WesBanco(US:WSBC)2021-02-26 21:37PART I Business Overview Wesbanco, Inc. is a bank holding company providing comprehensive financial services through community banking and trust segments, operating across six states with approximately $16.4 billion in assets as of December 31, 2020 - Wesbanco, Inc. is a bank holding company offering a full range of financial services, including retail and corporate banking, trust and investment, brokerage, mortgage banking, and insurance, through two reportable segments: community banking and trust and investment services12 - On November 22, 2019, Wesbanco acquired Old Line Bancshares, Inc. (OLBK), adding approximately $3.0 billion in assets and expanding its franchise into four new Metropolitan Statistical Areas in Maryland14 - Wesbanco Bank is classified as a 'large bank' (total assets exceeding $10 billion) for FDIC premium calculation purposes, leading to increased deposit insurance premiums in 20205152 - Wesbanco adopted the CECL accounting standard effective January 1, 2020, and elected a five-year transition period to phase out the estimated impact on regulatory capital, as permitted by the CARES Act87 - Wesbanco Bank received an 'Outstanding' rating for its community development performance for the seventh consecutive time, demonstrating strong compliance with the Community Reinvestment Act (CRA)91 Key Operational and Financial Metrics (December 31, 2020) | Metric | Value | | :-------------------------------- | :------------------- | | Total Assets | ~$16.4 billion | | Number of Branches | 233 | | Number of ATM Machines | 226 | | Assets Under Management (Trust & Investment Services) | ~$5.0 billion | | Full-time Equivalent Employees | 2,612 | | Average Employee Tenure | >10 years | | Average Executive Officer Tenure | >19 years | Regulatory Capital Ratios (December 31, 2020) | Ratio | Wesbanco, Inc. | Wesbanco Bank, Inc. | | :-------------------------- | :------------- | :---------------- | | Common Equity Tier 1 (CET1) | 13.40% | 14.04% | | Tier 1 Capital Ratio | 14.72% | 14.04% | | Total Capital Ratio | 17.58% | 15.40% | | Tier 1 Leverage Ratio | 10.51% | 10.00% | Risk Factors The company faces significant risks from the COVID-19 pandemic, economic downturns, high loan concentrations, extensive regulations, interest rate fluctuations, and operational challenges including cybersecurity and acquisitions - The COVID-19 pandemic has created widespread volatility, adversely impacting Wesbanco's operations and customers, potentially leading to decreased business, inability to meet payment obligations, and negative effects on liquidity and capital101103104 - Wesbanco's loan portfolio is highly concentrated in West Virginia, Ohio, Pennsylvania, Kentucky, Indiana, and Maryland, with approximately 16% in residential real estate and 53% in commercial real estate, making it vulnerable to regional economic downturns and real estate market fluctuations102118120 - Extensive federal and state regulations, including Basel III capital standards and the Dodd-Frank Act, impose significant costs and limitations on Wesbanco's business, with potential for further expansion in scope and complexity107109 - Fluctuations in market interest rates, particularly the significant reductions by the Federal Reserve in 2020, are expected to adversely affect net interest income and profitability, while the transition away from LIBOR introduces uncertainty for financial instruments tied to these rates112114 - The adoption of the CECL accounting standard introduces significant volatility in credit loss estimation, requiring complex judgments and potentially impacting financial condition and results of operations128 - Operational risks, including cybersecurity breaches, reliance on third-party vendors, and the challenges of integrating future acquisitions, could materially adversely affect Wesbanco's business, reputation, and financial performance138142153157 Unresolved Staff Comments There are no unresolved staff comments from the SEC Properties Wesbanco's properties primarily consist of 233 owned and leased banking offices and six leased loan production offices across its operating states, with its main office in Wheeling, West Virginia - As of December 31, 2020, Wesbanco operated 233 banking offices (164 owned, 69 leased) and six leased loan production offices across West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana, and Maryland167 - The main office is located at 1 Bank Plaza, Wheeling, West Virginia, in a bank-owned building that serves as the main office for community banking, trust and investment services, and executive offices168 Rental Income from Commercial Office Space | Year | Rental Income (in millions) | | :--- | :-------------------------- | | 2020 | $1.8 | | 2019 | $1.1 | | 2018 | $1.3 | Legal Proceedings Wesbanco is involved in various legal proceedings and claims that arise in the ordinary course of business, but management does not anticipate any material losses from these matters - Wesbanco is involved in lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business170 - Management does not believe that a material loss related to such proceedings or claims pending or threatened is reasonably possible170 Mine Safety Disclosures This item is not applicable to Wesbanco PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Wesbanco's common stock is traded on the NASDAQ Global Select Stock Market under the symbol WSBC, with 1,704,457 shares remaining for repurchase as of December 31, 2020, and a cumulative total shareholder return of 118.37 from 2015 to 2020 - Wesbanco's common stock is quoted on the NASDAQ Global Select Stock Market under the symbol WSBC, with approximately 7,866 record holders as of February 17, 2021174 - As of December 31, 2020, Wesbanco had two active stock repurchase plans with a total of 1,704,457 shares remaining to be repurchased175176 Cumulative Total Shareholder Returns (December 31, 2015 - December 31, 2020) | Index | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2017 | Dec 31, 2018 | Dec 31, 2019 | Dec 31, 2020 | | :---------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Wesbanco, Inc. | 100.00 | 147.62 | 143.17 | 132.63 | 141.30 | 118.37 | | Russell 2000 | 100.00 | 121.31 | 139.08 | 123.76 | 155.35 | 186.36 | | SNL Mid Cap Bank Index | 100.00 | 138.85 | 139.42 | 114.02 | 140.91 | 127.65 | Selected Financial Data This section provides a five-year summary of Wesbanco's consolidated financial data, including per common share information, key balance sheet figures, and selected performance ratios, offering insights into financial trends and operational performance - The selected financial data is derived from Wesbanco's audited financial statements for the five years ended December 31, 2020, and includes results from acquisitions such as OLBK (2019), FFKT (2018), FTSB (2018), and YCB (2016) since their respective acquisition dates180 Selected Per Common Share Information | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :----- | :----- | :----- | :----- | :----- | | Earnings per common share—basic | $1.78 | $2.83 | $2.93 | $2.15 | $2.16 | | Earnings per common share—diluted | $1.77 | $2.83 | $2.92 | $2.14 | $2.16 | | Dividends declared per common share | $1.28 | $1.24 | $1.16 | $1.04 | $0.96 | | Book value at year end | $38.84 | $38.24 | $36.24 | $31.68 | $30.53 | | Tangible book value at year end (Non-GAAP) | $21.75 | $21.55 | $19.63 | $18.42 | $17.19 | Selected Balance Sheet Information (Year-End) | Metric | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | :------------------ | | Securities | $2,722,069 | $3,257,654 | $3,146,800 | $2,284,822 | $2,316,214 | | Net portfolio loans | $10,603,406 | $10,215,556 | $7,607,333 | $6,296,157 | $6,205,762 | | Total assets | $16,425,610 | $15,720,112 | $12,458,632 | $9,816,178 | $9,790,877 | | Deposits | $12,429,373 | $11,004,006 | $8,831,633 | $7,043,588 | $7,040,879 | | Shareholders' equity | $2,756,737 | $2,593,921 | $1,978,827 | $1,395,321 | $1,341,408 | Selected Ratios | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :----- | :----- | :----- | :----- | :----- | | Return on average assets | 0.73% | 1.24% | 1.26% | 0.96% | 0.97% | | Return on average equity | 4.50% | 7.49% | 8.68% | 6.83% | 7.13% | | Net interest margin | 3.37% | 3.62% | 3.52% | 3.44% | 3.32% | | Efficiency ratio (Non-GAAP) | 56.38% | 56.68% | 54.60% | 56.44% | 56.69% | | Allowance for credit losses - loans to total loans | 1.72% | 0.51% | 0.64% | 0.71% | 0.70% | | Non-performing assets to total assets | 0.25% | 0.35% | 0.35% | 0.50% | 0.49% | | Tier 1 leverage ratio | 10.51% | 11.30% | 10.74% | 10.39% | 9.81% | | Total capital to risk-weighted assets | 17.58% | 15.12% | 15.99% | 15.16% | 14.18% | | Trust assets at market value (in thousands) | $5,025,565 | $4,719,966 | $4,269,961 | $3,943,519 | $3,723,142 | Summary Statements of Income (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :------- | :------- | :------- | :------- | :------- | | Interest and dividend income | $541,277 | $484,253 | $414,957 | $332,424 | $286,097 | | Interest expense | $61,797 | $84,349 | $67,721 | $42,129 | $32,767 | | Net interest income | $479,480 | $399,904 | $347,236 | $290,295 | $253,330 | | Provision for credit losses | $107,741 | $11,198 | $7,764 | $9,986 | $8,478 | | Non-interest income | $128,185 | $116,716 | $100,276 | $88,840 | $81,499 | | Non-interest expense | $354,845 | $312,208 | $265,224 | $220,860 | $208,680 | | Net income available to common shareholders | $119,400 | $158,873 | $143,112 | $94,482 | $86,635 | Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Wesbanco's financial performance and condition, highlighting key trends and factors influencing results, including a decrease in net income due to CECL adoption and increased credit loss provision, alongside growth in net interest income and non-interest income Forward-Looking Statements Forward-looking statements in the report involve risks and uncertainties, subject to factors that could cause actual results to differ materially from those contemplated - Forward-looking statements in the report involve risks and uncertainties, including those detailed under 'Risk Factors,' and are subject to important factors that could cause actual results to differ materially from those contemplated195 - Key factors influencing actual results include changing economic conditions (including COVID-19), interest rate fluctuations, potential credit losses, regulatory actions, cybersecurity breaches, and competitive conditions195 Application of Critical Accounting Policies and Estimates Wesbanco's financial statements require management estimates for critical policies such as the allowance for credit losses, goodwill impairment, and business combinations, with the CECL model adoption significantly impacting the allowance - Wesbanco's financial statements require management to make estimates, assumptions, and judgments, with the most significant policies identified as the allowance for credit losses, goodwill and other intangible assets impairment, and business combinations196197 - The company adopted the CECL model on January 1, 2020, resulting in a day-one impact of a $41.4 million increase to the allowance for credit losses and a $26.6 million after-tax effect on retained earnings198202 - Goodwill and other intangible assets are evaluated for impairment annually or more frequently if circumstances indicate, using market capitalization, discounted cash flow models, and other market-based methods214216 - Business combinations are accounted for using the acquisition method, with identifiable assets and liabilities measured at fair value, and any excess cost recorded as goodwill221 Executive Overview Wesbanco's 2020 performance saw a decrease in net income due to increased credit loss provisions, despite growth in net interest income and assets, while maintaining strong capital ratios and increasing its quarterly dividend - Wesbanco completed a $150.0 million capital raise of non-cumulative perpetual preferred stock in August 2020, which enhanced regulatory capital ratios and replaced the Tier 1 to Tier 2 reclassification of trust preferred securities227 - The quarterly dividend rate was increased by 3.2% to $0.32 per share in the first quarter of 2020, marking the thirteenth increase in ten years228 Key Financial Highlights (2020 vs. 2019) | Metric | 2020 | 2019 | Change ($) | Change (%) | | :------------------------------------------------ | :----------- | :----------- | :----------- | :----------- | | Net Income Available to Common Shareholders | $119.4 million | $158.9 million | $(39.5) million | (24.8)% | | Net Income Available to Common Shareholders (excl. certain items) | $127.1 million | $171.8 million | $(44.7) million | (26.0)% | | Net Interest Income | $479.5 million | $399.9 million | $79.6 million | 19.9% | | Net Interest Margin | 3.37% | 3.62% | (0.25)% | - | | Non-Interest Income | $128.2 million | $116.7 million | $11.5 million | 9.8% | | Non-Interest Expense | $354.8 million | $312.2 million | $42.6 million | 13.7% | | Provision for Credit Losses | $107.7 million | $11.2 million | $96.5 million | 861.6% | | Total Assets (Dec 31) | $16.4 billion | $15.7 billion | $0.7 billion | 4.5% | | Portfolio Loans (Dec 31) | $10.8 billion | $10.3 billion | $0.5 billion | 5.1% | | Criticized and Classified Loans (% of total portfolio loans) | 4.59% | 2.17% | 2.42% | 111.5% | | Net Loan Charge-offs to Average Loans | 0.06% | 0.09% | (0.03)% | (33.3)% | | Pandemic-related Loan Deferrals (Dec 31) | $171.1 million | N/A | N/A | N/A | | Tier I Leverage Ratio (Dec 31) | 10.51% | 11.30% | (0.79)% | - | | Tangible Equity to Tangible Assets (Dec 31) | 10.52% | 10.02% | 0.50% | - | Earnings Summary Wesbanco's net income and diluted EPS decreased in 2020 due to a significant increase in the provision for credit losses, despite growth in net interest income from acquisitions and PPP loans, and a rise in non-interest income from mortgage banking - Net interest income increased by $79.6 million (19.9%) in 2020, primarily due to a 28.3% increase in average earning assets from the OLBK acquisition and PPP loans, despite a 25 basis point decrease in the net interest margin to 3.37% due to lower interest rates230 - Non-interest income rose by $11.5 million (9.8%) in 2020, driven by a 176.6% increase in mortgage banking income, but partially offset by decreases in service charges on deposits and electronic banking fees due to the Durbin Amendment231 - Non-interest expense (excluding restructuring and merger-related expenses) increased by $49.3 million (16.7%) in 2020, mainly due to increased compensation, occupancy, equipment costs from the OLBK acquisition, and a significant rise in FDIC insurance expense232 Net Income and EPS (2020 vs. 2019) | Metric | 2020 | 2019 | Change ($) | Change (%) | | :----------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net Income Available to Common Shareholders | $119.4 million | $158.9 million | $(39.5) million | (24.8)% | | Diluted Earnings Per Share | $1.77 | $2.83 | $(1.06) | (37.5)% | Net Interest Income Analysis Net interest income increased by $79.6 million (19.9%) in 2020 due to higher average earning asset balances from acquisitions and PPP loans, despite a 25 basis point decrease in net interest margin to 3.37% from lower interest rates - Net interest income increased by $79.6 million (19.9%) in 2020, primarily due to a 28.3% increase in average earning asset balances, driven by the OLBK acquisition and PPP loans234 - The net interest margin decreased by 25 basis points to 3.37% in 2020, influenced by multiple Federal Reserve rate decreases and a relatively flat yield curve, partially offset by lower funding costs234 - Average loan balances increased by $2.9 billion (36.1%) in 2020, mainly from the OLBK acquisition and PPP loan originations, while average total deposits increased by $2.8 billion (31.5%) due to acquired deposits and CARES Act stimulus funds234 - Interest expense decreased by $22.6 million (26.7%) in 2020 due to lower market rates and management actions to reduce deposit rates, with the cost of interest-bearing liabilities decreasing by 42 basis points to 0.63%238 Net Interest Income (in thousands) | Metric | 2020 | 2019 | 2018 | | :----------------------------------- | :------- | :------- | :------- | | Net interest income | $479,480 | $399,904 | $347,236 | | Net interest margin, fully taxable-equivalent | 3.37% | 3.62% | 3.52% | Average Balance Sheets and Net Interest Margin Analysis Average loan balances increased by $2.9 billion in 2020 due to acquisitions and PPP loans, while loan yields decreased by 64 basis points to 4.28%, and the cost of interest-bearing liabilities decreased by 42 basis points to 0.63% - Average loan balances increased by $2.9 billion in 2020, primarily due to the OLBK acquisition and PPP loan originations, while loan yields decreased by 64 basis points to 4.28% due to federal funds rate decreases235 - Total average deposits increased by $2.8 billion (31.5%) in 2020, with non-interest bearing demand deposits increasing by 48.2% and comprising 31.9% of total average deposits238 - The cost of interest-bearing liabilities decreased by 42 basis points from 1.05% in 2019 to 0.63% in 2020, driven by reductions in deposit rates and lower rates for various borrowings238 Average Balance Sheets and Net Interest Margin Analysis (in thousands, except rates) | Metric | 2020 Average Balance | 2020 Interest | 2020 Rate | 2019 Average Balance | 2019 Interest | 2019 Rate | | :----------------------------------- | :------------------- | :------------ | :-------- | :------------------- | :------------ | :-------- | | ASSETS | | | | | | | | Loans, net of unearned income | $10,874,763 | $465,677 | 4.28% | $7,991,107 | $393,166 | 4.92% | | Total earning assets | $14,381,608 | $545,796 | 3.80% | $11,205,357 | $489,571 | 4.37% | | Total Assets | $16,442,704 | | | $12,853,920 | | | | LIABILITIES | | | | | | | | Total interest bearing deposits | $8,082,652 | $27,049 | 0.33% | $6,469,160 | $43,455 | 0.67% | | Federal Home Loan Bank borrowings | $1,135,934 | $24,701 | 2.17% | $1,074,715 | $26,548 | 2.47% | | Total interest bearing liabilities | $9,769,379 | $61,797 | 0.63% | $8,032,443 | $84,349 | 1.05% | | Non-interest bearing demand deposits | $3,781,583 | | | $2,550,864 | | | | Net interest margin (taxable equivalent) | | $483,999 | 3.37% | | $405,222 | 3.62% | Rate/Volume Analysis of Changes in Interest Income and Interest Expense The increase in net interest income was primarily driven by volume changes in earning assets, particularly loans, which contributed $129.2 million to interest income, partially offset by a $56.7 million decrease due to lower rates - The increase in net interest income was primarily driven by volume changes in earning assets, particularly loans, which contributed $129.2 million to interest income, partially offset by a $56.7 million decrease due to lower rates242 - Interest expense decreased significantly due to rate changes, with a $(34.9) million reduction from lower rates, partially offset by a $12.3 million increase from higher volumes of interest-bearing liabilities242 Rate/Volume Analysis of Changes in Interest Income and Interest Expense (2020 vs. 2019, in thousands) | Category | Volume Change | Rate Change | Net Change | | :----------------------------------- | :------------ | :---------- | :--------- | | Total interest income change | $125,924 | $(69,700) | $56,224 | | Total interest expense change | $12,303 | $(34,855) | $(22,552) | | Net interest income increase (decrease) | $113,621 | $(34,845) | $78,776 | Provision for Credit Losses - Loans The provision for credit losses significantly increased to $107.7 million in 2020, primarily due to the adoption of CECL and changes in macroeconomic forecasts, leading to a rise in criticized and classified loans to 4.59% of total portfolio loans - The provision for credit losses increased significantly to $107.7 million in 2020 from $11.2 million in 2019, primarily due to the adoption of the CECL accounting standard and changes in macroeconomic forecasts, particularly expected higher unemployment244 - The increase in criticized and classified loans to 4.59% of total portfolio loans (from 2.17% in 2019) was partly due to net downgrades of $209.9 million in hospitality loans, reflecting the pandemic's impact225 Credit Quality Indicators (December 31, 2020 vs. 2019) | Metric | 2020 | 2019 | | :----------------------------------- | :----- | :----- | | Non-performing loans (% of total loans) | 0.38% | 0.49% | | Non-performing assets (% of total assets) | 0.25% | 0.35% | | Criticized and classified loans (% of total loans) | 4.59% | 2.17% | | Past due loans (% of total loans) | 0.37% | 0.46% | | Annualized net loan charge-offs to average loans | 0.06% | 0.09% | Non-Interest Income Analysis Non-interest income increased by $11.5 million (9.8%) in 2020, primarily driven by a 176.6% surge in mortgage banking income, partially offset by decreases in service charges and electronic banking fees due to regulatory changes - Mortgage banking income increased by $14.5 million (176.6%) in 2020 due to record mortgage production and sales into the secondary market, driven by the low interest rate environment251 - Electronic banking fees decreased by $5.1 million (22.6%) in 2020, primarily due to the full-year impact of the Durbin Amendment's limitation on interchange fees for banks with over $10 billion in assets249 - Debit card sponsorship income, a new revenue stream from the OLBK acquisition, contributed $2.8 million in 2020, but Wesbanco plans to reduce this program's customer-related revenues252254 Non-Interest Income (in thousands) | Category | 2020 | 2019 | $ Change | % Change | | :-------------------------- | :------- | :------- | :------- | :------- | | Trust fees | $26,335 | $26,579 | $(244) | (0.9)% | | Service charges on deposits | $21,943 | $26,974 | $(5,031) | (18.7)% | | Electronic banking fees | $17,524 | $22,634 | $(5,110) | (22.6)% | | Bank-owned life insurance | $7,359 | $5,913 | $1,446 | 24.5% | | Mortgage banking income | $22,736 | $8,219 | $14,517 | 176.6% | | Debit card sponsorship income | $2,792 | $328 | $2,464 | 751.2% | | Swap fee and valuation income | $6,110 | $3,406 | $2,704 | 79.4% | | Total non-interest income | $128,185 | $116,716 | $11,469 | 9.8% | Non-Interest Expense Analysis Non-interest expense increased by $42.6 million (13.7%) in 2020, primarily due to higher salaries, occupancy, and equipment costs from the OLBK acquisition, alongside a significant surge in FDIC insurance expense - Salaries and wages increased by $20.7 million (15.6%) due to a 10.2% increase in average full-time equivalent employees from the OLBK acquisition and annual merit increases257 - FDIC insurance expense surged by $5.8 million (295.4%) in 2020 due to a larger assessment base from the OLBK acquisition and a higher assessment rate for banks with over $10 billion in assets260 - Restructuring and merger-related expenses decreased by $6.7 million (40.7%) in 2020, comprising $6.4 million for OLBK merger-related costs and $3.3 million for branch optimization strategy262 Non-Interest Expense (in thousands) | Category | 2020 | 2019 | $ Change | % Change | | :----------------------------------- | :------- | :------- | :------- | :------- | | Salaries and wages | $153,166 | $132,485 | $20,681 | 15.6% | | Employee benefits | $41,723 | $39,313 | $2,410 | 6.1% | | Net occupancy | $27,580 | $22,505 | $5,075 | 22.6% | | Equipment | $24,801 | $20,494 | $4,307 | 21.0% | | FDIC insurance | $7,734 | $1,956 | $5,778 | 295.4% | | Amortization of intangible assets | $13,411 | $10,340 | $3,071 | 29.7% | | Restructuring and merger-related expenses | $9,725 | $16,397 | $(6,672) | (40.7)% | | Consulting, regulatory and advisory fees | $11,717 | $8,993 | $2,724 | 30.3% | | Total non-interest expense | $354,845 | $312,208 | $42,637 | 13.7% | Income Taxes The provision for income taxes decreased in 2020, primarily due to a 24.9% decrease in pretax income and the utilization of additional New Markets Tax Credits, resulting in an effective tax rate of 15.9% - The decrease in the provision for income taxes was primarily due to a 24.9% decrease in pretax income from 2019 to 2020 and the utilization of additional New Markets Tax Credits264 Income Tax Provision and Effective Tax Rate | Metric | 2020 | 2019 | | :-------------------------- | :----------- | :----------- | | Provision for federal and state income taxes | $23.0 million | $34.3 million | | Effective tax rate | 15.9% | 17.8% | Financial Condition Wesbanco's total assets and portfolio loans increased by 4.5% and 5.1% respectively in 2020, driven by PPP loans, while deposit growth was fueled by stimulus funds and increased savings, and shareholders' equity rose due to preferred stock issuance and net income - The increase in total assets and portfolio loans was primarily driven by participation in the SBA PPP loan program, which accounted for $726.3 million in remaining loans at year-end 2020265 - Deposit growth was fueled by CARES Act stimulus funds, PPP loan proceeds, increased personal savings, and a strategic focus on transaction-based accounts, leading to significant increases in demand, savings, and money market deposits265 - Shareholders' equity increased due to $144.5 million in net proceeds from preferred stock issuance, net income exceeding dividends, and a $30.2 million comprehensive income gain, partially offset by the CECL adoption impact and share repurchases267 Balance Sheet Changes (December 31, 2020 vs. 2019) | Metric | Change ($) | Change (%) | | :-------------------------- | :----------- | :----------- | | Total Assets | $0.7 billion | 4.5% | | Total Deposits | $1.4 billion | 13.0% | | Shareholders' Equity | $162.8 million | 6.3% | | Total Securities | $(535.6) million | (16.4)% | | Total Portfolio Loans | $521.2 million | 5.1% | | Total Borrowings | $(914.6) million | (48.2)% | Securities Total securities decreased by $535.3 million (16.4%) in 2020, primarily due to sales of mortgage-backed securities and calls of higher-rate securities, resulting in a 46 basis point decrease in the weighted average yield to 2.43% - The decrease in available-for-sale securities was primarily due to sales of residential mortgage-backed securities to boost liquidity for potential COVID-19 related needs270 - The weighted average yield of the total securities portfolio decreased by 46 basis points to 2.43% due to increased prepayment speeds on mortgage-backed securities, calls of higher-rate securities, and purchases at lower market rates270 - Net unrealized gains on available-for-sale securities, included in accumulated other comprehensive income, increased to $46.9 million at December 31, 2020, from $20.7 million at December 31, 2019, due to decreases in market rates272 Composition of Securities (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | $ Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Equity securities (at fair value) | $13,047 | $12,343 | $704 | 5.7% | | Available-for-sale debt securities (at fair value) | $1,978,136 | $2,393,558 | $(415,422) | (17.4)% | | Held-to-maturity debt securities (at amortized cost) | $731,212 | $851,753 | $(120,541) | (14.2)% | | Total securities | $2,722,395 | $3,257,654 | $(535,259) | (16.4)% | | Weighted average yield (Total securities) | 2.43% | 2.89% | (0.46)% | - | Municipal Bond Portfolio Ratings (December 31, 2020) | Rating Category | Amount (in thousands) | % of Total | | :-------------------------- | :-------------------- | :--------- | | Investment Grade - Prime | $72,861 | 9.8% | | Investment Grade - High | $511,013 | 68.4% | | Investment Grade - Upper Medium | $152,704 | 20.4% | | Investment Grade - Lower Medium | $3,072 | 0.4% | | Non-Investment Grade - Speculative | $— | - | | Not rated | $7,354 | 1.0% | | Total municipal bond portfolio | $747,004 | 100.0% | Loans and Loan Commitments Total portfolio loans increased by $0.5 million (5.1%) in 2020, primarily due to PPP loan originations, with 52.1% in commercial real estate and 22.0% in commercial and industrial loans, while $171.1 million in pandemic-related deferrals remained at year-end - Total portfolio loans increased by $0.5 million (5.1%) from December 31, 2019, to December 31, 2020, primarily due to the origination of $853.1 million in PPP loans, with $726.3 million remaining at year-end291 - Excluding PPP loans, total loans decreased by 2.0% over the last twelve months, as a higher percentage of new residential loans were sold into the secondary market and consumer loan demand decreased due to the pandemic291 - Under the CARES Act, Wesbanco modified 3,550 loans totaling $2.2 billion in 2020, with $171.1 million (1.6% of total portfolio loans) remaining in deferral as of December 31, 2020, predominantly in the hospitality sector342 Loan Portfolio Composition (in thousands) | Category | Dec 31, 2020 Amount | % of Total | Dec 31, 2019 Amount | % of Total | | :----------------------------------- | :------------------ | :--------- | :------------------ | :--------- | | Commercial real estate | $5,705,392 | 52.1% | $5,725,008 | 55.5% | | Commercial and industrial (incl. PPP) | $2,407,438 | 22.0% | $1,644,699 | 16.0% | | Residential real estate | $2,367,348 | 21.6% | $2,523,325 | 24.5% | | Home equity lines of credit | $646,387 | 5.9% | $649,678 | 6.4% | | Consumer | $309,055 | 2.8% | $374,953 | 3.6% | | Total portfolio loans | $10,789,233 | 98.5% | $10,267,985 | 99.6% | | Loans held for sale | $168,378 | 1.5% | $43,013 | 0.4% | | Total loans | $10,957,611 | 100.0% | $10,310,998 | 100.0% | Commercial Loan Exposure by Industry (December 31, 2020, in thousands) | Industry | Total Loan Balance | % of Total Exposure | % of Capital | | :-------------------------- | :----------------- | :------------------ | :----------- | | Agriculture and farming | $33,014 | 0.3% | 2.4% | | Energy | $146,886 | 1.4% | 14.1% | | Construction | $531,702 | 5.3% | 48.2% | | Manufacturing | $304,333 | 3.0% | 26.6% | | Wholesale and distribution | $191,394 | 1.9% | 15.7% | | Retail | $409,876 | 4.1% | 29.2% | | Transportation and warehousing | $143,404 | 1.4% | 10.7% | | Information and communications | $23,083 | 0.2% | 1.9% | | Finance and insurance | $115,147 | 1.1% | 14.7% | | Equipment leasing | $86,179 | 0.9% | 6.9% | | Real estate - 1-4 family | $347,370 | 3.5% | 21.6% | | Real estate - multi-family | $774,830 | 7.7% | 59.3% | | Real estate - other retail | $252,226 | 2.5% | 15.3% | | Real estate - shopping center | $292,510 | 2.9% | 18.3% | | Real estate - office building | $561,483 | 5.6% | 34.9% | | Real estate - commercial/manufacturing | $380,450 | 3.8% | 23.4% | | Real estate - residential buildings | $212,695 | 2.1% | 18.7% | | Real estate - other | $538,260 | 5.4% | 38.3% | | Services | $486,146 | 4.9% | 35.8% | | Schools and education services | $162,095 | 1.6% | 10.7% | | Healthcare | $597,536 | 6.0% | 43.1% | | Entertainment and recreation | $74,027 | 0.7% | 5.0% | | Hotels | $737,492 | 7.4% | 45.5% | | Other accommodations | $37,628 | 0.4% | 2.7% | | Restaurants | $203,030 | 2.0% | 13.7% | | Religious organizations | $126,426 | 1.3% | 9.2% | | Government | $184,906 | 1.8% | 13.2% | | Unclassified | $158,702 | 1.6% | 15.0% | | Total commercial loans | $8,112,830 | 81.0% | 594.1% | Credit Quality Credit quality indicators showed a decrease in non-performing loans and assets in 2020, but criticized and classified loans increased to 4.59% of total portfolio loans, primarily due to downgrades in hospitality loans impacted by the pandemic - Criticized and classified loans increased to $494.9 million (6.1% of total commercial loans) at December 31, 2020, from $222.5 million (3.0%) in 2019, primarily due to downgrades in hospitality loans impacted by the pandemic373 Past Due and Accruing Loans (Excluding Non-Accrual and TDRs, in thousands) | Category | Dec 31, 2020 Amount | % of Loan Bal | Dec 31, 2019 Amount | % of Loan Bal | | :----------------------------------- | :------------------ | :------------ | :------------------ | :------------ | | Total 90 days or more | $8,846 | 0.08% | $11,613 | 0.11% | | Total 30 to 89 days | $31,596 | 0.29% | $36,330 | 0.35% | | Total 30 days or more | $40,442 | 0.37% | $47,943 | 0.47% | Non-Performing Assets (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Total TDRs accruing interest | $3,927 | $5,431 | | Total non-accrual loans | $36,880 | $44,913 | | Total non-performing loans | $40,807 | $50,344 | | Real estate owned and repossessed assets | $549 | $4,178 | | Total non-performing assets | $41,356 | $54,522 | | Non-performing loans as a percentage of total portfolio loans | 0.38% | 0.49% | | Non-performing assets as a percentage of total assets | 0.25% | 0.35% | Net Charge-offs (in thousands) | Metric | 2020 | 2019 | | :-------------------------- | :------- | :------- | | Total loan charge-offs | $11,524 | $10,998 | | Total recoveries | $5,060 | $4,663 | | Net charge-offs | $7,049 | $7,584 | | Total net loan charge-offs (% of average loans) | 0.06% | 0.09% | Allowance for Credit Losses The total allowance for credit losses significantly increased to $195.3 million at December 31, 2020, primarily due to the $41.4 million impact of adopting the CECL accounting standard and changes in macroeconomic forecasts - The total allowance for credit losses (loans and commitments) increased to $195.3 million at December 31, 2020, from $53.3 million in 2019, primarily due to the $41.4 million impact of adopting the CECL accounting standard on January 1, 2020378379 - Excluding PPP loans, the allowance for credit losses on loans was 1.85% of total portfolio loans, as no allowance is recorded for PPP loans due to their SBA guarantee379 - The CECL calculation utilizes a PD/LGD approach, macroeconomic forecasts (e.g., national unemployment peaking at 6.6% in Q1 2021), and qualitative factors, including COVID-19 pandemic-related transient credit risk and hospitality industry concentration382 Allowance for Credit Losses (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Allowance for credit losses - loans | $185,827 | $52,429 | | Allowance for credit losses - loan commitments | $9,514 | $874 | | Total ending allowance for credit losses | $195,341 | $53,303 | | Allowance for credit losses - loans as a percentage of total portfolio loans | 1.72% | 0.51% | | Allowance for credit losses - loans to total non-performing loans | 4.55x | 1.04x | Deposits Total deposits increased by $1.4 billion (13.0%) in 2020, driven by CARES Act stimulus funds, PPP loan proceeds, and increased personal savings, while certificates of deposit decreased by $437.4 million (21.3%) due to strategic remixing - Total deposits increased by $1.4 billion (13.0%) in 2020, primarily driven by CARES Act stimulus funds, PPP loan proceeds deposited into customer accounts, and increased personal savings391 - Certificates of deposit decreased by $437.4 million (21.3%) due to a corporate strategy to remix retail deposit relationships, lower offered rates, and customer preferences for non-maturity deposit types392 - Approximately $1.0 billion of certificates of deposit, with an average cost of 0.84%, are scheduled to mature within the next year392 Deposit Composition (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | $ Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Non-interest bearing demand | $4,070,835 | $3,178,270 | $892,565 | 28.1% | | Interest bearing demand | $2,839,536 | $2,316,855 | $522,681 | 22.6% | | Money market | $1,685,927 | $1,518,314 | $167,613 | 11.0% | | Savings deposits | $2,214,565 | $1,934,647 | $279,918 | 14.5% | | Certificates of deposit | $1,618,510 | $2,055,920 | $(437,410) | (21.3)% | | Total deposits | $12,429,373 | $11,004,006 | $1,425,367 | 13.0% | Borrowings Total borrowings decreased by $914.6 million (48.2%) in 2020, primarily due to a $866.6 million reduction in FHLB borrowings as Wesbanco utilized available liquidity, while maintaining a $4.1 billion FHLB borrowing capacity - FHLB borrowings decreased by $866.6 million in 2020, as $1.3 billion in maturities and principal paydowns were offset by $475.0 million in new advances, utilizing available liquidity394 - Wesbanco maintains a maximum borrowing capacity of approximately $4.1 billion with the FHLB at December 31, 2020, secured by residential mortgages and other loan types395 - A $30.0 million revolving line of credit with another financial institution, a senior obligation of the parent company, was renewed in August 2020, with no outstanding balance at year-end397 Borrowings (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | $ Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Federal Home Loan Bank Borrowings | $549,003 | $1,415,615 | $(866,612) | (61.2)% | | Other short-term borrowings | $241,950 | $282,362 | $(40,412) | (14.3)% | | Subordinated debt and junior subordinated debt | $192,291 | $199,869 | $(7,578) | (3.8)% | | Total | $983,244 | $1,897,846 | $(914,602) | (48.2)% | Contractual Obligations Wesbanco's total contractual obligations amounted to $13.9 billion at December 31, 2020, with $12.5 billion due within one year, primarily comprising deposits without a stated maturity and certificates of deposit - The table presents maturities of principal for significant fixed and determinable contractual obligations, excluding future interest payments398401 Contractual Obligations (December 31, 2020, in thousands) | Obligation Type | Total | One Year or Less | One to Three Years | Three to Five Years | More Than Five Years | | :----------------------------------- | :---------- | :--------------- | :----------------- | :------------------ | :------------------- | | Deposits without a stated maturity | $10,810,863 | $10,810,863 | $— | $— | $— | | Certificates of deposit | $1,618,510 | $1,000,380 | $400,724 | $159,210 | $58,196 | | Federal Home Loan Bank borrowings | $549,003 | $365,002 | $183,050 | $882 | $69 | | Other short term borrowings | $241,950 | $241,950 | $— | $— | $— | | Subordinated debt and junior subordinated debt | $192,291 | $— | $— | $25,000 | $167,291 | | Future benefit payments under benefit plans | $283,800 | $6,703 | $14,191 | $15,544 | $247,362 | | Director and executive officer retirement plans | $10,005 | $1,501 | $2,926 | $2,173 | $3,405 | | Leases / Right of use assets | $82,064 | $7,368 | $12,853 | $10,588 | $51,255 | | Software licenses and maintenance agreements | $77,266 | $6,216 | $21,585 | $21,585 | $27,880 | | Limited partnership funding commitments | $20,978 | $10,796 | $8,296 | $1,016 | $870 | | Total | $13,886,730 | $12,450,779 | $643,625 | $235,998 | $556,328 | Off-Balance Sheet Arrangements Wesbanco utilizes off-balance sheet credit arrangements, totaling approximately $3.0 billion at December 31, 2020, and is implementing a financial center optimization strategy expected to yield $6.0 million to $6.5 million in cost savings - Wesbanco utilizes off-balance sheet credit arrangements, such as commitments to extend credit and letters of credit, to meet customer financing needs, with total commitments approximating $3.0 billion at December 31, 2020403422 - The allowance for credit losses includes a reserve for unfunded loan commitments, which represents lifetime expected losses and is accounted for in other liabilities404 - Wesbanco is implementing a financial center optimization strategy, consolidating 25 locations and converting two to drive-up only, with expected gross cost savings of $6.0 million to $6.5 million in the first half of 2021405 Capital Resources Shareholders' equity increased to $2.8 billion at December 31, 2020, driven by preferred stock issuance and net income, despite a higher common dividend payout ratio of 72.3%, while maintaining capital ratios significantly above regulatory minimums - Shareholders' equity increased to $2.8 billion at December 31, 2020, from $2.6 billion in 2019, primarily due to $144.5 million in net proceeds from preferred stock issuance, $122.0 million in net income, and a $30.2 million other comprehensive income gain406 - The common dividend per share payout ratio increased to 72.3% in 2020 from 43.8% in 2019, mainly due to a decrease in earnings year-over-year, exceeding the board-approved target range of 35% to 60%407408 - Wesbanco's stock repurchase program was suspended in early March 2020 due to the COVID-19 pandemic, after purchasing 786,010 shares for $25.0 million in the first quarter410 - Wesbanco and Wesbanco Bank maintain Tier 1 risk-based, Total risk-based, and Tier 1 leverage capital ratios significantly above minimum regulatory levels, with Wesbanco Bank paying $64.0 million in dividends to the parent company in 2020411 - Junior subordinated debt and trust preferred securities totaling $130.0 million are now accounted for as Tier 2 capital, as Wesbanco's assets exceeded $15 billion, as per Basel III capital standards412 Liquidity Risk Wesbanco actively manages liquidity risk by maintaining liquid assets and substantial borrowing capacity, including $4.1 billion with the FHLB, and a stable core deposit base to meet cash and collateral obligations - Wesbanco actively manages liquidity risk by maintaining liquid assets, sufficient borrowing capacity, and a stable core deposit base to meet cash and collateral obligations414 - Available credit with the FHLB approximated $4.1 billion at December 31, 2020, providing an additional funding source, alongside existing overnight lines of credit with third-party banks totaling $275.0 million418419 - Parent company liquidity is primarily derived from dividends from Wesbanco Bank and $223.2 million in cash on hand, with the ability to receive up to $306.3 million in dividends from the Bank without prior regulatory approval421 Sources of Liquidity Expected Within the Next Year (December 31, 2020, in thousands) | Source | Amount | | :------------------------------------------------------------------------------------------------ | :--------- | | Cash and cash equivalents | $905,477 | | Securities with a maturity date within the next year and callable securities | $286,304 | | Projected payments and prepayments on mortgage-backed securities and collateralized mortgage obligations | $739,468 | | Loans held for sale | $168,378 | | Accruing loans scheduled to mature | $1,272,232 | | Normal loan repayments | $2,693,036 | | Total sources of liquidity expected within the next year | $6,064,895 | Quantitative and Qualitative Disclosures About Market Risk Wesbanco manages interest rate risk through earnings sensitivity and economic value-at-risk models, indicating asset sensitivity in rising rate scenarios, and is actively addressing the LIBOR transition by forming a committee and implementing new loan language - Wesbanco's most significant market risk is interest rate risk, managed by the Asset/Liability Committee (ALCO) using earnings sensitivity simulation and economic value-at-risk models427428 - Wesbanco has established a LIBOR transition committee to investigate and mitigate risks associated with the potential discontinuance of LIBOR, including adding alternative rate index language to new loans and exploring replacements like SOFR and AMERIBOR438441 Net Interest Income Sensitivity to Interest Rate Changes | Immediate Change in Interest Rates (basis points) | Percentage Change in Net Interest Income from Base over One Year (Dec 31, 2020) | ALCO Guidelines | | :------------------------------------------------ | :----------------------------------------------------------------------------- | :-------------- | | +300 | 15.3% | (15.0%) | | +200 | 10.3% | (10.0%) | | +100 | 5.5% | (7.5%) | | -100 | N/A | (7.5%) | Economic Value of Equity (EVE) Sensitivity to Interest Rate Changes | Immediate Change in Interest Rates (basis points) | Percentage Change in Economic Value of Equity from Base over One Year (Dec 31, 2020) | ALCO Guidelines | | :------------------------------------------------ | :----------------------------------------------------------------------------------- | :-------------- | | +300 | 13.4% | (30.0%) | | +200 | 10.6% | (20.0%) | | +100 | 7.1% | (10.0%) | | -100 | N/A | (10.0%) | Financial Statements and Supplementary Data This section presents Wesbanco's audited consolidated financial statements, including balance sheets, income statements, and cash flows for 2018-2020, along with detailed notes on accounting policies, mergers, and regulatory matters, providing a comprehensive financial overview Management's Report on Internal Control Over Financial Reporting Wesbanco's management assessed the effectiveness of its internal control over financial reporting as of December 31, 2020, based on COSO criteria, concluding that it is effective - Wesbanco's management assessed the effectiveness of its internal control over financial reporting as of December 31, 2020, based on the COSO criteria, concluding that it is effective443444 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm Ernst & Young LLP issued an unqualified opinion on Wesbanco's consolidated financial statements and the effectiveness of its internal control over financial reporting, identifying the Allowance for Credit Losses as a critical audit matter due to its complexity - Ernst & Young LLP issued an unqualified opinion on Wesbanco, Inc.'s consolidated financial statements as of December 31, 2020 and 2019, and for the three years ended December 31, 2020456 - The firm also expressed an unqualified opinion on the effectiveness of Wesbanco's internal control over financial reporting as of December 31, 2020447457 - The Allowance for Credit Losses (ACL) was identified as a critical audit matter due to the complexity of expected loss models and the high degree of subjectivity in evaluating management's qualitative factors, especially with the adoption of ASU 2016-13 (CECL)458462463 Consolidated Balance Sheets Wesbanco's consolidated balance sheets show total assets of $16.4 billion and total deposits of $12.4 billion at December 31, 2020, with shareholders' equity at $2.8 billion Consolidated Balance Sheets (in thousands) | Asset/Liability | Dec 31, 2020 | Dec 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Cash and due from banks | $905,447 | $234,796 | | Total securities | $2,722,069 | $3,257,654 | | Net portfolio loans | $10,603,406 | $10,215,556 | | Goodwill and other intangible assets, net | $1,163,091 | $1,149,153 | | Total Assets | $16,425,610 | $15,720,112 | | Total deposits | $12,429,373 | $11,004,006 | | Total borrowings | $983,244 | $1,897,846 | | Total Liabilities | $13,668,873 | $13,126,191 | | Total Shareholders' Equity | $2,756,737 | $2,593,921 | Consolidated Statements of Income Wesbanco's consolidated statements of income show net interest income of $479.5 million and net income available to common shareholders of $119.4 million in 2020, with diluted EPS at $1.77 Consolidated Statements of Income (in thousands) | Income/Expense | 2020 | 2019 | 2018 | | :----------------------------------- | :------- | :------- | :------- | | Total interest and dividend income | $541,277 | $484,253 | $414,957 | | Total interest expense | $61,797 | $84,349 | $67,721 | | Net interest income | $479,480 | $399,904 | $347,236 | | Provision for credit losses | $107,741 | $11,198 | $7,764 | | Total non-interest income | $128,185 | $116,716 | $100,276 | | Total non-interest expense | $354,845 | $312,208 | $265,224 | | Net income | $122,044 | $158,873 | $143,112 | | Net income available to common shareholders | $119,400 | $158,873 | $143,112 | | Diluted Earnings Per Common Share | $1.77 | $2.83 | $2.92 | Consolidated Statements of Comprehensive Income Wesbanco's consolidated statements of comprehensive income show net income of $122.0 million and a total other comprehensive gain of $30.2 million in 2020, resulting in comprehensive income of $152.2 million Consolidated Statements of Comprehensive Income (in thousands) | Metric | 2020 | 2019 | 2018 | | :----------------------------------- | :------- | :------- | :------- | | Net income | $122,044 | $158,873 | $143,112 | | Net effect on other comprehensive income for the period (Debt securities available-for-sale) | $28,217 | $40,166 | $(7,209) | | Net effect on other comprehensive income for the period (Debt securities held-to-maturity) | $(25) | $(168) | $(188) | | Net effect on other comprehensive income for the period (Defined benefit plans) | $1,966 | $(926) | $2,084 | | Total other comprehensive gain (loss) | $30,158 | $39,072 | $(5,313) | | Comprehensive income | $152,202 | $197,945 | $137,799 | Consolidated Statements of Changes in Shareholders' Equity Wesbanco's shareholders' equity increased to $2.8 billion at December 31, 2020, driven by net income, other comprehensive income, and preferred stock issuance, partially offset by common dividends and CECL adoption impact Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | | :----------------------------------- | :----------- | :----------- | :----------- | | Total Shareholders' Equity (Beginning Balance) | $2,593,921 | $1,978,827 | $1,395,321 | | Net income | $122,044 | $158,873 | $143,112 | | Other comprehensive income | $30,158 | $39,072 | $(5,313) | | Common dividends declared | $(85,815) | $(71,760) | $(57,951) | | Preferred dividends declared | $(2,644) | $— | $— | | Adoption of ASU 2016-13 | $(26,591) | $— | $— | | Issuance of preferred stock, net | $144,484 | $— | $— | | Treasury shares acquired | $(25,296) | $(10,298) | $(697) | | Total Shareholders' Equity (Ending Balance) | $2,756,737 | $2,593,921 | $1,978,827 | Consolidated Statements of Cash Flows Wesbanco's consolidated statements of cash flows show a net increase in cash, cash equivalents, and restricted cash of $670.7 million in 2020, primarily driven by financing activities, with cash and equivalents ending at $905.4 million Consolidated Statements of Cash Flows (in thousands) | Activity | 2020 | 2019 | 2018 | | :----------------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $59,606 | $163,363 | $191,891 | | Net cash provided by (used in) investing activities | $57,792 | $103,786 | $(51,859) | | Net cash provided by (used in) financing activities | $553,253 | $(201,539) | $(88,418) | | Net increase in cash, cash equivalents and restricted cash | $670,651 | $65,610 | $51,614 | | Cash, cash equivalents and restricted cash at end of the year | $905,447 | $234,796 | $169,186 | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Wesbanco adopted the CECL accounting standard on January 1, 2020, requiring a forward-looking 'expected loss' model for credit losses, while also applying fair value accounting for acquired loans and evaluating goodwill for impairment - Wesbanco adopted ASU 2016-13 (CECL) effective January 1, 2020, which requires a forward-looking 'expected loss' model for credit losses, resulting in earlier recognition of allowances498555 - The CARES Act and Economic Aid Act provided temporary relief for loan modifications related to COVID-19, allowing Wesbanco to suspend TDR classification for qualifying loans and offer payment deferrals504507 - Loans acquired in business combinations are recorded at fair value, with Purchased Credit-Deteriorated (PCD) loans having an allowance recognized on day one by adding it to the fair value508509 - The allowance for credit losses is calculated using a Probability of Default (PD) / Loss Given Default (LGD) approach, discounted to net present value, incorporating macroeconomic forecasts and qualitative factors like COVID-19 impacts515519 - Goodwill is not amortized but is evaluated for impairment annually, while finite-lived intangible assets are amortized over their estimated useful lives and tested for impairment when circumstances indicate533 NOTE 2. MERGERS AND ACQUISITIONS Wesbanco completed the acquisition of Old Line Bancshares, Inc. (OLBK) for $494.0 million in 2019, recording $231.8 million in goodwill, and also completed acquisitions of Farmers Capital Bank Corporation and First Sentry Bancshares in 2018 - On November 22, 2019, Wesbanco completed the acquisition of Old Line Bancshares, Inc. (OLBK) for $494.0 million, issuing 13,351,837 shares of common stock and recording $231.8 million in goodwill and $32.9 million in core deposit intangibles560 - Wesbanco recorded merger-related expenses of $6.5 million and $13.2 million associated with the OLBK acquisition for the years ended December 31, 2020, and 2019, respectively561 - The acquisition of Farmers Capital Bank Corporation (FFKT) on August 20, 2018, was valued at $428.9 million, resulting in $223.3 million in goodwill and $37.4 million in core deposit intangibles564 - The acquisition of First Sentry Bancshares, Inc. (FTSB) on April 5, 2018, was valued at $108.3 million, resulting in $67.7 million in goodwill and $8.1 million in core deposit intangibles566 NOTE 3. EARNINGS PER COMMON SHARE Wesbanco's diluted earnings per common share were $1.77 in 2020, with average common shares outstanding increasing in 2019 primarily due to the issuance of 13,351,837 shares for the OLBK acquisition - Diluted EPS calculations exclude options and Total Shareholder Return (TSR) plan shares if their effect would be antidilutive570571 - The increase in average common shares outstanding in 2019 was primarily due to the issuance of 13,351,837 shares for the OLBK acquisition573 Earnings Per Common Share (in thousands, except shares and per share amounts) | Metric | 2020 | 2019 | 2018 | | :----------------------------------- | :------- | :------- | :------- | | Net income available to common shareholders | $119,400 | $158,873 | $143,112 | | Total average basic common shares outstanding | 67,260,796 | 56,108,084 | 48,889,041 | | Total diluted average common shares outstanding | 67,310,584 | 56,214,364 | 49,022,990 | | Earnings per common share—basic | $1.78 | $2.83 | $2.93 | | Earnings per common share—diluted | $1.77 | $2.83 | $2.92 | NOTE 4. SECURITIES Total investment securities decreased by $535.3 million (16.4%) in 2020 due to sales and calls, while net unrealized gains on available-for-sale securities increased to $46.9 million, and a $0.2 million allowance for credit losses was recognized on held-to-maturity securities upon CECL adoption - Total investment securities decreased by $535.3 million (16.4%) from December 31, 2019, to December 31, 2020, primarily due to sales of residential mortgage-backed securities and calls of municipal securities270574 - Net unrealized gains on available-for-sale securities, net of tax, increased to $46.9 million at December 31, 2020, from $20.7 million at December 31, 2019578 - Upon CECL adoption on January 1, 2020, Wesbanco recognized a $0.2 million allowance for credit losses on held-to-maturity securities, with ongoing quarterly analysis for expected credit losses580 Fair Value and Amortized Cost of Debt Securities (in thousands) | Category | Dec 31, 2020 Amortized Cost | Dec 31, 2020 Fair Value | Dec 31, 2019 Amortized Cost | Dec 31, 2019 Fair Value | | :----------------------------------- | :-------------------------- | :-------------------- | :-------------------------- | :-------------------- | | Total available-for-sale debt securities | $1,916,658 | $1,978,136 | $2,369,416 | $2,393,558 | | Total held-to-maturity debt securities | $731,212 | $768,183 | $851,753 | $874,523 | | Total debt securities | $2,647,870 | $2,746,319 | $3,221,169 | $3,268,081 | NOTE 5. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses for loans increased to $185.8 million (1.72% of total portfolio loans) at December 31, 2020, primarily due to the $41.4 million impact of CECL adoption, with no allowance on SBA-guaranteed PPP loans - The adoption of CECL on January 1, 2020, resulted in a $41.4 million increase to the allowance for credit losses, including a $6.7 million adjustment for Purchased Credit-Deteriorated (PCD) loans585 - The allowance for credit losses for loans was $185.8 million (1.72% of total portfolio loans) at December 31, 2020, with no allowance on PPP loans due to their SBA guarantee379589 Loan Portfolio Composition (in thousands) | Category | Dec 31, 2020 | Dec 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Commercial re