WesBanco Announces Fourth Quarter 2023 Financial Results

Continued deposit and loan growth while maintaining a stable net interest margin

WHEELING, W.Va., Jan. 23, 2024 /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, 2023. Net income available to common shareholders for the fourth quarter of 2023 was $32.4 million, with diluted earnings per share of $0.55, compared to $49.7 million and $0.84 per diluted share, respectively, for the fourth quarter of 2022. For the twelve months ended December 31, 2023, net income was $148.9 million, or $2.51 per diluted share, compared to $182.0 million, or $3.02 per diluted share, for the 2022 period. As noted in the following table, net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three and twelve months ended December 31, 2023 were $32.4 million, or $0.55 per diluted share, and $151.9 million, or $2.56 per diluted share, respectively (non-GAAP measures).

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

• Deposits of $13.2 billion increased both year-over-year and sequentially, reflecting deposit gathering and retention efforts across retail and business customers
  • Average loans to average deposits were 87%, providing capacity to fund loan growth
• Total loan growth was 8.7% year-over-year and 2.9% quarter-over-quarter, reflecting the strength of our markets and lending teams
  • Loan production offices continued to contribute meaningfully to the commercial loan pipeline
• Non-interest income increased 8.0% year-over-year, supported by new commercial loan swap and wealth management fees
  • New commercial swap fees totaled $9.0 million during 2023
  • Trust assets increased to $5.4 billion, driven by both market value adjustments and organic growth
• Net interest margin of 3.02% was stable to the third quarter of 2023
• 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 (based upon the prior four quarters for banks with total assets between $10 billion and $25 billion)
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet with capacity to fund loan growth
• WesBanco continued to earn national accolades, being recognized as one of America's Best Regional Banks by Newsweek

"Record interest rate escalation by the Federal Reserve had a significant impact on all banks, including WesBanco. Despite that headwind, WesBanco performed well during 2023 through our continued focus on customer service and sustainable growth strategies. We achieved sustained loan, deposit, and fee income growth, while maintaining strong capital levels and credit quality," said Jeff Jackson, President and Chief Executive Officer, WesBanco. "Our focus on further diversifying our revenue streams with new fee-based services is driving positive non-interest income trends. As we begin 2024, we remain well-capitalized with solid liquidity and a strong balance sheet to fund loan growth, positioning us well to continue generating value for our stakeholders."

Balance Sheet
As of December 31, 2023, total portfolio loans were $11.6 billion, which increased 8.7% year-over-year driven by strong performance from our commercial and residential lending teams. Total commercial loans of $8.2 billion, which increased 7.8% year-over-year, reflects the benefit of our commercial banker hiring and loan production office strategies and lower commercial real estate payoffs of $276 million for the year, compared to an anticipated level in the $500 million range within a more normal operating environment.  Our new loan production offices accounted for more than 20% of commercial loan growth during the year. The commercial pipeline totaled $0.7 billion at December 31, 2023, approximately 28% of which is from the four new loan production offices.

Total deposits, as of December 31, 2023, were $13.2 billion, up 0.6% from September 30, 2023 and up 0.3% from December 31, 2022, reflecting the benefit of deposit gathering and retention efforts by our retail and commercial teams. Reflecting the impact of the significant increase in the federal funds rate, there continued to be some mix shift in the composition of total deposits; however, total demand deposits continue to represent 56% of total deposits, with the non-interest bearing component representing 30%, which remains consistent with the percentage range since early 2020.

Credit Quality
As of December 31, 2023, total loans past due, criticized and classified loans, 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 increased 9 basis points from the prior year, but remain below the quarterly average for the last three years. Criticized and classified loans as a percent of the loan portfolio decreased 12 basis points year-over-year to 2.22%, while non-performing assets as a percentage of total assets declined 9 basis points to 0.16%. The current recorded provision was primarily driven by changes in criticized and classified loan balances, prepayment assumptions, and loan growth. The allowance for credit losses to total portfolio loans at December 31, 2023 remained at 1.12% of total loans, as compared to the third quarter, or $130.7 million. Excluded from the allowance for credit losses and related coverage ratio are fair market value adjustments on previously acquired loans representing 0.12% of total loans.

Net Interest Margin and Income
The net interest margin of 3.02% for the fourth quarter of 2023 decreased just 1 basis point sequentially but 47 basis points year-over-year primarily due to higher funding costs from increasing deposit costs and continued remix from non-interest bearing deposits into higher tier money market and certificate of deposit accounts. Total deposit funding costs were 234 basis points for the fourth quarter of 2023, and, when including non-interest deposits, total deposit funding costs were 161 basis points. Accretion from acquisitions benefited the fourth quarter net interest margin by 3 basis points, as compared to 5 basis points in the prior year period.

Fourth quarter net interest income of $117.8 million decreased $12.1 million, or 9.3%, year-over-year, reflecting the impact of rising rates on funding costs more than offsetting higher loan and securities yields and loan growth. For the twelve months ended December 31, 2023, net interest income of $481.3 million increased $7.0 million, or 1.5%, primarily due to loan growth and the benefit of rising rates on earning assets outpacing funding costs.

Non-Interest Income
For the fourth quarter of 2023, non-interest income of $30.1 million increased $2.3 million, or 8.3%, from the fourth quarter of 2022.  This increase was primarily due to net securities gains of $0.9 million, as compared to a loss of $0.6 million in the prior year period, from market fluctuations of equity securities in the deferred compensation plan and higher death benefits within bank-owned life insurance. The net swap fee and valuation loss of $0.3 million reflects $2.2 million of new swap fees offset by negative fair value adjustments of $2.5 million, as compared to $1.7 million and negative $0.7 million, respectively, in the prior year period.

For the twelve months ended December 31, 2023, non-interest income of $120.4 million increased $3.1 million, or 2.6%, year-over-year due primarily to the items discussed above, partially offset by lower mortgage banking income. Mortgage banking income decreased $2.5 million from the prior year to $2.7 million due to reduced fair value adjustments on mortgage derivatives. Net gains on other assets of $1.5 million increased $1.0 million year-over-year primarily due to a $1.1 million recovery of an asset previously written-off.

Non-Interest Expense
Non-interest expense for the three months ended December 31, 2023 increased $9.0 million year-over-year to $99.5 million, reflecting increased salaries and wages, benefits, equipment and software expense, and FDIC insurance. As anticipated, salaries and wages declined sequentially which reflects efficiency improvements in the mortgage staffing model. Salaries and wages increased $2.6 million, or 6.0%, compared to the prior year period due to higher salary expense related to annual merit increases and new revenue-producing hires, mainly commercial lenders, during the past year. Employee benefits increased $2.2 million year-over-year due to higher deferred compensation expense, the offsetting gain is located within net securities gains, and higher health insurance contributions. FDIC insurance expense increased $1.3 million year-over-year due to an increase in the minimum rate for all banks. Marketing expense increased $1.2 million in support of deposit and loan generation campaigns. Equipment and software expense increased $0.9 million due to the planned upgrade of our ATM fleet with the latest technology and general inflationary cost increases for existing service agreements.

Excluding restructuring and merger-related expenses, non-interest expense during the twelve months of 2023 of $386.2 million increased $30.9 million compared to the prior year period, due primarily to the same factors as described above.

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, 2023, Tier I leverage was 9.87%, Tier I risk-based capital ratio was 12.05%, common equity Tier 1 capital ratio ("CET 1") was 10.99%, and total risk-based capital was 14.91%. In addition, the tangible common equity to tangible assets ratio improved to 7.62%.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the fourth quarter of 2023 at 10:00 a.m. ET on Wednesday, January 24, 2024. 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 4078172. The replay will begin at approximately 12:00 p.m. ET on January 24, 2024 and end at 12 a.m. ET on February 7, 2024. 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"), including WesBanco's Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, 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. The company's banking subsidiary, Wesbanco Bank, Inc., operates more than 190 financial centers in the states of Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and West Virginia. 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, the company provides trust, wealth management, securities brokerage, and private banking services through its century-old Trust and Investment Services department, with approximately $5.4 billion of assets under management (as of December 31, 2023). The company also offers insurance and brokerage services through its affiliates and subsidiaries. Learn more at www.wesbanco.com and follow us on Facebook, LinkedIn and X, formerly Twitter.