1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------
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 October 31, 1996, 10,221,023 shares.
1 of 20
2
PART 1 - FINANCIAL INFORMATION
Consolidated Balance Sheets at September 30, 1996
(unaudited) and December 31, 1995, Consolidated Statements of
Income, Consolidated Statements of Changes in Shareholders'
Equity and Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 (unaudited) are set
forth on the following pages. On August 30, 1996, WesBanco
consummated its merger of the Bank of Weirton. All previously
presented financial information has been restated to include the
Bank of Weirton. For further information, see Footnote 3. In
the opinion of management of the Registrant, all adjustments,
consisting of normal recurring accruals, necessary for a fair
presentation of the financial information referred to above for
such periods, have been made. The results of operations for the
nine months ended September 30, 1996 are not necessarily
indicative of what results will be for the entire year. For
further information, refer to the 1995 Annual Report to
Shareholders, which includes consolidated financial statements
and footnotes thereto on Form 8-K/A.
Earnings per share for the nine months ended September 30,
1996 and 1995 were computed by dividing net income less preferred
stock dividends and discount accretion, where applicable, by the
weighted average number of common shares outstanding during the
period. Effective November 15, 1995 WesBanco redeemed its Series
A 8% Cumulative Preferred stock. Prior to redemption, preferred
stock dividends were cumulative and payable quarterly at an
annual rate of $15.20 per share. The fully dilutive effect of
preferred stock for the nine months ended September 30, 1995 was
less than 3%.
3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
September 30, December 31,
1996 1995
------------- -------------
(Unaudited)
ASSETS
Cash and due from banks $ 60,570 $ 54,163
Due from banks - interest bearing 297 301
Federal funds sold 29,500 37,230
Securities:
Securities available for sale 249,828 172,137
Securities held to maturity (market
value of $249,686 and $353,760) 249,270 350,151
----------- -----------
Total securities 499,098 522,288
Loans:
Loans (net of unearned income of
$4,485 and $8,459) 965,783 893,919
Less: Allowance for possible loan
losses (14,597) (13,439)
---------- -----------
Net loans 951,186 880,480
Bank premises and equipment - net 29,745 28,395
Accrued interest receivable 12,743 12,708
Other assets 17,630 13,454
----------- -----------
TOTAL ASSETS $1,600,769 $1,549,019
=========== ===========
LIABILITIES
Deposits:
Non-interest bearing demand $ 144,918 $ 143,872
Interest bearing demand 261,161 279,217
Savings deposits 331,963 337,706
Certificates of deposit 533,470 494,049
---------- ----------
Total deposits 1,271,512 1,254,844
Federal funds purchased and repurchase
agreements 84,651 70,457
Short-term borrowings 7,804 1,402
Other borrowings 5,777 777
Accrued interest payable 7,109 7,091
Other liabilities 9,490 7,452
---------- ----------
TOTAL LIABILITIES 1,386,343 1,342,023
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;
10,372,103 shares issued 21,608 21,608
Capital surplus 31,207 31,237
Market value adjustment on investments
available for sale - net of tax effect (1,067) 849
Retained earnings 167,883 159,483
Less: Treasury stock at cost (148,196
and 186,131 shares, respectively) (4,004) (5,038)
--------- ---------
215,627 208,139
Deferred benefits for employees and directors (1,201) (1,143)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 214,426 206,996
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,600,769 $1,549,019
=========== ===========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except share and per share amounts)
For the three months For the nine months
ended September 30, ended September 30,
---------------------- ---------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
INTEREST INCOME:
Interest and fees on loans $ 20,684 $ 18,839 $ 60,046 $ 54,616
Interest on investment securities 7,451 7,756 22,305 23,600
Other interest income 329 537 1,293 1,959
---------- ---------- --------- ----------
Total interest income 28,464 27,132 83,644 80,175
---------- ---------- --------- ----------
INTEREST EXPENSE:
Interest on deposits 11,215 11,018 33,010 32,062
Interest on other borrowings 944 784 2,713 2,257
---------- ---------- --------- ----------
Total interest expense 12,159 11,802 35,723 34,319
---------- ---------- --------- ----------
NET INTEREST INCOME 16,305 15,330 47,921 45,856
Provision for possible loan losses 1,298 834 2,848 1,687
---------- ---------- --------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 15,007 14,496 45,073 44,169
---------- ---------- --------- ----------
OTHER INCOME:
Trust fees 1,204 1,027 4,039 3,495
Service charges and other income 1,692 1,703 4,713 4,778
Net securities transaction gains (losses) (167) 37 (51) 437
--------- ---------- --------- ----------
Total other income 2,729 2,767 8,701 8,710
--------- ---------- --------- ----------
OTHER EXPENSES:
Salaries, wages and fringe benefits 6,076 5,686 17,406 17,170
Premises and equipment - net 1,402 1,232 4,354 3,876
Other operating 3,356 3,312 9,686 10,264
--------- ---------- --------- ----------
Total other expenses 10,834 10,230 31,446 31,310
--------- ---------- --------- ----------
Income before provision for income taxes 6,902 7,033 22,328 21,569
Provision for income taxes 1,749 1,986 6,255 6,107
---------- ---------- ---------- ----------
NET INCOME $ 5,153 $ 5,047 $ 16,073 $ 15,462
========== ========== ========== ==========
Preferred stock dividends and discount
accretion $ --- $ 46 $ --- $ 137
========== ========== ========== ==========
Net income available to common
shareholders $ 5,153 $ 5,001 $ 16,073 $ 15,325
========== ========== ========== ==========
Earnings per share of common stock 0.50 0.49 1.58 1.51
========== ========== ========== ==========
Average shares outstanding 10,211,730 10,116,601 10,186,456 10,166,882
========== ========== ========== ==========
Dividends per share $ 0.28 $ 0.25 $ 0.80 $ 0.71
========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
5
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(dollars in thousands)
For the nine months ended
September 30,
--------------------------
1996 1995
------------ -----------
Total Shareholders' Equity
Balance, beginning of period $206,996 $192,305
---------- ----------
Net Income 16,073 15,462
Cash dividends:
Common (7,673) (6,568)
Preferred --- (114)
Accretion of preferred stock --- (23)
Net treasury stock activity 1,004 (2,817)
Change in market value adjustment on
investments available for sale-net
of tax effect (1,916) 4,305
Change in deferred benefits for employees
and directors (58) (469)
---------- ----------
Net change in Shareholders' Equity 7,430 9,776
---------- ----------
Total Shareholders' Equity
Balance, end of period $214,426 $202,081
========== ==========
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(dollars in thousands)
For the nine months ended
September 30,
----------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net income $ 16,073 $ 15,462
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,984 1,777
Provision for possible loan losses 2,848 1,687
Net amortization and accretion 2,298 3,715
Gain on sales of investment securities 51 (437)
Deferred income taxes (329) (49)
Other - net (244) 195
Increase or decrease in assets and
liabilities:
Interest receivable (35) (530)
Other assets (1,353) (2,585)
Interest payable 18 1,279
Other liabilities 1,861 772
--------- ---------
Net cash provided by operating activities 23,172 21,286
--------- ---------
Investing Activities:
Investment securities held to maturity:
Payments for purchases (38,306) (57,795)
Proceeds from maturities and calls 81,093 63,592
Investment securities available for sale:
Payments for purchases (121,848) (41,134)
Proceeds from sales 70,513 46,610
Proceeds from maturities, calls
and prepayments 26,228 38,098
Net increase in loans (73,525) (64,097)
Purchases of premises and equipment-net (3,260) (2,631)
--------- ---------
Net cash used by investing activities (59,105) (17,357)
--------- ---------
Financing activities:
Net increase in certificates of deposit 39,421 31,394
Net decrease in demand and savings accounts (22,753) (39,079)
Increase (decrease) in federal funds
purchased and repurchase agreements 14,194 (2,410)
Increase in short-term borrowings 6,402 3,364
Increase in other borrowings 5,000 ---
Dividends paid (6,937) (6,441)
Net purchases of treasury stock (721) (2,817)
Other --- 129
--------- ---------
Net cash provided (used) by financing
activities 34,606 (15,860)
--------- ---------
Net decrease in cash and cash equivalents (1,327) (11,931)
--------- ---------
Cash and cash equivalents at beginning of
period 91,694 94,546
---------- -----------
Cash and cash equivalents at end of period $ 90,367 $ 82,615
========== ===========
For the nine months ended September 30, 1996 and 1995, WesBanco
paid $35,359 and $33,041 in interest on deposits and other
borrowings and $6,220 and $6,105 for income taxes, respectively.
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
7
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
NOTE 1 - BASIS OF PRESENTATION:
- -------------------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements.
The consolidated financial statements include the accounts
of WesBanco, Inc. and its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated in
consolidation. All previously presented financial information
has been restated to include the Bank of Weirton.
NOTE 2 - MERGERS AND ACQUISITIONS:
- ----------------------------------
On July 18, 1996, WesBanco, Inc. announced the signing of a
Definitive Agreement and Plan of Merger providing for the
acquisition of Vandalia National Corporation, Morgantown, West
Virginia. Under the terms of the Agreement, shareholders of
Vandalia will receive 1.2718 shares of WesBanco common stock or,
at such shareholders' election, $34.34 in cash. Also, holders of
Vandalia warrants convertible in Vandalia common stock at $18 per
share shall receive cash in the amount of $16.34 per warrant. To
complete this transaction, WesBanco anticipates issuing up to
359,912 shares of WesBanco common stock from Treasury with
approximately 200,000 of those shares being acquired in the
marketplace. The Board of Directors of WesBanco approved the
repurchase of up to 200,000 shares of WesBanco common stock for
such purpose which can be acquired over a time period from
approximately October 1, 1996 through January 31, 1997. The
acquisition, which is based
8
upon a fixed exchange ratio, will be accounted for as a purchase
transaction, with an approximate value of $10,319,000. Vandalia
reported total assets of approximately $57,414,000 and shareholders'
equity of approximately $4,375,000 as of September 30, 1996. The
transaction is expected to be completed before year end. The
merger is subject to approval of the shareholders of Vandalia.
All regulatory approvals have now been received.
NOTE 3 - COMPLETED MERGERS:
- ---------------------------
On August 30, 1996, WesBanco consummated its acquisition of
the Bank of Weirton through the merger of the Bank of Weirton
into WesBanco Bank Wheeling, an affiliate of WesBanco. Bank of
Weirton had assets totaling approximately $177,877,000, and the
transaction was accounted for as a pooling-of-interests. In
connection with this transaction, the Corporation issued
1,690,000 shares of common stock. The consolidated balance
sheets as of September 30, 1996 and December 31, 1995, and
consolidated statements of income for the nine months ended
September 30, 1996 and 1995, include the accounts of the Bank of
Weirton for all periods presented.
The following supplemental information reflects the separate
results of the combined entities for the periods prior to the
acquisition: (in thousands, except per share amounts)
For the six months ended
June 30, 1996
-----------------------------------------
As
Previously Bank of
Presented Weirton Consolidated
----------- ---------- ------------
Net interest income $ 28,934 $ 2,682 $ 31,616
Net income 9,888 1,032 10,920
Earnings per common share 1.17 79.38 1.08
On August 20, 1996, the Corporation acquired the assets and
assumed certain liabilities of Universal Mortgage Company, and
formed a new mortgage banking affiliate operating under the name
of WesBanco Mortgage Company.
9
Universal Mortgage Company had assets totaling approximately $1,185,000
and the transaction was accounted for as a purchase. In connection with
this transaction, WesBanco issued 32,463 shares of common stock from
Treasury valued at approximately $856,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS (Dollars in thousands except per share amounts)
- ---------------------
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.
Financial Condition
-------------------
Total assets of WesBanco as of September 30, 1996 were
$1,600,769 as compared to $1,549,019 as of December 31, 1995, an
increase of 3.3%. The increase in assets consisted of an 8.0%
increase in loans partially offset by a 4.4% decline in securities.
Total deposits increased 1.3% during the comparative period.
Securities:
- -----------
The following table shows the composition of WesBanco's
securities portfolio at September 30, 1996 and December 31, 1995:
September 30, December 31,
1996 1995
------------- -------------
Securities Available for Sale (at market):
- ------------------------------------------
U.S. Treasury and Federal Agency
securities $165,550 $157,505
Obligations of states and political
subdivisions 14,145 5,667
Mortgage-backed securities 66,979 6,610
Other debt and equity securities 3,154 2,355
-------- --------
Total available for sale 249,828 172,137
-------- --------
Securities Held to Maturity (at cost):
- --------------------------------------
U.S. Treasury and Federal Agency
securities 109,969 219,719
Obligations of states and political
subdivisions 137,602 129,074
Other debt securities 1,699 1,358
-------- --------
Total held to maturity (market value
of $249,686 and $353,760, respectively) 249,270 350,151
-------- --------
Total securities $499,098 $522,288
======== ========
10
Representing a source of funds for increasing loan demand,
securities decreased by $23,190 between September 30, 1996 and
December 31, 1995. During the period, maturities, calls,
prepayments and sales aggregated $177,834, while investment
purchases totaled $160,154. To comply with WesBanco's investment
policies, approximately $54,948 in U.S. Treasury securities
from the Bank of Weirton merger were reclassified from the held
to maturity to the available for sale portfolio. During the
third quarter 1996, WesBanco sold approximately $43,441 of
U.S. Treasury securities to take advantage of the yield
opportunities in the mortgage-backed securities market. The U.S.
Treasury securities sold resulted in net losses of approximately
$167,000 in the third quarter which the Corporation anticipates
will be recovered by the additional interest income generated
from the higher-yielding securities.
The market value adjustments, before tax effect, in the
available for sale securities portfolio resulted in unrealized
net losses of $1,750 and unrealized net gains of $1,392 as of
September 30, 1996 and December 31, 1995, respectively. These
adjustments represent market value fluctuations caused by general
changes in market rates and the length of time to respective
maturity dates. If these securities are held until their
respective maturity date, no market value adjustment would be
realized.
11
Loans:
- ------
The following table shows the composition of WesBanco's loan
portfolio at September 30, 1996 and December 31, 1995:
September 30, 1996 December 31, 1995
------------------ ------------------
Amount Percent Amount Percent
------- ------- ------ -------
Loans:
Commercial $162,686 16.8% $176,809 19.5%
Real Estate-Construction 20,853 2.1% 16,544 1.8%
Real Estate-Mortgage 481,963 49.7% 424,917 47.0%
Consumer 304,766 31.4% 284,108 31.7%
-------- ------ -------- ------
Total Loans $970,268 100.0% $902,378 100.0%
Less:
Unearned income (4,485) (8,459)
Allowance for possible loan
losses (14,597) (13,439)
--------- ---------
Net loans $951,186 $880,480
========= =========
Net loans increased $70,706 or 8.0% between September 30,
1996 and December 31, 1995. Overall loan growth was primarily
attributable to consumer lending. During the first nine months
of 1996 and throughout 1995, WesBanco experienced steady growth
in this area as a result of offering attractive rates on
residential and automobile loans.
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 nonperforming loans.
Loans are considered impaired under FAS 114 when it is
determined that WesBanco will be unable to collect all principal
and interest due, according to the contractual terms of the
loans. Impaired loans, which include all nonperforming loans,
are as follows:
September 30, December 31,
1996 1995
------------- ------------
Nonaccrual $4,395 $5,199
Renegotiated and other 5,290 2,092
---------- ----------
Total impaired loans $9,685 $7,291
========== ==========
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The average balance of impaired loans during the periods
ended September 30, 1996 and December 31, 1995, were
approximately $11,380 and $6,773, respectively.
Specific allowances are allocated for impaired loans based
on the present value of expected future cash flows, or the fair
value of the collateral for loans that are collateral dependent.
Related allowances for possible loan losses on impaired loans
were $1,992 and $334 as of September 30, 1996 and December 31,
1995, respectively.
Other real estate totaled $3,605 as of September 30, 1996,
compared to $4,137 as of December 31, 1995. Loans past due 90
days or more was $3,831 or .4% of total loans as of September 30,
1996, as compared to $3,034 or .3% of total loans as of December
31, 1995.
Lending by WesBanco banks 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 area.
Allowance for Possible Loan Losses
- ----------------------------------
Activity in the allowance for possible loan losses is
summarized as follows:
For the nine months
ended September 30,
--------------------
1996 1995
--------- --------
Balance, at beginning of period $13,440 $12,960
Recoveries credited to allowance 372 513
Provision for possible loan losses 2,848 1,687
Losses charged to allowance (2,063) (1,733)
--------- ---------
Balance, at end of period $14,597 $13,427
========= =========
The provision for possible loan losses increased $1,161 due
to an increase in net charge-offs and loan growth during 1996.
Net charge-offs
13
increased to $1,691 as of September 30, 1996 from $1,220 as of
September 30, 1995. The allowance for possible loan losses as a
percentage of total loans was 1.5% as of September 30, 1996 and
December 31, 1995. Amounts allocated to the allowance for loan losses
are based upon management's evaluation of the loan portfolio.
Deposits:
- ---------
Total deposits increased $16,668 between September 30, 1996
and December 31, 1995 primarily due to growth in certificates of
deposit. Customer preference for higher yielding products
coupled with competitive pricing have contributed to the steady
certificate of deposit growth. In addition, WesBanco's retail
banking program called "Good Neighbor Banking", has contributed
to the increase in deposits. The program is designed to build
customer relationships by offering a series of pricing bonuses,
which vary according to the customer's number of qualifying
services. This relationship building is key to long term deposit
growth and customer profitability.
During the comparative period, a shift occurred in deposit
mix from demand and savings deposits, which decreased $23,799 or
3.8%, to certificates of deposit, which increased $39,421 or
7.9%. The shift in deposit balances reflects the customer's
preference for higher-yielding products, primarily in the Good
Neighbor Banking program which offers a tiered pricing structure
based on account balance and number of qualifying services.
Liquidity and Capital Resources
- -------------------------------
WesBanco manages its liquidity position to meet its funding
needs, including deposit outflows and loan principal
disbursements. WesBanco also manages its liquidity position to
meet its asset and liability management objectives.
14
In addition to funds provided from operations, WesBanco's
primary sources of funds are deposits, principal repayments on
loans and matured or called investment securities. Scheduled
loan repayments and maturing investment securities are relatively
predictable sources of funds. However, deposit flows and
prepayments on loans are significantly influenced by changes in
market interest rates, economic conditions, and competition.
WesBanco strives to manage the pricing of its deposits to
maintain a balance of cash flows commensurate with loan
commitments and other funding needs.
WesBanco is subject to risk-based capital guidelines that
measure capital relative to risk-adjusted assets and off-balance
sheet financial instruments. The Corporation's Tier I, total
risk-based capital and leverage ratios are well above the
required minimum levels of 4%, 8% and 3%, respectively. At
September 30, 1996, all of WesBanco's affiliate banks exceeded
the minimum regulatory levels. Capital adequacy ratios are
summarized as follows:
September 30, December 31,
1996 1995
------------- ------------
Capital Ratios:
Primary capital 14.2% 14.1%
Tier 1 capital 20.4% 21.7%
Total risk-based capital 21.7% 22.9%
Leverage 13.4% 13.4%
Comparison of the nine months ended September 30, 1996 and 1995
---------------------------------------------------------------
Earnings Summary
----------------
Net income for the nine months ended September 30, 1996 was
$16,073, a 4.0% increase over the same period in 1995. Earnings
per share of common stock for the nine months ended September 30,
1996 and 1995 were $1.58 and $1.51 respectively. Net income
increased primarily due to an increase in net interest income and
an increase in trust fees for the nine months ended September 30, 1996
as compared to the same period in 1995.
15
Return on average assets was 1.36% for the nine months ended
September 30, 1996 and 1995. Return on average equity was 10.25%
compared to 10.38% for the nine months ended September 30, 1996
and 1995, respectively.
Net Interest Income
- -------------------
Net interest income before the provision for possible loan
losses, for the nine months ended September 30, 1996 increased
$2,065 or 4.5% over the same period for 1995. The increase
resulted from an increase in the net tax equivalent yield
combined with volume growth in both average earning assets of
$42,411 and interest bearing liabilities of $42,659. The growth
in average earning assets was comprised primarily of an increase
in loans. As interest rates generally declined during 1995,
offering lower rates on mortgage and consumer loan products
contributed to a 10.1% increase in average loans. During the
nine months ended September 30, 1996, most banks' primary lending
rates averaged 8.3% compared to 8.9% for the corresponding period
in 1995. Average interest bearing liabilities increased
primarily due to growth in certificates of deposit and repurchase
agreements.
Net tax equivalent yield on average earning assets increased
to 4.8% from 4.6% for the nine months ended September 30, 1996
and 1995. The increase in the net yield was due to a shift in
the mix of assets from investment securities to higher-yielding
loans as well as a reduction of interest rates on demand and
savings products in January 1996.
Interest Income
- ---------------
Total interest income increased $3,469 or 4.3% between the
nine month periods ended September 30, 1996 and 1995. Interest
and fees on loans increased $5,430 or 9.9% primarily due to both
an increase in the average rates earned and the average balance
of loans outstanding. Average rates earned on loans decreased
approximately .07% while average loan balances
16
increased by approximately $83,057 or 10.1%. Interest on taxable
investments decreased $764 or 4.2%. The decline was due to a decrease
in the average outstanding balance of approximately $40,206, partially
offset by an increase in the average yield of .33% between the
nine month periods ending September 30, 1996 and 1995. The
decrease in taxable investments resulted from the funding of
excess loan demand with scheduled investment maturities.
Interest earned on nontaxable investments decreased by $531 or
9.3%. Increases in the average balance of this type of
investment approximated $9,110 while the average yield declined
.84%.
Interest Expense
- ----------------
Total interest expense increased $1,404 or 4.1% between the
nine month periods ended September 30, 1996 and 1995. Interest
expense on deposits increased $948 or 2.9% during the comparative
period as the average rate on interest-bearing deposits remained
stable at 3.9% and average interest-bearing deposit balances
increased by approximately $19,124 or 5.9%. The increase in
average interest-bearing deposit balances resulted from growth in
certificates of deposit of $41,299 or 8.8%. Customers were
attracted to the higher-yielding certificate of deposit products
and the introduction of the Good Neighbor Banking Program in the
fourth quarter of 1995. Interest expense on certificates of
deposit increased $2,662 or 14.5% reflecting the growth in
average balances. Interest expense on interest bearing demand
deposits decreased $756 or 12.7% primarily due to a decrease in
the average rate of approximately .43%. Interest on savings
accounts decreased $958 or 12.3% primarily due to a decrease in
the average balances of $27,843 combined with a .14% average rate
decrease. Interest on other borrowings, which consists primarily of
repurchase agreements, increased $456 or 20.2% due to an increase in
average balances outstanding of $23,536. Rates paid on repurchase
17
agreements closely follow the direction of interest rates in the federal
funds market.
Other Income
- ------------
Other income decreased $9 or .1%. Trust fee income
increased $544 primarily due to increases in the market values
and new trust business during the first nine months of 1996. The
market value of trust assets approximated $1,499,930 as of
September 30, 1996, an increase of $238,476 over September 30,
1995. Service charges and other income decreased $65 between the
nine month periods ended September 30, 1996 and 1995. WesBanco
recognized net securities transaction losses of $51 for the nine
months ended September 30, 1996 compared to net security
transaction gains of $437 for the same period in 1995. During
the third quarter 1996, certain U.S. Treasury securities were
sold at a loss in order to take advantage of higher yielding
investment opportunities. In 1995, the Corporation recognized
security gains of approximately $279, resulting from a decision
to divest an equity position which no longer had a strategic
value.
Other Expenses
- --------------
Total other expenses decreased $136 or .4%. Salaries and
employee benefits increased 1.4% during this period primarily due
to normal salary adjustments partially offset by a reduction in
pension expense. Premises and equipment expense increased $478
or 12.3% due to technological advancements, including a wide area
network, designed to enhance customer service. Other operating
expenses decreased $578 or 5.6% primarily due to a reduction in
FDIC insurance expense of $1,340. However, the decrease was
partially offset by expenses totaling $255 in an asset classified
as real estate held for resale coupled with increases in professional
fees associated with acquisition activity.
18
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 nine months
ended September 30,
----------------------------
1996 1995
------------- ------------
Federal statutory tax rate $7,814 35% $7,549 35%
Tax-exempt interest income from
securities of states and political
subdivisions (1,915) (8) (1,951) (9)
State income tax - net of federal
tax effect 668 3 628 3
Alternative minimum tax credit
carryforward recognized (364) (2) (98) (1)
All other - net 52 0 (21) 0
------------ ------------
Effective tax rate $6,255 28% $6,107 28%
------------ ------------
As of September 30, 1996, the Corporation has credits for
prior years minimum taxes of approximately $364,000 available in
future years to reduce regular taxes payable.
Comparison of the three months ended September 30, 1996 and 1996
- ----------------------------------------------------------------
Total interest income increased $1,332 or 4.9% between the
three month periods ending September 30, 1996 and 1995. Interest
and fees on loans increased $1,845 due to an increase in the
average volume of loans outstanding, partially offset by a
decrease in the average rate. Interest on taxable investments
increased $193 due to a decrease in average balances partially
offset by an increase in average rates. Interest on non-taxable
investments decreased $493 primarily due to a decrease in average
rates. Other interest income, primarily interest on federal
funds sold, decreased $213 due to a decrease in the average
balance outstanding and a decrease in average rates.
Total interest expense increased $357 between the three
month periods ending September 30, 1996 and 1995. Interest on
deposits increased $197 due to an increase in the average
interest bearing deposit balances outstanding of
19
approximately $18,342, partially offset by a decrease in the average rates
paid on deposits. Interest on other borrowings increased $160 for the
three months ended September 30, 1996 and 1995, primarily due to
an increase in the average volume of repurchase agreements of
approximately $35,239.
Total other income decreased by $38 primarily due to a
decrease in net security gain transactions of $204. During the
third quarter 1996, certain U.S. Treasury securities were sold at
a loss in order to take advantage of higher yielding investment
opportunities. Trust fees increased by $177 during the
comparative period.
Total other expense increased by $604. Salaries and
employee benefits increased $390 due to normal salary
adjustments. Premises and equipment expense increased $170 due
to continued technological costs. Other operating expenses
increased by $44 primarily due to increases in marketing and
professional fees combined with a reduction in FDIC insurance
expense.
Part II - OTHER INFORMATION
- ---------------------------
Item 2-5 - Not Applicable
- -------------------------
Item 6(a) - Exhibits
- --------------------
(27) Financial Data Schedule required by Article 9 of
Regulation S-X.
Item 6(b) - Reports on Form 8-K
- --------------------------------
(1) Filed current report on Form 8-K dated July 18, 1996,
announcing the signing of a Definitive Agreement and Plan of
Merger providing for the merger of Vandalia National Corporation
located in Morgantown, West Virginia, with WesBanco Fairmont, a
wholly owned subsidiary of WesBanco, Inc. This is to be
accounted for as a purchase transaction.
(2) Filed current report of Form 8-K dated August 30, 1996,
which reported the consummation of the acquisition of the Bank
of Weirton by WesBanco, Inc.
20
(3) Filed current report of Form 8-K/A dated November 4,
1996, which provided historical financial information of the registrant
restated to include the Bank of Weirton.
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: November 4, 1996 /s/ Edward M. George
----------------- __________________________________
Edward M. George
President and Chief Executive Officer
Date: November 4, 1996 /s/ Paul M. Limbert
---------------- ______________________________________
Paul M. Limbert
Executive Vice President and
Chief Financial Officer