WesBanco(US:WSBC)2022-07-27 20:35Financial Data and Key Metrics Changes - For Q2 2022, the company reported net income available to common shareholders of $40.3 million and diluted earnings per share of $0.67, excluding after-tax merger and restructuring charges [7][21] - Total assets reached $16.8 billion, with total portfolio loans at $10.2 billion and total securities at $4.2 billion, reflecting a 7.7% year-over-year increase in total securities [22] - The net interest margin improved to 3.03%, an increase of eight basis points sequentially, driven by a 125 basis point increase in the federal funds rate [25][26] Business Line Data and Key Metrics Changes - Total loans increased by 3.8% year-over-year, with strong growth in real estate loans, and a sequential increase of 5.4% or 21.8% annualized [23] - Residential mortgage originations totaled $328 million, a 21% increase from Q1 2022, with 90% of originations attributed to home construction and purchases [13][27] - Commercial loan growth was 21% annualized, supported by a robust commercial pipeline of approximately $825 million as of June 30 [10][11] Market Data and Key Metrics Changes - Total deposits increased year-over-year to $13.6 billion, despite a sequential decrease, with non-interest bearing deposits representing a record 35% of total deposits [24] - The company experienced strong deposit inflows from shale-related activities, with quarterly inflows ranging from $15 million to $25 million due to high natural gas prices [68] Company Strategy and Development Direction - The company remains focused on organic growth potential while balancing risk and credit quality, targeting mid to upper single-digit growth over time [16][54] - Strategic investments in hiring commercial lenders and expanding loan production offices in high-growth markets like Kentucky and Maryland are ongoing [15][39] - The company is opportunistic regarding M&A but does not prioritize it as a major focus [8] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued margin improvement as recent Fed rate increases impact interest income on earning assets [20][33] - The company expects to maintain a disciplined approach to expenses, projecting a 6% to 8% increase in operating expenses for Q3 2022 due to hiring and inflationary pressures [39][71] - The provision for credit losses will depend on macroeconomic factors, with a focus on unemployment rates as the primary driver for CECL reserves [40][88] Other Important Information - The company received national accolades for employee satisfaction and financial success, being recognized as one of America's most trustworthy companies [19][18] - The management team is preparing for a leadership transition, with Todd Clossin announcing his retirement and Jeff set to take over [90][92] Q&A Session Summary Question: Can you unpack the loan growth and potential for further increases in line utilization? - Management noted that commercial real estate payoffs have moderated, and C&I line utilization is still below historical ranges, indicating potential for growth [50][51] Question: What is the outlook for deposit sensitivity with later rate hikes? - Management expects to lag the market in deposit pricing but is monitoring the situation closely due to strong deposit inflows [66][67] Question: What is the expected expense growth with new hires? - Management indicated that while expenses will increase due to new hires, they expect positive operating leverage to offset these costs [100][101] Question: How are you thinking about fee income for the second half of the year? - Management expects trust fees to remain stable, with mortgage banking income dependent on customer preferences and market conditions [79][80] Question: What factors will influence the CECL reserve going forward? - Management highlighted that unemployment is the primary driver for CECL reserves, with a slightly negative view on unemployment impacting their forecasts [88][89]