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As filed with the Securities and Exchange Commission on May 4, 2001
Registration No. 333-59414
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4/A
(AMENDMENT NO. 1)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WESBANCO, INC.
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 6711 55-0571723
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(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
ONE BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9000
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
EDWARD M. GEORGE, PRESIDENT
WESBANCO, INC.
ONE BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9000
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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WITH COPIES TO:
JAMES C. GARDILL J. ROBERT VAN KIRK
PHILLIPS, GARDILL, KAISER & ALTMEYER KIRKPATRICK & LOCKHART LLP
61 FOURTEENTH STREET HENRY W. OLIVER BUILDING
WHEELING, WEST VIRGINIA 26003 535 SMITHFIELD STREET
(304) 232-6810 PITTSBURGH, PA 15222-2312
(412) 355-6500
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Approximate date of commencement of the proposed sale of the securities to
the public: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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FREEDOM BANCSHARES, INC.
315 CRIM AVENUE
BELINGTON, WEST VIRGINIA 26250
(304) 823-1531
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 2001
Notice is hereby given that a special meeting of shareholders of
Freedom will be held on June 19, 2001, at the principal executive offices of
Freedom, 315 Crim Avenue, Belington, West Virginia, commencing at 4:00 p.m.,
local time, to consider and vote upon the following matters described in the
accompanying proxy statement/prospectus:
1. Approval of an amendment to Freedom's bylaws to allow
Freedom shareholders to approve certain corporate transactions pursuant
to section 2.08 of the bylaws, including mergers, by a majority of the
shares of common stock entitled to vote, represented in person or by
proxy, at a meeting of Freedom shareholders.
2. Approval and adoption of the Agreement and Plan of Merger,
dated as of December 29, 2000, among Freedom, WesBanco, Inc., WesBanco
Bank, Inc., and FBI Corporation, a subsidiary of WesBanco, Inc.,
pursuant to which Freedom will be merged with and into FBI Corporation.
A copy of the Agreement and Plan of Merger is attached as Annex A to
the accompanying proxy statement/prospectus.
3. The transaction of such other business as may properly come
before the special meeting or any adjournment or postponement of the
special meeting.
Only holders of record of Freedom common stock at the close of business
on May 2, 2001, will be entitled to notice of, and to vote at, the special
meeting and any adjournment or postponement of the special meeting. The board of
directors of Freedom urge you to vote "FOR" approval and adoption of the
amendment to the bylaws and the merger.
Whether or not you plan to attend the special meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the United
States.
By Order of the board of directors,
/s/ NANCY RIGHMAN
-----------------------------------
Corporate Secretary
Belington, West Virginia
May 8, 2001
YOUR VOTE IS VERY IMPORTANT
TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
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PROXY STATEMENT
OF
FREEDOM BANCSHARES, INC.
PROSPECTUS
OF
WESBANCO, INC.
This proxy statement/prospectus is being furnished to you because you
are a holder of common stock, par value $1.00 per share of Freedom Bancshares,
Inc., a West Virginia bank holding company. The board of directors of Freedom is
soliciting your proxy for use at the special meeting of Freedom shareholders to
be held on June 19, 2001, at Freedom's principal executive offices, 315 Crim
Avenue, Belington, West Virginia, commencing at 4:00 p.m., local time, and any
adjournment or postponement thereof.
The purpose of the special meeting is the approval by you of an
amendment to the Freedom bylaws and the merger of Freedom with and into FBI
Corporation, a wholly owned subsidiary of WesBanco, Inc.
You will be asked to approve an amendment to Freedom's bylaws which
currently provide that certain corporate transactions pursuant to section 2.08
of the bylaws, including mergers, must be approved by the vote of at least 75%
of the outstanding shares of Freedom common stock. If the bylaw amendment is
recommended by the Board, only a majority vote is necessary to approve it. In
order to lessen the vote required to approve the merger, we are asking you to
approve an amendment to Freedom's bylaws that would permit the merger to be
consummated upon the affirmative vote of at least a majority of the shares of
Freedom common stock present in person or by proxy at the special meeting. The
board of directors of Freedom has approved the bylaw amendment and only a
majority vote is necessary to approve the amendment.
Each issued and outstanding share of Freedom common stock immediately
prior to the effective time of the merger, subject to some exceptions, will be
converted into the right to receive 2.58 shares of WesBanco common stock. A
copy of the merger agreement is attached as Annex A to the accompanying proxy
statement/prospectus.
This proxy statement/prospectus also constitutes the prospectus of
WesBanco for up to 490,200 shares of WesBanco common stock to be issued in the
merger in exchange for outstanding shares of Freedom common stock. WesBanco
common stock is quoted on the National Market System of the Nasdaq Stock Market
and traded under the symbol "WSBC".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF WESBANCO
COMMON STOCK TO BE ISSUED HEREUNDER OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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This Proxy Statement/Prospectus and accompanying proxy cards are first
being mailed to shareholders of Freedom on or about May 11, 2001.
THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS MORE FULLY DESCRIBES THE
PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING. WE URGE YOU TO READ THIS
DOCUMENT IN ITS ENTIRETY, INCLUDING THE SECTION ENTITLED "RISK FACTORS" ON PAGE
18.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 8, 2001.
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WHERE YOU CAN FIND MORE INFORMATION ABOUT WESBANCO
WesBanco files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
These filings are available over the internet from the SEC's web site at
www.sec.gov. You may inspect and copy WesBanco's filings at the public reference
facilities of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C., 20549. You may also obtain WesBanco's filings from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C., 20549 at
prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information
about the public reference rooms.
This proxy statement/prospectus is part of a registration statement on
Form S-4 that WesBanco has filed under the Securities Act of 1933 with respect
to the WesBanco common stock to be issued pursuant to the merger agreement. As
permitted by the SEC, this proxy statement/prospectus does not contain all of
the information set forth in the registration statement. If you would like to
view the additional information contained in the registration statement, you may
do so in the manner discussed in the preceding paragraph.
Statements in this proxy statement/prospectus that refer to the
contents of any omitted documents may be incomplete. In those cases, you are
referred to the omitted document for a more complete description. Such reference
modifies any statements made in this proxy statement/prospectus.
The SEC allows WesBanco to "incorporate by reference" the information
that WesBanco files with the SEC, which means that WesBanco can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this proxy
statement/prospectus, and information that WesBanco files later with the SEC
will automatically update and supersede this information.
WesBanco incorporates by reference its Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 and any future filings with the SEC
under Sections 13(a), 13(c), 14 or 14(d) of the Securities Exchange Act of 1934.
Future filings include filings made after the date of this proxy
statement/prospectus and prior to the date of the special meeting.
You may request a free copy of this information by writing or
telephoning WesBanco at the following address or telephone number:
Larry G. Johnson, Secretary
WesBanco, Inc.
One Bank Plaza
Wheeling, West Virginia 26003
(304) 234-9000
IN ORDER TO ENSURE TIMELY DELIVERY OF ANY DOCUMENTS, YOU MUST MAKE YOUR REQUEST
NO LATER THAN JUNE 12, 2001.
You should rely only on the information contained in this proxy
statement/prospectus or to which WesBanco has referred you. We have not
authorized any person to give any information or to make any representations
that are different from those in this document.
This proxy statement/prospectus is not an offer to sell, and it is not
soliciting an offer to buy, any securities other than those offered in this
document. This proxy statement/prospectus also is not an offer to sell, and it
is not soliciting an offer to buy, any securities offered in this document in
any circumstances in which such offer or solicitation is unlawful.
You should not assume that the information in this proxy
statement/prospectus is accurate as of any date other than the date on the first
page of this proxy statement/prospectus.
All information concerning Freedom contained in this proxy
statement/prospectus has been supplied by Freedom and all information concerning
WesBanco contained in this proxy statement/prospectus has been supplied by
WesBanco.
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TABLE OF CONTENTS
PROXY STATEMENT OF FREEDOM BANKSHARES, INC. PROSPECTUS OF WESBANCO, INC.............i
WHERE YOU CAN FIND MORE INFORMATION ABOUT WESBANCO.................................ii
TABLE OF CONTENTS.................................................................iii
QUESTIONS AND ANSWERS...............................................................1
SUMMARY.............................................................................3
The Companies.......................................................................3
The Special Meeting.................................................................3
The Merger..........................................................................4
Certain Federal Income Tax Consequences.............................................4
Dissenters' Rights..................................................................4
Comparison of Shareholder Rights....................................................5
Change in Officers of Freedom.......................................................5
Conditions to the Merger............................................................5
Termination of the Merger Agreement.................................................5
Regulatory Approvals................................................................5
Stock Option Agreement..............................................................5
Accounting Treatment................................................................6
Ownership of Freedom Common Stock by WesBanco.......................................6
Ownership of Freedom Common Stock by Freedom Directors,
Executive Officers and Affiliates......................... .......................6
Amendment of Bylaws.................................................................6
American Bancorporation Merger with WesBanco........................................6
Selected Historical Financial Data Of Wesbanco......................................8
Selected Historical Financial Data Of Freedom.......................................9
Selected Historical Financial Data of American.....................................10
WesBanco, Inc. Unaudited Pro Forma Condensed Combined Financial Information........11
WesBanco, Inc. Unaudited Pro Forma Condensed Combined Balance Sheet................12
WesBanco, Inc. Unaudited Pro Forma Condensed Combined Statement of Income..........13
Wesbanco, Inc. Notes To The Unaudited Pro Forma Condensed Financial Information....14
Comparative Per Share Data (unaudited).............................................15
Market Prices And Dividend Data....................................................16
WesBanco Common Stock Dividend Policy..............................................16
Freedom Common Stock Dividend Policy...............................................17
RISK FACTORS.......................................................................18
Forward-Looking Statements.........................................................20
THE SPECIAL MEETING................................................................21
General............................................................................21
Date, Time and Place of the Special Meeting........................................21
Record Date; Voting at the Special Meeting.........................................21
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THE MERGER............................................................................22
Background of the Merger..............................................................22
Recommendation of the Freedom Board...................................................22
Freedom Reasons for the Merger........................................................23
WesBanco Reasons for the Merger.......................................................23
Opinion of Alex Sheshunoff & Co. Investment Banking, L.P..............................24
Effects of the Merger: The Surviving Corporation......................................28
Merger of Subsidiary Banks............................................................29
Government Approvals..................................................................29
Rights of Dissenting Shareholders.....................................................29
Resale Restrictions...................................................................31
Accounting Treatment..................................................................31
Certain Federal Income Tax Consequences of the Merger.................................32
THE MERGER AGREEMENT..................................................................33
The Merger............................................................................33
Conversion of Securities..............................................................33
Representations and Warranties........................................................34
Additional Representations and Warranties of WesBanco.................................35
Mutual Covenants......................................................................35
Additional Covenants of Freedom.......................................................35
Additional Covenants of WesBanco......................................................36
Stock Option Agreement................................................................36
Conditions to Obligations of the Parties..............................................37
Conditions to Obligations of WesBanco.................................................38
Conditions to Obligations of Freedom..................................................39
Termination; Expenses.................................................................39
Amendment or Waiver...................................................................40
COMPARATIVE RIGHTS OF SHAREHOLDERS....................................................40
Description of WesBanco Capital Stock.................................................40
Description of Freedom Capital Stock..................................................40
Comparison of Rights of WesBanco and Freedom Shareholders.............................41
Differences in Rights.................................................................41
Advantages of WesBanco Anti-Takeover Provisions.......................................41
Disadvantages of WesBanco Anti-Takeover Provisions....................................42
INFORMATION WITH RESPECT TO FREEDOM...................................................43
History and Operations................................................................43
Competition...........................................................................43
Directors and Executive Officers......................................................43
Interests of Certain Persons in the Merger............................................44
Beneficial Ownership Of Common Stock By Management....................................45
Principal Shareholders Of Freedom.....................................................46
LEGAL MATTERS.........................................................................47
EXPERTS...............................................................................47
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ANNEXES
Agreement and Plan of Merger dated December 29, 2000, by and between WesBanco,
Inc., WesBanco Bank, Inc., FBI Corporation and Freedom Bancshares, Inc. ............A
Stock Option Agreement dated December 29, 2000, by and between WesBanco,
Inc. and Freedom Bancshares, Inc. ..................................................B
Fairness Opinion of Alex Sheshonoff & Co. Investment Banking, LP.......................C
West Virginia Dissenters' Rights Statute W. Va. Code Annot. Section 31-1-123...........D
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QUESTIONS AND ANSWERS
Q: WHO ARE THE PARTIES TO THE MERGER?
A: Freedom will merge with FBI Corporation, a subsidiary of WesBanco.
After the merger, Freedom will cease to exist and FBI Corporation will
continue as the surviving corporation.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote on a change to Freedom's bylaws and the
merger.
Q: IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE?
A: If the merger is completed, each share of Freedom common stock owned by
you will be converted into 2.58 shares of WesBanco common stock.
Q: HOW WILL I BE AFFECTED BY THE MERGER?
A: After the merger you will own shares in WesBanco. WesBanco is a much
larger and more diversified company than Freedom. However, you should
carefully review the differences between Freedom and Wesbanco, which
are discussed beginning on page 41.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: Assuming we receive the required approvals, we expect the merger to be
completed during the second quarter of 2001.
Q: WHAT DO I NEED TO DO NOW?
A: After reviewing this document, submit your proxy, by executing and
returning the enclosed proxy card. By submitting your proxy, you
authorize the individuals named in the proxy to represent you and vote
your shares at the special meeting in accordance with your
instructions. These persons also may vote your shares to adjourn the
special meeting from time to time and will be authorized to vote your
shares at any adjournments of the special meeting. Your vote is
important. Whether or not you plan to attend the special meeting,
please submit your proxy promptly in the enclosed envelope.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If the merger is completed, we will send you written instructions
for exchanging your Freedom common stock for WesBanco common stock.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER WILL MY BROKER VOTE
MY SHARES FOR ME?
A. Your broker will vote your shares only if you instruct your broker on
how to vote. Your broker will send you directions on how you can
instruct your broker to vote. Your broker cannot vote your shares
without instructions from you.
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Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you sign, date and send in your proxy card and do not indicate how
you want to vote, your proxies will be counted as a vote for the
proposals identified in this document and in the discretion of the
persons named as proxies in any other matters presented for a vote at
the special meeting.
Q. WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. If you are a Freedom shareholder and you abstain or do not return your
proxy card or otherwise vote at the special meeting, your failure to
vote will have the same effect as if you voted against approval of the
bylaw amendment and the merger agreement . Therefore, the board of
directors of Freedom encourages you to vote in favor of the proposed
bylaw amendment and the merger agreement as soon as possible.
Q. CAN I VOTE MY SHARES IN PERSON?
A. Yes, if you own your shares registered in your own name, you may attend
the Freedom special meeting and vote your shares in person rather than
signing and mailing your proxy card. However, in order to ensure that
your vote is counted at the special meeting, we recommend that you
sign, date and promptly mail the enclosed proxy card.
Q. CAN I CHANGE MY MIND AND REVOKE MY PROXY?
A. Yes, you may revoke your proxy and change your vote at any time before
the Freedom special meeting by:
o signing another proxy with a later date;
o giving written notice of the revocation of your proxy to the
Secretary of Freedom prior to the special meeting; or
o voting in person at the special meeting.
Your latest dated proxy or vote will be counted.
Q: WHERE CAN I GET MORE INFORMATION ABOUT WESBANCO AND THE MERGER?
A: You may obtain more information about WesBanco, the merger and the
bylaw amendment in this document and in the other sources listed on
page ii.
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SUMMARY
You are urged to read the entire proxy statement/prospectus before
deciding how to vote your shares.
THE COMPANIES
WESBANCO INC.
One Bank Plaza
Wheeling, West Virginia 26003
(304) 234-9000
WesBanco, a bank holding company headquartered in Wheeling, WV, offers
a full range of financial services including retail banking, corporate banking,
personal and corporate trust services, brokerage services, mortgage banking and
insurance.
WesBanco's primary business function is the operation of a commercial
bank through 60 offices located in West Virginia and Eastern Ohio. WesBanco
restructured its banking and mortgage operations on January 14, 2000, merging
all of its banking subsidiaries and its mortgage subsidiary into one state
member banking corporation, WesBanco Bank, Inc., headquartered in Wheeling with
regional administrative offices in Fairmont, Parkersburg and Charleston.
WesBanco previously maintained four separate banking subsidiaries. Total assets
of WesBanco Bank, Inc. as of December 31, 2000 approximated $2.3 billion.
WesBanco also offers services through its non-banking affiliates.
WesBanco Insurance Services, Inc., is a multi-line insurance agency specializing
in property, casualty and life insurance for personal and commercial clients.
WesBanco Securities, Inc., is a full service broker-dealer which also offers
discount brokerage services.
WesBanco also serves as investment adviser to a family of mutual funds
under the name "WesMark Funds" which include the WesMark Growth Fund, the
WesMark Balanced Fund, the WesMark Bond Fund, the WesMark West Virginia
Municipal Bond Fund and the new WesMark Small Company Growth Fund that was
introduced in the third quarter of 2000.
FREEDOM BANCSHARES, INC.
315 Crim Avenue
Belington, West Virginia 26250
(304) 823-1531
Freedom is a registered bank holding company with one bank subsidiary,
Belington Bank, Inc., located in West Virginia. Through this subsidiary, Freedom
conducts general and commercial banking from five offices located in Belington,
Elkins, Phillippi, Buckhannon and Bridgeport, West Virginia. Freedom offers
checking, savings, NOW accounts and certificates of deposit as well as consumer
and commercial loans. It does not exercise trust powers or offer trust services.
Freedom also offers ATM and Visa debit cards as well as an automated phone
banking system. Each office also provides ATM banking. Total assets of Belington
Bank, Inc. as of December 31, 2000 approximated $100 million.
FBI CORPORATION
FBI Corporation is a wholly-owned subsidiary of WesBanco. FBI
Corporation was incorporated for the sole purpose of effecting the merger.
THE SPECIAL MEETING
The special meeting will be held on Tuesday, June 19, 2001 at 4:00
p.m., local time, at the offices of Freedom at 315 Crim Avenue, Belington, West
Virginia, 26250. The purpose of the special meeting is to consider and vote upon
the amendment to the Freedom bylaws, the merger agreement and the merger.
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You may vote at the special meeting only if you owned shares of Freedom
common stock at the close of business on May 2, 2001. You may cast one vote
for each share of Freedom common stock owned at that date. If the bylaw
amendment is approved, the holders of at least a majority of the shares of
Freedom common stock present in person or by proxy at the special meeting must
vote in favor of the merger in order to approve the merger. If the bylaw
amendment is not approved, the holders of at least 75% of the outstanding shares
of Freedom common stock must vote in favor of the merger in order to approve the
merger. In order to approve the bylaw amendment, the holders of at least a
majority of the outstanding shares of Freedom common stock must vote in favor of
the amendment. As of May 2, 2001, there were 190,000 shares of Freedom common
stock outstanding, held by approximately 260 holders of record.
You can vote your shares by attending the special meeting and voting in
person, or by marking the enclosed proxy card with your vote, signing it and
mailing it in the enclosed return envelope. You can change your vote as late as
the date of the special meeting either by sending in a new proxy received prior
to the special meeting or by attending the special meeting and voting in person.
THE MERGER
We propose a merger between FBI Corporation and Freedom, with FBI
Corporation continuing as the surviving corporation. FBI Corporation will retain
its articles of incorporation and bylaws. FBI Corporation will also retain its
officers and directors.
In the merger, for each share of Freedom common stock you own, you will
receive 2.58 shares of WesBanco common stock.
You will not receive any fractional shares. Instead, you will receive a
check in payment for any fractional shares based on a value of $22.94 per whole
share of WesBanco common stock.
Your shares of Freedom common stock will be canceled as a result of the
merger. However, unless you properly exercise dissenters' rights, you will
receive shares of a much larger and more diversified company, as more fully
described in this proxy statement/prospectus.
We expect the merger to occur as soon as practicable after shareholder
and regulatory approvals have been received, and all applicable regulatory
waiting periods have expired. We expect this to occur during the second quarter
of 2001.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
We intend the merger to be a reorganization for federal income tax
purposes. If we obtain this treatment, you will not recognize any gain or loss
for federal income tax purposes upon receipt of shares of WesBanco common stock
in exchange for your shares of Freedom common stock. However, you will have to
pay taxes on any cash received in lieu of fractional shares.
Because of the complexity of the tax laws and the individual nature of
the tax consequences of the merger to a shareholder, you should consult your own
tax advisor concerning all federal, state, local and foreign tax consequences of
the merger that may apply to you.
DISSENTERS' RIGHTS
In connection with the merger, you are entitled to dissenters' rights
under West Virginia law. If you properly exercise your dissenters' rights, you
will be entitled to receive in cash the fair value of your shares determined as
of the day prior to the date of the special meeting, without regard to any
appreciation or depreciation in anticipation of the merger. See "The
Merger--Rights of Dissenting Shareholders" beginning on page 29.
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of WesBanco and Freedom are governed by
the articles of incorporation and bylaws of the respective organizations and by
West Virginia law, and are similar in many respects. Important differences do
exist however. Please see "Comparative Rights of Shareholders" beginning on page
40 for a complete description of these differences.
Because you will receive shares of WesBanco common stock in the merger,
you should know that the articles of incorporation of WesBanco contain
provisions that may have the effect of discouraging or deterring others from
attempting to acquire control of WesBanco. Please see "Comparative Rights of
Shareholders" beginning on page 40 for a complete description of these
provisions and their potential effect on you.
CHANGE IN OFFICERS OF FREEDOM
The officers of Freedom also serve as officers of its subsidiary bank,
Belington Bank. The corporate titles of Belington Bank officers will be
eliminated by the merger; however, after the merger, Freedom officers will
continue to serve as officers of the merged banking subsidiary, WesBanco Bank.
CONDITIONS TO THE MERGER
Several conditions must be satisfied or waived before the merger can be
completed, including approval of the shareholders of Freedom. Please see "The
Merger Agreement--Conditions to Obligations of the Parties" beginning on page 37
for a complete list of the conditions that must be satisfied.
TERMINATION OF THE MERGER AGREEMENT
We may agree to terminate the merger agreement at any time without
completing the merger, even after you have approved it.
In addition, either of us may decide, without the consent of the other,
to terminate the merger agreement if the merger has not occurred by June 30,
2001, or if the shareholders of Freedom fail to approve the merger. For a
description of other circumstances in which either of us may terminate the
merger agreement, see "The Merger Agreement--Termination; Expenses" beginning on
page 39.
Freedom has the right to terminate the merger agreement if the average
price of a share of WesBanco common stock falls below $18.00 over a specified
30-day period. You should carefully review the complete description of this
right contained later in this document.
REGULATORY APPROVALS
In addition to your approval, the merger is subject to the approval of
the Board of Governors of the Federal Reserve System and the West Virginia Board
of Banking and Financial Institutions. The Board of Governors of the Federal
Reserve System and the West Virginia Board of Banking and Financial Institutions
approved the merger on March 12, 2001.
STOCK OPTION AGREEMENT
We entered into a Stock Option Agreement dated December 29, 2000,
granting WesBanco the option to purchase up to 37,810 shares of Freedom common
stock at a price of $40.47 per share. Freedom granted WesBanco this option to
induce WesBanco to enter into the merger agreement and to increase the
likelihood that the corporations would complete the merger.
The Stock Option Agreement could discourage other companies from trying
or proposing to combine with Freedom before the completion of the merger. The
Stock Option Agreement in its entirety is attached as Annex B.
WesBanco cannot exercise this option unless certain events occur. These
events include business combinations or acquisition transactions relating to
Freedom and Freedom's failure to satisfy certain provisions in
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the merger agreement. Neither Freedom nor WesBanco is aware of any event, as of
the date of this document, which would permit WesBanco to exercise this option.
See "The Merger Agreement--Stock Option Agreement" on page 36 for more
information about the Stock Option Agreement.
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting purposes. The
results of this accounting treatment are shown in the unaudited pro forma
condensed combined financial information included on pages 11 through 14 of this
proxy statement/prospectus.
OWNERSHIP OF FREEDOM COMMON STOCK BY WESBANCO
As of May 2, 2001, WesBanco and parties related to WesBanco did not
own any shares of Freedom common stock.
OWNERSHIP OF FREEDOM COMMON STOCK BY FREEDOM DIRECTORS, EXECUTIVE OFFICERS AND
AFFILIATES
As of May 2, 2001, the directors, executive officers and affiliates
of Freedom owned or controlled the vote of 48,989 shares of Freedom common stock
constituting approximately 25.78% of the outstanding shares of Freedom common
stock. See "The Merger-Interest of Certain Persons in the Merger" on page 43 for
more information about Freedom directors, executive officers and affiliates.
AMENDMENT OF BYLAWS
Freedom's bylaws currently provide that certain corporate transactions
pursuant to section 2.08 of the bylaws, including mergers, must be approved by
the vote of at least 75% of the outstanding shares of Freedom common stock. In
order to lessen the vote required to approve the merger, we are asking you to
approve an amendment to Freedom's bylaws that would permit the merger to be
consummated upon the affirmative vote of at least a majority of the shares of
Freedom common stock present in person or by proxy at the special meeting. The
board of directors of Freedom has approved the bylaw amendment and recommends
that shareholders vote FOR approval and adoption.
AMERICAN BANCORPORATION MERGER WITH WESBANCO
On February 22, 2001, WesBanco, Inc. and American Bancorporation
entered into a definitive Agreement and Plan of Merger providing for the merger
of American with and into a wholly-owned subsidiary of WesBanco, AB Corporation,
and the merger of American affiliate, Wheeling National Bank, with and into
WesBanco affiliate, WesBanco Bank, Inc. The merger will be accounted for using
the purchase method of accounting. If the merger is completed, American
shareholders will receive 1.1 shares of WesBanco common stock for each share of
American common stock they owned prior to the merger. A total of 3,442,641
shares of WesBanco common stock will be issued to holders of American common
stock in the merger. The transaction, which was valued at $70,540,000 at the
date of announcement, is subject to the approvals of the appropriate banking
regulatory authorities and both American and WesBanco shareholders. American
granted an option to WesBanco to purchase 622,805 shares of its common stock at
$18.00 per share as an inducement to WesBanco to enter into the merger
agreement.
At December 31, 2000 American reported total assets of approximately
$705,216,000. If the merger had occurred as of December 31, 2000, American would
have, on a pro forma consolidated basis after giving effect to the Freedom
Merger, constituted approximately 20.2% of deposits, 22.4% of assets, and 11.9%
of equity of WesBanco, and its shareholders would have held approximately 15.3%
of the total outstanding shares of WesBanco. In addition, for the year ended
December 31, 2000, American would have contributed approximately 16.9% of net
interest income and 15.5% of net income to WesBanco on a pro forma consolidated
basis. The pro forma financial information set forth on pages 11 through 14
provides additional information concerning the merger of American with WesBanco.
Much of the information concerning American and its operations referred
to in this proxy statement/prospectus is derived from American's public filings
and press releases and has not been independently
6
14
verified by WesBanco or its representatives. American files annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange Commission (the "SEC"). These filings are available over the
internet from the SEC's web site at www.sec.gov. You may inspect and copy
American's filings at the public reference facilities of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain
American's filings from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information about the public reference rooms.
7
15
SELECTED HISTORICAL FINANCIAL DATA OF WESBANCO
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain historical financial data concerning
WesBanco for the five years ended December 31, 2000. This information is based
on information contained in WesBanco's 2000 Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, which is incorporated by reference into
this document.
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
SUMMARY STATEMENT OF INCOME:
Interest income $ 163,079 $ 155,861 $ 162,718 $ 157,790 $ 144,383
Interest expense 79,552 69,231 73,925 70,005 61,612
----------- ----------- ----------- ----------- -----------
Net interest income 83,527 86,630 88,793 87,785 82,771
Provision for loan losses 3,225 4,295 4,392 5,574 4,795
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 80,302 82,335 84,401 82,211 77,976
Other income 23,376 24,581 25,715 17,701 15,657
Other expense 64,483 67,813 68,308 65,182 57,043
----------- ----------- ----------- ----------- -----------
Income before income taxes 39,195 39,103 41,808 34,730 36,590
Income tax provision 12,271 11,465 13,495 9,519 10,648
----------- ----------- ----------- ----------- -----------
Net income $ 26,924 $ 27,638 $ 28,313 $ 25,211 $ 25,942
=========== =========== =========== =========== ===========
PER SHARE INFORMATION: *
Earnings per share $ 1.41 $ 1.37 $ 1.36 $ 1.23 $ 1.31
Dividends per share 0.895 0.88 0.84 0.786 0.72
Book value per share at year end 13.92 13.63 14.35 13.97 13.17
Average shares outstanding 19,092,927 20,229,524 20,867,193 20,461,742 19,855,791
SELECTED RATIOS:
Return on average assets 1.18% 1.23% 1.26% 1.18% 1.31%
Return on average equity 10.42% 9.85% 9.55% 8.99% 10.48%
AS OF DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
SELECTED BALANCE SHEET DATA:
Assets $ 2,310,137 $ 2,269,726 $ 2,242,712 $ 2,211,543 $ 2,090,750
Securities 546,389 567,928 680,550 629,218 600,330
Net loans 1,570,672 1,503,694 1,353,920 1,321,640 1,305,766
Deposits 1,870,361 1,814,001 1,787,642 1,779,867 1,702,660
Shareholders' equity 258,506 269,664 296,483 287,995 268,481
* ADJUSTED TO REFLECT A THREE FOR TWO STOCK SPLIT EFFECTED IN THE FORM OF
A 50% STOCK DIVIDEND, EFFECTIVE JUNE 19, 1997.
8
16
SELECTED HISTORICAL FINANCIAL DATA OF FREEDOM
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain historical financial data concerning
Freedom for the five years ended December 31, 2000. This information is based on
information contained in Freedom's 2000 Consolidated Financial Statements,
Accompanying Notes and Management's Discussion and Analysis, which are included
in this document.
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
SUMMARY STATEMENT OF INCOME:
Interest income $ 7,432 $ 7,401 $ 7,600 $ 7,221 $ 6,694
Interest expense 3,442 3,623 3,755 3,466 3,196
-------- -------- -------- -------- --------
Net interest income 3,990 3,778 3,845 3,755 3,498
Provision for loan losses 661 740 1,025 612 482
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 3,329 3,038 2,820 3,143 3,016
Other income 1,153 1,039 1,000 917 682
Other expense 3,988 3,227 3,230 3,112 2,517
-------- -------- -------- -------- --------
Income before income taxes 494 850 590 948 1,181
Income tax provision 132 282 169 246 398
-------- -------- -------- -------- --------
Net income $ 362 $ 568 $ 421 $ 702 $ 783
======== ======== ======== ======== ========
PER SHARE INFORMATION:
Earnings per share $ 1.91 $ 2.99 $ 2.22 $ 3.69 $ 4.12
Dividends per share 0.80 0.60 1.20 1.70 1.55
Book value per share at year end 42.23 39.03 39.35 38.44 35.66
Average shares outstanding 190,000 190,000 190,000 190,000 190,000
SELECTED RATIOS:
Return on average assets 0.36% 0.55% 0.42% 0.79% 0.96%
Return on average equity 4.75% 7.64% 5.58% 9.97% 11.77%
AS OF DECEMBER 31,
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
SELECTED BALANCE SHEET DATA:
Assets $100,474 $ 97,394 $102,006 $ 90,944 $ 86,299
Securities 29,324 28,940 26,534 19,426 22,932
Net loans 57,933 56,247 60,761 57,494 53,223
Deposits 91,914 89,663 94,037 83,006 79,069
Shareholders' equity 8,023 7,417 7,476 7,304 6,775
9
17
SELECTED HISTORICAL FINANCIAL DATA OF AMERICAN
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain historical financial data concerning
American for the five years ended December 31, 2000. This information is based
on information contained in American's 2000 Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
SUMMARY STATEMENT OF INCOME:
Interest income $ 52,776 $ 47,618 $ 40,301 $ 35,539 $ 29,885
Interest expense 34,724 29,171 23,440 18,278 13,802
---------- ---------- ---------- ---------- ----------
Net interest income 18,052 18,447 16,861 17,261 16,083
Provision for loan losses 910 420 240 -- --
---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 17,142 18,027 16,621 17,261 16,083
Other income 2,946 3,504 4,694 2,926 2,392
Other expense 14,192 14,650 14,343 13,101 12,707
---------- ---------- ---------- ---------- ----------
Income before income taxes 5,896 6,881 6,972 7,086 5,768
Income tax provision 1,190 1,527 1,770 2,577 2,102
---------- ---------- ---------- ---------- ----------
Net income $ 4,706 $ 5,354 $ 5,202 $ 4,509 $ 3,666
========== ========== ========== ========== ==========
PER SHARE INFORMATION: *
Earnings per share $ 1.50 $ 1.71 $ 1.66 $ 1.44 $ 1.17
Dividends per share 0.60 0.60 0.555 0.50 0.45
Book value per share at year end 12.96 9.00 11.65 10.77 9.72
Average shares outstanding 3,129,674 3,129,674 3,129,674 3,129,674 3,129,674
SELECTED RATIOS:
Return on average assets 0.66% 0.79% 0.95% 0.96% 0.91%
Return on average equity 14.39% 16.19% 14.64% 14.15% 12.62%
AS OF DECEMBER 31,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
SELECTED BALANCE SHEET DATA:
Assets $ 705,216 $ 711,291 $ 611,405 $ 484,606 $ 461,632
Securities 272,045 298,153 263,827 169,176 143,474
Net loans 386,272 368,143 297,580 283,407 267,886
Deposits 496,149 449,277 431,240 355,734 319,811
Shareholders' equity 40,561 28,179 36,447 33,694 30,423
* ADJUSTED TO REFLECT A TWO FOR ONE STOCK SPLIT, EFFECTIVE OCTOBER 23, 1997.
10
18
WESBANCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Financial Information is based on
the historical financial statements of WesBanco, Freedom and American and has
been prepared to illustrate the financial effect of the acquisitions described
below.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2000
assumes the mergers of Freedom and American into WesBanco, accounted for as
purchases, were consummated on December 31, 2000. The Unaudited Pro Forma
Condensed Combined Statement of Income for the year ended December 31, 2000
gives effect to the mergers of Freedom and American as if such transactions had
been effective during the entire period shown.
The Unaudited Pro Forma Condensed Financial Information reflects the mergers
based upon preliminary purchase accounting adjustments. Actual adjustments,
which may include adjustments to certain assets, liabilities and other items
including identifiable intangibles, will be made on the basis of evaluations as
of the effective date of the mergers and, therefore, may differ from those
reflected in the Unaudited Pro Forma Condensed Financial Information.
The Unaudited Pro Forma Condensed Information should be read in conjunction with
WesBanco's and American's Consolidated Financial Statements and Notes thereto,
and Freedom's Consolidated Financial Statements, Notes to the Consolidated
Financial Statements and Management's Discussion and Analysis which are included
in this document.
Projected pre-tax acquisition costs associated with the mergers of Freedom and
American include legal, accounting and advisory fees of approximately $150,000
and $1.1 million, respectively. Additional pre-tax costs related to the American
transaction will include approximately $4.5 million in personnel costs, which
are primarily severance-related. These acquisition costs are not included in the
pro forma financial statements.
11
19
WESBANCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, 2000
-------------------------------------------------------------------------------------------------------
FREEDOM PRO FORMA PRO FORMA
BANCSHARES, PRO FORMA COMBINED AMERICAN PRO FORMA COMBINED
WESBANCO, INC. INCORPORATED ADJUSTMENTS WESBANCO, INC. BANCORPORATION ADJUSTMENTS WESBANCO, INC.
-------------- ------------ ----------- -------------- -------------- ----------- --------------
ASSETS
Cash and due from
banks $ 72,796 $ 4,990 $ -- $77,786 $9,963 $ -- $87,749
Due from banks -
interest bearing 620 620 620
---------- -------- ------- ---------- -------- ------- ----------
Total cash and
due from banks 73,416 4,990 78,406 9,963 88,369
Federal funds sold 4,950 4,950 4,530 9,480
Available for sale
securities 350,287 16,184 366,471 272,045 638,516
Held to maturity
securities 196,102 13,140 (33)(C) 209,209 209,209
---------- -------- ------- ---------- -------- ------- ----------
Total securities 546,389 29,324 (33) 575,680 272,045 847,725
Loans, net of
unearned income 1,590,702 58,972 (720)(C) 1,648,954 389,524 (5,145)(C) 2,033,333
Allowance for loan
losses (20,030) (1,039) (21,069) (3,252) (24,321)
---------- -------- ------- ---------- -------- ------- ----------
Net loans 1,570,672 57,933 (720) 1,627,885 386,272 (5,145) 2,009,012
Bank premises and
equipment 53,147 2,102 55,249 9,538 64,787
Goodwill and other
intangibles 20,636 25 4,250 (A,C) 24,911 1,643 33,569 (B,C) 60,123
Other assets 45,877 1,150 47,027 21,225 68,252
---------- -------- ------- ---------- -------- ------- ----------
TOTAL ASSETS $2,310,137 $100,474 $ 3,497 $2,414,108 $705,216 $28,424 $3,147,748
========== ======== ======= ========== ======== ======= ==========
LIABILITIES
Non interest bearing
deposits $234,265 $13,176 $ -- $247,441 $41,213 $ $288,654
Interest bearing
deposits 1,636,096 78,738 242 (C) 1,715,076 454,936 659 (C) 2,170,671
---------- -------- ------- ---------- -------- ------- ----------
Total deposits 1,870,361 91,914 242 1,962,517 496,149 659 2,459,325
Federal funds
purchased and
repurchase
agreements 120,873 120,873 531 121,404
Other borrowings 38,444 38,444 148,844 187,288
---------- -------- ------- ---------- -------- ------- ----------
Total interest
bearing
liabilities 2,029,678 91,914 242 2,121,834 645,524 659 2,768,017
Other liabilities 21,953 537 22,490 6,481 28,971
Subordinated
debentures 12,650 (2,214)(C) 10,436
---------- -------- ------- ---------- -------- ------- ----------
TOTAL
LIABILITIES 2,051,631 92,451 242 2,144,324 664,655 (1,555) 2,807,424
SHAREHOLDERS' EQUITY
Common stock 43,742 190 (190)(A) 43,742 7,824 (4,690)(B) 46,876
Capital surplus 59,464 3,677 (6,737)(A) 56,404 10,302 9,433 (B) 76,139
Retained earnings 217,674 4,250 (4,250)(A) 217,674 24,734 (24,734)(B) 217,674
Treasury Stock (62,009) 14,338 (A) (47,671) 47,671 (B) --
Market value
adjustment on
securities
available for
sale - net of
tax effect (365) (94) 94 (A) (365) (2,299) 2,299 (B) (365)
---------- -------- ------- ---------- -------- ------- ----------
TOTAL
SHAREHOLDERS'
EQUITY 258,506 8,023 3,255 269,784 40,561 29,979 340,324
---------- -------- ------- ---------- -------- ------- ----------
TOTAL
LIABILITIES AND
SHAREHOLDERS'
EQUITY $2,310,137 $100,474 $ 3,497 $2,414,108 $705,216 $28,424 $3,147,748
========== ======== ======= ========== ======== ======= ==========
Book Value Per Share $13.92 $42.23 $14.16 $12.96 $15.12
Shares Outstanding 18,567,940 190,000 19,058,140 3,129,674 22,500,781
SEE NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
12
20
WESBANCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31, 2000
-------------------------------------------------------------------------------------------------------
FREEDOM PRO FORMA PRO FORMA
BANCSHARES, PRO FORMA COMBINED AMERICAN PRO FORMA COMBINED
WESBANCO, INC. INCORPORATED ADJUSTMENTS WESBANCO, INC. BANCORPORATION ADJUSTMENTS WESBANCO, INC.
-------------- ------------ ----------- -------------- -------------- ----------- --------------
INTEREST INCOME
Interest and fees on
loans $128,591 $5,338 $ 120 (C) $134,049 $34,103 $ 858 (C) $169,010
Interest on securities 33,271 1,833 15 (C) 35,119 18,439 53,558
Interest on federal
funds sold 1,217 261 1,478 234 1,712
-------- ------ ----- -------- ------- ------- --------
Total interest income 163,079 7,432 135 170,646 52,776 858 224,280
INTEREST EXPENSE
Interest on deposits 70,441 3,442 (121)(C) 73,762 21,960 (329)(C) 95,393
Interest on other
borrowings 9,111 9,111 12,764 82 (C) 21,957
-------- ------ ----- -------- ------- ------- --------
Total interest
expense 79,552 3,442 (121) 82,873 34,724 (247) 117,350
NET INTEREST INCOME 83,527 3,990 256 87,773 18,052 1,105 106,930
Provision for loan
losses 3,225 661 3,886 910 4,796
-------- ------ ----- -------- ------- ------- --------
NET INTEREST INCOME
AFTER PROVISION
FOR LOAN LOSSES 80,302 3,329 256 83,887 17,142 1,105 102,134
OTHER INCOME
Trust fees 12,226 12,226 12,226
Service charges on
deposit accounts 8,097 933 9,030 908 9,938
Other income 2,243 220 2,463 2,030 4,493
Net security
transaction gains 810 810 8 818
-------- ------ ----- -------- ------- ------- --------
Total other income 23,376 1,153 24,529 2,946 27,475
OTHER EXPENSE
Salaries, wages and
benefits 33,309 1,854 35,163 6,684 41,847
Premises and equipment,
net 10,283 609 10,892 2,610 13,502
Other operating 20,891 1,525 283 (C) 22,699 4,898 2,238 (C) 29,835
-------- ------ ----- -------- ------- ------- --------
Total other expense 64,483 3,988 283 68,754 14,192 2,238 85,184
Income before income
Taxes 39,195 494 (27) 39,662 5,896 (1,133) 44,425
Provision for income
taxes 12,271 132 102 (C) 12,505 1,190 442 (C) 14,137
-------- ------ ----- -------- ------- ------- --------
NET INCOME $ 26,924 $ 362 $(129) $ 27,157 $ 4,706 $(1,575) $ 30,288
======== ====== ===== ======== ======= ======= ========
Earnings Per Share $1.41 $1.91 $1.39 $1.50 $1.32
Average Shares
Outstanding 19,092,927 190,000 19,583,127 3,129,674 23,025,768
SEE NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
13
21
WESBANCO, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Unaudited Pro Forma Condensed Financial Information is based on the
following adjustments and related assumptions. The actual purchase price
accounting adjustments will be made on the basis of fair values as of the
effective date of the mergers and, therefore, may differ from those reflected in
the Unaudited Pro Forma Condensed Financial Information.
The purchase accounting adjustments to record the merger of Freedom and American
used in the preparation of the Unaudited Pro Forma Condensed Combined Balance
Sheet are summarized as follows:
NOTE A
FREEDOM BANCSHARES, INCORPORATED
Freedom common stock outstanding at December 31, 2000 190,000
Exchange ratio of WesBanco shares for Freedom shares 2.58
----------
Shares to be issued from WesBanco Treasury (acquired under a share repurchase program) 490,200
==========
Shares issued at market value (average closing price for a period preceding and following
the date of the Agreement to Merge) $ 11,278
Historical net assets acquired (8,023)
----------
Excess of purchase price over historical net assets acquired $ 3,255
==========
NOTE B
AMERICAN BANCORPORATION
American common stock outstanding at December 31, 2000 3,129,674
Exchange ratio of WesBanco shares for American shares 1.10
----------
Shares to be issued from WesBanco Treasury, 1,938,391 shares (acquired under a share
repurchase program) and the remainder in newly issued common shares 3,442,641
==========
Shares issued at market value (average closing price for a period preceding and following
the date of the Agreement to Merge) $ 70,540
Historical net assets acquired (40,561)
----------
Excess of purchase price over historical net assets acquired $ 29,979
==========
NOTE C
Using the purchase method of accounting, the excess of purchase price over the
fair value of the net assets acquired is allocated to goodwill. The estimated
fair value adjustments included in the Unaudited Pro Forma Condensed Combined
Balance Sheet have been determined based on information available as of December
31, 2000. Since the final determination of fair values of assets and liabilities
will be made based on the fair values as of the effective date of the mergers
and after evaluation of the values are complete, the final amounts may differ
from the estimates provided herein. Goodwill is amortized on a straight-line
basis over a period of 15 years. Fair value adjustments are amortized on a
straight-line basis over the estimated remaining portfolio life. Tax expense
related to net fair value adjustments is calculated at a 40% tax rate.
The accounting for goodwill will be impacted by the Proposed Statement of
Financial Accounting Standards, Business Combinations and Intangible Assets. The
FASB expects to release this new accounting rule on or about June 30, 2001. The
new standard proposes that goodwill arising from acquisitions completed either
before or after the statement is adopted will no longer be amortized. Recovery
of goodwill amortization from prior periods (interim or annual) is not
permitted. The Standard also provides new guidance on impairment testing, which
will be applied to existing goodwill.
14
22
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table sets forth historical per share financial
information for WesBanco and Freedom along with pro forma combinations of
WesBanco, Freedom and American for the year ended December 31, 2000. The pro
forma equivalent per share information is computed on Freedom stock only using
the WesBanco pro forma information and an exchange ratio of 2.58 shares of
WesBanco common stock for each share of Freedom common stock. The information in
these tables is not necessarily an indicator of future operations and should be
read in conjunction with the historical, supplemental and unaudited pro forma
financial statements which are furnished within this proxy statement/prospectus
or has been furnished separately.
FOR THE YEAR ENDED DECEMBER 31, 2000
------------------------------------------------
PRO FORMA
PRO FORMA COMBINED
COMBINED WESBANCO/FREEDOM/
HISTORICAL WESBANCO/FREEDOM AMERICAN
---------- ---------------- -----------------
WESBANCO COMMON STOCK:
Earnings per share $ 1.41 $ 1.39 $ 1.32
Dividends per share 0.895 0.895 0.895
Book value per share 13.92 14.16 15.12
FREEDOM COMMON STOCK:
Earnings per share $ 1.91 $ 3.59 $ 3.41
Dividends per share 0.80 2.31 2.31
Book value per share 42.23 36.53 39.01
15
23
MARKET PRICES AND DIVIDEND DATA
WesBanco common stock is quoted on the National Market System of the
Nasdaq Stock Market and traded under the symbol "WSBC." The table below sets
forth for the calendar quarters indicated, the range of high and low sales
prices of WesBanco common stock as reported by the National Market System of the
Nasdaq Stock Market and the cash dividends declared on WesBanco common stock.
There is no established trading market for the Freedom common stock.
WESBANCO COMMON STOCK
-----------------------------------
HIGH LOW DIVIDENDS
------ ------ ---------
2001
First Quarter $23.88 $17.69 $.230
2000
Fourth Quarter 24.25 21.50 .225
Third Quarter 24.63 19.13 .225
Second Quarter 24.63 20.00 .225
First Quarter 25.00 19.31 .220
1999
Fourth Quarter 28.63 21.50 .220
Third Quarter 30.00 25.50 .220
Second Quarter 30.25 27.50 .220
First Quarter 31.25 26.50 .220
- ----------
On December 28, 2000, the last full trading day prior to the execution
of the merger agreement, the closing price per share of WesBanco common stock as
reported on the National Market System of the Nasdaq Stock Market was $24.25. On
May 2, 2001, the most recent practicable date prior to the printing of this
proxy statement/prospectus, the closing price per share of WesBanco common stock
as reported on the National Market System of the Nasdaq Stock Market was $21.21.
You are urged to obtain current market quotations for WesBanco common
stock. Prices at which WesBanco common stock may trade prior to the merger may
not be indicative of prices at which WesBanco common stock may trade following
the merger.
Freedom common stock is not listed on any exchange, quotation system or
over-the-counter market and is not actively traded. However, since January 1,
2000, a total of 1,896 shares of Freedom common stock have been traded in
approximately 10 transactions known to Freedom. The prices buyers paid for
Freedom common stock ranged from $32 to $40 per share since this date.
WESBANCO COMMON STOCK DIVIDEND POLICY
WesBanco has historically declared and paid cash dividends on a
quarterly basis. WesBanco anticipates that, after the merger, it will initially
declare quarterly dividends on shares of WesBanco common stock of $0.23 per
share. You are cautioned, however, that the WesBanco board of directors may, at
any time and without notice, stop declaring dividends or reduce the amount of
the dividend.
Whether WesBanco pays a dividend, and the amount of any dividend, will
depend upon WesBanco's results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit agreements or
senior securities and other factors deemed relevant by the WesBanco board of
directors. Because WesBanco's principal source of income is dividends from its
subsidiaries, its ability to pay future dividends will depend upon the financial
condition and earnings of its subsidiaries.
16
24
WesBanco may pay dividends at the discretion of its board of directors
out of any funds legally available for the payment of dividends under West
Virginia law. Under the West Virginia Corporation Act, dividends may be paid out
of unreserved and unrestricted earned surplus, and, additionally, in certain
circumstances and with the affirmative vote of holders of a majority of
WesBanco's outstanding shares, out of capital surplus. WesBanco may never pay a
dividend, however, if, at the time of or after payment of the dividend, it is or
would be insolvent.
FREEDOM COMMON STOCK DIVIDEND POLICY
Freedom has recently declared and paid dividends of $0.40 on a
semi-annual basis on Freedom common stock. Freedom may pay dividends at the
discretion of its board of directors out of any funds legally available for the
payment of dividends under West Virginia law. Under the West Virginia
Corporation Act, dividends may be paid out of unreserved and unrestricted earned
surplus, and, additionally, in certain circumstances and with the approval of
holders of a majority of its outstanding shares, out of capital surplus. Freedom
may never pay a dividend, however, if at the time of or after payment of the
dividend, it is or would be insolvent.
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RISK FACTORS
WESBANCO'S STATUS AS A HOLDING COMPANY MAKES IT DEPENDENT ON DIVIDENDS FROM ITS
SUBSIDIARIES TO MEET ITS OBLIGATIONS.
WesBanco is a holding company and conducts almost all of its operations
through its subsidiaries. WesBanco does not have any significant assets other
than the stock of its subsidiaries. Accordingly, WesBanco depends on the cash
flows of its subsidiaries to meet its obligations. WesBanco's right to
participate in any distribution of earnings or assets of its subsidiaries is
subject to the prior claims of creditors of such subsidiaries. Under federal and
state law, WesBanco's bank subsidiaries are limited in the amount of dividends
they can pay to WesBanco without prior regulatory approval. Also, bank
regulators have the authority to prohibit WesBanco's subsidiary banks from
paying dividends if they think the payment would be an unsafe and unsound
banking practice.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM WESBANCO'S BUSINESS.
WesBanco's results of operations are materially affected by the
monetary and fiscal policies of the federal government and the regulatory
policies of governmental authorities. WesBanco's profitability will be dependent
to a large extent on its net interest income, which is the difference between
income on interest-earning assets, such as loans, and expense on
interest-bearing liabilities, such as deposits. A change in market interest
rates will adversely affect WesBanco's earnings if market interest rates change
such that the interest WesBanco pays on deposits and borrowings increases faster
than the interest it collects on loans and investments. Consequently, WesBanco,
along with other financial institutions generally, is sensitive to interest rate
fluctuations.
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WESBANCO COULD EXPERIENCE SIGNIFICANT DIFFICULTIES AND COMPLICATIONS IN
CONNECTION WITH ITS GROWTH.
WesBanco has grown significantly over the last few years and may seek
to continue to grow by acquiring financial institutions and branches as well as
non-depository entities engaged in permissible activities for its financial
institution subsidiaries. However, the market for acquisitions is highly
competitive. WesBanco may not be as successful in the future as it has been in
the past in identifying financial institution and branch acquisition candidates,
integrating acquired institutions or preventing deposit erosion at acquired
institutions or branches.
WesBanco may encounter unforeseen expenses, as well as difficulties and
complications in integrating expanded operations and new employees without
disruption to overall operations. In addition, rapid growth may adversely affect
WesBanco's operating results because of many factors, including start-up costs,
diversion of management time and resources, asset quality and required operating
adjustments. WesBanco may not successfully integrate or achieve the anticipated
benefits of its growth or expanded operations.
AMERICAN'S MERGER WITH WESBANCO REMAINS SUBJECT TO REGULATORY AND SHAREHOLDER
APPROVALS.
The pro forma information contained in this proxy statement/prospectus
includes information concerning WesBanco's merger with American Bancorporation,
a Wheeling, West Virginia based bank holding company with offices in West
Virginia, Ohio and Pennsylvania. On February 22, 2001, WesBanco, Inc. and
American Bancorporation entered into a definitive Agreement and Plan of Merger
providing for the merger of American with and into a wholly-owned subsidiary of
WesBanco, AB Corporation, and the merger of American affiliate, Wheeling
National Bank, with and into WesBanco affiliate, WesBanco Bank, Inc. This
transaction is subject to regulatory and shareholder approvals which have not
yet been obtained. There are no assurances that such approvals will be obtained
or that the merger will ever be consummated.
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FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus, including the information that
WesBanco incorporates by reference, includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. You can identify these forward-looking
statements by the words "believes," "contemplates," "expects," "may," "will,"
"should," "would," "anticipates," and similar expressions. Discussions of
strategy are also forward-looking statements.
We caution you that these statements are not guarantees of future
performance and involve risks and uncertainties that we cannot predict. In
addition, many of these forward-looking statements are based on assumptions
about the future that may prove to be inaccurate. Accordingly, actual results
may differ materially from those expressed in the forward-looking statements.
Factors that could cause forward-looking statements to be inaccurate
include:
o changes in the regional and national economies;
o changes in interest rates; and
o changes in federal and state regulations; and increased
competition.
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THE SPECIAL MEETING
GENERAL
This proxy statement/prospectus and the accompanying proxy card are
being mailed to you on or about May 11, 2001. The Freedom board of directors
is soliciting proxies from the holders of Freedom common stock to be voted at
the special meeting. The special meeting has been called to consider and vote
upon (i) the amendment to Freedom's bylaws recommended by the board of directors
of Freedom to allow shareholders to approve certain corporate transactions
pursuant to Section 2.08 of the bylaws, including mergers, by the affirmative
vote of at least a majority of the shares of Freedom common stock present in
person or by proxy at a meeting of Freedom's shareholders and (ii) the merger
agreement, which provides for the merger of Freedom with FBI Corporation, and
the exchange of each outstanding share of Freedom common stock for shares of
WesBanco common stock.
The Freedom board of directors has unanimously approved the bylaw
amendment and the merger agreement and recommends that you vote FOR approval
thereof.
A copy of the merger agreement is attached to this proxy
statement/prospectus as Annex A and is incorporated by reference into this
document in its entirety. You should read this agreement carefully.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on Tuesday, June 19, 2001, at 4:00
p.m., local time, in the principal executive offices of Freedom, at 315 Crim
Avenue, Belington, West Virginia, 26250.
RECORD DATE; VOTING AT THE SPECIAL MEETING
Only holders of record of Freedom common stock on May 2, 2001, will be
entitled to notice of and to vote at the special meeting and any adjournments or
postponements of the special meeting. On that date, there were 190,000 shares of
Freedom common stock outstanding and entitled to vote at the special meeting.
Each share is entitled to one vote. As of May 2, 2001, there were approximately
260 holders of record of Freedom common stock.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Freedom common stock entitled to vote is necessary to
constitute a quorum at the special meeting. If the bylaw amendment is approved,
the holders of at least a majority of the shares of Freedom common stock
entitled to vote and present in person or by proxy must vote in favor of the
merger in order to approve the merger. If the bylaw amendment is not approved,
the holders of at least 75% of the outstanding shares of Freedom common stock
must vote in favor of the merger in order to approve the merger. In order to
approve the bylaw amendment, the holders of at least a majority of the
outstanding shares of Freedom common stock must vote in favor of the amendment.
Abstentions and broker non-votes will have the effect of a vote against approval
of the bylaw amendment, merger agreement and the merger.
Each director and executive officer of Freedom who owns or has control
over shares of Freedom common stock has advised Freedom that he or she will vote
FOR adoption and approval of the bylaw amendment and the merger agreement. As of
May 2, 2001, the directors, executive officers and affiliates of Freedom owned
or controlled the vote of 48,989 shares of Freedom common stock, constituting
approximately 25.78% of the outstanding shares of Freedom common stock.
WesBanco owns no shares of Freedom common stock nor do any directors,
officers or affiliates of WesBanco own shares of Freedom common stock.
All shares of Freedom common stock represented at the special meeting
by properly executed proxies received prior to or at the special meeting, and
not revoked, will be voted at the special meeting in accordance with the
instructions on the proxies. If you properly execute a proxy but include no
voting instructions, your shares will be voted to approve the bylaw amendment
and the merger agreement and authorize the merger.
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The Freedom board of directors does not know of any matters, other than
as described in the notice of special meeting, which are to come before the
special meeting. If any other matters are properly presented at the special
meeting for action, the persons named in the enclosed form of proxy will have
the authority to vote on those matters in their discretion.
If you give a proxy, you have the right to revoke it at any time before
it is voted. You may revoke your proxy by (i) filing with the Secretary of
Freedom a written notice of revocation bearing a later date than the proxy, (ii)
duly executing a later dated proxy relating to the same shares and delivering it
to the Secretary of Freedom before the taking of the vote at the special
meeting, or (iii) attending the special meeting and voting in person. Any
written notice of revocation or subsequent proxy should be sent so as to be
delivered to Freedom Bancshares, Inc., 315 Crim Avenue, Belington, West
Virginia, 26250, Attention: Corporate Secretary, or hand delivered to the
foregoing representative of Freedom, at or before the taking of the vote at the
special meeting.
Freedom will bear the cost of the solicitation of proxies, except that
WesBanco will bear the costs of preparing, printing and mailing this proxy
statement/prospectus. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of Freedom in person or by
telephone, telegram or other means of communication. These directors, officers
and employees will not be additionally compensated but may be reimbursed for
out-of-pocket expenses they incur in connection with the solicitation.
Arrangements will also be made with custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of Freedom common
stock held of record by such persons. Freedom may reimburse these custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses they incur in
connection therewith. DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
THE MERGER
The following description of the terms of the merger is qualified in
its entirety by reference to the provisions of the merger agreement, which is
attached to this proxy statement/prospectus as Annex A and is incorporated into
this document by reference. You are strongly encouraged to read the merger
agreement for a more complete description of the terms of the merger.
BACKGROUND OF THE MERGER
On September 15, 2000, Mr. George, President of WesBanco, initiated
informal discussions with Mr. Hudnall, Chief Executive Officer of Freedom,
regarding Freedom's operating philosophy, products and services and whether
Freedom would be interested in merging with WesBanco. On September 20, 2000, Mr.
Hudnall relayed Mr. George's comments to the Freedom board of directors which
then directed Mr. Hudnall to further pursue merger opportunities. Mr. George,
Mr. Gardill, Chairman of the Board of WesBanco, and Mr. Hudnall met on several
occasions in October and November, 2000, prior to seeking approval of the merger
from Freedom's board of directors. The main focus of these meetings was the
compatibility of Freedom and WesBanco and the similarities in, and the
differences between, their operating philosophies. During the meetings, the
parties began negotiating the terms of an acquisition transaction.
The negotiations and discussions lead the parties to conclude that a
combination of WesBanco and Freedom would create a more competitive financial
institution in Belington, West Virginia, than either could be alone, and that
the combination would better serve the needs of the banks' respective customers
in West Virginia. On December 29, 2000, the parties agreed on the terms of a
transaction and executed the definitive merger agreement.
RECOMMENDATION OF THE FREEDOM BOARD
The Freedom board of directors has unanimously approved the bylaw
amendment and the merger agreement and recommends that you vote FOR approval and
adoption of the bylaw amendment and the merger agreement. The Freedom board of
directors has determined that the merger is in your best interests and in the
best interests of the employees and customers of Freedom.
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FREEDOM REASONS FOR THE MERGER
Financial Terms of Merger. The Freedom board of directors believes
that, based on historical and anticipated trading prices for WesBanco common
stock, the value of the consideration to be received by you represents fair
multiples of Freedom's per share book value and earnings. The board also
considered that the merger will result in a substantial increase in dividend
income per share to you, although there can be no assurance that WesBanco's
current dividends are indicative of future dividends. The board also considered
that you will receive WesBanco common stock, which is traded on the National
Market System of the Nasdaq Stock Market and has substantially greater liquidity
than the shares of Freedom common stock.
Non-financial Terms of the Merger. The Freedom board of directors also
considered the social and economic effects of the merger on Freedom's employees,
depositors, customers, and others dealing with Freedom, and the community in
which Freedom is located and operates. The board also believed that Freedom
shareholders would benefit by owning shares in a publicly traded company.
Certain Financial and Other Information Concerning WesBanco. The
Freedom board of directors also considered the business and financial condition
of WesBanco and its position among its peer group of financial institutions in
West Virginia and Ohio in terms of profitability, capital adequacy and asset
quality. The board considered that historical dividends per share and net income
per share of WesBanco common stock represent a substantial increase in
historical dividends per share and net income per share of Freedom common stock,
although there can be no assurance that pro forma amounts are indicative of
future dividends or income per share of WesBanco common stock. The board further
considered the reputation and business practices of WesBanco and its management
as they would affect the employees of Freedom.
Other Possible Alternatives. Having thoroughly explored other possible
alternatives to the transaction with WesBanco, including remaining independent,
the Freedom board of directors believes that the transaction with WesBanco is
the best available alternative for you and Freedom at this time.
The Freedom board of directors believes that the merger and the merger
agreement are advisable and are fair to and in the best interests of you and
Freedom. The Freedom board of directors unanimously recommends that you vote FOR
approval and adoption of the merger and the merger agreement.
WESBANCO REASONS FOR THE MERGER
WesBanco's board of directors believes that the combination of its
resources with those of Freedom will afford the resulting combined institution
better opportunities to compete with other financial and non-financial
institutions (including other commercial banks, thrift institutions, finance
companies, credit unions, money market mutual funds, brokerage firms, investment
companies, credit companies, insurance companies and retail stores that maintain
their own credit operations) in the markets in which Freedom and WesBanco's
subsidiary banks conduct their business. The merger will also provide WesBanco
with a presence in Belington, West Virginia, which will afford WesBanco an
opportunity for future growth in that market. The combined entity will also
benefit from the elimination of duplicative expenses.
The combined entity will be able to offer a broader range of services
than that currently available to Freedom customers. These additional services
include mutual funds, broader loan programs and, through participation in a
larger bank, the ability to service larger loan transactions.
In summary, WesBanco's board of directors believes that the merger will
enable both Freedom and WesBanco to better serve the financial needs of their
communities. The WesBanco board of directors also believes that WesBanco will
obtain these benefits at a cost that, under all the facts and circumstances, is
reasonable.
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OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
Freedom retained Alex Sheshunoff & Co. Investment Banking, L.P. to
provide an opinion of the fairness from a financial viewpoint, of the Exchange
Ratio to Freedom's shareholders in the merger. As part of its investment banking
business, Alex Sheshunoff & Co. is regularly engaged in the valuation of
securities in connection with mergers and acquisitions and valuations for
estate, corporate and other purposes. The board of directors of Freedom retained
Alex Sheshunoff & Co. based upon its experience as a financial advisor in
mergers and acquisitions of financial institutions and its knowledge of
financial institutions.
On April 4, 2001, Alex Sheshunoff & Co. rendered its written opinion
that, as of such date, the Exchange Ratio was fair, from a financial point of
view, to the shareholders of Freedom. The full text of the fairness opinion,
which sets forth, among other things, assumptions made, procedures followed,
matters considered, and limitations on the review undertaken, is attached to
this proxy statement/prospectus as Annex C. The shareholders of Freedom are
urged to read the fairness opinion carefully and in its entirety. The fairness
opinion is addressed to the board of directors of Freedom and does not
constitute a recommendation to any Freedom shareholder as to how to vote at the
meeting.
In connection with the fairness opinion, Alex Sheshunoff & Co.:
1. Reviewed the Agreement;
2. Reviewed Freedom's consolidated results based upon a review of
its annual financial statements for the three-year period
ending December 31, 2000;
3. Reviewed Freedom's Call Report information for the five-year
period ending December 31, 2000;
4. Conducted conversations with Freedom's and the WesBanco's
executive management regarding each company's recent and
projected financial performance;
5. Compared Freedom's recent operating results to those of
certain other banks in West Virginia which have been acquired
since January 1, 1995;
6. Compared Freedom's recent operating results to those of
certain other banks located in the United States which have
been acquired since January 1, 2000 with a high level of
nonperforming assets and a low level of reserves;
7. Compared Freedom's recent operating results to those of
publicly traded banks in the United States with a high level
of nonperforming assets and a low level of reserves;
8. Compared the pricing multiples for Freedom in the Merger to
those of certain other banks in West Virginia which have been
acquired since January 1, 1995;
9. Compared the pricing multiples for Freedom in the Merger to
those of certain other banks located in the United States
which have been acquired since January 1, 2000 with a high
level of nonperforming assets and a low level of reserves;
10. Compared the pricing multiples for Freedom in the Merger to
those of certain other publicly traded banks in the United
States with a high level of nonperforming assets and a low
level of reserves;
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11. Analyzed the net present value of the cash flows Freedom could
produce through the year 2005 as an independent company and
estimated a residual value, based on assumptions provided by
Freedom's management;
12. Analyzed the contribution Freedom's equity and earnings would
make to WesBanco;
13. Reviewed WesBanco's consolidated financial statements as
presented in its regulatory filings for the three-year period
ending December 31, 2000;
14. Reviewed the impact of WesBanco's pending merger with American
based upon information provided by WesBanco and other publicly
available information. We assumed that the merger would close
as scheduled based upon representation to that effect made by
WesBanco's management.
15. Analyzed the historical dividends paid by WesBanco;
16. Reviewed the historical trading volume and price of WesBanco's
common shares;
17. Compared the pricing multiples for WesBanco to those of
certain other publicly traded banks in Kentucky, Maryland,
Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia;
18. Performed such other analyses, as we deemed appropriate.
In connection with its review, Alex Sheshunoff & Co. relied upon and
assumed the accuracy and completeness of all of the foregoing information
provided to it or made publicly available, and Alex Sheshunoff & Co. did not
assume any responsibility for independent verification of such information. Alex
Sheshunoff & Co. assumed that internal confidential financial projections
provided by Freedom were reasonably prepared reflecting the best currently
available estimates and judgments of the future financial performance of Freedom
as an independent company and did not independently verify the validity of such
assumptions. Alex Sheshunoff & Co. did not make any independent evaluation or
appraisal of the assets or liabilities of Freedom and was not furnished with any
such appraisals. Alex Sheshunoff & Co. did not examine any individual loan files
of Freedom. Alex Sheshunoff & Co. is not an expert in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and has assumed that such allowance is, in the
aggregate, adequate to cover such losses.
With respect to WesBanco, Alex Sheshunoff & Co. did not conduct any
independent evaluation or appraisal of the assets, liabilities or business
prospects of WesBanco, was not furnished with any evaluations or appraisals and
did not review any individual loan files of WesBanco.
The fairness opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Alex
Sheshunoff & Co. as of April 4, 2001.
In rendering the fairness opinion, Alex Sheshunoff & Co. performed a
variety of financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Consequently, the fairness opinion is not readily susceptible to partial
analysis or summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the merger consideration is to some extent
subjective, based on the experience and judgment of Alex Sheshunoff & Co., and
not merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Alex Sheshunoff & Co.
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be Alex
Sheshunoff & Co.'s view of the actual value of Freedom.
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In performing its analyses, Alex Sheshunoff & Co. made numerous
assumptions with respect to industry performance, business, and economic
conditions and other matters, many of which are beyond the control of Freedom.
The analyses performed by Alex Sheshunoff & Co. are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by such analyses, nor are they appraisals. In addition,
you should not view Alex Sheshunoff & Co.'s analyses as determinative of the
opinion of the board of directors or the management of Freedom with respect to
the value of Freedom.
The following is a summary of the analyses performed by Alex Sheshunoff
& Co. in connection with its opinion. The following discussion contains
financial information concerning Freedom and WesBanco as of December 31, 2000
and market information as of April 4, 2001. For the purposes of the following
analysis, Alex Sheshunoff & Co. used a value of $50.00 per share for the merger
consideration based upon WesBanco's closing stock price of $19.38 per share as
of April 4, 2001 and the Exchange Ratio of 2.58.
Analysis of Selected Transactions
Alex Sheshunoff & Co. performed an analysis of premiums paid in
selected pending or completed acquisitions of banking organizations with
comparable characteristics to the Merger. Two sets of comparable transactions
were analyzed.
The first set of comparable transactions consisted of certain
transactions in West Virginia for which pricing information was available. These
comparable transactions consisted of 10 mergers and acquisitions of banks with
assets below $300 million and announced since January 1, 1995. The analysis
yielded multiples of the purchase prices in these transactions relative to:
Book value ranging from 114.43% to 282.29% with a median of 177.59%
compared with the multiple in the Merger of 118.37% of book value as of December
31, 2000 for Freedom;
Tangible book value ranging from 114.43% to 328.53% with a median of
177.59% compared with the multiple in the Merger of 118.76% of tangible book
value as of December 31, 2000 for Freedom;
Last-twelve-months earnings ranging from 17.43x to 32.41x with a median
of 25.39x compared with the multiple in the Merger of 26.17x last-twelve-months
earnings as of December 31, 2000 for Freedom;
Total assets ranging from 10.14% and 40.83% with a median of 24.06%
compared with the multiple in the Merger of 9.45% of total assets as of December
31, 2000 for Freedom; and
The second set of comparable transactions consisted of certain
transactions where the seller had comparable financial characteristics to
Freedom and pricing information was available. These comparable transactions
consisted of 17 mergers and acquisitions of banks in the United States with
total assets less than $300 million, nonperforming assets plus loans 90 days
past due to total assets ratios of greater than 1.50%, reserves to nonperforming
loans ratios of less than 75.00%, and announced since January 1, 2000. The
analysis yielded multiples of the purchase prices in these transactions relative
to:
Book value ranging from 84.08% to 300.93% with a median of 134.41%
compared with the multiple in the Merger of 118.37% of book value as of December
31, 2000 for Freedom;
Tangible book value ranging from 98.04% to 300.93% with a median of
139.62% compared with the multiple in the Merger of 118.76% of tangible book
value as of December 31, 2000 for Freedom;
Last-twelve-months earnings ranging from 12.73x to 57.91x with a median
of 20.53x compared with the multiple in the Merger of 26.17x last-twelve-months
earnings as of December 31, 2000 for Freedom;
Total assets ranging from 5.66% and 23.12% with a median of 13.30%
compared with the multiple in the Merger of 9.45% of total assets as of December
31, 2000 for Freedom.
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Comparable Company Analysis
Alex Sheshunoff & Co. performed an analysis of the market prices of
publicly traded banking organizations with comparable financial characteristics
to Freedom. One set of comparable companies was analyzed.
The comparable companies consisted of 7 publicly traded banking
organizations listed on major exchanges with nonperforming assets plus loans 90
days past due to total assets ratios of greater than 1.50% and reserves to
nonperforming loans ratios of less than 75.00%. The analysis yielded multiples
of the publicly traded prices of these companies relative to:
Book value ranging from 44.86% to 154.57% with a median of 77.92%
compared with the multiple implied in the merger of 118.37% of book value as of
December 31, 2000 for Freedom;
Tangible book value ranging from 51.47% to 154.57% with a median of
86.72% compared with the multiple implied in the merger of 118.76% of tangible
book value as of December 31, 2000 for Freedom;
Last-twelve-months earnings ranging from 8.15x to 17.25x with a median
of 14.61x compared with the multiple implied in the Merger of 26.17x
last-twelve-months earnings as of December 31, 2000 for Freedom;
Total assets ranging from 2.49% and 14.21% with a median of 6.20%
compared with the multiple implied in the merger of 9.45% of total assets as of
December 31, 2000 for Freedom.
Discounted Cash Flow Analysis
Using discounted cash flow analysis, Alex Sheshunoff & Co. estimated
the present value of the future after-tax cash flow streams that Freedom could
produce through the year 2005 as an independent company under various
circumstances, assuming that it performed in accordance with the earnings/return
projections provided by management.
Alex Sheshunoff & Co. estimated the residual value for Freedom at the
end of 2005 by capitalizing the final period projected earnings by the quotient
of (i) the assumed annual growth rate of Freedom plus one and (ii) the
difference between a range of required rates of return and the assumed annual
growth rate of earnings in (i) above. Alex Sheshunoff & Co. discounted the
annual cash flow streams and the residual values using discount rates ranging
from 14% to 16%. The discount range was chosen to reflect different assumptions
regarding the required rates of return of Freedom and the inherent risk
surrounding the underlying projections. This discounted cash flow analysis
indicated a range of values per share of $35.03 to $41.26, compared to the value
per share of the merger consideration to Freedom shareholders of $50.00 per
share as of April 4, 2001.
Accretion/Dilution Analysis
Alex Sheshunoff & Co. performed accretion/dilution analysis of: 2000
earnings; 2001 projected earnings; 2001 projected earnings including anticipated
cost savings; book value; tangible book value; and dividends to Freedom
shareholders based on the Exchange Ratio in the Merger. All of our analyses
included the impact of the proposed American Merger. Based on Freedom's December
31, 2000 earnings per share of $1.91 and pro forma 2000 earnings per share of
$3.48, the Exchange Ratio represents an 82.53% increase. Based on Freedom's
December 31, 2001 projected earnings per share of $2.74 and pro forma projected
2001 core earnings per share of $3.57 (excluding merger related charges), the
Exchange Ratio represents a 30.30% increase. Based on Freedom's December 31,
2001 projected earnings per share of $2.74 and pro forma projected 2001 core
earnings per share including cost savings of $3.71 (excluding merger related
charges), the Exchange Ratio represents a 35.63% increase. Based on Freedom's
December 31, 2000 book value per share of $42.23 and pro forma 2000 book value
per share of $39.34, the Exchange Ratio represents a 6.85% decrease. Based on
Freedom's December 31, 2000 tangible book value per share of $42.09 and pro
forma 2000 tangible book value per share of $32.92, the Exchange Ratio
represents a 21.80% decrease. Based on Freedom's December 31, 2000
last-twelve-month dividends per share of $0.80 and pro forma 2000
last-twelve-month dividends per share of $2.31, the Exchange Ratio represents a
188.64% increase.
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Contribution Analysis
Alex Sheshunoff & Co. analyzed the relative contribution of Freedom,
American, and WesBanco to certain pro forma balance sheet and income statement
items of the combined entity. The contribution analysis showed that Freedom
would contribute approximately: 3.19% of the total combined assets; 3.74% of the
total combined deposits; 3.29% of the total combined liabilities; 2.36% of the
total combined equity; 2.81% of the total combined tangible equity; 3.78% of the
total combined net interest income; 4.20% of the total combined noninterest
income; 4.73% of the total combined noninterest expense; and 1.19% of the total
combined net income as of December 31, 2000; compared to the estimated pro forma
ownership of 2.20% for Freedom shareholders based on the Exchange Ratio of 2.58.
Stock Consideration Analysis
As part of our analyses, Alex Sheshunoff & Co. compared the financial
performance and market pricing of WesBanco to certain other independent publicly
traded financial institutions in Kentucky, Maryland, Ohio, Pennsylvania,
Tennessee, Virginia, and West Virginia with assets between $1 billion and $5
billion. The comparable group consisted of 28 financial institutions. The price
to book ratios of the comparable group ranged from 76.12% to 283.95% with a
median of 163.10%. WesBanco's price to book ratio is 139.19%. The price to
tangible book ratios of the comparable group ranged from 85.69% to 296.65% with
a median of 178.77%. WesBanco's price to tangible book ratio is 151.01%. The
price to last-twelve-month earnings ratios of the comparable group ranged from
8.56x to 53.69x with a median of 13.99x. WesBanco's price to last-twelve-month
earnings ratio is 13.74x. The price to assets ratios of the comparable group
ranged from 4.15% to 28.27% with a median of 14.08%. WesBanco's price to assets
ratio is 15.57%.
Alex Sheshunoff & Co. also compared selected stock market results of
WesBanco to the publicly available corresponding data of other composites that
Alex Sheshunoff & Co. deemed to be relevant, the S&P 500 and the Alex Bank
Index. During the last twelve months, WesBanco's share price performance has
significantly outperformed the S&P 500. WesBanco's share price performance was
above the Alex Bank Index until December of 2000. Since January 2001 the share
price performance has been below the Alex Bank Index.
Conclusion
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Freedom, WesBanco or the merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of Freedom and WesBanco and other factors that could
affect the public trading value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data or
comparable company data.
The fairness opinion is directed only to the question of whether the
Exchange Ratio is fair from a financial perspective and is not a recommendation
to any Freedom stockholder to vote in favor of or against the merger. Freedom
did not impose any limitations on Alex Sheshunoff & Co. regarding the scope of
its investigation or otherwise.
Based on the results of the various analyses described above, Alex
Sheshunoff & Co. concluded that the Exchange Ratio is fair, from a financial
point of view to Freedom shareholders.
Pursuant to an engagement letter dated December 4, 2000, between
Freedom and Alex Sheshunoff & Co. Freedom agreed to pay Alex Sheshunoff & Co. a
fee of $20,000. Freedom also agreed to indemnify and hold harmless Alex
Sheshunoff & Co. and its officers and employees against certain liabilities in
connection with its services under the engagement letter, except for liabilities
resulting from the negligence, violation of law or regulation or bad faith of
Alex Sheshunoff & Co. or any matter for which Alex Sheshunoff & Co. may have
strict liability.
EFFECTS OF THE MERGER: THE SURVIVING CORPORATION
The merger will become effective at the time the Articles of Merger are
filed with, and the Certificate of Merger is issued by, the Secretary of State
of the State of West Virginia. At that time, the separate existence of
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Freedom will cease and FBI Corporation will be the surviving corporation. The
assets, liabilities, and capital of Freedom will be merged into FBI Corporation
and those assets, liabilities and capital will then constitute part of the
assets, liabilities and capital of FBI Corporation. FBI Corporation will
continue to operate under its articles of incorporation and bylaws effective as
of the day of the merger.
The articles of incorporation and bylaws of WesBanco will be unaffected
by the merger. The tenure of the directors and officers of WesBanco immediately
prior to the merger will be unaffected by the merger. For information concerning
WesBanco's current management, see WesBanco's Annual Proxy Statement filed
pursuant to Section 14(a) of the Securities Exchange Act on March 16, 2001. See
"Where You Can Find More Information About WesBanco" on page ii.
Without taking into account the American merger, Freedom would have, as
of December 31, 2001, on a pro forma consolidated basis, constituted
approximately 4.7% of deposits, 4.2% of assets, and 3.0% of equity of WesBanco,
and its shareholders would have held approximately 2.6% of the total outstanding
shares of WesBanco. In addition, for the year ended December 31, 2000, Freedom
would have contributed approximately 4.5% of net interest income and 1.3% of net
income to WesBanco on a pro forma consolidated basis.
Taking into account the American merger, Freedom would have, as of
December 31, 2001, on a pro forma consolidated basis, constituted approximately
3.7% of deposits, 3.2% of assets, and 2.4% of equity of WesBanco, and its
shareholders would have held approximately 2.2% of the total outstanding shares
of WesBanco. In addition, for the year ended December 31, 2000, Freedom would
have contributed approximately 3.7% of net interest income and 1.2% of net
income to WesBanco on a pro forma consolidated basis.
These percentages reflect the relative size of Freedom as of December
31, 2000 and may change with the normal variances in the rates of growth for
deposits and loans for all WesBanco affiliates. Additionally, it is contemplated
that WesBanco may combine with other financial institutions in the future and
these mergers may affect the percentages shown above. Other than the merger of
WesBanco with American Bancorporation which is expected to occur in the fourth
quarter of 2001, WesBanco is not presently involved in any other material merger
transactions for which definitive agreements or letters of intent have been
executed.
MERGER OF SUBSIDIARY BANKS
On the date of the merger, Belington Bank will be merged with and into
WesBanco Bank. At that time, the separate existence of Belington Bank will cease
and WesBanco Bank will be the surviving corporation. WesBanco Bank will continue
to operate the five offices of Belington Bank acquired by reason of the merger.
GOVERNMENT APPROVALS
The completion of the merger is conditioned upon the approval of the
merger by the Board of Governors of the Federal Reserve System and the West
Virginia Board of Banking and Financial Institutions.
Applications for approval were filed with the Board of Governors of the
Federal Reserve System and the West Virginia Board of Banking and Financial
Institutions on January 25, 2001. Approval of the merger was received from the
Board of Governors of the Federal Reserve System and the West Virginia Board of
Banking and Financial Institutions on March 12, 2001.
RIGHTS OF DISSENTING SHAREHOLDERS
If you object to the merger and comply with Section 31-1-123 of the
West Virginia Corporation Act, you are entitled to payment of the fair value of
your shares. The fair value of the shares will be determined as of the day prior
to the date of the special meeting without regard to any appreciation or
depreciation in anticipation of the merger.
The following is a brief summary of the steps you must take to perfect
your dissenters' rights under West Virginia law. This summary does not purport
to be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the provisions of Section 31-1-123 of
the West Virginia Corporation Act, which is reproduced in full as Annex D to
this proxy statement/prospectus.
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You Must Object to the Merger in Writing. You must file a written
objection to the proposed merger with the Secretary of Freedom prior to or at
the special meeting.
You Must Not Vote in Favor of the Merger. You must not vote your shares
in favor of the merger. You are not required to vote against the merger, but if
you vote for the merger you will lose your right to exercise dissenters' rights.
You Must Make Written Demand for Fair Value. You must make written
demand on Freedom or the surviving corporation for payment of the fair value of
your shares within 10 days after the vote is taken at the special meeting.
VOTING AGAINST THE MERGER DOES NOT CONSTITUTE THE DEMAND FOR PAYMENT REQUIRED BY
LAW. If you fail to make such written demand within the 10-day period, you will
be bound by the terms of the merger agreement. The written demand may be
addressed to Freedom Bancshares, Inc., 315 Crim Avenue, Belington, West
Virginia, 26250. Once you demand to be paid the fair value of your shares, you
cannot withdraw your demand without the permission of Freedom or the surviving
corporation.
Your Rights as a Dissenting Shareholder. If you make such a demand, you
shall thereafter be entitled only to payment as a dissenting shareholder as
provided by law and you shall not be entitled to vote or to exercise any other
rights of a shareholder of Freedom. Your right to be paid the fair value of your
shares will cease, and your status as a shareholder of Freedom will be restored,
without prejudice to any corporate proceedings which may have been taken during
the interim, if any of the following events occurs:
o your demand is withdrawn with the consent of Freedom or the
surviving corporation;
o the merger is abandoned or rescinded;
o the Freedom shareholders revoke the authority to effect the
merger;
o no demand or petition for the determination of fair value by a
court of general civil jurisdiction has been made or filed
within the time provided by statute; or
o a court of general civil jurisdiction determines that you are
not entitled to relief as a dissenting shareholder.
You Must Surrender your Certificate(s). You must surrender your stock
certificates to Freedom or the surviving corporation within 20 days after
demanding payment for your shares so that a notation that such demand has been
made may be placed on your stock certificates. Your failure to surrender your
certificates shall, at Freedom's or the surviving corporation's option,
terminate your dissenters' rights unless a court, for good cause shown, directs
otherwise.
Surviving Corporation Must Make Offer. If you have demanded to be paid
the fair value of your shares, within 10 days after the merger becomes effective
the surviving corporation must give you written notice of the merger and offer,
in writing, to purchase your shares at a price deemed by the surviving
corporation to be the fair value of your shares. The offer must be accompanied
by a balance sheet of Freedom as of the latest available date, which shall not
be more than twelve months prior to the making of the offer, and a profit and
loss statement of Freedom for the twelve month period ended on the date of that
balance sheet. If within 30 days after the merger becomes effective, you and the
surviving corporation agree upon the fair value, you will be entitled to receive
the agreed payment for your shares within 90 days after the merger becomes
effective upon surrender of your shares. Upon payment of the agreed value, you
shall cease to have any interest in your shares of Freedom common stock.
Filing Suit. If you and the surviving corporation fail to agree upon
the fair value within 30 days after the merger becomes effective then, within 30
days after receipt of written demand from any dissenting shareholder, which
written demand must be given within 60 days after the merger becomes effective,
the surviving corporation will file a complaint in the Circuit Court of Barbour
County, West Virginia, requesting that the fair value of the shares be found and
determined. If the surviving corporation fails to institute such a proceeding,
you or any other dissenting shareholder may do so in the name of the surviving
corporation.
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To exercise your dissenters' rights, strict adherence to the provisions
of West Virginia law is required. If you think you may desire to exercise your
dissenters' rights, you should carefully review the statutory provisions
attached to this proxy statement/prospectus as Annex D. As in all legal matters,
you would be well advised to seek the guidance of an attorney.
If you receive cash for the fair value of your shares of Freedom common
stock, that cash will be subject to federal income taxes. The amount of gain or
loss and its character as ordinary or capital gain or loss will be determined in
accordance with Sections 302 and 1001 (and in certain cases, other provisions)
of the Internal Revenue Code of 1986 (the "IRC"). If you are contemplating the
possible exercise of dissenters' rights, you are urged to consult a tax advisor
as to the federal (and any applicable state and local) income tax consequences
resulting from such an election.
RESALE RESTRICTIONS
The shares of WesBanco common stock that you will receive in the merger
will be registered under the Securities Act of 1933. Under current law, if you
are not an affiliate of WesBanco or Freedom within the meaning of Rule 144 under
the Securities Act of 1933, you may sell or transfer any shares of WesBanco
common stock that you receive in the merger without need of further registration
under the Securities Act of 1933.
If you are an affiliate of Freedom before the merger or an affiliate of
WesBanco after the merger, you may resell the shares of WesBanco common stock
issued to you in the merger only:
o in transactions permitted by Rules 144 and 145 under the
Securities Act of 1933;
o pursuant to an effective registration statement; or
o in transactions exempt from registration.
Generally, if you are an executive officer, director or a principal
shareholder or other control person of Freedom or WesBanco, you may be deemed to
be an affiliate for these purposes. Other shareholders would not be deemed to be
affiliates. Rules 144 and 145, insofar as relevant to shares acquired in the
merger, impose restrictions on the manner in which affiliates may make resales
and also on the quantity of resales that such affiliates, and others with whom
they might act in concert, may make within any three-month period.
It is a condition to WesBanco's obligation to consummate the merger
that Freedom deliver to WesBanco a schedule specifying the persons who may be
deemed to be affiliates of Freedom and use its best efforts to cause each
affiliate to deliver to WesBanco, prior to the closing of the merger, an
affiliate's letter. An affiliate's letter is a letter that states that the
shares of WesBanco common stock issued to an affiliate pursuant to the merger
will not be sold or otherwise disposed of except:
o in accordance with Rule 145 (where the affiliate has given
WesBanco evidence of compliance with the rule reasonably
satisfactory to WesBanco); or
o pursuant to an effective registration statement under the
Securities Act of 1933 unless such person has furnished to
WesBanco a no-action or interpretive letter from the SEC or an
opinion of counsel reasonably satisfactory to WesBanco that
such transaction is exempt from or otherwise complies with the
registration requirements of the Securities Act of 1933.
An affiliate's letter also acknowledges that the certificates
representing the shares of WesBanco common stock received by the affiliate may
bear a legend regarding these restrictions.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase by WesBanco. The results
of this accounting treatment are shown in the unaudited pro forma condensed
combined financial information included on pages 11 through 14 of this proxy
statement/prospectus.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The merger is conditioned upon receipt of a ruling from the IRS, or
instead, at the option of WesBanco, a legal opinion from counsel to WesBanco as
to the principal federal income tax consequences expected to result from the
merger. The board of directors of WesBanco elected to rely upon the legal
opinion of its counsel, Kirkpatrick & Lockhart LLP (Kirkpatrick & Lockhart").
The following summary of the material federal income tax consequences
expected to result from the merger is qualified in its entirety by reference to
the full text of the opinion of Kirkpatrick & Lockhart, including the
assumptions upon which that opinion is based. The opinion is filed as Exhibit
8.1 to the registration statement of which this proxy statement/prospectus is a
part. Neither the opinion nor this summary addresses any tax considerations
under foreign, state or local laws, or the tax considerations to shareholders
other than individual United States citizens who hold their shares of WesBanco
common stock or Freedom common stock as a capital asset within the meaning of
Section 1221 of the IRC.
No rulings have been requested from the Internal Revenue Service as to
the federal income tax consequences of the merger. You should be aware that the
opinion of Kirkpatrick & Lockhart is not binding on the IRS and the IRS is not
precluded from taking a different position. You should also be aware that some
of the federal income tax consequences of the merger are governed by provisions
of the IRC as to which there are no final regulations and little or no judicial
or administrative guidance. Kirkpatrick & Lockhart's opinion is based upon the
federal income tax laws as in effect on the date of the opinion and as those
laws are currently interpreted. There can be no assurance that future
legislation, regulations, administrative rulings or court decisions will not
adversely affect the accuracy of the statements contained herein or in the
opinion.
The federal income tax consequences discussed below are conditioned
upon, and Kirkpatrick & Lockhart's opinion is based upon, the accuracy, as of
the date of this proxy statement/prospectus and at, as of and after the time the
merger becomes effective, of certain assumptions. These assumptions include, but
are not limited to, the following:
o that the shareholders of Freedom receive shares of WesBanco
common stock with a value on the date the merger becomes
effective of not less than fifty percent (50%) of the value of
the Freedom common stock as of the same date;
o that following the merger, WesBanco will continue the historic
business of Freedom or use a significant portion of Freedom's
historic business assets in a business; and
o that a bona fide corporate business purpose exists for the
merger.
As of the date of this proxy statement/prospectus, WesBanco and Freedom
believe that all of these assumptions are now, and will be at, as of and after
the time the merger becomes effective, accurate. If either WesBanco or Freedom
learns before that time that the assumptions are false and that its counsel
therefore believes that the merger is unlikely to be treated as a tax-free
reorganization, then additional shareholder approval will be obtained before
consummation of the merger.
Subject to the limitations and assumptions described above, Kirkpatrick
& Lockhart will render an opinion to WesBanco and Freedom that the merger will
have the following federal income tax consequences:
o No gain or loss will be recognized by WesBanco, Freedom or FBI
Corporation as a result of the transactions contemplated in
the merger agreement;
o No gain or loss will be recognized by the shareholders of
Freedom as a result of their exchange of Freedom common stock
for WesBanco common stock, except to the extent any
shareholder receives cash in lieu of a fractional share or as
a dissenting shareholder;
o The holding period of the WesBanco common stock received in
the merger will include the period during which the stock of
Freedom exchanged therefor was held, provided such stock was a
capital asset in the hands of the holder on the date of
exchange; and
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o The federal income tax basis of the WesBanco common stock
received in the merger will be the same as the basis of the
Freedom common stock exchanged therefor.
The tax consequences of the merger may vary depending upon your
particular circumstances. You are urged to consult your own tax advisor to
determine the particular tax consequences of the merger to you, including the
applicability and effect of any state, local or foreign income, property,
transfer and other tax laws.
THE MERGER AGREEMENT
The following summary of the merger agreement is qualified in its
entirety by reference to the merger agreement, a copy of which is attached to
this proxy statement/prospectus as Annex A. Shareholders are urged to read this
document for a more complete description of the merger.
THE MERGER
After approval and adoption of the merger agreement by Freedom
shareholders, and the satisfaction or waiver of other conditions to the merger,
Freedom will be merged into FBI Corporation, with FBI Corporation continuing as
the surviving corporation. The articles of incorporation and bylaws of FBI
Corporation immediately prior to the merger will constitute the articles of
incorporation and bylaws of the surviving corporation.
CONVERSION OF SECURITIES
In the merger, each share of Freedom common stock issued and
outstanding immediately prior to the time the merger becomes effective (subject
to certain exceptions) will be exchanged for and become, without action on the
part of the shareholder, the right to receive 2.58 shares of WesBanco common
stock.
Shares of Freedom common stock held by Freedom in its treasury or
beneficially owned by FBI Corporation or WesBanco (other than in a fiduciary
capacity by them for others) will not be exchanged for shares of WesBanco common
stock in the merger. Instead, these shares will be canceled and retired. Shares
of Freedom common stock as to which dissenters' rights are properly exercised
also will not be exchanged for shares of WesBanco common stock in the merger.
No fractional shares of WesBanco common stock will be issued in the
merger. Instead, cash will be paid in lieu of fractional shares in an amount
based on a value of $22.94 per whole share of WesBanco common stock.
Promptly after the merger becomes effective, Fifth Third Bank,
WesBanco's stock transfer agent, will mail transmittal forms and exchange
instructions to each holder of record of Freedom common stock to be used to
exchange shares of Freedom common stock for shares of WesBanco common stock.
These transmittal letters will be accompanied by instructions specifying other
details of the exchange. FREEDOM SHAREHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM AND INSTRUCTIONS.
After the merger becomes effective, each certificate evidencing shares
of Freedom common stock will be deemed to evidence only the right to receive:
o the number of shares of WesBanco common stock that the holder
is entitled to receive by virtue of the merger; and
o the cash payment for any fractional share of WesBanco common
stock.
The holder of an unexchanged certificate will not receive any dividend
or other distribution payable by WesBanco until the certificate has been
exchanged.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains various customary representations and
warranties of Freedom, WesBanco, and FBI Corporation. These representations and
warranties, which will terminate when the merger becomes effective, relate to,
among other things:
o the corporate organization and qualification of Freedom,
WesBanco, and WesBanco's subsidiaries, including FBI
Corporation, and certain similar corporate matters;
o the authorization, execution, delivery, and enforceability of
the merger agreement and related matters;
o the absence of any violation under the charters and bylaws of
Freedom, WesBanco, or WesBanco's subsidiaries, or under
contracts or laws;
o the financial statements of each of Freedom and WesBanco;
o the absence of undisclosed suits, actions, proceedings,
claims, or investigations against either Freedom, WesBanco, or
WesBanco's subsidiaries;
o the capital structure of Freedom, WesBanco, and FBI
Corporation;
o material contracts of Freedom;
o the absence of materially adverse contracts of Freedom;
o the absence of undisclosed liabilities;
o title to properties;
o the accuracy of information provided in this proxy
statement/prospectus;
o taxes, tax returns and audits, and certain tax matters;
o the absence of certain materially adverse changes or events;
o the maintenance of fidelity bonds by Belington Bank and
WesBanco's subsidiaries;
o certain benefit matters;
o the absence of labor disputes;
o the adequacy of reserves for possible loan losses;
o the ownership by Freedom and WesBanco of their subsidiaries;
and
o the filing and delivery of certain reports under the
Securities Exchange Act of 1934.
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ADDITIONAL REPRESENTATIONS AND WARRANTIES OF WESBANCO
WesBanco has also made the following representations and warranties
which relate to, among other things:
o the registration of WesBanco as a bank holding company under
the Bank Holding Company Act of 1956; and
o the authority of WesBanco to issue shares of WesBanco common
stock under the merger agreement and the validity of WesBanco
common stock once issued.
MUTUAL COVENANTS
Pursuant to the merger agreement, Freedom and WesBanco have agreed
that, until the merger becomes effective or the merger agreement is terminated,
whichever occurs first, each will, with some exceptions:
o use its best efforts to take, or cause to be taken, all
actions required under the merger agreement on its part to be
taken so as to permit the consummation of the merger at the
earliest possible date;
o cooperate in furnishing information for the preparation and
filing of this proxy statement/prospectus;
o cooperate in the filing of any regulatory applications with
respect to the merger; and
o advise the other of any materially adverse change in its
financial condition, assets, business, or operations, or of
any material changes or inaccuracies in data provided to the
other party pursuant to the merger agreement.
ADDITIONAL COVENANTS OF FREEDOM
Freedom has further agreed that:
o it will not make any change in its authorized capital stock;
o it will not issue any shares of Freedom common stock;
o it will not issue or grant any options, warrants, or other
rights to purchase shares of Freedom common stock;
o it will not declare or pay any dividends or other
distributions on any shares of Freedom common stock other than
a semi-annual dividend of forty cents ($.40) per share
consistent with past practice;
o it will not purchase, otherwise acquire, or agree to acquire
for consideration any Freedom common stock (other than in a
fiduciary capacity);
o except as otherwise contemplated by the merger agreement or
required by law, it will not amend any employment agreement,
or any pension, retirement, stock option, profit sharing,
deferred compensation, consultant, bonus, group insurance, or
similar plan;
o it will not take any action materially and adversely affecting
the financial condition (present or prospective), businesses,
properties, or operations of Freedom;
o it will not acquire or merge with any other company or acquire
any branch or, other than in the ordinary course of business,
any assets of any other company;
o except in the ordinary course of business, it will not
mortgage, pledge, or subject any of its material assets to a
lien or other encumbrance, or incur or cancel any material
debts or claims;
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o it will not increase any compensation or benefits payable to
its officers or employees, except in the ordinary course of
its business as heretofore conducted;
o it will not take any other action not in the ordinary course
of its business as heretofore conducted or incur any material
obligation or enter into any material contract;
o it will not amend its charter or bylaws, except as necessary
to carry out the merger or as required by law;
o it will advise WesBanco of the name and address of, and the
number of shares of Freedom common stock held by, each
shareholder who elects to exercise his or her right to dissent
from the merger;
o it will operate its business only in the ordinary course and
consistent with past practice;
o it will not, and will not permit any person acting on its
behalf to, solicit any acquisition proposal, including any
proposal to merge or consolidate with, or acquire all or any
substantial portion of the assets of, Freedom, or any tender
or exchange offer (or proposal to make any tender or exchange
offer) for any shares of stock of Freedom, or any proposal to
acquire more than 5% of the outstanding shares of stock of
Freedom or any options, warrants, or rights to acquire, or
securities convertible into or exchangeable for, more than 5%
of the outstanding shares of stock of Freedom; and
o it will maintain its insurance at existing levels.
ADDITIONAL COVENANTS OF WESBANCO
WesBanco has further agreed that:
o it will file an application to organize and incorporate FBI
Corporation as a West Virginia corporation;
o it will cause FBI Corporation to execute and enter into the
merger agreement and cause FBI Corporation to take the actions
required of it in the merger agreement;
o it will prevent FBI Corporation from conducting any business
operations other than activities that are necessary to
consummate the merger;
o it will vote all of the shares of FBI Corporation in favor of
the merger;
o as of the time the merger becomes effective, it will appoint
Thomas M. Pitsenberger to the board of directors of WesBanco
Bank;
o prior to or at the closing of the merger, it will deliver to
Fifth Third Bank shares of WesBanco common stock and cash
sufficient in amount to meet the requirements of the merger;
and
o it will deliver to Freedom copies of its Forms 10-K, 10-Q and
8-K filed after the execution of the merger agreement.
STOCK OPTION AGREEMENT
In order to induce WesBanco to enter into the merger agreement and to
provide reasonable assurances that the transaction contemplated by the merger
agreement will be consummated, Freedom granted WesBanco an option to purchase up
to 37,810 shares of Freedom common stock at a price of $40.47 per share pursuant
to the Stock Option Agreement, dated December 29, 2001, a copy of which is
attached hereto as Annex B. The Stock
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Option Agreement could discourage other companies from trying or proposing to
combine with Freedom before the completion of the merger.
WesBanco cannot exercise this option unless certain events occur. These
events include:
o any person commences or announces the commencement of a tender
offer or exchange offer for at least 15% of Freedom's
outstanding common stock;
o any person acquires or gains the right to acquire direct or
indirect ownership of 15% or more of Freedom's outstanding
common stock;
o Freedom, without WesBanco's permission, shall have filed an
application or notice with any state or regulatory agency to
merge, sell or lease all or substantially all of Freedom's
assets, or to sell or otherwise dispose of 51% or more of
Freedom's outstanding common stock;
o any person announces a proposal to Freedom to acquire Freedom
by merger, purchase of all or substantially of its assets or
any similar transaction; or
o Freedom willfully breaches Section 9.23(d) of the merger
agreement and such breach has not been cured.
Neither Freedom nor WesBanco is aware of any event, as of the date of
this document, which would permit WesBanco to exercise this option.
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The respective obligations of Freedom and WesBanco to effect the merger
are subject to the following conditions, among others:
o the approval of the merger agreement by the shareholders of
Freedom, WesBanco, Belington Bank and WesBanco Bank;
o the West Virginia Board of Banking and Financial Institutions
(i) shall have granted its final approval of the incorporation
of FBI Corporation and (ii) shall not have entered an order
disapproving the acquisition of Freedom by WesBanco and the
merger of Freedom with and into FBI Corporation pursuant to
the merger agreement;
o the issuance of a Certificate of Incorporation for FBI
Corporation by the West Virginia Secretary of State;
o the approval by the Board of Governors of the Federal Reserve
System of (i) the application of WesBanco to acquire Freedom,
(ii) the merger of Freedom into FBI Corporation and (iii) the
merger of Belington Bank into WesBanco Bank;
o the effective status of the registration statement on the date
the merger closes and a declaration of effectiveness
regarding, or a withdrawal of, all post-effective amendments
thereto by that date;
o the absence of a pending or threatened stop order or
proceedings seeking a stop order suspending the effectiveness
of the registration statement or any amendments thereto;
o the receipt of all required state securities and "Blue Sky"
permits or approvals;
o the absence of any order to restrain, enjoin, or otherwise
prevent the consummation of the merger entered by any court or
administrative body which remains in effect on the date the
merger closes;
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o the receipt of all material governmental or other consents,
approvals, and permissions, including the filing of the
registration statement with the SEC;
o the receipt of all consents required by the merger agreement
to be obtained by WesBanco and Freedom;
o the expiration of all periods for review, objection, or appeal
of or to any consents, approvals or permissions required for
the consummation of the merger;
o the exercise of dissenters' rights in accordance with the West
Virginia Corporation Act by not more than 10% of the holders
of Freedom common stock;
o on or before the date the merger closes, the receipt of a
ruling from the IRS, or instead, at the option of WesBanco, an
opinion from counsel for WesBanco, to the effect that for
federal income tax purposes the merger will be treated as a
tax-free reorganization within the meaning of Section 368(a)
of the IRC, and regarding certain other tax matters;
o the absence of any action, proceeding, regulation, or
legislation before any court, governmental agency, or
legislative body to enjoin, restrain or prohibit, or to obtain
substantial damages with respect to, the merger agreement or
the consummation of the transactions contemplated therein;
o the absence of any required divestiture or cessation of any
significant part of the present operations of Freedom,
WesBanco, or any of their subsidiaries;
o the accuracy in all material respects of the representations
and warranties of the parties and the performance by the
parties in all material respects of all of their obligations
set forth in the merger agreement, and the receipt of a
certificate from an appropriate officer certifying the
foregoing;
o the receipt of legal opinions from the parties' counsel; and
o the delivery of certified copies of the resolutions duly
adopted by the boards of directors and the shareholders of
Freedom, FBI Corporation and WesBanco Bank, and the board of
directors of WesBanco approving the merger agreement and
authorizing the transactions contemplated therein.
CONDITIONS TO OBLIGATIONS OF WESBANCO
In addition to the conditions discussed above, the consummation of the
merger by WesBanco is conditioned upon:
o Michael H. Hudnall and Valerie Hurst having (i) executed
employment agreements with Belington Bank in the forms
attached as exhibits to the merger agreement and (ii) agreed
to terminate their current employment agreements with
Belington Bank;
o Terri Kittle and Nancy Rightman having executed amendments to
their existing employment agreements with Belington Bank in
substantially the forms attached as exhibits to the merger
agreement;
o the receipt of a schedule identifying all persons who may be
deemed to be affiliates of Freedom under Rule 145 of the
Securities Act of 1933, and the delivery of affiliate letters
by those persons;
o the absence of any suit, action, or proceeding pending against
Freedom or its officers or directors in their capacity as
such, which, in the reasonable judgment of WesBanco would, if
successful, have a materially adverse effect on the financial
condition or operations of Freedom or Belington Bank; and
o the execution by Freedom of a stock option agreement in
substantially the form as attached as an exhibit to the merger
agreement.
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CONDITIONS TO OBLIGATIONS OF FREEDOM
The consummation of the merger by Freedom is also conditioned upon:
o the absence of any suit, action, or proceeding pending against
WesBanco or any of its subsidiaries or the officers or
directors of WesBanco or of any of its subsidiaries in their
capacity as such, which, in the reasonable judgment of Freedom
would, if successful, have a materially adverse effect on the
financial condition or operations of WesBanco or any of its
subsidiaries; and
o the receipt of an opinion from Alex Sheshunoff & Co.
Investment Banking, LP, financial advisors to Freedom, that
the merger and the transactions contemplated by the merger
agreement are fair, from a financial point of view, to Freedom
and its shareholders.
TERMINATION; EXPENSES
The merger agreement may be terminated at any time prior to the closing
of the merger, either before or after the special meeting:
o by mutual consent of Freedom and WesBanco;
o by either Freedom or WesBanco if any of the conditions to such
party's obligations to close under the merger agreement have
not been met as of the date the merger is to close and such
conditions have not been waived by the party adversely
affected thereby;
o by either Freedom or WesBanco if the merger will violate any
non-appealable final order, decree, or judgment of any court
or governmental body having competent jurisdiction;
o by either Freedom or WesBanco if the merger has not closed by
June 30, 2001;
o by either Freedom or WesBanco in the event that the majority
shareholders of Freedom vote against consummation of the
merger;
o by Freedom if the average bid price for WesBanco common stock
for the thirty (30) calendar days preceding the fifth business
day before closing of the merger shall fall below $18.00 per
share of WesBanco common stock;
o by WesBanco or Freedom within thirty (30) days after the date
of the merger agreement if their investigation of the other
reveals any information that would have a material adverse
effect on the present or future value of the other
corporations' and its subsidiaries' assets, net worth,
business or income taken as a whole.
In the event of any termination of the merger agreement by either
Freedom or WesBanco as provided above, all further obligations of Freedom and
WesBanco under the merger agreement, except with respect to specified matters,
including without limitation those related to confidentiality and expenses, will
terminate without further liability of the parties.
Whether or not the merger is consummated, all legal and accounting
fees, and other costs and expenses incurred in connection with the merger
agreement and the transactions contemplated therein, will be paid by the party
incurring such expenses.
AMENDMENT OR WAIVER
The provisions of the merger agreement may be waived at any time by the
party which is, or the shareholders of which are, entitled to the benefit of
those provisions, by action taken by the board of directors of that party. Any
of the terms of the merger agreement may be amended or modified in writing
before or after the
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special meeting at any time prior to the closing of the merger. The conversion
ratio and any other material terms of the merger will not be amended after the
special meeting shareholders unless the amended terms are resubmitted to the
shareholders of Freedom for approval.
The merger agreement may not be modified or terminated except by a
written statement signed by the party against which the enforcement of the
modification or termination is sought.
COMPARATIVE RIGHTS OF SHAREHOLDERS
DESCRIPTION OF WESBANCO CAPITAL STOCK
The authorized capital stock of WesBanco consists of 50,000,000 shares
of common stock, par value $2.0833 per share, and 1,000,000 shares of preferred
stock without par value. As of May 2, 2001, there were approximately 18,158,137
shares of WesBanco common stock outstanding, held of record by approximately
5,301 holders.
As of the date of this proxy statement/prospectus, there were no shares
of preferred stock outstanding. Shares of preferred stock may be issued in one
or more classes or series with such preferences, voting rights, full or limited,
but not to exceed one vote per share, conversion rights and other special rights
as the WesBanco board of directors may fix in the resolution providing for the
issuance of the shares. The issuance of shares of preferred stock could affect
the relative rights of the WesBanco common stock.
Depending upon the exact terms, limitations and relative rights and
preferences, if any, of the shares of preferred stock as determined by the board
of directors at the time of issuance, the holders of preferred stock may be
entitled to a higher dividend rate than that paid on the WesBanco common stock,
a prior claim on funds available for the payment of dividends, a fixed
preferential payment in the event of liquidation and dissolution of WesBanco,
redemption rights, rights to convert their preferred stock into shares of
WesBanco common stock, and voting rights which would tend to dilute the voting
control of WesBanco by the holders of WesBanco common stock.
Subject to the above limitations, in the event of any liquidation,
dissolution or winding up of WesBanco, and subject to the application of state
and federal laws, holders of WesBanco common stock are entitled to share ratably
in the assets available for distribution to stockholders remaining after payment
of WesBanco's obligations.
Each share of WesBanco common stock is entitled to one vote, and to
cumulate votes in the election of directors. No holder of shares of WesBanco
common stock has any preemptive right to subscribe for or purchase any other
securities of WesBanco, and there are no conversion rights or redemption or
sinking fund provisions applicable to WesBanco common stock. However, WesBanco
elects directors on a staggered basis by class with terms of three years. This
provision of its articles of incorporation requires a super majority vote of its
shareholders to change.
DESCRIPTION OF FREEDOM CAPITAL STOCK
The authorized capital stock of Freedom consists of 1,000,000 shares of
common stock, par value of $1.00 per share. As of May 2, 2001, there were
approximately 190,000 shares of Freedom common stock outstanding, held of record
by approximately 260 holders.
In the event of a dissolution of Freedom, the liquidation of its
assets, or the winding up of its affairs, and subject to the application of
state and federal laws, the holders of Freedom common stock will be entitled to
share ratably in the assets of Freedom available for distributions to its
shareholders remaining after payment of Freedom's obligations.
Dividends may be paid on Freedom common stock at the discretion of the
Freedom board of directors out of any funds legally available therefor. For a
discussion of Freedom's dividend policy and restrictions on the payment of
dividends, see "Market Prices and Dividend Data" on page 16.
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Each share of Freedom common stock is entitled to one vote. No holder
of shares of Freedom common stock has any preemptive right to subscribe for or
purchase any other securities of Freedom, and there are no conversion rights or
redemption or sinking fund provisions applicable to Freedom common stock.
COMPARISON OF RIGHTS OF WESBANCO AND FREEDOM SHAREHOLDERS
The rights of the Freedom shareholders and the WesBanco shareholders
are governed by the respective articles of incorporation and bylaws of each
corporation and West Virginia law. In many respects, the rights of Freedom
shareholders and WesBanco shareholders are similar. For example:
o Holders of common stock of each corporation are entitled to
one vote for each share of common stock and to receive pro
rata any assets distributed to shareholders upon liquidation.
o Neither corporation's shareholders have preemptive rights.
o The shareholders of both corporations have the right under
West Virginia law to dissent from certain corporate
transactions and to elect dissenters' rights.
o The shareholders of both corporations have cumulative voting
in the election of directors.
o The shareholders of both corporations elect directors for
staggered terms of three years, with no more than one-third of
the directors being elected in any one year.
DIFFERENCES IN RIGHTS
There are, however, differences between the rights of Freedom
shareholders and WesBanco shareholders. For example:
o WesBanco's bylaws require that shareholders who intend to
nominate candidates for election to the board of directors
must give written notice of such intent at least 30 days prior
to the date of any shareholders meeting called for such
purpose. Freedom's bylaws do not require prior written notice
of shareholder nominations for directors.
o WesBanco's articles of incorporation contain certain "super
majority provisions." These provisions provide that the
affirmative vote of the holders of not less than 75% of the
outstanding shares of the voting stock of WesBanco will be
required to amend or repeal the articles of incorporation
provision dealing with the classification of the board of
directors into three separate classes, each to serve for
staggered terms of three years. Freedom's articles of
incorporation contain no such provision; however, its bylaws
contain similar provisions requiring a 75% vote of outstanding
shares to approve certain corporate transactions, including
mergers. The bylaws also contain a provision requiring only a
majority vote to change the 75% voting requirement if
Freedom's board of directors approves and recommends the
change to the shareholders. Freedom's board of directors did
approve this change on November 14, 2000 and has recommended
the change to the shareholders for approval.
ADVANTAGES OF WESBANCO ANTI-TAKEOVER PROVISIONS
Some of the provisions of WesBanco's articles of incorporation and
bylaws discussed above may constitute defensive measures in that they may
discourage or deter a third party from attempting to acquire control of
WesBanco. They are designed, in part, to discourage and to insulate the
corporation against hostile takeover efforts, which the WesBanco board of
directors might determine are not in the best interests of WesBanco and its
shareholders. The provisions are designed as reasonable precautions to protect
against, and to assure the opportunity to assess and evaluate, such
confrontations.
DISADVANTAGES OF WESBANCO ANTI-TAKEOVER PROVISIONS
The classification of the board of directors makes it more difficult to
change directors since they are elected for terms of three years rather than one
year, and at least two annual meetings instead of one are required
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to change a majority of the board of directors. Furthermore, due to the smaller
number of directors to be elected at each annual meeting, holders of a minority
of the voting stock may be in a less favorable position to elect directors
through the use of cumulative voting.
The super majority provision makes it more difficult for shareholders
to effect changes in the classification of directors.
The ability of the board of directors to issue additional shares of
common and preferred stock also permits the board of directors to authorize
issuances of stock which may be dilutive and, in the case of preferred stock,
which may affect the substantive rights of shareholders without requiring an
additional shareholder vote.
Collectively, the provisions may be beneficial to management in a
hostile takeover attempt, making it more difficult to effect changes, and at the
same time, adversely affecting shareholders who might wish to participate in
such a takeover attempt.
The foregoing identification of specific differences between the rights
of WesBanco and Freedom shareholders is not intended to indicate that other
equally or more significant differences do not exist. This summary is qualified
in its entirety by reference to the West Virginia Corporation Act and the
articles and bylaws of WesBanco and Freedom.
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INFORMATION WITH RESPECT TO FREEDOM
HISTORY AND OPERATIONS
Freedom was formed in 1988 as the parent company of Belington Bank, a
commercial bank with its main office located in Belington, Barbour County, West
Virginia. Belington Bank was founded in 1939. The general nature of Freedom's
business involves commercial and consumer deposits and commercial, consumer and
mortgage loans. Currently, Freedom operates with full-service offices in
Belington and Philippi, Barbour County; Elkins, Randolph County; Buckhannon,
Upshur County; and Bridgeport, Harrison County, West Virginia.
The FDIC insures all of Belington's deposit accounts up to a maximum
allowed by law (generally $100,000 per depositor, subject to aggregation rules).
Belington solicits these accounts from individuals, businesses, associations and
organizations, and governmental authorities.
COMPETITION
For most of the services that Belington performs, there is competition
from financial institutions other than commercial banks. For instance, credit
unions and issuers of commercial paper and money market funds actively compete
for funds and for various types of loans. In addition, personal and corporate
trust and investment counseling services are offered by insurance companies,
investment counseling firms and other business firms and individuals.
Due to the geographic location of Freedom's primary market area,
institutions in the market area served by Belington Bank influence the
competition. In addition, larger regional and national corporations continue to
be increasingly visible in offering a broad range of financial services to all
types of commercial and consumer customers.
The principal competitive factors in the markets for deposits and loans
are interest rates, either paid or charged. The chartering of numerous new banks
in West Virginia has increased competition for Freedom. The 1986 legislation
passed by the West Virginia legislature allowing state-wide branch banking
provides increased opportunities for Freedom, but it also increases competition
for Freedom in its service area.
In addition, in 1994, Congress passed the Riegle-Neal Interstate
Banking and Branching Efficiency Act. Under this act, absent contrary action by
a state's legislature, interstate branch banking may occur after June 1, 1997.
States are permitted to participate to a variety of degrees in interstate
banking or states may elect to "opt out." In 1996, the West Virginia legislature
elected to "opt in" effective May 31, 1997. Accordingly, out-of-state banks may
form de novo banks or may acquire existing branches of West Virginia banks on a
reciprocal basis.
DIRECTORS AND EXECUTIVE OFFICERS
No directors or officers of Freedom will serve as directors or officers
of WesBanco after the merger. However, Mr. Pitsenberger, Chairman of the Freedom
Board of Directors, will join the WesBanco Bank, Inc. board of directors upon
completion of the merger.
INTEREST OF CERTAIN PERSONS IN THE MERGER
As of May 2, 2001, directors and officers of Freedom beneficially
owned, in the aggregate, 48,989 shares of Freedom common stock, representing
approximately 25.78% of the outstanding shares of Freedom common stock.
All of Freedom's directors and officers that own Freedom common stock
will, as a result of the merger, obtain an equity interest in WesBanco in
exchange for their shares of Freedom common stock. Each of them will receive the
same number of shares of WesBanco common stock for each share of Freedom common
stock owned by him or her as every other Freedom shareholder. Directors and
officers of Freedom will be treated the same as other Freedom shareholders,
except that they may be subject to certain restrictions on any resale of
WesBanco common stock received by them pursuant to the merger.
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The executive officers and directors of Freedom do not own any shares
of WesBanco common stock. As of May 2, 2001, WesBanco held no shares of Freedom
common stock nor did any director, executive officer or affiliate of WesBanco
own shares of Freedom common stock.
Except for counsel fees paid to a director of WesBanco in the ordinary
course of business in connection with this transaction, no director, officer or
affiliate of WesBanco has any special interest in the merger or is receiving any
special consideration or compensation as a result of the merger.
No outstanding transactions between Freedom or WesBanco and their
respective affiliates, and any director, officer, or principal shareholder of
Freedom or WesBanco or their respective associates, including any outstanding
loans or trust relationships, will be affected by the merger.
Some members of Freedom management have interests in the merger that
are in addition to their interests as Freedom shareholders generally. As
described below, some of the executive officers of Freedom have entered into
agreements with WesBanco that will, effective upon the completion of the merger,
provide for their employment with WesBanco and for certain severance benefits.
MR. HUDNALL AND MS. HURST'S EMPLOYMENT AGREEMENTS WITH WESBANCO
Michael H. Hudnall, Chief Executive Officer of Belington Bank, and
Valerie Hurst, Senior Vice President of Belington Bank, will enter into
agreements relating to their employment with WesBanco Bank upon completion of
the merger. Mr. Hudnall and Ms. Hurst's employment agreements will supersede
their existing Employment Agreements with Freedom.
Pursuant to the terms of the employment agreements, Mr. Hudnall and Ms.
Hurst will be paid an annual base salary of not less than $132,000 and $55,000,
respectively, and each will have the opportunity to earn performance-based
bonuses. In addition, Mr. Hudnall will enter into a change of control agreement
providing for payments by WesBanco to Mr. Hudnall in the event of a change of
control which adversely affects Mr. Hudnall's position, compensation or
responsibilities. The agreement provides that Mr. Hudnall will receive a lump
sum payment of three times his annual rate of base salary in effect at any time
up to and including the termination and an amount equal to three times his
average annual bonus earned over the three most recent bonus plan years ending
prior to termination or his bonus established for the current bonus plan year.
Furthermore, Mr. Hudnall would be entitled to a continuation of his medical
benefits for up to eighteen months following the termination.
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BENEFICIAL OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth the number of shares of common stock
beneficially owned, directly or indirectly, by (i) each director of Freedom,
(ii) each named executive officer, and (iii) the directors and named executive
officers of Freedom, as a group, as of May 2, 2001. Unless otherwise indicated,
the address of each person in the following table is 315 Crim Avenue, Belington,
West Virginia 26250.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- ------------
A. Houston Booth (Director) 5,350(1) 2.82%
Norman L. Day (Director) 5,350(2) 2.82%
Michael H. Hudnall (Director) 500 *
John B. Lockwood (Director) 1,350(3) *
Thomas M. Pitsenberger (Director) 29,797(4) 15.68%
Dorothy F. Poling (Director) 2,742 1.44%
Robert B. Reger (Director) 3,795(5) 2.00%
Valerie Hurst (Officer) 5(6) *
Nancy Righman (Officer) 100(7) *
All Directors and Officers as a Group 48,989 25.78%
(9 persons)
* Less than 1 percent
1. Includes 500 shares owned jointly by Mr. Booth and his wife.
Additionally, Mr. Booth's wife, Wylorae Booth, is the owner of an
additional 31 shares for which Mr. Booth disclaims beneficial
ownership.
2. Includes 4,850 shares owned jointly by Mr. Day and his wife.
3. Additionally, Mr. Lockwood's wife, Nancy Lockwood, is the owner of an
additional 25 shares for which Mr. Lockwood disclaims beneficial
ownership.
4. Additionally, Mr. Pitsenberger's wife, Donna Pitsenberger, is the owner
of an additional 250 shares for which Mr. Pitsenberger disclaims
beneficial ownership.
5. Includes 3,295 shares owned jointly by Mr. Reger and his wife.
Additionally, Mr. Reger's wife, Marlan Reger, is the owner of an
additional 500 shares for which Mr. Reger disclaims beneficial
ownership.
6. Includes 5 shares owned jointly by Mrs. Hurst and her husband.
7. Includes 100 shares owned jointly by Mrs. Righman and her husband.
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PRINCIPAL SHAREHOLDERS OF FREEDOM
The following table sets forth, as of May 2, 2001, information with
respect to the securities holdings of all persons known to Freedom to be the
beneficial owners of more than 5% of the outstanding shares of Freedom common
stock.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
Margaret L. Baughman 14,680 7.73%
21 Citadel Road
Morgantown,, WV 26505
E.E. Hott (former director) 11,370 5.98%
315 Crim Avenue
Belington, WV 26250
Craig G. Phillips 9,499 5.00%
PO Box 950
Belington, WV 26250
28,018 14.75%
Anna G. Smithson
900 Beverly Pike
Belington, WV 26250
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LEGAL MATTERS
Certain matters will be passed upon for WesBanco by its counsel,
Phillips, Gardill, Kaiser & Altmeyer, 61 Fourteenth Street, Wheeling, West
Virginia 26003. As of May 2, 2001, the members of Phillips, Gardill, Kaiser &
Altmeyer participating in the preparation of this proxy statement/prospectus
owned an aggregate of 51,277 shares of WesBanco common stock. James C. Gardill,
a partner in that firm, serves as Chairman and as a director of WesBanco, and as
a director of its subsidiary, WesBanco Bank, Inc. Kirkpatrick & Lockhart LLP, as
tax counsel to WesBanco, will pass upon certain tax consequences related to the
merger.
EXPERTS
The consolidated financial statements of WesBanco, Inc. included in
WesBanco's Annual Report on Form 10-K for the year ended December 31, 2000, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon, included in such Form 10-K and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance on such report, given on the authority of such firm as an expert in
auditing and accounting.
The consolidated financial statements of Freedom as of December 31,
2000 and 1999, and for each of the three years in the periods ended December 31,
2000, 1999 and 1998, included in this proxy statement/prospectus, have been so
included in reliance on the report of Conley Johnson, A.C., independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in auditing and accounting .
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ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called "Agreement"),
made and entered into as of the 29th day of December, 2000, by and between
WESBANCO, INC., a West Virginia corporation, with its principal place of
business located at Bank Plaza, Wheeling, West Virginia (hereinafter called
"Wesbanco"), party of the first part, FREEDOM BANCSHARES, INC, a West Virginia
corporation, with its principal place of business located at 315 Crim Avenue,
Belington, West Virginia, 26250, (hereinafter called "Freedom") party of the
second part, FBI CORPORATION (hereinafter called "FBI"), a corporation to be
formed under the laws of the State of West Virginia by Wesbanco as a
wholly-owned subsidiary solely for the purpose of effecting the acquisition
contemplated by this Agreement, party of the third part, (effective as of its
organization and execution of this Agreement) and WESBANCO BANK, INC., a West
Virginia banking corporation, with its principal place of business located at
One Bank Plaza, Wheeling, WV, 26003, party of the fourth part (hereinafter
called "Bank").
WHEREAS, Wesbanco is a West Virginia corporation duly organized and
validly existing under the laws of the State of West Virginia, and is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and
WHEREAS, Freedom is a West Virginia corporation duly organized and
validly existing under the laws of the State of West Virginia, and is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, which owns one subsidiary, namely, Belington Bank, Inc. (hereinafter
also referred to as "Subsidiary"), and
WHEREAS, FBI will be a corporation duly organized and validly existing
under the laws of the State of West Virginia which corporation shall be
organized to effect the terms and conditions of this Agreement, and
WHEREAS, the Board of Directors of Wesbanco, by a majority vote of all
the members thereof, has approved this Agreement and has authorized the
execution hereof in counterparts; the Board of Directors of FBI shall, prior to
the execution hereof by FBI, have by a majority vote of all of the members and
shareholders thereof, approved this Agreement and authorized the execution
hereof in counterparts, all upon the issuance of FBI's Charter as hereinafter
provided, and
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WHEREAS, Wesbanco desires to acquire Freedom and the Board of Directors
of Freedom has determined that, subject to all of the conditions of this
Agreement, including but not limited to the requirement that certain tax rulings
and fairness opinions be obtained, it would be in the best interests of Freedom
and its shareholders for Freedom to enter into this Agreement to become
affiliated with Wesbanco, and
WHEREAS, it is proposed that Wesbanco, Freedom, FBI and Bank enter into
this Agreement whereby Freedom will merge with and into FBI (the "Merger") and
the outstanding shares of common stock of Freedom, par value $1.00, ("Freedom
Common Stock"), will be converted into shares of common stock of Wesbanco, par
value $2.0833, ("Wesbanco Common Stock") at an exchange ratio of 2.58 shares of
Wesbanco Common Stock for each share of Freedom Common Stock exchanged therefor,
and the Subsidiary will be merged with and into Bank with Bank as the surviving
corporation (the "Bank Merger").
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter set forth, and in accordance with the provisions of
applicable law, and intending to be legally bound hereby, the parties hereto do
hereby agree as follows:
SECTION 1
FBI
1.1 FORMATION. Wesbanco shall promptly cause FBI to be duly organized
as a business corporation under the laws of the State of West Virginia. FBI will
be wholly-owned by Wesbanco at all times through the closing of the transactions
contemplated by this Agreement.
1.2 CONDUCT OF BUSINESS. Wesbanco shall not permit FBI to conduct any
business operations other than such activities which are necessary to consummate
the merger contemplated in the Agreement.
1.3 EXECUTION OF AGREEMENT. Promptly after the organization of FBI,
Wesbanco shall cause FBI to take all necessary and proper action to ratify,
approve, adopt and execute the Agreement and to undertake the performance of all
of the terms and conditions of the Agreement to be performed by FBI.
1.4 VOTING OF FBI SHARES. Promptly after the organization of FBI,
Wesbanco, as sole shareholder of FBI, shall vote all of the shares of FBI in
favor of the Merger.
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SECTION 2
THE MERGER
2.1 THE MERGER. At the Effective Time (as defined in Section 2.5),
subject to the provisions of this Agreement, Freedom shall merge with FBI, under
the charter of FBI. FBI shall be the surviving corporation (hereinafter also
called the "Surviving Corporation").
2.2 EFFECT OF MERGER. At the Effective Time, the corporate existence of
Freedom, with all of its purposes, powers and objects, and all of its rights,
assets, liabilities and obligations, shall cease. FBI as the Surviving
Corporation shall continue unaffected and unimpaired by the Merger. FBI as the
Surviving Corporation shall also succeed to all of the rights, assets,
liabilities and obligations of Freedom in accordance with the West Virginia
Corporation Act ("WVCA"). Upon the Effective Date, (as defined in Section 12.5
hereof), the separate existence and corporate organization of Freedom shall
cease.
2.3 CLOSING. Wesbanco, Freedom and FBI will jointly request the
Secretary of State of West Virginia to issue a Certificate of Merger on the date
of the closing described in Section 12.4 hereof (the "Closing" and the "Closing
Date").
2.4 FREEDOM'S OBLIGATIONS. Freedom shall at any time, or from time to
time, as and when requested by the Surviving Corporation, or by its successors
and assigns, execute and deliver, or cause to be executed and delivered in its
name by its last acting officers, or by the corresponding officers of the
Surviving Corporation, all such conveyances, assignments, transfers, deeds, or
other instruments, and shall take or cause to be taken such further or other
action as the Surviving Corporation, its successors or assigns, may deem
necessary or desirable in order to evidence the transfer, vesting or devolution
of any property, right, privilege or franchise or to vest or perfect in or
confirm to the Surviving Corporation, its successors and assigns, title to and
possession of all the property, rights, privileges, powers, immunities,
franchises and interests referred to in this Agreement and otherwise to carry
out the intent and purposes hereof, all at the expense of the Surviving
Corporation.
2.5 ARTICLES OF MERGER. Subject to the terms and conditions herein
provided, Articles of Merger, incorporating this Agreement, shall be executed to
comply with the applicable filing requirements of the WVCA at the Closing and on
the Closing Date. On the Closing Date, such Articles of Merger shall be filed
with the Secretary of State of the State of West Virginia, who will duly issue a
Certificate of Merger. The Surviving Corporation shall record said Certificate
of Merger in the office of the Clerk of the County Commission of Barbour County.
The Merger shall become effective on the date (the "Effective Date") and at the
time (which
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time is hereinafter called the "Effective Time") when such Certificate of Merger
is issued by the Secretary of State.
SECTION 3
THE BANK MERGER
3.1 THE BANK MERGER. At the Effective Time of the Bank Merger (as
defined in Section 3.5), subject to the provisions of this Agreement, the
Subsidiary shall merge with Bank, under the charter of Bank. Bank shall be the
surviving corporation (hereinafter also called the "Surviving Bank
Corporation").
3.2 EFFECT OF MERGER. At the Effective Time, the corporate existence of
Bank, with all of its purposes, powers and objects, and all of its rights,
assets, liabilities and obligations, shall continue unaffected and unimpaired by
the Merger, and Bank as the Surviving Bank Corporation shall continue to be
governed by the laws of the State of West Virginia. Bank as the Surviving Bank
Corporation shall also succeed to all of the rights, assets, liabilities and
obligations of the Subsidiary in accordance with the WVCA. Upon the Effective
Date of the Bank Merger (as defined in Section 12.5 hereof), the separate
existence and corporate organization of the Subsidiary shall cease. This section
shall not be construed (i) to limit the ability of Wesbanco and its subsidiaries
to terminate the employment of any employee of the Subsidiary or to review
employee benefit programs from time to time and to make such changes as Wesbanco
deems appropriate, or (ii) to require Wesbanco or its subsidiaries to provide
employees or former employees of the Subsidiary with post-retirement medical
benefits.
3.3 CLOSING. Bank and the Subsidiary will jointly request the Secretary
of State of West Virginia to issue a Certificate of Merger on the date of the
closing described in Section 12.4 hereof (the "Closing" and the "Closing Date").
3.4 SUBSIDIARY'S OBLIGATIONS. The Subsidiary shall at any time, or from
time to time, as and when requested by the Surviving Bank Corporation, or by its
successors and assigns, execute and deliver, or cause to be executed and
delivered in its name by its last acting officers, or by the corresponding
officers of the Surviving Bank Corporation, all such conveyances, assignments,
transfers, deeds, or other instruments, and shall take or cause to be taken such
further or other action as the Surviving Bank Corporation, its successors or
assigns, may deem necessary or desirable in order to evidence the transfer,
vesting or devolution of any property, right, privilege or franchise or to vest
or perfect in or confirm to the Surviving Bank Corporation, its successors and
assigns, title to and possession of all the property, rights, privileges,
powers, immunities, franchises and interests
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referred to in this Agreement and otherwise to carry out the intent and purposes
hereof, all at the expense of the Surviving Bank Corporation.
3.5 ARTICLES OF MERGER. Subject to the terms and conditions herein
provided, Articles of Merger, incorporating this Agreement, shall be executed to
comply with the applicable filing requirements of the WVCA at the Closing and on
the Closing Date. On the Closing Date, such Articles of Merger shall be filed
with the Secretary of State of the State of West Virginia, who will duly issue a
Certificate of Merger. The Surviving Bank Corporation shall record said
Certificate of Merger in the office of the Clerk of the County Commission of
Ohio County. The Merger shall become effective on the date (the "Effective
Date") and at the time (which time is hereinafter called the "Effective Time")
when such Certificate of Merger is issued by the Secretary of State.
SECTION 4
ARTICLES OF INCORPORATION;
BYLAWS; BOARD OF DIRECTORS AND OFFICERS
4.1 FBI. The Articles of Incorporation of FBI, as organized, shall
constitute the Articles of Incorporation of the Surviving Corporation. The
Bylaws of FBI as in effect on the Effective Date shall constitute the Bylaws of
the Surviving Corporation. The directors and officers of FBI on the Effective
Date shall become the directors and officers of the Surviving Corporation. Any
vacancy in the Board of Directors or officers may be filled in the manner
provided in the Bylaws of the Surviving Corporation. The directors and officers
shall hold office as prescribed in the Bylaws.
4.2 BANK. The Articles of Incorporation of Bank and the Bylaws of Bank,
as in effect on the Effective Date, shall continue as the Articles of
Incorporation and Bylaws of Bank until the same shall thereafter be altered,
amended or repealed in accordance with law, such Articles of Incorporation or
said Bylaws. The directors and officers of Bank on the Effective Date shall
continue as the directors and officers of Bank after the Bank Merger and shall
hold office as prescribed in the Bylaws of Bank and applicable law, until their
successors shall have been elected and shall qualify.
4.3 BANK DIRECTOR. Wesbanco covenants and agrees that as of the
Effective Date it will appoint, as an additional director of Bank, Thomas M.
Pitsenberger. Such individual shall serve a term of at least one year and shall
continue to serve until his successor shall have been duly elected and
qualified.
4.4 ADVISORY BOARD. Wesbanco covenants and agrees that as of the
Effective Date it will appoint, as additional members of the Fairmont Regional
Advisory Board the currently serving members of Freedom's
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Board of Directors who are eligible to serve under Wesbanco's age limitation
provision for regional advisory boards. Such individuals shall serve in such
capacity for at least one (1) full year term and shall continue to serve in such
capacity thereafter so long as mutually satisfactory to Wesbanco and such
members.
SECTION 5
SHAREHOLDER APPROVALS
5.1 FREEDOM SHAREHOLDERS' MEETING. [Subject to the receipt by Freedom
of the fairness opinion described in Section 12.3(c) hereof], Freedom shall
submit the Agreement to its shareholders in accordance with the WVCA at a
meeting duly called, properly noticed and held at the earliest practicable date
(considering the regulatory approvals required to be obtained) after the receipt
of such opinion. In connection with such meeting, Freedom shall send to its
shareholders the Proxy Statement referred to in Section 14.1 hereof. Subject to
the fiduciary duties of the Board of Directors of Freedom to Freedom and its
shareholders, the Board of Directors of Freedom shall recommend a vote in favor
of the Merger and shall use its best efforts to obtain at such meeting the
affirmative vote of the Freedom shareholders required to effectuate the
transactions contemplated by the Agreement.
5.2 FBI AND BANK SHAREHOLDER MEETINGS. FBI and Bank shall promptly
submit the Agreement to their shareholder, Wesbanco, for approval in accordance
with the WVCA. Wesbanco agrees to vote, or to cause the vote of, the shares of
such subsidiary corporations in favor of the proposed transactions.
5.3 SUBSIDIARY SHAREHOLDERS MEETING. The Subsidiary shall promptly
submit the Agreement to its shareholder, Freedom, for approval in accordance
with the WVCA. Freedom agrees to vote the shares of such subsidiary corporation
in favor of the proposed transaction.
SECTION 6
CONVERSION OF SHARES
6.1 CONVERSION, RATIO AND OPTION. The manner of converting or
exchanging the shares of Freedom, and the Subsidiary shall be as follows:
(a) Each share of Freedom Common Stock issued and outstanding
immediately prior to the Effective Time, except shares of Freedom
Common Stock issued and held in treasury of Freedom or beneficially
owned by FBI or Wesbanco, other than in a fiduciary capacity by
Wesbanco for others, and shares as to which dissenters rights are
exercised pursuant to W.Va. Code Annot. Section 31-1-122, shall by
virtue of the Merger and
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at the Effective Time of the Merger be exchanged for and become,
without action on the part of the holder thereof, 2.58 shares of
Wesbanco Common Stock having equal rights and privileges with respect
to all other common stock of Wesbanco issued and outstanding as of the
Effective Time of the Merger.
(b) No fractional shares of Wesbanco Common Stock will be
issued in connection with the Merger. In lieu thereof each stockholder
of Freedom otherwise entitled to a fractional share of Wesbanco will
receive cash therefore in an amount based on a value of $22.94 per
whole share of Wesbanco stock, at the time of the exchange.
(c) In the event of any change in Wesbanco Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, exchanges of shares (by Wesbanco shareholders) or the
like, the type and number of shares to be issued pursuant to Section
6.1(a) hereof shall be adjusted proportionately.
(d) Each share of the common stock of the Subsidiary issued
and outstanding immediately prior to the Effective Date of the Bank
Merger shall, on the Effective Date, be converted into an equal number
of issued and outstanding shares of the Surviving Bank Corporation.
6.2 SHARES OWNED BY FREEDOM, WESBANCO OR FBI. Each share of Freedom
Common Stock issued and held in the treasury of Freedom or beneficially owned by
Wesbanco or FBI, other than in a fiduciary capacity, at the Effective Time of
the Merger shall be canceled and no stock shall be delivered in exchange
therefore.
6.3 EXCHANGE FOR STOCK. On and after the Effective Date of the Merger,
each holder of Freedom Common Stock, upon presentation and surrender of a
certificate or certificates therefore to the Fifth Third Bank (the "Exchange
Agent"), shall be entitled to receive in exchange therefore a certificate or
certificates representing the number of shares of Wesbanco Common Stock to which
he or she is entitled as provided herein, and payment in cash for any fractional
share of common stock which he is entitled to receive, without interest. Until
so presented and surrendered in exchange for a certificate representing Wesbanco
Common Stock, each certificate which represented issued and outstanding shares
of Freedom Common Stock immediately prior to the Effective Time shall be deemed
for all purposes to evidence ownership of the number of shares of Wesbanco
Common Stock into which such shares of stock have been converted pursuant to the
Merger. Until surrender of such
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certificates in exchange for certificates representing the converted stock, the
holder thereof shall not receive any dividend or other distribution payable to
holders of shares of such stock; provided, however, that upon surrender of such
certificates representing such converted stock in exchange for certificates
representing the stock into which it has been converted, there shall be paid to
the record holder of the certificate representing Wesbanco Common Stock issued
upon such surrender, the amount of dividends or other distributions (without
interest) which theretofore became payable with respect to the number of shares
of such stock represented by the certificate or certificates to be issued upon
such surrender, together with payment of cash for any fractional share to which
such holder is entitled, as above set forth.
6.4 CLOSING OF STOCK TRANSFER BOOKS. On the Effective Date, the stock
transfer books of Freedom shall be closed, and no shares of Freedom Common Stock
outstanding the day prior to the Effective Date shall thereafter be transferred.
6.5 DIRECTOR'S QUALIFYING SHARES. Immediately upon completion of the
mergers provided for above, the newly elected Director of Bank shall maintain at
least the minimum number of shares of Wesbanco Common Stock as are required to
be held as director's qualifying shares under applicable law for membership on
the Board of Directors of Bank.
SECTION 7
DISSENTERS RIGHTS
7.1 Subject to the rights of Wesbanco and Freedom, as permitted by
Section 12.1(j) of the Agreement, to terminate the Agreement and abandon the
Merger in the event that the number of Objecting Shares (as hereinafter defined)
shall exceed 10% of the shares of Freedom issued and outstanding on the date of
the shareholders' meeting described in Sections 5.1 and 14.1 of this Agreement
and entitled to vote on this Agreement (hereinafter, "Voting Shares"), the
rights and remedies of a dissenting shareholder under the WVCA shall be afforded
to any shareholder of Freedom who objects to the Merger in a timely manner in
accordance with the WVCA, and who takes the necessary steps in a timely manner
in accordance with the WVCA to perfect such shareholder's rights as a dissenting
shareholder (such shareholder being hereafter referred to as a "Dissenting
Shareholder"). The Surviving Corporation will make such payments as are required
to be made to Dissenting Shareholders in the exercise of such rights. The term
"Objecting Shares" shall mean the shares of those holders of Freedom Common
Stock who shall file written objections with respect to such shares, in a timely
manner in accordance with the WVCA, to the Agreement, shall not vote in favor of
the Agreement, and have made written
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demand for the fair value of such shares within ten days, in accordance with
WVCA Section 31-1-123. The Objecting Shares held by shareholders who do not
become Dissenting Shareholders shall be converted into Wesbanco Common Stock in
accordance with Section 6 hereof.
SECTION 8
REPRESENTATIONS, WARRANTIES AND COVENANTS OF FREEDOM
Freedom, represents and warrants to and covenants with Wesbanco and
FBI, in its own right and with respect to its wholly owned Subsidiary, that:
8.1 ORGANIZATION AND QUALIFICATION OF FREEDOM. Freedom is a corporation
duly organized, validly existing and in good standing under the laws of the
State of West Virginia and has the full corporate power and authority to own all
of its properties and assets and to carry on its business as it is now being
conducted, and neither the ownership of its property nor the conduct of its
business requires it or its Subsidiary to be qualified to do business in any
other jurisdiction, except where the failure to be so qualified, considering all
such cases in the aggregate, does not involve a material risk to the business,
properties, financial position or results of operations of Freedom and its
Subsidiary taken as a whole.
8.2 AUTHORIZATION OF AGREEMENT. The Board of Directors of Freedom has
authorized the execution of this Agreement as set forth herein, and subject to
the approval of this Agreement by the shareholders of Freedom as provided in the
Articles of Incorporation and Bylaws of Freedom and applicable West Virginia
law, Freedom has the corporate power and is duly authorized to merge with FBI
pursuant to this Agreement, and this Agreement is a valid and binding agreement
of Freedom enforceable in accordance with its terms, except as enforceability
may be subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and to any
equitable principles limiting the right to obtain specific performance of
certain obligations thereunder.
8.3 NO VIOLATION OF OTHER INSTRUMENTS. Subject to obtaining any
required consent (which consents will be obtained by Freedom prior to Closing),
the execution and delivery of this Agreement do not, and the consummation of the
Merger and the Bank Merger and the transactions contemplated hereby will not,
violate any provisions of Freedom's Articles of Incorporation or Bylaws, or any
provision of, or result in the acceleration of any obligation under, any
material mortgage, deed of trust, note, lien, lease, franchise, license, permit,
agreement, instrument, law, order, arbitration award, judgment or decree or in
the termination of any material license, franchise, lease or permit to which
Freedom or the Subsidiary are a party or by which they are bound.
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After the approval of this Agreement by the shareholders of the common stock of
Freedom, the Board of Directors and the shareholders of Freedom will have taken
all corporate action required by applicable law, the Articles of Incorporation
of Freedom, its Bylaws or otherwise to authorize the execution and delivery of
this Agreement and to authorize the Merger of Freedom and FBI pursuant to this
Agreement.
8.4 FINANCIAL STATEMENTS. Freedom has delivered to Wesbanco copies of
its consolidated statements of condition as of December 31, 1997, 1998, and 1999
and the interim period ended September 30, 2000, and its consolidated statements
of income, consolidated statements of changes in shareholders' equity and
consolidated statements of changes in financial position for the three year
period ended December 31, 1999, and the interim period ended September 30, 2000,
together with the notes thereto, accompanied by an audit report relating to the
financial statements for the three years ended December 31, 1999, of Conley
Johnson, A.C., Certified Public Accountants. Such statements, together with the
related notes to all of said financial statements, present fairly the
consolidated financial position of Freedom and the Subsidiary and the
consolidated results of their operations as of the dates and for the periods
ended on the dates specified in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated, except as may
be specifically disclosed in those financial statements, including the notes to
the financial statements attached thereto and subject to normal recurring year
end adjustments.
8.5 SUBSIDIARY OF FREEDOM. The sole subsidiary corporation of Freedom
is Belington Bank, Inc., Belington, West Virginia, a West Virginia banking
corporation. Such corporation is duly organized, validly existing, and in good
standing under the laws of the State of West Virginia, and has the requisite
corporate power and authority to own and lease its properties and to conduct its
business as it is now being conducted and is currently contemplated to be
conducted. Freedom owns 100% of the issued and outstanding stock of such
corporation. All issued and outstanding shares of stock of the Subsidiary have
been fully paid, were validly issued and are nonassessable.
8.6 NO ACTION, ETC. Except as disclosed in the Disclosure Schedule of
Freedom dated not more than 30 days from the date hereof (the "Freedom
Disclosure Schedule"), and as supplemented on the Effective Date, there are no
suits, actions, proceedings, claims or investigations (formal or informal)
pending, or to the knowledge of Freedom, threatened against or relating to
Freedom, its Subsidiary, their business or any of their properties or against
any of their officers or directors (in their capacity as such) in law or in
equity or before any governmental agency. There are no suits, actions,
proceedings, claims or investigations pending against Freedom, its Subsidiary,
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their properties or against any of their officers or directors (in their
capacity as such) in law or in equity or before any governmental agency which,
individually or in the aggregate, would, or is reasonably likely to, if
determined adversely to such party, materially and adversely affect the
financial condition (present or prospective), businesses, properties or
operations of Freedom or its Subsidiary or the ability of Freedom or its
Subsidiary to conduct their business as presently conducted or to consummate the
transactions contemplated hereby, and Freedom does not know of any basis for any
such action or proceeding. Except as disclosed in the Freedom Disclosure
Schedule, Freedom and its Subsidiary are not parties or subject to any cease and
desist order, agreement or similar arrangement with a regulatory authority which
restricts their operations or requires any action, and neither Freedom nor its
Subsidiary is transacting business in material violation of any applicable law,
ordinance, requirement, rule, regulation or order.
8.7 CAPITALIZATION. The authorized capital stock of Freedom consists of
One Million shares of common stock, par value of $1.00 per share, of which
190,000 shares are duly authorized, validly issued and outstanding and are fully
paid and nonassessable as of the date hereof. There are no other options,
warrants, calls or commitments of any kind entitling any person to acquire, or
securities convertible into, Freedom Common Stock, except as provided in the
Option Agreement dated the date hereof to be issued in accordance with this
Agreement.
8.8 COPIES OF ALL CONTRACTS, LEASES, ETC. Freedom has furnished, or
provided access, to Wesbanco true and complete copies of all material contracts,
leases and other agreements to which Freedom is a party or by which it is bound
and of all employment, pension, retirement, stock option, profit sharing,
deferred compensation, consultant, bonus, group insurance or similar plans with
respect to any of the directors, officers or other employees of Freedom and its
Subsidiary. A list of all such documents is set forth in the Freedom Disclosure
Schedule, and as updated on the Effective Date.
8.9 MATERIALLY ADVERSE CONTRACTS. Neither Freedom nor its Subsidiary is
a party to or otherwise bound by any contract, agreement, plan, lease, license,
commitment or undertaking which is materially adverse, materially onerous or
materially harmful to Freedom and its Subsidiary taken as a whole. There is no
breach or default by any party of or with respect to any material provision of
any material contract to which Freedom or its Subsidiary are a party that would
have a material adverse effect upon the financial condition, operations, results
of operations, business or prospects of Freedom and its Subsidiary taken as a
whole.
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8.10 UNDISCLOSED LIABILITIES. Freedom and its Subsidiary have no
material liabilities other than those liabilities disclosed on or provided for
in the financial statements delivered pursuant to Section 8.4 hereof, or as
disclosed in the Freedom Disclosure Schedule attached hereto and made a part
hereof.
8.11 TITLE TO PROPERTIES. Except for capitalized leases, liens and
encumbrances not material to the property, liens and encumbrances on property
acquired by Freedom and its Subsidiary in foreclosure of loans and existing at
the time of foreclosure, Freedom and its Subsidiary have good and marketable
title to all of the property, interests in properties and other assets, real and
personal, set forth in their consolidated balance sheet as of December 31, 1999,
and applicable interim period balance sheets or acquired since the date thereof,
other than property disposed of since such dates, subject to no material liens,
mortgages, pledges, encumbrances or charges of any kind except liens reflected
on said balance sheets or set forth in the financial statements delivered
pursuant to Section 8.4 hereof, and all of their material leases are in full
force and effect and neither Freedom nor its Subsidiary is in material default
thereunder. No asset included in the financial statements referred to above has
been valued in such statements in excess of its cost less depreciation or, in
the case of investment securities, in excess of cost, adjusted for amortization
of premiums or accretion of discounts. All material real and tangible personal
property owned by Freedom or its Subsidiary and used or leased by Freedom or its
Subsidiary in their business is in good condition, normal wear and tear
excepted, and is in good operating order. All of such property is insured
against loss for at least 80% of the full replacement value thereof (less
applicable deductibles) by reputable insurance companies authorized to transact
business in the State of West Virginia.
8.12 PROXY STATEMENT. The Proxy Statement referred to in Section 14 or
any amendment or supplement thereto mailed to the holders of the common stock of
Freedom will not contain any untrue statement of a material fact concerning
Freedom or omit to state a material fact concerning Freedom required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading with respect to
Freedom, and will comply, as to form in all material respects, with the
requirements of the United States and West Virginia securities laws and any
other applicable Blue Sky Laws.
8.13 ERISA. Except as disclosed in the Freedom Disclosure Schedule, (i)
each employee benefit plan subject to Titles I and/or IV of ERISA and
established or maintained for persons including employees or former employees of
Freedom, or its Subsidiary, (hereinafter collectively referred to as "Plan") has
been maintained, operated, administered and funded in accordance with its terms
and with all material provisions of ERISA and the Internal Revenue Code ("IRC")
applicable thereto; (ii) no event reportable under Section 4043 of
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ERISA has occurred and is continuing with respect to any Plan; (iii) no
liability to PBGC has been incurred with respect to any Plan, other than for
premiums due and payable, and all premiums required to have been paid to PBGC as
of the date hereof have and as of the Effective Date will have been paid; (iv)
no Plan has been terminated, no proceedings have been instituted to terminate
any Plan, and no decision has been made to terminate or institute proceedings to
terminate any Plan; (v) no Plan is a multi-employer Plan; (vi) there has been no
cessation of, and no decision has been made to cease, operations at a facility
or facilities where such cessation could reasonably be expected to result in a
separation from employment of more than 20% of the total number of employees who
are participants under any plan; (vii) each Plan which is an employee pension
plan meets the requirements of "qualified plans" under Section 401(a) of the
IRC; (viii) no accumulated funding deficiency within the meaning of Section 412
of the IRC or Section 302 of ERISA has been incurred with respect to any Plan
subject to the funding standards of those provisions; (ix) with respect to each
Plan, there have been no prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the IRC, and there are no actions, suits or claims with
respect to the assets thereof (other than routine claims for benefits) pending
or threatened; and (x) all required reports, descriptions and notices
(including, but not limited to, Form 5500 Annual Reports, Summary Annual Reports
and Summary Plan Descriptions) have been appropriately filed or distributed with
respect to each Plan.
8.14 EXCHANGE ACT REPORTS. Freedom is not required to file annual or
other periodic reports under the Securities Exchange Act of 1934 (the "Act").
8.15 LABOR DISPUTES. Neither Freedom nor its Subsidiary is directly or
indirectly involved in or threatened with any labor dispute, including, without
limitation, matters regarding discrimination by reason of race, creed, sex,
handicap or national origin, which would materially and adversely affect their
financial condition, assets, businesses or operations taken as a whole. No
collective bargaining representatives represent any employees of Freedom or the
employees of its Subsidiary, and no petition for election of any collective
bargaining representative has been filed and to the knowledge of Freedom and its
Subsidiary no organizational campaign on behalf of any collective bargaining
unit has been undertaken by or on behalf of the employees of Freedom or its
Subsidiary.
8.16 RESERVE FOR POSSIBLE LOAN LOSSES. The reserve for possible loan
losses shown on the consolidated balance sheets of Freedom and its Subsidiary as
of December 31, 1999, and the interim period ending
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September 30, 2000, delivered pursuant to this Agreement, which financial
statements are attached to the Freedom Disclosure Schedule, are adequate in all
material respects as of the respective dates thereof.
8.17 TAXES. Except as disclosed in the Freedom Disclosure Schedule:
(a) Freedom and its Subsidiary have timely and properly filed
all Federal Income Tax Returns and all other federal, state, municipal
and other tax returns which they are required to file, either on their
own behalf or on behalf of their employees or other persons or
entities, all such returns and reports being true and correct and
complete in all material respects, and have paid all taxes, including
penalties and interest, if any, which have become due pursuant to such
returns or reports or forms or pursuant to assessments received by
them;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against Freedom or its Subsidiary, or, to
its knowledge, threatening to assert against them, or any of them, any
material deficiency or claim for additional taxes, interest or penalty;
(c) There is no pending or, to its knowledge, threatened
examination of the Federal Income Tax Returns of Freedom or its
Subsidiary, and, except for tax years still subject to the assessment
and collection of additional Federal income taxes under the three year
period of limitations prescribed in IRC Section 6501(a), no tax year of
Freedom or its Subsidiary remains open to the assessment and collection
of additional material Federal Income Taxes; and
(d) There is no pending or, to its knowledge, threatened
examination of the West Virginia Business Franchise Tax Returns of
Freedom or its Subsidiary, and, except for tax years still subject to
the assessment and collection of additional Business Franchise Taxes
under the three year period of limitations prescribed in W.Va. Code
Annot. Section 11-10-15, no tax year of Freedom or its Subsidiary
remains open to the assessment and collection of additional Business
Franchise Taxes.
(e) Freedom, and its Subsidiary, have properly accrued and
reflected on their December 31, 1999, consolidated balance sheet,
delivered pursuant to Section 8.4 hereof, and have thereafter to the
date hereof properly accrued, and will from the date
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hereof through the Closing Date properly accrue, all liabilities for
taxes and assessments, and will timely and properly file all such
federal, state, local and foreign tax returns and reports and forms
which they are required to file, either on their own behalf or on
behalf of their employees or other persons or entities, all such
returns and reports and forms to be true and correct and complete in
all respects, and will pay or cause to be paid when due all taxes,
including penalties and interest, if any, which have become due
pursuant to such returns or reports or forms or pursuant to assessments
received by them, all such accruals being in the aggregate sufficient
for payment of all such taxes and assessments.
8.18 ABSENCE OF CERTAIN CHANGES. Except as may be disclosed in the
Freedom Disclosure Schedule, or except in connection with the transactions
contemplated by this Agreement, since December 31, 1999:
(a) There has been no change in the material assets, financial
condition or liabilities (contingent or otherwise), business, or
results of operations of Freedom and its Subsidiary which has had, or
changes which in the aggregate have had, a materially adverse effect on
such material assets, financial condition or results of operations of
Freedom and its Subsidiary taken as a whole, nor to their knowledge,
has any event or condition occurred which may result in such change or
changes;
(b) There has not been any material damage, destruction or
loss by reason of fire, flood, accident or other casualty (whether
insured or not insured) materially and adversely affecting the assets,
financial condition, business or operations of Freedom or its
Subsidiary taken as a whole;
(c) Other than in the ordinary course of business, neither
Freedom nor its Subsidiary has disposed of, or agreed to dispose of,
any of their material properties or assets, nor have they leased to
others, or agreed to so lease, any of such material properties or
assets;
(d) There has not been any change in the authorized, issued or
outstanding capital stock of Freedom except as provided for in this
Agreement, or any material change in the outstanding debt of Freedom or
its Subsidiary, other than changes due to payments in accordance with
the terms of such debt or changes in deposits, Federal funds
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purchased, repurchase agreements or other short- term borrowings in the
ordinary course of business;
(e) Except as otherwise disclosed in this Agreement, Freedom
has not granted any warrant, option or right to acquire, or agreed to
repurchase, redeem or otherwise acquire, any shares of its capital
stock or any other of its securities whatsoever;
(f) Freedom and its Subsidiary have, and shall have at
Closing, personnel sufficient to adequately staff all key positions
within their respective operations. Other than as disclosed by Freedom,
there has not been any material increase in the compensation or fees
payable by Freedom or its Subsidiary to their respective directors or
officers for services in their capacities as such, other than increases
in the regular course of Freedom or its Subsidiary, respectively, nor
any material increase in expenditures for any bonus, insurance, pension
or other employee benefit plan, payment or arrangement for or with any
of such directors or officers other than increases in the regular
course of business in accordance with past practices or the personnel
policies of Freedom or its Subsidiary;
(g) Neither Freedom nor its Subsidiary has made any material
loan or advance other than in the ordinary course of business;
(h) Neither Freedom nor its Subsidiary has made any
expenditure or major commitment for the purchase, acquisition,
construction or improvement of any material asset or assets which in
the aggregate would be material other than in the ordinary course of
business;
(i) Neither Freedom nor its Subsidiary has entered into any
other material transaction, contract or lease or incurred any other
material obligation or liability other than in the ordinary course of
business;
(j) There has not been any other event, condition or
development of any kind which materially and adversely affects the
material assets, financial condition or results of operations of
Freedom or its Subsidiary, taken as a whole, and neither Freedom nor
its Subsidiary has knowledge of any such event, condition or
development which
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may materially and adversely affect the assets, financial condition or
results of operations of Freedom and its Subsidiary, taken as a whole.
8.19 FIDELITY BONDS. The Subsidiary has continuously maintained a
fidelity bond insuring it against acts of dishonesty by its officers and
employees in such amounts as are required by law and as are customary, usual and
prudent for a bank of its size. Since January 1, 2000, there have been no claims
under such bond and, except as disclosed in the Freedom Disclosure Schedule,
neither Freedom nor its Subsidiary is aware of any facts which would form the
basis of a claim under such bonds. Neither Freedom nor its Subsidiary has any
reason to believe that its fidelity coverage will not be renewed by the
applicable carrier on substantially the same terms as its existing coverage.
8.20 NEGATIVE COVENANTS. Except as otherwise contemplated hereby,
between the date hereof and the Effective Date, or the time when this Agreement
terminates as provided herein, Freedom will not, except as contemplated by this
Agreement, without the prior written approval of Wesbanco:
(a) Make any change in its authorized capital stock;
(b) Issue any shares of its common stock, securities
convertible into its common stock, or any long term debt securities;
(c) Issue or grant any options, warrants or other rights to
purchase shares of its common stock;
(d) Declare or pay any dividends or other distributions on any
shares of common stock other than a semi-annual dividend of forty cents
($.40) per share payable in accordance with past practice.
(e) Purchase or otherwise acquire, or agree to acquire, for a
consideration any share of its capital stock (other than in a fiduciary
capacity);
(f) Except as otherwise contemplated by this Agreement or as
disclosed in or permitted by or under the conditions set forth in
Section 8.18(f) above and except for any amendments required by law,
enter into or amend any employment, pension, retirement, stock option,
profit sharing, deferred compensation, consultant, bonus, group
insurance or similar plan in respect of any of its directors, officers
or other employees for services in their capacities as such or
materially increase its contribution to any pension
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plan, except as disclosed in the Freedom Disclosure Schedule, regarding
pension or retirement plans or increases in accordance with past
practices;
(g) Take any action materially and adversely affecting the
financial condition (present or prospective), businesses, properties or
operations of Freedom or its Subsidiary, taken as a whole;
(h) Acquire or merge with any other company or acquire any
branch or, other than in the ordinary course of business, any assets of
any other company;
(i) Except in the ordinary course of business as heretofore
conducted, and except as hereinabove provided, mortgage, pledge or
subject to a lien or any other encumbrance any of its material assets,
dispose of any of its material assets, incur or cancel any material
debts or claims, or increase any compensation or benefits payable to
its officers or employees (other than as permitted in Sections 8.18(f)
and 8.20(f) hereof), except in the ordinary course of business as
heretofore conducted, or take any other action not in the ordinary
course of its business as heretofore conducted or incur any material
obligation or enter into any material contract; or
(j) Amend its Articles of Incorporation or Bylaws, except as
may be necessary to carry out this Agreement or as required by law.
8.21. ADDITIONAL COVENANTS. Except as otherwise contemplated by this
Agreement, Freedom covenants and agrees:
(a) That it will promptly advise Wesbanco in writing of the
name and address of, and the number of shares of Freedom stock held by,
each stockholder who elects to exercise his or her dissenters rights
pursuant to Sections 122 and 123 of the WVCA;
(b) Subsequent to the date of this Agreement and prior to the
Effective Date, that it will operate its business only in the ordinary
course and in a manner consistent with past practice;
(c) To the extent consistent with the fiduciary duties of the
Board of Directors to Freedom and its shareholders and in compliance
with applicable law, that it will use its best efforts to take or cause
to be taken all action required under this
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Agreement on its part to be taken as promptly as practicable so as to
permit the consummation of the Merger at the earliest possible date and
to cooperate fully with the other parties to that end;
(d) Freedom will not, and will not permit any person acting on
behalf of Freedom or its Subsidiary to, directly or indirectly,
initiate or solicit any acquisition proposal by any person, corporation
or entity. For the purposes of this subsection, "acquisition proposal"
means any proposal to merge or consolidate with, or acquire all or any
substantial portion of the assets of, Freedom or its Subsidiary, or any
tender or exchange offer (or proposal to make any tender or exchange
offer) for any shares of stock of Freedom, or any proposal to acquire
more than 5% of the outstanding shares of stock of Freedom or any
options, warrants or rights to acquire, or securities convertible into
or exchangeable for, more than 5% of the outstanding shares of stock of
Freedom. Freedom will give Wesbanco notice by telephone, promptly after
receipt thereof, of all material facts relating to any acquisition
proposal or any inquiry with respect to any acquisition proposal and
shall confirm such notice in writing immediately thereafter;
(e) To promptly advise Wesbanco of any material adverse change
in the financial condition, assets, businesses or operations of Freedom
or its Subsidiary, taken as a whole, or any material changes or
inaccuracies in data provided to Wesbanco pursuant to this Agreement;
(f) To maintain in full force and effect its and its
Subsidiary's present fire, casualty, public liability, employee
fidelity and other insurance coverages or replacement insurance
coverage at substantially the same premium and insurance levels;
(g) To cooperate with Wesbanco in furnishing such information
concerning the business and affairs of Freedom, its Subsidiary and
their respective directors and officers as is reasonably necessary or
requested in order to prepare and file any application for regulatory
or governmental approvals, including, but not limited to, an
application to the Federal Reserve Board, and the West Virginia
Department of Banking for prior approval of the acquisition of Freedom
by Wesbanco as contemplated hereunder. Consistent with its fiduciary
duties, Freedom will use its best efforts to obtain
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the approval or consent of any federal, state or other regulatory
agency having jurisdiction and of any other party to the extent that
such approvals or consents are required to effect the Merger and the
transactions contemplated hereby or are required with respect to the
documents described in Section 8.3 hereof; and
(h) To cooperate with Wesbanco in furnishing such information
concerning the business of Freedom and its Subsidiary as is reasonably
necessary or requested in order to prepare and file any Proxy Statement
to be prepared in connection with the Merger as provided in Section 14
hereof.
SECTION 9
REPRESENTATIONS, WARRANTIES AND COVENANTS OF WESBANCO AND FBI
Wesbanco and FBI represent and warrant to Freedom and covenant with
Freedom that:
9.1 CORPORATE ORGANIZATION OF WESBANCO AND SUBSIDIARIES. Wesbanco is,
and upon execution hereof FBI will be, a corporation duly organized, validly
existing and in good standing under the laws of the State of West Virginia, with
full corporate power and authority to carry on its business as it is now being
conducted and as contemplated by the Agreement and to own the properties and
assets which it owns, and neither the ownership of its property nor the conduct
of its business requires it, or any of its subsidiaries, to be qualified to do
business in any other jurisdiction except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve a material risk to
the business, properties, financial position or results of operations of
Wesbanco and its subsidiaries taken as a whole. Each of Wesbanco's subsidiaries
("Wesbanco Subs"), other than FBI, is a West Virginia, Ohio or Delaware
corporation, duly organized and validly existing in good standing under the laws
of Ohio, Delaware or West Virginia, as the case may be, with full corporate
power and authority to carry on its business as it is now being conducted and to
own the properties and assets which it owns. All issued and outstanding shares
of stock of FBI and the Wesbanco Subs are held, beneficially and of record, by
Wesbanco and have been or, as to FBI, on the date of its execution hereof, will
have been, fully paid, were validly issued and are nonassessable. There are no
options, warrants to purchase or contracts to issue, or contracts or any other
rights entitling anyone to acquire, any other stock of FBI or any of the
Wesbanco Subs or securities convertible into shares of stock of FBI or any of
the Wesbanco Subs.
9.2 AUTHORIZATION OF AGREEMENT. The Board of Directors of Wesbanco has
authorized the execution of this Agreement as set forth herein, and, without
further action by its Board of Directors or
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shareholders, Wesbanco has the corporate power and is duly authorized to execute
and deliver this Agreement and consummate the transactions contemplated herein,
pursuant to this Agreement, and this Agreement is a valid and binding agreement
of Wesbanco enforceable in accordance with its terms, except as enforceability
may be subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and to any
equitable principles limiting the right to obtain specific performance of
certain obligations thereunder. Upon execution hereof by FBI and Bank and
subject to the approval hereof by Wesbanco as their sole shareholder, FBI and
Bank have the corporate power to execute and deliver this Agreement and have
taken all action required by law, their Articles of Incorporation, their Bylaws
or otherwise to authorize and approve such execution and delivery, the
performance of the Agreement, the Merger, the Bank Merger and the consummation
of the transactions contemplated hereby; and this Agreement is a valid and
binding agreement of FBI and Bank enforceable in accordance with its terms,
except as enforceability may be subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and to any equitable principles limiting the right to obtain specific
performance of certain obligations thereunder.
9.3 TRANSFER OF SECURITIES TO EXCHANGE AGENT PRIOR TO, OR AS OF THE
CLOSING DATE. Prior to, or at the Closing Date, Wesbanco will deliver to the
Exchange Agent, for the benefit of the shareholders of Freedom, an amount of
common stock and cash sufficient to meet the necessary amount of securities and
cash into which such common stock shall have been converted pursuant to Section
6.
9.4 NO VIOLATION OF OTHER INSTRUMENTS. Subject to obtaining any
required consents (which consents will be obtained by Wesbanco prior to the
Closing), the execution and delivery of this Agreement do not, and the
consummation of the Merger and the Bank Merger and the transactions contemplated
hereby will not, violate any provision of the Articles of Incorporation or
Bylaws of Wesbanco or any of the Wesbanco Subs or any provision of, or result in
the acceleration of any obligation under, any material mortgage, Deed of Trust,
note, lien, lease, franchise, license, permit, agreement, instrument, law,
order, arbitration award, judgment or decree, or in the termination of any
material license, franchise, lease or permit, to which Wesbanco or any of the
Wesbanco Subs, is a party or by which they are bound.
9.5 APPLICATION FOR FBI. Wesbanco shall cause to be filed with the West
Virginia Secretary of State an application to organize and incorporate FBI as a
West Virginia corporation, in accordance with the provisions of the West
Virginia Code, and upon the approval of such application and the issuance of a
Certificate of Incorporation for FBI by the Secretary of State of West Virginia,
Wesbanco shall cause FBI and Bank to
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execute and enter into this Agreement and cause FBI and Bank to take such action
as is provided in this Agreement on their part to be taken.
9.6 GOOD FAITH. Wesbanco shall use its best efforts in good faith to
take or cause to be taken all action required under this Agreement on its part
to be taken as promptly as practicable so as to permit the consummation of this
Agreement at the earliest possible date and cooperate fully with the other
parties to that end.
9.7 EXCHANGE ACT REPORTS. Wesbanco has delivered to Freedom true and
correct copies of its Form 10-K (Annual Report) for the year ended December 31,
1999, and its Form 10-Q (Quarterly Report) for the quarter ended September 30,
2000, as filed with the SEC, all of which were prepared and filed in accordance
with the applicable requirements and regulations of the SEC. Wesbanco has also
delivered to Freedom true and correct copies of all documents and reports filed
by Wesbanco with the SEC pursuant to the Exchange Act since January 1, 2000 (the
"Wesbanco Reports"). Wesbanco has filed and will continue to file all reports
and other documents required to be filed with the SEC pursuant to the Exchange
Act in a timely manner. All of the Wesbanco Reports complied in all material
respects with the Act and did not contain, as of their respective dates, any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the circumstances
under which they were made.
9.8 SUBSIDIARIES OF WESBANCO. In addition to FBI, the subsidiaries of
Wesbanco are Wesbanco Bank, Inc., a West Virginia banking corporation, CBI
Corporation, a West Virginia corporation, Vandalia National Corporation, a
Delaware corporation, Wesbanco Securities, Inc., an Ohio corporation, Wesbanco
Insurance Services, Inc., a West Virginia corporation, and Hometown Finance
Company, a West Virginia corporation. All have the requisite corporate power and
authority to own and lease their respective properties and to conduct their
respective businesses as they are now being conducted and are currently
contemplated to be conducted. Wesbanco owns 100% of the issued and outstanding
stock of all such corporations.
9.9 REGISTERED BANK HOLDING COMPANY. Wesbanco is a duly registered bank
holding company under the Bank Holding Company Act of 1956, as amended.
9.10 AUTHORITY TO ISSUE SHARES. The shares of common stock to be issued
by Wesbanco pursuant to this Agreement will be duly authorized by all necessary
corporate action at the time the Merger is consummated. When issued upon the
terms and conditions specified in this Agreement, such shares shall be validly
issued, fully paid and nonassessable. The shareholders of Wesbanco have, and
will have, no preemptive rights with respect to the issuance of the shares of
Wesbanco to be issued in the transaction contemplated in this Agreement.
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9.11 FINANCIAL STATEMENTS. Wesbanco has delivered to Freedom copies of
its consolidated balance sheets as of December 31, 1997, 1998 and 1999 and the
interim period ended September 30, 2000, and its consolidated statements of
income, consolidated statements of changes in shareholders' equity and
consolidated statements of changes in financial position for the three year
period ended December 31, 1999, and the interim period ended September 30, 2000,
together with the notes thereto, accompanied by an audit report of Ernest &
Young, LLP, independent auditors. Such statements and the related notes to all
of said financial statements, present fairly the consolidated financial position
of Wesbanco and its consolidated subsidiaries and the consolidated results of
their operations as of the dates and for the periods ended on the dates
specified in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, except as may be
specifically disclosed in those financial statements, including the notes to the
financial statements attached thereto, and subject to normal recurring year end
adjustments.
9.12 NO ACTION, ETC. Except as disclosed in the Wesbanco Disclosure
Schedule, dated not more than 30 days from the date hereof (the "Wesbanco
Disclosure Schedule"), and as supplemented on the Effective Date, there are no
suits, actions, proceedings, claims or investigations (formal or informal)
pending, or to the knowledge of Wesbanco pending or threatened, against or
relating to Wesbanco, its subsidiaries, its businesses or any of its properties
or against any of their officers or directors (in their capacity as such) in law
or in equity or before any governmental agency. There are no suits, actions,
proceedings, claims or investigations pending against or relating to Wesbanco,
its subsidiaries, its businesses, its properties or against any of their
officers or directors (in their capacity as such) in law or in equity or before
any governmental agency, which, individually or in the aggregate, would, or is
reasonably likely to, if determined adversely to such party, materially and
adversely affect the financial condition (present or prospective), businesses,
properties or operations of Wesbanco or its subsidiaries or the ability of
Wesbanco or its subsidiaries to conduct its business as presently conducted or
consummate the transaction contemplated hereby, and Wesbanco does not know of
any basis for any such action or proceeding. Neither Wesbanco nor any of its
subsidiaries are a party or subject to any cease and desist order, agreement or
similar arrangement with a regulatory authority which restricts its operations
or requires any action and neither Wesbanco nor any of its subsidiaries are
transacting business in material violation of any applicable law, ordinance,
requirement, rule, order or regulation.
9.13 CAPITALIZATION. The authorized capital stock of Wesbanco consists
of 50,000,000 shares of common stock, par value of $2.0833 per share, of which
18,727,118 shares are duly authorized, validly issued and
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outstanding (as of September 30, 2000) and are fully paid and nonassessable, and
1,000,000 shares of preferred stock, without par value, none of which are issued
or outstanding. There are no options, warrants, calls or commitments of any kind
entitling any person to acquire, or securities convertible into, Wesbanco Common
Stock, except as disclosed on the Wesbanco Disclosure Schedule
Upon execution hereof by FBI, the authorized capital stock of FBI
consists of 100 shares of common stock, par value of $25.00 per share, all of
which such shares will be duly authorized and validly issued and outstanding and
will be fully paid and nonassessable. There are no options, warrants, calls or
commitments of any kind relating to, or securities convertible into, FBI Common
Stock.
9.14 UNDISCLOSED LIABILITIES. Wesbanco and the Wesbanco Subs have no
material liabilities other than those liabilities disclosed on or provided for
in the financial statements delivered pursuant to Section 9.11 of this
Agreement, or on the Wesbanco Disclosure Schedule.
9.15 TITLE TO PROPERTIES. Except for capitalized leases and liens and
encumbrances not material to the property and liens and encumbrances on property
acquired by Wesbanco Subs in foreclosure of loans and existing at the time of
foreclosure, Wesbanco and its subsidiaries have good and marketable title to all
of the property, interest in properties and other assets, real or personal, set
forth in its consolidated balance sheet as of December 31, 1999, and applicable
interim periods, or acquired since that date, subject to no material liens,
mortgages, pledges, encumbrances, or charges of any kind except liens reflected
on said balance sheets, and all of its leases are in full force and effect and
neither Wesbanco nor any of its subsidiaries is in material default thereunder.
No asset included in the financial statements referred to above has been valued
in such statements in excess of cost less depreciation or, in the case of
investment securities, in excess of cost, adjusted for amortization of premiums
or accretion of discounts. All real and tangible personal property owned by
Wesbanco or its subsidiaries and used or leased by Wesbanco or its subsidiaries,
or for its business is in good condition, normal wear and tear excepted, and is
in good operating order. All of such property is insured against loss for at
least 80% of the full replacement value thereof (less applicable deductibles) by
reputable insurance companies authorized to transact business in the States of
West Virginia and Ohio.
9.16 REGISTRATION STATEMENT. The Registration Statement referred to in
Section 14.2 of this Agreement or any amendment or supplement thereto mailed to
the holders of the common stock of Freedom will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not
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misleading with respect to Wesbanco, and will comply as to form in all material
respects with the requirements of the United States and West Virginia securities
laws and any other applicable Blue Sky laws.
9.17 ERISA. Except as disclosed in the Wesbanco Disclosure Schedule (i)
each employee benefit plan subject to Titles I and/or IV of ERISA and
established or maintained for persons including employees or former employees of
Wesbanco, or any of its subsidiaries, (hereinafter referred to as "Plan") has
been maintained, operated, administered and funded in accordance with its terms
and with all material provisions of ERISA and the IRC applicable thereto; (ii)
no event reportable under Section 4043 of ERISA has occurred and is continuing
with respect to any Plan; (iii) no liability to PBGC has been incurred with
respect to any Plan, other than for premiums due and payable and all premiums
required to have been paid to PBGC as of the date hereof have been and as of the
Effective Date will have been paid; (iv) other than the termination of the
defined benefit pension plans of Wheeling Dollar Bank, First National Bank and
Trust Company, Wirt County Bank, First-Tyler Bank & Trust Company, Brooke
National Bank, First National Bank of Barnesville, Albright National Bank and
First Fidelity Bancorp, Inc., no Plan has been terminated, no proceedings have
been instituted to terminate any Plan, and no decision has been made to
terminate or institute proceedings to terminate any Plan; (v) with respect to
the termination of the defined benefit pension plans of Wheeling Dollar Bank,
First National Bank and Trust Company, Wirt County Bank, First-Tyler Bank &
Trust Company, Brooke National Bank, First National Bank of Barnesville,
Albright National Bank and First Fidelity Bancorp, Inc., all required
governmental and regulatory approvals of such terminations have been obtained,
all participants in such Plans or their beneficiaries have received single
premium annuity contracts or other benefits which will provide those
participants or beneficiaries with the retirement income calculated under the
terms and conditions of such Plans, all liabilities of such Plans have been
paid, released, discharged or merged, and any surplus assets remaining in such
Plans after satisfaction of all of its liabilities have been recovered by
Wesbanco or its subsidiaries; (vi) neither Wesbanco nor any of its subsidiaries
currently are a participating employer in any multi-employer or multiple
employer employee benefit pension plan (including any multi-employer plans as
defined in Section 3(37) of ERISA) and, with respect to any multi-employer or
multiple employer plan in which Wesbanco or any of its subsidiaries was a
participating employer, all contributions due from Wesbanco or any of its
subsidiaries to any such multi-employer or multiple employer plan have been
timely paid and any additional contributions due on or before the Effective Date
shall have been paid; (vii) with respect to any multi-employer pension plan
subject to the Multi-Employer Pension Plan Amendments Act of 1980 in which
Wesbanco or any of its subsidiaries was a participating employer, neither
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Wesbanco nor any of its subsidiaries have incurred or will incur any withdrawal
liability, complete or partial, under Sections 4201, 4203, or 4205 of ERISA, as
a consequence of discontinuing participating in such multi-employer pension
plan; (viii) there has been no cessation of, and no decision has been made to
cease, operations at a facility or facilities where such cessation could
reasonably be expected to result in a separation from employment of more than
20% of the total number of employees who are participants under any Plan; (ix)
each Plan which is an employee pension plan meets the requirements of "qualified
plans" under Section 401(a) of the IRC; (x) no accumulated funding deficiency
within the meaning of Section 412 of the IRC or Section 302 of ERISA has been
incurred with respect to any Plan subject to the funding standards of those
provisions; (xi) with respect to each Plan, there have been no prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the IRC, and
there are no actions, suits or claims with respect to the assets thereof (other
than routine claims for benefits) pending or threatened; and (xii) all required
reports, descriptions and notices (including, but not limited to, Form 5500
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) have been
appropriately filed with the government or distributed to participants with
respect to each Plan.
9.18 LABOR DISPUTES. Except as disclosed in the Wesbanco Disclosure
Schedule, neither Wesbanco nor any of its subsidiaries are directly or
indirectly involved in or threatened with any labor dispute, including, without
limitation, matters regarding discrimination by reason of race, creed, sex,
handicap or national origin, which would materially and adversely effect their
financial condition, assets, businesses or operations taken as a whole. No
collective bargaining representatives represent employees of Wesbanco, FBI or
the Wesbanco Subs, and no petition for election of any collective bargaining
representative has been filed and, to the knowledge of Wesbanco and its
subsidiaries, no organizational campaign on behalf of any collective bargaining
unit has been undertaken by or on behalf of any Wesbanco, FBI or Wesbanco Subs
employees.
9.19 RESERVE FOR POSSIBLE LOAN LOSSES. The reserve for possible loan
losses shown on the consolidated balance sheet of Wesbanco and its subsidiaries
as of December 31, 1999, delivered pursuant to this Agreement is adequate in all
material respects as of the date thereof.
9.20 TAXES. Except as disclosed in the Wesbanco Disclosure Schedule:
(a) Wesbanco and its subsidiaries have timely and properly
filed all Federal Income Tax Returns and all other federal, state,
municipal and other tax returns which they are required to file, either
on their own behalf or on behalf of their employees or other persons or
entities, all such returns and reports being true and correct and
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complete in all material respects, and have paid all taxes, including
penalties and interest, if any, which have become due pursuant to such
returns or reports or forms or pursuant to assessments received by
them;
(b) Neither the Internal Revenue Service nor any other taxing
authority is now asserting against Wesbanco or any of its subsidiaries,
or, to its knowledge, threatening to assert against them, or any of
them, any material deficiency or claim for additional taxes, interest
or penalty;
(c) There is no pending or, to its knowledge, threatened
examination of the Federal Income Tax Returns of Wesbanco or any of its
subsidiaries, and, except for tax years still subject to the assessment
and collection of additional federal income taxes under the three-year
period of limitations prescribed in IRC Section 6501(a), no tax year of
Wesbanco or any of its subsidiaries remains open to the assessment and
collection of additional material Federal Income Taxes; and
(d) There is no pending or, to its knowledge, threatened
examination of the West Virginia Business Franchise Tax Returns of
Wesbanco or any of its subsidiaries, and, except for tax years still
subject to the assessment and collection of additional Business
Franchise Taxes under the three-year period of limitations prescribed
in W.Va. Code Annot. Section 11-10-15, no tax year of Wesbanco or any
of its subsidiaries remains open to the assessment and collection of
additional Business Franchise Taxes.
(e) Wesbanco, and its subsidiaries, have properly accrued and
reflected on their December 31, 1999, consolidated balance sheet,
delivered pursuant to Section 9.11 hereof, and have thereafter to the
date hereof properly accrued, and will, from the date hereof, through
the Closing Date, properly accrue all liabilities for taxes and
assessments, and will timely and properly file all such federal, state,
local and foreign tax returns and reports and forms which they are
required to file, either on their own behalf or on behalf of their
employees or other persons or entities, all such returns and reports
and forms to be true and correct and complete in all respects, and will
pay or cause to be paid when due all taxes, including penalties and
interest, if any, which have become due pursuant to
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such returns or reports or forms or pursuant to assessments received by
them, all such accruals being in the aggregate sufficient for payment
of all such taxes and assessments.
9.21 ABSENCE OF CERTAIN CHANGES. Except as may be disclosed in the
Wesbanco Disclosure Schedule, or except in connection with the transactions
contemplated by this Agreement, since December 31, 1999:
(a) There has been no change in the material assets, financial
condition, liabilities (contingent or otherwise), business or results
of operation of Wesbanco and its subsidiaries which has had, or changes
in the aggregate which have had, a materially adverse effect on the
material assets, financial condition or results of operations of
Wesbanco, nor, to its knowledge, has any event or condition occurred
which may result in such change or changes;
(b) There has not been any material damage, destruction, or
loss by reason of fire, flood, accident or other casualty (whether
insured or not insured) materially and adversely affecting the assets,
financial condition, business or operations of Wesbanco or any of its
subsidiaries taken as a whole;
(c) Other than in the ordinary course of business, neither
Wesbanco nor any of its subsidiaries have disposed of, or agreed to
dispose of, any of their material properties or assets, nor have they
leased to others, or agreed to so lease, any of such material
properties or assets;
(d) There has not been any change in the authorized, issued or
outstanding capital stock of Wesbanco, except as provided for in this
Agreement or as disclosed in the Wesbanco Disclosure Schedule, or any
material change in the outstanding debt of Wesbanco or any of its
subsidiaries, other than changes due to payments in accordance with the
terms of such debt or changes in deposits, federal funds purchased,
repurchase agreements or other short-term borrowings in the ordinary
course of business;
(e) Except for the purchases of its common stock pursuant to
its previously announced stock repurchase programs and stock options
issued under its Incentive Compensation Plan, Wesbanco has not granted
any warrant, option or right to acquire, or
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agreed to repurchase, redeem or otherwise acquire, any shares of its
capital stock or any other of its securities whatsoever;
(f) Neither Wesbanco nor any of its subsidiaries have made any
material loan or advance other than in the ordinary course of business;
(g) Neither Wesbanco nor any of its subsidiaries has entered
into any other material transaction, contract or lease or incurred any
other material obligation or liabilities other than in the ordinary
course of business;
(h) Neither Wesbanco nor any of its subsidiaries have made any
expenditure or major commitment for the purchase, acquisition,
construction or improvement of any material asset or assets which in
the aggregate would be material other than in the ordinary course of
business;
(i) There have not been any dividends or other distributions
declared or paid on any shares of Wesbanco Common Stock or preferred
stock of Wesbanco which, taken in the aggregate with all other such
distributions declared or paid in the same tax year, exceed 70% of the
after-tax income of Wesbanco for the tax year in which paid;
(j) Business has been conducted by Wesbanco in the ordinary
course and in a manner consistent with past practice;
(k) There has been no change in the Articles of Incorporation
or Bylaws of Wesbanco which would in the reasonable opinion of Freedom
have a material adverse effect on the rights of holders of Wesbanco
Common Stock; and
(l) There has not been any other event, condition or
development of any kind which materially and adversely affects the
material assets, financial condition or results of operations of
Wesbanco or any of its subsidiaries, and neither Wesbanco nor any of
its subsidiaries have knowledge of any such event, condition or
development which may materially and adversely affect the material
assets, financial condition or results of operations of Wesbanco and
its subsidiaries.
9.22 FIDELITY BONDS. Each of the Wesbanco Subs has continuously
maintained fidelity bonds insuring it against acts of dishonesty by each of its
officers and employees in such amounts as are required by law and as are
customary, usual and prudent for a bank of its size. Since January 1, 2000,
there have been no claims
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under such bonds (except as disclosed in the Wesbanco Disclosure Schedule) and,
except as disclosed in writing to Freedom, neither Wesbanco nor any Wesbanco
Subs are aware of any facts which would form the basis of a claim under such
bonds. Neither Wesbanco nor any Wesbanco Subs have any reason to believe that
any fidelity coverage will not be renewed by their carriers on substantially the
same terms as the existing coverage.
9.23 ADDITIONAL COVENANTS. Except as otherwise contemplated by this
Agreement, Wesbanco covenants and agrees:
(a) That it will use its best efforts in good faith to take,
or cause to be taken all action required under this Agreement on its
part, or FBI's or Bank's part, to be taken as promptly as practicable
so as to permit the consummation of the Merger at the earliest possible
date and to cooperate fully with the other parties to that end, and
that it will, in all such efforts, give priority to this acquisition of
Freedom;
(b) To deliver to Freedom all Forms 10-K, 10-Q and 8-K filed
for periods ending after the date of this Agreement within seven (7)
days after the filing of each such report with the SEC;
(c) To promptly advise Freedom of any material adverse change
in the financial condition, assets, businesses or operations of
Wesbanco or any of its subsidiaries, or any material changes or
inaccuracies in data provided to Freedom pursuant to this Agreement or
any "acquisition proposal" with respect to Wesbanco received by
Wesbanco;
(d) To cooperate with Freedom in furnishing such information
concerning the business and affairs of Wesbanco and its subsidiaries
and its directors and officers as is reasonably necessary or requested
in order to prepare and file any application for regulatory or
governmental approvals, including but not limited to an application to
the Federal Reserve Board, and the West Virginia Department of Banking
for prior approval of the acquisition of Freedom by Wesbanco as
contemplated hereunder. Wesbanco will use its best efforts to obtain
the approval or consent of any federal, state or other regulatory
agency having jurisdiction and of any other party to the extent that
such approvals or consents are required to effect the Merger and the
transactions contemplated hereby or are required with respect to the
documents described in Section 9.4 hereof; and
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(e) To cooperate with Freedom in furnishing such information
concerning the business of Wesbanco and its subsidiaries as is
reasonably necessary or requested in order to prepare any Proxy
Statement to be prepared in connection with the Merger.
9.24 TRANSFER OF SECURITIES TO EXCHANGE AGENT PRIOR TO, OR AS OF THE
CLOSING DATE. Prior to, or at the Closing Date, Wesbanco will deliver to the
Exchange Agent for the benefit of the holders of the common stock of Freedom, an
amount of common stock of Wesbanco and cash sufficient to meet the necessary
amount of securities and cash required pursuant to Section 6.
9.25 AUTHORITY TO ISSUE SHARES. The shares of common stock of Wesbanco
to be issued pursuant to this Agreement will be duly authorized at the time the
Merger is consummated. When issued upon the terms and conditions specified in
this Agreement, such shares shall be validly issued, fully paid, and
nonassessable. The shareholders of Wesbanco have, and will have, no preemptive
rights with respect to the issuance of the shares of Wesbanco to be authorized
and issued in the transaction contemplated in this Agreement.
SECTION 10
INVESTIGATION
Subject to the conditions set forth in this Section 10, prior to the
Effective Time, Wesbanco and Freedom may directly and through their
representatives, make such investigation of the assets and business of Wesbanco
and Freedom and their subsidiaries as each deems necessary or advisable.
Wesbanco and Freedom and their representatives, including, without limitation,
their accountants and investment advisors, shall have, at reasonable times after
the date of execution by Wesbanco and Freedom hereof, full access to the
premises and to all the property, documents, material contracts, books and
records of each, and its subsidiaries, and to all documents, information and
working papers concerning each held by such party's accountants, without
interfering in the ordinary course of business of such entity, and the officers
of each will furnish to the other such financial and operating data and other
information with respect to the business and properties of each other and their
subsidiaries as each shall from time to time reasonably request; provided,
however, that neither party shall be required to give such access or information
to the other party to the extent that it is prohibited therefrom by rule,
regulation, or order of any regulatory body, and further provided that
confidential information of individual banking customers shall not be
photocopied or removed from the premises of such institution. All data and
information received by Wesbanco and its authorized representatives from Freedom
and by Freedom and its authorized representatives from Wesbanco shall be held in
strict confidence by such party and its authorized representatives, and neither
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party nor its authorized representatives will use such data or information or
disclose the same to others except with the written permission of the other
party. For a period of 30 days after the date of execution hereof, or prior
completion of the investigation herein provided, this Agreement may be
terminated by each such corporation if such investigation reveals to the other
any information concerning the other which in the opinion of such corporation
would have a material adverse effect on the present or future value of the other
such corporation and its subsidiaries' assets, net worth, business or income
taken as a whole. Each such corporation shall provide prompt written notice to
the other of such decision and the matters relied on therefore.
SECTION 11
NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties included or provided herein shall
not survive the Effective Date.
SECTION 12
CONDITIONS PRECEDENT; CLOSING DATE AND EFFECTIVE DATE
12.1 CONDITIONS PRECEDENT OF WESBANCO AND FREEDOM. The consummation of
this Agreement by Wesbanco and Freedom and the Merger is conditioned upon the
following:
(a) The shareholders of Freedom, FBI, the Subsidiary and Bank
shall have approved this Agreement by such vote as required by law;
(b) The West Virginia Banking Board (i) shall have granted its
final approval of the incorporation and organization of FBI as a West
Virginia corporation, the Merger and the Bank Merger and (ii) shall
not, within 120 days from the date of Wesbanco's submission to the
Banking Board pursuant to West Virginia Code Section 31A-8A- 4(a), have
entered an order disapproving the acquisition of Freedom by Wesbanco or
the merger of the Subsidiary with and into Bank, pursuant to this
Agreement;
(c) The Secretary of State of West Virginia shall have issued
a Certificate of Incorporation for FBI;
(d) The Board of Governors of the Federal Reserve System shall
have approved the application of Wesbanco to acquire Freedom; the
Merger with FBI pursuant to this Agreement; and the merger of the
Subsidiary with and into the Bank;
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(e) The Registration Statement of Wesbanco shall be effective
on the date of the Closing and all post-effective amendments filed
shall have been declared effective or shall have been withdrawn by that
date. No stop orders suspending the effectiveness thereof shall have
been issued which remain in effect on the date of the Closing or shall
have been threatened, and no proceedings for that purpose shall, before
the Closing, have been initiated or, to the knowledge of Wesbanco,
threatened by the SEC. All state securities and "Blue Sky" permits or
approvals required (in the opinion of Wesbanco and Freedom to carry out
the transaction contemplated in this Agreement) shall have been
received.
(g) No order to restrain, enjoin or otherwise prevent the
consummation of the transactions contemplated in this Agreement shall
have been entered by any court or administrative body which remains in
effect on the date of the Closing.
(h) Wesbanco, Freedom, FBI and Bank shall have received, in
form and substance satisfactory to Wesbanco's and Freedom's counsel,
all consents, federal, state, governmental, regulatory and other
approvals and permissions, and the satisfaction of all the requirements
prescribed by law which are necessary to the carrying out of the
transactions contemplated hereby shall have been procured, including
the filing of an effective Registration Statement with the Securities
and Exchange Commission and in addition, Wesbanco and Freedom shall
have received any and all consents required with respect to the
documents described pursuant to Section 8.3 and Section 9.4 hereof;
(i) All delay periods and all periods for review, objection or
appeal of or to any of the consents, approvals or permissions required
with respect to the consummation of the Merger and the Bank Merger and
this Agreement shall have expired;
(j) Unless waived by Wesbanco and Freedom, the holders of not
more than ten percent (10%) of the outstanding common stock of Freedom
shall have filed written objections to the Agreement in accordance with
WVCA, not have voted in favor of the Agreement at the special meeting
of Freedom's shareholders referred to in Section 14.1 hereof and have
made written demand for the fair value of such shares within ten (10)
days;
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(k) On or before the Closing Date, there shall have been
received from the Internal Revenue Service a ruling or rulings, or, at
the option of Freedom, in lieu thereof, an opinion from counsel for
Freedom substantially to the effect that for Federal Income Tax
purposes:
(i) The statutory merger of Freedom with FBI and the
statutory merger of the Subsidiary with Bank will each
constitute a reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986 ("IRC"), and
Wesbanco, Freedom, FBI, Subsidiary, and Bank will each be a
"party to a reorganization" as defined in IRC Section 368(b);
(ii) No gain or loss will be recognized by Wesbanco,
Freedom, FBI, Subsidiary or Bank as a result of the
transactions contemplated in the Agreement;
(iii) No gain or loss will be recognized by the
shareholders of Freedom as a result of their exchange of
Freedom's Common Stock for Wesbanco's Common Stock, except to
the extent any shareholder receives cash in lieu of a
fractional share or as a dissenting shareholder;
(iv) The holding period of the Wesbanco Common Stock
received by each holder of Freedom Common Stock will include
the period during which the stock of Freedom surrendered in
exchange therefor was held, provided such stock was a capital
asset in the hands of the holder on the date of exchange; and
(v) The Federal Income Tax basis of the Wesbanco
Common Stock received by each holder of Freedom Common Stock
will be the same as the basis of the stock exchanged
therefore.
(l) No action, proceeding, regulation or legislation shall
have been instituted before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain
substantial damages with respect to, the Agreement or the consummation
of the transactions contemplated hereby, which, in the reasonable
judgment of Wesbanco or Freedom would make it inadvisable to consummate
such transactions (it being understood and agreed that a written
request by governmental authorities for information with respect to the
Merger or the Bank Merger may not be deemed by either party to be a
threat of material litigation or proceeding, regardless of whether such
request is received before or after execution of the Agreement).
(m) The approvals referred to in subparagraphs (b), (d) or (e)
of this Subsection 12.1 hereof shall not have required the divestiture
or cessation of any significant part of the present operations
conducted by Wesbanco, Freedom or any of their subsidiaries, and shall
not have imposed any other condition, which divestiture,
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cessation or condition Wesbanco reasonably deems to be materially
disadvantageous or burdensome.
12.2 CONDITIONS PRECEDENT OF WESBANCO. The consummation of this
Agreement by Wesbanco and the Merger is also conditioned upon the following:
(a) Unless waived by Wesbanco, the representations and
warranties of Freedom contained in this Agreement shall be correct on
and as of the Effective Date with the same effect as though made on and
as of such date, except for representations and warranties expressly
made only as of a particular date and except for changes which have
been consented to by Wesbanco or which are not, in the aggregate,
material and adverse, to the financial condition, businesses,
properties or operations of Freedom and its Subsidiary taken as a
whole, or which are the result of expenses or transactions contemplated
or permitted by the Agreement; and Freedom shall have performed in all
material respects all of its obligations and agreements hereunder
theretofore to be performed by it; and Wesbanco and FBI shall have
received on the Effective Date an appropriate certificate (in affidavit
form) dated the Effective Date and executed on behalf of Freedom by one
or more appropriate executive officers of Freedom to the effect that
such officers have no knowledge of the non-fulfillment of the foregoing
condition;
(b) Opinion of Freedom Counsel. An opinion of McNeer,
Highland, McMunn & Varner, counsel for Freedom, shall have been
delivered to Wesbanco, dated the Closing Date, and in form and
substance satisfactory to Wesbanco and its counsel, to the effect that:
(i) Freedom is a corporation duly organized, validly
existing and in good standing under the laws of the State of
West Virginia and has the full corporate power and authority
to own all of its properties and assets and to carry on its
business as it is now being conducted, and neither the
ownership of its property nor the conduct of its business
requires it, or its Subsidiary, to be qualified to do business
in any other jurisdiction except where the failure to be so
qualified, considering all such cases in the aggregate, does
not involve a material risk to the business, properties,
financial position or results of operations of Freedom and its
Subsidiary, taken as a whole.
(ii) Freedom has the full corporate power to execute
and deliver the Agreement. All corporate action of Freedom
required to duly authorize the Agreement and the actions
contemplated thereby has been taken, and the Agreement is
valid and binding on Freedom in accordance with its terms,
subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency,
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reorganization, fraudulent conveyance, receivership,
moratorium, or other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect,
whether state or federal; subject to application of the public
policy of the State of West Virginia; and subject to any
equitable principles limiting the right to obtain specific
performance of certain obligations thereunder, whether such
enforcement is considered in a proceeding in equity or at law.
(iii) All shares of common stock of Freedom issued
and outstanding as of the Effective Date are duly authorized,
validly issued, fully paid and nonassessable.
(iv) The consummation of the Merger and the Bank
Merger contemplated by the Agreement will not violate any
provision of Freedom's Articles of Incorporation or Bylaws, or
violate any provision of, or result in the acceleration of any
material obligation under, any material mortgage, loan
agreement, order, judgment, law or decree known to such
counsel to which Freedom is a party or by which it is bound
and will not violate or conflict with any other material
restriction of any kind or character known to such counsel to
which Freedom is subject, which would have a materially
adverse effect on the assets, business or operations of
Freedom, taken as a whole.
(v) Freedom's Subsidiary is a West Virginia banking
corporation and is duly organized, validly existing and in
good standing under the laws of the State of West Virginia,
and it has the requisite corporate power and authority to own
and lease its properties and to conduct its business as it is
now being conducted. To the best of such counsel's knowledge
Freedom owns 100% of the issued and outstanding stock of such
corporation.
(vi) To the best of such counsel's knowledge, as of
the date hereof neither Freedom nor its Subsidiary was
involved in any litigation against them (with possible
exposure of $100,000.00 or more), pending or threatened.
(c) Michael H. Hudnall, Valerie Hurst and Gary D. Shaw shall
have each duly executed and delivered the employment agreements with
the Subsidiary, dated as of the Closing Date, in substantially the form
attached hereto as Exhibits A, B and C. Each of such individuals shall
have agreed to terminate their existing Employment Agreements with the
Subsidiary. Additionally, Terri Kittle and Nancy Righman shall have
executed an Amendment Agreement to their existing Employment Agreements
with Belington Bank in substantially the form attached hereto as
Exhibits D and E.
(d) Freedom shall have delivered to Wesbanco a schedule
identifying all persons who may be deemed to be "affiliates" of Freedom
under Rule 145 of the Securities Act of 1933, as amended, and shall use
its best efforts to cause each affiliate to deliver to Wesbanco prior
to the Effective Date a letter substantially in the form attached
hereto as Exhibit "F".
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(e) Freedom shall have furnished Wesbanco with a certified
copy of resolutions duly adopted by the Board of Directors and the
shareholders of Freedom approving the Agreement and authorizing the
Merger and the transactions contemplated hereby.
(f) Unless waived by Wesbanco, on the Closing Date, there
shall not be pending against Freedom or its Subsidiary or the officers
or directors of Freedom or its Subsidiary in their capacity as such,
any suit, action or proceeding which, in the reasonable judgment of
Wesbanco, if successful, would have material adverse effect on the
financial condition or operations of Freedom or its Subsidiary.
(g) Freedom shall have executed and delivered to Wesbanco a
Stock Option Agreement, substantially in the form attached hereto as
Exhibit G, dated the date of this Agreement, and incorporated herein by
reference.
12.3 CONDITIONS PRECEDENT OF FREEDOM. The consummation of this
Agreement by Freedom and the Merger is also conditioned upon the following:
(a) Unless waived by Freedom the representations and
warranties of Wesbanco and FBI contained in this Agreement shall be
correct on and as of the Effective Date with the same effect as though
made on and as of such date, except for representations and warranties
expressly made only as of a particular date and except for changes
which have been consented to by Freedom or which are not in the
aggregate material and adverse to the financial condition, businesses,
properties or operations of Wesbanco and FBI or which are the result of
expenses or transactions contemplated or permitted by this Agreement,
and Wesbanco and FBI shall have performed in all material respects all
of their obligations and agreements hereunder theretofore to be
performed by them; and Freedom shall have received on the Effective
Date an appropriate certificate (in affidavit form) dated the Effective
Date and executed on behalf of Wesbanco and FBI by one or more
appropriate executive officers of each of them to the effect that such
officers have no knowledge of the non-fulfillment of the foregoing
conditions;
(b) Opinion of Wesbanco Counsel. An opinion of Phillips,
Gardill, Kaiser & Altmeyer, counsel for Wesbanco, shall have been
delivered to Freedom, dated the
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Closing Date, and in form and substance satisfactory to Freedom and its
counsel, to the effect that:
(i) Wesbanco, FBI and Bank are corporations duly
organized, validly existing and in good standing under the
laws of the State of West Virginia and have the full corporate
power and authority to own all of their properties and assets
and to carry on their businesses as they are now being
conducted, and neither the ownership of their property nor the
conduct of their businesses require them, or any of their
subsidiaries, to be qualified to do business in any other
jurisdiction except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve
a material risk to the business, properties, financial
position or results of operations of Wesbanco, FBI and Bank,
taken as a whole.
(ii) Wesbanco, FBI and Bank have the full corporate
power to execute and deliver the Agreement. All corporate
action of Wesbanco, FBI and Bank required to duly authorize
the Agreement and the actions contemplated thereby have been
taken, and the Agreement is valid and binding on Wesbanco, FBI
and Bank in accordance with its terms, subject, as to the
enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect, and
subject to any equitable principles limiting the right to
obtain specific performance of certain obligations thereunder.
(iii) The consummation of the mergers contemplated by
the Agreement will not violate any provision of Wesbanco's,
FBI's or Bank's Articles of Incorporation or Bylaws, or
violate any provision of, or result in the acceleration of any
material obligation under, any material mortgage, loan
agreement, order, judgment, law or decree known to such
counsel to which Wesbanco, FBI or Bank are a party or by which
they are bound, and will not violate or conflict with any
other material restriction of any kind or character known to
such counsel to which Wesbanco, FBI or Bank are subject which
would have a material adverse effect on the assets, business
or operations of Wesbanco, FBI and Bank taken as a whole.
(iv) Each of Wesbanco's subsidiaries is duly
organized, validly existing and in good standing under the
laws of the state of its organization and has the requisite
corporate power and authority to own and lease its properties
and to conduct its business as it is now being conducted. To
the best of such counsel's knowledge, Wesbanco owns 100% of
the issued and outstanding stock of each such corporation.
(v) To the best of such counsel's knowledge, as of
the date hereof, neither Wesbanco nor any of its subsidiaries
were involved in any litigation against them (with possible
exposure of $100,000.00 or more), pending or threatened, that
has not been disclosed to Freedom.
(vi) The shares of Wesbanco Common Stock to be issued
to Freedom's shareholders pursuant to the Agreement, when
issued as described therein, will be duly authorized, validly
issued, fully paid and nonassessable.
(c) Alex Sheshunoff & Co. Investment Banking, LP, financial
advisors to Freedom, shall have furnished to Freedom an opinion, or an
updating of any opinion rendered after the date of the Agreement, dated
on or prior to the distribution date of the
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Proxy Statement described in Section 14.1 of this Agreement, and at the
election of Freedom, updated as of the Closing if the Closing is held
more than five (5) days after the Freedom meeting of shareholders, to
the effect that the Merger and the transactions contemplated by this
Agreement are fair, from a financial point of view, to Freedom and its
shareholders.
(d) Wesbanco, FBI and Bank shall have furnished Freedom with
certified copies of resolutions duly adopted by the Boards of Directors
of Wesbanco, FBI and Bank and the shareholders of FBI and Bank
approving the Agreement and authorizing the Merger, the Bank Merger and
transactions contemplated hereby.
(e) Unless waived by Freedom, on the Closing Date, there shall
not be pending against Wesbanco or any of its subsidiaries or the
officers or directors of Wesbanco or any of its subsidiaries in their
capacity as such, any suit, action or proceeding which, in the
reasonable judgment of Freedom, if successful, would have a material
adverse effect on the financial condition or operations of Wesbanco or
any of its subsidiaries.
12.4 CLOSING DATE. The Closing shall be effected as soon as practicable
after all of the conditions contained herein shall have been satisfied on the
Closing Date as defined in Section 2.3 hereof, which Closing Date shall be the
latest of:
(a) The second business day after the meeting of the
shareholders of Freedom at which the Agreement is approved;
(b) The fifteenth (15th) day after the approval of the
acquisition of Freedom by the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board");
(c) The fifteenth (15th) day after the approval of the Bank
Merger by the Federal Reserve Board;
(d) The day after any stay of the Federal Reserve Board's
approval of the acquisition of Freedom or the approval of the Bank
Merger shall be vacated or shall have expired or the day after any
injunction against the closing of the Merger or the Bank Merger shall
be lifted, discharged or dismissed;
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(e) The day after the approval of the acquisition of Freedom
by the West Virginia Department of Banking is received by Wesbanco;
(f) The second business day after the date on which the last
condition set forth in Section 12 is satisfied or waived;
(g) Such other date as shall be mutually agreed to by Wesbanco
and Freedom.
The Closing shall be held in Belington, West Virginia, at such time and place as
the parties may agree upon. The date and time of closing are herein called the
"Closing Date". Promptly after the Closing, the Articles of Merger with respect
to the Merger, and the Bank Merger, shall be filed with the Secretary of State
of West Virginia.
12.5 EFFECTIVE DATE. The Merger, and the Bank Merger, shall become
effective (the "Effective Date") on the date on which the Certificates of Merger
approving the mergers are issued by the Secretary of State of West Virginia. The
surviving corporations shall record said Certificates of Merger in the office of
the Clerk of the County Commission of Barbour and Ohio Counties.
SECTION 13
TERMINATION OF AGREEMENT
13.1 GROUNDS FOR TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date
either before or after the meeting of the shareholders of Freedom:
(a) By mutual consent of Freedom and Wesbanco;
(b) By either Freedom or Wesbanco if any of the conditions
hereto to such party's obligations to close have not been met as of the
Closing Date and the same has not been waived by the party adversely
affected thereby;
(c) By either Freedom or Wesbanco if the Merger shall violate
any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(d) By Freedom or Wesbanco, if the Closing Date has not
occurred by June 30, 2001;
(e) By Freedom, unless waived by Freedom, if the Market Value
of Wesbanco stock shall fall below Eighteen Dollars ($18.00) per share
as of the Closing Date. Market Value, for purposes of this paragraph,
shall mean the average bid price of
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Wesbanco Common Stock (as quoted on Nasdaq Stock Market) for the 30
calendar days preceding five business days before the Closing.
(f) By either party in the event that the majority
shareholders of Freedom vote against consummation of the Merger.
(g) By Wesbanco or Freedom within 30 days of the date hereof
pursuant to the provisions of Section 10 of this Agreement.
13.2 EFFECT OF TERMINATING; RIGHT TO PROCEED. In the event this
Agreement shall be terminated pursuant to Section 13.1, all further obligations
of Wesbanco and Freedom under this Agreement, except Sections 10, 13.1, 13.2
and 20 hereof, shall terminate without further liability of Wesbanco and FBI
to Freedom or of Freedom to Wesbanco and FBI.
13.3 RETURN OF DOCUMENTS IN EVENT OF TERMINATION. In the event of
termination of this Agreement for any reason, Wesbanco and Freedom shall each
promptly deliver to the other all documents, work papers and other material
obtained from each other relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, including information
obtained pursuant to Section 10 hereof, and will take all practicable steps to
have any information so obtained kept confidential, and thereafter, except for
any breach of the continuing sections of the Agreement, each party shall be
mutually released and discharged from liability to the other party or to any
third parties hereunder, and no party shall be liable to any other party for any
costs or expenses paid or incurred in connection herewith.
SECTION 14
MEETING OF SHAREHOLDERS OF FREEDOM
14.1 Subject to receipt by Freedom of the fairness opinion described in
Section 12.3(c) hereof, Freedom shall take all steps necessary to call and hold
a special meeting of its shareholders, in accordance with applicable law and the
Articles of Incorporation and Bylaws of Freedom as soon as practicable
(considering the regulatory approvals required to be obtained) for the purpose
of submitting this Agreement to its shareholders for their consideration and
approval and will send to its shareholders for purposes of such meeting a Proxy
Statement which will not contain any untrue statement of a material fact with
respect to Freedom or omit to state a material fact with respect to Freedom
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, and which otherwise materially complies as to form with all
applicable laws, rules and regulations.
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14.2 It is understood that as an integral part of the transaction
contemplated by this Agreement, Wesbanco shall file a Registration Statement
with respect to the offering of its common shares to be issued in the Merger.
The term "Registration Statement" as used in this Agreement includes all
preliminary filings, post-effective amendments and any Proxy Statement of
Freedom. Accordingly, Wesbanco and Freedom agree to assist and cooperate fully
with each other in the preparation of the Registration Statement. Both Freedom
and Wesbanco further agree to deliver to each other, both as of the Effective
Date of the Registration Statement and as of the Closing, a letter, in form and
substance satisfactory to the other party and its counsel, stating that, to the
best of their knowledge and belief, all of the facts with respect to either
Wesbanco or Freedom, as the case may be, set forth in the Registration
Statement, are true and correct in all material respects, and that the
Registration Statement does not omit any material fact necessary to make the
facts stated therein with respect to such party not misleading in light of the
circumstances under which they were made.
SECTION 15
BROKERS
Freedom represents and warrants to Wesbanco and Wesbanco represents and
warrants to Freedom that no broker or finder has been employed, or is entitled
to a fee, commission or other compensation, with respect to this Agreement or
the transactions contemplated hereby, other than fees due from Freedom to Alex
Sheshunoff & Co. Investment Banking, LP, its financial advisor.
SECTION 16
GOVERNING LAW; SUCCESSORS AND
ASSIGNS; COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be governed by and construed under and in
accordance with the laws of the State of West Virginia; (b) shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that this Agreement may not be
assigned by any party without the written consent of the other parties hereto;
(c) may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective and binding as
to Wesbanco and Freedom when one or more counterparts shall have been signed and
delivered by Wesbanco and Freedom and shall become effective and binding as to
FBI when FBI receives its Certificate of Incorporation and its officers execute
the Agreement; and (d) embodies the entire Agreement and understanding of the
parties with respect to the
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subject matter hereof; and (e) supersedes all prior agreements and
understandings, written or oral, between Freedom and Wesbanco relating to the
subject matter hereof.
SECTION 17
EFFECT OF CAPTIONS
The captions of this Agreement are included for convenience only and
shall not in any way affect the interpretation or construction of any of the
provisions hereof.
SECTION 18
NOTICES
Except as specifically provided in Section 8.21(d) hereof, any notices
or other communication required or permitted hereunder shall be sufficiently
given if delivered personally or sent by first class, registered or certified
mail postage prepaid, with return receipt requested addressed as follows:
To Freedom:
Freedom Bancshares, Inc.
315 Crim Avenue
P.O. Box 10
Belington, WV 26250
ATTENTION: Michael H. Hudnall, President
With a copy to:
John C. Jarvis, Esq.
McNeer, Highland, McMunn & Varner
P.O. Drawer 2040
Clarksburg, WV 26302
To Wesbanco:
Wesbanco, Inc.
One Bank Plaza
Wheeling, WV 26003
ATTENTION: Edward M. George, President
With a copy to:
James C. Gardill, Esq.
Phillips, Gardill, Kaiser & Altmeyer
61 Fourteenth Street
Wheeling, WV 26003
or such other addresses as shall be furnished in writing by either party to the
other party. Any such notice or communication shall be deemed to have been given
as of the date so mailed.
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SECTION 19
AMENDMENTS
Any of the terms or conditions of the Agreement may be waived at any
time by the party which is, or the shareholders of which are, entitled to the
benefit thereof, by action taken by the Board of Directors of such party, or any
of such terms or conditions may be amended or modified in whole or in part at
any time as follows. This Agreement may be amended in writing (signed by all
parties hereto) before or after the meeting of Freedom shareholders at any time
prior to the Closing Date with respect to any of the terms contained herein,
provided, however, that if amended after such meeting of shareholders, the
conversion ratio per share at which each share of common stock of Freedom shall
be converted in the Merger and any other material terms of the Merger shall not
be amended after the meeting of Freedom shareholders unless the amended terms
are resubmitted to the shareholders for approval. Neither the Agreement nor any
provisions hereof, may be changed, waived, discharged or terminated orally, or
by the passage of time, except by a statement in writing signed by the party
against which the enforcement of such change, waiver, discharge or termination
is sought.
SECTION 20
EXPENSES
Each party to this Agreement shall pay its own legal and accounting
fees and other costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby.
SECTION 21
MISCELLANEOUS
21.1 PUBLICITY. The parties will not publicly release any information
about the transactions contemplated hereby except as they may mutually agree or
as may be required by law.
21.2 INCORPORATION BY REFERENCE. Any and all schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference as
though fully set forth at the point referred to in the Agreement.
21.3 MATERIAL ADVERSE CHANGE. In determining whether there has been a
material adverse change for purposes of this Agreement, costs and expenses of
the transactions contemplated hereby shall not be taken into account provided,
however, that only the first $50,000 of such expenses shall be so excluded.
21.4 BINDING DATE. This Agreement is effective and binding as to
Wesbanco and Freedom upon the date first above written and effective and binding
as to FBI upon execution hereof by FBI.
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IN WITNESS WHEREOF, WESBANCO, INC., FREEDOM BANCSHARES, INC., FBI
CORPORATION and WESBANCO BANK, INC. have each caused this Agreement to be
executed on their behalf by their officers thereunto duly authorized all as of
the day and year first above written.
WESBANCO, INC., A WEST VIRGINIA
CORPORATION
BY /S/ E.M. GEORGE
-------------------------------
ITS PRESIDENT & CEO
----------------------
(SEAL)
ATTEST:
/S/ STEPHEN E. HANNIG
- ----------------------------------
ASSISTANT SECRETARY
FREEDOM BANCSHARES, INC., A WEST
VIRGINIA CORPORATION,
BY /S/ MICHAEL HUDNALL
-------------------------------
ITS CHIEF EXECUTIVE OFFICER
-----------------------
(SEAL)
ATTEST:
/S/ NANCY A. RIGHMAN
- ----------------------------------
SECRETARY
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FBI CORPORATION, A WEST
VIRGINIA CORPORATION AS OF
THE 29TH DAY OF DECEMBER, 2000.
BY /S/ E.M. GEORGE
-------------------------------
ITS PRESIDENT
---------------------
(SEAL)
ATTEST:
/S/ JAMES C. GARDILL
- ----------------------------------
SECRETARY
WESBANCO BANK, INC., A WEST
VIRGINIA CORPORATION
BY /S/ E.M. GEORGE
-------------------------------
ITS PRESIDENT & CEO
-----------------------
(SEAL)
ATTEST:
/S/ DEBRA C. GARVIN
- ----------------------------------
ASSISTANT SECRETARY
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ANNEX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Option Agreement") dated as of the 29th
day of December, 2000, by and between WESBANCO, INC., a West Virginia
corporation ("Wesbanco") and FREEDOM BANCSHARES, INC., a West Virginia
corporation ("Freedom").
WITNESSETH:
WHEREAS, the Boards of Directors of Wesbanco and Freedom have approved
an Agreement and Plan of Merger ("Merger Agreement"), which contemplates the
merger of Freedom with FBI Corporation, a West Virginia corporation and
wholly-owned subsidiary of Wesbanco ("FBI"), with Freedom continuing as the
surviving corporation;
WHEREAS, as a condition to Wesbanco's entry into the Merger Agreement
and to induce such entry, Freedom has agreed to grant to Wesbanco the option set
forth herein to purchase authorized but unissued shares of common stock, par
value $1.00 per share of Freedom ("Freedom Common Stock");
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS. Capitalized terms defined in the Merger Agreement and
used herein shall have the same meanings as in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Freedom hereby grants to Wesbanco an option ("Option") to purchase up to
37,810 shares of Freedom Common Stock, at a price of $40.47 per share (the
"Option Price") payable in cash as provided in Section 4 hereof; provided,
however, that in the event Freedom issues or agrees to issue any shares of
Freedom Common Stock (other than as permitted under the Merger Agreement) at a
price less than $40.47 per share (as adjusted pursuant to Section 6 hereof), the
exercise price shall be equal to such lesser price.
3. EXERCISE OF OPTION.
a. Provided that Wesbanco is not in material breach of the
agreements and covenants contained in the Merger Agreement, Wesbanco
may exercise the Option, in whole or in part, at any time or from time
to time if a Purchase Event (as defined below) shall have occurred and
be continuing; provided that to the extent the Option shall not have
been exercised, it shall terminate and be of no further force and
effect (i) on the Effective Date of the Merger or (ii) upon termination
of the Merger Agreement in accordance with the provisions thereof
(other than a termination resulting from a willful breach by Freedom of
Section 9.23(d) of the Merger Agreement or, following the occurrence of
a Purchase Event, failure of Freedom's shareholders to approve the
Merger Agreement by the vote required under applicable law), or (iii)
six months after termination of the Merger Agreement due to a willful
breach by Freedom of Section 9.23(d) of the Merger Agreement or,
following the occurrence of a Purchase Event, failure of Freedom's
shareholders to approve the Merger Agreement by the vote required under
applicable law; and provided further that any such exercise shall be
subject to compliance with applicable provisions of law.
b. As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) any person (other than Freedom, the Freedom
Subsidiary, Wesbanco or any affiliate of Wesbanco) shall have
commenced a bona fide tender or exchange offer to purchase
shares of Freedom Common Stock such
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that upon consummation of such offer such person would own or
control 15% or more of the outstanding shares of Freedom
Common Stock;
(ii) any person (other than Freedom or the Freedom
Subsidiary), other than in connection with a transaction to
which Wesbanco has given its prior written consent, shall have
filed an application or notice with any federal or state
regulatory agency for clearance or approval, to (x) merge or
consolidate, or enter into any similar transaction, with
Freedom or the Freedom Subsidiary, (y) purchase, lease or
otherwise acquire all or substantially all of the assets of
Freedom or the Freedom Subsidiary or (z) purchase or otherwise
acquire (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing
51% or more of the voting power of Freedom or the Freedom
Subsidiary;
(iii) any person (other than Freedom, the Freedom
Subsidiary, the Freedom Subsidiary in a fiduciary capacity,
Wesbanco, affiliates of Wesbanco or subsidiaries of Wesbanco
in a fiduciary capacity) shall have acquired after the date
hereof beneficial ownership or the right to acquire beneficial
ownership of 15% or more of the outstanding shares of Freedom
Common Stock (the term "beneficial ownership" for purposes of
this Option Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the regulations
promulgated thereunder);
(iv) any person (other than Freedom or the Freedom
Subsidiary) shall have made a bona fide proposal to Freedom by
public announcement or written communication that is or
becomes the subject of public disclosure to (x) acquire
Freedom or the Freedom Subsidiary by merger, consolidation,
purchase of all or substantially all of its assets or any
other similar transaction, or (y) make an offer described in
clause (i) above; or
(v) Freedom shall have willfully breached Section
9.23(d) of the Merger Agreement, which breach would entitle
Wesbanco to terminate such Merger Agreement and such breach
shall not have been cured prior to the Notice Date (as defined
below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such transactions are abandoned. As used in
this Option Agreement, "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
c. In the event Wesbanco wishes to exercise the Option, it
shall send to Freedom a written notice (the date of which being herein
referred to as "Notice Date") specifying (i) the total number of shares
it will purchase pursuant to such exercise, and (ii) a place and date
not earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase ("Closing Date");
provided that if prior notification to or approval of any federal or
state regulatory agency is required in connection with such purchase,
Wesbanco shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of
time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification period has
expired or been terminated or such approval has been obtained and any
requisite waiting period shall have passed.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
a. At the closing referred to in Section 3(c) hereof, Wesbanco
shall pay to Freedom the aggregate purchase price for the shares of
Freedom Common Stock
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purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank account designated by
Freedom.
b. At such closing, simultaneously with the delivery of cash
as provided in subsection (a), Freedom shall deliver to Wesbanco a
certificate or certificates representing the number of shares of
Freedom Common Stock purchased by Wesbanco, and Wesbanco shall deliver
to Freedom a letter agreeing that Wesbanco will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
c. Certificates for Freedom Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend which shall
read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an agreement
between the registered holder hereof and Freedom Bancshares,
Inc. and to resale restrictions arising under the Securities
Act of 1933, as amended, a copy of which agreement is on file
at the principal office of Freedom Bancshares, Inc. A copy of
such agreement will be provided to the holder hereof without
charge upon receipt by Freedom Bancshares, Inc. of a written
request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Wesbanco shall have
delivered to Freedom a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to Freedom, to the effect that such legend is not required for
purposes of the Securities Act.
5. REPRESENTATIONS. Freedom hereby represents, warrants and covenants
to Wesbanco as follows:
a. Freedom shall at all times maintain sufficient authorized
but unissued shares of Freedom Common Stock so that the Option may be
exercised without authorization of additional shares of Freedom Common
Stock.
b. The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly
authorized, validly issued, fully paid and nonassessable.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in Freedom Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. In the event that any additional
shares of Freedom Common Stock are issued or otherwise become outstanding after
the date of this Option Agreement (other than pursuant to this Option
Agreement), the number of shares of Freedom Common Stock subject to the Option
shall be adjusted so that, after such issuance, it equals 19.9% of the number of
shares of Freedom Common Stock then issued and outstanding without giving effect
to any shares subject or issued pursuant to the Option. Nothing contained in
this Section 6 shall be deemed to authorize Freedom to breach any provision of
the Merger Agreement.
7. REGISTRATION RIGHTS. Freedom shall, if requested by Wesbanco, as
expeditiously as possible file a registration statement on a form of general use
under the Securities Act if necessary in order to permit the sale or other
disposition of the shares of Freedom Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by Wesbanco. Wesbanco shall provide all information
reasonably requested by Freedom for inclusion in any registration statement to
be filed hereunder. Freedom will use its best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 270 days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sales or other
dispositions. In no event shall Freedom be required to effect more than two
registrations hereunder. All expenses of registrations hereunder shall be borne
equally by Freedom and Wesbanco. The filing of any registration statement
hereunder may be delayed for such period of
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time as may reasonably be required to facilitate any public distribution by
Freedom of Freedom Common Stock. If requested by Wesbanco, in connection with
any such registration, Freedom will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating itself
in respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements. Upon receiving any request
from Wesbanco or assignee thereof under this Section 7, Freedom agrees to send a
copy thereof to Wesbanco and to any assignee thereof known to Freedom, in each
case by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies.
8. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement shall remain in full force and
effect, and shall in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Option will not
permit the holder to acquire the full number of shares of Freedom Common Stock
provided in Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is
the express intention of Freedom to allow the holder to acquire such lesser
number of shares as may be permissible, without any amendment or modification
hereof.
9. PUT-BACK RIGHTS.
a. Upon the consummation of any Purchase Event described in
Section 3(b)(ii) or (v) hereof such that (i) a merger, consolidation,
purchase, lease or acquisition of all or substantially all of the
assets of Freedom, purchase or other acquisition of securities
representing 51% or more of the voting power of Freedom or the Freedom
Subsidiary has been consummated, or (ii) a willful breach under Section
9.23(d) of the Merger Agreement has occurred so that Wesbanco would be
entitled to terminate the Merger Agreement, and prior to the expiration
of the Option in accordance with the terms hereof, at the request of
Wesbanco, Freedom shall repurchase the Option from Wesbanco at a price
(the "Repurchase Price") equal to the difference between the
market/offer price (as defined below) for shares of Freedom Common
Stock and the Option Price, multiplied by the number of shares for
which the Option being surrendered hereunder may then be exercised but
only if the market/offer price is greater than the Option Price (the
market/offer price is defined as the higher of the price per share at
which a tender offer or exchange offer for 51% or more of the voting
securities of Freedom has been made and consummated, the price per
share actually paid by any third party pursuant to an agreement that
has been consummated whereby Freedom has been merged, consolidated with
or otherwise acquired by a third party, and the highest closing price
for Freedom Common Stock within the four-month period immediately
preceding the date Wesbanco gives written notice of the required
repurchase of the Option pursuant to this Section 9). In the event that
an exchange offer is made or an agreement is entered into for a merger
or consolidation involving consideration other than cash, the value of
the securities or other property issuable or deliverable in exchange
for Freedom Common Stock shall be determined by a nationally recognized
investment banking firm mutually acceptable to the parties hereto.
b. Wesbanco may exercise its right to require Freedom to
repurchase the Option pursuant to this Section 9 by giving Freedom
written notice of its exercise of its repurchase right in accordance
with the provisions of this Section 9. Subject to the last proviso of
paragraph 9(c) below, as promptly as practicable, and in any event
within five business days after the receipt of such notice or notices
relating thereto, Freedom shall deliver or cause to be delivered to
Wesbanco the Repurchase Price for the Option or the portion thereof
which Freedom is not then prohibited under applicable law and
regulation from so delivering.
c. To the extent that Freedom is prohibited under applicable
law or regulation, or as a result of administrative or judicial action,
from repurchasing the Option in full, Freedom shall immediately so
notify Wesbanco and thereafter deliver or cause to be delivered, from
time to time, to Wesbanco, as appropriate, the portion of the
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Repurchase Price which it is no longer prohibited from delivering,
within five business days after the date on which Freedom is no longer
so prohibited, provided, however, that to the extent that Freedom is at
the time and after the expiration of 12 months, so prohibited from
delivering to Wesbanco, the Repurchase Price, in full (and Freedom
hereby undertakes to use its best efforts to receive all required
regulatory and legal approvals as promptly as practicable), Freedom
shall deliver to Wesbanco a new Option evidencing the right of Wesbanco
to purchase that number of shares of Freedom Common Stock obtained by
multiplying the number of shares of Freedom Common Stock for which the
Option may at such time be exercised by a fraction, the numerator of
which is the Repurchase Price less the portion thereof (if any)
theretofore delivered to the Holder and the denominator of which is the
Repurchase Price, and Freedom shall have no further obligation to
repurchase such new Option; and provided, further, that upon receipt of
such notice and until five days thereafter Wesbanco may revoke its
notice of repurchase of the Option by written notice to Freedom at its
principal office stating that Wesbanco elects to revoke its election to
exercise its rights to require Freedom to repurchase the Option,
whereupon Freedom will promptly deliver to Wesbanco the Option and
Freedom shall have no further obligation to repurchase such Option.
10. FIRST REFUSAL. If at any time during the eighteen months
immediately following the first purchase of shares of Freedom Common Stock
pursuant to the Option, Wesbanco shall desire to sell, assign, transfer or
otherwise dispose of all or any of the shares of Freedom Common Stock acquired
by it pursuant to the Option other than in accordance with the put-back rights
in Section 9 hereof, it shall give Freedom written notice of the proposed
transaction ("Offeror's Notice"), identifying the proposed transferee and
setting forth the terms of the proposed transaction. An Offeror's Notice shall
be deemed an offer by Wesbanco to Freedom, which may be accepted within ten
business days of the receipt of such Offeror's Notice, on the same terms and
conditions and at the same price at which Wesbanco is proposing to transfer such
shares to a third party. Settlement for any shares purchased by Freedom shall be
within 15 business days of the date of the acceptance of the offer and the
purchase price shall be paid to Wesbanco in immediately available funds;
provided that if prior notification to or approval of any federal or state
regulatory authority is required in connection with such purchase, Freedom shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification period has expired or been terminated or such approval has been
obtained and any requisite waiting period shall have passed. In the event of the
failure or refusal of Freedom to purchase all of the shares covered by the
Offeror's Notice or any applicable regulatory authority shall disapprove
Freedom's proposed purchase of such shares, Wesbanco may sell all, but not less
than all, of such shares to such third party at no less than the price specified
and on terms no more favorable than those set forth in the Offeror's Notice. The
requirements of this Section 10 shall not apply to any disposition (i) as a
result of which the proposed transferee would own not more than five percent of
the then outstanding shares of Freedom Common Stock, (ii) of Freedom Common
Stock by a person to which Wesbanco has assigned its rights under the Option in
accordance with Section 11(c) hereof or (iii) pursuant to a registration under
Section 7 hereof.
11. MISCELLANEOUS.
a. Expenses. Except as otherwise provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
b. Entire Agreement. Except as otherwise expressly provided
herein, this Option Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect
thereto, written or oral. The terms and conditions of this Option
Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. Nothing in this
Option Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors
and assigns, any rights, remedies, obligations or liabilities under or
by reason of this Option Agreement, except as expressly provided
herein.
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c. Assignment. Neither of the parties hereto may assign any of
its rights or obligations under this Option Agreement or the Option
created hereunder to any other person, without the express written
consent of the other party.
d. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered in the manner and to the addresses provided for in or
pursuant to Section 18 of the Merger Agreement.
e. Counterparts. This Option Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be
an original instrument, but all such counterparts together shall
constitute but one agreement.
f. Specific Performance. The parties agree that damages would
be an inadequate remedy for a breach of the provisions of this Option
Agreement by either party hereto and that this Option Agreement may be
enforced by either party hereto through injunctive or other equitable
relief.
g. Governing Law. This Option Agreement shall be governed by
and construed in accordance with the laws of the State of West Virginia
applicable to agreements made and entirely to be performed within such
state and such federal laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first written above.
WESBANCO, INC.
BY /S/ E.M. GEORGE
------------------------------------
ITS PRESIDENT & CEO
---------------------------
FREEDOM BANCSHARES, INC.
BY /S/ MICHAEL HUDNALL
-----------------------------------
ITS CHIEF EXECUTIVE OFFICER
-----------------------------
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ANNEX C
FAIRNESS OPINION
APRIL 4, 2001
Board of Directors
Freedom Bancshares, Inc.
315 Crim Avenue
Belington, West Virginia 26250
Members of the Board:
You requested that we provide an opinion to the shareholders of Freedom
Bancshares, Inc., Belington, West Virginia ("Freedom") as to the fairness, from
a financial point of view, of the exchange ratio in the proposed merger of
Freedom with and into WesBanco, Inc., Wheeling, West Virginia (the
"Corporation"). According to the Agreement and Plan of Merger dated December 29,
2000 (the "Agreement"), the Corporation agreed to exchange 2.58 shares of its
common stock (the "Exchange Ratio") for each outstanding share of Freedom common
stock. Pursuant to the Agreement, Freedom will be merged with and into FBI
Corporation, a subsidiary of the Corporation (the "Merger").
Alex Sheshunoff & Co. Investment Banking, LP ("Sheshunoff") is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
private placements, estate, corporate, and other purposes.
In connection with our opinion, we, among other things:
1. Reviewed the Agreement;
2. Reviewed Freedom's consolidated results based upon a review of
its annual financial statements for the three-year period
ending December 31, 2000;
3. Reviewed Freedom's Call Report information for the five-year
period ending December 31, 2000;
4. Conducted conversations with Freedom's and the Corporation's
executive management regarding each companies' recent and
projected financial performance;
5. Compared Freedom's recent operating results to those of
certain other banks in West Virginia which have been acquired
since January 1, 1995;
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Freedom Bancshares, Inc.
April 4, 2001
Page 2
6. Compared Freedom's recent operating results to those of
certain other banks located in the United States which have
been acquired since January 1, 2000 with a high level of
nonperforming assets and a low level of reserves;
7. Compared Freedom's recent operating results to those of
publicly traded banks in the United States with a high level
of nonperforming assets and a low level of reserves;
8. Compared the pricing multiples for Freedom in the Merger to
those of certain other banks in West Virginia which have been
acquired since January 1, 1995;
9. Compared the pricing multiples for Freedom in the Merger to
those of certain other banks located in the United States
which have been acquired since January 1, 2000 with a high
level of nonperforming assets and a low level of reserves;
10. Compared the pricing multiples for Freedom in the Merger to
those of certain other publicly traded banks in the United
States with a high level of nonperforming assets and a low
level of reserves;
11. Analyzed the net present value of the cash flows Freedom could
produce through the year 2005 as an independent company and
estimated a residual value, based on assumptions provided by
Freedom's management;
12. Analyzed the contribution Freedom's equity and earnings would
make to the Corporation;
13. Reviewed the Corporation's consolidated financial statements
as presented in its regulatory filings for the three-year
period ending December 31, 2000;
14. Analyzed the historical dividends paid by the Corporation;
15. Reviewed the historical trading volume and price of the
Corporation's common shares;
16. Compared the pricing multiples for the Corporation to those of
certain other publicly traded banks in Kentucky, Maryland,
Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia;
17. Performed such other analyses, as we deemed appropriate.
We assumed and relied upon, without independent verification, the accuracy and
completeness of the information provided to us by Freedom and the Corporation
for the purposes of this opinion. In addition, where appropriate, we relied upon
publicly available information that we believe to be reliable, accurate, and
complete; however, we cannot guarantee the reliability, accuracy, or
completeness of any such publicly available information.
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Freedom Bancshares, Inc.
April 4, 2001
Page 3
We did not independently value any of the assets or liabilities of Freedom or
the Corporation, nor were we furnished with any such appraisals. We are not
experts in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for loan and lease losses and assumed that such
allowances for each of the companies are, in the aggregate, adequate to cover
such losses.
We assume that all required regulatory approvals will be received in a timely
fashion and without any conditions or requirements that could adversely affect
the Merger or the Corporation's operations following the Merger.
Our opinion is necessarily based on economic, market, and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness of the Exchange Ratio, from a financial
point of view, to the holders of Freedom common stock. This letter and the
opinion expressed herein are not a recommendation to any stockholder as to any
approval of the Merger or the Agreement. This letter is for the information of
Freedom's Board of Directors and may not be used for any other purpose without
our prior written consent, except that this opinion and supporting documentation
may in their entirety be included in any proxy statement or similar
communication to Freedom's shareholders.
Based on the foregoing and such other matters we have deemed relevant, it is our
opinion, as of the date hereof, that the Exchange Ratio is fair, from a
financial point of view to Freedom shareholders.
Very truly yours,
/s/ Alex Sheshunoff & Co. Investment Banking, LP
------------------------------------------------
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING, LP
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ANNEX D
WEST VIRGINIA DISSENTERS' RIGHTS STATUTE
W. VA. CODE ANNOT. SECTION 31-1-123
(a) Any shareholder electing to exercise his right to dissent, pursuant to
section one hundred twenty-two (Section 31-1-122) of this article, shall file
with the corporation, prior to or at the meeting of shareholders at which such
proposed corporate action is submitted to a vote, a written objection to such
proposed corporate action. If such proposed corporate action be approved by the
required vote and such shareholder shall not have voted in favor thereof, such
shareholder may, within ten days after the date on which the vote was taken or
if a corporation is to be merged without a vote of its shareholders into another
corporation, any of its shareholders may, within fifteen days after the plan of
such merger shall have been mailed to such shareholders, make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, domestic or foreign, for payment of the fair value of such
shareholder's shares, and, if such proposed corporate action is effected, such
corporation shall pay to such shareholder, upon surrender of the certificate or
certificates representing such shares, the fair value thereof as of the day
prior to the date on which the vote was taken approving the proposed corporate
action, excluding any appreciation or depreciation in anticipation of such
corporate action. Any shareholder failing to make demand within the ten-day
period shall be bound by the terms of the proposed corporate action. Any
shareholder making such demand shall thereafter be entitled only to payment as
in this section provided and shall not be entitled to vote or to exercise any
other rights of a shareholder.
(b) No such demand may be withdrawn unless the corporation shall consent
thereto. If, however, such demand shall be withdrawn upon consent, or if the
proposed corporate action shall be abandoned or rescinded or the shareholders
shall revoke the authority to effect such action, or if, in the case of a
merger, on the date of the filing of the articles of merger the surviving
corporation, is the owner of all the outstanding shares of the other
corporations, domestic and foreign, that are parties to the merger, or if no
demand or petition for the determination of fair value by a court of general
civil jurisdiction have been made or filed within the time provided in
subsection (e) of this section, or if a court of general civil jurisdiction
shall determine that such shareholder is not entitled to the relief provided by
this section, then the right of such shareholder to be paid the fair value of
his shares shall cease and his status as a shareholder shall be restored,
without prejudice to any corporate proceedings which may have been taken during
the interim.
(c) Within ten days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or new
corporation, domestic or foreign, shall give written notice thereof to each
dissenting shareholder who has made demand as herein provided, and shall make a
written offer to each shareholder to pay for such shares at a specified price
deemed by such corporation to be fair value thereof. Such notice and offer shall
be accompanied by a balance sheet of the corporation the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
twelve months prior to the making of such offer, and a profit and loss statement
of such corporation for the twelve months' period ended on the date of such
balance sheet.
(d) If within thirty days after the date on which such corporate action is
effected the fair value of such shares is agreed upon between any such
dissenting shareholder and the corporation, payment therefor shall be made
within ninety days after the date on which such corporate action was effected,
upon surrender of the certificate or certificates representing such shares. Upon
payment of the agreed value the dissenting shareholder shall cease to have any
interest in such shares.
(e) If within such period of thirty days, a dissenting shareholder and the
corporation do not so agree, then the corporation shall within thirty days after
receipt of written demand from any dissenting shareholder, which written demand
must be given within sixty days after the date on which such corporate action
was effected, file a complaint in a court of general civil jurisdiction
requesting that the fair value of such shares be found and determined, or the
corporation may file such complaint at any time within such sixty-day period at
its own election. Such complaint shall be filed in any court of general civil
jurisdiction in the county in which the principal office of the corporation is
situated, or, if there be no such office in this State, in the county in which
any dissenting shareholder resides or is found or in which the property of such
corporation, or any part of it, may be. If the corporation shall fail to
institute such proceedings, any dissenting shareholder may do so in the name of
the
D-1
111
corporation. All dissenting shareholders wherever residing, may be made
parties to the proceedings as an action against their shares quasi in rem. A
copy of the complaint shall be served on each dissenting shareholder who is a
resident of this State in the same manner as in other civil actions. Dissenting
shareholders who are nonresidents of this State shall be served a copy of the
complaint by registered or certified mail, return receipt requested. In
addition, service upon such nonresident shareholders shall be made by
publication, as provided in Rule 4(e)(2) of the
West Virginia Rules of Civil Procedure. All shareholders who are parties to the
proceeding shall be entitled to judgment against the corporation for the amount
of the fair value of their shares. The court may, if it so elects, appoint one
or more persons as appraisers to receive evidence and recommend a decision on
the question of fair value. The appraisers shall have such power and authority
as shall be specified in the order of their appointment or any subsequent
appointment. The judgment shall be payable only upon and concurrently with the
surrender to the corporation of the certificate or certificates representing
such shares. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
The judgment shall include an allowance for interest at such rate as the
court may find to be fair and equitable in all the circumstances, from the date
on which the vote was taken on the proposed corporate action to the date of
payment.
The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of such
costs and expenses may be apportioned and assessed as the court may deem
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation shall have made an offer to pay for the
shares if the Court shall find that the action of such shareholders in failing
to accept such offer was arbitrary or vexatious or not in good faith. Such
expenses shall include reasonable compensation for and reasonable expenses of
the appraisers, but shall exclude the fees and expenses of counsel for and
experts employed by any part; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the shareholder in
the proceeding. Any party to the proceeding may appeal any judgment or ruling of
the court as in other civil cases.
(f) Within twenty days after demanding payment for his shares, each
shareholder demanding payment shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such demand
has been made. His failure to do so shall, at the option of the corporation,
terminate his rights under this section unless a court of general civil
jurisdiction, for good and sufficient cause shown, shall otherwise direct. If
shares represented by a certificate on which notation has been so made shall be
transferred, each new certificate issued therefor shall bear similar notation,
together with the name of the original dissenting holder of such shares, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which the original dissenting shareholder had after
making demand for payment of the fair value thereof.
(g) Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this section
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
D-2
112
INDEX TO FINANCIAL STATEMENTS FOR FREEDOM
PAGE
----
Report of Conley Johnson A.C. F-1
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-2
Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998 F-3
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 2000, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2000,
1999 and 1998 F-5
Notes to Consolidated Financial Statements F-6
Management's Discussion and Analysis of the Consolidated Financial Statements
of Freedom Bancshares, Inc. and Subsidiary F-24
113
CONLEY JOHNSON, A.C.
CERTIFIED PUBLIC ACCOUNTANTS
2622 FAIRMONT AVENUE
P.O. BOX 1150
FAIRMONT, WV 262555-1150
-------------------
(304) 366-2270
REPORT OF INDEPENDENT AUDITOR
TO THE BOARD OF DIRECTORS
FREEDOM BANCSHARES, INC.
BELINGTON, WEST VIRGINIA
We have audited the accompanying consolidated balance sheets of Freedom
Bancshares, Inc. and subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years ended December 31, 2000, 1999, and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Freedom Bancshares,
Inc. and subsidiary as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years ended December 31, 2000, 1999, and
1998, in conformity with generally accepted accounting principles.
/s/ Conley Johnson, A.C.
Fairmont, West Virginia
January 12,2001
F-1
114
CONSOLIDATED BALANCE SHEETS
FREEDOM BANCSHARES, INC.
DECEMBER 31, 2000 AND 1999
2000 1999
------------- ------------
ASSETS
Cash and due from banks (Note 2) $ 4,990,342 $ 7,118,393
Federal funds sold 4,950,000 1,010,000
Investment securities: (Note 3)
Securities held-to-maturity (approximate market value
of $13,106,480 - 2000; $13,219,815 - 1999) 13,140,097 13,671,862
Securities available-for-sale at approximate
market value 16,184,013 15,267,937
Loans (Note 4) 58,971,712 57,384,390
Less: Allowance for loan losses (1,038,470) (1,137,037)
------------- ------------
Net Loans 57,933,242 56,247,353
------------- ------------
Bank premises, furniture and equipment (Note 5) 2,102,341 2,344,693
Foreclosed assets held for sale, (net of impairment reserve
of $-0- - 2000; $28,869 - 1999) 145,001 150,916
Accrued interest receivable and other assets 1,029,019 1,582,663
------------- ------------
TOTAL ASSETS $ 100,474,055 $ 97,393,817
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits: (Note 6)
Interest bearing $ 78,738,300 $ 76,196,325
Non-interest bearing 13,176,044 13,466,808
------------- ------------
Total Deposits 91,914,344 89,663,133
Interest, taxes and other liabilities 536,529 314,077
------------- ------------
Total Liabilities 92,450,873 89,977,210
------------- ------------
STOCKHOLDERS' EQUITY
Common stock, par value $1; 1,000,000 shares authorized;
190,000 shares issued 190,000 190,000
Surplus 3,677,000 3,677,000
Retained earnings (Note 14) 4,249,928 4,039,641
Accumulated other comprehensive (loss) (Note 13) (93,746) (490,034)
------------- ------------
Total Stockholders' Equity 8,023,182 7,416,607
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 100,474,055 $ 97,393,817
============= ============
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-2
115
CONSOLIDATED STATEMENTS OF INCOME
FREEDOM BANCSHARES, INC.
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
----------- ---------- ----------
INTEREST INCOME
Interest and fees on loans $ 5,338,038 $5,320,901 $5,727,344
Federal funds sold 261,347 223,268 289,639
Investment securities:
Taxable 1,667,863 1,698,742 1,421,829
Tax-exempt 165,589 157,460 161,467
----------- ---------- ----------
7,432,837 7,400,371 7,600,279
INTEREST EXPENSE
Interest on deposits and borrowed funds 3,442,441 3,622,788 3,754,746
----------- ---------- ----------
NET INTEREST INCOME 3,990,396 3,777,583 3,845,533
Provision for loan losses 660,869 739,610 1,024,989
----------- ---------- ----------
Net Interest Income After Provision for Loan Losses 3,329,527 3,037,973 2,820,544
----------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts 933,788 875,915 799,825
Other service charges, commissions and fees 120,791 115,348 74,994
Realized (loss) gain on sale of securities (51,045) 40,423
Other operating income 98,525 99,174 84,685
----------- ---------- ----------
1,153,104 1,039,392 999,927
----------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 1,854,455 1,341,155 1,260,389
Premises and fixed assets 608,977 516,189 551,304
Data processing 112,484 118,465 112,339
Stationery and printing 135,143 148,558 129,427
Director and committee fees 40,600 33,350 76,400
Legal and professional 153,715 166,135 115,136
Dues and assessments 84,090 52,474 41,319
Postage and courier 165,073 151,121 164,511
Losses and expenses on other real estate 15,546 115,456 265,108
Other operating expenses 818,261 583,982 514,102
----------- ---------- ----------
3,988,344 3,226,885 3,230,035
----------- ---------- ----------
Income Before Income Taxes 494,287 850,480 590,436
Income Taxes (Note 8) 132,000 282,000 169,000
----------- ---------- ----------
NET INCOME $ 362,287 $ 568,480 $ 421,436
=========== ========== ==========
Net Income Per Common Share $ 1.91 $ 2.99 $ 2.22
=========== ========== ==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-3
116
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FREEDOM BANCSHARES, INC.
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
ACCUMULATED
OTHER TOTAL
COMMON RETAINED COMPREHENSIVE STOCKHOLDERS'
STOCK SURPLUS EARNINGS INCOME (LOSS) EQUITY
BALANCE, DECEMBER 31, 1997 $ 190,000 $ 3,677,000 $3,391,725 $ 45,039 $ 7,303,764
Net income 421,436 421,436
Other comprehensive (loss), net of
tax and reclassifications (Note 13) (20,938) (20,938)
-----------
Total Comprehensive Income 400,498
-----------
Cash dividends - $1.20 per share (228,000) (228,000)
--------- ----------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1998 190,000 3,677,000 3,585,161 24,101 7,476,262
Net income 568,480 568,480
Other comprehensive (loss), net of
tax and reclassifications (Note 13) (514,135) (514,135)
-----------
Total Comprehensive Income 54,345
-----------
Cash dividends - $.60 per share (114,000) (114,000)
--------- ----------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1999 190,000 3,677,000 4,039,641 (490,034) 7,416,607
Net income 362,287 362,287
Other comprehensive income, net of
tax (Note 13) 396,288 396,288
-----------
Total Comprehensive Income 758,575
-----------
Cash dividends - $.80 per share (152,000) (152,000)
--------- ----------- ---------- --------- -----------
BALANCE, DECEMBER 31, 2000 $ 190,000 $ 3,677,000 $4,249,928 $ (93,746) $ 8,023,182
========= =========== ========== ========= ===========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-4
117
CONSOLIDATED STATEMENTS OF CASH FLOWS
FREEDOM BANCSHARES, INC.
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 362,287 $ 568,480 $ 421,436
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 660,869 739,610 1,024,989
Loss provision for other real estate (28,869) 29,870 155,859
Depreciation and amortization 332,521 355,346 359,629
Accretion of investment security discounts (8,565) (9,081) (92,560)
Deferred income taxes (benefit) 31,000 234,000 (185,000)
Realized investment security losses (gains) 51,045 (40,423)
(Gain) loss on disposal of equipment and other real estate (4,639) 36,222 26,056
Decrease (increase) in interest receivable and other assets 309,344 (17,768) (212,030)
Increase (decrease) in interest payable and other liabilities 222,452 (178,302) (99,372)
----------- ----------- ------------
Net Cash Provided by Operating Activities 1,876,400 1,809,422 1,358,584
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in loans, net (2,346,758) 3,773,800 (4,673,636)
Proceeds from sale of equipment and other real estate 44,923 771,423 691,760
Purchases of premises and equipment (74,705) (180,090) (97,928)
Purchases of investment securities held-to-maturity (256,615) (9,988,284) (2,251,563)
Purchases of investment securities available-for-sale (828,940) (2,582,409) (17,733,510)
(Increase) decrease in federal funds sold (3,940,000) 2,350,000 1,320,000
Proceeds from maturity of securities available-for-sale 512,451 3,959,087 9,385,273
Proceeds from maturity of securities held-to-maturity 785,982 2,949,224 666,064
Proceeds from sale of securities available-for-sale 2,375,531 2,876,990
----------- ----------- ------------
Net Cash (Used In) Provided By
Investing Activities (6,103,662) 3,428,282 (9,816,550)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 2,251,211 (4,374,231) 11,031,334
Cash dividends (152,000) (114,000) (228,000)
----------- ----------- ------------
Net Cash Provided By (Used In)
Financing Activities 2,099,211 (4,488,231) 10,803,334
----------- ----------- ------------
(Decrease) increase in Cash and Cash Equivalents (2,128,051) 749,473 2,345,368
Cash and Cash Equivalents at Beginning of Year 7,118,393 6,368,920 4,023,552
----------- ----------- ------------
Cash and Cash Equivalents at End of Year $ 4,990,342 $ 7,118,393 $ 6,368,920
=========== =========== ============
The Notes to Consolidated Financial Statements are an integral part of these
statements.
F-5
118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
DECEMBER 31, 2000
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Freedom Bancshares, Inc. (the Company) and its subsidiary,
Belington Bank, provide banking services to domestic markets
in West Virginia. To a large extent, the operations of the
Company and its subsidiary bank, such as loan portfolio
management and deposit growth, are directly affected by the
market area economy. The consolidated financial statements
include the accounts of the respective parent company and its
subsidiary. All significant intercompany balances and
transactions have been eliminated. See Note 11 for parent
company information.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Such estimates, such as the
allowance for loan losses, are based upon known facts and
circumstances. Estimates are revised by management in the
period such facts and circumstances change.
INVESTMENT SECURITIES
Debt securities that management has the ability and intent to
hold to maturity are classified as held-to-maturity and
carried at cost, adjusted for amortization of premium and
accretion of discounts computed by the interest method from
purchase date to maturity. Other marketable securities are
classified as available-for-sale and are carried at fair
value. Unrealized gains and losses on securities
available-for-sale, net of the deferred income tax effect, are
recognized as direct increases or decreases in stockholders'
equity. Cost of securities sold is recognized using the
specific identification method.
LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are stated at the amount of unpaid principal, reduced by
unearned income and an allowance for loan losses. Income on
loans is recognized as income on daily balances of the
principal amount outstanding, calculated using the simple
interest and amortization methods. The allowance for loan
losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance
for loan losses when management believes the collectibility of
the principal is unlikely. The allowance is an amount
management believes will be adequate to absorb possible losses
on existing loans that may become uncollectible based on
evaluations of the collectibility of loans and prior loan loss
experience.
The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio,
overall portfolio quality, review of specific problem loans,
and current economic conditions that may affect the borrowers'
ability to pay. Accrual of interest is discontinued on an
impaired loan when management believes, after considering
economic and business conditions and collection efforts, the
borrowers' financial condition is such that collection of
interest is doubtful. When interest accrual is discontinued,
all unpaid accrued interest is reversed. Interest income is
subsequently recognized only to the extent of cash payments
received.
LOAN ORIGINATION FEES AND COSTS
Loan origination and commitment fees and direct loan
origination costs are primarily being recognized as collected
and incurred. The use of this method of recognition does not
produce results that are materially different from results
which would have been produced if such costs and fees were
deferred and amortized as an adjustment of the loan yield.
BANK PREMISES, FURNITURE AND EQUIPMENT
Bank premises, furniture and equipment are carried at cost
less accumulated depreciation. The provision for depreciation
is computed for financial reporting purposes by both
straight-line and declining-balance methods, based on the
estimated useful lives of assets.
F-6
119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORECLOSED ASSETS HELD FOR RESALE
Foreclosed assets held for resale acquired in satisfaction of
mortgage obligations and in foreclosure proceedings are
recorded at the lower of the loan balance or fair market value
of the property. Properties carried in foreclosed assets held
for resale are assessed quarterly for decline in market value
and future cash flows, and provisions for impairment losses
are charged to income as required. Total impairment losses for
2000 and 1999 were $ -0- and $29,869, respectively. These
amounts are included in losses and expenses on other real
estate in the statement of income.
INTANGIBLE ASSETS
Intangible assets recognized on acquisition of bank assets are
recorded at cost and are amortized over the estimated life of
the assets. Core deposit intangibles are amortized over an
estimated life of eight years using a constant yield method.
Goodwill is amortized over an estimated life of fifteen years
using a straight-line method.
INCOME TAXES
Deferred income taxes are reported for timing differences
between items of income or expense reported in the financial
statements and those reported for income tax purposes. The
differences relate principally to accretion of discounts on
investment securities, provision for loan losses, and
differences between book and tax methods of depreciation.
NET INCOME PER COMMON SHARE
Net income per common share amounts are computed based on the
weighted average number of common shares outstanding during
the period.
CASH FLOWS
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and
deposits in other banks.
Freedom Bancshares, Inc. and subsidiary paid $21,000,
$265,896, and $512,993, of applicable income taxes during
2000, 1999, and 1998, respectively. The Company made transfers
of loans to foreclosed assets held for resale of $ -0-,
$28,000, and $240,008, during 2000, 1999, and 1998,
respectively. Payments of interest did not vary materially
from interest reported on the statement of income for the
respective years.
RECLASSIFICATIONS
Certain items from 1999 and 1998 have been reclassified to
conform to 2000 financial statement presentation.
NOTE 2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The subsidiary bank is required to maintain average reserve balances
with the Federal Reserve Bank. The required reserve balance as of
December 31, 2000 and 1999, was approximately $325,000 and $625,000,
respectively.
F-7
120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 3. INVESTMENT SECURITIES
Amortized cost and approximate market values of investment securities
held-to-maturity, including gross unrealized gains and losses, are
summarized as follows:
DECEMBER 31, 2000
------------------------------------------------------------
APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
----------- --------- ------------ -----------
U.S. Treasury and Agency
Securities $ 4,749,133 $ -- $ (61,555) $ 4,687,578
State and municipal securities 2,966,133 60,997 -- 3,027,130
Mortgage-backed securities 5,419,831 43,840 (76,899) 5,386,772
Other 5,000 -- -- 5,000
----------- --------- ------------ -----------
$13,140,097 $ 104,837 $ (138,454) $13,106,480
=========== ========= ============ ===========
DECEMBER 31, 1999
------------------------------------------------------------
APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
----------- --------- ------------ -----------
U.S. Treasury and Agency
Securities $ 4,749,637 $ -- $ (298,213) $ 4,451,424
State and municipal securities 2,718,300 54,052 -- 2,772,352
Mortgage-backed securities 6,203,925 65,406 (273,292) 5,996,039
----------- --------- ------------ -----------
$13,671,862 $ 119,458 $ (571,505) $13,219,815
=========== ========= ============ ===========
Amortized cost and approximate market values of investment securities
available-for-sale are summarized as follows:
DECEMBER 31, 2000
------------------------------------------------------------
APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
----------- --------- ------------ -----------
U.S. Treasury and Agency
Securities $12,482,335 $ 3,200 $ (97,429) $12,388,106
State and municipal securities 202,706 1,764 -- 204,470
Collateralized mortgage
obligations 59,719 -- (947) 58,772
Mortgage-backed securities 3,583,499 6,562 (57,396) 3,532,665
----------- --------- ------------ -----------
$16,328,259 $ 11,526 $ (155,772) $16,184,013
=========== ========= ============ ===========
F-8
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 3. INVESTMENT SECURITIES (CONTINUED)
DECEMBER 31, 1999
------------------------------------------------------------
APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
----------- --------- ------------ -----------
U.S. Treasury and Agency
Securities $12,479,515 $ -- $ (598,627) $11,880,888
State and municipal securities -- -- -- --
Collateralized mortgage
obligations 59,940 -- (3,115) 56,825
Mortgage-backed securities 3,482,316 2,313 (154,405) 3,330,224
----------- --------- ------------ -----------
$16,021,771 $ 2,313 $ (756,147) $15,267,937
=========== ========= ============ ===========
Maturities of investment securities held-to-maturity at December 31,
2000, are as follows:
AMORTIZED COST - MATURING
------------------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS TOTAL
---------- ---------- ---------- ----------- -----------
U. S. Treasury and
Agency securities $ 250,000 $2,999,133 $ -- $ 1,500,000 $ 4,749,133
State and municipal
securities -- 2,249,605 716,528 -- 2,966,133
Mortgage-backed
securities 11,799 1,571,380 3,836,652 -- 5,419,831
Other -- -- -- 5,000 5,000
---------- ---------- ---------- ----------- -----------
$ 261,799 $6,820,118 $4,553,180 $ 1,505,000 $13,140,097
========== ========== ========== =========== ===========
MARKET VALUE - MATURING
------------------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS TOTAL
---------- ---------- ---------- ----------- -----------
U. S. Treasury and
Agency securities $ 249,133 $2,971,250 $ -- $ 1,467,195 $ 4,687,578
State and municipal
securities -- 2,295,899 731,231 -- 3,027,130
Mortgage-backed
securities 11,799 1,593,064 3,781,909 -- 5,386,772
Other -- -- -- 5,000 5,000
---------- ---------- ---------- ----------- -----------
$ 260,932 $6,860,213 $4,513,140 $ 1,472,195 $13,106,480
========== ========== ========== =========== ===========
F-9
122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 3. INVESTMENT SECURITIES (CONTINUED)
Maturities of investment securities available-for-sale at December 31,
2000, are as follows:
AMORTIZED COST - MATURING
------------------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS TOTAL
---------- ---------- ---------- ----------- -----------
U. S. Treasury and
Agency securities $1,000,000 $5,494,335 $4,988,000 $ 1,000,000 $12,482,335
State and municipal
securities -- 202,706 -- -- 202,706
Collateralized mort-
gage obligations -- 59,719 -- -- 59,719
Mortgage-backed
securities 20,009 2,008,727 1,554,763 -- 3,583,499
---------- ---------- ---------- ----------- -----------
$1,020,009 $7,765,487 $6,542,763 $ 1,000,000 $16,328,259
========== ========== ========== =========== ===========
MARKET VALUE - MATURING
------------------------------------------------------------------------
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER TEN
ONE YEAR FIVE YEARS TEN YEARS YEARS TOTAL
---------- ---------- ---------- ----------- -----------
U. S. Treasury and
Agency securities $ 996,560 $5,451,415 $4,946,740 $ 993,391 $12,388,106
State and municipal
securities -- 204,470 -- -- 204,470
Collateralized mort-
gage obligations -- 58,772 -- -- 58,772
Mortgage-backed
securities 20,309 1,985,390 1,526,966 -- 3,532,665
---------- ---------- ---------- ----------- -----------
$1,016,869 $7,700,047 $6,473,706 $ 993,391 $16,184,013
========== ========== ========== =========== ===========
Investment securities with a carrying amount of $5,767,155 and
$1,542,023 at December 31, 2000 and 1999, respectively, were
pledged to secure public deposits and for other purposes required
or permitted by law.
NOTE 4. LOANS
The components of loans in the consolidated balance sheets were as
follows:
2000 1999
----------- -----------
Real estate construction $ 1,579,918 $ 1,308,571
Commercial and non-residential real estate 26,625,582 28,516,723
Residential real estate 21,855,805 17,423,755
Consumer 8,910,407 10,135,341
----------- -----------
$58,971,712 $57,384,390
=========== ===========
F-10
123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 4. LOANS (CONTINUED)
CHANGES IN THE ALLOWANCE FOR POSSIBLE LOAN LOSSES WERE AS FOLLOWS:
2000 1999 1998
----------- ----------- -----------
Balance beginning of period $ 1,137,037 $ 1,455,326 $ 805,406
Losses charged to allowance (905,544) (1,214,027) (604,475)
Recoveries credited to allowance 146,108 156,128 229,406
Provision for possible loan losses 660,869 739,610 1,024,989
----------- ----------- -----------
Balance end of period $ 1,038,470 $ 1,137,037 $ 1,455,326
=========== =========== ===========
Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $1,821,000 and $1,816,000 at December 31,
2000 and 1999, respectively. If interest on those loans had been
accrued, such income would have approximated $77,550 and $133,200 for
the years 2000 and 1999, respectively.
The Company follows Statement of Financial Accounting Standards No.
114, Accounting by Creditors for Impairment of Loans, as amended by
Financial Accounting Standards No. 118. As of December 31, 2000 and
1999, recorded impairment reserve of $368,000 and $476,200,
respectively, has been recognized on impaired loans with a recorded
investment of $2,807,350 and $1,718,100, respectively. This impairment
reserve is included as a component of the allowance for loan losses on
the balance sheet. Recorded investment in loans not requiring an
impairment reserve is $864,100 and $849,400 at December 31, 2000 and
1999, respectively. The net investment in these loans has been reduced
by accrued interest of approximately $77,550 and $133,200 at December
31, 2000 and 1999, respectively. The average recorded investment in
impaired loans during 2000, 1999, and 1998 was $3,119,495, $2,646,900,
and $2,261,000, respectively. Interest income on impaired loans of
$286,300, $160,700, and $186,100, was recognized during the years ended
December 31, 2000, 1999, and 1998, respectively. Substantially all of
this interest income was received in cash.
The Company is not committed to lend additional funds to borrowers
whose loans are considered impaired or whose loans have been modified.
Loans and loan commitments, which are comprised primarily of loans to
borrowers in north central and eastern West Virginia, include timber,
poultry, real estate development, and retail/service industries. Loans
and loan commitments to the real estate development and rental
industries comprised approximately 7% and 15% of total loans for
December 31, 2000 and 1999, respectively. No other group of loans is
greater than 10% of total loans. Collateralization centers primarily
around commercial and residential real estate, personal property and
business equipment.
NOTE 5. BANK PREMISES, FURNITURE AND EQUIPMENT
Bank premises, furniture and equipment at December 31, 2000 and 1999,
were as follows:
2000 1999
---------- ----------
Bank premises $2,458,515 $2,464,015
Equipment, furniture and fixtures 2,272,466 2,197,760
---------- ----------
4,730,981 4,661,775
Less: Accumulated Depreciation 2,628,640 2,317,082
---------- ----------
Total $2,102,341 $2,344,693
========== ==========
F-11
124
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 6. DEPOSITS
Deposits at December 31, 2000 and 1999, were as follows:
2000 1999
----------- -----------
Demand deposits of individuals, partnerships and corporations:
Interest bearing $ 8,300,860 $ 7,155,976
Non-interest bearing 13,198,672 12,802,331
Time and savings deposits of individuals,
partnerships and corporations 68,738,924 68,649,114
Deposits of U. S. Government 2,321 4,227
Deposits of state and political subdivisions 1,180,449 475,954
All other deposits 16,303 12,223
Certified and official checks 476,815 563,308
----------- -----------
Total Domestic Deposits $91,914,344 $89,663,133
=========== ===========
Time deposits of over $100,000
included above $ 8,281,478 $ 6,672,626
=========== ===========
Scheduled maturities of certificates of deposit at December 31, 2000,
were as follows:
2001 $ 26,832,421
2002 14,882,912
2003 6,263,967
2004 2,330,487
2005 and thereafter 1,843,110
------------
$ 52,152,897
NOTE 7. FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The subsidiary bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated statements of
financial condition.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instruments
for commitments to extend credit and standby letters of credit
is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance-sheet
instruments.
F-12
125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 7. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount and type of collateral
obtained, if deemed necessary by the Bank upon extension of
credit, varies and is based on management's credit evaluation
of the customer.
Standby letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a
third party. Standby letters of credit generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. The credit risk involved in issuing letters
of credit is essentially the same as that involved in
extending loans to customers. The Bank's policy for obtaining
collateral, and the nature of such collateral, is essentially
the same as that involved in making commitments to extend
credit.
Total contractual amounts of the commitments as of December
31, 2000 and 1999, were as follows:
2000 1999
---------- ----------
Available on lines of credit $1,603,864 $1,014,985
Stand-by letters of credit 200,000 352,000
Other loan commitments 283,900 1,102,147
---------- ----------
Total $2,087,764 $2,469,132
========== ==========
CONCENTRATION OF CREDIT RISK
Certain cash deposits maintained by the Company with other
financial institutions are secured by federal depository
insurance. At times during the year these accounts are in
excess of the FDIC insured limit of $100,000.
FAIRVALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of FAS No. 107, Disclosure
About Fair Value of Financial Instruments, fair value
disclosure estimates are being made for like kind financial
instruments. Fair value estimates are based on present value
of expected future cash flows, quoted market prices of similar
financial instruments, if available, and other valuation
techniques. These valuations are significantly affected by the
discount rates, cash flow assumptions and risk assumptions
used. Therefore, the fair value estimates may not be
substantiated by comparison to independent markets and are not
intended to reflect the proceeds that may be realizable in an
immediate settlement of the financial instruments.
F-13
126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 7. FINANCIAL INSTRUMENTS (CONTINUED)
FAIRVALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
FAS No. 107 excludes certain items from the disclosure
requirements, and accordingly, the aggregate fair value of
amounts presented do not represent the underlying value of the
Company. Management does not have the intention to dispose of
a significant portion of its financial instruments and,
therefore, the unrealized gains or losses should not be
interpreted as a forecast of future earnings and cash flows.
The following table represents the estimates of fair value of
financial instruments as of December 31, 2000 and 1999:
2000 1999
------------------------------- ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
FINANCIAL ASSETS:
Cash and short-term
investments $ 9,940,342 $ 9,940,342 $ 8,128,393 $ 8,128,393
Investment securities 29,319,110 29,285,494 28,939,799 28,487,752
Net Loans 57,933,242 57,213,264 56,247,353 56,407,561
Accrued interest
receivable 726,459 726,459 959,867 959,867
FINANCIAL LIABILITIES:
Deposits 91,914,344 92,156,301 89,663,133 90,092,275
Accrued interest payable 344,984 344,984 276,684 276,684
The following methods and assumptions are used to estimate the
fair value of financial instruments:
CASH AND SHORT-TERM INVESTMENTS:
The carrying amount for cash and short-term
investments is a reasonable estimate of fair
value. Short-term investments consist of
Federal funds sold.
INVESTMENT SECURITIES:
Fair values for investment securities are
based on quoted market prices, if available.
If market prices are not available, quoted
market prices of similar securities are used.
NET LOANS:
The fair value of net loans is based on a
discounted value of the estimated future cash
flow expected to be received through the
earlier of the loan pay-out or the loan
repricing date. The interest rate applied in
the discounted cash flow method reflects
average current rates on new loans adjusted
for relative risk and maturity. Fair values of
impaired loans are estimated based on
estimates of net realization of underlying
collateral.
F-14
127
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 7. FINANCIAL INSTRUMENTS (CONTINUED)
Fair Value of Financial Instruments (Continued)
DEPOSITS:
The carrying amount is considered a reasonable
estimate of fair value for demand and savings
deposits and other variable rate deposit
accounts. The fair value of fixed maturity
certificates of deposit is estimated by a
discounted cash flow method using the interest
rates currently offered for deposits of
similar remaining maturities.
ACCRUED INTEREST RECEIVABLE AND PAYABLE:
The carrying amounts of accrued interest
receivable and payable approximate their fair
values.
OFF-BALANCE SHEET INSTRUMENTS:
The fair value of commitments is estimated
using the fees currently charged to enter into
similar agreements, taking into account the
remaining terms of the agreements and the
present credit standing of the customers. The
amount of fees currently charged on
commitments is determined to be insignificant
and therefore the fair value and carrying
value of off-balance sheet instruments are not
shown.
NOTE 8. INCOME TAXES
The Company records income taxes in accordance with Statement
of Financial Accounting Standards No. 109 (FAS 109),
Accounting for Income Taxes. FAS 109 is an asset and liability
approach that requires the recognition of deferred income tax
liabilities and assets for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax basis of other assets and liabilities.
The amount reflected as income taxes represents federal and
state income taxes on financial statement income. Certain
items of income and expense, primarily the provision for
possible loan losses, allowance for losses on foreclosed
assets held for resale, depreciation, and accretion of
discounts on investment securities are reported in different
accounting periods for income tax purposes.
The provision for income taxes was as follows:
2000 1999 1998
-------- --------- ---------
CURRENT:
Federal $ 82,000 $ 34,000 $ 294,000
State 19,000 14,000 60,000
-------- --------- ---------
101,000 48,000 354,000
-------- --------- ---------
DEFERRED (BENEFIT):
Federal 26,000 199,000 (162,000)
State 5,000 35,000 (23,000)
-------- --------- ---------
31,000 234,000 (185,000)
-------- --------- ---------
INCOME TAXES $132,000 $ 282,000 $ 169,000
======== ========= =========
F-15
128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 8. INCOME TAXES (CONTINUED)
Following is a reconciliation of income taxes at federal statutory
rates to recorded income taxes:
2000 1999 1998
------------------ ------------------ ----------------
AMOUNT % AMOUNT % AMOUNT %
--------- --- --------- --- -------- ---
Tax at federal tax rate $ 168,200 34% $ 289,200 34% $200,700 34%
Tax effect of:
Tax exempt income (54,000) (11%) (52,000) (6%) $(54,600) (9%)
State income taxes 18,000 4% 27,400 3% 14,500 3%
Other items (200) --% 17,400 2% 8,400 1%
--------- --- --------- --- -------- ---
Income Taxes $ 132,000 27% $ 282,000 33% $169,000 29%
========= === ========= === ======== ===
Deferred income tax liabilities and (assets) are the result of timing
differences in recognition of revenue and expense for income tax and
financial statement purposes.
Deferred income tax liabilities and (assets) were comprised of the
following at December 31:
2000 1999 1998
--------- --------- ---------
Depreciation $ 71,000 $ 109,000 $ 130,000
Accumulated other
Comprehensive income -- -- 13,000
Other items 91,000 122,000 96,000
--------- --------- ---------
Gross deferred tax liabilities 162,000 231,000 239,000
--------- --------- ---------
Provision for loan loss (177,000) (260,000) (432,000)
Other loss reserve -- (12,000) (73,000)
Accumulated other
comprehensive (loss) (51,000) (264,000) --
Accrued pension -- (2,000) (22,000)
Other items (21,000) (24,000) --
--------- --------- ---------
Gross deferred tax assets (249,000) (562,000) (527,000)
--------- --------- ---------
$ (87,000) $(331,000) $(288,000)
========= ========= =========
No deferred income tax asset valuation is provided since it is more
likely than not that realization of the deferred income tax asset will
occur in future years.
F-16
129
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 9. RELATED PARTY TRANSACTIONS
LOANS
The subsidiary bank has granted loans to officers and
directors of the Bank and to their associates. Related party
loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated parties and do not
involve more than normal risk of collectibility. Set forth
below is a summary of the related party loan activity:
BALANCE AT BALANCE
BEGINNING AT END
OF YEAR BORROWINGS REPAYMENTS OF YEAR
---------- ---------- ---------- ----------
DECEMBER 31, 2000 $1,584,687 $1,609,293 $1,546,867 $1,647,113
========== ========== ========== ==========
December 31, 1999 $2,541,300 $1,355,055 $2,311,668 $1,584,687
========== ========== ========== ==========
DEPOSITS
The Bank held related party deposits of approximately $342,000
and $1,049,000 at December 31, 2000 and 1999, respectively.
NOTE 10. REGULATORY LIMITATIONS ON DIVIDENDS
The primary source of funds for the dividends paid by Freedom
Bancshares, Inc. is dividends received from its subsidiary, Belington
Bank. The approval of the regulatory agencies is required if the total
of all dividends declared by the subsidiary bank in any calendar year
exceeds the subsidiary bank's net profits, as defined, for that year
combined with its retained net profits for the preceding two calendar
years. Using this formula, the subsidiary bank may, without prior
approval, declare dividends in 2001 of approximately $225,338 from its
retained earnings of $4,194,267 at December 31, 2000, plus any
additional net profits earned in 2001, up to the date of any such
dividend declaration.
NOTE 11. FREEDOM BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
Freedom Bancshares, Inc. was organized in 1988 and acquired Belington
Bank as a wholly-owned subsidiary in a pooling of interests transaction
whereby Freedom issued 126,000 shares of common stock for 100% of the
common stock of Belington Bank. Freedom Bancshares, Inc. accounts for
its subsidiary following the equity method of accounting.
F-17
130
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 11. FREEDOM BANCSHARES, INC. (PARENT COMPANY ONLY)
FINANCIAL INFORMATION (CONTINUED)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
---------- -----------
ASSETS
Cash $ 22,628 $ 61,026
Investment in Belington Bank 7,967,521 7,322,548
Other assets 33,033 33,033
---------- ----------
TOTAL ASSETS $8,023,182 $7,416,607
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Other Liabilities $ -- $ --
Stockholders' Equity 8,023,182 7,416,607
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $8,023,182 $7,416,607
========== ==========
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
-------- -------- --------
INCOME
Dividend from bank subsidiary $192,500 $175,000 $228,000
-------- -------- --------
EXPENSES 78,898 30 16
-------- -------- --------
Income Before Income Taxes and
Equity in Undistributed Net
Income of Subsidiary 113,602 174,970 227,984
INCOME TAX -- -- --
-------- -------- --------
113,602 174,970 227,984
Equity in Undistributed Net
Income of Bank Subsidiary 248,685 393,510 193,452
-------- -------- --------
NET INCOME $362,287 $568,480 $421,436
======== ======== ========
F-18
131
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 11. FREEDOM BANCSHARES, INC (PARENT COMPANY ONLY)
FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 362,287 $ 568,480 $ 421,436
Adjustment to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income
of bank subsidiary (248,685) (393,510) (193,452)
Decrease (increase) in other assets -- -- 1
--------- ---------
Net cash provided by operating activities 113,602 174,970 227,985
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (152,000) (114,000) (228,000)
--------- --------- ---------
Net cash (used in) financing activities (152,000) (114,000) (228,000)
--------- --------- ---------
Net (Decrease) Increase in Cash (38,398) 60,970 (15)
Cash at Beginning of Year 61,026 56 71
--------- --------- ---------
Cash at End of Year $ 22,628 $ 61,026 $ 56
========= ========= =========
NOTE 12. PENSION PLANS
The Company had participated in a trusteed pension plan sponsored by
the West Virginia Bankers Association covering virtually all full-time
employees. The Company's funding policy has been to fund normal costs
of the plan as accrued. During 1998, in order to control plan
administration costs and increase the net amount allocated to the
employee contributions, the Company terminated the defined benefit
pension plan and replaced the plan with a 401(K) Profit Sharing Plan.
Total estimated plan termination costs of $75,000 is included in
salaries and employee benefits on the 1998 consolidated statement of
income. Also included in salaries and employee benefits for 1999 is
approximately $38,000 of normal annual contributions to the deferred
benefit pension plan.
To replace the Defined Benefit Pension Plan, the Company adopted,
effective January 1, 1999, a 401(K) Profit Sharing Plan covering
substantially all eligible employees. Under the provisions of the plan,
eligible employees may defer up to 15% of their compensation. A
matching contribution equal to a percentage of the amount the employee
deferred is determined annually by the Company. Also at the discretion
of the Company, an amount may be contributed not to exceed 15% of
compensation earned by all participants in the plan. To be fully
vested, an employee must complete seven years of service. The Company's
matching contribution for December 31, 2000 and 1999, was approximately
$25,000 and $8,300, respectively.
NOTE 13. OTHER COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (FAS 130), Reporting Comprehensive Income.
Comprehensive income, as defined by FAS 130, includes net income and
other changes in assets and liabilities that are not reported in net
income but, instead, are reported as a separate component of
stockholders' equity.
F-19
132
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 13. OTHER COMPREHENSIVE INCOME (CONTINUED)
Following are the components of other comprehensive income as of
December 31, 1997, and for the years ended December 31, 1998, 1999, and
2000.
UNREALIZED
GAIN (LOSS) MINIMUM ACCUMULATED
ON SECURITIES PENSION OTHER
AVAILABLE (LIABILITY) COMPREHENSIVE
FOR SALE ASSET INCOME (LOSS)
------------- ----------- -------------
December 31, 1997, Accumulated
Other Comprehensive Income,
Net of Deferred Tax $ 72,829 $ (27,790) $ 45,039
Other Comprehensive Income for 1998:
Less reclassification adjustment for
minimum pension liability 42,754 42,754
Unrealized (losses) on securities
available for sale (34,305) (34,305)
Less: Reclassification adjustment
for realized gains (40,423) (40,423)
Deferred income tax effect 26,000 (14,964) 11,036
--------- --------- ---------
(48,728) $ 27,790 (20,938)
=========
December 31, 1998, Accumulated
Other Comprehensive Income,
Net of Deferred Tax 24,101 24,101
Other Comprehensive Income for 1999:
Unrealized (loss) on securities
available for sale (841,980) (841,980)
Less: Reclassification adjustment
for realized (losses) 51,045 51,045
Deferred income tax effect 276,800 276,800
--------- ---------
(514,135) (514,135)
December 31, 1999, Accumulated
Other Comprehensive (Loss),
Net of Deferred Tax (490,034) (490,034)
Other Comprehensive Income for 2000:
Unrealized gain on securities
available for sale 609,588 609,588
Deferred income tax effect (213,300) (213,300)
--------- ---------
396,288 396,288
December 31, 2000, Accumulated
Other Comprehensive (Loss),
Net of Deferred Tax $ (93,746) $ (93,746)
========= =========
F-20
133
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 14. REGULATORY MATTERS
During July 2000, the Commissioner of Banking of the State of
West Virginia released the Bank from an Order to Cease and
Desist certain banking practices which had been effective
since August 1999. This action by the Commissioner of Banking
was brought about through the positive efforts of the Senior
Management and the Board of Directors of the Bank.
The Cease and Desist Order which had been issued by the
Commissioner of Banking in August 1999 stated, among other
things that the Bank had not been adequately supervised and
that unsafe and unsound banking practices and violations of
law had occurred; certain policies and practices had been
followed that could jeopardize the safety of deposits; the
Bank had operated with excessive volumes of adversely
classified assets; and the Bank had operated without adequate
internal audit controls in accounting systems to prevent
certain unsafe and unsound banking practices.
Within ninety (90) days of the Cease and Desist Order, the
Bank was required to review its past due loan collection
practices and policies; provide a written plan to reduce
adversely classified loans; implement a formal loan review
system; adopt a capital plan; establish policies and
procedures for asset and liability management; appropriate
monitoring of interest rate sensitivity and develop a plan for
improving bank earnings through reduction of overhead expenses
and increasing net interest margins.
The Order also required the Bank within thirty (30) days of
its effective date to provide for regular monitoring of the
Bank's investment securities and elimination from the Bank
assets of certain loans classified as loss or doubtful in the
last report of examination from regulatory authorities.
At December 31, 2000 the Bank is no longer subject to the
provisions of the Cease and Desist Order and has received
satisfactory ratings from the Federal Deposit Insurance
Corporation and the Commissioner of Banking of the State of
West Virginia.
The Company and its subsidiary are subject to various
regulatory capital requirements administered by the federal
banking agencies. Failure to meet the minimum capital
requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company
and its subsidiaries financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and its subsidiary must meet
specific capital guidelines that involve quantitative measures
of the Company and its subsidiaries assets, liabilities, and
certain off-balance sheet items as calculated under regulatory
accounting practices. The Company and its subsidiary's capital
amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk ratings,
and other factors.
Quantitive measures established by regulation to insure
capital adequacy require the Company and its subsidiary to
maintain minimum amounts and ratios of Total and Tier I
capital to risk-weighted assets, and of Tier I capital to
average assets, as defined. Management believes, as of
December 31, 2000, that the Company and its subsidiary meet
all capital adequacy requirements to which they are subject.
F-21
134
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 14. REGULATORY MATTERS (CONTINUED)
As of December 31, 2000, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Company
and its subsidiary as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as
well capitalized, the Company and its subsidiary must maintain
minimum total risk-based, Tier I leverage ratios as set forth
in the table below. There are no conditions or events since
that notification that management believes have changed the
institution's category.
The Company and its subsidiary's actual capital amounts and
ratios are also presented in the table below.
MINIMUM MINIMUM
FOR CAPITAL TO BE WELL
ACTUAL ADEQUACY PURPOSES CAPITALIZED
--------------------- -------------------- -----------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
AS OF DECEMBER 31, 2000:
Total Capital
(to risk-weighted assets)
Consolidated $8,735,556 15.6% $4,476,758 8.0% N/A
Subsidiary Bank $8,791,221 15.7% $4,476,758 8.0% $5,595,947 10.0%
Tier I Capital
(to risk-weighted assets)
Consolidated $8,091,728 14.5% $2,238,379 4.0% N/A
Subsidiary Bank $8,036,063 14.4% $2,238,379 4.0% $3,357,568 6.0%
Tier I Capital
(to average assets)
Consolidated $8,091,728 8.1% $3,977,234 4.0% N/A
Subsidiary Bank $8,036,063 8.1% $3,977,234 4.0% $4,971,542 5.0%
AS OF DECEMBER 31, 1999:
Total Capital
(to risk-weighted assets)
Consolidated $8,494,252 15.0% $4,525,636 8.0% N/A
Subsidiary Bank $8,490,195 15.0% $4,525,636 8.0% $5,657,045 10.0%
Tier I Capital
(to risk-weighted assets)
Consolidated $7,787,121 13.8% $2,262,818 4.0% N/A
Subsidiary Bank $7,783,064 13.8% $2,262,818 4.0% $3,394,227 6.0%
Tier I Capital
(to average assets)
Consolidated $7,787,121 7.6% $4,077,442 4.0% N/A
Subsidiary Bank $7,783,064 7.6% $4,077,442 4.0% $5,096,803 5.0%
F-22
135
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FREEDOM BANCSHARES, INC.
NOTE 15. SUPPLEMENTARY DATA
The following is a summary of quarterly results of operations
for the years ended December 31, 2000 and 1999:
THREE MONTHS ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
2000
Interest income $1,843 $ 1,807 $1,902 $1,881
Net interest income 1,024 1,021 1,004 941
Provision for loan losses 40 336 245 40
Other income 261 367 279 246
Other expenses 978 1,030 858 1,122
Income before income taxes 267 22 180 25
Income taxes 87 (14) 58 1
Net income $ 180 $ 36 $ 122 $ 24
Net Income Per Common Share $ .95 $ .19 $ .64 $ .13
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
1999
Interest income $1,881 $1,939 $1,923 $1,657
Net interest income 931 997 1,040 810
Provision for loan losses 118 167 263 192
Other income 259 246 248 286
Other expenses 813 820 798 796
Income before income taxes 259 256 227 108
Income taxes 87 88 65 42
Net income $ 172 $ 168 $ 162 $ 66
Net Income Per Common Share $ .91 $ .88 $ .85 $ .35
NOTE 16. AGREEMENT AND PLAN OF MERGER
On December 29, 2000, the Company announced that it had entered
into a definitive Agreement and Plan of Merger with WesBanco,
Inc. The Agreement and Plan of Merger provides, among other
things, for a fixed exchange ratio of 2.58 shares of WesBanco,
Inc. common stock for each share of the outstanding common
stock of the Company. It is expected that this transaction will
be completed mid-year 2001 after approval by appropriate
regulatory authorities and the stockholders of the Company.
F-23
136
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS
FREEDOM BANCSHARES, INC. AND SUBSIDIARY
Management's Discussion and Analysis represents an overview of results of
operations and financial condition of Freedom Bancshares, Inc. (Freedom or the
Corporation), a bank holding company with headquarters in Belington, West
Virginia, and its subsidiary, Belington Bank. This discussion and analysis
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.
Certain information in Management's Discussion and other statements contained in
this report, which are not historical facts, may be forward looking statements
that involve risks and uncertainties. Such statements are subject to important
factors that could cause actual results to differ materially from those
contemplated by such statements, including without limitation, the effect of
changing area and regional economic conditions; changes in interest rates;
credit risks of commercial, real estate, and consumer loan customers and their
lending activities; changes in federal and state regulations; the presence in
the Corporation's market area of competitors with greater financial resources
than the Corporation; or other unanticipated external developments materially
impacting the Corporation's operational and financial performance.
TABLE 1 - FIVE YEAR SELECTED FINANCIAL SUMMARY
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
PER SHARE INFORMATION:
Dividends $ 0.80 $ 0.60 $ 1.20 $ 1.70 $ 1.55
Book value at year end 42.23 39.03 39.35 38.44 35.66
Average common shares
outstanding 190,000 190,000 190,000 190,000 190,000
SELECTED BALANCE SHEET
INFORMATION:
Total securities $ 29,324 $ 28,940 $ 26,534 $ 19,426 $ 22,932
Net loans 57,933 56,247 60,761 57,494 53,223
Total assets 100,474 97,394 102,006 90,944 86,299
Total deposits 91,914 89,663 94,037 83,006 79,069
Total stockholders'
equity 8,023 7,417 7,476 7,304 6,775
SELECTED RATIOS:
Return on average assets 0.36% 0.55% 0.42% 0.79% 0.96%
Return on average equity 4.75% 7.64% 5.58% 9.97% 11.77%
Dividend payout 41.99% 20.07% 54.16% 46.01% 37.68%
Average equity to average
assets 7.55% 7.21% 7.60% 7.94% 8.19%
F-24
137
TABLE 1 - FIVE YEAR SELECTED FINANCIAL SUMMARY (CONTINUED)
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
SUMMARY STATEMENT OF
INCOME
Interest income $7,433 $7,401 $7,600 $7,221 $6,694
Interest expense 3,443 3,623 3,755 3,466 3,196
------------------------------------------------------------------
Net interest income 3,990 3,778 3,845 3,755 3,498
Provision for loan losses 661 740 1,025 612 482
------------------------------------------------------------------
Net interest income after
provision for loan losses 3,329 3,038 2,820 3,143 3,016
Other income 1,153 1,039 1,000 917 682
Other expenses 3,988 3,227 3,230 3,112 2,517
------------------------------------------------------------------
Income before income taxes 494 850 590 948 1,181
Provision for income taxes 132 282 169 246 398
------------------------------------------------------------------
Net Income $ 362 $ 568 $ 421 $ 702 $ 783
==================================================================
Earnings per share $ 1.91 $ 2.99 $ 2.22 $ 3.69 $ 4.12
==================================================================
OVERVIEW
Freedom Bancshares, Inc.'s financial performance as of and for the year ended
December 31, 2000 showed moderate growth with assets increasing from $97,393,817
at December 31, 1999 to $100,474,055 at December 31, 2000. Moderate asset growth
for the year 2000 centered around increases in federal funds sold, investment
securities, and the loan portfolio.
The asset growth was complimented by corresponding growth in deposits for the
year 2000 of $2,251,211, and a corresponding increase in the stockholders'
equity of the Corporation which resulted from net income for the year 2000 of
$362,287 less cash dividends of $152,000 and a corresponding decrease in other
comprehensive loss which declined by $396,288 for the year 2000.
In August 1999, the West Virginia Commissioner of Banking issued a Cease &
Desist Order which applied to the subsidiary bank. This Cease & Desist Order is
discussed in greater detail in Note 14 of Notes to Consolidated Financial
Statements. During the fourth quarter of 1999, the Board of Directors, in
response to the Cease & Desist Order, made significant changes in the Senior
Management of the subsidiary bank and also made significant changes in the
banking policies and practices that were being followed by the Bank pursuant to
requirements of the Cease & Desist Order. At December 31, 2000, the Bank is no
longer subject to the provisions of the Cease & Desist Order, as the result of
actions taken by the Senior Management and Board of Directors of the Bank.
As the result of normal salary increases and the retention of the new Senior
Management group by the Board of Directors, salaries and employee benefits
increased from $1,260,389 for the year 1998 to $1,341,155 in 1999 and $1,854,455
for the year 2000. The Senior Management group also aggressively focused its
efforts in the resolution of impaired and nonperforming loans in the loan
portfolio, which resulted in charge-offs in 1999 of $1,214,027 and $905,544 in
2000. The provision for possible loan losses declined from $1,024,989 in 1998 to
$739,610 in 1999 to $660,869 in 2000. The significant effort by the Senior
Management and Board of Directors during the fall of 1999 and 2000 resulted in a
significant improvement of the quality of the assets in the loan portfolio and
the resolution of a number of issues with regard to impaired loans centered
primarily around real estate development activities in north central West
Virginia. As the direct result of the extensive effort by the Board of Directors
and Senior Management, the Cease & Desist Order was released by the West
Virginia Commissioner of Banking during July 2000.
The Corporation's earnings for 2000 were $362,287, or $1.91 per share, as
compared to $568,480, or $2.99 per share, in 1999. The earnings for the year
2000 were obviously impacted by the Board of Directors' decisions to retain
experienced Senior Management and to improve the overall asset quality of the
Corporation's loan portfolio.
F-25
138
RESULTS OF OPERATIONS
NET INTEREST INCOME
Taxable equivalent net interest income increased $216,000 for 2000, or 6%, in
comparison to 1999. As shown in Table 2, the taxable equivalent net yield on
earning assets increased during 2000 in comparison to 1999. Average earning
assets decreased only $1.2 million, or 1%, from 1999 to 2000, while
interest-bearing liabilities decreased $3.6 million, or 4%.
Taxable equivalent interest income increased $36,000 in 2000, or 5.2%, from
1999. This increase results primarily from an increase in average loan yields
and an increase in the volume of federal funds sold as well as an increase in
average yields on federal funds sold. Table 3 presents the impact of these
changes in volume and rate on interest income.
Interest expense decreased $179,000 in 2000, or 4.9%, from 1999. This decrease
results from a slight decrease in rates and also from a 4.5% decrease in average
interest bearing deposits during 2000. Table 3 presents the impact of these
changes in volume and rate on interest expense.
F-26
139
TABLE 2 - AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------- --------------------------------- ----------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
ASSETS
Loans:
Commercial and
Agriculture $28,493 $2,543 8.92% $ 31,421 $2,647 8.42% $ 34,040 $3,069 9.02%
Real Estate Mortgage 21,870 1,862 8.51% 18,473 1,606 8.69% 17,861 1,625 9.10%
Installment 9,376 933 9.95% 10,432 1,069 10.25% 10,200 1,033 10.13%
------------------ ------------------- -------------------
Total Loans 59,739 5,338 8.94% 60,326 5,322 8.82% 62,101 5,727 9.22%
------------------ ------------------- -------------------
Investments:
Taxable 26,430 1,668 6.31% 27,173 1,699 6.25% 19,916 1,422 7.14%
Tax Exempt 2,914 166 5.70% 2,919 157 5.38% 2,893 161 5.57%
------------------ ------------------- -------------------
Total Investments 29,344 1,834 6.25% 30,092 1,856 6.17% 22,809 1,583 6.94%
------------------ ------------------- -------------------
Federal Funds Sold 4,283 261 6.09% 4,117 223 5.42% 5,323 290 5.45%
------------------ ------------------- -------------------
Total Earning Assets 93,366 $7,433 7.96% 94,535 $7,401 7.83% 90,233 $7,600 8.42%
Cash and Due
from Banks 5,153 5,605 5,100
Premises and Equipment 2,200 2,439 2,623
Allowance for
Loan Losses (1,372) (1,400) (1,164)
Other Assets 1,644 1,861 2,457
-------- -------- --------
TOTAL ASSETS $100,991 $103,040 $ 99,249
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest Bearing Deposits
Demand $ 7,973 $ 184 2.31% $ 8,657 $ 222 2.56% $ 8,617 $ 220 2.55%
Savings 18,683 585 3.13% 18,750 610 3.25% 15,898 518 3.26%
Time 49,701 2,674 5.38% 52,519 2,791 5.31% 54,391 3,017 5.55%
------------------ ------------------- -------------------
Total Interest
Bearing Deposits 76,357 3,443 4.51% 79,926 3,623 4.53% 78,906 3,755 4.76%
Borrowings 0 0 0.00% 0 0 0.00% 0 0 0.00%
------------------ ------------------- -------------------
Total Interest
Bearing Liabilities 76,357 $3,443 4.51% 79,926 $3,623 4.53% 78,906 $3,755 4.76%
Non-interest Bearing
Deposits 15,525 13,537 11,644
Other Liabilities 1,489 2,146 1,159
Equity 7,620 7,431 7,540
-------- -------- ---------
TOTAL LIABILITIES
AND EQUITY $100,991 $103,040 $ 99,249
======== ======== ========
NET YIELD ON EARNING
ASSETS $3,990 4.27% $3,778 4.00% $3,845 4.26%
====== ==== ====== ==== ====== ====
TAXABLE EQUIVALENT NET
YIELD ON EARNING ASSETS $4,079 4.37% $3,863 4.09% $3,932 4.36%
====== ==== ====== ==== ====== ====
NOTES:
Total loans are gross of allowance for loan losses, net of unearned
income.
Nonaccrual loans were included in the average volume for the entire
year. Loan fees included in interest on loans are not material.
Average yields on securities available for sale have been calculated
based on amortized cost.
Taxable equivalent basis is calculated on tax-exempt securities using a
tax rate of 35% for each year presented.
F-27
140
TABLE 3 - RATE VOLUME ANALYSIS OF CHANGES IN
INTEREST INCOME AND INTEREST EXPENSE
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
2000 COMPARED TO 1999 1999 COMPARED TO 1998
---------------------------------------- ---------------------------------------
Net Increase Net Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
Increase (decrease) in interest income:
Total loans $ (43) $ 60 $ 17 $(160) $(245) $(405)
Taxable securities (48) 17 (31) 421 (144) 277
Tax-exempt securities 0 9 9 1 (5) (4)
Federal funds sold 9 29 38 (65) (2) (67)
----- ----- ----- ----- ----- -----
Total interest income change (82) 115 33 197 (396) (199)
----- ----- ----- ----- ----- -----
Increase (decrease) in interest expense:
Interest bearing demand deposits (17) (21) (38) 1 1 2
Savings deposits (3) (22) (25) 94 (2) 92
Certificates of deposit (154) 38 (116) (100) (126) (226)
Other borrowings 0 0 0 0 0 0
----- ----- ----- ----- ----- -----
Total interest expense change (174) (5) (179) (5) (127) (132)
----- ----- ----- ----- ----- -----
NET INTEREST INCOME INCREASE (DECREASE) $ 92 $ 120 $ 212 $ 202 $(269) $ (67)
===== ===== ===== ===== ===== =====
NOTES:
Changes to rate/volume are allocated to both rate and volume on
a proportionate dollar basis.
OTHER INCOME
Excluding realized net securities losses in 1999, other income increased
$63,000, or 5.7%, over 1999. This increase was primarily due to the increase in
service charges on deposit accounts of $58,000 in 2000, or 6.6%, from 1999.
In 1999 the Corporation experienced a net realized securities loss of $51,000
while the Corporation had no securities realized gains or losses in 2000 as the
Corporation had limited activity in its investment portfolio during the year
2000.
OTHER EXPENSES
Other expenses increased $761,000 in 2000, or 23.6%, from 1999. This increase
was primarily due to the increase in salaries and employee benefits of $513,000,
or 38%, over 1999 levels. The Corporation's subsidiary bank hired additional
personnel during the last quarter of 1999, including a CEO and three other
senior management personnel with significant commercial banking experience. The
additional management personnel were added to assist the subsidiary bank and
clear the Cease and Desist Order issued by state banking regulators in 1999. As
a result of the efforts of the Board of Directors and new Senior Management, the
regulators released the Cease and Desist Order in July 2000.
F-28
141
INCOME TAXES (CONTINUED)
The Corporation's effective tax rate decreased to 27% in 2000 from 33% in 1999.
This decline is primarily the result of the effect of tax exempt income. Tax
exempt income has remained constant for 2000 and 1999, but the percentage to
income before income taxes increased for 2000. Tax exempt income for 2000 was
$54,000 and resulted in an 11% effective tax rate reduction for 2000, while
tax-exempt income for 1999 was $52,000 and only resulted in a 6% effective tax
rate reduction in income taxes for 1999.
The Corporation is subject to a West Virginia corporate income tax, which is
based upon federal taxable income, with certain modifications. The statutory
West Virginia tax rate was 9.0% for 2000 and 1999. West Virginia income tax
included in the provision for income taxes was $24,000 for 2000 compared to
$49,000 for 1999.
FINANCIAL CONDITION
SECURITIES
Securities increased $384,000 between December 31, 2000 and 1999. As shown in
Table 4, the Corporation maintains an even mix between securities classes of
held to maturity and available for sale.
Held to maturity securities comprised 44.8% of total securities at December 31,
2000 compared to 47.2% at December 31, 1999. Held to maturity securities
decreased $532,000, or 3.89%, at December 31, 2000 from 1999. At December 31,
2000 the average yield of the held to maturity portfolio was 6.8%.
Available for sale securities comprised 55.2% of total securities at December
31, 2000 compared to 52.8% at December 31, 1999. Available for sale securities
increased $917,000, or 6.0%, at December 31, 2000 from 1999. At December 31,
2000 the average yield of the available for sale portfolio was 6.27%.
Unrealized gains/losses on available for sale securities (market value
adjustments) resulted in a $144,000 market loss as of December 31, 2000, down
from a $754,000 market loss as of December 31, 1999. This market loss was
reduced from 1999 to 2000, reflecting an increase in market value due to a
decrease in interest rates during 2000. Market value adjustments represent
temporary fluctuations in value resulting from changes in market rates in
relation to average yields in the available for sale portfolio. The Corporation
can adjust the volatility of the market value adjustment by managing both the
volume of securities classified as available for sale and average maturities. If
securities are held to their maturity dates, no gain or loss would be realized.
Securities represent a source of liquidity for the Corporation. During 2000, the
Corporation received investment principal paydowns of $786,000 on held to
maturity securities and principal paydowns of $512,000 on available for sale
securities.
F-29
142
TABLE 4 - COMPOSITION OF SECURITIES
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
-----------------------------------------------
2000 1999 1998
------- ------- -------
Securities held to maturity (at amortized cost):
U. S. Treasury and Federal Agency securities $ 4,749 $ 4,750 $ 3,801
Obligations of states and political subdivisions 2,966 2,718 2,832
Mortgage-backed and other debt securities 5,425 6,204 0
------- ------- -------
Total securities held to maturity 13,140 13,672 6,633
------- ------- -------
Securities available for sale (at market):
U. S. Treasury and Federal Agency securities 12,387 11,881 17,932
Obligations of states and political subdivisions 205 0 240
Mortgage-backed and other debt securities 3,592 3,387 1,729
------- ------- -------
Total securities available for sale 16,184 15,268 19,901
------- ------- -------
TOTAL SECURITIES $29,324 $28,940 $26,534
======= ======= =======
NOTES:
There are no individual securities included in obligations of state and
political subdivisions or other securities, which individually or in the
aggregate exceed ten percent of stockholders' equity.
TABLE 5 - MATURITY DISTRIBUTION AND YIELD ANALYSIS OF SECURITIES
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31, 2000
----------------------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS
----------------- ------------------ ------------------- -------------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------ ----- ------ ----- ------ -----
Securities Held to Maturity:
U. S. Treasury and Federal
Agency securities $ 250 6.47% $ 2,999 5.88% $ 0 0.00% $1,500 7.00%
Obligations of states and
political subdivisions 0 0.00% 2,250 8.10% 716 7.80% 0 0.00%
Mortgage-backed and other
debt securities 12 7.25% 1,571 7.25% 3,837 6.21% 5 N/A
------ ----- ------- ----- ------- ----- ------ ------
Total Held to Maturity 262 6.50% 6,820 6.92% 4,553 6.46% 1,505 7.00%
------ ----- ------- ----- ------- ----- ------ ------
Securities Available for Sale:
U. S. Treasury and Federal
Agency securities 1,000 5.72% 5,494 5.90% 4,988 6.54% 1,000 7.28%
Obligations of states and
political subdivisions 0 0.00% 203 6.74% 0 0.00% 0 0.00%
Mortgage-backed and other
debt securities 20 7.27% 2,068 6.09% 1,555 6.65% 0 0.00%
------ ----- ------- ----- ------- ----- ------ ------
Total Available for Sale 1,020 5.75% 7,765 5.97% 6,543 6.56% 1,000 7.28%
------ ----- ------- ----- ------- ----- ------ ------
TOTAL SECURITIES $1,282 5.90% $14,585 6.41% $11,096 6.52% $2,505 7.10%
====== ===== ======= ===== ======= ===== ====== ======
NOTES:
Yields are calculated using a weighted average yield to maturity.
Average yields on securities available for sale have been calculated
based on amortized cost.
Average yields on obligations of states and political subdivisions have
been calculated on a taxable equivalent basis. Other debt securities
include securities with no stated maturity dates.
Mortgage-backed securities, which have prepayment provisions, are
assigned to maturity categories based on estimated average lives.
F-30
143
LOANS
LOAN PORTFOLIO:
Loans at December 31, 2000 increased $1.6 million, or 2.8%, compared to loans at
December 31, 1999, as noted in Table 6. The net loan increase was primarily an
increase in residential mortgage loans of $4.4 million, or 25.4%, at December
31, 2000 while the other loan components experienced respective decreases.
Commercial loans decreased $1.9 million, or 6.6%, from 1999, while personal
loans decreased $1.2 million, or 12.1%, from 1999.
Referring to Table 6, commercial loans, at 45% of total loans, comprise the
single largest loan type in the loan portfolio. These loans are not concentrated
in any single industry, but reflect a broad range of businesses located
primarily within the Corporation's market area. The credit risk associated with
commercial lending is principally influenced by general economic conditions and
the resulting impact on the borrower's operations.
Residential real estate loans represent approximately 37% of total loans and
consist primarily of conventional adjustable and fixed rate residential
mortgages and home equity loans. The risks associated with real estate lending
are principally influenced by real property values, which are affected by
general economic conditions. Most of the real estate loans in the portfolio are
secured by properties located within the Corporation's market area.
Personal loans represent approximately 15% of total loans and consist primarily
of vehicle loans and other types of secured and unsecured consumer purpose
loans. Personal loans are a smaller loan balance, homogenous group of loans
which are concentrated within the Corporation's market area. Risks in this
lending category include the possibility of a general economic downturn which
may cause an increase in credit losses.
Except for speculative development by builders with long-standing relationships,
real estate-construction loans are only made when the Corporation also commits
to the permanent financing of the project or has a takeout commitment from
another lender for the permanent loan.
The Corporation follows lending policies which establish, among other things,
criteria for determining the repayment capacity of the borrower, requirements
for down payments and current market appraisals or other valuations of the
collateral when the loans are originated. The majority of loans are either
secured by real property or personal property.
The Corporation generally recognizes interest income on the accrual basis,
except for certain loans which are placed on a nonaccrual status, when in the
opinion of management, doubt exists as to loan collectibility. The subsidiary
bank must conform to regulatory policies which state that banks may not accrue
interest on any loan on which either the principal or interest is past due 90
days or more unless the loan is both well secured and in the process of
collection. When a loan is placed on a nonaccrual status, interest income may be
recognized as cash payments are received.
NON-PERFORMING ASSETS:
Non-performing assets consist of loans classified as impaired (nonaccrual and
certain loans internally classified as substandard or doubtful) and other real
estate owned. As noted in Table 8, at December 31, 2000, non-performing assets
increased to $3.8 million, or 6.5% of total loans. Non-performing loans are
generally secured by collateral believed to have adequate market values to
protect against significant loan losses. The Corporation continually monitors
its non-performing assets for deterioration in collateral values as it completes
its loan asset collection process.
ALLOWANCE FOR LOAN LOSSES:
The allowance for loan losses is available to absorb probable charge-offs. The
allowance is reduced by losses, net of recoveries, and increased by charging a
loan loss provision to operations to maintain the allowance at a level
determined appropriate by management. There can be no assurance that the
Corporation will not sustain credit losses in future periods, which could be
substantial in relation to the size of the allowance.
As shown in Table 9, at December 31, 2000, the allowance for loan losses to
total loans was 1.76% at December 31, 2000, down from 1.98% as of December 31,
1999. Net charge-offs for 2000 were $760,000 down from $1.1 million for 1999.
The decrease in net charge-offs reflects the continuing improvement in the
credit quality for all types of loans, as well as increased efforts to recover
loans charged off in prior periods.
F-31
144
ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The provision for loan losses was $661,000 in 2000 compared to $740,000 in 1999.
The provision is based on management's monthly evaluation of the loan portfolio
as well as prevailing and anticipated economic conditions, net loans charged
off, past loan experience, current delinquency factors, changes in the character
of the loan portfolio, specific problem loans and other factors.
The adequacy of the allowance for loan losses is evaluated monthly. Specific
reserves are established when warranted for loans. The determination of specific
reserves takes into consideration the anticipated future cash flows available to
pay the loan and/or the estimated realizable value of the collateral pledged and
other secondary repayment sources, if any. For consumer loans and all other
commercial loans not specifically reserved, management uses historical net
charge-off experience relative to loans outstanding to predict future losses.
Management further allocates against the reserve, when appropriate, based on
economic conditions, changes in loan underwriting standards or practices,
delinquency and other trends in the portfolio, specific industry conditions, the
results of recent internal loan reviews or regulatory examinations, and other
relevant factors that impact the loan portfolio.
Changes in the allocation of the allowance among the various loan types, as
noted in Table 10, are primarily the result of higher specific reserves on
certain commercial loans and growth in real estate loans.
Management expects to continue to reduce non-performing assets in 2001.
Management will continue to monitor the loan portfolio for possible
deterioration in credit quality.
LOAN RISK ELEMENTS AND CREDIT QUALITY:
The Corporation extends credit to individuals for various consumer purposes,
which include residential mortgage loans, construction loans, home equity lines
of credit, installment loans to purchase automobiles, and other personal loans.
The Corporation also extends credit to businesses of all types to purchase
assets, including commercial real estate, or to finance expansion, as well as
revolving lines of credit to finance operations and short-term loans for other
purposes. Credit risk, that is the risk that a borrower will default on a loan,
is inherent in all lending activities. The Corporation's primary goal in
managing credit risk is to minimize the impact of default by an individual
borrower or group of borrowers. Credit risk is managed both through the initial
underwriting process as well as through ongoing monitoring and administration of
the loan portfolio.
The Corporation has established standard credit policies to provide for
consistent underwriting of loans as well as procedures to assist in maintaining
and monitoring the overall credit quality of its loan portfolio. Credit policy
establishes: (1) underwriting guidelines for all types of loans; (2) lending
authorities; (3) exposures limits to individual borrowers or groups of
borrowers, as well as loan type, industry, and geographic concentrations; and
(4) loan portfolio administration procedures.
Loan underwriting guidelines require an appropriate evaluation of the
creditworthiness of each borrower; the adequacy of collateral, if any, to secure
the loan; and other factors unique to each loan that may increase or mitigate
its risks. Individual lending officers approve loans up to predetermined limits
depending on the type of loan. Loans above individual officers' lending
authorities require approval by the loan discount committee or the Board of
Directors. These loan approval requirements also apply to renewals and
extensions of loans. Exceptions to loan policy are permissible, but only after
careful evaluation of the credit risks associated with each exception and the
factors that may mitigate those risks.
Subsequent to loan origination, the process used to measure and monitor the
level of credit risk is dependent upon the type of loan. Consumer loans,
including residential mortgages, are generally smaller in amount and spread over
a larger number of diverse individual borrowers. Accordingly, credit risk in the
consumer portfolio can generally be managed effectively by monitoring the level
and trend of delinquent loans, and economic conditions that may impact a
borrower or group of borrowers. Commercial loans can be for substantially larger
amounts and the potential for loss as a result of default by any one borrower
can be significant. Therefore, credit risk in the commercial portfolio requires
periodic review of borrowing relationships and a loan grading system to help
management identify adverse trends and evaluate the quality of the loan
portfolio.
The Corporation maintains a loan grading system that categorizes all loans
according to their level of credit risk. All loans are assigned a grade at their
inception, and grades are regularly reviewed and evaluated. When the risk of a
loan increases beyond that which is considered acceptable in the assigned grade,
its grade is adjusted to reflect the change in its risk.
Classified loans are those that exhibit clear and defined weaknesses that may
jeopardize their recoverability. Loans are classified as "substandard" when they
are no longer adequately protected by the sound net worth and paying capacity of
the borrower or of the collateral pledged. Substandard loans are characterized
by the distinct possibility that the bank may sustain some loss. Loans are
classified as "doubtful" when the risk that a loss may occur has increased, or
at least a portion of the loan may require charge-off if liquidated at present.
Both substandard and doubtful loans include some loans that are delinquent or on
nonaccrual status.
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LOAN RISK ELEMENTS AND CREDIT QUALITY (CONTINUED)
The loan grading process provides management with an effective early warning
system of potential problems and also facilitates evaluating the adequacy of the
allowance for loan losses. The Corporation also maintains a loan review program.
The Corporation provides an internal loan review on a sample of loans written
during each month. This internal loan review selects a sample of loans
originated by each loan officer. The internal loan review reports are issued
monthly to the Chief Executive Officer of the Corporation. In addition to the
internal loan review, the Corporation has contracted with an outside consultant
to review all commercial loans over $100,000. This review includes all new loans
in addition to reviewing performance on older loans. This outside review is
performed periodically and reports are issued to the Chief Executive Officer of
the Corporation. The Corporation has outsourced its internal audit function. As
part of the internal audit function, a sample of new loans written is reviewed
quarterly. The internal audit function reports to the Audit Committee of the
Board of Directors. The loan review process further identifies areas that
require management's attention, evaluates the adequacy of loan administration
and documentation, and helps to ensure compliance with loan polices, and
validates the reliability of the loan grading system.
There are no significant loans made to customers outside the Corporation's
general market area. At December 31, 2000 there were no loan concentrations in
excess of 10% of total loans.
Management's review of the loan portfolio has not indicated any material amount
of loans, not disclosed in the accompanying tables and discussion which are
known to have possible credit problems which cause management to have serious
doubts as to the ability of each borrower to comply with their present loan
repayment terms.
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TABLE 6 - COMPOSITION OF LOANS
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
---------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------ ----------------- ------------------ ------------------ ------------------
% of % of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Loans:
Commercial $26,626 45% $28,517 50% $33,916 55% $31,612 55% $30,490 57%
Real estate -
construction 1,580 3% 1,309 2% 1,318 2% 2,329 4% 1,297 2%
Real estate -
residential 21,856 37% 17,423 30% 16,308 26% 14,818 25% 14,545 27%
Personal 8,910 15% 10,135 18% 10,674 17% 9,540 16% 7,495 14%
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL LOANS $58,972 100% $57,384 100% $62,216 100% $58,299 100% $53,827 100%
================ ================ ================ ================ ================
NOTES:
Loans are presented gross of allowance for loan losses and unearned
income on personal loans.
TABLE 7 - MATURITY DISTRIBUTION OF LOANS
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31, 2000
-------------------------------------------------------
AFTER ONE
IN ONE YEAR THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -----
Commercial $3,826 $3,499 $19,301 $26,626
Real estate - construction 235 100 1,245 1,580
------ ------ ------- -------
TOTAL $4,061 $3,599 $20,546 $28,206
====== ====== ======= =======
Fixed rates $1,713 $2,372 $ 1,895 $ 5,980
Variable rates 2,348 1,227 18,651 22,226
------ ------ ------- -------
TOTAL $4,061 $3,599 $20,546 $28,206
====== ====== ======= =======
NOTES:
Excludes personal and residential mortgage loans
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TABLE 8 - NONPERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Nonaccrual loans $1,821 $1,816 $1,227 $1,344 $1,397
Troubled debt restructuring 0 0 0 0 0
Other impaired loans 1,850 751 1,520 821 1,569
------ ------ ------ ------ ------
Total impaired loans 3,671 2,567 2,747 2,165 2,966
Other real estate owned 145 180 1,050 1,747 178
------ ------ ------ ------ ------
Total Non-Performing Assets $3,816 $2,747 $3,797 $3,912 $3,144
====== ====== ====== ====== ======
Percentage of non-performing assets
to loans outstanding 4.8% 5.4%
====== ====== ====== ====== ======
Accruing Loans 90 Days Past Due $ 0 $ 57 $ 152 $ 25 $ 0
====== ====== ====== ====== ======
NOTES: Other impaired loans include loans internally classified as doubtful and
substandard (as defined by banking regulations) that meet the definition
of impaired loans. The past due loans do not include non-accrual loans.
TABLE 9 - ALLOWANCE FOR LOAN LOSSES
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Beginning balance -
Allowance for loan losses $ 1,137 $ 1,455 $ 805 $ 604 $ 674
Provision for loan losses 661 740 1,025 612 482
Charge-offs
Commercial (652) (753) (83) (433) (493)
Real estate (89) (302) (419) 0 (16)
Personal (165) (159) (102) (62) (58)
------- ------- ------- ----- -----
Total charge-offs (906) (1,214) (604) (495) (567)
Recoveries:
Commercial 29 104 212 72 1
Real estate 72 16 6 5 3
Personal 45 36 11 7 11
------- ------- ------- ----- -----
Total recoveries 146 156 229 84 15
Net Charge-Offs (760) (1,058) (375) (411) (552)
------- ------- ------- ----- -----
Ending balance -
Allowance for loan losses $ 1,038 $ 1,137 $ 1,455 $ 805 $ 604
======= ======= ======= ===== =====
Ratio of net charge-offs to average total
loans outstanding for the period 1.31 1.75 0.62 0.73% 1.10
======= ======= ======= ===== =====
Ratio of the allowance for loan losses
to total loans outstanding at the end
of the period 1.76 1.98 2.34 1.38% 1.21
======= ======= ======= ===== =====
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TABLE 10 - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Commercial $ 736 $ 655 $1,068 $560 $407
Real estate - residential 191 231 89 35 29
Personal 103 36 254 191 168
Unallocated 8 215 44 19 0
------ ------ ------ ---- ----
TOTAL $1,038 $1,137 $1,455 $805 $604
====== ====== ====== ==== ====
NOTES:
No allocations were made for real estate - construction loans.
DEPOSITS AND OTHER BORROWINGS
Deposits increased $2.3 million between December 31, 2000 and 1999. As shown in
Table 2, the Corporation experienced a decrease in average interest bearing
deposits of $3.6 million from 1999 to 2000, while at the same time, experienced
an increase in average non-interest bearing deposits of $2.0 million.
The Corporation does not have any other borrowings for the periods shown.
TABLE 11 - MATURITY DISTRIBUTION OF
CERTIFICATES OF DEPOSITS
$100,000 OR MORE
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31,
----------------------
2000 1999
------ ------
Maturity:
Under three months $ 517 $ 840
Three to six months 1,235 1,075
Six to twelve months 1,095 1,484
Over twelve months 4,007 1,731
------ ------
TOTAL 6,854 5,130
Savings Deposits > $100,000 1,427 1,543
------ ------
TOTAL TIME DEPOSITS > $100,000 $8,281 $6,673
====== ======
CAPITAL ADEQUACY
Market value adjustments on securities available for sale, which represent
temporary market fluctuations resulting from changes in market rates, increased
to a net unrealized loss of $94,000 at December 31, 2000 compared to a net
unrealized loss of $490,000 at 1999.
During 2000, the Corporation was able to increase its dividends to $.80 per
share from $.60 per share in 1999.
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149
CAPITAL ADEQUACY (CONTINUED)
The Corporation is subject to risk-based capital guidelines that measure capital
relative to risk-weighted assets and off-balance sheet instruments. The
Corporation and its subsidiary bank maintain Tier I, Total Capital and Leverage
ratios well above minimum regulatory levels.
INTEREST RATE MANAGEMENT AND LIQUIDITY
ASSET/LIABILITY MANAGEMENT:
Interest rate management measures and monitors the sensitivity of net interest
earnings to changes in the level of interest rates. As interest rates change in
the market, rates earned on interest rate sensitive assets and rates paid on
interest rate sensitive liabilities do not necessarily move concurrently.
Differing rate sensitivities may arise because fixed rate assets and liabilities
may not have the same maturities or because variable rate assets and liabilities
differ in the timing and/or the percentage of rate changes.
The Corporation reviews its interest rate sensitivity on a periodic basis. This
review is performed by analyzing the maturity and repricing relationships
between rate sensitive assets and rate sensitive liabilities at a specific point
in time and by using a simulation model to estimate the impact on net interest
income of changing interest rates over a twelve-month projection period.
Net interest sensitivity, the difference between rate sensitive assets and
liabilities is a relatively simple analysis of the Corporation's Consolidated
Balance Sheet, but does not quantify the magnitude of the interest rate risk in
terms of changes in net interest income as interest rates change. Therefore,
management also considers the results of net interest income simulations using a
variety of interest rates changes. Key assumptions used in income simulation
include loan and deposit growth, pricing, interest sensitivity, and the level of
interest rate or balance changes on deposit growth, pricing, interest
sensitivity, and the level of interest rate or balance changes on deposit
products with no stated maturity such as savings and NOW deposits. These
assumptions have been developed through a combination of historical analysis and
future anticipated pricing.
As shown in Table 12, the liability sensitive position in the under three month
time period is primarily a result of $25.5 million in savings and NOW account
balances. Interest rates on these deposit instruments are subject to periodic
adjustment at management's discretion.
LIQUIDITY MANAGEMENT:
The Corporation manages its liquidity position to ensure that sufficient funds
are available to meet customer needs for borrowing and deposit withdrawals as
well as the operating cash needs of the Corporation. The Corporation's most
stable source of liquidity is its core deposit base. The principal source of
asset-funded liquidity is the securities portfolio. Securities liquidity include
securities classified as available for sale, which represented 55.2% and 52.8%
of total securities at December 31, 2000 and 1999. Also included in securities
liquidity are securities classified as held to maturity that are expected to
mature within a year, totaling $262,000 at December 31, 2000. Other sources of
asset-funded liquidity include cash balances and federal funds sold. As of
December 31, 2000, these two short-term funding sources totaled $9.9 million or
9.9% of total assets.
As of December 31, 2000 the Corporation had outstanding commitments to extend
credit in the ordinary course of business of $2.0 million. On a historical basis
only a small portion of these commitments result in expended funds. The
Corporation has no other material commitments to expend funds in 2001.
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TABLE 12 - INTEREST RATE SENSITIVITY ANALYSIS
FREEDOM BANCSHARES, INC.
($ IN THOUSANDS)
DECEMBER 31, 2000
-------------------------------------------------------------------------------------------
UNDER THREE SIX NINE OVER
THREE TO SIX TO NINE MONTHS TO ONE ONE
MONTHS MONTHS MONTHS YEAR YEAR TOTAL
-------- -------- -------- -------- ------- -------
Rate Sensitive Assets
Federal funds sold $ 4,950 $ 0 $ 0 $ 0 $ 0 $ 4,950
Securities 1,262 0 0 20 28,186 29,468
Loans 12,504 6,277 6,417 5,887 27,887 58,972
-------- -------- -------- -------- ------- -------
Total Rate Sensitive Assets 18,716 6,277 6,417 5,907 56,073 93,390
-------- -------- -------- -------- ------- -------
Rate Sensitive Liabilities
Money market deposit accounts 1,062 0 0 0 0 1,062
Savings and NOW accounts 25,523 0 0 0 0 25,523
Certificates of deposit 6,705 10,625 5,869 3,634 25,320 52,153
Other borrowings 0 0 0 0 0 0
-------- -------- -------- -------- ------- -------
Total Rate Sensitive Liabilities 33,290 10,625 5,869 3,634 25,320 78,738
-------- -------- -------- -------- ------- -------
NET INTEREST SENSITIVITY $(14,574) $ (4,348) $ 548 $ 2,273 $30,753 $14,652
======== ======== ======== ======== ======= =======
CUMULATIVE NET INTEREST SENSITIVITY $(14,574) $(18,922) $(18,374) $(16,101) $14,652
======== ======== ======== ======== =======
Notes: Securities are categorized above by expected maturity at cost.
COMPARISON OF 1999 VERSUS 1998 OPERATIONS
Net income for the year ended December 31, 1999 was $568,000 as compared to
$421,000 for 1998. This increase in net income is due primarily to a decrease in
the provision for loan loss of $285,000 or 27.8%, which was offset by a decrease
in net interest income of $68,000 or 1.7%.
On a fully taxable-equivalent basis, net interest income for 1999 decreased
$69,000 or 1.8% from 1998. The net interest margin was 4.00% for 1999 compared
to 4.26% for 1998. The 1999 decrease in the net interest margin is due primarily
to a decrease in all components of net interest income as follows:
Loans average yields decrease to 8.82% in 1999 from 9.22% in 1998
Investments average yields decrease to 6.17% in 1999 from 6.94% in 1998
The decrease in the provision for loan losses of $285,000 from 1998 to 1999 was
due primarily to a loan loss provision in 1998 to cover the anticipated losses
on three borrowers engaged in real estate rental, land development, and the
lumber industries.
Service charge income on deposit accounts was the most significant component of
other income. Service charges grew 9.5% in 1999 over 1998 or $76,000. The
increase in service charges income resulted from increased fees charged by
management to maintain competitive market pricing of the various service
charges. The other significant change in 1999 is the realized securities loss on
available for sale securities of $51,000. These losses resulted from the
Corporation's sale of certain investment securities in the continued efforts by
management to manage interest rate risk.
Total non-interest expense remained relatively unchanged in 1999 from the 1998
levels. Personnel costs, the single largest component of other expenses,
increased $81,000 in 1999 over 1998. The increase is due to normal wage and
fringe increases for the year. The decrease in premises and fixed assets of
$35,000 in 1999 relates to depreciation and costs of maintenance and service
contracts. Expenses related to other real estate holdings decreased $140,000 in
1999. The decrease is a result of management's continued effort to liquidate the
properties carried in other real estate in order to maximize returns on earning
assets. The increase for 1999 in legal and professional fees, dues and
assessments of $62,000 is due primarily to the impact of the Cease and Desist
Order.
The change in the effective tax rate, 33%, in 1999 from 29% in 1998 is due to a
reduction in the effect of tax exempt income.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
WesBanco's Bylaws provide, and West Virginia law permits (W. Va. Code
Section 31-1-9), the indemnification of directors and officers against certain
liabilities. Officers and directors of WesBanco and its subsidiaries are
indemnified generally against expenses reasonably incurred in connection with
proceedings in which they are made parties by reason of their being or having
been directors or offices of the corporation, except in relation to matters as
to which a recovery may be obtained by reason of an officer or director having
been finally adjudged derelict in such action or proceeding in the performance
of his duties.
A. Excerpts from Article VI of the Bylaws of WesBanco:
Indemnification of Directors and Officers
Each director and officer, whether or not then in office, shall be
indemnified by the corporation against all costs and expenses reasonably
incurred by and imposed upon him in connection with or resulting from any
action, suit or proceeding, to which he may be made a party by reason of his
being or having been a director or officer of the corporation, or of any other
company which he served at the request of the corporation, except in relation to
matters as to which a recovery shall be had against him by reason of his having
been finally adjudged derelict in such action, suit or proceeding, in the
performance of his duties as such director or officer, and the foregoing right
of indemnification shall not be exclusive of other rights to which he may be
entitled as a matter of law.
B. West Virginia Corporation Law, W. Va. Code Section 31-1-9:
Section 31-1-9. Indemnification of officers, directors, employees and agents.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines, taxes and penalties and interest thereon, and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, that such person did have
reasonable cause to believe that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or proceeding by or in the right of the corporation to procure
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
shall be made in respect of any claim, issue or matter, including, but not
limited to, taxes or any interest or penalties thereon, as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the court in which such action or proceeding was brought shall determine upon
application that, despite the adjudication
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152
of liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action or proceeding referred to in subsection (a) or (b), or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsection (a) or (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsection (a) or (b). Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action or proceeding, or (2) if such a
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the shareholders or members.
(e) Expenses (including attorney's fees) incurred in defending a civil or
criminal action or proceeding may be paid by the corporation in advance of the
final disposition of such action or proceeding as authorized in the manner
provided in Subsection (d) upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
(f) The indemnification provided by this section shall not be deemed
exclusive of any other rights to which any shareholder or member may be entitled
under any bylaw, agreement, vote of shareholders, members or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
(1961,c.15; 1974,c.13; 1975,c.118.)
WesBanco does provide indemnity insurance to its officers and directors.
Such insurance will not, however, indemnify officers or directors for willful
misconduct or gross negligence in the performance of a duty to WesBanco.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed herewith or incorporated herein by
reference as part of this Registration Statement:
EXHIBIT TITLE PAGE
- ------- ----- ----
2.1 Agreement and Plan of Merger (incorporated by reference to
Annex A of the Proxy Statement/Prospectus included in this
Registration Statement).
3.1 Articles of Incorporation of WesBanco, Inc., restated
as of November 17, 1995. *(1)
3.2 Articles of Amendment to the Articles of Incorporation of
WesBanco, Inc. *(6)
3.3 Bylaws of WesBanco, Inc. *(1)
4.1 Specimen Certificate of WesBanco, Inc. Common Stock. *(2)
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153
5.1 Opinion of Phillips, Gardill, Kaiser & Altmeyer, regarding
the validity of the WesBanco, Inc. common stock being
registered. (previously filed)
8.1 Form of Opinion of Kirkpatrick & Lockhart LLP as to certain
tax consequences of the merger. (filed herewith)
10.1 Restated WesBanco Directors' Deferred Compensation Plan,
effective December 15, 1994. *(1)
10.2 Key Executive Incentive Bonus and Option Plan. *(7)
10.3 Employment Agreements. *(3)(8)
10.4 Employment Continuity Agreement. *(5)
10.5 First Amendment to Employment Continuity Agreement *(13)
10.6 Form of Employment Agreement effective _______, 2001 by
and among Michael H. Hudnall, WesBanco, Inc. and
WesBanco Bank, Inc. (previously filed)
10.7 Form of Employment Agreement effective _______, 2001 by
and among Valerie (Staats) Hurst, WesBanco, Inc. and
WesBanco Bank, Inc. (previously filed)
10.8 Form of Change in Control Agreement effective _______, 2001
by and among Michael H. Hudnall, WesBanco, Inc. and WesBanco
Bank, Inc. (previously filed)
10.9 Change in Control Agreements *(9)
10.10 Stock Option Agreement (incorporated by reference to
Annex B of the Proxy Statement/Prospectus included in this
Registration Statement).
10.11 Salary Continuation Agreement *(13)
10.12 Executive Supplemental Income Agreement *(13)
10.13 Agreement and Plan of Merger dated February 22, 2001 by
and between WesBanco, Inc., WesBanco Bank, Inc.,
AB Corporation and American Bancorporation. *(12)
11.1 Computation of Earnings Per Share. *(10)
21.1 Subsidiaries of the Registrant. *(10)
23.1 Consent of Ernst & Young LLP, independent accountants
for WesBanco, Inc. (previously filed).
23.2 Consent of Conley Johnson, A.C., independent accountants
for Freedom Bancshares, Inc. (previously filed).
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer (included
in the opinion filed on Exhibit 5.1)
23.4 Consent of Kirkpatrick & Lockhart LLP (included in the
opinion filed as Exhibit 8.1).
23.5 Consent of Alex Sheshunoff & Co. Investment Banking, L.P.
(previously filed).
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154
24.1 Power of Attorney (included on signature page hereto).
99.1 Form of Proxy (filed herewith).
* Indicates document incorporated by reference.
(1) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-3905 which was filed with the Securities and Exchange Commission on
June 20, 1996.
(2) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-42157 which was filed with the Securities and Exchange Commission on
August 9, 1991.
(3) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-72228 which was filed with the Securities and Exchange Commission on
November 30, 1993.
(4) [Reserved]
(5) This exhibit is being incorporated by reference to a Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 11, 1999.
(6) This exhibit is being incorporated by reference to Form 10-Q filed
by WesBanco, Inc. with the Securities and Exchange Commission on
May 15, 1998.
(7) This exhibit is being incorporated by reference to Schedule 14A
(Appendix A) filed by WesBanco, Inc. with the Securities and Exchange
Commission on March 13, 1998.
(8) This exhibit is being incorporated by reference to Form 8-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
April 15, 1998.
(9) This exhibit is being incorporated by reference to a Form 10-Q filed
by WesBanco, Inc. with the Securities and Exchange Commission on
November 15, 1999.
(10) This exhibit is being incorporated by reference to a Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 30, 2001.
(11) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-74323 which was filed with the Securities and Exchange Commission on
March 12, 1999.
(12) This exhibit is being incorporated by reference to Form 8-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
February 23, 2001.
(13) This exhibit is being incorporated by reference to a Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 29, 2000.
Item 22. Undertakings.
The undersigned registrant hereby undertakes as follows:
(a) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(b) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933, as amended,
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
155
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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156
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Wheeling, West Virginia, on May 3, 2001.
WESBANCO, INC.
By: /s/ Edward M. George
-------------------------------------
Edward M. George
Its President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Edward M. George, his or her true and
lawful attorney-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documentation in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent with full power and authority to do and perform
each and every act and thing requisite and necessary to be done in or about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------- -------------------------- ---------------
* Director April __, 2001
- -------------------------------
James E. Altmeyer
* Director April 23, 2001
- -------------------------------
Ray A. Byrd
* Director April 23, 2001
- -------------------------------
R. Peterson Chalfant
* Director April 23, 2001
- -------------------------------
John H. Cheffy
* Director April 23, 2001
- -------------------------------
Christopher V. Criss
* Director April 23, 2001
- -------------------------------
James D. Entress
* Director April 23, 2001
- -------------------------------
Ernest S. Fragale
II-6
157
* Chairman, Director April 23, 2001
- -------------------------------
James C. Gardill
* President, Chief Executive April 23, 2001
- ------------------------------- Officer & Director
Edward M. George (Principal Executive Officer)
* Director April 23, 2001
- -------------------------------
Roland L. Hobbs
* Director April 23, 2001
- -------------------------------
John W. Kepner
Director April __, 2001
- -------------------------------
Frank R. Kerekes
* Executive Vice President April 23, 2001
- ------------------------------- & Chief Financial Officer
Paul M. Limbert (Principal Financial and
Accounting Officer)
Director April __, 2001
- -------------------------------
William E. Mildren, Jr.
* Director April 23, 2001
- -------------------------------
Joan C. Stamp
Director April __, 2001
- -------------------------------
Carter W. Strauss
Director April __, 2001
- -------------------------------
James W. Swearingen
Director April __, 2001
- -------------------------------
Reed J. Tanner
* Director April 23, 2001
- -------------------------------
Robert K. Tebay
Director April __, 2001
- -------------------------------
William E. Witschey
* /s/ Edward M. George
- -------------------------------
By Edward M. George
Attorney in Fact
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158
EXHIBIT INDEX
EXHIBIT TITLE PAGE
- ------- ----- ----
2.1 Agreement and Plan of Merger (incorporated by reference to
Annex A of the Proxy Statement/Prospectus included in this
Registration Statement).
3.1 Articles of Incorporation of WesBanco, Inc., restated as
of November 17, 1995. *(1)
3.2 Articles of Amendment to the Articles of Incorporation of
WesBanco, Inc. *(6)
3.3 Bylaws of WesBanco, Inc. *(1)
4.1 Specimen Certificate of WesBanco, Inc. Common Stock. *(2)
5.1 Opinion of Phillips, Gardill, Kaiser & Altmeyer, regarding
the validity of the WesBanco, Inc. common stock being
registered. (previously filed)
8.1 Form of Opinion of Kirkpatrick & Lockhart LLP as to certain
tax consequences of the merger. (filed herewith)
10.1 Restated WesBanco Directors' Deferred Compensation Plan,
effective December 15, 1994. *(1)
10.2 Key Executive Incentive Bonus and Option Plan. *(7)
10.3 Employment Agreements. *(3)(8)
10.4 Employment Continuity Agreement. *(5)
10.5 First Amendment to Employment Continuity Agreement *(13)
10.6 Form of Employment Agreement effective _______, 2001
by and among Michael H. Hudnall, WesBanco, Inc. and
WesBanco Bank, Inc. (previously filed)
10.7 Form of Employment Agreement effective _______, 2001
by and among Valerie (Staats) Hurst, WesBanco, Inc.
and WesBanco Bank, Inc. (previously filed)
10.8 Form of Change in Control Agreement effective _______, 2001
by and among Michael H. Hudnall, WesBanco, Inc. and
WesBanco Bank, Inc. (previously filed)
10.9 Change in Control Agreements *(9)
10.10 Stock Option Agreement (incorporated by reference to
Annex B of the Proxy Statement/Prospectus included in this
Registration Statement).
10.11 Salary Continuation Agreement *(13)
10.12 Executive Supplemental Income Agreement *(13)
10.13 Agreement and Plan of Merger dated February 22, 2001
by and between WesBanco, Inc., Wesbanco Bank, Inc.,
AB Corporation and American Bancorporation. *(12)
11.1 Computation of Earnings Per Share. *(10)
159
21.1 Subsidiaries of the Registrant. *(10)
23.1 Consent of Ernst & Young LLP, independent accountants
for WesBanco, Inc. (previously filed).
23.2 Consent of Conley Johnson, A.C., independent accountants
for Freedom Bancshares, Inc. (previously filed).
23.3 Consent of Phillips, Gardill, Kaiser & Altmeyer (included
in the opinion filed on Exhibit 5.1)
23.4 Consent of Kirkpatrick & Lockhart LLP (included in the
opinion filed as Exhibit 8.1).
23.5 Consent of Alex Sheshunoff & Co. Investment Banking, L.P.
(previously filed).
24.1 Power of Attorney (included on signature page hereto).
99.1 Form of Proxy (filed herewith).
* Indicates document incorporated by reference.
(1) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-3905 which was filed with the Securities and Exchange Commission on
June 20, 1996.
(2) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-42157 which was filed with the Securities and Exchange Commission on
August 9, 1991.
(3) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
33-72228 which was filed with the Securities and Exchange Commission on
November 30, 1993.
(4) [Reserved]
(5) This exhibit is being incorporated by reference to a Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 11, 1999.
(6) This exhibit is being incorporated by reference to Form 10-Q filed
by WesBanco, Inc. with the Securities and Exchange Commission on
May 15, 1998.
(7) This exhibit is being incorporated by reference to Schedule 14A
(Appendix A) filed by WesBanco, Inc. with the Securities and Exchange
Commission on March 13, 1998.
(8) This exhibit is being incorporated by reference to Form 8-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
April 15, 1998.
(9) This exhibit is being incorporated by reference to a Form 10-Q filed
by WesBanco, Inc. with the Securities and Exchange Commission on
November 15, 1999.
(10) This exhibit is being incorporated by reference to a Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 30, 2001.
(11) This exhibit is being incorporated by reference to a prior Registration
Statement filed by the Registrant on Form S-4 under Registration No.
333-74323 which was filed with the Securities and Exchange Commission on
March 12, 1999.
(12) This exhibit is being incorporated by reference to Form 8-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
February 23, 2001.
(13) This exhibit is being incorporated by reference to Form 10-K filed
by WesBanco, Inc. with the Securities and Exchange Commission on
March 30, 2000.