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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, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-8467
WESBANCO, INC.
(Exact name of registrant as specified in its charter)
West Virginia 55-0571723
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
(Address of principal executive offices) (Zip Code)
304-234-9000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or, for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Outstanding at
April 28, 1995, 8,504,963 shares.
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PART 1 - FINANCIAL INFORMATION
- ------------------------------
Consolidated Balance Sheets at March 31, 1995 (unaudited) and
December 31, 1994, Consolidated Statements of Income, Consolidated
Statements of Changes in Shareholders' Equity and Consolidated Statements
of Cash Flows for the three months ended March 31, 1995 and 1994
(unaudited) 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, 1995 are not
necessarily indicative of what results will be for the entire year. For
further information, refer to the 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, 1994.
Earnings per share was computed by dividing net income, less
preferred stock dividends and accretion, by the weighted average number
of common shares outstanding during the period. Preferred stock
dividends are cumulative and are payable quarterly at an annual rate of
$15.20 per share. Conversion of the preferred stock to common stock, in
accordance with the conversion requirements, would increase outstanding
common shares by approximately 113,443 shares. The fully dilutive effect
of preferred stock is less than 3%.
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WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
March 31, December 31,
1995 1994*
------------ ------------
(unaudited)
ASSETS
Cash and due from banks $ 45,357 $ 47,643
Due from banks - interest bearing 297 297
Federal funds sold 23,500 17,370
Investment securities (Note 1) 444,873 476,878
Loans-net (Notes 2 and 3) 773,360 764,801
Bank premises and equipment - net 22,270 21,874
Accrued interest receivable 11,332 11,347
Other assets 10,516 10,758
---------- ----------
TOTAL ASSETS $1,331,505 $1,350,968
---------- ----------
LIABILITIES
Deposits:
Non-interest bearing demand $ 123,478 $ 130,739
Interest bearing demand 253,233 263,717
Savings deposits 286,620 296,961
Certificates of deposit 437,283 417,802
---------- ----------
Total deposits 1,100,614 1,109,219
---------- ----------
Federal funds purchased and repurchase
agreements 49,637 65,750
Short-term borrowings 2,403 4,444
Dividends payable 1,957 1,872
Accrued interest payable 5,259 5,360
Other liabilities 8,376 5,833
---------- ----------
TOTAL LIABILITIES 1,168,246 1,192,478
---------- ----------
Redeemable Preferred Stock (Series A,
8% Cumulative, $1.25 par value, 10,000
shares issued; 9,925 shares
outstanding) 1,868 1,860
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 1,000,000
shares authorized; none outstanding --- ---
Common stock, $2.0833 par value;
25,000,000 shares authorized;
8,682,103 shares issued 18,087 18,087
Capital surplus 26,968 26,968
Market value adjustment on investments
available for sale - net of tax effect (2,012) (4,482)
Retained earnings 124,295 121,641
Less: Treasury stock at cost (174,141
and 172,145 shares, respectively) (4,786) (4,735)
---------- ----------
162,552 157,479
Deferred benefits for employees and
directors (1,161) (849)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 161,391 156,630
---------- ----------
TOTAL LIABILITIES, REDEEMABLE
PREFERRED STOCK AND SHAREHOLDERS'
EQUITY $1,331,505 $1,350,968
---------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
* Certain amounts in loans and other assets have been reclassified under
FAS No. 114 for comparative purposes.
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WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except share and per share amounts)
For the three months
ended March 31,
----------------------------
1995 1994
---------- ----------
INTEREST INCOME:
Interest and fees on loans $ 16,704 $ 15,238
Interest on investment securities 6,610 7,068
Other interest income 298 251
---------- ----------
Total interest income 23,612 22,557
---------- ----------
INTEREST EXPENSE:
Interest on deposits 9,137 8,251
Interest on other borrowings 746 433
---------- ----------
Total interest expense 9,883 8,684
---------- ----------
NET INTEREST INCOME 13,729 13,873
Provision for possible loan losses 377 706
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 13,352 13,167
---------- ----------
OTHER INCOME:
Trust fees 1,295 1,257
Service charges and other income 1,459 1,465
Net securities transaction gains 106 143
---------- ----------
Total other income 2,860 2,865
---------- ----------
OTHER EXPENSES:
Salaries, wages and fringe benefits 5,284 5,176
Premises and equipment - net 1,173 1,174
Other operating 3,134 3,165
---------- ----------
Total other expenses 9,591 9,515
---------- ----------
Income before provision for income taxes 6,621 6,517
Provision for income taxes (Note 4) 1,963 1,881
---------- ----------
NET INCOME $ 4,658 $ 4,636
---------- ----------
Preferred stock dividends and discount
accretion $ 46 $ 46
---------- ----------
Net income available to common
shareholders $ 4,612 $ 4,590
---------- ----------
Earnings per share of common stock $ .54 $ .53
---------- ----------
Average outstanding shares of common
stock 8,509,521 8,645,934
---------- ----------
Dividends declared per share of common
stock $ .23 $ .21
---------- ----------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
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WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands)
For the three months ended
March 31,
--------------------------
1995 1994
-------- --------
Total Shareholders' Equity
Balance, beginning of period $156,630 $157,516
-------- --------
Net Income 4,658 4,636
Cash dividends:
Common (1,957) (1,821)
Preferred (38) (38)
Accretion of preferred stock (8) (8)
Net sale (purchase) of treasury shares (51) 4
Change in market value adjustment on
investments available for sale-net of
tax effect 2,470 632
Change in deferred benefits for employees
and directors (312) ---
-------- --------
Net change in Shareholders' Equity 4,762 3,405
-------- --------
Total Shareholders' Equity
Balance, end of period $161,392 $160,921
-------- --------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
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WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (in thousands)
For the three months ended
March 31,
--------------------------
1995 1994*
-------- -------
Cash flows from operating activities:
Net income $ 4,658 $ 4,636
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 489 494
Provision for possible loan losses 377 706
Net amortization and accretion 956 1,384
Gain on sales of investment securities (106) (143)
Deferred income taxes (119) (136)
Other - net 7 ---
Increase or decrease in assets and
liabilities:
Interest receivable 15 (459)
Other assets (1,419) (1,130)
Interest payable (101) (856)
Other liabilities 2,244 2,141
-------- --------
Net cash provided by operating activities 7,001 6,637
-------- --------
Investing Activities:
Investment securities held to maturity:
Payments for purchases (3,234) (39,684)
Proceeds from maturities and calls 17,977 9,774
Investment securities available for sale:
Payments for purchases --- (24,326)
Proceeds from sales 12,307 16,535
Proceeds from maturities, calls
and prepayments 8,142 27,525
Net (increase) decrease in loans (8,927) 4,893
Purchases of premises and equipment-net (703) (298)
-------- --------
Net cash provided (used) by investing
activities 25,562 (5,581)
-------- --------
Financing activities:
Net increase (decrease)
in certificates of deposit 19,481 (1,524)
Net increase (decrease) in demand and
savings accounts (28,086) 2,847
Decrease in federal funds purchased
and repurchase agreements (16,113) (1,249)
Decrease in short-term borrowings (2,041) (4,535)
Dividends paid (1,909) (1,354)
Other (51) 2
-------- --------
Net cash used by financing activities (28,719) (5,813)
-------- --------
Net increase (decrease) in cash and cash
equivalents 3,844 (4,757)
Cash and cash equivalents at beginning of year 65,013 76,656
-------- -------
Cash and cash equivalents at end of period $ 68,857 $71,899
-------- -------
For the three months ended March 31, 1995 and 1994, WesBanco paid $9,985 and
$9,540 in interest on deposits and other borrowings and $30 and $130 for
income taxes, respectively.
* Certain amounts in loans and other assets have been reclassified under
FAS No. 114 for comparative purposes.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
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WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 1 - INVESTMENT SECURITIES
- ------------------------------
March 31, December 31,
1995 1994
--------- ------------
Securities:
Investments Held to Maturity (at cost):
U.S. Treasury and Federal
Agency Securities $136,716 $150,197
Obligations of States and
political subdivisions 120,869 122,716
Other debt securities 1,358 1,260
Investments Available for Sale (at market):
U.S. Treasuries and Federal
Agency Securities 176,554 193,114
U.S. Corporate Securities 930 915
Mortgage-backed securities 7,658 7,788
Other debt securities 788 888
-------- --------
Total $444,873 $476,878
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NOTE 2 - LOANS:
- --------------
March 31, December 31,
1995 1994*
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Loans:
Commercial $164,257 $161,521
Real Estate-Construction 23,793 24,734
Real Estate-Mortgage 364,985 358,540
Installment 242,889 241,441
-------- --------
795,924 786,236
-------- --------
Deduct:
Unearned income (9,974) (9,118)
Reserve for possible loan losses
(Note 3) (12,590) (12,317)
-------- --------
(22,564) (21,435)
-------- --------
Total $773,360 $764,801
-------- --------
* Loans have been reclassified under FAS No. 114 for comparative purposes.
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NOTE 3 - RESERVE FOR POSSIBLE LOAN LOSSES:
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For the three months
ended March 31,
--------------------
1995 1994
------- -------
Balance at beginning of period $12,317 $11,851
Recoveries credited to reserve 230 176
Provision for possible loan losses 377 706
Losses charged to reserve (334) (737)
------- -------
Balance at end of period $12,590 $11,996
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As of January 1, 1995, the Corporation adopted Financial Accounting
Standard "FAS" No. 114 (as amended by FAS No. 118), "Accounting by Creditors
for Impairment of a Loan." Under the new standard, the 1995 portion of the
reserve for possible loan losses related to loans that are identified for
evaluation in accordance with FAS No. 114 is based on discounted cash flows
using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans.
The reserve for possible loan losses is maintained at a level believed
adequate by management to absorb estimated probable loan losses. This
evaluation is inherently subjective as it requires material estimates
including the amounts and timing of future cash flows expected to be
received on impaired loans which may be susceptible to significant change.
At March 31, 1995, the recorded investment in loans that are considered
to be impaired under FAS No. 114 was $11,230 (of which $6,134 were on a
nonaccrual basis). Included in this amount is $3,575 of impaired loans for
which the related reserve for possible loan losses is $234 and $7,655 of
impaired loans that as a result of writedowns do not require an allowance
for credit losses. The average recorded investment in impaired loans during
the period ended March 31, 1995 was approximately $11,517. For the period
ended March 31, 1995, the interest income recognized on impaired loans does
not have a material effect on the results of operations.
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Foreclosed assets are comprised of property acquired through a
foreclosure proceeding, acceptance of a deed-in-lieu of foreclosure and
loans classified as in-substance foreclosure. In accordance with the
provisions of FAS No. 114, a loan is classified as an in-substance
foreclosure when the Corporation has taken possession of the collateral
regardless of whether formal foreclosure proceedings take place. Loans
previously classified as in-substance foreclosure but for which the
Corporation had not taken possession of the collateral have been
reclassified from other assets to the loan category for 1995 and 1994. The
reclassification did not significantly impact the Corporation's financial
condition.
NOTE 4 - INCOME TAXES
- ---------------------
A reconciliation of the average federal statutory tax rate to the
reported effective tax rate attributable to income from operations follows:
For the three months
ended March 31,
---------------------------
1995 1994
------------ ------------
Federal statutory tax rate $2,317 35% $2,281 35%
Tax-exempt interest income from
securities of states and
political subdivisions (571) (9) (588) (9)
State income tax - net of
federal tax effect 185 3 175 3
All other - net 32 1 13 0
------------ ------------
Effective tax rates $1,963 30% $1,881 29%
------------ ------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS (Dollars in thousands)
- ----------
Financial Condition
- -------------------
Total assets of WesBanco as of March 31, 1995 were $1,331,505 as
compared to $1,350,968 as of December 31, 1994.
Investment securities declined by $32,005 between March 31, 1995 and
December 31, 1994. Of the decline, approximately $26,119 was due to
maturities, calls and prepayments of investment securities while
approximately $12,307 was due to sales. The proceeds were partially used
to fund loan growth and provide for an increased federal funds sold balance.
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The market value adjustments resulting from FAS No. 115 reflected
unrealized net losses before tax effect on available for sale securities of
$3,295 and $7,342 as of March 31, 1995 and December 31, 1994, respectively.
The unrealized net losses represent temporary market value fluctuations
which may change depending upon general changes in market rates.
Net loans increased $8,559 between March 31 1995 and December 31, 1994.
The loan growth can be attributed primarily to an increase in real estate
loans of approximately $5,504 due to loans made for commercial real estate
projects during the first quarter of 1995. Commercial loans increased
approximately $2,736 and installment loans increased $1,448 between March
31, 1995 and December 31, 1994.
Total deposits declined $8,605 between March 31, 1995 and December 31,
1994. The lack of growth in the deposit area is due to the general economic
conditions and competition from nonbank products.
Comparison of the three months ended March 31, 1995 and 1994
- ------------------------------------------------------------
Earnings Summary
- ----------------
Net income for the three months ended March 31, 1995 was $4,658, a 1%
increase over the same period in 1994. Earnings per share of common stock
for the three months ended March 31, 1995 and 1994 were $.54 and $.53
respectively. Net income increased slightly due to a decrease in the
provision for possible loan losses, cost control efforts and an increase in
trust fees for the three months ended March 31, 1995 as compared to the same
period during 1994.
Return on average assets (ROA) was 1.40% and 1.38% for the three months
ended March 31, 1995 and 1994, respectively. Return on average equity (ROE)
was 11.72% compared to 11.65% for the three months ended March 31, 1995 and
1994, respectively.
Current period loan and deposit interest rates are generally above
levels noted in the previous comparative period. During the first three
months of 1995, most banks' primary lending rates were at 9.0% and the rates
for the first three months of 1994 were between 6.0% and 6.25%. The
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continued repricing of interest earning assets caused the average yield on
WesBanco's interest earning assets to increase to 7.5% during the first
three months of 1995 from 7.2% during the first three months of 1994.
Increases in deposit rates paid on interest bearing liabilities caused an
increase in average rates paid to 3.8% during the first three months of 1995
from 3.3% during the first three months of 1994. Net tax equivalent
interest income expressed as a percentage of average earning assets remained
stable at 4.7% for the three months ended March 31, 1995 and 1994.
Interest Income
- ---------------
Total interest income increased $1,055 or 5% between the three month
periods ended March 31, 1995 and 1994. Interest and fees on loans increased
$1,466 or 10% primarily due to both an increase in the average rates earned
and the average balance of loans outstanding. Average rates earned on loans
increased by approximately .4% and average balances of loans increased by
approximately $34,083,000. Interest on investments in U.S. Treasury and
Agencies decreased $456 or 9%. The decline was due to a decrease in the
average outstanding balance of approximately $26,472, along with a decrease
in the average yield of .1% between the three months ending March 31, 1995
and 1994. Interest earned on investments in states and political
subdivisions decreased $47 or 3%. Decreases in the average balance of this
type of investment, approximating $1,921 were offset by an increase in the
average yield of approximately .1%. Other interest income, comprised
primarily of interest on federal funds sold, increased $47 or 19%. The
increase was due to average rates earned which increased by approximately
2.6%, offset by a decrease in the average balance of approximately $11,006.
Interest Expense
- ----------------
Total interest expense increased $1,199 or 14% between the three month
period ended March 31, 1995 and 1994. During the period, average rates paid
on all deposits increased by approximately .4% and was partially offset by
a decrease in average total deposits of approximately $16,642. The decrease
in average deposits was due to the lack of general economic growth and
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competition from nonbank products. Interest expense on interest-bearing
demand deposits increased $55 or 3% primarily due to the increase in the
average rates paid of .3% partially offset by a decrease in average
balances. The interest rates paid on NOW and Money Market accounts was 2.5%
during the first quarter of 1995 and 1994. Traditional savings account
interest expense decreased $85 or 4% due to a decrease in average balances
of approximately $27,271 offset by an increase in the average rates paid by
.1%. Certificates of deposit interest expense increased $916 or 21% due to
an increase in the average balances of $28,071 combined with an increase in
the average rates paid of .6%. The increase in the average balance of
certificates of deposit was due to the shift from non-term deposits to
higher yielding deposits. Interest on other borrowings, which primarily
includes repurchase agreements, increased $313 or 73% primarily due to the
increase in average rates paid on repurchase agreements of 3.0% offset by
a decrease in the average balances outstanding of approximately $5,674.
Rates paid on repurchase agreements closely follow rates earned in the
federal funds market.
Provision for Possible Loan Losses
- ----------------------------------
The provision for possible loan losses decreased due to the decline in
net charge-offs and due to management's evaluation of the loan portfolio in
the current business environment. Net charge-offs decreased to $104 as of
March 31, 1995 from $561 as of March 31, 1994. The reserve for possible
loan losses was 1.60% of total loans as of March 31, 1995 and 1.59% as of
December 31, 1994. Nonaccrual loans, renegotiated loans, in-substance
foreclosures and other real estate owned decreased by $1,764 between
March 31, 1995 and December 31, 1994. Total nonaccrual and renegotiated
loans, in-substance foreclosures and other real estate owned totaled $7,031
or .9% of loans as of March 31, 1995 as compared to $8,795 or 1.2% as of
December 31, 1994. In conjunction with a regulatory examination, a
commercial mortgage loan totaling $3,493,000 was placed on non-accrual
status during April, 1995.
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Loans past due 90 days or more have decreased to $2,162 or .3% of total
loans as of March 31, 1995 from $2,526 or.3% of total loans as of
December 31, 1994. Many commercial loans are in the form of demand notes
and a number of these loans do not require principal payments so that past
due classifications might not be indicative of repayment risks.
Lending by WesBanco banks is guided by 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 out of the primary market areas as described by
uniform interagency definition of an "HLT" for supervisory purposes, jointly
issued by the Federal Reserve Bank, the Comptroller of Currency and the
Federal Deposit Insurance Corporation.
Other Income
- ------------
Other income decreased $5 or less than 1%. Trust fee income increased
$38 primarily due to increases in estate settlement fees during the first
three months of 1995. Trust assets remain in excess of $1 billion as of
March 31, 1995. Service charges and other income decreased $6 between the
three months ended March 31, 1995 and 1994 primarily due to the decline in
income from nonbanking activities. Net securities transaction gains
decreased $37 between the three months ended March 31, 1995 and 1994.
Other Expenses
- --------------
Total other expenses increased $76 or 1%. Salary expense increased
$108 due to normal salary adjustments, increased payroll taxes and increased
post-employment benefits for First Fidelity employees. Other operating
expenses decreased $31 or 1% due to internal consolidations during 1995 and
1994 which are improving operational efficiencies.
Other Matters
- -------------
A deferred compensation plan ("the Plan") for Directors of the
Corporation and its subsidiaries was modified in the first quarter of 1995.
Any Director may elect, at specified times, to participate in the Plan.
Each Director who elects to participate in the Plan will have an account
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established in which the director fees will be credited as they become
payable. Directors may elect to designate that all or part of such account
be deemed to be invested in WesBanco common stock or in a subsidiary bank
interest bearing account. Approximately $312,000 in existing deferred
account balances was invested in WesBanco common stock as of March 31, 1995,
at the election of the participating Directors. The balances invested in
common stock are classified as a deduction from Shareholders' Equity.
On January 1, 1995, WesBanco implemented a self-insurance medical plan
available to all employees at their option. Premiums are paid by both
employees and WesBanco into a trust account being administered by a
subsidiary bank. As claims become due, payment is made from the trust.
WesBanco pays a monthly premium, as determined by an independent actuary,
which includes reinsurance to limit its liability in providing medical
coverage through the self-insurance plan. Expenses for the self-insurance
plan approximate premiums paid into the trust account for the period ending
March 31, 1995.
PART II - OTHER INFORMATION
- ---------------------------
Item 1-3 - Not Applicable
- -------------------------
Item 4 - Results of Votes of Security Holders
- ---------------------------------------------
On April 19, 1995, the Annual Meeting of the shareholders of WesBanco,
Inc. was held. All nominees for directors listed in the proxy statement
dated March 24, 1995, were elected. There was no solicitation in opposition
to management's nominees as listed in the proxy statement.
Item 5 - Not Applicable
- -----------------------
Item 6 (a) - Exhibits
- ---------------------
(15) Letter re unaudited interim financial information. page 16.
Item 6 (b) - Reports on Form 8-K
- --------------------------------
There were no reports filed on Form 8-K for the three months ended
March 31, 1995.
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SIGNATURE
- ---------
Pursuant to the requirements 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 11, 1995 /s/ Edward M. George
----------------- --------------------
Edward M. George
President and Chief Executive Officer
Date: May 11, 1995 /s/ Paul M. Limbert
----------------- --------------------
Paul M. Limbert
Executive Vice President and
Chief Financial Officer
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