-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DBno4VrTqCwfYpSGtcbt+cWNxgIDTL12e1VKcUTA3AaYnsfic5Y/igJ2Hl7sGmpI W4mJnmcYXK0h96EJU0fI9g== 0000203596-00-000003.txt : 20000331 0000203596-00-000003.hdr.sgml : 20000331 ACCESSION NUMBER: 0000203596-00-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESBANCO INC CENTRAL INDEX KEY: 0000203596 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 550571723 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-08467 FILM NUMBER: 586752 BUSINESS ADDRESS: STREET 1: 1 BANK PLAZA CITY: WHEELING STATE: WV ZIP: 26003 BUSINESS PHONE: 3042349000 MAIL ADDRESS: STREET 1: ONE BANK PLZ CITY: WHEELING STATE: WV ZIP: 26003 10-K 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended December 31, 1999 ------------------------------------------- _____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ____________ to ____________ Commission File Number 0-8467 -------- WESBANCO, INC. ----------------------------------------------------- (Exact name of Registrant as specified in its charter) WEST VIRGINIA 55-0571723 - ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1 Bank Plaza, Wheeling, WV 26003 - --------------------------------------- ---------- Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 304-234-9000 ---------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each class Name of each Exchange on which registered - ------------------------------ ----------------------------------------- Common Stock $2.0833 Par Value National Association of Securities Dealers, Inc. Nonredeemable Preferred Stock None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ______ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ The aggregate market value of voting stock computed using the average of the bid and ask prices held by non-affiliates of the Registrant on February 29, 2000 was approximately $371,981,352. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) As of February 29, 2000, there were 19,664,338 shares of WesBanco, Inc. Common stock $2.0833 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of WesBanco's 1999 Annual Report ("Annual Report to Shareholders") are incorporated by reference into Parts I and II and portions of the definitive Proxy Statement of WesBanco, Inc. for the annual meeting of shareholders to be held on April 19, 2000 ("Proxy Statement") are incorporated by reference into Part III of this Form 10-K. 2 WESBANCO, INC. TABLE OF CONTENTS SEQUENTIAL ITEM # ITEM PAGE NO. - ------ ---- ------- Part I ------ 1 Business 3 2 Properties 6 3 Legal proceedings 6 4 Submission of matters to a vote of security holders N/A Part II ------- 5 Market for the registrant's common equity and related stockholder matters 6 6 Selected financial data 7 7 Management's discussion and analysis of financial condition and results of operations 7 8 Financial statements and supplementary data 7 9 Changes in and disagreements with accountants on accounting and financial disclosure N/A Part III -------- 10 Directors and Executive Officers of the registrant 7 11 Executive compensation 7 12 Security ownership of certain beneficial owners and management 7 13 Certain relationships and related transactions 7 Part IV ------- 14 Exhibits, financial statement schedules and reports on Form 8-K 8 Signatures 9 EXHIBIT INDEX 10 3 PART I ------ Item 1. Business - ----------------- General - ------- WesBanco, a bank holding company headquartered in Wheeling, WV, offers a full range of financial services including retail banking, corporate banking, personal and corporate trust services, brokerage, mortgage banking and insurance. Its subsidiary banking organization operates automated teller machines primarily under the name of MAC. The Corporation's primary business function is the operation of a commercial bank through 62 offices located in West Virginia and Eastern Ohio. WesBanco restructured its banking and mortgage operations on January 14, 2000, merging all of its banking subsidiaries and its mortgage subsidiary into one state member banking corporation, WesBanco Bank, Inc., headquartered in Wheeling with regional administrative offices in Fairmont, Parkersburg and Charleston. The corporation previously maintained four separate banking subsidiaries. Total assets of WesBanco Bank, Inc. as of December 31, 1999 approximated $2.2 billion. During 1999, WesBanco also consolidated its individual bank trust operations into a single operating division of its unit banking corporation under the name "WesBanco Trust and Investment Services". The trust department is one of the largest trust operations in West Virginia. As of December 31, 1999, the market value of trust assets was approximately $3.1 billion. WesBanco also offers services through its non-banking affiliates. WesBanco Insurance Services, Inc., which recently changed its name from Hunter Agency, Inc., is a multi-line insurance agency specializing in property, casualty and life insurance for personal and commercial clients. WesBanco Securities, Inc. is a full service broker-dealer which also offers discount brokerage services. WesBanco also serves as investment adviser to a family of mutual funds under the name "WesMark Funds" which include the WesMark Growth Fund, the WesMark Balanced Fund, the WesMark Bond Fund, and the WesMark West Virginia Municipal Bond Fund. On April 30, 1999, WesBanco completed the acquisition of The Heritage Bank of Harrison County, a unit bank located in Clarksburg, West Virginia. Heritage Bank had total assets of approximately $33.3 million at the time of its acquisition. This acquisition provided WesBanco with an important downtown Clarksburg location to compliment its existing branch network in North Central West Virginia. Competition - ----------- Each affiliate faces strong competition for local business in its respective market areas. Competition exists for new loans and deposits, in the scope and types of services offered, and the interest rates paid on time deposits and charged on loans, mortgage banking services and in other aspects of banking. WesBanco's banking subsidiary encounters substantial competition not only from other commercial banks but also from other financial institutions. Savings banks, savings and loan associations, brokerage business and credit unions actively compete for deposits and loans. Such institutions, as well as consumer finance companies, insurance companies and other enterprises, are important competitors for various types of lending 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. Supervision and Regulation - -------------------------- As a registered bank holding company, WesBanco is subject to the supervision of the Federal Reserve Board and is required to file with the Federal Reserve Board reports and other information regarding its business operations and the business operations of its subsidiaries. WesBanco is also subject to examination by the Federal Reserve Board and is 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, WesBanco 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, WesBanco must obtain approval from the Federal Reserve Board. WesBanco's banking subsidiary has deposits insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation (the "FDIC"), and is subject to supervision, examination and regulation by state banking authorities and the Federal Reserve Board. In addition to the impact of federal and state supervision and regulation, the banking subsidiary of WesBanco is 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. WesBanco's depository institution subsidiary is subject to affiliate transaction restrictions under federal law which limit the transfer of funds by the subsidiary bank to its parent 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 20% of any such institution's capital and surplus. Furthermore, such loans and extensions of credit are required to be secured in specified amounts. 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 WesBanco may not have 4 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 causes a loss to the FDIC, other bank subsidiaries of WesBanco could be required to compensate the FDIC by reimbursing to it the amount of such loss. The Gramm-Leach-Bliley Act of 1999 ("GLB Act") was signed by the President and enacted into law on November 12, 1999. The GLB Act removes the Glass-Steagall Act restrictions on affiliation between banks and securities firms and it authorizes financial holding companies that own a bank to engage in a full range of insurance activities. The result is that qualifying bank holding companies may opt to become financial holding companies and thus to hold subsidiaries that engage in banking, securities underwriting and dealing, and insurance agency and underwriting. They may also engage in financial activities listed in the GLB Act, including merchant banking or venture capital activities, the distribution of mutual funds and securities lending. Bank holding companies ("BHCs") now have the option under the GLB Act to continue to operate as BHCs or, if they qualify, to act as Financial Holding Companies ("FHCs"). It is important to note in this regard that both BHCs and FHCs and their non-bank operating subsidiaries are subject to the full panoply of affiliate transaction rules under Sections 23A and B of the Federal Reserve Act. As a consequence, all transactions between affiliated depository institutions and these entities will be restricted under the provisions of those laws. Under new Section 4(k), certain activities are listed as being "financial in nature" including "underwriting, dealing in, or making a market in securities," and "merchant banking." In addition, national banks and state banks (if the state bank chartering authority permits) may engage in certain "financial in nature" activities through financial services subsidiaries. Activities prohibited to financial services subsidiaries include merchant banking but not securities underwriting and dealing. To engage in these new activities, all depository institutions of a financial holding company must be well capitalized, well managed and have no less than a satisfactory CRA rating. Assuming these conditions are met, a financial holding company need only provide written notice to the Board within 30 calendar days after commencing the financial in nature activity or acquiring the firm engaging in that activity. If the activity is to be undertaken through a financial subsidiary of a depository institution, then that institution must meet essentially the same requirements. WesBanco will be evaluating its option to elect to qualify as a financial holding company under the GLB Act. In the interim, it will designate WesBanco Insurance Services, Inc., a subsidiary of its banking corporation, as a financial subsidiary under the GLB Act. Dividend Restrictions - --------------------- There are statutory limits on the amount of dividends WesBanco's depository institution subsidiaries can pay to their parent corporation 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. 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. Under the risk-based insurance assessment system that became effective January 1, 1994, 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). Regarding the assessment rates under the assessment system, on November 20, 1996, the FDIC voted to retain the existing Bank Insurance Fund ("BIF") assessment schedule of 0 to 0.27% (annual rate), and to collect an assessment against BIF assessable deposits to be paid to the Financing Corporation ("FICO"). In addition, the FDIC eliminated the statutory minimum annual assessment of $2,000. Each WesBanco Bank was subject to the FICO special assessment at an annual rate of 1.20% during 1999. No assessment was paid to the BIF for 1999. 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 revised the bank regulatory and funding provisions of the Federal Deposit Insurance Act and makes revisions to several other federal banking statutes. 5 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 undercapitalized. Rules adopted by the Federal banking agencies under FDICIA provide that an institution is deemed to be: "well capitalized" if the institution has a total (Tier 1 plus Tier II) risk-based capital ratio of 10.0% or greater, a Tier I risk-based ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater, and the institution is not subject to an order, written agreement, capital directive, or prompt corrective action directive to meet and maintain a specific level for any capital measure; "adequately capitalized" if the institution has a Total risk-based capital ratio of 8.0% or greater, a Tier I risk-based capital ratio of 4.0% or greater, and a leverage ratio of 4.0% or greater (or a leverage ratio of 3.0% or greater if the institution is rated composite 1 in its most recent report of examination, subject to appropriate Federal banking agency guidelines), and the institution does not meet the definition of a well-capitalized institution; "undercapitalized" if the institution has a Total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a leverage ratio that is less than 4.0% (or a leverage ratio that is less than 3.0% if the institution is rated composite 1 in its most recent report of examination, subject to appropriate Federal banking agency guidelines) and the institution does not meet the definition of a significantly undercapitalized or critically undercapitalized institution; "significantly undercapitalized" if the institution has a Total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0%, or a leverage ratio that is less than 3.0% and the institution does not meet the definition of a critically undercapitalized institution; and "critically undercapitalized" if the institution has a ratio of tangible equity to total assets that is equal to or less than 2%. At December 31, 1999, WesBanco and all of its bank subsidiaries qualified as well-capitalized based on the ratios and guidelines noted above. A bank's capital category, however, is determined solely for the purpose of applying the prompt corrective action rules and may not constitute an accurate representation of that bank's overall financial condition or prospects. The appropriate Federal banking agency may, under certain circumstances, reclassify a well capitalized insured depository institution as adequately capitalized. The appropriate agency is also permitted to require an adequately capitalized or undercapitalized institution to comply with the supervisory provisions as if the institutions were in the next lower category (but not treat a significantly undercapitalized institution as critically undercapitalized) based on supervisory information other than the capital levels of the institution. The statute provides that an institution may be reclassified if the appropriate Federal banking agency determines (after notice and opportunity for hearing) that the institution is in an unsafe and unsound condition or deems the institution to be engaging in an unsafe or unsound practice. FDICIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to growth limitations and are required to submit a capital restoration plan. The Federal banking agencies may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable, the depository institution's parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of (i) an amount equal to 5% of the depository institution's total assets at the time it became undercapitalized, and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized depository 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 are subject to the appointment of a receiver or conservator. FDICIA also contains a variety of other provisions that may affect the operation of WesBanco, including reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch. Capital Requirements - -------------------- The risk-based capital guidelines for bank holding companies and banks adopted by the Federal banking agencies were phased in at the end of 1992. The minimum ratio of qualifying total capital to risk-weighted assets (including certain off-balance sheet items, such as standby letters of credit) under the fully phased-in guidelines is 8%. At least half of the total capital is to be comprised of common stock, retained earnings, noncumulative perpetual preferred stocks, minority interests and, for bank holding companies, a limited amount of qualifying cumulative perpetual preferred stock, less goodwill and certain other intangibles ("Tier I capital"). The remainder ("Tier II capital") may consist of other preferred stock, certain other instruments, and limited amounts of subordinated debt and the reserve for credit losses. In addition, the Federal Reserve Board has established minimum leverage ratio (Tier I capital to total average assets less goodwill and certain other intangibles) guidelines for bank holding companies and banks. These guidelines provide for a minimum leverage ratio of 3.0% for bank holding companies and banks that meet certain specified criteria, including that they have the highest regulatory rating. All other banking organizations are required to maintain a leverage ratio of 3.0% plus an additional cushion of at least 100 to 200 basis points. The guidelines also provide that banking organizations 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 guidelines indicate that the Federal 6 Reserve Board will continue to consider a "tangible Tier I leverage ratio" in evaluating proposals for expansion or new activities. The tangible Tier I leverage ratio is the ratio of Tier I capital, less intangibles not deducted from Tier I capital, to total assets, less all intangibles. Neither WesBanco nor any of its bank subsidiaries, at December 31, 1999, has been advised of any specific minimum leverage ratio applicable to it. As of December 31, 1999, all of WesBanco's banking subsidiaries had capital in excess of all applicable requirements. Additional information relating to risk-based capital calculations is set forth under the heading "Note 14 Regulatory Matters" of the Annual Report to Shareholders and is incorporated herein by reference. Item 2. Properties - ------------------- The Registrant's affiliates generally own their respective offices, related facilities and unimproved real property which is held for future expansion. With certain branch office exceptions, all of the respective West Virginia offices are located in Wheeling, McMechen, Moundsville, Follansbee, Wellsburg, Weirton, New Martinsville, Paden City, Sistersville, Elizabeth, Charleston, South Charleston, Dunbar, Sissonville, Parkersburg, Ravenswood, Ripley, Pennsboro, Ellenboro, Harrisville, Cairo, Kingwood, Fairmont, Morgantown, Shinnston, Bridgeport, Masontown and Clarksburg. The Ohio bank offices are located in Marietta, Barlow, Devola, Barnesville, Bethesda, St. Clairsville, Woodsfield and Beallsville. During 1999, WesBanco constructed and is currently operating branch offices located in Charleston and Moundsville, West Virginia. Through the acquisition of Heritiage Bank of Harrison County during 1999, WesBanco operates a branch office located in Clarksburg. Consolidated investment in net bank premises and equipment at December 31, 1999 was $56.2 million compared to $48.0 million last year. The main office of the Registrant is located at 1 Bank Plaza, Wheeling, West Virginia, in a building owned by WesBanco Bank, Inc. The building contains approximately 100,000 square feet. During 1998, an office building located adjacent to the main office was acquired by WesBanco Properties, an affiliate of WesBanco. WesBanco Bank, Inc. currently occupies approximately one half of the office space available, with the remaining portion leased to unrelated businesses. At various building locations, WesBanco provides commercial office space and will continue to look for opportunities to rent office space to unrelated businesses. Rental income totaled $0.81 million for 1999 compared to $0.55 million for 1998. Item 3. Legal Proceedings - -------------------------- Reference has been made in prior filings to the case styled Tankovits v. Glessner, et al., Civil Action No. 96-C-59(W), presently pending in the Circuit Court of Ohio County, West Virginia. This is a suit by a trust beneficiary against Wesbanco Bank, Inc., the Plaintiff's uncle, the Plaintiff's mother and certain family owned corporations, and arises out of the administration of the estate of the Plaintiff's grandfather. The Bank has settled this claim and the Court has approved the settlement agreement. The Bank is no longer involved in the proceeding. The settlement has no material impact on WesBanco. Wesbanco Bank, Inc. is also a Defendant in a case styled Travelers v. Wesbanco Bank Wheeling and Coopers & Lybrand, under Civil Action No. 98-C-225, presently pending in the Circuit Court of Ohio County, West Virginia. In this action, Travelers, as subrogee of Wheeling-Nisshin, seeks to recover certain losses incurred by it over the embezzlement of funds by a former financial officer of Wheeling-Nisshin. The losses were generated through forged checks. Travelers has sued the Bank alleging a violation of the properly payable rule of the Uniform Commercial Code, even though the officer involved was a designated financial officer of Wheeling-Nisshin, reconciled checking accounts and had access to facsimile signatures used by Wheeling-Nisshin. The bank believes that it has a substantial defense to the claims of Travelers and is vigorously defending the case. The claimed losses are equivalent to the amount of the loss incurred by Travelers, $750,000.00, plus interest. The bank has filed a Motion to Dismiss the case which is pending hearing before the Court. A Declaratory Judgment suit was filed on behalf of Wesbanco Bank, in the United States District Court for the Southern District of West Virginia, under Civil Action No. 6:98-097, seeking to determine the benefits payable to certain former employees under an executive supplemental income plan maintained by several former affiliate banks of Commercial BancShares, Incorporated acquired by Wesbanco on March 31, 1998. The Complaint seeks a determination of the rights of the participants under this supplemental benefit plan. The Bank believes that it has correctly interpreted and applied the benefit plan in accordance with the terms of the plan and has relied upon the recommendations of its third party administrator in making such determinations. Certain named former employees who are participants in the plan have filed a counterclaim asserting a different interpretation of the plan. Discovery is now complete and it is anticipated that the case will be submitted to the Court on Summary Judgement Motions. PART II Item 5. - ------- Market for the Registrant's Common Equity and Related Shareholder Matters - ------------------------------------------------------------------------- WesBanco's common stock is quoted on The Nasdaq Stock Market (Nasdaq), with a trading symbol of WSBC. The approximate number of holders of WesBanco's $2.0833 par value common stock as of December 31, 1999 was 5,739. The number of holders does not include WesBanco employees who have had stock allocated to them through the Corporation's KSOP. All WesBanco employees who meet the eligibility requirements of the KSOP are included in the Plan. 7 Quarterly price information, reflecting high and low sales prices as reported by Nasdaq and quarterly dividends per share for 1999 and 1998 are as presented below: 1999 1998 --------------------------- ------------------------- Dividend Dividend High Low Declared High Low Declared ---------------------------------------------------------- 4th quarter $28.63 $21.50 $.22 $30.00 $25.38 $.21 3rd quarter 30.00 25.50 .22 28.25 22.00 .21 2nd quarter 30.25 27.50 .22 30.94 23.88 .21 1st quarter 31.25 26.50 .22 31.13 27.00 .21 - ---------------------------------------------------------------------------- Item 6. Selected Financial Data - ------------------------------- Selected financial data is set forth under the heading "Table 1. Five Year Selected Financial Summary" of the Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and - ----------------------------------------------------------------------- Results of Operations --------------------- Discussion of the Corporation's financial position and results of operations is set forth under the section "Management's Discussion and Analysis of the Consolidated Financial Statements" of the Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- The "Consolidated Financial Statements,""Notes to Consolidated Financial Statements," "Report of Ernst & Young LLP, Independent Auditors" and "Condensed Quarterly Statement of Income" of the Annual Report to Shareholders are incorporated herein by reference. PART III Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ Information relating to the principal occupations of directors of the Corporation, their ages, directorships in other companies and respective terms of office is set forth under the heading "Election of Directors" and "Continuing Directors" in the Proxy Statement and is incorporated herein by reference. Information relating to executive officers of the Corporation is set forth under the heading "Executive Officers of the Corporation" in the Proxy Statement and is incorporated herein by reference. Item 11. Executive Compensation - -------------------------------- Information relating to compensation of directors and executive officers is set forth under the heading "Compensation of Executive Officers" in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ Information relating to the beneficial ownership of the Corporation's common stock by all directors, each executive officer named in the "Summary Compensation Table" of the Proxy and all executive officers and directors as a group is set forth under the heading "Ownership of Securities by Directors, Nominees and Officers" of the Proxy and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- Information relating to transactions and relationships with certain directors and executive officers of the Corporation is set forth under the heading "Transactions with Directors and Officers" of the Proxy Statement and is incorporated herein by reference. Additional information concerning related party transactions is set forth, under Note 13 of the Consolidated Financial Statements of the Annual Report to Shareholders and is incorporated herein by reference. 8 PART IV Item 14. Exhibits, financial statement schedules and reports on Form 8-K - ------------------------------------------------------------------------- (a) Certain documents filed as part of the Form 10-K ----------------------------------------------------- Sequential (1) Financial Statements Page No. --------------------------------------------------------------------------- The following consolidated financial statements and report of independent auditors of WesBanco of the Annual Report to Shareholders are incorporated herein by reference: Consolidated Balance Sheets as of December 31, 1999 and 1998. 26 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997. 27 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997. 28 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997. 29 Notes to Consolidated Financial Statements 30 Report of Ernst & Young LLP, Independent Auditors 42 Condensed Quarterly Statement of Income 43 (2) Financial Statement Schedules --------------------------------- No financial statement schedules are being filed since the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related Notes. (3) Exhibit Listing -------------------- Exhibits listed on the Exhibit Index on page 10 of this Form 10-K are filed herewith or are incorporated herein by reference. (b) Reports on Form 8-K - ------------------------ On March 13, 2000, WesBanco filed a current report on Form 8-K announcing the resignation of Mr. Frank Abruzzino from the Board of Directors of WesBanco, Inc. No Form 8-K reports were filed during the quarter ended December 31, 1999. 9 SIGNATURES Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29, 2000. WESBANCO, INC. By: /s/ Edward M. George ---------------------------------------- Edward M. George President and Chief Executive Officer By: /s/ Paul M. Limbert ---------------------------------------- Paul M. Limbert Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on March 29, 2000. By: /s/ James C. Gardill --------------------------------------- James C. Gardill Chairman of the Board The Directors of WesBanco (listed below) executed a power of attorney appointing James C. Gardill their attorney-in-fact, empowering him to sign this report on their behalf. By: /s/ James C. Gardill --------------------------------------- James C. Gardill Attorney-in-fact James E. Altmeyer Larry G. Johnson Earl C. Atkins John W. Kepner James G. Bradley Frank R. Kerekes Ray A. Byrd Robert H. Martin John H. Cheffy William E. Mildren, Jr. Christopher V. Criss Eric Nelson Stephen F. Decker Joan C. Stamp James D. Entress Carter W. Strauss Ernest S. Fragale James W. Swearingen James C. Gardill Reed J. Tanner Edward M. George Robert K. Tebay Thomas J. Hansberry William E. Witschey Roland L. Hobbs 10 EXHIBIT INDEX Exhibit Sequential Number Document Page No. - ------- -------- ----------- 3.1 Articles of Incorporation of WesBanco, Inc. (1) 3.2 Articles of Amendment to the Articles of Incorporation of WesBanco , Inc. (6) 3.3 Bylaws of WesBanco, Inc. (1) 4.1 Specimen Certificate of WesBanco, Inc. Common Stock (2) 10.1 Directors' Deferred Compensation Plan (1) 10.2 Key Executive Incentive Bonus and Option Plan. (4) 10.3 Employment Agreements. (3), (5) 10.4 Employment Continuity Agreement. (7) 10.5 First Amendment to Employment Continuity Agreement.* 11 10.6 Change in Control Agreements. (8) 10.7 Salary Continuation Agreement.* 12 10.8 Executive Supplemental Income Agreement. * (Three(3) versions of the Agreement were executed - (A),(B) and (C). WesBanco has filed herewith Version (A) for an executive officer listed in the compensation table of the Proxy Statement). 17 11 Computation of Earnings Per Share. * 24 12 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. * 25 13 Annual Report to Shareholders. * 26 21 Subsidiaries of the Registrant. * 58 22 Proxy Statement for the Annual Shareholders' Meeting to be held April 19, 2000. (9) 23.1 Consent of Ernst & Young LLP. * 59 23.2 Consent of Harman, Thompson, Mallory & Ice, A.C. * 60 24 Power of Attorney. * 61 27 Financial Data Schedule. * 64 99.1 Report of Harman, Thompson, Mallory & Ice, A.C., dated March 6, 1998. * 63 * Filed herewith Notes to Exhibit Listing: - ------------------------- (1) Incorporated by reference to a prior Registration Statement on Form S-4 under Registration No. 333-3905 filed by the Registrant with the Securities and Exchange Commission on June 20, 1996. (2) Incorporated by reference to a prior Registration Statement on Form S-4 under Registration No. 33-42157 filed by the Registrant with the Securities and Exchange Commission on August 9, 1991. (3) Incorporated by reference to a prior Registration Statement on Form S-4 under Registration No. 33-72228 filed by the Registrant with the Securities and Exchange Commission on November 30,1993. (4) Incorporated by reference to Schedule 14A Definitive Proxy Statement (Appendix A) filed by the Registrant with the Securities and Exchange Commission on March 13, 1998. (5) Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 15, 1998. (6) Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on May 15, 1998. (7) Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 11, 1999. (8) Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on November 15, 1999. (9) Incorporated by reference to Schedule 14A Definitive Proxy Statement filed by the Registrant with the Securities and Exchange Commission on March 15, 2000. EX-10.5 2 11 EXHIBIT 10.5 FIRST AMENDMENT TO EMPLOYMENT CONTINUITY AGREEMENT -------------------------------------------------- THIS AGREEMENT, made this 1st day of June, 1999, by and between CBI HOLDING COMPANY, a West Virginia corporation (hereinafter referred to as "Company"), party of the first part, and WILLIAM E. MILDREN, JR. (hereinafter referred to as "Executive"), party of the second part. WHEREAS, Commercial Bancshares, Incorporated, the predecessor corporation to the Company, and the Executive heretofore entered into an Employment Continuity Agreement dated November 1, 1996 ("Employment Continuity Agreement"), and WHEREAS, the Company succeeded to the obligations of Commercial Bancshares, Incorporated, under the terms of said Employment Continuity Agreement by merger on March 31, 1998, which triggered the Change in Control provisions of said Employment Continuity Agreement thereby extending the term of said Agreement for a period of thirty-six (36) months from March 31, 1998, and WHEREAS, the Company and the Executive desire to make certain mutually agreeable changes to the Employment Continuity Agreement whereby the Executive will reduce his normal work week to 3-1/2 days, running Monday through Thursday at noon and in return for such reduced work week, his base compensation shall be reduced from Two Hundred Twenty Thousand Dollars ($220,000.00) to One Hundred Fifty Thousand Dollars ($150,000.00) and the term of the Agreement will be extended for an additional year to expire on March 31, 2002. NOW, THEREFORE, THIS AGREEMENT WITNESSETH: That for and in consideration of the mutual covenants and conditions hereinafter contained, the parties hereto, intending to be legally bound hereby, agree as follows: 1. Paragraphs 2(a) and 3(a) of said Employment Continuity Agreement are hereby modified and amended to provide that notwithstanding the terms of said agreement, the Executive's normal work week shall consist of a 3-1/2 day work week, running from Monday through approximately noon on Thursday of each week. The Executive understands and acknowledges, however, that it may be necessary, from time to time, to perform services on days and times outside the normal work week when necessary to meet customer needs or carry out the responsibilities of the Executive to the Company in serving as an Executive Officer of the Company. 2. Paragraph 2(h) and Paragraph 3(b) of said agreement are hereby amended to provide that in consideration for the reduction in the normal work week, the Executive's annual compensation shall be reduced from Two Hundred Twenty Thousand Dollars ($220,000.00) to One Hundred Fifty Thousand Dollars ($150,000.00), annually, effective as of June 1, 1999. 3. Paragraph 12 of said agreement is hereby amended to extend the term thereof for an additional twelve (12) months so that the agreement will extend for a period of forty-eight (48) months from March 31, 1998. The parties further acknowledge and agree that the Employment Continuity Agreement shall thereupon terminate on March 31, 2002, without further notice or election by either party to the other. 4. In all other respects, the terms and conditions of said Employment Continuity Agreement are hereby ratified, confirmed and continued in full force and effect. CBI HOLDING COMPANY By /s/ Edward M. George ------------------------- Its President /s/ William E. Mildren Jr. --------------------------- WILLIAM E. MILDREN EX-10.7 3 12 EXHIBIT 10.7 WESBANCO BANK, INC. SALARY CONTINUATION AGREEMENT THIS AGREEMENT is made this ________ day of _______________, 2000, by and between WESBANCO BANK, INC., a state-chartered commercial bank located in Wheeling, West Virginia (the "Company") and _____________________ (the "Executive"). INTRODUCTION To encourage the Executive to remain an employee of the Company, the Company is willing to provide salary continuation benefits to the Executive. The Company will pay the benefits from its general assets. AGREEMENT The Executive and the Company agree as follows: Article 1 Definitions Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 "Change of Control" shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied, followed by Termination of Employment within the time period hereinafter specified: (a) Final regulatory approval is obtained for any Person (other than those Persons in control of the Company as of the Effective Date, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the Beneficial Owner, directly or indirectly, or securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; or (b) During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of the Company (and any new Director, whose election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so approved), cease for any reason to constitute a majority thereof; or (c) Final regulatory approval is obtained with respect to: (A) a plan of complete liquidation of the Company; or (B) an agreement for the sale or disposition of all or substantially all the Company's assets; or (C) a merger, consolidation, or reorganization of the Company with or involving any other corporation, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. However, in no event shall a Change of Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change of Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change of Control by a majority of the non-employee continuing Directors of the Company, as applicable). The occurrence of a Change of Control as defined above shall also then be followed within three (3) years by the Executive's Termination of Employment for reasons other than death, Disability or retirement. 1.2 "Code" means the Internal Revenue Code of 1986, as amended. 1.3 "Disability" means, if the Executive is covered by a Company sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Executive is not covered by such a policy, Disability means the Executive suffering a sickness, accident or injury which, in the judgment of a physician satisfactory to the Company, prevents the Executive from performing substantially all of the Executive's normal duties for the Company. As a condition to 13 receiving any Disability benefits, the Company may require the Executive to submit to such physical or mental evaluations and tests as the Company's Board of Directors deems appropriate. 1.4 "Early Termination" means the Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change of Control. 1.5 "Early Termination Date" means the month, day and year in which Early Termination occurs. 1.6 "Effective Date" means ____________________________. 1.7 "Normal Retirement Age" means the Executive's 65th birthday. 1.8 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Employment. 1.9 "Plan Year" means a twelve-month period commencing on _____________ and ending on ________________ of each year. The initial Plan Year shall commence on the effective date of this Agreement. 1.10 "Salary" means the annual remuneration the Executive receives as base salary, but before deductions authorized by the Executive or required by law to be withheld from the Executive by the Company such as income taxes or Social Security taxes. 1.11 "Termination for Cause" See Section 5.2. 1.12 "Termination of Employment" means that the Executive ceases to be employed by the Company for any reason whatsoever other than by reason of a leave of absence, which is approved by the Company. For purposes of this Agreement, if there is a dispute over the employment status of the Executive or the date of the Executive's Termination of Employment, the Company shall have the sole and absolute right to decide the dispute. Article 2 Lifetime Benefits 2.1 Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Company shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement. 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $__________ (________________________ Dollars). 2.1.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month commencing with the month following the Executive's Normal Retirement Date. The annual benefit shall be paid to the Executive for 10 years. 2.2 Early Termination/Retirement Benefit. Upon Early Termination/Retirement, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement. 2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Early Termination/Retirement Annual Benefit set forth in Schedule A for the Plan Year ending immediately prior to the Termination of Employment, determined by vesting the Executive in 100 percent of the Accrual Balance. Any increase in the annual benefit under Section 2.1.1 shall require the recalculation of this benefit on Schedule A. 2.2.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month commencing with the month following Normal Retirement Age. The annual benefit shall be paid to the Executive for 10 years. The Company, in its sole and absolute discretion, may begin annual payments or make a lump sum payment of this benefit at any time, calculating the present value of said benefit using a discount rate equal to the 10-Year U.S. Treasury Bill rate and monthly compounding. 14 2.3 Disability Benefit. If the Executive terminates employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement. 2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Annual Benefit set forth in Schedule A for the Plan Year ending immediately prior to the date in which the Termination of Employment occurs, determined by vesting the Executive in the Normal Retirement Benefit. Any increase in the annual benefit under Section 2.1.1 would require the recalculation of this benefit on Schedule A. 2.3.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month commencing with the month following Normal Retirement Age. The annual benefit shall be paid to the Executive for 10 years. 2.4 Change of Control Benefit. Upon a Change of Control, the Company shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement. 2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change of Control Annual Benefit set forth in Schedule A for the Plan Year ending immediately prior to the date in which Termination of Employment occurs, determined by vesting the Executive in the Normal Retirement Benefit. Any increase in the annual benefit under Section 2.1.1 would require the recalculation of this benefit on Schedule A. 2.4.2 Payment of Benefit. The Company shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month commencing with the month following Normal Retirement Age. The annual benefit shall be paid to the Executive for 10 years. Article 3 Death Benefits 3.1 Death Benefit. If the Executive dies while in the active service of the Company, the Company shall pay to the Executive's beneficiary the benefit described in the Split Dollar Agreement and Endorsement attached as Addendum A between the Company and the Executive in lieu of any other benefit payable hereunder. The Company shall not pay a death benefit under this Section 3.1 if the Executive is entitled to a Lifetime Benefit under Article 2. 3.2 Death During Benefit Period. If the Executive dies after any Lifetime Benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived and no death benefit shall be payable under this Article 3. 3.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Executive is entitled to any Lifetime Benefit payments under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay the benefit payments to the Executive's beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Executive's death. Article 4 Beneficiaries 4.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive's lifetime. The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's estate. 4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Company may require proof of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit. 15 Article 5 General Limitations 5.1 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement to the extent the benefit would create an excise tax under the excess parachute rules of Section 280G of the Code. 5.2 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company terminates the Executive's employment for: (a) Gross negligence or gross neglect of duties; (b) Commission of a felony or of a gross misdemeanor involving moral turpitude; or (c) Fraud, disloyalty, dishonesty or willful violation of any law or significant Company policy committed in connection with the Executive's employment and resulting in an adverse effect on the Company. 5.3 Suicide or Misstatement. The Company shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the date of this Agreement, or if the Executive has made any material misstatement of fact on any application for life insurance purchased by the Company thereby precluding coverage under any policies of insurance contemplated hereunder. Article 6 Claims and Review Procedures 6.1 Claims Procedure. The Company shall notify any person or entity that makes a claim under this Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of this Agreement's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days. 6.2 Review Procedure. If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Company, but notice of this deferral shall be given to the Claimant. Article 7 Amendments and Termination This Agreement may be amended or terminated only by a written agreement signed by the Company and the Executive. Article 8 Miscellaneous 8.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees. 8.2 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company's right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time. 16 8.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 8.4 Reorganization. The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term "Company" as used in this Agreement shall be deemed to refer to the successor or survivor company. 8.5 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 8.6 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of West Virginia, except to the extent preempted by the laws of the United States of America. 8.7 Unfunded Arrangement. The Executive and any designated beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive's life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim, however, any insurance policy may be held in the Wesbanco Bank, Inc. Rabbi Trust dated _________________________, and subject to the terms and conditions of said trust. 8.8 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. 8.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to: (a) Interpreting the provisions of the Agreement; (b) Establishing and revising the method of accounting for the Agreement; (c) Maintaining a record of benefit payments; and (d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement. 8.10 Named Fiduciary. The Company shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals. IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement. EXECUTIVE: COMPANY: WESBANCO BANK, INC. _____________________________ By ________________________________ Title _________________________________ EX-10.8 4 17 EXHIBIT 10.8 EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT (Combined) AGREEMENT entered into this 29th day of May, 1986, by and between COMMERCIAL BANKING AND TRUST COMPANY, PARKERSBURG, WEST VIRGINIA, hereinafter called the "Bank," party of the first part, and WILLIAM E. MILDREN, JR., hereinafter called the "Officer," party of the second part. W I T N E S S E T H : WHEREAS, the Officer has been employed by the Bank and is currently employed by the Bank in an executive capacity; WHEREAS, the Bank desires to retain the valuable services and business counsel of the Officer and to induce the Officer to remain in an executive capacity with the Bank; WHEREAS, the Bank wishes to retain the Officer in order to prevent the substantial financial loss which the Bank would incur if the Officer were to leave and were to enter the employment of a competitor; WHEREAS, the Officer is considered a highly compensated officer or member of a select management group of the Bank; NOW, THEREFORE, the Bank promises to pay the Officer the benefits provided herein, subject to the terms and conditions set forth hereinafter, in consideration for the Officer's promise to remain in the continuous employment of the Bank until the earlier of the date of his disability or retirement, or voluntary termination or discharge without cause on or after the date on which a Merger, Buyout, or Substantial Change in Ownership occurs; and the parties hereto agree hereby that the following shall constitute the terms of this Agreement: ARTICLE 1. DEFINITIONS For the purposes of this Agreement, whenever the context so indicates, the singular or plural number and the masculine, feminine, or neuter gender shall be deemed to include the other, the terms, "he," "his," and "him," shall refer to the Officer, and the capitalized terms shall have the following meanings: Beneficiary: The person or persons the Officer has designated in writing to the Bank; if none, then the Officer's Spouse, if living; if none, then the Children of the Officer; if none, then the Estate of the Officer. Buyout: A transaction or series of transactions wherein the Bank is sold, either through the sale of a controlling interest in the Bank's voting stock or through the sale of substantially all of the Bank's assets, to a party not having a controlling interest in the Bank's voting stock on the date of execution of this Agreement. Children: The Officer's children, both natural and adopted, then living at the time payments are due are the Children under this Agreement. 18 Deferred Compensation Benefit: The benefit provided to the Officer at his Retirement Age, provided he has satisfied the conditions and terms of this Agreement, as calculated in Article 3. Estate: Means the Estate of the Officer. The benefits remaining, if any, after death of the Officer, the Officer's designated Beneficiaries, Spouse, and Children shall be paid to the Estate of the Officer. Just Cause: Theft, fraud, embezzlement or willful misconduct causing significant property damage to the Bank or personal injury to another employee. In the event the Officer is discharged for Just Cause, he agrees to consent to the revocation of this Agreement. In the event of such revocation, this Agreement shall be null and void and neither the Officer nor his Beneficiaries shall have a claim against the Bank. Merger: A transaction or series of transactions wherein the Bank is combined with another business entity, and after which the persons who had owned, either directly or indirectly, a controlling interest in the Bank's voting stock on the date of execution of this Agreement own less than a controlling interest in the voting stock of the combined entity. For the purposes of this Agreement, the term "Merger" shall include any event or series of events as described in the immediately preceding sentence, whether or not the combined entity retains the name of the Bank, retains the name of the business entity that acquired a controlling interest in the Bank, or a new name is given to the combined entity. Retirement Age: Normal Retirement Age shall be age 65, or later at election of the Board. Early retirement may be elected by the Officer at any time after age 55. Benefits payable under this Agreement shall be actuarially reduced for retirement prior to age 65. Spouse: The individual to whom the Officer is legally married at the time of the Officer's death. Substantial Change In Ownership: A transaction or series of transactions in which fifteen percent or more of the voting stock of the Bank is acquired by or for a person or business entity, either of which did not own, either directly or indirectly, a controlling interest in the voting stock of the Bank on the date that this Agreement was executed. The above shall not apply to stock purchased by the Employee Stock Ownership Plan (ESOP) at Commercial Banking and Trust Company. Year of Service: Twelve full months of continuous employment by the Officer. A fractional Year of Service shall accrue at a rate of one-twelfth of a Year of Service for each full month of continuous employment, and benefits under this Plan shall be adjusted accordingly. 19 The above definitions shall apply only to this Agreement and in any event shall not be construed as applying to any employee benefit plan(s) qualified under Section 401(a) of the Internal Revenue Code of 1954 as amended that the Bank or an affiliated company maintains, currently maintains, or will maintain. ARTICLE 2. PAYMENT OF PRE RETIREMENT (DEATH) BENEFITS The Bank agrees that if the Officer dies prior to attaining Retirement Age while covered by the provisions of this Agreement, then the Bank will pay the Officer's Beneficiaries in the manner prescribed in Article 5 of this Agreement, the sum of Sixty-One Thousand and no/100 Dollars ($61,000.00) per annum for one year, payable monthly in twelve equal installments, to commence on the first business day of the month following the month in which the Officer died. The Bank further agrees that if the Officer dies prior to attaining Retirement Age, then the Bank will pay the Officer's Beneficiaries in the manner prescribed in Article 5 of this Agreement, the sum of Forty-Five Thousand Seven Hundred Fifty and no/100 Dollars ($45,750.00) per annum for four years, payable monthly in forty-eight equal installments, to commence on the first business day of the month immediately following the date on which the last payment was made under the provisions of the immediately preceding sentence; and at the conclusion of this four year period, the Bank will pay the sum of Thirty Thousand Five Hundred and no/100 Dollars ($30,500.00) per annum for ten years, payable monthly in one hundred twenty equal installments. The payment of any amount under this Article 2 will be subject to the conditions and limitations set out elsewhere in this Agreement, and will be payable upon the first business day of each month. ARTICLE 3. DEFERRED COMPENSATION If the Officer is still in the employ of the Bank at retirement and covered under this Agreement, whether or not temporarily or permanently disabled, the Bank shall, after the Officer's retirement, commence payments as provided in this Article 3 and set forth below. Subject to the provisions and limitations of this Agreement, the Bank shall pay to the Officer a monthly benefit which shall commence the first day of the month next following the Officer's retirement date and shall be payable monthly thereafter until one hundred eighty payments have been made. A. At Retirement. Subject to the provisions and limitations of this Agreement, the Bank shall pay to the Officer the sum of Forty-Eight Thousand Four Hundred Forty-One and no/100 Dollars ($48,441.00) per annum payable in twelve equal installments which shall commence the first day of the month next following the officer's attainment of Retirement Age and shall be payable monthly thereafter until all payments have been made. B. Retirement Prior To Age 65. The Officer may retire after age 55 with the approval of the Board of Directors unless there has been a Buyout, Merger, or Substantial Change in Ownership. If there has been a Buyout, Merger, or Substantial Change in ownership, the Officer can retire at any time after attaining age 55 without Board approval. The amount payable due to early retirement will be the amount payable under Article 3A above actuarially reduced. Such payments are to begin the first day of the month next following the effective date of the Officer's retirement. C. Death Benefit. In the event of death of the Officer while covered by this Agreement on or after retirement regardless of age, payments as stated in paragraph A of Article 3 above shall be made as provided in Article 5 commencing on the first day of the month after the Officer's death. In the event the Officer dies while covered by this Agreement prior to retirement, Article 2 shall control. However, in no 20 event shall payments be made under provisions of Article 2 if payments are being made under provisions of Article 3. ARTICLE 4. CONDITIONS A. Normal Employment. The payment of benefits under this Agreement to the Officer or Officer's Beneficiaries is conditioned upon the continuous employment (periods of temporary disability and authorized leave of absence shall be considered as periods of employment) of the Officer by the Bank from date of execution of this Agreement until the date the Officer attains Retirement Age or becomes deceased, and upon the Officer's compliance with the terms of this Agreement so long as he lives and payments are due under terms of this Agreement; provided, however, in the event of a Buyout, Merger, or Substantial Change in Ownership, continuous employment of the Officer shall be required only until the date of the Officer's voluntary termination or discharge without Just Cause. B. Early Termination/Discharge. Notwithstanding paragraph A above, the Officer or his Beneficiaries shall be entitled to payment at Retirement Age of a portion of the benefit defined in Article 2 or Article 3 whichever applies should he prior to Retirement Age voluntarily terminate his employment on the date of or any date subsequent to a Buyout, Merger, or Substantial Change in Ownership; become permanently disabled; or if he should be discharged from employment by the Bank without Just Cause on the date of or on any date subsequent to a Buyout, Merger, or Substantial Change in ownership. The percentage payable shall be determined by reference to the vesting schedule contained herein. C. Vesting Schedule. In the event of a Buyout, Merger, or Substantial Change in Ownership the following vesting schedule shall apply. The Officer shall earn one year, or portion thereof, of benefit payments for each year, or portion thereof, of service to the Bank up to a maximum of fifteen years. In the event benefit payments are due under provisions of Article 2, the vesting schedule shall apply to the first year's benefit first, then the second, and continue until the Officer's vested service is exhausted. Such service commences with the inclusion of the Officer in the Executive Supplemental Income Plan. ARTICLE 5. PAYMENTS TO BENEFICIARIES For purposes of this Agreement, Beneficiaries shall mean the person or persons designated by the Officer in writing on forms furnished by the Bank. Such Officer may then from time to time change the designated Beneficiaries by written notice to the Bank, and upon such change, the rights of all previously designated Beneficiaries to receive any benefits under this Agreement shall cease. If, at the date of death of the officer, no duly designated Beneficiary exists, or if the officer has revoked a prior designation by a writing filed with the Bank without having filed a new designation, then for purposes of this Agreement, the legally recognized Spouse of the officer living at his death shall be the beneficiary; if none, then the Children, natural and adopted, then living; if none, then the officer's Estate. ARTICLE 6. FUNDING The Bank's obligations under this Agreement shall be an unfunded and unsecured promise to pay. The Bank shall not be obligated under any circumstances to fund its obligations under this Agreement. The Bank may, however, at its sole and exclusive option, elect to fund this Agreement in whole or in part. ARTICLE 7. OFFICER RIGHT TO ASSETS The rights of the Officer or his Beneficiaries shall be solely those of an unsecured general creditor of the Bank. The Officer or his Beneficiaries shall only have the right to receive from the Bank those payments 21 as specified under this Agreement. The Officer agrees that neither he nor his Beneficiaries shall have any rights or interests whatsoever in any asset of the Bank. Any asset used or acquired by the Bank in connection with the liabilities the Bank has assumed under this Agreement, except as expressly provided, shall not be deemed to be held under any trust for the benefit of the Officer or his Beneficiaries, nor shall it be considered security for the performance of the obligations of the Bank. It shall be, and remain, a general, unpledged, and unrestricted asset of the Bank. ARTICLE 8. ACCELERATION OF PAYMENT The Bank may accelerate the payment of any benefits payable under this Agreement with the consent of the Officer or his Beneficiaries. In the event it is agreed to accelerate these payments, the present value of any future payments shall be paid to the Officer or his Beneficiaries. ARTICLE 9. LEAVES OF ABSENCE The Bank may, in its sole discretion, permit the Officer to take a leave of absence; each such period shall not exceed one year in length. During such leave, the Officer shall be considered to be in the continuous employment of the Bank for purposes of this Agreement. ARTICLE 10. ASSIGNABILITY Except insofar as this provision may be contrary to applicable law, no sale, transfer, alienation, assignment, pledge, collateralization, or attachment of any benefits under this Agreement shall be valid or recognized by the Bank. ARTICLE 11. AMENDMENT/REVOCATION Prior to retirement, this Agreement may be amended, modified, or revoked at any time, in whole or part, by the Bank except in the event of a Buyout, Merger, or Substantial Change in Ownership. On or after a Buyout, Merger, or Substantial Change in Ownership, mutual consent of the Officer and the Bank shall be required to amend, modify, or revoke this Agreement. ARTICLE 12. LAW GOVERNING/ENFORCEMENT/PARTIES This Agreement shall be governed by the laws of the state of West Virginia. This Agreement is solely between the Bank and the Officer. Furthermore, the Officer or his Beneficiaries shall only have recourse against the Bank for enforcement of the Agreement. However, it shall be binding upon the Beneficiaries, heirs, executors and administrators of the Officer, and upon any and all successors and assigns of the Bank. ARTICLE 13. SEVERABILITY In the event that any of the provisions of this Agreement or portion thereof, are held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provision held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby. ARTICLE 14. INCOMPETENCY If the Bank shall find that any person to whom any payment is payable under this Agreement is unable to care for their affairs because of illness or accident, or is a minor, any payment due (unless a prior claim therefore shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to the Spouse, a child, a parent, a brother or sister, or a custodian determined pursuant to the Uniform Gift to Minors Act, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in such manner and proportions as the Bank may 22 determine. Any such payment shall be a complete discharge of the liabilities of the Bank under this Agreement. ARTICLE 15. EXECUTION This Agreement shall be executed in triplicate, each copy of which, when so executed and delivered, shall be an original, but all three copies shall together constitute one and the same instrument. In witness hereof, the parties have caused this Agreement to be executed on this 29th day of May, 1986. /s/ William E. Mildren, Jr. William E. Mildren, Jr. COMMERCIAL BANKING AND TRUST COMPANY PARKERSBURG, WEST VIRGINIA BY: /s/ Larry G. Johnson Sr. VP 23 COMMERCIAL BANK AND TRUST PARKERSBURG, WEST VIRGINIA ADDENDUM TO EXECUTIVE SUPPLEMENTAL INCOME AGREEMENT This Addendum to the Executive Supplemental Income Agreement covering WILLIAM E. MILDREN, JR. enumerates the dollar amount of death and retirement benefits payable under the Executive Supplemental Income Agreement. All rights and payment provisions are controlled by the Executive Supplemental Income Agreement effective on the 7th day of February, 1994. This Addendum revokes any previously dated Addendum. ANNUAL PRE-RETIREMENT DEATH BENEFIT. Year 1: $115,000 Years 2 - 5: $ 86,250 Years-6 - 15: $ 57,500 ANNUAL POST-RETIREMENT BENEFIT. $48,441 payable for 15 years IN WITNESS WHEREOF, the parties hereto have executed this Addendum this 7th day of February, 1994, each acknowledging receipt of a fully signed original hereof. /s/ William E. Mildren, Jr. WILLIAM E. MILDREN, JR. COMMERCIAL BANK AND TRUST PARKERSBURG, WEST VIRGINIA BY: /s/ Daniel N. Canada Director of Human Resources EX-11 5 24 EXHIBIT 11 WesBanco, Inc. Computation of Earnings Per Share For the years ended December 31, -------------------------------- (dollars in thousands, except per share amounts) 1999 1998 1997 - ----------------------------------------------------------------------------- Net income applicable to common stock $ 27,638 $ 28,313 $ 25,211 - ----------------------------------------------------------------------------- Average common shares outstanding 20,229,524 20,867,193 20,461,742 - ----------------------------------------------------------------------------- Earnings per share $ 1.37 $ 1.36 $ 1.23 - ----------------------------------------------------------------------------- EX-12 6 25 EXHIBIT 12 WesBanco, Inc. Ratio of Earnings to Fixed Charges and Preferred Stock Dividends For the years ended December 31, --------------------------------------------- (dollars in thousands) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------ Net income $27,638 $28,313 $25,211 $25,942 $25,049 Provision for income taxes 11,465 13,495 9,519 10,648 9,832 - ------------------------------------------------------------------------------ Earnings before provision for income taxes 39,103 41,808 34,730 36,590 34,881 - ------------------------------------------------------------------------------ Preferred stock dividend requirements --- --- --- --- 164 Ratio of pretax income to net income 1.41% 1.48% 1.38% 1.41% 1.39% - ------------------------------------------------------------------------------ Preferred dividend factor $ 0 $ 0 $ 0 $ 0 $ 228 Ratio of pretax net income to preferred dividends 0% 0% 0% 0% 152.7% - ------------------------------------------------------------------------------ WesBanco has no fixed charges as defined by Regulation S-K Item 503-Summary; Risk Factors; Ratio of Earnings to Fixed Charges. EX-13 7 26 EXHIBIT 13 WESBANCO, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except per share amounts) December 31, ------------------------------ 1999 1998 - ----------------------------------------------------------------------------- ASSETS Cash and due from banks $ 67,166 $ 62,989 Due from banks - interest bearing 4,653 5,174 Federal funds sold 9,535 38,055 Securities: Held to maturity (market values of $211,009 and $220,699, respectively) 213,253 214,845 Available for sale carried at market value 354,675 465,705 - ----------------------------------------------------------------------------- Total securities 567,928 680,550 - ----------------------------------------------------------------------------- Loans, net of unearned income 1,523,446 1,373,018 Allowance for loan losses (19,752) (19,098) - ----------------------------------------------------------------------------- Net loans 1,503,694 1,353,920 - ----------------------------------------------------------------------------- Bank premises and equipment 56,201 47,999 Accrued interest receivable 15,661 14,837 Other assets 44,888 39,188 - ----------------------------------------------------------------------------- Total Assets $2,269,726 $2,242,712 ============================================================================= LIABILITIES Deposits: Non-interest bearing demand $ 216,574 $ 227,349 Interest bearing demand 585,483 510,662 Savings deposits 274,052 308,979 Certificates of deposit 737,892 740,652 - ----------------------------------------------------------------------------- Total deposits 1,814,001 1,787,642 - ----------------------------------------------------------------------------- Federal funds purchased and repurchase agreements 131,865 112,511 Other borrowings 41,588 22,194 Accrued interest payable 6,165 6,669 Other liabilities 6,443 17,213 - ----------------------------------------------------------------------------- Total Liabilities 2,000,062 1,946,229 - ----------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Preferred stock, no par value; 1,000,000 shares authorized; none outstanding - - Common stock ($2.0833 par value; 50,000,000 authorized: 20,996,531 shares issued) 43,742 43,742 Capital surplus 60,133 60,283 Retained earnings 208,508 198,782 Treasury stock (1,206,606 and 336,296 shares, respectively, at cost) (34,311) (9,421) Accumulated other comprehensive income (market value adjustments) (7,456) 3,610 Deferred benefits for directors and employees (952) (513) - ----------------------------------------------------------------------------- Total Shareholders' Equity 269,664 296,483 - ----------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $2,269,726 $2,242,712 ============================================================================= See Notes to Consolidated Financial Statements. 27 WESBANCO, INC. CONSOLIDATED STATEMENT OF INCOME (dollars in thousands, except per share amounts) For the years ended December 31, ---------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------ Interest income: Loans, including fees $ 117,508 $ 118,766 $ 118,540 - ------------------------------------------------------------------------------ Securities: Taxable 27,269 31,205 27,045 Tax-exempt 10,182 9,592 9,121 - ------------------------------------------------------------------------------ Total interest on securities 37,451 40,797 36,166 - ------------------------------------------------------------------------------ Federal funds sold 902 3,155 3,084 - ------------------------------------------------------------------------------ Total interest income 155,861 162,718 157,790 - ------------------------------------------------------------------------------ Interest expense: Interest bearing demand deposits 18,071 16,693 12,335 Savings deposits 5,936 7,852 9,520 Certificates of deposit 38,545 43,067 43,041 - ------------------------------------------------------------------------------ Total interest on deposits 62,552 67,612 64,896 Other borrowings 6,679 6,313 5,109 - ------------------------------------------------------------------------------ Total interest expense 69,231 73,925 70,005 - ------------------------------------------------------------------------------ Net interest income 86,630 88,793 87,785 Provision for loan losses 4,295 4,392 5,574 - ------------------------------------------------------------------------------ Net interest income after provision for loan losses 82,335 84,401 82,211 - ------------------------------------------------------------------------------ Other income: Trust fees 10,582 9,066 7,640 Service charges and other income 13,620 15,139 9,545 Net securities gains 379 1,510 516 - ------------------------------------------------------------------------------ Total other income 24,581 25,715 17,701 - ------------------------------------------------------------------------------ Other expense: Salaries and wages 28,238 28,596 27,169 Employee benefits 7,107 6,799 7,644 Net occupancy 3,478 3,641 3,518 Equipment 6,300 5,876 5,615 Other operating 22,690 23,396 21,236 - ------------------------------------------------------------------------------ Total other expense 67,813 68,308 65,182 - ------------------------------------------------------------------------------ Income before provision for income taxes 39,103 41,808 34,730 Provision for income taxes 11,465 13,495 9,519 - ------------------------------------------------------------------------------ Net Income $ 27,638 $ 28,313 $ 25,211 ============================================================================== Earnings per share $1.37 $1.36 $1.23 Average shares outstanding 20,229,524 20,867,193 20,461,742 ============================================================================== See Notes to Consolidated Financial Statements. 28 WESBANCO, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (dollars in thousands, except per share amounts) For the years ended December 31, 1999, 1998, and 1997 --------------------------------------------------------------------------------------- Accumulated Deferred Common Stock Other Benefits for -------------------- Capital Retained Treasury Comprehensive Directors & Shares Amount Surplus Earnings Stock Income Employees Total - ------------------------------------------------------------------------------------------------------------------------- December 31, 1996 14,698,415 $ 30,812 $45,659 $193,363 $ (544) $ 46 $ (855) $268,481 - ------------------------------------------------------------------------------------------------------------------------- Net income 25,211 25,211 Net market value adjustment on securities available for sale -- net of tax effect 1,737 1,737 -------- Comprehensive income 26,948 Cash dividends: Common ($.786 per share) (12,474) (12,474) Common-by pooled bank prior to acquisition (1,929) (1,929) Stock issued for acquisitions 323,175 366 7,519 4,901 12,786 Net treasury shares purchased (186,362) 82 (6,032) (5,950) Retirement of pooled bank stock held by WesBanco (17) (116) (133) Stock dividend by pooled bank 417,573 733 4,853 (5,586) Stock issued for a 3 for 2 stock split effected in the form of a 50% stock dividend 5,357,003 11,161 (11,161) Net payments on ESOP debt 316 316 Deferred benefits for directors-net (50) (50) - -------------------------------------------------------------------------------------------------------------------------- December 31, 1997 20,609,804 43,055 57,997 187,424 (1,675) 1,783 (589) 287,995 - -------------------------------------------------------------------------------------------------------------------------- Net income 28,313 28,313 Net market value adjustment on securities available for sale -- net of tax effect 1,827 1,827 -------- Comprehensive income 30,140 Cash dividends: Common ($.84 per share) (16,470) (16,470) Common-by pooled bank prior to acquisition (485) (485) Stock issued for acquisitions 392,846 687 2,383 1,883 4,953 Net treasury shares purchased (342,415) (97) (9,629) (9,726) Net payments on ESOP debt 97 97 Deferred benefits for directors-net (21) (21) - -------------------------------------------------------------------------------------------------------------------------- December 31, 1998 20,660,235 43,742 60,283 198,782 (9,421) 3,610 (513) 296,483 - -------------------------------------------------------------------------------------------------------------------------- Net income 27,638 27,638 Net market value adjustment on securities available for sale -- net of tax effect (11,066) (11,066) -------- Comprehensive income 16,572 Cash dividends: Common ($.88 per share) (17,912) (17,912) Stock issued for acquisitions 422,916 (182) 12,153 11,971 Net treasury shares purchased (1,293,226) 32 (37,043) (37,011) Net borrowings on ESOP debt (350) (350) Deferred benefits for directors-net (89) (89) - -------------------------------------------------------------------------------------------------------------------------- December 31, 1999 19,789,925 $43,742 $60,133 $208,508 $(34,311) $ (7,456) $ (952) $ 269,664 - --------------------------------------------------------------------------------------------------------------------------
There was no activity in Preferred Stock during the years ended December 31, 1999, 1998 and 1997. See Notes to Consolidated Financial Statements. 29 WESBANCO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) For the years ended December 31, -------------------------------- Increase (decrease) in cash and cash equivalents 1999 1998 1997 - ---------------------------------------------------------------------------------------- Cash flows from operating activities: Net Income $ 27,638 $ 28,313 $ 25,211 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,488 5,290 4,844 Net amortization and accretion 1,366 116 1,497 Provision for loan losses 4,295 4,392 5,574 Gains on sales of securities-net (379) (1,510) (516) Gain on sale of credit card portfolio (3,561) --- --- Gain on sale of branch offices --- (4,605) --- Deferred income taxes 323 (243) (387) Other - net 476 248 439 Net change in assets and liabilities: Interest receivable (671) 460 (1,103) Other assets and other liabilities (2,453) (1,488) 4,748 Interest payable (618) (469) (151) - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 31,904 30,504 40,156 - ----------------------------------------------------------------------------------------- Cash flows from investing activities: Securities held to maturity: Proceeds from maturities and calls 50,357 116,675 103,537 Payments for purchases (49,778) (98,062) (54,261) Securities available for sale: Proceeds from sales 47,772 71,578 42,234 Proceeds from maturities and calls 129,216 196,492 65,487 Payments for purchases (83,400) (344,867) (174,357) Sale of branch offices, net of cash --- (2,726) --- Acquisitions, net of cash 2,809 4,951 6,635 Proceeds from the sale of credit card portfolio 18,789 --- --- Net increase in loans (143,142) (59,154) (2,674) Purchases of premises and equipment-net (10,243) (8,953) (7,498) - ----------------------------------------------------------------------------------------- Net cash used by investing activities (37,620) (124,066) (20,897) - ----------------------------------------------------------------------------------------- Cash flows from financing activities: Net increase (decrease) in deposits (3,133) 47,210 48,634 Increase in federal funds purchased and repurchase agreements 19,354 19,169 9,413 Increase (decrease) in borrowings 19,394 (2,253) 10,245 Dividends paid (17,752) (15,813) (14,045) Purchases of treasury shares-net (37,011) (9,726) (5,950) Other - net --- (97) (335) - ----------------------------------------------------------------------------------------- Net cash provided (used) by financing activities (19,148) 38,490 47,962 - ----------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (24,864) (55,072) 67,221 Cash and cash equivalents at beginning of period 106,218 161,290 94,069 - ----------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 81,354 $ 106,218 $ 161,290 ========================================================================================= Supplemental Disclosures: Interest paid on deposits and other borrowings $ 69,735 $ 74,393 $ 69,463 Income taxes paid 13,135 13,609 10,221
See Notes to Consolidated Financial Statements. 30 WESBANCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) NOTE 1: ACCOUNTING POLICIES WesBanco, Inc. is a bank holding company offering a full range of financial services, including trust, mortgage banking, insurance and brokerage services, through offices located in West Virginia and Eastern Ohio. WesBanco's only defined business segment is community banking. The Corporation primarily evaluates its performance and allocates resources based on the financial information of its community banking operations. 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. Business Combinations: Business combinations which have been accounted for under the purchase method of accounting include the results of operations of the acquired business from the date of acquisition. Net assets of the companies acquired were recorded at their estimated fair value as of the date of acquisition. Other business combinations have been accounted for under the pooling of interests method of accounting which requires the assets, liabilities and stockholders' equity of the merged entity to be retroactively combined with the Corporation's respective accounts at recorded value. Prior period financial statements have been restated to give effect to business combinations accounted for under this method. Reclassification: Certain prior year financial information has been reclassified to conform to the presentation in 1999. The reclassifications had no effect on net income. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and cash equivalents: For the purpose of reporting cash flows, cash and cash equivalents include cash and due from banks and federal funds sold. Generally, federal funds are sold for one day periods. Securities: Securities Available for Trading: The Corporation did not have a trading portfolio during the two-year period ended December 31, 1999. Securities Held to Maturity: Securities consisting principally of debt securities, which are purchased with the positive intent and ability to hold until their maturity, are stated at cost, adjusted for amortization of premiums and accretion of discounts. Securities Available for Sale: Debt securities not classified as trading or held to maturity, and marketable equity securities not classified as trading, are classified 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 stated at market value, with the market value adjustment, net of tax, reported as a separate component of accumulated other comprehensive income. Permanent declines in value on these securities are recognized in results of operations. Gains and Losses: Net realized gains and losses on sales of securities are included in other income. The cost of these securities sold is based on the specific identification method. Amortization and Accretion: Amortization of premiums and accretion of discounts are included in interest on securities. Loans and loans held for sale: Interest is accrued as earned on loans except where doubt exists as to collectability, in which case recognition of income is discontinued. Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Losses are recorded in other income based on the difference between the market value and the aggregate cost. A loan is considered impaired, based on current information and events, if it is probable that the Corporation will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. 31 Impaired loans include all nonaccrual and renegotiated loans, as well as loans internally classified as substandard or doubtful (as those terms are defined by banking regulations) that meet the definition of impaired loans. All loans considered impaired are included in non-performing loans. The Corporation recognizes interest income on nonaccrual loans on the cash basis. Loan origination fees and certain direct costs are amortized as an adjustment to the yield over the estimated lives of the related loans. Allowance for loan losses: The allowance for loan losses is maintained at a level considered adequate by management to provide for probable loan losses. The allowance is increased by provisions charged to operating expenses and reduced by loan losses, net of recoveries. Management's determination of the adequacy of the allowance is based on evaluation of the loan portfolio, as well as prevailing economic conditions, past loan loss experience, current delinquency factors, changes in the character of the loan portfolio, specific problem loans and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. While management has allocated the allowance to different loan categories, the allowance is general in nature and is available for the loan portfolio in its entirety. Premises and equipment: Premises and equipment are stated at cost less accumulated depreciation, and 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 premises and equipment retired or otherwise disposed of are charged to expense when incurred. Other real estate owned: Other real estate owned consists primarily of properties acquired through, or in lieu of, loan foreclosures. Valuations are performed periodically and the real estate is carried at the lower of cost or appraised value, less estimated costs to sell. Mortgage servicing rights: Mortgage servicing rights, which are reported in other assets, are amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying mortgage loans. Capitalized mortgage servicing rights are evaluated for impairment based on the fair value of those rights. Goodwill: The excess of the purchase price over net identifiable tangible and intangible assets acquired in a purchase business combination (goodwill) is included in other assets. Goodwill is amortized on a straight-line basis over varying periods not exceeding 20 years. Income taxes: Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities and their tax bases. In addition, such deferred tax asset and liability amounts are adjusted for the effects of enacted changes in tax laws or rates. Earnings per share: Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during each period. For diluted earnings per share, the weighted average number of shares for each period is increased by the number of shares which would be issued assuming the exercise of common stock options. There was no dilutive effect from the stock options and accordingly, basic and diluted earnings per share are the same. Trust assets: Assets held by subsidiary banks in fiduciary or agency capacities for their customers are not included as assets in the accompanying Consolidated Balance Sheet. Certain trust assets are held on deposit at subsidiary banks. Comprehensive income: Sources of comprehensive income not included in net income are limited to unrealized gains and losses (net market value adjustments) on securities available for sale, net of tax. Reclassification adjustments between unrealized gains and losses from prior periods and realized gains and losses included in earnings in the current period are not considered material in the presentation of comprehensive income. New accounting standards: SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133", requires derivative instruments be carried at fair value on the balance sheet. The Corporation plans to adopt the provisions of this statement, as amended, beginning January 1, 2001, the statements' effective date. The impact of adopting the provisions of this statement on WesBanco's financial position and results of operations subsequent to the effective date is not currently estimable and will depend on the financial position of the Corporation and the nature and purpose of the derivative instruments in use at that time. 32 NOTE 2: COMPLETED BUSINESS COMBINATIONS AND DIVESTITURE On March 31, 1998, WesBanco completed its business combination with Commercial BancShares, Incorporated, issuing 4,594,134 shares of stock in a transaction accounted for as a pooling of interests. Prior years' financial information has been restated to reflect the pooling of interests transaction. As of the transaction date, Commercial BancShares reported total assets of approximately $466,137, deposits of $395,504 and shareholders' equity of $46,358. For the year ended December 31, 1997, WesBanco and Commercial BancShares separately reported net interest income of $68,756 and $19,029, and net income of $22,274 and $2,937, respectively. The following table summarizes WesBanco's material purchase acquisitions, accounted for under the purchase method of accounting, for the three-year period ended December 31, 1999: - ------------------------------------------------------------------------------------------------------------ Purchase Assets Date Entity Price Consideration Goodwill Acquired - ------------------------------------------------------------------------------------------------------------ 4/30/99 Heritage Bank of Harrison County $12,621 422,916 shares of common stock $8,206 $33,049 6/30/97 Shawnee Bank, Inc. 12,786 323,175 shares of common stock 6,498 34,695 - ------------------------------------------------------------------------------------------------------------
On June 30, 1998, WesBanco fulfilled the regulatory requirement that it divest of Union Bank of Tyler County ("Union"). Union was a subsidiary of Commercial BancShares, with total assets of $46,873 as of the divestiture date. WesBanco recognized a pretax gain of $4,605 on the sale of Union, which is included in other income. NOTE 3: SECURITIES The following tables summarize amortized cost and fair values of held to maturity and available for sale securities: Held to Maturity ------------------------------------------------------------------------------------------- December 31, 1999 December 31, 1998 ---------------------------------------------- -------------------------------------------- Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value ---------------------------------------------- -------------------------------------------- U.S. Treasury and Federal Agency securities $ 13,346 $ 3 $ 70 $ 13,279 $ 41,961 $ 457 --- $ 42,418 Obligations of states and political subdivisions 182,005 976 3,153 179,828 169,552 5,405 $ 8 174,949 Other debt securities 17,902 --- --- 17,902 3,332 --- --- 3,332 - ----------------------------------------------------------------------------------------------------------------- Total $213,253 $ 979 $ 3,223 $211,009 $ 214,845 $ 5,862 $ 8 $ 220,699 ================================================================================================================= Available for Sale ------------------------------------------------------------------------------------------- December 31, 1999 December 31, 1998 ---------------------------------------------- -------------------------------------------- Gross Gross Estimated Gross Gross Estimated Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value ---------------------------------------------- -------------------------------------------- U.S. Treasury and Federal Agency securities $196,288 $ 37 $ 6,732 $189,593 $ 272,457 $ 3,839 $ 36 $ 276,260 Obligations of states and political subdivisions 18,482 13 197 18,298 24,376 336 --- 24,712 Mortgage-backed & other debt securities 147,669 2 5,496 142,175 158,387 1,193 109 159,471 - ----------------------------------------------------------------------------------------------------------------- Total debt securities 362,439 52 12,425 350,066 455,220 5,368 145 460,443 Equity securities 4,502 463 356 4,609 4,459 860 57 5,262 - ----------------------------------------------------------------------------------------------------------------- Total $366,941 $ 515 $ 12,781 $354,675 $ 459,679 $ 6,228 $ 202 $ 465,705 =================================================================================================================
33 The following table summarizes amortized cost and estimated fair value of securities by maturity: December 31, 1999 ------------------------------------------- Held to Maturity Available for Sale --------------------- ------------------- Estimated Estimated Amortized Fair Amortized Fair Cost Value Cost Value - ------------------------------------------------------------------------------ Within one year $ 28,150 $ 28,232 $ 76,039 $ 74,364 After one year, but within five 55,910 56,373 107,131 104,738 After five years, but within ten 60,004 59,671 176,741 168,507 After ten years 69,189 66,733 7,030 7,066 - ------------------------------------------------------------------------------ Total $ 213,253 $211,009 $ 366,941 $ 354,675 ============================================================================== Mortgage-backed securities are assigned to maturity categories based on estimated average lives. Available for sale securities in the after 10 year category include securities with no stated maturity. Other securities with prepayment provisions are categorized based on contractual maturity. Securities with par values aggregating $ 320,341 at December 31, 1999 and $244,715 at December 31, 1998 were pledged to secure public and trust funds. Gross security gains of $404, $1,512, and $562 and gross security losses of $25, $2 and $46 were realized for the years ended December 31, 1999, 1998 and 1997, respectively. NOTE 4: LOANS The following table is a summary of total loans: December 31, -------------------------- 1999 1998 - ----------------------------------------------------------------------------- Loans: Commercial $ 521,450 $ 484,269 Real estate - construction 31,742 46,033 Real estate - residential 630,939 520,393 Personal, net of unearned income 329,562 313,043 Loans held for sale 9,753 9,280 - ----------------------------------------------------------------------------- Loans, net of unearned income $1,523,446 $1,373,018 ============================================================================= The following table represents changes in the allowance for loan losses: For the years ended December 31, ------------------------------------ 1999 1998 1997 - ----------------------------------------------------------------------------- Balance, beginning of year $ 19,098 $ 20,261 $ 19,102 Allowance for loan losses of acquired/(sold) banks - net 192 (37) 269 Allowance for loan losses allocated to sold credit cards (450) --- --- Provision for loan losses 4,295 4,392 5,574 Charge-offs (4,718) (6,400) (5,793) Recoveries 1,335 882 1,109 - ----------------------------------------------------------------------------- Net charge-offs (3,383) (5,518) (4,684) - ----------------------------------------------------------------------------- Balance, end of year $ 19,752 $ 19,098 $ 20,261 ============================================================================= The following tables summarize loans classified as impaired: December 31, -------------------- 1999 1998 - ----------------------------------------------------------------------------- Nonaccrual $ 4,158 $ 10,488 Renegotiated 813 695 Other classified loans: Doubtful 112 115 Substandard 8,594 5,170 - ----------------------------------------------------------------------------- Total impaired loans $ 13,677 $ 16,468 - ----------------------------------------------------------------------------- Impaired loans with a related allowance for loan losses $ 10,802 $ 11,873 Allowance for loan losses allocated to impaired loans 3,908 2,165 ============================================================================= 34 For the years ended December 31, --------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Average impaired loans $ 17,173 $ 19,429 $ 17,514 Amount of contractual interest income on impaired loans 334 796 922 Amount of interest income recognized on a cash basis 77 391 202 ============================================================================= Most lending occurs with customers located within West Virginia and Eastern Ohio. No significant concentration of credit risk exists by industry or by individual borrowers. The Corporation has no significant exposure to highly leveraged loan transactions, nor any foreign loans. WesBanco's banking offices, 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 $49,425, $32,946, and $47,123 as of December 31, 1999, 1998 and 1997, respectively. During 1999, $66,475 related party loans were funded and $49,996 were repaid. NOTE 5: BANK PREMISES AND EQUIPMENT Bank premises and equipment include: December 31, Estimated ---------------------- useful life 1999 1998 - ------------------------------------------------------------------------ Land and improvements (3-10 years) $ 12,739 $ 11,491 Buildings and improvements (4-50 years) 54,491 48,973 Furniture and equipment (2-25 years) 41,920 36,059 - ------------------------------------------------------------------------ 109,150 96,523 Less - Accumulated depreciation (52,949) (48,524) - ------------------------------------------------------------------------ Total $ 56,201 $ 47,999 ======================================================================== NOTE 6: CERTIFICATES OF DEPOSIT Certificates of deposit in denominations of $100 thousand or more totaled $128,385, and $125,493 as of December 31, 1999 and 1998, respectively. Related interest expense was $7,206 in 1999 and $7,921 in 1998. At December 31, 1999, the scheduled maturities of total certificates of deposit are as follows: 2000 $ 456,464 2001 182,703 2002 65,869 2003 17,254 2004 and thereafter 15,602 - ------------------------------------------------------------------------ Total $ 737,892 ======================================================================== NOTE 7: REPURCHASE AGREEMENTS AND OTHER BORROWINGS Federal funds purchased and securities sold under agreements to repurchase represent short-term borrowings which generally mature within one to four days from the transaction date. Other borrowings consist principally of advances with the Federal Home Loan Bank (FHLB). These borrowings are collateralized by FHLB stock and a blanket collateral agreement which assigns a security interest in capital stock, deposits, mortgage loans, and investment securities. At December 31, 1999, FHLB borrowings, which are fixed rate instruments with a weighted average yield of 5.8%, have the following maturity dates: 2000 $ 21,397 2001 10,000 2005 and thereafter 3,690 - ------------------------------------------------------------------------ Total $ 35,087 ======================================================================== 35 Information concerning securities sold under agreements to repurchase is summarized as follows: For the years ended December 31, --------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Outstanding balance at year end $ 107,795 $ 111,029 $ 92,560 Average balance during the year 113,008 99,099 79,132 Maximum month-end balance during the year 123,817 123,277 92,560 Average interest rate at year end 4.45% 4.56% 5.61% Average interest rate during the year 4.48 4.78 5.01 ============================================================================= NOTE 8: EMPLOYEE BENEFIT PLANS Defined Benefit Pension Plan and Other Postretirement Plans: At December 31, 1999, substantially all employees were participants in the WesBanco Defined Benefit Pension Plan ("The Plan"). The Plan covers those employees who satisfy minimum age and length of service requirements. Benefits of the Plan are generally based on years of service and employee's compensation during the last five years of employment. The 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. Prior to its merger with WesBanco, Commercial BancShares did not provide a defined benefit pension plan to its employees. However, subsequent to the merger, Commercial employees have been included in the WesBanco Plan, with no credited prior years of service. Retirees and active employees who were hired prior to March 30, 1998, are provided a postretirement contributory health insurance and death benefit plan. For reported years 1999 and 1998, the health insurance benefit was $0.1 per month and death benefit was $7.5. Effective December 31, 1998, the related benefit obligation of $2,031 was merged into the defined benefit plan. Postretirement benefits for 1999 are included with retirees pension payment and for 1998 and 1997 resulted in payments of approximately $220 and $181, respectively. Net periodic pension cost for the defined benefit and other postretirement plans include the following components: For the years ended December 31, -------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Service cost - benefits earned during year $ 1,138 $ 906 $ 872 Interest cost on projected benefit obligation 1,873 1,836 1,615 Expected return on plan assets (2,474) (2,415) (3,582) Net amortization and deferral (35) (162) 1,194 - ----------------------------------------------------------------------------- Prior service costs --- 70 70 - ----------------------------------------------------------------------------- Net periodic pension cost $ 502 $ 235 $ 169 ============================================================================= For 1998 and 1997, includes the net periodic postretirement benefit cost, other than pensions, of $383 and $378, respectively. The following tables summarize the activity in the projected benefit obligation and plan assets: For the years ended December 31, -------------------- 1999 1998 - ----------------------------------------------------------------------------- Projected benefit obligation, at beginning of year $ 27,547 $ 20,830 Service cost 1,138 808 Interest cost 1,873 1,621 Benefits paid (1,786) (1,911) Change in interest rate assumptions --- 924 Plan amendments - other postretirement benefits --- 3,287 Actuarial (gain)/loss (4,770) 1,988 - ----------------------------------------------------------------------------- Projected benefit obligation, at end of year $ 24,002 $ 27,547 ============================================================================= For the years ended December 31, ------------------- 1999 1998 - ----------------------------------------------------------------------------- Fair value of plan assets, at beginning of year $ 28,794 $ 27,680 Actual return on assets 6,447 2,649 Market value adjustment --- 376 Contributions 1,230 --- Benefits paid (1,786) (1,911) - ----------------------------------------------------------------------------- Fair value of plan assets, at end of year $ 34,685 $ 28,794 ============================================================================= Plan assets consist of debt and equity securities which include U.S. Agency and Treasury issues, Corporate bonds and notes, listed common stocks including shares of WesBanco common stock (comprising less than 10% of Plan assets) and short-term cash equivalent instruments. 36 The following table sets forth the defined benefit pension plan's funded status and the asset reflected in the Consolidated Balance Sheet: December 31, --------------------- 1999 1998 - ----------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation $ 10,683 $ 1,247 Unrecognized prior service cost (1,773) (864) Unrecognized net (gain)/loss (7,023) 770 Unrecognized obligation 13 20 - ----------------------------------------------------------------------------- Net pension asset $ 1,900 $ 1,173 ============================================================================= Actuarial assumptions used in the determination of the projected benefit obligation in the plan are as follows: For the years ended December 31, -------------------------------- 1999 1998 1997 - ---------------------------------------------------------------------------- Weighted average discount rates 8.25% 7.00% 7.25% Rates of increase in compensation levels 4.50 4.50 4.50 Weighted average expected long-term return on assets 8.75 8.75 8.75 ============================================================================ KSOP (Employee Stock Ownership and 401(k) Plan): Substantially all employees are included in the WesBanco KSOP Plan. The KSOP plan consists of non-contributory employee stock ownership (ESOP) and 401(k) Plan. The 401(k) provisions require the Corporation to make matching contributions based upon employees' contribution subject to regulatory limitations. Effective January 1, 1999, Commercial BancShares' KSOP was merged into WesBanco's KSOP. As of December 31, 1999, the Plan holds 592,159 shares of WesBanco stock, of which 579,854 shares are allocated to specific employee accounts and 12,305 shares are unallocated. During 1995, WesBanco's ESOP established a line of credit with an affiliated lender. Conditions in the loan agreement provide for a revolving line of credit in the aggregate amount of $1,000 to facilitate purchases of WesBanco common stock in the open market. 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 balance at January 1 of each year. The loan has a final maturity date of 5 years from date of inception. The $1,000 revolving line of credit had an outstanding balance of $350 and zero at December 31, 1999 and 1998, respectively. Total contributions to the Plan for the three years ended December 31, 1999, 1998 and 1997 were $996, $1,046 and $1,156, respectively. Commercial BancShares Executive Supplemental Income Plan: The Executive Supplemental Income Plan is a non-contributory plan covering certain officers with benefits which include death and retirement benefits. This Plan funded future benefit payments through an insurance investment with fair values of $5,304 and $5,203 as of December 31, 1999 and 1998, respectively. The net expense recorded to provide these benefits was $377, $303 and $947 for the years ended December 31, 1999, 1998 and 1997, respectively. WesBanco does not anticipate providing this benefit to any additional employees. Key Executive Incentive Bonus & Option Plan: The Key Executive Incentive Bonus & Option Plan, which was started in 1998, is a non-qualified plan which includes three components, an Annual Bonus, a Long-Term Incentive Bonus and a Stock Option component. The three components allow for payments of cash, or a mixture of cash and stock, or granting of stock options, depending upon the component of the plan in which the award is earned through the attainment of certain performance goals. Performance goals are established by WesBanco's Board of Directors. Compensation expense incurred in 1999 and 1998 for the Annual Bonus component of the plan was $348 and $364, respectively. There were no awards or payments made for the Long-Term Bonus component of the plan during the two years ended December 31, 1999. The Stock Option component provides for granting of stock options to eligible employees. The Board of Directors provided for the issuance of 150,000 shares of common stock for this component of the Plan. During 1998, 28,000 shares were granted at an option price of $29.50 per share, which was the fair market price on the date of grant. Vesting of stock options is based upon achievement of performance goals, which include improvements in earnings per share. Vested shares totaled 15,552 at December 31, 1999 and 9,331 shares at December 31, 1998. Employees generally have a ten year period to exercise the vested options. No options have been exercised. All granted options become immediately vested in the event of a change in control of the Corporation. The Corporation accounts for stock options in accordance with APB Opinion No. 25 "Accounting for Stock Issued to Employees". Under APB No. 25, since the exercise price exceeds the market price of the underlying stock as of December 31, 1999, no compensation expense has been recognized. Under the expense recognition provisions of SFAS No. 123, compensation expense of $32 and $96 would have been recognized during 1999 and 1998, respectively. A fair value of $6.17 per share was estimated using the Black-Scholes option pricing model using a weighted-average expected life of the option of 6 years, risk free interest rate of 5.48%, dividend yield of 2.8% and a volatility factor of 18.1%. 37 NOTE 9: OTHER OPERATING EXPENSE Other operating expense consists of the following: For the years ended December 31, --------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Professional fees $ 3,766 $ 3,711 $ 3,432 Marketing 2,315 1,927 1,905 General administrative 1,194 1,205 1,087 Supplies 1,993 2,185 1,744 Postage 1,804 1,803 1,467 Communication 1,996 1,455 1,215 Miscellaneous taxes 3,323 3,238 2,860 Goodwill amortization 1,389 1,049 769 Other 4,910 6,823 6,757 - ---------------------------------------------------------------------------- Total $ 22,690 $ 23,396 $ 21,236 ============================================================================ NOTE 10: INCOME TAXES A reconciliation of the federal statutory tax rate to the reported effective tax rate is as follows: For the years ended December 31, -------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Federal statutory tax rate 35% 35% 35% Tax-exempt interest income from securities of states and political subdivisions (7) (7) (8) State income taxes 4 3 3 Other - net (3) 1 (3) - ----------------------------------------------------------------------------- Effective tax rate 29% 32% 27% ============================================================================= The provision for income taxes consists of the following: For the years ended December 31, -------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Current - Federal $ 9,612 $ 11,446 $ 8,174 State 2,067 2,293 1,733 Deferred - Federal (282) (189) (319) State 68 (55) (69) - ----------------------------------------------------------------------------- Total $ 11,465 $ 13,495 $ 9,519 ============================================================================= Tax expense applicable to securities transactions $ 153 $ 609 $ 208 ============================================================================= Deferred tax assets and liabilities are comprised of the following: December 31, ----------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Deferred tax assets: Allowance for loan losses $ 7,358 $ 7,075 $ 7,010 Deferred compensation 663 1,199 922 Net operating loss carryforward 337 --- --- Other 33 47 51 - ----------------------------------------------------------------------------- Gross deferred tax assets 8,391 8,321 7,983 - ----------------------------------------------------------------------------- Deferred tax liabilities: Tax effect of market value adjustment on Investment securities available for sale 4,844 (2,380) (1,139) Depreciation (1,628) (1,484) (1,513) Purchase accounting adjustments (472) (695) (458) Accretion on investments (138) (205) (215) - ----------------------------------------------------------------------------- Gross deferred tax liabilities 2,606 (4,764) (3,325) - ----------------------------------------------------------------------------- Net deferred tax assets $ 10,997 $ 3,557 $ 4,658 ============================================================================= 38 NOTE 11: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value estimates of financial instruments are based on present value of expected future cash flows, quoted market prices of similar financial instruments, if available, and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, 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. The aggregate fair value of amounts presented does 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: December 31, ------------------------------------------ 1999 1998 --------------------- ------------------- Carrying Fair Carrying Fair Amount Value Amount Value - ------------------------------------------------------------------------------ Financial assets: Cash and short-term investments $ 81,354 $ 81,354 $ 106,218 $ 106,218 Securities held to maturity 213,253 211,099 214,845 220,699 Securities available for sale 354,675 354,675 465,705 465,705 Net loans (including loans held for sale) 1,503,694 1,479,129 1,353,920 1,364,404 Financial liabilities: Deposits 1,814,001 1,813,446 1,787,642 1,792,970 Federal funds purchased, repurchase agreements and other borrowings 173,453 173,086 134,705 135,029 Off balance sheet financial instruments: Interest rate swaps gain/(loss) --- 1,031 --- (590) ============================================================================== 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. Securities: Fair values for 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 held for sale: The carrying amount for loans held for sale is a reasonable estimate of fair value. Net loans: Fair values for loans with interest rates that fluctuate as current rates change are generally valued at carrying amounts. The fair values for residential mortgage loans are based on quoted market prices of securitized financial instruments, adjusted for remaining maturity and differences in loan characteristics. Fair values of commercial real estate, construction and personal 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. At December 31, 1998, 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. Deposits: The carrying amount is considered a reasonable estimate of fair value for demand and savings deposits and other variable rate deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using the rates currently offered for deposits of similar remaining maturities. Federal funds purchased, repurchase agreements and other borrowings: For federal funds purchased and repurchase agreements, which represent short-term borrowings, the carrying amount is a reasonable approximation of fair value. For longer term Federal Home Loan Bank advances, fair value is based on rates currently available to WesBanco for borrowings with similar terms and remaining maturities. 39 Off-balance sheet instruments: Off-balance sheet instruments consist of commitments to extend credit, standby letters of credit and interest rate swap agreements. Fair values for commitments to extend credit are 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 estimated fair value of the commitments to extend credit is immaterial and therefore not presented in the above table. Fair values for interest rate swaps are estimated by obtaining quotes from brokers. The values represent the amount the Corporation would receive or pay to terminate the agreement considering current interest rates. NOTE 12: COMMITMENTS AND CONTINGENT LIABILITIES In the normal course of business, WesBanco offers off-balance sheet financial instruments to enable its customers to meet their financing objectives. The Corporation also enters into these transactions to manage its own risks arising from movement in interest rates. These financial instruments include commitments to extend credit, standby letters of credit, and interest rate swap agreements. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. WesBanco has various commitments outstanding to extend credit approximating $226,254 and $229,965 and standby letters of credit of $9,713 and $9,986 as of December 31, 1999 and 1998, respectively. WesBanco's exposure to credit loss in the event of non-performance 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 Corporation uses 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 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. Management evaluates each customer's credit worthiness on a case-by-case basis. Standby letters of credit are conditional commitments issued by 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 Corporation's commercial loans. Interest rate swap agreements generally involve the exchange of fixed and floating rate interest payments without the exchange of the underlying notional amount, on which interest payments are calculated. Differences between interest received and interest paid are reported as a component of interest expense in the Consolidated Statement of Income. Interest rate swap agreements are entered into as part of the Corporation's interest rate risk management strategy primarily to alter the interest rate sensitivity of its deposit liabilities. The following summarizes WesBanco's interest rate swap agreements: December 31, ------------------------ 1999 1998 - ----------------------------------------------------------------------------- Notional amount $ 65,904 $ 38,500 Unrealized gain/(loss) 1,031 (590) Weighted average receive variable rate 4.80% 4.55% Weighted average pay fixed rate 4.98% 5.14% Average life (years) 5.32 4.85 ============================================================================= The Corporation and its affiliates are parties to various legal and administrative proceedings and claims. While any litigation contains an element of uncertainty, management believes that the outcome of such proceedings or claims pending or known to be threatened will not have a material adverse effect on the Corporation's consolidated financial position. NOTE 13: TRANSACTIONS WITH RELATED PARTIES Some officers and directors (including their affiliates, families and entities in which they are principal owners) of the Corporation and its subsidiaries are customers of those subsidiaries and have had, and are expected to have, transactions with the subsidiaries in the ordinary course of business. In addition, some officers and directors are also officers and directors of corporations which are customers of the bank and have had, and are expected to have, transactions with the bank 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. 40 NOTE 14: REGULATORY MATTERS WesBanco (Parent Company) is a legal entity separate and distinct from its subsidiaries. There are various legal limitations on the extent to which WesBanco's banking subsidiary may extend credit, pay dividends or otherwise supply funds to WesBanco. Certain restrictions under Federal and State law exist regarding the ability of a certain subsidiary to pay dividends to WesBanco. Approval is required if total dividends declared by a bank subsidiary, in any calendar year, exceeds net profits for that year combined with its retained net profits for the preceding two years. In determining to what extent to pay dividends, a bank subsidiary must also consider the effect of dividend payments on applicable risk-based capital and leverage ratio requirements. During the fourth quarter of 1998 and second quarter of 1999, Federal and State regulatory agencies granted approval to declare special dividends to WesBanco for the purpose of funding share repurchase plans. As of December 31, 1999 and 1998, WesBanco's banking subsidiaries, in aggregate, could not have declared any dividends to be paid to WesBanco without prior approval from regulatory agencies. Federal Reserve regulations require depository institutions to maintain cash reserves with the Federal Reserve Bank. The average amounts of required reserve balances were approximately $24,024 and $16,846 during 1999 and 1998, respectively. WesBanco is subject to various regulatory capital requirements (risk-based capital ratios) administered by Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Corporation's financial results. All banks are required to have core capital (Tier 1) of at least 4% of risk weighted assets, total capital of at least 8% of risk-weighted assets, and a minimum Tier 1 leverage ratio of 3% of adjusted quarterly average assets. Tier 1 capital consists principally of shareholders' equity, excluding unrealized gains and losses on securities available for sale, less goodwill and certain other intangibles. Total capital consists of Tier 1 capital plus the allowance for loan losses subject to limitation. The regulations also define well-capitalized levels of Tier 1, total capital, and Tier 1 leverage as 6%, 10%, and 5%, respectively. WesBanco and each of its banking subsidiaries are categorized as well-capitalized under the regulatory framework for prompt corrective action at December 31, 1999 and 1998. The following table summarizes risk-based capital amounts and ratios for WesBanco and its largest bank subsidiary: December 31, ------------------------------------ 1999 1998 ---------------- ------------------ WesBanco, Inc. Amount Ratio Amount Ratio - ----------------------------------------------------------------------------- Total Capital to Risk-Weighted Assets $ 275,113 17.0% $ 296,732 19.8% Tier 1 Capital to Risk-Weighted Assets 255,361 15.7 277,976 18.5 Tier 1 Leverage 255,361 11.3 277,976 12.5 WesBanco Bank Wheeling - ----------------------------------------------------------------------------- Total Capital to Risk-Weighted Assets $ 114,167 15.9% $ 112,789 16.1% Tier 1 Capital to Risk-Weighted Assets 105,420 14.7 104,289 14.9 Tier 1 Leverage 105,420 9.5 104,289 9.2 WesBanco Bank, Inc. (Proforma) (1) - ----------------------------------------------------------------------------- Total Capital to Risk-Weighted Assets $ 249,191 15.5% --- --- Tier 1 Capital to Risk-Weighted Assets 229,443 14.3 --- --- Tier 1 Leverage 229,443 10.3 --- --- ============================================================================= (1) Effective January 14, 2000, WesBanco consolidated its four bank affiliates and mortgage company affiliate into a single bank subsidiary, WesBanco Bank, Inc. 41 NOTE 15: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS Presented below are the condensed Balance Sheet, Statement of Income and Statement of Cash Flows for the Parent Company: BALANCE SHEET December 31, ----------------------- 1999 1998 - ----------------------------------------------------------------------------- ASSETS Cash and short-term investments $ 4,661 $ 2,299 Investment in subsidiaries (at equity in net assets) 250,250 239,845 Securities available for sale carried at market value 19,198 28,494 Dividends receivable 2,400 30,900 Other assets 523 211 - ----------------------------------------------------------------------------- Total Assets $ 277,032 $ 301,749 ============================================================================= LIABILITIES Borrowings $ 2,350 --- Dividends payable and other liabilities 5,018 $ 5,266 - ----------------------------------------------------------------------------- Total Liabilities 7,368 5,266 SHAREHOLDERS' EQUITY 269,664 296,483 - ----------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 277,032 $ 301,749 ============================================================================= STATEMENT OF INCOME For the years ended December 31, -------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Dividends from subsidiaries $ 21,133 $ 56,234 $ 21,000 Income from securities 748 831 761 Other income 618 4,674 135 - ----------------------------------------------------------------------------- Total Income 22,499 61,739 21,896 - ----------------------------------------------------------------------------- Total Expenses 1,474 1,372 1,058 - ----------------------------------------------------------------------------- Income before income tax provision (benefit) and undistributed net income of subsidiaries 21,025 60,367 20,838 Income tax provision (benefit) (404) 1,485 (285) - ----------------------------------------------------------------------------- Income before undistributed net income of subsidiaries 21,429 58,882 21,123 Undistributed net income (excess dividends) of subsidiaries 6,209 (30,569) 4,088 - ----------------------------------------------------------------------------- Net Income $ 27,638 $ 28,313 $ 25,211 ============================================================================= STATEMENT OF CASH FLOWS For the years ended December 31, ------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 27,638 $ 28,313 $ 25,211 Excess dividends (undistributed net income) of subsidiaries (6,209) 30,569 (4,088) (Increase) decrease in other assets 28,133 (24,142) (847) Other - net 3,128 (4,282) 347 - ----------------------------------------------------------------------------- Net cash provided by operating activities 52,690 30,458 20,623 - ----------------------------------------------------------------------------- Cash flows from investing activities: Securities available for sale: Proceeds from sales --- 4,287 3,874 Proceeds from maturities and calls 4,778 907 1,909 Payments for purchases (693) (11,981) (8,319) (Acquisitions and additional capitalization) or sale of subsidiaries (2,000) 3,747 (2,003) - ----------------------------------------------------------------------------- Net cash provided (used) by investing activities 2,085 (3,040) (4,539) - ----------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (payments) related to ESOP debt 350 (97) (316) Increase in borrowings 2,000 --- --- Purchases of treasury stock - net (37,011) (9,726) (5,950) Dividends paid (17,752) (15,401) (12,118) Other --- --- (19) - ----------------------------------------------------------------------------- Net cash used by financing activities (52,413) (25,224) (18,403) - ----------------------------------------------------------------------------- Net increase (decrease) in cash 2,362 2,194 (2,319) Cash and short-term investments at beginning of year 2,299 105 2,424 - ----------------------------------------------------------------------------- Cash and short-term investments at end of year $ 4,661 $ 2,299 $ 105 ============================================================================= 42 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF DIRECTORS WESBANCO, INC. We have audited the accompanying consolidated balance sheets of WesBanco, Inc. and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the management of WesBanco, Inc. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Commercial BancShares, Inc, which statements reflect total revenues constituting 21% in 1997 of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for Commercial BancShares, Inc., is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of WesBanco, Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP January 28, 2000 Pittsburgh, Pennsylvania 43 CONDENSED QUARTERLY STATEMENT OF INCOME - --------------------------------------- (in thousands, except per share amounts) 1999 Quarter ended -------------------------------------------------- Annual March 31 June 30 September 30 December 31 Total - ----------------------------------------------------------------------------- Interest income $38,407 $38,751 $39,063 $39,640 $155,861 Interest expense 16,882 17,050 17,342 17,957 69,231 - ----------------------------------------------------------------------------- Net interest income 21,525 21,701 21,721 21,683 86,630 Provision for loan losses 1,406 1,290 679 920 4,295 - ----------------------------------------------------------------------------- Net interest income after provision for loan losses 20,119 20,411 21,042 20,763 82,335 Other income 5,338 8,898 4,890 5,455 24,581 Other expenses 16,243 16,954 17,074 17,542 67,813 - ----------------------------------------------------------------------------- Income before income taxes 9,214 12,355 8,858 8,676 39,103 Provision for income taxes 2,397 4,335 2,706 2,027 11,465 - ----------------------------------------------------------------------------- Net Income $ 6,817 $ 8,020 $ 6,152 $ 6,649 $ 27,638 ============================================================================= Earnings per share $ 0.33 $ 0.40 $ 0.30 $ 0.34 $ 1.37 ============================================================================= 1998 Quarter ended -------------------------------------------------- Annual March 31 June 30 September 30 December 31 Total - ----------------------------------------------------------------------------- Interest income $40,690 $41,348 $40,748 $39,932 $162,718 Interest expense 18,595 19,038 18,672 17,620 73,925 - ----------------------------------------------------------------------------- Net interest income 22,095 22,310 22,076 22,312 88,793 Provision for loan losses 753 1,649 503 1,487 4,392 - ----------------------------------------------------------------------------- Net interest income after provision for loan losses 21,342 20,661 21,573 20,825 84,401 Other income 5,135 9,463 5,259 5,858 25,715 Other expenses 16,175 18,615 15,804 17,714 68,308 - ----------------------------------------------------------------------------- Income before income taxes 10,302 11,509 11,028 8,969 41,808 Provision for income taxes 3,260 3,720 3,602 2,913 13,495 - ----------------------------------------------------------------------------- Net Income $ 7,042 $ 7,789 $ 7,426 $ 6,056 $ 28,313 ============================================================================= Earnings per share $ 0.34 $ 0.37 $ 0.36 $ 0.29 $ 1.36 ============================================================================= 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL STATEMENTS Management's Discussion and Analysis represents an overview of the results of operations and financial condition of WesBanco, Inc. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto. Certain information in Management's Discussion and other statements contained in this report, which are not historical facts, may be forward looking statements that involve risks and uncertainties. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effect of changing regional and national economic conditions; changes in interest rates; credit risks of commercial, real estate, and consumer loan customers and their lending activities; changes in federal and state regulations; the presence in the Corporation's market area of competitors with greater financial resources than the Corporation; or other unanticipated external developments materially impacting the Corporation's operational and financial performance. TABLE 1. FIVE YEAR SELECTED FINANCIAL SUMMARY - ---------------------------------------------- (dollars in thousands, except per share amounts) December 31, ------------------------------------------------------------------- 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------- Per share information: Dividends $ 0.88 $ 0.84 $ 0.786 $ 0.72 $ 0.64 Book value at year end 13.63 14.35 13.97 13.17 12.33 Average common shares outstanding 20,229,524 20,867,193 20,461,742 19,855,791 19,824,740 Selected balance sheet information: Total securities $ 567,928 $ 680,550 $ 629,218 $ 600,330 $ 609,712 Net loans 1,503,694 1,353,920 1,321,640 1,305,766 1,140,950 Total assets 2,269,726 2,242,712 2,211,543 2,090,750 1,934,675 Total deposits 1,814,001 1,787,642 1,779,867 1,702,660 1,595,428 Total shareholders' equity 269,664 296,483 287,995 268,481 245,154 Selected ratios: Return on average assets 1.23% 1.26% 1.18% 1.31% 1.31% Return on average equity 9.85 9.55 8.99 10.48 10.53 Dividend payout 64.23 61.76 63.90 54.96 50.79 Average equity to average assets 12.47 13.16 13.15 12.47 12.48 Trust assets, market value at year end $ 3,087,610 $ 2,774,906 $ 2,099,821 $ 1,712,280 $ 1,450,257 For the years ended December 31, ------------------------------------------------------------------ Summary statement of income: 1999 1998 1997 1996 1995 - -------------------------------------------------------------------------------------------------------- Interest income $ 155,861 $ 162,718 $ 157,790 $ 144,383 $ 138,507 Interest expense 69,231 73,925 70,005 61,612 59,122 - -------------------------------------------------------------------------------------------------------- Net interest income 86,630 88,793 87,785 82,771 79,385 Provision for loan losses 4,295 4,392 5,574 4,795 3,206 - -------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 82,335 84,401 82,211 77,976 76,179 Other income 24,581 25,715 17,701 15,657 14,385 Other expenses 67,813 68,308 65,182 57,043 55,683 - -------------------------------------------------------------------------------------------------------- Income before income taxes 39,103 41,808 34,730 36,590 34,881 Provision for income taxes 11,465 13,495 9,519 10,648 9,832 - -------------------------------------------------------------------------------------------------------- Net Income $ 27,638 $ 28,313 $ 25,211 $ 25,942 $ 25,049 ======================================================================================================== Preferred stock dividends and accretion --- --- --- --- $ 164 Net Income applicable to common stock $ 27,638 $ 28,313 $ 25,211 $ 25,942 24,885 Earnings per share 1.37 1.36 1.23 1.31 1.26 ========================================================================================================
45 OVERVIEW WesBanco's financial performance for 1999 was highlighted by strong loan growth, decreases in both non-performing assets and net loan charge-offs, and excellent growth in trust fees and trust assets under administration. Earnings for 1999 were $27.6 million or $1.37 per share, compared to $28.3 million or $1.36 per share in 1998. For the same comparative period, core earnings per share, excluding goodwill amortization, net securities gains and non-recurring items increased 3% to $1.32 from $1.28. GRAPH: Earnings Per Share Core Earnings Per Share* ------------------ ------------------------ 1995 $1.26 1995 $1.24 1996 $1.31 1996 $1.30 1997 $1.23 1997 $1.25 1998 $1.36 1998 $1.28 1999 $1.37 1999 $1.32 * Excludes goodwill amortization, net securites gains and non-recurring items. Non-recurring items recorded in the Statement of Income included a pretax gain of $3.5 million on the sale of credit card receivables in 1999 and a pretax gain of $4.6 million on the sale of branch offices in 1998. Additionally, special charges of $1.6 million, associated with the March 31, 1998 acquisition of Commercial BancShares, were recorded in various non-interest expense categories during 1998. Significant events, which impact the comparative analysis in management's discussion, included the acquisitions of Heritage Bank of Harrison County, Inc. on April 30, 1999, Hunter Agency, Inc. on June 18, 1998, and Shawnee Bank, Inc., on June 30, 1997. Where material, the impact of these events will be discussed. Other uses of financial resources during the year included construction of two branch offices and several technology-related projects including the introduction of check imaging, an on-line teller system, internet trust information services, and Y2K readiness. RESULTS OF OPERATIONS NET INTEREST INCOME Taxable equivalent net interest income decreased $1.8 million or 2% in comparison to 1998. As shown in Table 2, the taxable equivalent net yield on earning assets declined during 1999 in comparison to 1998, reflecting a trend consistent with the banking industry during the year. Average earning assets decreased slightly during the same period, while interest bearing liabilities increased $30.8 million or 1.8%. Interest rates were stable during the first half of 1999, following a 100 basis point decrease in the federal funds rate in the fourth quarter of 1998. During the fourth quarter of 1998, WesBanco lowered its base lending rate to 7.75% from 8.50%. During the third and fourth quarters of 1999, as the Federal Reserve raised the federal funds rate, WesBanco adjusted its base lending rate upward to 8.50% through year end. Deposit rates generally followed the rise in lending rates. Taxable equivalent interest income decreased $6.5 million or 3.9% from 1998, resulting primarily from a decline in average loan yields. Declining yields in the real estate loan portfolio, reflecting refinancing activity and competitive pricing, coupled with the yield impact from the sale of the credit card portfolio were contributing factors to the overall reduction in loan yields. Partially offsetting these yield changes were loan growth factors, including an 18% increase in real estate loans and the purchase acquisition of Heritage Bank, which added approximately $24.1 million in loans during the second quarter of 1999. Total average loan growth, which approximated 6.4% for the year, was funded primarily through a reduction in taxable securities. Table 3 presents the impact of these changes in volume and rate on interest income. Interest expense decreased $4.7 million or 6.4% from 1998 resulting from a decrease in rates on average interest bearing deposits and short-term borrowings. Certificates of deposit rates decreased gradually in 1999 due to the repricing of short-term CD's to lower rates early in the year. Additionally, average rates on savings and NOW accounts decreased due to rate adjustments in October 1998 and June 1999, respectively. Average rates on short-term borrowings declined during the fourth quarter of 1998 in connection with a drop in the federal funds rate. Referring to Table 3, the decline in average deposit rates and their impact on interest expense during 1999 was partially offset by growth in interest bearing demand deposits, primarily through the prime rate money market product. Management expects continued loan and deposit rate pressure on net interest income during 2000. However, it is expected that rate pressure on net interest income will be offset by balance sheet growth. Higher rate deposit products, such as certificates of deposit and prime rate money market products are anticipated to serve as the primary sources of funds, while moderate loan growth coupled with an increase in securities will represent the primary uses of funds. 46 TABLE 2. AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS For the years ended December 31, ----------------------------------------------------------------------------------------------- 1999 1998 1997 -------------------------------- ------------------------------ ----------------------------- Average Average Average Average Average Average (dollars in thousands) Volume Interest Rate Volume Interest Rate Volume Interest Rate - ------------------------------------------------------------------------------------------------------------------------ ASSETS Total loans $1,441,172 $117,508 8.15% $1,354,680 $118,766 8.77% $1,336,469 $118,540 8.87% Securities: Taxable 436,501 27,269 6.25 502,379 31,205 6.21 420,825 27,045 6.43 Tax-exempt 204,697 10,182 4.97 191,363 9,592 5.01 178,597 9,121 5.11 - ------------------------------------------------------------------------------------------------------------------------ Total securities 641,198 37,451 5.84 693,742 40,797 5.88 599,422 36,166 6.03 Federal funds sold 17,905 902 5.04 58,474 3,155 5.40 55,320 3,084 5.57 - ------------------------------------------------------------------------------------------------------------------------ Total earning assets 2,100,275 $155,861 7.42% 2,106,896 $162,718 7.72% 1,991,211 $157,790 7.92% - ------------------------------------------------------------------------------------------------------------------------ Cash and due from banks 64,093 63,872 62,371 Other assets 86,960 82,854 77,774 - ------------------------------------------------------------------------------------------------------------------------ Total Assets $2,251,328 $2,253,622 $2,131,356 ======================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing demand deposits $ 576,420 $ 18,071 3.14% $ 494,278 $ 16,693 3.38% $ 393,480 $ 12,335 3.13% Savings deposits 297,759 5,936 1.99 327,342 7,852 2.40 367,583 9,520 2.59 Certificates of deposit 725,555 38,545 5.31 765,750 43,067 5.62 766,981 43,041 5.61 - ------------------------------------------------------------------------------------------------------------------------ Total interest bearing deposits 1,599,734 62,552 3.91 1,587,370 67,612 4.26 1,528,044 64,896 4.25 Federal funds purchased, repurchase agreements, and other borrowings 144,774 6,679 4.61 126,362 6,313 5.00 99,659 5,109 5.13 - ------------------------------------------------------------------------------------------------------------------------ Total interest bearing liabilities 1,744,508 $ 69,231 3.97% 1,713,732 $ 73,925 4.31% 1,627,703 $ 70,005 4.30% - ------------------------------------------------------------------------------------------------------------------------ Non-interest bearing demand deposits 207,520 221,304 202,671 Other liabilities 18,615 22,105 20,661 Shareholders' Equity 280,685 296,481 280,321 - ------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Shareholders' Equity $2,251,328 $2,253,622 $2,131,356 ======================================================================================================================== Net yield on earning assets $ 86,630 4.12% $ 88,793 4.21% $ 87,785 4.40% ======================================================================================================================== Taxable equivalent net yield on earning assets $ 92,113 4.39% $ 93,959 4.46% $ 92,696 4.66% ========================================================================================================================
Total loans are gross of allowance for loan losses, net of unearned income, and include loans held for sale. Nonaccrual loans were included in the average volume for the entire year. Loan fees included in interest on loans are not material. Average yields on securities available for sale have been calculated based on amortized cost. Taxable equivalent basis is calculated on tax-exempt securities using a tax rate of 35% for each year presented. TABLE 3.RATE VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE 1999 Compared to 1998 1998 Compared to 1997 ----------------------------- ------------------------------- Net Increase Net Increase (in thousands) Volume Rate (Decrease) Volume Rate (Decrease) - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in interest income: Total loans $ 7,330 $(8,588) $(1,258) $1,605 $(1,379) $ 226 Taxable securities (4,115) 179 (3,936) 5,092 (932) 4,160 Tax-exempt securities 664 (74) 590 642 (171) 471 Federal funds sold (2,056) (197) (2,253) 172 (101) 71 - ----------------------------------------------------------------------------------------------------------- Total interest income change 1,823 (8,680) (6,857) 7,511 (2,583) 4,928 - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in interest expense: Interest bearing demand deposits 2,635 (1,257) 1,378 3,348 1,010 4,358 Savings deposits (668) (1,248) (1,916) (996) (673) (1,669) Certificates of deposit (2,200) (2,322) (4,522) (69) 95 26 Federal funds purchased, repurchase agreements, and other borrowings 874 (508) 366 1,337 (132) 1,205 - ----------------------------------------------------------------------------------------------------------- Total interest expense change 641 (5,335) (4,694) 3,620 300 3,920 - ----------------------------------------------------------------------------------------------------------- Net interest income increase (decrease) $1,182 $(3,345) $(2,163) $3,891 $(2,883) $1,008 ===========================================================================================================
Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis. 47 OTHER INCOME Excluding non-recurring gains in 1999 and 1998 of $3.5 million and $4.6 million, respectively, and net securities gains, other income increased $1.0 million or 5.3% over 1998, due to increases in trust fees and insurance agency fees. The increases, however, were partially offset by a reduction in credit card activity fees due to the sale of the credit card portfolio in June 1999. Trust fees increased $1.5 million or 16.7% over 1998, a result of increases in the number of accounts under administration, the market value of trust assets and investment fees associated with the WesMark mutual fund products. The market value of trust assets at December 31, 1999 was $3.1 billion, an increase of $312.7 million or 11.3% from 1998. GRAPH: (in thousands) Trust Fees ----------------- 1995 $ 5,400 1996 $ 6,180 1997 $ 7,640 1998 $ 9,066 1999 $10,582 Activity charges and other income, excluding nonrecurring gains, decreased approximately $0.5 million or 4.5%, reflecting a reduction in credit card activity fees. Service charges on deposit accounts approximated 1998 levels, while insurance agency fees increased 119.2% from last year, reflecting a full year of activity from Hunter Agency, WesBanco's insurance affiliate which was acquired in June 1998. Net securities gains decreased $1.1 million or 74.9% in comparison to 1998. In 1999, securities gains decreased as rising interest rates limited sales opportunities. During 1998, securities gains increased due to sales of higher coupon callable Agency and mortgage-backed securities during the third and fourth quarters of 1998. During this period of declining interest rates, the Corporation was able to realize gains while minimizing the risk of reinvestment at lower yields. OTHER EXPENSES Other expenses, excluding special charges of $1.6 million from 1998 related to WesBanco's business combination with Commercial BancShares, increased $1.1 million or 1.6% over 1998, due to technology-related costs, the purchase acquisition of Heritage Bank in April 1999, and opening two branch offices. These factors were partially offset by reductions in activity expenses from the sale of the credit card portfolio in June 1999, the divestiture of Union Bank in June 1998, and improved operating efficiencies occurring primarily through the integration of Commercial BancShares. Technology-related projects during 1999, included continued expansion of the Corporation's wide area network, a check-imaging system implemented in the fourth quarter, development of on-line trust information services, and Y2K readiness. The cost of technology impacts several non-interest expense categories including human resources, service agreements, depreciation, consulting and training. Salaries and employee benefits, excluding the special charges from 1998, increased $0.7 million or 2.2% during 1999, reflecting normal salary adjustments and staffing of new branch facilities. These increasing factors were partially offset by staff reductions through internal restructuring, which included closing four branch offices associated with Commercial BancShares, integration of the recently acquired Heritage Bank into a WesBanco affiliate, and the consolidation of certain backoffice operations. Full-time equivalent employees were 1,096 as of December 31, 1999 compared to 1,093 as of December 31, 1998. Other operating expenses, excluding the special charges from 1998, approximated the prior year. During the year an increase in technology- related costs, such as communication, consulting and training, were offset by a reduction in credit card activity expenses, resulting from the sale of the credit card portfolio in June 1999. On January 14, 2000, WesBanco completed the consolidation of its four banks and mortgage company affiliate into a single bank subsidiary. The consolidation, which is expected to trim approximately $1.7 million in annual non-interest expenses by the end of 2000, is designed to reduce the number of administrative positions of separate entities, centralize backoffice operations and redirect more senior management time to servicing customers. INCOME TAXES Federal income tax expense decreased $2.0 million to $9.3 million in 1999 from $11.3 million in 1998, reflecting a decline in the Corporation's effective tax rate to 29% compared to 32% from the prior year. The decrease in the effective tax rate resulted from an increase in tax-free income coupled with settlement of deferred tax benefits associated with the business combination with Commercial BancShares. WesBanco's federal income tax returns for 1998 and 1997 were subject to an Internal Revenue Service examination during the first quarter of 1999. In its final report, the IRS disallowed certain tax deductions for acquisition- related expenses and disagrees with the timing of certain loan origination costs taken in those years. WesBanco has appealed the IRS ruling. Should WesBanco not prevail, approximately $1.7 million in Federal and State income tax payments would be accelerated. The projected impact on the results of operation of the Corporation approximates $0.1 million. WesBanco's West Virginia affiliates are subject to a corporate net income tax, which is based upon federal taxable income, with certain modifications. The statutory West Virginia tax rate was 9.0% for 1999 and 1998. West Virginia income tax included in the provision for income taxes was $2.1 million for 1999 compared to $2.2 million for 1998. WesBanco's offices located in Ohio are subject to an Ohio franchise tax, rather than a corporate income tax. Ohio franchise taxes are included in other operating expenses. 48 FINANCIAL CONDITION SECURITIES Securities decreased $112.6 million between December 31, 1999 and 1998, creating liquidity for the Corporation to fund loans and a stock repurchase program. As shown in Table 4, available for sale securities, at fair value, representing 62.4% of total securities at December 31, 1999, decreased $111.0 million from the same period in 1998, while held to maturity securities, representing the remaining 37.6% of total securities, decreased $1.6 million over the same corresponding periods. During 1999, securities available for sale decreased through sales, maturities, paydowns of Federal Agency and mortgage-backed securities and market value adjustments. At December 31, 1999 the average yield of the available for sale portfolio was 6.3%, with an average maturity of 5.5 years. For the same period, the held to maturity portfolio had an average yield of 7.0% and an average maturity of 6.1 years. Unrealized after-tax gains/losses on available for sale securities (market value adjustments) resulted in a $12.3 million market loss as of December 31, 1999 from a $6.0 million market gain as of December 31, 1998, reflecting an increase in interest rates during 1999. These market value adjustments represent temporary fluctuations resulting from changes in market rates in relation to average yields in the available for sale portfolio. WesBanco can adjust the volatility of the market value adjustment by managing both the volume of securities classified as available for sale and average maturities. If securities are held to their maturity dates, no gain or loss would be realized. Securities represent a source of liquidity for the Corporation. During 1999, securities with a total carrying value of $179.6 million either matured or were called. Available for sale securities of $47.8 million were sold during 1999. During 2000, WesBanco expects loan growth to moderate and plans to manage its liquidity position using new deposit growth as a primary source of funds. TABLE 4. COMPOSITION OF SECURITIES December 31, ----------------------------------- (in thousands) 1999 1998 1997 - ----------------------------------------------------------------------------------------- Securities held to maturity (at amortized cost): U.S. Treasury and Federal Agency securities $ 13,346 $ 41,961 $ 79,220 Obligations of states and political subdivisions 182,005 169,552 164,684 Other debt securities 17,902 3,332 2,304 - ----------------------------------------------------------------------------------------- Total securities held to maturity 213,253 214,845 246,208 - ----------------------------------------------------------------------------------------- Securities available for sale (at market): U.S. Treasury and Federal Agency securities 189,593 276,260 247,042 Obligations of states and political subdivisions 18,298 24,712 20,638 Mortgage-backed and other securities 146,784 164,733 115,330 - ----------------------------------------------------------------------------------------- Total securities available for sale 354,675 465,705 383,010 - ----------------------------------------------------------------------------------------- Total securities $567,928 $680,550 $629,218 =========================================================================================
Other debt securities include Federal Reserve Bank Stock and Federal Home Loan Bank securities. Other securities, classified as available for sale, include equity interests in business corporations. There are no individual securities included in obligations of states and political subdivisions or other securities, which individually or in the aggregate exceed ten percent of shareholders' equity. 49 TABLE 5. MATURITY DISTRIBUTION AND YIELD ANALYSIS OF SECURITIES December 31, 1999 ---------------------------------------------------------------------------- After One But After Five But Within One Year Within Five Years Within Ten Years After Ten Years ---------------- ----------------- ---------------- --------------- (dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield - -------------------------------------------------------------------------------------------------------------- Securities held to maturity: U.S. Treasury and Federal agency securities $ 8,999 6.11% $ 1,504 6.37% $ 2,843 7.25% --- --- Obligations of states and political subdivisions 19,151 7.10 54,406 7.16 57,161 7.17 $ 51,287 6.65% Other debt securities --- --- --- --- --- --- 17,902 7.59 - -------------------------------------------------------------------------------------------------------------- Total held to maturity 28,150 6.78 55,910 7.14 60,004 7.17 69,189 6.89 - -------------------------------------------------------------------------------------------------------------- Securities available for sale: U.S. Treasury and Federal Agency securities 66,889 6.17 52,229 6.37 77,170 6.61 --- --- Obligations of states and political subdivisions 4,662 5.93 10,034 6.04 2,910 6.46 876 10.12 Mortgage-backed and other securities 4,488 5.51 44,868 6.31 96,661 6.06 6,154 2.42 - -------------------------------------------------------------------------------------------------------------- Total available for sale 76,039 6.12 107,131 6.31 176,741 6.31 7,030 3.38 - -------------------------------------------------------------------------------------------------------------- Total securities $104,189 6.29% $163,041 6.60% $236,745 6.53% $76,219 6.57% ==============================================================================================================
Yields are calculated using a weighted average yield to maturity. Average yields on securities available for sale have been calculated based on amortized cost. Average yields on obligations of states and political subdivisions have been calculated on a taxable equivalent basis. Other debt securities include securities with no stated maturity date. Mortgage-backed securities, which have prepayment provisions, are assigned to maturity categories based on estimated average lives. LOANS Loan Portfolio: As noted in Table 6, loans at December 31, 1999 increased $150.2 million or 10.9% compared to December 31, 1998, reflecting growth in all loan types, with the largest gains in residential mortgages. This growth reflected a continuation of increased loan activity which began in 1998 and was aided by the acquisition of Heritage Bank of Harrison County in the second quarter of 1999, which added approximately $24.1 million to loans outstanding. GRAPH: (in millions) Total Loans --------------- 1995 $1,166 1996 $1,329 1997 $1,343 1998 $1,373 1999 $1,524 Commercial loans increased $37.2 million or 7.7%, personal loans increased $16.3 million or 5.2%, and real estate loans increased $110.5 million or 21.2% compared to the prior year. The most significant growth came from real estate loans, which continued to be driven primarily by attractive pricing of residential mortgage loan products. Growth in commercial loans was largely reflective of the continuing strength of the economy in general. Increases in personal loans reflected consumers' ongoing confidence that the economy will remain strong, net of a reduction of approximately $15.4 million from the sale of credit cards during the second quarter of 1999. WesBanco's mortgage banking division originates residential mortgage loans and sells many of those loans to the secondary market. For 1999, the mortgage division loan originations decreased 17.9% from 1998 to approximately $82.1 million. TABLE 6. COMPOSITION OF LOANS December 31, ---------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 -------------- ------------- ------------- -------------- --------------- % of % of % of % of % of (dollars in thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans - ------------------------------------------------------------------------------------------------------------- Loans: Commercial $ 521,450 34% $ 484,269 35% $ 438,055 33% $ 490,428 37% $ 438,838 38% Real estate - construction 31,742 2 46,033 3 37,743 2 35,910 2 27,725 2 Real estate-residential 630,939 41 520,393 38 521,222 39 412,324 32 359,445 32 Personal 329,763 22 313,490 23 334,671 25 389,383 29 340,355 28 Loans held for sale 9,753 1 9,280 1 11,705 1 983 -- --- -- - ------------------------------------------------------------------------------------------------------------- Total loans $1,523,647 100% $1,373,465 100% $1,343,396 100% $1,329,028 100% $1,166,363 100% - -------------------------------------------------------------------------------------------------------------
Loans are presented gross of allowance for loan losses and unearned income on personal loans. 50 LOANS (Continued) Referring to Table 6, residential real estate loans, at 41% of total loans, comprise the single largest loan type in the portfolio. This category consists generally of conventional adjustable and fixed rate residential mortgages with terms of less than 15 years, and home equity loans. The risks associated with real estate lending are principally influenced by real property values, which are affected by the general economic conditions. Most of the real estate loans in the portfolio are secured by properties located within WesBanco's market areas. Except for speculative development by builders with long-standing relationships, real estate-construction loans are only made when WesBanco also commits to the permanent financing of the project or has a takeout commitment from another lender for the permanent loan. Loans held for sale consist of residential mortgage loans and are valued at the lower of aggregate cost or market value. Personal loans represent approximately 22% of total loans and consist primarily of indirect vehicle loans originated through automobile dealers and other types of secured and unsecured consumer purpose loans. Credit cards were also included in this category in prior years until the credit card portfolio was sold in 1999. Personal loans are a smaller balance, homogeneous group of loans which are not concentrated in a specific market area. Risks in this lending category include the possibility of a general economic downturn which may cause an increase in credit losses. The loan loss policy for consumer installment lending requires a charge-off if the loan reaches 120 delinquency days. Any payments subsequent to charge-off are reflected as recoveries. Commercial loans, including commercial loans secured by real estate, represent 34% of total loans. These loans are not concentrated in any single industry, but reflect a broad range of businesses located primarily within WesBanco's market areas. Commercial real estate loans include both loans that are secured by properties used in the operation of the borrower's business as well as loans that are secured by income producing rental properties. The credit risk associated with commercial lending is principally influenced by general economic conditions and the resulting impact on the borrower's operations. The credit risk associated with commercial real estate lending is also influenced by real property values, as well as the unique or single purpose nature of some properties. TABLE 7. MATURITY DISTRIBUTION OF LOANS December 31, 1999 -------------------------------------- After One In One Year through After (in thousands) Year or Less Five Years Five Years - ------------------------------------------------------------------------- Commercial $169,738 $ 74,874 $ 90,758 Commercial real estate 64,504 28,966 92,610 Real estate - construction 13,873 3,739 14,130 - ------------------------------------------------------------------------- Total $248,115 $107,579 $197,498 ========================================================================= Fixed rates $ 41,111 $ 74,005 $ 73,982 Variable rates 207,004 33,574 123,516 - ------------------------------------------------------------------------- Total $248,115 $107,579 $197,498 ========================================================================= Excludes personal, residential mortgage and loans held for sale WesBanco follows lending policies which establish, among other things, criteria for determining the repayment capacity of the borrower, requirements for down payments and current market appraisals or other valuations of the collateral when the loans are originated. The majority of loans are either secured by real property or personal property. WesBanco generally recognizes interest income on the accrual basis, except for certain loans which are placed on a nonaccrual status, when in the opinion of management, doubt exists as to collectability. All banks must conform to the policies of the Board of Governors of the Federal Reserve System and the Office of the Comptroller of Currency which state that banks may not accrue interest on any loan on which either the principal or interest is past due 90 days or more unless the loan is both well secured and in the process of collection. When a loan is placed on a nonaccrual status, interest income may be recognized as cash payments are received. Non-performing Assets: Non-performing assets consist of loans classified as impaired (nonaccrual, renegotiated and certain loans internally classified as substandard or doubtful) and other real estate owned. As noted in Table 8, at December 31, 1999, non-performing assets decreased 13.9% to $17.2 million or 1.1% of total loans. This decrease is largely the result of a reduction of $6.3 million in non-accrual loans, while other real estate owned remained virtually unchanged. This improvement in non-performing loans reflects WesBanco's continuing focus on maintaining credit quality while also growing the loan portfolio. Non-performing loans are generally secured by collateral believed to have adequate market values to protect against significant losses. WesBanco continually monitors its non-performing assets for deterioration in collateral values. GRAPH: Non-Performing Assets to Total Loans --------------------- 1995 1.31% 1996 1.33% 1997 1.50% 1998 1.45% 1999 1.13% 51 TABLE 8. NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE December 31, -------------------------------------------- (dollars in thousands) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------- Nonaccrual: Personal $ 36 $ 128 $ 105 $ 90 $ 171 Commercial 1,199 8,687 6,309 4,135 4,099 Real estate 2,923 1,673 1,999 945 1,750 - ----------------------------------------------------------------------------- Total 4,158 10,488 8,413 5,170 6,020 - ----------------------------------------------------------------------------- Renegotiated: Personal 3 --- 46 --- 22 Commercial 783 --- 1,307 1,527 2,361 Real estate 27 695 1,070 3,010 70 - ----------------------------------------------------------------------------- Total 813 695 2,423 4,537 2,453 - ----------------------------------------------------------------------------- Other classified loans: Commercial 8,706 5,285 3,765 3,057 341 Real estate --- --- --- 414 697 - ----------------------------------------------------------------------------- Total 8,706 5,285 3,765 3,471 1,038 - ----------------------------------------------------------------------------- Total non-performing loans 13,677 16,468 14,601 13,178 9,511 Other real estate owned 3,512 3,486 5,620 4,511 5,789 - ----------------------------------------------------------------------------- Total non-performing assets $17,189 $19,954 $20,221 $17,689 $15,300 ============================================================================= Percentage of non-performing assets to loans outstanding 1.1% 1.5% 1.5% 1.3% 1.3% - ----------------------------------------------------------------------------- Past due 90 days or more: Personal $ 1,219 $ 1,184 $ 1,611 $ 1,580 $ 934 Commercial 3,176 4,317 1,121 1,381 1,199 Real estate 1,637 1,453 599 1,395 1,891 - ----------------------------------------------------------------------------- Total past due 90 day or more $ 6,032 $ 6,954 $ 3,331 $ 4,356 $ 4,024 ============================================================================= Other classified loans include loans internally classified as doubtful and substandard (as defined by banking regulations) that meet the definition of impaired loans. Allowance for Loan Losses: The allowance for loan losses is available to absorb probable charge-offs. The allowance is reduced by losses, net of recoveries, and increased by charging a provision to operations to maintain the allowance at a level determined appropriate by management. There can be no assurance that WesBanco will not sustain credit losses in future periods, which could be substantial in relation to the size of the allowance. As shown in Table 9, at December 31, 1999, the allowance for loan losses to total loans was 1.30%, down from 1.39% as of December 31, 1998. Net charge-offs for 1999 were $3.4 million down from $5.5 million for 1998. The decrease in net charge-offs reflects the continuing improvement in the credit quality for all types of loans, as well as increased efforts to recover personal loans charged off in prior periods. The provision for loan losses was $4.3 million in 1999 compared to $4.4 million in 1998. Although net charge-offs decreased in 1999, additional growth in the loan portfolio held the provision at approximately the same level as 1998. The provision is based on management's periodic 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. 52 TABLE 9. ALLOWANCE FOR LOAN LOSSES For the years ended December 31, ------------------------------------------------ (dollars in thousands) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------ Beginning balance - Allowance for loan losses $19,098 $20,261 $19,102 $16,955 $16,390 Allowance for loan losses of Acquired (sold) banks-net 192 (37) 269 707 --- Allowance for loan losses Allocated to (sold) credit cards (450) --- --- --- --- Provision for loan losses 4,295 4,392 5,574 4,795 3,206 Charge-offs: Commercial 2,024 1,933 1,016 920 1,411 Real estate 204 515 254 231 246 Personal 2,490 3,952 4,523 2,807 1,873 - ------------------------------------------------------------------------------ Total charge-offs 4,718 6,400 5,793 3,958 3,530 - ------------------------------------------------------------------------------ Recoveries: Commercial 479 522 314 113 409 Real estate 64 39 90 71 110 Personal 792 321 705 419 370 - ------------------------------------------------------------------------------ Total recoveries 1,335 882 1,109 603 889 - ------------------------------------------------------------------------------ Net charge-offs 3,383 5,518 4,684 3,355 2,641 - ------------------------------------------------------------------------------ Ending balance - Allowance for loan losses $19,752 $19,098 $20,261 $19,102 $16,955 ============================================================================== Ratio of net charged-offs to average total loans outstanding for the period .23% .41% .35% .28% .24% ============================================================================== Ratio of the allowance for loan losses to total loans outstanding at the end of the period 1.30% 1.39% 1.51% 1.44% 1.46% ============================================================================== The adequacy of the allowance for loan losses is evaluated quarterly. Specific reserves are established when warranted for commercial loans greater than $100,000. The determination of specific reserves takes into consideration the anticipated future cash flows available to pay the loan and/or the estimated realizable value of the collateral pledged and other secondary repayment sources, if any. For consumer loans and all other commercial loans not specifically reserved, management uses historical net charge-off experience relative to loans outstanding to predict future losses. Management further allocates against the reserve, when appropriate, based on economic conditions, changes in underwriting standards or practices, delinquency and other trends in the portfolio, specific industry conditions, the results of recent internal loan reviews or regulatory examinations, and other relevant factors that impact the loan portfolio. Changes in the allocation of the allowance among the various loan types, as noted in Table 10, are primarily the result of higher specific reserves on certain commercial loans, lower net charge-offs in personal loans, growth in real estate loans and the sale of the credit card portfolio. TABLE 10. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES December 31, --------------------------------------------------- (dollars in thousands) 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------ Commercial and unallocated $15,792 $13,929 $13,740 $13,963 $13,616 Real estate - residential 749 611 634 470 781 Personal 3,211 4,558 5,887 4,669 2,558 - ------------------------------------------------------------------------------ Total $19,752 $19,098 $20,261 $19,102 $16,955 ============================================================================== No allocations were made for real estate-construction loans. Management expects loan growth to slow in the year 2000 due to several factors. Recent increases in interest rates by the Federal Reserve Board are expected to result in a softening of housing demand, which impacts residential mortgage lending and consumer spending in general. Similarly, consumers are unlikely to refinance mortgages during periods of rising interest rates. A significant portion of WesBanco's growth in real estate loans in 1999 was attributable to refinancings while interest rates were more attractive to the consumer. If the Federal Reserve continues to raise interest rates during 2000, there will likely be a decrease in commercial lending opportunities. Continual increases in interest rates may place additional pressure on corporate profits. As a result, WesBanco's focus on credit quality could cause a reduction in commercial lending. 53 Management expects to reduce non-performing assets in 2000. However, rising interest rates and a slowing of the economy may impact the ability of both consumer and commercial borrowers' to service debt. Management will continue to monitor the loan portfolio for possible deterioration in credit quality. Loan Risk Elements and Credit Quality: WesBanco extends credit to individuals for various consumer purposes, which include residential mortgage loans, construction loans, home equity lines of credit, installment loans to purchase automobiles, and other personal loans. WesBanco also extends credit to businesses of all types to purchase assets, including commercial real estate, or to finance expansion, as well as revolving lines of credit to finance operations and short-term loans for other purposes. Credit risk, that is the risk that a borrower will default on a loan, is inherent in all lending activities. WesBanco's primary goal in managing credit risk is to minimize the impact of default by an individual borrower or group of borrowers. Credit risk is managed both through the initial underwriting process as well as through ongoing monitoring and administration of the loan portfolio. WesBanco has established standard credit policies to provide for consistent underwriting of loans as well as procedures to assist in maintaining and monitoring the overall quality of its loan portfolio. Credit policy establishes: (1) underwriting guidelines for all types of loans; (2) lending authorities; (3) exposure limits to individual borrowers or groups of borrowers, as well as loan type, industry, and geographic concentrations; and (4) loan portfolio administration procedures. Underwriting guidelines require an appropriate evaluation of the creditworthiness of each borrower; the adequacy of collateral, if any, to secure the loan; and other factors unique to each loan that may increase or mitigate its risks. Individual lending officers approve loans up to predetermined limits depending on the type of loan. Loans above individual officers' lending authorities require approval by a loan committee or the Board of Directors, depending on the amount of credit exposure to the particular borrower. These approval requirements also apply to renewals and extensions of loans. Exceptions to credit policy are permissible, but only after careful evaluation of the risks associated with each exception and the factors that mitigate those risks. Subsequent to loan origination, the process used to measure and monitor the level of credit risk is dependent upon the type of loan. Consumer loans, including residential mortgages, are generally smaller in amount and spread over a larger number of diverse individual borrowers. Accordingly, credit risk in the consumer portfolio can generally be managed effectively by monitoring the level and trend of delinquent loans, and economic conditions that may impact a borrower or group of borrowers, or a particular geographic territory. Conversely, commercial loans can be for substantially larger amounts and the potential for loss as a result of default by any one borrower can be significant. Therefore, credit risk in the commercial portfolio also requires periodic review of large borrowing relationships and a loan grading system to help management identify adverse trends and evaluate the quality of the portfolio. WesBanco maintains a loan grading system that categorizes commercial loans according to their level of credit risk. All commercial loans are assigned a grade at their inception, and grades are regularly reviewed and evaluated. When the risk of a loan increases beyond that which is considered acceptable in the assigned grade, its grade is adjusted to reflect the change in its risk. Classified loans are those that exhibit clear and defined weaknesses that may jeopardize their recoverability. Loans are classified as "substandard" when they are no longer adequately protected by the sound net worth and paying capacity of the borrower or of the collateral pledged. Substandard loans are characterized by the distinct possibility that the bank may sustain some loss. Loans are classified as "doubtful" when the risk that a loss may occur has increased, or at least a portion of the loan may require charge-off if liquidated at present. Both substandard and doubtful loans include some loans that are delinquent or on nonaccrual status and may also include loans whose terms have been renegotiated. The loan grading process provides management with an effective early warning system of potential problems and also facilitates evaluating the adequacy of the allowance for loan losses. WesBanco also maintains an independent, formal and ongoing internal loan review program, which concentrates principally on commercial loans, to evaluate the effectiveness of WesBanco's credit risk management process. The loan review process further identifies areas that require management's attention, evaluates the adequacy of loan administration and identifies areas that require management's attention, evaluates the adequacy of loan administration and documentation, helps to ensure compliance with loan policies, and validates the reliability of the loan grading system. The loan review function reports to the Audit/Loan Review Committee of the Board of Directors. There are no significant loans made to customers outside WesBanco's general market areas. Borrowers located outside of WesBanco's market areas typically also have significant other non-lending relationships with the bank. At times, in order to maintain loan volumes, loans are purchased from correspondent banks. These loans aggregate less than $7.1 million as of December 31, 1999. WesBanco conducts its own customary credit analysis before a determination is made to purchase loans from correspondent banks. There were no loan concentrations in excess of 10% of total loans. Management's review of the loan portfolio has not indicated any material amount of loans, not disclosed in the accompanying tables and 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. 54 DEPOSITS AND OTHER BORROWINGS Deposits increased $26.4 million or 1.5% between December 31, 1999 and 1998. Deposit growth resulted from the purchase acquisition of Heritage Bank during the second quarter of 1999. During 1999, deposit growth was limited primarily to the interest bearing demand products. Both savings and certificates of deposit reflected steady declines through much of the year, before a fourth quarter increase in certificates of deposit. The declining balances resulted from the competition for funds, which continues to intensify among banks and non-banks. As illustrated in Table 2, the Corporation experienced decreases in average certificates of deposit of $40.2 million or 5.2% and average savings of $29.6 million or 9.0%, while average interest bearing demand, which includes prime rate money markets, increased $82.1 million or 16.6% in comparison to 1998. The acquisition of Heritage Bank added $19.4 million in average deposits for 1999. Other borrowings, representing an additional source of funds to deposits, increased 28.8% between December 31, 1999 and 1998. The increase in other borrowings consisted primarily of growth in repurchase agreements and Federal Home Loan Bank borrowings. FHLB borrowings increased to $35.1 million compared to $18.8 million at December 31, 1999 and 1998, respectively. In accordance with WesBanco's asset/liability management and liquidity strategy, which provides for balancing average deposit and loan growth, management expects additional emphasis on generating deposits during 2000. TABLE 11. MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 OR MORE December 31, -------------------------- (in thousands) 1999 1998 - --------------------------------------------------------------------------- Maturity: Under three months $ 19,752 $ 19,983 Three to six months 23,334 19,120 Six to twelve months 36,757 33,470 Over twelve months 48,542 52,920 - --------------------------------------------------------------------------- Total $128,385 $125,493 =========================================================================== Interest expense on certificates of deposit of $100,000 or more was approximately $7,206 in 1999, $7,921 in 1998, and $7,512 in 1997. CAPITAL ADEQUACY Shareholders' equity decreased to $269.7 million at December 31, 1999 from $296.5 million at December 31, 1998 due to purchases of treasury stock and changes in the market value adjustment on securities available for sale. These reductions to equity were partially offset by the retention of earnings and treasury stock used in the acquisition of Heritage Bank. The increase in treasury stock relates to activity in corporate stock repurchase plans. Treasury shares purchased through the corporate stock plans totaled 1,386,279 for 1999. The Corporation has approximately 183,011 shares remaining to be purchased in the current one million share repurchase program. The shares are being purchased for general corporate purposes, which may include potential acquisitions, dividend reinvestment and employee benefit plans. Timing, price and quantity of purchases are at the discretion of the Corporation and the plan may be discontinued or suspended at any time. Treasury shares totaling 422,916 were used during the year in the purchase acquisition of Heritage Bank. Market value adjustments on securities available for sale, which represent temporary fluctuations resulting from changes in market rates, decreased to a net unrealized loss of $7.5 million at December 31, 1999 compared to a $3.6 million net unrealized gain at December 31, 1998. The decrease in the market value of securities available for sale reflects the increase in interest rates during 1999. Interest rates for 1998 were at a comparatively lower level throughout most of the year. Ending primary capital to assets for 1999 was 12.6% compared to 14.0% for 1998, reflecting WesBanco's continued strong capital position. The relatively high level of capital coupled with strong earnings has enabled WesBanco to continue its steady increase in dividends declared per share. Effective with the first quarter of 1999 dividend, WesBanco increased its quarterly dividend per share 4.8% to $0.22 from $0.21 in the first quarter of 1998. On an annualized basis, dividends increased to $0.88 per share compared to $0.84 per share. The current dividend increase represented the fourteenth consecutive year of dividend increases for WesBanco. Dividend payout ratios over the last five years reflect the growth in dividends, increasing to 64.2% in 1999 from 50.8% in 1995. WesBanco is subject to risk-based capital guidelines that measure capital relative to risk-weighted assets and off-balance sheet instruments. WesBanco, and its banking subsidiaries, maintain Tier 1, Total Capital and Leverage ratios well above minimum regulatory levels. See Note 14 of the Consolidated Financial Statements for more information on capital amounts, ratios and minimum regulatory requirements. 55 INTEREST RATE MANAGEMENT AND LIQUIDITY Asset/Liability Management: Interest rate management measures and monitors the sensitivity of net interest earnings to changes in the level of interest rates. As interest rates change in the market, rates earned on interest rate sensitive assets and rates paid on interest rate sensitive liabilities do not necessarily move concurrently. Differing rate sensitivities may arise because fixed rate assets and liabilities may not have the same maturities or because variable rate assets and liabilities differ in the timing and/or the percentage of rate changes. WesBanco reviews its interest rate sensitivity on a periodic basis. This review is performed by analyzing the maturity and repricing relationships between rate sensitive assets and rate sensitive liabilities (Table 12) at a specific point in time and by using a simulation model to estimate the impact on net interest income of changing interest rates over a twelve month projection period. TABLE 12. INTEREST RATE SENSITIVITY ANALYSIS December 31, 1999 ------------------------------------------------------------------- Under Three Six Nine Over Three To Six to Nine Months to One (in thousands) Months Months Months One Year Year Total - -------------------------------------------------------------------------------------------------------- RATE SENSITIVE ASSETS Due from banks/interest bearing $ 4,653 --- --- --- --- $ 4,653 Federal funds sold 9,535 --- --- --- --- 9,535 Securities 28,813 $ 20,380 $ 29,572 $ 25,424 $ 476,005 580,194 Loans 303,868 90,401 25,424 144,752 959,001 1,523,446 - -------------------------------------------------------------------------------------------------------- Total rate sensitive assets 346,869 110,781 54,996 170,176 1,435,006 2,117,828 - -------------------------------------------------------------------------------------------------------- RATE SENSITIVE LIABILITIES Money market deposit accounts 285,281 --- --- --- 65,904 351,185 Savings and NOW accounts 508,350 --- --- --- --- 508,350 Certificates of deposit 149,345 114,739 72,056 120,324 281,428 737,892 Other borrowings 152,577 3,864 2,488 249 14,275 173,453 - -------------------------------------------------------------------------------------------------------- Total rate sensitive liabilities 1,095,553 118,603 74,544 120,573 361,607 1,770,880 - -------------------------------------------------------------------------------------------------------- Net interest sensitivity $ (748,684) $ (7,822) $ (19,548) $ 49,603 $1,073,399 $ 346,948 ======================================================================================================== Cumulative net interest sensitivity $ (748,684) $(756,506) $(776,054) $(726,451) $ 346,948 --- ========================================================================================================
Securities are categorized above by expected maturity at amortized cost. As shown in Table 12, the liability sensitive position in the under three month time period is primarily a result of $508.4 million in savings and NOW account balances. Interest rates on these deposit instruments are subject to periodic adjustment at management's discretion. Beginning in 1997, WesBanco experienced an increase in its short-term liability sensitive position due to growth in its prime rate money market product. In an effort to manage this additional interest sensitivity, the Corporation has entered into various interest rate swap agreements with notional values approximating $65.9 million. The swap agreements effectively fixed the interest rate on a portion of the money market deposits for an average life of 5.3 years. Net interest sensitivity, the difference between rate sensitive assets and liabilities is a relatively simple analysis of the Corporation's Consolidated Balance Sheet, but does not quantify the magnitude of the interest rate risk in terms of changes in net interest income as interest rates change. Therefore, management also considers the results of net interest income simulations using a variety of interest rate changes. Key assumptions used in income simulation include loan and deposit growth, pricing, interest sensitivity, and the level of interest rate or balance changes on deposit products with no stated maturity such as savings and NOW deposits. These assumptions have been developed through a combination of historical analysis and future anticipated pricing. Based on the results of the income simulation, at December 31, 1999, the Corporation would expect a decrease in net interest income of $3.5 million or 4.0% and an increase of $1.8 million or 2.1% from an immediate and sustained 200 basis point increase and decrease, respectively, in interest rates over a twelve month projection period. Liquidity Management: The Corporation manages its liquidity position to ensure that sufficient funds are available to meet customer needs for borrowing and deposit withdrawals as well as the operating cash needs of the Corporation. The Corporation's most stable source of liquidity is its core deposit base. In addition, the Corporation utilizes advances from the Federal Home Loan Bank as an additional funding source. The principal source of asset-funded liquidity is the securities portfolio. Securities liquidity include securities classified as available for sale, which represent 62.4% and 68.4% of total securities at December 31, 1999 and 1998. Also included are securities classified as held to maturity that are expected to mature within a year, totaling $28.2 million at December 31, 1999 and $46.7 million at December 31, 1998. Other sources of asset-funded liquidity include cash balances and federal funds sold. As of December 31, 1999, these two short-term funding sources 56 totaled $81.4 million or 3.6% of total assets as compared to $106.2 million or 4.7% of total assets as of December 31, 1998. The decrease in asset liquidity resulted from the use of these balances to fund strong loan growth and stock repurchase programs during the year. As of December 31, 1999 the Corporation had outstanding commitments to extend credit in the ordinary course of business approximating $226.3 million. On an historical basis only a small portion of these commitments result in expended funds. The Corporation has planned additions to fixed assets of approximately $1.0 million during 2000. COMPARISON OF 1998 VERSUS 1997 - ----------------------------------------------------------------------------- Net income increased 12.3% to $28.3 million or $1.36 per share for 1998 compared to $25.2 million or $1.23 per share for 1997, reflecting a reduction in the provision for loan losses, an increase in trust fees, net securities gains and net non-recurring income of $3.0 million. These improvements to earnings were partially offset by an increase in non-interest expenses and an increase in the Corporation's effective tax rate resulting from an alternative minimum tax credit which was fully utilized during 1997. Taxable equivalent net interest income increased $1.3 million or 1.4% in comparison to 1997, as the Corporation experienced strong balance sheet growth, driven by an increase in average interest bearing liabilities of $86.0 million or 5.3% in comparison to 1997. The increase in deposits, which occurred early in the year, funded an increase in securities and funded third and fourth quarter loan growth. Referring to Table 2, the majority of liability growth occurred in prime rate money market accounts (included in average interest bearing demand deposits) and repurchase agreements. Average earning assets increased $115.7 million or 5.8% in comparison to 1997. Both earning assets and interest bearing liabilities were impacted by the sale of Union Bank on June 30, 1998, which reported total assets, loans and deposits at the date of sale of $46.9 million, $22.4 million and $39.3 million, respectively. In a period of declining interest rates, the taxable equivalent net yield on earning assets decreased to 4.5% from 4.7% in 1997, reflecting the narrowing spread between loan and deposit products, a trend that was prevalent in the banking industry. Table 3 presents the impact of the declining net yield on earning assets on net interest income as average volume increases on the balance sheet were mostly offset by average rate and yield adjustments. The provision for loan losses decreased to $4.4 million from $5.6 million in 1997. Although WesBanco experienced an increase in net charge-offs during the year due to a rise in personal bankruptcies in WesBanco's market area, the allowance for loan losses, as well as the provision were lowered reflecting management's evaluation of the loan portfolio. Other income, excluding net securities gains and non-recurring income, increased $2.4 million or 14.1% over 1997. The increase resulted from increases in trust fees of $1.4 million or 18.7% and activity fees of $1.0 million or 10.4%. Net securities gains increased $1.0 million or 192.6% in comparison to 1997, as the Corporation was able to realize gains in a period of declining interest rates. Other expenses, excluding special charges related to the business combination with Commercial BancShares, increased $1.5 million or 2.4% over 1997. The increase resulted primarily from the cost of technology projects, including expansion of WesBanco's computer network and the installation of a new Trust operating system. Technology enhancements affected other expense categories through overtime, equipment, consulting and training costs. These increasing factors were partially offset by the sale of Union Bank coupled with improved operating efficiencies related to the integration of Commerical BancShares. BUSINESS COMBINATIONS AND DIVESTITURE During the three year period ended December 31, 1999, WesBanco completed the following business combinations and divestiture: Heritage Bank of Harrison County, Inc. - On April 30, 1999 WesBanco completed the purchase acquisition of Heritage Bank of Harrison County, Inc. Heritage reported total assets as of the acquisition date of $33.1 million. Union Bank of Tyler County - On June 30, 1998, WesBanco divested of the Union Bank of Tyler County in order to fulfill a regulatory condition. Union became affiliated with WesBanco as a result of WesBanco's business combination with Commercial. Union reported total assets of $46.9 million as of the sale date. Hunter Agency, Inc. - On June 18, 1998, WesBanco completed its purchase acquisition of Hunter Agency, located in Shinnston, WV, with and into a WesBanco affiliated company. During the third quarter of 1998, Hunter Insurance Agency expanded its service area to Morgantown, WV, through the purchase acquisition of Simons Insurance Agency. Hunter Agency was recently renamed WesBanco Insurance Services. Commercial BancShares, Incorporated - On March 31, 1998 WesBanco completed its business combination with Commercial BancShares, Incorporated, located in Parkersburg, WV. The transaction was accounted for as a pooling of interests and included Commercial's March 9, 1998 acquisition of Gateway Bancshares, Inc. Commercial and Gateway reported total combined assets as of the acquisition date of $466.1 million. Shawnee Bank, Inc. - On June 30, 1997, WesBanco completed the purchase acquisition of Shawnee Bank, Inc., located in Dunbar, WV. Shawnee reported total assets as of the acquisition date of $34.7 million. GRAPH: (in millions) Total Assets* ---------------- 1986 $ 326 1987 $ 540 1988 $ 630 1989 $ 660 1990 $ 715 1991 $ 825 1992 $1,010 1993 $1,039 1994 $1,351 1995 $1,372 1996 $1,678 1997 $1,789 1998 $2,243 1999 $2,270 * Total assets of acquired banks in year of acquisition. 57 IMPACT OF Y2K READINESS In prior years, WesBanco discussed the nature and progress of its plans to become Y2K ready. In early 1999, WesBanco completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Corporation experienced no significant disruptions in mission critical information technology and non-information technology systems and believes those systems successfully responded to the Y2K date change. WesBanco expensed approximately $0.3 million during 1999 and $0.6 million overall in connection with remediating its systems. The Corporation is not aware of any material problems resulting from Y2K issues, either with its products, its internal systems, or the products and services of third parties. Management will continue to monitor its mission critical computer applications and those suppliers and vendors throughout the year 2000 to ensure that any latent Y2K matters that may arise are addressed promptly. EX-21 8 58 EXHIBIT 21 Subsidiaries of WesBanco, Inc. Subsidiaries State of Incorporation - ----------------------------------- ---------------------- WesBanco, Inc. West Virginia WesBanco Bank, Inc.(1) West Virginia WesBanco Insurance Services, Inc.(2) West Virginia WesBanco Properties, Inc. West Virginia WesBanco Securities, Inc. (3) Ohio Hometown Finance Company West Virginia CBI Holding Company West Virginia Vandalia National Corporation (inactive) Delaware Hometown Insurance Company (inactive) West Virginia (1) Effective January 14, 2000, WesBanco combined its four banking subsidiaries and mortgage company affiliate into a single banking subsidiary, WesBanco Bank, Inc. (2) Effective February 28, 2000, name changed from Hunter Agency, Inc. to WesBanco Insurance Services, Inc. (3) Effective April 4, 1999, name changed from CommBanc Investments to WesBanco Securities, Inc. NOTE: All direct subsidiaries of the Registrant are 100% owned. EX-23.1 9 59 EXHIBIT 23.1 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of WesBanco, Inc. of our report dated January 28, 2000, included in the 1999 Annual Report to Shareholders of WesBanco, Inc. We also consent to the incorporation by reference in the Registration Statement (Form S-3 No.333-06467) of WesBanco, Inc. and in the related Prospectus of our report dated January 28, 2000, with respect to the consolidated financial statements of WesBanco, Inc. incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1999. /s/ Ernst & Young LLP Pittsburgh, Pennsylvania March 27, 2000 EX-23.2 10 60 EXHIBIT 23.2 Consent of Harman, Thompson, Mallory and Ice, A.C., Independent Auditors As independent auditors, we hereby consent to the incorporation by reference in this Annual Report (Form 10-K) of our report dated March 6, 1998 with respect to the consolidated financial statements of Commercial BancShares, Inc. and Subsidiaries at December 31, 1997 and 1996 and for the three years ended December 31, 1997, prior to their restatement for the 1998 pooling-of-interests with WesBanco, Inc., included in this Annual Report for the year ended December 31, 1998 filed with the SEC. /s/ Harman, Thompson, Mallory and Ice, A.C. Parkersburg, West Virginia March 27, 2000 EX-24 11 61 EXHIBIT 24 POWER OF ATTORNEY FOR EXECUTION OF FORM 10-K TO BE FILED WITH THE SECURITIES & EXCHANGE COMMISSION We, the undersigned Directors of WesBanco, Inc., hereby severally constitute and appoint James C. Gardill and/or 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 Annual Report of WesBanco to the Securities & Exchange Commission on Form 10-K to be filed for the year 1999 and any and all amendments thereto in our names and behalf in our capacities as Directors of WesBanco to enable WesBanco to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities Exchange Act of 1934, as amended, hereby ratifying and conforming our signatures as they may be signed by our attorneys, or either of them, to said Form 10-K and any and all amendments thereto. Pursuant to the requirements of the Securities Exchange Act of 1934, this Power of Attorney for purposes of executing the Form 10-K of WesBanco has been signed by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE DATE --------- ----- ---- /s/James E. Altmeyer - ------------------------ Director March 29, 2000 James E. Altmeyer /s/Earl C. Atkins - ------------------------ Director March 29, 2000 Earl C. Atkins /s/James G. Bradley - ------------------------ Director March 29, 2000 James G. Bradley /s/Ray A. Byrd - ------------------------ Director March 29, 2000 Ray A. Byrd - ------------------------ Director March __, 2000 R. Peterson Chalfant /s/John H. Cheffy - ------------------------ Director March 29, 2000 John H. Cheffy /s/Christopher V. Criss - ------------------------ Director March 29, 2000 Christopher V. Criss /s/Stephen F. Decker - ------------------------ Director March 29, 2000 Stephen F. Decker /s/James D. Entress - ------------------------ Director March 29, 2000 James D. Entress /s/Ernest S. Fragale - ------------------------ Director March 29, 2000 Ernest S. Fragale /s/James C. Gardill - ------------------------ Director March 29, 2000 James C. Gardill /s/Edward M. George - ------------------------ Director March 29, 2000 Edward M. George /s/Thomas J. Hansberry - ------------------------ Director March 29, 2000 Thomas J. Hansberry /s/Roland L. Hobbs - ------------------------ Director March 29, 2000 Roland L. Hobbs /s/Larry G. Johnson - ------------------------ Director March 29, 2000 Larry G. Johnson /s/John W. Kepner - ------------------------ Director March 29, 2000 John W. Kepner 62 /s/Frank R. Kerekes - ------------------------ Director March 29, 2000 Frank R. Kerekes /s/Robert H. Martin - ------------------------ Director March 29, 2000 Robert H. Martin /s/William E. Mildren, Jr. - ------------------------ Director March 29, 2000 William E. Mildren, Jr. /s/Eric Nelson - ------------------------ Director March 29, 2000 Eric Nelson - ------------------------ Director March __, 2000 Richard K. Riederer /s/Joan C. Stamp - ------------------------ Director March 29, 2000 Joan C. Stamp /s/Carter W. Strauss - ------------------------ Director March 29, 2000 Carter W. Strauss /s/James W. Swearingen - ------------------------ Director March 29, 2000 James W. Swearingen /s/Reed J. Tanner - ------------------------ Director March 29, 2000 Reed J. Tanner /s/Robert K. Tebay - ------------------------ Director March 29, 2000 Robert K. Tebay - ------------------------ Director March __, 2000 J. Christopher Thomas /s/William E. Witschey - ------------------------ Director March 29, 2000 William E. Witschey EX-99.1 12 63 EXHIBIT 99.1 Harman, Thompson, Mallory and Ice, A.C. Certified Public Accountants Independent Auditors' Report Board of Directors Commercial BancShares, Inc. Parkersburg, West Virginia We have audited the accompanying consolidated balance sheets of Commerical BancShares, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the years ended December 31, 1997, 1996 and 1995. These consolidated financial statements are the responsibility of management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Commercial BancShares, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years ended December 31, 1997, 1996 and 1995 in conformity with generally accepted accounting principles. /s/Harman, Thompson, Mallory and Ice, A.C. Parkersburg, West Virginia March 6, 1998 Towne Square, Parkersburg, West Virginia 26102 EX-27 13
9 1000 12-MOS DEC-31-1999 DEC-31-1999 67,166 4,653 9,535 0 354,675 213,253 211,009 1,523,446 19,752 2,269,726 1,814,001 152,577 12,608 20,876 0 0 43,742 225,922 2,269,726 117,508 37,451 902 155,861 62,552 69,231 86,630 4,295 379 67,813 39,103 39,103 0 0 27,638 1.37 1.37 4.12 4,158 6,032 813 0 19,098 4,718 1,335 19,752 19,752 0 19,752
-----END PRIVACY-ENHANCED MESSAGE-----