10-Q 1 qtr12001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----- AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 --------------------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----- EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 0-8467 ------- WESBANCO, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) West Virginia 55-0571723 ------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 1 Bank Plaza, Wheeling, WV 26003 --------------------------------------- --------- (Address of principal executive offices) (Zip Code) 304-234-9000 --------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or, for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. WesBanco had 18,178,137 shares outstanding at April 30, 2001. WESBANCO, INC. TABLE OF CONTENTS ----------------- ITEM # ITEM PAGE NO. ------ ---- -------- Part I ------ 1 Financial Statements 3 - 7 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 18 3 Quantitative and Qualitative Disclosures About Market Risk 18 Part II ------- 1 Legal Proceedings 18 - 19 2 Changes in Securities and Use of Proceeds 19 3 Defaults Upon Senior Securities 19 4 Submission of Matters to a Vote of Security Holders 19 5 Other Information 19 6 (a) Exhibits 19 6 (b) Reports on Form 8-K 19 - 20 Signatures 21 2 PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements ---------------------------- Consolidated Balance Sheets at March 31, 2001 and December 31, 2000, and Consolidated Statements of Income for the three-month periods ended March 31, 2001 and 2000, and Consolidated Statements of Changes in Shareholders' Equity and Consolidated Statements of Cash Flows for the three-months ended March 31, 2001 and 2000 are set forth on the following pages. In the opinion of management of the Registrant, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial information referred to above for such periods, have been made. The results of operations for the three- months ended March 31, 2001 are not necessarily indicative of what results may be attained for the entire year. For further information, refer to the 2000 Annual Report to Shareholders, which includes consolidated financial statements and footnotes thereto and WesBanco, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000. 3 WESBANCO, INC. CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------------------- (Unaudited, dollars in thousands, except per share amounts) March 31, December 31, 2001 2000 ----------- ----------- ASSETS Cash and due from banks $ 63,003 $ 72,796 Due from banks - interest bearing 589 620 Federal funds sold 92,200 --- Securities: Held to maturity (fair values of $223,860 and $198,534, respectively) 220,063 196,102 Available for sale, carried at fair value 351,568 350,287 ----------- ----------- Total securities 571,631 546,389 ----------- ----------- Loans, net of unearned income 1,559,833 1,590,702 Allowance for loan losses (19,971) (20,030) ----------- ----------- Net loans 1,539,862 1,570,672 ----------- ----------- Premises and equipment 52,629 53,147 Accrued interest receivable 14,733 15,725 Other assets 50,263 50,788 ----------- ----------- Total Assets $ 2,384,910 $ 2,310,137 =========== =========== LIABILITIES Deposits: Non-interest bearing demand $ 231,504 $ 234,265 Interest bearing demand 618,867 619,097 Savings deposits 253,249 249,830 Certificates of deposit 766,939 767,169 ----------- ----------- Total deposits 1,870,559 1,870,361 ----------- ----------- Other borrowings 230,877 159,317 Accrued interest payable 9,127 8,438 Other liabilities 17,740 13,515 ----------- ----------- Total Liabilities 2,128,303 2,051,631 ----------- ----------- SHAREHOLDERS' EQUITY Preferred stock, no par value, 1,000,000 shares authorized; none outstanding --- --- Common stock, $2.0833 par value; 50,000,000 shares authorized; 20,996,531 shares issued 43,742 43,742 Capital surplus 59,338 59,464 Retained earnings 221,707 218,539 Treasury stock (2,700,923 and 2,428,591 shares, respectively, at cost) (67,368) (62,009) Accumulated other comprehensive income (fair value adjustments) 2,062 (365) Deferred benefits for directors and employees (2,874) (865) ----------- ----------- Total Shareholders' Equity 256,607 258,506 ----------- ----------- Total Liabilities and Shareholders' Equity $ 2,384,910 $ 2,310,137 =========== =========== See Notes to Consolidated Financial Statements. 4 WESBANCO, INC. CONSOLIDATED STATEMENT OF INCOME ----------------------------------------------------------------------------- (Unaudited, dollars in thousands, except per share amounts) For the three months ended March 31, -------------------------- 2001 2000 ----------- ----------- INTEREST INCOME Loans, including fees $ 32,617 $ 30,680 Securities: Taxable 5,513 5,971 Tax-exempt 2,265 2,468 ----------- ----------- Total interest on securities 7,778 8,439 ----------- ----------- Federal funds sold 510 207 ----------- ----------- Total interest income 40,905 39,326 ----------- ----------- INTEREST EXPENSE Interest bearing demand deposits 5,253 5,053 Savings deposits 1,223 1,353 Certificates of deposit 11,173 10,097 ----------- ----------- Total interest on deposits 17,649 16,503 Other borrowings 2,320 1,966 ----------- ----------- Total interest expense 19,969 18,469 ----------- ----------- NET INTEREST INCOME 20,936 20,857 Provision for loan losses 900 567 ----------- ----------- Net interest income after provision for loan losses 20,036 20,290 ----------- ----------- NON-INTEREST INCOME Trust fees 3,122 3,119 Service charges on deposits 2,089 1,741 Other income 534 691 Net securities gains/(losses) 255 (4) ----------- ----------- Total non-interest income 6,000 5,547 ----------- ----------- NON-INTEREST EXPENSE Salaries and wages 6,621 6,692 Employee benefits 1,280 1,514 Net occupancy 992 940 Equipment 1,532 1,603 Other operating 4,619 5,193 ----------- ----------- Total non-interest expense 15,044 15,942 ----------- ----------- Income before provision for income taxes 10,992 9,895 Provision for income taxes 3,587 2,965 ----------- ----------- NET INCOME $ 7,405 $ 6,930 =========== =========== Earnings per share $ 0.40 $ 0.35 Average shares outstanding 18,469,445 19,647,732 Dividends per share $ 0.23 $ 0.22 See Notes to Consolidated Financial Statements. 5 WESBANCO, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY ----------------------------------------------------------------------------- (Unaudited, dollars in thousands, except per share amounts) Accumulated Deferred Common Stock Other Benefits for ------------------- Capital Retained Treasury Comprehensive Directors & Shares Amount Surplus Earnings Stock Income/(Loss) Employees Total ------------------------------------------------------------------------------------------------------------------------------ December 31, 1999 19,789,925 $ 43,742 $60,133 $208,508 $(34,311) $ (7,456) $ (952) $269,664 ------------------------------------------------------------------------------------------------------------------------------ Net Income 6,930 6,930 Net fair value adjustment on securities available for sale - net of tax effect (994) (994) -------- Comprehensive income 5,936 Cash dividends: Common ($.22 per share) (4,337) (4,337) Treasury shares purchased - net (435,330) (72) (9,952) (10,024) Deferred benefits for directors - net (11) (11) ------------------------------------------------------------------------------------------------------------------------------ March 31, 2000 19,354,595 $ 43,742 $60,061 $211,101 $(44,263) $ (8,450) $ (963) $261,228 ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ December 31, 2000 18,567,940 $ 43,742 $59,464 $218,539 $(62,009) $ (365) $ (865) $258,506 ------------------------------------------------------------------------------------------------------------------------------ Net Income 7,405 7,405 Net fair value adjustment on securities available for sale - net of tax effect 2,314 2,314 Cumulative effect of accounting change for derivative financial instruments - net of tax effect 558 558 Net fair value adjustment on derivatives - net of tax effect (406) (406) Net derivative gains reclassified into earnings - net of tax effect (39) (39) -------- Comprehensive income 9,832 Cash dividends: Common ($.23 per share) (4,237) (4,237) Treasury shares purchased-net (272,332) (126) (5,359) (5,485) Borrowing on ESOP debt (2,000) (2,000) Deferred benefits for directors - net (9) (9) ------------------------------------------------------------------------------------------------------------------------------ March 31, 2001 18,295,608 $ 43,742 $59,338 $221,707 $(67,368) $ 2,062 $ (2,874) $256,607 ==============================================================================================================================
See Notes to Consolidated Financial Statements. 6 WESBANCO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS ----------------------------------------------------------------------------- (Unaudited, in thousands) For the three months ended Increase (Decrease) in Cash and Cash Equivalents March 31, -------------------------- 2001 2000 ----------- ----------- Cash Flows From Operating Activities: Net Income $ 7,405 $ 6,930 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,297 1,275 Net amortization and accretion (16) 178 Provision for loan losses 900 567 (Gains)/losses on sales of securities - net (255) 4 Deferred income taxes 72 100 Other - net (1,977) (136) Net change in: Interest receivable 992 907 Other assets and other liabilities 3,245 (1,686) Interest payable 689 1,066 ---------- ---------- Net cash provided by operating activities 12,352 9,205 ---------- ---------- Cash Flows From Investing Activities: Securities held to maturity: Proceeds from maturities and calls 4,147 2,502 Payments for purchases (28,125) (71) Securities available for sale: Proceeds from sales 31,071 7,368 Proceeds from maturities and calls 62,782 11,930 Payment for purchases (91,019) (4,407) Decrease (increase) in loans 29,910 (10,916) Purchases of premises and equipment - net (804) (809) ---------- ---------- Net cash provided by investing activities 7,962 5,597 ---------- ---------- Cash Flows From Financing Activities: Increase in deposits 198 42,834 Increase (decrease) in other borrowings 71,560 (48,600) Dividends paid (4,211) (4,367) Treasury shares purchased - net (5,485) (10,024) ---------- ---------- Net cash provided (used) by financing activities 62,062 (20,157) ---------- ---------- Net increase (decrease) in cash and cash equivalents 82,376 (5,355) Cash and cash equivalents at beginning of period 73,416 81,354 ---------- ---------- Cash and cash equivalents at end of period $ 155,792 $ 75,999 ========== ========== Supplemental Disclosures: Interest paid on deposits and other borrowings $ 19,281 $ 17,403 Income taxes paid 175 --- See Notes to Consolidated Financial Statements. 7 WESBANCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ----------------------------------------------------------------------------- Note 1 - Accounting policies ---------------------------- Basis of presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The consolidated financial statements include the accounts of WesBanco, Inc. ("the Corporation") and its wholly-owned subsidiaries. Significant intercompany transactions have been eliminated in consolidation. Cash and cash equivalents: For the purpose of reporting cash flows, cash and cash equivalents include cash and due from banks, due from banks-interest bearing and federal funds sold. Generally, federal funds are sold for one-day periods. Earnings per share: Basic earnings per share are 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 assumes the exercise of stock options. There was no dilutive effect from the stock options and accordingly, basic and diluted earnings per share are the same. Note 2 - New accounting standard -------------------------------- As of January 1, 2001, the Corporation adopted 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". This Statement requires all derivatives to be recognized in the statement of condition at fair value, with changes in the fair value of the derivative instruments to be recorded in current earnings or deferred in other comprehensive income. The impact of adopting this new accounting standard on WesBanco's financial position was not material. 8 Item 2. Management's Discussion and Analysis of Financial Condition -------------------------------------------------------------------- and Results of Operations ------------------------- The following discussion and analysis presents in further detail the financial condition and results of operations of WesBanco, Inc. and its subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes presented in this report. Forward-looking statements in this report relating to the Corporation's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements, which are not historical fact, 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; or other unanticipated external developments materially impacting the Corporation's operational and financial performance. The Corporation does not assume any duty to update forward-looking statements. Earnings Summary ---------------- Comparison of the three-months ended March 31, 2001 and 2000 ------------------------------------------------------------ WesBanco's net income per share for the three-months ended March 31, 2001 increased 14.3% to $0.40 compared to $0.35 for the three-months ended March 31, 2000. Net income increased 6.9% to $7.4 million compared to $6.9 million. WesBanco's increased net income was primarily due to improved operating efficiencies, increases in deposit activity income and securities gains. WesBanco's key performance ratios remained strong. Earnings performance reflected a return on average assets of 1.3% and a return on average equity of 11.6% for the three-months ended March 31, 2001 compared to a return on average assets of 1.2% and a return on average equity of 10.4% for the same period in 2000. WesBanco's core earnings per share for the three-months ended March 31, 2001 increased 10.8% to $0.41 compared to $0.37 for the three-months ended March 31, 2000. Core earnings, which excludes amortization of goodwill and net securities gains, increased 4.6% to $7.5 million compared to $7.2 million. 9 TABLE 1 AVERAGE BALANCE SHEET AND NET INTEREST MARGIN Three months ended March 31, ------------------------------------------ 2001 2000 ------------------- ------------------- (dollars in thousands) Average Average Average Average Volume Rate Volume Rate ------------------- ------------------- ASSETS Loans, net of unearned income(1) $1,577,302 8.39% $1,528,367 8.07% Securities:(2) Taxable 346,708 6.36 374,716 6.37 Tax-exempt (3) 183,987 7.58 199,064 7.63 ------------------- ------------------- Total securities 530,695 6.78 573,780 6.81 Federal funds sold 39,407 5.18 14,163 5.88 ------------------- ------------------- Total earning assets (3) 2,147,404 7.93% 2,116,310 7.73% ------------------- ------------------- Other assets 159,418 146,108 ----------- ----------- Total Assets $2,306,822 $2,262,418 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing demand deposits $ 615,356 3.46% $ 601,166 3.38% Savings deposits 250,961 1.98 274,320 1.98 Certificates of deposit 765,056 5.92 753,836 5.39 ------------------- ------------------- Total interest bearing deposits 1,631,373 4.39 1,629,322 4.07 Other borrowings 178,243 5.28 143,639 5.50 ------------------- ------------------- Total interest bearing liabilities 1,809,616 4.48% 1,772,961 4.19% ------------------- ------------------- Non-interest bearing demand deposits 217,243 211,272 Other liabilities 21,713 12,208 Shareholders' Equity 258,250 265,977 ----------- ----------- Total Liabilities and Shareholders' Equity $2,306,822 $2,262,418 =========== =========== Net yield on earning assets 3.93% 3.95% ======= ======= Taxable equivalent net yield on average earning assets 4.16% 4.22% ======= =======
(1) Gross of allowance for loan losses and net of unearned income, includes non-accrual and loans held for sale, loan fees included in interest income on loans are not material. (2) Average yields on securities available for sale have been calculated based on amortized cost. (3) Taxable equivalent basis is calculated on tax-exempt securities using a tax rate of 35% for each year presented. TABLE 2 RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE Three months ended March 31, 2001 compared to 2000 --------------------------------- Net Increase (in thousands) Volume Rate (Decrease) ----------------------------------------------------------------------------- Increase (decrease) in interest income: Loans, net of unearned income $ 870 $ 1,067 $ 1,937 Taxable securities (445) (13) (458) Tax-exempt securities (1) (286) (26) (312) Federal funds sold 330 (27) 303 -------------------------------- Total interest income change (1) 469 1,001 1,470 -------------------------------- Increase (decrease) in interest expense: Interest bearing demand deposits 99 101 200 Savings deposits (125) (5) (130) Certificates of deposit 140 936 1,076 Other borrowings 439 (85) 354 -------------------------------- Total interest expense change 553 947 1,500 -------------------------------- Net interest income increase (decrease)(1) $ (84) $ 54 $ (30) ================================ Taxable equivalent adjustment 109 -------- Net interest income increase $ 79 ======== (1) Taxable equivalent basis is calculated on tax-exempt securities using a tax rate of 35% for each year presented. 10 Net Interest Income ------------------- Net interest income, on a taxable equivalent basis ("TE"), decreased $30 thousand for the three-months ended March 31, 2001 compared to the three-months ended March 31, 2000. Average earning assets increased $31.1 million or 1.5%, while average interest bearing liabilities increased $36.7 million or 2.1%. As shown in Table 1, the net (TE) yield on average earning assets decreased slightly to 4.16% compared to 4.22%. Similar to industry trends, between the two periods WesBanco's net yield declined due to the rising interest rate environment in 2000 and competitive pricing pressure to adjust rates on loan and deposit products. The decline in interest rates during the first quarter of 2001 however, proved to be a stabilizing factor for WesBanco's net yield. Table 2 presents volume and rate changes in interest income and interest expense and the impact of changes in interest rates and the effect competitive pricing pressure had for the comparative periods. Competitive pricing pressure to make interest rate adjustments on loan and deposit products offset the positive effects of lower deposit cost during the first quarter of 2001. Interest income (TE) increased $1.5 million or 3.6% for the three-months ended March 31, 2001 compared to the three-months ended March 31, 2000. As shown in Table 1 and 2, interest income (TE) increased $0.5 million due to volume increases in average earning assets of $31.1 million and increased $1.0 million due to average rate increases of 20 basis points. Average loan growth of $48.9 million was partially funded by decreases of $43.1 million in average investment securities. Average federal funds sold grew $25.2 million. The shifting of investment securities balances into higher yielding loan products and the general rise in interest rates contributed to the increase in the (TE) yield on average earning assets to 7.9% from 7.7%. Interest expense increased $1.5 million or 8.1% for the three- months ended March 31, 2001 compared to the three-months ended March 31, 2000. As shown in Table 1 and 2, interest expense increased $0.6 million due to volume increases in average interest bearing liabilities of $36.7 million and increased $0.9 million due to average rate increases of 29 basis points. The volume and rate increases were primarily due to average other borrowings increasing $34.6 million or 24.1% and average rates paid on certificates of deposits increasing to 5.92% from 5.39%. Rates paid on average interest bearing liabilities increased to 4.5% from 4.2% due to the rising interest rate environment in 2000. Customers shifted savings balances into competitively priced Prime Rate Money Market product, NOW accounts and certificates of deposit. Average savings deposits decreased $23.4 million or 8.5% while average interest bearing demand deposits, which includes the Prime Rate Money Market product and NOW accounts increased $14.2 million or 2.4%. Average certificates of deposit increased $11.2 million or 1.5%. 11 Non-interest Income ------------------- Non-interest income, excluding net securities gains, increased $0.2 million or 3.5% for the three-months ended March 31, 2001 compared to the three-months ended March 31, 2000. The majority of the increase resulted from improved deposit activity income. Deposit activity income increased $0.3 million or 20.0% due to increases in deposit activity fees and ATM fees. Trust revenue remained strong at $3.1 million for the comparative periods. Net securities gains increased $0.3 million for the comparative period. The Corporation was able to improve liquidity and realize securities gains on the sale of mortgage backed securities due to declining interest rates during the first quarter of 2001. Non-interest Expense -------------------- Non-interest expense for the three-months ended March 31, 2001 decreased $0.9 million or 5.6% compared to the three-months ended March 31, 2000 due to reduced levels of other operating expense and employee costs. The consolidation of WesBanco's four banking affiliates and mortgage company affiliate into a single bank charter in 2000 continues to provide improved internal operating efficiencies. As a result, WesBanco's efficiency ratio has improved to 52.8% from 56.5% for the comparative periods. Other operating expense decreased $0.6 million or 11.1% due to reductions in marketing, supplies and communication expenses. Employee costs decreased $0.3 million primarily due to a lower number of employees. Health care costs increased approximately $0.1 million. TABLE 3 Reconciliation of Income Tax Rates For the three months ended March 31, --------------------------- 2001 2000 ---- ---- Federal statutory tax rate 35% 35% Tax-exempt interest income from securities of states and political subdivisions (6) (7) State income tax - net of federal tax effect 4 4 All other - net --- (2) -------- ------- Effective tax rate 33% 30% ======== ======= WesBanco's federal income tax expense increased $0.6 million to $3.0 million for the three-months ended March 31, 2001 compared to $2.4 million for the three-months ended March 31, 2000. The Corporation's effective tax rate increased to 33% compared to 30%. The increase in the effective tax rate resulted from a decrease in tax-free income. 12 Financial Condition ------------------- WesBanco's balance sheet remained strong with a primary capital to asset ratio of 11.5% and a book value per share of $14.03 at March 31, 2001. Total assets of WesBanco were $2.4 billion as of March 31, 2001, an increase of $74.8 million or 3.2% compared to total assets as of December 31, 2000. Total loans decreased $30.9 or 1.9%, deposits remained stable and other borrowings increased $71.6 million or 44.9% during the first quarter of 2001. TABLE 4 Composition of Securities March, 31, December 31, 2001 2000 (in thousands) ---------- ------------ Securities held to maturity (at amortized cost): ------------------------------------------------ U.S. Treasury and Federal Agency securities $ 4,061 $ 4,357 Obligations of states and political subdivisions 198,029 173,771 Other debt securities 17,973 17,974 --------- --------- Total securities held to maturity (fair value of $223,860 and $198,534, respectively) 220,063 196,102 --------- --------- Securities available for sale (at fair value): ---------------------------------------------- U. S. Treasury and Federal Agency securities 215,001 206,268 Obligations of states and political subdivisions 12,931 12,907 Corporate securities 3,033 3,033 Mortgage-backed and other debt securities 120,603 128,079 --------- --------- Total securities available for sale 351,568 350,287 --------- --------- Total securities $ 571,631 $ 546,389 ========= ========= Securities increased $25.2 million between March 31, 2001 and December 31, 2000 representing a use of funds for the first quarter of 2001. WesBanco purchased obligations of states and political subdivisions classified as held to maturity securities to improve tax equivalent income and decrease income taxes. Unrealized pre-tax gains/losses on available for sale securities (fair value adjustments) increased to a $3.3 million market gain as of March 31, 2001 compared to a $0.5 million market loss as of December 31, 2000. These fair value adjustments represent temporary fluctuations resulting from changes in market rates in relation to average yields in the available for sale portfolio. WesBanco can impact the magnitude of the fair value adjustment by managing both the volume and average maturities of securities classified as available for sale. If these securities were held to their respective maturity dates, no fair value gain or loss would be realized. 13 TABLE 5 Composition of Loans March 31, December 31, (in thousands) 2001 2000 ------------ ------------- Commercial $ 529,487 $ 546,136 Real estate - construction 33,919 36,007 Real estate 648,968 654,315 Personal, net of unearned income 347,459 354,244 ---------- ---------- Loans, net of unearned income $1,559,833 $1,590,702 ========== ========== Loans, net of unearned income decreased $30.9 million or 1.9% between March 31, 2001 and December 31, 2000. All major segments of the portfolio experienced reductions during the first quarter due to the general slowdown in the economy. Commercial loans decreased $16.6 million due to payoffs by two commercial borrowers during the first quarter. The composition of loans as a percentage of total loans consist of commercial at 34%, real estate at 44% and personal loans at 22% as of March 31, 2001. WesBanco's loan to deposit ratio was 83.4%. TABLE 6 Non-performing Assets, Other Impaired Loans and Loans Past Due 90 Days or More March 31, December 31, (in thousands) 2001 2000 ----------- ------------ Non-accrual loans $ 4,720 $ 5,561 Renegotiated loans 4,832 417 Other real estate owned 3,353 3,424 -------- -------- Total non-performing assets 12,905 9,402 Other impaired loans (1) 7,771 11,513 -------- -------- Total non-performing assets and other impaired loans $ 20,676 $ 20,915 ======== ======== Loans past due 90 days or more $ 7,962 $ 6,581 ======== ======== (1) Includes loans internally classified as doubtful and substandard that meet the definition of impaired loans. WesBanco's level of non-performing assets and other impaired loans decreased $0.2 million between March 31, 2001 and December 31, 2000. Non-performing assets and other impaired loans as a percentage of total loans remained consistent at 1.32% for the comparative periods. The decrease in other impaired loans and corresponding increase in renegotiated loans resulted primarily from the reclassification of three commercial loans totaling $4.1 million. 14 WesBanco monitors the overall quality of its loan portfolio through various methods. Underwriting policies and guidelines have been established for all types of credits and management continually monitors the portfolio for adverse trends in delinquent and non- performing loans. Loans are considered impaired when it is determined that WesBanco may not be able to collect all principal and interest due according to the contractual terms of the loans. Impaired loans include all non-accrual and renegotiated loans, as well as loans internally classified as substandard or doubtful that meets the definition of impaired loans. Specific allowances for loan losses are allocated for impaired loans based on the present value of expected future cash flows, or a fair value of the collateral for loans that are collateral dependent. Lending by WesBanco is guided by written lending policies, which allow for various types of lending. Normal lending practices do not include the acquisition of high yield non-investment grade loans or "highly leveraged transactions" ("HLT") from outside the primary market. TABLE 7 Allowance for Loan Losses For the three months ended March 31, (in thousands) -------------------------- 2001 2000 ------------ ------------ Balance, at beginning of period $ 20,030 $ 19,752 Charge-offs (1,097) (912) Recoveries 138 371 -------- -------- Net charge-offs (959) (541) Provision for loan losses 900 567 -------- -------- Balance, at end of period $ 19,971 $ 19,778 ======== ======== The allowance for loan losses is maintained at a level considered adequate by management. Amounts allocated to the allowance for loan losses are based upon management's evaluation of the credit risk in the loan portfolio. While management has allocated the allowance for loan losses to each loan category, the allowance is general in nature and available for the loan portfolio in its entirety. The allowance for loan losses as a percentage of total loans remained consistent at 1.3% as of March 31, 2001 and March 31, 2000, respectively. Net loan charge-offs increased $0.4 million due to a $0.2 million increase in charge-offs and a $0.2 million decrease in recoveries for the comparative period. Net loan charge-offs as a percentage of average loans increased to 0.06% from 0.04%. 15 The adequacy of the allowance for loan losses is evaluated quarterly. Specific reserves are established when warranted for commercial loans greater than $0.1 million. 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 collateral and other secondary repayment sources, if any. For all other commercial loans not specifically reserved, and residential real estate and personal loans, management considers historical net charge-off experience relative to loans outstanding for each segment to estimate losses. Management also evaluates factors such as economic conditions, changes in underwriting standards or practices, delinquency and other trends in the portfolio, specific industry conditions, loan concentrations, the results of recent internal loan reviews or regulatory examinations, and other relevant factors that may impact the loan portfolio. Management relies on certain types of observable data, such as employment statistics, trends in bankruptcy filings, and external events that impact particular industries, to determine whether loss attributes exist at the balance sheet date that will lead to higher than historical losses in any segment of the portfolio. Deposits and Other Borrowings ----------------------------- Deposits increased $0.2 million between March 31, 2001 and December 31, 2000, reflecting growth in savings. The growth in this category was offset by reductions in non-interest and interest bearing demand deposits and certificates of deposits. This shifting of funds reflects our customers' preference for shorter term deposit alternatives in this period of declining interest rates. Other borrowings, which includes repurchase agreements, Federal funds purchased and Federal Home Loan Bank borrowings increased $71.6 million or 44.9%, represented a source of funds during this year-to- date period. Repurchase agreements increased $23.5 million, Federal funds purchased increased $2.3 million and Federal Home Loan Bank borrowings increased $45.8 million. WesBanco utilized other borrowings as an alternate source of funds due to the minimal deposit growth during the first quarter of 2001 to fund the purchase of tax- exempt and Federal Agency securities. Capital Resources ----------------- Shareholders' equity remained strong, highlighted by a primary capital to asset ratio of 11.5% and a book value per share of $14.03 at March 31, 2001. Shareholders' equity decreased $1.9 million between March 31, 2001 and December 31, 2000, due to the Corporation's purchase of 272,332 net treasury shares for $5.4 million and borrowing $2.0 million in WesBanco's Employee Stock Option Plan. These reductions in capital were partially offset by the $3.2 million retention of earnings, net of 16 dividends and a $2.4 million increase in other comprehensive income. The changes in other comprehensive income included fair value adjustments on securities available for sale and derivatives along with the cumulative effect of adopting SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". On March 22, 2001, WesBanco completed the acquisition of one million shares of common stock under a stock repurchase program and began a new program, approved on March 21, 2001 to repurchase up to one million shares of WesBanco common stock on the open market. The timing, price and quantity of purchases under the plan are at the discretion of the Corporation and the plan may be discontinued or suspended at any time. TABLE 8 Capital Adequacy Ratios March 31, December 31, 2001 2000 ----------- ------------ Tier I capital 14.4% 14.4% Total risk-based capital 15.7 15.6 Leverage 10.2 10.5 WesBanco is subject to risk-based capital guidelines that measure capital relative to risk-adjusted assets and off-balance sheet financial instruments. As shown in Table 8, the Corporation's Tier I, total risk-based capital and leverage ratios are well above the required minimum levels of 4%, 8%, and 4%, respectively. At March 31, 2001 and December 31, 2000, WesBanco's affiliate bank, WesBanco Bank, Inc., also exceeded the minimum regulatory levels. There are no conditions or events since March 31, 2001 that management believes have changed WesBanco's well-capitalized category. Liquidity Risk -------------- Liquidity risk is managed through the Corporation's ability to provide adequate funds to meet changes in loan demand, unexpected outflows in deposits and other borrowings as well as to take advantage of market opportunities and meet operating cash needs of the Corporation. This is accomplished by maintaining liquid assets in the form of securities, maintaining sufficient borrowing capacity and a stable core deposit base. WesBanco's Asset/Liability Management Committee monitors liquidity. The principal source of liquidity is WesBanco's deposit base and other borrowings. In addition to its deposit funding, the Corporation's banking subsidiary maintains a Federal Home Loan Bank borrowings line of credit of $652.1 million, of which $568.2 million remains unused. The Corporation 17 increased FHLB borrowings by $45.8 million during the first quarter of 2001 to purchase tax-exempt and Federal Agency securities. The securities portfolio, federal funds sold and cash and due from banks serves as additional sources of liquidity. Securities maturing within one year from both the available for a sale and held to maturity portfolios totaled $23.4 million as of March 31, 2001. Securities classified as available for sale totaled $351.6 million of which $307.0 million were pledged at March 31, 2001. Additional liquidity is provided by federal funds sold of $92.2 million and cash and due from banks of $63.6 million at March 31, 2001. At March 31, 2001, the Corporation had outstanding commitments to extend credit in the ordinary course of business approximating $216.1 million. On a historical basis, only a small portion of these commitments will result in an outflow of funds. Management believes the Corporation has sufficient liquidity to meet current obligations to borrowers, depositors and others. Item 3. Quantitative and Qualitative Disclosures about Market Risk ------------------------------------------------------------------ Not applicable. Part II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ------------------------- 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 filed a counterclaim asserting a different interpretation of the plan. Both parties filed Summary Judgment Motions and the Court granted the Bank's Motion for Summary Judgment on most of the substantive issues and denied the defendant's Motions. It is believed this matter will now be resolved based on the interpretation of the Plan proposed by the Bank. 18 WesBanco is also involved in other lawsuits, claims, investigations, and proceedings which arise in the ordinary course of business. There are no such other matters pending that WesBanco expects to be material in relation to its business, financial condition or results of operations. Items 2, 3, 5 and 6a --------------------- Not Applicable Item 4 - Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ On April 18, 2001, the Annual Meeting of the Stockholders of WesBanco, Inc. was held. The following directors were re-elected to the Board of Directors for a term of three years expiring at the annual stockholders meeting in 2004: For Against ------------- ------------ James E. Altmeyer 12,772,662 1,205,573 Christopher V. Criss 14,223,019 45,288 James C. Gardill 14,127,485 121,715 Roland L. Hobbs 14,194,228 68,320 William E. Mildren, Jr. 14,219,788 47,872 The shareholders voted to increase WesBanco's common shares authorized for the Key Executive Incentive Bonus and Option Plan to a total of one million (1,000,000) shares. For Against Abstained ---------- --------- --------- 11,460,941 2,094,059 363,496 Item 6(b) - Reports on Form 8-K ------------------------------- On January 8, 2001, WesBanco, Inc. filed a current report on Form 8-K, dated December 29, 2000 announcing the definitive Agreement and Plan of Merger providing for the acquisition of Freedom Bancshares, Inc. and merger of Freedom's affiliate Belington Bank, located in Belington, West Virginia, with and into WesBanco affiliate, WesBanco Bank, Inc. The transaction is expected to be completed in the second quarter of 2001. 19 On February 23, 2001, WesBanco, Inc. filed a current report on Form 8-K, dated February 22, 2001 announcing the definitive Agreement and Plan of Merger providing for the merger of American Bancorporation with and into a wholly-owned subsidiary of WesBanco to be formed for the purpose of effecting the merger, and the simultaneous merger of American's affiliate, Wheeling National Bank, with and into WesBanco's affiliate, WesBanco Bank, Inc. The transaction is expected to be completed in the third quarter of 2001. On March 22, 2001, WesBanco, Inc. filed a current report on Form 8-K, dated March 21, 2001 announcing the adoption of a new stock purchase plan, effective immediately, to begin repurchasing up to one million shares of WesBanco common stock on the open market. 20 SIGNATURES ---------- Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WESBANCO, INC. -------------- Date: May 15, 2001 /s/ Edward M. George --------------------------------- Edward M. George President and Chief Executive Officer /s/ Paul M. Limbert Date: May 15, 2001 ----------------------------------- Paul M. Limbert Executive Vice President and Chief Financial Officer 21