管理層發言
Good day, and welcome to WesBanco Inc.'s Third Quarter 2025 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon, and welcome to Wesbanco Inc.'s Third Quarter 2025 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 1 year, contains forward-looking information. 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, wesbanco.com. All statements speak only as of October 23, 2025, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff. Jeff?
Thanks, John, and good afternoon. On today's call, we will provide an overview on operational efforts and third quarter results as well as provide an update on our outlook for 2025. Key takeaways from the call today are: earnings per share of $0.94 when excluding merger-related charges, which was highlighted by loan growth funded by deposit growth, a net interest margin of 3.53% and year-over-year fee income growth of 52%. Continued success in our newest markets as demonstrated by growing pipelines and strong customer satisfaction. Commitment to operational excellence in support of profitable long-term growth and enhancing shareholder value. Our third quarter results demonstrate the successful integration of Premier and continued operational discipline. Despite elevated commercial real estate payoffs, we delivered strong loan growth fully funded by deposit growth, while meaningfully expanding our net interest margin and fee income. Combined with our focus on cost control, these efforts drove positive operating leverage and an improved efficiency ratio in the mid-50s. For the quarter ending September 30, 2025, we reported net income excluding merger and restructuring expenses of $90 million and diluted earnings per share of $0.94, an increase of 68% year-over-year. On a similar basis, our third quarter return on average assets and tangible equity improved to 1.3% and 17.5%, respectively. Our efficiency ratio improved 10 percentage points year-over-year to 55% due to expense synergies generated from the Premier acquisition as well as a continued focus on expense management and driving positive operating leverage. Our strong growth in fee revenue was driven by organic growth across our businesses, especially wealth management and our larger post-acquisition customer base. Turning to operational topics. We are pleased to share that customer satisfaction in our newest markets has rebounded even faster than we expected following the Premier acquisition. While a temporary dip is typical during conversions and integrations. Our team anticipated the challenge and proactively put plans in place to support service and quality and customer trust. Today, satisfaction scores in those markets are back to pre-conversion levels. And our overall customer satisfaction across all markets is in the upper 80th percentile level, well above the industry average. This reflects the strength of our integration strategy and the dedication and skill of our teams. That same operational discipline is reflected in our deposit performance. Our annual deposit campaign launched in the third quarter is once again delivering strong results. Total deposits grew organically across our footprint by more than $570 million year-over-year and $130 million sequentially, fully funding our organic loan growth. Importantly, this momentum was driven by core deposit categories, not higher-cost certificates of deposit, which we have strategically allowed to run down. We have continued to see a pickup in commercial real estate payoffs, which totaled $235 million during the third quarter and caused a nearly 1.5% headwind to loan growth. Reflecting this headwind, third quarter organic loan growth was 4.8% year-over-year and 2.2% quarter-over-quarter annualized. Encouragingly, total commercial loan growth continues to be solid as our teams take advantage of our record pipeline. As of both September 30 and mid-October, our commercial loan pipeline stood at approximately $1.5 billion with more than 40% tied to new markets and loan production offices. Notably, our new Knoxville LPO is already contributing meaningfully, accounting for 5% of the total pipeline. Given the current loan pipeline and CRE payoff headwind, we continue to expect mid-single-digit year-over-year loan growth during 2025. This strong pipeline continues to translate into meaningful wins, including in our newest markets. In one of our premier markets, we secured a major deal with a national motorcycle manufacturer looking to acquire additional dealerships on a tight timeline. Thanks to strategic collaboration across commercial banking, treasury management and retail, our team delivered a tailored package of solutions ahead of schedule. The result was an eight-figure loan, seven-figure deposits and additional treasury and swap products. This is a terrific example of how we collaborate to deepen banking relationships and deliver exceptional customer experiences. Our mission is to deliver financial solutions that empower our customers for success while maintaining operational efficiency. To that end, we continue to optimize our financial center network in support of evolving customer preferences and long-term growth. This strategy includes streamlining existing locations, continuing to enhance our digital banking capabilities and selectively opening new financial centers or refreshing existing ones within our footprint. Following the strong performance of our Chattanooga loan production office, which has grown to over $200 million in loans in just 2 years. We received regulatory approval to open our first full-service financial center in Tennessee. This new location will simplify deposit gathering and deepen client relationships. We are also opening a new center in Alliance, Ohio, where we see strong growth potential. Both centers are expected to open in the first quarter of next year. At the same time, we are streamlining our footprint to ensure efficiency and responsiveness. After a thorough review of our customer behavior and banking preferences, market conditions and proximity to existing centers, we made the decision to close 27 financial centers across our legacy markets, none of which are related to the Premier acquisition. More than 75% of these closures are within 10 miles of another location and deposit attrition is expected to be minimal. These closures bring our total since 2020 to 80 closed financial centers and are expected to generate approximately $6 million in net pre-tax annual savings. By focusing on the right locations, facilities, and customer experiences, we are positioning WesBanco for sustainable growth and exceptional service across all markets. I would now like to turn the call over to Dan Weiss, our CFO, for details on our third quarter financial results and our current outlook for the fourth quarter of 2025. Dan?
Yes, thanks, Jeff, and good afternoon. For the quarter ending September 30, 2025, we reported GAAP net income available to common shareholders of $81 million or $0.84 per share. Excluding restructuring and merger-related expenses, third-quarter net income was $90 million or $0.94 per share, which is nearly a 150% increase from $36.3 million or $0.56 per share in the same period last year. On a similar basis, excluding the after-tax day 1 provision for credit losses on acquired loans, we reported $2.55 per diluted share for the nine-month period compared to $1.61 per diluted share last year. During the third quarter, we achieved strong year-over-year pretax pre-provision core earnings growth of nearly 130%. We supported loan growth with deposits and improved the net interest margin by 58 basis points year-over-year, grew fee income by 52%, and reduced the efficiency ratio by 10 percentage points. Our balance sheet as of September 30 shows the benefits of both the acquired premier balance sheet and organic growth, with total assets of $27.5 billion, a 49% increase year-over-year, including portfolio loans of $18.9 billion and total securities of $4.4 million. Total portfolio loans increased by 52% year-over-year due to the acquired PFC loans of $5.9 billion and organic growth of $594 million, driven by the commercial teams. Commercial real estate payoffs increased, totaling approximately $235 million in the third quarter of 2025 and $490 million year-to-date, more than 2.5 times the amount from the same period last year, with projections near $800 million for the year. Despite this headwind, we remain optimistic about future loan growth, supported by our strong pipeline, banking teams, and markets, along with more than $1 billion in unfunded land construction and development commitments expected to fund over the next 18 months. We have achieved record commercial gross loan production through the first nine months of the year. Deposits grew by 53.8% year-over-year to $21.3 billion, driven by acquired PFC deposits of $6.9 billion and organic growth of $573 million, which fully funded loan growth. On a sequential quarter basis, total deposits increased by $130 million due to our consumer and business teams' efforts, more than offsetting the intentional runoff of $50 million of higher-cost brokered deposits and reduced reliance on public funds from PSC. Credit quality remains stable, with key metrics staying low historically and within a consistent range over the last five years. Criticized and classified loans decreased during the third quarter to 3.2% due to credit upgrades and loan payoffs. The allowance for credit losses was 1.15% of total loans or $217.7 million as of September 30, a decrease of $6.2 million from June 30, 2025, primarily due to the runoff of a $5 million qualitative factor established in 2023 for elevated interest rate risk, offsetting increases tied to slightly higher unemployment assumptions and loan growth. The third-quarter net interest margin of 3.53% improved by 58 basis points year-over-year due to higher loan and security yields and lower funding costs. Our net interest margin saw a sequential decline of 6 basis points, as the CD book from PFC matured and repriced, partially offset by a core margin improvement of 3 basis points. Deposit funding costs for the third quarter was 256 basis points, a decrease of 29 basis points year-over-year. Including noninterest-bearing deposits, the funding costs were 192 basis points. For the third quarter of 2025, noninterest income reached $44.9 million, an increase of 51.5% year-over-year, primarily due to the acquisition of Premier. With combined fee income, we set record highs this quarter in several categories such as trustees, service charges on deposits, and electronic banking fees. We also saw an increase in gross swap fees, which grew by $2.1 million year-over-year to $3.2 million in the third quarter, reflecting both the interest rate environment and growth in our new markets. Noninterest expense, excluding restructuring and merger-related costs for the three months ending September 30, 2025, was $144.8 million, an increase of 46% year-over-year due to Premier's expense base, higher core deposit intangible asset amortization from the acquisition, and increased FDIC insurance expense due to larger asset size. Salaries and wages amounted to $60.6 million, and employee benefits reached $18 million, both increased year-over-year due to higher staffing levels and health insurance costs but remained steady compared to the second quarter as staffing reductions balanced the impact of annual merit raises. Health care costs during the third quarter were somewhat elevated by about $1 million over our baseline projections due to larger claims compared to historical experience and overall increases in health care costs. We incurred restructuring and merger-related expenses of $11.4 million during the quarter, including roughly $7 million related to asset dispositions and lease terminations for the planned closure of 27 financial centers, with the remaining $4 million tied to the Premier merger. We expect to incur additional personnel-related restructuring charges from the closures in the fourth quarter, while nearly all merger-related expenses from PFC have been recognized. Our regulatory capital ratios remain above well-capitalized standards. On September 10, we raised $230 million in Series B preferred stock, intended to redeem the $150 million of outstanding Series A preferred stock on November 15 and $50 million of sub-debt from PFC later in the fourth quarter, with leftover proceeds allocated for general corporate purposes. With the new Series B preferred stock, classified as Tier 1 capital, we saw sequential improvements across all capital ratios. Following the redemption of Series A preferred stock and sub-debt, we expect our fourth-quarter CET1 ratio to build by 15 to 20 basis points per quarter, while Tier 1 risk-based capital may decline by about 50 basis points from the third quarter due to the redemption of Series A preferred stock. Looking ahead to our fourth-quarter outlook, we are currently modeling a 25 basis point Fed rate cut in October. However, given our neutral rate-sensitive position, we do not foresee a significant impact on our net interest margin due to this or the September cut in the near term. We expect our net interest margin to rebound in the fourth quarter to the mid- to high 3.50s, reflecting improved funding costs, fixed asset repricing, and loan growth. While revenues from trust fees and securities brokerage are dependent on market valuations, we anticipate noninterest income and expense to remain similar to our third-quarter trends. We expect the planned closure of the 27 financial centers to occur in late January, generating approximately $6 million in pre-tax annual savings starting thereafter. During the fourth quarter, preferred stock dividends will total around $13 million, including a $2.5 million Series A dividend, a $5.5 million redemption premium, and a $4.9 million Series B dividend. Finally, the provision for credit losses will largely depend on loan growth, economic factors, and charge-offs. Our effective tax rate should be around 19.5% for the year. We are enthusiastic about the positive momentum from the ongoing margin improvements, our financial center optimization strategy, and continued growth in our new markets, as well as the organic growth and opportunities that lie ahead. Operator, we are now ready to take questions.
分析師問答
Our first question comes from Karl Sheppard with RBC Capital Markets.
I’d like to start with you. It seems you are quite pleased with the production in the pipeline for loan growth, although the paydowns in commercial real estate are still somewhat of a challenge. Could you provide more insight into what you're observing regarding production? Also, what are your thoughts on the trend for paydowns? I hesitate to use the term 'normalizing,' but it appears to be decreasing somewhat and could potentially lead to stronger overall growth.
I'm very pleased with our production results. Looking at the year-over-year numbers through the third quarter, we achieved approximately $1.7 billion in new production last year, compared to $2.3 billion this year, which is nearly $600 million more. Our pipelines are strong at around $1.5 billion. I anticipate a robust fourth quarter, and we should meet our mid-single-digit loan growth target for the year. Regarding pay downs, some of what we aimed to reduce in the third quarter contributed to a drop in our CNC by 50 basis points. I feel confident about that. We might see another few hundred million in pay downs in the fourth quarter. Over a normalized period, I expect annualized pay downs to fall within the $400 million to $700 million range. This year, we may reach $800 million to $900 million on an annualized basis. While we don’t have exact figures for the fourth quarter yet, our pipelines remain very strong, and we feel optimistic about achieving mid-single-digit loan growth for the rest of this year. For next year, we're still targeting mid- to upper single-digit loan growth.
Okay, that's very helpful. Dan, I have a question for you. The margin seems to have aligned with your expectations this quarter, but I wanted to confirm if you still anticipate a quarterly expansion of 3 to 5 basis points in the core, and is there anything projected for 2026 that could potentially disrupt that trend?
Yes, Karl, I feel very positive about the continued improvement of 3 to 5 basis points. We're not offering much guidance for 2026, but based on what I shared last quarter, I am optimistic about the next few quarters showing further margin improvement. For our plans today, we are anticipating a 25 basis point cut next week, along with one cut in each of the following three quarters. This is our outlook. I want to point out that our Federal Home Loan Bank borrowings have decreased by $475 million since the second quarter, which is a positive development. Of the $230 million we raised in capital, $150 million will go towards paying off the Series A preferred, essentially borrowing back from the Federal Home Loan Bank for that amount. Additionally, we expect to have $50 million of subordinated debt maturing at the end of the year. Without normalized deposit growth, we anticipate that our Federal Home Loan Bank borrowing balance may increase by a couple of hundred million dollars.
Our next question comes from Catherine Mealor with KBW.
I'd like to ask about expenses. It was encouraging to see the announcement regarding branch closures. I understand that you're not ready to provide guidance for 2026 yet, but could you help us understand how branch closures might offset new hires and what organic loan growth could look like? I'm trying to get a sense of the expense trajectory and the potential for increased operating leverage and profitability as we approach 2026.
Yes. As far as the loan growth, I'll start out and I'll let Dan talk about the expense base. We feel very good about mid- to upper single digits and loan growth. A lot of that is obviously driven by our premier markets that are getting ramped up. I would also say our new health care vertical and then our LPOs. Our LPOs are just operating at a tremendous level. Tennessee ones of Chattanooga and Knoxville and Nashville, Indianapolis are doing a great job as well. Northern Virginia has really taken off. We feel very good about those prospects on the loan growth piece. I'll let Dan talk more about the expense base.
Yes. I would say once again, just to kind of reiterate, we're still in the process of finalizing our budgets and forecasts here for 2026 and we'll provide some more guidance at the end of the year. But I would say, certainly, closing branches is going to be a tailwind to expenses heading into 2026 as a result. This provides some opportunity potentially for reinvestment in technology, people, process and technology. But we certainly also make sure that we are recognizing that expense benefit to the bottom line as well. So I'm pretty excited about where we're at there.
And just to add on briefly, as you know, we are always looking to optimize the branch network, and we'll continue to look at that in the future as well.
Got it. And so it's fair to assume though, without giving targets that the efficiency ratio should continue to improve as we move through '26.
Yes. That would be our model today.
Our next question comes from Dave Bishop with Homsey.
You noted the health care team, I think you noted there's some opportunity to grow that portfolio pretty materially. Any way to ring fest how big the opportunity is there from that new team you hire?
I would say that they have closed about $250 million in loans and brought in around $80 million in deposits, along with approximately $2 million in fees. They have been here for about 6 months. If you project that out, next year they could potentially handle anywhere from $300 million to $500 million in loans on an annual basis. I'm very excited about that team and looking to grow it further, and it could be even larger than that, but that's my current estimate.
Got it. I noted the increase in average deposit cost on a sequential basis. Was that purely a function of the purchase accounting impact and how aggressive you think you can lead on into these Fed rate cuts?
Exactly. It has all to do with what we described last quarter and that being the temporary nature of the CDs that we had acquired 7-month CD specials that were effectively rolling off and don't expect that to see that repeat. That's behind us at this point.
Our next question comes from Russell Gunther with Stephens.
I appreciate all the color on the capital actions taken this quarter. It would be helpful to just get a reminder as to where you would plan to kind of manage capital levels to going forward, be it TCE or CET1. And then just any updated thoughts as to how you're thinking about the potential to reverse the CECL double now.
Sure. That's a great question. From a CET1 perspective, our internal targets are between 10.5% and 11%. We are growing CET1 by about 15 to 20 basis points each quarter, which we project will continue over the next several quarters. As I mentioned earlier, we do have some additional total risk-based capital due to the duplication of the Series A and Series B, with Series A being temporary and expected to decrease by about 50 basis points. However, compared to the second quarter, we will still see an increase of 70 basis points in total risk-based capital, which is encouraging. Regarding the CECL double count, we are still in the evaluation stage and it's unlikely that we will take action until the FASB issues the ASU, and as time passes, it seems less likely that any changes will be made.
Got it. Okay. And then last question here would be just use of excess capital going forward and any appetite for buyback around the current level?
Yes. I would say that we are currently focused on building capital, and as you know, buyback tends to be a lower priority for us. Therefore, I think it is certainly less likely to happen in the near term.
Yes, I was just going to say really focused on capital build back and then obviously, that would go toward dividends and really loan growth.
Excellent. If I could sneak one in, in terms of you gave us some incremental color on the health care vertical. It sounds like a good runway there. Anything kind of adjacent or similar vertical add-ons you would contemplate down the road?
At this point, we're just really focused on health care and then also the LPO strategy. That's working incredibly well. We would potentially look to other cities and end markets to continue to expand there. We talk about different verticals, but at this point, nothing really to share right now.
This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Jackson, CEO, for any closing remarks.
Thank you. We are continuing to deliver meaningful improvement in our financial metrics and strategic positioning to deliver enhanced shareholder value, highlighted by third quarter earnings per share of $0.94. The strong customer satisfaction scores and continued optimization efforts. We remain focused on driving positive operating leverage through sustainable long-term growth. 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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.