Increasingly reluctant to have its fortunes tied to the fates of the waning steel and coal industries, Wesbanco Inc. of Wheeling, W.Va., is broadening its push beyond the states borders.
Its $77 million deal last week for American Bancorp. of Wheeling, which has branches in eastern Ohio and western Pennsylvania, underscored Wesbancos desire to grow outside the state, whose economy historically has been dominated by steel and coal, as well as the natural gas and chemical industries.
Edward M. George, president and chief executive of the $2.3 billion-asset parent of Wesbanco Bank, said buying American would move his company into booming Columbus, Ohio, as well as Washington, Pa., two markets near West Virginias northern panhandle.
The economies in these areas are stronger than in Wheeling, Mr. George said. We looked to other markets, because of the problems in the steel and coal industry.
Wesbancos acquisition agenda also has included moves into the north-central, central, and southern parts of West Virginia, where the growth is, Mr. George said. In December it said it would buy Freedom Bancshares of Belington, W.Va, the $100 million-asset parent of Belington Bank, which has branches in four central West Virginia counties.
Gary B. Townsend, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Va., said he is encouraged by Wesbancos attempt to move into new markets, but he warned that it may not be sufficient to sustain earnings because its banks primary markets, including Wheeling, are in West Virginias panhandle.
The Wheeling market has a lot of manufacturing, Mr. Townsend said, referring to the steel companies in and around the area. If were looking at a recession, its not great for these markets.
Over the years, Wesbanco has scaled back its lending to steel and manufacturing companies as production has shrunk and jobs have moved out-of-state and overseas. Such loans now make up about 10% of the companys $1.6 billion portfolio, significantly less than 20 years earlier, Mr. George said.
Commercial loans made up 34% of total loans last year; real estate accounted for 44%; and personal loans, 22%. Nevertheless, though the company has emphasized other types of lending, West Virginias economy is still largely tied to manufacturing.
Even if theyre not lending directly to steel, the economy there has to transition into other types of businesses, Mr. Townsend said.
Douglas Maddy, vice president of the West Virginia Bankers Association, said the state has tried to cultivate other economic sectors and is enjoying significant growth in its service sector, including education, media, and financial services.
Our state is beginning to diversify its economy, and financial institutions are mirroring this and diversifying their holdings, he said.
But West Virginias economy is still dependent on heavy industry. The panhandle economy has been dominated by steel; the south-central area, by chemicals; and the southern region, by coal, he said.
In fact, the only part of the state not tied to natural resources lies along the eastern border with Virginia, where technology is a major component, Mr. Maddy said. As a result, many banks have gravitated toward this area and have moved into Virginia to diversify, he said.
Bankers realize they cant keep doing business the way theyve always done it because the world is changing, Mr. Maddy said. They cannot be married to the old way of doing business or the old industries, he said.