WesBanco(WSBC) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents Wesbanco's unaudited consolidated financial statements, including balance sheets, income statements, comprehensive income, changes in shareholders' equity, and cash flows for the periods ended September 30, 2024, and December 31, 2023, along with detailed notes on significant accounting policies, mergers, earnings per share, securities, loans, investments, derivatives, benefit plans, fair value measurements, revenue recognition, comprehensive income, commitments, and business segments Consolidated Balance Sheets This section presents Wesbanco's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :-------------------------------- | :------------------------------- | | ASSETS | | | | Total Assets | $18,514,169 | $17,712,374 | | Cash and due from banks | $620,897 | $595,383 | | Total securities | $3,404,093 | $3,405,984 | | Net portfolio loans | $12,310,558 | $11,507,786 | | LIABILITIES | | | | Total Liabilities | $15,712,584 | $15,179,312 | | Total deposits | $13,837,343 | $13,168,704 | | Total borrowings | $1,594,892 | $1,734,971 | | SHAREHOLDERS' EQUITY | | | | Total Shareholders' Equity | $2,801,585 | $2,533,062 | - Total Assets increased by $801.795 million (4.5%) from December 31, 2023, to September 30, 2024. Total Shareholders' Equity increased by $268.523 million (10.6%) over the same period[4] Consolidated Statements of Income This section details Wesbanco's revenues, expenses, and net income for the reported periods, including earnings per share | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :-------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total interest and dividend income | $213,729 | $183,589 | $612,055 | $520,198 | | Total interest expense | $92,587 | $65,907 | $260,354 | $156,618 | | Net interest income | $121,142 | $117,682 | $351,701 | $363,580 | | Provision for credit losses | $4,798 | $6,327 | $19,352 | $12,932 | | Total non-interest income | $29,612 | $30,879 | $91,596 | $90,372 | | Total non-interest expense | $101,183 | $97,939 | $300,768 | $290,498 | | Net income | $37,272 | $36,842 | $101,881 | $124,064 | | Net income available to common shareholders | $34,741 | $34,311 | $94,287 | $116,470 | | Basic Earnings Per Common Share | $0.54 | $0.58 | $1.54 | $1.96 | | Diluted Earnings Per Common Share | $0.54 | $0.58 | $1.54 | $1.96 | - Net interest income increased by $3.46 million (2.9%) in Q3 2024 compared to Q3 2023, but decreased by $11.879 million (3.3%) for the nine months ended September 30, 2024, compared to the same period in 2023[5] - Net income available to common shareholders increased slightly by $0.43 million (1.25%) in Q3 2024 YoY, but decreased by $22.183 million (19.0%) for the nine months ended September 30, 2024 YoY[5] Consolidated Statements of Comprehensive Income This section presents Wesbanco's comprehensive income, including net income and other comprehensive income components | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :---------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | $37,272 | $36,842 | $101,881 | $124,064 | | Net change in unrealized gains (losses) on debt securities available-for-sale | $70,448 | ($44,112) | $59,336 | ($47,521) | | Total other comprehensive income | $53,404 | ($33,279) | $44,889 | ($35,490) | | Comprehensive income | $90,676 | $3,563 | $146,770 | $88,574 | - Comprehensive income significantly increased to $90.676 million in Q3 2024 from $3.563 million in Q3 2023, primarily driven by a positive net change in unrealized gains on available-for-sale debt securities[6] Consolidated Statements of Changes in Shareholders' Equity This section outlines changes in Wesbanco's shareholders' equity, including common stock, retained earnings, and comprehensive income | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------------------- | :-------------------------------- | :------------------------------- | | Total Shareholders' Equity | $2,801,585 | $2,533,062 | | Common Stock Amount | $156,985 | $141,834 | | Capital Surplus | $1,808,272 | $1,635,859 | | Retained Earnings | $1,169,808 | $1,142,586 | | Accumulated Other Comprehensive Income (Loss) | ($181,804) | ($226,693) | - Total Shareholders' Equity increased by $268.523 million from December 31, 2023, to September 30, 2024, primarily due to a $190.967 million issuance of common stock, net income, and a $44.889 million increase in other comprehensive income[8][106] Consolidated Condensed Statements of Cash Flows This section summarizes Wesbanco's cash inflows and outflows from operating, investing, and financing activities | Metric | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $143,573 | $121,956 | | Net cash used in investing activities | ($762,867) | ($311,934) | | Net cash provided by financing activities | $644,808 | $276,649 | | Net increase in cash, cash equivalents and restricted cash | $25,514 | $86,671 | | Cash, cash equivalents and restricted cash at end of the period | $620,897 | $495,082 | - Net cash provided by operating activities increased by $21.617 million (17.7%) YoY for the nine months ended September 30, 2024. Net cash used in investing activities significantly increased by $450.933 million (144.5%) YoY, primarily due to a larger net increase in loans held for investment[9] - Net cash provided by financing activities increased by $368.159 million (133.1%) YoY, driven by an increase in deposits and issuance of common stock, partially offset by repayment of FHLB borrowings[9] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines Wesbanco's key accounting principles and recent accounting pronouncements - Wesbanco's interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, following significant accounting policies from its 2023 Annual Report on Form 10-K[10][11] - Recent accounting pronouncements (ASU 2024-02, 2024-01, 2023-09, 2023-08, 2023-07, 2023-06, 2023-05, 2023-02, 2023-01, 2022-04, 2022-03) are not expected to have a material impact on the Consolidated Financial Statements, with some already effective as of January 1, 2024[11][12][13][15][16] NOTE 2. MERGERS AND ACQUISITIONS This note details Wesbanco's pending merger with Premier Financial Corp. and related expenses - Wesbanco announced a definitive Agreement and Plan of Merger with Premier Financial Corp. on July 25, 2024, where Premier shareholders will receive 0.80 shares of Wesbanco common stock per Premier share, anticipated to be a tax-free exchange[17] - The merger is subject to regulatory and shareholder approvals, with special shareholder meetings scheduled for December 11, 2024, and is expected to close in Q1 2025[17] - Wesbanco recorded $2.0 million in merger-related expenses for the nine months ended September 30, 2024, related to the Premier acquisition[17] NOTE 3. EARNINGS PER COMMON SHARE This note provides details on basic and diluted earnings per common share calculations | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income available to common shareholders | $34,741 | $34,311 | $94,287 | $116,470 | | Basic Earnings Per Common Share | $0.54 | $0.58 | $1.54 | $1.96 | | Diluted Earnings Per Common Share | $0.54 | $0.58 | $1.54 | $1.96 | | Total average basic common shares outstanding | 64,488,962 | 59,358,653 | 61,143,452 | 59,280,644 | | Total diluted average common shares outstanding | 64,634,208 | 59,443,366 | 61,272,602 | 59,386,429 | - Wesbanco issued 7,272,728 shares of common stock on August 1, 2024, through a $200 million equity capital raise to support the pro-forma bank's balance sheet and regulatory capital ratios, which are included in average shares outstanding from that date[17] NOTE 4. SECURITIES This note details Wesbanco's investment securities, including available-for-sale and held-to-maturity debt securities | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------ | :-------------------------------- | :------------------------------- | | Total available-for-sale debt securities (Fair Value) | $2,228,527 | $2,194,329 | | Total held-to-maturity debt securities (Amortized Cost) | $1,162,359 | $1,199,527 | | Total debt securities (Fair Value) | $3,281,308 | $3,263,488 | | Net unrealized losses on AFS securities (net of tax) | ($188,100) | ($233,200) | | Metric | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net securities gains (losses) | $1,347 | $13 | - Securities with an aggregate carrying value of $2.2 billion at September 30, 2024, were pledged as security for public and trust funds, and securities sold under repurchase agreements[22] - The allowance for credit losses on held-to-maturity debt securities decreased from $192 thousand at December 31, 2023, to $148 thousand at September 30, 2024, with a current period provision of ($44) thousand[23] NOTE 5. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES This note details Wesbanco's loan portfolio, credit quality, and allowance for credit losses | Loan Category | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------- | :-------------------------------- | :------------------------------- | | Total portfolio loans | $12,451,430 | $11,638,461 | | Commercial real estate | $7,206,271 | $6,565,448 | | Commercial and industrial | $1,717,369 | $1,670,659 | | Residential real estate | $2,519,089 | $2,438,574 | | Home equity | $796,594 | $734,219 | | Consumer | $212,107 | $229,561 | | Loans held for sale | $22,127 | $16,354 | - Total portfolio loans increased by $812.969 million (7.0%) from December 31, 2023, to September 30, 2024, driven by growth in commercial real estate and home equity loans[27] | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | | Allowance for credit losses - loans | $140,872 | $130,675 | | Allowance for credit losses - loan commitments | $8,225 | $8,604 | | Total allowance for credit losses - loans and loan commitments | $149,097 | $139,279 | - The allowance for credit losses on loans increased by $10.197 million (7.8%) from December 31, 2023, to September 30, 2024, primarily due to continued loan growth, adjustments in regional macroeconomic factors, loan concentrations, a specific reserve on one C&I credit, and an increase in net charge-offs[28][29][102] | Loan Category | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------ | :-------------------------------- | :------------------------------- | | Total Commercial Loans (by risk grade) | $8,923,640 | $8,236,107 | | Pass | $8,629,915 | $7,977,436 | | Criticized - compromised | $200,540 | $183,174 | | Classified - substandard | $93,185 | $75,497 | | Classified - doubtful | $0 | $0 | | Loan Category | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------ | :-------------------------------- | :------------------------------- | | Total loans (Age Analysis) | $12,473,557 | $11,654,815 | | Current | $12,398,203 | $11,604,632 | | 30-59 Days Past Due | $19,196 | $15,152 | | 60-89 Days Past Due | $17,472 | $9,729 | | 90 Days Past Due or More | $38,686 | $25,302 | | Non-accrual loans | $30,421 | $26,808 | - Non-performing loans increased by $3.613 million (13.5%) from December 31, 2023, to September 30, 2024, reaching $30.421 million[37][100] | Modification Type | Three Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | | :------------------ | :--------------------------------------------- | :-------------------------------------------- | | Term Extension | $1,870 | $26,629 | | Payment Delay | $22,125 | $23,390 | | Total Modified Loans | $23,995 | $50,019 | - Total modified loans for borrowers experiencing financial difficulty increased significantly to $23.995 million in Q3 2024 from $966 thousand in Q3 2023, and to $50.019 million for the nine months ended September 30, 2024, from $18.457 million in the prior year period[40][41][42][43] NOTE 6. INVESTMENTS IN LIMITED PARTNERSHIPS This note describes Wesbanco's investments in tax-advantaged limited partnerships and associated commitments - Wesbanco had $34.4 million invested in tax-advantaged limited partnerships (VIEs) at September 30, 2024, up from $31.9 million at December 31, 2023, with unconditional unfunded equity commitments of $15.2 million[52] - Amortization of these investments, classified as a component of income tax expense, was $1.2 million for Q3 2024 and $3.5 million for the nine months ended September 30, 2024[52] | Year | Amount (in thousands) | | :--- | :-------------------- | | 2024 | $3,673 | | 2025 | $5,085 | | 2026 | $3,148 | | 2027 | $950 | | 2028 | $588 | | 2029 and thereafter | $1,726 | | Total | $15,170 | NOTE 7. DERIVATIVES AND HEDGING ACTIVITIES This note details Wesbanco's use of interest rate derivatives and their impact on financial results - Wesbanco uses interest rate swaps and caps with commercial customers, economically hedged by offsetting third-party derivatives, to minimize net risk exposure. These do not meet hedge accounting requirements, so fair value changes are recognized in earnings[55][57] | Derivative Type | September 30, 2024 (Notional/Contractual Amount in thousands) | December 31, 2023 (Notional/Contractual Amount in thousands) | | :------------------------------ | :------------------------------------------------------------ | :----------------------------------------------------------- | | Interest rate swaps and caps | $1,873,665 | $1,573,152 | | Interest rate lock commitments | $33,968 | $16,524 | | Forward TBA contracts | $41,500 | $27,000 | | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net swap fee and valuation (loss) income | ($1,702) | $1,352 | ($895) | $489 | | Mortgage banking income (from derivatives) | ($629) | $516 | ($650) | $836 | | Total (Loss) Gain | ($2,331) | $1,868 | ($1,545) | $1,325 | NOTE 8. BENEFIT PLANS This note provides information on Wesbanco's defined benefit pension plan and related expenses | Metric | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net periodic pension income | ($661) | ($647) | ($1,968) | ($1,918) | | Service cost | $334 | $357 | $994 | $1,061 | | Expected return on plan assets | ($2,627) | ($2,811) | ($7,825) | ($8,342) | - Wesbanco's Defined Benefit Pension Plan covers employees hired on or before August 1, 2007. Net periodic pension income was ($1.968 million) for the nine months ended September 30, 2024[61] - A minimum required contribution of $2.6 million is due in 2024, which can be offset by the Plan's $64.2 million available credit balance; Wesbanco does not expect to make a voluntary contribution in 2024[61] NOTE 9. FAIR VALUE MEASUREMENT This note describes Wesbanco's fair value measurements for financial assets and liabilities - Wesbanco measures financial assets and liabilities at fair value on a recurring basis, primarily using quoted market prices (Level 1) or matrix pricing (Level 2) for investment securities and discounted cash flow analysis for derivatives[62] | Asset/Liability Category | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | | Total assets recurring fair value measurements | $2,330,919 | $2,295,186 | | Total liabilities recurring fair value measurements | $68,708 | $73,083 | | Total nonrecurring fair value measurements | $22,165 | $19,770 | | Collateral dependent loans (nonrecurring) | $21,259 | $18,273 | | Other real estate owned and repossessed assets (nonrecurring) | $906 | $1,497 | | Financial Instrument | September 30, 2024 Carrying Amount (in thousands) | September 30, 2024 Fair Value Estimate (in thousands) | | :------------------------------------ | :------------------------------------------------ | :---------------------------------------------------- | | Cash and due from banks | $620,897 | $620,897 | | Equity securities | $13,355 | $13,355 | | Available-for-sale debt securities | $2,228,527 | $2,228,527 | | Net held-to-maturity debt securities | $1,162,211 | $1,052,781 | | Net loans | $12,310,558 | $12,018,968 | | Deposits | $13,837,343 | $13,827,070 | | Federal Home Loan Bank borrowings | $1,175,000 | $1,176,840 | | Subordinated debt and junior subordinated debt | $279,251 | $232,112 | NOTE 10. REVENUE RECOGNITION This note outlines Wesbanco's revenue recognition policies for various income streams - Wesbanco's revenue streams in scope of ASC 606, such as trust fees, service charges on deposits, and digital banking income, have no significant judgments related to the amount and timing of revenue recognition[70] | Revenue Stream | Point of Revenue Recognition | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :------------------------------------------ | :--------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Trust fees | Over time | $22,902 | $21,116 | | Service charges on deposits | At a point in time and over time | $21,841 | $19,128 | | Digital banking income | At a point in time | $14,828 | $14,564 | | Net swap fee and valuation (loss) income | At a point in time | $2,712 | $7,257 | | Mortgage banking income | At a point in time | $3,042 | $2,002 | NOTE 11. COMPREHENSIVE INCOME/(LOSS) This note details the components of Wesbanco's accumulated other comprehensive income or loss | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------------------------------------- | :-------------------------------- | :------------------------------- | | Balance of Accumulated Other Comprehensive Income/(Loss) | ($181,804) | ($226,693) | | Period change in AOCI | $44,889 | N/A | | Unrealized Gains (Losses) on Debt Securities Available-for-Sale | ($188,112) | ($233,208) | | Defined Benefit Plans | $6,308 | $6,515 | - Accumulated other comprehensive income/(loss) improved from ($226.693 million) at December 31, 2023, to ($181.804 million) at September 30, 2024, primarily due to a $45.096 million positive period change in unrealized gains (losses) on available-for-sale debt securities[74] NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES This note discloses Wesbanco's off-balance sheet credit arrangements and potential legal liabilities - Wesbanco offers off-balance sheet credit arrangements, including lines of credit, approved loans not yet closed, overdraft limits, letters of credit, and other guarantees, totaling $4.9 billion at September 30, 2024[76][77] | Commitment Type | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Lines of credit | $4,166,960 | $4,016,658 | | Loans approved but not closed | $289,531 | $275,954 | | Overdraft limits | $396,953 | $391,598 | | Letters of credit | $45,624 | $38,929 | | Contingent obligations and other guarantees | $22,577 | $15,037 | - The allowance for credit losses associated with commitments was $8.2 million at September 30, 2024, slightly down from $8.6 million at December 31, 2023[76] - Management does not believe that a material loss related to pending or threatened legal proceedings or claims is reasonably possible[76] NOTE 13. BUSINESS SEGMENTS This note provides financial information for Wesbanco's community banking and trust and investment services segments - Wesbanco operates two reportable segments: community banking and trust and investment services[76] - The community banking segment offers traditional commercial banking services, including loans, deposits, insurance, and securities brokerage[76] - The trust and investment services segment provides trust services and alternative investment products, managing approximately $6.1 billion in assets at September 30, 2024, up from $5.0 billion at September 30, 2023[76] | Segment | Nine Months Ended Sep 30, 2024 Net Income (in thousands) | Nine Months Ended Sep 30, 2023 Net Income (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Community Banking | $95,879 | $118,641 | | Trust and Investment Services | $6,002 | $5,423 | | Consolidated Net Income | $101,881 | $124,064 | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides an overview of Wesbanco's financial performance and condition for the three and nine months ended September 30, 2024, highlighting key changes in earnings, net interest income, non-interest income and expense, financial condition, and capital resources. It also includes forward-looking statements and details on the pending acquisition of Premier Financial Corp FORWARD-LOOKING STATEMENTS This section provides cautionary statements regarding forward-looking information and associated risks - Forward-looking statements in the report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[80] - Investors are cautioned that these statements involve risks and uncertainties, including those detailed in Wesbanco's Form 10-K and 10-Q filings, and factors such as economic conditions, interest rate changes, credit losses, regulatory actions, and competitive conditions[80] OVERVIEW This section provides a general description of Wesbanco's business operations and influencing economic factors - Wesbanco is a multi-state bank holding company operating through 192 branches and 186 ATMs, offering retail banking, corporate banking, trust services, brokerage, mortgage banking, and insurance[81] - Its businesses are significantly impacted by economic factors like market interest rates, federal monetary and regulatory policies, local/regional economic conditions, and competition affecting business volumes, deposit levels, and loan levels[81] PENDING ACQUISITION This section confirms Wesbanco's definitive merger agreement with Premier Financial Corp - Wesbanco entered into a definitive Agreement and Plan of Merger with Premier Financial Corp. on July 25, 2024, for the merger of Premier Financial into Wesbanco and Premier Bank into Wesbanco Bank[82] APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section states that Wesbanco's critical accounting policies remain consistent with prior disclosures - Wesbanco's critical accounting policies and estimates as of September 30, 2024, remain unchanged from those disclosed in its 2023 Annual Report on Form 10-K[82] RESULTS OF OPERATIONS This section analyzes Wesbanco's financial performance, including net income, interest income, and expenses EARNINGS SUMMARY This section provides a summary of Wesbanco's GAAP and non-GAAP earnings performance | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | 9M 2024 (in thousands) | 9M 2023 (in thousands) | | :------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income available to common shareholders (GAAP) | $34,741 | $34,311 | $94,287 | $116,470 | | Diluted Earnings Per Share (GAAP) | $0.54 | $0.58 | $1.54 | $1.96 | | Net income available to common shareholders (Non-GAAP, excl. merger-related) | $36,303 | $34,817 | $98,833 | $119,496 | | Diluted Earnings Per Share (Non-GAAP, excl. merger-related) | $0.56 | $0.59 | $1.61 | $2.01 | - Net income available to common shareholders (GAAP) increased by $0.43 million (1.25%) in Q3 2024 YoY, but decreased by $22.183 million (19.0%) for the nine months ended September 30, 2024 YoY[83][84] NET INTEREST INCOME This section analyzes Wesbanco's net interest income and margin, highlighting factors affecting profitability | Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net interest income (in thousands) | $121,142 | $117,682 | $351,701 | $363,580 | | Net interest margin | 2.92% | 3.00% | 2.91% | 3.16% | | Total earning assets (average, in thousands) | $16,463,042 | $15,552,218 | $16,143,845 | $15,409,649 | | Total interest bearing liabilities (average, in thousands) | $11,481,502 | $10,367,877 | $11,200,531 | $10,079,839 | | Cost of interest bearing liabilities | 3.21% | 2.52% | 3.10% | 2.08% | - Net interest income increased by $3.46 million (2.9%) in Q3 2024 YoY, driven by a 9.6% increase in average portfolio loans, but decreased by $11.879 million (3.3%) for the nine months ended September 30, 2024 YoY due to higher funding costs[86] - The net interest margin decreased to 2.92% in Q3 2024 from 3.00% in Q3 2023, and to 2.91% for 9M 2024 from 3.16% for 9M 2023, primarily due to increased deposit and borrowing costs[86] - Average non-interest bearing demand deposit balances decreased by $408.3 million (9.7%) from Q3 2023 to Q3 2024, reflecting customers' preferences for higher-yielding accounts[86] PROVISION FOR CREDIT LOSSES – LOANS AND LOAN COMMITMENTS This section discusses the provision for credit losses and key credit quality metrics for loans and commitments | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | 9M 2024 (in thousands) | 9M 2023 (in thousands) | | :------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Provision for credit losses – loans and loan commitments | $4,798 | $6,327 | $19,352 | $12,932 | | Annualized net loan charge-offs (% of average portfolio loans) | 0.05% | 0.01% | 0.11% | 0.03% | - The provision for credit losses decreased to $4.8 million in Q3 2024 from $6.3 million in Q3 2023, driven by continued loan growth, adjustments in regional macroeconomic factors, loan concentrations, and an increase in net charge-offs, partially offset by a reduction in individually evaluated loan reserves[89] - Non-performing loans were 0.24% of total portfolio loans at September 30, 2024, down from 0.26% at September 30, 2023. Criticized and classified loans increased to 2.36% from 2.22% over the same period[89] NON-INTEREST INCOME This section analyzes Wesbanco's non-interest income streams, including trust fees, service charges, and mortgage banking | Non-Interest Income Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) | % Change (QoQ) | 9M 2024 (in thousands) | 9M 2023 (in thousands) | % Change (YoY) | | :------------------------------------------ | :--------------------- | :--------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Total non-interest income | $29,612 | $30,879 | (4.1%) | $91,596 | $90,372 | 1.4% | | Trust fees | $7,517 | $6,705 | 12.1% | $22,902 | $21,116 | 8.5% | | Service charges on deposits | $7,945 | $6,726 | 18.1% | $21,841 | $19,128 | 14.2% | | Net swap fee and valuation (loss) income | ($627) | $3,845 | (116.3%) | $2,712 | $7,257 | (62.6%) | | Net securities gains (losses) | $675 | ($337) | 300.3% | $1,347 | $13 | NM | | Mortgage banking income | $1,280 | $975 | 31.3% | $3,042 | $2,002 | 51.9% | - Total non-interest income decreased by $1.3 million (4.1%) in Q3 2024 YoY, primarily due to a $4.5 million decrease in net swap fee and valuation income, partially offset by increases in service charges on deposits, net securities gains, trust fees, and mortgage banking income[90] - Trust fees increased by $0.8 million (12.1%) in Q3 2024 YoY, reflecting higher assets under management ($6.1 billion at Sep 30, 2024 vs. $5.0 billion at Sep 30, 2023) from organic growth and market value appreciation[90] NON-INTEREST EXPENSE This section details Wesbanco's non-interest expenses, including merger-related costs, equipment, and personnel expenses | Non-Interest Expense Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) | % Change (QoQ) | 9M 2024 (in thousands) | 9M 2023 (in thousands) | % Change (YoY) | | :------------------------------------------ | :--------------------- | :--------------------- | :------------- | :--------------------- | :--------------------- | :------------- | | Total non-interest expense | $101,183 | $97,939 | 3.3% | $300,768 | $290,498 | 3.5% | | Restructuring and merger-related expenses | $1,977 | $641 | 208.4% | $5,755 | $3,830 | 50.3% | | Equipment and software | $10,157 | $9,132 | 11.2% | $30,622 | $27,018 | 13.3% | | Professional fees | $4,686 | $4,072 | 15.1% | $14,281 | $11,348 | 25.8% | | Salaries and wages | $44,890 | $45,351 | (1.0%) | $131,879 | $131,774 | 0.1% | | Employee benefits | $11,522 | $11,922 | (3.4%) | $34,284 | $35,492 | (3.4%) | - Total non-interest expense increased by $3.2 million (3.3%) in Q3 2024 YoY, primarily due to a $1.3 million increase in restructuring and merger-related expenses, a $1.0 million increase in supplies, postage, and other operating expense, and a $1.0 million increase in equipment and software expense[91] - Salaries and wages decreased by $0.5 million (1.0%) in Q3 2024 YoY due to lower staffing levels from efficiency improvements, while employee benefits decreased by $0.4 million (3.4%) due to lower staffing and health insurance costs[91] INCOME TAXES This section provides an analysis of Wesbanco's income tax provision and effective tax rates | Metric | Q3 2024 (in thousands) | Q3 2023 (in thousands) | 9M 2024 (in thousands) | 9M 2023 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Provision for income taxes | $7,501 | $7,453 | $21,296 | $26,458 | | Effective tax rate | 16.8% | 17.4% | 17.3% | 17.6% | - The provision for income taxes was flat in Q3 2024 YoY at $7.5 million, with a slight decrease in the effective tax rate from 17.4% to 16.8%[92] - For the nine months ended September 30, 2024, the provision for income taxes decreased by $5.2 million YoY to $21.3 million, due to a $27.3 million decrease in pre-tax income, resulting in a slightly lower effective tax rate of 17.3% (vs. 17.6% in 9M 2023)[92] FINANCIAL CONDITION This section reviews Wesbanco's financial position, including assets, liabilities, equity, and capital resources OVERVIEW This section provides a high-level summary of Wesbanco's balance sheet changes and key financial metrics - Total assets increased by 4.5% to $18.514 billion, and shareholders' equity increased by 10.6% to $2.802 billion at September 30, 2024, compared to December 31, 2023[4][93] - Total portfolio loans grew by $0.8 billion (7.0%) to $12.5 billion, driven by strong commercial and residential lending. Deposits increased by $0.7 billion (5.1%) to $13.8 billion due to deposit gathering and retention efforts[4][93] - FHLB borrowings decreased by $175.0 million (13.0%) as proceeds from a $200 million common equity raise were used to pay down borrowings[93] SECURITIES This section details Wesbanco's investment securities portfolio, including changes in fair value and yields | Security Type | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | :--------- | :--------- | | Total securities | $3,404,241 | $3,406,176 | ($1,935) | (0.1%) | | Equity securities (at fair value) | $13,355 | $12,320 | $1,035 | 8.4% | | Total available-for-sale debt securities (at fair value) | $2,228,527 | $2,194,329 | $34,198 | 1.6% | | Total held-to-maturity debt securities (at amortized cost) | $1,162,359 | $1,199,527 | ($37,168) | (3.1%) | - Total securities decreased marginally by $1.9 million (0.1%) from December 31, 2023, to September 30, 2024, as investment runoff was reinvested in new securities[93][94] - The weighted average yield for total securities increased to 2.64% at September 30, 2024, from 2.52% at December 31, 2023, while the weighted average life decreased to 6.7 years from 7.4 years[94] LOANS AND CREDIT RISK This section provides a detailed analysis of Wesbanco's loan portfolio composition and credit risk management | Loan Category | September 30, 2024 (in thousands) | % of Loans | December 31, 2023 (in thousands) | % of Loans | | :---------------------------- | :-------------------------------- | :--------- | :------------------------------- | :--------- | | Total portfolio loans | $12,451,430 | 99.8% | $11,638,461 | 99.9% | | Commercial real estate | $7,206,271 | 57.7% | $6,565,448 | 56.4% | | Commercial and industrial | $1,717,369 | 13.8% | $1,670,659 | 14.3% | | Residential real estate | $2,519,089 | 20.2% | $2,438,574 | 20.9% | | Home equity | $796,594 | 6.4% | $734,219 | 6.3% | | Consumer | $212,107 | 1.7% | $229,561 | 2.0% | | Loans held for sale | $22,127 | 0.2% | $16,354 | 0.1% | - Total portfolio loans increased by $0.8 billion (7.0%) from December 31, 2023, driven by 36.8% growth in land and construction loans and increases in home equity, improved property, commercial and industrial, and residential real estate loans[96] - Total loan commitments, including approved but not closed loans, increased by $0.2 billion (3.7%) to $4.9 billion, primarily due to increased lines of credit[96] - The commercial portfolio is monitored for credit risk concentrations, with improved property CRE being 25% owner-occupied and 75% investor-owned. Investor-owned office buildings represent 3.7% of the total loan portfolio[96] NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE This section reports on Wesbanco's non-performing assets and loans past due, indicating asset quality trends | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | | Total non-performing assets | $31,327 | $28,305 | | Total non-performing loans | $30,421 | $26,808 | | Other real estate owned and repossessed assets | $906 | $1,497 | | Non-performing loans/total portfolio loans | 0.24% | 0.23% | | Non-performing assets/total assets | 0.17% | 0.16% | - Total non-performing assets increased by $3.022 million (10.7%) from December 31, 2023, to September 30, 2024, primarily due to a $3.6 million increase in non-performing loans[100] | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | | Total loans past due 90 days or more | $20,427 | $9,638 | | Total loans past due 30 to 89 days | $33,762 | $22,875 | | Total loans 30 days or more past due | $54,189 | $32,513 | | Loans past due 90 days or more and accruing to total portfolio loans | 0.16% | 0.08% | | Loans past due 30-89 days and accruing to total portfolio loans | 0.27% | 0.20% | ALLOWANCE FOR CREDIT LOSSES - LOANS AND LOAN COMMITMENTS This section details the allowance for credit losses on loans and commitments, reflecting credit risk coverage | Metric | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | | Total allowance for credit losses – loans and commitments | $149,097 | $139,279 | | Allowance for credit losses – loans | $140,872 | $130,675 | | Allowance for credit losses – loan commitments | $8,225 | $8,604 | | Allowance for credit losses – loans as % of total portfolio loans | 1.13% | 1.12% | | Criticized and classified loans as % of total portfolio loans | 2.36% | 2.22% | - The total allowance for credit losses increased by $9.818 million (7.0%) from December 31, 2023, to September 30, 2024, primarily due to continued loan growth and adjustments in regional macroeconomic factors[102] - The allowance for credit losses – loans individually-evaluated increased by $2.2 million, and collectively-evaluated loans increased by $8.0 million[102] DEPOSITS This section analyzes Wesbanco's deposit composition and changes, including non-interest and interest-bearing accounts | Deposit Type | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | :--------- | :--------- | | Total deposits | $13,837,343 | $13,168,704 | $668,639 | 5.1% | | Non-interest bearing demand | $3,777,781 | $3,962,592 | ($184,811) | (4.7%) | | Interest bearing demand | $3,667,082 | $3,463,443 | $203,639 | 5.9% | | Money market | $2,347,444 | $2,017,713 | $329,731 | 16.3% | | Certificates of deposit | $1,663,494 | $1,231,702 | $431,792 | 35.1% | - Total deposits increased by $668.6 million (5.1%) during the first nine months of 2024, driven by growth in money market and interest-bearing demand deposits, partially offset by a decrease in non-interest bearing demand and savings deposits[104] - Certificates of deposit increased significantly by 35.1% to $1.663 billion, with approximately $1.5 billion scheduled to mature within the next 12 months at a weighted average cost of 4.17%[104] BORROWINGS This section details Wesbanco's borrowing activities, including Federal Home Loan Bank advances and other short-term debt | Borrowing Type | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :-------------------------------- | :------------------------------- | :--------- | :--------- | | Total borrowings | $1,594,892 | $1,734,971 | ($140,079) | (8.1%) | | Federal Home Loan Bank Borrowings | $1,175,000 | $1,350,000 | ($175,000) | (13.0%) | | Other short-term borrowings | $140,641 | $105,893 | $34,748 | 32.8% | | Subordinated debt and junior subordinated debt | $279,251 | $279,078 | $173 | 0.1% | - Total borrowings decreased by $140.1 million (8.1%) from December 31, 2023, to September 30, 2024[105] - FHLB borrowings decreased by $175.0 million (13.0%), as proceeds from a $200 million capital raise were used to pay down FHLB advances[105] CAPITAL RESOURCES This section reviews Wesbanco's capital structure, regulatory capital ratios, and changes in shareholders' equity - Shareholders' equity increased by $268.5 million (10.6%) to $2.8 billion at September 30, 2024, primarily due to a $191.0 million private placement of common shares, net income, and a $44.9 million other comprehensive gain[106] - Wesbanco's regulatory capital levels for both the Bank and the holding company were substantially greater than the minimum amounts needed to be considered 'well capitalized' at September 30, 2024[106] | Capital Ratio | Wesbanco, Inc. Sep 30, 2024 | Wesbanco, Inc. Dec 31, 2023 | Wesbanco Bank, Inc. Sep 30, 2024 | Wesbanco Bank, Inc. Dec 31, 2023 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :------------------------------- | :------------------------------- | | Tier 1 leverage | 10.69% | 9.87% | 9.90% | 9.93% | | Common equity Tier 1 | 11.89% | 10.99% | 11.94% | 12.13% | | Tier 1 capital to risk-weighted assets | 12.89% | 12.05% | 11.94% | 12.13% | | Total capital to risk-weighted assets | 15.74% | 14.91% | 12.89% | 12.97% | LIQUIDITY RISK This section describes Wesbanco's liquidity management strategies, available resources, and uninsured deposit levels - Wesbanco actively manages liquidity risk by maintaining liquid assets, sufficient borrowing capacity, and a stable core deposit base, with oversight from its Asset/Liability Committee (ALCO) and Board of Directors (BOD)[108] | Source of Liquidity (Expected within next year) | Amount (in thousands) | | :------------------------------------------------------------ | :-------------------- | | Cash and cash equivalents | $620,897 | | Securities with a maturity date within the next year and callable securities | $453,470 | | Projected payments and prepayments on mortgage-backed securities and collateralized mortgage obligations | $291,736 | | Loans held for sale | $22,127 | | Accruing loans scheduled to mature | $1,469,912 | | Normal loan repayments | $1,581,409 | | Total sources of liquidity expected within the next year | $4,439,551 | - Uninsured deposits totaled $4.6 billion (33% of total deposits) at September 30, 2024, including $1.6 billion of public funds deposits secured by pledged investment securities[108] - Wesbanco maintains available credit with the FHLB of approximately $3.6 billion and has unpledged available-for-sale securities of $261.9 million and held-to-maturity securities of $762.6 million for additional liquidity[108] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details Wesbanco's management of market risk, primarily interest rate risk, through its Asset/Liability Committee (ALCO). It outlines the use of earnings sensitivity simulation (NII) and economic value of equity (EVE) models to project the impact of interest rate changes on net interest income and tangible equity, respectively, within established policy limits MARKET RISK This section details Wesbanco's management of interest rate risk using NII and EVE sensitivity models - Wesbanco's primary market risk is interest rate risk, managed by its ALCO to maximize net interest income within policy parameters[111] | Immediate Change in Interest Rates (basis points) | September 30, 2024 Net Interest Income Sensitivity | December 31, 2023 Net Interest Income Sensitivity | ALCO Guidelines | | :------------------------------------------------ | :------------------------------------------------- | :------------------------------------------------ | :-------------- | | +200 | 5.6% | 3.3% | (10.0%) | | +100 | 4.2% | 3.0% | (7.5%) | | -100 | (4.2%) | (3.0%) | (7.5%) | | -200 | (9.3%) | (7.0%) | (10.0%) | | -300 | (14.7%) | (11.5%) | (15.0%) | | -400 | N/A | (16.3%) | (20.0%) | | Immediate Change in Interest Rates (basis points) | September 30, 2024 Economic Value of Equity | December 31, 2023 Economic Value of Equity | ALCO Guidelines | | :------------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :-------------- | | +200 | 2.2% | 0.3% | (20.0%) | | +100 | 2.6% | 2.6% | (10.0%) | | -100 | (3.4%) | (2.8%) | (10.0%) | | -200 | (9.5%) | (8.0%) | (20.0%) | | -300 | (19.9%) | (16.5%) | (30.0%) | | -400 | N/A | (28.0%) | (40.0%) | - NII sensitivity in rising rate scenarios (+100bps, +200bps) improved from December 31, 2023, while EVE sensitivity also showed changes related to market interest rates[111][113] - Strategic balance sheet management includes increasing variable/adjustable commercial and home equity loans, adjusting residential mortgage loan sales, managing deposit rates, and utilizing loan swaps and FHLB borrowings[114] ITEM 4. CONTROLS AND PROCEDURES Wesbanco's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2024. They acknowledge inherent limitations in control systems and reported no material changes in internal control over financial reporting during the quarter - Wesbanco's CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024[117] - Management acknowledges that no control system can prevent all errors or fraud due to inherent limitations such as faulty judgments, simple errors, circumvention by individuals, collusion, or management override[117] - There were no material changes in Wesbanco's internal control over financial reporting during the fiscal quarter ended September 30, 2024[117] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Wesbanco is involved in various lawsuits, claims, investigations, and proceedings in the ordinary course of business. Management does not believe that a material loss related to these matters is reasonably possible - Wesbanco is involved in various lawsuits, claims, investigations, and proceedings arising in the ordinary course of business[119] - Management does not believe that a material loss related to such proceedings or claims pending or known to be threatened is reasonably possible[119] ITEM 1A. RISK FACTORS This section details risks related to the Premier merger, including integration difficulties, unrealized synergies, transaction costs, and adverse effects if the merger is not completed - The success of the Premier acquisition depends on successful integration of operations, strategies, technologies, and personnel, with potential difficulties including disruption, retention issues, and unanticipated costs[120] - Wesbanco has incurred and will incur significant transaction-related costs for the merger and a related private placement, which may not be offset by anticipated benefits if the merger is not completed[120] - Failure to complete the merger could adversely affect Wesbanco's business, operations, and common stock market price, as it is subject to various conditions and potential termination circumstances[121][122] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Wesbanco had one active stock repurchase plan with 972,298 shares remaining, purchasing 37,201 shares at $28.77 average price in the quarter - Wesbanco had one active stock repurchase plan, approved on February 24, 2022, for 3.2 million shares, with 972,298 shares remaining for repurchase as of September 30, 2024[124] | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares that May Yet Be Purchased Under the Plans | | :------------------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :--------------------------------------------------------------- | | July 1, 2024 to July 31, 2024 | 33,597 | $28.58 | 142 | 972,298 | | August 1, 2024 to August 31, 2024 | 2,206 | $31.12 | — | 972,298 | | September 1, 2024 to September 30, 2024 | 1,398 | $29.64 | — | 972,298 | | Total | 37,201 | $28.77 | 142 | 972,298 | ITEM 5. OTHER INFORMATION No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2024[125] ITEM 6. EXHIBITS This section lists Form 10-Q exhibits, including the Premier merger agreement, securities purchase agreement, registration rights agreement, and CEO/CFO certifications - Key exhibits include the Agreement and Plan of Merger with Premier Financial Corp., Form of Securities Purchase Agreement, and Form of Registration Rights Agreement, all dated July 25, 2024[127] - Certifications from the Chief Executive Officer and Chief Financial Officer, as well as XBRL instance and taxonomy documents, are also included[127] SIGNATURES The report was signed on October 31, 2024, by Jeffrey H. Jackson (CEO) and Daniel K. Weiss, Jr. (CFO) on behalf of Wesbanco, Inc - The report was signed on October 31, 2024, by Jeffrey H. Jackson, President and Chief Executive Officer, and Daniel K. Weiss, Jr., Senior Executive Vice President and Chief Financial Officer[128]