UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2017March 31, 2018
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number000-08467
WESBANCO, INC.
(Exact name of Registrant as specified in its charter)
WEST VIRGINIA | 55-0571723 | |
(State of incorporation) | (IRS Employer Identification No.) |
1 Bank Plaza, Wheeling, WV | 26003 | ||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:304-234-9000
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.
Large accelerated filer | ☑ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule12b-2 of the Exchange Act).
Yes ☐ No ☑
As of July 25, 2017,April 23, 2018, there were 44,031,33546,568,911 shares of WesBanco, Inc. common stock, $2.0833 par value, outstanding.
WESBANCO, INC.
PART I — FINANCIAL INFORMATION
WESBANCO, INC. CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except shares) | June 30, 2017 | December 31, 2016 | ||||||
ASSETS | ||||||||
Cash and due from banks, including interest bearing amounts of$6,506 and $21,913, respectively | $ | 110,695 | $ | 128,170 | ||||
Securities: | ||||||||
Trading securities, at fair value | 7,880 | 7,071 | ||||||
Available-for-sale, at fair value | 1,239,420 | 1,241,176 | ||||||
Held-to-maturity (fair values of $1,049,374and $1,076,790, respectively) | 1,030,394 | 1,067,967 | ||||||
|
|
|
| |||||
Total securities | 2,277,694 | 2,316,214 | ||||||
|
|
|
| |||||
Loans held for sale | 21,677 | 17,315 | ||||||
|
|
|
| |||||
Portfolio loans, net of unearned income | 6,390,417 | 6,249,436 | ||||||
Allowance for loan losses | (44,909 | ) | (43,674 | ) | ||||
|
|
|
| |||||
Net portfolio loans | 6,345,508 | 6,205,762 | ||||||
|
|
|
| |||||
Premises and equipment, net | 134,903 | 133,297 | ||||||
Accrued interest receivable | 28,501 | 28,299 | ||||||
Goodwill and other intangible assets, net | 591,252 | 593,187 | ||||||
Bank-owned life insurance | 190,304 | 188,145 | ||||||
Other assets | 173,476 | 180,488 | ||||||
|
|
|
| |||||
Total Assets | $ | 9,874,010 | $ | 9,790,877 | ||||
|
|
|
| |||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest bearing demand | $ | 1,801,423 | $ | 1,789,522 | ||||
Interest bearing demand | 1,625,011 | 1,546,890 | ||||||
Money market | 1,005,184 | 995,477 | ||||||
Savings deposits | 1,255,083 | 1,213,168 | ||||||
Certificates of deposit | 1,385,772 | 1,495,822 | ||||||
|
|
|
| |||||
Total deposits | 7,072,473 | 7,040,879 | ||||||
|
|
|
| |||||
Federal Home Loan Bank borrowings | 1,021,592 | 968,946 | ||||||
Other short-term borrowings | 167,671 | 199,376 | ||||||
Subordinated debt and junior subordinated debt | 164,228 | 163,598 | ||||||
|
|
|
| |||||
Total borrowings | 1,353,491 | 1,331,920 | ||||||
|
|
|
| |||||
Accrued interest payable | 2,407 | 2,204 | ||||||
Other liabilities | 68,102 | 74,466 | ||||||
|
|
|
| |||||
Total Liabilities | 8,496,473 | 8,449,469 | ||||||
|
|
|
| |||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock, no par value; 1,000,000 shares authorized; none outstanding | — | — | ||||||
Common stock, $2.0833 par value; 100,000,000 shares authorized in 2017 and 2016, respectively;44,041,572 and 43,931,715 shares issued, respectively;44,031,335 and 43,931,715 shares outstanding, respectively | 91,753 | 91,524 | ||||||
Capital surplus | 682,443 | 680,507 | ||||||
Retained earnings | 626,421 | 597,071 | ||||||
Treasury stock (10,237 and 0 shares in 2017 and 2016, respectively, at cost) | (385 | ) | — | |||||
Accumulated other comprehensive loss | (22,118 | ) | (27,126 | ) | ||||
Deferred benefits for directors | (577 | ) | (568 | ) | ||||
|
|
|
| |||||
Total Shareholders’ Equity | 1,377,537 | 1,341,408 | ||||||
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity | $ | 9,874,010 | $ | 9,790,877 | ||||
|
|
|
|
(unaudited, in thousands, except shares) | March 31, 2018 | December 31, 2017 | ||||||
ASSETS | ||||||||
Cash and due from banks, including interest bearing amounts of$9,484 and $19,826, respectively | $ | 100,845 | $ | 117,572 | ||||
Securities: | ||||||||
Equity securities, at fair value | 13,986 | 13,457 | ||||||
Available-for-sale debt securities, at fair value | 1,728,377 | 1,261,865 | ||||||
Held-to-maturity debt securities (fair values of $1,005,502and $1,023,784, respectively) | 1,006,042 | 1,009,500 | ||||||
|
|
|
| |||||
Total securities | 2,748,405 | 2,284,822 | ||||||
|
|
|
| |||||
Loans held for sale | 12,962 | 20,320 | ||||||
|
|
|
| |||||
Portfolio loans, net of unearned income | 6,322,538 | 6,341,441 | ||||||
Allowance for loan losses | (46,334 | ) | (45,284 | ) | ||||
|
|
|
| |||||
Net portfolio loans | 6,276,204 | 6,296,157 | ||||||
|
|
|
| |||||
Premises and equipment, net | 128,583 | 130,722 | ||||||
Accrued interest receivable | 31,963 | 29,728 | ||||||
Goodwill and other intangible assets, net | 588,339 | 589,264 | ||||||
Bank-owned life insurance | 191,839 | 192,589 | ||||||
Other assets | 166,279 | 155,004 | ||||||
|
|
|
| |||||
Total Assets | $ | 10,245,419 | $ | 9,816,178 | ||||
|
|
|
| |||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest bearing demand | $ | 1,950,619 | $ | 1,846,748 | ||||
Interest bearing demand | 1,768,977 | 1,625,015 | ||||||
Money market | 984,429 | 1,024,856 | ||||||
Savings deposits | 1,314,632 | 1,269,912 | ||||||
Certificates of deposit | 1,207,669 | 1,277,057 | ||||||
|
|
|
| |||||
Total deposits | 7,226,326 | 7,043,588 | ||||||
|
|
|
| |||||
Federal Home Loan Bank borrowings | 1,166,939 | 948,203 | ||||||
Other short-term borrowings | 207,653 | 184,805 | ||||||
Subordinated debt and junior subordinated debt | 164,379 | 164,327 | ||||||
|
|
|
| |||||
Total borrowings | 1,538,971 | 1,297,335 | ||||||
|
|
|
| |||||
Accrued interest payable | 4,033 | 3,178 | ||||||
Other liabilities | 73,063 | 76,756 | ||||||
|
|
|
| |||||
Total Liabilities | 8,842,393 | 8,420,857 | ||||||
|
|
|
| |||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock, no par value; 1,000,000 shares authorized; none outstanding | — | — | ||||||
Common stock, $2.0833 par value;100,000,000shares authorized in 2018 and 2017, respectively;44,060,957and 44,043,244 shares issued, respectively;44,060,957and 44,043,244 shares outstanding, respectively | 91,793 | 91,756 | ||||||
Capital surplus | 686,169 | 684,730 | ||||||
Retained earnings | 673,174 | 651,357 | ||||||
Treasury stock (0shares in 2018 and 2017, respectively, at cost) | — | — | ||||||
Accumulated other comprehensive loss | (47,076 | ) | (31,495 | ) | ||||
Deferred benefits for directors | (1,034 | ) | (1,027 | ) | ||||
|
|
|
| |||||
Total Shareholders’ Equity | 1,403,026 | 1,395,321 | ||||||
|
|
|
| |||||
Total Liabilities and Shareholders’ Equity | $ | 10,245,419 | $ | 9,816,178 | ||||
|
|
|
|
See Notes to Consolidated Financial Statements.
WESBANCO, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||
(unaudited, in thousands, except shares and per share amounts) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||||||||||||||||
Loans, including fees | $ | 67,360 | $ | 52,697 | $ | 132,258 | $ | 105,035 | $ | 69,237 | $ | 64,898 | ||||||||||||
Interest and dividends on securities: | ||||||||||||||||||||||||
Taxable | 9,375 | 9,775 | 18,970 | 19,993 | 11,543 | 9,596 | ||||||||||||||||||
Tax-exempt | 4,864 | 4,540 | 9,756 | 9,061 | 4,834 | 4,891 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total interest and dividends on securities | 14,239 | 14,315 | 28,726 | 29,054 | 16,377 | 14,487 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Other interest income | 561 | 573 | 1,100 | 1,097 | 803 | 539 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total interest and dividend income | 82,160 | 67,585 | 162,084 | 135,186 | 86,417 | 79,924 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
INTEREST EXPENSE | ||||||||||||||||||||||||
Interest bearing demand deposits | 1,506 | 643 | 2,599 | 1,150 | 2,524 | 1,093 | ||||||||||||||||||
Money market deposits | 644 | 450 | 1,218 | 906 | 878 | 574 | ||||||||||||||||||
Savings deposits | 185 | 165 | 367 | 330 | 189 | 181 | ||||||||||||||||||
Certificates of deposit | 2,491 | 2,583 | 4,902 | 5,242 | 2,536 | 2,411 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total interest expense on deposits | 4,826 | 3,841 | 9,086 | 7,628 | 6,127 | 4,259 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Federal Home Loan Bank borrowings | 3,145 | 3,031 | 5,980 | 6,099 | 4,498 | 2,836 | ||||||||||||||||||
Other short-term borrowings | 262 | 99 | 560 | 181 | 558 | 297 | ||||||||||||||||||
Subordinated debt and junior subordinated debt | 1,788 | 840 | 3,600 | 1,663 | 1,942 | 1,813 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total interest expense | 10,021 | 7,811 | 19,226 | 15,571 | 13,125 | 9,205 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
NET INTEREST INCOME | 72,139 | 59,774 | 142,858 | 119,615 | 73,292 | 70,719 | ||||||||||||||||||
Provision for credit losses | 2,383 | 1,811 | 5,094 | 4,135 | 2,168 | 2,711 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income after provision for credit losses | 69,756 | 57,963 | 137,764 | 115,480 | 71,124 | 68,008 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
NON-INTEREST INCOME | ||||||||||||||||||||||||
Trust fees | 5,572 | 5,036 | 11,716 | 10,747 | 6,503 | 6,143 | ||||||||||||||||||
Service charges on deposits | 5,081 | 4,176 | 9,933 | 8,128 | 4,822 | 4,853 | ||||||||||||||||||
Electronic banking fees | 4,984 | 3,742 | 9,512 | 7,345 | 4,829 | 4,528 | ||||||||||||||||||
Net securities brokerage revenue | 1,680 | 1,750 | 3,442 | 3,646 | 1,670 | 1,762 | ||||||||||||||||||
Bank-owned life insurance | 1,367 | 942 | 2,508 | 1,915 | 2,756 | 1,140 | ||||||||||||||||||
Net gains on sales of mortgage loans | 968 | 683 | 2,408 | 1,231 | ||||||||||||||||||||
Net securities gains | 494 | 585 | 506 | 1,696 | ||||||||||||||||||||
Net gain on other real estate owned and other assets | 342 | 214 | 307 | 196 | ||||||||||||||||||||
Mortgage banking income | 1,004 | 1,440 | ||||||||||||||||||||||
Net securities (losses) gains | (39 | ) | 12 | |||||||||||||||||||||
Net gain (loss) on other real estate owned and other assets | 262 | (76 | ) | |||||||||||||||||||||
Other income | 1,634 | 2,463 | 4,674 | 4,080 | 2,173 | 3,082 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total non-interest income | 22,122 | 19,591 | 45,006 | 38,984 | 23,980 | 22,884 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
NON-INTEREST EXPENSE | ||||||||||||||||||||||||
Salaries and wages | 23,616 | 19,731 | 46,618 | 38,911 | 25,006 | 23,002 | ||||||||||||||||||
Employee benefits | 7,731 | 7,332 | 15,941 | 14,409 | 6,912 | 8,210 | ||||||||||||||||||
Net occupancy | 4,510 | 3,220 | 8,837 | 6,811 | 4,656 | 4,327 | ||||||||||||||||||
Equipment | 4,097 | 3,402 | 8,139 | 6,830 | 3,949 | 4,042 | ||||||||||||||||||
Marketing | 2,060 | 1,608 | 2,884 | 2,581 | 1,116 | 824 | ||||||||||||||||||
FDIC insurance | 906 | 1,099 | 1,733 | 2,264 | 658 | 827 | ||||||||||||||||||
Amortization of intangible assets | 1,240 | 697 | 2,513 | 1,427 | 1,086 | 1,273 | ||||||||||||||||||
Restructuring and merger-related expense | — | 694 | 491 | 694 | 245 | 491 | ||||||||||||||||||
Other operating expenses | 11,724 | 9,577 | 23,112 | 18,776 | 10,943 | 11,388 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total non-interest expense | 55,884 | 47,360 | 110,268 | 92,703 | 54,571 | 54,384 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income before provision for income taxes | 35,994 | 30,194 | 72,502 | 61,761 | 40,533 | 36,508 | ||||||||||||||||||
Provision for income taxes | 9,653 | 8,085 | 20,274 | 16,779 | 7,004 | 10,622 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
NET INCOME | $ | 26,341 | $ | 22,109 | $ | 52,228 | $ | 44,982 | $ | 33,529 | $ | 25,886 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
EARNINGS PER COMMON SHARE | ||||||||||||||||||||||||
Basic | $ | 0.60 | $ | 0.58 | $ | 1.19 | $ | 1.17 | $ | 0.76 | $ | 0.59 | ||||||||||||
Diluted | $ | 0.60 | $ | 0.58 | $ | 1.19 | $ | 1.17 | $ | 0.76 | $ | 0.59 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||||||||||
Basic | 43,995,749 | 38,373,610 | 43,971,789 | 38,380,296 | 44,050,701 | 43,947,563 | ||||||||||||||||||
Diluted | 44,061,421 | 38,410,393 | 44,046,812 | 38,414,922 | 44,168,242 | 44,020,765 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.26 | $ | 0.24 | $ | 0.52 | $ | 0.48 | $ | 0.29 | $ | 0.26 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
COMPREHENSIVE INCOME | $ | 29,065 | $ | 27,368 | $ | 57,236 | $ | 62,839 | $ | 19,011 | $ | 28,171 | ||||||||||||
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
WESBANCO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the SixThree Months Ended June 30,March 31, 2018 and 2017 and 2016
Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Deferred Benefits for Directors | Total | Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive (Loss) Income | Deferred Benefits for Directors | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands, except shares and per share amounts) | Shares Outstanding | Amount | Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017 | 44,043,244 | $ | 91,756 | $ | 684,730 | $ | 651,357 | $ | — | $ | (31,495 | ) | $ | (1,027 | ) | $ | 1,395,321 | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 33,529 | — | — | — | 33,529 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | (14,518 | ) | — | (14,518 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | 19,011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.29 per share) | — | — | — | (12,775 | ) | — | — | — | (12,775 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of accounting standard ASU2016-01 | — | — | — | 1,063 | — | (1,063 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | 17,713 | 37 | 523 | — | — | — | — | 560 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 909 | — | — | — | — | 909 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred benefits for directors- net | — | — | 7 | — | — | — | (7 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2018 | 44,060,957 | $ | 91,793 | $ | 686,169 | $ | 673,174 | $ | — | $ | (47,076 | ) | $ | (1,034 | ) | $ | 1,403,026 | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2016 | 43,931,715 | $ | 91,524 | $ | 680,507 | $ | 597,071 | $ | — | $ | (27,126 | ) | $ | (568 | ) | $ | 1,341,408 | 43,931,715 | $ | 91,524 | $ | 680,507 | $ | 597,071 | $ | — | $ | (27,126 | ) | $ | (568 | ) | $ | 1,341,408 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 52,228 | — | — | — | 52,228 | — | — | — | 25,886 | — | — | — | 25,886 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 5,008 | — | 5,008 | — | — | — | — | — | 2,285 | — | 2,285 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | 57,236 | — | — | — | — | — | — | — | 28,171 | ||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.52 per share) | — | — | — | (22,878 | ) | — | — | — | (22,878 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury shares acquired | (12,987 | ) | — | — | — | (488 | ) | — | — | (488 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.26 per share) | — | — | — | (11,429 | ) | — | — | — | (11,429 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | 38,584 | 75 | 883 | — | 103 | — | — | 1,061 | 17,634 | 36 | 490 | — | — | — | — | 526 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 74,023 | 154 | (154 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock granted | 3,702 | 8 | (8 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 1,198 | — | — | — | — | 1,198 | — | — | 477 | — | — | — | — | 477 | ||||||||||||||||||||||||||||||||||||||||||||||||
Deferred benefits for directors- net | — | — | 9 | — | — | — | (9 | ) | — | — | — | 5 | — | — | — | (5 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | 44,031,335 | $ | 91,753 | $ | 682,443 | $ | 626,421 | $ | (385 | ) | $ | (22,118 | ) | $ | (577 | ) | $ | 1,377,537 | ||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2017 | 43,953,051 | $ | 91,568 | $ | 681,471 | $ | 611,528 | $ | — | $ | (24,841 | ) | $ | (573 | ) | $ | 1,359,153 | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2015 | 38,459,635 | $ | 80,304 | $ | 516,294 | $ | 549,921 | $ | (2,640 | ) | $ | (20,954 | ) | $ | (793 | ) | $ | 1,122,132 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | 44,982 | — | — | — | 44,982 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 17,857 | — | 17,857 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | — | 62,839 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.48 per share) | — | — | — | (18,420 | ) | — | — | — | (18,420 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury shares acquired | (128,317 | ) | — | — | — | (3,674 | ) | — | — | (3,674 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | 28,375 | — | (173 | ) | — | 882 | — | — | 709 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of restricted stock | 51,650 | — | (1,564 | ) | — | 1,564 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 834 | — | — | — | — | 834 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred benefits for directors- net | — | — | (235 | ) | — | — | — | 235 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2016 | 38,411,343 | $ | 80,304 | $ | 515,156 | $ | 576,483 | $ | (3,868 | ) | $ | (3,097 | ) | $ | (558 | ) | $ | 1,164,420 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
WESBANCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, | For the Three Months Ended March 31, | |||||||||||||||
(unaudited, in thousands) | 2017 | 2016 | 2018 | 2017 | ||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 56,509 | $ | 59,861 | $ | 32,371 | $ | 47,508 | ||||||||
|
|
|
| |||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Net increase in loans held for investment | (141,174 | ) | (103,249 | ) | ||||||||||||
Securities available-for-sale: | ||||||||||||||||
Proceeds from sales | 7,760 | 109,644 | ||||||||||||||
Net decrease (increase) in loans held for investment | 19,923 | (63,701 | ) | |||||||||||||
Debt securitiesavailable-for-sale: | ||||||||||||||||
Proceeds from maturities, prepayments and calls | 102,225 | 154,447 | 53,496 | 59,043 | ||||||||||||
Purchases of securities | (104,584 | ) | (83,783 | ) | (540,624 | ) | (41,742 | ) | ||||||||
Securities held-to-maturity: | ||||||||||||||||
Debt securitiesheld-to-maturity: | ||||||||||||||||
Proceeds from maturities, prepayments and calls | 64,188 | 44,077 | 17,121 | 24,367 | ||||||||||||
Purchases of securities | (15,343 | ) | (16,023 | ) | ||||||||||||
Equity securities: | ||||||||||||||||
Purchases of securities | (29,912 | ) | (31,848 | ) | (558 | ) | — | |||||||||
Proceeds from bank-owned life insurance | 349 | 19 | 3,506 | — | ||||||||||||
Purchases of premises and equipment – net | (4,898 | ) | (2,804 | ) | (328 | ) | (2,311 | ) | ||||||||
|
|
|
| |||||||||||||
Net cash (used in) provided by investing activities | (106,046 | ) | 86,503 | |||||||||||||
Net cash used in investing activities | (462,807 | ) | (40,367 | ) | ||||||||||||
|
|
|
| |||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Increase (decrease) in deposits | 32,494 | (137,386 | ) | |||||||||||||
Increase in deposits | 183,012 | 105,344 | ||||||||||||||
Proceeds from Federal Home Loan Bank borrowings | 415,000 | 65,000 | 375,000 | 170,000 | ||||||||||||
Repayment of Federal Home Loan Bank borrowings | (362,331 | ) | (49,685 | ) | (156,261 | ) | (201,825 | ) | ||||||||
Decrease in other short-term borrowings | (6,205 | ) | (6,253 | ) | ||||||||||||
(Decrease) increase in federal funds purchased | (25,500 | ) | 4,000 | |||||||||||||
Increase (decrease) in other short-term borrowings | 27,848 | (25,733 | ) | |||||||||||||
Decrease in federal funds purchased | (5,000 | ) | (58,000 | ) | ||||||||||||
Dividends paid to common shareholders | (21,969 | ) | (18,060 | ) | (11,450 | ) | (10,539 | ) | ||||||||
Issuance of common stock | 990 | — | 560 | 526 | ||||||||||||
Treasury shares purchased – net | (417 | ) | (3,039 | ) | ||||||||||||
|
|
|
| |||||||||||||
Net cash provided by (used in) financing activities | 32,062 | (145,423 | ) | 413,709 | (20,227 | ) | ||||||||||
|
|
|
| |||||||||||||
Net (decrease) increase in cash and cash equivalents | (17,475 | ) | 941 | |||||||||||||
Net decrease in cash and cash equivalents | (16,727 | ) | (13,086 | ) | ||||||||||||
Cash and cash equivalents at beginning of the period | 128,170 | 86,685 | 117,572 | 128,170 | ||||||||||||
|
|
|
| |||||||||||||
Cash and cash equivalents at end of the period | $ | 110,695 | $ | 87,626 | $ | 100,845 | $ | 115,084 | ||||||||
|
|
|
| |||||||||||||
SUPPLEMENTAL DISCLOSURES | ||||||||||||||||
Interest paid on deposits and other borrowings | $ | 19,844 | $ | 15,994 | $ | 12,496 | $ | 9,441 | ||||||||
Income taxes paid | 14,700 | 14,500 | — | 250 | ||||||||||||
Transfers of loans to other real estate owned | 298 | 546 | — | 77 |
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation —The accompanying unaudited interim financial statements of WesBanco, Inc. and its consolidated subsidiaries (“WesBanco”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our Annual Report on Form10-K for the year ended December 31, 2016.2017.
WesBanco’s interim financial statements have been prepared following the significant accounting policies disclosed in Note 1 of the Notes to the Consolidated Financial Statements of its 20162017 Annual Report on Form10-K filed with the Securities and Exchange Commission. In the opinion of management, the accompanying interim financial information reflects all adjustments, including normal recurring adjustments, necessary to present fairly WesBanco’s financial position and results of operations for each of the interim periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no impact on WesBanco’s net income and stockholders’ equity. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year.
Recent accounting pronouncements —In MayAugust 2017, the FinancialFASB issued ASUNo. 2017-12, “Targeted Improvements to Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09 “Compensation—Stock Compensation (Topic 718), Scopefor Hedging Activities.” The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of Modification Accounting.” These amendments provide guidance on determining which changeshedge accounting, and increase transparency as to the termsscope and conditionsresults of share-based payment awards require an entity to apply modification accounting under Topic 718.hedging programs. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.2018. Early adoption is permitted, including adoption in an interim period. The amendments should be applied on a prospective basis to an award modified on or after the adoption date. WesBanco is assessing the impact of ASU 2017-09 and does not expect it to have a material impact on WesBanco’s Consolidated Financial Statements.
In March 2017, FASB issued ASU 2017-08 that shortens the amortization period of certain callable debt securities held at a premium. The premium is required to be amortized to the earliest call date. Securities held at a discount continue to be amortized to maturity. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, which for WesBanco will be effective for the fiscal year beginning January 1, 2019. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact2017-12 on WesBanco’s Consolidated Financial Statements.
In March 2017, the FASB issued ASU2017-07 that changes how an employer presents the net periodic benefit cost in the income statement for an employer-sponsored defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement.plans. Employers will present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line items that includes the service cost outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual period (i.e., only in the first interim period). For WesBanco, this update will bewas effective for the fiscal year beginning January 1, 2018. Upon adoption, WesBanco will reclassifyreclassified the service cost component from employee benefits to salaries and wages, which are both components ofnon-interest expense. The service cost component for the three and six months ending June 30, 2017ended March 31, 2018 was $0.6 million and $1.3 million, respectively.$0.7 million.
In January 2017, the FASB issued ASU 2017-04 that eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. Public business entities that are a U.S. Securities and Exchange Commission filer should adopt this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, which for WesBanco will be effective for the fiscal year beginning January 1, 2020. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU2017-01 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, which for WesBanco will bewas effective for the fiscal year beginning January 1, 2018. WesBanco is currently evaluating the potential impact of ASU 2017-01 but it is not expected that theThe adoption of this new standard willpronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.
In October 2016, the FASB issued ASU2016-16 that provides the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in generally accepted accounting principles. The exception has led to diversity in practice and is a source of complexity in financial reporting. FASB decided that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this update eliminate the exception for an intra-entity transfer of an asset other than inventory. The amendments in this update do not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an intra-entity transfer of an asset other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, which for WesBanco will bewas effective for the fiscal year beginning January 1, 2018. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of this pronouncement isdid not expected to have a material impact on WesBanco’s Consolidated Financial Statements.
In August 2016, the FASB issued ASU2016-15 that provides guidance for the classification of cash flows related to (1) debt prepayment or extinguishment costs, (2) settlement ofzero-coupon debt instruments or other debt instruments with coupon rates that are insignificant in relation to the effective interest rate on the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions and (8) separately identifiable cash flows and application of the predominance principle. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, which for WesBanco will bewas effective for the fiscal year beginning January 1, 2018. Early adoption is permitted. The adoption of this pronouncement isdid not expected to have a material impact on WesBanco’s Consolidated Financial Statements.
In June 2016, the FASB issued ASU2016-13 that will require entities to use a new forward-looking “expected loss” model on trade and other receivables,held-to-maturity debt securities, loans and other instruments that generally will result in the earlier recognition of allowances for credit losses. Foravailable-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Entities will have to disclose
significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which for WesBanco will be effective for the fiscal year beginning January 1, 2020. Early adoption is permitted for fiscal years beginning after December 15, 2018. WesBanco is currently evaluating the impact of the adoption of this pronouncement on WesBanco’s Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09 that will require all excess income tax benefits or tax deficiencies of stock awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-07 that eliminates the requirement to retrospectively apply the equity method in previous periods when an investor initially obtains significant influence over an investee. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016, and requires prospective adoption. Early adoption is permitted. The adoption of this pronouncement did not have a material impact on WesBanco’s Consolidated Financial Statements.
In February 2016, the FASB issued ASU2016-02 that will require entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. The principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases were not previously recognized in the balance sheet. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. WesBanco isIn January 2018, the FASB issued ASU2018-01, which allows entities the option to apply the provisions of the new lease guidance at the effective date without adjusting the comparative periods presented. While we are currently evaluatingassessing the impact of the adoption of this pronouncement, we expect the primary impact to our consolidated financial position upon adoption will be the recognition, on WesBanco’s Consolidated Financial Statements.a discounted basis, of our minimum commitments undernon-cancellable operating leases on our consolidated Balance Sheets resulting in the recording of right of use assets and lease obligations.
In January 2016, the FASB issued ASU2016-01 that will require entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The standard does not change the guidance for classifying and measuring investments in debt securities and loans. Entities will have to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. TheIn February 2018, the FASB issued ASU2018-03, which clarifies certain aspects of the guidance issued in ASU2016-01. WesBanco adopted these pronouncements as of January 1, 2018 and recognized a $1.1 million adjustment to retained earnings upon adoption of this pronouncement is not expected to have a material impactpronouncement. In addition, WesBanco reclassified investment securities on WesBanco’sthe Consolidated Financial Statements.Statements into the following – equity securities,available-for-sale debt securities andheld-to-maturity debt securities.
In May 2014, the FASB issued ASU2014-09 related to the recognition of revenue from contracts with customers. The new revenue pronouncement creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. The pronouncement provides a five-step model for a company to recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The five steps are, (1) identify the contract with the customer, (2) identify the separate performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the separate performance obligations and (5) recognize revenue when each performance obligation is satisfied. On July 9, 2015, the FASB approved aone-year deferral of the effective date of the update. The update is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017. Early adoption is now permitted as of the original effective date for interim and annual reporting periods in fiscal years beginning after December 15, 2016. In March 2016, the FASB issued ASU2016-08, which amends the principle versus agent guidance in the revenue standard. In April 2016, the FASB issued ASU2016-10, which clarifies when promised goods or services are separately identifiable in the revenue standard. In May 2016, FASB issued ASU2016-12, which provides narrow-scope improvements and practical expedients to the revenue standard. While WesBanco is currently evaluating the impact of this standard on individual customer contracts, management has evaluated the impact of this standard on the broad categories of its customer contracts and revenue streams. WesBanco currently anticipates this standard will not have a material impact on its Consolidated Financial Statements because revenue related to financial instruments, including loans and investment securities are not in scope ofadopted these updates. Loan interest income, investment interest income, insurance services revenue and BOLI are accounted for under other U.S. GAAP standards and are therefore, out of scope of the ASC 606 revenue standard. Trust fees, service charges on deposits, electronic banking fees, net securities brokerage revenue, net gains on sales of mortgage loans, and net gain on other real estate owned and other assets are in scope of the ASC 606 revenue standard. The Company is currently reviewing contracts related to these revenue streams. The Company does not anticipate any material changes to revenue recognition; however, the Company’s review is still ongoing. The Company plans to adopt the revenue recognition standardpronouncements as of January 1, 2018.
In January 2014, the FASB issued ASU No. 2014-01, which applies to all reporting entities that invest in qualified affordable housing projects through limited liability entities. The pronouncement permits reporting entities to make an accounting policy election to account for these investments2018 using the proportional amortization method if certain conditions exist. The pronouncement also requires disclosure that enables users of its financial statements to understand the nature of these investments in proportionmodified retrospective approach. WesBanco noted no material change to the tax creditstiming of revenue recognition and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The pronouncement is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. WesBanco made an accounting policy election to adopt the ASU in the first quarter of 2017. With the adoption of this pronouncement, WesBanco now classifies the amortization of the investment as a component of income tax expense (benefit). The amount for the three and six months ending June 30, 2017there was $0.3 million and $0.8 million, respectively, which is included in income tax expense withinno material impact on WesBanco’s Consolidated Financial Statements. See Note 8, Revenue Recognition for further discussion on revenue within the scope of ASC 606.
NOTE 2. MERGERS AND ACQUISITIONS
On September 9, 2016, WesBanco completed its acquisition of Your Community Bankshares, Inc. (“YCB”), and its wholly-owned banking subsidiary, Your Community Bank (“YCB Bank”), an Indiana state-chartered commercial bank headquartered in New Albany, Indiana. The transaction expanded WesBanco’s franchise into Kentucky and southern Indiana.
On the acquisition date, YCB had approximately $1.5 billion in total assets, excluding goodwill, including approximately $1.0 billion in loans and $173.2 million in securities. The YCB acquisition was valued at $220.5 million, based on WesBanco’s closing stock price on September 9, 2016 of $32.62, and resulted in WesBanco issuing 5,423,348 shares of its common stock and $43.3 million in cash in exchange for all of the outstanding shares of YCB common stock. The assets and liabilities of YCB were recorded on WesBanco’s balance sheet at their preliminary estimated fair value as of September 9, 2016, the acquisition date, and YCB’s results of operations have been included in WesBanco’s Consolidated Statements of Income since that date. Due to the timing of the acquisition relative to the end of the reporting period, the fair values for certain assets and liabilities acquired from YCB on September 9, 2016 represented preliminary estimates. Based on the purchase price allocation, WesBanco recorded $93.0 million in goodwill and $12.0 million in core deposit intangibles in its Community Banking segment, representing the principal change in goodwill and intangibles in 2016. None of the goodwill is deductible for income tax purposes, as the acquisition is accounted for as a tax-free exchange for tax purposes.
For the six months ended June 30, 2017 and for the twelve months ended December 31, 2016, WesBanco recorded merger-related expenses of $0.5 million and $13.3 million, respectively, associated with the YCB acquisition.
The purchase price of the YCB acquisition and resulting goodwill is summarized as follows:
(unaudited, in thousands) | September 9, 2016 | |||
Purchase Price: | ||||
Fair value of WesBanco shares issued | $ | 177,149 | ||
Cash consideration for outstanding YCB shares | 43,349 | |||
|
| |||
Total purchase price | $ | 220,498 | ||
Fair value of: | ||||
Tangible assets acquired | $ | 1,398,183 | ||
Core deposit and other intangible assets acquired | 11,957 | |||
Liabilities assumed | (1,330,887 | ) | ||
Net cash received in the acquisition | 48,212 | |||
|
| |||
Fair value of net assets acquired | $ | 127,465 | ||
|
| |||
Goodwill recognized | $ | 93,033 | ||
|
|
The following table presents the preliminary allocation of the purchase price of the assets acquired and the liabilities assumed at the date of acquisition.
(unaudited, in thousands) | September 9, 2016 | |||
Assets acquired | ||||
Cash and due from banks | $ | 48,212 | ||
Securities | 173,223 | |||
Loans | 1,012,410 | |||
Goodwill and other intangible assets | 104,990 | |||
Accrued income and other assets (1) | 212,550 | |||
|
| |||
Total assets acquired | $ | 1,551,385 | ||
|
| |||
Liabilities assumed | ||||
Deposits | $ | 1,193,010 | ||
Borrowings | 123,001 | |||
Accrued expenses and other liabilities | 14,876 | |||
|
| |||
Total liabilities assumed | 1,330,887 | |||
|
| |||
Net assets acquired | $ | 220,498 | ||
|
|
The following table presents the changes in the preliminary allocation of the purchase price of the assets acquired and the liabilities assumed at the date of the acquisition previously reported as of December 31, 2016:
(unaudited, in thousands) | September 9, 2016 | |||
Goodwill recognized as of December 31, 2016 | $ | 92,889 | ||
Change in fair value of net assets acquired: | ||||
Assets | ||||
Loans | (1,156 | ) | ||
Accrued income and other assets | 743 | |||
Liabilities | ||||
Borrowings | — | |||
Accrued expenses and other liabilities | 269 | |||
|
| |||
Fair value of net assets acquired | $ | (144 | ) | |
|
| |||
Increase in goodwill recognized | 144 | |||
|
| |||
Goodwill recognized as of June 30, 2017 | $ | 93,033 | ||
|
|
While purchase accounting is substantially complete, there may be subsequent adjustments to other assets and other liabilities. The Company expects to finalize purchase accounting in the third quarter, or within one year of the date of the acquisition.
NOTE 3.2. EARNINGS PER COMMON SHARE
Earnings per common share are calculated as follows:
(unaudited, in thousands, except shares and per share amounts) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||||||||||
(unaudited, in thousands, except shares and per share amounts) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||
Net income | $ | 26,341 | $ | 22,109 | $ | 52,228 | $ | 44,982 | $ | 33,529 | $ | 25,886 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Denominator: | ||||||||||||||||||||||||
Total average basic common shares outstanding | 43,995,749 | 38,373,610 | 43,971,789 | 38,380,296 | 44,050,701 | 43,947,563 | ||||||||||||||||||
Effect of dilutive stock options and other stock compensation | 65,672 | 36,783 | 75,023 | 34,626 | 117,541 | 73,202 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total diluted average common shares outstanding | 44,061,421 | 38,410,393 | 44,046,812 | 38,414,922 | 44,168,242 | 44,020,765 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Earnings per common share – basic | $ | 0.60 | $ | 0.58 | $ | 1.19 | $ | 1.17 | $ | 0.76 | $ | 0.59 | ||||||||||||
Earnings per common share – diluted | $ | 0.60 | $ | 0.58 | $ | 1.19 | $ | 1.17 | $ | 0.76 | $ | 0.59 | ||||||||||||
|
|
|
|
|
|
OptionsAll options to purchase 117,550 shares were included in the diluted shares computation for the three months ended March 31, 2018 and 186,350March 31, 2017.
As of March 31, 2018, contingently issuable shares, at June 30,totaling 39,216, were estimated to be awarded under the 2018, 2017 and 2016 respectively,total shareholder return plans as stock performance targets were met and are included in the diluted calculation. As of March 31, 2017, the shares related to the 2017 and 2016 total shareholder return plans were not included in the computation of net income per diluted share for the three months ended June 30, 2017 and 2016, respectively, because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. All stock options were included in the computation of net income per diluted share for the six months ended June 30, 2017. Options to purchase 186,350 shares at June 30, 2016 were not included in the computation of net income per diluted share for the six months ended June 30, 2016 because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.
As of June 30, 2017, 24,000 shares of restricted stock were not included in the computation of net income per diluted share for the three and six months ended June 30, 2017calculation because the effect would be antidilutive. There were no antidilutive shares ofPerformance based restricted stock excluded from the computation of net income for the three or six months ended June 30, 2016.
On September 9, 2016, WesBanco issued 5,423,348 shares of common stock (109,257 of whichcompensation totaling 9,000 shares were treasury stock)estimated to complete its acquisitionbe awarded as of YCB. These sharesMarch 31, 2018 and are included in average shares outstanding beginning on that date. For additional information relating to the YCB acquisition, refer to Note 2, “Mergers and Acquisitions.”diluted calculation. No performance base restricted stock had been granted as of March 31, 2017.
NOTE 4.3. SECURITIES
The following table presents the fair value and amortized cost ofavailable-for-sale andheld-to-maturity debt securities:
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 9,900 | $ | — | $ | (6 | ) | $ | 9,894 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | 44,307 | $ | 9 | $ | (480 | ) | $ | 43,836 | $ | 54,803 | $ | 3 | $ | (763 | ) | $ | 54,043 | 98,166 | 1 | (1,709 | ) | 96,458 | 72,425 | 24 | (606 | ) | 71,843 | ||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 938,425 | 811 | (12,477 | ) | 926,759 | 953,475 | 884 | (16,070 | ) | 938,289 | 1,377,904 | 214 | (33,708 | ) | 1,344,410 | 954,115 | 214 | (19,407 | ) | 934,922 | ||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 116,584 | 90 | (1,152 | ) | 115,522 | 98,922 | 27 | (2,139 | ) | 96,810 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commerical mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 144,568 | 19 | (3,661 | ) | 140,926 | 116,448 | 4 | (1,585 | ) | 114,867 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 110,020 | 3,358 | (703 | ) | 112,675 | 110,208 | 3,114 | (1,659 | ) | 111,663 | 100,531 | 2,093 | (1,193 | ) | 101,431 | 102,363 | 2,927 | (460 | ) | 104,830 | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 35,263 | 177 | (101 | ) | 35,339 | 35,292 | 117 | (108 | ) | 35,301 | 35,219 | 170 | (131 | ) | 35,258 | 35,234 | 228 | (59 | ) | 35,403 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities | $ | 1,244,599 | $ | 4,445 | $ | (14,913 | ) | $ | 1,234,131 | $ | 1,252,700 | $ | 4,145 | $ | (20,739 | ) | $ | 1,236,106 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 4,238 | 1,056 | (5 | ) | 5,289 | 4,062 | 1,032 | (24 | ) | 5,070 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Totalavailable-for-sale debt securities | $ | 1,766,288 | $ | 2,497 | $ | (40,408 | ) | $ | 1,728,377 | $ | 1,280,585 | $ | 3,397 | $ | (22,117 | ) | $ | 1,261,865 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | $ | 1,248,837 | $ | 5,501 | $ | (14,918 | ) | $ | 1,239,420 | $ | 1,256,762 | $ | 5,177 | $ | (20,763 | ) | $ | 1,241,176 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-maturity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-maturity debt securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | 12,319 | $ | — | $ | (296 | ) | $ | 12,023 | $ | 13,394 | $ | — | $ | (414 | ) | $ | 12,980 | $ | 11,263 | $ | — | $ | (373 | ) | $ | 10,890 | $ | 11,465 | $ | — | $ | (325 | ) | $ | 11,140 | ||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 187,385 | 802 | (1,638 | ) | 186,549 | 215,141 | 1,279 | (2,563 | ) | 213,857 | 162,904 | 301 | (4,987 | ) | 158,218 | 170,025 | 544 | (2,609 | ) | 167,960 | ||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 796,307 | 20,528 | (1,289 | ) | 815,546 | 805,019 | 15,652 | (5,529 | ) | 815,142 | 798,536 | 10,510 | (5,838 | ) | 803,208 | 794,655 | 17,364 | (1,609 | ) | 810,410 | ||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 34,383 | 889 | (16 | ) | 35,256 | 34,413 | 418 | (20 | ) | 34,811 | 33,339 | 82 | (235 | ) | 33,186 | 33,355 | 919 | — | 34,274 | |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total held-to-maturity securities | $ | 1,030,394 | $ | 22,219 | $ | (3,239 | ) | $ | 1,049,374 | $ | 1,067,967 | $ | 17,349 | $ | (8,526 | ) | $ | 1,076,790 | ||||||||||||||||||||||||||||||||||||||||||||||
Totalheld-to-maturity debt securities | $ | 1,006,042 | $ | 10,893 | $ | (11,433 | ) | $ | 1,005,502 | $ | 1,009,500 | $ | 18,827 | $ | (4,543 | ) | $ | 1,023,784 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 2,279,231 | $ | 27,720 | $ | (18,157 | ) | $ | 2,288,794 | $ | 2,324,729 | $ | 22,526 | $ | (29,289 | ) | $ | 2,317,966 | ||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities | $ | 2,772,330 | $ | 13,390 | $ | (51,841 | ) | $ | 2,733,879 | $ | 2,290,085 | $ | 22,224 | $ | (26,660 | ) | $ | 2,285,649 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TradingAt March 31, 2018, and December 31, 2017, there were no holdings of any one issuer, other than U.S. government sponsored entities and its agencies, in an amount greater than 10% of WesBanco’s shareholders’ equity.
Equity securities, of which some consist of investments in various mutual funds held in grantor trusts formed in connection with the Company’s deferred compensation plan, are recorded at fair value and totaled $7.9$14.0 million and $7.1$13.5 million, at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
At June 30, 2017 and December 31, 2016, there were no holdings of any one issuer, other than U.S. government sponsored entities and its agencies, in an amount greater than 10% of WesBanco’s shareholders’ equity.
The following table presents the fair value ofavailable-for-sale andheld-to-maturity debt securities by contractual maturity at June 30, 2017.March 31, 2018. In some instances, the issuers may have the right to call or prepay obligations without penalty prior to the contractual maturity date.
June 30, 2017 | March 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | One Year or less | One to Five Years | Five to Ten Years | After Ten Years | Mortgage-backed and Equity | Total | One Year or less | One to Five Years | Five to Ten Years | After Ten Years | Mortgage-backed securities | Total | ||||||||||||||||||||||||||||||||||||
Available-for-sale | ||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale debt securities | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 9,894 | $ | — | $ | — | $ | — | $ | — | $ | 9,894 | ||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | — | $ | 11,972 | $ | 16,849 | $ | 6,898 | $ | 8,117 | $ | 43,836 | 9,945 | 1,961 | 16,671 | 6,864 | 61,017 | 96,458 | ||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies(1) | — | — | — | — | 926,759 | 926,759 | — | — | — | — | 1,344,410 | 1,344,410 | ||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies(1) | — | — | — | — | 115,522 | 115,522 | — | — | — | — | 140,926 | 140,926 | ||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 9,038 | 20,278 | 37,662 | 45,697 | — | 112,675 | 3,686 | 17,368 | 40,161 | 40,216 | — | 101,431 | ||||||||||||||||||||||||||||||||||||
Corporate debt securities | — | 30,330 | 3,062 | 1,947 | — | 35,339 | 3,991 | 26,299 | 4,968 | — | — | 35,258 | ||||||||||||||||||||||||||||||||||||
Equity securities(2) | — | — | — | — | 5,289 | 5,289 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total available-for-sale securities | $ | 9,038 | $ | 62,580 | $ | 57,573 | $ | 54,542 | $ | 1,055,687 | $ | 1,239,420 | ||||||||||||||||||||||||||||||||||||
Totalavailable-for-sale debt securities | $ | 27,516 | $ | 45,628 | $ | 61,800 | $ | 47,080 | $ | 1,546,353 | $ | 1,728,377 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Held-to-maturity(3) | ||||||||||||||||||||||||||||||||||||||||||||||||
Held-to-maturity debt securities(2) | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | — | $ | — | $ | — | $ | — | $ | 12,023 | $ | 12,023 | $ | — | $ | — | $ | — | $ | — | $ | 10,890 | $ | 10,890 | ||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies(1) | — | — | — | — | 186,549 | 186,549 | — | — | — | 158,218 | 158,218 | |||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 3,535 | 78,391 | 405,143 | 328,477 | — | 815,546 | 6,872 | 114,768 | 398,845 | 282,723 | — | 803,208 | ||||||||||||||||||||||||||||||||||||
Corporate debt securities | — | 981 | 34,275 | — | — | 35,256 | — | 7,504 | 25,682 | — | — | 33,186 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total held-to-maturity securities | $ | 3,535 | $ | 79,372 | $ | 439,418 | $ | 328,477 | $ | 198,572 | $ | 1,049,374 | ||||||||||||||||||||||||||||||||||||
Totalheld-to-maturity debt securities | $ | 6,872 | $ | 122,272 | $ | 424,527 | $ | 282,723 | $ | 169,108 | $ | 1,005,502 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | $ | 12,573 | $ | 141,952 | $ | 496,991 | $ | 383,019 | $ | 1,254,259 | $ | 2,288,794 | ||||||||||||||||||||||||||||||||||||
Total debt securities | $ | 34,388 | $ | 167,900 | $ | 486,327 | $ | 329,803 | $ | 1,715,461 | $ | 2,733,879 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds. |
(2) |
Theheld-to-maturity debt securities portfolio is carried at an amortized cost of $1.0 billion. |
Securities with aggregate fair values of $1.3$1.5 billion and $1.2$1.4 billion at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively, were pledged as security for public and trust funds, and securities sold under agreements to repurchase. Proceeds from the saleThere were no sales ofavailable-for-sale debt securities were $7.8 million and $109.6 million for the sixthree months ended June 30,March 31, 2018 and 2017, and 2016, respectively. Net unrealized losses onavailable-for-sale debt securities included in accumulated other comprehensive income net of tax, as of June 30, 2017March 31, 2018 and December 31, 2016,2017 were $5.9$29.2 million and $9.9$13.3 million, respectively.
The following table presents the gross realized gains and losses on sales and calls ofavailable-for-sale andheld-to-maturity debt securities, as well as gains and held-to-maturitylosses on equity securities for the three and six months ended June 30,March 31, 2018 and 2017, and 2016, respectively. Gains and losses due to fair value fluctuations on trading securities are included in non-interest income under other income, with an offsetting entry in compensation expense.
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||
(unaudited, in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Gross realized gains | $ | 562 | $ | 778 | $ | 574 | $ | 1,916 | $ | 7 | $ | 12 | ||||||||||||
Gross realized losses | (68 | ) | (193 | ) | (68 | ) | (220 | ) | (18 | ) | — | |||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net realized gains | $ | 494 | $ | 585 | $ | 506 | $ | 1,696 | ||||||||||||||||
Net (losses) gains on debt securities | $ | (11 | ) | $ | 12 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||
Unrealized (losses) gains recognized on securities still held | $ | (28 | ) | $ | — | |||||||||||||||||||
Net realized (losses) gains recognized on securities sold | — | — | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
Net (losses) gains on equity securities | $ | (28 | ) | $ | — | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net securities (losses) gains | $ | (39 | ) | $ | 12 | |||||||||||||||||||
|
|
The following tables provide information on unrealized losses on investmentdebt securities that have been in an unrealized loss position for less than twelve months and twelve months or more as of June 30, 2017March 31, 2018 and December 31, 2016:2017:
March 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | Fair | Unrealized | # of | Fair | Unrealized | # of | Fair | Unrealized | # of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Value | Losses | Securities | Value | Losses | Securities | Value | Losses | Securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | $ | 9,894 | $ | (6 | ) | 1 | $ | — | $ | — | — | $ | 9,894 | $ | (6 | ) | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | 36,989 | $ | (744 | ) | 8 | $ | 9,968 | $ | (32 | ) | 1 | $ | 46,957 | $ | (776 | ) | 9 | 59,280 | (1,129 | ) | 8 | 41,203 | (953 | ) | 8 | 100,483 | (2,082 | ) | 16 | ||||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 898,142 | (11,884 | ) | 224 | 71,302 | (2,231 | ) | 19 | 969,444 | (14,115 | ) | 243 | 785,806 | (13,021 | ) | 128 | 602,202 | (25,674 | ) | 195 | 1,388,008 | (38,695 | ) | 323 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 97,844 | (1,135 | ) | 14 | 667 | (17 | ) | 2 | 98,511 | (1,152 | ) | 16 | 101,309 | (2,780 | ) | 12 | 23,376 | (881 | ) | 4 | 124,685 | (3,661 | ) | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 169,042 | (1,954 | ) | 309 | 2,315 | (38 | ) | 3 | 171,357 | (1,992 | ) | 312 | 335,762 | (4,776 | ) | 527 | 72,751 | (2,255 | ) | 152 | 408,513 | (7,031 | ) | 679 | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | — | — | — | 11,939 | (117 | ) | 4 | 11,939 | (117 | ) | 4 | 35,405 | (352 | ) | 12 | 1,974 | (14 | ) | 1 | 37,379 | (366 | ) | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 1,357 | (5 | ) | 1 | — | — | — | 1,357 | (5 | ) | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired securities | $ | 1,203,374 | $ | (15,722 | ) | 556 | $ | 96,191 | $ | (2,435 | ) | 29 | $ | 1,299,565 | $ | (18,157 | ) | 585 | $ | 1,327,456 | $ | (22,064 | ) | 688 | $ | 741,506 | $ | (29,777 | ) | 360 | $ | 2,068,962 | $ | (51,841 | ) | 1,048 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2016 | Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | Fair | Unrealized | # of | Fair | Unrealized | # of | Fair | Unrealized | # of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Value | Losses | Securities | Value | Losses | Securities | Value | Losses | Securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | 58,108 | $ | (1,177 | ) | 11 | $ | — | $ | — | — | $ | 58,108 | $ | (1,177 | ) | 11 | $ | 24,776 | $ | (160 | ) | 4 | $ | 42,248 | $ | (771 | ) | 8 | $ | 67,024 | $ | (931 | ) | 12 | |||||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 969,174 | (16,436 | ) | 232 | 58,839 | (2,197 | ) | 14 | 1,028,013 | (18,633 | ) | 246 | 423,794 | (5,039 | ) | 87 | 637,461 | (16,977 | ) | 193 | 1,061,255 | (22,016 | ) | 280 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies |
| 88,169 |
| (2,122 | ) | 14 | 679 | (17 | ) | 2 | 88,848 | (2,139 | ) | 16 | 79,061 | (1,089 | ) | 10 | 27,852 | (496 | ) | 6 | 106,913 | (1,585 | ) | 16 | ||||||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 364,583 | (7,121 | ) | 604 | 2,047 | (67 | ) | 3 | 366,630 | (7,188 | ) | 607 | 132,831 | (852 | ) | 210 | 77,554 | (1,217 | ) | 160 | 210,385 | (2,069 | ) | 370 | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate debt securities | 10,011 | (78 | ) | 3 | 5,973 | (50 | ) | 2 | 15,984 | (128 | ) | 5 | 4,015 | (19 | ) | 1 | 1,948 | (40 | ) | 1 | 5,963 | (59 | ) | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity securities | 2,938 | (24 | ) | 2 | — | — | — | 2,938 | (24 | ) | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total temporarily impaired securities | $ | 1,492,983 | $ | (26,958 | ) | 866 | $ | 67,538 | $ | (2,331 | ) | 21 | $ | 1,560,521 | $ | (29,289 | ) | 887 | $ | 664,477 | $ | (7,159 | ) | 312 | $ | 787,063 | $ | (19,501 | ) | 368 | $ | 1,451,540 | $ | (26,660 | ) | 680 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on debt securities in the tables represent temporary fluctuations resulting from changes in market rates in relation to fixed yields. Unrealized losses in theavailable-for-sale portfolio are accounted for as an adjustment, net of taxes, to other comprehensive income in shareholders’ equity.
WesBanco does not believe the securities presented above are impaired due to reasons of credit quality, as substantially all debt securities are rated above investment grade and all are paying principal and interest according to their contractual terms. WesBanco does not intend to sell, nor is it more likely than not that it will be required to sell, loss position securities prior to recovery of their cost, and therefore, management believes the unrealized losses detailed above are temporary and no impairment loss relating to these securities has been recognized.
Securities that do not have readily determinable fair values and for which WesBanco does not exercise significant influence are carried at cost. Cost method investments consist primarily of FHLB of Pittsburgh, Cincinnati and Indianapolis stock totaling $49.1$55.6 million and $46.4$45.9 million at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively, and are included in other assets in the Consolidated Balance Sheets. Cost method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.
NOTE 5.4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
The recorded investment in loans is presented in the Consolidated Balance Sheets net of deferred loan fees and costs, and discounts on purchased loans. The net deferred loan (costs) and feescosts were $(0.1)$1.9 million and $0.3$1.6 million at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively. The unamortized discount on purchased loans from acquisitions was $25.0$20.8 million, including $12.7$10.0 million related to YCB, and $24.1$21.9 million at June 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
(unaudited, in thousands) | June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | ||||||||||||
Commercial real estate: | ||||||||||||||||
Land and construction | $ | 615,881 | $ | 496,539 | $ | 440,896 | $ | 392,597 | ||||||||
Improved property | 2,397,846 | 2,376,972 | 2,574,330 | 2,601,851 | ||||||||||||
|
|
|
| |||||||||||||
Total commercial real estate | 3,013,727 | 2,873,511 | 3,015,226 | 2,994,448 | ||||||||||||
|
|
|
| |||||||||||||
Commercial and industrial | 1,136,195 | 1,088,118 | 1,118,333 | 1,125,327 | ||||||||||||
Residential real estate | 1,363,579 | 1,383,390 | 1,345,993 | 1,353,301 | ||||||||||||
Home equity | 516,612 | 508,359 | 523,425 | 529,196 | ||||||||||||
Consumer | 360,304 | 396,058 | 319,561 | 339,169 | ||||||||||||
|
|
|
| |||||||||||||
Total portfolio loans | 6,390,417 | 6,249,436 | 6,322,538 | 6,341,441 | ||||||||||||
|
|
|
| |||||||||||||
Loans held for sale | 21,677 | 17,315 | 12,962 | 20,320 | ||||||||||||
|
|
|
| |||||||||||||
Total loans | $ | 6,412,094 | $ | 6,266,751 | $ | 6,335,500 | $ | 6,361,761 | ||||||||
|
|
|
|
The following tables summarize changes in the allowance for credit losses applicable to each category of the loan portfolio:
Allowance for Credit Losses By Category | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended March 31, 2018 and 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate- | Real Estate- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses By Category For the Six Months Ended June 30, 2017 and 2016 | Land and | Improved | Commercial | Residential | Home | Deposit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Commercial Real Estate- Land and Construction | Commercial Real Estate- Improved Property | Commercial & Industrial | Residential Real Estate | Home Equity | Consumer | Deposit Overdraft | Total | Construction | Property | & Industrial | Real Estate | Equity | Consumer | Overdraft | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | $ | 3,117 | $ | 21,166 | $ | 9,414 | $ | 3,206 | $ | 4,497 | $ | 3,063 | $ | 821 | $ | 45,284 | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 119 | 26 | 173 | 7 | 212 | 37 | — | 574 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total beginning allowance for credit losses | 3,236 | 21,192 | 9,587 | 3,213 | 4,709 | 3,100 | 821 | 45,858 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | 1,090 | (895 | ) | 919 | 202 | 262 | 583 | (48 | ) | 2,113 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan commitments | 57 | (5 | ) | 3 | — | (4 | ) | 4 | — | 55 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total provision for credit losses | 1,147 | (900 | ) | 922 | 202 | 258 | 587 | (48 | ) | 2,168 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | (279 | ) | (109 | ) | (287 | ) | (576 | ) | (1,125 | ) | (267 | ) | (2,643 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | 117 | 287 | 270 | 131 | 120 | 546 | 109 | 1,580 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net charge-offs | 117 | 8 | 161 | (156 | ) | (456 | ) | (579 | ) | (158 | ) | (1,063 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | 4,324 | 20,279 | 10,494 | 3,252 | 4,303 | 3,067 | 615 | 46,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 176 | 21 | 176 | 7 | 208 | 41 | — | 629 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total ending allowance for credit losses | $ | 4,500 | $ | 20,300 | $ | 10,670 | $ | 3,259 | $ | 4,511 | $ | 3,108 | $ | 615 | $ | 46,963 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2016: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | $ | 4,348 | $ | 18,628 | $ | 8,412 | $ | 4,106 | $ | 3,422 | $ | 3,998 | $ | 760 | $ | 43,674 | $ | 4,348 | $ | 18,628 | $ | 8,412 | $ | 4,106 | $ | 3,422 | $ | 3,998 | $ | 760 | $ | 43,674 | ||||||||||||||||||||||||||||||||
Allowance for loan commitments | 151 | 17 | 188 | 9 | 162 | 44 | — | 571 | 151 | 17 | 188 | 9 | 162 | 44 | — | 571 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total beginning allowance for credit losses | 4,499 | 18,645 | 8,600 | 4,115 | 3,584 | 4,042 | 760 | 44,245 | 4,499 | 18,645 | 8,600 | 4,115 | 3,584 | 4,042 | 760 | 44,245 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | 1,039 | 558 | 1,552 | 39 | 466 | 970 | 444 | 5,068 | (425 | ) | 983 | 832 | 330 | 365 | 583 | 66 | 2,734 | |||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan commitments | 14 | 1 | (9 | ) | 1 | 17 | 2 | — | 26 | (8 | ) | — | (31 | ) | 1 | 17 | (2 | ) | — | (23 | ) | |||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total provision for credit losses | 1,053 | 559 | 1,543 | 40 | 483 | 972 | 444 | 5,094 | (433 | ) | 983 | 801 | 331 | 382 | 581 | 66 | 2,711 | |||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | (1,574 | ) | (1,205 | ) | (592 | ) | (293 | ) | (1,965 | ) | (611 | ) | (6,240 | ) | — | (602 | ) | (880 | ) | (404 | ) | (108 | ) | (1,287 | ) | (338 | ) | (3,619 | ) | ||||||||||||||||||||||||||||||||||
Recoveries | 70 | 376 | 475 | 164 | 151 | 990 | 181 | 2,407 | 52 | 251 | 376 | 78 | 48 | 369 | 98 | 1,272 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Net charge-offs | 70 | (1,198 | ) | (730 | ) | (428 | ) | (142 | ) | (975 | ) | (430 | ) | (3,833 | ) | 52 | (351 | ) | (504 | ) | (326 | ) | (60 | ) | (918 | ) | (240 | ) | (2,347 | ) | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2017: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2017: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | 5,457 | 17,988 | 9,234 | 3,717 | 3,746 | 3,993 | 774 | 44,909 | 3,975 | 19,260 | 8,740 | 4,110 | 3,727 | 3,663 | 586 | 44,061 | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 165 | 18 | 179 | 10 | 179 | 46 | — | 597 | 143 | 17 | 157 | 10 | 179 | 42 | — | 548 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total ending allowance for credit losses | $ | 5,622 | $ | 18,006 | $ | 9,413 | $ | 3,727 | $ | 3,925 | $ | 4,039 | $ | 774 | $ | 45,506 | $ | 4,118 | $ | 19,277 | $ | 8,897 | $ | 4,120 | $ | 3,906 | $ | 3,705 | $ | 586 | $ | 44,609 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2015: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | $ | 4,390 | $ | 14,748 | $ | 10,002 | $ | 4,582 | $ | 2,883 | $ | 4,763 | $ | 342 | $ | 41,710 | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 157 | 26 | 260 | 7 | 117 | 46 | — | 613 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total beginning allowance for credit losses | 4,547 | 14,774 | 10,262 | 4,589 | 3,000 | 4,809 | 342 | 42,323 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan losses | 1,252 | (559 | ) | 1,999 | (172 | ) | 164 | 898 | 581 | 4,163 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan commitments | (10 | ) | (13 | ) | (16 | ) | 1 | 10 | — | — | (28 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total provision for credit losses | 1,242 | (572 | ) | 1,983 | (171 | ) | 174 | 898 | 581 | 4,135 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | (1,328 | ) | (765 | ) | (386 | ) | (216 | ) | (2,089 | ) | (362 | ) | (5,146 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Recoveries | 3 | 1,168 | 139 | 306 | 77 | 790 | 118 | 2,601 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net charge-offs | 3 | (160 | ) | (626 | ) | (80 | ) | (139 | ) | (1,299 | ) | (244 | ) | (2,545 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2016: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | 5,645 | 14,029 | 11,375 | 4,330 | 2,908 | 4,362 | 679 | 43,328 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 147 | 13 | 244 | 8 | 127 | 46 | — | 585 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total ending allowance for credit losses | $ | 5,792 | $ | 14,042 | $ | 11,619 | $ | 4,338 | $ | 3,035 | $ | 4,408 | $ | 679 | $ | 43,913 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
The following tables present the allowance for credit losses and recorded investments in loans by category:
Allowance for Credit Losses and Recorded Investment in Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate- | Real Estate- | Commercial | Residential | Deposit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses and Recorded Investment in Loans | Land and | Improved | and | Real | Home | Over- | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Commercial Real Estate- Land and Construction | Commercial Real Estate- Improved Property | Commercial and Industrial | Residential Real Estate | Home Equity | Consumer | Deposit Over- draft | Total | Construction | Property | Industrial | Estate | Equity | Consumer | draft | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loans individually evaluated for impairment | $ | — | $ | 897 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 897 | $ | — | $ | 387 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 387 | ||||||||||||||||||||||||||||||||
Allowance for loans collectively evaluated for impairment | 5,457 | 17,091 | 9,234 | 3,717 | 3,746 | 3,993 | 774 | 44,012 | 4,324 | 19,892 | 10,494 | 3,252 | 4,303 | 3,067 | 615 | 45,947 | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 165 | 18 | 179 | 10 | 179 | 46 | — | 597 | 176 | 21 | 176 | 7 | 208 | 41 | — | 629 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total allowance for credit losses | $ | 5,622 | $ | 18,006 | $ | 9,413 | $ | 3,727 | $ | 3,925 | $ | 4,039 | $ | 774 | $ | 45,506 | $ | 4,500 | $ | 20,300 | $ | 10,670 | $ | 3,259 | $ | 4,511 | $ | 3,108 | $ | 615 | $ | 46,963 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment (1) | $ | — | $ | 5,156 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,156 | $ | — | $ | 2,104 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,104 | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 614,353 | 2,385,876 | 1,135,243 | 1,362,813 | 516,612 | 360,297 | — | 6,375,194 | 439,480 | 2,567,367 | 1,117,607 | 1,345,290 | 523,425 | 319,561 | — | 6,312,730 | ||||||||||||||||||||||||||||||||||||||||||||||||
Acquired with deteriorated credit quality | 1,528 | 6,814 | 952 | 766 | — | 7 | — | 10,067 | 1,416 | 4,859 | 726 | 703 | — | — | — | 7,704 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total portfolio loans | $ | 615,881 | $ | 2,397,846 | $ | 1,136,195 | $ | 1,363,579 | $ | 516,612 | $ | 360,304 | $ | — | $ | 6,390,417 | $ | 440,896 | $ | 2,574,330 | $ | 1,118,333 | $ | 1,345,993 | $ | 523,425 | $ | 319,561 | $ | — | $ | 6,322,538 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loans individually evaluated for impairment | $ | — | $ | 470 | $ | 407 | $ | — | $ | — | $ | — | $ | — | $ | 877 | $ | — | $ | 388 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 388 | ||||||||||||||||||||||||||||||||
Allowance for loans collectively evaluated for impairment | 4,348 | 18,158 | 8,005 | 4,106 | 3,422 | 3,998 | 760 | 42,797 | 3,117 | 20,778 | 9,414 | 3,206 | 4,497 | 3,063 | 821 | 44,896 | ||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan commitments | 151 | 17 | 188 | 9 | 162 | 44 | — | 571 | 119 | 26 | 173 | 7 | 212 | 37 | — | 574 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total allowance for credit losses | $ | 4,499 | $ | 18,645 | $ | 8,600 | $ | 4,115 | $ | 3,584 | $ | 4,042 | $ | 760 | $ | 44,245 | $ | 3,236 | $ | 21,192 | $ | 9,587 | $ | 3,213 | $ | 4,709 | $ | 3,100 | $ | 821 | $ | 45,858 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment (1) | $ | — | $ | 3,012 | $ | 1,270 | $ | — | $ | — | $ | — | $ | — | $ | 4,282 | $ | — | $ | 3,344 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 3,344 | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 494,928 | 2,364,067 | 1,086,445 | 1,382,447 | 508,359 | 396,049 | — | 6,232,295 | 391,140 | 2,593,393 | 1,124,544 | 1,352,587 | 529,196 | 339,163 | — | 6,330,023 | ||||||||||||||||||||||||||||||||||||||||||||||||
Acquired with deteriorated credit quality | 1,611 | 9,893 | 403 | 943 | — | 9 | — | 12,859 | 1,457 | 5,114 | 783 | 714 | — | 6 | — | 8,074 | ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||
Total portfolio loans | $ | 496,539 | $ | 2,376,972 | $ | 1,088,118 | $ | 1,383,390 | $ | 508,359 | $ | 396,058 | $ | — | $ | 6,249,436 | $ | 392,597 | $ | 2,601,851 | $ | 1,125,327 | $ | 1,353,301 | $ | 529,196 | $ | 339,169 | $ | — | $ | 6,341,441 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Commercial loans greater than $1 million that are reported asnon-accrual or as a |
WesBanco maintains an internal loan grading system to reflect the credit quality of commercial loans. Commercial loan risk grades are determined based on an evaluation of the relevant characteristics of each loan, assigned at the inception of each loan and adjusted thereafter at any time to reflect changes in the risk profile throughout the life of each loan. The primary factors used to determine the risk grade are the reliability and sustainability of the primary source of repayment and overall financial strength of the borrower. This includes an analysis of cash flow available to repay debt, profitability, liquidity, leverage, and overall financial trends. Other factors include management, industry or property type risks, an assessment of secondary sources of repayment such as collateral or guarantees, other terms and conditions of the loan that may increase or reduce its risk, and economic conditions and other external factors that may influence repayment capacity and financial condition.
Commercial real estate – land and construction consists of loans to finance investments in vacant land, land development, construction of residential housing, and construction of commercial buildings. Commercial real estate – improved property consists of loans for the purchase or refinance of all types of improved owner-occupied and investment properties. Factors that are considered in assigning the risk grade vary depending on the type of property financed. The risk grade assigned to construction and development loans is based on the overall viability of the project, the experience and financial capacity of the developer or builder to successfully complete the project, project specific and market absorption rates and comparable property values, and the amount ofpre-sales for residential housing construction orpre-leases for commercial investment property. The risk grade assigned to commercial investment property loans is based primarily on the adequacy of net rental income generated by the property to service the debt, the type, quality, industry and mix of tenants, and the terms of leases, but also considers the overall financial capacity of the investors and their experience in owning and managing investment property. The risk grade assigned to owner-occupied commercial real estate and commercial and industrial loans is based primarily on historical and projected earnings, the adequacy of operating cash flow to service all of the business’ debt, and the capital resources, liquidity and leverage of the business, but also considers the industry in which the business operates, the business’ specific competitive advantages or disadvantages, the quality and experience of management, and external influences on the business such as economic conditions. Other factors
Commercial and industrial loans consist of revolving lines of credit to finance accounts receivable, inventory and other general business purposes; term loans to finance fixed assets other than real estate, and letters of credit to support trade, insurance or governmental requirements for a variety of businesses. Most C&I borrowers are privately-held companies with annual sales up to $100 million. Factors that are considered for commercial and industrial loans include the type, quality and marketability ofnon-real estate collateral and whether the structure of the loan increases or reduces its risk. The type, age, condition, location and any environmental risks associated with a property are also considered for all types of commercial real estate. The overall financial condition and repayment capacity of any guarantors is also evaluated to determine the extent to which they mitigate other risks of the loan. The following paragraphs provide descriptions of risk grades that are applicable to commercial real estate and commercial and industrial loans.
Pass loans are those that exhibit a history of positive financial results that are at least comparable to the average for their industry or type of real estate. The primary source of repayment is acceptable and these loans are expected to perform satisfactorily during most economic cycles. Pass loans typically have no significant external factors that are expected to adversely affect these borrowers more than others in the same industry or property type. Any minor unfavorable characteristics of these loans are outweighed or mitigated by other positive factors including but not limited to adequate secondary or tertiary sources of repayment.
Criticized or compromised loans are currently protected but have weaknesses, which, if not corrected, may be inadequately protected at some future date. These loans represent an unwarranted credit risk and would generally not be extended in the normal course of lending. Specific issues which may warrant this grade include declining financial results, increased reliance on secondary sources of repayment or guarantor support and adverse external influences that may negatively impact the business or property.
Substandard and doubtful loans are equivalent to the classifications used by banking regulators. Substandard loans are inadequately protected by the current repayment capacity and equity of the borrower or collateral pledged, if any. Substandard loans have one or more well-defined weaknesses that jeopardize their repayment or collection in full. These loans may or may not be reported asnon-accrual. Doubtful loans have all the weaknesses inherent to a substandard loan with the added characteristic that full repayment is highly questionable or improbable on the basis of currently existing facts, conditions and collateral values. However, recognition of loss may be deferred if there are reasonably specific pending factors that will reduce the risk if they occur.
The following tables summarize commercial loans by their assigned risk grade:
Commerical Loans by Internally Assigned Risk Grade | Commerical Loans by Internally Assigned Risk Grade | |||||||||||||||||||||||||||||||
(unaudited, in thousands) | Commercial Real Estate- Land and Construction | Commercial Real Estate- Improved Property | Commercial & Industrial | Total Commercial Loans | Commercial Real Estate- Land and Construction | Commercial Real Estate- Improved Property | Commercial & Industrial | Total Commercial Loans | ||||||||||||||||||||||||
As of June 30, 2017 | ||||||||||||||||||||||||||||||||
As of March 31, 2018 | ||||||||||||||||||||||||||||||||
Pass | $ | 609,309 | $ | 2,341,928 | $ | 1,118,983 | $ | 4,070,220 | $ | 434,665 | $ | 2,526,334 | $ | 1,104,209 | $ | 4,065,208 | ||||||||||||||||
Criticized - compromised | 3,910 | 26,046 | 9,278 | 39,234 | 3,384 | 24,807 | 5,594 | 33,785 | ||||||||||||||||||||||||
Classified - substandard | 2,662 | 29,872 | 7,934 | 40,468 | 2,847 | 23,189 | 8,530 | 34,566 | ||||||||||||||||||||||||
Classified - doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 615,881 | $ | 2,397,846 | $ | 1,136,195 | $ | 4,149,922 | $ | 440,896 | $ | 2,574,330 | $ | 1,118,333 | $ | 4,133,559 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||||||||||||||
As of December 31, 2017 | ||||||||||||||||||||||||||||||||
Pass | $ | 489,380 | $ | 2,324,755 | $ | 1,072,751 | $ | 3,886,886 | $ | 386,753 | $ | 2,548,805 | $ | 1,110,267 | $ | 4,045,825 | ||||||||||||||||
Criticized - compromised | 4,405 | 15,295 | 5,078 | 24,778 | 2,984 | 25,673 | 7,435 | 36,092 | ||||||||||||||||||||||||
Classified - substandard | 2,754 | 36,922 | 10,289 | 49,965 | 2,860 | 27,373 | 7,625 | 37,858 | ||||||||||||||||||||||||
Classified - doubtful | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 496,539 | $ | 2,376,972 | $ | 1,088,118 | $ | 3,961,629 | $ | 392,597 | $ | 2,601,851 | $ | 1,125,327 | $ | 4,119,775 | ||||||||||||||||
|
|
|
|
|
|
|
|
Residential real estate, home equity and consumer loans are not assigned internal risk grades other than as required by regulatory guidelines that are based primarily on the age of past due loans. WesBanco primarily evaluates the credit quality of residential real estate, home equity and consumer loans based on repayment performance and historical loss rates. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard in accordance with regulatory guidelines were $20.4was $19.4 million at June 30, 2017March 31, 2018 and $20.6$22.8 million at December 31, 2016,2017, of which $3.4$1.0 and $2.5 million were accruing, for each period.period, respectively. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard are not included in the tables above.
Acquired YCB Loans — The carrying amount of loans acquired from YCB with deteriorated credit quality at June 30, 2017March 31, 2018 and December 31, 20162017 was $5.8$4.2 million and $5.7$4.3 million, respectively, of which $0.8$0.7 million and $1.4$0.8 million, respectively, were accounted for under the cost recovery method in accordance with ASC310-30 as cash flows cannot be reasonably estimated, and therefore are categorized asnon-accrual. At June 30, 2017,March 31, 2018, the accretable yield was $1.1$1.3 million. At June 30, 2017March 31, 2018 and December 31, 2016,2017, an allowance for loan loss of $0.1$0.2 million and $0, respectively, has been recognized related to the YCB acquired impaired loans, as the estimates for future cash flows on these loans have been negatively impacted.
Acquired ESB Loans— The carrying amount of loans acquired from ESB with deteriorated credit quality at June 30, 2017March 31, 2018 and December 31, 20162017 was $4.3$3.5 million and $7.2$3.7 million, respectively, of which $3.5 million and $0, respectively, werefor both periods was accounted for under the cost recovery method in accordance with ASC310-30 as cash flows cannot be reasonably estimated, and therefore arewere categorized asnon-accrual. At June 30, 2017,March 31, 2018, the accretable yield was $0.9$2.9 million. At June 30, 2017March 31, 2018 and December 31, 20162017 an allowance for loan loss of $2.0 million and $1.8 million, respectively, has been recognized related to the ESB acquired impaired loans, as the estimates for future cash flows on these loans have been negatively impacted.
The following table provides changes in accretable yield for loans acquired with deteriorated credit quality:
For the Six Months Ended | For the Three Months Ended | |||||||||||||||
(unaudited, in thousands) | June 30, 2017 | June 30, 2016 | March 31, 2018 | March 31, 2017 | ||||||||||||
Balance at beginning of period | $ | 1,717 | $ | 1,206 | $ | 1,724 | $ | 1,717 | ||||||||
Acquisitions | — | — | — | — | ||||||||||||
Reduction due to change in projected cash flows | (86 | ) | (200 | ) | ||||||||||||
Reclass from non-accretable difference | 738 | 1,064 | 2,841 | 174 | ||||||||||||
Transfers | (216 | ) | (328 | ) | ||||||||||||
Transfers out | — | — | ||||||||||||||
Accretion | (279 | ) | (266 | ) | (268 | ) | (151 | ) | ||||||||
|
|
|
| |||||||||||||
Balance at end of period | $ | 1,960 | $ | 1,676 | $ | 4,211 | $ | 1,540 | ||||||||
|
|
|
|
The following tables summarize the age analysis of all categories of loans:
Age Analysis of Loans | Age Analysis of Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Total Loans | 90 Days or More Past Due and Accruing (1) | Current | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Total Loans | 90 Days or More Past Due and Accruing(1) | ||||||||||||||||||||||||||||||||||||||||||
As of June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | $ | 611,756 | $ | 3,817 | $ | 27 | $ | 281 | $ | 4,125 | $ | 615,881 | $ | — | $ | 439,926 | $ | — | $ | — | $ | 970 | $ | 970 | $ | 440,896 | $ | 172 | ||||||||||||||||||||||||||||
Improved property | 2,385,823 | 777 | 1,499 | 9,747 | 12,023 | 2,397,846 | 808 | 2,559,491 | 4,431 | 528 | 9,880 | 14,839 | 2,574,330 | 364 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total commercial real estate | 2,997,579 | 4,594 | 1,526 | 10,028 | 16,148 | 3,013,727 | 808 | 2,999,417 | 4,431 | 528 | 10,850 | 15,809 | 3,015,226 | 536 | ||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 1,131,611 | 979 | 847 | 2,758 | 4,584 | 1,136,195 | 30 | 1,115,453 | 667 | 201 | 2,012 | 2,880 | 1,118,333 | 21 | ||||||||||||||||||||||||||||||||||||||||||
Residential real estate | 1,350,915 | 1,568 | 3,176 | 7,920 | 12,664 | 1,363,579 | 1,472 | 1,333,175 | 3,860 | 1,618 | 7,340 | 12,818 | 1,345,993 | 561 | ||||||||||||||||||||||||||||||||||||||||||
Home equity | 509,747 | 2,478 | 419 | 3,968 | 6,865 | 516,612 | 1,284 | 517,172 | 2,654 | 682 | 2,917 | 6,253 | 523,425 | 251 | ||||||||||||||||||||||||||||||||||||||||||
Consumer | 355,665 | 2,853 | 1,002 | 784 | 4,639 | 360,304 | 616 | 316,517 | 1,950 | 432 | 662 | 3,044 | 319,561 | 210 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total portfolio loans | 6,345,517 | 12,472 | 6,970 | 25,458 | 44,900 | 6,390,417 | 4,210 | 6,281,734 | 13,562 | 3,461 | 23,781 | 40,804 | 6,322,538 | 1,579 | ||||||||||||||||||||||||||||||||||||||||||
Loans held for sale | 21,677 | — | — | — | — | 21,677 | — | 12,962 | — | — | — | — | 12,962 | — | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total loans | $ | 6,367,194 | $ | 12,472 | $ | 6,970 | $ | 25,458 | $ | 44,900 | $ | 6,412,094 | $ | 4,210 | $ | 6,294,696 | $ | 13,562 | $ | 3,461 | $ | 23,781 | $ | 40,804 | $ | 6,335,500 | $ | 1,579 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Impaired loans included above are as follows: | Impaired loans included above are as follows: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-accrual loans | $ | 12,301 | $ | 352 | $ | 2,353 | $ | 21,229 | $ | 23,934 | $ | 36,235 | $ | 8,120 | $ | 1,310 | $ | 754 | $ | 22,202 | $ | 24,266 | $ | 32,386 | ||||||||||||||||||||||||||||||||
TDRs accruing interest(1) | 6,690 | 48 | 84 | 19 | 151 | 6,841 | 6,435 | 230 | 193 | — | 423 | 6,858 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Total impaired | $ | 18,991 | $ | 400 | $ | 2,437 | $ | 21,248 | $ | 24,085 | $ | 43,076 | $ | 14,555 | $ | 1,540 | $ | 947 | $ | 22,202 | $ | 24,689 | $ | 39,244 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | $ | 496,245 | $ | — | $ | — | $ | 294 | $ | 294 | $ | 496,539 | $ | — | $ | 392,189 | $ | — | $ | 172 | $ | 236 | $ | 408 | $ | 392,597 | $ | — | ||||||||||||||||||||||||||||
Improved property | 2,367,790 | 1,154 | 363 | 7,665 | 9,182 | 2,376,972 | 318 | 2,589,704 | 374 | 1,200 | 10,573 | 12,147 | 2,601,851 | 243 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total commercial real estate | 2,864,035 | 1,154 | 363 | 7,959 | 9,476 | 2,873,511 | 318 | 2,981,893 | 374 | 1,372 | 10,809 | 12,555 | 2,994,448 | 243 | ||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 1,082,390 | 2,508 | 1,011 | 2,209 | 5,728 | 1,088,118 | 229 | 1,121,957 | 572 | 196 | 2,602 | 3,370 | 1,125,327 | 20 | ||||||||||||||||||||||||||||||||||||||||||
Residential real estate | 1,365,956 | 6,701 | 1,043 | 9,690 | 17,434 | 1,383,390 | 1,922 | 1,338,240 | 4,487 | 2,376 | 8,198 | 15,061 | 1,353,301 | 1,113 | ||||||||||||||||||||||||||||||||||||||||||
Home equity | 502,087 | 2,358 | 862 | 3,052 | 6,272 | 508,359 | 626 | 522,584 | 2,135 | 683 | 3,794 | 6,612 | 529,196 | 742 | ||||||||||||||||||||||||||||||||||||||||||
Consumer | 390,354 | 3,674 | 1,149 | 881 | 5,704 | 396,058 | 644 | 334,723 | 2,466 | 842 | 1,138 | 4,446 | 339,169 | 608 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total portfolio loans | 6,204,822 | 16,395 | 4,428 | 23,791 | 44,614 | 6,249,436 | 3,739 | 6,299,397 | 10,034 | 5,469 | 26,541 | 42,044 | 6,341,441 | 2,726 | ||||||||||||||||||||||||||||||||||||||||||
Loans held for sale | 17,315 | — | — | — | — | 17,315 | — | 20,320 | — | — | — | — | 20,320 | — | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total loans | $ | 6,222,137 | $ | 16,395 | $ | 4,428 | $ | 23,791 | $ | 44,614 | $ | 6,266,751 | $ | 3,739 | $ | 6,319,717 | $ | 10,034 | $ | 5,469 | $ | 26,541 | $ | 42,044 | $ | 6,361,761 | $ | 2,726 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Impaired loans included above are as follows: | Impaired loans included above are as follows: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-accrual loans | $ | 7,570 | $ | 3,479 | $ | 923 | $ | 19,812 | $ | 24,214 | $ | 31,784 | $ | 9,195 | $ | 1,782 | $ | 2,033 | $ | 23,815 | $ | 27,630 | $ | 36,825 | ||||||||||||||||||||||||||||||||
TDRs accruing interest(1) | 7,014 | 342 | 50 | 240 | 632 | 7,646 | 6,055 | 348 | 168 | — | 516 | 6,571 | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Total impaired | $ | 14,584 | $ | 3,821 | $ | 973 | $ | 20,052 | $ | 24,846 | $ | 39,430 | $ | 15,250 | $ | 2,130 | $ | 2,201 | $ | 23,815 | $ | 28,146 | $ | 43,396 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Loans 90 days or more past due and accruing interest exclude TDRs 90 days or more past due and accruing interest. |
The following tables summarize impaired loans:
Impaired Loans | ||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans | Unpaid Principal Balance (1) | Recorded Investment | Related Allowance | Unpaid Principal Balance (1) | Recorded Investment | Related Allowance | ||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Unpaid Principal Balance (1) | Recorded Investment | Related Allowance | Unpaid Principal Balance (1) | Recorded Investment | Related Allowance | ||||||||||||||||||||||||||||||||||||||||||
With no related specific allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | $ | 588 | $ | 413 | $ | — | $ | 1,212 | $ | 766 | $ | — | $ | 873 | $ | 800 | $ | — | $ | 412 | $ | 239 | $ | — | ||||||||||||||||||||||||
Improved property | 16,234 | 11,136 | — | 9,826 | 8,141 | — | 14,554 | 10,319 | — | 18,229 | 12,863 | — | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | 10,613 | 4,092 | — | 4,456 | 3,181 | — | 3,045 | 2,496 | — | 3,745 | 3,086 | — | ||||||||||||||||||||||||||||||||||||
Residential real estate | 18,645 | 16,983 | — | 20,152 | 18,305 | — | 19,601 | 17,751 | — | 20,821 | 18,982 | — | ||||||||||||||||||||||||||||||||||||
Home equity | 5,247 | 4,608 | — | 4,589 | 4,011 | — | 5,771 | 4,971 | — | 5,833 | 5,169 | — | ||||||||||||||||||||||||||||||||||||
Consumer | 804 | 688 | — | 884 | 744 | — | 918 | 803 | — | 1,084 | 952 | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans without a specific allowance | 52,131 | 37,920 | — | 41,119 | 35,148 | — | 44,762 | 37,140 | — | 50,124 | 41,291 | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
With a specific allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Improved property | 5,156 | 5,156 | 897 | 3,012 | 3,012 | 470 | 2,104 | 2,104 | 387 | 2,105 | 2,105 | 388 | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | — | — | — | 4,875 | 1,270 | 407 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans with a specific allowance | 5,156 | 5,156 | 897 | 7,887 | 4,282 | 877 | 2,104 | 2,104 | 387 | 2,105 | 2,105 | 388 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans | $ | 57,287 | $ | 43,076 | $ | 897 | $ | 49,006 | $ | 39,430 | $ | 877 | $ | 46,866 | $ | 39,244 | $ | 387 | $ | 52,229 | $ | 43,396 | $ | 388 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previouslycharged-off and fair market value adjustments on acquired impaired loans. |
Impaired Loans | ||||||||||||||||||||||||||||||||||||||||||||||||
Impaired Loans | For the Three Months Ended March 31, 2018 | For the Three Months Ended March 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | ||||||||||||||||||||||||||||||||||||||||
With no related specific allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | $ | 411 | $ | — | $ | 840 | $ | 8 | $ | 529 | $ | — | $ | 1,223 | $ | 14 | $ | 520 | $ | — | $ | 588 | $ | — | ||||||||||||||||||||||||
Improved Property | 11,118 | 23 | 9,846 | 96 | 10,125 | 369 | 10,084 | 180 | ||||||||||||||||||||||||||||||||||||||||
Improved property | 11,591 | 345 | 9,620 | 346 | ||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 4,268 | 2 | 3,303 | 52 | 3,905 | 4 | 3,362 | 93 | 2,791 | 2 | 3,812 | 2 | ||||||||||||||||||||||||||||||||||||
Residential real estate | 17,787 | 66 | 16,830 | 194 | 17,959 | 135 | 16,783 | 433 | 18,367 | 66 | 18,448 | 69 | ||||||||||||||||||||||||||||||||||||
Home equity | 4,485 | 5 | 3,428 | 28 | 4,327 | 10 | 3,296 | 52 | 5,070 | 5 | 4,186 | 5 | ||||||||||||||||||||||||||||||||||||
Consumer | 733 | 1 | 853 | 17 | 737 | 3 | 1,000 | 35 | 878 | 3 | 761 | 2 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans without a specific allowance | 38,802 | 97 | 35,100 | 395 | 37,582 | 521 | 35,748 | 807 | 39,217 | 421 | 37,415 | 424 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
With a specific allowance recorded: | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Improved Property | 5,999 | — | 3,012 | — | 5,003 | — | 3,012 | — | ||||||||||||||||||||||||||||||||||||||||
Improved property | 2,105 | — | 4,927 | — | ||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | — | — | 4,312 | 26 | 423 | — | 4,498 | 58 | — | — | 635 | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans with a specific allowance | 5,999 | — | 7,324 | 26 | 5,426 | — | 7,510 | 58 | 2,105 | — | 5,562 | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total impaired loans | $ | 44,801 | $ | 97 | $ | 42,424 | $ | 421 | $ | 43,008 | $ | 521 | $ | 43,258 | $ | 865 | $ | 41,322 | $ | 421 | $ | 42,977 | $ | 424 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present the recorded investment innon-accrual loans and TDRs:
Non-accrual Loans(1) | Non-accrual Loans (1) | |||||||||||||||
(unaudited, in thousands) | June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | ||||||||||||
Commercial real estate: | ||||||||||||||||
Land and construction | $ | 413 | $ | 766 | $ | 800 | $ | 239 | ||||||||
Improved property | 14,859 | 9,535 | 10,821 | 13,318 | ||||||||||||
|
|
|
| |||||||||||||
Total commercial real estate | 15,272 | 10,301 | 11,621 | 13,557 | ||||||||||||
|
|
|
| |||||||||||||
Commercial and industrial | 3,955 | 4,299 | 2,373 | 2,958 | ||||||||||||
Residential real estate | 12,225 | 12,994 | 13,149 | 14,661 | ||||||||||||
Home equity | 4,171 | 3,538 | 4,540 | 4,762 | ||||||||||||
Consumer | 612 | 652 | 703 | 887 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 36,235 | $ | 31,784 | $ | 32,386 | $ | 36,825 | ||||||||
|
|
|
|
(1) | At |
TDRs | TDRs | |||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Accruing | Non-Accrual | Total | Accruing | Non-Accrual | Total | Accruing | Non-Accrual | Total | Accruing | Non-Accrual | Total | ||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | $ | — | $ | 6 | $ | 6 | $ | — | $ | 8 | $ | 8 | $ | — | $ | 2 | $ | 2 | $ | — | $ | 3 | $ | 3 | ||||||||||||||||||||||||
Improved property | 1,433 | 528 | 1,961 | 1,618 | 688 | 2,306 | 1,602 | 490 | 2,092 | 1,650 | 428 | 2,078 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total commercial real estate | 1,433 | 534 | 1,967 | 1,618 | 696 | 2,314 | 1,602 | 492 | 2,094 | 1,650 | 431 | 2,081 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Commercial and industrial | 137 | 237 | 374 | 152 | 151 | 303 | 123 | 94 | 217 | 128 | 97 | 225 | ||||||||||||||||||||||||||||||||||||
Residential real estate | 4,758 | 1,902 | 6,660 | 5,311 | 2,212 | 7,523 | 4,602 | 1,525 | 6,127 | 4,321 | 1,880 | 6,201 | ||||||||||||||||||||||||||||||||||||
Home equity | 437 | 337 | 774 | 473 | 297 | 770 | 431 | 220 | 651 | 407 | 337 | 744 | ||||||||||||||||||||||||||||||||||||
Consumer | 76 | 148 | 224 | 92 | 190 | 282 | 100 | 66 | 166 | 65 | 120 | 185 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | $ | 6,841 | $ | 3,158 | $ | 9,999 | $ | 7,646 | $ | 3,546 | $ | 11,192 | $ | 6,858 | $ | 2,397 | $ | 9,255 | $ | 6,571 | $ | 2,865 | $ | 9,436 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2017March 31, 2018 and December 31, 2016,2017 there were no TDRs greater than $1.0 million. The concessions granted in the majority of loans reported as accruing andnon-accrual TDRs are extensions of the maturity date or the amortization period, reductions in the interest rate below the prevailing market rate for loans with comparable characteristics, and/or permitting interest-only payments for longer than three and six months. WesBanco had no unfunded commitments to debtors whose loans were classified as impaired of $0.1 million as of June 30, 2017 orMarch 31, 2018 and December 31, 2016.2017.
The following tables present details related to loans identified as TDRs during the three and six months ended June 30,March 31, 2018 and 2017, and 2016, respectively:
New TDRs (1) For the Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2018 | March 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
Pre- | Post- | Pre- | Post- | |||||||||||||||||||||||||||||||||||||||||||||
Modification | Modification | Modification | Modification | |||||||||||||||||||||||||||||||||||||||||||||
New TDRs(1) For the Three Months Ended | Outstanding | Outstanding | Outstanding | Outstanding | ||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | June 30, 2016 | Number of | Recorded | Recorded | Number of | Recorded | Recorded | |||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Number of Modifications | Pre- Modification Outstanding Recorded Investment | Post- Modification Outstanding Recorded Investment | Number of Modifications | Pre- Modification Outstanding Recorded Investment | Post- Modification Outstanding Recorded Investment | Modifications | Investment | Investment | Modifications | Investment | Investment | ||||||||||||||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Land and construction | — | $ | — | $ | — | — | $ | — | $ | — | — | $ | — | $ | — | — | $ | — | $ | — | ||||||||||||||||||||||||||||
Improved Property | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total commercial real estate | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Commercial and industrial | — | — | — | — | — | — | — | — | — | 2 | 126 | 122 | ||||||||||||||||||||||||||||||||||||
Residential real estate | 1 | 11 | 10 | 1 | 23 | 22 | 5 | 203 | 195 | 1 | 10 | 9 | ||||||||||||||||||||||||||||||||||||
Home equity | 1 | 44 | 44 | 1 | 43 | 42 | — | — | — | 1 | 44 | 43 | ||||||||||||||||||||||||||||||||||||
Consumer | 2 | 22 | 20 | 6 | 38 | 34 | 2 | 4 | 3 | 2 | 84 | 21 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total | 4 | $ | 77 | $ | 74 | 8 | $ | 104 | $ | 98 | 7 | $ | 207 | $ | 198 | 6 | $ | 264 | $ | 195 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Excludes loans that were either paid off orcharged-off by period end. Thepre-modification balance represents the balance outstanding at the beginning of the period. The post-modification balance represents the outstanding balance at period end. |
(unaudited, dollars in thousands) Commercial real estate: Land and construction Improved Property Total commercial real estate Commercial and industrial Residential real estate Home equity Consumer Total New TDRs(1) For the Six Months Ended June 30, 2017 June 30, 2016 Number of
Modifications Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment Number of
Modifications Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment — $ — $ — — $ — $ — — — — — — — — — — — — — 2 125 120 — — — 2 22 18 1 23 22 1 45 44 1 44 42 3 34 29 6 41 34 8 $ 226 $ 211 8 $ 108 $ 98
The following table summarizes TDRs which defaulted (defined as past due 90 days) during the sixthree months ended June 30,March 31, 2018 and 2017, and 2016, respectively, that were restructured within the last twelve months prior to June 30,March 31, 2018 and 2017, and 2016, respectively:
Defaulted TDRs(1) | Defaulted TDRs(1) | Defaulted TDRs(1) | ||||||||||||||||||||||||||||||
For the Six Months Ended | For the Three Months Ended | For the Three Months Ended | ||||||||||||||||||||||||||||||
June 30, 2017 | June 30, 2016 | March 31, 2018 | March 31, 2017 | |||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Number of Defaults | Recorded Investment | Number of Defaults | Recorded Investment | Number of Defaults | Recorded Investment | Number of Defaults | Recorded Investment | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||
Land and construction | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||
Improved property | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total commercial real estate | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Commercial and industrial | — | — | 1 | 40 | — | — | — | — | ||||||||||||||||||||||||
Residential real estate | — | — | — | — | 1 | 122 | — | — | ||||||||||||||||||||||||
Home equity | — | — | — | — | 1 | 7 | — | — | ||||||||||||||||||||||||
Consumer | — | — | — | — | — | — | 1 | 9 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | — | $ | — | 1 | $ | 40 | 2 | $ | 129 | 1 | $ | 9 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Excludes loans that were eithercharged-off or cured by period end. The recorded investment is as of |
TDRs that default are placed onnon-accrual status unless they are both well-secured and in the process of collection. The loanloans in the table above waswere not accruing interest.
The following table summarizes other real estate owned and repossessed assets included in other assets:
(unaudited, in thousands) | June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | ||||||||||||
Other real estate owned | $ | 6,654 | $ | 8,206 | $ | 3,991 | $ | 5,195 | ||||||||
Repossessed assets | 69 | 140 | 76 | 102 | ||||||||||||
|
|
|
| |||||||||||||
Total other real estate owned and repossessed assets | $ | 6,723 | $ | 8,346 | $ | 4,067 | $ | 5,297 | ||||||||
|
|
|
|
At June 30, 2017, other real estate owned includes $2.0 million from the YCB acquisition and $3.1 million at December 31, 2016. Residential real estate included in other real estate owned at June 30, 2017March 31, 2018 and December 31, 20162017 was $1.7$0.9 million and $1.6$1.5 million, respectively. At June 30, 2017March 31, 2018 and December 31, 2016,2017, formal foreclosure proceedings were in process on residential real estate loans totaling $2.3$4.3 million and $4.1$3.5 million, respectively.
NOTE 5. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives
WesBanco is exposed to certain risks arising from both its business operations and economic conditions. WesBanco principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. WesBanco manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. WesBanco’s existing interest rate derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in WesBanco’s assets or liabilities. WesBanco manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. A matched book is when the Bank’s assets and liabilities are equally distributed but also have similar maturities.
Loan Swaps
WesBanco executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that WesBanco executes with a third party, such that WesBanco minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements of FASB ASC 815, changes in the fair value of both the customer swaps and the offsetting third-party swaps are recognized directly in earnings. As of March 31, 2018 and December 31, 2017, WesBanco had 43 and 39, respectively, interest rate swaps with an aggregate notional amount of $309.2 million and $298.2 million, respectively, related to this program. During the three months ended March 31, 2018 and 2017, WesBanco recognized net gains (net losses) of $0.2 million and $(0.2) million, respectively, related to the changes in fair value of these swaps. Additionally, WesBanco recognized $0.4 million and $1.0 million of income for the related swap fees for the three months ended March 31, 2018 and 2017, respectively.
Mortgage Loans Held for Sale and Loan Commitments
Certain residential mortgage loans are originated for sale in the secondary mortgage loan market. These loans are classified as held for sale and carried at fair value as WesBanco has elected the fair value option. Fair value is determined based on rates obtained from the secondary market for loans with similar characteristics. WesBanco sells loans to the secondary market on a mandatory or best efforts basis. The loans sold on a mandatory basis are not committed to an investor until the loan is closed with the borrower. WesBanco enters into forward TBA contracts to manage the interest rate risk between the loan commitment and the closing of the loan. The loans sold on a best efforts basis are committed to an investor simultaneous to the interest rate commitment with the borrower.
Fair Values of Derivative Instruments on the Balance Sheet
All derivatives are carried on the consolidated balance sheet at fair value. Derivative assets are classified in the consolidated balance sheet under other assets, and derivative liabilities are classified in the consolidated balance sheet under other liabilities. Changes in fair value are recognized in earnings. None of WesBanco’s derivatives are designated in qualifying hedging relationships under ASC 815.
The table below presents the fair value of WesBanco’s derivative financial instruments as well as their classification on the Balance Sheet as of March 31, 2018 and December 31, 2017:
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
(unaudited, in thousands) | Notional or Contractual Amount | Asset Derivatives | Liability Derivatives | Notional or Contractual Amount | Asset Derivatives | Liability Derivatives | ||||||||||||||||||
Derivatives | ||||||||||||||||||||||||
Loan Swaps: | ||||||||||||||||||||||||
Interest rate swaps | $ | 309,242 | $ | 9,257 | $ | 9,083 | $ | 298,223 | $ | 7,351 | $ | 7,345 | ||||||||||||
Other contracts: | ||||||||||||||||||||||||
Interest rate loan commitments | 24,730 | 147 | — | 20,319 | 49 | — | ||||||||||||||||||
Best efforts forward delivery commitments | 3,941 | — | 11 | 2,905 | — | 6 | ||||||||||||||||||
Forward TBA contracts | 36,500 | — | 3 | 31,750 | — | 23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total derivatives | $ | 9,404 | $ | 9,097 | $ | 7,400 | $ | 7,374 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Derivative Instruments on the Income Statement
The table below presents the change in the fair value of the Company’s derivative financial instruments reflected within the othernon-interest income line item of the consolidated income statement for the three months ended March 31, 2018 and 2017, respectively.
For the Three Months Ended | ||||||||||
Location of Gain/(Loss) | March 31, | |||||||||
(unaudited, in thousands) | 2018 | 2017 | ||||||||
Interest rate swaps | Other income | $ | (167 | ) | $ | 195 | ||||
Interest rate loan commitments | Mortgage banking income | 98 | — | |||||||
Best efforts forward sales contracts | Mortgage banking income | (5 | ) | — | ||||||
Forward TBA contracts | Mortgage banking income | 410 | — | |||||||
|
|
|
| |||||||
Total | $ | 336 | $ | 195 | ||||||
|
|
|
|
Credit-risk-related Contingent Features
WesBanco has agreements with its derivative counterparties that contain a provision where if WesBanco defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then WesBanco could also be declared in default on its derivative obligations.
WesBanco also has agreements with certain of its derivative counterparties that contain a provision where if WesBanco fails to maintain its status as either a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and WesBanco would be required to settle its obligations under the agreements.
WesBanco has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral with a market value of $2.9 million as of March 31, 2018. If WesBanco had breached any of these provisions at March 31, 2018, it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.
NOTE 6. PENSION PLAN
The following table presents the net periodic pension cost for WesBanco’s Defined Benefit Pension Plan (the “Plan”) and the related components:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||
(unaudited, in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||
Service cost – benefits earned during year | $ | 643 | $ | 696 | $ | 1,279 | $ | 1,392 | $ | 699 | $ | 636 | ||||||||||||
Interest cost on projected benefit obligation | 1,096 | 1,209 | 2,180 | 2,533 | 1,114 | 1,084 | ||||||||||||||||||
Expected return on plan assets | (1,907 | ) | (1,919 | ) | (3,793 | ) | (3,838 | ) | (2,204 | ) | (1,886 | ) | ||||||||||||
Amortization of prior service cost | 6 | 6 | 12 | 12 | 6 | 6 | ||||||||||||||||||
Amortization of net loss | 803 | 808 | 1,597 | 1,502 | 753 | 794 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net periodic pension cost | $ | 641 | $ | 800 | $ | 1,275 | $ | 1,601 | $ | 368 | $ | 634 | ||||||||||||
|
|
|
|
|
|
The Plan covers all employees of WesBanco and its subsidiaries who were hired on or before August 1, 2007 who satisfy minimum age and length of service requirements, and is not available to employees hired after such date.
A minimum required contribution of $2.7$5.1 million is due for 2017,2018, which could be all or partially offset by the Plan’s $46.9$56.9 million available credit balance. AWesBanco currently expects to make a voluntary contribution of $2.5$5.0 million was madeto the Plan in June 2017.2018.
On September 9, 2016, WesBanco assumed YCB’s obligation for a predecessor bank’s participation in the Pentegra Defined Benefit Plan for Financial Institutions (“Pentegra Plan”). The participating employer plan hadhas been frozen to new participants since 2002. WesBanco spun outoff the assets from the Pentegra Plan, in the second quarter of 2017, and contributedcontributing approximately $2.8 million to satisfy the estimated final costs to do so. TheThis spin off had no impact on earnings as the liability was included in YCB’s balance sheet as of the acquisition date. The $8.4 million in distributed assets from the Pentegra Plan were transferred to a new plan providing substantially the same benefits to the participants. The net periodic pension income for this plan for the three months ended March 31, 2018 was $62 thousand, which was comprised of a $0.2 million expected return on plan assets and a $3 thousand recognized net actuarial gain partially offset by a $0.1 million interest cost on projected benefit obligation.
No minimum contribution is due for this plan for fiscal year 2018; however, WesBanco expects to make a voluntary contribution of $0.2 million.
NOTE 7. FAIR VALUE MEASUREMENT
Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.
Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities, and therefore the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.
The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:
Investment securities: The fair value of investment securities which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other similar securities. These securities are classified within level 1 or 2 in the fair value hierarchy. Certain equity securities that are lightly traded in over-the-counter markets are classified as level 2 in the fair value hierarchy, as quoted market prices may not be available on the fair value measurement date. Positions that are not traded in active markets for which valuations are generated using assumptions not observable in the market or management’s best estimate are classified within level 3 of the fair value hierarchy. This includes certain specific municipal debt issues for which the credit quality and discount rate must be estimated.
Derivatives: WesBanco enters into interest rate swap agreements with qualifying commercial customers to meet their financing, interest rate and other risk management needs. These agreements provide the customer the ability to convert from variable to fixed interest rates. The credit risk associated with derivatives executed with customers is essentially the same as that involved in extending loans and is subject to normal credit policies and monitoring. Those interest rate swaps are simultaneouslyeconomically hedged by offsetting interest rate swaps that WesBanco executes with derivative counterparties in order to offset its exposure on the fixed components of the customer interest rate swap agreements. The interest rate swap agreement with the loan customer and with the counterparty is reported at fair value in other assets and other liabilities on the consolidated balance sheet with any resulting gain or loss recorded in current period earnings as other income and other expense.
WesBanco enters into forward TBA contracts to manage the interest rate risk between the loan commitments to the customer and the closing of the loan for loans that will be sold on a mandatory basis to secondary market investors. The forward TBA contract is reported at fair value in other assets and other liabilities on the consolidated balance sheet with any resulting gain or loss recorded in current period’s earnings as mortgage banking income.
WesBanco determines the fair value for derivatives using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects contractual terms of the derivative, including the period to maturity, and uses
observable market basedmarket-based inputs, including interest rate curves and implied volatilities. WesBanco incorporates credit valuation adjustments to appropriately reflect both its ownnon-performance risk and the respective counterparty’snon-performance risk in the fair value measurements.
We may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market accounting or write-downs of individual assets and liabilities.
Impaired loans: Impaired loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within level 3 of the fair value hierarchy.
Other real estate owned and repossessed assets: Other real estate owned and repossessed assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. The use of independent appraisals and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral, and therefore other real estate owned and repossessed assets are classified within level 3 of the fair value hierarchy.
Loans held for sale: Loans held for sale are carried, in aggregate, at fair value as WesBanco has elected the lowerfair value option as of cost or fair value.October 1, 2017. The use of a valuation model using quoted prices of similar instruments are significant inputs in arriving at the fair value and therefore loans held for sale are classified within level 2 of the fair value hierarchy.
Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the table below are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The following tables set forth WesBanco’s financial assets and liabilities that were accounted for at fair value on a recurring and nonrecurring basis by level within the fair value hierarchy as of June 30, 2017March 31, 2018 and December 31, 2016:2017:
June 30, 2017 | March 31, 2018 | |||||||||||||||||||||||||||||||||||||||
Fair Value Measurements Using: | Fair Value Measurements Using: | |||||||||||||||||||||||||||||||||||||||
June 30, 2017 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Investments Measured at Net Asset | March 31, 2018 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Investments Measured at Net Asset | |||||||||||||||||||||||||||||||
(unaudited, in thousands) | (level 1) | (level 2) | (level 3) | Value | (level 1) | (level 2) | (level 3) | Value | ||||||||||||||||||||||||||||||||
Recurring fair value measurements | ||||||||||||||||||||||||||||||||||||||||
Trading securities | $ | 7,880 | $ | 6,483 | $ | — | $ | — | $ | 1,397 | ||||||||||||||||||||||||||||||
Securities - available-for-sale | ||||||||||||||||||||||||||||||||||||||||
Equity securities | $ | 13,986 | $ | 11,568 | $ | — | $ | — | $ | 2,418 | ||||||||||||||||||||||||||||||
Debt securities -available-for-sale | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury | 9,894 | — | 9,894 | — | — | |||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | 43,836 | — | 43,836 | — | — | 96,458 | — | 96,458 | — | — | ||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 926,759 | — | 926,759 | — | — | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies | 1,344,410 | — | 1,344,410 | — | — | |||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 115,522 | — | 115,522 | — | — | 140,926 | — | 140,926 | — | — | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions | 112,675 | — | 112,675 | — | — | 101,431 | — | 101,431 | — | — | ||||||||||||||||||||||||||||||
Corporate debt securities | 35,339 | — | 35,339 | — | — | 35,258 | — | 35,258 | — | — | ||||||||||||||||||||||||||||||
Equity securities | 5,289 | 3,149 | 2,140 | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total securities - available-for-sale | $ | 1,239,420 | $ | 3,149 | $ | 1,236,271 | $ | — | $ | — | ||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total debt securities -available-for-sale | $ | 1,728,377 | $ | — | $ | 1,728,377 | $ | — | $ | — | ||||||||||||||||||||||||||||||
Loans held for sale | 12,962 | — | 12,962 | — | — | |||||||||||||||||||||||||||||||||||
Other assets - interest rate derivatives agreements | $ | 5,666 | $ | — | $ | 5,666 | $ | — | $ | — | 9,257 | — | 9,257 | — | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total assets recurring fair value measurements | $ | 1,252,966 | $ | 9,632 | $ | 1,241,937 | $ | — | $ | 1,397 | $ | 1,764,582 | $ | 11,568 | $ | 1,750,596 | $ | — | $ | 2,418 | ||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Other liabilities - interest rate derivatives agreements | $ | 5,572 | $ | — | $ | 5,572 | $ | — | $ | — | $ | 9,083 | $ | — | $ | 9,083 | $ | — | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total liabilities recurring fair value measurements | $ | 5,572 | $ | — | $ | 5,572 | $ | — | $ | — | $ | 9,083 | $ | — | $ | 9,083 | $ | — | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Nonrecurring fair value measurements | ||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | 4,259 | $ | — | $ | — | $ | 4,259 | $ | — | $ | 1,717 | $ | — | $ | — | $ | 1,717 | $ | — | ||||||||||||||||||||
Other real estate owned and repossessed assets | 6,723 | — | — | 6,723 | — | 4,067 | — | — | 4,067 | — | ||||||||||||||||||||||||||||||
Loans held for sale | 21,677 | — | 21,677 | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total nonrecurring fair value measurements | $ | 32,659 | $ | — | $ | 21,677 | $ | 10,982 | $ | — | $ | 5,784 | $ | — | $ | — | $ | 5,784 | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2016 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||
Fair Value Measurements Using: | Fair Value Measurements Using: | |||||||||||||||||||||||||||||||||||||||
December 31, 2016 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Investments Measured at Net Asset | December 31, | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Investments Measured at Net Asset | |||||||||||||||||||||||||||||||
(unaudited, in thousands) | (level 1) | (level 2) | (level 3) | Value | 2017 | (level 1) | (level 2) | (level 3) | Value | |||||||||||||||||||||||||||||||
Recurring fair value measurements | ||||||||||||||||||||||||||||||||||||||||
Trading securities | $ | 7,071 | $ | 5,633 | $ | — | $ | — | $ | 1,438 | ||||||||||||||||||||||||||||||
Securities - available-for-sale | ||||||||||||||||||||||||||||||||||||||||
Equity securities | $ | 13,457 | $ | 11,391 | $ | — | $ | — | $ | 2,066 | ||||||||||||||||||||||||||||||
Debt securities -available-for-sale | ||||||||||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | 54,043 | — | 54,043 | — | — | 71,843 | — | 71,843 | — | — | ||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 938,289 | — | 938,289 | — | — | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies | 934,922 | — | 934,922 | — | — | |||||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 96,810 | — | 96,810 | — | — | 114,867 | — | 114,867 | — | — | ||||||||||||||||||||||||||||||
Obligations of state and political subdivisions | 111,663 | — | 111,663 | — | — | 104,830 | — | 104,830 | — | — | ||||||||||||||||||||||||||||||
Corporate debt securities | 35,301 | — | 35,301 | — | — | 35,403 | — | 35,403 | — | — | ||||||||||||||||||||||||||||||
Equity securities | 5,070 | 2,938 | 2,132 | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total securities - available-for-sale | $ | 1,241,176 | $ | 2,938 | $ | 1,238,238 | $ | — | $ | — | ||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Total debt securities -available-for-sale | $ | 1,261,865 | $ | — | $ | 1,261,865 | $ | — | $ | — | ||||||||||||||||||||||||||||||
Loans held for sale | 20,320 | — | 20,320 | — | — | |||||||||||||||||||||||||||||||||||
Other assets - interest rate derivatives agreements | $ | 5,596 | $ | — | $ | 5,596 | $ | — | $ | — | 7,351 | — | 7,351 | — | — | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total assets recurring fair value measurements | $ | 1,253,843 | $ | 8,571 | $ | 1,243,834 | $ | — | $ | 1,438 | $ | 1,302,993 | $ | 11,391 | $ | 1,289,536 | $ | — | $ | 2,066 | ||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Other liabilities - interest rate derivatives agreements | $ | 5,199 | $ | — | $ | 5,199 | $ | — | $ | — | $ | 7,345 | $ | — | $ | 7,345 | $ | — | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total liabilities recurring fair value measurements | $ | 5,199 | $ | — | $ | 5,199 | $ | — | $ | — | $ | 7,345 | $ | — | $ | 7,345 | $ | — | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Nonrecurring fair value measurements | ||||||||||||||||||||||||||||||||||||||||
Impaired loans | $ | 3,405 | $ | — | $ | — | $ | 3,405 | $ | — | $ | 1,717 | $ | — | $ | — | $ | 1,717 | $ | — | ||||||||||||||||||||
Other real estate owned and repossessed assets | 8,346 | — | — | 8,346 | — | 5,297 | — | — | 5,297 | — | ||||||||||||||||||||||||||||||
Loans held for sale | 17,315 | — | 17,315 | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total nonrecurring fair value measurements | $ | 29,066 | $ | — | $ | 17,315 | $ | 11,751 | $ | — | $ | 7,014 | $ | — | $ | — | $ | 7,014 | $ | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
WesBanco’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no significant transfers between level 1, 2 or 3 for the three and six months ended June 30, 2017March 31, 2018 or for the year ended December 31, 2016.2017.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which WesBanco has utilized level 3 inputs to determine fair value:
|
| |||||||||||||
| ||||||||||||||
| ||||||||||||||
| ||||||||||||||
| ||||||||||||||
| ||||||||||||||
|
Quantitative Information about Level 3 Fair Value Measurements | ||||||||||
Fair Value | Valuation | Unobservable | Range (Weighted | |||||||
(unaudited, in thousands) | Estimate | Techniques | Input | Average) | ||||||
March 31, 2018 | ||||||||||
Impaired loans | $ | 1,717 | Appraisal of collateral (1) | Appraisal adjustments (2) | (4.8%) / (4.8%) | |||||
Liquidation expenses (2) | (7.6%) / (7.6%) | |||||||||
Other real estate owned and repossessed assets | 4,067 | Appraisal of collateral (1), (3) | ||||||||
December 31, 2017: | ||||||||||
Impaired loans | $ | 1,717 | Appraisal of collateral (1) | Appraisal adjustments (2) | (4.8%) / (4.8%) | |||||
Liquidation expenses (2) | (7.6%) / (7.6%) | |||||||||
Other real estate owned and repossessed assets | 5,297 | Appraisal of collateral (1), (3) |
(1) | Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable. |
(2) | Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of appraisal adjustments and liquidation expenses are presented as a percent of the appraisal. |
(3) | Includes estimated liquidation expenses and numerous dissimilar qualitative adjustments by management which are not identifiable. |
The estimated fair values of WesBanco’s financial instruments are summarized below:
Fair Value Measurements at June 30, 2017 | Fair Value Measurements at March 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Carrying Amount | Fair Value Estimate | Quoted Prices in Active Markets for Identical Assets (level 1) | Significant Other Observable Inputs (level 2) | Significant Unobservable Inputs (level 3) | Investments Measured at Net Asset Value | Carrying Amount | Fair Value Estimate | Quoted Prices in Active Markets for Identical Assets (level 1) | Significant Other Observable Inputs (level 2) | Significant Unobservable Inputs (level 3) | Investments Measured at Net Asset Value | ||||||||||||||||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 110,695 | $ | 110,695 | $ | 110,695 | $ | — | $ | — | $ | — | $ | 100,845 | $ | 100,845 | $ | 100,845 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Trading securities | 7,880 | 7,880 | 6,483 | — | — | 1,397 | ||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale | 1,239,420 | 1,239,420 | 3,149 | 1,236,271 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Securities held-to-maturity | 1,030,394 | 1,049,374 | — | 1,048,782 | 592 | — | ||||||||||||||||||||||||||||||||||||||||||
Equity securities | 13,986 | 13,986 | 11,568 | — | — | 2,418 | ||||||||||||||||||||||||||||||||||||||||||
Debt securitiesavailable-for-sale | 1,728,377 | 1,728,377 | — | 1,728,377 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Debt securitiesheld-to-maturity | 1,006,042 | 1,005,502 | — | 1,004,912 | 590 | — | ||||||||||||||||||||||||||||||||||||||||||
Net loans | 6,345,508 | 6,239,814 | — | — | 6,239,814 | — | 6,276,204 | 6,158,399 | — | — | 6,158,399 | — | ||||||||||||||||||||||||||||||||||||
Loans held for sale | 21,677 | 21,677 | — | 21,677 | — | — | 12,962 | 12,962 | — | 12,962 | — | — | ||||||||||||||||||||||||||||||||||||
Other assets - interest rate derivatives | 5,666 | 5,666 | — | 5,666 | — | — | 9,257 | 9,257 | — | 9,257 | — | — | ||||||||||||||||||||||||||||||||||||
Accrued interest receivable | 28,501 | 28,501 | 28,501 | — | — | — | 31,963 | 31,963 | 31,963 | — | — | — | ||||||||||||||||||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | 7,072,473 | 7,083,413 | 5,686,701 | 1,396,712 | — | — | 7,226,326 | 7,230,335 | 6,018,657 | 1,211,678 | — | — | ||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank borrowings | 1,021,592 | 1,020,403 | — | 1,020,403 | — | — | 1,166,939 | 1,161,442 | — | 1,161,442 | — | — | ||||||||||||||||||||||||||||||||||||
Other borrowings | 167,671 | 167,663 | 165,565 | 2,098 | — | — | 207,653 | 207,627 | 205,651 | 1,976 | — | — | ||||||||||||||||||||||||||||||||||||
Subordinated debt and junior subordinated debt | 164,228 | 134,420 | — | 134,420 | — | — | 164,379 | 149,887 | — | 149,887 | — | — | ||||||||||||||||||||||||||||||||||||
Other liabilities - interest rate derivatives | 5,572 | 5,572 | — | 5,572 | — | — | 9,083 | 9,083 | — | 9,083 | — | — | ||||||||||||||||||||||||||||||||||||
Accrued interest payable | 2,407 | 2,407 | 2,407 | — | — | — | 4,033 | 4,033 | 4,033 | — | — | — |
Fair Value Measurements at December 31, 2016 | Fair Value Measurements at December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Carrying Amount | Fair Value Estimate | Quoted Prices in Active Markets for Identical Assets (level 1) | Significant Other Observable Inputs (level 2) | Significant Unobservable Inputs (level 3) | Investments Measured at Net Asset Value | Carrying Amount | Fair Value Estimate | Quoted Prices in Active Markets for Identical Assets (level 1) | Significant Other Observable Inputs (level 2) | Significant Unobservable Inputs (level 3) | Investments Measured at Net Asset Value | ||||||||||||||||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 128,170 | $ | 128,170 | $ | 128,170 | $ | — | $ | — | $ | — | $ | 117,572 | $ | 117,572 | $ | 117,572 | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
Trading securities | 7,071 | 7,071 | 5,633 | — | — | 1,438 | ||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale | 1,241,176 | 1,241,176 | 2,938 | 1,238,238 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Securities held-to-maturity | 1,067,967 | 1,076,790 | — | 1,076,189 | 601 | — | ||||||||||||||||||||||||||||||||||||||||||
Equity securities | 13,457 | 13,457 | 11,391 | — | — | 2,066 | ||||||||||||||||||||||||||||||||||||||||||
Debt securitiesavailable-for-sale | 1,261,865 | 1,261,865 | — | 1,261,865 | — | — | ||||||||||||||||||||||||||||||||||||||||||
Debt securitiesheld-to-maturity | 1,009,500 | 1,023,784 | — | 1,023,191 | 593 | — | ||||||||||||||||||||||||||||||||||||||||||
Net loans | 6,205,762 | 6,073,558 | — | — | 6,073,558 | — | 6,296,157 | 6,212,823 | — | — | 6,212,823 | — | ||||||||||||||||||||||||||||||||||||
Loans held for sale | 17,315 | 17,315 | — | 17,315 | — | — | 20,320 | 20,320 | — | 20,320 | — | — | ||||||||||||||||||||||||||||||||||||
Other assets - interest rate derivatives | 5,596 | 5,596 | — | 5,596 | — | — | 7,351 | 7,351 | — | 7,351 | — | — | ||||||||||||||||||||||||||||||||||||
Accrued interest receivable | 28,299 | 28,299 | 28,299 | — | — | — | 29,728 | 29,728 | 29,728 | — | — | — | ||||||||||||||||||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposits | 7,040,879 | 7,052,501 | 5,545,057 | 1,507,444 | — | — | 7,043,588 | 7,053,536 | 5,766,531 | 1,287,005 | — | — | ||||||||||||||||||||||||||||||||||||
Federal Home Loan Bank borrowings | 968,946 | 974,430 | — | 974,430 | — | — | 948,203 | 944,706 | — | 944,706 | — | — | ||||||||||||||||||||||||||||||||||||
Other borrowings | 199,376 | 199,385 | 197,164 | 2,221 | — | — | 184,805 | 184,814 | 182,785 | 2,029 | — | — | ||||||||||||||||||||||||||||||||||||
Subordinated debt and junior subordinated debt | 163,598 | 134,859 | — | 134,859 | — | — | 164,327 | 146,484 | — | 146,484 | — | — | ||||||||||||||||||||||||||||||||||||
Other liabilities - interest rate derivatives | 5,199 | 5,199 | — | 5,199 | — | — | 7,345 | 7,345 | — | 7,345 | — | — | ||||||||||||||||||||||||||||||||||||
Accrued interest payable | 2,204 | 2,204 | 2,204 | — | — | — | 3,178 | 3,178 | 3,178 | — | — | — |
The following methods and assumptions were used to measure the fair value of financial instruments recorded at cost on WesBanco’s consolidated balance sheets:
Cash and due from banks:The carrying amount for cash and due from banks is a reasonable estimate of fair value.
Securities Debt securitiesheld-to-maturity:Fair values for debt securitiesheld-to-maturity are determined in the same manner as the investment securities which are described above.
Net loans: Fair values for loans are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loan and other market factors, including liquidity.
WesBanco believes the discount rates are consistent with transactions occurring in the marketplace for both performing and distressed loan types. The carrying value is net of the allowance for loan losses and other associated premiums and discounts. Due to the significant judgment involved in evaluating credit quality, loans are classified within level 3 of the fair value hierarchy.
Accrued interest receivable:The carrying amount of accrued interest receivable approximates its fair value.value.
Deposits:The carrying amount is considered a reasonable estimate of fair value for demand, savings and other variable rate deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using rates currently offered for deposits of similar remaining maturities.
Federal Home Loan Bank borrowings:The fair value of FHLB borrowings is based on rates currently available to WesBanco for borrowings with similar terms and remaining maturities.
Other borrowings:The carrying amount of federal funds purchased and overnight sweep accounts generally approximate fair value. Other repurchase agreements are based on quoted market prices if available. If market prices are not available, for certain fixed and adjustable rate repurchase agreements, then quoted market prices of similar instruments are used.
Subordinated debt and junior subordinated debt:The fair value of subordinated debt is estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements. Due to the pooled nature of junior subordinated debt owed to unconsolidated subsidiary trusts, which are not actively traded, estimated fair value is based on recent similar transactions of single-issuer trust preferred securities.
Accrued interest payable:The carrying amount of accrued interest payable approximates its fair value.
Off-balance sheet financial instruments:Off-balance sheet financial instruments consist of commitments to extend credit, including letters of credit. Fair values for commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit standing of the counterparties. The estimated fair value of the commitments to extend credit and letters of credit are insignificant and therefore are not presented in the above tables.
NOTE 8. REVENUE RECOGNITION
WesBanco adopted ASU2014-09 as of January 1, 2018 under the modified retrospective approach and there was no material impact on WesBanco’s Consolidated Financial statements. Interest income, net securities (losses) gains and bank-owned life insurance are not in scope of ASC 606,Revenue from Contracts with Customers. For the revenue streams in scope of ASC 606 - trust fees, service charges on deposits, electronic banking fees, net securities brokerage revenue, mortgage banking income and net gain or loss on sale of other real estate owned – there are no significant judgements related to the amount and timing of revenue recognition.
Trust fees: Fees are earned over a period of time between monthly and annually, per the related fee schedule. The fees are earned ratably over the period for investment, safekeeping and other services performance by WesBanco. The fees are accrued when earned based on the daily asset value on the last day of the quarter. In most cases, the fees are directly debited from the customer account.
Service charges on deposits: There are monthly service charges for both commercial and personal banking customers, which are earned over the month per the related fee schedule based on the customers’ deposits. There are also transaction-based fees, which are earned based on specific transactions or customer activity within the customers’ deposit accounts. These are earned at the time the transaction or customer activity occurs. The fees are debited from the customer account.
Electronic banking fees: Interchange and ATM fees are earned based on customer and ATM transactions. Revenue is recognized when the transaction is settled.
Net securities brokerage revenue: Commission income is earned based on customer transactions and management of investments. The commission income from customers’ transactions is recognized when the transaction is complete. The commission income from the management of investments is earned continuously over a quarterly period.
Mortgage banking income: Income is earned when WesBanco-originated loans are sold to an investor on the secondary market. The investor bids on the loans. If the price is accepted, WesBanco delivers the loan documents to the investor. Once received and approved by the investor, revenue is recognized and the loans are derecognized from the Consolidated Balance Sheet. Prior to the loans being sold, they are classified as loans held for sale. Additionally, the changes in the fair value of the loans held for sale, loan commitments and related derivatives are included in mortgage banking income.
Net gain or loss on sale of other real estate owned: Net gain or loss is recorded when other real estate is sold to a third party and the Bank collects substantially all of the consideration to which WesBanco is entitled in exchange for the transfer of the property.
The following table summarizes the point of revenue recognition and the income recognized for each of the revenue streams for the three months ended March 31, 2018:
(unaudited, in thousands) | Point of Revenue Recognition | For the Three Months Ended March 31, 2018 | ||||||
Revenue Streams | ||||||||
Trust Fees | ||||||||
Trust account fees | Over time | $ | 4,292 | |||||
WesMark fees | Over time | 2,211 | ||||||
Total trust fees | 6,503 | |||||||
Service charges on deposits | ||||||||
Commercial banking fees | Over time | 407 | ||||||
Personal service charges | At a point in time & Over time | 4,415 | ||||||
Total service charges on deposits | 4,822 | |||||||
Net securities brokerage revenue | ||||||||
Annuity commissions | At a point in time | 1,200 | ||||||
Equity and debt security trades | At a point in time | 102 | ||||||
Managed money | Over time | 141 | ||||||
Trail commissions | Over time | 227 | ||||||
Total net securities brokerage revenue | 1,670 | |||||||
Electronic banking fees | At a point in time | 4,829 | ||||||
Mortgage banking income | At a point in time | 1,004 | ||||||
Gain/loss on sale of OREO/other assets | At a point in time | 262 |
NOTE 9. COMPREHENSIVE INCOMEINCOME/(LOSS)
The activity in accumulated other comprehensive income for the three and six months ended June 30,March 31, 2018 and 2017 and 2016 is as follows:
Accumulated Other Comprehensive Income/(Loss) (1) | Accumulated Other Comprehensive Income/(Loss) (1) | |||||||||||||||||||||||||||||||
(unaudited, in thousands) | Defined Benefit Pension Plan | Unrealized Gains (Losses) on Securities Available-for-Sale | Unrealized Gains on Securities Transferred from Available-for-Sale to Held-to-Maturity | Total | Defined Benefit Pension Plan | Unrealized Gains (Losses) on Debt Securities Available-for-Sale | Unrealized Gains on Debt Securities Transferred from Available-for-Sale to Held-to-Maturity | Total | ||||||||||||||||||||||||
Balance at December 31, 2017 | $ | (18,626 | ) | $ | (13,250 | ) | $ | 381 | $ | (31,495 | ) | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other comprehensive income before reclassifications | — | (14,905 | ) | — | (14,905 | ) | ||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | 437 | — | (50 | ) | 387 | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Period change | 437 | (14,905 | ) | (50 | ) | (14,518 | ) | |||||||||||||||||||||||||
Adoption of Accounting Standard ASU2016-01 (2) | — | (1,063 | ) | — | (1,063 | ) | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | (18,189 | ) | $ | (29,218 | ) | $ | 331 | $ | (47,076 | ) | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Balance at December 31, 2016 | $ | (17,758 | ) | $ | (9,890 | ) | $ | 522 | $ | (27,126 | ) | $ | (17,758 | ) | $ | (9,890 | ) | $ | 522 | $ | (27,126 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Other comprehensive income before reclassifications | — | 3,932 | — | 3,932 | — | 1,680 | — | 1,680 | ||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | 1,164 | 35 | (123 | ) | 1,076 | 655 | — | (50 | ) | 605 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Period change | 1,164 | 3,967 | (123 | ) | 5,008 | 655 | 1,680 | (50 | ) | 2,285 | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance at June 30, 2017 | $ | (16,594 | ) | $ | (5,923 | ) | $ | 399 | $ | (22,118 | ) | |||||||||||||||||||||
Balance at March 31, 2017 | $ | (17,103 | ) | $ | (8,210 | ) | $ | 472 | $ | (24,841 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance at December 31, 2015 | $ | (17,539 | ) | $ | (4,162 | ) | $ | 747 | $ | (20,954 | ) | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other comprehensive income before reclassifications | — | 18,100 | — | 18,100 | ||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | 921 | (1,061 | ) | (103 | ) | (243 | ) | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Period change | 921 | 17,039 | (103 | ) | 17,857 | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Balance at June 30, 2016 | $ | (16,618 | ) | $ | 12,877 | $ | 644 | $ | (3,097 | ) | ||||||||||||||||||||||
|
|
|
|
(1) | All amounts are net of tax. Related income tax expense or benefit is calculated using a combined Federal and State income tax rate approximating 23% in 2018 and 37% |
(2) | See Note 1, Summary of Significant Accounting Policies for additional information about WesBanco’s adoption of ASU2016-01. |
The following table provides details about amounts reclassified from accumulated other comprehensive income for the three and six months ended June 30, 2017March 31, 2018 and 2016:2017:
Details about Accumulated Other Comprehensive | For the Three Months Ended June 30, | For the Six Months Ended June 30, | Affected Line Item in the Statement of Net Income | |||||||||||||||||||||||||
Details about Accumulated Other Comprehensive Income/(Loss) Components | Amounts Reclassified from Accumulated Other Comprehensive Income/(Loss) For the Three Months Ended March 31, | Affected Line Item in the Statement of Net Income | ||||||||||||||||||||||||||
(unaudited, in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||||||
Securities available-for-sale(1): | ||||||||||||||||||||||||||||
Net securities gains/losses reclassified into earnings | $ | 55 | $ | (618 | ) | $ | 55 | $ | (1,672 | ) | Net securities gains (Non-interest income) | |||||||||||||||||
Related income tax benefit | (20 | ) | 226 | (20 | ) | 611 | Provision for income taxes | |||||||||||||||||||||
Debt securitiesavailable-for-sale(1): | ||||||||||||||||||||||||||||
Net securities gains reclassified into earnings | $ | — | $ | — | Net securities gains(Non-interest income) | |||||||||||||||||||||||
Related income tax expense | — | — | Provision for income taxes | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Net effect on accumulated other comprehensive income for the period | 35 | (392 | ) | 35 | (1,061 | ) | — | — | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Securities held-to-maturity(1): | ||||||||||||||||||||||||||||
Debt securitiesheld-to-maturity(1): | ||||||||||||||||||||||||||||
Amortization of unrealized gain transferred from available-for-sale | (118 | ) | (84 | ) | (189 | ) | (165 | ) | Interest and dividends on securities (Interest and dividend income) | (66 | ) | (72 | ) | Interest and dividends on securities (Interest and dividend income) | ||||||||||||||
Related income tax expense | 44 | 31 | 66 | 62 | Provision for income taxes | 16 | 22 | Provision for income taxes | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Net effect on accumulated other comprehensive income for the period | (74 | ) | (53 | ) | (123 | ) | (103 | ) | (50 | ) | (50 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Defined benefit pension plan(2): | ||||||||||||||||||||||||||||
Amortization of net loss and prior service costs | 809 | 815 | 1,610 | 1,514 | Employee benefits (Non-interest expense) | 756 | 801 | Employee benefits(Non-interest expense) | ||||||||||||||||||||
Related income tax benefit | (300 | ) | (298 | ) | (446 | ) | (593 | ) | Provision for income taxes | (319 | ) | (146 | ) | Provision for income taxes | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Net effect on accumulated other comprehensive income for the period | 509 | 517 | 1,164 | 921 | 437 | 655 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Total reclassifications for the period | $ | 470 | $ | 72 | $ | 1,076 | $ | (243 | ) | $ | 387 | $ | 605 | |||||||||||||||
|
|
|
|
|
|
(1) | For additional detail related to unrealized gains on securities and related amounts reclassified from accumulated other comprehensive income, see Note |
(2) | Included in the computation of net periodic pension cost. See Note 6, “Pension Plan” for additional detail. |
NOTE 9.10. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments —In the normal course of business, WesBanco offersoff-balance sheet credit arrangements to enable its customers to meet their financing objectives. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. WesBanco’s exposure to credit losses in the event ofnon-performance by the other parties to the financial instruments for commitments to extend credit and standby letters of credit is limited to the contractual amount of those instruments. WesBanco uses the same credit policies in making commitments and conditional obligations as for all other lending. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The allowance for credit losses associated with commitments was $0.6($0.6) million as of both June 30, 2017March 31, 2018 and December 31, 2016,2017, and is included in other liabilities on the Consolidated Balance Sheets.
Letters of credit are conditional commitments issued by banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including normal business activities, bond financing and similar transactions. Letters of credit are considered guarantees. The liability associated with letters of credit was $0.2 million as of both June 30, 2017March 31, 2018 and December 31, 2016.2017.
Contingent obligations to purchase loans funded byand other entitiesguarantees include affordable housing plan guarantees, credit card guarantees and mortgages sold intoobligations under the secondary market with recourse.FHLB’s loan purchasing program. Affordable housing plan guarantees are performance guarantees for various building project loans. The guarantee amortizes as the loan balances decrease. Credit card guarantees are credit card balances not owned by WesBanco, whereby the Bank guarantees the performance of the cardholder. The mortgages sold to FHLB obligate WesBanco to reimburse the FHLB for a portion of the loan balances that default.
The following table presents total commitments to extend credit, guarantees and various letters of credit outstanding:
June 30, | December 31, | March 31, | December 31, | |||||||||||||
(unaudited, in thousands) | 2017 | 2016 | 2018 | 2017 | ||||||||||||
Lines of credit | $ | 1,483,500 | $ | 1,418,329 | $ | 1,464,970 | $ | 1,452,697 | ||||||||
Loans approved but not closed | 228,118 | 185,253 | 358,367 | 245,644 | ||||||||||||
Overdraft limits | 126,459 | 126,517 | 124,752 | 126,671 | ||||||||||||
Letters of credit | 31,260 | 32,907 | 31,947 | 31,951 | ||||||||||||
Contingent obligations to purchase loans funded by other entities | 8,945 | 13,036 | ||||||||||||||
Contingent obligations and other guarantees | 6,796 | 6,700 |
Contingent Liabilities —WesBanco is a party to various legal and administrative proceedings and claims. While any litigation contains an element of uncertainty, management does not believe that a material loss related to such proceedings or claims pending or known to be threatened is reasonably possible.
NOTE 10.11. BUSINESS SEGMENTS
WesBanco operates two reportable segments: community banking and trust and investment services. WesBanco’s community banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certainnon-traditional offerings, such as insurance and securities brokerage services. The trust and investment services segment offers trust services as well as various alternative investment products including mutual funds. The market value of assets managed or held in custody by the trust and investment services segment was approximately $4.0 billion and $3.8 billion at March 31, 2018 and $3.7 billion at June 30, 2017, and 2016, respectively. These assets are held by WesBanco in fiduciary or agency capacities for their customers and therefore are not included as assets on WesBanco’s Consolidated Balance Sheets.
Condensed financial information by business segment is presented below:
Trust and | Trust and | |||||||||||||||||||||||
Community | Investment | Community | Investment | |||||||||||||||||||||
(unaudited, in thousands) | Banking | Services | Consolidated | Banking | Services | Consolidated | ||||||||||||||||||
For the Three Months ended June 30, 2017: | ||||||||||||||||||||||||
For the Three Months ended March 31, 2018: | ||||||||||||||||||||||||
Interest and dividend income | $ | 82,160 | $ | — | $ | 82,160 | $ | 86,417 | $ | — | $ | 86,417 | ||||||||||||
Interest expense | 10,021 | — | 10,021 | 13,125 | — | 13,125 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income | 72,139 | — | 72,139 | 73,292 | — | 73,292 | ||||||||||||||||||
Provision for credit losses | 2,383 | — | 2,383 | 2,168 | — | 2,168 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income after provision for credit losses | 69,756 | — | 69,756 | 71,124 | — | 71,124 | ||||||||||||||||||
Non-interest income | 16,550 | 5,572 | 22,122 | 17,477 | 6,503 | 23,980 | ||||||||||||||||||
Non-interest expense | 52,754 | 3,130 | 55,884 | 50,894 | 3,677 | 54,571 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income before provision for income taxes | 33,552 | 2,442 | 35,994 | 37,707 | 2,826 | 40,533 | ||||||||||||||||||
Provision for income taxes | 8,676 | 977 | 9,653 | 6,411 | 593 | 7,004 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net income | $ | 24,876 | $ | 1,465 | $ | 26,341 | $ | 31,296 | $ | 2,233 | $ | 33,529 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
For the Three Months ended June 30, 2016: | ||||||||||||||||||||||||
For the Three Months ended March 31, 2017: | ||||||||||||||||||||||||
Interest and dividend income | $ | 67,585 | $ | — | $ | 67,585 | $ | 79,924 | $ | — | $ | 79,924 | ||||||||||||
Interest expense | 7,811 | — | 7,811 | 9,205 | — | 9,205 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income | 59,774 | — | 59,774 | 70,719 | — | 70,719 | ||||||||||||||||||
Provision for credit losses | 1,811 | — | 1,811 | 2,711 | — | 2,711 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income after provision for credit losses | 57,963 | — | 57,963 | 68,008 | — | 68,008 | ||||||||||||||||||
Non-interest income | 14,555 | 5,036 | 19,591 | 16,741 | 6,143 | 22,884 | ||||||||||||||||||
Non-interest expense | 44,396 | 2,964 | 47,360 | 50,992 | 3,392 | 54,384 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Income before provision for income taxes | 28,122 | 2,072 | 30,194 | 33,757 | 2,751 | 36,508 | ||||||||||||||||||
Provision for income taxes | 7,256 | 829 | 8,085 | 9,522 | 1,100 | 10,622 | ||||||||||||||||||
|
|
| �� |
|
|
| ||||||||||||||||||
Net income | $ | 20,866 | $ | 1,243 | $ | 22,109 | $ | 24,235 | $ | 1,651 | $ | 25,886 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
For the Six Months ended June 30, 2017: | ||||||||||||||||||||||||
Interest and dividend income | $ | 162,084 | $ | — | $ | 162,084 | ||||||||||||||||||
Interest expense | 19,226 | — | 19,226 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net interest income | 142,858 | — | 142,858 | |||||||||||||||||||||
Provision for credit losses | 5,094 | — | 5,094 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net interest income after provision for credit losses | 137,764 | — | 137,764 | |||||||||||||||||||||
Non-interest income | 33,290 | 11,716 | 45,006 | |||||||||||||||||||||
Non-interest expense | 103,746 | 6,522 | 110,268 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Income before provision for income taxes | 67,308 | 5,194 | 72,502 | |||||||||||||||||||||
Provision for income taxes | 18,196 | 2,078 | 20,274 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net income | $ | 49,112 | $ | 3,116 | $ | 52,228 | ||||||||||||||||||
|
|
| ||||||||||||||||||||||
For the Six Months ended June 30, 2016: | ||||||||||||||||||||||||
Interest and dividend income | $ | 135,186 | $ | — | $ | 135,186 | ||||||||||||||||||
Interest expense | 15,571 | — | 15,571 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net interest income | 119,615 | — | 119,615 | |||||||||||||||||||||
Provision for credit losses | 4,135 | — | 4,135 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net interest income after provision for credit losses | 115,480 | — | 115,480 | |||||||||||||||||||||
Non-interest income | 28,237 | 10,747 | 38,984 | |||||||||||||||||||||
Non-interest expense | 86,461 | 6,242 | 92,703 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Income before provision for income taxes | 57,256 | 4,505 | 61,761 | |||||||||||||||||||||
Provision for income taxes | 14,977 | 1,802 | 16,779 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Net income | $ | 42,279 | $ | 2,703 | $ | 44,982 | ||||||||||||||||||
|
|
|
Totalnon-fiduciary assets of the trust and investment services segment were $1.6$1.8 million and $3.2$3.8 million at June 30,March 31, 2018 and 2017, and 2016, respectively. All other assets, including goodwill and other intangible assets, were allocated to the community banking segment.
NOTE 12. SUBSEQUENT EVENTS
On April 5, 2018, WesBanco completed its acquisition of First Sentry Bancshares, Inc. (“FTSB”), a bank holding company headquartered in Huntington, West Virginia. As of March 31, 2018, FTSB had approximately $705.1 million in assets excluding goodwill, $577.4 million in total deposits, $459.5 million in total loans and 5 branches in West Virginia. The acquisition was valued at approximately $107.5 million and resulted in WesBanco issuing approximately 2.5 million shares of its common stock and $1.0 million in cash in exchange for FTSB common stock. The assets and liabilities of FTSB will be recorded on WesBanco’s balance sheet at their preliminary estimated fair values as of April 5, 2018, the acquisition date, and FTSB’s results of operations will be included in WesBanco’s Consolidated Statements of Income from that date. For the three months ended March 31, 2018, WesBanco recorded merger-related expenses of $0.2 million associated with the FTSB acquisition. WesBanco accounts for business combinations using the acquisition method of accounting. The initial accounting and determination of the fair values of the assets and liabilities resulting from the acquisition was incomplete at the time of this filing due to the timing of the closing of the acquisition in relation to WesBanco’s required Form10-Q filing deadline. A more complete disclosure of the business combination is expected to be reported in WesBanco’s Form10-Q as of June 30, 2018.
On April 19, 2018, WesBanco and Farmers Capital Bank Corporation (“Farmers”), a bank holding company headquartered in Frankfort, Kentucky with approximately $1.7 billion in assets, $1.4 billion in deposits, $1.0 billion in loans and 34 branches, jointly announced that a definitive Agreement and Plan of Merger was executed providing for the merger of Farmers with and into WesBanco. On the date of the announcement, the transaction was valued at approximately $378.2 million. Under the terms of the Agreement and Plan of Merger, which has been approved by that board of directors of both companies, WesBanco will exchange a combination of its common stock and cash for Farmers common stock. Farmers shareholders will be entitled to receive 1.053 shares of WesBanco common stock and cash in the amount of $5.00 per share for each share of Farmers’common stock for a total value of approximately $50.31 per share at the date of announcement. The receipt by Farmers’ shareholders of shares of WesBanco common stock in exchange for their shares of Farmers common stock is anticipated to qualify as atax-free exchange. The acquisition is subject to the approvals of the appropriate banking regulatory authorities and the shareholders of Farmers. It is expected that the transaction will be completed in the third or fourth quarter of 2018.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis (“MD&A”) represents an overview of WesBanco’s financial condition as of June 30, 2017, as compared to December 31, 2016, and WesBanco’sthe results of operations and financial condition of WesBanco for the three and six months ended June 30, 2017 and 2016.March 31, 2018. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes in this report and WesBanco’s Form10-K for the fiscal year ended December 31, 2016.thereto.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report relating to WesBanco’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco’s Form10-K for the year ended December 31, 20162017 and documents subsequently filed by WesBanco with the Securities and Exchange Commission (“SEC”), including WesBanco’s Form10-Q for the quarter ended March 31, 2017, which are available at the SEC’s website, www.sec.gov or at WesBanco’s website, www.wesbanco.com. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed in WesBanco’s most recent Annual Report on Form10-K filed with the SEC under “Risk Factors” in Part I, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, that the businesses of WesBanco, FTSB and Farmers may not integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from the merger of WesBanco, FTSB and Farmers may not be fully realized within the expected timeframes; disruption from the merger of WesBanco, FTSB and Farmers may make it more difficult to maintain relationships with clients, associates, or suppliers; the effects of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to WesBanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, the FDIC, the SEC, FINRA, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; internet hacking; competitive conditions in the financial services industry; rapidly changing technology affecting financial services; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting WesBanco’s operational and financial performance. WesBanco does not assume any duty to update forward-looking statements.
OVERVIEW
WesBanco is a multi-state bank holding company operating through 173177 branches and 161168 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, and southern Indiana, offering retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. WesBanco’s businesses are significantly impacted by economic factors such as market interest rates, federal monetary and regulatory policies, local and regional economic conditions and the competitive environment’s effect upon WesBanco’s business volumes. WesBanco’s deposit levels are affected by numerous factors including personal savings rates, personal income, and competitive rates on alternative investments, as well as competition from other financial institutions within the markets we serve and liquidity needs of WesBanco. Loan levels are also subject to various factors including construction demand, business financing needs, consumer spending and interest rates, as well as loan terms offered by competing lenders.
On September 9, 2016, WesBanco completed the acquisition of YCB, a bank holding company headquartered in New Albany, Indiana with approximately $1.5 billion in assets, excluding goodwill, with $1.2 billion in total deposits and $1.0 billion in total loans, and 34 branches in Kentucky and southern Indiana. WesBanco now has approximately $9.9 billion in total assets, $7.1 billion in total deposits, and $6.4 billion in total loans, operating in five contiguous states. YCB’s results were included in WesBanco’s results from the date of merger consummation.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
WesBanco’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of June 30, 2017March 31, 2018 have remained unchanged from the disclosures presented in WesBanco’s Annual Report on Form10-K for the year ended December 31, 20162017 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Net income for the three months ended June 30, 2017 increased to $26.3March 31, 2018 was $33.5 million, whilewith diluted earnings per share increased to $0.60,of $0.76, compared to $22.1$25.9 million or $0.58and $0.59 per diluted share, for the second quarter of 2016. For the six month period ended June 30, 2017, net income increased to $52.2 million or $1.19 per diluted share compared to $45.0 million or $1.17 per diluted sharerespectively, for the first six monthsquarter of 2016.2017. Excludingafter-tax merger-related expenses(non-GAAP measure), in both periods, net income for the six months ended June 30, 2017, increased 15.7% to $52.5 million compared to $45.4 million for 2016, whileand diluted earnings per share improvedwould have increased 28.7% to $1.19,$33.7 million, or $0.76 per diluted share for the three months ended March 31, 2018, as compared to $1.18 per share for 2016.the prior year quarter.
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands, | Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||||||||||||
Net income(Non-GAAP)(1) | $ | 26,341 | $ | 0.60 | $ | 22,560 | $ | 0.59 | $ | 52,547 | $ | 1.19 | $ | 45,433 | $ | 1.18 | $ | 33,722 | $ | 0.76 | $ | 26,205 | $ | 0.60 | ||||||||||||||||||||||||
Less: After tax merger-related expenses | — | — | (451 | ) | (0.01 | ) | (319 | ) | — | (451 | ) | (0.01 | ) | (193 | ) | — | (319 | ) | (0.01 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Net income (GAAP) | $ | 26,341 | $ | 0.60 | $ | 22,109 | $ | 0.58 | $ | 52,228 | $ | 1.19 | $ | 44,982 | $ | 1.17 | $ | 33,529 | $ | 0.76 | $ | 25,886 | $ | 0.59 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Non-GAAP net income excludesafter-tax merger-related expenses. The abovenon-GAAP financial measures used by WesBanco provide information useful to investors in understanding WesBanco’s operating performance and trends, and facilitate comparisons with the performance of WesBanco’s peers. |
Net interest income increased $12.4$2.6 million or 20.7%, during3.6% in the secondfirst quarter of 20172018 compared to the same quarter of 2016,2017 due to a 23.4%2.7% increase in average loan balances andearning assets. In addition, the increase in net interest margin of 15 basis points.Year-to-date, net interest income increased $23.2 million or 19.4%, as average earning assets increased 14.4% and the net interest margin increased 14 basis points to 3.43%. The yield on earning assets has increased a total of 13 basis points since the first quarter of 2017. However, the net interest margin decreased by 4 basis points to 3.38% in eachthe first quarter of 2018 compared to 3.42% in the first quarter of 2017 due primarily due to a 6 basis point reduction in thetax-equivalency of the last six quarters totaling 22 basis points, with 18 basis points ofincome from state and local municipaltax-exempt securities portfolio resulting from the increase occurring subsequent to the acquisition of YCB’s higher yielding earning assets“Tax Cuts and Jobs Act” signed into law in September 2016. Six basis points of the increase occurredDecember 2017. The net interest margin has somewhat benefited from increases in the most recent quarter after the first quarter’s Federal Reserve Board’s target federal funds rate increased 25 basis points. Asover the past year, partially offset by higher funding costs as well as a result,flattening of the net interest margin increased by 15 basis points to 3.45% in the second quarter of 2017 compared to 3.30% in the second quarter of 2016. Yields increased on more than 90% of earning assets, which more than offset an 8 basis point increase in the cost of interest bearing liabilities as compared to the second quarter of 2016.yield curve. The increase in the cost of interest bearing liabilities is primarily due to higher rates for certain short term borrowings and interest bearing demand deposits, which includes public funds. Average interest bearing deposits duringfunds, and certain Federal Home Loan Bank and other borrowings. Accretion from prior acquisitions benefited the 2017 second quarter increased 12.2%, compared to the second quarter of 2016, as all interest bearing deposit types increased other than CDs. In addition, the secondfirst quarter net interest margin includedby approximately 8six basis points, of accretion from prior acquisitionsas compared to 7eight basis points in the second quarter of 2016, and 8 basis points in the first quarter of 2017.prior year period.
The provision for credit losses increaseddecreased to $2.4 million in the second quarter of 2017 compared to $1.8 million in the second quarter of 2016, due primarily to loan growth. On a linked-quarter basis, the provision decreased $0.3 million. The provision for credit losses for the first half of 2017 increased to $5.1 million compared to $4.1$2.2 million in the first halfquarter of 2016.2018, compared to $2.7 million in the first quarter of 2017, due to continued strength in the loan credit quality and minimal overall loan growth. Net charge-offs, as a percentage of average portfolio loans were 0.09%of 0.07% in the secondfirst quarter of 2017 as compared to 0.08%2018 were lower than the 0.15% in the secondfirst quarter of 2016.2017.
For the secondfirst quarter of 2017,2018,non-interest income increased $2.5$1.1 million, or 12.9%4.8%, compared to the secondfirst quarter of 2016.2017. Bank owned-life insurance increased $1.6 million or 141.8%, due to higher death benefits received during the quarter compared to the first quarter of 2017. Trust fees increased $0.5$0.3 million or 10.6%5.9%, based in part on a 4.1% increase inas equity markets improved and trust assets improvements in equity markets duringincreased 5.0% since the past year, as well as organic growth, and estate fees. Service charges on deposits increased $0.9 million or 21.7%, and electronicfirst quarter of 2017. Electronic banking fees increased $1.2$0.3 million or 33.2%, through6.6% based on increased debit card volume. Net gain (loss) on other real estate owned and other assets increased $0.3 million or 444.7% as result of an increase in a larger customer deposit base from the addition of YCB. Bank-owned life insurance increased $0.4 million primarily due to life insurance death benefits recordedventure capital fund established for qualifying Community Reinvestment Act investment purposes in the second quarter of 2017. Other income decreased $0.8 million primarily due to a decrease in commercial customer loan swap fee income, which was related to a larger commercial project in the prior year period. For the six month period ending June 30, 2017,2009.
The following comments onnon-interest income increased $6.0 million, reflecting similar trends as in the second quarter, while net gains on sale of mortgage loans increased $1.2 million due to increases in mortgage loans sold into the secondary market, as total mortgage loan volume increased by 15.9% to $188.5 million. Net securities gains decreased $1.2 million, primarily due to gains on called securities in 2016.
Excludingexpense exclude merger-related expenses in both years as noted in the table above,years.non-interestNon-interest expense in the secondfirst quarter of 2017 increased $9.22018 grew slightly by $0.4 million or 19.8%0.8%, compared to the prior year period, principally due to the acquisition.2017 first quarter. Salaries and wages increased $3.9$2.0 million or 19.7%, due8.7% compared to an 18.7% increase in full-time equivalent employees primarily from the YCB acquisition (net of positions terminated in the fourth quarter upon systems and branch conversions), and annual adjustments to compensation effective during thelast year’s first quarter. Employee benefits expense increased $0.4However, employee benefit expenses decreased $1.3 million or 5.4%, primarily from higher health insurance costs and payroll taxes associated with the additional employees, which factors were offset somewhat by lower pension expense. Increases in net occupancy and equipment were also primarily related15.8% as compared to the additional branches from the YCB acquisition. Marketing expense was seasonally higher during the secondfirst quarter reflecting current consumer advertising campaigns, with the year-over-year increase related mostly to the market expansion from the acquisition. FDIC insurance decreased 17.6%, even with the acquisition, due to a lower fee schedule implemented July 1, 2016 by the FDIC for banks under $10 billion in total asset size as well as certain improved risk factors. Other operating expenses increased $2.1 million or 22.4%, through increases in miscellaneous taxes, professional fees, postage, and communications,of 2017. These fluctuations are primarily due to the YCB acquisition. Foradoption of an accounting standard, which requires the first six monthsservice component of 2017,non-interestpension expense increased $17.8 million or 19.3%, reflecting similar trends as in the second quarter, while payroll taxes were seasonally higher in the first quarter and marketing expenses were higher in the second quarter due to campaign management expenses. Some additional expected cost savings from the YCB acquisition should continue to be experienced throughout the remainder of 2017, although most personnel-related savings were obtained after the late 2016 branchincluded in salaries and system conversions.wages as opposed to employee benefit expenses. The pronouncement was adopted January 1, 2018.
The provision foreffective income taxes increased $3.5 million or 20.8%, during the first half of 2017 compared to the first half of 2016, due mostly to the first half of 2017pre-tax income increasing 17.4% from the same period in 2016. In addition, the adoption earlier this year of a new accounting standard related to low income housing investment amortization moved $0.8 million from other operating expense to thetax rate and associated provision for income taxes for the first six monthsquarter of 2017. For2018 are reflective of the secondrecently enacted “Tax Cuts and Jobs Act”, which lowered the Federal income tax rate for corporations to 21%. During the first quarter, the same factors affected the provision, with $0.3 million of recorded low income housing investment amortization, and a lower overall effective tax rate than inwas 17.28% as compared to 29.09% last year, while the first quarter dueprovision for income taxes decreased $3.6 million to factors such as the forecast of taxable income,$7.0 million, despite higher stock-related excess tax benefits and adjustments to certain permanent tax item estimates.year-over-yearpre-tax income.
NET INTEREST INCOME
TABLE 1. NET INTEREST INCOME
For the Three Months Ended | ||||||||||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | March 31, | ||||||||||||||||||||||
(unaudited, dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017 | ||||||||||||||||||
Net interest income | $ | 72,139 | $ | 59,774 | $ | 142,858 | $ | 119,615 | $ | 73,292 | $ | 70,719 | ||||||||||||
Taxable equivalent adjustments to net interest income | 2,619 | 2,445 | 5,253 | 4,879 | ||||||||||||||||||||
Taxable equivalent adjustment to net interest income | 1,285 | 2,634 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest income, fully taxable equivalent | $ | 74,758 | $ | 62,219 | $ | 148,111 | $ | 124,494 | $ | 74,577 | $ | 73,353 | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest spread,non-taxable equivalent | 3.18 | % | 3.05 | % | 3.17 | % | 3.06 | % | 3.12 | % | 3.16 | % | ||||||||||||
Benefit of netnon-interest bearing liabilities | 0.15 | % | 0.12 | % | 0.14 | % | 0.10 | % | 0.20 | % | 0.14 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest margin | 3.33 | % | 3.17 | % | 3.31 | % | 3.16 | % | 3.32 | % | 3.30 | % | ||||||||||||
Taxable equivalent adjustment | 0.12 | % | 0.13 | % | 0.12 | % | 0.13 | % | 0.06 | % | 0.12 | % | ||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Net interest margin, fully taxable equivalent | 3.45 | % | 3.30 | % | 3.43 | % | 3.29 | % | 3.38 | % | 3.42 | % | ||||||||||||
|
|
|
|
|
|
Net interest income, which is WesBanco’s largest source of revenue, is the difference between interest income on earning assets, primarily loans and securities, and interest expense on liabilities (deposits and short and long-term borrowings). Net interest income is affected by the general level and changes in interest rates, the steepness and shape of the yield curve, changes in the amount and composition of interest earning assets and interest bearing liabilities, as well as the frequency of repricing of existing assets and liabilities. Net interest income increased $12.4$2.6 million or 20.7%3.6% in the secondfirst quarter of 2018 compared to 2017, due to a 2.7% increase in average earning asset balances, primarily from an 11.6% increase in average taxable securities balances. Average loan balances increased by 1.0% in the first quarter of 2018 compared to the first quarter of 2017, compared toand were driven by growth in total commercial loans and home equity loans, both strategic focus categories of WesBanco, which more than offset the same quarter of 2016, due to a 23.4% increase in average loan balances and a 15 basis point increasetargeted reductions in the net interest margin. Forconsumer portfolio to reduce the first six months of 2017, net interest income increased $23.2 million or 19.4% from the first six months of 2016 as average earning assets increased 14.4% and the net interest margin increased 14 basis points to 3.43%. Loan balances increased from both the YCB acquisition and from 4.1% of organicoverall loan growth, highlighted by 8.7% of organic commercial loan growth over the last twelve months.portfolio’s risk profile. Total average deposits increased in the secondfirst quarter of 2018 by $1.0 billion$64.1 million or 17.2%0.9% compared to the secondfirst quarter of 2016,2017, while certificates of deposit, which have the highest overall interest cost among deposits, decreased by $85.9$213.0 million or 5.8%. Total average organic deposits, excluding CDs, increased $200.1 million or 4.4% from14.6% over the second quartersame time period. The effect of 2016, and was driven by 10.2% growthmultiple increases in interest bearing andnon-interest bearing deposits, reflecting customer preferences, and marketing and customer incentive strategies. Thethe Federal Reserve’s target federal funds rate over the past year on the net interest margin increased to 3.45%were offset by lower tax equivalent yields ontax-exempt securities resulting from the decrease in the secondcorporate tax rate to 21% for 2018. Due to this adjustment intax-equivalency, the net interest margin decreased to 3.38% for the first quarter of 2017 from 3.30%2018 compared to 3.42% in the samefirst quarter of 2016, due to a 20 basis point increase in the yield on earning assets.2017. Yields increased on over 90%for all earning asset categories in 2018 except fortax-exempt securities. The cost of earning assets, more than offsetting an 8interest bearing liabilities increased by 23 basis pointpoints from the first quarter of 2017. The increase in the cost of interest bearing liabilities from the second quarter of 2016. The increase in overall funding costs wasis primarily due to higher ratesrate increases for certain short term borrowings andlarger balance customers in interest bearing demand deposits, which include public funds.funds, and higher rates for certain short term and Federal Home Loan Bank borrowings. Approximately 86 basis points of accretion from prior acquisitions was included in the second2018 first quarter of 2017 net interest margin compared to 78 basis points in the second2017 first quarter of 2016, and 8 basis points for the first quarter.net interest margin.
Interest income increased $14.6$6.5 million or 21.6% in the second quarter of 2017 and $26.9 million or 19.9%8.1% in the first halfquarter of 20172018 compared to the same periods in 2016first quarter of 2017 due to higher average loan and securities balances and higher yields in almost every earning asset category. Earning asset yields were influenced positively in 2017 by the 25 basis point first quarter targetof 2018 compared to the first quarter of 2017 due to three federal funds rate increase.increases occurring during the past twelve months. Average loan balances increased by $1.2 billion$60.8 million or 1.0% in the secondfirst quarter of 20172018 compared to the second quartersame period of 2016,2017, primarily due to the acquisition,increases in commercial and loanhome equity loans. Loan yields increased by 1324 basis points during this same period. Loan yields increasedperiod to 4.24% in the second quarter of 2017 compared to the same quarter in 2016 due to higher loan yields on the acquired YCB loan portfolio and4.43% from the previously mentioned federal funds rate increase. Loans currently provide the greatest impact on interest income and the yield from earning assets as they have the largest balance and the highest yield within major earning asset categories.increases. In the secondfirst quarter of 2017,2018, average loans represented 73.2%71.2% of average earning assets, an increasea decrease from 68.0%72.4% in the samefirst quarter of 2016.2017, primarily due to purchases of taxable securities exceeding the average loan growth. Average taxable securities balances increased by $186.0 million or 11.6% from the first quarter of 2017, consistent with management’s strategy of growing total assets above $10 billion in the first quarter of 2018 to improve profitability. Total securities yields increaseddecreased by 1312 basis points in 2018 from the secondfirst quarter of 2017 from the same period in 2016 due toa lower amortization expense from paydownstax-equivalency benefit on mortgage-backed securities, select sales of short-term, lower yielding investment securities in 2016 and a higher percentage of averagetax-exempt securities, resulting from the “Tax Cuts and Jobs Act”, which decreased the corporate tax rate from 35% to total securities.21%. This yield decrease had no effect on net interest income, as the tax effect is included in the provision for income taxes. The average balance oftax-exempt securities which providedecreased slightly from the highest yield within securities, increased 12.8% or $81.8 million over the last year,first quarter of 2017, and were 31.7%was 28.6% of total average securities in 2018 compared to 31.2% in the secondfirst quarter of 2017. Taxable securities yields increased by 19 basis points in the first quarter of 2018 as compared to the first quarter of 2017 compareddue to 27.1%purchases in the secondfirst quarter of 2016, which helped to mitigate their 22 basis point decline in yield. While the yield on taxable securities2018 at higher market rates.
Total portfolio loans increased by 14 basis points from the second quarter of 2016, taxable securities balances decreased by $168.4$10.4 million or 9.8% from the second quarter of 2016 due to maturities, calls, sales and paydowns. These securities were not fully replaced due to management’s focus on maintaining the size of the balance sheet in order to delay the financial impact of crossing $10 billion in assets.
Portfolio loans increased $1.2 billion or 23.6%0.2% over the last twelve months, with $1.0 billion from the YCB acquisition and $210.1while total commercial loans increased $74.2 million or 4.1% from organic loan growth. Organic loan1.8%. Loan growth was achieved through $2.2$1.8 billion in total loan originations, led by $1.2 billion in the last twelve months. Total business loan originations were up approximately 37.6% overfor the last year. Organic loanpast twelve months. Loan growth was driven by expanded market areas and additional commercial personnel in our core markets.markets, partially offset by significant loan paydowns or payoffs as some loans moved into the secondary lending market by customers who refinanced their mortgages, and targeted reductions of the consumer portfolio to reduce the risk profile of the loan portfolio.
Interest expense increased $2.2$3.9 million or 28.3% in the second quarter of 2017 and $3.7 million or 23.5%42.6% in the first halfquarter of 20172018 compared to the same periods in 2016,first quarter of 2017, due primarily to increases in the balances and rates paid on most interest bearing liability categories. The cost of interest bearing liabilities increased by 823 basis points infrom the secondfirst quarter of 2017 to 0.80% in the first quarter of 2018. Average interest bearing deposits decreased by $24.0 million or 0.5% from the same periodfirst quarter of 2016.2017, due primarily to a decrease in the average balance of CDs of $213.0 million or 14.6%. This decrease was partially due to a $42.5 million reduction in CDARS® balances from $116.7 million at March 31, 2017 to $74.2 million at March 31, 2018. The rate on interest bearing deposits increased by 14 basis points from the first quarter of 2017, primarily from increases in rates on interest bearing public funds. Averagenon-interest bearing demand deposits increased from the first quarter of 2017 to the first quarter of 2018 by $88.1 million or 4.9% and are now 26.3% of total average deposits, compared to 25.3% in 2017, reflecting customers’ preferences and marketing strategies. The increase innon-interest bearing deposits reflect positively in the net interest margin, as the benefit ofnon-interest bearing liabilities increased by 6 basis points from the first quarter of 2017
to the first quarter of 2018. Average other borrowings and subordinated debt balances increased by $116.0 million or 57.5%remained virtually unchanged from the secondfirst quarter of 2016 primarily due to debt acquired in the YCB acquisition. However, FHLB borrowings decreased by $74.3 million or 7.3% from the second quarter of 2016 due to scheduled maturities of borrowings, while2017, but their average rates paid increased by 1449 and 30 basis points, respectively, over this time period due to a lengtheningincreases in averageLIBOR, the index upon which most of this variable-rate type of borrowing term. Average interest bearing deposits increased by $578.2 million or 12.2% from the second quarter of 2016, also due to the YCB acquisition. Slightly offsetting the previously mentioned increases, theis priced. The average balance of CDs decreased $85.9FHLB borrowings increased by $88.4 million from the secondfirst quarter of 2016, even after acquiring YCB’s CD portfolio. This decrease was partially2017, and their average rate paid increased by 55 basis points to 1.76% over this same time period due to an $80.8 million reduction in CDARS® balances from $205.6 million at June 30, 2016 to $124.8 million at June 30, 2017.In addition,non-interest bearing demand deposits increased by $466.7 million fromhigher interest rates and the secondreplacement of some maturing shorter-term borrowings with those of a medium-term length throughout 2017 and the first quarter of 20162018 to improve asset sensitivity and are now 25.4% of total average deposits, compared to 22.1% in the second quarter of 2016, reflecting customers’ preferences toward demand deposits, and marketing strategies.liquidity measures.
TABLE 2. AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN ANALYSIS
For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | 2018 | 2017 | |||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | Average Balance | Average Rate | Balance | Rate | Balance | Rate | ||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
Due from banks—interest bearing | $ | 12,875 | 0.75 | % | $ | 20,985 | 0.72 | % | $ | 13,398 | 0.63 | % | $ | 38,805 | 0.45 | % | ||||||||||||||||||||||||||||||||
Due from banks – interest bearing | $ | 8,727 | 2.06 | % | $ | 13,926 | 0.52 | % | ||||||||||||||||||||||||||||||||||||||||
Loans, net of unearned income (1) | 6,365,965 | 4.24 | % | 5,156,789 | 4.11 | % | 6,322,582 | 4.22 | % | 5,124,942 | 4.12 | % | 6,339,550 | 4.43 | % | 6,278,718 | 4.19 | % | ||||||||||||||||||||||||||||||
Securities: (2) | ||||||||||||||||||||||||||||||||||||||||||||||||
Taxable | 1,550,114 | 2.42 | % | 1,718,491 | 2.28 | % | 1,576,578 | 2.41 | % | 1,744,438 | 2.29 | % | 1,789,336 | 2.58 | % | 1,603,337 | 2.39 | % | ||||||||||||||||||||||||||||||
Tax-exempt (3) | 720,561 | 4.15 | % | 638,746 | 4.37 | % | 723,593 | 4.15 | % | 635,773 | 4.39 | % | 717,624 | 3.41 | % | 726,658 | 4.14 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total securities | 2,270,675 | 2.97 | % | 2,357,237 | 2.84 | % | 2,300,171 | 2.95 | % | 2,380,211 | 2.85 | % | 2,506,960 | 2.82 | % | 2,329,995 | 2.94 | % | ||||||||||||||||||||||||||||||
Other earning assets | 46,525 | 4.62 | % | 45,354 | 4.72 | % | 46,774 | 4.52 | % | 45,577 | 4.43 | % | 50,388 | 6.02 | % | 47,025 | 4.43 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total earning assets (3) | 8,696,040 | 3.91 | % | 7,580,365 | 3.71 | % | 8,682,925 | 3.88 | % | 7,589,535 | 3.71 | % | 8,905,625 | 3.98 | % | 8,669,664 | 3.85 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Other assets | 1,132,435 | 925,437 | 1,122,181 | 939,226 | 1,087,739 | 1,111,813 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total Assets | $ | 9,828,475 | $ | 8,505,802 | $ | 9,805,106 | $ | 8,528,761 | $ | 9,993,364 | $ | 9,781,477 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY |
| ||||||||||||||||||||||||||||||||||||||||||||||
Interest bearing demand deposits | $ | 1,634,305 | 0.37 | % | $ | 1,230,484 | 0.21 | % | $ | 1,585,564 | 0.33 | % | $ | 1,209,989 | 0.19 | % | $ | 1,697,755 | 0.60 | % | $ | 1,536,282 | 0.29 | % | ||||||||||||||||||||||||
Money market accounts | 1,014,682 | 0.25 | % | 915,879 | 0.20 | % | 1,026,567 | 0.24 | % | 937,846 | 0.19 | % | 1,005,236 | 0.35 | % | 1,038,584 | 0.22 | % | ||||||||||||||||||||||||||||||
Savings deposits | 1,253,444 | 0.06 | % | 1,091,950 | 0.06 | % | 1,240,390 | 0.06 | % | 1,088,154 | 0.06 | % | 1,288,120 | 0.06 | % | 1,227,190 | 0.06 | % | ||||||||||||||||||||||||||||||
Certificates of deposit | 1,403,818 | 0.71 | % | 1,489,764 | 0.70 | % | 1,428,892 | 0.69 | % | 1,535,061 | 0.69 | % | 1,241,228 | 0.83 | % | 1,454,245 | 0.67 | % | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total interest bearing deposits | 5,306,249 | 0.36 | % | 4,728,077 | 0.33 | % | 5,281,413 | 0.35 | % | 4,771,050 | 0.32 | % | 5,232,339 | 0.47 | % | 5,256,301 | 0.33 | % | ||||||||||||||||||||||||||||||
Federal Home Loan Bank borrowings | 947,346 | 1.33 | % | 1,021,642 | 1.19 | % | 948,168 | 1.27 | % | 1,031,378 | 1.19 | % | 1,037,441 | 1.76 | % | 949,001 | 1.21 | % | ||||||||||||||||||||||||||||||
Other borrowings | 153,565 | 0.68 | % | 95,522 | 0.42 | % | 175,341 | 0.64 | % | 91,277 | 0.40 | % | 204,833 | 1.10 | % | 197,358 | 0.61 | % | ||||||||||||||||||||||||||||||
Junior subordinated debt | 164,184 | 4.37 | % | 106,196 | 3.18 | % | 164,050 | 4.43 | % | 106,196 | 3.15 | % | ||||||||||||||||||||||||||||||||||||
Subordinated debt and junior subordinated debt | 164,334 | 4.79 | % | 163,913 | 4.49 | % | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Total interest bearing liabilities (1) | 6,571,344 | 0.61 | % | 5,951,437 | 0.53 | % | 6,568,972 | 0.59 | % | 5,999,901 | 0.52 | % | 6,638,947 | 0.80 | % | 6,566,573 | 0.57 | % | ||||||||||||||||||||||||||||||
Non-interest bearing demand deposits | 1,806,144 | 1,339,436 | 1,793,897 | 1,322,853 | 1,869,624 | 1,781,513 | ||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 73,721 | 58,006 | 74,748 | 57,788 | 83,522 | 75,789 | ||||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 1,377,266 | 1,156,923 | 1,367,489 | 1,148,219 | 1,401,271 | 1,357,602 | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 9,828,475 | $ | 8,505,802 | $ | 9,805,106 | $ | 8,528,761 | $ | 9,993,364 | $ | 9,781,477 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Taxable equivalent net interest spread | 3.30 | % | 3.18 | % | 3.29 | % | 3.19 | % | 3.18 | % | 3.28 | % | ||||||||||||||||||||||||||||||||||||
Taxable equivalent net interest margin | 3.45 | % | 3.30 | % | 3.43 | % | 3.29 | % | 3.38 | % | 3.42 | % | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
(1) | Gross of allowance for loan losses and net of unearned income. Includesnon-accrual and loans held for sale. Loan fees included in interest income on loans totaled |
(2) | Average yields onavailable-for-sale debt securities are calculated based on amortized cost. |
(3) | Taxable equivalent basis is calculated ontax-exempt securities using a |
TABLE 3. RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2017 Compared to June 30, 2016 | Six Months Ended June 30, 2017 Compared to June 30, 2016 | Compared to March 31, 2017 | ||||||||||||||||||||||||||||||||||
(unaudited, in thousands) | Volume | Rate | Net Increase (Decrease) | Volume | Rate | Net Increase (Decrease) | Volume | Rate | Net Increase (Decrease) | |||||||||||||||||||||||||||
Increase (decrease) in interest income: | ||||||||||||||||||||||||||||||||||||
Due from banks—interest bearing | $ | (15 | ) | $ | 1 | $ | (14 | ) | $ | (72 | ) | $ | 26 | $ | (46 | ) | $ | (9 | ) | $ | 36 | $ | 27 | |||||||||||||
Loans, net of unearned income | 12,347 | 2,316 | 14,663 | 24,736 | 2,487 | 27,223 | 634 | 3,705 | 4,339 | |||||||||||||||||||||||||||
Taxable securities | (994 | ) | 594 | (400 | ) | (1,988 | ) | 965 | (1,023 | ) | 1,165 | 782 | 1,947 | |||||||||||||||||||||||
Tax-exempt securities (1) | 863 | (365 | ) | 498 | 1,851 | (782 | ) | 1,069 | (92 | ) | (1,314 | ) | (1,406 | ) | ||||||||||||||||||||||
Other earning assets | 14 | (12 | ) | 2 | 27 | 22 | 49 | 39 | 198 | 237 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total interest income change (1) | 12,215 | 2,534 | 14,749 | 24,554 | 2,718 | 27,272 | 1,737 | 3,407 | 5,144 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Increase (decrease) in interest expense: | ||||||||||||||||||||||||||||||||||||
Interest bearing demand deposits | 256 | 607 | 863 | 433 | 1,016 | 1,449 | 126 | 1,305 | 1,431 | |||||||||||||||||||||||||||
Money market accounts | 51 | 143 | 194 | 90 | 222 | 312 | (19 | ) | 323 | 304 | ||||||||||||||||||||||||||
Savings deposits | 22 | (2 | ) | 20 | 45 | (8 | ) | 37 | 8 | — | 8 | |||||||||||||||||||||||||
Certificates of deposit | (165 | ) | 73 | (92 | ) | (377 | ) | 37 | (340 | ) | (385 | ) | 510 | 125 | ||||||||||||||||||||||
Federal Home Loan Bank borrowings | (230 | ) | 344 | 114 | (518 | ) | 399 | (119 | ) | 285 | 1,377 | 1,662 | ||||||||||||||||||||||||
Other borrowings | 81 | 82 | 163 | 228 | 151 | 379 | 12 | 249 | 261 | |||||||||||||||||||||||||||
Junior subordinated debt | 554 | 394 | 948 | 1,111 | 826 | 1,937 | ||||||||||||||||||||||||||||||
Subordinated debt and junior subordinated debt | 5 | 124 | 129 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total interest expense change | 569 | 1,641 | 2,210 | 1,012 | 2,643 | 3,655 | 32 | 3,888 | 3,920 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Net interest income increase (decrease)(1) | $ | 11,646 | $ | 893 | $ | 12,539 | $ | 23,542 | $ | 75 | $ | 23,617 | $ | 1,705 | $ | (481 | ) | $ | 1,224 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
(1) | Taxable equivalent basis is calculated ontax-exempt securities using a tax rate of 21% for 2018 and 35% for |
PROVISION FOR CREDIT LOSSES
The provision for credit losses is the amount to be added to the allowance for credit losses after net charge-offs have been deducted to bring the allowance to a level considered appropriate to absorb probable losses in the loan portfolio. The provision for credit losses also includes the amount to be added to the reserve for loan commitments to bring that reserve to a level considered appropriate to absorb probable losses on unfunded commitments. The provision for credit losses increaseddecreased to $2.4$2.2 million in the secondfirst quarter of 2018 compared to $2.7 million in the first quarter of 2017 compared to $1.8 million in the second quarter of 2016 due primarily to the consistent high quality of the loan growth. Credit quality continuesportfolio. Overall, most credit ratios continued to be excellent and improved year-over-yearimprove on a percentage basis.basis, year-over-year.Non-performing loans (including TDRs), and criticized and classified loans all improved as a percentage of total portfolio loans from June 30, 2016.March 31, 2017. TotalNon-performingnon-performing loans were 0.67%0.62% of total loans at June 30, 2017,March 31, 2018, decreasing from 0.80%0.74% of total loans at the end of the secondfirst quarter of 2016.2017. Criticized and classified loans were 1.25%1.08% of total loans, improving from 1.53%1.35% at June 30, 2016.March 31, 2017. Past due loans at March 31, 2018 were 0.25% of total loans, compared to 0.22% at March 31, 2017. Annualized net loan charge-offs as a percentage of average portfolio loans were 0.09% in the second quarter ofalso decreased from 0.15% at March 31, 2017 as compared to 0.08% in the second quarter of 2016.0.07% at March 31, 2018. (Please see the Allowance for Credit Losses section of this MD&A for additional discussion).
NON-INTEREST INCOME
TABLE 4.NON-INTEREST INCOME
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||
Trust fees | $ | 5,572 | $ | 5,036 | $ | 536 | 10.6 | % | $ | 11,716 | $ | 10,747 | $ | 969 | 9.0 | % | $ | 6,503 | $ | 6,143 | $ | 360 | 5.9 | |||||||||||||||||||||||||
Service charges on deposits | 5,081 | 4,176 | 905 | 21.7 | % | 9,933 | 8,128 | 1,805 | 22.2 | % | 4,822 | 4,853 | (31 | ) | (0.6 | ) | ||||||||||||||||||||||||||||||||
Electronic banking fees | 4,984 | 3,742 | 1,242 | 33.2 | % | 9,512 | 7,345 | 2,167 | 29.5 | % | 4,829 | 4,528 | 301 | 6.6 | ||||||||||||||||||||||||||||||||||
Net securities brokerage revenue | 1,680 | 1,750 | (70 | ) | (4.0 | %) | 3,442 | 3,646 | (204 | ) | (5.6 | %) | 1,670 | 1,762 | (92 | ) | (5.2 | ) | ||||||||||||||||||||||||||||||
Bank-owned life insurance | 1,367 | 942 | 425 | 45.1 | % | 2,508 | 1,915 | 593 | 31.0 | % | 2,756 | 1,140 | 1,616 | 141.8 | ||||||||||||||||||||||||||||||||||
Net gains on sales of mortgage loans | 968 | 683 | 285 | 41.7 | % | 2,408 | 1,231 | 1,177 | 95.6 | % | ||||||||||||||||||||||||||||||||||||||
Net securities gains | 494 | 585 | (91 | ) | (15.6 | %) | 506 | 1,696 | (1,190 | ) | (70.2 | %) | ||||||||||||||||||||||||||||||||||||
Net gain on other real estate owned and other assets | 342 | 214 | 128 | 59.8 | % | 307 | 196 | 111 | 56.6 | % | ||||||||||||||||||||||||||||||||||||||
Mortgage banking income | 1,004 | 1,440 | (436 | ) | (30.3 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net securities (losses) gains | (39 | ) | 12 | (51 | ) | (425.0 | ) | |||||||||||||||||||||||||||||||||||||||||
Net gain (loss) on other real estate owned and other assets | 262 | (76 | ) | 338 | 444.7 | |||||||||||||||||||||||||||||||||||||||||||
Net insurance services revenue | 735 | 715 | 20 | 2.8 | % | 1,652 | 1,690 | (38 | ) | (2.2 | %) | 892 | 916 | (24 | ) | (2.6 | ) | |||||||||||||||||||||||||||||||
Swap fee and valuation income | 65 | 922 | (857 | ) | (93.0 | %) | 822 | 929 | (107 | ) | (11.5 | %) | 517 | 757 | (240 | ) | (31.7 | ) | ||||||||||||||||||||||||||||||
Other | 834 | 826 | 8 | 1.0 | % | 2,200 | 1,461 | 739 | 50.6 | % | 764 | 1,409 | (645 | ) | (45.8 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Totalnon-interest income | $ | 22,122 | $ | 19,591 | $ | 2,531 | 12.9 | % | $ | 45,006 | $ | 38,984 | $ | 6,022 | 15.4 | % | $ | 23,980 | $ | 22,884 | $ | 1,096 | 4.8 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income is a significant source of revenue and an important part of WesBanco’s results of operations. WesBanco offers its customers a wide range of retail, commercial, investment and electronic banking services, which are viewed as a vital component of WesBanco’s ability to attract and maintain customers, as well as providing additional fee income beyond normal spread-related income to WesBanco. For the secondfirst quarter of 2017,2018,non-interest income increased $2.5$1.1 million or 12.9%4.8% compared to the secondfirst quarter of 2016.2017. The increase is driven by a $1.2$1.6 million increase in bank-owned life insurance, a $0.4 million increase in trust fees, a $0.3 million increase in electronic banking fees and a $0.9$0.3 million increase in service chargesnet gain (loss) on deposits,other real estate owned and a $0.5 million increaseother assets, partially offset by decreases in trust fees, whileother income, swap fee and valuation income, decreased $0.9 millionand mortgage banking income compared to the secondfirst quarter of 2016. For the six months ended June 30, 2017,non-interest income increased $6.0 million or 15.4%, reflecting similar trends as in the second quarter, as well as reduced securities gains year over year due to one agency note called in the first six months of 2016 resulting in a $0.9 million securities gain.2017.
Trust fees increased $0.5$0.4 million or 10.6%5.9% compared to the secondfirst quarter of 20162017 due to market improvements and customer and revenue development initiatives, and higher estate fees.initiatives. Total trust assets have increased $0.1$0.2 billion from $3.7 billion at June 30, 2016 to $3.8 billion at June 30, 2017.March 31, 2017 to $4.0 billion at March 31, 2018. At June 30, 2017,March 31, 2018, trust assets include managed assets of $3.2$3.3 billion andnon-managed (custodial) assets of $0.6$0.7 billion. Assets managed for the WesMark Funds, a proprietary group of mutual funds that is advised by WesBanco Trust and Investment Services, were $925.6$933.6 million as of June 30,March 31, 2018 and $906.2 million at March 31, 2017 and $895.0 million at June 30, 2016, which are included in trust managedtrust-managed assets.
Service charges on deposits remained consistent quarter over quarter, decreasing by 0.6%. Deposits increased $0.9$80.6 million or 21.7% compared to the second quarter$7.2 billion as of 2016 due to the larger customer deposit base from the YCB acquisition. For the six months ended June 30, 2017, service charges on deposits increased $1.8 million or 22.2%March 31, 2018 as compared to the six months ended June 30, 2016. Deposits increased $1.1 billion or 19.3% to $7.1 billion as of June 30, 2017 as compared to June 30, 2016.March 31, 2017.
Electronic banking fees, which include debit card interchange fees, continued to grow, increasing $1.2$0.3 million or 33.2%6.6% compared to the second quarterfirst three months of 2016,2017, due to a higher volume of debit card transactions from the YCB acquisition as well as WesBanco’s legacy customers.customer base. The volume increase in our legacy markets is due to marketing and process initiatives as well as a higher percentage of customers using these products.products as well as marketing initiatives.
Bank-owned life insurance revenue increased $0.4$1.6 million or 45.1%141.8% compared to the secondfirst quarter of 20162017 due to the YCB acquisition as well ashigher death benefits of $0.2 million. Forreceived during the six months ended June 30, 2017, bank-owned life insurance revenue increased $0.6 million or 31.0% as compared to the six months ended June 30, 2016.period. The total cash surrender value of bank-owned life insurance increased $37.4$2.6 million to $190.3$191.8 million as of June 30, 2017March 31, 2018 as compared to $152.9 million as of June 30, 2016, due mostly to the YCB acquisition plus an increase over the last twelve months in policy cash surrender values.March 31, 2017.
Net gains on sales of mortgage loans increased $0.3Mortgage banking income decreased $0.4 million or 41.7%30.3% as compared to the second quarter of 2016 due to increased production volumes combined with higher sales percentages. Total mortgage production was $106.3 million in the secondfirst quarter of 2017 up 4.3%primarily due to a $0.5 million favorable market adjustment recognized during the first quarter of 2017. Mortgage production was $73.3 million, which decreased 10.9% from the comparable 20162017 quarter. Mortgages sold into the secondary market represented $58.4$38.6 million or 54.9%52.7% of overall mortgage loan production in the secondfirst three months of 2018 compared to $36.1 million or 43.9% in the first three months of 2017.
Net gain (loss) on other real estate owned and other assets increased $0.4 million or 444.7% as compared to the first quarter of 2017 comparedprimarily due to $41.5an increase in value of $0.2 million or 40.7% in the same 2016 period. For the six months ended June 20, 2017, net gains on sales of mortgage loans increased $1.2 million or 95.6% as compared to June 30, 2016.a venture capital investment.
Swap fee and valuation income decreased $0.9$0.2 million or 93.0% compared to the second quarterfirst three months of 20162017 primarily due to the prior year quarter including higher commercial customer loan swap-related income, primarily from one larger commercial loan relationship. Forchange in the six months ended June 30, 2017,valuation of the interest rate swaps and lower new swap fee and valuationvolume.
Other income decreased $0.1$0.6 million or 11.5% as45.8% compared to June 30, 2016.the first three months of 2017 primarily due to a $0.4 million gain on the sale of certain real estate-related joint venture assets acquired from ESB recognized in the first quarter of 2017. WesBanco is currently in the process of winding up and dissolving its business activities of these acquired joint ventures.
NON-INTEREST EXPENSE
TABLE 5.NON-INTEREST EXPENSE
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | 2018 | 2017 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||
Salaries and wages | $ | 23,616 | $ | 19,731 | $ | 3,885 | 19.7 | % | $ | 46,618 | $ | 38,911 | $ | 7,707 | 19.8 | % | $ | 25,006 | $ | 23,002 | $ | 2,004 | 8.7 | |||||||||||||||||||||||||
Employee benefits | 7,731 | 7,332 | 399 | 5.4 | % | 15,941 | 14,409 | 1,532 | 10.6 | % | 6,912 | 8,210 | (1,298 | ) | (15.8 | ) | ||||||||||||||||||||||||||||||||
Net occupancy | 4,510 | 3,220 | 1,290 | 40.1 | % | 8,837 | 6,811 | 2,026 | 29.7 | % | 4,656 | 4,327 | 329 | 7.6 | ||||||||||||||||||||||||||||||||||
Equipment | 4,097 | 3,402 | 695 | 20.4 | % | 8,139 | 6,830 | 1,309 | 19.2 | % | 3,949 | 4,042 | (93 | ) | (2.3 | ) | ||||||||||||||||||||||||||||||||
Marketing | 2,060 | 1,608 | 452 | 28.1 | % | 2,884 | 2,581 | 303 | 11.7 | % | 1,116 | 824 | 292 | 35.4 | ||||||||||||||||||||||||||||||||||
FDIC insurance | 906 | 1,099 | (193 | ) | (17.6 | %) | 1,733 | 2,264 | (531 | ) | (23.5 | %) | 658 | 827 | (169 | ) | (20.4 | ) | ||||||||||||||||||||||||||||||
Amortization of intangible assets | 1,240 | 697 | 543 | 77.9 | % | 2,513 | 1,427 | 1,086 | 76.1 | % | 1,086 | 1,273 | (187 | ) | (14.7 | ) | ||||||||||||||||||||||||||||||||
Restructuring and merger-related expenses | — | 694 | (694 | ) | (100.0 | %) | 491 | 694 | (203 | ) | (29.3 | %) | 245 | 491 | (246 | ) | (50.1 | ) | ||||||||||||||||||||||||||||||
Franchise and other miscellaneous taxes | 2,045 | 1,622 | 423 | 26.1 | % | 4,129 | 3,238 | 891 | 27.5 | % | 2,235 | 2,084 | 151 | 7.2 | ||||||||||||||||||||||||||||||||||
Consulting, regulatory, accounting and advisory fees | 1,532 | 1,673 | (141 | ) | (8.4 | ) | ||||||||||||||||||||||||||||||||||||||||||
ATM and electronic banking interchange expenses | 1,216 | 1,088 | 128 | 11.8 | ||||||||||||||||||||||||||||||||||||||||||||
Postage and courier expenses | 970 | 843 | 127 | 15.1 | % | 1,990 | 1,541 | 449 | 29.1 | % | 959 | 1,021 | (62 | ) | (6.1 | ) | ||||||||||||||||||||||||||||||||
Consulting, regulatory, accounting and advisory fees | 1,654 | 1,274 | 380 | 29.8 | % | 3,328 | 2,580 | 748 | 29.0 | % | ||||||||||||||||||||||||||||||||||||||
Other real estate owned and foreclosure expenses | 326 | 279 | 47 | 16.8 | % | 655 | 607 | 48 | 7.9 | % | ||||||||||||||||||||||||||||||||||||||
Legal fees | 650 | 695 | (45 | ) | (6.5 | %) | 1,411 | 1,276 | 135 | 10.6 | % | 713 | 761 | (48 | ) | (6.3 | ) | |||||||||||||||||||||||||||||||
Communications | 634 | 363 | 271 | 74.7 | % | 1,381 | 721 | 660 | 91.5 | % | 488 | 747 | (259 | ) | (34.7 | ) | ||||||||||||||||||||||||||||||||
ATM and electronic banking interchange expenses | 1,202 | 1,057 | 145 | 13.7 | % | 2,291 | 2,190 | 101 | 4.6 | % | ||||||||||||||||||||||||||||||||||||||
Supplies | 901 | 683 | 218 | 31.9 | % | 1,729 | 1,364 | 365 | 26.8 | % | 687 | 828 | (141 | ) | (17.0 | ) | ||||||||||||||||||||||||||||||||
Other real estate owned and foreclosure expenses | 199 | 328 | (129 | ) | (39.3 | ) | ||||||||||||||||||||||||||||||||||||||||||
Other | 3,342 | 2,761 | 581 | 21.0 | % | 6,198 | 5,259 | 939 | 17.9 | % | 2,914 | 2,858 | 56 | 2.0 | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
Totalnon-interest expense | $ | 55,884 | $ | 47,360 | $ | 8,524 | 18.0 | % | $ | 110,268 | $ | 92,703 | $ | 17,565 | 18.9 | % | $ | 54,571 | $ | 54,384 | $ | 187 | 0.3 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense in the secondfirst quarter of 20172018 grew $8.5marginally by $0.2 million or 0.3% compared to the same quarter in 2016, principally2017 in an effort to control operating expenses. Excluding merger-related expenses,non-interest expense increased $0.4 million or 0.8%. For the first quarter, salaries and wages increased $2.0 million, net occupancy increased $0.3 million, and marketing expense increased $0.3 million, offset by a $1.3 million decrease in employee benefits, a $0.3 million decrease in communications, coupled with decreases in various other expense categories.
Salaries and wages increased $2.0 million or 8.7% from the YCB acquisition.Non-interestfirst quarter of 2017 due to the adoption of a new accounting standard, which requires the service component portion of pension expense forto be classified to salaries and wages from employee benefits. The remaining increase is due to routine annual compensation adjustments and stock based compensation. Employee benefits expense decreased $1.3 million compared to the six months ended June 30,first quarter of 2017, grew $17.6primarily from the $0.7 reclassification of the service component portion of pension cost to salaries and wages. Pension costs excluding the service component decreased $0.3 million compared to the first quarter 2017. The fair value of certain executive deferred compensation benefits decreased $0.3 million as compared to the same period in 2016. For the second quarter, salaries and wages increased $3.9 million or 19.7% due primarily to increased compensation expense related to annual compensation adjustments and an increase in full-time equivalent employees from the acquisition. Net occupancy increased $1.3 million or 40.1% primarily related to the YCB acquisition, which added 34 new branch locations. Nearly all other expenses increased primarily from the acquisition as well.
Salaries and wages increased $3.9 million or 19.7% from the second quarter of 2016 and $7.7 million or 19.8% over the first half of 2016 due to increased compensation expense related to an 18.7% increase in full-time equivalent employees, primarily from the acquisition, and annual adjustments to compensation. Employee benefits expense increased $0.4 million or 5.4% compared to the second quarter of 2016 and $1.5 million or 10.6% over the first half of 2016 primarily from the additional employees as well as seasonally higher payroll taxes in the first quarter, which was partially offset by a decrease in pension costs.2017.
Net occupancy costs increased $1.3$0.3 million or 40.1% from the second quarter of 2016 and $2.0 million or 29.7% over7.6% compared to the first halfthree months of 20162017, primarily due to increased building-related costs including utilities, lease expense, depreciation, repairs and other seasonal maintenance costs, such as snow removal.
Marketing expenses increased $0.3 million or 35.4% compared to the first three months of 2017. The increase is primarily due to advertising expense as new marketing campaigns began in 2018.
Merger-related expenses in 2018 relate to the 34 YCB branch locations acquired and normal building maintenance and repairFTSB acquisition that closed on April 5, 2018. The costs consist of the legacy branch networkprimarily legal and other infrastructure needs.
Equipmentprofessional fees. The merger-related costs increased $0.7 million or 20.4% from the second quarter of 2016 and $1.3 million or 19.2% over the first half of 2016 due to continuous improvements in technology and communication infrastructure, software costs and origination and customer support centers combined with the YCB acquisition.
FDIC insurance decreased $0.2 million compared to the second quarter 2016 and $0.5 million over the first half of 2016 despite a larger balance sheet from the YCB acquisition. The Deposit Insurance Fund reached 1.15% prior to July 1, 2016, thus allowing the FDIC to institute new favorable assessment rate calculations beginning on that date for banks under $10 billion in size. WesBanco also experienced a further decrease in FDIC insurance expense based on continuing improvement in certain risk factors.
Amortization of intangible assets of $1.2 million in the second quarter, an increase of $0.5 million compared to the second quarter of 2016, included $0.6 million2017 related to the YCB acquisition. The YCB acquisition, added approximately $12.0which closed on September 9, 2016.
Communications expense decreased $0.3 million in core deposit intangibles and $0.8 million innon-compete agreements with former YCB executives covering a three-year term.
Franchise and other miscellaneous taxes increased $0.4 millionor 34.7% compared to the second quarterfirst three months of 20162017. WesBanco improved the technology and $0.9 million overcommunications infrastructure at the first half of 2016 due toformerYCB-acquired branches, which further allowed for future cost savings as noted in the YCB acquisition and organic company growth.
Professional fees have increased $0.4 million from the second quarter of 2016 and $0.7 million over the first half of 2016 primarily due to certain third-party fees associated with the increased volume in loan originations, as well as consulting fees related to preparations for certain regulatory requirements, such as stress testing, for institutions that exceed $10 billion in total assets. Postage, communications, supplies and other expenses have increased a total of $1.2 million from the second quarter of 2016 primarily due to normal operating expenses related to the YCB acquisition.current period.
INCOME TAXES
The provision for income taxes increased $3.5decreased $3.6 million or 20.8%, during34.1% in the first halfquarter of 20172018 compared to the first halfquarter of 2016,2017, due to the enacted Federal tax reform legislation that reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Partially offsetting this decrease in partincome tax expense, first quarter 2018pre-tax income was 11.0% higher. As a result of these changes, the effective tax rate decreased to a 17.4% increase17.28% compared to 29.09% in the first halfquarter of 2017pre-tax income as compared to the same period of 2016. In addition, earlier this year the Company adopted a new accounting standard related to low income housing investment amortization, which, for the first six months of 2017, moved $0.8 million from other operating expense to the provision for income taxes. For the second quarter, the amount was $0.3 million. Additionally, the adoption of another new accounting standard resulted in the reclassification of excess tax benefits related to stock-based compensation from additional paid in capital in shareholders’ equity to income tax expense, which reduced income tax expense by $0.2 million in the second quarter and $0.3 million year to date. For the quarter, the provision increased 22.2% from last year due to higherpre-tax income and the above-noted additional factors. The effective tax rate was 29.1% for the first quarter and 26.8% for the second quarter, due to adjustments to the forecast for taxable income and permanent deductions for the remainder of the year. Theyear-to-date effective tax rate of 28.0% is currently anticipated to be in the range of the approximate effective tax rate for the reminder of the year.2017.
FINANCIAL CONDITION
Total assets increased 0.8% during the six months ended June 30, 2017,4.4%, while deposits and shareholders’ equity increased 0.4%2.6% and 2.7%0.6%, respectively, compared to December 31, 2016.2017. Total securities increased by $463.6 million or 20.3% from December 31, 2017 to March 31, 2018, and was driven by management’s strategy to exceed the $10 billion threshold in total assets during the first quarter of 2018 by purchasing taxable securities. These purchases had an average yield of approximately 3.06%. Total portfolio loans increased $141.0decreased $18.9 million or 2.3%0.3% as a result of originations outpacingpay-downs, which were a result of expandedtargeted reductions in the consumer portfolio offsetting growth in strategic focus categories, coupled with increased secondary market areas and additional commercial personnel in WesBanco’s core markets.residential mortgage loan sales. Deposits increased $31.6$182.7 million fromyear-end resulting from a 3.5% increase in savings deposits, a 2.7%7.1% increase in demand deposits and a 1.0%3.5% increase in money marketsavings deposits, which more than offset the 7.4%3.9% decrease in money market deposits and the 5.4% decrease in certificates of deposit. The decrease in certificates of deposit is a result of periodically offering lower rate offeringsthan median competitive rates for maturing certificates of deposit and customer preferences for other deposit types, ornon-deposit products, coupled with a $10.4$30.8 million decrease in CDARS® balances and decreases in certificates of deposit balances acquired in the ESB and YCB transactions of $42.6 million and $19.7 million, respectively.balances. The increasesincrease in demand deposits and savings deposits were attributable to marketing, incentives paid to customers, focused retail and business strategies to obtain more account relationships, and customers’ preference for short-term maturities, coupled with deposits from bonus and royalty payments for Marcellus and Utica shale gas payments from energy companies in WesBanco’s southwestern Pennsylvania, eastern Ohio and northern West Virginia markets. Total borrowings increased 1.6%18.6% during the first sixthree months of 2017 primarily2018 as a result of a $52.6short-term borrowings increased $22.8 million increase inand new FHLB borrowings which was partially offsetexceeded maturities by a $31.7 million decrease in other short-term borrowings.$219.2 million. Proceeds from borrowings were utilized to purchase investment securities during the three months ended March 31, 2018. Total shareholders’ equity increased by approximately $36.1$8.0 million or 2.7%0.6%, compared to December 31, 2016,2017, primarily due to net income exceeding dividends for the period by $29.4$20.8 million, coupled withwhich was partially offset by a $5.0$14.5 million decrease in other comprehensive losses.loss.
TABLE 6. COMPOSITION OF SECURITIES (1)
June 30, | December 31, | |||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | 2017 | 2016 | $ Change | % Change | March 31, 2018 | December 31, 2017 | $ Change | % Change | ||||||||||||||||||||||||
Trading securities (at fair value) | $ | 7,880 | $ | 7,071 | $ | 809 | 11.4 | |||||||||||||||||||||||||
Available-for-sale (at fair value) | ||||||||||||||||||||||||||||||||
Equity securities (at fair value) | $ | 13,986 | $ | 13,457 | $ | 529 | 3.9 | |||||||||||||||||||||||||
Available-for-sale debt securities (at fair value) | ||||||||||||||||||||||||||||||||
U.S. Treasury | 9,894 | — | 9,894 | 100.0 | ||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | 43,836 | 54,043 | (10,207 | ) | (18.9 | ) | 96,458 | 71,843 | 24,615 | 34.3 | ||||||||||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 926,759 | 938,289 | (11,530 | ) | (1.2 | ) | 1,344,410 | 934,922 | 409,488 | 43.8 | ||||||||||||||||||||||
Commercial mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 115,522 | 96,810 | 18,712 | 19.3 | 140,926 | 114,867 | 26,059 | 22.7 | ||||||||||||||||||||||||
Obligations of states and political subdivisions | 112,675 | 111,663 | 1,012 | 0.9 | 101,431 | 104,830 | (3,399 | ) | (3.2 | ) | ||||||||||||||||||||||
Corporate debt securities | 35,339 | 35,301 | 38 | 0.1 | 35,258 | 35,403 | (145 | ) | (0.4 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total debt securities | 1,234,131 | 1,236,106 | (1,975 | ) | (0.2 | ) | ||||||||||||||||||||||||||
Equity securities | 5,289 | 5,070 | 219 | 4.3 | ||||||||||||||||||||||||||||
Totalavailable-for-sale debt securities | $ | 1,728,377 | $ | 1,261,865 | $ | 466,512 | 37.0 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Totalavailable-for-sale securities | $ | 1,239,420 | $ | 1,241,176 | $ | (1,756 | ) | (0.1 | ) | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Held-to-maturity (at amortized cost) | ||||||||||||||||||||||||||||||||
Held-to-maturity debt securities (at amortized cost) | ||||||||||||||||||||||||||||||||
U.S. Government sponsored entities and agencies | $ | 12,319 | $ | 13,394 | $ | (1,075 | ) | (8.0 | ) | $ | 11,263 | $ | 11,465 | $ | (202 | ) | (1.8 | ) | ||||||||||||||
Residential mortgage-backed securities and collateralized mortgage obligations of government sponsored entities and agencies | 187,385 | 215,141 | (27,756 | ) | (12.9 | ) | 162,904 | 170,025 | (7,121 | ) | (4.2 | ) | ||||||||||||||||||||
Obligations of states and political subdivisions | 796,307 | 805,019 | (8,712 | ) | (1.1 | ) | 798,536 | 794,655 | 3,881 | 0.5 | ||||||||||||||||||||||
Corporate debt securities | 34,383 | 34,413 | (30 | ) | (0.1 | ) | 33,339 | 33,355 | (16 | ) | (0.0 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Totalheld-to-maturity securities | 1,030,394 | 1,067,967 | (37,573 | ) | (3.5 | ) | ||||||||||||||||||||||||||
Totalheld-to-maturity debt securities | 1,006,042 | 1,009,500 | (3,458 | ) | (0.3 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total securities | $ | 2,277,694 | $ | 2,316,214 | $ | (38,520 | ) | (1.7 | ) | $ | 2,748,405 | $ | 2,284,822 | $ | 463,583 | 20.3 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Available-for-sale and trading securities: | ||||||||||||||||||||||||||||||||
Available-for-sale and equity securities: | ||||||||||||||||||||||||||||||||
Weighted average yield at the respective period end(2) | 2.31 | % | 2.22 | % | 2.57 | % | 2.35 | % | ||||||||||||||||||||||||
As a % of total securities | 54.8 | % | 53.9 | % | 63.4 | % | 55.8 | % | ||||||||||||||||||||||||
Weighted average life (in years) | 4.3 | 4.3 | 4.8 | 4.2 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Held-to-maturity securities: | ||||||||||||||||||||||||||||||||
Weighted average yield at the respective period end(2) | 3.81 | % | 3.76 | % | 3.42 | % | 3.85 | % | ||||||||||||||||||||||||
As a % of total securities | 45.2 | % | 46.1 | % | 36.6 | % | 44.2 | % | ||||||||||||||||||||||||
Weighted average life (in years) | 4.4 | 5.0 | 4.8 | 4.2 | ||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total securities: | ||||||||||||||||||||||||||||||||
Weighted average yield at the respective period end(2) | 2.99 | % | 2.93 | % | 2.88 | % | 3.01 | % | ||||||||||||||||||||||||
As a % of total securities | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||
Weighted average life (in years) | 4.4 | 4.6 | 4.8 | 4.2 | ||||||||||||||||||||||||||||
|
|
|
|
(1) | At |
(2) | Weighted average yields have been calculated on a taxable-equivalent basis using the federal statutory tax rate of 21% in 2018 and 35% |
Total investment securities, which are a source of liquidity for WesBanco as well as a contributor to interest income, decreasedincreased by $38.5$463.6 million or 1.7%20.3% from December 31, 20162017 to June 30, 2017.March 31, 2018. Through the first sixthree months of 2017,2018, theavailable-for-sale portfolio decreasedincreased by $1.8$466.5 million or 0.1%37.0%, while theheld-to-maturity portfolio decreased by $37.6 million or 3.5%.remained relatively unchanged. The decreaseincrease in the overall portfolio from December 31, 20162017 was causeddriven by calls, maturities and paydowns exceeding purchases in the first six months of 2017, as a result of management’s strategiesstrategy to remix earning assets to a higher percentage of loans and a lower percentage of securities and to control the size of the balance sheet to delay crossingexceed the $10 billion asset size threshold. In addition, $9.4 million of securities were sold fromthreshold in total assets during the HTM portfolio in the secondfirst quarter of 2017, which resulted in $0.4 million in realized gains. These2018 by purchasing mortgage-backed securities were all deemed to be at maturity, as less than 15%and collateralized mortgage obligations, with an average yield of their acquired principal balance was remaining at the time of sale.approximately 3.06%. The weighted average yield of the portfolio increaseddecreased by 613 basis points from 3.01% at December 31, 20162017 to June 30, 2017. This yield increase was due to a continuing mix shift that resulted in a higher balance oftax-exempt securities to the total portfolio, as well as lower amortization expense on mortgage-backed securities from decreases in principal paydowns2.88% at March 31, 2018. Though market rates increased in the first halfquarter of 2017. The2018 on all securities purchased, the decrease in the corporate federal tax rate from 35% to 21% reduced thetax-equivalent yield by approximately 73 basis points on thetax-exempt portion ofmunicipal bond portfolio, and 16 basis points on the investmententire portfolio generally providesfromyear-end, as the highesttax benefit was reduced. This decrease in thetax-equivalent yieldsyield ontax-exempt municipals more than offset the general market rate increases, astax-exempt municipals comprise approximately 25% of any security type withinWesBanco’s investment portfolio. The higher-yielding first quarter purchases helped to mitigate the portfolio.impact of thetax-equivalent yield reduction on the municipal bonds.
Net unrealized losses onavailable-for-sale securities included in accumulated other comprehensive income, net of tax, as of June 30, 2017March 31, 2018 and December 31, 20162017 were $5.9$29.2 million and $9.9$13.3 million, respectively. With approximately 45%37% of the investment portfolio in theheld-to-maturity category, the recent volatility in interest rates does not have as much impact on other comprehensive income as if the entire portfolio were included in the categoryavailable-for-sale.
Trading
Equity securities, of which a portion consist of investments in various mutual funds held in grantor trusts formed in connection with an officer/a key officer and director deferred compensation plan, are recorded at fair value. Gains and losses due to fair value fluctuations on tradingequity securities are included innon-interest income under other income, while net securities gains or losses. For those equity securities relating to the key officer and director deferred compensation plan, the corresponding change in the obligation to the employee is recognized in employee benefits expense.
WesBanco’s municipal portfolio comprises 39.9%32.7% of the overall securities portfolio as of June 30, 2017March 31, 2018 as compared to 39.6%39.4% as of December 31, 2016,2017, and it carries different risks that are not as prevalent in other security types contained in the portfolio. The following table presents the allocation of the municipal bond portfolio based on the combined S&P and Moody’s ratings of the individual bonds (at fair value):
TABLE 7. MUNICIPAL BOND RATINGS
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||
Municipal bonds (at fair value) (1): | ||||||||||||||||||||||||||||||||
Moody’s: Aaa / S&P: AAA | $ | 96,577 | 10.4 | $ | 93,676 | 10.1 | $ | 99,976 | 11.1 | $ | 96,253 | 10.5 | ||||||||||||||||||||
Moody’s: Aa1 ; Aa2 ; Aa3 / S&P: AA+ ; AA ; AA- | 704,263 | 75.9 | 700,506 | 75.5 | 673,666 | 74.4 | 685,446 | 74.9 | ||||||||||||||||||||||||
Moody’s: A1 ; A2 ; A3 / S&P: A+ ; A ; A- | 119,011 | 12.8 | 121,903 | 13.2 | 122,043 | 13.5 | 125,032 | 13.7 | ||||||||||||||||||||||||
Moody’s: Baa1 ; Baa2 ; Baa3 / S&P: BBB+ ; BBB ;BBB- (2) | 746 | 0.1 | 729 | 0.1 | 1,035 | 0.1 | 745 | 0.1 | ||||||||||||||||||||||||
Not rated by either agency | 7,624 | 0.8 | 9,991 | 1.1 | 7,919 | 0.9 | 7,764 | 0.8 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total municipal bond portfolio | $ | 928,221 | 100.0 | $ | 926,805 | 100.0 | $ | 904,639 | 100.0 | $ | 915,240 | 100.0 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | The highest available rating was used when placing the bond into a category in the table. |
(2) | As of |
WesBanco’s municipal bond portfolio consists of both taxable (primarily Build America Bonds) andtax-exempt general obligation and revenue bonds from various municipalities, school districts and local revenue bond issues.bonds. The following table presents additional information regarding the municipal bond type and issuer (at fair value):
TABLE 8. COMPOSITION OF MUNICIPAL SECURITIES
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||||
Municipal bond type: | ||||||||||||||||||||||||||||||||
General Obligation | $ | 636,814 | 68.6 | $ | 638,868 | 68.9 | $ | 622,511 | 68.8 | $ | 630,824 | 68.9 | ||||||||||||||||||||
Revenue | 291,407 | 31.4 | 287,937 | 31.1 | 282,128 | 31.2 | 284,416 | 31.1 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total municipal bond portfolio | $ | 928,221 | 100.0 | $ | 926,805 | 100.0 | $ | 904,639 | 100.0 | $ | 915,240 | 100.0 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Municipal bond issuer: | ||||||||||||||||||||||||||||||||
State Issued | $ | 95,353 | 10.3 | $ | 92,241 | 10.0 | $ | 93,002 | 10.3 | $ | 95,160 | 10.4 | ||||||||||||||||||||
Local Issued | 832,868 | 89.7 | 834,564 | 90.0 | 811,637 | 89.7 | 820,080 | 89.6 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total municipal bond portfolio | $ | 928,221 | 100.0 | $ | 926,805 | 100.0 | $ | 904,639 | 100.0 | $ | 915,240 | 100.0 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
WesBanco’s municipal bond portfolio is broadly spread across the United States. The following table presents the top five states of municipal bond concentration within those states based on total fair value at June 30, 2017:March 31, 2018:
TABLE 9. CONCENTRATION OF MUNICIPAL SECURITIES
June 30, 2017 | March 31, 2018 | |||||||||||||||
(unaudited, dollars in thousands) | Fair Value | % of Total | Fair Value | % of Total | ||||||||||||
Pennsylvania | $ | 201,793 | 21.7 | $ | 192,508 | 21.3 | ||||||||||
Texas | 109,169 | 11.8 | 103,670 | 11.5 | ||||||||||||
Ohio | 105,467 | 11.4 | 101,493 | 11.2 | ||||||||||||
Illinois | 51,332 | 5.5 | 46,457 | 5.1 | ||||||||||||
West Virginia | 35,120 | 3.8 | 34,379 | 3.8 | ||||||||||||
All other states | 425,340 | 45.8 | 426,132 | 47.1 | ||||||||||||
|
|
|
| |||||||||||||
Total municipal bond portfolio | $ | 928,221 | 100.0 | $ | 904,639 | 100.0 | ||||||||||
|
|
|
|
WesBanco uses prices from independent pricing services and, to a lesser extent, indicative(non-binding) quotes from independent brokers, to measure the fair value of its securities. WesBanco validates prices received from pricing services or brokers using a variety of methods, including,
but not limited to, comparison to secondary pricing services, corroboration of pricing by reference to other independent market data such as
secondary broker quotes and relevant benchmark indices, review of pricing by personnel familiar with market liquidity and other market-related conditions, review of pricing service methodologies, review of independent auditor reports received from the pricing service regarding its internal controls, and through review of inputs and assumptions used in pricing certain securities thinly traded or with limited observable data points. The procedures in place provide management with a sufficient understanding of the valuation models, assumptions, inputs and pricing to reasonably measure the fair value of WesBanco’s securities. For additional disclosure relating to fair value measurements, refer to Note 7, “Fair Value Measurement” in the Consolidated Financial Statements.
LOANS AND CREDIT RISK
Loans represent WesBanco’s single largest balance sheet asset classification and the largest source of interest income. Business purpose loans consist of commercial real estate (“CRE”) loans and other commercial and industrial (“C&I”) loans that are not secured by real estate. CRE loans are further segmented into land and construction loans, and loans for improved property. Consumer purpose loans consist of residential real estate loans, home equity lines of credit and other consumer loans. Loans held for sale generally consist of residential real estate loans originated for sale in the secondary market, but at times may also include other types of loans. The outstanding balance of each major category of the loan portfolio is summarized in Table 10.
The risk that borrowers will be unable or unwilling to repay their obligations and default on loans is inherent in all lending activities. Credit risk arises from many sources including general economic conditions, external events that impact businesses or industries, isolated events that impact a major employer, individual loss of employment or other personal hardships as well as changes in interest rates or the value of collateral. Credit risk is also impacted by a concentration of exposure within a geographic market or to one or more borrowers, industries or collateral types. The primary goal in managing credit risk is to minimize the impact of default by an individual borrower or group of borrowers. Credit risk is managed through the initial underwriting process as well as through ongoing monitoring and administration of the portfolio that varies by the type of loan. The Bank’s credit policies establish standard underwriting guidelines for each type of loan and require an appropriate evaluation of the credit characteristics of each borrower. This evaluation includes the borrower’s primary source of repayment capacity; the adequacy of collateral, if any, to secure the loan; the potential value of personal guarantees as secondary sources of repayment; and other factors unique to each loan that may increase or mitigate its risk. Credit bureau scores are also considered when evaluating consumer purpose loans as well as guarantors of business purpose loans. However, the Bank does not periodically update credit bureau scores subsequent to when loans are made to determine changes in credit history.
Credit risk is mitigated for all types of loans by continuously monitoring delinquency levels and pursuing collection efforts at the earliest stage of delinquency. The Bank also monitors general economic conditions, including employment, housing activity and real estate values in its market. The Bank also periodically evaluates and changes its underwriting standards when warranted based on market conditions, the historical performance of a category of the portfolio, or other external factors. Credit risk is also regularly evaluated for the impact of adverse economic and other events that increase the risk of default and the potential loss in the event of default to understand their impact on the Bank’s earnings and capital.
TABLE 10. COMPOSITION OF LOANS (1)
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Amount | % of Loans | Amount | % of Loans | Amount | % of Loans | Amount | % of Loans | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||
Land and construction | $ | 615,881 | 9.6 | $ | 496,539 | 7.9 | $ | 440,896 | 7.0 | $ | 392,597 | 6.2 | ||||||||||||||||||||
Improved property | 2,397,846 | 37.4 | 2,376,972 | 37.9 | 2,574,330 | 40.6 | 2,601,851 | 40.9 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total commercial real estate | 3,013,727 | 47.0 | 2,873,511 | 45.8 | 3,015,226 | 47.6 | 2,994,448 | 47.1 | ||||||||||||||||||||||||
Commercial and industrial | 1,136,195 | 17.7 | 1,088,118 | 17.4 | 1,118,333 | 17.7 | 1,125,327 | 17.7 | ||||||||||||||||||||||||
Residential real estate | 1,363,579 | 21.3 | 1,383,390 | 22.1 | 1,345,993 | 21.2 | 1,353,301 | 21.3 | ||||||||||||||||||||||||
Home equity | 516,612 | 8.1 | 508,359 | 8.1 | 523,425 | 8.3 | 529,196 | 8.3 | ||||||||||||||||||||||||
Consumer | 360,304 | 5.6 | 396,058 | 6.3 | 319,561 | 5.0 | 339,169 | 5.3 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total portfolio loans | 6,390,417 | 99.7 | 6,249,436 | 99.7 | 6,322,538 | 99.8 | 6,341,441 | 99.7 | ||||||||||||||||||||||||
Loans held for sale | 21,677 | 0.3 | 17,315 | 0.3 | 12,962 | 0.2 | 20,320 | 0.3 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total loans | $ | 6,412,094 | 100.0 | $ | 6,266,751 | 100.0 | $ | 6,335,500 | 100.0 | $ | 6,361,761 | 100.0 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Loans are presented gross of the allowance for loan losses and net of unearned income, credit valuation adjustments, and unamortized net deferred loan fee income and loan origination costs. |
Total loans decreased $26.3 million or 0.4% from December 31, 2017 while portfolio loans increased $141.0$10.4 million or 2.3% from December 31, 2016 and $1.2 billion or 23.6%0.2% over the last twelve months. Total loan growth over the last twelve months was driven by strategic focus categories with $1.0 billion1.8% growth in total commercial loans and 3.0% growth in home equity loans, from the YCB acquisition and $210.1 million or 4.1% from organic loan growth. Expandedexpanded market areas and additional commercial personnel in our core markets provided the growth, which occurred primarilymarkets. Secondary market loan sales of residential mortgages continued to increase resulting in commercial real estate, commercial and industrial and home equity lending categories and was achieved through $2.2 billion in loan originations in the last twelve months. Total business loan originations were up approximately 37.6% over the last year. Residential real estate loans decreased, despite increased mortgage production, due to an increase in loans sold into the secondary marketgain on sale of mortgages and payoffs, whilea reduction in residential mortgages retained in the portfolio. In addition, the consumer loans decreased $35.8 million or 9.0%portfolio declined due to a reduced focus and pricing adjustments for indirect installment loans.
Total loan commitments of $2.0 billion, including loans approved but not closed, of $1.9 billion, increased $102.2$123.2 million or 5.8%6.6% from December 31, 20162017 due primarily to the larger borrowing base from the YCB acquisition as well as typical seasonal increases, particularly in land and construction.loans approved but not closed. The line utilization percentage for the commercial portfolio was 47.8%47.7% at June 30, 2017March 31, 2018 and 45.5%48.0% at December 31, 2016.2017.
The commercial portfolio is monitored for potential concentrations of credit risk by market, type of lending, CRE property type, C&I and owner-occupied CRE by industry, investment CRE dependence on common tenants and industries or property types that are similarly impacted by external factors.
The global decline in coal, oil and natural gas prices has had both a positive impact on the commercial portfolio by lowering all borrowers’ energy costs, but also resulted in a reduction in coal, oil and gas activity that adversely impacted certain industries or property types. At June 30, 2017March 31, 2018 total exposure to core energy industries such as drilling, extraction, pipeline construction, mining equipment, investment real estate with energy-related tenants and other related support activities approximated $49.5$50.0 million or 0.61%0.63% of the total loan portfolio as compared to $52.7$55.2 million or 0.66%0.69% of the total loan portfolio at MarchDecember 31, 2017. Exposure to ancillary industries such as utility distribution and transportation, engineering services, manufacturers and retailers of other heavy equipment used in core energy industries, approximates an additional $65.0$60.9 million in exposure or 0.81%0.76% of the total loan portfolio as compared to $62.7$65.3 million or 0.78%0.82% of the total loan portfolio at MarchDecember 31, 2017. The largest exposure to any one borrower in either core energy or ancillary industries was $24.9$21.0 million to a company that operates as a natural gas distribution utility.
NON-PERFORMING ASSETS, IMPAIRED LOANS AND LOANS PAST DUE 90 DAYS OR MORE
Non-performing assets consist ofnon-accrual loans and TDRs, other real estate acquired through or in lieu of foreclosure, bank premises held for sale, and repossessed automobiles acquired to satisfy defaulted consumer loans.
TABLE 11.NON-PERFORMING ASSETS
(unaudited, dollars in thousands) | June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | ||||||||||||
Non-accrual loans: | ||||||||||||||||
Commercial real estate - land and construction | $ | 413 | $ | 766 | $ | 800 | $ | 239 | ||||||||
Commercial real estate - improved property | 14,859 | 9,535 | 10,821 | 13,318 | ||||||||||||
Commercial and industrial | 3,955 | 4,299 | 2,373 | 2,958 | ||||||||||||
Residential real estate | 12,225 | 12,994 | 13,149 | 14,661 | ||||||||||||
Home equity | 4,171 | 3,538 | 4,540 | 4,762 | ||||||||||||
Consumer | 612 | 652 | 703 | 887 | ||||||||||||
|
|
|
| |||||||||||||
Totalnon-accrual loans (1) | 36,235 | 31,784 | 32,386 | 36,825 | ||||||||||||
|
|
|
| |||||||||||||
TDRs accruing interest: | ||||||||||||||||
Commercial real estate - land and construction | — | — | — | — | ||||||||||||
Commercial real estate - improved property | 1,433 | 1,618 | 1,602 | 1,650 | ||||||||||||
Commercial and industrial | 137 | 152 | 123 | 128 | ||||||||||||
Residential real estate | 4,758 | 5,311 | 4,602 | 4,321 | ||||||||||||
Home equity | 437 | 473 | 431 | 407 | ||||||||||||
Consumer | 76 | 92 | 100 | 65 | ||||||||||||
|
|
|
| |||||||||||||
Total TDRs accruing interest (1) | 6,841 | 7,646 | 6,858 | 6,571 | ||||||||||||
|
|
|
| |||||||||||||
Totalnon-performing loans | $ | 43,076 | $ | 39,430 | $ | 39,244 | $ | 43,396 | ||||||||
|
|
|
| |||||||||||||
Other real estate owned and repossessed assets | 6,723 | 8,346 | 4,067 | 5,297 | ||||||||||||
|
|
|
| |||||||||||||
Totalnon-performing assets | $ | 49,799 | $ | 47,776 | $ | 43,311 | $ | 48,693 | ||||||||
|
|
|
| |||||||||||||
Non-performing loans/total portfolio loans | 0.67 | % | 0.63 | % | 0.62 | % | 0.68 | % | ||||||||
Non-performing assets/total assets | 0.50 | % | 0.49 | % | 0.42 | % | 0.50 | % | ||||||||
Non-performing assets/total portfolio loans, other real estate and repossessed assets | 0.78 | % | 0.76 | % | 0.68 | % | 0.77 | % | ||||||||
|
|
|
|
(1) | TDRs on nonaccrual of |
Non-performing loans, which consist ofnon-accrual loans and TDRs, increased $3.6decreased $4.2 million or 9.2%9.6%, from December 31, 2016,2017, primarily due to a purchased credit impairedthe paydown of one large CRE loan from ESB, placed on nonaccrual in the first quarter. TDRs decreased $0.8increased slightly by $0.3 million due to successful exit strategies combined with normal repayments and fewer additions to the category due to overall improvement in economic conditions in our markets.being slightly higher than normal repayments. (Please see the Notes to the Consolidated Financial Statements for additional discussion.)
Other real estate owned and repossessed assets decreased $1.6$1.2 million from December 31, 20162017 primarily due to continued efforts to liquidate properties acquired from YCB, which totaled $3.0 million on the acquisition date.properties.
The following table presents past due and accruing loans excludingnon-accrual and TDRs:
TABLE 12. PAST DUE AND ACCRUING LOANS EXCLUDINGNON-ACCRUAL AND TDRs
(unaudited, dollars in thousands) | June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | ||||||||||||
Loans past due 90 days or more: | ||||||||||||||||
Commercial real estate - land and construction | $ | — | $ | — | $ | 172 | $ | — | ||||||||
Commercial real estate - improved property | 808 | 318 | 364 | 243 | ||||||||||||
Commercial and industrial | 30 | 229 | 21 | 20 | ||||||||||||
Residential real estate | 1,472 | 1,922 | 561 | 1,113 | ||||||||||||
Home equity | 1,284 | 626 | 251 | 742 | ||||||||||||
Consumer | 616 | 644 | 210 | 608 | ||||||||||||
|
|
|
| |||||||||||||
Total loans past due 90 days or more | 4,210 | 3,739 | 1,579 | 2,726 | ||||||||||||
|
|
|
| |||||||||||||
Loans past due 30 to 89 days: | ||||||||||||||||
Commercial real estate - land and construction | 3,831 | — | — | 172 | ||||||||||||
Commercial real estate - improved property | 1,284 | 747 | 4,727 | 316 | ||||||||||||
Commercial and industrial | 1,073 | 1,522 | 684 | 721 | ||||||||||||
Residential real estate | 3,805 | 6,080 | 3,987 | 4,392 | ||||||||||||
Home equity | 2,789 | 2,949 | 2,765 | 2,281 | ||||||||||||
Consumer | 3,823 | 4,731 | 2,373 | 3,290 | ||||||||||||
|
|
|
| |||||||||||||
Total loans past due 30 to 89 days | 16,605 | 16,029 | 14,536 | 11,172 | ||||||||||||
|
|
|
| |||||||||||||
Total 30 days or more | $ | 20,815 | $ | 19,768 | $ | 16,115 | $ | 13,898 | ||||||||
|
|
|
| |||||||||||||
Loans past due 90 days or more and accruing to total portfolio loans | 0.07 | % | 0.06 | % | 0.02 | % | 0.04 | % | ||||||||
Loans past due30-89 days and accruing to total portfolio loans | 0.26 | % | 0.26 | % | 0.23 | % | 0.18 | % | ||||||||
|
|
|
|
Loans past due 30 days or more and accruing interest excludingnon-accruals and TDRs increased $1.0$2.2 million or 5.3%16.0% from December 31, 2016.2017. These loans continue to accrue interest because they are both well-secured and in the process of collection. The increase in the 30 to 89 days past due status was primarily relateddue to onea $4.4 million increase in the commercial real estate customer in process of refinancing. Delinquency in all other loan categories decreased fromyear-end primarily due to successful collection efforts on delinquent YCB acquired loans,category and represented 0.26%0.23% of total loans at both June 30, 2017March 31, 2018 and 0.18% at December 31, 2016, respectively.2017. Loans past due 90 days or more increased $0.6decreased $1.1 million fromcompared to December 31, 20162017 and represented 0.07%0.02% of total loans at June 30, 2017March 31, 2018 compared to 0.06%0.04% at December 31, 2016.2017. The continued low levels of delinquency are the result of management’s continued focus on sound initial underwriting, timely collection of loans at their earliest stage of delinquency, stable unemployment and generally improved economic conditions.
ALLOWANCE FOR CREDIT LOSSES
The allowance for loan losses of $46.3 million represented 0.70%0.73% of total portfolio loans at June 30, 2017March 31, 2018 compared to 0.70%0.71% as of December 31, 20162017 and 0.84%0.70% as of June 30, 2016.March 31, 2017. Included in the ratio are acquired YCB and ESB loans (recorded at fair value at the date of acquisition of $1.7 billion) and the related allowance on YCB and ESB acquired loans of $3.3$3.2 million at June 30, 2017.March 31, 2018. Excluding these acquired loans and the related allowance results in a more comparable coverage ratio to prior periods.
The allowance for loans individually-evaluated was relativelyremained unchanged compared tofrom December 31, 2016.2017 to March 31, 2018 at $0.4 million. The allowance for loans collectively-evaluated increased from December 31, 2017 to March 31, 2018 by $1.1 million.
The allowance for loan commitments of $0.6 million at June 30, 2017March 31, 2018 was unchanged compared to December 31, 20162017, and is included in other liabilities on the Consolidated Balance Sheets.
The allowance for credit losses by loan category, presented in Note 54 “Loans and the Allowance for Credit Losses” to the Consolidated Financial Statements, summarizes the impact of changes in various factors that affect the allowance for loan losses in each segment of the portfolio. The allowance for all segments is impacted by changes in loan balances, as well as changes in historical loss rates adjusted for qualitative factors such as economic conditions. The CRE and C&I segments of the portfolio are also impacted by changes in the risk grading distribution of the portfolio as well as the migration of CRE loans from land and construction to improved property upon the completion of construction.
The loss migration rate by internal risk grade is the primary factor for establishing the allowance for all commercial loans, and the portfolio segment loss history is the primary factor for establishing the allowance for residential real estate, home equity and consumer loans. The categorization of loans asnon-performing is not as significant a factor as the loss migration rate by risk grade or the segment loss history, although certainnon-performing loans that carry specific reserves are also typically considered classified under the internal risk grading system. Criticized and classified loans were 1.25%1.08% of total loans, improving from 1.53%1.35% at June 30, 2016.March 31, 2017. Criticized and classified loans as a percent of total loans improved as overall credit quality continued to improve, enabling certain loans to be upgraded while others have paid down. Criticized and classified loans decreased $5.6 million from December 31, 2017 to $68.4 million at March 31, 2018, with the paydown and/or upgrade of several large CRE loans.
Table 13 summarizes the allocation of the allowance for credit losses to each category of the loan portfolio. The increase in the allocation of the allowance for commercial loans from December 31, 2017 is primarily due to loan growth in the CRE—land and construction and C&I loans is primarily driven by growth in these respective categories. The allowance for CRE—improved property declined despite 0.9% of loan growth incategory, while the category as historical charge-offs and loan downgrades continue to decline at a faster pace than growth in the category. The overall allowance for retail loan categories was relatively unchanged.
TABLE 13. ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
(unaudited, dollars in thousands) | June 30, 2017 | Percent of Total | December 31, 2016 | Percent of Total | March 31, 2018 | Percent of Total | December 31, 2017 | Percent of Total | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||
Commercial real estate - land and construction | $ | 5,457 | 12.0 | $ | 4,348 | 9.8 | $ | 4,324 | 9.2 | $ | 3,117 | 6.8 | ||||||||||||||||||||
Commercial real estate - improved property | 17,988 | 39.5 | 18,628 | 42.1 | 20,279 | 43.2 | 21,166 | 46.2 | ||||||||||||||||||||||||
Commercial and industrial | 9,234 | 20.3 | 8,412 | 19.0 | 10,494 | 22.4 | 9,414 | 20.5 | ||||||||||||||||||||||||
Residential real estate | 3,717 | 8.2 | 4,106 | 9.3 | 3,252 | 6.9 | 3,206 | 7.0 | ||||||||||||||||||||||||
Home equity | 3,746 | 8.2 | 3,422 | 7.7 | 4,303 | 9.2 | 4,497 | 9.8 | ||||||||||||||||||||||||
Consumer | 3,993 | 8.8 | 3,998 | 9.0 | 3,067 | 6.5 | 3,063 | 6.7 | ||||||||||||||||||||||||
Deposit account overdrafts | 774 | 1.7 | 760 | 1.8 | 615 | 1.3 | 821 | 1.6 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total allowance for loan losses | $ | 44,909 | 98.7 | $ | 43,674 | 98.7 | $ | 46,334 | 98.7 | $ | 45,284 | 98.6 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Allowance for loan commitments: | ||||||||||||||||||||||||||||||||
Commercial real estate - land and construction | $ | 165 | 0.4 | $ | 151 | 0.4 | $ | 176 | 0.4 | $ | 119 | 0.3 | ||||||||||||||||||||
Commercial real estate - improved property | 18 | 0.0 | 17 | 0.0 | 21 | 0.0 | 26 | 0.1 | ||||||||||||||||||||||||
Commercial and industrial | 179 | 0.4 | 188 | 0.4 | 176 | 0.4 | 173 | 0.4 | ||||||||||||||||||||||||
Residential real estate | 10 | 0.0 | 9 | 0.0 | 7 | 0.0 | 7 | 0.0 | ||||||||||||||||||||||||
Home equity | 179 | 0.4 | 162 | 0.4 | 208 | 0.4 | 212 | 0.5 | ||||||||||||||||||||||||
Consumer | 46 | 0.1 | 44 | 0.1 | 41 | 0.1 | 37 | 0.1 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total allowance for loan commitments | 597 | 1.3 | 571 | 1.3 | 629 | 1.3 | 574 | 1.4 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total allowance for credit losses | $ | 45,506 | 100.0 | $ | 44,245 | 100.0 | $ | 46,963 | 100.0 | $ | 45,858 | 100.0 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
Although the allowance for credit losses is allocated as described in Table 13, the total allowance is available to absorb actual losses in any category of the loan portfolio. However, differences between management’s estimation of probable losses and actual incurred losses in subsequent periods for any category may necessitate future adjustments to the provision for loan losses applicable to the category. Management believes the allowance for credit losses is appropriate to absorb probable losses at June 30, 2017.March 31, 2018.
DEPOSITS
TABLE 14. DEPOSITS
(unaudited, dollars in thousands) | June 30, 2017 | December 31, 2016 | $ Change | % Change | March 31, 2018 | December 31, 2017 | $ Change | % Change | ||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||||||||||
Non-interest bearing demand | $ | 1,801,423 | $ | 1,789,522 | $ | 11,901 | 0.7 | $ | 1,950,619 | $ | 1,846,748 | $ | 103,871 | 5.6 | ||||||||||||||||||
Interest bearing demand | 1,625,011 | 1,546,890 | 78,121 | 5.1 | 1,768,977 | 1,625,015 | 143,962 | 8.9 | ||||||||||||||||||||||||
Money market | 1,005,184 | 995,477 | 9,707 | 1.0 | 984,429 | 1,024,856 | (40,427 | ) | (3.9 | ) | ||||||||||||||||||||||
Savings deposits | 1,255,083 | 1,213,168 | 41,915 | 3.5 | 1,314,632 | 1,269,912 | 44,720 | 3.5 | ||||||||||||||||||||||||
Certificates of deposit | 1,385,772 | 1,495,822 | (110,050 | ) | (7.4 | ) | 1,207,669 | 1,277,057 | (69,388 | ) | (5.4 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total deposits | $ | 7,072,473 | $ | 7,040,879 | $ | 31,594 | 0.4 | $ | 7,226,326 | $ | 7,043,588 | $ | 182,738 | 2.6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
Deposits, which represent WesBanco’s primary source of funds, are offered in various account forms at various rates through WesBanco’s 173172 financial centers. The FDIC insures deposits up to $250,000 per account.
Total deposits increased by $31.6$182.7 million or 0.4%2.6% during the first sixthree months of 2017.2018. Interest bearing demand, andnon-interest bearing demand, and savings deposits increased 5.1%8.9%, 5.6%, and 0.7%3.5%, respectively, while savings andwhich more than offset the 3.9% decrease in money market deposits increased 3.5% and 1.0%, respectively.deposits. This net growth is primarily attributable to marketing, customer incentives, focused retail and business strategies to obtain more account relationships and customers’ preferences for shorter-term maturities, coupled with deposits from bonus and royalty payments for Marcellus and Utica shale gas payments from energy companies in WesBanco’s southwestern Pennsylvania, eastern Ohio and northern West Virginia markets. In addition, moneyMoney market deposits were influenced primarily through WesBanco’s participation in the Insured Cash Sweep (ICS��®) money market deposit program. ICS® reciprocal balances totaled $48.0$63.1 million at June 30, 2017March 31, 2018 compared to $5.7$65.9 million at December 31, 2016.2017.
Certificates of deposit decreased $110.1$69.4 million due primarily to the effects of an overall corporate strategy designed to increase and remix retail deposit relationships with a focus on overall products that can be offered at a lower cost to WesBanco. The decline was also impacted by lower offered rates on maturing certificates of deposit earlier in the period and customer preferences for othernon-maturity deposit types. WesBanco does not generally solicit brokered or other depositsout-of-market or over the internet, but does participate in the Certificate of Deposit Account Registry Services (CDARS®) program and the ICSInsured Cash Sweep (ICS®) money market deposit program. CDARS® balances totaled $124.8$74.2 million in outstanding balances at June 30, 2017,March 31, 2018, of which $92.3$54.3 million representedone-way buys, compared to $135.2$105.0 million in total outstanding balances at December 31, 2016,2017, of which $100.1$72.7 million representedone-way buys. Certificates of deposit greater than $250,000 were approximately $220.8$208.0 million at June 30, 2017March 31, 2018 compared to $219.3$216.4 million at December 31, 2016.2017. Certificates of deposit of $100,000 or more were approximately $635.5$532.8 million at June 30, 2017March 31, 2018 compared to $681.5$581.6 million at December 31, 2016.2017. Certificates of deposit totaling approximately $810.9$694.4 million at June 30, 2017March 31, 2018 with a cost of 0.59%0.76% are scheduled to mature within the next 12 months. WesBanco intends to continue to focus on its core deposit strategies and improving its overall mix of transaction accounts to total deposits, anddeposits. From time to time, the Bank may offer special promotions or match competitor rates on certain certificates of deposit maturities of CD’s and other savings products based on competition, sales strategies, liquidity needs and wholesale borrowing costs.
BORROWINGS
TABLE 15. BORROWINGS
(unaudited, dollars in thousands) | June 30, 2017 | December 31, 2016 | $ Change | % Change | March 31, 2018 | December 31, 2017 | $ Change | % Change | ||||||||||||||||||||||||
Federal Home Loan Bank Borrowings | $ | 1,021,592 | $ | 968,946 | $ | 52,646 | 5.4 | $ | 1,166,939 | $ | 948,203 | $ | 218,736 | 23.1 | ||||||||||||||||||
Other short-term borrowings | 167,671 | 199,376 | (31,705 | ) | (15.9 | ) | 207,653 | 184,805 | 22,848 | 12.4 | ||||||||||||||||||||||
Subordinated debt and junior subordinated debt | 164,228 | 163,598 | 630 | 0.4 | 164,379 | 164,327 | 52 | 0.0 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 1,353,491 | $ | 1,331,920 | $ | 21,571 | 1.6 | $ | 1,538,971 | $ | 1,297,335 | $ | 241,636 | 18.6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
BorrowingsWhile borrowings are a less significant source of funding for WesBanco, they are less significant as compared to total deposits, totaling 13.7% of total assets.deposits. During the first six monthsquarter of 2017, WesBanco reduced other short-term borrowings and borrowed approximately $60.0 million of2018, FHLB borrowings with longer-termincreased $218.7 million, as $375.0 million advances offset $155.8 million in maturities. In addition, WesBanco extended the maturities of approximately $230.0$155.0 million of maturing FHLB borrowings at an averagein the first quarter with a prior cost of 1.57% versusapproximately 1.29%, at current short-term FHLB rates approximating 1.10%2.43% - 1.20%2.75%.
Other short-term borrowings, which consist primarily of securities sold under agreements to repurchase and federal funds purchased at June 30, 2017, andMarch 31, 2018, but may also include notes payable, were $167.7$207.7 million at June 30, 2017March 31, 2018 compared to $199.4$184.8 million at December 31, 2016.2017. The decreaseincrease is primarily due to a $25.5$27.8 million decreaseincrease in securities sold under agreements to repurchase, which was partially offset by the repayments of $5.0 million in federal funds purchased and a $6.2 million decrease in repurchase agreements.outstanding at December 31, 2017. WesBanco has a revolving line of credit, which is a senior obligation of the parent company, with another financial institution. This line of credit, which accrues interest at an adjusted LIBOR rate, provides for aggregate unsecured borrowings of up to $25.0 million. There was no outstanding balance at June 30, 2017March 31, 2018 or December 31, 2016.
Subordinated debt2017. Rates have generally increased over the past year on all borrowing types due to the federal funds and junior subordinated debt consisted of $25.9 million in subordinated debentures and $138.3 million in junior subordinated debt at June 30,LIBOR rate increases that have occurred since early 2017. The subordinated debt was issued by the former Your Community Bank and has a fixed rate of 6.25% through the call date of December 15, 2020 at which time the interest rate converts to a variable rate equal to three-month LIBOR plus 459 basis points. The subordinated debt matures on December 15, 2025 and is considered Tier 2 regulatory capital for both WesBanco Bank and WesBanco, Inc. The junior subordinated debt has either been issued by trusts formed by WesBanco or assumed in acquisitions. At June 30, 2017, junior subordinated debt totaling $129.8 million had variable interest rates based on three-month LIBOR ranging from 2.85% to 4.40%, and junior subordinated debt totaling $8.5 million had a fixed rate of 8.00%. The junior subordinated debt matures at various dates from June 2033 through June 2038 and is considered Tier 1 regulatory capital for WesBanco, Inc. under current regulatory guidelines.
OFF-BALANCE SHEET ARRANGEMENTS
WesBanco enters into financial instruments withoff-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, letters of credit, loans approved but not closed, overdraft limits and contingent obligations to purchase loans funded by other entities. Since many of these commitments expire unused or partially used, these commitments may not reflect future cash requirements. Please refer to Note 9,10, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Credit Risk” section of this MD&A for additional information.
CAPITAL RESOURCES
Shareholders’ equity wasincreased $7.7 million or 0.6% from $1.4 billion at June 30, 2017 compared to $1.3 billion at December 31, 2016.2017. The increase resulted primarily from net income during the currentsix-month three-month period of $52.2$33.5 million, and a $5.0which was partially offset by $14.5 million decrease in other comprehensive loss which were partially offset byand the declaration of common shareholder dividends totaling $22.9$12.8 million for the sixthree months ended June 30, 2017.March 31, 2018. WesBanco also increased its quarterly dividend rate to $0.26$0.29 per share in February, representing an 8.3%11.5% increase over the prior quarterly rate and a cumulative 86%107% increase oversince 2010.
WesBanco did not purchase any shares during the lasttwenty-six quarters.
Underthree-month period ended March 31, 2018 under the current share repurchase plan, WesBanco purchased 12,987 shares during thesix-month period ended June 30, 2017 from employees for the payment of withholding taxes to facilitate the vesting of restricted stock.plans. At June 30, 2017,March 31, 2018, the remaining shares authorized to be purchased under the current repurchase plans totaled 1,107,3201,107,297 shares.
On February 17, 2017,22, 2018, WesBanco granted 12,000 Total Shareholder Return Plan (“TSR”) shares for the performance period beginning January 1, 20172018 and ending December 31, 20192020 to certain executives. The award is determined at the end of the three-year period if the TSR of WesBanco common stock is equal to or greater than the 50th percentile of the TSR of the peer group. The number of shares to be earned by the participant shall be 200% of the grant-date award if the TSR of WesBanco common stock is equal to or greater than the 75th percentile of the TSR of the peer group. Upon achieving the market-based metric, shares determined to be earned by the participant become service-basedtime-based and vest in three equal annual installments.
On May 16, 2017, WesBanco granted 117,550 stock options to selected officers at an exercise price of $38.88. These options are service-based and vest 50% at December 31, 2017 and 50% at December 31, 2018. On the same date, WesBanco also issued 70,321 shares of time-based restricted stock to selected officers and 9,003 shares of performance-based restricted stock to selected officers. The time-based restricted shares are service-based and cliff-vest 36 months from the date of grant. The performance-based restricted shares have a three-year performance period, beginning January 1, 2018, based on WesBanco’s return on average assets and return on average tangible common equity measured for each year, compared to a national peer group of peer financial institutions with total assets between approximately $9 billion and $15 billion. Earned performance-based restricted shares are also subject to additional service-based vesting with 50% vesting on May 16, 2021 after the completion of the three-year performance period and the final 50% vesting on May 16, 2022.
Regulatory guidelines require bank holding companies and commercial banks to maintain certain minimum capital ratios and define companies as “well capitalized” that sufficiently exceed the minimum ratios. At June 30, 2017,March 31, 2018, regulatory capital levels for both the Bank and WesBanco were substantially greater than the minimum amounts needed to be considered “well capitalized” under the regulations. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to WesBanco. As of June 30, 2017,March 31, 2018, under FDIC regulations, WesBanco could receive, without prior regulatory approval, a dividend of approximately $50.3$51.9 million from the Bank. WesBanco intends to continue to improve its consolidated and Bank capital ratios as necessary over time, primarily from retaining a majority of its increasing earnings.
The following table summarizes risk-based capital amounts and ratios for WesBanco and the Bank for the periods indicated:
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, dollars in thousands) | Minimum Value (1) | Well Capitalized (2) | Amount | Ratio | Minimum Amount (1) | Amount | Ratio | Minimum Amount (1) | Minimum Value (1) | Well Capitalized (2) | Amount | Ratio | Minimum Amount (1) | Amount | Ratio | Minimum Amount (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
WesBanco, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 leverage | 4.00 | % | 5.00 | % | $ | 933,005 | 10.09 | % | $ | 369,815 | $ | 901,873 | 9.81 | % | $ | 367,843 | 4.00 | % | 5.00 | % | $ | 997,327 | 10.56 | % | $ | 377,827 | $ | 970,425 | 10.39 | % | $ | 373,566 | ||||||||||||||||||||||||||||||||
Common equity Tier 1 | 4.50 | % | 6.50 | % | 799,185 | 11.44 | % | 314,274 | 773,306 | 11.28 | % | 308,462 | 4.50 | % | 6.50 | % | 859,327 | 12.33 | % | 313,611 | 834,554 | 12.14 | % | 309,298 | ||||||||||||||||||||||||||||||||||||||||
Tier 1 capital to risk-weighted assets | 6.00 | % | 8.00 | % | 933,005 | 13.36 | % | 419,033 | 901,873 | 13.16 | % | 411,283 | 6.00 | % | 8.00 | % | 997,327 | 14.31 | % | 418,148 | 970,425 | 14.12 | % | 412,397 | ||||||||||||||||||||||||||||||||||||||||
Total capital to risk-weighted assets | 8.00 | % | 10.00 | % | 1,004,203 | 14.38 | % | 558,710 | 971,762 | 14.18 | % | 548,378 | 8.00 | % | 10.00 | % | 1,069,510 | 15.35 | % | 557,530 | 1,042,124 | 15.16 | % | 549,863 | ||||||||||||||||||||||||||||||||||||||||
WesBanco Bank, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 leverage | 4.00 | % | 5.00 | % | $ | 845,267 | 9.16 | % | $ | 369,043 | $ | 827,173 | 9.02 | % | $ | 366,903 | 4.00 | % | 5.00 | % | $ | 887,798 | 9.42 | % | $ | 377,142 | $ | 869,227 | 9.32 | % | $ | 372,900 | ||||||||||||||||||||||||||||||||
Common equity Tier 1 | 4.50 | % | 6.50 | % | 845,267 | 12.13 | % | 313,594 | 827,173 | 12.10 | % | 307,728 | 4.50 | % | 6.50 | % | 887,798 | 12.75 | % | 313,273 | 869,227 | 12.66 | % | 308,900 | ||||||||||||||||||||||||||||||||||||||||
Tier 1 capital to risk-weighted assets | 6.00 | % | 8.00 | % | 845,267 | 12.13 | % | 418,125 | 827,173 | 12.10 | % | 410,305 | 6.00 | % | 8.00 | % | 887,798 | 12.75 | % | 417,698 | 869,227 | 12.66 | % | 411,866 | ||||||||||||||||||||||||||||||||||||||||
Total capital to risk-weighted assets | 8.00 | % | 10.00 | % | 915,994 | 13.14 | % | 557,500 | 896,598 | 13.11 | % | 547,073 | 8.00 | % | 10.00 | % | 959,981 | 13.79 | % | 556,930 | 940,303 | 13.70 | % | 549,155 |
(1) | Minimum requirements to remain adequately capitalized. |
(2) | Well-capitalized under prompt corrective action regulations. |
LIQUIDITY RISK
Liquidity is defined as a financial institution’s capacity to meet its cash and collateral obligations at a reasonable cost. Liquidity risk is the risk that an institution’s financial condition or overall safety and soundness is adversely affected by an inability, or perceived inability, to meet its obligations. An institution’s obligations, and the funding sources to meet them, depend significantly on its business mix, balance sheet structure and the cash flows of itson- andoff-balance sheet obligations. Institutions confront various internal and external situations that can give rise to increased liquidity risk including funding mismatches, market constraints on funding sources, contingent liquidity events, changes in economic conditions, and exposure to credit, market, operation, legal and reputation risk. WesBanco actively manages liquidity risk through its ability to provide adequate funds to meet changes in loan demand, unexpected outflows in deposits and other borrowings as well as to take advantage of market opportunities and meet operating cash needs. This is accomplished by maintaining liquid assets in the form of securities, sufficient borrowing capacity and a stable core deposit base. Liquidity is centrally monitored by WesBanco’s Asset/Liability Committee (“ALCO”).
WesBanco determines the degree of required liquidity by the relationship of total holdings of liquid assets to the possible need for funds to meet unexpected deposit losses and/or loan demands. The ability to quickly convert assets to cash at a minimal loss is a primary function of WesBanco’s investment portfolio management. WesBanco believes its cash flow from the loan portfolio, the investment portfolio and other sources adequately meet its liquidity requirements. WesBanco’s net loans to assets ratio was 64.3%61.3% at June 30, 2017March 31, 2018 and deposit balances funded 71.6%70.5% of assets.
The following table lists the sources of liquidity from assets at June 30, 2017March 31, 2018 expected within the next year:
(unaudited, in thousands) | ||||||||
Cash and cash equivalents | $ | 110,695 | $ | 100,845 | ||||
Securities with a maturity date within the next year and callable securities | 140,225 | 199,244 | ||||||
Projected payments and prepayments on mortgage-backed securities and collateralized mortgage obligations (1) | 201,783 | 208,799 | ||||||
Loans held for sale | 21,677 | 12,962 | ||||||
Accruing loans scheduled to mature | 855,668 | 914,959 | ||||||
Normal loan repayments | 1,554,668 | 1,041,516 | ||||||
|
| |||||||
Total sources of liquidity expected within the next year | $ | 2,884,716 | $ | 2,478,325 | ||||
|
|
(1) | Projected prepayments are based on current prepayment speeds. |
Deposit flows are another principal factor affecting overall WesBanco liquidity. Deposits totaled $7.1$7.2 billion at June 30, 2017.March 31, 2018. Deposit flows are impacted by current interest rates, products and rates offered by WesBanco versus various forms of competition, as well as customer behavior. Certificates of deposit scheduled to mature within one year totaled $810.9$694.4 million at June 30, 2017,March 31, 2018, which includes jumbo regular certificates of deposit totaling $313.0$292.5 million with a weighted-average cost of 0.73%1.06%, and jumbo CDARS® deposits of $82.6$48.3 million with a weighted-average cost of 0.88%1.20%.
WesBanco maintains a line of credit with the FHLB as an additional funding source. Available credit with the FHLB at June 30, 2017March 31, 2018 and December 31, 20162017 approximated $1.6 billion and $1.7$1.8 billion, respectively. The FHLB requires securities to be specifically pledged to the FHLB and maintained in a FHLB-approved custodial arrangement if the member wishes to include such securities in the maximum borrowing capacity calculation. WesBanco has elected not to specifically pledge to the FHLB otherwise unpledged securities. At June 30, 2017,March 31, 2018, the Bank had unpledgedavailable-for-sale securities with an amortized cost of $294.4$516.9 million. A portion of these securities could be sold for additional liquidity, or such securities could be pledged to secure additional FHLB borrowings. Available liquidity through the sale ofavailable-for-sale investment securities is currently limited as onlyto approximately 25%30.1% of theavailable-for-sale portfolio which is unpledged, due to the pledging agreements that WesBanco has with their public deposit customers. Public deposit balances have increased significantly through the ESB and YCB acquisitions ofin the past twothree years. WesBanco’sheld-to-maturity portfolio currently contains $629.0$654.5 million of unpledged securities. However, most of the balance represents municipal bonds, which can only be pledged in limited circumstances. Unless in compliance with certain criteria, these securities cannot be sold without tainting the remainder of theheld-to-maturity portfolio. If tainting occurs, all remaining securities with theheld-to-maturity designation would be required to gomove toavailable-for-sale, and theheld-to-maturity designation would not be available to WesBanco for several years.some time.
WesBanco participates in the Federal Reserve Bank’sBorrower-in-Custody Program (“BIC”) whereby WesBanco pledges certain consumer loans as collateral for borrowings. At June 30, 2017,March 31, 2018, WesBanco had a BIC line of credit totaling $208.1$187.6 million, none of which was outstanding. Alternative funding sources may include the utilization of existing overnight lines of credit with third party banks totaling $285.0 million, of which $32.5$20.0 million was outstanding at June 30, 2017,March 31, 2018, along with seeking other lines of credit, borrowings under repurchase agreement lines, increasing deposit rates to attract additional funds, accessing brokered deposits, or selling securitiesavailable-for-sale or certain types of loans.
Other short-term borrowings of $167.7$207.7 million at June 30, 2017March 31, 2018 consisted of callable repurchase agreements, and overnight sweep checking accounts for large commercial customers, and federal funds purchased. There has not been a significant fluctuation in the average deposit balances of the overnight sweep checking accounts during 2017.2018. The overnight sweep checking accounts require U.S. Government securities to be pledged equal to or greater than the average deposit balance in the related customer accounts.
The principal sources of parent company liquidity are dividends from the Bank, $64.1$84.7 million in cash and investments on hand, and a $25.0 million revolving line of credit with another bank, which did not have an outstanding balance at June 30, 2017.March 31, 2018. WesBanco is in compliance with all loan covenants. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to the parent company. As of June 30, 2017,March 31, 2018, under FDIC and State of West Virginia regulations, WesBanco could receive, without prior regulatory approval, dividends of approximately $50.3$51.9 million from the Bank. Management believes these are appropriate levels of cash for WesBanco given the current environment. Management continuously monitors the adequacy of parent company cash levels and sources of liquidity through the use of metrics that relate current cash levels to historical and forecasted cash inflows and outflows.
WesBanco had outstanding commitments to extend credit in the ordinary course of business approximating $1.9 billion and $1.8 billion at both June 30, 2017March 31, 2018 and December 31, 2016.2017, respectively. On a historical basis, only a small portion of these commitments will result in an outflow of funds. Please refer to Note 9,10, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Loan Commitments” section of this MD&A for additional information.
Federal financial regulatory agencies previously have issued guidance to provide for sound practices for managing funding and liquidity risk and strengthening liquidity risk management practices. WesBanco maintains a comprehensive management process for identifying, measuring, monitoring, and controlling liquidity risk, which is fully integrated into its risk management process. Management believes WesBanco has sufficient current liquidity to meet current obligations to borrowers, depositors and others as of June 30, 2017,March 31, 2018 and that WesBanco’s current liquidity risk management policies and procedures adequately address this guidance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The disclosures set forth in this item are qualified by the section captioned “Forward-Looking Statements” included in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.
MARKET RISK
The primary objective of WesBanco’s ALCO is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition, market risk exposures arising from changing economic conditions and liquidity risk.
Market risk is defined as the risk of loss due to adverse changes in the fair value of financial instruments resulting from fluctuations in interest rates and equity prices. Management considers interest rate risk to be WesBanco’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. The relative consistency of WesBanco’s net interest income is largely dependent on effective management of interest rate risk. As interest rates change in the market, rates earned on interest rate sensitive assets and rates paid on interest rate sensitive liabilities do not necessarily move concurrently. Differing rate sensitivities may arise because fixed rate assets and liabilities may not have the same maturities, or because variable rate assets and liabilities differ in the timing and/or the percentage of rate changes.
WesBanco’s ALCO is a Board-level committee with both Board and seniorexecutive management representation, including the Chief Executive Officer, the Chief Financial Officer, the Chief Risk Management Officer and the Senior Treasury Officer. It monitorsis responsible for monitoring and managesmanaging interest rate risk within Board- approvedBoard-approved policy limits. Interest rate risk is monitored primarily through the use of an earnings sensitivity simulation model and an economicvalue-at-risk model, to measuremeasuring the fair value of net equity. These models are highly dependent on various assumptions, which change regularly as the balance sheet and market interest rates change. The key assumptions and strategies employed are analyzed and reviewed quarterly by the ALCO, while appropriate documentation is maintained in meeting minutes and treasury department files.maintained.
The earnings sensitivity simulation model projects changes in net interest income resulting from the effect of changes in interest rates. Forecasting changes in net interest income requires management to make certain assumptions regarding loan and security prepayment rates, security call dates, adjustmentschanges to variousnon-maturity deposit product rates, or “betas”,betas, andnon-maturity deposit decay rates, which may not necessarily reflect the manner in which actual cash flows, yields, and costs respond to changes in market interest rates. Assumptions used are based primarily on both historical experience, and current market rates and economic forecasts, and are periodically back-tested and reviewed by third-party consultants. Security portfolio maturities and prepayments are assumed to be reinvested in similar instruments and callable/prepayable security forecasts are adjusted at varying levels of interest rates. While management believes such assumptions to be reasonable, there can be no assurance that assumed prepayment rates, callable security forecasts andnon-maturity deposit product behavior assumptions will approximate actual future results. Moreover, theThe net interest income sensitivity chartresults presented in Table 1, “Net Interest Income Sensitivity,” assumes that the balance sheet composition of interest sensitive assets and liabilities existing at the end of the period remains constant over the period being measured, and also assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the duration of the maturity orre-pricing of specific assets and liabilities. Since the assumptions used in the model relative to changes in interest rates are uncertain, the simulation analysis may not be indicative of actual results. In addition, thethis analysis maydoes not consider all actions that management couldmight employ in response to changes in interest rates and variousas well as earning asset and costing liability balances.
Management is aware of the significant effect inflation or deflation has upon interest rates and ultimately upon financial performance. WesBanco’s ability to cope with inflation or deflation is best determined by analyzing its capability to respond to changing market interest rates, as well as its ability to manage the various elements ofnon-interest income and expense during periods of increasing or decreasing inflation or deflation. WesBanco monitors the level and mix of interest-rate sensitive assets and liabilities through ALCO in order to reduce the impact of inflation or deflation on net interest income. Management also controls the effects of inflation or deflation by conducting periodic reviews of the prices and terms of its various products and services, both in terms of the costs to offer the services as well as outside market influences upon such pricing, by introducing new products and services or reducing the availability of existing products and services, and by controlling overhead expenses.
Interest rate risk policy limits are determined by measuring the anticipated change in net interest income over a twelve-month period, assuming an immediate and sustained market interest rate increases and decreases of 100 200, 300 and- 400 basis point increase or decrease in market interest ratespoints across the entire yield curve, compared to a stable rate environment or base model. WesBanco’s current policy limits this exposure for the noted interest rate changes to a reduction of between 10%, 12.5%, 15% and - 20% or less respectively, of net interest income from the stable rate base model over a twelve-month period. The table below shows WesBanco’s interest rate sensitivity at June 30, 2017March 31, 2018 and December 31, 2016,2017, assuming the above-noted interest rate increases as compared to a base model. Due toIn the current lower interest rate environment, particularly for short-term rates, the 200 and 300 basis point decreasing change are not shown due to the unrealistic nature of results associated with short-term negative interest rates.
TABLE 1. NET INTEREST INCOME SENSITIVITY
Immediate Change in (basis points) | Percentage Change in Net Interest Income from Base over One Year | ALCO Guidelines | Percentage Change in Net Interest Income from Base over One Year | ALCO Guidelines | ||||||||
June 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||
+400 | 12.0% | 4.5% | (20.0%) | 9.0% | 8.3% | (20.0%) | ||||||
+300 | 9.7% | 4.7% | (15.0%) | 7.0% | 6.2% | (15.0%) | ||||||
+200 | 6.8% | 4.6% | (12.5%) | 4.5% | 4.0% | (12.5%) | ||||||
+100 | 4.0% | 3.1% | (10.0%) | 2.4% | 2.4% | (10.0%) | ||||||
-100 | (4.2%) | (2.3%) | (10.0%) | (2.7%) | (3.0%) | (10.0%) |
As per the table above, the earnings sensitivity simulation model at June 30, 2017March 31, 2018 currently projects that net interest income for the next twelve-month period would decrease by 4.2%2.7% if interest rates were to fall immediately by 100 basis points, compared to a decrease of 2.3%3.0% for the same scenario as of December 31, 2016.2017.
For rising rate scenarios, net interest income would increase by 4.0%, 6.8%, 9.7% and 12.0%between 2.4% - 9.0% if rates were to increase by between 100 200, 300 and- 400 basis points respectively, as of June 30, 2017,March 31, 2018, compared to increases of 3.1%, 4.6%, 4.7% and 4.5%between 2.4% - 8.3% in a 100 200, 300 and- 400 basis point increasing rate environment as of December 31, 2016.2017. If rates were to increase over aone-year period instead of an instantaneous shock, which management feels is a more practical scenario, than for a 200 basis point increasing rate ramp analysis, the model projects that net interest income would increase 2.1% over the next twelve months, as compared to a 2.2% increase at the end of 2017.
Management also utilizes a “Most Likely” forecast scenario to project net interest income over a rollingtwo-year time frame. This forecast is updated and reviewed quarterly, incorporating updated assumptions into the model such as estimated loan and deposit growth, balance sheetre-mixing strategies, changes in base forecasted rates for various maturities, competitive market spreads for various products and other assumptions. Such modeling helps to predict changes in forecasted outcomes and necessary adjustments to the plan to achieve management’s earnings goals.
The balance sheet shows greaterslightly higher asset sensitivity as of June 30, 2017,March 31, 2018, as compared to December 31, 2016,2017, with differences resulting from changes in the mix of, and growth in various earning assets and costing liabilities, as well as recent adjustments infor various modeling assumptions such as deposit beta rates, decay rates fornon-maturity deposits and loan prepayment speeds. A recent third-party study of the Company’s own historical betas, decay rates and prepayment speeds in various interest rate environments was completed, and the results were used to replace general industry data in prior evaluations, resulting in a portion of the increased asset sensitivity. WhileGenerally, deposit betas have been increased from those usedover time in prior periods,the model, while loan prepayment speeds werehave also increased to reflect our ownvarious loan balances’classifications’ propensity to prepay over time. The net impact was increased asset sensitivity in combination with the aforementioned balance sheet changes experienced fromyear-end. OverallManagement believes that overall asset sensitivity innon-parallel rising rate scenarios with shifting yield curve assumptions may be somewhat neutralized due to slower prepayment speeds, slowerrate floors, lower than forecasted increases to loan yields, for competitive reasons, existing quotes on previously committed loans, extension risk associated with residential mortgages and mortgage-backedmortgage-related securities, and other earning asset and costing liability differences versus currently modeled assumptions. In addition, variable rateCommercial loan floors currently average 4.10% on approximately $1.2 billion, or 29% of total commercial loans with rate floors averaging 4.10% approximated $1.3at March 31, 2018, as compared to $1.2 billion at June 30, 2017, or 30% of commercial loans as compared to $1.3 billionat December 31, 2017. Approximately 43% or 32% of commercial loans atyear-end. Approximately 48% or $602.7$525.4 million of these loans are currently priced at their floor, as compared to 53%45% or $671.9$552.6 million at December 31, 2016.2017. In a less than 100 basis point rising rate environment, these loans may not adjust as rapidly from their current floor level as compared to loans without floors. As a result of the December 2016, March 2017 and June 2017 federal funds rate increases affecting short-term market rates such as one and three month LIBOR (an index used frequently in the setting of commercial loan rates, fixed rate loan spreads, andback-to-back loan swaps for certain commercial loan customers), more commercial loans with floors should experience a rate increase in a rising rate environment of 100 basis points or more.
Given the interest rate environment and flatter yield curve for much of 2016 affecting the repricing of loans and investments, WesBanco previously experienced a declining or flat net interest margin, with net interest income dependent upon both loan growth and assetre-mix strategies. It was expected that the base case net interest margin would somewhat decrease without loan growth. After the acquisition in 2016 of YCB and with three recent federal funds rate increases, theThe net interest margin has growndecreased by 144 basis points for the three month period ended March 31, 2018 compared to last year, as thepre-acquisitiontax-exempt levels duesecurities portfoliotax-equivalent rate adjustment from 35% to 21% caused a reduction in the overall net interest margin by 6 basis points. New securities purchased at current rates helped to offset this reduction. In addition, higher yielding loansnon-interest bearing demand deposits and limited increases in other deposit categories resulted in margin improvement that limited the decrease from YCB, loan mix and purchase accounting accretion. Furtherthe tax equivalency calculation. The opportunity for margin expansion would beis dependent on additional federal funds increases and other market rate/yield curve increases over the remaindershape of the year,yield curve, in addition to continued execution of our business strategy to remix investment securities runoff into loansgrow certain loan categories and remixing higher cost wholesale borrowings and CDs into lower costingcost transaction accounts. Netaccounts, while controlling transaction account betas as rates rise. In addition, net purchase accounting accretion is expected to decrease slightly throughout 2017, which should be mostly offset by2018, requiring loan growth and by the asset sensitivity of the balance sheet in a risingand/or rate scenario.increases to offset such impact. Management currently anticipates that onetwo to three additional short-term federal funds rate increaseincreases may occur duringby the remainderend of 2017, and potentially two more in 2018, relatively consistent with general market and consensus economist expectations. Delays in implementing further rate increases, for an asset-sensitive balance sheet or increases to deposit betas beyond our current modeling assumptions for existing accounts, typically would have a negative impact on management’s estimates of the future direction and level of the net interest margin.
Maturities and repricing of higher-costing certificates of deposit in prior years has had the beneficial impact of mitigating compression from lower loan spreads in a competitive loan environment, combined with organic loan growth. However, with current CDs costing an average of 0.71%, this factor does not improve the net interest margin as CDs mature and reprice, as new offering rates are generally higher than current maturities’ rates. While customersCustomers over the past few years have moved maturing CD balances to lower-costing transaction accounts as well as certainintonon-deposit products, aproducts. A portion of these lower-cost transaction account balances may movemigrate to higher-costing CDs or money market accounts as short-term rates continue to increase. Prior and current period CD runoffRunoff of CDs from formerprior acquisitions, many of which were customers with single service customers at ESB and YCB and our own retail focus on customers with multiple relationships versus single service CD customers hashave been replaced with FHLB and other short-term borrowings. Certificates of deposit totaling approximately $810.9$694.4 million mature within the next year at an average cost of 0.59%0.76%. Approximately $230 million of short-term maturing FHLBMaturing borrowings in the first half of 2017 were replaced with higher cost, medium-term borrowings, which strategy was intended to improve asset sensitivity and certain short-term liquidity measures. Additional maturing borrowings over the remainder of the year2018 may also be lengthened at a somewhat higher cost to continue to improve various short-term liquidity ratios that management monitors, and in anticipation of future rate increases.than the maturing borrowings’ average rate. In addition, with the pending First Sentry Bancshares acquisition, management is currentlyno longer intent on controlling the total size of the balance sheet without limiting loan growth, in order to remain under $10 billion in total assets, throughand increased investment purchases in the remainderfirst quarter resulted in an increasedperiod-end total asset amount of 2017 and into 2018.$10.2 billion.
The Bank has significant additional borrowing capacity with the FHLB of Pittsburgh, the Federal Reserve Bank of Cleveland, and various correspondent banks, and may utilize these funding sources or an interest rate swap strategy,strategies as necessary to lengthen liabilities, to help offset mismatches in various asset maturities, and manage liquidity. CDARS® and ICS® deposits also continue tomay be used to lengthen maturities in certificates of deposit and for similar purposes as well as for certain customers seeking higher-yielding instruments and/or to maintain their totalmaintaining deposit levels below individual FDIC insurance limits.
Current balance sheet strategies to manage the net interest margin in the expected rate environment include:
• | using the CDARS®and ICS® deposit programs |
As an alternative to the immediate rate shock analysis, the ALCO monitors interest rate risk by ramping or increasing interest rates 200 basis points gradually over a twelve-month period. WesBanco’s current policy limits this exposure to a change of minus 10% in net interest income from the base model for a twelve-month period and for an extended two year rate ramp of 400 basis points. Management believes that the ramping analysis reflects a more realistic movement of interest rates, whereas the immediate rate shock reflects a less likely scenario. The simulation model at June 30, 2017 using the 200 basis point increasing rate ramp analysis, projects that net interest income would increase 3.4% over the next twelve months, compared to a 3.2% increase at December 31, 2016. For the first twelve months of a 400 basis point rate ramp over two years, the increase in net interest income would be 3.8% in year one as compared to the base, and 12.1% in year two when compared to year two’s base. In addition, management utilizes a most likely forecast scenario to forecast net interest income over a rolling two year time frame. This forecast is updated and reviewed quarterly, incorporating current budget orre-forecast assumptions into the model such as estimated loan and deposit growth, asset and liabilityre-mixing, competitive market rates and spreads for various products, marketing promotions and other assumptions. Such modeling helps to predict changes in forecasted outcomes and necessary adjustments to the plan to achieve management’s earnings goals.
WesBanco also periodically measures the economic value of equity, which is defined as the market value of tangible equity in various rate scenarios. At June 30, 2017,March 31, 2018, the market value of tangible equity as a percent of base in a 200 basis point rising rate environment indicates an increasea decrease of 2.9%7.0%, compared to an increasea decrease of 6.7%1.8% at December 31, 2016.2017. In a 100 basis point falling rate environment at March 31, 2018, the model indicates a decreasean increase of 8.2%0.1%, compared to a decrease of 9.8%3.1% as of December 31, 2016.2017. WesBanco’s policy is to limit such change to minus 10% increments for aeach 100 basis point change in interest rates, minus 20% for a 200 basis point changerates. Generally, changes in interest rates, minus 30% for a 300 basis point rate changethe economic value of equity relate to changes in interest rates, and minus 40% for a 400 basis point rate change in interest rates. Changes to various assets and liabilities, as well as certain changes toin loan prepayment speeds and deposit decay rates associated withnon-maturity deposits, caused the change in market value of tangible equity as compared toyear-end.rates.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES—WesBanco’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that WesBanco’s disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form10-Q, are effective to ensure that information required to be disclosed by WesBanco in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to WesBanco’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS—WesBanco’s management, including the CEO and CFO, does not expect that WesBanco’s disclosure controls and internal controls will prevent all errors and all fraud. While WesBanco’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, no control system, no matter how well conceived and operated, can provide absolute assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
CHANGES IN INTERNAL CONTROLS—There were no changes in WesBanco’s internal control over financial reporting that occurred during our fiscal quarter ended June 30, 2017March 31, 2018 as required to be reported by paragraph (d) of Rules13a-15 and15d-15 under the Securities Exchange Act of 1934, that materially affected, or are reasonably likely to materially affect, WesBanco’s internal control over financial reporting.
WesBanco is involved in various lawsuits, claims, investigations and proceedings which arise in the ordinary course of business. While any litigation contains an element of uncertainty, WesBanco does not believe that a material loss related to such proceedings or claims pending or known to be threatened is reasonably possible.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As of June 30, 2017,March 31, 2018, WesBanco had two active one million share stock repurchase plans. The first plan was originally approved by the Board of Directors on March 21, 2007 and the second, which is incremental to the first, was approved October 22, 2015. Each provides for shares to be repurchased for general corporate purposes, which may include a subsequent resource for potential acquisitions, shareholder dividend reinvestment and employee benefit plans. The timing, price and quantity of purchases are at the discretion of WesBanco, and the plan may be discontinued or suspended at any time.
The following table presents the monthly share purchase activity during the quarter ended June 30, 2017:March 31, 2018:
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 | 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 | ||||||||||||||||||||||||
Balance at March 31, 2017 | 1,120,307 | |||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 1,107,297 | |||||||||||||||||||||||||||||||
April 1, 2017 to April 31, 2017 | ||||||||||||||||||||||||||||||||
January 1, 2018 to January 31, 2018 | ||||||||||||||||||||||||||||||||
Open market repurchases | — | $ | — | — | 1,120,307 | — | — | — | 1,107,297 | |||||||||||||||||||||||
Other transactions (1) | 17,830 | 38.30 | N/A | N/A | 16,669 | $ | 41.31 | N/A | N/A | |||||||||||||||||||||||
May 1, 2017 to May 31, 2017 | ||||||||||||||||||||||||||||||||
Other repurchases (2) | 12,987 | $ | 37.61 | 12,987 | 1,107,320 | |||||||||||||||||||||||||||
February 1, 2018 to February 28, 2018 | ||||||||||||||||||||||||||||||||
Open market repurchases | — | — | — | 1,107,297 | ||||||||||||||||||||||||||||
Other transactions (1) | 936 | 39.16 | N/A | N/A | 1,628 | $ | 41.81 | N/A | N/A | |||||||||||||||||||||||
June 1, 2017 to June 30, 2017 | ||||||||||||||||||||||||||||||||
March 1, 2018 to March 31, 2018 | ||||||||||||||||||||||||||||||||
Open market repurchases | — | — | — | 1,107,297 | ||||||||||||||||||||||||||||
Other transactions (1) | 1,565 | $ | 38.01 | N/A | N/A | 1,374 | $ | 43.26 | N/A | N/A | ||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Second Quarter 2017 | ||||||||||||||||||||||||||||||||
First Quarter 2018 | ||||||||||||||||||||||||||||||||
Open market repurchases | — | $ | — | — | 1,120,307 | — | — | — | 1,107,297 | |||||||||||||||||||||||
Other repurchases (2) | 12,987 | 37.61 | 12,987 | 1,107,320 | ||||||||||||||||||||||||||||
Other transactions (1) | 20,331 | 38.31 | N/A | N/A | 19,671 | $ | 41.49 | N/A | N/A | |||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | 33,318 | $ | 38.04 | 12,987 | 1,107,320 | 19,671 | $ | 41.49 | — | 1,107,297 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Consists of open market purchases transacted for employee benefit and dividend reinvestment plans. |
N/A – Not applicable
* | Indicates management contract or compensatory plan |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
WESBANCO, INC. | ||||
Date: | /s/ Todd F. Clossin | |||
| ||||
Todd F. Clossin | ||||
President and Chief Executive Officer (Principal Executive Officer) | ||||
Date: | /s/ Robert H. Young | |||
| ||||
Robert H. Young | ||||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
5754