth to slow in the year 2000 due to several
factors. Recent increases in interest rates by the Federal Reserve Board are
expected to result in a softening of housing demand, which impacts residential
mortgage lending and consumer spending in general. Similarly, consumers are
unlikely to refinance mortgages during periods of rising interest rates. A
significant portion of WesBanco's growth in real estate loans in 1999 was
attributable to refinancings while interest rates were more attractive to the
consumer.
If the Federal Reserve continues to raise interest rates during 2000,
there will likely be a decrease in commercial lending opportunities.
Continual increases in interest rates may place additional pressure on
corporate profits. As a result, WesBanco's focus on credit quality could
cause a reduction in commercial lending.
<PAGE> 53
Management expects to reduce non-performing assets in 2000. However,
rising interest rates and a slowing of the economy may impact the ability of
both consumer and commercial borrowers' to service debt. Management
will continue to monitor the loan portfolio for possible deterioration in
credit quality.
Loan Risk Elements and Credit Quality: WesBanco extends credit to individuals
for various consumer purposes, which include residential mortgage loans,
construction loans, home equity lines of credit, installment loans to
purchase automobiles, and other personal loans. WesBanco also extends credit
to businesses of all types to purchase assets, including commercial real
estate, or to finance expansion, as well as revolving lines of credit to
finance operations and short-term loans for other purposes. Credit risk,
that is the risk that a borrower will default on a loan, is inherent in all
lending activities. WesBanco's primary goal in managing credit risk is to
minimize the impact of default by an individual borrower or group of
borrowers. Credit risk is managed both through the initial underwriting
process as well as through ongoing monitoring and administration of the loan
portfolio.
WesBanco has established standard credit policies to provide for
consistent underwriting of loans as well as procedures to assist in
maintaining and monitoring the overall quality of its loan portfolio. Credit
policy establishes: (1) underwriting guidelines for all types of loans; (2)
lending authorities; (3) exposure limits to individual borrowers or groups of
borrowers, as well as loan type, industry, and geographic concentrations; and
(4) loan portfolio administration procedures.
Underwriting guidelines require an appropriate evaluation of the
creditworthiness of each borrower; the adequacy of collateral, if any, to
secure the loan; and other factors unique to each loan that may increase or
mitigate its risks. Individual lending officers approve loans up to
predetermined limits depending on the type of loan. Loans above individual
officers' lending authorities require approval by a loan committee or the
Board of Directors, depending on the amount of credit exposure to the
particular borrower. These approval requirements also apply to renewals and
extensions of loans. Exceptions to credit policy are permissible, but only
after careful evaluation of the risks associated with each exception and the
factors that mitigate those risks.
Subsequent to loan origination, the process used to measure and monitor
the level of credit risk is dependent upon the type of loan. Consumer loans,
including residential mortgages, are generally smaller in amount and spread
over a larger number of diverse individual borrowers. Accordingly, credit
risk in the consumer portfolio can generally be managed effectively by
monitoring the level and trend of delinquent loans, and economic conditions
that may impact a borrower or group of borrowers, or a particular geographic
territory. Conversely, commercial loans can be for substantially larger
amounts and the potential for loss as a result of default by any one borrower
can be significant. Therefore, credit risk in the commercial portfolio also
requires periodic review of large borrowing relationships and a loan grading
system to help management identify adverse trends and evaluate the quality of
the portfolio.
WesBanco maintains a loan grading system that categorizes commercial
loans according to their level of credit risk. All commercial loans are
assigned a grade at their inception, and grades are regularly reviewed and
evaluated. When the risk of a loan increases beyond that which is considered
acceptable in the assigned grade, its grade is adjusted to reflect the change
in its risk.
Classified loans are those that exhibit clear and defined weaknesses
that may jeopardize their recoverability. Loans are classified as
"substandard" when they are no longer adequately protected by the sound net
worth and paying capacity of the borrower or of the collateral pledged.
Substandard loans are characterized by the distinct possibility that the bank
may sustain some loss. Loans are classified as "doubtful" when the risk that
a loss may occur has increased, or at least a portion of the loan may require
charge-off if liquidated at present. Both substandard and doubtful loans
include some loans that are delinquent or on nonaccrual status and may also
include loans whose terms have been renegotiated.
The loan grading process provides management with an effective early
warning system of potential problems and also facilitates evaluating the
adequacy of the allowance for loan losses. WesBanco also maintains an
independent, formal and ongoing internal loan review program, which
concentrates principally on commercial loans, to evaluate the effectiveness
of WesBanco's credit risk management process. The loan review process
further identifies areas that require management's attention, evaluates the
adequacy of loan administration and identifies areas that require management's
attention, evaluates the adequacy of loan administration and documentation,
helps to ensure compliance with loan policies, and validates the reliability
of the loan grading system. The loan review function reports to the
Audit/Loan Review Committee of the Board of Directors.
There are no significant loans made to customers outside WesBanco's
general market areas. Borrowers located outside of WesBanco's market areas
typically also have significant other non-lending relationships with the bank.
At times, in order to maintain loan volumes, loans are purchased from
correspondent banks. These loans aggregate less than $7.1 million as of
December 31, 1999. WesBanco conducts its own customary credit analysis
before a determination is made to purchase loans from correspondent banks.
There were no loan concentrations in excess of 10% of total loans.
Management's review of the loan portfolio has not indicated any material
amount of loans, not disclosed in the accompanying tables and discussions
which are known to have possible credit problems which cause management to
have serious doubts as to the ability of each borrower to comply with their
present loan repayment terms.
<PAGE> 54
DEPOSITS AND OTHER BORROWINGS
Deposits increased $26.4 million or 1.5% between December 31, 1999 and
1998. Deposit growth resulted from the purchase acquisition of Heritage Bank
during the second quarter of 1999. During 1999, deposit growth was limited
primarily to the interest bearing demand products. Both savings and
certificates of deposit reflected steady declines through much of the year,
before a fourth quarter increase in certificates of deposit. The declining
balances resulted from the competition for funds, which continues to intensify
among banks and non-banks. As illustrated in Table 2, the Corporation
experienced decreases in average certificates of deposit of $40.2 million or
5.2% and average savings of $29.6 million or 9.0%, while average interest
bearing demand, which includes prime rate money markets, increased $82.1
million or 16.6% in comparison to 1998. The acquisition of Heritage Bank
added $19.4 million in average deposits for 1999.
Other borrowings, representing an additional source of funds to
deposits, increased 28.8% between December 31, 1999 and 1998. The increase
in other borrowings consisted primarily of growth in repurchase agreements
and Federal Home Loan Bank borrowings. FHLB borrowings increased to $35.1
million compared to $18.8 million at December 31, 1999 and 1998, respectively.
In accordance with WesBanco's asset/liability management and liquidity
strategy, which provides for balancing average deposit and loan growth,
management expects additional emphasis on generating deposits during 2000.
TABLE 11. MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR MORE
December 31,
--------------------------
(in thousands) 1999 1998
- ---------------------------------------------------------------------------
Maturity:
Under three months $ 19,752 $ 19,983
Three to six months 23,334 19,120
Six to twelve months 36,757 33,470
Over twelve months 48,542 52,920
- ---------------------------------------------------------------------------
Total $128,385 $125,493
===========================================================================
Interest expense on certificates of deposit of $100,000 or more was
approximately $7,206 in 1999, $7,921 in 1998, and $7,512 in 1997.
CAPITAL ADEQUACY
Shareholders' equity decreased to $269.7 million at December 31, 1999
from $296.5 million at December 31, 1998 due to purchases of treasury stock
and changes in the market value adjustment on securities available for sale.
These reductions to equity were partially offset by the retention of earnings
and treasury stock used in the acquisition of Heritage Bank.
The increase in treasury stock relates to activity in corporate stock
repurchase plans. Treasury shares purchased through the corporate stock plans
totaled 1,386,279 for 1999. The Corporation has approximately 183,011 shares
remaining to be purchased in the current one million share repurchase program.
The shares are being purchased for general corporate purposes, which may
include potential acquisitions, dividend reinvestment and employee benefit
plans. Timing, price and quantity of purchases are at the discretion of the
Corporation and the plan may be discontinued or suspended at any time.
Treasury shares totaling 422,916 were used during the year in the purchase
acquisition of Heritage Bank.
Market value adjustments on securities available for sale, which
represent temporary fluctuations resulting from changes in market rates,
decreased to a net unrealized loss of $7.5 million at December 31, 1999
compared to a $3.6 million net unrealized gain at December 31, 1998. The
decrease in the market value of securities available for sale reflects the
increase in interest rates during 1999. Interest rates for 1998 were at a
comparatively lower level throughout most of the year.
Ending primary capital to assets for 1999 was 12.6% compared to 14.0%
for 1998, reflecting WesBanco's continued strong capital position. The
relatively high level of capital coupled with strong earnings has enabled
WesBanco to continue its steady increase in dividends declared per share.
Effective with the first quarter of 1999 dividend, WesBanco increased its
quarterly dividend per share 4.8% to $0.22 from $0.21 in the first quarter
of 1998. On an annualized basis, dividends increased to $0.88 per share
compared to $0.84 per share. The current dividend increase represented the
fourteenth consecutive year of dividend increases for WesBanco. Dividend
payout ratios over the last five years reflect the growth in dividends,
increasing to 64.2% in 1999 from 50.8% in 1995.
WesBanco is subject to risk-based capital guidelines that measure
capital relative to risk-weighted assets and off-balance sheet instruments.
WesBanco, and its banking subsidiaries, maintain Tier 1, Total Capital and
Leverage ratios well above minimum regulatory levels. See Note 14 of the
Consolidated Financial Statements for more information on capital amounts,
ratios and minimum regulatory requirements.
<PAGE> 55
INTEREST RATE MANAGEMENT AND LIQUIDITY
Asset/Liability Management: Interest rate management measures and monitors
the sensitivity of net interest earnings to changes in the level of interest
rates. As interest rates change in the market, rates earned on interest
rate sensitive assets and rates paid on interest rate sensitive liabilities
do not necessarily move concurrently. Differing rate sensitivities may arise
because fixed rate assets and liabilities may not have the same maturities or
because variable rate assets and liabilities differ in the timing and/or the
percentage of rate changes.
WesBanco reviews its interest rate sensitivity on a periodic basis.
This review is performed by analyzing the maturity and repricing
relationships between rate sensitive assets and rate sensitive liabilities
(Table 12) at a specific point in time and by using a simulation model to
estimate the impact on net interest income of changing interest rates over
a twelve month projection period.
TABLE 12. INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
December 31, 1999
-------------------------------------------------------------------
Under Three Six Nine Over
Three To Six to Nine Months to One
(in thousands) Months Months Months One Year Year Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATE SENSITIVE ASSETS
Due from banks/interest bearing $ 4,653 --- --- --- --- $ 4,653
Federal funds sold 9,535 --- --- --- --- 9,535
Securities 28,813 $ 20,380 $ 29,572 $ 25,424 $ 476,005 580,194
Loans 303,868 90,401 25,424 144,752 959,001 1,523,446
- --------------------------------------------------------------------------------------------------------
Total rate sensitive assets 346,869 110,781 54,996 170,176 1,435,006 2,117,828
- --------------------------------------------------------------------------------------------------------
RATE SENSITIVE LIABILITIES
Money market deposit accounts 285,281 --- --- --- 65,904 351,185
Savings and NOW accounts 508,350 --- --- --- --- 508,350
Certificates of deposit 149,345 114,739 72,056 120,324 281,428 737,892
Other borrowings 152,577 3,864 2,488 249 14,275 173,453
- --------------------------------------------------------------------------------------------------------
Total rate sensitive liabilities 1,095,553 118,603 74,544 120,573 361,607 1,770,880
- --------------------------------------------------------------------------------------------------------
Net interest sensitivity $ (748,684) $ (7,822) $ (19,548) $ 49,603 $1,073,399 $ 346,948
========================================================================================================
Cumulative net interest sensitivity $ (748,684) $(756,506) $(776,054) $(726,451) $ 346,948 ---
========================================================================================================
</TABLE>
Securities are categorized above by expected maturity at amortized cost.
As shown in Table 12, the liability sensitive position in the under
three month time period is primarily a result of $508.4 million in savings
and NOW account balances. Interest rates on these deposit instruments are
subject to periodic adjustment at management's discretion. Beginning in
1997, WesBanco experienced an increase in its short-term liability sensitive
position due to growth in its prime rate money market product. In an effort
to manage this additional interest sensitivity, the Corporation has entered
into various interest rate swap agreements with notional values approximating
$65.9 million. The swap agreements effectively fixed the interest rate on a
portion of the money market deposits for an average life of 5.3 years.
Net interest sensitivity, the difference between rate sensitive assets
and liabilities is a relatively simple analysis of the Corporation's
Consolidated Balance Sheet, but does not quantify the magnitude of the
interest rate risk in terms of changes in net interest income as interest
rates change. Therefore, management also considers the results of net
interest income simulations using a variety of interest rate changes. Key
assumptions used in income simulation include loan and deposit growth,
pricing, interest sensitivity, and the level of interest rate or balance
changes on deposit products with no stated maturity such as savings and NOW
deposits. These assumptions have been developed through a combination of
historical analysis and future anticipated pricing. Based on the results of
the income simulation, at December 31, 1999, the Corporation would expect a
decrease in net interest income of $3.5 million or 4.0% and an increase of
$1.8 million or 2.1% from an immediate and sustained 200 basis point increase
and decrease, respectively, in interest rates over a twelve month projection
period.
Liquidity Management: The Corporation manages its liquidity position to
ensure that sufficient funds are available to meet customer needs for
borrowing and deposit withdrawals as well as the operating cash needs of the
Corporation. The Corporation's most stable source of liquidity is its core
deposit base. In addition, the Corporation utilizes advances from the
Federal Home Loan Bank as an additional funding source. The principal source
of asset-funded liquidity is the securities portfolio. Securities liquidity
include securities classified as available for sale, which represent 62.4%
and 68.4% of total securities at December 31, 1999 and 1998. Also included
are securities classified as held to maturity that are expected to mature
within a year, totaling $28.2 million at December 31, 1999 and $46.7 million
at December 31, 1998. Other sources of asset-funded liquidity include cash
balances and federal funds sold. As of December 31, 1999, these two
short-term funding sources
<PAGE> 56
totaled $81.4 million or 3.6% of total assets as compared to $106.2 million
or 4.7% of total assets as of December 31, 1998. The decrease in asset
liquidity resulted from the use of these balances to fund strong loan growth
and stock repurchase programs during the year.
As of December 31, 1999 the Corporation had outstanding commitments to
extend credit in the ordinary course of business approximating $226.3 million.
On an historical basis only a small portion of these commitments result in
expended funds. The Corporation has planned additions to fixed assets of
approximately $1.0 million during 2000.
COMPARISON OF 1998 VERSUS 1997
- -----------------------------------------------------------------------------
Net income increased 12.3% to $28.3 million or $1.36 per share for 1998
compared to $25.2 million or $1.23 per share for 1997, reflecting a reduction
in the provision for loan losses, an increase in trust fees, net securities
gains and net non-recurring income of $3.0 million. These improvements to
earnings were partially offset by an increase in non-interest expenses and an
increase in the Corporation's effective tax rate resulting from an alternative
minimum tax credit which was fully utilized during 1997.
Taxable equivalent net interest income increased $1.3 million or 1.4% in
comparison to 1997, as the Corporation experienced strong balance sheet growth,
driven by an increase in average interest bearing liabilities of $86.0 million
or 5.3% in comparison to 1997. The increase in deposits, which occurred early
in the year, funded an increase in securities and funded third and fourth
quarter loan growth. Referring to Table 2, the majority of liability growth
occurred in prime rate money market accounts (included in average interest
bearing demand deposits) and repurchase agreements. Average earning assets
increased $115.7 million or 5.8% in comparison to 1997. Both earning assets
and interest bearing liabilities were impacted by the sale of Union Bank on
June 30, 1998, which reported total assets, loans and deposits at the date
of sale of $46.9 million, $22.4 million and $39.3 million, respectively. In
a period of declining interest rates, the taxable equivalent net yield on
earning assets decreased to 4.5% from 4.7% in 1997, reflecting the narrowing
spread between loan and deposit products, a trend that was prevalent in the
banking industry. Table 3 presents the impact of the declining net yield
on earning assets on net interest income as average volume increases on the
balance sheet were mostly offset by average rate and yield adjustments.
The provision for loan losses decreased to $4.4 million from $5.6
million in 1997. Although WesBanco experienced an increase in net charge-offs
during the year due to a rise in personal bankruptcies in WesBanco's market
area, the allowance for loan losses, as well as the provision were lowered
reflecting management's evaluation of the loan portfolio.
Other income, excluding net securities gains and non-recurring income,
increased $2.4 million or 14.1% over 1997. The increase resulted from
increases in trust fees of $1.4 million or 18.7% and activity fees of $1.0
million or 10.4%. Net securities gains increased $1.0 million or 192.6% in
comparison to 1997, as the Corporation was able to realize gains in a period
of declining interest rates.
Other expenses, excluding special charges related to the business
combination with Commercial BancShares, increased $1.5 million or 2.4% over
1997. The increase resulted primarily from the cost of technology projects,
including expansion of WesBanco's computer network and the installation of a
new Trust operating system. Technology enhancements affected other expense
categories through overtime, equipment, consulting and training costs. These
increasing factors were partially offset by the sale of Union Bank coupled
with improved operating efficiencies related to the integration of Commerical
BancShares.
BUSINESS COMBINATIONS AND DIVESTITURE
During the three year period ended December 31, 1999, WesBanco completed
the following business combinations and divestiture:
Heritage Bank of Harrison County, Inc. - On April 30, 1999 WesBanco
completed the purchase acquisition of Heritage Bank of Harrison County, Inc.
Heritage reported total assets as of the acquisition date of $33.1 million.
Union Bank of Tyler County - On June 30, 1998, WesBanco divested of the
Union Bank of Tyler County in order to fulfill a regulatory condition. Union
became affiliated with WesBanco as a result of WesBanco's business combination
with Commercial. Union reported total assets of $46.9 million as of the sale
date.
Hunter Agency, Inc. - On June 18, 1998, WesBanco completed its purchase
acquisition of Hunter Agency, located in Shinnston, WV, with and into a
WesBanco affiliated company. During the third quarter of 1998, Hunter
Insurance Agency expanded its service area to Morgantown, WV, through the
purchase acquisition of Simons Insurance Agency. Hunter Agency was recently
renamed WesBanco Insurance Services.
Commercial BancShares, Incorporated - On March 31, 1998 WesBanco
completed its business combination with Commercial BancShares, Incorporated,
located in Parkersburg, WV. The transaction was accounted for as a pooling
of interests and included Commercial's March 9, 1998 acquisition of Gateway
Bancshares, Inc. Commercial and Gateway reported total combined assets as of
the acquisition date of $466.1 million.
Shawnee Bank, Inc. - On June 30, 1997, WesBanco completed the purchase
acquisition of Shawnee Bank, Inc., located in Dunbar, WV. Shawnee reported
total assets as of the acquisition date of $34.7 million.
GRAPH: (in millions) Total Assets*
----------------
1986 $ 326
1987 $ 540
1988 $ 630
1989 $ 660
1990 $ 715
1991 $ 825
1992 $1,010
1993 $1,039
1994 $1,351
1995 $1,372
1996 $1,678
1997 $1,789
1998 $2,243
1999 $2,270
* Total assets of acquired banks in year of acquisition.
<PAGE> 57
IMPACT OF Y2K READINESS
In prior years, WesBanco discussed the nature and progress of its plans
to become Y2K ready. In early 1999, WesBanco completed its remediation and
testing of systems. As a result of those planning and implementation
efforts, the Corporation experienced no significant disruptions in mission
critical information technology and non-information technology systems and
believes those systems successfully responded to the Y2K date change.
WesBanco expensed approximately $0.3 million during 1999 and $0.6 million
overall in connection with remediating its systems. The Corporation is not
aware of any material problems resulting from Y2K issues, either with its
products, its internal systems, or the products and services of third parties.
Management will continue to monitor its mission critical computer applications
and those suppliers and vendors throughout the year 2000 to ensure that any
latent Y2K matters that may arise are addressed promptly.
<PAGE> 58
EXHIBIT 21
Subsidiaries of WesBanco, Inc.
Subsidiaries State of Incorporation
- ----------------------------------- ----------------------
WesBanco, Inc. West Virginia
WesBanco Bank, Inc.(1) West Virginia
WesBanco Insurance Services, Inc.(2) West Virginia
WesBanco Properties, Inc. West Virginia
WesBanco Securities, Inc. (3) Ohio
Hometown Finance Company West Virginia
CBI Holding Company West Virginia
Vandalia National Corporation (inactive) Delaware
Hometown Insurance Company (inactive) West Virginia
(1) Effective January 14, 2000, WesBanco combined its four banking
subsidiaries and mortgage company affiliate into a single banking
subsidiary, WesBanco Bank, Inc.
(2) Effective February 28, 2000, name changed from Hunter Agency, Inc. to
WesBanco Insurance Services, Inc.
(3) Effective April 4, 1999, name changed from CommBanc Investments to
WesBanco Securities, Inc.
NOTE: All direct subsidiaries of the Registrant are 100% owned.
<PAGE> 59
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of WesBanco, Inc. of our report dated January 28, 2000, included in the 1999
Annual Report to Shareholders of WesBanco, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No.333-06467) of WesBanco, Inc. and in the related
Prospectus of our report dated January 28, 2000, with respect to the
consolidated financial statements of WesBanco, Inc. incorporated by
reference in this Annual Report (Form 10-K) for the year ended December 31,
1999.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 27, 2000
<PAGE> 60
EXHIBIT 23.2
Consent of Harman, Thompson, Mallory and Ice, A.C., Independent Auditors
As independent auditors, we hereby consent to the incorporation by reference
in this Annual Report (Form 10-K) of our report dated March 6, 1998 with
respect to the consolidated financial statements of Commercial BancShares,
Inc. and Subsidiaries at December 31, 1997 and 1996 and for the three years
ended December 31, 1997, prior to their restatement for the 1998
pooling-of-interests with WesBanco, Inc., included in this Annual Report for
the year ended December 31, 1998 filed with the SEC.
/s/ Harman, Thompson, Mallory and Ice, A.C.
Parkersburg, West Virginia
March 27, 2000
<PAGE> 61
EXHIBIT 24
POWER OF ATTORNEY FOR EXECUTION OF FORM 10-K
TO BE FILED WITH THE SECURITIES & EXCHANGE COMMISSION
We, the undersigned Directors of WesBanco, Inc., hereby severally
constitute and appoint James C. Gardill and/or Edward M. George, and each of
them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names and in the capacities
indicated below, the Annual Report of WesBanco to the Securities & Exchange
Commission on Form 10-K to be filed for the year 1999 and any and all
amendments thereto in our names and behalf in our capacities as Directors of
WesBanco to enable WesBanco to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Act of 1934, as amended, hereby ratifying and conforming our
signatures as they may be signed by our attorneys, or either of them, to said
Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Power of Attorney for purposes of executing the Form 10-K of WesBanco
has been signed by the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/James E. Altmeyer
- ------------------------ Director March 29, 2000
James E. Altmeyer
/s/Earl C. Atkins
- ------------------------ Director March 29, 2000
Earl C. Atkins
/s/James G. Bradley
- ------------------------ Director March 29, 2000
James G. Bradley
/s/Ray A. Byrd
- ------------------------ Director March 29, 2000
Ray A. Byrd
- ------------------------ Director March __, 2000
R. Peterson Chalfant
/s/John H. Cheffy
- ------------------------ Director March 29, 2000
John H. Cheffy
/s/Christopher V. Criss
- ------------------------ Director March 29, 2000
Christopher V. Criss
/s/Stephen F. Decker
- ------------------------ Director March 29, 2000
Stephen F. Decker
/s/James D. Entress
- ------------------------ Director March 29, 2000
James D. Entress
/s/Ernest S. Fragale
- ------------------------ Director March 29, 2000
Ernest S. Fragale
/s/James C. Gardill
- ------------------------ Director March 29, 2000
James C. Gardill
/s/Edward M. George
- ------------------------ Director March 29, 2000
Edward M. George
/s/Thomas J. Hansberry
- ------------------------ Director March 29, 2000
Thomas J. Hansberry
/s/Roland L. Hobbs
- ------------------------ Director March 29, 2000
Roland L. Hobbs
/s/Larry G. Johnson
- ------------------------ Director March 29, 2000
Larry G. Johnson
/s/John W. Kepner
- ------------------------ Director March 29, 2000
John W. Kepner
<PAGE> 62
/s/Frank R. Kerekes
- ------------------------ Director March 29, 2000
Frank R. Kerekes
/s/Robert H. Martin
- ------------------------ Director March 29, 2000
Robert H. Martin
/s/William E. Mildren, Jr.
- ------------------------ Director March 29, 2000
William E. Mildren, Jr.
/s/Eric Nelson
- ------------------------ Director March 29, 2000
Eric Nelson
- ------------------------ Director March __, 2000
Richard K. Riederer
/s/Joan C. Stamp
- ------------------------ Director March 29, 2000
Joan C. Stamp
/s/Carter W. Strauss
- ------------------------ Director March 29, 2000
Carter W. Strauss
/s/James W. Swearingen
- ------------------------ Director March 29, 2000
James W. Swearingen
/s/Reed J. Tanner
- ------------------------ Director March 29, 2000
Reed J. Tanner
/s/Robert K. Tebay
- ------------------------ Director March 29, 2000
Robert K. Tebay
- ------------------------ Director March __, 2000
J. Christopher Thomas
/s/William E. Witschey
- ------------------------ Director March 29, 2000
William E. Witschey
<PAGE> 63
EXHIBIT 99.1
Harman, Thompson, Mallory and Ice, A.C.
Certified Public Accountants
Independent Auditors' Report
Board of Directors
Commercial BancShares, Inc.
Parkersburg, West Virginia
We have audited the accompanying consolidated balance sheets of
Commerical BancShares, Inc. and Subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the years ended December 31, 1997,
1996 and 1995. These consolidated financial statements are the responsibility
of management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Commercial BancShares, Inc. and Subsidiaries as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years ended December 31, 1997, 1996 and 1995 in conformity
with generally accepted accounting principles.
/s/Harman, Thompson, Mallory and Ice, A.C.
Parkersburg, West Virginia
March 6, 1998
Towne Square, Parkersburg, West Virginia 26102
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 67,166
<INT-BEARING-DEPOSITS> 4,653
<FED-FUNDS-SOLD> 9,535
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 354,675
<INVESTMENTS-CARRYING> 213,253
<INVESTMENTS-MARKET> 211,009
<LOANS> 1,523,446
<ALLOWANCE> 19,752
<TOTAL-ASSETS> 2,269,726
<DEPOSITS> 1,814,001
<SHORT-TERM> 152,577
<LIABILITIES-OTHER> 12,608
<LONG-TERM> 20,876
0
0
<COMMON> 43,742
<OTHER-SE> 225,922
<TOTAL-LIABILITIES-AND-EQUITY> 2,269,726
<INTEREST-LOAN> 117,508
<INTEREST-INVEST> 37,451
<INTEREST-OTHER> 902
<INTEREST-TOTAL> 155,861
<INTEREST-DEPOSIT> 62,552
<INTEREST-EXPENSE> 69,231
<INTEREST-INCOME-NET> 86,630
<LOAN-LOSSES> 4,295
<SECURITIES-GAINS> 379
<EXPENSE-OTHER> 67,813
<INCOME-PRETAX> 39,103
<INCOME-PRE-EXTRAORDINARY> 39,103
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,638
<EPS-BASIC> 1.37
<EPS-DILUTED> 1.37
<YIELD-ACTUAL> 4.12
<LOANS-NON> 4,158
<LOANS-PAST> 6,032
<LOANS-TROUBLED> 813
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,098
<CHARGE-OFFS> 4,718
<RECOVERIES> 1,335
<ALLOWANCE-CLOSE> 19,752
<ALLOWANCE-DOMESTIC> 19,752
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 19,752
</TABLE>
