| Company Contact John Iannone Vice President, Investor Relations WesBanco, Inc. 304-905-7021 |
WesBanco Announces Second Quarter 2018 Net Income
Wheeling, WV, July 23, 2018 – WesBanco, Inc. ("WesBanco") (Nasdaq: WSBC), a diversified, multi-state bank holding company, today announced net income and related earnings per share for the three and six months ended June 30, 2018. Net income for the three months ended June 30, 2018 was $33.2 million, with diluted earnings per share of $0.71, compared to $26.3 million and $0.60 per diluted share, respectively, for the second quarter of 2017. For the six months ended June 30, 2018, net income was $66.7 million, or $1.47 per diluted share, compared to $52.2 million, or $1.19 per diluted share, for the 2017 period. Net Income excluding after-tax merger-related expenses for the three months ended June 30, 2018, increased 42.2% year-over-year to $37.4 million, or $0.80 per diluted share as compared to $0.60 per diluted share in the prior year quarter (non-GAAP measures). On the same basis, net income for the six months ended June 30, 2018 increased 35.4% year-over-year to $71.2 million, or $1.57 per diluted share versus $1.19 per diluted share in the prior year period (non-GAAP measures).
| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| (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) | $ 37,445 | | $ 0.80 | | $ 26,341 | | $ 0.60 | | $ 71,167 | | $ 1.57 | | $ 52,547 | | $ 1.19 |
| Less: After tax merger-related expenses | (4,276) | | (0.09) | | - | | - | | (4,469) | | (0.10) | | (319) | | - |
| Net income (GAAP) | $ 33,169 | | $ 0.71 | | $ 26,341 | | $ 0.60 | | $ 66,698 | | $ 1.47 | | $ 52,228 | | $ 1.19 |
(1) See non-GAAP financial measures for additional information relating to the calculation of these items. | | | |
On April 5, 2018, WesBanco consummated the merger with First Sentry Bancshares, Inc. ("FTSB"), a bank holding company headquartered in Huntington, WV with $706 million in assets, excluding goodwill. Financial results for FTSB have been included in WesBanco's results subsequent to the merger date of April 5, 2018.
Financial and operational highlights:
| · | Execution of well-defined long-term growth strategies driving strong profitability |
| o | Year-to-date income before provisions for credit losses and income taxes increased 9.4% year-over-year, or 16.0% when excluding merger-related costs |
| · | Solid expense management as demonstrated by a year-to-date efficiency ratio of 54.68% (non-GAAP measure) |
| · | Continued strength across key credit quality metrics |
| · | Successful completion of the merger with FTSB and conversion of its data processing system |
| · | On July 11th, announced receipt of all necessary regulatory approvals for the merger with Farmers Capital Bank Corporation ("FFKT"), pursuant to the merger agreement dated April 19, 2018 |
| o | In addition, today, the shareholders of FFKT approved the merger with and into WesBanco, Inc. |
"We are pleased with WesBanco's performance during the second quarter of 2018 as we reported net earnings of $0.80 per share, when excluding merger-related costs," said Todd F. Clossin, President and Chief Executive Officer of WesBanco. "We were able to deliver these record results by remaining focused on generating positive operating leverage and profitability through effective execution of our strategies related to long-term growth, expense management, and strategic acquisitions."
Mr. Clossin added, "We successfully executed upon our $10 billion asset threshold strategy as we welcomed the customers and employees of First Sentry into WesBanco on April 5th. Furthermore, through disciplined growth, meeting customer needs efficiently and effectively, and leveraging our core deposit advantage while maintaining our foundation of strong credit standards and diligent expense management we will continue delivering long-term shareholder value."
Balance Sheet
Portfolio loans of $6.8 billion, as of June 30, 2018, increased 6.3% when compared to the prior year period due to the acquisition of FTSB. Total organic loan growth was flat year-over-year resulting from continued targeted reductions in the consumer portfolio to reduce its risk profile and elevated levels of commercial real estate loans moving to an aggressive secondary financing market. Solid new loan production during the second quarter of 2018, as well as our lending diversification strategy, helped to offset those loan category reductions. Both the commercial & industrial and residential mortgage loan categories reported low single-digit organic loan growth year-over-year. Total deposits increased 8.4% year-over-year to $7.7 billion due to the FTSB acquisition. Continuing to reflect the strength of our legacy footprint, total deposits, excluding CDs, increased 4.9% organically, driven by 6.0% organic growth in interest bearing and non-interest bearing demand deposits.
Credit Quality
Our strong legacy of credit and risk management is reflected in the strength of our credit quality ratios as we continue to focus on prudent lending standards. As of June 30, 2018, despite the addition of approximately $450 million of loans from the acquisition of FTSB, non-performing assets, past due loans, and criticized and classified loans decreased year-over-year on both an absolute dollar basis and as a percentage of the portfolio. Non-performing assets as a percentage of total assets of 0.39%, non-performing loans as a percentage of total portfolio loans of 0.57%, and annualized net charge-offs as a percentage of average portfolio loans of 0.03% have continued to show improvements and have declined to the lowest levels in at least five quarters. Further reflecting the consistent high quality of the loan portfolio, the provision for credit losses decreased from $2.4 million in the second quarter of 2017 to $1.7 million in the current quarter.
Net Interest Margin and Income
The net interest margin for the second quarter of 2018 declined two basis points year-over-year to 3.43% which was primarily driven by higher funding costs, and asset mix changes, as total securities now represent 25.9% of total assets, compared to 23.1% last year. Also contributing to the net interest margin decrease was a six basis point reduction related to the lower tax-equivalency of the state and local municipal tax-exempt securities resulting from the "Tax Cuts and Jobs Act". The increase in the cost of interest bearing liabilities is primarily due to higher rates for interest bearing public funds, higher tier money market accounts, and Federal Home Loan Bank and other borrowings. Accretion from prior acquisitions benefited the second quarter net interest margin by approximately 12 basis points, as compared to eight basis points in the prior year period.
Net interest income increased $10.2 million, or 14.2%, during the second quarter of 2018 as compared to the same quarter of 2017 due to a 12.4% increase in average total earning assets, primarily driven by the acquisition of FTSB and related purchase accounting income. For the six months ended June 30, 2018, net interest income increased $12.7 million, or 8.9%, due to higher average total earning assets from a larger investment portfolio and the earning assets acquired from FTSB.
Non-Interest Income
For the second quarter of 2018, non-interest income of $23.4 million increased $1.3 million, or 5.8%, from the second quarter of 2017, driven by higher electronic banking fees and mortgage banking income. The $0.7 million increase in electronic banking fees was driven by higher transaction volumes and an ATM fee increase. Residential mortgage origination volumes increased 33% year-over-year during the second quarter, which drove the $0.7 million increase in mortgage banking income.
For the six months ended June 30, 2018, non-interest income increased $2.5 million, or 5.5%. The primary drivers of this increase were higher bank-owned life insurance due to higher death benefits received during the first quarter of 2018, and higher electronic banking fees, as discussed above.
Non-Interest Expense
Total operating expenses continued to be well-controlled during the second quarter of 2018. Excluding merger-related expenses, non-interest expense increased $2.2 million, or 4.0%, compared to the prior year period. This year-over-year increase is due to higher salaries and wages, which increased $3.3 million primarily due to the higher staffing levels from the acquisition of FTSB. This increase was more than offset by strong discretionary expense management across most other expense categories.
Excluding merger-related expenses in both years, non-interest expense during the first half of 2018 increased $2.7 million, or 2.4%, compared to the prior year period, reflecting the acquisition of FTSB, partially offset by strong expense management.
Provision for Income Taxes
The effective income tax rate and associated provision for income taxes for the second quarter of 2018 are reflective of the recently enacted "Tax Cuts and Jobs Act", which lowered the statutory Federal income tax rate for corporations to 21%. During the second quarter, the effective tax rate was 18.1% as compared to 26.8% last year, while the provision for income taxes decreased $2.3 million to $7.3 million, despite higher year-over-year pre-tax income.
Capital
WesBanco continues to maintain strong regulatory capital ratios as both consolidated and bank-level regulatory capital ratios are well above the applicable "well-capitalized" standards promulgated by bank regulators and the BASEL III capital standards. At June 30, 2018, Tier I leverage was 10.21%, Tier I Risk-Based capital was 14.26%, Total Risk-Based capital was 15.26%, and the Common Equity Tier 1 capital ratio ("CET 1") was 12.38%. Record earnings achieved during 2017, strong regulatory capital and liquidity positions, and solid execution on well-defined long-term operational and growth strategies enabled WesBanco to increase the quarterly cash dividend by 11.5% to $0.29 per share during February of this year. This is the eleventh increase over the last eight years, representing a cumulative increase of 107%.
Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the second quarter of 2018 at 9:00 a.m. ET on Tuesday, July 24, 2018. 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 10115493. The replay will begin at approximately 11:00 a.m. ET on July 24, and end at 12 a.m. ET on August 7, 2018. An archive of the webcast will be available for one year on the Investor Relations section of the Company's website (www.wesbanco.com).
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, 2017 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, 2018, 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, FTSB and FFKT may not be integrated successfully or such integration may take longer to accomplish than excepted; the expected cost savings and any revenue synergies from the merger of WesBanco, FTSB and FFKT may not be fully realized within the expected timeframes; disruption from the merger of WesBanco, FTSB and FFKT 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.
About WesBanco, Inc.
Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a multi-state, bank holding company with total assets of approximately $10.9 billion (as of June 30, 2018). 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 approximately $4.0 billion of assets under management (as of June 30, 2018), and serves as registered investment advisor to a proprietary mutual fund family, the WesMark Funds. WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 177 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.
| WESBANCO, INC. | | | | | | | | | | | |
| Consolidated Selected Financial Highlights | | | | | | | | | | | Page 4 |
| (unaudited, dollars in thousands, except shares and per share amounts) | | | | | | | | |
| | | Three Months Ended | | Year to Date |
| | | June 30, | | Mar. 31, | | Dec. 31, | | Sept. 30, | | June 30, | | June 30, |
| (unaudited, dollars in thousands, except shares and per share amounts) | 2018 | | 2018 | | 2017 | | 2017 | | 2017 | | 2018 | 2017 |
| Return on average assets, excluding after-tax merger-related expenses and net deferred tax asset revaluation: |
| | Net income (annualized) | $ 133,039 | | $ 135,979 | | $ 63,068 | | $ 104,566 | | $ 105,653 | | $ 134,501 | $ 105,322 |
| | Plus: after-tax merger-related expenses (annualized) (1) | 17,150 | | 784 | | 1,170 | | - | | - | | 9,012 | 643 |
| | Plus: net deferred tax asset revaluation (annualized) | - | | - | | 50,703 | | - | | - | | - | - |
| | Net income excluding after-tax merger-related expenses and net deferred tax asset revaluation (annualized) | 150,189 | | 136,763 | | 114,941 | | 104,566 | | 105,653 | | 143,513 | 105,965 |
| | | | | | | | | | | | | | |
| | Average total assets | $ 10,918,731 | | $ 9,993,364 | | $ 9,907,944 | | $ 9,897,487 | | $ 9,828,475 | | $ 10,458,602 | $ 9,805,106 |
| | | | | | | | | | | | | | |
| Return on average tangible assets, excluding after-tax merger-related expenses and net deferred tax asset revaluation | 1.38% | | 1.37% | | 1.16% | | 1.06% | | 1.07% | | 1.37% | 1.08% |
| | | | | | | | | | | | | | |
| Return on average equity, excluding after-tax merger-related expenses and net deferred tax asset revaluation: |
| | Net income (annualized) | $ 133,039 | | $ 135,979 | | $ 63,068 | | $ 104,566 | | $ 105,653 | | $ 134,501 | $ 105,322 |
| | Plus: after-tax merger-related expenses (annualized) (1) | 17,150 | | 784 | | 1,170 | | - | | - | | 9,012 | 643 |
| | Plus: net deferred tax asset revaluation (annualized) | - | | - | | 50,703 | | - | | - | | - | - |
| | Net income excluding after-tax merger-related expenses and net deferred tax asset revaluation (annualized) | 150,189 | | 136,763 | | 114,941 | | 104,566 | | 105,653 | | 143,513 | 105,965 |
| | | | | | | | | | | | | | |
| | Average total shareholders' equity | 1,517,036 | | 1,401,271 | | 1,406,263 | | 1,393,965 | | 1,377,266 | | 1,459,472 | 1,367,489 |
| | | | | | | | | | | | | | |
| Return on average tangible equity, excluding after-tax merger-related expenses and net deferred tax asset revaluation | 9.90% | | 9.76% | | 8.17% | | 7.50% | | 7.67% | | 9.83% | 7.75% |
| | | | | | | | | | | | | | |
| Return on average tangible equity: | | | | | | | | | | | | |
| | Net income (annualized) | $ 133,039 | | $ 135,979 | | $ 63,068 | | $ 104,566 | | $ 105,653 | | $ 134,501 | $ 105,322 |
| | Plus: amortization of intangibles (annualized) (1) | 4,156 | | 3,479 | | 3,104 | | 3,154 | | 3,233 | | 3,819 | 3,294 |
| | Net income before amortization of intangibles (annualized) | 137,195 | | 139,458 | | 66,172 | | 107,720 | | 108,886 | | 138,320 | 108,616 |
| | | | | | | | | | | | | | |
| | Average total shareholders' equity | 1,517,036 | | 1,401,271 | | 1,406,263 | | 1,393,965 | | 1,377,266 | | 1,459,472 | 1,367,489 |
| | Less: average goodwill and other intangibles, net of def. tax liability | (652,318) | | (585,711) | | (584,227) | | (584,903) | | (585,057) | | (619,198) | (585,210) |
| | Average tangible equity | $ 864,718 | | $ 815,560 | | $ 822,036 | | $ 809,062 | | $ 792,209 | | $ 840,274 | $ 782,279 |
| | | | | | | | | | | | | | |
| Return on average tangible equity | 15.87% | | 17.10% | | 8.05% | | 13.31% | | 13.74% | | 16.46% | 13.88% |
| | | | | | | | | | | | | | |
| Return on average tangible equity, excluding after-tax merger-related expenses and net deferred tax asset revaluation: |
| | Net income (annualized) | $ 133,039 | | $ 135,979 | | $ 63,068 | | $ 104,566 | | $ 105,653 | | $ 134,501 | $ 105,322 |
| | Plus: after-tax merger-related expenses (annualized) (1) | 17,150 | | 784 | | 1,170 | | - | | - | | 9,012 | 643 |
| | Plus: net deferred tax asset revaluation (annualized) | - | | - | | 50,703 | | - | | - | | - | - |
| | Plus: amortization of intangibles (annualized) (1) | 4,156 | | 3,479 | | 3,104 | | 3,154 | | 3,233 | | 3,819 | 3,294 |
| | Net income before amortization of intangibles and excluding | | | | | | | |
| | after-tax merger-related expenses and net deferred tax asset revaluation (annualized) | 154,345 | | 140,242 | | 118,045 | | 107,720 | | 108,886 | | 147,332 | 109,259 |
| | | | | | | | | | | | | | |
| | Average total shareholders' equity | 1,517,036 | | 1,401,271 | | 1,406,263 | | 1,393,965 | | 1,377,266 | | 1,459,472 | 1,367,489 |
| | Less: average goodwill and other intangibles, net of def. tax liability | (652,318) | | (585,711) | | (584,227) | | (584,903) | | (585,057) | | (619,198) | (585,210) |
| | Average tangible equity | $ 864,718 | | $ 815,560 | | $ 822,036 | | $ 809,062 | | $ 792,209 | | $ 840,274 | $ 782,279 |
| | | | | | | | | | | | | | |
| Return on average tangible equity, excluding after-tax merger-related expenses and net deferred tax asset revaluation | 17.85% | | 17.20% | | 14.36% | | 13.31% | | 13.74% | | 17.53% | 13.97% |
| | | | | | | | | | | | | | |
| Efficiency ratio: | | | | | | | | | | | | |
| | Non-interest expense | $ 63,543 | | $ 54,571 | | $ 54,837 | | $ 55,754 | | $ 55,884 | | $ 118,114 | $ 110,268 |
| | Less: restructuring and merger-related expense | (5,412) | | (245) | | (454) | | - | | - | | (5,657) | (491) |
| | Non-interest expense excluding restructuring and merger-related expense | 58,131 | | 54,326 | | 54,383 | | 55,754 | | 55,884 | | 112,457 | 109,777 |
| | | | | | | | | | | | | | |
| | Net interest income on a fully taxable equivalent basis | 83,691 | | 74,577 | | 75,805 | | 76,872 | | 74,758 | | 158,165 | 148,111 |
| | Non-interest income | 23,408 | | 23,980 | | 22,934 | | 20,899 | | 22,122 | | 47,491 | 45,006 |
| | Net interest income on a fully taxable equivalent basis plus non-interest income | $ 107,099 | | $ 98,557 | | $ 98,739 | | $ 97,771 | | $ 96,880 | | $ 205,656 | $ 193,117 |
| | Efficiency Ratio | 54.28% | | 55.12% | | 55.08% | | 57.03% | | 57.68% | | 54.68% | 56.84% |
| | | | | | | | | | | | | | |
| Net income, excluding net deferred tax asset revaluation and after-tax merger-related expenses: |
| | Net income | $ 33,169 | | $ 33,529 | | $ 15,897 | | $ 26,356 | | $ 26,341 | | $ 66,698 | $ 52,228 |
| | Add: Net deferred tax asset revaluation | - | | - | | 12,780 | | - | | - | | - | - |
| | Add: After-tax merger-related expenses (1) | 4,276 | | 193 | | 295 | | - | | - | | 4,469 | 319 |
| Net income, excluding net deferred tax asset revaluation and after-tax merger-related expenses | $ 37,445 | | $ 33,722 | | $ 28,972 | | $ 26,356 | | $ 26,341 | | $ 71,167 | $ 52,547 |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Net income, excluding net deferred tax asset revaluation and after-tax merger-related expenses per diluted share: |
| | Net income per diluted share | $ 0.71 | | $ 0.76 | | $ 0.36 | | $ 0.60 | | $ 0.60 | | $ 1.47 | $ 1.19 |
| | Add: Net deferred tax asset revaluation per diluted share | - | | - | | 0.29 | | - | | - | | - | - |
| | Add: After-tax merger-related expenses per diluted share (1) | 0.09 | | - | | 0.01 | | - | | - | | 0.10 | - |
| Net income, excluding net deferred tax asset revaluation and after-tax merger-related expenses per diluted share | $ 0.80 | | $ 0.76 | | $ 0.66 | | $ 0.60 | | $ 0.60 | | $ 1.57 | $ 1.19 |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | Period End | | | |
| | | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | | |
| | | 2018 | | 2018 | | 2017 | | 2017 | | 2017 | | | |
| Tangible book value per share: | | | | | | | | | | | | |
| | Total shareholders' equity | $ 1,524,106 | | $ 1,403,026 | | $ 1,395,321 | | $ 1,394,558 | | $ 1,377,537 | | | |
| | Less: goodwill and other intangible assets, net of def. tax liability | (657,111) | | (585,316) | | (583,903) | | (584,543) | | (585,195) | | | |
| | Tangible equity | 866,995 | | 817,710 | | 811,418 | | 810,015 | | 792,342 | | | |
| | | | | | | | | | | | | | |
| | Common shares outstanding | 46,643,250 | | 44,060,957 | | 44,043,244 | | 44,033,585 | | 44,031,335 | | | |
| | | | | | | | | | | | | | |
| Tangible book value per share | $ 18.59 | | $ 18.56 | | $ 18.42 | | $ 18.40 | | $ 17.99 | | | |
| | | | | | | | | | | | | | |
| Tangible equity to tangible assets: | | | | | | | | | | | |
| | Total shareholders' equity | $ 1,524,106 | | $ 1,403,026 | | $ 1,395,321 | | $ 1,394,558 | | $ 1,377,537 | | | |
| | Less: goodwill and other intangible assets, net of def. tax liability | (657,111) | | (585,316) | | (583,903) | | (584,543) | | (585,195) | | | |
| | Tangible equity | 866,995 | | 817,710 | | 811,418 | | 810,015 | | 792,342 | | | |
| | | | | | | | | | | | | | |
| | Total assets | 10,946,584 | | 10,245,419 | | 9,816,178 | | 9,918,277 | | 9,874,010 | | | |
| | Less: goodwill and other intangible assets, net of def. tax liability | (657,111) | | (585,316) | | (583,903) | | (584,543) | | (585,195) | | | |
| | Tangible assets | $ 10,289,473 | | $ 9,660,103 | | $ 9,232,275 | | $ 9,333,734 | | $ 9,288,815 | | | |
| | | | | | | | | | | | | | |
| Tangible equity to tangible assets | 8.43% | | 8.46% | | 8.79% | | 8.68% | | 8.53% | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| (1) Tax effected at 21% for the periods in 2018 and 35% for all prior periods. |
