John IannoneVice President, Investor Relations304-905-7021 Investor Presentation (Q4 2017)(WSBC financials as of Q3 2017)
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, 2016 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, June 30, and September 30, 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 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, 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. Forward-Looking Statements *
* Who and Where We Are Founded in 1870$9.9 billion in assetsStrong community banking rootsHeadquartered in Wheeling, WVStrong market positions across legacy and diverse, major metropolitan marketsBalanced market distributionStrong demographic trends across footprintDiversified and well-balancedMultiple revenue generation engines100-year old trust businessProprietary mutual fund familyStrong credit quality and regulatory complianceWell-defined growth strategies Strong Market Positions in Major Markets Broad and Balanced Market Distribution Note: asset, location, loan, & deposit data as of 9/30/2017; market share based on 2017 MSA deposit rankings (source: S&P Global) (approximated on map by circles) (Pittsburgh MSA excludes BNY Mellon; Columbus MSA excludes single Wells Fargo branch & Nationwide Insurance) #18 #12 #15 #2 #10 #10 #3
* Key Differentiators Emerging financial services company with a community bank at its coreDiversified revenue growth engines with a critical focus on credit qualityWell-balanced loan and deposit distribution across broad footprintRobust legacy market share combined with strong market positions across diverse metropolitan marketsStrong legacy of credit and risk managementSolid, and growing, non-interest income generation$3.9B of assets under management, including $0.9B in our WesMark FundsYear-to-date operating non-interest income increased 14% year-over-yearFocus on customer service to ensure relationship value that meets all customer needs efficiently and effectivelyStrong expense management culture with a year-to-date efficiency ratio of 56.9%, while executing on long-term growth strategies Note: market share based on 2017 MSA deposit rankings (source: S&P Global); financial data as of quarter ending 9/30/2017 (operating non-interest income as of year-to-date period ending 9/30/17); please see the reconciliations to GAAP results in the appendix
* Investment Rationale Well-balanced financial services company with a diversified earnings stream and a strong legacy of credit and risk managementDisciplined growth, balanced by a fundamental focus on expense management, that delivers positive operating leverage and increases shareholder valueWell-defined growth and $10 billion asset threshold strategies for long-term successFocus on shareholder value through earnings and dividend growthFavorable asset quality and operating metrics when compared to peersStock trades at a 1-2x multiple discount – despite favorable operating metrics Well-positioned for continued, high-quality growth withstrong upside market appreciation potential Note: multiple discount based on stock prices and consensus estimates (current year and next year) as of 10/30/17 (source: FactSet)
Growth Strategy
* Long-Term Growth Strategies Diversified loan portfolio with a focus on Commercial & Industrial (C&I) and home equity lendingIncreased productivity from and enhancements to the commercial lending teamUtilizing financial center network to support home equity lendingLong history of strong wealth management capabilitiesProprietary mutual funds, and a century of trust experienceEstablished wealth management services key to fee income growth strategyTraditional retail banking service strategiesFocus on customer service and convenienceCustomer needs-based product evaluation and delivery through various channels and cross-disciplinesStrong culture of expense management Focus on delivering positive operating leverage while making necessary growth-oriented and risk-prevention investmentsFranchise-enhancing expansion in contiguous markets
* Diversified Loan Portfolio Focus on strategic growth, diversification, and credit qualityExpansion of Commercial and Industrial (C&I) and HELOC portfoliosTargeted reductions in consumer portfolio to reduce risk profileFull suite of treasury management products, including international services, foreign exchange, and enhanced wire and lockbox capabilitiesAverage loans to average deposits ratio of 90.4% provides significant opportunity for continued loan growthManageable lending exposure, with no concentrations, to the energy-related, hotel, and retail industries $6.4 Billion Loan Portfolio Note: loan and deposit data as of 9/30/17; CAGR based on 9/30/12; organic CAGR excludes loans acquired from Your Community Bankshares (9/9/16), ESB Financial (2/10/15), and Fidelity Bancorp (11/30/12) Five-Year CAGR Loan CategoryC&IHELOCResidential R/EComm’l R/E (Total)Consumer Total20%16%15%12%7% Organic11%10%3%5%(7%)
Private Banking$500MM in private banking loans and deposits1,600+ relationships Growth opportunities from shale-related private wealth managementExpansion in Kentucky and Indiana * Strong Wealth Management Capabilities Note: assets and clients as of 9/30/17; chart financials as of 12/31 unless otherwise stated Private Banking Loans and Deposits(as of 12/31) ($MM) Trust & Investments$3.9B of trust and mutual fund assets under management5,000+ relationshipsGrowth opportunities from shale-related private wealth managementExpansion in Kentucky and IndianaWesMark funds Securities BrokerageSecurities investment salesLicensed banker programInvestment advisory servicesRegional player/coach programExpand external business development opportunitiesExpansion in Kentucky and Indiana CAGR52% InsurancePersonal, commercial, title, health, and lifeExpand title business in all marketsApplied quotation software utilization (personal)TPA services for small business healthcare plans Trust Assets(Market Value as of 12/31) ($B) CAGR4% `
* Retail Banking Strategies Efficient financial center network that provides a core funding advantageEffective staff management and technology utilization supported by centralized, low-cost back office functionsUtilizing network to support residential mortgage, home equity lending, and business banking, as well as wealth management products and servicesTransitioning financial center personnel from transaction-based to needs-based sales activityFull integration of CRM system to track relationships and referralsCenters in key markets have bankers licensed to offer investment productsMajority of urban center managers have completed or are enrolled in our Business Banking Academy program Growth in demand deposits, business banking loans, and e-banking feesContinuous reviews for financial center optimizationTechnology deployments and an omni-channel distribution modelSince 2012, closed eleven offices, downsized five, and opened or moved four offices in more attractive locations Note: location data as of 9/30/2017
* Strong Culture of Expense Management Fundamental focus on expense management to deliver positive operating leverage and increase shareholder valueScalable technology infrastructure supports both organic and acquisition-related growth without significant additional investmentEmphasis on technology and software to streamline and improve processes, reduce travel cost, and enhance communicationIntroduced software and cost control tools to enhance overall combined purchasing efforts and to better manage travel expensesRegular review of all operational and information technology contracts and services to ensure quality while controlling costs
* Franchise Expansion Targeted acquisitions in existing markets and new higher-growth metro areasCritical, long-term focus on shareholder returnStrong capital and liquidity, along with strong regulatory compliance processes, provides ability to execute transactions quickly Diligent efforts to maintain a community bank oriented value-based approach to our marketsHistory of successful acquisitions that have improved earnings Contiguous Markets Radius Recent Acquisitions YCB: announced May-16; closed Sep-16ESB: announced Oct-14; closed Feb-15Fidelity: announced Jul-12; closed Nov-12AmTrust (5 branches): announced Jan-09; closed Mar-09Oak Hill: announced Jul-07; closed Nov-07
Current environment does not change stated plans or infrastructure buildMethodically making the necessary investments, and believe are well-positioned from staffing, infrastructure development, process, compliance, and CRA perspectivesLiquidity, loan, and capital stress testing in preparation for DFAST reportingMajority of preparatory costs (staff, software, consulting) have been incurred to-date, and currently anticipate no large, single-period investment requirementContinuing to monitor and assess the timing and impact of crossingWhile currently ready to cross the threshold, anticipate crossing sometime during the next one to two years, without having to constrain loan growthPrefer to cross via a franchise-enhancing acquisition(s) within a six-hour drive of Wheeling headquarters either through a combination of several small- to mid-sized deals, or a larger, several billion dollar asset transactionPotential acquisition must enhance shareholder value and be accretive to help cover reduced interchange income and additional FDIC expense $10 Billion Asset Threshold Plan *
* Favorable Operating Metrics Disciplined execution upon growth strategies providing favorable performance versus peer group across key operating metrics Note: financial data as of 12/31; current YTD data as of 9/30/2017; please see the reconciliations in the appendix; peer group includes SRCE, CHFC, CBU, EGBN, FNB, FCF, FFBC, FRME, NBTB, ONB, PRK, PNFP, STBA, TMP, TOWN, UBSH, UBSI; peer ratios from S&P Global and company reports (as of 10/31/17) and represent simple averages for ROTCE & efficiency ratio, and weighted averages for ROAA & NPAs to Assets Efficiency Ratio Return on Average Assets Return on Average Tangible Equity Non-Performing Assets to Total Assets
Returning Value to Shareholders Focus on appropriate capital allocation to provide flexibility while continuing to enhance shareholder valueQ3 2017 dividend payout ratio of 43.3% provides upside potentialQ3 2017 dividend yield 2.6%, compared to 1.6% for bank group * Note: dividend through August 2017 declaration announcement; WSBC dividend payout ratio based on earnings per share excluding restructuring & merger-related costs; WSBC dividend yield based upon 10/30/17 closing stock price of $40.08; bank group ($5B to $10B total assets) dividend data as of 3Q2017 (source as of 10/31/17: S&P Global) Tangible Book Value per Share ($) Quarterly Dividend per Share ($) +86% +52%
Financial Overview
* Financial and Operational Highlights – Q3 2017 Net income up 13.9% and EPS of $0.60 (excluding merger-related costs)Return on tangible common equity of 13.3% (excluding merger-related costs)Strong progress on our operational and growth strategies in order to maintain a strong financial institutionWell-positioned for success in any type of operating environmentInvesting in becoming a larger company while carefully managing costsCommitted to driving positive operating leverage and maintaining a strong efficiency ratio while balancing the necessary investments for crossing the $10 billion asset threshold and future growthEnhancing talent and product breadth for strategic long-term growthContinued strategy execution to diversify/strengthen loan portfolio qualityStrategic focus loan categories delivered mid-single digit year-over-year loan growth of 5.5% in total commercial lending and 4.3% in home equity lendingTargeted reductions in consumer portfolio (indirect lending) to reduce risk profileContinued sale of a higher percentage of residential real estate mortgages in the secondary market, which has benefit of increasing fee income Note: financial data as of quarter ending 9/30/2017, which reflects impact of the YCB merger (closed 9/9/2016), and compared to the quarter ending 9/30/2016; please see the reconciliations to GAAP results in the appendix
Financial Performance Summary (Non-GAAP) * excludes merger-related expensesall figures are three month ending figures; do not disclose year-to-date figuresNote: please see the reconciliations to GAAP results in the appendix; Your Community Bankshares merger closed September 9, 2016
Net Interest Margin During 2017, net interest margin (NIM) improvement has resulted from a combination of balance sheet remix strategy, the YCB acquisition, and recent Federal Reserve target federal funds rate increasesPositioned for asset sensitivity in a rising interest rate environmentDemand deposits have increased to 50% of total deposits (vs. 46% last year)Year-to-date total interest-bearing deposit costs have only increased 5 basis points year-over-year, benefiting from non-interest bearing deposits increasing to 26% of total deposits and, potentially, our core deposit funding advantageCompetitive pressures continue on loan pricing and non-pricing termsDecline in yield curve since the end of 2016 provides NIM expansion headwind * Net Interest Margin (FTE) Note: the “yield curve” represents the spread difference in the market yields for the 2-year and 10-year U.S. Treasury securities; the spread was ~125bp at 12/31/2016 and declined to ~80bp at 9/30/2017 (source: Federal Reserve H.15 Selected Interest Rates)
Interest Rate Sensitivity Positioned for asset sensitivity in a rising rate environment * Immediate Change in Interest Rates Change in Net Interest Incomefrom Base over One Year Change in Net Interest Incomefrom Base over One Year Immediate Change in Interest Rates December 31, 2016 September 30, 2017 +1% Rate Shock +3.1% +3.0% +2% Rate Shock +4.6% +5.0% +3% Rate Shock +4.7% +7.4% +2% Rate Ramp +3.2% +2.3% (1%) Rate Shock (2.3%) (3.0%) EVE +2% Rate Shock +6.7% (1.6%) EVE (1%) Rate Shock (9.8%) (2.9%) Note: “EVE” is the economic value of equity, which is defined as the market value of equity in various increasing and decreasing rate scenarios
Securities Portfolio Securities portfolio represents ~24% of total assetsScheduled maturities, calls, and select sales of short-term, lower-yielding securities to help manage risk and portfolio efficiency while funding loan growthProvides near-term flexibility to support loan growth, provide liquidity, and manage the size of the balance sheet under $10BPortfolio characteristics:No credit-related issuesFew callable agency and no high-premium mortgage-backed securitiesAverage tax-equivalent yield 2.99%Weighted average life ~4.1 years40% unpledged * Composition as of 9/30/2017 Total Securities = $2.3B Note: financial data as of 9/30/2017
Diversified Revenue Generation: Non-Interest Income Operating non-interest income contributed 23% of net revenue during Q3 2017 year-to-dateQ3 2017 operating non-interest income reflects:Growth in electronic banking and deposit service fees from a larger customer deposit base from new Indiana and Kentucky marketsHigher gains on mortgage sales from strategy to sell a higher percentage of residential mortgages in secondary marketTrust fees impacted by ~$(0.2MM) adjustment and lower estate feesOther income declined due to the prior year including higher commercial loan swap income * Note: operating non-interest income (excludes gain/loss on securities and on sale of OREO property) is a non-GAAP measure, please see the reconciliations to GAAP results in the appendix Operating Non-Interest Income ($MM) Year-to-Date
Strong legacy of credit and risk managementBased upon conservative underwriting standardsMature enterprise risk management program headed by Chief Risk Officer addressing key risks in all business lines and functional areasReports to board-level Risk CommitteeEnhancing strong compliance management systemStrong and scalable BSA/AML functionLiquidity, loan, and capital stress testing for post-$10 billion DFAST reportingStrong regulatory capital ratios well above regulatory requirementsSix consecutive “outstanding” CRA ratings since 2003 Risk Management and Regulatory Compliance * Basel III Tier 1 Risk-Based Capital Ratio Basel III Common Equity Tier 1 Capital Ratio Note: Your Community Bankshares merger closed September 9, 2016
Appendix
Stock Performance: Long-Term Cumulative Return * Note: cumulative return since WSBC IPO compared to the cumulative return for the S&P500 Index over the same time period
Executive Position Years in Banking Years atWSBC James Gardill Chairman of the Board 44* 44 Todd Clossin President & Chief Executive Officer 33 4 Robert Young EVP – Chief Financial Officer 31 16 Lynn Asensio EVP – Retail Administration 39 12 Ivan Burdine EVP – Chief Credit Officer 37 4 Jonathan Dargusch EVP – Wealth Management 36 7 Gregory Dugan EVP – Senior Operations Officer 40 38 Steve Lawrence EVP – Chief Internal Auditor 37 23 Michael Perkins EVP – Chief Risk & Administration Officer 22 22 Anthony Pietranton EVP – Human Resources 29** 4 Brent Richmond EVP – Treasury & Strategic Planning 32 15 Jayson Zatta EVP – Chief Banking Officer 31 9 Experienced and Stable Management Team * as legal counsel to WesBanco ** in financial services, including nine in banking *
Financial Performance Summary Trend – Annual * Efficiency Ratio (1) Net Income (1) ($MM) (1) excludes merger-related expensesNote: please see the reconciliations to GAAP results in the appendix; Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012 Return on Average Tangible Equity (1) Return on Average Assets (1)
Loan loss allowance decline due to improvement in credit quality Legacy Loan Loss Allowance and Total Loans Non-Performing Assets to Total Assets Net Charge-Offs as % of Average Loans NPAs to Total Loans, OREO & Repossessed Assets Diligent Focus on Credit Quality – Annual Trend * Note: please see the reconciliations to GAAP results in the appendix; Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012; “Legacy” as defined in WSBC’s ALLL model glossary are “loans that were originated by WesBanco Bank, Inc.”
Reconciliation: Efficiency Ratio * Note: “efficiency ratio” is non-interest expense excluding restructuring and merger-related expense divided by total income; FTE represents fully taxable equivalent; Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012
Reconciliation: Net Income and EPS (Diluted) * Note: Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012
* (1) three-, six-, and nine-month (as applicable) net income figures are annualizedNote: Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012 Reconciliation: Return on Average Assets
* (1) three-, six-, and nine-month (as applicable) net income figures are annualized; amortization of intangibles tax effected at 35%Note: Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012 Reconciliation: Return on Average Tangible Equity
Reconciliation: Operating Non-Interest Income * Note: Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012
* Note: Your Community Bankshares merger closed September 2016, ESB Financial merger closed February 2015, and Fidelity Bancorp merger closed November 2012; “Legacy” as defined in WSBC’s ALLL model glossary are “loans that were originated by WesBanco Bank, Inc.” Reconciliation: Legacy Loan Loss Allowance and Total Loans