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 June 30, 1997
--------------------------------------------
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 August 1, 1997,
16,071,864 shares.
1 of 17
2
PART 1 - FINANCIAL INFORMATION
- -------------------------------
Consolidated Balance Sheets at June 30, 1997 and December 31, 1996, and
Consolidated Statements of Income, Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 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 six months ended June 30, 1997 are not
necessarily indicative of what results may be attained for the entire year.
Average shares and per share information have been restated to reflect a 3
for 2 stock split that was effected in the form of a fifty percent (50%) stock
dividend, declared June 19, 1997, payable August 1, 1997. On June 30, 1997,
WesBanco consummated the acquisition of Shawnee Bank, Inc. which was accounted
for as a purchase transaction.
For further information, refer to the 1996 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,
1996.
3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- -----------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
June 30, December 31,
1997 1996
ASSETS ------------ ------------
Cash and due from banks $64,224 $58,828
Due from banks - interest bearing 198 197
Federal funds sold 63,670 10,970
Securities:
Available for sale, carried at market value 282,056 276,201
Held to maturity (market value of $220,103
and $250,132, respectively) 218,855 249,108
--------- ---------
Total securities 500,911 525,309
Loans held for sale 12,178 983
Loans (net of unearned income of $2,547 and
$4,160, respectively) 1,032,900 1,026,370
Allowance for loan losses (15,745) (15,528)
--------- ---------
Net loans 1,017,155 1,010,842
--------- ---------
Bank premises and equipment - net 33,223 32,670
Accrued interest receivable 12,189 11,748
Other assets 31,849 26,224
---------- ----------
Total Assets $1,735,597 $1,677,771
========== ==========
LIABILITIES
Deposits:
Non-interest bearing demand $164,409 $159,176
Interest bearing demand 327,286 284,143
Savings 303,784 323,673
Certificates of deposit 591,350 575,828
--------- ---------
Total deposits 1,386,829 1,342,820
--------- ---------
Federal funds purchased and
repurchase agreements 79,153 81,089
Other short-term borrowings 11,575 11,682
Accrued interest payable 6,202 5,826
Other liabilities 10,348 8,822
--------- ---------
Total Liabilities 1,494,107 1,450,239
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; 16,071,894 and
10,538,993 shares issued, respectively 33,483 21,956
Capital surplus 44,494 36,949
Retained earnings 164,058 170,116
Treasury stock at cost (21,542 and 17,139
shares, respectively) (506) (544)
Market value adjustment on securities
available for sale-net of tax effect 820 (90)
Deferred benefits for employees and directors (859) (855)
--------- ---------
Total Shareholders' Equity 241,490 227,532
---------- ----------
Total Liabilities and Shareholders' Equity $1,735,597 $1,677,771
========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- ---------------------------------------------------------------------------
(Unaudited, dollars in thousands, except per share amounts)
For the three For the six
months ended months ended
June 30, June 30,
----------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME
Interest and fees on loans $22,408 $19,838 $44,495 $39,362
Interest on securities 7,612 7,475 15,256 14,854
Interest on short-term investments 625 391 809 964
------- ------- ------- -------
Total interest income 30,645 27,704 60,560 55,180
------- ------- ------- -------
INTEREST EXPENSE
Interest on deposits 12,531 10,886 24,559 21,795
Interest on other borrowings 1,101 868 2,068 1,769
------- ------- ------- -------
Total interest expense 13,632 11,754 26,627 23,564
------- ------- ------- -------
Net interest income 17,013 15,950 33,933 31,616
Provision for loan losses 889 681 1,989 1,550
------- ------- ------- -------
Net interest income after
provision for loan losses 16,124 15,269 31,944 30,066
------- ------- ------- -------
OTHER INCOME
Trust fees 1,611 1,364 3,283 2,835
Service charges and other income 1,692 1,516 3,285 3,021
Net securities gains 80 30 85 116
------- ------- ------- -------
Total other income 3,383 2,910 6,653 5,972
------- ------- ------- -------
OTHER EXPENSES
Salaries, wages and
employee benefits 6,262 5,858 12,464 11,400
Premises and equipment-net 1,684 1,454 3,478 2,952
Other operating 3,795 3,180 7,429 6,260
------- ------- ------- -------
Total other expenses 11,741 10,492 23,371 20,612
------- ------- ------- -------
Income before provision for
income taxes 7,766 7,687 15,226 15,426
Provision for income taxes 2,118 2,140 4,073 4,506
------- ------- ------- -------
Net Income $5,648 $5,547 $11,153 $10,920
======= ======= ======= =======
Earnings per share of common stock* $0.36 $0.36 $0.71 $0.72
======= ======= ======= =======
Average shares outstanding* 15,617,915 15,239,697 15,680,573 15,247,799
========== ========== ========== ==========
Dividends per share* $0.193 $0.173 $0.386 $0.346
========== ========== ========== ==========
* Restated to reflect a 3 for 2 stock split effected in the form of a 50% stock
dividend, declared June 19, 1997, payable August 1, 1997.
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, in thousands)
For the six months ended
June 30,
-------------------------
1997 1996
---- ----
Total Shareholders' Equity
Balance, beginning of period $227,532 $206,996
---------- ----------
Net Income 11,153 10,920
Cash dividends on common stock (6,050) (4,806)
Net treasury shares purchased (4,856) (721)
Net effect of purchase acquisition 12,805 -
Change in market value adjustment on
securities available for sale-net of tax effect 910 (2,466)
Change in deferred benefits for
employees and directors (4) (34)
--------- ---------
Net change in Shareholders' Equity 13,958 2,893
--------- ---------
Total Shareholders' Equity
Balance, end of period $241,490 $209,889
========= =========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- -----------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (unaudited, in thousands)
For the six months ended
June 30,
------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net Income $11,153 $10,920
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,514 2,970
Provision for loan losses 1,989 1,550
Gains on sales of securities-net (85) (116)
Deferred income taxes 122 (133)
Origination of loans held for sale (11,195) --
Other-net (27) (34)
Net change in assets and liabilities:
Interest receivable (278) 62
Other assets 1,354 (4,547)
Interest payable 96 91
Other liabilities 644 1,160
-------- --------
Net cash provided by operating activities 6,287 11,923
-------- --------
Cash flows from investing activities:
Securities held to maturity:
Payments for purchases (19,739) (33,200)
Proceeds from maturities and calls 56,638 67,251
Securities available for sale:
Payments for purchases (44,551) (76,342)
Proceeds from sales 20,332 16,326
Proceeds from maturities and calls 22,368 27,407
Purchase of subsidiary, net of cash acquired 6,635 ---
Net (increase) decrease in loans 9,199 (44,353)
Purchases of premises and equipment-net (1,396) (2,120)
-------- --------
Net cash provided by (used in) investing activities 49,486 (45,031)
-------- --------
Cash flows from financing activities:
Net increase in deposits 15,416 7,731
Increase (decrease) in federal funds
purchased and repurchase agreements (2,237) 9,229
Increase (decrease) in short-term borrowings (106) 5,902
Dividends paid (5,894) (4,732)
Purchases of treasury shares-net (4,856) (721)
-------- --------
Net cash provided by financing activities 2,323 17,409
-------- --------
Net increase (decrease) in cash and cash equivalents 58,096 (15,699)
Cash and cash equivalents at beginning of period 69,798 91,393
-------- -------
Cash and cash equivalents at end of period $127,894 $75,694
======== =======
For the six months ended June 30, 1997 and 1996, WesBanco paid $11,992 and
$11,854 in interest on deposits and other borrowings, and $3,736 and $4,470
for income taxes respectively. During the six months ended June 30, 1997,
non-cash activity consisted of common stock issued in connection with the
purchase acquisition of Shawnee on June 30, 1997 which totaled $12,805.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
7
WESBANCO, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------
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.
Earnings per common share are based on the average number of
shares of common stock outstanding during the periods presented.
Financial Accounting Standards Board Statement No. 128, "Accounting
for Earnings Per Share" ("Statement No. 128") is effective in 1997
and provides specific computations, presentation and disclosure
requirements for earnings per share. The statement's objective is
to simplify the computation of earnings per share and to make the
U. S. standard for computing earnings per share more compatible
with the standards of other countries and with that of the
International Accounting Standards Committee. Early adoption is
not permitted and Statement No. 128 will not have a material effect
on the Corporation's reported earnings per share.
Note 2 - Mergers and Acquisitions
- ---------------------------------
On June 30, 1997, WesBanco consummated its acquisition of
Shawnee Bank, Inc., into WesBanco Bank Charleston, a wholly-owned
subsidiary of WesBanco. In accordance with the terms of the
acquisition, WesBanco issued a total of 323,172 shares of common
stock, of which 147,274 shares were from its Treasury balance and
175,898 shares were newly issued. The acquisition was accounted
for as a purchase transaction with a total purchase price of
$12,805,000. The excess of the purchase price over the fair market
value of the net assets (goodwill) of Shawnee approximated
$7,107,000 and is being amortized over a period of 15 years. As of
the acquisition date, Shawnee reported total assets of
approximately $34,695,000.
Note 3 - Stock split
- --------------------
On June 19, 1997 the Board of Directors of WesBanco, Inc.
declared a 3 for 2 stock split that was effected in the form of a
fifty percent (50%) stock dividend, payable August 1, 1997. On the
payable date, WesBanco issued 5,357,003 common shares to
shareholders of record on July 15, 1997. Recorded at par value on
the date of declaration, the stock dividend increased common stock
and reduced retained earnings $11,160,244. Average shares and per
share amounts have been restated to reflect the stock dividend.
8
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------
(Unaudited, 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 June 30, 1997 were $1,735,597
as compared to $1,677,771 as of December 31, 1996, an increase of
3.4%. During this period, securities decreased $24,398 or 4.6%
as maturities were reinvested in federal funds sold, which
increased $52,700. Also during this six-month period, total
loans, net of unearned income, increased $6,530 or .6%, while
deposits increased $44,009 or 3.3%. The increase in total loans
was primarily due to the acquisition of the Shawnee loan
portfolio approximating $17,771 at June 30, 1997, partially
offset by a decrease in the consumer loan portfolio. The increase
in deposits was attributed to the acquisition of Shawnee deposits
approximating $28,643 at June 30, 1997, as well as growth in
certificates of deposit and interest bearing demand, reflecting
the competitive pricing of certificates of deposit and the
Prime Rate Money Market product.
Securities
- ----------
The following table shows the composition of WesBanco's
securities portfolio:
June 30, December 31,
1997 1996
Securities Available for Sale (at market): -------- ------------
- -----------------------------------------
U.S. Treasury and Federal Agency securities $177,571 $161,817
Obligations of states and political subdivisions 14,283 14,120
Corporate securities - 5,005
Mortgage-backed securities 88,546 93,750
Other debt and equity securities 1,656 1,509
--------- ---------
Total available for sale 282,056 276,201
--------- ---------
Securities Held to Maturity (at cost):
- --------------------------------------
U.S. Treasury and Federal Agency securities 63,950 99,457
Obligations of states and political subdivisions 152,511 147,643
Other debt securities 2,394 2,008
--------- ---------
Total held to maturity (market value of
$220,103 and $250,132, respectively 218,855 249,108
--------- ---------
Total securities $500,911 $525,309
========= =========
9
The market value adjustment, before tax effect, in the
available for sale securities portfolio reflected unrealized net
gains of $1,346 as of June 30, 1997 compared to unrealized net
losses of $144 as of December 31, 1996. These adjustments
represent temporary 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.
Loans
- -----
The following table shows the composition of WesBanco's loan
portfolio at June 30, 1997 and December 31, 1996:
June 30, 1997 December 31, 1996
------------- -----------------
Amount Percent Amount Percent
------ ------- ------ -------
Commercial $ 190,945 18.4% $ 177,136 17.2%
Real Estate - Construction 23,038 2.2 21,556 2.0
Real Estate - Mortgage 523,172 50.5 510,778 49.6
Consumer 298,292 28.9 321,060 31.2
-------- ---- -------- ----
Total Loans 1,035,447 100.0% 1,030,530 100.0%
Less:
Unearned income (2,547) (4,160)
Allowance for loan losses (15,745) (15,528)
---------- -----------
Net Loans $1,017,155 $1,010,842
========== ==========
While WesBanco experienced an increase in mortgage loan
activity during the second quarter of 1997, consumer loans
continued to decline reflecting a slowdown in auto financing.
During the second half of 1997, the Corporation expects loan
growth to remain slow due to the competitive environment and lack
of economic growth in the Upper Ohio Valley.
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 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, including all nonperforming loans, are as follows:
June 30, December 31,
1997 1996
-------- -----------
Nonperforming loans:
Nonaccrual $ 5,343 $ 4,664
Renegotiated 1,262 2,150
Other classified loans:
Doubtful - 94
Substandard 5,268 3,377
-------- --------
Total impaired loans $ 11,873 $ 10,285
======== ========
The average balance of impaired loans during the six months ended
June 30, 1997 and year ended December 31, 1996, was approximately
$12,280 and $11,541, respectively.
10
Specific allowances for loan losses 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 loan losses on
impaired loans were $1,807 and $2,120 as of June 30, 1997 and
December 31, 1996, respectively.
Other real estate owned totaled $4,535 as of June 30, 1997,
compared to $3,555 as of December 31, 1996. Loans past due 90
days or more increased to $7,268 or .7% of total loans as of June
30, 1997, as compared to $4,105 or .4% of total loans as of
December 31, 1996, primarily due to a commercial real estate loan
being placed into the past due 90 days category during the second
quarter 1997. On August 6, 1997, this commercial real estate
loan was paid in full.
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.
Allowance for Loan Losses
- -------------------------
Activity in the allowance for loan losses is summarized as
follows:
For the six months
ended June 30,
---------------------
1997 1996
--------- ---------
Balance, at beginning of period $ 15,528 $ 13,439
Allowance for loan losses of purchased bank 269 -
Charge-offs (2,543) (1,197)
Recoveries 502 256
-------- -------
Net charge-offs (2,041) (941)
Provision for loan losses 1,989 1,550
-------- -------
Balance, at end of period $ 15,745 $ 14,048
======== ========
The increase in net charge-offs during the first half of
1997 was due to an increase in consumer loan charge-offs and the
writedown of a commercial loan. The increase in consumer loan
charge-offs can be attributable to the lack of economic growth in
the Upper Ohio Valley. The allowance for loan losses as a
percentage of total loans was 1.52% as of June 30, 1997 and 1.50%
as of June 30, 1996. Amounts allocated to the allowance for loan
losses are based upon management's evaluation of the credit risk
in the loan portfolio. Management believes that the allowance
for loan losses as of June 30, 1997 is adequate to provide for
potential losses in the portfolio.
11
Deposits
- --------
Total deposits increased $44,009 primarily due to the
purchase acquisition of Shawnee Bank, Inc., which accounted for
approximately $28,643 of the growth between June 30, 1997 and
December 31, 1996. In addition, WesBanco experienced growth in
both interest bearing demand and certificates of deposit.
Customer preference for higher yielding products coupled with
competitive pricing through the Good Neighbor Banking program
have resulted in steady growth in certificates of deposit.
Contributing to the growth in interest bearing demand was the
Prime Rate Money Market account, introduced on October 1, 1996.
This deposit product, competitively priced at 60% of WesBanco's
prime rate, has generated both new deposit growth and a shift in
deposit balances from savings and other interest bearing demand
products. Prime Rate Money Market accounts increased 247%
between June 30, 1997 and December 31, 1996.
Liquidity and Capital Resources
- -------------------------------
WesBanco manages its liquidity position to meet its funding
needs, including deposit outflows and loan principal
disbursements and to meet its asset and liability management
objectives.
In addition to funds provided from operations, WesBanco's
primary sources of funds are deposits, principal repayments on
loans and matured or called securities. Scheduled loan
repayments and maturing 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 4%, respectively.
At June 30, 1997 and December 31, 1996, all of WesBanco's
affiliate banks exceeded the minimum regulatory levels. Capital
adequacy ratios are summarized as follows:
June 30, December 31,
1997 1996
---- ----
Tier I capital 19.8% 19.8%
Total risk-based capital 21.0 21.0
Leverage 13.5 13.7
12
Earnings Summary
----------------
Comparison of the six months ended June 30, 1997 and 1996
---------------------------------------------------------
Net income for the six months ended June 30, 1997 was
$11,153, a 2.1% increase over the same period in 1996. Earnings
per share of common stock for the six months ended June 30, 1997
and 1996 was $.71 and $.72, respectively. Two purchase
acquisitions, Universal Mortgage Company and Vandalia National
Corporation ("Vandalia") were completed subsequent to the first
half 1996. The impact of these acquisitions increased certain
income and expense classifications as further explained in the
Earnings Summary. The purchase acquisition of Shawnee Bank,
Inc., consummated on June 30, 1997, did not have an effect on
average balances or income and expense classifications for the
six months ended June 30, 1997.
Return on average assets was 1.3% for the six months ended
June 30, 1997 and 1.4% for the six months ended June 30, 1996.
Return on average equity was 9.9% compared to 10.5% for the six
months ended June 30, 1997 and 1996, respectively.
Net Interest Income
- -------------------
During a period of level market rates, net interest income
before the provision for loan losses, for the six months ended
June 30, 1997 increased $2,317 or 7.3% over the same period for
1996. While the net tax equivalent yield on average earning
assets remained stable at 4.6%, the increase in net interest
income was primarily the result of higher growth in average
earning assets of $96,336 than interest bearing liabilities of
$81,821.
Interest Income
- ---------------
Total interest income increased $5,380 or 9.7% between the
six month periods ended June 30, 1997 and 1996. Interest and
fees on loans increased $5,133 or 13% primarily due to an
increase in the average balance of loans outstanding. Average
rates earned on loans increased approximately .07%, while average
loan balances increased by approximately $117,450 or 13%.
Interest on taxable securities, which did not change significantly
between the six month periods ended June 30, 1997 and 1996, reflected
a decline in the average outstanding balance of $41,175 offset by
an increase in the average rate of approximately .7%. The decrease in
the average balance was the result of funding loan demand with scheduled
maturities. Interest earned on nontaxable securities increased $506 or
13.6%. Increases in the average balance of municipal securities
approximated $24,941 while the average yield declined .1%.
13
WesBanco emphasized purchases in municipal securities, which represented
yield and tax advantages over other securities during the comparative
period.
Interest Expense
- ----------------
Total interest expense increased $3,063 or 13% between the
six month periods ended June 30, 1997 and 1996. Interest expense
on deposits increased $2,764 or 12.7% during the comparative
period as the average rate on interest bearing deposits increased
.3% and average interest bearing deposit balances increased by
approximately $72,628 or 6.5%. Interest expense on interest
bearing demand deposits increased $1,074 or 31.2% primarily due
to an increase in the average rate of .5% coupled with an
increase in the average balance of $28,723 or 10.4%. An increase
of $2,453 or 18% in the interest expense on certificates of
deposit was the result of an average balance increase of $75,447.
The increase in average volume and rate for both interest bearing
demand and certificates of deposit was primarily the result of
the competitively priced Prime Rate Money Market product and the
Good Neighbor Banking bonuses offered on various certificates of
deposit products. Affected primarily by a shift in balances from
savings into money markets and certificates of deposit, interest
on savings accounts decreased $763 or 16.6%. Average savings
balances declined $31,542 and the average rate decreased .2%.
Interest on other borrowings, which consists primarily of
repurchase agreements, increased $299 or 16.9% due to an increase
in average balances outstanding of $9,193. Rates paid on
repurchase agreements closely follow the direction of interest
rates in the federal funds market.
Other Income
- ------------
Other income increased $681 or 11.4%. Trust fee income
increased $448 due to increases in the market value of trust
assets and new trust business as well as fees associated with the
establishment of a new family of mutual funds, the WesMark funds.
The market value of trust assets approximated $1,811,040 as of
June 30, 1997, an increase of $345,663 or 23.6% over June 30,
1996. Service charges and other income increased $264 or 8.7%
between the six month periods ended June 30, 1997 and 1996.
Other Expenses
- --------------
Total other expenses increased $2,759 or 13.4%.
Approximately $1,331 or 48% of the increase was associated with
the purchase acquisitions which occurred subsequent to the first
half of 1996. Salaries and employee benefits increased $1,064 or
9.3% during the comparative period, of which approximately $864
was due to the purchase acquisitions. The remaining portion of
the increase resulted from an increase in health insurance costs,
partially offset by a reduction in the cost of the defined
benefit pension plan. Premises and equipment expense increased
$526 or 17.8%. While the purchase acquisitions contributed to
the increase in this expense category, the majority of the
increase was due to
14
depreciation expense and service agreements associated with
initiatives in technology during 1996, including the installation
of a wide area network and a new banking software system. Other
operating expenses increased $1,169 or 18.7%, of which approximately
$580 or 50% of the increase was associated with the purchase acquisitions,
including the related goodwill amortization.
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 six months
ended June 30,
-------------------
1997 1996
---- ----
Federal statutory tax rate 35% 35%
Tax-exempt interest income from
securities of states and political
subdivisions (9) (8)
State income tax - net of federal
tax effect 3 3
Alternative minimum tax credit
carryforward recognized (3) -
All other - net 1 (1)
---- ----
Effective tax rate 27% 29%
==== ====
As of June 30, 1997, the Corporation had credits for prior
years' minimum taxes of approximately $496 available for future
periods to reduce federal income taxes payable.
Earnings Summary
-----------------
Comparison of the three months ended June 30, 1997 and 1996
-----------------------------------------------------------
Interest Income
- ---------------
Total interest income increased $2,941 or 10.6% between the
three month periods ended June 30, 1997 and 1996. Interest and
fees on loans increased $2,570 or 13% primarily due to an
increase in the average balance of loans outstanding. Average
loan balances increased by approximately $92,584 or 9.9% as
average rates earned on loans increased approximately .19%.
Interest on taxable securities, which did not change significantly
between the three month periods ended June 30, 1997 and 1996,
reflected a decrease in the average outstanding balance of
$44,792 offset by an increase in the average rate of
approximately .6%. The decrease in taxable securities was the
result of funding loan demand with scheduled maturities.
Interest earned on nontaxable securities increased by $252 or
13.3%. Increases in the average balance of municipal securities
approximated $23,058 while the average yield declined .1%.
15
WesBanco emphasized purchases in municipal securities, which
represented yield and tax advantages over other securities during
the comparative period.
Interest Expense
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Total interest expense increased $1,878 or 16% between the
three month periods ended June 30, 1997 and 1996. Interest
expense on deposits increased $1,645 or 15.1% during the
comparative period as the average rate on interest bearing
deposits increased .3% and average interest-bearing deposit
balances increased by approximately $77,155 or 6.9%. Interest
expense on interest bearing demand deposits increased $735 or
42.3% primarily due to an increase in the average rate of .6%
coupled with an increase in the average balance of $42,288 or
15.3%. An increase of $1,314 or 19.2% in the interest expense on
certificates of deposit was the result of an average balance
increase of $70,545. Affected primarily by a shift in balances
from savings into money markets and certificates of deposit,
interest on savings accounts decreased $404 or 17.5%. Average
savings balances declined $35,679 and the average rate decreased
.2%. Interest on other borrowings, which consist primarily of
repurchase agreements, increased $233 or 26.8% due to an increase
in average balances outstanding of $12,028.
Other Income
- ------------
Other income increased $473 or 16.3% between the three month
periods ended June 30, 1997 and 1996. The increase was due to
both trust fee income, which reflected fees associated with the
WesMark funds, and increased service charges on loan and deposit
accounts.
Other Expenses
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Total other expenses increased $1,249 or 11.9%, of which
approximately $656 or 52.5% was associated with the purchase
acquisitions. Salaries and employee benefits increased $404 or
6.9% during the comparative period. Premises and equipment
expense increased $230 or 15.8% primarily due to technology
initiatives. Other operating expenses increased $615 or 19.3%, of
which approximately $290 of the increase was associated with the
purchase acquisitions, including the related goodwill
amortization.
16
Other Matters
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WesBanco has approximately 57.9% of its assets located in
the Upper Ohio Valley, an area that experienced an extended
strike between the United Steel Workers Union and Wheeling-
Pittsburgh Steel Corporation. On August 12, 1997, a new contract
was ratified between the Union and Wheeling-Pittsburgh Steel.
Part II - OTHER INFORMATION
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Item 1-5 - Not Applicable
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Item 6(a) - Exhibits
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(27) Financial Data Schedule required by Article 9 of Regulation S-X.
Item 6(b) - Reports on Form 8-K
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(1) On July 7, 1997, the Registrant filed a current report
on Form 8-K, dated June 30, 1997, announcing the consummation of
the acquisition of Shawnee Bank, Inc. through a statutory merger
of Shawnee into WesBanco affiliate, WesBanco Bank Charleston.
(2) On August 5, 1997, the Registrant filed a current report
on Form 8-K, dated August 1, 1997, reporting the issuance of
stock in connection with a 3 for 2 stock split that was effected
in the form of a 50% stock dividend.
17
SIGNATURE
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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.
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August 13, 1997 /s/ Edward M. George
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Edward M. George
President and Chief Executive Officer
August 13, 1997 /s/ Paul M. Limbert
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Paul M. Limbert
Executive Vice President-Credit Administration
and Chief Financial Officer