WesBanco Announces First Quarter 2023 Financial Results

WHEELING, W.Va., April 24, 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 March 31, 2023.  Net income available to common shareholders for the first quarter of 2023 was $39.8 million, with diluted earnings per share of $0.67, compared to $41.6 million and $0.68 per diluted share, respectively, for the first quarter of 2022.  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, 2023, was $42.3 million, or $0.71 per diluted share, as compared to $42.9 million and $0.70 per diluted share, respectively, in the prior year quarter (non-GAAP measures).

Financial and operational highlights during the quarter ended March 31, 2023:

• Generated solid growth in pre-tax, pre-provision income (excluding restructuring and merger-related expenses) of 13.2% year-over-year (non-GAAP)
• Total loan growth was 11.9% year-over-year and 7.0% annualized when compared to December 31, 2022, reflecting the strength of our markets and lending teams
• 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)
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet with capacity to fund loan growth
• Returns on average assets and tangible equity were 1.01% and 13.48%, respectively (non-GAAP)
• Average loans to average deposits were 83.5%
• Strong new commercial swap fee income, excluding fair market value adjustments, increased $1.7 million year-over-year
• Controlled discretionary expenses, while continuing to make important long-term growth investments
• WesBanco continues to be acknowledged for its soundness, profitability, employee focus, and customer service as it continued to receive numerous national accolades the last few months
• For the 13^th time since 2010, named one of America's Best Banks for strong capital, credit quality, and profitability
• For the third consecutive year, voted one of America's Best Midsize Employers by our employees
• For the fifth year in a row, recognized by our customers as one of the World's Best Banks

"WesBanco demonstrated the earnings power, capital, and liquidity to perform well during a quarter of industry volatility," said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  "I am pleased with both the company's performance and our employees continued commitment to serving the needs of our customers and communities.  The recent naming of our company as One of America's Best Banks, and One of America's Best Midsize Employers by Forbes is a testament to the dedicated efforts of our teams."

Jeffrey H. Jackson, Senior Executive Vice President and Chief Operating Officer added, "We continued to effectively execute our strategic business plans, during the quarter, as evidenced by our solid loan growth across all markets, disciplined expense management, and excellent credit quality.  Our deposit granularity, as evidenced by our average deposit account size of $27,000, reflects the trust our customers have in our 153-year heritage as a community bank.  Our current loan to deposit ratio of 83% also provides us with ample lending capacity to support our customers as they grow."

Balance Sheet
Loan growth for the first quarter of 2023 continues to reflect strong performance by our commercial and consumer lending teams, as well as more 1-to-4 family residential mortgages retained on the balance sheet.  As of March 31, 2023, total portfolio loans were $10.9 billion, which increased 7.0% annualized, when compared to December 31, 2022, driven by strong growth across our markets, and the total commercial pipeline was $1.1 billion.  Further, commercial real estate payoffs during the first quarter remained in the historical range of approximately $90 million.

Total deposits, as of March 31, 2023, were $12.9 billion, down 2.0%, when compared to December 31, 2022, reflecting the impact of rate and inflationary pressures and rising costs across the economy.  Further, the Federal Reserve's tightening actions to control inflation have resulted in industry-wide deposit contraction.  Deposits declined approximately $360 million early during the quarter and remained flat through February and March.  Despite the decrease in deposits, early in the quarter, the average loans to average deposits ratio remained relatively low at 83.5% for the first quarter of 2023.

Credit Quality
As of March 31, 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 4 basis points from the fourth quarter and 19 basis points from the prior year, while criticized and classified loans as a percent of the loan portfolio decreased 74 and 208 basis points, respectively, to 1.60%.  For the first quarter, net loan charge-offs totaled $1.9 million, mostly related to one long-term care facility credit.  During the first quarter of 2023, we recorded a provision for credit losses of $3.6 million, as compared to a release of provision in the prior year period of $3.4 million.  Reflecting the current recorded provision and loan growth, as well as changes in prepayment assumptions, the allowance for credit losses to total portfolio loans at March 31, 2023 was $118.7 million, or 1.09% of total loans.

Net Interest Margin and Income
The net interest margin of 3.36% for the first quarter of 2023 increased 41 basis points year-over-year, which reflects the 425 basis point increase in the federal fund rate since March 2022, as well as our successful deployment of excess cash into higher-yielding loans.  However, the net interest margin decreased 13 basis points from the fourth quarter of 2022 primarily due to higher funding costs as lower cost deposits were replaced with higher cost wholesale borrowings.  While our robust legacy deposit base provides a pricing advantage, we are not immune to the impact of rising interest rates on our funding sources, including rising competitive rates for public funds, which totaled approximately $1.4 billion at March 31, 2023.  Total deposit funding costs of 100 basis points for the first quarter of 2023 increased 88 basis points year-over-year and 43 quarter-over-quarter, or 57 and 28 basis points, respectively, when including non-interest bearing deposits.  This reflects a total deposit beta of 13%, when compared to the 425 basis point increase in the federal fund rate from May 2022 through February 2023.  Accretion from acquisitions benefited the first quarter net interest margin by 4 basis points, as compared to 8 basis points in the prior year period.

Net interest income increased $16.6 million, or 15.4%, during the first quarter of 2023, as compared to the same quarter of 2022, reflecting loan growth and the benefit of rising rates on loan and securities yields, which more than offset higher funding costs. 

Non-Interest Income
For the first quarter of 2023, non-interest income of $27.7 million decreased $2.7 million, or 9.0%, from the first quarter of 2022, driven primarily by lower bank-owned life insurance and mortgage banking income.  Bank-owned life insurance decreased $1.9 million year-over-year due to $1.9 million of higher death benefits received in the prior year period.  Mortgage banking income decreased $1.5 million year-over-year due to a reduction in residential mortgage originations, primarily driven by the higher interest rate environment, and our retention of more residential mortgages on the balance sheet as production continues to migrate towards shorter-term adjustable rate mortgage products.  First quarter mortgage originations decreased 40% year-over-year to $162 million, with approximately 70% retained, as compared to 75% last year.  New commercial swap fees, which are recorded in other income, increased $1.7 million from the prior year period to $1.8 million, while associated fair market value adjustments totaled negative $1.0 million during the first quarter, as compared to a positive $1.5 million last year.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended March 31, 2023 totaled $93.0 million, an increase of 8.2% year-over-year, reflecting increased salaries and wages, benefits, FDIC insurance, and equipment expense, partially offset by discretionary cost control.  Salaries and wages increased $3.0 million, or 7.7%, 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 $2.9 million from last year due to higher staffing levels, increased pension expense, and higher health insurance contributions.  FDIC insurance expense increased $1.4 million year-over-year due to the 2 basis point increase in the minimum rate for all banks.  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.  Lastly, restructuring charges of $3.2 million during the quarter reflect the associated write-downs of leases and fixed assets related to five properties, two of which are larger back-office facilities, to be closed later this year.

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, 2023, Tier I leverage was 9.82%, Tier I risk-based capital ratio was 12.22%, common equity Tier 1 capital ratio ("CET 1") was 11.11%, and total risk-based capital was 14.97%.  In addition, tangible common equity to tangible assets improved 16 basis points on a sequential quarter basis to 7.44%.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the first quarter of 2023 at 10:00 a.m. ET on Tuesday, April 25, 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 7397505.  The replay will begin at approximately 12:00 p.m. ET on April 25, 2023 and end at 12 a.m. ET on May 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"), 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.  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.  Furthermore, our strong financial performance and employee focus has earned us recognition by Forbes as both one of America's Best Banks and Best Midsize Employers.  In addition to a full range of online and mobile banking options and a full-suite of commercial products and services, WesBanco provides trust, wealth management, securities brokerage, and private banking services through our century-old Trust and Investment Services department, with approximately $5.0 billion of assets under management (as of March 31, 2023).  WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 194 financial centers in the states of Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and West Virginia.  Additionally, WesBanco operates an insurance agency, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc.  Learn more at www.wesbanco.com.  Follow @WesBanco on Facebook, LinkedIn, and Twitter.