WSBC - WesBanco Announces Second Quarter 2022 Financial Results

PR Newswire

WHEELING, W.V. , July 26, 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 months ended June 30 , 2022.  Net income available to common shareholders for the second quarter of 2022 was $40.2 million , with diluted earnings per share of $0.67 , compared to $68.1 million and $1.01 per diluted share, respectively, for the second quarter of 2021, which included a release of provision for credit losses of $21.0 million , or $16.6 million net of tax, due to improved economic forecasts in the prior year period.  For the six months ended June 30, 2022 , net income was $81.8 million , or $1.34 per diluted share, compared to $138.6 million , or $2.06 per diluted share, for the 2021 period, which included a release of provision for credit losses of $49.0 million , or $39.0 million net of tax.  Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended June 30, 2022 , was $40.3 million , or $0.67 per diluted share, as compared to $69.0 million and $1.03 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, 2022 was $83.1 million , or $1.36 per diluted share, as compared to $140.3 million , or $2.09 per diluted share, in the prior year period (non-GAAP measures).

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

• Reflecting the strength of our markets and lending teams, total loan growth was 5.4% sequentially, or 21.8% annualized, and 3.8% year-over-year, when excluding Small Business Administration Payroll Protection Program ("SBA PPP") loans
• Residential mortgage production of $328 million , which was consistent with production in the year ago period, significantly outperformed industry trends
• Deposit growth, excluding certificates of deposit ("CDs"), was 5.3% year-over-year, driven by growth in demand deposits and savings accounts
• Second quarter net interest margin of 3.03% increased 8 basis points sequentially, and, when excluding purchase accounting and SBA PPP loan accretion, it increased 13 basis points sequentially to 2.93%
• Strong execution, combined with being named both one of America's best employers and most trustworthy companies, has enabled us to exceed our previously announced commercial hiring plan in half the time, as we have hired 24 commercial lenders since January, with 10 of those expected to start during the third quarter
• In addition, we announced the hiring of Jeffrey Jackson as Senior Executive Vice President and Chief Operating Officer, with the expectation that he will succeed Todd Clossin as President and CEO upon Mr. Clossin's anticipated retirement date of January 1, 2024 , allowing for a smooth and successful transition for our employees, customers, and shareholders
• During the quarter, we continued to return capital to our shareholders as we purchased approximately 1.1 million shares of our common stock on the open market under existing share repurchase authorizations
• 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)
• WesBanco continues to be recognized by its customers for high quality customer service, financial advice, digital services, and trust as it was named multiple times to the Forbes 2022 Best-in-State Banks list as the #1 bank in Ohio and the #2 bank in Kentucky

"We are very pleased with WesBanco's performance during the second quarter of 2022, as we continue to demonstrate the success of our operational strategies implemented the past few years," said Todd F. Clossin , President and Chief Executive Officer of WesBanco.  "We reported strong, broad-based loan growth that was driven by the strength of our teams and their respective markets, as we continued to execute upon our plans of hiring additional revenue-producers across commercial lending, residential lending, and wealth management.  Further, while making strategic, long-term investments, we have maintained our diligent focus on expense management through controlling discretionary costs and managing our financial center footprint.  We believe that the strong foundation we have developed, supported by our unique long-term advantages, position us well for our future opportunities."

Mr. Clossin added, "WesBanco is privileged to have been named one of the top banks in the states of Kentucky and Ohio , which follows our also being recognized by Forbes as the only midsize bank ranked in the top ten of both America's Best Banks for our strong financial performance and Best Midsize Employers for our employee focus.  These top rankings are a strong testament to the outstanding efforts and dedication of our employees, and we are honored to again be recognized by our customers for our trust and service."

Balance Sheet
Loan growth for the second quarter of 2022 reflects strong performance by our commercial and consumer lending teams and efforts to keep more 1-to-4 family residential mortgages on the balance sheet, partially offset by the continuation of both SBA PPP loan forgiveness and elevated commercial real estate payoffs.  As of June 30, 2022 , total portfolio loans of $10.2 billion , when excluding SBA PPP loans, driven by strong growth across all loan categories and markets, increased 5.4%, or 21.8% annualized, when compared to March 31, 2022 , and increased 3.8% from the prior year period.  This strong sequential quarter loan growth demonstrates the successful execution of our expansion into higher-growth markets, including Kentucky and Maryland , and ability to hire top-tier commercial and mortgage loan officers across our footprint.  The second quarter of 2022 included the forgiveness of approximately 606 SBA PPP loans totaling $50 million (net of deferred fees).  As of June 30, 2022 , approximately 480 SBA PPP loans for $27 million remained in the loan portfolio.

As of June 30, 2022 , total deposits were $13.6 billion , which increased year-over-year due primarily to increased personal savings, which more than offset a $379.2 million year-over-year reduction in CDs.  Deposits, excluding CDs, increased 5.3% year-over-year, driven by a 4.9% increase in total demand deposits, which represent approximately 59% of total deposits, as well as a 10.5% increase in savings accounts.  Furthermore, non-interest bearing demand deposits represented approximately 35% of total deposits, as of June 30, 2022 .

Credit Quality
As of June 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 127 basis points year-over-year to 3.14%.  For the second quarter, net loan charge-offs to average loans were immaterial at zero basis points.  The allowance for credit losses to total portfolio loans at June 30, 2022 was $117.4 million , or 1.15% of total loans.  During the three- and six- month periods ending June 30, 2021 , we recorded negative provision for credit losses of $21.0 million and $49.0 million , respectively, due to significantly improved macroeconomic forecasts and other factors during 2021, as compared to negative provisions of $0.8 million and $4.3 million , respectively, in the current year.

Net Interest Margin and Income
The net interest margin of 3.03% for the second quarter of 2022 increased 8 basis points sequentially, which reflects the 125 basis point increase in the federal fund rate during the last 3 months, as well as our successful deployment of excess cash through loan and securities growth.  As a result of increased cash balances from our customers' higher personal savings, investment securities increased by $0.3 billion year-over-year and, as of June 30, 2022 , represented approximately 25% of total assets.  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.  We have reduced deposit funding costs 4 basis points year-over-year to 13 basis points for the second quarter of 2022, or just 9 basis points when including non-interest bearing deposits.  The cost of total interest-bearing liabilities decreased 5 basis points year-over-year to 26 basis points, or 17 basis points when including non-interest bearing deposits.  Accretion from acquisitions benefited the second quarter net interest margin by 6 basis points, as compared to 12 basis points in the prior year period.  Lastly, the forgiveness of SBA PPP loans benefited the second quarter of 2022 net interest margin by a net 4 basis points, as compared to a net 5 basis points in the prior year period.

Net interest income decreased $3.6 million , or 3.1%, during the second quarter of 2022, as compared to the same quarter of 2021, reflecting lower accretion from purchase accounting and lower SBA PPP-related loan income.  For the six months ended June 30, 2022 , net interest income decreased $12.4 million , or 5.3%, primarily due to the reasons discussed for the three-month period comparison.

Non-Interest Income
For the second quarter of 2022, non-interest income of $27.0 million decreased $9.1 million , or 25.3%, from the second quarter of 2021, driven primarily by lower mortgage banking income, which decreased $6.5 million year-over-year, and a net loss on other assets.  Reflective of increased general consumer spending, service charges on deposits increased $1.6 million year-over-year to $6.5 million and electronic banking fees increased slightly to $5.2 million .  While mortgage originations remained strong year-over-year, mortgage banking income was lower due to our continued efforts to retain more residential mortgages on the balance sheet.  We retained 80% of originations during the second quarter of 2022 as compared to 52% last year.  Reflecting the strength of our lending teams and home purchase and construction portfolio, residential mortgage originations during the second quarter totaled $328 million , up 21% from the first quarter and roughly flat to the prior year period.  Net securities losses reflected a $1.2 million loss which is the offset to equity securities in the deferred compensation plan, recorded within employee benefits expense.  The net loss on other assets of $1.3 million 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, as compared to a net gain of $3.7 million for the same investment in the prior year period.

Primarily reflecting the items discussed above, as well as lower loan swap-related income, which is recorded in other income, non-interest income, for the six months ended June 30, 2022 , decreased $12.0 million , or 17.2%.  In addition, bank-owned life insurance of $6.3 million increased $2.8 million year-over-year due to higher death benefits and the impact of new policies purchased during the third quarter of 2021.

Non-Interest Expense
Excluding restructuring and merger-related expenses, non-interest expense for the three months ended June 30, 2022 totaled $87.0 million , a 5.3% year-over-year increase and a 1.2% increase from the first quarter of this year.  Salaries and wages increased $3.8 million , or 10.1%, compared to the prior year period due to higher salary expense related to normal merit increases and the hourly wage increase that we implemented last year, lower deferred loan origination costs, and higher bonus and stock option accruals.  Employee benefits included a $1.2 million credit related to the deferred compensation plan.  FDIC insurance of $1.9 million increased $1.8 million from last year due primarily to certain prior period reporting adjustments resulting in a $1.0 million refund and improved risk factors recorded in the prior year period.  Equipment and software expense for the second quarter of 2022 increased $0.4 million , or 5.8% year-over-year due primarily to the movement of online banking costs from other operating expenses.  Other operating expenses decreased $1.4 million , or 7.9%, due to the aforementioned move of online banking costs, as well as a reduction in ACH and ATM processing charges related to a change in providers, in conjunction with last summer's core banking software system conversion, as well as lower legal costs associated with the resolution of a lawsuit in the prior year period.

On a similar basis, non-interest expense during the first half of 2022 increased $4.9 million , or 2.9%, 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 June 30, 2022 , Tier I leverage was 9.51%, Tier I risk-based capital ratio was 12.49%, common equity Tier 1 capital ratio ("CET 1") was 11.31%, and total risk-based capital was 15.40%.

During the second quarter of 2022, WesBanco repurchased 1.1 million shares of its outstanding common stock on the open market at a total cost of $35.8 million , or $33.28 per share.  As of June 30, 2022 , approximately 1.8 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 second quarter of 2022 at 10:00 a.m. ET on Wednesday , July 27, 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 10162208.  The replay will begin at approximately 12:00 p.m. ET on July 27, 2022 and end at 12 a.m. ET on August 10 , 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 quarter ended March 31, 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 $4.8 billion of assets under management (as of June 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.