Good morning and welcome to WesBanco, Inc's First Quarter 2022 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist. After today's presentation, there will be an opportunity to ask questions. To ask a question you may follow the provided instructions, and to withdraw your question, follow the provided instructions. Please limit questions to one and a follow-up, and then you can return to the queue. Please note this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President Investor Relations and Public Relations. Please go ahead.

Thank you. Good morning. And welcome to WesBanco, Inc. 's First Quarter 2022 Earnings Conference Call. Leading the call today are Todd Clossin, President and Chief Executive Officer, and Dan Weiss, Executive Vice President and Chief Financial Officer. Today's call, an archive of which will be available on our website for one year, contains forward-looking information. Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings-related materials issued yesterday afternoon, as well as our other SEC filings and investor materials. These materials are available on the Investor Relations section of our website, wesbanco.com. All statements speak only as of April 27th, 2022. And WesBanco undertakes no obligation to update them. I would now like to turn the call over to Todd.

Thank you, John. Good morning, everyone. On today's call, we're going to review our results for the first quarter of 2022 and provide an update on our operations and current 2022 outlook. Key takeaways from the call today are; WesBanco remains a well-capitalized financial institution which was enhanced by our tier-2 capital raise and continued to return capital to our shareholders. We continue to make appropriate investments, including strategic hires and our new loan production offices to enhance our ability to leverage growth opportunities while remaining focused on expense management. The successful execution of our strategies has positioned us well for continued success and we're excited about our growth opportunities. We're pleased with our performance during the first quarter of 2022, as we reported net income available to common shareholders of $42.9 million and diluted earnings per share of $0.70 when excluding after-tax mergers and restructuring charges. We exhibited strong expense management as our operating expenses were roughly consistent with the year-ago period. Furthermore, we enhanced our capital position to provide further financial flexibility, while also enhancing shareholder value through effective capital management, which includes the appropriate balancing of share repurchases, dividends, and M&A. While M&A is still not a major focus for us, we remain opportunistic and if we found the right opportunity that fit our well-defined strategy, we would act upon it. During the first quarter, we successfully completed a Tier-2 capital raise through our public offering of $150 million of 10-year fixed to floating rate subordinated debt priced at 3.75%. In addition, our Board of Directors approved the adoption of a new stock repurchase plan for the purchase of up to an additional $3.2 million shares of WesBanco common stock, as well as a 3% increase in our quarterly dividend, which was our 15th increase since 2010. We also repurchased approximately $1.7 million shares of our common stock on the open market during the quarter. The combination of these efforts reflected our commitment to returning capital to our shareholders. As I've said previously, our focus remains firmly on the organic growth potential within our markets, but we will carefully balance the risk-reward proposition between growth and credit quality. As we have clearly demonstrated, our credit strategy continues to generate strong metrics and loan portfolios and enables us to make prudent long-term decisions for our shareholders. Driven by our residential mortgage and commercial loan portfolios which generated annualized loan growth of 10.62% and 2.9% respectively, we reported total loan growth of 3.6% annualized when excluding SBA PPP loans. The growth in our residential loan portfolio reflects both our efforts to retain more loans on our balance sheet and continued relative strength in originations. Total commercial loan growth was driven by both our commercial real estate portfolio, despite continued high payoffs and our C&I portfolio, despite line utilization still roughly 10 percentage points below our historical range. Regarding our residential lending group, we continue to see good growth from our team of mortgage loan originators as their books of business have shifted significantly to home purchases and construction, which accounted for approximately 75% of the originations during the first quarter. As of March 31st, our residential mortgage pipeline, while down slightly from a year ago, has grown to approximately $215 million, an increase of 33% from the fourth quarter. Further, we'll continue to prudently add additional originators, in particular, within our newest markets of Northern Virginia, Nashville, and Indianapolis, which I will comment upon in a few minutes. In fact, our office in Northern Virginia has accounted for approximately 15% of mortgage origination volumes the last few quarters. The combination of our solid pipeline and new loan production offices, which will ramp up over the coming months, bode well for our residential lending program this year. We also continue to see good production from our commercial lending teams. Based on our strong commercial pipeline as we entered the first quarter, these experienced teams generated gross loan production of roughly $640 million during the first quarter, nearly double the year-ago period. In addition, they have continued to seek new business opportunities, which has helped our commercial pipeline reach a record $990 million as of March 31st, a nearly 70% increase from the pipeline year-end, with our Mid-Atlantic region accounting for approximately 28% of our current pipeline. We continue to make appropriate long-term investments, including strategic hires in our new loan production offices to enhance our ability to leverage growth opportunities while remaining focused on expense management. Regarding costs associated with these investments; we continue to review our financial center network to find opportunities for both improvements and optimization. Reflecting the adoption of our digital services by our customers, as well as the proximity of another location of ours, we have recently identified 11 more locations across our markets that could be consolidated, allowing us to fund these strategic investments. As I mentioned last quarter, we made more than 45 revenue-producing hires during 2021 and implemented a plan to hire an additional 20 commercial lenders over the next 12 to 18 months in both our existing and adjacent metro markets. To date, we've accomplished 50% of this goal, including a lender in our Akron-Canton market, we'll be focused on the Cleveland area. We also hired a new Director of commercial and industrial lending. In this new role, this seasoned leader will develop our C&I infrastructure plan, lead strategic initiatives around developing products, and identify necessary resources and internal changes required to enhance this business segment. We also recently announced the opening of two new loan production offices, one each in the Nashville and Indianapolis areas. On March 1st, we announced the opening of our Nashville office, which will initially focus on residential lending as we've hired a very experienced individual who has a lot of success building mortgage teams throughout his career. Then on April 18th, we announced the opening of our Indianapolis office, which will focus on both commercial and residential lending, as we have hired two commercial lenders and our residential sales manager. In fact, this new commercial team has already started to get on opportunities within the first week. We're excited about the long-term growth opportunities of these two new offices. These investments continue to enhance our evolution into a strong regional financial services institution that is built upon distinct growth strategies, unique long-term advantages, and a strong credit and risk culture. Furthermore, none of this would be possible if not for the hard work, dedication, and passion of our employees. I'm extremely proud of our entire organization as our employees have adhered to our community banking roots by focusing on providing top-tier service to our customers. Their efforts have allowed us to receive numerous national accolades so far this year. We were recognized by Forbes as one of the best banks in America based upon financial performance, and an independent survey of our employees voted us one of America's Best Midsized Employers, reflecting our efforts to create an environment where they are supported and positioned to succeed. In fact, we were the only midsize bank in the country to receive top-ten honors for both employee satisfaction and financial success. Lastly, for the fourth consecutive year, WesBanco was named one of the best banks in the world in a ranking based on customer satisfaction and consumer feedback. The culmination of all these accolades in our employees living our Better Banking Pledge daily allowed us to be recognized as one of America's Most Trustworthy Companies by Newsweek through an independent survey of U.S. residents. This has truly been a great start to the year. I would now like to turn the call over to Dan Weiss, our CFO, for an update on our first-quarter financial results and current outlook for 2022. Dan?

Thanks, Todd, and good morning. During the quarter, we recognized record trust fees, record securities brokerage revenue, and record demand deposit levels, as well as positive sequential quarter loan growth while maintaining our discipline over expenses. We continued to make important growth-oriented investments and experienced improvements in the credit reserve for macroeconomic forecasts. We believe our balance sheet is well-positioned for future loan growth and we look forward to margin improvement as rates rise. As noted in yesterday's earnings release, we reported improved GAAP net income available to common shareholders of $41.6 million, and earnings per diluted share of $0.68 for the first quarter of 2022. Excluding restructuring and merger-related charges, results were $0.70 per share for the quarter as compared to $1.06 last year. It's important to note that the first quarter of 2021 was favorably impacted by a negative provision of $22.1 million net of tax or $0.33 per share. Total assets of $17.1 billion as of March 31st, 2022 included total portfolio loans of $9.7 billion and total securities of $4.1 billion. Total securities increased 13.3% year-over-year due mainly to excess liquidity related to our customers' higher personal savings. Loan balances for the first quarter reflected the continuation of both SBA PPP loan forgiveness and elevated commercial real estate payoffs, partially offset by efforts to keep more one to four family residential mortgages on the balance sheet, as well as sequential quarter commercial loan growth. Commercial real estate payoffs during the first quarter continued to decline as expected, totaling approximately $136 million, and we expect these payoffs to continue to decline throughout 2022. As Todd mentioned, the real story this quarter was the sequential quarter loan growth. As of March 31st, 2022, total portfolio loans excluding PPP loans increased 3.6% annualized when compared to December 31st, 2021 due to growth from both commercial and residential real estate loans. Commercial real estate increased 3% annualized quarter-over-quarter, and commercial and industrial, excluding PPP loans increased 2.5% annualized. Strong deposit growth continues to be a key story as total deposits increased, both sequentially and year-over-year to $13.8 billion driven by growth in total demand deposits, which represent approximately 59% of total deposits, as well as growth in savings. We continue to use excess liquidity to strengthen our balance sheet by reducing higher cost CDs and wholesale borrowings, which in total declined $654 million or 33% year-over-year. The net interest margin in the first quarter was 2.95%, decreasing 32 basis points year-over-year, primarily due to the low interest rate environment, as well as the mix shift on the balance sheet to more securities, which now represent approximately 24% of total assets versus 21% last year. Further, additional cash held on the balance sheet negatively impacted the net interest margin by approximately 15 basis points for the quarter. Reflecting the low interest rate environment, we reduced the cost of total interest-bearing liabilities by 18 basis points year-over-year to 19 basis points as we've lowered deposit rates including certificates of deposit and continued to reduce higher-cost FHLB borrowings. Despite record trust fee income and record securities brokerage income this quarter, non-interest income for the first quarter of 2022 was $30.4 million down 8.5% primarily due to lower swap fee income and lower mortgage banking income from our continued efforts to retain more residential mortgages on the balance sheet. Reflecting the rising rate environment and general lack of inventory, residential mortgage originations declined 17% year-over-year to $271 million during the first quarter, with mortgage refinancing representing 26% of production compared to 57% in the first quarter of last year. Furthermore, the amount retained on our balance sheet increased from 40% of originations last year to approximately 75% this quarter, which we expect to return to a more historical 50% range over time. As I mentioned, we prudently manage our expense base in order to make appropriate investments in support of long-term organic growth potential within both our existing and new adjacent markets. For example, we utilized the expense savings from our branch optimization efforts to fund our recent loan production office strategy, as well as our hiring of key revenue-producing personnel across our markets. Excluding restructuring and merger-related expenses, non-interest expense for the first quarter of 2022 increased $0.5 million, less than 1% to $86 million compared to the prior year. Salaries and wages, which increased at $2 million, or 5.5% compared to the prior year, reflect our new hire strategy, normal merit increases, and the hourly wage increase that we implemented last year, partially offset by lower deferred loan origination costs. As compared to the linked fourth quarter expenses of $88.1 million, expenses were down $2.1 million due to salaries reduced from lower day count and reductions in healthcare, pension, and market adjustments on the deferred compensation plan. Turning to capital, we continue to maintain strong regulatory capital ratios as both consolidated and bank-level regulatory capital ratios are well above the applicable well-capitalized standards. We enhanced our capital structure during the quarter with the issuance through a public offering of $150 million of fixed-to-floating rate sub-debt, which qualifies as Tier 2 capital. Our solid capital position allowed us to continue to return capital to our shareholders through both a $0.01 dividend increase and the repurchase of approximately 1.7 million shares during the first quarter. As of March 31st, 2022, we reported Tier 1 risk-based capital of 13.25%, Tier 1 leverage of 9.67%, CET1 of 12.01%, and total risk-based capital of 16.32%, as well as tangible common equity to tangible assets ratio of 7.92%. Due to the rising rate environment, the impact on our tangible common equity ratio from unrealized losses on our available-for-sale portfolio, which are recognized in accumulated other comprehensive income, reduced the tangible common equity ratio by 61 basis points or approximately 7%. We believe we are well-positioned, given our held-to-maturity portfolio makes up 28% of the securities portfolio. Furthermore, 25% of our available-for-sale portfolio is variable rate, which is less sensitive to rising rates, resulting in a lesser impact to AOCI. Now I'll provide some thoughts on our current outlook for the remainder of 2022. We remain an asset-sensitive bank and subject to factors expected to affect industry-wide net interest margins in the near term, including a relatively flat spread between the two-year and 10-year treasury yields and the current overall rising rate environment. We're currently modeling 175 basis points of increases in the federal funds rate with the expectation that we will see two 50 basis point increases over the next three Fed meetings. Our GAAP net interest margin in the second quarter is expected to remain flat due to lower purchase accounting accretion and lower PPP accretion offset by improvements in earning asset yields as rate increases begin to make an impact. We anticipate some margin accretion from PPP loan forgiveness, and the majority of the remaining balance to run off by mid-year, including the remaining net deferred fees of $2.9 million that would accrue to income. Furthermore, we expect the low deposit beta benefit that we experienced during the last rising rate environment roughly four years ago from our core deposit funding base, to provide similar benefits in the expected rising rate environment this year, and anticipate our betas to be lower compared to peers as they have been historically. Our static Alco models indicate an intermediate 100 basis point rate shock scenario, net interest income increases 5.3%, while in a 200-basis-point intermediate rate shock scenario, an 11% increase. Residential mortgage originations should remain strong due to our new loan production offices and hiring initiatives, but at lower levels than the record volumes realized during 2021. In addition, we continue to anticipate selling approximately 50% into the secondary market. Trust fees, which are seasonally higher during the first quarter, and securities brokerage revenue should continue to benefit from organic growth. Electronic banking fees and service charges on deposits will most likely remain in a similar range as the last few quarters. Similar to the rest of the industry, we're not immune from inflationary pressures during 2022, but we'll maintain our diligent focus on discretionary expense management. We will continue to make long-term growth investments through our LPO and hiring strategies, most of which will be funded by the anticipated expense savings from our branch optimization efforts. We are planning our annual mid-year merit increases, and currently anticipate somewhat higher marketing spend during 2022 to supplement our focus on organic growth. Overall, operating expenses will continue to be impacted by the factors just mentioned, predominantly investments in our loan production offices and people, as well as general inflationary pressures. And we're comfortable with the current consensus range for operating expenses. The provision for credit losses under CSL will depend upon changes to the macroeconomic forecasts and qualitative factors, as well as various credit quality metrics, including potential charge-offs criticized and classified loan balances, delinquencies, and future loan growth. In general, reductions in the allowance as a percentage of total loans will depend on the possibility of continued improvements in industries impacted by COVID, unemployment rates and other macroeconomic factors, including increases in interest rates and inflation expectations. Share repurchase activity is expected to continue at a relatively similar pace as during the first quarter, subject to pricing levels, volume restrictions, and future share repurchase authorizations. Lastly, we currently anticipate our full-year effective tax rate to be between 18% and 19% subject to changes in tax legislation, deductions and credits, and taxable income levels.

We will now start the Q&A session. To ask a question, please follow the instructions provided. If at any point your question has been answered and you wish to withdraw it, please let us know. We kindly ask that you limit your questions to one and a follow-up before returning to the queue. We will take a moment to gather our list of questions. The first question comes from Casey Whitman with Piper Sandler. Please go ahead.

Hey, good morning.

Morning.

Morning.

I guess first, Dan, just the commentary you just made around the margin, especially in the second quarter, maybe can you walk us through what that means for the core margin for that quarter? I'm not sure what you're assuming for accretion income and I think you just gave a PBP number that should be around $2.9 million if I just heard correctly. But so does that assume the core margin is somewhat flat as well or maybe can you just dumb that down for us?

Sure, Casey. I'm referring to GAAP margin here. If we compare the first quarter GAAP margin of 295 to the fourth quarter margin of 297, and exclude 15 basis points from both purchase accounting accretion, which was eight basis points in the quarter, and PPP, which was seven basis points, we arrive at what we call core margin excluding PPP, which comes in at 2.80%. This is an increase from 2.79% in the fourth quarter. We anticipate that the second-quarter margin on the same basis will be a few basis points higher when excluding purchase accounting and PPP accretion. We are expecting a couple of basis points decrease from purchase accounting and PPP, along with a couple of basis points of improvement on the core margin. It's important to note that interest expense on the subordinated debt will affect the second quarter margin compared to the first quarter, specifically a 3.75% interest on $150 million that only applied for two weeks in the first quarter. Additionally, as shown on Slide 4, we are experiencing a loan runoff around 3.74%, while new loans are coming in at approximately 3.33%. This means the spread of about 40 basis points has decreased since the fourth quarter and even from the third quarter of last year, and we expect this spread to tighten considerably in the second quarter. These factors contribute to why we might not see a margin improvement greater than two basis points in the second quarter.

Maybe third quarter we could see more of a lift, I guess without the sub-debt and potentially with this adjusting spread?

The real increase in our margin is expected in the second half of the year, specifically in the third and fourth quarters. We anticipate significant improvements once the rate increases have been fully implemented for three full months. Currently, for each 25-basis point increase in rates, we're forecasting an improvement in the quarterly margin between three to five basis points, but only after that 25 basis point increase has been in effect for a complete three months, as many of our loans re-price on a quarterly basis. Additionally, if we consider a total rate increase of 100 basis points in the second quarter, the effects will be evident in the third quarter.

Okay. Appreciate that. Thank you. Just your comments around expenses with everything going on with new hires, branch closures, etc. Sorry, when you were talking about the consensus range you're talking about the full year, 2022 to look at or the quarterly range going forward being somewhere in that range consensus?

We're in the range.

The quarterly range. Okay. I will let someone else jump on. Thank you.

The next question comes from Karl Shepard with RBC Capital Markets. Please go ahead.

Morning guys. How is everyone doing?

Morning.

Morning.

I wanted to start, I guess, with the question on the loan pipelines. I heard record levels and that's because it's good. I wanted to ask if you could expand a little bit on the color respect that the new hires are contributing in some of the efforts in newer markets too. But more curious in an update on general customer sentiment, demand, and any shift in thinking about your borrower base in the last three months?

I'll answer that. This is Todd. If you look at the pipeline right now, it's just under $1 billion. I wish I could say it was $1 billion, but it's $980 million to $990 million. So it's hovering right around that, which, as we mentioned, is up significantly from where it was in the fourth quarter. We've never seen pipeline numbers as big as we have right now. It is pretty much across the footprint, but we are seeing outsized pipeline opportunities in our newer markets, particularly in Maryland and the Mid-Atlantic region, and also in some of our Kentucky markets. We're glad to see that because the reason for entering those markets was to transition our bank from a historical low mid-single-digit growth rate to eventually a mid-upper single-digit growth rate. So we're seeing the expected growth there. I would say we're starting to see opportunities from people we've hired in the past since this hiring has been happening for over a year. We mentioned we're about 50% through our goal of hiring over the next 12 to 18 months. We feel really good about the talent we've brought on board, as they joined during the mid to latter part of the first quarter after receiving their incentives and bonuses from their previous positions. We expect this to be additive to the pipeline moving forward. In response to the last part of the question regarding what we are seeing across the footprint,

I would say sentiment is good, very positive. We do see some supply challenges, particularly with labor in various businesses, but they seem to view this as a temporary situation. Inventory build appears to be occurring, and although we experienced growth in commercial and industrial sectors, we're still about 10 basis points or approximately 10% below the average line usage we observed before the pandemic. We believe that improvement is still to come. Additionally, everyone is closely monitoring inflationary pressures and assessing whether they can pass those costs onto their sales prices. Overall, I would say the general outlook has been very positive, and we're not receiving many negative signals from any area of our operations.

That's helpful. I have a follow-up question. You mentioned the progress with new hires and the seasonal aspect of that after year-end. Would it be correct to say that there is considerable capacity among the new hires to contribute in the next quarter or two, or is this more about a year-end impact on production?

No, we would expect them to produce pretty quickly. Loan production office in Northern Virginia was last July or so that we get that going and that's been representing about 15% of our quarterly Company-wide production in residential mortgage so that came on really quickly and you know with the new hires and Nashville, and if we mentioned in the prepared remarks and in Indianapolis, already starting to see deal flow on the commercial side. So we would expect to see that build throughout the second, third quarters and then be part of our permanent run rate going forward.

Okay. Great. Thanks for the help.

Sure.

The next question comes from Stuart Lotz with KBW. Please go ahead.

Hey, guys. Good morning.

Good morning, Stuart.

Morning, Stuart.

Appreciate all the color on the expense outlook. But as I think about the $86 million run rate, this quarter, expense savings from the 11 branch closures in that you identified, and I think that met your commentary last quarter. Just help me piece together how we get from the $86 million to the higher, I guess, what consensus is implying on the expense run rate, closer to $88 million or $89 million per quarter.

Dan, maybe you want to go through that. Some of it is just a lower benefit expense in the first quarter that we're not going to see most likely in the second quarter. But we are bringing on more people and we do have mid-year merit increases and things like that that will take place. But a lot of it's really what we're looking at in the first quarter, not a typical run rate as you would typically have in the first-quarter. Dan?

Sure, Stuart. Let's break down the expenses, particularly salaries and wages and employee benefits, from the fourth quarter to the first quarter. Salaries and wages decreased by approximately $1.5 million compared to the fourth quarter. There are two main reasons for this: first, there were two fewer days in the first quarter, which accounted for about $900,000. Secondly, lower mortgage broker commissions contributed an additional $500,000 to $600,000 due to reduced production volumes in that sector. This summarizes the salary decrease. As Todd mentioned, our hiring initiatives, along with new hires made in the first quarter, haven’t fully impacted our numbers yet. Regarding benefits, they decreased by about $1.7 million for three primary reasons. Firstly, market adjustments in our deferred compensation plan saw a decline of approximately $900,000, which reflects as a loss in our securities gains or losses. This downward movement in equity securities corresponds with a credit of $900,000 to employee benefits. The second factor is a $400,000 reduction in pension expenses, linked to the funded status of our plan and the expected return on plan assets. This reduction will result in a consistent $400,000 lower pension expense each quarter for the remainder of 2022. Finally, other employee benefits dropped by $300,000 due to lower healthcare costs compared to the unusually high fourth quarter, along with a change to a more cost-effective PPO. However, this decrease was offset by higher unemployment, social security contributions, and 401k matching tied to the timing of 2021 bonuses processed in the first quarter. Additionally, we experienced increased recruiting costs due to our hiring efforts. Overall, these factors help clarify the differences from the fourth quarter, and as we continue hiring, we expect to address these discrepancies.

That's very helpful. Regarding capital and your outlook for the buyback, I see that this quarter you have spent $1.7 million and have about $2.9 million remaining in the current authorization. Given the thinner total capital, how comfortable are you with potentially lowering that amount if we encounter another AOCI hit next quarter? Additionally, would you consider possibly renewing that authorization if you were to reach the mid-year limit? Any insights on this would be appreciated. Thanks.

You go first.

I mentioned in my prepared comments that we expect similar levels of share buyback in the second quarter, influenced by core pricing levels, volume restrictions, and future share repurchase authorizations. From a TCE perspective, there are a few factors to consider. First, we believe the rising rate environment will greatly benefit the bank. Additionally, we see the TCE deterioration as a temporary issue rather than a permanent one, and we do not plan to sell any AFS securities. Therefore, there will be no impact on interest income. If we experienced a similar impact as we did this quarter, which was 61 basis points, based on our current position on the curve and some sensitivity analyses we've carried out, it would require a 100 basis points increase in the 10-year rate to result in about a 50-basis point decrease in our TCE ratio. This provides us some protection. Generally speaking, our long-term capital target should have a TCE ratio around 7.5%, and we are currently about 42 basis points above that. While the AOCI impact is bringing us down more quickly, we're comfortable with our current status and the level of exposure we have.

He answered it very, very well and we do like to have slightly more capital than peers, just our conservative nature and we continue to take that into consideration and evaluating buy-back activity.

Great, thanks for taking my questions.

Sure.

The next question comes from Russell Gunther with D.A. Davidson. Please go ahead.

Morning, Russell.

Good morning.

Hey, good morning, guys. Wanted to circle back to the loan growth commentary there. Very solid results, very strong commentary. And Todd, you touched on the strategic goals of migrating from the low-to-mid to the mid-to-upper single-digit range. I guess based on the start to the year and a lot of what we've already discussed, is that a goal you think you can achieve this year?

The long-term plan targets mid to upper single-digit growth, which is why we entered the chosen markets and pursued specific acquisitions. We're encouraged by the current progress. If we had seen a typical $85 million quarterly payoff in commercial real estate to the secondary market, our performance would have suggested an annualized loan growth of around 5.5% for the quarter, as we actually reached about $536 million. While we've added a bit more to our books than we might in the future, we're moving closer to achieving that mid-to-upper single-digit goal if other factors stabilize. A significant factor affecting this is the continuation of commercial real estate loans flowing to the secondary market, which we anticipate will decrease. Our overall growth is somewhat tied to that trend, along with general economic growth. Although a slowdown in the economy may not necessarily lead to a recession, we need to consider its potential effects on lending. These factors are beyond our control, which is why our focus is on maintaining that mid to upper single-digit growth outlook. This perspective allows us to exclude unpredictable variables and showcase our strategic efforts to drive long-term growth over time. It's important to note that we're committed to maintaining our credit profile as we pursue growth, and we prefer to originate loans rather than buy portfolios to ensure we uphold our credit standards without compromising for loan growth. With strong pipelines and an expectation of a decline in commercial real estate payoffs as discussed, we are looking toward achieving solid, high-quality growth. Our approach has involved entering markets with slightly higher growth rates than the national average, complementing our legacy markets, which have traditionally performed well. We believe this strategy has been effective, and we look forward to seeing the results over the coming quarters and years.

I appreciate your thoughts there, Todd. Thank you for that. And then as my follow-up, along the same lines, you mentioned halfway through the targeted hires for this year and the national Indianapolis LPOs. Are you in the newer markets where you want to be and those new hires would bulk up there or are there contemplated other LPOs? And if so, just a reminder of what would be attractive.

We're not really looking at other LPOs at this point. We identified Northern Virginia last year, we're there, we identified Nashville and Indianapolis, we're there now. We already have a team in Akron-Canton, which is 20 minutes south of Cleveland. So we're building that out a little bit too. But those are the markets that we liked and with the liquidity we have, and those are markets that are close enough to markets that we're already in that we feel comfortable with them. I mean, I spent most of my career in Cleveland and spent time in Nashville and head oversight of Indianapolis from a board perspective and stuff. So they're not unknown markets to me and other people on the team. But we're comfortable with those because we can get a car, we can drive to them. And they are markets that we could get bigger in at some point in the future through potential M&A like we did in Pittsburgh. Set up an LPO there for a number of years, 10, 15 years ago and then did two acquisitions to build that into a market. So I could see that happening in some of the markets where we have LPOs right now. But we don't have any plans to go to St. Louis or Atlanta or something like that and continue to do more LPOs. We're in the markets we want to be in right now.

That's very helpful. Thank you, guys, for taking my questions.

Sure.

The next question comes from Steve Moss with B. Riley Securities. Please go ahead.

Hey, this is Steve sitting in for him today. Many of my questions have unfortunately been addressed, but asset sensitivity seems to be an important factor here. I would like to know if you could outline the deposit beta assumptions and provide an update on the duration of the securities portfolio as well.

Sure Dan, do you want to handle that?

I will address your question about the duration of the securities portfolio first. The total duration for the entire portfolio, which includes both available-for-sale and held-to-maturity securities, is 4.8 years. The duration for available-for-sale is 4.6 years, while for held-to-maturity it is 5.4 years. It's worth mentioning that around 26% of the available-for-sale portfolio consists of floating rate securities, which will re-price significantly faster than fixed-rate ones. This factor has been crucial in mitigating the impact on tangible common equity and accumulated other comprehensive income, as the effect on the available-for-sale portfolio is lessened due to the floating rate portion. Regarding betas, if we refer back to our position in 2018, we observed a beta of approximately 20%. We expect a similar level throughout this cycle, anticipating no immediate change in deposit rates early on. However, later in the cycle, we predict that betas may exceed 20%. For now, we are modeling a 20% beta based on past experiences. Currently, our loan-to-deposit ratio stands at 71%, with our target being around 95%. We have ample balance sheet liquidity, with cash making up about 8% of the balance sheet. This gives us significant leeway to maintain deposit rates at their current levels. However, I believe that predicting betas in this cycle may be more challenging due to the expected pace of rate increases. That's our current situation.

Our legacy footprint is in Shale Country. We consistently receive deposits ranging from $15 million to $25 million a month simply by operating our facilities. It's impressive to see this steady inflow. While it depends somewhat on natural gas prices, which are currently rising, we benefit significantly from this situation. As Dan noted, our loan-to-deposit ratio is in the low 70% range, giving us ample room for growth. We continue to see a substantial amount of deposits flowing into the organization, and that trend is likely to persist.

That trend is likely to continue. I believe it will provide benefits for a decade or more. We recognize this, and it allows us to maintain a lower deposit beta. As we noted, this was a significant advantage for us during the last rising rate cycle. Looking back to 2018, we experienced substantial benefits, and we're hopeful for a similar situation this time. However, as Dan pointed out, the current environment is different due to the expected rapid rate increases. Nonetheless, I anticipate that the same dynamics will emerge. We will likely be one of the last to need to raise deposit rates, and we will continue to be selective in addressing the needs of certain customers while ensuring that we take care of them. Overall, I believe you will see a similar approach from us as during the previous rate increases.

Thank you. Very helpful. And I guess last question from me, it's going to be like you guys have a nice pipeline here. You guys have gone through a lot of how you plan on harvesting that. I'm just curious how are roll on yields holding up nowadays and if there's any changes there.

Dan, I know we've got a slide on that. You've mentioned a little bit already in terms of the difference between what's coming on versus what's coming off and if you want to handle that again.

If you look at slide 4, you can see the bottom graph on the left-hand side. During the quarter, we observed a roll-off around 374 and new loans coming in at approximately 3.33%. That's the average for the quarter. In March, we noticed that new loans were about four or five basis points higher, around 337 or 338.

Okay. Awesome. Thank you. Very helpful. And great quarter.

Thank you.

Thank you.

The next question comes from Brody Preston with Stephens Inc. Please go ahead.

Morning, Brody.

Hey. Good morning, everyone.

Morning, Brody.

I wanted to ask Dan about the commercial loan portfolio mix. On the slide where you mentioned that up to 64% is variable rate, could you clarify if that is the contractual re-pricing schedule? I'm trying to understand how much of the 64% that is variable rate is actually floating rate, meaning it reprices immediately, or if that is indicated by the 46% that is up for re-pricing in three months.

Yes, you are correct, Brody. It's 46%. This figure represents the portion of variable rate loans that will reprice within three months, referring specifically to the re-pricing term.

Got it. Okay. I have a follow-up on the yield question, specifically regarding the LPOs you are involved with. Is there any difference in the competitive landscape of those markets? Nashville is known to be quite competitive, which may be prompting you to lower your pricing or accept narrower spreads on pricing.

I would say we have the most experience in Northern Virginia, where we've been operating since July of last year. My answer is no, it is competitive, but all our markets are quite competitive. It's still early in Nashville and Indianapolis, but I expect the level of competitiveness to be similar to what we're observing in other areas. For example, Cincinnati is one of the most competitive markets in the country due to the number of banks and strong institutions there, along with the population size, so I don't anticipate other markets being more competitive. When I was in Nashville for a few years, it was indeed a competitive market, and while things have changed since then, I don't expect it to be more competitive than our other markets. If it were to be more competitive, we would likely adjust pricing rather than alter our risk appetite. We're committed to maintaining the same risk profile, and if adjustments were necessary, we would only do so on price. However, at this stage, we have not seen a need to make such adjustments, and I would be surprised if that changed.

And Todd, I did want to follow-up on that, what you just said on the natural gas and shale customers that you have just given some of the upwards swings in natural gas prices that you see, are those royalties that your customers are seeing, those fixed pricing and do they adjust at any point within the contracts' life? I'm just looking at it saying, if there is any flexibility there, it's a little bit of a perfect storm for you guys because you've got another source of outsize non-interest bearing deposit growth just from the price swings alone.

Yeah. Typically what you see when the leases are initially done, again, these are homeowners, we don't finance or bank the big natural gas companies or anything like that. But when the leases are struck, there's a bonus payment that's made, and then there's the royalty fees. The bonus payment is behind it, that was done a number of years ago. And then they typically would have a five-year or so time period as associated with that, so they get a chance to renegotiate it probably several times over the life of the fracking that's going on. So there could be more of an upside opportunity there, but I think what we've seen most is that it's based upon the throughput. It's really the amount of natural gas that's being taken out of the ground multiplied by whatever that current price is that's going on. So we see a trend up and then we see a trend down. We've been to a couple of different up and down cycles. We've seen over the last eight to 10 years. And I think on the low side, maybe it got down as low as $4 million or $5 million a month. And then we're probably at the higher end of it now, and that $20 million to $25 million a month range. So it moves back and forth between that, but I don't expect there to be any big changes one way or the other on that. If there are new leases that come on, kind of the way it works that they've got to drill within five years or if they lose they lose the right to the lease. And a lot of the drilling companies are more focused on profitability now than they were in the past. But with natural gas prices up and the demand for natural gas kind of as a transition fuel being as strong as it is, there's just seems to be a lot more activity, not just in terms of price going up, but in terms of expectations that the band and companies are going to make more money. And I think when that happens, the brand owners make more money too, because they get higher royalties.

Got it. Okay. And if I could just sneak one last one in. Hey, Dan, how much of the increase in taxable security yields was due to lower premium amortization?

That's a tough one. I do not have that in front of me.

No worries. That's okay. I'll follow up if I feel like I really need it. Thanks, guys.

Thank you.

Thanks.

The next question comes from Daniel Cardenas with Boenning and Scattergood. Please go ahead.

Good morning, guys.

Morning, Dan.

Most of my questions have been asked and answered. Just a couple of small follow-ups. As it relates to the $990 million pipeline that you have at the end of the first quarter, what's your anticipated conversion rate on that and how does that compare to historical conversion rates?

I think we generally avoid including items in the pipeline unless we are quite confident about them. While we have a broader report that covers more opportunities, the pipeline report focuses on those projects we expect to see a strong follow-through on. Last year, we originated around $1 billion to $2 billion in commercial loans, and based on that, I anticipate the conversion rate will be well above 50%. If we maintain the pipeline at $900 million to $1 billion and continue to progress through the year, I would hope that we would convert more than 50% of that, possibly significantly more.

Okay, good. And then just a quick question on the fee income, the fee income number that we saw this quarter, how much of that was related to the debt benefit?

Dan, do you have that?

$1.9 million.

Okay. All right. That's all I have. I'll step back. Thank you guys.

Thanks, Dan.

Thanks.

Hey, good morning, gentlemen.

Morning.

Hey, good morning, gentlemen.

Morning.

Some of the most of my questions have been asked and answered, but one follow-up question in terms of the hiring outlook here, I think you said you're halfway through. Given the strong production growth and the strong pipeline, any chance you might up your hiring targets as you move through the year from that 20 to get closer back to the 2021 level?

I believe we can find good talent and we are currently experiencing positive momentum. Some of the recognition we have received has increased our visibility in markets where WesBanco was previously less known, such as Nashville and Indianapolis, and I hope this upward trend continues. If we bring on more talent, we will certainly see the results in our production. We prioritize achieving positive operating leverage, and as long as we can demonstrate this through our new hires, we will keep moving forward with hiring. My goal for the next year is to potentially report that while our salary expenses may have been higher than expected, we will have seen significant growth in loans and fee income, which would reflect positively on our operating leverage. Our success in the first quarter was partly due to timing, but we are also in discussions with many strong candidates. I expect to complete our hiring plans in the coming quarters. As a growing bank and company, I will not prevent our teams from hiring talented individuals who can contribute to our success, as I believe this is essential for the long-term health of the company.

Got it. I appreciate the color.

Sure.

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Clossin for any closing remarks.

Great. Thank you. And appreciate everyone joining us today. Hopefully, I know we're doing more in-person conferences and visits and things now than we were over the last year or two. And so I'm hoping to get a chance to see many of you in person. Many of you haven't met Dan Weiss yet, our CFO in person. So looking forward to doing that as well too. And please continue to stay safe, have a good day, and appreciate your continued interest in our story.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.