1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number 0-8467 ------- WESBANCO, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) West Virginia 55-0571723 - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1 Bank Plaza, Wheeling, WV 26003 - ---------------------------------------- ------------ (Address of principal executive offices) (Zip Code) 304-234-9000 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or, for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at October 31, 1996, 10,221,023 shares. 1 of 20
2 PART 1 - FINANCIAL INFORMATION Consolidated Balance Sheets at September 30, 1996 (unaudited) and December 31, 1995, Consolidated Statements of Income, Consolidated Statements of Changes in Shareholders' Equity and Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited) are set forth on the following pages. On August 30, 1996, WesBanco consummated its merger of the Bank of Weirton. All previously presented financial information has been restated to include the Bank of Weirton. For further information, see Footnote 3. In the opinion of management of the Registrant, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial information referred to above for such periods, have been made. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of what results will be for the entire year. For further information, refer to the 1995 Annual Report to Shareholders, which includes consolidated financial statements and footnotes thereto on Form 8-K/A. Earnings per share for the nine months ended September 30, 1996 and 1995 were computed by dividing net income less preferred stock dividends and discount accretion, where applicable, by the weighted average number of common shares outstanding during the period. Effective November 15, 1995 WesBanco redeemed its Series A 8% Cumulative Preferred stock. Prior to redemption, preferred stock dividends were cumulative and payable quarterly at an annual rate of $15.20 per share. The fully dilutive effect of preferred stock for the nine months ended September 30, 1995 was less than 3%.
3 WESBANCO, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands) September 30, December 31, 1996 1995 ------------- ------------- (Unaudited) ASSETS Cash and due from banks $ 60,570 $ 54,163 Due from banks - interest bearing 297 301 Federal funds sold 29,500 37,230 Securities: Securities available for sale 249,828 172,137 Securities held to maturity (market value of $249,686 and $353,760) 249,270 350,151 ----------- ----------- Total securities 499,098 522,288 Loans: Loans (net of unearned income of $4,485 and $8,459) 965,783 893,919 Less: Allowance for possible loan losses (14,597) (13,439) ---------- ----------- Net loans 951,186 880,480 Bank premises and equipment - net 29,745 28,395 Accrued interest receivable 12,743 12,708 Other assets 17,630 13,454 ----------- ----------- TOTAL ASSETS $1,600,769 $1,549,019 =========== =========== LIABILITIES Deposits: Non-interest bearing demand $ 144,918 $ 143,872 Interest bearing demand 261,161 279,217 Savings deposits 331,963 337,706 Certificates of deposit 533,470 494,049 ---------- ---------- Total deposits 1,271,512 1,254,844 Federal funds purchased and repurchase agreements 84,651 70,457 Short-term borrowings 7,804 1,402 Other borrowings 5,777 777 Accrued interest payable 7,109 7,091 Other liabilities 9,490 7,452 ---------- ---------- TOTAL LIABILITIES 1,386,343 1,342,023 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; 10,372,103 shares issued 21,608 21,608 Capital surplus 31,207 31,237 Market value adjustment on investments available for sale - net of tax effect (1,067) 849 Retained earnings 167,883 159,483 Less: Treasury stock at cost (148,196 and 186,131 shares, respectively) (4,004) (5,038) --------- --------- 215,627 208,139 Deferred benefits for employees and directors (1,201) (1,143) --------- --------- TOTAL SHAREHOLDERS' EQUITY 214,426 206,996 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,600,769 $1,549,019 =========== =========== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
4 WESBANCO, INC. CONSOLIDATED STATEMENT OF INCOME (Unaudited) (in thousands, except share and per share amounts) <TABLE> <CAPTION> For the three months For the nine months ended September 30, ended September 30, ---------------------- --------------------- 1996 1995 1996 1995 ---------- ---------- --------- ---------- <S> <C> <C> <C> <C> INTEREST INCOME: Interest and fees on loans $ 20,684 $ 18,839 $ 60,046 $ 54,616 Interest on investment securities 7,451 7,756 22,305 23,600 Other interest income 329 537 1,293 1,959 ---------- ---------- --------- ---------- Total interest income 28,464 27,132 83,644 80,175 ---------- ---------- --------- ---------- INTEREST EXPENSE: Interest on deposits 11,215 11,018 33,010 32,062 Interest on other borrowings 944 784 2,713 2,257 ---------- ---------- --------- ---------- Total interest expense 12,159 11,802 35,723 34,319 ---------- ---------- --------- ---------- NET INTEREST INCOME 16,305 15,330 47,921 45,856 Provision for possible loan losses 1,298 834 2,848 1,687 ---------- ---------- --------- ---------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 15,007 14,496 45,073 44,169 ---------- ---------- --------- ---------- OTHER INCOME: Trust fees 1,204 1,027 4,039 3,495 Service charges and other income 1,692 1,703 4,713 4,778 Net securities transaction gains (losses) (167) 37 (51) 437 --------- ---------- --------- ---------- Total other income 2,729 2,767 8,701 8,710 --------- ---------- --------- ---------- OTHER EXPENSES: Salaries, wages and fringe benefits 6,076 5,686 17,406 17,170 Premises and equipment - net 1,402 1,232 4,354 3,876 Other operating 3,356 3,312 9,686 10,264 --------- ---------- --------- ---------- Total other expenses 10,834 10,230 31,446 31,310 --------- ---------- --------- ---------- Income before provision for income taxes 6,902 7,033 22,328 21,569 Provision for income taxes 1,749 1,986 6,255 6,107 ---------- ---------- ---------- ---------- NET INCOME $ 5,153 $ 5,047 $ 16,073 $ 15,462 ========== ========== ========== ========== Preferred stock dividends and discount accretion $ --- $ 46 $ --- $ 137 ========== ========== ========== ========== Net income available to common shareholders $ 5,153 $ 5,001 $ 16,073 $ 15,325 ========== ========== ========== ========== Earnings per share of common stock 0.50 0.49 1.58 1.51 ========== ========== ========== ========== Average shares outstanding 10,211,730 10,116,601 10,186,456 10,166,882 ========== ========== ========== ========== Dividends per share $ 0.28 $ 0.25 $ 0.80 $ 0.71 ========== ========== ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
5 WESBANCO, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (dollars in thousands) For the nine months ended September 30, -------------------------- 1996 1995 ------------ ----------- Total Shareholders' Equity Balance, beginning of period $206,996 $192,305 ---------- ---------- Net Income 16,073 15,462 Cash dividends: Common (7,673) (6,568) Preferred --- (114) Accretion of preferred stock --- (23) Net treasury stock activity 1,004 (2,817) Change in market value adjustment on investments available for sale-net of tax effect (1,916) 4,305 Change in deferred benefits for employees and directors (58) (469) ---------- ---------- Net change in Shareholders' Equity 7,430 9,776 ---------- ---------- Total Shareholders' Equity Balance, end of period $214,426 $202,081 ========== ========== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
6 WESBANCO, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (dollars in thousands) For the nine months ended September 30, ---------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 16,073 $ 15,462 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,984 1,777 Provision for possible loan losses 2,848 1,687 Net amortization and accretion 2,298 3,715 Gain on sales of investment securities 51 (437) Deferred income taxes (329) (49) Other - net (244) 195 Increase or decrease in assets and liabilities: Interest receivable (35) (530) Other assets (1,353) (2,585) Interest payable 18 1,279 Other liabilities 1,861 772 --------- --------- Net cash provided by operating activities 23,172 21,286 --------- --------- Investing Activities: Investment securities held to maturity: Payments for purchases (38,306) (57,795) Proceeds from maturities and calls 81,093 63,592 Investment securities available for sale: Payments for purchases (121,848) (41,134) Proceeds from sales 70,513 46,610 Proceeds from maturities, calls and prepayments 26,228 38,098 Net increase in loans (73,525) (64,097) Purchases of premises and equipment-net (3,260) (2,631) --------- --------- Net cash used by investing activities (59,105) (17,357) --------- --------- Financing activities: Net increase in certificates of deposit 39,421 31,394 Net decrease in demand and savings accounts (22,753) (39,079) Increase (decrease) in federal funds purchased and repurchase agreements 14,194 (2,410) Increase in short-term borrowings 6,402 3,364 Increase in other borrowings 5,000 --- Dividends paid (6,937) (6,441) Net purchases of treasury stock (721) (2,817) Other --- 129 --------- --------- Net cash provided (used) by financing activities 34,606 (15,860) --------- --------- Net decrease in cash and cash equivalents (1,327) (11,931) --------- --------- Cash and cash equivalents at beginning of period 91,694 94,546 ---------- ----------- Cash and cash equivalents at end of period $ 90,367 $ 82,615 ========== =========== For the nine months ended September 30, 1996 and 1995, WesBanco paid $35,359 and $33,041 in interest on deposits and other borrowings and $6,220 and $6,105 for income taxes, respectively. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
7 WESBANCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) NOTE 1 - BASIS OF PRESENTATION: - ------------------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of WesBanco, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. All previously presented financial information has been restated to include the Bank of Weirton. NOTE 2 - MERGERS AND ACQUISITIONS: - ---------------------------------- On July 18, 1996, WesBanco, Inc. announced the signing of a Definitive Agreement and Plan of Merger providing for the acquisition of Vandalia National Corporation, Morgantown, West Virginia. Under the terms of the Agreement, shareholders of Vandalia will receive 1.2718 shares of WesBanco common stock or, at such shareholders' election, $34.34 in cash. Also, holders of Vandalia warrants convertible in Vandalia common stock at $18 per share shall receive cash in the amount of $16.34 per warrant. To complete this transaction, WesBanco anticipates issuing up to 359,912 shares of WesBanco common stock from Treasury with approximately 200,000 of those shares being acquired in the marketplace. The Board of Directors of WesBanco approved the repurchase of up to 200,000 shares of WesBanco common stock for such purpose which can be acquired over a time period from approximately October 1, 1996 through January 31, 1997. The acquisition, which is based
8 upon a fixed exchange ratio, will be accounted for as a purchase transaction, with an approximate value of $10,319,000. Vandalia reported total assets of approximately $57,414,000 and shareholders' equity of approximately $4,375,000 as of September 30, 1996. The transaction is expected to be completed before year end. The merger is subject to approval of the shareholders of Vandalia. All regulatory approvals have now been received. NOTE 3 - COMPLETED MERGERS: - --------------------------- On August 30, 1996, WesBanco consummated its acquisition of the Bank of Weirton through the merger of the Bank of Weirton into WesBanco Bank Wheeling, an affiliate of WesBanco. Bank of Weirton had assets totaling approximately $177,877,000, and the transaction was accounted for as a pooling-of-interests. In connection with this transaction, the Corporation issued 1,690,000 shares of common stock. The consolidated balance sheets as of September 30, 1996 and December 31, 1995, and consolidated statements of income for the nine months ended September 30, 1996 and 1995, include the accounts of the Bank of Weirton for all periods presented. The following supplemental information reflects the separate results of the combined entities for the periods prior to the acquisition: (in thousands, except per share amounts) For the six months ended June 30, 1996 ----------------------------------------- As Previously Bank of Presented Weirton Consolidated ----------- ---------- ------------ Net interest income $ 28,934 $ 2,682 $ 31,616 Net income 9,888 1,032 10,920 Earnings per common share 1.17 79.38 1.08 On August 20, 1996, the Corporation acquired the assets and assumed certain liabilities of Universal Mortgage Company, and formed a new mortgage banking affiliate operating under the name of WesBanco Mortgage Company.
9 Universal Mortgage Company had assets totaling approximately $1,185,000 and the transaction was accounted for as a purchase. In connection with this transaction, WesBanco issued 32,463 shares of common stock from Treasury valued at approximately $856,000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - --------------------------------------------------------------- RESULTS OF OPERATIONS (Dollars in thousands except per share amounts) - --------------------- The following discussion and analysis presents in further detail the financial condition and results of operations of WesBanco, Inc. and its subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes presented in this report. Financial Condition ------------------- Total assets of WesBanco as of September 30, 1996 were $1,600,769 as compared to $1,549,019 as of December 31, 1995, an increase of 3.3%. The increase in assets consisted of an 8.0% increase in loans partially offset by a 4.4% decline in securities. Total deposits increased 1.3% during the comparative period. Securities: - ----------- The following table shows the composition of WesBanco's securities portfolio at September 30, 1996 and December 31, 1995: September 30, December 31, 1996 1995 ------------- ------------- Securities Available for Sale (at market): - ------------------------------------------ U.S. Treasury and Federal Agency securities $165,550 $157,505 Obligations of states and political subdivisions 14,145 5,667 Mortgage-backed securities 66,979 6,610 Other debt and equity securities 3,154 2,355 -------- -------- Total available for sale 249,828 172,137 -------- -------- Securities Held to Maturity (at cost): - -------------------------------------- U.S. Treasury and Federal Agency securities 109,969 219,719 Obligations of states and political subdivisions 137,602 129,074 Other debt securities 1,699 1,358 -------- -------- Total held to maturity (market value of $249,686 and $353,760, respectively) 249,270 350,151 -------- -------- Total securities $499,098 $522,288 ======== ========
10 Representing a source of funds for increasing loan demand, securities decreased by $23,190 between September 30, 1996 and December 31, 1995. During the period, maturities, calls, prepayments and sales aggregated $177,834, while investment purchases totaled $160,154. To comply with WesBanco's investment policies, approximately $54,948 in U.S. Treasury securities from the Bank of Weirton merger were reclassified from the held to maturity to the available for sale portfolio. During the third quarter 1996, WesBanco sold approximately $43,441 of U.S. Treasury securities to take advantage of the yield opportunities in the mortgage-backed securities market. The U.S. Treasury securities sold resulted in net losses of approximately $167,000 in the third quarter which the Corporation anticipates will be recovered by the additional interest income generated from the higher-yielding securities. The market value adjustments, before tax effect, in the available for sale securities portfolio resulted in unrealized net losses of $1,750 and unrealized net gains of $1,392 as of September 30, 1996 and December 31, 1995, respectively. These adjustments represent market value fluctuations caused by general changes in market rates and the length of time to respective maturity dates. If these securities are held until their respective maturity date, no market value adjustment would be realized.
11 Loans: - ------ The following table shows the composition of WesBanco's loan portfolio at September 30, 1996 and December 31, 1995: September 30, 1996 December 31, 1995 ------------------ ------------------ Amount Percent Amount Percent ------- ------- ------ ------- Loans: Commercial $162,686 16.8% $176,809 19.5% Real Estate-Construction 20,853 2.1% 16,544 1.8% Real Estate-Mortgage 481,963 49.7% 424,917 47.0% Consumer 304,766 31.4% 284,108 31.7% -------- ------ -------- ------ Total Loans $970,268 100.0% $902,378 100.0% Less: Unearned income (4,485) (8,459) Allowance for possible loan losses (14,597) (13,439) --------- --------- Net loans $951,186 $880,480 ========= ========= Net loans increased $70,706 or 8.0% between September 30, 1996 and December 31, 1995. Overall loan growth was primarily attributable to consumer lending. During the first nine months of 1996 and throughout 1995, WesBanco experienced steady growth in this area as a result of offering attractive rates on residential and automobile loans. WesBanco monitors the overall quality of its loan portfolio through various methods. Underwriting policies and guidelines have been established for all types of credits and management continually monitors the portfolio for adverse trends in delinquent and nonperforming loans. Loans are considered impaired under FAS 114 when it is determined that WesBanco will be unable to collect all principal and interest due, according to the contractual terms of the loans. Impaired loans, which include all nonperforming loans, are as follows: September 30, December 31, 1996 1995 ------------- ------------ Nonaccrual $4,395 $5,199 Renegotiated and other 5,290 2,092 ---------- ---------- Total impaired loans $9,685 $7,291 ========== ==========
12 The average balance of impaired loans during the periods ended September 30, 1996 and December 31, 1995, were approximately $11,380 and $6,773, respectively. Specific allowances are allocated for impaired loans based on the present value of expected future cash flows, or the fair value of the collateral for loans that are collateral dependent. Related allowances for possible loan losses on impaired loans were $1,992 and $334 as of September 30, 1996 and December 31, 1995, respectively. Other real estate totaled $3,605 as of September 30, 1996, compared to $4,137 as of December 31, 1995. Loans past due 90 days or more was $3,831 or .4% of total loans as of September 30, 1996, as compared to $3,034 or .3% of total loans as of December 31, 1995. Lending by WesBanco banks is guided by written lending policies which allow for various types of lending. Normal lending practices do not include the acquisition of high yield non-investment grade loans or "highly leveraged transactions" ("HLT") from outside the primary market area. Allowance for Possible Loan Losses - ---------------------------------- Activity in the allowance for possible loan losses is summarized as follows: For the nine months ended September 30, -------------------- 1996 1995 --------- -------- Balance, at beginning of period $13,440 $12,960 Recoveries credited to allowance 372 513 Provision for possible loan losses 2,848 1,687 Losses charged to allowance (2,063) (1,733) --------- --------- Balance, at end of period $14,597 $13,427 ========= ========= The provision for possible loan losses increased $1,161 due to an increase in net charge-offs and loan growth during 1996. Net charge-offs
13 increased to $1,691 as of September 30, 1996 from $1,220 as of September 30, 1995. The allowance for possible loan losses as a percentage of total loans was 1.5% as of September 30, 1996 and December 31, 1995. Amounts allocated to the allowance for loan losses are based upon management's evaluation of the loan portfolio. Deposits: - --------- Total deposits increased $16,668 between September 30, 1996 and December 31, 1995 primarily due to growth in certificates of deposit. Customer preference for higher yielding products coupled with competitive pricing have contributed to the steady certificate of deposit growth. In addition, WesBanco's retail banking program called "Good Neighbor Banking", has contributed to the increase in deposits. The program is designed to build customer relationships by offering a series of pricing bonuses, which vary according to the customer's number of qualifying services. This relationship building is key to long term deposit growth and customer profitability. During the comparative period, a shift occurred in deposit mix from demand and savings deposits, which decreased $23,799 or 3.8%, to certificates of deposit, which increased $39,421 or 7.9%. The shift in deposit balances reflects the customer's preference for higher-yielding products, primarily in the Good Neighbor Banking program which offers a tiered pricing structure based on account balance and number of qualifying services. Liquidity and Capital Resources - ------------------------------- WesBanco manages its liquidity position to meet its funding needs, including deposit outflows and loan principal disbursements. WesBanco also manages its liquidity position to meet its asset and liability management objectives.
14 In addition to funds provided from operations, WesBanco's primary sources of funds are deposits, principal repayments on loans and matured or called investment securities. Scheduled loan repayments and maturing investment securities are relatively predictable sources of funds. However, deposit flows and prepayments on loans are significantly influenced by changes in market interest rates, economic conditions, and competition. WesBanco strives to manage the pricing of its deposits to maintain a balance of cash flows commensurate with loan commitments and other funding needs. WesBanco is subject to risk-based capital guidelines that measure capital relative to risk-adjusted assets and off-balance sheet financial instruments. The Corporation's Tier I, total risk-based capital and leverage ratios are well above the required minimum levels of 4%, 8% and 3%, respectively. At September 30, 1996, all of WesBanco's affiliate banks exceeded the minimum regulatory levels. Capital adequacy ratios are summarized as follows: September 30, December 31, 1996 1995 ------------- ------------ Capital Ratios: Primary capital 14.2% 14.1% Tier 1 capital 20.4% 21.7% Total risk-based capital 21.7% 22.9% Leverage 13.4% 13.4% Comparison of the nine months ended September 30, 1996 and 1995 --------------------------------------------------------------- Earnings Summary ---------------- Net income for the nine months ended September 30, 1996 was $16,073, a 4.0% increase over the same period in 1995. Earnings per share of common stock for the nine months ended September 30, 1996 and 1995 were $1.58 and $1.51 respectively. Net income increased primarily due to an increase in net interest income and an increase in trust fees for the nine months ended September 30, 1996 as compared to the same period in 1995.
15 Return on average assets was 1.36% for the nine months ended September 30, 1996 and 1995. Return on average equity was 10.25% compared to 10.38% for the nine months ended September 30, 1996 and 1995, respectively. Net Interest Income - ------------------- Net interest income before the provision for possible loan losses, for the nine months ended September 30, 1996 increased $2,065 or 4.5% over the same period for 1995. The increase resulted from an increase in the net tax equivalent yield combined with volume growth in both average earning assets of $42,411 and interest bearing liabilities of $42,659. The growth in average earning assets was comprised primarily of an increase in loans. As interest rates generally declined during 1995, offering lower rates on mortgage and consumer loan products contributed to a 10.1% increase in average loans. During the nine months ended September 30, 1996, most banks' primary lending rates averaged 8.3% compared to 8.9% for the corresponding period in 1995. Average interest bearing liabilities increased primarily due to growth in certificates of deposit and repurchase agreements. Net tax equivalent yield on average earning assets increased to 4.8% from 4.6% for the nine months ended September 30, 1996 and 1995. The increase in the net yield was due to a shift in the mix of assets from investment securities to higher-yielding loans as well as a reduction of interest rates on demand and savings products in January 1996. Interest Income - --------------- Total interest income increased $3,469 or 4.3% between the nine month periods ended September 30, 1996 and 1995. Interest and fees on loans increased $5,430 or 9.9% primarily due to both an increase in the average rates earned and the average balance of loans outstanding. Average rates earned on loans decreased approximately .07% while average loan balances
16 increased by approximately $83,057 or 10.1%. Interest on taxable investments decreased $764 or 4.2%. The decline was due to a decrease in the average outstanding balance of approximately $40,206, partially offset by an increase in the average yield of .33% between the nine month periods ending September 30, 1996 and 1995. The decrease in taxable investments resulted from the funding of excess loan demand with scheduled investment maturities. Interest earned on nontaxable investments decreased by $531 or 9.3%. Increases in the average balance of this type of investment approximated $9,110 while the average yield declined .84%. Interest Expense - ---------------- Total interest expense increased $1,404 or 4.1% between the nine month periods ended September 30, 1996 and 1995. Interest expense on deposits increased $948 or 2.9% during the comparative period as the average rate on interest-bearing deposits remained stable at 3.9% and average interest-bearing deposit balances increased by approximately $19,124 or 5.9%. The increase in average interest-bearing deposit balances resulted from growth in certificates of deposit of $41,299 or 8.8%. Customers were attracted to the higher-yielding certificate of deposit products and the introduction of the Good Neighbor Banking Program in the fourth quarter of 1995. Interest expense on certificates of deposit increased $2,662 or 14.5% reflecting the growth in average balances. Interest expense on interest bearing demand deposits decreased $756 or 12.7% primarily due to a decrease in the average rate of approximately .43%. Interest on savings accounts decreased $958 or 12.3% primarily due to a decrease in the average balances of $27,843 combined with a .14% average rate decrease. Interest on other borrowings, which consists primarily of repurchase agreements, increased $456 or 20.2% due to an increase in average balances outstanding of $23,536. Rates paid on repurchase
17 agreements closely follow the direction of interest rates in the federal funds market. Other Income - ------------ Other income decreased $9 or .1%. Trust fee income increased $544 primarily due to increases in the market values and new trust business during the first nine months of 1996. The market value of trust assets approximated $1,499,930 as of September 30, 1996, an increase of $238,476 over September 30, 1995. Service charges and other income decreased $65 between the nine month periods ended September 30, 1996 and 1995. WesBanco recognized net securities transaction losses of $51 for the nine months ended September 30, 1996 compared to net security transaction gains of $437 for the same period in 1995. During the third quarter 1996, certain U.S. Treasury securities were sold at a loss in order to take advantage of higher yielding investment opportunities. In 1995, the Corporation recognized security gains of approximately $279, resulting from a decision to divest an equity position which no longer had a strategic value. Other Expenses - -------------- Total other expenses decreased $136 or .4%. Salaries and employee benefits increased 1.4% during this period primarily due to normal salary adjustments partially offset by a reduction in pension expense. Premises and equipment expense increased $478 or 12.3% due to technological advancements, including a wide area network, designed to enhance customer service. Other operating expenses decreased $578 or 5.6% primarily due to a reduction in FDIC insurance expense of $1,340. However, the decrease was partially offset by expenses totaling $255 in an asset classified as real estate held for resale coupled with increases in professional fees associated with acquisition activity.
18 Income Taxes - ------------ A reconciliation of the average federal statutory tax rate to the reported effective tax rate attributable to income from operations follows: For the nine months ended September 30, ---------------------------- 1996 1995 ------------- ------------ Federal statutory tax rate $7,814 35% $7,549 35% Tax-exempt interest income from securities of states and political subdivisions (1,915) (8) (1,951) (9) State income tax - net of federal tax effect 668 3 628 3 Alternative minimum tax credit carryforward recognized (364) (2) (98) (1) All other - net 52 0 (21) 0 ------------ ------------ Effective tax rate $6,255 28% $6,107 28% ------------ ------------ As of September 30, 1996, the Corporation has credits for prior years minimum taxes of approximately $364,000 available in future years to reduce regular taxes payable. Comparison of the three months ended September 30, 1996 and 1996 - ---------------------------------------------------------------- Total interest income increased $1,332 or 4.9% between the three month periods ending September 30, 1996 and 1995. Interest and fees on loans increased $1,845 due to an increase in the average volume of loans outstanding, partially offset by a decrease in the average rate. Interest on taxable investments increased $193 due to a decrease in average balances partially offset by an increase in average rates. Interest on non-taxable investments decreased $493 primarily due to a decrease in average rates. Other interest income, primarily interest on federal funds sold, decreased $213 due to a decrease in the average balance outstanding and a decrease in average rates. Total interest expense increased $357 between the three month periods ending September 30, 1996 and 1995. Interest on deposits increased $197 due to an increase in the average interest bearing deposit balances outstanding of
19 approximately $18,342, partially offset by a decrease in the average rates paid on deposits. Interest on other borrowings increased $160 for the three months ended September 30, 1996 and 1995, primarily due to an increase in the average volume of repurchase agreements of approximately $35,239. Total other income decreased by $38 primarily due to a decrease in net security gain transactions of $204. During the third quarter 1996, certain U.S. Treasury securities were sold at a loss in order to take advantage of higher yielding investment opportunities. Trust fees increased by $177 during the comparative period. Total other expense increased by $604. Salaries and employee benefits increased $390 due to normal salary adjustments. Premises and equipment expense increased $170 due to continued technological costs. Other operating expenses increased by $44 primarily due to increases in marketing and professional fees combined with a reduction in FDIC insurance expense. Part II - OTHER INFORMATION - --------------------------- Item 2-5 - Not Applicable - ------------------------- Item 6(a) - Exhibits - -------------------- (27) Financial Data Schedule required by Article 9 of Regulation S-X. Item 6(b) - Reports on Form 8-K - -------------------------------- (1) Filed current report on Form 8-K dated July 18, 1996, announcing the signing of a Definitive Agreement and Plan of Merger providing for the merger of Vandalia National Corporation located in Morgantown, West Virginia, with WesBanco Fairmont, a wholly owned subsidiary of WesBanco, Inc. This is to be accounted for as a purchase transaction. (2) Filed current report of Form 8-K dated August 30, 1996, which reported the consummation of the acquisition of the Bank of Weirton by WesBanco, Inc.
20 (3) Filed current report of Form 8-K/A dated November 4, 1996, which provided historical financial information of the registrant restated to include the Bank of Weirton. SIGNATURE - --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WESBANCO, INC. -------------- Date: November 4, 1996 /s/ Edward M. George ----------------- __________________________________ Edward M. George President and Chief Executive Officer Date: November 4, 1996 /s/ Paul M. Limbert ---------------- ______________________________________ Paul M. Limbert Executive Vice President and Chief Financial Officer </TABLE>