WesBanco Announces Fourth Quarter 2021 Financial Results

WHEELING, W.Va., Jan. 25, 2022 /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 twelve months ended December 31, 2021.  Net income available to common shareholders for the fourth quarter of 2021 was $51.6 million, with diluted earnings per share of $0.82, compared to $50.2 million and $0.75 per diluted share, respectively, for the fourth quarter of 2020.  For the twelve months ended December 31, 2021, net income was $232.1 million, or $3.53 per diluted share, compared to $119.4 million, or $1.77 per diluted share, for the 2020 period.  Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended December 31, 2021, was $51.8 million, or $0.82 per diluted share, as compared to $50.6 million and $0.76 per diluted share, respectively, in the prior year quarter (non-GAAP measures).  On the same basis, net income for the twelve months ended December 31, 2021 was $237.4 million, or $3.62 per diluted share, as compared to $127.1 million, or $1.88 per diluted share, in the prior year period (non-GAAP measures).

Financial and operational highlights during the quarter ended December 31, 2021:

• Continued expense management demonstrated by a year-to-date efficiency ratio of 58.22% (non-GAAP measure)
• Trust assets reached a record level of $5.6 billion, reflecting both market appreciation and organic growth
• Reflecting strong organic growth, residential mortgage originations increased 9% year-over-year, and totaled a record $1.4 billion during 2021, a 7% year-over-year increase
• Improving macro-economic forecasts and hospitality metrics approaching pre-pandemic levels favorably impacted the provision for credit losses under the Current Expected Credit Losses ("CECL") methodology, which drove both the net benefit in the provision for credit losses and the reduction in allowance for credit losses during the quarter
• Key credit quality metrics such as non-performing assets, past due loans, criticized and classified 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)
• Deposit growth, excluding certificates of deposit ("CDs"), was 13.5% year-over-year, driven by growth in demand deposits
• During the quarter, we continued to return capital to our shareholders as we purchased approximately 1.6 million shares of our common stock on the open market under existing share repurchase authorizations

"WesBanco had another successful year during 2021 as we remained focused on ensuring a strong organization for our shareholders, and continued to appropriately return capital to them through both long-term, sustainable earnings growth and effective capital management," said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  "Through the successful execution of our well-defined strategies we generated solid annual pre-tax, pre-provision earnings, while remaining a well-capitalized financial institution with a strong balance sheet and solid credit quality."

Mr. Clossin added, "Most importantly, we are proud of our entire organization as it adhered to our community banking roots and diligently focused on serving the financial needs of our customers and communities through the continuing pandemic, the gradual re-opening of our economies, and the completion of our core banking software system conversion, while still managing to receive numerous national accolades.  Lastly, we remain well-positioned for continued success, and are excited about our growth opportunities for the upcoming year."

Balance Sheet
As of December 31, 2021, total portfolio loans were $9.7 billion, and, when excluding SBA Payroll Protection Program ("SBA PPP") loans, total loans of $9.6 billion decreased 0.7% sequentially and 4.9% year-over-year.  Loan growth for the fourth quarter of 2021 reflects the continuation of both SBA PPP loan forgiveness and elevated commercial real estate payoffs.  While commercial real estate payoffs of $160 million during the fourth quarter declined by approximately $100 million from the third quarter, they remained above our more historical $85 million quarterly range.  This higher level of payoffs negatively impacted total loan growth by approximately one percentage point (non-annualized).  Further, the fourth quarter of 2021 included forgiveness of approximately 1,240 SBA PPP loans totaling $109 million (net of deferred fees).  As of December 31, 2021, approximately 1,950 SBA PPP loans for $163 million remained in the loan portfolio.

As of December 31, 2021, total deposits were $13.6 billion, which increased both sequentially and year-over-year due primarily to stimulus funds previously received by our customers and increased personal savings, which more than offset a $325.9 million year-over-year reduction in CDs.  Deposits, excluding CDs, increased 13.5% year-over-year, driven by a 15.3% increase in total demand deposits, which represent approximately 59% of total deposits.

Credit Quality
As of December 31, 2021, total loans past due, non-performing loans, and non-performing assets as percentages of the loan portfolio and total assets have remained relatively low and consistent throughout the last five quarters.  In addition, criticized and classified loans as a percent of the loan portfolio decreased 84 basis points year-over-year to 3.75%.  For the fourth quarter, we realized net loan charge-offs to average loans of four basis points, on an annualized basis.  The allowance for credit losses specific to total portfolio loans at December 31, 2021 was $121.6 million, or 1.25% of total loans; or, when excluding SBA PPP loans, 1.27% of total portfolio loans.  The improvements in macroeconomic forecasts and hospitality qualitative factors resulted in a negative provision for credit losses of $13.6 million for the fourth quarter of 2021, and a negative provision of $64.3 million for the year-to-date period.

Net Interest Margin and Income
The net interest margin of 2.97% for the fourth quarter of 2021 decreased 11 basis points sequentially and 34 basis points from the fourth quarter of 2020, primarily due to the lower interest rate environment, and a shift to a higher level of securities as a percentage of total assets.  As a result of increased cash balances from our customers' higher personal savings, investment securities increased by $1.3 billion year-over-year and, as of December 31, 2021, represented approximately 24% of total assets.  Reflecting the continued low interest rate environment, we remain focused on controlling the costs of our various funding sources.  We have reduced deposit funding costs 10 basis points year-over-year to 13 basis points for the fourth quarter of 2021, or just 8 basis points when including non-interest bearing deposits.  When including our continued reductions in FHLB and other borrowings, the costs of total interest-bearing liabilities decreased 25 basis points year-over-year to 20 basis points.  Accretion from acquisitions benefited the fourth quarter net interest margin by 9 basis points, as compared to 16 basis points in the prior year period.  Lastly, the forgiveness of SBA PPP loans benefited the fourth quarter of 2021 net interest margin by a net 9 basis points, as compared to a net 2 basis points in the prior year period.

Net interest income decreased $9.4 million, or 7.8%, during the fourth quarter of 2021, as compared to the same quarter of 2020, reflecting lower loan yields due to repricing of existing loans and lower new offered rates in the current market environment, lower accretion from purchase accounting, and lower rates on new investment securities purchased, partially offset by lower interest paid on deposits and borrowings as described above.  For the twelve months ended December 31, 2021, net interest income decreased $21.5 million, or 4.5%, due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the fourth quarter of 2021, non-interest income of $30.7 million decreased $2.0 million, or 6.1%, from the fourth quarter of 2020, driven primarily by lower mortgage banking income, which decreased $2.6 million, or 47.2%, as we continued efforts to retain more residential mortgages on the balance sheet.  Residential mortgage originations of $383 million continued to be strong during the quarter, while the amount retained increased from 35% last year to approximately 70%.  Bank-owned life insurance increased $1.1 million, or 63.7%, year-over-year due to death benefits during the quarter and new policies purchased during the third quarter.  Reflective of macroeconomic improvements, service charges on deposits were higher due to increased general consumer spending, resulting in higher eligible account fees.  Lastly, other income decreased $1.9 million, or 28.6%, due to lower loan swap-related income driven by a negative fair market value adjustment as compared to last year, and the sale of the debit card sponsorship business earlier this year.

Non-interest income, for the twelve months ended December 31, 2021, increased $4.6 million, or 3.6%.  The $4.7 million increase in net gain on other real estate owned and other assets was primarily due to a gain earned during the second quarter on an investment made by WesBanco's Community Development Corporation in a start-up firm more than ten years ago that was recently acquired by a public company.  Trust fees increased $3.2 million, or 12.1%, to $29.5 million reflecting a 12.3% year-over-year increase in trust assets to $5.6 billion due to both market appreciation and organic growth.  In addition, net securities gains decreased $3.2 million, or 73.9%, year-over-year due to higher sales of securities during the prior year.  Mortgage banking fees decreased $3.2 million, or 14.1%, compared to the prior year period, net of year-to-date fair value loss adjustments of $1.2 million, from our efforts to keep more 1-to-4 family residential mortgages on the balance sheet.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended December 31, 2021 were well-controlled as they increased $0.5 million, or 0.6%, to $88.1 million compared to the prior year period.  Salaries and wages increased $1.3 million, or 3.3%, due to higher securities broker and residential mortgage originator commissions and lower loan contra-costs, which more than offset lower year-over-year salary expense of approximately $1.7 million and a net decrease in bonus and stock compensation expense of $0.6 million compared to the prior year period.  Equipment and software expense for the fourth quarter of 2021 increased $1.5 million, or 22.6%, year-over-year due primarily to the movement of online banking costs from other operating expenses.  Lastly, other operating expenses decreased $2.8 million, or 15.4%, due to the aforementioned move of online banking costs, as well as a reduction in ACH and ATM processing charges related to a change in providers, in conjunction with our core banking software system conversion.

On a similar basis, non-interest expense during the twelve months of 2021 increased just $1.3 million, or 0.4%, compared to the prior year period.  The primary drivers of this slight increase were higher equipment and software costs, legal settlement costs incurred during the third quarter, and marketing expense from product advertising and brand awareness campaigns that were delayed from 2020 due to the COVID-19 pandemic.  The increases were mostly offset by lower FDIC insurance from a refund received during the second quarter and improved risk factors and amortization of intangible asset expense, as well as efficiencies derived from financial center closures during the past 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 December 31, 2021, Tier I leverage was 10.02%, Tier I risk-based capital ratio was 14.05%, common equity Tier 1 capital ratio ("CET 1") was 12.77%, and total risk-based capital was 15.91%.

During the fourth quarter of 2021, WesBanco repurchased 1,560,266 shares of its outstanding common stock on the open market at a total cost of $54.7 million, or $35.03 per share.  During the twelve months of 2021, WesBanco repurchased 5,177,563 shares of its outstanding common stock on the open market.  As of December 31, 2021, approximately 1.4 million shares remained for repurchase under the existing share repurchase authorization that was approved on August 26, 2021, 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 fourth quarter of 2021 at 10:00 a.m. ET on Wednesday, January 26, 2022.  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.   

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 4384990.  The replay will begin at approximately 12:00 p.m. ET on January 26, and end at 12 a.m. ET on February 9.  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, 2020 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, 2021, June 30, 2021 and September 30, 2021, 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 including the effects of the COVID-19 pandemic; 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 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. (www.wesbanco.com) 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.  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 $5.6 billion of assets under management (as of December 31, 2021).  WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 205 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.