Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wesbanco Inc (WSBC, Financial) reported strong year-over-year loan and deposit growth.
- The company maintained solid fee income growth and a lower expense run rate.
- Wesbanco Inc (WSBC) achieved a significant milestone with total assets surpassing $18 billion.
- The proposed merger with Premier Financial Corporation is expected to create a community-focused regional financial services partner with over $27 billion in assets.
- The merger is anticipated to result in strong 2025 EPS accretion of over 40%, driven by cost synergies and net interest margin improvement.
Negative Points
- GAAP net income available to common shareholders decreased to $26.4 million from $42.4 million in the prior year period.
- The second quarter results were impacted by a $10.5 million provision for credit losses.
- Noninterest income for the second quarter of 2024 decreased by $500,000 or 1.5% from the prior year.
- Noninterest expense increased by 2.3% year-over-year, primarily due to increases in other operating expenses and equipment and software expenses.
- The merger will result in tangible book value dilution of approximately 13%, with an associated tangible book value earn back of less than three years.
Q & A Highlights
Q: Can you talk about the process of getting to know Premier better? And why are you confident that this is such a strong cultural fit?
A: We've known Premier for several years. The process started formally at the end of January, and we realized we had a lot of synergies and similar characteristics. Many of our key executives had worked with their employees and executives in the past. We like their granular rural deposit base and the growth potential in Northern Ohio and the manufacturing sector. We feel great about this fit. - Jeffrey Jackson, President, Chief Executive Officer, Director
Q: Are there investments you need to make alongside this merger to handle the increased asset size?
A: We don't anticipate significant investments to handle the increased asset size. We've already gone through a core change and use the same systems as Premier. We will, however, add significant people on the compliance and risk side, integrating Premier's staff into our group. - Jeffrey Jackson, President, Chief Executive Officer, Director
Q: Can you talk about the combined balance sheet's asset sensitivity and how it will perform in different rate environments?
A: On a stand-alone basis, WesBanco is slightly asset sensitive, and Premier is slightly liability sensitive. Combined, we expect to remain slightly asset sensitive. Premier's loan portfolio is heavier on the fixed rate side, while ours is more variable. Both banks will benefit from rate cuts, and we expect to continue being slightly asset sensitive. - Daniel Weiss, Chief Financial Officer, Executive Vice President
Q: Could you talk more about the decision to raise capital and your comfort level with pro forma ratios?
A: We targeted maintaining a leverage ratio above 8.5% and CET1 above 9.5%. The pro forma CET1 is 9.6%, and the leverage ratio is 8.6%. The CRE concentration is 299%, just under regulatory guidelines. We plan to push down the $200 million capital raise to the bank and explore exiting a $100 million portfolio, which will help manage the CRE concentration. - Daniel Weiss, Chief Financial Officer, Executive Vice President
Q: Can you provide more details on the magnitude of purchase accounting and its impact on the NIM?
A: We assumed a rate mark on the loan portfolio of about $325 million, with accretion around $55 million in year one. Premier's one to four family book has a longer duration, so accretion will be recognized over a longer period. The accretion will benefit our yield over the life of these loans, with low prepayment risk. - Daniel Weiss, Chief Financial Officer, Executive Vice President
Q: What are your expectations for loan growth post-transaction?
A: We expect mid to upper single-digit loan growth in the third and fourth quarters. Post-transaction, we will be well-positioned to continue these growth levels, especially as we roll out additional products and enter new markets. - Jeffrey Jackson, President, Chief Executive Officer, Director
Q: Does the CRE concentration change your pipeline mix or desire for certain types of loans?
A: The CRE concentration is already contemplated in our expectations. We have raised minimum interest rates on some CRE projects to be more selective. The low marks on the accretion build back quickly, which could lower the CRE concentration ratio by the time of close. - Jeffrey Jackson, President, Chief Executive Officer, Director
Q: Can you expand on your plans to invest in Premier's branch network?
A: We plan to invest about $13 million in capitalized expenses for branch upgrades, ATM upgrades, and rebranding signage for Premier's 73 branches. - Daniel Weiss, Chief Financial Officer, Executive Vice President
Q: When do you anticipate the transaction closing?
A: We anticipate closing in the first quarter of next year. We've had good preliminary discussions with regulators and feel confident about submitting the application. - Jeffrey Jackson, President, Chief Executive Officer, Director
Q: Any desire to build out the Michigan market further through M&A?
A: We're open to the right opportunity and partner. We believe we can be successful in Michigan, but we need to get to know the market and players better before considering further expansion. - Jeffrey Jackson, President, Chief Executive Officer, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
