WesBanco joins parade of W.Va. banks into D.C. area
WesBanco in Wheeling, W.Va., is following a playbook used by other expansion-minded banks in its home state.
The $12.5 billion-asset company is set to enter Baltimore and Washington — two of the mid-Atlantic's fastest-growing markets — after agreeing to buy the $3.1 billion-asset Old Line Bancshares in Bowie, Md., for $500 million.
Growth is a challenge for banks like WesBanco that have historically operated in rural markets. While the company has a strong presence in Huntington, West Virginia's second-biggest market, the city's population fell by nearly 20% between 1990 and 2017, according to the Census Bureau.
WesBanco is "in a lot of sluggish or slow-growth areas in Kentucky and West Virginia," said Bert Ely at the consulting firm Ely & Co. in Alexandria, Va. "By buying Old Line, they're moving into a more urbanized and potentially more dynamic market."
Other West Virginia banks have made similar moves.
MVB Financial in Fairmont and United Bankshares in Charleston have focused heavily on Washington in recent years. MVB has targeted having $1 billion in assets in northern Virginia in the next two to three years, while 10 of United's last 11 acquisitions have been around the nation's capital.
Washington "is a market everyone wants to be in, and it’s a natural expansion for WesBanco," said Jon Winick, CEO of Clark Street Capital.
The move shouldn't be too surprising. Todd Clossin, WesBanco's president and CEO, had made it clear he would look at markets located within six hours of Wheeling. Washington is only a five-hour drive away.
A limited number of banks operate in both Washington and Baltimore, and Winick added that the planned merger of BB&T and SunTrust could provide opportunities in both cities.
While WesBanco has yet to set a growth target for Washington, Clossin said during a conference call to discuss the deal that his team will focus heavily on northern Virginia.
"We're not coming here to do this and be done," he said.
Clossin said he will continue to evaluate buying banks about a fifth of WesBanco's size after it acquires Old Line. That could mean targets with up to $3 billion in assets.
"You want to be sure you're partnering with a team and a bank that's going to be big enough to defend and grow," Clossin said.
James Cornelsen, Old Line's president and CEO, said during the call that the deal puts Old Line in a better position to provide value to its customers.
"We're proud to say that our customers have grown with us," Cornelsen said, noting that Old Line had grown from a single branch to having 37 locations in the past three decades.
Clossin said both banks have strong credit quality and disciplined risk cultures. He also said that while Old Line is focused on commercial lending its residential mortgage book is a highlight of its portfolio.
The Old Line deal, which is expected to close by early 2020, will significantly enhance WesBanco’s growth potential by providing access into "dynamic" markets, Will Curtiss, an analyst at Hovde Group, wrote in a note to clients.
"The deal is not without some execution/integration risk given its relative size and extension into newer, more competitive markets, but [WesBanco] has a fair amount of recent experience executing similar type deals, which should help alleviate some portion of those concerns," Curtiss added.
Other industry observers were supportive of the Old Line deal.
"Our initial thought is that this transaction makes sense for both sides," Casey Orr Whitman, an analyst at Sandler O'Neill, wrote in a note to clients.