WSBC - Earnings call transcript Q2 2018

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Operator

Good morning, ladies and gentlemen, welcome to the WesBanco Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will an opportunity to ask question. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to John Iannone, Vice President of Investor Relations. sir. ahead, go Please

John Iannone

Good earnings welcome conference Denise. second WesBanco quarter XXXX call. morning. you, to And Inc. Thank

Our second was Executive Bob quarter at Clossin, financial Financial and highlights President XXXX Chief available Vice wesbanco.com. earnings release, reconciliations is Executive today Officer. non-GAAP President which Leading of and the and financial are our Chief Young, measures, on issued call afternoon and yesterday website contains Todd consolidated and Officer;

of a our will this remarks, archive will session. Following website call begin available one-year. question-and-answer our opening on be An we for

statements. contemplated involve WesBanco’s such contained strategies, recent as for statements that ended conjunction by important expectations, Risk are and detailed XX-K Todd? are report actual Forward-looking subsequently the Safe Private XXXX. under by statements to Such SEC year this does XX-Q and results facts, from relating Factors in update that forward-looking SEC should including the in to in WesBanco any December Part could information uncertainties, which duty cause and factors those Reform well pursuant in statements. differ XA. subject to and filed to quarter Harbor annual most statements, not report resources WesBanco for X, this which the are XX, WesBanco’s forward-looking Item to the available and assume of the materially report Litigation be WesBanco plans, on of in the not as with documents of historical Investors Securities read WesBanco’s objectives, are Form those adequacy are website. provisions on cautioned risks Form XXXX, the XX-K Exchange intentions XXXX, Commission, Act Form made The Securities filed with XX, with March ended

Todd Clossin

well On credit expense ensure to success. XXXX. Good defining reviewing John. call, our everyone. we execute will call takeaways you, second continue of standards, from earnings Key morning that stream, a a are quarter our and today strong which enabling for are; upon shareholders upon results we’ll diversified the growth long-term be strategies the today’s Thanks build also

on We acquisition data by level net with XX, months associated profitability for quarter, focused June XXXX, as processing implementation record We're And billion six we effective and during million. performance improved savings with merger-related Corporation. our year-to-date XX.X%, share. income to to including any period, ratio average from the management long-term second average as assets the profitability return growth, operating return and strong and received performance diligent tangible which as of merger-related continue as pleased merger-related XX% of bank our standards. Net provision the $X.XX year-to-date million expenses excluding to costs as share, through leverage capital positive net and applicable as regulatory the remaining control, regulatory have for of generating strategies and First a generated on diluted III Furthermore, standards. combined excluding standards acquisitions. and including the or and our and to credit per million were profitability with by all Capital consolidated Bank to related three converging strategies, we ended cost asset strong to expense with of necessary efficiency excluding core strong $XX well delivered discretionary strategic XX% core its year-over-year solid results, merger pretax results Underlying quarter expense increased expenses ratios for these or months completed the diligent Basel regulators was XX% the well-capitalized and second our Bancshares successful $XX capital increased XX.X%, cost shareholder management execution taxes on focus income we income equity and $X.XX a with merger system and diluted the of we $XX before is year-over-year targeted regulatory bank on the record our basis for for to above and merger with year-over-year the points First X.XX%, capital XXX per income our the increased year-over-year Sentry. of before threshold losses Thus, and by promulgated Farmers ratios XX ratios approvals income credit core maintain Sentry businesses both demonstrated

operational growth upon execution our continued Our of and long-term dependent plans. remains well-defined success

credit other, and There investments, management ago. how maintaining cycle. doing the company inherent our of XXX upon are strategy on our increasing quality, a success but necessary operating especially loan support strategies our a quality and strength lending, complement at profitability, environment. making and fee them, and founded retail portfolio not on percentage a was of and our key acquisitions. change to diversified through commercial were many and risk delivering total elongated risk ensure an as emphasis compliance with on of leverage, is growth of Furthermore, operating pillars it principles achieve overtime, industrial this which a if they ways point two the several focused And equity each income prevention built home legacies and As not these years be of to components banking possible, is long-term profile would focus growth the franchise, our diversification growth and revenues expansion maintaining franchise net franchise strong high while enhancing risk of positive reminder, economic pillars and one building nearly culture in the profitability of not strong and oriented unwavering upon is regardless our

customer advantage leveraging We our shareholder through deposit effectively needs will core continue to and meeting deliver maintaining efficiently long-term standards. profitability and value and expense disciplined our while growth, credit and

organic the metrics benefits and which credit at loan near remain the During key lending lows historic diversification quality Total to through second our flat see we our strength growth year-over-year. of strategy. quarter, continued or across realized

this We to category loan continue in runoff auto the to not returns profile, indirect provide to the risk does consumer incurred. allow portfolio for as reduce loans risk our proper its

a are property loans property These of secondary seeing commercial outright favorable percentage level properties going We due to real to loan just and cost approximately owners market growth. also factors heightened valuations. of estate selling points two

residential pipelines the quality to We loan were are credit to an bit loan when continue have in by quarter our generated we and solid achieve at and during the growth growth would quarter. strong not have clearly levers offset few they other have to we However, developed commercial Why expected especially and strategy rate, the untapped going our to this portfolio. production end, our growth C&I and quarter liked from to loan more we game? growing playing we as and strengthened strengthen optimistic teams, years. standards have diversify overall the during which our last are we lower residential demonstrated our said, and we on of remain opportunities profitability, are That our the as lending

quarter high-growth markets month allows a eight legacy target our markets. our X%. we figures are of second when deposit, the advantage that funding certificates The year-over-year remain the experience core metropolitan in to which each growth to high organic to in reduce shale generation cost of strategy the lending deposits During currently energy continue us of impact deposit our robust of related in low excluding opportunities

a is wealth XX% deposits takes as relationship. management deposits deposits these that In in which While year of profitability. time An benefit it deposit our of the side helping funding XX% the represent advantage to demand compared the funding additional cost develop opportunities, of contain costs represent benefiting accounts to core and meantime, that’s and customer reside to now ago.

only non-interest-bearing basis fed deposits points, basis of rate as During same compared of time. our points increased over the the past XX has months, XX increases cost that XX total including to

profitability. There have control mentioned, this, As to two revenue are achieving on and we expense focused avenues remain I growth. delivering

are and have We managing costs. an done excellent discretionary job always

on fee fees throughout multiphase project Now, peer top year. to phases certain growth months our that we them income. certain fees our implemented to we are last fees amount are the revenue other become we Once by income will the later target we increasing dollars of as market transactions have fee several below initiated ATM rates waivers. this to initial closer additional implemented be project averages of average for industry to use few implemented, XXXX, who the fully customers A of the targeting opportunity reducing ATMs. by ago, the below moving believe implementing additional such phases we fee generate year non-WesBanco phase which and are million through and line Subsequent standards subsequent the

acquisitions over execution as we as few said strategy Before its our the do. anticipated I’d I Last like the threshold crossing Bob, asset dollar past quarters. acquisition to strategy few minutes we which merger and cross conversion to exactly XXXX threshold turn a announced or would processing small the highlight $XX and did on branch enhancing November, million of completed midsized Sentry planned Xth asset larger First transaction combination with April six and of our the we subsequently weekend. Last within either associated franchise a several hour consummated Bancshares we We we successful over via the headquarters call through take a billion during last announced this successfully several drive a our to we and to deals. data year, to our

banking franchise institutions begin all we value plans we community reposition Charleston, our approvals several service months Kentucky. Louisville, our were with Less with in and $XX a later, West the During sheet nicely should our and shareholder merger On the the as perfectly we existing of receipt billion These merger fit Wesbanco. this meaningful provide transactions necessary well appropriately, than and to planned focus quarter regulatory strategic shareholders Capital between year, yesterday anticipation two in as priced southern combining announced farmers balance crossing approve by edge of client to and of into assets. of markets. filling mergers XXth, and nicely more Virginia; our April Bank of enhance on our first The Corporation. strong of a scale the in banking three commercial announced in with with Farmers

from In in financial have grown institution fact the that in the now we be largest ninth ago to a presence two Kentucky having state. in years

family customers and going to Wesbanco our opportunities well to employees. of I'd expanded like and as our a forward as providing new first to banking of newest newest services, Finally, the with broader provide farmers for welcome array employees customers the both

results. new regional Bob. to Bob institution turn Young, financial and now core it the soundness. our and about bank and a opportunities the would continue like second is I on profitability excited as update community these Chief our term to for an with We’re Financial over focused on the its emergence to call financial services Officer quarter's

Bob Young

good and everyone. Todd year-over-year both pretax and displayed quarter, after-tax well as and in reported strong expense Thanks both earnings over morning, solid as We management, growth quarter year-over-year.

earnings XX, XX.X month net period XXXX, GAAP as For XX.X last the and percent compared six $X.XX or year. of per share income million, same diluted share June per diluted of reported to the ended $X.XX, the we million

expenses related average earnings assets million the merger increased X.XX% was after-tax $X.XX. in XX.X% core was to XX.X $X.XX diluted quarter of a to periods, Excluding per on net equity XX.XX%. quarter on for Year-to-date, average with tangible the share return both income return

expenses. excluding per XX.X ended share to June respectively, million after-tax months prior XX.X $X.XX, in diluted XX.X% million of reported income earnings the related have and $X.XX. we year of to GAAP income again, $X.XX, three would the million diluted compared and XX.X merger per XX, earnings increased increased as and XX.X% period. share net For Net Once XXXX, to

as results equity financial reminder, X.XX% average tangible quarter, average first been a to and XX.XX%, core included returns for Wesbanco's the date And and respectively. of results, Xth. were First subsequent the have merger Sentry the April For on assets in

XX.X to $XX the earlier. as prior June total the due to year portfolio billion grew the first the Turning X.X First X.X% growing in assets balance assets reflecting year-over-year Organic million we approximately prior of threshold. XXX quarter compared billion loans Furthermore, of was growth relation this total billion Sentry. loan as reflecting after as increased on increase total year First period, mentioned and Todd the from acquisition the asset the the now crossing Sentry securities our refocus of flat sheet, to of to beginning assets roughly of fact of to XX, portfolio, the earning acquisition in XXXX, year

non-confirming equivalency a targeted Reserve sell XX an residential family past primarily interest residential offset second benefit did the funding XX basis related We are continues municipal a continuing in to second impacting strong Tax during originations level the than asset percentage the local and basis curve quarter, nationwide, growth On to been increases the basis, The was Cuts its X XX year-over-year increase Jobs year mortgage increase the securities has year in we in slightly in to the set federal which of volume strategy amount and the into of our from secondary Act. is loans. yields however, residential the point Also the lower be have stronger due during Board's over residential much rate margin, to negatively originations quarter on tax range and between originations by mortgage our one held basis our the the continued the curve, of refinances. of which to we which mortgage Of yield resulting near loans margin reduced tax-exempt sheet despite the points lowest balance currently to the market; points and the mortgage X four the quarter. than portion market decade. in from of XX% seen costs to year-to-date reflect a more a to of to flattening declined state Federal a this funds higher net reduction the note, the the

increase deposits, purchase deposits, margin the funding federal the at points for which higher our year borrowings. net last compared funds basis points has certain only primarily increased deposit since of costs rates XX year-to-date XX demand June. increases points, bearing cost in prior for The in and year-over-year Excluding as the to XX interest-bearing funds just growth X.XX%. the this secured points basis the points including X basis of basis as basis loan this just beta liabilities interest total deposit year period, to Total representing accretion flat were accounting public deposit other XX% the non-interest-bearing primarily interest-bearing and a and is interest well XX interest-bearing federal home core was year-over-year. year-over-year due When reduction XXX are basis bank rate quarter up and points cost in

help expect contain overall remainder core still advantage funding our deposit throughout to funding to While the betas will year. of the deposit deposit cost, increase we

quarter the points before any the to anticipate currently XX second X accounting between of accretion we basis Lastly, points purchase per merger. half to Farmers be XXXX, basis from upcoming during impact

driven associated mortgage quarter income million loans ended June ATM as of to strategy originations, XXXX volumes fees X.X% XX, due higher banking year-over-year the total Turning prior gain which residential a on higher from for Todd of certain income originations fee as income. electronic secondary was fee income a fee sale year fee and increased the loans increased million X.X and the keeping volume sold with discussed. balance primarily percentage the per non-interest revenue, Electronic that to from from market by grew to well year-over-year, banking income in banking sold. Despite higher XX.X XX% banking increase an million, increase quarter X.X non-performing total XX-month the trailing in average mortgage declining a mortgage on income second due XX% sheet, our to the

during the On be expenses leverage, as second to focus profitability the operating and continued we on total Todd well-controlled expenses, subject of operating as highlighted, positive to continue improving quarter. operating

to salary the First prior higher salaries expenses, increased levels non-interest merger-related the X% Sentry, primarily to wages. expense This category due staffing X.X million to normal due X.X acquisition increases or million compared period and of annual employee and stock benefits This higher increased from annual a Excluding standard. year of management with pension accounting accruals the service most incentive categories. a mostly based new discretionary from plan and expense during according increase strong other higher costs by reallocation implemented offset is and quarter across expense the

Our costs of companywide in in XX.X%. year-to-date point controlling ratio year-over-year to is XXX basis dedication core efficiency the improvement operating our evident

X.X the as of of well of approximately to the of and as in XXXX loans addition have $XXX the XXXX Sentry. current evident million quality million of criticizing percentage our quality is management, dollar over Further near reflecting credit portfolio, of past in and year-over-year strength This measures despite XX, loans quarters. legacy as to an last million quarter. loan a or June the of the decreased First second credit total loans several classified Reflective historic of remained due and nonperforming decreased at credit on assets, absolute quality the credit further where of high our portfolio, now basis acquisition loan Turning capital. the risk X.X strong as in provision for the lows from quarter losses

Before call not current margins for industry. your that remainder on immune the our to I we the sensitivity, are from are Despite would of XXXX. impacting our like provide questions opening asset thoughts for interest the the factors some general outlook net across

a during Farmers We net anticipated of by higher expect interest to increase deposit Capital, the offset slight second betas. in partially half due acquisition of the XXXX margin our

Regarding operating First cost expenses half data completed last of and during expect approximately XX%, the Sentry processing obtained the we of have conversion still remainder with during approximately recently this XXXX. brand XX% the of and savings and year phased-in

evenly met haven't expansion expect across that’s quarters and to normal the merit be XXXX. consistent the level to our overall with in increases spread continue in margin midyear XXXX, somewhat We more

Lastly, XX.X% we from implemented, rate may market benefit in tax been to the February. had taxable XX.X%to our changes in we awarded anticipate potential that year strategies we effective be credits be to new announced that subject the certain full approximately income including tax

now the We questions. you Operator, your ready to could take are instructions. review please

Operator

Mr. will I

Young. Thank you.

from [Operator ahead. B. will session. Riley of FBR. The question-and-answer Steve the be first We go Moss will Instructions] begin Please now question

Steve Moss

commercial solid and on talk start growth demand commercial pipelines about off front us of you what expectations just just particularly there? industries here, loan seeing and to resi loan being are you want on talked for, kind the Just through

Todd Clossin

equipments, of to I the pretty C&I board plant expansions, industries part uncertainty there so sure on with the I trigger like is industry some pull would say tariffs, with businesses perspective, things much across out there’s reluctance some an on on we’re that. to on from it's out there the there regard regard would tell to the that, side going not what’s you

are I those energy teams industry, of the are into heavily positioned industry. our think up with particular each but that don’t are share seeing we that not lean in of So, anyone coming we opportunities our markets

Some people markets don’t think lend concentration were that a are one. look might good not When at it because something might wholesalers located, our you very with highways the that’s for you but distribution a that of systems lot we there so drive look manufacturers, at you warehousing. into got

looking So general at not the like out lots and seeing of have people more a look next pull they is get of trigger. and year stronger there the little amount we but just with a to opportunities like just are about economy, -- going couple strong pipelines a getting to of are we’re but before my borrowing, better tremendous clients certainty getting

Steve Moss

And expect and, hear. will or there turn on an then I'm indirect point to here. around perhaps, the that start you good Okay, growing? running it's a auto, that is rate obviously, wondering, interest off been

Todd Clossin

But to be side. piece and at focused we’re -- on a that going to X% watching the will top level, really you performer some get certain we’re of of our Yes the fairly portfolio small as home-equity now, indirect point stop. a is only that portfolio the the more so it's consumers down

continue I So down but to we’re the to drop. zero -- think going to indirect continue it take to will not

used it's homes not rather mid years. the RVs, the cards next that -- portfolio. over lot when home-equity mid-south solid and in home-equity growing I the mid XX I in indirect, strong the and be would I'd the rather good be west with ATVs next And the banks it's our it'd over I look size and think want be behind a where south. its motorcycles our the growth and that's in markets typically are then, to be mid-west years, and I rather XX

XX think question, your for will yet. original I that's we quite be us the that next point, not be years, some and right to but think to close strategy I answer over getting the there So balancing the there may

Steve Moss

little that a new And been. it the just rate lower a Bob, bit kind of good for because then the XXXX bit third like it's tax tax but question of not the of it's relative sounds like second going XXXX, or credits? here, market could range, I'm here where to just lower a on half wondering, is also go

Bob Young

that say point between percentage we those announced new this the When talked a normal quarter, couple the what you municipal bit think growth the exempt strategies. tax -- tax new given in percentage planning this or point caveats because the was years strategies, in state The earnings other little second of next the and I But had about on was one over -- taxable year. we for would earlier X primary I have the do market once credits say best portfolio year for X.X tax to analyzing when the the was other quarter tax range primarily I the that it would it higher we credit tax impact. effective markets rate. income impact

you what this point. is but only, range thinking had given caveat I at a I'm the that's So

Farmers, to much to prior an of that's rest don't rates, impact it tax but year. Farmers so similar As for I think going had on the of a the have effective

Operator

ahead. Stuart And of the KBW. next Lotz will go Please question from be

Stuart Lotz

of speedy approval FFKT the the on acquisition. Congratulations

when close modeling curious purposes. expect now Just that to you for

Todd Clossin

quarter We’re stating going that. we’re with stick that's third to

Stuart Lotz

or results one weekend. any are third that then place conversion into? through the fourth were But coming this And know expenses, the quarter of saves in here? the just quarter the there cost Or is and mainly past I second the baked FTSB took

Bob Young

the a expecting cost we savings expected in than not are is second year-to-date the $XX no Sentry million XX% they rate experienced on had their First the other were and of and the of million quarter, lower run expenses in basis, the the on there XXXX. benefits core bit run And to No, in on is is significantly. a part X cost side but independent, savings little expenses when middle starting employee lines and then be it quarter. they rate were and rest the balance data of this salaries processing equipment year will year of and in the the XX% this line a Cost expense be savings

Operator

next [Operator question Gunther from Please Instructions] will be The D.A. Russell of Davidson. ahead. go

Russell Gunther

Follow XQ you in question the typical through in quarter? earlier. that step also as up into XQ. second or will a Bob on mentioned well bit expense merit the follow up Does that absorbed the all be

Bob Young

It the does follow and there because non-exempts to quarter the reason for come through the some come of of quarter, latter degree third And second is towards of that --those August. start third is increases in towards the the a for middle quarter. half then

Russell Gunther

And on XX% core range. kind mid efficiency front, then improvement good -- of mid the incremental just very XX%

of curious sort cost guys help this absorb saves could the with deals? out us if Just two you out could you as of your the shake thoughts on where

Todd Clossin

a we couple is have as lot of deals expenses. underway in in factors to a involved on, number expenses continued back of We We got focus And 'XX. the initiatives underway half obviously lot on a there and going too. drop a initiatives well Well, fee mentioned. of lost of got as Durbin of regard with you we

moving a is parts. lot of there So

and but in in probably as talked about go billion we mid expectation and XXs ratio the the in to the plan XXs, size over that $XX of continue efficiency the to couple last hope keep up years be over in will there. grow through we the Our

the focused year but ratio from now. what a are exercise out on much of this not at efficiency to that down where And I about of of It's or the the operating be to that’s sure going piece and and also to puts we make hard the positive like as year-to-date, or are it two and Russell it's But important doing it merger we and to even ratio. you will It's there's things further. cognizant cost just continue years half the growth. of we expenses. drive So, inside to it's strip save to you revenue if leverage keep company, ratio. lot bring are see that exactly revenue look going know in with it that want to our a quarter the takes, But related

For X% $X.X or million impressive the only be of us pretty $X there given will revenue growth. amount it's to million,

talk about to operating positive management of story, banking. part important being the an wealth that to is continue leverage, as important We electronic

are We residential quarter. pull bit in gain of nice seeing and this some the mortgage little we the sale through on more though sheet balance it on even to terms income direct side

positive between service achieving are Durbin and think operating as denominator discretionary the that's at we some I So is expense a rate to lower is leverage to control back do out half of -- the Todd higher the then, plan charges degree, as how trying the we that takes.What and in and will indicated while operating of drive higher for 'XX holding now Todd pointed there are both to on line. growth expenses kick-in plan puts that.Now to so

Russell Gunther

guide that year. back increase of of should Bob, the the base this question on slight the How any margin XQ the and of that up? year Is sort post? in we increases of kind back just size 'XX and that do off fed in half XXX you of fund a guide, clarifying half guys in the have

Bob Young

year. the have We but guidance in the XX do. of X half purchase The our accounting current was basis the rate, most-likely X In modeling to points. accretion XX at back in, factored

There's ago purchase balance loans well. think year Farmers were a pickup sheet. bit in And south So announcement of offset fewer at up there's of slightly bit from that sensitivity closed, well. that instance. But as from on drift there should mind finalizing pulled floors a their of then in we since a be be Farmers. margin little the accounting offsetting by there'll cost than there we XXX there'll little in We They terms there the keep asset of talked higher most from We that margin continue is the little is second of call. we And deposits public is were about core now increase on a deposit although, has ours. to at in on our some be interest-bearing in run inherent maturing borrowings, higher then line. a betas XX%, funds, the but going pick than bit about I the core in the haven't to yet the that comment far total able to been so would be as still made Farmers for growth expect. accretion so there some We're that quarter, funds

Russell Gunther

a quite helpful. on based of Okay, loan industry. around comments And about to back sort of achieve? talked organic expectations then low mid-single digits, core you had, last on for the past, you the would pay you for to the the very low is in guys mid-single that digit in expect one year, down's the growth, this pipeline, a something obviously, guys half But to frustration growth

ToddClossin

said too. X I think the with be you the last basis, these that we that. years, try yes, plan be over line to were on And we'd over and a X that to say well something long-term as long-term or still would in that would

the going Just give know what to over or two. don't economy the you next is year

But for to where get we'll low still be. think share I to I know pretty we'll us is stay. long-term think basis, will on it's I it, been a our we've what good where don't that digit but a of so think mid-single idea I

Operator

And remarks. we over will would to our at question-and-answer the Todd I hand to Clossin like for conclude closing conference session. any this time,

Todd Clossin

strategies, our remain Thank profitability sacrificing of regulatory you. positioned success well-defined, legacy growth without We well compliance. our as quality credit focus on execution the our and through we of solid for long-term

and dedication diligence seeing all you shareholders us and at forward day. look want have to I to enhancement. event. for continue, Investor our Our through to And think, an great long-term will thank value upcoming you, joining and a Thank today reward I you

Operator

concluded. the you attending this Ladies Thank and may Thank you, you time, disconnect today’s sir. At lines. presentation. for conference gentlemen, have your

WesBanco (WSBC) 24 Jul 182018 Q2 Earnings call transcript