WesBanco Announces Third Quarter 2020 Financial Results

Wheeling, WV, October 21, 2020 – WesBanco, Inc. (“WesBanco”) (Nasdaq: WSBC), a diversified, multi-state bank holding company, today announced net income and related earnings per share for the three and nine months ended September 30, 2020. Reflecting the impact from the 2020 adoption of the new Current Expected Credit Losses (“CECL”) accounting standard, net income for the three months ended September 30, 2020 was $41.3 million, with diluted earnings per share of $0.61, compared to $37.3 million and $0.68 per diluted share, respectively, for the third quarter of 2019. For the nine months ended September 30, 2020, net income was $69.2 million, or $1.03 per diluted share, compared to $122.5 million, or $2.24 per diluted share, for the 2019 period. Net income excluding after-tax restructuring and merger-related expenses for the three months ended September 30, 2020, was $44.2 million, or $0.66 per diluted share, as compared to $38.7 million and $0.71 per diluted share, respectively, in the prior year quarter (non-GAAP measures). On the same basis, net income for the nine months ended September 30, 2020 was $76.5 million, or $1.14 per diluted share, as compared to $2.31 per diluted share in the prior year period (non-GAAP measures).

On November 22, 2019, WesBanco consummated the merger with Old Line Bancshares, Inc. (“OLBK”), a bank holding company headquartered in Bowie, MD with approximately $3.0 billion in assets, excluding goodwill. Financial results for OLBK have been included in WesBanco’s results from the merger consummation date.

WesBanco believes that pre-tax, pre-provision income (non-GAAP measure) provides a more comparable year-over-year measure as it removes the impact of the new CECL accounting standard implemented earlier this year. For the three months ended September 30, 2020, pre-tax, pre-provision income, excluding merger-related expenses, increased 33.8% year-over-year to $68.9 million compared to $51.5 million. On the same basis, pre-tax, pre-provision income, for the nine months ended September 30, 2020, increased 20.5% year-over-year to $197.7 million compared to $164.0 million. In addition, on the same basis, the return on average assets was 1.64% for the three month period and 1.61% for the nine month period. WesBanco believes that these non-GAAP financial measures are useful to investors as they enhance investors’ understanding of the company’s business and performance.

Financial and operational highlights during the quarter ended September 30, 2020:

“We are pleased with WesBanco’s performance during the third quarter as we exhibited strong fee income growth and disciplined expense management to deliver growth of 33.8% year-over-year and 3.0% quarter-over-quarter in our pre-tax, pre-provision income,” said Todd F. Clossin, President and Chief Executive Officer of WesBanco.  “WesBanco is a well-capitalized institution with peer-leading reserve levels combined with diversified growth engines and diligent expense management.  We remain focused on the long-term success of our company for our shareholders, customers, and communities.”

Mr. Clossin added, “I continue to be extremely proud of our employees as they have gone above and beyond to serve our customers and communities during the last six months.  In addition to our company donating more than a half million dollars for pandemic-related efforts, our employees continue to provide their time and efforts supporting local charitable organizations.  They have assisted more than 7,200 businesses secure Payroll Protection Program loans from the Small Business Administration.  Furthermore, they helped nearly 2,300 small business and commercial, 550 residential mortgage, 490 consumer loan, and 230 home equity loan customers during the early stages of the pandemic with primarily 90-day loan deferrals.  Our customers have been very grateful for our efforts that allowed them to worry about one less thing during this unprecedented time.  These actions speak loudly to our community bank roots.”

Financial Center Optimization Strategy

WesBanco annually reviews the needs of the communities it serves, as well as the performance of its financial centers, to identify necessary improvement plans.  Based in part on customer migration to digital channels, community transition, and capital deployment, it has closed 15 locations during the last three years.  Reflecting the current operating environment and increased utilization of digital services, WesBanco announced, on August 27, 2020, a plan to accelerate its financial center optimization strategy.  Through this plan, WesBanco will consolidate a total of 25 existing locations and convert two others to drive-up only locations across Indiana, Kentucky, Ohio, Pennsylvania, and West Virginia.  One location closed during the last week of September, two others are slated for closure during the fourth quarter of 2020, and the remainder will close on or about January 22, 2021.  Cost savings of approximately $6.0 to $6.5 million are expected to be phased-in during the first half of 2021.  During the next few quarters, including the third quarter of 2020, WesBanco anticipates incurring total charges of approximately $3.5 to $4.0 million due to the disposition of assets, lease terminations, severance, and other costs associated with the closures, of which $3.0 million was incurred during the third quarter of 2020.  Importantly, staff at the locations being consolidated will be given the opportunity to fill certain open positions at other nearby financial centers.

Balance Sheet

Portfolio loans of $11.0 billion as of September 30, 2020 increased 41.7% when compared to the prior year period due to the OLBK acquisition and participation in the SBA PPP.  Total organic loan growth was 10.0% year-over-year, driven by the SBA PPP and commercial real estate loans.  Total deposits increased 40.8% year-over-year to $12.2 billion due primarily to the OLBK acquisition, CARES Act stimulus, and increased personal savings.  Total deposits, excluding the OLBK acquisition, increased $1.1 billion, or 12.9%, year-over-year due to CARES Act stimulus and increased personal savings, which more than offset a $0.4 million reduction in certificates of deposit.

Credit Quality

As of September 30, 2020, both non-performing loans and non-performing assets as percentages of the portfolio and total assets have remained relatively low and consistent throughout the last five quarters. The granting of loan deferrals has resulted in continued relatively benign asset quality metrics, as nonperforming and delinquency amounts do not reflect loans that have been modified as a result of the COVID-19 pandemic. Total loans past due as a percentage of total portfolio loans of 25 basis points decreased 5 basis points year-over-year and 26 basis points sequentially.  In addition, annualized net loan charge-offs to average loans remained low for the quarter and year-to-date periods at zero and 8 basis points, respectively.

The provision for credit losses of $16.3 million decreased significantly from the second quarter due to improved macroeconomic factors.  The allowance for credit losses specific to total portfolio loans at September 30, 2020 was $185.1 million, or 1.68% of total loans; or, when excluding SBA PPP loans, 1.83% of total portfolio loans.  Excluded from the allowance for credit losses and related coverage ratio are fair market value adjustments on previously acquired loans representing 0.43% of total loans.

Criticized and classified loan balances increased to 3.25% of total portfolio loans due primarily to the downgrade of $72 million of hotel loans resulting from low occupancy due to the current pandemic-driven environment.  These downgraded loans satisfy the CARES Act loan deferral guidelines, and have an average LTV of 60% as well as strong guarantor support.  Furthermore, the criticized and classified ratio continued to be favorable to peer bank averages.

Net Interest Margin and Income

The net interest margin of 3.31% for the third quarter of 2020 decreased 25 basis points year-over-year, primarily due to the lower interest rate environment from the five decreases in the Federal Reserve Board’s target federal funds rate, totaling 225 basis points, from July 2019 through March 2020, as well as a flattening of the yield curve.  Reflecting the significantly lower interest rate environment, we aggressively reduced our deposit rates beginning in late March, which helped to lower deposit funding costs 45 basis points year-over-year to 26 basis points for the third quarter of 2020.  In addition, we shortened the maturities and experienced lower rates in our third quarter FHLB borrowings as compared to the prior year, which helped to lower the cost of borrowings 35 basis points year-over-year.  Accretion from acquisitions benefited the third quarter net interest margin by 18 basis points, as compared to 13 basis points in

the prior year period and 19 basis points during the second quarter of 2020.  Lastly, while the SBA PPP loans will positively impact the net interest margin as the loans are forgiven during the next several quarters, the funding of these loans benefited the third quarter of 2020 net interest margin by a net two basis points.

Net interest income increased $24.5 million, or 25.5%, during the third quarter of 2020, as compared to the same quarter of 2019, due to a 34.8% increase in average total earning assets, primarily driven by the OLBK acquisition and related accretion from purchase accounting, partially offset by the lower loan yields, reflecting repricing of existing loans and lower new offered rates in the current market environment.  For the nine months ended September 30, 2020, net interest income increased $66.8 million, or 22.8%, due to higher average total earning assets, despite an overall lower net interest margin, as discussed for the three-month period comparison.

Non-Interest Income

For the third quarter of 2020, non-interest income of $34.6 million increased $7.7 million, or 28.4%, from the third quarter of 2019, driven primarily by mortgage banking income and higher commercial customer loan swap-related income, which were partially offset by lower service charges on deposits.  Reflecting the low interest rate environment and organic growth, mortgage banking fees increased $5.9 million, or 228.0%, compared to the prior year period, as residential mortgage origination dollar volume doubled, with approximately 75% of those originations sold into the secondary market.  Loan swap-related income for the quarter was $1.3 million reflecting commercial loan customer demand in the current rate environment.  This quarter represented the one-year anniversary of the limitation on interchange fees due to the Durbin amendment in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).  Service charges on deposits were lower due to higher consumer deposits associated with CARES Act stimulus and lower general consumer spending, resulting in fewer eligible account fees.  Primarily reflecting the items discussed above, non-interest income, for the nine months ended September 30, 2020, increased $9.6 million, or 11.2%.

Non-Interest Expense

Excluding restructuring and merger-related expenses, non-interest expense for the three months ended September 30, 2020 increased $14.8 million, or 20.6%, to $86.3 million compared to the prior year period, primarily reflecting additional staffing and financial center locations from the OLBK acquisition.  Total operating expenses continued to be well-controlled through company-wide efforts to effectively manage discretionary costs, open positions, and marketing expenses.  These efforts are demonstrated by efficiency ratios of 55.23% and 56.15% for the three-month and nine-month periods ending September 30, 2020, respectively.  FDIC insurance expense increased $3.2 million, or 259.5%, due to a higher assessment rate associated with our larger asset level, as well as the recording of a $2.4 million assessment credit in the prior year period.  On a similar basis, non-interest expense during the first nine months of 2020 increased $42.8 million, or 19.9%, compared to the prior year period, primarily reflecting the OLBK acquisition and the mid-year annual salary increases.

Capital

WesBanco continues to maintain what we believe are strong regulatory capital ratios as both consolidated and bank-level regulatory capital ratios are well above the applicable “well-capitalized” standards promulgated by bank regulators and the BASEL III capital standards.  At September 30, 2020, Tier I leverage was 10.18%, Tier I risk-based capital ratio was 14.29%, common equity Tier 1 capital ratio (“CET 1”) was 12.99%, and total risk-based capital was 17.18%.  

As compared to the prior year period, Tier 1 leverage and Tier 1 risk-based capital ratios were adversely impacted by the movement of $136.5 million of trust preferred securities, during the fourth quarter of 2019, from Tier 1 to Tier 2 risk-based capital, as required by the Dodd-Frank Act for financial institutions with total assets greater than $15 billion.  As an offset to this requirement, WesBanco, on August 4, 2020, raised $150 million of preferred stock, considered Tier 1 capital, through the issuance of 6,000,000 depositary shares, which are listed on the Nasdaq Global Select Market under the symbol “WSBCP”.  The net proceeds from this issuance are expected to be used for general corporate purposes, which may include repayment, redemption or refinancing of indebtedness, capital expenditures, making contributions to the capital of WesBanco Bank to support its lending, investing and other financial services activities, funding of possible acquisitions, working capital, satisfaction of other obligations of WesBanco and its subsidiaries, and repurchase of WesBanco’s outstanding equity securities.

Conference Call and Webcast

WesBanco will host a conference call to discuss the Company's financial results for the third quarter of 2020 at 3:00 p.m. ET on Thursday, October 22, 2020.  Interested parties can access the live webcast of the conference call through the Investor Relations section of the Company's website, www.wesbanco.com.  Participants can also listen to the conference call by dialing 888-347-6607, 855-669-9657 for Canadian callers, or 412-902-4290 for international callers, and asking to be joined into the WesBanco call.

A replay of the conference call will be available by dialing 877-344-7529, 855-669-9658 for Canadian callers, or 412-317-0088 for international callers, and providing the access code of 10136715.  The replay will begin at approximately 5:00 p.m. ET on October 22, and end at 12 a.m. ET on November 5.  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, 2019 and documents subsequently filed by WesBanco with the Securities and Exchange Commission (“SEC”), including WesBanco’s Form 10-Q for the quarters ended March 31 and June 30, 2020, 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 and under “Risk Factors” in Part II, Item 1A of WesBanco’s March 31, 2020 Quarterly Report on Form 10-Q.  Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, the effects of changing regional and national economic conditions including the effects of the COVID-19 pandemic; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to WesBanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the SEC, the Financial Institution Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; cyber-security breaches; competitive conditions in the financial services industry; rapidly changing technology affecting financial services; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting WesBanco’s operational and financial performance.  WesBanco does not assume any duty to update forward-looking statements.

Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), WesBanco's management uses, and this presentation contains or references, certain non-GAAP financial measures, such as pre-tax pre-provision income, tangible common equity/tangible assets; net income excluding after-tax restructuring and merger-related expenses; efficiency ratio; return on average assets; and return on average tangible equity.  WesBanco believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which facilitate comparisons with the performance of others in the financial services industry. Although WesBanco believes that these non-GAAP financial measures enhance investors' understanding of WesBanco's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The non-GAAP financial measures contained therein should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K as well as the unaudited financial statements and analyses as presented in the Quarterly Reports on Forms 10-Q for WesBanco and its subsidiaries, as well as other filings that the company has made with the SEC.

About WesBanco, Inc.

Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a diversified and balanced financial services company that delivers large bank capabilities with a community bank feel.  Our distinct long-term growth strategies are built upon unique sustainable advantages permitting us to span six states with meaningful market share.  Built upon our ‘Better Banking Pledge’, our customer-centric service culture is focused on growing long-term relationships by pledging to serve all personal and business customer needs efficiently and effectively.  In addition to a full range of online and mobile banking options and a full-suite of commercial products and services, WesBanco provides trust, wealth management, securities brokerage, and private banking services through our century-old Trust and Investment Services department, with approximately $4.6 billion of assets under management (as of September 30, 2020).  WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 235 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.

SOURCE:  WesBanco, Inc.

WesBanco Company Contact:

John H. Iannone

Senior Vice President, Investor and Public Relations

304-905-7021

WESBANCO, INC.

Consolidated Selected Financial Highlights

(unaudited, dollars in thousands, except shares and per share amounts)

WESBANCO, INC.

Consolidated Selected Financial Highlights

(unaudited, dollars in thousands, except shares)