WesBanco Q1 2025 Earnings Call Transcript

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April 30, 2025
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Operator

Good morning, everyone, and welcome to the WesBanco First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. Please also note, today's event is being recorded. I would now like to turn the conference call over to John Iannone, Senior Vice President, Investor Relations. Please go ahead.

John Iannone
John Iannone
SVP - IR at WesBanco

Thank you. Good morning and welcome to WesBanco Inc. First quarter twenty twenty five earnings conference call. Leading the call today are Jeff Jackson, President and Chief Executive Officer and Dan Weiss, Senior Executive Vice President and Chief Financial Officer. Today's call, an archive of which will be available on our website for one year, contains forward looking information.

John Iannone
John Iannone
SVP - IR at WesBanco

Cautionary statements about this information and reconciliations of non GAAP measures are included in our earnings related materials issued yesterday afternoon as well as our other SEC filings and investor materials. These materials are available on the Investor Relations section of our website, westbanco.com. All statements speak only as of 04/30/2025, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff. Jeff?

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Thanks, John, and good morning. On today's call, we will review our acquisition of Premier Financial and our strong first quarter results as well as provide an update on our outlook for 2025. Key takeaways from the call today are successful completion of our acquisition of Premier, improved net interest margin, which is expected to continue to improve through 2025, strong organic loan growth that was fully funded by organic deposit growth. Our first quarter results demonstrate continued solid operational performance as we again delivered strong organic loan and deposit growth while driving positive operating leverage. We also continued to strengthen our balance sheet and net interest margin by funding loan growth with deposits and reducing higher cost borrowings.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

For the quarter ending 03/31/2025, we reported net income excluding merger and restructuring expenses and the day one provision on acquired loans of $51,200,000 and diluted earnings per share of $0.66 which increased 18% year over year despite significantly higher shares outstanding from the PFC acquisition. On a similar basis, our first quarter returns on average assets and tangible equity improved year over year to approximately 112% respectively. Reflecting our focus on organic growth and positive operating leverage combined with the benefits of the Premier acquisition, our net interest margin increased to 3.35% and our efficiency ratio improved to 58.62%. This quarter's key story was the successful acquisition of Premier Financial elevating us into the ranks of the top 100 largest U. S.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Banks by asset size. This strategic merger expands and strengthens our market position and accelerates our long term growth strategy. We are pleased to welcome Premier's talented team, loyal customers and strong community partners to WesBanco. We've retained nearly 90% of the Premier employees and the response to our merger has been overwhelmingly positive both in our communities and our teams. I have already seen great examples of collaboration sparking new growth opportunities and I look forward to sharing the results with you in months ahead.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

As we move forward together, our teams are focused on executing seamlessly integration and delivering on the full potential of the combined organization for all stakeholders. The strength of our strategies and teams are reflected in our performance with organic total and commercial loan growth and organic deposit growth continuing to significantly outperform the monthly data for all domestically chartered commercial banks on both a year over year and quarter over quarter basis. For the first quarter, total deposits organically increased $922,000,000 year over year and $285,000,000 quarter over quarter to more than $14,400,000,000 Importantly, this growth was driven by deposit categories other than certificate of deposits as organic deposit growth excluding CDs was 5% year over year and nearly 11% quarter over quarter annualized. Further, deposit growth again fully funded our total organic loan growth. While there could be fluctuations quarter to quarter, our plan is to still to fund full year loan growth with deposits.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

First quarter organic loan growth was 8% year over year and 4% quarter over quarter annualized driven by the strong performance of our banking teams across our markets. Total commercial loans organically increased 10% year over year and almost 7% sequentially on an annualized basis driven by commercial real estate. Our commercial loan pipeline as of March 31 was approximately $1,300,000,000 with more than 25% attributable to Premier. Reflecting our strong organic growth engine, WesBanco's standalone pipeline at March 31 improved approximately 18% from year end. In the three weeks since quarter end, the commercial pipeline has grown approximately $100,000,000 to $1,400,000,000 Based on the current loan pipeline, we continue to expect mid single digit loan growth during 2025.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

This continued growth is made possible by the strength of our markets and lending teams who are working across business lines to meet customers' needs and drive growth. One example highlights a collaborative effort across commercial products, treasury management and private banking to deliver a tailored solution and secure a significant win with an Ohio customer. Consistent with our mission, the team tailored a loan structure to meet the customer's unique needs closing a $50,000,000 loan and securing $45,000,000 in deposits and a $1,000,000 fee income item, as well as significant near term treasury management and private banking opportunities. Turning briefly to the macroeconomic environment. The equity markets are extremely volatile right now, reflecting the threat of trade wars due to constant fluctuations in tariff pronouncements.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

While these pronouncements are likely negotiating tactics, the eventual outcome of trade negotiations remain unclear and it is too early to accurately gauge potential impacts if any. However, the benefit of our loan portfolio is its variety and granularity spread across our economically diverse nine state footprint, which provides soundness and stability if an industry or region is struggling. Roughly 70% of our total portfolio was in our Mid Atlantic region with roughly a third of that residential related and it spans our footprint across the state of Maryland. In fact, the percentage of this that falls within the DC MSA is less than 0.7% with roughly half of that residential. Further, we do not have a government contractor line of business and our total office investment portfolio is less than 4% of our total loan portfolio and has solid loan to value and DSC ratios.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

We're staying close to our customers and continually monitoring our portfolios to proactively manage risk and help our customers navigate evolving market dynamics. I would now like to turn the call over to Dan Weiss, our CFO for details on our first quarter financial results and our current outlook for 2025. Dan?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Thanks, Jeff, and good morning. For the quarter ending 03/31/2025, we reported GAAP net income available to common shareholders of negative $11,500,000 or $0.15 per share. When excluding the day one provision for credit losses and merger related expenses from the Premier acquisition, net income was $51,200,000 or $0.66 per share, representing an increase of 54% from $33,200,000 or $0.56 per share in the prior year period. To highlight a few of the first quarter's accomplishments, we successfully closed our acquisition of Premier Financial, generated strong year over year pre tax pre provision earnings growth of 25%, grew both loans and deposits organically, improved the net interest margin and reduced the efficiency ratio. We also restructured the premier balance sheet through a securities restructuring, unwound the macro hedges, paid down higher cost brokered deposits, remain on pace to exit $140,000,000 of commercial loans during the second quarter and remain on track to exit the mortgage servicing business in the coming months.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

So we're excited about the opportunities that lie ahead and pleased with the success of our strategies playing out according to our plan. Our balance sheet as of March 31 reflects the benefits of both the Premier acquired balance sheet and organic growth. Total assets increased 54% year over year to $27,400,000,000 which included total portfolio loans of $18,700,000,000 total securities of $4,300,000,000 and the addition of approximately $480,000,000 in goodwill generated from the acquisition. Total portfolio loans increased 57.3, reflecting $5,900,000,000 from Premier and $921,000,000 from organic growth, which as Jeff mentioned was driven by strong performance by our banking teams across our markets. We remain optimistic about future loan growth with our strong pipeline, banking teams and markets combined with more than $1,000,000,000 in unfunded land construction and development commitments expected to fund over the next eighteen months.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

During March, we sold approximately $775,000,000 of Premier Securities and purchased $475,000,000 of higher coupon fixed rate securities and used the excess proceeds to pay down higher cost borrowings, which provided immediate benefit to the first quarter net interest margin. Deposits of $21,300,000,000 increased 58% versus the prior year due to premier deposits of $6,900,000,000 and organic growth of $922,000,000 Our organic deposit growth fully funded loan growth on both a year over year and sequential quarter basis. Further, when excluding CDs, we realized organic deposit growth of 4.8% year over year and 10.6% quarter over quarter annualized. Credit quality continues to remain stable with key metrics have remained low from a historical perspective and within a consistent range to the last five years. The first quarter provision for credit losses was $69,000,000 with $59,000,000 related to the day one non PCD provision.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

The allowance for credit losses was $234,000,000 at March 31, which increased the coverage ratio to 1.25% from 1.1% as of 12/31/2024. The first quarter margin of 3.35% improved 32 basis points compared to the fourth quarter and 43 basis points on a year over year basis through a combination of higher loan and securities yields, lower funding costs and purchase accounting accretion. Interest rate mark accretion from the Premier acquisition in addition to the securities restructuring benefited the first quarter net interest margin by approximately 25 basis points. Deposit funding costs of two fifty five basis points for the first quarter decreased as compared to two seventy one basis points in the fourth quarter of twenty twenty four and two fifty six basis points in the prior year period. When including non interest bearing deposits, deposit funding costs for the first quarter were 188 basis points.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

In conjunction with the closing of our acquisition of Premier, interest accretion added approximately $8,400,000 to net interest income in the first quarter, mostly from loan accretion of $6,200,000 as well as $1,900,000 from CDs. The PCD book totaled $220,000,000 with an interest mark of 4.3% and credit mark of roughly $30,000,000.6000000000 dollars in premier loans were identified as non PCD with an interest mark of $270,000,000 representing approximately 4.5% and a credit mark of roughly $60,000,000 representing a 1% credit mark, both of which will be accreted to income over the life of the portfolio. The interest mark on CDs was $11,000,000 with the majority to accrete over the next nine to twelve months and interest marks on other borrowings were relatively small. For the first quarter, non interest income totaled $34,700,000 a 13% increase from the prior year period due primarily to the Premier acquisition. Net swap fee and valuation income was down due to fair market value adjustments from recent rate volatility.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

However, gross swap fees increased $1,200,000 year over year to $2,000,000 Non interest expense, excluding restructuring and merger related costs for the three months ended 03/31/2025 was $114,000,000 an increase of 17.2% year over year due to the addition of Premier's expense base and higher amortization of intangible assets. Equipment and software expense of $13,100,000 includes the additional cost of operating two core systems until conversion to one platform in midday. Amortization of intangible assets of $4,200,000 increased $2,100,000 year over year due to the core deposit intangible asset that was created from the Premier acquisition. Excluding the impacts of from the addition of Premier, our legacy cost base was roughly flat to the fourth quarter. Turning to capital.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Our regulatory ratios remain above the applicable well capitalized standards. In conjunction with the February 28 closing of the Premier Financial acquisition, we converted all of Premier's outstanding common shares into 28,700,000.0 Westbanko shares, which increased total capital by $1,000,000,000 and as anticipated modestly impacted our capital ratios. It's also worth noting here that under the regulatory definition for the calculation of the leverage ratio, period end capital is divided by average assets, which included just one month of Premier's balance sheet. Therefore, the reported ratio of 11.11% is expected to come down into the high 8% range on a full quarter basis. Turning to our current outlook for the remainder of 2025, which includes the benefits from our acquisition of Premier, we are currently modeling two twenty five basis point Fed rate cuts in June and September.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

However, given our relatively neutral rate sensitive position, we do not expect a meaningful impact for our net interest margin from these cuts. We anticipate approximately two thirds of our $3,000,000,000 CD book to mature or reprice lower over the next six months with an average interest rate of 3.9% as compared to our current seven month CD rate of 3.5. We anticipate Premier related accretion during the second quarter to add approximately 15 to 20 basis points to the first quarter margin and therefore expect to break through a 3.5% margin during the second quarter. Nearly all fee income categories will be positively impacted by the Premier acquisition and as a reminder, first quarter trust fees include tax preparation fees totaling roughly $700,000 Excluding these fees, trust fees as well as securities brokerage revenue for the remainder of the year should be modestly higher in future quarters, reflecting modest organic growth and the benefit of our new markets and newly acquired assets under management. Electronic banking fees and service charges on deposit, which are subject to overall consumer spending behaviors should increase from the first quarter, reflecting the addition of Premier's markets despite the Durbin amendment impact expected to be 1,000,000 per quarter from Premier's historical run rate.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Mortgage banking income should improve modestly reflecting the opportunities in our new markets, but will continue to be impacted by the overall residential housing market and economic trends and interest rates. And finally, commercial swap fee income excluding market adjustments should be in a similar range to the first quarter. As we stated in the past, we remain focused on delivering disciplined expense management to drive positive operating leverage and we'll continue our efforts throughout 2025. During the second quarter, we will be operating two core systems and have a higher staffing level as planned to facilitate our core system conversion in mid May, which will drive a slightly higher expense base before the remaining cost saves are realized and fully reflected in the third quarter run rate. With Premier's core deposit intangible of $151,500,000 representing 3.28% of core deposits, amortization of intangible assets is expected to be roughly $9,000,000 per quarter, up from the $4,000,000 reported in the first quarter as we realized the full quarter impact of the amortization of the intangible assets created from the Premier acquisition.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

We believe the temporary costs of preparing for the core system conversion during the second quarter will be similar to our anticipated midyear merit increase and therefore most of the 26% cost savings should be reflected in the third quarter and we expect the expense run rate will be in the $140,000,000 range for the remaining quarters of twenty twenty five, which reflects legacy WesBanco's one hundred million dollars cost base, the addition of Premier's cost base after cost savings, mid year merit increases and the higher intangible amortization. The provision for credit losses will depend upon changes to the macroeconomic forecast and qualitative factors as well as various credit quality metrics, including potential charge offs, criticized and classified loan balances, delinquencies, changes in prepayment speeds and future loan growth. And lastly, our anticipated full year effective tax rate is expected to be between 1919.5% subject to changes in tax regulations and taxable income levels. This increase from last quarter is due to non deductible costs related to the Premier acquisition. We further expect the bulk of the remaining merger related expenses totaling approximately $45,000,000 to be recognized in the second quarter as contract terminations, severance and retention bonuses mostly occur then.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Operator, we're now ready to take questions. Would you please review the instructions?

Operator

Ladies and gentlemen, at this time, we'll begin the question and answer session. Session. Our first question today comes from Andrew Liesch from Piper Sandler. Please go ahead with your question.

Andrew Liesch
Andrew Liesch
MD & Senior Research Analyst at Piper Sandler Companies

Thanks. Good morning, guys. On the margins looking forward here, appreciate the commentary with the addition and the accretion from Premier. But on an organic basis, how do you think it can perform absent rate cuts? It looked like loan yields on new production was up a little bit.

Andrew Liesch
Andrew Liesch
MD & Senior Research Analyst at Piper Sandler Companies

And maybe there's some opportunity to reduce funding costs with the CDs. But how should we be looking at the margin more on an organic basis?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes, Andrew, I'll take that one. Similar to what we discussed last quarter on a kind of organic legacy basis, we anticipate roughly four to six basis points of margin improvement per quarter. With Premier in the fold representing about a third the overall balance sheet, I might call that maybe it's three to five basis points or two to four basis points of legacy improvement. And all for the reasons that we kind of discussed last quarter as well. Obviously, as we talked CDs repricing downward, certainly we are anticipating right now Fed cut in June that would have an impact both on Federal Home Loan Bank borrowings, most of which are one month advances.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

It's currently right around 4.5%. Those would reprice down immediately as would our variable rate commercial loans and security. So a couple of things that we did do and we talked about the securities restructuring a little bit. But one of the things that we would anticipate that's outside well even outside of the restructuring, We did, as we said in the past, have been evaluating our floating rate securities book. This is West Bankers floating rate securities book representing about 16% of the overall securities.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

In the quarter, in February, we did sell about $100,000,000 at a these are floating rate securities at about a $40,000 gain. The yield on those was about four point 9%. We reinvested that $100,000,000 and got a book yield of about 5.5% and only picked up about four tenths of a year in duration. So that also should be kind of part of that, I would say tailwind towards margin expansion on an organic basis.

Andrew Liesch
Andrew Liesch
MD & Senior Research Analyst at Piper Sandler Companies

It. All right. That's helpful. Thanks. And then that $140,000,000 expense number, it sounds like the cost saves from the deal are on track or maybe even a little bit ahead of schedule.

Andrew Liesch
Andrew Liesch
MD & Senior Research Analyst at Piper Sandler Companies

But just some clarity, is that $140,000,000 for the third quarter and the fourth quarter? Or are there still going to be some legacy costs before they're all realized to the 140,000,000 number is a better number for the fourth quarter?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. No, I would say it's right now we're modeling in that low 140 range for each of the next three quarters. And again, it's obviously second quarter is really due to the combined cores, all of the cost saves haven't been taken out, won't expect to be taken out really until June 30 fully. We do have a little bit of spillover into the third quarter. Our trust conversion, our security brokerage conversion and some of our MSR assets are likely to be still serviced for a short period of time in the third quarter.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

So there might be a little bit of additional kind of duplication of cost there. But for the most part, we expect to see that twenty six percent fully baked in, in the fourth quarter for sure and mostly baked in, in the third quarter. And as you know, there were some cost saves on the salaries and wages front here in effective February 28 with some folks leaving on kind of legal day one.

Andrew Liesch
Andrew Liesch
MD & Senior Research Analyst at Piper Sandler Companies

Right, right. Great. Thank you for that clarity. I'll step back.

Operator

Our next question comes from Catherine Mealor from KBW. Please go ahead with your question.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Thanks. Good morning.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Hey, good morning.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Good morning.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

I wanted to dig a little bit into the margin just a couple of lines, if you don't mind. Maybe just the first on the bond book. Do you have I know there's a lot of moving parts. Is there any way for you to disclose where your bond yields were maybe at quarter end when we get the kind of full impact of the bond restructure and maybe kind of where we're starting this quarter?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. So what I would tell you specific to the restructure, as we said sold $775,000,000 and if we think about those securities were yielding about 3% on Premier's books. The markup was about four point was up to 4.86% on those sold. We reinvested as we said $475,000,000 at a yield of about 5.43%. So we picked up 57 basis points kind of on that reinvestment focused on mortgage backed and CMOs to improve pledgeability certainly and as you know AFS.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

But I would tell you that if we look at kind of spot securities yield at the March, it is it's right around three zero seven. So hopefully, Catherine, that kind of helps to explain where we're at.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Yes, that's great. That's great. Okay, that's perfect. And then on the deposit side, I know Premier had a higher deposit base than you did, but and we only have a partial quarter. So is it fair to assume that deposit costs actually increase next quarter once we kind of get the full impact?

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Or are we still kind of stable in deposit costs relative to the quarter we've seen at that 188 level?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. No, I think that we do see some continued reduction in deposit costs for certainly on the CD front as kind of we've talked about in the past. At this point, we have implemented our pricing of deposits that's been fully implemented at Premier. And so we think that we can we're going to be patient certainly with the deposits there. But we do think that we're going to see some improvement in overall funding costs here maybe in the 10 basis point range coming off of first quarter.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Okay, great. And then I'm going to back up actually, I'm just going to kind of hit a couple of lines hopefully, I'm not going ask too many questions. And then on FHLB, I know you've got $1,000,000,000 coming off in FHLB. Do you expect to shrink the balance sheet by that amount or just reinvest it into lower yielding FHLB?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. I would say it's going to be at this point, the shrinkage of the balance sheet is really dependent upon a couple of things. First, we're obviously monitoring the securities book. We did shrink that somewhat. It represents about 16% right now of total assets.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

That's on kind of I would say the lower end of the range for where we want to be to maintain what we build appropriate levels of liquidity to maintain pledging for our public funds and such. So I don't see us necessarily shrinking that. I would tell you though, we are holding a little more cash than what we have historically. Historically, we try to target around 2.5% of total assets to 3%. At period end, we're holding about 4%.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

So we could see $100,000,000 or so potentially reduction in FHLB there. But generally speaking, the expectation is we would continue to fund our loan growth with deposit growth and FHLB borrowings would generally kind of fill in any gaps there, but we would maintain the securities book to be about 16 to 17% of the overall balance sheet cash or rent, around 3%.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Okay. Okay, that's great. And then if I could just round up the margin questions going back up to loan. In your comment, you said that you expect fair value accretion to be 15 to 20 basis points over the first quarter. So that's not 15 to 20 basis points of fair value accretion, that's increased from the first quarter?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

That's exactly right, Catherine. That's a build of 15 to 20 basis points on the 3.35% that we reported here in the first quarter.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Okay, great. And so then all that together, you're saying you're going to go through this 3.5% margin. How conservative do you feel with that number? Because I feel like you're going get higher than that.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

I'm giving you the bottom end, not the top end.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

I'm getting high. When I put all that together, it's a bigger number. So that so you're very conservative with that three fifty million

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes, I think so.

Catherine Mealor
Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)

Okay. All right, great. Awesome. Thank you for letting me ask all the questions. Appreciate it.

Operator

Our next question comes from Daniel Tamayo from Raymond James. Please go ahead with your question.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Thank you. Good morning, guys.

John Iannone
John Iannone
SVP - IR at WesBanco

Hey, good morning, Daniel. Good morning.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

So we've hit the margin a lot. Appreciate all that guidance there. We've talked a little bit about the balance sheet, but maybe we could dig in just a little bit more to try and put a finer point on where net interest income might end up this year. So I'll ask you directly if you have any comments on what you think net interest income numbers could look like for the rest of the year. If not, or in addition, you could kind of size for us how you're thinking about just absolute balances on the asset side going forward, given all the moving parts you've talked about with FHLB and the securities restructurings and loan growth obviously baked in.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

So just curious how in your mind or budget how you think the size of the assets and or net interest income could move the rest of the year?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. I would say, we certainly anticipate still that mid to upper single digit loan growth and that to be fully funded with deposits. So that kind of and I've already talked about kind of the other levers on the balance sheet and what the percentages would be. So I think that kind of helps guide what we would be expecting for the balance sheet by the end of the year. As it relates to net interest income, we typically wouldn't give a whole lot of deep guidance here.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

But what can tell you and I think this should help clear up at least some parts of this is the accretion that we are anticipating as a result of the Premier deal. I can give that and these are kind of rough estimates at this point. We're still finalizing our purchase accounting. But we talked about the overall interest mark on the non PCD book is roughly two seventy million dollars that's a 4.5% mark. Credit mark, is also would be accreted through interest income is right around $60,000,000 So that's 1% roughly.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

And overall, including the PCD book as well, we still have about a 4.5% interest mark and about a 1.6% credit mark. And of course some of that on the PCD side it would not be accretable. But if we think about the accretion, the breakdown here that we are showing today and this could fluctuate again based on prepayment speeds in the future etcetera is right around $59,000,000 here in business for loans in 2025, around $60,000,000 in 2026, dollars '50 million in 2027. Again, this is going to be very much subject to additional review and very much dependent on interest rates in the future as that would influence prepayment speeds. So we do have some prepayment assumptions baked into this.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

But that's kind of what we see today based on everything that we know.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

That's very helpful, Dan. Appreciate it. Maybe switching gears here. We haven't talked about credit in the question section at least yet. And everything looked pretty good.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

I guess there was somewhat of an increase in the criticized loans in the quarter. I'm assuming that's from the acquisition. Maybe you could give a little color around the increase there and if you have any thoughts on kind of go forward charge off expectations and or provision, however you want to guide us in terms of how we should think about that?

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes, I can start. No, I think most of that C and C is just normal course of business related to the Premier acquisition as well as just how we're seeing things today. I think if you look at the provision, was up. A lot of that was due to obviously the acquisition. We also did have one credit that we took a larger provision on, but feel very good about that working through that the rest of the year.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

So I would say overall, we still feel very good about our credit metrics. We still feel like we're going to be better than our peer group, better than the industry. And at this point, we're not really seeing any sort of outsized risk in any sort of market. As I mentioned in my earlier comments, we have very, very, very limited exposure to the DC market specifically. And so feel good about that as well as obviously having a nine state footprint.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

We have a very diverse portfolio. So I would say, I think where we're at obviously will fluctuate quarter to quarter, but we feel very good with the range we're in today.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Okay. In terms of kind of recent net charge off activity, is that what you're referring to?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes.

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

Got it. Okay. All right. Thanks for taking my questions, guys.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes.

Operator

Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

Russell Gunther
Managing Director & Equity Research Analyst at Stephens Inc

Hey, good morning, guys.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Good morning, Russell. Good morning.

Russell Gunther
Managing Director & Equity Research Analyst at Stephens Inc

I wanted to follow-up on the expenses. First to just confirm that the 4Q run rate provided is fully inclusive of all deal related cost saves and then to inquire about how we should think about a normalized growth rate from there?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Russell. I would say that fourth quarter, the 4Q run rate would be inclusive of all cost saves certainly. Like we said in the low 140 range. And I would anticipate probably a 4%, call it 4% build off of there as we look towards 2026 and beyond.

Russell Gunther
Managing Director & Equity Research Analyst at Stephens Inc

Okay, great. Thanks, Dan. And then just my second question would be on capital. So with CET1 around 10%, how are you guys thinking about managing this ratio going forward? What does that suggest for capital deployment beyond loan growth, specifically any appetite for buybacks or M and A?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes, I would say today we're in capital build mode for the next several quarters. And in terms of capital deployment and how we might deploy that through M and A or buyback, I'll maybe defer to Jeff.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes. As Dan said, we're still building back the capital. Obviously, we need to digest this transaction. We're going to have conversion coming up in a few weeks. We expect that to go really, really well.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

And then if we were ever to look to announce another deal, it'd probably way into this year, early first quarter, second quarter. At this point, we're really focused on getting Premier squared away, making sure everything is running very smoothly and then taking it from there. But we're in no hurry to do another deal or I would say at this point, we're just trying to build back capital. Hopefully, answers your question.

Russell Gunther
Managing Director & Equity Research Analyst at Stephens Inc

Yes, guys. Thank you both for taking my question.

Operator

Our next question comes from Emmanuel Nieves Nieves from D. A. Davidson. Please go ahead with your question.

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Hey, can I just clarify the NIM a little bit? So PAA gets you to that $350,000,000 to $355,000,000 range next year. And then you have just organic legacy NIM improvement and there were two ranges. Is it three to five basis points on top or is it four to six basis points on top potentially?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. Manuel, I say three to five. So the four to six was what we disclosed last quarter for West Bank of Legacy. So if we think about obviously the purchase accounting accretion and marking Premier's balance sheet, which represents roughly a third of our assets and interest income, I would just say, you have to kind of calculate basically two thirds of the four to six, which is I would say kind of more three to five would be additive.

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Okay. I appreciate that. And can you add a little bit more color on any balance sheet items that still need to be done? I know you're going to there's a couple of loan sales that should come through next quarter. Anything else that's still to come?

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Maybe is there any more securities restructurings that you're going to do? Is that kind of all done with that spot rate you gave? Like is there anything left to come on the balance sheet next this coming quarter?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

I think securities is pretty well done. Certainly, we've got the loan sale about $140,000,000 that could be sold. We have roughly that marked down to about 100,000,000 Certainly, the MSR business is something else that is expected to kind of close out over the next several months probably we'll kind of wrap that completely up here in the early in the third quarter. But no, I think that really covers the majority of balance sheet restructuring. I mean, we certainly do have later in the year our preferred stock does become callable.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

And so we'll be evaluating that along with some of the sub debt that we acquired from Premier to kind of potentially refinancing that to take advantage of some savings there, but nothing significant outside

Daniel Tamayo
Daniel Tamayo
Vice President at Raymond James Financial

of that.

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Kind of shifting direction a little bit. Can you talk about the puts and takes in the loan growth outlook? The pipeline is strong. What are your expectations for pull through? Have there been any kind of shifts or delays in your customer base with pull throughs?

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Has there been any uptick in payoff activity since the end of the first quarter? And some discussion on the different regions, like which ones are doing well, which ones could do better? And just kind of a little bit more on the puts and takes behind your loan growth?

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Sure. So as I mentioned, our pipelines continue to grow. They're combined. I believe it's about $1,400,000,000 and that's pretty solid pipeline. So there's obviously other stuff beyond that.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

I would say as far as pull through, we're still seeing customers do a lot of business. We have seen a few things pull back due to tariffs, just waiting to see. But overall, I feel very good about the loan growth, that mid single digit to potentially upper single digit loan growth. If you look at the kind of the markets that are doing really well from a pipeline perspective, I do know our LPOs continue to be, I believe 20% to 25% of the pipeline of legacy West Banco with Chattanooga and Nashville and Indianapolis showing really strong growth there. The whole state of Ohio, obviously with the addition of Premier, we are getting a lot more opportunities to pull through there.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

And then we are seeing good pipelines over in the Mid Atlantic region also. So overall, I would say, it looks very similar to last year. With the addition to Premier, we should see more, I would say more C and I pipeline, because that franchise and that mark those markets tend to lean more C and I, which is good for us. And we are seeing more opportunities there that we're able to capitalize on. So once again, overall, we feel very good about mid to upper single digits as far as loan growth, have not seen any slowdown as far as pull through.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Once again, a few customers, few things due to tariffs. But overall, I think it's still unknown the impact is there.

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

I appreciate that. And the deposit growth has been excellent. And are the pipeline similar on that side of the house? And how much of that is coming from the commercial teams themselves? And I'll step back into the queue.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes. We had a very good first quarter in deposits. I would expect this year to look very similar to last year as it relates to deposits. So as you remember, we grew deposits in first quarter last year. We grew them this year.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

That looked really, really good. In the second quarter, you do have tax time. So you do see typically a little bit of a dip and then it builds back toward the end of the second quarter. But I would say the deposit pipeline still look very good as well. And a lot of it is commercial.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

We do have some really good opportunities ahead of us. Also on the treasury management side too, I do believe we have a lot of new purchase card and TM products in place too that we hope to build over the next several quarters, our revenue there as well.

Manuel Navas
MD & Senior Research Analyst at D.A. Davidson

Thank you. Thank you for the commentary.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Thank you.

Operator

Our next question comes from Karl Shepherd from RBC Capital Markets. Please go ahead with your question.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

Hey, good morning, guys.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Hey, good morning, Karl.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Good morning, Karl.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

I got a few ones for you. On capital, I think the message you're trying to send is you have ample capital for all the organic growth you want to do, but just kind of waiting to build back to more normalized level. Is that fair? Yes. Okay.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

And then at deal announcement, we talked a little bit about CRE concentration. Do you just have a quick update there and ability to put CRE loans on?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. So we calculate our CRE concentration ratio as a percentage of total risk based capital at the bank level. And at the bank level, we are calculating right around 298%, which is obviously under the guideline. I know many like to focus on total risk based capital at the HoldCo, which is obviously significantly lower than that $298,000,000 But yes, we're going to continue to monitor those levels and wouldn't be it will be dependent upon kind of CRE growth here quarter to quarter as it ebbs and flows. But wouldn't be concerned if we eclipse that 300% threshold kind of are bouncing right around that for some period of time.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

As we continue obviously to build back capital though, which is coming back at a pretty nice clip through the organic margin as well as the accretion. We do think that that is going to continue to work its way back downward, but we do have typically the seasonal CRE growth occurs in second and third quarter. So we'll see where we land there.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

Okay. The balance sheet is, call it 50% larger today than it was three months ago. Does that change any way you think about running your business or open up any strategic opportunities? Or how should we think about the way you guys are approaching that or anything that's rallying around in your head?

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes. I think it obviously gives us a bigger balance sheet to lend to our stronger customers. We're doing that right now, especially as we look at our new Premier top customers where we've already done an analysis on potential lending opportunities where we can lend more to them than, say, legacy Premier has looked at in the past. It has also given us an opportunity to look at are there certain lines of business that maybe we wouldn't have gone into that we're doubling down on looking at to move into moving forward. So we're looking at all those different things.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Dan, I don't know if there's anything else you would add.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

I think you covered it. Yes.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

Okay. And then one last one for me. If you go back to the merger deck last summer, I think you had a pro form a of $3.59 of EPS for this year with fully phased in cost savings. And I don't want to pick over line by line. Dan has done a ton of help already.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

But that number, it feels like it should be achievable. The accretion seems dialed in with the high mortgage book and the margins tracking a little bit better pre closed. Is there anything that you would steer us away from thinking about and that was in that deck other than what we've talked about already?

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes, Karl.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

That $359,000,000 is that I assume that's excluding merger related and probably excluding the kind of day one double count on the provision for credit losses?

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

Yes.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. I would say given all the guidance that we provided that should be within range then certainly.

Karl Shepard
Karl Shepard
Assistant Vice President at RBC Capital Markets

Okay. Thank you both for all the help.

Operator

And our last question today comes from David Bishop from Hovde Group. Please go ahead with your question.

David Bishop
Director - Research Department at Hovde Group

Hey, good morning gentlemen.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Hey, good morning. Hey, Jeff, just curious,

David Bishop
Director - Research Department at Hovde Group

obviously, with the added exposure to maybe more manufacturing C and I type markets, I'm sure you guys are aware of the impact of tariffs. Just curious if you've been able to do any sort of stress testing or deep dives in terms of the legacy Premier book in terms of tariff exposure, maybe even the legacy WesBanco book, maybe where you see some, I guess, exposure there to increased tariffs across the commercial loan book?

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Yes. We've taken a look at both books. Obviously, the Premier book, we've looked at multiple times pre close and post close, and so we've gone through that. Once again, tariffs, it's kind of an unknown right now, but we have looked at different C and I exposure. And legacy WesBanco, we were not as big in C and I.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

And so but we are taking a look at the current portfolio. But I would say at this point, we don't feel like we have a significant amount of exposure to the tariffs. But once again, there's a lot of unknown. So I wish I could answer your question better. It's just there's a lot of unknown at this point.

David Bishop
Director - Research Department at Hovde Group

Understood. Understood. And final question, maybe a little bit of guidance on the fee income side of the house. I assume you guys will be layering in your legacy swap products and such. Just curious maybe, I don't know if you're looking for a specific number, but maybe percentage growth or percent of average assets, how you sort of see that trending out over the course of the year? Thanks.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

Yes. I think we certainly see opportunities, particularly even as you mentioned there on the swap fee income, for example. Certainly, this the first quarter here only includes one month of fee income from Premier. So we'd expect to see a nice bump here in the second quarter as we kind of realize the full quarter's effect of the fee income. I would say today and you could see the trends pretty cleanly if you compare fourth quarter to first quarter for the most part with the exception of swap of net swap fee income, which obviously has some negative fair value adjustments there with the exception of BOLI and with the exception of insurance, mostly the improvement that you see kind of fourth quarter versus third quarter is representative of about one month of Premier.

Daniel Weiss
Daniel Weiss
Senior EVP & CFO at WesBanco

So if you can get there by almost multiplying the delta for those areas by three to get kind of your full quarter run rate for second quarter and beyond. If that's helpful, would just also just mention that just keep in mind that trust fee income does include about $700,000 in the first quarter related to the tax prep fees that would not be it only occurs once a year in the first quarter.

David Bishop
Director - Research Department at Hovde Group

Got it. Appreciate the guidance.

Operator

And ladies and gentlemen, with that we'll conclude today's question and answer session. I'd like to turn the floor back over to Jeff Jackson for any closing remarks.

Jeffrey Jackson
Jeffrey Jackson
President & CEO at WesBanco

Thank you. There's a tremendous opportunity ahead as we continue to build our future as a community focused regional financial services organization. Our transformational acquisition of Premier provides enhanced scale and capabilities, while our organic growth engine continues to deliver strong loan and deposit growth. Our stronger company, which has already begun to drive improved financial metrics positions us well to continue to deliver shareholder value. Thank you for joining us today and we look forward to speaking with you at one of our upcoming investor events. Have a great day. Thank you.

Operator

And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Executives
    • John Iannone
      John Iannone
      SVP - IR
    • Jeffrey Jackson
      Jeffrey Jackson
      President & CEO
    • Daniel Weiss
      Daniel Weiss
      Senior EVP & CFO
Analysts
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Key Takeaways

  • The Premier Financial acquisition closed on February 28, elevating WesBanco into the top 100 U.S. banks by assets and retaining nearly 90% of Premier’s employees to drive strategic synergies.
  • Adjusted Q1 net income was $51.2 million with diluted EPS of $0.66, an 18% year-over-year increase despite a higher share count from the acquisition.
  • Net interest margin improved to 3.35% (up 43 bps year-over-year) and is expected to exceed 3.5% in Q2, supported by purchase accounting accretion and a $775 million securities restructuring into higher-coupon assets.
  • Strong organic growth continued as loans rose 8% year-over-year and deposits grew $922 million (5% excluding CDs), fully funding loan growth and reducing higher-cost borrowings.
  • Management targets a mid-year expense run-rate of ~$140 million per quarter, models two 25 bp Fed rate cuts in 2025, and expects mid-single-digit loan growth with continued positive operating leverage.
AI Generated. May Contain Errors.
Earnings Conference Call
WesBanco Q1 2025
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