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Table of Contents

 

 

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 September 30, 2014

 

¨ 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 000-08467

WESBANCO, INC.

(Exact name of Registrant as specified in its charter)

 

WEST VIRGINIA   55-0571723
(State of incorporation)  

(IRS Employer

Identification No.)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 27, 2014, there were 29,283,675 shares of WesBanco, Inc. common stock, $2.0833 par value, outstanding.

 

 

 


Table of Contents

WESBANCO, INC.

TABLE OF CONTENTS

 

Item
No.

 

ITEM

  

Page
No.

 
 

PART I - FINANCIAL INFORMATION

  
1  

Financial Statements

  
 

Consolidated Balance Sheets at September 30, 2014 (unaudited) and December 31, 2013

     3   
 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013 (unaudited)

     4   
 

Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2014 and 2013 (unaudited)

     5   
 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)

     6   
 

Notes to Consolidated Financial Statements (unaudited)

     7   
2  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     28   
3  

Quantitative and Qualitative Disclosures About Market Risk

     47   
4  

Controls and Procedures

     49   
 

PART II - OTHER INFORMATION

  
1  

Legal Proceedings

     50   
2  

Unregistered Sales of Equity Securities and Use of Proceeds

     50   
6  

Exhibits

     51   
 

Signatures

     52   

 

2


Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESBANCO, INC. CONSOLIDATED BALANCE SHEETS

 

 

(unaudited, in thousands, except shares)

   September 30,
2014
    December 31,
2013
 

ASSETS

    

Cash and due from banks, including interest bearing amounts of $2,704 and $15,550, respectively

   $ 76,419      $ 95,551   

Securities:

    

Available-for-sale, at fair value

     959,553        934,386   

Held-to-maturity (fair values of $617,332 and $596,308, respectively)

     594,860        598,520   
  

 

 

   

 

 

 

Total securities

     1,554,413        1,532,906   
  

 

 

   

 

 

 

Loans held for sale

     6,260        5,855   
  

 

 

   

 

 

 

Portfolio loans, net of unearned income

     4,031,704        3,894,917   

Allowance for loan losses

     (45,029     (47,368
  

 

 

   

 

 

 

Net portfolio loans

     3,986,675        3,847,549   
  

 

 

   

 

 

 

Premises and equipment, net

     92,090        93,157   

Accrued interest receivable

     20,032        18,960   

Goodwill and other intangible assets, net

     319,973        321,426   

Bank-owned life insurance

     122,678        121,390   

Other assets

     99,954        107,979   
  

 

 

   

 

 

 

Total Assets

   $ 6,278,494      $ 6,144,773   
  

 

 

   

 

 

 

LIABILITIES

    

Deposits:

    

Non-interest bearing demand

   $ 1,027,636      $ 960,814   

Interest bearing demand

     897,827        857,761   

Money market

     993,211        942,768   

Savings deposits

     824,703        789,709   

Certificates of deposit

     1,358,308        1,511,478   
  

 

 

   

 

 

 

Total deposits

     5,101,685        5,062,530   
  

 

 

   

 

 

 

Federal Home Loan Bank borrowings

     123,374        39,508   

Other short-term borrowings

     117,637        150,536   

Junior subordinated debt owed to unconsolidated subsidiary trusts

     106,166        106,137   
  

 

 

   

 

 

 

Total borrowings

     347,177        296,181   
  

 

 

   

 

 

 

Accrued interest payable

     2,103        2,354   

Other liabilities

     38,745        37,113   
  

 

 

   

 

 

 

Total Liabilities

     5,489,710        5,398,178   
  

 

 

   

 

 

 

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; 29,367,511 issued in 2014 and 2013, respectively; outstanding: 29,283,675 and 29,175,236 shares in 2014 and 2013, respectively

     61,182        61,182   

Capital surplus

     244,358        244,974   

Retained earnings

     494,511        460,351   

Treasury stock (83,836 and 192,275 shares in 2014 and 2013, respectively, at cost)

     (2,601     (5,969

Accumulated other comprehensive loss

     (7,423     (12,734

Deferred benefits for directors

     (1,243     (1,209
  

 

 

   

 

 

 

Total Shareholders’ Equity

     788,784        746,595   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 6,278,494      $ 6,144,773   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

3


Table of Contents

WESBANCO, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 

(unaudited, in thousands, except shares and per share amounts)

   2014     2013     2014     2013  

INTEREST AND DIVIDEND INCOME

        

Loans, including fees

   $ 43,399      $ 43,678      $ 128,691      $ 131,706   

Interest and dividends on securities:

        

Taxable

     7,375        7,226        22,051        22,015   

Tax-exempt

     3,413        3,355        10,234        9,748   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividends on securities

     10,788        10,581        32,285        31,763   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other interest income

     116        58        829        165   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

     54,303        54,317        161,805        163,634   
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

        

Interest bearing demand deposits

     399        369        1,168        1,035   

Money market deposits

     487        345        1,394        1,023   

Savings deposits

     135        128        398        395   

Certificates of deposit

     3,254        5,597        10,305        17,626   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense on deposits

     4,275        6,439        13,265        20,079   
  

 

 

   

 

 

   

 

 

   

 

 

 

Federal Home Loan Bank borrowings

     264        291        650        900   

Other short-term borrowings

     348        651        1,255        1,900   

Junior subordinated debt owed to unconsolidated subsidiary trusts

     805        805        2,392        2,506   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     5,692        8,186        17,562        25,385   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

     48,611        46,131        144,243        138,249   

Provision for credit losses

     1,478        2,819        4,526        5,942   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for credit losses

     47,133        43,312        139,717        132,307   
  

 

 

   

 

 

   

 

 

   

 

 

 

NON-INTEREST INCOME

        

Trust fees

     5,096        4,854        15,954        14,694   

Service charges on deposits

     4,170        4,650        12,107        13,309   

Electronic banking fees

     3,268        3,124        9,549        9,186   

Net securities brokerage revenue

     1,701        1,506        5,533        4,644   

Bank-owned life insurance

     882        911        3,577        3,739   

Net gains on sales of mortgage loans

     550        745        1,178        2,157   

Net securities gains / (losses)

     581        (15     756        687   

Net (loss) / gain on other real estate owned and other assets/liabilities

     (1,167     8        (1,218     63   

Other income

     1,573        1,333        4,508        3,857   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     16,654        17,116        51,944        52,336   
  

 

 

   

 

 

   

 

 

   

 

 

 

NON-INTEREST EXPENSE

        

Salaries and wages

     17,331        16,480        50,700        48,079   

Employee benefits

     5,051        5,323        16,289        17,481   

Net occupancy

     2,916        2,921        9,265        8,943   

Equipment

     2,837        2,692        8,534        7,901   

Marketing

     1,276        1,585        3,992        4,015   

FDIC insurance

     786        916        2,543        2,806   

Amortization of intangible assets

     477        556        1,454        1,742   

Restructuring and merger-related expense

     —          36        —          1,265   

Other operating expenses

     8,589        9,500        26,884        28,024   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expense

     39,263        40,009        119,661        120,256   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

     24,524        20,419        72,000        64,387   

Provision for income taxes

     6,358        4,884        18,538        15,815   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 18,166      $ 15,535      $ 53,462      $ 48,572   
  

 

 

   

 

 

   

 

 

   

 

 

 

EARNINGS PER COMMON SHARE

        

Basic

   $ 0.62      $ 0.53      $ 1.83      $ 1.66   

Diluted

   $ 0.62      $ 0.53      $ 1.82      $ 1.66   
  

 

 

   

 

 

   

 

 

   

 

 

 

AVERAGE COMMON SHARES OUTSTANDING

        

Basic

     29,280,648        29,325,128        29,235,364        29,260,967   

Diluted

     29,360,880        29,412,458        29,316,914        29,328,305   
  

 

 

   

 

 

   

 

 

   

 

 

 

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.22      $ 0.20      $ 0.66      $ 0.58   
  

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME

   $ 16,136      $ 14,422      $ 58,773      $ 36,495   
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

4


Table of Contents

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

For the Nine Months Ended September 30, 2014 and 2013

 

     Common Stock                       Accumulated
Other
    Deferred        

(unaudited, in thousands, except

shares and per share amounts)

   Shares
Outstanding
    Amount     Capital
Surplus
    Retained
Earnings
    Treasury
Stock
    Comprehensive
Income (Loss)
    Benefits for
Directors
    Total  

December 31, 2013

     29,175,236      $ 61,182      $ 244,974      $ 460,351      $ (5,969   $ (12,734   $ (1,209   $ 746,595   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —          —          53,462        —          —          —          53,462   

Other comprehensive income

     —          —          —          —          —          5,311        —          5,311   
                

 

 

 

Comprehensive income

     —          —          —          —          —          —          —          58,773   

Common dividends declared ($0.66 per share)

     —          —          —          (19,302     —          —          —          (19,302

Treasury shares acquired

     (2,258     —          49        —          (69     —          —          (20

Stock options exercised

     68,143        —          (342     —          2,116        —          —          1,774   

Restricted stock granted

     42,554        —          (1,321     —          1,321        —          —          —     

Stock compensation expense

     —          —          964        —          —          —          —          964   

Deferred benefits for directors- net

     —          —          34        —          —          —          (34     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

September 30, 2014

     29,283,675      $ 61,182      $ 244,358      $ 494,511      $ (2,601   $ (7,423   $ (1,243   $ 788,784   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

     29,214,660      $ 60,863      $ 241,672      $ 419,246      $ —        $ (6,365   $ (1,232   $ 714,184   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —          —          48,572        —          —          —          48,572   

Other comprehensive loss

     —          —          —          —          —          (12,077     —          (12,077
                

 

 

 

Comprehensive income

     —          —          —          —          —          —          —          36,495   

Common dividends declared ($0.58 per share)

     —          —          —          (16,985     —          —          —          (16,985

Treasury shares acquired

     (11,851     —          —          —          (296     —          —          (296

Stock options exercised

     113,674        233        2,411        —          27        —          —          2,671   

Restricted stock granted

     38,250        57        (326     —          269        —          —          —     

Adjustment to shares issued in acquisition

     (4,672     (9     (95     —          —          —          —          (104

Stock compensation expense

     —          —          723        —          —          —          —          723   

Deferred benefits for directors- net

     —          —          (33     —          —          —          33        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

September 30, 2013

     29,350,061      $ 61,144      $ 244,352      $ 450,833      $ —        $ (18,442   $ (1,199   $ 736,688   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

5


Table of Contents

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

     For the Nine Months Ended
September 30,
 

(unaudited, in thousands)

   2014     2013  

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 70,215      $ 88,613   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Net increase in loans

     (142,693     (159,087

Securities available-for-sale:

    

Proceeds from sales

     4,819        9,265   

Proceeds from maturities, prepayments and calls

     169,094        192,714   

Purchases of securities

     (192,340     (137,156

Securities held-to-maturity:

    

Proceeds from maturities, prepayments and calls

     34,572        74,590   

Purchases of securities

     (33,153     (77,179

Purchases of premises and equipment - net

     (4,409     (6,571

Proceeds from bank-owned life insurance

     2,284        2,954   

Sale of portfolio loans - net

     —          5,886   
  

 

 

   

 

 

 

Net cash used in investing activities

     (161,826     (94,584
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Increase in deposits

     39,688        117,049   

Proceeds from Federal Home Loan Bank borrowings

     100,532        —     

Repayment of Federal Home Loan Bank borrowings

     (16,559     (50,627

Decrease in other short-term borrowings

     (64,074     (18,421

Increase in federal funds purchased

     30,000        —     

Repayment of junior subordinated debt

     —          (7,732

Dividends paid to common shareholders

     (18,695     (16,373

Treasury shares sold (purchased) - net

     1,587        (274

Issuance of common stock

     —          2,383   
  

 

 

   

 

 

 

Net cash provided by financing activities

     72,479        26,005   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (19,132     20,034   

Cash and cash equivalents at beginning of the period

     95,551        125,605   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 76,419      $ 145,639   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES

    

Interest paid on deposits and other borrowings

   $ 18,672      $ 25,802   

Income taxes paid

     12,300        15,725   

Transfers of loans to other real estate owned

     1,832        1,800   

Transfers of loans to held for sale

     —          9,434   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

6


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation — The accompanying unaudited interim financial statements of WesBanco, Inc. and its consolidated subsidiaries (“WesBanco”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and 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 GAAP for complete financial statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013.

WesBanco’s interim financial statements have been prepared following the significant accounting policies disclosed in Note 1 of the Notes to the Consolidated Financial Statements of its 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, the accompanying interim financial information reflects all adjustments, including normal recurring adjustments, necessary to present fairly WesBanco’s financial position and results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year.

Recent accounting pronouncements — In August 2014, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) (ASU 2014-14) related to the classification of certain government-guaranteed mortgage loans upon foreclosure. The amendments in this update require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) The loan has a government guarantee that is not separable from the loan before foreclosure, (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based upon the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014 and may be adopted under either a modified retrospective transition method or a prospective transition method. However, the same method of transition as elected under ASU 2014-04 must be applied. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

In June 2014, the FASB issued an accounting pronouncement (ASU 2014-11) related to repurchase-to-maturity transactions, repurchase financing and disclosures. The pronouncement changes the accounting for repurchase-to-maturity transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The pronouncement also requires two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is not permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

In May 2014, the FASB issued an accounting pronouncement (ASU 2014-09) related to the recognition of revenue from contracts with customers. The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016 using either a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. Early adoption is not permitted. WesBanco is currently evaluating the impact of the adoption of this pronouncement on its Consolidated Financial Statements.

In January 2014, the FASB issued an accounting pronouncement (ASU 2014-04) related to in-substance repossessions and foreclosures. The pronouncement clarifies when an in-substance repossession or foreclosure occurs. A creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014 and may be adopted under either a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.

In January 2014, the FASB issued an accounting pronouncement (ASU 2014-01) which applies to all reporting entities that invest in qualified affordable housing projects through limited liability entities. The pronouncement permits reporting entities to make an accounting policy election to account for these investments using the proportional amortization method if certain conditions exist. The pronouncement also requires disclosure that enables users of its financial statements to understand the nature of these investments. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The pronouncement should be applied retrospectively for all periods presented, effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

 

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NOTE 2. EARNINGS PER COMMON SHARE

Earnings per common share are calculated as follows:

 

     For the Three Months Ended
September 30,
     For the Nine Months Ended
September 30,
 

(unaudited, in thousands, except shares and per share amounts)

   2014      2013      2014      2013  

Numerator for both basic and diluted earnings per common share:

           

Net income

   $ 18,166       $ 15,535       $ 53,462       $ 48,572   
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Total average basic common shares outstanding

     29,280,648         29,325,128         29,235,364         29,260,967   

Effect of dilutive stock options and warrant

     80,232         87,330         81,550         67,338   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total diluted average common shares outstanding

     29,360,880         29,412,458         29,316,914         29,328,305   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per common share - basic

   $ 0.62       $ 0.53       $ 1.83       $ 1.66   

Earnings per common share - diluted

   $ 0.62       $ 0.53       $ 1.82       $ 1.66   
  

 

 

    

 

 

    

 

 

    

 

 

 

Stock options representing shares of 45,701 for the three months ended September 30, 2013, and shares of 73,536 for the nine months ended September 30, 2013, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. For the three and nine months ended September 30, 2014, all outstanding options were dilutive.

 

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NOTE 3. SECURITIES

The following table presents the fair value and amortized cost of available-for-sale and held-to-maturity securities:

 

    September 30, 2014     December 31, 2013  

(unaudited, in thousands)

  Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Estimated
Fair Value
    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Estimated
Fair Value
 

Available-for-sale

               

Obligations of government agencies

  $ 80,769      $ 430      $ (677   $ 80,522      $ 75,164      $ 6      $ (1,938   $ 73,232   

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies

    736,497        3,069        (11,150     728,416        707,000        3,191        (15,924     694,267   

Obligations of states and political subdivisions

    97,137        5,573        (15     102,695        112,536        4,165        (355     116,346   

Corporate debt securities

    36,723        248        (179     36,792        38,777        174        (470     38,481   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt securities

  $ 951,126      $ 9,320      $ (12,021   $ 948,425      $ 933,477      $ 7,536      $ (18,687   $ 922,326   

Equity securities

    10,492        644        (8     11,128        10,597        1,463        —          12,060   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ 961,618      $ 9,964      $ (12,029   $ 959,553      $ 944,074      $ 8,999      $ (18,687   $ 934,386   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity

               

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies

  $ 83,632      $ 3,221      $ (507   $ 86,346      $ 99,409      $ 2,804      $ (1,023   $ 101,190   

Obligations of states and political subdivisions

    505,486        21,589        (1,786     525,289        496,396        10,158        (13,906     492,648   

Corporate debt securities

    5,742        39        (84     5,697        2,715        —          (245     2,470   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

  $ 594,860      $ 24,849      $ (2,377   $ 617,332      $ 598,520      $ 12,962      $ (15,174   $ 596,308   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities

  $ 1,556,478      $ 34,813      $ (14,406   $ 1,576,885      $ 1,542,594      $ 21,961      $ (33,861   $ 1,530,694   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At September 30, 2014, and December 31, 2013, there were no holdings of any one issuer, other than the U.S. government and certain government or government-related agencies, in an amount greater than 10% of WesBanco’s shareholders’ equity.

The following table presents the fair value of available-for-sale and held-to-maturity securities by contractual maturity at September 30, 2014. In some instances, the issuers may have the right to call or prepay obligations without penalty prior to the contractual maturity date.

 

    September 30, 2014  

(unaudited, in thousands)

  One Year
or less
    One to
Five Years
    Five to
Ten Years
    After
Ten Years
    Mortgage-backed
and Equity
    Total  

Available-for-sale

           

Obligations of government agencies

  $ —        $ 17,056      $ 44,812      $ 18,654      $ —        $ 80,522   

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies (1)

    —          —          —          —          728,416        728,416   

Obligations of states and political subdivisions

    6,799        39,840        20,649        35,407        —          102,695   

Corporate debt securities

    14,034        5,865        12,069        4,824        —          36,792   

Equity securities (2)

    —          —          —          —          11,128        11,128   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale securities

  $ 20,833      $ 62,761      $ 77,530      $ 58,885      $ 739,544      $ 959,553   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity (3)

           

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies (1)

  $ —        $ —        $ —        $ —        $ 86,346      $ 86,346   

Obligations of states and political subdivisions

    2,725        10,650        200,258        311,656        —          525,289   

Corporate debt securities

    —          —          5,697        —          —          5,697   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

  $ 2,725      $ 10,650      $ 205,955      $ 311,656      $ 86,346      $ 617,332   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities

  $ 23,558      $ 73,411      $ 283,485      $ 370,541      $ 825,890      $ 1,576,885   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds.

(2)

Equity securities, which have no stated maturity, are not assigned a maturity category.

(3) 

The held-to-maturity portfolio is carried at an amortized cost of $594.9 million.

 

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Table of Contents

Securities with aggregate fair values of $721.8 million and $701.7 million at September 30, 2014 and December 31, 2013, respectively, were pledged as security for public and trust funds, and securities sold under agreements to repurchase. Proceeds from the sale of available-for-sale securities were $4.8 million and $9.3 million for the nine months ended September 30, 2014 and 2013, respectively. Net unrealized losses on available-for-sale securities included in accumulated other comprehensive income net of tax, as of September 30, 2014 and December 31, 2013 were ($1.3) million and ($6.1) million, respectively.

The following table presents the gross realized gains and losses on sales and calls of securities for the three and nine months ended September 30, 2014.

 

     For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 

(unaudited, in thousands)

   2014     2013     2014     2013  

Gross realized gains

   $ 602      $ 5      $ 967      $ 881   

Gross realized losses

     (21     (20     (211     (194
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains (losses)

   $ 581      $ (15   $ 756      $ 687   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following tables provide 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 September 30, 2014 and December 31, 2013:

 

     September 30, 2014  
     Less than 12 months      12 months or more      Total  

(unaudited, dollars in thousands)

   Fair
Value
     Unrealized
Losses
    # of
Securities
     Fair
Value
     Unrealized
Losses
    # of
Securities
     Fair
Value
     Unrealized
Losses
    # of
Securities
 

Obligations of government agencies

   $ 22,192       $ (139     7       $ 19,457       $ (538     4       $ 41,649       $ (677     11   

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies

     306,257         (2,585     55         237,876         (9,072     43         544,133         (11,657     98   

Obligations of states and political subdivisions

     13,160         (90     16         79,954         (1,711     130         93,114         (1,801     146   

Corporate debt securities

     5,955         (45     2         4,490         (218     2         10,445         (263     4   

Equity securities

     281         (8     1         —           —          —           281         (8     1   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total temporarily impaired securities

   $ 347,845       $ (2,867     81       $ 341,777       $ (11,539     179       $ 689,622       $ (14,406     260   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     December 31, 2013  
     Less than 12 months      12 months or more      Total  

(unaudited, dollars in thousands)

   Fair
Value
     Unrealized
Losses
    # of
Securities
     Fair
Value
     Unrealized
Losses
    # of
Securities
     Fair
Value
     Unrealized
Losses
    # of
Securities
 

Obligations of government agencies

   $ 54,356       $ (1,911     15       $ 5,083       $ (27     2       $ 59,439       $ (1,938     17   

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies

     513,495         (14,639     89         37,002         (2,308     11         550,497         (16,947     100   

Obligations of states and political subdivisions

     181,667         (10,830     277         47,793         (3,431     76         229,460         (14,261     353   

Corporate debt securities

     19,837         (560     7         2,845         (155     1         22,682         (715     8   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total temporarily impaired securities

   $ 769,355       $ (27,940     388       $ 92,723       $ (5,921     90       $ 862,078       $ (33,861     478   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Unrealized losses on debt securities in the tables represent temporary fluctuations resulting from changes in market rates in relation to fixed yields. Unrealized losses in the available-for-sale portfolio are accounted for as an adjustment to other comprehensive income in shareholders’ equity.

WesBanco does not believe the securities presented above are impaired due to reasons of credit quality, as there are no debt securities rated below investment grade and all are paying principal and interest according to their contractual terms. WesBanco does not intend to sell, nor is it more likely than not that it will be required to sell, loss position securities prior to recovery of their cost, and therefore, management believes the unrealized losses detailed above are temporary and no impairment loss relating to these securities has been recognized.

Securities that do not have readily determinable fair values and for which WesBanco does not exercise significant influence are carried at cost. Cost method investments consist primarily of Federal Home Loan Bank (“FHLB”) Pittsburgh and FHLB Cincinnati stock totaling $15.0 million and $11.6 million at September 30, 2014 and December 31, 2013, respectively, and are included in other assets in the Consolidated Balance Sheets. Cost method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.

 

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NOTE 4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES

The recorded investment in loans is presented in the Consolidated Balance Sheets net of deferred loan fees and costs of $2.6 million and $2.7 million at September 30, 2014 and December 31, 2013, respectively.

 

     September 30,      December 31,  

(unaudited, in thousands)

   2014      2013  

Commercial real estate:

     

Land and construction

   $ 235,249       $ 263,117   

Improved property

     1,738,087         1,649,802   
  

 

 

    

 

 

 

Total commercial real estate

     1,973,336         1,912,919   
  

 

 

    

 

 

 

Commercial and industrial

     603,245         556,249   

Residential real estate

     909,531         890,804   

Home equity

     313,711         284,687   

Consumer

     231,881         250,258   
  

 

 

    

 

 

 

Total portfolio loans

     4,031,704         3,894,917   
  

 

 

    

 

 

 

Loans held for sale

     6,260         5,855   
  

 

 

    

 

 

 

Total loans

   $ 4,037,964       $ 3,900,772   
  

 

 

    

 

 

 

The following tables summarize changes in the allowance for credit losses applicable to each category of the loan portfolio:

 

    Allowance for Credit Losses By Category
For the Nine Months Ended September 30, 2014 and 2013
 

(unaudited, in thousands)

  Commercial
Real Estate -
Land and
Construction
    Commercial
Real Estate -
Improved
Property
    Commercial
& Industrial
    Residential
Real Estate
    Home
Equity
    Consumer     Deposit
Overdraft
    Total  

Balance at December 31, 2013:

               

Allowance for loan losses

  $ 6,056      $ 18,157      $ 9,925      $ 5,673      $ 2,017      $ 5,020      $ 520      $ 47,368   

Allowance for loan commitments

    301        62        130        5        85        19        —          602   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total beginning allowance for credit losses

    6,357        18,219        10,055        5,678        2,102        5,039        520        47,970   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses:

               

Provision for loan losses

    (812     (403     1,357        1,867        860        1,066        660        4,595   

Provision for loan commitments

    (35     (42     (6     1        12        1        —          (69
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for credit losses

    (847     (445     1,351        1,868        872        1,067        660        4,526   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

    —          (1,696     (2,632     (2,025     (591     (2,326     (577     (9,847

Recoveries

    —          457        1,058        339        94        782        183        2,913   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

    —          (1,239     (1,574     (1,686     (497     (1,544     (394     (6,934
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2014:

               

Allowance for loan losses

    5,244        16,515        9,708        5,854        2,380        4,542        786        45,029   

Allowance for loan commitments

    266        20        124        6        97        20        —          533   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance for credit losses

  $ 5,510      $ 16,535      $ 9,832      $ 5,860      $ 2,477      $ 4,562      $ 786      $ 45,562   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012:

               

Allowance for loan losses

  $ 3,741      $ 23,614      $ 9,326      $ 7,182      $ 2,458      $ 5,557      $ 821      $ 52,699   

Allowance for loan commitments

    27        25        215        6        49        19        —          341   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total beginning allowance for credit losses

    3,768        23,639        9,541        7,188        2,507        5,576        821        53,040   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses:

               

Provision for loan losses

    1,179        3,066        (561     459        (61     1,457        373        5,912   

Provision for loan commitments

    57        (1     (64     —          37        1        —          30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for credit losses

    1,236        3,065        (625     459        (24     1,458        373        5,942   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

    (526     (5,651     (1,264     (2,092     (508     (3,018     (666     (13,725

Recoveries

    125        482        407        250        108        887        197        2,456   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

    (401     (5,169     (857     (1,842     (400     (2,131     (469     (11,269
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013:

               

Allowance for loan losses

    4,519        21,511        7,908        5,799        1,997        4,883        725        47,342   

Allowance for loan commitments

    84        24        151        6        86        20        —          371   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance for credit losses

  $ 4,603      $ 21,535      $ 8,059      $ 5,805      $ 2,083      $ 4,903      $ 725      $ 47,713   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

The following tables present the allowance for credit losses and recorded investment in loans by category:

 

     Allowance for Credit Losses and Recorded Investment in Loans  

(unaudited, in thousands)

   Commercial
Real Estate-
Land and
Construction
     Commercial
Real Estate-
Improved
Property
     Commercial
and Industrial
     Residential
Real Estate
     Home
Equity
     Consumer      Over-draft      Total  

September 30, 2014

                       

Allowance for credit losses:

                       

Allowance for loans individually evaluated for impairment

   $ —         $ 57       $ 1,026       $ —         $ —         $ —         $ —         $ 1,083   

Allowance for loans collectively evaluated for impairment

     5,244         16,458         8,682         5,854         2,380         4,542         786         43,946   

Allowance for loan commitments

     266         20         124         6         97         20         —           533   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for credit losses

   $ 5,510       $ 16,535       $ 9,832       $ 5,860       $ 2,477       $ 4,562       $ 786       $ 45,562   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio loans:

                       

Individually evaluated for impairment (1)

   $ —         $ 8,592       $ 3,015       $ —         $ —         $ —         $ —         $ 11,607   

Collectively evaluated for impairment

     235,249         1,729,495         600,230         909,531         313,711         231,881         —           4,020,097   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

   $ 235,249       $ 1,738,087       $ 603,245       $ 909,531       $ 313,711       $ 231,881       $ —         $ 4,031,704   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                       

Allowance for credit losses:

                       

Allowance for loans individually evaluated for impairment

   $ —         $ 51       $ 681       $ —         $ —         $ —         $ —         $ 732   

Allowance for loans collectively evaluated for impairment

     6,056         18,106         9,244         5,673         2,017         5,020         520         46,636   

Allowance for loan commitments

     301         62         130         5         85         19         —           602   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for credit losses

   $ 6,357       $ 18,219       $ 10,055       $ 5,678       $ 2,102       $ 5,039       $ 520       $ 47,970   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio loans:

                       

Individually evaluated for impairment (1)

   $ —         $ 4,321       $ 1,754       $ —         $ —         $ —         $ —         $ 6,075   

Collectively evaluated for impairment

     263,117         1,645,481         554,495         890,804         284,687         250,258         —           3,888,842   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

   $ 263,117       $ 1,649,802       $ 556,249       $ 890,804       $ 284,687       $ 250,258       $ —         $ 3,894,917   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Commercial loans greater than $1 million that are reported as non-accrual or as a troubled debt restructuring (“TDR”) are individually evaluated for impairment.

WesBanco maintains an internal loan grading system to reflect the credit quality of commercial loans. Commercial loan risk grades are determined based on an evaluation of the relevant characteristics of each loan, assigned at the inception of each loan and adjusted thereafter at any time to reflect changes in the risk profile throughout the life of each loan. The primary factors used to determine the risk grade are the reliability and sustainability of the primary source of repayment and overall financial strength of the borrower. This includes an analysis of cash flow available to repay debt, profitability, liquidity, leverage, and overall financial trends. Other factors include management, industry or property type risks, an assessment of secondary sources of repayment such as collateral or guarantees, other terms and conditions of the loan that may increase or reduce its risk, and economic conditions and other external factors that may influence repayment capacity and financial condition.

Commercial real estate — land and construction consists of loans to finance investments in vacant land, land development, construction of residential housing, and construction of commercial buildings. Commercial real estate – improved property consists of loans for the purchase or refinance of all types of improved owner-occupied and investment properties. Factors that are considered in assigning the risk grade vary depending on the type of property financed. The risk grade assigned to construction and development loans is based on the overall viability of the project, the experience and financial capacity of the developer or builder to successfully complete the project, project specific and market absorption rates and comparable property values, and the amount of pre-sales for residential housing construction or pre-leases for commercial investment property. The risk grade assigned to commercial investment property loans is based primarily on the adequacy of net rental income generated by the property to service the debt, the type, quality, industry and mix of tenants, and the terms of leases, but also considers the overall financial capacity of the investors and their experience in owning and managing investment property. The risk grade assigned to owner-occupied commercial real estate and commercial and industrial loans is based primarily on historical and projected earnings, the adequacy of operating cash flow to service all of the business’ debt, and the capital resources, liquidity and leverage of the business, but also considers the industry in which the business operates, the business’ specific competitive advantages or disadvantages, the quality and experience of management, and external influences on the business such as economic conditions. Other factors that are considered for commercial and industrial loans include the type, quality and marketability of non-real estate collateral and whether the structure of the loan increases or reduces its risk. The type, age, condition, location and any environmental risks associated with a property are also considered for all types of commercial real estate. The overall financial condition and repayment capacity of any guarantors is also evaluated to determine the extent to which they mitigate other risks of the loan. The following descriptions of risk grades apply to commercial real estate and commercial and industrial loans:

Pass loans are those that exhibit a history of positive financial results that are at least comparable to the average for their industry or type of real estate. The primary source of repayment is acceptable and these loans are expected to perform satisfactorily during most economic cycles. Pass loans typically have no significant external factors that are expected to adversely affect these borrowers more than others in the same industry or property type. Any minor unfavorable characteristics of these loans are outweighed or mitigated by other positive factors including but not limited to adequate secondary or tertiary sources of repayment.

Criticized or compromised loans are currently protected but have weaknesses, which, if not corrected, may inadequately protect WesBanco Bank, Inc. (the “Bank”) at some future date. These loans represent an unwarranted credit risk and would generally not be extended in the normal course of lending. Specific issues which may warrant this grade include declining financial results, increased reliance on secondary sources of repayment or guarantor support and adverse external influences that may negatively impact the business or property.

 

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Table of Contents

Substandard and doubtful loans are equivalent to the classifications used by banking regulators. Substandard loans are inadequately protected by the current repayment capacity and equity of the borrower or collateral pledged, if any. Substandard loans have one or more well-defined weaknesses that jeopardize their repayment or collection in full. These loans may or may not be reported as non-accrual. Doubtful loans have all the weaknesses inherent to a substandard loan with the added characteristic that full repayment is highly questionable or improbable on the basis of currently existing facts, conditions and collateral values. However, recognition of loss may be deferred if there are reasonably specific pending factors that will reduce the risk if they occur.

The following tables summarize commercial loans by their assigned risk grade:

 

     Commerical Loans by Internally Assigned Risk Grade  

(unaudited, in thousands)

   Commercial
Real Estate-
Land and
Construction
     Commercial
Real Estate-
Improved
Property
     Commercial
& Industrial
     Total
Commercial
Loans
 

As of September 30, 2014

           

Pass

   $ 227,987       $ 1,680,289       $ 580,748       $ 2,489,024   

Criticized - compromised

     5,499         19,783         14,271         39,553   

Classified - substandard

     1,763         38,015         8,192         47,970   

Classified - doubtful

     —           —           34         34   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 235,249       $ 1,738,087       $ 603,245       $ 2,576,581   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2013

           

Pass

   $ 253,231       $ 1,548,780       $ 531,573       $ 2,333,584   

Criticized - compromised

     6,498         57,983         10,768         75,249   

Classified - substandard

     3,388         43,039         13,908         60,335   

Classified - doubtful

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 263,117       $ 1,649,802       $ 556,249       $ 2,469,168   
  

 

 

    

 

 

    

 

 

    

 

 

 

Residential real estate, home equity and consumer loans are not assigned internal risk grades other than as required by regulatory guidelines that are based primarily on the age of past due loans. WesBanco primarily evaluates the credit quality of residential real estate, home equity and consumer loans based on repayment performance and historical loss rates. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard in accordance with regulatory guidelines were $14.6 million at September 30, 2014 and $14.4 million at December 31, 2013, of which $3.1 and $2.0 million were accruing, for each period, respectively. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard are not included in the tables above.

 

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Table of Contents

The following tables summarize the age analysis of all categories of loans:

 

     Age Analysis of Loans  

(unaudited, in thousands)

   Current      30-59
Days
Past Due
     60-89
Days
Past Due
     90 Days
or More
Past Due
     Total
Past Due
     Total Loans      90 Days or
More
Past Due and
Accruing (1)
 

As of September 30, 2014

                    

Commercial real estate:

                    

Land and construction

   $ 233,591       $ 140       $ 233       $ 1,285       $ 1,658       $ 235,249       $ —     

Improved property

     1,720,260         2,531         4,911         10,385         17,827         1,738,087         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     1,953,851         2,671         5,144         11,670         19,485         1,973,336         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     598,791         334         1,320         2,800         4,454         603,245         86   

Residential real estate

     897,554         1,121         2,347         8,509         11,977         909,531         1,826   

Home equity

     309,672         1,727         479         1,833         4,039         313,711         852   

Consumer

     228,342         2,464         527         548         3,539         231,881         383   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

     3,988,210         8,317         9,817         25,360         43,494         4,031,704         3,147   

Loans held for sale

     6,260         —           —           —           —           6,260         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 3,994,470       $ 8,317       $ 9,817       $ 25,360       $ 43,494       $ 4,037,964       $ 3,147   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans included above are as follows:

                    

Non-accrual loans

   $ 7,723       $ 893       $ 6,113       $ 22,042       $ 29,048       $ 36,771      

TDRs accruing interest (1)

     11,668         174         209         171         554         12,222      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total impaired

   $ 19,391       $ 1,067       $ 6,322       $ 22,213       $ 29,602       $ 48,993      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

As of December 31, 2013

                    

Commercial real estate:

                    

Land and construction

   $ 261,165       $ 2       $ —         $ 1,950       $ 1,952       $ 263,117       $ 248   

Improved property

     1,632,973         2,482         2,346         12,001         16,829         1,649,802         318   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     1,894,138         2,484         2,346         13,951         18,781         1,912,919         566   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     552,414         1,112         977         1,746         3,835         556,249         —     

Residential real estate

     875,192         1,641         4,710         9,261         15,612         890,804         1,289   

Home equity

     281,004         1,581         470         1,632         3,683         284,687         411   

Consumer

     245,876         3,223         649         510         4,382         250,258         325   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

     3,848,624         10,041         9,152         27,100         46,293         3,894,917         2,591   

Loans held for sale

     5,855         —           —           —           —           5,855         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 3,854,479       $ 10,041       $ 9,152       $ 27,100       $ 46,293       $ 3,900,772       $ 2,591   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans included above are as follows:

                    

Non-accrual loans

   $ 9,028       $ 588       $ 2,722       $ 24,295       $ 27,605       $ 36,633      

TDRs accruing interest (1)

     13,595         171         881         214         1,266         14,861      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total impaired

   $ 22,623       $ 759       $ 3,603       $ 24,509       $ 28,871       $ 51,494      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

(1)

Loans 90 days or more past due and accruing interest exclude TDRs 90 days or more past due and accruing interest.

Impaired Loans — A loan is considered impaired, based on current information and events, if it is probable that WesBanco will be unable to collect the payments of principal and interest when due according to the contractual terms of the loan agreement. Impaired loans generally included all non-accrual loans and TDRs.

Loans are generally placed on non-accrual when they are 90 days past due unless the loan is well-secured and in the process of collection. Loans may also be placed on non-accrual when full collection of principal is in doubt even if payments on such loans remain current, or may remain on non-accrual if they were past due but subsequently brought current.

Loans are categorized as TDRs when the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider.

 

14


Table of Contents

The following tables summarize impaired loans:

 

     Impaired Loans  
     September 30, 2014      December 31, 2013  

(unaudited, in thousands)

   Unpaid
Principal
Balance (1)
     Recorded
Investment
     Related
Allowance
     Unpaid
Principal
Balance (1)
     Recorded
Investment
     Related
Allowance
 

With no related specific allowance recorded:

                 

Commercial real estate:

                 

Land and construction

   $ 1,647       $ 1,547       $ —         $ 2,663       $ 2,564       $ —     

Improved property

     18,361         16,888         —           21,421         19,628         —     

Commercial and industrial

     4,192         3,714         —           3,773         3,249         —     

Residential real estate

     19,438         17,782         —           22,006         20,090         —     

Home equity

     2,551         2,264         —           2,675         2,506         —     

Consumer

     1,264         1,071         —           1,402         1,182         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans without a specific allowance

     47,453         43,266         —           53,940         49,219         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With a specific allowance recorded:

                 

Commercial real estate:

                 

Improved property

     3,812         3,812         57         729         729         51   

Commercial and industrial

     1,915         1,915         1,026         1,546         1,546         681   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans with a specific allowance

     5,727         5,727         1,083         2,275         2,275         732   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 53,180       $ 48,993       $ 1,083       $ 56,215       $ 51,494       $ 732   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off.

 

    Impaired Loans  
    For the Three Months Ended     For the Nine Months Ended  
    September 30, 2014     September 30, 2013     September 30, 2014     September 30, 2013  

(unaudited, in thousands)

  Average
Recorded
Investment
    Interest
Income
Recognized
    Average
Recorded
Investment
    Interest
Income
Recognized
    Average
Recorded
Investment
    Interest
Income
Recognized
    Average
Recorded
Investment
    Interest
Income
Recognized
 

With no related specific allowance recorded:

               

Commercial real estate:

               

Land and construction

  $ 1,749      $ 11      $ 4,181      $ —        $ 2,099      $ 26      $ 5,049      $ 89   

Improved Property

    17,672        169        22,777        92        18,415        322        23,471        408   

Commercial and industrial

    4,071        (2     3,643        26        3,802        87        3,884        87   

Residential real estate

    18,337        219        19,487        217        18,900        610        19,872        582   

Home equity

    2,191        13        2,278        20        2,279        48        2,201        50   

Consumer

    1,087        26        1,361        28        1,131        72        1,425        77   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans without a specific allowance

    45,107        436        53,727        383        46,626        1,165        55,902        1,293   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

With a specific allowance recorded:

               

Commercial real estate:

               

Land and construction

    —          —          1,500        6        —          —          1,543        28   

Improved Property

    2,269        109        2,765        —          1,499        113        3,251        —     

Commercial and industrial

    1,938        27        —          —          2,134        68        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans with a specific allowance

    4,207        136        4,265        6        3,633        181        4,794        28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $ 49,314      $ 572      $ 57,992      $ 389      $ 50,259      $ 1,346      $ 60,696      $ 1,321   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15


Table of Contents

The following tables present the recorded investment in non-accrual loans and TDRs:

 

     Non-accrual Loans (1)  

(unaudited, in thousands)

   September 30,
2014
     December 31,
2013
 

Commercial real estate:

     

Land and construction

   $ 1,547       $ 2,564   

Improved property

     18,206         17,305   
  

 

 

    

 

 

 

Total commercial real estate

     19,753         19,869   
  

 

 

    

 

 

 

Commercial and industrial

     5,432         4,380   

Residential real estate

     9,404         10,240   

Home equity

     1,499         1,604   

Consumer

     683         540   
  

 

 

    

 

 

 

Total

   $ 36,771       $ 36,633   
  

 

 

    

 

 

 

 

(1) 

Total non-accrual loans include loans that are also restructured. Such loans are also set forth in the following table as non-accrual TDRs.

 

     TDRs  
     September 30, 2014      December 31, 2013  

(unaudited, in thousands)

   Accruing      Non-
Accrual
     Total      Accruing      Non-
Accrual
     Total  

Commercial real estate:

                 

Land and construction

   $ —         $ 466       $ 466       $ —         $ 1,601       $ 1,601   

Improved property

     2,494         1,572         4,066         3,052         3,658         6,710   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     2,494         2,038         4,532         3,052         5,259         8,311   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     197         686         883         415         579         994   

Residential real estate

     8,378         2,208         10,586         9,850         2,991         12,841   

Home equity

     765         264         1,029         902         289         1,191   

Consumer

     388         300         688         642         206         848   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 12,222       $ 5,496       $ 17,718       $ 14,861       $ 9,324       $ 24,185   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2014, there were no TDRs greater than $1.0 million. The concessions granted in the majority of loans reported as accruing and non-accrual TDRs are extensions of the maturity date or the amortization period, reductions in the interest rate below the prevailing market rate for loans with comparable characteristics, and/or permitting interest-only payments for longer than three months.

The following tables present details related to loans identified as TDRs during the three and nine months ended September 30, 2014 and September 30, 2013, respectively:

 

    New TDRs (1)
For the Three Months Ended
 
    September 30, 2014     September 30, 2013  

(unaudited, dollars in thousands)

  Number  of
Modifications
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
    Number  of
Modifications
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
 

Commercial real estate:

           

Land and construction

    —        $ —        $ —          1      $ 66      $ 65   

Improved Property

    2        475        465        1        49        49   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

    2        475        465        2        115        114   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial and industrial

    —          —          —          1        14        14   

Residential real estate

    1        112        112        8        307        280   

Home equity

    1        58        57        2        75        52   

Consumer

    2        52        50        9        98        92   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    6      $ 697      $ 684        22      $ 609      $ 552   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Excludes loans that were either paid off or charged-off by period end. The pre-modification balance represents the balance outstanding at the beginning of the period. The post-modification balance represents the outstanding balance at period end.

 

16


Table of Contents
    New TDRs (1)  
    For the Nine Months Ended  
    September 30, 2014     September 30, 2013  

(unaudited, dollars in thousands)

  Number  of
Modifications
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
    Number  of
Modifications
    Pre-
Modification
Outstanding
Recorded
Investment
    Post-
Modification
Outstanding
Recorded
Investment
 

Commercial real estate:

           

Land and construction

    —        $ —        $ —          2      $ 366      $ 359   

Improved Property

    4        692        664        6        568        395   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

    4        692        664        8        934        754