WesBanco Inc (WSBCP) 2010 Q4 法說會逐字稿

Good morning and welcome to WesBanco's conference call. My name is Keith and I will be your conference facilitator today. Today's call will cover WesBanco's discussion of results of operations for the quarter ending December 31, 2010. Please be advised that all lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions) This call also is being recorded. If you object to the recording, please disconnect at this time.

Forward-looking statements in this presentation 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 herein should be read in conjunction with WesBanco's 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission, including WesBanco's Form 10-Q as of March 31, 2010, June 30, 2010, and September 30, 2010, which is available on the SEC's website at 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 2009 Annual Report on Form 10-K filed with the SEC under the section Risk Factors in Part 1, Item 1A. Such statements are subject to important factors that could include actual results to differ materially from those contemplated in such statements. WesBanco does not assume any duty to update any forward-looking statements.

WesBanco's fourth-quarter 2010 earnings release was issued yesterday afternoon and is available at WesBanco.com.

This call will include about 15 minutes of prepared commentary followed by a question-and-answer period which I will facilitate. An archived webcast of this call will be available at WesBanco.com.

WesBanco's participants in today's call will be Paul Limbert, President and Chief Executive Officer; Jim Gardill, Chairman of the Board; and Bob Young, Executive Vice President and Chief Financial Officer, and all will be available for questions following these statements.

Mr. Limbert, you may begin your conference.

Thank you, Keith. Good morning. Thank you for participating in WesBanco's quarterly earnings conference call. We are pleased to be able to provide this information to interested parties. I would like to make some opening comments. Bob Young will then provide financial highlights of the fourth quarter and for the Year 2010 and then Jim Gardill will moderate the question-and-answer period.

A press release was issued last evening which has more details than the accompanying slides which we are presenting today. A copy of the entire press release and slides is available on our website.

Yesterday WesBanco reported fourth quarter earnings of $10.3 million or $0.39 per share as compared to $7.3 million or $0.27 per share for the fourth quarter of 2009. Our 2010 annual reported earnings were $35.6 million or $1.34 per share, which represents a 90% increase over the same period in the prior year. Prior year's earnings were $18.7 million.

We are pleased with the financial performance of WesBanco as compared to the prior year. This is the fifth consecutive quarter of growth in net income on a linked-quarter basis. The growth in net income was achieved by improving net interest income, a reduced loan loss provision, improving revenues from the trust, securities and mortgage business units, and a concerted effort to control costs without affecting either the quality of our operations or our revenue generating capability. Finally we have recognized the full-year benefit of repurchasing our TARP preferred shares in 2009.

We are also pleased with our capital position. WesBanco's capital at the end of the quarter exceeds well-capitalized levels, and based upon our preliminary computations we anticipate having no problem complying with the Basel III 2019 guidelines, assuming of course that they are eventually applicable for smaller cap banks even without the trust-preferred securities on our balance sheet.

During 2009 WesBanco was able to acquire $600 million in deposits, repay TARP and repurchase the outstanding stock warrant without raising additional common stock which would have diluted our existing shareholders. After those events as of the end of last year our tangible equity ratio was 5.9%. However, based upon earnings retained during 2010 and the additional investment market gains, tangible equity has grown to 6.3%, a nice improvement from 2009.

Based upon strong capital levels and the proven ability to increase equity, we believe WesBanco is well positioned for the current economic climate and future growth. Credit issues remain in our market areas. Our quarterly loan loss provision remains at an unacceptably high level. We are continuing to work with our borrowers, assisting them in working through this recession.

Our historical community bank philosophy has been to work with and assist borrowers to make it through difficult economic times. We have shared the challenges of this recession with our customers, but believe that when economic times improve those customers will emerge stronger and drive economic growth in our communities. The impact of this community bank philosophy has resulted in higher loan restructurings which offsets declining balances of non-accrual loans. We are confident that as the economy grows our impaired loans will also decline.

Our loan-to-deposit ratio has declined to approximately 80% which gives us plenty of opportunity for growth going forward. In order to generate additional loan volume, we've hired six additional commercial loan officers, mostly in the Ohio region, and have begun a transition of other loan officers from working solely on problem loans to generating additional new loan volume.

If we can generate additional loan volume, we can continue to grow net interest income. This growth is important since we anticipate new government regulations which restrict all banks' ability to maintain historical earnings opportunities. Each new year brings its own set of challenges to which management needs to adjust our approaches in adding value for our shareholders.

We were pleased to note the recovery of WesBanco's stock price during 2010. For the year 2010 our stock price increased by 54%. Based upon an S&L price index, the percentage change in the Midwest region was about 23%. WesBanco has performed better than many of the banks that are located in the Midwest.

In the December 14, 2010 edition of the online publication The Street, WesBanco was included in their list of the ten best bank stocks for 2010. Forbes Magazine recently recognized WesBanco in its list of America's 100th best banks, ranking it 38th in the 2010 listing. We are pleased that WesBanco is receiving this type of attention during a period of economic difficulties.

I would like Bob Young, our CFO, to discuss with you in more detail the financial results of the fourth quarter and year 2010.

Thank you, Paul. Good morning to all of you on the line this morning. Fourth quarter and year-to-date improvements in net income were primarily the result of an increase in the net interest margin, a reduction in the provision for loan losses, and overall reductions in non-interest expenses. Our net interest income improved by $7.7 million during 2010 due to higher levels of investment securities and a reduction in the rates paid on deposits as well as significantly lower levels of higher-costing borrowings.

The net interest margin improved to 3.66% in the fourth quarter from 3.46% last year, and for the year-to-date it was up from 3.36% in 2009 to 3.60% in 2010. We have successfully managed net interest income through tighter control of loan pricing, repaying higher-cost borrowings as they mature during the year, and reducing rates paid on deposit accounts while also improving the mix towards a higher transaction account base.

Our net interest margin and efficiency ratio have both improved substantially over the past six quarters as you can see if you have our slide deck up on your screen. During the second quarter 2009, all financial institutions experienced a special FDIC assessment which did affect our efficiency ratio, and as well due to the acquisition in 2009 we incurred certain additional merger-related expenses. However, subsequent to mid 2009 our efforts to reduce expenses has resulted in an improved efficiency ratio. It ended 2010 at just under 61% versus 65% in 2009.

As we noted earlier, our net interest margin was also impacted by the branch acquisition. As you can imagine, receiving $600 million of cash to invest at one time did result in a temporary decline in the margin in the second quarter of 2009. However, since then we've been able to restructure the balance sheet and use those funds to pay down higher-cost liabilities or invest them in the portfolio at higher returns. As a result our margin has consistently improved quarter over quarter.

As further explanation of the improvement in the efficiency ratio, non-interest expense decreased $8.5 million year-to-date with the decline in FDIC insurance costs of $2.1 million making up about 25% of that decline. We have also been able to maintain stable salary costs through an overall reduction in staffing levels which commenced in late 2009 and continued throughout 2010, as well as a reduction in some of our fringe benefits such as pension costs and healthcare which were down by $1.6 million. Full-time equivalent employees have dropped by about 16 during the past year. We were also able to successfully reduce most other discretionary expense categories as you can see in the earnings release such as equipment expense, marketing, intangibles amortization and other operating expenses.

WesBanco's earnings for all of 2010 were $35.6 million or $1.34 per share compared to $18.7 million or $0.70 per share in the comparable time period of 2009. The trends previously discussed as applicable to the fourth quarter were similar for the entire year. In addition, it's noteworthy that the loan loss provision was lower by $5.7 million as compared to all of 2009.

WesBanco remains in a strong regulatory capital position with a total risk-based capital ratio of 13.2%. As Paul mentioned earlier our tangible equity ratio increased to 6.3% which was up about 45 basis points from the end of 2009. The increase in shareholders' equity and our improving overall regulatory capital ratios were the result of improved earnings, unrealized securities gains accounted for as part of other comprehensive income which affected the tangible common equity ratio, and de-leveraging the balance sheet.

Our overall balance sheet size has declined just under 1% in 2009 primarily due to a planned reduction in non-relationship CDs and federal home loan bank and re-borrowings. We used cash flows from a relatively short-duration investment portfolio as well as reductions in longer-term residential mortgages to fund these maturities.

Also of note, we repaid our TARP preferred stock in September of 2009 from existing liquidity resources which reduced shareholders' at the back time by about $75 million. However, as Paul noted previously, we did not need to raise common equity to repay TARP.

WesBanco's securities portfolio remains a source of strength for the bank. We have no significant exposure to either trust preferred securities or non-agency mortgage backs. Overall the portfolio had unrealized pre-tax net security gains of approximate $5 million at year end which is down from $32 million as of September 30.

Approximately 33% of the portfolio is in-state municipal bonds, and we have been monitoring their credit ratings and overall this portion of the portfolio has seen a decline in value during the last quarter. This is primarily due to higher required spreads throughout that sector, and as well due to intermediate-term rate increases.

We do intend to report on the portfolio's credit quality as well as other metrics in our Form 10-K, but there is a slide in the deck on municipal bonds, and it's noteworthy that approximately 87.5% of those muni bonds are at or above an A rating and only 12.5% is not rated, and as well no rated bonds are below investment grade.

You may recall earlier this year WesBanco transferred approximately $427 million in securities from the available for sale portion of the investment portfolio to the held-to-maturity portfolio. This transfer was completed in order to mitigate the potential impact of interest rate volatility upon total unrealized security gains included in capital. Since about $200 million of the securities transferred were municipal bonds, we were able to preserve approximately $600 in gain related to those securities alone.

We have experienced a slowdown in loan originations during 2010, particularly in our Western Ohio markets, as customer demand remained relatively weak due to the slow economic recovery, and as well we were focused on improving the portfolio's credit quality. However, we are now starting to see our commercial pipeline building once again as rates have remained low for an extended period and we are beginning to see signs of economic recovery in our markets. As I mentioned earlier, cash flows from investments and loan portfolio runoff have been used to further de-leverage the balance sheet during this period of time.

WesBanco's loan portfolio presently includes approximately 53% in commercial real estate loans. Approximately 57% of those commercial real estate loans are investor owned, 34% owner occupied, and only 9% are construction and development. There are many portions of the portfolio that represent a variety of consumer loan products and CNI lending.

The federal portfolio did decrease by 5.3% from December 31, 2009 due to the continued intentional reduction of residential real estate loans through sales of most new mortgage loans into the secondary market. Consumer loans other than home equities declined due to reduced demand. Commercial real estate loans decreased year-over-year but did improve 1.4% from the third quarter. Home equity loans have also slightly increased despite tightened credit underwriting standards due to marketing strategies and sales incentives.

We continue to focus on improving the overall profitability of the loan portfolio through disciplined underwriting and pricing practices. We have also taken action to improve the quality of the portfolio by implementing additional review processes and by providing additional education for our loan officers and credit underwriters.

More recently, several new commercial lenders have been added, primarily in our Ohio regions, in anticipation of better lending opportunities as we move beyond a recession to a more moderate growth environment, and we are also currently adding several new products to our customer offerings. It's also noteworthy that we had significant growth in treasury management and business-related deposits in 2010 due to an expansion of customer offerings, more focused customer calling efforts, as well as new incentive programs.

Loan quality continues as the big question for most banks. While we were not an exception to that trend, we did experience a significant reduction in non-accrual loans due to a sale in September of approximately $20 million in face value commercial loans with carrying values totaling $15 million, and as well we continued to reduce this type of non-performing loan during the fourth quarter.

Our overall non-accrual loans decreased by $16.5 million from 12/31/2009 when the balance was $65 million to just under $49 million at the end of 2010. Non-accrual loans declined during the fourth quarter by about $5 million as of December 31st.

Lower net charge-offs, consistent early stage delinquencies at year end combined with the improvement in non-accrual and other classified loans permitted a decrease in the fourth-quarter provision as compared to the third quarter and last year. Both of those decreases were approximately 18%.

Non-performing loans and loans past due 90 days or more as of December 31 increased to 3.17% as compared to 2.94% at the end of the third quarter. For the year-to-date the non-performing loan increase is attributable to a $32.5 million increase in renegotiated loans as non-accrual loans are down by $16.5 million from last year-end.

Net charge-offs decreased $7.3 million in the fourth quarter compared to last year, and year-to-date they were $43.5 million as compared to $39.2 million in 2009 with the charge-offs related to the third-quarter loan sale totaling $10.5 million. The year-to-date provision net of charge-offs increased the allowance to 1.86% of total loans at December 31 compared to 1.76% last year-end and 1.78% as of September 30.

As an overall summary of the quarter, management was very pleased with operating results. Return on average assets pre-tax, pre-provision has improved to 1.71%. We have had five quarters in a row which have shown increases in net income in spite of the effects of a lingering recession. We will continue to work on improving the quality of the loan portfolio and have instituted changes which we believe over time will reflect in improved credit quality ratios.

The institution continues to also be very, very liquid. Our loan-to-deposit ratio is slightly under 80%, we have approximately $1.4 billion in an investment security portfolio with a duration of about three years, and we have in excess of $1 billion in available borrowing capacity. All of this liquidity positions WesBanco to be able to move beyond the recent recession and be able to participate in the recovery as it grows.

This does conclude our prepared commentary and we will now open the call for questions. Jim Gardill, our Chairman of the Board, will moderate the Q&A session. I'd like to turn the call now back over to the facilitator, Keith, for questions.

Thank you. (Operator Instructions) Brett Scheiner, FBR Capital Markets.

This is actually Tom Barry for Brett Scheiner. I just wanted to ask you a quick question on -- hey, first of all a great quarter, and we just wanted to see what your updated thoughts were on M&A if you had any.

I'll touch on that a little bit. I think we're seeing sort of the falling of what was basically a freeze in the M&A market, and there appear to be several different categories of institutions out there, some distressed, some simply tired of the regulatory environment, and others looking for strategic direction and opportunities. So we think we'll see more opportunities in 2011 and the years starting in that direction, so we believe there will be more opportunities to look at.

I guess would it be primarily -- would you look at primarily a whole bank or would you consider business lines or --?

In our M&A focus we're looking within our markets. We're also looking for opportunities to enhance market share, and we're also looking at the quality of the institutions that we would be addressing. If you have a problem institution, it would take a little more analysis certainly and a lot more depth in understanding to weigh in on those kinds of transactions, but we're willing to look and evaluate every opportunity within our footprint.

Thanks. That's all I have.

Steve Scinicariello, Macquarie.

Just a couple of quick ones for you. Just given the significant step down in terms of the charge-offs this quarter, I'm assuming you really took the opportunity last quarter in the loan sale to clean up a lot of those NPLs that were probably some of the biggest contributor to that. As you look ahead, do you feel that kind of the run rate from here in terms of charge-offs should be more like this quarter as opposed to some of the previous ones? I'm just curious to get some color on that.

I appreciate the question. I'll open it and I'll defer to Bob or Paul to talk in detail about it, but basically I think what we're seeing is a very mixed marketplace. There was a story in the Wall Street Journal yesterday about executives looking at very diverse markets. That is, some markets are realizing a more rapid recovery than others. We're seeing something similar in our footprint, so as far as looking forward in 2011 we have still some markets that are under stress. They still are faced with high unemployment rates. How those high unemployment rates translate into credit quality will be certainly one of the question marks that we'll be dealing with in 2011.

We have some markets, primarily the Upper Ohio Valley, North Central West Virginia, Western Pennsylvania, that are reasonably strong. We're seeing some loan demand, so we're more optimistic in those markets for both loan growth and maintaining credit quality. We'll continue to evaluate markets that are weaker. Certainly Cincinnati still has its challenges as well as the Dayton/Springfield area, so we'll continue to monitor those.

Paul or Bob, any contributions to that summary?

I think we're fine.

I do think that our pace of charge-offs has slowed, and there was quite a bit of cleanup with the loan sale. As we mentioned, $20 million of face value, $15 million of carrying and the charge-offs were $10.5 million on that, so that was a big slug, and as you can see our charge-offs were significantly down in the fourth quarter.

I think going forward, as Jim says, it's somewhat dependent upon portions of our marketplace and how the economy performs. As you can imagine there is also some lumpiness quarter to quarter depending upon certain impaired loans and whether or not they are ripe for charge-off. Other than that the trends are better. If you look at 30- to 89-day loans, they're down 29 basis points from the middle of the year. Our 90-day past-due loans are relatively flat over the past five quarters, and as we said earlier non-accruals are also down.

Appreciate the color on that. Then just real quick on kind of the margin, definitely nice job re-pricing I'd say more of the core deposits this quarter than on the CD front, and I'm just wondering how much more you might have to go on that front.

We continue to work at that. I think the restructuring of the deposit base is something that's been a focus of our whole retail sector. You will recall that when we did the AmTrust transaction, we picked up a lot of high-priced CDs, some single-service, and as we announced at that time we were working to restructure those deposit relationships, and that's going as we had hoped and as we had planned. And so restructuring those deposit relationships and re-pricing our deposits into transaction accounts has worked reasonably well and we continue that effort and that's been successful as we have continued to accumulate deposits in the right categories.

The only thing I might add to that -- this is Paul Limbert -- is looking forward I believe the competition will wind up having a significant impact on what we can and can't do with our deposit rates moving forward. We are in some very competitive markets. We've got several banks who are being more aggressive today than they were six months ago, and I do believe that our ability to change deposit rates is going to be somewhat reflective of the competition we see in our marketplaces.

This is Bob Young. I think it's noteworthy that we've been able to decrease money market rates quite substantially over the past few quarters, but if you compare our money market cost of 73 basis points to some of our peers, there's probably a little bit of room there yet to go. We'll determine whether or not in our marketplace that makes sense, but you'll note that we've grown money market accounts year-over-year from $629 million in average deposits in 2009 to $817 million this year. So we've chosen to focus on increasing transaction and lower-cost deposit accounts and to de-emphasize to some degree, as Paul and Jim mentioned, the CD portfolio which has been more expensive.

Catherine Mealor, KBW.

Can you comment a little bit on the trends in your watch list? Are you seeing the same level of decline in inflows as you're seeing on past-dues and non-performing loans?

We continue to see some improvement in credit quality, and that's generally across a broad spectrum, so as far as our watch list loans I think we continue with the same trends. That's why I think we were comfortable with the provision that we have made in the last several quarters, and that is a declining trend as you've seen from the summary. I think with that, it's the improving credit quality metrics really across most lines of business, most of our lending lines of business that we're involved with.

How about the higher renegotiated loans over the past year? Can you give us a little bit more color on that?

The accounting rules have adjusted how we account for TDRs. TDRs have a fairly strict categorization for financial reporting purposes, and so we look at that whole mix and we look at the delinquency trends, the non-accrual trends. TDRs in many cases can be loans that we feel quite comfortable with, but because of a classification they appear to be problem credit when, in fact, we'll be making ongoing adjustments to a loan as it matures and processes through its cycle and yet it would be in the classification of TDR. So in our case we watch that category closely, but we're not uncomfortable with where we are and where the provision is. We do spend a lot more time on non-accrual because all of those categories are important, but the non-accrual is one that we try to work as aggressively as we can.

Part of this goes back to our community bank philosophy, though. As we go through these recessionary times and economic difficulties, this bank has had a history of working with our customers and not trying to push all of them out of the door or put their backs up to the walls during difficult times. WesBanco has taken the philosophy or working with our customers because in the long run these customers we believe will be very profitable customers for not only the bank but profitable customers for our communities when better economic times are with us. So our philosophy I think here has contributed to the increase in TDRs. It is primarily what we would have expected to see with our particular operating philosophy, so we are not overly concerned with the rise that we saw in the TDRs given the economic circumstances.

Would it be fair to say that you believe a low percentage of your TDRs will eventually become NPLs?

It's hard to forecast but that would be our thought, and that's why we feel comfortable with, as Paul said, the method by which we do business as a community bank envisions that those would grow in difficult times like a recession since we are working with our borrowers. Many of these borrowers we've had long-term relationships with and we see them go through business cycles similar to a financial institution, and we've worked with them, and we've worked with them through this cycle just as we have prior cycles.

Thank you for the color.

Overall, Catherine, our trends on criticized and classified have been flat to slightly down over the past few quarters, and all banks will be required to disclose their gradations in their portfolio and their annual report this year for the first time so you'll get that color on us, as well.

Ed Timmons, Sterne Agee.

Good morning, guys, and good quarter. Just to kind of build on Catherine's question there on the TDRs, Paul, you've talked about your approach to working with borrowers. I'm wondering if you could possibly give us some sort of idea when you expect maybe TDRs to peak and also the historical kind of experience with re-default rates you've seen in that portfolio.

Very, very difficult question to answer. I think it's really all going to depend on the recovery that we see in our local economies. I'm not sure that I can make any kind of a guess. That's just a little bit too difficult I'm afraid.

Our issue is that from an economic perspective, unemployment rates will drive that issue as much as anything. As we've seen in some of the other markets that we're operating in where we've had lower unemployment such as North Central West Virginia and Southwestern Pennsylvania, we see those categories coming down and recovering quicker, so it's hard, Ed, to be able to forecast into the future.

Specifically as to the re-default rate, very few of those loans are in a past-due category at this point. You'll see that information in the call report when it comes out in a couple of days. The call report for the bank has that information, and these loans are still on our watch list or on our classified asset list, but they have not gone to either delinquent status or moved to non-accrual.

Any thought on any further loan sales, either non-performers or just classified?

Ed, I think we look at that as an asset and we watch the market so when market opportunities present themselves we certainly evaluate those. We'll continue to monitor that. I don't think we have anything on the immediate horizon in that context, but it is an evaluation that's ongoing in our organization.

I know it's only been a few months, but how does pricing compare relative to when you did the last bond sale in the third quarter?

I think it's still recovering some, but it's still very light as you saw on the loan sale we had the last quarter with our buyers, but there have been some recoveries, some new buyers entering the market and some more liquidity in the market. Those are all positive trends. I think the bottom feeding that occurred maybe played itself out a little bit now. I think people are being more discerning, looking at more opportunities so they're looking more carefully. There's a lot of liquidity out there, and as people start to feel more comfortable with the recovery we think we'll see that move up and provide more opportunities for sales in the future.

Ed, I think it really depends upon the type of credit that you're selling, the history on that particular credit, the quality of the property. We had some poor-quality properties in our portfolio sale back at the end of the third quarter. We would not consider that the mark for most of what we have in our classified assets.

Then last question quickly on the margin side. We talked about some of the re-pricing on the deposit side, but the loan units moved up a little bit this quarter. Can you talk about what drove that? Was it fewer interest reversals from NPL inflow or was it lower yielding stuff running off? Maybe talk about the competition you're seeing out there and any impact on pricing.

We can speak to that in a couple of fashions. Let me just give you the general overview first. One, I think we have been more disciplined in our pricing, and so we've been working very hard at insisting on a reasonable [apprisable] risk in our commercial portfolio. Two, I think looking at pricing and setting floors on credit has become more of a standard practice. As we have seen the cycle down of rates, we've looked at restructuring some of our loans when they come up for renewal. So I think we've worked very hard at the pricing side, and as we have seen those ratios change, we've had more opportunity to re-price the credits and that's built in I think a higher yield on our loans.

What we're concerned about, of course, will be competition as Paul mentioned going into 2011 and the ability for financial institutions to stay disciplined about their pricing of their risk in loans. We've seen some erosion of that discipline already with some of the recent entrance into commercial lending who had not been very active in commercial lending over the last 12 to 18 months, so I think that's yet to be seen in 2011.

The inflows into non-accrual have certainly slowed, and I think that is a factor, as well. The loan sale in the third quarter would have taken $15 million worth of carrying value of the portfolio, so I think the slight improvement that you see in the rate for business loans third quarter to fourth quarter is attributable to those factors.

Great detail. Thanks, guys.

Carter Bundy, Stifel Nicolaus

Sorry to be jumping on later here, so if I ask these questions you can stop me. The first thing I wanted to get your outlook on potential M&A activity and your interest in that right now.

We did address that a little bit earlier, Carter. We continue to look at opportunities within our marketplaces, and we're seeing additional activity as we've moved into the new year. There are several different categories of banks available out there, some that have credit problems, some that are tired of the regulatory environment or do not have enough scope and scale to deal with the deluge of regulation that we're dealing with, and then some are just looking for strategic opportunities on a reinvestment scale. So I think it's very important to be discerning in this marketplace, and we're quite anxious and quite interested in looking at opportunities but I think we've had a practice of being fairly disciplined in those opportunities that we look at to ensure that they will drive shareholder value and drive earnings opportunities.

Could you all provide some color on your local markets and how they're incrementally performing?

Yes.

Specifically I guess the weaker markets.

Yes, Carter. The stronger markets in our footprint, the nice thing about our footprint is it does cover several different geographical areas and so that really helps us. North Central West Virginia and the Upper Ohio Valley are recovering probably quicker than we're seeing in some of the western Ohio markets like Cincinnati, Dayton and Springfield where the unemployment rate is still extraordinarily high and that's a dampening impact on the economic recovery in those markets. Columbus is showing a little bit of life. Their unemployment rate has come down some but it's still pretty high. Southwestern Pennsylvania, that along with North Central and the Upper Ohio Valley with some energy based economic activity has been seeing a quicker recovery and improving unemployment rates.

I guess with regard to loan growth expectations, if you haven't already discussed that, if you could talk a little bit about that.

That again is going to be driven by how the unemployment rate changes. We are seeing some loan growth. We saw some recovery in the fourth quarter. We had a fairly strong quarter. We anticipate loan growth in 2011. It is an emphasis that Paul has stressed, and we have employed as Paul mentioned in his remarks six new lenders in that market in order to drive some growth. The other thing is we have seen our problem credits stabilize. We can move lenders whom we've had concentrating on problem credits, moving them back into a lending mode where they can drive additional growth as opposed to managing credit quality issues. So that's also been a shift in personnel without additional cost where we can drive growth, so I think those are just sort of a quick observation about those factors.

Good quarter.

Thank you very much.

(Operator Instructions) There are no more questions at the present time. Do you have any closing comments?

I think what we would like to leave with our audience is that we felt that we had a very nice quarter. Importantly, we've shown now five consecutive quarterly increases in net income, very positive trends, so we feel pretty comfortable about where we are in this cycle. We think that we continue to weather it well, and we're very pleased to be able to show these kind of earnings.

I think the slide showing our pre-tax pre-provision earnings strength really is the message of our bank, that we have a diversified earnings base that performs well. As we work through this cycle, we think it will continue to show improvement, so we're very pleased with where we are in the cycle and optimistic about the future.

Thanks, everybody. We appreciate your time and appreciate your participation this morning. Keith, thank you for moderating.

Thank you. That does conclude today's teleconference. You may disconnect your phone lines. Thank you very much.