WesBanco Announces First Quarter 2016 Net Income

WHEELING, W.Va., April 20, 2016 /PRNewswire/ -- Todd F. Clossin, President and Chief Executive Officer of WesBanco, Inc. (NASDAQ Global Market: WSBC), a Wheeling, West Virginia based multi-state bank holding company, today announced net income and related earnings per share for the three months ended March 31, 2016.  Net income for the three months ended March 31, 2016 was $22.9 million or $0.60 per diluted share compared to $13.9 million or $0.40 per diluted share for the first quarter of 2015. Net income excluding after-tax merger-related expenses (non-GAAP measure), increased 13.2% to $22.9 million compared to $20.2 million for the first quarter of 2015, while diluted earnings per share, excluding after-tax merger-related expenses (non-GAAP measure), totaled $0.60, compared to $0.59 per share for the first quarter of 2015.

WesBanco's results for the three months ended March 31, 2016 and 2015 included ESB Financial Corporation's ("ESB") results from February 10, 2015, the date of consummation of the merger.  ESB was a Pennsylvania thrift holding company with approximately $2.0 billion in assets and 23 offices in southwestern Pennsylvania. 

"I am pleased to report that WesBanco continues to make progress as we execute upon our growth strategies," said Mr. Clossin.  "While the first quarter is typically impacted by seasonal issues, we experienced strong loan growth as the commercial lending hires we have made over the past eighteen months continue to gain traction.  Total loans at March 31, were higher by 5.6% annualized, when compared to 2015 year-end.  In addition, as we passed the one year anniversary of the merger with ESB Financial, we continued to show year-over-year improvement in our returns on average assets and average tangible equity of 1.08% and 14.40%, respectively."

Mr. Clossin continued, "we are making steady progress on our private and retail banking strategies which emphasize multiple relationship customers.  Lastly, our efficiency ratio has improved to 55.52% as we continue to demonstrate tight discretionary expense controls."

Financial Condition

Total assets at March 31, 2016 increased 4.1% or $336.1 million compared to March 31, 2015 primarily from growth in portfolio loans, which increased $262.7 million or 5.4% over the last twelve months.  Loan growth was achieved through $452.5 million in loan originations in the first quarter, compared to $366.3 million in the first quarter of 2015.  Loan growth occurred in most loan categories with residential real estate nearly unchanged. Approximately 22.5% of the growth was in commercial and industrial loans and 23.8% was in home equity loans.  Loan growth was driven by increased business activity, additional commercial personnel in our core urban markets, focused calling efforts and improvement in loan origination processes. Total deposits, excluding CDs, increased $56.7 million or 1.3% during the last twelve months with a 6.3% increase in non-interest bearing demand deposits to $1.3 billion.  Deposits from Marcellus and Utica shale gas customers were $126.4 million over the last year.  Certificates of deposit dropped $330.0 million from lower rate offerings for single service maturing CDs, runoff of higher cost ESB CDs held by retail customers and customer preferences for other deposit types as we remix our deposits to emphasize multiple relationship customers.

WesBanco continues to maintain strong regulatory capital ratios after the ESB acquisition and implementation of the new BASEL III capital standards at the start of 2015.  At March 31, 2016, Tier I leverage was 9.46%, Tier I Risk-Based capital was 13.30%, Total Risk-Based capital was 14.06% and Common Equity Tier 1 capital ratio (CET 1), was 11.58%.  Both consolidated and bank-level regulatory capital ratios are well above the applicable "well-capitalized" standards promulgated by bank regulators, as well as the recently finalized BASEL III capital standards.  Total tangible equity to tangible assets (non-GAAP measure) was 8.15% at March 31, 2016, increasing from 7.78% at March 31, 2015, and 7.95% at December 31, 2015.  Strong earnings and increased total capital have enabled WesBanco to increase the quarterly dividend rate, currently at $0.24 per share, nine times over the last six years, cumulatively representing a 71% increase.  The most recent increase was $0.01 per share in the first quarter of 2016.

Credit Quality

The provision for credit losses increased to $2.3 million in the first quarter of 2016 compared to $1.3 million in the first quarter of 2015 due to loan growth, but decreased 10.1% from the fourth quarter of 2015.  Net charge-offs for the quarter as a percentage of average portfolio loans of 0.12% decreased from 0.16% in the first quarter of 2015 and from 0.20% in the fourth quarter of 2015.

Non-performing loans (including TDRs) as well as criticized and classified loans, improved as a percentage of total portfolio loans from the first quarter of 2015. Total non-performing loans were 0.85% of total loans at March 31, 2016, decreasing from 1.20% of total loans in the first quarter of 2015. Criticized and classified loans were 1.65% of total loans, improving from 1.91% at the end of the 2015 first quarter. Past due loans at March 31, 2016 were 0.31% of total loans, increasing slightly from 0.27% at March 31, 2015.

The allowance for loan losses represented 0.83% of total portfolio loans at March 31, 2016.  If the acquired ESB loans (which were recorded at fair value at the date of acquisition of $701.0 million) were excluded from the ratio, the allowance would approximate 0.96% of the adjusted loan total as compared to 1.09% at the end of 2014 before the acquisition.

Net Interest Income

Net interest income increased $4.9 million or 8.9% in the first quarter of 2016 compared to the same quarter of 2015 due to an 18.7% increase in average earning assets, primarily through the acquisition, and through a 6.6% increase in average loan balances, partially offset by a 30 basis point decrease in the net interest margin.

The net interest margin decreased to 3.29% in the first quarter, compared to 3.59% in same quarter of 2015. The decrease in the net interest margin is primarily due to a change in the mix of securities to total average earning assets from 28.9% in 2015 to 31.6% in 2016, a 15 basis point decline in the average rate earned on securities due to lower yields from a restructuring of the ESB portfolio in 2015 and a decrease of 17 basis points for total loans due to repricing of existing loans at lower spreads and competitive pricing on new loans.  The lower spreads were due to the continued low interest rate environment with a relatively flat yield curve. Mitigating this reduction is the aforementioned loan growth, which improves asset yields as the average rate on loans is higher than the average rate on securities. Funding costs increased 9 basis points in the first quarter compared to the same quarter in 2015, primarily due to an increase in FHLB borrowings to 17.2% of interest bearing liabilities from 6.4% in 2015 with an associated 51 basis point increase in the average rate on these borrowings as the term increased from short to medium. Average deposits in the first quarter increased by 6.0%, primarily due to the acquisition which closed midway through the first quarter of 2015. The rate on interest bearing deposits decreased 2 basis points to 0.32% due to the maturity of higher cost CDs. In addition, growth in average deposits occurred in lower cost categories of interest and non-interest bearing demand deposits and savings deposits, while CDs decreased by 3.3%.

Non-Interest Income

For the first quarter of 2016, non-interest income increased $1.2 million or 6.6% compared to the 2015 first quarter.  Service charges on deposits increased $0.3 million or 8.2% from the addition of ESB and adjustments to the fee schedule last year.  Electronic banking fees increased $0.3 million or 8.4% from increases in transaction volume. Bank-owned life insurance decreased by $0.3 million primarily due to death benefits received in the first quarter of 2015.  Net gains on sales of mortgage loans increased $0.3 million from a larger percentage of originations being sold in the secondary market. Trust fees decreased $0.3 million or 5.7% compared to the first quarter of last year from market declines, but increased 8.9% compared to the fourth quarter of last year primarily due to higher tax return preparation fees.  Net securities gains increased by $1.1 million in the first quarter of 2016 compared to the first quarter of 2015, primarily due to realized gains resulting from calls on agency securities in the 2016 quarter.

Non-Interest Expense

The following paragraph on non-interest expense excludes merger-related expenses of $9.7 million in the first quarter of 2015.  There were no merger related expenses in the first quarter of 2016.  Non-interest expense in the first quarter of 2016 grew $1.6 million or 3.7%, compared to the same quarter in 2015, partially due to the ESB acquisition.  With net revenue growth of 8.3%, this positive operating leverage helped to improve the efficiency ratio in 2016 to 55.52% from 58.24% in the first quarter of 2015. Salaries and wages increased $0.8 million or 4.5%, due to a 3.8% increase in average full-time equivalent employees from the merger, routine annual adjustments to compensation and increased bonus and stock compensation expense. Employee benefits expense decreased $0.2 million, primarily from decreased health insurance costs. Equipment costs increased $0.5 million related to continuous improvements in computer system and software infrastructure, and origination and customer support systems.  FDIC insurance expense increased $0.3 million due to the increased size of the balance sheet. Amortization of intangible assets increased $0.2 million from additional ESB intangible assets related to core deposits and non-compete agreements.

Financial Results Conference Call

WesBanco will also host a conference call to discuss the Company's financial results for the first quarter of 2016 at 3 p.m. ET on Wednesday, April 20, 2016.  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.

Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a multi-state, bank holding company with total assets of approximately $8.6 billion (as of March 31, 2016). 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 141 financial centers in the states of 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, 2015 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.