| NEWS FOR IMMEDIATE RELEASE |
July 18, 2007 For Further Information Contact:
Paul M. Limbert
President and Chief Executive Officer
or
Robert H. Young
Executive Vice President and Chief Financial Officer
(304) 234-9000
NASDAQ Symbol: WSBC
Website: www.wesbanco.com
WesBanco Announces Increased Second Quarter 2007 Results
Wheeling, WV… 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 increased earnings for the second quarter and year-to-date ended June 30, 2007.
Net income for the quarter ended June 30, 2007 was $12.3 million, an increase of $1.0 million over the $11.3 million of net income for the second quarter of 2006, while diluted earnings per share for the quarter were $0.59 per share compared to $0.52 per share for 2006. Second quarter results improved from last year due to a reduced loan loss provision, an increase in non-interest income, and a lower income tax provision. The tax provision decreased by $1.6 million due to an adjustment to correct the recognition of deferred taxes from prior periods on certain tax exempt income amounts. This adjustment was not material to any one prior period since its inception. The improvements in the second quarter were partially offset by lower net interest income.
On a diluted per share basis, core operating earnings were $0.51 per share, as compared to $0.52 per share in 2006. Core operating return on average assets improved to 1.19% from last year’s 1.08% and return on average equity increased to 11.72% from 10.74%. For the year-to-date period, earnings per share were $1.15 versus last year’s $0.77, an increase of 49.4%, on net income of $24.2 million as compared to $16.8 million, with core operating earnings excluding certain gains and charges, and the tax benefit noted above, up 10.6% to $1.04 per share from $0.94 per share last year.
“Results for the second quarter on a core basis were in line with our expectations given the difficult interest rate and competitive operating environment and current Midwest economic factors and market demographics, said Mr. Limbert. “While our net interest margin was down somewhat in the second quarter as compared to the prior year, we were able to make up for the reduction in net interest income by improving non-interest income from trust, securities and mortgage businesses, increased service charge activity from our marketing campaigns, a current non-interest income revenue enhancement program, and higher bank-owned life insurance income. Despite other financial organizations noting credit problems throughout the Midwest, our loan portfolio continues to perform better than our expectations for the year, leading to lower loan loss provisions as compared to year ago levels and lower non-performing asset and net charge-off ratios so far in 2007.”
“We recently opened a new office in the Gahanna (Columbus), Ohio market, replacing an older, existing facility in the same vicinity, and we are well along in constructing a new, state-of-the art banking center in the Highlands/Cabela’s retail shopping destination development between Wheeling, West Virginia and Washington, Pennsylvania which we will open in September,” said Mr. Limbert. “These new facilities will serve to enhance WesBanco’s presence in these markets and further improve customer service. We implemented new commercial
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loan platform technology during this quarter which should positively enhance loan delivery timeframes and provide for greater efficiencies. We also intend to upgrade our core processing technology platform later this year, with the board recently approving a mainframe and related operating system replacement strategy for fourth quarter implementation at an overall cost of approximately $2.4 million that will provide both cost and operating efficiencies over the present platform.”
Highlights for the second quarter and six months year-to-date include the following:
| · | Net interest income for the second quarter decreased $1.7 million or 5.4% compared to the second quarter of 2006 as a result of the flat and inverted yield curve environment over much of the last year experienced by the banking industry, and a lower balance sheet size primarily as a result of the prior year’s intentional repositioning and reduction in the investment and fixed rate mortgage loan portfolios. Year-to-date, the margin was 3.52% versus 3.47% for the first half of 2006, with the better performance reflective of the smaller, more profitable balance sheet post-restructuring, enhanced somewhat by controlled deposit cost increases, loan yield increases and a greater mix of average non-interest bearing deposit accounts. Lower overall loan growth has also impacted both net interest income and the margin. The net interest margin for the second quarter was 3.46% as compared to 3.54% for the prior year, and 3.56% for the first quarter. |
| · | The increase in non-interest income for the second quarter of 8.6% was due to a 9.8% increase in trust fees, a 6.0% increase in service charge income, and net proceeds from a bank-owned life insurance claim of $0.9 million. Also, WesBanco recognized $0.9 million in gains on early calls of FHLB advances in the quarter, as compared to $1.0 million in the prior year’s quarter, and losses on disposal of fixed assets of $0.2 million. On a year-to-date basis, non-interest income was up 49.9% or $8.9 million due primarily to the prior year’s recognized impairment loss of $8.0 million on the investment portfolio restructuring. Also last year, WesBanco recognized $2.6 million in net gain on the sale of four branches in Ritchie County, and for the six months year-to-date in 2007 a deferred gain on the sale of a former branch facility of $1.0 million was recorded. Excluding the effects of these items, non-interest income year-over-year was up 10.6%. The increase in year-to-date core non-interest income was due to higher trust fees of $0.6 million, service charges on deposits of $0.3 million, improved securities brokerage revenues, increased mortgage banking income from sales to the secondary market and $0.7 million in security sale gains. |
| · | The provision for credit losses decreased $0.5 million in the second quarter of 2007 as compared to second quarter 2006 primarily due to lower net charge-offs and non-performing loans. The allowance for loan losses as a percentage of total loans increased to 1.13% at June 30, 2007, from 1.05% at the end of the second quarter of 2006, primarily due to regional economic conditions exhibited in banks’ generally experiencing record levels of residential real estate foreclosures and the potential resulting impact on estimated credit losses inherent in our residential loan portfolio. However, WesBanco does not have any material exposure to sub-prime residential real estate loans, which other banking organizations have announced recently as problem assets. Non-performing assets, which improved as compared to the first quarter as well as last year’s second quarter, decreased primarily through payoffs and improvements in loan quality. Net charge-offs to average loans decreased to 0.19% for the quarter as compared to 0.54% for the second quarter of 2006, and year-to-date, net charge-offs were 0.21% as compared to 0.36% for last year. During the period, a provision for credit losses on unfunded loan commitments was established for $0.3 million as part of the quarter’s total $1.8 million overall provision for credit losses. Year-to-date, the total provision decreased 34.0% to $3.2 million from $4.9 million. |
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| · | Non-interest expense was flat for the second quarter as compared to the prior year period and was up $0.6 million from the first quarter of 2007 due to higher planned marketing expense. Year-to-date, total expenses were down $0.4 million primarily due to last year’s first quarter restructuring charge of $0.5 million for mortgage back-office operations, with higher salaries and benefits expense offset by lower overall marketing expense. Full-time equivalent employees were 1,191 at June 30, 2007 as compared to 1,176 the prior year. The decrease in marketing expenses year-to-date was due to higher customer incentive expense related to last year’s marketing campaigns as compared to the current campaign’s related expense. Such campaigns have been primarily focused on increasing both the number of checking and savings accounts and related current account balances for accounts opened in last year’s campaigns, higher levels of new consumer loans and improved deposit service charge and activity fee income. |
| · | The provision for income taxes decreased $1.1 million compared to the second quarter of 2006 due primarily to the correction of prior period amounts related to the accumulation of deferred taxes on a small portion of the municipal bond investment portfolio. These bonds were purchased at a discount, the accretion for which was previously treated as a future taxable timing difference. The bonds were discovered to have certain tax-exempt attributes of purchased zero coupon bonds, acquired by the Bank in its investment portfolio since the late 1990’s and in a prior acquisition, and therefore, the accretion of the discount should not have been treated as taxable. The total amount of related book accretion recognized in income to date was $4.6 million, creating life to date deferred taxes of approximately $1.6 million. Since this amount had built up over many years, the impact on each of the prior periods was not material. Therefore, WesBanco has made a current period adjustment to correct the prior period accrual in accordance with SEC Staff Accounting Bulletin #108 and other related accounting guidance. For 2007 year-to-date, the effective tax rate, without the aforementioned tax adjustment, increased to 22.7% as compared to 19.6% in the second quarter of 2006, due primarily to higher taxable income and a lower percentage of tax-exempt income to total income. |
| · | Total loans at June 30, 2007 decreased $79.8 million or 2.7% compared to June 30, 2006 due to planned decreases in residential real estate loans and customer payoffs of home equity lines of credit. Loan growth over the last year has been somewhat restrained due to the Bank’s strategy of selling most residential mortgages to the secondary market, reduced market opportunities for residential mortgages, construction loans and home equity loans in the current higher interest rate environment, accelerated payoffs of commercial real estate loans, lower overall commercial line usage, and a focus on obtaining appropriate interest rate spreads on new loans in a more competitive lending environment. |
| · | Total deposits were up $24.2 million or 0.8% over last year primarily due to increases in certificates of deposit and interest and non-interest bearing demand deposits. As a result of the current interest rate environment, customers are favoring shorter-term CD’s and money market accounts, while new checking account campaigns have improved demand deposit account balances. Deposits were flat with year-end levels, as WesBanco continues to focus on management strategies to control deposit costs as best as is possible in the current competitive rate environment. |
| · | FHLB and other short-term borrowings decreased to $463.0 million as of June 30, 2007, from $577.5 million at June 30, 2006, a $114.5 million or 19.8% reduction. Borrowings were $812.2 million before the restructuring at the end of last year’s first quarter. These borrowings as a percent of total assets decreased to 11.6% from 14.1% at the end of the prior year’s second quarter. Total investment securities have dropped since the end of the first quarter of 2006 due to restructuring the size of the balance sheet |
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| in a flat interest rate environment. The decreased balance sheet size has improved capital ratios over the past year with tangible equity improving to 6.80% at June 30, 2007. |
| · | For the quarter ended June, 2007, WesBanco repurchased a total of 201,145 common shares at an average price of $31.08 per share. Year-to-date shares repurchased totaled 761,398 at $31.43 per share. WesBanco has 868,600 shares remaining for repurchase under the current repurchase plan approved by the Board of Directors in March, 2007. |
WesBanco is a multi-state bank holding company with total assets of approximately $4.0 billion, operating through 78 banking offices, one loan production office, and 110 ATMs in West Virginia, Ohio, and Pennsylvania. WesBanco’s banking subsidiary is WesBanco Bank, Inc., headquartered in Wheeling, West Virginia. In addition, WesBanco operates an insurance brokerage company, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc. that also operates Mountaineer Securities, WesBanco’s discount brokerage operation.
A reconciliation of GAAP basis net income to core operating earnings is found on the last table of this release.
Forward-looking statements in this press release 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 press release should be read in conjunction with WesBanco’s 2006 Annual Report on Form 10-K and March 31, 2007 Form 10-Q, filed with the Securities and Exchange Commission (“SEC”), which is 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 2006 Annual Report on Form 10-K filed with the SEC under the section “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 the parent company 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, State of West Virginia Division of Banking, Federal Deposit Insurance Corporation, the SEC, the NASDAQ, the National Association of Securities Dealers and other regulatory bodies; potential legislative and federal and state regulatory actions and reform; competitive conditions in the financial services industry; rapidly changing technology affecting financial services and/or other external developments materially impacting WesBanco’s operational and financial performance. WesBanco does not assume any duty to update forward-looking statements.
