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WI

WESBANCO INC (WSBC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered solid loan and deposit growth, a sequential NIM uptick, but lower EPS driven by a larger provision for credit losses and restructuring charges; diluted EPS was $0.44 (adjusted $0.49), down year-over-year from $0.71 and down sequentially from $0.56 .
  • Net interest margin rose to 2.95% from 2.92% in Q1, while total portfolio loans grew 10.1% YoY and 3.2% QoQ; deposits increased 4.4% YoY, with demand deposits at 55% of total and noninterest-bearing at 28% .
  • Provision for credit losses rose to $10.5M (approx. $0.09 EPS impact), primarily from strong loan growth, macro changes, and a specific reserve on one C&I loan; allowance to loans increased to 1.11% .
  • A major catalyst: WesBanco announced a transformative all-stock merger with Premier Financial (PFC), plus a $200M equity raise; management projects >40% 2025 EPS accretion, NIM improving ~40 bps to 3.46%, and a pro forma ROA of ~1.2% .

What Went Well and What Went Wrong

  • What Went Well
    • Continued growth: Total loans up $1.1B YoY (+10.1%) and +3.2% QoQ; deposits up 4.4% YoY; average loans-to-deposits ~89.4% supports funding capacity .
    • NIM inflected: Net interest margin increased 3 bps QoQ to 2.95% as higher loan yields began to outpace funding costs; deposit funding costs (incl. noninterest-bearing) at 195 bps .
    • Management confidence and execution: “WesBanco sustained its positive momentum in 2024 with solid second-quarter results characterized by continued loan and deposit growth” — CEO Jeff Jackson .
  • What Went Wrong
    • Earnings pressure: GAAP diluted EPS fell to $0.44 (adjusted $0.49), down YoY due to elevated provision and higher noninterest expense; net interest income declined ~4% YoY .
    • Provision spike: $10.5M provision, tied to growth, macro factors, and a specific reserve on a renewable energy C&I loan (fully reserved $3.3M) .
    • Efficiency higher: Efficiency ratio at 66.11% vs 62.33% in Q2 2023, reflecting deposit remix and cost inflation; noninterest expense ex-restructuring rose YoY on equipment/software and other operating expenses .

Financial Results

MetricQ2 2023Q4 2023Q1 2024Q2 2024
Net Interest Income ($MM)$121.6 $117.8 $114.0 $116.6
Total Non-Interest Income ($MM)$31.8 $30.1 $30.6 $31.4
Net Interest Income (FTE) + Non-Interest Income ($MM)$154.7 $149.1 $145.8 $149.2
Diluted EPS (GAAP) ($)$0.71 $0.55 $0.56 $0.44
Diluted EPS ex-Restructuring ($)$0.71 $0.55 $0.56 $0.49
Net Interest Margin (FTE, %)3.18 3.03 2.92 2.95
Provision for Credit Losses ($MM)$3.0 $4.8 $4.0 $10.5

Segment/Balance Mix

Portfolio Loans ($MM)Jun 30, 2023Dec 31, 2023Mar 31, 2024Jun 30, 2024
Commercial Real Estate$6,295.5 $6,565.4 $6,754.9 $6,998.9
Commercial & Industrial$1,558.5 $1,670.7 $1,683.2 $1,760.5
Residential Real Estate$2,341.9 $2,438.6 $2,469.4 $2,507.0
Home Equity$701.8 $734.2 $741.0 $770.6
Consumer$232.3 $229.6 $224.7 $220.6
Total Portfolio Loans$11,130.0 $11,638.5 $11,873.2 $12,257.5

Key KPIs

KPIQ2 2023Q4 2023Q1 2024Q2 2024
Average Loans / Average Deposits (%)85.44 86.79 88.67 89.40
Deposit Funding Cost incl. Non-Interest Deposits (bps)103 161 181 195
Non-Performing Assets / Total Assets (%)0.19 0.16 0.19 0.20
Allowance for Credit Losses - Loans / Total Loans (%)1.08 1.12 1.09 1.11
CET1 Ratio (%)11.04 10.99 10.84 10.58
Efficiency Ratio (%)62.33 66.75 66.65 66.11

Guidance Changes

MetricPeriodPrevious Guidance (Q1 call)Current Guidance (Q2 call)Change
Net Interest Margin (FTE)Q3 2024Stabilize mid-2.90% through 2024 “Relatively consistent with Q2” in low-to-mid 2.90% Maintained
Net Interest Margin (FTE)Q4 2024Stabilize mid-2.90% Mid-to-upper 2.90% as assets reprice faster than deposits Slightly Raised vs Q3 trajectory
Non-Interest Income2H 2024Modest growth; consistent with recent levels “Relatively consistent” with Q2 trends Maintained
Non-Interest ExpenseQ2 2024~$99M run-rate; midyear merit increases in back half Impact from midyear merit increases and late-summer marketing Maintained (timing clarified)
Provision for Credit LossesQ3 2024Dependent on macro and growth “Somewhat lower than the second quarter” Lower
Effective Tax RateFY 202417.5%-18.5% ~18% Maintained
Branch Network Optimization2024-2025Under review Consolidate 12 locations; ~$4M annual savings, mostly in 2025; $3.8M restructuring in Q2 New Specifics
DividendsOngoingQuarterly dividend maintained Dividends declared $0.36 in Q2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23, Q1’24)Current Period (Q2’24)Trend
Net Interest Margin trajectoryExpected mid-to-upper 2.90s in 1H24; stabilize in 2H24 Q3: low-to-mid 2.90%; Q4: mid-to-upper 2.90% Stabilizing, slight improvement
Deposit growth & funding strategyDeposits growth funded loans; pay down FHLB Strong deposit pipeline for Q3; funding costs elevated but slowing Supportive for NIM
Treasury products & fee incomeLaunch integrated payables & multicard; pipeline building for 2H24 Continued progress; multicard deals closed; 2025 contribution expected stronger Building; 2025 tailwind
Loan pipeline & growthLPO-driven pipeline (TN, OH, etc.); mid-to-upper single-digit targeted Pipeline ~$950M; mid-to-upper single-digit outlook; CRE selectivity Healthy; disciplined
Credit quality & provisioningStable metrics; provision tied to unemployment forecasts Provision elevated in Q2; specific renewable energy C&I fully reserved $3.3M One-off reserve; overall stable
Capital & branch optimizationStaffing/ATM upgrades; branch rationalization contemplated 12 branches to consolidate; ~$4M annual savings mostly in 2025 Cost efficiency actions
Strategic M&AExploring targets ($2–5B assets); LPOs precede M&A Transformative PFC merger announced; $200M equity raise Major strategic shift

Management Commentary

  • CEO strategic tone: “WesBanco sustained its positive momentum in 2024 with solid second-quarter results characterized by continued loan and deposit growth. We maintained a diligent focus on cost control, while making strategic investments...position us well for continued growth in the second half of 2024.” — Jeff Jackson .
  • CFO on provision and specific reserve: “Provision for credit losses of $10.5 million due to strong loan growth, higher unemployment assumption, and a specific reserve for an individual C&I loan...fully reserved at $3.3 million” — Dan Weiss .
  • CFO outlook on NIM: “Net interest margin in the third quarter is modeled to be relatively consistent with the second quarter...and we modeled the fourth quarter to be in the mid- to upper [2.90s] as assets continue to reprice higher at a faster pace than deposits” — Dan Weiss .
  • CEO on merger rationale: “This transformational merger...create[s] a community-focused regional financial services partner...with significant economies of scale” — Jeff Jackson .
  • CFO on purchase accounting accretion durability: “After-tax accretion ~$55M in year 1; 1–4 family book with ~82-month avg life supports longer accretion tail” — Dan Weiss .

Q&A Highlights

  • Cultural and strategic fit with Premier: Management emphasized a “mini version of us” fit with granular deposits and contiguous markets; due diligence by ~80 WesBanco employees across functions .
  • Infrastructure needs at ~$27B assets: Limited new investments given shared core/BSA-AML; additions expected in compliance/risk, leveraging Premier talent .
  • Capital raise & pro forma metrics: $200M raised at $27.50; targeted CET1 >9.5% and leverage >8.5%; CRE concentration pro forma ~299% with actions to stay below 300% .
  • NIM accretion and marks: Loan rate mark ~$325M; after-tax accretion ~$55M year 1; low prepay risk on legacy 3.5% mortgages marked to ~6.5–7% yields .
  • Branch network investment: ~$13M capitalized upgrades (signage, branches, ATMs) across 73 Premier branches .
  • Near-term operations: Deposit pipeline strong into Q3; provision expected lower than Q2; expenses impacted by merit and marketing .

Estimates Context

  • Consensus EPS and revenue estimates from S&P Global for Q2 2024 were unavailable due to request limits, so a beat/miss analysis versus Wall Street could not be performed. Values were not retrievable via SPGI during this review window [GetEstimates error].
  • As a result, estimate comparisons and potential revisions should be reassessed once SPGI access is restored.

Key Takeaways for Investors

  • NIM inflection: Sequential NIM improvement to 2.95% with assets repricing faster than deposits; management models stability/improvement into Q4 — supportive for FY margin trajectory .
  • Growth funded prudently: Loans +10.1% YoY and deposits +4.4% YoY; average loans/deposits ~89–90% remains manageable, with deposit pipeline and securities cash flow funding .
  • Credit quality resilient despite one-off reserve: NPA/Assets 0.20%, allowance 1.11%; Q2 provision elevated but expected to be lower in Q3 .
  • Cost efficiency actions underway: 12-branch consolidation and $4M annual savings mostly realized in 2025; watch expense cadence (merit, marketing) near term .
  • Transformational M&A catalyst: PFC merger and $200M equity raise target >40% EPS accretion in 2025, NIM ~3.46%, efficiency low-50s — a medium-term re-rating driver if integration delivers .
  • Fee-income build: Treasury products (multicard, integrated payables) ramp in 2H24; more material contribution expected in 2025 .
  • Monitor CRE concentration pro forma (~299%) and execution on planned securities/borrrowings actions and hedge exits at close .

Additional Relevant Press Releases (Q2’24 timing)

  • Second quarter 2024 results press release with detailed financial tables (Ex. 99.1) .
  • Merger announcement press release with Premier Financial (all-stock, ~$959M value; 0.80x exchange; $200M equity raise) .

Cross-References and Discrepancies

  • EPS reconciliation: Adjusted diluted EPS excludes after-tax restructuring and merger-related expenses; management consistently reconciles non-GAAP measures in exhibits .
  • Deposit funding costs: Q2 press release cites 195 bps including noninterest deposits; tables show funding costs detail and trend consistent between releases .

Sources: 8-K Q2 2024 and attached press release/exhibits ; Q2 2024 call transcript ; Q2 2024 press release ; Q1 2024 press release and call transcript ; Q4 2023 call transcript .