Good day and welcome to the WesBanco Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. John Iannone. Please go ahead, sir.

Thank you. Good morning and welcome to WesBanco, Inc.'s Fourth Quarter 2023 Earnings Conference Call. Leading the call today are Jeff Jackson, 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 January 24th, 2024, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff.

Thanks, John, and good morning. On today's call, we will review our results for the fourth quarter of 2023 and provide an update on our operations and current 2024 outlook. Key takeaways from the call today include that we successfully navigated industry-wide headwinds through the strength of our teams and our strategies, sustained loan, deposit and fee income growth, maintained strong capital levels and key credit quality measures, and focused on delivering positive operating leverage through new products and services and expense management. Despite the industry-wide headwinds caused by the Federal Reserve's record interest rate escalation, WesBanco performed well during 2023 through our continued focus on customer service and sustainable growth strategies. We achieved sustained loan, deposit and fee income growth, maintained strong capital levels and credit quality, and remain focused on ensuring a strong organization for our shareholders while investing appropriately for long-term sustainable growth. Through successful operational execution, we generated solid annual net income while remaining a well-capitalized financial institution with sound liquidity, a balance sheet and credit quality metrics built upon well-defined strategies and core advantages, which will ensure success regardless of the economic environment. As we began 2024, we remain well capitalized with solid liquidity and capacity to fund loan growth, positioning us well to continue generating value for our shareholders. For the quarter ending December 31st, 2023, we reported net income available to common shareholders of $32.4 million and diluted earnings per share of $0.55. And for the full year, we reported net income available to common shareholders of $151.9 million and diluted earnings per share of $2.56 when excluding after-tax merger and restructuring charges. Furthermore, the strength of our financial performance during the past year is demonstrated by our return on tangible common equity of 13%, nonperforming assets to total assets of just 16 basis points, and a capital position that continues to provide financial and operational flexibility, as demonstrated by our tangible common equity ratio of 7.62%. Throughout the past year, we accomplished several milestones and continued to receive numerous national accolades resulting from our strong performance, operational strengths and focus on communities, customers and employees. These accolades, which recognize our commitment to sustainability and excellence, are also a testament to the hard work and dedication of our employees, so I extend a heartfelt thank you to them. Just to highlight a few of our accomplishments, WesBanco was awarded its eighth consecutive composite outstanding rating by the FDIC for its Community Reinvestment Act performance, a period spanning more than 20 years. We expanded our commercial loan production office strategy into the fast-growing Chattanooga market, representing another step in the execution of our long-term sustainable growth strategy. We introduced new products and services to better serve our customers, including the new WesBanco One Account, which continues to exceed adoption expectations with more than 90,000 new and migrated accounts today. We continued our commitment to building a diverse and inclusive workforce by hosting three in-person WesBanco equity conferences in our Upper Ohio Valley, Mid-Atlantic and Southwestern Ohio-Northern Kentucky markets. Lastly, we continue to receive top rankings this past year, reflecting our strength and stability and the efforts of our employees every day to maintain our community banking roots and customer focus philosophy. We were recognized for strong customer service, digital services, financial advice, soundness, safety and profitability, and were named one of Newsweek's Best Regional Banks based on soundness, profitability, and customer reviews. The key story for the fourth quarter as well as the year was solid loan growth and deposit growth, while maintaining our strong credit standards, which remain at relatively low levels and favorable to average of all banks with assets between $10 billion and $25 billion. We reported fourth quarter loan growth of nearly 9% year-over-year and 11% quarter-over-quarter annualized, which was driven by both our commercial and residential lending teams. Total commercial loans increased 8% year-over-year and 13% sequentially annualized, driven by our banker hiring and loan production office strategies. In fact, our four newest loan production offices accounted for more than 20% of the commercial loan growth during the year as they continue to demonstrate a strong return on investment. Furthermore, we continue to ensure that we earn an appropriate return on the loans we are generating as new commercial loan yields are topping 8%. Our commercial loan pipeline as of January 15th was approximately $820 million, a 19% increase from the level at December 31st and roughly flat to September 30th. Our teams continue to find business opportunities to replenish the pipeline that has been driving our strong loan growth. Our new loan production offices account for 28% of the current pipeline, with Tennessee representing a meaningful percentage. Depending upon the economy, we expect to generate continued loan growth in the mid to upper single digit range during 2024 as our loan production offices and banker hiring initiatives gain additional traction. Through the strong efforts of our retail and commercial teams, we successfully navigated the industry-wide turmoil earlier in 2023 and grew total deposits year-over-year. Building upon the success of our company-wide deposit generation and retention campaign, we again grew total deposits during the fourth quarter, which increased 2.4% annualized from the third quarter. In addition, our focus on diversifying our revenue streams with new fee-based services is driving positive noninterest income trends as demonstrated by $9 million of new commercial swap revenue and organic growth in our trust and wealth management business during this past year. Our bankers continue to work diligently on deepening our commercial relationships with a focus on deposit and fee business cross-sell. During the fourth quarter, we had a nice team win in our Western Pennsylvania markets, where a team comprised of retail, commercial, and treasury management associates significantly expanded our relationship with a commercial customer. After several discussions to understand the client's unique needs, the team recommended several tailored financial solutions including ICS accounts, wealth management, and perks of work to better serve the client and its employees, ultimately earning several business deposit accounts totaling seven figures, a multi-million dollar family trust, and additional personal deposit accounts. This example highlights our commitment to winning complete banking relationships through a deep understanding of client needs, and we expect to continue these strong efforts at deepening relationships going forward. We continue to make important growth-oriented strategic investments that will generate positive operating leverage. During the past year, we implemented our retail transformation initiative, which we expect to complete during the first quarter of 2024. This initiative focuses on ensuring appropriate staffing models for all of our financial centers, including staffing reductions and the hiring of business bankers to drive additional growth. We reduced staffing by 65 employees throughout 2023 through a combination of attrition and retirements, and currently expect another 20 reductions during the first quarter. We intend to use about half of the overall savings to grow our business banking program and generate additional revenue through loans, deposits, and merchant and treasury management fees. We expect a slow build on business banking investment through the first year with potential expansion in coming years. Lastly, the transformation of our treasury management business into a sales-oriented organization primed to be more comprehensive and profitable is progressing nicely. We are completing the rollout of a couple of new products during the first half of the year. Integrated payables is a business-to-business payment solution designed to streamline the accounts payable process for our customers by migrating traditional check payments to more efficient forms of payment. Customers will benefit from reduced AP costs, elimination of errors, enhanced fraud mitigation, and potential rebates generated from virtual card payments. The multi-card is a pay-in-full card issued to employees of established companies combining travel and entertainment fleet cards and purchasing cards into one. Customers will benefit from optimizing payable efficiency while benefiting from robust employee controls designed to reduce fraud and enhance accountability. In addition to robust transaction reporting and multi-card transaction control, multi-card clients will receive an annual rebate based on their total card spend. Due to the complexity of integrated payables, onboarding new clients takes somewhat longer after service agreement documentation is completed; however, multi-card has a shorter timeframe after the service agreement documentation is completed. As industry experts estimate that 40% of all business-to-business payments in the U.S. are still made with a check, we believe this is an untapped market for our commercial and small business clients, and we have great opportunities to deepen our commercial banking relationships. We are currently focused on building a strong pipeline, with revenue beginning to be generated during the second half of 2024. These are examples of our commitment to innovation and investments that serve customers better and drive sustainable growth. I believe in the long-term growth prospects we are building for our customers, communities, employees, and shareholders. I would now like to turn the call over to Dan Weiss, our CFO, for an update on fourth quarter financial results and a current outlook for 2024. Dan?

Thanks, Jeff, and good morning. Our fourth quarter results continued to demonstrate loan and deposit growth, strong capital levels and credit quality, and a stable net interest margin. For the quarter ending December 31st, 2023, we reported GAAP net income available to common shareholders of $32.4 million or $0.55 per share and $148.9 million or $2.51 per share for the full year. Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses for 2023 was $151.9 million or $2.56 per diluted share, compared to $183.3 million or $3.04 per diluted share in the prior year period. The primary driver of year-over-year results was the impact of the higher interest rate environment, the recording of a provision expense this year compared to a provision release in the prior year, and inflation. As of December 31st, total assets of $17.7 billion included total portfolio loans of $11.6 billion and securities of $3.4 billion. Total portfolio loans grew nearly 9% year-over-year, reflecting the strength of our markets and lending teams combined with our strategic lending initiatives. We continue to use our securities portfolio to fund loan growth, as the regular cash flow from the portfolio funded roughly 40% of the nearly $1 billion of loan growth during the year. Commercial real estate loan payoffs totaled $276 million during the year compared to an anticipated annual level in the $500 million range within a more normal operating environment. As interest rates continue to stabilize and potentially decline, we anticipate the pace of CRE payoffs to pick up meaningfully as we progress throughout 2024. Residential mortgage originations totaled approximately $690 million for the full year, with roughly 43% of the originations sold into the secondary market compared to $1 billion and 23% respectively for 2022. Our retail and commercial teams continue to grow deposits by winning new accounts and deepening relationships with existing customers as total deposits of $13.2 billion increased both sequentially and year-over-year. Further, broker deposits totaled $211 million at December 31st, a decrease of $53 million from September 30th. Excluding broker deposits, total deposits increased approximately $134 million over the third quarter, representing a 4% annualized growth rate. Consistent with the higher interest rate environment, we continue to experience some shift in the mix of our deposits with noninterest-bearing demand deposits down 5% from the third quarter; however, total demand deposits and non-interest-bearing demand deposits as percentages of total deposits continue to remain consistent with the ranges and averages since 2019. The fourth quarter's net interest margin of 3.02% remains stable to the third quarter, but similar to the industry, declined year-over-year due to higher funding costs from increased deposit costs and continued deposit remix into higher rate money market and CD accounts. Total deposit funding costs, including non-interest-bearing deposits for the fourth quarter of 2023, were 161 basis points, an increase of 25 basis points over the linked quarter. We mostly offset these higher funding costs through the reinvestment of cash from securities and loan maturities into higher-yielding loans. Our fourth quarter loan yield of 5.61% is up 93 basis points year-over-year and 15 basis points sequentially as yields on new commercial loans have exceeded 8% during the quarter. Non-interest income for the quarter ending December 31st totaled $30 million, an 8.3% increase from the prior year period, driven by commercial swap and wealth management fees as well as higher bank-owned life insurance income. Swap valuation losses totaled $2.5 million during the fourth quarter, more than offsetting the $2.2 million in new commercial swap fees. For the full year, we generated $9 million of new swap fees, more than doubling the amount earned during the prior year and exceeding the $8 million target. Operating expenses continued to reflect nationwide inflationary pressures as well as long-term growth investments, including previously completed elements of our strategic loan production office and lender hiring initiatives. Excluding restructuring and merger-related expenses, non-interest expense for the three months ended December 31st, 2023, totaled $99.5 million, up $9 million year-over-year due to higher employee-related expenses, equipment and software, marketing, and FDIC insurance. Salaries and wages were higher due to mid-year merit increases. Equipment and software was up from our ATM upgrade project, and marketing expense increased in support of our loan and deposit campaigns. FDIC insurance was higher due to the increase in the minimum rate for all banks, but it's also worth noting that we were not subject to the special FDIC assessment that some other banks incurred. Lastly, employee benefits expense increased due to higher deferred compensation expenses and healthcare costs. And just as a reminder, market fluctuations in equity securities and the deferred compensation plan are recognized within employee benefits expense and added $1 million in the fourth quarter. The offsetting gain is recorded within net securities gains. Excluding these market fluctuations, the fourth quarter run rate would have been $98.5 million. Our capital position has remained strong, as demonstrated by regulatory ratios that are above the applicable well-capitalized standards and favorable tangible equity levels compared to peers. Our tangible common equity to tangible assets as of December 31st, 2023, was 7.62%, up 34 basis points year-over-year or 7.07% when including unrealized losses on our held-to-maturity securities. We continue to believe that we're well positioned for any operating environment, and we actively manage our liquidity risk to ensure adequate funds to meet changes in loan demand, unexpected outflows in deposits, and other borrowings, as well as to take advantage of market opportunities as they arise. Turning to our current 2024 outlook, we continue to model Fed funds to remain unchanged at 5.5% until mid-year with three 25 basis point rate cuts in June, September, and December. Reflecting the current operating environment of higher funding costs and some deposit mix shift into higher-yielding deposit products, we expect some slight net interest margin contraction in the first half of the year into the mid to upper 2.90s, and then stabilizing throughout the rest of the year. Trust fees should benefit modestly from organic growth but will be impacted by equity and fixed income market trends. As a reminder, first quarter trust fees are seasonally higher due to tax preparation fees. Securities brokerage revenue is expected to remain consistent with the amount generated during 2023, but could benefit modestly from organic growth dependent upon the economy and equity and fixed income markets. Electronic banking fees, which are subject to overall consumer spending behaviors, are anticipated to grow slightly from the range over the last few quarters, and service charges on deposits are expected to remain consistent with the amount that we earned during 2023. Mortgage banking income will continue to be impacted by the overall residential housing market trends, but should see some improvement if interest rates begin to move lower. Depending on customer preferences, we intend to sell approximately 50% of our mortgage originations into the secondary market. Gross commercial swap fee income excluding market adjustments should be in a similar range to 2023. Regarding the new treasury management products Jeff highlighted, we're focused on building the pipeline and anticipate some modest benefit during the second half of 2024. We remain focused on delivering disciplined expense management to drive positive operating leverage. And as Jeff mentioned, in support of this, we're well into the transformation of our financial center network to optimize branch-level staffing and reallocate resources into additional revenue-generating hires. The cost savings from the staffing adjustments are partially in the fourth quarter run rate, and we plan to make additional business banker hires. So we expect salaries and wages in the first half of the year to be relatively flat. Software and equipment will be higher throughout the year due to the ongoing related costs related to the upgrade of our ATMs and other product and service enhancements, which are expected to add between $1 million and $1.5 million per quarter to this line item. We currently anticipate modest increases in employee benefits and occupancy offset by a decrease in marketing and other expenses while maintaining our loan and deposit growth plans. Based on what we know today, we believe our expense run rate during the first half of 2024 to be roughly consistent with the fourth quarter reported $99.5 million and then grow modestly due to annual mid-year merit increases, higher healthcare costs, and technology investments during the back half of the year. The provision for credit losses under CECL will depend upon the changes in the macroeconomic forecast and qualitative factors as well as various credit quality metrics, including potential charge offs, criticized and classified loan balances, delinquencies, changes in prepayment speeds, and future loan growth. Lastly, we currently anticipate our full year effective tax rate to be between 17.5% and 18.5% subject to changes in tax regulations and taxable income levels. Operator, we are now ready to take questions. Would you please review the instructions?

Thank you. We will now begin the question-and-answer session. And the first question will come from Karl Shepard with RBC Capital Markets. Please go ahead.

Hey, good morning, guys.

Good morning.

Good morning, Karl.

I wanted to start on loan growth. It was obviously a very strong quarter for you guys. Could you talk a little bit about the production you're getting in these new markets? Just kind of the industry verticals, loan size and just anything different about what you're seeing there versus the rest of the book?

We are experiencing significant loan growth from our LPOs, which is a favorable combination of C&I businesses and CRE business. This represents a substantial part of our pipeline for the year. The trends we're observing are consistent with what we see in other areas of our operations. Since these LPOs are relatively new, there is considerable potential for them to attract customers from other banks, and we are witnessing positive results in that regard. We anticipate continued growth as the year progresses. Additionally, we are always assessing opportunities to open new LPOs, which will be integral to our strategy this year. I believe as we move forward, utilizing the LPO approach is a cost-effective way for us to expand our loan portfolio.

Okay. And then on the margin guidance. Dan, I was hoping you could touch a little bit on how sensitive it is to different rate scenarios. If we don't get cuts, do you still expect improvement in the second half? And if cuts come a little earlier, what would that do to the margin guidance?

Yes, Karl, as you know, we generally try to maintain a neutral posture. Considering both headwinds and tailwinds, without cuts or with cuts, based on December's data, our spot margin was 2.97. We believe that in the short term, our deposit costs will be slightly higher than our asset yields, which aligns with the mid to upper 2.90 outlook we mentioned in our commentary. We expect deposits to continue to reprice upward, but we've noticed a decline in exception pricing. If we see new deposit growth, it will likely come in at a higher rate than our average. We also anticipate some non-interest-bearing remix as we progress into 2024, but at a slower pace. These are the headwinds affecting our margin. On the tailwind side, we have $200 million in brokered deposits rolling off, with $100 million maturing in April and $100 million in May, which are priced at Fed funds plus 30 basis points. About 70% of our CD book, totaling over $800 million, is set to reprice within the next 12 months from rates around 3% to 3.25%, allowing us to adjust according to market movements. Most of those costs are already factored into our margin. We also have approximately $1 billion in short-term FHLB borrowings that will reprice quickly if there are any rate cuts. On the asset side, as illustrated in our slide deck, 70% of our portfolio is variable rate and 30% fixed. Of the variable rate, 60% of that commercial portfolio reprices every three months or less, which helps maintain a neutral stance. This represents about $3.5 billion currently priced around 7.75%. In a rate cut scenario, those would reprice downward. The remaining variable rate portfolio includes adjustable rates, with about $300 million set to reprice within the next 12 months starting from 5.25%, which we expect to adjust upwards. In terms of the fixed portfolio, approximately 30% of our overall commercial portfolio is fixed, with 10% maturing in the next 12 months around 4.9%. We see positive momentum with new loan growth coming in at an 8% rate and cash flows from our securities portfolio, currently yielding 2.5%, also repricing to the 8% range. Overall, we anticipate a lot of positive momentum as we move into the latter half of 2024. To summarize, we believe we'll remain relatively neutral regardless of whether there are three or six rate cuts.

That's great. Lots of puts and takes for sure, but it sounds like you guys have your arms around it. So, thank you very much. I'll step back.

Your next question will come from David Bishop with the Hovde Group. Please go ahead.

Yeah, good morning, gentlemen.

Hey, good morning, Dave.

Hey, Jeff. Obviously, you know, you have a focus on operating expenses. Probably some of the growth this year reflected, you know, the aggressive LPO expansion and lender hires, you know, with employee benefits up. Just curious, within the compensation and maybe employee benefits, is there anything specific you can do other than maybe slowing the rate of growth to restrain that? Just curious how you're thinking this year to really keep a lid on expense growth overall.

Yeah, Dave, we're looking at everything. And, you know, we just went through a retail transformation and we're hoping to wrap that up in the next month or two. You may have seen we're down 65 employees in retail. We're looking to take down another 20. We are reinvesting some of that into the business banking space. The other thing we're looking to do is there are some processes across the bank that we're looking to see if we can make them more efficient. And then going back to the retail space, you know, we always evaluate kind of our bottom performing branches, and so we expect to do that again this year and also look at our hours as well. So I think there are a couple of things we're really looking to do that. We think we can reduce expenses and become more efficient. We're always looking to do that. But I do think we have some opportunities as we move forward this year.

Could you remind me if the expenses related to the ATM fleet upgrade are already accounted for in the current run rate?

I would say the final 50 ATMs were installed in the fourth quarter, so they aren't fully reflected in the run rate yet. In my prepared comments, I mentioned that I expect an impact of around $1 million on a quarterly basis in the software and equipment line item, primarily related to the ATMs and some other investments.

Got it. And then circling back to the margin and the funding of loans, remind us what the prospect for quarterly securities cash flow is entering 2024?

It's usually $100 million a quarter.

That's where it's still at?

Yeah, it's still $100 million a quarter. And we'll still continue to use that, obviously, to fund loan growth.

Got it. Then finally, you know, you mentioned the success, obviously, on the loan side from the new LPOs. Just curious if you're seeing any traction yet in terms of the deposit and funding side out of these new locations. Thanks and I'll hop back into the queue.

Yes, we are seeing a little bit of traction. It's more of, obviously, a loan funding. But yes, we are seeing some deposit growth there, especially as we continue to focus on expanding our C&I focus. So that's one of our main strategic goals: to really expand our C&I lending because it does bring deposits and also brings fee opportunities. And between that and obviously continuing our swap fees as well, as Dan mentioned, we overachieved our goal of $8 million last year. We feel like those LPOs are really driving some nice returns for us.

The next question will come from Russell Gunther with Stephens. Please go ahead.

Hey, good morning, guys. I wanted to follow-up on the margin discussion. Dan, I appreciate all the puts and takes. Maybe just sticking with the deposit data, could you give us a sense for where you expect that to peak in the first half of the year? And then what are you assuming for the way down and what's kind of baked into your three-cut fed fund cut guidance for '24?

Sure. We typically avoid disclosing betas, but we anticipate that deposit costs will peak in the first half of the year. According to our modeling, we expect betas to be around 25%. There are questions about whether this impact is immediate or delayed, and if it occurs after one, two, or three cuts. These are open for discussion. However, our modeling indicates that under various scenarios, we see an improvement in margins, as deposit costs should decline faster than asset prices.

Okay, that's great, Dan. I appreciate that. And then just switching gears for my follow-up. Jeff, I believe you mentioned the potential for new LPOs as a part of the growth strategy this year. Just any color on geographic appetite would be great.

Sure. We evaluate a lot of different geographies, but really our focus is on Tennessee continuing to fill in there. We have Nashville and Chattanooga. We would look at potentially Knoxville or continuing to fill out the Nashville and Chattanooga areas. Virginia is another expansion state for us. Richmond, Northern Virginia. And then I would say potentially in Ohio, we always look at opportunities in Ohio. Obviously, we have a good presence there in part of the state, but continue to look there as well. I would say those are our three main areas. North Carolina could be a possibility down the road, but once again, mainly either filling in where we're at or potentially continuing to move south.

All right, Jeff. That's great. Thank you, guys. That's it for me.

Thank you.

The next question will come from Daniel Tamayo with Raymond James. Please go ahead.

Hey, good morning, guys. Thanks for taking my question.

Good morning.

Hey, good morning.

Maybe just starting on, you know, you guys talked a lot about the treasury management investments as that comes online, I guess, over the course of the year and into next year. Just your thought on, you know, the ultimate goal there? Like, how big do you want that contribution in terms of fee revenue? And maybe if you could put a little finer point on what may be the contribution in the back half of 2024 that you're expecting to grow off of?

Sure. We're always aiming to reduce our dependence on spread revenue. My target for total fee revenue is around 30%, which is a multi-year goal. Regarding our treasury management products, we are actively developing the pipeline and I believe it is gaining strength. I don't want to provide specific revenue guidance for the second half of the year, but we anticipate significant growth during that period. We're transforming our treasury management team to adopt a more sales-oriented approach, moving away from a purely operational role. I believe this shift, along with the introduction of new products and the incentives we've created for our commercial teams, will lead to a notable increase in performance in the latter half of the year.

Okay, terrific. Thanks for that. And then my second question, just on capital, you're benefiting as everyone is from lower rates here. And then, you know, assuming that we do get a soft landing or, you know, you continue to build capital, just curious your thoughts on how share repurchases could fit into the capital priorities?

Yeah, I think we look at, you know, kind of our capital deployment, starting with dividends. We obviously put that at the top of our capital deployment. Then we look at obviously loan growth, then would be M&A, and then would be buybacks. We're always actively out talking to other banks, but, you know, looking for different opportunities. But, you know, at this point, we're not really looking at buybacks if something may change in the back half of the year. But right now, I would say it's down on the capital deployment priority list.

Okay, understood. That's it for me. Thanks guys. Appreciate it.

Thank you.

The next question will come from Catherine Mealor with KBW. Please go ahead.

Thanks. Good morning.

Hey, good morning, Catherine.

Good morning.

Maybe just start as a follow-up to the M&A comment you just made. Just talk to us about how you're thinking about M&A versus LPOs and team lift outs. It feels like that's been a little bit of a priority recently just given M&A has been slower. But what do you think it takes to get more active in M&A and what kind of potential deals would you put at the top of your strategy list?

I would lay in basically the same comments I just made about LPOs of where we're looking. Typically, it would be Tennessee, Virginia, filling in in Ohio. And so for us, you know, our target size is usually that $2 billion to $5 billion range of asset bank. That's kind of a nice fit for us. It's 10% to 15% of our asset size. But I think it's definitely an option for us. We do have a great capital position and are in a good position to do an acquisition should one come along. So I think, you know, our history has shown that we create these LPOs to kind of test the waters in the market, and then potentially do deals after that. So I would not see us changing that course. But once again, I think as you mentioned, the M&A market has been difficult. I do believe sellers are looking for interest rates to decline, and so that may make it more difficult because they seemingly want to wait to see rates decline, potentially their valuations go up; but we will continue to be out there talking.

That's great. And then on credit, you know, credit just remains really strong. Just give me any outlook for how you think provisioning may trend this year. You've had a lot of negative provisions over the past couple of years. And that's starting to turn, but still really low. So just generally how you're thinking about provision cost and credit cost over the next year?

Yeah, for us related to credit, we obviously continue to look at all our portfolio to make sure they're doing well. We obviously look at office and do deep dives on our office, which is in great shape there. I would see for this year, our credit provisioning and cost to continue to stay relatively the same. We have seen, like every bank, you have a credit here or there, but so far we've been able to fix those credits and restructure and right-size those credits based on the strength of our borrowers. Dan, you want to add anything on the provision?

Yeah. No, I think you covered it, Jeff. I mean, certainly provisioning is going to be dependent upon loan growth, is probably the biggest thing absent, you know, credit events. And wouldn't, you know, today a big portion of our provision or allowance is based on, you know, the forecast of unemployment rates. And based on those forecasts, we're not seeing anything really significantly out of the ordinary. So we're, just as Jeff said, we're kind of in that anticipating something similar to what we experienced here in '23.

And on your just commercial real estate maturities, can you give any just anecdotes or commentary on what you're seeing as, you know, some of your fixed rate CRE loans are coming due and repricing? You know, are you seeing any credit stress in those moments or, you know, just kind of rental rates being big enough to offset the impact of higher interest rates? Just kind of any commentary on what you're seeing just with your borrowers would be helpful.

Yeah, we have not really seen any stress. I mean, we've had, obviously, like every bank, a few deals here or there that have caused stress. But the nice thing is we've done a great job in picking the customers we lend to. And as I've said, you know, people forget that since the OA crisis, it's been a great run for real estate developers. And so fortunately for us, our customers have had a lot of liquidity. And so when we do run into a situation which has been rare, they have been able to step in and provide the additional equity to right size the refinance of the deal based on the higher rates.

Great, very helpful. Thank you.

Thank you.

The next question will come from Casey Whitman with Piper Sandler. Please go ahead.

Hey, good morning.

Good morning, Casey.

Good morning.

Good morning. Most of my questions have been answered, but could you explain your assumptions for deposit growth this year in relation to your comments about mid to upper single-digit loan growth? How comfortable are you with the loan deposit ratio being around 88%? What do you consider the ideal level for WesBanco?

Yes, I do believe we will have solid deposit growth. As far as it relates to the loan to deposit ratio, I could see that creeping up to near 90% to 92%. I do believe potentially our loan growth might outrun a little bit of our deposit growth. But once again, we do have the $100 million a quarter that helps fund the loan growth. So, I could see it slightly moving up because I do believe loans will outgrow deposits, but I don't think it will be by a wide margin. And I do believe the securities, $100 million a quarter will help fund that gap.

Got it. And how low are you comfortable with the securities book getting to, I guess, as a percentage of assets or is there a target range?

Yeah, Casey, it's right around 17. I would say mid-teens of, I would say, 17% of total assets is kind of probably our bottom end.

All right. Thanks.

Thank you.

The next question will come from Manuel Navas with D.A. Davidson. Please go ahead.

Good morning. Most of my questions have been answered as well. Could you discuss the pace of loan growth throughout the year? Will interest rates help speed it up, or will the normalization of paydowns in commercial real estate slow it down? Please walk me through your thoughts on loan growth for the year.

I believe that the few cuts we have outlined, specifically three, probably won't significantly increase pay down speeds. Larger cuts would be necessary for that. When considering paydowns, I'm primarily focused on our commercial real estate portfolio and the transition to the permanent market. A couple of minor cuts aren’t likely to justify moving a substantial amount of our commercial real estate to that market. I think reductions in rates might slightly accelerate our loan growth, but I don’t expect that three cuts of 25 basis points will have a dramatic impact either way.

No, that's helpful. With the securities book, it seems like you'll need to fund some of this loan growth with deposits. Have there been any opportunities to restructure the securities book, and are you consistently considering that to reduce borrowings, perhaps?

Yeah. We've been discussing this for the last six quarters. At this point, we feel comfortable with our loan deposit ratio and our liquidity. We don't see a need to engage in any loss trades. We believe that with potential rate cuts, the unrealized losses will improve in the near term. So, I am hesitant to take a loss by selling securities right now. I would prefer to wait a couple more quarters to see where we stand.

Thank you. I appreciate that. Thank you for the comments today.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jeff Jackson for any closing remarks. Please go ahead, sir.

Thank you for joining us today. During the past year, we achieved sustained loan, deposit, and fee income growth while maintaining strong capital levels and credit quality. We remain committed to continuing these growth trends while leveraging new products and expense management to deliver positive operating leverage. We look forward to speaking with you in the near future at one of our upcoming investor events. Please have a good day. Thank you.

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