SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 1, 2002
----------------
WesBanco, Inc.
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(Exact name of registrant as specified in its charter)
West Virginia 0-8467 55-0571723
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1 Bank Plaza, Wheeling, WV 26003
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (304) 234-9000
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Former name or former address, if changed since last report Not Applicable
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This Current Report on Form 8-K/A is being filed to amend Item 7 of
the Form 8-K filed by WesBanco, Inc. ("WesBanco") with the Securities
and Exchange Commission on March 15, 2002 to include the financial
statements of American Bancorporation ("American") and the pro forma
financial information reflecting the pro forma effects of WesBanco's
acquisition of American.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired. The following
audited financial statements of American are included in this
Form 8-K/A on pages 3 through 31:
Consolidated balance sheets as of December 31, 2001 and 2000
and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 2001, notes to
consolidated financial statements and the independent
auditor's report.
(b) Pro forma financial information. The following unaudited
pro forma condensed combined financial statements, based on
historical financial statements of WesBanco and American, are
included in this Form 8-K/A on pages 32 through 34:
Pro forma condensed combined balance sheet as of December 31,
2001, pro forma condensed combined statement of income
for the year ended December 31, 2001 and notes to the pro
forma condensed combined financial statements.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of February 22,
2001 among WesBanco, Inc., American Bancorporation,
AB Corporation and WesBanco Bank, Inc. (incorporated by
reference to Annex A of the Proxy Statement contained in
the Registration Statement on Form S-4/A (Amendment
No. 1)(Registration No. 333-74814) filed with the
Securities and Exchange Commission on January 14, 2002).
2.2 First Amendment to Agreement and Plan of Merger
dated as of November 5, 2001 among WesBanco, Inc.,
American Bancorporation, AB Corporation and
WesBanco Bank, Inc. (incorporated by reference to
Annex B of the Proxy Statement contained in the
Registration Statement on Form S-4/A (Amendment No. 1)
(Registration No. 333-74814) filed with the Securities
and Exchange Commission on January 14, 2002).
23.1 Consent of KPMG LLP (filed herewith)
99.1 Press release dated March 1, 2002, announcing
that WesBanco, Inc. consummated its merger with
American Bancorporation. (previously filed on
March 15, 2002 as Exhibit 99 of the Current Report
on Form 8-K).
2
CONSOLIDATED BALANCE SHEETS American Bancorporation and Subsidiaries
December 31, 2001 and 2000
2001 2000
ASSETS ------------ ------------
Cash and due from banks........................ $ 13,800,664 $ 9,962,874
Federal funds sold............................. 3,866,000 4,530 000
Investment securities available for sale ...... 286,152,345 272,045,286
Loans
Commercial, financial and agricultural...... 176,866,228 158,611,104
Real estate mortgage........................ 124,856,327 157,297,233
Installment................................. 57,728,717 73,615,667
------------ ------------
359,451,272 389,524,004
Less allowance for loan losses.............. 3,673,412 3,252,073
------------ ------------
355,777,860 386,271,931
Premises and equipment - net................... 10,253,601 9,538,072
Accrued interest receivable ................... 4,252,874 4,736,395
Excess of cost over net assets acquired........ 1,307,334 1,643,066
Other assets................................... 16,456,737 16,488,437
------------ ------------
TOTAL ASSETS............................. $691,867,415 $705,216,061
============ ============
LIABILITIES
Deposits
Demand - non-interest bearing.............. $ 44,955,834 $ 41,213,045
Demand - interest bearing.................. 22,114,188 22,316,485
Savings.................................... 135,542,780 135,590,637
Time - under $100,000...................... 195,958,708 220,222,098
Time - over $100,000....................... 77,012,585 76,806,587
------------ ------------
TOTAL DEPOSITS......................... 475,584,095 496,148,852
Borrowed funds................................ 155,265,923 149,376,008
Accrued interest payable...................... 2,836,548 3,578,923
Other liabilities............................. 2,373,453 2,900,945
Company obligated mandatorily redeemable trust
preferred securities of subsidiary trust
holding solely junior subordinated debentures
of the Company............................... 12,650,000 12,650,000
------------ ------------
TOTAL LIABILITIES...................... 648,710,019 664,654,728
STOCKHOLDERS' EQUITY
Preferred stock............................. --- ---
Common stock without par value, stated
value $2.50 a share, authorized 6,500,000
shares, issued and outstanding 3,129,674.. 7,824,185 7,824,185
Additional paid-in capital.................. 10,301,982 10,301,982
Retained earnings........................... 25,926,999 24,733,853
Accumulated other comprehensive results, net
of tax benefit of $549,020 in 2001 and
$1,408,872 in 2000........................ (895,770) (2,298,687)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY................ 43,157,396 40,561,333
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $691,867,415 $705,216,061
============ ============
See accompanying notes to consolidated financial statements.
3
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
INTEREST INCOME ----------- ----------- -----------
Loans............................... $30,744,136 $34,102,554 $28,501,782
Investment securities
Taxable interest income........... 10,618,043 14,499,768 15,330,699
Non-taxable interest income....... 4,201,043 3,041,189 2,771,283
Dividends......................... 581,944 851,085 649,083
----------- ----------- -----------
15,401,030 18,392,042 18,751,065
Short-term investments.............. 530,199 280,691 365,400
----------- ----------- -----------
Total interest income.......... 46,675,365 52,775,287 47,618,247
INTEREST EXPENSE
Deposits
Interest bearing demand........... 268,238 385,829 413,588
Savings........................... 4,024,880 5,173,100 2,792,845
Time - under $100,000............. 12,563,640 12,354,580 11,472,173
Time - over $100,000.............. 4,599,326 4,045,515 3,221,631
----------- ----------- -----------
21,456,084 21,959,024 17,900,237
Borrowings
Borrowed funds....................... 8,631,065 11,662,790 10,169,583
Notes payable and other long-term debt 1,100,825 1,100,825 1,101,412
----------- ----------- -----------
Total interest expense.......... 31,187,974 34,722,639 29,171,232
----------- ----------- -----------
NET INTEREST INCOME................. 15,487,391 18,052,648 18,447,015
PROVISION FOR LOAN LOSSES.............. 1,460,000 910,000 420,000
----------- ----------- -----------
Net interest income after provision
for loan losses..................... 14,027,391 17,142,648 18,027,015
OTHER INCOME
Service charges on deposit accounts.. 950,634 907,799 896,191
Insurance commissions................ 50,160 93,096 80,714
Net gains on sale of loans........... 55,928 1,089,373 1,524,509
Net securities gains................. 475,089 7,601 342,967
Other income......................... 1,030,952 847,878 659,607
----------- ----------- -----------
Total other income............... 2,562,763 2,945,747 3,503,988
OTHER EXPENSE
Salaries and employee benefits....... 6,016,232 6,684,241 6,920,404
Occupancy expense.................... 1,222,719 1,297,707 1,317,634
Furniture and equipment expense...... 1,165,349 1,311,864 1,274,460
Other expenses....................... 5,499,529 4,899,302 5,137,784
----------- ----------- -----------
Total other expense.............. 13,903,829 14,193,114 14,650,282
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ............ 2,686,325 5,895,281 6,880,721
PROVISION FOR INCOME TAXES............. (384,625) 1,189,780 1,526,902
----------- ----------- -----------
NET INCOME............................ $ 3,070,950 $ 4,705,501 $ 5,353,819
=========== =========== ===========
Basic Earnings Per Share.......... $ 0.98 $ 1.50 $ 1.71
=========== =========== ===========
See accompanying notes to consolidated financial statements.
4
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2001, 2000 and 1999
Accumulated
other
Additional comprehensive Total
Common paid-in Retained results, stockholders'
stock capital earnings net of tax equity
----------- ----------- ----------- ------------- ------------
Balance at January 1, 1999...... $ 7,824,185 $10,301,982 $18,430,141 $ (108,815) $ 36,447,493
Comprehensive results:
Net Income................... --- --- 5,353,819 --- 5,353,819
Unrealized security loss,
net of ($7,050,970) tax...... --- --- --- (11,532,374) (11,532,374)
Reclassification adjustment,
net of ($37,449) tax......... --- --- --- (212,173) (212,173)
----------- ----------- ----------- ------------ ------------
Total comprehensive results --- --- 5,353,819 (11,744,547) (6,390,728)
Dividends ($0.60) per share) --- --- (1,877,804) -- (1,877,804)
----------- ----------- ----------- ------------ ------------
Balance at December 31, 1999... 7,824,185 10,301,982 21,906,156 (11,853,362) 28,178,961
----------- ----------- ----------- ------------ ------------
Comprehensive results:
Net income.................. --- --- 4,705,501 --- 4,705,501
Unrealized security gain,
net of $5,825,783 tax...... --- --- --- 9,505,225 9,505,225
Reclassification adjustment,
net of $30,308 tax......... --- --- --- 49,450 49,450
----------- ----------- ----------- ------------ ------------
Total comprehensive results --- --- 4,705,501 9,554,675 14,260,176
Dividends ($0.60 per share) --- --- (1,877,804) -- (1,877,804)
----------- ----------- ----------- ------------ ------------
Balance at December 31, 2000... 7,824,185 10,301,982 24,733,853 (2,298,687) 40,561,333
----------- ----------- ----------- ------------ ------------
Comprehensive results:
Net income.................. --- --- 3,070,950 --- 3,070,950
Unrealized security gain,
net of $552,374 tax......... --- --- --- 901,241 901,241
Reclassification adjustment,
net of $307,479 tax......... --- --- --- 501,676 501,676
----------- ----------- ----------- ------------ ------------
Total comprehensive results --- --- 3,070,950 1,402,917 4,473,867
Dividends ($0.60 per share) --- --- (1,877,804) --- (1,877,804)
----------- ----------- ----------- ------------ ------------
Balance at December 31, 2001.. $ 7,824,185 $10,301,982 $25,926,999 $ (895,770) $ 43,157,396
=========== =========== =========== ============ ============
See accompanying notes to consolidated financial statements.
5
American Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, 2000 and 1999
Operating Activities: 2001 2000 1999
----------- ----------- -----------
Net income.................................. $ 3,070,950 $ 4,705,501 $ 5,353,819
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation.............................. 826,094 938,049 907,350
Amortization of intangibles............... 335,732 319,234 277,805
Net amortization of premiums and
discounts on investment securities....... 524,609 382,330 929,776
Provision for loan losses................. 1,460,000 910,000 420,000
Net gain on sale of mortgage servicing rights --- (251,393) ---
Net gain on sale of investment securities.. (475,089) (7,601) (342,967)
Net gain on sale of loans.................. (55,928) (1,089,373) (1,524,509)
Change in assets and liabilities net of effects
from the purchase of branch assets:
Net (increase) decrease in accrued interest
receivable................................ 483,521 (266,463) (1,076,532)
Net increase (decrease) in accrued interest
payable................................... (742,375) 1,026,689 204,642
Real estate mortgage loans originated
for sale.................................. (6,696,387) (58,603,413) (98,409,845)
Proceeds from sale of real estate mortgage
loans originated for sale................. 6,832,248 60,768,625 101,049,167
Net (increase) decrease in other assets.... (779,648) (11,642,406) 257,056
Net decrease in other liabilities.......... (527,492) (1,180,670) (778,651)
Net (increase) decrease from other
operating activities...................... (48,504) 45,483 (352,857)
----------- ----------- -----------
Net cash provided by (used in)
operating activities.................. 4,207,731 (3,945,408) 6,914,254
Investing Activities:
Investment securities available for sale:
Proceeds from maturities and repayments 65,556,307 35,548,466 84,908,012
Proceeds from sales..................... 85,609,949 6,900,241 37,800,556
Purchases.............................. (163,060,066) (1,304,829) (176,454,231)
Proceeds from the sale of mortgage
service rights.......................... --- 1,814,545 ---
Net (increase) decrease in loans.......... 28,954,138 (20,097,947) (72,098,476)
Purchase of premises and equipment........ (1,553,866) (329,712) (1,385,976)
Proceeds from sale of premises and equipment 12,243 139,551 ---
----------- ----------- -----------
Net cash provided by (used in)
investing activities.................. 15,518,705 22,670,315 (127,230,115)
Financing Activities:
Net increase (decrease) in non-interest
bearing demand deposits.................. 3,742,789 3,235,884 (1,538,030)
Net increase (decrease) in interest bearing
demand and savings deposits.............. (250,154) 11,720,089 25,045,019
Net increase (decrease) in time deposits... (24,057,392) 21,448,581 (5,469,691)
Net increase (decrease) in borrowed funds.. 5,889,915 (65,217,193) 90,702,018
Principal repayment of long-term debt...... --- --- (11,242)
Proceeds received in branch acquisition,
net of assets acquired................... --- 9,860,800 ---
Cash dividends paid........................ (1,877,804) (1,877,804) (1,877,804)
----------- ----------- -----------
Net cash provided by (used in)
financing activities.................. (16,552,646) (20,829,643) 106,850,270
----------- ----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents........................... 3,173,790 (2,104,736) (13,465,591)
Cash and Cash Equivalents Beginning Balance.. $14,492,874 $16,597,610 $30,063,201
----------- ----------- -----------
Cash and Cash Equivalents Ending Balance..... $17,666,664 $14,492,874 $16,597,610
=========== =========== ===========
Supplemental information:
Cash paid during the year for:
Interest................................ $31,930,349 $33,655,212 $28,966,590
=========== =========== ===========
Income taxes............................ $ 680,000 $ 1,980,000 $ 1,320,000
=========== =========== ===========
Non-cash investing and financing activities:
Loan foreclosures and repossessions..... $ 1,472,736 $ 1,861,979 $ 1,309,224
=========== =========== ===========
See accompanying notes to consolidated financial statements.
6
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
Note A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Bancorporation (the "Company"), which was organized in
1966, is a registered Ohio bank holding company with its
headquarters located in Wheeling, West Virginia. The Company's
wholly owned subsidiaries are Wheeling National Bank ("WNB"),
American Bancdata Corporation, American Bancservices, Inc., American
Mortgages, Inc. ("AMI") and American Bancorporation Capital Trust I
(the "Trust"). The Company's subsidiaries primarily engage in
commercial banking and mortgage banking. The subsidiary bank branch
offices are primarily located in the northern panhandle of West
Virginia, central and eastern Ohio and southwestern Pennsylvania.
The accounting and reporting policies of American Bancorporation
and Subsidiaries conform to generally accepted accounting principles
and with general practice within the banking industry. The following
is a description of the significant policies.
Principles of Consolidation
The consolidated financial statements include the accounts of
American Bancorporation and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Subsidiaries acquired in purchase transactions are included in the
consolidated financial statements from the date of acquisition.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks and federal funds sold. Generally,
federal funds are sold for one-day periods.
Investment Securities
The Company has adopted a methodology for the classification of
securities at the time of their purchase as either held to maturity
or available for sale. If it is management's intent and the Company
has the ability to hold such securities until their maturity, these
securities are classified as held to maturity and are carried on the
Company's books at cost, adjusted for amortization of premium and
accretion of discount on a level yield basis. Alternatively, if it
is management's intent at the time of purchase to hold securities
for an indefinite period of time and/or to use such securities as
part of its asset/liability management strategy, the securities are
classified as available for sale and are carried at fair value, with
net unrealized gains and losses excluded from earnings and reported
as a separate component of accumulated other comprehensive results,
net of applicable income taxes. Investment securities available for
sale include securities which may be sold in response to changes in
interest rates, resultant prepayment risk and other factors related
to interest rate or prepayment risk. Gains and losses on sales of
securities are recognized using the specific identification method.
Loans
Loans are reported at their principal amounts, net of any deferred
origination fees and costs and the allowance for loan losses.
Interest on loans is computed on the principal balance outstanding.
For loans not primarily secured by real estate or in the process of
collection, the Company discontinues the accrual of interest when a
loan is 90 days past due or collection of the interest is doubtful.
Real estate loans are placed on nonaccrual status when, in
management's judgement, collection is in doubt or when foreclosure
proceedings are initiated,
7
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
which is generally 180 days past the due date. Loan origination and
commitment fees, as well as certain direct loan origination costs,
are deferred and amortized as a yield adjustment over the lives of
the related loans via a method which approximates a level yield.
The Company grants commercial and industrial loans, commercial and
residential mortgages and consumer loans to customers primarily in
north-eastern West Virginia, southwestern Pennsylvania and central
and eastern Ohio. The Company's loan portfolio can be adversely
impacted by downturns in the local economic and real estate markets
as well as employment conditions.
A loan is considered to be impaired when it is probable that the
Company will be unable to collect all principal and interest amounts
due according to the original contractual terms of the loan
agreement. The Company considers all nonaccrual loans to be
impaired loans. Large groups of smaller homogenous loans, such as
loans secured by first and second liens on residential properties
and other consumer loans, are evaluated collectively for impairment.
Impaired loans are measured based upon the present value of expected
future cash flows, discounted at the loan's initial effective
interest rate, or at the loan's market price or fair value of the
collateral if the loan is collateral dependent. If the loan
valuation is less than the recorded value of the loan, an impairment
reserve must be established for the difference. The impairment
reserve is established by provision for loan losses or an allocation
of the existing allowance for loan losses. Interest receipts on
nonaccrual and impaired loans are recognized as interest revenue or
are applied to principal when management believes the ultimate
collectibility of principal is in doubt.
Allowance for Loan Losses
The determination of the balance in the allowance for loan losses
is based on an analysis of the portfolio and reflects an amount
which, in management's judgement, is appropriate to provide for
probable losses after giving consideration to the character of the
portfolio, current economic conditions, past loss experience and
such other factors that deserve current recognition. The regulatory
examiners may require the Company to recognize additions to the
allowances based upon their judgements about information available
to them at the time of their examinations. The provision for loan
losses is charged to current operations.
8
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Mortgage Loan Servicing
The Company measures the impairment of the mortgage servicing
rights based on their current fair value. Current fair value is
determined through the discounted present value of the estimated
future net servicing cashflows using a risk-based discount rate and
assumptions based upon market estimates for future servicing
revenues and expenses (including prepayment expectations, servicing
costs, default rates and interest earnings on escrows). For
impairment measurement purposes, servicing rights are stratified by
interest rate. If the carrying value of an individual stratum
exceeds its fair value, a valuation allowance is established.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation is provided on the
straight-line method, distributing the cost of premises over an
estimated useful life of twenty to fifty years and the cost of
equipment over an estimated useful life of three to fifteen years.
Excess of Cost over Net Assets Acquired
Excess of cost over net assets acquired include both goodwill and
core deposit intangibles. Goodwill is being amortized on a
straight-line basis over a period of twelve to thirty years. Core
deposit intangibles are being amortized over a period of eight
years. Such assets are periodically evaluated for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
Other Real Estate Owned
Other real estate owned in connection with loan settlements,
including real estate acquired, is stated at the lower of estimated
fair value less estimated costs to sell, or the carrying amount of
the loan. Decreases in fair value between annual appraisals, net
gains or losses on the sale of other real estate owned, and net
direct operating expense attributable to these assets are included
in other income/other expense. Other real estate owned is included
in other assets.
Income Taxes
Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases using enacted tax laws
and rates.
Pension Plan
Pension costs, based on actuarial computations, are charged to
expense and funded as required by minimum Internal Revenue Service
standards. (See Note R "Pension Plan and Profit Sharing 401(k)
Savings Plan").
9
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Earnings Per Common Share
Basic EPS is computed by dividing net income applicable to common
stock by the weighted average number of common shares outstanding
during the period, without considering any dilutive items. Diluted
EPS is computed by dividing net income applicable to common stock by
the weighted average number of common shares and common stock
equivalents for items that are dilutive, net of shares assumed to be
repurchased using the treasury stock method using the average share
price for the Company's common stock during the period. Common
stock equivalents arise from the assumed conversion of outstanding
stock options, warrants and convertible capital notes. During the
years 2001, 2000 and 1999, the Company had no common stock
equivalents. The weighted average number of shares used in the
calculation of basic earnings per share was 3,129,674 for 2001, 2000
and 1999.
Comprehensive Results
Comprehensive results is defined as net income, as currently
reported, as well as unrealized gains and losses on assets available
for sale and certain other items not currently included in the
income statement. Other comprehensive results include unrealized
gains (losses) on investment securities available for sale.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amount of
revenues and expenses during the reporting period. Actual results
could differ from these estimates. Estimates are used when
accounting for allowance for loan losses, realization of deferred
tax assets, fair values of certain assets and liabilities,
determination and carrying value of impaired loans, carrying value
of other real estate, carrying value and amortization of
intangibles, employee benefit plans and other areas.
Note B-CASH AND DUE FROM BANKS
The Company's banking subsidiary is required to maintain with a
Federal Reserve Bank reserve balances based principally on deposits
outstanding. Balances maintained are included in cash and due from
banks. The required reserves were approximately $150,000 at
December 31, 2001 and 2000.
10
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note C-INVESTMENT SECURITIES
Securities Available for Sale
The amortized cost and approximate market value of investment
securities available for sale as of December 31, 2001 and 2000 is
summarized as follows:
2001
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ----------- ---------- ------------
United States Treasury.......... $ --- $ --- $ --- $ ---
United States Federal agencies.. 3,099,605 39,521 --- 3,139,126
United States agency
mortgage-backed securities.... 176,944,895 1,046,966 876,694 177,115,167
States and political subdivisions 99,047,035 34,337 1,688,920 97,392,452
------------ ---------- --------- ------------
Total Debt Securities........ 279,091,535 1,120,824 2,565,614 277,646,745
Equity securities............... 8,505,600 --- --- 8,505,600
------------ ---------- --------- ------------
Total Securities Available
for Sale.................. $287,597,135 $1,120,824 $2,565,614 $286,152,345
============ ========== ========== ============
2000
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ----------- ---------- ------------
United States Treasury.......... $ --- $ --- $ --- $ ---
United States Federal agencies.. 24,991,770 3,635 159,627 24,835,778
United States agency
mortgage-backed securities.... 175,449,040 186,282 2,504,731 173,130,591
States and political subdivisions 63,181,435 64,425 1,297,543 61,948,317
------------ ----------- ---------- ------------
Total Debt Securities........ 263,622,245 254,342 3,961,901 259,914,686
Equity securities............... 12,130,600 --- --- 12,130,600
------------ ----------- ---------- ------------
Total Securities Available
for Sale.................. $275,752,845 $ 254,342 $3,961,901 $272,045,286
============ =========== ========== ============
Included in equity securities at December 31, 2001 are Federal
Home Loan Bank and Federal Reserve Bank stock of $8,100,000 and
$405,600, respectively. At December 31, 2000 these stock
investments were $11,725,000 and $405,600, respectively.
11
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
The amortized cost and approximate market value of debt
securities at December 31, 2001, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Market
Cost Value
------------- -------------
Due in one year or less.................$ 99,612 $ 102,556
Due after one year through five years... 873,894 893,677
Due after five years through ten years.. 4,863,899 4,911,245
Due after ten years..................... 273,254,130 271,739,267
------------- -------------
$ 279,091,535 $ 277,646,745
============= =============
Proceeds from the sale of securities available for sale for the
years ended December 31, 2001, 2000 and 1999 were $85,610,000,
$6,900,000 and $37,801,000, respectively. Gross realized gains on
the sale of securities available for sale were $513,000 in 2001,
$8,000 in 2000 and $343,000 in 1999. Gross realized losses on the
sale of securities totalled $38,000 in 2001. There were no gross
realized losses in 2000 or 1999.
At December 31, 2001, the amortized cost of securities pledged
to secure public deposits or for other purposes required or permitted
by law aggregated $54,157,000.
12
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note D-NONPERFORMING ASSETS
Nonperforming assets consist of nonaccrual loans, restructured
loans, past due loans and other real estate owned. Nonaccrual
loans are loans on which interest recognition has been suspended
until realized because of doubts as to the borrowers' ability to
repay principal or interest. Restructured loans are loans where
the terms have been altered to provide a reduction or deferral of
interest or principal because of a deterioration in the financial
position of the borrower. Past due loans are accruing loans which
are contractually past due 90 days or more as to interest or
principal payments. The following summarizes the nonperforming
assets as of December 31:
2001 2000 1999
Nonperforming loans ----------- ----------- -----------
Nonaccrual..................... $ 2,419,000 $ 896,000 $ 1,248,000
90 days past due............... 1,770,000 2,121,000 1,122,000
Restructured................... 173,000 280,000 360,000
----------- ----------- -----------
$ 4,362,000 $ 3,297,000 $ 2,730,000
Other real estate owned......... 493,000 444 ,000 536,000
----------- ----------- -----------
Total......................... $ 4,855,000 $ 3,741,000 $ 3,266,000
=========== =========== ===========
There were no commitments to advance additional funds to such
borrowers at December 31, 2001. Gross interest income that would have
been recorded if nonaccrual loans and restructured loans had been
current and in accordance with their original terms approximated
$162,000, $100,000 and $193,000 for the years ended December 31, 2001,
2000 and 1999, respectively. Interest recognized on such loans
approximated $39,000, $31,000 and $79,000 for the years ended December
31, 2001, 2000 and 1999, respectively.
Impaired loans totalled $2,419,000 and $896,000 at December 31, 2001
and 2000, respectively. Impaired loans totalling $1,843,000 and
$136,000 at the end of 2001 and 2000, respectively, had a
corresponding specific allowance for credit losses of $276,000 and
$16,000. The average balance of impaired loans was $840,000 in 2001,
$1,183,000 in 2000 and $1,119,000 in 1999. Interest income recognized
on impaired loans totalled $123,000, $31,000 and $79,000 in 2001, 2000
and 1999, respectively.
Note E-RELATED PARTY TRANSACTIONS
At December 31, 2001, receivables, both direct and indirect, from
persons related to the Company and subsidiaries as directors,
executive officers or principal shareholders, exclusive of loans to
such persons which in the aggregate do not exceed $60,000,
approximated $1,604,000. The following is an analysis of the activity
with respect to such loans for the year ended December 31, 2001:
Aggregate outstanding balance at January 1, 2001....... $ 1,847,000
Additions........................................... 128,000
Retirements......................................... (371,000)
-----------
Aggregate outstanding balance at December 31, 2001..... $ 1,604,000
===========
13
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note F-ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
Years ended December 31, 2001 2000 1999
------------ ----------- -----------
Balance at beginning of year.. $ 3,252,073 $ 3,079,796 $ 3,042,269
Provision for loan losses.... 1,460,000 910,000 420,000
Loans charged-off............ (1,178,241) (904,449) (527,481)
Less recoveries.............. 139,580 166,726 145,008
------------ ----------- -----------
Net loans charged-off....... (1,038,661) (737,723) (382,473)
------------ ----------- -----------
Balance at end of year........ $ 3,673,412 $ 3,252,073 $ 3,079,796
============ =========== ===========
Note G-MORTGAGE LOAN SERVICING
During 2000, the Company sold its mortgage loan servicing for third
parties portfolio which consisted of approximately 1,700 mortgage
loans with an aggregate balance of $137,700,000. In conjunction with
this sale, the Company recorded a net gain of $251,000, which is
included in other income.
At December 31, 2001 and 2000, the Company had no mortgage loan
servicing for third parties portfolio. At December 31, 1999, the
Company was servicing approximately 1,700 mortgage loans for various
investors with aggregate balances of approximately $137,337,000.
Originated mortgage servicing rights capitalized during 2000 and
1999 totalled $116,000 and $327,000, respectively. At December 31,
2000, the Company had no capitalized mortgage servicing rights
compared to $1,570,000 at December 31, 1999, which related to
approximately $136 million in loans serviced. In connection with
these loans serviced for others, the Company held advances by
borrowers for taxes and insurance in the amount $1,586,000 at December
31, 1999.
The fair value of the capitalized mortgage servicing rights at
December 31, 1999 approximated $1,828,000. There was no impairment
valuation allowance based on the fair value of the designated strata
for the capitalized mortgage servicing rights at December 31, 1999.
The Company amortized capitalized mortgage servicing rights in
proportion to, and over the period of, the estimated net servicing
income. The amortization for the years ending December 31, 2001, 2000
and 1999 was $0, $108,000 and $309,000, respectively. The 2000
amortization reflects activity prior to the sale of the servicing
portfolio.
Mortgage loans originated for sale totalled $6,696,000, $58,603,000
and $98,410,000 during 2001, 2000 and 1999, respectively. Mortgage
loans sold during 2001, 2000 and 1999 totalled $6,832,000, $60,768,000
and $101,049,000, respectively. Net gains on mortgage loans sold
aggregated $56,000, $1,089,000 and $1,525,000 during 2001, 2000 and
1999, respectively. Mortgage loans available for sale, which are
carried at lower cost or market value on a net aggregate basis
included in real estate mortgage loans, totalled $0, $124,000 and
$2,214,000 at December 31, 2001, 2000 and 1999, respectively.
14
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note H-PREMISES AND EQUIPMENT
A summary of premises and equipment and accumulated depreciation and
amortization follows:
December 31, 2001 2000
Premises and Equipment ------------ -----------
Buildings................................. $ 8,544,239 $ 7,275,969
Equipment................................. 7,676,241 7,541,319
Leasehold improvements.................... 884,812 874,845
------------ -----------
17,105,292 15,692,133
Less accumulated depreciation
and amortization....................... 10,036,632 9,337,992
------------ -----------
7,068,660 6,354,141
Land...................................... 3,184,941 3,183,931
------------ -----------
$ 10,253,601 $ 9,538,072
============ ===========
Depreciation and amortization of premises and equipment charged
to expense for the years ended December 31, 2001, 2000 and 1999 was
$826,000, $938,000 and $907,000, respectively.
At December 31, 2001, the Company and certain subsidiaries were
obligated under various noncancellable operating leases for premises
and equipment. The leases, expiring at various dates to 2009,
generally provide options to renew and to purchase at fair value and
require payment of taxes, insurance and maintenance costs. Total
rental expense for all operating leases for the years ended December
31, 2001, 2000 and 1999 was $672,000, $783,000 and $856,000,
respectively. Future minimum payments under operating leases were as
follows at December 31, 2001:
2002......................... $ 442,000
2003......................... 314,000
2004......................... 219,000
2005......................... 141,000
2006......................... 99,000
After 2006................... 544,000
-----------
Total minimum lease payments $ 1,759,000
===========
Note I - DEPOSITS
At December 31, 2001, the scheduled maturity of time deposits for
the years 2002 through 2006 are as follows: $185,729,000,
$67,501,000, $14,753,000, $3,264,000, and $1,578,000, respectively.
15
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note J-BORROWED FUNDS
The following summarizes borrowed funds at December 31:
2001 2000 1999
------------ ------------ ------------
Securities sold under repurchase agreements $ --- $ 531,751 $ 831,944
Treasury tax and loan notes................. 265,923 844,257 1,442,801
Warehouse revolving line of credit.......... --- --- 1,318,456
Federal Home Loan Bank advances............. 155,000,000 148,000,000 211,000,000
------------ ------------ ------------
Total borrowed funds...................... $155,265,923 $149,376,008 $214,593,201
============ ============ ============
Securities sold under repurchase agreements are retained by the
Company's custodian under written agreements that recognize the
customer's interests in the securities. The subsidiary bank has an
agreement with its Federal Reserve district bank to be an
authorized treasury tax and loan depository.
WNB is a member of the Federal Home Loan Bank of Pittsburgh (the
"FHLB"). Under a blanket collateral pledge agreement, WNB has
pledged, as collateral for advances from the FHLB, all stock in the
Federal Home Loan Bank and certain other qualifying collateral,
such as investment securities, mortgage-backed securities and
loans. The remaining maximum borrowing capacity with the FHLB at
December 31, 2001 is $273,171,000.
Included in Federal Home Loan Bank advances are FHLB "RepoPlus"
advances and FHLB "Convertible Select" advances. FHLB "RepoPlus"
Advances are short-term borrowings maturing within one day to one
year, bear a fixed interest rate and are subject to prepayment
penalty. Although no specific collateral is required to be pledged
for these borrowings, "RepoPlus" Advances are secured under the
blanket collateral agreement.
The daily average "RepoPlus" balance during 2001, 2000 and 1999
was $2,582,000, $63,864,000, and $102,462,000, respectively, and
the daily average interest rate was 4.02%, 6.32% and 5.24%,
respectively, with an average interest rate at December 31,2001 of
2.02%, December 31, 2000 of 6.63% and December 31, 1999 of 5.63%.
The maximum amount outstanding at any month end during 2001, 2000
and 1999 was $7,000,000, $216,400,000 and $145,000,000,
respectively. The interest expense incurred on the FHLB "RepoPlus"
Advances during 2001, 2000 and 1999 was $104,000, $4,039,000 and
$5,373,000, respectively.
16
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
FHLB "Convertible Select" Advances are long-term borrowings with
terms of up to ten years, and which have a fixed rate for the first
three months to five years of the term. After the fixed rate term
expires, and quarterly thereafter, the FHLB may convert the advance
to an adjustable-rate advance at their option. If the advance is
converted to an adjustable-rate advance, WNB has the option at the
conversion date, and quarterly thereafter, to prepay the advance
with no prepayment fee. The daily average balance during 2001,
2000 and 1999 was $141,941,000, $125,027,000 and $79,863,000,
respectively. The daily average interest rate during 2001, 2000
and 1999 was 5.99%, 5.93% and 5.64%, respectively. The maximum
amount outstanding at any month end during 2001, 2000 and 1999 was
$150,000,000, $140,000,000 and $100,000,000 respectively. The
interest expense incurred on the FHLB "Convertible Select" Advances
during 2001, 2000 and 1999 was $8,502,000, $7,419,000 and
$4,507,000, respectively.
The contractual maturities of Federal Home Loan Bank advances as
of December 31, 2001 and 2000 are as follows:
December 31,
Current ---------------------------------
Interest Rate 2001 2000
RepoPlus Advances: ------------- -------------- --------------
Due within one year........... 2.02% $ 5,000,000 $ 8,000,000
Convertible Select Advances
April 7, 2003............. 5.65% 25,000,000 25,000,000
April 15, 2005............ 5.65% 25,000,000 25,000,000
October 27, 2009.......... 5.65% 25,000,000 25,000,000
November 10, 2009......... 5.57% 25,000,000 25,000,000
March 8, 2010............. 6.57% 15,000,000 15,000,000
June 28, 2010............. 6.75% 25,000,000 25,000,000
October 23, 2006.......... 4.26% 10,000,000 ---
-------------- --------------
Total FHLB Advances....................... $ 155,000,000 $ 148,000,000
============== ==============
17
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note K-GUARANTEED PREFERRED BENEFICIAL INTEREST IN SUBORDINATED DEBT
On April 27, 1998, the Trust, a statutory business trust created
under Delaware law issued $12,650,000 of 8.5% Trust Preferred
Securities ("Preferred Securities") with a stated value and
liquidation preference of $10 per share. The Trust's obligations
under the Preferred Securities issued are fully and unconditionally
guaranteed by the Company. The proceeds from the sale of the
Preferred Securities of the Trust, as well as proceeds from the
issuance of common securities to the Company, were utilized by the
Trust to invest in $13,041,000 of 8.5% Junior Subordinated
Debentures (the "Debentures") of the Company. The Debentures are
unsecured and rank subordinate and junior in right of payment to all
indebtedness, liabilities and obligations of the Company. The
Debentures represent the sole assets of the Trust. Interest on the
Preferred Securities is cumulative and payable quarterly in arrears.
The Company has the right to optionally redeem the Debentures prior
to the maturity date of April 30, 2028, on or after April 30, 2003,
at 100% of the stated liquidation amount, plus accrued and unpaid
distributions, if any, to the redemption date. Under the occurrence
of certain events, specifically, a Tax Event, Investment Company
Event or Capital Treatment Event as more fully defined in the ABC
Capital Trust I Prospectus dated April 21, 1998, the Company may
redeem in whole, but not in part, the Debentures prior to April 30,
2003. Proceeds from any redemption of the Debentures would cause a
mandatory redemption of the Preferred Securities and the common
securities having an aggregate liquidation amount equal to the
principal amount of the Debentures redeemed.
The interest incurred on these Preferred Securities for the years
ended December 31, 2001, 2000 and 1999 amounted to $1,101,000,
$1,101,000 and $1,101,000, respectively.
The Trust is a wholly owned subsidiary of the Company, has no
independent operations and has issued securities that contain a full
and unconditional guarantee of its parent, the Company. Accordingly,
on October 21, 1998, the Securities and Exchange Commission exempted
the Trust from the reporting requirements of the Securities Exchange
Act of 1934.
Note L-FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Company enters into
contractual commitments involving financial instruments with
off-balance-sheet risk. These financial instruments include
commitments to extend credit, commercial letters of credit and
standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of
nonperformance by the other party to the financial instruments for
commitments to extend credit, commercial letters of credit and
standby letters of credit is represented by the contractual amount
of those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.
18
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Unless noted otherwise, the Company does not require collateral or
other security to support financial instruments with off-balance-sheet
risk. A summary of off-balance-sheet financial instruments at
December 31, 2001 and 2000 is as follows:
Financial instruments whose contract amounts represent credit risk:
Contract Amounts
----------------------------
2001 2000
----------- -----------
Commitments to extend credit.... $60,623,000 $62,422,000
Standby letters of credit....... 5,350,000 -
Commercial letters of credit.... 5,629,000 6,253,000
Commitments to extend credit include approximately $910,000 at
December 31, 2001 and $429,000 at December 31, 2000, for dealer floor
plan lines which are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates of less than one
year or other termination clauses and may require payment of a fee.
Since many of the commitments, except dealer floor plan lines, are
expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the
Company upon extension of credit, is based on management's credit
evaluation of the counterparty. A majority of the commitments
extended by the Company have variable interest rates. An adverse
movement in market interest rates is not deemed to be a significant
risk on the outstanding commitments at December 31, 2001.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Commercial letters of credit are issued by the Company specifically
to facilitate trade or commerce. Essentially all letters of credit
issued have expiration dates within one year. The credit risk
involved in issuing letters of credit is essentially the same as that
in extending loan facilities to customers.
Note M-FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial
Instruments", requires that the Company disclose estimated fair
values for its financial instruments. Fair value estimates, methods
and assumptions are set forth below for the Company's financial
instruments.
Securities and Federal Funds Sold
The carrying amounts for federal funds sold approximate fair value
as they mature in 90 days or less. The fair value of investment and
mortgage-backed securities is based on quotations from an independent
investment portfolio accounting service.
Loans
Fair values are estimates for portfolios of loans with similar
financial characteristics. Loans are segregated by type and include
commercial, real estate mortgage and installment loans. Each loan
category is further segmented into fixed and adjustable rate terms,
for purposes of estimating their fair value.
19
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
The carrying values approximate fair value for variable rate loans
which reprice frequently, provided there has been no change in
credit quality since origination. Book value also approximates fair
value for loans with a relatively short term to maturity, provided
there is little or no risk of default before maturity and the
disparity between the current rate and market rate is small. Any
mark-to-market adjustment for these short-term loans would be
insignificant. This estimation methodology is applied to the
Company's demand loans, lines of credit and credit card portfolios.
The fair value of all other performing loans is calculated by
discounting scheduled cash flows through the estimated maturity
using the rates currently offered for loans of similar remaining
maturities. The estimate of maturity is based on the Company's
historical experience with repayments for each loan classification,
modified, as required, by an estimate of the effect of current
economic and lending conditions. The fair value reflects market
prepayment estimates.
The fair value of nonperforming loans is calculated by discounting
carrying values adjusted for specific reserve allocations through
anticipated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loan.
Deposits and Other Liabilities
Under SFAS No. 107, the fair value of deposits with no stated
maturity, such as demand and savings accounts, is equal to the amount
payable on demand as of December 31, 2001 and 2000. The fair value
of time deposits is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently
offered for deposits of similar remaining maturities.
Borrowed Funds
The fair values of the Company's short-term and long-term
borrowings with variable rates are based on carrying amounts since
these borrowings reprice frequently as market rates change. The fair
value of long-term fixed rate borrowed funds is based on the
discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for similar remaining
maturities. The fair value of the Company's Preferred Securities is
based on the issue's quoted market price.
Off-Balance-Sheet Financial Instruments
The Company's off-balance-sheet financial instruments are
comprised of commitments to extend credit, 45% of which are lines of
credit. These commitments to extend credit generally are not sold or
traded and estimated fair values are not readily available. The fair
value of commitments to extend credit can be estimated by discounting
the remaining contractual fees over the term of the commitment using
the fees currently charged to enter into similar agreements.
Considering the current economic environment and the creditworthiness
of the counterparties in the portfolio, the Company believes that
such a calculation would not indicate a material calculated fair
value.
Limitations
Fair value estimates are made at a specific point in time, based
on relevant market data and information about each financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Company's
entire holdings of a particular instrument. Because no market exists
for a significant portion of the Company's
20
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
financial instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic conditions,
risk characteristics of various financial instruments and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing financial instruments
without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not
considered financial instruments. Other significant assets that are
not considered financial assets include premises and equipment. The
following table represents carrying values and estimated fair values
of the Company's financial instruments as of December 31, 2001 and
2000:
2001 2000
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
-----------------------------------------------------------------------------
FINANCIAL ASSETS
Federal funds sold........$ 3,866,000 $ 3,866,000 $ 4,530,000 $ 4,530,000
Investment securities
available for sale......286,152,000 286,152,000 272,045,000 272,045,000
Loans receivable, net
of allowance............355,778,000 355,864,000 386,272,000 381,127,000
FINANCIAL LIABILITIES
Fixed maturity deposits (1)
Time deposits............272,971,000 275,296,000 297,029,000 297,688,000
Borrowed funds...........155,266,000 164,139,000 149,376,000 149,946,000
Guaranteed preferred
beneficial interest
in subordinated debt....12,650,000 12,359,000 12,650,000 10,436,000
(1) SFAS No. 107 defines the estimated fair value of
deposits with no stated maturity, which includes demand
deposits, money market and other savings accounts, to be
equal to the amount payable on demand. Therefore, the
balances of the Company's $202.6 million and $199.1
million of such deposits at December 31, 2001 and 2000,
respectively, are not included in this table.
Note N-STOCKHOLDERS' EQUITY
The Company has authorized 200,000 shares of $100 par value preferred
stock issuable in series. No shares of preferred stock were issued or
outstanding at December 31, 2001 and 2000.
Note O-DIVIDEND RESTRICTIONS
Dividends declared by the Company may be substantially provided from
subsidiary bank dividends. The payment of dividends by bank subsidiaries
is subject to various restrictions imposed under banking regulations. For
national banks, surplus in an amount equal to capital stock is not
available for dividends and prior approval of the Comptroller of the
Currency is required if total dividends declared exceed the total
(defined) net profits from the beginning of the current year to the date
of declaration, combined with the retained net profits of the preceding
two years.
At December 31, 2001, WNB's retained earnings available for the payment
of dividends was $10,517,000.
In addition, dividends paid by WNB to the Company would be prohibited
if the effect thereof would cause WNB's capital to be reduced below
acceptable minimum capital requirements.
21
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note P-INCOME TAXES
Total income tax provision (benefit) for the three years
ended December 31, 2001 was allocated as follows:
2001 2000 1999
----------- ----------- ------------
Income from operations..............$ (384,625) $ 1,189,780 $ 1,526,902
Shareholders' equity for the tax
effect of net unrealized gain
(loss) on securities available
for sale........................... 859,852 5,856,091 (7,088,419)
----------- ----------- ------------
$ 475,227 $ 7,045,871 $(5,561,517)
=========== =========== ============
The composition of the provision for income taxes from operations
for the three years ended December 31, 2001 follows:
2001 2000 1999
----------- ----------- ------------
Federal Income Taxes
Current.............................$ 698,704 $ 1,757,720 $ 1,347,227
Deferred............................(1,135,577) (672,267) 163,550
----------- ----------- ------------
Provision for federal income taxes.. (436,873) 1,085,453 1,510,777
State................................. 52,248 104,327 16,125
----------- ----------- ------------
Provision for income taxes..........$ (384,625) $ 1,189,780 $ 1,526,902
=========== =========== ============
The following is a reconciliation of federal income tax expense to
the amount computed at the statutory rate:
2001 2000 1999
----------- ----------- -----------
Pre-tax income at statutory rate......$ 913,351 $ 2,004,396 $ 2,339,446
Increase (decrease) resulting from:
Tax exempt income.................. (1,389,268) (839,259) (784,724)
Dividends received deduction....... - - (1,785)
Amortization of goodwill and
other intangibles................ 15,378 21,464 21,464
State tax provision
(net of federal tax benefit)..... (17,764) (35,471) (5,483)
Change in valuation allowance...... - - (14,093)
Other.............................. 41,430 (65,677) (44,048)
----------- ----------- -----------
Provision for federal income taxes.$ (436,873) $ 1,085,453 $ 1,510,777
=========== =========== ===========
The Company has determined that the deferred tax assets recorded
under SFAS No. 109 are expected to be realized through carryback to
taxable income in prior years, future reversals of existing taxable
temporary differences, and, to a lesser extent, future taxable income.
The valuation allowance decreased in 1999 by $16,580 as a result of the
sale of equity securities. Since no net deferred tax benefit was
recorded on the initial writedown of the asset, due to its capital
nature, no tax expense or benefit was recorded in 1999 on its recovery.
22
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities as of
December 31, 2001, 2000 and 1999 consist of the following:
2001 2000 1999
Deferred tax assets: ----------- ---------- ----------
Loan loss reserves...................$ 1,241,470 $ 906,953 $ 710,388
Investment securities................ 549,020 1,408,872 7,264,963
Pension plan......................... 120,575 124,218 150,959
Real estate owned.................... - - 2,415
Alternative minimum tax credit
carryforwards..................... 578,937 - -
Other................................ 303,674 251,162 180,552
----------- ---------- ----------
2,793,676 2,691,205 8,309,277
Deferred tax liabilities:
Fixed assets......................... 129,177 170,384 198,187
Cash basis accounting................ 114,993 247,040 199,380
Mortgage servicing rights............ - - 454,105
----------- ---------- ----------
244,170 417,424 851,672
Net deferred tax asset before
valuation allowance............... 2,549,506 2,273,781 7,457,605
Valuation allowance................... - - -
----------- ---------- ----------
Net deferred tax asset................$ 2,549,506 $2,273,781 $7,457,605
=========== ========== ==========
As of December 31, 2001, the Company has alternative minimum tax
credit carryforwards of $578,937 which are available to reduce future
federal income taxes over an indefinite period. The Company also has
capital loss credit carryforwards of $127,500 which are available to
reduce future capital gains through December 31, 2004.
23
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note Q-OTHER EXPENSES
Amounts included in other expenses are as follows for the years
ended December 31, 2001, 2000 and 1999:
2001 2000 1999
---------- ---------- ----------
Advertising.................$ 175,850 $ 252,418 $ 457,582
Data processing............. 535,946 521,913 462,833
FDIC assessment............. 238,305 246,985 219,108
Postage..................... 258,517 264,873 265,301
Professional fees........... 1,453,291 844,181 823,286
Stationery and supplies..... 232,255 263,088 360,586
Taxes other than on income.. 569,355 421,201 455,704
Other (each less than
1% of income)........ 2,036,010 2,084,643 2,093,384
---------- ---------- ----------
$5,499,529 $4,899,302 $5,137,784
========== ========== ==========
Note R-PENSION PLAN AND PROFIT SHARING 401(k) SAVINGS PLAN
Effective January 1, 1989, the Company established the American
Bancorporation Pension Plan (the "Plan"). This non-contributory
defined benefit plan covers certain employees of the Company and
its banking and non-banking subsidiaries. Benefits are based on
employees' years of service and compensation. The following table
sets forth the changes in the Plan's benefit obligation and Plan
assets for the year ended December 31, 2001 and 2000 (as measured
on October 1, 2001):
2001 2000
---------- ----------
Change in benefit obligation:
Benefit obligation at beginning of year....$ 876,665 $ 925,675
Interest cost.............................. 57,192 58,417
Actuarial (gain) loss...................... 2,766 4,558
Benefits paid.............................. (54,754) (111,985)
---------- ----------
Benefit obligation at end of year..........$ 881,869 $ 876,665
========== ==========
Changes in plan assets:
Plan assets at beginning of year...........$ 698,712 $ 739,671
Actual return on plan assets............... 96,718 34,702
Employer contributions..................... 51,969 36,324
Benefits paid.............................. (54,754) (111,985)
---------- -----------
Plan assets at end of year.................$ 792,645 $ 698,712
========== ===========
As of December 31, 2001 and 2000, the Company's accrued pension
costs were $317,000 and $327,000, respectively. Net periodic
pension cost for the years ended December 31, 2000, 1999 and 1998
were insignificant. The Plan assets are held by Principal
Financial Group and are comprised of money market accounts and
other fixed income investments.
24
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
The discount rate used in determining the projected benefit
obligation in 2001, 2000 and 1999 was 6.50%, 6.75% and 6.50%,
respectively. The expected long-term rate of return on plan assets
was 6.50%, 6.50% and 6.50% for the years ending in 2001, 2000 and
1999, respectively.
In 1993, due to the continuation of a claim discussed below, the
Company notified the Plan participants that the planned termination
of the Plan was rescinded; however, an amendment to freeze all
benefit accruals and fully vest all participants in the benefits
accrued to them as of December 31, 1992 remains in effect at
December 31, 2001 due to an additional claim made against the Plan
during 1996.
A claim was made against the Plan during 1992 by a former
employee (the "Claimant"), alleging additional benefits due him
under the Plan and litigation between the parties ensued. Prior to
the Court's final ruling, all parties agreed as to the method of
computing the benefit due the claimant. The Court found that the
computation was made pursuant to the pertinent Plan provisions and
approved a joint motion by the parties to dismiss the action. As a
result, the Plan Administrator disbursed $141,135 to the Claimant
during 1995 to settle the claim and approximately $215,000 in 1996
to other affected Plan participants as determined based on the
application of the Court's final ruling. No amount of the
disbursements were recognized in the 1996 or 1995 statement of
operations as the Company recorded a reserve in 1994 to recognize
the liability for additional benefits due to Plan participants as
determined based on the application of the Court's decision
regarding the method of computing benefits to affected Plan
participants. Management believes appropriate liabilities have
been established to recognize the application of the Court's
decision and expects to incur no further expense for this
situation.
An additional claim was made against the Plan during 1996 by
former employees alleging further additional benefits due them
under the Plan. The Administrator of the Plan denied the claim and
the claimants' subsequent appeal. During 2000, the claimants filed
a complaint in the United States District Court alleging that the
Plan and Plan Administrator had erroneously determined the amount
of benefits due and payable under the Plan. The complaint also
represents that the plaintiff's theory of calculations may impact
the benefits of several other participants as well.
The Company does not expect that any additional provision need be
made in the consolidated financial statements for this matter.
The Company sponsors a profit sharing 401(k) savings plan to
which eligible employees are permitted to contribute up to 15% of
their salary to the plan each year. The plan provides for matching
contributions of the Company equal to 50% of employee contributions
up to the first 6% of compensation. The Company may, at its
discretion, make profit sharing contributions to the plan. Plan
participants are fully and immediately vested in Company matching
contributions and fully vested in Company profit sharing
contributions after five years of service. Company matching
contributions for the years ended December 31, 2001, 2000 and 1999
amounted to $76,000, $91,000 and $88,000, respectively.
25
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note S - REGULATORY CAPITAL REQUIREMENTS
The Company and WNB are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can initiate certain actions
by regulators that, if undertaken, could have a direct material
effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the entities must meet specific capital
guidelines that involve quantitative measures of their assets,
liabilities and certain off-balance- sheet items as calculated
under regulatory accounting practices. The entities' capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and
other factors.
Tier I and Total capital are expressed as a percentage of risk-
adjusted assets which include various credit risk-weighted
percentages of on-balance-sheet exposures. The Leverage capital
ratio evaluates capital adequacy on the basis of the ratio of Tier
I capital to quarterly average total assets as reported on the
Company's regulatory financial statements, net of the loan loss
reserve, goodwill and certain other intangibles. To be categorized
well-capitalized, the Company's banking subsidiary must maintain
minimum Tier I, Total and Leverage capital ratios of 6%, 10% and
5%, respectively. At December 31, 2001, the Company and its
subsidiary bank, WNB, exceeded the regulatory minimums and met the
regulatory definition of well capitalized.
The following table summarizes the Company's and WNB's actual
consolidated capital amounts and ratios as of December 31, 2001 and
2000.
Company WNB
------------------- ------------------
December 31,
---------------------------------------
2001 2000 2001 2000
------- ------ ------- ------
Tier I Capital........................$ 54,500 $ 53,867 $ 52,599 $ 50,876
Total Qualifying Capital.............. 58,173 57,119 56,272 54,128
Risk-Adjusted Assets.................. 403,771 404,524 401,655 401,115
Regulatory Requirements
-----------------------
Well-
Minimum Capitalized
------- -----------
Capital Ratios
Tier I Capital Ratio...,, 4.00% 6.00% 13.50% 13.32% 13.10% 12.68%
Total Capital Ratio...... 8.00 10.00 14.41 14.12 14.01 13.49
Leverage Capital Ratio... 3.00 5.00 7.81 7.64 7.55 7.27
Note T - CONTINGENT LIABILITIES
The Company and its subsidiaries, in the normal course of
business, are subject, from time to time to various asserted and
unasserted claims. Management believes that the aggregate liability,
if any, resulting from such pending and threatened actions and
proceedings will not have a material adverse effect on the Company's
financial statements.
26
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note U-PARENT COMPANY CONDENSED FINANCIAL INFORMATION
AMERICAN BANCORPORATION (Parent Company Only)
BALANCE SHEET
December 31, 2001 and 2000 2001 2000
ASSETS ----------- -----------
Cash and short-term investments.........$ 1,341,579 $ 1,179,316
Due from subsidiaries................... 17,344 8,271
Investment in subsidiaries
Banking................................ 53,008,260 50,220,639
Non-banking............................ 500,872 1,265,037
----------- -----------
53,509,132 51,485,676
Premises and equipment - net............ 9,356 16,470
Other assets............................ 1,762,820 1,619,140
----------- -----------
Total Assets..........................$56,640,231 $54,308,873
=========== ===========
LIABILITIES
Due to subsidiaries.....................$ 41,887 $ 379,536
Other liabilities....................... 790,948 718,004
Notes payable........................... 12,650,000 12,650,000
----------- -----------
Total Liabilities..................... 13,482,835 13,747,540
STOCKHOLDERS' EQUITY..................... 43,157,396 40,561,333
----------- -----------
Total Liabilities and
Stockholders' Equity.........$56,640,231 $54,308,873
=========== ===========
STATEMENT OF INCOME (Parent Company Only)
Years ended December 31, 2001, 2000 and 1999
2001 2000 1999
---------- ---------- ----------
INCOME
Dividends from banking subsidiaries.....$2,700,000 $2,700,000 $ -
Reimbursement from subsidiaries......... 830,149 866,000 625,000
Interest income......................... 25,740 26,192 92,985
Other income............................ 351 442 412
---------- ---------- ----------
Total income 3,556,240 3,592,634 718,397
EXPENSE
Interest expense......................... 1,100,825 1,100,825 1,100,825
Other expenses........................... 1,243,966 1,123,228 970,077
---------- ---------- ----------
Total expense......................... 2,344,791 2,224,053 2,070,902
---------- ---------- ----------
1,211,449 1,368,581 (1,352,505)
Credit for income taxes (493,734) (498,601) (526,588)
----------- ----------- -----------
1,705,183 1,867,182 (825,917)
Equity in undistributed net income
of subsidiaries 1,365,767 2,838,319 6,179,736
----------- ----------- -----------
NET INCOME $3,070,950 $4,705,501 $5,353,819
=========== =========== ===========
27
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
STATEMENT OF CASH FLOWS (Parent Company Only)
Years ended December 31, 2001, 2000 and 1999 2001 2000 1999
Operating Activities: ----------- ----------- -----------
Net income..............................$3,070,950 $4,705,501 $5,353,819
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization............. 76,084 77,627 51,603
Equity in undistributed net income of
subsidiaries..................... (1,365,767) (2,838,319) (6,179,736)
Net (increase) decrease in due to/from
subsidiaries..................... (346,722) 358,299 (22,201)
Net change in other assets and other
liabilities. .................... (94,478) 238,512 (599,196)
----------- ----------- -----------
Net cash provided by (used in)
operating activities......... 1,340,067 2,541,620 (1,395,711)
Investing Activities:
Purchase of premises and equipment..... - (1,465) (10,297)
Net change in investment in
subsidiaries..................... 700,000 - -
----------- ----------- -----------
Net cash provided by (used in)
investing activities. ....... 700,000 (1,465) (10,297)
Financing Activities:
Cash dividends paid................... .(1,877,804) (1,877,804) (1,877,804)
----------- ----------- -----------
Net cash used in financing activities. (1,877,804) (1,877,804) (1,877,804)
----------- ----------- -----------
Net increase (decrease) in
Cash and Cash Equivalents............ 162,263 662,351 (3,283,812)
Cash and Cash Equivalents Beginning
Balance.............................. 1,179,316 516,965 3,800,777
----------- ----------- -----------
Cash and Cash Equivalents Ending Balance.$ 1,341,579 $ 1,179,316 $ 516,965
=========== =========== ===========
Cash paid during the year for:
Interest.................................$ 1,075,250 $ 1,075,250 $ 1,075,250
The Parent Company paid no income taxes during 2001, 2000 or 1999.
Note V - SEGMENT REPORTING
SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information", requires disclosures about reportable segments
of an enterprise. The determination of these segments is based upon
the manner in which the decision makers of an enterprise evaluate its
financial information.
American Bancorporation, through its wholly owned subsidiaries
Wheeling National Bank, American Bancdata Corporation, American
Mortgages, Inc. and American Bancorporation Capital Trust I, performs
traditional banking services. These financial services include making
loans to individuals and businesses, offering an array of deposit
products and investment in marketable securities. The retail network
of offices is located throughout the northern panhandle of West
Virginia, central and eastern Ohio, and southwestern Pennsylvania.
These market areas all possess similar characteristics. The operating
results of the Company as a single entity are used by management in
making operating decisions. Therefore, the consolidated financial
statements, as presented, represent the results of a single financial
services segment.
28
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note W-SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarters Ended (In thousands, except per share)
Mar 31 June 30 Sept 30 Dec 31 Year
------- ------- ------- ------- -------
2001
Interest income..............$12,450 $11,728 $11,403 $11,094 $46,675
Interest expense............. 8,377 8,067 7,646 7,098 31,188
------- ------- ------- ------- -------
Net interest income......... 4,073 3,661 3,757 3,996 15,487
Provision for loan losses.... 225 225 225 785 1,460
------- ------- ------- ------- -------
Net interest income after
provision for loan losses.. 3,848 3,436 3,532 3,211 14,027
Other operating income....... 696 637 767 463 2,563
Other operating expense...... 3,374 3,284 3,491 3,755 13,904
------- ------- ------- ------- -------
Income before income taxes.. 1,170 789 808 (81) 2,686
Provision for income taxes. 150 (32) (133) (370) (385)
------- ------- ------- ------- -------
Net income..............$ 1,020 $ 821 $ 941 $ 289 $ 3,071
======= ======= ======= ======= =======
Basic earnings per share.$ 0.33 $ 0.26 $ 0.30 $ 0.09 $ 0.98
2000
Interest income..............$12,942 $13,191 $13,370 $13,272 $52,775
Interest expense............. 8,300 8,693 8,983 8,747 34,723
------- ------- ------- ------- -------
Net interest income......... 4,642 4,498 4,387 4,525 18,052
Provision for loan losses.... 180 295 210 225 910
------- ------- ------- ------- -------
Net interest income after
provision for loan losses.. 4,462 4,203 4,177 4,300 17,142
Other operating income....... 804 1,028 677 437 2,946
Other operating expense...... 3,578 3,654 3,474 3,487 14,193
------- ------- ------- ------- -------
Income before income taxes.. 1,688 1,577 1,380 1,250 5,895
Provision (credit) for
income taxes.............. 347 320 253 269 1,189
------- ------- ------- ------- -------
Net income..............$ 1,341 $ 1,257 $ 1,127 $ 981 $ 4,706
======= ======= ======= ======= =======
Basic earnings per share.$ 0.43 $ 0.40 $ 0.36 $ 0.31 $ 1.50
29
NOTES TO CONSOLIDATED American Bancorporation and Subsidiaries
FINANCIAL STATEMENTS-CONTINUED
December 31, 2001, 2000 and 1999
Note X - BRANCH ACQUISITION
On May 19, 2000 the Company acquired certain assets and assumed
certain liabilities of the Barnesville, Ohio branch of Sky Bank. The
Company assumed deposits totalling $10.4 million and purchased the
premises and personal property of the branch. The Company paid a
$607,000 premium based on core deposits which is being amortized over
a period of eight years.
Note Y - PENDING MERGER
On February 20, 2002 the shareholders of the Company approved and
adopted an Agreement and Plan of Merger, (the "Agreement") which was
entered into on February 22, 2001 with WesBanco, Inc. ("WesBanco")
providing for the merger of the Company with and into a wholly-owned
subsidiary of WesBanco to be formed for the purpose of effecting the
merger, and the simultaneous merger of the Company's banking
subsidiary, Wheeling National Bank, with and into WesBanco affiliate,
WesBanco Bank, Inc. The transaction will be accounted for using the
purchase method of accounting. Under the terms of the Agreement,
WesBanco will exchange WesBanco common stock based upon a fixed
exchange ratio of 1.1 shares of WesBanco common stock for each share
of American Bancorporation common stock outstanding. The Company
granted an option to WesBanco to purchase 622,805 shares of its common
stock at $18.00 per share. The Company has agreed to pay its
financial advisor a fee equal to one percent of the transaction value
for financial advisory services in connection with the proposed
merger. It is estimated, based on current WesBanco common stock
prices, the total fee would be approximately $750,000, less $100,000
paid in 2001. It is expected that the transaction will be completed
on March 1, 2002.
30
KPMG
One Mellon Center Telephone 412 391 9710
Pittsburgh, PA 15219 Fax 412 391 8963
Independent Auditors' Report
To the Board of Directors and Shareholders of
American Bancorporation:
We have audited the accompanying consolidated balance sheets of
American Bancorporation and subsidiaries (the Company) as of
December 31, 2001 and 2000 and the related consolidated statements
of income, changes in stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of American Bancorporation and subsidiaries as of December
31, 2001 and 2000, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
February 19, 2002
KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is
a member of KPMG International, a Swiss association
31
WesBanco Inc. and American Bancorporation
Unaudited Pro forma Condensed Combined Financial Statements
The following unaudited pro forma condensed combined financial
statements are based on the applicable historical financial
statements of WesBanco and American and reflect the adjustments
necessary to illustrate the financial effect of WesBanco's
acquisition of American on March 1, 2002. The pro forma condensed
combined balance sheet is as of December 31, 2001 and assumes that
the acquisition was completed on December 31, 2001. The pro forma
condensed combined statement of income is for the year ended
December 31, 2001 and assumes that the acquisition was completed
on January 1, 2001.
Non-recurring merger expenses and estimated cost savings expected
after the date of the acquisition have not been included in the
pro forma financial statements. Pre-tax merger expenses
approximate $3.1 million, with $2.5 million to be recorded in 2002
and the remainder in 2003. Total annual cost savings expected
to be realized from the merger by the end of 2003 approximates $3.0
million.
Unaudited Pro Forma Condensed Combined Balance Sheet
(Dollars in thousands, except for per share data)
December 31, 2001
------------------------------------------------------------------------
Pro forma Adjustments Pro forma
American --------------------- Combined
WesBanco, Inc. Bancorporation Debit Credit WesBanco, Inc.
Assets --------------- -------------- --------------------- ---------------
Cash and cash equivalents $ 82,275 $ 17,667 $ 99,942
Available for sale securities 517,517 286,152 803,669
Held to maturity securities 240,953 - 240,953
Net loans 1,518,909 355,778 $ 86 (b) 1,874,773
Goodwill and other intangibles 18,878 1,307 30,183 (a)
13,881 (b)
847 (c) 65,096
Other assets 95,922 30,963 $ 3,060 (b) 123,825
--------------- -------------- --------- -------- ---------------
Total Assets $ 2,474,454 $ 691,867 $44,997 $ 3,060 $ 3,208,258
=============== ============== ========= ======== ===============
Liabilities
Deposits $ 1,913,458 $ 475,584 $ 2,325 (b) $ 2,391,367
Other borrowings 279,131 155,266 8,873 (b) 443,270
Other liabilities 23,664 5,210 847 (c)
2,800 (a) 32,521
Subordinated debentures -
(Trust Preferred Securities) 12,650 $ 291 (b) 12,359
--------------- -------------- --------- -------- ---------------
Total Liabilities 2,216,253 648,710 291 14,845 2,879,517
Shareholders' Equity 258,201 43,157 43,157 (a) 70,540 (a) 328,741
--------------- -------------- --------- -------- ---------------
Total Liabilities and
Shareholders' Equity $ 2,474,454 $ 691,867 $43,448 $85,385 $ 3,208,258
=============== ============== ========= ======== ==============
Book value per share $ 14.46 $ 13.79 $ 15.44
Shares outstanding 17,854,497 3,129,674 21,296,385
See Notes to the Pro Forma Condensed Combined Financial Statements.
32
Unaudited Pro Forma Condensed Combined Statement of Income
(Dollars in thousands, except for per share data)
For the year ended December 31, 2001
------------------------------------------------------------------------
Pro forma Adjustments Pro forma
American --------------------- Combined
WesBanco, Inc. Bancorporation Debit Credit WesBanco, Inc.
--------------- -------------- --------------------- ---------------
Interest Income
Loans, including fees $ 126,230 $ 30,744 $ 54 (b) $ 156,920
Securities and other
investments 37,709 15,931 53,640
--------------- -------------- --------- -------- ---------------
Total interest income 163,939 46,675 54 210,560
=============== ============== ========= ======== ===============
Interest Expense
Deposits 66,229 21,456 2,325 (b) 85,360
Other borrowings 10,125 9,732 1,510 (b) 18,347
--------------- -------------- --------- -------- ---------------
Total interest expense 76,354 31,188 --- 3,835 103,707
--------------- -------------- --------- -------- ---------------
Net interest income 87,585 15,487 54 3,835 106,853
Provision for Loan Losses 5,995 1,460 7,455
-------------- -------------- --------- -------- ---------------
Net interest income after
provision for loan losses 81,590 14,027 54 3,835 99,398
Other income 24,588 2,563 27,151
Other Expense 64,894 13,904 1,405 (b) 84 (b) 80,119
-------------- -------------- --------- -------- ---------------
Income before income taxes 41,284 2,686 1,459 3,919 46,430
Provision (benefit) for
income taxes 12,282 (385) 984 (d) 12,881
-------------- -------------- --------- -------- ---------------
Net income $ 29,002 $ 3,071 $ 2,443 $ 3,919 $ 33,549
============== ============== ========= ======== ===============
Earning per share $ 1.60 $ 0.98 $ 1.56
Average shares outstanding 18,123,851 3,129,674 21,565,739
See Notes to the Pro Forma Condensed Combined Financial Statements.
33
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Basis of Presentation
The following pro forma adjustments are based on available
information and certain estimates and assumptions.
Therefore, it is likely that the actual adjustments will
differ from the pro forma adjustments. WesBanco believes
that such assumptions provide a reasonable basis for
presenting all of the significant effects of the following
transactions and that the pro forma adjustments give
appropriate effect to those assumptions and are properly
applied in the unaudited pro forma consolidated condensed
financial statements.
Adjustments to Pro forma Condensed Combined Financial
Statements:
(a) Represents the purchase accounting entries and the
elimination of American's equity accounts. The total
purchase price of $70.5 million was funded through the
issuance of 3,441,888 shares of WesBanco common stock. In
addition, acquisition related direct costs totaling
approximately $2.8 million were capitalized as part of the
transaction and consisted of certain severance payments,
legal, accounting, advisory and other transaction related
fees.
(b) Fair value adjustments made to acquired assets and
liabilities were determined based on information available as
of December 31, 2001. Fair value adjustments are being
amortized or accreted over their applicable remaining lives.
The excess of the purchase price over the fair value of the
net assets acquired was allocated to the core deposit
intangible and goodwill. The pro forma condensed combined
financial statements reflect the adoption of SFAS No. 142,
"Goodwill and Other Intangible Assets" whereby goodwill is
not amortized but is subject to annual impairment tests. The
core deposit intangible is subject to amortization over its
estimated economic life. For purposes of these pro forma
statements, the fair value adjustments and the core deposit
intangible are being amortized on a straight-line basis.
(c) Represents net deferred tax liabilities related to fair
value adjustments and the core deposit intangible. Deferred
taxes were calculated using an effective tax rate of 40%.
(d) Represents the estimated income tax effect on the pro
forma adjustments using an income tax rate of 40%.
Regulatory Divestiture of Branch Office
In conjunction with the merger, WesBanco was required to
divest the deposits of one office of American to address a
possible anti-trust issue. The divestiture of this office,
with deposits as of December 31, 2001 of approximately $16.5
million, or 0.7% of pro forma combined deposits, was
considered immaterial to the transaction and, therefore, has
not been reflected in the pro forma financial information.
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
WesBanco, Inc.
--------------
(Registrant)
May 14, 2002 /s/ Paul M. Limbert
------------ -----------------------------------
Date Paul M. Limbert
President & Chief Executive Officer
35