WSBC WesBanco Inc

Deposit growth outpaces strong sequential quarter loan growth

WHEELING, W.Va., April 23, 2024 /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 months ended March 31, 2024. Net income available to common shareholders for the first quarter of 2024 was $33.2 million, with diluted earnings per share of $0.56, compared to $39.8 million and $0.67 per diluted share, respectively, for the first quarter of 2023. As noted in the following table, net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended March 31, 2024 was $33.2 million, or $0.56 per diluted share, as compared to $42.3 million, or $0.71 per diluted share (non-GAAP measures).

Financial and operational highlights during the quarter ended March 31, 2024:

• Deposits of $13.5 billion increased 4.8% year-over-year and 2.5% quarter-over-quarter
  • Average loans to average deposits were 88.7%, providing continued capacity to fund loan growth
  • Solid sequential quarter deposit growth allowed for both the funding of loan growth and the pay-down of Federal Home Loan Bank borrowings
• Total loan growth was 9.0% year-over-year and 2.0% quarter-over-quarter, or 8.1% annualized
  • Total loans are up $1.0 billion as compared to the prior year period
• Non-interest income increased 10.8% year-over-year, supported by new commercial loan swap and wealth management fees
  • Trust assets increased to $5.6 billion, driven by both market value adjustments and organic growth
• Non-interest expense declined sequentially due to management of staffing levels and marketing costs
• 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 continues to earn national accolades, most recently Forbes' America's Best Banks 2024

"WesBanco's first quarter results marked a strong start to 2024. We grew loans and deposits while smartly managing borrowings, controlling costs, and advancing our efforts to diversify revenue streams and drive non-interest income," said Jeff Jackson, President and Chief Executive Officer, WesBanco. "Our commitment to customer service, sustainable growth strategies, and strong credit quality earned us yet another national accolade this quarter. With this solid start to the year and the continued strength of our teams, markets, and strategies, we are well-positioned to continue delivering value for our shareholders."

Balance Sheet
As of March 31, 2024, total portfolio loans were $11.9 billion, which increased $1.0 billion, or 9.0%, year-over-year driven by strong performance from our commercial and residential lending teams. Total commercial loans of $8.4 billion increased 9.3% year-over-year and 9.8% quarter-over-quarter annualized. Commercial loan growth continues to reflect the benefit of our commercial banker hiring and loan production office strategies, as well as lower commercial real estate payoffs of $63 million for the quarter, compared to an anticipated annual level in the $500 million range within a more normal operating environment. The commercial pipeline was a record $1.2 billion at March 31, 2024, with substantial generation from the four new loan production offices.

Total deposits, as of March 31, 2024, were $13.5 billion, up 4.8% from March 31, 2023 and up 2.5% from December 31, 2023, reflecting the benefit of deposit gathering and retention efforts by our retail and commercial teams. The composition of total deposits continues to have some mix shift, reflecting the impact of the significant increase in the federal funds rate; however, total demand deposits continue to represent 55% of total deposits, with the non-interest bearing component representing 29%, which remains consistent with the percentage range prior to the pandemic.

Credit Quality
As of March 31, 2024, 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 through the last two years. Total loans past due as a percent of the loan portfolio increased 4 basis points from the prior year but declined 8 basis points sequentially. Criticized and classified loans as a percent of the loan portfolio increased 8 basis points quarter-over-quarter to 2.30%, while non-performing assets as a percentage of total assets increased 3 basis points to 0.19% but were down 5 basis points from the prior year period. Net charge-offs of $5.9 million primarily reflect a single borrower with loans totaling $4.8 million. The allowance for credit losses to total portfolio loans at March 31, 2024 decreased slightly, as compared to the fourth quarter, to 1.09% of total loans, or $129.2 million. Excluded from the allowance for credit losses and related coverage ratio are fair market value adjustments on previously acquired loans representing 0.11% of total loans.

Net Interest Margin and Income
As anticipated, the net interest margin of 2.92% for the first quarter of 2024 decreased 10 basis points sequentially and 44 basis points year-over-year primarily due to higher funding costs from increasing deposit costs and associated remix from non-interest bearing deposits into higher tier money market and certificate of deposit accounts. Total deposit funding costs were 256 basis points for the first quarter of 2024, and, when including non-interest deposits, total deposit funding costs were 181 basis points. Accretion from acquisitions benefited the first quarter net interest margin by 3 basis points, as compared to 4 basis points in the prior year period.

First quarter net interest income of $114.0 million decreased $10.4 million, or 8.3%, year-over-year, reflecting the impact of rising rates on funding costs more than offsetting higher loan and securities yields and loan growth.

Non-Interest Income
For the first quarter of 2024, non-interest income of $30.6 million increased $3.0 million, or 10.8%, from the first quarter of 2023. This increase was primarily due to net swap fee and valuation income, service charges on deposits, and trust fees. The net swap fee and valuation income of $1.6 million reflects $0.8 million of new swap fees and net fair value adjustments of $0.8 million, as compared to $1.8 million and negative $1.0 million, respectively, in the prior year period. Service charges on deposits increased $0.6 million year-over-year, reflecting fee income from new products and services and increased general consumer spending. Trust fees, which are seasonally higher during the first quarter, increased $0.6 million year-over-year due to an 11.4% increase in trust assets, driven by both market value adjustments and organic growth.

Non-Interest Expense
Non-interest expense, excluding restructuring and merger-related costs, for the three months ended March 31, 2024 were $97.2 million, a $4.2 million increase year-over-year but a $2.3 million decrease sequentially, which reflects lower quarterly average staffing levels and the timing of marketing campaigns. The year-over-year increase was primarily driven by increases in other operating expenses, salaries and wages, and equipment and software expenses. Other operating expenses increased $2.2 million primarily due to higher costs and fees in support of loan growth and higher miscellaneous taxes and expenses. Salaries and wages increased $1.0 million 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, partially offset by efficiency improvements in the mortgage and branch staffing models. Equipment and software expense increased $0.9 million due to the planned upgrade of our ATM fleet with the latest technology and general inflationary cost increases for existing service agreements.

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 March 31, 2024, Tier I leverage was 9.79%, Tier I risk-based capital ratio was 11.87%, common equity Tier 1 capital ratio ("CET 1") was 10.84%, and total risk-based capital was 14.76%. In addition, the tangible common equity to tangible assets ratio improved to 7.63%.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the first quarter of 2024 at 10:00 a.m. ET on Wednesday, April 24, 2024. 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 7101399. The replay will begin at approximately 12:00 p.m. ET on April 24, 2024 and end at 12 a.m. ET on May 8, 2024. 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, 2023 and documents subsequently filed by WesBanco with the Securities and Exchange Commission ("SEC"), 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 $5.6 billion of assets under management (as of March 31, 2024). 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.