WesBanco Announces Second Quarter 2021 Financial Results

WHEELING, W.Va., July 27, 2021 /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 six months ended June 30, 2021.  Net income available to common shareholders for the period was $68.1 million, with diluted earnings per share of $1.01, compared to $4.5 million and $0.07 per diluted share, respectively, for the second quarter of 2020.  For the six months ended June 30, 2021, net income was $138.6 million, or $2.06 per diluted share, compared to $27.9 million, or $0.41 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 June 30, 2021, was $69.0 million, or $1.03 per diluted share, as compared to $4.9 million and $0.07 per diluted share, respectively, in the prior year quarter (non-GAAP measures).  On the same basis, net income for the six months ended June 30, 2021 was $140.3 million, or $2.09 per diluted share, as compared to $32.3 million, or $0.48 per diluted share, in the prior year period (non-GAAP measures).

WesBanco believes that pre-tax, pre-provision income ("PTPP") (non-GAAP measure) provides a more comparable year-over-year measure as it removes the provision for credit losses to improve comparability from period-to-period.  For the three months ended June 30, 2021, PTPP, excluding restructuring and merger-related expenses, increased 3.8% year-over-year to $69.4 million, as compared to $66.8 million for the prior period.  In addition, on the same basis, the PTPP return on average assets was 1.63% for the three months ended June 30, 2021, as compared to 1.61% in the prior year period.  For the six months ended June 30, 2021, PTPP income, excluding restructuring and merger-related expenses, increased 3.7% year-over-year to $133.6 million, as compared to $128.8 million for the prior period.

Financial and operational highlights during the quarter ended June 30, 2021:

• Deposit growth, excluding certificates of deposit ("CDs"), was 14.0% year-over-year, driven by growth in demand deposits
• Trust assets under management increased 22.2% year-over-year to a record $5.5 billion, which was driven by both market appreciation and organic growth
• Continued expense management demonstrated by a year-to-date efficiency ratio of 55.33% (non-GAAP measure)
• Improving macro-economic factors 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, 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)
• During the quarter, we purchased approximately 1.5 million shares of our common stock on the open market under existing share repurchase authorizations
• WesBanco Bank was named, for the third year in a row, one of the world's best banks in an independent ranking based solely on customer satisfaction and feedback
• We anticipate our core banking software system conversion to be completed during the third quarter, which will provide enhanced products and services for our customers, as well as improved operational efficiencies

"We are pleased with WesBanco's performance during the second quarter of 2021 as we continue to deliver pre-tax, pre-provision earnings growth," said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  "Our financial performance this quarter was again driven by strong fee income growth and disciplined expense management.  In addition, we remain focused on ensuring a strong organization for our shareholders and will continue to appropriately return capital to them."

Mr. Clossin added, "The successful execution of our growth and diversification plans has enabled WesBanco to transform into an emerging regional financial institution with the majority of our organization in higher growth markets.  This diversification, combined with our experienced teams, make us well-positioned to drive loan growth once the excess liquidity throughout our economies is absorbed.  In fact, we have continued to make strategic hires across our organization and markets in order to strengthen our teams and enhance our ability to leverage growth opportunities once they fully return."

Balance Sheet
Portfolio loans of $10.4 billion as of June 30, 2021 decreased 6.5% when compared to the prior year period, due primarily to forgiveness of approximately $662 million of SBA Payroll Protection Program ("SBA PPP") loans and lower residential real estate and consumer loans.  Further, when excluding SBA PPP loans, total loans decreased 4.1% year-over-year and 0.7% sequentially.  During the second quarter, approximately 2,320 customers applied for and received forgiveness of their SBA PPP loans totaling $327 million; while our lenders assisted more than 780 businesses with Round 2 SBA PPP loans totaling approximately $27 million, through its conclusion at the end of May.

Total deposits increased 9.3% year-over-year to $13.3 billion due primarily to stimulus funds previously received by our customers and increased personal savings, which more than offset a $324.5 million reduction in CDs.  Deposits, excluding CDs, increased 14.0% year-over-year, driven by a 14.4% increase in total demand deposits, which represent approximately 57% of total deposits.

Credit Quality
As of June 30, 2021, total loans past due, non-performing loans, and non-performing assets as percentages of the portfolio and total assets have remained relatively low and consistent throughout the last five quarters.  In addition, we realized annualized net loan recoveries to average loans of three basis points.  Reflecting improved macroeconomic factors and qualitative adjustments in the CECL calculation, the allowance for credit losses specific to total portfolio loans at June 30, 2021 was $140.7 million, or 1.36% of total loans; or, when excluding SBA PPP loans, 1.43% of total portfolio loans.  The improvements in these macroeconomic factors resulted in a negative provision for credit losses of $21.0 million for the second quarter of 2021.

Net Interest Margin and Income
The net interest margin of 3.12% for the second quarter of 2021 decreased 15 basis points sequentially and 20 basis points from the second quarter of 2020, primarily due to the lower interest rate environment, and a mix shift of higher securities as a percentage of total assets.  As a result of higher cash balances from additional stimulus funds received by our customers and their higher personal savings creating extra liquidity, investment securities increased by $1.0 billion year-over-year and represent approximately 23% of total assets, as of June 30, 2021.  Reflecting the significantly lower interest rate environment, we aggressively reduced our deposit rates throughout the past year, which helped to lower deposit funding costs 13 basis points year-over-year to 17 basis points for the second quarter of 2021, or 12 basis points when including non-interest bearing deposits.  The total cost of deposits was down 2 basis points sequentially.  Furthermore, we continued to lower the cost of FHLB borrowings, down 17 basis points quarter-over-quarter, as second quarter average borrowings declined $0.1 billion, or 20.1%, from the first quarter to $0.4 billion, which have a remaining average life of less than one year.  Accretion from acquisitions benefited the second quarter net interest margin by 12 basis points, as compared to 19 basis points in the prior year period and 13 basis points during the first quarter of 2021.  Lastly, the forgiveness of existing and funding of new SBA PPP loans benefited the second quarter of 2021 net interest margin by a net 5 basis points, and should positively impact the net interest margin as the loans are forgiven during the next few quarters.

Net interest income decreased $3.2 million, or 2.7%, during the second quarter of 2021, as compared to the same quarter of 2021, 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 six months ended June 30, 2021, net interest income decreased $6.8 million, or 2.9%, due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the second quarter of 2021, non-interest income of $36.1 million increased $3.3 million, or 9.9%, from the second quarter of 2020, driven primarily by a net gain on other real estate owned and other assets, electronic banking fees, and trust fees, which were partially offset by lower other income and net securities gains.  The net gain on other real estate owned and other assets of $4.0 million was due to a gain earned 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.  Electronic banking fees increased $1.0 million, or 24.4%, due primarily to increased point-of-sale transactions and ATM volumes.  Trust fees increased $0.9 million, or 15.3%, due to market value appreciation and organic growth.  Loan swap-related income, which is recorded in other income, of $1.0 million was offset during the quarter by a negative $1.0 million of fair market value adjustments, as compared, respectively, to $3.5 million and a negative $0.5 million last year.

Primarily reflecting the items discussed above, non-interest income, for the six months ended June 30, 2021, increased $8.5 million, or 13.9%.  In addition, reflecting the low interest rate environment and organic growth, mortgage banking fees increased $3.3 million, or 37.3%, compared to the prior year period, net of fair value adjustments, while service charges on deposits were lower due to higher consumer deposits associated with the three rounds of stimulus to-date and lower general consumer spending, resulting in fewer eligible account fees. 

Non-Interest Expense
Total operating expenses continued to be well-controlled through company-wide efforts to effectively manage discretionary costs and full-time equivalent employee counts, as demonstrated by a year-to-date efficiency ratio of 55.33%.  Excluding restructuring and merger-related expenses, non-interest expense for the three months ended June 30, 2021 decreased $2.4 million, or 2.9%, to $82.6 million compared to the prior year period, primarily due to lower FDIC insurance expense, as well as continuing cost control measures over certain discretionary expenses.  FDIC insurance expense decreased $2.2 million, or 92.4%, due to certain prior period reporting adjustments resulting in a $1.0 million refund and improved risk factors.  Equipment and software expense for the second quarter of 2021 increased $1.6 million, or 27.2%, year-over-year due to increased asset size and the SBA PPP loan program.  Other operating expenses decreased $1.1 million, or 6.1%, reflecting a $0.8 million state franchise tax refund.

On a similar basis, non-interest expense during the first half of 2021 decreased $3.1 million, or 1.8%, compared to the prior year period, due primarily to lower salaries and wages from financial center closures during the past year, lower FDIC insurance, and discretionary cost control which more than offset higher equipment and software costs, higher marketing expense from product advertising and brand awareness campaigns that were delayed from 2020 due to the COVID-19 pandemic, and mid-2020 annual salary increases.

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 June 30, 2021, Tier I leverage was 10.42%, Tier I risk-based capital ratio was 15.15%, common equity Tier 1 capital ratio ("CET 1") was 13.83%, and total risk-based capital was 17.68%.

During the second quarter of 2021, WesBanco repurchased 1,478,882 shares of its outstanding common stock on the open market at a total cost of $55.6 million.  As of June 30, 2021, approximately 1.9 million shares remained for repurchase under existing share repurchase authorizations.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the second quarter of 2021 at 10:00 a.m. ET on Wednesday, July 28, 2021.  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 10150982.  The replay will begin at approximately 12:00 p.m. ET on July 28, and end at 12 a.m. ET on August 11.  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 quarter ended March 31, 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 $5.5 billion of assets under management (as of June 30, 2021).  WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 206 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.