-----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, VuUCrl90KrUEZPKvie9e0H78a3w2ex2mRHIA+q4vgIde62YhCn0D/wxubYg9yiyr PgcREOx3RVd6XLL1hFsPUg== 0000203596-98-000007.txt : 20030406 0000203596-98-000007.hdr.sgml : 20030406 19980317111948 ACCESSION NUMBER: 0000203596-98-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980313 DATE AS OF CHANGE: 19980324 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-08467 FILM NUMBER: 98567013 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, 1997 - - ----------------------------------------------------------------------------- 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 Nonredeemable Preferred Stock Dealers, Inc. 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 27, 1998 was approximately $405,804,147. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) As of February 27, 1998, there were 15,964,362 shares of WesBanco, Inc. Common stock $2.0833 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of WesBanco, Inc.'s 1997 Annual Report to Shareholders - Parts II and III Portions of the Registrant's definitive proxy statement to be filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year (December 31, 1997) are incorporated by reference in Part III. Page 1 of 64 2 WESBANCO, INC. TABLE OF CONTENTS ITEM # ITEM PAGE(S) - - ------ ---- ------ Part I ------ 1 Business 3-17 2 Properties 18 3 Legal proceedings 18 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 19,55 6 Selected financial data 45-46 7 Management's discussion and analysis of financial condition and results of operations 46-55 8 Financial statements and supplementary data 27-44 9 Changes in and disagreements with accountants on accounting and financial disclosure N/A Part III -------- 10 Directors and Executive Officers of the registrant 19 * 11 Executive compensation * 12 Security ownership of certain beneficial owners and management * 13 Certain relationships and related transactions * Part IV ------- 14 Exhibits, financial statement schedules, and reports on Form 8-K 20 * Incorporated by reference to WesBanco, Inc.'s Proxy Statement dated March 13, 1998, for Annual Meeting of Stockholders to be held April 15, 1998. This Form contains a total of 64 pages. 3 PART I Item 1. Business - - ----------------- General - - ------- As of December 31, 1997, the Corporation had four banking affiliates located in Wheeling, Charleston, Parkersburg, and Fairmont, West Virginia. The Registrant had one banking affiliate in Barnesville, Ohio. WesBanco Wheeling has fourteen offices, all in West Virginia, five located in Wheeling, two located in Follansbee, three in New Martinsville, one in Sistersville, one in Wellsburg and two in Weirton. WesBanco Barnesville has six offices, two located in Barnesville and one each in St. Clairsville, Bethesda, Woodsfield and Beallsville, Ohio. WesBanco Parkersburg has three offices, one located in Parkersburg, one located in Elizabeth and one in Mineral Wells. WesBanco Charleston has four offices, one located in South Hills, one in South Charleston, one in Dunbar and one in Sissonville. WesBanco Fairmont has four offices located in Fairmont, five offices located in Morgantown, three offices located in Bridgeport, two in Shinnston and one each in Nutter Fort, Kingwood, Masontown and Bruceton Mills, West Virginia. The Corporation's mortgage banking affiliate has offices located in Bridgeport, South Charleston, Barboursville, Elkins, Wheeling, and Weirton, West Virginia. There are approximately 883 full time equivalent employees employed by all affiliates as of December 31, 1997. On September 30, 1997, WesBanco and Commercial Bancshares, Incorporated jointly announced the signing of a definitive Agreement and Plan of Merger providing for Commercial, a multibank holding company headquartered in Parkersburg, West Virginia, to merge with WesBanco affiliated companies. Commercial is the bank holding company for seven community banks with seventeen offices located in West Virginia and Ohio. Under the terms of the definitive Agreement and Plan of Merger, WesBanco will exchange 2.85 shares of WesBanco common stock for each share of Commercial common stock outstanding in a tax free exchange. The merger, which is based on a fixed exchange ratio, will be accounted for as a pooling of interests. This transaction, which is subject to approval by the stockholders of Commercial and WesBanco, is expected to be consummated on March 31, 1998. WesBanco, Inc., through its subsidiaries, conducts general banking, commercial, mortgage banking and trust business. Its full service banks offer a wide range of services to commercial, consumer and government bodies, including but not limited to, retail banking services, such as demand, savings and time deposits; commercial, mortgage, and personal loans; credit card services through VISA and MasterCard; personal and corporate trust services and discount brokerage services. Most affiliates are participating in local partnerships which operate banking machines in those local regions primarily under the name of MAC. The banking machines are linked to CIRRUS, a nationwide banking network. The Corporation has reported to its shareholders that it may engage in other activities of a financial nature authorized by the Federal Reserve Board through a subsidiary, or through acquisition of established companies. As of December 31, 1997, none of the affiliates were engaged in any operation in foreign countries and none has had transactions with customers in foreign countries. 4 Item 1. Business (continued) - - ----------------------------- General (continued) - - ------------------- Competition - - ----------- Each affiliate bank faces strong competition for local business in their 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. The affiliate banks encounter 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. 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 subsidiaries have deposits insured by the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation (the "FDIC"), and are subject to supervision, examination and regulation by state banking authorities and either the FDIC or the Federal Reserve Board. In addition to the impact of federal and state supervision and regulation, the banking subsidiaries of WesBanco are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. WesBanco's depository institution subsidiaries are subject to affiliate transaction restrictions under federal law which limit the transfer of funds by the subsidiary banks to their 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. 5 Item 1. Business (continued) - - ----------------------------- Supervision and Regulation (continued) - - -------------------------------------- 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 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 principal 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. 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. 6 Item 1. Business (continued) - - ----------------------------- 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 1.29% during 1997. No assessment was paid to the BIF for 1997. 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. 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%. 7 Item 1. Business (continued) - - ----------------------------- At December 31, 1997, 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 bearing) 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. 8 Item 1. Business (continued) - - ----------------------------- 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 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 has been advised of any specific minimum leverage ratio applicable to it. As of December 31, 1997, all of WesBanco's banking subsidiaries had capital in excess of all applicable requirements. Interstate Banking Act - - ---------------------- The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (hereinafter called "Interstate Banking Act") was signed into law by President Clinton on September 29, 1994. The Act generally allows adequately capitalized and managed bank holding companies to acquire banks in any state starting one year after enactment. The Act also authorized interstate merger transactions effective June 1, 1997. States are permitted, however, to pass legislation providing for either earlier approval of mergers with out-of-state banks or "opting-out" of interstate mergers entirely. The Act would permit banks to acquire branches of out-of-state banks by converting their office into branches of the resulting bank. The Act would also permit banks to establish and operate "de novo branches" in any state that "opts-in" to de novo branching. The Act also requires each Federal banking agency to prescribe uniform regulations, including guidelines insuring that interstate branches operated by out-of-state banks are reasonably helping to meet the credit needs of communities where they operate. WesBanco is incorporated under the laws of the State of West Virginia and the West Virginia Legislature adopted substantial amendments to the West Virginia banking laws in 1996 specifically permitting interstate branching under Section 102 and 103 of the Interstate Banking Act, effective May 31, 1997. The State of Ohio, in which WesBanco has an affiliate bank, enacted legislation in 1997 specifically permitting interstate branching. 9 Item 1. Business (continued) - - ----------------------------- Statistical Information - - ----------------------- Except as noted, the following statistical data averages included in Item I - Business were computed using daily averages for the years ended December 31, 1997, 1996 and 1995. Statistical data not included in Item I - Business have been omitted due to inclusion in the 1997 Annual Report to Shareholders, incorporated herein by reference, or are not applicable. The effect on interest income and interest expense for the years ended December 31, 1997, 1996 and 1995, due to changes in average volume and rate from the prior year, is presented below. The average volumes and rates are shown in the 1997 Annual Report to Shareholders. The effect of a change in average volume has been determined by applying the average rate in the earlier year to the change in volume. The change in rate has been determined by applying the average volume in the earlier year to the change in rate. The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of change in each. (in thousands): 1997 Compared to 1996 ------------------------------- Net Increase Volume Rate (Decrease) -------- ------- ------------ Loans $ 8,587 $ 431 $ 9,018 Taxable securities (1,054) 2,050 996 Tax-exempt securities 1,014 (182) 832 Federal funds sold 676 70 746 ------- ------- ------- Total interest earned 9,223 2,369 11,592 ------- ------- ------- Interest bearing demand (943) 4,363 3,420 Savings deposits (835) (531) (1,366) Certificates of deposit 3,428 1,316 4,744 Federal funds purchased and repurchase agreements 157 158 315 Other borrowings 193 250 443 ------- ------- ------- Total interest paid 2,000 5,556 7,556 ------- ------- ------- Net Interest Differential $ 7,223 $(3,187) $ 4,036 ======= ======= ======= 1996 Compared to 1995 ------------------------------- Net Increase Volume Rate (Decrease) -------- ------- ----------- Loans $ 7,181 $ (184) $ 6,997 Taxable securities (2,398) 850 (1,548) Tax-exempt securities 640 (522) 118 Federal funds sold (428) (283) (711) ------- ------- --------- Total interest earned 4,995 (139) 4,856 ------- ------- --------- Interest bearing demand (175) (697) (872) Savings deposits (587) (929) (1,516) Certificates of deposit 2,944 473 3,417 Federal funds purchased and repurchase agreements 978 (336) 642 Other borrowings 65 (88) (23) ------ ------- --------- Total interest paid 3,225 (1,577) 1,648 ------ ------- --------- Net Interest Differential $1,770 $1,438 $3,208 ====== ======= ========= 10 Item 1. Business (continued) - - ----------------------------- Investment Portfolio - - -------------------- The maturity distribution, using book value including accretion of discounts and the amortization of premiums and approximate yield of investment securities at December 31, 1997, is presented in the following table. Tax equivalent yield basis was not used. Approximate yield was calculated using a weighted average of yield to maturity (in thousands): After One But After Five But Within One Year Within Five Years Within Ten Years After Ten Years --------------- ----------------- ---------------- --------------- Amount Yield Amount Yield Amount Yield Amount Yield Held to Maturity: ------ ----- ------ ----- ------ ----- ------ ----- - - ----------------- U.S. Treasury and Federal Agency securities $24,620 6.01% $42,980 6.19% ---- ---- ---- ---- States and political subdivisions 14,962 5.14% 54,754 5.07% $52,896 5.12% $31,558 5.28% Other debt securities (1) --- --- --- --- --- --- 2,277 7.06% -------------------------------------------------------------------------- Total held to maturity 39,582 5.68% 97,734 5.56% 52,896 5.12% 33,835 5.40% Available for Sale: (2) - - ----------------------- U.S. Treasury and Federal Agency securities 21,681 5.57% 98,382 6.23% 93,996 6.72% 766 7.28% States and political subdivisions 4,260 3.84% 12,709 4.28% 1,590 4.74% 527 4.65% Mortgage-backed and other securities (1) (3) 19,699 6.22% 67,106 6.66% 10,299 6.57% 3,206 2.32% -------------------------------------------------------------------------- Total available for sale 45,640 5.86% 178,197 6.25% 105,885 6.68% 4,499 3.44% -------------------------------------------------------------------------- Total Investment Securities $85,222 5.78% $275,931 6.01% $158,781 6.16% $38,334 5.17% ==========================================================================
(1) Represents investments with no stated maturity date. (2) Average yields on investment securities available for sale have been calculated based on amortized cost. (3) Mortgage-backed securities which have prepayment provisions are assigned to maturity categories based on estimated average lives. 11 Item 1. Business (continued) - - ----------------------------- Investment Portfolio (continued) - - -------------------------------- Book values of investment securities are as follows (in thousands): December 31, --------------------------------- 1997 1996 1995 Investments Held to Maturity (at cost): ---- ---- ---- - - --------------------------------------- U.S. Treasury and Federal Agency securities $ 67,600 $ 99,457 $219,719 Obligations of states and political subdivisions 154,170 147,643 129,074 Other debt securities (1) 2,277 2,008 1,358 -------- -------- -------- Total Held to Maturity 224,047 249,108 350,151 -------- -------- -------- Investments Available for Sale (at market): - - ------------------------------------------- U.S. Treasury and Federal Agency securities 215,908 161,817 157,505 Obligations of states and political subdivisions 18,994 14,120 5,667 Mortgage-backed and other securities (2) 107,608 100,264 8,965 -------- -------- -------- Total Available for Sale 342,510 276,201 172,137 -------- -------- -------- Total Investments $566,557 $525,309 $522,288 ======== ======== ======== (1) Includes Federal Reserve Bank Stock and Federal Home Loan Bank securities. (2) Includes stocks of business corporations. There are no issues included in obligations of state and political subdivisions which individually or in the aggregate exceed ten percent of shareholders' equity as of December 31, 1997. Loan Portfolio - - -------------- Loans outstanding, including loans held for sale, are as follows (in thousands): December 31, ------------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Loans:* Commercial $206,909 $177,136 $176,809 $170,164 $169,341 Real Estate--Construction 25,306 21,556 16,544 25,575 21,732 Real Estate--Mortgage 515,194 510,778 424,917 380,178 356,286 Personal 275,305 321,060 284,108 245,032 231,705 --------- --------- -------- -------- -------- Subtotal 1,022,714 1,030,530 902,378 820,949 779,064 Loans Held for Sale 11,705 983 0 0 0 --------- --------- -------- -------- -------- Total Loans $1,034,419 $1,031,513 $902,378 $820,949 $779,064 ========= ========= ======== ======== ======== *Gross of allowance for loan losses. Does not include unearned income on personal loans. 12 Item 1. Business (continued) - - ----------------------------- Loan Portfolio (continued) - - -------------------------- WesBanco's real estate-mortgage loans, at 50% of total loans, comprise the single largest loan type in the portfolio. This category consists generally of conventional adjustable and fixed rate residential mortgages and home equity loans located within the bank's general market areas. The risks associated with real estate lending are principally influenced by real property values which are affected by the general economic conditions in each bank's market areas. Loans held for sale consists of residential mortgage loans and are valued at the lower of aggregate cost or market value. Personal loans represent approximately 27% of total loans and consist primarily of indirect vehicle loans originated through automobile dealers and credit card outstanding balances. These 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 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, representing 20% of total loans are not concentrated in any single industry, but reflect a broad range of business in West Virginia and Eastern Ohio. These loans are predominantly in the manufacturing, wholesaling and retail service industries. The credit risk associated with commercial lending is principally influenced by general economic conditions and the resulting impact on the borrower's operations, mitigated by collateral values. Each bank within the Corporation has its own renewal policies regarding commercial and real estate-construction loans. However, real estate- construction loans are generally not renewed at any bank. Commercial loans above certain pre-approved dollar limits must be reviewed by the respective credit review committee or senior management prior to extension of maturity dates or rollover of the loan into a new loan. Renewals of commercial loans below specified lending limitations may be approved by the respective bank loan officer. The following table presents the approximate maturities of loans other than personal loans, residential mortgages, and loans held for sale, for all affiliate banks as of December 31, 1997 (in thousands): After one In one year through After year or less five years five years ------------ ------------ ---------- Commercial $ 98,862 $ 59,384 $ 48,663 Real estate: Construction 5,395 987 11,784 Other real estate 12,084 9,769 63,356 --------- --------- --------- Total $116,341 $ 70,140 $123,803 ========= ========= ========= Fixed rates $ 23,380 $ 51,234 $ 39,155 Variable rates 92,961 18,906 84,648 --------- --------- --------- Total $116,341 $ 70,140 $123,803 ========= ========= ========= 13 Item 1. Business (continued) - - ----------------------------- Loan Portfolio (continued) - - -------------------------- WesBanco banks follow lending policies which require substantial down payments along with current market appraisals on the collateral when the loans are originated. The majority of loans are either secured by deeds of trust on real property, security agreements on personal property, insurance contracts from independent insurance companies or through marketable securities. WesBanco Bank Wheeling has approximately 42% of consolidated gross loans. All affiliate banks generally recognize interest income on the accrual basis, except for certain loans which are placed on a nonaccrual status, when in the opinion of management, doubt exists as to collectability. All banks must conform to the 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 and secured loans which are in the process of collection but are contractually past due 90 days or more as to interest or principal are as follows (in thousands): December 31, ------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Nonaccrual: Personal $ 61 $ 53 $ 59 $ 12 $ 124 Commercial 4,662 3,683 3,467 6,766 9,496 Mortgage 1,935 928 1,673 1,475 1,620 ------ ------ ------ ------ ------ 6,658 4,664 5,199 8,253 11,240 ------ ------ ------ ------ ------ Renegotiated: Personal -- -- 9 -- -- Commercial -- 1,527 1,006 23 80 Mortgage 773 623 39 81 88 ------ ------ ------ ------ ------ 773 2,150 1,054 104 168 ------ ------ ------ ------ ------ Other classified loans: (1) Personal -- -- -- -- -- Commercial 3,765 3,057 341 -- -- Mortgage -- 414 697 -- -- ------ ------ ------ ------ ------ 3,765 3,471 1,038 -- -- ------ ------ ------ ------ ------ Total non-performing loans 11,196 10,285 7,291 8,357 11,408 Other Real Estate Owned 4,202 3,555 4,137 612 801 ------ ------ ------ ------ ------ Total non-performing assets $15,398 $13,840 $11,428 $8,969 $12,209 ====== ====== ====== ====== ====== 14 Item 1. Business (continued) - - ----------------------------- Loan Portfolio (continued) - - -------------------------- December 31, --------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Percentage of non-performing assets to loans outstanding 1.5% 1.3% 1.3% 1.1% 1.6% Past Due 90 Days or More: Personal $1,379 $1,538 $ 863 $ 944 $ 857 Commercial 934 1,294 916 923 754 Real Estate 515 1,273 1,255 680 1,131 ------ ------ ------ ------ ------ $2,828 $4,105 $3,034 $2,547 $2,742 ====== ====== ====== ====== ====== (1) Includes loans internally classified as doubtful and substandard (as defined by banking regulations) that meet the definition of impaired loans. At December 31, 1997, nonperforming loans, which included all impaired loans, totaled $11,196,000, an increase of $911,000 over 1996. The increase was primarily attributable to an increase in nonaccrual commercial and commercial real estate loans. At December 31, 1996 nonperforming loans totaled $10,285,000, an increase of $2,994,000 over 1995. The increase was primarily attributable to a commercial loan which was classified as substandard under the definition of an impaired loan. At December 31, 1995, nonaccrual loans decreased $3,054,000 to $5,199,000, primarily due to the reclassification of a commercial real estate loan to other real estate owned. The action was taken on November 1, 1995 by an affiliate through a transfer by deed in-lieu of foreclosed commercial property. Contributing to the increase in renegotiated loans during 1995 were certain performing loans classified as impaired, in accordance with FAS No. 114. The 1994 decline in nonaccrual loans was the result of a commercial real estate loan which was taken off of nonaccrual status. Nonaccrual loans are generally secured by collateral believed to have adequate market values to protect the Corporation from significant losses. Prior to 1995, loans totaling $3,666,000 which were classified as in-substance forcelosures and included in other assets were reclassified to loans in accordance with FAS No. 114. Management continues to monitor nonperforming assets to ensure against deterioration in collateral values. 15 Item 1. Business (continued) - - ---------------------------- Summary of Loan Loss Experience - - ------------------------------- The historical relationship between average loans, loan losses and recoveries and the provision for loan losses is presented in the following table (in thousands): For the years ended December 31, ------------------------------------------ 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Beginning balance - Allowance for loan losses $15,528 $13,439 $12,960 $12,483 $11,308 Allowance for loan losses of purchased bank 269 707 --- --- --- Loans charged off: Commercial 950 639 1,263 4,521 1,229 Real Estate-Mortgage 254 222 220 524 183 Personal 4,288 2,613 1,619 1,003 1,274 ------ ------ ------ ------ ------ Total loans charged off 5,492 3,474 3,102 6,048 2,686 ------ ------ ------ ------ ------ Recovery of loans previously charged off: Commercial $ 212 $ 76 $ 377 $ 171 $ 184 Real Estate - Mortgage 42 67 97 25 36 Personal 658 377 319 256 394 ------- ------- ------- ------- ------- Total recoveries 912 520 793 452 614 ------- ------- ------- ------- ------- Net loans charged off 4,580 2,954 2,309 5,596 2,072 ------- ------- ------- ------- ------- Provision for loan losses 4,314 4,336 2,788 6,073 3,247 Ending balance - ------- ------- ------- ------- ------- Allowance for loan losses $15,531 $15,528 $13,439 $12,960 $12,483 ======= ======= ======= ======= ======= Ratio of net loans charged off to average loans outstanding for the period .44% .32% .27% .79% .28% ======== ======= ======= ======= ======= Ratio of the allowance for loan losses to loans outstanding at the end of the period 1.50% 1.51% 1.50% 1.61% 1.62% ======== ======= ======= ======= ======= The provision for loan losses is based on periodic management evaluation of the loan portfolio as well as prevailing and anticipated economic conditions, net loans charged off, past loan experience, current delinquency factors, changes in the character of the loan portfolio, specific problem loans and other factors. During 1997 and 1996, WesBanco experienced an increase in personal loan charge offs. These increases reflect a rise in personal bankruptcies consistent with national trends. 16 Item 1. Business (continued) - - ---------------------------- Allocation of the Allowance for Loan Losses - - ------------------------------------------- The following represents the allocation of the allowance for loan losses (dollars in thousands): December 31, ------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 ------------- ------------- -------------- -------------- -------------- % of % of % of % of % of Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- Specific Allowance: Commercial and Unallocated $ 8,404 20% $ 9,557 17% $10,480 20% $10,536 21% $10,468 22% Real Estate-Construction -- 3 -- 2 17 2 16 3 16 3 Real Estate-Mortgage 2,256 50 2,124 50 1,232 47 871 46 750 45 Personal 4,871 27 3,847 31 1,710 31 1,537 30 1,249 30 ------- ---- ------- ---- ------- ---- ------- ---- ------- ---- Total $15,531 100% $15,528 100% $13,439 100% $12,960 100% $12,483 100% ======= ==== ======= ==== ======= ==== ======= ==== ======= ====
WesBanco has allocated the allowance for loan losses to specific portfolio segments based upon historical net charge-off experience, changes in the level of non-performing loans, average portfolio growth, local economic conditions and management experience. During 1997, personal loans as a percentage of total loans decreased as a result of a decline in direct auto loan originations, while the increase in specific personal loan allocations of the allowance reflects an expected continued rise in personal bankruptcies. During 1996, the specific allowance for personal loans increased due primarily to an increase in outstanding balance and an increase in personal bankruptcies. Management deems the allowance for loan losses at December 31, 1997 to be adequate. Loan Risk Elements - - ------------------ The Corporation has historically maintained an allowance for loans losses which is greater than actual charge-offs. Management maintains loan quality through monthly reviews of past due loans, and a quarterly review of significant loans which are considered by affiliate bank personnel to be potential problem loans. Periodic review of significant loans are completed by personnel independent of the loan function. There are no significant loans made to customers outside the general market area of each affiliate bank. At times, in order to maintain loan volumes, loans are purchased from correspondent banks. These loans aggregate less than $4,500,000 as of December 31, 1997. Each bank within the Corporation follows its usual loan analysis procedures before a determination is made to purchase loans from correspondent banks. 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. There were no loan concentrations in excess of 10% of total consolidated loans. 17 Item 1. Business (continued) - - ----------------------------- Certificates of Deposit - - ----------------------- Maturities of certificates of deposit in denominations of $100,000 or more is as follows: (in thousands) December 31, ------------------------ 1997 1996 Maturity ---- ---- Under three months $25,325 $18,506 Three to six months 14,593 14,264 Six to twelve months 19,372 28,762 Over twelve months 44,322 30,804 -------- -------- Total $103,612 $92,336 ======== ======== Interest expense on certificates of deposit of $100,000 or more was approximately $5,901,000 in 1997, $4,658,000 in 1996, and $4,042,000 in 1995. Short-Term Borrowings - - --------------------- Securities sold under agreement to repurchase have maturities which range between one day and one year. The following table presents short-term liabilities (dollars in thousands): For the years ended December 31, -------------------------------- 1997 1996 1995 ---- ---- ---- Securities sold under agreement to repurchase: Outstanding at year end $90,528 $72,587 $70,091 Average daily outstanding 77,304 69,975 54,791 Maximum outstanding at any month end 90,528 86,854 70,091 Average interest rate: During year 5.00% 4.81% 5.17% At year end 5.62 5.48 5.45 Return on Equity and Assets - - --------------------------- The following financial ratios are presented: For the years ended December 31, -------------------------------- 1997 1996 1995 ---- ---- ---- Net income to: Average total assets 1.30% 1.34% 1.33% Average shareholders' equity 9.38 10.02 10.15 Average shareholders' equity and redeemable preferred stock 9.38 10.02 10.07 Dividend payout percentage (cash dividends, including those of pooled banks, divided by net income) 56.00 49.76 44.19 Equity to assets (average equity divided by average assets) 13.85 13.33 13.09 Equity and redeemable preferred stock to assets (average equity and redeemable preferred stock dividend by average assets) 13.85 13.33 13.20 18 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 downtown Wheeling, Follansbee, Wellsburg, Weirton, New Martinsville, Sistersville, Elizabeth, Charleston, South Charleston, Dunbar, Sissonville, Parkersburg, Kingwood, Fairmont, Morgantown, Shinnston, Bridgeport and Masontown. The Ohio bank offices are located in Barnesville, Bethesda, St. Clairsville, Woodsfield and Beallsville. During the fourth quarter of 1997, WesBanco acquired property in Charleston, West Virginia, where a new office will be constructed to facilitate WesBanco's expansion in the downtown area. Consolidated investment in net bank premises and equipment at December 31, 1997 was $34,436,000. The main office of the Registrant is located at 1 Bank Plaza, Wheeling, West Virginia, in a building owned by WesBanco Wheeling. The building contains approximately 100,000 square feet. At various building locations, WesBanco rents and will continue to look for opportunities to rent office space to unrelated businesses. Rental income generated during 1997 was not considered material. Item 3. Legal Proceedings - - -------------------------- WesBanco, Inc. and its affiliates are involved in various legal proceedings presently pending which are incidental to the business of banking in which they are engaged. These proceedings are pending in various jurisdictions in which WesBanco, Inc. and its subsidiaries are engaged in business. Based on the information which has been developed in such proceedings as of the date hereof, and available to the Corporation, management does not believe that any of such proceedings involve claims for damages which expose it to a material liability on a consolidated basis. The case previously reported in the 1995 Form 10-K, Tankovits v. Glessner, et al., Civil Action No. 96-C-59(W) is still pending. Additional development of the facts in the case has failed to disclose any significant actionable conduct on the part of the Corporation's subsidiary bank. Plaintiff has initiated some discovery in the case and motions to dismiss the case have been filed by all defendants in the proceeding. While the development of the Plaintiff's case is incomplete, and subject to that Contingency, counsel has advised the Corporation that the factual allegations contained in the Complaint do not appear to provide a basis for recovery by the Plaintiff. 19 PART II Item 5. Market for the Registrant's Common Equity and Related - - ------------------------------------------------------------- Shareholder Matters ------------------- (a) Approximate Number of Security Holders ------------------------------------------- Set forth below is the approximate number of holders of record of the Registrant's equity securities as of February 27, 1998. Title of Class Number -------------- ------ Common Stock ($2.0833 Par Value) 4,283 The number of holders listed above does not include WesBanco, Inc. 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. PART III Item 10. Executive Directors of the Corporation - - ------------------------------------------------ Name Age Position - - ---- --- --------- James C. Gardill 51 Chairman of the Board Robert H. Martin 64 Vice Chairman Edward M. George 61 President and Chief Executive Officer Paul M. Limbert 50 Executive Vice President and Chief Financial Officer Dennis P. Yaeger 47 Executive Vice President and Chief Operating Officer Peter W. Jaworski 42 Senior Vice President-Credit Administration John W. Moore, Jr. 49 Senior Vice President-Human Resources Jerome B. Schmitt 48 Senior Vice President-Investments Edward G. Sloane 59 Vice President-Management Information Systems Mr. Jaworski was appointed Senior Vice President-Credit Administration of the Corporation on January 1, 1998. Prior to that time, Mr. Jaworski was Vice President Credit Risk Management of WesBanco Bank Wheeling since July 1997. From June 1995 to July 1997, he was Senior Loan Review Officer. Mr. Jaworski joined WesBanco after serving as Senior Vice President and Senior Credit Officer of Bank One. Mr. Martin was appointed Vice Chairman of the Corporation on February 28, 1994. Prior to that time, Mr. Martin was Chairman of the Board of First Fidelity Bancorp, Inc. since 1986. Each of the remaining officers listed above have been an Executive Officer of the Corporation or one of its subsidiaries during the past five years. 20 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 ----------------------------------------------------- Page(s) ------- (1) Consolidated Balance Sheet as of December 31, 27 1997 and 1996. Consolidated Statements of Income for the years 28 ended December 31, 1997, 1996 and 1995. Consolidated Statements of Changes in Shareholders' 29 Equity for the years ended December 31, 1997, 1996 and 1995. Consolidated Statement of Cash Flows for the years 30 ended December 31, 1997, 1996 and 1995. Notes to Consolidated Financial Statements 31-43 Report of Ernst & Young LLP, Independent Auditors 44 (b) Reports on Form 8-K ------------------------ No reports of Form 8K were filed during the quarter ended December 31, 1997. 21 Item 14. Exhibits, financial statement schedules and reports on Form 8-K - - ------------------------------------------------------------------------- (continued) ----------- Exhibit Title Page(s) - - ------- ----- ------- 3.1 Articles of Incorporation of WesBanco, Inc., restated * as of November 17, 1995 (1) 3.2 Bylaws of WesBanco, Inc. (1) * 4 Specimen Certificate of WesBanco, Inc. Common Stock (2) * 10.1 The Stock Option Agreement By and Between WesBanco, Inc. * and Commercial Bancshares, Incorporated, dated September 12, 1997 (7) 10.2 The Restated WesBanco Directors' Deferred Compensation * Plan Effective December 15, 1994 (1) 10.3 Employment Agreement Between Robert H. Martin, First * National Bank in Fairmont and WesBanco dated February 28, 1994 (4) 10.4 Employment Agreement Between Ernest S. Fragale, WesBanco * Mortgage Company and WesBanco, Inc. dated the 20th Day of August, 1996 (5) 10.5 Employment Agreement Between Frank R. Kerekes, First * National Bank in Fairmont and WesBanco, dated February 28, 1994 (4) 10.6 Employment Agreement Effective January 1, 1993, By and * Between Edward M. George, WesBanco and WesBanco Bank Wheeling (4) 10.7 Employment Agreement Effective January 1, 1993, By * and Between Paul M. Limbert, WesBanco and WesBanco Bank Wheeling (4) 10.8 Employment Agreement Effective January 1, 1993, By and * Between Dennis P. Yeager, WesBanco and WesBanco Bank Wheeling (4) 10.9 Employment Agreement Effective January 1, 1993, By and * Between Jerome B. Schmitt, WesBanco and WesBanco Bank Wheeling (4) 10.10 Employment Agreement Effective December 2, 1991, By and * Between Stephen F. Decker, Albright National Bank of Kingwood, and WesBanco (4) 10.11 Employment Agreement Effective December 2, 1991, By and * Between Rudy F. Torjak, Albright National Bank of Kingwood, and WesBanco (4) 10.12 Employment Agreement Effective December 1, 1993, By and * Between Thomas L. Jones, WesBanco and WesBanco Bank South Hills (4) 10.13 Employment Agreement Effective December 1, 1993, By and * Between John W. Moore, Jr., WesBanco and WesBanco Bank Wheeling (4) 22 Item 14. Exhibits, financial statement schedules and reports on Form 8-K - - ------------------------------------------------------------------------- (continued) - - ----------- Exhibit Title Page(s) - - ------- ----- ------- 10.14 Employment Agreement By and Between The National Bank of * West Virginia, WesBanco, Inc., and C. Barton Loar dated December 30, 1996 (5) 10.15 Employment Agreement By and Between Brenda H. Robertson, * WesBanco Bank South Hills and WesBanco and dated as of June 30, 1997 (6) 11 Computation of Earnings Per Share 25 12 Ratio of Earnings to Combined Fixed Charges and 26 Preferred Stock Dividends 13 1997 Annual Report to Shareholders 27-55 The Consolidated Financial Statements, together with the report thereon of Ernst & Young LLP dated February 4, 1998, Management Discussion and Analysis of the Consolidated Financial Statements included in the accompanying 1997 Annual Report to Shareholders are incorporated herein by reference. With the exception of the aforementioned information, the 1997 Annual Report is not to be deemed filed as part of this report. Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto. 21 Subsidiaries of the Registrant 56 22 Proxy Statement for the Annual Shareholders' meeting * held April 15, 1998 (3) 23.1 Consent of Ernst & Young LLP 57 23.2 Consent of Price Waterhouse LLP 58 24 Power of Attorney 59-61 27 Financial Data Schedule 64 99.1 Report of Price Waterhouse LLP dated January 25, 62 1996, except as to the pooling-of-interests with Bank of Weirton which is as of August 30, 1996, on WesBanco, Inc. Consolidated Financial Statements as of December 31, 1995 and for the year then ended December 31, 1995 99.2 Report of Grant Thornton LLP dated October 17, 1996, 63 on Bank of Weirton Financial Statements as of December 31, 1995 and for the year then ended December 31, 1995, not presented separately herein. 23 Item 14. Exhibits, financial statement schedules and reports on Form 8-K - - ------------------------------------------------------------------------- (continued) - - ----------- * Indicates document incorporated by reference. (1) This exhibit is being incorporated by reference with respect to a prior Registration Statement filed by the Registrant on Form S-4 under Registration No. 333-3905 which was filed with the Securities and Exchange Commission on June 20, 1996. (2) This exhibit is being incorporated by reference with respect to a prior Registration Statement filed by the Registrant on Form S-4 under Registration No. 33-42157 which was filed with the Securities and Exchange Commission on August 9, 1991. (3) This exhibit is being incorporated by reference with respect to a Schedule 14A, Definitive Proxy Statement, which was filed by the Registrant with the Securities and Exchange Commission on March 13, 1998. (4) This exhibit is being incorporated by reference with respect to a prior Registration Statement filed by the Registrant on Form S-4 under Registration No. 33-72228 which was filed with the Securities and Exchange Commission on November 30, 1993. (5) This exhibit is being incorporated by reference with respect to a prior Registration Statement filed by the Registrant on Form S-4 under Registration No. 333-11461 which was filed with the Securities and Exchange Commission on November 6, 1996. (6) This exhibit is being incorporated by reference with respect to a prior Registration Statement filed by the Registrant on Form S-4 under Registration No. 333-24171 which was filed with the Securities and Exchange Commission on April 25, 1997. (7) Incorporated by reference to a schedule 13D filed by WesBanco with the Securities and Exchange Commission on September 22, 1997. 24 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 13, 1998. 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 13, 1998. 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. James E. Altmeyer Earl C. Atkins Ray A. Byrd R. Peterson Chalfant Christopher V. Criss James D. Entress Ernest S. Fragale James C. Gardill Edward M. George By: /s/James C. Gardill John W. Kepner ___________________________ Frank R. Kerekes James C. Gardill Robert H. Martin Attorney-in-fact Eric Nelson Melvin C. Snyder, Jr. Joan C. Stamp Carter W. Strauss Reed J. Tanner J. Christopher Thomas John A. Welty William E. Witschey EX-11 2 25 EXHIBIT 11 WesBanco, Inc. Computation of Earnings Per Share* (Dollars in thousands, except per share amounts) For the years ended December 31, ----------------------------------- 1997 1996 1995 ---- ---- ---- Net Income $ 22,274 $ 21,161 $ 20,304 Less: Preferred dividends and discount accretion --- --- 164 --------- --------- --------- Net income applicable to common stock $ 22,274 $ 21,161 $ 20,140 ========= ========= ========= Average common share outstanding 15,867,608 15,253,107 15,240,492 Earnings per share $ 1.40 $ 1.39 $ 1.32 - - ------------------------------------------------------------------------------ * Adjusted to reflect a 3 for 2 stock split effected in the form of a 50% stock dividend, declared June 19, 1997. The Corporation adopted the provision of SFAS No. 128, "Earnings per Share," during 1997. EX-12 3 26 EXHIBIT 12 WesBanco, Inc. Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (Dollar amounts in thousands) For the years ended December 31, --------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Net income $22,274 $21,161 $20,304 $17,892 $19,718 Provision for income taxes 8,157 8,344 7,656 6,283 7,070 ------- ------- ------- ------- ------- Earnings before provision for income taxes 30,431 29,505 27,960 24,175 26,788 ------- ------- ------- ------- ------- Preferred stock dividend requirements --- --- 164 183 184 Ratio of pretax income to net income 1.37% 1.39% 1.38% 1.35% 1.36% ------- ------- ------- ------- ------- Preferred dividend factor $ 0 $ 0 $ 226 $ 247 $ 250 Ratio of pretax net income to preferred dividends 0% 0% 123.8% 97.8% 107.2% ======== ======= ======= ======= ======= WesBanco has no fixed charges as defined by Regulation S-K Item 503-Summary; Risk Factors; Ratio of Earnings to Fixed Charges. EX-13 4 27 EXHIBIT 13 WESBANCO, INC. CONSOLIDATED BALANCE SHEET - - ----------------------------------------------------------------------------- (dollars in thousands, except per share amounts) December 31, ------------------------- 1997 1996 - - ----------------------------------------------------------------------------- ASSETS Cash and due from banks $ 56,446 $ 58,828 Due from banks - interest bearing 198 197 Federal funds sold 71,513 10,970 Investment securities: Held to maturity (market values of $226,789 and $250,132, respectively) 224,047 249,108 Available for sale carried at market value 342,510 276,201 - - ----------------------------------------------------------------------------- Total investment securities 566,557 525,309 - - ----------------------------------------------------------------------------- Loans, net of unearned income 1,032,983 1,027,353 Allowance for loan losses (15,531) (15,528) - - ----------------------------------------------------------------------------- Net loans 1,017,452 1,011,825 - - ----------------------------------------------------------------------------- Bank premises and equipment 34,436 32,670 Accrued interest receivable 12,942 11,748 Other assets 29,751 26,224 - - ----------------------------------------------------------------------------- Total Assets $1,789,295 $1,677,771 - - ----------------------------------------------------------------------------- LIABILITIES Deposits: Non-interest bearing demand $ 158,323 $ 159,176 Interest bearing demand 383,978 284,143 Savings deposits 276,341 323,673 Certificates of deposit 595,612 575,828 - - ----------------------------------------------------------------------------- Total deposits 1,414,254 1,342,820 - - ----------------------------------------------------------------------------- Federal funds purchased and repurchase agreements 90,881 81,089 Other short-term borrowings 15,804 11,682 Accrued interest payable 5,804 5,826 Other liabilities 13,002 8,822 - - ----------------------------------------------------------------------------- Total Liabilities 1,539,745 1,450,239 - - ----------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Preferred stock, no par value; 1,000,000 shares authorized; none outstanding Common stock ($2.0833 par value; 25,000,000 shares authorized; 16,072,051 and 10,538,993 shares issued, respectively) 33,483 21,956 Capital surplus 44,550 36,949 Retained earnings 168,755 170,116 Treasury stock (56,381 and 17,139 shares, respectively, at cost) (1,675) (544) Market value adjustment on investments available for sale-net of tax effect 5,026 (90) Deferred benefits for directors and employees (589) (855) - - ----------------------------------------------------------------------------- Total Shareholders' Equity 249,550 227,532 - - ----------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $1,789,295 $1,677,771 - - ----------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 28 WESBANCO, INC. CONSOLIDATED STATEMENT OF INCOME - - ----------------------------------------------------------------------------- (dollars in thousands, except per share amounts) For the years ended December 31, -------------------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------ Interest income: Interest and fees on loans $ 90,467 $ 81,449 $ 74,452 - - ------------------------------------------------------------------------------ Interest on investment securities: Taxable 23,062 22,066 23,614 Tax-exempt 8,474 7,642 7,524 - - ------------------------------------------------------------------------------ Total interest on investment securities 31,536 29,708 31,138 - - ------------------------------------------------------------------------------ Other interest income 2,527 1,781 2,492 - - ------------------------------------------------------------------------------ Total interest income 124,530 112,938 108,082 - - ------------------------------------------------------------------------------ Interest expense: Interest bearing demand deposits 10,484 7,064 7,936 Savings deposits 7,451 8,817 10,333 Certificates of deposit 33,295 28,551 25,134 - - ------------------------------------------------------------------------------ Total interest on deposits 51,230 44,432 43,403 Other borrowings 4,544 3,786 3,167 - - ------------------------------------------------------------------------------ Total interest expense 55,774 48,218 46,570 - - ------------------------------------------------------------------------------ Net interest income 68,756 64,720 61,512 Provision for loan losses 4,314 4,336 2,788 - - ------------------------------------------------------------------------------ Net interest income after provision for loan losses 64,442 60,384 58,724 - - ------------------------------------------------------------------------------ Other income: Trust fees 6,833 5,442 4,716 Service charges and other income 7,350 6,592 6,213 Net gains on sales of securities 510 239 437 - - ------------------------------------------------------------------------------ Total other income 14,693 12,273 11,366 - - ------------------------------------------------------------------------------ Other expenses: Salaries and wages 21,163 19,110 18,272 Employee benefits 4,610 4,500 4,945 Net occupancy expense 2,676 2,651 2,672 Equipment expense 4,464 3,135 2,461 Other operating expense 15,791 13,756 13,780 - - ------------------------------------------------------------------------------ Total other expenses 48,704 43,152 42,130 - - ------------------------------------------------------------------------------ Income before provision for income taxes 30,431 29,505 27,960 Provision for income taxes 8,157 8,344 7,656 - - ------------------------------------------------------------------------------ Net Income $ 22,274 $ 21,161 $ 20,304 - - ------------------------------------------------------------------------------ Preferred stock dividends and accretion - - $ 164 Net income applicable to common stock $ 22,274 $ 21,161 20,140 Earnings per share 1.40 1.39 1.32 Average shares outstanding 15,867,608 15,253,107 15,240,492 - - ------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 29 WESBANCO, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - - ------------------------------------------------------------------------------ (dollars in thousands, except per share amounts) For the years ended December 31, 1997, 1996, and 1995 ------------------------------------------------------------------------------ Market Value Adjustment on Deferred Investments Benefits for Shares Common Capital Retained Treasury Available Directors & Outstanding Stock Surplus Earnings Stock for Sale Employees Total - - ----------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 10,199,958 $21,608 $32,447 $148,316 $(4,735) $(4,482) $(849) $192,305 - - ----------------------------------------------------------------------------------------------------------- Net Income 20,304 20,304 Cash dividends: Common ($.64 per share) (8,139) (8,139) Common by pooled bank prior to acquisition (834) (834) Preferred dividends & accretion (164) (164) ESOP contribution 3,500 96 96 Net treasury shares purchased (128,597) (3,456) (3,456) Redemption of preferred stock 111,111 (1,210) 3,057 1,847 ESOP borrowing (129) (129) Principal payment on ESOP debt 200 200 Deferred benefits for directors (365) (365) Market value adjustment on investments available for sale-net of tax effect 5,331 5,331 - - ----------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 10,185,972 21,608 31,237 159,483 (5,038) 849 (1,143) 206,996 - - ----------------------------------------------------------------------------------------------------------- Net Income 21,161 21,161 Cash dividends: Common ($.72 per share) (10,125) (10,125) Common by pooled bank prior to acquisition (403) (403) Stock issued for acquisitions 378,008 348 5,674 5,899 11,921 Net treasury shares purchased (42,126) 38 (1,405) (1,367) Principal payment on ESOP debt 365 365 Deferred benefits for directors (77) (77) Market value adjustment on investments available for sale-net of tax effect (939) (939) - - ----------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 10,521,854 21,956 36,949 170,116 (544) (90) (855) 227,532 - - ----------------------------------------------------------------------------------------------------------- Net Income 22,274 22,274 Cash dividends: Common ($.786 per share) (12,474) (12,474) Net treasury shares purchased (186,362) 82 (6,032) (5,950) 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) ---- Stock issued for acquisition 323,175 366 7,519 4,901 12,786 ESOP borrowing (134) (134) Principal payment on ESOP debt 450 450 Deferred benefits for directors (50) (50) Market value adjustment on investments available for sale-net of tax effect 5,116 5,116 - - ----------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 16,015,670 $33,483 $44,550 $168,755 $(1,675) $5,026 $(589) $249,550 - - -----------------------------------------------------------------------------------------------------------
There was no activity or outstanding balances in Nonredeemable Preferred Stock for the years ended December 31, 1997, 1996 and 1995. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 30 WESBANCO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS - - ------------------------------------------------------------------------------ (dollars in thousands, except per share amounts) For the years ended December 31, ---------------------------------- Increase (Decrease) in Cash and Cash Equivalents 1997 1996 1995 - - ------------------------------------------------------------------------------------- Cash flows from operating activities: Net Income $22,274 $21,161 $20,304 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,245 5,563 7,169 Provision for loan losses 4,314 4,336 2,788 Gains on sales of investment securities - net (510) (239) (437) Deferred income taxes 373 (143) 82 Other - net 435 (387) 269 Net change in assets and liabilities: Interest receivable (1,030) 960 873 Other assets 2,860 (3,461) (6,115) Interest payable (302) (1,358) 1,468 Other liabilities 1,010 665 (906) - - -------------------------------------------------------------------------------------- Net cash provided by operating activities 34,669 27,097 25,495 - - -------------------------------------------------------------------------------------- Cash flows from investing activities: Investment securities held to maturity: Proceeds from maturities and calls 93,925 113,454 80,059 Payments for purchases (51,438) (66,161) (67,026) Investment securities available for sale: Proceeds from sales 41,735 89,075 59,291 Proceeds from maturities and calls 52,018 43,843 47,901 Payments for purchases (160,233) (183,065) (50,145) Purchase of subsidiaries, net of cash acquired 6,635 2,127 --- Net (increase) decrease in loans 7,560 (89,004) (84,815) Purchases of premises and equipment-net (4,783) (5,978) (3,215) - - -------------------------------------------------------------------------------------- Net cash used by investing activities (14,581) (95,709) (17,950) - - -------------------------------------------------------------------------------------- Cash flows from financing activities: Net increase in deposits 42,862 37,723 258 Increase in federal funds purchased and repurchase agreements 9,491 9,681 4,707 Increase (decrease) in short-term borrowings 4,122 10,280 (3,042) Net payments related to ESOP debt (316) (364) (71) Dividends paid (12,117) (9,799) (8,854) Purchases of treasury shares-net (5,950) (1,367) (3,456) Other-net (19) 863 57 - - -------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 38,073 47,017 (10,401) - - -------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 58,161 (21,595) (2,856) Cash and cash equivalents at beginning of year 69,798 91,393 94,249 - - -------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $127,959 $69,798 $91,393 - - -------------------------------------------------------------------------------------- During 1997, 1996 and 1995, WesBanco paid $55,797, $49,576, and $45,103 in interest on deposits and other borrowings and $7,720, $8,578, and $8,113 for income taxes, respectively. During 1997, and 1996, non cash activity consisted of common stock issued in purchase acquisitions totaling $12,786 and $11,921, respectively. During 1995, non-cash activity consisted of the redemption of 9,925 shares of preferred stock. Of the total shares redeemed, 9,723 shares were exchanged for 111,111 shares of WesBanco common stock in this transaction. The remaining 202 shares were redeemed for cash at $190 per preferred share and are included in other financing activities. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 31 WESBANCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - - ----------------------------------------------------------------------------- NOTE 1: ACCOUNTING POLICIES - - ----------------------------------------------------------------------------- WesBanco, Inc. is a multi-bank holding company offering a full range of financial services, including trust and mortgage banking services, through offices located in West Virginia and Eastern Ohio. 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. Reclassification: Certain prior year financial information has been reclassified to conform to the presentation in 1997. 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. Investment securities: Investments Available for Trading: The Corporation did not have a trading portfolio during the two year period ended December 31, 1997. Investments Held to Maturity: Investment 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. Investments 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 shareholders' equity. 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 held for sale: Loan originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Losses, if any, are recorded in other income based on the difference between the market value and the aggregate cost. Loans: Interest is accrued as earned on loans except where doubt exists as to collectability, in which case recognition of income is discontinued. 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. 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. The Corporation recognizes interest income on nonaccrual impaired loans on the cash basis. The allowance for loan losses is maintained at a level considered adequate by management to provide for potential loan losses. The allowance is increased by provisions charged to operating expenses and reduced by loan losses, net of recoveries. The amount of allowance is based on management's evaluation of the loan portfolio, as well as prevailing and anticipated economic conditions, past loan loss experience, current delinquency factors, changes in the character of the loan portfolio, specific problem loans and other relevant factors. Bank premises and equipment: Bank premises and equipment are stated at cost less accumulated depreciation, 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 32 NOTE 1: ACCOUNTING POLICIES (CONTINUED) - - ----------------------------------------------------------------------------- capitalized. Gains and losses on bank 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. Purchase method of accounting: Net assets of companies acquired in purchase transactions are recorded at fair market value at the date of acquisition. The excess of cost over net assets of affiliates purchased (goodwill) is amortized over 15 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: The Corporation adopted the provisions of SFAS No. 128, "Earnings Per Share," during 1997. Under the provisions of SFAS No. 128, previously reported primary and fully diluted earnings per share were replaced with basic and diluted earnings per share amounts, with restatement required for all periods presented. Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is calculated by increasing the denominator for the assumed conversion of all potentially dilutive securities. WesBanco does not have any dilutive securities, therefore, basic and diluted earnings per share are the same. On June 19, 1997, the Corporation's Board of Directors declared a 3 for 2 stock split effected in the form of a 50% stock dividend, payable August 1, 1997. Average common shares outstanding and per common share data in the consolidated financial statements have been retroactively adjusted to reflect the common stock dividend. 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. New accounting standards: SFAS No. 130, "Reporting Comprehensive Income," is effective for fiscal years beginning after December 15, 1997. The statement establishes standards for reporting and disclosure of comprehensive income and its components. Comprehensive income includes net income and all other changes in shareholders' equity except those resulting from investments and distributions of owners. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" is effective for financial statements for periods beginning after December 15, 1997. This Statements requires financial and descriptive information about an entity's operating segments to be included in the annual financial statements. These standards, when implemented, are not expected to materially impact the reported financial position or results of operations of the Corporation. NOTE 2: AGREEMENT TO MERGE - - ------------------------------------------------------------------------------ On September 30, 1997, WesBanco and Commercial BancShares, Incorporated jointly announced the signing of a definitive Agreement and Plan of Merger providing for Commercial, a multibank holding company headquartered in Parkersburg, West Virginia, to merge with WesBanco affiliated companies. Under the terms of the definitive Agreement and Plan of Merger, WesBanco will exchange 2.85 shares of common stock for each share of Commercial common stock outstanding in a tax free exchange. The merger, which is based on a fixed exchange ratio, will be accounted for as a pooling of interests. In addition, Commercial has granted to WesBanco an option, exercisable under certain conditions, to purchase up to 19.9% of Commercial's outstanding common shares. The transaction, which is subject to, among other things, approval by the stockholders of Commercial and WesBanco, is expected to be consummated on March 31, 1998. Prior to its agreement with WesBanco, Commercial executed a definitive agreement to acquire Gateway Bancshares, Inc., located in McMechen, West Virginia. The Gateway acquisition is expected to be consummated during March 1998. As of December 31, 1997, Gateway reported total assets of approximately $31 million, which represented 1.4% of the pro forma combined assets of WesBanco and Commerical. Gateway is considered immaterial to the transaction between WesBanco and Commercial. 33 NOTE 2: AGREEMENT TO MERGE (CONTINUED) - - ------------------------------------------------------------------------------ WesBanco, including Commercial, on a pro forma combined basis reflected the following: (unaudited, in thousands) Pro forma December 31, 1997 WesBanco Commercial Combined - - ----------------------------------------------------------------------------- Total Assets $1,789,295 $428,312 $2,217,255 Total Liabilities 1,539,745 386,114 1,925,789 For the year ended December 31, 1997 - - ----------------------------------------------------------------------------- Net interest income $68,756 $19,029 $87,785 Net income 22,274 2,937 25,211 - - ----------------------------------------------------------------------------- NOTE 3: COMPLETED BUSINESS COMBINATIONS - - ----------------------------------------------------------------------------- On August 30, 1996, WesBanco consummated a pooling of interests acquisition with the Bank of Weirton, issuing 1,690,000 shares of common stock in the transaction. As of the acquisition date, Bank of Weirton reported total assets of approximately $177,877,000. The following financial information presents the combined results of WesBanco and Bank of Weirton as if the acquisition had occurred as of the beginning of 1995: (in thousands) For the WesBanco, Inc. year ended as previously Bank of December 31, 1995 presented Weirton WesBanco, Inc. - - ----------------------------------------------------------------------------- Net interest income $56,029 $5,483 $61,512 Net income 18,189 2,115 20,304 - - ----------------------------------------------------------------------------- The following table summarizes WesBanco's purchase acquisitions for the three year period ended December 31, 1997: (dollars in thousands)
- - ------------------------------------------------------------------------------------------------------ Purchase Assets Date Entity price Consideration Goodwill Acquired - - ------------------------------------------------------------------------------------------------------ 6/30/97 Shawnee Bank, Inc. $12,786 323,175 shares of common stock $6,498 $34,695 12/30/96 Vandalia National Corporation 12,046* 345,545 shares of common stock 7,783 55,372 8/20/96 Universal Mortgage Company 856 32,463 shares of common stock 538 1,185 - - ------------------------------------------------------------------------------------------------------
*Includes cash for stock warrants of $981 NOTE 4: INVESTMENT SECURITIES - - ------------------------------------------------------------------------------ The following tables summarize amortized cost and fair values of held to maturity and available for sale securities: (in thousands) Held to Maturity ----------------------------------------------------------------------------------------- December 31, 1997 December 31, 1996 ------------------------------------------- -------------------------------------------- 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 $ 67,600 $ 274 $ 4 $ 67,870 $ 99,457 $ 287 $ 38 $ 99,706 Obligations of states and political subdivisions 154,170 2,900 428 156,642 147,643 1,426 651 148,418 Other debt securities 2,277 _ _ 2,277 2,008 _ _ 2,008 - - ----------------------------------------------------------------------------------------------------------------- Totals $224,047 $3,174 $432 $226,789 $249,108 $1,713 $ 689 $250,132 - - -----------------------------------------------------------------------------------------------------------------
34 NOTE 4: INVESTMENT SECURITIES (CONTINUED) - - ---------------------------------------------------------------------------- Available For Sale ----------------------------------------------------------------------------------------- December 31, 1997 December 31, 1996 ------------------------------------------- -------------------------------------------- Gross Gross Estimate 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 $214,825 $1,590 $507 $215,908 $161,838 $ 714 $ 735 $161,817 Obligations of states and political subdivisions 19,086 38 130 18,994 14,233 21 134 14,120 Mortgage-backed & other debt securities 97,133 6,711 98 103,746 99,003 405 624 98,784 - - ---------------------------------------------------------------------------------------------------------------- Total debt securities 331,044 8,339 735 338,648 275,074 1,140 1,493 274,721 Equity securities 3,177 689 4 3,862 1,271 209 _ 1,480 - - ---------------------------------------------------------------------------------------------------------------- Totals $334,221 $9,028 $739 $342,510 $276,345 $1,349 $1,493 $276,201 - - ----------------------------------------------------------------------------------------------------------------
The following table summarizes amortized cost and estimated fair value of securities by maturity December 31, 1997 ---------------------------------------------- Held to Maturity Available for Sale ---------------------- --------------------- Estimated Estimated Amortized Fair Amortized Fair (in thousands) Cost Value Cost Value - - ------------------------------------------------------------------------------ Within one year $ 39,582 $ 39,700 $ 45,640 $ 47,708 After one year, but within five 97,734 98,772 178,197 182,845 After five years, but within ten 52,896 54,227 105,885 106,699 After ten years 33,835 34,090 4,499 5,258 - - ------------------------------------------------------------------------------ Total $224,047 $226,789 $334,221 $342,510 - - ------------------------------------------------------------------------------ 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. Investment securities with par values aggregating $178,550,000 at December 31, 1997 and $156,876,000 at December 31, 1996 were pledged to secure public and trust funds. Gross security gains of $552,000, $602,000, and $513,000 and gross security losses of $42,000, $363,000 and $76,000 were realized for the years ended December 31, 1997, 1996 and 1995, respectively. NOTE 5: LOANS - - ------------------------------------------------------------------------------ The following table is a summary of total loans: December 31, -------------------------- (in thousands) 1997 1996 - - ------------------------------------------------------------------------------ Loans: Commercial $ 206,909 $ 177,136 Real estate - construction 25,306 21,556 Real estate - mortgage 515,194 510,778 Personal, net of unearned income 273,869 316,900 - - ------------------------------------------------------------------------------ 1,021,278 1,026,370 Loans held for sale 11,705 983 - - ------------------------------------------------------------------------------ Loans, net of unearned income $1,032,983 $1,027,353 - - ------------------------------------------------------------------------------ 35 NOTE 5: LOANS (CONTINUED) - - ----------------------------------------------------------------------------- The following table represents changes in the allowance for loan losses: For the years ended December 31, --------------------------------- (in thousands) 1997 1996 1995 - - ----------------------------------------------------------------------------- Balance, January 1 $15,528 $13,439 $12,960 Allowance for loan losses of purchased banks 269 707 _ Provision for loan losses 4,314 4,336 2,788 Losses charged to the allowance (5,492) (3,474) (3,102) Recoveries 912 520 793 - - ----------------------------------------------------------------------------- Net losses charged to the allowance (4,580) (2,954) (2,309) - - ----------------------------------------------------------------------------- Balance, December 31 $15,531 $15,528 $13,439 - - ----------------------------------------------------------------------------- The following tables summarize loans classified as impaired: December 31, ----------------------- (in thousands) 1997 1996 - - ----------------------------------------------------------------------------- Nonaccrual $ 6,658 $ 4,664 Renegotiated 773 2,150 Other classified loans: Doubtful -- 94 Substandard 3,765 3,377 - - ----------------------------------------------------------------------------- Total impaired loans $11,196 $10,285 - - ----------------------------------------------------------------------------- Impaired loans with a related allowance for loan losses $7,291 $6,328 Allowance for loan losses on impaired loans 1,817 2,120 - - ----------------------------------------------------------------------------- For the years ended December 31, -------------------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------- Average impaired loans $12,692 $11,541 $6,773 Amount of contractual interest income on impaired loans 676 595 382 Amount of interest income recognized on a cash basis 78 82 164 - - ------------------------------------------------------------------------------- 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. Subsidiaries of WesBanco, 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 $32,507,000, $40,114,000, and $46,809,000 as of December 31, 1997, 1996 and 1995, respectively. During 1997 $25,358,000 of loans were funded and $32,965,000 of loans were repaid. NOTE 6: BANK PREMISES AND EQUIPMENT - - ------------------------------------------------------------------------------ Bank premises and equipment include: Estimated December 31, (in thousands) useful life 1997 1996 - - ------------------------------------------------------------------------------ Land and improvements (3-10 years) $ 7,330 $ 6,902 Buildings and improvements (4-50 years) 36,128 33,191 Furniture and equipment (2-25 years) 27,109 24,684 - - ------------------------------------------------------------------------------ 70,567 64,777 Less - Accumulated depreciation (36,131) (32,107) - - ------------------------------------------------------------------------------ Total $34,436 $32,670 - - ------------------------------------------------------------------------------ 36 NOTE 7: CERTIFICATES OF DEPOSIT - - ------------------------------------------------------------------------------ Certificates of deposit in denominations of $100,000 or more were $103,612,000, and $92,336,000 as of December 31, 1997 and 1996, respectively. Related interest expense was $5,901,000 in 1997 and $4,658,000 in 1996. At December 31, 1997, the scheduled maturities of certificates of deposit are as follows: (in thousands) 1998 $352,319 1999 149,717 2000 56,821 2001 12,304 2002 and thereafter 24,451 - - ----------------------------------- Total $595,612 - - ----------------------------------- NOTE 8: REPURCHASE AGREEMENTS AND OTHER SHORT-TERM BORROWINGS - - ------------------------------------------------------------------------------ Federal funds purchased and securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Other short-term borrowings consist of treasury tax and loan deposits and a $10,000,000 fixed rate commitment with the Federal Home Loan Bank of Pittsburgh. The loan was entered into with an affiliate bank for liquidity purposes to fund a growing loan demand in its market area. The loan has a guaranteed interest rate of 6.1% and will mature on July 15, 1998. Information concerning securities sold under agreements to repurchase is summarized as follows: For the years ended December 31, --------------------------- (in thousands) 1997 1996 - - ----------------------------------------------------------------------------- Average balance during the year $77,304 $69,975 Average interest rate during the year 5.00% 4.81% Maximum month-end balance during the year $90,528 $86,854 - - ----------------------------------------------------------------------------- NOTE 9: EMPLOYEE BENEFIT PLANS - - ----------------------------------------------------------------------------- Defined benefit pension plan: At December 31, 1997, 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 the years of service and the 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. During 1996, all the assets and liabilities of Bank of Weirton's defined benefit plan were merged into the WesBanco plan. Prior to the merger, Bank of Weirton had a non-contributory defined benefit pension plan. The Bank of Weirton's plan benefit formula was based on length of service and average employee compensation. Net periodic pension cost benefit for the plans include the following components: For the years ended December 31, -------------------------------- (in thousands) 1997 1996 1995 - - ------------------------------------------------------------------------------ Service cost - benefits earned during year $ 773 $ 755 $ 913 Interest cost on projected benefit obligation 1,406 1,380 1,543 Actual return on plan assets (3,582) (3,313) (3,714) Net amortization and deferral 1,194 1,329 2,318 - - ------------------------------------------------------------------------------ Net periodic pension cost (benefit) $ (209) $ 151 $1,060 - - ------------------------------------------------------------------------------ 37 NOTE 9: EMPLOYEE BENEFIT PLANS (CONTINUED) - - ------------------------------------------------------------------------------ The following table sets forth the defined benefit pension plan's funded status and the asset reflected in the Consolidated Balance Sheet: December 31, ---------------------- (in thousands) 1997 1996 - - ----------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefit obligation $ 16,041 $ 15,296 Accumulated benefit obligation 17,611 17,001 - - ----------------------------------------------------------------------------- Projected benefit obligation $(20,830) $(19,642) Plan assets at current market value, primarily listed stocks, bonds and cash equivalents 27,680 24,928 - - ----------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 6,850 5,286 Unrecognized prior service cost (1,479) (1,655) Unrecognized net gain (2,342) (1,245) Unrecognized obligation 27 33 - - ----------------------------------------------------------------------------- Net pension asset $ 3,056 $ 2,419 - - ----------------------------------------------------------------------------- Actuarial assumptions used in the determination of the projected benefit obligation in the plan are as follows: For the years ended December 31, ------------------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------ Weighted average discount rates 7.25% 7.50% 7.50% 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 - - ------------------------------------------------------------------------------ Assumptions used in the Bank of Weirton's plan were 8.0% for discount rates in 1996 and 1995, and 8.0% and 8.5% for expected long term return on assets in 1996 and 1995, respectively. The Bank of Weirton rates of compensation are based on a decreasing percentage scale as age increases. Postretirement medical and death benefit plan: The Corporation currently provides a death benefit and a contributory health insurance plan for all retirees. Contributions toward health insurance are fixed amounts which may be changed at the Corporation's sole discretion. For 1997, the health insurance benefit for retirees was $100 per month and the death benefit for retirees was $7,500. As of December 31,1997 substantially all employees were included in the post retirement medical and death benefit programs. Net periodic postretirement benefit costs other than pension costs include the following components: For the years ended December 31, ------------------------------- (in thousands) 1997 1996 1995 - - ----------------------------------------------------------------------------------- Service cost - benefits earned during year $ 99 $128 $ 71 Interest cost on projected benefit obligation 209 191 173 Prior service cost 70 70 57 - - ----------------------------------------------------------------------------------- Net periodic postretirement benefit cost other than pensions $378 $389 $301 - - -----------------------------------------------------------------------------------
The following table sets forth the liability reflected in the Consolidated Balance Sheet: December 31, -------------------- (in thousands) 1997 1996 - - ---------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $1,375 $1,178 Fully eligible active plan participants 1,728 1,579 - - ---------------------------------------------------------------------------- Total 3,103 2,757 Unrecognized prior service cost (986) (1,056) Unrecognized net loss (249) (31) - - ---------------------------------------------------------------------------- Net postretirement benefit liability $1,868 $1,670 - - ---------------------------------------------------------------------------- 38 NOTE 9: EMPLOYEE BENEFIT PLANS (CONTINUED) - - ------------------------------------------------------------------------------ Weighted average discount rate assumptions used in the accounting for the WesBanco postretirement plan were 7.25%, 7.5% and 7.5% for 1997, 1996 and 1995, respectively. Postretirement benefits are funded as incurred resulting in cash payments of approximately $169,000, $138,000 and $126,000 for the years ended December 31, 1997, 1996 and 1995, respectively. The Corporation's portion of the cost of health care benefits is not expected to increase during 1998. An assumption of a 1% per year increase in the benefit level would increase the expense in health care benefits by $48,521 or 16% for the year ended 1997 and increase the accumulated postretirement benefit obligation by $299,393 or 13% as of December 31, 1997. KSOP: (Employee Stock Ownership and 401(k) Plan) The Corporation's KSOP consists of a qualified noncontributory Employee Stock Ownership Plan and Trust Agreement, which was expanded on January 1, 1996 to include the provisions of a 401(k). As of December 31, 1997, substantially all employees were included in the KSOP. Under the 401(k) provisions, the Corporation makes matching contributions to the 401(k), up to a maximum of 1.5% of employees' annual compensation, subject to regulatory limitations. The employer's matching contributions to the 401(k) plan during 1997 and 1996 were $236,000 and $201,000, respectively. Under the employee stock ownership portion of the Plan, a Trust holds 162,375 shares of WesBanco common stock. Approximately 156,530 shares of stock were allocated to specific employee accounts as of December 31, 1997. During November 1995, the Trust renegotiated its existing line of credit with an affiliated lender. Conditions in the loan agreement remain the same, providing for a line of credit in the aggregate amount of $1,000,000 to facilitate purchases of WesBanco common stock in the open market. 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 $1,000,000 revolving line of credit had a balance of $97,000 and $413,000 as of December 31, 1997 and 1996, respectively. Total contributions to the employee stock ownership portion of the Plan during 1997 were $490,000. Contributions during 1996 and 1995 were $400,000 and $350,000, respectively. NOTE 10: OTHER OPERATING EXPENSE - - ---------------------------------------------------------------------------- Other operating expense consists of the following: For the years ended December 31, ----------------------------------- (in thousands) 1997 1996 1995 - - ----------------------------------------------------------------------------- Customer and office supplies $ 1,460 $ 1,465 $ 1,291 Postage and freight 1,221 1,229 1,047 Legal and accounting fees 870 944 998 Marketing media 1,630 1,732 1,303 Miscellaneous taxes 2,452 1,977 1,787 FDIC Insurance 168 12 1,462 Goodwill amortization 769 18 5 Other 7,221 6,379 5,887 - - ----------------------------------------------------------------------------- Total $15,791 $13,756 $13,780 - - ----------------------------------------------------------------------------- NOTE 11: 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, ------------------------------- 1997 1996 1995 - - ----------------------------------------------------------------------------- Federal statutory tax rate 35% 35% 35% Tax-exempt interest income from securities of states and political subdivisions (8) (8) (9) State income taxes 3 3 3 Other - net (3) (2) (2) - - ----------------------------------------------------------------------------- Effective tax rate 27% 28% 27% - - ----------------------------------------------------------------------------- 39 NOTE 11: INCOME TAXES (CONTINUED) - - ----------------------------------------------------------------------------- The provision for income taxes consists of the following: For the years ended December 31, -------------------------------- (in thousands) 1997 1996 1995 - - ----------------------------------------------------------------------------- Current - Federal $6,361 $7,142 $6,363 State 1,423 1,345 1,208 Deferred - Federal 332 (146) 87 State 41 3 (2) - - ----------------------------------------------------------------------------- Total $8,157 $8,344 $7,656 - - ----------------------------------------------------------------------------- Tax expense applicable to securities transactions $206 $96 $174 - - ----------------------------------------------------------------------------- Deferred tax assets and liabilities are comprised of the following: December 31, ----------------------------- (in thousands) 1997 1996 1995 - - ----------------------------------------------------------------------------- Deferred tax assets: Allowance for loan losses $5,521 $5,398 $4,532 Deferred compensation 338 335 355 Other 39 167 117 - - ----------------------------------------------------------------------------- Gross deferred tax assets 5,898 5,900 5,004 - - ----------------------------------------------------------------------------- Deferred tax liabilities: Tax effect of market value adjustment on investment securities available for sale 3,245 - 542 Depreciation 1,248 1,095 925 Purchase accounting adjustments 458 214 167 Accretion on investments 214 143 136 Postretirement and pension expense 456 252 - Other - 237 257 - - ----------------------------------------------------------------------------- Gross deferred tax liabilities 5,621 1,941 2,027 - - ----------------------------------------------------------------------------- Deferred tax asset valuation allowance - - - - - ----------------------------------------------------------------------------- Net deferred tax assets $ 277 $3,959 $2,977 - - ----------------------------------------------------------------------------- NOTE 12: 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 the discount rates, cash flow assumptions, and risk assumptions used. Therefore, the fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments. 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, ----------------------------------------------- 1997 1996 ---------------------- ---------------------- Carrying Fair Carrying Fair (in thousands) Amount Value Amount Value - - ------------------------------------------------------------------------------------------ Financial assets: Cash and short-term investments $ 128,157 $ 128,157 $ 69,995 $ 69,995 Investment securities-held to maturity 224,047 226,789 249,108 250,132 Investment securities-available for sale 342,510 342,510 276,201 276,201 Net loans (including loans held for sale) 1,017,452 1,022,579 1,011,825 1,015,831 Financial liabilities: Deposits 1,414,254 1,415,618 1,342,820 1,343,730 Short-term borrowings 106,685 106,685 92,771 92,771 - - --------------------------------------------------------------------------------------------
40 NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) - - ----------------------------------------------------------------------------- The following methods and assumptions are used to estimate the fair value of like kinds of financial instruments: Cash and Short-Term Investments: The carrying amount for cash and short-term investments is a reasonable estimate of fair value. Short-term investments consist of federal funds sold. Investment Securities: Fair values for investment securities are based on quoted market prices, if available. If market prices are not available, then quoted market prices of similar instruments are used. Loans 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. The fair value of credit cards is estimated based on the anticipated average cost of soliciting a new account and the present credit quality of the outstanding balances. For nonaccrual loans, fair value is estimated by discounting expected future principal cash flows only. 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. Short-Term Borrowings: For short-term borrowings, which include federal funds purchased, repurchase agreements, a Federal Home Loan Bank commitment, and other short-term borrowings, the carrying amount is a reasonable approximation of fair value. Off-Balance Sheet Instruments: Off-balance sheet instruments consist of commitments to extend credit, standby letters of credit and an interest rate swap agreement. 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 fair value for the interest rate swap agreement, which has a notional value of $10 million is estimated by obtaining quotes from brokers. The value represents the amount the Corporation would receive or pay to terminate the agreement considering current interest rates. The estimated fair value of the commitments to extend credit and the interest rate swap are immaterial. NOTE 13: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - - ------------------------------------------------------------------------------ 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 outstanding various commitments to extend credit approximating $98,446,000 and $70,527,000 and standby letters of credit of $8,224,000 and $7,909,000 as of December 31, 1997 and 1996, 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. 41 NOTE 13: FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED) - - ----------------------------------------------------------------------------- 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. 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. As of December 31, 1997, the Corporation had an interest rate swap agreement with a notional value of $10 million and a fixed pay rate of 5.29%/variable receive rate of 60% of Bank Prime Rate, due to mature in 1999. 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 14: 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 banks and have had, and are expected to have, transactions with the banks in the ordinary course of business. In the opinion of management, such transactions are consistent with prudent banking practices and are within applicable banking regulations. NOTE 15: REGULATORY MATTERS - - ------------------------------------------------------------------------------ The operations of affiliate banks are subject to Federal and State statutes which limit the banks' ability to pay dividends or otherwise transfer funds to the Parent Company. At December 31, 1997 the banks, without prior approval from regulatory agencies, could have distributed dividends of approximately $856,000. Federal Reserve regulations require depository institutions to maintain cash reserves with the Federal Reserve Bank. The average amounts of required reserve balances were approximately $11,466,000 and $9,695,000 during 1997 and 1996, respectively. WesBanco is subject to various regulatory capital requirements administered by the 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 direct material effect on the Corporation's financial statements. Under capital guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. WesBanco's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios of Tier I and Total Capital to risk-weighted assets and of Tier I to average assets (Leverage). As of December 31, 1997 and 1996, each of the affiliate banks are categorized as well capitalized and meet all capital adequacy requirements to which each respective entity is subject. To be categorized as well capitalized the Corporation must maintain minimum total risk based capital, Tier I capital, and leverage ratios as set forth in the following table. There are no conditions or events that management believes have changed WesBanco's category. 42 NOTE 15: REGULATORY MATTERS (CONTINUED) - - ------------------------------------------------------------------------------ The following table summarizes capital amounts and ratios for WesBanco and its largest affiliate, WesBanco Wheeling: (dollars in thousands) To Be Well Capitalized Under For Capital Corrective Action Actual Adequacy Purposes: Provisions: --------------- ------------------ ----------------- WesBanco Amount Ratio Amount Ratio Amount Ratio - - ------------------------------------------------------------------------------------------------ As of December 31, 1997: Total Capital to Risk-Weighted Assets $245,021 21.2% $92,491 8.0% $115,614 10.0% Tier I Capital to Risk-Weighted Assets 230,556 19.9 46,246 4.0 69,369 6.0 Leverage 230,556 13.1 70,784 4.0 88,483 5.0 - - ------------------------------------------------------------------------------------------------ As of December 31, 1996: Total Capital to Risk-Weighted Assets $233,139 21.0% $88,698 8.0% $110,872 10.0% Tier I Capital to Risk-Weighted Assets 219,259 19.9 44,349 4.0 66,523 6.0 Leverage 219,259 13.8 63,875 4.0 79,844 5.0 - - ------------------------------------------------------------------------------------------------ WesBanco Wheeling - - ------------------------------------------------------------------------------------------------ As of December 31, 1997: Total Capital to Risk-Weighted Assets $112,717 21.8% $41,420 8.0% $51,775 10.0% Tier I Capital to Risk-Weighted Assets 106,258 20.5 20,710 4.0 31,065 6.0 Leverage 106,258 12.2 34,804 4.0 43,505 5.0 - - ------------------------------------------------------------------------------------------------ As of December 31, 1996: Total Capital to Risk-Weighted Assets $111,472 22.9% $38,879 8.0% $48,598 10.0% Tier I Capital to Risk-Weighted Assets 105,394 21.7 19,439 4.0 29,159 6.0 Leverage 105,394 12.9 32,570 4.0 40,713 5.0 - - ------------------------------------------------------------------------------------------------
NOTE 16: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS - - ------------------------------------------------------------------------------ Presented below are the condensed Balance Sheet, Statement of Income and Statement of Cash Flows for the Parent Company: (in thousands) BALANCE SHEET December 31, ----------------------- 1997 1996 - - ----------------------------------------------------------------------------- ASSETS Cash $ 105 $ 2,424 Investment in subsidiaries (at equity in net assets) 224,862 204,095 Investment securities: Available for sale carried at market value 21,526 18,679 Dividends receivable 6,500 5,500 Other assets 406 543 - - ----------------------------------------------------------------------------- Total Assets $253,399 $231,241 - - ----------------------------------------------------------------------------- LIABILITIES Long-term borrowings $ 97 $ 413 Dividends payable and other liabilities 3,752 3,296 - - ----------------------------------------------------------------------------- Total Liabilities 3,849 3,709 SHAREHOLDERS' EQUITY 249,550 227,532 - - ----------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $253,399 $231,241 - - ----------------------------------------------------------------------------- 43 NOTE 16: CONDENSED PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED) - - ------------------------------------------------------------------------------ STATEMENT OF INCOME For the years ended December 31, -------------------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------------- Dividends from subsidiaries $21,000 $19,900 $20,500 Income from investment securities 761 594 361 Other income 135 285 312 - - ------------------------------------------------------------------------------------- Total Income 21,896 20,779 21,173 - - ------------------------------------------------------------------------------------- Total Expenses 1,058 1,059 809 - - ------------------------------------------------------------------------------------- Income before income tax benefit and undistributed net income of subsidiaries 20,838 19,720 20,364 Income tax benefit 285 303 145 - - -------------------------------------------------------------------------------------- Income before undistributed net income of subsidiaries 21,123 20,023 20,509 Undistributed net income (excess dividends) of subsidiaries 1,151 1,138 (205) - - -------------------------------------------------------------------------------------- Net Income $22,274 $21,161 $20,304 - - --------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS For the years ended December 31, ------------------------------- 1997 1996 1995 - - ------------------------------------------------------------------------------------------- Cash flows from operating activities: Net Income $22,274 $21,161 $20,304 Undistributed (net income) excess dividends of subsidiaries (1,151) (1,138) 205 Increase (decrease) in other assets (847) 4,103 (7,795) Other-net 347 151 (163) - - ------------------------------------------------------------------------------------------- Net cash provided by operating activities 20,623 24,277 12,551 - - ------------------------------------------------------------------------------------------- Cash flows from investing activities: Investment securities available for sale: Proceeds from sales 3,874 2,927 2,267 Proceeds from maturities and calls 1,909 1,703 852 Payments for purchases (8,319) (15,315) (1,671) Investments held to maturity: Proceeds from maturities and calls - - 1,883 Payments for purchases - - (1,848) Acquisitions and additional capitalization of subsidiaries (2,003) (2,605) - - - ------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (4,539) (13,290) 1,483 - - ------------------------------------------------------------------------------------------- Cash flows from financing activities: Net payments on ESOP related debt (316) (364) (71) Purchases of treasury stock-net (5,950) (1,367) (3,456) Dividends paid (12,117) (9,396) (8,022) Other (20) 21 57 - - ------------------------------------------------------------------------------------------- Net cash used in financing activities (18,403) (11,106) (11,492) - - ------------------------------------------------------------------------------------------- Net increase (decrease) in cash (2,319) (119) 2,542 Cash at beginning of year 2,424 2,543 1 - - ------------------------------------------------------------------------------------------- Cash at end of year $ 105 $ 2,424 $ 2,543 - - -------------------------------------------------------------------------------------------
During 1997 and 1996, non cash activity consisted of common stock issued in purchase acquisitions totaling $12,786 and $11,921, respectively. During 1995, non-cash activity consisted of the redemption of 9,925 shares of preferred stock. Of the total shares redeemed, 9,723 shares were exchanged for 111,111 shares of WesBanco common stock in this transaction. The remaining 202 shares were redeemed for cash at $190 per preferred share and are included in other financing activities. 44 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS - - ------------------------------------------------------------------------------ The financial statements and the information pertaining to those statements are the responsibility of management. The financial statements have been prepared in conformity with generally accepted accounting principles, applied on a consistent basis. The accounting systems of the Corporation and its subsidiaries include internal controls and procedures which provide reasonable assurance as to the reliability of the financial records. Internal controls are generally supported by written policies and procedures. Internal audit performs audits of operations, reviews procedures, monitors adherence to bank policies and submits written audit reports to the Audit Committee. The Audit Committee of the Board of Directors is composed of only outside directors. The Audit Committee meets regularly with management, internal audit and our independent auditors to review accounting, auditing and financial matters. The internal auditors, Federal and State examiners, and Ernst & Young LLP have full access to the Audit Committee to discuss any appropriate matters. Independent auditors provide an objective review of management's discharge of its financial responsibilities relating to the preparation of the financial statements. The independent auditor's report is based on an audit in accordance with generally accepted auditing standards. This report expresses an informed judgment as to whether management's financial statements present fairly, in conformity with generally accepted accounting principles, the Corporation's financial position, results of operations and cash flows. 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, 1997 and 1996 and the related consolidated statements of income, changes in shareholders' equity, and cash flows for the two years ended December 31, 1997. 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. The financial statements of WesBanco, Inc. for the year ended December 31, 1995 were audited by other auditors whose report dated January 25, 1996, except as to the Bank of Weirton transaction, which is as of August 30, 1996, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of WesBanco, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for the two years ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Pittsburgh, Pennsylvania February 4, 1998 45 WESBANCO, INC. CONDENSED QUARTERLY STATEMENT OF INCOME - - ------------------------------------------------------------------------------ (in thousands, except per share amounts) 1997 Quarter ended --------------------------------------------------------- Annual March 31 June 30 September 30 December 31 Total - - ---------------------------------------------------------------------------------------------- Interest income $29,915 $30,645 $31,748 $32,222 $124,530 Interest expense 12,995 13,632 14,345 14,802 55,774 - - ---------------------------------------------------------------------------------------------- Net interest income 16,920 17,013 17,403 17,420 68,756 Provision for loan losses 1,100 889 875 1,450 4,314 - - ---------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 15,820 16,124 16,528 15,970 64,442 Other income 3,270 3,383 3,758 4,282 14,693 Other expenses 11,630 11,741 12,261 13,072 48,704 - - ---------------------------------------------------------------------------------------------- Income before income taxes 7,460 7,766 8,025 7,180 30,431 Provision for income taxes 1,955 2,118 2,087 1,997 8,157 - - ---------------------------------------------------------------------------------------------- Net Income $ 5,505 $ 5,648 $ 5,938 $ 5,183 $ 22,274 - - ---------------------------------------------------------------------------------------------- Earnings per share $.35 $.36 $.37 $.32 $1.40 - - ----------------------------------------------------------------------------------------------
1996 Quarter ended --------------------------------------------------------- Annual March 31 June 30 September 30 December 31 Total - - ---------------------------------------------------------------------------------------------- Interest income $27,476 $27,704 $28,048 $29,710 $112,938 Interest expense 11,810 11,754 12,159 12,495 48,218 - - ---------------------------------------------------------------------------------------------- Net interest income 15,666 15,950 15,889 17,215 64,720 Provision for loan losses 869 681 1,298 1,488 4,336 - - ---------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 14,797 15,269 14,591 15,727 60,384 Other income 3,062 2,910 3,145 3,156 12,273 Other expenses 10,120 10,492 10,834 11,706 43,152 - - ---------------------------------------------------------------------------------------------- Income before income taxes 7,739 7,687 6,902 7,177 29,505 Provision for income taxes 2,366 2,140 1,749 2,089 8,344 - - ---------------------------------------------------------------------------------------------- Net Income $ 5,373 $ 5,547 $ 5,153 $ 5,088 $ 21,161 - - ---------------------------------------------------------------------------------------------- Earnings per share $.36 $.36 $.34 $.33 $1.39 - - ----------------------------------------------------------------------------------------------
46 WESBANCO, INC. 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, consumer 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. FIVE YEAR SELECTED FINANCIAL SUMMARY(1) - - ------------------------------------------------------------------------------ (dollars in thousands, except per share amounts) December 31, -------------------------------------------------------------- 1997 1996 1995 1994 1993 - - ------------------------------------------------------------------------------------------------------ Cash dividends declared per share(2) $ 0.786 $ 0.72 $ 0.64 $ 0.573 $ 0.527 Book value per share(2) 15.58 14.41 13.55 12.57 12.35 Average common shares outstanding(2) 15,867,608 15,253,107 15,240,492 15,421,317 15,569,249 Selected Balance Sheet Information: Total Investments $ 566,557 $ 525,309 $ 522,288 $ 587,953 $ 602,888 Net Loans 1,017,452 1,011,825 880,480 798,413 759,318 Total Assets 1,789,295 1,677,771 1,549,019 1,532,832 1,534,131 Total Deposits 1,414,254 1,342,820 1,254,844 1,254,586 1,265,677 Total Shareholders' Equity 249,550 227,532 206,996 192,305 191,801 Selected Ratios: Return on Average Assets 1.30% 1.34% 1.33% 1.17% 1.30% Return on Average Equity 9.38 10.02 10.15 9.32 10.59 Dividend Payout Ratio 56.00 49.76 44.19 45.80 37.28 Average Equity to Average Assets 13.85 13.33 13.09 12.58 12.24 For the years ended December 31, ------------------------------------------------------------- Summary Statement of Income: 1997 1996 1995 1994 1993 - - ----------------------------------------------------------------------------------------------------- Interest income $124,530 $112,938 $108,082 $101,720 $105,268 Interest expense 55,774 48,218 46,570 39,660 43,727 - - ----------------------------------------------------------------------------------------------------- Net interest income 68,756 64,720 61,512 62,060 61,541 Provision for loan losses 4,314 4,336 2,788 6,073 3,247 - - ----------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 64,442 60,384 58,724 55,987 58,294 Other income 14,693 12,273 11,366 11,028 10,367 Other expenses 48,704 43,152 42,130 42,840 41,873 - - ----------------------------------------------------------------------------------------------------- Income before income taxes 30,431 29,505 27,960 24,175 26,788 Provision for income taxes 8,157 8,344 7,656 6,283 7,070 - - ----------------------------------------------------------------------------------------------------- Net Income $22,274 $21,161 $20,304 $17,892 $19,718 - - ----------------------------------------------------------------------------------------------------- Preferred stock dividends and accretion - - $ 164 $ 183 $ 184 Net income applicable to common stock $22,274 $21,161 20,140 17,709 19,534 Earnings per share(2) 1.40 1.39 1.32 1.15 1.25 - - -----------------------------------------------------------------------------------------------------
(1) See Note 1 of the Notes to Consolidated Financial Statements. (2) Adjusted to reflect a 3 for 2 stock split effected in the form of a 50% stock dividend, declared June 19, 1997. 47 RESULTS OF OPERATIONS - - ------------------------------------------------------------------------------ SUMMARY - - ------------------------------------------------------------------------------ WesBanco's net income for 1997 was a record $22.3 million or $1.40 per share, up 5.3% and 0.7%, respectively, from $21.2 million or $1.39 per share in 1996. The increase resulted from a 6.2% increase in net interest income and a 19.7% increase in other income partially offset by a 12.9% increase in other expense. Contributing to the 1997 increase in income was a 7.6% increase in average earning assets coupled with an increase in trust and deposit fees. WesBanco's results of operations and financial position have not been restated to include the acquisitions of Vandalia National Corporation, acquired December 30, 1996, and Shawnee Bank, Inc., acquired June 30, 1997, which were accounted for using the purchase method of accounting. These acquisitions impact performance comparisons between 1997 and prior periods. Management's Discussion reflects the impact of these purchase acquisitions NET INTEREST INCOME - - ------------------------------------------------------------------------------ Net interest income, the spread between interest income on earning assets and interest expense on liabilities to fund those assets, represents the largest component of earnings to the Corporation. Net interest income is affected by both changes in the level of interest rates and changes in the amounts and mix of interest earning assets and interest bearing liabilities. The net yield on earning assets (net interest income as a percentage of interest earning assets) is a frequently used measurement of net interest income. For 1997, net interest income was $68.8 million, up $4.0 million or 6.2% over 1996, reflecting an increase in average earning assets of $113.1 million or 7.6%. Of this increase in earning assets, $61.4 million resulted from the purchase acquisitions with the remaining growth in average loans. Average loans increased $98.1 million or 10.5% over 1996 due to the purchase acquisitions, which contributed $49.9 million, as well as, increases in both loans held for sale and commercial loans. Residential mortgage and personal loans, which increased significantly during 1996, declined during 1997 effectively slowing the growth rate in loans. Average loan yields increased only 5 basis points to 8.75% compared to the prior year, reflecting the stable interest rate environment during the year. Average securities totaled $525.1 million for 1997, which approximated 1996 levels. Taxable securities declined during 1997 primarily through maturity run-off, as proceeds were used to invest in tax-exempt securities. Average federal funds sold, which increased $12.4 million over 1996, represented a short-term use of funds. Average yields on securities improved 33 basis points to 6.01% between 1997 and 1996, while average yields on federal funds sold increased 20 basis points over 1996. Earning assets are funded primarily by deposits. During 1997, average deposits increased to $1.4 billion, up $94.7 million or 7.4% over 1996. Purchase acquisitions contributed $43.4 million to the growth in average deposits, while additional funds were provided through growth in money market deposit accounts and certificates of deposit. The average cost of interest bearing liabilities was 4.28% for 1997, up 30 basis points from 1996, reflecting a shift in the composition of deposits from savings and NOW accounts to higher-yielding money market accounts and certificates of deposit. The net yield on earning assets was 4.28% for 1997, reflecting a decline of 6 basis points from 1996. An increase in the cost of interest bearing deposits, caused by a shift in balances to higher-yielding deposit products, contributed to the decline in the net yield. 48 AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME - - ------------------------------------------------------------------------------ (dollars in thousands) For the years ended December 31, -------------------------------------------------------------------------------------- 1997 1996 1995 ------------------------------ --------------------------- ------------------------- Average Average Average Average Average Average Volume Interest Rate Volume Interest Rate Volume Interest Rate - - ------------------------------------------------------------------------------------------------------------------------- ASSETS Total loans $1,033,477 $ 90,467 8.75% $935,360 $81,449 8.70% $852,902 $74,452 8.73% Investment securities: Taxable 358,061 23,062 6.44 375,451 22,066 5.88 416,646 23,614 5.67 Tax-exempt 167,088 8,474 5.07 147,165 7,642 5.19 135,211 7,524 5.56 - - ------------------------------------------------------------------------------------------------------------------------- Total investment securities 525,149 31,536 6.01 522,616 29,708 5.68 551,857 31,138 5.64 Federal funds sold 46,306 2,527 5.46 33,880 1,781 5.26 41,591 2,492 5.99 - - ------------------------------------------------------------------------------------------------------------------------- Total earning assets 1,604,932 $124,530 7.76% 1,491,856 $112,938 7.57% 1,446,350 $108,082 7.47% - - ------------------------------------------------------------------------------------------------------------------------- Cash and due from banks 48,918 50,580 45,893 Other assets 59,503 42,558 35,454 - - ------------------------------------------------------------------------------------------------------------------------- Total Assets $1,713,353 $1,584,994 $1,527,697 - - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Interest bearing demand $328,544 $10,484 3.19% $273,790 $7,064 2.58% $280,063 $ 7,936 2.83% Savings deposits 299,215 7,451 2.49 331,879 8,817 2.66 352,674 10,333 2.93 Certificates of deposit 585,996 33,295 5.68 524,938 28,551 5.44 470,668 25,134 5.34 - - ------------------------------------------------------------------------------------------------------------------------- Total interest bearing deposits 1,213,755 51,230 4.22 1,130,607 44,432 3.93 1,103,405 43,403 3.93 Federal funds purchased and repurchase agreements 78,393 3,914 4.99 75,183 3,599 4.79 55,272 2,957 5.35 Other borrowings 11,494 630 5.48 6,646 187 2.81 4,825 210 4.35 - - ------------------------------------------------------------------------------------------------------------------------- Total interest bearing liabilities 1,303,642 $55,774 4.28% 1,212,436 $48,218 3.98% 1,163,502 $46,570 4.00% - - ------------------------------------------------------------------------------------------------------------------------- Noninterest bearing demand 156,574 145,069 145,397 Other liabilities 15,772 16,241 17,177 Redeemable Preferred Stock & Shareholders' Equity 237,365 211,248 201,621 - - ------------------------------------------------------------------------------------------------------------------------- Total Liabilities, Redeemable Preferred Stock & Shareholders' Equity $1,713,353 $1,584,994 $1,527,697 - - ------------------------------------------------------------------------------------------------------------------------- Net yield on earning assets $68,756 4.28% $64,720 4.34% $61,512 4.25% - - ------------------------------------------------------------------------------------------------------------------------- Taxable equivalent net yield on earning assets $73,319 4.57% $68,835 4.61% $65,559 4.53% - - -------------------------------------------------------------------------------------------------------------------------
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 investment 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. OTHER INCOME - - ------------------------------------------------------------------------------ Other income, excluding securities transactions, increased $2.1 million or 17.9% over 1996, due to increases in both trust fees and service charges on deposit accounts. The impact of the purchase acquisitions on other income included $0.2 million in service charges on deposit accounts. Trust fees were $6.8 million for 1997, an increase of $1.4 million or 25.6% over 1996, reflecting increases in the number of accounts under administration, the market value of trust assets and investment fees associated with the WesMark mutual fund products which were introduced in early 1997. The market value of trust assets at December 31, 1997 was $1.9 billion as compared to $1.6 billion at December 31, 1996, an increase of 20.6%. Service charges and other income, excluding the purchase acquisitions, totaled $7.2 million for 1997, an increase of $0.6 million or 8.5% over 1996, reflecting an increase in deposit service charges. Enhancements to the monitoring system for collecting fees primarily contributed to the increase over 1996. 49 OTHER EXPENSE - - ------------------------------------------------------------------------------ Other expense increased $5.6 million or 12.9% in 1997 to $48.7 million. The 1997 increase in other expense was significantly affected by the purchase acquisitions and related goodwill amortization. The purchase acquisitions added $3.5 million in other expense during 1997, of which $1.6 million was in salaries and employee benefits, $0.3 million in net occupancy and equipment expense, $0.8 million in goodwill amortization and $0.8 million in other operating expense. Full-time equivalent employees related to purchase acquisitions totaled 17 as of December 31, 1997. Excluding the $3.5 million in expense related to the purchase acquisitions, other expense for 1997 totaled $45.2 million, an increase of $2.1 million or 4.7% over 1996. The remaining other expense discussion excludes the purchase acquisitions. Salaries and employee benefits increased $0.6 million or 2.4% over the prior year, reflecting annual salary adjustments and staffing increases associated with expansion of WesBanco's mortgage banking affiliate, partially offset by a reduction in pension costs. Full-time equivalent employees increased to 866 as of December 31, 1997 from 860 as of December 31, 1996. Occupancy and equipment expense increased $1.0 million or 18.2%, reflecting corporate-wide enhancements in technology, which included the expansion of a wide area network. These technology related expenses have contributed to efficiencies in customer-related services as well as non-customer support functions. Through the use of the wide area network, efficiencies in communication between affiliate locations have improved extensively, while the utilization of new computer software has enhanced customer serviceability. The increase in occupancy and equipment also reflected startup and operational costs of a new branch facility in St. Clairsville, Ohio, which opened in early 1997. Other operating expense for 1997 increased $0.4 million or 3.0%, reflecting an increase in professional fees associated with improving fee income levels and operational efficiencies. INCOME TAXES - - ------------------------------------------------------------------------------ Federal income tax expense decreased $0.3 million to $6.7 million during 1997 from $7.0 million during the prior year. The effective tax rate for the Corporation decreased to 26.8% during 1997 from 28.3% during 1996. The decrease in the effective tax rate primarily resulted from the utilization of $0.9 million in alternative minimum tax credit, and to a lesser extent, changes in the level of taxable income and the changing state effective tax rate. For 1998, the Corporation anticipates an increase in the effective tax rate, as a result of full utilization of the tax credit in 1997. The State of West Virginia has a corporate net income tax based upon federal taxable income, adjusted for certain items not subject to state taxation. The statutory state tax rate for 1997 was 9.0%. State income tax included in the provision for income taxes was $1.5 million for 1997 compared to $1.3 million for 1996. The State of Ohio does not have a corporate income tax, but rather, businesses are subject to an Ohio corporate franchise tax which is included in other operating expenses. FINANCIAL CONDITION - - ------------------------------------------------------------------------------ INVESTMENT SECURITIES - - ------------------------------------------------------------------------------ Investment securities at December 31, 1997 totaled $566.6 million compared to $525.3 million as of December 31, 1996. The increase in investment securities as well as federal funds sold primarily resulted from deposit growth which was in excess of loan growth. The increase in federal funds sold, up $60.5 million at December 31, 1997 compared to the prior year, further reflected the lack of short-term investment alternatives during the year. WesBanco's available for sale portfolio at fair market value was $342.5 million or 61% of total investment securities as of December 31, 1997 compared to $276.2 million or 53% of total investment securities as of December 31, 1996. At December 31, 1997, the available for sale portfolio had an average yield of 6.3% and an average maturity of 4.7 years, compared to 6.2% and 4.1 years, respectively as of December 31, 1996. The market value adjustment, recorded on the Consolidated Balance Sheet as an adjustment to Shareholders' Equity, reflected an unrealized after-tax gain of $5.0 million, as of December 31, 1997 compared to an unrealized after-tax loss of $90,000 as of December 31, 1996. These market value adjustments represent temporary 50 INVESTMENT SECURITIES (CONTINUED) - - ------------------------------------------------------------------------------ market value fluctuations caused by changes in market rates in relation to the 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. Held to maturity securities, at cost, totaled $224.0 million or 39% of total investment securities as of December 31, 1997 compared to $249.1 million or 47% of total investment securities as of December 31, 1996. At December 31, 1997, the held to maturity portfolio had an average yield of 5.5% and an average maturity of 4.8 years, compared to 5.5% and 3.8 years, respectively as of December 31, 1996. Total investment securities reflected an average yield of 6.0% as of December 31, 1997, up slightly from 5.9% the prior year. Affected primarily by extending maturities on agency securities purchased during 1997, the total average maturity of investment securities at December 31, 1997 extended to 4.7 years as compared to 4 years as of December 31, 1996. Investment securities represent a primary source of liquidity. During 1997, investment securities with a total carrying value of $145.9 million either matured or were called. Available for sale securities of $41.7 million were sold during 1997. LOANS - - ------------------------------------------------------------------------------ Loans, net of unearned income at December 31, 1997 totaled $1.0 billion, which approximated 1996 levels. The lack of growth reflected competitive pricing pressures which negatively impacted certain mortgage and personal loan products, tightening of credit quality standards, and lack of economic growth in the Upper Ohio Valley. These decreasing factors were offset by increases resulting from the Shawnee Bank purchase acquisition, which added approximately $11.2 million in total loans, and loans held for sale. Commercial loans, at December 31, 1997, increased $29.8 million, while personal loans decreased $43.0 million, compared to the prior year. The decrease in personal loans reflected a decline in indirect auto loan originations, which was impacted by a general downturn in auto financing by banks. Mortgage loan originations through WesBanco's affiliate, WesBanco Mortgage Company increased during 1997. The Mortgage Company originates residential mortgage loans and sells its fixed rate mortgage loans to the secondary market. For 1997, the Mortgage Company originated approximately $58.4 million in residential mortgage loans. As of December 31, 1997, commercial loans comprised 20% of total loans outstanding, real estate secured loans comprised 53% and personal loans comprised 27%. Although market rates have remained stable during 1997, rates offered on several loan products were lowered, reflecting the competitive environment. The majority of commercial loans reprice monthly based on changes in prime rate. Impaired loans, at December 31, 1997 and 1996, included all nonaccrual and renegotiated loans as well as loans internally classified as substandard or doubtful. Loans classified as impaired increased to $11.2 million in 1997 or 1.1% of loans outstanding compared to $10.3 million in 1996 or 1% of loans outstanding. Nonaccrual loans are generally secured by collateral believed to have adequate market values to protect against significant losses. The Corporation continues to monitor the nonperforming assets to ensure against deterioration in collateral values. Net charge-offs in 1997 were $4.6 million compared to $3.0 million in 1996. The increase resulted from a rise in personal bankruptcies in WesBanco's market area, which are consistent with bankruptcy trends nationally. During 1997, the Corporation tightened its credit standards contributing to a decrease in personal loan volume. The provision for loan losses was $4.3 million in 1997, consistent with 1996. The allowance for loan losses to loans was 1.5% as of December 31, 1997, unchanged from December 31, 1996. Amounts charged to earnings were based on periodic management evaluations of the loan portfolio, specific problem loans and other factors. The allowance for loan losses is considered adequate to provide for future losses in the loan portfolio. 51 DEPOSITS - - ------------------------------------------------------------------------------ As of December 31, 1997, total deposits were $1.4 billion, reflecting an increase of $71.4 million or 5.3% from December 31, 1996. The 1997 increase was due in part to the acquisition of Shawnee Bank, which accounted for approximately $28.6 million of the growth. The remaining portion of the increase was the result of growth in Prime Rate Money Market accounts, which averaged a rate of 5.22% during 1997, and certificates of deposits. These deposit products, along with various pricing bonuses from the Good Neighbor Banking Program, represented interest rate advantages to customers over other deposit products in the marketplace. During 1997, WesBanco continued to experience a change in deposit mix as customers shifted funds from demand and savings products into the higher- yielding Prime Rate Money Market account and certificates of deposit. This change in deposit mix has contributed to a 30 basis point increase in the cost of interest bearing deposits during 1997 coupled with an increase in the rate sensitivity of the deposit base. As competition for deposits between banks and nonbanks continues to intensify, the rising cost of deposits and change in composition of deposits will also continue. During 1998, the Corporation expects the change in deposit mix to continue, as the focus will be on growth in higher-rate deposit products. CAPITAL ADEQUACY - - ------------------------------------------------------------------------------ Shareholders' equity increased to $249.6 million at December 31, 1997 from $227.5 million at December 31, 1996 due to the retention of earnings, issuance of stock for the acquisition of Shawnee and the upward market value adjustment on investment securities available for sale. Ending capital to assets for 1997 was 14.7% compared to 14.4% for 1996, reflecting WesBanco's 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. Dividend payout ratios over the last five years reflect the steady growth in dividends, increasing to 56% in 1997 from 37% in 1993. The Corporation announced cash dividend increases during 1997 and the first quarter of 1998. On April 1, 1997 and October 1, 1997 the quarterly dividend per share increased to $.193 and $.20, respectively, a 7% increase from the January 1, 1997 quarterly dividend of $.187. On February 19, 1998, the quarterly dividend per share, payable April 1, 1998 was increased to $.21, representing the thirteenth consecutive year of common stock cash dividend increases for WesBanco. During 1997, common shares outstanding increased to 16.0 million from 10.5 million. This increase reflected the issuance of 5.4 million common shares related to a 3 for 2 stock split effected in the form of a 50% stock dividend and shares issued in the purchase acquisition of Shawnee Bank, Inc. Throughout the Annual Report average shares and per share information have been restated to reflect the 50% stock dividend. 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 I, Total Capital and Leverage ratios well above minimum regulatory levels. See Note 15 of the Consolidated Financial Statements for more information on capital amounts, ratios and minimum regulatory requirements. INTEREST RATE MANAGEMENT AND LIQUIDITY - - ------------------------------------------------------------------------------ Interest rate management measures the sensitivity of net interest earnings to changes in the level of interest rates. As interest rates change in the market, rates earned on interest earning assets and rates paid on interest-bearing liabilities do not necessarily move concurrently. Differing rate sensitivities may arise because fixed rate assets and liabilities may not have the same maturities or because variable rate assets and liabilities differ in the timing of rate changes. WesBanco and its banking subsidiaries review their interest rate sensitivity on a periodic basis. The following table classifies interest earning assets and interest bearing liabilities into maturity categories and measures the differences between maturing assets and liabilities in each category (interest sensitivity gap). 52 INTEREST RATE MANAGEMENT AND LIQUIDITY (CONTINUED) - - ------------------------------------------------------------------------------ At December 31, 1997, the Corporation was in a liability sensitive position as summarized in the table below: Under Three Six Nine Over Three to Six to Nine Months to One (in thousands) Months Months Months One Year Year Total - - ------------------------------------------------------------------------------------------------------- ASSETS Due from banks/interest bearing $ 198 - - - - $ 198 Loans 265,484 $67,644 $61,777 $73,718 $564,360 1,032,983 Investment securities(1) 26,730 28,107 10,600 19,785 473,046 558,268 Federal funds sold 71,513 - - - - 71,513 - - ------------------------------------------------------------------------------------------------------- Total interest earning assets 363,925 95,751 72,377 93,503 1,037,406 1,662,962 - - ------------------------------------------------------------------------------------------------------- LIABILITIES Savings and NOW accounts 483,564 - - - - 483,564 All other interest bearing deposits 311,620 83,166 69,649 54,639 253,293 772,367 Short-term borrowings 91,036 3,218 11,665 509 257 106,685 - - ------------------------------------------------------------------------------------------------------- Total interest bearing liabilities 886,220 86,384 81,314 55,148 253,550 1,362,616 - - ------------------------------------------------------------------------------------------------------- Interest sensitivity gap $(522,295) $ 9,367 $(8,937) $38,355 $783,856 $ 300,346 - - ------------------------------------------------------------------------------------------------------- Cumulative interest sensitivity gap $(522,295) $(512,928) $(521,865) $(483,510) $300,346 - - -------------------------------------------------------------------------------------------------------
(1) Securities are categorized above by expected maturity at amortized cost. The changing interest rate environment can substantially impact the Corporation's net interest income and profitability. The Asset/Liability Management Committee believes the Corporation's interest sensitivity (gap) position provides for a changing interest rate environment. The liability sensitive position in the under three month time period is primarily caused by savings and NOW deposits. Interest rates on these deposit instruments are subject to periodic adjustment at management's discretion. The Corporation's short-term liability sensitive position would suggest exposure of the net interest margin to changing interest rates. An increase in interest rates may cause a decline in the net interest margin while a decrease in interest rates may have the opposite effect. The Corporation may reduce its short-term liability sensitive position, making its net interest margin less vulnerable to rising interest rates, by shortening asset maturities primarily through reinvestment into federal funds from investment maturities or by extending deposit maturities. During 1997, WesBanco experienced an increase in its short-term liability sensitive position due to growth in the Prime Rate Money Market Product. In an effort to manage this additional interest sensitivity, in 1997 WesBanco entered into an interest rate swap with a notional value of $10 million, due to mature in 1999. The swap agreement effectively fixed the interest rate on $10 million in short-term deposits for 2 years. Another measure used to assess changes in net interest income resulting from changing interest rates is income simulation. Key assumptions used in income simulation include loan and deposit growth, pricing, interest sensitivity, and the level of interest rate or balance changes on indeterminate maturity deposit products such as savings and NOW deposits. These assumptions have been developed through a combination of historical analysis and future anticipated pricing behavior. Based on the results of the income simulation, as of December 31, 1997, the Corporation would expect an increase in net interest income of $0.2 million and a decrease of $1.6 million from an immediate and sustained 200 basis point increase and decrease, respectively, in interest rates over a 12-month period. The Corporation manages its liquidity position to ensure that sufficient funds are available to meet customer needs for borrowing and deposit withdrawals. The Corporation's primary source of liquidity is its strong core deposit base. The growth in deposits is somewhat dependent upon interest rates of competitive financial instruments. Short-term liquidity is maintained through the use of federal funds sold, which represents one day investments and cash balances. As of December 31, 1997, federal funds sold and cash balances were $128.2 million or 7.2% of total assets as compared to $70 million or 4.2% of total assets as of December 31, 1996. The increase in short-term liquidity resulted from a $60.5 million increase in federal funds sold, reflecting an excess of deposit growth over loan growth. Additional short-term liquidity is maintained through investments with expected maturities of less than one year which, during 1998, approximate $85.2 million or 4.8% of total assets. During 1997 investment 53 INTEREST RATE MANAGEMENT AND LIQUIDITY (CONTINUED) - - ------------------------------------------------------------------------------ maturities and calls of $145.9 million became available for reinvestment. As of December 31, 1997 the Corporation had outstanding commitments to extend credit in the ordinary course of business approximating $98.5 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 $5.5 million during 1998, of which commitments totaling $1.7 million have been made. COMPARISON OF 1996 VERSUS 1995 - - ------------------------------------------------------------------------------ Net income increased 4.2% to $21.2 million for the year ended December 31, 1996 compared to 1995, reflecting increases in net interest income and service fees. Return on average assets was 1.3%, consistent with the prior year, while return on average equity decreased to 10.0% from 10.2% in 1995. Net interest income increased $3.2 million or 5.2% over 1995, reflecting balance sheet growth and an improvement in the net yield on earning assets. Average earning assets increased $45.5 million or 3.1%, while the net yield improved to 4.34% from 4.25%. Mortgage and consumer loans contributed to a 9.7% growth in average loans, which were funded, in part, by maturing securities causing a change in asset mix. Average interest bearing liabilities increased $48.9 million or 4.2%, reflecting an 11.5% increase in average certificates of deposit. The increase in certificates of deposit resulted from the competitively-priced Good Neighbor Banking Program and a shift in deposits from demand and savings deposits. Influenced by falling market rates, improvement in the net yield on earning assets during 1996 primarily resulted from a decrease in rates on short-term borrowing, demand and savings deposits, partially offset by a change in deposit mix to higher-yielding deposits. The provision for loan losses increased to $4.3 million from $2.8 million in 1995, reflecting an increase in net charge-offs and growth in the mortgage and consumer loan portfolios. Net charge-offs increased to $3.0 million from $2.3 million in the prior year. The allowance for loan losses to total loans was 1.5% as of December 31, 1996, consistent with 1995. Other income, excluding securities transactions, and other expense increased $1.1 million or 10.1% and $1.0 million or 2.4%, respectively, over 1995. Other income increased primarily due to a $0.7 million or 15.4% increase in trust fees. The other expense increase primarily resulted from increases in equipment, training, and overtime costs associated with technology enhancements, including the installation of a wide area network and a new mainframe computer software system. Pension and other employee benefits decreased in 1996, reflecting a reduction in pension costs caused by market value appreciation of pension plan assets. BUSINESS COMBINATIONS - - ------------------------------------------------------------------------------ Commercial BancShares, Incorporated - On September 30, 1997, WesBanco and Commercial BancShares, Incorporated, a multi-bank holding company located in Parkersburg, WV, entered into a definitive Agreement and Plan of Merger. The transaction will be accounted for as a pooling of interests. Please refer to the following table for selected financial data on a pro forma combined basis. Shawnee Bank, Inc. - On June 30, 1997, WesBanco completed the acquisition of Shawnee Bank, Inc., located in Dunbar, WV. The acquisition was accounted for using the purchase method of accounting. Vandalia National Corporation - On December 30, 1996, WesBanco completed the acquisition of Vandalia National Corporation, located in Morgantown, WV. The acquisition was accounted for using the purchase method of accounting. Bank of Weirton - On August 30, 1996, WesBanco consummated its acquisition of the Bank of Weirton. WesBanco issued 1,690,000 shares of common stock to shareholders of Bank of Weirton, in a transaction accounted for as a pooling of interests. Bank of Weirton reported net income of $2.1 million for the year ended December 31, 1995. Universal Mortgage Company - On August 20, 1996, WesBanco completed the acquisition of Universal Mortgage Company which was accounted for using the purchase method of accounting. 54 BUSINESS COMBINATIONS (CONTINUED) - - ------------------------------------------------------------------------------ The following table sets forth WesBanco and Commercial BancShares selected financial data on a pro forma combined basis: December 31, 1997 -------------------------------------------- Commercial (unaudited, dollars in thousands, BancShares, Pro forma except per share amounts) WesBanco, Inc. Incorporated Combined - - -------------------------------------------------------------------------------------- For the year: Interest income $124,530 $33,260 $157,790 Interest expense 55,774 14,231 70,005 - - -------------------------------------------------------------------------------------- Net interest income 68,756 19,029 87,785 Provision for loan losses 4,314 1,260 5,574 Other income 14,693 3,008 17,701 Other expense 48,704 16,478 65,182 - - -------------------------------------------------------------------------------------- Income before income taxes 30,431 4,299 34,730 Income taxes 8,157 1,362 9,519 - - -------------------------------------------------------------------------------------- Net Income $ 22,274 $ 2,937 $ 25,211 - - -------------------------------------------------------------------------------------- Earnings per share $1.40 $1.82 $1.23 Average shares outstanding 15,867,608 1,616,187 20,461,743 Return on average assets 1.3% 0.7% 1.2% Return on average equity 9.4% 6.8% 9.0% At year end: - - -------------------------------------------------------------------------------------- Assets $1,789,295 $428,312 $2,217,255 Securities 566,557 68,725 634,930 Loans, net of unearned income 1,032,983 308,670 1,341,653 Allowance for loan losses 15,531 4,731 20,262 Deposits 1,414,254 365,612 1,779,866 Shareholders' equity 249,550 42,198 291,466 Book value per share 15.58 26.11 14.14
YEAR 2000 - - ------------------------------------------------------------------------------ During 1997, WesBanco continued a corporate wide project to address issues associated with the year 2000. Many computer programs were originally designed to recognize only a two-digit date field. The issue is that instead of recognizing the four-digit date of "2000", computer logic will cause programs with a two-digit date to work as if the clock had been turned back to the year 1900. In early 1997, the Corporation assembled a task force, comprised of representatives from each affiliate, to design and implement a corporate plan which will identify systems affected by this issue, and apply corrective measures for full year 2000 compliance. The task force, which meets monthly, has made considerable progress toward completion of the corporate plan. Currently, all major noncompliant systems have been identified. WesBanco plans to either modify or replace these systems by the end of 1998. In addition, a list of all vendor-supplied equipment and software has been compiled for use in obtaining vendor certification or formal commitment to become compliant. All computer software applications that manage our customer banking systems have been certified year 2000 compliant by the vendor. The Corporation believes that modifications to existing systems, conversion to new systems, and vendor compliance upgrades, will be resolved on a timely basis, and related costs will not have a material impact on its results of operations or financial condition. 55 MARKET OF COMMON STOCK AND RELATED SHAREHOLDER MATTERS - - ------------------------------------------------------------------------------ WesBanco's common stock is quoted on The Nasdaq Stock Market (Nasdaq), with a trading symbol of WSBC. As reported by Nasdaq, the price information reflects high and low sales prices. The approximate number of holders of WesBanco's $2.0833 par value common stock as of December 31, 1997 was 4,391. On February 19, 1998, the quarterly dividend per share payable April 1, 1998 was increased to $.21. The following represents reported high and low trading prices and dividends declared during the respective quarter: Dividend High Low Declared - - ------------------------------------------------------------- 1997 4th quarter $31.25 $27.50 $.200 3rd quarter 30.50 25.75 .200 2nd quarter 27.17 21.33 .193 1st quarter 22.17 21.17 .193 1996 4th quarter $21.67 $18.33 $.187 3rd quarter 19.00 17.50 .187 2nd quarter 18.17 17.17 .173 1st quarter 19.17 17.50 .173 OTHER MATTERS - - ------------------------------------------------------------------------------ As of December 31, 1997, WesBanco had approximately 58% of its assets in the Upper Ohio Valley, an area that experienced a strike between the United Steel Workers Union and Wheeling-Pittsburgh Steel Corporation. On August 12, 1997, a new contract was ratified between the Union and Wheeling-Pittsburgh Steel. The direct impact of the strike on the financial results of WesBanco is not determinable. A rise in personal bankruptcies, consistent with national trends, and the continued slow economic growth in the Upper Ohio Valley represent external factors impacting WesBanco's market area, which may or may not be directly related to the strike. EX-21 5 56 EXHIBIT 21 WESBANCO SUBSIDIARIES WesBanco, Inc. WesBanco Properties, Inc. (non-bank) WesBanco Mortgage Company (non-bank) WesBanco Bank Wheeling McLure Hotel, Inc. (non-bank) WesBanco Bank Charleston FFB Corporation WesBanco Bank Fairmont WesBanco Bank Barnesville WesBanco Bank Parkersburg Vandalia National Corporation (inactive) NOTE: All direct subsidiaries of the Registrant are 100% owned. EX-23 6 57 EXHIBIT 23.1 Consent of Ernst & Young LLP Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-06467) of WesBanco, Inc. of our report dated February 4, 1998, with respect to the consolidated financial statements of WesBanco, Inc. and subsidiaries incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 1997. /s/ Ernst & Young LLP Pittsburgh, Pennsylvania March 11, 1998 EX-23 7 58 EXHIBIT 23.2 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of this Registration Statement on Form S-3 (No. 333-06467) of WesBanco, Inc. of our report dated January 25, 1996, except as to Note 2, the pooling of interest with Bank of Weirton, which is as of August 30, 1996, included as Exhibit 99.1 in WesBanco, Inc's Annual Report on Form 10-K. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Price Waterhouse LLP Price Waterhouse LLP Pittsburgh, Pennsylvania March 11, 1998 EX-24 8 59 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 1997 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 - - --------- ----- ---- __________________ Director February 19, 1998 Frank K. Abruzzino /s/James E. Altmeyer - - --------------------- Director February 19, 1998 James E. Altmeyer /s/ Earl C. Atkins - - ------------------ Director February 19, 1998 Earl C. Atkins /s/ Ray A. Byrd - - -------------------- Director February 19, 1998 Ray A. Byrd /s/ R. Peterson Chalfant - - ------------------------- Director February 19, 1998 R. Peterson Chalfant /s/ Christopher V. Criss - - ------------------------- Director February 19, 1998 Christopher V. Criss _____________________ Director February 19, 1998 Stephen F. Decker 60 /s/ James D. Entress - - --------------------- Director February 19, 1998 James D. Entress /s/ Ernest S. Fragale - - ---------------------- Director February 19, 1998 Ernest S. Fragale /s/ James C. Gardill - - ---------------------- Director February 19, 1998 James C. Gardill /s/ Edward M. George - - --------------------- Director February 19, 1998 Edward M. George ____________________ Director February 19, 1998 Roland L. Hobbs /s/ John W. Kepner - - ------------------- Director February 19, 1998 John W. Kepner /s/ Frank R. Kerekes - - --------------------- Director February 19, 1998 Frank R. Kerekes /s/ Robert H. Martin - - -------------------- Director February 19, 1998 Robert H. Martin _____________________ Director February 19, 1998 George M. Molnar /s/ Eric Nelson - - -------------------- Director February 19, 1998 Eric Nelson _____________________ Director February 19, 1998 Richard K. Riederer _____________________ Director February 19, 1998 John R. Scheessele /s/ Melvin C. Snyder, Jr. - - ------------------------- Director February 19, 1998 Melvin C. Snyder, Jr. /s/ Joan C. Stamp - - --------------------- Director February 19, 1998 Joan C. Stamp /s/ Carter W. Strauss - - --------------------- Director February 19, 1998 Carter W. Strauss 61 /s/ Reed J. Tanner - - -------------------- Director February 19, 1998 Reed J. Tanner /s/ J. Christopher Thomas - - ------------------------- Director February 19, 1998 J. Christopher Thomas /s/ John A. Welty - - ------------------ Director February 19, 1998 John A. Welty /s/ William E. Witschey - - ----------------------- Director February 19, 1998 William E. Witschey EX-99 9 62 Exhibit 99.1 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of WesBanco, Inc. In our opinion, based upon our audits and the report of other auditors, the consolidated statements of income, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the results of operations and of cash flows of WesBanco, Inc., and its subsidiaries (the Corporation) for the year ended December 31, 1995 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. As described in Note 2, on August 30, 1996, the Corporation merged with Bank of Weirton in a transaction accounted for as a pooling of interests. The accompanying financial statements give retroactive effect to the merger of the Corporation with Bank of Weirton. We did not audit the financial statements of the Bank of Weirton which statements reflect net interest income of $5,483,000 for the year ended December 31, 1995. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Bank of Weirton is based solely on the report of the other auditors. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of the Corporation for any period subsequent to December 31, 1995. /s/ Price Waterhouse LLP Price Waterhouse LLP Pittsburgh, Pennsylvania January 25, 1996, except as to Note 2, the pooling of interests with Bank of Weirton, which is as of August 30, 1996. EX-99 10 63 Exhibit 99.2 [Grant Thornton Logo] REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Bank of Weirton We have audited the statement of condition of the Bank of Weirton as of December 31, 1995 and the related statements of income, changes in stockholders' equity and cash flows for the one year period ended December 31, 1995, not presented separately herein. These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Bank of Weirton as of December 31, 1995, and the results of its operations and its cash flows for the one year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ GRANT THORNTON LLP Grant Thornton LLP Chicago, Illinois October 17, 1996 EX-27 11 ART. 9 FOR WESBANCO, INC. 10-K
9 1000 12-MOS DEC-31-1997 DEC-31-1997 56,446 198 71,513 0 342,510 224,047 226,789 1,032,983 15,531 1,789,295 1,414,254 106,685 18,709 97 0 0 33,483 216,067 1,789,295 90,467 31,536 2,527 124,530 51,230 55,774 68,756 4,314 510 48,704 30,431 30,431 0 0 22,274 1.40 1.40 4.28 6,658 2,828 773 0 15,528 5,492 912 15,531 15,531 0 6,258
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