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Shale activity spurs WesBanco growth

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By JIM ROSS

For The State Journal

Managing growth has been a problem for some companies in the shale gas region of West Virginia, leading WesBanco to provide services to help them.

“Much of the infrastructure to move gas from the wells is still being built,” WesBanco President and CEO Todd F. Clossin said during a recent conference call with investment analysts. “Royalty payments will increase as gas production increases over time. We have the geographic good fortune of having 71 percent of our franchise footprint located within shale-producing areas.

“The companies involved in shale-related activities need financing activities to grow. That's a double-edged sword: On the one hand, there's growth and they need financing. On the other hand, some of these companies are growing rather rapidly and we need to make sure they've got the infrastructure in place from a management perspective to manage their growth so that they focus on cash flow and not just on net income.”

WesBanco is the largest bank based in West Virginia. Its corporate headquarters are in Wheeling. As of June 30, it had assets of $6.28 billion, up about 3.2 percent from June 30, 2013. Its deposits totaled $5.12 billion, up 3.6 percent. The company has 119 branch locations and 106 ATMs in West Virginia, Ohio and Pennsylvania.

Clossin said the bank had about $260 million in royalty deposits for Marcellus and Utica shale gas over the previous 12 months.

“A company going from $10 (million) to $40 (million) to $80 million in revenue over a three-year time period has got to change their internal reporting,” he said. “I'm finding a number of banks are not having those conversations with their customers. We are.

“I think that's helping our customers, but I also think it will keep our credit quality pristine during this whole time period of growing financing related to the shale-related activities.”

WesBanco has made some acquisitions, but growth in the shale gas areas has produced growth that has not required new branch offices, Clossin said.

“Historically, we opened a branch or two every 12 or 18 months,” he said. “I think one of the benefits we have with the strong deposit flow we have coming from shale-related activities, it's a huge and enormous benefit, I think, to our organization.

“We don't need to put up a lot of brick and mortar and wait for that to become profitable in order to generate deposits. We just open the doors every morning and the checks from the gas companies go to our customers and they deposit them in our bank.”

Clossin said some of the royalty streams will go on for 50 or 60 years, so from a funding perspective, he doesn't have much need for opening new branches.

“But it does make sense strategically for us to have a presence in key markets to support our commercial banking activity (and) our business banking activity,” he said. “Plus I want to push more products through our distribution system.”