| NEWS FOR IMMEDIATE RELEASE | |
| | | |
| October 25, 2016 | | For Further Information Contact: |
| | | |
| | | John Iannone |
| | | Vice President, Investor Relations |
| | | (304) 905-7021 |
| | | NASDAQ Symbol: WSBC |
| | | Website: www.wesbanco.com |
WesBanco Announces Third 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 nine months ended September 30, 2016. Net income for the nine months ended September 30, 2016 was $62.4 million or $1.61 per diluted share compared to $57.8 million or $1.55 per diluted share for the first nine months of 2015. Net income for the three months ended September 30, 2016 was $17.4 million, while diluted earnings per share were $0.44, compared to $22.2 million or $0.58 per diluted share for the third quarter of 2015. Excluding after-tax merger-related expenses (non-GAAP measure) for the nine months ended September 30, 2016, net income increased 6.7% to $69.3 million compared to $64.9 million for 2015, while diluted earnings per share totaled $1.79, compared to $1.75 per share for 2015. Excluding after-tax merger-related expenses (non-GAAP measure), net income for the three months ended September 30, 2016 was $23.9 million, while diluted earnings per share were $0.60, compared to $22.4 million or $0.58 per diluted share for the third quarter of 2015.
| | | For the Three Months Ended September 30, | | For the Nine Months Ended September 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) | | $ 23,859 | | $ 0.60 | | $ 22,368 | | $ 0.58 | | $ 69,292 | | $ 1.79 | | $ 64,931 | | $ 1.75 |
| Less: After tax merger-related expenses | | (6,424) | | (0.16) | | (120) | | - | | (6,875) | | (0.18) | | (7,171) | | (0.20) |
| Net income (GAAP) | | $ 17,435 | | $ 0.44 | | $ 22,248 | | $ 0.58 | | $ 62,417 | | $ 1.61 | | $ 57,760 | | $ 1.55 |
(1) Non-GAAP net income excludes after-tax merger related expenses. Non-GAAP measures are defined on page 12 under "Non-GAAP Financial Measures."
Financial results for Your Community Bankshares, Inc. ("YCB") were included in WesBanco's results after September 9, 2016, the date of the consummation of the merger. The merger, which was announced on May 3, 2016, was approved by all appropriate regulatory agencies and the shareholders of YCB before the end of August, permitting the transaction to be closed in slightly over four months. YCB, with approximately $1.5 billion of assets, was headquartered in New Albany, Indiana and operated through 34 financial centers in Indiana and Kentucky. The YCB merger meshes well with WesBanco's strategic growth plans and contiguous market expansion, and expands the WesBanco franchise into new attractive growth markets. WesBanco now has $9.8 billion in total assets and provides banking services through 174 branch locations in five states. WesBanco's results also include ESB Financial Corporation's ("ESB") results from February 10, 2015, the date of consummation of that merger.
"On September 9th, we welcomed the customers and employees of Your Community Bank into the WesBanco family," said Mr. Clossin. "We are excited about the opportunities in Indiana and Kentucky as we continue to execute upon our strategic growth plans, and we look forward to formally unveiling the WesBanco brand over the November 4th weekend in our newest markets. And, most importantly, we are eager to provide a broad array of products and services to our new retail and commercial customers while continuing to deliver the exceptional service to which they are accustomed."
Mr. Clossin added, "we are pleased with WesBanco's performance during the third quarter of 2016 as we continue to drive positive operating leverage in this extended lower for longer interest rate environment. Our team is executing well against its growth strategies while continuing to maintain tight control over discretionary expenses as demonstrated by the 118 basis point improvement in our year-to-date efficiency ratio."
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Financial Condition
Total assets at September 30, 2016 increased $1.4 billion or 16.1% compared to September 30, 2015 due to the acquisition of YCB. Excluding the acquisition, total assets decreased slightly as management focused on controlling overall growth in order to delay the financial impact of crossing $10 billion in assets. Portfolio loans increased $1.3 billion or 26.0% over the last twelve months with $1.0 billion from the YCB acquisition and $273.0 million, or 5.5% from organic loan growth. Expanded market areas and additional commercial personnel in our core markets provided the organic loan growth, which occurred primarily in commercial real estate, commercial and industrial and home equity lending categories, and was achieved through $1.4 billion in loan originations in the first nine months of 2016. Total business loan originations were up approximately 14% compared to the first nine months of 2015.
Total deposits increased $940.6 million or 15.2% during the last twelve months primarily due to the YCB acquisition. Organic total interest bearing and non-interest bearing demand deposits increased 8.9% and total organic deposits, excluding CDs, increased 1.4%. Through WesBanco's planned funding strategy, certain higher cost or single service CDs were intentionally allowed to run off. Total borrowings increased $162.8 million or 15.0% over the last twelve months, with $122.8 million due to the acquisition, and $36.4 million associated with organic Federal Home Loan Bank ("FHLB") borrowings as part of our stated balance sheet re-mix strategy.
WesBanco continues to maintain strong regulatory capital ratios after the YCB acquisition and implementation of the BASEL III capital standards. At September 30, 2016, Tier I leverage was 9.51%, Tier I Risk-Based capital was 12.95%, Total Risk-Based capital was 13.94% and the Common Equity Tier 1 capital ratio ("CET 1"), was 11.07%. 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. Reflecting the impact of the YCB acquisition, these ratios were down somewhat from June 30 levels, however they were higher than originally anticipated at the time of the May merger announcement. Total tangible equity to tangible assets (non-GAAP measure) was 8.26% at September 30, 2016, down 30 basis points from June 30 due to the acquisition, but increasing from 7.87% at September 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
While the provision for credit losses increased primarily due to loan growth, credit metrics continued to improve. The provision for credit losses increased to $2.2 million in the third quarter of 2016, compared to $1.8 million in the third quarter of 2015, while year-to-date the provision increased to $6.4 million from $5.8 million in the same period of 2015. Net charge-offs as a percentage of average portfolio loans of 0.20% in the third quarter of 2016 decreased from 0.30% in the third quarter of 2015. For the first nine months of 2016, net charge-offs as a percentage of average portfolio loans of 0.14% decreased from 0.24% in the same 2015 period.
Non-performing loans (including TDRs), criticized and classified loans and past due loans all improved as a percentage of total portfolio loans from the third quarter of 2015. Total non-performing loans were 0.63% of total loans at September 30, 2016, decreasing from 1.08% of total loans in the third quarter of 2015. Criticized and classified loans were 1.42% of total loans, improving from 1.65% at the end of the 2015 third quarter. Past due loans at September 30, 2016 were 0.32% of total loans, improving from 0.37% at September 30, 2015.
The allowance for loan losses represented 0.69% of total portfolio loans at September 30, 2016 compared to 0.82% as of December 31, 2015. If the acquired YCB and ESB loans (recorded at fair value at the date of acquisition of $1,714.1 million) were excluded from the ratio, the allowance would approximate 0.95% of the adjusted loan total at September 30, 2016 compared to 1.09% prior to the ESB acquisition.
Net Interest Income
Net interest income increased $1.4 million or 2.3% in the third quarter of 2016 compared to the same quarter of 2015 due to a 10.2% increase in average loan balances resulting in a 3.8% increase in average earning assets, partially offset by a 4 basis point decrease in the net interest margin. For the first nine months of 2016, net interest income increased $5.3 million or 3.0% from the acquisitions and from annualized organic loan growth of approximately 4.2%, reduced by a 14 basis point decline in the net interest margin.
The net interest margin decreased to 3.32% in the third quarter, compared to 3.36% in same quarter of 2015, but increased two basis points from the second quarter of 2016's 3.30%. The year-over-year decrease in the quarter's net interest margin is primarily due to a 9 basis point decrease for total loans due to repricing of existing loans at lower spreads, competitive pricing on new loans and the extended low interest rate environment. Mitigating this reduction is the aforementioned loan growth, which improves overall asset yields as average loan rates are generally higher than securities rates. Funding costs increased 11 basis points in the third quarter compared to the same quarter in 2015, primarily due to an increase in the percentage of total FHLB borrowings to 16.4% of interest bearing liabilities from 12.7% in 2015, as well as a 34 basis point increase in the average rate on these borrowings year-over-year. Average interest bearing deposits in the third quarter decreased by 3.5%, primarily due to the runoff of CDs. During 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
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percentage of total assets have been reduced from 29.8% at September 30, 2015 to 24.0% at September 30, 2016, while loans have increased as a percentage of total assets to 63.6%. Year-to-date, the decline in the margin of 14 basis points resulted from the same factors affecting the third quarter. Loan growth has assisted in maintaining the net interest margin at its present level despite lower loan yields and overall spread compression.
Non-Interest Income
For the third quarter of 2016, non-interest income increased $2.8 million or 15.6% compared to the 2015 third quarter. Trust fees increased $0.3 million or 5.6% compared to the third quarter of last year from increased total assets under management, higher estate fees and market improvements. Service charges on deposits increased $0.3 million or 7.0% through a larger customer deposit base from the addition of YCB. Net securities gains increased $0.6 million in the third quarter of 2016 compared to the third quarter of 2015, primarily due to realized gains resulting from the sale of mortgage-backed securities in the quarter. Net securities brokerage revenue decreased $0.5 million or 26.2% from staff restructuring and an emphasis on deposit retention. Other income increased $1.9 million in the third quarter due to $1.3 million of commercial customer loan swap fee income and improvement in various other income categories including mortgage banking gains. For the nine months ended September 30, 2016, non-interest income increased $5.6 million or 10.2%, reflecting similar trends as in the third quarter, while trust fees decreased 3.0% due to lower total assets under management and lower estate fees earlier in the year, electronic banking fees increased 5.8% and net gain on sales of mortgage loans increased 40.2%.
Non-Interest Expense
The following comments on non-interest expense exclude merger-related expenses in both years. Non-interest expense in the third quarter of 2016 grew $0.9 million or 2.0%, compared to the same quarter in 2015. For the first nine months, non-interest expense increased $3.7 million or 2.7%. With net revenue growth of 4.7% in the first nine months of 2016, this positive operating leverage helped to improve the efficiency ratio in 2016 to 56.1% from 57.3% in the 2015 period. For the third quarter, salaries and wages increased $1.4 million or 7.0% due to increased compensation expense related to an 18.3% increase in full-time equivalent employees, primarily in the third quarter of 2016 from the YCB acquisition, and routine annual adjustments to compensation. Employee benefits expense increased $0.2 million, primarily from increased deferred compensation expense. Marketing expense decreased $0.2 million as WesBanco focused on preparing for the introduction of YCB customers to our organization. The increase in non-interest expense for the first nine months of 2016 reflects similar trends as in the third quarter.
Financial Results Conference Call
WesBanco will also host a conference call to discuss the Company's financial results for the third quarter of 2016 at 1:30 p.m. ET on Wednesday, October 26, 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 888-347-6607, 855-669-9657 for Canadian callers, or 412-902-4290 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 10094264. The replay will begin at approximately 3:30 p.m. ET on October 26, and end at 12 a.m. ET on November 9. 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 $9.8 billion (as of September 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 174 financial centers in the states of Indiana, Kentucky, 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.
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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 quarters ended March 31 and June 30, 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 merger of WesBanco and YCB may not be fully realized within the expected timeframes; disruption from the merger of WesBanco and YCB 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 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.
| WESBANCO, INC. | | | | | | | | | | | |
| Consolidated Selected Financial Highlights | | | | | | | | | | | Page 5 |
| (unaudited, dollars in thousands, except shares and per share amounts) | | | | | | | | | | |
| | | | | For the Three Months Ended | | For the Nine Months Ended |
STATEMENT OF INCOME | September 30, | | September 30, |
| Interest and dividend income | 2016 | | 2015 | | % Change | | 2016 | | 2015 | | % Change |
| | Loans, including fees | $ 55,822 | | $ 51,876 | | 7.6 | | $ 160,858 | | $ 151,913 | | 5.9 |
| | Interest and dividends on securities: | | | | | | | | | | | |
| | | Taxable | 9,137 | | 10,251 | | (10.9) | | 29,129 | | 28,792 | | 1.2 |
| | | Tax-exempt | 4,559 | | 4,535 | | 0.5 | | 13,620 | | 12,120 | | 12.4 |
| | | | Total interest and dividends on securities | 13,696 | | 14,786 | | (7.4) | | 42,749 | | 40,912 | | 4.5 |
| | Other interest income | 574 | | 273 | | 110.3 | | 1,671 | | 1,227 | | 36.2 |
| Total interest and dividend income | 70,092 | | 66,935 | | 4.7 | | 205,278 | | 194,052 | | 5.8 |
| Interest expense | | | | | | | | | | | |
| | Interest bearing demand deposits | 691 | | 517 | | 33.7 | | 1,841 | | 1,425 | | 29.2 |
| | Money market deposits | 444 | | 485 | | (8.5) | | 1,350 | | 1,430 | | (5.6) |
| | Savings deposits | 173 | | 165 | | 4.8 | | 502 | | 475 | | 5.7 |
| | Certificates of deposit | 2,592 | | 2,662 | | (2.6) | | 7,835 | | 8,403 | | (6.8) |
| | | | Total interest expense on deposits | 3,900 | | 3,829 | | 1.9 | | 11,528 | | 11,733 | | (1.7) |
| | Federal Home Loan Bank borrowings | 3,005 | | 1,650 | | 82.1 | | 9,104 | | 3,157 | | 188.4 |
| | Other short-term borrowings | 118 | | 89 | | 32.6 | | 299 | | 254 | | 17.7 |
| | Subordinated debt and junior subordinated debt owed to unconsolidated subsidiary trusts | 1,043 | | 758 | | 37.6 | | 2,706 | | 2,541 | | 6.5 |
| | | | Total interest expense | 8,066 | | 6,326 | | 27.5 | | 23,637 | | 17,685 | | 33.7 |
| Net interest income | 62,026 | | 60,609 | | 2.3 | | 181,641 | | 176,367 | | 3.0 |
| | Provision for credit losses | 2,214 | | 1,798 | | 23.1 | | 6,350 | | 5,768 | | 10.1 |
| Net interest income after provision for credit losses | 59,812 | | 58,811 | | 1.7 | | 175,291 | | 170,599 | | 2.8 |
| Non-interest income | | | | | | | | | | | |
| | Trust fees | 5,413 | | 5,127 | | 5.6 | | 16,160 | | 16,656 | | (3.0) |
| | Service charges on deposits | 4,733 | | 4,425 | | 7.0 | | 12,861 | | 12,342 | | 4.2 |
| | Electronic banking fees | 3,945 | | 3,849 | | 2.5 | | 11,290 | | 10,670 | | 5.8 |
| | Net securities brokerage revenue | 1,473 | | 1,996 | | (26.2) | | 5,119 | | 5,897 | | (13.2) |
| | Bank-owned life insurance | 995 | | 1,021 | | (2.5) | | 2,910 | | 3,264 | | (10.8) |
| | Net gains on sales of mortgage loans | 814 | | 779 | | 4.5 | | 2,045 | | 1,459 | | 40.2 |
| | Net securities gains | 598 | | 47 | | 1,172.3 | | 2,293 | | 69 | | 3,223.2 |
| | Net gain/(loss) on other real estate owned and other assets | 184 | | (18) | | 1,122.2 | | 380 | | 167 | | 127.5 |
| | Other income | 2,862 | | 960 | | 198.1 | | 6,943 | | 3,916 | | 77.3 |
| | | | Total non-interest income | 21,017 | | 18,186 | | 15.6 | | 60,001 | | 54,440 | | 10.2 |
| Non-interest expense | | | | | | | | | | | |
| | Salaries and wages | 21,225 | | 19,832 | | 7.0 | | 60,136 | | 57,468 | | 4.6 |
| | Employee benefits | 6,275 | | 6,028 | | 4.1 | | 20,684 | | 20,151 | | 2.6 |
| | Net occupancy | 3,647 | | 3,533 | | 3.2 | | 10,459 | | 10,298 | | 1.6 |
| | Equipment | 3,557 | | 3,731 | | (4.7) | | 10,387 | | 9,689 | | 7.2 |
| | Marketing | 1,295 | | 1,514 | | (14.5) | | 3,876 | | 4,221 | | (8.2) |
| | FDIC insurance | 961 | | 1,064 | | (9.7) | | 3,225 | | 3,014 | | 7.0 |
| | Amortization of intangible assets | 837 | | 815 | | 2.7 | | 2,263 | | 2,325 | | (2.7) |
| | Restructuring and merger-related expenses | 9,883 | | 185 | | 5,242.2 | | 10,577 | | 11,033 | | (4.1) |
| | Other operating expenses | 9,921 | | 10,279 | | (3.5) | | 28,696 | | 28,830 | | (0.5) |
| | | | Total non-interest expense | 57,601 | | 46,981 | | 22.6 | | 150,303 | | 147,029 | | 2.2 |
| Income before provision for income taxes | 23,228 | | 30,016 | | (22.6) | | 84,989 | | 78,010 | | 8.9 |
| | Provision for income taxes | 5,793 | | 7,768 | | (25.4) | | 22,572 | | 20,250 | | 11.5 |
| Net Income | $ 17,435 | | $ 22,248 | | (21.6) | | $ 62,417 | | $ 57,760 | | 8.1 |
| | | | | | | | | | | | | | | |
| Taxable equivalent net interest income | $ 64,481 | | $ 63,051 | | 2.3 | | $ 188,975 | | $ 182,893 | | 3.3 |
| | | | | | | | | | | | | | | |
Per common share data | | | | | | | | | | | |
| Net income per common share - basic | $ 0.44 | | $ 0.58 | | (24.1) | | $ 1.61 | | $ 1.55 | | 3.9 |
| Net income per common share - diluted | 0.44 | | 0.58 | | (24.1) | | 1.61 | | 1.55 | | 3.9 |
| Dividends declared | 0.24 | | 0.23 | | 4.3 | | 0.72 | | 0.69 | | 4.3 |
| Book value (period end) | | | | | | | 30.71 | | 28.97 | | 6.0 |
| Tangible book value (period end) (1) | | | | | | | 17.38 | | 16.27 | | 6.8 |
| Average common shares outstanding - basic | 39,715,516 | | 38,523,593 | | 3.1 | | 38,828,618 | | 37,144,783 | | 4.5 |
| Average common shares outstanding - diluted | 39,743,291 | | 38,556,995 | | 3.1 | | 38,855,453 | | 37,204,114 | | 4.4 |
| Period end common shares outstanding | 43,860,883 | | 38,517,542 | | 13.9 | | 43,860,883 | | 38,517,542 | | 13.9 |
(1) See non-GAAP financial measures for additional information relating to the calculation of this item.
(1) See non-GAAP financial measures for additional information relating to the calculation of this item.
(1) Tax effected at 35%.
