AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1994
REGISTRATION NO. 33-72228
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WESBANCO, INC.
(EXACT NAME OF REGISTRATION AS SPECIFIED IN ITS CHARTER)
WEST VIRGINIA 6711 55-0571723
(STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EDWARD M. GEORGE, PRESIDENT
WESBANCO, INC.
BANK PLAZA
WHEELING, WEST VIRGINIA 26003
(304) 234-9202
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
JAMES C. GARDILL, ESQUIRE
PHILLIPS, GARDILL, KAISER, BOOS & ALTMEYER
61 FOURTEENTH STREET
WHEELING, WEST VIRGINIA 26003
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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: [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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Common Stock, $2.0833
Par Value............. 2,221,304(1) $24.25(1) $50,879,022(1) $17,543.09(1)
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8% Cumulative
Convertible Preferred
Stock................. 10,000(2) $183.30(2) $1,833,000(2) $632.02(2)
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(1) Estimated solely for purpose of computing the registration fee based upon
the market value per share of the Common Stock, $1.25 par value, of First
Fidelity Bancorp, Inc. to be exchanged for Wesbanco Common Stock, $2.0833
par value. This number includes approximately 2,090,954 shares for the
exchange, 1,150 shares for fractional share buy up elections, and an
additional 6,000 shares for additional stock purchases in the First
Fidelity Dividend Reinvestment Plan. Pursuant to Rule 457(i), 123,200
shares of Common Stock have been excluded from the fee calculation since
such shares represent the estimated shares into which the Convertible
Preferred may be converted and the registration fee is calculated on the
Preferred Stock only.
(2) Estimated solely for purpose of computing the registration fee based upon
the book value of the First Fidelity 8% Cumulative Convertible Preferred
Stock to be exchanged for Wesbanco 8% Cumulative Convertible Preferred
Stock in accordance with Rule 457(f)(2) of the General Rules and
Regulations under the Securities Act of 1933.
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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Exhibit Index is on page .
WESBANCO, INC.
CROSS REFERENCE SHEET
FIRST FIDELITY BANCORP, INC.
(PURSUANT TO RULE 404 OF REGULATION C AND ITEM 501 OF REGULATION S-K SHOWING
THE LOCATION IN THE JOINT PROXY STATEMENT/PROSPECTUS OF THE ANSWERS TO THE
ITEMS OF PART I OF FORM S-4.)
CAPTION OR LOCATION
ITEM NUMBER IN PROSPECTUS/PROXY
S-4 STATEMENT
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Front Cover Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary Information; Market Prices and
Selected Financial Information; Selected
Pro Forma Financial Information;
Comparative Stock Prices and Dividends;
Pro Forma Data; Government Regulation
4. Terms of the Transaction.................. Summary Information; The Merger;
Comparative Rights of Shareholders
5. Pro Forma Financial Information........... Selected Pro Forma Financial Information;
The Merger--Accounting Treatment; Pro
Forma Data
6. Material Contacts with the Company Being
Acquired................................. Introduction; The Merger; Background of the
Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *
8. Interests of Named Experts and Counsel.... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Front Cover Page; Available Information;
Registrants.............................. Market Prices and Selected Financial
Information; Information with Respect to
Wesbanco; Index to Financial Statements-
Wesbanco; Government Regulation;
Incorporation of Documents by Reference.
11. Incorporation of Certain Information by
Reference................................ Incorporation of Documents by Reference;
Comparative Stock Prices and Dividends;
Information with respect to Wesbanco.
12. Information with Respect to S-2 or S-3
Registrants.............................. *
i
CAPTION OR LOCATION
ITEM NUMBER IN PROSPECTUS/PROXY
S-4 STATEMENT
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13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants........ *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies................................ *
16. Information with Respect to S-2 or S-3
Companies................................ Cover; Market Prices and Selected Financial
Information; Information with Respect to
First Fidelity; Government Regulation;
Index to Financial Statements-First
Fidelity; Incorporation of Documents by
Reference
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies.......... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited
(a)(1) Date, Time and Place Information.. Summary; Voting Information
(2) Revocability of Proxy............. Voting Information--Voting and Revocation
of Proxies
(3) Dissenters' Rights................ The Merger--Rights of Dissenting
Shareholders
(4) Persons Making the Solicitations.. Introduction; Voting Information; --
Solicitation of Proxies; The Merger--
Expenses
(5) (i) Interest of Certain Persons in
Matters to be Acted Upon........... The Merger--Interests of Certain Persons in
the Merger; Information with Respect to
First Fidelity
(ii) Voting Securities and Principal
Holders Thereof................ Voting Information--Voting and Revocation
of Proxies; Comparative Rights of
Shareholders; Information with Respect to
First Fidelity--Principal Shareholders;
Information with Respect to Wesbanco-
Principal Shareholders
(6) Vote Required for Approval........ Summary Information; Voting Information--
Voting and Revocation of Proxies; The
Merger--Wesbanco and FFB Shareholder
Approval; Conditions and Covenants
(7) (i) Directors and Executive
Officers...................... The Merger--Effects of the Merger; The
Surviving Corporation; Information with
Respect to First Fidelity; Information
with Respect to Wesbanco-Principal
Shareholders; Incorporation of Certain
Documents by Reference
(ii) Executive Compensation....... Incorporation of Certain Documents by
Reference; Information with Respect to
First Fidelity
ii
CAPTION OR LOCATION
ITEM NUMBER IN PROSPECTUS/PROXY
S-4 STATEMENT
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(iii) Certain Relationships and Related
Transactions.......................... Incorporation of Documents by Reference;
Information with Respect to First Fidelity
(iv) Relationship with Independent Public
Accountant............................ Pro Forma Data; Voting Information--
Accountants; Relationship with Independent
Accountants
(v) Incorporation by Reference............ Incorporation of Certain Documents by
Reference
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer.................. *
20. Indemnification of Directors and Part II--Indemnification of Directors and
Officers................................. Officers
21. Exhibits and Financial Statement Part II--Exhibits; Financial Statement
Schedules................................ Schedules
22. Undertakings.............................. Part II--Undertakings
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* Indicates a negative response or item is not applicable.
iii
[WESBANCO LETTERHEAD]
January 12, 1994
Dear Wesbanco Shareholder:
You are cordially invited to attend a Special Meeting of shareholders of
Wesbanco, Inc. ("Wesbanco") to consider the acquisition of First Fidelity
Bancorp, Inc. ("First Fidelity") by Wesbanco. The Special Meeting will be held
in the Board of Directors Room of Wesbanco Bank Wheeling, Bank Plaza, Wheeling,
WV, on Wednesday, February 16, 1994, at 4:00 p.m., local time.
As is explained in the attached Notice of Special Meeting of Shareholders,
the purpose of the Special Meeting is to consider and vote upon an
authorization for the issuance of up to 2,221,304 shares of common stock, par
value $2.0833 per share, of Wesbanco, and 10,000 shares of Wesbanco 8%
Cumulative Convertible Preferred Stock in exchange for all of the outstanding
common stock, par value $1.25 per share, of First Fidelity Common Stock and all
of the outstanding 8% Cumulative Convertible Preferred Stock of First Fidelity
pursuant to the terms and conditions of the Agreement and Plan of Merger by and
between Wesbanco, First Fidelity and FFB Corporation, dated August 26, 1993.
The Board of Directors of Wesbanco carefully reviewed the terms of the
Agreement and Plan of Merger and the proposed merger. The Board of Directors of
Wesbanco has unanimously approved the proposed merger and recommends a vote FOR
approval of the authorization for the issuance of the above-identified shares.
You are urged to carefully review the attached Proxy Statement, which
describes the proposed transaction more fully.
It is important that your shares be represented at the Special Meeting,
whether or not you are personally able to attend the meeting. The transaction
as proposed requires the affirmative vote of the holders of at least a majority
of the outstanding shares of Wesbanco Common Stock. In order to insure that
your vote is represented, please complete and sign the enclosed form of Proxy
and return it promptly in the enclosed envelope. If you attend the special
meeting, you may revoke your Proxy at the special meeting by voting in person.
Sincerely,
EDWARD M. GEORGE
President and Chief Executive Officer
[FIRST FIDELITY LETTERHEAD]
January 12, 1994
Dear First Fidelity Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
First Fidelity Bancorp, Inc. ("First Fidelity") to consider the acquisition of
First Fidelity by Wesbanco, Inc. ("Wesbanco"). The Special Meeting will be held
in the 7th Floor Conference Room of First National Bank in Fairmont, 301 Adams
Street, Fairmont, West Virginia on Wednesday, February 16, 1994 at 11:00 a.m.,
local time.
As is explained in the attached Notice of Special Meeting of Shareholders,
the purpose of the Special Meeting is to consider and vote upon the approval of
the Agreement and Plan of Merger, by and between Wesbanco, First Fidelity and
FFB Corporation, a wholly-owned subsidiary of Wesbanco, dated as of August 26,
1993. If this agreement is approved and the merger is consummated, each share
of First Fidelity common stock that you own will be converted into .9 share of
Wesbanco common stock and each share of First Fidelity preferred stock that you
own will be converted into one share of Wesbanco preferred stock.
The Board of Directors of First Fidelity carefully reviewed the terms of the
Agreement and Plan of Merger and the proposed merger. Due to the significance
of the proposed merger to all shareholders of First Fidelity, the Board of
Directors retained LSC Financial Services, Inc. to render its opinion as to the
fairness from a financial point of view of the terms of the merger to the
shareholders of First Fidelity. After considering a variety of factors,
including the favorable fairness opinion of LSC Financial, the Board of
Directors of First Fidelity unanimously approved the proposed merger, and
recommends a vote FOR approval of the Agreement and Plan of Merger.
You are urged to carefully review the attached Proxy Statement, which
describes the proposed merger more fully.
It is important that your shares be represented at the Special Meeting
whether or not you are personally able to attend the meeting. For the Agreement
and Plan of Merger to be approved, the affirmative vote of the holders of at
least two-thirds of the outstanding shares of First Fidelity common stock and
the affirmative vote of the holders of a majority of the 10,000 shares of First
Fidelity Preferred Stock entitled to vote on such agreement is required. In
order to ensure that your vote is represented, please complete and sign the
enclosed form of proxy and return it promptly in the enclosed envelope. If you
attend the Special Meeting, you may revoke your proxy at the Special Meeting by
voting in person.
Sincerely,
Patrick L. Schulte President and
Chief Executive Officer
FIRST FIDELITY BANCORP, INC.
P.O. BOX 1152
FAIRMONT, WEST VIRGINIA 26554
(304) 363-1300
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 1994
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TO THE SHAREHOLDERS OF FIRST FIDELITY BANCORP, INC.:
Notice is hereby given that a special meeting (the "Special Meeting") of the
shareholders of First Fidelity Bancorp, Inc. ("First Fidelity") will be held on
Wednesday, February 16, 1994, at 11:00 A.M., in the 7th Floor Conference Room
of First National Bank in Fairmont, 301 Adams Street, Fairmont, West Virginia,
for the purpose of considering and voting on the following matters:
1. Approval of the Agreement and Plan of Merger by and between Wesbanco,
Inc., First Fidelity and FFB Corporation, dated as of August 26, 1993 (the
"Agreement and Plan of Merger"), in the form attached to the accompanying
Joint Proxy Statement/Prospectus as Appendix II, providing for (i) the
Merger of First Fidelity with and into FFB Corporation, a newly formed,
wholly owned subsidiary of Wesbanco, Inc., (ii) the exchange of each share
of common stock, par value $1.25 per share, of First Fidelity for .9 share
of common stock of Wesbanco, par value $2.0833 per share, and (iii) the
exchange of each share of 8% Cumulative Convertible Preferred Stock of
First Fidelity for one share of 8% Cumulative Convertible Preferred Stock
of Wesbanco, all on the terms described in the Agreement and Plan of Merger
and summarized in the Joint Proxy Statement/Prospectus; and
2. Such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof.
Only shareholders of record at the close of business on January 7, 1994, will
be entitled to notice of and to vote at the Special Meeting and any adjournment
or postponement thereof.
The vote of each shareholder, regardless of the number of shares held, is
important. The failure of a holder of common stock to vote will constitute a
vote against the proposed Merger. Accordingly, if you cannot attend the Special
Meeting in person, please mark, sign and date the accompanying Proxy and return
it promptly in the enclosed envelope, which requires no postage if mailed in
the United States. It is important that proxies be mailed promptly. If the
enclosed Proxy is executed and returned, it may be revoked at any time prior to
the voting of the Proxy by written notice to the Secretary of First Fidelity,
by a duly executed, later-dated Proxy or orally by the shareholder at the
Special Meeting.
Dated: January 11, 1994
By Order of the Board of Directors
/s/ Frank R. Kerekes
_____________________________________
Secretary
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE AS PROMPTLY
AS POSSIBLE.
WESBANCO, INC.
BANK PLAZA
WHEELING, WV 26003
(304) 234-9000
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 16, 1994
----------------
TO THE SHAREHOLDERS OF WESBANCO, INC.:
Notice is hereby given that a special meeting (the "Special Meeting") of the
shareholders of Wesbanco, Inc. ("Wesbanco") will be held on Wednesday, February
16, 1994, at 4:00 P.M., in the Board of Directors Room of Wesbanco Bank
Wheeling, Bank Plaza, Wheeling, West Virginia, for the purpose of considering
and voting on the following matters:
1. Authorization for the issuance of up to 2,221,304 shares of common
stock, par value $2.0833 per share, of Wesbanco and 10,000 shares of
Wesbanco 8% Cumulative Convertible Preferred Stock in exchange for all of
the outstanding common stock, par value $1.25 per share, of First Fidelity
Bancorp, Inc. ("First Fidelity"), Fairmont, West Virginia, and all of the
outstanding 8% Cumulative Convertible Preferred Stock of First Fidelity
pursuant to the terms and conditions of the Agreement and Plan of Merger,
by and between Wesbanco, First Fidelity and FFB Corporation, dated August
26, 1993, attached to the accompanying Joint Proxy Statement/Prospectus as
Appendix II.
2. Such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof.
Only shareholders of record at the close of business on January 7, 1994, will
be entitled to notice of and to vote at the Special Meeting and any adjournment
or postponement thereof.
The vote of each shareholder, regardless of the number of shares held, is
important. Accordingly, if you cannot attend the Special Meeting in person,
please mark, sign and date the accompanying Proxy and return it promptly in the
enclosed envelope, which requires no postage if mailed in the United States. It
is important that proxies be mailed promptly. If the enclosed Proxy is executed
and returned, it may be revoked at any time prior to the voting of the Proxy by
written notice to the Secretary of Wesbanco, by duly executed, later-dated
Proxy or orally by the shareholder at the Special Meeting.
Dated: January 11, 1994
By Order of the Board of Directors
/s/ Shirley A. Bucan
_____________________________________
Secretary
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE AS PROMPTLY
AS POSSIBLE.
JOINT PROXY STATEMENT/PROSPECTUS
WESBANCO, INC.
BANK PLAZA, WHEELING, WV 26003
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SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 16, 1994.
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FIRST FIDELITY BANCORP, INC.
P.O. BOX 1152
FAIRMONT, WEST VIRGINIA 26554
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SPECIAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 16, 1994.
This Joint Proxy Statement, which is also a Prospectus of Wesbanco, Inc.
("Wesbanco") (the "Joint Proxy Statement/Prospectus") is being furnished to
holders of common stock and holders of preferred stock of First Fidelity
Bancorp, Inc., a West Virginia corporation ("First Fidelity"), and holders of
common stock of Wesbanco, a West Virginia corporation, in connection with the
solicitation of proxies by the Boards of Directors of First Fidelity and
Wesbanco for use at their respective Special Meetings of Shareholders to be
held on February 16, 1994, and any adjournments or postponements thereof, to
consider and take action upon the proposed merger of First Fidelity with FFB
Corporation, a wholly-owned subsidiary of Wesbanco (the "Merger") as described
in this Joint Proxy Statement/Prospectus. As used in this Joint Proxy
Statement/Prospectus, the terms "First Fidelity" and "Wesbanco" refer to such
corporations, respectively, and where the context requires, such entities and
their subsidiaries.
All information contained in this Joint Proxy Statement/Prospectus with
respect to First Fidelity has been supplied by First Fidelity, and all
information with respect to Wesbanco and FFB has been supplied by Wesbanco.
This Joint Proxy Statement/Prospectus, the attached Notice and the enclosed
Letter to Shareholders and Proxy are first being mailed to shareholders of
First Fidelity and Wesbanco on or about January 12, 1994.
Wesbanco has filed a Registration Statement pursuant to the Securities Act of
1933, as amended, (the "Securities Act") covering a maximum of 2,221,304 shares
of Common Stock (par value $2.0833) of Wesbanco and 10,000 shares of 8%
Cumulative Convertible Preferred Stock of Wesbanco to be issued in connection
with the Merger (the "Registration Statement").
No person is authorized to give any information or to make any
representations not contained in this Joint Proxy Statement/Prospectus, and, if
given or made, such information or representation should not be relied upon as
having been authorized. This Joint Proxy Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Joint Proxy Statement/Prospectus, or the
solicitation of a Proxy, in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation of any offer or proxy solicitation
in such jurisdiction. Neither the delivery of this Joint Proxy
Statement/Prospectus nor any distribution of the securities to which this Joint
Proxy Statement/Prospectus relates shall, under any circumstances, create any
implication that there has been no change in the affairs of First Fidelity or
Wesbanco since the date of this Joint Proxy Statement/Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is January 11, 1994.
1
AVAILABLE INFORMATION
Wesbanco and First Fidelity each are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
each files reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). Information, as of particular
dates, concerning directors and officers of Wesbanco and First Fidelity,
respectively, their compensation, the principal holders of securities and any
material interest of such persons in transactions with their respective
companies is disclosed in proxy statements distributed to shareholders and
filed with the Commission. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549;
and at the Commission's Regional offices at 7 World Trade Center, New York, New
York, 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois, 60661. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C., 20549 at prescribed rates.
Wesbanco's common stock and First Fidelity's common stock each are listed on
the National Market System of NASDAQ and accordingly periodic reports, proxy
and information statements concerning Wesbanco or First Fidelity may be
inspected at the offices of the NASDAQ National Market System, 1735 K Street,
N.W., Washington, D.C. 20006
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
FILED BY WESBANCO WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS ARE AVAILABLE UPON REQUEST WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST TO SHIRLEY A. BUCAN, SECRETARY,
WESBANCO, INC., BANK PLAZA, WHEELING, WEST VIRGINIA, 26003, (TELEPHONE (304)
234-9000). IN ORDER TO INSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY FEBRUARY 9, 1994.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
FILED BY FIRST FIDELITY WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS ARE AVAILABLE UPON REQUEST WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO FRANK R. KEREKES, SECRETARY,
FIRST FIDELITY BANCORP, INC., P.O. BOX 1152, FAIRMONT, WEST VIRGINIA, 26554,
(TELEPHONE (304) 363-1300). IN ORDER TO INSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 9, 1994.
2
JOINT PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION...................................................... 2
SUMMARY INFORMATION........................................................ 5
MARKET PRICES AND SELECTED FINANCIAL INFORMATION........................... 12
Market Prices............................................................ 12
Selected Financial Information........................................... 12
SELECTED PRO FORMA FINANCIAL INFORMATION................................... 15
INTRODUCTION............................................................... 16
VOTING INFORMATION......................................................... 16
Date, Time and Place of the Special Meetings............................. 16
Voting and Revocation of Proxies......................................... 16
Solicitation of Proxies.................................................. 17
Accountants.............................................................. 18
Date for Submission of Shareholder Proposals............................. 18
THE MERGER................................................................. 18
General.................................................................. 18
Background of the Merger................................................. 18
Recommendation of the Boards of Directors................................ 19
First Fidelity Reasons for the Merger.................................... 19
Wesbanco Reasons for the Merger.......................................... 20
Interest of Certain Persons in the Merger................................ 20
Opinion of Investment Advisor............................................ 23
Effective Time........................................................... 27
Conversion of First Fidelity Common Stock and Preferred Stock............ 27
Exchange of Certificates................................................. 28
Wesbanco and FFB Shareholder Approval.................................... 28
Effects of the Merger: The Surviving Corporation......................... 28
Conditions and Covenants................................................. 29
Approval by First Fidelity and Wesbanco Shareholders.................... 30
Government Approvals.................................................... 30
Covenants............................................................... 31
Other Conditions........................................................ 31
Waiver and Amendment..................................................... 32
Termination.............................................................. 32
The Stock Option Agreement............................................... 32
Rights of Dissenting Shareholders........................................ 33
Resales of Wesbanco Common Stock and Wesbanco Preferred Stock............ 34
Expenses................................................................. 35
Accounting Treatment..................................................... 35
Certain Federal Income Tax Consequences of the Merger.................... 35
COMPARATIVE STOCK PRICES AND DIVIDENDS..................................... 36
Wesbanco Stock Prices and Dividends...................................... 36
Stock Price Range........................................................ 36
Dividends Paid........................................................... 37
Wesbanco Common Stock Dividend Policy.................................... 37
Proposed Wesbanco Preferred Stock........................................ 37
First Fidelity Stock Prices and Dividends Paid--Common Stock............. 38
First Fidelity Dividend Policy........................................... 38
First Fidelity Preferred Stock........................................... 39
3
PAGE
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COMPARATIVE RIGHTS OF SHAREHOLDERS......................................... 39
Description of Wesbanco Capital Stock.................................... 39
Description of First Fidelity Capital Stock.............................. 40
Comparison of Rights of Wesbanco and First Fidelity Shareholders......... 41
PRO FORMA DATA............................................................. 43
COMPARATIVE PER SHARE DATA................................................. 50
INFORMATION WITH RESPECT TO WESBANCO....................................... 51
History.................................................................. 51
Future Acquisitions...................................................... 51
Operations............................................................... 52
Competition.............................................................. 54
Principal Shareholders................................................... 54
Wesbanco ESOP............................................................ 55
Changes in West Virginia Taxes........................................... 56
Directors and Executive Officers......................................... 57
Executive Compensation................................................... 57
Certain Relationships and Related Transactions........................... 57
INFORMATION WITH RESPECT TO FIRST FIDELITY................................. 57
History.................................................................. 57
Banking Services......................................................... 58
Competition.............................................................. 58
Economic Conditions...................................................... 59
Monetary Policies........................................................ 60
Properties............................................................... 60
Legal Proceedings........................................................ 60
Principal Shareholders................................................... 60
Directors and Executive Officers......................................... 61
Executive Compensation................................................... 61
Certain Relationships and Related Transactions........................... 61
GOVERNMENT REGULATION...................................................... 61
Holding Company Structure................................................ 62
Dividend Restrictions.................................................... 63
FDIC Insurance........................................................... 63
Capital Requirements..................................................... 63
Federal Deposit Insurance Corporation Improvement Act of 1991............ 65
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 67
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS.................................. 67
LEGAL MATTERS.............................................................. 68
EXPERTS.................................................................... 68
LEGAL PROCEEDINGS.......................................................... 68
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
APPENDICES................................................................. A-1
I.Statutory Excerpts Concerning Dissenters' Rights of Appraisal.......... A-1
II.Agreement and Plan of Merger.......................................... A-3
III.Stock Option Agreement............................................... A-33
IV. Proxy Statement of Wesbanco, Inc..................................... A-39
4
SUMMARY INFORMATION
The following is a brief summary of certain information with respect to
matters to be considered at the Special Meetings of Shareholders of First
Fidelity and Wesbanco. This summary is necessarily incomplete and is qualified
in its entirety by the more detailed information and financial statements
contained in this Joint Proxy Statement/Prospectus and in the Agreement and
Plan of Merger and the Stock Option Agreement attached as Appendices II and
III, respectively, to this Joint Proxy Statement/Prospectus.
Date, Time, and Place of
the Special Meetings.......
The meeting of the shareholders of First Fidelity
Bancorp, Inc. ("First Fidelity") will be held on
Wednesday, February 16, 1994, at 11:00 A.M.
Eastern Standard Time in the 7th Floor Confer-
ence Room of First National Bank in Fairmont
("First National"), 301 Adams Street, Fairmont,
West Virginia, 26554. See "Voting Information".
The meeting of the shareholders of Wesbanco, Inc.
("Wesbanco") will be held on Wednesday, February
16, 1994, at 4:00 P.M. Eastern Standard Time in
the Directors Room of Wesbanco Bank Wheeling,
Bank Plaza, Wheeling, WV 26003. See "Voting In-
formation".
Purpose of the Special First Fidelity's meeting will be to consider and
Meetings................... vote upon the Agreement and Plan of Merger dated
as of August 26, 1993, (the "Agreement"), pro-
viding for (i) the merger (the "Merger") of
First Fidelity with and into FFB Corporation
("FFB"), a wholly owned subsidiary of Wesbanco
which has been formed for purposes of effecting
the Merger, (ii) the exchange of each outstand-
ing share of common stock, par value $1.25 per
share ("First Fidelity Common Stock") for .9
share of Wesbanco common stock, par value
$2.0833 per share ("Wesbanco Common Stock"), and
(iii) the exchange of each outstanding share of
First Fidelity 8% Cumulative Convertible Pre-
ferred Stock ("First Fidelity Preferred Stock")
for one share of Wesbanco 8% Cumulative Convert-
ible Preferred Stock ("Wesbanco Preferred
Stock"). See "Voting Information" and "The Merg-
er".
Wesbanco's meeting will be to authorize the issu-
ance of up to 2,221,304 shares of Wesbanco Com-
mon Stock and 10,000 shares of Wesbanco Pre-
ferred Stock to be issued in connection with the
Merger. See "Voting Information" and "The Merg-
er".
Parties to the Merger....... Wesbanco is a multi-bank holding company incorpo-
rated under the laws of the State of West Vir-
ginia which conducts a general commercial bank-
ing and trust business through its bank subsidi-
aries. It owns nine subsidiary banks located in
West Virginia and Eastern Ohio with its princi-
pal subsidiary being Wesbanco Bank Wheeling. Its
principal executive offices are located at Bank
Plaza, Wheeling, West Virginia, 26003, telephone
(304) 234-9000. See "Information with Respect to
Wesbanco".
5
FFB is a West Virginia corporation and is a
wholly owned subsidiary of Wesbanco which has
been formed solely for purposes of effecting the
Merger.
First Fidelity is a multi-bank holding company
incorporated under the laws of the State of West
Virginia which conducts a general commercial
banking and trust business through its bank sub-
sidiaries. It owns four subsidiary banks located
in West Virginia and conducts business princi-
pally in the communities of Fairmont, Morgan-
town, Shinnston and Bridgeport. Its principal
executive offices are located at 301 Adams
Street, Fairmont, West Virginia, 26554, tele-
phone (304) 363-1300. See "Information with Re-
spect to First Fidelity".
Anti-Takeover Provisions....
The Agreement provides for the exchange of each
share of First Fidelity Common Stock for .9
share of Wesbanco Common Stock; and each share
of First Fidelity Preferred Stock for one share
of Wesbanco Preferred Stock. The Articles of In-
corporation of First Fidelity contain certain
anti-takeover provisions. The Articles of Incor-
poration of Wesbanco also contain anti-takeover
provisions, including, among others, a super ma-
jority voting provision and a staggered Board of
Directors provision as more fully explained
herein. Additionally, the Articles of Incorpora-
tion of Wesbanco provide that the Board of Di-
rectors of Wesbanco may issue, without share-
holder approval, up to 1,000,000 shares of pre-
ferred stock in one or more series, with such
preferences, voting rights, conversion rights
and other special rights as the Board may deter-
mine. The rights of holders of Wesbanco Common
Stock are subject to the rights and preferences
of any preferred stock issued by the Wesbanco
Board of Directors to the extent set forth in a
resolution fixing such terms and conditions. Un-
der certain circumstances, additional shares of
Wesbanco Common Stock or shares of Wesbanco Pre-
ferred Stock which are authorized but not issued
could be used to create voting impediments or to
frustrate persons seeking to gain control of
Wesbanco through acquisition of a substantial
number of shares of Wesbanco Common Stock. See
"Comparative Rights of Shareholders--Comparison
of Rights of Wesbanco and First Fidelity Share-
holders." These anti-take over provisions pro-
vide the continuity and stability of management
that is considered essential to providing share-
holders with long-term value on their invest-
ments, allow the Board greater flexibility, and
permit the issuance of additional common and
preferred shares without the expense and delay
of a shareholders' meeting. These provisions
also constitute defensive measures which are de-
signed, in part, to discourage and to insulate
Wesbanco against certain hostile takeover ef-
forts, which the Wesbanco Board might determine
are not in Wesbanco's best interests and the
best interests of its shareholders. The stag-
gered board provision makes it more difficult to
change the full Board of Directors of Wesbanco
at any one time and make it more
6
difficult to amend the specific provisions of
the Articles of Incorporation which deal with
the classification of directors. The staggered
board provision reduces the number of directors
to be elected at each annual meeting, so that
minority shareholders may be in a less favorable
position to elect directors through cumulative
voting. Such provisions may also be beneficial
to management in a hostile takeover attempt and
adversely affect shareholders who might wish to
participate in such a takeover. See "Comparative
Rights of Shareholders".
Vote Required for Merger....
Approval of the Merger requires the affirmative
vote of the holders of two-thirds of the out-
standing shares of First Fidelity Common Stock
and the affirmative vote of the holders of a ma-
jority of the outstanding shares of First Fidel-
ity Preferred Stock entitled to vote as of Janu-
ary 7, 1994, the record date for the Special
Meeting. As of the record date, the directors
and officers of First Fidelity and its affili-
ates, beneficially owned 416,161 shares of First
Fidelity Common Stock representing 17.9% of the
outstanding shares and 4,769 shares of First Fi-
delity Preferred Stock representing 47.7% of the
outstanding shares. See "Information with Re-
spect to First Fidelity--Principal Shareholders"
and "Voting Information--Voting and Revocation
of Proxies."
Approval of the Merger also requires the affirma-
tive vote of the sole shareholder of FFB.
The authorization for the issuance of additional
Wesbanco Common Stock and Wesbanco Preferred
Stock requires the affirmative vote of the hold-
ers of a majority of the outstanding shares of
Wesbanco entitled to vote as of the record date,
January 7, 1994. See "Wesbanco and FFB Share-
holder Approval".
Terms of the Merger......... Upon the effective date of the Merger, each out-
standing share of First Fidelity Common Stock
will be converted into .9 (9/10ths) share of
Wesbanco Common Stock. Cash will be paid in lieu
of issuing fractional shares of Wesbanco Common
Stock in connection with the Merger based on a
whole share value of $32.00 per share, or at the
election of each shareholder, such shareholder
may elect to purchase the remaining fraction of
such share, at the aforesaid value. Each holder
of First Fidelity Preferred Stock will be enti-
tled to receive one share of Wesbanco Preferred
Stock for each share held. For additional infor-
mation concerning the treatment of First Fidel-
ity shares in the Merger, and the effect of the
Merger upon First Fidelity shareholders, see
"The Merger". It is contemplated that First Fi-
delity will be merged with a wholly owned sub-
sidiary of Wesbanco, FFB, with FFB being the
surviving corporation under the Articles of In-
corporation of FFB. FFB will maintain its sepa-
rate identity and continue its operations as an
affiliate of Wesbanco. If the Merger had been
concluded on September 30, 1993, First Fidelity
would have constituted 23% of deposits, 23% of
assets,
7
21% of equity, and the former shareholders of
First Fidelity would hold 24% of the total out-
standing shares of Wesbanco on a consolidated
pro forma basis. In addition, First Fidelity
would have contributed 25% of net interest in-
come and 19% of net income of Wesbanco on a con-
solidated pro forma basis as of September 30,
1993. See "The Merger--Effects of the Merger:
The Surviving Corporation" and "Selected Pro
Forma Financial Information".
Dissenters' Rights..........
Any holder of First Fidelity Common Stock or
First Fidelity Preferred Stock who files written
objection to the proposed Merger prior to or at
the Special Meeting, does not vote in favor of
the proposed Merger, makes written demand on
First Fidelity within ten days following the
Special Meeting, and surrenders his certificates
within twenty days after making the demand for
notation thereon that such demand has been made,
will be entitled to receive in cash the fair
value of his shares determined as of the day
prior to the date of the Special Meeting, with-
out regard to any appreciation or depreciation
in anticipation of the Merger, upon compliance
with all statutory requirements. Holders of
Wesbanco Common Stock will not be entitled to
dissenters' rights in the transaction. See "The
Merger--Rights of Dissenting Shareholders," and
"Appendix I". It is a condition to the obliga-
tions of Wesbanco and First Fidelity to consum-
mate the Merger that the holders of not more
than 10% of First Fidelity Common Stock and
First Fidelity Preferred Stock exercise their
dissenters' rights. See "The Merger--Conditions
and Covenants".
Federal Income Tax Consummation of the Merger is conditioned upon
Consequences............... receipt of a ruling from the Internal Revenue
Service, or an opinion of counsel, that, among
other things, the Merger will be treated as a
tax free reorganization for Federal Income Tax
purposes upon consummation of the Merger except
for dissenting shareholders and shareholders who
receive cash for fractional shares. See "The
Merger--Certain Federal Income Tax Consequences
of the Merger."
Regulatory Approvals........
Notwithstanding approval by the shareholders of
First Fidelity, FFB and Wesbanco, the consumma-
tion of the Merger is subject to certain condi-
tions, including approval of the Board of Gover-
nors of the Federal Reserve System, and the
Board of Banking and Financial Institutions of
the State of West Virginia. Applications for ap-
proval with the regulatory authorities were
filed. The approval of the Federal Reserve Board
was received on December 7, 1993, and the ap-
proval of the West Virginia Board of Banking and
Financial Institutions was received on December
13, 1993. See "The Merger--Conditions and Cove-
nants" and "Termination".
Effective Date of Merger....
The Effective Date of the Merger is anticipated
to occur shortly after the Special Meetings upon
receipt of all regulatory approv-
8
als and satisfaction of all conditions in the
Agreement and such approvals. See "The Merger--
Effective Time."
Shareholders Entitled to
Vote....................... On January 7, 1994, there were 2,327,485 shares
of First Fidelity Common Stock and 10,000 shares
of First Fidelity Preferred Stock outstanding.
Only holders of record of First Fidelity Common
Stock and holders of record of First Fidelity
Preferred Stock at the close of business on Jan-
uary 7, 1994, are entitled to vote at the Spe-
cial Meeting. See "Voting Information". On Janu-
ary 7, 1994, there were 6,578,328 shares of
Wesbanco Common Stock outstanding. Only holders
of record of Wesbanco Common Stock at the close
of business on January 7, 1994, are entitled to
vote at the Special Meeting. See "Voting Infor-
mation".
As of January 7, 1994, Wesbanco held 500 shares
of First Fidelity Common Stock. Directors,
executive officers and affiliates of Wesbanco
owned 900 shares of First Fidelity Common Stock
as of such date.
Exchange of Certificates.... As promptly as practicable after the Effective
Date, instructions on how to effect the exchange
of certificates of First Fidelity Common Stock
and First Fidelity Preferred Stock for certifi-
cates of Wesbanco Common Stock and Wesbanco Pre-
ferred Stock will be sent to each First Fidelity
shareholder of record as of the Effective Date.
See "The Merger--Exchange of Certificates."
First Fidelity shareholders should not send in
stock certificates until they receive instruc-
tions to do so.
Wesbanco Common Stock....... Holders of Wesbanco Common Stock are entitled to
one vote per share on all matters voted upon by
shareholders, are entitled to cumulative voting
rights in the election of directors and do not
have preemptive rights for the purchase of addi-
tional shares of any class of Wesbanco Common
Stock or Wesbanco Preferred Stock. Holders of
Wesbanco Common Stock are entitled to receive
such dividends as may be declared by Wesbanco's
Board of Directors out of funds legally avail-
able therefor. In the event of the liquidation
or winding up of the affairs of Wesbanco, hold-
ers of Wesbanco Common Stock would be entitled
to share ratably in all assets remaining after
payment to creditors. See "Comparative Rights of
Shareholders."
Conditions to Consummation;
Termination................ Consummation of the Merger is subject to various
conditions, including, among others, approvals
by the above noted regulatory authorities, the
holders of First Fidelity Common Stock, the
holders of First Fidelity Preferred Stock, the
holders of Wesbanco Common Stock, and receipt of
the tax opinion or ruling mentioned above.
Wesbanco and First Fidelity have also reserved
the right to terminate the Merger if the holders
of more than 10% of First Fidelity Common Stock
and First Fidelity Preferred Stock exercise dis-
senters' rights with respect to their stock.
Wesbanco has reserved the right to terminate the
Merger
9
in the event the transaction cannot be accounted
for as a "pooling-of-interests" for accounting
purposes, in addition to other conditions. First
Fidelity has reserved the right to terminate the
Merger if the average of the market price of
Wesbanco Common Stock falls below $28 per share.
See "The Merger-Conditions and Covenants"; "Ter-
mination".
Interest of Certain Persons
in the Merger.............. The Agreement provides that Robert H. Martin,
Patrick L. Schulte, Frank K. Abruzzino and Earl
C. Atkins will become directors of Wesbanco on
the Effective Date, and further, that Messrs.
Martin and Schulte will become members of the
Executive Committee of the Board of Directors of
Wesbanco. In addition, it is a condition to con-
summation of the Merger that Patrick L. Schulte,
President of First Fidelity and First National
Bank in Fairmont ("First National"), Robert A.
Martin, Chairman of First Fidelity and a direc-
tor of First National, Frank R. Kerekes, a di-
rector of First Fidelity and an Executive Vice
President of First National, Robert E. Moran,
President of Bridgeport Bank, a wholly owned
subsidiary of First Fidelity ("Bridgeport"), and
Frank K. Abruzzino, President of FirstBank
Shinnston, a wholly owned subsidiary of First
Fidelity ("FirstBank"), and a director of First
Fidelity, enter into employment agreements with
the applicable subsidiary banks of First Fideli-
ty. See "The Merger-Interests of Certain Persons
in the Merger".
The Stock Option Agreement.. First Fidelity and Wesbanco entered into a Stock
Option Agreement as of August 26, 1993 (the
"Stock Option Agreement"). A copy of the Stock
Option Agreement is attached to this Joint Proxy
Statement/Prospectus as Appendix III. Pursuant
to the Stock Option Agreement, First Fidelity
granted Wesbanco an Option (the "Option") to
purchase up to 464,405 shares of First Fidelity
Common Stock at an exercise price of $26.00 per
share payable in cash, which represented approx-
imately 19.9% of the outstanding First Fidelity
Common Stock as of such date. The Option is ex-
ercisable by Wesbanco upon the occurrence of
certain events, including, among others, the
commencement by any person of a tender offer for
15% or more of First Fidelity Common Stock; the
filing by any person of an application to merge,
or consolidate with, or sell substantially all
of First Fidelity's assets to, any person; the
acquisition by any person of 15% or more of
First Fidelity Common Stock; the commencement by
any person of a public proposal to acquire First
Fidelity; or the willful breach by First Fidel-
ity of a covenant not to solicit or initiate
proposals from third parties with respect to any
acquisition of First Fidelity. See "The Merger-
The Stock Option Agreement".
Financial Information....... Financial Statements for the interim period ended
September 30, 1993, for First Fidelity and
Wesbanco are included herein. See "Index to Fi-
nancial Statements."
10
For the nine months ended September 30, 1993,
Wesbanco's net income was $11,241,000 or $1.70
per share. Total assets were approximately
$1,038,085,000, total deposits were approxi-
mately $853,520,000 and total shareholders' eq-
uity was approximately $122,838,000.
For the nine months ended September 30, 1993,
First Fidelity's net income was $2,625,000 or
$1.07 per share. Total assets were approximately
$310,083,000, total deposits were approximately
$259,210,000 and total stockholders' equity was
approximately $32,244,000.
11
MARKET PRICES AND SELECTED FINANCIAL INFORMATION
MARKET PRICES
Wesbanco Common Stock and First Fidelity Common Stock are quoted in the over-
the-counter market and are reported through NASDAQ on the National Market
System. These stock price ranges may not necessarily represent actual
transactions. See "Comparative Stock Prices and Dividends".
WESBANCO FIRST FIDELITY
------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------- -------
Market Price Per Share:
As of January 5, 1994............................ $29.38 $29.00 $ 25.13 $ 24.50
As of August 25, 1993 (1)........................ 34.00 34.00 $ 23.50 $ 23.25
Pro Forma Equivalent (2)......................... -- -- $ 30.60 $ 30.60
- --------
(1) August 25, 1993, is the date immediately preceding public announcement of
the proposed Merger.
(2) The pro forma equivalent was computed by multiplying the exchange ratio by
the average of the high and low price of Wesbanco as of August 25, 1993.
The exchange ratio is .9 shares of Wesbanco Common Stock for 1 share of
First Fidelity Common Stock.
THERE IS CURRENTLY NO MARKET FOR THE FIRST FIDELITY PREFERRED STOCK AND IT IS
NOT ANTICIPATED THAT THERE WILL BE A MARKET FOR THE WESBANCO PREFERRED STOCK.
THERE IS NO EXPECTATION THAT ANY SUCH MARKET WILL DEVELOP, AND THERE CAN BE NO
ASSURANCE AS TO THE PRICE THAT MAY BE AVAILABLE TO A SHAREHOLDER DESIRING TO
SELL SHARES OF WESBANCO PREFERRED STOCK. WESBANCO HAS NO INTENTION OF SEEKING
TO LIST WESBANCO PREFERRED STOCK ON ANY EXCHANGE OR TO HAVE IT INCLUDED ON THE
NASDAQ SYSTEM.
SELECTED FINANCIAL INFORMATION
The following pages present selected financial information for the years
ended December 31, 1988 through 1992, and for the nine months ended September
30, 1993 and 1992, for each of Wesbanco and First Fidelity.
The information should be read in conjunction with the more detailed
information in the financial statements contained or incorporated herein by
reference, including the Notes thereto. See "Index to Financial Statements" and
"Incorporation of Certain Documents by Reference."
12
WESBANCO, INC.
Selected Financial Information
(in thousands, except for share and per share data)
For the nine months ended
September 30,
------------------------- For the year ended
1993 1992 December 31,
---- ---- ---------------------------------------------------------
(Unaudited) 1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Interest income $ 55,861 $ 58,838 $ 77,797 $ 82,645 $ 84,493 $ 80,218 $ 73,173
Interest expense 23,934 29,529 38,122 46,358 50,130 46,242 41,044
---------------------------------------------------------------------------------
Net interest income 31,927 29,309 39,675 36,287 34,363 33,976 32,129
---------------------------------------------------------------------------------
Provlsion for possible loan losses 1,700 1,578 2,850 2,337 1,984 1,978 1,706
---------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 30,227 27,731 36,825 33,950 32,379 31,998 30,423
Total other income 6,504 6,417 8,450 7,810 7,247 6,830 6,587
Total other expense 21,353 20,847 27,668 26,799 24,922 23,784 23,775
---------------------------------------------------------------------------------
Income before income taxes and effect
of change in accounting for post-
retirement benefits 15,378 13,301 17,607 14,961 14,704 15,044 13,235
Provision for income taxes 4,137 3,675 4,683 3,723 3,424 3,790 3,106
---------------------------------------------------------------------------------
Income before effect of change in
accounting for postretirement benefits 11,241 9,626 12,924 11,238 11,280 11,254 10,129
Effect of change in accounting for
postretirement benefits --- (592) (592) --- --- --- ---
---------------------------------------------------------------------------------
Net income $ 11,241 $ 9,034 $ 12,332 $ 11,238 $ 11,280 $ 11,254 $ 10,129
=================================================================================
Earnings per share of common stock: (1)
Net income $ 1.70 $ 1.37 $ 1.87 $ 1.70 $ 1.71 $ 1.70 $ 1.53
Average shares outstanding 6,601,533 6,613,400 6,613,382 6,610,722 6,617,748 6,614,944 6,618,686
Total Assets $1,038,085 $1,001,962 $1,010,104 $ 966,501 $ 946,220 $ 886,140 $ 853,207
Total Deposits 853,520 833,332 838,171 801,016 789,040 745,492 722,451
Total Equity 122,838 114,729 116,991 109,720 101,982 94,592 86,504
Cash dividends declared per share .585 .525 .70 .675 .65 .60 .575
Boak value per share (1) 18.67 17.35 17.69 16.59 15.43 14.27 13.09
(1) Per share information has been retroactively adjusted for the April 1993 two
for one stock split.
13
FIRST FIDELITY BANCORP INC.
Selected Financial Information
(in thousands, except for share and per share data)
(Unaudited)
For the nine months ended For the year ended
------------------------- ------------------------------------------------------
September 30, December 31,
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
Interest income $ 16,444 $ 18,181 $ 23,974 $ 26,340 $ 21,283 $ 19,297 $ 17,299
Interest expense 6,002 7,695 9,961 12,964 11,195 10,367 9,189
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 10,442 10,486 14,013 13,376 10,088 8,930 8,110
---------- ---------- ---------- ---------- ---------- ---------- ----------
Provision for possible loan losses 255 315 429 626 384 358 172
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest income after provision for
possible loan losses 10,187 10,171 13,584 12,750 9,704 8,572 7,938
Total other income 1,028 1,048 1,413 1,357 999 779 743
Total other expense 7,217 7,119 9,609 9,426 7,179 6,456 6,548
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 3,998 4,100 5,388 4,681 3,524 2,895 2,133
Provision for income taxes 1,373 1,405 1,841 1,516 1,063 843 508
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 2,625 $ 2,695 $ 3,547 $ 3,165 $ 2,461 $ 2,052 $ 1,625
========== ========== ========== ========== ========== ========== ==========
Earnings per share of common stock: (1)
Net income $ 1.07 $ 1.11 $ 1.46 $ 1.30 $ 1.25 $ 1.09 $.86
Average shares outstanding 2,318,287 2,303,604 2,307,195 2,295,623 1,961,686 1,888,176 1,889,875
Preferred stock dividends and discount
accretion 138 138 184 184 18 --- ---
Total Assets $ 310,083 $ 302,776 $ 306,192 $ 302,818 $ 299,526 $ 211,342 $ 209,330
Total Deposits 259,210 252,849 257,651 256,227 251,575 176,566 179,722
Redeemable Preferred Stock 1,833 1,801 1,809 1,777 1,745 --- --
Total Equity 32,244 30,020 30,478 28,143 26,191 21,690 20,424
Cash dividends declared per common share .39 .39 .521 .491 .486 .454 .454
Book value per share (1) 13.88 12.99 13.21 12.26 13.35 11.49 10.81
(1) Per share information has been retroactively adjusted for the July 1992 10%
stock dividend.
14
SELECTED PRO FORMA FINANCIAL INFORMATION
The following information provides certain selected unaudited pro forma
information for the merger for the periods indicated. This information, which
reflects the application of the pooling-of-interests method of accounting, is
based upon the pro forma financial data which appears elsewhere in this document
(see "Pro Forma Data") and should be read in conjunction with those statements.
Pro forma per share data has been calculated using the number of outstanding
shares of WesBanco Common Stock after giving effect to the proposed acquisition
of all of the outstanding shares of First Fidelity Common Stock.
PRO FORMA COMBINED (in thousands, except for per share amounts)
- -------------------
September 30, December 31,
---------------------- ----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance Sheet (unaudited)
- -------------
(Balance as of:)
Total Assets $1,348,159 $1,304,738 $1,316,294 $1,269,319 $1,245,746 $1,097,482 $1,062,537
Loans - Net 720,428 693,882 700,012 675,687 638,434 575,485 557,005
Deposits 1,112,730 1,086,181 1,095,822 1,057,243 1,040,615 922,058 902,173
Redeemable Preferred Stock 1,833 1,801 1,809 1,777 1,745 --- ---
Stockholders' Equity 155,073 144,749 147,467 137,863 128,173 116,282 106,928
Book Value Per Share 17.89 16.65 16.96 16.22 15.10 13.96 12.86
For the Nine Months Ended
September 30, For the Year Ended December 31,
1993 1992 1992 1991 1990 1989 1988
---------------------- ----------------------------------------------------------
Income Statement (unaudited)
- ----------------
Net Interest Income $ 42,369 $ 39,795 $ 53,688 $ 49,663 $ 44,451 $ 42,906 $ 40,239
Provision for Loan Losses 1,955 1,893 3,279 2,963 2,368 2,336 1,878
Net Income 13,866 11,729 15,879 14,403 13,741 13,306 11,754
Preferred Stock Dividends and
Discount Accretion 138 138 184 184 18 --- ---
Per Share Data: WesBanco
Net Income Per Share $ 1.58 $ 1.33 $ 1.81 $ 1.64 $ 1.64 $ 1.60 $ 1.41
Dividends Per Share .585 .525 .70 .675 .65 .60 .575
Average Shares Outstanding 8,687,991 8,686,644 8,689,858 8,676,783 8,383,265 8,314,302 8,319,574
Equivalent Per Share Data:
First Fidelity Bancorp, Inc.
Net Income $ 1.42 $ 1.19 $ 1.63 $ 1.48 $ 1.48 $ 1.44 $ 1.27
Dividends Per Common Share .527 .473 .63 .608 .585 .54 .518
15
INTRODUCTION
This Joint Proxy Statement/Prospectus and the accompanying proxy are being
mailed to the shareholders of First Fidelity and Wesbanco on or about January
12, 1994, in connection with the solicitation of proxies by the Board of
Directors of First Fidelity of the holders of First Fidelity Common Stock and
the holders of First Fidelity Preferred Stock and the Board of Directors of
Wesbanco of its shareholders to be voted at the Special Meetings of First
Fidelity and Wesbanco shareholders (the "Special Meetings") called, with
respect to First Fidelity, to consider and vote upon the Agreement and Plan of
Merger dated August 26, 1993, (the "Agreement") providing for (i) the Merger of
First Fidelity with and into FFB, a wholly owned subsidiary of Wesbanco, (ii)
the exchange of each outstanding share of First Fidelity Common Stock for .9
share of Wesbanco Common Stock, and (iii) the exchange of each outstanding
share of First Fidelity Preferred Stock for one share of Wesbanco Preferred
Stock, and with respect to Wesbanco, to authorize the issuance of Wesbanco
Common Stock and Wesbanco Preferred Stock in conjunction with the transaction.
The Boards of Directors of First Fidelity and Wesbanco unanimously have
approved the Agreement, and the Boards of Directors of First Fidelity and
Wesbanco recommend unanimously that their shareholders vote FOR approval
thereof. For information concerning the background of, reasons for and terms
and conditions of the Merger and the interests of certain persons, including
members of the Board of Directors of First Fidelity in the Merger, see "THE
MERGER", including "Background of the Merger", "Recommendation of the Boards of
Directors", "Wesbanco Reasons for the Merger", "First Fidelity Reasons for the
Merger", and "Interests of Certain Persons in the Merger."
A copy of the Agreement is attached to this Joint Proxy Statement/Prospectus
as Appendix II and is incorporated by reference herein in its entirety. See
also the following subheadings under "THE MERGER": "Conditions and Covenants,"
"Waiver and Amendment" and "Termination". All information concerning First
Fidelity contained herein has been supplied by First Fidelity, and all
information concerning Wesbanco contained herein has been supplied by Wesbanco.
VOTING INFORMATION
DATE, TIME AND PLACE OF THE SPECIAL MEETINGS
The Special Meeting of First Fidelity will be held on Wednesday, February 16,
1994, at 11:00 A.M., Eastern Standard Time, in the 7th Floor Conference Room of
First National, at 301 Adams Street in Fairmont, West Virginia.
The Special Meeting of Wesbanco will be held on Wednesday, February 16, 1994,
at 4:00 P.M., Eastern Standard Time, in the Board of Directors Room of Wesbanco
Bank Wheeling, Bank Plaza, Wheeling, West Virginia.
VOTING AND REVOCATION OF PROXIES
Only holders of record of First Fidelity Common Stock, holders of record of
First Fidelity Preferred Stock and holders of record of Wesbanco Common Stock
on January 7, 1994, the Record Date, will be entitled to notice of and to vote
at the Special Meetings of First Fidelity and Wesbanco and any adjournments or
postponements thereof. On the Record Date, there were outstanding and entitled
to vote 2,327,485 shares of First Fidelity Common Stock, and 10,000 shares of
First Fidelity Preferred Stock, with each share entitled to one vote. As of
January 7, 1994, First Fidelity Common Stock was held by approximately 1,154
shareholders of record and First Fidelity Preferred Stock was held by
approximately 43 shareholders of record. On such Record Date, there were
outstanding and entitled to vote 6,578,328 shares of Wesbanco Common Stock,
with each share entitled to one vote. As of January 7, 1994, Wesbanco Common
Stock was held by approximately 2,911 shareholders of record.
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The presence, in person or by proxy, of the holders of a majority of the
2,327,485 shares of First Fidelity Common Stock entitled to vote and of the
holders of a majority of the 10,000 shares of First Fidelity Preferred Stock
entitled to vote is necessary to constitute a quorum at the Special Meeting.
The affirmative vote of the holders of at least two-thirds of the outstanding
2,327,485 shares of First Fidelity Common Stock entitled to vote at the Special
Meeting, or 1,551,657 shares, and the affirmative vote of the holders of a
majority of the 10,000 shares of First Fidelity Preferred Stock entitled to
vote at the special meeting is required for approval of the Agreement and the
Merger. With respect to the First Fidelity Common Stock, abstentions and broker
non-votes will have the effect of a vote against approval of the Agreement and
the Merger. With respect to the First Fidelity Preferred Stock, abstentions and
broker non-votes will not constitute or be counted as votes cast for purposes
of the Special Meeting.
The presence, in person or by proxy, of the holders of a majority of the
6,578,328 shares of Wesbanco Common Stock entitled to vote is necessary to
constitute a quorum at Wesbanco's Special Meeting. The affirmative vote of a
majority of the 6,578,328 shares of Wesbanco Common Stock entitled to vote at
the Special Meeting is required for approval of the issuance of Wesbanco Common
Stock and Wesbanco Preferred Stock. With respect to the Wesbanco Common Stock,
abstentions and broker non-votes will not constitute or be counted as votes
cast for purposes of the Special Meeting.
As of the Record Date, the directors and officers of First Fidelity and its
affiliates beneficially owned approximately, in the aggregate, 416,161 shares
of First Fidelity Common Stock, constituting in the aggregate approximately
17.9% of the outstanding First Fidelity Common Stock as of such date and 4,769
shares of First Fidelity Preferred Stock, constituting in the aggregate
approximately 47.7% of the outstanding First Fidelity Preferred Stock as of
such date.
As of the Record Date, Wesbanco's directors, officers and their affiliates
beneficially owned approximately, in the aggregate, 922,656 shares of Wesbanco
Common Stock, constituting in the aggregate approximately 14.02% of the
outstanding Wesbanco Common Stock as of such date. If all of these shares were
voted in favor of the proposal, they would represent approximately 28.05% of
the votes needed to approve the proposal by Wesbanco.
As of January 7, 1994, Wesbanco held 500 shares of First Fidelity Common
Stock. Directors, executive officers and affiliates of Wesbanco owned 900
shares of First Fidelity Common Stock as of such date.
All shares of First Fidelity Common Stock, and Preferred Stock and Wesbanco
Common Stock represented at the Special Meetings by properly executed proxies
received prior to or at the Special Meetings, and not revoked, will be voted at
the Special Meetings in accordance with the instructions on the proxies. If no
instructions are indicated, properly executed proxies will be voted to approve
the Agreement and authorize the issuance of Wesbanco Common Stock and Wesbanco
Preferred Stock.
The Boards of Directors of First Fidelity and Wesbanco do not know of any
matters, other than as described in the Notices of Special Meeting, which are
to come before the Special Meetings. If any other matters are properly
presented at the Special Meetings for action, the persons named in the enclosed
form of proxy and acting thereunder, all of whom are either directors of First
Fidelity or Wesbanco, will have the authority to vote on such matters in their
discretion.
A shareholder giving a proxy has the right to revoke it at any time before it
is voted by filing with the Secretary of First Fidelity or Wesbanco a written
notice of revocation or a duly executed later-dated proxy, or orally at the
Special Meetings.
SOLICITATION OF PROXIES
Proxies are being solicited by the Boards of Directors of First Fidelity and
Wesbanco for use at the Special Meetings. Each Company will bear the cost of
the solicitation of proxies from the holders of its own
17
shareholders in connection with its Special Meeting, except that Wesbanco will
bear substantially all the costs relating to the printing and mailing of the
Joint Proxy Statement/Prospectus. In addition to solicitation by use of the
mails, proxies may be solicited by directors, officers and employees of First
Fidelity and Wesbanco in person or by telephone or telegram. Such 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 First Fidelity Common Stock and Preferred Stock and Wesbanco Common
Stock held of record by such persons, and First Fidelity and Wesbanco may
reimburse such custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses they incur in connection therewith.
ACCOUNTANTS
Ernst & Young, certified public accountants have been independent auditors
for First Fidelity and its predecessors since 1975. Representatives of Ernst &
Young are expected to be present at the First Fidelity Special Meeting to
respond to appropriate questions and will also have the opportunity to make a
statement if they desire to do so. See "Relationship With Independent
Accountants" and "Experts".
Price Waterhouse serves as Wesbanco's independent accountant. It is expected
that representatives of Price Waterhouse will be present at the Special
Meeting. Such representatives will have the opportunity to make a statement if
they desire to do so and will be available to respond to questions.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
In the event that the Merger has not been consummated by the date of the next
First Fidelity annual meeting, shareholder proposals may be submitted to the
attention of Frank Kerekes, Secretary, First Fidelity Bancorp, Inc., P.O. Box
1152, Fairmont, West Virginia, 26554. Such proposals were to have been received
by First Fidelity no later than the 26th day of November, 1993.
THE MERGER
The following description of the terms of the Merger is qualified in its
entirety by reference to the provisions of the Agreement and the Stock Option
Agreement, which are attached hereto as Appendices II and III, respectively,
and are incorporated herein by reference in their entirety. Shareholders of
both corporations are strongly encouraged to read the Agreement and the Stock
Option Agreement for a more complete description of the terms of the Merger and
the related Option.
GENERAL
Pursuant to the Agreement, First Fidelity will merge with and into FFB, a
wholly owned subsidiary of Wesbanco formed solely for purposes of the Merger,
which will be the surviving corporation. Under the Agreement, each outstanding
share of First Fidelity Common Stock will be converted into .9 (9/10ths) share
of Wesbanco Common Stock, with cash, or the opportunity to buy an additional
fraction, sufficient to result in a whole share for any resulting fraction,
except for shares held by Dissenting First Fidelity Shareholders. See "Rights
of Dissenting Shareholders" below. The conversion is more fully described
below. See "Conversion of First Fidelity Common Stock and Preferred Stock."
BACKGROUND OF THE MERGER
Effective in June of 1982, the West Virginia banking laws were amended to
permit West Virginia bank holding companies to own more than one West Virginia
bank for the first time. Subsequent legislation, effective May 30, 1986,
permitted nationwide reciprocal acquisition of banks and bank holding companies
by West Virginia bank holding companies after December 31, 1987.
18
Wesbanco has maintained a relationship with First Fidelity and its principal
bank, First National Bank in Fairmont, for a substantial number of years and
representatives of the two institutions have held informal discussions
concerning a possible merger over the last several years. These informal
discussions did not result in a definitive agreement among the parties.
However, in the summer of 1993 substantive discussions were initiated which
resulted in the execution of a definitive Agreement and Plan of Merger on
August 26, 1993.
The negotiations were principally held between James C. Gardill and Edward M.
George, Chairman and President, respectively, of Wesbanco, and Patrick L.
Schulte and Robert H. Martin, President and Chairman, respectively of First
Fidelity, and Frank K. Abruzzino, a member of the Board of Directors of First
Fidelity. A number of meetings were held between these parties beginning on May
14, 1993, including meetings on June 16, July 20, August 11, and August 18,
1993. Though the transaction was continuously structured as an exchange of
stock, the proposed exchange ratio changed several times during the
negotiations due in part to changes in the market price of Wesbanco Common
Stock and the respective earnings and equity levels of the two corporations.
The final Agreement and the Stock Option Agreement were approved by the Board
of Directors of First Fidelity after consultation with First Fidelity's
investment advisor, LSC Financial Services, Inc. Preliminary due diligence
reviews were conducted by representatives of both corporations during the
negotiations which disclosed no material adverse conditions as that term is
defined in the Agreement.
RECOMMENDATION OF THE BOARDS OF DIRECTORS
The Boards of Directors of First Fidelity and Wesbanco have approved the
Agreement by unanimous vote of the directors of the respective corporations and
recommend that their respective shareholders vote for approval of the Agreement
and the exchange of stock. The Boards of Directors of First Fidelity and
Wesbanco have determined that the Agreement is in the best interests of their
respective companies, shareholders and employees, and that the Merger will
enhance the ability of Wesbanco and First Fidelity to serve the financial needs
of their respective customers.
The Boards of Directors of Wesbanco and First Fidelity believe that the
Merger will produce a stronger combined entity better able to compete with
banks and a variety of non-bank institutions including securities companies,
insurance companies, thrift institutions and retailers, in a financial services
industry that has changed and is in the process of changing further.
FIRST FIDELITY REASONS FOR THE MERGER
In making its determination, the Board of Directors of First Fidelity
considered a number of factors, including (i) the operating history, financial
and future prospects of First Fidelity and Wesbanco, (ii) pro forma financial
information concerning the Merger, including, among other things, the pro forma
book value, earnings and dividends per share to First Fidelity shareholders,
(iii) a comparison of the price being paid in this Merger to other comparable
bank mergers, based, among other things, on multiples of book value and
earnings, (iv) the historical dividends on Wesbanco Common Stock as compared to
the historical dividends on First Fidelity Common Stock, as well as prospects
for future dividends, (v) the tax-free nature of the transaction (see,
generally, "Certain Federal Income Tax Consequences of the Merger" below), (vi)
the historical trading prices for First Fidelity Common Stock and Wesbanco
Common Stock, (vii) First Fidelity's alternatives to this Merger, including
remaining independent or negotiating a business combination or transaction with
another institution, and (viii) the provisions of the Agreement allowing First
Fidelity to terminate the Agreement if certain conditions, including certain
Wesbanco market price tests and the obtaining of a fairness opinion by First
Fidelity are not met at the Closing (see "Conditions and Covenants" and
"Termination" below).
In reviewing comparable bank mergers, the Board of Directors considered other
transactions which had a variety of ranges in book value multiples and earnings
multiples.
19
The Board of Directors of First Fidelity also took into account that the
First Fidelity shareholders would have the opportunity to participate in the
future growth of Wesbanco by obtaining Wesbanco Common Stock and Wesbanco
Preferred Stock in the Merger. The Board noted that First Fidelity, as part of
a multi-bank holding company of greater size than First Fidelity and with a
substantial trust department at Wesbanco Bank Wheeling and other resources,
should be able to provide its customers with a greater range of services and
should become a stronger competitor in its existing markets. Since it is
anticipated that First Fidelity's subsidiary banks will operate as a separate
division of Wesbanco, First Fidelity will be able to continue to be responsive
to the needs of the local communities it serves. At the same time, First
Fidelity and Wesbanco will each have the benefit of the resources and skills of
the other institution, and Wesbanco's Board will be increased to include four
First Fidelity directors, namely, Robert H. Martin, Patrick L. Schulte, Frank
K. Abruzzino and Earl C. Atkins, with Mr. Martin and Mr. Schulte to also serve
on Wesbanco's Executive Committee. See "Effects of the Merger: The Surviving
Corporation" below. As shareholders of Wesbanco, the shareholders of First
Fidelity (other than Dissenting First Fidelity Shareholders who would receive
only cash in the proposed transaction) would continue to be able to participate
in any future growth from the combination of First Fidelity and Wesbanco. See
"Effects of the Merger: The Surviving Corporation" below.
After reviewing all relevant facts, the First Fidelity Board of Directors has
determined to approve the Agreement and recommend the Merger to the First
Fidelity Shareholders. If any conditions to Closing are not met (see
"Conditions and Covenants" and "Termination" below), the First Fidelity Board
of Directors will make an independent determination, after consultation with
counsel, where appropriate, as to whether or not to terminate the Agreement and
abandon the Merger.
WESBANCO REASONS FOR THE MERGER
Wesbanco's Board of Directors believes that the proposed Merger will allow
Wesbanco to combine its resources with those of First Fidelity, thereby
affording 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 First Fidelity and Wesbanco's subsidiary
banks conduct their business. The Merger will provide Wesbanco with a greater
presence in the Central West Virginia area which will provide Wesbanco with an
opportunity for future growth in that market which it does not presently have.
Moreover, the affiliation should permit a greater investment in data processing
systems, accounting and other support services, as well as provide greater
economies of scale. Benefits to the combined entity may also be available
through the elimination of duplicative expenses.
Wesbanco will be able to offer a broader range of services than those
currently available to First Fidelity customers, in particular expanded trust
services, and the combined entity will be able to offer a broader loan program
and, through participations by the subsidiary banks, to service larger loan
transactions. In summary, Wesbanco's Board of Directors believes that the
Merger will enable both First Fidelity and Wesbanco's subsidiaries to better
serve the financial needs of their communities, and that the Merger will enable
Wesbanco to obtain these benefits at a cost that, under all the facts and
circumstances, is reasonable.
INTEREST OF CERTAIN PERSONS IN THE MERGER
Directors and officers of First Fidelity and its affiliates, beneficially
owned, in the aggregate, approximately 416,161 shares, or 17.9%, of First
Fidelity Common Stock, and 4,769 shares or 47.7%, of First Fidelity Preferred
Stock, as of January 7, 1994.
All of First Fidelity's directors and officers will, as a result of the
Merger, obtain an equity interest in Wesbanco in exchange for their shares of
First Fidelity Common Stock and First Fidelity Preferred Stock. Each of them
will receive the same number of shares of Wesbanco Common Stock or Preferred
Stock for each share of First Fidelity Common Stock or Preferred Stock owned by
him or her as every other First
20
Fidelity shareholder. Certain affiliates of First Fidelity will, however, be
subject to certain restrictions on any resale of Wesbanco stock received by
them pursuant to the Merger. See "Resales of Wesbanco Common Stock and Wesbanco
Preferred Stock". The directors of First Fidelity do not own any shares of
Wesbanco Common Stock.
As a result of the Merger each five-percent shareholder of First Fidelity
will receive, in exchange for the First Fidelity Common Stock beneficially
owned by them, the amount and percentage of shares of Wesbanco Common Stock set
forth in "Information With Respect to First Fidelity--Principal Shareholders".
Under the Agreement, Robert H. Martin, Patrick L. Schulte, Frank K. Abruzzino
and Earl C. Atkins, directors of First Fidelity, will become directors of
Wesbanco on the Effective Date, and Mr. Martin and Mr. Schulte will become
members of the Wesbanco Executive Committee. See "Effects of the Merger: The
Surviving Corporation" below. It is also a condition to Wesbanco's obligations
to consummate the Merger that Patrick L. Schulte, President of First Fidelity
and President of First National Bank, Robert H. Martin, Chairman of First
Fidelity and Chairman of First National Bank, Frank R. Kerekes, a Director of
First Fidelity and Executive Vice President of First National Bank, Robert E.
Moran, President of Bridgeport Bank, and Frank K. Abruzzino, President of
FirstBank Shinnston and a Director of First Fidelity, enter into employment
agreements with the applicable subsidiary banks of First Fidelity, as described
in the section entitled "Conditions and Covenants", below. While Wesbanco has
advised First Fidelity that the other individuals who serve as directors and
officers of First Fidelity's subsidiary banks will remain in their respective
positions following the Merger, there are no agreements to that effect between
Wesbanco or First Fidelity and any such individuals, except for the employment
agreements hereinafter described. See "Effects of the Merger: The Surviving
Corporation" below.
Patrick L. Schulte presently has an Employment Agreement with First National.
Pursuant to such Employment Agreement, Mr. Schulte was employed as President
and Chief Executive Officer of First National for a nine-year term expiring on
June 30, 1997, at a salary determined by the Board of Directors of First
National from time to time. Mr. Schulte's current Employment Agreement will be
terminated and superseded by the proposed Employment Agreement. The proposed
Employment Agreement for Mr. Schulte would have a revolving three year term
commencing on the Effective Date of the Merger at a salary not less than the
salary in effect for Mr. Schulte as of the Effective Date of the Merger. The
estimated annual base salary payable to Mr. Schulte for 1994 is $200,000. The
contract also contains a "make whole" clause which protects Mr. Schulte against
any loss of benefits currently provided by First National. Additionally, the
contract requires First National to provide hospitalization insurance coverage
for Mr. Schulte and his spouse if Mr. Schulte elects to retire prior to age 65
or the Employment Agreement is otherwise terminated prior to Mr. Schulte
reaching age 65. The proposed Employment Agreement also provides that in the
event Mr. Schulte retires prior to age 65, but after age 62, he shall be
entitled to one year's current salary in a lump sum or installments. The
Agreement also requires First National to provide the same benefits to Mr.
Schulte which it provides to other executive employees, during the period of
his employment. The Agreement contains a termination for cause provision and a
termination on death clause. In the event of the death of the employee during
the term of the Agreement, First National is required to pay to Mr. Schulte's
spouse an amount equal to six months of his base salary at his then current
base rate. In the event First National attempts to terminate Mr. Schulte's
employment other than for cause, or due to the death of the employee, or by
mutual consent with the employee, Mr. Schulte is entitled to receive an amount
equal to the greater of six months base salary or the base salary payable under
the remaining term of the Agreement. Wesbanco is a party to such contract and
will unconditionally guarantee the performance of the bank thereunder.
Robert H. Martin does not presently have an Employment Agreement with either
First National or First Fidelity. The proposed Employment Agreement for Mr.
Martin would have a revolving three year term commencing on the Effective Date
of the Merger at a salary not less than the salary in effect for Mr. Martin as
of the Effective Date of the Merger. The estimated annual base salary payable
to Mr. Martin for 1994 is $24,174. The contract also contains a "make whole"
clause which protects Mr. Martin against any loss of benefits currently
provided by First National. Additionally, the contract requires First National
to provide
21
hospitalization insurance coverage for Mr. Martin and his spouse until Mr.
Martin reaches age 65 or subsequently no longer retains the position of
Chairman, whichever is later. The Agreement also provides for the payment of
directors fees to Mr. Martin for attendance at meetings of the Board of
Directors of Wesbanco, which Mr. Martin shall attend as a member of such Board.
The Agreement also requires First National to provide the same benefits to Mr.
Martin which it provides to other executive employees, during the period of his
employment. The Agreement contains a termination for cause provision and a
termination on death clause. In the event of the death of the employee during
the term of the Agreement, First National is required to pay to Mr. Martin's
spouse an amount equal to 12 months of his base salary at his then current base
rate. In the event First National attempts to terminate Mr. Martin's employment
other than for cause, or due to the death of the employee, or by mutual consent
with the employee, Mr. Martin is entitled to receive an amount equal to the
greater of six months base salary or the base salary payable under the
remaining term of the Agreement. Wesbanco is a party to such contract and will
unconditionally guarantee the performance of the bank thereunder.
Frank R. Kerekes does not presently have an Employment Agreement with either
First National or First Fidelity. The proposed Employment Agreement for Mr.
Kerekes would have a revolving three year term commencing on the Effective Date
of the Merger at a salary not less than the salary in effect for Mr. Kerekes as
of the Effective Date of the Merger. The estimated annual base salary payable
to Mr. Kerekes for 1994 is $97,300. The contract also contains a "make whole"
clause which protects Mr. Kerekes against any loss of benefits currently
provided by First National. The Agreement also requires First National to
provide the same benefits to Mr. Kerekes which it provides to other executive
employees, during the period of his employment. The Agreement contains a
termination for cause provision and a termination on death clause. In the event
of the death of the employee during the term of the Agreement, First National
is required to pay to Mr. Kerekes' spouse an amount equal to six months of his
base salary at his then current base rate. In the event First National attempts
to terminate Mr. Kerekes' employment other than for cause, or due to the death
of the employee, or by mutual consent with the employee, Mr. Kerekes is
entitled to receive an amount equal to the greater of six months base salary or
the base salary payable under the remaining term of the Agreement. Wesbanco is
a party to such contract and will unconditionally guarantee the performance of
the bank thereunder.
Robert E. Moran does not presently have an Employment Agreement with either
Bridgeport or First Fidelity. The proposed Employment Agreement for Mr. Moran
would have a revolving three year term commencing on the Effective Date of the
Merger at a salary not less than the salary in effect for Mr. Moran as of the
Effective Date of the Merger. The estimated annual base salary payable to Mr.
Moran for 1994 is $95,300. The contract also contains a "make whole" clause
which protects Mr. Moran against any loss of benefits currently provided by
Bridgeport. The Agreement also requires Bridgeport to provide the same benefits
to Mr. Moran which it provides to other executive employees, during the period
of his employment. The Agreement contains a termination for cause provision and
a termination on death clause. In the event of the death of the employee during
the term of the Agreement, Bridgeport is required to pay to Mr. Moran's spouse
an amount equal to six months of his base salary at his then current base rate.
In the event Bridgeport attempts to terminate Mr. Moran's employment other than
for cause, or due to the death of the employee, or by mutual consent with the
employee, Mr. Moran is entitled to receive an amount equal to the greater of
six months base salary or the base salary payable under the remaining term of
the Agreement. Wesbanco is a party to such contract and will unconditionally
guarantee the performance of the bank thereunder.
Frank K. Abruzzino currently has an employment contract with FirstBank dated
November 1, 1990, which provides for a ten year term. This agreement currently
provides for a minimum guaranteed salary of $72,000 per year. Under the terms
of the proposed agreement with Mr. Abruzzino, the current term of his
Employment Agreement would be reduced to a term of three years from and after
the Effective Date of the Merger. Under the terms of the proposed Amendment
Agreement, the guaranteed annual salary of Mr.
22
Abruzzino shall be not less than $95,000 per year, and Mr. Abruzzino will be
entitled to receive directors fees as a member of such Boards of Directors of
Wesbanco and its affiliates as he shall be a member of. Mr. Abruzzino will also
be elected to the Board of Directors of Wesbanco as part of the Agreement.
Under the terms of the Agreement, Mr. Abruzzino shall continue as the Chief
Executive Officer of FirstBank until its subsequent merger with and into
Bridgeport at which time he shall no longer retain an operating position with
the combined entity. Mr. Abruzzino shall, however, continue on the Board of
Directors of the combined entity and shall serve as the Chairman of the Board
of such entity during the remainder of the term of his Agreement. Additionally,
the proposed Agreement provides that after termination of his full time
employment, Mr. Abruzzino shall continue to be covered under the group
hospitalization insurance provided by the combined bank in accordance with the
group hospitalization coverage provisions in effect for other employees of the
bank.
As of January 7, 1994, Wesbanco held 500 shares of First Fidelity Common
Stock. Directors, executive officers and affiliates of Wesbanco owned 900
shares of First Fidelity Common Stock as of such date. The Merger will have no
effect on the positions of the present directors and officers of Wesbanco, and
except for the stock ownership of First Fidelity described herein and for
counsel fees paid to a director of Wesbanco in the ordinary course of business
in connection with this transaction, no directors, officers or affiliates of
Wesbanco have any special interest in the Merger or are receiving any special
consideration or compensation as a result of the Merger.
It is not anticipated that any outstanding transactions between First
Fidelity or Wesbanco and their respective affiliates, and any directors,
officers, or principal shareholders of First Fidelity or Wesbanco or their
respective associates, including any outstanding loans or trust relationships,
will be affected by the Merger.
OPINION OF INVESTMENT ADVISOR
As described in more detail under "Recommendation of the First Fidelity Board
of Directors" and "Reasons for the Merger" above, in its role as investment
advisor, LSC Financial Services, Inc. ("LSC Financial") gave the Board its
preliminary advice as of August 26, 1993, based on the information then
available, that the terms of the Merger were fair, from a financial point of
view, to First Fidelity and its shareholders. On January 12, 1994, LSC
Financial rendered its definitive written opinion to that effect. In the event
the closing of the Merger is held more than five days after the First Fidelity
Special Meeting, First Fidelity may request LSC Financial to update its
opinion. The full text of LSC Financial's opinion, which sets forth the
assumptions made, matters considered and limitations on the review undertaken
in connection with such opinion, is set forth below and should be read in its
entirety.
23
LOGO of LSC Financial Services, Inc.
Consultants to Financial Institutions
January 12, 1994
The Board of Directors
First Fidelity Bancorp, Inc.
P.O. Box 1152
Fairmont, West Virginia 26555
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of First Fidelity Bancorp, Inc. ("First Fidelity") of
the financial terms of the proposed merger of First Fidelity with and into
Wesbanco, Inc. ("Wesbanco"). The terms of the proposed merger between First
Fidelity and Wesbanco are set forth in the Agreement and Plan of Merger ("Merger
Agreement") dated August 26, 1993, and provide that each issued and outstanding
share of First Fidelity Common Stock, other than shares held by dissenting First
Fidelity shareholders or shares held by First Fidelity or Wesbanco other than in
a fiduciary capacity, will be converted into .9 share of Wesbanco Common Stock.
Each share of 8% Cumulative Convertible Preferred Stock of First Fidelity will
be converted into one share of 8% Cumulative Convertible Preferred Stock of
Wesbanco.
LSC Financial Services, Inc. as part of its investment banking and bank
consulting business is regularly engaged in the valuation of financial
institution securities in connection with various types of transactions,
including mergers, acquisitions and valuations for various other purposes, and
in the determination of adequate consideration in such transactions.
For purposes of this opinion, we reviewed and analyzed information pertaining to
the financial and operating condition of First Fidelity and Wesbanco. This
review included, but was not limits to: (i) financial and other information
which was publicly available or provided to us by First Fidelity and Wesbanco;
(ii) certain financial information relating to the banking industry in general;
(iii) our evaluation of future prospects for the merged institution; (iv) the
Merger Agreement and related Stock Option Agreement; (v) terms and conditions of
comparable merger transactions and, (vi) such other financial reviews, analyses,
and investigations as we deemed appropriate.
P.O. Box 989 / Davis Road & Oakwood Lane, Valley Forge, Pennsylvania 19482
(215) 783-5488
24
Board of Directors January 12, 1994
First Fidelity Bancorp, Inc. Page 2
In rendering our opinion, we have relied on the accuracy of information and
representations made to us by First Fidelity and Wesbanco and their
officers, directors, counsel and other agents. We have not independently
verified the information reviewed by us, and in rendering this opinion have
relied upon such information as being complete and accurate in all material
respects.
We assumed that in the course of obtaining the necessary regulatory approvals
for the Merger, no restrictions will be imposed on Wesbanco that would have a
material adverse effect on the contemplated benefits of the Merger to First
Fidelity. We further assumed that no change would occur in applicable law or
regulation that would cause material adverse change in the prospects or
operations of Wesbanco after the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the exchange is fair, from a financial point of view, to the
shareholders of First Fidelity Bancorp, Inc.
Sincerely,
Signature of LSC Financial Services, Inc.
LSC FINANCIAL SERVICES, INC.
LOGO OF LSC Financial Services, Inc.
25
LSC Financial is a nationally recognized, regional investment banking firm
headquartered in Valley Forge, Pennsylvania, and is regularly engaged in the
valuation of banks and other financial institutions and their securities.
LSC Financial was retained by the Board of Directors of First Fidelity on
August 17, 1993, to advise and assist management in the analysis and evaluation
of the acquisition proposal from Wesbanco, including a review of First
Fidelity's current and prospective financial position and its current
acquisition value, the evaluation of the financial terms of the proposal for
the Board of Directors, and, the rendering of an opinion as to the fairness,
from a financial point of view, of the terms of the proposed Merger to First
Fidelity and its shareholders. See "Recommendation of the Boards of Directors"
and "First Fidelity Reasons for the Merger" above for additional discussion of
LSC Financial's role in advising the First Fidelity Board of Directors.
The Board of Directors selected LSC after reviewing several candidates on the
basis of its experience in the valuation of financial institutions and their
securities and its familiarity with the commercial banking industry, bank
securities and merger and acquisition transactions in the region and on the
basis of cost. No limitations were imposed by First Fidelity or Wesbanco with
respect to the opinion rendered by LSC Financial, or the scope of its
investigations.
The terms of the Merger were not determined by LSC Financial, but instead
were established by the respective boards of directors of First Fidelity and
Wesbanco.
LSC Financial arrived at its opinion after discussions with senior officers
of First Fidelity and Wesbanco; a review of pertinent financial information
concerning First Fidelity and Wesbanco; a review of the trading history of
First Fidelity Common Stock and Wesbanco Common Stock; a review of the dividend
record of First Fidelity and Wesbanco; a comparison of the financial terms of
the Merger with the terms of other recent business combinations involving banks
and bank holding companies; a comparison of financial and market information of
selected banks and bank holding companies with that of First Fidelity and
Wesbanco; a review of the Stock Option Agreement, the Agreement, and the Joint
Proxy Statement/Prospectus; and such other analyses, studies and investigations
as LSC Financial deemed relevant.
In rendering its opinion, LSC Financial assumed that in the course of
obtaining the necessary regulatory approvals for the Merger, no restrictions
will be imposed on Wesbanco that would have a material adverse effect on the
contemplated benefits of the Merger to First Fidelity. LSC Financial also
assumed that there would not occur any change in applicable law or regulation
that would cause a material adverse change in the prospects or operations of
Wesbanco after the Merger.
LSC Financial did not independently verify the information used in arriving
at its opinion, but assumed the accuracy and completeness of all such
information. Also, LSC Financial did not make or obtain any independent
appraisal of the assets or liabilities of First Fidelity or Wesbanco. LSC was
not requested to, and did not, solicit third party indications of interest in
acquiring First Fidelity.
For its financial services, including rendering the opinion included herein,
LSC Financial will receive a fee of $25,000, of which $7,500 was paid on August
26, 1993, of which $7,500 will be paid upon completion and delivery of the
fairness opinion to First Fidelity, and of which $10,000 will be paid upon
consummation of the Merger. An additional fee will be payable for any update to
LSC Financial's opinion. First Fidelity has also agreed to reimburse LSC
Financial for its reasonable out-of-pocket expenses and to indemnify LSC
Financial against certain liabilities, including liabilities arising under
Federal securities laws, which may arise in connection with the performance of
its services for First Fidelity. The amount of the consideration was determined
as a result of negotiations between First Fidelity and LSC Financial.
LSC Financial has had no other material relationship with First Fidelity,
Wesbanco or any of their respective affiliates in the past two years.
26
LSC FINANCIAL'S OPINION IS DIRECTED ONLY TO THE EXCHANGE RATIO IN THE MERGER
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY FIRST FIDELITY SHAREHOLDER AS
TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE FIRST FIDELITY SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF LSC SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
LSC Financial's opinion was based solely upon information available to it and
provided by First Fidelity and Wesbanco, the economic market and other
conditions as they existed as of the date of its opinion was rendered.
EFFECTIVE TIME
The Merger will become effective (the "Effective Time") on the effective date
specified in the Certificate of Merger to be issued by the West Virginia
Secretary of State, which will occur as soon as practicable after the closing
(the "Closing"). It is anticipated that the Closing will be held and such
Certificates will be issued on the date which is the latest of: (i) the day of
the meetings of the shareholders of First Fidelity and Wesbanco at which the
Agreement is approved; (ii) the thirtieth (30th) day after the approval of
Wesbanco's acquisition of First Fidelity by the Federal Reserve Board; (iii)
the day after any stay of the Federal Reserve Board's approval of the
acquisition of First Fidelity shall be vacated or shall have expired or the day
after any injunction against the closing of the Merger shall be lifted,
discharged or dismissed; (iv) the day after the approval of the transaction by
the West Virginia Department of Banking and Financial Institutions; (v) the
date on which the conditions set forth in the Agreement are satisfied or
waived; or (vi) such other date as shall be mutually agreed to by Wesbanco and
First Fidelity. It is presently anticipated that if the shareholders of First
Fidelity approve the Agreement at the Special Meeting and the regulatory
approvals are obtained, the Department of Justice does not object to the
Merger, and all other conditions to the Merger are satisfied or waived, the
Merger will become effective by February 28, 1994. See "Conditions and
Covenants" and "Termination" below.
CONVERSION OF FIRST FIDELITY COMMON STOCK AND PREFERRED STOCK
Each share of First Fidelity Common Stock issued and outstanding immediately
prior to the Effective Time, other than shares held by dissenting First
Fidelity Shareholders or shares held by First Fidelity or Wesbanco, other than
in a fiduciary capacity, will, at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into .9
(9/10ths) share of Wesbanco Common Stock.
Each share of First Fidelity Preferred Stock issued and outstanding
immediately prior to the effective time will, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into one share of Wesbanco Preferred Stock. As of the Effective Time,
holders of record of First Fidelity Common Stock and Preferred Stock will be
deemed to be holders of record of Wesbanco Common Stock and Preferred Stock.
All issued and outstanding shares of FFB will continue to be held by Wesbanco
and will be the issued and outstanding shares of the Surviving Corporation.
No certificates for fractional shares of Wesbanco Common Stock will be issued
to any holder of First Fidelity Common Stock in the Merger. Wesbanco will pay
cash in lieu of any fractional share to which any shareholder of First Fidelity
Common Stock may otherwise be entitled in an amount based on a value of $32.00
per whole share of Wesbanco Common Stock or, at the option of such shareholder,
such shareholder may purchase the remaining fraction of such share from
Wesbanco at the same price and receive a whole share of Wesbanco Common Stock.
For a discussion of the treatment of shares held by First Fidelity
shareholders who elect to exercise their dissenters' rights, see "Rights of
Dissenting Shareholders" below.
27
EXCHANGE OF CERTIFICATES
As promptly as practicable after the Effective Time of the Merger, each
holder of any outstanding certificate or certificates for First Fidelity Common
Stock (other than First Fidelity shareholders who elect to exercise their
dissenters' rights) or First Fidelity Preferred Stock upon surrender of their
certificates, together with a duly executed letter of transmittal, to Wesbanco
Bank Wheeling, which is acting as Exchange Agent for Wesbanco, shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of Wesbanco Common Stock or Wesbanco
Preferred Stock, as the case may be, into which the shares of outstanding First
Fidelity Common Stock or outstanding First Fidelity Preferred Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted, together with a check for cash in lieu of fractional shares of
common stock or, if the proper amount of cash is submitted for the remaining
fraction, an additional whole share of Wesbanco Common Stock. Each holder of
First Fidelity Preferred Stock, upon surrender of their certificates, together
with a duly executed letter of transmittal to the Exchange Agent, shall be
entitled to receive in exchange therefore a certificate or certificates
representing the number of shares of Wesbanco Preferred Stock into which such
shares shall have been converted. See "Conversion of First Fidelity Common
Stock and Preferred Stock" above.
Whenever a dividend is declared by Wesbanco on Wesbanco Common Stock after
the Effective Date, the dividend will apply to all shares of Wesbanco Common
Stock into which shares of First Fidelity Common Stock have been converted by
virtue of the Merger. Dividends on the Wesbanco Preferred Stock will accrue
from the Effective Date at an annual rate of $15.20 per share, payable
quarterly, as and when declared by the Wesbanco Board of Directors. See
"Comparative Stock Prices and Dividends". No former First Fidelity shareholder
will be entitled to receive such dividend, however, until he or she has
exchanged the certificates representing his or her First Fidelity Common Stock
for certificates representing Wesbanco Common Stock or Preferred Stock, upon
which exchange he or she will be entitled to receive such dividend (without
interest thereon and less the amount of taxes, if any, which may have been
imposed or paid thereon).
SHAREHOLDERS OF FIRST FIDELITY SHOULD NOT RETURN CERTIFICATES REPRESENTING
FIRST FIDELITY COMMON STOCK OR FIRST FIDELITY PREFERRED STOCK WITH THE ENCLOSED
PROXY CARD. Instructions for surrendering such certificates will be sent to
shareholders of First Fidelity promptly after the Effective Time.
WESBANCO AND FFB SHAREHOLDER APPROVAL
Wesbanco shareholder approval of the Agreement is not required under West
Virginia corporation law or the Articles of Incorporation of Wesbanco. However,
Wesbanco Common Stock is quoted on the National Market System of the NASDAQ
Stock Market, and Schedule D of the NASD Bylaws requires shareholder approval
if a quoted company issues in excess of 20% of the number of shares outstanding
in connection with the acquisition of the stock of another company. The
issuance of 2,221,304 shares of Wesbanco Common Stock, the maximum shares which
could be exchanged, including the preferred stock, with respect to the proposed
transaction would constitute approximately 25.2% of the Wesbanco Common Stock
outstanding after the transaction.
The Board of Directors of Wesbanco has approved the Agreement and Wesbanco
has agreed to cause the Board of Directors of FFB to approve the Agreement.
Wesbanco has also agreed, as sole shareholder of FFB, to vote all of the
outstanding shares of said corporation in favor of the Merger.
EFFECTS OF THE MERGER: THE SURVIVING CORPORATION
At the Effective Time, the separate existence of First Fidelity will cease.
FFB will be the surviving corporation (sometimes referred to as the "Surviving
Corporation"). The assets, liabilities, and capital of First Fidelity will be
merged into FFB and these assets, liabilities, and capital will then constitute
part of the assets, liabilities, and capital of FFB. FFB will operate under the
Articles of Incorporation and Bylaws of FFB effective as of the day of the
Merger.
28
The Articles of Incorporation and Bylaws of Wesbanco will be unaffected by
the Merger, except to the extent of the issuance of Wesbanco Preferred Stock by
reason of the Merger, and the individuals who served as directors and officers
of Wesbanco immediately prior to the Merger will continue to serve as directors
and officers of Wesbanco after the Effective Time, until their successors shall
have been elected and qualified or until their resignation or removal according
to law. For information concerning Wesbanco's current management, see
Wesbanco's Proxy Statement for its annual meeting of stockholders held on April
23, 1993, which has been incorporated by reference into this Joint Proxy
Statement/Prospectus and a copy of which is being delivered herewith as
Appendix IV. See "Incorporation Of Certain Documents By Reference." In
addition, however, pursuant to the Agreement, Wesbanco will appoint as
directors of Wesbanco, as of the Effective Date, Robert H. Martin, Patrick L.
Schulte, Frank K. Abruzzino and Earl C. Atkins, or if they are unable or
unwilling for any reason to serve, such successor appointees as may be
designated in the Agreement or as otherwise designated by First Fidelity, and
acceptable to Wesbanco, to serve until the next annual meeting of Wesbanco
shareholders and will nominate for the position of Wesbanco director and
solicit proxies for each such person from its shareholders until such person
has served a full three year term as a Wesbanco director. Such persons will be
appointed to different classes of Wesbanco's classified Board of Directors to
the extent feasible. Should either Mr. Schulte or Mr. Abruzzino be unable or
unwilling to complete said terms as directors, Mr. Frank R. Kerekes will serve
as a substitute director for Mr. Schulte and Mr. Dean C. Ramsey will serve as a
substitute director for Mr. Abruzzino. Should either Mr. Martin or Mr. Atkins
be unable or unwilling to complete said terms as directors, a substitute,
reasonably satisfactory to Wesbanco, will be designated by the Board of
Directors of First Fidelity. Wesbanco has also agreed to appoint, effective as
of the Effective Date, Mr. Martin and Mr. Schulte as members of its Executive
Committee and will continue to appoint Mr. Martin and Mr. Schulte to its
Executive Committee at least as long as one of the First Fidelity designees is
a director of Wesbanco pursuant to the terms of the Agreement. All four of the
above identified individuals are directors of First Fidelity. See "Information
with Respect to First Fidelity--Principal Shareholders".
First Fidelity will be merged with and into FFB, which is a wholly-owned
subsidiary of Wesbanco formed solely for purposes of the Merger. While Wesbanco
has advised First Fidelity that the officers, directors, and employees of the
affiliate banks of First Fidelity immediately after the Merger will be the same
as the officers, directors, and employees now holding such positions, there are
no agreements to that effect, except as noted in the employment contracts. See
"The Merger--Interests of Certain Persons in the Merger". The present directors
and executive officers of First Fidelity will also become the directors and
executive officers of FFB. The banking subsidiaries of First Fidelity will
continue to maintain their separate corporate identity and name, under the
Articles of Association or Articles of Incorporation, each operating as a
wholly owned subsidiary of FFB. It is anticipated that after the Effective
Date, there will be a close liaison and a high level of cooperation among all
Wesbanco subsidiaries, which can be expected to result in improved services to
their respective customers and greater efficiency.
If the Merger had occurred as of September 30, 1993, First Fidelity would
have, on a pro forma consolidated basis, constituted 23% of deposits, 23% of
assets, 21% of equity, and its shareholders would have held 24% of the total
outstanding shares of Wesbanco on a consolidated basis. In addition, for the
nine months ended September 30, 1993, First Fidelity would have contributed 25%
of net interest income and 19% of net income to Wesbanco on a pro forma
consolidated basis. These percentages reflect the relative size of First
Fidelity as of September 30, 1993. These percentages 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. However, Wesbanco is not presently involved in any
other merger transactions for which definitive agreements or letters of intent
have been executed.
CONDITIONS AND COVENANTS
The Agreement provides that the Merger will not take place unless and until
certain conditions are met, or, in some cases, waived.
29
Approval by First Fidelity and Wesbanco Shareholders
Approval by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of First Fidelity Common Stock entitled to vote and approval
by the affirmative vote of the holders of a majority of the shares of First
Fidelity Preferred Stock and Wesbanco Common Stock entitled to vote at the
Special Meetings of First Fidelity and Wesbanco, and approval by Wesbanco as
sole shareholder of FFB (which approval Wesbanco has agreed to give) is
required by law and must be obtained before the Merger can be consummated. As
of the Record Date, the directors and officers of First Fidelity and its
affiliates beneficially owned, in the aggregate, approximately 416,161 shares
or 17.9% of the outstanding shares of First Fidelity Common Stock and 4,769
shares or 47.7% of the outstanding shares of First Fidelity Preferred Stock.
See "Voting Information--Voting and Revocation of Proxies" and "The Merger--
Interests of Certain Persons in the Merger" above.
Government Approvals
The completion of the Merger was also conditioned upon the approval of the
acquisition by the Federal Reserve Board and the West Virginia Department of
Banking. These approvals have now been obtained.
The Merger was subject to approval by the Federal Reserve Board under the
provisions of the Bank Holding Company Act of 1956, as amended. Applications
for such approval were filed with the Federal Reserve Board on October 28,
1993. The Federal Reserve Board approved the transaction on December 7, 1993.
Under the Bank Holding Company Act, the Federal Reserve Board must withhold
approval of a merger if it finds that the merger would result in a monopoly or
be in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any geographical area. In addition, the
Federal Reserve Board may not approve a merger if it finds that the effect of
the merger may be substantially to lessen competition or to tend to create a
monopoly or would in any other manner be in restraint of trade, unless it finds
that the anticompetitive effects of a proposed transaction are clearly
outweighed in the public interest by the probable effects of the transaction in
meeting the convenience and needs of the communities to be served. In ruling
upon the application, the Federal Reserve Board also took into consideration
the financial and managerial resources and future prospects of First Fidelity
and Wesbanco. See "Information With Respect To First Fidelity--Principal
Shareholders."
Under the Bank Holding Company Act, the Merger may not be consummated before
the thirtieth calendar day after the date of such approval by the Federal
Reserve Board, during which time the Department of Justice of the United States
may challenge the Merger under the antitrust laws. Such time period has now
expired.
The Merger was also subject to the approval of the Board of Banking and
Financial Institutions of the State of West Virginia under the provisions of
Code 31A-8A-4. The Board of Banking and Financial Institutions may not approve
the Merger if it finds that the effects of the Merger would be similar to those
which require disapproval in accordance with the Bank Holding Company Act set
forth above. In addition, under the state statute, the Merger may not be
consummated for 120 days following the date of the submission to the Board of
the application for approval, unless the Board otherwise provides in an order
approving the Merger. Applications for approval were confirmed as filed with
the West Virginia Board of Banking and Financial Institutions on the 29th day
of October, 1993. A hearing on the application was held on December 13, 1993,
before the West Virginia Board of Banking and Financial Institutions, and the
Board approved the transaction by order dated December 13, 1993.
The Merger could not have proceeded in the absence of the requisite
regulatory approvals. Although there was no assurance that these regulatory
approvals would be obtained, the managements of Wesbanco and First Fidelity
believed that the required governmental approvals would be obtained, and that
the Department of Justice would not object to the Merger.
30
Covenants
In the Agreement, First Fidelity agrees to take certain actions and to
refrain from taking certain actions in connection with its business from August
26, 1993, until the Effective Time or until the Agreement is terminated. Among
other things, the Agreement generally requires First Fidelity to conduct its
business only in the ordinary course and in a manner consistent with past
practice and to keep Wesbanco advised of any material adverse changes in the
financial condition, assets, business or operations of First Fidelity. The
Agreement further prohibits First Fidelity from making certain distributions to
its shareholders and engaging in certain corporate transactions or transactions
with others outside of the ordinary course of its business operations without
the consent of Wesbanco, including with certain exceptions, (i) issuing shares
of its Common Stock, or warrants, options, convertible securities or the rights
to purchase the same; (ii) issuing long-term debt; (iii) changing its
authorized capital stock; (iv) purchasing or otherwise acquiring shares of its
capital stock; (v) entering into or amending any employment, pension,
retirement, stock option, profit sharing, deferred compensation or similar plan
in respect of any of its directors, officers or employees or increasing its
contribution to any such Plan except as provided in the Agreement; (vi)
acquiring or merging with any other company; (vii) mortgaging, pledging or
subjecting to a lien or disposing of any of its material assets; (viii)
amending its Articles of Incorporation or Bylaws; or (ix) taking any action
materially and adversely affecting the financial condition, business,
properties or operations of First Fidelity.
The Agreement also prohibits dividends or other distributions on First
Fidelity Common Stock other than cash dividends in the amount of sixty cents
($.60) per share per year, payable quarterly; provided such dividends
cumulatively do not exceed 45% of the after-tax income of First Fidelity for
the fiscal year in which the dividends are paid.
First Fidelity further agrees in the Agreement that it will not, and will not
permit any person acting on behalf of it, to directly or indirectly, take any
action to support, encourage or accept any offer from any other person to
acquire First Fidelity, or its assets. First Fidelity further agrees to notify
Wesbanco if any such offer is made.
Other Conditions
The consummation of the Merger is subject to a number of further conditions
which must be met or may be waived by the party or parties to be benefited
thereby.
The obligations of both Wesbanco and First Fidelity are subject to a number
of conditions, including: (i) the effectiveness of the Registration Statement
and compliance with applicable state securities laws; (ii) the receipt of all
required consents and approvals and the expiration of any related delay
periods; (iii) holders of no more than 10% of the shares of First Fidelity
Common Stock and Preferred Stock entitled to vote at its Special Meeting shall
have filed written objections to the Merger as dissenting shareholders in
compliance with West Virginia law and not voted in favor of the Agreement; (iv)
the receipt of an opinion of counsel on certain tax consequences of the Merger
(See "Certain Federal Income Tax Consequences of the Merger" below); (v) the
absence of any action, proceeding, regulation or legislation to enjoin,
restrain, prohibit, or to obtain substantial damages with respect to, the
Agreement or the consummation of the transactions contemplated thereby; and
(vi) the performance by the other party of its obligations under the Agreement.
Wesbanco's obligations are also subject to other conditions to be met by
First Fidelity including: (i) the accuracy of certain representations and
warranties made by First Fidelity (including, among other things,
representations as to organization, authority to enter into the Agreement,
financial statements, absence of material litigation, capitalization, material
contracts, ERISA and tax matters, adequacy of the loan loss reserve, and the
absence of materially adverse changes in areas such as financial condition,
results of operations, material assets, authorized, issued or outstanding
capital stock, certain personnel expenses, and material expenditures for assets
or other material obligations outside of the ordinary course of business) as of
the Closing; (ii) opinions of counsel on such matters as organization,
authority and stock issuances; (iii) an accounting opinion by Price Waterhouse
related to the transaction; (iv) receipt, or best efforts of First Fidelity
31
to cause the receipt of, letters from certain affiliates whose stock will be
restricted (See "Resales of Wesbanco Common Stock" below); and (v) absence of
any suit, action or proceeding against First Fidelity or its officers or
directors in their capacity as such which, in reasonable judgment of Wesbanco
would, if successful, have a material adverse effect on the financial condition
or operations of First Fidelity.
First Fidelity's obligations are also subject to certain other conditions to
be met, in part, by Wesbanco, including: (i) the accuracy of certain
representations and warranties made by Wesbanco (including, among other things,
representations as to organization, actions to be taken in connection with FFB,
authority to enter into the Agreement and to issue shares in the Merger,
financial statements, absence of material litigation, capitalization, material
contracts, ERISA and tax matters, adequacy of loan loss reserves, and the
absence of materially adverse changes in areas such as financial condition,
results of operations, material assets, authorized, issued or outstanding
capital stock, certain changes in Articles or Bylaws, and material expenditures
for assets or other material obligations outside of the ordinary course of
business) as of the Closing; (ii) opinions of counsel on such matters as
organization, authority, and the legality of the shares to be issued in the
Merger; (iii), the absence of any suit, action or proceeding against Wesbanco,
any of its subsidiaries, or their officers or directors in their capacities as
such which, in the reasonable judgment of First Fidelity, would, if successful,
have a material adverse effect on the financial condition or operations of
Wesbanco or any of its subsidiaries; (iv) the furnishing of a fairness opinion
by LSC Financial (See "Opinion of Investment Advisor" above), and at First
Fidelity's option, an update of said opinion as of the closing if the closing
is held more than five days after the First Fidelity Special Meeting; and (v)
the absence of any change in control of Wesbanco since July 1, 1993.
WAIVER AND AMENDMENT
The Agreement provides that any of the terms or conditions thereof may be
waived by action of the Board of Directors of the party which is, or the
shareholders of which, are, entitled to the benefits thereof. The parties may
also amend or modify the Agreement in whole or in part at any time prior to
Closing, provided that the conversion ratio for First Fidelity Common Stock in
the Merger and any other material terms of the Merger cannot be amended after
its Special Meeting, unless the amended terms are resubmitted to the
shareholders of First Fidelity.
TERMINATION
The Agreement and the transactions contemplated thereby may be terminated at
any time prior to the Effective Time by mutual consent of First Fidelity and
Wesbanco or by either of them if: (i) any of the conditions to that party's
obligation to close have not been met or waived; (ii) the Merger would violate
any non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction; (iii) the requisite vote of the
shareholders is not obtained; (iv) the Closing has not been held by August 26,
1994; or (v) by First Fidelity if the average of the market price of Wesbanco
Common Stock shall fall below $28.00 per share.
THE STOCK OPTION AGREEMENT
In connection with the Merger Agreement, First Fidelity and Wesbanco entered
into the Stock Option Agreement. Pursuant to the Stock Option Agreement, First
Fidelity granted Wesbanco the Option to purchase up to 464,405 shares of First
Fidelity Common Stock at an exercise price of $26.00 per share payable in cash.
The Option is exercisable by Wesbanco upon the occurrence of certain events,
including, among others, the commencement by any person of a tender offer for
15% or more of First Fidelity Common Stock; the filing by any person of an
application to merge or consolidate with, or sell substantially all of First
Fidelity's assets to, any person; the acquisition by any person of 15% or more
of First Fidelity Common Stock; the announcement by any person of a public
proposal to acquire First Fidelity; or the willful breach by First Fidelity of
a covenant not to solicit or initiate proposals from third parties with respect
to an acquisition of First Fidelity (each event, a "Purchase Event"). The
Option terminates (a) at the Effective Time of the Merger; (b) upon the
termination of the Agreement other than (i) due to willful breach by First
Fidelity
32
of the no solicitation covenant, or (ii) following the occurrence of a Purchase
Event, failure of the First Fidelity shareholders to approve the Agreement; or
(c) six months after termination of the Agreement due to a willful breach by
First Fidelity of the no solicitation covenant or, following the occurrence of
a Purchase Event, termination due to the failure of the First Fidelity
shareholders to approve the Agreement.
Pursuant to the Stock Option Agreement, Wesbanco was granted certain
registration rights to register the shares of First Fidelity Common Stock
acquired upon the exercise of the Option. Wesbanco also was granted certain
put-back rights to require First Fidelity to repurchase the Option if First
Fidelity entered into and consummated a merger, consolidation or other similar
agreement with a third party, or if First Fidelity willfully breached the no
solicitation covenant in the Agreement. First Fidelity would be required to
repurchase the Option at a price equal to the difference between the higher of
the market price or the competing transaction price and $26.00 per share. In
addition, First Fidelity was granted a right of first refusal to acquire any
shares of First Fidelity Common Stock acquired by Wesbanco upon the exercise of
the Option.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of First Fidelity Common Stock and holders of First Fidelity
Preferred Stock who object to the Merger and comply with Section 31-1-123 of
the West Virginia Corporation Act (the "Act"), are entitled to payment of the
fair value of their shares (each such shareholder, a "Dissenting Shareholder").
The fair value of the shares held by a Dissenting Shareholder is determined as
of the day prior to the date on which the First Fidelity shareholder vote on
the Agreement was taken without regard to any appreciation or depreciation in
anticipation of such corporate action.
The following is a brief summary of the steps necessary to be taken by a
shareholder to perfect his or her rights under West Virginia law to be paid the
fair value of his or her shares as a Dissenting Shareholder. 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 Act, which is reproduced in full as Appendix I to this Joint Proxy
Statement/Prospectus.
1. Written Objection to the Merger Must Be Filed. A Dissenting Shareholder
must file written objection to the proposed Merger with First Fidelity prior to
or at the Special Meeting.
2. Shares Must Not Be Voted in Favor of the Merger. A Dissenting Shareholder
must not vote his or her shares of First Fidelity Common Stock in favor of the
Merger. It is not required that they be voted against the Merger; however, a
vote in favor of the Merger will preclude the exercise of dissenters' rights.
3. Shareholders Must Make Written Demand for Fair Value. A Dissenting
Shareholder must make written demand on First Fidelity or the Surviving
Corporation for payment of the fair value of his or her shares of First
Fidelity Common Stock or First Fidelity Preferred Stock 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. A Dissenting Shareholder who
fails to make such written demand within the 10-day period shall be bound by
the terms of the Agreement. The written demand may be addressed to Patrick L.
Schulte, President and Chief Executive Officer, First Fidelity Bancorp, Inc.,
301 Adams Street, Fairmont, West Virginia, 26554. Once the demand has been
made, it cannot be withdrawn without the permission of First Fidelity or the
Surviving Corporation.
4. Rights of a Dissenting Shareholder. Any shareholder making such demand
shall thereafter be entitled only to payment as a Dissenting Shareholder as
provided by law and shall not be entitled to vote or to exercise any other
rights of a shareholder. No such demand may be withdrawn without the consent of
First Fidelity or the Surviving Corporation. If, however, such demand is
withdrawn upon consent, or if the proposed Merger is abandoned or rescinded, or
if the shareholders revoke the authority to effect the Merger, or if no demand
or petition for the determination of fair value by a court of general civil
jurisdiction has been made
33
or filed within the time set forth under Paragraph 7 below, or if a court of
general civil jurisdiction determines that such shareholder is not entitled to
the relief as a Dissenting Shareholder, then the right of such shareholder to
be paid the fair value of his or her shares ceases and his or her status as a
shareholder shall be restored, without prejudice to any corporate proceedings
which may have been taken during the interim.
5. Dissenting Shareholder Must Surrender Certificate(s). A Dissenting
Shareholder must surrender his or her stock certificates to First Fidelity
within 20 days after demanding payment for his or her shares in order for
First Fidelity to place a notation on the stock certificates that such demand
has been made. A Dissenting Shareholder's failure to surrender his or her
certificate shall, at First Fidelity's option, terminate his or her
dissenters' rights unless a court, for good cause shown, directs otherwise.
6. First Fidelity Must Make Offer. Within 10 days after the Effective Date
of the Merger, the Surviving Corporation must give written notice thereof and
make a written offer to each Dissenting Shareholder who has made written
demand (as set forth in Paragraph 3 above) to pay for the Dissenting
Shareholder's shares at a specified price deemed by it to be the fair value
thereof, accompanied by a balance sheet of First Fidelity as of the latest
available date (not more than twelve months prior to the making of the offer)
and a profit and loss statement of First Fidelity for the twelve month period
ended on the date of such balance sheet. If within 30 days after the Effective
Date, a Dissenting Shareholder and First Fidelity agree upon the fair value,
the Dissenting Shareholder shall be entitled to receive the agreed payment for
his or her shares within 90 days after the Effective Date upon surrender of
such shares. Upon payment of the agreed value, the Dissenting Shareholder
shall cease to have any interest in such shares.
7. Filing Suit. If a Dissenting Shareholder and First Fidelity fail to agree
upon the fair value within 30 days after the Effective Date, First Fidelity on
its own initiative may, or upon written demand from the Dissenting Shareholder
shall, within 30 days after receipt of such request, file a complaint in the
Circuit Court of Marion County, West Virginia, within 60 days after the
Effective Date requesting that the fair value of such shares be found and
determined. In the event of the failure of First Fidelity to institute such
proceeding, the Dissenting Shareholder may do so in the name of First
Fidelity.
The foregoing does not purport to be a complete statement of the procedures
to be followed by shareholders desiring to exercise dissenters' rights. To
exercise such rights, strict adherence to the provisions of those sections of
the law of the State of West Virginia referred to above is required. EACH
SHAREHOLDER WHO MAY DESIRE TO EXERCISE SUCH RIGHTS SHOULD CONSULT SUCH LAWS
AND ADHERE TO THE PROVISIONS THEREOF. As in all legal matters, you would be
well advised to seek the guidance of an attorney at law.
The receipt of cash for shares of First Fidelity Common Stock and First
Fidelity Preferred Stock held by a Dissenting Shareholder will be a taxable
transaction to the Dissenting Shareholder for Federal income tax purposes. 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. Any First
Fidelity shareholder contemplating the possible exercise of dissenters' rights
is urged to consult a tax advisor as to the Federal (and any applicable state
and local) income tax consequences resulting from such an election.
Shareholders of Wesbanco do not have dissenters' rights under applicable
West Virginia law with respect to the vote at its Special Meeting.
RESALES OF WESBANCO COMMON STOCK AND WESBANCO PREFERRED STOCK
The shares of Wesbanco Common Stock and Wesbanco Preferred Stock issuable
upon the consummation of the Merger will be registered with the Commission
under the Securities Act. Under current law, each holder of First Fidelity
Common Stock and First Fidelity Preferred Stock who is not an affiliate of
Wesbanco or First Fidelity within the meaning of Rule 144 or 145 under the
Securities Act, may sell or transfer any
34
shares of Wesbanco Common Stock or Wesbanco Preferred Stock such holder
receives in the Merger without need of further registration under the
Securities Act. This Joint Proxy Statement/Prospectus does not cover and may
not be used in connection with any resales of Wesbanco Common Stock or Wesbanco
Preferred Stock by such affiliates.
Shares of Wesbanco Common Stock and Wesbanco Preferred Stock issued to First
Fidelity shareholders who may be deemed to be affiliates of First Fidelity
before the Merger or affiliates of Wesbanco after the Merger may be resold only
in transactions permitted by Rules 145 and 144 under the Securities Act,
pursuant to an effective registration statement or in transactions exempt from
registration. Generally a shareholder who is an executive officer, director or
a principal shareholder or other control person of a company may be deemed to
be an affiliate for these purposes, while 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
First Fidelity (i) deliver to Wesbanco a schedule specifying the persons who
may be deemed to be "affiliates" of First Fidelity within the meaning of Rule
145 under the Securities Act ("Affiliates"); and (ii) use its best efforts to
cause each Affiliate to deliver to Wesbanco, prior to Closing, a letter,
substantially in the form of Exhibit A to the Agreement (which is set forth in
Appendix II hereto) providing that the shares of Wesbanco Common Stock or
Wesbanco Preferred Stock issued pursuant to the Merger in exchange for shares
of First Fidelity Common Stock or First Fidelity Preferred Stock held by or for
the benefit of such Affiliate (a) will not be sold or otherwise disposed of
except in accordance with Rule 145 (where the Affiliate has given Wesbanco
evidence of compliance with the Rule reasonably satisfactory to it) or pursuant
to an effective registration statement under the Securities Act unless such
person has furnished to Wesbanco a no-action or interpretive letter from the
Commission 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; and (b) may be represented by certificates
which bear an appropriate legend.
EXPENSES
Wesbanco and First Fidelity will each bear and pay their respective costs and
expenses incurred in connection with the Merger; however, all costs and
expenses incurred in the printing and mailing of the Joint Proxy
Statement/Prospectus are being borne by Wesbanco. If the Merger is consummated,
any expense incurred but not paid prior to the Effective Time will become the
obligation of the Surviving Corporation by reason of the Merger.
ACCOUNTING TREATMENT
As required by generally accepted accounting principles, the Merger will be
accounted for as a "pooling-of-interests" by Wesbanco and First Fidelity. The
results of this accounting treatment are shown in the summary unaudited
combined pro forma financial data included elsewhere in this Joint Proxy
Statement/Prospectus. See "Pro Forma Data".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
First Fidelity has requested, and the obligations of First Fidelity and
Wesbanco to consummate the Merger are conditioned upon, the receipt of an
opinion of counsel, substantially to the effect that, on the basis of facts and
representations set forth in such opinion, for Federal income tax purposes:
(i) The statutory merger of First Fidelity with FFB will constitute a
reorganization within the meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended, ("IRC"), and Wesbanco and First Fidelity
will each be a "party to the reorganization" as defined in IRC Section
368(b);
(ii) No gain or loss will be recognized by Wesbanco or First Fidelity as
a result of the transactions contemplated in the Agreement;
35
(iii) No gain or loss will be recognized by the shareholders of First
Fidelity as a result of their exchange of First Fidelity Common Stock or
First Fidelity Preferred Stock, except to the extent any common stock
shareholder receives cash in lieu of a fractional share or as a dissenting
shareholder;
(iv) The payment of cash in lieu of fractional share interests of
Wesbanco Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by Wesbanco and these
cash payments will be treated as having been received as distributions in
full payment in exchange for the First Fidelity Common Stock redeemed;
(v) The holding period of the Wesbanco Common Stock and Wesbanco
Preferred Stock received by each holder of First Fidelity Common Stock and
Preferred Stock will include the period during which the stock of First
Fidelity 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
(vi) The Federal income tax basis of the Wesbanco Common Stock and
Wesbanco Preferred Stock received by each holder of First Fidelity Common
Stock or First Fidelity Preferred Stock will be the same as the basis of
the stock exchanged therefor.
THE FOREGOING FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY.
THE DISCUSSION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL TAXATION
OR ANY ASPECT OF STATE, LOCAL OR OTHER TAXATION THAT MAY BE RELEVANT TO
PARTICULAR SHAREHOLDERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES, NOR TO
CERTAIN TYPES OF SHAREHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL
INCOME TAX LAWS (FOR EXAMPLE, LIFE INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS AND NON-U.S. PERSONS). SHAREHOLDERS ARE ACCORDINGLY URGED TO
CONSULT WITH THEIR OWN TAX ADVISERS AS TO THE FEDERAL, STATE, LOCAL AND OTHER
TAX CONSEQUENCES TO THEM OF THE MERGER.
COMPARATIVE STOCK PRICES AND DIVIDENDS
WESBANCO STOCK PRICES AND DIVIDENDS
On May 11, 1987, Wesbanco Common Stock became quoted on the National
Association of Securities Dealers Automated Quotations System (NASDAQ) under
the symbol WSBC. The following Wesbanco stock prices represent the range of
published quotations by NASDAQ during each quarter. The most recent high and
low prices on Wesbanco Common Stock were $29.38 and $29.00 as of January 5,
1994.
STOCK PRICE RANGE
WESBANCO (1)(2)
---------------
HIGH LOW
---------------
1991:First Quarter........................................... $ 14.75 $ 13.50
Second Quarter............................................ 15.00 13.50
Third Quarter............................................. 16.50 14.75
Fourth Quarter............................................ 16.75 15.75
1992:First Quarter........................................... $ 18.38 $ 15.75
Second Quarter............................................ 20.75 17.50
Third Quarter............................................. 22.50 20.63
Fourth Quarter............................................ 23.00 21.25
1993:First Quarter........................................... $ 26.25 $ 22.13
Second Quarter............................................ 30.00 25.50
Third Quarter............................................. 34.25 29.75
Fourth Quarter............................................ 32.00 27.75
- --------
(1) On August 25, 1993, the date immediately preceding public announcement of
the proposed Merger, the published high and low price reported by NASDAQ
for Wesbanco stock was $34.00 and $34.00, respectively.
(2) Market Price has been adjusted for a 2 for 1 stock split which occurred on
April 22, 1993.
36
DIVIDENDS PAID
The following table summarizes the quarterly cash dividends per share on
Wesbanco Common Stock declared by Wesbanco.
WESBANCO (1)(2)
---------------
1991:First Quarter........................................... $.1688
Second Quarter............................................ .1688
Third Quarter............................................. .1688
Fourth Quarter............................................ .1688
1992:First Quarter........................................... .175
Second Quarter............................................ .175
Third Quarter............................................. .175
Fourth Quarter............................................ .175
1993:First Quarter........................................... .1925
Second Quarter............................................ .1925
Third Quarter............................................. .20
Fourth Quarter............................................ .20
- --------
(1) Dividends have been adjusted for a 2 for 1 stock split which occurred on
April 22, 1993.
(2) On December 16, 1993 Wesbanco announced an increase in its quarterly cash
dividend payable April 1, 1994 from 20 cents per share to 21 cents per
share.
WESBANCO COMMON STOCK DIVIDEND POLICY
It has been the policy of Wesbanco to declare and pay cash dividends on a
quarterly basis. However, declaration and payment of future dividends will
depend upon the earnings of Wesbanco and its subsidiaries, their financial
condition and other factors, including applicable governmental regulations and
policies. The principal sources of Wesbanco's income are dividends from its
subsidiary banks. For a description of parent company liquidity, see "Index to
Financial Statements--Wesbanco."
Dividends may be paid on Wesbanco Common Stock at the discretion of
Wesbanco's Board of Directors out of any funds legally available therefor.
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 its
outstanding shares, out of capital surplus, provided, however, that in no event
may dividends be paid if Wesbanco is at the time insolvent or would be
insolvent after payment of such dividends. The amount and timing of any future
dividends will depend upon the earnings of Wesbanco and its subsidiaries, their
financial condition, and other relevant factors. See "Government Regulation--
Dividend Restrictions".
PROPOSED WESBANCO PREFERRED STOCK
It is not anticipated that there will be a market for Wesbanco Preferred
Stock, nor is there any expectation that such a market will develop.
Accordingly, there can be no assurance as to the price that may be available to
a shareholder desiring to sell shares of Wesbanco Preferred Stock. Dividends on
Wesbanco Preferred Stock will accrue from and after the Effective Date at an
annual rate of $15.20 per share. Dividends will be cumulative and will be
payable quarterly when and as declared by the Board of Directors from funds
legally available for that purpose, and are payable quarterly on the 15th days
of March, June, September and December in each year commencing the first
dividend date after the Effective Date of the Merger. The above-described
limitations under the West Virginia Corporation Act for dividends on common
stock apply equally to dividends on the Wesbanco Preferred Stock.
37
FIRST FIDELITY STOCK PRICES AND DIVIDENDS--COMMON STOCK
On May 5, 1987, First Fidelity's Common Stock became quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") under
the symbol FFWV. The following First Fidelity stock prices represent the range
of published quotations by NASDAQ during each quarter. The most recent high and
low prices on First Fidelity Common Stock were $25.13 and $24.50 as of January
5, 1994.
CASH
STOCK PRICE RANGE(1) DIVIDENDS
--------------------- PAID PER
HIGH LOW SHARE(2)
---------- ---------- ---------
1991First Quarter............................ $ 9.00 $ 6.63 $.11
Second Quarter............................ 9.68 7.88 .11
Third Quarter............................. 11.03 9.23 .11
Fourth Quarter............................ 11.93 10.58 .16
1992First Quarter............................ $ 13.28 10.35 .11
Second Quarter............................ 14.63 12.60 .11
Third Quarter............................. 17.25 13.87 .12
Fourth Quarter............................ 19.50 16.25 .18
1993First Quarter............................ $ 19.75 $ 17.50 .13
Second Quarter............................ 20.00 18.13 .13
Third Quarter............................. 28.25 18.75 .13
Fourth Quarter............................ 25.75 24.00 .21
- --------
(1) Market prices have been restated to reflect a 10% stock dividend declared
in July 1992.
(2) The first quarter dividends for the First Fidelity Common Stock and First
Fidelity Preferred Stock will be paid by Wesbanco if the Merger receives
the requisite shareholder approvals. The record date for the preferred
stock cash dividend will be March 1, 1994 payable on March 15, 1994 to
shareholders who submit their shares for transfer. The dividend amount will
be $3.80 per share. The record date for the common stock cash dividend will
be March 11, 1994 payable on April 1, 1994 to shareholders who submit their
shares for transfer. The dividend amount will be 21 cents for each share of
Wesbanco Common Stock to be received in the exchange or a pro forma
equivalent of approximately 18.9 cents for each share of First Fidelity
Common Stock.
FIRST FIDELITY DIVIDEND POLICY
It has been the policy of First Fidelity to pay cash dividends on First
Fidelity Common Stock and First Fidelity Preferred Stock to holders of record
of such stock on the 15th day of each March, June, September and December. An
annual fixed dividend of $15.20 per share of First Fidelity Preferred Stock is
required to be paid in quarterly increments. The dividend payable with respect
to the First Fidelity Preferred Stock is cumulative. However, the declaration
and payments of future dividends will depend upon the earnings of First
Fidelity and its subsidiary banks, their financial condition, and other
factors, including applicable governmental regulations and policies. The
principal source of First Fidelity's income is dividends from its four
subsidiary banks. See "Index to Financial Statements--First Fidelity".
Dividends may be paid on First Fidelity Common Stock at the discretion of
First Fidelity's Board of Directors out of any funds legally available
therefor. Under the West Virginia Corporation Act, dividends may be paid out of
unreserved and unrestricted earned surplus, and, additionally, in certain
circumstances and with the affirmative vote of holders of a majority of its
outstanding shares, out of capital surplus, provided, however, that in no event
may dividends be paid if First Fidelity is at the time insolvent or would be
insolvent after payment of such dividends. The amount and timing of any future
dividends will depend upon the earnings of First Fidelity and its subsidiaries,
their financial condition and other relevant factors. See "Government
Regulation--Dividend Restrictions".
38
The Agreement provides that First Fidelity may not pay or declare dividends
or other distributions on First Fidelity Common Stock other than cash dividends
in the amount of sixty cents ($.60) per share of First Fidelity Common Stock
per year, payable quarterly, provided that such dividends may not cumulatively
exceed 45% of the after-tax income of First Fidelity for the fiscal year in
which the dividends are paid. See "The Merger--Conditions and Covenants".
FIRST FIDELITY PREFERRED STOCK
The First Fidelity Preferred Stock was issued on November 1, 1990, in
conjunction with the acquisition by First Fidelity of FirstBank Shinnston.
There is currently no market for the First Fidelity Preferred Stock and it is
not anticipated that there will be a market for First Fidelity Preferred Stock.
There can be no assurance as to the price that may be available or at which
First Fidelity Preferred Stock may be sold or traded. The First Fidelity
Preferred Stock is not listed on any exchange and is not included on the NASDAQ
system. Dividends on the First Fidelity Preferred Stock accrue at a fixed
annual rate of $15.20 per share per annum, payable quarterly on the 15th days
of March, June, September and December of each year.
COMPARATIVE RIGHTS OF SHAREHOLDERS
DESCRIPTION OF WESBANCO CAPITAL STOCK
The authorized capital stock of Wesbanco consists of 25,000,000 shares of
common stock of the par value of $2.0833 per share, and 1,000,000 shares of
preferred stock without par value. The shares of Wesbanco Common Stock now
outstanding are fully paid and nonassessable. As of January 7, 1994, there were
approximately 2,911 holders of record of the common stock of Wesbanco. Of the
25,000,000 shares of authorized common stock, 6,578,328 shares were issued and
outstanding as of January 7, 1994. For a description of Wesbanco dividend
rights, see "Comparative Stock Prices and Dividends--Wesbanco Common Stock
Dividend Policy".
As of January 7, 1994, 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 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
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 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 the
company, redemption rights, rights to convert their preferred stock into shares
of common stock, and voting rights which would tend to dilute the voting
control of the company by the holders of common stock.
It is anticipated that Wesbanco will issue 10,000 shares of Wesbanco
Preferred Stock in conjunction with the Merger transaction. The Wesbanco
Preferred Stock will be identical in terms, conditions, dividends and
conversion rights to that of the First Fidelity Preferred Stock, except that
the conversion ratio will be fixed as of the Effective Time in accordance with
the terms of the First Fidelity Preferred Stock. See "Description of First
Fidelity Capital Stock" for a discussion of the rights, preferences and
conversion privileges of the First Fidelity Preferred 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 the corporation's obligations.
39
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. See "Comparison of Rights of Wesbanco and First
Fidelity Shareholders".
DESCRIPTION OF FIRST FIDELITY CAPITAL STOCK
The authorized capital stock of First Fidelity consists of 4,000,000 shares
of common stock, par value of $1.25 per share, and 1,000,000 shares of
preferred stock of the par value of $1.25 per share. The shares of First
Fidelity Common Stock now outstanding are fully paid and nonassessable. As of
January 7, 1994, there were 1,154 shareholders of record of First Fidelity
Common Stock with 2,327,485 shares issued and outstanding and 43 holders of
record of First Fidelity Preferred Stock with 10,000 shares of First Fidelity
Preferred Stock issued and outstanding.
Each share of First Fidelity Common Stock is entitled to one vote and to
cumulate votes in the election of directors. No holder of shares of First
Fidelity Common Stock has any preemptive right to subscribe for or purchase
any other securities of First Fidelity, and there are no conversion rights or
redemption or sinking fund provisions applicable to First Fidelity Common
Stock.
Dividends may be paid on First Fidelity Common Stock at the discretion of
First Fidelity's Board of Directors out of any funds legally available
therefor. For a discussion of First Fidelity's dividend policy and
restrictions on the payment of dividends see "Comparative Stock Prices and
Dividends--First Fidelity Dividend Policy."
In the event of liquidation or dissolution of First Fidelity, either
voluntary or involuntary, the holders of First Fidelity Common Stock are
entitled to receive prorata, subject to the application of state and federal
laws, such net assets of First Fidelity as are distributable to shareholders
on the respective shares held by them after payment of all liabilities of the
corporation and payment of all liquidation preferences to holders of First
Fidelity Preferred Stock.
First Fidelity has issued 10,000 of First Fidelity Preferred Stock with a
par value of $1.25 per share. First Fidelity is authorized to issue up to
1,000,000 shares of preferred stock, in one or more series. First Fidelity may
not create any class or series of stock ranking as to dividends or liquidation
rights either senior or on a parity with First Fidelity Preferred Stock unless
First Fidelity has first received the affirmative vote of at least two-thirds
of the outstanding shares of First Fidelity Preferred Stock. The shares of
First Fidelity Preferred Stock have no other voting rights except as required
by law.
An annual fixed dividend of $15.20 per share, payable in quarterly
increments, is required to be paid with respect to the First Fidelity
Preferred Stock. The dividend commitment is cumulative. The preferred stock
may be redeemed by First Fidelity within the period from November 1, 1995
through November 30, 1995, and holders of the preferred stock are to be given
at least thirty (30) days notice of the redemption date. First Fidelity may
elect to convert the shares into the right to receive $190.00 in cash per
share. If First Fidelity has not selected a redemption date and the holders of
the shares have not otherwise caused the redemption of their shares, then on
November 30, 1995, all outstanding shares will be converted into First
Fidelity Common Stock.
Each holder of First Fidelity Preferred Stock has the right to convert his
shares into shares of First Fidelity Common Stock. The conversion right may be
exercised any time between the sending of a redemption notice and the close of
business on the redemption date, and if First Fidelity has not sent a
redemption notice, the conversion right may be exercised at any time during
the redemption period. The number of shares of First Fidelity Common Stock
into which a share of First Fidelity Preferred Stock may be converted will be
determined by dividing $190.00 by the "book value" of the First Fidelity
Common Stock as defined in the
40
Certificate of Designation of the First Fidelity Preferred Stock. Subject to
certain conditions and exceptions, the "book value" is defined to be the
quotient found by dividing (1) the difference between (i) the amount of the
assets of First Fidelity and (ii) the sum of (a) the amount of the total
liabilities of First Fidelity and (b) the amount of the liquidation
preferences of any class of shares having a preference as to liquidation
rights which is not convertible into First Fidelity Common Stock by (2) the
number of outstanding shares of First Fidelity Common Stock. Such "book value"
differs from the "book value" of the First Fidelity Common Stock determined in
accordance with Generally Accepted Accounting Principles ("GAAP"), principally
in that under GAAP, the amount under Clause (1)(ii)(b) above, would generally
be the amount of the liquidation preferences of all classes of shares having a
liquidation preference, without regard to whether the shares of that class,
such as the First Fidelity Preferred Stock, are convertible. If at the time of
conversion there are accrued and unpaid dividends on the shares of First
Fidelity Preferred Stock so converted, First Fidelity will have the option of
either paying cash in respect of those dividends or issuing a number of
additional shares of First Fidelity Common Stock found by dividing the amount
of the dividends by the "book value".
In the event of a dissolution of First Fidelity, the liquidation of its
assets, or the winding up of its affairs, the holders of First Fidelity
Preferred Stock will be entitled to receive out of the assets of First
Fidelity available for distributions to its shareholders, before any payment
or distribution is made on the First Fidelity Common Stock or any other shares
ranking junior to the First Fidelity Preferred Stock as to liquidation,
$190.00 per share, plus a sum equal to all dividends (whether or not earned or
declared) on such shares cumulated and unpaid thereon to the date of final
distribution.
If there is any merger of First Fidelity, the holders of the First Fidelity
Preferred Stock will not have voting rights if the merger does not change the
terms of such preferred stock, except as otherwise required by law. The
successor corporation, however, must agree that, upon conversion of the First
Fidelity Preferred Stock, the holders will receive the same consideration that
they would have received had they converted their shares immediately prior to
the merger. The successor corporation in the merger must give notice of any
such agreement to the holders of the First Fidelity Preferred Stock. Wesbanco
has agreed that the holders of Wesbanco Preferred Stock issued in exchange for
First Fidelity Preferred Stock will receive the same consideration upon
conversion of the Wesbanco Preferred Stock that they would have received if
they had converted their First Fidelity Preferred Stock immediately prior to
the Merger. Based on "book value" of First Fidelity Common Stock as of
September 30, 1993, if a holder of First Fidelity Preferred Stock had
converted his shares immediately prior to the Merger, such holder would have
received 13.688 shares of First Fidelity Common Stock for each share of First
Fidelity Preferred Stock so converted. Accordingly, applying the merger
conversion ratio of .9 share of Wesbanco Common Stock for each share of First
Fidelity Common Stock, the conversion ratio for Wesbanco Preferred Stock into
Wesbanco Common Stock would have been 12.319 shares, based on the book value
of First Fidelity Common Stock as of September 30, 1993.
The remaining authorized but unissued shares of preferred stock of First
Fidelity may be issued in one or more classes or series with such preferences
and voting rights as the Board of Directors may fix in the resolution
providing for the issuance of such shares. The issuance of shares of preferred
stock could effect the relative rights of the First Fidelity 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 of First Fidelity at the time of issuance, the holders of
preferred stock may be entitled to a higher dividend rate than that paid on
the 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 the company, redemption rights, rights to convert their
preferred stock into shares of First Fidelity Common Stock, and voting rights
which would tend to dilute the voting control of the corporation by the
holders of First Fidelity Common Stock.
COMPARISON OF RIGHTS OF WESBANCO AND FIRST FIDELITY SHAREHOLDERS
The rights of the First Fidelity 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 First
Fidelity shareholders and Wesbanco shareholders are similar. Holders of common
stock of each corporation are entitled to one vote for each share of common
stock and to receive prorata any assets distributed to shareholders upon
liquidation. The affirmative vote of the holders of the majority of the
41
outstanding common stock of either corporation is required to approve major
corporate transactions except mergers and consolidations in which case a two-
thirds vote of the holders of outstanding First Fidelity Common Stock is
necessary to effect such a transaction. Cumulative voting is permitted in the
election of directors for both corporations, and each corporation elects
directors by class using three separate classes, each with three year terms.
Shareholders of neither corporation have preemptive rights to purchase their
prorata shares of any additional stock issued. Additionally, both corporations
are authorized to issue by appropriate resolution of their respective Boards of
Directors shares of preferred stock with such preferences and rights as the
Boards may determine. The shareholders of both corporations have the right
under West Virginia law to dissent from certain corporate transactions and to
elect dissenters' rights. See "Proposed Merger--Rights of Dissenting
Shareholders".
(i) Differences in Rights:
There are, however, a number of differences between the rights of First
Fidelity shareholders and Wesbanco shareholders. For example, 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. First
Fidelity's Bylaws do not require prior written notice of shareholders
nominations for directors.
Furthermore, 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
the corporation will be required to amend or repeal the Articles of
Incorporation provision dealing with the classification of the Directors into
three separate classes, each to serve for staggered terms of three years. First
Fidelity's Articles of Incorporation require only a two-thirds vote of the
shareholders to effect a change in the classification of Directors.
(ii) Advantages of Wesbanco Anti-Takeover Provisions:
The provisions constitute defensive measures which are designed in part, to
discourage, and to insulate the corporation against, hostile takeover efforts,
which the Wesbanco Board 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.
(iii) Disadvantages of Wesbanco Anti-Takeover Provisions:
The classification of the Board 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 to change a majority of
the Board. 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 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 certain specific differences between the
rights of Wesbanco and First Fidelity 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 Corporations Act
and the articles and bylaws referred to above.
42
PRO FORMA DATA
Certain Information about the Unaudited
Pro forma Combined Financial Data
Notes to Pro forma Financial Information
The following unaudited pro forma combined balance sheet as of September
30, 1993 and pro forma combined income statements for the nine months ended
September 30, 1993 and 1992 and years ended December 31, 1992, 1991 and 1990
are presented on the following pages and include pro forma combined data for
WesBanco and First Fidelity.
This acquisition will be accounted for using the pooling-of-interests
accounting method. Under this method of accounting, the historical financial
statements are combined for all periods presented. The unaudited pro forma
statements were prepared as if the combinations became effective on January 1
of the earliest year presented, January 1, 1990, and are for informational
purposes only. The pro forma financial information should be read in
conjunction with the other financial information presented herein, incorporated
by reference and with the separate historical and supplemental financial
statements, including the notes thereto, of each institution.
Expenses relating to the acquisition of First Fidelity are estimated
within a range of $150,000 to $175,000.
Notes to Pro forma Financial Information
- ----------------------------------------
An adjustment was made to the pro forma balance sheet which represents the
issuance of 2,090,954 shares of WesBanco Common Stock at par value and the
related transfer out of capital surplus. An adjustment was also made to the pro
forma balance sheet to retire 500 shares of First Fidelity Common Stock held by
WesBanco and the related transfer out of common stock and surplus. WesBanco will
also issue 10,000 shares of a WesBanco Redeemable Preferred Stock which has the
same attributes as First Fidelity Redeemable Preferred Stock. First Fidelity
treasury stock was considered retired as of the acquisition date. There were no
intercompany transactions or adjustments to the pro forma summary income
statement.
Per share information has been retroactively adjusted for the April 1993 two
for one stock split by WesBanco and the July 1992 10% stock dividend by First
Fidelity.
Earnings per share was computed by dividing net income less preferred dividends
and accretion, where applicable, by the weighted average number of shares
outstanding during each period.
43
WESBANCO, INC.
PRO FORMA BALANCE SHEET
September 30,1993
(In Thousands, Unaudited)
FIRST CONSOL-
WESBANCO, FIDELITY IDATION PRO FORMA
ASSETS INC. BANCORP, INC. ENTRIES COMBINED
-------- ------------- ------- ---------
Cash and due from banks $ 30,563 $ 14,623 $ 45,186
Interest-bearing deposits 297 142 439
Federal funds sold 19,020 16,935 35,955
Investment securities 413,816 86,135 (9) 499,942
Loans (net of unearned income) 548,509 183,300 731,809
Less: reserve for possible loan losses (9,044) (2,337) (11,381)
---------- -------- ---------- ----------
Loans - net 539,465 180,963 720,428
Bank premises and equipment 14,700 7,881 22,581
Other assets 20,224 3,404 23,628
---------- -------- ---------- ----------
TOTAL ASSETS $1,038,085 $310,083 (9) $1,348,159
========== ======== ========== ==========
LIABILITIES
Deposits:
Non interest bearing $82,505 $ 31,317 $ 113,822
Interest bearing 771,015 227,893 998,908
---------- -------- ---------- ----------
Total deposits 853,520 259,210 1,112,730
Short-term borrowings 49,395 14,206 63,601
Other liabilities 12,332 2,590 14,922
---------- -------- ---------- ----------
TOTAL LIABILITIES 915,247 276,006 1,191,253
---------- -------- ---------- ----------
Redeemable Preferred stock (Series A 8% cumulative,
$1.25 par value,10,000 shares issued and outstanding) 0 1,833 1,833
SHAREHOLDERS' EQUITY
Preferred stock (no par value; 1,000,000
shares authorized) 0 0 0
Common stock ($2.0833 par value; 25,000,000
shares authorized) 13,809 2,920 1,435 18,164
Capital surplus 16,352 13,059 (1,580) 27,831
Capital reserves 2,139 0 2,139
Retained earnings 92,843 16,401 109,244
Less: Treasury stock (1,323) (136) 136 (1,323)
ESOP benefit (982) 0 (982)
---------- -------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 122,838 32,244 (9) 155,073
---------- -------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,038,085 $310,083 (9) $1,348,159
========== ======== ========== ==========
See Notes to ProForma Financial Information
44
WESBANCO, INC.
PRO FORMA SUMMARY INCOME STATEMENT
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,1993
(in thousands, except for share and per share amounts)
(unaudited)
FIRST CONSOL-
WESBANCO FIDELITY IDATION PRO FORMA
INC. BANCORP, INC. ENTRIES COMBINED
-------- ------------- ------- ---------
INTEREST INCOME:
Interest and fees on loans $35,988 $12,064 $0 $48,052
Interest on investment securities 19,695 3,993 0 23,688
Other interest income 178 387 0 565
---------- -------- ---------- ----------
Total interest income 55,861 16,444 0 72,305
---------- -------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 22,870 5,603 0 28,473
Other borrowings 1,064 399 0 1,463
---------- -------- ---------- ----------
Total interest expense 23,934 6,002 0 29,936
---------- -------- ---------- ----------
Net interest income 31,927 10,442 0 42,369
Provision for possible loan losses 1,700 255 0 1,955
---------- -------- ---------- ----------
Net interest income after provision
for possible loan losses 30,227 10,187 0 40,414
Total other income 6,504 1,028 0 7,532
Total other expense 21,353 7,217 0 28,570
---------- -------- ---------- ----------
Income before income taxes 15,378 3,998 0 19,376
Provision for income taxes 4,137 1,373 0 5,510
---------- -------- ---------- ----------
Net Income $11,241 $2,625 $0 $13,866
========== ======== ========== ==========
Preferred Stock Dividends and Discount Accretion $0 $138 $138
Earnings Per Share of Common Stock:
Net Income $1.70 $1.07 $1.58
Average Shares Outstanding 6,601,533 2,318,287 8,687,991
Book Value Per Share of Common Stock $18.67 $13.88 $17.89
See Notes to ProForma Financial Information.
45
WESBANCO, INC.
PRO FORMA SUMMARY INCOME STATEMENT
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1992
(in thousands, except for share and per share amounts)
(unaudited)
FIRST CONSOL-
WESBANCO, FIDELITY IDATION PRO FORMA
INC. BANCORP, INC. ENTRIES COMBINED
--------- ------------- -------- ------------
INTEREST INCOME:
Interest and fees on loans $37,155 $13,028 $0 $50,183
Interest on investment
securities 19,985 4,585 0 24,570
Other interest income 1,698 568 0 2,266
---------- ----------- -------- ------------
Total interest income 58,838 18,181 0 77,019
---------- ----------- -------- ------------
INTEREST EXPENSE:
Interest on deposits 28,410 7,264 0 35,674
Other borrowings 1,119 431 0 1,550
---------- ----------- -------- ------------
Total interest expense 29,529 7,695 0 37,224
---------- ----------- -------- ------------
Net interest income 29,309 10,486 0 39,795
Provision for possible loan losses 1,578 315 0 1,893
---------- ----------- -------- ------------
Net interest income after
provision for possible
loan losses 27,731 10,171 0 37,902
Total other income 6,417 1,048 0 7,465
Total other expense 20,847 7,119 0 27,966
---------- ----------- -------- ------------
Income before income taxes and
effect of the change in
accounting for post-
retirement benefits 13,301 4,100 0 17,401
Provision for income taxes 3,675 1,405 5,080
---------- ----------- -------- ------------
Income before effect of the
change in accounting for
postretirement benefits 9,626 2,695 0 12,321
Effect of the change in
accounting for postretirement
benefits-net of tax effect (592) 0 0 (592)
---------- ----------- -------- ------------
Net Income $9,034 $2,695 $0 $11,729
========== =========== ======== ============
Preferred Stock Dividends and
Discount Accretion $0 $ 138 $ 138
Earnings Per Share of Common Stock:
Income before effect of the
change in accounting for
postretirement benefits $ 1.46 $ 1.11 $ 1.40
Effect of the change in accounting
for postretirement benefits-net
of tax effect (0.09) 0 (0.07)
---------- ----------- -------- ------------
Net Income $ 1.37 $ 1.11 $ 1.33
========== =========== ======== ============
Average Shares Outstanding 6,613,400 2,303,604 8,686,644
Book Value Per Share of Common
Stock $17.35 $12.99 $16.65
See Notes to ProForma Financial Information.
46
WESBANCO, INC.
PRO FORMA SUMMARY INCOME STATEMENT
FOR THE YEAR ENDED
DECEMBER 31, 1992
(in thousands, except for share and per share amounts)
(unaudited)
FIRST CONSOL-
WESBANCO, FIDELITY IDATION PRO FORMA
INC. BANCORP, INC. ENTRIES COMBINED
--------- ------------ ------- ---------
INTEREST INCOME:
Interest and fees on loans $49,146 $17,242 $0 $66,388
Interest on investment securities 26,930 6,031 0 32,961
Other interest income 1,721 701 0 2,422
--------- ---------- ----- -------
Total interest income 77,797 23,974 0 101,771
--------- ---------- ----- -------
INTEREST EXPENSE:
Interest on deposits 36,657 9,364 0 46,021
Other borrowings 1,465 597 0 2,062
--------- ---------- ----- -------
Total interest expense 38,122 9,961 0 48,083
--------- ---------- ----- -------
Net interest income 39,675 14,013 0 53,688
Provision for possible loan
losses 2,850 429 0 3,279
--------- ---------- ----- -------
Net interest income after
provision for possible loan
losses 36,825 13,584 0 50,409
Total other income 8,450 1,413 0 9,863
Total other expense 27,668 9,609 0 37,277
--------- ---------- ----- -------
Income before income taxes and
effect of the change in
accounting for postretirement
benefits 17,607 5,388 0 22,995
Provision for income taxes 4,683 1,841 6,524
--------- ---------- ----- -------
Income before effect of the
change in accounting for
postretirement benefits 12,924 3,547 0 16,471
Effect of the change in
accounting for postretirement
benefits-net of tax effect (592) 0 0 (592)
--------- ---------- ----- -------
Net Income $12,332 $3,547 $0 $15,879
========= ========== ===== =======
Preferred Stock Dividends and
Discount Accretion $0 $184 $184
Earnings Per Share of Common
Stock:
Income before effect of the
change in accounting for
postretirement benefits $ 1.96 $1.46 $1.88
Effect of the change in
accounting for postretirement
benefits-net of tax effect (0.09) 0 (0.07)
--------- ---------- ----- -------
Net Income $1.87 $1.46 $1.81
========= ========== ===== =======
Average Shares Outstanding 6,613,382 2,307,195 8,689,858
Book Value Per Share of Common
Stock $17.69 $13.21 $16.96
See Notes to ProForma Financial Information.
47
WESBANCO, INC.
PRO FORMA SUMMARY INCOME STATEMENT
FOR THE YEAR ENDED
DECEMBER 31,1991
(in thousands, except for share and per share amounts)
unaudited
FIRST CONSOL-
WESBANCO, FIDELITY IDATION PRO FORMA
INC. BANCORP, INC. ENTRIES COMBINED
---------- ------------- ------- ---------
INTEREST INCOME:
Interest and fees on loans $52,200 $17,753 $0 $69,953
Interest on investment securities 27,015 7,056 0 34,071
Other interest income 3,430 1,531 0 4,961
---------- --------- --- ---------
Total interest income 82,645 26,340 0 108,985
---------- --------- --- ---------
INTEREST EXPENSE:
Interest on deposits 44,060 12,138 0 56,198
Other borrowings 2,298 826 0 3,124
---------- --------- --- ---------
Total interest expense 46,358 12,964 0 59,322
---------- --------- --- ---------
Net interest income 36,287 13,376 0 49,663
Provision for possible loan losses 2,337 626 0 2,963
---------- --------- --- ---------
Net interest income after provision for
possible loan losses 33,950 12,750 0 46,700
Total other income 7,810 1,357 0 9,167
Total other expense 26,799 9,426 0 36,225
---------- --------- --- ---------
Income before provision for income taxes 14,961 4,681 0 19,642
Provision for income taxes 3,723 1,516 0 5,239
---------- --------- --- ---------
Net Income $11,238 $3,165 $0 $14,403
========== ========= === =========
Preferred Stock Dividends and
Discount Accretion $0 $184 $184
Earnings Per Share of Common Stock:
Net Income $1.70 $1.30 $1.64
Average Shares Outstanding 6,610,722 2,295,623 8,676,783
Book Value Per Share of Common Stock $16.59 $12.26 $16.22
See Notes to ProForma Financial Information.
48
WESBANCO, INC.
PRO FORMA SUMMARY INCOME STATEMENT
FOR THE YEAR ENDED
DECEMBER 31,1990
(in thousands, except for share and per share amounts)
(unaudited)
FIRST CONSOL-
WESBANCO, FIDELITY IDATION PRO FORMA
INC. BANCORP, INC. ENTRIES COMBINED
---------- ------------- ------- ---------
INTEREST INCOME:
Interest and fees on loans $52,035 $14,028 $0 $66,063
Interest on investment
securities 27,581 5,519 0 33,100
Other interest income 4,877 1,736 0 6,613
---------- --------- --- ----------
Total interest income 84,493 21,283 0 105,776
---------- --------- --- ----------
INTEREST EXPENSE:
Interest on deposits 47,300 10,014 0 57,314
Other borrowings 2,830 1,181 0 4,011
---------- --------- --- ----------
Total interest expense 50,130 11,195 0 61,325
---------- --------- --- ----------
Net interest income 34,363 10,088 0 44,451
Provision for possible loan
losses 1,984 384 0 2,368
---------- --------- --- ----------
Net interest income after
provision for possible
loan losses 32,379 9,704 0 42,083
Total other income 7,247 999 0 8,246
Total other expense 24,922 7,179 0 32,101
---------- --------- --- ----------
Income before provision for
income taxes 14,704 3,524 0 18,228
Provision for income taxes 3,424 1,063 0 4,487
---------- --------- --- ----------
Net Income $11,280 $2,461 $0 $13,741
========== ========= === ==========
Preferred Stock Dividends and
Discount Accretion $0 $18 $18
Earnings Per Share of Common
Stock:
Net Income $1.71 $1.25 $1.64
Average Shares Outstanding 6,617,748 1,961,686 8,383,265
Book Value Per Share of Common
Stock $15.43 $13.35 $15.10
See Notes to ProForma Financial Information.
49
COMPARATIVE PER SHARE DATA
(unaudited)
The following table sets forth for WesBanco and First Fidelity certain
historical per share financial information for the nine month periods ended
September 30, 1993 and 1992 and the years ended December 31, 1992, 1991 and
1990. The pro forma equivalent per share information for each company is
computed, where applicable, using the WesBanco pro forma information and the
applicable exchange ratio of WesBanco Common Stock for each share of the First
Fidelity Common Stock. This information 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 Joint Proxy Statement/Prospectus or have been furnished separately.
The exchange ratio for each share of First Fidelity Common Stock is .9 shares of
WesBanco Common Stock. See "Pro Forma Data."
For the Nine
Months Ended
September 30, Year Ended December 31,
------------------ ------------------------
1993 1992 1992 1991 1990
------ ----- ------ ------ ------
WESBANCO COMMON STOCK
Net income per share
Historical $ 1.70 $ 1.37 $ 1.87 $ 1.70 $ 1.71
Pro forma 1.58 1.33 1.81 1.64 1.64
Dividend per share
Historical .585 .525 .70 .675 .65
Book value per share
Historical 18.67 17.35 17.69 16.59 15.43
Pro forma 17.89 16.65 16.96 16.22 15.10
FIRST FIDELITY COMMON STOCK
Net income per share
Historical $ 1.07 $ 1.11 $ 1.46 $ 1.30 $ 1.25
Pro forma 1.42 1.19 1.63 1.48 1.48
Dividend per share
Historical .39 .39 .521 .491 .486
Pro forma .527 .473 .63 .608 .585
Book value per share
Historical 13.88 12.99 13.21 12.26 13.35
Pro forma 16.10 14.99 15.26 14.60 13.59
50
INFORMATION WITH RESPECT TO WESBANCO
HISTORY
Wesbanco is a multi-bank holding company chartered under the laws of the
State of West Virginia. As of December 1, 1993, Wesbanco had nine banking
affiliates located in Wheeling, Wellsburg, Elizabeth, Parkersburg, Charleston,
Sissonville and Kingwood in West Virginia and Barnesville, Ohio. On a
consolidated historical basis, as of September 30, 1993, Wesbanco had total
assets of $1,038,085,000, net loans of $539,465,000, deposits of $853,520,000
and shareholders equity of $122,838,000. As of January 7, 1994, Wesbanco had
approximately 2,911 shareholders, and 6,578,328 shares of common stock
outstanding. Wesbanco has no preferred stock issued and outstanding.
Wesbanco had been inactive since its incorporation in 1968, but was activated
on December 31, 1976, and exchanged its common stock on a share for share basis
with the former holders of common stock of Wheeling Dollar Savings & Trust Co.
During 1984, Wesbanco acquired three financial institutions with combined
assets approximating $57,000,000 as of December 31, 1984. During 1985, Wesbanco
acquired one financial institution with assets as of December 31, 1985, of
approximately $41,000,000 and merged Wheeling Dollar Savings & Trust Co. with
the Citizens National Bank of Follansbee, which was one of the banks acquired
in 1984. The name of the resulting institution was changed to Wheeling Dollar
Bank. During 1987, Wesbanco acquired four financial institutions with combined
assets of approximately $215,567,000. During 1988, Wesbanco acquired one
financial institution with assets as of the date of acquisition of
approximately $68,280,000. During 1991 Wesbanco acquired one financial
institution with assets as of the date of acquisition of approximately
$95,510,000. During 1992, Wesbanco acquired two financial institutions, one
with assets of approximately $144,849,000 in assets, and one of approximately
$18,127,000 in assets, as of the dates of acquisition. Effective July 1, 1991,
Wesbanco changed the name of all of its affiliate banks to Wesbanco Bank plus
the name of the location of the Bank, except for Albright National Bank of
Kingwood and The First National Bank of Barnesville which were changed
subsequently since they were acquired after that date.
Wesbanco is a decentralized banking operation, with affiliates acting
autonomously in day to day decisions. The principal role of the holding company
is to provide management, leadership and access to specialized staff resources
in areas such as: asset/liability management, regulations, lending policies,
data processing, accounting, investment and budgeting.
Dividends received from affiliates are Wesbanco's major source of income.
Dividend payments by the banking affiliates depend primarily on their earnings
and are limited by various regulatory restrictions. On September 30, 1993, the
affiliates, without prior approval from the regulators, could have distributed
dividends of approximately $18,991,000. Wesbanco has not issued debt securities
as a source of funding for the assets of the affiliate banks.
Wesbanco has reported to its stockholders that it may engage in other
activities of a financial nature authorized by the Board of Governors of the
Federal Reserve System either directly through a subsidiary or through
acquisition of established companies, though no specific proposals are
underway. As of September 30, 1993, neither the parent corporation nor any of
the subsidiaries were engaged in any operation in foreign countries and have
had no material transactions with customers in foreign countries.
FUTURE ACQUISITIONS
Wesbanco continues to foster discussion with respect to additional
acquisitions of banks, thrifts and thrift and bank holding companies. The
tentative nature of such discussions, however, makes it impossible to predict
the number or size of any future acquisitions.
51
OPERATIONS
Wesbanco, through its subsidiaries, conducts a general banking, commercial
and trust business. Its full service banks offer, among other things, retail
banking services, such as demand, savings and time deposits; commercial,
mortgage and consumer installment loans; credit card services through VISA and
MasterCard; personal and corporate trust services; discount brokerage services;
and travel services. Most affiliates are participating in or will be
participating in local partnerships which operate banking machines in those
local regions under the name of OWL. The banking machines are linked to CIRRUS,
a nationwide banking network.
The principal operations of Wesbanco are conducted at the main offices of
Wesbanco and Wesbanco Bank Wheeling located at Bank Plaza, Wheeling, West
Virginia. This facility was constructed in 1976, and consists of a modern eight
story glass enclosed commercial building with a main lobby for banking
operations and an integral four-lane drive-in facility with additional space
for customer parking. The structure not only provides office space for Wesbanco
and Wesbanco Bank Wheeling, but as well, certain additional commercial space
which is leased to various commercial enterprises.
Wesbanco Bank Wheeling (formerly Wheeling Dollar Bank), a state banking
corporation, is the largest banking subsidiary of Wesbanco and represents
approximately 39% of the consolidated assets and 33% of the consolidated net
income as of September 30, 1993. It is a full service bank offering a wide
range of services to consumers, businesses and government bodies, including but
not limited to, checking and savings accounts, certificates of deposit,
consumer loans, mortgage loans, commercial loans, personal and corporate
trusts, data processing and other banking services. The bank has approximately
288 full-time equivalent employees. The bank's Trust Department is one of the
largest in the State of West Virginia and offers a wide range of services as
Executor, Trustee, Guardian and Agent. It serves as Transfer Agent and
Registrar for corporations and performs fiduciary services for municipalities.
Total market value of assets under management in the Trust Department was
approximately $1.1 billion as of September 30, 1993. The Bank also operates
nine branch offices, three of which are located in Wheeling, two of which are
located in Follansbee, two in New Martinsville, one in Pine Grove and one in
Sistersville, West Virginia. All branch offices of the bank also operate drive-
in facilities.
Wesbanco Bank Wellsburg, Inc. (formerly Brooke National Bank) is a state
banking corporation located in Wellsburg, West Virginia. The bank also provides
general services and offers a similar range of services to that provided by
Wesbanco Bank Wheeling. The bank also operates drive-in facilities which are
located immediately adjacent to its banking facility. As of September 30, 1993,
assets, deposits and number of full time equivalent employees were $55,391,000,
$46,966,000 and 20, respectively.
Wesbanco Bank South Hills (formerly South Hills Bank) is a state banking
corporation located in Charleston, West Virginia. The bank also provides
general banking services similar to the services provided by Wesbanco Bank
Wheeling. The bank operates a drive-in facility which is located at its main
banking facility. As of September 30, 1993, the bank had total assets of
approximately $52,716,000, deposits of approximately $43,544,000, and 20 full
time equivalent employees.
Wesbanco Bank Elizabeth (formerly Wirt County Bank) is a state banking
corporation located in Elizabeth, Wirt County, West Virginia. The bank also
provides general banking services similar to the services provided by Wesbanco
Bank Wheeling. The bank operates a drive-in facility, which is located at its
main banking facility. As of September 30, 1993, the bank had approximately
$24,483,000 in assets, deposits of approximately $20,277,000, and 11 full time
equivalent employees.
Wesbanco Bank Elm Grove, Inc. (formerly First National Bank and Trust Company
of Wheeling) is a state banking corporation located in Elm Grove, Wheeling,
West Virginia. Wesbanco Bank Elm Grove, Inc. also provides general banking and
trust services similar to the services provided by WesBanco Bank Wheeling. The
bank also operates a drive-in facility and one branch facility. As of September
30, 1993, the bank had
52
approximately $156,285,000 in assets, deposits of approximately $124,150,000,
and 54 full time equivalent employees.
Wesbanco Bank Sissonville (formerly Bank of Sissonville) is a state banking
corporation located in Sissonville, West Virginia. The bank also provides
general banking services similar to the services provided by Wesbanco Bank
Wheeling. The bank operates a drive-in facility which is located at its main
banking facility. As of September 30, 1993, the bank had approximately
$37,485,000 in assets, $31,022,000 in deposits and 19 full time equivalent
employees.
Wesbanco Bank Parkersburg (formerly Mountain State Bank) is also a state
banking corporation located in Parkersburg, West Virginia. The bank also
provides general banking and trust services similar to the services provided by
Wesbanco Bank Wheeling. The bank also operates a drive-in facility which is
located at its main banking facility and a full service branch which is located
at Mineral Wells, West Virginia. As of September 30, 1993, the bank had
approximately $81,920,000 in assets, $71,724,000 in deposits, and 48 full time
equivalent employees.
Wesbanco Bank Kingwood is a West Virginia banking corporation located in
Kingwood, West Virginia. The bank also provides general banking and trust
services similar to the services provided by Wesbanco Bank Wheeling. The bank
operates two full service branch offices at Masontown and Bruceton Mills, West
Virginia. As of September 30, 1993, the bank had approximately $98,879,000 in
assets and, $85,755,000 in deposits, and 50 full time employees.
Wesbanco Bank Barnesville is an Ohio banking corporation located in
Barnesville, Ohio, the bank also provides general banking and trust services
similar to the services provided by Wesbanco Bank Wheeling. The bank operates
out of its principal office located at 101 E. Main Street, Barnesville, Ohio,
and also operates branch facilities in Beallsville, Bethesda and Woodsfield,
Ohio. As of September 30, 1993, the bank had approximately $145,234,000 in
assets and $125,887,000 in deposits, and 68 full time employees.
As lenders, banks can be potentially liable under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. (S)
9601 et seq., for cleanup of hazardous substances from property on which the
bank forecloses or in which it has a security interest. CERCLA imposes
liability for removal and remediation of hazardous substances on various types
of parties, including "owners or operators" of a contaminated site. See 42
U.S.C. (S) 9607(a). In the definition of "owners or operators," CERCLA exempts
from liability those who, without participating in the management of a
facility, hold indicia of ownership in the facility primarily to protect a
security interest. See 42 U.S.C. (S) 9601(2)(A). However, CERCLA's secured
creditor exemption from liability has been narrowed by recent judicial
interpretation. In a recent decision, the United States Court of Appeals for
the Eleventh Circuit held that a lender could be liable for cleanup costs if
its involvement in the financial management of the facility was broad enough to
support an inference that it could have affected hazardous waste disposal
decisions. See United States v. Fleet Factors Corp., 801 F.2d 1550 (11th Cir.
1990), cert. denied, 111 S.Ct. 752 (1991). A federal district court had earlier
held that CERCLA's secured creditor exemption did not insulate from liability a
mortgagee that had foreclosed and later acquired secured property. See United
States v. Maryland Bank & Trust Co., 632 F. Supp. 573 (D. Md. 1986). More
recently, however, the Ninth Circuit rejected the "capacity to influence" test
of Fleet Factors and held that the mere unexercised power of a lender to get
involved in a borrower's management was not enough to impose CERCLA liability
on a secured lender. See Bergsoe Metal v. East Asiatic Co., 910 F.2d 668 (9th
Cir. 1990). The United States Court of Appeals for the Fourth Circuit, which
has jurisdiction over Wesbanco, has not yet ruled on this issue, and whether it
will follow the Fleet Factors decision cannot be determined at this time.
Currently, Wesbanco does attempt to screen loan applicants concerning
environmental matters with respect to collateral pledged to it as security for
loans. Currently, Wesbanco is not aware of any specific collateral pledged to
it on which there are hazardous materials or potential liability under CERCLA.
However, there can be no assurances that liability under CERCLA or otherwise
for cleanup of hazardous materials will not occur in the future. In the event
53
that such liability occurs, it could have a material adverse effect on the
financial position and results of operations of Wesbanco.
COMPETITION
The 1980's was a period of significant legislative change in West Virginia
for banks and bank holding companies. Prior to 1982, West Virginia was a unit
banking State and prohibited multi-bank holding companies and branch banking.
As a result of legislation enacted in 1982, banks were permitted to establish
a limited number of branches by purchase, merger or consolidation with another
banking institution and to establish an additional branch by the construction,
lease or acquisition of branch facilities in the unbanked areas within the
county of its principal office. In 1984, legislation further eased these
restriction by removing the "unbanked area" limitation on county wide
branching effective June 7, 1984, and by providing for the phased
implementation of branch banking throughout the State beginning in 1987, with
unlimited branch banking after 1991.
As a result of legislation adopted in the 1986 session of the Legislature,
West Virginia further eased or eliminated restrictions on branch banking and
joined the growing number of states that permit interstate acquisitions of
banks and bank holding companies on a reciprocal basis. Specifically, the new
legislation permits West Virginia bank holding companies to acquire banks and
bank holding companies in other states and out-of-state bank holding companies
to acquire West Virginia banks or bank holding companies on a reciprocal
basis; however, the entry by out-of-state bank holding companies is permitted
only by the acquisition of an existing institution which has operated in West
Virginia for two years prior to acquisition. Similar provisions were enacted
to allow reciprocal interstate acquisitions by thrift institutions such as
savings and loan holding companies, savings and loan associations, savings
banks, and building and loan associations.
The new legislation also accelerated the effective date of state-wide
unlimited branch banking from 1991 to January 1, 1987. Under the recent
legislation, interstate banking activities were delayed until January 1, 1988,
in order to permit West Virginia institutions one year to branch and make
other acquisitions state-wide before the advent of interstate banking. The
recent legislation does not permit the chartering and formation of de novo
banks in West Virginia by out-of-state bank holding companies nor does it
permit West Virginia banks to establish branch banks across state lines
(either de novo or by formation or merger).
Each bank faces strong competition for local business in its respective
market areas. Competition exists in efforts to obtain new deposits, in the
scope and types of services offered, and the interest rates paid on time
deposit and charged on loans, and in other aspects of banking. Banks encounter
substantial competition not only from other commercial banks but also from
other financial institutions. Savings banks, savings and loan associations,
and credit unions actively compete for deposits. Such institutions, as well as
consumer finance companies, brokerage firms, insurance companies and other
enterprises, are important competitors for various types of business. In
addition, personal and corporate trust services and investment counseling
services are offered by insurance companies, investment counseling firms and
other business firms and individuals.
Such competition has increased due to the passage of the Depository
Institution Deregulation and Monetary Control Act of 1980 and the Garn-St.
Germain Depository Institutions Act of 1982.
PRINCIPAL SHAREHOLDERS
To the best of management's knowledge, the Trust Department of Wesbanco Bank
Wheeling, Bank Plaza, Wheeling, West Virginia, 26003, is the only holder or
beneficial owner of more than 5% of the common stock of the Corporation. As of
November 4, 1993, 794,009 shares of the common stock of the Corporation,
representing 12.07% of the shares outstanding, were held in various capacities
in the Trust Department. Of these shares, the Bank does not have voting
control of 462,169 shares, representing 7.03% of the shares outstanding, has
partial voting control of 12,742 shares, representing .19% of the shares
outstanding, and sole voting control of 319,098 shares, representing 4.85% of
the shares outstanding. In accordance with its general
54
practice shares of the common stock of the Corporation over which the Bank has
sole voting control will be voted in accordance with the recommendations of
management. Shares over which the Bank has partial voting control will be
similarly voted if the Bank has the concurrence of the co-fiduciary or co-
fiduciaries.
The following table lists each stockholder known to Wesbanco to be the
beneficial owner of more than 5% of Wesbanco's common stock as of September 30,
1993, as more fully described above:
NAME &
ADDRESS OF AMOUNT & NATURE
TITLE OF BENEFICIAL OF BENEFICIAL PERCENT
CLASS OWNER OWNERSHIP OF CLASS
-------- -------------------- --------------- --------
Common......................... Wesbanco Bank 794,009* 12.07%
Wheeling Trust Dept.
Bank Plaza
Wheeling, WV 26003
- --------
* Nature of beneficial ownership more fully described in text immediately
preceding table.
Holders of Wesbanco Common Stock will not experience a change in the number
of Wesbanco shares held by them as a result of the Merger; however, their
percentage ownership will decrease. Based on stock ownership as of November 4,
1993, and assuming a total of 8,669,282 shares of Wesbanco Common Stock
outstanding immediately after the Merger, the Trust Department of Wesbanco Bank
Wheeling would own 3.68% with sole voting and investment power and .15% with
shared power, Directors and Officers, as a group, would beneficially hold 8.7%
and 2 Directors or Officers would beneficially hold 1% or more of the
outstanding common stock of Wesbanco. For stock ownership of Wesbanco Directors
and Officers see the Wesbanco Proxy Statement for the Annual Meeting of
Shareholders for April 21, 1993, incorporated herein by reference and delivered
herewith. See "Incorporation of Certain Documents by Reference."
WESBANCO ESOP
The Wesbanco Employee Stock Ownership Plan (the "ESOP") is a stock bonus plan
designated as an employee stock ownership plan within the meaning of Section
4975 of the Internal Revenue Code of 1986 (the "Code"). The ESOP was adopted on
December 31, 1986, primarily to permit eligible employees to acquire stock
ownership interests in the Company. The ESOP is intended to be a qualified plan
within the meaning of Section 401(a) of the Code and the trust created pursuant
to the ESOP (the "ESOP Trust") is intended to be a qualified trust within the
meaning of Section 501(a) of the Code.
All employees of Wesbanco, together with all employees of affiliated
companies which adopt or have adopted the ESOP, to date, all existing
affiliates of Wesbanco, are eligible to participate in the ESOP upon completion
of a year of service. Employees may make no contributions to the ESOP. The
Board of Directors of Wesbanco annually determines, in its discretion, the
amount, if any, of the employer contribution to the ESOP. However, when, as is
now the case, the ESOP trust has entered into a loan for the purposes of
acquiring employer securities, the employer contribution will be at least an
amount of cash sufficient to amortize the loan. Otherwise, employer
contributions may be in the form of cash or shares of Wesbanco securities.
The ESOP provides that the trustee of the ESOP Trust (the "ESOP Trustee") may
enter into a loan transaction, upon terms and conditions not inconsistent with
Section 4975 of the Code and the regulations thereunder, and apply the proceeds
of such loan toward the purchase of employer securities from Wesbanco, a
shareholder or former shareholder, or any other person.
The ESOP Trustee borrowed $559,725 from an unaffiliated financial institution
on October 2, 1992, to be amortized over a five year period at an interest rate
equal to the lender's base rate. Wesbanco is required to make annual payments
to principal equal to 20% of the January 1 balance each year. The proceeds of
that
55
loan were used to purchase 28,800 shares of employer securities at $21.75* per
share in block transactions on October 2, 1992. An additional $422,000 was
borrowed on March 29, 1993, to purchase 16,000 shares of $26.38* per share. The
outstanding balance of this loan as of September 30, 1993, was $981,725. The
ESOP Trust pledged the shares of employer securities purchased with the
proceeds of the loan as security for the loan. Wesbanco guaranteed the loan
issuing a Contribution Commitment Letter. As such securities are allocated to
the accounts of participating employees, and the loan balance paid down, they
will be released by the secured party.
Employer securities purchased with the proceeds of a loan are placed in a
suspense account and released, prorata, from such suspense account under a
formula which considers the amount of principal and interest paid for a given
period over the amount of principal and interest anticipated to be paid for
that period and all future periods. Shares released from the suspense account,
employer contributions, if any, and forfeitures are each allocated, prorata,
subject to limits imposed by the Code, to the accounts of individual
participants under a formula which considers the amount of the participant's
compensation over the aggregate compensation of all participants.
Participants become vested in their account upon retirement, death or
disability or upon completion of five years of service from and after December
31, 1986. Distributions upon retirement, death or disability are normally made
in the form of substantially equal annual installments over a period of 10
years commencing as soon as practicable after such retirement, death or
disability. Distributions upon other separation from service are normally made
in the form of installments commencing upon the earlier of the date the former
employee attains age 65 or his or her death. With the consent of the Committee,
distributions may be made in the form of whole shares of employer securities,
however, if demand is not timely made, distributions may be made in cash.
The assets of the ESOP Trust will be invested and accounted for primarily in
shares of employer securities. However, from time to time, the ESOP Trustee may
hold assets in other forms, either (i) as required for the proper
administration of the ESOP or (ii) as directed by participants as set forth in
Section 401(a) (28) of the Code.
The ESOP is administered by a Committee appointed by the Board of Directors
of Wesbanco.
The ESOP Trustee votes employer securities that have not been allocated to
the accounts of individual participants in accordance with directions from the
Committee appointed by the Board of Directors to administer the ESOP. Employer
securities allocated to the accounts of individual participants are voted, with
respect to any matter submitted to the shareholders of Wesbanco, in accordance
with instructions received from each participant.
CHANGES IN WEST VIRGINIA TAXES
Recent West Virginia tax legislation, which was effective July 1, 1987,
greatly changed the way banks and bank holding companies are taxed by the
State. As of July 1, 1987, the gross receipts-based Business and Occupation ("B
& O") Tax was repealed with regard to banking institutions and most other
entities engaging in business in West Virginia. In place of the B & O Tax, the
West Virginia Legislature broadened the Corporation Net Income Tax ("CNIT") and
enacted a new Business Franchise Tax.
The most significant state tax law change with respect to banks is that, for
taxable period beginning after July 1, 1987, banks must pay CNIT. Banks and
other financial institutions were exempt from the CNIT for taxable periods
beginning prior to July 1, 1987. The CNIT rate applied to West Virginia taxable
income was increased to 9.75% beginning July 1, 1987 (reduced by 0.15% annually
for five successive years until it reached 9% on July 1, 1992).
- --------
* Market Price of shares was adjusted for the 2 for 1 stock split on April 22,
1993.
56
Also effective July 1, 1987, was the newly enacted Business Franchise Tax,
imposed on the capital of partnerships and corporations at a rate of 0.55%. The
Business Franchise Tax provides a mechanism for certain exclusions and credits,
such as excluding from taxable capital certain obligations of the United States
and the State of West Virginia and certain residential mortgage loans.
DIRECTORS AND EXECUTIVE OFFICERS
The information with respect to directors and executive officers of Wesbanco
is set forth in the Wesbanco Annual Proxy Statement for the Annual Meeting of
Shareholders held on April 21, 1993, and is incorporated herein by reference.
See "Incorporation of Certain Documents by Reference", and Appendix IV.
EXECUTIVE COMPENSATION
The information with respect to executive compensation is set forth in the
Wesbanco Annual Proxy Statement for the Annual Meeting of Shareholders held on
April 21, 1993, and is incorporated herein by reference. See "Incorporation of
Certain Documents by Reference", and Appendix IV.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to certain relationships and related
transactions is set forth in the Wesbanco Annual Proxy Statement for the Annual
Meeting of Shareholders held on April 21, 1993, and is incorporated herein by
reference. See "Incorporation of Certain Documents by Reference", and Appendix
IV.
INFORMATION WITH RESPECT TO FIRST FIDELITY
HISTORY
First Fidelity, with assets totaling $310,083,000 as of September 30, 1993,
was organized under the laws of West Virginia in 1982 and commenced operations
in 1983 with the acquisition of First National. First Fidelity continued to
grow through the acquisition of Central National Bank ("Central National") in
1984, Bridgeport in 1986 and FirstBank in 1990. First Fidelity now operates
four wholly-owned banking subsidiaries: First National, Central National,
Bridgeport and FirstBank.
First National is a national bank which provides commercial banking services
primarily in the market area of Marion County, West Virginia. First National
commenced business in 1933 and has operated at the same location since
inception. At September 30, 1993, First National had 90 full-time equivalent
employees; capital accounts of $17,947,000; total deposits of $128,507,000;
total loans, less allowance for possible loan losses, of $91,060,000; and total
assets of $158,915,000.
Central National commenced operations as a national bank in 1977. It provides
commercial banking services primarily in the market area of Monongalia County,
West Virginia. At September 30, 1993, it had 20 full-time equivalent employees;
capital accounts of $2,729,000; total deposits of $26,401,000; total loans,
less allowance for possible loan losses, of $19,653,000; and total assets of
$29,272,000.
Bridgeport was organized under the laws of West Virginia in 1902 and
commenced operations as a state-chartered bank in that year. It provides
commercial banking services primarily in the market area of Harrison County,
West Virginia. At September 30, 1993, Bridgeport had 30 full-time equivalent
employees; capital accounts of $4,602,000; total deposits of $37,029,000; total
loans, less allowance for possible loan losses, of $28,585,000; and total
assets of $45,664,000.
FirstBank was organized under the laws of West Virginia in 1932 and commenced
operations as a state-chartered bank in that year. FirstBank was originally
chartered under the title of "Bank of Shinnston". In
57
1982, FirstBank changed its name to its present title. FirstBank provides
commercial banking services primarily in the market area of Harrison County,
West Virginia. At September 30, 1993, FirstBank had 64 full-time equivalent
employees; capital accounts of $7,662,000; total deposits of $68,263,000; total
loans, less the reserve for possible loan losses, of $42,167,000; and total
assets of $76,216,000.
BANKING SERVICES
First National is a full-service commercial bank offering all services
associated with a bank and trust company, including demand and time deposit
accounts, individual and commercial loans, corporate pension, personal trust
and fiduciary service, and drive-in banking. Central National, Bridgeport and
FirstBank provide the same range of banking services as First National but do
not offer trust services. The deposits of each institution are insured by the
FDIC to the extent provided by law. First National and Central National are
members of the Federal Reserve System; Bridgeport and FirstBank are non-
members. Each institution provides VISA and Master Charge processing services
for its retail business customers. Each institution participates in a national
automated teller machine ("ATM") network with First National, Central National,
Bridgeport and FirstBank presently operating six, two, two and four ATMS,
respectively.
First Fidelity's four subsidiary banks make available to consumers
residential mortgage loans, home improvement loans, auto loans, loans secured
by deposits and listed securities, and personal loans.
First National originates permanent mortgage loans secured by single family
dwellings, including condominium units, located in its market area. First
National offers fifteen year fixed-rate residential mortgage loans along with
one to five year "balloon" mortgages which are amortized over 20 years and
which are designed to add interest sensitive assets to First National's loan
portfolio. Central National offers 15 year fixed-rate residential mortgages
along with mortgages on a one to five year balloon basis amortized over 20
years. Bridgeport offers 15 year fixed-rate residential mortgage loans along
with adjustable residential mortgage loans on a one to five year basis
amortized over 20 years. FirstBank presently offers both fixed-rate and
adjustable-rate mortgage loans. The fixed-rate mortgage loans are written on
either a five-, ten- or fifteen-year term. The adjustable-rate mortgages are
written for one to five years and are amortized over up to 30 years.
An aggregate of $45,498,000 of First National's loans outstanding at
September 30, 1993, representing 254% of its capital accounts at such date,
were made to finance the purchase of automobiles by approximately 24 automobile
dealers and individual customers. A total of $8,361,000 of such amount
represented floor plan loans to approximately nine automobile dealers. All such
loans were extended on a secured basis. Significant lending to finance the
purchase of automobiles is a part of First National's marketing philosophy, and
the present level of automobile financing is representative of its involvement
in this area.
First Fidelity attempts to limit its exposure to concentrations of credit
risk by diversifying its loan portfolio. At September 30, 1993, financings of
new car inventory represented 25.9% of First Fidelity's capital accounts.
Substantially all extensions of credit are to individuals and corporations in
First Fidelity's defined market area of North Central West Virginia. The loan
portfolio does not include any foreign loans or significant loans for
agricultural production.
As of September 30, 1993, First Fidelity and its subsidiaries had 204 full-
time equivalent employees.
COMPETITION
First Fidelity, through its subsidiaries, First National, Central National,
Bridgeport and FirstBank, is subject to intense competition from other
commercial banks, other financial institutions, including savings and loan
associations, savings banks, finance companies and credit unions, and other
providers of financial services such as money market mutual funds, brokerage
firms and credit companies. First Fidelity's banking subsidiaries also compete
with non-financial institutions such as retail stores that maintain their own
credit programs and governmental agencies that make available low-cost loans to
certain borrowers.
58
First National is the second largest banking institution operating in its
primary market area of Marion County, West Virginia. Within Marion County,
First National competes with approximately five commercial banks along with
credit unions and consumer finance companies. Central National is the second
smallest banking institution in Monongalia County, West Virginia, its primary
market area. Central National competes with approximately seven commercial
banks, several savings and loan associations, credit unions, and consumer
finance companies within Monongalia County. FirstBank and Bridgeport are the
fourth and sixth largest commercial banking institutions, respectively, in
Harrison County, West Virginia, their primary market area. Within Harrison
County, FirstBank and Bridgeport compete with approximately seven commercial
banks and several savings and loan associations, credit unions, and consumer
finance companies.
Revisions in West Virginia law permitting multi-bank holding companies and
bank mergers give West Virginia banking institutions not present in Marion,
Monongalia or Harrison Counties the ability to expand operations into these
counties through acquisitions. A number of such West Virginia banks are
significantly larger in terms of assets and deposits than First National Bank,
Central National, Bridgeport and FirstBank. West Virginia law also permits
banking organizations from other states to acquire West Virginia banks, provide
these states grant the reciprocal privilege to West Virginia banks and bank
holding companies. During 1992 and 1993, several financial institutions in West
Virginia have engaged in acquisitions with out-of-state financial institutions.
If the trend toward mergers and acquisitions continues, competition will shift
from many local community banks to a few large financial institutions.
Competition has also increased in recent years in many areas in which First
National, Central National, Bridgeport and FirstBank primarily operate as other
entities have begun to engage in activities traditionally engaged in by
commercial banks. Commercial banks now face significant competition in
acquiring assets due to such factors as increased lending powers granted to,
and activities by, many types of thrift institutions and credit unions.
Commercial banks also have difficulty attracting deposits at reasonable prices
due to the profusion of money market funds, increased activities of nonbank
deposit takers traditionally associated with the brokerage business, and the
increased availability of demand deposit-type accounts at thrift institutions
and credit unions. Unlike First Fidelity's subsidiaries, many of such nonbank
institutions are not subject to extensive regulation and, thus, may have a
competitive advantage over banks in certain respects.
ECONOMIC CONDITIONS
Marion County, which is the home of First Fidelity and the primary market for
First National, is centrally located between Monongalia and Harrison Counties.
This three county area is dramatically changing from a coal producing area to
an area with an emphasis on technology. In conjunction with the FBI
Identification Division being constructed in Harrison County, a training site
which has been established in Marion County to train approximately 1,000 people
who will eventually relocate to the new FBI facility. The Marion County
Industrial Park also is currently being expanded and several large national
retail chains have located in the county over the past year. Educational
facilities in Marion County have been upgraded to include a new elementary
school, a new high school and additional expansions at Fairmont State College
which enrolls approximately 6,500 students. Along with these positive changes,
Marion County should experience an additional indirect economic benefit from
the business and economic development occurring in neighboring Harrison and
Monongalia Counties.
Monongalia County is the primary market for Central National. West Virginia
University is the largest employer in the county which tends to stabilize
economic conditions in the county. Not only does the university provide many
direct jobs, but it also draws employment in the research and medical sectors
from both private firms and governmental agencies. The health-care and
pharmaceutical sectors in Monongalia County also continue to grow.
Harrison County is the primary market for Bridgeport and FirstBank. The
single most important economic development project for the county is the new
FBI Identification Division, which is expected to be in full operation by the
fall of 1995 and is expected to employ approximately 2,800 persons by December,
59
1995. In connection with this facility, Benedum Airport in Harrison County is
scheduled to be updated to accommodate commercial jet aircraft by December
1995. Funding has been approved to expand the runway along with the acquisition
of 200 acres around the runway for economic development. As a result, Harrison
County should experience growth in the next few years.
MONETARY POLICIES
The commercial banking business is affected by the monetary and fiscal
policies of various regulatory agencies, including the Federal Reserve Board.
Among the techniques available to the Federal Reserve Board are open market
purchases in United States Government securities; changing the reserve
requirements applicable to member bank deposits and to certain borrowings by
member banks and their affiliates; and restricting dividends. These policies
influence to a significant extent the overall growth and distribution of bank
loans, investments and deposits and the interest rates paid on savings and time
deposits. The monetary policies of the Federal Reserve Board have had a
significant effect on the operating results of commercial banks in the past and
are expected to do so in the future. In view of the changing conditions in the
national economy, as well as the effect of acts by monetary and fiscal
authorities, including the Federal Reserve Board, no predictions can be made by
First Fidelity as to future changes in interest rates, credit availability, or
deposit levels.
PROPERTIES
First Fidelity does not own or hold any physical properties. First Fidelity
has its headquarters at the First National Bank Building in Fairmont, West
Virginia. First National owns this ten-story building which contains
approximately 95,000 square feet, along with three branch facilities containing
3,350, 2,057 and 800 square feet, respectively. First Fidelity and First
National use approximately 57,000 square feet of the headquarters building in
their operations, and the remainder is leased to various tenants. One off-site
automated teller machine is located in Fairmont. Central National's principal
office is a two-story building owned by Central National in Sabraton, West
Virginia, containing approximately 12,600 square feet. Central National also
leases a 2,400 square foot facility in Westover, West Virginia, which it
utilizes as a branch. Bridgeport's principal office is an 8,000 square foot
owned two-story building located in Bridgeport, West Virginia. Bridgeport
operates a branch, under a lease agreement at a local mall, and a one-story,
1,200 square foot branch located in a suburban area of Bridgeport. FirstBank's
principal office is a three-story building situated in the business district of
Shinnston, West Virginia, containing approximately 16,600 square feet.
FirstBank also owns and operates three branch facilities. One is a two-story,
4,050 square foot structure located in the City of Nutter Fort, West Virginia.
A one-story, 2,240 square foot structure is located in the City of Bridgeport,
West Virginia. The third branch contains 756 square feet and is located on U.S.
Route 19 south of Shinnston. All bank facilities are located in Harrison
County, West Virginia, the primary market of FirstBank.
LEGAL PROCEEDINGS
There are no material legal proceedings against First Fidelity or its
subsidiaries. First Fidelity's banking subsidiaries, by the nature of their
business, may have legal actions pending at any time to collect delinquent loan
accounts; however, these are ordinary and incidental to their business.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding all persons known by
First Fidelity to be the beneficial owners of 5% or more of First Fidelity
Common Stock and information regarding the ownership of Wesbanco Common Stock
by such person after consummation of the Merger as of September 30, 1993:
60
PRO FORMA
PERCENT OF
AMOUNT AND NATURE WESBANCO
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF COMMON
BENEFICIAL OWNER OWNERSHIP CLASS STOCK
------------------- ----------------- ---------- ----------
Frank K. Abruzzino(1)................... 147,363 6.34% 2.01%
Route 1, Box 360
Clarksburg, WV 26301
First National Bank in Fairmont(2)...... 266,709 11.48% 3.63%
Trust Department
301 Adams Street
Fairmont, WV 26554
- --------
(1) Mr. Abruzzino directly owns 30,641 shares and has indirect beneficial
ownership of 116,556 shares.
(2) First National Bank in Fairmont, as trustee or custodian has the sole power
to vote 253,036 shares, shared power to vote 13,673 shares, sole power to
dispose of 199,716 shares, and shared power to dispose of 13,673 shares.
The information with respect to ownership of First Fidelity Common Stock by
the directors and executive officers of First Fidelity is set forth in the
First Fidelity Proxy Statement for Annual Meeting of Shareholders held on May
18, 1993, and is incorporated herein by reference. See "Incorporation of
Certain Documents by Reference".
DIRECTORS AND EXECUTIVE OFFICERS
The information with respect to directors and executive officers of First
Fidelity is set forth in the First Fidelity Annual Proxy Statement for the
Annual Meeting of Shareholders held on May 18, 1993, and is incorporated herein
by reference. See "Incorporation of Certain Documents by Reference".
EXECUTIVE COMPENSATION
The information with respect to executive compensation is set forth in the
First Fidelity Annual Proxy Statement for the Annual Meeting of Shareholders
held on May 18, 1993, and is incorporated herein by reference. See
"Incorporation of Certain Documents by Reference".
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to certain relationships and related
transactions is set forth in the First Fidelity Annual Proxy Statement for the
Annual Meeting of Shareholders held on May 18, 1993, and is incorporated herein
by reference. See "Incorporation of Certain Documents by Reference".
GOVERNMENT REGULATION
As registered bank holding companies, both Wesbanco and First Fidelity are
subject to the supervision of the Federal Reserve Board and are required to
file with the Federal Reserve Board reports and other information regarding
their business operations and the business operations of their subsidiaries.
Each of them is also subject to examination by the Federal Reserve Board and
required to obtain Federal Reserve Board approval prior to acquiring, directly
or indirectly, ownership or control of voting shares of any bank, if, after
such acquisition, it would own or control more than 5% of the voting stock of
such bank. In addition, pursuant to federal law and regulations promulgated by
the Federal Reserve Board, both Wesbanco and First Fidelity may only engage in,
or own or control companies that engage in, activities deemed by the Federal
Reserve Board to be so closely related to banking as to be a proper incident
thereto. Prior to engaging in most new business activities, both Wesbanco and
First Fidelity must obtain approval from the Federal Reserve Board.
Both Wesbanco's and First Fidelity's banking subsidiaries have deposits
insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation (the "FDIC"), and are subject to supervision, examination, and
regulation by the OCC, or by state banking authorities and either the FDIC or
the Federal
61
Reserve Board. In addition to the impact of federal and state supervision and
regulation, the banking and non-banking subsidiaries of Wesbanco and First
Fidelity are affected significantly by the actions of the Federal Reserve Board
as it attempts to control the money supply and credit availability in order to
influence the economy.
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
HOLDING COMPANY STRUCTURE
Both Wesbanco's and First Fidelity's depository institution subsidiaries are
subject to affiliate transaction restrictions under federal law which limit the
transfer of funds by the subsidiary banks to their respective parents and any
nonbanking subsidiaries, whether in the form of loans, extensions of credit,
investments or asset purchases. Such transfers by any subsidiary bank to its
parent corporation or to any nonbanking subsidiary are limited in amount to 10%
of the institution's capital and surplus and, with respect to such parent and
all such nonbanking subsidiaries, to an aggregate of 20% of any such
institution's capital and surplus. Furthermore, such loans and extensions of
credit are required to be secured in specified amounts. Under applicable
regulation, at September 30, 1993, approximately $6 million was available for
loans to Wesbanco from its subsidiary banks and approximately $3 million was
available for loans to First Fidelity from its subsidiary banks.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with engaging
in unsafe and unsound practices for failure to commit resources to such a
subsidiary bank. This capital injection may be required at times when either
Wesbanco or First Fidelity may not have the resources to provide it. Any
capital loans by a holding company to any of the subsidiary banks are
subordinate in right of payment to deposits and to certain other indebtedness
of such subsidiary bank. Moreover, in the event of a bank holding company's
bankruptcy, any commitment by such holding company to a federal bank regulatory
agency to maintain the capital of a subsidiary bank will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institution Reform, Recovery,
and Enforcement Act ("FIRREA"). FIRREA established a new principle of liability
on the part of depository institutions insured by the FDIC for any losses
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1989, in connection with (i) the default of a commonly controlled FDIC-insured
depository institution, or (ii) any assistance provided by the FDIC to a
commonly controlled FDIC-insured depository institution in danger of default.
"Default" is defined generally as the appointment of a conservator or receiver
and "in danger of default" is defined generally as the existence of certain
conditions indicating that a "default" is likely to occur in the absence of
regulatory assistance. Accordingly, in the event that any insured bank
subsidiary of Wesbanco or First Fidelity causes a loss to the FDIC, other bank
subsidiaries of that parent could be required to compensate the FDIC by
reimbursing to it the amount of such loss.
Federal law permits the OCC to order the pro rata assessment of shareholders
of a national bank whose capital stock has become impaired, by losses or
otherwise to relieve a deficiency in such national bank's capital stock. This
statute also provides for the enforcement of any such pro rata assessment of
shareholders of such national bank to cover such impairment of capital stock by
sale, to the extent necessary, of the capital stock of any assessed shareholder
failing to pay the assessment. Similarly, the laws of certain states provide
for such assessment and sale with respect to the subsidiary banks chartered by
such states. First Fidelity, as the sole shareholder of its subsidiary banks,
is subject to such provisions. Wesbanco has no national bank subsidiaries.
62
DIVIDEND RESTRICTIONS
There are statutory limits on the amount of dividends either Wesbanco's or
First Fidelity's depository institution subsidiaries can pay to their
respective parent corporations without regulatory approval. Under applicable
federal regulations, appropriate bank regulatory agency approval is required if
the total of all dividends declared by a bank in any calendar year exceeds the
available retained earnings and exceeds the aggregate of the bank's net profits
(as defined by regulatory agencies) for that year and its retained net profits
for the preceding two years, less any required transfers to surplus or a fund
for the retirement of any preferred stock.
In addition, national banks may not pay a dividend in an amount greater than
such bank's net profits after deducting its losses and bad debts. For this
purpose, bad debts are defined to include, generally, loans which have matured
and are in arrears with respect to interest by six months or more, other than
such loans which are well secured and in the process of collection. Under these
provisions and in accordance with the above-described formula, Wesbanco's
subsidiary banks could, without regulatory approval, declare dividends in 1993
of approximately $14,753,000 plus an additional amount equal to their net
profits during 1993 and First Fidelity's subsidiary banks could, without
regulatory approval, declare dividends in 1993 of approximately $3,599,000 plus
an additional amount equal to their net profits during 1993.
If, in the opinion of the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could
include the payment of dividends), such authority may require, after notice and
hearing, that such bank cease and desist from such practice. The Federal
Reserve Board, the OCC and the FDIC have issued policy statements which provide
that insured banks and bank holding companies should generally only pay
dividends out of current operating earnings.
FDIC INSURANCE
The FDIC has the authority to raise the insurance premiums for institutions
in the BIF to a level necessary to achieve a target reserve level of 1.25% of
insured deposits within not more than 15 years. In addition, the FDIC has the
authority to impose special assessments in certain circumstances. The level of
deposit premiums affects the profitability of subsidiary banks and thus the
potential flow of dividends to parent companies. See "Government Regulation--
Dividend Restrictions".
Under a transitional risk-based insurance assessment system that became
effective January 1, 1993, the FDIC places each insured depository institution
in one of nine risk categories based on its level of capital and other relevant
information (such as supervisory evaluations). See "Government Regulation--
Capital Requirements". The assessment rates under the new system range from
0.23% to 0.31% depending upon the assessment category into which the insured
institution is placed.
On June 17, 1993, the FDIC adopted a permanent risk-based assessment system
for assessment periods beginning on and after January 1, 1994. The permanent
system retains the transitional system without substantial modification. It is
possible that the FDIC insurance assessments will be increased in the future.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital guidelines for bank
holding companies, such as Wesbanco and First Fidelity. The guidelines
establish a systematic analytical framework that makes regulatory capital
requirements more sensitive to differences in risk profiles among banking
organizations, takes off-balance sheet exposures into explicit account in
assessing capital adequacy, and minimizes disincentives to holding liquid, low-
risk assets. Under the guidelines and related policies, bank holding companies
must maintain capital sufficient to meet both a risk-based asset ratio test and
leverage ratio test on a consolidated basis. The risk-based ratio is determined
by allocating assets and specified off-balance sheet commitments into four
weighted categories, with higher levels of capital being required for
categories
63
perceived as representing greater risk. The leverage ratio is determined by
relating core capital (as described below) to total assets adjusted as
specified in the guidelines. All of Wesbanco's and First Fidelity's depository
institution subsidiaries are subject to substantially similar capital
requirements adopted by applicable regulatory agencies.
Generally, under the applicable guidelines, the financial institution's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, noncumulative perpetual preferred stock (excluding auction rate issues)
and minority interests in equity accounts of consolidated subsidiaries, less
goodwill. Bank holding companies, however, may include cumulative perpetual
preferred stock in their Tier 1 capital, up to a limit of 25% of such Tier 1
capital. "Tier 2", or supplementary capital, includes, among other things,
cumulative and limited-life preferred stock, hybrid capital instruments,
mandatory convertible securities, qualifying subordinated debt, and the
allowance for loan losses, subject to certain limitations, less required
deductions. "Total capital" is the sum of Tier 1 and Tier 2 capital.
Financial institutions are required to maintain a risk-based ratio of 8%, of
which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's particular circumstances
warrant.
Financial institutions that meet certain specified criteria, including
excellent asset quality, high liquidity, low interest rate exposure and the
highest regulatory rating, are required to maintain a minimum leverage ratio of
3%. Financial institutions not meeting these criteria are required to maintain
a leverage ratio which exceeds 3% by a cushion of at least 100 to 200 basis
points.
The guidelines also provide that financial institutions experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the Federal Reserve
Board's guidelines indicate that the Federal Reserve Board will continue to
consider a "tangible Tier 1 leverage ratio" in evaluating proposals for
expansion or new activities. The tangible Tier 1 leverage ratio is the ratio of
an institution's Tier 1 capital, less all intangibles, to total assets, less
all intangibles.
Failure to meet applicable capital guidelines could subject the financial
institution to a variety of enforcement remedies available to the federal
regulatory authorities, including limitations on the ability to pay dividends,
the issuance by the regulatory authority of a capital directive to increase
capital and the termination of deposit insurance by the FDIC, as well as to the
measures described under "Federal Deposit Insurance Corporation Improvement Act
of 1991" as applicable to undercapitalized institutions.
As of September 30, 1993, the Tier 1 risk-based ratio, total risk-based ratio
and total assets leverage ratio for Wesbanco and First Fidelity were as
follows:
WESBANCO
REGULATORY ----------------------- FIRST
REQUIREMENT HISTORICAL PRO FORMA(1) FIDELITY
----------- ---------- ------------ --------
Tier 1 Risk-Based Ratio............ 4.00% 19.75% 19.52% 18.66%
Total Risk-Based Ratio............. 8.00% 21.01% 20.86% 20.34%
Total Assets Leverage Ratio........ 3.00% 11.83% 11.49% 10.36%
- --------
(1) Includes Wesbanco and First Fidelity on a pro forma combined basis as of
September 30, 1993.
As of September 30, 1993, all of Wesbanco's and First Fidelity's banking
subsidiaries had capital in excess of all applicable requirements.
The Federal Reserve Board, as well as the FDIC and the OCC have adopted
changes to their risk-based and leverage ratio requirements that require that
all intangible assets, with certain exceptions, be deducted from Tier 1
capital. Under the Federal Reserve Board's rules, the only types of intangible
assets that may be included in (i.e., not deducted from) a bank holding
company's capital are readily marketable purchased
64
mortgage servicing rights ("PMSRs") and purchased credit card relationships
("PCCRs"), provided that, in the aggregate, the total amount of PMSRs and PCCRs
included in capital does not exceed 50% of Tier 1 capital. PCCRs are subject to
a separate sublimit of 25% of Tier 1 capital. The amount of PMSRs and PCCRs
that a bank holding company may include in its capital is limited to the lesser
of (i) 90% of such assets' fair market value (as determined under the
guidelines), or (ii) 100% of such assets' book value, each determined
quarterly. Identifiable intangible assets (i.e., intangible assets other than
goodwill) other than PMSRs and PCCRs, including core deposit intangibles,
acquired on or before February 19, 1992 (the date the Federal Reserve Board
issued its original proposal for public comment), generally will not be
deducted from capital for supervisory purposes, although they will continue to
be deducted for purposes of evaluating applications filed by bank holding
companies. These revisions became effective for periods commencing after March
15, 1993, and are reflected in Wesbanco's and First Fidelity's capital ratios
as of September 30, 1993.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), which substantially revises the bank
regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes.
Among other things, FDICIA requires federal bank regulatory authorities to
take "prompt corrective action" with respect to depository institutions that do
not meet minimum capital requirements. For these purposes, FDICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically under capitalized.
The regulatory authorities have adopted regulations to implement the prompt
corrective action provisions of FDICIA. Among other things, the regulations
define the relevant capital measures for the five capital categories. An
institution is deemed to be "well capitalized" if it has a total risk-based
capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
greater and a Tier 1 leverage ratio of 5% or greater and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater and, generally, a
Tier 1 leverage ratio of 4% or greater and the institution does not meet the
definition of a "well capitalized" institution. An institution that does not
meet one or more of the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based capital ratio
that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%,
or a leverage ratio that is less than 3%, it is deemed to be "significantly
undercapitalized". Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" institutions are subject to growth limitations and are
required to submit a capital restoration plan. If an "undercapitalized"
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. "Significantly undercapitalized" institutions
may be subject to a number of requirements and restrictions, including orders
to sell sufficient voting stock to become adequately capitalized, requirements
to reduce total assets and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions may not, beginning 60 days
after becoming "critically undercapitalized" make any payment of principal or
interest on their subordinated debt. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
Under FDICIA, a depository institution that is not "well capitalized" is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. All of
Wesbanco's depository institution subsidiaries and all of First Fidelity's
depository institution subsidiaries currently meet the FDIC's definition of a
"well capitalized" institution for purposes of accepting brokered deposits. For
the purposes of the brokered deposit rules, a bank is defined to be "well
capitalized" if it maintains a ratio of Tier 1 capital to risk-adjusted assets
of at least 6%, a ratio of total capital to risk-adjusted assets of at least
10% and a Tier 1 leverage ratio of at least 5% and is not otherwise in a
"troubled
65
condition" as specified by its appropriate federal regulatory agency. On
October 25, 1993, the FDIC published a final rule providing for purposes of its
brokered deposit rules the definitions of "well capitalized", "adequately
capitalized" and "undercapitalized" as previously adopted by the bank
regulatory agencies under the prompt corrective action rules described above.
Neither Wesbanco nor First Fidelity believes that adoption of the definition of
capital levels under the prompt corrective action rules will adversely affect
the ability of their respective depository institution subsidiaries to accept
brokered deposits. Neither Wesbanco nor First Fidelity have any significant
brokered deposits.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating
to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and such other standards as the agency deems
appropriate. On November 18, 1993, the bank regulatory agencies published a
notice of proposed rule making to implement these provisions of FDICIA. The
proposed rules set forth general standards to be observed, but in most
instances do not specify operating or managerial procedures to be followed. At
this time, neither Wesbanco nor First Fidelity believes that the proposed
rules, if adopted in their current form, would have a material effect on their
respective operations.
FDICIA also contains a variety of other provisions that may affect the
operations of Wesbanco's and First Fidelity's depository institution
subsidiaries, including new reporting requirements, revised regulatory
standards for real estate lending, "truth in savings" provisions and the
requirements that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch.
In addition to FDICIA, there have been proposed a number of legislative and
regulatory proposals designed to strengthen the federal deposit insurance
system and to improve the overall financial stability of the United States
banking system. These include proposals to increase capital requirements above
presently published guidelines, to place assessments on depository institutions
to increase funds available to the FDIC and to allow national banks to branch
on an interstate basis. It is impossible to predict whether or in what form
these proposals may be adopted in the future and, if adopted, what their effect
would be on Wesbanco. It is likewise impossible to predict what the competitive
effect on Wesbanco's or First Fidelity's bank subsidiaries will be of the
recent action taken by the Office of Thrift Supervision to allow certain thrift
institutions to engage in interstate branching on a nationwide basis.
66
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions thereof filed by Wesbanco with the
Commission under the Securities Exchange Act of 1934 (the "1934 Act") are
hereby incorporated by reference in this Joint Proxy Statement/Prospectus:
Wesbanco Documents (Commission File No. 0-8467):
(1) Pages 12 through 35 of the Wesbanco Annual Report to Shareholders for
the year ended December 31, 1992.*
(2) Wesbanco Proxy Statement for the annual meeting of shareholders held
on April 21, 1993.*
(3) Wesbanco Annual Report on Form 10-K for the year ended December 31,
1992.
(4) Wesbanco's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1993, June 30, 1993 and September 30, 1993.
(5) Wesbanco's Current Report on Form 8-K dated August 26, 1993.
First Fidelity Documents (Commission File No. 0-11145):
(1) Pages 7 through 35 of the First Fidelity Annual Report to
Shareholders for the year ended December 31, 1992.
(2) First Fidelity Proxy Statement for the annual meeting of shareholders
held on May 18, 1993.
(3) First Fidelity Annual Report on Form 10-K for the year ended December
31, 1992.
(4) First Fidelity's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1993, June 30, 1993 and September 30, 1993.
(5) First Fidelity's Current Report on Form 8-K, dated August 26, 1993.
All documents filed by Wesbanco pursuant to Section 13(a), 13(c), 14 or 15(d)
of the 1934 Act subsequent to the date hereof and prior to the Special Meeting
are hereby incorporated by reference into this Joint Proxy Statement/Prospectus
and shall be deemed a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
- --------
* Indicates the document is being delivered with this Joint Proxy
Statement/Prospectus.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Board of Directors of Wesbanco, Inc. has retained Price Waterhouse to
serve as the corporation's independent accountants. The services rendered by
Price Waterhouse during the year 1993 involved primarily auditing and
accounting services, completion of the audit of the consolidated financial
statements of the corporation for the year 1992. It is expected that a
representative of the accounting firm will have the opportunity to make a
statement if such representative desires to do so and will be available to
respond to appropriate questions from the stockholders who are present at the
Special Meeting.
The firm of Ernst & Young, independent certified public accountants, audited
the financial statements of First Fidelity for the year ended December 31,
1992. A representative of Ernst & Young will attend the special meeting and
will be available to answer questions.
67
LEGAL MATTERS
Certain matters will be passed upon for Wesbanco by its counsel, Phillips,
Gardill, Kaiser, Boos & Altmeyer, 61 Fourteenth Street, Wheeling, WV, 26003. As
of December 31, 1991, the members of Phillips, Gardill, Kaiser, Boos & Hartley
participating in the preparation of this Joint Proxy Statement/Prospectus owned
an aggregate of 11,393 shares of Wesbanco Common Stock. James C. Gardill, a
partner in said firm, serves as Chairman and as a director of Wesbanco, and as
a director of its subsidiary, Wesbanco Bank Wheeling. Certain matters will be
passed upon for First Fidelity by its counsel, Tharp, Liotta & Janes, First
National Bank Building, P.O. Box 1509, Fairmont, West Virginia, 26554, and
Kirkpatrick & Lockhart, 1500 Oliver Building, Pittsburgh, PA, 15222.
EXPERTS
The consolidated financial statements of Wesbanco, Inc. as of December 31,
1992 and 1991 and for each of the three years in the period ended December 31,
1992, included in this Prospectus have been so included in reliance on the
report of Price Waterhouse, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of First Fidelity at December 31, 1992,
and 1991, and for each of the three years in the period ended December 31,
1992, appearing in this Joint Proxy Statement/Prospectus and Registration
Statement have been audited by Ernst & Young, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
LEGAL PROCEEDINGS
Wesbanco and its subsidiaries are defendants in various legal proceedings
arising in the normal course of business. In the opinion of management, based
on the advice of legal counsel, the ultimate resolution of these proceedings
will not have a material effect on the financial position of Wesbanco or its
subsidiaries.
68
INDEX TO FINANCIAL STATEMENTS
PAGE
----
WESBANC0
- --------
Report of Independent Accountants dated January 28,
1993 F-3
Consolidated Balance Sheets as of December 31, 1992
and 1991 F-4
Consolidated Statements of Income for the Years
Ended December 31, 1992, 1991 and 1990 F-5
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended December 31, 1992, 1991
and 1990 F-6
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1992, 1991 and 1991 F-7
Notes to Consolidated Financial Statements as of
December 31, 1992 F-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Year Period Ended December 31, 1992 F-21
Report of Independent Accountants dated November 5, 1993 F-28
Consolidated Balance Sheets as of September 30, 1993
(unaudited) and December 31, 1992 F-30
Consolidated Statements of Income for the Three Months
and Nine Months Ended September 30, 1993 and 1992
(unaudited) F-31
Consolidated Statements of Changes in Shareholders'
Equity for the Nine Months Ended September 30, 1993
and 1992 (unaudited) F-32
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1993 and 1992 (unaudited) F-33
Notes to Consolidated Financial Statements as of
September 30, 1993 (unaudited) F-34
Management's Discussion and Analysis of Financial
Condition and Results of Operations as of
September 30, 1993 F-38
Selected Statistical Information F-47
F-1
PAGE
---------
FIRST FIDELITY
- --------------
Report of Independent Accountants dated
February 4, 1993 F-58
Consolidated Statements of Condition for
December 31, 1992 and 1991 F-59
Consolidated Statements of Income for
Years Ended December 31, 1992, 1991 and 1990 F-60
Consolidated Statements of Changes in Shareholders'
Equity for Years Ended December 31, 1992, 1991 and 1990 F-61
Consolidated Statements of Cash Flows for Years
Ended December 31, 1992, 1991 and 1990 F-62
Notes to Consolidated Financial Statements as of
December 31, 1992 F-63
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Years Ended December 31, 1992 F-72
Consolidated Balance Sheet as of September 30, 1993 and
December 31, 1992 (unaudited) F-87
Consolidated Statements of Income for the Three Months '
Ended September 30, 1993 and 1992 (unaudited) F-88
Consolidated Statements of Income for the Nine Months
Ended September 30, 1993 and 1992 (unaudited) F-89
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1993 and 1992 (unaudited) F-90
Note to Consolidated Financial Statements as of
September 30, 1993 (unaudited) F-91
Management's Discussion and Analysis of Financial
Condition and Results of Operations as of
September 30, 1993 F-91
Schedules Omitted
- ------------------------------------------------------------------------------
Certain schedules are omitted because of the absence of conditions under
which they are required or applicable, or because the required information is
included elsewhere in the Consolidated Financial Statements or related notes.
F-2
Logo of
Price Waterhouse
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WESBANCO, INC.
In our opinion, based on our audits and the reports of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of income, of changes in shareholders' equity and of cash flows present fairly,
in all material respects, the financial position of WesBanco, Inc., and its
subsidiaries (the Corporation) at December 31, 1992 and 1991, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1992, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Corporation's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of The First National Bank of Barnesville for 1991 or the
consolidated financial statements of Albright Bancorp, Inc., for 1990, wholly
owned subsidiaries, whose statements reflect total assets of $141,825,000 and
$92,380,000, respectively, at December 31, 1991 and 1990, and net interest
income of $4,663,000 and $3,403,000, respectively, for the years then ended.
Those statements were audited by other auditors whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for The First National Bank of Barnesville and Albright
Bancorp, Inc., is based solely on the reports of other auditors. We conducted
our audits of the consolidated statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the reports of other auditors provide a reasonable basis for the
opinion expressed above.
As discussed in Note 15, the Corporation adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," during 1992.
Signature of Price Waterhouse
600 Grant Street
Pittsburgh, Pennsylvania 15219
January 28, 1993
F-3
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
- ------------------------------------------------------------------------------
(in thousands, except per shares)
December 31,
-------------------------------------
1992 1991
-------------------------------------
- ------------------------------------------------------------------------------
ASSETS
Cash and due from banks (Note 3) $ 36,839 $ 34,378
Due from banks--interest bearing 100 1,600
Federal funds sold 4,970 64,935
Investment securities (market values of:
1992-$421,370; 1991-$346,516)(Note 5) 411,054 331,915
Loans: (Note 4) 534,452 511,407
Unearned income (1,459) (1,813)
Reserve for possible loan losses (Note 8) (8,367) (7,476)
- ------------------------------------------------------------------------------
Net loans 524,626 502,118
- ------------------------------------------------------------------------------
Bank premises and equipment (Note 9) 14,433 14,281
Accrued interest receivable 10,596 10,372
Other assets (Note 10) 7,486 6,902
- ------------------------------------------------------------------------------
Total Assets $1,010,104 $966,501
- ------------------------------------------------------------------------------
LIABILITIES
Deposits:
Non-interest bearing demand $ 83,120 $ 80,111
Interest bearing demand 211,504 183,553
Savings deposits 204,400 154,838
Certificates of deposit (Note 11) 339,147 382,514
- ------------------------------------------------------------------------------
Total deposits 838,171 801,016
- ------------------------------------------------------------------------------
Federal funds purchased and repurchase
agreements 37,075 35,792
Short-term borrowings 6,199 7,626
Accrued interest payable 5,222 6,656
Other liabilities (Note 12) 6,446 5,691
- ------------------------------------------------------------------------------
Total Liabilities 893,113 856,781
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (NOTE 19)
Preferred stock, no par value: 100,000 shares
authorized; none outstanding -- --
Common stock, $4.1666 par value; 10,000,000
shares authorized; 3,314,144 shares issued 13,809 13,809
Capital surplus 16,352 16,352
Capital reserves 2,139 2,139
Retained earnings 85,472 77,769
Less: Treasury stock (7,480 and 6,480 shares,
respectively, at cost) (221) (188)
- ------------------------------------------------------------------------------
117,551 109,881
Deferred employee benefit related to ESOP
(Note 12) (560) (161)
- ------------------------------------------------------------------------------
Total Shareholders' Equity 116,991 109,720
- ------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,010,104 $966,501
- ------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-4
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------------------------------------------------------
(in thousands, except per share amounts)
For the year ended December 31,
--------------------------------
1992 1991 1990
- --------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $49,146 $52,200 $52,035
- --------------------------------------------------------------------------------
Interest on investment securities:
U.S. Treasury and Federal Agency
securities 20,290 20,466 20,394
States and political subdivisions 5,656 5,758 5,995
Other investments 984 791 1,192
- --------------------------------------------------------------------------------
Total interest on investment securities 26,930 27,015 27,581
- --------------------------------------------------------------------------------
Other interest income 1,721 3,430 4,877
- --------------------------------------------------------------------------------
Total interest income 77,797 82,645 84,493
Interest expense:
Interest-bearing demand deposits 8,129 8,455 8,057
Savings deposits 7,695 7,630 7,654
Certificates of deposit 20,833 27,975 31,589
- --------------------------------------------------------------------------------
Total interest on deposits 36,657 44,060 47,300
- --------------------------------------------------------------------------------
Other borrowings 1,465 2,298 2,830
- --------------------------------------------------------------------------------
Total interest expense 38,122 46,358 50,130
- --------------------------------------------------------------------------------
Net interest income 39,675 36,287 34,363
Provision for possible loan losses (Note 8) 2,850 2,337 1,984
- --------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 36,825 33,950 32,379
- --------------------------------------------------------------------------------
Other income:
Trust fees 3,653 3,527 3,221
Charge card discounts and fees 973 942 907
Service charges and other income 3,422 3,168 2,968
Net investment securities transaction gains 402 173 151
- --------------------------------------------------------------------------------
Total other income 8,450 7,810 7,247
- --------------------------------------------------------------------------------
Other expenses:
Salaries and wages 11,930 11,419 11,135
Pension and other employee benefits (Notes 14
and 15) 2,649 2,487 2,319
Net premises expense (Note 9) 1,386 1,475 1,421
Equipment expense 1,601 1,418 1,498
Other operating expense (Note 16) 10,102 10,000 8,549
- --------------------------------------------------------------------------------
Total other expenses 27,668 26,799 24,922
- --------------------------------------------------------------------------------
Income before provision for income taxes and
effect of the change in accounting for post
retirement benefits 17,607 14,961 14,704
Provision for income taxes (Note 17) 4,683 3,723 3,424
- --------------------------------------------------------------------------------
Income before effect of the change in
accounting for postretirement benefits 12,924 11,238 11,280
Effect of the change in accounting for post
retirement benefits--net of tax effect (Note 15) (592) -- --
- --------------------------------------------------------------------------------
Net Income $12,332 $11,238 $11,280
- --------------------------------------------------------------------------------
Earnings per share of common stock: (Note 1)
Income before effect of the change in
accounting for postretirement benefits $3.91 $3.40 $3.41
Effect of the change in accounting for
postretirement benefits--net of tax effect (.18) -- --
- --------------------------------------------------------------------------------
Net Income $ 3.73 $ 3.40 $3.41
- --------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-5
WESBANCO,INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(in Thousands)
For the years ended December 31, 1992, 1991 and l990
-------------------------------------------------------------------------------
Deferred
Common Capital Capital Retained Treasury ESOP
Stock Surplus Reserves Earnings Stock Benefit Total
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1989 $13,818 $16,409 $2,139 $62,710 $ (1) $(483) $94,592
- -------------------------------------------------------------------------------------------------------------------------
Net Income 11,280 11,280
Cash dividends:
Common ($1.30 per share) (3,119) (3,119)
By pooled banks prior to acquisition (614) (614)
Treasury shares purchased (317) (317)
Treasury shares sold 73 73
Retirement of treasury stock
of pooled bank (9) (56) (65)
Principal payment 161 161
Change in market value of equity security (9) (9)
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1990 13,809 16,353 2,139 70,248 (245) (322) 101,982
- -------------------------------------------------------------------------------------------------------------------------
Net Income 11,238 11,238
Cash dividends:
Common ($1.35 per share) (3,338) (3,338)
By pooled banks prior to acquisition (561) (561)
Treasury shares purchased (26) (26)
Treasury shares sold (1) 83 82
Principal payment 161 161
Change in market value of equity security 182 182
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 13,809 16,352 2,139 77,769 (188) (161) 109,720
- -------------------------------------------------------------------------------------------------------------------------
Net Income 12,332 12,332
Cash dividends:
Common ($ 1.40 per share) (4,209) (4,209)
By pooled banks prior to acquisition (420) (420)
Treasury shares purchased (33) (33)
ESOP borrowing (560) (560)
Principal payment 161 161
- -------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 $13,809 $16,352 $2,139 $85,472 $(221) $(560) $116,991
- -------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
There was no activity or outstanding balances in Preferred Stock during the
years ended December 31, 1992, 1991 and 1990.
F-6
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents (in thousands)
For the year ended December 31
1992 1991 1990
----------------------------------
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net Income $12,332 $11,238 $11,280
Adjustments to reconcile net income
to net cash provided
by operating activities:
Effect of accounting change for
postretirement benefits--
net of tax effect 592 -- --
Depreciation 1,222 1,249 1,229
Provision for possible loan losses 2,850 2,337 1,984
Investment amortization--net 3,236 1,618 1,121
Gains on sales of investment
securities (402) (173) (151)
Deferred income taxes (842) (645) (507)
Other--net (345) 218 229
Increase or decrease in assets
and liabilities:
Interest receivable (224) 779 (491)
Other assets 182 (2,381) 2,330
Interest payable (1,434) (650) 797
Other liabilities (192) 21 (27)
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 16,975 13,611 17,794
- ------------------------------------------------------------------------------
Investing activities:
Proceeds from sales of investment
securities 25,844 9,517 22,145
Proceeds from maturities and calls
of investment securities 97,191 100,407 112,602
Purchases of investment securities (203,510) (102,200) (164,030)
Net increase in loans (24,980) (28,008) (21,587)
Net increase in charge card loans (378) (918) (2,035)
Purchases of premises and
equipment--net (1,412) (1,081) (795)
- ------------------------------------------------------------------------------
Net cash used by investing activities (107,245) (22,283) (53,700)
- ------------------------------------------------------------------------------
Financing activities:
Net increase (decrease) in
certificates of deposit (43,367) (24,093) 29,356
Net increase in demand deposits and
savings accounts 80,522 36,069 14,191
Increase in federal funds purchased
and repurchase agreements 1,283 887 3,789
Increase (decrease) in short-term
borrowings (1,427) 424 4,648
Principal payments on ESOP related
debt (161) (161) (161)
Proceeds from ESOP related borrowings 560 -- --
Dividends paid (4,611) (3,816) (3,649)
Other--net (33) 56 (310)
- ------------------------------------------------------------------------------
Net cash provided by financing
activities 32,766 9,366 47,864
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (57,504) 694 11,958
Cash and cash equivalents at
beginning of year 99,313 98,619 86,661
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of year $41,809 $99,313 $98,619
- ------------------------------------------------------------------------------
During 1992, 1991 and 1990, WesBanco paid $39,555, $47,008 and $49,333 in
interest on deposits and other borrowings and $5,312,$4,378 and $3,975 for
income taxes, respectively.
As of December 31, 1992, 1991 and 1990 the net change in in-substance
foreclosures amounted to ($187), $2,936 and $0, respectively. During 1992, of
the loans classified as in-substance foreclosures, approximately $340 were
transferred from Loans to Other Assets and $527 of loans classified as
in-substance foreclosures were either paid or transferred back to loans.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-7
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1: ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
WesBanco, Inc. and its subsidiary banks provide banking services primarily in
the West Virginia and Eastern Ohio markets. The significant accounting
principles employed in the preparation of the accompanying consolidated
financial statements are summarized below:
PRINCIPLES OF CONSOLIDATION:
The Consolidated Financial Statements of WesBanco, Inc. (the Corporation)
include the accounts of the Corporation and its wholly owned subsidiaries.
Material intercompany transactions and accounts have been eliminated.
INVESTMENT SECURITIES:
Investments Held to Maturity:
Investment securities consisting principally of debt securities, which are
generally held to maturity, are stated at cost, adjusted for amortization of
premiums and accretion of discounts. These securities are purchased with the
intent and ability to hold until their maturity. Amortization of premiums and
accretion of discounts are included in interest on investment securities in the
Consolidated Statement of Income.
Investments Available for Sale:
As of December 31, 1992, U. S. Treasury and Agency debt securities with a
maturity of one year or less, corporate securities, and marketable equity
securities were reclassified as available for sale. These securities may be sold
at any time based upon management's assessment of changes in economic or
financial market conditions, interest rate or prepayment risks, liquidity
considerations, and other factors. These securities are carried at the lower of
aggregate amortized cost or market value, with changes being reported in the
Consolidated Statement of Income. This reclassification had no effect on net
income for the year ended December 31, 1992.
Gains and Losses:
Gains and losses on sale of investment securities represent the differences
between net proceeds and carrying values determined by the specific
identification method.
Loans:
Interest is accrued as earned except where doubt exists as to collectability,
in which case recognition of income is discontinued. Net loan fees and
deferrable costs are not material.
RESERVE FOR POSSIBLE LOAN LOSSES:
The reserve for possible loan losses is maintained at a level considered
adequate by management to provide for potential loan losses. The reserve is
increased by provisions charged to operating expenses and reduced by loan
losses net of recoveries. The amount of reserve is based on management's
evaluation of the loan portfolio, as well as prevailing and anticipated
economic conditions, past loan loss experience, current delinquency factors,
changes in the character of the loan portfolio, specific problem loans, and
other relevant factors.
BANK PREMISES AND EQUIPMENT:
Bank premises and equipment are stated at cost less accumulated depreciation.
Bank premises and equipment are depreciated over their estimated useful lives
using either the straight-line or an accelerated method. Useful lives are
revised when a change in life expectancy becomes apparent.
Maintenance and repairs are charged to expense and betterments are
capitalized. Gains and losses on bank premises and equipment retired or
otherwise disposed of, are charged to expense when incurred.
INCOME TAXES:
The Corporation provides for deferred income taxes to give recognition to the
tax effect of including items of income and expense in different years for
financial reporting purposes rather than for income tax purposes. The principal
timing differences relate to the reserve for possible loan losses,
postretirement benefits including pension expense, and accretion of discounts on
investment securities.
EARNINGS PER SHARE:
Earnings per share are calculated based upon the weighted average number of
shares of common stock outstanding during the year, retroactively adjusted to
include the effects of acquisitions using the pooling-of-interests accounting
method.
TRUST DEPARTMENT:
Assets held by the banks in fiduciary or agency capacities for their customers
are not included as assets in the accompanying Consolidated Balance Sheet. Trust
fees are reported on the cash basis of accounting in accordance with customary
banking practice. Reporting of trust income on an accrual basis would not
materially affect net income. Certain trust assets are held on deposit at
subsidiary banks.
STATEMENT OF CASH FLOWS:
For the purpose of reporting cash flows, cash and cash equivalents include
cash and due from banks, and federal funds sold. Generally, federal funds sold
are sold for one day periods.
F-8
NOTE 2: ACQUISITIONS AND MERGERS
- -------------------------------------------------------------------------------
On July 17, 1992, WesBanco, Inc. acquired First National Bank of Barnesville.
In accordance with the terms of the merger, 600,000 shares of WesBanco common
stock were issued for all of First National Bank of Barnesville's stock.
The acquisition was accounted for using the pooling-of-interest method of
accounting and accordingly, the consolidated financial statements include the
accounts of First National Bank of Barnesville for all periods presented.
The following information summarizes total assets, net interest income, and
net income for First National Bank of Barnesville: (in thousands)
Net
Total Interest Net
Assets Income Income
- -------------------------------------------------------------------------------
For The Six Months
Ended June 30, 1992
(Unaudited) $143,706 $2,310 $ 648
For the year ended
December 31,
1991 $141,825 $4,663 $1,355
1990 (unaudited) 139,276 5,008 1,916
On February 10, 1992, WesBanco Bank Wheeling, a subsidiary of WesBanco, Inc.,
acquired the Bank of Follansbee, Follansbee, West Virginia. The acquisition,
which was not significant to WesBanco, was accounted for as a cash purchase of
the net assets. The Bank of Follansbee had total assets of approximately
$18,127,000 as of February 10, 1992. The purchase price of the Bank of
Follansbee was $1,900,000. After adjustment of acquired assets to fair value,
there was no significant goodwill recorded. Net income from the Bank of
Follansbee is included in the Consolidated Statement of Income for the period
subsequent to the acquisition date.
NOTE 3: RESTRICTED CASH BALANCES
- -------------------------------------------------------------------------------
Federal Reserve regulations require depository institutions to maintain cash
reserves with the Federal Reserve Bank. The average amounts of required reserve
balances were approximately $4,876,000 and $6,617,000 during 1992 and 1991,
respectively.
NOTE 4: LOANS
- -------------------------------------------------------------------------------
December 31,
---------------------------
1992 1991
- -------------------------------------------------------------------------------
Loans: (in thousands)
Commercial $135,119 $146,793
Real estate--construction 11,930 4,524
Real estate--mortgage 233,321 214,505
Installment 154,082 145,585
- -------------------------------------------------------------------------------
$534,452 $511,407
- -------------------------------------------------------------------------------
Most lending is with customers who are located within the state of West
Virginia and Eastern Ohio. There is no significant concentration of credit risk
by industry or by individual borrowers, no significant exposure to highly
leveraged loan transactions, and no foreign loans. Loans aggregating $6,645,000,
and $9,015,000 were classified as renegotiated or nonaccrual as of December 31,
1992 and 1991, respectively. Interest and fees on loans would have been
increased by approximately $259,000 and $406,000 for the years 1992 and 1991,
respectively, if these loans had earned their stated interest from the entire
year. The amount of interest from renegotiated and nonaccrual loans included in
net income is $410,000 and $550,000 for the years ended December 31, 1992 and
1991, respectively.
The banks, in the ordinary course of business, grant loans to related parties
at terms which do not vary from terms that would have been required if the
transactions had been with unrelated parties. Indebtedness of related parties
aggregated approximately $24,620,000, $33,315,000, and $24,409,000 as of
December 31, 1992, 1991, and 1990, respectively. Activity for the year ended
December 31, 1992 is summarized as follows: (in thousands)
1992
- -------------------------------------------------------------------------------
Balance, beginning of year $33,315
Additions 18,771
Reductions (primarily cash payments) (27,466)
- -------------------------------------------------------------------------------
Balance, end of year $24,620
- -------------------------------------------------------------------------------
F-9
NOTE 5: INVESTMENT SECURITIES
- -------------------------------------------------------------------------------
The amortized cost and estimated market values of investment securities are as
follows: (in thousands)
December 31,
-----------------------------------------------------------------------------------------------
1992 1991
------------------------------------------------- --------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury and Federal
Agency securities $234,088 $7,127 $(784) $240,431 $232,575 $11,423 $ (12) $243,986
Obligations of states and
political subdivisions 100,008 3,205 (357) 102,856 81,720 3,171 (112) 84,779
Corporate securities -- -- -- -- 7,848 96 (189) 7,755
Mortgage-backed securities 4,247 116 (11) 4,352 6.203 185 (18) 6,370
Other securities 875 -- -- 875 3,569 120 (63) 3,626
Investments available for sale 71,836 1,336 (316) 72,856 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $411,054 $11,784 $(1,468) $421,370 $331,915 $14,995 $(394) $346,516
- ----------------------------------------------------------------------------------------------------------------------------------
The amortized cost and estimated market value of the total investment
portfolio at December 31, 1992, by contractual maturity, is shown below.
Expected maturities will differ from contractual maturities because certain
borrowers have the right to call or prepay obligations: (in thousands)
December 31,
--------------------
1992
Estimated
Amortized Market
Cost Value
- ---------------------------------------------------------------------------
Within one year $ 66,805 $ 68,076
After one year, but within five 231,696 239,494
After five years, but within ten 95,449 96,400
After ten years 12,857 13,048
Mortgage-backed securities 4,247 4,352
- ---------------------------------------------------------------------------
Total investments $411,054 $421,370
- ---------------------------------------------------------------------------
Investment securities with par values aggregating $94,655,000 at December 31,
1992 and $90,426,000 at December 31, 1991 were pledged to secure public and
trust funds. Gross gains from sales of investment securities of $412,000,
$176,000, and $ 170,000 and gross losses of $10,000, $3,000, and $ 19,000 were
realized on investment sales for the years ended December 31, 1992, 1991, and
1990, respectively.
The Corporation did not maintain a trading portfolio during either of the two
years ended December 31, 1992 and 1991.
NOTE 6: TRANSACTIONS WITH RELATED PARTIES
- -------------------------------------------------------------------------------
Some officers and directors (including their affiliates, families, and
entities in which they are principal owners) of the Corporation and banks are
customers of the banks and have had, and are expected to have, transactions with
the banks in the ordinary course of business. In addition, some officers and
directors are also officers and directors of corporations which are customers of
the banks and have had, and are expected to have, transactions with the banks in
the ordinary course of business. In the opinion of management, such transactions
are consistent with prudent banking practices and are within applicable banking
regulations.
The amount of transactions with related parties including loans and legal fees
aggregated approximately $24,856,000 at December 31, 1992. These related party
transactions equal 21 % of shareholders' equity at December 31, 1992.
F-10
NOTE 7: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
- -------------------------------------------------------------------------------
Individual banks within the Corporation incur off-balance-sheet risks in the
normal course of business in order to meet financing needs of their customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
financial statements.
In the normal course of business, there are outstanding various commitments to
extend credit approximating $34,793,000 and standby letters of credit of
$9,709,000 as of December 31, 1992.
The banks' exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The banks use the same credit and collateral policies in making commitments and
conditional obligations as for all other lending. Collateral which secures these
types of commitments is the same type as collateral for other types of lending,
such as accounts receivable, inventory, and fixed assets.
Commitments to extend credit are commitments to lend to a customer as long as
there is no violation of any condition established in the loan agreement.
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 banks evaluate each customer's credit
worthiness on a case-by-case basis.
Standby letters of credit written are conditional commitments issued by the
banks to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including normal business activities, bond financing and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loans to customers.
Collateral securing these types of transactions is similar to collateral
securing the banks' commercial borrowings.
NOTE 8: RESERVE FOR POSSIBLE LOAN LOSSES
- -------------------------------------------------------------------------------
The transactions in the reserve for possible loan losses were as follows: (in
thousands)
Year ended December 31,
---------------------------------------
1992 1991 1990
- -----------------------------------------------------------------------------
Balance, beginning of year $7,476 $7,120 $6,507
Reserves of purchased bank 62 -- --
Provision 2,850 2,337 1,984
Loan recoveries 652 288 707
Loan losses (2,673) (2,269) (2,078)
- -----------------------------------------------------------------------------
Balance, end of year $8,367 $7,476 $7,120
- -----------------------------------------------------------------------------
NOTE 9: BANK PREMISES AND EQUIPMENT
- -------------------------------------------------------------------------------
Bank premises and equipment include: (in thousands)
December 31,
Estimated useful -----------------------
life 1992 1991
- -----------------------------------------------------------------------------
Land and improvements (3-lO years) $ 3,261 $ 3,210
Buildings and improvements (4-50 years) 16,989 16,346
Furniture and equipment (2-25 years) 9,331 9,706
- -----------------------------------------------------------------------------
29,581 29,262
Less-Accumulated depreciation (15,148) (14,981)
- -----------------------------------------------------------------------------
$14,433 $14,281
- -----------------------------------------------------------------------------
F-11
NOTE 10: OTHER ASSETS
- -------------------------------------------------------------------------------
Real estate acquired in satisfaction of a loan and in-substance foreclosures
are reported in other assets. Properties acquired by foreclosure or deed in lieu
of foreclosure and properties classified as in-substance foreclosures are
transferred to other assets and recorded at the lower of cost or fair market
value based on appraisal value at the date actually or constructively received.
Losses arising from acquisition of such property are charged against the
allowance for loan losses.
The total other real estate including in-substance foreclosures was
$2,904,000 and $3,104,000 as of December 31, 1992 and 1991, respectively.
NOTE 11: CERTIFICATES OF DEPOSIT
- -------------------------------------------------------------------------------
Maturities of certificates of deposit in denominations of $100,000 or more are
as follows: (in thousands)
December 31,
--------------------------
Maturity 1992 1991
- -------------------------------------------------------------------------------
Under three months $18,127 $23,352
Three to six months 8,415 5,654
Six to twelve months 7,957 8,339
Over twelve months 6,684 7,911
- -------------------------------------------------------------------------------
$41,183 $45,256
- -------------------------------------------------------------------------------
Interest expense on certificates of deposit of $ 100,000 or more was
approximately $2,098,000 in 1992, $3,282,000 in 1991, and $5,166,000 in 1990.
NOTE 12: ESOP AND LONG-TERM BORROWINGS
- -------------------------------------------------------------------------------
The Corporation has a qualified noncontributory Employee Stock Ownership Plan
(ESOP) and Trust Agreement for the purpose of investing in the common stock of
WesBanco on behalf of its employees. Currently, the ESOP Trust holds 35,882
shares of WesBanco common stock. All employees, with the exception of Albright
National Bank and First National Bank of Barnesville employees, are included in
this plan. Albright and Barnesville employees elected to participate in this
plan effective January 1, 1993. Approximately 23,171 shares of stock were
allocated to specific employee accounts as of December 31, 1992.
During September 1992, the WesBanco ESOP Trust entered into a revolving loan
agreement with an independent financial institution providing for a line of
credit in the aggregate amount of $1,000,000 to facilitate purchases of WesBanco
common stock in the open market. Subsequently, the ESOP Trust purchased 12,900
shares of stock for $559,725 with funds provided under the revolving loan for
the Employee Stock Ownership Plan (ESOP), pledging those shares as collateral.
The loan bears interest at a rate equal to the lender's base rate and requires
annual repayments of principal equal to 20% of the January 1 balance of each
year. The loan has a final maturity date of five years from date of inception.
Contributions to the ESOP during 1992, 1991, and 1990 were $180,000, $161,000,
and $204,000, respectively, which approximated the required loan payments,
including interest.
F-12
NOTE 13: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
- -------------------------------------------------------------------------------
In accordance with the requirements of Statement of Financial Accounting
Standards (FAS) No. 107, "Disclosure About Fair Value of Financial Instruments,"
fair value disclosure estimates are being made for like kinds of financial
instruments. Fair value estimates are based on present values 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 instruments.
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 Corporation. 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: (in thousands)
December 31, 1992
--------------------
Carrying Fair
Amount Value
- ----------------------------------------------------------------------
Financial assets:
Cash and short-term investments $ 41,909 $ 41,909
Investment securities 411,054 421,370
Net loans 524,626 537,368
Financial liabilities:
Deposits 838,171 846,955
Short-term borrowings 43,274 43,274
- ----------------------------------------------------------------------
The following methods and assumptions are used to estimate the fair value of
like kinds 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, then quoted market prices of
similar instruments are used.
Loans Receivable:
Fair values for variable rate loans are based on carrying values. The fair
values for residential mortgage loans are based on quoted market prices of
securitized financial instruments, adjusted for differences in remaining
maturity and in other loan characteristics. Commercial real estate,
construction, and consumer loans are based on a discounted value of the
estimated future cash flows expected to be received. The current interest rates
applied in the discounted cash flow method reflect rates used to price new loans
of similar type, adjusted for relative risk and remaining maturity. The fair
value of credit cards is estimated based on the anticipated average cost of
soliciting a new account and the present credit quality of the outstanding
balances. For nonaccrual loans, fair value is estimated by discounting expected
future principal cash flows only.
Deposit Liabilities:
The fair value of interest bearing and non-interest bearing demand deposits
and savings deposits is equal to the amount payable on demand (carrying amount).
The fair value of fixed maturity certificates of deposit is estimated by a
discounted cash flow method using the rates currently offered for deposits of
similar remaining maturities.
Short-Term Borrowings:
For short-term borrowings, which include federal funds purchased, repurchase
agreements, and other short-term borrowings, the carrying amount is a reasonable
approximation of fair value.
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 counterparties. The amount of
fees currently charged on commitments are determined to be insignificant and
therefore the fair value and carrying value of off-balance sheet instruments are
not shown.
F-13
NOTE 14: PENSION BENEFITS
- -------------------------------------------------------------------------------
Substantially all employees are participants in either the WesBanco or
affiliate bank benefit plans. The benefits of the WesBanco defined benefit plan
are generally based on the years of service and the employee's compensation
during the last five years of employment. The WesBanco plan's funding policy has
been to contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those expected to be earned in the
future.
Albright National Bank's defined benefit plan formula uses length of service
and employee earnings during the last years of employment and funds its plan at
the maximum allowable amount. Albright also has a defined contribution 401K
plan covering substantially all of its employees. The employer matches employee
deferrals at 50% of the deferral up to a maximum of 4% of the employee's salary.
The First National Bank of Barnesville sponsored a defined benefit pension
plan that covered all employees with six or more months of service and had
attained the age of 20-1/2 and who worked more than 1,000 hours in a plan
year. The plan called for benefits to be paid to eligible employees after
retirement based primarily upon years of service with the bank and compensation
rates near retirement. Contributions to the plan reflect benefits attributed to
employees' services to date. Plan assets consist exclusively of insurance
annuity contracts. Payment of retirement benefits is funded solely through
these annuity contracts.
Net periodic pension cost for the defined benefit plans in 1992, 1991, and
1990 include the following components: (in thousands)
1992 1991 1990
- ---------------------------------------------------------
Service cost--benefits
earned during year $500 $541 $522
Interest cost on
projected benefit
obligation 524 475 426
Actual return on
plan assets (387) (784) (222)
Net amortization
and deferral (190) 304 (220)
- ---------------------------------------------------------
Net periodic
pension cost $447 $536 $506
- ---------------------------------------------------------
The following table sets forth for all defined benefit plans the funded status
and the liability reflected in the Consolidated Balance Sheet at December 31,
1992 and 1991: (in thousands)
December 31,
1992 1991
- -------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested benefit obligation $ 4,684 $ 3,949
Accumulated benefit
obligation $ 5,129 $ 4,417
- -------------------------------------------------------------
Projected benefit obligation $(7,381) $(6,724)
Plan assets at current market value,
primarily listed stocks, bonds, and
cash equivalents 7,186 6,631
- -------------------------------------------------------------
Projected benefit obligation in excess
of plan assets (195) (93)
Unrecognized prior service cost (78) (86)
Unrecognized net gain (1,025) (1,046)
Unrecognized obligation 69 104
- -------------------------------------------------------------
Net pension liability $(1,229) $(1,121)
- -------------------------------------------------------------
December 31.
1992 1991
- -------------------------------------------------------------
Assumptions used in the
accounting were:
Discount rates 8.0% 8.0%
Rates of increase in
compensation levels 5.0% 5.0%
Expected long-term return
on assets 8.0% 8.0%
Albright's pension plan uses the same interest rate assumptions as the
WesBanco plan except for a 4.5% rate of increase in compensation levels for 1992
and 1991.
As of January 1, 1993, all assets and liabilities of the Barnesville and
Albright pension plans were merged into the WesBanco plan.
F-14
NOTE 15: POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
- -------------------------------------------------------------------------------
WesBanco, Inc. elected to adopt Statement of Financial Accounting Standard
(FAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," during December 1992. This statement generally requires accrual
accounting for nonpension postretirement benefits. WesBanco currently provides a
death benefit of $5,000 and a contributory health insurance plan for all
retirees. WesBanco's contribution toward health insurance is a fixed amount
which may be changed at its sole discretion.
With the adoption of FAS No. 106 during 1992, the Corporation recognized a one
time non-cash charge of $943,947 before the applicable income tax benefit of
$351,453. The recognized charge to earnings has been accounted for as a change
in accounting principle. Each quarter of 1992 has been restated to reflect the
adoption of FAS No. 106 in the first quarter 1992.
Net periodic postretirement benefit costs other than pension costs in 1992
include the following components:
(in thousands)
Service cost-benefits earned during year $ 35
Interest cost on projected benefit obligation 74
- ---------------------------------------------------------------------
Net periodic postretirement benefit cost other than pensions $109
- ---------------------------------------------------------------------
The following table sets forth the liability reflected in
the Consolidated Balance Sheet at December 31, 1992:
(in thousands)
Accumulated postretirement
benefit obligation:
Retirees $ 394
Fully eligible active plan participants 610
- ------------------------------------------------------------------------
Net benefit liability $1,004
- ------------------------------------------------------------------------
Assumptions used in the
accounting were:
Discount rate 8.0%
Postretirement benefits are funded as incurred, resulting in cash payments of
$48,000, $43,000, and $34,000 for the years ended December 31, 1992, 1991, and
1990, respectively.
The Corporation's portion of the cost of health care benefits is expected to
remain constant. An assumption of a 1% per year increase in the benefit level
would increase the expense in health care benefits by $20,000 or 15% for the
year ended December 31, 1992 and increase the accumulated postretirement benefit
obligation by $174,000 or 13% as of December 31, 1992.
FAS No. 112, "Employer's Accounting for Postemployment Benefits", requires
employers who provide benefits to former or inactive employees after employment,
but before retirement, to recognize the obligation during the periods employees
provide services to earn those benefits and is effective for periods beginning
after December 15, 1993. The adoption of FAS No. 112 is expected to be
insignificant to the Corporation.
NOTE 16: OTHER OPERATING EXPENSES
- -------------------------------------------------------------------------------
Other operating expenses for the years 1992, 1991, and 1990 include: (in
thousands)
1992 1991 1990
- -------------------------------------------------------------------------------
Customer and office supplies $ 1,049 $ 1,117 $ 940
Legal and accounting fees 896 833 719
Marketing media 759 912 672
Miscellaneous taxes 1,430 1,291 1,229
FDIC Insurance 1,876 1,670 938
Other 4,092 4,177 4,051
- -------------------------------------------------------------------------------
$10,102 $10,000 $8,549
- -------------------------------------------------------------------------------
F-15
NOTE 17: INCOME TAXES
- -------------------------------------------------------------------------------
A reconciliation of the federal statutory tax rate to the reported effective tax
rate is as follows:
Year ended December 31,
------------------------
1992 1991 1990
---- ---- ----
Federal statutory tax rate 34% 34% 34%
Tax-exempt interest income from
securities of states and
political subdivisions (12) (14) (15)
State income taxes 3 3 3
Other--net 1 2 1
- -----------------------------------------------------------------------------
Reported effective tax rate 26% 25% 23%
- -----------------------------------------------------------------------------
The provision for income taxes in the Consolidated Statement of Income consists
of the following: (in thousands)
Year ended December 31,
------------------------------
1992 1991 1990
- -----------------------------------------------------------------------------
Current--Federal $4,391 $3,708 $3,295
State 782 660 636
Deterred (842) (645) (507)
- -----------------------------------------------------------------------------
$4,331 $3,723 $3,424
- -----------------------------------------------------------------------------
The Corporation's Federal and State income tax returns have been examined
through 1990 with no significant adjustment proposed by the Internal Revenue
Service or the State Tax Department.
The approximate tax effects of the net investment securities transactions for
the years ended December 31, 1992, 1991, and 1990 were $173,000, $75,000, and
$65,000, respectively.
The deferred portion of the income tax provision consists of the following:
(in thousands)
Year ended December 31,
----------------------------------
1992 1991 1990
- -------------------------------------------------------------------------------
Postretirement benefits $(383) -- --
Accretion of discounts on investment
securities--net (60) $ (68) $ 2
Reserve for possible loan losses (376) (533) (532)
Other--net (23) (44) 23
- -------------------------------------------------------------------------------
$(842) $(645) $(507)
- -------------------------------------------------------------------------------
The Financial Accounting Standards Board issued Statement 109, "Accounting for
Income Taxes", in February 1992. FAS No. 109 requires, among other things, that
an asset and liability approach be applied for income taxes and that recognition
of deferred tax assets be evaluated using a more likely than not realizability
criteria.
FAS No. 109 must be adopted for fiscal years beginning after December 15, 1992.
Management believes implementation of FAS No. 109 during the first quarter 1993
will not result in a material effect upon the reported financial position or
results of operations of the Corporation.
F-16
NOTE 18: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Presented below are the condensed Balance Sheet, Statement of Income, and
Statement of Cash Flows for the Parent Company. (in thousands)
BALANCE SHEET
December 31,
-------------------------
1992 1991
- -------------------------------------------------------------------------------
ASSETS
Cash $ 545 $ 332
Investment in subsidiary banks (at equity in
net assets) 115,152 107,658
Investment securities:
Federal Agency securities (market values
of $0 and $207, respectively) -- 200
States and political subdivisions
(market values of $1,360 and $ 1,285,
respectively) 1,353 1,253
Other investments (market values of $0
and $588, respectively) -- 485
Investments available for sale (market
values of $452 and $0, respectively) 394 --
Other assets 1,463 1,083
- -------------------------------------------------------------------------------
TOTAL ASSETS $118,907 $111,011
- -------------------------------------------------------------------------------
LIABILITIES
Long-term borrowings (Note 12) $ 560 $ 161
Other liabilities 1,356 1,130
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 1,916 1,291
TOTAL SHAREHOLDERS' EQUITY 116,991 109,720
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $118,907 $111,011
- -------------------------------------------------------------------------------
STATEMENT OF INCOME
For the year ended December 31,
-------------------------------
1992 1991 1990
- -------------------------------------------------------------------------------
Dividends from subsidiary banks $ 5,020 $ 3,560 $ 5,439
Interest income from investments 109 129 103
Other income 53 6 24
- -------------------------------------------------------------------------------
TOTAL INCOME 5,182 3,695 5,566
- -------------------------------------------------------------------------------
TOTAL EXPENSES 531 553 410
- -------------------------------------------------------------------------------
Income before income tax benefit and
equity in undistributed net income of
subsidiary banks 4,651 3,142 5,156
Income tax benefit 188 196 161
- -------------------------------------------------------------------------------
Income before equity in undistributed net
income of subsidiary banks 4,839 3,338 5,317
Equity in undistributed net income of
subsidiary banks 7,493 7,900 5,963
- -------------------------------------------------------------------------------
NET INCOME $ 12,332 $ 11,238 $ 11,280
- -------------------------------------------------------------------------------
F-17
STATEMENT OF CASH FLOWS
For the year ended December 31,
---------------------------------
1992 1991 1990
- ----------------------------------------------------------------------------------
Operating activities:
Net Income $12,332 $11,238 $11,280
Undistributed earnings of subsidiary banks (7,493) (7,900) (5,963)
Other--net (1,266) (125) (106)
- ----------------------------------------------------------------------------------
Net cash provided by operating activities 3,573 3,213 5,211
- ----------------------------------------------------------------------------------
Investing activities:
Proceeds from maturities of investment securities 1,587 1,227 551
Purchases of investment securities (1,347) (1,360) (2,115)
Change in investment in subsidiary banks -- 75 (10)
- ----------------------------------------------------------------------------------
Net cash provided (used) by investing activities 240 (58) (1,574)
- ----------------------------------------------------------------------------------
Financing activities:
Principal payments on ESOP related debt (161) (161) (161)
Proceeds from ESOP related borrowings 560 -- --
Change in treasury stock--net (33) 56 (244)
Dividends paid (3,966) (3,203) (3,060)
- ----------------------------------------------------------------------------------
Net cash used by financing activities (3,600) (3,308) (3,465)
- ----------------------------------------------------------------------------------
Net increase (decrease) in cash 213 (153) 172
Cash at beginning of year 332 485 313
- ----------------------------------------------------------------------------------
Cash at end of year $ 545 $ 332 $ 485
- ----------------------------------------------------------------------------------
The operations of the banks are subject to federal and state statutes which
limit the banks' ability to pay dividends or otherwise transfer funds to the
Parent Company. At December 31, 1992, the banks, without prior approval from the
regulators, could have distributed dividends of approximately $20,230,000.
NOTE 19: SUBSEQUENT EVENTS--STOCK SPLIT (UNAUDITED)
- --------------------------------------------------------------------------------
At its February 1993 meeting, the Board of Directors of Corporation recommended
to its shareholders a 2 for 1 common stock split. As a part of the split, the
Board has recommended an increase in the authorized common shares from 10
million to 25 million shares, a change in common stock par value from $4.1666 to
$2.083 per share and an increase in the authorized preferred stock
from 100,000 shares to 1 million. Subject to stockholders approval at the
annual meeting scheduled for April 21, 1993, the stock split will be effective
on April 22, 1993 and will increase the number of shares of common stock
currently outstanding to approximately 6,613,328 shares.
The proforma effect of the anticipated common stock split on earnings per share
is as follows:
For the year ended December 31,
-------------------------------
1992 1991 1990
- -------------------------------------------------------------------------------
Income before the change in
accounting for postretirement
benefits $1.96 $1.70 $1.71
Effect of the change in accounting
for postretirement benefits--
net of tax effect (.09) -- --
- -------------------------------------------------------------------------------
Net Income $1.87 $1.70 $1.71
- -------------------------------------------------------------------------------
F-18
WESBANCO, INC.
CONDENSED QUARTERLY STATEMENT OF INCOME
- ------------------------------------------------------------------------------
(in thousands, except for earnings per share)
1992 Quarter ended
-------------------------------------------------------------------
Annual
March 31(1) June 30(1) September 30(1) December 31 Total
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income $19,833 $19,617 $19,388 $18,959 $77,797
Interest expense 10,291 9,845 9,393 8,593 38,122
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income 9,542 9,772 9,995 10,366 39,675
Provision for loan losses 415 556 607 1,272 2,850
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 9,127 9,216 9,388 9,094 36,825
Other income 2,349 2,086 1,982 2,033 8,450
Other expenses 6,665 7,252 6,930 6,821 27,668
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and effect of
prior years' postretirement benefits 4,811 4,050 4,440 4,306 17,607
Provision for income taxes 1,353 1,111 1,211 1,008 4,683
- ---------------------------------------------------------------------------------------------------------------------------------
Income before effect of prior years' post-
retirement benefits 3,458 2,939 3,229 3,298 12,924
Effect of prior years' postretirement benefits--net of
tax effect (592) -- -- -- (592)
- ---------------------------------------------------------------------------------------------------------------------------------
Net lncome $ 2,866 $ 2,939 $ 3,229 $3,298 $12,332
- ---------------------------------------------------------------------------------------------------------------------------------
Per share:
Income before effect of prior years' post-
retirement benefits $ 1.04 $ .89 $ .98 $ 1.00 $ 3.91
Effect of prior years' postretirement benefits--net of
tax effect (.18) -- -- -- (.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income $ .86 $ .89 $ .98 $ 1.00 $ 3.73
- ---------------------------------------------------------------------------------------------------------------------------------
The effect of First National Bank of
Barnesville acquisition on the quarterly
data previously reported is as follows:
Net interest income $ 1,085 $ 1,225
Net Income 361 287
Earnings per share (.10) (.09)
1991 Quarter ended
-------------------------------------------------------------------
Annual
March 31 June 30 September 30 December 31 Total
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income $20,582 $20,728 $20,870 $20,465 $82,645
Interest expense 11,907 11,627 11,558 11,266 46,358
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income 8,675 9,101 9,312 9,199 36,287
Provision for loan losses 331 513 653 840 2,337
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 8,344 8,588 8,659 8,359 33,950
Other income 1,878 1,992 2,065 1,875 7,810
Other expenses 6,286 6,407 6,913 7,193 26,799
- ---------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 3,936 4,173 3,811 3,041 14,961
Provision for income taxes 937 1,183 988 615 3,723
- ---------------------------------------------------------------------------------------------------------------------------------
Net lncome $ 2,999 $ 2,990 $ 2,823 $ 2,426 $11,238
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per share: $ .91 $ .90 $ .85 $ .74 $ 3.40
- ---------------------------------------------------------------------------------------------------------------------------------
The effect of First National Bank of
Barnesville acquisition on the quarterly
data previously reported is as follows:
Net interest income $ 1,197 $ 1,116 $ 1,197 $ 1,153 $ 4,663
Net Income 436 354 390 175 1,355
Earnings per share (.04) (.07) (.05) (.09) (.25)
(1) Other expenses and the provision for income taxes were restated by $15 and
$6, respectively, in each of the first three quarters of 1992 to adjust for the
current year effect of postretirement benefits (see Note 15).
F-19
WESBANCO, INC.
CONSOLIDATED FINANCIAL SUMMARY(1)
- ------------------------------------------------------------------------------
December 31,
---------------------------------------------------------------------
1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------
Cash dividends declared $1.40 $1.35 $1.30 $1.20 $1.15
Book value 35.38 33.17 30.85 28.54 26.17
Average common shares outstanding 3,306,691 3,305,361 3,308,874 3,307,472 3,309,343
Selected Balance Sheet Information
(in thousands):
Total Investments $411,054 $331,915 $340,506 $311,098 $290,851
Net Loans 524,626 502,118 475,528 453,891 430,968
Total Assets 1,010,104 966,501 946,220 886,140 853,207
Total Deposits 838,171 801,016 789,040 745,492 722,451
Total Shareholders' Equity 116,991 109,720 101,982 94,592 86,504
For the year ended December 31,
-----------------------------------------------------------
1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------
Summary Statement of Income
(in thousands, except per share amounts):
Interest income $77,797 $82,645 $84,493 $80,218 $73,173
Interest expense 38,122 46,358 50,130 46,242 41,044
- ------------------------------------------------------------------------------------------------------------
Net interest income 39,675 36,287 34,363 33,976 32,129
Provision for loan losses 2,850 2,337 1,984 1,978 1,706
- ------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses 36,825 33,950 32,379 31,998 30,423
Other income 8,450 7,810 7,247 6,830 6,587
Other expenses 27,668 26,799 24,922 23,784 23,775
- ------------------------------------------------------------------------------------------------------------
Income before income taxes and effect of
prior years' postretirement benefits 17,607 14,961 14,704 15,044 13,235
Provision for income taxes 4,683 3,723 3,424 3,790 3,106
- ------------------------------------------------------------------------------------------------------------
Income before effect of prior years'
postretirement benefits 12,924 11,238 11,280 11,254 10,129
Effect of prior years' postretirement
benefits--net of tax effect (592) -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Income $12,332 $11,238 $11,280 $11,254 $10,129
- ------------------------------------------------------------------------------------------------------------
Per Share:
Income before effect of prior years'
postretirement benefits $ 3.91 $ 3.40 $ 3.41 $ 3.40 $ 3.06
Effect of prior years' postretirement
benefits--net of tax effect (.18) -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Income $ 3.73 $ 3.40 $ 3.41 $ 3.40 $ 3.06
- ------------------------------------------------------------------------------------------------------------
(1) See Note 1 of the Notes to Consolidated Financial Statements
F-20
WESBANCO, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
Management's discussion and analysis represents an overview of the financial
condition and results of operations of WesBanco, Inc. for the three year period
ended December 31, 1992. This discussion and analysis should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
INCOME AND EXPENSE
- ------------------------------------------------------------------------------
Net income increased 9.7% to $12,332,000 between the years ended December
31, 1992 and 1991 and decreased $42,000, less than 1% between the years ended
December 31, 1991 and 1990. The growth in net income during 1992 can be
primarily attributed to increased net interest income. During 1992, WesBanco
elected to change accounting for employee postretirement benefits, recognizing
the cumulative effect of the accounting change as a charge to earnings. The
effect on the consolidated income statement of this accounting change, net of
the applicable income tax effect, was $592,000. Excluding the effect of
postretirement benefits, net income increased 15.0% over 1991 results. Return
on average assets, using income prior to the effect of the postretirement
benefits, was 1.30% for the year ended December 31, 1992, compared to 1.19% for
1991. The return on average equity, using income excluding the effect of
postretirement benefits, was 11.4% for the year ending December 31, 1992,
compared to 10.6% for 1991. Net tax equivalent interest income expressed as a
percentage of average earning assets improved to 4.5% for the year ended
December 31, 1992, from 4.4% for the year 1991 and 1990.
During the past three years, nationwide bank base lending rates were at a high
of 10.5% during 1990 then dropped to a low of 6.0% as of year end 1992. Current
period loan and deposit interest rates are generally below levels noted in the
previously compared periods. During 1992, most nationwide banks' primary
lending rates ranged between 6.0% to 6.5% while rates for 1991 ranged between
6.5% to 10%. This decline in market interest rates caused the average yield on
WesBanco's interest earning assets to decrease to 8.3% from 9.3% during 1991.
The average yield on earning assets was 9.8% for the year 1990. A corresponding
decrease in rates paid on interest bearing liabilities caused a decrease in
average rates paid to 4.8% during 1992 from 6.2% during 1991. The average rates
paid on interest bearing liabilities was 6.9% during 1990.
Total operating expenses increased $869,000 or 3.2% between 1992 and 1991.
Approximately 77% of the increase or $673,000, was caused by an increase in
personnel expenses. Personnel expenses were increased due to normal salary
adjustments, increasing payroll taxes, increases in health insurance, and an
increase in the number of full-time equivalent employees primarily associated
with the acquisition of the Bank of Follansbee. Total operating expenses
increased $1,877,000 or 7.5% between 1991 and 1990 with the largest single
increase caused by FDIC insurance expense.
INVESTMENTS
- ------------------------------------------------------------------------------
Investment securities increased by $79,139,000 in 1992 after declining by
$8,591,000 in 1991. The increase in 1992 was attributable to the investment of
federal funds and through deposit growth which exceeded loan growth. Our
investment strategy for 1992 included maintaining low balances in federal funds
sold in order to minimize the earnings penalty associated with holding excess
liquidity. The decline of investments during 1991 was due to maturities in the
investment portfolio and loan growth which was in excess of deposit growth.
Securities with a total book value of $97,191,000 and $100,407,000 matured
or were called and $25,844,000 and $9,517,000 were sold during 1992 and 1991,
respectively. As a result, 30% of the portfolio repriced during 1992. Municipal
securities increased by $18,288,000 after declining by $1,043,000 in 1991.
Management expects to continue to take advantage of market opportunities to
increase the municipal sector of the portfolio in the future. The taxable
equivalent yields for municipal securities were relatively attractive
throughout most of 1992. Corporate bonds increased by $2,765,000 in 1992 due to
stronger economic trends and debt refinancing which has improved credit quality
in this sector. U.S. Treasury and Federal Agency securities were used as an
investment alternative to the sales of federal funds. Purchases of this type of
investment with maturities in the three-year range resulted in an increase of
$59,021,000 during 1992.
As of December 31, 1992, the Corporation elected to designate certain types
of investments as available for sale. Investments included in this category
are; U.S. Treasury and Agency securities with remaining maturities of one year
or less, and all corporate and marketable equity securities. These types of
securities may be sold to adjust the bank's asset/liability position, and for
purposes of providing liquidity. Sales of corporate and equity
F-21
securities may be based upon changes in credit ratings and other market factors.
Investments in this available for sale category represent approximately
$71,836,000 or 17% of the total investment portfolio.
Investment income declined by $85,000 in 1992 after declining by $566,000 in
1991. The impact of declining interest rates on those securities which repriced
in 1992 was almost exactly offset by the increased volume by which investment
securities increased during the year. The average yield on taxable securities
was 7.3% for 1992 compared to 8.3% in 1991 and 8.5% in 1990. The average yield
for non-taxable securities, not adjusted for tax equivalency, was 6.6% as
compared to 7.1% in 1991 and 7.2% in 1990. Net realized securities gains
amounted to $402,000 in 1992, $173,000 in 1991, and $151,000 in 1990. Our
investment strategy in 1992 included selling bonds with near term maturities
and bonds expected to be called during the year, so as to reinvest the proceeds
before interest rates declined further. Approximately $66,805,000 or 16% of the
portfolio will mature or is expected to be called during 1993 providing
excellent liquidity for the Corporation. The average maturity of the portfolio
at year-end was 3.75 years as compared to 3.25 years at year-end 1991 and 3.17
years at year-end 1990. At year-end 1992, the market value of the portfolio
exceeded book value by $10,316,000. The Corporation has no investment trading
portfolio.
LOANS
- ------------------------------------------------------------------------------
Loans outstanding increased $23,045,000 or 4.5% during 1992. Approximately 57%
of the overall increase in loan volume was at WesBanco Wheeling as a result of
the purchase of the Bank of Follansbee in 1992. During 1992, overall commercial
loan demand was weak due to the uncertainty of the economies in many of the
serviced market areas. Mortgage and consumer loan volumes, exclusive of those
acquired through the purchase of the Bank of Follansbee, increased approximately
$19,595,000 and $6,254,000, respectively. Loans outstanding during 1991
increased $27,912,000 or 5.8% . A major portion of the increase in loan volume
was attributable to a highly successful marketing program for new automobile
loans, primarily in the Upper Ohio Valley.
Interest and fees on loans declined $3,054,000 or 5.9% and increased $165,000
or less than 1% in 1992 and 1991, respectively. In spite of the increase in
total loan volume, interest income decreased because of the continuing decline
in commercial, mortgage, and consumer loan rates of 110 basis points or more
during 1992. The majority of commercial and mortgage loans reprice monthly or
annually in conjunction with changes in nationwide interest rates. The average
yield earned on the total loan portfolio during 1992 was 9.6% as compared to
10.7% in 1991 and 11.2% in 1990.
Loans classified as nonaccrual or renegotiated were $6,645,000 or 1.2% of
total loans outstanding as of December 31, 1992 compared with $9,015,000 or
1.8% as of December 31, 1991. During 1992 nonaccrual loans declined $1,107,000
from $3,706,000 to $2,599,000. During this same period renegotiated loans
declined $1,263,000 from $5,309,000 on December 31, 1991 to $4,046,000 On
December 31, 1992. Nonaccrual loans consist primarily of commercial real estate
loans which are secured by properties believed to have adequate values to
protect from loss. Renegotiated loans, consisting principally of one commercial
real estate loan, which previously had its original interest rate lowered and
is now at a current market interest rate, are considered to be well secured.
The decline in non-performing loans was due to loan pay-downs, liquidation of
collateral, and loan write-downs. Management continues to closely review these
loans to ensure against deterioration in collateral values. Loans totaling
$200,000 and $2,936,000 previously classified as renegotiated or nonaccrual
were transferred to insubstance foreclosures during 1992 and 1991.
In conjunction with a recent regulatory examination completed in February
1993, a loan totaling $3,863,000, which was included with the renegotiated loans
at December 31, 1992, was placed on nonaccrual status. Also placed on nonaccrual
were loans of a commercial customer totaling $1,451,000, which are on a current
payment status.
Net loan chargeoffs were $2,021,000 in 1992 compared to $1,981,000 in 1991
and $1,371,000 in 1990. A significant portion of net chargeoffs in 1992 were
the result of write-downs on loans secured by commercial real estate with the
largest single write-down approximating $500,000. Other losses on commercial
real estate loans occurred at recently acquired institutions. Losses on
consumer-type loans increased over previous years due to increases in personal
bankruptcies.
The provision for loan losses increased to $2,850,000 in 1992 from $2,337,000
in 1991 compared to $1,984,000 in 1990. The reserve for loan losses as of
December 31, 1992 was $8,367,000, an increase of $891,000 over December
31, 1991. The reserve for loan losses as a percentage of total loans increased
to 1.57% as of December 31,1992 compared to 1.47% as of December 31, 1991. Net
loan chargeoffs were 24% of the reserve for loan
F-22
losses as of December 31, 1992, as compared to 26% as of December 31, 1991. The
reserve for loan losses is considered adequate to provide for future loan
losses in the portfolio.
Twenty-five percent (25%) of the loan portfolio is comprised of commercial
loans, forty-six percent (46%) in real estate secured loans, and twenty-nine
percent (29%) in consumer-type loans. The aggregate lending limits of all
affiliate banks as of December 31, 1992 was $18,500,000.
DEPOSITS
- ------------------------------------------------------------------------------
As of December 31,1992, total deposits increased $37,155,000 to $838,171,000,
an increase of 4.6% over 1991 balances. Deposits increased $11,976,000 to
$801,016,000 during 1991. The modest increase in 1992 levels was partially
caused by the addition of approximately $16,000,000 in deposits resulting from
the acquisition of the Bank of Follansbee. Deposit growth during 1992, as well
as 1991, was again limited because of general economic conditions, lower
interest rates, and increased pressure from nonbank competition.
Certificates of deposit decreased $43,367,000 between 1992 and 1991, and by
$24,093,000 between 1991 and 1990. Lower interest rates in both years have
caused the continued outflow of certificate balances into interest bearing
demand and savings products. Because of the current rate environment, the
interest rate differential between certificates of deposit and passbook savings
provides limited incentive for customers to reinvest in term accounts. Growth in
certificate balances has been confined to modest increases in Individual
Retirement Accounts (IRAs) and our Rising Rate Certificate product.
Interest bearing demand accounts increased by $27,951,000 in 1992 and by
$34,289,000 in 1991. Our traditional savings accounts increased by $49,562,000
in 1992 and by $11,123,000 in 1991. Growth in both interest bearing demand
accounts and regular savings accounts was caused by the large transfer of
deposit balances out of certificates into such accounts and by the continued
acceptance of our Freedom Fifty and CheckMate account programs.
Interest expense on deposits decreased $7,403,000 or 16.8% between 1992 and
1991 and $3,240,000 or 6.8% between 1991 and 1990. The decrease in interest
expense, in spite of increased deposit balances, was jointly caused by the shift
in balances from higher yielding certificates of deposit to demand accounts and
by a substantial reduction in the interest rates paid on deposits. Average rates
paid on all deposit accounts were 4.9% in 1992, 6.2% in 1991, and 6.9% in 1990.
OPERATIONS
- ------------------------------------------------------------------------------
Salaries, wages, and employee benefits increased $673,000 or 4.8% during 1992
and $452,000 or 3.4% in 1991. In 1992 employee expenses increased due to normal
annual salary adjustments, as well as increases in overall staffing levels.
Total employment increased to 568 at December 31, 1992, decreased slightly in
1991 to 546 employees, and totaled 552 at December 31, 1990. Increases in 1992
staffing levels were primarily caused by the addition of staff resulting from
the acquisition of the Bank of Follansbee.
Equipment and premises expenses totaled $2,987,000 in 1992, $2,893,000 in
1991, and $2,919,000 in 1990. Insignificant fluctuations in these expenses can
be attributed to our success in monitoring the cost of all operational areas of
the Corporation.
Other operating expenses increased $102,000 to $10,102,000 or 1% in 1992
and $1,451,000 to $10,000,000 or 17% in 1991. During 1992, other operating
expenses increased because of FDIC insurance expense and increased postage
expense of $86,000, offset by lower marketing expenses. Lower marketing expenses
reflect the completion of the WesBanco name change promotion, which took place
in 1991. The large increase in 1991 was caused by a $732,000 increase in FDIC
insurance premiums resulting from increased deposit balances and an increase in
FDIC insurance rates. Increased marketing expenses of $240,000 was caused by the
cost of marketing the name change of our affiliate banks to the common name of
WesBanco.
F-23
TRUSTS
- ------------------------------------------------------------------------------
The market value of assets held by the Trust Department declined by
$3,000,000 to $1,136,000,000 at year-end 1992 after increasing by $188,000,000
in 1991. The decline in the market value in 1992 was primarily caused by
declining market prices for certain equity securities which was offset by the
continuation of growth in the number of new trust accounts opened. The Trust
Department increased the number of accounts under management by 187 after an
increase of 270 accounts in 1991. The market value of new accounts obtained
during 1992 was $54,000,000, as compared to $42,000,000 in 1991.
Trust fees were $3,653,000 in 1992, which represented an increase of $126,000
from 1991. During 1991, trust fees increased $306,000 from 1990. Higher fee
income in both years was the result of a larger number of trusts under
administration.
INCOME TAXES
- ------------------------------------------------------------------------------
Income tax expense for 1992 increased $960,000 to $4,683,000 and increased
$299,000 between 1991 and 1990. The reported effective tax rates of 26% during
1992, 25% during 1991, and 23% during 1990 are representative of the change in
the level of nontaxable income and, to a lesser extent, the changing state tax
rates. The increases in the effective tax rates during 1992 and 1991 were caused
by declines in nontaxable income during 1992 and 1991 from previous levels.
WesBanco has been affected by the changes in the Federal and State tax
regulations. The Corporation has been required to recapture the bad debt
reserves for each acquired bank. Due to past changes in the tax laws, WesBanco
has lost and will continue to lose certain investment opportunities which were
previously available in tax-exempt investments. The ultimate impact of losing
these investment opportunities depends upon the development of and availability
of alternative types of investments. The alternative minimum tax will affect
WesBanco only if a significant amount of nontaxable income exists when compared
to taxable income. WesBanco could reduce nontaxable income through the sale of
tax-exempt securities.
The State of West Virginia has a corporate net income tax which is based upon
federal taxable net income, adjusted for certain items not subject to state
taxation. The average tax rate paid was 9.075% and will be by law reduced to
9.0% for 1993. State income taxes included in the Consolidated Statement of
Income for the years ended December 31, 1992, 1991, and 1990 were $782,000,
$660,000, and $636,000, respectively.
The State of Ohio does not have a corporate income tax. Businesses are subject
to an Ohio corporate franchise tax which is included in other operating
expenses.
CAPITAL ADEQUACY
- ------------------------------------------------------------------------------
Adequate levels of capital are required to sustain growth and absorb credit
losses. The Corporation's primary capital to asset ratio was 12.3% as of
December 31, 1992 and 12.0% as of December 31, 1991. The risk-based capital
ratios are calculated under current regulatory guidelines. Tier 1 and Total
Capital to Risk Adjusted Assets, which exceed minimum regulatory levels of 4%
and 8%, respectively, are as follows:
As of December 31,
------------------
1992 1991
- ---------------------------------------------
Tier 1 Capital to Risk
Adjusted Assets 19.2% 19.0%
Total Capital to Risk
Adjusted Assets 20.5% 20.2%
F-24
INTEREST RATE MANAGEMENT
- ------------------------------------------------------------------------------
Interest rate management encompasses measuring 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-earning assets and rates paid on
interest bearing 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 of rate changes.
The affiliate banks review their interest rate sensitivity on a periodic
basis. The Corporation's Asset/Liability Committee has projected, on a monthly
basis, interest rate sensitivity for the next year. Summary information as of
December 31, 1992 is supplied by the table below (in thousands):
Under Three Six Nine Over
Three to Six to Nine Months to One
Months Months Months One Year Year Total
- ----------------------------------------------------------------------------------------------------------
ASSETS
Due from banks/interest
bearing -- -- $ 100 -- -- $ 100
Loans $ 181,673 $ 38,484 44,624 $ 40,453 $227,759 532,993
Investment securities 12,301 15,747 16,852 21,905 344,249 411,054
Federal funds sold 4,970 -- -- -- -- 4,970
- ---------------------------------------------------------------------------------------------------------------
Total selected assets 198,944 54,231 61,576 62,358 572,008 949,117
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Savings and NOW accounts 331,306 -- -- -- -- 331,306
All other interest bearing
deposits 186,721 79,122 32,314 30,686 94,902 423,745
Short term and other
borrowings 43,024 250 -- -- -- 43,274
- ----------------------------------------------------------------------------------------------------------
Total selected liabilities 561,051 79,372 32,314 30,686 94,902 798,325
- ---------------------------------------------------------------------------------------------------------------
Differences $(362,107) $ (25,141) $ 29,262 $ 31,672 $477,106 $150,792
- ----------------------------------------------------------------------------------------------------------
Cumulative differences $(362,107) $(387,248) $(357,986) $(326,314) $150,792
- ----------------------------------------------------------------------------------------------------------
The Asset/Liability Committee believes the Corporation's interest sensitivity
position allows for a changing interest rate environment. During the next twelve
months, the Corporation's net interest sensitivity position is $(362,107,000),
$(25,141,000), $29,262,000, and $31,672,000 during the periods under three
months, three to six months, six to nine months, and nine months to one year,
respectively.
Traditional savings and NOW deposits, which formerly had fixed interest rates
are now subject to management's discretion. Rates on these types of deposits
decreased to 3.50% during 1992 from 4.50% during 1991. Classifications of these
types of accounts as interest rate sensitive have caused the Corporation to be
liability sensitive in the under three month time period.
The Corporation's short-term interest sensitivity position would suggest
exposure of the net interest margin to changing interest rates. If interest
rates continue to decline, the net interest margin may improve. The Corporation
is in a position to extend asset maturities, primarily through Federal Funds
and investment maturities. If interest rates rise, the net interest margin may
decline, however, the decline could be mitigated by reinvesting maturing
investments with short-term assets. In addition, management may emphasize
attracting longer term deposits by holding the rates paid on savings and NOW
accounts at a fixed level and increasing rates on term certificates of deposit.
F-25
FAIR VALUE OF FINANCIAL INSTRUMENTS
- ------------------------------------------------------------------------------
As of December 31, 1992, the fair value of financial assets, which includes
cash, investment securities, and loans, exceeded the carrying value, reflecting
a premium of $23,058,000 or 2.4%. Premiums on investment securities and loans
were $10,316,000 and $12,742,000, respectively. Mortgage and installment loans
comprised the majority of the total loan premiums. Factors influencing the
financial asset premiums include the interest rate environment as of December
31, 1992 in relation to average portfolio yields, repricing characteristics of
each homogeneous group of assets, and credit quality.
The fair value of financial liabilities exceeded carrying value at December
31, 1992 by $8,784,000 or 1.0%. Like financial assets, the variance between
carrying value and fair value is the result of the current interest rate
environment and the repricing characteristics or maturity structure of the
financial instruments. Because of their immediate repricing features, fair
values for demand deposits, savings deposits, and short-term borrowings were
based on carrying value. However, with certificates of deposit, the fixed
maturity structure coupled with market interest rates as of December 31, 1992
at a lower level than the average rates paid on these deposits produced a fair
value in excess of carrying value.
LIQUIDITY
- ------------------------------------------------------------------------------
The Corporation manages its liquidity position to ensure that sufficient
funds are available to meet customer needs for borrowing and deposit
withdrawals. Short-term liquidity is maintained through the use of federal
funds sold, which represent one day investments, and cash balances. As of
December 31, 1992, federal funds sold and cash balances were $41,809,000 or
4.1% of total assets as compared to $99,313,000 or 10.3% of total assets as of
December 31, 1991. The large balance in federal funds sold was due to the
excessive liquidity position held by The First National Bank of Barnesville as
of December 31, 1991. Upon merger with WesBanco, Barnesville's federal funds
were used to purchase investment securities, thus decreasing the December 31,
1992 balance. Additional short term liquidity is maintained through the
investments with maturities of less than one year. Investments with maturities
of less than one year approximate $66,805,000 or 6.6% of total assets. During
1992, investment maturities and calls of $97,191,000, along with deposit growth
of $37,155,000 became available for reinvestment.
Deposit growth is the primary source of funds for the Corporation. The growth
in deposits is somewhat dependent upon interest rates of competitive financial
instruments.
The percentage of loans to deposits was 63% as of December 31, 1992 and
December 31, 1991. This ratio reflects the ability of the Corporation to change
its mix of assets to higher yielding loans as credit and economic conditions
improve.
As of December 31, 1992 the Corporation had outstanding commitments to extend
credit in the ordinary course of business approximating $34,793,000. On a
historical basis, only a small portion of these commitments result in expended
funds.
The Corporation had adequate sources of liquidity to fund the purchase of the
Bank of Follansbee without any borrowed funds. The acquisition of the First
National Bank of Barnesville was accounted for as a pooling-of-interests. The
Corporation has no significant borrowed funds and has no present plans to issue
any debt securities. Commitments for the planned additions to fixed assets of
approximately $500,000 consist of building remodeling and equipment purchases.
F-26
ACQUISITIONS
- ------------------------------------------------------------------------------
During 1992 the Corporation acquired all of the outstanding stock of The
First National Bank of Barnesville. The acquisition was accounted for using the
pooling-of-interest method of accounting, which requires that all amounts
included in the financial statements be restated as if the acquisition had
occurred on the first day of each year presented. The following information
summarizes the WesBanco financial data as previously presented and the
contribution to the Consolidated Income Statement of the acquired bank (in
thousands, except for per share amounts).
As previously First National Bank
Year presented of Barnesville Combined
- --------------------------------------------------------------------------------
Net interest income after the
provision for loan losses
1991 $29,569 $4,381 $33,950
1990 27,416 4,963 32,379
1989 27,200 4,798 31,998
1988 26,328 4,095 30,423
Net Income
1991 9,883 1,355 11,238
1990 9,364 1,916 11,280
1989 9,414 1,840 11,254
1988 8,644 1,485 10,129
As previously Adjusted
presented for Acquisition
- --------------------------------------------------------------------------------
Earnings per share
1991 $3.65 $3.40
1990 3.46 3.41
1989 3.48 3.40
1988 3.19 3.06
The acquisition of The First National Bank of Barnesville caused dilution in
earnings per share of $.25, $.05, $.08, and $.13 for the years ended December
31, 1991, 1990, 1989, and 1988, respectively. Book value was diluted by $.94,
$.75, $.76, and $.76 for 1991, 1990, 1989, and 1988, respectively. The dilution
is less than 3% of the preacquisition book value.
Improved future earnings of the acquired institution are expected to recapture
the dilution in both the book value per share and earnings per share.
MARKET PRICES AND DIVIDENDS DECLARED
- ------------------------------------------------------------------------------
Since May 1987, WesBanco's common stock has been quoted on the National
Association of Security Dealers Automated Quotations (NASDAQ) system, with a
trading symbol of WSBC. As reported by NASDAQ, the price information reflects
high and low sales prices.
The following represents reported high and low trading prices and dividends
declared during the respective quarter.
Dividend
High Low Declared
- ------------------------------------------
1992
4th quarter $46.00 $42.50 $ .35
3rd quarter 45.00 41.25 .35
2nd quarter 41.50 35.00 .35
1st quarter 36.75 31.50 .35
1991
4th quarter $33.50 $31.50 .3375
3rd quarter 33.00 29.50 .3375
2nd quarter 30.00 27.00 .3375
1st quarter 29.50 27.00 .3375
During December 1992, the Board of Directors of the Corporation authorized an
increased first quarter 1993 dividend to $.385 per share, representing a 10%
increase in the annualized dividend to $1.54 per share.
F-27
Letterhead of of Price Waterhouse
Price Waterhouse Logo of Price Waterhouse
Report of Independent Accountants
---------------------------------
November 5, 1993
To the Board of Directors and
Shareholders of WesBanco, Inc.
We have reviewed the consolidated balance sheet and the related consolidated
statements of income, changes in shareholders' equity and cash flows of
WesBanco, Inc., and its subsidiaries (the Company) as of September 30, 1993 and
1992, and for the 3-month and 9-month periods then ended (the consolidated
interim financial information) as presented in the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993. This consolidated interim
financial information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated interim financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1992, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended (not presented herein), and in our report dated
January 28, 1993, we expressed our unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1992, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
Signature of Price Waterhouse
F-28
Consolidated Balance Sheets at September 30, 1993 (unaudited) and December
31, 1992, Consolidated Statements of Income, Consolidated Statements of Changes
in Shareholders' Equity and Consolidated Statements of Cash Flows for the three
months and nine months ended September 30, 1993 and 1992 (unaudited) are set
forth on the following pages. In the opinion of management of the Registrant,
all adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the financial information referred to above for such periods,
have been made. The results of operations for the nine months ended September
30, 1993 are not necessarily indicative of what results will be for the entire
year. For further information refer to the Annual Report to Shareholders which
includes consolidated financial statements and footnotes thereto and WesBanco,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992.
Earnings per share was computed by dividing net income by the weighted
average number of shares outstanding during the period, retroactively adjusted
for the two-for-one stock split (see Note 5).
F-29
WESBANCO, INC.
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
September 30, December 31,
1993 1992
------------- ------------
(Unaudited)
ASSETS
Cash and due from banks $ 30,563 $ 36,839
Due from banks - interest bearing 297 100
Federal funds sold 19,020 4,970
Investment securities (Note 1) 413,816 411,054
Loans-net (Notes 2 and 3) 539,465 524,626
Bank premises and equipment - net 14,700 14,433
Accrued interest receivable 10,578 10,596
Other assets 9,646 7,486
---------- ----------
TOTAL ASSETS $1,038,085 $1,010,104
========== ==========
LIABILITIES
Deposits:
Non-interest bearing demand $ 82,505 $ 83,120
Interest bearing demand 223,555 211,504
Savings deposits 221,716 204,400
Certificates of deposit 325,744 339,147
---------- ----------
Total deposits 853,520 838,171
---------- ----------
Federal funds purchased and securities sold under
agreements to repurchase 41,380 37,075
Short-term borrowings 8,015 6,199
Dividends payable 1,323 1,157
Accrued interest payable 4,503 5,222
Other liabilities 6,506 5,289
---------- ----------
TOTAL LIABILITIES 915,247 893,113
---------- ----------
SHAREHOLDERS' EQUITY (NOTE 5)
Preferred stock, no par value; 1,000,000 shares
authorized; none outstanding -- --
Common stock, $2.0833 par value; 25,000,000
shares authorized; 6,628,288 shares issued 13,809 13,809
Capital surplus 16,352 16,352
Capital reserves 2,139 2,139
Retained earnings 92,843 85,472
Less: Treasury stock at cost (49,960
and 14,960 shares, respectively) (1,323) (221)
---------- ----------
123,820 117,551
Deferred employee benefit related to ESOP (982) (560)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 122,838 116,991
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,038,085 $1,010,104
========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-30
WESBANCO, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(in thousands, except share and per share amounts)
For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
1993 1992 1993 1992
---- ---- ---- ----
INTEREST INCOME:
Interest and fees on loans $ 12,298 $ 12,244 $ 35,988 $ 37,155
Interest on investment securities 6,422 6,793 19,695 19,985
Other interest income 60 351 178 1,698
---------- ---------- ---------- ----------
Total interest income 18,780 19,388 55,861 58,838
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 7,372 9,037 22,870 28,410
Interest on other borrowings 384 356 1,064 1,119
---------- ---------- ---------- ----------
Total interest expense 7,756 9,393 23,934 29,529
---------- ---------- ---------- ----------
NET INTEREST INCOME 11,024 9,995 31,927 29,309
Provision for possible loan losses 473 607 1,700 1,578
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 10,551 9,388 30,227 27,731
---------- ---------- ---------- ----------
OTHER INCOME:
Trust fees 829 800 2,896 2,743
Service charges and other income 1,173 1,111 3,483 3,301
Net securities transaction gains (losses) (4) 71 125 373
---------- ---------- ---------- ----------
Total other income 1,998 1,982 6,504 6,417
---------- ---------- ---------- ----------
OTHER EXPENSES:
Salaries, wages and fringe benefits 3,816 3,717 11,510 11,136
Premises and equipment - net 759 733 2,251 2,204
Other operating 2,596 2,480 7,592 7,507
---------- ---------- ---------- ----------
Total other expenses 7,171 6,930 21,353 20,847
---------- ---------- ---------- ----------
Income before income taxes and effect of the change in
accounting for postretirement benefits 5,378 4,440 15,378 13,301
Provision for income taxes (Note 4) 1,448 1,211 4,137 3,675
---------- ---------- ---------- ----------
Income before effect of the change in accounting for
postretirement benefits 3,930 3,229 11,241 9,626
Effect of the change in accounting for postretirement
benefits-net of tax effect -- -- -- (592)
---------- ---------- ---------- ----------
NET INCOME $ 3,930 $ 3,229 $ 11,241 $ 9,034
========== ========== ========== ==========
Earnings per share of common stock: (Note 5)
Income before effect of the change in accounting for
postretirement benefits-net of tax effect $ .60 $ .49 $ 1.70 $ 1.46
Effect of the change in accounting for post-
retirement benefits - net of tax effect -- -- -- (.09)
---------- ---------- ---------- ----------
NET INCOME $ .60 S .49 $ 1.70 $ 1.37
========== ========== ========== ==========
Average outstanding shares of common stock (Note 5) 6,586,317 6,613,328 6,601,533 6,613,400
========== ========== ========== ==========
Dividends declared per share (Note 5) $ .20 .175 $ .585 $ .525
========== ========== ========== ==========
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-31
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands)
For the nine months ended
September 30,
------------------------
1993 1992
---- ----
Total Shareholders' Equity
Balance, beginning of period $116,991 $109,720
-------- --------
Net Income 11,241 9,034
Cash dividends:
Common (3,870) (3,053)
By pooled banks prior to acquisition --- (420)
Net purchases of treasury shares (1,102) (33)
Change in deferred ESOP benefit (422) (519)
-------- --------
Net change in Shareholders' Equity 5,847 5,009
-------- --------
Total Shareholders' Equity
Balance, end of period $122,838 $114,729
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral Part
of these financial statements.
F-32
WESBANCO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (in thousands)
For the nine months ended
September 30,
-------------------------
1993 1992
---- ----
Cash flows from operating activities:
Net Income $ 11,241 $ 9,034
Adjustments to reconcile net income to net cash
provided by operating activities:
Effect of accounting change for postretirement
benefits - net of tax effect --- 592
Depreciation 915 908
Provision for possible loan losses 1,700 1,578
Investment amortization - net 3,311 2,192
Gain on sales of investment securities (125) (373)
Deferred income taxes (29) (265)
Other - net 63 43
Proceeds from maturities of securities
available for sale 67,080 ---
Proceeds from the sales of securities
available for sale 24,420 ---
Purchases of securities available for sale (28,285) ---
Increase or decrease in assets and liabilities:
Interest receivable 18 (1,000)
Other assets (2,281) (592)
Interest payable (719) (1,296)
Other liabilities 518 419
-------- --------
Net cash provided by operating activities 77,827 11,240
-------- --------
Investing activities:
Net increase in investment securities excluding
investments available for sale (69,360) (83,667)
Net increase in loans (16,539) (16,387)
Purchases of premises and equipment - net (1,241) (1,148)
-------- --------
Net cash used by investing activities (87,140) (101,202)
-------- --------
Financing activities:
Net decrease in certificates of deposit (13,403) (33,103)
Net increase in demand and savings accounts 28,752 65,419
Increase (decrease) in federal funds purchased
and repurchase agreements 4,305 (2,805)
Proceeds from ESOP related borrowings 422 ---
Increase in short-term borrowings 1,816 721
Dividends paid (3,703) (3,454)
Purchases of treasury stock (1,102) (33)
-------- --------
Net cash provided by financing activities 17,087 26,745
-------- --------
Net increase (decrease) in cash and cash equivalents 7,774 (63,217)
Cash and cash equivalents at beginning of year 41,809 99,313
-------- --------
Cash and cash equivalents at end of period $ 49,583 $ 36,096
======== ========
For the nine months ended September 30, 1993 and 1992, WesBanco paid $24,653 and
$30,825 in interest on deposits and other borrowings and $4,250 and $3,768 for
income taxes, respectively.
As of September 30, 1993 and 1992, the net change in in-substance foreclosure
loans and other real estate owned amounted to $(781) and $(275), respectively.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
F-33
WESBANCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 1 - INVESTMENT SECURITIES:
- -------------------------------
September 30, December 31,
1993 1992
------------- -----------
Securities:
U.S. Treasury and Federal
Agency Securities $215,113 $234,088
Obligations of States and political
subdivisions 114,729 100,008
Mortgage-backed securities 2,336 4,247
Other securities 836 875
Investments available for sale 80,802 71,836
-------- --------
Total $413,816 $411,054
======== ========
NOTE 2 - LOANS:
- ---------------
September 30, December 31,
1993 1992
------------- -----------
Loans:
Commercial $135,714 $135,119
Real Estate-Construction . 17,075 11,930
Real Estate-Mortgage 239,994 233,321
Installment 157,293 154,082
-------- --------
550,076 534,452
-------- --------
Deduct:
Unearned income (1,567) (1,459)
Reserve for possible loan losses (Note 3) (9,044) (8,367)
-------- --------
(10,611) (9,826)
-------- --------
$539,465 $524,626
======== ========
NOTE 3 - RESERVE FOR POSSIBLE LOAN LOSSES:
- ------------------------------------------
For nine months ended September 30,
-----------------------------------
1993 1992
---- ----
Balance at beginning of period $ 8,367 $ 7,476
Reserves of purchased bank --- 62
Recoveries credited to reserve 402 503
Provision for loan losses 1,700 1,578
Losses charged to reserve (1,425) (1,440)
------- -------
Balance at end of period $ 9,044 $ 8,179
======= =======
F-34
NOTE 4 - INCOME TAXES:
- ---------------------
In February 1992, the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes." The company adopted the provisions
of the new standard in its financial statements as of January 1, 1993. There
was no material cumulative effect as of January 1, 1993 of adopting Statement
109. Under Statement 109, the liability method is used in accounting for
income taxes. This method requires deferred tax assets and liabilities to
be determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the current enacted tax
regulations. Prior to the adoption of Statement 109, deferred tax assets
and liabilities were measured at the tax rate in effect in the year the
difference originated. As permitted under the new rules, prior years' financial
statements have not been restated. Disclosures for 1992 have been prepared
under the guidelines set forth in Accounting Principles Board Opinion No.
11. For additional disclosures on the implementation of FAS No. 109, see
the March 31, 1993 Form 10-Q.
Recent legislation passed by Congress and signed by President Clinton
increased certain corporate income tax rates retroactive to January 1, 1993.
Due to the timing of this legislation, the retroactive effect was included
in the third quarter 1993. The effect of this rate change on the
beginning-of-year deferred tax balances and the tax provision was not
significant.
F-35
A reconciliation of the average federal statutory tax rate to the reported
effective tax rate attributable to income from operations follows:
(in thousands)
For the nine months
ended September 30,
--------------------
1993 1992
------------- -------------
Federal statutory tax rate $ 5,229 34% $ 4,522 34%
Tax-exempt interest income from
securities of states and
political subdivisions (1,562) (10) (1,449) (11)
State income tax - net of
federal tax effect 415 3 399 3
All other - net (including
retroactive effect of tax rate
increase) 55 0 203 2
------------ ------------
Effective tax rates $ 4,137 27% $ 3,675 28%
============ ============
NOTE 5 - TWO-FOR-ONE STOCK SPLIT
- --------------------------------
At the Annual Meeting held on April 21, 1993, the shareholders of the
Corporation approved a two-for-one stock split which was payable on April
22, 1993, an increase in the authorized common shares from 10 million to
25 million shares, a change in common stock par value from $4.1666 to $2.0833
per share and an increase in the authorized preferred stock from 100,000
shares to 1 million with no par value. The stock split increased the number
of shares of common stock outstanding at April 22, 1993, to approximately
6,613,328 shares. All shares and per share amounts have been retroactively
adjusted for the stock split.
F-36
NOTE 6 - ACQUISITIONS AND MERGERS
- ---------------------------------
On August 26, 1993, WesBanco and First Fidelity Bancorp, Inc., a
multi-bank holding company headquartered in Fairmont, West Virginia, jointly
announced the execution of a definitive Agreement and Plan of Merger providing
for the merger of First Fidelity with and into a wholly owned subsidiary
of WesBanco, FFB Corporation, to be formed for the purpose of effecting
the merger. The merger is subject to a number of conditions including approval
by regulatory authorities and shareholders. Subject to such conditions,
it is anticipated that the merger could be consummated in the first quarter
of 1994. The acquisition will be accounted for using the pooling of interest
method of accounting. Upon consummation, each share of First Fidelity Bancorp,
Inc. common stock will be converted into .9 share of WesBanco common stock
resulting in the issuance of approximately 2,090,954 shares of WesBanco
common stock. The outstanding Series A, 8% cumulative preferred stock of
First Fidelity will be converted into 10,000 shares of 1.25 par value Series
A, 8% cumulative preferred stock of WesBanco. First Fidelity had total assets
as of September 30, 1993 approximating $310,083,000 and net income for
the nine months ending September 30, 1993 of $2,625,000.
F-37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
Comparison of the nine months ended September 30, 1993 and 1992
- ---------------------------------------------------------------
Net income for the nine months ended September 30, 1993 was $11,241,000, a
24% increase over the same period in 1992. Earnings per share for the nine
months ended September 30, 1993 and 1992 were $1.70 and $1.37 respectively.
Income before effect of the change in accounting for postretirement benefits
for the nine months ended September 30, 1993 was $11,241,000 a 17% increase
over the same period in 1992. Earnings per share before the effect of the
change in accounting for postretirement benefits for the nine months ended
September 30, 1993 and 1992, were $1.70 and $1.46, respectively. During 1992,
WesBanco elected to adopt Statement of Financial Accounting Standards (FAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
The effect of this election was a one time non-cash charge, net of the
applicable income tax effect, of $592,000 against the first quarter 1992
earnings. The improvement in operating income can be attributed to increased
net interest income for the nine months ended September 30, 1993 as compared to
the same period during 1992.
Return on average assets (ROA), using income before the effect of the
change in accounting for postretirement benefits, increased to 1.47% from 1.30%
for the nine months ended September 30, 1993 and 1992, respectively. Return on
average equity (ROE) was 12.5% compared to 11.41% for the nine months ended
September 30, 1993 and 1992, respectively.
Current period loan and deposit interest rates are generally below levels
noted in the previous comparative period. During the first nine months of 1993,
most banks' primary lending rates were at 6.0% while the
F-38
rates for the first nine months of 1992 were between 6.0% and 6.5%. The
decline in market interest rates caused the average yield on WesBanco's interest
earning assets to decrease to 7.7% during the first nine months of 1993 from
8.4% during the first nine months of 1992. A corresponding decrease in deposit
rates paid on interest bearing liabilities caused a decrease in average rates
paid to 4.0% during the first nine months of 1993 from 5.0% during the first
nine months of 1992. Net tax equivalent interest income expressed as a
percentage of average earning assets improved to 4.8% for the nine months ended
September 30, 1993 from 4.5% for the same time period ended September 30, 1992.
Total interest income decreased $2,977,000 or 5% between the nine month
periods ended September 30, 1993 and 1992. Interest and fees on loans
decreased $1,167,000 or 3% primarily due to the decrease in the average rates
earned on loans outstanding partially offset by an increase in the average
balance of loans outstanding. Average rates earned on loans decreased by
approximately .8%. Average balances of loans increased due to increases in
refinancing of residential mortgage loans throughout 1993. Interest on
investments in U. S. Treasury and Agencies decreased $884,000 or 6%. Average
yields decreased by approximately 1.1% while average outstanding balances of
this type of investment increased approximately $29,924,000 between the nine
months ending September 30, 1993 and 1992. Interest earned on investments in
states and political subdivisions increased $553,000 or 13%. There was an
increase in the average balance of this type of investment of approximately
$22,435,000 offset by a decrease in the average yield of approximately .7%.
Other interest income, primarily interest on federal funds sold, decreased
$1,520,000 or 90%. There was a decrease in the average rate earned of
approximately .7% along with a
F-39
significant decrease in the average balance outstanding of approximately
$52,576,000. The decrease in the average balance outstanding of federal funds
sold was due to the decrease in the large balances being carried by WesBanco
Bank Barnesville (formerly First National Bank of Barnesville) through most of
1992. These federal funds were used to purchase U. S. Treasury and State and
political subdivision investment securities.
Total interest expense decreased $5,595,000 or 19% between the nine
month period ended September 30, 1993 and 1992. Interest paid on deposits
decreased $5,540,000 or 20%. Average total deposit volumes increased
approximately $14,113,000 between the periods ended September 30, 1993 and 1992
offset by a decrease in average rates paid on all deposits of approximately
1.1%. The growth in the average total deposit volumes have been slow due to the
lack of economic growth in our major market areas and the lower interest rates
being offered. The deposits grew by approximately 2% between September 30, 1993
and 1992 as compared to 6% for the previous year. Interest expense on
interest-bearing demand deposits decreased $1,206,000 or 19% primarily due to
the decrease in the average rates paid by 1.1% partially offset by the increase
in the average balances. The interest rate paid on NOW and Money Market
accounts was 2.75% during the third quarter 1993 down from 3.75% during the
majority of the third quarter 1992. Traditional savings account interest
expense decreased $425,000 or 7% due to the decrease in the average rate paid
of approximately .9% offset by an increase in the average balance outstanding
of approximately $34,276,000. The interest rate paid on traditional savings
accounts decreased from 4.5% during the first quarter 1992 to 3.25% throughout
the second quarter 1993 and was further decreased to 3.00% on July 1, 1993.
Certificates of deposit interest expense decreased S3,909,000 or 24%. The
average outstanding
F-40
balances decreased by $35,104,000 due to declining rates offered on
certificates of deposit during 1992 and into 1993. Lower interest rates in 1993
caused the continued outflow of certificate balances into other deposit
products. Due to the deposit rate environment, the interest rate differential
between certificates of deposit and passbook savings provides limited incentive
for customers to reinvest in term accounts. Average rates paid on certificates
of deposit decreased approximately .9% due to the decline in rates paid on new
and rollover deposits. Interest on other borrowings, which primarily includes
securities sold under agreements to repurchase, decreased $55,000 or 5%
primarily due to the decrease in average rates paid of .8% offset by an
increase in the average balances outstanding. Rates paid on repurchase
agreements closely follow rates earned in the federal funds market.
Other income increased $87,000 or 1%. Trust fee income increased $153,000
primarily due to the number of new trust accounts and increases in fees during
the first nine months of 1993. During the second quarter 1993, advisor services
for one significant trust customer were not renewed. This customer generated
approximately $136,000 of fee income annually. Trust assets remain in excess of
$1 billion as of September 30, 1993. Service charges and other income
increased $182,000 between the nine months ended September 30, 1993 and 1992.
Service charges and other income increased due to the growth in the number of
deposit accounts and the increase in the fees associated with deposit accounts.
Net securities transaction gains decreased $248,000 between the nine months
ended September 30, 1993 and 1992. This decrease was partially due to the loss
of $57,000 on the sale of an equity security held by an affiliate bank.
F-41
Total other expenses increased $506,000 or 2%. Salary expense increased
$374,000 due to normal salary adjustments, increased payroll taxes, increased
cost of health insurance and the increase in the number of full time equivalent
employees to 578 at September 30, 1993 from 562 at September 30, 1992. Other
operating expenses increased $85,000, primarily due to the increase in
marketing expenses of approximately $106,000 associated with the name change of
two affiliate banks during the first nine months of 1993. All WesBanco banks
now operate under the principal name WesBanco.
The provision for loan losses increased due to the increase in net charge-
offs and management's evaluation of the loan portfolio in the current business
environment. Net charge-offs increased to $1,023,000 as of September 30,
1993 from $937,000 as of September 30, 1992. The reserve for loan loss was
1.65% of total loans as of September 30, 1993 and 1.57% as of December 31,
1992. Nonaccrual loans, renegotiated loans, in-substance foreclosures and other
real estate owned increased by $427,000 between December 31, 1992 and September
30, 1993. Total nonaccrual and renegotiated loans, in-substance foreclosures
and other real estate owned totaled $9,976,000 or 1.8% of loans as of September
30, 1993 as compared to $9,549,000 or 2.3% as of December 31, 1992. The decline
in the percentages of nonperforming assets was caused by an increase in loans
outstanding. The level of non-performing assets continues to be a result of the
depressed commercial real estate market and the lack of industrial growth in
the primary market areas.
Loans past due 90 days or more have decreased to $1,234,000 or .2% of total
loans as of September 30, 1993 from $2,664,000 or .5% of total loans as of
December 31, 1992. Many commercial loans are made on demand notes and
F-42
a number of these loans do not require principal payments so that past due
classifications might not be indicative of repayment risks.
The provision for income taxes increased consistent with the increase in
operating income. The provision was not materially affected by the
implementation of FAS No. 109. The effect of the recent tax law change in
certain corporate income tax rates has increased the reported September 30,
1993 tax provision by approximately $31,000.
FAS No. 114, "Accounting by Creditors for Impairment of a Loan," requires that
certain impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. FAS No. 114 is effective
for periods beginning after December 15, 1994 and management is unable to
determine the effect of adopting FAS No. 114 at this time. FAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," addresses
the accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securities.
FAS No. 115 is effective for periods beginning after December 15, 1993 and is
expected to be insignificant to the Corporation.
Lending by WesBanco banks is guided by lending policies which allow for
various types of lending. Normal lending practices do not include the
acquisition of high yield non-investment grade loans or "highly leveraged
transactions" ("HLT") from out of the primary market areas as described by
uniform interagency definition of an "HLT" for supervisory purposes, jointly
issued by the Federal Reserve Bank, the Comptroller of Currency and the Federal
Deposit Insurance Corporation.
F-43
Comparison of the three months ended September 30, 1993 and 1992
- ----------------------------------------------------------------
Total interest income decreased $608,000 between the three month periods
ending September 30, 1993 and 1992. Interest and fees on loans decreased
$54,000 due to a decrease in average rates earned partially offset by an
increase in the average volume of loans outstanding. Interest on investments in
U.S. Treasury and Agencies decreased $588,000. Average balances outstanding
increased but were offset by a decrease in the average rates earned. Interest
on investments in states and political subdivisions increased $200,000. Average
balances outstanding increased while there was a decrease in the average rates
earned. Other interest income, primarily interest on federal funds sold,
decreased by $291,000. Average balances outstanding decreased as well
as average rates earned on federal funds sold.
Total interest expense decreased $1,637,000 between the three month periods
ended September 30, 1993 and 1992. Interest paid on deposits decreased
$1,665,000 primarily due to the decrease in the average balances outstanding
for certificates of deposit and the decrease in average rates paid on deposits.
Interest on other borrowings increased $28,000 between the nine months ended
September 30, 1993 and 1992.
Total other income increased by $16,000 primarily due to the increase in
service charges and other income of $62,000 and trust fees of $29,000. Net
securities transaction gains decreased by $75,000.
Total other expenses increased by $241,000. Salaries and employee benefits
increased $99,000 due to normal salary adjustments. Other operating expenses
increased $116,000 primarily due to increased marketing expenses.
F-44
INTEREST RATE MANAGEMENT AS OF SEPTEMBER 30, 1993
- -------------------------------------------------
Interest rate management encompasses measuring 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 bearing 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 of rate changes.
The affiliate banks review their interest rate sensitivity on a periodic
basis. The Corporation's Asset/Liability Committee has projected, on a monthly
basis, interest rate sensitivity for the next twelve month period. Summary
information as of September 30, 1993 is supplied by the table below (in
thousands):
Under Three Six Nine Over
Three to Six to Nine Months to One
Months Months Months One Year Year Total
------ ------ ------- -------- ----- -----
ASSETS
Due from banks/interest
bearing $ 100 $ 197 $ 297
Loans $ 162,000 $ 45,728 $ 36,655 36,811 267,315 548,509
Investment securities 19,418 14,252 16,533 14,337 349,276 413,816
Federal funds sold 19,020 19,020
--------- -------- --------- --------- -------- --------
Total selected assets 200,438 59,980 53,188 51,248 616,788 981,642
--------- -------- --------- --------- -------- --------
LIABILITIES
Savings and NOW accounts 355,281 355,281
All other interest bearing
deposits 189,640 78,098 26,018 26,851 95,127 415,734
Short term and other
borrowings 49,395 49,395
--------- -------- --------- --------- -------- --------
Total selected liabilities 594,316 78,098 26,018 26,851 95,127 820,410
--------- -------- --------- --------- -------- --------
Differences $(393,878) $(18,118) $ 27,170 $ 24,397 $521,661 $161,232
========= ======== ========= ========= ======== ========
Cumulative differences $(393,878) $(411,996) $(384,826) $(360,429) $161,232
========= ======== ========= ========= ======== ========
The Asset/Liability Committee believes the Corporation's interest sensitivity
position allows for a changing interest rate environment. During the next
twelve months, the Corporation's net interest sensitivity position is
$(393,878,000), $(18,118,000), $27,170,000 and $24,397,000 during the periods
under three months, three to six months, six to nine months, and nine months to
one year, respectively.
Traditional savings and NOW deposits, which formerly had fixed interest rates
are now subject to management's discretion. Rates on these types of deposit
decreased to 3.00% during 1993 from 3.25% at December 31, 1992. Classifications
of these types of accounts as interest rate sensitive have caused the
Corporation to be liability sensitive in the under three month time period.
F-45
The Corporation's short-term interest sensitivity position would suggest
exposure of the net interest margin to changing interest rates. If interest
rates continue to decline, the net interest margin may improve. The Corporation
is in a position to extend asset maturities, primarily through Federal Funds
and investment maturities. If interest rates rise, the net interest margin may
decline, however, the decline could be mitigated by reinvesting maturing
investments with short-term assets. In addition, management may emphasize
attracting longer-term deposits by holding the rates paid on savings and NOW
accounts at a fixed level and increasing rates on term certificates of deposit.
F-46
Certain Statistical Information
- -------------------------------
Distribution of Assets, Liabilities and Shareholders' Equity:
-------------------------------------------------------------
Interest Rates and Interest Differential
----------------------------------------
The following table presents an average balance sheet, interest rates and
interest differentials (in thousands):
For the nine months ended For the year ended
------------------------------------- -----------------------------------
September 30, 1993 December 31, 1992
------------------------------------- -----------------------------------
Annualized
Average Average Average Average
Volume Interest Rate Volume Interest Rate
------------------------------------- -----------------------------------
ASSETS
- -----------------------------------------------
Loans $ 534,119 $35,988 8.98% $512,969 $ 49,146 9.58%
Taxable investment securities 298,437 14,249 6.37 278,111 20,312 7.30
Non-taxable investment securities 104,800 4,678 5.95 85,959 5,634 6.55
Federal funds sold 7,885 178 3.01 45,752 1,721 3.76
Other investments 17,397 768 5.89 14,543 984 6.77
-------------------------------------- ---------------------------------
Total interest earning assets 962,638 $55,861 7.74% 937,334 $77,797 8.30%
------------------==================== --------------==================
Cash and due from banks 27,315 27,099
Other assets 30,624 29,520
---------- --------
Total Assets $1,020,577 $993,953
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------
Interest bearing demand $ 212,439 $ 5,092 3.20% $200,551 $ 8,129 4.05%
Savings deposits 216,462 5,453 3.36 187,477 7,695 4.10
Certificates of deposit 332,313 12,325 4.95 361,157 20,833 5.77
Federal funds purchased and repurchase
agreements 38,954 951 3.26 32,460 1,282 3.95
Other borrowings 6,320 113 2.38 5,746 183 3.18
-------------------------------------- ---------------------------------
Total interest bearing liabilities 806,488 $23,934 3.96% 787,391 $38,122 4.84%
------------------==================== --------------==================
Demand deposits 83,430 79,501
Other liabilities 10,744 13,706
---------- --------
Total Liabilities 900,662 880,598
---------- --------
Shareholders' Equity 119,915 113,355
---------- --------
Total Liabilities and
Shareholders' Equity $1,020,577 $993,953
========== ========
Net interest revenue as a percentage of
average earning assets $31,927 4.42% $39,675 4.23%
======= ==== ======= ====
The net interest revenue as a percentage of average earning assets, adjusted
for the taxable equivalent basis of non-taxable investment securities, is shown
below. A tax rate of 34% was used for 1993 and 1992, respectively. Certain
corporate income tax rates have increased due to a recent tax law change during
1993. The effect of this change was not significant to the corporation at
September 30, 1993.
Fully taxable equivalent basis $34,337 4.76% $42,577 4.54%
======= ==== ======= ====
Nonaccrual loans were included in the average volume for the entire year.
Except for interest actually received, no interest subsequent to the nonaccrual
status determination was included in interest income. Loan fees included with
interest on loans are not material.
F-47
The effect on annualized interest income and interest expense for the periods
ended September 30, 1993 and December 31, 1992, due to changes in average
volume and rate from the prior year, is presented below. The effect of a change
in average volume has been determined by applying the average rate in the
earlier year by the change in volume. The change in rate has been determined by
applying the average volume in the earlier year by the change in rate. The
change in interest due to both rate and volume has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar amounts
of change in each. (in thousands)
1993 (Annualized) Compared to 1992
-----------------------------------
Net
increase
Volume Rate (decrease)
------------ ------- ---------
Loans $ 1,976 $(3,138) $(1,162)
Taxable investment securities 1,415 (2,728) (1,313)
Non-taxable investment securities 1,155 (552) 603
Federal funds sold (1,197) (286) (1,483)
Other investments 178 (139) 39
-------- -------- --------
Total interest earned 3,527 (6,843) (3,316)
-------- -------- --------
Interest bearing demand 460 (1,799) (1,339)
Savings deposits 1,090 (1,515) (425)
Certificates of deposit (1,579) (2,820) (4,399)
Federal funds purchased and
repurchase agreements 232 (246) (14)
Other borrowings 17 (50) (33)
-------- -------- --------
Total interest paid 220 (6,430) (6,210)
-------- -------- --------
Net Interest differential $ 3,307 $ (413) $ 2,894
======== ======== ========
F-48
Investment Portfolio
The maturity distribution using book value including accretion of discounts
and the amortization of premiums and approximate yield of investment
securities at September 30, 1993 is presented in the following table. Tax
equivalent yield basis was not used. Approximate yield was calculated using a
weighted average of yield to maturities (in thousands):
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
------ ----- ------ ----- ------ ----- ------ -----
U.S. Treasury and other U.S.
Government Agencies $ --- ---% $173,982 5.99% $ 41,131 6.78% $ --- ---%
States & Political Subdivisions 9,796 6.67 42,456 6.13 55,693 5.23 6,784 5.36
Mortgage-Backed Securities 242 7.55 882 7.64 660 7.76 552 7.59
Other Investments --- --- --- --- --- --- 836(1) 5.31
Investments Available for Sale 54,502 6.74 18,344 6.26 6,196 6.94 1,760 5.62
---------------- ---------------- ---------------- ---------------
$64,540 6.73% $235,664 6.04% $103,680 5.97% $9,932 5.52%
---------------- ---------------- ---------------- ---------------
(1) Represents investments with no stated maturity dates.
F-49
Investment Portfolio (continued)
- --------------------------------
Book values of investment securities are as follows (in thousands):
September 30, December 31,
1993 1992
------------ ------------
U.S. Treasury and other
U.S. Government Agencies $215,113 $234,088
States and political
subdivisions 114,729 100,008
Mortgage-Backed Securities 2,336 4,247
Other investments 836 875
Investments Available for Sale 80,802 71,836
-------------------------
Total Investment Securities $413,816 $411,054
-------------------------
Other investments include a depository trust and stock of the Federal Reserve
Bank.
Except for U. S. Treasury and Government Agencies, there are no issues
included in the above investment securities categories which individually or in
the aggregate exceed ten percent of shareholders' equity as of September 30,
1993.
Loan Portfolio
- --------------
Loans outstanding are as follows (in thousands):
September 30, December 31,
1993 1992
------------- ------------
Loans:
Commercial $135,714 $135,119
Real Estate--Construction 17,075 11,930
Real Estate--Mortgage 239,994 233,321
Installment 157,293 154,082
---------------------
Total loans $550,076 $534,452
---------------------
Each bank within the Corporation has its own renewal policies regarding
commercial and real estate-construction loans, however real estate-construction
loans are generally not renewed at any bank. Depending on the size of each
institution, commercial loans above certain pre-approved dollar limits must be
reviewed by the respective credit review committee or senior management prior
to extension of maturity dates or rollover of the loan into a new loan.
Renewals of commercial loans below specified lending limitations may be
approved by the respective bank loan officer. During 1993, a Loan Review
Department was established for the corporation which is independent of the
credit review committee. This new department monitors existing loans over a
specified dollar amount on an ongoing basis.
F-50
Loan Portfolio (continued)
- --------------------------
The following table presents the approximate maturities of loans other than
installment loans and residential mortgages for all affiliate banks as of
September 30, 1993 (in thousands):
After one
In one year year through After five
or less five years years
----------- ------------ ----------
Commercial $84,018 $22,753 $28,943
Real estate:
Construction 2,948 2,572 10,195
Other real estate 2,170 7,258 40,401
------- ------- -------
Total $89,136 $32,583 $79,539
======== ======= ========
The following is an analysis as of September 30, 1993 of loans other than
installment loans and residential mortgages, with fixed and variable rates for
all banks (in thousands):
After one
In one year year through After five
or less five years years
----------- ------------ ----------
Fixed rates $30,004 $17,628 $16,747
Variable rates 59,132 14,955 62,792
------- ------- -------
$89,136 $32,583 $79,539
======= ======= =======
WesBanco Bank Wheeling and WesBanco Bank Elm Grove, which have approximately
54% of consolidated gross loans have a practice of originating most commercial
loans and real estate construction loans on a demand basis. Most of these loans
do not require formal repayment terms other than monthly interest payments.
There is no significant impact on cash flows since these loans are monitored on
a regular basis and principal repayments, if not made by borrowers, are
requested.
All affiliate banks generally recognize 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 collectability. All banks must
conform to the Board of Governors of the Federal Reserve System and the Office
of the Comptroller of Currency Policy which states 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 is
recognized as cash payments are received. Interest payments of approximately
$482,000 were received on nonaccrual loans through September 30, 1993 and
included in interest income.
F-51
Loan Portfolio (continued)
- --------------------------
Secured loans which are in the process of collection, but are
contractually past due 90 days or more as to interest or principal,
renegotiated, nonaccrual loans and other non-performing assets, are as follows
(in thousands):
September 30, December 31,
-------------- -------------
1993 1992
-------------- -------------
Past Due 90 Days or More:
Installment $ 407 $ 627
Commercial 125 1,593
Real Estate 702 444
------- -------
1,234 2,664
------- -------
Renegotiated:
Installment 0 0
Commercial 83 3,938
Mortgage 90 108
------- -------
173 4,046
------- -------
Nonaccrual:
Installment 100 137
Commercial 6,001 1,901
Mortgage 1,380 561
------- -------
7,481 2,599
------- -------
Other Real Estate
Owned: (Including
in-substance foreclosures) 2,322 2,904
------- -------
Total non-performing assets $11,210 $12,213
------- -------
Percentage of non-performing
assets to loans outstanding 2.0% 2.3%
======= =======
In conjunction with a 1993 regulatory examination, a commercial loan
totaling $3,863,000 which was included as a renegotiated loan at December 31,
1992 was placed on a nonaccrual status. Also placed on nonaccrual status during
1993 was a commercial customer whose loans total $1,451,000. Both of these
loans were current as to their respective interest payments as of December 31,
1992. As of September 30, 1993, these loans have made their respective interest
payments thru September, 1993. The effect of these 1993 classifications in
relation to December 31, 1992 balances decreased renegotiated loans to $173,000
and increased nonaccrual loans to $7,481,000 as of September 30, 1993. The
decrease in loans past due 90 days or more was caused by one borrower who was
90 days past due as of December 31, 1992, making extra payments during 1993,
which reduced the number of days delinquent as of September 30, 1993. The
corporation cannot determine if this borrower will return to a delinquent
status in the future.
The total amount of non-performing assets declined to 2.0% from 2.3%
during 1993. The decline of $1,003,000 was through payments by borrowers and
realization of collateral which secured these loans.
F-52
Summary of Loan Loss Experience
- -------------------------------
The historical relationship between average loans, loan losses and
recoveries and the provision for possible loan losses is presented in the
following table (in thousands):
For the Nine For the
Months Ended Year Ended
September 30, December 31,
-------------- -------------
1993 1992
---- ----
Beginning balance -
Reserve for possible loan losses $8,367 $7,476
Reserve for purchased affiliate 0 62
Loans charged off:
Commercial 465 1,436
Real Estate - Construction 0 0
Real Estate - Mortgage 153 242
Installment 807 995
---------------------
Total loans charged off 1,425 2,673
---------------------
Recovery of previously charged off:
Commercial 78 428
Real Estate - Construction 0 0
Real Estate - Mortgage 35 33
Installment 289 191
---------------------
Total recoveries 402 652
---------------------
Net loans charged off 1,023 2,021
---------------------
Additions to reserve charged to operating
expense 1,700 2,850
---------------------
Ending balance -
Reserve for possible loan losses $9,044 $8,367
---------------------
Ratio of net loans charged off to average
loans outstanding for the period .19% .39%
---------------------
Ratio of the reserve for loan losses to
loans outstanding at the end of the
period 1.64% 1.57%
======================
The amount charged to earnings is based on periodic management 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.
F-53
Allocation of the Allowance for Loan Losses
- -------------------------------------------
The following represents the allocation of the allowance for possible loan
losses as of September 30, 1993 and December 31, 1992 (dollars in thousands):
September 30, December 31,
------------------- --------------------
1993 1992
------------------- --------------------
Amount % of Loans Amount % of Loans
------ ---------- ------ ----------
Specific Reserves:
Commercial $3,837 25% $3,436 25%
Real Estate - Construction 0 3 0 2
Real Estate - Mortgage 640 44 783 44
Installment 1,256 28 1,211 29
Unallocated 3,311 -- 2,937 --
------ --- ------ ---
Total $9,044 100% $8,367 100%
------ --- ------ ---
WesBanco has allocated the allowance for loan losses to specific portfolio
segments based upon historical net charge-off experience, changes in the level
of non-performing assets, local economic conditions and management experience.
The allowance for loan losses increased by $677,000 or 8% between
September 30, 1993 and December 31, 1992. The allocated portion of the reserve
increased 6% while the unallocated portion increased 13%. The unallocated
portion is maintained to provide reserves against unanticipated losses in the
loan portfolio.
Management deems the allowance for loan losses at September 30, 1993 to be
adequate.
Risk Elements
- -------------
The Corporation has historically maintained a reserve for possible loan
losses which is greater than actual charge-offs. Charge-offs for the year 1993
are anticipated to be within the historical ranges as detailed in the summary
of loan loss experience.
Management maintains loan quality through monthly reviews of past due
loans, and a quarterly review with the Board of Directors of significant loans
which are considered by affiliate bank personnel to be potential problem loans.
Periodic reviews of significant loans are completed by personnel not supervised
by the loan function.
The loan portfolio is weighted towards consumer lending with approximately
75% of loans consisting of residential mortgage, installment and credit card
lending. The remaining portfolio of commercial loans is represented by a wide
F-54
variety of industries. There are no significant loans made to customers outside
the general market area of each affiliate bank. At times, in order to maintain
loan volumes, loans are purchased from correspondent banks. These loans
aggregate less than $7,000,000 as of September 30, 1993. Each bank within the
Corporation follows its usual loan analysis procedures before a determination is
made to purchase this type of loan.
Management's review of the loan portfolio has not indicated any material
amount of loans, not disclosed in the accompanying tables and related
discussions 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. There were no loan concentrations in
excess of 10% of total consolidated loans.
General business activity in the Upper Ohio Valley has lagged behind the
national economy. Real estate market values have generally remained steady over
the past several years. Non-performing loans are concentrated within a certain
segment of the local economy, namely loans secured by commercial real estate.
Certificates of Deposit
- -----------------------
Maturities of certificates of deposit in denominations of $100,000 or more
are as follows (in thousands):
September 30, December 31,
------------- ------------
1993 1992
---- ----
Maturity
- --------
Under three months $21,478 $18,127
Three to six months 8,430 8,415
Six to twelve months 4,406 7,957
Over twelve months 8,544 6,684
------- -------
$42,858 $41,183
======= =======
Short-Term Borrowings
- -----------------------------
Securities sold under agreement to repurchase have maturities which range
between one day and one year. The following table presents short-term
liabilities for the period ended September 30, 1993 and December 31, 1992
(dollars in thousands):
September 30, December 31,
------------- ------------
1993 1992
---- ----
Securities sold under agreement
to repurchase:
Outstanding at period end $38,937 $30,365
Average daily outstanding 35,242 30,278
Maximum outstanding at any month end 48,777 33,263
Average interest rate:
During year 3.24% 3.85%
At period end 3.14% 3.59%
F-55
Return on Equity and Assets
- ---------------------------
The following financial ratios are presented:
Annualized for the
Nine Months Ended
September 30, December 31,
------------------- -------------
1993 1992
---- ----
Income before effect of change in
accounting for postretirement
benefits to:
Average total assets 1.47% 1.30%
Average shareholders' equity 12.50% 11.40%
Net income to:
Average total assets 1.47% 1.24%
Average shareholders' equity 12.50% 10.88%
Dividend payout percentage
(cash dividends, including those of
pooled banks, divided by net
income) 34% 38%
Equity to assets (average equity
divided by average assets) 11.75% 11.40%
F-56
Regulations (Risk-Based Capital)
- --------------------------------
During 1988, the Federal Reserve Board adopted guidelines which make
capital requirements sensitive to assets having more risk of ultimate
realization and considers off-balance sheet exposure. These guidelines, which
became effective March 15, 1989, require a phase-in compliance with minimum
capital ratios by December 31, 1992. Using the 1992 fully phased-in capital
requirements, the Tier I and Tier II capital to risk adjusted assets for the
four largest banks, which represents approximately 72% of consolidated assets,
and consolidated WesBanco, Inc. is as follows as of September 30, 1993 and
December 31, 1992.
September 30, December 31,
1993 1992
------------- ------------
Tier I capital to risk-adjusted assets/ratio:
WesBanco, Inc. (Consolidated) 19.8% 19.2%
WesBanco Bank Wheeling 17.6% 16.6%
WesBanco Bank Elm Grove 18.3% 17.3%
WesBanco Bank Barnesville 26.0% 28.7%
WesBanco Bank Kingwood 19.8% 18.8%
Minimum regulatory Tier I capital ratio 4.0% 4.0%
Tier I and Tier II capital to risk-adjusted
assets/ratio:
WesBanco, Inc. (Consolidated) 21.0% 20.5%
WesBanco Bank Wheeling 18.8% 17.8%
WesBanco Bank Elm Grove 19.5% 18.5%
WesBanco Bank Barnesville 27.1% 30.2%
WesBanco Bank Kingwood 20.9% 20.0%
Minimum regulatory total capital ratio 8.0% 8.0%
Tier I and Tier II capital to risk-adjusted asset ratios for WesBanco
affiliate banks, not presented above, are in excess of the Federal Reserve
requirements.
F-57
Report of Ernst & Young, Independent Auditors
- -------------------------------------------------------------------------------
Logo of
ERNST & YOUNG 2000 Pittsburgh Phone 412 644 7800
National Building
Pittsburgh, Pennsylvania 15222
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
First Fidelity Bancorp, Inc.
We have audited the accompanying consolidated statements of condition of First
Fidelity Bancorp, Inc. and subsidiaries as of December 31, 1992 and 1991, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1992. These
financial statements are the responsibility of the Bancorp's management. Our
responsibility is to express an opinion on these 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First Fidelity
Bancorp, Inc. and subsidiaries at December 31, 1992 and 1991, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1992 in conformity with generally
accepted accounting principles.
Ernst & Young
February 4, 1993
F-58
Consolidated Statements of Condition
- ------------------------------------------------------------------------------
December 31, 1992 and 1991
1992 1991
- ------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------
Cash and due from banks $ 13,911,652 $ 13,793,896
Interest-bearing deposits 19,980 -0-
Federal funds sold 18,303,000 25,659,000
Investment securities (market value for
1992--$89,153,000 for 1991--$80,740,000) 87,306,710 78,267,159
Loans 181,874,477 181,119,234
Less:
Unearned interest 4,217,705 5,232,408
Allowance for loan losses 2,270,818 2,317,914
- ------------------------------------------------------------------------------
NET LOANS 175,385,954 173,568,912
- ------------------------------------------------------------------------------
Bank premises and equipment 7,912,352 7,575,480
Other assets 3,352,240 3,953,202
- ------------------------------------------------------------------------------
TOTAL ASSETS $306,191,888 $302,817,649
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------
Deposits:
Non-interest bearing $ 31,114,819 $ 30,445,784
Interest-bearing 226,536,363 225,780,919
- ------------------------------------------------------------------------------
TOTAL DEPOSITS 257,651,182 256,226,703
- ------------------------------------------------------------------------------
Securities sold under repurchase agreements 13,430,945 13,576,996
Other liabilities 2,822,537 3,093,576
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 273,904,664 272,897,275
- ------------------------------------------------------------------------------
Redeemable Preferred Stock ($1.25 par value,
10,000 shares issued and outstanding of Series
A 8% Cumulative) 1,809,342 1,777,338
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Common stock ($1.25 par value, 4,000,000
shares authorized: 2,327,113 issued and
outstanding - 1992; 2,106,345 issued
and outstanding - 1991) 2,908,891 2,632,931
Additional paid-in capital 12,887,685 9,691,410
Retained earnings 14,817,846 15,955,235
- ------------------------------------------------------------------------------
30,614,422 28,279,576
Treasury stock at cost (12,656 shares) (136,540) (136,540)
- ------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 30,477,882 28,143,036
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $306,191,888 $302,817,649
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-59
Consolidated Statements of Income
- -------------------------------------------------------------------------------
For Years Ended December 31, 1992, 1991 and 1990
1992 1991 1990
- -------------------------------------------------------------------------------
INTEREST INCOME
- -------------------------------------------------------------------------------
Interest and fees on loans $17,242,473 $17,753,301 $14,027,574
Interest on investment securities:
Taxable 5,674,086 6,567,771 5,061,605
Tax-exempt 355,214 487,789 457,139
Interest on federal funds sold 701,137 1,530,606 1,735,962
Interest on deposits in other banks 844 -0- -0-
- -------------------------------------------------------------------------------
TOTAL INTEREST INCOME 23,973,754 26,339,467 21,282,280
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INTEREST EXPENSE
- -------------------------------------------------------------------------------
Interest on deposits 9,363,682 12,138,271 10,013,826
Interest on short-term borrowings 596,902 789,336 1,168,588
Interest on note payable -0- 36,600 12,200
- -------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 9,960,584 12,964,207 11,194,614
- -------------------------------------------------------------------------------
NET INTEREST INCOME 14,013,170 13,375,260 10,087,666
Provision for loan losses 428,500 626,000 384,000
- -------------------------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,584,670 12,749,260 9,703,666
- -------------------------------------------------------------------------------
OTHER INCOME
- -------------------------------------------------------------------------------
Trust income 283,765 212,295 276,260
Service charges on deposit accounts 780,215 760,830 468,014
Other service charges,
commissions, and fees 201,706 238,894 145,403
Other operating income 144,503 257,558 109,648
Net gains (losses) on investment
securities 2,104 (112,543) -0-
- -------------------------------------------------------------------------------
TOTAL OTHER INCOME 1,412,293 1,357,034 999,325
- -------------------------------------------------------------------------------
OTHER EXPENSES
- -------------------------------------------------------------------------------
Salaries and employee benefits 4,992,579 4,789,796 3,576,833
Bank premises and occupancy
expense (net) 695,960 682,585 517,429
Furniture and equipment expense 775,328 785,813 696,902
Business taxes 134,312 150,436 155,928
Data processing fees 378,064 451,396 533,523
Federal Deposit Insurance 593,930 536,809 224,922
Other operating expenses 2,038,859 2,029,013 1,472,969
- -------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 9,609,032 9,425,848 7,178,506
- -------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 5,387,931 4,680,446 3,524,485
Applicable income taxes 1,840,900 1,515,900 1,063,225
- -------------------------------------------------------------------------------
NET INCOME $ 3,547,031 $ 3,164,546 $ 2,461,260
- -------------------------------------------------------------------------------
Preferred stock dividends and
discount accretion $ 184,004 $ 184,004 $ 18,000
Net income to common shareholders $ 3,363,027 $ 2,980,542 $ 2,443,260
Earnings per average common share* $1.46 $1.30 $1.25
*Years 1991 and 1990 have been restated to reflect a 10% stock dividend
declared in 1992.
The accompanying notes are an integral part of these consolidated financial
statements.
F-60
Consolidated Statements of Changes in Shareholders' Equity
- ------------------------------------------------------------------------------
For Years Ended December 31, 1992, 1991 and 1990
Additional Total
Common Paid-in Retained Treasury Shareholders'
Shares Stock Capital Earnings Stock Equity
-------------------------------------------------------------------------------------
Balance, January 1, 1990 1,730,745 $ 2,163,431 $ 7,019,907 $12,611,224 $ (105,000) $21,689,562
Net income 2,461,260 2,461,260
Cash dividends declared on common
stock--$.49 per share (952,974) (952,974)
Cash dividends declared on preferred stock (12,666) (12,666)
Accretion of preferred stock (5,334) (5,334)
Common stock issued in a
business combination 352,464 440,580 2,467,248 2,907,828
Common stock issued through
a dividend reinvestment plan 11,372 14,215 88,745 102,960
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1990 2,094,581 2,618,226 9,575,900 14,101,510 (105,000) 26,190,636
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 3,164,546 3,164,546
Cash dividends declared on common
stock--$.49 per share (1,126,817) (1,126,817)
Cash dividends declared on preferred
stock (152,000) (152,000)
Accretion of preferred stock (32,004) (32,004)
Purchase of treasury stock (31,540) (31,540)
Common stock issued through
a dividend reinvestment plan 11,764 14,705 115,510 130,215
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 2,106,345 2,632,931 9,691,410 15,955,235 (136,540) 28,143,036
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 3,547,031 3,547,031
Cash dividends declared--
$.52 per share (1,202,113) (1,202,113)
Stock dividend declared--
10% per share 209,416 261,770 3,036,533 (3,298,303) -0-
Cash dividend declared on
preferred stock (152,000) (152,000)
Accretion of preferred stock (32,004) (32,004)
Common stock issued through
a dividend reinvestment plan 11,352 14,190 159,742 173,932
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 2,327,113 $2,908,891 $12,887,685 $14,817,846 $(136,540) $30,477,882
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-61
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
For Years Ended December 31, 1992, 1991 and 1990
1992 1991 1990
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES
- -------------------------------------------------------------------------------
Net income $ 3,547,031 $ 3,164,546 $ 2,461,260
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 428,500 626,000 384,000
Provision for depreciation
and amortization 651,098 696,796 625,121
Net amortization of security
premiums 711,199 99,120 (58,531)
Net amortization of loan
discounts (54,696) (99,280) (23,238)
(Gain)/loss on sale of fixed
assets (17,279) (2,345) (50)
(Gain)/loss on investment
securities (2,104) 112,543 -0-
(Gain)/loss on sale of other
real estate 55,552 (9,255) -0-
Net amortization of other
assets 74,292 92,964 25,257
Net decrease in accrued
interest receivable 233,176 125,866 43,363
Net decrease in accrued
interest payable (284,022) (150,708) (88,132)
Deferred income taxes 85,075 (161,937) (150,309)
Other (173,140) 69,014 (21,679)
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,254,682 4,563,324 3,197,062
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES
- -------------------------------------------------------------------------------
Purchase of investment securities (42,886,540) (15,238,159) (15,668,813)
Maturities of investment
securities 31,643,609 24,028,554 13,721,166
Proceeds from sale of investment
securities 1,494,286 981,250 -0-
Net (increase)/decrease in loans (2,190,844) (11,190,950) (5,926,215)
Purchases of premises and
equipment (994,958) (384,787) (273,679)
Proceeds from sale of fixed assets 24,268 3,925 10,486
Net decrease/(increase) in other
assets 171,991 10,998 (139,476)
Cash received from acquisition of
FirstBank Shinnston -0- -0- 7,423,012
- -------------------------------------------------------------------------------
NET CASH (USED)/PROVIDED BY
INVESTING ACTIVITIES (12,738,188) (1,789,169) (853,519)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES
- -------------------------------------------------------------------------------
Net increase/(decrease) in demand
deposits, NOW accounts, and
savings accounts 16,998,835 8,441,910 2,810,653
Net (decrease)/increase in
certificates of deposit (15,574,355) (3,790,135) 2,944,133
Net (decrease)/increase in
repurchase agreements (146,051) (2,374,787) 5,586,101
Net increase/(decrease) in
treasury notes purchased 166,994 24,770 228,662
Cash dividends paid (net of
dividend reinvestment) (1,180,181) (1,148,601) (862,681)
Acquisition of treasury stock -0- (31,540) -0-
Payment of note payable -0- (750,000) -0-
- -------------------------------------------------------------------------------
NET CASH PROVIDED/(USED) BY
FINANCING ACTIVITIES 265,242 371,617 10,706,868
- -------------------------------------------------------------------------------
(Decrease)/increase in cash/cash
equivalents (7,218,264) 3,145,772 13,050,411
Cash/cash equivalents at
beginning of year 39,452,896 36,307,124 23,256,713
- -------------------------------------------------------------------------------
CASH/CASH EQUIVALENTS AT END OF
YEAR $ 32,234,632 $ 39,452,896 $ 36,307,124
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-62
Notes to Consolidated Financial Statements / December 31, 1992
- -------------------------------------------------------------------------------
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying consolidated financial statements
include First Fidelity Bancorp, Inc. (Corporation or First Fidelity) and its
wholly-owned subsidiaries, First National Bank in Fairmont, Central National
Bank, Bridgeport Bank, and FirstBank Shinnston. All significant inter-company
balances and transactions have been eliminated. Investments in subsidiaries are
carried at the parent company's equity in the underlying net assets.
Statement of Cash Flows: Cash and cash equivalents for purposes of this
statement include cash and due from banks, interest-bearing deposits in other
banks, and federal funds sold. First Fidelity Bancorp and its subsidiaries paid
interest of approximately $10,245,000, $13,115,000 and $11,282,000 on deposits
and other contractual debt obligations and $1,821,000, $1,622,000, and
$1,220,000 of applicable income taxes during 1992, 1991, and 1990, respectively.
Investment Securities: Management determines the appropriate classification of
securities at the time of purchase. If management has the intent and the
Corporation has the ability at the time of purchase to hold securities until
maturity or on a long-term basis, they are classified as investments and carried
at amortized historical cost. Securities to be held for indefinite periods of
time and not intended to be held to maturity or on a long-term basis are
classified as held for sale and carried at the lower of cost or market value.
Gains or losses on disposition are computed by the specific identification
method. At December 31, 1992 and 1991, there are no securities classified as
held for sale.
Loans: Interest on commercial and real estate loans is credited to operating
income in the period in which it is earned based upon the principal amount
outstanding. Interest on installment loans is credited to operating income based
on the sum-of-the-months' digits and actuarial methods, depending on the
original length of the contract. First Fidelity Bancorp adheres to the policy of
the Office of the Comptroller of the Currency and the Federal Reserve that banks
may not accrue interest on any loan when principal or interest is due and has
remained unpaid for 90 days or more unless the loan is both well secured and in
the process of collection. Any interest accrued in the current year but not yet
collected is charged against current income; any income accrued in a prior year
hut not yet collected is charged against allowance for loan losses.
Loan Fees and Costs: Loan origination and commitment fees and direct loan
origination costs are 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 loan yield.
Allowance for Loan Losses: An allowance is maintained and provisions are made to
absorb possible loan losses. The provision for loan losses is largely resultant
from management's review of the quality of the loan portfolio, supplemented by
historical loan loss experience. The allowance is maintained at a level which,
in management's judgment, is sufficient to absorb potential loan losses.
Bank Premises and Equipment: Bank premises and equipment are stated at cost less
accumulated depreciation. For financial reporting purposes, depreciation is
computed primarily on the straight-line method over the estimated life of each
asset. For income tax purposes depreciable assets placed in service after 1980
are depreciated using accelerated methods. Expenditures for maintenance and
repairs are expensed as incurred.
Income Taxes: Deferred income taxes result from timing differences in
recognizing certain income and expense items on the accrual basis for reporting
purposes and the cash basis for tax purposes such as bond discount accretion,
deductions for loan losses, and depreciation. The Corporation and subsidiaries
file a consolidated federal income tax return. In February 1992, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes." Based upon the Bank's study and review of
implementation issues, the standard will not have a material impact on Results
of Operations or Financial Condition when adopted in the first quarter of 1993.
Trust Assets and Income: Assets held in a fiduciary or agency capacity for bank
customers are not included in the financial statements because such items are
not assets of the Bank. Trust Department income is credited to operating income
upon receipt .
Income Per Common Share: Income per common share was calculated using a weighted
average common shares outstanding (2,307,195 shares for 1992, 2,295,623 shares
for 1991, and 1,961,686 shares for 1990). Years 1991 and 1990 have been restated
to reflect a 10% stock dividend occurring in 1992.
Pensions: The provision for pension expense for the Bank's defined pension plan
was actuarially determined using the projected unit credit actuarial cost
method. The Corporation's funding policy for the plan is to contribute amounts
sufficient to meet the minimum funding requirements of ERISA, plus such
additional amounts as may be appropriate, subject to federal income tax
limitations.
Other Real Estate: Real estate acquired in satisfaction of a loan is reported in
other assets. Properties acquired by foreclosure or deed in lieu of foreclosure
are transferred to other real estate and recorded at the lower of cost or fair
market value based on appraised value at the dates actually received. Loan
losses arising from the acquisition of such property are charged against the
allowance for loan losses. Other real estate is stated at the lower of cost or
market.
F-63
- ------------------------------------------------------------------------------
NOTE B--FAIR VALUE OF FINANCIAL INSTRUMENTS
In December 1991, the Financial Accounting Standards Board issued FASB Statement
No. 107 "Disclosures about Fair Value of Financial Instruments."
FASB Statement No. 107 requires disclosure of fair value information about
financial instruments whether or not recognized in the statement of condition,
for which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair value is based on estimates using present value
or other valuation techniques. These techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instruments. Statement No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of First Fidelity.
The following schedule displays at December 31, 1992, the carrying values and
related estimated fair values for financial instruments:
Carrying Estimated
Amount Fair Value
-------- ----------
Financial Assets:
Cash/Due from banks $ 13,911,652 $ 13,911,652
Interest bearing deposits 19,980 19,980
Federal funds 18,303,000 18,303,000
Investment securities 87,306,710 89,153,000
Loans, net of allowance and unearned interest 175,385,954 177,735,888
------------ ------------
Total Financial Assets 294,927,296 $299,123,520
============
Bank premises and equipment 7,912,352
Other assets 3,352,240
------------
Total Assets $306,191,888
============
Financial Liabilities
Time deposits $ 85,924,062 $ 86,590,051
Other deposits 171,727,120 171,727,120
Securities sold under repurchase agreements 13,430,945 13,430,945
Redeemable preferred stock 1,809,342 2,732,600
------------ ------------
Total Financial Liabilities 272,891,469 $274,480,716
============
Other liabilities 2,822,537
------------
Total Liabilities and Redeemable Preferred Stock $275,714,006
============
The following methods and assumptions were used to estimate fair market value
disclosures for financial instruments:
Cash and due from banks: The carrying amounts reported in the balance sheet
for cash and due from banks approximate those assets' fair values.
Interest bearing deposits: The carrying amounts of interest bearing deposits
approximate their fair values.
Federal funds sold: The carrying amounts of federal funds sold approximate
their fair values.
Investment securities: Fair values for investment securities are based on
quoted market prices (see Note D).
Loans receivable: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
The fair values for other loans are estimated using discounted cash flow
analyses, using interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality. The carrying amount of accrued
interest approximates its fair value.
Deposits: The fair values disclosed for demand deposits (e.g., interest and
noninterest checking, savings, and certain types of money market accounts) are,
by definition, equal to the amount payable on demand at the reporting date. The
carrying amounts for variable-rate, fixed-term money market accounts and
certificates of deposit approximate their fair market value at the reporting
date. Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Securities sold under repurchase agreements: The carrying amounts of
securities sold under repurchase agreements, approximate their fair value.
F-64
Notes to Consolidated Financial Statements / December 31, 1992
- ------------------------------------------------------------------------------
Redeemable preferred stock: The fair value for First Fidelity's redeemable
preferred stock is estimated using discounted cash flow analyses based on
estimated incremental borrowing rates for similar types of borrowing
arrangements, assuming the option to convert the stock into shares of First
Fidelity common stock is elected (see Note P). The conversion factor used in
the analysis is based on December 31, 1992 market value and book value of First
Fidelity common stock.
Off-balance-sheet instruments: Fair values for First Fidelity's off-balance
sheet instruments (principally lending commitments and letters of credit) are
equal to their carrying values based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the counterparties' credit standing.
NOTE C--RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Banks are required to maintain average reserve balances with the Federal
Reserve Bank either indirectly through vault cash or directly with the Federal
Reserve. The average daily combined amount of the required reserve balances for
the year ended December 31, 1992, was approximately $2,473,000.
NOTE D--INVESTMENT SECURITIES
Maturity distribution of investment securities and a comparison of values are as
follows:
(In Thousands)
December 31. 1992 December 31, 1991
--------------------------- -----------------------------
Par Book Market Par Book Market
Value Value Value Value Value Value
--------------------------- -----------------------------
U.S. Treasury and agency securities:
U.S. Treasury securities:
Within one year $18,000 $18,097 $18,270 $18,600 $18,628 $ 18,928
One to five years 18,600 19,140 19,483 13,650 13,772 14,352
U.S. agency securities:
Within one year 12,500 12,573 12,799 6,000 6,003 6,135
One to five years 23,050 23,690 24,278 21,500 21,688 22,641
Five to ten years 4,178 4,210 4,370 2,620 2,621 2,769
After ten years 576 576 596 1,273 1,271 1,329
- -----------------------------------------------------------------------------------------------------------
Total U.S. Treasury and Agency Securities 76,904 78,286 79,796 63,643 63,983 66,154
- -----------------------------------------------------------------------------------------------------------
Obligations of state and political
subdivisions:
Within one year 870 870 887 740 739 750
One to five years 3,170 3,167 3,353 3,920 3,916 4,081
Five to ten years 480 480 529 635 634 690
After ten years 295 296 330 600 502 538
- -----------------------------------------------------------------------------------------------------------
Total Obligations of State and Political
Subdivisions 4,815 4,813 5,099 5,895 5,791 6,059
- -----------------------------------------------------------------------------------------------------------
Other securities:
Within one year 5 5 5 500 500 500
One to five years 10 10 10 10 10 10
Five to ten years -0- -0- -0- 5 5 5
After ten years 1,892 1,892 1,942 4,471 4,475 4,509
- -----------------------------------------------------------------------------------------------------------
Total Other Securities 1,907 1,907 1,957 4,986 4,990 5,024
- -----------------------------------------------------------------------------------------------------------
Other investments:
Other 1,367 1,367 1,367 3,359 3,359 3,359
Equity securities 934 934 934 144 144 144
- -----------------------------------------------------------------------------------------------------------
Total Other Investments 2,301 2,301 2,301 3,503 3,503 3,503
- -----------------------------------------------------------------------------------------------------------
Total Investment Securities $85,927 $87,307 $89,153 $78,027 $78,267 $80,740
- -----------------------------------------------------------------------------------------------------------
Investment securities with a book value of $29,876,000 at December 31, 1992 and
$31,923,000 at December 31, 1991 were pledged to secure public deposits,
securities sold under repurchase agreements, and for other purposes required or
permitted by law.
F-65
- ------------------------------------------------------------------------------
Investment Securities Unrealized Gains/Losses
(In Thousands)
December 31, 1992 December 31, 1991
------------------------------------------------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
------------------------------------------------------------------------------------------
U.S. Treasury securities $37,237 $ 562 $ 46 $37,753 $32,400 $ 880 $-0- $33,280
U.S. Agency securities 41,049 1,029 35 42,043 31,583 1,292 1 32,874
Obligations of states and political
subdivisions 4,813 286 -0- 5,099 5,791 268 -0- 6,059
Other securities 1,907 50 -0- 1,957 4,990 39 5 5,024
Other investments:
Other 1,367 -0- -0- 1,367 3,359 -0- -0- 3,359
Equity securities 934 -0- -0- 934 144 -0- -0- 144
- -----------------------------------------------------------------------------------------------------------------------------------
Total $87,307 $1,927 $81 $89,153 $78,267 $2,479 $ 6 $80,740
- -----------------------------------------------------------------------------------------------------------------------------------
Gross realized gains and losses in 1992 were approximately $15,000 and $13,000,
respectively, while 1991 gross realized losses were $113,000. There were no
gross realized gains or losses in 1990.
Securities Maturities
(In Thousands)
December 31, 1992 December 31, 1991
------------------------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
------------------------------------------
Due in one year or less $31,545 $ 31,961 $ 25,870 $26,313
Due after one year through five
years 46,007 47,124 39,386 41,084
Due after five years through
ten years 4,690 4,899 3,260 3,464
Due after ten years 2,764 2,868 6,248 6,376
Other 2,301 2,301 3,503 3,503
- -------------------------------------------------------------------------------
Total $87,307 $ 89,153 $ 78,267 $80,740
- -------------------------------------------------------------------------------
NOTE E--LOANS
The major categories comprising the loan portfolio are as follows:
(Table In Thousands)
December 31
1992 1991
----------------------
Commercial and agricultural
loans $ 30,760 $ 32,267
Installment loans 49,717 57,863
Residential real estate 76,830 67,903
Commercial real estate 24,471 23,008
All other loans 97 78
- ------------------------------------------------------------------
Total Loans--Gross 181,875 181,119
- ------------------------------------------------------------------
Less unearned interest 4,218 5,232
Less allowance for loan losses 2,271 2,318
- ------------------------------------------------------------------
Total Loans--Net $175,386 $173,569
- ------------------------------------------------------------------
The Corporation extends credit to customers and requires collateral based upon
management's evaluation of each customer's financial condition and ability to
satisfy completely the terms of the agreement.
The Corporation attempts to limit its exposure to concentrations of credit risk
by diversifying its loan portfolio. No significant concentrations of credit risk
to specific industries or groups exists at December 31, 1992. Additionally,
substantially all extensions of credit are to individuals and corporations in
the Corporation's defined market area in north central West Virginia.
Certain directors and executive officers of the Corporation and the subsidiary
banks, including their associates and companies in which they are principal
owners, are loan customers of the subsidiary banks. Such loans are made in the
ordinary course of business at the respective banks' normal credit terms
including interest rate and collateralization and do not represent more than a
normal risk of collection. At December 31, 1991, the Corporation had $8,366,000
of these loans outstanding. During all of 1992 new loans totaled $3,542,000,
while payments totaled $4,174,000, leaving an ending balance of $7,734,000 on
December 31. 1992.
F-66
Notes to Consolidated Financial Statements / December 31, 1992
- ------------------------------------------------------------------------------
NOTE F--ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three years ended December 31,
1992, were as follows:
(Table In Thousands)
1992 1991 1990
----------------------------
Balance beginning January 1 $2,318 $2,000 $1,306
Losses charged to allowance (595) (506) (243)
Recoveries credited to allowance 119 198 35
---------------------------
Net (charge-offs) recoveries (476) (308) (208)
Provision for possible loan losses 429 626 384
Additional allowance from business combination -0- -0- 518
- ------------------------------------------------------------------------------
Balance Ending December 31 $2,271 $2,318 $2,000
- ------------------------------------------------------------------------------
Non-accrual loans totaled $2,224,000 and $3,445,000 at December 31, 1992 and
1991, respectively. Interest income recorded on these loans approximated $41,000
and $99,000 for the years ending December 31, 1992 and 1991, respectively. If
interest income for 1992 and 1991 would have been accrued under the original
terms, such income for 1992 and 1991 would have been approximately $178,000 and
$332,000, respectively.
NOTE G--BANK PREMISES AND EQUIPMENT
The following is a summary of bank premises and equipment:
(Table In Thousands)
December 31
1992 1991
-----------------------------
Land $ 2,388 $ 2,388
Bank premises 6,682 6,177
Equipment 5,217 4,748
- ------------------------------------------------------------------------------
Total 14,287 13,313
- ------------------------------------------------------------------------------
Less accumulated depreciation (6,375) (5,738)
- ------------------------------------------------------------------------------
Bank Premises and Equipment--Net $ 7,912 $ 7,575
- ------------------------------------------------------------------------------
The amount shown as occupancy expense on the statement of income is net of
rental income. Rental income amounted to $85,000 in 1992, $86,000 in 1991, and
$68,000 in 1990.
NOTE H--DEPOSITS
A summary of deposits follows:
(In Thousands)
----------------------------------------------------------------
December 31, 1992 December 31, 1991
-------------------------------- -------------------------
Non-Interest Interest Non-Interest Interest
Bearing Bearing Bearing Bearing
-------------------------------- -------------------------
Individuals, partnerships and
corporations $21,623 $225,436 $22,675 $224,713
United States Government 117 -0- 223 -0-
State and political subdivisions 7,875 1,030 6,045 797
Depository institutions 892 70 603 271
Certified and official checks 608 -0- 900 -0-
- ------------------------------------------------------------------------------------------------------
Total Deposits $31,115 $226,536 $30,446 $225,781
- ------------------------------------------------------------------------------------------------------
NOTE I--DIVIDEND AND LOAN RESTRICTIONS
Federal law prevents the Corporation from borrowing from the banks unless the
loans are secured by specified obligations. Further, such loans are limited in
amount to ten percent (10%) of the banks' total capital. In addition, the
Comptroller of the Currency must approve a dividend if the total for the year
exceeds net profits for the year combined with net profits less dividends for
the two preceding calendar years. In 1993 the banks would have $3,599,000
available for dividends plus any 1993 net profits retained up to the date of the
dividend.
At December 31, 1992, the maximum amount available for transfer from the Banks
to the Corporation in the form of loans and dividends approximated 22.04% of
consolidated net assets.
F-67
NOTE J--INCOME TAXES
Current and deferred income tax provisions consisted of the following for each
of the three years ended December 31:
1992 1991 1990
--------------------------------------
Currently payable
Federal $1,518,114 $1,432,697 $1,025,189
State 237,711 245,140 188,345
Deferred tax expense (Credit) 85,075 (161,937) (150,309)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income Tax Provisions $1,840,900 $1,515,900 $1,063,225
- ----------------------------------------------------------------------------------------------------------------------------------
A reconciliation of the federal statutory income tax rate to the effective tax
rate is as follows:
1992 1991 1990
----------------------------------------------------------------------
Provision on pre-tax income at statutory rates 34.0% $1,831,897 34.0% $1,591,352 34.0% $1,198,325
Effect of tax-exempt income (3.6) (194,345) (5.4) (254,066) (7.9) (278,554)
State income taxes, net of federal benefit 3.3 177,331 3.5 165,715 3.7 130,500
Other .5 26,017 0.3 12,899 0.4 12,954
- ----------------------------------------------------------------------------------------------------------------------------------
Applicable Tax Expense 34.2% $1,840,900 32.4% $1,515,900 30.2% $1,063,225
- ----------------------------------------------------------------------------------------------------------------------------------
Timing differences in the recognition of revenue and expense for tax and
financial reporting purposes resulted in deferred income taxes as follows:
1992 1991 1990
--------------------------------------
Valuation reserve $ 34,000 $ (34,000) $ -0-
Cash basis accounting -0- -0- (39,35l)
Provision for loan losses 16,013 (108,363) (59,714)
Interest income (8,673) (47,408) (35,646)
Depreciation (24,461) 39,510 3,513
All other differences 68,196 (11,676) (19,111)
- ----------------------------------------------------------------------------------------------------------------------------------
Deferred Tax Expense (Credit) $85,075 $(161,937) $(150,309)
- ----------------------------------------------------------------------------------------------------------------------------------
Included in other liabilities are income taxes currently payable of $43,723 and
$145,250 and in other assets are deferred income taxes of $47,200 and $132,275
at December 31, 1992 and 1991, respectively.
NOTE K--SHORT-TERM BORROWINGS
Short-term borrowings of the Banks are limited to securities sold under
repurchase agreements and treasury, tax, and loan notes purchased, which consist
of funds received as treasury tax payments. Repurchase agreements are written on
a demand basis with specific rates determined periodically by management based
upon the dollar amounts invested. Interest on treasury, tax and loan notes
purchased is determined by the federal government. Two of First Fidelity's
subsidiaries have become members of the Federal Home Loan Bank of Pittsburgh. A
Flexline Line of Credit was established up to a maximum of 10% of total assets
secured by the assets of the bank. Neither subsidiary has drawn on these lines
of credit.
Following is a summary of short-term borrowings for the three years ended
December 31:
(In Thousands)
1992 1991 1990
-----------------------------
Securities sold under repurchase agreements $13,431 $13,577 $15,952
Treasury, tax and loan notes purchased
(included in other liabilities) 1,692 1,525 1,500
- -------------------------------------------------------------------------------
Total Short-Term Borrowings $15,123 $15,102 $17,452
- -------------------------------------------------------------------------------
Average interest rate at December 31 3.61% 4.00% 5.97%
Maximum outstanding at any month-end 18,654 17,955 18,103
Monthly average amount outstanding 16,077 16,152 16,283
Weighted average interest rate
(actual interest expense on borrowings divided
by average borrowings outstanding) 3.71% 4.89% 7.17%
F-68
Notes to Consolidated Financial Statements /December 31, 1992
- -------------------------------------------------------------------------------
NOTE L--PENSIONS
The Corporation maintained one defined benefit pension plan in 1992 covering
substantially all employees. Plan benefits are based upon years of service and
the employee's compensation. Contributions are intended to provide for benefits
attributed to employee service to date and for those benefits expected to be
earned in the future. Prior to 1992 two pension plans were maintained. One
covered employees at First National Bank, Central National Bank, and Bridgeport
Bank while the other covered Firstbank Shinnston. The plans were combined
effective January 1, 1992.
A summary of the components of net periodic pension expense for the
Corporation's defined benefit plan is as follows:
YEAR ENDED DECEMBER 31
1992 1991 1990
----------------------------------
Service cost - benefits earned during the
period $ 222,019 $ 161,688 $ 149,432
Interest on projected benefit obligation 235,881 174,338 178,269
Actual return on plan assets (148,131) (356,775) (189,435)
Net amortization and deferral (180,711) 102,110 (88,586)
---------- --------- ---------
Net periodic pension expense $ 129,058 $ 81,361 $ 49,680
---------- --------- ---------
The following table sets forth the plan's funded status and amounts recognized
in the consolidated financial statements at December 31, 1992 and 1991.
1992 1991
---------------------------
Actuarial present value of the accumulated benefit
obligation, including vested benefits of
$2,146,580 and $1,298,581 in 1992 and 1991,
respectively $(2,180,672) $(1,360,678)
===========================
Actuarial present value of projected benefit
obligation for service rendered to date (3,229,394) (2,361,043)
Plan assets at fair value 3,522,586 2,885,312
---------------------------
Plan assets in excess of Projected Benefit
Obligation 293,192 524,269
Unrecognized net loss (gain) from past experience
different from that assumed and effects of
changes in assumptions (290,643) (371,153)
Prior service cost 161,553 -0-
Balance of net asset not recognized at transition (258,940) (255,478)
---------------------------
Accrued pension cost $ (94,838) $ (102,362)
---------------------------
Actuarial assumptions used in the determination of
the projected benefit obligation were as follows:
1992 1991
---------------------------
Weighted-average discount rate 7.8% 8.0%
Rate of increase in future compensation levels 5.0% 5.5%
Expected long-term rate of return on plan assets 8.5% 9.0%
The unrecognized net asset at transition is amortized over the expected service
life of eligible employees, which approximates 16 years. Trusteed pension plan
assets consist primarily of fixed income securities, equity securities, and
short-term investments.
A summary of the components of net periodic pension expense for FirstBank
Shinnston's defined benefit plan prior to being combined in 1992 is as follows:
Year Ended December 31
1991 1990
--------------------------
Service cost - benefits earned during the period $ 34,085 $ 35,278
Interest on projected benefit obligation 34,461 32,422
Actual return on plan assets (68,141) (24,993)
Net amortization and deferral 35,539 (7,645)
-------- --------
Net period pension expense $ 35,944 $ 35,062
-------- --------
F-69
The following is a summary of the change in the accumulated benefit obligation
during 1992:
First
Fidelity Firstbank
-------- ---------
Accumulated benefit obligation as
of December 31, 1991 $1,360,678 $ 299,636
Gain/loss 80,894 (18,761)
Changes in plan 169,015 130,427
Transfers of liabilities 411,302 (411,302)
- -------------------------------------------------------------------------------
Combined plans at January 1, 1992 2,021,889 $ -0-
===========
Expected growth in accrued
liabilities 136,991
Benefit disbursements (209,411)
Decrease in the discount period 158,783
Changes in economic assumption 72,420
- -------------------------------------------------------------
Accumulated benefit obligation as
of December 31, 1992 $2,180,672
===============================================================================
NOTE M--COMMITMENTS
In the normal course of business, there are outstanding various commitments to
extend credit which are not reflected in the accompanying financial statements.
Below is a summary of commitments for the two years ended December 31.
(In Thousands)
1992 1991
------------------------
Loan commitments $12,189 $9,186
Standby letters of credit 581 391
Commercial letters of credit 100 173
- -------------------------------------------------------------------------------
Total $12,870 $9,750
- -------------------------------------------------------------------------------
NOTE N--LEASES
Total rental expenses for all leased bank premises amounted to approximately
$80,500 for 1992 and $75,000 for 1991 and 1990, respectively. The rental
commitments under noncancelable leases for bank premises for years subsequent
to 1992 are shown below.
The leases include renewable options for three and five five-year periods and
provide for the payment of property taxes, insurance premiums, and maintenance
costs by the Corporation.
(In Thousands)
1993 $84
1994 84
1995 50
1996 46
Thereafter 81
----------------------------------------------------------
Total $381
----------------------------------------------------------
NOTE O--FIRST FIDELITY BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
Statement of Condition
(In Thousands)
Assets December 31
1992 1991
--------------------------------
Cash $ 100 $ 46
Investment in subsidiary banks 32,182 29,869
Other assets 9 9
- ----------------------------------------------------------------------------
Total Assets $ 32,291 $ 29,924
- ----------------------------------------------------------------------------
Liabilities
Other liabilities $ 4 $ 4
- ----------------------------------------------------------------------------
Total Liabilities 4 4
- ----------------------------------------------------------------------------
Preferred stock on ($1.25 par value
10,000 shares issued and outstanding of
Series A 8% Cumulative) 1,809 1,777
- ----------------------------------------------------------------------------
Shareholders' Equity
Common stock ($1.25 par value, 4,000,000
authorized: 2,327,113 issued and
outstanding-1992: 2,106,345 issued and
outstanding-1991): 2,909 2,633
Additional paid in capital 12,887 9,691
Retained earnings 14,818 15,955
- ----------------------------------------------------------------------------
Treasury stock at cost (12,656 shares) (136) (136)
- ----------------------------------------------------------------------------
Total Shareholders' Equity 30,478 28,143
- ----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 32,291 $ 29,924
- ----------------------------------------------------------------------------
F-70
Notes to Consolidated Financial Statements / December 31, 1992
- -------------------------------------------------------------------------------
Statement of Income
(In Thousands)
Year Ended December 31:
1992 1991 1990
------------------------------------
Dividends from subsidiary banks $ 1,348 $ 2,060 $ 1,766
Equity in undistributed earnings of
subsidiaries 2,319 1,241 856
- -------------------------------------------------------------------------------
Total Income 3,667 3,301 2,622
- -------------------------------------------------------------------------------
Interest on note payable -0- (36) (12)
Miscellaneous expense (191) (171) (235)
- -------------------------------------------------------------------------------
Net Income before Federal Income Tax 3,476 3,094 2,375
- -------------------------------------------------------------------------------
Applicable Federal Income Tax (Credit) (71) (71) (86)
- -------------------------------------------------------------------------------
Net Income $ 3,547 $ 3,165 $ 2,461
- -------------------------------------------------------------------------------
Statement of Cash Flows
Year Ended December 31:
------------------------------------
1992 1991 1990
Operating Activities
Net income $ 3,547 $ 3,165 $ 2,461
Adjustment to reconcile net income to
net cash provided by operating
activities:
Increase in undistributed earnings (2,313) (1,225) (816)
Other -0- (45) 30
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,234 1,895 1,675
- -------------------------------------------------------------------------------
Investing Activities
Acquisition of subsidiary -0- -0- (1,675)
Other assets -0- -0- 10
- -------------------------------------------------------------------------------
NET CASH USED BY INVESTING
ACTIVITIES -0- -0- (1,665)
- -------------------------------------------------------------------------------
Financing Activities
Cash dividends (1,180) (1,149) (863)
Acquisition of treasury stock -0- (32) -0-
Note payable -0- -0- 750
Repayment of note payable -0- (750) -0-
- -------------------------------------------------------------------------------
NET CASH (USED) BY FINANCING
ACTIVITIES (1,180) (1,931) (113)
- -------------------------------------------------------------------------------
Increase in cash/cash equivalents 54 (36) (103)
Cash/cash equivalents at beginning of year 46 82 185
- -------------------------------------------------------------------------------
Cash/cash equivalents at year end $ 100 $ 46 $ 82
- -------------------------------------------------------------------------------
Supplemental Disclosure of other cash
investing and financing activity
Interest paid $ -0- $ 36 $ 12
Taxes credited (71) (71) (86)
- -------------------------------------------------------------------------------
NOTE P--PREFERRED STOCK
First Fidelity's 10,000 shares of 8% cumulative preferred stock with a par
value of $1.25 per share were recorded at the fair market value of $174 per
share when issued. Periodic accretion using the straight line method which
approximates the interest method will increase the stock's carrying value to
$190 per share by the redemption date. The accretion is charged against retained
earnings. Five years after issuance and for a 30 day period (the redemption
period) the cumulative preferred stock may be redeemed by the Corporation at a
redemption price of $190. The holder of the cumulative preferred stock has the
option to convert the stock into shares of First Fidelity common stock based on
the quotient of $190 divided by the book value per share of the common stock on
the redemption date. Holders of the cumulative preferred stock who do not
surrender their shares by the redemption date will have their shares
automatically converted into shares of First Fidelity common stock based on the
formula previously described.
F-71
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
TABLE 1
Average Balances and Interest Rates
On a Fully Taxable-Equivalent Basis
(Dollar Amounts in Thousands) 1992 1991 1990
---------------------------------------------------------------------------------------
Balance Int. Yield Balance Int. Yield Balance Int. Yield
---------------------------------------------------------------------------------------
ASSETS
Interest earning assets:
Loans, net of unearned income $178,383 $ 17,389 9.75% $169,184 $17,943 10.61% $130,800 $14,273 lO.91%
Investment securities:
U.S. Treasury securities 35,142 2,456 6.99 39,040 3,204 8.21 32,609 2,767 8.49
U.S. Government agencies securities 39,281 2,765 7.04 30,278 2,579 8.52 24,781 2,139 8.63
State and municipal obligations 5,257 538 10.23 7,140 739 10.35 6,853 692 10.10
Other securities 3,192 252 7.89 5,718 462 8.08 1,070 87 8.13
Other investments 1,932 183 9.47 3,597 314 8.73 659 59 8.95
-------- -------- -------- ------- -------- -------
Total investment securities 84,804 6,194 7.30 85,773 7,298 8.51 65,972 5,744 8.71
Equity Securities 440 18 4.09 144 9 6.25 144 9 6.25
Federal funds sold 18,376 701 3.81 24,535 1,531 6.24 19,487 1,736 8.91
Due from banks 8 1 12.50
-------- -------- -------- ------- -------- -------
Total Interest-Earning
Assets 282,011 $ 24,303 8.61% 279,636 $26,781 9.58% 216,403 $21,762 10.06%
Non-interest-earning assets:
Cash and due from banks 13,917 12,378 9,431
Bank premises and equipment, net 7,665 7,636 5,716
Other assets 3,999 4,083 2,974
Less allowance for loan losses (2,304) (2,145) (1,437)
-------- -------- --------
Total Assets $305,288 $301,588 $233,087
==================================================================================================================================
1992 1991 1990
---------------------------------------------------------------------------------------
Balance Int. Yield Balance Int. Yield Balance Int. Yield
---------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS EQUITY
Interest-bearing Liabilities:
Savings/NOW accounts/
Insured Earnings $133,155 $ 4,781 3.59% $120,374 $ 5,464 4.54% $ 89,764 $ 4,439 4.95%
Time deposits 92,652 4,583 4.95 104,051 6,674 6.41 79,700 5,576 7.00
Note payable -0- -0- -0- 375 37 9.87 125 12 9.60
Short-term borrowings 16,077 597 3.71 16,152 789 4.88 16,283 1,168 7.17
-------- -------- -------- ------- -------- -------
Total Interest-Bearing
Liabilities 241,884 $ 9,961 4.12% 240,952 $12,964 5.38% 185,872 $11,195 6.02%
NON-INTEREST-BEARING LIABILITIES:
Demand deposits 30,428 29,509 22,113
Other 1,596 1,916 1,608
PREFERRED STOCK 1,795 1,763 291
SHAREHOLDERS' EQUITY 29,585 27,448 23,203
-------- -------- --------
Total Liabilities and
Shareholders' Equity $305,288 $301,588 $233,087
==================================================================================================================================
Net interest earnings $ 14,342 $ 13,817 $ 10,567
==================================================================================================================================
Net yield on interest earning assets (1) 5.09% 4.94% 4.88%
==================================================================================================================================
(1) Net yield is calculated by dividing net interest earnings by total
interest-earning assets.
The table above includes non-performing loans in average loan amounts
outstanding.
F-72
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
Introduction:
First Fidelity Bancorp, Inc. (FFBC or First Fidelity) is a multi-bank holding
company headquartered in Fairmont, West Virginia. As of December 31, 1992 it had
$306 million in assets, $175 million in net loans, and $258 million in deposits.
Its four subsidiaries include First National Bank in Fairmont, (FNB), Central
National Bank, Morgantown, (CNB), Bridgeport Bank, Bridgeport, (BB) and
FirstBank Shinnston, (FB). First National and Central National operate as
national banks while Bridgeport Bank and FirstBank operate as state-chartered
banks. Located in north central West Virginia, these subsidiaries are engaged in
commercial banking activities which provide financial services to both
individual and commercial customers. The national banks are subject to the
supervision, examination, and regulation of the Comptroller of the Currency
while the state chartered banks are subject to state examination. All subsidiary
banks are members of the Federal Deposit Insurance Corporation (FDIC), an agency
that insures customers deposits. Selected financial data on the subsidiaries'
condition and operations is filed quarterly with the FDIC.
The following discussion is intended to focus on and highlight certain financial
information regarding FFBC and should be read in conjunction with the
Consolidated Financial Statements and related notes which have been prepared by
the management of First Fidelity in conformity with generally accepted
accounting principles. The audit committee of the Board of Directors engaged
Ernst and Young, independent auditors, to audit the consolidated financial
statements, and their report is included on page 7 of this report. To assist in
understanding and evaluating major changes in First Fidelity's financial
position and results of operations, two, three, and five year comparisons are
provided in tabular form for ease of comparison.
The three major areas of discussion that follow are analyses of (a) assets and
liabilities including liquidity and interest rate sensitivity, (b) shareholders'
equity including dividends and risk-based capital, and (c) 1992 results of
operations.
TABLE 2
1992 1991 1990
---------------------------------------------------------------------------
Increase Increase
Funding Uses and Sources Average (Decrease) Average (Decrease) Average
(Dollar Amounts in Thousands) Balance Amount % Balance Amount % Balance
---------------------------------------------------------------------------
FUNDING USES:
Loans $176,079 $ 9,040 5.4 $167,039 $37,676 29.1 $129,363
Taxable investment securities 79,547 914 1.2 78,633 19,514 33.0 59,119
Nontaxable investment securities 5,257 (1,883) (26.4) 7,140 287 4.2 6,853
Federal funds sold 18,376 (6,159) (25.1) 24,535 5,048 25.9 19,487
Equity securities 440 296 205.6 144 -0- -0- 144
Interest bearing deposits 8 8 100.0 -0- -0- -0- -0-
Other 25,581 1,484 6.2 24,097 5,976 33.0 18,121
- -----------------------------------------------------------------------------------------------------------------
Total Uses $305,288 $ 3,700 1.2 $301,588 $68,501 29.4 $233,087
=================================================================================================================
FUNDING SOURCES:
Demand deposits $ 30,428 $ 919 3.1 $ 29,509 $ 7,396 33.5 $ 22,113
Saving deposits 133,155 12,781 10.6 120,374 30,610 34.1 89,764
Time deposits 92,652 (11,399) (11.0) 104,051 24,351 30.6 79,700
Note payable -0- (375) (100.0) 375 250 200.0 125
Short-term borrowings 16,077 (75) (.5) 16,152 (132) (.8) 16,284
Other 32,976 1,849 5.9 31,127 6,026 24.0 25,101
- -----------------------------------------------------------------------------------------------------------------
Total Sources $305,288 $ 3,700 1.2 $301,588 $68,501 29.4 $233,087
=================================================================================================================
Financial Condition
Loan Portfolio
Loans represent the largest component of earning assets and are the primary use
of financial resources. The Corporation offers a wide variety of loans including
commercial, consumer, and both residential and commercial real estate in its
primary marketing area of northern West Virginia. At December 31, 1992 the
Corporation did not have any loan concentrations which exceeded 10% of total
loans, foreign loans or significant amounts of loans for agricultural purposes.
Average loans increased 5% in 1992 to represent 63% of average interest earning
assets compared to 61% in 1991 and 60% in 1990. Year-end total real estate loans
increased 11% over 1991 which had increased 9% over 1990, particularly from
residential real estate. Commercial and installment loans to individuals
declined 5% and 14% respectively in 1992 after increases of 1% and 6%
respectively in 1991. Table 3 provides a five year loan history.
F-73
- -------------------------------------------------------------------------------
In addition to the loans reported in Table 3 are certain off-balance sheet
products such as letters of credit and loan commitments which are offered under
the same credit standards as the loan portfolio. Since the possibility of a
liability exits, generally accepted accounting principles require that these
financial instruments be disclosed but treated as contingent liabilities and
thus, not reflected in the accompanying consolidated financial statements.
Management closely monitors the financial condition of potential creditors
throughout the terms of the instrument to assure that they maintain certain
credit standards. Refer to Note M for additional information on off-balance
sheet financial instruments.
TABLE 3
Loan Portfolio
(Dollar Amounts in Thousands)
December 31
-------------------------------------------------
1992 1991 1990 1989 1988
-------------------------------------------------
Commercial $ 30,760 $ 32,267 $ 31,816 $ 23,814 $ 24,147
Installment loans to
individuals 49,717 57,863 54,551 39,790 42,749
Residential/commercial real
estate mortgages 101,301 90,911 83,658 64,035 63,881
All other 97 78 158 58 111
-------------------------------------------------
Total Gross Loans $181,875 $181,119 $170,183 $127,697 $130,888
================================================================================
The following table shows the scheduled repricing of principal categorized by
type of loan. All variable rate loans are included in the within one year
category.
Repricing
---------------------------------------------
After One
But
Within After
Within Five Five
One Year Years Years Total
---------------------------------------------
Commercial $19,699 $ 8,425 $ 2,636 $ 30,760
Installment loans to individuals 15,835 32,150 1,732 49,717
Residential/commercial real estate
mortgages 31,078 39,888 30,335 101,301
Other 97 -0- -0- 97
---------------------------------------------
Total $66,709 $80,463 $34,703 $181,875
================================================================================
TABLE 4
Non-Performing Loans
The following table shows information regarding past-due, non-accrual loans, and
renegotiated troubled debt.
(Dollar Amounts In Thousands)
December 31
-------------------------------------------------
1992 1991 1990 1989 1988
-------------------------------------------------
Loans accounted for on a
non-accrual basis $2,224 $3,445 $2,739 $2,369 $2,919
Accruing loans which are
contractually past due 90
days or more as to principal
or interest payments $ 547 $1,306 $1,621 $ 981 $ 848
Renegotiated troubled debt $ 41 $ 94 $ 735 $ 750 $ -0-
Other real estate $ 474 $ 694 $ 579 $ 290 $ 310
================================================================================
Non-performing assets to:
Total Assets 1.1% 1.8% 1.9% 2.1% 1.9%
Total Loans and Other Real
Estate 1.8% 3.1% 3.4% 3.6% 3.2%
F-74
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
TABLE 5
Analysis of the Allowance for Loan Losses
(Dollar Amounts in Thousands)
Year Ended December 31
-------------------------------------------------
1992 1991 1990 1989 1988
-------------------------------------------------
Allowance for loan losses at
beginning of year $2,318 $2,000 $1,306 $1,175 $1,062
Loans charged off:
Commercial, financial and
agricultural 349 41 86 32 13
Installment loans to
individuals 222 321 147 100 90
Residential/Commercial
Real Estate 24 144 10 203 66
- ------------------------------------------------------------------------------
Total Charge-offs 595 506 243 335 169
- ------------------------------------------------------------------------------
Recovery of loans charged off:
Commercial, financial and
agricultural 8 18 5 -0- -0-
Installment loans to
individuals 106 62 27 17 15
Residential/Commercial
Real Estate 5 118 3 91 95
- ------------------------------------------------------------------------------
Total Recoveries 119 198 35 108 110
- ------------------------------------------------------------------------------
Net (charge-offs) recoveries (476) (308) (208) (227) (59)
Additional allowance from
business combination -0- -0- 518 -0- -0-
Provisions charged to
operations 429 626 384 358 172
- ------------------------------------------------------------------------------
Balance at end of period $2,271 $2,318 $2,000 $1,306 $1,175
==============================================================================
Ratio of net (charge-offs)
recoveries during the
period to average loans
outstanding during that
period (.27%) (.18%) (.16%) (.18%) (.05%)
Average allowance to average
loans outstanding 1.29% 1.27% 1.10% .95% .91%
Non-Performing Assets
Table 4 provides a five year summary of non-performing assets which are defined
as loans accounted for on a non-accrual basis, accruing loans that are
contractually past due 90 days or more as to principal or interest payments,
renegotiated troubled debt, and other real estate obtained through loan
foreclosures.
A loan is placed on non-accrual when the payment terms have been seriously
violated and stays on non-accrual until the loan is brought current as to
principal and interest. The classification of a loan or other asset as
nonaccruing does not indicate that loan principal and interest will be
uncollectable. The Banks adhere to the policy of the Office of the Comptroller
of the Currency and the Federal Reserve that banks may not accrue interest on
any loan when the principal or interest is due and has remained unpaid for 90
days or more unless the loan is both well secured and in the process of
collection.
A loan is considered restructured or renegotiated when either the rate is
reduced below current market rate for that type of risk, principal or interest
is forgiven, or the term is extended beyond that which the Corporation would
accept for loans with comparable risk. Property obtained from foreclosing on
loans secured by real estate are adjusted to market value prior to being
capitalized in an "Other Real Estate" account for possible resale. Regulatory
provisions on other real estate are such that after five years, or ten years
under special circumstances, property must be charged-off. This period gives the
Corporation adequate time to make provisions for disposing of any real estate
property.
Loans accounted for on a non-accrual basis declined $1,221,000 or 35% as of
year-end 1992. Of the $2,224,000 outstanding non-accrual loans at year-end 1992,
$1,517,000 or 68% relates to investors with a franchise from a major motel chain
who constructed a motel in the area in 1986. Since September of 1990 all
payments received have been applied to the principal balance. Negotiations with
motel management were conducted in late spring of 1991 and starting in June of
that year a new repayment schedule was drafted with First Fidelity Bancorp
receiving approximately $11,300 monthly. In September of 1992 a new repayment
schedule was drafted whereby the Corporation would receive approximately $12,000
monthly from October 1, 1992 through March 1993 and $12,500 monthly beginning in
April 1993 and extending thru September 1993 at which time a review of the
repayment schedule would occur. The repayment schedule was adhered to in 1992.
Construction in the area in 1992 helped maintain the occupancy rate which should
continue to improve as the surrounding area becomes more established.
F-75
- -------------------------------------------------------------------------------
A $210,000 loan to a coal contractor who declared bankruptcy was placed on
non-accrual in the third quarter of 1992. Subsequent to year-end $100,000 of the
loan was transferred to other real estate while $63,000 was charged to the
allowance for loan loss and $47,000 of equipment placed in a repossession
account pending a sale. The remaining non-accrual balance consists of small
loans, none of which exceeded $75,000. Non-accrual loans at year-end 1992 would
have accrued total income of $178,000 in 1992. Actual income reported on
non-accrual loans in 1992 amounted to $41,000.
Accruing loans that are past due 90 days or more as to principal or interest
payments decreased $759,000 or 58% from 1991. As of year-end 1992, installment
loans constituted the largest percentage of past due loans at 81% while real
estate loans accounted for 19%. As of year-end 1991 past due installment, real
estate, and commercial loans were 37%, 32% and 31% respectively.
At December 31, 1992, the Company had one $41,000 loan which was classified as
restructured when the term was extended beyond the normal maturity for that
particular type of loan.
Other real estate was $474,000 at year-end 1992, down $220,000 or 32% from
year-end 1991.
At December 31, 1992 the Company had approximately $578,000 of loans which were
not included in the past due, non-accrual or restructured categories but where
the borrowers may not be able to comply with present payment terms.
Analysis of the Allowance/Provision for Loan Loss
The allowance for loan losses was established and is maintained by periodic
charges to the provision for loan loss, an operating expense, in order to
provide for losses inherent in any loan portfolio. Loan losses and recoveries
are charged or credited respectively to the allowance for loan losses as they
occur. See Table 5 for a five-year summary.
The allowance/provision for loan losses is determined by management by
considering such factors as the size and character of the loan portfolio, loan
loss experience, problem loans, and economic conditions in its market area. The
risk associated with the lending operation can be minimized by evaluating each
loan independently based on criteria which includes, but is not limited to, (a)
the purpose of the loan, (b) the credit history of the borrower, (c) the market
value of the collateral involved, and (d) the down payment made.
Approximately 97% of First Fidelity's total gross loans are either secured by
deeds of trust on real property, security agreements on personal property,
insurance contracts from independent insurance companies or through the full
faith and credit of government agencies. The Corporation's lending policies
require substantial down payments along with current market appraisals on the
collateral when the loans are originated, thus reducing the risk of any
potential losses.
To further minimize the risks of lending, quarterly reviews of the loan
portfolio are made to identify problem loans and to determine the course of
action. Collection policies have been developed to monitor the status of all
loans and are activated when a loan becomes past due.
The entire allowance for loan losses is available to absorb any particular loan
loss. However, for analytical purposes, the allowance could be allocated based
on net historical charge-offs of each loan type for the last five years. If
applied, installment (consumer) loans would require 51% of the reserve while
real estate and commercial loans would require 11% and 38% respectively. The
volatility of the market value of the collateral of a consumer loan is the
primary reason for the larger percentage allocation of the allowance to this
loan type.
Management believes significant factors affecting the allowance are reviewed
regularly and that the allowance is adequate to cover potentially uncollectable
loans. First Fidelity has no exposure from troubled debts to lesser developed
countries nor from significant amounts of agricultural, real estate or energy
related loans.
The average allowance to average loans outstanding ratio increased to 1.29% in
1992 from 1.27% and 1.10% in 1991 and 1990 respectively. The allowance for loan
losses to loan balances at year-end was 1.28%, 1.32% and 1.21% for years, 1992,
1991, and 1990 respectively.
Net charge-offs in 1992 of $476,000 increased 55% from $308,000 in 1991. Of the
$595,000 gross charge-offs in 1992, $324,000 resulted from two charge-offs of
$161,000 and $163,000 respectively. A loan made to an insurance company who used
a savings passbook as collateral declared bankruptcy. The bankruptcy court has
frozen the passbook and has not allowed the subsidiary bank access to the funds.
Legal counsel has been retained in order to have the passbook released. The loan
was charged-off pending the outcome of these proceedings but management expects
a full recovery.
Beginning in 1991 one of the Corporation's subsidiaries that finances heavily in
the retail automobile business changed its policy regarding losses recognized on
repossessions. The automobile is now written to current market value upon
repossession as opposed to recording the loss at the time of resale. Any
additional loss or recovery on the subsequent resale is applied to the
allowance. This has the potential of resulting in higher installment loan
charge-offs and recoveries.
F-76
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
TABLE 6
Securities Maturities and Yields
(Dollar Amounts in Thousands) Maturity Schedule
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
------------------------------------------------------------------------------------
PAR PAR PAR PAR
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities $18,000 6.38% $18,600 5.99% $ -0- -0-% $ -0- -0-%
U.S. Government agency securities 12,500 7.07% 23,050 6.20% 4,178 8.26% 576 9.19%
State and municipal obligations 870 9.44% 3,170 9.81% 480 11.36% 295 13.08%
Other securities 5 5.50% 10 5.53% -0- -0-% 1,892 7.91%
Other investments -0- -0-% -0- -0-% -0- -0-% 1,367 9.48%
Equity securities -0- -0-% -0- -0-% -0- -0-% 934 6.42%
- -----------------------------------------------------------------------------------------------------------------------------------
Total $31,375 $44,830 $4,658 $5,064
===================================================================================================================================
Tax equivalent
adjustment for calculation for yield* $ 28 $ 106 $ 19 $ 13
===================================================================================================================================
*Weighted average yields on tax-exempt obligations have been computed on a fully
tax-equivalent basis assuming a tax rate of 34 % .
Investments
Investments represent the second largest user of financial resources. The
investment portfolio, shown in Table 6, includes United States securities, state
and municipal obligations, other securities consisting of collateralized
mortgage obligations (CMO), investments in mortgage-backed securities, and
equity securities of the Federal Reserve Bank and the Federal Home Loan Bank.
The Company does not maintain a trading account and it is management's intent to
hold securities until their maturity. First Fidelity has historically not been
dependent upon its investment portfolio as a source of liquidity which has been
met in the form of cash and federal funds sold. Because the Corporation does not
anticipate selling securities to meet its liquidity needs, nor have they in the
past, future effects on net income, portfolio yields, and capital adequacy from
such sales are not expected to be material.
During 1992 First Fidelity realized a net gain of $2,000 from the sale of two
securities. In the fourth quarter of 1991 the Corporation reduced a $300,000
housing project municipal bond to its current market value of $200,000 after the
guarantor of the security, an insurance company, came under strict supervision
of the state insurance commission. Even though the security paid interest
regularly and was not in default, uncertainty surrounded its disposition. In
1992 the security was sold for $215,000, resulting in a $15,000 gain.
Included in "Other investments" at year-end 1991 was a mortgage-backed security
with a book value of $208,000 which was in default of both principal and
interest. In 1992 the servicing bank purchased the security resulting in a
$13,000 loss.
Investment securities by year-end 1992 increased $9,040,000 or 12% over year-end
1991 while federal funds sold decreased $7,356,000 or 29% during the same
period. Federal funds sold are consistently maintained at levels that will cover
short-term borrowings related to securities sold under repurchase agreements.
Because of declining interest rates and the bank's ability to borrow funds from
the Federal Home Loan Bank, excess federal funds sold were transferred to U.S.
Government Securities which produce higher rates without significantly
sacrificing liquidity.
Two of First Fidelity's subsidiaries became members of the Federal Home Loan
Bank through the purchase of $790,000 of equity securities to provide additional
liquidity if the need should arise. The Corporation has limited foreign debt
securities of $15,000 and other equity securities of Federal Reserve Bank stock
of $144,000. While concentrations of credit risk are not defined in absolute
terms for disclosure purposes, the Corporation has $2,740,000 of municipal
school district bonds outstanding at December 31, 1992. With declining rates on
investments in 1992, the market value of the Corporation's securities, as shown
in Note D to the Consolidated Financial Statements, increased to $89,153,000 or
$1,846,000 above the book value of $87,307,000. This represents an approximate
2% increase of market over book value.
The Corporation employs an outside investment firm to analyze, evaluate, and
make investment recommendations to management based on such criteria as security
ratings, yields, and terms. First Fidelity does not invest in any one type of
security over another. Funds allocated to the investment portfolio are
constantly monitored by management to ensure that a proper ratio of liquidity
and earnings is maintained.
F-77
- -------------------------------------------------------------------------------
First Fidelity will continue to use conservatism in its future security
purchases. The acquisition of a subsidiary in 1990 resulted in two types of
investments, collateralized mortgage obligations (CMO) and mortgage-backed
securities being obtained that were not consistent with the Corporation's
conservative policy. Future investments in these types of securities is not
expected.
Deposits
Table 7 highlights average deposits and interest rates during the last three
years. Average deposits in 1992 have increased approximately $2,300,000 or 1%
over 1991 which had increased approximately $62,300,000 or 33% over 1990. The
November 1990 acquisition of FirstBank Shinnston resulted in an average of
$11,000,000 in total deposits for a two-month period in 1990 and $69,000,000 for
the twelve month period in 1991.
Competition for deposits in First Fidelity's market area is intensive and has
occurred from both inside and outside the banking industry through stocks,
bonds, government securities, and mutual funds. The Corporation has not in the
past engaged in the practice of purchasing deposits through higher than market
rates. Interest margins are managed and maintained at levels to provide an
average return on our investment.
One way the Corporation competes effectively is through strategic placement of
banking facilities. In 1992 one subsidiary completed and opened a full-service
banking facility in order to better serve its customers.
TABLE 7
DEPOSITS
The monthly average amount of deposits are summarized below:
(Dollar Amounts in Thousands)
Year Ended December 31
------------------------------------------------------------------------------
1992 1991 1990
------------------------------------------------------------------------------
Cost of Cost of Cost of
Amount Funds Amount Funds Amount Funds
------------------------------------------------------------------------------
Non-interest-bearing demand deposits $ 30,428 0% $ 29,509 0% $ 22,113 0%
Interest-bearing demand deposits 52,429 3.29% 48,750 4.35% 36,329 4.76%
Savings deposits 80,726 3.78% 71,624 4.67% 53,435 5.00%
Time deposits 92,652 4.95% 104,051 6.41% 79,700 7.00%
-----------------------------------------------------------------------------
$256,235 4.15% $253,934 5.41% $191,577 5.89%
=============================================================================
Maturities of time deposits of $100,000 or more (in thousands) outstanding at
December 31, 1991 are summarized as follows:
3 months or less $2,769
Over 3 through 6 months 2,034
Over 6 through 12 months 1,458
Over 12 months 1,818
------
$8,079
======
SHORT-TERM BORROWINGS
Short-term borrowings are presented in tabular form in Note K to the
Consolidated Financial Statements. These borrowings consist of securities sold
under repurchase agreements and treasury tax and loan notes purchased.
Securities sold under repurchase agreements are offered to customers for terms
as short as one day with interest rates based on the federal funds rate for that
day. Customers who want the advantage of liquidity combined with a competitive
interest rate take advantage of these agreements which are secured by both
United States Treasury and Agency securities, pledged from the Bank's investment
portfolio.
Treasury tax and loan notes consists of funds deposited by customers for payment
of their federal taxes. The balance in the bank's note account is limited to
$1,500,000 with any excess called by the Treasury Department on a daily basis.
Interest rates are determined by the federal government.
F-78
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
TABLE 8
CAPITAL RESOURCES
1992 1991 1990
--------------------------
Return on average assets 1.16% 1.05% 1.06%
Dividend payout ratio 38.5% 40.8% 39.3%
Average equity to average assets ratio 9.7% 9.1% 10.0%
Return on average equity 12.0% 11.5% 10.6%
Times
Earnings retained 61.5% 59.2% 60.7%
Equals
Internal capital growth 7.4% 6.8% 6.4%
Shareholders' Equity
Maintaining a strong capital position in order to absorb inherent risk is one of
management's top priorities. Selected capital ratios for the last three years,
presented in Table 8, "Capital Resources", reveals that the Corporation is
enjoying favorable capital growth. The return on average assets and the return
on average equity have increased 11 and 50 basis points respectively in 1992.
Average equity to average assets increased 60 basis points in 1992 after a 90
basis point decline in 1991 as a result of the acquisition of FirstBank
Shinnston. Assets for FirstBank were averaged in for a full twelve month period
in 1991 as opposed to two months in 1990. For the three years presented, the
internal capital growth ratio has increased over the period from 6.4% in 1990 to
7.4% in 1992. Earnings retained of 61.5% is the result of increased earnings in
1992 as opposed to any decrease in dividends. Earnings retained declined in 1991
primarily as a result of the 352,464 shares of additional common stock and
10,000 shares of Series A 8% cumulative convertible preferred stock which were
issued for the acquisition of FirstBank Shinnston. Cash dividends of $1,202,113
or $.52 per average common share and $152,000 or 8% on preferred stock were paid
in 1992. Company paid dividends are dependent on dividends received from the
subsidiary banks. There are certain regulatory restrictions regarding the amount
subsidiaries are able to transfer in dividends or loans to the Company. See Note
C for further information.
Discount accretion of $32,004 on preferred stock for 1992 was charged to
retained earnings to increase the book value of the stock to the
redemption/conversion amount by the redemption date. First Fidelity's 10,000
shares of 8% cumulative preferred stock with a par value of $1.25 per share
were recorded at the fair market value of $174 per share when issued. Periodic
accretion using the straight line method which approximates the interest method
will increase the stock to $190 per share by the redemption date. Five years
after issuance and for a 30-day period (the redemption period) the cumulative
preferred stock may be redeemed by the Corporation at a redemption price of
$190. The holder of the cumulative preferred stock has the option to convert
the stock into shares of First Fidelity common stock based on the quotient of
$190 divided by the book value per share of the common stock on the redemption
date. Holders of the cumulative preferred stock who do not surrender their
shares by the redemption date will have their shares automatically converted
into shares of First Fidelity common stock based on the formula previously
described.
First Fidelity's dividend reinvestment plan issued 11,352 additional shares of
common stock and added $14,190 to common stock and $159,742 to additional paid
in capital in 1992.
The Corporation's 12,656 shares of treasury stock, valued at cost of $136,540,
are deducted from shareholders' equity. There are no plans to retire the stock.
Banking regulations in 1989 established minimum capital ratios for banks and
bank holding companies to be met by year-end 1992. The primary purpose of these
requirements is to assess the riskiness of a financial institution's balance
sheet and off balance sheet financial instruments in relation to adjusted
capital. The two year period up to December 31, 1992 is considered a transition
period. A minimum total qualifying capital ratio of at least 8% with at least
4% of capital composed of Tier I (core) capital must be met by year-end 1992.
Tier I capital includes common equity, noncumulative perpetual preferred stock
and minority interest less goodwill and other disallowed intangibles. Tier II
(supplementary) capital includes subordinate debt intermediate term preferred
stock, the allowance for loan losses and preferred stock not qualifying for
Tier I capital. Tier II capital is limited to lOO% of Tier I capital. At
December 31, 1992 First Fidelity's consolidated risk-based capital ratio for
Tier I and Tier II capital is 18.2% and 19.9% respectively, thus meeting the
required 4% and 8% for Tier I and Tier II capital. Table 9 is a summary of both
the Company's risk-based capital and leverage components and ratios.
F-79
TABLE 9
RISK BASED CAPITAL
(Dollar Amounts in Thousands)
December 31
1992 1991
-------------------
Tier I Capital:
Shareholders' equity $ 30,478 $ 28,143
Less disallowed intangibles 162 236
-------- --------
Total Tier I Capital $ 30,316 $ 27,907
-------- --------
Eligible amount of the allowance for loan losses $ 2,080 $ 2,137
Eligible amount of intermediate term preferred stock 724 1,066
-------- --------
Total Tier II Capital $ 33,120 $ 31,110
======== ========
Risk adjusted assets $166,245 $170,771
Average assets $305,288 $301,588
Risk-based capital ratios:
Tier I 18.24% 16.34%
Tier II 19.92% 18.22%
======== ========
Tier I leverage ratio 9.93% 9.25%
Common Stock and Dividends
The following tables show the highs and lows of First Fidelity Bancorp's stock
each quarter as reported to the Corporation along with the quarterly dividends.
Corporation common stock is traded on the NASDAQ exchange under the symbol
"FFWV" (listed in Wall Street Journal as "Fst Fdlty WVa") through outside
brokers. First Fidelity's stock is transferred at Corporate headquarters.
TABLE 10
1992 1991
----------------------------------
HIGH LOW HIGH LOW
----------------------------------
First Quarter $13.28 $10.35 $ 9.00 $ 6.63
Second Quarter 14.63 12.60 9.68 7.88
Third Quarter 17.25 13.87 11.03 9.23
Fourth Quarter 19.50 16.25 11.93 10.58
1992 1991
----------------------------------
DECLARED PAID DECLARED PAID
----------------------------------
First Quarter $.11 $ .11 $ .11 $ .11
Second Quarter .11 .11 .11 .11
Third Quarter .12 .12 .11 .11
Fourth Quarter .18 .18 .16 .16
----------------------------------
$.52 $ .52 $ .49 $ .49
=====================================================
Year 1991 and the first half of 1992 have been restated to reflect a 10% stock
dividend declared in July 1992. The weighted average number of shares
outstanding was 2,307,195 in 1992 and 2,295,623 in 1991.
The Corporation's subsidiary banks' ability to pay dividends are restricted to
the net profits for the year combined with the net profits less dividends for
the two preceding calendar years.
As of January 31, 1993, the Corporation had 1,088 shareholders of record.
F-80
Management's Discussion and Analysis
- ------------------------------------------------------------------------------
Results of Operations
Net Interest Income (Taxable-Equivalent Basis)
Net interest income, the income received on investments in loans, securities,
due from banks, and federal funds less the interest paid to depository and
short-term creditors to fund these investments, is First Fidelity's primary
source of revenue. The following discussion and analysis of the Corporation's
net interest income is based primarily on Table 1, "Average Balances and
Interest Rates," Table 13, ''Net Interest Income," Table 14, "Rate/Volume
Analysis of Changes in Interest Income and Interest Expense'' and on Table 17,
"Interest Sensitive Assets and Liabilities'' for all years presented using the
Federal statutory rate of 34%. Tables 1, 13 and 14 have been prepared on a tax-
equivalent basis. The stated (pre-tax) yield on tax-exempt loans and securities
is lower than the yield on taxable assets of similar risk and maturity. The
average balances were calculated on a monthly basis. Since FirstBank Shinnston
was acquired November 1, 1990, the tables and consequently the following
discussions use FirstBank average balances and earnings for a two month period
in 1990.
The net yield on interest-earning assets has increased for all years presented
to 5.09% in 1992 from 4.94% and 4.88% in 1991 and 1990 respectively. Net
interest earnings increased $525,000 or 4% in 1992 while 1991 earnings increased
$3,250,000 or 31% from $10,567,000 in 1990. FirstBank Shinnston contributed a
full twelve months of net interest income in 1991 resulting in a higher dollar
volume of net interest earnings for that year. Table 14 analyzes the reason for
the changes in interest income by applying either volume or rate changes to
interest sensitive assets and liabilities. Both asset and liability volumes in
1992 were volatile but resulted in increased earnings of $653,000 while rates
declined for each asset and liability and resulted in a net reduction of
$128,000 in net interest income.
Tax-equivalent loan income decreased $554,000 or 3% in 1992 while 1991 net loan
income increased $3,670,000 or 26% over the prior year primarily as a result of
the increased volume resulting from the FirstBank acquisition. In 1992 volume
increased loan income by $976,000 while interest rates decreased loan income by
$1,530,000. Average loan yields have decreased 86 basis points in 1992 after a
30 basis point decline in 1991. As interest rates for loans continued to decline
and with approximately $68,000,000 of the loan portfolio maturing in 1992, loan
income declined. As of year-end 1992 approximately $66,000,000 or 37% of loans
mature within the next year. Variable rates and short-term maturities are two
tools management is using to achieve greater flexibility in a changing rate
environment.
Interest rates on investment securities have declined 121 basis points in 1992
resulting in a $1,001,000 decline in taxable equivalent income due to rates.
Added to this is a $94,000 decrease in income due to lower volume with the
result that investment income declined by a total of $1,095,000 or 15%.
Approximately $26,000,000 of securities matured in 1992. Reinvestment yields on
the approximately $31,500,000 of maturing securities in 1993 will be used to
determine appropriate maturities or alternative investments.
Federal funds sold income decreased $830,000 or 54%, in 1992 after a $205,000 or
12% decrease in 1991. Volume increased earnings $450,000 in 1991 when it became
appropriate to remain liquid in anticipation of rates on longer term investments
rising in the future. When federal fund rates continued to decline in 1992 from
6.24% in 1991 to 3.81%, management chose alternative investments such as loans
and taxable securities without sacrificing liquidity, earnings, or a well
balanced portfolio. Two of First Fidelity's subsidiaries have become members of
the Federal Home Loan Bank which provides members with preestablished methods in
providing for emergency liquidity needs and eliminated the need to carry excess
funds in anticipation of liquidity requirements. First Fidelity will continue to
diversify its investments by allocating funds to loans which yield higher
interest rates while at the same time investing in federal funds to achieve
proper liquidity levels.
Interest-bearing deposit expense decreased $2,774,000 or approximately 23% in
1992 after a $2,123,000 or 21% increase in 1991 resulting from $50,000,000 in
additional average interest-bearing deposits of FirstBank Shinnston. A volume
decrease caused interest expense to decline $151,000 while declining rates
caused a $2,623,000 reduction in interest expense in 1992. Rates paid on
savings/NOW accounts/insured earnings and time deposits decreased 95 and 146
basis points respectively in 1992 which had decreased 41 and 59 basis points
respectively in 1991. A shifting of funds from time deposits to savings has
occurred as a result of the narrowing of the spread between these two types of
deposits and the short term nature of the savings deposit. As the Corporation's
higher yielding investment opportunities declined in 1992, deposit rates were
reduced in order to maintain a proper net interest margin. As of year-end 1992
approximately $212,000,000 of interest-bearing deposits are repriceable in one
year. Interest rates paid on deposits will have a direct effect on investment
rates required to maintain proper margins.
A $750,000 note payable was executed with Pittsburgh National Bank in November
of 1990 in conjunction with the acquisition of FirstBank Shinnston. Interest of
$37,000 was paid in 1991 and the note was satisfied in July of 1991.
Short-term borrowings expense, consisting of securities sold under repurchase
agreements and treasury tax and loan notes expense, decreased $192,000 or 24% in
1992 which had decreased $379,000 or 32% in 1991. Volume decreases resulted in
$4,000 of lower expense while lower interest rates paid decreased interest
expense by $188,000.
In summary, the increase in net interest income of $525,000 between years 1992
and 1991, as shown in Table 14, was primarily the result of increases in asset
volume resulting in $498,000 of additional earnings while decreases in
liability volume increased earnings by $155,000. Interest rates declined
further on the asset rather than on the liability accounts resulting in
$2,976,000 of lower asset earnings while lower liability rates reduced interest
expense by only $2,848,000. This resulted in a net of $128,000 of lower net
interest income. The change in net interest income of $3,250,000 between years
1991 and 1990 was the result of net asset volume resulting in $3,102,000 of
additional earnings while net declining liability rates increased
F-81
- -------------------------------------------------------------------------------
earnings $148,000. The acquisition of FirstBank Shinnston provided the asset
growth in 1991 while careful monitoring of market conditions provided the lower
rate. In 1992 liability rates, due to market conditions, did not decline to a
point where the decline in asset rates would provide the offset. First
Fidelity's subsidiary banks employ simulation models to facilitate the
evaluation and control of funding and investment strategies. Committees meet
regularly to evaluate the Bank's current position and analyze and plan for
future interest rate sensitivity positions and product enhancements.
TABLE 11
Five Year Comparative Financial Information
(In thousands, except per share data)
SUMMARY OF OPERATIONS 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $ 17,243 $ 17,753 $ 14,027 $ 13,267 $ 12,041
Interest on investment securities
Taxable 5,674 6,567 5,062 4,611 4,103
Tax-exempt 355 488 457 273 285
Interest on federal funds sold 701 1,531 1,736 1,146 869
Interest on deposits at other banks 1 -0- -0- -0- 1
- ----------------------------------------------------------------------------------------------------
Total Interest Income 23,974 26,339 21,282 19,297 17,299
- ----------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 9,364 12,138 10,014 9,540 8,859
Interest on short-term borrowings 597 790 1,168 827 322
Interest on notes payable -0- 36 12 -0- 8
- ----------------------------------------------------------------------------------------------------
Total interest expense 9,961 12,964 11,194 10,367 9,189
- ----------------------------------------------------------------------------------------------------
Net interest income 14,013 13,375 10,088 8,930 8,110
- ----------------------------------------------------------------------------------------------------
Provision for loan losses 429 626 384 358 172
- ----------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 13,584 12,749 9,704 8,572 7,938
Other income 1,412 1,357 999 779 743
Other expense 9,609 9,426 7,179 6,456 6,548
Applicable income taxes 1,840 1,515 1,063 843 508
- ----------------------------------------------------------------------------------------------------
Net income $ 3,547 $ 3,165 $ 2,461 $ 2,052 $ 1,625
====================================================================================================
Per share data:*
Net income $ 1.46 $ 1.30 $ 1.25 $ 1.09 $ .86
Dividends declared $ .521 $ .491 $ .486 $ .454 $ .454
Shareholders' equity, end of year $ 13.21 $ 12.26 $ 13.35 $ 11.49 $ 10.81
FINANCIAL HIGHLIGHTS
Total assets $306,192 $302,818 $299,526 $211,342 $209,330
Total deposits $257,651 $256,227 $251,575 $176,566 $179,722
Total long-term debt $ -0- $ -0- $ 750 $ -0- $ -0-
Redeemable preferred stock $ 1,809 $ 1,777 $ 1,745 $ -0- $ -0-
Total shareholders- equity $ 30,478 $ 28,143 $ 26,191 $ 21,690 $ 20,424
Return on average assets 1.16% 1.05% 1.06% .97% .80
Return on average shareholders' equity 11.99% 11.53% 10.61% 9.68% 8.04
Dividend-payment ratio on common stock 35.74% 37.81% 39.00% 41.83% 52.78
Average equity to average assets ratio 9.69% 9.10% 9.95% 10.00% 10.00
*Per share data was calculated using a weighted average of 2,307,195 in 1992.
2,295,623 in 1991, 1,96l,686 shares in 1990. 1,888,176 shares in 1989, and
1,889,875 in 1988. Years 1988 through 1991 were restated to reflect a 10% stock
dividend declared in July 1992.
F-82
Management's Discussion and Analysis
- ------------------------------------------------------------------------------
TABLE 12
Quarterly Earnings Summary
The following is a summary of the quarterly results of operations for the years
ended December 31, 1992 and 1991:
(In Thousands, except per share amounts)
March 31 June 30 September 30 December 31
-----------------------------------------------------------------------------------------
1992 1991 1992 1991 1992 1991 1992 1991
-----------------------------------------------------------------------------------------
Interest income:
Interest and fees on loans $4,389 $4,355 $4,325 $4,366 $4,314 $4,469 $4,215 $4,563
Interest on investment
securities:
Taxable 1,443 1,694 1,474 1,704 1,394 1,651 1,363 1,518
Tax-exempt 97 137 92 128 85 119 81 104
Interest on federal funds sold 263 430 171 417 134 347 133 337
Interest on deposits in other
banks -0- -0- -0- -0- -0- -0- 1 -0-
-----------------------------------------------------------------------------------------
Total Interest Income 6,192 6,616 6,062 6,615 5,927 6,586 5,793 6,522
Interest expense:
Interest on deposits 2,603 3,158 2,417 3,084 2,244 3,003 2,100 2,893
Interest on short-term
borrowings 130 217 155 206 146 174 166 193
Interest on notes payable -0- 18 -0- 18 -0- -0- -0- -0-
-----------------------------------------------------------------------------------------
Total Interest Expense 2,733 3,393 2,572 3,308 2,390 3,177 2,266 3,086
Net interest income 3,459 3,223 3,490 3,307 3,537 3,409 3,527 3,436
Provision for loan losses 109 122 92 121 114 104 114 279
Net interest income after
provision for loan losses 3,350 3,101 3,398 3,186 3,423 3,305 3,413 3,157
Net gains/(losses) on investment
securities 2 (13) -0- -0- -0- -0- -0- (100)
Other income 407 472 305 343 334 341 364 201
Other expense 2,335 2,309 2,423 2,416 2,361 2,304 2,490 2,284
Income before income taxes 1,424 1,251 1,280 1,113 1,396 1,342 1,287 974
Applicable income tax 492 404 433 352 480 441 435 318
-----------------------------------------------------------------------------------------
Net Income $ 932 $ 847 $ 847 $ 761 $ 916 $ 901 $ 852 $ 656
Per share:
Net income .38 .35 .35 .31 .38 .37 .35 .27
Dividends declared .11 .11 .11 .11 .12 .11 .18 .16
Per common share data for 1991 and the first half of 1992 has been adjusted to
reflect a 10% stock dividend declared in July 1992.
TABLE 13
NET INTEREST INCOME
(TAXABLE-EQUIVALENT BASIS)
(In Thousands) Year Ended December 31
-----------------------------------------------
1992 1991 1990 1989 1988
-----------------------------------------------
Interest income per summary
of operations $23,974 $26,339 $21,282 $19,297 $17,299
Adjustment to fully taxable
basis 329 442 480 412 494
- -------------------------------------------------------------------------------
Adjusted interest income 24,303 26,781 21,762 19,709 17,793
Interest expense 9,961 12,964 11,195 10,367 9,188
- -------------------------------------------------------------------------------
Net interest income adjusted
to a fully
taxable-equivalent basis* $14,342 $13,817 $10,567 $ 9,342 $ 8,605
===============================================================================
*The adjustment to fully taxable basis for income on tax-exempt obligations has
been computed assuming a federal tax rate of 34% for the years 1988 through
1992.
F-83
TABLE 14
Rate/Volume Analysis of Changes in Interest Income and Interest Expense
On A Fully Taxable-Equivalent Basis
(In Thousands)
1992 COMPARED TO 1991 1991 COMPARED TO 1990
- ------------------------------------------------------------------------------------------ --------------------------------------
VOLUME RATE NET VOLUME RATE NET
- ------------------------------------------------------------------------------------------ --------------------------------------
Income earned on:
Loans $ 976 $(1,530) $ (554) $4,188 $ (518) $3,670
Investment securities:
Taxable 101 (995) (894) 1,668 (161) 1,507
Tax-exempt (195) (6) (201) 29 18 47
Federal funds sold (384) (446) (830) 450 (655) (205)
Interest-bearing deposits with other banks -0- 1 1 -0- -0- -0-
- ------------------------------------------------------------------------------------------ --------------------------------------
Total Interest-Earning Assets 498 (2,976) (2,478) 6,335 (1,316) 5,019
- ------------------------------------------------------------------------------------------ --------------------------------------
Interest paid on:
Savings and NOW accounts 580 (1,263) (683) 1,514 (489) 1,025
Time deposits (731) (1,360) (2,091) 1,704 (606) 1,098
Short-term borrowings (4) (188) (192) (9) (370) (379)
Note payable -0- (37) (37) 24 1 25
- ------------------------------------------------------------------------------------------ --------------------------------------
Total Interest-Bearing Liabilities (155) (2,848) (3,003) 3,233 (1,464) 1,769
- ------------------------------------------------------------------------------------------ --------------------------------------
Change in Net Interest Income $653 + $ (128) = $ 525 $ 3,102 + $ 148 = $3,250
=========================================================================================== ======================================
The analysis of year-to-year changes in net interest income is segregated into
amounts attributable to both volume and rate variances. In calculating the
variances, the changes are first segregated into (1) changes in volume (change
in volume times old rate), (2) changes in rates (change in rate times new
volume) and (3) changes in rate/volume (change in rate times the change in
volume). The latter change in rate/volume has been allocated 100% to the change
in rate variances.
Table 15
The major sources of per share earnings increases and decreases are shown
below:
Changes in: 1992/1991 1991/1990
- ------------------------------------------------------------------------
Net interest income $ .36 $ 1.32
Salaries and benefits (.09) (.53)
Occupancy expense -0- (.11)
Other income .02 .16
Other expense .01 (.34)
Applicable income tax (.14) (.20)
Other -0- (.25)
----------- ------------
Net Income $ .16 $ .05
=========== ============
Changes in years 1991/1990 have been restated to reflect a 10% stock dividend
declared in July 1992.
Other Income and Other Expenses
An analysis of other income and other expense is presented in Table 16.
FirstBank Shinnston contributed two months of income and expense in 1990 and
twelve months in 1991.
Fiduciary income is accounted for under the cash basis of accounting which
results in fluctuating earnings from year to year. Trust
income increased $72,000 or 34% in 1992 after a decline of $64,000 or 23% in
1991. Service charges on deposit accounts increased $19,000 or 2% in 1992 as
compared to $293,000 or 63% in 1991. FirstBank Shinnston recorded $276,000 of
service charge income in 1991 and contributed approximately $50,000 for two
months in 1990. Other service charges, commissions and fees decreased $37,000 or
15% in 1992 while 1991 fees increased $94,000 or 65% primarily as a result of
$54,000 in fees from FirstBank Shinnston. Investment gains of $2,000 in 1992
resulted from the disposal of two securities. In the fourth quarter of 1991 a
$300,000 municipal bond to finance a housing project was reduced to the current
market value of $200,000 after the guarantor of the security, an insurance
company, came under strict supervision by the state insurance commission. The
security was paying interest regularly but because of the uncertainty of the
situation the security was reduced to market. The bond subsequently was sold for
$215,000, resulting in a gain of $15,000 recorded in 1992. A mortgage-backed
security with a book value of $208,000 which was in default of both principal
and interest was purchased by the servicing bank result-
F-84
Management's Discussion and Analysis
- -------------------------------------------------------------------------------
ing in a $13,000 loss in 1992. A pension settlement gain in 1991 resulted from
the lump-sum settlement of pension benefits with several retiring employees.
Other income decreased $46,000 or 58% in 1992 after a $38,000 or 90% increase in
1991. FirstBank Shinnston contributed an additional $44,000 of other income in
1991 while other income at First Fidelity's three other subsidiaries declined
approximately $6,000.
Total other expenses increased $183,000 or approximately 2% in 1992 after a
$2,247,000 or 31% increase in 1991 resulting from one full year of FirstBank
expense. Salary and benefit expense increased $203,000 or 4% in 1992 resulting
from salary increases. Salary and benefits increased $1,213,000 or 34% in 1991
with FirstBank contributing $1,095,000 of this increase leaving a remaining
salary increase of approximately 3%. Bank premises and occupancy expense
increased $2,000 over 1991 which had increased $255,000 or 21% in 1991.
FirstBank incurred an additional $393,000 of premises and occupancy expense in
1991 offset by an approximate $108,000 decline in purchase accounting
amortization and a $30,000 decline in premises and occupancy expense at First
Fidelity's three other subsidiaries. Business taxes include all taxes that are
not generated from net income such as franchise tax, business and occupation
tax, purchases use tax, and sales tax. Franchise tax is paid based on capital,
business and occupation tax is based on gross income, and use and sales taxes
are based on purchases. Business taxes have declined for all years presented
with a $16,000 or 11% reduction in 1992 and a $6,000 or 4% reduction in 1991.
FirstBank incurred an additional $14,000 of business taxes in 1991 while the
remaining subsidiaries experienced an approximate $20,000 decline. Data
processing fees declined $73,000 or 16% in 1992 after an $83,000 or 16% decline
in 1991 due primarily to the renegotiation of a contract with the vendor. Three
of First Fidelity's subsidiaries are under this contract while the fourth
processes in-house. Federal Deposit Insurance Corporation (FDIC) insurance
increased $57,000 or 11% in 1992 after a $312,000 or 139% increase in 1991.
Other expenses, each less than 1% of total income, remained relatively
consistent with 1991. FirstBank contributed $631,000 of additional expenses in
1991.
TABLE 16
Other Income and Other Expenses
A summary of items included in other income and other expenses is listed below.
(In Thousands)
Other Income: 1992 1991 1990
-----------------------
Fiduciary activities (trust income) $ 284 $ 212 $ 276
Service charges on deposit accounts 780 761 468
Other service charges, commissions, fees 202 239 145
Safe deposit fees 93 93 68
Net gains (losses) on investment securities 2 (113) -0-
Pension settlement gain -0- 74 -0-
Gain on sale of fixed assets 17 2 -0-
Gain on sale of other real estate -0- 9 -0-
Other income 34 80 42
-----------------------
$1,412 $1,357 $ 999
- ------------------------------------------------------------------------------
Other Expenses: 1992 1991 1990
-----------------------
Salaries and employee benefits $4,993 $4,790 $3,577
Bank premises and occupancy expense (net) 1,471 1,469 1,214
Business taxes 134 150 156
Data processing fees 378 451 534
Loss on sale of other real estate 56 -0- -0-
Federal deposit insurance 594 537 225
Other expenses (each less than 1% of total income) 1,983 2,029 1,473
-----------------------
$9,609 $9,426 $7,179
===============================================================================
Income Taxes
Applicable income taxes of $1,840,900 in 1992 consist of both federal and state
taxes amounting to $1,571,400 and $269,500 respectively. For the last three
reported years the federal tax rate was 34%. The state income tax rate was
initially 9.75% on July 1, 1987 when the state business and occupation tax on
banks was repealed and credit could no longer be applied against state income
tax liability. Reductions in the tax rate of .15% per year occurred beginning
July 1, 1988 and will continue to be reduced .15% on July 1 for the next four
years. For the period January 1, 1992 through June 30, 1992 the rate was 9.15%,
while the rate for the period July 1, 1992 through December 31, 1992 was 9.00%.
The Corporation acquired through the recent acquisition of FirstBank Shinnston
an alternative minimum tax (AMT) credit of $134,000. This has reduced cash tax
payments through 1992.
Impacting the tax provisions for the three years covered in this report is the
level of tax-exempt income on loans and securities which was $640,000, $857,000
and $933,000 for years 1992, 1991, and 1990 respectively. Pursuant to the Tax
Reform Act of 1986, investment in these tax-exempt assets has become less
attractive. The effect on applicable tax expense of these tax-exempt investments
can be seen in Note J.
F-85
- -------------------------------------------------------------------------------
The Financial Accounting Standard Board issued FASB No. 109 "Accounting for
Income Taxes" in February 1992. This statement, effective for fiscal years
beginning after December 15, 1992, amends or supersedes existing pronouncements
relating to the accounting for income taxes. The Corporation will adopt the
statement in January 1993. FASB No. 109 requires a liability approach to
accounting for income taxes as opposed to a deferred approach. The liability
approach places emphasis on the accuracy of the balance sheet while the deferred
approach emphasizes the correctness of the income statement. Under the liability
approach, deferred taxes are computed based on the tax rates in effect for the
periods in which temporary differences are expected to reverse. An annual
adjustment of the deferred tax liability or asset is made for any subsequent
change in tax rates. The effect of implementation on the Company's results of
operations is not expected to have a material effect.
Effects of Inflation/Changing Prices
The effects of inflation on operations of First Fidelity occurs through
increased operating costs which can be recovered through increased prices for
services. Virtually all of the banks assets and liabilities are monetary in
nature and can be repriced on a more frequent basis than in other industries.
Every effort is being made through interest sensitivity management to monitor
products and interest rates and their impact on future earnings.
Liquidity and Interest Rate Sensitivity Management
The Corporation's subsidiary banks use a simulation model as a tool to ensure
that sufficient liquid funds are available to satisfy the normal loan and
deposit needs of its customers while taking advantage of investment
opportunities as they arise in order to maintain consistent growth of net
interest income. Cash and due from banks, marketable investment securities with
maximum one year maturities, and federal funds are the principal components of
asset liquidity. Referring to Table 17, the Corporation is in a liability
sensitive position up to one year which is more beneficial in our current period
of declining interest rates since liabilities can be repriced at lower rates. In
periods of rising interest rates, interest sensitive assets are more favorable
since they allow the adjustment of interest-sensitive assets prior to maturing
interest sensitive liabilities. The three month category of interest sensitive
liabilities includes approximately $140,612,000 consisting of savings, NOW
accounts, and insured earnings which can be adjusted in any one category at any
time to offset any positive gap in a declining rate environment.
Management utilizes variable rate loans, balloon real estate mortgages, and
adjustable rate deposits to maintain desired net interest margins. A procedural
process has been developed to monitor changes in market rates on interest-
sensitive assets and liabilities with appropriate action being taken when
warranted.
TABLE 17
INTEREST-SENSITIVE ASSETS AND
LIABILITIES
(In Thousands)
Over Three
Within Through Over
Three Twelve One
Months Months Year Total
-------------------------------------------
Interest-Earning Assets:
Due from banks/interest-bearing $ 20 $ -0- $ -0- $ 20
Loans 42,682 23,645 113,324 179,651
Investment securities:
Taxable 8,368 22,808 50,384 81,560
Non-taxable 170 200 4,443 4,813
Federal funds sold 18,303 18,303
-------------------------------------------
Total Interest-Earning Assets $ 69,543 $ 46,653 $168,151 $284,347
===========================================
Interest-Bearing Liabilities:
Interest-bearing demand deposits $ 54,683 $ -0- $ -0- $ 54,683
Savings deposits 85,929 85,929
Time deposits 33,921 37,650 14,353 85,924
Short-term borrowings 15,123 15,123
-------------------------------------------
Total Interest-Bearing Liabilities $ 189,656 $ 37,650 $ 14,353 $241,659
===========================================
Interest Sensitivity Gap (120,113) 9,003 153,798 42,688
Cumulative Interest Sensitivity Gap (120,113) (111,110) 42,688
Cumulative Gap Ratio .37 .51 1.18
F-86
Part I
Item 1. Financial Statements
First Fidelity Bancorp, Inc.
Consolidated Balance Sheet
(Dollars in Thousands)
(Unaudited)
Assets: September 30, 1993 December 31, 1992
- ------- ------------------ -----------------
Cash and due from banks $ 14,623 $ 13,912
Interest-bearing deposits 142 20
Federal funds sold 16,935 18,303
Investment securities (market value
at September 30, 1993-$88,240; at
December 31, 1992-$89,153) 86,135 87,307
Loans: 189,119 181,874
Less unearned interest 5,819 4,217
Allowance for loan loss 2,337 2,271
-------- --------
Net loans 180,963 175,386
Bank premises and equipment 7,881 7,912
Other assets 3,404 3,352
-------- --------
Total Assets $310,083 $306,192
======== =========
Liabilities:
- ------------
Deposits:
Non-interest bearing $ 31,317 $ 31,115
Interest bearing 227,893 226,536
-------- --------
Total deposits 259,210 257,651
Securities sold under repurchase agreements 14,206 13,431
Other liabilities 2,590 2,823
-------- --------
Total Liabilities 276,006 273,905
-------- --------
Redeemable Preferred Stock ($1.25 1,833 1,809
par value, 10,000 shares issued and
outstanding of Series A 8% Cumulative)
Shareholders' Equity:
Common stock ($1.25 par value 4,000,000
shares authorized: 2,335,938 issued and
outstanding-September 30, 1993; 2,327, 113
issued and outstanding-December 31, 1992) 2,920 2,909
Additional paid in capital 13,059 12,887
Retained earnings 16,401 14,818
-------- --------
32,380 30,614
Treasury stock at cost (12,656 shares) (136) (136)
-------- --------
Total Shareholders' Equity 32,244 30,478
-------- --------
Total Liabilities and Shareholders' Equity $310,083 $306,192
======== ========
F-87
First Fidelity Bancorp, Inc.
Consolidated Statements of Income
(Dollars in Thousands)
(Unaudited)
For Three Months Ending September 30
1993 1992
---- ----
Interest Income:
- ------------------
Interest and fees on loans $ 4,004 $ 4,314
Interest on investment securities:
Taxable 1,205 1,394
Tax-exempt 75 85
Interest on federal funds sold 135 134
------ ------
Total Interest Income 5,419 5,927
Interest Expense:
- -----------------
Interest on deposits 1,756 2,244
Interest on short-term borrowings 137 146
------ ------
Total Interest Expense 1,893 2,390
------ ------
Net Interest Income 3,526 3,537
Provision for loan losses (90) (114)
------ ------
Net Interest Income After
Provision For Loan Losses 3,436 3,423
Other Income:
- ------------
Fiduciary income 64 70
Service charges on deposit accounts 206 199
Other operating income 61 65
------ ------
Total Other Income 331 334
Other Expenses:
- --------------
Salaries and employee benefits 1,244 1,177
Net occupancy expense 368 374
Business taxes 33 33
Data processing fees 100 98
Federal deposit insurance 148 149
Other operating expenses 498 530
------ ------
Total Other Expenses 2,391 2,361
------ ------
Income Before Income Taxes 1,376 1,396
Applicable income taxes:
Federal 413 410
State 62 70
------ ------
Net Income $ 901 $ 916
Preferred stock dividends and discount accretion $ 46 $ 46
Net income available to common shareholders $ 855 $ 870
Earnings per average common share $ .37 $ .38
F-88
First Fidelity Bancorp, Inc.
Consolidated Statements of Income
(Dollars in Thousands)
(Unaudited)
For Nine Months Ending September 30
1993 1992
-------- --------
Interest Income:
- ------------------
Interest and fees on loans $12,064 $13,028
Interest on investment securities:
Taxable 3,769 4,311
Tax-exempt 223 274
Interest on federal funds sold 387 568
Interest due from banks 1 -0-
------- -------
Total Interest Income 16,444 18,181
Interest Expense:
- -------------------
Interest on deposits 5,603 7,264
Interest on short-term borrowings 399 431
------- -------
Total Interest Expense 6,002 7,695
------- -------
Net Interest Income 10,442 10,486
Provision for loan losses (255) (315)
------- -------
Net Interest Income After
Provision For Loan Losses 10,187 10,171
Other Income:
- -------------
Fiduciary income 211 233
Service charges on deposit accounts 582 577
Net gains/(losses) on investment securities 4 2
Other operating income 231 236
------- -------
Total Other Income 1,028 1,048
Other Expenses:
- ---------------
Salaries and employee benefits 3,819 3,662
Net occupancy expense 1,125 1,095
Business taxes 101 105
Data processing fees 297 284
Federal deposit insurance 442 445
Other operating expenses 1,433 1,528
------- -------
Total Other Expenses 7,217 7,119
------- -------
Income Before Income Taxes 3,998 4,100
Applicable income taxes:
Federal 1,200 1,199
State 173 206
------- -------
Net Income $ 2,625 $ 2,695
Preferred stock dividends and discount accretion $ 138 $ 138
Net income available to common shareholders $ 2,487 $ 2,557
Earnings per average common share $1.07 $ 1.11
F-89
First Fidelity Bancorp, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Unaudited)
For Period Ended September 30
1993 1992
-------- --------
OPERATING ACTIVITIES
Net income $ 2,625 $ 2,695
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 255 315
Provision for depreciation and amortization 498 484
Net amortization/(accretion) of security
premiums/discounts 848 473
Net amortization/(accretion) of loan premiums/discounts (33) (41)
(Gain)/loss on sale of securities (4) (2)
(Gain)/loss on sale of other real estate 4 52
(Gain)/loss on sale of fixed assets (8) (17)
(Gain)/loss on sale of repossessions (11) -0-
Net amortization/(accretion) of other assets 42 56
Net (increase)/decrease in accrued interest receivable 38 170
Net increase/(decrease) in accrued interest payable (206) (277)
Deferred income tax asset 121 (23)
Deferred income tax liability (29) -0-
Other (274) (113)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,866 3,772
INVESTING ACTIVITIES
Purchase of investment securities (29,250) (33,851)
Maturities of investment securities 29,578 26,180
Proceeds from sale of investment securities -0- 1,494
Net (increase)/decrease in loans (5,798) (3,660)
Purchases of premises and equipment (467) (666)
Proceeds from sale of fixed assets 7 24
Net (increase)/decrease in other assets 1 45
------- -------
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES (5,929) (10,434)
FINANCING ACTIVITIES
Net increase/(decrease) in demand deposits, NOW accounts,
and savings accounts 9,971 10,075
Net increase/(decrease) in certificates of deposit (8,412) (13,453)
Net increase/(decrease) in repurchase agreements 775 1,867
Net increase/(decrease) in treasury notes purchased (153) 10
Cash dividends paid (net of dividend reinvestment) (835) (793)
Increase/(decrease) in other liabilities 182 -0-
------- -------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 1,528 (2,294)
Net increase/(decrease) in cash/cash equivalents (535) (8,956)
Cash/cash equivalents at beginning of year 32,235 39,453
------- -------
CASH/CASH EQUIVALENTS AT END OF QUARTER $31,700 $30,497
F-90
Part I
Note To Consolidated Financial Statements
Quarter Ended September 30, 1993
(Unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results through September 30 of 1993 are not
necessarily indicative of the results that may be expected for the year-ended
December 31, 1993. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Corporation's annual report on
Form 10-K for the year-ended December 31, 1992.
Managements Discussion And Analysis Of Financial
------------------------------------------------
Condition And Results Of Operations
-----------------------------------
Financial Condition
- -------------------
First Fidelity's increase in loans continued during the third quarter as a
result of a special installment loan program initiated in the first quarter of
this year which offered a very competitive interest rate for automobile
financing. The program has been very successful in creating an investment with a
higher rate of return without sacrificing significant liquidity or risk. A
$5,600,000 or 3% increase in net loans this year was funded in part by a
$1,600,000 or .6% increase in deposits, a $800,000 or 6% increase in repurchase
agreements and a $1,800,000 or 6% increase in internal capital. The need for
$1,400,000 of additional loan funds resulted in a 7% decline in federal funds
sold. Competitive pricing of deposits and repurchase agreements have helped
maintain a consistent availability of funds.
Total consolidated assets of First Fidelity have increased approximately
$3,900,000 or 1% as of September 30, 1993. The investment portfolio has remained
relatively stable since year-end 1992 declining approximately $1,200,000 or 1%.
All other assets and liabilities have remained relatively stable.
Other real estate is included on the balance sheet in other assets and consists
of real estate acquired in satisfaction of debts previously contracted. At
September 30, 1993 other real estate had increased approximately $54,000 or 11%
since year-end 1992. In the first quarter of 1993, $100,000 of a $210,000 loan
to a local coal contractor who declared bankruptcy in 1992 was placed in other
real estate while $63,000 was charged to the allowance for loan loss with the
remaining $47,000 of equipment placed
F-91
in a repossession account pending a sale. In the second quarter of 1993 a
determination was made that the $100,000 classified as other real estate "in
substance" be reclassified as a non-accrual loan. A loan with an original
balance of $56,000 to finance repossessed real estate was placed in other real
estate in 1993 since a downpayment of at least 10% of the selling price was not
received. It will be transferred to loan status when principal payments reduce
the outstanding balance to 90% of the amount financed. One other currently owned
significant addition to other real estate consists of a one to four family
dwelling with a current outstanding balance of $73,000. Sales on existing real
estate property for 1993 have totaled approximately $75,000.
Shareholders' equity has increased $1,766,000 or approximately 6% since year-end
1992 as a result of $2,625,000 of earnings and $183,000 of dividend reinvestment
funds decreased by $1,018,000 of dividends and $24,000 of preferred stock
accretion. At September 30, 1993 First Fidelity's capital to asset ratio was
10.40%, up 45 basis points from 9.95% at December 31, 1992.
Proper liquidity levels will ensure that sufficient funds are available to
satisfy the normal loan and deposit needs of bank customers while at the same
time taking advantage of longer term investment opportunities in order to
maximize profits. Cash and due from banks, interest-bearing deposits, marketable
investment securities, and federal funds sold are the principal components of
asset liquidity. Each subsidiary maintains individual liquidity ratios for
regulatory purposes of between 29% and 41% while consolidated liquidity at
quarter-end was approximately 36%.
Risk based capital ratio calculations for banks and their holding companies
evaluate both on and off balance sheet assets as to both risk and conversion
factors before being applied to adjusted capital. A minimum total qualifying
capital ratio of at least 8% with 4% being Tier I (core) capital must be
maintained. For regulatory reporting each subsidiary maintains separate risk
based calculations which range from 16% to 19% for Tier I capital and 19% to 20%
for Tier II capital. On a consolidated basis Tier I and Tier II capital were 19%
and 20% respectively as of September 30, 1993. Based on ending assets, First
Fidelity's Tier I leverage ratio at September 30, 199 was 10.36% compared to
9.90% at December 31, 1992.
The allowance for loan loss was 1.27% of total loans at September 30, 1993
compared to 1.28% at December 31, 1992. A provision of $255,000 has been made
through September 30 while net charge-offs of approximately $189,000 have been
made. The single most significant charge-off was the $63,000 to a local
contractor previously discussed. Approximately $92,000 of installment loans have
been charged-off through September 30, 1993. As growth in installment loans
continues, management recognizes the need to closely monitor the allowance for
possible losses. At 1.27% of total loans at September 30, 1993, the reserve is
adequate given the collateral maintained.
Non-accrual loans at September 30, 1993 totaled $1,860,000 of which $1,431,000
belongs to investors with a franchise from a major motel chain which constructed
a motel in the area in 1986. Since September of 1990 all payments received have
been applied to the principal balance. Negotiations in late spring of 1991
conducted with motel management resulted in a new repayment schedule starting in
June of that year where First Fidelity would receive approximately $11,300
monthly. In September of 1992 a new repayment schedule was drafted whereby the
Corporation would receive approximately $12,000 monthly beginning October 1,
1992. This is the current repayment schedule which is likely to continue.
F-92
On August 26, 1993, First Fidelity Bancorp, WesBanco, Inc. and FFB Corporation,
a wholly owned subsidiary of WesBanco, entered into an Agreement and Plan of
Merger which provides for, among other things, the merger of First Fidelity with
and into FFB. Under the terms of the Merger Agreement, each share of common
stock, par value $1.25 per share of First Fidelity issued and outstanding
immediately prior to the effective time of the Merger will be converted into .9
(nine-tenths) share of common stock, par value $2.0833 per share of WesBanco
common stock.
Each share of Series A 8% Cumulative Preferred Stock of First Fidelity issued
and outstanding immediately prior to the Merger will be converted into one share
of Series A 8% Cumulative Preferred Stock of WesBanco convertible into WesBanco
Common Stock in 1995 at the same conversion ratio as if such First Fidelity
preferred stock had been converted into First Fidelity Common Stock immediately
prior to the Merger. Shares of First Fidelity Common Stock held in the treasury
of First Fidelity, held by FFB or WesBanco (other than shares held in a
fiduciary capacity for others) and shares as to which dissenters' rights have
been perfected will not be converted into WesBanco Common Stock.
In connection with the Merger Agreement, First Fidelity and WesBanco entered
into the Stock option Agreement which granted WesBanco the right to purchase up
to 19.9% or 464,405 shares of First Fidelity Common Stock at an exercise price
of S26.00 per share payable in cash. The Option is exercisable by WesBanco upon
the occurrence of certain events.
First Fidelity operates four banks in north central West Virginia with thirteen
offices. WesBanco presently operates ten banks in West Virginia with twenty
offices and one bank in Ohio with five offices.
The transaction, which is subject to regulatory and stockholder approval, among
other terms, is expected to be completed during the first quarter of 1994.
Results of Operations
- ---------------------
Net interest income has declined less than 1% or approximately $44,000 when
compared to the same period in 1992. Although net income available to common
shareholders is $70,000 or.3% below 1992, it continues to exceed 1% of ending
consolidated assets at September 30, 1993. With some stability returning to
interest rates it is likely that these trends will remain through year-end. Each
subsidiary utilizes asset/liability management and budgeting techniques in
order to closely monitor changing interest rates and makes changes to interest
spreads and maturities as needed. The effect of some changes will take time to
be realized.
Total other income has declined approximately $20,000 or 2% when compared to the
same period in 1992 primarily because of a $22,000 or 9% decline in fiduciary
income which is recorded using the cash basis of accounting. This decline as of
the third quarter may not be indicative of year-end fiduciary earnings. The
$4,000 investment gain reported in 1993 is the result of securities called as
opposed to any sale.
Total other operating expense for 1993 continues to exceed 1992 expense by-
approximately 1% or $98,000 primarily from salary and occupancy expense
increases of $157,000 or 4% and $30,000 or 3% respectively. The only other
F-93
major change in total other expenses was a $95,000 or 6% decline in other
operating expenses. All other components of other expenses have remained
relatively constant.
First Fidelity is subject to both federal and state income taxes, state
franchise taxes, local business and occupation taxes, personal and real estate
taxes, and sales/use taxes. Consolidated returns are filed for federal and state
income and state franchise taxes while each of First Fidelity's subsidiaries
file individual returns for the remaining.
The adoption of FASB #109, "Accounting for income taxes," was completed in the
first quarter of 1993 with no resulting material impact on current year
financial statements. No prior year financial information required adjustment
nor did the adoption require a valuation allowance. The federal income tax rate
is 34% for both 1993 and 1992 while the state tax rate is 9.00% and 9.075% for
Years 1993 and 1992 respectively.
F-94
APPENDIX I
W.VA. CODE ANNOT. SECTION (S) 31-1-123
(a) Any shareholder electing to exercise his right to dissent, pursuant to
section one hundred twenty-two ((S)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, or 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
A-1
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 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 Procedures. 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 any
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 therefore,
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 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.
A-2
APPENDIX II
Agreement and Plan of Merger
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called "Agreement"), made and
entered into as of the 26th day of August, 1993, 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, and FIRST FIDELITY BANCORP, INC., a West Virginia corporation,
with its principal place of business located at 301 Adams Street, Fairmont,
West Virginia, 26555, (hereinafter called "First Fidelity") party of the second
part, and FFB CORPORATION (hereinafter called "FFB"), a corporation to be
formed under the laws of the State of West Virginia by Wesbanco as its 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).
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, First Fidelity 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 four subsidiaries, namely, First National Bank in Fairmont,
FirstBank Shinnston, Bridgeport Bank, and Central National Bank, Morgantown,
West Virginia, (hereinafter collectively called "Subsidiaries"), and
WHEREAS, FFB 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 Nesbanco, by a majority vote of all the
members thereof, has approved this Agreement and has authorized the execution
hereof in counterparts and subject to the terms hereof will direct that it be
submitted to its shareholders; the Board of Directors of FFB shall, prior to
the execution hereof by FFB, 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 FFB's charter as hereinafter
provided, and
WHEREAS, Wesbanco desires to acquire First Fidelity and the Board of
Directors of First Fidelity 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 First Fidelity and its shareholders for First Fidelity to enter
into this Agreement to become affiliated with Wesbanco, and
WHEREAS, it is proposed that Wesbanco, First Fidelity and FFB enter into this
Agreement whereby First Fidelity will merge with and into FFB and the
outstanding shares of common stock of First Fidelity ("First Fidelity Common
Stock") will be converted into shares of common stock of Wesbanco ("Wesbanco
Common Stock"), and the outstanding Series A 8% Cumulative Preferred Stock of
First Fidelity ("First Fidelity Preferred Stock") will be converted into shares
of Series A 8% Cumulative Preferred Stock of Wesbanco ("Wesbanco Preferred
Stock");
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:
A-3
SECTION 1
FFB
1.1 Formation. Wesbanco shall promptly cause FFB to be duly organized as a
business corporation under the laws of the State of West Virginia. FFB 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 FFB to conduct any
business operations other than such activities which are necessary to
consummate the merger contemplated in the Agreement (the "Merger").
1.3 Execution of Agreement. Promptly after the organization of FFB, Wesbanco
shall cause FFB 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 FFB.
1.4 Voting of FFB Shares. Promptly after the organization of FFB, Wesbanco,
as sole shareholder of FFB, shall vote all of the shares of FFB in favor of the
Merger.
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, FFB shall merge with First Fidelity (the
"Merger"), under the charter of FFB. FFB shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation").
2.2 Effect of Merger. At the Effective Time, the corporate existence of FFB,
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 FFB as the Surviving Corporation shall continue to be governed by
the laws of the State of West Virginia. FFB as the Surviving Corporation shall
also succeed to all of the rights, assets, liabilities and obligations of First
Fidelity in accordance with the West Virginia Corporation Act ("WVCA"). Upon
the Effective Date, (as defined in Section 11.5 hereof), the separate existence
and corporate organization of First Fidelity shall cease.
2.3 Closing. Wesbanco, First Fidelity and FFB 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 11.4 hereof (the "Closing" and the
"Closing Date").
2.4 First Fidelity's Obligations. First Fidelity 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
A-4
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
Marion 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 3
Articles of Incorporation; Bylaws: Board of Directors and Officers
3.1 FFB Corporation. The Articles of Incorporation of FFB, as organized,
shall constitute the Articles of Incorporation of the Surviving Corporation.
The Bylaws of FFB as in effect on the Effective Date shall constitute the
Bylaws of the Surviving Corporation. The directors and officers of FFB 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.
3.2 Subsidiaries of First Fidelity. The Articles of Association or
Incorporation of the Subsidiaries and the Bylaws of the Subsidiaries, as in
effect on the Effective Date, shall continue respectively as the Articles of
Association or Incorporation and Bylaws of the Subsidiaries until the same
shall thereafter be altered, amended or repealed in accordance with law, such
Articles of Association or Incorporation or said Bylaws. The directors and
officers of the Subsidiaries on the Effective Date shall continue as the
directors and officers of the Subsidiaries after the Merger and shall hold
office as prescribed in the Bylaws of such Subsidiaries and applicable law,
until their successors shall have been elected and shall qualify.
3.3 Wesbanco Directors. Wesbanco covenants and agrees that as of the
Effective Date it will appoint as directors of Wesbanco Robert H. Martin,
Patrick L. Schulte, Frank R. Abruzzino and Earl C. Atkins, or, if one or more
of them should be unwilling or unable to serve, a person or persons to be
designated by First Fidelity ("Substituted Person"), and acceptable to
Wesbanco. If Patrick L. Schulte is unable or unwilling to serve, the parties
hereto agree that Frank R. Rerekes shall be the Substituted Person. If Frank R.
Abruzzino is unable or unwilling to serve, the parties hereto agree that Dean
C. Ramsey shall be the Substituted Person. Such individuals shall serve until
the next annual meeting of shareholders, and Wesbanco shall include such
persons on the list of nominees for the position of director presented by the
Wesbanco Board of Directors and for which said Board shall solicit proxies at
its next annual meeting of shareholders, with such persons to be nominated for
such terms as are available under Wesbanco's Bylaws, except that such Directors
shall be elected to separate classes of Wesbanco's classified Board of
Directors to the extent feasible; and provided that in the event that one or
more of the First Fidelity nominees are nominated as set forth above by the
Wesbanco Board of Directors for less than full three year terms, upon the
expiration of any such lesser term, Wesbanco covenants and agrees that it will
again include such person or persons on the list of nominees for the position
of Wesbanco director presented by its Board of Directors for a full three year
term and shall solicit proxies for said person or persons for the annual
meeting or meetings of shareholders at which such election or elections shall
be held.
Wesbanco also covenants and agrees that as of the Effective Date it will
appoint Robert H. Martin and Patrick L. Schulte as members of the Executive
Committee of the Board of Directors of Wesbanco, and covenants and agrees that
it will continue to appoint or elect Robert H. Martin and Patrick L. Schulte
(or the designated Substituted Person for the said Patrick L. Schulte if he
should be unable to serve) for so long as at least one person serves as a
Director of Wesbanco pursuant to the requirements of this Section 3.3. If
either of the foregoing named individuals or their Substituted Person should be
unwilling or unable to serve as such, then Wesbanco shall appoint the next
Substituted Person as designated pursuant to this Section 3.3, to such
Executive Committee.
A-5
SECTION 4
Shareholder Approvals
4.1 First Fidelity Shareholders' Meeting. Subject to the receipt by First
Fidelity of the fairness opinion described in Section 11.3(c) hereof, First
Fidelity 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, First
Fidelity shall send to its shareholders the Proxy Statement referred to in
Section 13.1 hereof. Subject to the fiduciary duties of the Board of Directors
of First Fidelity to First Fidelity and its shareholders, the Board of
Directors of First Fidelity 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 First Fidelity shareholders required to effectuate the transactions
contemplated by the Agreement.
4.2 FFB Shareholder Meeting or Consent. FFB shall promptly submit the
Agreement to its shareholder, Wesbanco, for approval in accordance with the
WVCA.
4.3 Wesbanco Shareholder Meeting. Wesbanco 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). In connection with such meeting, Wesbanco
shall send to its shareholders the Proxy Statement referred to in Section 13.1
hereof. Subject to the fiduciary duties of the Board of Directors of Wesbanco
to Wesbanco and its shareholders, the board of Directors of Wesbanco 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 Wesbanco shareholders
required to effectuate the transactions contemplated by the Agreement.
SECTION 5
Conversion of Shares
5.1 Conversion, Ratio and Option. The manner of converting or exchanging the
shares of FFB and First Fidelity shall be as follows:
(a) Each share of Preferred Stock of First Fidelity issued and
outstanding immediately prior to the Effective Time, shall, at the
Effective Time, become one issued and outstanding share of Wesbanco
Preferred Stock, subject to the same terms, provisions and conversion
rights of the First Fidelity Preferred Stock as existed immediately prior
to the Effective Time, except that the common stock into which such stock
may be converted shall be Wesbanco Common Stock and the conversion ratio
shall be the same as that set forth in subparagraph (b) hereof for First
Fidelity Common Stock, and as calculated in Appendix A, attached hereto.
(b) Each share of First Fidelity Common Stock issued and outstanding
immediately prior to the Effective Time, except shares of First Fidelity
Common Stock issued and held in treasury of First Fidelity or beneficially
owned by FFB 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 at the Effective Time of the Merger:
(i) Be exchanged for and become, without action on the part of the
holder thereof, .9 (Nine Tenths) shares of the Common Stock of
Wesbanco, 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.
(ii) No fractional shares of Wesbanco Common Stock will be issued in
connection with the Merger. In lieu thereof each stockholder of First
Fidelity otherwise entitled to a fractional share of Wesbanco will
receive cash therefore in an amount based on a value of $32.00 per
whole share of
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Wesbanco stock, at the time of the exchange, or at the election of such
holder, shall be entitled to purchase the remaining fraction of such
share from Wesbanco based on such price.
(iii) In the event of any change in Wesbanco Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations,
combinations, exchanges of shares or the like, the type and number of
shares to be issued pursuant to Section 5.1(b)(i) and (ii) hereof shall
be adjusted proportionately.
5.2 Shares Owned by First Fidelitv Wesbanco or FFB. Each share of First
Fidelity Common Stock issued and held in the treasury of First Fidelity or
beneficially owned by Wesbanco or FFB, other than in a fiduciary capacity, at
the Effective Time of the Merger shall be canceled and retired, and no shares
of stock or the securities of Wesbanco shall be issuable with respect thereto.
5.3 Exchange for Stock. On and after the Effective Date of the Merger, each
holder of First Fidelity Common Stock or First Fidelity Preferred Stock, upon
presentation and surrender of a certificate or certificates therefore to the
Exchange Agent (Wesbanco Bank Wheeling), shall be entitled to receive in
exchange therefore a certificate or certificates representing the number of
shares of Wesbanco Common Stock or Wesbanco Preferred 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, should such
shareholder not elect to purchase the remaining fraction of such share of
common stock at the price above set forth. Until so presented and surrendered
in exchange for a certificate representing Wesbanco Common Stock or Wesbanco
Preferred Stock, each certificate which represented issued and outstanding
shares of First Fidelity Common Stock or First Fidelity Preferred 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 or Wesbanco
Preferred Stock into which such shares of stock have been converted pursuant to
the Merger. Until surrender of such 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 or Wesbanco Preferred 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.
5.4 Closing of Stock Transfer Books. On the Effective Date, the stock
transfer books of First Fidelity shall be closed, and no shares of Common Stock
or Preferred Stock of First Fidelity outstanding the day prior to the Effective
Date shall thereafter be transferred.
5.5 Directors' Qualifying Shares. Immediately upon completion of the
conversion provided for above, the continuing Directors of First Fidelity shall
maintain at least the minimum number of shares of common stock of Wesbanco as
are required to be held as directors' qualifying shares under applicable law
for continued membership on the Board of Directors of any of the First Fidelity
Subsidiaries.
SECTION 6
Dissenters Rights
6.1 Subject to the rights of Wesbanco and First Fidelity, as permitted by
Section ll.l(i) 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 First Fidelity issued and
outstanding on the date of the shareholders' meeting described in Sections 4.1
and 13.1 of this Agreement and entitled to vote
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on this Agreement (hereinafter, "Voting Shares"), the rights and remedies of a
dissenting shareholder under the WVCA shall be afforded to any shareholder of
First Fidelity 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 First Fidelity 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 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, or to extent applicable Wesbanco
Preferred Stock, in accordance with Section 5 hereof.
SECTION 7
Representations, Warranties and Covenants of First Fidelity
First Fidelity represents and warrants to and covenants with Wesbanco and
FFB, in its own right and with respect to its wholly owned Subsidiaries, that:
7.1 Organization and Qualification of First Fidelity. First Fidelity 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 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 First Fidelity and its Subsidiaries taken as a whole.
7.2 Authorization of Agreement. The Board of Directors of First Fidelity has
authorized the execution of this Agreement as set forth herein, and subject to
the approval of this Agreement by the shareholders of First Fidelity as
provided in the Articles of Incorporation and Bylaws of First Fidelity and West
Virginia Code 31-1-117, First Fidelity has the corporate power and is duly
authorized to merge with FFB pursuant to this Agreement, and this Agreement is
a valid and binding agreement of First Fidelity 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.
7.3 No Violation of Other Instruments. Subject to obtaining any required
consent (which consents will be obtained by First Fidelity prior to Closing),
the execution and delivery of this Agreement do not, and the consummation of
the Merger and the transactions contemplated hereby will not, violate any
provisions of First Fidelity'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 First Fidelity or its Subsidiaries (as defined in Section 7.5)
are a party or by which it is bound. After the approval of this Agreement by
the shareholders of the common stock of First Fidelity, the Board of Directors
and the shareholders of First Fidelity will have taken all corporate action
required by applicable law, the Articles of Incorporation of First Fidelity,
its Bylaws or otherwise to authorize the execution and delivery of this
Agreement and to authorize the Merger of First Fidelity and FFB pursuant to
this Agreement.
7.4 Financial Statements. First Fidelity has delivered to Wesbanco copies of
its consolidated statements of condition as of December 31, 1992, 1991, and
1990, and its consolidated statements of income,
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consolidated statements of changes in shareholders' equity and consolidated
statements of changes in financial position for the three year period ended
December 31, 1992, together with the notes thereto, accompanied by audit
reports relating to the financial statements for each of the three years ended
December 31, 1992, 1991, and 1990, of Ernst & Young, independent auditors, and
its unaudited consolidated statement of condition, consolidated statement of
income, consolidated statement of changes in shareholders' equity and
consolidated statement of changes in financial condition for the interim period
ended June 30, 1993. Such statements, together with the related notes to all of
said financial statements, present fairly the consolidated financial position
of First Fidelity and its 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.
7.5 Subsidiaries of First Fidelity. The Subsidiaries of First Fidelity are
First National Bank in Fairmont and Central National Bank, Morgantown, both
national banking associations, and FirstBank Shinnston and Bridgeport Bank,
both West Virginia banking corporations. Such corporations and associations are
duly organized, validly existing, and in good standing under the laws of the
United States or of the State of West Virginia, as the case may be, and have
the requisite corporate power and authority to own and lease their properties
and to conduct their business as they are now being conducted and are currently
contemplated to be conducted. First Fidelity owns 100% of the issued and
outstanding stock of such corporations and associations. All issued and
outstanding shares of stock of the Subsidiaries have been fully paid, were
validly issued and are nonassessable, except as provided under 12 U.S.C.
Section 55, with respect to the national associations, and neither First
Fidelity nor its Subsidiaries have any knowledge that the Comptroller of the
Currency has threatened or considered any assessment under 12 U.S.C. Section 55
against the shareholders of the Subsidiaries which are national associations.
7.6 No Action, Etc. Except as disclosed in the Disclosure Schedule of First
Fidelity dated not more than 60 days from the date hereof (the "First Fidelity
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 First Fidelity, threatened against or relating
to First Fidelity, its Subsidiaries, 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 against First Fidelity, its
Subsidiaries, 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 adversely affect the financial
condition (present or prospective), businesses, properties or operations of
First Fidelity or its Subsidiaries or the ability of First Fidelity or its
Subsidiaries to conduct their business as presently conducted or to consummate
the transaction contemplated hereby, and First Fidelity does not know of any
basis for any such action or proceeding. Except as disclosed in the First
Fidelity Disclosure Schedule, First Fidelity and its Subsidiaries 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 First Fidelity nor its Subsidiaries are
transacting business in material violation of any applicable law, ordinance,
requirement, rule, regulation or order.
7.7 Capitalization. The authorized capital stock of First Fidelity consists
of 4,000,000 shares of common stock, par value of $1.25 per share, of which
2,333,698 shares are duly authorized, validly issued and outstanding and are
fully paid and nonassessable as of the date hereof, and 1,000,000 shares of
preferred stock with a par value of $1.25 per share, of which 10,000 shares of
8% cumulative convertible preferred stock are issued and outstanding as of the
date hereof, and which are convertible into common stock. There are no other
options, warrants, calls or commitments of any kind entitling any person to
acquire, or securities convertible into, First Fidelity Common Stock, except as
provided in the Option Agreement dated the date hereof to be issued in
accordance with this Agreement. First Fidelity shall have insufficient
authorized
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common stock if the Option Agreement dated the date hereof is exercised at the
time that the First Fidelity Preferred Stock is convertible into First Fidelity
Common Stock if at such time the book value of such common stock is less than
approximately $1.60 per share.
7.8 Copies of All Contracts Leases Etc. First Fidelity has furnished to
Wesbanco true and complete copies of all material contracts, leases and other
agreements to which First Fidelity 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 plan with respect
to any of the directors, officers or other employees of First Fidelity and its
Subsidiaries. A list of all such documents is set forth in the First Fidelity
Disclosure Schedule, and as updated on the Effective Date.
7.9 Materially Adverse Contracts. Neither First Fidelity nor its Subsidiaries
are 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 First Fidelity and its Subsidiaries 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 First Fidelity or its
Subsidiaries are a party that would have a material adverse effect upon the
consolidated financial condition, operations, results of operations, business
or prospects of First Fidelity and its Subsidiaries taken as a whole.
7.10 Undisclosed Liabilities. First Fidelity and its Subsidiaries have no
material liabilities other than those liabilities disclosed on or provided for
in the financial statements delivered pursuant to Section 7.4 hereof, or as
disclosed in the First Fidelity Disclosure Schedule attached hereto and made a
part hereof.
7.11 Title to Properties. Except for capitalized leases, liens and
encumbrances not material to the property and liens and encumbrances on
property acquired by First Fidelity and its Subsidiaries in foreclosure of
loans and existing at the time of foreclosure, First Fidelity and its
Subsidiaries have good and marketable title to all of the property, interest in
properties and other assets, real and personal, set forth in their consolidated
balance sheet as of December 31, 1992, 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
7.4 hereof, and all of their material leases are in full force and effect and
neither First Fidelity nor its Subsidiaries are 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 First Fidelity or its Subsidiaries and used or leased by First
Fidelity or its Subsidiaries 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.
7.12 Proxy Statement. The Proxy Statement referred to in Section 13 or any
amendment or supplement thereto mailed to the holders of the common stock of
First Fidelity will not contain any untrue statement of a material fact
concerning First Fidelity or omit to state a material fact concerning First
Fidelity 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 First Fidelity, and will comply, as to form in
all material respects, with the requirements of federal and West Virginia
securities laws and any other applicable Blue Sky Laws.
7.13 ERISA. Except as disclosed in the First Fidelity 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 First Fidelity, or 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 Internal Revenue Code ("IRC")
applicable thereto; (ii) no event reportable under Section
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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 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.
7.14 Exchange Act Reports. First Fidelity has delivered to Wesbanco true and
correct copies of its Form 10-K (Annual Report) for the year ended December 31,
1992, its Form 10-Q (Quarterly Report) for the quarters ended March 31, 1993,
and June 30, 1993, as filed with the SEC, all of which were prepared and filed
in accordance with the applicable requirements and regulations of the SEC, and
all other documents and reports filed by First Fidelity with the Securities &
Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934
(the "Act") since January 1, 1993 (the "Reports"). First Fidelity has filed and
will continue to file all reports and other documents required to be filed with
the SEC pursuant to the Act in a timely manner. All of the 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.
7.15 Labor Disputes. Except as disclosed in the First Fidelity Disclosure
Schedule, neither First Fidelity nor 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 affect their
financial condition, assets, businesses or operations taken as a whole. No
collective bargaining representatives represent any employees of First Fidelity
or the employees of its Subsidiaries, and no petition for election of any
collective bargaining representative has been filed and to the knowledge of
First Fidelity and its Subsidiaries no organizational campaign on behalf of any
collective bargaining unit has been undertaken by or on behalf of the employees
of First Fidelity or its Subsidiaries.
7.16 Reserve for Possible Loan Losses. The reserve for possible loan losses
shown on the consolidated balance sheet of First Fidelity and its Subsidiaries
as of December 31, 1992, delivered pursuant to this Agreement is adequate in
all material respects as of the respective date thereof.
7.17 Taxes. Except as disclosed in the First Fidelity Disclosure Schedule:
(a) First Fidelity 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 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 First Fidelity or 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;
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(c) There is no pending or, to its knowledge, threatened examination of
the Federal Income Tax Returns of First Fidelity or 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 First Fidelity or 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 First Fidelity or 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 First Fidelity or its Subsidiaries remains open to the
assessment and collection of additional Business Franchise Taxes.
(e) First Fidelity, and its Subsidiaries, have properly accrued and
reflected on their December 31, 1992, consolidated balance sheet, delivered
pursuant to Section 7.4 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
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.
7.18 Absence of Certain Changes. Except as may be disclosed in the First
Fidelity Disclosure Schedule, or except in connection with the transactions
contemplated by this Agreement, since December 31, 1992:
(a) There has been no change in the material assets, financial condition
or liabilities (contingent or otherwise), business, or results of
operations of First Fidelity and its Subsidiaries 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 First
Fidelity and its Subsidiaries 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 First Fidelity or its Subsidiaries taken as a
whole;
(c) Other than in the ordinary course of business, neither First Fidelity
nor 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 First Fidelity except as provided for in this
Agreement, or any material change in the outstanding debt of First Fidelity
or 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 as otherwise disclosed in this Agreement, First Fidelity 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) First Fidelity and its Subsidiaries have, and shall have at Closing,
personnel sufficient to adequately staff all key positions within their
respective operations. There has not been any material increase in the
compensation or fees payable by First Fidelity or its Subsidiaries to their
respective directors or officers for services in their capacities as such,
other than increases in the regular course of business in accordance with
past practices or the personnel policies of First Fidelity or its
Subsidiaries, respectively, nor any material increase in expenditures for
any bonus, insurance, pension or other
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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
First Fidelity or its Subsidiaries;
(g) Neither First Fidelity nor its Subsidiaries have made any material
loan or advance other than in the ordinary course of business;
(h) Neither First Fidelity nor 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) Neither First Fidelity nor its Subsidiaries have 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; and
(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 First Fidelity or its Subsidiaries,
taken as a whole, and neither First Fidelity nor its Subsidiaries have
knowledge of any such event, condition or development which may materially
and adversely affect the assets, financial condition or results of
operations of First Fidelity and its Subsidiaries, taken as a whole.
7.19 Fidelity Bonds. The Subsidiaries have continuously maintained fidelity
bonds insuring them against acts of dishonesty by each of their officers and
employees in such amounts as are required by law and as are customary, usual
and prudent for banks of their size. Since January 1, 1993, there have been no
claims under such bonds and, except as disclosed in the First Fidelity
Disclosure Schedule, neither First Fidelity nor its Subsidiaries are aware of
any facts which would form the basis of a claim under such bonds. Neither First
Fidelity nor its Subsidiaries have any reason to believe that their fidelity
coverage will not be renewed by the applicable carrier on substantially the
same terms as its existing coverage.
7.20 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, First Fidelity 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, except for shares of its
common stock issued pursuant to its Dividend Reinvestment Plan;
(c) Issue or grant any options, warrants 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 cash dividends which do not in the aggregate exceed
the lesser of $0.60 cents per share per year (to be paid on a quarterly
basis in such proportions as are consistent with past practices) or 45% of
the after- tax income of First Fidelity for the tax years in which paid;
(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 7.18(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
plan, except as disclosed in the First Fidelity 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
First Fidelity or its Subsidiaries, taken as a whole;
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(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 7.18(f) and 7.20(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.
7.21. Additional Covenants. Except as otherwise contemplated by this
Agreement, First Fidelity covenants and agrees:
(a) That it will promptly advise Wesbanco in writing of the name and
address of, and the number of shares of First Fidelity stock held by, each
stockholder who elects to exercise his or her right to dissent to the
Merger pursuant to West Virginia Code Annot. Sections 31-1-122 and 123;
(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 First Fidelity 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 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) First Fidelity will not, and will not permit any person acting on
behalf of First Fidelity or its Subsidiaries 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, First Fidelity or its Subsidiaries,
or any tender or exchange offer (or proposal to make any tender or exchange
offer) for any shares of stock of First Fidelity, or any proposal to
acquire more than 5% of the outstanding shares of stock of First Fidelity
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 First Fidelity. First Fidelity 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 deliver to Wesbanco all Forms filed with the SEC for periods
ending after the date of this Agreement within seven (7) days after the
filing of each such report with the SEC;
(f) To promptly advise Wesbanco of any material adverse change in the
financial condition, assets, businesses or operations of First Fidelity or
its Subsidiaries, taken as a whole, or any material changes or inaccuracies
in data provided to Wesbanco pursuant to this Agreement;
(g) To maintain in full force and effect its and its Subsidiaries'
present fire, casualty, public liability, employee fidelity and other
insurance coverages or replacement insurance coverage at substantially the
same premium and insurance levels;
(h) To cooperate with Wesbanco in furnishing such information concerning
the business and affairs of First Fidelity, its Subsidiaries 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 First Fidelity by Wesbanco as
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contemplated hereunder. Consistent with its fiduciary duties, First
Fidelity 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 7.3 hereof; and
(i) To cooperate with Wesbanco in furnishing such information concerning
the business of First Fidelity and its Subsidiaries as is reasonably
necessary or requested in order to prepare and file any Registration
Statement to be prepared in connection with the issuance of Wesbanco Common
Stock and Wesbanco Preferred Stock as provided in Section 13 hereof.
SECTION 8
Representations, Warranties and Covenants of Wesbanco and FFB
Wesbanco and FFB represent and warrant to First Fidelity and covenant with
First Fidelity that:
8.1 Corporate Organization of Wesbanco and Subsidiaries. Wesbanco is, and
upon execution hereof FFB 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 FFB, is a West Virginia
or Ohio banking corporation, duly organized and validly existing in good
standing under the laws of Ohio 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 FFB and Wesbanco Subs are held, beneficially and
of record, by Wesbanco and have been or, as to FFB, 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 FFB or any of the Wesbanco Subs or securities convertible into shares
of stock of FFB or any of the Wesbanco Subs.
8.2 Corporate Power and Action. The Board of Directors of Wesbanco has
authorized the execution of this Agreement as set forth herein, and subject to
the approval of this Agreement by the shareholders of Wesbanco as provided in
its Articles of Incorporation, its Bylaws and the WVCA, Wesbanco has the
corporate power and is duly authorized to merge with First Fidelity, 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 FFB and subject to the
approval hereof by Wesbanco as its sole shareholder, FFB has the corporate
power to execute and deliver this Agreement and has taken all action required
by law, its Articles of Incorporation, its Bylaws or otherwise to authorize and
approve such execution and delivery, the performance of the Agreement, the
Merger and the consummation of the transactions contemplated hereby; and this
Agreement is a valid and binding agreement of FFB 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 Transfer of Securities to Exchanqe Agent Prior to, or as of the Closing
Date. Prior to, or at the Closing Date, Wesbanco will deliver to the Exchange
Agent, Wesbanco Bank Wheeling, for the benefit of the
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holders of the common stock or preferred stock of First Fidelity, an amount of
common stock of Wesbanco and preferred stock of Wesbanco and cash sufficient to
meet the necessary amount of securities and cash required pursuant to Section
5.
8.4 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 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 it is bound.
8.5 Application for FFB. Wesbanco shall cause to be filed with the West
Virginia Secretary of State an application to organize and incorporate FFB 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 FFB by the Secretary of State of West
Virginia, Wesbanco shall cause FFB to execute and enter into this Agreement and
cause FFB to take such action as is provided in this Agreement on FFB's part to
be taken.
8.6 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.
8.7 Exchange Act Reports. Wesbanco has delivered to First Fidelity true and
correct copies of its Form 10-K (Annual Report) for the year ended December 31,
1992, and its Forms 10-Q (Quarterly Report) for the quarters ended March 31,
1993, and June 30, 1993, 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 First Fidelity true and correct copies of
all documents and reports filed by Wesbanco with the SEC pursuant to the
Exchange Act since January 1, 1993 (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.
8.8 Subsidiaries of Wesbanco. In addition to FFB, the subsidiaries of
Wesbanco are Wesbanco Bank Wheeling, a West Virginia banking corporation,
Wesbanco Bank Wellsburg, a West Virginia banking corporation, Wesbanco Bank New
Martinsville, a West Virginia banking corporation, Wesbanco Bank Sistersville,
a West Virginia banking corporation, Wesbanco Bank Elizabeth, a West Virginia
banking corporation, Wesbanco Bank South Hills, a West Virginia banking
corporation, Wesbanco Bank Sissonville, a West Virginia banking corporation,
Wesbanco Bank Elm Grove, a West Virginia banking corporation, Wesbanco Bank
Parkersburg, a West Virginia banking corporation, Wesbanco Bank Kingwood, a
West Virginia corporation, and Wesbanco Bank Barnesville, an Ohio banking
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.
8.9 Registered Bank Holding Company. Wesbanco is a duly registered bank
holding company under the Bank holding Company Act of 1956, as amended.
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8.10 Authority to Issue Shares. The shares of common and preferred 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.
8.11 Financial Statements. Wesbanco has delivered to First Fidelity copies of
its consolidated balance sheets as of December 31, 1992, 1991 and 1990 and the
interim period ended June 30, 1993, 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, 1992, and the interim period ended June 30, 1993, together with
the notes thereto, accompanied by an audit report of Price Waterhouse,
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.
8.12 No Action, Etc. Except as disclosed in the Wesbanco Disclosure Schedule,
dated not more than 60 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 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
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.
8.13 Capitalization. The authorized capital stock of Wesbanco consists of
25,000,000 shares of common stock, par value of $2.0833 per share, of which
6,613,328 shares are duly authorized, validly issued and outstanding (as of
June 30, 1993) 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 herein provided. At June 30, 1993, Wesbanco held 14,960 shares of its
common stock as treasury stock. Wesbanco has no other reserve commitments with
respect to its common stock.
Upon execution hereof by FFB, the authorized capital stock of FFB consists of
100 shares of common stock, par value of $25.00 per share, of which all 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 FFB common
stock.
8.14 Copies of All Contracts, Leases, Etc. Wesbanco has furnished to First
Fidelity true and complete copies of all material contracts, leases and other
agreements to which Wesbanco 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 and similar plans with respect
to any of the directors, officers or other
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employees of Wesbanco. A list of all such documents is set forth in the
Wesbanco Disclosure Schedule, and as supplemented on the Effective Date.
8.15 Materially Adverse Contracts. Neither Wesbanco nor any of its
subsidiaries are 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 Wesbanco or its subsidiaries 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 Wesbanco or its
subsidiaries is a party that would have a material adverse effect upon the
financial condition, operations, results of operations, business or prospects
of Wesbanco or its subsidiaries taken as a whole.
8.16 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 8.11 of this Agreement, or
on the Wesbanco Disclosure Schedule.
8.17 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, 1992,
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 State of West Virginia.
8.18 Registration Statement. The Registration Statement referred to in
Section 13.2 of this Agreement or any amendment or supplement thereto mailed to
the holders of the common stock of First Fidelity 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 misleading with respect to
Wesbanco, and will comply as to form in all material respects with the
requirements of federal and West Virginia securities laws and any other
applicable Blue Sky laws.
8.19 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 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
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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, 1992, consolidated balance sheet, delivered pursuant
to Section 8.11 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
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.
8.20 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, 1992:
(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 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 as otherwise disclosed in this Agreement, Wesbanco 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) 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;
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(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 45% 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 First Fidelity 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.
8.21 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, 1993, there have
been no claims under such bonds (except as disclosed in the Wesbanco Disclosure
Schedule) and, except as disclosed in writing to First Fidelity, 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.
8.22 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 and Albright National Bank,
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 and Albright National Bank, 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 multiemployer or multiple
employer employee benefit pension plan (including any multiemployer plans as
defined in Section 3(37) of ERISA) and, with respect to any multiemployer 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 multiemployer 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 multiemployer pension plan
subject to the Multiemployer Pension Plan Amendments Act of 1980 in which
Wesbanco or any of its
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subsidiaries was a participating employer, neither Wesbanco nor any of its
subsidiaries have incurred or will incur any withdrawal liability, complete or
partial, under Section 4201, 4203, or 4205 of ERISA, as a consequence of
discontinuing participating in such multiemployer 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.
8.23 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 any Wesbanco, FFB or Wesbanco
Subs employees 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, FFB or Wesbanco Subs
employees.
8.24 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, 1992, delivered pursuant to this Agreement is adequate in all
material respects as of the date thereof.
8.25 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 FFB'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 First Fidelity;
(b) To deliver to First Fidelity 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 First Fidelity 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 First Fidelity pursuant to this Agreement or any "acquisition
proposal" with respect to Wesbanco received by Wesbanco;
(d) To cooperate with First Fidelity 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 First Fidelity 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 8.4 hereof; and
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(e) To cooperate with First Fidelity 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.
SECTION 9
Investigation
Subject to the conditions set forth in this Section 9, prior to the Effective
Time, Wesbanco and First Fidelity may directly and through their
representatives, make such investigation of the assets and business of Wesbanco
and First Fidelity and their subsidiaries as each deems necessary or advisable.
Wesbanco and First Fidelity and their representatives, including their
accountants, shall have, at reasonable times after the date of execution by
Wesbanco and First Fidelity 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 First Fidelity and by First Fidelity and
its authorized representatives from Wesbanco shall be held in strict confidence
by such party and its authorized representatives, and neither 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 60 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 10
Non-Survival of Representations and Warranties
The representations and warranties included or provided herein shall not
survive the Effective Date.
SECTION 11
Conditions Precedent: Closing Date and Effective Date
11.1 Conditions Precedent of Wesbanco and First Fidelity. The consummation of
this Agreement by Wesbanco and First Fidelity and the Merger is conditioned
upon the following:
(a) The shareholders of First Fidelity, FFB and Wesbanco shall have
approved this Agreement by such vote as required by law, and if required
under applicable law, the preferred shareholders of First Fidelity 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 FFB as a West Virginia
corporation and the 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 First Fidelity by Wesbanco pursuant to this Agreement;
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(c) The Secretary of State of West Virginia shall have issued a
Certificate of Incorporation for FFB;
(d) The Board of Governors of the Federal Reserve System shall have
approved the application of Wesbanco to acquire First Fidelity; and of FFB
to become a bank holding company pursuant to this Agreement;
(e) The Registration Statement of Wesbanco shall still 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 First Fidelity to carry out the transaction
contemplated in this Agreement) shall have been received.
(f) No order to restrain, enjoin or otherwise prevent the consummation of
the transaction contemplated in this Agreement shall have been entered by
any court or administrative body which remains in effect on the date of the
Closing.
(g) Wesbanco, First Fidelity and FFB shall have received, in form and
substance satisfactory to Wesbanco's and First Fidelity'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 the
West Virginia Securities Commissioner, and in addition, Wesbanco and First
Fidelity shall have received any and all consents required with respect to
the documents described pursuant to Section 7:3 and Section 8.4 hereof;
(h) 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 this Agreement shall have expired;
(i) Unless waived by Wesbanco and First Fidelity, the holders of not more
than ten percent (10%) of the Voting Shares (as defined in Section 6.1
hereof) shall have filed written objections to the Agreement in accordance
with the WVCA, not have voted in favor of the Agreement at the special
meeting of First Fidelity shareholders referred to in Section 13.1 hereof
and have made written demand for the fair value of such Voting Shares
within ten days;
(j) 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
First Fidelity, in lieu thereof an opinion from counsel for First Fidelity
substantially to the effect that for Federal Income Tax purposes:
(i) The statutory merger of First Fidelity with FFB will constitute a
reorganization within the meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986 ("IRC"), and Wesbanco, First Fidelity and FFB will
each be a "party to the reorganization" as defined in IRC Section
368(b);
(ii) No gain or loss will be recognized by Wesbanco, First Fidelity
or FFB as a result of the transactions contemplated in the Agreement;
(iii) No gain or loss will be recognized by the shareholders of First
Fidelity as a result of their exchange of First Fidelity's Common Stock
or Preferred Stock for Wesbanco's Common Stock or Wesbanco's Preferred
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 and Wesbanco
Preferred Stock received by each holder of First Fidelity's Common
Stock or Preferred Stock will include the period during which the stock
of First Fidelity 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
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(v) The Federal Income Tax Basis of the Wesbanco Common Stock and
Wesbanco Preferred Stock received by each holder of First Fidelity's
Common Stock and Preferred Stock will be the same as the basis of the
stock exchanged therefore.
(k) 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 First Fidelity,
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 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).
(l) The approvals referred to in subparagraphs (b), (c) and (d) of
Subsection 11.1 herein shall not have required the divestiture or cessation
of any significant part of the present operations conducted by Wesbanco,
First Fidelity or any of their subsidiaries, and shall not have imposed any
other condition, which divestiture, cessation or condition Wesbanco
reasonably deems to be materially disadvantageous or burdensome.
11.2 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
First Fidelity 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 First Fidelity
and its Subsidiaries taken as a whole, or which are the result of expenses
or transactions contemplated or permitted by the Agreement, and First
Fidelity shall have performed in all material respects all of its
obligations and agreements hereunder theretofore to be performed by it; and
Wesbanco and FFB shall have received on the Effective Date an appropriate
certificate (in affidavit form) dated the Effective Date and executed on
behalf of First Fidelity by one or more appropriate executive officers of
First Fidelity to the effect that such officers have no knowledge of the
nonfulfillment of the foregoing condition;
(b) Opinion of First Fidelity Counsel. An opinion of J. Scott Tharp, Esq.
of the law firm of Tharp, Liotta & Janes, counsel for First Fidelity, 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) First Fidelity 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 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 First Fidelity and its Subsidiaries, taken
as a whole.
(ii) First Fidelity has the full corporate power to execute and
deliver the Agreement and Plan of Merger. All corporate action of First
Fidelity required to duly authorize the Agreement and Plan of Merger
and the actions contemplated thereby has been taken, and the Agreement
and Plan of Merger is valid and binding on First Fidelity 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.
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(iii) No action to approve the transaction is required by the holders
of the First Fidelity Series A 8% Cumulative Preferred Stock.
(iv) All shares of common stock and preferred stock of First Fidelity
issued and outstanding as of the Effective Date are duly authorized,
validly issued, fully paid and nonassessable.
(v) The consummation of the merger contemplated by the Agreement and
Plan of Merger will not violate any provision of First Fidelity'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 First Fidelity 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
First Fidelity is subject, which would have a materially adverse effect
on the assets, business or operations of First Fidelity, taken as a
whole.
(vi) First Fidelity's Subsidiaries are national banking associations
and West Virginia banking corporations and are duly organized, validly
existing and in good standing under the laws of the United States or
the State of West Virginia and have the requisite corporate power and
authority to own and lease their properties and to conduct their
businesses as they are now being conducted. To the best of such
counsel's knowledge, First Fidelity owns 100% of the issued and
outstanding stock of such corporations.
(vii) To the best of such counsel's knowledge, as of the date hereof
neither First Fidelity nor 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 Wesbanco.
(c) Unless waived by Wesbanco, on or before the Effective Date, Price
Waterhouse, the independent public accountants for Wesbanco, shall have
rendered an opinion to Wesbanco that the Merger will be treated as a
"pooling of interest" for accounting purposes.
(d) First Fidelity shall have delivered to Wesbanco a schedule
identifying all persons who may be deemed to be "affiliates" of First
Fidelity 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 A.
(e) Patrick L. Schulte, Robert A. Martin, Frank R. Kerekes, Robert E.
Moran and Frank K. Abruzzino shall have duly executed and delivered
employment agreements with First Fidelity and/or its Subsidiaries, dated as
of the Closing Date, in substantially the form attached hereto as Exhibits
B, C, D, E and F.
(f) First Fidelity shall have furnished Wesbanco with a certified copy of
resolutions duly adopted by the Board of Directors and the shareholders of
First Fidelity approving the Agreement and authorizing the Merger and the
transactions contemplated hereby.
(g) Unless waived by Wesbanco, on the Closing Date, there shall not be
pending against First Fidelity or its Subsidiaries or the officers or
directors of First Fidelity or its Subsidiaries 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 First Fidelity or its Subsidiaries.
(h) First Fidelity shall have executed and delivered to Wesbanco an
Option Agreement, substantially in the form attached hereto as Exhibit G,
dated the date of this Agreement, and incorporated herein by reference.
11.3 Conditions Precedent of First Fidelity. The consummation of this
Agreement by First Fidelity and the Merger is also conditioned upon the
following:
(a) Unless waived by First Fidelity the representations and warranties of
Wesbanco and FFB 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
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of a particular date and except for changes which have been consented to by
First Fidelity or which are not in the aggregate material and adverse to
the financial condition, businesses, properties or operations of Wesbanco
and FFB or which are the result of expenses or transactions contemplated or
permitted by this Agreement, and Wesbanco and FFB shall have performed in
all material respects all of their obligations and agreements hereunder
theretofore to be performed by them; and First Fidelity shall have received
on the Effective Date an appropriate certificate (in affidavit form) dated
the Effective Date and executed on behalf of Wesbanco and FFB by one or
more appropriate executive officers of each of them to the effect that such
officers have no knowledge of the nonfulfillment of the foregoing
conditions;
(b) Opinion of Wesbanco Counsel. An opinion of Phillips, Gardill, Kaiser,
Boos & Altmeyer, counsel for Wesbanco, shall have been delivered to First
Fidelity, dated the Closing Date, and in form and substance satisfactory to
First Fidelity and its counsel, to the effect that:
(i) Wesbanco and FFB 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,
FFB and the Wesbanco Subs, taken as a whole.
(ii) Wesbanco and FFB have the full corporate power to execute and
deliver the Agreement and Plan of Merger. All corporate action of
Wesbanco and FFB required to duly authorize the Agreement and Plan of
Merger and the actions contemplated thereby has been taken, and the
Agreement and Plan of Merger is valid and binding on Wesbanco and FFB
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 shares of common stock and preferred stock of Wesbanco into
which shares of common stock and preferred stock of First Fidelity
shall be converted pursuant to the terms of the Agreement and Plan of
Merger have been duly authorized, and when delivered pursuant to the
terms of the Agreement and Plan of Merqer, will have been legally and
validly issued, and will be fully paid and nonassessable.
(iv) The consummation of the merger contemplated by the Agreement and
Plan of Merger will not violate any provision of Wesbanco's or FFB'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 or FFB are 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
Wesbanco or FFB are subject which would have a material adverse effect
on the assets, business or operations of Wesbanco and FFB, taken as a
whole.
(v) 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.
(vi) 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 First
Fidelity.
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(vii) The Registration Statement for the stock to be delivered
pursuant to the Agreement and Plan of Merger has become effective under
the Securities Act of 1933, and such counsel is not aware of any stop
orders in effect with regard to such Registration Statement.
(c) LSC Financial Services, Inc., financial advisors to First Fidelity,
shall have furnished to First Fidelity 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 Proxy Statement described in Section 13.1 of this
Agreement, and at the election of First Fidelity, updated as of the Closing
if the Closing is held more than five (5) days after the First Fidelity
meeting of shareholders, to the effect that the Merger and transactions
contemplated by this Agreement are fair, from a financial point of view, to
First Fidelity and its shareholders.
(d) Wesbanco and FFB shall have furnished First Fidelity with certified
copies of resolutions duly adopted by the Boards of Directors of Wesbanco
and FFB and the shareholders of FFB approving the Agreement and authorizing
the Merger and transactions contemplated hereby.
(e) Unless waived by First Fidelity, 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 First
Fidelity, if successful, would have a material adverse effect on the
financial condition or operations of Wesbanco or any of its subsidiaries.
(f) Unless waived by First Fidelity, there shall not have been any change
in control of Wesbanco since July 1, 1993.
11.4 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 day of the meetings of the shareholders of First Fidelity or
Wesbanco, whichever is later, at which the Agreement is approved;
(b) The thirtieth (30th) day after the approval of the acquisition of
First Fidelity by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board");
(c) The day after any stay of the Federal Reserve Board's approval of the
acquisition of First Fidelity shall be vacated or shall have expired or the
day after any injunction against the closing of the Merger shall be lifted,
discharged or dismissed;
(d) The day after the approval of the acquisition of First Fidelity by
the West Virginia Department of Banking is received by Wesbanco;
(e) The date on which the conditions set forth in Section 11 are
satisfied or waived;
(f) Such other date as shall be mutually agreed to by Wesbanco and First
Fidelity.
The Closing shall be held in Fairmont, 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 shall be filed with the Secretary of State of West Virginia.
11.5 Effective Date. The Merger shall become effective (the "Effective Date")
on the date on which the Certificate of Merger approving the Merger is issued
by the Secretary of State of West Virginia. The Surviving Corporation shall
record said Certificate of Merger in the office of the Clerk of the County
Commission of Marion County.
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SECTION 12
Termination of Agreement
12.1 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 First Fidelity:
(a) By mutual consent of First Fidelity and Wesbanco;
(b) By either First Fidelity 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 First Fidelity 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 First Fidelity or Wesbanco, if the Closing Date has not occurred
by the first anniversary of the date of execution of this Agreement;
(e) By First Fidelity, unless waived by First Fidelity, if the Market
Value of Wesbanco stock shall fall below Twenty-Eight Dollars ($28.00) per
share as of the Closing Date. Market Value, for purposes of this paragraph,
shall mean the average bid price of Wesbanco Common Stock (as quoted on
NASDAQ) for the 30 calendar days preceding five business days before the
Closing.
(f) By either party in the event that the shareholders of First Fidelity
or the shareholders of Wesbanco vote against consummation of the Merger.
(g) By Wesbanco or First Fidelity within 60 days of the date hereof
pursuant to the provisions of Section 9 of this Agreement.
12.2 Effect of Terminating; Right to Proceed. In the event this Agreement
shall be terminated pursuant to Section 12.1, all further obligations of
Wesbanco and First Fidelity under this Agreement, except Sections 9, 12.1,
12.2, and 19 hereof, shall terminate without further liability of Wesbanco and
FFB to First Fidelity or of First Fidelity to Wesbanco and FFB.
12.3 Return of Documents in Event of Termination. In the event of termination
of this Agreement for any reason, Wesbanco and First Fidelity 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 9 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 13
Meeting of Shareholders of First Fidelity
13.1 Subject to receipt by First Fidelity of the fairness opinion described
in Section 11.3(c) hereof, First Fidelity 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 First Fidelity
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 First Fidelity or omit to state a material
fact with respect to First Fidelity required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were
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made, not misleading, and which otherwise materially complies as to form with
all applicable laws, rules and regulations.
13.2 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 First
Fidelity. Accordingly, Wesbanco and First Fidelity agree to assist and
cooperate fully with each other in the preparation of the Registration
Statement. Both First Fidelity 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 First Fidelity, 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 14
Brokers
First Fidelity represents and warrants to Wesbanco and Wesbanco represents
and warrants to First Fidelity 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
First Fidelity to LSC Financial Services, Inc., its financial advisor.
SECTION 15
Governing Law; Successors andAssigns; 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 First Fidelity when one or more counterparts shall have been
signed and delivered by Wesbanco and First Fidelity and shall become effective
and binding as to FFB when FFB 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 subject matter hereof; and (e)
supersedes all prior agreements and understandings, written or oral, between
First Fidelity and Wesbanco relating to the subject matter hereof.
SECTION 16
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.
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SECTION 17
Notices
Except as specifically provided in Section 7.21(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 First Fidelity:
First Fidelity Bancorp, Inc.301 Adams Street Fairmont, WV
26555ATTENTION: Patrick L. Schulte, President
With a copy to:
Kirkpatrick & Lockhart1500 Oliver BuildingPittsburgh, PA
15222ATTENTION: J. Robert Van Rirk, Esq.
To Wesbanco:
Wesbanco, Inc.One Bank PlazaWheeling, WV 26003ATTENTION: Edward M.
George, President
With a copy to:
Phillips, Gardill, Kaiser, Boos & Altmeyer61 Fourteenth StreetWheeling,
WV 26003ATTENTION: James C. Gardill, Esq.
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.
SECTION 18
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 First Fidelity 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 First
Fidelity shall be converted in the Merger and any other material terms of the
Merger shall not be amended after the meeting of First Fidelity 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
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by a statement in writing signed by the party against which the enforcement of
such change, waiver, discharge or termination is sought.
SECTION 19
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 20
Miscellaneous
20.1 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.
20.2 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.
20.3 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.
20.4 Binding Date This Agreement is effective and binding as to Wesbanco and
First Fidelity upon the date first above written and effective and binding as
to FFB upon execution hereof by FFB.
A-31
In Witness Whereof, Wesbanco and First Fidelity have each caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized all as of the day and year first above written and FFB has caused
this Agreement to be executed on its behalf by its officers thereunto duly
authorized as of the date set forth below.
Wesbanco, Inc., a West Virginia
corporation
/s/ E. M. George
By___________________________________
Its President
(SEAL)
Attest:
/s/ Shirley A. Bucan
_____________________________________
Secretary
First Fidelity Bancorp, Inc., a West
Virginia corporation
/s/ Patrick L. Schulte
By___________________________________
Its President
(SEAL)
Attest:
/s/ Frank R. Kerekes
_____________________________________
Secretary
FFB Corporation, a West Virginia
corporation as of the 28th day of
October, 1993.
/s/ E. M. George
By___________________________________
Its President
(SEAL)
Attest:
/s/ James C. Gardill
_____________________________________
Secretary
A-32
APPENDIX III
Stock Option Agreement
This STOCK OPTION AGREEMENT ("Option Agreement") dated as of August 26, 1993
by and between Wesbanco, Inc., a West Virginia corporation ("Wesbanco") and
First Fidelity Bancorp, Inc., a West Virginia corporation ("First Fidelity").
Witnesseth
WHEREAS, the Boards of Directors of Wesbanco and First Fidelity have approved
an Agreement and Plan of Merger ("Merger Agreement"), which contemplates the
merger of First Fidelity with and into FFB Corporation, a West Virginia
corporation and wholly-owned subsidiary of Wesbanco ("FFB"), with FFB
continuing as the surviving corporation;
WHEREAS, as a condition to Wesbanco's entry into the Merger Agreement and to
induce such entry, First Fidelity has agreed to grant to Wesbanco the option
set forth herein to purchase authorized but unissued shares of common stock,
par value $1.25 per share of First Fidelity ("First Fidelity 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,
First Fidelity hereby grants to Wesbanco an option ("Option") to purchase up to
464,405 shares of First Fidelity Common Stock, at a price of $26.00 per share
(the "Option Price") payable in cash as provided in Section 4 hereof; provided,
however, that in the event First Fidelity issues or agrees to issue any shares
of First Fidelity Common Stock (other than as permitted under the Merger
Agreement) at a price less than $26.00 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 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 First Fidelity of Section 7.21(d) of the Merger
Agreement or, following the occurrence of a Purchase Event, failure of
First Fidelity'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 First Fidelity of Section
7.21(d) of the Merger Agreement or, following the occurrence of a Purchase
Event, failure of First Fidelity'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 First Fidelity, any First Fidelity
Subsidiary, Wesbanco or any affiliate of Wesbanco) shall have commenced
a bona fide tender or exchange offer to purchase shares of First
Fidelity Common Stock such that upon consummation of such offer such
person would own or control 15% or more of the outstanding shares of
First Fidelity Common Stock;
A-33
(ii) any person (other than First Fidelity or any First Fidelity
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 First Fidelity or any First Fidelity
Subsidiary, (y) purchase, lease or otherwise acquire all or
substantially all of the assets of First Fidelity or any First Fidelity
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 First
Fidelity or any First Fidelity Subsidiary;
(iii) any person (other than First Fidelity, any First Fidelity
Subsidiary, the First Fidelity Subsidiaries 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 First Fidelity 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 First Fidelity or any First Fidelity
Subsidiary) shall have made a bona fide proposal to First Fidelity by
public announcement or written communication that is or becomes the
subject of public disclosure to (x) acquire First Fidelity or any First
Fidelity 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) First Fidelity shall have willfully breached Section 7.21(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
First Fidelity 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 First Fidelity the aggregate purchase price for the shares of First
Fidelity Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated
by First Fidelity.
b. At such closing, simultaneously with the delivery of cash as provided
in subsection (a), First Fidelity shall deliver to Wesbanco a certificate
or certificates representing the number of shares of First Fidelity Common
Stock purchased by Wesbanco, and Wesbanco shall deliver to First Fidelity 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.
A-34
c. Certificates for First Fidelity 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 First Fidelity Bancorp, 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 First Fidelity Bancorp, Inc. A copy of
such agreement will be provided to the holder hereof without
charge upon receipt by First Fidelity Bancorp, 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 First Fidelity 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 First Fidelity, to the effect that such legend is
not required for purposes of the Securities Act.
5. Representations. First Fidelity hereby represents, warrants and covenants
to Wesbanco as follows:
a. First Fidelity shall at all times maintain sufficient authorized but
unissued shares of First Fidelity Common Stock so that the Option may be
exercised without authorization of additional shares of First Fidelity
Common Stock; provided, however, that if the Option is exercised at the
time that the book value of First Fidelity Common Stock is less than
approximately $1.60 per share, First Fidelity may have insufficient
authorized but unissued shares of First Fidelity 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
First Fidelity 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 First Fidelity 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 First Fidelity Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
19.9% of the number of shares of First Fidelity 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
First Fidelity to breach any provision of the Merger Agreement.
7. Registration Rights. First Fidelity 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 First Fidelity 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 First Fidelity for inclusion in any
registration statement to be filed hereunder. First Fidelity 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 First Fidelity be
required to effect more than two registrations hereunder. All expenses of
registrations hereunder shall be borne equally by First Fidelity and Wesbanco.
The filing of any registration statement hereunder may be delayed for such
period of time as may reasonably be required to facilitate any public
distribution by First Fidelity of First Fidelity Common Stock. If requested by
Wesbanco, in connection with any such registration, First Fidelity 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, First Fidelity agrees to send a copy thereof to
Wesbanco and to any assignee thereof known to First Fidelity, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
A-35
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 First Fidelity Common Stock provided in
Section 2 hereof (as adjusted pursuant to Section 6 hereof), it is the express
intention of First Fidelity 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 First
Fidelity, purchase or other acquisition of securities representing 51% or
more of the voting power of First Fidelity or any First Fidelity Subsidiary
has been consummated, or (ii) a willful breach under Section 7.21(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, First
Fidelity 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 First Fidelity 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 First Fidelity has been
made and consummated, the price per share actually paid by any third party
pursuant to an agreement that has been consummated whereby First Fidelity
has been merged, consolidated with or otherwise acquired by a third party,
and the highest closing price for First Fidelity 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 First Fidelity Common shall be determined by a nationally
recognized investment banking firm mutually acceptable to the parties
hereto.
b. Wesbanco may exercise its right to require First Fidelity to
repurchase the Option pursuant to this Section 9 by giving First Fidelity
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,
First Fidelity shall deliver or cause to be delivered to Wesbanco the
Repurchase Price for the Option or the portion thereof which First Fidelity
is not then prohibited under applicable law and regulation from so
delivering.
c. To the extent that First Fidelity is prohibited under applicable law
or regulation, or as a result of administrative or judicial action, from
repurchasing the Option in full, First Fidelity 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 Repurchase Price
which it is no longer prohibited from delivering, within five business days
after the date on which First Fidelity is no longer so prohibited,
provided, however, that to the extent that First Fidelity is at the time
and after the expiration of 12 months, so prohibited from delivering to
Wesbanco, the Repurchase Price, in full (and First Fidelity hereby
undertakes to use its best efforts to receive all required regulatory and
legal approvals as promptly as practicable), First Fidelity shall deliver
to Wesbanco a new Option evidencing the right of Wesbanco to purchase that
number of shares of First Fidelity Common Stock obtained by multiplying the
number of shares of First Fidelity 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 First
Fidelity shall have no further obligation to repurchase such new Option;
and provided, further, that upon receipt of such notice and until five days
A-36
thereafter Wesbanco may revoke its notice of repurchase of the Option by
written notice to First Fidelity at its principal office stating that
Wesbanco elects to revoke its election to exercise its right to require
First Fidelity to repurchase the Option, whereupon First Fidelity will
promptly deliver to Wesbanco the Option and First Fidelity 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 First Fidelity Common Stock pursuant
to the Option Wesbanco shall desire to sell, assign, transfer or otherwise
dispose of all or any of the shares of First Fidelity 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 First Fidelity 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 First Fidelity, 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 First
Fidelity 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, First
Fidelity 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 First Fidelity to purchase all of the
shares covered by the Offeror's Notice or any applicable regulatory authority
shall disapprove First Fidelity'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 9 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 First Fidelity
Common Stock, (ii) of First Fidelity 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. Expense. 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.
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 17 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.
A-37
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.
/s/ E. M. George
By: _________________________________
First Fidelity Bancorp. Inc.
/s/ Patrick L. Schulte
By: _________________________________
A-38
WESBANCO, INC.
Wheeling, West Virginia 26003
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
April 21, 1993
-------------------
To the Stockholders
of Wesbanco, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of Wesbanco
Inc. will be held in the Directors Room of Wesbanco Bank Wheeling, Bank Plaza,
Wheeling, West Virginia 26003, on Wednesday, April 21, 1993, at 2:00 p.m.
The purposes of the meeting are as follows:
(1) To elect nine persons to the Board of Directors, seven to serve for a
term of three years, and two to serve for a term of two years.
(2) To consider and act upon a proposed amendment to the Articles of
Incorporation of the Corporation, as set forth in the Proxy Statement, for
the purpose of increasing the authorized capital stock of the Corporation
to 26,000,000 shares, consisting of 25,000,000 shares of common stock of
the par value of $2.0833 per share and 1,000,000 shares of preferred stock
without par value.
(3) To consider and act upon a proposed amendment to the Articles of
Incorporation to convert the outstanding shares of common stock of the par
value of $4.1666 per share into, and the reclassification of such shares
as, two shares of the common stock of the Corporation of the par value of
$2.0833 per share.
(4) To consider and act upon such other matters as properly may come
before the meeting or any adjournment thereof.
The holders of the common stock of the Corporation as of the close of
business on March 12, 1993, are entitled to vote at the meeting.
You are requested to sign and date the enclosed form of Proxy and return it
in the enclosed envelope at your earliest convenience. As indicated in the
accompanying Proxy Statement, proxies may be revoked at any time prior to the
voting thereof.
By order of the Board of Directors.
SHIRLEY A. BUCAN
Assistant Secretary
Wheeling, West Virginia
March 29, 1993
A-39
PROXY STATEMENT
OF
WESBANCO, INC.
Bank Plaza
Wheeling, West Virginia 26003
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1993
-----------------------
This statement is furnished to the stockholders of Wesbanco, Inc. in
connection with the solicitation of proxies to be used in voting at the annual
meeting of the stockholders of the Corporation, which will be held in the
Directors Room of Wesbanco Bank Wheeling, Bank Plaza, Wheeling, West Virginia
26003, at 2:00 p.m. on Wednesday, April 21, 1993. This statement is being
mailed to the stockholders on or about March 29, 1993.
Wesbanco, Inc. is the parent company and the holder of all of the outstanding
shares of the capital stock of Wesbanco Bank Wheeling, Wheeling, West Virginia,
Wesbanco Bank New Martinsville, New Martinsville, West Virginia, Wesbanco Bank
Sistersville, Sistersville, West Virginia, Wesbanco Bank Wellsburg, Wellsburg,
West Virginia, Wesbanco Bank Elizabeth, Elizabeth, West Virginia, Wesbanco Bank
South Hills, Charleston, West Virginia, Wesbanco Bank Sissonville, Sissonville,
West Virginia, Wesbanco Bank Elm Grove, Wheeling, West Virginia, Wesbanco Bank
Parkersburg, Parkersburg, West Virginia, The First National Bank of
Barnesville, Barnesville, Ohio, and Albright National Bank of Kingwood,
Kingwood, West Virginia (through ABI Corporation).
James C. Gardill is Chairman of the Board of Wesbanco, Inc. Executive
Officers of Wesbanco, Inc. include Edward M. George, President and Chief
Executive Officer; Paul M. Limbert, Executive Vice President and Chief
Financial Officer; Dennis P. Yaeger, Executive Vice President and Chief
Operating Officer; John W. Moore, Jr., Senior Vice President-Personnel; Jerome
B. Schmitt, Senior Vice President-Investments; Edward G. Sloane, Vice
President-Data Processing; Larry L. Dawson, Vice President; Jerry A. Halverson,
Vice President; and Albert A. Pietz, Jr., Vice President and Compliance
Officer.
Proxies
-------
The proxies are solicited by the Board of Directors of the Corporation, and
the cost thereof is being borne by the Corporation. Proxies may be revoked, by
the stockholders who execute them, at any time prior to the exercise thereof,
by written notice to the Corporation, or by announcement at the stockholders
meeting. Unless so revoked, the shares represented by all proxies will be
voted, by the persons named in the proxies, at the stockholders meeting and all
adjournments thereof, in accordance with the specifications set forth therein,
or, absent such specifications, in accordance with the judgment of the holders
of such proxies.
Stock Outstanding and Voting Rights
-----------------------------------
The authorized capital stock of the Corporation consists of 10,000,000 shares
of common stock of the par value of $4.1666 per share, and 100,000 shares of
preferred stock without par value. Of the 10,000,000 shares of authorized
common stock, 3,306,665 shares presently are issued and outstanding. There are
no shares of preferred stock issued and outstanding.
A-40
Stockholders of record as of the close of business on March 12, 1993, will be
entitled to vote at the stockholders meeting. Each stockholder will be entitled
to one vote for each share of common stock held, as shown by the records of the
Corporation, at that time. Cumulative voting, in the election of Directors, is
permitted by State statute, and the exercise of that right is not subject to
any condition precedent. Each stockholder is entitled to as many votes as shall
equal the number of his shares of common stock multiplied by the number of
Directors to be elected within each class, and he may cast all of such votes
for a single Director or he may distribute them among the number to be voted
for as he may see fit.
To the best of management's knowledge, the Trust Department of Wesbanco Bank
Wheeling, Bank Plaza, Wheeling, West Virginia 26003, is the only holder or
beneficial owner of more than 5% of the common stock of the Corporation. As of
February 12, 1993, 392,019 shares of the common stock of the Corporation,
representing 11.86% of the shares outstanding, were held in various capacities
in the Trust Department. Of these shares, the Bank does not have voting control
of 223,178 shares, representing 6.75% of the shares outstanding, has partial
voting control of 6,621 shares, representing .20% of the shares outstanding,
and sole voting control of 162,220 shares, representing 4.91% of the shares
outstanding. In accordance with its general practice, shares of the common
stock of the Corporation over which the Bank has sole voting control will be
voted in accordance with the recommendations of management. Shares over which
the Bank has partial voting control will be similarly voted if the Bank has the
concurrence of the co-fiduciary or co-fiduciaries.
The following table lists each stockholder known to Wesbanco to be the
beneficial owner of more than 5% of Wesbanco's common stock as of February 12,
1993, as more fully described above:
Principal Holders
-----------------
Name &
Address of Amount and Nature
Title of Beneficial of Beneficial Percent
Class Owner Ownership of Class
- -------- ------------ -------------------- -------------
Common Wesbanco Bank
Wheeling Trust Dept.
Bank Plaza
Wheeling, WV 26003 392,019* 11.86%
*Nature of beneficial ownership more fully described in text immediately
preceding table.
Election Of Directors
---------------------
The Board of Directors of the Corporation is divided into three classes, as
nearly equal in number as the numerical membership of the Board will permit, the
members of such classes to serve staggered terms of three years each. In
accordance with the Bylaws, the Board of Directors has determined that the Board
shall consist of twenty-five (25) members, and has fixed the number of Directors
to be elected at the forthcoming meeting at nine (9), seven (7) to be elected
for a term of three years expiring at the annual stockholders meeting in 1996,
and two (2) to be elected for a term of two years expiring at the annual
stockholders meeting in 1995. Since one vacancy exists in the Class of Directors
to be elected for a three-year term expiring in 1996 (See Note (1) under heading
"Nominees"), proxies may not be voted for a greater number of persons than are
named.
Accordingly, the following persons have been nominated for election to the
Board:
A-41
Nominees (1)
------------
A. For the three-year term expiring at the Annual Stockholders Meeting in 1996:
Name Age Principal Occupation (2) Director Since
- ----------------------- ---- ------------------------------ --------------
Gilbert S. Bachmann 74 Lawyer; Partner, Bachmann, 7/28/76
Hess, Bachmann & Garden
H. Thomas Corrie 67 President, Atlantic 3/28/84
Development Corporation, Inc.
(Real estate development
company, Charleston, WV)
John W. Kepner 60 Mortician; President, 7/28/76
Kepner Funeral Homes
John D. Kirk 75 Retired; former owner, 7/17/92
Kirk's Furniture
Walter W. Knauss, Jr. 72 Former Vice President 3/6/75
& Secretary, Wesbanco,
Inc. & Wesbanco Bank Wheeling,
former Assistant to the
President & Secretary,
Chairman of the Board,
Wesbanco Bank Wheeling
Melvin C. Snyder, Jr. 64 Lawyer; Partner, 12/2/91
Snyder & Hopkins
John A. Welty 65 Secretary-Treasurer, 7/28/76
Welty Buick, Pontiac,
GMC Truck, former President,
Welty Buick, Inc.
(1) One vacancy exists in this class, the Board having fixed the membership
of the class at eight. The vacancy was created by the untimely death of
Thomas G. Dove, former President and CEO of the Corporation. The Board of
Directors has determined to leave the position open for the present. The
Bylaws of the Corporation would permit the Board to fill the vacancy
during the ensuing year, but any such appointment would be effective only
until the next annual meeting of shareholders.
(2) Principal occupation during the past five years.
B. For a two-year term expiring at the Annual Stockholders Meeting in 1995:
Name Age Principal Occupation (1) Director Since
- ----------------------- ---- ------------------------------ --------------
Christopher V. Criss 37 President & Chief 7/17/92
Executive Officer,
Atlas Towing Company
Charles J. Bradfield 59 President & Chief 7/17/92
Executive Officer,
The First National
Bank of Barnesville
(1) Principal occupation during the past five years.
A-42
In the absence of instructions to the contrary, the enclosed form of proxy, if
executed and returned to the Corporation, will be voted in the manner determined
by the holder or holders thereof. Discretionary authority to cumulate votes in
the election of Directors is solicited, and unless otherwise directed, the
holder or holders of such proxies shall have the authority to cumulate votes
represented thereby and to distribute the same among the nominees in such manner
and numbers as such holder or holders, in his or their discretion, may
determine. This authority will be exercised by the holder or holders of the
proxies in the event that any person or persons, other than the nominees named
above, should be nominated for election to the Board of Directors.
All of the foregoing nominees presently are serving as members of the Board.
In the event that at any time prior to the stockholders meeting, any of the
foregoing nominees should become unavailable for election to the Board of
Directors, the shares of stock represented by the proxies will be voted for
such other nominee or nominees as the holders of the proxies, in their
judgment, may determine.
Continuing Directors
--------------------
In addition to the foregoing nominees, the following persons presently are
serving as members of the Board of Directors:
Directors Whose Term of Office Will Expire
at the Annual Stockholders Meeting in 1995 (1)
----------------------------------------------
Name Age Principal Occupation (2) Director Since
- ------------------- --- ------------------------------ --------------
James E. Altmeyer 54 President, Altmeyer 10/16/87
Funeral Homes, Inc.
Stephen F. Decker 41 President & Chief 12/2/91
Executive Officer,
Albright National Bank
of Kingwood, Kingwood, WV
James C. Gardill 46 Chairman of the Board, 11/13/80
Wesbanco, Inc.; Lawyer;
Partner, Phillips, Gardill,
Kaiser, Boos & Hartley
Roland L. Hobbs 60 Former Chairman of the 7/28/76
Board of Wesbanco, Inc., former
Vice Chairman of the Board of
Wesbanco Bank Wheeling,
former President of Wesbanco, Inc.
Eric Nelson 63 President, Nelson 4/16/87
Enterprises (Investments)
John J. Paull 70 Chairman & Treasurer, 1/19/89
Eagle Manufacturing Co.
A-43
James L. Wareham 53 Chairman of the Board, 12/20/90
President & Chief Executive (3)
Officer, Wheeling-Pittsburgh
Steel Corp.; former President
and Chief Executive Officer,
Bliss-Salem, Inc.
(1) Two vacancies exist in this class, the Board having fixed the membership
of the class at nine (9). These vacancies will be filled at the
forthcoming stockholders meeting. See "Nominees," Subsection "B."
(2) Principal occupation during the past five years.
(3) Mr. Wareham also serves as a Director of Wheeling-Pittsburgh Steel Corp.
Directors Whose Term of Office Will Expire
at the Annual Stockholders Meeting in 1994
------------------------------------------
Name Age Principal Occupation (1) Director Since
- ----------------------- ---- ------------------------------ --------------
Michael M. Boich 65 Mining Industry 4/16/87 (2)
Ray A. Byrd 48 Lawyer; Partner, Schrader 6/9/77
Byrd, Byrum & Companion
David B. Dalzell 76 Retired, former 7/28/76
Chairman of the Board
& President, Fostoria
Glass Co.
James D. Entress 54 Oral & Maxillo-Facial Surgeon 12/20/90
Edward M. George 56 President & Chief Executive 12/2/91
Officer, Wesbanco, Inc.;
formerly Executive Vice
President-Loans, Wesbanco,
Inc; formerly Vice-
President-Commercial and
Mortgage Lending, Wesbanco,
Inc.; formerly President &
CEO, Wesbanco Bank Wheeling;
formerly President & COO
Wesbanco Bank Wheeling
Carter W. Strauss 46 President, Herman 7/28/76
Strauss, Inc. (Recycler
ferrous & non-ferrous
metals)
Thomas L. Thomas 66 Physician 10/16/87
William E. Witschey 61 President, Witschey's 1/10/85
Market, Inc. (Retail Food
Market)
(1) Principal occupation during the past five years.
(2) Attended less than 75% of the meetings of the Board.
A-44
Ownership of Securities by Directors, Nominees and Officers
-----------------------------------------------------------
The following table sets forth the number of shares of the Corporation's common
stock beneficially owned by the nominees, continuing directors and officers of
the Corporation as a group as of February 12, 1993. There is no other class of
voting securities issued and outstanding.
Name of Sole Voting and Shared Voting and/or
Beneficial Owner Investment Authority Investment Authority Percent
- ---------------------- --------------------- ---------------------- --------
James E. Altmeyer 2,435 -- *
Gilbert S. Bachmann 7,700 -- *
Michael M. Boich 113,176 (1) -- 3.4
Charles J. Bradfield 18,876 (2) -- *
Ray A. Byrd 2,006 -- *
H. Thomas Corrie 2,639 11,292 (3) *
Christopher V. Criss 465 137,595 (4) 4.2
David B. Dalzell 1,000 -- *
Stephen F. Decker 3,012 -- *
James D. Entress 15,773 (5) -- *
James C. Gardill 12,222 (6) -- *
Edward M. George 2,249 -- *
Roland L. Hobbs 8,000 (7) 679 (8) *
John W. Kepner 1,671 -- *
John D. Kirk 11,196 (9) -- *
Walter W. Knauss, Jr. 12,334(10) -- *
Eric Nelson 13,519(11) -- *
John J. Paull 10,441 8,151 (12) *
Melvin C. Snyder, Jr. 2,816(13) -- *
Carter W. Strauss 6,085(14) -- *
Thomas L. Thomas 7,110(15) 111,835 (16) 3.6
James L. Wareham 101 -- *
John A. Welty 1,650(17) -- *
William E. Witschey 2,310 14,054 (18) *
All Directors and Officers
as a group (34 persons) 275,307 283,606 16.9
* Beneficial ownership does not exceed one percent.
(1) Mr. Boich's wife, Doris G. Boich, is the owner of an additional 5,000
shares.
(2) Mr. Bradfield's wife, Gretchen H. Bradfield, is the owner of an
additional 1,740 shares.
(3) Atlantic Development Corporation, in which Mr. Corrie has a substantial
stock interest, is the owner of 11,292 additional shares.
(4) Mr. Criss is the Co-Trustee of an additional 137,594 shares held in the
A.V. Criss, Sr. Trusts. Wesbanco Bank Parkersburg and John S. Criss also
serve as Co-Trustees of these trusts.
(5) Dr. Entress' wife, Dr. Cheryl Entress, is the owner of an additional
3,566 shares, which are held in an IRA custodian account at Wesbanco Bank
Wheeling. Dr. James D. Entress' shares are held at Wesbanco Bank Wheeling
as Custodian for James D. Entress Individual Retirement Custodian
Account.
(6) Includes 330 shares held by Mr. Gardill's wife, Linda T. Gardill, and 761
shares held in custodian account at Wesbanco Bank Wheeling.
A-45
(7) Mr. Hobbs' wife, Sarah F. Hobbs, is the owner of an additional 1,540
shares.
(8) Mr. Hobbs is Co-Trustee of an additional 679 shares held in Trust.
(9) Mr. Kirk's wife, Margaret V. Kirk, is the owner of an additional 1,524
shares.
(10) Mr. Knauss' wife, Mary E. Knauss, is the owner of an additional 6,600
shares.
(11) Mr. Nelson's wife, Ann P. Nelson, is the owner of an additional 1,586
shares.
(12) Eagle Manufacturing Company, of which Mr. Paull is an officer and
director and in which he has a substantial stock interest, is the owner
of 4,290 shares, and 3,861 shares are held in a trust at Security
National Bank & Trust Co., in which Mr. Paull has a one-third interest.
(13) Mr. Snyder's wife, Ann E. Snyder, is the owner of an additional 226
shares.
(14) Mr. Strauss' wife, Barbara Strauss, is the owner of an additional 800
shares held in a custodian account at Wesbanco Bank Wheeling. In
addition, Mr. Strauss' children are the owners of an additional 200
shares held in a custodial account at Wesbanco Bank Wheeling.
(15) Dr. Thomas' wife, Ann F. Thomas, is the owner of an additional 1,104
shares, and 1,071 shares are held by Dr. Thomas' Retirement Trust, of
which he shares voting and investment powers with the Trustee. In
addition, Dr. Thomas has a substantial stock interest in two
corporations, namely, Fath Corporation and J.T. Corporation, the owners
of 945 shares, and 5,556 shares of the common stock of the Corporation,
respectively.
(16) Dr. Thomas is President and one of five Trustees of the James B. Chambers
Memorial Association, Inc., of Wheeling, West Virginia, the owner of
111,835 shares of common stock of the Corporation. The James B. Chambers
Memorial Association, Inc. is an eleemosynary corporation which is
operated for the benefit and advancement of disadvantaged children of the
greater Wheeling area.
(17) Mr. Welty's wife, Joyce W. Welty, is the income beneficiary of a Trust
which owns an additional 990 shares.
(18) Mr. Witschey's wife, Wilda Witschey, is the owner of an additional 2,640
shares; 14,054 shares of the Corporation's stock are owned by Witschey's
Market, Inc., in which Mr. Witschey has a substantial stock interest.
Section 16(a) Filing Requirements
---------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities & Exchange Commission.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Corporation believes that, during the calender
year 1992, all filing requirements applicable to its officers, directors and
greater than 10 % beneficial owners were complied with, except that (a) one
report covering three transactions involving indirect purchases by a trust was
filed late by Carter W. Strauss; (b) one report covering three transactions by
members of the immediate family was filed late by Ray A. Byrd; and (c) one
report covering one transaction was filed late by Roland L. Hobbs involving
indirect shares purchased by a trust.
A-46
Transactions With Directors and Officers
----------------------------------------
It has been the practice of some of the subsidiary banks of the Corporation,
on occasion, to engage in the ordinary course of business in banking
transactions, which at times involved loans in excess of $60,000.00, with some
of their Officers and Directors and some of the Officers and Directors of the
Corporation and their associates. It is anticipated that that practice will be
continued. All loans to such persons, however, have been made, and in the
future will be made, in the ordinary course of business and on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and did not, and will
not, involve more than normal risk of collectibility or present other
unfavorable features. From time to time the firm of Phillips, Gardill, Kaiser,
Boos & Hartley of which James C. Gardill, Chairman of the Board and a Director
of the Corporation, is a partner**, the firm of Schrader, Byrd, Byrum &
Companion, of which Ray A. Byrd, Director of the Corporation, is a partner, and
the firm of Bachmann, Hess, Bachmann & Garden, of which Gilbert S. Bachmann, a
Director of the Corporation, is a partner, have rendered legal services to the
Corporation. It is contemplated that one or more of these firms will be
retained to perform legal services during the current year.
- ------------
** Fees aggregating $243,032.82 were paid to the law firm of Phillips, Gardill,
Kaiser, Boos & Hartley for legal services rendered to the Corporation and its
banking affiliates during the year 1992
Compensation of Executive Officers
----------------------------------
The officers of the Corporation presently are serving without compensation
from Wesbanco, Inc. They are, however, compensated by Wesbanco, Inc. affiliate
banks for services rendered as officers of those corporations.
The following table sets forth the total compensation paid by Wesbanco, Inc.
affiliate banks, during the year 1992, to the five highest paid executive
officers, whose total compensation exceeded $100,000.00, together with the
benefits payable to them from the Corporation's pension plan upon retirement.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-------------------------------
Annual Compensation Awards Payouts
- ----------------------------------------------------------------------------------------------------
Other Restricted All Other
Annual Stock Options LTIP Compensation
Name and Position Year Salary ($) Bonus ($) Comp (1) Awards SARS (#) Payouts ($) (2)
- --------------------------------------------------------------------------------------------------------------------
Thomas G. Dove (3) 1992 150,500 25,000 0 0 0 0 3,670
President & CEO 1991 150,500 10,000 4,725 0 0 0 15,742
1990 137,500 10,200 4,320 0 0 0 13,795
Edward M. George 1992 121,800 18,000 0 0 0 0 2,868
EVP Loans 1991 116,000 7,500 4,725 0 0 0 15,041
1990 105,600 7,200 4,320 0 0 0 12,981
Paul M. Limbert 1992 97,650 14,000 0 0 0 0 2,302
EVP & Controller 1991 93,000 6,000 3,544 0 0 0 11,440
1990 86,000 6,000 3,240 0 0 0 9,919
Dennis P. Yaeger 1992 97,650 14,000 0 0 0 0 2,302
EVP Operations 1991 93 000 6,000 3,544 0 0 0 11,440
1990 86,000 6,000 3,240 0 0 0 9,919
Jerry A. Halverson 1992 105,000 3,500 0 0 0 0 2,154
Vice President 1991 105,000 5,000 0 0 0 0 2,024
1990 101,309 5,000 0 0 0 0 1,851
A-47
(1) "Other Annual Compensation" includes payments in 1990 and 1991 to cover
the estimated tax liability with respect to the 1990 and 1991 stock bonus.
Payments for 1991 are as follows: Mr. Dove received $4,725, Mr. George
received $4,725, Mr. Limbert received $3,544, and Mr. Yaeger received
$3,544. Payments for 1990 are as follows: Mr. Dove received $4,320, Mr.
George received $4,320, Mr. Limbert received $3,240, and Mr. Yaeger
received $3,240.
(2) "All Other Compensation" includes the following: (i) contributions to the
Bank's ESOP Plan on behalf of each of the named executives as follows: for
Mr. Dove, 1992 - $3,670, 1991 - $3,142, 1990 - $2,995; for Mr. George,
1992 - $2,868, 1991 - $2,441, 1990 - $2,181; for Mr. Limbert, 1992 -
$2,302, 1991 - $1,990, 1990 - $1,819; for Mr. Yaeger, 1992 - $2,302,
1991 - $1,990, 1990 $,1819, for Mr. Halverson, 1992 - $2,154, 1991 -
$2,024, 1990 - $1,851, and (ii) non-cash bonus in the form of stock as
follows: for 1991, Mr. Dove received 400 shares with a cash value of
$12,600; Mr. George received 400 shares with a cash value of $12,600; Mr.
Limbert received 300 shares with a cash value of $9,450; and Mr. Yaeger
received 300 shares with a cash value of $9,450. Market price per share
was $31.50. For 1990, Mr. Dove received 400 shares with a cash value of
$10,800; Mr. George received 400 shares with a cash value of $10,800; Mr.
Limbert received 300 shares with a cash value of $8,100; and Mr. Yaeger
received 300 shares with a cash value of $8,100. Market price per share
was $27.00. All shares issued were issued as restricted stock but subject
to regular dividend payments.
(3) Died December 31, 1992.
Comparison of Five Year Cumulative Total Return*
Among WesBanco, Inc., Nasdaq Stock Market (U.S.), and Nasdaq Banks**
Measurement period Wesbanco, Inc. NASDAQ Stock Market NASDAQ Bank's
(Fiscal year Covered) Index (U.S.) Index
Measurement PT_
12/31/87 $100 $100 $100
FYE 12/31/88 $110 $118 $118
FYE 12/31/89 $120 $143 $132
FYE 12/31/90 $128 $122 $ 98
FYE 12/31/91 $140 $198 $158
FYE 12/31/92 $216 $231 $231
Assumes $100 Invested on January 1, 1988 *Total Return Assumes Reinvestment
In WesBanco, Inc., Nasdaq Stock Market, of Dividends
and Nasdaq Banks
**Fiscal Year Ending December 31
A-48
Pension Plan Benefits
Estimated Annual Benefits Upon Retirement to Persons in
Specified Remuneration and Years-of-Service Classifications
-----------------------------------------------------------
Years of Service
----------------
Remuneration 15 20 25 30 35
- ------------ ---- ---- ---- ---- ----
85,000 21,782 29,042 36,303 43,567 50,000
95,000 24,392 32,522 40,653 48,784 50,000
105,000 27,002 36,002 45,003 50,000 50,000
120,000 30,917 41,222 50,000 50,000 50,000
130,000 33,527 44,702 50,000 50,000 50,000
140,000 36,137 48,182 50,000 50,000 50,000
150,000 38,747 50,000 50,000 50,000 50,000
175,000 45,272 50,000 50,000 50,000 50,000
200,000 50,000 50,000 50,000 50,000 50,000
225,000 50,000 50,000 50,000 50,000 50,000
A Participant's compensation covered by the Bank's pension plan is the salary
reported on the Form W-2 plus Section 125 contributions made by the employee (as
reported in the Summary Compensation Table), for the 60 consecutive months out
of the last 120 consecutive months of the Participant's career for which such
average is the highest, or in the case of the Participant who has been employed
for less than 60 months, the period of his employment with the Bank. Average
compensation for named executives as of the end of the last calendar year is:
Mr. Dove: $167,854; Mr. George: $121,978; Mr. Limbert: $99,318; Mr. Yaeger:
$99,318; Mr. Halverson: $107,132. The estimated years of service for each named
executive are as follows: Mr. Dove: 28; Mr. George: 9.583; Mr. Limbert: 15.666;
Mr. Yaeger: 20.333; Mr. Halverson: 28.583. Benefits shown are computed as a
straight life annuity beginning at age 65.
Description of Employment Contracts
-----------------------------------
The Corporation provides certain executive officers, including the Executive
Officers named in the Summary Compensation Table, with written Employment
Contracts at their respective base annual salaries. These contracts are all
substantially the same and are structured on a revolving three-year term which
is annually renewable. The contracts provide for discharge for cause, and
terminate in the event of the death of the employee. If terminated by reason of
the death of the employee, or without cause, the employee or his designated
beneficiary is entitled to a severance payment equal to six months of the
employee's base salary. There are no golden parachute type provisions contained
in the contracts.
Description of Bonus Plan
-------------------------
Annually, the Executive Committee of the Corporation makes a determination as
to the amount and allocation among the executive officers of the Corporation of
a bonus payable to such officers. The amount and participants vary each year
based on an assessment of profitability and merit as determined by the
Committee. A total of $148,000 in cash was allocated and paid for such bonuses
for the year 1992.
A-49
Compensation Committee Report
-----------------------------
Members of the Compensation Committee consist of the non-salaried members of
the Executive Committee and include Messrs. Gardill, Criss, Thomas, Witschey,
Hobbs, Strauss and Bachmann.
Generally, compensation policies are determined by the annual budget process
in which overall salary adjustment ranges are established based upon a
projected annual budgeted amount for salaries. The actual increases are then
allocated based on administration of the company's salary administration
program, a Hay type system, and individual performance evaluations, which are
done each year on all employees, including executive officers. Salary increases
are also adjusted for merit increases and changes in duties and responsibilities
where warranted. The Committee also considered that executive salaries for the
Corporation's executives are somewhat lower than industry peer group averages
and have been moving closer to industry standards, subject to corporate
performance.
Company performance is considered in establishing the annual budget for salary
increases, which is the initial part of the process. Projected annual income
growth and savings through consolidation are considered in establishing the
overall salary increase range. Also, Company performance factors, including net
income, return on assets and return on equity, are considered in setting annual
bonuses.
Considerations affecting Mr. George's salary and bonus for 1992 included his
intended elevation to the position of President and CEO effective January 1,
1993, the positive performance of the company for 1992 in terms of return on
assets and return on equity, and his annual evaluation, which was very positive.
Also the Committee considered the recent acquisition of an additional bank, and
the attendant additional work load assumed.
Compensation Committee Interlocks and
Insider Participation in Compensation Decisions
------------------------------------------------
Roland L. Hobbs, a member of the Compensation Committee, formerly served as
Chairman and President of Wesbanco until June 1, 1990. He continues to serve as
a member of the Board and Executive Committee of the Corporation.
James C. Gardill, also a member of the Compensation Committee, serves as
Chairman of the Board of the Corporation, which is a non-salaried position,
though Mr. Gardill is included in annual bonus considerations of the
Compensation Committee. Mr. Gardill does not participate in the Committee's
discussion of such bonus. Mr. Gardill also is a partner in the law firm
Phillips, Gardill, Kaiser, Boos & Hartley, and acts as general counsel for the
Corporation. During the year 1992 fees aggregating $243,032.82 were paid to the
firm of Phillips, Gardill, Kaiser, Boos & Hartley for legal services rendered to
the Corporation and its banking affiliates.
Wesbanco ESOP Plan
------------------
The Wesbanco Employee Stock Ownership Plan (the "ESOP") is a qualified
non-contributory employee stock ownership plan. It was adopted by the
Corporation on December 31, 1986, and is designed to serve as a vehicle for the
acquisition of stock ownership interests in the Corporation by eligible
employees of the Corporation and its subsidiary companies. All employees of
Wesbanco, together with all employees of the subsidiary companies which adopt
the Plan, are eligible to participate in the ESOP upon completion of a year's
service. All affiliate banks, except Albright National Bank of Kingwood and The
First National Bank of Barnesville, became participants in the Plan between 1986
and 1989, and the Wesbanco Board has approved the adoption of the Plan by all
such affiliates. Albright National Bank of Kingwood and The First National Bank
of Barnesville became participants in the Plan as of January 1, 1993. The ESOP
is administered by a Committee appointed by the Board of Directors of the
Corporation.
A-50
No contributions are made to the ESOP by the employees. All contributions are
made by the Corporation, and the amount thereof is determined annually by the
Board of Directors of the Corporation. The Trustee of the ESOP Trust is
authorized to borrow funds upon terms and conditions not inconsistent with
Section 4975 of the Internal Revenue Code and the regulations thereunder, for
the purpose of purchasing stock of the Corporation, from the Corporation or any
shareholder. In the event that such a loan is obtained, the employer
contributions must be made in an amount sufficient to amortize the loan.
Otherwise, employer contributions may be paid in the form of cash or shares.
At the present time, the Trust holds 35,882 shares of Wesbanco common stock.
The purchase of 12,900 shares, in 1992, was financed through a loan, in the
amount of $559,725, that was obtained from an independent financial institution,
and the shares of stock have been pledged as collateral security for the
repayment of the loan. The loan requires annual payments of principal over a
five-year period, and bears interest at a rate equal to the lender's prime rate,
fluctuating quarterly. Until the loan is repaid, Wesbanco's annual contribution
to the ESOP will be at least equal to the principal and interest requirements of
the loan.
Employer securities purchased with the proceeds of the loan are placed in a
suspense account and released, prorata, from such suspense account under a
formula which considers the amount of principal and interest paid for a given
period over the amount of principal and interest anticipated to be paid for that
period and all future periods. Shares released from the suspense account,
employer contributions, if any, and forfeitures are each allocated, prorata,
subject to limits imposed by the Code, to the accounts of individual
participants under a format which considers the amount of the participant's
compensation over the aggregate compensation of all participants.
Participants become vested in their accounts upon retirement, death or
disability or upon completion of five years of service from and after December
31, 1986, or, with respect to affiliate banks, five years from the date of
acquisition. Distributions upon retirement, death or disability are normally
made in the form of substantially equal annual installments over a period of 10
years commencing as soon as practicable after such retirement, death or
disability. Distributions upon other separation from service are normally made
in the form of installments commencing upon the earlier of the date the former
employee attains age 65, his or her death or after a one-year break in service.
With the consent of the Committee, distributions may be made in the form of a
lump sum. Participants may demand distributions in the form of whole shares of
employer securities. If demand is not timely made, however, distributions may be
made in cash.
The assets of the ESOP Trust will be invested and accounted for primarily in
shares of employer securities. However, from time to time, the ESOP Trustee may
hold assets in other forms, either (i) as required for the proper administration
of the ESOP or (ii) as directed by participants as set forth in Section
401(a)(28) of the Code.
During the year 1992, Wesbanco contributed a total of $174,223.74 to the ESOP
on behalf of its employees.
A-51
The following table sets forth, with respect to those persons named in the
Compensation Table, and for all executive officers as a group, the number of
shares of the Corporation's common stock allocated to such individuals during
1992:
Name Number of Shares
---- ----------------
Thomas G. Dove 116
Edward M. George 91
Paul M. Limbert 73
Dennis P. Yaeger 73
Jerry A. Halverson 68
Officers of the Corporation
(14 persons) as a group 802
Meetings of the Board of Directors and Committees
and Compensation of Members
--------------------------------------------------
The Board of Directors of the Corporation meets bimonthly and the Executive
Committee of the Corporation meets monthly. Fees paid for attendance at Board
meetings and meetings of the Executive Committee are $300.00 and $150.00,
respectively. Beginning April 1, 1993, the Directors will also receive an annual
fee of $2,000.00 payable quarterly at the rate of $500.00 per quarter. During
1992, the Board of Directors of the Corporation held six meetings. Directors of
the Corporation are paid a fee of $100.00 for attendance at meetings of special
committees of the Corporation. Fees in the total amount of $34,350.00 were paid
to Directors for attendance at meetings of the Board of Directors of the
Corporation and at meetings of all Committees of the Corporation during the year
1992. In addition, fees in the aggregate amount of $9,150.00 were credited to
the accounts of those Directors who have elected to participate in the Directors
Deferred Compensation Plan of the Corporation, pursuant to which payment of fees
for attendance at meetings of the Board of Directors and Committees established
by the Board may be deferred until following the termination of Board
membership.
The Corporation does have a standing Compensation Committee. The members of
the Corporation's Compensation Committee include James C. Gardill, Roland L.
Hobbs, Gilbert S. Bachmann, Carter W. Strauss, Thomas L. Thomas, Christopher V.
Criss and William E. Witschey. The Corporation does have a standing Nominating
Committee. Members of the Corporation's Nominating Committee are Roland L.
Hobbs, James C. Gardill, Thomas L. Thomas and Eric Nelson.
The Corporation does have an Audit Committee, the members of which in 1992
were Carter W. Strauss, Chairman, Ray A. Byrd, D. Duane Cummins, James D.
Entress and Thomas M. Hazlett. The principal functions of the Audit Committee
are to confer with the independent accountants and the Internal Auditor of the
Corporation and the affiliate banks, and to review and assess the interim and
year-end audit reports and the reports of the examinations made by the Federal
and State Bank Examiners and other regulatory authorities. The Committee held
four meetings during 1992. Three of the meetings were attended by
representatives of Price Waterhouse, the independent accountants, and all of the
meetings were attended by the Internal Auditor, for the Corporation and its
affiliate banks. These meetings were devoted, for the most part, to reviewing
and discussing the reports and recommendations of Price Waterhouse concerning
the interim and year-end audits, and the reports of the Internal Auditor
concerning the results of the examinations and the accounting controls and
procedures followed by the Internal Audit Department. Various other matters
pertaining to the business and operations of the Corporation received attention
by the Committee throughout the year, including the scope of the audits, review
of nonperforming credits, consideration of financial statements, internal
control procedures, loan policies, and loan loss reserves.
A-52
Stockholders Intending to Nominate Candidates for
Election to Board of Directors Must Give Notice to Corporation
--------------------------------------------------------------
Under Section 2 of Article III of the bylaws of the Corporation, any
stockholder who intends to nominate, or cause to have nominated, a candidate for
election to the Board of Directors (other than any candidate proposed by the
Board of Directors) shall so notify the Secretary of the Corporation in writing
not less than thirty (30) days prior to the date of any meeting of the
stockholders at which Directors are to be elected, or five (5) days after the
giving of notice of such meeting, whichever is later. Only candidates nominated
in accordance with this section, other than candidates nominated by the Board of
Directors, shall be eligible for election to the Board of Directors.
Proposals of Stockholders for Presentation
at Next Year's Annual Meeting, to be Held
April 20, 1994
-------------------------------------------
Proposals which stockholders intend to present at next year's annual meeting,
to be held on Wednesday, April 20, 1994, will be eligible for inclusion in the
Corporation's proxy material for that meeting if they are submitted to the
Corporation in writing not later than December 21, 1993. A proponent may submit
only one proposal. At the time of the submission of a proposal, a stockholder
also may submit a written statement in support thereof for inclusion in the
proxy statement for the meeting, if requested by the proponent; provided,
however, that a proposal and its supporting statement in the aggregate shall not
exceed 500 words.
Proposed 2 for 1 Split of
the Common Stock of the Corporation
-----------------------------------
As pointed out under the heading "Stock Outstanding and Voting Rights," the
authorized capital stock of the Corporation consists of 10,100,000 shares,
divided into 10,000,000 shares of common stock of the par value of $4.166 per
share and 100,000 shares of preferred stock without par value. At the regular
bimonthly meeting of the Board of Directors held February 18, 1993, the Board
concluded that a 2 for 1 split of the common stock of the Corporation would be
to the advantage of the Corporation and the stockholders. To that end, the Board
approved proposed Amendments for submission to the stockholders at the annual
meeting to be held April 21, 1993, providing (1) for the amendment to the
Articles of Incorporation of the Corporation for the purpose of increasing the
total authorized capital stock to 26,000,000 shares, to be divided into
25,000,000 shares of common stock, of the par value of $2.0833 per share, and
1,000,000 shares of preferred stock without par value, and (2) that each share
of the common stock of the Corporation of the par value of $4.1666 per share
presently issued and outstanding, shall be converted into, and reclassified as,
2 shares of the common stock of the Corporation of the par value of $2.0833 per
share.
The proposed Amendments will be submitted to the stockholders, for
consideration and action, at the annual meeting, and will become effective if
approved by the holders of a majority of the shares of the common stock of the
Corporation issued and outstanding. If so approved, the authorized common stock
of the Corporation will be increased to 25,000,000 shares of the par value of
$2.0833 per share, and each outstanding certificate, evidencing ownership of
shares of the common stock of the Corporation of the par value of $4.1666 per
share, forthwith and without further action on the part of the Corporation or
the holder of such certificate, will represent the same number of shares of the
common stock of the Corporation of the par value of $2.0833 per share, and each
such holder will be entitled to receive, and thereafter will receive, a
certificate or certificates representing in the aggregate one additional share
of the new common stock of the par value of $2.0833 per share for each share of
the old common stock, of the par value of $4.1666 per share, formerly held by
such stockholder.
A-53
It is believed that the proposed stock split will enhance the marketability of
the shares. It is believed, that is to say, that the division of each of the
present $4.1666 par value shares of common stock into 2 shares of $2.0833 par
value stock will make the new shares more salable than the present shares. If
approved, the stock split will not in any way affect the rights or interests of
the stockholders. The result will be simply that each share of the $4.1666 par
value common stock will become 2 shares of $2.0833 par value common stock. The
common stock of the Corporation is listed on the NASDAQ National Market System.
The most recent bid and ask prices, as quoted by local securities dealers, were
$50.50 and $52.00, respectively, as of March 22, 1993.
If the foregoing stock increase and split are authorized at the forthcoming
stockholders meeting, approximately 6,613,330 shares of the authorized common
stock of the Corporation will be issued and outstanding, and the remaining
18,386,670 shares will be held, as authorized but unissued shares, for the
future use and benefit of the Corporation. It is also proposed that the
authorized preferred stock be increased from 100,000 shares of no par value
stock to 1,000,000 shares of no par value stock. At the present time, the
Corporation has no plans for the issuance of any of those shares for any
particular purpose. For the foreseeable future, it is contemplated simply that
they will be held in reserve, for use in such manner and for such purposes as
may serve the best interests of the Corporation as, for example, the acquisition
of subsidiary banks through mergers involving the exchange of Wesbanco common
stock for voting stock of the banks being acquired.
The Board of Directors of the Corporation can approve the issuance of such
stock. However, Wesbanco stock is listed on the NASDAQ National Market System
and Schedule D of the NASD Bylaws requires shareholder approval if a listed
company issues stock under certain circumstances. Shareholder approval is
required under two circumstances in connection with transactions involving the
acquisition of stock or assets of another company. Shareholder approval will be
required where an officer, director, or substantial security holder of the
issuer has a 5% (or if such persons collectively hold a 10%) or greater
interest in the company, assets to be acquired, or consideration paid, and the
issuance could result in a 5% or greater increase in outstanding common shares
or voting power. Secondly, any issuance in connection with a merger or
acquisition that will be equal to 20% or more of the outstanding shares of
voting power of the issuer will require shareholder approval. Included in all
issuances in connection with a merger or acquisition are securities convertible
into or exercisable for common stock. In connection with transactions other than
a public offering, shareholder approval will be required for issuances of
securities for less than the greater of book or market value if either (1) the
issuance equals 20% of the outstanding stock, or (2) a smaller issuance coupled
with sales by the officers, directors or substantial security holders meets the
20% threshold. Included in such issuances are securities convertible into or
exercisable for common stock.
In passing, it is to be noted that it is conceivable that such authorized but
unissued stock could be employed as a defensive anti-takeover safeguard in the
event that the Corporation should be targeted for a takeover by outside
interests. The mere availability of such stock in itself could serve as a
deterrent to the initiation of a hostile takeover effort. Furthermore, any
increase in the number of shares outstanding, through the sale or distribution
of authorized but unissued shares, would make the acquisition of a controlling
stock interest in the Corporation proportionately more difficult and expensive.
Thus, to that limited extent, the proposed increase in the authorized stock
will supplement those defensive measures, designed in part to protect the
Corporation against hostile takeover efforts, which were approved by the
shareholders at the annual stockholders meeting held March 25, 1981. The first
of those provisions, now constituting Section VII of the Articles of
Incorporation, provides that the Board of Directors shall be divided into three
classes, as nearly equal in number as the total number of Directors will permit,
the members of which shall serve for staggered terms of three years. The second
of the foregoing defensive measures, now constituting Section VIII of the
Articles of Incorporation, is a so-called "super majority" provision and
provides that the affirmative vote of the holders of 75% of the outstanding
shares of the voting stock of the Corporation shall be required
A-54
to amend or repeal either Section VII, providing for the classification of the
Directors, or the super majority requirement set forth in Section VIII itself.
The increase in the authorized common and preferred stock also gives the Board
the authority to issue additional shares in response to a hostile takeover
attempt. Taken together, these provisions provide impediments to hostile
takeover efforts by making it difficult to change the membership of the full
Board of Directors and to amend the provisions of the Articles of Incorporation
dealing with the classification of Directors.
Independent Accountants
-----------------------
The Board of Directors has retained Price Waterhouse to serve as the
Corporation's independent accountants for 1993. Price Waterhouse also served as
such accountant for the Corporation and all affiliates for the year 1992. The
services rendered by Price Waterhouse during the year 1992 consisted of auditing
and tax services primarily, and involved the Corporation's acquisition program,
as well as the examination of the Corporation's consolidated financial
statements. It is expected that a representative of the accounting firm will be
present at the stockholders meeting. Such representative will have the
opportunity to make a statement if such representative desires to do so, and
will be available to respond to appropriate questions from the stockholders who
are present.
Matters to be Considered at the Meeting
---------------------------------------
The management has no knowledge of any matters, other than those referred to
above, which will be presented for consideration and action at the meeting. As
set forth in the Notice of the meeting, however, the stockholders will have the
right to consider and act upon such other matters as properly may come before
the meeting, and the enclosed form of proxy confers, upon the holders thereof,
discretionary authority to vote with respect to such matters. Accordingly, if
any such matters are presented, the holders of the proxies will vote the shares
of stock represented thereby in accordance with their best judgment.
By order of the Board of Directors.
JAMES C. GARDILL
Chairman of the Board
Wheeling, West Virginia
March 29, 1993
A-55
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Wesbanco's Bylaws provide, and West Virginia law permits (Code (S) 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 officers 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 the 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, Code Section 31-1-9:
(S) 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 attorney's
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
interest 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
attorney's 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 penalties thereon,
as to which such person shall
II-1
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 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 subsections (a) or (b), or
in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (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
Subsections (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, (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.
PAGE
NUMBER TITLE NO.
------ ----- ----
2 Agreement and Plan of Merger, by and between First Fidelity, *
Wesbanco and FFB Corporation, dated August 26, 1993 (1)
3.1 Articles of Incorporation of Wesbanco (2) *
3.2 Amendments to Articles of Incorporation Dated April 21, 1993 *
(5)
3.3 Bylaws of Wesbanco, Inc. (4) *
II-2
PAGE
NUMBER TITLE NO.
------ ----- ----
4.1 Specimen Certificate of Wesbanco Common Stock (4) *
4.2 Specimen Certificate of Wesbanco 8% Cumulative Convertible *
Preferred Stock
5 Opinion of Phillips, Gardill, Kaiser, Boos & Altmeyer as to the *
Legality of the Shares Being Registered
8 Opinion of Kirkpatrick & Lockhart as to Certain Tax Matters
10.1 Stock Option Agreement by and between First Fidelity and *
Wesbanco Dated August 26, 1993 (1)
10.2 Wesbanco Director's Deferred Compensation Agreement (3) *
10.3 Proposed Employment Agreement Between Robert H. Martin, First *
National Bank in Fairmont and Wesbanco to be Dated as of the
Effective Date of the Merger
10.4 Proposed Employment Agreement Between Patrick L. Schulte, First *
National Bank in Fairmont and Wesbanco to be Dated as of the
Effective Date of the Merger
10.5 Proposed Employment Agreement Between Frank R. Kerekes, First *
National Bank in Fairmont and Wesbanco to be Dated as of the
Effective Date of the Merger
10.6 Proposed Employment Agreement Between Robert E. Moran, *
Bridgeport Bank and Wesbanco to be Dated as of the Effective
Date of the Merger
10.7 Proposed Addendum Agreement Between Frank K. Abruzzino, *
FirstBank and Wesbanco to be Dated as of the Effective Date of
the Merger, and Employment Contract Dated November 1, 1990,
Between FirstBank Shinnston and Frank K. Abruzzino
10.8 Employment Agreement Effective January 1, 1993, By and Between *
Edward M. George, Wesbanco and Wesbanco Bank Wheeling
10.9 Employment Agreement Effective January 1, 1993, By and Between *
Paul M. Limbert, Wesbanco and Wesbanco Bank Wheeling
10.10 Employment Agreement Effective January 1, 1993, By and Between *
Dennis P. Yaeger, Wesbanco and Wesbanco Bank Wheeling
10.11 Employment Agreement Effective January 1, 1993, By and Between *
Jerome B. Schmitt, Wesbanco and Wesbanco Bank Wheeling
10.12 Employment Agreement Effective December 2, 1991, By and Between *
Stephen F. Decker, Albright National Bank of Kingwood, and
Wesbanco
10.13 Employment Agreement Effective December 2, 1991, By and Between *
Rudy F. Torjak, Albright National Bank of Kingwood, and
Wesbanco
10.14 Employment Agreement Effective November 14, 1990 By and Between *
Jerry A. Halverson, First National Bank of Wheeling and
Wesbanco, Inc.
10.15 Employment Agreement Effective December 1, 1993, By and Between *
Thomas L. Jones, Wesbanco and Wesbanco Bank South Hills
10.16 Employment Agreement Effective December 1, 1993, By and Between *
Larry L. Dawson, Wesbanco and Wesbanco Bank South Hills
10.17 Employment Agreement Effective January 1, 1993, By and Between *
John W. Moore, Jr., Wesbanco and Wesbanco Bank Wheeling
II-3
PAGE
NUMBER TITLE NO.
------ ----- ----
10.18 Employment Agreement Effective January 2, 1991, By and Between *
Albert A. Pietz, Jr., Wesbanco and Wesbanco Bank Wheeling
11.1 Computation of Per Share Earnings of Wesbanco (Included in Pro *
Forma Data)
11.2 Computation of Per Share Earnings of First Fidelity (Included *
in Pro Forma Data)
12.1 Computation of Earnings to Combined Fixed Charges and Preferred *
Stock Dividends of Wesbanco, First Fidelity and Pro Forma
13.1 Wesbanco Annual Report to Shareholders for the Year Ended *
December 31, 1992 (incorporated by reference)
13.2 Wesbanco Annual Report on Form 10-K for the Year Ended December *
31, 1992 (incorporated by reference)
13.3 Wesbanco Proxy Statement for the Annual Meeting of Shareholders *
Held on April 21, 1993 (incorporated by reference)
13.4 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period *
Ended March 31, 1993 (incorporated by reference)
13.5 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period *
Ended June 30, 1993 (incorporated by reference)
13.6 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period *
Ended September 30, 1993 (incorporated by reference)
15 Letter from Price Waterhouse Re Unaudited Interim Financial *
Information
21 Subsidiaries of Wesbanco *
23.1 Consent of Price Waterhouse
23.2 Consent of Phillips, Gardill, Kaiser, Boos & Altmeyer
23.3 Consent of Tharp, Liotta & Janes
23.4 Consent of Ernst & Young
23.5 Consent of Kirkpatrick & Lockhart
23.6 Consent of Dixon, Francis, Davis & Oneson, Inc.
23.7 Consent of Cunningham, Lively, Hardesty, Mateer & Zimmerman
24 Power of Attorney (Incorporated in the Registration Statement) *
99.1 First Fidelity Form of Proxy
99.2 Wesbanco Form of Proxy
- --------
* Previously Filed
(1) Incorporated by reference herein from Exhibits 2.1 and 2.2 to Wesbanco,
Inc. Current Report on Form 8-K dated August 26, 1993.
(2) This exhibit is being incorporated by reference with respect to a prior
Registration Statement filed by the Registrant on Form S-14 under
Registration No. 2-91054 which was filed with the Securities and Exchange
Commission on August 3, 1984.
(3) This exhibit is being incorporated by reference with respect to a prior
Registration Statement filed by the Registrant on Form S-4 under
Registration No. 33-15342 which was filed with the Securities and Exchange
Commission on June 25, 1987.
II-4
(4) This exhibit is being incorporated by reference with respect 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.
(5) This exhibit is being incorporated by reference to the Wesbanco Quarterly
Report on Form 10-Q for quarter ended March 31, 1993, which was filed with
the Securities and Exchange Commission on May 12, 1993. The document
appears as Exhibit (4) therein.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(a) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the Prospectus, to each person to whom the Prospectus is
sent or given, the latest report to security holders that is incorporated
by reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14(a)-3 or Rule (c)-3 under the Securities Exchange
Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the
Prospectus, to deliver or cause to be delivered, to each person to whom the
Prospectus is sent or given the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such
interim financial information.
(b) 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 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.
(c) The registrant undertakes that every Prospectus (i) that is filed
pursuant to Paragraph (b) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act 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, 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.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 & Exchange Commission such indemnification is against public
policy as expressed in the Act 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 Act and will be governed by the final
adjudication of such issue.
(e) 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 (1) 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.
(f) 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.
II-5
(g) 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.
(h) The undersigned registrant hereby undertakes.:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the Effective Date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wheeling, West Virginia,
on January 11, 1994.
Wesbanco, Inc.
/s/ E. M. George
By___________________________________
ITS PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
We, the undersigned officers and directors of Wesbanco, Inc., hereby
severally constitute James C. Gardill and Edward M. George, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names and in the capacities indicated below,
the Registration Statement filed herewith and any and all such things in our
name and behalf in our capacities as officers and directors to enable Wesbanco,
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities Act of 1933, as amended, hereby
ratifying and confirming our signatures as they may be signed by our attorneys,
or any of them, to said Registration Statement and any and all amendments
thereto.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and Power of Attorney have been signed by the following persons in
the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ James C. Gardill Chairman, Director
- ------------------------------------- January 11,
JAMES C. GARDILL 1994
/s/ Edward M. George President, Chief
- ------------------------------------- Executive Officer & January 11,
EDWARD M. GEORGE Director (Principal 1994
Executive Officer)
/s/ Paul M. Limbert Executive Vice
- ------------------------------------- President & Chief January 11,
PAUL M. LIMBERT Financial Officer 1994
(Principal
Financial and
Accounting Officer)
/s/ Gilbert S. Bachmann* Director January 11,
- ------------------------------------- 1994
GILBERT S. BACHMANN
II-7
SIGNATURES TITLE DATE
Director
- ------------------------------------- January 11, 1994
M. M. BOICH
Director
/s/ Ray A. Byrd* January 11, 1994
- -------------------------------------
RAY A. BYRD
Director
/s/ H. Thomas Corrie* January 11, 1994
- -------------------------------------
H. THOMAS CORRIE
Director
/s/ Walter W. Knauss, Jr.* January 11, 1994
- -------------------------------------
WALTER W. KNAUSS, JR.
Director
/s/ James E. Altmeyer* January 11, 1994
- -------------------------------------
JAMES E. ALTMEYER
Director
/s/ James D. Entress* January 11, 1994
- -------------------------------------
JAMES D. ENTRESS
Director
- ------------------------------------- January 11, 1994
ERIC NELSON
Director
/s/ James L. Wareham* January 11, 1994
- -------------------------------------
JAMES L. WAREHAM
Director
/s/ John J. Paull* January 11, 1994
- -------------------------------------
JOHN J. PAULL
Director
- ------------------------------------- January 11, 1994
JOHN W. KEPNER
II-8
SIGNATURES TITLE DATE
Director
/s/ Carter W. Strauss* January 11,
- ------------------------------------- 1994
CARTER W. STRAUSS
Director
/s/ John A. Welty* January 11,
- ------------------------------------- 1994
JOHN A. WELTY
Director
/s/ William E. Witschey* January 11,
- ------------------------------------- 1994
WILLIAM E. WITSCHEY
Director
/s/ Roland L. Hobbs* January 11,
- ------------------------------------- 1994
ROLAND L. HOBBS
Director
/s/ Thomas L. Thomas* January 11,
- ------------------------------------- 1994
THOMAS L. THOMAS
- ------------------------------------- Director
STEPHEN F. DECKER January 11,
1994
- ------------------------------------- Director
MELVIN C. SNYDER, JR. January 11,
1994
Director
/s/ C. J. Bradfield* January 11,
- -------------------------------------
C. J. BRADFIELD
- ------------------------------------- Director
JOHN D. KIRK January 11,
1994
Director
- ------------------------------------- January 11,
CHRISTOPHER V. CRISS 1994
* Executed by Attorney in Fact under Power of Attorney
II-9
INDEX
-----
NUMBER TITLE PAGE NO.
- ------ ----- --------
2 Agreement and Plan of Merger, by and between First Fidelity, Wesbanco
and FFB Corporation, dated August 26, 1993 (1) *
3.1 Articles of Incorporation of Wesbanco (2) *
3.2 Amendments to Articles of Incorporation Dated April 21, 1993 (5) *
3.3 Bylaws of Wesbanco, Inc. (4) *
4.1 Specimen Certificate of Wesbanco Common Stock (4) *
4.2 Specimen Certificate of Wesbanco 8% Cumulative Convertible Preferred
Stock *
5 Opinion of Phillips, Gardill, Kaiser, Boos & Altmeyer as to the
Legality of the Shares Being Registered *
8 Opinion of Kirkpatrick & Lockhart as to Certain Tax Matters
10.1 Stock Option Agreement by and between First Fidelity and Wesbanco
Dated August 26, 1993 (1) *
10.2 Wesbanco Director's Deferred Compensation Agreement (3) *
10.3 Proposed Employment Agreement Between Robert H. Martin, First National
Bank in Fairmont and Wesbanco to be Dated as of the Effective Date of
the Merger *
10.4 Proposed Employment Agreement Between Patrick L. Schulte, First
National Bank in Fairmont and Wesbanco to be Dated as of the Effective
Date of the Merger *
10.5 Proposed Employment Agreement Between Frank R. Kerekes, First National
Bank in Fairmont and Wesbanco to be Dated as of the Effective
Date of the Merger *
NUMBER TITLE PAGE NO.
- ------ ----- --------
10.6 Proposed Employment Agreement Between Robert E. Moran, Bridgeport
Bank and Wesbanco to be Dated as of the Effective Date of
the Merger *
10.7 Proposed Addendum Agreement Between Frank K. Abruzzino, FirstBank
and Wesbanco to be Dated as of the Effective Date of the Merger,
and Employment Contract Dated November 1, 1990, Between FirstBank
Shinnston and Frank K. Abruzzino *
10.8 Employment Agreement Effective January 1, 1993, By and Between
Edward M. George, Wesbanco and Wesbanco Bank Wheeling *
10.9 Employment Agreement Effective January 1, 1993, By and Between
Paul M. Limbert, Wesbanco and Wesbanco Bank Wheeling *
10.10 Employment Agreement Effective January 1, 1993, By and Between
Dennis P. Yaeger, Wesbanco and Wesbanco Bank Wheeling *
10.11 Employment Agreement Effective January 1, 1993, By and Between
Jerome B. Schmitt, Wesbanco and Wesbanco Bank Wheeling *
10.12 Employment Agreement Effective December 2, 1991, By and Between
Stephen F. Decker, Albright National Bank of Kingwood, and
Wesbanco *
10.13 Employment Agreement Effective December 2, 1991, By and Between
Rudy F. Torjak, Albright National Bank of Kingwood, and
Wesbanco *
10.14 Employment Agreement Effective November 14, 1990, By and Between
Jerry A. Halverson, First National Bank of Wheeling and
Wesbanco, Inc. *
NUMBER TITLE PAGE NO.
- ------ ----- --------
10.15 Employment Agreement Effective December 1, 1993, By and Between
Thomas L. Jones, Wesbanco and Wesbanco Bank South Hills *
10.16 Employment Agreement Effective December 1, 1993, By and Between
Larry L. Dawson, Wesbanco and Wesbanco Bank South Hills *
10.17 Employment Agreement Effective January 1, 1991, By and Between
John W. Moore, Jr., Wesbanco and Wesbanco Bank Wheeling *
10.18 Employment Agreement Effective January 2, 1991, By and Between
Albert A. Pietz, Jr., Wesbanco and Wesbanco Bank Wheeling *
11.1 Computation of Per Share Earnings of Wesbanco (Included in
Pro Forma Data) *
11.2 Computation of Per Share Earnings of First Fidelity (Included in
Pro Forma Data) *
12.1 Computation of Earnings to Combined Fixed Charges and Preferred
Stock Dividends of Wesbanco, First Fidelity and Pro Forma *
13.1 Wesbanco Annual Report to Shareholders for the Year Ended
December 31, 1992 (incorporated by reference) *
13.2 Wesbanco Annual Report on Form 10-K for the Year Ended
December 31, 1992 (incorporated by reference) *
13.3 Wesbanco Proxy Statement for the Annual Meeting of Shareholders
Held on April 21, 1993 (incorporated by reference) *
13.4 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period
Ended March 31, 1993 (incorporated by reference) *
NUMBER TITLE PAGE NO.
- ------ ----- --------
13.5 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period
Ended June 30, 1993 (incorporated by reference) *
13.6 Wesbanco Quarterly Report on Form 10-Q for the Quarterly Period
Ended September 30, 1993 (incorporated by reference) *
15 Letter from Price Waterhouse Re Unaudited Interim Financial
Information *
21 Subsidiaries of Wesbanco *
23.1 Consent of Price Waterhouse
23.2 Consent of Phillips, Gardill, Kaiser, Boos & Altmeyer
23.3 Consent of Tharp, Liotta & Janes
23.4 Consent of Ernst & Young
23.5 Consent of Kirkpatrick & Lockhart
23.6 Consent of Dixon, Francis, Davis & Oneson, Inc.
23.7 Consent of Cunningham, Lively, Hardesty, Mateer & Zimmerman
24 Power of Attorney (Incorporated in the Registration Statement) *
99.1 First Fidelity Form of Proxy
99.2 Wesbanco Form of Proxy
*Previously filed
(1) Incorporated by reference herein from Exhibits 2.1 and 2.2 to Wesbanco,
Inc. Current Report on Form 8-K dated August 26, 1993.
(2) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-14 under
Registration No. 2-91054 which was filed with the Securities and Exchange
Commission on August 3, 1984.
(3) This exhibit is being incorporated by reference with respect to a
prior Registration Statement filed by the Registrant on Form S-4 under
Registration No. 33-15342 which was filed with the Securities and
Exchange Commission on June 25, 1987.
(4) This exhibit is being incorporated by reference with respect 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.
(5) This exhibit is being incorporated by reference to the Wesbanco Quarterly
Report on Form 10-Q for quarter ended March 31, 1993, which was filed
with the Securities and Exchange Commission on May 12, 1993. The
document appears as Exhibit (4) therein.