WesBanco Announces Second Quarter 2023 Financial Results

Generated solid earnings and loan growth; maintained strong capital levels; stable deposits

WHEELING, W.Va., July 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 months ended June 30, 2023. Net income available to common shareholders for the second quarter of 2023 was $42.3 million, with diluted earnings per share of $0.71, compared to $40.2 million and $0.67 per diluted share, respectively, for the second quarter of 2022. For the six months ended June 30, 2023, net income was $82.2 million, or $1.38 per diluted share, compared to $81.8 million, or $1.34 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 six months ended June 30, 2023 was $84.7 million, or $1.43 per diluted share, as compared to $83.1 million, or $1.36 per diluted share, in the prior year period (non-GAAP measures).

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

• Generated solid growth in pre-tax, pre-provision income (excluding restructuring and merger-related expenses) of 9.2% year-over-year (non-GAAP)
• Total loan growth was 9.0% year-over-year and 8.0% annualized (when compared to December 31, 2022), reflecting the strength of our markets and lending teams
• Both period-end and average total deposits were flat compared to the quarter ending March 31, 2023, reflecting deposit gathering and retention efforts across retail and business customers
  • Average loans to average deposits were 85.4%
• 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, those with total assets between $10 billion and $25 billion (based upon the prior four quarters)
• Expanded Tennessee presence with the hiring of a team of commercial and industrial lenders in Chattanooga
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet with capacity to fund loan growth

"Our second quarter results demonstrate the continued strength of our franchise and successful execution of our strategic initiatives. We delivered solid earnings and loan growth, and focused on maintaining our net interest margin," said Todd Clossin, President and Chief Executive Officer of WesBanco. "As I close my tenure as CEO, I believe WesBanco is well-positioned for ongoing success with strong market positions, diversified revenue generation capabilities, and distinct long-term advantages. I am confident these will be the foundation for further growth and expansion through our incoming CEO Jeff Jackson's strategic vision and leadership."

Jeffrey H. Jackson, Senior Executive Vice President and Chief Operating Officer added, "Our solid earnings growth during the second quarter was supported by year-to-date annualized loan growth of 8 percent. This loan growth was driven by our strong markets and lending teams and underpinned by our strategic loan production office and lender hiring initiatives. Additionally, our commercial and retail teams concerted efforts enabled us to maintain deposit levels despite industry headwinds. We remain focused on disciplined expense management while making appropriate investments that ensure a safe and sound financial institution with attractive long-term growth prospects. As I assume the CEO role on August 1^st, I look forward to building on the impressive foundation Todd and the team have established to deliver continued growth and success for our customers, shareholders, and employees."

Balance Sheet

Loan growth for the second quarter of 2023 continues to reflect strong performance by our commercial and consumer lending teams. As of June 30, 2023, total portfolio loans were $11.1 billion, which increased 9.0% year-over-year driven by strong growth across all markets and the closing of loans from the commercial pipeline, which totaled $0.7 billion at June 30, 2023. Reflecting our strategic loan production office and lender hiring initiatives, commercial and industrial loans of $1.6 billion, as of June 30, 2023, increased 10.2% annualized quarter-over-quarter.

Total deposits, as of June 30, 2023, were $12.9 billion, consistent with the level reported at March 31, 2023, reflecting the benefit of deposit gathering and retention efforts by our retail and commercial teams. In addition, brokered deposits increased $60 million sequentially. 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 has 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 59% of total deposits, with the non-interest bearing component representing 33%, which is consistent with the percentage range since early 2020.

Credit Quality

As of June 30, 2023, total loans past due, 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 19 basis points from the prior year, while criticized and classified loans as a percent of the loan portfolio decreased 146 basis points to 1.68%. During the second quarter of 2023, we recorded a provision for credit losses of $3.0 million, as compared to a release of provision in the prior year period of $0.8 million. The current recorded provision was primarily driven by loan growth and adjustments in regional macroeconomic factors and loan concentrations. The allowance for credit losses to total portfolio loans at June 30, 2023 was $120.2 million, or 1.08% of total loans. Excluded from the allowance for credit losses and related coverage ratio are fair market value adjustments on previously acquired loans representing 0.14% of total loans.

Net Interest Margin and Income

The net interest margin of 3.18% for the second quarter of 2023 increased 15 basis points year-over-year, which reflects the 500 basis point increase in the federal fund rate since March 2022, and the subsequent increase in funding costs, as well as the deployment of excess cash into higher-yielding loans. The net interest margin decreased 18 basis points from the first quarter of 2023 primarily due to higher funding costs from increasing deposit costs and higher cost wholesale borrowings to support loan growth. Total deposit funding costs of 157 basis points for the second quarter of 2023 increased 144 basis points year-over-year and 57 quarter-over-quarter. When including non-interest deposits, total deposit funding costs were 103 basis points, up 94 basis points year-over-year and 38 basis points sequentially. Accretion from acquisitions benefited the second quarter net interest margin by 3 basis points, as compared to 6 basis points in the prior year period.

Net interest income of $121.6 million increased $9.3 million, or 8.3%, during the second quarter of 2023, as compared to the same quarter of 2022, reflecting loan growth and the impact of rising rates on loan and securities yields and funding costs. For the six months ended June 30, 2023, net interest income of $245.9 million increased $26.0 million, or 11.8%, primarily due to the reasons discussed for the three-month period comparison.

Non-Interest Income

For the second quarter of 2023, non-interest income of $31.8 million increased $4.9 million, or 18.0%, from the second quarter of 2022, driven primarily by higher commercial swap fees, as well as, net gains on other assets and net securities gains, both of which reported losses in the prior year period. New commercial swap fees, which are recorded in other income, increased $1.6 million from the prior year period to $2.4 million, while associated fair market value adjustments totaled $0.2 million during the second quarter, as compared to $1.1 million last year. Net gains on other assets of $0.9 million increased $2.2 million year-over-year primarily due to a $1.1 million recovery of an asset previously written-off, as well as, a net loss on other assets of $1.3 million in the prior year period from the change in the fair value of an underlying equity investment, which was subsequently sold. Net securities gains of $0.2 million increased $1.4 million year-over-year due to market fluctuations from equity securities in the deferred compensation plan.

Primarily reflecting the items discussed above, as well as lower mortgage banking and bank-owned life insurance income, non-interest income, for the six months ended June 30, 2023, of $59.5 million increased $2.1 million, or 3.7%. Mortgage banking income decreased $2.2 million from the prior year to $1.0 million due to a reduction in residential mortgage originations, primarily driven by the higher interest rate environment. Bank-owned life insurance of $5.1 million decreased $1.1 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 June 30, 2023 totaled $96.4 million, reflecting increased salaries and wages, benefits, FDIC insurance, and equipment and software expense. Salaries and wages increased $3.3 million, or 7.9%, compared to the prior year period due to higher salary expense related to higher staffing levels, mainly revenue-producing positions, and merit increases. Employee benefits increased $2.8 million from last year due to a $1.2 million credit in the prior year period related to the deferred compensation plan, higher staffing levels, and higher health insurance contributions. Equipment and software expense increased $1.1 million due to the planned upgrade to one-third of our ATM fleet with the latest technology and general inflationary cost increases for existing service agreements. FDIC insurance expense increased $0.9 million year-over-year due to increase in the minimum rate for all banks.

Excluding restructuring and merger-related expenses, non-interest expense during the first half of 2023 of $189.4 million increased $16.4 million, or 9.5%, 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 June 30, 2023, Tier I leverage was 9.78%, Tier I risk-based capital ratio was 12.12%, common equity Tier 1 capital ratio ("CET 1") was 11.03%, and total risk-based capital was 14.83%. In addition, the tangible common equity to tangible assets ratio was 7.35%.

During the second quarter, WesBanco repurchased 0.1 million shares of its outstanding common stock on the open market at a total cost of $2.2 million, or $22.02 per share. As of June 30, 2023, approximately 1.0 million shares remained for repurchase under the existing share repurchase authorization that was approved on February 24, 2022, by WesBanco's Board of Directors.

Conference Call and Webcast

WesBanco will host a conference call to discuss the Company's financial results for the second quarter of 2023 at 10:00 a.m. ET on Wednesday, July 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 2737150. The replay will begin at approximately 12:00 p.m. ET on July 26, 2023 and end at 12 a.m. ET on August 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 quarter ended March 31, 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 $5.1 billion of assets under management (as of June 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 Twitter.