WesBanco Announces First Quarter 2017 Net Income

WHEELING, W.Va., April 18, 2017 /PRNewswire/ -- Todd F. Clossin, President and Chief Executive Officer of WesBanco, Inc. (NASDAQ: WSBC), a multi-state bank holding company based in Wheeling, WV, today announced net income and related earnings per share for the three months ended March 31, 2017.  Net income for the three months ended March 31, 2017 was $25.9 million or $0.59 per diluted share compared to $22.9 million or $0.60 per diluted share for the first quarter of 2016.  Excluding after-tax merger-related expenses (non-GAAP measure), net income increased 14.6% to $26.2 million compared to $22.9 million for the first quarter of 2016, while diluted earnings per share totaled $0.60, compared to $0.60 per share for the first quarter of last year.

Financial results for Your Community Bankshares, Inc. ("YCB") were included in WesBanco's results after September 9, 2016, the date of the consummation of the merger.  YCB, with approximately $1.5 billion of assets, was headquartered in New Albany, IN and operated through 34 financial centers in Indiana and Kentucky.  The YCB merger meshes well with WesBanco's strategic growth plans and contiguous market expansion, and expands the WesBanco franchise into new attractive growth markets.  WesBanco now has $9.8 billion in total assets and provides banking services through 173 branch locations in five states.

"We are pleased with WesBanco's performance during the first quarter of 2017, as we continue to make progress on our growth strategies," said Mr. Clossin. "We remain focused on disciplined growth, expense management, and increasing long-term shareholder value.  Furthermore, our efficiency ratio of 56.0% improved more than 200 basis points compared to the fourth quarter of 2016, and approximately 70 basis points compared to full year 2016."

Mr. Clossin added, "During February, we announced an 8.3% increase in our quarterly dividend rate to $0.26 per share, representing an 86% increase since 2010.  We are continuing to remix our balance sheet by reducing securities and increasing loans, which now represent 72% of average earning assets. In addition, our return on average assets has increased to 1.07%.  Over the last twelve months, we have generated more than $2 billion in loan originations, with our new Indiana and Kentucky markets contributing to that total.  Lastly, the merger with Your Community Bankshares, which converted during the fourth quarter, is generating nice returns and solid earnings accretion."

Financial Condition

Total assets at March 31, 2017 increased $1.2 billion, or 14.4%, compared to March 31, 2016. Portfolio loans increased $1.2 billion or 22.9% over the last twelve months with $1.0 billion from the YCB acquisition and $165.3 million, or 3.2% from organic loan growth. Expanded market areas and additional commercial personnel in our core markets provided the organic loan growth, which occurred primarily in commercial real estate, commercial and industrial and home equity lending categories, and was achieved through $2.1 billion in loan originations in the last twelve months, partially offset by certain large commercial real estate payoffs.  Total business loan originations were up approximately 19.4% over the last year.  The re-mix in average earning assets continued as securities as a percentage of total assets were reduced from 31.6% at March 31, 2016 to 26.9% at March 31, 2017, while loans have increased as a percentage of average earning assets to 72.4% from 67.0% in March of 2016.

Total deposits increased $1.0 billion or 16.3% during the last twelve months.  Total organic deposits, excluding CDs, increased 4.5%, driven by 11.1% organic growth in interest bearing and non-interest bearing demand deposits.  Reflecting customer preferences, total demand deposits, as of March 31, 2017, now represent 48.2% of total deposits, an increase from 41.6% a year ago.

WesBanco continues to maintain strong regulatory capital ratios after the YCB acquisition and implementation of the BASEL III capital standards.  At March 31, 2017, Tier I leverage was 9.97%, Tier I Risk-Based capital was 13.21%, Total Risk-Based capital was 14.22% and the Common Equity Tier 1 capital ratio ("CET 1"), was 11.28%.  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. These ratios improved in the first quarter of 2017 as compared to year-end.  Total tangible equity to tangible assets (non-GAAP measure) was 8.40% at March 31, 2017, increasing from 8.20% at December 31, 2016, which reflects post-acquisition retained earnings and adjustments to accumulated other comprehensive income.  Strong earnings and increased total capital have enabled WesBanco to increase the quarterly dividend rate, currently at $0.26 per share, ten times over the last seven years, cumulatively representing an 86% increase.  The most recent increase was $0.02 per share per quarter during the first quarter of 2017.

Credit Quality

Overall, most credit ratios continued to improve year-over-year, on a percentage basis. Non-performing loans (including TDRs), and criticized and classified loans all improved as a percentage of total portfolio loans from March 31, 2016. Total non-performing loans were 0.74% of total loans at March 31, 2017, decreasing from 0.85% of total loans at the end of the first quarter of 2016. Criticized and classified loans were 1.35% of total loans, improving from 1.65% at March 31, 2016. Past due loans at March 31, 2017 were 0.22% of total loans, compared to 0.31% at March 31, 2016.  Net charge-offs as a percentage of average portfolio loans of 0.15% in the first quarter of 2017 were minimally higher than the 0.12% in the first quarter of 2016.

The allowance for loan losses represented 0.70% of total portfolio loans at March 31, 2017 compared to 0.83% as of March 31, 2016.  If the acquired YCB and ESB loans (recorded at fair value at the date of acquisition of $1.7 billion) were excluded from the ratio, the allowance would approximate 0.96% of the adjusted loan total at March 31, 2017 compared to 1.09% prior to the 2015 ESB acquisition.  The provision for credit losses increased to $2.7 million in the first quarter of 2017 compared to $2.3 million in the first quarter of 2016 due primarily to loan growth.

Net Interest Income

The yield on earning assets has increased in each of the last five quarters, a total of 16 basis points, with 12 basis points of the increase occurring subsequent to the acquisition of YCB's higher yielding earning assets.  As a result, the net interest margin increased by 13 basis points to 3.42% in the first quarter of 2017 compared to 3.29% in the first quarter of 2016.  Yields increased on over 90% of earning assets, more than offsetting a 5 basis point increase in the cost of interest bearing liabilities as compared to the first quarter of 2016.  Net interest income increased $10.9 million or 18.2% in the first quarter of 2017 compared to the same quarter of 2016 due to a 23.3% increase in average loan balances and the increase in net interest margin noted above.  The increase in average loan balances in the first quarter of 2017 compared to the first quarter of 2016 was due to a combination of the acquisition and 3.2% organic loan growth highlighted by 6.7% of commercial loan growth. Approximately 8 basis points of accretion from prior acquisitions was included in the first quarter net interest margin compared to 7 basis points in the first quarter of 2016, and 10 basis points in the fourth quarter, when the net interest margin was 3.42%.

The 5 basis point increase in the cost of interest bearing liabilities is primarily due to an increase in the percentage of funding from, and increases in rates related to, subordinated debt and other borrowings. Average interest bearing deposits in 2017 increased 9.2%, as all interest bearing deposit types increased other than CDs.  Average non-interest bearing deposits increased 36.4% to $1.8 billion in the first quarter of 2017 compared to the same quarter in 2016. 

Non-Interest Income

For the first quarter of 2017, non-interest income increased $3.5 million, or 18.0%, compared to the first quarter of 2016.  Trust fees increased $0.4 million, or 7.6%, as equity markets improved and trust assets increased 5.9% since the first quarter of 2016. Service charges on deposits increased $0.9 million, or 22.8%, and electronic banking fees increased $0.9 million or 25.6% through a larger customer deposit base from the addition of YCB.  Net gains on sale of mortgage loans increased $0.9 million primarily due to increases in mortgage loans sold into the secondary market as total mortgage loan volume increased by 35.3%.  Net securities gains decreased $1.1 million in the first quarter of 2017 compared to the first quarter of 2016, primarily due to calls of agency notes in the 2016 first quarter.  Other income increased $1.5 million due to a $0.7 million increase in commercial customer loan swap related income, and improvement in various other income categories, including YCB miscellaneous income.

Non-Interest Expense

The following comments on non-interest expense exclude merger-related expenses in both years.  Non-interest expense in the first quarter of 2017 grew $8.6 million or 18.9%, compared to the 2016 first quarter, principally due to the acquisition.  Salaries and wages increased $3.8 million or 19.9% due to increased compensation expense related to a 19.1% increase in full-time equivalent employees, primarily late in the third quarter of 2016 from the YCB acquisition, and routine annual adjustments to compensation. Employee benefits expense increased $1.1 million, or 16.0%, also primarily from the additional employees which increased health insurance expense and other benefits, and also due to seasonally higher payroll taxes. Increases in net occupancy and equipment were also primarily from costs related to the additional branches from the YCB acquisition and typical first quarter seasonal maintenance expenses. Post-conversion cost savings are continuing to be experienced after fourth quarter branch and system conversions were completed.  Other operating expenses increased $2.2 million or 23.8% through increases in certain other expenses including miscellaneous taxes, professional fees and postage and communications, also partially due to the acquisition.

Provision for Income Taxes

The provision for income tax increased $1.9 million or 22.2% in the first quarter of 2017 compared to the first quarter of 2016, due to the adoption of a new accounting standard related to low income housing investment amortization which, in 2017, moved $0.5 million from other operating expense to the provision for income taxes. In addition, first quarter 2017 pre-tax income was 15.6% higher.  As a result, the effective tax rate increased to 29.09% compared to 27.54% in the first quarter of 2016.

Financial Results Conference Call

WesBanco will also host a conference call to discuss the Company's financial results for the first quarter of 2017 at 3:00 p.m. ET on Wednesday, April 19, 2017.  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 10099580. The replay will begin at approximately 5:00 p.m. ET on April 19, and end at 12 a.m. ET on May 3. An archive of the webcast will be available for one year on the Investor Relations section of the Company's website (www.wesbanco.com).

Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a multi-state, bank holding company with total assets of approximately $9.8 billion (as of March 31, 2017). WesBanco is a diversified and well-balanced financial services institution, with a community bank at its core, built upon a strong legacy of credit and risk management. WesBanco has meaningful market share across its key geographies  maintained by its commitment to dedicated customer service and solid fee-based businesses. It also provides wealth management services through a century-old trust and wealth management business, with more than $3 billion of assets under management, and serves as registered investment advisor to a proprietary mutual fund family, the WesMark Funds.  WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 173 financial centers in the states of Indiana, Kentucky, Ohio, Pennsylvania, and West Virginia. In addition, WesBanco operates an insurance agency, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc.

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, 2016 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 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; internet hacking; 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.

SOURCE WesBanco, Inc.