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WHEELING, W.Va., Oct. 26, 2021 /PRNewswire/ -- 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 nine months ended September 30, 2021. Net income available to common shareholders for the period was $41.9 million, with diluted earnings per share of $0.64, compared to $41.3 million and $0.61 per diluted share, respectively, for the third quarter of 2020. For the nine months ended September 30, 2021, net income was $180.5 million, or $2.71 per diluted share, compared to $69.2 million, or $1.03 per diluted share, for the 2020 period. Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses, for the three months ended September 30, 2021, was $45.4 million, or $0.70 per diluted share, as compared to $44.2 million and $0.66 per diluted share, respectively, in the prior year quarter (non-GAAP measures). On the same basis, net income for the nine months ended September 30, 2021 was $185.7 million, or $2.79 per diluted share, as compared to $76.5 million, or $1.14 per diluted share, in the prior year period (non-GAAP measures).
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(unaudited, dollars in thousands,
Net income available to common
Less: After-tax restructuring and merger-
Net income available to common shareholders (GAAP)
(1)See non-GAAP financial measures for additional information relating to the calculation of these items.
Financial and operational highlights during the quarter ended September 30, 2021:
Pre-tax, pre-provision income ("PTPP") excluding restructuring and merger-related expenses (non-GAAP measure) was $57.8 million, which included $2.6 million of settlement costs with respect to the pending resolution of a lawsuit
Continued expense management demonstrated by a year-to-date efficiency ratio of 57.04% (non-GAAP measure)
Deposit growth, excluding certificates of deposit ("CDs"), was 15.0% year-over-year, driven by growth in demand deposits
Improving macro-economic forecasts favorably impacted the provision for credit losses under the Current Expected Credit Losses ("CECL") methodology, which drove both the net benefit in the provision for credit losses and the reduction in allowance for credit losses during the quarter
Key credit quality metrics such as non-performing assets, past due loans, and net loan charge-offs, as percentages of total portfolio loans, have remained at low levels and favorable to peer bank averages, those with total assets between $10 billion and $25 billion (based upon the prior four quarters)
During the quarter, we purchased approximately 2.1 million shares of our common stock on the open market under existing share repurchase authorizations
WesBanco Bank was named, for the second consecutive year, to Newsweek magazine's ranking of America's Best Banks, recognizing those banks that best serve their customers' needs, as well as being named the Best Big Bank in the state of West Virginia
Our core banking software system conversion was completed on August 2, which, among other benefits, provides enhanced digital capabilities
"We are pleased with WesBanco's performance during the third quarter of 2021 as we continue to deliver solid pre-tax, pre-provision earnings and manage discretionary expenses," said Todd F. Clossin, President and Chief Executive Officer of WesBanco. "We remain focused on ensuring a strong organization for our shareholders and will continue to appropriately return capital to them. In addition, we continue to make strategic hires across our organization and markets to enhance our ability to leverage growth opportunities once they fully return."
Mr. Clossin added, "I remain proud of our entire organization as it has remained diligently focused on serving the financial needs of our customers and communities throughout the pandemic, the re-opening of our economies, and through the completion of our core banking software system conversion. For the second year in a row, we have been named to Newsweek magazine's ranking of America's Best Banks which recognizes those institutions that best serve their customers' needs. I would also like to congratulate our Community Development team for their being nationally honored with the ABA Foundation Community Commitment Award for their strong performance and outreach with our New Markets Loan Program."
Portfolio loans of $9.9 billion as of September 30, 2021 decreased 9.8% when compared to the prior year period, due primarily to forgiveness of approximately 8,140 SBA Payroll Protection Program ("SBA PPP") loans totaling $940 million and a high level of commercial real estate loan payoffs of $260 million during the third quarter of 2021. This higher level of payoffs negatively impacted total loan growth by approximately two percentage points. Further, when excluding SBA PPP loans, total loans decreased 4.9% year-over-year and 1.8% sequentially. As of September 30, approximately 3,190 SBA PPP loans for $272 million remained in the loan portfolio.
Total deposits increased 10.0% year-over-year to $13.4 billion due primarily to stimulus funds previously received by our customers and increased personal savings, which more than offset a $353.3 million reduction in CDs. Deposits, excluding CDs, increased 15.0% year-over-year, driven by a 16.5% increase in total demand deposits, which represent approximately 58% of total deposits.
As of September 30, 2021, total loans past due, non-performing loans, and non-performing assets as percentages of the portfolio and total assets have remained relatively low and consistent throughout the last five quarters. In addition, for the third quarter, we realized net loan charge-offs to average loans of three basis points, on an annualized basis. The allowance for credit losses specific to total portfolio loans at September 30, 2021 was $136.6 million, or 1.38% of total loans; or, when excluding SBA PPP loans, 1.42% of total portfolio loans. The improvements in the macroeconomic forecasts and certain qualitative factors resulted in a negative provision for credit losses of $1.7 million for the third quarter of 2021, and a negative provision of $50.7 million for the year-to-date period.
Net Interest Margin and Income
The net interest margin of 3.08% for the third quarter of 2021 decreased 4 basis points sequentially and 23 basis points from the third quarter of 2020, primarily due to the lower interest rate environment, and a shift to a higher level of securities as a percentage of total assets. As a result of increased cash balances from our customers' higher personal savings creating extra liquidity, investment securities increased by $1.1 billion year-over-year and, as of September 30, 2021, represented approximately 23% of total assets. Reflecting the continued low interest rate environment, we remain focused on controlling the costs of our various funding sources. We have reduced all posted deposit rates, including certificates of deposit, throughout the past year, which helped to lower deposit funding costs 12 basis points year-over-year to 14 basis points for the third quarter of 2021, or 9 basis points when including non-interest bearing deposits. Furthermore, we continued to reduce our average FHLB borrowings to $0.3 billion, down 71.3% from the prior year, which lowered the cost of these borrowings by 53 basis points year-over-year. Accretion from acquisitions benefited the third quarter net interest margin by 10 basis points, as compared to 18 basis points in the prior year period. Lastly, the forgiveness of existing and funding of new SBA PPP loans benefited the third quarter of 2021 net interest margin by a net 14 basis points, as compared to a net 2 basis points in the prior year period.
Net interest income decreased $5.3 million, or 4.4%, during the third quarter of 2021, as compared to the same quarter of 2020, reflecting lower loan yields due to repricing of existing loans and lower new offered rates in the current market environment, lower accretion from purchase accounting, and lower rates on new investment securities purchased, partially offset by lower interest paid on deposits and borrowings as described above. For the nine months ended September 30, 2021, net interest income decreased $12.2 million, or 3.4%, due to the reasons discussed for the three-month period comparison.
For the third quarter of 2021, non-interest income of $32.8 million decreased $1.9 million, or 5.4%, from the third quarter of 2020, driven primarily by lower mortgage banking income, which decreased $3.9 million, or 46.2%, from the record level recorded in the prior year period. While residential mortgage originations of $382 million continued to be strong during the quarter, as compared to $394 million last year, the amount sold in the secondary market decreased from 75% last year to approximately 40%, as we continued efforts to keep more 1-to-4 family residential mortgages on the balance sheet. Trust fees increased $0.9 million, or 13.4%, primarily from net organic growth during the quarter. Electronic banking fees increased $0.6 million, or 13.5%, as we transitioned to adjusted settlement processes of a new third-party digital banking service provider. Lastly, other income decreased $1.0 million, or 19.4%, due to lower loan swap-related income and the sale of the debit card sponsorship business earlier this year.
Non-interest income, for the nine months ended September 30, 2021, increased $6.6 million, or 6.9%. The net gain on other real estate owned and other assets of $5.0 million was primarily due to a gain earned during the second quarter on an investment made by WesBanco's Community Development Corporation in a start-up firm more than ten years ago that was recently acquired by a public company. In addition, mortgage banking fees decreased $0.6 million, or 3.7%, compared to the prior year period, net of year-to-date fair value loss adjustments of $1.0 million, while service charges on deposits were lower due to higher consumer deposits associated with the three rounds of stimulus to-date and lower general consumer spending, resulting in fewer eligible account fees.
Total operating expenses continued to be well-controlled through company-wide efforts to effectively manage discretionary costs and full-time equivalent employee counts, as demonstrated by a year-to-date efficiency ratio of 57.04%. Excluding restructuring and merger-related expenses, non-interest expense for the three months ended September 30, 2021 increased $3.9 million, or 4.5%, to $90.2 million compared to the prior year period, primarily due to $2.6 million of settlement costs with respect to the pending resolution of a lawsuit, included within other operating expenses, and higher salary expense. Salaries and wages increased $1.2 million, or 3.0%, due to higher incentive compensation expense of $1.8 million, reflecting increased business growth and financial performance as compared to the pandemic-impacted prior year, which more than offset lower year-over-year salary expense of approximately $0.9 million. In addition, employee benefits for the third quarter of $10.7 million, as compared to $10.6 million last year, included an additional $1.4 million from higher employee health insurance claims offset by lower pension and deferred compensation expenses. Equipment and software expense for the third quarter of 2021 increased $1.4 million, or 22.2%, year-over-year due to increased asset size, increased usage of digital banking services, and SBA PPP loan forgiveness. Lastly, FDIC insurance expense decreased $0.7 million, or 37.0%, year-over-year due to improved risk factors.
On a similar basis, non-interest expense during the first nine months of 2021 increased just $0.8 million, or 0.3%, compared to the prior year period. The primary drivers of this slight increase were higher equipment and software costs and legal settlement costs mentioned above and higher marketing expense from product advertising and brand awareness campaigns that were delayed from 2020 due to the COVID-19 pandemic. The increases were mostly offset by lower FDIC insurance from a refund received last quarter and improved risk factors, lower salaries and wages from financial center closures during the past year, and lower amortization of intangible asset expense.
WesBanco continues to maintain what we believe are 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 September 30, 2021, Tier I leverage was 10.10%, Tier I risk-based capital ratio was 14.18%, common equity Tier 1 capital ratio ("CET 1") was 12.91%, and total risk-based capital was 16.38%.
During the third quarter of 2021, WesBanco repurchased 2,138,515 shares of its outstanding common stock on the open market at a total cost of $71.3 million. As of September 30, 2021, approximately 2.96 million shares remained for repurchase under the existing share repurchase authorization that was approved on August 26, 2021, by WesBanco's Board of Directors.
Conference Call and Webcast
WesBanco will host a conference call to discuss the Company's financial results for the third quarter of 2021 at 10:00 a.m. ET on Wednesday, October 27, 2021. 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.
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 10150984. The replay will begin at approximately 12:00 p.m. ET on October 27, and end at 12 a.m. ET on November 10. 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 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, 2020 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, 2021 and June 30, 2021, 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 including the effects of the COVID-19 pandemic; 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; cyber-security breaches; 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.
Non-GAAP Financial Measures
In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), WesBanco's management uses, and this presentation contains or references, certain non-GAAP financial measures, such as pre-tax pre-provision income, tangible common equity/tangible assets; net income excluding after-tax restructuring and merger-related expenses; efficiency ratio; return on average assets; and return on average tangible equity. WesBanco believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which facilitate comparisons with the performance of others in the financial services industry. Although WesBanco believes that these non-GAAP financial measures enhance investors' understanding of WesBanco's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The non-GAAP financial measures contained therein should be read in conjunction with the audited financial statements and analysis as presented in the Annual Report on Form 10-K as well as the unaudited financial statements and analyses as presented in the Quarterly Reports on Forms 10-Q for WesBanco and its subsidiaries, as well as other filings that the company has made with the SEC.
About WesBanco, Inc.
Founded in 1870, WesBanco, Inc. (www.wesbanco.com) is a diversified and balanced financial services company that delivers large bank capabilities with a community bank feel. Our distinct long-term growth strategies are built upon unique sustainable advantages permitting us to span six states with meaningful market share. Built upon our 'Better Banking Pledge', our customer-centric service culture is focused on growing long-term relationships by pledging to serve all personal and business customer needs efficiently and effectively. In addition to a full range of online and mobile banking options and a full-suite of commercial products and services, WesBanco provides trust, wealth management, securities brokerage, and private banking services through our century-old Trust and Investment Services department, with approximately $5.5 billion of assets under management (as of September 30, 2021). WesBanco's banking subsidiary, WesBanco Bank, Inc., operates 206 financial centers in the states of Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and West Virginia. Additionally, WesBanco operates an insurance agency, WesBanco Insurance Services, Inc., and a full service broker/dealer, WesBanco Securities, Inc.
Consolidated Selected Financial Highlights
(unaudited, dollars in thousands, except shares and per share amounts)
For the Three Months Ended
For the Nine Months Ended
Statement of Income
Interest and dividend income
Loans, including fees
Interest and dividends on securities:
Total interest and dividends on securities
Other interest income
Total interest and dividend income
Interest bearing demand deposits
Money market deposits
Certificates of deposit
Total interest expense on deposits
Federal Home Loan Bank borrowings
Other short-term borrowings
Subordinated debt and junior subordinated debt
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Service charges on deposits
Electronic banking fees
Net securities brokerage revenue
Bank-owned life insurance
Mortgage banking income
Net securities (losses) gains
Net gain/(loss) on other real estate owned and other assets
Total non-interest income
Salaries and wages
Equipment and software
Amortization of intangible assets
Restructuring and merger-related expense
Other operating expenses
Total non-interest expense
Income before provision for income taxes
Provision for income taxes
Preferred stock dividends
Net income available to common shareholders
Taxable equivalent net interest income
Per common share data
Net income per common share - basic
Net income per common share - diluted
Net income per common share - diluted, excluding certain items (1)(2)
Book value (period end)
Tangible book value (period end) (1)
Average common shares outstanding - basic
Average common shares outstanding - diluted
Period end common shares outstanding
Period end preferred shares outstanding
(1) See non-GAAP financial measures for additional information relating to the calculation of this item.
(2) Certain items excluded from the calculation consist of after-tax restructuring and merger-related expenses.
NM - Not Meaningful
Consolidated Selected Financial Highlights
(unaudited, dollars in thousands)