Attached files

file filename
EX-31.2 - EX-31.2 - WESBANCO INCd165517dex312.htm
EX-32.1 - EX-32.1 - WESBANCO INCd165517dex321.htm
EX-31.1 - EX-31.1 - WESBANCO INCd165517dex311.htm
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 March 31, 2016

 

¨ 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  þ    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  þ    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   þ    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  þ

As of April 29, 2016, there were 38,362,534 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 March 31, 2016 (unaudited) and December 31, 2015

     3   
 

Consolidated Statements of Comprehensive Income for the three months ended March  31, 2016 and 2015 (unaudited)

     4   
 

Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March  31, 2016 and 2015 (unaudited)

     5   
 

Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 (unaudited)

     6   
 

Notes to Consolidated Financial Statements (unaudited)

     7   
2  

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

     27   
3  

Quantitative and Qualitative Disclosures About Market Risk

     44   
4  

Controls and Procedures

     47   
 

PART II – OTHER INFORMATION

  
1  

Legal Proceedings

     48   
2  

Unregistered Sales of Equity Securities and Use of Proceeds

     48   
6  

Exhibits

     49   
 

Signatures

    
50
  

 

2


Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESBANCO, INC. CONSOLIDATED BALANCE SHEETS

 

 

(unaudited, in thousands, except shares)

   March 31,
2016
    December 31,
2015
 

ASSETS

    

Cash and due from banks, including interest bearing amounts of $19,845 and $10,978, respectively

   $ 167,973      $ 86,685   

Securities:

    

Available-for-sale, at fair value

     1,380,762        1,409,520   

Held-to-maturity (fair values of $1,042,690 and $1,038,207, respectively)

     1,004,925        1,012,930   
  

 

 

   

 

 

 

Total securities

     2,385,687        2,422,450   
  

 

 

   

 

 

 

Loans held for sale

     4,942        7,899   
  

 

 

   

 

 

 

Portfolio loans, net of unearned income

     5,136,385        5,065,842   

Allowance for loan losses

     (42,525     (41,710
  

 

 

   

 

 

 

Net portfolio loans

     5,093,860        5,024,132   
  

 

 

   

 

 

 

Premises and equipment, net

     110,542        112,203   

Accrued interest receivable

     26,574        25,759   

Goodwill and other intangible assets, net

     490,688        490,888   

Bank-owned life insurance

     151,939        150,980   

Other assets

     137,176        149,302   
  

 

 

   

 

 

 

Total Assets

   $ 8,569,381      $ 8,470,298   
  

 

 

   

 

 

 

LIABILITIES

    

Deposits:

    

Non-interest bearing demand

   $ 1,327,906      $ 1,311,455   

Interest bearing demand

     1,225,068        1,152,071   

Money market

     940,244        967,561   

Savings deposits

     1,095,819        1,077,374   

Certificates of deposit

     1,553,855        1,557,838   
  

 

 

   

 

 

 

Total deposits

     6,142,892        6,066,299   
  

 

 

   

 

 

 

Federal Home Loan Bank borrowings

     1,039,254        1,041,750   

Other short-term borrowings

     76,630        81,356   

Junior subordinated debt owed to unconsolidated subsidiary trusts

     106,196        106,196   
  

 

 

   

 

 

 

Total borrowings

     1,222,080        1,229,302   
  

 

 

   

 

 

 

Accrued interest payable

     2,070        1,715   

Other liabilities

     56,429        50,850   
  

 

 

   

 

 

 

Total Liabilities

     7,423,471        7,348,166   
  

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY

    

Preferred stock, no par value; 1,000,000 shares authorized; none outstanding

     —          —     

Common stock, $2.0833 par value; 100,000,000 shares authorized in 2016 and 2015, respectively; issued: 38,546,042 shares in 2016 and 2015, respectively; outstanding: 38,362,534 and 38,459,635 shares in 2016 and 2015, respectively

     80,304        80,304   

Capital surplus

     516,260        516,294   

Retained earnings

     563,592        549,921   

Treasury stock (183,508 and 86,407 shares in 2016 and 2015, respectively, at cost)

     (5,335     (2,640

Accumulated other comprehensive loss

     (8,357     (20,954

Deferred benefits for directors

     (554     (793
  

 

 

   

 

 

 

Total Shareholders’ Equity

     1,145,910        1,122,132   
  

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 8,569,381      $ 8,470,298   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

3


Table of Contents

WESBANCO, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

     For the Three Months Ended
March 31,
 

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

   2016     2015  

INTEREST AND DIVIDEND INCOME

    

Loans, including fees

   $ 52,338      $ 47,713   

Interest and dividends on securities:

    

Taxable

     10,217        8,498   

Tax-exempt

     4,521        3,533   
  

 

 

   

 

 

 

Total interest and dividends on securities

     14,738        12,031   
  

 

 

   

 

 

 

Other interest income

     525        635   
  

 

 

   

 

 

 

Total interest and dividend income

     67,601        60,379   
  

 

 

   

 

 

 

INTEREST EXPENSE

    

Interest bearing demand deposits

     507        422   

Money market deposits

     456        456   

Savings deposits

     165        148   

Certificates of deposit

     2,659        2,872   
  

 

 

   

 

 

 

Total interest expense on deposits

     3,787        3,898   
  

 

 

   

 

 

 

Federal Home Loan Bank borrowings

     3,068        557   

Other short-term borrowings

     82        75   

Junior subordinated debt owed to unconsolidated subsidiary trusts

     822        894   
  

 

 

   

 

 

 

Total interest expense

     7,759        5,424   
  

 

 

   

 

 

 

NET INTEREST INCOME

     59,842        54,955   

Provision for credit losses

     2,324        1,289   
  

 

 

   

 

 

 

Net interest income after provision for credit losses

     57,518        53,666   
  

 

 

   

 

 

 

NON-INTEREST INCOME

    

Trust fees

     5,711        6,053   

Service charges on deposits

     3,952        3,652   

Electronic banking fees

     3,604        3,325   

Net securities brokerage revenue

     1,896        2,059   

Bank-owned life insurance

     973        1,251   

Net gains on sales of mortgage loans

     548        272   

Net securities gains

     1,111        22   

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

     (18     122   

Other income

     1,616        1,434   
  

 

 

   

 

 

 

Total non-interest income

     19,393        18,190   
  

 

 

   

 

 

 

NON-INTEREST EXPENSE

    

Salaries and wages

     19,180        18,357   

Employee benefits

     7,077        7,316   

Net occupancy

     3,591        3,490   

Equipment

     3,428        2,973   

Marketing

     973        965   

FDIC insurance

     1,166        910   

Amortization of intangible assets

     730        566   

Restructuring and merger-related expense

     —          9,733   

Other operating expenses

     9,198        9,131   
  

 

 

   

 

 

 

Total non-interest expense

     45,343        53,441   
  

 

 

   

 

 

 

Income before provision for income taxes

     31,568        18,415   

Provision for income taxes

     8,694        4,528   
  

 

 

   

 

 

 

NET INCOME

   $ 22,874      $ 13,887   
  

 

 

   

 

 

 

EARNINGS PER COMMON SHARE

    

Basic

   $ 0.60      $ 0.40   

Diluted

   $ 0.60      $ 0.40   
  

 

 

   

 

 

 

AVERAGE COMMON SHARES OUTSTANDING

    

Basic

     38,386,983        34,393,137   

Diluted

     38,402,316        34,478,335   
  

 

 

   

 

 

 

DIVIDENDS DECLARED PER COMMON SHARE

   $ 0.24      $ 0.23   
  

 

 

   

 

 

 

COMPREHENSIVE INCOME

   $ 35,471      $ 19,088   
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

4


Table of Contents

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

 

For the Three Months Ended March 31, 2016 and 2015

 

     Common Stock                        Accumulated
Other
    Deferred        

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

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

December 31, 2015

     38,459,635      $ 80,304       $ 516,294      $ 549,921      $ (2,640   $ (20,954   $ (793   $ 1,122,132   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —           —          22,874        —          —          —          22,874   

Other comprehensive income

     —          —           —          —          —          12,597        —          12,597   
                 

 

 

 

Comprehensive income

     —          —           —          —          —          —          —          35,471   

Common dividends declared

                 

($0.24 per share)

     —          —           —          (9,203     —          —          —          (9,203

Treasury shares acquired

     (117,101     —           —          —          (3,317     —          —          (3,317

Stock options exercised

     20,000        —           (146     —          622        —          —          476   

Stock compensation expense

     —          —           351        —          —          —          —          351   

Deferred benefits for directors- net

     —          —           (239     —          —          —          239        —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2016

     38,362,534      $ 80,304       $ 516,260      $ 563,592      $ (5,335   $ (8,357   $ (554   $ 1,145,910   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                 

December 31, 2014

     29,298,188      $ 61,182       $ 244,661      $ 504,578      $ (2,151   $ (18,825   $ (1,255   $ 788,190   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     —          —           —          13,887        —          —          —          13,887   

Other comprehensive income

     —          —           —          —          —          5,201        —          5,201   
                 

 

 

 

Comprehensive income

     —          —           —          —          —          —          —          19,088   

Common dividends declared

                 

($0.23 per share)

     —          —           —          (8,843     —          —          —          (8,843

Shares issued for acquisition

     9,178,531        19,122         274,507        —          —          —          —          293,629   

Treasury shares acquired

     (38,237     —           —          —          (1,262     —          —          (1,262

Stock options exercised

     11,330        —           (44     —          352        —          —          308   

Restricted stock granted

     —          —           —          —          —          —          —          —     

Stock compensation expense

     —          —           274        —          —          —          —          274   

Deferred benefits for directors- net

     —          —           1,198        —          —          —          (1,198     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2015

     38,449,812      $ 80,304       $ 520,596      $ 509,622      $ (3,061   $ (13,624   $ (2,453   $ 1,091,384   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements.

 

5


Table of Contents

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

     For the Three Months Ended
March 31,
 

(unaudited, in thousands)

   2016     2015  

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 40,275      $ 36,064   
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Net increase in loans held for investment

     (70,534     (94,812

Securities available-for-sale:

    

Proceeds from sales

     15,026        560,676   

Proceeds from maturities, prepayments and calls

     83,528        52,783   

Purchases of securities

     (51,020     (405,998

Securities held-to-maturity:

    

Proceeds from maturities, prepayments and calls

     22,248        9,430   

Purchases of securities

     (15,848     (51,246

Proceeds from bank-owned life insurance

     14        1,185   

Cash paid to acquire a business, net of cash acquired

     —          (28,551

Purchases of premises and equipment – net

     (526     (2,033
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (17,112     41,434   
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Increase in deposits

     77,050        120,954   

Proceeds from Federal Home Loan Bank borrowings

     —          325,000   

Repayment of Federal Home Loan Bank borrowings

     (2,443     (507,982

Decrease in other short-term borrowings

     (4,726     (9,060

Dividends paid to common shareholders

     (8,859     (6,446

Treasury shares purchased—net

     (2,897     (992
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     58,125        (78,526
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     81,288        (1,028

Cash and cash equivalents at beginning of the period

     86,685        94,002   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 167,973      $ 92,974   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES

    

Interest paid on deposits and other borrowings

   $ 7,914      $ 5,522   

Income taxes paid

     1,100        100   

Transfers of loans to other real estate owned

     336        344   

Non-cash transactions related to ESB acquisition

     —          301,933   
    

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, 2015.

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 2015 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 March 2016, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) (ASU 2016-09) that will require all income tax effects of stock awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-07 that eliminates the requirement to retrospectively apply the equity method in previous periods when an investor initially obtains significant influence over an investee. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016, and requires prospective adoption. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02 that will require entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. The principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases were not previously recognized in the balance sheet. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. WesBanco is currently evaluating the impact of the adoption of this pronouncement on its Consolidated Financial Statements.

In January 2016, the FASB issued ASU 2016-01 that will require entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The standard does not change the guidance for classifying and measuring investments in debt securities and loans. Entities will have to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.

In September 2015, the FASB issued ASU 2015-16 which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The acquirer still must disclose the amounts and reasons for adjustments to the provisional amounts. The acquirer also must disclose, by line item, the amount of the adjustment reflected in the current-period income statement that would have been recognized in previous periods if the adjustment to provisional amounts had been recognized as of the acquisition date. Alternatively, an acquirer may present those amounts separately on the face of the income statement. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2015, including interim periods with those fiscal years. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.

In May 2015, the FASB issued ASU 2015-07 related to disclosures for investments in certain entities that calculate net asset value (NAV) per share (or its equivalent). This update removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and modifies certain disclosure requirements. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2015, and requires retrospective adoption. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-05 that provides guidance on when to account for a cloud computing arrangement as a software license. The guidance applies only to internal-use software that a customer obtains access to in a hosting arrangement if both of the following criteria are met: (1) The customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty, (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02 that revised the consolidation model, requiring reporting entities to reevaluate whether they should consolidate certain legal entities under the revised model. The amendments in this update modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, and eliminate the presumption that a general partner should consolidate and affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee

 

7


Table of Contents

arrangements and related party relationships. The pronouncement also provides for a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.

In May 2014, the FASB issued 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 was originally 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 was not permitted. On July 9, 2015, the FASB approved a one-year deferral of the effective date of the update. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is now permitted as of the original effective date for interim and annual reporting periods in fiscal years beginning after December 15, 2016. In March 2016, the FASB issued ASU 2016-08 which amends the principal versus agent guidance in the revenue standard. WesBanco is currently evaluating the impact of the adoption of this pronouncement on its Consolidated Financial Statements.

NOTE 2. EARNINGS PER COMMON SHARE

Earnings per common share are calculated as follows:

 

     For the Three Months Ended  
     March 31,  

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

   2016      2015  

Numerator for both basic and diluted earnings per common share:

     

Net income

   $ 22,874       $ 13,887   
  

 

 

    

 

 

 

Denominator:

     

Total average basic common shares outstanding

     38,386,983         34,393,137   

Effect of dilutive stock options and warrant

     15,333         85,198   
  

 

 

    

 

 

 

Total diluted average common shares outstanding

     38,402,316         34,478,335   
  

 

 

    

 

 

 

Earnings per common share - basic

   $ 0.60       $ 0.40   

Earnings per common share - diluted

   $ 0.60       $ 0.40   
  

 

 

    

 

 

 

Stock options representing shares of 167,750 and 0 for the three months ended March 31, 2016 and 2015, respectively, were not included in the computation of diluted earnings per share, because to do so would have been anti-dilutive. Contingently issuable shares awarded under the total shareholder return plan were not included in the diluted computation for three months ended March 31, 2016, because to do so would have been anti-dilutive.

On February 10, 2015, WesBanco issued 9,178,531 shares to complete its acquisition of ESB. These shares are included in average shares outstanding beginning on that date.

 

8


Table of Contents

NOTE 3. SECURITIES

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

 

     March 31, 2016      December 31, 2015  

(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

   $ 68,720       $ 662       $ (16   $ 69,366       $ 82,725       $ 1,183       $ (403   $ 83,505   

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

     1,171,807         8,822         (1,962     1,178,667         1,188,256         1,720         (13,896     1,176,080   

Obligations of states and political subdivisions

     75,359         4,812         —          80,171         76,106         4,205         (46     80,265   

Corporate debt securities

     41,456         141         (311     41,286         58,745         181         (333     58,593   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total debt securities

   $ 1,357,342       $ 14,437       $ (2,289   $ 1,369,490       $ 1,405,832       $ 7,289       $ (14,678   $ 1,398,443   

Equity securities

     10,684         588         —          11,272         10,263         816         (2     11,077   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total available-for-sale securities

   $ 1,368,026       $ 15,025       $ (2,289   $ 1,380,762       $ 1,416,095       $ 8,105       $ (14,680   $ 1,409,520   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Held-to-maturity

                     

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

   $ 212,176       $ 3,485       $ (133   $ 215,528       $ 216,419       $ 1,922       $ (2,014   $ 216,327   

Obligations of states and political subdivisions

     758,291         33,083         (190     791,184         762,039         26,121         (726     787,434   

Corporate debt securities

     34,458         1,579         (59     35,978         34,472         237         (263     34,446   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total held-to-maturity securities

   $ 1,004,925       $ 38,147       $ (382   $ 1,042,690       $ 1,012,930       $ 28,280       $ (3,003   $ 1,038,207   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

   $ 2,372,951       $ 53,172       $ (2,671   $ 2,423,452       $ 2,429,025       $ 36,385       $ (17,683   $ 2,447,727   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

At March 31, 2016, and December 31, 2015, there were no holdings of any one issuer, other than the U.S. government and its 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 March 31, 2016. In some instances, the issuers may have the right to call or prepay obligations without penalty prior to the contractual maturity date.

 

     March 31, 2016  

(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

   $ 2,000       $ 16,008       $ 27,538       $ 23,820       $ —         $ 69,366   

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

     —           —           —           —           1,178,667         1,178,667   

Obligations of states and political subdivisions

     7,910         20,996         36,594         14,671         —           80,171   

Corporate debt securities

     —           25,124         14,220         1,942         —           41,286   

Equity securities (2)

     —           —           —           —           11,272         11,272   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

   $ 9,910       $ 62,128       $ 78,352       $ 40,433       $ 1,189,939       $ 1,380,762   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity (3)

                 

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

   $ —         $ —         $ —         $ —         $ 215,528       $ 215,528   

Obligations of states and political subdivisions

     1,692         46,620         368,327         374,545         —           791,184   

Corporate debt securities

     —           937         35,041         —           —           35,978   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

   $ 1,692       $ 47,557       $ 403,368       $ 374,545       $ 215,528       $ 1,042,690   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 11,602       $ 109,685       $ 481,720       $ 414,978       $ 1,405,467       $ 2,423,452   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 $1.0 billion.

 

9


Table of Contents

Securities with aggregate fair values of $1.1 billion and $1.0 billion at March 31, 2016 and December 31, 2015, 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 $15.0 million and $560.7 million for the three months ended March 31, 2016 and 2015, respectively. Net unrealized gains (losses) on available-for-sale securities included in accumulated other comprehensive income net of tax, as of March 31, 2016 and December 31, 2015 were $8.1 million and ($4.2) million, respectively.

The following table presents the gross realized gains and losses on sales and calls of securities for the three months ended March 31, 2016 and 2015, respectively.

 

     For the Three Months Ended  
     March 31,  

(unaudited, in thousands)

   2016      2015  

Gross realized gains

   $ 1,137       $ 24   

Gross realized losses

     (26      (2
  

 

 

    

 

 

 

Net realized gains (losses)

   $ 1,111       $ 22   
  

 

 

    

 

 

 

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 March 31, 2016 and December 31, 2015:

 

     March 31, 2016  
     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

   $ 22,445       $ (16     3       $ —         $ —          —         $ 22,445       $ (16     3   

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

     52,251         (174     11         152,333         (1,921     33         204,584         (2,095     44   

Obligations of states and political subdivisions

     12,659         (67     16         14,817         (123     18         27,476         (190     34   

Corporate debt securities

     26,736         (326     8         1,942         (44     1         28,678         (370     9   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total temporarily impaired securities

   $ 114,091       $ (583     38       $ 169,092       $ (2,088     52       $ 283,183       $ (2,671     90   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

     December 31, 2015  
     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

   $ 49,826       $ (403     11       $ —         $ —          —         $ 49,826       $ (403     11   

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

     1,003,397         (10,981     187         146,182         (4,929     31         1,149,579         (15,910     218   

Obligations of states and political subdivisions

     58,705         (400     76         23,691         (372     29         82,396         (772     105   

Corporate debt securities

     41,326         (541     12         1,931         (55     1         43,257         (596     13   

Equity securities

     1,378         (2     1         —           —          —           1,378         (2     1   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total temporarily impaired securities

   $ 1,154,632       $ (12,327   $ 287       $ 171,804       $ (5,356   $ 61       $ 1,326,436       $ (17,683   $ 348   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

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, net of taxes, to other comprehensive income in shareholders’ equity.

WesBanco does not believe the securities presented above are impaired due to reasons of credit quality, as substantially all debt securities are rated above 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 FHLB of Pittsburgh stock totaling $45.4 million and $45.5 million at March 31, 2016 and December 31, 2015, 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.

 

10


Table of Contents

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 $1.1 million and $1.0 million at March 31, 2016 and December 31, 2015, respectively and discounts on purchased loans from prior transactions of $14.8 million and $15.7 million at March 31, 2016 and December 31, 2015, respectively.

 

(unaudited, in thousands)

   March 31,
2016
     December 31,
2015
 

Commercial real estate:

     

Land and construction

   $ 400,739       $ 344,748   

Improved property

     1,904,147         1,911,633   
  

 

 

    

 

 

 

Total commercial real estate

     2,304,886         2,256,381   
  

 

 

    

 

 

 

Commercial and industrial

     768,714         737,878   

Residential real estate

     1,238,227         1,247,800   

Home equity

     424,561         416,889   

Consumer

     399,997         406,894   
  

 

 

    

 

 

 

Total portfolio loans

     5,136,385         5,065,842   
  

 

 

    

 

 

 

Loans held for sale

     4,942         7,899   
  

 

 

    

 

 

 

Total loans

   $ 5,141,327       $ 5,073,741   
  

 

 

    

 

 

 

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 Three Months Ended March 31, 2016 and 2015
 

(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, 2015:

                

Allowance for loan losses

   $ 4,390      $ 14,748      $ 10,002      $ 4,582      $ 2,883      $ 4,763      $ 342      $ 41,710   

Allowance for loan commitments

     157        26        260        7        117        46        —          613   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total beginning allowance for credit losses

     4,547        14,774        10,262        4,589        3,000        4,809        342        42,323   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses:

                

Provision for loan losses

     1,387        716        (37     (279     (154     416        298        2,347   

Provision for loan commitments

     57        (14     (64     (2     1        (1     —          (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for credit losses

     1,444        702        (101     (281     (153     415        298        2,324   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

     —          (878     (20     (176     (72     (1,183     (169     (2,498

Recoveries

     1        240        35        186        53        375        76        966   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     1        (638     15        10        (19     (808     (93     (1,532
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2016:

                

Allowance for loan losses

     5,778        14,826        9,980        4,313        2,710        4,371        547        42,525   

Allowance for loan commitments

     214        12        196        5        118        45        —          590   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance for credit losses

   $ 5,992      $ 14,838      $ 10,176      $ 4,318      $ 2,828      $ 4,416      $ 547      $ 43,115   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2014:

                

Allowance for loan losses

   $ 5,654      $ 17,573      $ 9,063      $ 5,382      $ 2,329      $ 4,078      $ 575      $ 44,654   

Allowance for loan commitments

     194        10        112        9        90        40        —          455   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total beginning allowance for credit losses

     5,848        17,583        9,175        5,391        2,419        4,118        575        45,109   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses:

                

Provision for loan losses

     (323     903        (44     (208     747        133        58        1,266   

Provision for loan commitments

     (16     8        8        4        17        2        —          23   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total provision for credit losses

     (339     911        (36     (204     764        135        58        1,289   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs

     —          (577     (122     (358     (589     (717     (154     (2,517

Recoveries

     —          136        114        218        10        229        63        770   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     —          (441     (8     (140     (579     (488     (91     (1,747
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2015:

                

Allowance for loan losses

     5,331        18,035        9,011        5,034        2,497        3,723        542        44,173   

Allowance for loan commitments

     178        18        120        13        107        42        —          478   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ending allowance for credit losses

   $ 5,509      $ 18,053      $ 9,131      $ 5,047      $ 2,604      $ 3,765      $ 542      $ 44,651   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


Table of Contents

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

 

     Allowance for Credit Losses and Recorded Investment in Loans  

(unaudited, in thousands)

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

March 31, 2016

                       

Allowance for credit losses:

                       

Allowance for loans individually evaluated for impairment

   $ —         $ 667       $ 704       $ —         $ —         $ —         $         —         $ 1,371   

Allowance for loans collectively evaluated for impairment

     5,778         14,159         9,276         4,313         2,710         4,371         547         41,154   

Allowance for loan commitments

     214         12         196         5         118         45         —           590   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for credit losses

   $ 5,992       $ 14,838       $ 10,176       $ 4,318       $ 2,828       $ 4,416       $ 547       $ 43,115   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio loans:

                       

Individually evaluated for impairment (1)

   $ —         $ 4,031       $ 4,574       $ —         $ —         $ —         $ —         $ 8,605   

Collectively evaluated for impairment

     400,739         1,892,461         764,140         1,238,227         424,561         399,997         —           5,120,125   

Acquired with deteriorated credit quality

     —           7,655         —           —           —           —              7,655   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

   $ 400,739       $ 1,904,147       $ 768,714       $ 1,238,227       $ 424,561       $ 399,997       $ —         $ 5,136,385   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

                       

Allowance for credit losses:

                       

Allowance for loans individually evaluated for impairment

   $ —         $ 668       $ 853       $ —         $ —         $ —         $ —         $ 1,521   

Allowance for loans collectively evaluated for impairment

     4,390         14,080         9,149         4,582         2,883         4,763         342         40,189   

Allowance for loan commitments

     157         26         260         7         117         46         —           613   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total allowance for credit losses

   $ 4,547       $ 14,774       $ 10,262       $ 4,589       $ 3,000       $ 4,809       $ 342       $ 42,323   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Portfolio loans:

                       

Individually evaluated for impairment (1)

   $ —         $ 4,031       $ 4,872       $ —         $ —         $ —         $ —         $ 8,903   

Collectively evaluated for impairment

     343,832         1,899,738         732,957         1,247,639         416,862         406,622         —           5,047,650   

Acquired with deteriorated credit quality

     916         7,864         49         161         27         272            9,289   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

   $ 344,748       $ 1,911,633       $ 737,878       $ 1,247,800       $ 416,889       $ 406,894       $ —         $ 5,065,842   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 paragraphs provide descriptions of risk grades that are applicable 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 be inadequately protected 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

 

12


Table of Contents

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.

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:

 

     Commercial 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 March 31, 2016

           

Pass

   $ 392,298       $ 1,856,399       $ 740,311       $ 2,989,008   

Criticized - compromised

     5,414         12,310         13,686         31,410   

Classified - substandard

     3,027         35,438         14,717         53,182   

Classified - doubtful

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 400,739       $ 1,904,147       $ 768,714       $ 3,073,600   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2015

           

Pass

   $ 335,989       $ 1,864,986       $ 713,578       $ 2,914,553   

Criticized - compromised

     5,527         10,911         9,860         26,298   

Classified - substandard

     3,232         35,736         14,440         53,408   

Classified - doubtful

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 344,748       $ 1,911,633       $ 737,878       $ 2,994,259   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 $16.0 million at March 31, 2016 and $15.8 million at December 31, 2015, of which $2.1 and $3.1 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.

Acquired Loans - Loans acquired with deteriorated credit quality at March 31, 2016 and December 31, 2015 were $7.7 million and $9.3 million, respectively, while the non-accretable difference was $8.0 million and $9.1 million, respectively. At March 31, 2016 and December 31, 2015 no allowance for loan losses has been recognized related to the acquired impaired loans, as estimates of future cash flows on these loans have not been negatively impacted.

The following table provides changes in accretable yield for loans acquired with deteriorated credit quality:

 

     For the Three Months Ended  

(unaudited, in thousands)

   March 31,
2016
    March 31,
2015
 

Balance at beginning of period

   $ 1,206      $ —     

Acquisitions

     —          1,815   

Reclass from non-accretable difference

     1,033        —     

Transfers

     (328     —     

Accretion

     (134     (107
  

 

 

   

 

 

 

Balance at end of period

   $ 1,777      $ 1,708   
  

 

 

   

 

 

 

 

13


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 March 31, 2016

                    

Commercial real estate:

                    

Land and construction

   $ 398,836       $ 286       $ —         $ 1,617       $ 1,903       $ 400,739       $ 1,133   

Improved property

     1,890,881         2,754         1,823         8,689         13,266         1,904,147         920   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     2,289,717         3,040         1,823         10,306         15,169         2,304,886         2,053   

Commercial and industrial

     764,485         943         1,129         2,157         4,229         768,714         54   

Residential real estate

     1,227,332         3,208         279         7,408         10,895         1,238,227         920   

Home equity

     420,242         1,334         501         2,484         4,319         424,561         878   

Consumer

     395,875         2,708         948         466         4,122         399,997         281   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

     5,097,651         11,233         4,680         22,821         38,734         5,136,385         4,186   

Loans held for sale

     4,942         —           —           —           —           4,942         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 5,102,593       $ 11,233       $ 4,680       $ 22,821       $ 38,734       $ 5,141,327       $ 4,186   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans included above are as follows:

                    

Non-accrual loans

   $ 12,116       $ 2,350       $ 1,005       $ 18,389       $ 21,744       $ 33,860      

TDRs accruing interest (1)

     8,634         535         135         246         916         9,550      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total impaired

   $ 20,750       $ 2,885       $ 1,140       $ 18,635       $ 22,660       $ 43,410      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

As of December 31, 2015

                    

Commercial real estate:

                    

Land and construction

   $ 344,184       $ —         $ —         $ 564       $ 564       $ 344,748       $ —     

Improved property

     1,901,466         909         1,097         8,161         10,167         1,911,633         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     2,245,650         909         1,097         8,725         10,731         2,256,381         —     

Commercial and industrial

     734,660         298         714         2,206         3,218         737,878         33   

Residential real estate

     1,234,839         1,389         2,871         8,701         12,961         1,247,800         2,159   

Home equity

     412,450         2,252         314         1,873         4,439         416,889         407   

Consumer

     401,242         4,115         764         773         5,652         406,894         527   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total portfolio loans

     5,028,841         8,963         5,760         22,278         37,001         5,065,842         3,126   

Loans held for sale

     7,899         —           —           —           —           7,899         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 5,036,740       $ 8,963       $ 5,760       $ 22,278       $ 37,001       $ 5,073,741       $ 3,126   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans included above are as follows:

                    

Non-accrual loans

   $ 11,349       $ 943       $ 2,147       $ 18,942       $ 22,032       $ 33,381      

TDRs accruing interest (1)

     10,710         390         238         210         838         11,548      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total impaired

   $ 22,059       $ 1,333       $ 2,385       $ 19,152       $ 22,870       $ 44,929      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

(1)

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

 

14


Table of Contents

The following tables summarize impaired loans:

 

     Impaired Loans  
     March 31, 2016      December 31, 2015  

(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

   $ 983       $ 878       $ —         $ 2,126       $ 1,990       $ —     

Improved property

     14,221         10,332         —           14,817         10,559         —     

Commercial and industrial

     4,134         3,267         —           4,263         3,481         —     

Residential real estate

     19,051         17,169         —           18,560         16,688         —     

Home equity

     3,818         3,281         —           3,562         3,033         —     

Consumer

     1,070         897         —           1,603         1,294         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans without a specific allowance

     43,277         35,824         —           44,931         37,045         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With a specific allowance recorded:

                 

Commercial real estate:

                 

Land and construction

     —           —           —           —           —           —     

Improved property

     3,012         3,012         667         3,012         3,012         668   

Commercial and industrial

     5,878         4,574         704         6,176         4,872         853   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans with a specific allowance

     8,890         7,586         1,371         9,188         7,884         1,521   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 52,167       $ 43,410       $ 1,371       $ 54,119       $ 44,929       $ 1,521   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off and fair market value adjustments on acquired impaired loans.

 

     Impaired Loans  
     For the Three Months Ended
March 31, 2016
     For the Three Months Ended
March 31, 2015
 

(unaudited, in thousands)

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

With no related specific allowance recorded:

           

Commercial real estate:

           

Land and construction

   $ 1,434       $ 6       $ 2,128       $ 16   

Improved property

     10,446         84         18,932         223   

Commercial and industrial

     3,374         41         2,513         13   

Residential real estate

     16,929         239         18,715         230   

Home equity

     3,157         24         2,641         20   

Consumer

     1,096         18         1,194         20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans without a specific allowance

     36,436         412         46,123         522   
  

 

 

    

 

 

    

 

 

    

 

 

 

With a specific allowance recorded:

           

Commercial real estate:

           

Land and construction

     —           —           —           —     

Improved property

     3,012         —           7,223         —     

Commercial and industrial

     4,723         32         1,805         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans with a specific allowance

     7,735         32         9,028         19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 44,171       $ 444       $ 55,151       $ 541   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15


Table of Contents

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

 

     Non-accrual Loans (1)  

(unaudited, in thousands)

   March 31,
2016
     December 31,
2015
 

Commercial real estate:

     

Land and construction

   $ 878       $ 1,023   

Improved property

     11,371         11,507   
  

 

 

    

 

 

 

Total commercial real estate

     12,249         12,530   
  

 

 

    

 

 

 

Commercial and industrial

     7,694         8,148   

Residential real estate

     10,502         9,461   

Home equity

     2,679         2,391   

Consumer

     736         851   
  

 

 

    

 

 

 

Total

   $ 33,860       $ 33,381   
  

 

 

    

 

 

 

 

(1) 

At March 31, 2016 and December 31, 2015, there were three borrowers with loans greater than $1.0 million. 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  
     March 31, 2016      December 31, 2015  

(unaudited, in thousands)

   Accruing      Non-Accrual      Total      Accruing      Non-Accrual      Total  

Commercial real estate:

                 

Land and construction

   $ —         $ 391       $ 391       $ 967       $ 431       $ 1,398   

Improved property

     1,973         1,152         3,125         2,064         1,442         3,506   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     1,973         1,543         3,516         3,031         1,873         4,904   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     147         273         420         205         282         487   

Residential real estate

     6,667         2,308         8,975         7,227         2,060         9,287   

Home equity

     602         236         838         642         218         860   

Consumer

     161         157         318         443         184         627   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,550       $ 4,517       $ 14,067       $ 11,548       $ 4,617       $ 16,165   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of March 31, 2016, 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. WesBanco had no unfunded commitments to debtors whose loans were classified as impaired as of March 31, 2016 and $0.2 million as of December 31, 2015.

The following table presents details related to loans identified as TDRs during the three months ended March 31, 2016 and 2015, respectively:

 

     New TDRs (1)  
     For the Three Months Ended  
     March 31, 2016      March 31, 2015  

(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       $ 115       $ 113   

Improved Property

     —           —           —           2         835         603   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     —           —           —           4         950         716   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     —           —           —           —           —           —     

Residential real estate

     —           —           —           6         413         411   

Home equity

     —           —           —           1         7         6   

Consumer

     —           —           —           2         19         17   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —         $ —         $ —           13       $ 1,389       $ 1,150   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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

The following table summarizes TDRs which defaulted (defined as past due 90 days) during the three months ended March 31, 2016 and 2015, respectively, that were restructured within the last twelve months prior to March 31, 2016 and 2015, respectively:

 

     Defaulted TDRs (1)
For the Three Months Ended
March 31, 2016
     Defaulted TDRs (1)
For the Three Months Ended
March 31, 2015
 

(unaudited, dollars in thousands)

   Number of
Defaults
     Recorded
Investment
     Number of
Defaults
     Recorded
Investment
 

Commercial real estate:

           

Land and construction

     —         $ —           —         $ —     

Improved property

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial real estate

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Commercial and industrial

     —           —           —           —     

Residential real estate

     —           —           —           —     

Home equity

     —           —           1         42   

Consumer

     —           —           1         27   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —         $ —           2       $ 69   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Excludes loans that were either charged-off or cured by period end. The recorded investment is as of March 31, 2016 and 2015, respectively.

TDRs that default are placed on non-accrual status unless they are both well-secured and in the process of collection. None of the loans in the table above were accruing interest.

The following table summarizes other real estate owned and repossessed assets included in other assets:

 

(unaudited, in thousands)

   March 31,
2016
     December 31,
2015
 

Other real estate owned

   $ 5,155       $ 5,669   

Repossessed assets

     174         156   
  

 

 

    

 

 

 

Total other real estate owned and repossessed assets

   $ 5,329       $ 5,825   
  

 

 

    

 

 

 

Residential real estate included in other real estate owned at March 31, 2016 and December 31, 2015 was $1.6 million and $2.0 million, respectively. At March 31, 2016 and December 31, 2015, formal foreclosure proceedings were in process on residential real estate loans totaling $3.5 million and $4.1 million, respectively.

NOTE 5. PENSION PLAN

The following table presents the net periodic pension cost for WesBanco’s Defined Benefit Pension Plan (the “Plan”) and the related components:

 

     For the Three Months Ended
March 31,
 

(unaudited, in thousands)

   2016      2015  

Service cost – benefits earned during year

   $ 696       $ 827   

Interest cost on projected benefit obligation

     1,324         1,201   

Expected return on plan assets

     (1,919      (1,907

Amortization of prior service cost

     6         6   

Amortization of net loss

     694         784   
  

 

 

    

 

 

 

Net periodic pension cost

   $ 801       $ 911   
  

 

 

    

 

 

 

The Plan covers all employees of WesBanco and its subsidiaries who were hired on or before August 1, 2007 who satisfy minimum age and length of service requirements, and is not available to employees hired after such date.

A minimum required contribution of $0.6 million is due for 2016 which could be all or partially offset by the Plan’s $39.1 million available credit balance. WesBanco expects to make a voluntary contribution of $7.5 million to the Plan in 2016.

 

17


Table of Contents

NOTE 6. FAIR VALUE MEASUREMENT

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:

Securities available-for-sale: The fair value of securities available-for-sale which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other similar securities. These securities are classified within level 1 or 2 in the fair value hierarchy. Certain equity securities that are lightly traded in over-the-counter markets are classified as level 2 in the fair value hierarchy, as quoted market prices may not be available on the fair value measurement date. Positions that are not traded in active markets for which valuations are generated using assumptions not observable in the market or management’s best estimate are classified within level 3 of the fair value hierarchy. This includes certain specific municipal debt issues for which the credit quality and discount rate must be estimated.

We may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or market accounting or write-downs of individual assets.

Impaired loans: Impaired loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within level 3 of the fair value hierarchy.

Other real estate owned and repossessed assets: Other real estate owned and repossessed assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. The use of independent appraisals and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral, and therefore other real estate owned and repossessed assets are classified within level 3 of the fair value hierarchy.

Loans held for sale: Loans held for sale are carried, in aggregate, at the lower of cost or fair value. The use of a valuation model using quoted prices of similar instruments are significant inputs in arriving at the fair value and therefore loans held for sale are classified within level 2 of the fair value hierarchy.

 

18


Table of Contents

The following tables set forth WesBanco’s financial assets and liabilities that were accounted for at fair value on a recurring and nonrecurring basis by level within the fair value hierarchy as of March 31, 2016 and December 31, 2015:

 

            March 31, 2016  
            Fair Value Measurements Using:  

(unaudited, in thousands)

   March 31, 2016      Quoted Prices in
Active Markets
for Identical
Assets (level 1)
     Significant Other
Observable
Inputs

(level 2)
     Significant
Unobservable
Inputs

(level 3)
 

Recurring fair value measurements

           

Securities – available-for-sale

           

Obligations of government agencies

   $ 69,366       $ —         $ 69,366       $ —     

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

     1,178,667         —           1,178,667         —     

Obligations of state and political subdivisions

     80,171         —           80,171         —     

Corporate debt securities

     41,286         —           41,286         —     

Equity securities

     10,097         8,466         1,631         —     

Investments measured at net asset value (1)

     1,175         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities – available-for-sale

   $ 1,380,762       $ 8,466       $ 1,371,121       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recurring fair value measurements

   $ 1,380,762       $ 8,466       $ 1,371,121       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Nonrecurring fair value measurements

           

Impaired loans

   $ 6,215       $ —         $ —         $ 6,215   

Other real estate owned and repossessed assets

     5,329         —           —           5,329   

Loans held for sale

     4,942         —           4,942         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total nonrecurring fair value measurements

   $ 16,486       $ —         $ 4,942       $ 11,544   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

 

            December 31, 2015  
            Fair Value Measurements Using:  

(unaudited, in thousands)

   December 31, 2015      Quoted Prices in
Active Markets
for Identical
Assets (level 1)
     Significant Other
Observable
Inputs

(level 2)
     Significant
Unobservable
Inputs
(level 3)
 

Recurring fair value measurements

           

Securities – available-for-sale

           

Obligations of government agencies

   $ 83,505       $ —         $ 83,505       $ —     

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

     1,176,080         —           1,176,080         —     

Obligations of state and political subdivisions

     80,265         —           80,265         —     

Corporate debt securities

     58,593         —           58,593         —     

Equity securities