UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
------
WESBANCO, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0571723
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 17,947,884 shares outstanding at October 31, 2001.
WESBANCO, INC.
TABLE OF CONTENTS
-----------------
ITEM # ITEM PAGE NO.
- ------ ---- --------
PART I - FINANCIAL INFORMATION
------------------------------
1 Financial Statements 3 - 7
2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 23
3 Quantitative and Qualitative Disclosures
About Market Risk 23 - 24
PART II - OTHER INFORMATION
---------------------------
1 Legal Proceedings 24
2 Changes in Securities and Use of Proceeds 25
3 Defaults Upon Senior Securities 25
4 Submission of Matters to a Vote of Security
Holders 25
5 Other Information 25
6 (a) Exhibits 25
6 (b) Reports on Form 8-K 25 - 26
Signatures 27
2
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. - Financial Statements
- ------------------------------
Consolidated Balance Sheets at September 30, 2001 and
December 31, 2000, and Consolidated Statements of Income for the
three and nine-months ended September 30, 2001 and 2000, and
Consolidated Statements of Changes in Shareholders' Equity and
Consolidated Statements of Cash Flows for the nine-months ended
September 30, 2001 and 2000 are set forth on the following pages.
In the opinion of management of WesBanco, Inc. ("WesBanco"),
all adjustments, consisting of normal recurring accruals necessary
for a fair presentation of the financial information referred to
above for such periods, have been made. The results of
operations for the nine-months ended September 30, 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 SHEETS
- ------------------------------------------------------------------------------
(Unaudited, dollars in thousands, except par value amount)
September 30, December 31,
2001 2000
------------- --------------
ASSETS
Cash and due from banks $ 73,746 $ 72,796
Due from banks - interest bearing 684 620
Federal funds sold 20,000 ---
Securities:
Held to maturity (fair values of
$251,278 and $198,534, respectively) 246,173 196,102
Available for sale, carried at
fair value 463,942 350,287
---------- ----------
Total securities 710,115 546,389
---------- ----------
Loans, net of unearned income 1,565,383 1,590,702
Allowance for loan losses (20,606) (20,030)
---------- ----------
Net loans 1,544,777 1,570,672
---------- ----------
Premises and equipment 50,715 53,147
Accrued interest receivable 15,860 15,725
Other assets 50,050 50,788
---------- ----------
Total Assets $2,465,947 $2,310,137
========== ==========
LIABILITIES
Deposits:
Non-interest bearing demand $ 238,222 $ 234,265
Interest bearing demand 240,462 260,058
Money Market 376,871 359,039
Savings 254,294 249,830
Certificates of deposit 793,471 767,169
---------- ----------
Total deposits 1,903,320 1,870,361
---------- ----------
Other borrowings 272,263 159,317
Accrued interest payable 8,705 8,438
Other liabilities 22,849 13,515
---------- ----------
Total Liabilities 2,207,137 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 58,884 59,464
Retained earnings 227,752 218,539
Treasury stock (3,052,996 and 2,428,591
shares, respectively, at cost) (74,693) (62,009)
Accumulated other comprehensive
income/(loss) 6,037 (365)
Deferred benefits for directors and
employees (2,912) (865)
---------- ----------
Total Shareholders' Equity 258,810 258,506
---------- ----------
Total Liabilities and Shareholders'
Equity $2,465,947 $2,310,137
========== ==========
See Notes to Consolidated Financial Statements.
4
WESBANCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
For the Three For the Nine
Months ended Months ended
September 30, September 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
INTEREST INCOME
Loans, including fees $ 31,606 $ 32,793 $ 96,075 $ 95,247
Securities:
Taxable 6,787 5,925 18,655 17,928
Tax-exempt 2,693 2,366 7,531 7,224
-------- -------- -------- --------
Total interest on securities 9,480 8,291 26,186 25,152
-------- -------- -------- --------
Federal funds sold 477 489 1,547 861
-------- -------- -------- --------
Total interest income 41,563 41,573 123,808 121,260
-------- -------- -------- --------
INTEREST EXPENSE
Interest bearing demand deposits 916 1,284 3,279 3,580
Money Market deposits 3,456 4,172 10,880 12,205
Savings deposits 1,256 1,314 3,724 4,003
Certificates of deposit 11,088 11,437 33,428 32,213
-------- -------- -------- --------
Total interest on deposits 16,716 18,207 51,311 52,001
Other borrowings 2,803 2,686 7,819 6,677
-------- -------- -------- --------
Total interest expense 19,519 20,893 59,130 58,678
-------- -------- -------- --------
NET INTEREST INCOME 22,044 20,680 64,678 62,582
Provision for loan losses 2,327 732 4,350 2,179
-------- -------- -------- --------
Net interest income after provision
for loan losses 19,717 19,948 60,328 60,403
-------- -------- -------- --------
NON-INTEREST INCOME
Trust fees 2,607 2,698 8,560 8,665
Service charges on deposits 2,307 2,095 6,793 5,989
Other income 653 606 1,887 1,812
Net securities gains 583 25 967 242
-------- -------- -------- --------
Total non-interest income 6,150 5,424 18,207 16,708
-------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and wages 7,172 7,024 20,652 20,794
Employee benefits 1,560 1,419 4,263 4,054
Net occupancy 984 933 3,037 2,821
Equipment 1,386 1,725 4,414 4,862
Other operating 5,158 5,159 15,129 15,666
-------- -------- -------- --------
Total non-interest expense 16,260 16,260 47,495 48,197
-------- -------- -------- --------
Income before provision for income taxes 9,607 9,112 31,040 28,914
Provision for income taxes 2,601 2,724 9,329 8,915
-------- -------- -------- --------
NET INCOME $ 7,006 $ 6,388 $ 21,711 $ 19,999
======== ======== ======== ========
Earnings per share $0.39 $0.34 $1.19 $1.04
Average shares outstanding 17,983,793 18,846,117 18,194,491 19,235,127
Dividends per share $0.23 $0.225 $0.69 $0.67
See Notes to Consolidated Financial Statements
5
WESBANCO, INC.
CONSOLIDATED STATEMENTS 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 19,999 19,999
Net fair value adjustment on
securities available for
sale - net of tax effect 2,577 2,577
---------
Comprehensive income 22,576
Cash dividends:
Common($.67 per share) (12,662) (12,662)
Treasury shares purchased - net (1,062,807) (372) (24,388) (24,760)
Deferred benefits for directors - net (40) (40)
- ---------------------------------------------------------------------------------------------------------------------------------
September 30,2000 18,727,118 $43,742 $59,761 $215,845 $(58,699) $(4,879) $ (992) $254,778
=================================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
December 31,2000 18,567,940 $43,742 $59,464 $218,539 $(62,009) $ (365) $ (865) $258,506
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income 21,711 21,711
Net fair value adjustment on
securities available for
sale - net of tax effect 8,026 8,026
Cumulative effect of accounting
change for derivative financial
instruments - net of tax effect 558 558
Net fair value adjustment on
derivatives - net of tax effect (2,070) (2,070)
Net derivative gains reclassified
into earnings - net of tax effect (112) (112)
---------
Comprehensive income 28,113
Cash dividends:
Common ($.69 per share) (12,498) (12,498)
Treasury shares purchased - net (624,405) (580) (12,684) (13,264)
Borrowing on ESOP debt (2,000) (2,000)
Deferred benefits for directors - net (47) (47)
- ---------------------------------------------------------------------------------------------------------------------------------
September 30,2001 17,943,535 $43,742 $58,884 $227,752 $(74,693) $ 6,037 $(2,912) $258,810
=================================================================================================================================
Comprehensive income for the three-month periods ended September 30, 2001
and 2000 was $12,562 and $9,617, respectively.
See Notes to Consolidated Financial Statements.
6
WESBANCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
(Unaudited, in thousands)
For the Nine Months ended
Increase in Cash and Cash Equivalents September 30,
-------------------------
2001 2000
--------- ---------
Cash Flows From Operating Activities:
Net Income $ 21,711 $ 19,999
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,741 3,862
Net amortization (accretion) (407) 354
Provision for loan losses 4,350 2,179
Gains on sales of securities - net (967) (242)
Deferred income taxes (63) (218)
Other - net (1,825) (107)
Net change in:
Interest receivable (135) (135)
Other assets and other liabilities 3,516 (79)
Interest payable 267 4,200
--------- ---------
Net cash provided by operating activities 30,188 29,813
--------- ---------
Cash Flows From Investing Activities:
Securities held to maturity:
Proceeds from maturities and calls 19,129 16,011
Payments for purchases (69,026) (475)
Securities available for sale:
Proceeds from sales 58,884 17,243
Proceeds from maturities and calls 141,297 40,915
Payment for purchases (299,555) (35,715)
(Increase) decrease in loans 21,545 (59,380)
Purchases of premises and equipment - net (1,484) (2,007)
Purchases of bank owned life insurance --- (4,400)
--------- ---------
Net cash used in investing activities (129,210) (27,808)
--------- ---------
Cash Flows From Financing Activities:
Increase in deposits 32,959 42,416
Increase (decrease) in other borrowings 112,946 (14,986)
Dividends paid (12,605) (12,944)
Treasury shares purchased - net (13,264) (24,760)
--------- ---------
Net cash provided (used) by financing activities 120,036 (10,274)
--------- ---------
Net increase (decrease) in cash and cash equivalents 21,014 (8,269)
Cash and cash equivalents at beginning of period 73,416 81,354
--------- ---------
Cash and cash equivalents at end of period $ 94,430 $ 73,085
========= =========
Supplemental Disclosures:
Interest paid on deposits and other borrowings $ 60,061 $ 54,478
Income taxes paid 7,256 9,335
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, and its wholly-owned
subsidiaries. Significant intercompany transactions have been
eliminated in consolidation.
Reclassification: Certain prior year financial information has
been reclassified to conform to the presentation at September 30,
2001. The reclassifications had no effect on net income.
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 - Agreements to Merge
- ----------------------------
On September 17, 2001, WesBanco and Freedom Bancshares, Inc.
mutually agreed to terminate the definitive Agreement and Plan of
Merger dated December 29, 2000, which provided for the
acquisition of Freedom Bancshares, Inc. and the merger of
Freedom Bancshares affiliate, Belington Bank, with and into
WesBanco's affiliate, WesBanco Bank, Inc.
On October 24, 2001, WesBanco's banking subsidiary, WesBanco
Bank, Inc., ("Bank") announced that it was successful in
upgrading its Community Reinvestment Act ("CRA") rating to a
"Satisfactory" rating through the Federal Reserve Bank Appeal
process. The change in the Bank's CRA rating will permit
WesBanco to proceed with the filing of an application to the
Federal Reserve Bank of Cleveland for the acquisition of American
Bancorporation, Wheeling, West Virginia, in accordance with the
terms and conditions of the Agreement and Plan of Merger dated
February 22, 2001.
On November 7, 2001, WesBanco and American Bancorporation
announced the execution of a First Amendment to the definitive
Agreement and Plan of Merger dated February 22, 2001. The First
8
Amendment provides for an extension of the period within which
this closing must be consummated from December 31, 2001 to March 31,
2002, extends the expiration of the term to be served by certain
American representatives appointed to the boards of WesBanco, Inc.
and WesBanco Bank, Inc. to December 31, 2002, and provides for both
institutions to perform additional due diligence.
Note 3 - New accounting standards
- ---------------------------------
In July 2001, the FASB issued SFAS No. 141, "Business
Combinations". SFAS No. 141 requires the purchase method of
accounting be used for all business combinations initiated or
completed after June 30, 2001 and eliminates the pooling-of-
interests method of accounting. The statement also addresses
disclosure requirements for business combinations and initial
recognition and measurement criteria for goodwill and other
intangible assets as a result of purchase business combinations.
Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and
Other Intangible Assets", which changes the accounting for
goodwill from an amortization method to an evaluation of possible
impairment approach. The amortization of goodwill, including
goodwill recognized relating to past business combinations, will
cease upon adoption of the new standard. Impairment testing for
goodwill at a reporting unit level will be required on at least
an annual basis. The new standard also addresses other accounting
matters, disclosure requirements and financial statement
presentation issues relating to goodwill and other intangible
assets. WesBanco will adopt SFAS No. 142 effective January 1,
2002, as required. Early adoption is not permitted. The impact
of adopting the provisions of this statement on WesBanco's
financial position and results of operations is currently not
estimated and will depend on the completion of an analysis of
WesBanco's goodwill balances and the cessation of goodwill
amortization.
In August 2001, the FASB issued SFAS No. 143, "Accounting for
Asset Retirement Obligations," which requires that the fair value
of a liability be recognized when incurred for the retirement of
a long-lived asset and the value of the asset be increased by
that amount. The statement also requires that the liability be
maintained at its present value in subsequent periods and
outlines certain disclosures for such obligations. The adoption
of this statement, which is effective January 1, 2003, is not
expected to have a material impact on the WesBanco's financial
statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," which replaces
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Assets to be Disposed Of." This statement primarily
defines one accounting model for long-lived assets to be disposed
of by sale, including discontinued operations, and addresses
implementation issues. The adoption of this statement, which is
effective January 1, 2002, is not expected to have a material
impact on the WesBanco's financial statements.
9
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 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 WesBanco'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;
actions of the Federal Reserve Board and Federal Deposit
Insurance Corporation, legislative, and federal and state
regulatory actions or reforms; or other unanticipated
developments materially impacting WesBanco's operational and
financial performance. WesBanco does not assume any duty to
update forward-looking statements.
10
TABLE 1: AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
Three Months ended September 30, Nine Months ended September 30,
----------------------------------------- -----------------------------------------
2001 2000 2001 2000
(dollars in thousands) ------------------- ------------------- ------------------- -------------------
Average Average Average Average Average Average Average Average
Volume Rate Volume Rate Volume Rate Volume Rate
------------------- ------------------- ------------------- -------------------
ASSETS
Loans,net of unearned income (1) $1,555,644 8.06% $1,570,826 8.31% $1,562,982 8.22% $1,549,828 8.21%
Securities: (2)
Taxable 448,988 6.05% 362,645 6.53% 401,652 6.19% 369,648 6.47%
Tax-exempt (3) 218,012 7.60% 187,511 7.77% 204,797 7.54% 192,910 7.68%
------------------- ------------------- ------------------- -------------------
Total securities 667,000 6.55% 550,156 6.95% 606,449 6.65% 562,558 6.88%
Federal funds sold 53,518 3.54% 28,804 6.76% 48,436 4.26% 17,958 6.40%
------------------- ------------------- ------------------- -------------------
Total earning assets (3) 2,276,162 7.51% 2,149,786 7.94% 2,217,867 7.70% 2,130,344 7.84%
------------------- ------------------- ------------------- -------------------
Other assets 167,700 160,106 163,713 154,328
----------- ----------- ----------- -----------
Total Assets $2,443,862 $2,309,892 $2,381,580 $2,284,672
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing demand deposits $ 243,799 1.49% $ 243,764 2.09% $ 247,597 1.77% $ 245,612 1.95%
Money Market deposits 373,399 3.67% 347,397 4.76% 367,749 3.96% 351,735 4.64%
Savings deposits 252,788 1.97% 264,272 1.98% 252,583 1.97% 270,047 1.98%
Certificates of deposit 787,700 5.58% 792,802 5.74% 776,320 5.76% 773,761 5.56%
------------------- ------------------- ------------------- -------------------
Total interest bearing deposits 1,657,686 4.00% 1,648,235 4.39% 1,644,249 4.17% 1,641,155 4.23%
Other borrowings 278,540 3.99% 173,179 6.17% 234,363 4.46% 152,527 5.85%
------------------- ------------------- ------------------- -------------------
Total interest
bearing liabilities 1,936,226 4.00% 1,821,414 4.56% 1,878,612 4.21% 1,793,682 4.37%
------------------- ------------------- ------------------- -------------------
Non-interest bearing
demand deposits 232,421 212,006 225,817 213,825
Other liabilities 21,408 22,186 21,130 18,062
Shareholders' Equity 253,807 254,286 256,021 259,103
---------- ---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $2,443,862 $2,309,892 $2,381,580 $2,284,672
========== ========== ========== ==========
Taxable-equivalent net yield
on earning assets 4.11% 4.07% 4.14% 4.16%
======== ======== ======== ========
(1) Excludes allowance for loan losses; 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 September 30, Nine Months ended September 30,
(in thousands) 2001 compared to 2000 2001 compared to 2000
-------------------------------- ---------------------------------
Net Increase Net Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------------------------------- ---------------------------------
Increase (decrease) in interest income:
Loans, net of unearned income $ (287) $ (900) $(1,187) $ 875 $ (47) $ 828
Taxable securities 1,323 (461) 862 1,508 (781) 727
Tax-exempt securities (1) 583 (80) 503 675 (203) 472
Federal funds sold 293 (305) (12) 1,054 (368) 686
------------------------------- --------------------------------
Total interest income change (1) 1,912 (1,746) 166 4,112 (1,399) 2,713
------------------------------- --------------------------------
Increase (decrease) in interest expense:
Interest bearing demand deposits --- (368) (368) 28 (329) (301)
Money Market deposits 295 (1,011) (716) 533 (1,858) (1,325)
Savings deposits (51) (7) (58) (261) (18) (279)
Certificates of deposit (66) (283) (349) 104 1,111 1,215
Other borrowings 1,279 (1,162) 117 2,986 (1,844) 1,142
------------------------------- --------------------------------
Total interest expense change 1,457 (2,831) (1,374) 3,390 (2,938) 452
------------------------------- --------------------------------
Taxable-equivalent net interest
income increase (decrease) (1) $ 455 $ 1,085 $ 1,540 $ 722 $ 1,539 $ 2,261
=============================== ================================
Increase in taxable-
equivalent adjustment 176 165
------- -------
Net interest income increase $ 1,364 $ 2,096
======= =======
(1) Taxable-equivalent basis is calculated on tax-exempt securities using a
tax rate of 35% for each year presented.
11
Earnings Summary
----------------
Comparison of the three-months ended September 30, 2001 and 2000
----------------------------------------------------------------
WesBanco's earnings per share for the third quarter of 2001
increased 14.7% to $0.39 compared to $0.34 for the third quarter
of 2000. Net income increased 9.7% to $7.0 million compared to
$6.4 million. WesBanco's increased net income was primarily due
to increases in net interest income, net securities gains and
deposit activity fees. These positive factors were partially
offset by an increase in the provision for loan losses.
WesBanco's key earnings performance ratios improved for the
three-month comparative period. Annualized return on average
assets increased to 1.14% from 1.10% and annualized return on
average equity increased to 10.95% from 9.99%.
WesBanco's core earnings per share for the third quarter of 2001
increased 11.1% to $0.40 compared to $0.36 for the third quarter
of 2000. Core earnings, which excludes amortization of goodwill,
net securities gains and non-recurring items increased 6.5% to
$7.2 million compared to $6.8 million.
Net Interest Income
-------------------
Taxable-equivalent net interest income increased $1.5 million or
7.0% for the third quarter of 2001 compared to the third quarter
of 2000. Average earning assets increased $126.4 million or
5.9%, while average interest bearing liabilities increased $114.8
million or 6.3%. As shown in Table 1, the net interest margin
improved to 4.11% from 4.07%. The declining interest rates
during 2001 and the short-term interest rate sensitivity of
interest bearing liabilities favorably impacted WesBanco's net
interest margin. Table 2 presents the impact these volume and
rate changes had on the net interest margin.
Taxable-equivalent interest income increased $0.2 million or
0.4% for the third quarter of 2001 compared to the third quarter
of 2000. As shown in Table 2, taxable-equivalent interest income
increased $1.9 million or 4.5% due to the growth of average
earning assets and decreased $1.7 million or 4.1% due to the
decline in average interest rates. As shown in Table 1, average
securities increased $116.8 million, average federal funds sold
increased $24.7 million and average loans decreased $15.2
million. The general decline in interest rates during 2001 and a
combination of lower loan demand and an increase in securities at
lower yields contributed to the decrease in taxable-equivalent
yield on average earning assets to 7.51 % from 7.94%.
12
Interest expense decreased $1.4 million or 6.6% for the third
quarter of 2001 compared to the third quarter of 2000. As shown
in Table 2, interest expense decreased $2.8 million or 13.6% due
to average interest rate decreases and increased $1.4 million or
7.0% due to the growth of average interest bearing liabilities.
The decrease in average interest rates was primarily attributed
to the 218 and 109 basis points reductions in other borrowings
and money market accounts, respectively. The growth of average
interest bearing liabilities resulted primarily from average
increases in Federal Home Loan Bank ("FHLB") borrowings,
repurchase agreements and Prime Rate Money Market accounts of
$55.0 million, $30.7 million and $29.4 million, respectively. This
growth was partially offset by reductions in average savings
balances of $11.5 million and average certificates of deposit of
$5.1 million. The decrease in interest rates during 2001 and
customers shifting certificates of deposit into the competitively
priced Prime Rate Money Market product contributed to the
decrease in cost of funds on average interest bearing liabilities
to 4.00% from 4.56%.
Non-interest Income
-------------------
Non-interest income, excluding net securities gains, increased
$0.2 million or 3.1% for the third quarter of 2001 compared to
the third quarter of 2000. This increase resulted primarily from
increases in deposit activity income and income from real estate
loans originated for sale in the secondary market. Deposit
activity income increased $0.2 million or 10.1% due to increases
in deposit activity fees, debit cards and ATM fees. Income from
real estate loans originated for sale in the secondary market
increased $0.1 million. Trust revenue declined $0.1 million
primarily due to the continued declines in the equity markets.
Net securities gains increased $0.6 million due primarily to
gains realized on called U.S. Agency securities during the third
quarter of 2001.
Non-interest Expense
--------------------
Non-interest expense, excluding non-recurring acquisition related
expenses, decreased $0.3 million for the third quarter of 2001
compared to the third quarter of 2000. WesBanco recognized
acquisition related expenses of $0.3 million associated with the
WesBanco and Freedom Bancshares, Inc. mutually agreed
termination of the definitive Agreement and Plan of Merger dated
December 29, 2000. The decrease in non-interest expense was
primarily due to reductions in equipment, marketing, and tele-
communication expenses. Equipment costs decreased $0.3 million
or 19.7%, marketing expense decreased $0.2 million and tele-
communication expense decreased $0.1 million due to internal
operating efficiencies achieved from the single bank charter
consolidation. These decreases were partially offset by salary
and employee costs, which increased $0.3 million or 3.4% due to
increased temporary employment costs, recruiting expenses and
health care costs.
13
Income Taxes
------------
TABLE 3: Reconciliation of Income Tax Rates
For the Three Months ended
September 30,
--------------------------
2001 2000
---------- ----------
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (8) (7)
State income tax - net of federal tax effect 3 4
All other - net (3) (2)
---------- ----------
Effective tax rate 27% 30%
========== ==========
WesBanco's federal income and state tax expense decreased $0.1
million to $2.6 million for the three-months ended September 30,
2001 compared to $2.7 million for the three-months ended
September 30, 2000. WesBanco's effective tax rate for third
quarter of 2001 decreased to 27% from 30%. This decrease was
primarily due to increases in tax-exempt securities and loan
income recognized during the quarter.
Earnings Summary
----------------
Comparison of the nine-months ended September 30, 2001 and 2000
---------------------------------------------------------------
WesBanco's earnings per share for the nine-months ended September
30, 2001 increased 14.4% to $1.19 compared to $1.04 for the nine-
months ended September 30, 2000. Net income increased 8.6% to
$21.7 million compared to $20.0 million. WesBanco's increased
net income was primarily due to increases in net interest income,
net securities gains, deposit activity fees and a reduction in
non-interest expense resulting from improved internal operating
efficiencies. These positive factors were partially offset by an
increase in the provision for loan losses.
WesBanco's key earnings performance ratios continued to improve.
Annualized return on average assets increased to 1.22% from 1.17%
and annualized return on average equity increased to 11.33% from
10.31%.
WesBanco's core earnings per share increased 12.8% to $1.23
compared to $1.09. Core earnings, which excludes amortization of
goodwill, net securities gains and non-recurring items increased
7.0% to $22.4 million compared to $20.9 million.
14
Net Interest Income
-------------------
Taxable-equivalent net interest income increased $2.3 million or
3.4% for the nine-months ended September 30, 2001 compared to the
nine-months ended September 30, 2000. The general decline in
interest rates during 2001 and the growth of average earnings
assets favorably impacted WesBanco's net interest income. As
shown in Table 2, average earning assets increased $87.5 million
or 4.1%, while average interest bearing liabilities increased
$84.9 million or 4.7%. Similar to industry trends, WesBanco's net
interest margin decreased slightly to 4.14% from 4.16% due
primarily to competitive pricing pressure to adjust rates on loan
and deposit products. Increases in average securities at lower
yields also impacted the decrease in the net interest margin.
Additionally, customers are shifting savings balances into the
competitively priced Prime Rate Money Market product and
certificates of deposit at higher yields. Table 2 presents the
impact these volume and rate changes had on net interest income.
Taxable-equivalent interest income increased $2.7 million or
2.2% for the nine-months ended September 30, 2001 compared to the
nine-months ended September 30, 2000. As shown in Table 2,
taxable-equivalent interest income increased $4.1 million or 3.3%
due to the growth of average earning assets and decreased $1.4
million or 1.1% due to the decline in average interest rates. As
shown in Table 1, all average earning asset categories increased
for the comparative periods. Average securities, average federal
funds sold and average loans grew $43.9 million, $30.5 million
and $13.2 million, respectively. The general decline in interest
rates during 2001 coupled with average increases in securities
and federal funds sold at lower yields contributed to the
decrease in taxable-equivalent yield on average earning assets to
7.70% from 7.84%.
Interest expense increased $0.5 million or 0.8% for the nine-
months ended September 30, 2001 compared to the nine-months ended
September 30, 2000. As shown in Table 2, interest expense
increased $3.4 million or 5.8% due to the growth of average
interest bearing liabilities and decreased $2.9 million or 5.0%
due to average interest rate decreases. The growth of average
interest bearing liabilities resulted primarily from increases in
FHLB borrowings of $47.5 million, which was utilized to fund
securities growth. The decrease in average interest rates was
primarily attributed to the 139 and 68 basis points reductions in
other borrowings and money market accounts, respectively.
Customers are shifting savings balances into the competitively
priced Prime Rate Money Market product and certificates of
deposit. WesBanco's cost of funds on average interest bearing
liabilities decreased to 4.21% from 4.37% during this period of
declining interest rates.
15
Non-interest Income
-------------------
Non-interest income, excluding net securities gains, increased
$0.8 million or 4.7% for the nine-months ended September 30, 2001
compared to the nine-months ended September 30, 2000. This
increase resulted primarily from increases in deposit activity
income and other income. Deposit activity income increased $0.8
million or 13.4% due to increases in deposit activity fees, debit
cards and ATM fees. Other income increased $0.1 million
primarily due to a $0.3 million increase in income from real
estate loans originated for sale in the secondary market. This
increase was partially offset by $0.2 million reduction in other
banking income. Trust revenue declined $0.1 million primarily
due to the continued declines in the equity markets. Net
securities gains increased $0.7 million due primarily to the sale
of mortgage-backed securities during the first quarter of 2001
and gains realized on called U. S. Agency securities during the
third quarter of 2001.
Non-interest Expense
--------------------
Non-interest expense, excluding non-recurring acquisition
related expenses, decreased $1.0 million or 2.1.% for the nine-months
ended September 30, 2001 compared to the nine-months ended
September 30, 2000. WesBanco recognized acquisition related
expenses of $0.3 million for the third quarter of 2001 associated
with the WesBanco and Freedom Bancshares, Inc. mutually agreed
termination of the definitive Agreement and Plan of Merger dated
December 29, 2000. The decrease in non-interest expense was
primarily due to reductions in other operating expense and
equipment costs, which resulted from internal operating
efficiencies achieved from the single bank charter consolidation.
Other operating expense, excluding non-recurring acquisition
expenses of $0.3 million, decreased $0.9 million due to
reductions in marketing, tele-communications and supply expense.
Equipment costs decreased $0.4 million or 9.2%. These decreases
were partially offset by salary and employee costs increases of
$0.1 million due to increases in temporary employment and health
care 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 at
September 30, 2001 continues to compare favorably to peers and
has improved to 53.5% from 57.0% at September 30, 2000.
16
Income Taxes
------------
TABLE 4: Reconciliation of Income Tax Rates
For the Nine Months ended
September 30,
-------------------------
2001 2000
---------- ----------
Federal statutory tax rate 35% 35%
Tax-exempt interest income from securities
of states and political subdivisions (7) (7)
State income tax - net of federal tax effect 3 4
All other - net (1) (1)
---------- ----------
Effective tax rate 30% 31%
========== ==========
WesBanco's federal income and state tax expense increased $0.4
million to $9.3 million for the nine-months ended September 30, 2001
compared to $8.9 million for the nine-months ended September 30, 2000.
WesBanco's effective tax rate for the comparative period decreased to
30% from 31%.
Financial Condition
-------------------
Total assets of WesBanco were $2.5 billion as of September 30,
2001, an increase of $155.8 million or 6.7% compared to total
assets as of December 31, 2000. Total securities increased
$163.7 million or 30.0%, total loans decreased $25.3 million or
1.6%, deposits increased $33.0 million or 1.8% and other
borrowings increased $112.9 million or 70.9% during the first
nine months of 2001. WesBanco utilized the increase in other
borrowings as an alternative source of funds and invested the
proceeds into short and long-term securities to take advantage of
yield opportunities during the first nine months of 2001. The
decrease in total loans was primarily due to a continued slowdown
in the regional economy, the economic effects associated with the
steel industry and medical malpractice insurance crisis in the
Northern Panhandle of West Virginia and two large commercial
loans that were paid off in the first quarter of 2001.
17
TABLE 5: Composition of Securities
September 30, December 31,
(in thousands) 2001 2000
Securities held to maturity (at amortized cost): ------------- ------------
- ----------------------------------------------
U.S. Treasury and Federal Agency securities $ 1,002 $ 4,357
Obligations of states and political subdivisions 227,142 173,771
Other debt securities 18,029 17,974
--------- ---------
Total securities held to maturity (fair value
of $251,278 and $198,534, respectively) 246,173 196,102
--------- ---------
Securities available for sale (at fair value):
- --------------------------------------------
U. S. Treasury and Federal Agency securities 266,008 206,268
Obligations of states and political subdivisions 12,004 12,907
Corporate securities 15,257 3,033
Mortgage-backed and other debt securities 170,673 128,079
--------- ---------
Total securities available for sale (amortized
cost of $451,220 and $350,831, respectively) 463,942 350,287
--------- ---------
Total securities $ 710,115 $ 546,389
========= =========
Total securities increased $163.7 million or 30.0% from December
31, 2000 to September 30, 2001, representing a use of funds.
WesBanco purchased tax-exempt obligations classified as held to
maturity securities to improve tax-equivalent income.
Additionally, WesBanco purchased Federal Agencies, corporate and
mortgage-backed securities, classified as available for sale, to
take advantage of favorable market rate opportunities during
2001. Unrealized pre-tax gains on available for sale securities
(fair value adjustments) increased to a $12.7 million market gain
as of September 30, 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.
TABLE 6: Composition of Loans
September 30, December 31,
(in thousands) 2001 2000
------------- ------------
Commercial $ 574,169 $ 546,136
Real estate - construction 37,659 36,007
Real estate - residential 627,128 654,315
Personal, net of unearned income 326,427 354,244
----------- -----------
Loans, net of unearned income $ 1,565,383 $ 1,590,702
=========== ===========
18
Loans, net of unearned income decreased $25.3 million or
1.6% from December 31, 2000 to September 30, 2001. The decrease
in total loans was primarily due to a continued slowdown in the
regional economy, the economic effects associated with the steel
industry and medical malpractice insurance crisis in the Northern
Panhandle of West Virginia and two large commercial loans that
were paid off in the first quarter of 2001. WesBanco decided to
sell a greater portion of its originated mortgage loans to the
secondary market due to the interest rate environment during
2001. Mortgage loans originated and sold in the secondary market
increased by $43.8 million or 33.5% for the nine-months ended
September 30, 2001 compared to $32.8 million for the nine-months
ended September 30, 2000. The composition of loans as a
percentage of total loans consisted of commercial at 37%, real
estate at 42% and personal loans at 21% as of September 30, 2001.
WesBanco's total loan to deposit ratio was 82.2% at September 30,
2001 compared 85.0% at December 31, 2000.
TABLE 7: Non-performing Assets, Other Impaired Loans and Loans Past Due
90 Days or More
September 30, December 31,
(in thousands) 2001 2000
------------- ------------
Non-accrual loans $ 4,364 $ 5,561
Renegotiated loans 3,790 417
------------- ------------
Total non-performing loans 8,154 5,978
Other real estate owned 3,304 3,424
------------- ------------
Total non-performing assets 11,458 9,402
Other impaired loans (1) 8,354 11,513
------------- ------------
Total non-performing assets and
other impaired loans $ 19,812 $ 20,915
============= ============
Loans past due 90 days or more $ 8,141 $ 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 $1.1 million from December 31, 2000 to September
30, 2001. This decrease resulted primarily from the payoff of a
renegotiated commercial loan totaling $1.0 million. 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 during the first
quarter of 2001. One of the three renegotiated commercial loans
totaling $1.0 million was paid off. The remaining two
renegotiated commercial loans are currently performing under the
renegotiated terms.
Non-performing assets as a percentage of total assets increased
to 0.46% from 0.41% for the comparative periods. WesBanco monitors
the overall quality of its loan portfolio through various
19
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 meet 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 fair value
of the collateral for loans that are collateral-dependent.
TABLE 8: Allowance for Loan Losses
For the Nine Months ended
September 30,
-------------------------
(in thousands) 2001 2000
----------- -----------
Balance, at beginning of period $ 20,030 $ 19,752
Charge-offs (4,245) (2,710)
Recoveries 471 921
----------- -----------
Net charge-offs (3,774) (1,789)
Provision for loan losses 4,350 2,179
----------- -----------
Balance, at end of period $ 20,606 $ 20,142
=========== ===========
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
increased to 1.32% as of September 30, 2001 compared to 1.27% at
September 30, 2000 due to the increased level of non-performing
assets and the continued slowdown in the regional economy. The
provision for loan losses increased $2.2 million. Net loan
charge-offs increased $2.0 million due to a $1.5 million increase
in charge-offs and a $0.5 million decrease in recoveries for the
comparative periods. Personal loan net charge-offs for the
comparative period increased $1.1 million due to higher consumer
loan bankruptcies. The net loan charge-offs to average loans
ratio increased to 0.24% from 0.12% for the comparative periods.
20
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 delinquency, net charge-off
experience and general and regional economic trends relative to
loans outstanding for each segment to estimate losses.
Management also evaluates factors such as 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 $33.0 million from December 31, 2000 to
September 30, 2001. This increase was primarily attributed to
the growth of certificates of deposit and money market deposit
accounts. The growth in certificates of deposit was primarily
due to increases in short-term deposits. These increases were
partially offset by a decline in interest bearing demand
deposits. This shifting of funds reflects a preference by
customers for a variety of short-term, competitively priced
deposit alternatives in a period of declining interest rates.
Other borrowings, which include FHLB borrowings, repurchase
agreements and federal funds purchased, increased $112.9 million
or 70.9%, representing an additional source of funds for the
period from December 31, 2000 to September 30, 2001. FHLB
borrowings increased $79.5 million, repurchase agreements
increased $47.9 million and federal funds purchased decreased
$14.5 million. WesBanco utilized the increase in other
borrowings as an alternative source of funds to fund the
purchases of tax-exempt, Federal Agency, corporate and mortgage-
backed securities and maintain adequate balance sheet liquidity
for future loan commitments or the purchase of securities.
21
Capital Resources
-----------------
Shareholders' equity remained strong at September 30, 2001,
highlighted by Tier I leverage capital of 9.6% and Tier I and
total-risked based capital ratios of 14.0% and 15.3%,
respectively. Book value per share was $14.42 at September 30,
2001 compared to $13.92 at December 31, 2000. Shareholders'
equity increased $0.3 million from December 31, 2000 to September
30, 2001 due to the retention of earnings, net of dividends and
fair value adjustments to securities available for sale and
derivatives of $15.6 million. This increase in capital was
partially offset by WesBanco's purchase of 699,930 treasury
shares for $13.3 million and borrowing of $2.0 million in
WesBanco's Employee Stock Ownership Plan.
On March 21, 2001 WesBanco approved a new program to repurchase
up to an additional one million shares of WesBanco common stock.
As of September 30, 2001, 533,770 shares of WesBanco common stock
remains to be repurchased under the current stock repurchase
plan. The timing, price and quantity of purchases under the plan
are at the discretion of WesBanco and the plan may be
discontinued or suspended at any time.
TABLE 9: Capital Adequacy Ratios
September 30, December 31,
2001 2000
------------- ------------
Tier I leverage capital 9.6% 10.5%
Tier I risk-based capital 14.0% 14.4%
Total risk-based capital 15.3% 15.6%
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 9, WesBanco's Tier I
leverage, Tier I risk-based and total risk-based capital ratios
are well above the required minimum levels of 4%, 4%, and 8%,
respectively. At September 30, 2001 and December 31, 2000,
WesBanco's affiliate bank, WesBanco Bank, Inc., also exceeded the
minimum regulatory levels and is considered well-capitalized
under FDICIA. There are no conditions or events that have
occurred since September 30, 2001 that management believes has
changed WesBanco's well-capitalized category.
Liquidity Risk
--------------
Liquidity risk is managed through WesBanco'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 WesBanco. This is accomplished
22
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. WesBanco's banking subsidiary has a maximum
borrowing capacity at Federal Home Loan Bank of $601.6 million,
of which $489.6 million currently remains unused. WesBanco
increased FHLB borrowings by $79.5 million during 2001 and used
the proceeds to purchase tax-exempt, Federal Agency, corporate
and mortgage-backed securities.
Securities portfolio, federal funds sold and cash and due
from banks serves as additional sources of liquidity. Securities
totaled $710.1 million as of September 30, 2001, of which $463.9
million were classified as available for sale. Securities
maturing within one year from both the available for sale and
held to maturity portfolios totaled $33.1 million at September
30, 2001. Securities of $331.1 million were pledged at September 30,
2001. Additional liquidity is provided by federal funds sold
of $20.0 million and cash and due from banks of $74.4 million at
September 30, 2001.
At September 30, 2001, WesBanco had outstanding commitments
to extend credit in the ordinary course of business approximating
$245.7 million. On a historical basis, only a small portion of
these commitments should result in an outflow of funds.
Management believes that the company has sufficient liquidity to
meet current obligations to borrowers, depositors and others.
Item 3. - Quantitative and Qualitative Disclosures about Market Risk
- --------------------------------------------------------------------
Management considers interest rate risk WesBanco's most
significant market risk. Interest rate risk is the exposure to
adverse changes in net interest income due to changes in 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 timing and/or the
percentage of rate changes.
Management uses an earnings simulation model to analyze net
interest income sensitivity to changing interest rates. The
model takes into consideration numerous assumptions regarding
cash flow, repricing characteristics, prepayment factors and
callable bond forecasts at varying levels of interest rates.
Since these assumptions are uncertain, the simulation analysis
should not be relied upon as being indicative of actual results.
The analysis may not consider all actions that WesBanco could
employ in response to changes in interest rates.
23
WesBanco's Asset/Liability Management Committee monitors loan,
investment and liability portfolios to ensure comprehensive
management of interest rate risk within Board approved policy
limits. The current interest rate risk policy prescribes a
maximum impact on net interest income of +/- 5% for a 200 basis
point immediate change in interest rates over twelve months.
WesBanco's net interest income sensitivity to change in interest
rates on September 30, 2001 was within policy limits. In order
to reduce the exposure of interest rate fluctuations, WesBanco
utilizes interest rate swap agreements. These 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. These
agreements are entered into as part of WesBanco's interest rate
risk management strategy primarily to alter the interest rate
sensitivity of deposit liabilities. At September 30, 2001, the
notional value of interest rate swap agreements outstanding was
approximately $123.5 million.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. - Legal Proceedings
- ---------------------------
WesBanco previously reported that its banking subsidiary,
WesBanco Bank, Inc., had received notification from its bank
regulatory agency, the Federal Reserve Bank of Cleveland, of a
downgrading of the bank's Community Reinvestment Act rating. It
reported that the impact of this change might adversely affect
the ability of WesBanco to obtain regulatory approval of its two
previously announced acquisitions with Freedom Bancshares, Inc.
and American Bancorporation. WesBanco successfully appealed the
regulatory action and obtained a satisfactory rating as a result
of the appeal. As also previously reported, the time for closing
the Freedom Bancshares, Inc. transaction had expired under the
terms of the applicable Merger Agreement and Freedom declined to
consider extending the closing. An amicable settlement between
the parties was negotiated and the Merger Agreement terminated.
Wesbanco and American Bancorporation have mutually agreed to
extend the closing date under their Merger Agreement from
December 31, 2001 to March 31, 2002. The parties intend to
pursue closing of the transaction within that timeframe.
WesBanco is involved in 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 operation.
24
Item 2. - Changes in Securities and Use of Proceeds
- ----------------------------------------------------
Not Applicable
Item 3. - Defaults Upon Senior Securities
- ------------------------------------------
Not Applicable
Item 4. - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
Not Applicable
Item 5. - Other Information
- ---------------------------
Not Applicable
Item 6(a). - Exhibits
- ---------------------
Not Applicable
Item 6(b). - Reports on Form 8-K
- --------------------------------
On July 23, 2001, WesBanco filed a current report on Form 8-K,
dated July 23, 2001 announcing second quarter 2001 earnings and
regulatory notification. WesBanco's banking subsidiary, WesBanco
Bank, Inc., had received preliminary notification from its bank
regulatory agency, the Federal Reserve Bank of Cleveland, of a
downgrading of the bank's Community Reinvestment Act rating.
On August 8, 2001, WesBanco filed a current report on Form 8-K,
dated August 6, 2001 announcing that Edward M. George was
retiring his position as WesBanco, Inc.'s President and CEO and
WesBanco Bank, Inc.'s President and CEO, effective August 8,
2001. WesBanco, Inc.'s Board of Directors elected Paul M.
Limbert to succeed Mr. George as President and CEO and Robert H.
Young to succeed Mr. Limbert as Executive Vice President and CFO.
WesBanco Bank, Inc.'s Board of Directors elected Kristine N.
Molnar to succeed Mr. George as President and CEO of WesBanco
Bank, Inc.
On September 18, 2001, WesBanco filed a current report on
Form 8-K, dated September 17, 2001 announcing that on July 23,
2001, WesBanco, Inc.'s banking subsidiary, WesBanco Bank, Inc.,
received notice from its banking regulator, the Federal Reserve
Bank of Cleveland, of a downgrading of the Bank's Community
Reinvestment Act ("CRA") rating. With regard to WesBanco's
previously announced acquisition with Freedom Bancshares, Inc.,
WesBanco and Freedom Bancshares, Inc.
25
mutually agreed on September 17, 2001, to terminate the definitive
Agreement and Plan of Merger dated December 29, 2000, which
provided for the acquisition of Freedom's Bancshares, Inc. and
the merger of Freedom Bancshares affiliate, Belington Bank, Belington,
West Virginia, with and into WesBanco's affiliate, WesBanco Bank, Inc.
On October 30, 2001, WesBanco filed a current report on
Form 8-K, dated October 24, 2001 announcing that its Community
Reinvestment Act ("CRA") rating for its subsidiary bank,
WesBanco Bank, Inc. ("Bank") has been determined to be
"Satisfactory" through the Federal Reserve Bank appeal process.
This change in the Bank's CRA rating will permit WesBanco, Inc.
to proceed with the filing of an application to the Federal
Reserve Bank of Cleveland for the acquisition of American
Bancorporation. The parties anticipate extending the date set
forth in the Agreement by which the closing of the transaction
was required from December 31, 2001 to March 31, 2002.
On November 9, 2001, WesBanco filed a current report on
Form 8-K, dated November 7, 2001 announcing that WesBanco, Inc.
and American Bancorporation had signed and executed a First
Amendment to the definitive Agreement and Plan of Merger dated
February 22, 2001. The First Amendment provides for an extension
of the final date for the closing of the transaction from
December 31, 2001 to March 31, 2002, extends the expiration of
the term to be served by certain American representatives
appointed to the boards of WesBanco, Inc. and WesBanco Bank,
Inc. to December 31, 2002, and provides for both institutions to
perform additional due diligence.
26
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: November 14, 2001 /s/ Paul M. Limbert
----------------- -----------------------------
Paul M. Limbert
President and Chief Executive
Officer
Date: November 14, 2001 /s/ Robert H. Young
----------------- -----------------------------
Robert H. Young
Executive Vice President and
Chief Financial Officer
27