UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
(Mark
One)
|
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended June 30, 2005
|
|
|
¨
|
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
|
(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
|
|
|
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
þ
No
¨
Indicate
by check mark whether the Registrant is an accelerated filer as defined by
Rule
12b-2 of the Exchange Act.
Yes
þ
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. As of July 29, 2005, there were
22,335,077 shares of WesBanco, Inc. common stock $2.0833 par value,
outstanding.
|
WESBANCO,
INC.
|
|
|
|
TABLE
OF CONTENTS
|
|
|
|
|
|
|
ITEM
#
|
ITEM
|
Page
No.
|
|
|
|
|
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
1
|
Financial
Statements
|
|
|
|
Consolidated
Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004
|
3
|
|
|
Consolidated
Statements of Income for the three and six months ended June 30,
2005 and
2004 (unaudited)
|
4
|
|
|
Consolidated
Statements of Changes in Shareholders' Equity for the Six months
ended
June 30, 2005 and 2004 (unaudited)
|
5
|
|
|
Consolidated
Statements of Cash Flows for the six months ended June 30, 2005
and 2004
(unaudited)
|
6
|
|
|
Notes
to Consolidated Financial Statements
|
7
-
18
|
|
|
|
|
|
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
- 31
|
|
|
|
|
|
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
31
-32
|
|
|
|
|
|
4
|
Controls
and Procedures
|
32
|
|
|
|
|
|
|
PART
II – OTHER INFORMATION
|
|
|
1
|
Legal
Proceedings
|
33
|
|
|
|
|
|
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
34
|
|
|
|
|
|
3
|
Defaults
Upon Senior Securities
|
34
|
|
|
|
|
|
4
|
Submission
of Matters to a Vote of Security Holders
|
34
|
|
|
|
|
|
5
|
Other
Information
|
34
|
|
|
|
|
|
6
|
Exhibits
|
34
|
|
|
|
|
|
|
Signatures
|
35
|
|
2
PART
I - FINANCIAL INFORMATION
WESBANCO,
INC. CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
(dollars
in thousands, except per share amounts)
|
2005
|
|
2004
|
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
93,045
|
|
$
|
93,611
|
|
Due
from banks – interest bearing
|
|
|
2,370
|
|
|
3,446
|
|
Federal
funds sold
|
|
|
-
|
|
|
-
|
|
Securities:
|
|
|
|
|
|
|
|
Held
to maturity (fair values of $460,717 and $420,839,
respectively)
|
|
|
446,587
|
|
|
406,862
|
|
Available
for sale, at fair value
|
|
690,537
|
|
|
765,320
|
|
Total
securities
|
|
|
1,137,124
|
|
|
1,172,182
|
|
Loans
held for sale
|
|
|
8,518
|
|
|
3,169
|
|
Total
portfolio loans, net of unearned income
|
|
|
2,924,851
|
|
|
2,485,366
|
|
Allowance
for loan losses
|
|
|
(32,348
|
)
|
|
(29,486
|
)
|
Net
portfolio loans
|
|
|
2,892,503
|
|
|
2,455,880
|
|
Premises
and equipment, net
|
|
|
63,459
|
|
|
56,670
|
|
Accrued
interest receivable
|
|
|
20,621
|
|
|
18,599
|
|
Goodwill
|
|
|
137,339
|
|
|
73,760
|
|
Core
deposit intangible, net
|
|
|
11,720
|
|
|
10,162
|
|
Cash
surrender value of bank-owned life insurance
|
|
|
79,503
|
|
|
78,186
|
|
Other
assets
|
|
|
50,558
|
|
|
45,734
|
|
Total
Assets
|
|
$
|
4,496,760
|
|
$
|
4,011,399
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Non-interest
bearing demand
|
|
$
|
373,210
|
|
$
|
355,364
|
|
Interest
bearing demand
|
|
|
318,786
|
|
|
312,080
|
|
Money
market
|
|
|
517,516
|
|
|
587,523
|
|
Savings
deposits
|
|
|
464,628
|
|
|
362,581
|
|
Certificates
of deposit
|
|
|
1,381,986
|
|
|
1,108,386
|
|
Total
deposits
|
|
|
3,056,126
|
|
|
2,725,934
|
|
Federal
Home Loan Bank borrowings
|
|
|
673,183
|
|
|
599,411
|
|
Other
short-term borrowings and federal funds purchased
|
|
|
226,417
|
|
|
200,513
|
|
Junior
subordinated debt
|
|
|
87,638
|
|
|
72,174
|
|
Total
borrowings
|
|
|
987,238
|
|
|
872,098
|
|
Accrued
interest payable
|
|
|
7,929
|
|
|
6,903
|
|
Other
liabilities
|
|
|
25,265
|
|
|
36,283
|
|
Total
Liabilities
|
|
|
4,076,558
|
|
|
3,641,218
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
Preferred
stock, no par value; 1,000,000 shares authorized; none
outstanding
|
|
|
—
|
|
|
—
|
|
Common
stock, $2.0833 par value; 50,000,000 shares authorized; 23,615,859
shares
issued;
|
|
|
|
|
|
|
|
outstanding:
22,321,525 shares in 2005 and 20,837,469 shares in 2004
|
|
|
49,200
|
|
|
44,415
|
|
Capital
surplus
|
|
|
121,329
|
|
|
61,451
|
|
Retained
earnings
|
|
|
291,551
|
|
|
281,013
|
|
Treasury
stock (1,294,334 and 481,879 shares, respectively, at
cost)
|
|
|
(36,526
|
)
|
|
(12,711
|
)
|
Accumulated
other comprehensive loss
|
|
|
(3,727
|
)
|
|
(2,415
|
)
|
Deferred
benefits for directors and employees
|
|
|
(1,625
|
)
|
|
(1,572
|
)
|
Total
Shareholders' Equity
|
|
|
420,202
|
|
|
370,181
|
|
Total
Liabilities and Shareholders' Equity
|
|
$
|
4,496,760
|
|
$
|
4,011,399
|
|
See
Notes
to Consolidated Financial Statements.
3
WESBANCO,
INC. CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
For
the Three Months
|
|
|
For
the Six Months
|
|
|
|
|
Ended
June 30,
|
|
|
Ended
June 30,
|
|
(Unaudited,
dollars in thousands, except per share amounts)
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
INTEREST
AND DIVIDEND INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
including fees
|
|
$
|
44,540
|
|
$
|
28,618
|
|
$
|
87,386
|
|
$
|
56,782
|
|
Interest
and dividends on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
7,200
|
|
|
7,069
|
|
|
14,530
|
|
|
14,362
|
|
Tax-exempt
|
|
|
4,792
|
|
|
4,322
|
|
|
9,478
|
|
|
8,673
|
|
Total
interest and dividends on securities
|
|
|
11,992
|
|
|
11,391
|
|
|
24,008
|
|
|
23,035
|
|
Federal
funds sold
|
|
|
2
|
|
|
11
|
|
|
24
|
|
|
35
|
|
Total
interest and dividend income
|
|
|
56,534
|
|
|
40,020
|
|
|
111,418
|
|
|
79,852
|
|
INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing demand deposits
|
|
|
341
|
|
|
178
|
|
|
668
|
|
|
374
|
|
Money
market deposits
|
|
|
2,547
|
|
|
2,311
|
|
|
5,209
|
|
|
4,647
|
|
Savings
deposits
|
|
|
733
|
|
|
277
|
|
|
1,289
|
|
|
557
|
|
Certificates
of deposit
|
|
|
10,341
|
|
|
6,464
|
|
|
19,978
|
|
|
12,997
|
|
Total
interest expense on deposits
|
|
|
13,962
|
|
|
9,230
|
|
|
27,144
|
|
|
18,575
|
|
Federal
Home Loan Bank borrowings
|
|
|
5,823
|
|
|
3,337
|
|
|
11,766
|
|
|
6,527
|
|
Other
short-term borrowings and federal funds purchased
|
|
|
1,576
|
|
|
578
|
|
|
2,775
|
|
|
1,119
|
|
Junior
subordinated debt
|
|
|
1,305
|
|
|
513
|
|
|
2,364
|
|
|
942
|
|
Total
interest expense
|
|
|
22,666
|
|
|
13,658
|
|
|
44,049
|
|
|
27,163
|
|
NET
INTEREST INCOME
|
|
|
33,868
|
|
|
26,362
|
|
|
67,369
|
|
|
52,689
|
|
Provision
for loan losses
|
|
|
1,919
|
|
|
1,496
|
|
|
3,762
|
|
|
3,296
|
|
Net
interest income after provision for loan losses
|
|
|
31,949
|
|
|
24,866
|
|
|
63,607
|
|
|
49,393
|
|
NON-INTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
fees
|
|
|
3,512
|
|
|
3,210
|
|
|
7,226
|
|
|
6,741
|
|
Service
charges on deposits
|
|
|
2,723
|
|
|
2,283
|
|
|
5,185
|
|
|
4,466
|
|
Bank-owned
life insurance
|
|
|
711
|
|
|
732
|
|
|
1,394
|
|
|
1,421
|
|
Net
securities gains
|
|
|
1,068
|
|
|
155
|
|
|
1,821
|
|
|
816
|
|
Net
gains on sales of loans
|
|
|
197
|
|
|
78
|
|
|
329
|
|
|
146
|
|
Other
income
|
|
|
1,729
|
|
|
1,634
|
|
|
3,516
|
|
|
3,263
|
|
Total
non-interest income
|
|
|
9,940
|
|
|
8,092
|
|
|
19,471
|
|
|
16,853
|
|
NON-INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
10,422
|
|
|
8,294
|
|
|
20,993
|
|
|
16,684
|
|
Employee
benefits
|
|
|
4,106
|
|
|
2,984
|
|
|
7,431
|
|
|
5,789
|
|
Net
occupancy
|
|
|
1,751
|
|
|
1,362
|
|
|
3,547
|
|
|
2,930
|
|
Equipment
|
|
|
2,190
|
|
|
1,884
|
|
|
4,394
|
|
|
3,654
|
|
Core
deposit intangible amortization
|
|
|
685
|
|
|
287
|
|
|
1,348
|
|
|
574
|
|
Merger-related
expenses
|
|
|
70
|
|
|
8
|
|
|
563
|
|
|
17
|
|
Other
operating expenses
|
|
|
8,269
|
|
|
6,627
|
|
|
16,346
|
|
|
12,933
|
|
Total
non-interest expense
|
|
|
27,493
|
|
|
21,446
|
|
|
54,622
|
|
|
42,581
|
|
Income
before provision for income taxes
|
|
|
14,396
|
|
|
11,512
|
|
|
28,456
|
|
|
23,665
|
|
Provision
for income taxes
|
|
|
3,138
|
|
|
2,149
|
|
|
6,118
|
|
|
4,543
|
|
NET
INCOME
|
|
$
|
11,258
|
|
$
|
9,363
|
|
$
|
22,338
|
|
$
|
19,122
|
|
Earnings
per share - basic
|
|
$
|
0.50
|
|
$
|
0.48
|
|
$
|
0.98
|
|
$
|
0.97
|
|
Earnings
per share - diluted
|
|
$
|
0.50
|
|
$
|
0.48
|
|
$
|
0.98
|
|
$
|
0.97
|
|
Average
shares outstanding - basic
|
|
|
22,587,213
|
|
|
19,665,779
|
|
|
22,788,686
|
|
|
19,692,856
|
|
Average
shares outstanding - diluted
|
|
|
22,643,463
|
|
|
19,709,958
|
|
|
22,840,483
|
|
|
19,740,856
|
|
Dividends
per share
|
|
$
|
0.26
|
|
$
|
0.25
|
|
$
|
0.52
|
|
$
|
0.50
|
|
See
Notes
to Consolidated Financial Statements.
4
WESBANCO,
INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
|
|
|
(Unaudited,
dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
Deferred
|
|
|
|
|
|
|
|
Other
|
Benefits
for
|
|
|
Common
Stock
|
Capital
|
Retained
|
Treasury
|
Comprehensive
|
Directors
&
|
|
|
Shares
|
Amount
|
Surplus
|
Earnings
|
Stock
|
Income
(Loss)
|
Employees
|
Total
|
January
1, 2004
|
19,741,464
|
$
44,415
|
$
52,900
|
$
263,080
|
$
(38,383)
|
$
(1,864)
|
$
(1,712)
|
$
318,436
|
Net
income
|
|
|
|
19,122
|
|
|
|
19,122
|
Change
in accumulated
|
|
|
|
|
|
|
|
|
other
comprehensive income
|
|
|
|
|
|
(6,529)
|
|
(6,529)
|
Comprehensive
income
|
|
|
|
|
|
|
|
12,593
|
Cash
dividends: Common ($0.50 per share)
|
|
|
|
(9,832)
|
|
|
|
(9,832)
|
Treasury
shares purchased
|
(140,874)
|
|
|
|
(4,058)
|
|
|
(4,058)
|
Treasury
shares sold
|
48,863
|
|
75
|
|
1,163
|
|
|
1,238
|
Deferred
benefits for directors – net
|
|
|
|
|
|
|
251
|
251
|
June
30, 2004
|
19,649,453
|
$
44,415
|
$
52,975
|
$
272,370
|
$
(41,278)
|
$
(8,393)
|
$
(1,461)
|
$
318,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2005
|
20,837,469
|
$
44,415
|
$
61,451
|
$
281,013
|
$
(12,711)
|
$
(2,415)
|
$
(1,572)
|
$
370,181
|
Net
income
|
|
|
|
22,338
|
|
|
|
22,338
|
Change
in accumulated
|
|
|
|
|
|
|
|
|
other
comprehensive income
|
|
|
|
|
|
(1,312)
|
|
(1,312)
|
Comprehensive
income
|
|
|
|
|
|
|
|
21,026
|
Cash
dividends: Common ($.52 per share)
|
|
|
|
(11,800)
|
|
|
|
(11,800)
|
Treasury
shares purchased
|
(962,863)
|
|
|
|
(27,514)
|
|
|
(27,514)
|
Treasury
shares sold
|
150,408
|
|
(1,389)
|
|
3,699
|
|
|
2,310
|
Shares
issued for acquisition
|
2,296,511
|
4,785
|
60,539
|
|
|
|
|
65,324
|
Tax
benefit from employee benefit plans
|
|
|
728
|
|
|
|
|
728
|
Deferred
benefits for directors – net
|
|
|
|
|
|
|
(53)
|
(53)
|
June
30, 2005
|
22,321,525
|
$49,200
|
$
121,329
|
$
291,551
|
$(36,526)
|
$
(3,727)
|
$
(1,625)
|
$
420,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There
was no activity in Preferred Stock during the six months ended
June 30,
2005 and 2004.
|
|
|
|
See
Notes
to Consolidated Financial Statements.
5
WESBANCO,
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For
the Six Months Ended June 30,
|
|
(Unaudited,
in thousands)
|
|
2005
|
|
2004
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
Net
income
|
|
$
22,338
|
|
$
19,122
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation
|
|
3,291
|
|
2,904
|
|
Net
amortization
|
|
(195)
|
|
1,849
|
|
Provision
for loan losses
|
|
3,762
|
|
3,296
|
|
Gains
on sales of securities – net
|
|
(1,821)
|
|
(816)
|
|
Gains
on sales of mortgage loans – net
|
|
(329)
|
|
(146)
|
|
Tax
benefit from employee benefit plans
|
|
727
|
|
-
|
|
Deferred
income taxes
|
|
114
|
|
(1,387)
|
|
Increase
in cash surrender value of bank-owned life insurance
|
|
(1,317)
|
|
(1,400)
|
|
Loans
originated for sale
|
|
(47,711)
|
|
(11,343)
|
|
Proceeds
from the sale of loans originated for sale
|
|
42,606
|
|
11,602
|
|
Net
change in: other assets and accrued interest receivable
|
|
6,278
|
|
(4,147)
|
|
Net
change in: other liabilities and interest payable
|
|
(16,219)
|
|
423
|
|
Other
– net
|
|
552
|
|
(105)
|
|
Net
cash provided by operating activities
|
|
12,076
|
|
19,852
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
Securities
held to maturity:
|
|
|
|
|
|
Proceeds
from maturities, prepayments and calls
|
|
12,860
|
|
37,480
|
|
Payments
for purchases
|
|
(36,732)
|
|
(13,536)
|
|
Securities
available for sale:
|
|
|
|
|
|
Proceeds
from sales
|
|
114,884
|
|
66,843
|
|
Proceeds
from maturities, prepayments and calls
|
|
127,455
|
|
119,561
|
|
Payments
for purchases
|
|
(140,215)
|
|
(181,442)
|
|
Acquisition,
net of cash paid
|
|
(37,808)
|
|
-
|
|
Purchases
of loans
|
|
-
|
|
(17,261)
|
|
Sale
of loans
|
|
66,791
|
|
-
|
|
Increase
in loans
|
|
(32,512)
|
|
(82,053)
|
|
Purchases
of premises and equipment – net
|
|
(4,284)
|
|
(2,792)
|
|
Net
cash provided by (used in) investing activities
|
|
70,439
|
|
(73,200)
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
Decrease
in deposits
|
|
(28,453)
|
|
(34,607)
|
|
Increase
(decrease) in Federal Home Loan Bank borrowings
|
|
(60,709)
|
|
72,396
|
|
Increase
(decrease) in other borrowings
|
|
15,003
|
|
(50,557)
|
|
Increase
in federal funds purchased
|
|
10,900
|
|
24,300
|
|
Proceeds
from the issuance of junior subordinated debt
|
|
15,464
|
|
41,238
|
|
Dividends
paid
|
|
(11,158)
|
|
(9,673)
|
|
Treasury
shares purchased – net
|
|
(25,204)
|
|
(2,820)
|
|
Net
cash provided by (used in) financing activities
|
|
(84,157)
|
|
40,277
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
(1,642)
|
|
(13,071)
|
|
Cash
and cash equivalents at beginning of the period
|
|
97,057
|
|
108,210
|
|
Cash
and cash equivalents at end of the period
|
|
$
95,415
|
|
$
95,139
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
Interest
paid on deposits and other borrowings
|
|
$
|
42,407
|
|
$
|
27,312
|
|
Income
taxes paid
|
|
|
6,425
|
|
|
7,375
|
|
Transfers
of loans to other real estate owned
|
|
|
572
|
|
|
454
|
|
Summary
of business acquisition:
|
|
|
|
|
|
|
|
Fair
value of tangible assets acquired
|
|
$
|
547,949
|
|
$
|
-
|
|
Fair
value of core deposit intangible acquired
|
|
|
2,905
|
|
|
-
|
|
Fair
value of liabilities assumed
|
|
|
(505,199
|
)
|
|
-
|
|
Stock
issued for the purchase of acquired company's common stock
|
|
|
(65,323
|
)
|
|
-
|
|
Cash
paid in the acquisition
|
|
|
(43,778
|
)
|
|
-
|
|
Goodwill
recognized
|
|
$
|
(63,446
|
)
|
$
|
-
|
|
See
Notes
to Consolidated Financial Statements.
6
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE
OF OPERATIONS:
WesBanco,
Inc. ("WesBanco") is a bank holding company offering a full range of financial
services, including trust and investment services, mortgage banking, insurance
and brokerage services. WesBanco’s defined business segments are community
banking and trust and investment services. WesBanco’s banking subsidiary,
WesBanco Bank, Inc. (the "Bank"), headquartered in Wheeling, West Virginia,
operates through 85 banking offices, 2 loan production offices and 129 ATM
machines in West Virginia, Ohio and Western Pennsylvania. In addition, WesBanco
operates an insurance brokerage company, WesBanco Insurance Services, Inc.,
and
a full service broker/dealer, WesBanco Securities, Inc. that also operates
Mountaineer Securities, WesBanco’s discount brokerage operation.
BASIS
OF PRESENTATION:
The
accompanying unaudited consolidated interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all
of the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. The Consolidated Financial
Statements include the accounts of WesBanco and its wholly-owned subsidiaries.
Significant intercompany transactions have been eliminated in consolidation.
The
accounting and reporting policies followed in the presentation of these
financial statements are consistent with those applied in the preparation of
WesBanco’s 2004 Annual Report on Form 10-K. In the opinion of management,
adjustments necessary for a fair presentation of financial position and results
of operations for the interim periods have been made. Such adjustments are
of a
normal and recurring nature. The results of operations for the three and six
months ended June 30, 2005 and 2004 are not necessarily indicative of the
results that may be or were attained for the entire year.
PRINCIPLES
OF CONSOLIDATION:
The
Consolidated Financial Statements include the accounts of WesBanco and those
entities in which WesBanco has a controlling financial interest. All material
intercompany balances and transactions have been eliminated in
consolidation.
WesBanco
determines whether it has a controlling financial interest in an entity by
first
evaluating whether the entity is a voting interest entity or a variable interest
entity. Under Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," a voting interest entity is an entity in which the total equity
investment at risk is sufficient to enable the entity to finance itself
independently and provides the equity holders with the obligation to absorb
losses, the right to receive residual returns and the right to make financial
and operating decisions. WesBanco consolidates voting interest entities in
which
it owns all, or at least a majority (generally, greater than 50%) of the voting
interest. Under Financial Accounting Standards Board ("FASB") Interpretation
No.
46 ("FIN No. 46"), "Consolidation of Variable Interest Entities," variable
interest entities ("VIE") are entities that in general either do not have equity
investors with voting rights or that have equity investors that do not provide
sufficient financial resources for the entity to support its activities. A
controlling financial interest in a VIE is present when a company absorbs a
majority of an entity’s expected losses, receives a majority of an entity’s
expected residual returns, or both. The company with a controlling financial
interest, known as the primary beneficiary, is required to consolidate the
VIE.
WesBanco has five wholly-owned trust subsidiaries, WesBanco, Inc. Capital Trusts
II, IV, V and VI and WesBanco, Inc. Capital Statutory Trust III (collectively
referred to as the "Trusts"), for which it does not absorb a majority of
expected losses or receive a majority of the expected residual returns.
Accordingly, these Trusts and their net assets are not included in the
Consolidated Financial Statements. However, the junior subordinated debt issued
by such trusts to WesBanco and the minority interest in the common stock issued
by the trusts is shown on the Consolidated Balance Sheets of WesBanco.
USE
OF ESTIMATES:
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
BUSINESS
COMBINATIONS:
Business
combinations are required to be accounted for by the purchase method of
accounting. Under the purchase method, net assets of the business acquired
are
recorded at their estimated fair values as of the date of acquisition with
any
excess of the cost of the acquisition over the fair value of the net tangible
and intangible assets acquired recorded as goodwill. Results of operations
of
the acquired business are included in the income statement from the date of
acquisition.
RECLASSIFICATIONS:
Certain
prior period financial information has been reclassified to conform to the
presentation in 2005. The reclassifications had no effect on net
income.
CASH
AND CASH EQUIVALENTS:
For the
purpose of reporting cash flows, cash and cash equivalents include cash and
due
from banks, due from banks - interest bearing and federal funds sold. Generally,
federal funds are sold for one-day periods.
EARNINGS
PER SHARE:
Basic
earnings per share are calculated by dividing net income by the weighted average
number of shares of common stock outstanding during each period. For diluted
earnings per share, the weighted average number of shares for each period is
increased by the number of shares which would be issued assuming the exercise
of
common stock options. Unallocated shares held by the employee stock ownership
plan ("ESOP") are excluded from the computation of earnings per share, whereas
allocated shares are included in computing earnings per share.
ALLOWANCE
FOR LOAN LOSSES:
In
December 2003, the AICPA issued Statement of Position ("SOP") 03-3, "Accounting
for Certain Loans or Debt Securities Acquired in a Transfer." This Statement
applies to all loans acquired in a transfer, including those acquired in the
acquisition of a bank or a branch, and provides that such loans be accounted
for
at fair value without a related allowance for loan losses, or other valuation
allowance, recorded at the time of acquisition. The difference between cash
flows expected at the acquisition date and the investment in the loan should
be
recognized as interest income over the life of the loan. If contractually
required payments for principal and
7
interest
are less than expected cash flows, this amount should not be recognized as
a
yield adjustment, a loss accrual, or a valuation allowance. This statement
is
effective beginning January 1, 2005. Please see note 5, "Loans and the Allowance
for Loan Losses," of the Consolidated Financial Statements for additional
information.
MORTGAGE
SERVICING RIGHTS:
Mortgage
servicing rights ("MSR") represent the right to service loans for third party
investors. MSR are accounted for pursuant to the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers
and
Servicing of Financial Assets and Extinguishment of Liabilities," which requires
that a company recognize as separate assets, rights to service mortgage loans
for others, regardless of how those servicing rights are acquired. MSR are
recognized by the sale of mortgage loan(s) to a third party investor with the
servicing rights retained by WesBanco. Servicing loans for others generally
consists of collecting the mortgage payment from the respective borrower,
maintaining escrow accounts, remitting payments to the third party investor
and
if necessary, foreclosure processing. Serviced loans are not included in the
Consolidated Balance Sheets. Loan servicing income includes servicing fees
received from the third party investors and certain charges collected from
the
borrowers. Originated MSR are recorded at allocated fair value at the time
of
the sale of the loan(s) to the third party investor. MSR are amortized in
proportion to and over the estimated period of net servicing income. MSR are
carried at amortized cost, less the valuation for impairment, if any. Impairment
exists if the carrying value of MSR exceeds the estimated fair value of the
MSR.
In calculating the fair value of the MSR, the serviced loans are segregated
into
pools using, as pooling criteria, the loan term and the coupon rate. Individual
impairment allowances for each pool are established when necessary and then
adjusted in subsequent periods to reflect changes in the valuation of the pool.
Once pooled, each grouping of loans is evaluated on a discounted earnings basis
to determine the present value of future earnings that a purchaser could expect
to realize from each portfolio as well as numerous assumptions including;
servicing income and costs, market discount rates, prepayment speeds and other
market driven data. The fair value of MSR is highly sensitive to changes in
assumptions. Changes in prepayment speed assumptions have the most significant
impact on the fair value of MSR. Generally, as interest rates decline,
prepayments accelerate due to increased refinance activity, which results in
a
decrease in the fair value of MSR, conversely, as interest rates rise,
prepayments slow down generally resulting in an increase in the fair value
of
MSR. All assumptions are reviewed on a quarterly basis and adjusted as necessary
to reflect current and anticipated market conditions.
NEW
ACCOUNTING STANDARDS:
In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which provides guidance on how to
transition from the intrinsic value method of accounting for stock-based
employee compensation under Accounting Principles Board Opinion No. 25 ("APB
No.
25"), "Accounting for Stock Issued to Employees," to the fair value method
of
accounting under SFAS No. 123, "Accounting for Stock-Based Compensation," if
a
company so elects. WesBanco has elected to continue to account for stock-based
compensation under APB No. 25 using the intrinsic value method. Under APB No.
25, compensation expense for employee stock options is generally not recognized
if the exercise price of the option equaled or exceeded the market price of
the
stock on the date of grant.
During
the quarter ended June 30, 2005, WesBanco’s Board of Directors approved a
116,500 share stock option grant to selected participants, including certain
named executive officers, under WesBanco’s Key Executive Incentive Bonus and
Option Plan, adopted and approved by the Board of Directors of WesBanco on
February 19, 1998, (the "Incentive Plan"). The Incentive Plan was approved
by
the stockholders of WesBanco on April 15, 1998, and the stockholders approved
an
increase in the amount of stock available under the plan to 1,000,000 shares
on
April 18, 2001. The stock option grants were effective as of May 18, 2005,
at a
grant price of $29.16, which was the closing price of the stock on May 17,
2005.
The options vest in three increments of one-third each year, with the first
one-third vesting on December 31, 2005, the second one-third vesting on December
31, 2006 and the final one-third vesting on December 31, 2007, with each annual
vesting based on certain WesBanco earnings per share performance targets
achieved for each such annual period. If the options vest as scheduled, the
options expire ten years from the date of grant, or May 18, 2015.
During
the first quarter of 2005, WesBanco assumed 132,174 vested stock options,
adjusted for the WesBanco common stock exchange ratio, from Winton Financial
Corporation ("Winton") in conjunction with the January 3, 2005 merger at an
average option price of $14.33 per share, for certain of the former key
officers.
During
the second quarter of 2004, WesBanco issued 63,000 stock options at an average
option price of $26.60 per share and a fair value of $6.19 per share. These
options were fully vested at December 31, 2004. During the third quarter of
2004, WesBanco assumed 40,009 vested stock options, adjusted for the WesBanco
common stock exchange ratio, from Western Ohio Financial Corporation ("Western
Ohio") in conjunction with the August 31, 2004 merger at an average option
price
of $16.93 per share, for certain of the former key officers.
As
of
June 30, 2005 and 2004, WesBanco’s unvested stock options were 116,500 and
131,661, respectively.
The
following table illustrates the effect on net income and earnings per share
as
if the fair value method had been applied to all outstanding and unvested awards
in each period:
|
For
the Three Months Ended
|
For
the Six Months Ended
|
|
June
30,
|
|
June
30,
|
(Unaudited,
in thousands, except per share amounts)
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Net
income as reported
|
$
11,258
|
|
$
9,363
|
|
$
22,338
|
|
$
19,122
|
Stock
based compensation expense included in reported net income - net
of
tax
|
10
|
|
-
|
|
10
|
|
-
|
Stock
based compensation expense under fair value method - net of
tax
|
(78)
|
|
(166)
|
|
(78)
|
|
(216)
|
Pro
forma net income
|
$
11,190
|
|
$
9,197
|
|
$
22,270
|
|
$
18,906
|
|
|
|
|
|
|
|
|
Earnings
per share as reported - basic
|
$
0.50
|
|
$
0.48
|
|
$
0.98
|
|
$
0.97
|
Earnings
per share as reported - diluted
|
$
0.50
|
|
$
0.48
|
|
$
0.98
|
|
$
0.97
|
|
|
|
|
|
|
|
|
Pro
forma earnings per share - basic
|
$
0.50
|
|
$
0.47
|
|
$
0.98
|
|
$
0.96
|
Pro
forma earnings per share - diluted
|
$
0.50
|
|
$
0.47
|
|
$
0.98
|
|
$
0.96
|
8
The
fair values of
stock options granted were estimated at the date of grant using the
Black-Scholes option-pricing model. The following table sets forth the
significant assumptions used in calculating the fair value of the
grants:
|
For
the Three Months Ended
|
|
For
the Six Months Ended
|
|
June
30,
|
|
June
30,
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Weighted-average
life
|
6
Years
|
|
6
Years
|
|
6
Years
|
|
6
Years
|
Risk-free
interest rates
|
3.80%
|
|
4.16%
|
|
3.80%
|
|
4.16%
|
Dividend
yield
|
3.65%
|
|
3.75%
|
|
3.65%
|
|
3.75%
|
Volatility
factors
|
29.33
|
|
29.64
|
|
29.33
|
|
29.64
|
Fair
value of the grants
|
$
6.63
|
|
$
6.19
|
|
$
6.63
|
|
$
6.19
|
Since
the
options granted in May 2005 only vest if certain performance targets are
met,
the fair value of each option was determined as if it was vested at the date
of
grant. Compensation expense under the fair value method was based on the
number
of options expected to vest, which was based on management’s best estimate of
the probability that the underlying performance targets will be
achieved.
In
December 2004 the FASB issued SFAS No. 123 (Revised 2004), "Share-Based Payment"
("SFAS No. 123-R"). SFAS No. 123-R addresses all forms of share-based payment
("SBP") awards, including shares issued under employee stock purchase plans,
stock options, restricted stock and stock appreciation rights. SFAS No. 123-R
requires all entities to recognize compensation expense in an amount equal
to
the fair value of share-based payments such as stock options granted to
employees. WesBanco will be required to apply SFAS No. 123-R using one of two
methods, the modified prospective method or restatement of previously issued
financial statements. Under the modified prospective method, a company will
be
required to record compensation expense (as previous awards continue to vest)
for the unvested portion of previously granted awards that remain outstanding
at
the date of adoption. Under the second method, a company may restate previously
issued financial statements, basing the amounts on the expense previously
calculated and reported in their pro forma disclosures that had been required
by
SFAS No. 123. WesBanco will apply the modified prospective method upon
adopting SFAS No. 123-R.
In
March
2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 107 ("SAB No. 107"), "Share-Based Payment,"
providing guidance on option valuation methods, the accounting for income tax
effects of share-based payment arrangements upon adoption of
SFAS No. 123-R, and the disclosures in MD&A subsequent to the
adoption. WesBanco will provide SAB No. 107 required disclosures
upon
adoption of SFAS No. 123-R on January 1, 2006. The adoption
of
this standard in 2006 is not expected to have a significant impact on WesBanco’s
financial condition, results of operations, or cash flows.
In
September 2004, the FASB issued FASB Staff Position ("FSP") Emerging
Issues Task Force ("EITF") Issue No. 03-1-1 delaying the effective date
of
paragraphs 10-20 of EITF 03-1, "The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments," which provides guidance for
determining the meaning of the phrase "other-than-temporarily impaired" and
its
application to certain debt and equity securities within the scope of SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and investments accounted for under the cost method. The guidance
requires that an investment which has declined in value due to credit concerns
or solely due to changes in interest rates must be recorded as
other-than-temporarily impaired unless WesBanco can assert and demonstrate
its
intention to hold the security for a period of time sufficient to allow for
a
recovery of fair value up to or beyond the cost of the investment, which might
mean maturity. In September 2004, the FASB issued the proposed FSP Issue 03-1-a
which was intended to provide implementation guidance with respect to all
securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. On
June 29, 2005, the Financial Accounting Standards Board gave direction
that
the proposed FSP Issue 03-1-a be issued as final thus nullifying paragraphs
10-18 of EITF 03-1. The measurement, disclosure, and subsequent accounting
for
debt securities guidance, as well as the evaluation of whether a cost method
investment (as defined in Issue 03-1) is impaired, would remain in effect.
Management continues to closely monitor and evaluate how the provisions of
EITF
03-1 and proposed FSP Issue 03-1-a will affect WesBanco.
NOTE
2: EARNINGS PER SHARE
Earnings
per share are calculated as follows:
|
For
the Three Months Ended
|
|
For
the Six Months Ended
|
|
June
30,
|
|
June
30,
|
(Unaudited,
in thousands, except shares and per share amounts)
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Numerator
for both basic and diluted earnings per share:
|
|
|
|
|
|
|
|
Net
Income
|
$
11,258
|
|
$
9,363
|
|
$
22,338
|
|
$
19,122
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Total
average basic common shares outstanding
|
22,587,213
|
|
19,665,779
|
|
22,788,686
|
|
19,692,856
|
Effect
of dilutive stock options
|
56,250
|
|
44,179
|
|
51,797
|
|
48,000
|
Total
diluted average common shares outstanding
|
22,643,463
|
|
19,709,958
|
|
22,840,483
|
|
19,740,856
|
|
|
|
|
|
|
|
|
Earnings
per share - basic
|
$
0.50
|
|
$
0.48
|
|
$
0.98
|
|
$
0.97
|
Earnings
per share - diluted
|
$
0.50
|
|
$
0.48
|
|
$
0.98
|
|
$
0.97
|
NOTE
3: COMPLETED BUSINESS COMBINATIONS
On
January 3, 2005, WesBanco completed the acquisition of Winton and the merger
of
Winton’s subsidiary, Winton Savings and Loan Company, Cincinnati, Ohio, with and
into the Bank. WesBanco and Winton entered into a definitive Agreement and
Plan
of Merger on August 25, 2004. Winton and its banking subsidiary operated through
seven branch offices and two residential mortgage loan production offices in
the
Cincinnati, Ohio, metropolitan market at the time of acquisition, although
the
loan production offices have been subsequently closed. The primary reasons
for
the merger with Winton were for entry into new higher growth markets and to
further expand WesBanco’s branch network in southwestern Ohio.
The
aggregate purchase price for Winton was approximately $109.1 million and was
consummated through the exchange of a combination of WesBanco common stock
at a
rate of 0.755 shares for 60% of Winton’s shares outstanding and $20.75 per share
in cash for the remaining 40% of its stock. The acquisition was completed
through the issuance of 2,296,511 shares of WesBanco newly issued
9
common
stock and $42.1 million in cash, paid from WesBanco’s available cash of which
$20.0
million was funded by a line of credit with an independent commercial
bank.
WesBanco
also paid $1.9 million for Winton’s outstanding stock options to those
individuals electing cash instead of WesBanco stock options and recognized
$1.7
million in direct costs associated with the merger, of which $0.5 million
remained unpaid at June 30, 2005. The direct merger costs included involuntary
employee termination costs of $0.5 million along with legal, accounting advisory
and conversion costs of $1.1 million and an additional $0.1 million in other
costs. Winton recognized approximately $5.0 million in merger-related expenses,
on a pre-tax basis, prior to the merger date. As of the date of the acquisition
on January 3, 2005, Winton had total assets of approximately $551 million,
loans
of $482 million, deposits of $359 million, borrowings of $133 million and
shareholders’ equity of $49 million. WesBanco’s Consolidated Statement of Income
includes the results of operations of Winton from the closing date of the
acquisition.
On
August
31, 2004, WesBanco completed the acquisition of Western Ohio, Springfield,
Ohio
and the merger of Western Ohio’s subsidiary, Cornerstone Bank, with and into the
Bank. WesBanco and Western Ohio entered into a definitive Agreement and Plan
of
Merger on April 1, 2004. The merger with Western Ohio provided WesBanco entry
into new higher growth markets and expanded WesBanco’s already existing branch
network in the state of Ohio. The acquisition was accounted for using the
purchase accounting method.
The
aggregate purchase price for the acquisition was approximately $67.9 million
consummated through the exchange of a combination of WesBanco’s common stock and
cash for Western Ohio common stock. For each share of Western Ohio common stock
that a Western Ohio shareholder owned they received, at their election, either
$35.00 in cash or 1.18 shares of WesBanco common stock, subject to certain
limitations. The exchange was structured to be a 55% stock and 45% cash
transaction. The purchase was funded through the issuance of 1,176,935 shares
of
WesBanco common shares held in treasury while the cash consideration totaling
$28.6 million for the cash portion of the stock purchase was paid from
WesBanco’s available cash, primarily from the issuance of junior subordinated
debt in June of 2004. WesBanco also paid $1.6 million for Western Ohio’s
outstanding stock options to those individuals electing cash instead of WesBanco
stock options and recognized $1.5 million in direct costs associated with the
merger, of which $36 thousand remained unpaid at June 30, 2005. The direct
merger costs included involuntary employee termination costs of $0.6 million
along with legal, accounting advisory and conversion costs of $0.9 million.
Western Ohio recognized approximately $1.8 million in merger-related expenses
on
a pre-tax basis, prior to the merger date. As of the date of the acquisition
on
August 31, 2004, Western Ohio had total assets of approximately $412 million,
loans of $334 million, deposits of $255 million, borrowings of $111 million
and
shareholders’ equity of $44 million.
In
conjunction with the Winton and Western Ohio mergers, WesBanco recorded goodwill
of $63.4 million and $24.0 million, respectively, and core deposit intangibles
of $2.9 million and $3.6 million, respectively. Goodwill and core deposit
intangibles were allocated to WesBanco’s community banking segment. Under SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets," a core deposit intangible is separated from goodwill and
amortized over its remaining useful life. The Winton and Western Ohio core
deposit intangibles each have a weighted average remaining useful life of
approximately 10 years. The remaining goodwill intangible, which is not subject
to amortization and is not deductible for income tax purposes, is evaluated
annually for possible impairment.
The
following table presents pro forma combined results of operations of WesBanco,
Western Ohio and Winton as if the business combinations had been completed
as of
the beginning of each respective period:
|
For
the Three Months Ended
|
|
For
the Six Months Ended
|
|
June
30,
|
|
June
30,
|
(Unaudited,
in thousands, except per share amounts)
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Net
Interest Income
|
$
33,868
|
|
$
33,869
|
|
$
67,369
|
|
$
67,578
|
Net
Income
|
11,258
|
|
11,474
|
|
22,338
|
|
23,252
|
|
|
|
|
|
|
|
|
Pro
forma earnings per share - basic
|
$
0.50
|
|
$
0.50
|
|
$
0.98
|
|
$
1.01
|
Pro
forma earnings per share - diluted
|
$
0.50
|
|
$
0.50
|
|
$
0.98
|
|
$
1.01
|
The
pro
forma combined results of operations include net amortization/accretion of
purchase accounting fair value adjustments based on asset and liability
valuations as of the merger date. These adjustments have been consistently
applied to each period presented in the above table. The pro forma information
also includes merger-related expenses occurring after the date of the
acquisition.
NOTE
4: SECURITIES
The
following tables summarize amortized cost and fair values of held to maturity
and available for sale securities:
|
June
30,
|
|
December
31,
|
(Unaudited,
dollars in thousands)
|
2005
|
|
2004
|
Securities
held to maturity (at amortized cost):
|
|
|
|
Obligations
of states and political subdivisions
|
$
396,985
|
|
$
367,780
|
Other
equity securities
(1)
|
49,602
|
|
39,082
|
Total
securities held to maturity
|
446,587
|
|
406,862
|
|
|
|
|
Securities
available for sale (at fair value):
|
|
|
|
U.S.
Treasury and Federal Agency securities
|
291,425
|
|
314,399
|
Obligations
of states and political subdivisions
|
43,754
|
|
42,497
|
Mortgage-backed
securities
|
343,998
|
|
397,341
|
Corporate
and other securities
(2)
|
11,360
|
|
11,083
|
Total
securities available for sale
|
690,537
|
|
765,320
|
Total
securities
|
$
1,137,124
|
|
$
1,172,182
|
(1)
Other debt securities, classified as held to maturity at June 30, 2005
and
December 31, 2004 consist primarily of Federal Reserve Bank stock and Federal
Home Loan Bank stock.
(2)
Other equity securities, classified as available for sale, include certain
equity interests in business corporations.
10
At
June
30, 2005 and December 31, 2004, there were no holdings of any one issuer, other
than the U.S. government and certain federal or federally-related agencies,
in
an amount greater than 10% of WesBanco’s shareholders’ equity.
Securities
with par values aggregating $500.6 million and $439.9 million at June 30, 2005
and December 31, 2004, respectively, were pledged to secure public and trust
funds. Proceeds from the sale of available for sale securities were $42.2
million and $114.9 million for the quarter and six months ended June 30, 2005,
respectively, compared to $17.2 million and $66.8 million for the same periods
in 2004.
In
the
first half of 2005, gross security gains on available for sale securities of
$1.8 million and gross security losses on available for sale securities of
$28
thousand were realized, compared to $0.8 million and $37 thousand, respectively,
for the same period in 2004.
The
following table provides information on unrealized losses on investment
securities that have been in an unrealized loss position for less than twelve
months and twelve months or more as of June 30, 2005 and December 31, 2004:
|
June
30, 2005
|
|
Less
than 12 months
|
12
months or more
|
Total
|
|
Fair
|
Unrealized
|
#
of
|
Fair
|
Unrealized
|
#
of
|
Fair
|
Unrealized
|
#
of
|
(Unaudited,
dollars in thousands)
|
Value
|
Losses
|
Securities
|
Value
|
Losses
|
Securities
|
Value
|
Losses
|
Securities
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Federal Agency securities
|
$
153,421
|
$
(870)
|
35
|
$
82,714
|
$
(1,193)
|
19
|
$
236,135
|
$
(2,063)
|
54
|
Obligations
of states and political subdivisions
|
31,296
|
(212)
|
59
|
23,966
|
(327)
|
62
|
55,262
|
(539)
|
121
|
Mortgage-backed
& other debt securities
|
170,620
|
(1,292)
|
45
|
145,702
|
(2,978)
|
49
|
316,322
|
(4,270)
|
94
|
Corporate
securities
|
4,052
|
(42)
|
2
|
2,050
|
(45)
|
1
|
6,102
|
(87)
|
3
|
Total
temporarily impaired securities
|
$
359,389
|
$
(2,416)
|
141
|
$
254,432
|
$
(4,543)
|
131
|
$
613,821
|
$
(6,959)
|
272
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2004
|
|
Less
than 12 months
|
12
months or more
|
Total
|
|
Fair
|
Unrealized
|
#
of
|
Fair
|
Unrealized
|
#
of
|
Fair
|
Unrealized
|
#
of
|
(Unaudited,
dollars in thousands)
|
Value
|
Losses
|
Securities
|
Value
|
Losses
|
Securities
|
Value
|
Losses
|
Securities
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Federal Agency securities
|
$
172,225
|
$
(864)
|
38
|
$
30,934
|
$
(534)
|
7
|
$
203,159
|
$
(1,398)
|
45
|
Obligations
of states and political subdivisions
|
25,594
|
(245)
|
47
|
18,031
|
(555)
|
51
|
43,625
|
(800)
|
98
|
Mortgage-backed
& other debt securities
|
230,303
|
(2,084)
|
61
|
40,844
|
(932)
|
12
|
271,147
|
(3,016)
|
73
|
Corporate
securities
|
4,182
|
(37)
|
2
|
-
|
-
|
-
|
4,182
|
(37)
|
2
|
Total
temporarily impaired securities
|
$
432,304
|
$
(3,230)
|
148
|
$
89,809
|
$
(2,021)
|
70
|
$
522,113
|
$
(5,251)
|
218
|
Declines
in the fair value of held-to-maturity and available-for-sale securities below
their cost that are deemed to be other-than-temporarily impaired are reflected
in current earnings as realized losses. WesBanco performs a thorough review
of
its entire investment portfolio on a quarterly basis in order to identify
investment securities that may have indications of possible impairment. In
estimating other-than-temporary impairment losses, management considers the
length of time and the extent to which the fair value has been less than cost,
the financial condition and near-term prospects of the issuer (i.e., credit
downgrades), the receipt of principal and interest according to the contractual
terms and the intent and ability of WesBanco to retain its investment in the
issuer for a period of time sufficient to allow for any anticipated recovery
in
fair value.
WesBanco
does not believe any of the securities are impaired due to reasons of credit
quality as none of the securities presented above represent securities that
have
had credit downgrades and all securities are paying principal and interest
according to the contractual terms. WesBanco also has the ability and intent
to
hold the securities classified as held to maturity until they mature, at which
time WesBanco will receive full value for the securities. Furthermore,
management also has the ability and intent to hold the noted loss position
securities classified as available for sale for a period of time sufficient
for
a recovery of cost. WesBanco believes that all of the securities in an
unrealized loss position at June 30, 2005, are considered temporary impairment
losses due to the securities having lower interest rates than current market
interest rates. The difference in rates causes the securities fair value to
fluctuate in response to prevailing market interest rates. None of the
securities in an unrealized loss position at June 30, 2005 is in a
non-investment grade category security. Accordingly, as of June 30, 2005,
management believes the unrealized losses detailed above are temporary and
no
impairment loss has been recognized in the Consolidated Statements of
Income.
NOTE
5: LOANS AND THE ALLOWANCE FOR LOAN LOSSES
The
following table is a summary of total loans:
|
June
30,
|
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
|
2004
|
Commercial
|
$
420,077
|
|
$
409,904
|
Commercial
real estate
|
1,102,226
|
|
898,140
|
Residential
real estate
|
948,271
|
|
771,337
|
Home
equity
|
181,932
|
|
148,486
|
Consumer
|
272,345
|
|
257,499
|
Total
portfolio loans
(1)
|
2,924,851
|
|
2,485,366
|
Loans
held for sale
|
8,518
|
|
3,169
|
Total
Loans
|
$2,933,369
|
|
$2,488,535
|
(1)
Included
in the above loan categories are net deferred loan fees of $5.7 million at
June
30, 2005 and $5.1 million at December 31, 2004.
11
The
following table represents changes in the allowance for loan losses:
|
For
the Six Months Ended
|
|
June
30,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Balance,
at beginning of period
|
$
29,486
|
$
26,235
|
Allowance
for loan losses of acquired bank
|
1,947
|
-
|
Provision
for loan losses
|
3,762
|
3,296
|
|
|
|
Charge-offs
|
(4,011)
|
(3,001)
|
Recoveries
|
1,164
|
737
|
Net
loan charge-offs
|
(2,847)
|
(2,264)
|
|
|
|
Balance,
at end of period
|
$
32,348
|
$
27,267
|
In
conjunction with the Winton acquisition on January 3, 2005, WesBanco acquired
loans approximating $482 million. Winton’s allowance for loan losses at the
acquisition date of January 3, 2005 was approximately $2.4 million. WesBanco
applied the guidance required under SOP 03-3 and determined that certain loans
acquired in the Winton acquisition, for which there was, at acquisition,
evidence of deterioration of credit quality since origination and for which
it
was probable, at acquisition, that all contractually required payments would
not
be collected. WesBanco determined that two commercial real estate loans totaling
approximately $2.0 million were within the guidelines set forth under SOP 03-3.
Accordingly, WesBanco recorded $1.9 million in carry-over allowance on loans
not
subject to SOP 03-3. The following table sets forth the information for the
loans accounted for under SOP 03-3 as of June 30, 2005:
|
|
|
Cash
Flows
|
|
|
|
Contractually
|
|
Expected
|
Post-
|
|
|
Required
|
Carrying
|
to
be
|
Acquisition
|
Accretable
|
(Unaudited,
in thousands)
|
Payments
|
Amount
|
Collected
|
Allowance
|
Yield
|
Balance
at January 1, 2005
|
$
1,968
|
$
1,466
|
$
1,488
|
$
-
|
$
-
|
Additions
|
-
|
-
|
-
|
-
|
44
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
Accretion
|
-
|
-
|
-
|
-
|
(22)
|
Balance
at June 30, 2005
|
$
1,968
|
$
1,466
|
$
1,488
|
$
-
|
$
22
|
Due
to
the uncertainty surrounding the timing of the receipt of the cash flows expected
to be collected, these loans were transferred to non-accrual status in the
second quarter of 2005 and are no longer being accreted.
The
following tables summarize loans classified as impaired:
|
June
30,
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Non-accrual
loans
|
$
10,941
|
$
8,195
|
Renegotiated
loans
|
-
|
-
|
Other
impaired loans
|
2,720
|
7,078
|
Total
non-performing loans and other impaired loans
|
$
13,661
|
$
15,273
|
|
|
|
|
June
30,
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Balance
of impaired loans with no allocated allowance for loan
losses
|
$
8,722
|
$
5,982
|
Balance
of impaired loans with an allocated allowance for loan
losses
|
4,939
|
9,291
|
Total
impaired loans
|
$
13,661
|
$
15,273
|
|
|
|
Allowance
for loan losses allocated to impaired loans
|
$
1,183
|
$
1,623
|
At
June
30, 2005 and December 31, 2004, WesBanco had no material commitments to lend
additional funds to debtors whose loans were classified as
impaired.
12
NOTE
6: MORTGAGE SERVICING RIGHTS
At
June
30, 2005 and December 31, 2004, WesBanco had approximately $2.0 million and
$0.3
million of capitalized MSR, respectively, of which $0.7 million were due to
the
June 2005 sale of approximately $67.8 million of 1-4 family, fixed rate
residential mortgage loans, from its existing loan portfolio, while $1.0 million
were acquired in the January 3, 2005 Winton transaction and $0.3 million were
acquired in the August 31, 2004 Western Ohio transaction. The fair value of
the
MSR at June 30, 2005 and December 31, 2004 were $2.2 million and $0.4 million
which exceeded the recorded value and to date no valuation allowance has been
established. WesBanco recorded amortization expense related to MSR totaling
approximately $73 thousand and $118 thousand for the quarter and six months
ended June 30, 2005, respectively, compared to $-0- for both of the same periods
in 2004.
Servicing
loans for others generally consists of collecting mortgage payments, maintaining
escrow accounts, disbursing payments to investors and foreclosure processing.
Loan servicing income includes servicing fees withheld from investors and
certain charges collected from borrowers, such as late payment fees. As of
June
30, 2005 and December 31, 2004, WesBanco serviced loans for others aggregating
approximately $198.2 million and $39.2 million, respectively. Such loans are
not
included in the accompanying Consolidated Balance
Sheets.
At June 30, 2005 and December 31, 2004, WesBanco held custodial funds of $1.0
million and $0.1 million, respectively, relating to the servicing of residential
real estate loans, which are included in deposits in the Consolidated Balance
Sheets. These custodial deposits represent funds due to investors on mortgage
loans serviced by WesBanco and customer funds held for real estate taxes and
insurance.
NOTE
7: GOODWILL AND CORE DEPOSIT INTANGIBLES
WesBanco’s
Consolidated Balance Sheet includes goodwill of $137.3 million at June 30,
2005
and $73.8 million at December 31, 2004. In 2005, WesBanco capitalized $63.4
million in goodwill and $2.9 million in core deposit intangibles in connection
with the Winton acquisition which was allocated to WesBanco’s community banking
segment. The core deposit intangible from Winton is being amortized over a
weighted average remaining useful life of approximately 10 years. In 2004,
WesBanco capitalized $24.0 million in goodwill and $3.6 million in core deposit
intangibles in connection with the Western Ohio acquisition which was allocated
to WesBanco’s community banking segment. The core deposit intangible from
Western Ohio is being amortized over a weighted average remaining useful life
of
approximately 10 years. Substantially all of the remaining goodwill and core
deposit intangible relates to the 2002 acquisition of American Bancorporation
("American"). Amortization expense on core deposit intangibles for the three
and
six months ended June 30, 2005 totaled $0.7 million and $1.3 million,
respectively, compared to $0.3 million and $0.6 million for the same periods
in
2004. The remaining goodwill intangible, which is not subject to amortization
and is not deductible for income tax purposes, is evaluated annually for
possible
impairment.
The
following table shows WesBanco’s capitalized core deposit intangible and the
related accumulated amortization:
|
June
30,
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Gross
carrying amount
|
$
17,625
|
$
14,720
|
Less:
accumulated amortization
|
(5,905)
|
(4,558)
|
Net
carrying amount
|
$
11,720
|
$
10,162
|
The
following table shows WesBanco’s core deposit intangible amortization for the
remainder of 2005 and for each of the next five years:
(Unaudited,
in thousands)
|
Amount
|
Remainder
of 2005
|
$
1,320
|
2006
|
2,511
|
2007
|
2,360
|
2008
|
2,209
|
2009
|
1,139
|
2010
|
806
|
NOTE
8: FEDERAL HOME LOAN BANK BORROWINGS
WesBanco
is a member of the Federal Home Loan Bank ("FHLB") of Pittsburgh. WesBanco’s
FHLB borrowings are secured by a blanket lien by the FHLB on certain residential
mortgage loans or securities with a market value at least equal to the
outstanding balances of the borrowings. At June 30, 2005 and December 31, 2004,
WesBanco had FHLB borrowings of $673.2 million and $599.4 million, respectively,
with a weighted average interest rate of 3.34% and 3.31%, at each respective
period end. Included in WesBanco’s FHLB borrowings at June 30, 2005 are $192.7
million in FHLB of Cincinnati advances obtained in conjunction with the Winton
and Western Ohio acquisitions, compared to $100.6 million at December 31, 2004.
The terms of the security agreement with the FHLB of Pittsburgh include a
specific assignment of collateral that requires the maintenance of qualifying
first mortgage loans as pledged collateral with unpaid principal amounts at
least equal to or greater than the FHLB advances, when discounted at 83% of
the
unpaid principal balance. FHLB stock totaling $48.0 million at June 30, 2005
and
$37.4 million at December 31, 2004 is also pledged as collateral on these
advances. The remaining maximum borrowing capacity with the FHLB at June 30,
2005 was $1.5 billion compared to $915.5 million at December 31, 2004.
Certain
FHLB advances contain call features, which allows the FHLB to convert a fixed
rate borrowing to a variable rate advance if the strike rate goes beyond a
certain predetermined rate. The probability that these advances and repurchase
agreements will be called depends primarily on the level of related interest
rates during the call period. Of the $673.2 million in total FHLB advances
at
June 30, 2005, convertible advances with a carrying value of $196.5 million
are
subject to conversion to a variable rate advance by the FHLB at various future
dates and at various strike rates.
The
following table summarizes the FHLB maturities at June 30, 2005 based on
contractual dates and effective interest rates:
(Unaudited,
dollars in thousands)
|
Scheduled
|
Weighted
|
Year
|
Maturity
|
Average
Rate
|
2005
|
$
89,664
|
2.54%
|
2006
|
184,719
|
2.98%
|
2007
|
163,330
|
3.27%
|
2008
|
66,591
|
3.21%
|
2009
|
88,475
|
4.17%
|
2010
and thereafter
|
80,404
|
4.42%
|
Total
|
$
673,183
|
3.34%
|
13
NOTE
9: OTHER BORROWINGS
Other
borrowed funds are summarized as follows:
|
June
30,
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Federal
funds purchased
|
$
44,000
|
$
33,100
|
Securities
sold under agreements to repurchase
|
166,635
|
165,097
|
Treasury
tax and loan notes and other
|
3,282
|
2,316
|
Revolving
line of credit, parent company
|
12,500
|
-
|
Total
|
$
226,417
|
$
200,513
|
NOTE
10: JUNIOR SUBORDINATED DEBT
In
March
2005, WesBanco formed a wholly-owned trust subsidiary, WesBanco Capital Trust
VI
("Trust VI"), under the laws of Delaware, by issuing $15.0 million in
Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures due
March
17, 2035, to a statutory trust which issued 15,000 shares of trust preferred
securities with a total liquidation value of $15.0 million, based upon the
debentures and a guarantee from WesBanco. In connection with the issuance of
the
trust preferred securities, Trust VI issued 464 shares of common securities
to
WesBanco with a liquidation value of $0.5 million. The trust preferred
securities were issued and sold in a private placement offering, as part of
a
pooled transaction.
As
part
of this transaction, WesBanco issued an aggregate principal amount of $15.5
million in fixed rate/floating rate junior subordinated deferrable interest
debentures to Trust VI, with interest payable quarterly beginning in June 2005
at an initial rate of 6.37% for the first five years ("no call period") and
resetting quarterly beginning on March 17, 2010 at a rate equal to the 3-month
London Inter Bank Offering Rate ("LIBOR") plus 1.77%.
The
debentures may be redeemed at par anytime commencing in March 2010. The
debentures and trust preferred securities provide that WesBanco has the right
to
elect to defer the payment of interest on the debentures and trust preferred
securities for up to an aggregate of 20 quarterly periods. However, if WesBanco
should defer the payment of interest or default on the payment of interest
on
the debentures, it may not declare or pay any dividends on its common stock
during any such period. Undertakings made by WesBanco with respect to the Trust
Preferred Securities constitute a full and unconditional guarantee by WesBanco
of the obligations of the Trust Preferred Securities.
WesBanco
adopted the provisions of FIN No. 46 in the fourth quarter of 2003. Accordingly,
WesBanco deconsolidated its special purpose trusts, which were formed to issue
trust preferred securities to outside investors, because WesBanco does not
absorb a majority of the expected losses or residual returns of the trusts.
These Trusts were previously consolidated because they were controlled by
WesBanco through a majority voting interest. The effect of such deconsolidation
was to remove the Trust Preferred Securities from WesBanco’s Consolidated
Balance Sheet, recognize WesBanco’s junior subordinated debt obligations to the
special purpose trusts, and record each of WesBanco’s equity investments in the
common stock of the special purpose trusts as an other asset. The junior
subordinated debt obligations and equity investments were previously eliminated
in consolidation.
The
Junior Subordinated Debentures are presented as a separate category of long-term
debt on the Consolidated Balance Sheet. For regulatory purposes, the Federal
Reserve Board currently allows bank holding companies to include trust preferred
securities up to a certain limit of Tier 1 Capital. As of June 30, 2005, all
of
WesBanco’s outstanding Trust Preferred Securities are allowed to be included in
the Tier 1 Capital calculation. The Trust Preferred Securities provide the
issuer with a unique capital instrument that has a tax deductible interest
feature not normally associated with the equity of a corporation.
The
following table shows WesBanco’s Trust Subsidiaries with outstanding Trust
Preferred Securities as of June 30, 2005:
|
Trust
|
|
Junior
|
Stated
|
Optional
|
|
Preferred
|
Common
|
Subordinated
|
Maturity
|
Redemption
|
(Unaudited,
in thousands)
|
Securities
|
Securities
|
Debt
|
Date
|
Date
|
WesBanco,
Inc. Capital Trust II
(1)
|
$
13,000
|
$
410
|
$
13,410
|
6/30/2033
|
6/30/2008
(6)
|
WesBanco,
Inc. Capital Statutory Trust III
(2)
|
17,000
|
526
|
17,526
|
6/26/2033
|
6/26/2008
(6)
|
WesBanco
Capital Trust IV
(3)
|
20,000
|
619
|
20,619
|
6/17/2034
|
6/17/2009
(6)
|
WesBanco
Capital Trust V
(4)
|
20,000
|
619
|
20,619
|
6/17/2034
|
6/17/2009
(6)
|
WesBanco
Capital Trust VI
(5)
|
15,000
|
464
|
15,464
|
3/17/2035
|
3/17/2010
(6)
|
Total
trust preferred securities
|
$
85,000
|
$
2,638
|
$
87,638
|
|
|
(1)
Fixed
rate of 5.80% through June 30, 2008 and three-month LIBOR plus 3.15%
thereafter.
(2)
Fixed
rate of 5.55% through June 26, 2008 and three-month LIBOR plus 3.10%
thereafter.
(3)
Fixed
rate of 6.07% through September 17, 2005 and three-month LIBOR plus 2.65%
thereafter, quarterly.
(4)
Fixed
rate of 6.91% through June 17, 2009 and three-month LIBOR plus 2.65%
thereafter.
(5)
Fixed
rate of 6.37% through March 17, 2010 and three-month LIBOR plus 1.77%
thereafter.
(6)
Redeemable at par at anytime after the noted date.
14
NOTE
11: PENSION PLAN
The
following table presents the net periodic pension cost for WesBanco’s Defined
Benefit Pension Plan and the related components in accordance with SFAS No.
132
(revised 2003), "Employers’ Disclosures about Pensions and Other Postretirement
Benefits":
|
For
the Three Months Ended
|
|
For
the Six Months Ended
|
|
June
30,
|
|
June
30,
|
(Unaudited,
in thousands)
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Service
cost – benefits earned during year
|
$
539
|
|
$
515
|
|
$
1,078
|
|
$
1,030
|
Interest
cost on projected benefit obligation
|
664
|
|
652
|
|
1,328
|
|
1,304
|
Expected
return on plan assets
|
(830)
|
|
(729)
|
|
(1,660)
|
|
(1,458)
|
Net
amortization and recognized loss
|
194
|
|
175
|
|
388
|
|
350
|
Net
periodic pension cost
|
$
567
|
|
$
613
|
|
$
1,134
|
|
$
1,226
|
Cash
Flows
The
following table sets forth information about the expected cash flows for the
pension plan
:
(Unaudited, in thousands)
Employer
Contributions
|
Amount
|
2005
|
$
-
|
The
minimum tax-deductible contribution is $-0- for 2005 and the maximum
tax-deductible contribution is $5.3 million. It has not yet been determined
by
WesBanco if any amount above the minimum required contribution will be paid
for
2005.
NOTE
12: INCOME TAXES
Reconciliation
from the federal statutory income tax rate to the effective tax rate is as
follows:
|
For
Three Months Ended
|
|
For
Six Months Ended
|
|
June
30,
|
|
June
30,
|
(Unaudited)
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Federal
statutory tax rate
|
35.0%
|
|
35.0%
|
|
35.0%
|
|
35.0%
|
Tax-exempt
interest income on securities of state and political
subdivisions-net
|
(11.6%)
|
|
(13.3%)
|
|
(11.5%)
|
|
(12.9%)
|
State
income taxes, net of federal tax effect
|
0.9%
|
|
0.7%
|
|
0.9%
|
|
0.9%
|
Bank-owned
life insurance
|
(1.7%)
|
|
(2.2%)
|
|
(1.7%)
|
|
(2.1%)
|
All
other – net
|
(0.8%)
|
|
(1.5%)
|
|
(1.2%)
|
|
(1.7%)
|
Effective
tax rate
|
21.8%
|
|
18.7%
|
|
21.5%
|
|
19.2%
|
NOTE
13: COMPREHENSIVE INCOME
The
changes in accumulated other comprehensive income is as follows:
|
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
(Unaudited,
in thousands)
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
2004
|
|
Net
Income
|
|
$
|
11,258
|
|
$
|
9,363
|
|
$
|
22,338
|
|
$
|
19,122
|
|
Securities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized gains (losses) on securities available for
sale
|
|
|
6,854
|
|
|
(19,489
|
)
|
|
(1,121
|
)
|
|
(11,419
|
)
|
Related
income tax (expense) benefit
(1)
|
|
|
(2,707
|
)
|
|
7,698
|
|
|
443
|
|
|
4,511
|
|
Net
securities (gains) losses reclassified into earnings
|
|
|
(1,022
|
)
|
|
(155
|
)
|
|
(1,754
|
)
|
|
(816
|
)
|
Related
income tax expense (benefit)
(1)
|
|
|
404
|
|
|
61
|
|
|
693
|
|
|
322
|
|
Net
effect on other comprehensive income for the period
|
|
|
3,529
|
|
|
(11,885
|
)
|
|
(1,739
|
)
|
|
(7,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedge derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized gains (losses) on derivatives
|
|
|
(142
|
)
|
|
1,938
|
|
|
835
|
|
|
1,527
|
|
Related
income tax (expense) benefit
(1)
|
|
|
56
|
|
|
(766
|
)
|
|
(330
|
)
|
|
(604
|
)
|
Net
derivative (gains) losses reclassified into earnings
|
|
|
(26
|
)
|
|
(41
|
)
|
|
(57
|
)
|
|
(83
|
)
|
Related
income tax expense (benefit)
(1)
|
|
|
10
|
|
|
16
|
|
|
22
|
|
|
33
|
|
Net
effect on other comprehensive income for the period
|
|
|
(102
|
)
|
|
1,147
|
|
|
470
|
|
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
pension liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in minimum pension liability
|
|
|
-
|
|
|
-
|
|
|
(71
|
)
|
|
-
|
|
Related
income tax expense (benefit)
(1)
|
|
|
-
|
|
|
-
|
|
|
28
|
|
|
-
|
|
Net
effect on other comprehensive income for the period
|
|
|
-
|
|
|
-
|
|
|
(43
|
)
|
|
-
|
|
|
|
|
Total
change in other comprehensive income (loss)
|
|
|
3,427
|
|
|
(10,738
|
)
|
|
(1,312
|
)
|
|
(6,529
|
)
|
Comprehensive
income (loss)
|
|
$
|
14,685
|
|
$
|
(1,375
|
)
|
$
|
21,026
|
|
$
|
12,593
|
|
(1)
Related income tax expense (benefit) is calculated using a combined
Federal and State income tax rate approximating
40%.
|
15
The
activity in accumulated other comprehensive income for the six months ended
June
30, 2005 and 2004 is as follows:
|
|
|
|
|
Net
Unrealized Gains
|
|
|
|
|
|
Unrealized
|
|
(Losses)
on Derivative
|
|
|
|
Minimum
|
|
Gains
(Losses)
|
|
Instruments
Used in
|
|
|
|
Pension
|
|
on
Securities
|
|
Cash
Flow Hedging
|
|
|
(Unaudited,
in thousands)
|
Liability
|
|
Available
for Sale
|
|
Relationships
|
|
Total
|
Balance,
January 1, 2004
|
$
-
|
|
$
561
|
|
$
(2,425)
|
|
$
(1,864)
|
Period
change, net of tax
|
-
|
|
(7,402)
|
|
873
|
|
(6,529)
|
Balance,
June 30, 2004
|
$
-
|
|
$
(6,841)
|
|
$
(1,552)
|
|
$
(8,393)
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2005
|
$
-
|
|
$
(987)
|
|
$
(1,428)
|
|
$
(2,415)
|
Period
change, net of tax
|
(43)
|
|
(1,739)
|
|
470
|
|
(1,312)
|
Balance,
June 30, 2005
|
$ (43)
|
|
$
(2,726)
|
|
$
(958)
|
|
$
(3,727)
|
NOTE
14: COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS:
In the
normal course of business, WesBanco offers off-balance sheet credit arrangements
to enable its customers to meet their financing objectives. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the financial statements. WesBanco’s exposure to
credit losses in the event of non-performance by the other parties to the
financial instruments for commitments to extend credit and standby letters
of
credit is limited to the contractual amount of those instruments. WesBanco
uses
the same credit policies in making commitments and conditional obligations
as
for all other lending. 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.
Expected losses on such commitments would be recorded in other liabilities
and
were $0 as of each of the periods ended June 30, 2005 and December 31,
2004.
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. Standby letters
of
credit are considered guarantees in accordance with the criteria specified
by
FIN No. 45, which was adopted on January 1, 2003. After that date, WesBanco
issued new or modified standby letters of credit with an aggregate contract
amount of $22.3 million. The guarantee liability associated with these new
or
modified standby letters of credit is carried at the estimated fair value of
$0.1 million and $0.1 million as of June 30, 2005 and December 31, 2004,
respectively. The guarantee liability is included in other liabilities on the
Consolidated Balance Sheets.
The
following table presents total commitments and letters of credit
outstanding:
|
June
30,
|
December
31,
|
(Unaudited,
in thousands)
|
2005
|
2004
|
Commitments
to extend credit
|
$
505,447
|
$
431,324
|
Standby
letters of credit
|
41,641
|
42,003
|
CONTINGENT
LIABILITIES:
WesBanco
and its subsidiaries 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 WesBanco’s consolidated
financial position. Please see "Part II, Item 1. Legal Proceedings", for
additional information.
NOTE
15: REGULATORY MATTERS
WesBanco
(the "Parent Company") is a legal entity separate and distinct from its
subsidiaries. There are various legal limitations on the extent to which the
Bank may extend credit, pay dividends or otherwise supply funds to WesBanco.
Certain restrictions under Federal and State law exist regarding the ability
of
the Bank to pay dividends to WesBanco. Approval is required if total dividends
declared by a bank subsidiary, in any calendar year, exceeds net profits for
that year combined with its retained net profits for the preceding two years.
In
determining to what extent to pay dividends, a bank subsidiary must also
consider the effect of dividend payments on applicable risk-based capital and
leverage ratio requirements.
WesBanco
is subject to various regulatory capital requirements (risk-based capital
ratios) administered by Federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a material
effect on WesBanco’s financial results.
All
bank
holding companies and banking subsidiaries are required to have core capital
("Tier 1") of at least 4% of risk-weighted assets, total capital of at least
8%
of risk-weighted assets, and for banking subsidiaries a minimum Tier 1 leverage
ratio of 3% of adjusted quarterly average assets. Tier 1 capital consists
principally of shareholders’ equity, excluding unrealized gains and losses on
securities available for sale and derivatives, less goodwill and certain other
intangibles. Total capital consists of Tier 1 capital plus the allowance for
loan losses subject to limitation. The regulations also define well-capitalized
levels of Tier 1, total capital, and Tier 1 leverage as 6%, 10%, and 5%,
respectively. WesBanco and the Bank were categorized as "well-capitalized"
under
the Federal Deposit Insurance Corporation Improvement Act at June 30, 2005
and
December 31, 2004. There are no conditions or events since June 30, 2005 that
management believes have changed WesBanco’s "well-capitalized"
category.
In
the
ordinary course of business, WesBanco is dependent upon dividends from the
Bank
to provide funds for the payment of dividends to shareholders, fund the current
stock repurchase plan and to provide for other cash requirements. Federal and
State banking regulations require the maintenance of certain capital and net
income levels that may limit the amount of dividends that may be paid. Approval
by regulatory authorities is required if the effect of dividends declared would
cause the regulatory capital of the Bank to fall below specified minimum levels.
Approval is also needed if dividends declared exceed the net profits for that
year combined with the retained net profits for
16
the
two
preceding years. At June 30, 2005, the Bank could pay dividends of up to $12.3
million to WesBanco without prior regulatory approval and without adversely
affecting its "well capitalized" status.
On
May 6,
2004, the Federal Reserve Board proposed a rule that would retain trust
preferred securities in Tier 1 capital, but with stricter quantitative limits
and clearer qualitative standards. Under the proposal, after a three-year
transition period, the aggregate amount of trust preferred securities and
certain other capital elements would be limited to 25 percent of Tier 1 capital
elements, net of goodwill. The amount of trust preferred securities and certain
other elements in excess of the limit could be included in Tier 2 capital,
subject to restrictions. On March 1, 2005, a final rule was promulgated by
the
Federal Reserve that confirms most elements of the May 6, 2004 proposal except
for permitting a longer transition period of five years and other
clarifications.
WesBanco
currently has $87.6 million in junior subordinated debt on its Consolidated
Balance Sheet presented as a separate category of long-term debt. For regulatory
purposes, trust preferred securities totaling $85.0 million, issued by WesBanco,
Inc. Capital Trusts II, IV, V and VI and WesBanco, Inc. Capital Statutory Trust
III, underlying such junior subordinated debt is included in Tier 1 capital
in
accordance with regulatory reporting requirements. As of June 30, 2005, assuming
WesBanco was not allowed to include in Tier 1 capital the $85.0 million in
trust
preferred securities, WesBanco’s Tier 1 leverage capital ratio would have
approximated 6.2% and would still significantly exceed the regulatory required
minimums for capital adequacy purposes.
Under
the
newly proposed Federal Reserve Board rule, it is currently anticipated that
all
of WesBanco’s trust preferred securities will continue to count as Tier 1
capital. If the WesBanco, Inc. Capital Trust II trust preferred securities
are
no longer allowed to be included in Tier 1 capital, WesBanco would be permitted
to redeem the trust preferred securities without penalty, while the WesBanco,
Inc. Capital Statutory Trust III and WesBanco Capital Trusts IV, V and VI would
result in an early redemption penalty.
The
following table summarizes risk-based capital amounts and ratios for WesBanco
and the Bank:
|
Minimum
|
Well
|
June
30, 2005
|
December
31, 2004
|
(Unaudited,
dollars in thousands)
|
Value
(1)
|
Capitalized
(2)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
WesBanco,
Inc.
|
|
|
|
|
|
|
Tier
1 Leverage
|
4.00%
(3)
|
N/A
|
$
359,624
|
8.17%
|
$
358,632
|
9.34%
|
Tier
1 Capital to Risk-Weighted Assets
|
4.00%
|
6.00%
|
359,624
|
11.93%
|
358,632
|
13.43%
|
Total
Capital to Risk-Weighted Assets
|
8.00%
|
10.00%
|
392,104
|
13.01%
|
388,118
|
14.54%
|
|
|
|
|
|
|
|
WesBanco
Bank, Inc.
|
|
|
|
|
|
|
Tier
1 Leverage
|
4.00%
|
5.00%
|
$
359,723
|
8.19%
|
$
319,577
|
8.35%
|
Tier
1 Capital to Risk-Weighted Assets
|
4.00%
|
6.00%
|
359,723
|
12.00%
|
319,577
|
12.05%
|
Total
Capital to Risk-Weighted Assets
|
8.00%
|
10.00%
|
392,201
|
13.08%
|
349,061
|
13.16%
|
(1)
Minimum
requirements to remain adequately capitalized.
(2)
Well
capitalized under prompt corrective action regulations.
(3)
Minimum
requirement is 3% for certain highly-rated bank holding companies.
NOTE
16: BUSINESS SEGMENTS
WesBanco
operates two reportable segments: community banking and trust and investment
services. WesBanco’s community banking segment offers services traditionally
offered by full-service commercial banks, including commercial demand,
individual demand and time deposit accounts, as well as commercial, mortgage
and
individual installment loans. The trust and investment services segment offers
trust services as well as various alternative investment products including
mutual funds. The market value of assets of the trust and investment services
segment was approximately $2.6 billion at June 30, 2005 and 2004, respectively.
These assets are held by the Bank, in fiduciary or agency capacities for their
customers and therefore are not included as assets on WesBanco’s Consolidated
Balance Sheets.
Presented
below are the Condensed Statements of Income for WesBanco’s business
segments:
17
|
|
|
Trust
and
|
|
|
|
|
|
|
|
|
Investment
|
|
|
|
|
(Unaudited,
in thousands)
|
|
Banking
|
|
|
Services
|
|
|
Consolidated
|
|
For
the Three Months ended June 30, 2005:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
56,534
|
|
|
-
|
|
$
|
56,534
|
|
Interest
expense
|
|
22,666
|
|
|
-
|
|
|
22,666
|
|
Net
interest income
|
|
33,868
|
|
|
-
|
|
|
33,868
|
|
Provision
for loan losses
|
|
1,919
|
|
|
-
|
|
|
1,919
|
|
Net
interest income after provision for loan losses
|
|
31,949
|
|
|
-
|
|
|
31,949
|
|
Non-interest
income
|
|
6,427
|
|
$
|
3,513
|
|
|
9,940
|
|
Non-interest
expense
|
|
25,320
|
|
|
2,173
|
|
|
27,493
|
|
Income
before provision for income taxes
|
|
13,056
|
|
|
1,340
|
|
|
14,396
|
|
Provision
for income taxes
|
|
2,602
|
|
|
536
|
|
|
3,138
|
|
Net
income
|
$
|
10,454
|
|
$
|
804
|
|
$
|
11,258
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
and core deposit intangibles
|
$
|
149,059
|
|
$
|
-
|
|
$
|
149,059
|
|
Depreciation
and amortization expense
|
|
1,577
|
|
|
20
|
|
|
1,597
|
|
Net
deferred tax assets
|
|
11,603
|
|
|
-
|
|
|
11,603
|
|
Total
assets
|
$
|
4,493,956
|
|
$
|
2,804
|
|
$
|
4,496,760
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months ended June 30, 2004:
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
|
40,020
|
|
|
-
|
|
$
|
40,020
|
|
Interest
expense
|
|
13,658
|
|
|
-
|
|
|
13,658
|
|
Net
interest income
|
|
26,362
|
|
|
-
|
|
|
26,362
|
|
Provision
for loan losses
|
|
1,496
|
|
|
-
|
|
|
1,496
|
|
Net
interest income after provision for loan losses
|
|
24,866
|
|
|
-
|
|
|
24,866
|
|
Non-interest
income
|
|
4,882
|
|
$
|
3,210
|
|
|
8,092
|
|
Non-interest
expense
|
|
19,419
|
|
|
2,027
|
|
|
21,446
|
|
Income
before provision for income taxes
|
|
10,329
|
|
|
1,183
|
|
|
11,512
|
|
Provision
for income taxes
|
|
1,675
|
|
|
474
|
|
|
2,149
|
|
Net
income
|
$
|
8,654
|
|
$
|
709
|
|
$
|
9,363
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
and core deposit intangibles
|
$
|
57,227
|
|
$
|
-
|
|
$
|
57,227
|
|
Depreciation
and amortization expense
|
|
1,412
|
|
|
23
|
|
|
1,435
|
|
Net
deferred tax assets
|
|
17,755
|
|
|
-
|
|
|
17,755
|
|
Total
assets
|
$
|
3,493,649
|
|
$
|
2,174
|
|
$
|
3,495,823
|
|
For
the Six Months ended June 30, 2005:
|
|
|
Interest
income
|
$
111,418
|
|
-
|
|
$
111,418
|
|
Interest
expense
|
44,049
|
|
-
|
|
44,049
|
|
Net
interest income
|
67,369
|
|
-
|
|
67,369
|
|
Provision
for loan losses
|
3,762
|
|
-
|
|
3,762
|
|
Net
interest income after provision for loan losses
|
63,607
|
|
-
|
|
63,607
|
|
Non-interest
income
|
12,244
|
|
$
7,227
|
|
19,471
|
|
Non-interest
expense
|
50,183
|
|
4,439
|
|
54,622
|
|
Income
before provision for income taxes
|
25,668
|
|
2,788
|
|
28,456
|
|
Provision
for income taxes
|
5,003
|
|
1,115
|
|
6,118
|
|
Net
income
|
$
20,665
|
|
$
1,673
|
|
$
22,338
|
|
|
|
|
|
|
|
|
Goodwill
and core deposit intangibles
|
$
149,059
|
|
$
-
|
|
$
149,059
|
|
Depreciation
and amortization expense
|
3,233
|
|
38
|
|
3,271
|
|
Net
deferred tax assets
|
11,603
|
|
-
|
|
11,603
|
|
Total
assets
|
$
4,493,956
|
|
$
2,804
|
|
$
4,496,760
|
|
|
|
|
|
|
|
|
For
the Six Months ended June 30, 2004:
|
|
|
Interest
income
|
$
79,852
|
|
-
|
|
$
79,852
|
|
Interest
expense
|
27,163
|
|
-
|
|
27,163
|
|
Net
interest income
|
|
52,689
|
|
|
-
|
|
|
52,689
|
|
Provision
for loan losses
|
|
3,296
|
|
|
-
|
|
|
3,296
|
|
Net
interest income after provision for loan losses
|
|
49,393
|
|
|
-
|
|
|
49,393
|
|
Non-interest
income
|
|
10,112
|
|
$
|
6,741
|
|
|
16,853
|
|
Non-interest
expense
|
|
38,534
|
|
|
4,047
|
|
|
42,581
|
|
Income
before provision for income taxes
|
|
20,971
|
|
|
2,694
|
|
|
23,665
|
|
Provision
for income taxes
|
|
3,465
|
|
|
1,078
|
|
|
4,543
|
|
Net
income
|
$
|
17,506
|
|
$
|
1,616
|
|
$
|
19,122
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
and core deposit intangibles
|
$
|
57,227
|
|
$
|
-
|
|
$
|
57,227
|
|
Depreciation
and amortization expense
|
|
2,818
|
|
|
44
|
|
|
2,862
|
|
Net
deferred tax assets
|
|
17,755
|
|
|
-
|
|
|
17,755
|
|
Total
assets
|
$
|
3,493,649
|
|
$
|
2,174
|
|
$
|
3,495,823
|
|
18
ITEM
2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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.
FORWARD-LOOKING
STATEMENTS
Forward-looking
statements in this report relating to WesBanco’s plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The information contained in this report should be read in conjunction with
WesBanco’s Form 10-K for the year ended December 31, 2004, as well as the Form
10-Q for the prior quarter ended March 31, 2005 filed with the Securities and
Exchange Commission ("SEC"), which is available at the SEC’s website
www.sec.gov
or at
WesBanco’s website,
www.wesbanco.com
.
Investors are cautioned that forward-looking statements, which are not
historical fact, involve risks and uncertainties, including those detailed
in
WesBanco’s most recent Annual Report on Form 10-K filed with the SEC under the
section "Risk Factors." 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 businesses of WesBanco and
its recent acquisitions may not be integrated successfully or such integration
may take longer to accomplish than expected; the expected cost savings and
any
revenue synergies from the mergers may not be fully realized within the expected
time frames; disruption from the mergers may make it more difficult to maintain
relationships with clients, associates, or suppliers; the effects of changing
regional and national economic conditions; changes in interest rates, spreads
on
earning assets and interest-bearing liabilities, and associated interest rate
sensitivity; sources of liquidity available to the Parent Company and its
related subsidiary operations; potential future credit losses and the credit
risk of commercial, real estate, and consumer loan customers and their borrowing
activities; actions of the Federal Reserve Board, Federal Deposit Insurance
Corporation, the SEC, the National Association of Securities Dealers and other
regulatory bodies; potential legislative and federal and state regulatory
actions and reform; competitive conditions in the financial services industry;
rapidly changing technology affecting financial services and/or other external
developments materially impacting WesBanco’s operational and financial
performance. WesBanco does not assume any duty to update forward-looking
statements.
APPLICATION
OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
WesBanco’s
critical accounting policies involving the significant judgments and assumptions
used in the preparation of the Consolidated Financial Statements as of June
30,
2005 have remained unchanged from the disclosures presented in WesBanco’s Annual
Report on Form 10-K for the year ended December 31, 2004 under the section
"Management’s Discussion and Analysis of Financial Condition and Results of
Operations."
EXECUTIVE
OVERVIEW
WesBanco
is a multi-state bank holding company operating at quarter-end through 85
banking offices, 2 loan production offices and 129 ATM machines in West
Virginia, Ohio and Western Pennsylvania, offering retail banking, corporate
banking, personal and corporate trust services, brokerage services, mortgage
banking and insurance. WesBanco’s businesses are significantly impacted by
economic factors such as market interest rates, federal monetary policies,
local
and regional economic conditions and the competitive environment influence
upon
WesBanco’s business volumes. WesBanco’s deposit levels are affected by numerous
factors including personal savings rates, personal income, and competitive
rates
on alternative investments, as well as competition from other financial
institutions within the markets we serve and liquidity needs of WesBanco. Loan
levels are also subject to various factors including construction demand,
business financing needs, consumer spending and interest rates and loan terms
offered by competing lenders.
On
January 3, 2005, WesBanco completed the acquisition of Winton, which was
announced on August 25, 2004. The acquisition was consummated through the
exchange of a combination of 2,296,511 shares of WesBanco common stock and
cash
totaling approximately $42.1 million. WesBanco recorded approximately $0.6
million in merger-related expenses related to this acquisition and recorded
goodwill of $63.4 million and a core deposit intangible of $2.9 million.
WesBanco completed the customer data conversion in late February 2005. As of
January 3, 2005, Winton had total assets of approximately $551 million, loans
of
$482 million, deposits of $359 million, borrowings of $133 million and equity
of
$49 million and operated through seven banking locations, two loan production
offices and 7 ATM’s in the greater Cincinnati, Ohio area. Please refer to Note
3, "Completed Business Combinations" and Note 7, "Goodwill and Core Deposit
Intangible," of the Consolidated Financial Statements for additional information
on the Winton acquisition.
In
February 2005, WesBanco’s Board of Directors authorized the increase of its
dividend from $0.25 per share, per quarter to $0.26 per share, a 4.0% increase.
In March 2005, WesBanco’s Board of Directors authorized a new one million share
repurchase plan, which began in the second quarter of 2005 after the completion
of the previous plan.
In
March
2005, WesBanco, Inc. formed WesBanco Capital Trust VI, by issuing $15.0 million
in fixed/floating rate junior subordinated deferrable interest debentures due
March 17, 2035, to a statutory trust which issued $15.0 million trust preferred
securities, with an initial rate of 6.37% for the first five years resetting
quarterly beginning on March 17, 2010 at a rate equal to the 3-month London
Inter Bank Offering Rate ("LIBOR") plus 1.77%. Please refer to Note 10, "Junior
Subordinated Debt," of the Consolidated Financial Statements for additional
information.
In
June
2005, WesBanco sold approximately $67.8 million of 1-4 family, fixed rate
residential mortgage loans, with mortgage servicing rights retained, from its
existing loan portfolio, at no significant gain or loss. The loans were sold
primarily to reduce sensitivity to higher interest rates.
WesBanco’s
results of operations are primarily dependent on its net interest income, which
is the difference between the interest that WesBanco earns on its loans and
investments and the interest expense it pays on its deposits and borrowings.
During the first half of 2005, WesBanco’s net interest income grew primarily due
to the Winton and Western Ohio acquisitions, as well as from an overall increase
in average earning assets throughout 2004. The increase in net interest income
was partially offset by a decline in the net interest margin primarily from
higher borrowing costs and a change in WesBanco’s deposit funding mix due to the
acquired deposits of Winton and Western Ohio being more heavily weighted towards
higher costing certificates of deposit and to a lesser extent, additional
Federal Home Loan Bank ("FHLB") borrowings.
19
Total
average loans increased primarily because of the Winton and Western Ohio
acquisitions coupled with the continued growth in commercial lending. WesBanco
has experienced growth mainly in commercial and commercial real estate loans
as
a result of a greater focus on new business development in all markets with
a
concentrated effort in the newer markets of southwestern Pennsylvania and
central Ohio, as these areas have shown the potential for higher levels of
growth. WesBanco expects growth opportunities to continue in commercial lending
as WesBanco’s footprint expands in the central and western Ohio markets, and to
a lesser extent, increased mortgage lending due to new marketing campaigns
and
the acquired operations of Winton, which on a historical basis, originated
and
sold higher volumes of mortgage loans in the secondary market than WesBanco
has
in the past. Home equity loan volumes are also anticipated to increase due
to
the increased marketing and promotional offers, although to date, such
originations have not resulted in significant loan balances outstanding due
to
prepayments and lower line usage. WesBanco continues to analyze the current
and
expected profit opportunities from its indirect lending program and due to
heavy
competition has not experienced significant growth from this type of lending
through automobile dealers. Recent efforts to expand this portion of the
consumer loan portfolio have been primarily associated with recreational vehicle
financing. Other direct consumer loans, while receiving greater branch sales
emphasis, are not expected to grow significantly due primarily to customer
preference for home equity products as a result of their tax-advantaged status.
In relation to the loan portfolio, asset quality in the first half of 2005
continued to show marked improvement, with most ratios showing improvement
over
the same periods in 2004.
Total
average investment securities during the first half of 2005 had no significant
change as compared to the same period in 2004. Cash flows showed a slight
decrease due to a slowing of pay downs received on mortgage-backed securities.
WesBanco also had higher levels of investment securities sales during the first
half of 2005 due to the repositioning of the acquired Winton investment
portfolio.
Total
average deposits increased since year end 2004, primarily due to the Winton
acquisition. The average cost of deposits has increased as well since the
deposits of the acquired institution contained a higher percentage of
certificates of deposits, which are generally a more expensive category of
deposits. Also influencing the cost of deposits was the normal repricing of
certificates of deposit to current market rates and certain higher-tiered money
market accounts tied to the prime rate index, as well as the overall increase
in
the competition’s deposit product rates. Throughout 2004, more emphasis was
placed on lower interest cost transaction accounts, with a new campaign to
market WesBanco’s free checking products and certain competitive special
certificates of deposit offerings. WesBanco is continuing with this strategy
in
2005, while also ensuring the competitiveness of its certificates of deposits
and savings product offerings.
RESULTS
OF OPERATIONS
EARNINGS
SUMMARY
WesBanco’s
earnings for the quarter ended June 30, 2005 were $11.3 million or $0.50 per
diluted share compared to $9.4 million or $0.48 per diluted share in 2004.
WesBanco’s earnings for the six months ended June 30, 2005 were $22.3 million or
$0.98 per diluted share compared to $19.1 million or $0.97 per diluted share
in
2004. The second quarter and first half of 2005 includes Winton, a $550 million
thrift institution acquired on January 3, 2005. Please refer to Note 3,
"Completed Business Combinations" of the Consolidated Financial Statements
for
additional information on the Winton acquisition. For the second quarter and
first half 2005, WesBanco’s financial performance was highlighted by growth in
most categories of net interest income and non-interest income. These positive
factors were partially offset by an overall increase in interest expense due
to
additional interest bearing liabilities and higher operating expenses primarily
from an increase in salaries, wages, and employee benefit expense, the
incremental costs associated with the additional branch structure from the
Winton acquisition and acquisition related expenses.
Annualized
return on average assets was 0.99% for the second quarter and first half of
2005, respectively, compared to 1.10% and 1.13% for the corresponding periods
in
2004. Annualized return on equity was 10.66% and 10.54% for the second quarter
and first half of 2005 respectively, compared to 11.80% and 12.02% for the
same
periods in 2004. These ratios have been negatively impacted due to the less
profitable nature of the acquired thrifts’ balance sheets and acquisition
related expenses.
NET
INTEREST INCOME
TABLE
1: NET INTEREST INCOME
|
For
the Three Months
|
|
|
|
For
the Six Months
|
|
|
|
Ended
June 30,
|
|
|
|
Ended
June 30,
|
|
|
(dollars
in thousands)
|
2005
|
|
2004
|
$
Change
|
%
Change
|
|
2005
|
|
2004
|
$
Change
|
%
Change
|
Net
Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
$
56,534
|
|
$
40,020
|
$
16,514
|
41.3%
|
|
$
111,418
|
|
$
79,852
|
$
31,566
|
39.5%
|
Interest
expense
|
22,666
|
|
13,658
|
9,008
|
66.0%
|
|
44,049
|
|
27,163
|
16,886
|
62.2%
|
Total
net interest income
|
$
33,868
|
|
$
26,362
|
$
7,506
|
28.5%
|
|
$
67,369
|
|
$
52,689
|
$
14,680
|
27.9%
|
Net
interest income, which is WesBanco’s major revenue source, is the difference
between interest income received by WesBanco on its earning assets (loans,
securities and federal funds sold) and interest expense paid by WesBanco on
its
liabilities (deposits, short term and long term borrowings). Net interest
income, which comprised 77.6% of total net revenues for six months ended June
30, 2005 compared to 75.8% for 2004, is affected by the general level of, and
changes in, interest rates, the steepness of the yield curve, changes in the
amount and composition of interest earning assets and interest bearing
liabilities, as well as the continued repricing of those assets and
liabilities.
Net
interest income increased for the three and six month periods ended June 30,
2005, compared to the same periods in 2004, due to a $1.0 billion increase
in
average earning assets, with the majority of the increase attributable to the
Winton and Western Ohio acquisitions. The net interest margin was 3.52% and
3.51% for the three months and six months ended June 30, 2005, respectively,
compared to 3.67% and 3.69% for the same periods in 2004. The decrease in net
interest margin for 2005 was primarily the result of a higher cost of funds
due
to funding costs increasing faster than the rates earned on loans and investment
securities. Also affecting the net interest margin were the acquired assets
of
Winton and Western Ohio, which had net interest margins approximating between
2.90% and 3.00% after purchase accounting adjustments. WesBanco’s net interest
margin for the second quarter was relatively flat with the first quarter’s 3.51%
despite recent Federal Reserve rate increases, as core deposit rates have begun
to respond to the increase in short-term market interest rates. With market
rates anticipated to further increase over the course of the year, competitive
factors for loans and deposits may result in further margin compression.
Interest
income increased for the three and six months ended June 30, 2005 compared
to
2004, due to a $1.0 billion increase in average
20
earning
assets, with the majority of the increase attributable to the Winton and Western
Ohio acquisitions, and the continued organic growth of commercial and commercial
real estate loans. As shown in Table 2, the yield on average earning assets
for
the three and six months ended June 30, 2005 increased by 29 and 22 basis
points, respectively, compared to the yields for the same periods in 2004.
The
average yield for the investment portfolio increased to 4.94% for the three
months ended June 30, 2005 compared to 4.76% for the same period in 2004 and
on
a year to date basis, increased to 4.93% from 4.78% for 2004.
Interest
expense increased for the three and six months ended June 30, 2005 compared
to
2004, due to an approximate $1.0 billion increase in average interest bearing
liabilities for both periods, with the majority of the increase attributable
to
the Winton and Western Ohio acquisitions. As shown in table 2, the average
rate
paid on interest bearing liabilities for the three and six months ended June
30,
2005 increased by 44 and 39 basis points, respectively, compared to the yields
for the same periods in 2004. The increase in rates paid on interest bearing
liabilities was primarily due to the acquired institutions having a larger
percentage of higher rates paid on certificates of deposits, as well as money
market account rates tied to a percentage of the prime rate, which has increased
225 basis points since the second quarter of 2004. WesBanco is beginning to
see
a shift by customers out of certain tiers of money market accounts into more
competitively priced deposit products offered in the market, including our
own
certificate of deposit and savings account offerings. Also impacting interest
expense for the three and six months ended June 30, 2005 was an overall increase
in borrowed funds, primarily due to the additional longer term FHLB borrowings
obtained in the Winton and Western Ohio acquisitions as well as an increase
in
the amount of junior subordinated debt, which was issued to assist in the
funding of both acquisitions. Within the next year, $503.4 million in
certificates of deposit are scheduled to mature. If interest rates continue
to
increase, these deposits, as well as certain core deposits, such as interest
bearing checking, money market accounts and savings accounts, could re-price
upward based on WesBanco’s current market rates.
TABLE
2: AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN ANALYSIS
|
For
the Three Months Ended June 30,
|
|
For
the Six Months Ended June 30,
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Average
|
Average
|
|
Average
|
Average
|
|
Average
|
Average
|
|
Average
|
Average
|
(dollars
in thousands)
|
Volume
|
Rate
|
|
Volume
|
Rate
|
|
Volume
|
Rate
|
|
Volume
|
Rate
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Due
from banks - interest bearing
|
$
4,631
|
1.91%
|
|
$
2,298
|
3.49%
|
|
$
5,678
|
1.49%
|
|
$
2,655
|
0.76%
|
Loans,
net of unearned income(1)
|
2,968,613
|
6.02%
|
|
1,981,904
|
5.81%
|
|
2,964,017
|
5.95%
|
|
1,954,934
|
5.84%
|
Securities:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
741,597
|
3.86%
|
|
778,670
|
3.76%
|
|
751,735
|
3.83%
|
|
782,911
|
3.67%
|
Tax-exempt
(3)
|
433,806
|
6.80%
|
|
372,130
|
7.15%
|
|
422,316
|
6.91%
|
|
373,708
|
7.14%
|
Total
securities
|
1,175,403
|
4.93%
|
|
1,150,800
|
4.76%
|
|
1,174,051
|
4.92%
|
|
1,156,619
|
4.78%
|
Federal
funds sold
|
-
|
0.00%
|
|
4,367
|
1.01%
|
|
1,835
|
2.62%
|
|
7,421
|
0.94%
|
Total
earning assets (3)
|
4,148,647
|
5.71%
|
|
3,139,369
|
5.42%
|
|
4,145,581
|
5.66%
|
|
3,121,629
|
5.44%
|
Other
assets
|
402,949
|
|
|
278,819
|
|
|
405,061
|
|
|
274,410
|
|
Total
Assets
|
$
4,551,596
|
|
|
$
3,418,188
|
|
|
$
4,550,642
|
|
|
$
3,396,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Interest
bearing demand deposits
|
$
330,273
|
0.41%
|
|
$
291,827
|
0.25%
|
|
$
330,375
|
0.41%
|
|
$
292,892
|
0.26%
|
Money
market accounts
|
545,475
|
1.87%
|
|
558,354
|
1.66%
|
|
566,780
|
1.85%
|
|
561,310
|
1.66%
|
Savings
deposits
|
455,916
|
0.64%
|
|
355,871
|
0.31%
|
|
446,954
|
0.58%
|
|
353,809
|
0.32%
|
Certificates
of deposit
|
1,377,006
|
3.01%
|
|
926,761
|
2.81%
|
|
1,364,713
|
2.95%
|
|
928,580
|
2.81%
|
Total
interest bearing deposits
|
2,708,670
|
2.07%
|
|
2,132,813
|
1.74%
|
|
2,708,822
|
2.02%
|
|
2,136,591
|
1.75%
|
Federal
Home Loan Bank borrowings
|
695,179
|
3.36%
|
|
394,063
|
3.41%
|
|
707,395
|
3.35%
|
|
375,910
|
3.49%
|
Other
borrowings
|
229,916
|
2.75%
|
|
180,103
|
1.29%
|
|
225,730
|
2.48%
|
|
178,030
|
1.26%
|
Junior
subordinated debt
|
87,638
|
5.97%
|
|
37,270
|
5.54%
|
|
81,145
|
5.87%
|
|
34,103
|
5.55%
|
Total
interest bearing liabilities
|
3,721,403
|
2.44%
|
|
2,744,249
|
2.00%
|
|
3,723,092
|
2.39%
|
|
2,724,634
|
2.00%
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing demand deposits
|
372,201
|
|
|
322,402
|
|
|
365,945
|
|
|
318,709
|
|
Other
liabilities
|
34,492
|
|
|
32,339
|
|
|
34,335
|
|
|
32,681
|
|
Shareholders'
Equity
|
$
423,500
|
|
|
$
319,198
|
|
|
$
427,270
|
|
|
$
320,015
|
|
Total
Liabilities and
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity
|
$
4,551,596
|
|
|
$
3,418,188
|
|
|
$
4,550,642
|
|
|
$
3,396,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest spread
|
|
3.27%
|
|
|
3.42%
|
|
|
3.27%
|
|
|
3.44%
|
Taxable
equivalent net interest margin (3)
|
|
3.52%
|
|
|
3.67%
|
|
|
3.51%
|
|
|
3.69%
|
(1)
Total
loans are gross of allowance for loan losses, net of unearned income and
include
loans held for sale. Non-accrual loans were included in the average volume
for
the entire period. Loan fees included in interest income on loans totaled
$1.1
million and $2.0 million for the three and six months ended June 30, 2005,
respectively and $0.8 million and $1.4 million for the same periods in
2004.
(2)
Average
yields on securities available for sale have been calculated based on amortized
cost.
(3)
The
yield on earning assets and the net interest margin are presented on a fully
taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the
tax
benefit of income on certain tax-exempt loans and investments using the federal
statutory tax rate of 35% for each period presented. WesBanco believes this
measure to be the preferred industry measurement of net interest income and
provides relevant comparison between taxable and non-taxable
amounts.
TABLE
3: RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST
EXPENSE
(1)
|
Three
Months Ended June 30, 2005
|
|
Six
Months Ended June 30, 2005
|
|
Compared
to June 30, 2004
|
|
Compared
to June 30, 2004
|
|
|
|
|
Net
Increase
|
|
|
|
|
Net
Increase
|
(in
thousands)
|
Volume
|
Rate
|
|
(Decrease)
|
|
Volume
|
Rate
|
|
(Decrease)
|
Increase
(decrease) in interest income:
|
|
|
|
|
|
|
|
|
|
Due
from banks - interest bearing
|
$
216
|
$
(195)
|
|
$
21
|
|
$
17
|
$
15
|
|
$
32
|
Loans,
net of unearned income
|
14,854
|
1,068
|
|
15,922
|
|
29,571
|
1,033
|
|
30,604
|
Taxable
securities
|
(3,969)
|
4,079
|
|
110
|
|
(2,360)
|
2,496
|
|
136
|
Tax-exempt
securities (2)
|
8,445
|
(7,975)
|
|
470
|
|
3,441
|
(2,636)
|
|
805
|
Federal
funds sold
|
(5)
|
(4)
|
|
(9)
|
|
(151)
|
140
|
|
(11)
|
Total
interest income change (2)
|
19,541
|
(3,027)
|
|
16,514
|
|
30,518
|
1,048
|
|
31,566
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in interest expense:
|
|
|
|
|
|
|
|
|
|
Interest
bearing demand deposits
|
27
|
136
|
|
163
|
|
54
|
240
|
|
294
|
Money
market accounts
|
(1,418)
|
1,654
|
|
236
|
|
43
|
519
|
|
562
|
Savings
deposits
|
94
|
362
|
|
456
|
|
178
|
554
|
|
732
|
Certificates
of deposit
|
3,377
|
500
|
|
3,877
|
|
6,303
|
678
|
|
6,981
|
Federal
Home Loan Bank borrowings
|
3,999
|
(1,513)
|
|
2,486
|
|
6,990
|
(1,751)
|
|
5,239
|
Other
borrowings
|
196
|
802
|
|
998
|
|
359
|
1,297
|
|
1,656
|
Junior
subordinated debt
|
749
|
43
|
|
792
|
|
1,364
|
58
|
|
1,422
|
Total
interest expense change
|
7,024
|
1,984
|
|
9,008
|
|
15,291
|
1,595
|
|
16,886
|
|
|
|
|
|
|
|
|
|
|
Net
interest income increase(decrease) (2)
|
$
12,517
|
$
(5,011)
|
|
$
7,506
|
|
$
15,227
|
$
(547)
|
|
$
14,680
|
(1)
Changes
to rate/volume are allocated to both rate and volume on a proportionate dollar
basis.
(2)
The
yield on earning assets and the net interest margin are presented on a fully
taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the
tax
benefit of income on certain tax-exempt loans and investments using the federal
statutory tax rate of 35% for each period presented. WesBanco believes this
measure to be the preferred industry measurement of net interest income and
provides relevant comparison between taxable and non-taxable
amounts.
PROVISION
FOR LOAN LOSSES
The
provision for loan losses is determined by management as the amount to be added
to the allowance for loan losses after net charge-offs have been deducted to
bring the allowance to a level considered appropriate to absorb probable losses
in the loan portfolio. The provision for loan losses was $1.9 million and $3.8
million for the three and six months ended June 30, 2005, respectively, compared
to $1.5 million and $3.3 million for the same periods in 2004.
NON-INTEREST
INCOME
TABLE
4: NON-INTEREST INCOME
|
For
the Three Months
|
|
|
|
For
the Six Months
|
|
|
|
Ended
June 30,
|
|
|
|
Ended
June 30,
|
|
|
(dollars
in thousands)
|
2005
|
|
2004
|
$
Change
|
%
Change
|
|
2005
|
|
2004
|
$
Change
|
%
Change
|
Non-Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
Trust
fees
|
$
3,512
|
|
$
3,210
|
$
302
|
9.4%
|
|
$
7,226
|
|
$
6,741
|
$
485
|
7.2%
|
Service
charges on deposits
|
2,723
|
|
2,283
|
440
|
19.3%
|
|
5,185
|
|
4,466
|
719
|
16.1%
|
Bank-owned
life insurance
|
711
|
|
732
|
(21)
|
-2.9%
|
|
1,394
|
|
1,421
|
(27)
|
-1.9%
|
Net
securities gains
|
1,068
|
|
155
|
913
|
589.0%
|
|
1,821
|
|
816
|
1,005
|
123.2%
|
Net
gains on sales of loans
|
197
|
|
78
|
119
|
152.6%
|
|
329
|
|
146
|
183
|
125.3%
|
Other
income
|
1,729
|
|
1,634
|
95
|
5.8%
|
|
3,516
|
|
3,263
|
253
|
7.8%
|
Total
non-interest income
|
$
9,940
|
|
$
8,092
|
$
1,848
|
22.8%
|
|
$
19,471
|
|
$
16,853
|
$
2,618
|
15.5%
|
Non-interest
income is a significant source of revenue and plays an important part in
WesBanco’s results of operations. WesBanco offers its customers a wide range of
retail, commercial, investment and electronic banking services, which it views
as a vital component of its strategy for retaining and attracting customers,
as
well as providing additional non-interest income to WesBanco.
Contributing
to the increase in trust fees in 2005, were the replacement of certain low
fee
custodial accounts with higher revenue services and corresponding relationships,
as well as an increase in the number of new accounts. The market value of trust
assets was $2.6 billion at June 30, 2005 and June 30, 2004, respectively.
Service
charges on deposit accounts increased due to growth in deposit accounts
primarily from the Winton and Western Ohio acquisitions and to a lesser extent
adjustments in the fee schedule. WesBanco intends to implement a new overdraft
service charge product in the third quarter, which should increase such fees
as
the product is sold in WesBanco’s branches over the next few
quarters.
Bank-owned
life insurance income was relatively flat, despite WesBanco experiencing a
decrease in the yields on the underlying variable-return investments. This
decrease in return was partially offset by the income earned on the additional
$9.3 million in bank-owned life insurance acquired from Western
Ohio.
Net
securities gains were higher for the second quarter and first half of 2005,
compared to 2004. In the second quarter of 2005, WesBanco recorded a $0.7
million gain on the disposition of an equity security, which was previously
noted in a Form 8-K filed in the first quarter of 2005.
22
Other
income increased primarily due to the increase in Automated Teller Machine
("ATM") income and debit card interchange income due to additional cards issued
during special promotions in 2004, as well as increased customer use of ATM’s.
For the second quarter and first half of 2005, WesBanco sold $31.3 million
and
$42.6 million, respectively, in loans to the secondary market compared to $7.2
million and $11.6 million for the same periods in 2004. The higher volume for
2005 reflects the additional secondary mortgage loan operation obtained in
the
Winton acquisition, which generated additional loan sales to the secondary
market. In June 2005, WesBanco sold approximately $67.8 million of 1-4 family,
fixed rate residential real estate loans, with mortgage servicing rights
retained, from its existing loan portfolio, at no significant gain or loss.
The
sale was completed in order to reduce exposure to potential rising interest
rates and to improve the company’s asset/liability position.
NON-INTEREST
EXPENSE
TABLE
5: NON-INTEREST EXPENSE
|
For
the Three Months
|
|
|
|
For
the Six Months
|
|
|
|
Ended
June 30,
|
|
|
|
Ended
June 30,
|
|
|
(dollars
in thousands)
|
2005
|
|
2004
|
$
Change
|
%
Change
|
|
2005
|
|
2004
|
$
Change
|
%
Change
|
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
$
10,422
|
|
$
8,294
|
$
2,128
|
25.7%
|
|
$
20,993
|
|
$
16,684
|
$
4,309
|
25.8%
|
Employee
benefits
|
4,106
|
|
2,984
|
1,122
|
37.6%
|
|
7,431
|
|
5,789
|
1,642
|
28.4%
|
Net
occupancy
|
1,751
|
|
1,362
|
389
|
28.6%
|
|
3,547
|
|
2,930
|
617
|
21.1%
|
Equipment
|
2,190
|
|
1,884
|
306
|
16.2%
|
|
4,394
|
|
3,654
|
740
|
20.3%
|
Core
deposit intangible
|
685
|
|
287
|
398
|
138.7%
|
|
1,348
|
|
574
|
774
|
134.8%
|
Merger-related
expenses
|
70
|
|
8
|
62
|
775.0%
|
|
563
|
|
17
|
546
|
3,211.8%
|
Other
operating
|
8,269
|
|
6,627
|
1,642
|
24.8%
|
|
16,346
|
|
12,933
|
3,413
|
26.4%
|
Total
non-interest expense
|
$
27,493
|
|
$
21,446
|
$
6,047
|
28.2%
|
|
$
54,622
|
|
$
42,581
|
$
12,041
|
28.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency
ratio
|
59.27%
|
|
58.31%
|
|
|
|
59.41%
|
|
57.38%
|
|
|
The
increase in salaries and wages for the second quarter and first half of 2005,
compared to 2004, was primarily due to the number of full-time equivalent
employees increasing from 1,161 at June 30, 2004 to 1,311 at June 30, 2005,
with
the majority of this increase attributable to the Winton and Western Ohio
acquisitions, and to a lesser extent additional staffing in certain key areas.
Anticipated staffing reductions in the Winton transaction did not begin until
after the data processing conversion late in February 2005, with final staffing
reductions from the Winton transaction occurring in the second quarter of 2005.
In conjunction with the staffing reductions, the number of full-time equivalent
employees has decreased from 1,358 at March 31, 2005 to 1,311 at June 30, 2005.
In addition, salaries and wages were impacted by normal annual salary increases,
which take effect mid-year, as well as additional production-related incentive
compensation for employees meeting certain sales production goals, primarily
in
commercial and mortgage lending.
The
increase in employee benefit costs for both the second quarter and first half
of
2005, compared to 2004, is also commensurate with the rise in full time
equivalent employees, as well as continued increases in health insurance
premiums, which are affecting nearly all companies. Health insurance expense
for
the three and six months ended June 30, 2005 increased $0.7 million or 71.2%
and
$0.8 million or 42.8% over 2004, primarily due to higher insurance premiums
and
an increase in the number of employees. Also contributing to the increase in
employee benefit costs in 2005 is the corresponding rise in payroll taxes
increasing in relation to the amount of salary expense. For both periods in
2005, WesBanco’s 401(k) expense increased $0.2 million or 158.9% and $0.4
million or 167.3% compared to the same periods in 2004 due to an increase in
the
match provided by the company and the increase in the number of full-time
equivalent employees.
WesBanco’s
net occupancy expense, which is comprised mainly of utility costs, office
rental, general repairs and maintenance, maintenance agreements and depreciation
expense for the second quarter and first half of 2005, increased over the same
periods in 2004 primarily due to the increase in the number of branches from
the
Winton and Western Ohio acquisitions and the opening of two loan production
offices and one new branch in western Pennsylvania late in 2004.
WesBanco
equipment expense, which is comprised of equipment depreciation, rental, repairs
and maintenance, and service agreements for both the second quarter and first
half of 2005, increased over the same periods in 2004 primarily due to an
increase in service agreement expense, higher depreciation expense and building
lease expense from the Winton and Western Ohio acquisitions. WesBanco opted
to
have certain computer systems and ATM equipment covered by service agreements.
Depreciation expense and building rental expense increased due to the additional
14 branches from the two acquisitions.
WesBanco’s
core deposit intangible expense represents the amortization of the capitalized
core deposit intangible. The increase in core deposit intangible expense was
primarily due to the 2005 Winton acquisition and 2004 Western Ohio acquisition,
which added an additional $0.7 million in expense to this category for 2005.
Please refer to Note 7, "Goodwill and Core Deposit Intangibles," of the
Consolidated Financial Statements for more information.
Relative
to the merger-related expenses recorded in 2005, nearly all of the expense
represents the costs related to the Winton acquisition while the 2004 expense
is
comprised of expenses from the American acquisition. For 2005, WesBanco
estimates that approximately $0.6 million in merger-related expenses from the
2005 Winton acquisition are to be recorded, with $0.1 million and $0.6 million
being recorded in the second quarter and first half of 2005, respectively.
Cost
savings related to the Winton acquisition, which are estimated to be 16% to
20%
of Winton’s pre-tax operating expenses of approximately $12.0 million annually,
commenced in March 2005 and are expected to be fully realized later this
year.
For
the
second quarter and first half of 2005, other operating expense increased in
several key areas, due primarily to the additional branch network from the
Winton and Western Ohio acquisitions, which caused a rise in nearly all expense
categories within other operating expenses. One of the largest increases was
in
communication costs, which increased $0.3 million and $0.6 million compared
to
the second quarter and first half of 2004 primarily due to higher leased line
and local and long distance telephone costs. For the same periods, professional
fees increased $0.1 million and $0.5 million due to additional costs from
outside consultants and audit fee increases. Other taxes for the second quarter
and first half of 2005, compared to 2004 increased $0.2 million and $0.5
million, respectively, primarily due to an
23
increase
in corporate franchise tax, which is based on the total capital of the company.
Marketing expenses also increased $0.1 million and $0.3 million, compared to
2004, due to additional costs associated with certain product marketing
campaigns, and increased marketing in Cincinnati, Ohio.
INCOME
TAXES
The
provision for income taxes for the three and six months ended June 30, 2005
increased $1.0 million or 46.0% and $1.6 million or 34.7% compared to the same
periods in 2004. The increase was primarily due to an increase in pretax income
despite an increase in tax-exempt income and to a lesser extent, Winton and
Western Ohio which both had effective tax rates approximating 33% prior to
the
respective merger. The effective tax rate for the quarter end June 30, 2005
increased to 21.8% compared to 18.7% for 2004. On a year to date basis for
2005
the effective tax rate increased to 21.5% compared to 19.2% for 2004. For the
remainder of 2005 WesBanco anticipates the effective tax rate to approximate
21.5%.
FINANCIAL
CONDITION
Total
assets of WesBanco were $4.5 billion as of June 30, 2005, an increase of $485.4
million or 12.1% compared to December 31, 2004. Total liabilities of WesBanco
were $4.1 billion as of June 30, 2005, an increase of $435.3 million or 12.0%
compared to December 31, 2004. The increases were primarily due to the
acquisition of Winton on January 3, 2005, which had total assets of
approximately $551 million, loans of $482 million, deposits of $359 million,
borrowings of $133 million and equity of $49 million.
SECURITIES
TABLE
6: COMPOSITION OF SECURITIES (1)
|
June
30,
|
|
December
31,
|
|
|
(dollars
in thousands)
|
2005
|
|
2004
|
$
Change
|
%
Change
|
Securities
held to maturity (at amortized cost):
|
|
|
|
|
|
Obligations
of states and political subdivisions
|
$
396,985
|
|
$
367,780
|
$
29,205
|
7.9%
|
Other
equity securities
(2)
|
49,602
|
|
39,082
|
10,520
|
26.9%
|
Total
securities held to maturity
|
446,587
|
|
406,862
|
39,725
|
9.8%
|
|
|
|
|
|
|
Securities
available for sale (at fair value):
|
|
|
|
|
|
U.S.
Treasury and Federal Agency securities
|
291,425
|
|
314,399
|
(22,974)
|
-7.3%
|
Obligations
of states and political subdivisions
|
43,754
|
|
42,497
|
1,257
|
3.0%
|
Mortgage-backed
securities
|
343,998
|
|
397,341
|
(53,343)
|
-13.4%
|
Corporate
and other securities
(3)
|
11,360
|
|
11,083
|
277
|
2.5%
|
Total
securities available for sale
|
690,537
|
|
765,320
|
(74,783)
|
-9.8%
|
Total
securities
|
$
1,137,124
|
|
$
1,172,182
|
$
(35,058)
|
-3.0%
|
|
|
|
|
|
|
Held
to maturity securities:
|
|
|
|
|
|
Weighted
average yield at the respective period end
|
6.54%
|
|
6.25%
|
|
|
As
a % of total securities
|
39.3%
|
|
34.7%
|
|
|
Weighted
average life (in years)
|
4.7
|
|
5.1
|
|
|
|
|
|
|
|
|
Available
for sale securities:
|
|
|
|
|
|
Weighted
average yield at the respective period end
|
3.89%
|
|
3.95%
|
|
|
As
a % of total securities
|
60.7%
|
|
65.3%
|
|
|
Weighted
average life (in years)
|
3.1
|
|
3.0
|
|
|
(1)
At
June 30, 2005 and December 31, 2004, there were no holdings of any one issuer,
other than the U.S. government and certain federal or federally-related
agencies,
in
an amount greater than 10% of WesBanco’s shareholders’ equity.
(2)
Other
equity securities, classified as held to maturity at
June
30, 2005 and December 31, 2004
consist
primarily of Federal Reserve Bank stock and Federal
Home
Loan
Bank stock.
(3)
Other
securities, classified as available for sale, include certain equity interests
in business corporations.
Total
investment securities, which represent a source of liquidity for WesBanco,
decreased from December 31, 2004 to June 30, 2005, due to the sale of investment
securities from the Winton acquisition, which at the acquisition date
approximated $37.0 million, as well as increased sales of certain lower yielding
investment securities, offset somewhat by purchases of additional
obligations of states and political subdivisions.
For
the
three and six months ended June 30, 2005, cash flows from the portfolio due
to
calls, maturities and prepayments were $55.8 million and $140.3 million,
respectively, which were slightly lower than the $88.5 million and $157.0
million for the same periods in 2004. This decrease was primarily due to lower
levels of prepayments on mortgage-backed securities and callable agencies for
2005 as calls and maturities were relatively consistent with 2004.
At
June
30, 2005, total unamortized premium and discount on the investment portfolio,
as
a percentage of the total investment portfolio, was 0.65% and 1.63%,
respectively, compared to 0.64% and 1.60% at December 31, 2004, respectively.
The premium amortization on the investment portfolio recorded as a reduction
to
interest income for the three and six months ended June 30, 2005 was $0.9
million and $2.0 million, respectively, compared to $1.6 million and $3.2
million for the same periods in 2004. Total premium on the investment portfolio,
which relates primarily to collateralized mortgage obligations and
mortgage-backed securities in the available for sale portion of the portfolio,
is subject to increased amortization in times of accelerated
prepayments.
The
discount accretion on the investment portfolio recorded into income for the
three and six months ended June 30, 2005 was $0.5 million and $0.9 million,
respectively, compared to $0.4 million and $0.9 million for the same periods
in
2004. The discount primarily relates to obligations of states and political
subdivisions, which comprised 97.6% of the total discount at June 30, 2005.
24
WesBanco
believes that all of the securities in an unrealized loss position at June
30,
2005 are considered temporary impairment losses due to the securities having
lower interest rates than current market interest rates. The difference in
rates
causes the securities fair value to fluctuate in response to prevailing market
interest rates. None of the securities in an unrealized loss position at June
30, 2005 is in a non-investment grade category security.
Accordingly,
as of June 30, 2005, management believes the unrealized losses are temporary
and
no impairment loss has been recorded in the Consolidated Statements of Income.
Please refer to Note 4, "Securities," of the Consolidated Financial Statements
for more information.
Unrealized
pre-tax gains and losses on available for sale securities (fair value
adjustments) reflected a $4.4 million market loss as of June 30, 2005, compared
to a $1.6 million market loss as of December 31, 2004. These fair value
adjustments represent temporary fluctuations resulting from changes in market
rates in relation to fixed yields in the available for sale portfolio and are
accounted for as an adjustment to other comprehensive income in shareholders’
equity. WesBanco may impact the magnitude of the fair value adjustment by
managing both the volume and average maturities of securities that are
classified as available for sale as well as the portion of new investments
allocated to this category versus the held to maturity portfolio.
If
these
securities were held to their respective maturity dates, no fair value gain
or
loss would be realized. During the second quarter and first half of 2005,
proceeds from the sale of available for sale securities were $42.2 million
and
$114.9 million, respectively, compared to $17.2 million and $66.8 million for
the same periods in 2004. In the first half of 2005, gross security gains of
$1.8 million and gross security losses of $28 thousand were realized, compared
to $0.8 million and $37 thousand, respectively, for the same period in 2004.
LOANS
AND CREDIT RISK
The
loan
portfolio is WesBanco’s single largest balance sheet asset classification and
the largest source of interest income. The risk that borrowers will be unable
or
unwilling to repay their obligations and default on loans is inherent in all
lending activities. In addition to the inherent risk of a change in a borrower’s
repayment capacity, economic conditions and other factors beyond WesBanco’s
control can adversely impact credit risk. WesBanco’s primary goal in managing
credit risk is to minimize the impact of default by an individual borrower
or
group of borrowers. Credit risk is managed through the initial underwriting
process as well as through ongoing monitoring and administration of the loan
portfolio that varies by category. WesBanco’s credit policies establish standard
underwriting guidelines for each type of loan and require an appropriate
evaluation of the credit characteristics of each borrower. This evaluation
includes the borrower’s repayment capacity; the adequacy of collateral, if any,
to secure the loan; and other factors unique to each loan that may increase
or
mitigate its risk.
WesBanco’s
loan portfolio consists of the five major categories of lending set forth in
Table 7. WesBanco makes loans for business and consumer purposes. Business
purpose loans consist of commercial and commercial real estate loans, while
consumer purpose loans consist of residential real estate loans, home equity
and
other consumer loans. Each category entails certain distinct elements of risk
that impact the manner in which those loans are underwritten, monitored, and
administered. The elements of risk that are distinct to a particular category
of
loans are explained further within that category of loans’ section of this
Management’s Discussion and Analysis.
TABLE
7: COMPOSITION OF LOANS
|
June
30, 2005
|
|
December
31, 2004
|
|
|
%
of
|
|
|
%
of
|
(dollars
in thousands)
|
Amount
|
Loans
|
|
Amount
|
Loans
|
Loans:
(1)
|
|
|
|
|
|
Commercial
|
$
420,077
|
14.3%
|
|
$
409,904
|
16.5%
|
Commercial
real estate
|
1,102,226
|
37.6%
|
|
898,140
|
36.1%
|
Residential
real estate
|
948,271
|
32.3%
|
|
771,337
|
31.0%
|
Home
equity
|
181,932
|
6.2%
|
|
148,486
|
6.0%
|
Consumer
|
272,345
|
9.3%
|
|
257,499
|
10.3%
|
Total
portfolio loans
|
2,924,851
|
99.7%
|
|
2,485,366
|
99.9%
|
Loans
held for sale
|
8,518
|
0.3%
|
|
3,169
|
0.1%
|
Total
Loans
|
$
2,933,369
|
100.0%
|
|
$
2,488,535
|
100.0%
|
(1)
Loans
are presented gross of the allowance for loan losses, and net of unearned income
on consumer loans and unamortized net deferred loan fees.
The
increase in total loans between December 31, 2004 and June 30, 2005 is primarily
due to the Winton acquisition, which added approximately $477 million to
WesBanco’s loan portfolio at the time of the merger and continued organic loan
growth primarily in the commercial and commercial real estate categories, which
was partially offset by the sale of $67.8 million in residential real estate
loans in June 2005. On a linked quarter basis from the first quarter of 2005,
organic loan growth was approximately $35 million or 1.2% for the second quarter
of 2005.
In
order
to attract potential home borrowers, WesBanco offers rate lock commitments
to
such potential borrowers. The commitments are generally for sixty days and
guarantee a specified interest rate for a loan if underwriting standards are
met, but the commitment does not obligate the potential borrower to close on
the
loan. Accordingly, some commitments expire prior to becoming loans. For all
rate
lock commitments issued in connection with potential loans intended for sale,
which currently consist of all originated twenty and thirty year fixed rate
residential home mortgage loan products, the bank enters into one-to-one forward
sales contracts on a best efforts basis (if the loan does not close for whatever
reason, there is no obligation on WesBanco’s part to sell the loan to the
investor). WesBanco enters into such contracts in order to control interest
rate
risk under an asset/liability strategy that is meant to limit risk from holding
longer-term mortgages. Whenever a customer desires these products, a mortgage
originator quotes a secondary market rate, guaranteed for that day by the
investor. The rate lock is executed between the mortgagee and WesBanco, and
in
turn, a forward sales contract is executed between WesBanco and the investor.
Both the rate lock commitment and the corresponding forward sales contract
for
each customer are considered derivatives under SFAS No. 133, as amended. As
such, changes in the fair value of the derivatives during the commitment period
are recorded in current earnings and included in other income on the
Consolidated Statements of Income. Should the loan close before the end of
a
period but prior to funding by the investor, it is accounted for in "Loans
Held
for Sale," on WesBanco’s Consolidated Balance Sheets at the lower of cost
or
25
market.
At June 30, 2005, Loans Held for Sale totaled $8.5 million. At June 30, 2005,
the fair value adjustment of the forward sales commitments to the investor
included in the gain on sale of mortgage loans was $42 thousand while the loss
on the fair value of the interest rate lock commitments to customers was $0.1
million.
NON-PERFORMING
ASSETS, IMPAIRED LOANS AND LOANS PAST DUE 90 DAYS OR MORE
Non-performing
assets consist of non-accrual and renegotiated loans, other real estate acquired
through or in lieu of foreclosure, bank premises held for sale, and repossessed
automobiles acquired to satisfy defaulted consumer loans. Other impaired loans
include certain loans that are internally classified as substandard or
doubtful.
Loans
are
placed on non-accrual status when they become past due 90 days or more unless
they are both well secured and in the process of collection. Except for certain
consumer and residential real estate loans, when a loan is placed on
non-accrual, interest income may not be recognized as cash payments are
received.
Loans
are
categorized as renegotiated when WesBanco, for economic or legal reasons related
to a borrower’s financial difficulties, grants a concession to the borrower that
it would not otherwise consider. Concessions that may be granted include a
reduction of the interest rate, the amount of accrued interest, or the face
amount of the loan; as well as an extension of the maturity date or the
amortization schedule. Loans may be removed from renegotiated status after
they
have performed according to the renegotiated terms for a period of
time.
WesBanco
considers loans that are classified as substandard or doubtful because of a
borrower’s diminished repayment capacity to be impaired when they are not fully
secured by collateral or the observable market price for the loan is less than
the outstanding balance. Such loans continue to accrue interest, have not been
renegotiated, and may or may not have a record of delinquent payments. Also
included in other impaired loans are loans acquired through acquisition that
are
subject to the guidance required under SOP 03-3 which show evidence of
deterioration of credit quality since origination and for which it is probable
at acquisition, that all contractually required payments would not be
collected.
Other
real estate and repossessed assets consists primarily of real estate acquired
through or in lieu of foreclosure and repossessed automobiles or other personal
property. This category may also include bank premises held for sale and
residential real estate of relocated employees, which do not arise as a result
of lending activities.
TABLE
8: NON-PERFORMING ASSETS, OTHER IMPAIRED LOANS AND LOANS PAST DUE 90 DAYS OR
MORE
|
June
30,
|
|
December
31,
|
(dollars
in thousands)
|
2005
|
|
2004
|
Non-accrual:
|
|
|
|
Commercial
|
$
2,254
|
|
$
2,511
|
Commercial
real estate
|
7,611
|
|
4,768
|
Residential
real estate
|
1,047
|
|
785
|
Home
equity
|
18
|
|
28
|
Consumer
|
11
|
|
103
|
Total
|
10,941
|
|
8,195
|
Renegotiated:
|
-
|
|
-
|
Total
|
-
|
|
-
|
Total
non-performing loans
|
10,941
|
|
8,195
|
Other
real estate owned and repossessed assets
|
2,525
|
|
2,059
|
Total
non-performing assets
|
13,466
|
|
10,254
|
Other
impaired loans:
|
|
|
|
Commercial
|
1,500
|
|
5,295
|
Commercial
real estate
|
1,220
|
|
1,783
|
Total
other impaired loans
|
2,720
|
|
7,078
|
Total
non-performing assets and other impaired loans
|
$
16,186
|
|
$
17,332
|
|
|
|
|
Non-performing
loans as a percentage of total loans
|
0.37%
|
|
0.33%
|
Non-performing
assets as a percentage of total assets
|
0.30%
|
|
0.26%
|
Percentage
of non-performing assets to total loans outstanding and
|
|
|
|
other
real estate owned and repossessed assets
|
0.46%
|
|
0.41%
|
Percentage
of non-performing loans and other impaired loans to
|
|
|
|
loans
outstanding
|
0.47%
|
|
0.61%
|
|
|
|
|
Past
due 90 days or more:
|
|
|
|
Commercial
|
$
640
|
|
$
665
|
Commercial
real estate
|
3,180
|
|
3,602
|
Residential
real estate
|
2,811
|
|
2,133
|
Home
equity
|
304
|
|
439
|
Consumer
|
650
|
|
745
|
Total
past due 90 days or more
|
$
7,585
|
|
$
7,584
|
Non-performing
assets, which are defined as non-accrual and renegotiated loans, and other
real
estate owned increased $2.8 million between December 31, 2004 and June 30,
2005
while other impaired loans decreased $4.3 million during the same period. The
increase in non-performing loans is primarily due to certain loans migrating
from the other impaired category during the period, including $1.5 million
of
loans acquired from Winton. Other impaired loans also decreased as a result
of
principal repayments and WesBanco’s success
26
implementing
various risk reduction strategies to remove those loans from the portfolio.
Other
real estate owned and repossessed assets increased slightly between December
31,
2004 and June 30, 2005 due to an increase in repossessed assets which was
partially offset by a decrease in other real estate owned due to sales of
foreclosed property. Residential real estate of relocated employees included
in
other real estate and repossessed assets were $0.4 million at June 30, 2005
and
$0.5 million at December 31, 2004.
Loans
past due 90 days or more and still accruing interest were relatively unchanged
from December 31, 2004 to June 30, 2005. All categories decreased except for
residential real estate loans, which increased primarily due to the portfolio
containing a higher percentage of these types of loans.
ALLOWANCE
FOR LOAN LOSSES
The
allowance for loan losses increased between December 31, 2004 and June 30,
2005
primarily as a result of the acquired allowance of Winton, which after the
application of SOP 03-3, approximated $1.9 million. The reduction in the
allowance as a percentage of total loans is primarily attributable to the net
decrease in total non-performing and other impaired loans, and the change in
composition of the loan portfolio as a result of the Western Ohio and Winton
acquisitions. Both of the acquired companies' loan portfolios were more heavily
weighted to residential real estate loans, which have the lowest historical
loss
rate of any category of loans.
TABLE
9: ALLOWANCE FOR LOAN LOSSES
|
June
30,
|
|
June
30,
|
(dollars
in thousands)
|
2005
|
|
2004
|
Beginning
Balance - Allowance for loan losses
|
$
29,486
|
|
$
26,235
|
Allowance
for loan losses of acquired bank
|
1,947
|
|
-
|
Provision
for loan losses
|
3,762
|
|
3,296
|
Charge-offs:
|
|
|
|
Commercial
|
1,312
|
|
354
|
Commercial
real estate
|
118
|
|
182
|
Residential
real estate
|
169
|
|
25
|
Home
equity
|
184
|
|
34
|
Consumer
|
2,228
|
|
2,406
|
Total
charge-offs
|
4,011
|
|
3,001
|
|
|
|
|
Recoveries:
|
|
|
|
Commercial
|
277
|
|
221
|
Commercial
real estate
|
41
|
|
4
|
Residential
real estate
|
121
|
|
8
|
Home
equity
|
-
|
|
-
|
Consumer
|
725
|
|
504
|
Total
recoveries
|
1,164
|
|
737
|
Net
loan charge-offs
|
2,847
|
|
2,264
|
|
|
|
|
Ending
Balance - Allowance for loan losses
|
$
32,348
|
|
$
27,267
|
|
|
|
|
Components
of the allowance for loan losses:
(1)
|
|
|
|
General
reserves pursuant to SFAS No. 5
|
$
31,165
|
|
$
23,311
|
Specific
reserves pursuant to SFAS No. 114
|
1,183
|
|
3,956
|
Total
allowance for loan losses
|
$
32,348
|
|
$
27,267
|
|
|
|
|
Ratio
of net charge-offs to average loan type:
|
|
|
|
Commercial
|
0.48%
|
|
0.07%
|
Commercial
real estate
|
0.01%
|
|
0.01%
|
Residential
real estate
|
0.01%
|
|
0.01%
|
Home
equity
|
0.20%
|
|
0.06%
|
Consumer
|
1.17%
|
|
1.53%
|
Total
ratio of net charge-offs to average loans
|
0.19%
|
|
0.23%
|
|
|
|
|
Allowance
for loan losses to total loans
|
1.10%
|
|
1.34%
|
Allowance
for loan losses to total non-performing loans
|
2.96x
|
|
2.94x
|
Allowance
for loan losses to total non-performing loans and
|
|
|
|
loans
past due 90 days or more
|
1.75x
|
|
2.03x
|
Provision
for loan losses to net loan charge-offs
|
132.1%
|
|
145.6%
|
(1)
Specific
reserves have been adjusted to reclassify amounts disclosed as part of that
component in prior years to be consistent with their current period
classification. These amounts represent allocations for pools of loans that
were
not individually tested for impairment, which are therefore more appropriately
categorized as general reserves.
The
allowance for loan losses is maintained at a level considered appropriate by
management to absorb probable losses in the loan
27
portfolio.
The provision for loan losses is the amount that is added to the allowance
after
net charge-offs have been deducted to bring the allowance to the necessary
level
based on management’s estimate of probable losses. Determining the amount of the
allowance requires significant judgement about the collectibility of loans
and
the factors that deserve consideration in estimating probable credit losses.
Management evaluates the adequacy of the allowance at least quarterly. This
evaluation is inherently subjective as it requires material estimates that
may
be susceptible to significant change.
Larger
commercial and commercial real estate loans that exhibit observed credit
weaknesses and are deemed to be impaired pursuant to SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan" are subject to individual review. Where
appropriate, reserves are established for these loans based on the present
value
of expected future cash flows available to pay the loan and/or the estimated
realizable value of the collateral, if any. Reserves are established for the
remainder of the commercial and commercial real estate loans based on a
migration analysis, which computes historical loss rates on loans according
to
their internal risk grade. The risk grading system is intended to identify
and
measure the credit quality of all commercial and commercial real estate loans.
Homogenous loans, such as consumer, residential real estate and home equity
loans are not individually risk graded. Reserves for homogenous loans are based
on average historical loss rates for each category. Historical loss rates for
all categories of loans are calculated for multiple periods of time ranging
from
the most recent quarter to the past three years. Historical loss rates may
be
adjusted to reflect factors that, in management's judgement, impact expected
loss rates such as changing economic conditions, delinquency and non-performing
loan trends, changes in internal lending policies and credit standards, and
the
results of examinations by bank regulatory agencies and WesBanco's independent
loan review function.
Management
relies on observable data from internal and external sources to evaluate each
of
these factors, adjust assumptions and recognize changing conditions to reduce
differences between estimated and actual observed losses from period to period.
The evaluation of the allowance also takes into consideration the inherent
imprecision of loss estimation models and techniques and includes general
reserves for probable but undetected losses in each category of loans. While
WesBanco continually refines and enhances the loss estimation models and
techniques it uses to determine the appropriateness of the allowance for loan
losses, there have been no material substantive changes to such models and
techniques compared to prior periods. While management allocates the allowance
to different loan categories, the allowance is general in nature and is
available to absorb credit losses for the entire loan portfolio.
Net
charge-offs increased $0.6 million between June 30, 2004 and June 30, 2005
but
decreased as a percentage of total loans. Commercial loan losses increased
due
to higher charge-offs on small business loans and approximately $0.7 million
attributable to a fraudulent lease transaction. However, consumer loan losses
decreased as a result of lower losses recognized during the period net of higher
recoveries from increased collection efforts on previously charged off consumer
loans.
The
SFAS
No. 114 allocation for impaired loans is also an important factor in evaluating
the adequacy of the allowance for loan losses. Specific allocations decreased
from December 31, 2004 to June 30, 2005 primarily due to a decrease in the
amount of impaired loans that required allocations. This change also reflects
WesBanco’s success in implementing risk reduction strategies during 2004 to
remove those impaired loans with the greatest risk of loss from the portfolio.
Sales of impaired commercial real estate loans in 2004 eliminated approximately
$0.4 million of specific allocations.
The
general economy continued to rebound and contributed to strong loan demand
and
growth throughout 2004. However, pockets of economic weakness or uncertainty
exist in one or more of WesBanco’s markets, the most significant of which is the
Upper Ohio Valley, which represents approximately 25 to 30 percent of WesBanco’s
loan portfolio. The Upper Ohio Valley economy continues to be adversely impacted
by the difficulties that have faced the primary metals industries in recent
years. One of the ten largest integrated steel companies in the United States
is
headquartered in the Upper Ohio Valley, operated under Chapter 11 of the
Bankruptcy Act for a period of time in 2004 and has significantly reduced its
workforce. While the prospects of both of its two principal steel
companies have improved, with one emerging from bankruptcy and resuming
profitable operations and the other selling to a large integrated steel company
which in turn sold to an overseas-based company, the longer-term outlook
is
still uncertain. In addition, a leading producer of aluminum headquartered
in
the Upper Ohio Valley is currently operating under Chapter 11 protection and
has
curtailed or shuttered certain of its operating facilities and is involved
in an
extended labor dispute. As of June 30, 2005, WesBanco had no material direct
credit exposure to the steel or aluminum producing industries. However, WesBanco
extends credit to consumers employed in those industries and to businesses
that
provide products or services to the industries. In addition, a number of other
businesses not directly associated with the primary metals industry would be
adversely impacted by a significant loss of employment. The recent acquisitions
of Western Ohio in August 2004 and Winton in January 2005 combined with organic
loan growth in the Columbus, Ohio and western Pennsylvania markets throughout
2004 have significantly changed the geographic distribution of WesBanco's loan
portfolio and reduced the percentage of total loans that are impacted by the
Upper Ohio Valley economy.
There
are
no other markets in which WesBanco operates that have been as severely impacted
by local economic conditions or industry specific concerns as the Upper Ohio
Valley. However, weakness in other parts of the manufacturing sector became
evident in other markets toward the latter part of 2004 and there has also
been
some deterioration in the credit quality of loans to small businesses in 2004.
Many small companies have been under significant pressure from new competition,
fundamental changes in their respective industries, and the impact of the
protracted economic downturn of the last two years on the profitability of
their
operations.
TABLE
10: ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
|
June
30,
|
Percent
of
|
|
December
31,
|
Percent
of
|
(in
thousands)
|
2005
|
Total
|
|
2004
|
Total
|
Commercial
|
$
13,679
|
42.3%
|
|
$
12,957
|
43.9%
|
Commercial
real estate
|
12,473
|
38.6%
|
|
10,521
|
35.7%
|
Residential
real estate
|
1,148
|
3.5%
|
|
1,163
|
3.9%
|
Home
equity
|
362
|
1.1%
|
|
295
|
1.0%
|
Consumer
|
4,686
|
14.5%
|
|
4,550
|
15.5%
|
Total
allowance for loan losses
|
$
32,348
|
100.0%
|
|
$
29,486
|
100.0%
|
Between
December 31, 2004 and June 30, 2005, the allowance for commercial real estate
loans increased primarily due to the Winton acquisition and the allowance for
commercial loans increased as a result of recent higher losses in that category.
Changes in the amounts allocated to all categories of loans also reflect the
combined impact of changes in historical loss rates, judgmental allocations
for
economic factors, and the respective changes in loan balances as a result of
organic loan growth.
28
Management
believes the allowance of $32.3 million is appropriate to absorb probable credit
losses associated with the loan portfolio at June 30, 2005. However, probable
losses associated with the economic conditions described above is difficult
to
accurately measure and future adjustments to the allowance and the provision
for
loan losses may be required to the extent such losses become more probable
than
is currently estimable.
DEPOSITS
TABLE
11: DEPOSITS
|
June
30,
|
December
31,
|
|
|
(dollars
in thousands)
|
2005
|
2004
|
$
Change
|
%
Change
|
Deposits
|
|
|
|
|
Non-interest
bearing demand
|
$
373,210
|
$
355,364
|
$
17,846
|
5.0%
|
Interest
bearing demand
|
318,786
|
312,080
|
6,706
|
2.1%
|
Money
market
|
517,516
|
587,523
|
(70,007)
|
-11.9%
|
Savings
deposits
|
464,628
|
362,581
|
102,047
|
28.1%
|
Certificates
of deposit
|
1,381,986
|
1,108,386
|
273,600
|
24.7%
|
Total
deposits
|
$
3,056,126
|
$2,725,934
|
$
330,192
|
12.1%
|
Deposits,
which represent WesBanco’s primary source of funds, are offered in various
account forms at various rates through WesBanco’s 85 branches in West Virginia,
Ohio and Western Pennsylvania. All categories of deposits, except for money
markets, increased between December 31, 2004 and June 30, 2005, primarily from
the Winton acquisition, which added approximately $359 million in deposits
to
WesBanco’s balance sheet at the time of acquisition, with the main account
concentration being in certificates of deposit.
WesBanco
is continuing to place increased marketing emphasis on transaction-based
accounts, which are typically viewed as a lower-cost funding source and may
also
provide WesBanco ancillary activity fee income. Included in the money market
category is the WesBanco Prime Rate Money Market Account, which permits limited
check writing and pays interest on a tiered structure based on the customer’s
outstanding balance, with the highest tier above $100,000 indexed to the prime
rate of interest. During the prior years’ lower interest rate environment,
customers favored WesBanco’s variable rate deposit products over fixed rate
certificates of deposit, but as rates have begun to rise since the third quarter
of 2004 and have continued this trend through the first half of 2005, WesBanco
has noted an increase in certificates of deposit with a corresponding decrease
in money market accounts as customers seek the higher rates offered on longer
term certificates of deposit and other competitively priced deposit
products.
Within
the next year, $503.4 million in certificates of deposit are scheduled to
mature. If interest rates continue to rise in 2005, these deposits could
re-price upward based on WesBanco’s current rates at that time, which could
impact the net interest margin if WesBanco decides to pursue these types of
deposits over other types of deposit accounts, based on WesBanco’s liquidity
needs. For 2005, WesBanco will continue its focus on deposit growth leading
with
lower cost transaction based accounts, as well as offering special promotions
on
certain certificates of deposit maturities and savings products based on
competition, sales strategies, liquidity needs and wholesale borrowing
costs.
BORROWINGS
TABLE
12: BORROWINGS
|
June
30,
|
December
31,
|
|
|
(in
thousands)
|
2005
|
2004
|
$
Change
|
%
Change
|
Borrowings
|
|
|
|
|
Federal
Home Loan Bank Borrowings
|
$
673,183
|
$
599,411
|
$
73,772
|
12.3%
|
Other
borrowings
|
226,417
|
200,513
|
25,904
|
12.9%
|
Junior
subordinated debt
|
87,638
|
72,174
|
15,464
|
21.4%
|
Total
borrowings
|
$
987,238
|
$
872,098
|
$
115,140
|
13.2%
|
WesBanco
is a member of the FHLB of Pittsburgh. The FHLB system functions as a borrowing
source for regulated financial institutions that are engaged in residential
real
estate lending. WesBanco uses term FHLB borrowings as a general funding source
and to more appropriately match certain assets, as an alternative to
shorter-term wholesale borrowings. FHLB borrowings are secured by a blanket
lien
by the FHLB on certain residential mortgage loans or securities with a market
value at least equal to the outstanding balances. The terms of a security
agreement with the FHLB of Pittsburgh include a specific assignment of
collateral that requires the maintenance of qualifying first mortgage loans
as
pledged collateral with unpaid principal amounts at least equal to or greater
than the FHLB advances, when discounted at 83% of the unpaid principal balance.
The FHLB of Pittsburgh stock, which is recorded at cost of $48.0 million at
June
30, 2005, is also pledged as collateral for these advances. The remaining
maximum borrowing capacity with the FHLB of Pittsburgh at June 30, 2005, which
WesBanco is approved for collateralized advances, is $1.5 billion compared
to
$915.5 million at December 31, 2004.
At
June
30, 2005, WesBanco had $673.2 million in outstanding FHLB borrowings, from
both
the FHLB of Pittsburgh and Cincinnati, with a weighted average interest rate
of
3.34%, compared to $599.4 million at December 31, 2004 with a weighted average
interest rate of 3.31%. The increase was primarily due to the additional $119.3
million in net new FHLB of Cincinnati borrowings assumed in the Winton
acquisition, less paydowns occurring since that time and as result of the loan
sale in June 2005.
WesBanco’s
FHLB borrowings have maturities ranging from the years 2005 to 2027. WesBanco
uses term FHLB borrowings as a general funding source and to more appropriately
match certain assets, as an alternative to shorter-term wholesale
borrowings.
WesBanco
periodically analyzes overall maturities of its FHLB borrowings and may
restructure such borrowings through prepayments, which may cause WesBanco to
incur a prepayment penalty.
Certain
FHLB advances contain call features, which allows the FHLB to convert a fixed
rate borrowing to a variable rate advance if the strike rate goes beyond a
certain predetermined rate. The probability that these advances and repurchase
agreements will be called depends primarily on the level of related interest
rates during the call period. Of the $673.2 million outstanding at June 30,
2005, in FHLB of Pittsburgh convertible select fixed rate advances with a
carrying value of $105.2 million and FHLB of Cincinnati convertible fixed rate
29
advances
with a carrying value of $91.3 million are subject to conversion to a variable
rate advance by the respective FHLB issuer.
Please
refer to Note 8, "Federal Home Loan Bank Borrowings," of the Consolidated
Financial Statements for additional information.
OTHER
BORROWINGS
Other
borrowings, which consist of federal funds purchased, securities sold under
agreement to repurchase, treasury tax and loan notes and a revolving line of
credit, at June 30, 2005 were $226.4 million compared to $200.5 million at
December 31, 2004. The increase was primarily due to an increase in the
revolving line of credit as well as an increase in federal funds
purchased.
The
revolving line of credit is a senior obligation of the parent company for an
initial two-year period subject to renewal from a large southeastern U.S.-based
bank. WesBanco increased this line of credit in 2004 to $35.0 million and at
June 30, 2005 had an outstanding balance of $12.5 million. The line has various
performance covenants and other obligations, as amended in March 2005, which
WesBanco was in compliance with at June 30, 2005, and depending on tangible
capital has a rate between the one-month LIBOR plus 90 basis points and the
one-month LIBOR plus 140 basis points, plus an unused line commitment fee of
12.5 basis points. WesBanco utilized $20.0 million of the revolving line of
credit in January of 2005 to fund part of the cash portion of the Winton
acquisition and to fund WesBanco’s current share repurchase program. WesBanco
paid down the line of credit to a balance of $12.5 million by the end of the
second quarter of 2005. Please refer to Note 9, "Other Borrowings," of the
Consolidated Financial Statements for additional information.
In
March
of 2005, WesBanco created a wholly-owned trust subsidiary, WesBanco Capital
Trust VI, which issued $15.5 million of junior subordinated debt to WesBanco
at
the parent company level, at an initial weighted average rate of 6.37%. The
proceeds received from the issuance of the trust preferred securities will
be
used for general corporate purposes, which may include, among other things,
share repurchases, potential acquisitions and employee benefit plans. Please
refer to Note 10, "Junior Subordinated Debt," of the Consolidated Financial
Statements for additional information.
CAPITAL
RESOURCES
Shareholders'
equity was $420.2 million at June 30, 2005 compared to $370.2 million at
December 31, 2004. Book value was $18.82 per share at June 30, 2005 and $17.77
at December 31, 2004. The increase in total equity was due to the issuance
of
approximately 2.3 million shares of common stock, with an approximate value
of
$65.3 million, that was issued in conjunction with the Winton acquisition as
well as current year earnings of $22.3 million. During the second quarter and
first half of 2005, WesBanco also became more active in the repurchase of its
common stock by purchasing nearly a million shares with a value of $27.5
million. In 2004, WesBanco was limited by SEC rules that reduce a company’s
ability to repurchase it shares during periods of pending acquisitions. The
increase in total equity was partially offset by the payment of $11.8 million
in
dividends and a $1.3 million change in comprehensive income. In March 2005,
WesBanco’s Board of Directors authorized a new one million share repurchase
plan, which began in April 2005 upon completion of the former one million share
plan. In February 2005, WesBanco’s Board of Directors authorized the increase of
its dividend from $0.25 per share, per quarter to $0.26 per share, a 4.0%
increase. This dividend increase represented the twentieth consecutive year
of
dividend increases at WesBanco.
WesBanco
is subject to risk-based capital guidelines that measure capital relative to
risk-weighted assets and off-balance sheet instruments. WesBanco and the Bank
maintain Tier 1, Total Capital and Leverage ratios well above minimum regulatory
levels. There are various legal limitations under Federal and State laws that
limit the payment of dividends from the Bank to the parent company. As of June
30, 2005, the parent company may receive without prior regulatory approval
a
dividend of up to $12.3 million from the Bank. WesBanco and its banking
subsidiary were categorized as "well-capitalized" under the Federal Deposit
Insurance Corporation Improvement Act at June 30, 2005 and December 31, 2004.
There are no conditions or events since June 30, 2005 that management believes
have changed WesBanco's "well-capitalized" category. Please refer to Note 15,
"Regulatory Matters," of the Consolidated Financial Statements for more
information on capital amounts, ratios and minimum regulatory
requirements.
In
addition, WesBanco’s parent company line of credit agreement requires the
maintenance of a minimum tangible shareholders’ equity to tangible total assets
of 5.75 % to 6.00% under certain conditions, and at June 30, 2005, such ratio
was 6.24% compared to 7.29% at December 31, 2004. For this purpose, tangible
shareholders’ equity excludes goodwill and other intangibles, with similar
deductions from total assets. Please refer to Note 3, "Completed Business
Combinations," of the Consolidated Financial Statements for more information
on
this acquisition.
LIQUIDITY
RISK
Liquidity
is defined as the degree of readiness to convert assets into cash with minimum
loss. Liquidity risk is managed through WesBanco’s ability to provide adequate
funds to meet changes in loan demand, unexpected outflows in deposits and other
borrowings as well as to take advantage of market opportunities and meet
operating cash needs. This is accomplished by maintaining liquid assets in
the
form of securities, sufficient borrowing capacity and a stable core deposit
base. Liquidity is centrally monitored by WesBanco’s Asset/Liability Management
Committee ("ALCO").
WesBanco
determines the degree of required liquidity by the relationship of total
holdings of liquid assets to the possible need for funds to meet unexpected
deposit losses and/or loan demands. The ability to quickly convert assets to
cash at a minimal loss is a primary function of WesBanco’s investment portfolio
management. Federal funds sold and U.S. Treasury and Federal Agency Securities
maturing within three months are classified as secondary reserve assets. These
secondary reserve assets, combined with the cash flows from the loan portfolio
and the remaining sectors of the investment portfolio, and other sources, and
are intended to adequately meet the liquidity requirements of
WesBanco.
Securities
are the principal source of liquidity in total assets. Securities totaled $1.1
billion at June 30, 2005, of which $690.5 million were classified as available
for sale. At June 30, 2005, WesBanco had approximately $18.4 million in
securities scheduled to mature within one year compared to $43.0 million for
the
same period in 2004. Additional cash flows may be anticipated from approximately
$191.3 million in callable bonds, which have call dates within the next year,
compared to $244.4 million at June 30, 2004.
At
June
30, 2005, WesBanco had $359.4 million in investment securities in an unrealized
loss position for less than 12 months and $254.4 million in investment
securities in an unrealized loss position for more than 12 months. These
securities in an unrealized loss position may not be available to meet
WesBanco’s short-term liquidity needs if management indicates its ability and
intent to hold such loss position securities for a period of time sufficient
for
recovery of cost. At June 30, 2005, WesBanco has $95.4 million of cash and
cash
equivalents, a portion of which may also serve as additional sources of
liquidity.
Deposit
flows are another principal factor affecting overall bank liquidity. Deposits
totaled $3.1 billion at June 30, 2005. Deposit flows
30
are
impacted by current interest rates, products and rates offered by WesBanco
versus its competition, as well as customer behavior. Certificates of deposit
scheduled to mature within one year totaled $503.4 million at June 30, 2005,
which includes $175.9 million in certificates of deposit with balances of
$100,000 or more. In addition to the relatively stable core deposit base, the
Bank maintains a line of credit with the FHLB as an additional funding source.
The available line of credit with the FHLB at June 30, 2005 approximated $1.5
billion. At June 30, 2005, WesBanco had unpledged securities with a book value
of $500.6 million that could be used for collateral or sold, excluding FHLB
blanket liens on WesBanco’s mortgage-related assets. During 2004, certain Member
offices of the FHLB system experienced financial difficulty. Should WesBanco
cease using FHLB advances due to weakness in that particular bank, WesBanco
may
be forced to find alternative funding sources. Such alternative funding sources
may include the issuance of additional junior subordinated debt within allowed
capital guidelines, utilization of existing lines of credit with third party
banks along with seeking other lines of credit, borrowings under repurchase
agreement lines, increasing deposit rates to attract additional funds, accessing
brokered deposits as well as selling certain investment securities categorized
as available for sale in order to maintain adequate levels of liquidity. The
FHLB of Pittsburgh paid a dividend approximating 2.62% for the second quarter
of
2005, up from 2.43% for the fourth quarter of 2004, which may indicate the
FHLB
of Pittsburgh’s improving financial strength.
The
principal sources of the Parent Company’s liquidity are dividends from the Bank,
the Parent’s investment security portfolio as well as a revolving line of credit
with another bank. There are various legal limitations under Federal and State
laws that limit the payment of dividends from the Bank to the Parent Company.
As
of June 30, 2005, the Parent Company may receive without prior regulatory
approval a dividend of up to $12.3 million from the Bank. The available lines
of
credit with an independent commercial bank and the Bank totaled $38.5 million
at
June 30, 2005, with a total outstanding balance of $15.5 million as of June
30,
2005. In March of 2005, WesBanco issued $15.5 million in junior subordinated
debt, which gave the parent company added liquidity to be used for general
corporate purposes, which may include, among other things, share repurchases,
potential acquisitions and for employee benefit plans.
At
June
30, 2005, WesBanco had outstanding commitments to extend credit in the ordinary
course of business approximating $505.4 million compared to $431.3 million
at
the December 31, 2004. On a historical basis, only a small portion of these
commitments will result in an outflow of funds.
Management
believes WesBanco has sufficient liquidity to meet current obligations to
borrowers, depositors and others.
ITEM
3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
disclosures set forth in this item are qualified by the section captioned
"Forward-Looking Statements" included in Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, of this
report.
MARKET
RISK
The
primary objective of WesBanco’s asset/liability management ("ALM") function is
to maximize net interest income within established policy parameters. This
objective is accomplished through the management of balance sheet composition,
market risk exposures arising from changing economic conditions and liquidity
risk.
Market
risk is defined as the risk of loss due to adverse changes in the fair value
of
financial instruments resulting from fluctuations in interest rates and equity
prices. Management considers interest rate risk WesBanco’s most significant
market risk. Interest rate risk is the exposure to adverse changes in net
interest income due to changes in interest rates. Consistency of WesBanco’s net
interest income is largely dependent on effective management of interest rate
risk. As interest rates change in the market, rates earned on interest rate
sensitive assets and rates paid on interest rate sensitive liabilities do not
necessarily move concurrently. Differing rate sensitivities may arise because
fixed rate assets and liabilities may not have the same maturities or because
variable rate assets and liabilities differ in the timing and/or the percentage
of rate changes.
WesBanco’s
ALCO, comprised of senior management, monitors and manages interest rate risk
within Board approved policy limits. Interest rate risk is monitored primarily
through the use of an earnings simulation model. The model is highly dependent
on assumptions, which change regularly as adjustments occur in the balance
sheet
and interest rates change. The key assumptions and strategies employed are
analyzed regularly and reviewed by ALCO.
The
earnings simulation model projects changes in net interest income resulting
from
the effect of changes in interest rates. Certain shortcomings are inherent
in
the methodologies used in the earnings simulation model. Modeling changes in
net
interest income requires making certain assumptions regarding prepayment rates,
callable bonds, and adjustments to non-time deposit interest rates which may
or
may not reflect the manner in which actual yields and costs respond to changes
in market interest rates. Prepayment assumptions and adjustments to non-time
deposit rates at varying levels of interest rates are based primarily on
historical experience and current market rates. Security portfolio maturities
and prepayments are assumed to be reinvested in similar instruments and callable
bond forecasts are adjusted at varying levels of interest rates. While
management believes such assumptions are reasonable, there can be no assurance
that assumed prepayment rates, callable bond forecasts and non-time deposit
rate
changes will approximate actual future results. Moreover, the net interest
income sensitivity chart presented in Table 1, "Net Interest Income
Sensitivity," assumes the composition of interest sensitive assets and
liabilities existing at the beginning of the period remains constant over the
period being measured and also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
of the maturity or re-pricing of specific assets and liabilities. Since the
assumptions used in modeling changes in interest rates are uncertain, the
simulation analysis should not be relied upon as being indicative of actual
results. The analysis may not consider all actions that WesBanco could employ
in
response to changes in interest rates.
Interest
rate risk policy limits are determined by measuring the anticipated change
in
net interest income over a 12-month period assuming an immediate and sustained
200 basis point increase or decrease in market interest rates compared to a
stable rate or base model. WesBanco’s current policy limits this exposure to +/-
10.0% of net interest income from the base model for a 12-month period. Table
1,
"Net Interest Income Sensitivity," shows WesBanco’s interest rate sensitivity at
June 30, 2005 and December 31, 2004 assuming both a 200 and 100 basis point
interest rate change, compared to a base model.
31
TABLE
1: NET INTEREST INCOME SENSITIVITY
Immediate
Change in
|
Percentage
Change in
|
|
Interest
Rates
|
Net
Interest Income from Base over One Year
|
ALCO
|
(basis
points)
|
June
30, 2005
|
December
31, 2004
|
Guidelines
|
+200
|
-3.79%
|
-3.83%
|
+/-
10.0%
|
+100
|
-0.61%
|
-0.11%
|
N/A
|
Flat
|
—
|
—
|
—
|
-100
|
-0.19%
|
-1.03%
|
N/A
|
-200
|
-1.84%
|
-4.96%
|
+/-
10.0%
|
With
the
federal funds rate at 3.25% at June 30, 2005 and interest rates directionally
increasing, management believes that a decline of 200 basis points in rates
is
highly unlikely. The earnings simulation model projects that net interest income
for the next 12-month period would decrease by approximately 0.61% and 3.79%
if
interest rates were to rise immediately by 100 and 200 basis points,
respectively. Net interest income would decrease by approximately 0.19% and
1.84% if interest rates were to decline by 100 and 200 basis points,
respectively. At June 30, 2005, WesBanco’s increased exposure to rising interest
rates was impacted by assumptions on callable bonds and by a decrease in the
interest sensitivity of the loan portfolio due to an increased amount of fixed
rate residential real estate loans acquired from Winton and Western Ohio and
by
the shorter maturities of certificates of deposit and FHLB
borrowings.
As
an
alternative to the immediate rate shock analysis, the ALCO monitors interest
rate risk by ramping or increasing interest rates 200 basis points gradually
over a 12-month period. WesBanco’s current policy limits this exposure to +/-
5.0% of net interest income from the base model for a 12-month period.
Management believes that the ramping analysis reflects a more realistic movement
of interest rates, whereas the immediate rate shock reflects a worse case
scenario. The simulation model using the 200 basis point ramp analysis projects
that net interest income would decrease 0.34% over the next
12-months.
WesBanco’s
ALCO evaluates various strategies to reduce the exposure to interest rate
fluctuations. These strategies at June 30, 2005 emphasized increasing asset
sensitivity in anticipation of rising interest rates. Among the strategies
that
are evaluated from time to time are the utilization of interest rate swap
agreements and the evaluation of the level and possible prepayment of certain
higher-cost FHLB borrowings. The current interest rate swap agreements employed
by WesBanco were purchased at various times in 2001 to effectively convert
a
portion of prime rate money market deposits to a fixed-rate basis. At June
30,
2005, the notional value of the interest rate swap agreements was $82.3 million,
compared to $87.4 million at December 31, 2004. Related market losses of $1.0
million, net of tax, at June 30, 2005 compared to a market loss of $1.5 million,
net of tax, at December 31, 2004, are recorded in other comprehensive
income.
Other
strategies evaluated by ALCO include managing the level of WesBanco’s fixed rate
residential real estate loans, the purchase of shorter term or variable rate
residential real estate loan pools, additional sales of existing portfolio
15
and 30 year mortgages, shortening maturities in the securities portfolio,
emphasizing lower cost transaction-based accounts, growth in intermediate and
long-term certificate of deposit products, special premium savings accounts
and
attempting to maintain increased liquidity to fund loans while not fully
reinvesting investment security proceeds from maturities, calls and
repayments.
ITEM
4: CONTROLS AND PROCEDURES
Evaluation
of disclosure controls and procedures.
WesBanco’s
Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have
concluded that WesBanco’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934,
as
amended), based on their evaluation of these controls and procedures as of
the
end of the period covered by this Form 10-Q, are effective at the reasonable
assurance level as discussed below to ensure that information required to be
disclosed by WesBanco in the reports it files under the Securities Exchange
Act
of 1934, as amended, is recorded, processed, summarized and reported within
the
time periods specified in the rules and forms of the Securities and Exchange
Commission and that such information is accumulated and communicated to
WesBanco’s management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure.
Limitations
on the effectiveness of controls.
WesBanco’s management, including the CEO and CFO, does not expect that
WesBanco’s disclosure controls and internal controls will prevent all errors and
all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute assurance that the objectives of the
control system are met. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls.
Changes
in internal controls.
Our CEO
and our CFO have evaluated the changes to WesBanco’s internal control over
financial reporting that occurred during our fiscal quarter ended June 30,
2005,
as required by paragraph (d) of Rules 13a-15 and 15d-15 under the Securities
Exchange Act of 1934, as amended and have concluded that there were no such
changes that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II
ITEM
1: LEGAL PROCEEDINGS
On
March
1, 2002, WesBanco consummated its acquisition of American Bancorporation through
a series of corporate mergers. At the time of the consummation of this
transaction, American Bancorporation was a defendant in a suit styled Martin,
et
al. v. The American Bancorporation Retirement Plan, et al., under Civil Action
No. 5:2000-CV-168 (Broadwater), pending in the United States District Court
for
the Northern District of West Virginia. WesBanco became the principal defendant
in this suit by reason of the merger. This case involves a class action suit
against American Bancorporation by certain beneficiaries of the American
Bancorporation Defined Benefit Retirement Plan (the "Plan") seeking to challenge
benefit calculations and methodologies used by the Plan Administrator in
determining benefits under the Plan which was frozen by American Bancorporation,
as to benefit accruals, some years ago. The Plan had been the subject of a
predecessor action in a case styled American Bancorporation Retirement Plan,
et
al. v. McKain, Civil Action No. 5:93-CV-110, which was also litigated in the
United States District Court for the Northern District of West Virginia. The
McKain case resulted in an Order entered by the District Court on September
22,
1995, which directed American Bancorporation to follow a specific method for
determining retirement benefits under the Plan. American Bancorporation has
asserted that it has calculated the benefits in accordance with the requirements
of the 1995 Order. The purported class of plaintiffs have asserted that they
are
not bound by the 1995 Order since they were not parties to that proceeding
and
are seeking a separate benefit determination. The District Court in the current
case limited the class of plaintiffs to a group of approximately 37 individuals
and granted partial summary judgment to significantly reduce the scope and
extent of the case. The Court subsequently granted summary judgment in favor
of
WesBanco on the remaining claims on March 31, 2004, and the plaintiff appealed
the decision to the Fourth Circuit Court of Appeals.
The
Fourth Circuit Court of Appeals issued an opinion dated May 11, 2005, which
reversed the District Court’s earlier grant of summary judgment on behalf of
WesBanco, and remanded the case for further proceedings. The Appellate Court
reversed the District Court’s ruling that res judicata and collateral estoppel
are applicable under the circumstances which precluded the re-litigation of
matters previously decided by the District Court in the earlier 1995 case
involving the same pension plan. The remand will address certain issues
identified by the Appellate Court for further determination. WesBanco continues
to believe that it has meritorious defenses to the claims asserted by the
plaintiffs in this proceeding.
On
August
1, 2002, WesBanco was named in a lawsuit filed by a former loan customer of
WesBanco's banking subsidiary over a failed purchase of an ambulance service
enterprise operated by a local hospital. WesBanco's banking subsidiary was
subsequently substituted as the named defendant in the case now styled Matesic
v. WesBanco Bank, Inc, et al., Civil Action No. 02-C-293(M), pending in the
Circuit Court of Ohio County, West Virginia. The suit alleges numerous counts
and claims against multiple defendants over the purchase and subsequent failure
of the ambulance service. WesBanco's banking subsidiary made a loan to the
plaintiff's company which became delinquent and the Bank recovered a portion
of
the loan through liquidation of pledged collateral. Allegations of fraudulent
conduct and tortuous interference are alleged against WesBanco's banking
subsidiary. The case is currently in its discovery phase. A second suit
involving essentially the same issues was filed by another party involved in
the
ambulance service and this case is styled Ellis v. OVMC, et al., Civil Action
NO. 03-C-578(G). This case has recently been consolidated with the Matesic
case.
The Bank does not believe that there is any merit to the allegations of the
complaints in the consolidated cases and is vigorously defending the
consolidated case.
On
April
23, 2004, the Bank was served with a Complaint in a suit styled AUM Hospitality,
et al. v. NTK Hotel Group, under Civil Action No. 04 CV H04 03681, presently
pending in the Common Pleas Court of Franklin County, Ohio. This is a suit
by
current or former shareholders of a closely held corporation for fraudulent
exercise of control over the corporation against a minority shareholder, David
Patel, seeking damages against David Patel and others and seeking to set aside
a
$13,000,000 first mortgage on a Hampton Inn located in Downtown Columbus with
another lender, as well as the Bank’s $1.3 Million second mortgage. The suit
alleges that David Patel engaged in illegal conduct in exercising dominion
and
control over a corporation and that the mortgage instruments are invalid. The
mortgage instruments secured funds for the construction of the Hampton Inn
upon
property owned by AUM Hospitality. The Bank has title insurance insuring its
mortgage interest and the title insurance company has assumed the defense of
the
claim. The Bank believes that it has substantial defenses to the claim and
that
it also has recourse to the title insurance company with respect to coverage
provided under the title insurance policy.
The
Bank
has also been involved in a case styled Copier Word Processing Supply, Inc.
v.
WesBanco, Inc., et al. under Civil Action No. 03-C-472, filed in the Circuit
Court of Wood County, West Virginia on October 8, 2003. The suit alleges that
a
former office manager of the plaintiff converted checks payable to the plaintiff
by forging the endorsement of its President, endorsing the instruments in her
own right, and depositing such checks into her personal account at the Bank.
The
Complaint alleges such misconduct over an undetermined period and for an
undetermined amount. The suit alleges negligence and conversion claims against
the Bank over the deposit of the checks. Through continuing discovery, the
Bank
has identified a number of checks which were deposited to the personal accounts
of the former office manager over a period of approximately 10 years. The
Circuit Court has applied a three year statute of limitations to the action
and
the plaintiff is seeking to extend the applicable statute and the question
will
be certified to the West Virginia Supreme Court for resolution.
The
Bank
believes that the accounting controls and practices of the plaintiff were
primarily at fault and substantially contributed to the loss. The plaintiff’s
employee had previously been convicted of criminal fraud and the Bank believes
that the failure of the plaintiff to supervise its employee, especially given
her prior record, substantially contributed to the loss. Under a comparative
fault analysis, the Bank believes that the plaintiff must bear a substantial
portion of the loss. Under West Virginia’s comparative fault procedures, if the
plaintiff is found to be more than 50% at fault, then the plaintiff may not
be
permitted a recovery at all in the case.
WesBanco
is also involved in other lawsuits, claims, investigations and proceedings
which
arise in the ordinary course of business. There are no such other matters
pending that WesBanco expects to be material in relation to its business,
financial condition or results of operations.
33
ITEM
2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As
of
June 30, 2005, WesBanco has an active one million share stock repurchase plan,
which was approved by the Board of Directors on March 17, 2005. All purchases
under the previous one million share stock repurchase plan approved by the
Board
on April 17, 2003 were completed during the second quarter of 2005. The shares
are purchased for general corporate purposes, which may include potential
acquisitions, shareholder dividend reinvestment and employee benefit plans.
The
timing, price and quantity of purchases are at the discretion of WesBanco,
and
the plan may be discontinued or suspended at any time.
The
following table shows the activity in WesBanco’s stock repurchase plans for the
six months ended June 30, 2005:
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced
Plan
|
Maximum
Number of Shares that May Yet Be Purchased Under the
Plan
|
Activity
for the April 17, 2003 authorized one million share repurchase
plan
|
|
|
|
|
Balance
at March 31, 2005
|
|
|
|
23,522
|
April
1, 2005 to April 30, 2005
|
23,522
|
$
27.61
|
23,522
|
-
|
Total
|
23,522
|
$
27.68
|
23,522
|
-
|
|
|
|
|
|
Activity
for the March 31, 2005 authorized one million share repurchase
plan
|
|
|
|
|
Balance
at March 17, 2005
|
|
|
|
1,000,000
|
April
1, 2005 to April 30, 2005
|
44,178
|
$ 27.49
|
44,178
|
955,822
|
May
1, 2005 to May 31, 2005
|
190,022
|
29.05
|
190,022
|
765,800
|
June
1, 2005 to June 30, 2005
|
212,020
|
30.57
|
212,020
|
553,780
|
Total
|
446,220
|
$
29.62
|
446,220
|
553,780
|
|
|
|
|
|
Total
|
469,742
|
$
29.52
|
469,742
|
553,780
|
ITE
M
3: DEFAULTS UPON SENIOR SECURITIES
Not
Applicable
ITEM
4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5: OTHER INFORMATION
None
ITEM
6: EXHIBITS
10.1
|
Form
of Amendment to WesBanco Bank, Inc. Salary Continuation
Agreement
|
|
|
10.2
|
Form
of Amended and Restated Change in Control Agreement
|
|
|
10.3
|
WesBanco
Inc. Deferred Compensation Plan - For Directors and Eligible
Employees
|
|
|
10.4
|
Form
of Amended and Restated WesBanco Bank, Inc. Salary Continuation
Agreement
|
|
|
10.5
|
Form
of Amended and Restated WesBanco Bank, Inc. Salary Continuation Agreement
- With Change in Control Provision
|
|
|
31.1
|
Chief
Executive Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Chief
Financial Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Chief
Executive Officer’s and Chief Financial Officer’s Certification Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002.
|
SIGNATURES
Pursuant
to the requirement of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
WESBANCO,
INC.
|
|
|
|
|
|
|
Date:
August 5, 2005
|
|
/s/
Paul M. Limbert
|
|
|
Paul
M. Limbert
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
Date:
August 5, 2005
|
|
/s/
Robert H. Young
|
|
|
Robert
H. Young
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
EXHIBIT
10.1
AMENDMENT
TO
WESBANCO
BANK, INC.
SALARY
CONTINUATION AGREEMENT
THIS
AMENDMENT TO THE WESBANCO BANK, INC. SALARY CONTINUATION AGREEMENT by and
between WesBanco Bank, Inc. a state chartered commercial bank located in
Wheeling, West Virginia (the "Company") and ___________ (the "Executive")
initially effective April 14, 2000 is made and entered into as of the ___ day
of
July, 2005.
WHEREAS,
the Company and the Executive are parties to the Salary Continuation Agreement
that provides, among other things, that, before the happening of a Change in
Control, if the Executive ceases to be an employee by reason of Early
Termination or Retirement prior to the Executive’s Normal Retirement Date, the
Executive would receive a monthly benefit commencing at age 65 and payable
for
10 years in the amount determined with reference to the number of years that
have passed after April 14, 2000 and the column on Schedule A labeled "Early
Termination/Retirement Benefit payable at Age 65" or, if such Early Termination
or Retirement prior to Normal Retirement Age should occur after a Change in
Control, the Executive would receive a monthly benefit commencing at his age
65
in the amount determined with reference to the column on Schedule A labeled
"Change in Control Annual Benefit Payable at Age 65";
WHEREAS,
the parties recognize that to the extent the amount payable in connection with
a
Change in Control is greater than the amount payable without regard to a Change
in Control, that amount must be taken into account for purposes of Section
280G
of the Internal Revenue Code of 1986, as amended; and
WHEREAS,
the parties intend by this Amendment to eliminate the increase in the amount
payable upon an Early Termination or retirement prior to Normal Retirement
Age.
NOW,
THEREFORE, in consideration of the premises and intending to be legally bound
hereby, the parties agree as follows:
1.
Defined
Terms
.
Initially capitalized words used herein and not otherwise defined shall have
the
meaning ascribed thereto in the Salary Continuation Agreement.
2.
Section
2.4 Deleted in its Entirety
.
The
parties agree that Section 2.4 is deleted from the Salary Continuation Agreement
in its entirety. The amount payable to the Executive upon an Early Termination
or Retirement prior to his Normal Retirement Age shall be the amount determined
under Section 2.2 by reference to the number of years that have then passed
since April 14, 2000 and the column headed "Early Termination/Retirement Annual
Benefit Payable at Age 65" on Schedule A whether such Early Termination or
Retirement prior to Normal Retirement Age occurs before or after a Change in
Control.
3.
Change
to Schedule A.
The
column headed "Change of Control Annual Benefit Payable at Age 65" is deleted
in
its entirety from Schedule A.
4.
References
to Change in Control
.
All
references to Change in Control, including the definition at Section 1.1 of
the
Salary Continuation Agreement are inoperative from and after the effective
date
of this Amendment.
5.
Company
Acknowledgement
.
The
Company acknowledges that the effect of this amendment under the Executive’s
existing Employment Agreement could be to increase the amount of cash payment
payable to the Executive following a change in Control as defined in his
Employment Agreement.
6.
Effectiveness
of Salary Continuation Agreement
.
Except
as changed in this Amendment, the Salary Continuation Agreement remains in
full
force and effect in accordance with its terms.
IN
ORDER
TO cause this Amendment to the Salary Continuation Agreement to be effective,
the parties have caused its execution as of the dates indicated.
WESBANCO
BANK, INC.
ATTEST
____________________________
By:
______________________________
Title:
_____________________________
Date:
_____________________________
EXECUTIVE
WITNESS:
_____________________________
_________________________________
Date:
____________________________
EXHIBIT
10.2
AMENDED
AND RESTATED
CHANGE
IN CONTROL AGREEMENT
Section
Page
Article
1.
|
Definitions
|
2
|
Article
2.
|
Severance
Benefits
|
6
|
2.1.
|
Right
to Severance Benefits
|
6
|
2.2.
|
Services
During Certain Events
|
6
|
2.3.
|
Qualifying
Termination
|
6
|
2.4.
|
Description
of Severance Benefits
|
7
|
2.5.
|
Termination
for Total and Permanent Disability
|
7
|
2.6.
|
Termination
for Retirement or Death
|
8
|
2.7.
|
Termination
for Cause or by the Executive Other Than for Good Reason
|
8
|
2.8.
|
Notice
of Termination
|
8
|
2.9.
|
Effectiveness
of Agreement
|
8
|
Article
3.
|
Form
and Timing of Severance Benefits
|
8
|
3.1.
|
Form
and Timing of Severance Benefits
|
8
|
3.2.
|
Withholding
of Taxes
|
9
|
Article
4.
|
Tax
Limitation Provision
|
9
|
4.1.
|
Limitation
on Termination Payment
|
9
|
Article
5.
|
The
Company’s and the Bank’s Payment Obligation
|
10
|
5.1.
|
Payment
Obligations Absolute
|
10
|
5.2.
|
Contractual
Rights to Benefits
|
10
|
Article
6.
|
Term
of Agreement
|
10
|
Article
7.
|
Legal
Remedies
|
11
|
7.1.
|
Arbitration
|
11
|
7.2.
|
Payment
of Legal Fees
|
11
|
Article
8.
|
Successors
|
11
|
Article
9.
|
Miscellaneous
|
12
|
9.1.
|
Employment
Status
|
12
|
9.2.
|
Beneficiaries
|
12
|
9.3.
|
Entire
Agreement; Superseding Effect
|
12
|
9.4.
|
Gender
and Number
|
12
|
9.5.
|
Notices
|
12
|
9.6.
|
Execution
in Counterparts
|
13
|
9.7.
|
Conflicting
Agreements
|
13
|
9.8.
|
Severability
|
13
|
9.9.
|
Modification
|
14
|
9.10.
|
Applicable
Law
|
14
|
AMENDED
AND RESTATED
CHANGE
IN CONTROL AGREEMENT
THIS
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT is made and entered into as
of
this __ day of July, 2005 by and among WESBANCO, INC., a West Virginia bank
holding company (hereinafter referred to as the "Company"); and WESBANCO BANK,
INC., a West Virginia banking corporation and a wholly-owned subsidiary of
the
Company (hereinafter referred to as the "Bank");
and___________________(hereinafter referred to as the "Executive").
W
I T N E
S S E T H:
WHEREAS,
the Board of Directors of the Company and the Board of Directors of the Bank
have approved the Company and the Bank entering into change in control
agreements with certain key executives of the Company and the Bank;
WHEREAS,
the Executive is a key executive of the Company and the Bank;
WHEREAS,
the Board of the Company and the Board of the Bank each believes that, should
the possibility of a Change in Control Event of the Company and/or the Bank
arise, it is imperative that the Company and the Bank be able to rely upon
the
Executive to continue in his position, and that the Company and the Bank be
able
to receive and rely upon his advice, if they request it, as to the best
interests of the Company, the Bank, and their shareholders without concern
that
he might be distracted by the personal uncertainties and risks created by the
possibility of a Change in Control Event;
WHEREAS,
should the possibility of a Change in Control Event arise, in addition to the
Executive’s regular duties, he may be called upon to assist in the assessment of
such possible Change in Control Event, advise management and the Board of the
Company and the Board of the Bank as to whether such Change in Control Event
would be in the best interests of the Bank, the Company, and their shareholders,
and to take such other actions as the Boards determine to be appropriate;
and
WHEREAS,
the Executive, the Company and the Bank are parties to a Change in Control
Agreement dated as of September 1, 1999 intended to address the foregoing
concerns and, in light of the adoption of Section 409A of the Code (as defined
below) and the publication of guidance thereunder, the parties wish to amend
and
restate the Change in Control Agreement in its entirety to cause the terms
and
conditions to comply with Section 409A of the Code; and
WHEREAS,
the Executive, the Company, and the Bank desire that the terms of this Agreement
shall act as a supplement to the benefits under the Executive’s Employment
Agreement; and
WHEREAS,
it is intended by the parties hereto that the benefits under the terms of this
Change in Control Agreement shall supersede and replace the termination benefits
under the Executive’s Employment Contract in the event of a termination or
severance of his employment subsequent to a Change in Control Event;
and
NOW
THEREFORE, to assure the Company and the Bank that they will have the continued
dedication of the Executive and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control
Event of the Company and/or the Bank, and to induce the Executive to remain
in
the employ of the Company and the Bank, and for other good and valuable
consideration, the Company, the Bank, and the Executive, intending to be legally
bound, agree as follows:
Article
1.
Definitions
Whenever
used in this Agreement, the following terms shall have the meanings set forth
below when the initial letter of the word is capitalized:
(a)
|
"Agreement"
means this Change in Control Agreement, as the same may be amended
from
time to time in accordance with Section 9.9
herein.
|
(b)
|
"Bank"
means Wesbanco Bank, Inc., a West Virginia banking corporation, or
any
successor thereto as provided in Article 8
herein.
|
(c)
|
"Base
Salary" means the salary of record paid by the Company and/or the
Bank to
the Executive as annual salary, excluding amounts received under
incentive
bonus and option plans, whether or not
deferred.
|
(d)
|
"Beneficial
Owner" shall have the meaning ascribed to such term in Rule 13d-3
of the
General Rules and Regulations under the Exchange
Act.
|
(e)
|
"Beneficiary"
means the persons or entities designated or deemed designated by
the
Executive pursuant to Section 9.2
herein.
|
(f)
|
"Board"
means the Board of Directors of Wesbanco,
Inc.
|
(g)
|
"Cause"
shall be determined by the Board of the Company and the Board of
the Bank,
in exercise of good faith and reasonable judgment, and shall mean
the
occurrence of any one or more of the
following:
|
(i)
|
An
act of dishonesty, willful disloyalty or fraud by the Employee that
the
Bank determines is detrimental to the best interests of the Bank;
or
|
(ii)
|
The
Employee’s continuing inattention to, neglect of, or inability to perform,
the duties to be performed under this Agreement,
or
|
(iii)
|
Any
other breach of the Employee’s covenants contained herein or of any of the
other terms and provisions of this Agreement;
or
|
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2 -
(iv)
|
The
deliberate and intentional engaging by the Employee in gross misconduct
which is materially and demonstrably injurious to the
Bank.
|
(h)
|
"Change
in Control Event" shall be deemed to have occurred as of the first
day
that any one or more of the following conditions shall have been
satisfied:
|
(i)
|
Final
regulatory approval is obtained for any Person (other than those
Persons
in control of the Company and/or the Bank, as applicable, as of the
Effective Date, or other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company and/or the
Bank,
as applicable, or a corporation owned directly or indirectly by the
stockholders of the Company and/or the Bank, as applicable, in
substantially the same proportions as their ownership of stock of
the
Company and/or the Bank), becomes the Beneficial Owner, directly
or
indirectly, of securities of the Company and/or the Bank, as applicable,
representing thirty five percent (35%) or more of the combined voting
power of the Company’s (or the Bank’s, as applicable) then outstanding
securities; or
|
(ii)
|
During
any period of two (2) consecutive years (not including any period
prior to
the execution of this Agreement), individuals who at the beginning
of such
period constitute the Board of the Company (and any new Director,
whose
election by the Company’s stockholders or the Bank’s stockholders, as
applicable, was approved by a vote of at least two-thirds (2/3) of
the
Directors then still in office who either were Directors at the beginning
of the period or whose election or nomination for election was so
approved), cease for any reason to constitute a majority thereof;
or
|
(iii)
|
Final
regulatory approval is obtained with respect to: (A) a plan of complete
liquidation of the Company or the Bank; or (B) an agreement for the
sale
or disposition of all or substantially all the Company’s or the Bank’s
assets; or (C) a merger, consolidation, or reorganization of the
Company
and/or the Bank with or involving any other corporation, other than
a
merger, consolidation, or reorganization that would result in the
voting
securities of the Company or the Bank (as applicable) outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), at least fifty percent (50%) of the combined voting power
of the
voting securities of the Company or the Bank (as applicable) (or
such
surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
|
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3 -
However,
in no event shall a Change in Control Event be deemed to have occurred, with
respect to the Executive, if the Executive is part of a purchasing group which
consummates the Change in Control Event transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the preceding sentence
if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent (3%) of the stock
of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control Event by a majority of the non-employee
continuing Directors of the Company, as applicable).
Notwithstanding
the foregoing, no event or combination of events shall constitute a Change
in
Control Event if or to the extent such event or events would not constitute
a
Change in Control Event under Section 409A of the Code or the guidance published
thereunder as then in effect.
(i)
|
"Code"
means the Internal Revenue Code of 1986, as
amended.
|
(j)
|
"Company"
means Wesbanco, Inc., a West Virginia bank holding company, or any
successor thereto as provided in Article 8
herein.
|
(k)
|
"Disability"
means the inability of the Executive due to mental or physical defect
or
disease to perform the services required of the Executive in the
position
he or she held prior to the manifestation of that defect or
disease.
|
(l)
|
"Effective
Date" means September 1, 1999 for the Change in Control Agreement
and for
the Change in Control Agreement as amended and restated is the date
this
Agreement is approved by the Company’s Board, or such other date as the
Company’s Board shall designate in its resolution approving this
Agreement.
|
(m)
|
"Effective
Date of Termination" means the date on which a Qualifying Termination
occurs which triggers the payment of Severance Benefits
hereunder.
|
(n)
|
"Exchange
Act" means the Securities Exchange Act of 1934, as
amended.
|
(p)
|
"Good
Reason" means, without the Executive’s express written consent, the
occurrence after a Change in Control Event of the Company or the
Bank of
any one or more of the following:
|
(i)
|
The
assignment of the Executive to duties materially inconsistent with
the
Executive’s authorities, duties, responsibilities, and status (including
offices, titles, and reporting requirements) as an officer of the
Company
and/or the Bank, or a reduction or alteration in the nature or status
of
the Executive’s authorities, duties, or responsibilities from those in
effect as of ninety (90) days prior to the Change in Control Event,
other
than an insubstantial and inadvertent act that is remedied by the
Company
and/or the Bank promptly after receipt of notice thereof given by
the
Executive, and other than any such alteration which is consented
to by the
Executive in writing;
|
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4 -
(ii)
|
The
Company’s requiring the Executive to be based at a location in excess of
thirty-five (35) miles from the location of the Executive’s principal job
location or office immediately prior to the Change in Control Event;
except for required travel on the Company’s and/or the Bank’s business to
an extent substantially consistent with the Executive’s present business
obligations;
|
(iii)
|
A
reduction by the Company or the Bank of the Executive’s Base Salary by at
least ten percent (l0%) from that in effect on the Effective
Date;
|
(iv)
|
The
failure of the Company or the Bank to obtain a satisfactory agreement
from
any successor to the Company or the Bank to assume and agree to perform
the Company’s and the Bank’s obligations under this Agreement, as
contemplated in Article 8 herein;
and
|
(v)
|
Any
purported termination by the Company or the Bank of the Executive’s
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 2.8 herein, and for purposes
of
this Agreement, no such purported termination shall be
effective.
|
The
Executive’s right to terminate employment for Good Reason shall not be affected
by the Executive’s incapacity due to physical or mental illness. The Executive’s
continued employment shall not constitute consent to, or a waiver of rights
with
respect to, any circumstance constituting Good Reason herein.
(q)
|
"Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of
the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including
a
"group" as defined in Section 13(d). The term Person shall not include
the
Company or the Bank, any executive officer or Director of the Company,
the
Bank, or a subsidiary of the Company or Bank, or a group controlled
by
such Directors or executive officers, or any employee benefit plan
of the
Company, the Bank, or a subsidiary of the Company or Bank; provided,
however, that the term Person shall include any individual who is
a
Director on the Effective Date, and who as of the Effective Date
beneficially owned five percent (5%) or more of the voting shares
of
common stock of the Company, or a group controlled by such a
Director.
|
(r)
|
"Qualifying
Termination" means any of the events described in Section 2.3 herein,
the
occurrence of which triggers the payment of Severance Benefits
hereunder.
|
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5 -
(s)
|
"Severance
Benefits" means the payment of severance compensation as provided
in
Section 2.4 herein.
|
Article
2.
Severance
Benefits
2.1.
Right
to Severance Benefits.
Subject
to Section 2.9 herein, the Executive shall be entitled to receive from the
Company and the Bank, jointly and severally, Severance Benefits as described
in
Section 2.4 herein, if a Change in Control Event of the Company and/or the
Bank
has occurred and if, within twenty-four (24) calendar months thereafter, the
Executive’s employment with the Company and/or the Bank shall end for any reason
specified in Section 2.3 herein as being a Qualifying Termination.
The
Executive shall not be entitled to receive Severance Benefits if he is
terminated for Cause, or if his employment with the Company ends due to death,
Disability, retirement (as defined under the then established rules of the
Company’s tax-qualified retirement plan), or due to a voluntary termination of
employment by the Executive without Good Reason.
2.2.
Services
During Certain Events
.
In the
event a Person begins a tender or exchange offer, solicits proxies from
shareholders of the Company and/or the Bank, or takes other steps seeking to
effect a Change in Control Event, the Executive agrees that he will not
voluntarily leave the employ of the Company or the Bank and will render services
until such Person has abandoned or terminated his or its efforts to effect
a
Change in Control Event, or, if later, until twenty-four (24) months after
a
Change in Control Event has occurred; provided, however, that the Company and
the Bank may terminate the Executive for Cause at any time, and the Executive
may terminate his employment any time after the Change in Control Event for
Good
Reason.
2.3.
Qualifying
Termination
.
The
occurrence of any one or more of the following events within twenty-four (24)
calendar months after a Change in Control Event of the Company or the Bank
shall
trigger the payment of Severance Benefits to the Executive under this
Agreement:
(a)
|
An
involuntary termination of the Executive’s employment with the Company or
the Bank without Cause;
|
(b)
|
A
voluntary termination of the Executive’s employment with the Company or
the Bank for Good Reason;
|
(c)
|
A
successor company fails or refuses to assume the Company’s and the Bank’s
obligations under this Agreement, as required by Article 8 herein;
or
|
(d)
|
The
Company, the Bank, or any successor company breaches any of the provisions
of this Agreement.
|
For
purposes of this Agreement, a Qualifying Termination shall not include a
termination of employment by reason of death, Disability, or retirement (as
such
term is defined under the
-
6
-
then-established
rules of the Company’s tax-qualified retirement plan), a voluntary termination
without Good Reason, or an involuntary termination for Cause.
2.4.
Description
of Severance Benefits
.
Subject to Section 2.9 herein, in the event that the Executive becomes
entitled to receive Severance Benefits, as provided in Sections 2.1 and 2.3
herein, and subject to the limits set forth in Article 4 herein, the Company
and/or the Bank shall pay to the Executive and provide him with total Severance
Benefits equal to the following:
(a)
|
An
amount equal to three (3) times the highest rate of the Executive’s annual
Base Salary in effect at any time up to and including the Effective
Date
of Termination.
|
(b)
|
An
amount equal to three (3) times the greater of: (i) the Executive’s
average annual bonus earned over the most recent three (3) bonus
plan
years ending prior to the Effective Date of Termination; or (ii)
the
Executive’s bonus established for the annual bonus plan year in which the
Executive’s Effective Date of Termination
occurs.
|
(c)
|
An
amount equal to the Executive’s unpaid Base Salary and accrued vacation
pay through the Effective Date of
Termination.
|
(d)
|
A
continuation of all medical benefits pursuant to plans under which
the
Executive and/or the Executive’s family is eligible to receive medical
benefits and/or coverage as of the effective date of the Change in
Control
Event. These benefits shall be provided by the Company and/or the
Bank to
the Executive immediately upon the Effective Date of Termination
and shall
continue to be provided for eighteen (18) months from the Effective
Date
of Termination. Such benefits shall be provided to the Executive
at the
same coverage level as in effect as of the Executive’s Effective Date of
Termination. The Company and/or the Bank shall pay the full cost
of such
continued benefits, except that the Executive shall bear any portion
of
such cost as is required to be borne by key executives of the Company
and/or the Bank generally at the time of such Change in Control
Event.
|
The
medical benefits described in this Subsection 2.4(d) shall continue for eighteen
(18) months following the Effective Date of Termination; provided, however,
that
such benefits shall be discontinued prior to the end of the eighteen (18) month
period to the extent, but only to the extent, that the Executive receives
substantially similar benefits from a subsequent employer, as determined by
the
Company or the Bank.
The
obligation of the Company and the Bank to provide the Executive with the
Severance Benefits described herein shall be joint and several. Regardless
of
how the Company and the Bank apportion the responsibility for satisfying the
obligations set forth herein, the total Severance Benefits payable to the
Executive shall equal the amounts set forth in this Article 2, as limited by
Article 4 herein.
2.5.
Termination
for Total and Permanent Disability
.
Following a Change in Control Event, if the Executive’s employment is
terminated with the Company or the Bank due to
-
7 -
Disability,
the Executive shall receive his Base Salary and accrued vacation through the
Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Executive is entitled under any employment contract or
any
compensation plans of the Company and the Bank, at the time such payments are
due, and otherwise the Executive’s benefits shall be determined in accordance
with the Company’s and the Bank’s retirement, insurance, and other applicable
plans and programs then in effect.
2.6.
Termination
for Retirement or Death
.
Following a Change in Control Event, if the Executive’s employment with
the Company or the Bank is terminated by reason of his retirement (as defined
under the then established rules of the Company’s tax-qualified retirement
plan), or death, the Executive (or his Beneficiary) shall receive his Base
Salary and accrued vacation through the Effective Date of Termination, at the
rate then in effect, plus all other amounts to which the Executive is entitled
under any compensation plans of the Company and the Bank, at the time such
payments are due, and otherwise the Executive’s benefits shall be determined in
accordance with the Company’s and the Bank’s retirement, survivor’s benefits,
insurance, and other applicable programs then in effect.
2.7.
Termination
for Cause or by the Executive Other Than for Good Reason
.
Following a Change in Control Event, if the Executive’s employment is
terminated either: (i) by the Company or the Bank for Cause; or
(ii) by the Executive other than for Good Reason, the Company and/or
the
Bank shall pay the Executive his full Base Salary and accrued vacation through
the Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Executive is entitled under any employment contract or
any
compensation plans of the Company and the Bank, at the time such payments are
due, and the Company and the Bank shall have no further obligations to the
Executive under this Agreement.
2.8.
Notice
of Termination
.
Any termination by the Company or the Bank for Cause or by the Executive
for Good Reason shall be communicated by Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination" shall mean
a
written notice which shall indicate the specific termination provision in this
Agreement relied upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.
2.9.
Effectiveness
of Agreement
.
Notwithstanding any provision of this Agreement to the contrary, this
Agreement and any payments, benefits or rights of the Executive as provided
herein are subject to Section 18(k) of the Federal Deposit Insurance Act, as
amended, and any applicable regulations thereunder.
Article
3.
Form
and Timing of Severance Benefits
3.1.
Form
and Timing of Severance Benefits
.
Except as limited by Article 4 herein, the Severance Benefits described
in
Sections 2.4(a), 2.4(b), and 2.4(c) herein shall be paid in cash to the
Executive in a single lump sum as soon as practicable following the Effective
Date of Termination, but in no event beyond thirty (30) days from such
date.
-
8 -
3.2.
Withholding
of Taxes
.
The Company and/or the Bank, as applicable, shall withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes
as
legally shall be required.
Article
4.
Tax
Limitation Provision
4.1.
Limitation
on Termination Payment.
(a)
|
Determination
of Termination Payment Limit. Notwithstanding any other provision
of this
Agreement, if any portion of the Severance Benefits or any other
payment
under this Agreement, or under any other agreement with or plan of
the
Company or the Bank (in the aggregate "Total Payments") would constitute
an åexcess parachute payment,æ then the payments to be made to the
Executive under this Agreement shall be reduced or extended over
an
installment period such that the value of the aggregate Total Payments
that the Executive is entitled to receive shall be One Dollar ($1.00)
less
than the maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Code, or which
the
Company and the Bank may pay without loss of deduction under Section
280G(a) of the Code. For purposes of this Agreement, the terms åexcess
parachute paymentæ and åparachute paymentsæ shall have the meanings
assigned to them in Section 280G of the Code, and such åparachute
paymentsæ shall be valued as provided
therein.
|
(b)
|
Procedure
for Establishing Limitation on Termination Payment. Within twenty
(20)
days following delivery of the Notice of Termination (as described
in
Section 2.8 herein) or notice by the Company or the Bank to
the
Executive of its belief that there is a payment or benefit due the
Executive which will result in an "excess parachute payment" as defined
in
Section 280G of the Code, the Executive, the Company, and the Bank,
at the
Company’s and the Bank’s expense, shall obtain the opinion of the
Company’s principal outside accounting firm (the "Accounting Firm"), which
sets forth: (i) the amount of the Executive’s "annualized includible
compensation for the base period" (as defined in Code Section 280G(d)(1));
(ii) the present value of the Total Payments; and (iii) the amount
and
present value of any "excess parachute payment." Such opinion shall
be
binding upon the Company, the Bank, and the
Executive.
|
In
the
event that such opinion determines that there would be an "excess parachute
payment," the Severance Benefits hereunder or any other payment determined
by
such accounting firm to be includible in Total Payments shall be reduced or
eliminated as specified by the Executive in writing delivered to the Company
and
the Bank within ten (10) days of his receipt of such opinion, or, if the
Executive fails to so notify the Company and the Bank, then as the Company
or
the Bank, as applicable, shall reasonably determine, so that under the basis
of
calculations set forth in such opinion, there will be no "excess parachute
payment."
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9 -
The
provisions of this Section 4.1(b), including the calculations, notices, and
opinion provided for herein, shall be based upon the conclusive presumption
that
any compensation earned prior to the Effective Date of Termination by the
Executive pursuant to the Company’s and the Bank’s compensation programs (if
such compensation would have been paid in the future in any event, even though
the timing of payment thereof is triggered by the Change in Control Event)
is
reasonable.
Article
5.
The
Company’s and the Bank’s Payment Obligation
5.1.
Payment
Obligations Absolute
.
Except as otherwise provided in the last sentence of Section 2.4(d)
herein, the Company’s and the Bank’s obligation to make the payments and the
arrangements provided for herein shall be absolute and unconditional, and shall
not be affected by any circumstance, including, without limitation, any offset,
counterclaim, recoupment, defense, or other right which the Company or the
Bank
may have against the Executive or any other party. All amounts payable by the
Company and the Bank hereunder shall be paid without notice or demand. Each
and
every payment made hereunder by the Company and the Bank shall be final, and
neither the Company nor the Bank shall seek to recover all or any part of such
payment from the Executive or from whomsoever may be entitled thereto, for
any
reasons whatsoever.
The
Executive shall not be obligated to seek other employment in mitigation of
the
amounts payable or arrangements made under any provision of this Agreement,
and
the obtaining of any such other employment shall in no event effect any
reduction of the Company’s or the Bank’s obligations to make the payments and
arrangements required to be made under this Agreement, except to the extent
provided in Section 2.4(d) herein.
5.2.
Contractual
Rights to Benefits
.
This
Agreement establishes and vests in the Executive a contractual right to the
benefits to which he is entitled hereunder. However, nothing herein contained
shall require or be deemed to require, or prohibit or be deemed to prohibit,
the
Company or the Bank to segregate, earmark, or otherwise set aside any funds
or
other assets, in trust or otherwise, to provide for any payments to be made
or
required hereunder.
Article
6.
Term
of Agreement
6.1
Subject
to Section 2.9 herein, this Agreement shall commence on the Effective Date
and
shall continue in effect for three (3) full years, the last day of which shall
be the "Expiration Date." However, at the end of such three-year period and,
if
extended, at the end of each additional year thereafter, the term of this
Agreement shall be extended automatically for one (1) additional year, unless
the Company or the Bank delivers written notice three (3) months prior to the
end of such term, or extended term, to the Executive, that the Agreement will
not be extended. In such case, the Agreement will terminate at the end of the
term, or extended term, then in progress.
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10 -
However,
in the event a Change in Control Event occurs during the original or any
extended term, this Agreement will remain in effect for the longer of: (i)
twenty-four (24) months beyond the month in which such Change in Control Event
occurred; or (ii) until all obligations of the Company and the Bank hereunder
have been fulfilled, and until all benefits required hereunder have been paid
to
the Executive or other party entitled thereto.
Article
7.
Legal
Remedies
7.1.
Arbitration
.
Any controversy or claim arising out of or relating to this Agreement
or
the breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in the City of Wheeling in accordance with
the
laws of the State of West Virginia by three (3) arbitrators, one of whom shall
be appointed by the Company or the Bank, as applicable, one by the Executive,
and the third of whom shall be appointed by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association. The arbitration shall be conducted in accordance with the rules
of
the American Arbitration Association, except with respect to the selection
of
arbitrators which shall be as provided in this Section 7.1. The cost of any
arbitration proceeding hereunder shall be borne equally by the Company or the
Bank, as applicable, and the Executive. The award of the arbitrators shall
be
binding upon the parties. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.
7.2.
Payment
of Legal Fees
.
In the event that it shall be necessary or desirable for the Executive
to
retain legal counsel and/or incur other costs and expenses in connection with
the enforcement of any or all of his rights under this Agreement, and provided
that the Executive substantially prevails in the enforcement of such rights,
the
Company or the Bank, as applicable, shall pay (or the Executive shall be
entitled to recover from the Company or the Bank, as the case may be) the
Executive’s reasonable attorneys, fees, costs and expenses in connection with
the enforcement of his rights including the enforcement of any arbitration
award.
Article
8.
Successors
8.1
The
rights of the Company and the Bank hereunder shall run in favor of the Company
and the Bank, and their respective successors, assigns, nominees, or other
legal
representatives. Termination of the Executive’s employment shall not operate to
relieve him of any remaining obligations hereunder, and all such obligations
are
binding upon his heirs, executors, administrators, or other legal
representatives. The Company and the Bank shall require any successor (whether
direct or indirect by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
significant portion of the assets of the Company or the Bank, as the case may
be, by agreement in form and substance satisfactory to the Executive, expressly
to assume and agree to perform this Agreement in the same manner and to the
same
extent that the Company or the Bank, as the case may be, would be required
to
perform if no such succession had taken place. Regardless of whether such
agreement is executed, this Agreement shall be binding upon any successor in
accordance with
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11
-
the
operation of law and such successor shall be deemed the "Company" or the "Bank,"
as the case may be, for purposes of this Agreement.
Article
9.
Miscellaneous
9.1.
Employment
Status
.
The Executive, the Company, and the Bank acknowledge that, except as
may
be provided under any other agreement between the Executive and the Company
or
the Bank, the employment of the Executive by the Company and the Bank is
"at
will," and, except as set forth in Section 2.2 herein, prior to the effective
date of a Change in Control Event, may be terminated by either the Executive,
the Company, or the Bank, at any time. Upon a termination of the Executive’s
employment prior to the effective date of a Change in Control Event, there
shall
be no further rights under this Agreement; provided, however, that if such
an
employment termination shall arise in connection with, or in anticipation of,
a
Change in Control Event, then the Executive’s rights shall be the same as if the
termination had occurred within two (2) years following a Change in Control
Event.
9.2.
Beneficiaries
.
The
Executive may designate one or more persons or entities as the primary and/or
contingent Beneficiaries of any Severance Benefits owing to the Executive under
this Agreement. Such designation must be in the form of a signed writing
acceptable to the Board of Directors of the Company or the Board of the Bank,
as
applicable. The Executive may make or change such designation at any
time.
9.3.
Entire
Agreement; Superseding Effect
.
This
Agreement contains the entire understanding of the Company, the Bank, and the
Executive with respect to the subject matter hereof. In particular, to the
extent of any conflict between the terms of this Amended and Restated Change
in
Control Agreement and any employment agreement to which the Executive, the
Company and the Bank are parties, the terms of this Amended and Restated Change
in Control Agreement shall completely replace and supersede the terms of the
Executive’s employment agreement.
In
addition and subject to Article 4, the payments provided for under this
Agreement in the event of the Executive’s termination of employment shall be in
lieu of any severance benefits payable under any severance plan, program, or
policy of the Company and the Bank to which he might otherwise be
entitled.
9.4.
Gender
and Number
.
Except
where otherwise indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the singular, and the
singular shall include the plural.
9.5.
Notices
.
All
notices, requests, demands, and other communications hereunder must be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first-class certified mail,
return receipt requested, postage prepaid, to the other party, addressed as
follows:
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12 -
Wesbanco,
Inc.
One Bank Plaza
Wheeling, WV
26003
Wesbanco
Bank, Inc.
One
Bank
Plaza
Wheeling,
WV 26003
Addresses
may be changed by written notice sent to the other party at the last recorded
address of that party.
9.6.
Execution
in Counterparts
.
This
Agreement may be executed by the parties hereto in counterparts, each of which
shall be deemed to be original, but all such counterparts shall constitute
one
and the same instrument, and all signatures need not appear on any one
counterpart.
9.7.
Conflicting
Agreements
.
The
executive hereby represents and warrants to the Company and the Bank that his
entering into this Agreement, and the obligations and duties undertaken by
him
hereunder, will not conflict with, constitute a breach of, or otherwise violate
the terms of, any other employment or other agreement to which he is a party,
except to the extent any such conflict, breach, or violation under any such
agreement has been disclosed to the Company’s Board and the Bank’s Board in
writing in advance of the signing of this Agreement.
9.8.
Severability
.
In the
event any provision of this Agreement shall be held illegal or invalid for
any
reason, the illegality or invalidity shall not affect the remaining parts of
the
Agreement, and the Agreement shall be construed and enforced as if the illegal
or invalid provision had not been included. Further, the captions of this
Agreement are not part of the provisions hereof and shall have no force and
effect.
Notwithstanding
any other provision of this Agreement to the contrary, the Company and the
Bank
shall have no obligation to make any payment to the Executive hereunder to
the
extent, but only to the extent, that such payment is prohibited by the terms
of
any final order of a Federal or state court or regulatory agency of competent
jurisdiction; provided, however, that such an order shall not affect, impair,
or
invalidate any provision of this Agreement not expressly subject to such
order.
-
13 -
9.9.
Modification
.
No
provision of this Agreement may be modified, waived, or discharged unless such
modification, waiver, or discharge is agreed to in writing and signed by the
Executive and by a member of the Company’s Board or the Bank’s Board, as
applicable, or by the respective parties, legal representatives or
successors.
9.10.
Applicable
Law
.
To the
extent not preempted by the laws of the United States, the laws of the
Commonwealth of Pennsylvania shall be the controlling law in all matters
relating to this Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
WESBANCO,
INC.
By
____________________________________
Title
_______________________________
WESBANCO
BANK, INC.
By
__________________________________
Title
_____________________________
________________________________
EXECUTIVE
EXHIBIT
10.3
WESBANCO
INC.
Deferred
Compensation Plan
(DCP)
FOR
DIRECTORS AND ELIGIBLE EMPLOYEES
Table
of Contents
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Page
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ARTICLE
I
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Definitions
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2
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ARTICLE
II
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Eligibility
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5
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ARTICLE
III
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Deferral
of Base Compensation
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5
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ARTICLE
IV
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Deferral
of Bonus
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6
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ARTICLE
V
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Employer
Contribution
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7
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ARTICLE
VI
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Accounting
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7
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ARTICLE
VII
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Vesting
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9
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ARTICLE
VIII
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Distribution
of Benefits
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9
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ARTICLE
IX
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Funding
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11
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ARTICLE
X
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Plan
Administration
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12
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ARTICLE
XI
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Amendment
and Discontinuance
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14
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ARTICLE
XII
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General
Provisions
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15
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WesBanco,
Inc.
Deferred
Compensation Plan
Preamble
WHEREAS
,
WesBanco, Inc., for itself and each of its subsidiaries (collectively, the
"Employer") desires to provide competitive total compensation to its key
Employees so the Employer can attract and retain the executive talent necessary
to drive the success of the Employer.
WHEREAS
,
the
Employer ,as part of a key employee’s total compensation, may provide additional
employer funded deferred compensation benefits.
WHEREAS
,
the
Employer desires to allow its key Employees to defer portions of their Base
Compensation and Bonus in order to encourage the Employees to maintain a
long-term relationship with the Employer and provide flexibility to the Employee
in his or her financial planning.
WHEREAS
,
WesBanco, Inc. has allowed Directors to defer directors’ fees into The Restated
WesBanco, Inc. and WesBanco Affiliate Banks Directors Deferred Compensation
Plan
(the "Directors’ Deferred Compensation Plan").
WHEREAS
,
in
order to ease the administration of the deferred compensation programs and
directors, WesBanco intends to amend and restate the Directors’ Deferred
Compensation Plan in its entirety to be set out in this document and combined
with the program for employees.
NOW,
THEREFORE
,
the
Employer adopts this Deferred Compensation Plan ("DCP") effective [________],
2005.
Article
I
Definitions
1.1
|
"Account"
means an unfunded liability of the Employer in the name of each
Participant. For any Director who participated in the Restated WesBanco,
Inc. and WesBanco Affiliate Banks Directors Deferred Compensation
Plan on
the Effective Date, each Director’s Account balance under this DCP shall
be equal to such Director’s Account balance under the Restated WesBanco,
Inc. and WesBanco Affiliate Banks Directors Deferred Compensation
Plan on
the Effective Date.
|
1.2
|
"Base
Compensation"
means the Participant’s regular salary, wages and other cash remuneration
which is scheduled to be paid to the Participant on a regular and
periodic
basis.
|
1.3
|
"Beneficiary"
means any person(s) designated in writing by the Board to be a Participant
to receive payment under this DCP in the event of the Participant's
death.
In the event the Participant is married and has designated no other
beneficiary (or if the designated beneficiary has predeceased the
Participant), Beneficiary shall mean the participant's spouse. In
the
event the Participant is not married at death and has designated
no
beneficiary (or if the designated beneficiary has predeceased the
Participant), Beneficiary shall mean the Participant's
estate.
|
1.4
|
"Board"
means the Board of Directors of WesBanco, Inc.
.
|
1.5
|
"Bonus"
means any additional cash remuneration that is paid to a Participant
over
and above any Base Compensation, and any other amounts as determined
by
the Board.
|
1.6
|
"Change
in Control Event"
means Change in Control Event as defined in Notice 2005-1, or any
superseding guidance issued by the Internal Revenue Service or the
U.S.
Treasury.
|
1.7
|
"Code"
means the Internal Revenue Code of 1986, as
amended.
|
1.8
|
"Director"
means a non-employee member of the Board (exclusive of Honorary
Directors). Directors who are also Employees shall participate in
this
Plan, if at all, under the provisions applicable to
Employees.
|
1.9
|
"Directors’
Fees"
means amounts paid for service as a non-employee members of the
Board.
|
1.10
|
"Disability"
or "Disabled"
means
a Participant (a) is unable to engage in any substantial gainful
activity
by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last
for a
continuous period of not less than 12 months, or (b) is, by reason
of any
medically determinable physical or mental impairment which can be
expected
to result in death or can be expected to last for a continuous period
of
not less than 12 months, receiving income replacement benefits for
a
period of not less than 3 months under an accident and health plan
covering employees of the Employer.
|
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2 -
1.11
|
"E
arnings"
means the positive or negative adjustment to a Participant’s Account that
is based on the hypothetical rate of return as determined with respect
to
a Participant’s Account under the rules of §6.2 of the Plan and is
intended to reflect the change that would have occurred in the value
of
the Account if the Account had actually been
invested.
|
1.12
|
"Effective
Date"
means _________________, 2005, the date of the adoption by the Board
of
this DCP.
|
1.13
|
"
Eligible
Employee"
means an Employee who has been designated as eligible to participate
in
this Plan but has not at any time made contributions to this Plan
pursuant
to Articles III or IV or received an allocation pursuant to Article
V.
|
1.14
|
"Employee"
means any individual employed by the
Employer.
|
1.15
|
"Employer"
means WesBanco, Inc. and any subsidiary or other entity that would
be part
of the controlled group of corporations or under common control with
WesBanco, Inc as defined in Code §414 (b&c), and that adopts this Plan
under the procedures and terms and conditions established by the
Board.
|
1.16
|
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
|
1.17
|
"Fiscal
Year"
means the 12-consecutive month accounting period adopted by the Employer
for federal income tax purposes.
|
1.18
|
"Participant"
means (i) an Employee who has been designated pursuant to Article
II and
makes one or more deferrals pursuant to Article III or IV of this
DCP or
receives an allocation pursuant to Article V, (ii) any Director who
elects
to make deferrals of fees on or after the effective date of this
DCP and
(iii) any former Eligible Employee or Director who has an Account
balance
under this DCP, including Account balances for Directors transferred
from
the Restated WesBanco, Inc. and WesBanco Affiliate Banks Directors’
Deferred Compensation Plan.
|
1.19
|
"Plan"
or
"
DCP"
means the WesBanco, Inc. Deferred Compensation
Plan.
|
1.20
|
"Plan
Year"
means the 12-consecutive month period beginning each January 1 and
ending
on the following December 31.
|
1.21
|
"Qualified
401(k) Plan"
means the WesBanco, Inc. 401(k) Profit Sharing Plan or the qualified
plan
of the Employer having 401(k) features that is applicable to the
Eligible
Employee.
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3 -
1.22
|
"Retirement"
means separation from service within the meaning of Section 409A
of the
Code on or after attaining age 62.
|
1.23
|
"Salary
Deferral"
means the total amount deferred by the Participant from his or her
Base
Compensation under Article III and from his or her Bonus under Article
IV.
|
1.24
|
"Valuation
Date"
means the date or dates as of which the Participant’s Account is valued
and adjusted for all contributions, distributions, Earnings, expenses
and
other like items.
|
1.25
|
"Vested"
means the nonforfeitable portion of a Participant’s
Account.
|
1.26
|
"Year
of Service"
means one completed Plan Year during which the Participant is
employed.
|
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4 -
Article
II
Eligibility
a.
Directors.
Each
Director who is or becomes a Director on or after the Effective Date of this
Plan shall be eligible to defer fees under Article III of this Plan. Directors
(including then former Directors) with an account balance under the Restated
WesBanco, Inc. and WesBanco Affiliate Banks Directors Deferred Compensation
Plan
shall automatically become a Participant in this DCP on the Effective Date
with
an initiated Account balance equal to his or her then Account balance under
the
Restated WesBanco, Inc. and WesBanco Affiliate Banks Deferred Compensation
Plan.
b.
Employees
.
Any
Employee who is individually designated by the Board in writing to be eligible
to participate in this DCP shall be eligible to participate in this Plan. No
Employee shall be eligible to participate in this Plan unless or until he or
she
receives written confirmation from the Human Resources Department of the
Employer that he or she has been designated by the Board to be eligible to
participate in this Plan. In choosing Employees from time to time to be eligible
to participate in this Plan, the Board shall have plenary discretion in all
respects and may apply any criteria for eligibility it may choose and may change
or be inconsistent in the criteria it chooses, in its discretion, except, only
Employees who are considered to be in a select group of management or highly
compensated employees, within the meaning of DOL Reg. §2520.104-24, shall be
eligible to participate in this Plan. No distribution shall be made to an
Employee who ceases to meet the eligibility conditions of this Plan until such
time as the distribution would be made pursuant to Article VIII.
Article
III
Deferral
of Directors’ Fees and Base Compensation
a.
Directors’
Fees.
Each
Director may elect to defer all or any portion of his or her Directors’ Fees to
be earned after that election is made under the rules set forth in this Article
III.
b.
Base
Compensation of Employees
.
Each
Eligible Employees (or Eligible Employees who have previously made or received
allocations under this Plan) may elect to defer all or any portion of his or
her
Base Compensation as he or she may elect in advance of the earning of that
compensation.
c.
Method
of Election
.
Such
election shall be made by the Director or Eligible Employee by completing and
delivering to the Human Resources Department his or her election form no later
than the last day of the Plan Year preceding the Plan Year in which the Base
Compensation is earned.
However,
an individual who becomes a Director or an Eligible Employee during a Plan
Year
may complete and deliver to the Human Resources Department his or her election
form within 30 days after first becoming a Director or an Eligible Employee
and
may defer all or any portion of his or her Directors’ Fees or Base Compensation,
as the case may be, earned subsequent to the deferral election.
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5 -
Any
such
election made by a Participant to defer his or her Directors’ Fees or Base
Compensation shall be irrevocable for the entire Plan Year and shall continue
for all subsequent years unless revoked. Any Participant may change or revoke
his or her deferral election to be effective with respect to Directors’ Fees or
Base Compensation to be earned in a subsequent Plan Year by submitting a new
election form to the Human Resources Department no later than the last day
of
the Plan Year preceding the next Plan Year. Such change or revocation will
take
effect on the first day of the Plan Year next following receipt by the Human
Resources Department of such election form.
On
the
election form by which the Director or Eligible Employee elects to defer
Directors’ Fees or Base Compensation, he or she can designate a date certain for
its distribution, together with Earnings and Matching Contributions for Eligible
Employees, if any. If no date certain is designated, all amounts held with
respect to the deferral of Directors’ Fees or Base Compensation will be
distributed, for Directors, 180 days after the Directors’ separation from
service (as defined in IRS Notice 2005-1) or, for Eligible Employees, 180 days
after the Eligible Employee’s separation from service (as defined in IRS Notice
2005-1) or after the attaining age 62, as described in Section 8.1, unless
otherwise accelerated for Directors and Eligible Employees under Article VIII.
The
deferral election under this DCP is separate from any election made to the
Qualified 401(k) Plan and an Eligible Employee is not required to participate
in
the Qualified 401(k) Plan as a condition for participation in this
DCP.
Article
IV
Deferral
of Bonus
Each
Participant (which for purposes of this Article IV does not include Directors)
may elect to defer all or any portion of his or her Bonus, as established by
the
Board.
If
the
Bonus is "performance-based compensation" as that phrase is defined for purposes
of Code §409A and is based on services performed over a period of at least 12
months, such election shall be made by the Participant by completing and
delivering to the Human Resources Department his or her election form no later
than the last day of the sixth month of the period during which the Bonus is
earned.
If
the
bonus is not "performance-based compensation" as that phrase is defined for
purposes of Code §409A, or if the period of the services on which the Bonus is
based is less than 12 months, such election shall be made by the Participant
by
completing and delivering to the Human Resources Department his or her election
form no later than the later of (1) the end of the Plan Year that precedes
the
beginning of the period during which the Bonus is earned, or (2) such date
as
permitted under guidance regarding non-qualified deferred compensation issued
by
the Internal Revenue Service or the U.S. Treasury.
-
6 -
Any
such
election made by a Participant to defer his or her Bonus shall be irrevocable
during the Plan Year to which it is applicable.
On
the
election form by which the Eligible Employee elects to defer his or her Bonus,
he or she can designate a date certain for its distribution, together with
Earnings and Employer Contributions, if any. If no date certain is designated
on
the election form, all amounts held in the Plan with respect to deferrals of
Bonus shall be distributed after his or her separation from service (as defined
in IRS Notice 2005-1) or attaining age 62 as described in Section 8.1, unless
otherwise accelerated under Article VIII.
Any
such
Bonus deferral election is separate from any election made with respect to
Base
Compensation, or the Qualified 401(k) Plan and the Eligible Employee is not
required to participate in the Qualified 401(k) Plan as a condition for
participation in this Plan.
Article
V
Employer
Contribution
The
Employer may, but shall not be required to, make an allocation to the Account
of
one or more Eligible Employees (which term excludes non-employee Directors)
for
any Plan Year in which a Participant is eligible to participate in this Plan
in
an amount determined and calculated by the Board, in its sole an absolute
discretion. The Board may choose to make contributions with respect to one
Eligible Employee and not others and it shall not be discrimination within
the
meaning of the Plan for the Board to exercise discretion as to whether to make
contributions with respect to one or more Eligible Employee but not others
or to
vary the amount of the Employer contribution among Eligible Employee who receive
Employer contributions. For this purpose, the Board may take into account such
portion of the Participant’s remuneration as the Board in its sole discretion
determines. No Participant shall receive a contribution under this Article
V
unless the Participant is in the employ of the Employer as of the last day
of
the Plan Year, unless the Eligible Employee attained age 65 during such Plan
Year.
Article
VI
Accounting
6.1
Allocation
to Participant’s Account
|
a.
|
The
total amount of the deferred Directors’ Fees or Base Compensation shall be
credited to the Participant’s Account as of the date such amount would
otherwise have been paid to such
Participant.
|
-
7 -
|
b.
|
The
total amount of any deferred Bonus shall be credited to the Participant's
Account as of the date such amount would otherwise have been paid
to such
Participant.
|
|
c.
|
The
total amount of the Employer Contribution made pursuant to Article
V shall
be credited to the Participant’s Account as of the date or dates
established by the Board. Such allocation dates shall be established
by
the Board in their sole discretion.
|
6.2
Earnings
The
Participant will receive a statement at least annually, and at such other dates
set by the Human Resources Department, reflecting all adjustments for
contribution allocations, distributions and Earnings. The Participant's Account
shall be adjusted on the last day of each Plan Year and at such other Valuation
Dates established by the Human Resources Department in its sole discretion
to
reflect all contribution allocations, distributions and Earnings. The Human
Resources Department shall develop such accounting procedures as it, in its
sole
discretion, deems advisable to properly reflect the value attributable to the
Participant’s Account.
Unless
the Board chooses to set aside assets in a grantor trust with respect to which
the Participant may direct the investment of his or her Account balance,
Earnings prior to a Change in Control Event shall be determined using any rate
established by the Board in its sole discretion and shall remain in effect
for
such period as the Board establishes in its discretion. For this purpose, the
Board may establish a rate of return that is based on an external or internal
index, a formula taking into account multiple items, changes in the value of
WesBanco, Inc. common stock, or any other criteria it deems suitable. In the
event of a Change in Control Event, Earnings shall be based on a rate of
interest no less than the prime rate quoted in the Wall Street Journal for
the
date of the Change in Control Event, or the nearest date to that date, plus
2%.
This prime rate plus 2% method shall be used for a period of one year, subject
to termination of the Plan as approved in Article XI or waiver by the
Participant, and in no event may the Board reduce such rate under any provision
of this DCP.
Prior
to
a Change in Control Event, the Board may, but shall not be required to, set
assets aside in a grantor trust with individual accounting and allow
Participants to direct the investment of their individual Account balance from
such range of investments as the Human Resources Department may permit from
time
to time but which shall at all times include WesBanco common stock. After a
Change in Control Event, all assets shall be credited with Earnings at a rate
no
less than the prime rate plus 2% method described in the foregoing paragraph.
The
Board, in its sole discretion, may take into account when determining Earnings,
except as Earnings is mandated to be prime plus 2% following a Change in Control
Event, any administrative or trustee expense that would affect the rate of
return if the Participant’s Account had actually been invested.
Should
the Participant become entitled to a distribution, Earnings will be credited
to
the Participant’s Account until the Account is completely distributed using the
Earnings method in effect and applicable to each Valuation Date. For the purpose
of this Earnings allocation, the Board may use an estimated distribution date,
which shall be reasonably close in time to when the distribution is actually
made in order to minimize lost earnings to the Participant due to being
uninvested.
-
8 -
All
Earnings allocation methods shall be applied uniformly and without regard to
employment position. However, in order to preserve principal for any Participant
who is nearing retirement, or who is in pay status, such rule shall not prohibit
use of different Earnings methods that is sensitive to age and the Participant’s
proximity to retirement.
Article
VII
Vesting
A
Participant’s Account attributable to his or her Salary Deferrals shall always
be 100% nonforfeitable.
A
Participant’s Account attributable to Employer Contributions shall vest at such
times and be subject to such restrictions and conditions as the Board shall
determine in its sole discretion.
The
vested percentage of the Account shall be determined at the Participant’s
termination of employment. Should the Participant’s employment terminate due to
Retirement, death or Disability, the Participant’s Account shall be 100% vested.
Further, in the event of a Change in Control Event or if the DCP is terminated
by the Employer, the Account of each Participant who is then an active Employee
will become 100% vested regardless of the Participant’s Years of
Service.
Any
amount unvested at termination of employment, other than for Retirement, death
or Disability, shall be forfeited and shall not be recredited to the Account
regardless of any subsequent return to employment unless the Board, in its
sole
discretion, elects otherwise.
Article
VIII
Distribution
of Benefits
8.1
General
Rule
Unless
a
specific date for distribution is set forth on an election form, the benefits
under this Plan (the Participant’s Account) shall be paid over a period of ten
(10) years, in substantially equal annual installments. The first payment shall
be made no earlier than the earlier of (i) the date specified on the election
form, (ii) 180 days after the date the Participant separates from service (as
defined in IRS Notice 2005-1) or (iii) the date the Participant attains age
65.
If a specific date is set forth in an election form, the portion of the
Participant’s Account attributable to deferrals or allocations attributable to
that election form, together with Earnings thereon, shall be distributed on
the
date specified on the election form. For the purposes of distribution of that
portion of a Director’s Account attributable to deferrals before the Effective
Date, distribution shall be made in accordance with elections made by the
Director prior to the Effective Date.
-
9 -
8.2
Modification
of General Rule
|
a.
|
Death
and Disability.
In
the event a Participant dies or becomes Disabled, the balance of
the
Participant's Account shall be paid over a period of three (3) years,
in
substantially equal annual installments to the Participant, or in
the case
of death, to the Participant’s Beneficiary. The first payment shall be
made no later than 60 days after the date of the Participant’s Disability
or death.
|
|
b.
|
Change
in Control Event
.
Unless the Participant elects otherwise, in the event of a Change
in
Control Event prior to commencement of benefits, the Participant’s Account
shall be paid in a lump sum one year after the occurrence of a Change
in
Control Event. Such Participant may elect at any date prior to the
Change
in Control Event, to defer payment of all or a portion of his or
her
Account by delivering an election to such effect to the Human Resources
Department. Such deferral shall be directed by the Participant but
shall
be for a minimum of five years. Such deferred payment shall be made
in
accordance with Section 8.1 or Section 8.2(a), as applicable.
|
In
the
event of a Change in Control Event after benefits have commenced, the remaining
balance of the Participant's Account shall be paid in a lump sum as soon as
administratively practicable after the Change in Control Event to the
Participant or, if the Participant has died, to the Participant's Beneficiary.
c.
Qualified
Domestic Relations Order.
If
the
terms of a qualified domestic
relations
order require payment to a spouse, such payment shall be made as set
forth
in
the qualified domestic relations order.
d.
Payment
of Employment Taxes.
If tax
amounts need be paid under Code
§§3101
and 3121(v) or withheld under Code §3401 with respect to amounts
deferred
here under, an amount necessary to met those tax obligations may be
distributed.
8.3
Election
Method
Elections
shall be made in writing on a form provided by the Human Resources Department
and shall be made in accordance with the rules established by the Human
Resources Department.
8.4
Earnings
on Unpaid Balances
In
the
event a Participant separates from employment and is entitled to receive a
distribution, the Participant's Account shall continue to be credited with
Earnings until the Account is completely distributed pursuant to the provisions
set forth in §6.2 of this Plan.
-
10 -
8.5
Request
for Benefits
Any
person claiming a benefit under the DCP shall present the request to the Human
Resources Department in writing, which shall respond in writing as soon as
may
be feasible.
8.6
Tax
Withholding
With
respect to any benefit payments under the DCP, Employer shall make all
appropriate income tax withholdings; however, the Participant will be solely
liable for any and all income taxes applicable on such benefit
payments.
The
benefits which accrue under the DCP are subject to FICA taxes (which include
the
Old-Age, Survivors and Disability Insurance tax and/or Medicare tax, as the
case
may be) which may become due before the benefits are actually paid as provided
under Code Section 3121(v)(2) and related IRS regulations.
To
ensure
proper compliance with these regulations, Employer will calculate the amount
of
FICA tax when it becomes due and notify the Participant of the amount of his
or
her share of such tax. Employer will remit the entire tax to the IRS and arrange
for the collection of the Participant’s share of the tax from the Participant.
The Participant will be solely liable for his or her share of FICA taxes on
benefits accrued under the DCP.
Article
IX
Funding
9.1
Unfunded
Plan
Benefits
under this DCP shall be paid from the general assets of the Employer. This
DCP
shall be administered as an unfunded plan which is maintained primarily for
the
purpose of providing supplemental retirement compensation "for a select group
of
management or highly compensated employees" as set forth in Sections 201(2),
301(3), and 401(a)(1) of the ERISA, and is not intended to meet the
qualification requirements of Section 401 of the Code. Any assets set aside
by
the Employer for the purpose of paying benefits under this DCP shall not be
deemed to be the property of the Participant and shall be subject to claims
of
creditors of the Employer. No participant or other person shall have any claim
against, right to, or security or other interest in, any fund, account or asset
of the Employer from which any payment under the DCP may be made. Any use of
the
words "contributions", "contribute", "earnings" or "Earnings" or any similar
phrase, shall not require actual contributions or funding of this DCP and is
only used for convenience when describing the deferral and supplemental
retirement benefit activities of this DCP.
-11-
Article
X
Plan
Administration
10.1
General
Duty
The
DCP
shall be administered by the Board which may delegate the power and duty to
perform any non-discretionary actions to the Human Resources Department in
addition to the powers and authority given to the Human Resources Department
under the terms of this DCP. It shall be the principal duty of the Board to
oversee that the provisions of the DCP are carried out in accordance with its
terms, for the exclusive benefit of persons entitled to participate in the
DCP.
It shall be the principal duty of the Human Resources Department to exercise
its
power and authority to administer the DCP as directed by the Board and as its
powers and duties are set out in this DCP.
10.2
Board's
General Powers, Rights and Duties
The
Board
shall have full power to administer the DCP in all of its details, subject
to
the applicable requirements of law. For this purpose, the Board is, as respects
the rights and obligations of all parties with an interest in this DCP, given
the powers, rights and duties specifically stated elsewhere in the DCP, or
any
other document, and in addition is given, but not limited to, the following
powers, rights and duties:
|
a.
|
to
determine all questions arising under the DCP, including the power
to
determine the rights or eligibility of Employees or Participants
and any
other persons, and the amounts of their contributions or benefits
under
the DCP, to interpret the DCP, and to remedy ambiguities, inconsistencies
or omissions;
|
|
b.
|
to
adopt such rules of procedure and regulations, including the establishment
of any claims procedure that may be required by law, as in its opinion
may
be necessary for the proper and efficient administration of the DCP
and as
are consistent with the DCP;
|
|
c.
|
to
direct payments or distributions from the DCP in accordance with
the
provisions of the DCP;
|
|
d.
|
to
develop such information as may be required for tax reporting and
withholding or other purposes; and
|
|
e.
|
to
employ agents, attorneys, accountants or other persons (who also
may be
employed by an Employer), and allocate or delegate to them such powers,
rights and duties as the Board may consider necessary or advisable
to
properly carry out the administration of the
DCP.
|
-12-
10.3
Exercise
of Authority
Whenever
any discretionary action by the Board is required, the Board may exercise its
authority in a manner that discriminates between and among participants. The
Board shall not be required to treat each Eligible Employee and each Participant
in the same way. Non-discretionary duties exercised by the Human Resources
Department shall be exercised in a nondiscriminatory manner so that all persons
similarly situated will receive substantially the same treatment from the Human
Resources Department.
However,
such preceding requirement shall not prohibit the Human Resources Department
from valuing the Account of a Participant at a different date or time in order
to facilitate a distribution, nor from taking other actions which may be
different with respect to a Participant so long as with respect to a particular
action, right, or privilege granted by the DCP or established by the Human
Resources Department, the Participant is treated in a similar
fashion.
10.4
Indemnification
of Administrator
The
Employer agrees to indemnify and to defend to the fullest extent permitted
by
law any Employee serving in the Human Resources Department or otherwise as
a
delegate or agent of the Board (including any Employee or former Employee who
is
serving or formerly served as a delegate or agent of the Board) against all
liabilities, damages, costs and expenses (including attorney's fees and amounts
paid in settlement of any claims approved by the Employer) occasioned by any
act
or omission to act in connection with the DCP, if such act or omission is or
was
in good faith.
10.5
Information
Required by Human Resources Department
The
Human
Resources Department shall obtain such data and information as the Human
Resources Department may deem necessary or desirable in order to administer
the
DCP. The records of the Employer as to an Employee's or Participant's period
or
periods of employment, termination of employment and the reason therefore,
leave
of absence, re-employment and earnings will be conclusive on all persons unless
determined by independent agents or delegates of the Human Resources Department
to be incorrect. Participants and other persons entitled to benefits under
the
DCP also shall furnish the Human Resources Department with such evidence, data
or information as the Human Resources Department considers necessary or
desirable to administer the DCP.
10.6
Claims
and Review Procedures
|
a.
|
Claims
Procedure.
If
any Participant believes he is being improperly denied any rights
or
benefits under the DCP, such Participant may file a claim in writing
with
the Human Resources Department. If any such claim is wholly or partially
denied, the Human Resources Department shall notify such Participant
of
its decision in writing. Such notification shall be written in a
manner
calculated to be understood by such Participant and shall contain
(i)
specific reasons for the denial, (ii) specific reference to pertinent
DCP
provisions, (iii) a description of any additional material or information
necessary for the Participant to perfect such claim and an explanation
of
why such material or information is necessary, and (iv) information
as to
the steps to be taken if the Participant wishes to submit a request
for
review. Such notification shall be given within 30 days after the
claim is
received by the Human Resources Department (or within 60 days, if
special
circumstances require an extension of time for processing the claim,
and
if written notice of such extension and circumstances is given to
such
Participant within the initial 30 day period). If such notification
is not
given within such period, the claim shall be considered denied as
of the
last day of such period and such Participant may request a review
of his
claim.
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-13-
|
b.
|
Review
Procedure.
Within 30 days after the date on which a Participant receives a written
notice of a denied claim (or, if applicable, within 30 days after
the date
on which such denial is considered to have occurred) such Participant
(or
his duly authorized representative) may (i) file a written request
with
the Board for a review of his denied claim and of pertinent documents,
and
(ii) submit written issues and comments to the Board. The Board shall
notify such Participant of its decision in writing. Such notification
shall be written in a manner calculated to be understood by such
Participant and shall contain specific reasons for the decision as
well as
specific references to pertinent DCP provisions. The decision on
review
shall be made within 30 days after the request for review is received
by
the Board (or within 60 days, if special circumstances require an
extension of time for processing the request, such as an election
by the
Board to hold a hearing, and if written notice of such extension
and
circumstances is given to such person within the initial 30-day period).
If the decision on review is not made within such period, the claim
shall
be considered denied.
|
10.7
Furnishing
Information or Providing Other Reports
The
Human
Resources Department shall provide Employees with: (a) a description of the
DCP
and (b) such other information or notices as required by ERISA or other
applicable law. After payment by the Employee of a reasonable charge, which
charge may be waived by the Human Resources Department, the Human Resources
Department shall provide the Employee with a copy of this DCP upon written
request by the Employee. The Human Resources Department shall also file with
government authorities any reports or returns required.
Article
XI
Amendment
and Discontinuance
The
Employer hereby reserves the right and power, by action of the Board, to amend,
suspend or terminate the Plan in whole or in part, at any time. Included in
the
Employer’s
right
to
amend, suspend or terminate is the Employer’s right at any time to no longer
permit any additional participants under the DCP, to cease making benefit
allocations, and to distribute all Account balances upon DCP termination unless
such terminated distribution would violate the
-
14
-
distribution
restrictions of Code §409A(a)(2)(A) and Code §409(a)(3). The Human Resources
Department may promulgate rules and procedures from time to time to carry out
the provisions of this Article XI. However, in no event shall the Employer
or
Board have the right to eliminate or reduce any benefit which has been vested
or
become nonforfeitable under the DCP, pursuant to Article VII.
Article
XII
General
Provisions
12.1
Notices
Each
Participant entitled to benefits under the DCP must file in writing with the
Board such Participant's post office address and each change of post office
address. Any communication, statement or notice addressed to any such
Participant at the last post office address filed with the Human Resources
Department will be binding upon such person for all purposes of the DCP, and
the
Human Resources Department shall not be obligated to search for or ascertain
the
whereabouts of any Participant. Any notice or document required to be given
to
or filed with the Human Resources Department shall be considered as given or
filed if delivered or mailed by registered mail, postage prepaid, to WesBanco,
Inc., .One Bank Plaza, Wheeling, WV 26003
12.2
Employment
Rights
The
DCP
does not constitute a contract of employment, and participation in the Plan
will
not give any Participant the right to be retained in the employ of the Employer
nor any right or claim to any benefit under the DCP, unless such right or claim
has specifically accrued under the terms of the DCP.
12.3
Interests
Not Transferable
Except
as
may be required by law, including the federal income and employment tax
withholding provisions of the Code, or of an applicable state's income tax
act,
the interests of Participants and their beneficiaries under this Plan are not
subject to the claims of their creditors and may not be voluntarily or
involuntarily sold, transferred, alienated, assigned or encumbered. The
preceding shall not preclude the Employer from asserting any claim for damages
or for any debt that the Employer may have with respect to the
Participant.
12.4
No
Interest or Earnings
No
interest or earnings of any type shall accrue, be credited or be payable on
any
amounts that are credited to a Participant's Account under this DCP other than
as specified at Section 6.2.
-
15 -
12.5
Facility
of Payment
When
a
Participant entitled to benefits under the DCP is under a legal disability,
or,
in the Human Resources Department's opinion, is in any way incapacitated so
as
to be unable to manage his financial affairs, the Human Resources Department
may
direct that the benefits to which such Participant otherwise would be entitled
shall be made to such Participant's legal representative, or to such other
person or persons as the Human Resources Department may select for the benefit
of such Participant. Any payment made in accordance with the provisions of
this
Section 12.5 shall be a full and complete discharge of any liability for such
payment.
12.6
Gender
and Number
Where
the
context permits, words denoting the masculine gender shall include the feminine
gender, the singular shall include the plural, and the plural shall include
the
singular.
12.7
Controlling
State Law
To
the
extent not superseded by the laws of the United States, the laws of the state
of
West Virginia shall be controlling in all matters relating to the
DCP.
12.8
Severability
In
case
any provisions of the DCP shall be held illegal or invalid for any reason,
such
illegality or invalidity shall not affect the remaining provisions of the DCP,
and the DCP shall be construed and enforced as if such illegal and invalid
provisions had never been set forth in the DCP.
12.9
Statutory
References
All
references to the Code and ERISA include reference to any comparable or
succeeding provisions of any legislation which amends, supplements or replaces
such section or subsection.
12.10
Headings
Section
headings and titles are for reference only. In the event of a conflict between
a
title and the content of a section, the content of the section shall
control.
12.11
Non-taxable
Benefits
It
is the
intention of each Employer that this DCP meet all requirements of the Code
so
that the benefits provided are non-taxable during the period of deferral and
until actual distribution is made.
-
16 -
12.12
Action
by the Employer
Any
action to be performed by the Employer under the DCP shall be by resolution
of
its board of directors, by a duly authorized committee of its board of
directors, or by a person or persons authorized by resolution of its board
of
directors or by resolution of such committee.
Executed
this ____ day of _______________________________, 2005.
Witness
-
17 -
EXHIBIT
10.4
AMENDED
AND RESTATED
WESBANCO
BANK, INC.
SALARY
CONTINUATION AGREEMENT
THIS
AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT
is made
this ____ day of ________, 2005, by and between
WESBANCO
BANK,
INC.
,
a
state-chartered commercial bank located in Wheeling, West Virginia (the
"Company") and ____________
(the
"Executive").
WITNESSETH
WHEREAS,
the parties had entered into a Salary Continuation Agreement dated April 14,
2000 to encourage the
Executive
to remain an employee of the Company under which the Company was willing to
provide salary continuation benefits to the Executive from its general assets
under certain circumstances;
WHEREAS,
the parties amended that Salary Continuation Agreement by amendment dated _____
__, 2005 to eliminate a Change in Control benefit under the Salary Continuation
Agreement; and
WHEREAS,
the parties intend here by to conform the Salary Continuation Agreement with
the
Section 409A of the Code (as defined herein) and guidance issued thereunder
and
to restate the Salary Continuation Agreement to include both the conforming
changes for Section 409A and the amendment.
AGREEMENT
The
Executive and the Company agree as follows:
Article
1
Definitions
Whenever
used in this Agreement, the following words and phrases shall have the meanings
specified:
1.1
"Code"
means
the
Internal Revenue Code of 1986, as amended.
1.2
"Disability"
means,
if
the Executive is covered by a Company sponsored disability policy, total
disability as defined in such policy without regard to any waiting period.
If
the Executive is not covered by such a policy, Disability means the Executive
suffering a sickness, accident or injury which, in the judgment of a physician
satisfactory to the Company, prevents the Executive from performing
1
substantially
all of the Executive's normal duties for the Company. As a condition to
receiving any Disability benefits, the Company may require the Executive to
submit to such physical or mental evaluations and tests as the Company's Board
of Directors deems appropriate. Notwithstanding the foregoing, in any case
in
which Section 409A may apply, a Disability will not be deemed to occur unless
the Executive is unable to engage in substantial gainful activity for a period
of 12 months due to a medically determinable physical or mental impairment
or,
due to such impairment, is receiving disability benefits for a period of three
months under a plan provided by the Company to its employees.
1.3
"Early Termination"
means
the
Termination of Employment before Normal Retirement Age for reasons other than
death, Disability, Termination for Cause.
1.4
"Early
Termination Date"
means
the
month, day and year in which Early Termination occurs.
1.5
"Effective Date"
means,
for the initial Salary Continuation Agreement, April 14, 2000 and, for this
Amended and Restated Salary Continuation Agreement, ______________ ___,
2005.
1.6
"Normal Retirement Age"
means
the
Executive's 65th birthday.
1.7
"Normal
Retirement Date"
means
the
later of the Normal Retirement Age or Termination of Employment.
1.8
"Plan
Year"
means
a
twelve-month period commencing on April 14th and ending on April 13th of each
year. The initial Plan Year shall commence on the effective date of this
Agreement.
1.9
"Salary"
means
the
annual remuneration the Executive receives as base salary, but before deductions
authorized by the Executive or required by law to be withheld from the Executive
by the Company such as income taxes or Social Security taxes.
1.10
"Termination
for Cause"
See
Section 5.2.
1.11
"Termination of Employment"
means
that the Executive ceases to be employed by the Company for any reason
whatsoever other than by reason of a leave of absence, which is approved by
the
Company. For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive's Termination
of
Employment, the Company shall have the sole and absolute right to decide the
dispute.
Article
2
Lifetime
Benefits
2.1
Normal Retirement Benefit.
Upon
Termination of Employment on or after the Normal Retirement Age for reasons
other than death, the Company shall pay to the Executive the benefit described
in this Section 2.1 in lieu of any other benefit under this
Agreement.
2
2.1.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following the Executive's Normal Retirement Date. The annual benefit shall
be
paid to the Executive for 10 years.
2.2
Early Termination/Retirement Benefit.
Upon
Early Termination/Retirement, the Company shall pay to the Executive the benefit
described in this Section 2.2 in lieu of any other benefit under this
Agreement.
2.2.1
Amount of Benefit.
The
benefit under this Section 2.2 is the Early Termination/Retirement Annual.
Benefit set forth in Schedule A for the Plan Year ending immediately prior
to
the Termination of Employment, determined by vesting the Executive in 100
percent of the Accrual Balance. Any increase in the annual benefit under Section
2.1.1 shall require the recalculation of this benefit on Schedule
A.
2.2.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Normal Retirement Age. The annual benefit shall be paid to the
Executive
for 10 years. The Company, in its sole and absolute discretion, may begin annual
payments or make a lump sum payment of this benefit at any time, calculating
the
present value of said benefit using a discount rate equal to the 10-Year U.S.
Treasury Bill rate and monthly compounding.
2.3
Disability Benefit.
If
the
Executive terminates employment due to Disability prior to Normal Retirement
Age, the Company shall pay to the Executive the benefit described in this
Section 2.3 in lieu of any other benefit under this Agreement.
2.3.1
Amount
of Benefit.
The
annual benefit under this Section 2.3 is the Disability Annual Benefit set
forth
in Schedule A for the Plan Year ending immediately prior to the date in which
the Termination of Employment occurs, determined by vesting the Executive in
the
Normal Retirement Benefit. Any increase in the annual benefit under Section
2.1.1 would require the recalculation of this benefit on Schedule
A.
2.3.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Normal Retirement Age. The annual benefit shall be paid to the
Executive for 10 years.
2.4
Section
409A of the Code.
If,
in
the opinion of the Company, Section 409A of the Code applies to payments of
any
benefit under this Article 2, the Company may defer the initial payment of
benefits subject to Section 409A of the Code until the date which is the first
day of the month next following the month in which falls the six month
anniversary of the event giving rise to payments.
3
Article
3
Death
Benefits
3.1
Death
Benefit.
If
the
Executive dies while in the active service of the Company, the Company shall
pay
to the Executive's beneficiary the benefit described in the Split Dollar
Agreement and Endorsement attached as Addendum A between the Company and the
Executive in lieu of any other benefit payable hereunder. The Company shall
not
pay a death benefit under this Section 3.1 if the Executive is entitled to
a
Lifetime Benefit under Article 2.
3.2
Death During Benefit Period.
If
the
Executive dies after any Lifetime Benefit payments have commenced under this
Agreement but before receiving all such payments, the Company shall pay the
remaining benefits to the Executive's beneficiary at the same time and in the
same amounts they would have been paid to the Executive had the Executive
survived and no death benefit shall be payable under this Article
3.
3.3
Death
After Termination of Employment But Before Benefit Payments Commence.
If
the
Executive is entitled to any Lifetime Benefit payments under this Agreement,
but
dies prior to the commencement of said benefit payments, the Company shall
pay
the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence
on
the first day of the month following the date of the Executive's
death.
Article
4
Beneficiaries
4.1
Beneficiary Designations.
The
Executive shall designate a beneficiary by filing a written designation with
the
Company. The Executive may revoke or modify the designation at any time by
filing a new designation. However, designations will only be effective if signed
by the Executive and accepted by the Company during the Executive's lifetime.
The Executive's beneficiary designation shall be deemed automatically revoked
if
the beneficiary predeceases the Executive, or if the Executive names a spouse
as
beneficiary and the marriage is subsequently dissolved. If the Executive dies
without a valid beneficiary designation, all payments shall be made to the
Executive's estate.
4.2
Facility of Payment.
If
a
benefit is payable to a minor, to a person declared incapacitated, or to a
person incapable of handling the disposition of his or her property, the Company
may pay such benefit to the guardian, legal representative or person having
the
care or custody of such minor, incapacitated person or incapable person. The
Company may require proof of incapacity, minority or guardianship as it may
deem
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge the Company from all liability with respect to such
benefit.
Article
5
General
Limitations
5.1
Excess Parachute Payment.
Notwithstanding
any provision of this Agreement to the contrary, the Company shall not pay
any
benefit under this Agreement to the extent the benefit would create an excise
tax under the excess parachute rules of Section 28OG of the Code.
4
5.2
Termination for Cause.
Notwithstanding
any provision of this Agreement to the
contrary,
the Company shall not pay any benefit under this Agreement if the Company
terminates
the
Executive's employment for:
(a)
Gross
negligence or gross neglect of duties;
(b)
Commission
of a felony or a crime involving moral turpitude; or
(c)
Fraud,
disloyalty, dishonesty or willful violation of any law or significant Company
policy committed in connection with the Executive's employment and resulting
in
an adverse effect on the Company.
5.3
Suicide
or Misstatement.
The
Company shall not pay any benefit under this Agreement if the Executive commits
suicide within two years after the date of this Agreement, or if the Executive
has made any material misstatement of fact on any application for life insurance
purchased by the Company thereby precluding coverage under any policies of
insurance contemplated hereunder.
Article
6
Claims
and Review Procedures
6.1
Claims
Procedure.
The
Company shall notify any person or entity that makes a claim under this
Agreement (the "Claimant") in writing, within 90 days of Claimant's written
application for benefits, of his or her eligibility or noneligibility for
benefits under the
Agreement.
If the Company determines that the Claimant is not eligible for benefits or
full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the Claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of this Agreement's claims review procedure
and
other appropriate information as to the steps to be taken if the Claimant wishes
to have the claim reviewed. If the Company determines that there are special
circumstances
requiring
additional time to make a decision, the Company shall notify the Claimant of
the
special circumstances and the date by which a decision is expected to be made,
and may extend the time for up to an additional 90 days.
6.2
Review
Procedure.
If
the
Claimant is determined by the Company not to be eligible for benefits, or if
the
Claimant believes that he or she is entitled to greater or different benefits,
the Claimant shall have the opportunity to have such claim reviewed by the
Company by filing a petition for review with the Company within 60 days after
receipt of, the notice issued by the Company. Said petition shall state the
specific reasons which the Claimant believes entitle him or her to benefits
or
to greater or different benefits. Within 60 days after receipt by the Company
of
the petition, the Company shall afford the Claimant (and counsel, if any) an
opportunity to present
his
or
her position to the Company verbally or in writing, and the Claimant (or
counsel) shall have the right to review the pertinent documents. The Company
shall notify the Claimant of its decision in writing within the 60-day period,
stating specifically the basis of its decision, written in a manner calculated
to be understood by the Claimant and the specific provisions of the Agreement
on
which the decision is based. If, because of the need for a hearing, the 60-day
period is not sufficient, the decision may be deferred for
5
up
to
another 60 days at the election of the Company, but notice of this deferral
shall be given to the Claimant.
Article
7
Amendments
and Termination
This
Agreement may be amended or terminated only by a written agreement signed by
the
Company and the Executive.
Article
8
Miscellaneous
8.1
Binding
Effect.
This
Agreement shall bind the Executive and the Company, and their beneficiaries,
survivors, executors, successors, administrators and transferees.
8.2
No
Guarantee of Employment.
This
Agreement is not an employment policy or contract. It does not give the
Executive the right to remain an employee of the Company, nor does it interfere
with the Company's right to discharge the Executive. It also does not require
the Executive to remain an employee nor interfere with the Executive's right
to
terminate employment at any time.
8.3
Non-Transferability.
Benefits
under this Agreement cannot be sold, transferred, assigned, pledged, attached
or
encumbered in any manner.
8.4
Reorganization.
The
Company shall not merge or consolidate into or with another company, or
reorganize, or sell substantially all of its assets to another company, firm,
or
person unless such succeeding or continuing company, firm, or person agrees
to
assume and discharge the obligations of the Company under this Agreement. Upon
the occurrence of such event, the term "Company" as used in this Agreement
shall
be deemed to refer to the successor or survivor company.
8.5
Tax
Withholding.
The
Company shall withhold any taxes that are required to be withheld from the
benefits provided under this Agreement.
8.6
Applicable
Law.
The
Agreement and all rights hereunder shall be governed by the laws of the State
of
West Virginia, except to the extent preempted by the laws of the United States
of America.
8.7
Unfunded Arrangement.
The
Executive and any designated beneficiary are general unsecured creditors of
the
Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits. The rights to benefits
are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any
insurance on the Executive's life is a general asset of the Company to which
the
Executive and beneficiary have no preferred or secured claim.
6
8.8
Entire
Agreement.
This
Agreement constitutes the entire agreement between the Company and the Executive
as to the continuation of salary following his separation from employment,
provided, if the Executive is then a party to an employment agreement and/or
a
Change in Control Agreement, each such agreement shall be given force and effect
in accordance with their respective terms. No rights are granted to the
Executive by virtue of this Agreement other than those specifically set forth
herein.
8.9
Administration.
The
Company shall have powers which are necessary to administer this Agreement,
including but not limited to:
(a)
Interpreting
the provisions of the Agreement;
(b)
Establishing
and revising the method of accounting for the Agreement;
(c)
Maintaining
a record of benefit payments; and
(d)
Establishing
rules and prescribing any forms necessary or desirable to administer the
Agreement.
8.10
Named
Fiduciary.
The
Company shall be the named fiduciary and plan administrator under this
Agreement. It may delegate to others certain aspects of the management and
operational responsibilities including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN
WITNESS WHEREOF
,
the
Executive and the Company have signed this Agreement.
EXECUTIVE:
COMPANY
WESBANCO
BANK, INC.
_________________________________
By_________________________________
Title________________________________
7
EXHIBIT
10.5
AMENDED
AND RESTATED
WESBANCO
BANK, INC.
SALARY
CONTINUATION AGREEMENT
[WITH
CHANGE IN CONTROL PROVISION]
THIS
AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT
is made
this _____ day of _________, 2005, by and between
WESBANCO
BANK,
INC.
,
a
state-chartered commercial bank located in Wheeling, West Virginia (the
"Company") and
{NAME}
(the
"Executive").
WITNESSETH
WHEREAS,
the parties had entered into a Salary Continuation Agreement dated
[Date]
,
to
encourage the Executive to remain an employee of the Company, under which the
Company was willing to provide salary continuation benefits to the Executive
from its general assets under certain circumstances;
WHEREAS,
the parties intend here by to conform the Salary Continuation Agreement with
the
Section 409A of the Code (as defined herein) and guidance issued thereunder
and
to restate the Salary Continuation Agreement to include both the conforming
changes for the Section 409A and the amendment.
AGREEMENT
The
Executive and the Company agree as follows:
Article
1
Definitions
Whenever
used in this Agreement, the following words and phrases shall have the meanings
specified:
1.1
"Change
of Control Event"
shall
be
deemed to have occurred as of the first day that any one or more of the
following conditions shall have been satisfied, followed by Termination of
Employment within the time period hereinafter specified:
(a)
Final
regulatory approval is obtained for any Person (other than those Persons in
control of the Company as of the Effective Date, or other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, or securities
of
the Company representing thirty five percent (35%) or more of the combined
voting power of the Company's then outstanding securities; or
(b)
During
any period of two (2) consecutive years (not including any period prior to
the
execution of this Agreement), individuals who at the beginning of such period
constitute the Board of the Company (and any new Director, whose election by
the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of
the Directors then still in office who either were Directors at the beginning
of
the period or whose election or
nomination
for election was so approved), cease for any reason to constitute a majority
thereof; or
(c)
Final
regulatory approval is obtained with respect to: (A) a plan of complete
liquidation of the Company; or (B) an agreement for the sale or disposition
of
all or substantially all the Company's assets; or (C) a merger, consolidation,
or reorganization of the Company with or involving any other corporation, other
than a merger, consolidation, or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity), at least fifty percent (50%) of the
combined voting power of the voting securities of the Company (or such surviving
entity) outstanding immediately after such merger, consolidation, or
reorganization.
However,
in no event shall a Change in Control Event be deemed to have occurred, with
respect to the Executive, if the Executive is part of a purchasing group which
consummates the Change in Control Event transaction. The Executive shall be
deemed "part of a purchasing group" for purposes of the preceding sentence
if
the Executive is an equity participant in the purchasing company or group
(except for: (i) passive ownership of less than three percent (3%) of the stock
of the purchasing company; or (ii) ownership of equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control Event by a majority of the non-employee
continuing Directors of the Company, as applicable).
The
occurrence of a Change in Control Event as defined above shall also then be
followed within three (3) years by the Executive's Termination of Employment
for
reasons other than death, Disability or retirement.
Notwithstanding
the foregoing, no event or combination of events shall constitute a Change
in
Control Event if and to the extent that event or combination of events would
not
constitute a Change in Control Event under Section 409A of the Code or the
guidance published thereunder as then in effect.
1.2
"Code"
means
the
Internal Revenue Code of 1986, as amended.
1.3
"Disability"
means,
if
the Executive is covered by a Company sponsored disability policy, total
disability as defined in such policy without regard to any waiting period.
If
the Executive is not covered by such a policy, Disability means the Executive
suffering a sickness, accident or injury which, in the judgment of a physician
satisfactory to the Company, prevents the Executive from performing
substantially all of the Executive's normal duties for the Company. As a
condition to receiving any Disability benefits, the Company may require the
Executive to submit to such physical or mental evaluations and tests as the
Company's Board of Directors deems appropriate. Nothwithstanding the foregoing,
in any case in which Section 409A may apply, a Disability will not be deemed
to
occur
2
unless
the Executive is unable to engage in substantial gainful activity for a period
of 12 months due to a medically determinable physical or mental impairment
or,
due to such impairment, is receiving disability benefits for a period of three
months under a plan provided by the company to its employees.
1.4
"Early Terminationæ
means
the
Termination of Employment before Normal Retirement Age for reasons other than
death, Disability, Termination for Cause or following a Change in Control
Event.
1.5
"Early
Termination Date"
means
the
month, day and year in which Early Termination occurs.
1.6
"Effective Date"
means
[Date]
,
for the
initial Salary Continuation Agreement and the _____ day of _________, 2005
for
this Amended and Restated Salary Continuation Agreement.
1.7
"Normal Retirement Age"
means
the
Executive's 65th birthday.
1.8
"Normal
Retirement Date"
means
the
later of the Normal Retirement Age or Termination of Employment.
1.9
"Plan
Year"
means
a
twelve-month period commencing on
[anniversary
of initial agreement
]
and
ending on
[day
before the anniversary]
of each
year. The initial Plan Year shall commence on the effective date of this
Agreement.
1.10
"Salary"
means
the
annual remuneration the Executive receives as base salary, but before deductions
authorized by the Executive or required by law to be withheld from the Executive
by the Company such as income taxes or Social Security taxes.
1.11
"Termination
for Cause"
See
Section 5.2.
1.12
"Termination of Employment"
means
that the Executive ceases to be employed by the Company for any reason
whatsoever other than by reason of a leave of absence, which is approved by
the
Company. For purposes of this Agreement, if there is a dispute over the
employment status of the Executive or the date of the Executive's Termination
of
Employment, the Company shall have the sole and absolute right to decide the
dispute.
Article
2
Lifetime
Benefits
2.1
Normal Retirement Benefit.
Upon
Termination of Employment on or after the Normal Retirement Age for reasons
other than death, the Company shall pay to the Executive the benefit described
in this Section 2.1 in lieu of any other benefit under this
Agreement.
2.1.1.
Amount
of Benefit.
The
annual benefit under this Section 2.1 is
(_________
Thousand ________ Hundred ______Dollars
).
2.1.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following the Executive's Normal Retirement Date. The annual benefit shall
be
paid to the Executive for 10 years.
3
2.2
Early Termination/Retirement Benefit.
Upon
Early Termination/Retirement, the Company shall pay to the Executive the benefit
described in this Section 2.2 in lieu of any other benefit under this
Agreement.
2.2.1
Amount of Benefit.
The
benefit under this Section 2.2 is the Early Termination/Retirement Annual.
Benefit set forth in Schedule A for the Plan Year ending immediately prior
to
the Termination of Employment, determined by vesting the Executive in 100
percent of the Accrual Balance. Any increase in the annual benefit under Section
2.1.1 shall require the recalculation of this benefit on Schedule
A.
2.2.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Normal Retirement Age. The annual benefit shall be paid to the
Executive
for 10 years. The Company, in its sole and absolute discretion, may begin annual
payments or make a lump sum payment of this benefit at any time, calculating
the
present value of said benefit using a discount rate equal to the 10-Year U.S.
Treasury Bill rate and monthly compounding.
2.3
Disability Benefit.
If
the
Executive terminates employment due to Disability prior to Normal Retirement
Age, the Company shall pay to the Executive the benefit described in this
Section 2.3 in lieu of any other benefit under this Agreement.
2.3.1
Amount
of Benefit.
The
annual benefit under this Section 2.3 is the Disability Annual Benefit set
forth
in Schedule A for the Plan Year ending immediately prior to the date in which
the Termination of Employment occurs, determined by vesting the Executive in
the
Normal Retirement Benefit. Any increase in the annual benefit under Section
2.1.1 would require the recalculation of this benefit on Schedule
A.
2.3.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Normal Retirement Age. The annual benefit shall be paid to the
Executive for 10 years.
2.4
Change in Control Event Benefit.
Upon
a
Change
in Control Event
,
the
Company shall pay to the Executive the benefit described in this Section 2.4
in
lieu of any other benefit under this Agreement.
2.4.1
Amount
of Benefit.
The
annual benefit under this Section 2.4 is the Change of
Control
Annual Benefit set forth in Schedule A for
the
Plan
Year ending immediately prior
to
the
date in which Termination of Employment occurs, determined by vesting the
Executive in the Normal Retirement Benefit. Any increase in the annual benefit
under Section 2.1.1 would require the recalculation of this benefit on Schedule
A.
2.4.2
Payment of Benefit.
The
Company shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month commencing with the month
following Normal Retirement Age. The annual benefit shall be paid to the
Executive for 10 years.
4
2.5
Section
409A of the Code.
If,
in
the opinion of the Company, Section 409A of the Code applies to payments of
any
benefit under this Article 2, the Company may defer the initial payment of
benefits subject to Section 409A of the Code until the date which is the first
day of the month next following the month in which falls the six month
anniversary of the event giving rise to payments.
Article
3
Death
Benefits
3.1
Death
Benefit.
If
the
Executive dies while in the active service of the Company, the Company shall
pay
to the Executive's beneficiary the benefit described in the Split Dollar
Agreement and Endorsement attached as Addendum A between the Company and the
Executive in lieu of any other benefit payable hereunder. The Company shall
not
pay a death benefit under this Section 3.1 if the Executive is entitled to
a
Lifetime Benefit under Article 2.
3.2
Death During Benefit Period.
If
the
Executive dies after any Lifetime Benefit payments have commenced under this
Agreement but before receiving all such payments, the Company shall pay the
remaining benefits to the Executive's beneficiary at the same time and in the
same amounts they would have been paid to the Executive had the Executive
survived and no death benefit shall be payable under this Article
3.
3.3
Death
After Termination of Employment But Before Benefit Payments Commence.
If
the
Executive is entitled to any Lifetime Benefit payments under this Agreement,
but
dies prior to the commencement of said benefit payments, the Company shall
pay
the benefit payments to the Executive's beneficiary that the Executive was
entitled to prior to death except that the benefit payments shall commence
on
the first day of the month following the date of the Executive's
death.
Article
4
Beneficiaries
4.1
Beneficiary Designations.
The
Executive shall designate a beneficiary by filing a written designation with
the
Company. The Executive may revoke or modify the designation at any time by
filing a new designation. However, designations will only be effective if signed
by the Executive and accepted by the Company during the Executive's lifetime.
The Executive's beneficiary designation shall be deemed automatically revoked
if
the beneficiary predeceases the Executive, or if the Executive names a spouse
as
beneficiary and the marriage is subsequently dissolved. If the Executive dies
without a valid beneficiary designation, all payments shall be made to the
Executive's estate.
4.2
Facility of Payment.
If
a
benefit is payable to a minor, to a person declared incapacitated, or to a
person incapable of handling the disposition of his or her property, the Company
may pay such benefit to the guardian, legal representative or person having
the
care or custody of such minor, incapacitated person or incapable person. The
Company may require proof of incapacity, minority or guardianship as it may
deem
appropriate prior to distribution of the benefit. Such distribution shall
completely discharge the Company from all liability with respect to such
benefit.
5
Article
5
General
Limitations
5.1
Excess Parachute Payment.
Notwithstanding
any provision of this Agreement to the contrary, the Company shall not pay
any
benefit under this Agreement to the extent the benefit would create an excise
tax under the excess parachute rules of Section 28OG of the Code, but
recognizing that only the excess of the Change in Control Benefit need be taken
into account for purposes of Section 280G of the Code.
5.2
Termination for Cause.
Notwithstanding
any provision of this Agreement to the
contrary,
the Company shall not pay any benefit under this Agreement if the Company
terminates
the
Executive's employment for:
(a)
Gross
negligence or gross neglect of duties;
(b)
Commission
of a felony or a crime involving moral turpitude; or
(c)
Fraud,
disloyalty, dishonesty or willful violation of any law or significant Company
policy committed in connection with the Executive's employment and resulting
in
an adverse effect on the Company.
5.3
Suicide
or Misstatement.
The
Company shall not pay any benefit under this Agreement if the Executive commits
suicide within two years after the date of this Agreement, or if the Executive
has made any material misstatement of fact on any application for life insurance
purchased by the Company thereby precluding coverage under any policies of
insurance contemplated hereunder.
Article
6
Claims
and Review Procedures
6.1
Claims
Procedure.
The
Company shall notify any person or entity that makes a claim under this
Agreement (the "Claimant") in writing, within 90 days of Claimant's written
application for benefits, of his or her eligibility or noneligibility for
benefits under the
Agreement.
If the Company determines that the Claimant is not eligible for benefits or
full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provisions of the Agreement on which the denial
is based, (3) a description of any additional information or material necessary
for the Claimant to perfect his or her claim, and a description of why it is
needed, and (4) an explanation of this Agreement's claims review procedure
and
other appropriate information as to the steps to be taken if the Claimant wishes
to have the claim reviewed. If the Company determines that there are special
circumstances
requiring
additional time to make a decision, the Company shall notify the Claimant of
the
special circumstances and the date by which a decision is expected to be made,
and may extend the time for up to an additional 90 days.
6.2
Review
Procedure.
If
the
Claimant is determined by the Company not to be eligible for benefits, or if
the
Claimant believes that he or she is entitled to greater or different benefits,
the Claimant shall have the opportunity to have such claim reviewed by the
Company by filing a petition for review with the Company within 60 days after
receipt of, the notice issued by the Company. Said
6
petition
shall state the specific reasons which the Claimant believes entitle him or
her
to benefits or to greater or different benefits. Within 60 days after receipt
by
the Company of the petition, the Company shall afford the Claimant (and counsel,
if any) an opportunity to present
his
or
her position to the Company verbally or in writing, and the Claimant (or
counsel) shall have the right to review the pertinent documents. The Company
shall notify the Claimant of its decision in writing within the 60-day period,
stating specifically the basis of its decision, written in a manner calculated
to be understood by the Claimant and the specific provisions of the Agreement
on
which the decision is based. If, because of the need for a hearing, the 60-day
period is not sufficient, the decision may be deferred for up to another 60
days
at the election of the Company, but notice of this deferral shall be given
to
the Claimant.
Article
7
Amendments
and Termination
This
Agreement may be amended or terminated only by a written agreement signed by
the
Company and the Executive.
Article
8
Miscellaneous
8.1
Binding
Effect.
This
Agreement shall bind the Executive and the Company, and their beneficiaries,
survivors, executors, successors, administrators and transferees.
8.2
No
Guarantee of Employment.
This
Agreement is not an employment policy or contract. It does not give the
Executive the right to remain an employee of the Company, nor does it interfere
with the Company's right to discharge the Executive. It also does not require
the Executive to remain an employee nor interfere with the Executive's right
to
terminate employment at any time.
8.3
Non-Transferability.
Benefits
under this Agreement cannot be sold, transferred, assigned, pledged, attached
or
encumbered in any manner.
8.4
Reorganization.
The
Company shall not merge or consolidate into or with another company, or
reorganize, or sell substantially all of its assets to another company, firm,
or
person unless such succeeding or continuing company, firm, or person agrees
to
assume and discharge the obligations of the Company under this Agreement. Upon
the occurrence of such event, the term "Company" as used in this Agreement
shall
be deemed to refer to the successor or survivor Company.
8.5
Tax
Withholding.
The
Company shall withhold any taxes that are required to be withheld from the
benefits provided under this Agreement.
8.6
Applicable
Law.
The
Agreement and all rights hereunder shall be governed by the laws of the State
of
West Virginia, except to the extent preempted by the laws of the United States
of America.
7
8.7
Unfunded Arrangement.
The
Executive and any designated beneficiary are general unsecured creditors of
the
Company for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Company to pay such benefits. The rights to benefits
are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any
insurance on the Executive's life is a general asset of the Company to which
the
Executive and beneficiary have no preferred or secured claim.
8.8
Entire
Agreement.
This
Agreement constitutes the entire agreement between the Company and the Executive
as to the continuation of salary following his separation from employment,
provided, if the Executive is then a party to an employment agreement and/or
a
Change in Control Agreement, each such agreement shall be given force and effect
in accordance with their respective terms. No rights are granted to the
Executive by virtue of this Agreement other than those specifically set forth
herein.
8.9
Administration.
The
Company shall have powers which are necessary to administer this Agreement,
including but not limited to:
(a)
Interpreting
the provisions of the Agreement;
(b)
Establishing
and revising the method of accounting for the Agreement;
(c)
Maintaining
a record of benefit payments; and
(d)
Establishing
rules and prescribing any forms necessary or desirable to administer the
Agreement.
8.10
Named
Fiduciary.
The
Company shall be the named fiduciary and plan administrator under this
Agreement. It may delegate to others certain aspects of the management and
operational responsibilities including the employment of advisors and the
delegation of ministerial duties to qualified individuals.
IN
WITNESS WHEREOF
,
the
Executive and the Company have signed this Agreement.
EXECUTIVE:
COMPANY
WESBANCO
BANK, INC.
_________________________________
By_________________________________
[NAME]
Title________________________________
8
EXHIBIT
31.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
I,
Paul
M. Limbert, certify that:
1.
I have
reviewed this Report on Form 10-Q of WesBanco, Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors:
a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant’s internal control over financial
reporting.
Date:
August 5, 2005
|
|
/s/
Paul M. Limbert
|
|
|
Paul
M. Limbert
|
|
|
President
and Chief Executive Officer
|
EXHIBIT
31.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Robert
H. Young, certify that:
1.
I have
reviewed this Report on Form 10-Q of WesBanco, Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made,
in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act
Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
5.
The
registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors:
a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the registrant’s internal control over financial
reporting.
Date:
August 5, 2005
|
|
/s/
Robert H. Young
|
|
|
Robert
H. Young
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In
connection with the Quarterly Report of WesBanco, Inc on Form 10-Q as filed
with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacity and on the date indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to his knowledge:
|
1.
|
The
Report fully complies with the requirements of Section 13(a) or 15(d)
of
the Securities Exchange Act of 1934;
and
|
|
2.
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of WesBanco,
Inc.
|
Date:
August 5, 2005
|
|
/s/
Paul M. Limbert
|
|
|
Paul
M. Limbert
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
Date:
August 5, 2005
|
|
/s/
Robert H. Young
|
|
|
Robert
H. Young
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
The
forgoing certifications are being furnished solely pursuant to Subsections
(a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code in
accordance with Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be
deemed åfiledæ for purposes of Section 18 of the Securities Exchange Act of
1934, or otherwise subject to the liability of that section, and shall not
be
deemed to be incorporated by reference into any filing under the Securities
Act
of 1933 or the Securities Exchange Act of 1934.
A
signed
original of this written statement required by Section 906 of the Sarbanes-Oxley
Act of 2002, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version
of this written statement required by Section 906, has been provided to the
Corporation and will be retained by the Corporation and furnished to the
Securities and Exchange Commission or its staff upon request.