WesBanco Announces Improved Fourth Quarter 2009 Results

WHEELING, W.Va., Jan. 26 /PRNewswire-FirstCall/ -- Paul M. Limbert, President and Chief Executive Officer of WesBanco, Inc. (Nasdaq: WSBC), a Wheeling, West Virginia based multi-state bank holding company, today announced earnings for the fourth quarter and year ended December 31, 2009.

Net income available to common shareholders for the quarter ended December 31, 2009 was $7.3 million while diluted earnings per common share were $0.27, as compared to $5.5 million or $0.21 per common share for the fourth quarter of 2008, and $2.3 million or $0.09 per common share in the prior quarter ended September 30, 2009.  For all of 2009, net income available to common shareholders was $18.7 million or $0.70 per common share, while for 2008, net income was $37.8 million or $1.42 per common share. Net income for 2009 before preferred stock dividends and the third quarter amortization expense related to the Troubled Asset Relief Program ("TARP") preferred stock repurchase was $23.9 million as compared to $38.1 million for 2008.

Highlights for the fourth quarter and year ended December 31, 2009 include the following:

• The provision for credit losses decreased $0.7 million from the fourth quarter of 2008 and $1.8 million from the third quarter of 2009 to $14.4 million in the fourth quarter of 2009.  Lower provision expense for the 2009 fourth quarter reflects a 2.6% decrease in non-performing loans from the third quarter of 2009, and a 5.9% decrease in past due loans while charge-offs decreased slightly.  The allowance for loan losses increased in the final quarter of 2009 to 1.76% of total loans from 1.74% at September 30, 2009 and 1.38% at December 31, 2008.
• Net interest income increased 0.3% in the fourth quarter as compared to the third quarter of 2009 and 6.4% over the first quarter of 2009 as a result of the acquisition of five former AmTrust Bank branches in the Columbus, Ohio metropolitan area on March 27, 2009.  Net interest income and the net interest margin have increased in each of the last three quarters.  The net interest margin increased 11 basis points to 3.46% in the fourth quarter as compared to the third quarter of 2009 due to lower rates on interest bearing liabilities, particularly for deposits, as a result of decreasing market interest rates, maturities of higher rate certificates of deposit and an increase in lower cost deposits.  In addition, the average balances for higher rate borrowings have decreased by 12.3% from the first quarter through planned reductions due to liquidity obtained from the branch acquisitions.
• In December 2008, WesBanco issued a warrant to the U.S. Department of the Treasury to purchase 439,282 shares of the Company's common stock under the TARP program.  The warrant was repurchased from the Treasury department on December 23, 2009 for a negotiated price of $950,000.  The TARP preferred stock issued to the Treasury department in December 2008 was repurchased in September 2009, when the unamortized discount of $2.3 million was expensed.

Mr. Limbert commented, "substantial improvement in net income available to common shareholders in the fourth quarter of 2009 resulted from a combination of consistent growth in net interest income over the last three quarters, reduction in loan loss provision expense through reduced delinquencies, and elimination of the dividend charge on TARP preferred stock.  The net interest margin has increased in each of the last two quarters from reductions in our cost of funds due to lower market interest rates.  The positive quarter, and the reduction in the size of the balance sheet through the use of the Bank's liquidity position to eliminate higher cost borrowings, improved regulatory capital ratios above our already strong capital position.  The recession, however, is not over and continues to affect the allowance for loan losses."  Mr. Limbert further remarked, "trust fees improved again in the fourth quarter as equity markets improved, while deposit fee income grew substantially in the last nine months of 2009 due in part to the branch acquisitions in March and implementation of successful retail strategies."

Net Interest Income

Net interest income decreased slightly by 0.7% in the fourth quarter of 2009 and 1.3% for all of 2009 as compared to the same periods in 2008.  Average earning assets increased $274.1 million or 6.0% for the quarter and $362.8 million or 7.9% for the year, primarily due to the acquisition of the branches.  However, the net interest margin decreased by 25 and 32 basis points in the 2009 fourth quarter and for the year, respectively, as compared to the same periods in 2008, primarily due to reinvesting proceeds from the branch deposit acquisitions into lower yielding, short duration securities. Also, the continuation of the low interest environment in 2009 has impacted the margin as lower security and loan yields and a reduction of interest income from the increased non-performing loans have not been fully offset by decreases in deposit and borrowing cost of funds. However, the margin has benefited from a 5.3% increase in average non-interest bearing deposit balances in 2009, the result of marketing campaigns focused on checking account products.

The net interest margin increased 11 basis points to 3.46% in the fourth quarter as compared to the third quarter of 2009 as a result of a 16 basis point decline in the cost of interest bearing liabilities resulting from the lower interest rate environment and re-pricing of higher rate CDs and certain term borrowings.  Net interest income increased by 0.3% from the third to the fourth quarter of 2009 as the benefit of the improved cost of funds was partially offset by a 3.4% decline in average earning assets.  Investment security sales and maturities were used to fund the previously anticipated run off of some of AmTrust's former higher rate, single service customer CDs and to proactively reduce FHLB and other maturing borrowings that were generally at higher rates.

Provision for Credit Losses

The provision for credit losses was $14.4 million in the fourth quarter of 2009, a decrease of $0.7 million from the fourth quarter of 2008 and a $1.8 million decrease from the third quarter of 2009.  For 2009 the provision was $50.4 million, as compared to $32.6 million in 2008.  Lower provision expense for the 2009 fourth quarter reflects decreases in non-performing assets and past due loans from the third quarter of 2009.  Higher provision expense for 2009 reflects the general deterioration of credit quality across all segments of the loan portfolio due to the prolonged recession, and three specific larger credits, two of which were customer frauds.

Loans past due 30 days or more decreased 5.9% to 0.88% as a percent of total loans from the third quarter of 2009 and 43.6% from year end 2008.  Loans past due 90 days or more and accruing decreased 72.0% from December 31, 2008 to 0.15% of total loans.  Non-performing loans decreased $2.1 million from the third quarter to $80.3 million at December 31, 2009 or 2.31% of total loans, and increased $44.0 million from December 31, 2008.  The non-performing loan increase in 2009 reflects general deterioration of credit quality which has been most prevalent in the commercial and residential real estate portfolios, but migration into non-accrual status and overall new loan delinquencies have slowed since the first quarter of 2009.  Commercial real estate and residential real estate loans represent approximately 62% and 20%, respectively, of non-performing loans at December 31, 2009.  Commercial real estate has been impacted by rising vacancy rates and declining property values across all classes of property particularly in the metropolitan markets of central and southwestern Ohio.  More residential real estate loans are experiencing extended delinquency that requires them either to be renegotiated to avoid foreclosure whenever possible or placed on non-accrual even if they remain adequately secured.  Although categorized as non-performing loans, loans categorized as renegotiated loans are accruing as they generally continue to perform in accordance with their modified terms.  

Net charge-offs for the fourth quarter of 2009 increased $5.3 million compared to the fourth quarter of 2008  and decreased slightly compared to the third quarter of 2009.  Included in net charge-offs in the 2009 fourth quarter were $3.6 million for three specific loans reserved for in prior quarters and $3.4 million relating to one commercial loan involving borrower fraud.  Throughout 2009, worsening economic conditions and declining property values have resulted in higher residential and commercial real estate losses while consumer loan losses have been relatively stable.  The provision for loan losses exceeded net charge-offs by $0.4 million in the fourth quarter of 2009 and $11.4 million for all of 2009, which increased the allowance for loan losses to 1.76% of total loans at December 31, 2009 compared to 1.74% at September 30, 2009 and 1.38% at December 31, 2008.  The allowance provided coverage of 156% of net charge-offs for the trailing twelve months ended December 31, 2009, and 76% of non-performing loans.

Non-Interest Income

Non-interest income in the fourth quarter of 2009 increased 38.4% over the same quarter in 2008, as nearly all major sources of non-interest income experienced increases, including trust fees, security gains, deposit service charges, securities brokerage income, mortgage gain on sale income, and electronic banking fees.  Also contributing to the 2009 fourth quarter increase was a $0.5 million decline in losses recognized on other real estate-owned.

Non-interest income improved by $7.2 million or 12.6%, for the year compared to 2008 due to higher security gains of $4.5 million, growth in securities brokerage income of $1.6 million, a bank owned life insurance claim of $1.0 million, and a combined $1.6 million increase in gains on the sale of mortgage loans, service charges on deposits, and electronic banking fees.  Additionally, losses recognized on other real estate-owned declined $0.9 million.  These improvements in non-interest income were partially offset by lower trust fees of $1.1 million, due to lower average market values of trust assets, and decreased mortgage servicing income of $0.8 million as a result of increased customer refinancing and an impairment charge to mortgage servicing rights during 2009.  

Non-Interest Expense

For the year ended December 31, 2009 non-interest expense increased $7.0 million or 4.9% compared to the same period in 2008; however, expenses only increased $1.1 million or 0.8% excluding Federal Deposit Insurance Corporation ("FDIC") insurance and merger-related expenses.  An increase in FDIC insurance of $8.1 million from 2008 results can be attributed to a $2.6 million special assessment in the second quarter of 2009, an increase in the FDIC base rate, usage of certain assessment credits recognized in prior periods and, to a lesser extent, the increase in deposits resulting from the branch acquisitions.  

Salaries and wages declined $1.7 million due to a decrease in full time equivalent employees from December 31, 2008 to December 31, 2009; however, employee benefits increased by $4.0 million due to higher health care costs and higher pension expenses resulting from a decline in the value of pension assets experienced in 2008.  Improved efficiencies in marketing, net occupancy and equipment, administrative fees, supplies, and postage represented a $1.9 million cost reduction in 2009 as compared to 2008.  Miscellaneous taxes decreased by $1.1 million primarily due to state franchise tax reductions and the termination of a REIT subsidiary in the fourth quarter of 2008, while amortization of intangibles expense declined $0.7 million.  These cost reductions were partially offset by increased foreclosure expenses, increased costs related to other real estate, higher expenses relating to electronic banking activities and a termination fee related to internet banking software upgrades.

In the fourth quarter of 2009, non-interest expense grew by $3.9 million as compared to the fourth quarter of 2008 due to increases in FDIC insurance, employee health care and pension expenses, restructuring expenses, and other real estate-owned and foreclosure costs, partially offset by a decline in salaries and wages.  Restructuring expenses of $1.2 million in the fourth quarter represented costs associated with personnel reductions and impairment of certain branch fixed assets held for sale.

Investments

Total investments at December 31, 2009 increased $327.7 million or 35.0% from the prior year due to the investment of cash from the branch acquisitions, partially offset by security sales at net gains, which funded the repurchase of the TARP preferred stock as well as planned reductions in CDs, Federal Home Loan Bank ("FHLB") borrowings and certain other borrowings.  As a result of changes in market interest rates, net unrealized gains on the available-for-sale portfolio increased $3.3 million to $20.8 million at December 31, 2009 from December 31, 2008.

Loans

Total portfolio loans were $3.5 billion at December 31, 2009, down 3.7% from 2008, primarily due to continued strategic reductions in residential mortgage loan balances, while management continues to focus on improving overall credit quality.  Reduced new commercial and consumer loan demand as well as normal pay-downs on both consumer and residential loans contributed to the decreases.  The average loan to deposit ratio was 87% at December 31, 2009 as compared to 102% in the prior year, primarily as a result of the added liquidity provided by the branch deposit acquisitions.

Deposits

Deposits at December 31, 2009 increased $470.3 million or 13.4% compared to December 31, 2008 due to the  branch acquisitions.  This increase has been partially offset by expected run off of the acquired, higher-cost CDs over the last three quarters.  Some of this runoff has contributed to a remix into lower cost money market and checking account deposits.  

Borrowings

FHLB borrowings at December 31, 2009 decreased 16.8% from December 31, 2008 to $496.4 million, while other short-term borrowings decreased $109.3 million or 36.7% from 2008.  The shift to a more liquid balance sheet with the recent branch deposit acquisition has provided opportunities to reduce borrowings as they mature.

Income Taxes

The provision for income taxes decreased $5.5 million for the year ended 2009 compared to the same period in 2008 due to a decrease in pre-tax income and a decrease in the effective tax rate.  For 2009 the effective tax rate decreased to (4.3%) as compared to 10.5% in 2008, due primarily to a higher percentage of tax-exempt income to total income, and certain filed return adjustments during the year.

Shareholders' Equity

WesBanco continues to maintain strong regulatory capital ratios of 7.86% tier I leverage capital, 11.12% tier I risk-based capital, and 12.37% total risk-based capital, all of which improved from the third quarter of 2009 and are considerably above the "well capitalized" standards promulgated by bank regulators.  The improvement in regulatory capital ratios occurred despite the repurchase of the warrant in the fourth quarter which reduced common equity by $950,000.  Total tangible common equity to tangible assets (non-GAAP measure) improved to 5.88% at December 31, 2009 from 5.75% in the third quarter, primarily due to balance sheet strategies and improved fourth quarter results, offset somewhat by a decline in other comprehensive income from lower unrealized securities gains and the repurchase of the warrant.

WesBanco is a multi-state bank holding company with total assets of approximately $5.4 billion, operating through 114 branch locations and 138 ATMs in West Virginia, Ohio, and Pennsylvania. WesBanco's banking subsidiary is WesBanco Bank, Inc., headquartered in Wheeling, West Virginia. WesBanco also operates an insurance brokerage company, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc.

Forward-looking Statements:

Forward-looking statements in this report relating to WesBanco's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco's Form 10-K for the year ended December 31, 2008 and documents subsequently filed by WesBanco with the Securities and Exchange Commission ("SEC"), including WesBanco's Form 10-Q as of March 31, June 30, and September 30, 2009, which are available at the SEC's website www.sec.gov  or at WesBanco's website, www.wesbanco.com .  Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed in WesBanco's most recent Annual Report on Form 10-K filed with the SEC under Part I, Item 1A. Risk Factors.  Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effects of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to WesBanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, Federal Deposit Insurance Corporation, the SEC, the Financial Institution Regulatory Authority and other regulatory bodies; potential legislative and federal and state regulatory actions and reform; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; internet hacking; competitive conditions in the financial services industry; rapidly changing technology affecting financial services, greater than expected outflows on recent branch acquisition deposits; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting WesBanco's operational and financial performance. WesBanco does not assume any duty to update forward-looking statements.

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SOURCE WesBanco, Inc.