UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
---------------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-8467
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WESBANCO, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0571723
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
304-234-9000
---------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or, for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. WesBanco had 18,178,137
shares outstanding at April 30, 2001.
WESBANCO, INC.
TABLE OF CONTENTS
-----------------
ITEM # ITEM PAGE NO.
- ------ ---- --------
Part I
------
1 Financial Statements 3 - 7
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 18
3 Quantitative and Qualitative Disclosures About
Market Risk 18
Part II
-------
1 Legal Proceedings 18 - 19
2 Changes in Securities and Use of Proceeds 19
3 Defaults Upon Senior Securities 19
4 Submission of Matters to a Vote of Security Holders 19
5 Other Information 19
6 (a) Exhibits 19
6 (b) Reports on Form 8-K 19 - 20
Signatures 21
2
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ----------------------------
Consolidated Balance Sheets at March 31, 2001 and December 31,
2000, and Consolidated Statements of Income for the three-month
periods ended March 31, 2001 and 2000, and Consolidated Statements of
Changes in Shareholders' Equity and Consolidated Statements of Cash
Flows for the three-months ended March 31, 2001 and 2000 are set forth
on the following pages.
In the opinion of management of the Registrant, all adjustments,
consisting of normal recurring accruals, necessary for a fair
presentation of the financial information referred to above for such
periods, have been made. The results of operations for the three-
months ended March 31, 2001 are not necessarily indicative of what
results may be attained for the entire year.
For further information, refer to the 2000 Annual Report to
Shareholders, which includes consolidated financial statements and
footnotes thereto and WesBanco, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 2000.
3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- -----------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
March 31, December 31,
2001 2000
----------- -----------
ASSETS
Cash and due from banks $ 63,003 $ 72,796
Due from banks - interest bearing 589 620
Federal funds sold 92,200 ---
Securities:
Held to maturity (fair values of
$223,860 and $198,534, respectively) 220,063 196,102
Available for sale, carried at fair value 351,568 350,287
----------- -----------
Total securities 571,631 546,389
----------- -----------
Loans, net of unearned income 1,559,833 1,590,702
Allowance for loan losses (19,971) (20,030)
----------- -----------
Net loans 1,539,862 1,570,672
----------- -----------
Premises and equipment 52,629 53,147
Accrued interest receivable 14,733 15,725
Other assets 50,263 50,788
----------- -----------
Total Assets $ 2,384,910 $ 2,310,137
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing demand $ 231,504 $ 234,265
Interest bearing demand 618,867 619,097
Savings deposits 253,249 249,830
Certificates of deposit 766,939 767,169
----------- -----------
Total deposits 1,870,559 1,870,361
----------- -----------
Other borrowings 230,877 159,317
Accrued interest payable 9,127 8,438
Other liabilities 17,740 13,515
----------- -----------
Total Liabilities 2,128,303 2,051,631
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000
shares authorized; none outstanding --- ---
Common stock, $2.0833 par value; 50,000,000
shares authorized; 20,996,531 shares issued 43,742 43,742
Capital surplus 59,338 59,464
Retained earnings 221,707 218,539
Treasury stock (2,700,923 and 2,428,591 shares,
respectively, at cost) (67,368) (62,009)
Accumulated other comprehensive income
(fair value adjustments) 2,062 (365)
Deferred benefits for directors and employees (2,874) (865)
----------- -----------
Total Shareholders' Equity 256,607 258,506
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,384,910 $ 2,310,137
=========== ===========
See Notes to Consolidated Financial Statements.
4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- -----------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
For the three months ended
March 31,
--------------------------
2001 2000
----------- -----------
INTEREST INCOME
Loans, including fees $ 32,617 $ 30,680
Securities:
Taxable 5,513 5,971
Tax-exempt 2,265 2,468
----------- -----------
Total interest on securities 7,778 8,439
----------- -----------
Federal funds sold 510 207
----------- -----------
Total interest income 40,905 39,326
----------- -----------
INTEREST EXPENSE
Interest bearing demand deposits 5,253 5,053
Savings deposits 1,223 1,353
Certificates of deposit 11,173 10,097
----------- -----------
Total interest on deposits 17,649 16,503
Other borrowings 2,320 1,966
----------- -----------
Total interest expense 19,969 18,469
----------- -----------
NET INTEREST INCOME 20,936 20,857
Provision for loan losses 900 567
----------- -----------
Net interest income after provision
for loan losses 20,036 20,290
----------- -----------
NON-INTEREST INCOME
Trust fees 3,122 3,119
Service charges on deposits 2,089 1,741
Other income 534 691
Net securities gains/(losses) 255 (4)
----------- -----------
Total non-interest income 6,000 5,547
----------- -----------
NON-INTEREST EXPENSE
Salaries and wages 6,621 6,692
Employee benefits 1,280 1,514
Net occupancy 992 940
Equipment 1,532 1,603
Other operating 4,619 5,193
----------- -----------
Total non-interest expense 15,044 15,942
----------- -----------
Income before provision for income taxes 10,992 9,895
Provision for income taxes 3,587 2,965
----------- -----------
NET INCOME $ 7,405 $ 6,930
=========== ===========
Earnings per share $ 0.40 $ 0.35
Average shares outstanding 18,469,445 19,647,732
Dividends per share $ 0.23 $ 0.22
See Notes to Consolidated Financial Statements.
5
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
Accumulated Deferred
Common Stock Other Benefits for
------------------- Capital Retained Treasury Comprehensive Directors &
Shares Amount Surplus Earnings Stock Income/(Loss) Employees Total
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1999 19,789,925 $ 43,742 $60,133 $208,508 $(34,311) $ (7,456) $ (952) $269,664
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 6,930 6,930
Net fair value adjustment on
securities available for
sale - net of tax effect (994) (994)
--------
Comprehensive income 5,936
Cash dividends:
Common ($.22 per share) (4,337) (4,337)
Treasury shares purchased - net (435,330) (72) (9,952) (10,024)
Deferred benefits for
directors - net (11) (11)
- ------------------------------------------------------------------------------------------------------------------------------
March 31, 2000 19,354,595 $ 43,742 $60,061 $211,101 $(44,263) $ (8,450) $ (963) $261,228
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 2000 18,567,940 $ 43,742 $59,464 $218,539 $(62,009) $ (365) $ (865) $258,506
- ------------------------------------------------------------------------------------------------------------------------------
Net Income 7,405 7,405
Net fair value adjustment on
securities available for
sale - net of tax effect 2,314 2,314
Cumulative effect of accounting
change for derivative financial
instruments - net of tax effect 558 558
Net fair value adjustment on
derivatives - net of tax effect (406) (406)
Net derivative gains reclassified
into earnings - net of tax effect (39) (39)
--------
Comprehensive income 9,832
Cash dividends:
Common ($.23 per share) (4,237) (4,237)
Treasury shares purchased-net (272,332) (126) (5,359) (5,485)
Borrowing on ESOP debt (2,000) (2,000)
Deferred benefits for
directors - net (9) (9)
- ------------------------------------------------------------------------------------------------------------------------------
March 31, 2001 18,295,608 $ 43,742 $59,338 $221,707 $(67,368) $ 2,062 $ (2,874) $256,607
==============================================================================================================================
See Notes to Consolidated Financial Statements.
6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------
(Unaudited, in thousands)
For the three months ended
Increase (Decrease) in Cash and Cash Equivalents March 31,
--------------------------
2001 2000
----------- -----------
Cash Flows From Operating Activities:
Net Income $ 7,405 $ 6,930
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,297 1,275
Net amortization and accretion (16) 178
Provision for loan losses 900 567
(Gains)/losses on sales of securities - net (255) 4
Deferred income taxes 72 100
Other - net (1,977) (136)
Net change in:
Interest receivable 992 907
Other assets and other liabilities 3,245 (1,686)
Interest payable 689 1,066
---------- ----------
Net cash provided by operating activities 12,352 9,205
---------- ----------
Cash Flows From Investing Activities:
Securities held to maturity:
Proceeds from maturities and calls 4,147 2,502
Payments for purchases (28,125) (71)
Securities available for sale:
Proceeds from sales 31,071 7,368
Proceeds from maturities and calls 62,782 11,930
Payment for purchases (91,019) (4,407)
Decrease (increase) in loans 29,910 (10,916)
Purchases of premises and equipment - net (804) (809)
---------- ----------
Net cash provided by investing activities 7,962 5,597
---------- ----------
Cash Flows From Financing Activities:
Increase in deposits 198 42,834
Increase (decrease) in other borrowings 71,560 (48,600)
Dividends paid (4,211) (4,367)
Treasury shares purchased - net (5,485) (10,024)
---------- ----------
Net cash provided (used) by financing activities 62,062 (20,157)
---------- ----------
Net increase (decrease) in cash and cash equivalents 82,376 (5,355)
Cash and cash equivalents at beginning of period 73,416 81,354
---------- ----------
Cash and cash equivalents at end of period $ 155,792 $ 75,999
========== ==========
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 19,281 $ 17,403
Income taxes paid 175 ---
See Notes to Consolidated Financial Statements.
7
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Note 1 - Accounting policies
- ----------------------------
Basis of presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. The consolidated financial statements include the
accounts of WesBanco, Inc. ("the Corporation") and its wholly-owned
subsidiaries. Significant intercompany transactions have been eliminated
in consolidation. Cash and cash equivalents: For the purpose of reporting
cash flows, cash and cash equivalents include cash and due from banks, due
from banks-interest bearing and federal funds sold. Generally, federal funds
are sold for one-day periods.
Earnings per share: Basic earnings per share are calculated by dividing net
income by the weighted average number of shares of common stock outstanding
during each period. For diluted earnings per share, the weighted average
number of shares for each period assumes the exercise of stock options.
There was no dilutive effect from the stock options and accordingly, basic
and diluted earnings per share are the same.
Note 2 - New accounting standard
- --------------------------------
As of January 1, 2001, the Corporation adopted 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". This Statement requires all
derivatives to be recognized in the statement of condition at fair value,
with changes in the fair value of the derivative instruments to be recorded
in current earnings or deferred in other comprehensive income. The impact
of adopting this new accounting standard on WesBanco's financial position
was not material.
8
Item 2. Management's Discussion and Analysis of Financial Condition
- --------------------------------------------------------------------
and Results of Operations
- -------------------------
The following discussion and analysis presents in further detail
the financial condition and results of operations of WesBanco, Inc.
and its subsidiaries. This discussion and analysis should be read in
conjunction with the consolidated financial statements and notes
presented in this report.
Forward-looking statements in this report relating to the
Corporation's plans, strategies, objectives, expectations, intentions
and adequacy of resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements, which
are not historical fact, 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; or other unanticipated external developments materially
impacting the Corporation's operational and financial performance.
The Corporation does not assume any duty to update forward-looking
statements.
Earnings Summary
----------------
Comparison of the three-months ended March 31, 2001 and 2000
------------------------------------------------------------
WesBanco's net income per share for the three-months ended March 31,
2001 increased 14.3% to $0.40 compared to $0.35 for the three-months ended
March 31, 2000. Net income increased 6.9% to $7.4 million compared to $6.9
million. WesBanco's increased net income was primarily due to improved
operating efficiencies, increases in deposit activity income and securities
gains.
WesBanco's key performance ratios remained strong. Earnings
performance reflected a return on average assets of 1.3% and a return
on average equity of 11.6% for the three-months ended March 31, 2001
compared to a return on average assets of 1.2% and a return on average
equity of 10.4% for the same period in 2000.
WesBanco's core earnings per share for the three-months ended
March 31, 2001 increased 10.8% to $0.41 compared to $0.37 for the
three-months ended March 31, 2000. Core earnings, which excludes
amortization of goodwill and net securities gains, increased 4.6% to
$7.5 million compared to $7.2 million.
9
TABLE 1 AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
Three months ended March 31,
------------------------------------------
2001 2000
------------------- -------------------
(dollars in thousands) Average Average Average Average
Volume Rate Volume Rate
------------------- -------------------
ASSETS
Loans, net of unearned income(1) $1,577,302 8.39% $1,528,367 8.07%
Securities:(2)
Taxable 346,708 6.36 374,716 6.37
Tax-exempt (3) 183,987 7.58 199,064 7.63
------------------- -------------------
Total securities 530,695 6.78 573,780 6.81
Federal funds sold 39,407 5.18 14,163 5.88
------------------- -------------------
Total earning assets (3) 2,147,404 7.93% 2,116,310 7.73%
------------------- -------------------
Other assets 159,418 146,108
----------- -----------
Total Assets $2,306,822 $2,262,418
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $ 615,356 3.46% $ 601,166 3.38%
Savings deposits 250,961 1.98 274,320 1.98
Certificates of deposit 765,056 5.92 753,836 5.39
------------------- -------------------
Total interest bearing deposits 1,631,373 4.39 1,629,322 4.07
Other borrowings 178,243 5.28 143,639 5.50
------------------- -------------------
Total interest bearing liabilities 1,809,616 4.48% 1,772,961 4.19%
------------------- -------------------
Non-interest bearing demand deposits 217,243 211,272
Other liabilities 21,713 12,208
Shareholders' Equity 258,250 265,977
----------- -----------
Total Liabilities and Shareholders'
Equity $2,306,822 $2,262,418
=========== ===========
Net yield on earning assets 3.93% 3.95%
======= =======
Taxable equivalent net yield on
average earning assets 4.16% 4.22%
======= =======
(1) Gross of allowance for loan losses and net of unearned income,
includes non-accrual and loans held for sale, loan fees included in
interest income on loans are not material.
(2) Average yields on securities available for sale have been calculated
based on amortized cost.
(3) Taxable equivalent basis is calculated on tax-exempt securities using
a tax rate of 35% for each year presented.
TABLE 2 RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND
INTEREST EXPENSE
Three months ended March 31,
2001 compared to 2000
---------------------------------
Net Increase
(in thousands) Volume Rate (Decrease)
- -----------------------------------------------------------------------------
Increase (decrease) in interest income:
Loans, net of unearned income $ 870 $ 1,067 $ 1,937
Taxable securities (445) (13) (458)
Tax-exempt securities (1) (286) (26) (312)
Federal funds sold 330 (27) 303
--------------------------------
Total interest income change (1) 469 1,001 1,470
--------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits 99 101 200
Savings deposits (125) (5) (130)
Certificates of deposit 140 936 1,076
Other borrowings 439 (85) 354
--------------------------------
Total interest expense change 553 947 1,500
--------------------------------
Net interest income increase (decrease)(1) $ (84) $ 54 $ (30)
================================
Taxable equivalent adjustment 109
--------
Net interest income increase $ 79
========
(1) Taxable equivalent basis is calculated on tax-exempt securities
using a tax rate of 35% for each year presented.
10
Net Interest Income
-------------------
Net interest income, on a taxable equivalent basis ("TE"),
decreased $30 thousand for the three-months ended March 31, 2001
compared to the three-months ended March 31, 2000. Average earning
assets increased $31.1 million or 1.5%, while average interest bearing
liabilities increased $36.7 million or 2.1%. As shown in Table 1, the
net (TE) yield on average earning assets decreased slightly to 4.16%
compared to 4.22%. Similar to industry trends, between the two periods
WesBanco's net yield declined due to the rising interest rate environment
in 2000 and competitive pricing pressure to adjust rates on loan and
deposit products. The decline in interest rates during the first quarter
of 2001 however, proved to be a stabilizing factor for WesBanco's net yield.
Table 2 presents volume and rate changes in interest income
and interest expense and the impact of changes in interest rates and
the effect competitive pricing pressure had for the comparative
periods. Competitive pricing pressure to make interest rate
adjustments on loan and deposit products offset the positive effects
of lower deposit cost during the first quarter of 2001.
Interest income (TE) increased $1.5 million or 3.6% for the
three-months ended March 31, 2001 compared to the three-months ended
March 31, 2000. As shown in Table 1 and 2, interest income (TE) increased
$0.5 million due to volume increases in average earning assets of
$31.1 million and increased $1.0 million due to average rate increases
of 20 basis points. Average loan growth of $48.9 million was
partially funded by decreases of $43.1 million in average investment
securities. Average federal funds sold grew $25.2 million. The
shifting of investment securities balances into higher yielding loan
products and the general rise in interest rates contributed to the
increase in the (TE) yield on average earning assets to 7.9% from 7.7%.
Interest expense increased $1.5 million or 8.1% for the three-
months ended March 31, 2001 compared to the three-months ended March
31, 2000. As shown in Table 1 and 2, interest expense increased $0.6
million due to volume increases in average interest bearing liabilities
of $36.7 million and increased $0.9 million due to average rate
increases of 29 basis points. The volume and rate increases were
primarily due to average other borrowings increasing $34.6 million or
24.1% and average rates paid on certificates of deposits increasing to
5.92% from 5.39%. Rates paid on average interest bearing liabilities
increased to 4.5% from 4.2% due to the rising interest rate
environment in 2000. Customers shifted savings balances into
competitively priced Prime Rate Money Market product, NOW accounts and
certificates of deposit. Average savings deposits decreased $23.4
million or 8.5% while average interest bearing demand deposits, which
includes the Prime Rate Money Market product and NOW accounts
increased $14.2 million or 2.4%. Average certificates of deposit
increased $11.2 million or 1.5%.
11
Non-interest Income
-------------------
Non-interest income, excluding net securities gains, increased
$0.2 million or 3.5% for the three-months ended March 31, 2001
compared to the three-months ended March 31, 2000. The majority of
the increase resulted from improved deposit activity income. Deposit
activity income increased $0.3 million or 20.0% due to increases in
deposit activity fees and ATM fees. Trust revenue remained strong at
$3.1 million for the comparative periods. Net securities gains
increased $0.3 million for the comparative period. The Corporation
was able to improve liquidity and realize securities gains on the sale
of mortgage backed securities due to declining interest rates during
the first quarter of 2001.
Non-interest Expense
--------------------
Non-interest expense for the three-months ended March 31, 2001
decreased $0.9 million or 5.6% compared to the three-months ended
March 31, 2000 due to reduced levels of other operating expense and
employee costs. The consolidation of WesBanco's four banking
affiliates and mortgage company affiliate into a single bank charter
in 2000 continues to provide improved internal operating efficiencies.
As a result, WesBanco's efficiency ratio has improved to 52.8% from
56.5% for the comparative periods. Other operating expense decreased
$0.6 million or 11.1% due to reductions in marketing, supplies and
communication expenses. Employee costs decreased $0.3 million
primarily due to a lower number of employees. Health care costs
increased approximately $0.1 million.
TABLE 3 Reconciliation of Income Tax Rates
For the three months ended
March 31,
---------------------------
2001 2000
---- ----
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (6) (7)
State income tax - net of federal tax effect 4 4
All other - net --- (2)
-------- -------
Effective tax rate 33% 30%
======== =======
WesBanco's federal income tax expense increased $0.6 million to
$3.0 million for the three-months ended March 31, 2001 compared to
$2.4 million for the three-months ended March 31, 2000. The
Corporation's effective tax rate increased to 33% compared to 30%.
The increase in the effective tax rate resulted from a decrease in
tax-free income.
12
Financial Condition
-------------------
WesBanco's balance sheet remained strong with a primary capital
to asset ratio of 11.5% and a book value per share of $14.03 at March
31, 2001. Total assets of WesBanco were $2.4 billion as of March 31,
2001, an increase of $74.8 million or 3.2% compared to total assets as
of December 31, 2000. Total loans decreased $30.9 or 1.9%, deposits
remained stable and other borrowings increased $71.6 million or 44.9%
during the first quarter of 2001.
TABLE 4 Composition of Securities
March, 31, December 31,
2001 2000
(in thousands) ---------- ------------
Securities held to maturity (at amortized cost):
- ------------------------------------------------
U.S. Treasury and Federal Agency securities $ 4,061 $ 4,357
Obligations of states and political subdivisions 198,029 173,771
Other debt securities 17,973 17,974
--------- ---------
Total securities held to maturity (fair value
of $223,860 and $198,534, respectively) 220,063 196,102
--------- ---------
Securities available for sale (at fair value):
- ----------------------------------------------
U. S. Treasury and Federal Agency securities 215,001 206,268
Obligations of states and political subdivisions 12,931 12,907
Corporate securities 3,033 3,033
Mortgage-backed and other debt securities 120,603 128,079
--------- ---------
Total securities available for sale 351,568 350,287
--------- ---------
Total securities $ 571,631 $ 546,389
========= =========
Securities increased $25.2 million between March 31, 2001 and
December 31, 2000 representing a use of funds for the first quarter of
2001. WesBanco purchased obligations of states and political
subdivisions classified as held to maturity securities to improve tax
equivalent income and decrease income taxes. Unrealized pre-tax
gains/losses on available for sale securities (fair value adjustments)
increased to a $3.3 million market gain as of March 31, 2001 compared
to a $0.5 million market loss as of December 31, 2000. These fair
value adjustments represent temporary fluctuations resulting from
changes in market rates in relation to average yields in the available
for sale portfolio. WesBanco can impact the magnitude of the fair
value adjustment by managing both the volume and average maturities of
securities classified as available for sale. If these securities were
held to their respective maturity dates, no fair value gain or loss
would be realized.
13
TABLE 5 Composition of Loans
March 31, December 31,
(in thousands) 2001 2000
------------ -------------
Commercial $ 529,487 $ 546,136
Real estate - construction 33,919 36,007
Real estate 648,968 654,315
Personal, net of unearned income 347,459 354,244
---------- ----------
Loans, net of unearned income $1,559,833 $1,590,702
========== ==========
Loans, net of unearned income decreased $30.9 million or 1.9%
between March 31, 2001 and December 31, 2000. All major segments of
the portfolio experienced reductions during the first quarter due to
the general slowdown in the economy. Commercial loans decreased $16.6
million due to payoffs by two commercial borrowers during the first
quarter. The composition of loans as a percentage of total loans
consist of commercial at 34%, real estate at 44% and personal loans at
22% as of March 31, 2001. WesBanco's loan to deposit ratio was 83.4%.
TABLE 6 Non-performing Assets, Other Impaired Loans and Loans Past
Due 90 Days or More
March 31, December 31,
(in thousands) 2001 2000
----------- ------------
Non-accrual loans $ 4,720 $ 5,561
Renegotiated loans 4,832 417
Other real estate owned 3,353 3,424
-------- --------
Total non-performing assets 12,905 9,402
Other impaired loans (1) 7,771 11,513
-------- --------
Total non-performing assets and
other impaired loans $ 20,676 $ 20,915
======== ========
Loans past due 90 days or more $ 7,962 $ 6,581
======== ========
(1) Includes loans internally classified as doubtful and substandard
that meet the definition of impaired loans.
WesBanco's level of non-performing assets and other impaired
loans decreased $0.2 million between March 31, 2001 and December 31,
2000. Non-performing assets and other impaired loans as a percentage
of total loans remained consistent at 1.32% for the comparative
periods. The decrease in other impaired loans and corresponding
increase in renegotiated loans resulted primarily from the
reclassification of three commercial loans totaling $4.1 million.
14
WesBanco monitors the overall quality of its loan portfolio
through various methods. Underwriting policies and guidelines have
been established for all types of credits and management continually
monitors the portfolio for adverse trends in delinquent and non-
performing loans. Loans are considered impaired when it is determined
that WesBanco may not be able to collect all principal and interest
due according to the contractual terms of the loans. Impaired loans
include all non-accrual and renegotiated loans, as well as loans
internally classified as substandard or doubtful that meets the
definition of impaired loans. Specific allowances for loan losses are
allocated for impaired loans based on the present value of expected
future cash flows, or a fair value of the collateral for loans that
are collateral dependent.
Lending by WesBanco is guided by written lending policies, which
allow for various types of lending. Normal lending practices do not
include the acquisition of high yield non-investment grade loans or
"highly leveraged transactions" ("HLT") from outside the primary
market.
TABLE 7 Allowance for Loan Losses
For the three months ended
March 31,
(in thousands) --------------------------
2001 2000
------------ ------------
Balance, at beginning of period $ 20,030 $ 19,752
Charge-offs (1,097) (912)
Recoveries 138 371
-------- --------
Net charge-offs (959) (541)
Provision for loan losses 900 567
-------- --------
Balance, at end of period $ 19,971 $ 19,778
======== ========
The allowance for loan losses is maintained at a level considered
adequate by management. Amounts allocated to the allowance for loan
losses are based upon management's evaluation of the credit risk in
the loan portfolio. While management has allocated the allowance for
loan losses to each loan category, the allowance is general in nature
and available for the loan portfolio in its entirety.
The allowance for loan losses as a percentage of total loans
remained consistent at 1.3% as of March 31, 2001 and March 31, 2000,
respectively. Net loan charge-offs increased $0.4 million due to a
$0.2 million increase in charge-offs and a $0.2 million decrease in
recoveries for the comparative period. Net loan charge-offs as a
percentage of average loans increased to 0.06% from 0.04%.
15
The adequacy of the allowance for loan losses is evaluated
quarterly. Specific reserves are established when warranted for
commercial loans greater than $0.1 million. 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 collateral and other secondary repayment sources, if any. For all
other commercial loans not specifically reserved, and residential real
estate and personal loans, management considers historical net charge-off
experience relative to loans outstanding for each segment to estimate
losses.
Management also evaluates factors such as economic conditions,
changes in underwriting standards or practices, delinquency and other
trends in the portfolio, specific industry conditions, loan
concentrations, the results of recent internal loan reviews or
regulatory examinations, and other relevant factors that may impact
the loan portfolio. Management relies on certain types of observable
data, such as employment statistics, trends in bankruptcy filings, and
external events that impact particular industries, to determine
whether loss attributes exist at the balance sheet date that will lead
to higher than historical losses in any segment of the portfolio.
Deposits and Other Borrowings
-----------------------------
Deposits increased $0.2 million between March 31, 2001 and
December 31, 2000, reflecting growth in savings. The growth in this
category was offset by reductions in non-interest and interest bearing
demand deposits and certificates of deposits. This shifting of funds
reflects our customers' preference for shorter term deposit
alternatives in this period of declining interest rates.
Other borrowings, which includes repurchase agreements, Federal
funds purchased and Federal Home Loan Bank borrowings increased $71.6
million or 44.9%, represented a source of funds during this year-to-
date period. Repurchase agreements increased $23.5 million, Federal
funds purchased increased $2.3 million and Federal Home Loan Bank
borrowings increased $45.8 million. WesBanco utilized other
borrowings as an alternate source of funds due to the minimal deposit
growth during the first quarter of 2001 to fund the purchase of tax-
exempt and Federal Agency securities.
Capital Resources
-----------------
Shareholders' equity remained strong, highlighted by a primary
capital to asset ratio of 11.5% and a book value per share of $14.03
at March 31, 2001. Shareholders' equity decreased $1.9 million
between March 31, 2001 and December 31, 2000, due to the Corporation's
purchase of 272,332 net treasury shares for $5.4 million and borrowing
$2.0 million in WesBanco's Employee Stock Option Plan. These
reductions in capital were partially offset by the $3.2 million
retention of earnings, net of
16
dividends and a $2.4 million increase in other comprehensive income. The
changes in other comprehensive income included fair value adjustments on
securities available for sale and derivatives along with the cumulative
effect of adopting SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities".
On March 22, 2001, WesBanco completed the acquisition of one
million shares of common stock under a stock repurchase program and
began a new program, approved on March 21, 2001 to repurchase up to
one million shares of WesBanco common stock on the open market. The
timing, price and quantity of purchases under the plan are at the
discretion of the Corporation and the plan may be discontinued or
suspended at any time.
TABLE 8 Capital Adequacy Ratios
March 31, December 31,
2001 2000
----------- ------------
Tier I capital 14.4% 14.4%
Total risk-based capital 15.7 15.6
Leverage 10.2 10.5
WesBanco is subject to risk-based capital guidelines that measure
capital relative to risk-adjusted assets and off-balance sheet
financial instruments. As shown in Table 8, the Corporation's Tier I,
total risk-based capital and leverage ratios are well above the
required minimum levels of 4%, 8%, and 4%, respectively. At March 31,
2001 and December 31, 2000, WesBanco's affiliate bank, WesBanco Bank,
Inc., also exceeded the minimum regulatory levels. There are no
conditions or events since March 31, 2001 that management believes
have changed WesBanco's well-capitalized category.
Liquidity Risk
--------------
Liquidity risk is managed through the Corporation's ability to
provide adequate funds to meet changes in loan demand, unexpected
outflows in deposits and other borrowings as well as to take advantage
of market opportunities and meet operating cash needs of the
Corporation. This is accomplished by maintaining liquid assets in the
form of securities, maintaining sufficient borrowing capacity and a
stable core deposit base. WesBanco's Asset/Liability Management
Committee monitors liquidity.
The principal source of liquidity is WesBanco's deposit base and
other borrowings. In addition to its deposit funding, the
Corporation's banking subsidiary maintains a Federal Home Loan Bank
borrowings line of credit of $652.1 million, of which $568.2 million
remains unused. The Corporation
17
increased FHLB borrowings by $45.8 million during the first quarter of
2001 to purchase tax-exempt and Federal Agency securities.
The securities portfolio, federal funds sold and cash and due from
banks serves as additional sources of liquidity. Securities maturing
within one year from both the available for a sale and held to maturity
portfolios totaled $23.4 million as of March 31, 2001. Securities
classified as available for sale totaled $351.6 million of which $307.0
million were pledged at March 31, 2001. Additional liquidity is provided
by federal funds sold of $92.2 million and cash and due from banks of $63.6
million at March 31, 2001.
At March 31, 2001, the Corporation had outstanding commitments to
extend credit in the ordinary course of business approximating $216.1
million. On a historical basis, only a small portion of these
commitments will result in an outflow of funds. Management believes
the Corporation has sufficient liquidity to meet current obligations
to borrowers, depositors and others.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- ------------------------------------------------------------------
Not applicable.
Part II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- -------------------------
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 filed a counterclaim asserting a different interpretation
of the plan. Both parties filed Summary Judgment Motions and the
Court granted the Bank's Motion for Summary Judgment on most of the
substantive issues and denied the defendant's Motions. It is believed
this matter will now be resolved based on the interpretation of the
Plan proposed by the Bank.
18
WesBanco is also involved in other lawsuits, claims,
investigations, and proceedings which arise in the ordinary course of
business. There are no such other matters pending that WesBanco
expects to be material in relation to its business, financial
condition or results of operations.
Items 2, 3, 5 and 6a
- ---------------------
Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On April 18, 2001, the Annual Meeting of the Stockholders of
WesBanco, Inc. was held.
The following directors were re-elected to the Board of Directors
for a term of three years expiring at the annual stockholders meeting
in 2004:
For Against
------------- ------------
James E. Altmeyer 12,772,662 1,205,573
Christopher V. Criss 14,223,019 45,288
James C. Gardill 14,127,485 121,715
Roland L. Hobbs 14,194,228 68,320
William E. Mildren, Jr. 14,219,788 47,872
The shareholders voted to increase WesBanco's common shares
authorized for the Key Executive Incentive Bonus and Option Plan to a
total of one million (1,000,000) shares.
For Against Abstained
---------- --------- ---------
11,460,941 2,094,059 363,496
Item 6(b) - Reports on Form 8-K
- -------------------------------
On January 8, 2001, WesBanco, Inc. filed a current report on Form
8-K, dated December 29, 2000 announcing the definitive Agreement and
Plan of Merger providing for the acquisition of Freedom Bancshares,
Inc. and merger of Freedom's affiliate Belington Bank, located in
Belington, West Virginia, with and into WesBanco affiliate, WesBanco
Bank, Inc. The transaction is expected to be completed in the second
quarter of 2001.
19
On February 23, 2001, WesBanco, Inc. filed a current report on
Form 8-K, dated February 22, 2001 announcing the definitive Agreement
and Plan of Merger providing for the merger of American Bancorporation
with and into a wholly-owned subsidiary of WesBanco to be formed for
the purpose of effecting the merger, and the simultaneous merger of
American's affiliate, Wheeling National Bank, with and into WesBanco's
affiliate, WesBanco Bank, Inc. The transaction is expected to be
completed in the third quarter of 2001.
On March 22, 2001, WesBanco, Inc. filed a current report on Form
8-K, dated March 21, 2001 announcing the adoption of a new stock
purchase plan, effective immediately, to begin repurchasing up to one
million shares of WesBanco common stock on the open market.
20
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WESBANCO, INC.
--------------
Date: May 15, 2001 /s/ Edward M. George
---------------------------------
Edward M. George
President and Chief Executive Officer
/s/ Paul M. Limbert
Date: May 15, 2001 -----------------------------------
Paul M. Limbert
Executive Vice President and Chief
Financial Officer
21