Wesbanco, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Wesbanco is a multi-state bank holding company operating 192 branches across six states, with community banking and trust and investment services segments. This unaudited filing covers the three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023 unless noted. Amounts below are in U.S. dollars.
Key financial results
| Metric | Q1 2024 | Comparable period / change |
|---|---|---|
| Net interest income | $114.0 million | Down 8.3% from $124.3 million in Q1 2023 |
| Net interest margin, fully taxable equivalent | 2.92% | 3.36% in Q1 2023; down 44 basis points |
| Non-interest income | $30.6 million | Up 10.8% from $27.7 million |
| Non-interest expense | $97.2 million | Up 1.1% from $96.1 million; excluding prior-year restructuring and merger costs, up 4.5% |
| Provision for credit losses | $4.0 million | $3.6 million in Q1 2023 |
| Net income / net income available to common shareholders | $35.7 million / $33.2 million | $42.3 million / $39.8 million in Q1 2023 |
| Diluted earnings per common share | $0.56 | $0.67 in Q1 2023 |
| Operating cash flow | $64.6 million | $10.9 million in Q1 2023 |
| Cash, cash equivalents and restricted cash | $509.7 million at quarter-end | Down $85.7 million from year-end |
Financial condition, liquidity and capital
- Total assets were $17.77 billion, up 0.3% from year-end. Portfolio loans were $11.87 billion, up 2.0% during the quarter and 9.0% year over year; commercial real estate made up 56.8% of portfolio loans.
- Deposits rose 2.5% to $13.50 billion. Total borrowings declined 16.3% to $1.45 billion, including $1.10 billion of Federal Home Loan Bank borrowings. Shareholders’ equity was $2.54 billion.
- The allowance for credit losses on loans was $129.2 million, or 1.09% of portfolio loans; the allowance for loan commitments was $8.2 million. The combined allowance was $137.4 million.
- Wesbanco reported regulatory capital ratios above “well-capitalized” thresholds: company common equity Tier 1 was 10.84% and total risk-based capital was 14.76%; the bank’s corresponding ratios were 12.08% and 12.98%.
- Management reported $3.7 billion in available FHLB credit, $235 million in overnight lines with third-party banks (unused), and $234.6 million in parent-company cash. Uninsured deposits were $4.2 billion, or 31% of deposits, including $1.5 billion of public funds deposits secured by pledged securities.
- Available-for-sale and held-to-maturity securities had gross unrealized losses of $456.5 million at quarter-end. After-tax unrealized losses on available-for-sale securities in accumulated other comprehensive loss were $241.4 million. Management attributed the losses primarily to market-rate changes and said it did not expect to sell the loss-position securities before recovery.
Material changes and management commentary
- Funding-cost pressure drove the decline in net interest income and margin. Interest income increased 21.7% year over year, but interest expense rose $45.1 million as deposit and borrowing costs increased. The cost of interest-bearing liabilities rose 146 basis points; non-interest-bearing deposits declined by $681.2 million on average year over year as customers shifted toward interest-bearing accounts.
- Average loans grew 9.4% year over year, while average securities declined 10.1%, partly as maturities and calls funded loan growth. Average deposits increased 2.9% year over year. Management reported an average loans-to-deposits ratio of 88.7% for Q1.
- Non-interest income improved, led by trust fees, service charges and swap fee and valuation income. Swap income included $0.8 million of fees and $0.8 million of positive fair-value adjustments; the comparable 2023 quarter had $1.8 million of fees and $1.0 million of negative fair-value adjustments.
- Credit indicators were mixed: nonperforming loans rose to $32.9 million from $26.8 million at year-end, while past-due and accruing loans 30 days or more fell to $23.9 million from $32.5 million. Criticized and classified commercial loans were $273.4 million, or 2.30% of portfolio loans; the company cited increased downgrades. Annualized net charge-offs rose to 0.20% from 0.07%, primarily reflecting $4.8 million charged off in connection with one borrower relationship.
- Expenses excluding restructuring and merger-related costs increased 4.5%, reflecting higher salaries, technology, professional fees and loan-related costs. No such restructuring and merger-related expense was recorded in Q1 2024, versus $3.2 million in Q1 2023.
- Quarterly common dividends declared were $0.36 per share, compared with $0.35 in Q1 2023. The company said it made no open-market repurchases under its authorization during the quarter; 1,019,136 shares remained authorized.
Outlook, risks and contingencies
- The filing provides no specific earnings, revenue, margin or loan-growth guidance. Management says results depend on economic conditions, interest rates, deposit competition and customer behavior; interim results are not necessarily indicative of full-year results.
- Interest-rate sensitivity modeling estimated that a 200-basis-point rate decrease would reduce one-year net interest income by 8.1%, while a 400-basis-point decrease would reduce it by 18.1%. These are model estimates based on a static balance sheet and immediate parallel rate shocks, not forecasts; management noted that results depend on assumptions about deposit behavior, prepayments and other factors.
- Key stated risks include deposit outflows or higher funding costs, credit deterioration (including commercial real estate exposure), changing market values of securities, liquidity needs, regulatory actions, cyber and fraud risks, and competition and technology changes. Management stated that it believes current liquidity is sufficient and that capital levels exceed well-capitalized requirements.
- Off-balance-sheet commitments to extend credit and related items totaled approximately $5.0 billion. Management did not believe a material loss from pending or threatened litigation was reasonably possible.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether deposit pricing and the shift from non-interest-bearing accounts continue to pressure net interest margin and earnings.
- Trends in nonperforming loans, criticized and classified loans, net charge-offs and the concentration of losses, particularly in commercial lending.
- The amount and duration of unrealized securities losses, liquidity available without selling securities, and the effects of deposit maturities and uninsured deposit levels.
- Whether loan growth, fee income and cost controls can offset higher funding and operating costs; the filing gives no specific forward guidance.
- How rate sensitivity and actual deposit, loan and prepayment behavior compare with the company’s interest-rate models.