WSBC WesBanco Inc

Generated solid deposit and loan growth; maintained strong capital levels and credit quality

WHEELING, W.V., Oct. 25, 2023 /PRNewswire/ -- WesBanco, Inc. ("WesBanco") (Nasdaq: WSBC), a diversified, multi-state bank holding company, today announced net income and related earnings per share for the three and nine months ended September 30, 2023.  Net income available to common shareholders for the third quarter of 2023 was $34.3 million, with diluted earnings per share of $0.58, compared to $50.5 million and $0.85 per diluted share, respectively, for the third quarter of 2022.  For the nine months ended September 30, 2023, net income was $116.5 million, or $1.96 per diluted share, compared to $132.3 million, or $2.19 per diluted share, for the 2022 period.  As noted in the following table, net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three and nine months ended September 30, 2023 were $34.8 million, or $0.59 per diluted share, and $119.5 million, or $2.01 per diluted share, respectively (non-GAAP measures).

Financial and operational highlights during the quarter ended September 30, 2023:

• Deposits increased compared to the quarter ending June 30, 2023, reflecting deposit gathering and retention efforts across retail and business customers
  • Period-end deposits essentially flat to December 31, 2022
  • Average loans to average deposits were 87%
• Total loan growth was 10.1% year-over-year and 7.6% annualized (when compared to December 31, 2022), reflecting the strength of our markets and lending teams
  • Loan production offices, led by our newest in Chattanooga, TN, are contributing meaningfully to the commercial loan pipeline
• Non-interest income trends remained solid, supported by new commercial loan swap and wealth management fees
• Key credit quality metrics such as non-performing assets, total past due loans, and net loan charge-offs, as percentages of total portfolio loans, have remained at low levels and favorable to peer bank averages (based upon the prior four quarters for banks with total assets between $10 billion and $25 billion)
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet with capacity to fund loan growth

"For the third quarter of 2023, WesBanco returned deposit balances to year-end 2022 levels and delivered another quarter of year-over-year loan growth at 10%, while maintaining strong credit quality metrics.  Our solid financial results for the quarter reflect the strength of our franchise and the competitiveness of our growth strategies and teams in the current environment," said Jeff Jackson, President and Chief Executive Officer, WesBanco.  "The strong adoption of our new WesBanco One account by new and existing customers, meaningful pipeline contributions from our latest loan production office in Chattanooga, and forthcoming treasury management offerings to support commercial customers are all proof points of our commitment to innovation and investments that serve customers better and drive sustainable growth.  We remain focused on disciplined expense management and generating positive operating leverage.  And, I believe in the long-term growth prospects we are building for our customers, communities, employees and shareholders." 

Balance Sheet
Loan growth for the third quarter of 2023 continues to reflect strong performance by our commercial and residential lending teams.  As of September 30, 2023, total portfolio loans were $11.3 billion, which increased 10.1% year-over-year driven by strong growth across all markets and the closing of loans from the commercial pipeline.  The commercial pipeline totaled $0.8 billion at September 30, 2023, approximately 25% of which is from the four new loan production offices.  Commercial and industrial loans increased 4.7% year-over-year and 7.5% annualized quarter-over-quarter to $1.6 billion, as of September 30, 2023, reflecting our strategic loan production office and lender hiring initiatives.

Total deposits, as of September 30, 2023, were $13.1 billion, up 1.8% from June 30, 2023 and consistent with the level reported at December 31, 2022, reflecting the benefit of deposit gathering and retention efforts by our retail and commercial teams.  In addition, brokered deposits increased $64 million from June 30, 2023.  On a year-over-year basis, the decrease in total deposits reflects the impact of interest rate and inflationary pressures and rising costs across the economy, combined with Federal Reserve's tightening actions to control inflation, which resulted in industry-wide deposit contraction.  While there has been some mix shift in the composition of total deposits, total demand deposits continue to represent 57% of total deposits, with the non-interest bearing component representing 32%, which remains consistent with the percentage range since early 2020.  

Credit Quality
As of September 30, 2023, total loans past due, criticized and classified loans, non-performing loans, and non-performing assets as percentages of the loan portfolio and total assets have remained low, from a historical perspective, and within a consistent range throughout the last five quarters.  Total loans past due as a percent of the loan portfolio decreased 23 basis points from the prior year, while criticized and classified loans as a percent of the loan portfolio decreased 21 basis points to 2.22%.  During the third quarter of 2023, we recorded a provision for credit losses of $6.3 million, as compared to a release of provision in the prior year period of $0.5 million.  The current recorded provision was primarily driven by a $2.9 million specific reserve on one hospitality loan in addition to loan growth and regional macroeconomic factors.  The allowance for credit losses to total portfolio loans at September 30, 2023 was $126.6 million, or 1.12% of total loans.  Excluded from the allowance for credit losses and related coverage ratio are fair market value adjustments on previously acquired loans representing 0.13% of total loans.

Net Interest Margin and Income
The net interest margin of 3.03% for the third quarter of 2023 decreased 15 basis points sequentially primarily due to higher funding costs from increasing deposit costs and continued remix from non-interest bearing deposits into higher tier money market and certificate of deposit accounts.  Total deposit funding costs were 201 basis points for the third quarter of 2023, and, when including non-interest deposits, total deposit funding costs were 136 basis points, up 119 basis points year-over-year and 33 basis points sequentially, which reflect the 525 basis point increase in the federal funds rate since March 2022.  Accretion from acquisitions benefited the third quarter net interest margin by 2 basis points, as compared to 5 basis points in the prior year period.

Net interest income of $117.7 million decreased $6.8 million, or 5.5%, during the third quarter of 2023, as compared to the same quarter of 2022, reflecting loan growth and the impact of rising rates on funding costs and loan and securities yields.  For the nine months ended September 30, 2023, net interest income of $363.6 million increased $19.1 million, or 5.6%, primarily due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the third quarter of 2023, non-interest income of $30.9 million decreased $1.4 million, or 4.3%, from the third quarter of 2022, due primarily to a $1.5 million gain on the sale of the underlying equity investments held by WesBanco Community Development Corporation last year, which was recorded in net gains on other real estate owned and other assets.  Excluding this prior year gain on sale, non-interest income would have increased 0.5% year-over-year, reflecting the strength in commercial swap fees, which are now reflected as their own line item on the income statement.  New commercial swap fees increased $0.8 million from the prior year period to $2.5 million, while associated fair market value adjustments totaled $1.4 million during the third quarter, as compared to $0.8 million last year.  

Primarily reflecting the items discussed above, as well as lower mortgage banking and bank-owned life insurance income, non-interest income, for the nine months ended September 30, 2023, of $90.4 million increased $0.8 million, or 0.8%.  Mortgage banking income decreased $2.5 million from the prior year to $2.0 million due to a reduction in residential mortgage originations, primarily driven by the higher interest rate environment.  Bank-owned life insurance of $7.5 million decreased $0.7 million year-over-year due to higher death benefits during 2022.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended September 30, 2023 totaled $97.3 million, reflecting increased salaries and wages, benefits, equipment and software expense, and FDIC insurance.  Salaries and wages increased $1.1 million, or 2.4%, compared to the prior year period due to higher salary expense related to annual merit increases and new revenue-producing hires, mainly commercial lenders, during the past year, offset somewhat by efficiency improvements in the mortgage banking staffing model.  Employee benefits increased $1.2 million year-over-year due primarily to higher health insurance contributions.  Equipment and software expense increased $1.0 million due to the planned upgrade of our ATM fleet with the latest technology and general inflationary cost increases for existing service agreements.  FDIC insurance expense increased $0.7 million year-over-year due to an increase in the minimum rate for all banks.

Excluding restructuring and merger-related expenses, non-interest expense during the first nine months of 2023 of $286.7 million increased $21.9 million compared to the prior year period, due primarily to higher salaries and wages, employee benefits, FDIC insurance, and equipment and software expense as described above.

Capital
WesBanco continues to maintain what we believe are strong regulatory capital ratios, as both consolidated and bank-level regulatory capital ratios are well above the applicable "well-capitalized" standards promulgated by bank regulators and the BASEL III capital standards.  At September 30, 2023, Tier I leverage was 9.84%, Tier I risk-based capital ratio was 12.07%, common equity Tier 1 capital ratio ("CET 1") was 11.00%, and total risk-based capital was 14.97%.  In addition, the tangible common equity to tangible assets ratio was 7.26%.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the third quarter of 2023 at 3:00 p.m. ET on Thursday, October 26, 2023. Interested parties can access the live webcast of the conference call through the Investor Relations section of the Company's website, www.wesbanco.com.  Participants can also listen to the conference call by dialing 888-347-6607, 855-669-9657 for Canadian callers, or 412-902-4290 for international callers, and asking to be joined into the WesBanco call.  Please log in or dial in at least 10 minutes prior to the start time to ensure a connection.

A replay of the conference call will be available by dialing 877-344-7529, 855-669-9658 for Canadian callers, or 412-317-0088 for international callers, and providing the access code of 5727200.  The replay will begin at approximately 5:00 p.m. ET on October 26, 2023 and end at 12 a.m. ET on November 9, 2023.  An archive of the webcast will be available for one year on the Investor Relations section of the Company's website (www.wesbanco.com).

Forward-Looking Statements
Forward-looking statements in this report 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 in this report should be read in conjunction with WesBanco's Form 10-K for the year ended December 31, 2022 and documents subsequently filed by WesBanco with the Securities and Exchange Commission ("SEC"), including WesBanco's Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, which are available at the SEC's website, 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 most recent Annual Report on Form 10-K filed with the SEC under "Risk Factors" in Part I, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, the effects of changing regional and national economic conditions, changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to WesBanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, the SEC, the Financial Institution Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; cyber-security breaches; competitive conditions in the financial services industry; rapidly changing technology affecting financial services; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting WesBanco's operational and financial performance. WesBanco does not assume any duty to update forward-looking statements.

Non-GAAP Financial Measures
In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), WesBanco's management uses, and this presentation contains or references, certain non-GAAP financial measures, such as pre-tax pre-provision income, tangible common equity/tangible assets; net income excluding after-tax restructuring and merger-related expenses; efficiency ratio; return on average assets; and return on average tangible equity. WesBanco believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which facilitate comparisons with the performance of others in the financial services industry. Although WesBanco believes that these non-GAAP financial measures enhance investors' understanding of WesBanco's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The non-GAAP financial measures contained therein should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K as well as the unaudited financial statements and analyses as presented in the Quarterly Reports on Forms 10-Q for WesBanco and its subsidiaries, as well as other filings that the company has made with the SEC.

About WesBanco, Inc.
Founded in 1870, Wesbanco, Inc. is a diversified and balanced financial services company that delivers large bank capabilities with a community bank feel. Our distinct long-term growth strategies are built upon unique sustainable advantages permitting us to span six states with meaningful market share. The company's banking subsidiary, Wesbanco Bank, Inc., operates more than 190 financial centers in the states of Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and West Virginia. Built upon our 'Better Banking Pledge', our customer-centric service culture is focused on growing long-term relationships by pledging to serve all personal and business customer needs efficiently and effectively. In addition to a full range of online and mobile banking options and a full-suite of commercial products and services, the company provides trust, wealth management, securities brokerage, and private banking services through its century-old Trust and Investment Services department, with approximately $5.0 billion of assets under management (as of September 30, 2023). The company also offers insurance and brokerage services through its affiliates and subsidiaries. Learn more at www.wesbanco.com and follow us on Facebook, LinkedIn and X, formerly Twitter.