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 for the first quarter ended March 31, 2008.
Net income for the quarter ended March 31, 2008 was $9.5 million, as compared to $11.9 million for the first quarter of 2007, while diluted earnings per share for the 2008 first quarter were $0.36 per share compared to $0.56 per share for the first quarter of 2007. First quarter earnings per share included a full quarter's effect of the issuance of additional shares of stock for the purchase of Oak Hill Financial, Inc., which closed on November 30, 2007. Net interest income increased 28.7% for the comparable periods as a result of the acquisition of Oak Hill. The net interest margin showed continued improvement, increasing to 3.48% in the 2008 quarter from 3.40% in the fourth quarter of 2007 due to a decline in the cost of funds. However, the provision for loan losses increased $4.0 million in the first quarter, primarily due to a decline in overall economic conditions in our market areas which have led to an increase in non-accrual and 90 day past due loans.
WesBanco's merger with Oak Hill created a multi-state bank holding company with approximately $5.3 billion in total assets providing banking services in West Virginia, Ohio and Pennsylvania. The transaction expands WesBanco's franchise along the Interstate 71 and Interstate 75 corridors from Dayton, Ohio to Cincinnati, Ohio and opens new markets in south and central Ohio.
"An improved interest rate environment has reduced the cost of liabilities over the last two quarters, resulting in a higher net interest margin," said Mr. Limbert. "We also continue to improve our fee income businesses, as total non-interest income grew, primarily from improvements in service charges and other fees. However, the challenging environment for the banking industry continues from competitive and economic factors."
"We did complete the sale of five Oak Hill Branches in April. Also in the second quarter, we intend to merge Oak Hill Banks into WesBanco Bank and convert the data processing systems to improve efficiency and standardize products and delivery systems. We will continue through 2008 to integrate the Oak Hill operations into WesBanco to further realize the benefits of this acquisition. Many of these cost savings are expected to be realized in the second half of 2008."
Highlights for the first quarter of 2008 include the following:
-- Net interest income for first quarter increased 28.7%, due to a higher average balance sheet resulting from the acquisition of Oak Hill, slightly offset by a lower net interest margin of 3.48% as compared to 3.56% in the first quarter of 2007. The eight basis points decrease in the net interest margin was due to the continued effects of the flat yield curve and competitive interest rates in our major markets. However, the 2008 margin increased eight basis points from 3.40% in the fourth quarter of 2007, the second consecutive quarterly increase, primarily due to a twenty basis point decline in the cost of interest bearing liabilities. This decrease in interest expense resulted from the effect on WesBanco's liability sensitive balance sheet of declining interest rates over the previous six months. The margin has also benefited from higher average non-interest bearing deposit balances.
-- The increase in non-interest income was $1.9 million compared to the first quarter of 2007. Service charges on deposits increased $1.7 million, primarily due to the acquisition of Oak Hill, a gain of $0.4 million was recorded on the mandatory redemption of VISA class B stock, and revenue improved from electronic banking fees, insurance and securities brokerage operations.
-- The provision for loan losses in the first quarter of 2008 increased $4.0 million compared to the first quarter of 2007. This additional provision is a reflection of changing economic conditions adversely impacting our market areas which have caused charge-offs and non-performing loans to increase. For the 2008 first quarter, the provision for credit losses was $5.4 million, with net charge-offs at 0.39%, about even with the 2007 fourth quarter and higher from 0.24% for the 2007 first quarter. Total net charge offs were $3.6 million. Non-performing loans as a percent of total loans was 0.72% for the 2008 quarter, 0.54% for the fourth quarter of 2007 and 0.43% for the first quarter of 2007. Although WesBanco does not have any material direct exposure to sub-prime loans, the problems associated with sub-prime lending such as declines in the market value of residential real estate and the decrease in consumer spending, are having a broad adverse impact on business segments in which WesBanco has exposure. The allowance for loan losses as a percent of total loans increased from 1.04% as of December 31, 2007 to 1.10% at March 31, 2008.
-- Non-interest expense for the 2008 first quarter increased $10.1 million as compared to the first quarter of 2007. Expenses in the first quarter 2008 included the costs of operating two separate bank charters. Oak Hill merger-related expenses charged to operations in the 2008 quarter were $1.0 million. Other expense increases were due to a $0.5 million increase in marketing expense relating to deposit gathering programs in all market areas in the first quarter of 2007, a $1.0 million increase in occupancy expense from two new branch facilities opened in 2007 and recent technology and other equipment upgrades, and normal increases in personnel-related costs, partially offset by decreases in professional fees and miscellaneous taxes.
-- The provision for income taxes decreased $1.2 million compared to the first quarter of 2007 due to a decrease in pre-tax income and a decrease in the effective tax rate. For 2008 the effective tax rate decreased to 19.2% as compared to 22.3% in the first quarter of 2007 due primarily to a higher percentage of tax-exempt income to total income and the benefit of certain tax credits including New Market Tax Credits awarded to Oak Hill Community Development Corporation, a wholly-owned subsidiary.
-- Total loans at March 31, 2008 decreased 1.5% compared to December 31, 2007 primarily due to the Bank's strategy of reducing existing residential mortgage loans and selling most new originations, somewhat reduced demand across the entire portfolio, a continued focus on maintaining appropriate interest margins on new loans, and continuing efforts to maintain or improve credit quality.
-- Total deposits at March 31, 2008 decreased 1.8% compared to December 31, 2007. The decrease was primarily in certificates of deposits and money market accounts as Wesbanco attempted to reduce its cost of funds aggressively as market rates were falling.
-- At March 31, 2008, FHLB and other short-term borrowings decreased 1.5% from December 31, 2007. These borrowings were 13.7% of total assets at both balance sheet dates. Certain short-term borrowings were replaced with longer-term FHLB advances with call options to take advantage of the current rate environment.
-- Tangible capital increased from 5.96% to 6.23% at the end of the first quarter. No shares were repurchased during the quarter. A total of 584,325 shares remain under the current board-approved repurchase authorization.
WesBanco is a multi-state bank holding company with total assets of approximately $5.3 billion, operating through 111 locations and 153 ATMs in West Virginia, Ohio, and Pennsylvania. WesBanco's banking subsidiaries are WesBanco Bank, Inc., headquartered in Wheeling, West Virginia, and Oak Hill Banks, headquartered in Jackson, Ohio. In addition, WesBanco operates an insurance brokerage company, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc. -- WesBanco, Inc.
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