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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
[ ] 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
[logo]
WESBANCO, INC.
(Exact name of Registrant as specified in its charter)
WEST VIRGINIA 55-0571723
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State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Bank Plaza, Wheeling, WV 26003
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 304-234-9000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each Exchange on which registered
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Common Stock $2.0833 Par Value NASDAQ
Nonredeemable Preferred Stock None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the Registrant is an accelerated filer as defined
by Rule 12b-2 of the Exchange Act. Yes [X] No [ ]
The aggregate market value of the Registrant's outstanding voting common stock
held by nonaffiliates on June 30, 2003, determined using a per share closing
price on that date of $24.03, was approximately $431,980,053.
As of February 27, 2004, there were 19,718,128 shares of WesBanco, Inc. common
stock $2.0833 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The portions of WesBanco Inc.'s 2003 Annual Report ("Annual Report to
Shareholders") for the year ended December 31, 2003 referred to in Parts I, II,
III and IV of this Form 10-K are incorporated by reference herein. The portions
of the definitive Proxy Statement of WesBanco, Inc. for the Annual Meeting of
Shareholders to be held on April 21, 2004 ("Proxy Statement") referred to in
Part III of this Form 10-K are incorporated by reference. Except for the parts
of the Annual Report to Shareholders expressly incorporated herein by reference,
the Annual Report to Shareholders is not to be deemed filed with the Securities
and Exchange Commission.
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WESBANCO, INC.
TABLE OF CONTENTS
ITEM # ITEM Page No.
- --------------- ----------------------------------------------------------------------------------------------- ---------------
Part I
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1 Business 3
2 Properties 9
3 Legal Proceedings 9
4 Submission of Matters to a Vote of Security Holders 10
Part II
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5 Market for the Registrant's Common Equity, Related Stockholders Matters, and Issuer 10
Repurchases of Equity Securities
6 Selected Financial Data 11
7 Management's Discussion and Analysis of Financial Condition and Results of Operations 11
7A Quantitative and Qualitative Disclosures about Market Risk 11
8 Financial Statements and Supplementary Data 11
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11
9A Controls and Procedures 11
Part III
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10 Directors and Executive Officers of the Registrant 11 - 12
11 Executive Compensation 12
12 Security Ownership of Certain Beneficial Owners and Management 12
13 Certain Relationships and Related Transactions 12
14 Principal Accountant Fees and Services 12
Part IV
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15 Exhibits, Financial Statement Schedules and Reports on Form 8-K 12 - 13
Signatures 14
Exhibits Index E-1 - E-2
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PART I
ITEM 1. BUSINESS
GENERAL
WesBanco Inc. ("WesBanco"), a bank holding company headquartered in
Wheeling, West Virginia, offers a full range of financial services including
retail banking, corporate banking, personal and corporate trust services,
brokerage services, mortgage banking and insurance. WesBanco offers these
services through two reportable segments, community banking and trust and
investment services. Additional information regarding WesBanco's business
segments is set forth under the heading "Note 21: Business Segments" on page
E-26 of Exhibit 13 incorporated herein by reference.
On March 1, 2002, WesBanco completed the acquisition of American
Bancorporation ("American") and the merger of American's affiliate, Wheeling
National Bank, Wheeling, West Virginia, with and into WesBanco's affiliate,
WesBanco Bank, Inc. As of the acquisition date, American operated 20 offices and
had total assets of approximately $678 million. WesBanco's merger with American
expanded its market share in the tri-state area and included expansion into new
markets with an office in Washington, Pennsylvania, an office in Cambridge, Ohio
and four offices in Columbus, Ohio. Additional information regarding WesBanco's
acquisition of American is set forth under the heading "Note 2: Completed
Business Combination" on pages E-10 and E-11 of Exhibit 13 incorporated herein
by reference.
As of December 31, 2003, WesBanco operated a commercial bank, WesBanco
Bank, Inc. (the "Bank"), through 72 offices and 105 ATM machines located in West
Virginia, Central and Eastern Ohio, and Western Pennsylvania. Total assets of
WesBanco Bank, Inc. as of December 31, 2003 approximated $3.4 billion. WesBanco
Bank, Inc. also offers trust and investment services as well as various
alternative investment products including mutual funds and annuities. The market
value of assets under management of the trust and investment services segment
was approximately $2.8 billion at December 31, 2003. These assets are held by
WesBanco Bank, Inc. in fiduciary or agency capacities for their customers and
therefore are not included as assets on WesBanco's Consolidated Balance Sheet.
WesBanco offers additional services through its non-banking affiliates, WesBanco
Insurance Services, Inc., a multi-line insurance agency specializing in
property, casualty and life insurance for personal and commercial clients and
WesBanco Securities, Inc., a full service broker-dealer, which also offers
discount brokerage services. WesBanco Asset Management, Inc. and WesBanco
Services, Inc., which were incorporated in November 2002, collectively hold
certain investment securities and real estate loans of WesBanco Bank, Inc. and
assist in managing these assets. There were approximately 1,124 full-time
equivalent employees employed by all WesBanco affiliates as of December 31,
2003.
As of December 31, 2003, none of WesBanco's affiliates were engaged in any
operations in foreign countries and none had transactions with customers in
foreign countries.
WesBanco also serves as investment adviser to a family of mutual funds
under the name "WesMark Funds" which includes the WesMark Growth Fund, the
WesMark Balanced Fund, the WesMark Bond Fund, the WesMark West Virginia
Municipal Bond Fund, the WesMark Small Company Growth Fund and the Automated
Cash Management Trust.
COMPETITION
Competition in the form of price and service from other banks, including
local, regional and national banks and financial companies such as savings and
loans, internet banks, credit unions, finance companies, and brokerage firms is
intense in most of the markets served by WesBanco and its subsidiaries.
WesBanco's trust and investment services segment receives competition from
commercial bank and trust companies, mutual fund companies, investment advisory
firms, law firms, brokerage firms and other financial services companies.
Mergers between, and the expansion of, financial institutions both within and
outside West Virginia have provided significant competitive pressure in major
markets. Since 1995, when federal interstate banking legislation became
effective that made it permissible for bank holding companies in any state to
acquire banks in any other state, and for banks to establish interstate branches
(subject to certain limitations by individual states), actual or potential
competition in each of WesBanco's markets has been intensified. Internet
banking, offered both by established traditional institutions and by start-up
Internet-only banks, constitutes another significant form of competitive
pressure on WesBanco's business. Finally, financial services reform legislation
enacted in November 1999 eliminates the long-standing Glass-Steagall Act
restrictions on securities activities of bank holding companies and banks. The
legislation permits bank holding companies that elect to become financial
holding companies to engage in a broad range of financial activities, including
defined securities and insurance activities, and to affiliate with securities
and insurance firms. Correspondingly, it permits securities and insurance firms
to engage in banking activities under specified conditions. The same legislation
allows banks to have financial subsidiaries that may engage in certain
activities not otherwise permissible for banks.
In addition to the impact of federal and state regulation, the bank and
nonbank subsidiaries of WesBanco are affected significantly by the actions of
the Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
SUPERVISION AND REGULATION
As a registered bank holding company, WesBanco is subject to the
supervision of the Federal Reserve Board and is required to file with the
Federal Reserve Board reports and other information regarding its business
operations and the business operations of its subsidiaries. WesBanco is also
subject to examination by the Federal Reserve Board and is required to obtain
Federal Reserve Board approval prior to acquiring, directly or indirectly,
ownership or control of voting shares of any bank, if, after such acquisition,
it would own or control more than 5.0% of the voting stock of such bank. In
addition, pursuant to federal law and regulations promulgated by the Federal
Reserve Board, WesBanco may only engage in, or own or control companies that
engage in, activities deemed by the Federal Reserve Board to be so closely
related to banking as to be a proper incident thereto. Prior to engaging in most
new business activities, WesBanco must obtain approval from the Federal Reserve
Board.
WesBanco's banking subsidiary, WesBanco Bank, Inc., is a West Virginia
banking corporation and is member bank of the Federal Reserve System. It is
subject to examination and supervision by the Federal Reserve Board and the West
Virginia Division of Banking. Its deposits are insured by the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). WesBanco's
nonbank
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subsidiaries are also subject to examination and supervision by the Federal
Reserve Board and examination by other federal and state agencies, including, in
the case of certain securities activities, regulation by the Securities and
Exchange Commission. The banking subsidiary maintains one designated financial
subsidiary, WesBanco Insurance Services, Inc.
On July 22, 2003, the Bank, a wholly-owned banking subsidiary of WesBanco,
Inc., entered into an informal agreement styled as a Memorandum of Understanding
with the Federal Reserve Bank of Cleveland (the "Federal Reserve") and the West
Virginia Department of Banking (collectively the "regulatory agencies") to
improve and strengthen the Bank's Bank Secrecy Act and anti-money laundering
controls and procedures. The Bank has worked with the Federal Reserve and
outside consultants to implement revised policies and enhanced procedures, which
includes improvements in its bank secrecy and anti-money laundering
record-keeping and reporting procedures, implementation of an enhanced customer
due diligence program with additional technological resources, improvements to
internal compliance procedures and audit programs and testing of the processes
and controls. During the fourth quarter of 2003, an independent third party
audit firm has completed an audit of the newly-implemented procedures.
The informal agreement requires quarterly reporting of the Bank's
corrective actions under the plan until all corrections required under the terms
of the informal agreement are completed to the satisfaction of the regulatory
agencies. The Bank has filed its second quarterly response to the Federal
Reserve under the Memorandum of Understanding.
HOLDING COMPANY STRUCTURE
WesBanco has one state bank subsidiary, WesBanco Bank, Inc., as well as
nonbank subsidiaries, which are described further in "Item 1: Business -
General" section of this Form 10-K. The state bank subsidiary is subject to
affiliate transaction restrictions under federal law which limit the transfer of
funds by the subsidiary bank to the parent and any nonbank subsidiaries of the
parent, whether in the form of loans, extensions of credit, investments, or
asset purchases. Such transfers by a subsidiary bank to its parent corporation
or to any individual nonbank subsidiary of the parent are limited in amount to
10% of the subsidiary bank's capital and surplus and, with respect to such
parent together with all such nonbank subsidiaries of the parent, to an
aggregate of 20% of the subsidiary bank's capital and surplus. Furthermore, such
loans and extensions of credit are required to be secured in specified amounts.
In addition, all affiliate transactions must be conducted on terms and under
circumstances that are substantially the same as such transactions with
unaffiliated entities. WesBanco has a $7.5 million line of credit from its
subsidiary bank, which was not drawn upon as of December 31, 2003.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with engaging
in unsafe and unsound practices for failure to commit resources to such a
subsidiary bank. This capital injection may be required at times when WesBanco
may not have the resources to provide it. Any loans by a holding company to its
subsidiary banks are subordinate in right of payment to deposits and to certain
other indebtedness of such subsidiary bank. Moreover, in the event of a bank
holding company's bankruptcy, any commitment by such holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank will
be assumed by the bankruptcy trustee and entitled to a priority of payment.
DIVIDEND RESTRICTIONS
Dividends from WesBanco's subsidiary bank are a significant source of funds
for payment of dividends to WesBanco's shareholders. In the year ended December
31, 2003, WesBanco declared cash dividends to its shareholders of approximately
$19.2 million. There are, however, statutory limits on the amount of dividends
that WesBanco's subsidiary bank can pay to WesBanco without regulatory approval.
Under applicable federal regulations, appropriate bank regulatory agency
approval is required if the total of all dividends declared by a bank in any
calendar year exceeds the available retained earnings and exceeds the aggregate
of the bank's net profits (as defined by regulatory agencies) for that year and
its retained net profits for the preceding two years, less any required
transfers to surplus or a fund for the retirement of any preferred stock. As of
December 31, 2003 and 2002, WesBanco's banking subsidiary could not have
declared any dividends to be paid to WesBanco without prior approval from
regulatory agencies. During the second quarter of 2003, federal and state
regulatory agencies granted approval to WesBanco's banking subsidiary to pay a
$40.0 million dividend to WesBanco.
If, in the opinion of the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice which, depending on the financial condition of the bank, could include
the payment of dividends, such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board
has issued policy statements provide that insured banks and bank holding
companies should generally only pay dividends out of current operating earnings.
Additional information regarding dividend restrictions is set forth in
"Note 19: Regulatory Matters" on page E-24 of Exhibit 13 incorporated herein by
reference.
FDIC INSURANCE
WesBanco's banking subsidiary is classified by the FDIC as a
well-capitalized institution in the highest supervisory subcategory, and is
therefore not obliged under current FDIC assessment practices to pay deposit
insurance premiums on its deposits insured by the BIF. The FDIC may alter its
assessment practices in the future if required by developments affecting the
resources of the BIF. The FDIC is also conducting a comprehensive review of the
deposit insurance system to study alternatives for pricing, funding and
coverage.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and leverage
ratio guidelines for bank holding companies such as WesBanco. The risk-based
capital ratio guidelines establish a systematic analytical framework that makes
regulatory capital requirements more sensitive to differences in risk profiles
among banking organizations, takes off-balance sheet exposures into explicit
account in assessing capital adequacy, and minimizes disincentives to holding
liquid, low-risk assets. Under the guidelines and related policies, bank holding
companies must maintain capital sufficient to meet both a risk-based asset ratio
test and a leverage ratio test on a consolidated basis. The risk-based ratio is
determined by allocating assets and specified off-balance sheet commitments into
four weighted categories, with higher weighting being assigned to categories
perceived as representing greater risk. A bank holding company's capital is then
divided by total risk-weighted assets to yield the risk-based ratio. The
leverage ratio is determined by relating core capital to total assets adjusted
as specified in the guidelines. WesBanco's subsidiary bank is subject to
substantially similar capital requirements.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. Institutions that must incorporate market
risk exposure into their risk-based capital requirements may also have a third
tier of capital in the form of restricted short-term subordinated debt. "Tier
1", or core capital, includes common equity, noncumulative perpetual preferred
stock excluding auction rate issues, and minority interests in equity accounts
of consolidated subsidiaries, less goodwill and, with certain limited
exceptions, all other intangible assets. Bank holding companies, however, may
include cumulative preferred stock in their Tier 1 capital, up to a limit of 25%
of such Tier 1 capital. "Tier 2", or supplementary capital, includes, among
other things, cumulative and limited-life preferred stock, hybrid capital
instruments, mandatory convertible securities, qualifying subordinated debt, and
the allowance for loan and lease losses, subject to certain limitations. "Total
capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators require
that all intangible assets, with certain limited exceptions, be deducted from
Tier 1 capital. Under the Federal Reserve Board's rules, the only types of
intangible assets that may be included in (i.e., not
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deducted from) a bank holding company's capital are originated or purchased
mortgage servicing rights, non-mortgage servicing assets, and purchased credit
card relationships, provided that, in the aggregate, the total amount of these
items included in capital does not exceed 100% of Tier 1 capital.
Under the risk-based guidelines, financial institutions are required to
maintain a risk-based ratio, which is total capital to risk-weighted assets, of
8%, of which 4% must be Tier 1 capital. The appropriate regulatory authority may
set higher capital requirements when an institution's circumstances warrant.
The Federal Reserve Board has established a minimum ratio of Tier 1 capital
to total assets of 3.0% for strong bank holding companies rated composite "1"
under the BOPEC ("bank", "other", parent", "earnings", and "capital") components
rating system of bank holding companies, and for bank holding companies that
have implemented the Board's risk-based capital measure for market risk. For all
other bank holding companies, the minimum ratio of Tier 1 capital to total
assets is 4.0%. Banking organizations with supervisory, financial, operational,
or managerial weaknesses, as well as organizations that are anticipating or
experiencing significant growth are expected to maintain capital ratios well
above the minimum levels. Moreover, higher capital ratios may be required for
any bank holding company if warranted by its particular circumstances or risk
profile. In all cases, bank holding companies should hold capital commensurate
with the level and nature of the risks, including the volume and severity of
problem loans, to which they are exposed.
In early 2002, bank regulatory agencies established special minimum capital
requirements for equity investments in nonfinancial companies. The requirements
consist of a series of marginal capital charges that increase within a range
from 8% to 25% as a financial institution's overall exposure to equity
investments increases as a percentage of its Tier 1 capital. At December 31,
2003, capital charges relating to WesBanco's equity investments in nonfinancial
companies were immaterial.
Failure to meet applicable capital guidelines could subject the financial
institution to a variety of enforcement remedies available to the federal
regulatory authorities including limitations on the ability to pay dividends,
the issuance by the regulatory authority of a capital directive to increase
capital, and the termination of deposit insurance by the FDIC, as well as to the
measures described below under "Prompt Corrective Action" as applicable to
undercapitalized institutions.
As of December 31, 2003, WesBanco's Tier 1 and total capital to
risk-adjusted assets ratios were 13.31% and 14.50%, respectively. As of December
31, 2003, WesBanco's bank subsidiary also had capital in excess of the minimum
requirements. Neither WesBanco nor its bank subsidiary has been advised by the
appropriate federal banking regulator of any specific leverage ratio applicable
to it. As of December 31, 2003, WesBanco's leverage ratio was 8.76%.
The risk-based capital standards of the Federal Reserve Board and the FDIC
specify that evaluations by the banking agencies of a bank's capital adequacy
will include an assessment of the exposure to declines in the economic value of
the bank's capital due to changes in interest rates. These banking agencies
issued a joint policy statement on interest rate risk describing prudent methods
for monitoring such risk that rely principally on internal measures of exposure
and active oversight of risk management activities by senior management.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires federal banking regulatory authorities to take "prompt
corrective action" with respect to depository institutions that do not meet
minimum capital requirements. For these purposes, FDICIA establishes five
capital tiers: well-capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
An institution is deemed to be "well-capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject
to a regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater, and, generally, a
Tier 1 leverage ratio of 4% or greater and the institution does not meet the
definition of a "well-capitalized" institution. An institution that does not
meet one or more of the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based capital ratio that
is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%, or a
Tier 1 leverage ratio that is less than 3%, it is deemed to be "significantly
undercapitalized". Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%. As of December
31, 2003, WesBanco's subsidiary bank had capital levels that met the "well
capitalized" standards under such regulations.
FDICIA generally prohibits a depository institution from making any capital
distribution, including payment of a cash dividend, or paying any management fee
to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized institutions are subject to growth
limitations and are required to submit a capital restoration plan. If any
depository institution subsidiary of a holding company is required to submit a
capital restoration plan, the holding company would be required to provide a
limited guarantee regarding compliance with the plan as a condition of approval
of such plan by the appropriate federal banking agency. If an undercapitalized
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized institutions may
be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
GRAMM-LEACH-BLILEY ACT OF 1999 (THE "GLB ACT")
Under the GLB Act enacted in 1999, banks are no longer prohibited by the
Glass-Steagall Act from associating with, or having management interlocks with,
a business organization engaged principally in securities activities. By
qualifying as a new entity known as a "financial holding company", a bank
holding company may acquire new powers not otherwise available to it. In order
to qualify, a bank holding company's depository subsidiaries must all be both
well-capitalized and well managed, and must be meeting their Community
Reinvestment Act obligations. The bank holding company must also declare its
intention to become a financial holding company to the Federal Reserve Board and
certify that its depository subsidiaries meet the capitalization and management
requirements. The repeal of the
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Glass-Steagall Act and the availability of new powers both became effective on
March 11, 2000. WesBanco has not elected to become a financial holding company
under the GLB Act, though it has qualified a subsidiary of its bank as a
financial subsidiary under the GLB Act.
Financial holding company powers relate to "financial activities" that are
determined by the Federal Reserve Board, in coordination with the Secretary of
the Treasury, to be financial in nature, incidental to an activity that is
financial in nature, or complementary to a financial activity, provided that the
complementary activity does not pose a safety and soundness risk. The statute
itself defines certain activities as financial in nature, including but not
limited to underwriting insurance or annuities; providing financial or
investment advice; underwriting, dealing in, or making markets in securities;
merchant banking, subject to significant limitations; insurance company
portfolio investing, subject to significant limitations; and any activities
previously found by the Federal Reserve Board to be closely related to banking.
National and state banks are permitted under the GLB Act, subject to
capital, management, size, debt rating, and Community Reinvestment Act
qualification factors, to have "financial subsidiaries" that are permitted to
engage in financial activities not otherwise permissible. However, unlike
financial holding companies, financial subsidiaries may not engage in insurance
or annuity underwriting; developing or investing in real estate; merchant
banking, for at least five years, or insurance company portfolio investing.
Other provisions of the GLB Act establish a system of functional regulation for
financial holding companies and banks involving the Securities and Exchange
Commission, the Commodity Futures Trading Commission, and state securities and
insurance regulators; deal with bank insurance sales and title insurance
activities in relation to state insurance regulation; prescribe consumer
protection standards for insurance sales; and establish minimum federal
standards of privacy to protect the confidentiality of the personal financial
information of consumers and regulate its use by financial institutions. Federal
bank regulatory agencies have issued certain rules over the past two years
relating to the implementation of the GLB Act.
USA PATRIOT ACT OF 2001
The USA PATRIOT Act of 2001 (the "USA Patriot Act") was signed into law
primarily as result of the terrorist attacks of September 11, 2001. The USA
Patriot Act is comprehensive anti-terrorism legislation that substantially
broadened the scope of anti-money laundering laws and regulations by imposing
significant new compliance and due diligence obligations, creating new crimes
and penalties and expanding the extra-territorial jurisdiction of the United
States.
The regulations adopted by the United States Treasury Department under the
USA Patriot Act impose new obligations on financial institutions, such as
WesBanco's broker-dealer subsidiary and its bank subsidiary, to maintain
appropriate policies, procedures and control to detect, prevent and report money
laundering and terrorist financing. Additionally, the regulations require that
WesBanco's banking subsidiary, upon request from the appropriate federal
regulatory agency, provide records related to anti-money laundering, perform due
diligence of private banking and correspondent accounts, establish standards for
verifying customer identity and perform other related duties. Failure of a
financial institution to comply with the USA Patriot Act's requirements could
have serious legal and reputational consequences for the institution.
WEB SITE ACCESS TO WESBANCO'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION
All of WesBanco's electronic filings for 2003, filed with the Securities
and Exchange Commission ("SEC"), including the Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
these reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, are made available at no cost on WesBanco's web
site, www.wesbanco.com, through the Investor Relations link as soon as
reasonably practicable after WesBanco files such material with, or furnishes it
to, the SEC. WesBanco's SEC filings are also available through the SEC's web
site at www.sec.gov.
RISK FACTORS
You should carefully consider the risks described below, as well as the other
information included or incorporated by reference in this Annual Report, before
making an investment in our common stock. The risks described below are not the
only ones we face in our business. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also
impair our business operations. If any of the following risks occur, our
business, financial condition or operating results could be materially harmed.
In such an event, our common stock could decline in price, and you may lose all
or part of your investment.
INCREASED BANK SECRECY ACT CONTROLS AND PROCEDURES MAY NEGATIVELY IMPACT
EARNINGS DUE TO INCREASED COMPLIANCE COSTS.
On July 22, 2003, the Bank entered into an informal agreement styled as a
Memorandum of Understanding with the Federal Reserve Bank of Cleveland (the
"Federal Reserve") and the West Virginia Department of Banking (collectively the
"regulatory agencies") to improve and strengthen the Bank's Bank Secrecy Act and
anti-money laundering controls and procedures. The informal agreement requires
quarterly reporting of the Bank's corrective actions under the plan until all
corrections required under the terms of the informal agreement are completed to
the satisfaction of the regulatory agencies. The Bank has worked with the
Federal Reserve and outside consultants to implement revised policies and
enhanced procedures, which includes improvements in its bank secrecy and
anti-money laundering record-keeping and reporting procedures, implementation of
an enhanced customer due diligence program with additional technological
resources, improvements to internal compliance procedures and audit programs and
testing of the processes and controls. An independent third party audit firm has
completed an audit of the newly-implemented procedures. These necessary
improvements will most likely lead to higher expenses, which could negatively
impact WesBanco's future earnings.
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ACQUISITION OPPORTUNITIES MAY NOT BE AVAILABLE TO THE COMPANY IN THE FUTURE.
The Company continually evaluates opportunities to acquire other
businesses. However, the Company may not have the opportunity to make suitable
acquisitions on favorable terms in the future, which could negatively impact the
growth of its business. The Company expects that other banking and financial
companies, many of which have significantly greater resources, will compete with
it to acquire compatible businesses. This competition could increase prices for
acquisitions that the Company would likely pursue, and its competitors may have
greater resources than it does. Also, acquisitions of regulated business such as
banks are subject to various regulatory approvals. If the Company fails to
receive the appropriate regulatory approvals, it will not be able to consummate
an acquisition that it believes is in its best interests.
Any future acquisitions may result in unforeseen difficulties, which could
require significant time and attention from our management that would otherwise
be directed at developing our existing business. In addition, we could discover
undisclosed liabilities resulting from any acquisitions for which we may become
responsible. Further, the benefits that we anticipate from these acquisitions
may not develop.
THE COMPANY MAY BE REQUIRED TO WRITE DOWN GOODWILL AND OTHER INTANGIBLE ASSETS,
CAUSING ITS FINANCIAL CONDITION AND RESULTS TO BE NEGATIVELY AFFECTED.
When the Company acquires a business, a portion of the purchase price of
the acquisition is allocated to goodwill and other identifiable intangible
assets. The amount of the purchase price which is allocated to goodwill and
other intangible assets is determined by the excess of the purchase price over
the net identifiable assets acquired. At December 31, 2003, the Company's
goodwill and other identifiable intangible assets were approximately $49.9
million. Under current accounting standards, if the Company determines goodwill
or intangible assets are impaired, it would be required to write down the value
of these assets. The Company conducts an annual review to determine whether
goodwill and other identifiable intangible assets are impaired. The Company
recently completed such an impairment analysis and concluded that no impairment
charge was necessary for the year ended December 31, 2003. The Company cannot
provide assurance that it will not be required to take an impairment charge in
the future. Any impairment charge would have a negative effect on its
stockholders' equity and financial results and may cause a decline in our stock
price.
DUE TO INCREASED COMPETITION, THE COMPANY MAY NOT BE ABLE TO ATTRACT AND RETAIN
BANKING CUSTOMERS AT CURRENT LEVELS.
The Company faces competition from the following:
o local, regional and national banks;
o savings and loans;
o internet banks
o credit unions;
o finance companies; and
o brokerage firms serving the Company's market areas
In particular, the Bank's competitors include several major national
financial companies whose greater resources may afford them a marketplace
advantage by enabling them to maintain numerous banking locations and mount
extensive promotional and advertising campaigns. Additionally, banks and other
financial institutions may have products and services not offered by the
Company, which may cause current and potential customers to choose those
institutions. Areas of competition include interest rates for loans and
deposits, efforts to obtain deposits and range and quality of services provided.
If the Company is unable to attract new and retain current customers, loan and
deposit growth could decrease causing the Company's results of operations and
financial condition to be negatively impacted.
THE COMPANY MAY NOT BE ABLE TO EXPAND ITS TRUST AND INVESTMENT SERVICES SEGMENT
AND RETAIN ITS CURRENT CUSTOMERS.
As of December 31, 2003, the Company had approximately $2.8 billion in
assets under management, which account for 5.9% of the Company's revenues. The
Company may not be able to attract new and retain current investment management
clients due to competition from the following:
o commercial banks and trust companies;
o mutual fund companies;
o investment advisory firms;
o law firms;
o brokerage firms; and
o other financial services companies.
Its ability to successfully attract and retain investment management
clients is dependent upon its ability to compete with competitors' investment
products, level of investment performance, client services and marketing and
distribution capabilities. Due to the changes in economic conditions, the
performance of the Trust and Investment services segment may be negatively
impacted by the financial markets in which investment customer's assets are
invested, causing the customer to seek other alternative investment options. If
the Company is not successful, its results from operations and financial
position may be negatively impacted.
CUSTOMERS MAY DEFAULT ON THE REPAYMENT OF LOANS.
The Bank's customers may default on the repayment of loans, which may
negatively impact the Company's earnings due to loss of principal and interest
income. Increased operating expenses may result from the allocation of
management time and resources to the collection and work-out of the loan.
Collection efforts may or may not be successful causing the Company to write off
the loan or repossess the collateral securing the loan, which may or may not
exceed the balance of the loan.
Management evaluates the adequacy of the allowance for loan losses at least
quarterly, which includes testing certain individual loans as well as collective
pools of loans for impairment. This evaluation includes an assessment of actual
loss experience within each category of the
7
portfolio, individual commercial and commercial real estate loans that exhibit
credit weakness; current economic events, including employment statistics,
trends in bankruptcy filings, and other pertinent factors; industry or
geographic concentrations, and regulatory guidance. Additions to the allowance
for loan loss may result in an expense for the period.
The Company's regulatory agencies periodically review the allowances for
loan losses. Based on their assessment the regulatory agencies may require the
Company to adjust the allowance for loan loss. These adjustments could
negatively impact the Banks' results of operations or financial position.
ECONOMIC CONDITIONS IN THE COMPANY'S MARKET AREAS COULD NEGATIVELY IMPACT
EARNINGS.
A downturn in the local and regional economies could negatively impact the
Company's banking business. The Banks serve both individuals and business
customers throughout the state of West Virginia, Central and Eastern Ohio and
Western Pennsylvania. The ability of the Banks' customers to repay their loans
is strongly tied to the economic conditions in these areas. These economic
conditions may also force customers to utilize deposits held by the Bank in
order to pay current expenses causing the Bank's deposit base to shrink. As a
result the Bank may have to borrow funds at higher rates in order to meet
liquidity needs. These events may have a negative impact on the Company's
earnings.
CURRENT MARKET INTEREST RATES AND COST OF FUNDS MAY NEGATIVELY IMPACT THE
COMPANY'S BANKING BUSINESS.
Fluctuations in interest rates may negatively impact the business of the
Bank. The Bank's main source of income from operations is net interest income,
which is equal to the difference between the interest income received on
interest-bearing assets (usually loans and investment securities) and the
interest expense incurred in connection with interest-bearing liabilities
(usually deposits and borrowings). These rates are highly sensitive to many
factors beyond the Company's control, including general economic conditions,
both domestic and foreign and the monetary and fiscal policies of various
governmental and regulatory authorities. The Bank's net interest income can be
affected significantly by changes in market interest rates. Changes in relative
interest rates may reduce the Bank's net interest income as the difference
between interest income and interest expense decreases. As a result, the Bank
has adopted asset and liability management policies to minimize the potential
adverse effects of changes in interest rates on net interest income, primarily
by altering the mix and maturity of loans, investments and funding sources.
However, even with these policies in place, the Company cannot assure you that a
decrease in interest rates will not negatively impact its results from
operations or financial position.
The Company's cost of funds for banking operations may increase as a result
of general economic conditions, interest rates and competitive pressures. The
Bank has traditionally obtained funds principally through deposits and through
borrowings. As a general matter, deposits are a cheaper source of funds than
borrowings, because interest rates paid for deposits are typically less than
interest rates charged for borrowings. If, as a result of general economic
conditions, market interest rates, competitive pressures or otherwise, the value
of deposits at the Bank decreases relative to its overall banking operations,
the Bank may have to rely more heavily on borrowings as a source of funds in the
future.
CHANGES IN REGULATORY CAPITAL REGULATIONS BY THE FEDERAL RESERVE BOARD MAY
NEGATIVELY IMPACT THE COMPANY'S CAPITAL LEVELS.
The Company currently has $30.0 million in trust preferred securities on it
balance sheet. The trust preferred securities are presented as a separate
category of long-term debt on the Consolidated Balance Sheet. For regulatory
purposes, the trust preferred securities are included in Tier I Capital in
accordance with regulatory reporting requirements. In July 2003, the Board
issued a supervisory letter indicating that trust preferred securities currently
will continue to qualify as Tier 1 capital for regulatory purposes until further
notice. The Board has also stated that it will continue to review the regulatory
implications of any accounting treatment changes and will provide further
guidance, if necessary. Should the Board disallow trust preferred securities to
be treated as Tier 1 capital due to changes made by the Financial Accounting
Standards Board ("FASB") the Company's Tier 1 capital ratio may be negatively
impacted. The Company's earnings may also be negatively impacted due to the
possible prepayment penalties associated with the redemption of the trust
preferred securities.
BORROWINGS FROM THE FEDERAL HOME LOAN BANK SYSTEM.
The Bank is currently a member bank of the Federal Home Loan of Pittsburgh
("FHLB"). Membership in this system allows the Company's subsidiary bank to
participate in various programs offered by its member banks. The company's bank
borrows funds from the FHLB, which are secured by a blanket lien on certain
residential mortgage loans or securities with a market value at least equal to
the outstanding balances. Recent weakness with certain Federal Home Loan Banks,
including Pittsburgh, may impact the collateral necessary to secure borrowings
and limit the borrowings extended to its member banks, as well as require
additional capital contributions by its member banks. Should this occur the
company's short term liquidity needs could be negatively impacted. At December
31, 2003 the Bank owns $22.7 million of FHLB stock, which has a dividend yield
approximating 1.40%. This dividend may be eliminated by the FHLB at anytime in
the future in order for the FHLB to restore its retained earnings. In such case,
the FHLB stock owned by the Company may be deemed a non-earning asset.
THE COMPANY'S FUTURE DEPENDS ON THE SUCCESSFUL GROWTH OF ITS SUBSIDIARIES.
The Company's primary business activity for the foreseeable future will be
to act as the holding company of the Bank and subsidiaries. Therefore, the
Company's future profitability will depend on the success and growth of these
subsidiaries. In the future, part of the Company's growth may come from buying
other banks and buying or establishing other companies. Such entities may not be
profitable after they are purchased or established, and they may lose money or
be dilutive to earnings per share, particularly for the first few years. A new
bank or company may bring with it unexpected liabilities, bad loans, or poor
employee relations, or the new bank or company may lose customers and the
associated revenue.
8
THE COMPANY'S ABILITY TO PAY DIVIDENDS IS LIMITED.
Holders of shares of the Company's common stock are entitled to dividends
if, when, and as declared by the Company's Board of Directors out of funds
legally available for that purpose. Although the Board of Directors has declared
cash dividends in the past, the current ability to pay dividends is largely
dependent upon the receipt of dividends from the Bank. Federal and state laws
impose restrictions on the ability of the Bank to pay dividends. Additional
restrictions are placed upon the Company by the policies of federal regulators,
including the Federal Reserve Board's November 14, 1985 policy statement, which
provides that bank holding companies should pay dividends only out of the past
year's net income, and then only if their prospective rate of earnings retention
appears consistent with their capital needs, asset quality, and overall
financial condition. In general, future dividend policy is subject to the
discretion of the Board of Directors and will depend upon a number of factors,
including the Company's and Bank's future earnings, capital requirements,
regulatory constraints and financial condition.
ITEM 2. PROPERTIES
The Registrant's subsidiaries generally own their respective offices,
related facilities and unimproved real property that is held for future
expansion. As of December 31, 2003, WesBanco operated 72 banking offices in West
Virginia, Central and Eastern Ohio and Western Pennsylvania, of which 60 are
owned and 12 are operated under long-term leases. These leases expire at various
dates through April 2010 and generally include options to renew.
The main office of the Registrant is located at One Bank Plaza, Wheeling,
West Virginia, in a building owned by the Bank. The building contains
approximately 100,000 square feet and serves as the main office for both
WesBanco's community banking segment and the trust and investment services
segment. During 1998, an office building located adjacent to the main office was
acquired by WesBanco Properties, Inc., an affiliate of WesBanco. The Bank's back
office operations currently occupy approximately one half of the office space
available, with the remaining portion leased to unrelated businesses.
The consolidated investment in net bank premises and equipment at December
31, 2003 was $53.2 million compared to $55.7 million at December 31, 2002.
At various building locations, WesBanco provides commercial office space
and will continue to look for opportunities to rent office space to unrelated
businesses. Rental income totaled $0.7 million for 2003 compared to $0.6 million
for 2002. For additional disclosures related to WesBanco's properties, other
fixed assets and leases, see "Note 5: Premises and Equipment" on page E-13 of
Exhibit 13 incorporated herein by reference.
ITEM 3. 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), presently pending in the
United States District Court for the Northern District of West Virginia.
WesBanco has essentially become 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 outside 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
they have calculated the benefits in accordance with the requirements of the
1995 Order. The purported class of plaintiffs now asserts 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
has substantially limited the class of plaintiffs to a group of approximately 37
individuals and has granted partial summary judgment to significantly reduce the
scope and extent of the underlying case. The Judge handling the case is a
military reservist and has been called to active duty and there is some
uncertainty as to the timeframe for proceedings in the matter. It is not
believed that the case presents any material risk of exposure to WesBanco
though, as with any litigation matter, there are uncertainties in the outcome of
the proceeding which cannot be determined with any degree of certainty.
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 did make a loan
to the plaintiff's company which became delinquent and the bank did recover 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. The broad and
sweeping nature of the alleged conduct makes it difficult to assess the
substance of Complaint.
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 at the request of the defendants, including the bank. The
bank intends to vigorously defend the suit and believes that there is no merit
to the allegations of the suits.
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.
9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER REPURCHASES OF EQUITY SECURITIES
WesBanco's common stock is quoted on The NASDAQ Stock Market ("NASDAQ"),
with a trading symbol of WSBC. The approximate number of holders of WesBanco's
$2.0833 par value common stock as of December 31, 2003 was 5,485. The number of
holders does not include WesBanco employees who have had stock allocated to them
through WesBanco's KSOP. All WesBanco employees who meet the eligibility
requirements of the KSOP are included in the Plan.
Quarterly price information, reflecting high and low sales prices as reported by
NASDAQ and quarterly dividends per share for 2003 and 2002 are as presented
below:
2003 2002
----------------------------------------- -------------------------------------------
Dividend Dividend
High Low Declared High Low Declared
=================================================================== ===========================================
Fourth quarter $28.83 $23.40 $.240 $26.00 $19.32 $.235
Third quarter 26.00 23.39 .240 25.00 19.66 .235
Second quarter 26.50 22.58 .240 25.52 22.35 .235
First quarter 25.50 21.67 .240 24.00 19.99 .230
- ------------------------------------------------------------------- -------------------------------------------
On June 19, 2003, WesBanco Capital Trust II formed by WesBanco under the
laws of Delaware, issued a $13.0 million Junior Subordinated Note, due June 30,
2033, to a statutory trust which issued 13,000 shares of trust preferred
securities with a liquidation value of $13.0 million, based upon this note and a
guarantee from WesBanco. In connection with the issuance of the trust preferred
securities WesBanco Capital Trust II issued 410 common securities to WesBanco
with a liquidation value of $0.4 million. The trust preferred securities were
issued and sold in a private placement offering. Interest is payable quarterly
at a rate of 5.80% for the first five years ("no call period"), which will then
reset quarterly beginning on June 30, 2008 and thereafter, at a rate equal to
the three-month LIBOR index plus 3.15%. The note matures on June 30, 2033, and
may be redeemed on or after June 30, 2008, without penalty, after the no call
period. The note and trust preferred securities provide that WesBanco has the
right to elect to defer the payment of interest on the note 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 debenture, it may not, among other things, declare or pay any dividends on
its common stock during any such period. The net proceeds received by WesBanco
are being used to reduce outstanding indebtedness, fund the current stock
repurchase plan and for general working capital purposes.
The trust preferred securities were sold to Trapeza CDO III, LLC. A
discount in the amount of $0.3 million was earned by Trapeza CDO III, LLC in
connection with the private placement. This private placement was limited to a
single institutional investor which qualified as an "accredited investor" as
defined in Rule 501(a) of Regulation D. The issuance of the note and the related
trust preferred securities was exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act").
On June 26, 2003, WesBanco, Inc. Capital Statutory Trust III formed by
WesBanco under the laws of Connecticut, issued a $17.0 million Fixed/Floating
Rate Junior Subordinated Deferrable Interest Debenture due June 26, 2033, to a
statutory trust which issued 17,000 shares of trust preferred securities with a
liquidation value of $17.0 million, based upon this debenture and a guarantee
from WesBanco. In connection with the issuance of the trust preferred securities
WesBanco, Inc. Capital Statutory Trust III issued 526 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. Interest is
payable quarterly at a rate of 5.55% for the first five years, which will then
reset quarterly beginning on June 26, 2008 and thereafter, at a rate equal to
the three-month LIBOR index plus 3.10%. The debenture matures on June 30, 2033,
and may be redeemed on or after June 30, 2008, without penalty, after the no
call period. The debenture and trust preferred securities provide that WesBanco
has the right to elect to defer the payment of interest on the debenture 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 debenture, it may not declare or pay any dividends on
its common stock during any such period. The net proceeds received by WesBanco
are being used to reduce outstanding indebtedness, fund the current stock
repurchase plan and for general working capital purposes.
The trust preferred securities were sold to Preferred Term Securities X,
Ltd. A discount in the amount of $0.5 million was earned by FTN Financial
Capital Markets and Keefe, Bruyette & Woods, Inc. in connection with the private
placement. This private placement was limited to a single institutional
investor, which qualified as an "accredited investor" as defined in Rule 501(a)
of Regulation D. The issuance of the debenture and the related trust preferred
securities was exempt from registration under the Securities Act.
On June 30, 2003, WesBanco redeemed all of the 8.50% Junior Subordinated
Deferrable Interest Debentures held by WesBanco Capital Trust I, by redeeming
1,265,000 shares of its outstanding 8.50% Cumulative Trust Preferred Securities.
A total of $12.65 million of trust preferred securities were redeemed at a price
of $10.00 per share. These securities were listed on the NASDAQ under the symbol
"WSBCP", and after they were redeemed the issue was delisted.
For additional disclosures relating to WesBanco's Trust Preferred
Securities, see "Note 10: Trust Preferred Securities and Junior Subordinated
Debt" on page E-15 of Exhibit 13 incorporated herein by reference.
10
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data is set forth under the heading "Table 1. Six Year
Selected Financial Summary" on page E-30 of Exhibit 13 incorporated herein by
reference in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Discussion of the Corporation's financial position and results of
operations is set forth under the section "Management's Discussion and Analysis
of the Consolidated Financial Statements" on pages E-29 through E-46 of Exhibit
13 incorporated herein by reference in this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Discussion of the Corporation's Quantitative and Qualitative Disclosures
About Market Risk is set forth under the section "Management's Discussion and
Analysis of the Consolidated Financial Statements" on pages E-44 through E-46 of
Exhibit 13 incorporated herein by reference in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The "Consolidated Financial Statements", the "Notes to Consolidated Financial
Statements", "Management's Responsibility for Financial Statements", the "Report
of Ernst & Young LLP, Independent Auditors" and the "Condensed Quarterly
Statements of Income" are set forth on pages E-3 through E-28 of Exhibit 13
incorporated herein by reference in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. 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-K, 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 error 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 WesBanco 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 December 31, 2003, 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 controls over financial
reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the principal occupations of directors of WesBanco,
their ages, directorships in other companies and respective terms of office is
set forth under the heading "Election of Directors" and "Continuing Directors"
in the Proxy Statement and is incorporated by reference.
Information relating to executive officers of WesBanco is set forth under
the heading "Executive Officers of the Corporation" in the Proxy Statement and
is incorporated by reference.
Information relating to late filings is set forth under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement
and is incorporated by reference.
Information relating to the Audit Committee of WesBanco is set forth under
the heading "Audit Committee" in the Proxy Statement and is incorporated by
reference.
Information relating to the Financial Expert of WesBanco's Audit Committee
is set forth under the heading "Audit Committee" in the Proxy Statement and is
incorporated by reference.
11
CODE OF ETHICS
WesBanco has adopted a Code of Business Conduct and Ethics that applies to
our directors, officers and employees, including WesBanco's Chief Executive
Officer, Chief Financial Officer, Controller and other executive officers.
WesBanco's "Code of Business Conduct and Ethics" can be found posted on our
website at http://www.wesbanco.com in the "Investor Relations" section under
"Corporate Governance". WesBanco intends to disclose any changes or amendments
to this code of ethics on its website.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to compensation of directors and executive officers is
set forth under the heading "Compensation of Executive Officers" in the Proxy
Statement and is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to the beneficial ownership of WesBanco's common stock
by all directors, each executive officer named in the "Summary Compensation
Table" of the Proxy and all executive officers and directors as a group is set
forth under the heading "Ownership of Securities by Directors, Nominees and
Officers" in the Proxy and is incorporated by reference.
EQUITY COMPENSATION PLAN INFORMATION
PLAN CATEGORY NUMBER OF SECURITIES TO WEIGHTED AVERAGE NUMBER OF SECURITIES REMAINING
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FOR FUTURE ISSUANCE UNDER
OF OUTSTANDING OPTIONS OUTSTANDING OPTIONS EQUITY COMPENSATION PLANS
- ---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved by
security holders 384,840 $23.21 578,070
- ---------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved
by security holders None None None
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to transactions and relationships with certain
directors and executive officers of WesBanco is set forth under the heading
"Transactions with Directors and Officers" in the Proxy Statement and is
incorporated by reference. Additional information concerning related party
transactions is set forth under "Note 18: Transactions with Related Parties" on
page E-23 of Exhibit 13 incorporated herein by reference in this Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information relating to the Principal Accounting Fees and Services is
set forth under the heading "Independent Auditors" in the Proxy Statement and is
incorporated by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) CERTAIN DOCUMENTS FILED AS PART OF THE FORM 10-K
(1) FINANCIAL STATEMENTS
PAGE NO.
--------
The following consolidated financial statements and report of
independent auditors of WesBanco of the Annual Report to
Shareholders are incorporated herein by reference:
Consolidated Balance Sheets as of December 31, 2003 and 2002 E-3
Consolidated Statements of Income for the years ended December
31, 2003, 2002 and 2001 E-4
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 2003, 2002 and 2001 E-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 200 1 E-6
Notes to Consolidated Financial Statements E-7 to E-26
Management's Responsibility for Financial Statements E-27
Report of Ernst & Young LLP, Independent Auditors E-27
Condensed Quarterly Statements of Income E-28
(2) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are being filed since the required
information is inapplicable or the information is presented in the
Consolidated Financial Statements or related Notes.
(3) EXHIBIT LISTING
Exhibits listed on the Exhibit Index on page E-1 and E-2 of this Form
10-K are filed herein or are incorporated by reference.
12
(B) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed by the registrant subsequent to
September 30, 2003:
On October 17, 2003 WesBanco, Inc. furnished a Form 8-K, in accordance with
general instruction B.2. of Form 8-K. The information was furnished and shall
not be deemed filed for the purposes of Section 18 of the Securities Exchange
Act of 1934. The Form 8-K included a press release dated October 16, 2003
announcing the election of Edward M. George as Chairman of the Board.
On October 17, 2003, WesBanco, Inc. furnished a Form 8-K, in accordance
with general instruction B.2. of Form 8-K. The information was furnished and
shall not be deemed filed for the purposes of Section 18 of the Securities
Exchange Act of 1934. The Form 8-K included a press release dated October 16,
2003 containing the earnings for the three months and nine months ended
September 30, 2003.
On December 23, 2003, WesBanco, Inc. furnished a Form 8-K, in accordance
with general instruction B.2. of Form 8-K. The information was furnished and
shall not be deemed filed for the purposes of Section 18 of the Securities
Exchange Act of 1934. The Form 8-K included a press release dated December 23,
2003 announcing that the WesBanco Board of Directors recently elected Paul M.
Limbert to the holding company board at their December meeting.
On January 21, 2004, WesBanco, Inc. furnished a Form 8-K, in accordance
with general instruction B.2. of Form 8-K. The information was furnished and
shall not be deemed filed for the purposes of Section 18 of the Securities
Exchange Act of 1934. The Form 8-K included a press release dated January 21,
2004 containing the earnings for the three months and twelve months ended
December 31, 2003.
On February 26, 2004, WesBanco, Inc. filed a Form 8-K, in accordance with
general instruction B.2. of Form 8-K. The Form 8-K included a press release
dated February 19, 2004, announcing that the WesBanco Board of Directors
approved an increase in the quarterly cash dividends to be paid to its
shareholders, increasing the quarterly cash dividend to $.25 per common share
and a press release dated February 26, 2004, announcing that the WesBanco Board
of Directors elected Vaughn L. Kiger and Robert E. Kirkbride to the holding
company board at their February meeting.
13
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 15, 2004.
WESBANCO, INC.
By: /s/ Paul M. Limbert
------------------------------------
PAUL M. LIMBERT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ Robert H. Young
------------------------------------
ROBERT H. YOUNG
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on March 15, 2004.
By: /s/ Edward M. George
------------------------------------
EDWARD M. GEORGE
CHAIRMAN OF THE BOARD
The Directors of WesBanco (listed below) executed a power of attorney
appointing Paul M. Limbert their attorney-in-fact, empowering him to sign this
report on their behalf.
By: /s/ Paul M. Limbert
------------------------------------
PAUL M. LIMBERT
ATTORNEY-IN-FACT
JAMES E. ALTMEYER VAUGHN L. KIGER
RAY A. BYRD ROBERT E. KIRKBRIDE
R. PETERSON CHALFANT JOHN W. KEPNER
JOHN H. CHEFFY PAUL M. LIMBERT
CHRISTOPHER V. CRISS JAY T. MCCAMIC
JAMES D. ENTRESS WILLIAM E. MILDREN, JR.
ABIGAIL M. FEINKNOPF JOAN C. STAMP
ERNEST S. FRAGALE CARTER W. STRAUSS
EDWARD M. GEORGE REED J. TANNER
ROLAND L. HOBBS ROBERT K. TEBAY
14
EXHIBIT INDEX
Exhibit
Number Document Location:
- ------- -------- ---------
3.1 Restated Articles of Incorporation of WesBanco, Inc. Incorporated by reference to a prior Registration Statement
on Form S-4 under Registration No. 333-03905 filed by the
Registrant with the Securities and Exchange Commission on
May 16, 1996.
3.2 Articles of Amendment to the Articles of Incorporation of Incorporated by reference to Form 10-Q filed by the
WesBanco, Inc. Registrant with the Securities and Exchange Commission on
May 15, 1998.
3.3 Bylaws of WesBanco, Inc. (As Amended and Restated August Incorporated by reference to Form 10-Q filed by the
22, 2002) Registrant with the Securities and Exchange Commission on
November 14, 2002.
4.1 Specimen Certificate of WesBanco, Inc. Common Stock Incorporated by reference to a prior Registration Statement
on Form S-4 under Registration No. 33-42157 filed by the
Registrant with the Securities and Exchange Commission on
August 9, 1991.
4.2 Junior Subordinated Indenture dated June 19, 2003 entered Incorporated by reference to Form 10-Q filed by the
into between WesBanco, Inc., as issuer and The Bank of New Registrant with the Securities and Exchange Commission on
York, as Trustee August 13, 2003.
4.3 Amended and Restated Declaration of Trust of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Trust II Registrant with the Securities and Exchange Commission on
August 13, 2003.
4.4 Form of Common Securities Certificate of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Trust II (included as an exhibit to Exhibit 4.3) Registrant with the Securities and Exchange Commission on
August 13, 2003.
4.5 Form of Preferred Securities Certificate of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Trust II (included as an exhibit to Exhibit 4.3) Registrant with the Securities and Exchange Commission on
August 13, 2003.
4.6 Guarantee Agreement between WesBanco, Inc. and The Bank of Incorporated by reference to Form 10-Q filed by the
New York Registrant with the Securities and Exchange Commission on
August 13, 2003.
4.7 Indenture dated June 26, 2003 entered into between Incorporated by reference to Form 10-Q filed by the
WesBanco, Inc., as issuer and U.S. Bank National Registrant with the Securities and Exchange Commission on
Association, as Trustee August 13, 2003.
4.8 Amended and Restated Declaration of Trust of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Statutory Trust III Registrant with the Securities and Exchange Commission on
August 13, 2003.
4.9 Form of Capital Security Certificate of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Statutory Trust III (included as an exhibit to Registrant with the Securities and Exchange Commission on
Exhibit 4.8) August 13, 2003.
4.10 Form of Common Security Certificate of WesBanco, Inc. Incorporated by reference to Form 10-Q filed by the
Capital Statutory Trust III (included as an exhibit to Registrant with the Securities and Exchange Commission on
Exhibit 4.8) August 13, 2003.
4.11 Guarantee Agreement between WesBanco, Inc. and U.S. Bank Incorporated by reference to Form 10-Q filed by the
National Association Registrant with the Securities and Exchange Commission on
August 13, 2003.
10.1 Directors' Deferred Compensation Plan Incorporated by reference to a prior Registration Statement
on Form S-4 under Registration No. 333-03905 filed by the
Registrant with the Securities and Exchange Commission on
May 16, 1996.
10.2 Key Executive Incentive Bonus and Option Plan Incorporated by reference to Schedule 14A Definitive Proxy
Statement (Appendix A) filed by the Registrant with the
Securities and Exchange Commission on March 13, 1998
10.3 Employment Agreements Incorporated by reference to a prior Registration Statement
on Form S-4 under Registration No. 33-72228 filed by the
Registrant with The Securities and Exchange Commission on
November 30,1993.
Incorporated by reference to Form 8-K filed by the
Registrant with the Securities and Exchange Commission on
April 15, 1998.
10.4 Employment Continuity Agreement Incorporated by reference to Form 10-K filed by the
Registrant with the Securities and Exchange Commission on
March 11, 1999.
10.5 Executive Supplemental Income Agreement Incorporated by reference to Form 10-K filed by the
Registrant with the Securities and Exchange Commission on
March 30, 2000.
E-1
EXHIBIT INDEX
Exhibit
Number Document Location:
- ------- -------- ---------
10.6 Form of Change in Control Agreement by and between Incorporated by reference to Form 10-Q filed by the
WesBanco, Inc., WesBanco Bank, Inc., and Paul M. Limbert, Registrant with the Securities and Exchange Commission on
Jerome B. Schmitt, John W. Moore, Kristine N. Molnar and November 15, 1999.
Robert H. Young
10.7 Form of Salary Continuation Agreement by and between Incorporated by reference to Form 10-K filed by the
WesBanco, Inc., WesBanco Bank, Inc., Paul M. Limbert, Registrant with the Securities and Exchange Commission on
Jerome B. Schmitt, John W. Moore, Kristine N. Molnar, Peter March 30, 2000.
W. Jaworski and Edward M. George
10.8 Second Amended Severance Plan Clarification Agreement, Incorporated by reference to Form 10-K filed by the
dated February 26, 2002, by and between American Registrant with the Securities and Exchange Commission on
Bancorporation, Jeremy C. McCamic and WesBanco, Inc. March 29, 2002.
10.9 Second Amended Consulting Agreement, dated February 26, Incorporated by reference to Form 10-K filed by the
2002, by and between WesBanco, Inc. and Jeremy C. McCamic Registrant with the Securities and Exchange Commission on
March 29, 2002.
10.10 Employment Agreement, dated November 30, 2001, by and Incorporated by reference to a prior Registration
between WesBanco Bank, Inc., WesBanco, Inc. and Brent E. Statement on Form S-4 under Registration No. 333-74814
Richmond filed by the Registrant with the Securities and Exchange
Commission on December 10, 2001.
10.11 Employment Agreement dated June 30, 2001, by and between Incorporated by reference to Form 10-K filed by the
WesBanco Bank, Inc., Robert H. Young and WesBanco, Inc. Registrant with the Securities and Exchange Commission on
March 29, 2002.
10.12 Stock Option Amendment Agreement, dated May 31, 2002, by Incorporated by reference to Form 10-Q filed by the
and between WesBanco, Inc. and Dennis P. Yaeger Registrant with the Securities and Exchange Commission on
August 14, 2002.
10.13 Separation Agreement and Release and Waiver of Claims, Incorporated by reference to Form 10-Q filed by the
dated May 2, 2002, by and between WesBanco, Inc. and Dennis Registrant with the Securities and Exchange Commission on
P. Yaeger August 14, 2002.
10.14 Employment Agreement dated May 28, 2003, by and between Incorporated by reference to Form 10-Q filed by the
WesBanco Bank, Inc., and Peter W. Jaworski and WesBanco, Registrant with the Securities and Exchange Commission on
Inc. August 13, 2003.
11 Computation of Earnings Per Share Computation of earnings per share can be clearly determined
from the material contained in Exhibit 13, page E-4.
Primary and fully diluted earnings per share are the same
for all years presented.
13 Annual Report to Shareholders (except for those portions
expressly incorporated by reference herein, this report is
not "filed" as part of this Report on Form 10-K.) *
21 Subsidiaries of the Registrant *
22 Proxy Statement for the Annual Shareholders' Meeting to be Incorporated by reference to Schedule 14A Definitive Proxy
held April 21, 2004 Statement filed by the Registrant with the Securities and
Exchange Commission on March 15, 2004.
23 Consent of Ernst & Young LLP *
24 Power of Attorney *
31.1 Certification of Chief Executive Officer of Periodic Report *
Pursuant to Rule 13a-15(e) or Rule 15d-15(e)
31.2 Certification of Chief Financial Officer of Periodic Report *
Pursuant to Rule 13a-15(e) or Rule 15d-15(e)
32.1 Certification Pursuant to 18 U.S.C.Section 1350, as adopted *
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Filed Within
E-2