NEWS FOR IMMEDIATE RELEASE
July 19, 2016 For Further Information Contact:
John Iannone
Vice President, Investor Relations
(304) 905-7021
NASDAQ Symbol: WSBC
Website: www.wesbanco.com
WesBanco Announces Second Quarter 2016 Net Income
(Wheeling, WV)… Todd F. Clossin, President and Chief Executive Officer of WesBanco, Inc. (NASDAQ: WSBC), a Wheeling, West Virginia based multi-state bank holding company, today announced net income and related earnings per share for the three and six months ended June 30, 2016. Net income for the six month period ended June 30, 2016 was $45.0 million or $1.17 per diluted share compared to $35.5 million or $0.97 per diluted share for the first six months of 2015. Net income for the three months ended June 30, 2016 was $22.1 million, while diluted earnings per share were $0.58, compared to $21.6 million or $0.56 per diluted share for the second quarter of 2015. For the six months ended June 30, 2016, net income excluding after-tax merger-related expenses (non-GAAP measure), increased 6.7% to $45.4 million compared to $42.6 million for 2015, while diluted earnings per share, excluding after-tax merger-related expenses (non-GAAP measure), totaled $1.18, compared to $1.17 per share for 2015.
| | | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| | | | 2016 | | 2015 | | 2016 | | 2015 |
(unaudited, dollars in thousands, except per share amounts) | | 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) | | $ 22,560 | | $ 0.59 | | $ 22,358 | | $ 0.58 | | $ 45,433 | | $ 1.18 | | $ 42,563 | | $ 1.17 |
| Less: After tax merger-related expenses | (451) | | (0.01) | | (725) | | (0.02) | | (451) | | (0.01) | | (7,051) | | (0.20) |
| Net income (GAAP) | | $ 22,109 | | $ 0.58 | | $ 21,633 | | $ 0.56 | | $ 44,982 | | $ 1.17 | | $ 35,512 | | $ 0.97 |
(1) Non-GAAP net income excludes after-tax merger related expenses. Non-GAAP measures are defined on page 12 under "Non-GAAP Financial Measures." |
WesBanco's results include ESB Financial Corporation's ("ESB") results from February 10, 2015, the date of consummation of the merger. ESB was a Pennsylvania thrift holding company with approximately $2.0 billion in assets and 23 offices in southwestern Pennsylvania.
On May 3 of this year, WesBanco and Your Community Bankshares, Inc. ("YCB"), a bank holding company headquartered in New Albany, Indiana with approximately $1.6 billion in assets and 33 branches, jointly announced that a definitive Agreement and Plan of Merger was executed providing for the merger of YCB with and into WesBanco. The transaction is valued at approximately $221.0 million and is expected to close in the third or fourth quarter of 2016.
"We are pleased with WesBanco's performance during the second quarter of 2016 as we continue to focus on credit quality and expense management while generating long-term growth," said Mr. Clossin. "While we currently anticipate a lower for longer interest rate environment, resulting in fewer rate increases in the near-term horizon, we are making steady progress on our previously-stated business mix and balance sheet mix strategies. Year-over-year total loan growth remains in the mid-single digit range, despite quarterly fluctuations in the construction portfolio due to prepayments. In addition, our commercial and industrial loan portfolio continues to grow at a double digit pace of 11%. As a percentage of total loans, C&I loans are approaching 16%, as compared to approximately 14% three years ago."
Mr. Clossin added, "We remain on track to close on our recently announced merger with Your Community Bankshares. As I mentioned previously, we are excited about this quality franchise as it meshes nicely with our strategic growth plans. Southern Indiana and Kentucky are high-growth markets with excellent demographics that attractively enhance our current market footprint."
Financial Condition
Portfolio loans increased $236.2 million or 4.8% over the last twelve months through $821.9 million in loan originations in the first half of 2016, with total business loan originations up approximately 13%. Loan growth occurred in commercial real estate, commercial and industrial and home equity lending categories. Loan growth was driven by increased business opportunities, additional commercial personnel in our core urban markets, focused sales and referral calling programs and continued improvement in loan origination processes.
Page 2
Total deposits, excluding certificates of deposit ("CDs"), increased $17.3 million or 0.4% during the last twelve months with a 4.2% increase in non-interest bearing demand deposits to $1.3 billion. Certificates of deposit declined $202.6 million, excluding CD runoff from former ESB retail customers of $145.6 million. The non-ESB runoff was from lower rate offerings for single service maturing CDs, $86.7 million from lower Certificate of Deposit Account Registry Service ("CDARS@") balances, and customer preferences for other deposit types, as we continue to re-mix our deposits to emphasize multiple relationship customers. FHLB borrowings, which increased $275.6 million or 35.3% over the last twelve months, reflects our stated balance sheet re-mix strategy which included increasing our balance sheet asset sensitivity late last year in anticipation of rising rates, while providing additional funding. Total assets at June 30, 2016 increased minimally year-over-year as management focused on maintaining the current size of the balance sheet in order to delay the financial impact of crossing $10 billion in assets through acquisitions.
WesBanco continues to maintain strong regulatory capital ratios after the ESB acquisition and implementation of the new BASEL III capital standards. At June 30, 2016, Tier I leverage was 9.71%, Tier I Risk-Based capital was 13.62%, Total Risk-Based capital was 14.40% and the Common Equity Tier 1 capital ratio ("CET 1"), was 11.88%. Both consolidated and bank-level regulatory capital ratios are well above the applicable "well-capitalized" standards promulgated by bank regulators, as well as the 2015-implemented BASEL III capital standards. Total tangible equity to tangible assets (non-GAAP measure) was 8.56% at June 30, 2016, increasing from 7.68% at June 30, 2015, and 7.95% at December 31, 2015. Strong earnings and increased total capital have enabled WesBanco to increase the quarterly dividend rate, currently at $0.24 per share, nine times over the last six years, cumulatively representing a 71% increase. The most recent increase was $0.01 per share per quarter in the first quarter of 2016.
Credit Quality
The provision for credit losses decreased to $1.8 million in the second quarter of 2016, compared to $2.7 million in the second quarter of 2015, due to improved credit metrics. Year-to-date, the provision increased slightly to $4.1 million from $4.0 million in the same period of 2015 primarily due to loan growth. Net charge-offs as a percentage of average portfolio loans of 0.08% in the second quarter of 2016 decreased from 0.25% in the second quarter of 2015 and from 0.12% in the first quarter of 2016.
Non-performing loans (including TDRs), criticized and classified loans and past due loans all improved as a percentage of total portfolio loans from the second quarter of 2015. Total non-performing loans were 0.80% of total loans at June 30, 2016, decreasing from 1.24% of total loans in the second quarter of 2015. Criticized and classified loans were 1.53% of total loans, improving from 1.68% at the end of the 2015 second quarter. Past due loans at June 30, 2016 were 0.24% of total loans, improving from 0.26% at June 30, 2015.
The allowance for loan losses represented 0.84% of total portfolio loans at June 30, 2016 compared to 0.82% as of December 31, 2015. If the acquired ESB loans (recorded at fair value at the date of acquisition of $701.0 million) were excluded from the ratio, the allowance would approximate 0.97% of the adjusted loan total at June 30, 2016 compared to 1.09% prior to the ESB acquisition.
Net Interest Income
Net interest income decreased $1.0 million or 1.7% in the second quarter of 2016 compared to the same quarter of 2015 due to a 14 basis point decrease in the net interest margin, partially offset by a 5.2% increase in average loan balances resulting in a 3.2% increase in average earning assets. For the first six months, net interest income increased $3.9 million or 3.3%, partially from the acquisition in February of last year and from average organic loan growth of approximately 5.7%, reduced by a 20 basis point decline in the net interest margin.
The net interest margin decreased to 3.30% in the second quarter, compared to 3.44% in same quarter of 2015 and up one basis point from the first quarter's 3.29%. The decrease in the net interest margin year-over-year is primarily due to a decrease of 17 basis points for total loans due to repricing of existing loans at lower spreads and competitive pricing on new loans. The lower spreads were due to the continued low interest rate environment and a flatter yield curve. Mitigating this reduction is the aforementioned loan growth, which over time improves asset yields as average loan rates are higher than securities rates. Funding costs increased 12 basis points in the second quarter compared to the same quarter in 2015, primarily due to an increase in the percentage of total FHLB borrowings to 17.2% of interest bearing liabilities from 8.3% in 2015, as well as an increase in the average rate on these borrowings year-over-year. Average deposits in the second quarter decreased by 5.3%, primarily due to the runoff of CDs. Overall, for the last few quarters, the net interest margin has been relatively stable, ranging from 3.29% to 3.32% and the re-mix in average earning assets has continued as securities as a percentage of total assets has been reduced from 29.2% to 26.8% from June 30, 2015 to June 30, 2016, while loans have increased as a percentage of total assets to 61.6% and by an overall $236 million. Year-to-date, the decline in the margin of 20 basis points resulted from the same factors affecting the second quarter, combined with post-ESB mix shifts which increased the percentage of earning assets invested in securities. Loan growth since then has assisted in maintaining the net interest margin at its present level despite lower loan yields and overall spread compression, particularly over the last few months.
Page 3
Non-Interest Income
For the second quarter of 2016, non-interest income increased $1.5 million or 8.4% compared to the 2015 second quarter. Electronic banking fees increased $0.2 million or 7.0% from increases in transaction volumes. Net gains on sales of mortgage loans increased $0.3 million from a 39.3% production increase in mortgage originations, partially offset by a reduced percentage being sold into the secondary market. Trust fees decreased $0.4 million or 8.0% compared to the second quarter of last year from reduced total assets under management, lower estate fees and market declines. Net securities gains increased $0.6 million in the second quarter of 2016 compared to the second quarter of 2015, primarily due to realized gains resulting from the sale of mortgage-backed securities in the 2016 quarter. Other income increased $1.0 million in the second quarter due to $0.8 million of commercial customer loan swap fee income. For the six months ended June 30, 2016, non-interest income increased $2.7 million or 7.5%, reflecting similar trends as in the second quarter, while bank-owned life insurance decreased $0.3 million primarily due to death benefits received in the first quarter of 2015, and securities gains increased $1.7 million due to sales in both 2016 quarters.
Non-Interest Expense
The following comments on non-interest expense excludes merger-related expenses in both years, as noted in the attached income statements. Non-interest expense in the second quarter of 2016 grew $1.2 million or 2.6%, compared to the same quarter in 2015. For the first six months, non-interest expense increased $2.8 million or 3.2%. With net revenue growth of 4.3% in the first half of 2016, this positive operating leverage helped to improve the efficiency ratio in 2016 to 56.3% from 57.1% in the first half of 2015. For the second quarter, salaries and wages increased $0.4 million or 2.2% due to routine annual adjustments to compensation and increased stock compensation expense, partially offset by a 1.0% decrease in full-time equivalent employees. Employee benefits expense increased $0.5 million, primarily from increased health insurance costs. Equipment costs increased $0.4 million related to continuous improvements in computer system and software infrastructure, and origination and customer support systems. The increase in non-interest expense for the first six months of 2016 reflects similar trends as in the second quarter.
Financial Results Conference Call
WesBanco will also host a conference call to discuss the Company's financial results for the second quarter of 2016 at 1 p.m. ET on Wednesday, July 20, 2016. Interested parties can access the live webcast of the conference call through the Investor Relations section of the Company's website, www.wesbanco.com. Participants can also listen to the conference call by dialing 866-652-5200, 855-669-9657 for Canadian callers, or 412-317-6060 for international callers, and asking to be joined into the WesBanco call. Please log in or dial in at least 10 minutes prior to the start time to ensure a connection.
A replay of the conference call will be available by dialing 877-344-7529, 855-669-9658 for Canadian callers, or 412-317-0088 for international callers, and providing the access code of 10088995. The replay will begin as soon as the final transcript is available, and end at 12 a.m. ET on August 3. An archive of the webcast will be available for one year on the Investor Relations section of the Company's website (www.wesbanco.com).
Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a multi-state, bank holding company with total assets of approximately $8.4 billion (as of June 30, 2016). WesBanco is a diversified and well-balanced financial services institution, with a community bank at its core, built upon a strong legacy of credit and risk management. WesBanco has meaningful market share across its key geographies maintained by its commitment to dedicated customer service and solid fee-based businesses. It also provides wealth management services through a century-old trust and wealth management business, with more than $3 billion of assets under management, and serves as registered investment advisor to a proprietary mutual fund family, the WesMark Funds. WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 141 financial centers in the states of Ohio, Pennsylvania, and West Virginia. In addition, WesBanco operates an insurance agency, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc.
Page 4
Forward-looking Statements:
Forward-looking statements in this report relating to WesBanco's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco's Form 10-K for the year ended December 31, 2015 and documents subsequently filed by WesBanco with the Securities and Exchange Commission ("SEC"), including WesBanco's Form 10-Q for the quarter ended March 31, 2016, which are available at the SEC's website, www.sec.gov or at WesBanco's website, www.wesbanco.com. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed in WesBanco's most recent Annual Report on Form 10-K filed with the SEC under "Risk Factors" in Part I, Item 1A. 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 and YCB may not be integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from the proposed merger of WesBanco and YCB may not be fully realized within the expected timeframes; disruption from the proposed merger of WesBanco and YCB may make it more difficult to maintain relationships with clients, associates, or suppliers; the required governmental approvals of the proposed merger may not be obtained on the expected terms and schedule; YCB's shareholders may not approve the proposed merger; 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 Federal Deposit Insurance Corporation, the SEC, the Financial Institution Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; 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.
Additional Information About the Merger and Where to Find It
In connection with the proposed merger with YCB, WesBanco filed with the SEC a Registration Statement on Form S-4, which was declared effective on July 18, 2016, that includes a Proxy Statement of YCB and a Prospectus of WesBanco, as well as other relevant documents concerning the proposed transaction. SHAREHOLDERS OF YCB AND OTHER INTERESTED PARTIES ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. The Proxy Statement/Prospectus will be mailed to shareholders of YCB on or about July 20, 2016. The YCB shareholder meeting is scheduled for August 19, 2016. In addition, the Registration Statement on Form S-4, which includes the Proxy Statements/Prospectus, and other related documents filed by WesBanco or YCB with the SEC may be obtained for free at the SEC's website at http://www.sec.gov, on the NASDAQ website at http://www.nasdaq.com and from either WesBanco's or YCB's website at http://www.wesbanco.com or http://www.yourcommunitybank.com, respectively.
Participants in the Solicitation
WesBanco and YCB and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of YCB in connection with the proposed merger. Information about the directors and executive officers of WesBanco is set forth in the proxy statement for WesBanco's 2016 annual meeting of shareholders, as filed with the SEC on March 11, 2016. Information about the directors and executive officers of YCB is set forth in the proxy statement for YCB's 2016 annual meeting of shareholders, as filed with the SEC on April 7, 2016. Information about any other persons who may, under the rules of the SEC, be considered participants in the solicitation of YCB shareholders in connection with the proposed merger are included in the Proxy Statement/Prospectus. You can obtain free copies of these documents from the SEC, WesBanco or YCB using the website information above. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
YCB SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS WITH RESPECT TO THE PROPOSED MERGER.
| | | | | | | | | | | | | | | |
| WESBANCO, INC. | | | | | | | | | | | |
| Consolidated Selected Financial Highlights | | | | | | | | | | | Page 5 |
| (unaudited, dollars in thousands, except shares and per share amounts) | | | | | | | | | | |
