WesBanco Announces Fourth Quarter 2022 Financial Results

WHEELING, W.Va., Jan. 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 and twelve months ended December 31, 2022.  Net income available to common shareholders for the fourth quarter of 2022 was $49.7 million, with diluted earnings per share of $0.84, compared to $51.6 million and $0.82 per diluted share, respectively, for the fourth quarter of 2021.  For the twelve months ended December 31, 2022, net income was $182.0 million, or $3.02 per diluted share, compared to $232.1 million, or $3.53 per diluted share, for the 2021 period, which included a release of provision for credit losses of $64.3 million, or $51.6 million net of tax.  Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended December 31, 2022, was $49.7 million, or $0.84 per diluted share, as compared to $51.8 million and $0.82 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, 2022 was $183.3 million, or $3.04 per diluted share, as compared to $237.4 million, or $3.62 per diluted share, in the prior year period (non-GAAP measures).

Financial and operational highlights during the quarter ended December 31, 2022:

• Total loan growth was 11.7% year-over-year, and 4.2%, or 16.8% annualized, when compared to September 30, 2022, excluding Small Business Administration Payroll Protection Program ("SBA PPP"), 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)
• Fourth quarter net interest margin increased 16 basis points sequentially to 3.49%
• Deposits, excluding certificates of deposit ("CDs"), were essentially flat compared to the prior year quarter, as growth in non-interest bearing demand deposits and savings accounts offset a decline in interest-bearing demand deposit balances
• Non-interest expense increased just 2.6% year-over-year, excluding restructuring and merger-related expenses, which demonstrates our commitment to strong discretionary cost control in an inflationary environment
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet
• Returns on average assets and tangible equity were 1.18% and 16.05%, respectively

"WesBanco had another successful year during 2022 as our operational strategies and core advantages were evident," said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  "We have begun to realize the benefit of our strategic growth initiatives, as we continue to post solid loan growth, as well as organic growth across our wealth management businesses.  We continued to benefit from our core funding advantage, strong credit standards, and focus on discretionary cost control.  Further, we received numerous accolades during the year recognizing us for financial performance, employee satisfaction, customer service, and trust.  I am exceptionally pleased that we were the only midsize bank to be ranked in the top ten as one of America's Best Banks and Best Midsize Employers."

Mr. Clossin added, "We remain focused on ensuring a strong organization with sound credit quality, solid liquidity, and strong balance sheet.  We have the right markets, teams, leadership, and strategies, combined with our core strengths, to provide long-term success for our shareholders, customers, and employees.  I am excited for our future growth opportunities."

Balance Sheet
Loan growth for the fourth quarter of 2022 reflects strong performance by our commercial and consumer lending teams and more 1-to-4 family residential mortgages retained on the balance sheet.  As of December 31, 2022, total portfolio loans were $10.7 billion, which increased 11.7% year-over-year, and 4.2%, or 16.8% annualized, when compared to September 30, 2022, excluding SBA PPP loans, driven by strong growth across our markets.  Commercial real estate payoffs during the fourth quarter moderated, as expected, totaling approximately $63 million, as compared to $173 million in the third quarter and $160 million in the fourth quarter of last year.  The fourth quarter of 2022 included the forgiveness of approximately $5 million of SBA PPP loans, with approximately $8 million remaining in the loan portfolio (net of deferred fees).

Deposits, excluding CDs, were essentially flat to the prior year period but decreased 1.7%, or 6.7% annualized, quarter-over-quarter reflecting the impact of inflationary pressures and rising costs across the economy.  Total deposits, as of December 31, 2022, were $13.1 billion, a decrease of $434.8 million year-over-year due primarily to a $406.8 million reduction in CDs. 

Credit Quality
As of December 31, 2022, total loans past due, non-performing loans, and non-performing assets as percentages of the loan portfolio and total assets have remained relatively low, from a historical perspective, and consistent throughout the last five quarters.  Total loans past due as a percent of the loan portfolio decreased 26 basis points from the third quarter, while criticized and classified loans as a percent of the loan portfolio decreased 9 basis points to 2.34%.  In addition, total loans past due and criticized and classified loans as percentages of the loan portfolio decreased 17 and 141 basis points year-over-year, respectively.  For the fourth quarter, net loan charge-offs to average loans totaled $0.5 million, as compared to $0.9 million in the prior year period.  The allowance for credit losses to total portfolio loans at December 31, 2022 was $117.8 million, or 1.10% of total loans, reflecting increases in current loan growth and projected macroeconomic forecasts, offset by continued improvements in COVID-impacted borrowers.  During the prior year three- and twelve- month periods ending December 31, 2021, we recorded negative provisions for credit losses of $13.6 million and $64.3 million, respectively, due to significantly improved macroeconomic forecasts and other factors, as compared to provisions of $3.1 million and a negative $1.7 million, respectively, in the current year.

Net Interest Margin and Income
The net interest margin of 3.49% for the fourth quarter of 2022 increased 16 basis points sequentially and 52 basis points year-over-year, which reflects the 425 basis point increase in the federal fund rate during 2022, as well as our successful deployment of excess cash into higher-yielding loans.  Variable rate securities, which represent 18% of the total securities portfolio also contributed to the margin.  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.  Deposit funding costs increased 44 basis points year-over-year to 57 basis points for the fourth quarter of 2022, or 29 basis points when including non-interest bearing deposits.  This reflects a total deposit beta of 8%, when compared to the 375 basis point increase in the federal fund rate through November 2022.  Further, total deposit funding costs also increased 20 basis points on a sequential quarter basis.  Accretion from acquisitions benefited the fourth quarter net interest margin by 5 basis points, as compared to 9 basis points in the prior year period.  Lastly, the forgiveness of SBA PPP loans had no material impact on the fourth quarter of 2022 net interest margin, as compared to a net 9 basis point benefit in the prior year period.

Net interest income increased $19.5 million, or 17.7%, during the fourth quarter of 2022, as compared to the same quarter of 2021, reflecting loan growth and the benefit of rising rates on loan and securities yields, which more than offset higher funding costs, lower accretion from purchase accounting, and lower SBA PPP-related loan income.  For the twelve months ended December 31, 2022, net interest income increased $16.4 million, or 3.6%, primarily due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the fourth quarter of 2022, non-interest income of $27.8 million decreased $2.9 million, or 9.6%, from the fourth quarter of 2021, driven primarily by lower mortgage banking income.  Mortgage banking income decreased $2.3 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.  Fourth quarter mortgage originations decreased 53% year-over-year to $179 million, with approximately 80% retained, as compared to 70% last year.  Net securities brokerage revenue increased $1.0 million year-over-year to a record $2.6 million during the quarter due to organic growth.

Non-interest income, for the twelve months ended December 31, 2022, decreased $15.4 million, or 11.6%, to $117.4 million.  In addition to the items discussed above, both service charges on deposits and electronic banking fees increased year-over-year to $26.3 million and $20.0 million, respectively, reflecting increased general consumer spending.  Bank-owned life insurance of $10.7 million increased $1.8 million year-over-year due to higher death benefits and the impact of new policies purchased during the fourth quarter of 2021.  Trust fees decreased $2.0 million year-over-year to $27.6 million, primarily due to the declines in the equity markets on the value of trust assets, which more than offset net organic growth.  The net gain on other real estate owned and other assets of $0.5 million reflects the change in the fair value of an underlying equity investment held by WesBanco Community Development Corporation during the second quarter of 2022, as compared to a net gain of $3.8 million for the same investment in the prior year.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended December 31, 2022 totaled $90.4 million, an increase of just 2.6% year-over-year, reflecting discretionary cost control and a credit from adjustments to the mortgage incentive compensation plan.  Salaries and wages increased $2.2 million, or 5.4%, compared to the prior year period due to higher salary expense related to merit increases and higher staffing levels.  Employee benefits of $9.2 million decreased $1.6 million from last year due primarily to a higher health insurance liability recorded in the prior year period, as well as a decrease in this quarter's pension expense.

On a similar basis, non-interest expense for the twelve months ended December 31, 2022 increased $8.8 million, or 2.5%, due primarily to higher salaries and wages, as described above, and higher FDIC insurance, which reflects the benefit to last year's FDIC insurance calculation from the large negative credit loss provision recognized during 2021, partially offset by lower employee benefits from lower deferred compensation expense and discretionary cost control.

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, 2022, Tier I leverage was 9.90%, Tier I risk-based capital ratio was 12.33%, common equity Tier 1 capital ratio ("CET 1") was 11.20%, and total risk-based capital was 15.11%.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the fourth quarter of 2022 at 10:00 a.m. ET on Wednesday, January 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 8654312. The replay will begin at approximately 12:00 p.m. ET on January 25, 2023 and end at 12 a.m. ET on February 8, 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, 2021 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, 2022, June 30, 2022 and September 30, 2022, 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. (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.  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 – the only midsize bank making the top ten of both rankings.  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 $4.9 billion of assets under management (as of December 31, 2022).  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.