WesBanco Announces Third Quarter 2022 Financial Results

WHEELING, W.Va., Oct. 25, 2022 /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 nine months ended September 30, 2022.  Net income available to common shareholders for the third quarter of 2022 was $50.5 million, with diluted earnings per share of $0.85, compared to $41.9 million and $0.64 per diluted share, respectively, for the third quarter of 2021.  For the nine months ended September 30, 2022, net income was $132.3 million, or $2.19 per diluted share, compared to $180.5 million, or $2.71 per diluted share, for the 2021 period, which included a release of provision for credit losses of $50.7 million, or $40.5 million net of tax.  Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended September 30, 2022, was $50.6 million, or $0.85 per diluted share, as compared to $45.4 million and $0.70 per diluted share, respectively, in the prior year quarter (non-GAAP measures).  On the same basis, net income for the nine months ended September 30, 2022 was $133.7 million, or $2.21 per diluted share, as compared to $185.7 million, or $2.79 per diluted share, in the prior year period (non-GAAP measures).

Financial and operational highlights during the quarter ended September 30, 2022:

• Third quarter net interest margin of 3.33% increased 30 basis points sequentially, and, when excluding purchase accounting and Small Business Administration Payroll Protection Program ("SBA PPP") loan accretion, it increased 34 basis points sequentially to 3.27%
• Reflecting the pricing advantage of our robust legacy deposit base and growth in non-interest bearing demand deposits, year-over-year total deposits increased 8 basis points to 0.17%
• Reflecting the strength of our markets and lending teams, total loan growth was 6.5% year-over-year, and 0.8%, or 3.2% annualized, when compared to June 30, 2022, excluding SBA PPP loans
• Deposit growth, excluding certificates of deposit ("CDs"), was 3.2% year-over-year and essentially flat compared to the second quarter, driven by growth in non-interest bearing demand deposits and savings accounts
• Strong discretionary cost control as evidenced by non-interest expenses increasing just 1.8% year-over-year, excluding restructuring and merger-related expenses
• 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)
• WesBanco remains well-capitalized with solid liquidity and a strong balance sheet
• Returns on average assets and tangible equity were 1.19% and 15.39%, respectively

"We are pleased with WesBanco's performance during the third quarter of 2022, as we continued to deliver loan growth, control discretionary expenses, and manage the costs of our funding sources," said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  "We again reported strong, broad-based, year-over-year loan growth during the quarter, despite elevated commercial real estate loan payoffs.  Furthermore, our commercial loan pipeline remains robust.  Our core funding advantage of our legacy markets continues to provide us with strong, low cost deposit flows during a time of quickly rising interest rates.  And, our historic strengths of risk management and loan underwriting remain evident through our solid credit quality measures."

Mr. Clossin added, "For more than 150 years, we have been a source of stability, strength and trust for our customers, communities, employees, and shareholders.  The success of our operational strategies implemented the past few years continues to be evident, and combined with our core strengths, will allow us to succeed regardless of the operating environment."

Balance Sheet
Loan growth for the third 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, partially offset by the continuation of both SBA PPP loan forgiveness and elevated commercial real estate payoffs.  As of September 30, 2022, total portfolio loans of $10.3 billion, when excluding SBA PPP loans, driven by strong growth across all loan categories and markets, increased 6.5% year-over-year, and 0.8%, or 3.2% annualized, when compared to June 30, 2022.  While down from the prior year period, commercial real estate payoffs increased to $173 million during the third quarter, as compared to $98 million in the second quarter.  The third quarter of 2022 included the forgiveness of approximately $14 million of SBA PPP loans, with approximately $13 million remaining in the loan portfolio (net of deferred fees).

As of September 30, 2022, total deposits of $13.4 billion increased $21.1 million year-over-year due primarily to increased net personal savings across the other deposit categories, which more than offset a $362.7 million year-over-year reduction in CDs.  Deposits, excluding CDs, were essentially flat to the quarter ending June 30, 2022 but increased 3.2% year-over-year, driven by a 1.6% increase in total demand deposits, which represent approximately 59% of total deposits, and a 10.2% increase in savings accounts.

Credit Quality
As of September 30, 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.  In addition, criticized and classified loans as a percent of the loan portfolio decreased 178 basis points year-over-year to 2.43%.  For the third quarter, net loan charge-offs to average loans totaled $1.1 million, as compared to $0.8 million in the prior year period.  The allowance for credit losses to total portfolio loans at September 30, 2022 was $114.6 million, or 1.11% of total loans, reflecting a slight increase in projected future unemployment rates, offset by continued improvements in COVID-impacted borrowers.  During the prior year three- and nine- month periods ending September 30, 2021, we recorded negative provisions for credit losses of $1.7 million and $50.7 million, respectively, due to significantly improved macroeconomic forecasts and other factors, as compared to negative provisions of $0.5 million and $4.8 million, respectively, in the current year.

Net Interest Margin and Income
The net interest margin of 3.33% for the third quarter of 2022 increased 30 basis points sequentially, which reflects the 225 basis point increase in the federal fund rate from March through July, 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.  We remain focused on controlling the costs of our various funding sources, which is enhanced by the pricing advantage of our robust legacy deposit base.  Deposit funding costs increased just 13 basis points year-over-year to 27 basis points for the third quarter of 2022, or 17 basis points when including non-interest bearing deposits.  This reflects a total deposit beta of just 4%, when compared to the 225 basis point increase in the federal fund rate through July of this year.  Further, total deposit funding costs also increased 8 basis points on a sequential quarter basis.  Accretion from acquisitions benefited the third quarter net interest margin by 5 basis points, as compared to 10 basis points in the prior year period.  Lastly, the forgiveness of SBA PPP loans benefited the third quarter of 2022 net interest margin by a net 1 basis point, as compared to a net 14 basis points in the prior year period.

Net interest income increased $9.2 million, or 8.0%, during the third 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 lower accretion from purchase accounting and lower SBA PPP-related loan income.  For the nine months ended September 30, 2022, net interest income decreased $3.2 million, or 0.9%, primarily due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the third quarter of 2022, non-interest income of $32.3 million decreased $0.5 million, or 1.5%, from the third quarter of 2021, driven primarily by lower mortgage banking income.  Other income of $5.5 million increased $1.5 million, or 37.4%, year-over-year due primarily to higher commercial loan swap-related income.  Net gain on other real estate owned and other assets increased $1.3 million year-over-year to $2.0 million due to the gain on the sale of the underlying equity investments held by WesBanco Community Development Corporation.  Mortgage banking income decreased $3.3 million year-over-year due to a reduction in residential mortgage originations and our retention of more residential mortgages on the balance sheet.  Third quarter mortgage originations decreased 38% year-over-year to $235 million, with approximately 73% retained, as compared to 63% last year.

Non-interest income, for the nine months ended September 30, 2022, decreased $12.5 million, or 12.2%, to $89.6 million.  In addition to the items discussed above, service charges on deposits increased $3.7 million year-over-year to $19.5 million, reflective of increased general consumer spending.  Bank-owned life insurance of $8.3 million increased $2.2 million year-over-year due to higher death benefits and the impact of new policies purchased during the third quarter of 2021.  The net loss on other real estate owned and other assets of $0.1 million also reflects the change in the fair value of underlying equity investments held by WesBanco Community Development Corporation primarily driven by the decline in the equity market during the second quarter of 2022, as compared to a net gain of $4.2 million for the same investment during the first nine months of 2021.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended September 30, 2022 totaled $91.9 million, an increase of only 1.8% year-over-year, reflecting discretionary cost control.  As compared to the second quarter, the increase in expenses reflects the hiring of additional commercial and residential lenders and hourly wage increases, as noted in our prior quarterly comments.  Salaries and wages increased $4.8 million, or 12.1%, compared to the prior year period due to higher salary expense related to normal merit increases, higher staffing levels, and hourly wage increase implemented during the third quarter.  FDIC insurance of $2.4 million increased $1.2 million from last year due primarily to the benefit to last year's FDIC insurance calculation from the large negative credit loss provision recognized during 2021.

On a similar basis, non-interest expense during the first nine months of 2022 increased $6.5 million, or 2.5%, compared to the prior year period, due primarily to higher salaries and wages and higher FDIC insurance, as described above, 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 September 30, 2022, Tier I leverage was 9.68%, Tier I risk-based capital ratio was 12.51%, common equity Tier 1 capital ratio ("CET 1") was 11.35%, and total risk-based capital was 15.37%.

During the third quarter of 2022, WesBanco repurchased 409 thousand shares of its outstanding common stock on the open market at a total cost of $14.2 million, or $34.64 per share.  As of September 30, 2022, approximately 1.3 million shares remained for repurchase under the existing share repurchase authorization that was approved on February 24, 2022, by WesBanco's Board of Directors.

Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the third quarter of 2022 at 10:00 a.m. ET on Wednesday, October 26, 2022.  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 10162209.  The replay will begin at approximately 12:00 p.m. ET on October 26, 2022 and end at 12 a.m. ET on November 9, 2022.  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 and June 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 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 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 $4.6 billion of assets under management (as of September 30, 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.